MEV Conservation: Why Can Ordering Value Not Be Eliminated, Only Hidden?

Introduction: Jascha Samadi uses a physics-style proposition to puncture the industry's biggest illusion: MEV simply cannot be "designed away." Whether it's Ethereum's public auctions, Canton's permissioned ledger, or traditional finance's "payment for order flow" and "last look," ordering value never disappears—it just finds a new place to hide. For investors and practitioners, the real question has never been "is there MEV," but rather: to whom are you handing the power to price ordering?

In physics, energy cannot be destroyed: it only changes form. Transaction ordering has the same property. Wherever a ledger executes transactions against valuable shared state, execution order carries economic value, and that value is conserved across every architecture we know of. It can be auctioned, hidden, burned, or renamed, but it does not disappear. Ethereum turned it into a public market. Permissioned networks like Canton moved it behind contracts and nondisclosure agreements. Traditional finance spent a century packaging it under names like "payment for order flow" and "last look." Hyperliquid recently started burning it.

Over the past few years, we have spent a great deal of time working inside and around the transaction supply chain—the path a transaction travels from a click in a wallet to its final placement in a block—and the market structure that self-assembles around that path. This article is the structural perspective those efforts left us with. It traces the conservation of ordering value across four regimes: public markets, private ledgers, regulated intermediaries, and public auctions. The genuinely interesting question has never been "MEV or no MEV," but whether the price of ordering is public or hidden. And traditional finance's enforcement record shows in detail what happens when that value is denied rather than priced.

This article continues our block building series, which currently covers an introduction to block space markets and the demand side and supply side of Ethereum block building since 2024.

Public Markets: Ethereum Prices Ordering Value

A public, permissionless blockchain is built on a few foundational design choices:

• Anyone can run a node and independently verify the network's history.
• Anyone can submit a transaction.
• Participation in consensus (i.e., the right to produce blocks and extend the chain) is open, obtained through capital or work rather than granted by a gatekeeper.
• Underpinning all of this is the most critical choice: every participant replicates the same ledger. There is a single global state visible to all participants, and every node re-executes every transaction to confirm that the rules were followed.

Global shared state is the fundamental reason these systems transcend ordinary distributed databases. Because every application exists in the same state machine, any contract can read and synchronously compose with any other contract. A lending protocol can consume a price oracle it never coordinated with, accept collateral tokens issued by a third party, and be wrapped by an aggregator no one approved: all within a single atomic transaction. Integration is an import statement, not a business development negotiation. This property—permissionless composability over co-verifiable state—is the source of most of what is genuinely novel in on-chain finance: open verifiability, credible neutrality, and markets that unaffiliated parties can assemble at deployment speed.

The same choice carries a second, less-advertised implication. If everyone shares the same state, transactions must be applied to that state in some order, and because many transactions touch the same state, order can change outcomes. Two transactions targeting the same liquidity pool are not commutative: the one ordered first gets the better price. A liquidation is available to only one caller: the first to arrive. An arbitrage opportunity exists in only one transaction: the one that front-runs the others. Position in the sequence is access to economic opportunity, and scarce, valuable access does not remain unpriced for long.

Ethereum is the clearest case of what happens once this value becomes legible. An industrialized supply chain—searchers, builders, relays, validators (see also our introduction to Ethereum block space markets)—self-assembled around the path between user wallets and final blocks. Searchers scan the public mempool and state for extractable opportunities: cross-pool arbitrage, liquidations, and at the predatory end, sandwich attacks around visible user orders. Builders assemble candidate blocks. They package and order transactions and bundles to maximize total block value. Under proposer-builder separation (PBS), validators no longer build blocks themselves; they can auction block-building rights via relays to the highest-bidding builder. Further upstream, order flow itself has become an auctionable asset, with wallets and applications selling the right to interact with user transactions.

People often describe this mechanism as parasitic, and some parts of it may indeed be. A more precise description is this: PBS is what a market for a scarce resource looks like once the resource is acknowledged.

Ordering was always valuable; Ethereum's architecture made that value visible, contestable, and measurable.

The research agenda that followed—order flow auctions, MEV rebates that return extraction to the users who create the value in these transactions, encrypted mempools, batch auctions—is not an attempt to deny the phenomenon, but to govern it: to consciously decide who captures ordering value and how much of it flows back to users.

The alternative is to remove the preconditions for a public ordering market altogether. This permissioned approach now also has trillions of dollars in monthly transaction volume behind it.

