New research reveals shift towards confidential trading, raising concerns over transparency and centralization.

Ethereum, the world’s second-largest blockchain network, is experiencing a significant increase in private transactions, according to recent research by Blocknative. This trend shows sophisticated users increasingly opting for “dark pool” arrangements to avoid front-running bots that can diminish trading profits.

The study reveals that private transactions now account for approximately half of Ethereum’s total gas usage, a dramatic rise from just 7% in September 2022. This shift towards private trading, where transactions are sent directly to validators instead of public mempools, has accelerated in 2024, jumping from about 15% at the year’s start.

While this trend helps users protect their trades from predatory bots, it raises concerns about the network’s transparency and potential centralization. Blocknative CEO Matt Cutler notes that this creates a divide where only a select few can access private transaction flows, potentially leading to information asymmetry and unfair advantages.

The research also highlights that private transactions tend to be more complex and gas-intensive than public ones. This new perspective on measuring network activity provides a more nuanced understanding of Ethereum’s evolving dynamics, challenging previous metrics that focused solely on transaction counts.

As Ethereum continues to grow, this shift towards private transactions presents a complex challenge: balancing user protection against the core principles of openness and decentralization that underpin blockchain technology.