CLVR Ordering Rule Reduces Intra-Block Volatility on AMMs

Automated Market Makers (AMMs) power decentralized exchanges by continuously updating asset prices with each trade. This makes transaction order within a block highly valuable—and volatile. Traders often face price slippage or failed transactions when block producers order trades arbitrarily. A new paper from McLaughlin, Chemaya, Liu, and Malkhi (arXiv:2408.02634) proposes CLVR (Clever Look-ahead Volatility Reduction), a transaction ordering rule that explicitly targets intra-block price stability.

CLVR operates under the common DeFi framework where block assemblers can observe pending trades and arrange them. The algorithm uses a look-ahead approach to select an order that approximately minimizes price volatility across the block. This is done with a small computational cost, making it practical for real-time use. Crucially, the resulting ordering can be trivially verified externally, ensuring transparency and trust.

The primary benefit for traders is two-fold: lower transaction failure rates and execution prices that stay closer to the reference price at submission time. By dampening intra-block price swings, CLVR reduces the financial risk associated with frontrunning and sandwich attacks inherent in current Maximal Extractable Value (MEV) practices. The authors show that CLVR’s ordering achieves near-optimal volatility reduction, significantly outperforming naive ordering strategies.

For DeFi protocols and exchanges, adopting CLVR could improve user experience and reduce losses from failed transactions. As the paper is under peer review (categorized under Computer Science and Game Theory, Mathematical Finance, and Trading Market Microstructure), it represents a formal step toward order-flow fairness. If implemented, CLVR could become a standard for block builders, making AMM trading more predictable and equitable for retail and institutional participants alike.