Realized Extractable Value

REV provides a direct, empirical measurement of the value that block producers successfully extract from transaction ordering. It is calculated by analyzing the on-chain state changes and profit flows to validator-controlled addresses after a block is finalized. This contrasts with MEV, which is a theoretical maximum based on potential opportunities. Key metrics include:

• Validator Profits: Direct payments from arbitrageurs or liquidators.
• Cross-Domain Flows: Value moved from L2 sequencers or other domains to the L1 proposer.
• Burn & Redistribution: Value captured via mechanisms like EIP-1559's base fee burn or proposer payments.

While Maximum Extractable Value (MEV) defines the total possible profit from reordering, including, or censoring transactions in a block, Realized Extractable Value (REV) is the subset that is actually captured. The gap between MEV and REV is caused by:

• Inefficient Searchers: Searchers may not find or execute on all profitable opportunities.
• Competition: Multiple searchers competing for the same opportunity can drive profits down via gas auctions.
• Protocol Design: Mechanisms like proposer-builder separation (PBS) or MEV-Boost on Ethereum explicitly route a portion of this value to validators, converting potential MEV into measurable REV.

REV is captured through several concrete on-chain mechanisms, which are identifiable and measurable:

• Arbitrage & Liquidations: Profits from DEX arbitrage and liquidation bonuses that are paid to the block proposer via transaction tips or direct transfers.
• Cross-Domain MEV: Value extracted from sequencing transactions across rollups (L2s) or other chains, where the L1 proposer captures fees for including certain bundles.
• Transaction Ordering Fees: Direct payments from users or searchers to have their transactions included in a specific position (e.g., via Flashbots bundles).
• Consensus-Level Value: In proof-of-stake systems, REV can include additional staking rewards from mechanisms that share transaction fees with proposers.

REV is a critical component of a validator's total reward, supplementing standard block rewards and transaction fees. It introduces variability and can significantly impact the security and decentralization of a proof-of-stake network.

• Revenue Stability: High and predictable REV can lower the token issuance needed to secure the network.
• Centralization Pressure: The ability to capture REV can favor larger, more sophisticated staking pools, creating centralization risks.
• Measurement for Incentive Design: Accurate REV tracking is essential for designing fair proposer rewards and smoothing pools to mitigate the randomness of this income.

The pursuit and capture of REV directly influence blockchain protocol architecture and the development of mitigating infrastructure.

• Proposer-Builder Separation (PBS): A design (e.g., Ethereum's roadmap) that separates the roles of block building and proposing to create a fair, transparent market for block space and REV.
• MEV-Boost: Middleware that allows Ethereum validators to outsource block building to a competitive market of builders, capturing REV efficiently.
• MEV Smoothing & Redistribution: Protocols like MEV-Share or MEV-Burn proposals aim to redistribute or destroy a portion of REV to reduce its negative externalities and centralization effects.

The most common form of REV, where a searcher profits from price differences across decentralized exchanges (DEXs) within a single block. The validator who includes and orders these transactions captures the profit as REV.

• Example: Buying ETH on Uniswap for $3,000 and immediately selling it on SushiSwap in the same block for $3,010.
• The profit is the arbitrage spread, which is paid to the validator as a priority fee or via a direct payment mechanism like Flashbots' MEV-Share.

REV captured from liquidating undercollateralized positions in lending protocols like Aave or Compound. Searchers compete to be the first to submit a liquidation transaction, paying the validator to prioritize it.

• The searcher repays the borrower's debt and receives the collateral at a discount as a liquidation bonus.
• A portion of this bonus is paid to the validator as REV, incentivizing them to include the profitable liquidation transaction ahead of competitors.

A predatory form of REV where a validator exploits a pending DEX trade. They front-run the victim's large trade to buy the asset first, then back-run it to sell at the inflated price.

• The validator profits from the artificial price movement they create around the victim's transaction.
• This directly extracts value from the trader via increased slippage and is a classic example of harmful REV that degrades user experience.

A sophisticated REV extraction method where a validator reorganizes the blockchain (reorg) to capture MEV from a past block. This is a risk in chains with probabilistic finality.

• The validator mines a competing chain in secret, then releases it to replace a previously accepted block if it contains more valuable MEV opportunities.
• This undermines finality and network security, representing REV captured at the expense of chain stability.

REV captured by exploiting price oracles that use on-chain data (e.g., DEX prices). A validator can manipulate the oracle price within a block to trigger favorable conditions.

• Example: Artificially lowering the price of a collateral asset to trigger unjustified liquidations, or inflating it to borrow more assets than allowed.
• The validator profits from these triggered events, extracting value from the protocol and its users.

The most direct form of REV, where validators maximize their share of the base fee and priority fees (tips) by strategically ordering transactions within a block.

• Validators can employ a greedy algorithm to select the set of transactions with the highest total fees.
• In Ethereum's EIP-1559 model, the base fee is burned, but the priority fee is REV captured by the block proposer.

