Lighthouse Auctions

Lighthouse runs on a hybrid architecture that combines off-chain execution (a dedicated server runs real-time auctions and processes data) with on-chain settlement (smart contracts manage deposits/withdrawals and final auction settlement), balancing performance with security. [Figure 2]

Figure 2. Interaction Overview – Shows how the rollup, Lighthouse, SBB, and searchers interact.

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Lighthouse Auction Process

1. Deposit: Searchers deposit tokens into the Lighthouse auction contract to collateralize bids, ensuring settlement integrity.

2. Slot Transition & Real-time Auctions (Concurrent):

   • 2-1. Create Auction (Slot N+1): The rollup requests an auction for the next slot; Lighthouse notifies all searchers participating in the rollup’s auction.

   • 2-2. Deliver Bundles (Slot N): Confirmed winning bundles from the previous Lighthouse auction are submitted to the rollup.

   • 2-3. Fetch Transactions (Slot N): The rollup retrieves the list of user transactions from SBB.

   • 2-4. Broadcast Transactions: The rollup merges Lighthouse bundles with SBB transactions and broadcasts the complete list to searchers participating in the auction, enabling backrunning opportunities for the next auction.

   • 2-5. Include in Mempool (Slot N): Transactions for Slot N are added to the mempool and executed in the defined order.

3. Simulate Transactions (Private Node): Searchers simulate MEV opportunities on private full nodes using the latest transaction order flow.

4. Submit Bids: Searchers submit MEV bundles and a BidMsg, which includes:

   • BidPrice, AuctionNonce, bidderAddress, mevTxHashes, and Signature.

   • Each signature is verified against the bidder’s private key to prevent unauthorized withdrawals.

5. Auction Close & Settlement (Concurrent):

   • 5-1. Order Bundles: After the auction closes, bundles are sorted by descending bid price.

   • 5-2. Simulate Bundles: Bundles are simulated in sequence; only valid bundles are confirmed and forwarded to the rollup for Slot N+1 (Step 2-2).

   • 5-3. Submit Auction Closed Msg: The Lighthouse contract executes settlement and closes the auction.

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Transaction Handling for SBB and Lighthouse

• Standalone SBB: Manages both FCFS user transaction ordering and local searcher bundles, optimized for value capture within a single rollup.

• SBB + Lighthouse: SBB manages user transactions, while Lighthouse coordinates cross-market auctions, expanding arbitrage opportunities and supporting more advanced trading strategies across connected venues.