Maximal Extractable Value (MEV) Definition

Maximal Extractable Value, or MEV, is the extra profit that block producers and some others can earn by choosing which transactions go into a block, changing their order, or leaving some out. This profit is on top of regular block rewards and gas fees, and comes from how transactions interact on the blockchain.

Origin of the term and simple idea

The term was first called “miner extractable value” when proof-of-work miners built most blocks. As many blockchains switched to proof-of-stake, the name changed to “maximal” because validators and others can also earn this value. MEV is mainly about using control over which transactions are included and in what order to make extra profit.

How MEV actually happens

When you send a transaction, it first goes to the mempool, where everyone can see it before it is added to a block. The person building the next block can choose which transactions from the mempool to include and in what order. This control lets them arrange transactions to make a profit, such as by creating on-chain arbitrage or triggering a liquidation they can capture. Some participants, called searchers, scan mempools and create bundles to take advantage of these opportunities. They might pay higher fees to get their transactions placed in the right spot.

Common types of MEV

MEV appears in several common ways:

• Arbitrage: spotting a price difference across decentralized exchanges and executing trades to capture the gap.
• Front-running: inserting a transaction ahead of a known pending trade to take advantage of the expected price move.
• Back-running: placing a transaction immediately after a target trade to benefit from its effects.
• Sandwich attacks: placing one transaction before and one after a target trade to profit from the price change it causes.
• Liquidation capture: quickly carrying out the liquidation of undercollateralized positions on lending platforms to earn rewards.

Who benefits from MEV

Several groups can earn MEV:

• Block builders, such as miners or validators, control block content.
• Searchers, who are traders or bots that find and submit profitable transaction bundles.
• In some cases, specialized relays or block-building services reorder or package transactions for a fee.

Effects on users and networks

MEV can have both positive and negative effects. On the positive side, fast liquidations by MEV actors can help keep some DeFi systems stable by closing risky positions quickly. On the negative side, attacks like sandwiching can raise costs for regular users, cause bigger price changes, and make transactions less predictable. In rare cases, if MEV payouts are larger than normal block rewards, there may be incentives to reorganize blocks for extra profit, which can weaken network stability.

Ways people try to reduce harmful MEV

Developers and researchers have suggested several ways to reduce negative effects:

• Private transaction submission channels, which hide transactions from the public mempool until they are included.
• Ordering rules and fair sequencing services that try to make transaction orders less exploitable.

Bundled transaction protocols where searchers submit packages that are executed atomically, reducing front-running risk.These methods try to make transaction ordering fairer or hide sensitive information, so attackers cannot easily take advantage of pending transactions.