MEV (Maximal Extractable Value) refers to the profit that miners or validators can extract by strategically ordering, inserting, or censoring transactions within a block they produce. Originally called Miner Extractable Value, the term was broadened to Maximal Extractable Value as Proof of Stake networks replaced mining with validation.
MEV exists because the order in which transactions appear in a block can significantly impact outcomes, especially in decentralized finance. Common forms of MEV extraction include:
- Front-running — placing a transaction ahead of a known pending trade to profit from the resulting price movement.
- Sandwich attacks — wrapping a victim's trade between two attacker transactions to extract value from the price impact.
- Arbitrage — exploiting price differences between DEXs by reordering transactions to capture the spread.
- Liquidations — competing to be the first to liquidate undercollateralized positions on lending protocols.
MEV has become a multi-billion-dollar phenomenon on Ethereum. It is primarily extracted by specialized bots known as searchers, who monitor the public mempool for profitable opportunities and bid for priority placement through mechanisms like Flashbots.
While some forms of MEV, like arbitrage, can benefit the market by equalizing prices, others — like sandwich attacks — directly harm regular users. Solutions being explored include encrypted mempools, MEV-aware protocol designs, and fair ordering services.
MEV is closely connected to flash loans, which are often used to amplify MEV strategies without requiring upfront capital.