Ethereum bots are burning over 50% of gas fees so ETH strangely needs privacy tech to fix it at scale
On some Ethereum L2s, bots now burn over half the gas simply looking for MEV, and so they don’t pay proportionally for it. That’s a scaling and market-fairness downside rooted in market construction.
The privacy dialog in crypto has lastly escaped the “nameless cash” framing that dominated the final cycle. In early 2026, the urgency is financial and rooted in quick monetary realities.
The trade faces a structural downside: on-chain transparency generates extractable worth at huge scale, and that extraction has grown right into a scaling bottleneck slightly than remaining a purely philosophical concern.
Flashbots has documented how MEV-related “search spam” can eat greater than 50% of gas on main layer 2s whereas paying a small share of fees. Alchemy, citing EigenPhi knowledge, factors to practically $24 million in MEV profit extracted on Ethereum over simply 30 days, from Dec. 8, 2025, to Jan. 6, 2026.
When a hedge fund’s $10 million DEX swap is seen within the mempool earlier than it lands, slippage from sandwich assaults can dwarf gas prices.
Privacy is now not a function request. It’s a market equity downside.
Reads, writes, proving
The Ethereum Foundation’s Privacy and Scaling Explorations workforce has standardized a three-part framework: non-public writes, non-public reads, and personal proving.
Private reads relate to hiding transaction intent earlier than execution. Private reads disguise which customers and apps are querying, comparable to balances and positions. Private proving is about making zero-knowledge proofs and attestations low cost and transportable sufficient to embed in every single place.
Cais Manai, co-founder and CPO of TEN Protocol, argues essentially the most pressing downside is reads. He said that the trade has spent years obsessing over hiding who despatched what to whom, the ‘write’ facet of privacy.
However, he famous:
“The actual hemorrhage proper now could be on the learn facet: the truth that each stability, each place, each liquidation threshold, each technique is sitting there in plaintext for anybody to examine. That’s what powers MEV. That’s what makes institutional DeFi a non-starter.”
Over 112,000 ETH, roughly $400 million at present costs, has been extracted from customers by sequencers and MEV bots feeding on the readable state, in accordance to TEN’s estimates.
The answer Manai advocates entails encrypting your entire execution atmosphere utilizing Trusted Execution Environments (TEEs). He defined:
“Contract state and logic keep encrypted whereas in use, not simply at relaxation. Nobody reads what they don’t seem to be supposed to, as a result of there’s nothing uncovered to learn.”
Tanisha Katara, founder of Katara Consulting Group, sees “writes” as the most expensive downside proper now.
According to her:
“Read privacy (RPC leakage, question patterns) is a slow-burning surveillance subject. Write privacy (front-running, sandwich assaults on institutional flows) is actively destroying worth at the moment. It’s tons of of tens of millions per 12 months being extracted from customers as a result of their transaction intent is seen earlier than execution. “
Andy Guzman, who leads the Ethereum Foundation’s Privacy and Scaling Explorations workforce, emphasizes that personal reads are not broadly understood.
He elaborated additional:
“Private Writes is the one which presently takes most consideration, it’s the ‘first base’ and arguably the very first thing you could have to do. Private Proving is the enabler of the opposite two, and it has superior considerably lately. Still rather a lot to do.”
Ethereum non-public writes because the wedge
Private orderflow is a product.
Flashbots’ MEV-Share operates as an order-flow public sale through which customers and wallets selectively share transaction knowledge to redistribute MEV. By default, 90% of extracted worth flows again to customers slightly than disappearing to bots.
Encrypted mempools signify the following layer. Shutter’s analysis paperwork a pathway that uses threshold encryption and timed key launch, built-in with proposer-builder separation.
Transactions enter the mempool encrypted and are decrypted solely after the order is dedicated, eliminating the general public mempool as an assault floor. The design acknowledges sensible constraints: latency overhead, reorg edge circumstances, and coordination challenges throughout validator units.
The financial strain is actual sufficient that main infrastructure suppliers are constructing MEV safety into default flows.
Alchemy’s MEV overview characterizes the issue as systemic, with documented revenue extraction totaling roughly $1 billion yearly throughout main chains.
| Layer | What’s uncovered at the moment | Economic hurt | What’s deploying now (examples) | Main bottleneck |
|---|---|---|---|---|
| Writes | Trade intent pre-execution | Sandwiching / slippage | MEV-Share, non-public orderflow, encrypted mempool analysis | Coordination + pockets defaults |
| Reads | Balances / positions / queries | Strategy leakage / MEV gas | Private RPC, stealth addresses (ERC-5564), TEEs / confidential execution | UX + developer UX |
| Proving | Privacy proofs portability/price | Deployment friction | zk tooling enhancing (Ethproofs: ~5× latency ↓, ~15× price ↓) | Integration + product selections |
Silent leak changing into the following Ethereum headline
The Ethereum privacy roadmap now explicitly elevates non-public reads as a first-class observe.
RPC privacy, which hides which addresses question which contracts, is vital as a result of question patterns expose methods. If a bot observes {that a} particular tackle repeatedly checks a liquidation threshold, it is aware of the place is close to collapse.
