MEV is a protocol-level problem. The in-protocol auction for block space determines who profits from transaction ordering, not just off-chain bots. This shifts the focus from post-hoc mitigation to preemptive design.
the-appchain-thesis-cosmos-and-polkadot
Blog
The Future of MEV is Shaped by Chain-Level Design Choices
Monolithic L1s inherit MEV as a bug. Appchains on Cosmos and Polkadot treat it as a design parameter, enabling controlled extraction, fair ordering, and novel fee markets from the ground up.
introduction
THE ARCHITECTURAL SHIFT
Introduction
Maximal Extractable Value is no longer a searcher's game, but a foundational design constraint for new blockchain architectures.
Layer 2s define the MEV surface. The sequencer design of Arbitrum and Optimism centralizes MEV capture, while shared sequencer networks like Espresso and Astria aim to decentralize it. The choice dictates the economic and security model.
Intent-based architectures bypass MEV. Protocols like UniswapX and CowSwap abstract execution, moving competition from block builders to solvers. This transfers value from validators to users and dApps.
Evidence: Over 60% of Ethereum's MEV is captured by just three builders. New chains like Monad and Sei bake parallel execution and order-flow auctions directly into their VMs to redistribute this value.
thesis-statement
THE ARCHITECTURAL IMPERATIVE
The Core Argument: MEV as a First-Class Design Parameter
Future blockchain performance and user experience are determined by how protocols architecturally manage MEV from the ground up.
MEV is a protocol-level resource that must be managed, not eliminated. Ignoring it in the consensus or execution layer design cedes control and value to off-chain searchers and builders, creating systemic risks like chain reorgs and frontrunning. Protocols like Solana and Sui treat fast, deterministic finality as a core defense against time-bandit attacks.
Execution environment design dictates MEV flow. A shared mempool is an open auction; a private mempool or encrypted mempool like Flashbots Protect or Eden Network is a controlled market. The choice between a monolithic chain like Ethereum and a modular stack with a dedicated settlement layer (e.g., Celestia + Rollup) fundamentally changes who captures and redistributes MEV.
Intent-based architectures externalize complexity. Instead of submitting precise transactions, users submit desired outcomes. Systems like UniswapX, CowSwap, and Across use solvers to compete on fulfilling these intents, bundling and optimizing execution. This shifts the MEV competition from transaction ordering to solution finding, potentially returning value to users.
Evidence: Ethereum's PBS (Proposer-Builder Separation) fork, EIP-1559's base fee burn, and Cosmos's ABCI++ are explicit, chain-level design choices that reconfigure MEV economics. Their adoption proves that treating MEV as a post-hoc concern is no longer viable for scalable, user-centric chains.
key-trends
ARCHITECTURAL TRADEOFFS
The Appchain MEV Design Matrix
MEV is no longer just a byproduct; it's a core design parameter that dictates chain security, user experience, and economic viability.
01
The Sovereign Sorter: MEV as Consensus Fuel
Appchains like dYdX v4 and Sei bake MEV capture directly into the protocol. The chain's native validator set acts as the exclusive block builder and proposer, capturing all value.\n- Key Benefit: Guaranteed revenue for validators, securing the chain without high inflation.\n- Key Benefit: Predictable, on-chain execution eliminates off-chain deal-making complexity.
100%
MEV Capture
Stable
Validator Yield
02
The Permissioned Builder Network
Adopted by chains like Avalanche and Polygon, this model enforces a whitelist of professional builders (e.g., Flashbots SUAVE, BloXroute) to compete for block space.\n- Key Benefit: High-quality blocks from specialized infrastructure, maximizing chain revenue.\n- Key Benefit: Censorship resistance is maintained via a competitive, permissioned auction.
~10
Builders
Optimized
Extractable Value
03
The Encrypted Mempool Frontier
Chains like Eclipse and Aztec integrate threshold encryption (e.g., Shutter Network) at the protocol level to obscure transaction content until inclusion.\n- Key Benefit: Front-running protection by default, creating a fairer UX for DeFi.\n- Key Benefit: Preserves auction revenue for validators via sealed-bid, first-price auctions.
