TPS is just a ticket to entry; rankings determine success or failure, and on-chain transactions enter a new phase of "application awareness."

Blockchain competition has shifted from TPS to transaction ordering layers. The order directly affects the bid-ask spread and depth for market makers. A new generation of ordering innovations is transitioning from “general ordering” to “application-aware ordering,” which could be the key turning point for DEX surpassing CEX. This article is adapted from a PANews article, compiled, translated, and written by Dongqu.
(Background: What does Solana achieving 100,000 TPS under ideal conditions mean?)
(Additional context: Ethereum’s impact at 10,000 TPS? How ZK technology can break the “impossible triangle”)

The competition between chains has risen to the level of “transaction ordering,” which directly influences the bid-ask spread and depth for market makers🧐🧐.

The demand for “general chains” has been disproven. Currently, chain-to-chain competition focuses on two levels:

1. Building “application chains” on top of existing mature businesses, supplementing current operations with blockchain in settlement and other processes;

2. Competition at the “transaction ordering” layer.

This article focuses on the second level.

Order directly impacts the behavior of market makers. This is the core issue.

What is transaction ordering?

On-chain, user transactions are not immediately written into blocks but first enter the “mempool” (waiting area). Thousands of transactions may occur simultaneously, and it is up to sequencers, validators, or miners to decide:

1. Which transactions are included in the next block?

2. In what order are these transactions arranged?

The process of “deciding the order” is transaction sequencing, which directly affects on-chain user transaction costs, MEV opportunities, success rates, and fairness.

For example, during network congestion, the order determines whether transactions can be quickly confirmed or remain in the mempool indefinitely.

For high-frequency traders like market makers, canceling an order being filled is more important than the order being successfully placed. The prioritization of cancel instructions in sequencing directly influences whether market makers dare to provide deep liquidity.

In the last cycle, everyone pursued TPS, believing that speed alone could improve on-chain transaction settlement. But it has proven that, besides speed, risk pricing for market makers is equally important.

On centralized exchanges, trade matching strictly follows the “price-time priority” principle. In such a highly deterministic environment, market makers can provide deep order book liquidity with very narrow slippage.

On-chain, after transactions enter the mempool, nodes select transactions based on Gas prices, creating opportunities for front-running and sniping existing orders.

Suppose TRUMP’s price is $4.50, and a market maker places a buy order at $4.40 and a sell order at $4.60 to provide depth. Suddenly, TRUMP’s price crashes to $4.00.

At this moment, the on-chain market maker wants to cancel the $4.40 order but gets sniped by high-frequency traders who raise Gas prices—buying at $4.00 and selling back to the market maker at $4.40.

Therefore, market makers can only widen their spreads to reduce risk.

The goal of the new generation of ordering innovation is to transition from “general ordering” to “application-aware ordering”(Application-Aware Sequencing).

The ordering layer can understand transaction intent and sort based on predefined fairness rules, rather than solely relying on Gas fees.

1. Establish ordering rules at the consensus layer

A typical example is Hyperliquid. It enforces priority for cancel and Post-Only orders at the consensus layer, breaking the Gas priority rule.

For market makers, being able to “run away” is most important. During sharp price fluctuations, cancel requests are always executed before others’ fill requests.

Market makers fear being sniped. Hyperliquid guarantees that cancel orders always take precedence—when prices fall, market makers can cancel orders, and the system enforces priority, allowing them to hedge successfully.

On 10.11, during a sharp crash, Hyperliquid market makers remained online with spreads of 0.01–0.05%. The reason is that market makers knew they could “run away.”

2. Adding new ordering methods at the sequencing layer

For example, Solana’s Application Controlled Execution (ACE). Jito Labs developed BAM (Block Assembly Marketplace), which introduces dedicated BAM nodes responsible for collecting, filtering, and ordering transactions.

These nodes run in Trusted Execution Environments (TEE), ensuring transaction privacy and fairness in ordering.

Through ACE, DEXs on Solana (such as Jupiter, Drift, Phoenix) can register custom ordering rules with BAM nodes, such as prioritizing market makers (similar to Hyperliquid) or conditional liquidity.

Additionally, Prop AMMs like HumidiFi, which are proprietary market makers, also innovate at the ordering layer by connecting directly with Nozomi and major validators to reduce latency and execute trades efficiently.

In specific transactions, HumidiFi’s off-chain servers monitor prices across platforms, communicate with on-chain oracles and contracts, and inform them of market conditions. Nozomi acts as a VIP channel, enabling effective cancelation before order execution.

3. Utilizing MEV facilities and private channels

Chainlink SVR (Smart Value Recapture) focuses on the attribution of value generated by ordering(MEV).

By tightly integrating with oracle data, it redefines the rights to order and the distribution of auction proceeds for liquidation transactions. After Chainlink nodes generate price updates, they send data through two channels:

1. Public channel: sent to standard on-chain aggregators (as a backup, but with slight delays in SVR mode to leave room for auctions).

2. Private channel (Flashbots MEV-Share): sent to auction markets supporting MEV-Share.

This way, the auction proceeds from liquidation triggered by oracle price changes (the amount bidders are willing to pay) are no longer solely captured by miners but mostly by the SVR protocol.

Summary

If TPS is the ticket to entry, then TPS alone is clearly insufficient. Custom ordering logic may not only be an innovation but also the essential pathway for transactions to be truly on-chain.

It might also mark the beginning of DEX surpassing CEX.