Miner Extractable Value (MEV)

A searcher submits a transaction with a higher gas fee to execute before a target transaction they have observed in the mempool. This is commonly used to profit from predictable price movements in DEX arbitrage or to capture the value of a large, pending trade.

• Example: Buying an asset before a known large buy order to sell it back at a higher price immediately after.

A transaction is submitted to execute immediately after a target transaction. This is typical in DEX arbitrage, where a searcher profits from the price discrepancy created by the initial trade, or in liquidations, to claim collateral after a loan becomes undercollateralized.

• Example: Snapping up an under-priced asset on one DEX after a large trade, then selling it on another.

A combination of front-running and back-running that sandwiches a victim's large DEX trade. The attacker:

1. Front-runs the trade, buying the asset to drive the price up.
2. Lets the victim's trade execute at the worse price.
3. Back-runs, selling the asset at the inflated price for a profit. The victim suffers from slippage and worse execution.

A sophisticated form of MEV where a miner or validator reorganizes the blockchain (reorg) to extract value from a past block. This involves discarding a recently produced block in favor of an alternative chain that includes profitable MEV transactions. It undermines finality and is considered a severe security threat, mitigated by mechanisms like Proposer-Builder Separation (PBS).

The most common and often benign source of MEV. Searchers exploit price differences for the same asset across different decentralized exchanges (DEXs) or liquidity pools. This activity is economically efficient as it helps align prices across the ecosystem, but the profit from doing so is captured as MEV.

• Tools: Searchers use Flashbots bundles and sophisticated algorithms to execute these opportunities.

In lending protocols (e.g., Aave, Compound), undercollateralized loans can be liquidated for a bonus. Searchers compete to be the first to submit a liquidation transaction, paying high gas to win the gas auction. This activity is critical for protocol health but results in MEV extraction through the liquidation penalty.

• Example: A keeper bot automatically liquidates a position when its collateral ratio falls below the threshold.

The most fundamental MEV strategy, where a searcher profits from price discrepancies of the same asset across different decentralized exchanges (DEXs) or liquidity pools within a single block. The bot buys the asset at a lower price on one venue and instantly sells it at a higher price on another.

• Example: Buying ETH on Uniswap for $3,000 and selling it on SushiSwap for $3,010 in the same block.
• Key Tools: Flash loans are often used to fund these trades without upfront capital.

A strategy where a searcner triggers the forced closure of an undercollateralized loan in a lending protocol (like Aave or Compound) and claims a liquidation bonus. Bots compete to be the first to submit the liquidation transaction.

• Process: Monitors loan health; when collateral value falls below the required threshold, the bot repays the debt and seizes the collateral at a discount.
• Impact: Essential for protocol solvency but can be predatory, leading to "liquidation cascades."

A predatory strategy that exploits a visible pending transaction (e.g., a large DEX swap). The attacker places two transactions around the victim's transaction: one to buy the asset before the victim (front-running), and one to sell it after the victim's trade pushes the price up (back-running).

• Result: The victim gets a worse price due to slippage, while the attacker profits from the artificial price movement.
• Detection: Identified by analyzing transaction order and price impact within a block.

A sophisticated and contentious strategy where a miner or validator reorganizes the blockchain itself to extract MEV. This involves creating an alternative chain branch (a reorg) that excludes certain transactions and includes profitable ones, then getting this new chain accepted as canonical.

• Mechanism: Requires significant hashing power (PoW) or stake (PoS) to override consensus.
• Risk: Undermines blockchain finality and is considered a severe attack on network security.

Encompasses niche, complex, or emerging strategies beyond the major categories. These often involve interacting with multiple protocols and complex state changes within a single transaction bundle.

• Examples: NFT MEV (sniping undervalued NFTs, arbitraging across marketplaces), Oracle Manipulation (profiting from price feed updates), Governance Attacks (influencing DAO votes).
• Characteristic: Lower competition but higher technical and simulation complexity.

Front-running occurs when a searcher observes a pending transaction (e.g., a large DEX trade) and pays a higher gas fee to have their own transaction executed first, profiting from the anticipated price impact. A sandwich attack is a specific form where the attacker places one order before and one after the victim's trade, capturing the spread. These are the most common forms of time-bandit attacks that extract value from regular users.

A time-bandit attack involves a miner or validator intentionally reorganizing the blockchain (a reorg) to replace a recently mined block with a new one that includes more profitable MEV transactions. This undermines the finality of the chain. While costly on Proof-of-Work, it's a critical consideration for Proof-of-Stake networks where block production is more predictable. It represents a direct attack on blockchain liveness and consensus security.

