The Evolution of Blockchain: From Lit to Dark

Studies whether Flashbot relay channels can reduce the miner extractable value from frontrunning arbitrages. The authors show that miners may not fully adopt hidden processing channels to preserve rents extracted from arbitrageurs, hence creating execution risk for users. Hidden processing neither eliminates frontrunning risk nor reduces transaction costs. It increases the payoff of users and miners adopting it, but reduces arbitrageurs' profits as well as the payoff of miners who monitor only public processing channels. The study collects a dataset from a node of the Ethereum blockchain, and shows that a 1% increase in the probability of being frontrun raises users' adoption rate of hidden processing channels by 0.6%.