An increasing number of Ethereum users are opting for private transactions on the blockchain to avoid front-running bots that erode trading profits. However, this trend is raising concerns about the potential loss of transparency and a move toward centralization.
Recent research by Blocknative, a firm specializing in minimizing the impact of maximal extractable value (MEV), highlights this shift. MEV refers to the profits made by bots that quickly execute trades to exploit margins from transactions in the public mempool, which is where transactions wait before being processed on the network.
Private transactions, which are sent directly to validators or block proposers rather than through public mempools, now account for roughly half of the total gas usage on Ethereum. This represents a significant increase from just 7% in September 2022, when Ethereum transitioned to a proof-of-stake network. Since the start of 2024, private transaction usage has jumped from about 15%.
While private transactions offer a way to avoid front-running bots, they also limit visibility to a select few network participants, potentially centralizing control. This could lead to a situation where a small group of sophisticated players reaps the majority of rewards. “You have a small number of actors who can see the private flow,” said Blocknative CEO Matt Cutler. “Certain people can see stuff, and certain people can’t, and that creates opportunity and advantage.”
Traditionally, the prevalence of private activity on Ethereum has been measured by transaction count, which currently stands at around 30%, up from 4.5% in 2022. However, Blocknative points out that private transactions tend to be more complex and therefore require more gas, leading to a higher impact on network dynamics.
“By focusing on the amount of gas used by private transactions, we gain a more accurate understanding of network dynamics,” Blocknative noted in its blog post.
One downside for users engaging in public transactions is that fee rates can be highly volatile and unpredictable, particularly during times of high network demand. “Only certain actors, like block builders, can see what’s going on in the network,” Cutler said. “They have exclusive access to certain information, which gives them an edge. It’s a big fact of life.”