Users can capture REV through mechanisms designed to return value:

• MEV Rebates: Protocols like CowSwap or UniswapX use batch auctions and order flow auctions to return captured MEV/REV to users as better prices.
• Proposer Commitments: Validators can commit to returning a portion of REV to stakers or a public good fund.
• Fair Sequencing Services: L2s or specialized sequencers can enforce fair ordering to prevent front-running, effectively redistributing value.

The base protocol and its stakers (delegators) can capture REV indirectly:

• In-Protocol PBS: Designs like Ethereum's enshrined PBS aim to force REV from builders back to the proposer, increasing staking rewards.
• Consensus Security: REV captured by honest proposers strengthens validator revenue, improving network security and decentralization by making staking more profitable.
• Smoothing & Redistribution: Proposals exist to smooth and redistribute REV across all validators to reduce validator inequality.

Malicious actors capture REV at the expense of other participants, representing a value leak from the system:

• Time-Bandit Attacks: Reorganizing the chain to steal already-included MEV.
• Sandwich Attacks: Front-running and back-running user transactions to extract value from slippage.
• Long-Range MEV: Influencing protocol governance or future state for profit. These captures are a net negative, representing extracted value that does not contribute to protocol security or user welfare.

Understanding REV capture requires distinguishing it from related forms of extractable value:

• Maximum Extractable Value (MEV): The theoretical maximum value extractable from a block state. REV is the subset actually captured.
• Dark Forest: The competitive, opaque environment where MEV/REV extraction occurs.
• Proposer-Builder Separation (PBS): A design paradigm that formalizes the roles in REV capture to improve efficiency and decentralization.

Realized Extractable Value (REV) is the profit a block proposer (e.g., validator, miner) actually earns by manipulating the transaction ordering in a block they create. This is distinct from the theoretical Maximum Extractable Value (MEV). REV is realized through specific strategies like arbitrage, liquidations, and sandwich attacks, where the proposer inserts their own transactions to capture value that would otherwise go to users.

While often conflated, REV and MEV are distinct:

• Maximum Extractable Value (MEV): The total potential value available for extraction from a set of pending transactions.
• Realized Extractable Value (REV): The value actually captured by a specific block proposer. Not all MEV becomes REV due to competition, gas costs, failed transactions, or protocol-level mitigations. REV is the measurable, on-chain outcome.

The pursuit of REV creates significant security risks:

• Consensus Instability: Validators may be incentivized to fork the chain or engage in time-bandit attacks to capture large, delayed REV opportunities.
• Centralization Pressure: Entities with advanced infrastructure (searchers, sophisticated validators) capture more REV, leading to potential validator set centralization.
• User Harm: Strategies like sandwich attacks directly harm end-users by causing worse trade execution and increased slippage.

REV represents a redistribution of value from general users to block producers and sophisticated searchers. This creates an economic subsidy for validators, which can be positive (securing the chain) or negative (extractive). Some protocols, like Ethereum post-EIP-1559 and with proposer-builder separation (PBS), aim to capture a portion of this value (e.g., via MEV-Boost auctions) and burn it or redistribute it to the protocol, mitigating validator centralization.

Several approaches aim to mitigate the negative externalities of REV:

• Proposer-Builder Separation (PBS): Separates block building from proposing, creating a competitive market for block space.
• Encrypted Mempools: Hide transaction content until inclusion to prevent frontrunning.
• Fair Ordering Protocols: Use cryptographic techniques to enforce a canonical transaction order.
• MEV Burn/Smoothing: Capture and burn REV or distribute it evenly among validators to reduce centralization incentives.

The maximum value that can be extracted from block production in excess of the standard block reward and gas fees. REV is a subset of MEV, representing the portion that is actually captured by searchers and validators after competition and costs. MEV includes both realized profits and failed or wasted extraction attempts.

A protocol design that separates the roles of block building (by builders) and block proposing (by validators). It is a primary architectural response to MEV centralization risks. PBS aims to:

• Democratize access to block building.
• Reduce the advantage of vertically integrated entities.
• Make REV extraction more competitive and transparent through an open builder market.

An entity (often a bot or automated strategy) that identifies and executes profitable MEV opportunities. Searchers compete to capture REV by:

• Arbitrage: Exploiting price differences across DEXs.
• Liquidations: Triggering undercollateralized loan closures.
• Sandwich Attacks: Profiting from predictable trades. They pay transaction fees and potential bribes (via PBS) to validators to include their profitable bundles.

A mechanism where a portion of the value extracted from transaction ordering (MEV) is destroyed (burned) instead of being captured by validators or searchers. Implemented on Ethereum via EIP-1559, it turns some MEV into a public good by reducing the ETH supply. MEV Burn transforms potential REV for private actors into a deflationary force for the network.

A class of consensus protocols and layer-2 solutions designed to prevent frontrunning and malicious reordering. They aim to produce a canonical transaction order that is fair (e.g., first-come-first-served) and resistant to manipulation, thereby eliminating certain types of REV at the protocol level. Examples include Chainlink Fair Sequencing Services and consensus mechanisms like Avalanche.