Canton Strategic Holdings CEO Mark Wendland has warned that maximum extractable value (MEV) could leave tokenized stock investors paying hidden trading costs as financial institutions choose which blockchain networks to use.
Summary
- Canton Strategic CEO Mark Wendland warns that MEV can leave onchain traders with hidden costs.
- Wendland told crypto.news that Canton prevents validator tips and restricts visibility of pending blockchain trades.
- Helius tracked 1.55 million sandwich transactions and $13.43 million in profits from one Solana program.
- Canton Strategic completed tokenized share trades as issuers consider where their securities may trade onchain.
Wendland told crypto.news that issuers and investors need protection against traders who gain priority over other transactions. His comments followed Digital Asset co-founder and CEO Yuval Rooz’s article on X, “Front-Running Is Not Payment for Order Flow,” which questioned how some public blockchains handle transaction ordering. Digital Asset and Rooz hold minority stakes in Canton Strategic Holdings.
“Issuers and market participants deserve an onchain market structure that prevents front-running and protects users from hidden costs,” Wendland said.
He argued that payments to validators can give some traders preferential execution while other users receive less favorable prices.
Canton Strategic CEO criticizes paid transaction ordering
MEV describes profits that can arise when traders or network operators influence the sequence of blockchain transactions. One form, known as a sandwich attack, involves buying an asset immediately before another trader’s order and selling afterward at a higher price. The targeted trader may complete the transaction without seeing a separate charge for the price difference.
“When transacting on a chain that permits MEV, the true trading costs are paid by users who receive subpar execution,” Wendland said.
He described validator tips as payments that let certain orders move ahead of others.
Rooz drew a distinction between harmful MEV practices and payment for order flow, which allows brokerages to receive compensation for directing customer orders to market makers. The latter operates within securities-market requirements, including best execution and disclosures. Under FINRA Rule 5310, broker-dealers must use reasonable diligence to obtain favorable execution terms for customers.
The Digital Asset executive argued that the amount a bot pays for transaction priority does not show the full loss incurred by affected users. He cited research on Solana sandwich trading to explain why bot profits and validator tips should be examined separately.
Solana research shows how sandwich attacks generate profits
A Helius report documented 1.55 million sandwich transactions by one Solana trading program during the 30 days ending January 5, 2025. The program generated 65,880 SOL, worth approximately $13.43 million, in profit while paying 22,760 SOL, or $4.63 million, in Jito tips.
Helius found that 16 of the 20 tokens most frequently targeted by the program had originated on Pump.fun. The report examined one program, not all Solana transactions, and distinguished tips paid to validators from profits captured by trading bots.
Rooz’s article cited these findings while arguing that the same transaction-ordering concerns deserve scrutiny as blockchains begin supporting securities. He acknowledged that not every form of MEV is harmful, distinguishing sandwich attacks from arbitrage that helps align prices between trading venues.
Canton Network says its design blocks MEV
Wendland said Canton’s network architecture is intended to remove the conditions that make sandwich attacks possible: public visibility of pending transactions and payments that influence transaction ordering.
“Importantly, the Canton Network is designed to prohibit MEV both in structure and practice,” he told crypto.news.
He said its privacy protections prevent universal visibility of orders and that validators cannot accept payments to change their position in the transaction sequence.
Canton’s published documentation describes a system in which parties only receive transaction information relevant to them. The Global Synchronizer coordinates ordering, while network operators can access limited metadata needed to confirm transactions, not the full transaction contents. Network usage fees are burned, and Canton Coin rewards support infrastructure operators and other contributors.
Rooz said the absence of a public mempool and paid priority ordering prevents the kind of sandwiching he described. His article was prompted in part by SupaNova, a memecoin trading application operating on Canton, where the network’s transaction protections are intended to apply to individual trades.
Tokenized stock trading raises questions over venue selection
Canton Strategic completed its first tokenized share trades on November 4 under a US Securities and Exchange Commission exemption. Five North sold tokenized CNTN shares to DRW Cumberland, with Flowdesk supplying liquidity through a permissioned trading pool. Fairmint, an SEC-registered transfer agent, maintains the ownership record.
The issue of issuer control has surfaced elsewhere in tokenized securities trading. At least 67 companies had objected to OKXICE’s tokenization plans by November 5, while the venue announced a November 23 launch for eligible US customers. The exemption allows issuers to object to third-party tokenization of their shares on a specific venue.
Meanwhile, Formation Securities has proposed Solana-based stock trading beginning in 2027, subject to applicable requirements. Its proposed securities include shares of Exodus Movement, Forward Industries and Galaxy Digital.
“As we speak, decisions are being made by institutions and regulators that will shape onchain markets well into the future,” Wendland said.
He added that issuers are choosing which venues and blockchains may carry tokenized versions of their shares, while firms assess cost, speed and compliance.
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