The Future of MEV on Low-Fee L2s

With L2 transaction fees often under $0.01, the economic model for permissionless block building collapses. Searchers cannot profitably outbid each other, and proposers have no incentive to run sophisticated infrastructure like mev-boost.

• Base fee is ~$0.002, making priority gas auctions (PGAs) non-viable.
• Proposer revenue drops >99% vs. Ethereum L1, eliminating the builder market.
• Result: MEV extraction becomes centralized and ad-hoc.

MEV moves upstream to the application layer. Protocols like UniswapX and CowSwap aggregate user intents and auction order flow directly to solvers, bypassing the public mempool entirely.

• Users get better prices via competition among solvers.
• Protocols capture value via auction revenue or improved execution.
• L2 sequencers become commoditized settlement layers.

Low-fee L2s enable high-frequency, cross-domain arbitrage between DEX pools on different chains. This requires new infrastructure like Across and LayerZero for fast, guaranteed message delivery.

• Arbitrage becomes latency game between L2 sequencers.
• New risk: Cross-chain settlement failures create toxic MEV.
• Opportunity: ~$50M+ in weekly cross-chain volume creates new extractable value.

To prevent frontrunning in a low-fee world, privacy is mandatory. Encrypted mempools (e.g., Shutter Network) and shared sequencer architectures like EigenLayer and Astria enable fair ordering. SUAVE aims to be a decentralized block builder for all chains.

• Prevents toxic MEV like frontrunning and sandwich attacks.
• Centralizes power in the encryptor/sequencer, a new trust assumption.
• Critical for DeFi adoption and institutional order flow.

The Problem: Public mempools on L2s are low-hanging fruit for generalized frontrunning. The Solution: Direct, private transaction submission via services like Flashbots Protect RPC or BloXroute's private mempool. This hides intent until inclusion, neutralizing simple frontrunning and sandwich attacks.

• Key Benefit: Eliminates >90% of harmful MEV for retail users.
• Key Benefit: Preserves composability and L1 settlement guarantees.

The Problem: Proposer-Builder Separation (PBS) centralizes power with a few dominant builders. The Solution: A dedicated decentralized mempool and block-building network. SUAVE creates a competitive marketplace for execution, separating the roles of user, solver, and builder.

• Key Benefit: Democratizes MEV revenue, redistributing it to users and a network of builders.
• Key Benefit: Enables cross-chain intent expression and execution, challenging Across and LayerZero.

The Problem: Users specify low-level transactions (swap X for Y), exposing them to path and price manipulation. The Solution: Users declare high-level outcomes ("I want the best price for Y"). Solvers compete off-chain to fulfill the intent, submitting only the winning, settled transaction.

• Key Benefit: User gets price improvement from solver competition, potentially turning MEV positive.
• Key Benefit: Removes all on-chain failure states (e.g., slippage, reverts) for the user.

The Problem: Private RPCs and mempools are trusted, centralized intermediaries. The Solution: Encrypt transactions at the client with a Distributed Key Generation (DKG) network. Transactions are only decrypted after they are included in a block, making censorship and frontrunning cryptographically impossible.

• Key Benefit: Trust-minimized privacy without relying on a single entity.
• Key Benefit: Protects against malicious sequencers and validators, not just searchers.

The Problem: A single sequencer determines transaction order, enabling time-bandit attacks and censorship. The Solution: A decentralized network of sequencers that reaches consensus on transaction ordering before execution, using a fair ordering algorithm (e.g., first-come-first-serve).

• Key Benefit: Eliminates the centralized sequencer as a single point of MEV extraction and failure.
• Key Benefit: Enables fast pre-confirmations with decentralized security guarantees.

The Problem: Anti-MEV solutions are fragmented, hurting UX. The Solution: Integrated L2 stacks that bundle a private RPC, encrypted mempool, and fair sequencer by default. Think EigenLayer AVS for sequencing + Shutter + a shared SUAVE marketplace.

• Key Benefit: Default privacy and fairness becomes a core L2 competitive advantage.
• Key Benefit: Captures and redistributes native L2 MEV, creating a new revenue flywheel beyond gas.

With transaction costs negligible, the primary constraint becomes time. This shifts the competitive advantage from capital to infrastructure, centralizing power.

• Frontrunning becomes a sub-millisecond game, favoring centralized, co-located operators.
• Fair ordering protocols like Axiom and SUAVE face immense pressure to deliver ~100ms finality.
• Builders must now compete on network topology, not just gas optimization.

Proposer-Builder Separation (PBS) relies on profitable block building. On low-fee L2s, the MEV pie shrinks, threatening the model.

• Builder revenue may fall below the cost of operating sophisticated MEV-boost infrastructure.
• This could lead to proposer centralization as only large entities can subsidize operations.
• Protocols may need to introduce native staking subsidies or priority fee burn mechanics to secure the chain.

MEV doesn't stop at the L2 border. Arbitrage and liquidation opportunities span Ethereum L1, Optimism, Arbitrum, and Base, creating a fragmented but interconnected battlefield.

• Cross-chain MEV requires coordination across different finality times and bridging delays.
• This introduces new oracle manipulation and bridge exploit vectors for generalized extractors.
• Solutions like Chainlink CCIP and Across's intent-based bridging become critical, yet are themselves MEV targets.

Low fees make privacy a premium service. Every transaction is cheap to analyze and frontrun, exposing user intent at scale.

• Transaction simulation by searchers becomes trivial, leading to complete loss of stealth.
• Privacy pools and zk-proof systems like Aztec become essential but add cost, negating the low-fee advantage.
• The default user experience becomes maximally extractable.

High-frequency, identifiable MEV activity on compliant L2s creates a clear trail for regulators. Builders become de facto financial intermediaries.

• OFAC-sanctioned address filtering becomes a technical requirement for block builders, enforced via mev-boost relays.
• This creates legal liability for entities constructing blocks, moving risk from validators to builders.
• Censorship resistance becomes a paid feature, not a base-layer guarantee.

If L2 sequencers capture and internalize too much MEV, they recreate the rent-seeking problems of L1. The value capture shifts but doesn't disappear.

• Centralized sequencers (e.g., early OP Stack chains) can become monopolistic extractors.
• This undermines the core scaling promise of fairer, cheaper access.
• The endgame may require decentralized sequencer sets with MEV redistribution, a complex unsolved problem.