EIP-8105 Enhances Ethereum with Encrypted Mempool Design

A fresh proposal, EIP-8105, aims to revolutionize Ethereum’s mempool by introducing a scheme-agnostic encrypted framework. This initiative is designed to obscure transaction details until they are confirmed, addressing persistent issues associated with miner extractable value (MEV).

Ethereum users are losing approximately $60 million annually due to sandwich attacks, where malicious bots manipulate transaction order for profit. Transactions visible in the public mempool allow these bots to exploit vulnerabilities, a challenge that has endured despite numerous discussions and attempts to mitigate its impact.

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To counteract these abuses, the encryption of mempool transactions presents a promising solution. Although the concept has been a topic of conversation for several years, it has yet to be executed at the protocol level. Various proposals, including those utilizing threshold encryption, have been analyzed in previous studies. EIP-8105 is a meta-proposal that aims to standardize an encrypted mempool.

EIP-8105, referred to as the Universal Enshrined Encrypted Mempool, introduces a design that is adaptable to various encryption techniques such as threshold encryption and multiparty computation (MPC) committees. A new contract intended for the execution layer, known as the key provider registry, will facilitate this versatile architecture. This registry allows accounts to act as key providers, managing decryption keys according to their preferred encryption methodologies.

The proposal outlines the introduction of two new transaction types within the existing EIP-2718 framework: one for encrypted transactions and another for decrypted ones. Encrypted transactions encapsulate a payload that remains hidden along with necessary metadata such as gas parameters and key provider information. This structure is essential for linking transactions to the selected key provider and ensuring gas fees are managed correctly.

Execution within the Universal Enshrined Encrypted Mempool follows a dual-step procedure. Initially, encrypted transaction envelopes are added to the blockchain while keeping the payload concealed. Key providers observe these transactions, registering relevant identifiers and later revealing decryption keys or issuing withhold notices when the block is unveiled.

Subsequently, upon the publication of the execution data by the block builder, key providers disclose the appropriate decryption keys or withhold notices. To guarantee timely processing, a Payload Timeliness Committee (PTC) oversees the availability of decryption keys, validating and confirming their presence before transaction execution. Transactions that fail decryption are omitted from processing, but the initial envelope remains in the block, ensuring that associated fees are still collected.

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Furthermore, EIP-8105 includes a structural design that prevents the insertion of MEV-extracting transactions during the decryption and execution phases. In this structure, decrypted transactions are prioritized at the beginning of a block, plaintext transactions follow, and encrypted transactions conclude the sequence. This arrangement facilitates the execution of transactions only after inclusion and effectively curtails secondary MEV risks.

While the proposal significantly reduces exposure to MEV, it acknowledges that providers in earlier block positions may still attempt to extract value by selectively managing key disclosures. To mitigate this, the proposal allows trusted key providers to designate others, shaping a trust graph that influences transaction order.

Encrypted mempools are becoming a focal point in Ethereum’s strategic roadmap, as the network seeks protocol-level solutions to diminish MEV’s adverse effects. Although EIP-8105 currently is not slated as a priority for the impending 2027 hard fork, it remains an important draft that continues to inform ongoing efforts to establish a robust encrypted mempool framework for future upgrades.