What is MEV in cryptocurrency?

Maximal Extractable Value (MEV), originally termed Miner Extractable Value, is the profit that block producers (miners in proof-of-work, validators in proof-of-stake) can extract by manipulating the ordering, inclusion, or exclusion of transactions within the blocks they produce. MEV exists because the order in which transactions execute within a block determines their outcomes, and whoever controls transaction ordering can exploit this to capture value.

The most common forms of MEV include: sandwich attacks, where a searcher places a buy order before and a sell order after a large decentralized exchange trade, profiting from the price impact at the victim's expense; arbitrage, where price discrepancies between decentralized exchanges are corrected by searchers who submit transactions to buy cheap and sell expensive; and liquidations, where searchers compete to liquidate undercollateralized lending positions and claim the liquidation bonus.

On Ethereum, the MEV ecosystem has become highly sophisticated. Specialized "searchers" identify MEV opportunities and submit bundles of transactions to block builders through MEV-Boost, an out-of-protocol auction system that separates the roles of block building (ordering transactions) and block proposing (validators who attest to blocks). This Proposer-Builder Separation (PBS) creates a competitive market for block space where builders bid for the right to construct blocks, with a portion of MEV flowing back to validators as increased staking rewards.

MEV is a double-edged phenomenon. On one hand, arbitrage MEV improves market efficiency by keeping prices aligned across venues. On the other hand, sandwich attacks and related forms represent a hidden tax on users, degrading execution quality. Researchers estimate cumulative extracted MEV on Ethereum exceeds several billion dollars since 2020. Efforts to mitigate harmful MEV include encrypted mempools (preventing frontrunning by hiding transaction details until ordering is committed), intent-based trading systems, and batch auction mechanisms that eliminate ordering advantages within a block.