The fair combinatorial auction provides several benefits:
- MEV Protection: Fair combinatorial auctions allow for Uniform Directed Clearing Prices (UDP), where a directed asset pair that appears multiple times across orders in the same auction settles for a consistent price. This makes transaction order irrelevant within the block, undermining the ability for MEV bots to extract value.
- Coincidence of Wants: When multiple orders trade the same assets within an auction, there may be an opportunity for a peer-to-peer swap that doesn’t tap on-chain liquidity, which a solver could exploit by submitting a batched bid.
- Fairness: Ensuring that each order receives as much as it would have received had that order been auctioned off alone.