Private transactions are taking over Ethereum’s order flow, consuming over 50% of the gas used on the network, according to a recent report from Blocknative. While private orders represent only about 30% of Ethereum transactions, their significant gas consumption and growing presence highlight a shift that could impact traders in several ways.
This rise in private transactions, often routed through “dark pools,” is a response to the risk of front-running by automated trading bots, which exploit public transactions to profit at users’ expense—a practice known as Maximum Extractable Value (MEV). These dark pools allow users to submit transactions directly to validators, bypassing the public queue and mitigating MEV risks.
However, this shift has created new challenges. The dominance of a few blockbuilders in the private transaction space, such as Beaver, Titan, Rsync, and Flashbots, has led to a dramatic increase in gas consumption by these entities, with some reporting a 130% to 150% rise in usage since March. This concentration raises concerns about centralization and its effects on public transaction queues.
For traders, the rise of private transactions means more unpredictable and volatile gas prices. With the majority of block space occupied by private transactions, public transactions face increased uncertainty. Traders may find themselves either pricing their transactions too low, resulting in stuck orders, or too high to ensure their transactions are processed. This volatility can lead to increased costs and inefficiencies in trading strategies.
Despite these issues, there’s a silver lining. The trend towards private transactions reflects a broader effort by users to protect their trades and optimize their execution. As the Ethereum network evolves, traders must stay informed about these changes to navigate the shifting landscape effectively.