Wallet-side privacy primitives are the place this will get sensible. Stealth addresses are formally standardized beneath ERC-5564, enabling recipient privacy by producing distinctive, unlinkable addresses for every fee.
The specification exists, however broad Ethereum wallet adoption stays hindered by UX challenges, together with scanning incoming funds, reconciling balances throughout ephemeral addresses, and the complexity of key administration.
Manai’s developer UX argument hits hardest right here:
“The actual UX bottleneck in 2026 is developer UX, the hole between ‘I would like to construct a personal utility’ and really having the ability to do it with out studying a completely new programming mannequin, a customized language, or a bespoke proving system.”
He highlighted the necessity for full EVM/SVMs operating inside TEEs so builders can construct encrypted dApps utilizing the identical instruments, languages, and psychological fashions they have already got. No circuits to write, no customized VMs to be taught.
Proving is enhancing quick sufficient
Zero-knowledge proving prices have collapsed. Ethproofs’ 2025 assessment paperwork onboarding a number of zkVMs and provers, verifying roughly 200,000 blocks, and seeing latency fall roughly fivefold whereas prices dropped round fifteenfold over the 12 months.
Proof era is now not the first constraint on privacy deployment.
The Ethereum bottleneck has shifted to coordination and integration. Guzman identifies consumer expertise and value as the first boundaries for retail customers, and regulation and compliance as the first boundaries for establishments.
He stated:
“The most cost-effective transaction you possibly can ship on Ethereum is round 21,000 gas, roughly $0.02. A non-public switch can simply be 420,000 gas or extra. In intervals of low exercise, it’s okay (round $0.40), however high exercise may develop into pricey for some use circumstances.”
Katara frames it as a coordination downside:
“Proof price was the bottleneck in 2023-24. It’s resolving. The coordination downside is the bottleneck: Who decides that shielded sends are on by default in a pockets? Who governs the important thing server threshold in an encrypted mempool? These are the unsexy mechanism design issues that decide whether or not privacy really reaches customers.”
Regulation is shaping and directing the Ethereum design house
Privacy builders are designing within the shadow of compliance necessities and authorized threat.
The US Treasury delisted Tornado Cash sanctions in 2025, however authorized uncertainty did not vanish. Tornado Cash developer Roman Storm faced a mixed verdict: responsible on an unlicensed money-transmitting enterprise cost, with the jury deadlocked or acquitted on different counts.
On the compliance facet, the EU’s crypto journey rule regime beneath Regulation (EU) 2023/1113 took impact on Dec. 30, 2024, requiring the gathering and transmission of identities for crypto-asset transfers.
Privacy is not disappearing, however being productized into kinds that may survive regulation: selective disclosure, coverage controls, auditability home windows.
Permanent opacity scares regulators. Privacy that is auditable on a schedule is one thing they will work with.
Katara notes the irony:
“Permissioned and enterprise chains might ship default privacy to institutional customers earlier than public chains ship it to retail.”
What minimal viable privacy appears like in 2026
For the common MetaMask consumer in 2026, Katara expects one-address-per-application to develop into extra widespread, non-obligatory shielded sends in just a few wallets, and early RPC privacy options.
Guzman factors to stealth addresses and shielded swimming pools as already sensible, with UI enhancing quickly:
“I believe we are going to see extra L2s specializing in funds and personal transfers.”
Manai is extra pessimistic about defaults on most chains. He said:
“Honestly? Close to nothing. The common consumer in 2026 continues to be broadcasting each swap, each stability examine, each approval in plaintext. The minimal viable privacy needs to be: your balances aren’t public, your commerce intent is not seen earlier than execution, and you are not shedding worth to front-runners.”
Three paths ahead
The first state of affairs is that MEV makes privacy unavoidable.
Wallets and apps proceed to combine non-public transaction pathways, comparable to non-public RPC, MEV-Share-style routing, and per-app addressing. The set off is sustained MEV extraction plus extra institutional capital shifting on-chain.
The second state of affairs is confidential execution goes enterprise-first. TEEs and policy-based encryption acquire traction in managed environments, comparable to establishments, regulated apps, and personal markets, as a result of they prioritize enterprise confidentiality over shopper anonymity.
The third state of affairs is that regulatory chill pushes privacy to an opt-in-only mannequin. If enforcement focuses broadly on privacy tooling, retail privacy UX stays area of interest. Teams shift to selective disclosure and “coverage privacy” designs, comparable to Privacy Pools, slightly than generalized shielding.
Privacy in 2026 is not a function. It’s a response to structural issues that grew to become too costly to ignore.
Ethereum MEV extraction, technique leakage, and on-chain surveillance create quantifiable losses at an institutional scale. The expertise to tackle these issues exists: encrypted mempools, stealth addresses, confidential execution environments, and zero-knowledge proving with collapsed prices.
The barrier is not cryptography anymore. It’s coordination, developer UX, and the unsexy work of making privacy the default slightly than opt-in.
The trade spent the final cycle constructing privacy as an exception. The subsequent cycle will decide whether or not privacy turns into infrastructure (boring, invisible, and in every single place) or stays a distinct segment function for the paranoid and the institutional.
The distinction comes down to whether or not the folks constructing wallets, apps, and protocols determine that leaking all the things by default is a bug price fixing. In 2026, the economists lastly recommend it’s a bug.
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