MEV
MEV (Maximal Extractable Value) is the profit that can be extracted by reordering, including, or excluding transactions in a block beyond standard block rewards and fees. It is the on-chain equivalent of high-frequency trading edge, plus features unique to public mempools and smart-contract composability.
✦ Key Insight
MEV is paid by ordinary traders, often invisibly, through worse fill prices on swaps and lower returns on LP positions. Understanding MEV — and how to defend against it — is essential for anyone trading on-chain at meaningful size.
✕ Common Misconceptions
Setting wide slippage on large trades, painting a target on yourself.
Using public RPC endpoints when private order flow services exist.
Assuming MEV only affects huge swaps — it scales to whatever size is profitable.
Detailed Explanation
How It Works: Searchers run bots that scan the mempool for profitable patterns: arbitrage across DEXes, liquidations, sandwich attacks against large swaps. They submit bundles to block builders, who include them in the optimal order. Validators receive a share of MEV through proposer-builder separation.
FAQs:
Is all MEV bad? No — arbitrage MEV often improves market efficiency. Sandwich MEV is purely extractive.
How do I avoid being MEVed? Use private RPCs (Flashbots Protect, MEV Blocker), tight slippage, and intent-based execution where possible.
In Practice
Dig Deeper
Arbitrage
Arbitrage is a trading strategy where a trader buys the same crypto asset on one exchange at a lower price and sells it on another exchange at a higher price. The goal is to profit from the temporary price difference between markets.
Slippage
Slippage is the difference between the expected price of a trade at the time of submission and the actual executed price, caused by market movement or insufficient liquidity during confirmation.