>99%
Front-run Proof
Sealed-Bid
Auction Type
04
The Intent-Centric Settlement Layer
Appchains designed for UniswapX or CowSwap-style intents shift complexity off-chain. Users submit desired outcomes; a network of solvers competes to fulfill them.\n- Key Benefit: Abstracts gas & slippage for users, a superior UX.\n- Key Benefit: Concentrates MEV competition among professional solvers, not bots.
User
Outcome-Focused
Solver
Complexity-Bearing
05
The Cross-Chain MEV Sink
Appchains like Injective and dYdX that are natively connected to Cosmos IBC or layerzero turn cross-domain arbitrage into a primary MEV source. The chain becomes the optimal venue for settling inter-chain value flows.\n- Key Benefit: Captures value from latency and pricing inefficiencies across ecosystems.\n- Key Benefit: Attracts liquid capital by being the nexus for cross-chain activity.
Multi-Chain
Liquidity Source
Nexus
Arbitrage Venue
06
The Minimal MEV Chain
Chains like Berachain (via Polaris EVM) or purpose-built gaming chains intentionally minimize MEV surface area through deterministic transaction ordering (e.g., FIFO) and simple AMMs.\n- Key Benefit: Eliminates toxic MEV (front-running, sandwiching), crucial for gaming and social apps.\n- Key Benefit: Reduces validator centralization pressure from sophisticated bots.
Near-Zero
Toxic MEV
FIFO
Ordering Rule
ARCHITECTURAL TRADEOFFS
MEV Design: Monolithic L1 vs. Sovereign Appchain
Compares how base-layer design dictates MEV flow, capture, and mitigation strategies, impacting application economics and security.
| Feature / Metric | Monolithic L1 (e.g., Ethereum, Solana) | Sovereign Appchain (e.g., dYdX, Injective) | Shared Sequencer Network (e.g., Espresso, Astria) |
|---|---|---|---|
MEV Capture Point | Validator/Proposer (Post-tx inclusion) | Sequencer/Proposer (Pre-tx inclusion) | Shared Sequencer (Pre-tx inclusion, cross-chain) |
MEV Revenue Recipient | Validator (via priority fees) & Builder (via PBS) | Appchain Treasury & Validator Set | Shared Sequencer & Appchain (via revenue share) |
Searcher Competition Surface | Public mempool or private orderflow (e.g., Flashbots) | App-specific private mempool | Cross-rollup & cross-domain mempool |
Native MEV Mitigation | Proposer-Builder Separation (PBS), MEV-Boost | App-specific logic (e.g., frequent batch auctions) | Encrypted mempools, fair ordering |
Time-to-Finality for MEV | 12 seconds (Ethereum slot time) | < 1 second (appchain-specific consensus) | 2-5 seconds (shared sequencing latency) |
Extractable Value per TX | $10-50 (generalized DeFi) | $0.01-0.10 (optimized app logic) | Variable (aggregated cross-chain flow) |
Sovereignty over MEV Policy | Partial (policy set by network) | ||
Cross-Domain MEV Arbitrage | Via L1 settlement (slow, expensive) | Via IBC or custom bridge (fast, cheap) | Native within sequencer network (atomic) |
deep-dive
THE INFRASTRUCTURE LAYER
Architecting the MEV-Aware Stack: From Consensus to Cash Flow
The future of MEV is defined by chain-level design choices that embed extraction logic into the protocol itself.
Consensus is the first market. Proposer-Builder Separation (PBS) architectures like Ethereum's PBS and Solana's Jito-Solana formalize block building as a competitive auction. This separates block validation from construction, creating a transparent market for block space.
Execution environments dictate MEV flow. Rollups like Arbitrum and Optimism inherit but can reshape MEV. Arbitrum's Timeboost ordering and Optimism's upcoming MEV-Auction design demonstrate how sequencer design internalizes and redistributes value.