Block producers can censor transactions by refusing to include them in blocks. This can be used to:

• Target specific applications or users.
• Exclude transactions that would reduce their MEV opportunities (e.g., arbitrage trades).
• Comply with external regulatory pressure. Censorship resistance is a core blockchain property, and pervasive MEV-driven censorship weakens network neutrality and decentralization.

The competition to capture MEV leads to gas auctions, where searchers bid increasingly high gas prices to have their bundles included. This results in:

• Gas price inflation for all network users.
• Network congestion, slowing down ordinary transactions.
• Increased volatility in base fee, making transaction cost prediction difficult. This creates a negative externality, pricing out regular users during periods of high MEV activity.

The large, consistent revenue from MEV creates a centralization pressure. Entities that can run sophisticated MEV extraction software (like searchers and block builders) gain a significant economic advantage. This can lead to:

• Proposer-Builder Separation (PBS) becoming necessary to level the playing field.
• The rise of dominant, centralized block-building markets.
• Smaller validators being outcompeted, reducing the decentralization of the validator set.

The most common form of MEV is on-chain arbitrage, where searchers exploit price differences between decentralized exchanges (DEXs) like Uniswap. A searcher's bot detects a profitable trade and pays a priority fee to a validator to have its transaction executed first, capturing the spread. This activity provides liquidity efficiency but can increase slippage for regular users whose trades are sandwiched.

MEV is integral to the health of overcollateralized lending protocols like Aave and Compound. When a loan falls below its required collateralization ratio, it becomes eligible for liquidation. Searchers compete to be the first to supply the repayment transaction and claim the liquidation bonus, paying fees to validators for priority. This competition helps maintain protocol solvency but can lead to aggressive gas bidding wars.

A malicious form of MEV where a searcher exploits a pending user transaction. In a sandwich attack, the attacker:

• Frontruns the victim's large DEX trade, buying the asset first.
• Lets the victim's trade execute, pushing the price.
• Backruns the victim, selling the asset at the higher price. This results in profit for the attacker and worse execution (negative slippage) for the victim, representing a direct extraction of user value.

MEV competition directly impacts network performance. Searchers engage in Priority Gas Auctions (PGAs), repeatedly outbidding each other to win block space, which can cause:

• Extreme volatility in gas prices.
• Network congestion for all users.
• Chain reorgs as validators are incentivized to orphan blocks with lower MEV. This creates an unstable and expensive environment, particularly on networks like Ethereum during peak activity.

A core architectural solution to mitigate MEV's negative externalities. PBS decouples the roles of block building (specialized builders who compete to create MEV-optimized blocks) and block proposing (validators who simply choose the most profitable block). This design, central to Ethereum's roadmap, aims to democratize access to MEV, reduce its wasteful aspects, and prevent validator centralization.

A specific type of MEV extraction where a searcher observes a pending transaction in the mempool and submits their own transaction with a higher gas fee to execute first, profiting from the anticipated price movement. This is a common strategy in DEX arbitrage and liquidations.

• Example: Seeing a large buy order for a token, a searcher front-runs it to buy the token first, then sells it to the original buyer at a higher price.

The practice of placing a transaction immediately after a known target transaction in the same block. This is often used to profit from the state changes caused by the initial transaction without preventing its execution.

• Common Use: A DEX arbitrage bot detects a large trade that creates a price imbalance between exchanges. It submits an arbitrage transaction right after the trade to capture the profit, ensuring the initial trade settles first.

A predatory MEV strategy that combines front-running and back-running. A searcher sandwiches a victim's large DEX trade between two of their own transactions.

1. Front-run: Buy the asset before the victim, driving the price up.
2. Victim's trade executes at the inflated price.
3. Back-run: Sell the asset immediately after, profiting from the price impact.

This results in slippage and worse execution for the victim.

A protocol design, central to Ethereum's roadmap, that separates the roles of block building and block proposing to mitigate MEV centralization risks.

• Builders: Specialized nodes (searchers) compete to create the most profitable block content, including MEV opportunities.
• Proposers (validators): Simply choose the most valuable block from builders via a commit-reveal auction. This democratizes access to MEV revenue and reduces the advantage of large, centralized validator pools.

A class of solutions aimed at preventing front-running and sandwich attacks by enforcing a fair, canonical order for transaction execution. Instead of pure gas price auctions, FSS uses techniques like commit-reveal schemes or trusted hardware to create a first-come, first-served or randomly ordered mempool.

• Goal: To return MEV profits to users by preventing predatory extraction and ensuring transaction order fairness.