Miner Extractable Value (MEV)

The practice of placing a transaction immediately before a known pending transaction to profit from its anticipated market impact. This is a primary arbitrage strategy.

• Example: Seeing a large DEX trade about to execute, a searcher submits their own buy order with a higher gas fee to purchase the asset first, then sells it into the victim's trade for a profit.
• Enabled by the mempool, where pending transactions are visible before confirmation.

Placing a transaction immediately after a known pending transaction to capture value from the resulting state change. Often involves liquidation or DEX arbitrage.

• Example: After a large trade moves a DEX price, a searcher arbitrages the price difference against other exchanges.
• Liquidations: A searcher submits a transaction to liquidate an undercollateralized loan immediately after the price update that triggers it, claiming the liquidation fee.

A specific, harmful form of frontrunning that sandwiches a victim's trade between two attacker transactions.

• Mechanism: 1) Frontrun: Buy the asset the victim is buying. 2) Victim's trade executes, pushing the price up. 3) Backrun: Sell the purchased asset at the higher price.
• This results in slippage and worse execution for the victim, with profit extracted directly from them.

A consensus-level attack where a miner or validator intentionally reorganizes the blockchain (reorg) to extract MEV from a past block.

• The validator discards a recently produced block to mine an alternative version that includes more profitable transactions.
• This undermines finality and is considered a severe security threat, though mitigated in Proof-of-Stake by slashing penalties.

The ecosystem of actors that has emerged to specialize in MEV extraction and distribution.

• Searchers: Run algorithms to detect MEV opportunities and submit transaction bundles.
• Builders: Construct entire block contents, optimizing for MEV, often using services like Flashbots.
• Relays: Act as trusted intermediaries between builders and validators to prevent theft of bundle content.
• Validators/Proposers: Ultimately choose which block (or bundle) to propose, capturing the MEV via priority fees.

The practice of placing a transaction immediately before a known pending transaction to profit from its execution. This is often done by searchers who detect a profitable opportunity (like a large DEX trade) in the mempool and submit their own transaction with a higher gas fee to ensure it is processed first.

• Example: Detecting a large buy order for a token and buying it first to sell back at the higher price created by the victim's trade.
• Tools: Commonly executed via mempool snooping and automated bots.

Placing a transaction immediately after a known target transaction to profit from its side effects. Unlike frontrunning, this does not directly compete with the victim's transaction for position.

• Example: After a large DEX trade moves the price, a backrunner executes an arbitrage trade across other pools to capture the newly created price discrepancy.
• Sandwich Attacks: A combination of frontrunning and backrunning, where a victim's trade is sandwiched between two attacker transactions to extract maximum value from the price impact.

Exploiting price differences for the same asset across different decentralized exchanges (DEXs) or liquidity pools. This is often considered a "benign" form of MEV as it helps align prices across the ecosystem.

• Process: A searcher buys an asset on the cheaper DEX and simultaneously sells it on the more expensive DEX, pocketing the difference.
• Requirement: Requires atomic execution (all trades succeed or fail together) to avoid risk, often achieved via flash loans.

Triggering the forced closure of undercollateralized loans in lending protocols like Aave or Compound. Liquidators are incentivized with a liquidation bonus for repaying the borrower's debt and seizing their collateral.

• Mechanism: Searchers monitor loan health and compete to be the first to submit a liquidation transaction when the loan's health factor falls below a threshold.
• Impact: While profitable for searchers, this is a critical risk-management function for DeFi protocols.

A sophisticated attack where a miner or validator intentionally reorganizes the blockchain (a reorg) to revert a block that included MEV transactions, then re-mines it to capture that MEV for themselves. This undermines blockchain finality.

• Prerequisite: Requires significant hashing power (PoW) or staking control (PoS).
• Mitigation: Proposals like Proposer-Builder Separation (PBS) aim to separate block building from proposing to reduce the incentive for such attacks.

Extracting value from Non-Fungible Token markets, including:

• Trait Snipping: Buying an undervalued NFT immediately after a reveal event before the market adjusts to its new rarity traits.
• Floor Sweeping: Buying multiple NFTs at the floor price to create artificial scarcity and raise the floor, then selling at a profit.
• Mint Frontrunning: Securing a favorable position or rare NFT during a public mint by paying high priority fees, often crowding out regular users.

A malicious actor, typically a searcher, observes a pending transaction in the mempool and submits their own transaction with a higher gas fee to execute first. This exploits the pending transaction's outcome.

• Example: Front-running a large DEX trade to buy the asset first, profiting from the price impact.
• This leads to worse execution prices for regular users and increased network congestion.

A specific, harmful form of front-running that targets DEX trades. The attacker places one transaction before and one after the victim's trade.

• The first transaction buys the asset, driving its price up.
• The victim's trade executes at this inflated price.
• The attacker's second transaction sells the asset, profiting from the price difference.
• This directly extracts value from the victim's trade, a form of value leakage.

A severe consensus-level attack where a miner intentionally reorganizes the blockchain (reorg) to revert a block containing profitable MEV and claim it for themselves.

• This undermines blockchain finality and consensus security.
• It creates economic incentives to disrupt the canonical chain, especially when MEV rewards exceed the block reward and slashing penalties.

Block producers can exclude certain transactions from blocks entirely. This can be used for:

• Protocol-level censorship: Complying with regulatory demands to block addresses.
• Economic censorship: Excluding transactions that don't pay priority fees (tips).
• MEV-related censorship: Ignoring transactions that would reduce the MEV available for extraction in that block. Censorship threatens network neutrality and permissionless access.

Competition to capture MEV leads to gas price auctions, where searchers bid increasingly higher gas fees to get their bundles included.

• This drives up base fee costs for all network users.
• Creates unpredictable and spiking transaction costs.
• Results in network externalities where a few complex MEV transactions can price out regular users.

Markets that formalize the auction of transaction ordering rights. Users or applications can pay for guaranteed placement (e.g., top of block) or protection (e.g., non-frontrunnable slot). This turns opaque MEV extraction into a transparent, paid service.

• Use Case: A DEX paying to have its liquidity addition transaction placed atomically with a large trade.
• Mechanism: Searchers bid for the right to insert transactions in specific slots.
• Benefit: Revenue can be shared with the protocol or its users.