📝 Editor's Note:

Welcome to OurNetwork's latest. Today we're digging into maximal extractable value, or MEV, a term for the reordering of transactions in between the time users submit them and they are actually included in the blockchain. The reorderings — also insertions and deletions— are carried out by programmed bots for profit and typically come at the expense of transactions' original sender.

Coined originally as Miner Extractable Value in 2019, MEV has evolved into an under-the-radar industry of its own, with major players generating millions in profits, and billion-dollar R&D operations like Flashbots, which aim to "mitigate the negative externalities posed by MEV."

SKALE Labs, an OurNetwork partner, is taking a different approach in the battle against MEV and is looking to eliminate it entirely in order to make its platform fair for end users. In service of this goal, the team behind SKALE has developed a solution called Blockchain Integrated Threshold Encryption, or BITE, which encrypts transactions' instructions until they are confirmed onchain.

That's what we'll be looking into today.

– ON Editorial Team

• As stated above, MEV has moved from a cottage industry to a major force in the crypto space. That's not to say it isn't complicated to measure — it's not always easy to discern whether transactions are true MEV. Still, the European Banking Authority (EBA), the primary regulatory body of the banking sector in the EU, cited a Flashbots estimate that extracted MEV to have been $675M from January 2020 to September 2022.
• MEV hits crypto's largest blockchains. For example, sandwich attacks, one of the most common MEV attacks, are present in over 30% of blocks on Ethereum, according to a query by the well-known researcher Hildobby.

• Solana too, has an MEV ecosystem which is costing users — sandwich attacks have generated over $350,000 for their creators in the past 30 days, according to sandwiched.me.

• And according to a report from EigenPhi, which specializes in MEV analysis, a single address generated over $40M in revenue in a three month period in 2023.

• BITE, which stands for Blockchain Integrated Threshold Encryption, is a first of its kind cryptographic protocol designed to eliminate MEV by integrating threshold encryption directly into the consensus layer of a blockchain.

• BITE works by encrypting transaction data before the transaction enters the mempool, making contents completely unreadable during block propagation. This removes the window MEV bots typically exploit.
• BITE utilizes cryptographic guarantees, not  economic incentives, secondary networks, or private mempools. This eliminates MEV in a fully trustless manner, making the blockchain a truly fair environment for users.

1️⃣ Encryption: before submission, transaction data, like function calls, are encrypted client-side using BITE’s threshold encryption.

2️⃣ Consensus: once submitted, the encrypted transaction is broadcast to the network. Validators validate and collect signatures, although transaction contents remain encrypted while pending, fully obscuring the mempool from observers and validators.

3️⃣ Decryption: upon reaching consensus, a supermajority of validators can use their private shares to produce decryption shares. Combining these decryption shares reconstructs the original, unencrypted transaction data.

4️⃣ Execution & Persistence: post-execution, the transaction data remains encrypted within block explorers and accessible only viaBITE-specific JSON-RPC calls.

BITE sets a new standard for blockchain fairness with trustless, cryptographic guarantees of transaction privacy. Follow @skalenetwork for updates as this transformative technology approaches release and check the links below to learn more about BITE.

• Read the BITE whitepaper
• Read launch post