MEV-Share Model vs Closed MEV Auctions in Yield Protocols

Open order flow model: Searchers and builders compete on a public mempool for user-intent bundles. This matters for protocols like Uniswap or Aave seeking maximum extractable value returned to users via order flow auctions (OFAs).

Guaranteed fee capture: Protocols like MakerDAO with Spark Protocol or Compound can auction off exclusive rights to a known searcher (e.g., Oasis.app). This matters for protocols needing stable, predictable treasury income from liquidations.

Trade-off for openness: Requires sophisticated intent signaling (via EIP-7512), bundle validation, and trust in relay governance. This can add latency vs. a direct RPC call. Not ideal for ultra-low-latency arbitrage systems.

Trade-off for simplicity: Concentrates power with the auction winner, creating a potential single point of failure or censorship. Long-term, the winning searcher may capture disproportionate value, reducing user benefits.

Higher integration complexity: Requires managing private transaction relays, intent bundling, and potential fragmentation across multiple MEV-Share instances. The value capture for users depends on a competitive searcher market, which can be volatile. This matters for protocols with constrained engineering resources.

Limited solver set & potential for rent-seeking: A closed system may have fewer competing solvers than the open market, potentially leading to less efficient pricing. It can also isolate the protocol from broader ecosystem innovations in MEV capture. This matters for protocols in highly competitive DeFi verticals like perps or money markets.

Open participation for searchers: Any builder can compete for order flow, preventing a single entity from monopolizing extractable value. This matters for protocols like Aave or Compound that prioritize censorship resistance and a robust, competitive searcher ecosystem to minimize slippage for users.

Direct value redistribution: Users can opt-in to share transaction intent (via hashes) and receive a portion of the MEV captured, as seen in Flashbots' implementation. This matters for building user-centric protocols where retroactive rewards can improve retention and transparency, turning a cost into a potential yield source.

Relies on external relay infrastructure: Integrating with Flashbots Protect or a custom SUAVE appchain adds system complexity. This matters for high-frequency yield strategies (e.g., perp DEX arbitrage) where sub-second latency is critical, and dependency on an external relay can introduce bottlenecks and points of failure.

Guaranteed revenue share: Protocols like CowSwap (via CoW Protocol) or a custom private RPC channel negotiate fixed fees or a percentage of captured MEV. This matters for protocol treasuries requiring predictable, budgetable income streams from their own order flow, with full control over auction parameters.

Customizable auction logic: The protocol can enforce specific rules (e.g., maximum slippage, whitelisted solvers) and integrate directly with a trusted builder set. This matters for sophisticated vault strategies (like Yearn or Gamma) where execution quality and minimization of toxic MEV (e.g., sandwich attacks) are non-negotiable.

Creates walled gardens: By routing order flow to a limited set of partners, it reduces liquidity and composability across the broader DeFi stack. This matters for protocols whose value depends on network effects (e.g., lending markets); fragmenting block space can lead to worse prices for end-users compared to a shared, open marketplace.