How Does Maximal Extractable Value (MEV) Relate to Front-Running in Decentralized Finance?
MEV is the profit validators or miners can extract by arbitrarily including, excluding, or reordering transactions within a block. Front-running is a form of MEV where a malicious actor sees a profitable pending transaction in the mempool and inserts their own transaction immediately before it by paying a higher gas fee.
This allows them to profit from the price change caused by the original, larger trade. Solutions like Flashbots and private transaction relays are designed to mitigate MEV-based front-running.
Glossar
Private Transaction Relays
Relay ⎊ Private Transaction Relays (PTRs) represent a paradigm shift in cryptographic transaction routing, particularly relevant within decentralized finance (DeFi) and options trading ecosystems.
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.
Private Mempools
Environment ⎊ Private Mempools are segregated, often encrypted, networks or channels through which users submit transactions directly to block builders or validators without exposing the transaction details to the public mempool.
Maximal Extractable Value
Value ⎊ Within cryptocurrency derivatives and financial engineering, Maximal Extractable Value (MEV) represents the profit achievable by strategically ordering transactions within a blockchain.