Miner extractable value (MEV) poses a persistent challenge for blockchain ecosystems. It arises from the fact that a block builder can exploit its unilateral control over transaction inclusion and ordering to extract profit, potentially at users' expense. Recent work has explored consensus-aided mechanism design to mitigate MEV. This approach combines generic consensus-layer guarantees with application-layer mechanisms that use these guarantees to address application-specific MEV problems. Prior work exemplifies this approach for automated market makers (AMMs). When the consensus layer offers fair sequencing, which orders transactions according to their arrival times, their proposed mechanism achieves incentive compatibility (IC) and weak local efficiency (wLE). Informally, IC rules out profitable strategic deviations by users and builders. Meanwhile, wLE ensures that after execution, any order willing to trade at the initial price cannot benefit from further trade with the pool at the ending marginal price. In this work, we resolve the main open question left by prior works: whether IC and wLE can be achieved under plain consensus (e.g., current Ethereum) without fair sequencing. We prove that no deterministic, anonymous batch AMM can achieve both properties. The impossibility holds even when the consensus layer guarantees censorship resilience and block space is unlimited, establishing the first separation between censorship resilience and fair sequencing in the context of decentralized mechanism design. Our impossibility proof combines three strategic capabilities: creating Sybil identities, over-reporting budgets, and misreporting values. We further show the tightness of our impossibility result: removing any one from the strategy space restores feasibility under censorship resilience. Specifically, we construct a mechanism achieving IC and wLE for each restricted setting.
The adaptive clinching auction of Dobzinski, Lavi, and Nisan (FOCS'08) is a cornerstone of mechanism design with budget-constrained bidders, and it has since inspired a broad range of extensions to substantially richer market settings. Adaptive clinching enjoys compelling guarantees: it is Pareto optimal, and truthful bidding is a dominant strategy whenever budgets cannot be overreported. In many real-world environments, however, identities are cheap to create, making resilience to Sybil attacks an additional requirement. Whether the guarantees of adaptive clinching survive when a bidder can split its budget across fake identities has remained open. We introduce a generalized framework for adaptive clinching and prove that it satisfies Sybil-robust incentive compatibility: a bidder cannot benefit from splitting into any finite number of identities with arbitrary value reports, provided their aggregate reported budget does not exceed the bidder's enforceable true budget. Sybil resilience thus joins the list of ideal properties of adaptive clinching. Our work is motivated by practical problems in decentralized finance, where automated market makers (AMMs) are among the most widely used applications. We design a new AMM mechanism that extends classical adaptive clinching in two ways: it supports a two-sided market and protects against two-sided strategies, and it allows the supply function to depend on the auction state. Its one-sided special case is captured by our generalized adaptive clinching framework, and our proof techniques show that the full two-sided mechanism simultaneously satisfies Sybil-robust incentive compatibility and a relaxed notion of Pareto optimality. We argue that these guarantees are essentially the best possible via impossibility results. More broadly, our work reveals new connections between classical algorithmic game theory and modern decentralized blockchains.
Miner extractable value (MEV) in automated market makers allows block builders to profit from transaction ordering and injected trades, imposing costs on users and contributing to builder centralization. We introduce Otter (Optimal Truthful Trading with Excess Redistribution), a two-asset batch AMM that achieves provable MEV resilience when the consensus layer provides censorship resilience and block space is uncongested. Otter makes truthful behavior a dominant strategy for both users and builders. Consequently, a builder cannot profit from strategic deviations, including reordering bids or injecting sybil bids, even when the builder is itself a trader with intrinsic value. Moreover, we show that Otter maximizes social welfare, in a strong sense, within a natural class of mechanisms satisfying the desired game-theoretic properties. To achieve these guarantees, we introduce a new paradigm called surplus redistribution, which provably prevents residual surplus from being captured as MEV by redirecting it to the broader community. Specifically, the pool's output tokens need not be distributed entirely among users in the current batch. Instead, residual surplus may be transferred to a smart contract governed by the decentralized community. The accumulated surplus can be used to benefit community members --- for example, by subsidizing transaction fees, rewarding liquidity providers, or returning assets to the pool. Our approach relies on the underlying consensus layer to provide censorship resilience. We motivate its necessity through an impossibility result showing that the desired game-theoretic guarantees become unattainable when the builder is additionally allowed to censor transactions. Thus, our results also provide a mathematically formal demonstration of how consensus-level security guarantees can fundamentally expand what is achievable at the application layer.