What Is “Miner Extractable Value” (MEV) and How Does It Affect Arbitrage?
MEV is the profit miners (or validators in Proof-of-Stake) can earn by arbitrarily including, excluding, or reordering transactions within the blocks they produce. Arbitrage bots often pay high gas fees to be front-run or "sandwiched" by MEV bots, which can copy the profitable trade and execute it first.
This process significantly reduces the profitability of public arbitrage transactions.
Glossar
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.
Gas Fees
Mechanism ⎊ Gas fees represent the computational cost required to execute transactions on a blockchain network, functioning as a deterrent against denial-of-service attacks and incentivizing miners or validators to process transactions.
Profitability
Yield ⎊ Within cryptocurrency derivatives and options trading, yield represents the aggregate return generated from a portfolio or strategy, encompassing premiums, gains from underlying asset movements, and any associated financing costs.
Arbitrage
Exploitation ⎊ Arbitrage, within cryptocurrency, options, and derivatives, represents the simultaneous purchase and sale of an asset in different markets to capitalize on transient price discrepancies, effectively a risk-free profit opportunity.
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.
Miners
Validation ⎊ Miners, within the cryptocurrency ecosystem, represent network participants who compete to bundle pending transactions into blocks, subsequently adding these blocks to the blockchain through computationally intensive processes.