Decision template for Encrypted Mempool Integration in OP Stack
The integration of a Shutterized, threshold encrypted mempool into the OP Stack ecosystem represents a significant step towards enhancing its security and efficiency. This technology aims to mitigate prevalent issues such as front-running and censorship, particularly in DEFI trading environments. However, its implementation brings forth a set of challenges and considerations that need to be carefully evaluated.
In this analysis, we will delve into the general pros and cons of incorporating this encrypted mempool into OP Stack. These insights will provide a foundational understanding of the impact such an integration could have on the entire ecosystem. Following this, we will address three critical sub-questions to further clarify and guide the decision-making process:
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Should an OP Stack rollup implement the encrypted mempool for itself?
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Should OP Stack support and sanction the development of the encrypted mempool as a module for the OP Stack?
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Given that encryption is optional if implemented, should applications and users opt to encrypt their transactions?
By evaluating these sub-questions in the context of the broader pros and cons, we aim to offer a comprehensive view that will assist in making an informed decision regarding the integration of a Shutterized, threshold encrypted mempool in OP Stack.
General pros
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Safer DEFI Trading: Encrypted mempool significantly reduces the risk of front-running, ensuring fairer and safer trading environments.
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Censorship Resistance: Adds real-time censorship resistance, beneficial even with centralized sequencers.
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Increased DEFI Profitability: Users potentially retain more value in trades by avoiding malicious MEV (Miner Extractable Value).
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Sequencer Compliance and Image Benefits: Sequencers can plausibly demonstrate their inability to front-run or censor transactions, enhancing compliance, reputation, and regulatory standing.
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MEV Benefits for Sequencers: Sequencers can still engage in back-running related MEV activities like arbitrage and liquidations, maintaining a revenue stream.
General cons
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Increased Cost: Though offset by safer and potentially more profitable trading, there is a slightly increased cost for users.
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Enhanced Protocol Complexity: The integration increases the system’s complexity, impacting maintenance and operational demands.
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Execution Latency: The process may slow down due to additional encryption steps, though this does not affect inclusion latency.
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Less (front-running-related) MEV extraction by the sequencer: It can be expected that the front-running related MEV that a sequencer can extract will be limited. Back-running related MEV should not be affected.
Failure mode analysis
When considering the integration of a Shutterized, threshold encrypted mempool in OP Stack, it’s crucial to understand and elaborate on potential failure modes. These failure scenarios can impact the system’s reliability and trustworthiness. Here, we detail two primary failure modes that could arise from this integration:
A. Keyper Collusion
Description: This failure mode involves a scenario where ‘keypers,’ responsible for managing the cryptographic keys necessary for the encrypted mempool, collude with the sequencer.
Impact: If keypers and the sequencer collude, it could potentially lead to front-running and censorship, which would essentially be a falling back to status quo (where the sequencer alone is able to front-run).
Mitigation Strategies:
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Robust Keyper Selection: Implementing strict criteria and processes for selecting keypers, ensuring they are independent and trustworthy.
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Decentralized Keyper Network: Creating a decentralized network of keypers to reduce the risk of collusion.
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Regular Audits and Monitoring: Continuously monitoring keyper activities and conducting regular audits to detect any signs of collusion early.
B. Non-Production of Keys by Keypers
Description:
In this scenario, keypers fail to produce or provide the necessary cryptographic keys for decrypting transactions in the mempool. This failure could be due to technical issues, malicious intent, or coordination problems among keypers.
Impact:
Failure to produce keys could result in transaction delays or failures. Specifically, a transaction might not get decrypted in time for inclusion in the intended block, leading to potential delays or the need for resubmission.
Mitigation Strategies:
Fallback Mechanisms: Implementing a fallback system where transactions can be processed in an unencrypted manner if key decryption fails.
Redundancy in Keyper Infrastructure: Ensuring that multiple keypers are capable of providing the necessary keys, reducing dependency on a single keyper.
Incentivization and Penalties: Establishing a system of incentives for timely key production and penalties for failures, encouraging keyper reliability.
Sub Questions Analysis
1. Should an OP Stack Rollup Implement the Encrypted Mempool for Itself?
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Pros: Direct implementation ensures the benefits of reduced front-running risk and censorship resistance are consistently applied.
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Cons: The complexity and maintenance burden on the OP Stack rollup team increases.
2. Should OP Stack Support and Sanction the Development of the Encrypted Mempool as a Module for the OP Stack?
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Pros: A modular approach allows for flexibility and optional integration, which can adapt to different dApps’ needs.
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Cons: Increased complexity of having to deal with this module.
3. Should Applications and Users Encrypt Their Transactions?
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Pros: Encryption offers enhanced security and profitability for users, along with censorship resistance.
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Cons: Users must contend with increased costs and potential delays in transaction execution.
Expanded Contextual Discussion
Balancing Act: The decision should balance the enhanced security and profitability against the potential performance impacts.
Opt-in Modular Approach: A flexible, opt-in approach allows users and dApps to assess and decide based on their individual risk profiles and needs.
Risk Management and Transparency: Robust fallback mechanisms and transparent communication about the trade-offs are essential.
Community Engagement: Engaging with the community to understand their preferences and concerns is vital for a decision that affects a broad range of stakeholders.
Conclusion
Integrating a Shutterized, threshold encrypted mempool into OP Stack presents compelling advantages in terms of security, fairness in trading, and potential profitability for DEFI users. The challenges lie in managing the increased costs, complexity, and potential latency. A flexible, modular approach, coupled with robust risk management strategies and community feedback, could provide a balanced and effective solution for the OP Stack ecosystem.