Searchers and Builders are the new L1. Specialized firms like Flashbots and Jito Labs operate as infrastructure layers. They provide the RPC endpoints (e.g., Flashbots Protect) and block-building software that applications and users depend on.
Application logic must be MEV-aware. Protocols like Uniswap V4 with hooks and CowSwap with batch auctions bake MEV resistance into their core design. They treat transaction ordering as a feature, not a bug.
Evidence: Ethereum's PBS flow now routes over 90% of block value through builders. This centralization is the trade-off for a formalized, efficient MEV market.
protocol-spotlight
CHAIN-LEVEL ARCHITECTURE
In the Lab: Appchains Redefining MEV
Application-specific blockchains are moving MEV from a protocol-level externality to a core, designable primitive.
01
The Problem: MEV as a Public Good
On L1s, MEV is a tax extracted by searchers and validators, with minimal value recaptured for users or the protocol.\n- Value Leakage: Billions in MEV are externalized, benefiting only the extractors.\n- Inefficient Auctions: Priority gas auctions on Ethereum waste >$100M annually in network congestion.
$1B+
Annual MEV
>100M
Gas Wasted
02
The Solution: Sovereign MEV Auctions (dYdX v4)
Appchains can internalize MEV via protocol-native auction mechanisms, turning it into a sustainable revenue stream.\n- Direct Protocol Capture: Validators bid for the right to produce blocks, with proceeds funding the treasury or stakers.\n- Predictable Economics: Separates transaction ordering from execution, reducing frontrunning and providing ~50% lower slippage for users.
100%
MEV Capture
-50%
Slippage
03
The Problem: Opaque Order Flow
General-purpose chains bundle all transactions, making it impossible to apply custom rules or privacy for specific applications like DEXes.\n- Frontrunning Inevitable: Searchers exploit predictable AMM mechanics on shared mempools.\n- No Application Control: Protocols like Uniswap cannot enforce fair ordering for their own users.
~200ms
Arb Latency
0%
App Control
04
The Solution: Enshrined Sequencers (Sei, Eclipse)
Appchains can run a dedicated, permissioned sequencer to guarantee transaction ordering rules, such as first-come, first-served (FCFS).\n- Eliminate PGAs: No priority gas auctions means ~500ms finality and no wasteful bidding wars.\n- Custom Logic: The chain can enforce application-specific fairness, akin to a centralized exchange's matching engine.
~500ms
Finality
FCFS
Ordering
05
The Problem: MEV Fragmentation Across Rollups
The multi-rollup future scatters liquidity and MEV opportunities, making cross-domain arbitrage complex and inefficient.\n- Inefficient Arbitrage: Searchers must manage capital and execution across 5+ different chains, increasing risk.\n- Liquidity Silos: MEV that requires moving assets between chains (e.g., UniswapX-style intents) faces bridging delays and costs.
5+
Chains
$10M+
Bridged Daily
06
The Solution: MEV-Aware Shared Sequencing (Espresso, Astria)
A shared sequencer network for rollups can coordinate cross-chain MEV, creating a unified liquidity and arbitrage landscape.\n- Atomic Cross-Rollup Bundles: Searchers can submit transactions that execute atomically across multiple appchains, capturing 10x larger opportunities.\n- Revenue Sharing: The sequencer layer can redistribute a portion of cross-domain MEV back to the constituent rollups.
10x
Opp. Size
Atomic
Execution
counter-argument
THE ARCHITECTURAL IMPERATIVE
The Liquidity Fragmentation Rebuttal
Chain-level design, not application-layer patches, determines the structure and scale of MEV.
MEV is a protocol property. The MEV landscape is not a random market force; it is a direct output of a blockchain's consensus, execution, and data availability design. Solana's parallel execution and fast block times create a different MEV profile than Ethereum's serialized execution.
Fragmentation is a design choice. The proliferation of L2s and appchains is not an accident; it is a deliberate architectural trade-off for scalability. This creates cross-domain MEV, a new primitive requiring specialized infrastructure like Across and LayerZero for atomic execution.
