What Is ‘Miner Extractable Value’ (MEV) in Relation to Transaction Ordering?
MEV is the profit that validators (or miners in PoW) can extract by strategically ordering, censoring, or inserting transactions within a block. This includes front-running decentralized exchange trades or liquidating positions.
It is a controversial practice that can negatively impact users by causing higher slippage and is a major area of research and mitigation efforts.
Glossar
Liquidation
Trigger ⎊ Liquidation in cryptocurrency derivatives represents the forced closure of a trading position due to insufficient margin to cover accruing losses, a critical event impacting market stability.
Decentralized Exchange
Architecture ⎊ A decentralized exchange (DEX) fundamentally diverges from traditional order book exchanges through its reliance on smart contracts and blockchain technology to facilitate peer-to-peer trading, eliminating the need for a central intermediary.
Slippage
Variance ⎊ Slippage, within cryptocurrency, options, and derivatives, represents the difference between the expected price of a trade and the price at which the trade is actually executed, stemming from market dynamics and order book depth.
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.
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.
Miners
Validation ⎊ The term "Miners," within cryptocurrency contexts, fundamentally denotes entities responsible for validating and adding new transaction records to a blockchain.