Mitigating Blockchain Extractable Value threats by Distributed Transaction Sequencing Strategy

Abstract

The rapid growth of blockchain and Decentralized Finance (DeFi) has introduced new challenges and vulnerabilities that threaten the integrity and efficiency of the ecosystem. This study identifies critical issues such as Transaction Order Dependence (TOD), Blockchain Extractable Value (BEV), and Transaction Importance Diversity (TID), which collectively undermine the fairness and security of DeFi systems. BEV-related activities, including sandwich attacks, liquidations, transaction replay etc. have emerged as significant threats, collectively generating $540.54 million in losses over 32 months across 11,289 addresses, involving 49,691 cryptocurrencies and 60,830 on-chain markets. These attacks exploit transaction mechanics to manipulate asset prices and extract value at the expense of other participants, with sandwich attacks being particularly impactful. Additionally, the growing adoption of blockchain in traditional finance highlights the challenge of TID, wherein high transaction volumes can strain systems and compromise time-sensitive operations. To address these pressing issues, we propose a novel Distributed Transaction Sequencing Strategy (DTSS) that integrates forking mechanisms with an Analytic Hierarchy Process (AHP) to enforce fair and transparent transaction ordering in a decentralized manner. Our approach is further enhanced by an optimization framework and the introduction of a Normalized Allocation Disparity Metric (NADM) that ensures optimal parameter selection for transaction prioritization. Experimental evaluations demonstrated that the DTSS effectively mitigated BEV risks, enhanced transaction fairness, and significantly improved the security and transparency of DeFi ecosystems. • Distributed Transaction Sequencing Strategy (DTSS) was proposed address TOD, BEV, and TID issues. • DTSS adapts block size based on transaction attributes. • An optimization framework was introduced to determine optimal parameters for DTSS. • Experimental results show the superiority of DTSS in mitigating risks associated with BEV. • Results also show that DTSS can ensure a fair and transparent transaction ordering.