Understanding MEV: Miner Extractable Value

By: Eliza Bennet

Miner Extractable Value (MEV) represents the profit miners can derive from controlling transaction ordering within blocks they mine in blockchain networks. Initially highlighted in Ethereum, MEV encompasses various activities like front-running, arbitrage, and sandwich attacks, impacting both miners and regular users. Miners can reorder, include, or exclude transactions, seizing opportunities for higher profitability beyond standard block rewards and transaction fees.

Front-running involves miners inserting transactions ahead of others to leverage price changes, while arbitrage exploits price disparity across exchanges. Sandwich attacks sandwich a user's transaction between two of the attacker's own, manipulating the price movement for personal gain.

MEV poses challenges by exacerbating network congestion and fairness concerns, prompting the development of solutions like Flashbots—a project aimed at creating transparent and fair MEV extraction mechanisms.

Focusing on MEV unveils the intricate balance between incentivizing miners and maintaining a fair user experience, driving ongoing research and innovation in the blockchain ecosystem.