This paper presents a practical algorithm for fair transaction ordering that takes into account both transaction timestamps and bids. The algorithm ensures that users get their transactions published with bounded delay against a bid, while extracting a fair value from sophisticated users who have an edge in latency by moving expenditure from investment in latency improvement technology to bidding. The algorithm creates a score from timestamps and bids and orders transactions based on the score. The authors first demonstrate that a scoring rule is the only type of rule that satisfies the independence of latency races. They provide an economic analysis of the protocol in an environment of private information, where investment in latency is made ex-ante or interim stages, while bidding happens at the interim stage where private signals have been observed. Fair transaction ordering has recently attracted a lot of attention, with several studies focusing on how to aggregate the order of transactions seen by multiple different parties/sequencers fairly and efficiently. This paper's approach is closest to previous works interested in an asynchronous network setting. The implementation version of these protocols can be found elsewhere, including improved asynchronous Byzantine Fault Tolerant (BFT) implementations and more recent reviews of literature. Latency reduction techniques for players in decentralized systems are also discussed. Overall, this algorithm is useful for transaction sequencing in rollups or other environments where the sequencer has privileged access to order flows. The authors hope that this work will contribute to creating more efficient and fairer markets where all participants can benefit if they apply policies honestly.
There is a way to make sure people's transactions get processed fairly and quickly. This way looks at the time the transaction was made and how much someone is willing to pay for it. The algorithm that does this makes sure everyone gets a fair deal, even if some people have an advantage with faster internet. It uses something called a "scoring rule" to decide which transactions should go first. People who invest in faster internet before making their transaction can also use this algorithm to make sure they get a fair deal. This algorithm can be used in different situations where someone has special access to process transactions.
Fair Transaction Ordering with Timestamps and Bids
In recent years, there has been a growing interest in fair transaction ordering for decentralized systems. This paper presents an algorithm that takes into account both transaction timestamps and bids to ensure users get their transactions published with bounded delay against a bid, while extracting a fair value from sophisticated users who have an edge in latency.
The Algorithm
The algorithm creates a score from timestamps and bids and orders transactions based on the score. The authors first demonstrate that a scoring rule is the only type of rule that satisfies the independence of latency races. They provide an economic analysis of the protocol in an environment of private information, where investment in latency is made ex-ante or interim stages, while bidding happens at the interim stage where private signals have been observed.
Implementation Version
The implementation version of this protocol can be found elsewhere, including improved asynchronous Byzantine Fault Tolerant (BFT) implementations and more recent reviews of literature. Latency reduction techniques for players in decentralized systems are also discussed. Overall, this algorithm is useful for transaction sequencing in rollups or other environments where the sequencer has privileged access to order flows.
Conclusion
The authors hope that this work will contribute to creating more efficient and fairer markets where all participants can benefit if they apply policies honestly. Fair transaction ordering has recently attracted a lot of attention, with several studies focusing on how to aggregate the order of transactions seen by multiple different parties/sequencers fairly and efficiently; this paper's approach is closest to previous works interested in an asynchronous network setting
We design a practical algorithm for transaction ordering that takes into account both transaction timestamps and bids. The algorithm guarantees that users get their transactions published with bounded delay against a bid, while it extracts a fair value from sophisticated users that have an edge in latency, by moving expenditure from investment in latency improvement technology to bidding. The algorithm creates a score from timestamps and bids, and orders transactions based on the score. We first show that a scoring rule is the only type of rule that satisfies the independence of latency races. We provide an economic analysis of the protocol in an environment of private information, where investment in latency is made ex-ante or interim stages, while bidding happens at the interim stage where private signals have been observed. The algorithm is useful for transaction sequencing in rollups or in other environments where the sequencer has privileged access to order flows.
