MEV (Miner Extractable Value)

the profit can be extracted from a transaction
happen when miners prioritizing or re-ordering transactions in a block
- traders paying higher gas fee to miners to prioritize their profitable arbitrage
- miners make extra profit by executing TXs (transactions) with extra gas fee
Benefit: DEX arbitrage maintain correct price over different DEXs
Drawback: MEV incentive triggers bot gas war that makes normal users pay more gas/slippage

front running: putting a higher gas in a TX to win the gas auction, so blockchain finalise your TX before others to get a better deal , such as selling higher price/buying lower price, liquidators liquidating borrowers loans (selling borrowers’ collaterals) before they can repay the debt to extract profits
back running: putting a lower gas to proceed after a known pending target, such as queuing for token initial liquidity to be the first to trade
sandwiching: mix tactic of front & back running. When victim is queuing a TX on chain, attacker places one TX before & another right after a victim's pending TX. This allows attacker to buy before victim to push price up, then sell the token straight after the victim at a higher price, where the price gap is attacker's profit
DEX arbitrage: buy from DEX A at lower price and sell in DEX B at high price to make profit from price difference

A private network layer mitigates negative externalities of MEV to the Ethereum network

Flashbots Auction
- private transaction pool with a blind auction mechanism
- block producers to trustlessly outsource the work of finding optimal block construction
- users can privately communicate their bid and not require to pay for fail bid
Flashbots Data
- MEV inspector to find miner payments + tokens transfers and profit + swaps and arbitrages in a block
Flashbots Protect
- Flashbots RPC endpoint can be easily add to users' wallet
- TXs are masked by flashbots and not visible on public mempool
- provide frontrunning protection and no fail transaction (drop if not executable)

Last updated 2 years ago

the profit can be extracted from a transaction
happen when miners prioritizing or re-ordering transactions in a block
- traders paying higher gas fee to miners to prioritize their profitable arbitrage
- miners make extra profit by executing TXs (transactions) with extra gas fee
Benefit: DEX arbitrage maintain correct price over different DEXs
Drawback: MEV incentive triggers bot gas war that makes normal users pay more gas/slippage

front running: putting a higher gas in a TX to win the gas auction, so blockchain finalise your TX before others to get a better deal , such as selling higher price/buying lower price, liquidators liquidating borrowers loans (selling borrowers’ collaterals) before they can repay the debt to extract profits
back running: putting a lower gas to proceed after a known pending target, such as queuing for token initial liquidity to be the first to trade
sandwiching: mix tactic of front & back running. When victim is queuing a TX on chain, attacker places one TX before & another right after a victim's pending TX. This allows attacker to buy before victim to push price up, then sell the token straight after the victim at a higher price, where the price gap is attacker's profit
DEX arbitrage: buy from DEX A at lower price and sell in DEX B at high price to make profit from price difference

A private network layer mitigates negative externalities of MEV to the Ethereum network

Flashbots Auction
- private transaction pool with a blind auction mechanism
- block producers to trustlessly outsource the work of finding optimal block construction
- users can privately communicate their bid and not require to pay for fail bid
Flashbots Data
- MEV inspector to find miner payments + tokens transfers and profit + swaps and arbitrages in a block
Flashbots Protect
- Flashbots RPC endpoint can be easily add to users' wallet
- TXs are masked by flashbots and not visible on public mempool
- provide frontrunning protection and no fail transaction (drop if not executable)

Last updated 2 years ago