🤖 AI Summary
This work addresses the vulnerability of encrypted mempools to economically lagging and security risks arising from self-authorized state manipulation—such as perpetual contract funding rate manipulation—due to their inability to inject corrective transactions into already committed batches, despite offering protection against victim-dependent MEV attacks. The paper proposes a micro-correction mechanism grounded in executable arbitrage, modeling how correctors optimally choose order sizes balancing price impact and inventory costs, while evaluating exploitable opportunities through the lens of protocol disclosure timing. It introduces a novel local security index incorporating attacker blind spots, correction shielding, and capitalization shielding, revealing how private transactions suppress predictive capitalization of funding rates and induce dual amplification effects. By integrating game theory, market mechanism design, and encrypted mempool architecture, the study establishes a dynamic security framework driven by information scheduling and response factors, proving that closed-phase correction rates fall below adaptive correction rates and quantifying both state distortion and its responsive amplification.
📝 Abstract
Encrypted mempools are designed to hide transaction contents until execution order is fixed, preventing many victim dependent forms of maximal extractable value. This paper studies a different class of attack in the form of self-authored state manipulation, in which the attacker knows its own transaction and owns a downstream claim on the state that transaction changes. Perpetual futures funding is a canonical example. The funding signal determines a transfer rate, while receiving side open interest is the transfer base. In a commit then reveal mempool, an adaptive corrective transaction cannot enter the already committed batch. Privacy can therefore create an economic reaction gap even when cryptographic decryption overhead is negligible. We microfound correction through executable arbitrage opportunities. Correctors choose order size against local price impact and inventory cost, while the protocol information schedule determines which opportunities are actionable. The ordering barrier removes ordinary adaptive searchers from the closed stage. It therefore yields a closed stage correction rate below the adaptive correction rate whenever positive adaptive capacity becomes available after reveal. The distortion entering a funding window is multiplied by an explicit response factor. Transaction privacy can also reduce capitalization of predictable funding into entry prices, producing a second amplification channel. The resulting local security index separates attacker blindness, correction shielding, and capitalization shielding.