Shared sequencing is the rebuttal. Protocols like Espresso and Astria propose a unified sequencing layer that aggregates blockspace from multiple rollups. This re-centralizes ordering to recapture liquidity and MEV at the protocol level, countering fragmentation.
Evidence: The 90%+ validator adoption of MEV-Boost on Ethereum proves that economic incentives dictate infrastructure. Chain designers who ignore this will see their MEV exported to more efficient venues.
risk-analysis
CHAIN-LEVEL DESIGN CHOICES
The New Attack Vectors: Appchain MEV Risks
Appchains trade shared security for sovereignty, creating novel MEV vectors defined by their consensus, validator set, and execution environment.
01
The Centralized Sequencer Problem
A single, permissioned sequencer is a single point of failure and extraction. It enables time-bandit attacks and transaction censorship, negating the core value proposition of decentralization.\n- Risk: Complete control over transaction ordering and inclusion.\n- Example: Early Arbitrum and Optimism designs had centralized sequencers, now moving to decentralized models.
100%
Control
1
Point of Failure
02
Small Validator Set Cartels
Appchains with <50 validators are vulnerable to collusion. A small group can easily form a cartel to monopolize block production and extract maximal MEV, turning the chain into a rent-seeking platform.\n- Risk: O(1/n) trust model where 'n' is dangerously small.\n- Mitigation: Celestia-style data availability sampling or EigenLayer-secured validator sets increase decentralization.
<50
Validators
O(1/n)
Trust Model
03
Sovereign Execution Enables Custom MEV
Full control over the execution client (e.g., a custom Cosmos SDK or FuelVM chain) lets builders encode MEV capture directly into protocol rules. This can be predatory (front-running users) or beneficial (e.g., CowSwap-style batch auctions).\n- Risk/Opportunity: MEV is baked into the state transition function.\n- Example: dYdX v4 as a Cosmos appchain controls its own order book matching engine.
Protocol-Level
MEV Capture
Custom VM
Execution
04
Cross-Chain MEV Bridge Attacks
Appchain bridges to Ethereum/L1 are rich targets. Adversaries can perform time-bandit attacks on the appchain, then bridge stolen assets out before the fraudulent state is challenged. Light client bridges and optimistic verification have inherent latency vulnerabilities.\n- Risk: $100M+ bridge hacks often involve MEV-style sequencing attacks.\n- Vectors: Exploiting IBC packet ordering or LayerZero oracle delays.
$100M+
Hack Risk
~30 min
Challenge Window
05
The PBS (Proposer-Builder Separation) Mandate
Without enforced PBS, the block proposer is also the builder, creating a monopoly on MEV extraction. Appchains must implement PBS at the protocol level (like Ethereum) or face endemic centralization. MEV-Boost equivalents are non-negotiable infrastructure.\n- Solution: Protocol-enforced commit-reveal schemes or a native auction market for block space.\n- Goal: Separate profit motive from consensus safety.
Mandatory
For Health
MEV-Boost
Reference Model
06
Intent-Based Architectures as a Cure
Moving from transaction-based to intent-based systems (like UniswapX or Across) fundamentally reshapes the MEV landscape. Users submit desired outcomes, and a solver network competes to fulfill them optimally, internalizing and redistributing MEV.\n- Solution: MEV becomes a competitive service, not a predatory extractor.\n- Future: Appchains like Anoma are built from the ground up on intent-centric paradigms.
Solver Network
New Primitive
Redistributed
MEV Value
future-outlook
THE ARCHITECTURAL IMPERATIVE
The Inevitable Specialization: MEV-Optimized Chains
General-purpose L1s are obsolete for high-value DeFi; the future belongs to chains designed from the ground up to capture and redistribute MEV.
Monolithic L1s are MEV-inefficient. Their consensus, execution, and settlement layers are tightly coupled, creating a single, chaotic market for extractable value. This forces protocols like Uniswap and Aave to compete for block space with every NFT mint and social post, guaranteeing suboptimal execution and maximal leakage.
