Why Quantifying 'Good' vs 'Bad' MEV Is a Fallacy

Treats all MEV as a cost to be minimized for users. Its batch auctions and Coincidence of Wants (CoWs) prevent frontrunning and internalize value.

• Key Benefit: Users get better-than-market prices via surplus from order flow auctions.
• Key Benefit: Solvers compete on net cost, not speed, making ~$2B+ in monthly volume MEV-resistant.

Acknowledges block proposer extractable value (PBEV) as inevitable. Creates a competitive marketplace for block space, redistributing value to validators.

• Key Benefit: Democratizes access to MEV, preventing a single entity from monopolizing ~$1B+ annual extracted value.
• Key Benefit: >90% of Ethereum validators use it, proving the demand for explicit, fair value redistribution over hidden extraction.

Aims to dismantle the dark forest by creating a neutral, decentralized mempool and block builder. Separates block building from proposing.

• Key Benefit: Transparent auction for block space eliminates private order flow and opaque deals.
• Key Benefit: Redirects MEV profits from exclusive searcher-builders to a permissionless network of participants.

Attempts to classify 'good' (arbitrage) vs. 'bad' (frontrunning) MEV add protocol complexity and are inherently subjective.

• Key Flaw: A validator's profit is invariant to the moral label; they will always select the highest-paying bundle.
• Key Flaw: Adds legal and regulatory risk by making subjective judgments on transaction validity, moving away from cryptographic truth.

Superior systems don't judge intent; they create transparent mechanisms to capture and redistribute extracted value.

• Key Principle: Use cryptoeconomic design (like fee rebates, protocol treasury shares) to align searcher/validator profit with user outcomes.
• Key Principle: Maximize extractable value for users, not for the protocol. Let users decide what 'good' is with their realized price improvement.

Delegates routing and execution to a network of fillers competing in open auctions. Internalizes MEV competition as better prices.

• Key Benefit: Users get gas-free, MEV-optimized swaps without understanding the underlying complexity.
• Key Benefit: Fillers absorb all risk (slippage, MEV) and compete on net output, directly converting extracted value into user surplus.

Labeling MEV as 'good' or 'bad' is a value judgment that obscures the underlying economic reality. It leads to misguided protocol design, like subsidizing 'good' arbitrage, which is economically equivalent to a block subsidy and distorts the natural fee market. The only objective metrics are extractability and redistribution.

Focus on who bears the cost and who captures the value. The critical question is whether value extraction degrades the core protocol function (a negative externality) or is a neutral byproduct. Builders should model MEV flows like Uniswap liquidity or Lido staking rewards to design for redistribution via mechanisms like MEV smoothing or PBS (Proposer-Builder Separation).

All stateful systems create arbitrage opportunities. This value will be extracted; the only choice is by whom. Protocols like Cosmos, Solana, and Avalanche all have MEV, expressed through different latency games and validator collusion. Investors must evaluate a chain's MEV supply chain (e.g., Jito, Flashbots) as a core component of its security budget and validator economics.

Design systems that do not pick winners. Instead of moral categorization, implement technical solutions that make extraction fair and transparent. This means integrating with SUAVE, using encrypted mempools, or adopting intent-based architectures (UniswapX, CowSwap) that shift the bargaining power from searchers back to users. The goal is minimization of negative externalities, not elimination of MEV.

The real trade-off is not good vs. bad, but liveness (chain progress) vs. censorship resistance (inclusion). High MEV can threaten liveness through time-bandit attacks, while aggressive MEV capture can lead to censorship. Protocols must measure and optimize for this frontier. Ethereum's PBS is a direct response to this, separating block building from proposing to manage this tension.

The pursuit of perfectly fair, MEV-free ordering (e.g., Aptos, Fuel) often centralizes sequencing power or simply moves the MEV game off-chain. True decentralization requires accepting some MEV as the cost of an open, permissionless auction. The focus should be on verifiability of the sequencing process (e.g., Espresso, Astria) rather than an unattainable ideal of fairness.