Private Ledgers: Canton Removes the Market, Not the Value

The most important permissioned network currently in production reverses every one of the above design choices (deliberately and coherently), but what it eliminates is the ordering market, not discretion over ordering. Canton has no global state and no global transparency. Its structure is a network of networks: each participant runs a validator that holds only those contracts to which it is a party, with data propagated strictly on a need-to-know basis. This privacy model extends inside a single transaction. Sub-transaction privacy means that even the counterparty to one branch of an atomic transaction cannot see the other branches: a bank settling the bond leg of a delivery-versus-payment trade will not learn the commission terms of another branch in the same atomic submission. There is no public mempool: pending transactions are never broadcast, only delivered to their stakeholders. The ordering layer is blind: the synchronizer operator orders encrypted confirmations without seeing transaction contents.

Canton's stance on MEV follows almost mechanically from these choices, built on four mechanisms:

• No mempool to snipe: transactions are never publicly broadcast, so the raw material for front-running (visible pending order flow) does not exist at the network layer.
• Ordering is blind: the operator cannot front-run what it cannot read.
• No ordering market: no builder or searcher auctions, no priority fee bidding for position, no PBS supply chain: ordering is a utility function performed by identified, contracted, legally liable institutions, not by anonymous actors.
• Ordering rules exist at the application layer: they are written into smart contract logic itself, so exchange-style fairness rules (such as price-time priority) can be enforced by construction rather than depending on validator behavior.

The scale of adoption behind this design is considerable by any standard. Broadridge's distributed ledger repo platform settles roughly $8-9 trillion in monthly repo volume on Canton infrastructure (about $354 billion per day), making it the largest tokenized real-world asset settlement platform currently in operation. Publicly tracked data shows approximately $345 billion in representative asset value on the network, with claimed total monthly throughput approaching $9 trillion. The fit with the flagship use case is real: interbank repo and collateral markets are precisely the domains where privacy, permissioning, and recourse-based finality matter more than censorship resistance. No bank would broadcast its funding positions to a public mempool (real-time exposure of who is borrowing overnight cash is not transparency but an accelerator of runs), and no regulator would license critical market infrastructure where a software failure means irrecoverable losses.

We think this divergence is quite durable: such permissioned networks are likely to keep succeeding in institutional back-office workflows (settlement, collateral movement, post-trade processing), where participants are known, trades are pre-negotiated, and confidentiality and recourse are requirements rather than preferences. That market is large, and Canton is winning it on the strength of its design. But the question at hand is narrower: whether this architecture eliminates MEV or does something more familiar with it.

The structural observation is: someone is still ordering.

On Canton, ordering discretion has not disappeared; it has been relocated: to synchronizer operators at the public layer, and to individual companies on private synchronizers, where the vast majority of today's volume actually settles.

Discretion still exists; it is non-contestable, unobservable, and bound by nondisclosure agreements and terms of service rather than eliminated by cryptography. Thus what a permissioned network can strictly claim under the "no MEV" headline is far narrower than the phrase suggests: there is no permissionless MEV market, and no public evidence that anyone is extracting MEV. These are two different statements, and the distance between them is where most of market structure history resides.

There is a second explanation for the near-zero MEV observed on these networks, alongside design: use case. Canton's flagship workflows (bilateral repo, delivery-versus-payment settlement of pre-arranged trades) contain almost no contested shared state. In a repo agreement where price, size, and counterparty are all determined before the trade reaches the ledger, there is nothing to sandwich; ordering a pre-negotiated settlement queue generates no economic value on any chain, under any design. The current record is therefore better described as not yet falsified than as proven.

The falsifiable test will come when such a network carries genuinely competitive market structure: a shared central limit order book, a clearing engine, oracle-triggered margin calls, a tokenized Treasury market trading at scale. At that point, the order in which things reach the synchronizer will again be economically decisive, and the participants able to capture it will be those with latency advantages, physical proximity, or operator relationships. The rent will not disappear. It will migrate into privileged and opaque channels: preferential connections that never appear in a fee schedule, informational proximity that never appears anywhere. The architecture reintroduces a trusted intermediary with ordering discretion onto a ledger, and rebuilds traditional finance's trust model.

Whether this is a stable endpoint depends on that trust model's record on this exact question. And that record is quite instructive.

Regulated Intermediaries: TradFi Has Been Hiding the Same Rent for a Century

Traditional finance has run the "trusted intermediary with ordering discretion" model for decades; its enforcement record shows that opacity did not prevent the capture of ordering value—opacity is what made the capture profitable.

Traditional market structure typically treats what we now call MEV as a system design problem: a problem already solved through the right rules, responsible intermediaries, and enforcement. The structural view holds that this is not so.

