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Miner Extractable Value

What is MEV?

Miner Extractable Value (or MEV) is an umbrella term for any profit that can be captured by miners or keepers (third-party bots) in a blockchain ecosystem in addition to mining rewards, generally at the expense of normal users. MEV is a rapidly growing problem on the Ethereum blockchain
Miners are a fundamental component of any Proof-of-Work blockchain. They provide an essential service by aggregating pending transactions from the mempool into blocks, which are then written immutably to the public ledger. However, miners are able to arbitrarily include, exclude, and re-order transactions within a given block before it is mined. This capability can be (and regularly is) exploited to generate profit at the expense of normal users.
Although it's called Miner Extractable Value, the value is not only extractable by miners but most often also by third-party bots (called Keepers). MEV simply describes the theoretical upper limit of extractable on-chain value considering miners' fundamental control of the final order of transactions within blocks of a blockchain ecosystem. Simply put, MEV is the maximum amount of on-chain profit available.

The Problem with MEV

Because block producers are able to prioritize transactions with higher gas fees, a bidding war between bots (who either try to arbitrage or front-run) can occur. This hurts ordinary users and DeFi platforms, because these bidding wars drive up gas fees (Priority Gas Auctions) and cause slippage and failed transactions. MEV poses risks not only to the user but also to the consensus layer itself. The reorganisation of blocks, the reordering of transactions, and — even momentarily — the censorship of transactions can have profound impacts on the blockchain and breaks the assumptions of many applications.

How much MEV is available?

While it's hard to quantify the total amount of MEV available on-chain, Flashbots has created a live dashboard displaying how much MEV has been extracted over time. As of May 2021, around $3-4 million of MEV is being captured daily.
Total Extracted MEV - Flashbots MEV Explore v0
Research by Glassnode shows that Ethereum-based DeFi has seen exponential growth over the last several years and shows no signs of abating. As the Ethereum ecosystem continues to grow exponentially, so will the amount of MEV available to be captured on-chain.
Data and graphics by Glassnode

Common MEV Strategies

The most common MEV strategies employed by bots and miners are front-running, tailgating (a.k.a. back-running), and sandwiching. All three are predatory and unwelcome in the Ethereum ecosystem. Learn more about them here:
Last modified 1mo ago