There’s another big problem with the auction. It hugely favours whales over small holders.
Let’s say a whale wants to sell 1000 ETH and 1000 small holders want to buy 1 ETH each. The auction is worth 5% of volume in slippage avoided to whoever wins it.
So to the whale it is worth paying up to 50 ETH to win the auction. To each of the small holders it is worth only 0.05 ETH.
So the whale wins hands down each time, and is able to trade perfectly against the order flow of smaller participants, however sophisticated they are.
This is horrible. It doesn’t make any difference how charitably the auction money is spent, the little guy is getting ripped off.
Remember the point of Flashboys was that until it was banned, big players were able to pay to see and react to orders before retail who could never afford the privilege. This is exactly what is being proposed here.