{"id":556,"date":"2023-05-29T10:50:01","date_gmt":"2023-05-29T15:50:01","guid":{"rendered":"https:\/\/www.stakepark.xyz\/?p=556"},"modified":"2023-05-29T10:50:02","modified_gmt":"2023-05-29T15:50:02","slug":"what-is-mev","status":"publish","type":"post","link":"https:\/\/www.stakepark.xyz\/what-is-mev\/","title":{"rendered":"What is MEV?"},"content":{"rendered":"\n
MEV (Maximum Extractable Value) for Ethereum<\/strong>: What it is and why it matters for stakers… \u2139\ufe0f Maximum Extractable Value (MEV<\/strong>) refers to the ETH that validators can earn by including, excluding, or reordering transactions before finalizing them. This can be done in the following methods: Arbitrage, Sandwich or Liquidation.<\/p>\n\n\n\n In recent years, the concept of Maximum Extractable Value (MEV) has become increasingly common and pertinent in the world of Ethereum. MEV refers to the total value that can be extracted from a set of transactions on a blockchain, usually by manipulating the order of transactions via arbitrage, sandwiching or liquidating.<\/p>\n\n\n\n In this article, we’ll explore what MEV is, why it matters, and how it’s impacting the Ethereum ecosystem. MEV is a term that was first introduced by a 2019 paper titled “Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges.” <\/p>\n\n\n\n The paper describes how certain actors in the Ethereum ecosystem can extract value from transactions by manipulating the order in which they are processed by the network.<\/p>\n\n\n\n In practice, MEV can take many different forms. For example, a validator may be able to include their own transactions in a block before other users’ transactions, allowing them to earn higher fees. Alternatively, an attacker may be able to manipulate the order of transactions in a way that allows them to execute a profitable trade before others can. In some cases, MEV can even lead to attacks on the underlying consensus mechanism of the blockchain, leading to a breakdown in trust and security. There are a variety of tactics are ways in which participants in the Ethereum ecosystem can extract value from transactions by manipulating the order in which they are processed by the network. Three common MEV tactics are arbitrage, sandwich attacks, and liquidations.<\/p>\n\n\n\n Arbitrage <\/strong>is a common MEV tactic that involves exploiting price differences between different markets. In the context of Ethereum, this typically involves buying an asset on one exchange where the price is lower and then selling it on another exchange where the price is higher. This is a common strategy used by traders to profit from market inefficiencies. However, MEV bots can automate this process by monitoring multiple exchanges simultaneously and executing trades at lightning speed to ensure they get the best possible price.<\/p>\n\n\n\n Sandwich <\/strong>attacks are a type of MEV tactic where bots insert transactions in between two legitimate transactions to profit from the price movement caused by the legitimate transactions. For example, a bot may insert a sell order between two buy orders for a particular asset, causing the price to temporarily drop. The bot can then buy the asset at the lower price and sell it back at a higher price once the market stabilizes.<\/p>\n\n\n\n Liquidations <\/strong>are another common MEV tactic in the context of decentralized finance (DeFi). In DeFi lending protocols, users can borrow assets by putting up collateral. If the value of the collateral drops below a certain threshold, the user’s position can be liquidated to protect the lender. MEV bots can profit from this process by monitoring lending protocols and inserting transactions to buy the collateral at a discounted price during the liquidation process.<\/p>\n\n\n\n But that’s not all. Some less common methods used in MEV are: Back-running<\/strong> is when a validator places their transaction right after another transaction, typically during token listings on DEXs. Front-running<\/strong> is when a validator copies a profitable transaction and pays a higher fee to execute it first, stealing gains. Spam attacks <\/strong>submit many transactions to prevent others from having theirs confirmed. Time-bandit attacks<\/strong> rewrite a blockchain’s history to steal funds from past smart contract allocations. Uncle-bandit attacks<\/strong> selectively bring rejected transactions back into the main blockchain to profit.
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<\/p>\n\n\n\nWhat is MEV?<\/h2>\n\n\n\n
View recent MEV transactions and data<\/a> on EigenPhi.
<\/p>\n\n\n\nWhat MEV tactics are used?<\/h3>\n\n\n\n
<\/p>\n\n\n\nWhy does MEV matter?<\/h3>\n\n\n\n