Specialized chains optimize the MEV supply chain. A modular stack separates execution environments (like Fuel or Eclipse) from a shared settlement layer. This allows the execution layer to implement native order flow auctions (OFAs), batch auctions, and encrypted mempools by design, not as an afterthought.
The business model shifts from gas to value capture. An MEV-optimized rollup does not maximize base fee revenue. It maximizes the total value captured for its users and validators through efficient bundling, then redistributes it via proposer-builder separation (PBS) and MEV burn. This aligns chain incentives with user outcomes.
Evidence: Ethereum's PBS via mev-boost and Flashbots SUAVE prototype this future. They demonstrate that separating block building from proposing increases chain revenue and reduces wasteful gas bidding. Dedicated chains will bake these mechanisms into their state transition functions.
takeaways
CHAIN-LEVEL MEV DESIGN
TL;DR for Architects and Investors
The MEV landscape is no longer just about searchers and builders; it's a protocol-level design space where architectural choices directly dictate extractable value, security, and user experience.
01
The Problem: In-Protocol Ordering is a Centralization Vector
Native block proposers with full ordering power create a single point of failure and rent extraction. This leads to proposer-builder separation (PBS) being a reactive patch, not a solution.
- Centralized Sequencing: A single entity controls transaction order and timing.
- Value Leakage: Proposer Extractable Value (PEV) is a tax on the entire system.
- Security Risk: High-value blocks make proposers targets for attacks.
>99%
Blocks Centralized
$1B+
Annual PEV
02
The Solution: Encrypted Mempools & Threshold Cryptography
Hide transaction content until after block commitment to neutralize frontrunning. This shifts the MEV game from speed to computation.
- Fair Ordering: Transactions are ordered while encrypted, then revealed.
- Builder Competition: Builders must bid on potential value, not snipe known opportunities.
- Protocols Leading: Adopted by Succinct, Eclipse, and research from Flashbots SUAVE.
~0s
Frontrun Window
+300%
Builder Overhead
03
The Problem: Intents Fragment Liquidity & Trust
User-centric intents (via UniswapX, CowSwap) push complexity to solvers but create a new layer of intermediation and cross-domain fragmentation.
- Solver Oligopoly: A few large solvers dominate, recreating centralization.
- Cross-Chain Complexity: Executing intents across Ethereum, Solana, Avalanche requires trusted relayers like Across or LayerZero.
- Liquidity Silos: Solvers manage private liquidity pools, reducing network effects.
3-5
Dominant Solvers
$500M+
Bridged via Intents
04
The Solution: Native Intents as a Protocol Primitive
Embed intent fulfillment and cross-domain communication directly into the chain's state machine. This turns solvers into a permissionless, verifiable market.
- Verifiable Execution: Solvers post bonds and proofs on-chain.
- Unified Liquidity: The chain itself becomes the settlement layer for all intent paths.
- Architectural Shift: Requires new VMs and consensus models, as seen in Anoma's vision.
1000x
More Solver Entrants
-90%
Relayer Trust
05
The Problem: MEV Revenue Funds Security, But Unfairly
MEV is a multi-billion dollar subsidy for validators, but it's captured asymmetrically, leading to stake centralization and unpredictable validator rewards.
- Rich Get Richer: Top validators with better MEV capture compound their advantage.
- Unstable Yields: Staking APR becomes volatile and dependent on predatory extraction.
- Protocol Distortion: Application design is warped to minimize losses, not maximize utility.
20-30%
APR from MEV
Top 10%
Capture 50%+
06
The Solution: MEV Smoothing & Socialized Distribution
Redistribute extracted value protocol-wide via mechanisms like MEV burn, MEV sharing, or threshold encryption to create a fairer, more stable security budget.
- Predictable Staking: Validator rewards are smoothed and normalized.
- Protocol Treasury: A portion of MEV is directed to public goods funding.
- Design Examples: Ethereum's PBS with MEV burn, Cosmos' Skip Protocol.
-70%
Reward Variance
$100M+/yr
To Public Goods
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