MEV (maximal extractable value) is the profit that can be made by choosing which transactions go into a block and in which order. Because pending transactions are visible before they are confirmed, specialised bots, called searchers, can react to them: buying just before a large trade, liquidating a loan the moment it becomes eligible, or capturing a price difference between two exchanges. MEV was originally called miner extractable value, from the time Ethereum still used mining.
Common Types of MEV
- Arbitrage: buying on one DEX and selling on another when prices differ. Generally seen as healthy, because it aligns prices.
- Liquidations: repaying under-collateralised loans in lending protocols in exchange for a bonus.
- Sandwich attacks: placing a buy right before a user's swap and a sell right after it, so the user gets a worse price. Harmful to users.
- Front-running and back-running: copying or reacting to a profitable pending transaction.
How MEV Works Today
On Ethereum, most blocks are built by specialised builders who collect transaction bundles from searchers and bid for the right to have their block proposed. Validators receive these blocks through MEV-Boost, a system that separates block building from block proposing. Much of this activity started with Flashbots, which introduced private channels for bundles to reduce harmful side effects.
Protecting Against MEV
- Slippage limits on swaps, so a sandwich cannot push the price too far.
- Private transaction submission through MEV-protected RPC endpoints, so transactions are not visible in the public mempool.
- Batch auctions and intent-based trading, where orders are matched in a way that leaves less room for extraction.
- Protocol design with robust oracles and time-weighted prices, so contracts cannot be manipulated within one block.
For trading software, MEV is both a risk and a factor in execution quality. See on-chain trading bots and DeFi development.
Frequently Asked Questions
Is MEV illegal?
MEV itself is part of how public blockchains work. Some strategies, such as sandwiching users, are widely considered harmful, and the legal view on specific practices is still developing.
How can I avoid sandwich attacks?
Use tight slippage limits and send swaps through an MEV-protected RPC endpoint or a trading interface that offers protection.
Does MEV exist on layer 2 networks?
Yes, although the form differs. Many layer 2 networks use a central sequencer that orders transactions, which changes how MEV can be extracted.