MEV is a property of valuable shared state plus sequential execution, and every trading venue has both. On this view, traditional finance never eliminated the problem; it prohibited it by rule, regulated it imperfectly, and pushed extraction into channels invisible to the victims. The enforcement record is consistent with the structural view.

Payment for order flow turned retail orders themselves into a monetizable asset. In 2021 alone, U.S. brokers collected roughly $3.8 billion in payment for order flow: the value of seeing and internalizing order flow, captured through bilateral agreements between brokers and wholesalers that were invisible to the customers whose orders were the product. Robinhood paid a $65 million SEC settlement in 2020 for misrepresenting execution quality related to that arrangement. Dark pools, marketed as protecting institutions from predatory order flow, produced a string of opposite settlements: Barclays paid $70 million in 2016, and Credit Suisse paid $84.5 million, for misrepresenting how their dark pools operated, including customers being told they had been excluded from high-frequency order flow when in fact it was participating; ITG paid $20.3 million in 2015 for operating an internal desk within its own dark pool that traded on confidential customer order information. In foreign exchange, Barclays paid $150 million in 2015 for its use of "last look" (the dealer's option to reject a trade after observing the direction of price movement) and for coordinating shared customer order information ahead of benchmark fixes, with cumulative industry fines for such conduct exceeding $10 billion.

The pattern across these cases is consistent. Ordering value is real. Extraction was performed by trusted intermediaries positioned in the sequence. Affected parties could not observe it in real time. And the facts surfaced only years after the rent had been collected, through whistleblowers and enforcement actions. This is the operating model that "no MEV by design" imports onto a ledger: ordering rent adjudicated by compliance departments and discovered by regulators, rather than priced by a public market.

Public Auctions: Hyperliquid Burns It

The transparent alternative is not hypothetical: Hyperliquid took the same structural rent, put it into a public auction, and directed the proceeds to a public pool.

Hyperliquid's architecture (no public mempool, ordering handled at the consensus layer) has long been described as MEV-resistant, and by the standard of mempool-based extraction, it is. Yet execution advantages still exist, because under the structural view they always do: priority belongs to those who achieve the lowest latency through engineering. Sophisticated market makers win queue position through infrastructure optimization and network proximity, functionally equivalent to colocation. This advantage existed for a long time, was economically significant, and was open only to participants with the capital and connections to build it. The rent was being captured; it just did not appear on anyone's dashboard.

This April, Hyperliquid formalized this dynamic. It introduced priority fees: a public, continuously recurring Dutch auction, denominated in $HYPE, auctioning exactly the two things low latency actually buys: earlier sight of incoming transaction data and earlier position in the execution queue. The effect can be measured with unusual precision: each basis point of priority fee paid improves end-to-end latency by roughly 45 milliseconds. An advantage that was previously implicit, private, and bounded by engineering capability is now explicit, public, continuously repriced, and open to all participants.

Two properties of this mechanism deserve separate discussion. First, it formalizes a paid priority tier, which is indeed open to criticism: where none existed before, there is now a visible queue-position tax. But the relevant comparison is not a market with no priority tier; it is the same tier previously allocated invisibly through capital expenditure and connectivity, at a price of zero.

A public, priced advantage is more honest than a hidden, free one, and easier to correct.

A visible market can be measured, debated, capped, and redesigned, whereas an invisible market can only be discovered after the fact.

The second property is where the proceeds go, and it is where we think the genuine market-structure novelty lies. These fees are burned. The clearing price of execution priority is not paid to the venue operator, not shared with favored counterparties, and not embedded in some bilateral agreement; it is removed from supply (economically equivalent to a pro-rata distribution to every holder of the network asset $HYPE). The contrast with how an equivalent amount of value flows in traditional markets is direct: colocation fees accrue to exchange shareholders; payment for order flow is allocated by wholesalers and brokers under contracts end clients never see; the information rent from dark pools and last look belongs to those holding privileged seats, until enforcement claws back a portion. Hyperliquid put the same structural rent—the value of position in a sequence—out in the open, allowed a permissionless auction to discover its price, and directed the proceeds to a public pool.

The queue still exists; what changed is that its price is public and its economic benefits are shared with every holder, rather than settled in closed bilateral structures.

This is not a claim that ordering value has been designed away. It is an acknowledgment that it cannot be, followed by a decision to price it in a public market and redistribute the proceeds.

Conclusion: The Difference Is Whether the Price Is Public

The meaningful comparison among chain designs has never been "MEV versus no MEV"—every venue that orders valuable state transitions structurally produces ordering value.

The question that truly distinguishes market designs is narrower and easier to answer: who holds ordering power; is it contestable or assigned; is it observable or hidden; are its rents priced in a public market and redistributed,