LayerZero Research Team Proposes OTTER AMM Mechanism to Improve MEV Resistance

LayerZero research team, Oblivious Labs, and Carnegie Mellon University have published a paper introducing OTTER, short for Optimal Truthful Trading with Excess Redistribution, an AMM mechanism designed to improve resistance to MEV. According to Foresight News, the mechanism relies on censorship resistance in the underlying consensus and uncongested block space. The paper says OTTER batches buy and sell quotes for in-block clearing and uses a VCG-like auction to show that truthful quoting is the dominant strategy for traders and block producers. It also says the outcome depends on the set of quotes rather than their order, preventing block producers from profiting through reordering, injecting Sybil quotes, or misreporting their own valuations. Unlike trade-by-trade execution along a curve, the mechanism only requires the pool to end each batch on the pricing curve and does not need to distribute all output from the batch to the current trader, creating surplus. That surplus can be allocated to LPs, traders, the pool itself, or validators, rather than being kept solely by the block producer.