What Is the Potential Impact of “Maximal Extractable Value” (MEV) on Transaction Ordering?
Maximal Extractable Value (MEV) is the profit a miner (or validator) can make by arbitrarily including, excluding, or reordering transactions within a block. MEV can significantly impact transaction ordering by incentivizing miners to deviate from a simple fee-per-byte prioritization.
For example, a miner might reorder transactions to profit from arbitrage opportunities or liquidations. This practice can lead to front-running, where a miner places their own profitable transaction just before a large user transaction, affecting the user's execution price.
Glossar
Transaction Ordering
Sequencing ⎊ Transaction ordering within cryptocurrency, options, and derivatives markets establishes the chronological execution of trades, critical for maintaining systemic integrity and preventing manipulation.
Extractable Value
Definition ⎊ Extractable Value, commonly known as MEV, quantifies the profit a block producer can realize by including, excluding, or reordering transactions within a block beyond the standard block reward and explicit transaction fees.
Arbitrage Opportunities
Exploitation ⎊ Arbitrage Opportunities in crypto derivatives arise from temporary price dislocations between related instruments across different venues or between the derivative and its underlying spot asset, demanding rapid, automated execution to capture the spread.