‘Flash Boys’ Who Cried Wolf
By Rebecca Rettig, Chief Operating Officer and Chief Legal Officer, Jito Labs
When Michael Lewis published Flash Boys in 2014, the charge was explosive: the U.S. stock market was rigged. Not by fraudsters, but by speed — high-frequency traders who paid to glimpse the tape a fraction of a second early and traded ahead of everyone else. The Flash Boys catastrophe never came. The speed advantage that was supposed to doom the small investor got competed away. The market did not collapse under speed. It adapted.
More than a decade later, Wall Street is sounding a different alarm about new trading infrastructure: permissionless blockchains. As markets begin to move “on-chain,” a familiar chorus warns that public, permissionless blockchains — Bitcoin, Ethereum, Solana — cannot safely host real financial activity because they invite front-running and information leakage. The loudest voices belong to sophisticated incumbents, several among the fastest traders in traditional markets, who also happen to be building the closed, “permissioned” alternatives they have been asking regulators to bless over open networks.
The front running criticism deserves a fair hearing. Here is the plain version. Space in each block of a blockchain is scarce, and users pay fees to have transactions included and prioritized — the digital equivalent of a faster lane. Whoever assembles the block sets the order in which transactions settle. Almost always that is mundane. Occasionally it can be exploited: seeing a large pending order, someone slips in front to profit from the price move it will cause. Many lump all transaction ordering together as “MEV” and have tried to make it synonymous with “front running”. But transaction ordering — and many of the various costs associated with gaining an edge (e.g., private feeds, co-location, microwave data signals) — exist in all markets. That is separate from the small harmful slice of transaction ordering on permissionless networks, more aptly termed “adverse transaction ordering”.
Skeptics are right that this is not identical to high-frequency trading. In traditional markets, firms race for priority within fixed rules and cannot change the sequence once orders arrive; on some blockchains, the sequence itself can be influenced. That is a real distinction. But it cuts less than it seems, for two reasons.
First, transparency. Adverse ordering on a public chain happens in the open — recorded and visible to anyone, permanently. Its analog in traditional markets — the quiet costs of information leakage and market impact — is often invisible to the investors bearing it. A harm you can see and measure is a harm you can police: a feature of public ledgers, not a bug. Second, the scale is smaller than the rhetoric. Adverse ordering occurs, but not on every trade and not at the volumes implied — and, as in 2014 with the HFT “Flash Boys” craze, serious technologists are already competing it away.
Those fixes are not hypothetical. Some networks now seal a transaction’s contents until the instant it executes, so there is nothing to trade against. Others batch orders, sequence them by neutral rules, or auction that value and rebate it to users. Traditional finance has its own way of hiding orders from predatory eyes: the dark pool. And where conduct becomes genuine fraud or manipulation, it is already illegal. Securities law targets deception and manipulation — not the mere existence of speed, priority, or ordinary trading costs.
Proponents of “closed” networks have asked regulators to bless these as the exclusive modality for onchain financial markets. While of course regulators should police front-running and abuse wherever they occur, on-chain or off, they should not pick winners by forcing intermediaries back into systems built to work without them and forfeiting the openness and lower costs that make public networks worth building on. For this, the “cure” would be much worse than the small, narrow, traceable “disease.”
The one thing that truly separates these networks from what they would replace is that they are permissionless; wall that off, and you have simply rebuilt the old walled garden in new brick. Public blockchains are valuable precisely because they are resilient, open, interoperable and global by default. Those qualities allow new entrants to build without asking permission from incumbent platforms, and they are already beginning to bring meaningful competition to financial markets.
Having been in rooms with global policymakers and regulators for the better part of a decade discussing the pros and cons of public blockchains, it is clear they understand that proper, robust markets can function on these networks and — critically — that novel solutions exist to address the issue of front running.
The right answer is not to ignore the risks Wall Street identifies. It is to address them directly while preserving the openness that makes public blockchains important. Regulators should police front running and market abuse wherever they occur. Market designers should reduce harmful information leakage. But they should not mistake a solvable market structure challenge for a reason to close the market before it has had the chance to develop. In the history of the open versus closed technology debate, the new, open systems that expanded and improved our way of life have won out each time.
The right response to the risks of public blockchains is the one that answered Flash Boys: fix the problem, don’t close the market. Every time the open-versus-closed argument has run, the open system has won — and left us better off. These “Flashboys” who cried wolf were wrong about the impact on the stock market and they’re wrong again about the impact in digital asset markets.
Rebecca Rettig is chief operating officer and chief legal officer of Jito Labs, which builds infrastructure for the Solana blockchain. She is a member of the Board of the Texas Stock Exchange.
