Ethereum Users Shift to Private Transactions Amid Frontrunning Issues

Ethereum users are increasingly turning to private transactions in response to the persistent issue of frontrunning. Over the past year, these private transactions have taken up a significant portion of Ethereum’s Layer 1 block space, accounting for more than half of all gas usage. 

This shift is leading to reduced transparency across the network, which could impact everything from digital wallets to decentralized applications (dApps).

Surge in private transaction gas usage

Private transactions have been part of the Ethereum ecosystem for some time, but their recent surge in gas consumption is drawing attention. Historically, the market size was often gauged by the number of private transactions. However, the focus has shifted to the amount of gas these transactions consume. Although private transactions comprise only about 30% of all Ethereum transactions, they now consume over 50% of the network’s gas. 

This is largely due to the complexity of these transactions, which often involve gas-intensive operations like swaps that require protection from frontrunning. The significant gas usage by private transactions highlights a new economic layer within the Ethereum network. Every unit of gas used represents a portion of the block’s capacity, which reflects that block space’s actual value. The growing reliance on private transactions suggests a shift in how economic activities are conducted on Ethereum.

Impact on Ethereum’s base fees

The increasing prevalence of private transactions also affects Ethereum’s base fees, making them more volatile. The EIP-1559 upgrade, implemented in 2021, introduced a dynamic base fee that adjusts based on block space demand. With private transactions consuming more gas, base fees have become increasingly unpredictable. 

This shift displaces standard “vanilla blocks,” built without MEV-Boost, and fills the block space with private transactions, leading to significant fluctuations in base fees. This volatility is particularly challenging for users trying to navigate the network, as the erratic base fees make it difficult to predict transaction costs. The situation is exacerbated by the growing dominance of large players in the private transaction market, such as Beaver, Titan, Rsync, and Flashbots.

Dominance of major private transaction builders

The influence of major builders in the private transaction market has surged in recent months. Since March 2024, leading builders have noticed a noticeable increase in gas usage. Titan, for instance, has increased its private gas usage from around 3.5 million to 8.5 million. Similarly, Beaver’s usage has grown from 3 million to 7.5 million, Flashbots from 3 million to 7 million, and Rsync from 2.5 million to 6 million. 

This substantial growth pushes smaller builders out of the market, as they need help meeting the 15 million gas target set by EIP-1559. The trend towards private transactions and the dominance of larger builders is reshaping the Ethereum network. As private transactions consume more gas, smaller builders increasingly struggle to compete, leading to a more concentrated market. This shift could have long-term implications for the Ethereum ecosystem, potentially affecting its decentralization and accessibility.

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