Browsing by Author "Althonayan, Majed"

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Blindly Backrunning Private Transactions With Fully Homomorphic Encryption
(Imperial College London, 2024-09) Althonayan, Majed; Passerat-Palmbach, Jonathan
Blockchains and cryptocurrencies have experienced a monumental rise over the past decade. With Ethereum alone having around 1 million transactions per day [1], making it increasingly more attractive to opportunists who attempt to extract monetary value from transactions. This is, however, often at the expense of the user. As a result, it is of paramount importance to ensure that users are protected from malicious agents who exploit the public, transparent nature of Blockchains for individual gain. A Blockchain is a chain of blocks, each of which consisting of transactions that are executed sequentially. The ability to alter this order of transactions (by insertion, removal and re-ordering of transactions) can lead to the extraction of additional value commonly referred to as Maximal Extractable Value (MEV). MEV has led to the extraction of $750 million from Ethereum before the merge [2]. Although certain forms of MEV are universally considered to have adverse effects on users and their experience, other forms of MEV, such as arbitrage and liquidations, are believed to have a positive effect in regulating the markets. This research introduces a promising solution that allows searchers to backrun transactions, leveraging the effects of arbitrage while mitigating the harmful effects of MEV. It expands on the work done by Flashbots by utilising fully homomorphic encryption to enable the blind backrunning of transactions by searchers through the fhEVM framework [3] on the UniswapV2 decentralised exchange. This paper also addresses the challenges faced by previous works, aiming to reduce the computational overhead and enhance the solution’s usability. Despite computational constraints, this paper presents a novel solution to the outlined aims through the advancement of known solutions by allowing searchers to combine multiple transactions and accept a greater number of UniswapV2 methods, thereby allowing searchers to generate complex and novel arbitrage opportunities. This advancement is aided with use of the fhEVM framework [3] which was utilised to build and deploy the solution on the public network. This paper represents a solid foundation for future research with the aim of further enhancing the use of fully homomorphic encryption in decentralised finance to create a fairer, more ethical ecosystem.
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