Cardano bug reportedly allows nodes to illegally manipulate transaction orders

Stake pool operators (SPOs) in Cardano (ADA), according to the co-founder of Adahandle and the operator of Blade Pool, one of SundaeSwap’s Scoopers, may potentially circumvent transaction ordering in the blockchain’s Mempool and thus prioritize certain transactions.

As a response to a tweet that was posted on October 16 by $conread, who claimed that he had tested and proven that SPOs could, in his particular circumstance, “deny incoming transactions from all other peers and only accept them from specific DEXs, for example, that could pay me a fee. If I’m minting enough blocks, I could provide this service.”

Yes, this is technically possible and I have tested it. I could deny incoming transactions from all other peers and only accept them from specific DEXs for example that could pay me a fee. If I’m minting enough blocks, I could provide this service.

Another reason for sSPO

— $conrad (@conraddit) October 16, 2022

Apparently, this could be used to deny someone financial access because of a blacklisted AdaHandle, according to $conrad.

Cardano transaction process

Cardano is built on a transaction processing architecture in which transactions may be processed based on the fees the sender is prepared to pay. On Cardano, a user creates a transaction on their Cardano client software, which is then disseminated to all other nodes and forms part of the blockchain. This reportedly is a vulnerability, making it a potential attack vector that causes price manipulation.

The Proof-of-Stake (PoS) network has implemented a smart contracting system on top of a first-come, first-serve transaction processing architecture. The system became operational in September 2021 with the Alonzo hard fork. 

Possible for SPOs to block transactions

The co-founder of Adahandle points out that there is no technical definition of whether or not the problem of Minimum Extractable Value (MEV), which plagues Ethereum (ETH) and account-based blockchains, is achievable with Cardano. The developer has admitted that it is indeed possible for SPOs to block certain transactions and prioritize others, which may portend problems for projects, particularly DEXes, that are currently operational or are planning to deploy on the network. 

DEXes, such as SundaeSwap, must depend on off-chain engines due to Cardano’s unique design. SundaeSwap employs Scooper nodes, responsible for “building and submitting a transaction which executes many swaps against the automated market maker (AMM)” in return for an ADA fee. Scooper node operators are trusted and have the power to operate in the best interests of SundaeSwap and the burgeoning Cardano DeFi community. 

According to one commenter, the lack of documentation might be due to Cardano’s default node rules lacking this capability. To establish whether SPOs infringe Cardano’s first-come, first-served design, one must manually monitor the Mempool and ward off nodes that may be implicated in manipulation efforts.

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