Define ‘Miner Extractable Value’ (MEV) and Provide a Common Example.
MEV is the profit that miners (or validators in PoS) can extract by arbitrarily including, excluding, or reordering transactions within the blocks they produce. It is a measure of the total value they can gain beyond the standard block reward and transaction fees.
A common example is a 'DEX Arbitrage' bot that observes a price difference across two decentralized exchanges in the Mempool and submits a transaction to profit from it, paying a high fee to ensure front-running.
Glossar
Mempool
Component ⎊ The Mempool is the waiting area where broadcasted but unconfirmed cryptocurrency transactions reside before being selected by a miner or validator for inclusion in the next block.
Miners
Validation ⎊ The term "Miners," within cryptocurrency contexts, fundamentally denotes entities responsible for validating and adding new transaction records to a blockchain.
Validators
Role ⎊ Validators are the network participants, typically in Proof-of-Stake systems, responsible for verifying the correctness of new transactions and proposing new blocks to be added to the blockchain ledger.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.
Mev
Extraction ⎊ Maximal Extractable Value, or MEV, refers to the profit that can be extracted by block producers through their ability to reorder, insert, or censor transactions within a block.