The Future of MEV Capture: Will It Move to Layer 2?

L2s fragment liquidity and often rely on a single sequencer, creating new, opaque MEV opportunities and potential censorship vectors. This centralizes the value capture that was once more distributed among Ethereum validators.

• Sequencer profits are opaque and not shared with L2 users or token holders.
• Cross-domain MEV between L1 and L2s is inefficient, leaving value on the table.
• User experience suffers from frontrunning and poor cross-chain swap prices.

Adopting Ethereum's PBS model and shared sequencer networks like Espresso and Astria decentralizes block production, creating a competitive market for MEV capture on L2s.

• Transparent auction for block space replaces opaque sequencer ordering.
• MEV revenue can be shared back to the L2's DAO or users via mechanisms like EIP-1559 burns.
• Enables native cross-rollup composability by having a unified sequencing layer.

The endgame isn't just better auctions; it's abstracting transactions away. Protocols like UniswapX, CowSwap, and Across use intents and solver networks to capture MEV for user benefit.

• Users submit intent ("I want this token"), not a transaction.
• Competitive solvers (like Flashbots SUAVE) find optimal execution across L1 and L2s.
• MEV becomes a subsidy for better prices and gasless transactions, flipping the value flow.

Major dApps (e.g., dYdX, Aevo) launching their own L2/L3 chains with custom sequencers will fully internalize MEV. This creates sovereign revenue streams but risks recreating walled gardens.

• Application-specific order flow is a monopolizable asset.
• 100% of sequencer/MEV revenue can fund protocol treasury or token buybacks.
• Risk: Fragments liquidity and innovation if chains don't interoperate, counter to the shared sequencing thesis.

MEV searchers arbitrage price differences across L2s, but fragmented liquidity on each chain increases slippage costs for users. This creates a negative feedback loop where high-value trades are extracted, leaving worse prices for everyone else.\n- Slippage can be 2-5x higher on nascent L2 DEXs versus Ethereum mainnet.\n- Cross-chain arbitrage bots (via LayerZero, Axelar) exacerbate this by moving value in large, predatory blocks.

Most L2s use a single sequencer to order transactions, creating a centralized MEV capture monopoly. This sequencer can front-run, censor, and extract maximum value with zero competition, undermining L2 decentralization claims.\n- Sequencer profits are opaque and not shared with the L2 community.\n- Creates systemic risk; a compromised or malicious sequencer can halt the chain or steal funds.

Proposer-Builder Separation (PBS) is the gold standard for fair MEV distribution, but its adoption across L2s is inconsistent and often proprietary. This leads to inefficient markets and rent-seeking as each chain reinvents the wheel.\n- Builders must develop custom integration for each L2's system.\n- Users face varying levels of protection and cost across chains, harming UX.

Projects like Astria, Espresso, and Radius are building shared sequencing layers that enable atomic cross-rollup bundles. This allows MEV to be captured and redistributed more efficiently across the entire L2 ecosystem.\n- Enables cross-domain arbitrage as a native primitive.\n- Can reintroduce competitive builder markets at the L2 level, reducing sequencer monopoly power.

Intent-based architectures (e.g., UniswapX, CowSwap) push MEV risk from users to solvers. On L2s, this concentrates risk in a few solver entities that must manage liquidity and execution across fragmented chains. Solver failure means total transaction failure.\n- Increases systemic reliance on a small set of sophisticated actors.\n- Cross-chain intents via Across or Chainlink CCIP add additional oracle and bridge risk layers.

The endgame is verifiable, decentralized sequencing with enforced MEV redistribution. L2s must implement cryptographically proven fair ordering (e.g., based on VDFs) and direct a portion of extracted value back to users via gas subsidies or protocol treasury.\n- Turns MEV from a tax into a public good funding mechanism.\n- Aligns sequencer incentives with long-term chain health and user adoption.

Centralized sequencers on major L2s like Arbitrum and Optimism have a monopoly on transaction ordering. They can extract 100% of on-chain MEV without competition, creating a ~$100M+ annual revenue stream that currently bypasses users and builders.

• Value Leakage: MEV profits flow to sequencer operators, not L1 validators or L2 users.
• Opaque Markets: No public mempool means no transparent auction, enabling off-chain, centralized capture.

Protocols like Espresso, Astria, and Radius are building decentralized sequencer networks and encrypted mempools. This forces MEV to be competed for in a public market, redistributing value.

• Redistributed Value: MEV is auctioned, with proceeds potentially returned to users via gas rebates or protocol treasuries.
• Builder-Blocker Separation: Enables specialized MEV players (e.g., Flashbots SUAVE) to operate on L2s, improving chain efficiency.

The endgame isn't better auction mechanics—it's abstracting transactions away. Intent-based architectures, pioneered by UniswapX and CowSwap, move MEV competition off-chain to solver networks.

• User-Centric: Users submit desired outcomes (intents); solvers compete to fulfill them optimally, capturing MEV as profit.
• Cross-Chain Native: Solvers on networks like Across and LayerZero will dominate cross-L2 MEV, making chain boundaries irrelevant for value flow.

The most sustainable equilibrium redistributes extracted value. Optimism's retroactive public goods funding and Ethereum's PBS (Proposer-Builder Separation) model point the way: MEV revenue funds protocol development and user subsidies.

• Protocol-Controlled Value: Sequencer profits are directed to a DAO treasury or gas subsidy pool.
• Verified Markets: Transparent, on-chain auctions (like CowSwap's batch auctions) ensure fair price discovery and minimal extractable value.