MEV (Maximal Extractable Value)

MEV refers to the maximum value that can be extracted from block production beyond the standard block reward and gas fees. It arises from the ability of block producers to include, exclude, or reorder transactions within a block.

• Sandwich Attacks: A bot detects a large pending swap on a DEX, places a buy order before it (frontrunning) and a sell order after it (backrunning), profiting from the price impact.
• Frontrunning: Detecting a profitable transaction in the mempool and executing a similar one first with a higher gas price.
• Backrunning: Placing a transaction immediately after a known transaction to capture the opportunity it creates (e.g., arbitrage after a large trade).
• Liquidations: Bots racing to execute liquidations on lending protocols to earn the liquidation bonus.
• JIT (Just-In-Time) Liquidity: Adding liquidity to a pool right before a large trade and removing it immediately after to capture fees.

• Flashbots: A research organization building tools to mitigate MEV's negative externalities
• Private Mempools: Submit transactions directly to validators, bypassing the public mempool
• MEV-Aware DEXs: DEXs that route trades to minimize MEV extraction (e.g., CoW Protocol)