Why Automated Market Makers Are Structurally Incapable of Neutralizing MEV

AMMs are public order books. Every swap function and pool state is on-chain, creating a predictable price impact that searchers and validators exploit. This transparency is the protocol's core feature, not a bug.

The atomic sandwich is inevitable. AMM logic guarantees a price movement for a given trade size. This creates a risk-free profit opportunity for any entity controlling transaction ordering, which protocols like Uniswap V3 cannot cryptographically prevent.

Batch auctions fail at scale. Solutions like CowSwap and UniswapX externalize ordering to solvers but merely shift MEV extraction to a different layer. The economic value of the arbitrage still exists and will be captured by the most sophisticated actor.

Evidence: Over $1.2B in MEV has been extracted from Ethereum DEXs, with sandwich attacks on Uniswap and PancakeSwap comprising the majority. This is a direct tax levied by the network's block producers on the AMM's design.

AMMs are price oracles. Their public mempools and deterministic execution broadcast price updates before settlement. This creates a guaranteed arbitrage signal that searchers and bots exploit for risk-free profit.

Liquidity is not execution. AMMs like Uniswap V3 separate providing capital from transaction ordering. This cedes control of the execution layer to validators and block builders who optimize for maximal extractable value.

MEV is a design feature. Protocols like CowSwap and UniswapX now explicitly outsource routing to professional solvers. This formalizes MEV as a competitive fee for optimal execution, not a bug.

Evidence: Over $1.2B in MEV was extracted from Ethereum DEXs in 2023. This value leakage is a permanent structural tax paid by every AMM user for the convenience of permissionless trading.

AMMs are public order books. Every pending swap is a visible, executable intent on-chain. This public state creates a predictable price impact that searchers and block builders exploit through front-running and sandwich attacks.

Atomic composability guarantees extraction. The permissionless nature of Ethereum's mempool and the atomic execution of blocks allow searchers to construct arbitrage and liquidation bundles that capture value between Uniswap and Curve pools before users' transactions finalize.

Fee tiers create MEV cliffs. Concentrated liquidity in v3 AMMs like Uniswap creates discrete liquidity bands. Large swaps that cross these bands trigger predictable, multi-step price movements, which sophisticated bots like those from Flashbots exploit for deterministic profit.

Evidence: Over 60% of DEX volume on Ethereum is susceptible to MEV. Protocols like CoW Swap and UniswapX use batch auctions and solver networks to mitigate this, but they work around the AMM, not within its core mechanics.

AMMs are public order books. Every swap function and liquidity state is on-chain, creating a deterministic execution environment. Searchers scan pending transactions to front-run profitable arbitrage or sandwich attacks before block finalization.

Liquidity fragmentation worsens MEV. Protocols like Uniswap V3 concentrate liquidity, but this creates predictable price ticks. Searchers exploit predictable liquidity pools across chains via bridges like Stargate, turning cross-chain arbitrage into a primary MEV vector.

Fee mechanisms are not a solution. Dynamic fees or 'just-in-time’ liquidity from protocols like CoW Swap shift, but do not eliminate, the value extraction. The profit simply moves from arbitrageurs to LPs or solvers, remaining as systemic extractable value.

Evidence: Over 60% of Ethereum DEX volume is arbitrage, not organic trading. This is a structural subsidy from LPs to searchers that AMM math guarantees.