Shutter Network Proposes Encrypted Mempool to Combat $1.5B MEV Activity on BNB Chain

Shutter Network, an open-source protocol, has introduced a proposal to implement a threshold-encrypted mempool on BNB Chain. This initiative aims to eliminate Maximal Extractable Value (MEV) activities, such as front-running and sandwich attacks, and to enhance real-time censorship resistance. The encrypted mempool is designed to provide complete protection from these malicious activities by ensuring that transaction orders are finalized before the content is visible. This approach reduces opportunities for transaction interference and supports both encrypted and regular transactions. The system is decentralized, preventing any single party from decrypting or manipulating transactions, thereby decreasing centralization.

The proposal is motivated by the ethical vision of the BNB Good Will Alliance, which works to protect user interests. It suggests that validators on Binance Chain can include encrypted transactions in block proposals. When a user submits a transaction, the solution encrypts it before it enters the mempool, making the contents invisible to validators, builders, and bots. Transactions are only decrypted after block finalization, effectively eliminating the opportunity for front-running. This method has already been demonstrated on the Gnosis Chain.

The proposal is a joint effort by brainbot GmbH, Erigon, and NodeReal, submitted as a BNB Chain Evolution Proposal (BEP) for community consideration. However, it does not yet commit to specific assignments, milestones, or resources, with implementation tasks and deliverables to be defined in future phases. Shutter Network highlights that there has been an increase in MEV activity on BNB Chain, impacting more than $1.5 billion in DEX trades in a single day in late 2024. Binance founder Changpeng Zhao was also a recent victim of such activities.

Ethereum co-founder Vitalik Buterin has emphasized the importance of encrypted mempools as crucial components in combating value extraction issues. He explained that encrypted mempools involve users broadcasting their transactions in encrypted form, along with proof of their validity, and including them into blocks in encrypted form without the block builder knowing the contents. Luis Bezzenberger, Head of Product at brainbot, a core contributor to Shutter Network, argues that most current MEV solutions address the issue at a surface level, introducing centralization and relying on manual processes to blacklist users. He suggests that validators can show true goodwill to the BNB Chain community by committing to processing encrypted transactions through an encrypted mempool using distributed threshold encryption.

Shutter Network’s proposed threshold-encrypted mempool has been live on a dedicated OPstack testnet since March 2024 and on Gnosis Chain since July 2024. The network has also created a whitepaper for implementing this method on the Ethereum mainnet. This initiative represents a significant step towards enhancing the security and integrity of transactions on BNB Chain, addressing the growing concerns around MEV activities and ensuring a more transparent and secure blockchain environment.