  Transactions submitted through the blockchain peer-to-peer (P2P) network may
leak out exploitable information. We study the economic incentives behind the
adoption of blockchain dark venues, where users' transactions are observable
only by miners on these venues. We show that miners may not fully adopt dark
venues to preserve rents extracted from arbitrageurs, hence creating execution
risk for users. The dark venue neither eliminates frontrunning risk nor reduces
transaction costs. It strictly increases the payoff of miners, weakly increases
the payoff of users, and weakly reduces arbitrageurs' profits. We provide
empirical support for our main implications, and show that they are
economically significant. A 1% increase in the probability of being frontrun
raises users' adoption rate of the dark venue by 0.6%. Arbitrageurs'
cost-to-revenue ratio increases by a third with a dark venue.
