Why MEV-Bots Are Now a DeFi Infrastructure Risk

It's a systemic risk vector. Bots now execute time-bandit attacks and sandwich attacks that can destabilize protocols, not just extract value.\n- $1B+ in cumulative MEV extracted, creating a powerful, adversarial economic force.\n- Attacks can cause cascading liquidations and oracle manipulation, threatening protocol solvency.

Shift from transaction-based to outcome-based execution. Users submit signed 'intents,' and a network of solvers competes to fulfill them optimally.\n- Removes frontrunning surface by design, as transactions are not broadcast publicly.\n- Aggregates liquidity across venues, often providing better prices than any single AMM like Uniswap V3.

MEV-Boost and PBS created a validator cartel problem. A handful of builders/relayers (e.g., Flashbots, bloXroute) control >80% of block space, creating a new centralization layer.\n- Censorship risk: Relayers can exclude OFAC-sanctioned transactions.\n- Extraction efficiency is now gated by private mempool access and relationships.

A dedicated chain for decentralized block building. Separates the roles of searcher, builder, and proposer into a competitive, permissionless marketplace.\n- Breaks cartel control by commoditizing block building.\n- Enables cross-chain MEV capture, creating a new primitive for intents and bridges like Across and LayerZero.

Sequencer MEV is the new frontier. Centralized sequencers on Optimism, Arbitrum, Base have full control over transaction ordering, creating a single point of failure and extraction.\n- No PBS equivalent exists for L2s today.\n- Forced inclusion mechanisms are slow and clunky, failing to protect users in practice.

Decentralize the sequencer role via a shared network or marketplace. Enables fast preconfirmations with economic guarantees.\n- Eliminates single-operator risk and creates a competitive market for L2 block space.\n- Unlocks cross-rollup atomic composability, a foundational upgrade for the modular stack.

MEV bots exploit probabilistic finality in chains like Ethereum pre-merge or Solana. By reorging recent blocks, they can reverse settled transactions to steal arbitrage or liquidations. This undermines the core guarantee of settlement.

• Attacks have targeted Solana and Polygon, causing multi-block reorgs.
• Creates systemic uncertainty for bridges and oracles that assume finality.

Bots spam the public mempool with high-fee transactions to frontrun user swaps on Uniswap or Curve. This congestion acts as a paid DDoS, pricing out real users and crippling protocol usability during volatile events.

• Gas auctions can spike base fees by >1000x.
• Chainlink oracle updates and Aave liquidations can be delayed or fail.

Preventing frontrunning requires removing the public data advantage. Encrypted mempools (e.g., Flashbots Protect, Eden Network) and dedicated chains like SUAVE separate transaction ordering from execution.

• SUAVE aims to be a decentralized block builder marketplace.
• Shutter Network uses threshold encryption for Gnosis Safe and voting.

PBS, a core Ethereum roadmap feature, professionalizes block building. It isolates the consensus role (proposer) from profit-maximization (builder), creating a competitive market for block space that reduces centralization risks from dominant builders like Flashbots.

• Enforces credible neutrality at the protocol layer.
• Builders use sophisticated algorithms to maximize MEV for Lido stakers.

Loss-Versus-Rebalancing (LVR) is a stealth tax where arbitrage bots extract value from Uniswap V2-style AMMs by frontrunning every price update. This permanently drains LP value, making many pools economically non-viable.

• LVR represents a >50% drain on some LP fees.
• Forces protocols like Balancer and Curve to adopt oracle-based designs.

Instead of submitting executable transactions, users submit declarative intents (e.g., "swap X for Y at best price"). Solvers like those in UniswapX, CowSwap, and Across compete off-chain to fulfill them, internalizing and redistributing MEV.

• CowSwap's batch auctions achieve coincidence of wants.
• Flashbots SUAVE is a generalized intent infrastructure layer.

DEX pricing is no longer a function of your pool's reserves, but of the latency war between searchers. This creates a fragile, extractive layer between your protocol's intended economics and on-chain execution.\n- Result: Price updates are front-run, making AMMs unreliable for other DeFi primitives.\n- Scale: Top bots execute ~80% of large DEX swaps, controlling price discovery.

Shift from transaction-based to outcome-based systems. Let users express what they want, not how to do it. Solvers compete off-chain to fulfill the intent, bundling and optimizing execution.\n- Key Benefit: Eliminates front-running and sandwich attacks at the design level.\n- Key Benefit: Enables gas cost absorption and better price discovery through solver competition.

Validators (especially in PoS chains like Ethereum) are incentivized to re-org chains for multi-block MEV, violating the credible neutrality of the base layer. This undermines all L2 bridges, oracles, and fast withdrawal services.\n- Result: Time-sensitive DeFi positions can be reversed after appearing settled.\n- Entity Risk: A few large staking pools control the re-org capability.

Hide transaction content from searchers and validators until it's too late to front-run. This uses Threshold Encryption (e.g., via a Keyper set) to create a blind mempool.\n- Key Benefit: Neutralizes most extractive MEV (sandwich, arbitrage) by default.\n- Key Benefit: Preserves composability and transparency post-reveal, unlike full privacy chains.

The multi-billion dollar lending sector depends on a handful of specialized keeper bots (e.g., from Jump, Wintermute). This creates a single point of failure and allows for collateral trapping—keeping positions unhealthy to extract maximum fees.\n- Result: Protocol bad debt risk is tied to the health of 2-3 bot operators.\n- Inefficiency: Users pay ~13% APY in liquidation penalties that mostly go to bots.

Move from first-come-first-serve to a gradual, price-decaying auction open to anyone. This democratizes the keeper role and ensures collateral is sold at a fair market price.\n- Key Benefit: Eliminates keeper centralization as a systemic risk.\n- Key Benefit: Reduces penalty costs for users by introducing competitive price discovery.