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Buying Time: Latency Racing vs. Bidding for Transaction Ordering

Authors Akaki Mamageishvili, Mahimna Kelkar, Jan Christoph Schlegel, Edward W. Felten

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Author Details

Akaki Mamageishvili
  • Offchain Labs, Zürich, Switzerland
Mahimna Kelkar
  • Cornell University, New York, NY, USA
Jan Christoph Schlegel
  • City, University of London, UK
Edward W. Felten
  • Offchain Labs, Washington, D.C., USA

Acknowledgements

We are grateful to Lee Bousfield, Chris Buckland, Potuz Heluani, Raul Jordan, Mallesh Pai, Ron Siegel, Terence Tsao as well as participants at the Swiss National Bank Technology and Finance Seminar for interesting discussions and valuable feedback.

Cite As Get BibTex

Akaki Mamageishvili, Mahimna Kelkar, Jan Christoph Schlegel, and Edward W. Felten. Buying Time: Latency Racing vs. Bidding for Transaction Ordering. In 5th Conference on Advances in Financial Technologies (AFT 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 282, pp. 23:1-23:22, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023) https://doi.org/10.4230/LIPIcs.AFT.2023.23

Abstract

We design TimeBoost: a practical transaction ordering policy for rollup sequencers that takes into account both transaction timestamps and bids; it works by creating a score from timestamps and bids, and orders transactions based on this score. 
TimeBoost is transaction-data-independent (i.e., can work with encrypted transactions) and supports low transaction finalization times similar to a first-come first-serve (FCFS or pure-latency) ordering policy. At the same time, it avoids the inefficient latency competition created by an FCFS policy. It further satisfies useful economic properties of first-price auctions that come with a pure-bidding policy. We show through rigorous economic analyses how TimeBoost allows players to compete on arbitrage opportunities in a way that results in better guarantees compared to both pure-latency and pure-bidding approaches.

Subject Classification

ACM Subject Classification
  • Theory of computation → Algorithmic game theory
Keywords
  • Transaction ordering
  • First-come-first-serve
  • First-price auctions

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