Ethereum’s EIP-8105 Aims to Transform Mempool Security

In an effort to enhance transaction privacy on the Ethereum network, EIP-8105 introduces an innovative design for an encrypted mempool. This proposal seeks to conceal transaction details until they are officially included in the blockchain, thereby addressing the pressing issue of malicious miner extractable value (MEV).

Currently, users bear significant financial losses due to sandwich attacks, which are estimated to cost Ethereum participants around $60 million annually. These attacks exploit the public visibility of transactions in the mempool, allowing MEV bots to manipulate transaction orders for profit. Despite extensive discussions on potential solutions, a robust implementation has remained elusive.

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The EIP-8105 framework envisions a scheme-agnostic mempool, capable of accommodating various encryption methodologies, including threshold encryption and multi-party computation (MPC). It introduces a key provider registry on the execution layer, enabling any account to register as a key provider responsible for managing decryption keys tailored to their encryption preferences.

This proposal also brings new transaction types under the EIP-2718 framework: an encrypted transaction type (0x05) and a decrypted transaction type (0x06). An encrypted transaction comprises an encrypted payload enclosed in an envelope that includes public elements like gas parameters and key provider identifiers. This framework ensures that the transaction remains tied to its designated key provider while covering necessary transaction fees.

The process of executing these encrypted transactions follows a two-step flow. Initially, an encrypted transaction envelope is incorporated into a block while its payload remains confidential. Key providers monitor the encrypted transactions, gathering key IDs necessary for decryption. Once a block builder discloses the execution payload, the key provider either reveals the decryption key or issues a notice of withholding.

A Payload Timeliness Committee (PTC) plays a crucial role in this process, ensuring that decryption keys are made available promptly. The committee validates these keys and attests whether they were present or absent. Successful decryption leads to execution in the subsequent block, while any failure results in the transaction being omitted but still incurs a fee.

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Furthermore, EIP-8105 establishes a structured block design aimed at preventing MEV-extractive practices. It mandates that decrypted transactions occur at the start of a block, plaintext transactions occupy the middle, and encrypted ones are positioned at the end. This ordering is crucial, as it ensures that encrypted information is disclosed and executed only after being included in the blockchain, thereby minimizing MEV opportunities.

Although EIP-8105 offers significant advantages in limiting MEV risks, some exposure remains for initial block providers who can still selectively reveal decryption keys. The proposal addresses this by recommending a trust graph for key providers, enhancing the integrity of the transaction process.

The concept of encrypted mempools has become increasingly vital in shaping Ethereum’s future roadmap. Although EIP-8105 will not feature prominently in the upcoming 2027 hard fork discussions, it remains an active draft. The insights garnered from this proposal are expected to contribute to developing an effective encrypted mempool strategy for Ethereum upgrades.