The co-founder of Adahandle and the operator of Blade Pool, one of SundaeSwap’s Scoopers, claim it is technically possible for stake pool operators (SPOs) in Cardano to by-pass transaction ordering in the blockchain’s Mempool and prioritize certain transactions.
Responding to a tweet over the weekend, he claimed that he has tested and proved that SPOs could, in his case, “deny incoming transactions from all other peers and only accept them from specific DEXs, for example, that could pay me a fee”.
Cardano, unlike Ethereum, is built on Bitcoin’s transaction processing architecture and is a complete overhaul of the pioneer smart contracting platform and, broadly, account-based blockchains, where transactions can be processed depending on the fees the sender is willing to pay. As demonstrated over the years, this is an attack vector causing price manipulation.
The Proof-of-Stake network has overlaid a first-come, first-serve transaction processing architecture with smart contracting that went live in September 2021. That is when as part of the Goguen development pace; Cardano developers activated the Goguen Upgrade allowing developers to build dApps on the network, opening a sluice gate leading to dense network activity in the Ethereum competitor.
The Adahandle co-founder notes that there is no technical description of whether Minimum Extractable Value (MEV), plaguing Ethereum and account-based blockchains, is possible in Cardano. This absence of vital documentation and the developer admitting that it’s indeed possible for SPOs to block certain transactions and prioritize others could portend problems for projects, especially DEXes, operational or planning to deploy on the network.
While tx in #Cardano are validated on a first-come, first-served basis in Mempool, can an SPO choose which tx to validate by circumventing the order?
Can an SPO censor tx and leave it in Mempool without validating it?
I did not find any official doc.— Li₿εʁLiøη 🏴a³ (@liberlion17) October 15, 2022
Because of Cardano’s unique design, DEXes, such as SundaeSwap, must rely on off-chain engines. In SundaeSwap’s case, they use the Scooper, special nodes tasked with “building and submitting a transaction which executes many swaps against the automated market maker (AMM)” in exchange for a fee in ADA. Node operators acting as Scoopers are trusted and have the pedigree to execute for the best interest of SundaeSwap and the growing Cardano DeFi community.
The absence of documentation may be because the default node rules in Cardano don’t have this feature, according to one observer who chimed in. To determine whether SPOs bypass certain transactions against the first-come, first-serve design in Cardano, one has to manually keep track of the Mempool and flag off nodes which may be involved in manipulation attempts.
