Rethinking Execution Layer Front-Running Protection with Threshold Encryption : F3B: A Per-Transaction Front-Running Protection Architecture with Low-Latency Overhead

Abstract: Blockchain is a decentralized and immutable append-only ledger. Smart contracts, the self-executing programs on blockchain, help build the Decentralized Finance (DeFi) markets. Front-running is the practice of benefiting from advanced knowledge of pending transactions. It impairs the fairness of DeFi ecosystem, leading to huge losses of honest participants. In this thesis, We present Flash Freezing Flash Boys (F3B), a blockchain framework that mitigates front-running with threshold cryptography. In F3B, transactions are encrypted with symmetric keys, which are collaboratively kept by a decentralized secret-management committee (SMC). Once the transactions are committed and immutable, the keys are reconstructed to execute the transactions. F3B hides the content of pending transactions so that adversaries cannot acquire information about them, thus mitigating frontrunning. Previous work using threshold encryption mitigates front-running with per-block encryption, which would fail when a transaction is not included in the expected future block. F3B solves this issue by adopting per-transaction encryption, ensuring that any uncommitted transaction remains encrypted and private, even when a huge network delay occurs. F3B is an execution layer front-running solution, meaning that it is independent of the consensus algorithms and compatible with existing blockchain networks and smart contracts. F3B is evaluated on a simulated Ethereum network, and proved to be a practical low-latency solution. F3B presents a negligible (0.026%) latency overhead with 128 SMC members, compared with the unprotected blockchain.