Why Cross-Domain MEV Extraction Will Reshape Modular Economics

Arbitrageurs must now manage capital and state across dozens of rollups and L1s. This creates massive operational overhead and capital inefficiency, leaving significant value unextracted.

• Capital is siloed across domains, increasing opportunity cost.
• Latency arbitrage between rollup sequencers and L1 finality opens new attack vectors.
• ~$1B+ in annual cross-domain MEV is currently suboptimally captured.

Protocols like UniswapX, CowSwap, and Across abstract execution. Users submit signed intents ("I want this outcome"), and a network of solvers competes to fulfill them across domains, internalizing MEV.

• Better prices for users via competition among solvers.
• Atomic composability across chains without user bridging.
• MEV is captured and redistributed to the protocol and users, not just searchers.

Centralized sequencing is the new MEV bottleneck. Shared sequencers (e.g., Astria, Espresso) and cross-domain PBS (e.g., SUAVE) create competitive markets for block building across rollups.

• Prevents sequencer-level MEV exploitation by auctioning block space.
• Enables cross-rollup atomic bundles for complex arbitrage.
• Decouples trust from execution, aligning with modular ethos.

Protocols will no longer outsource all value extraction. By integrating solvers, shared sequencing, or PBS, they can directly capture and redistribute MEV, turning a parasitic cost into a sustainable revenue stream.

• Subsidize transaction fees or fund public goods via MEV auctions.
• Incentivize validator/sequencer decentralization with fair payout mechanisms.
• Shift from L1 burn to application-layer value capture as the primary economic model.

Sovereign chains and rollups with independent proposers create latency arbitrage windows. Bots will front-run state updates across domains, extracting value that should accrue to the chain's security budget.\n- Attack Vector: Exploiting ~2-12 second finality gaps between Celestia-data rollups and Ethereum settlement.\n- Economic Impact: Siphons sequencer/validator revenue, weakening the fee/security feedback loop.

Centralized sequencing on L2s (e.g., Arbitrum, Optimism) creates a single point of failure. MEV cartels will bribe sequencers to reorder or censor cross-domain messages, breaking atomic composability.\n- The Problem: A $1M+ bribe to censor a bridge withdrawal is rational if the extracted MEV is $10M+.\n- Protocols at Risk: Cross-chain lending (Compound, Aave) and intent-based systems (UniswapX, Across) become unreliable.

Modular chains bid for blob space on DA layers like Celestia or EigenDA. MEV searchers can manipulate this auction, creating artificial congestion to delay rival chains' inclusions and create arbitrage opportunities.\n- Mechanism: Spam the DA layer with high-fee bids, forcing economically weaker rollups into >1 block latency.\n- Result: PBS for DA becomes a requirement, adding complexity and centralization pressure.

Shared sequencers (e.g., Espresso, Astria) are pitched as a solution but centralize cross-domain MEV capture. A single entity controlling order flow for hundreds of rollups becomes the ultimate extractor.\n- New Monopoly: Replaces L1 proposer monopoly with an inter-domain sequencing monopoly.\n- Economic Capture: Can extract >90% of cross-rollup MEV, making rollups mere execution tenants.

Native bridges between modular chains (e.g., IBC, Hyperlane) hold $10B+ in TVL but have slow, batch-based finality. Searchers will perform liquidity arbitrage across identical pools on different domains, making capital inefficient.\n- Consequence: Increases slippage and LP losses, disincentivizing deep liquidity provision.\n- Amplified by: Intent-based routing (CowSwap, 1inch Fusion) which already exploits fragmented liquidity.

The only sustainable defense is architectural: designing the modular stack from first principles to minimize extractable value gaps. This means tightly coupled finality and MEV-redistribution mechanisms baked into interop layers.\n- Required Innovation: Atomic cross-domain blocks and proposer-builder separation for DA.\n- Bull Case: Forces a new design paradigm where economic security is a cross-stack primitive.