How Does MEV (Maximal Extractable Value) Relate to Arbitrage in DEX Pools?
MEV is the maximum value that can be extracted from block production by including, excluding, or reordering transactions within a block. Arbitrage is a primary source of MEV.
Searchers identify arbitrage opportunities and pay validators (or miners) a high fee to ensure their profitable transaction is included and ordered before others, often resulting in front-running or sandwich attacks.
Glossar
Block Production
Genesis ⎊ Block production, within cryptocurrency networks, represents the foundational process of creating and validating new blocks on a blockchain, fundamentally securing the network and enabling transaction finality.
Arbitrage Opportunities
Opportunity ⎊ Within cryptocurrency, options trading, and financial derivatives, arbitrage opportunities represent discrepancies in pricing across different markets or exchanges for identical or highly correlated assets.
Validators
Attestation ⎊ Validators, within cryptocurrency networks, represent nodes actively participating in a consensus mechanism, verifying and attesting to the validity of new blocks or transactions.
MEV Extraction
Extraction ⎊ Within cryptocurrency markets, particularly concerning options trading and financial derivatives, extraction denotes the opportunistic capture of value arising from predictable transaction ordering vulnerabilities within blockchain networks.
Decentralized Sequencer
Architecture ⎊ A Decentralized Sequencer fundamentally alters order flow management within cryptocurrency derivatives, moving from centralized exchange control to a network-based consensus mechanism.
Reordering Transactions
Action ⎊ Reordering Transactions is the deliberate action by a block producer or sequencer to change the sequence of pending transactions within a block from the order they were received in the mempool.