SuperEx Educational Series: Understanding Miner / Maximal Extractable Value (MEV)

1. The Birth of MEV on Ethereum

The idea of MEV originated with Ethereum, a chain where anyone can submit transactions that interact with decentralized applications. Before transactions are confirmed, they sit in a public “waiting room” called the mempool. Every node sees these pending transactions, including their gas prices and contents.

Miners — those responsible for producing the next block — can inspect the mempool and decide which transactions to include and in what order. If a miner notices a profitable arbitrage opportunity (for example, buying a token cheaply on one DEX and selling it at a higher price on another), they can reorder transactions to ensure they capture the profit first.

Originally, this kind of manipulation was called Miner Extractable Value because miners were the only actors capable of controlling the order of transactions. However, as Ethereum transitioned from Proof-of-Work to Proof-of-Stake in 2022, “miners” were replaced by validators, and the term evolved into Maximal Extractable Value to reflect the broader set of participants involved.

2. A Simple Example

Imagine two traders, Alice and Bob, both submitting a transaction to swap ETH for DAI on a decentralized exchange like Uniswap. Alice’s trade moves first and slightly increases the price of DAI. If Bob’s transaction executes right after, he’ll get fewer DAI for the same ETH.

Now, a third actor — let’s call them Carol — sees both transactions pending in the mempool. Carol can send her own transaction with a higher gas fee that goes between Alice and Bob’s orders. Her goal? To buy DAI before Bob’s trade and sell it back immediately after — capturing the small price movement as profit.

If Carol also happens to be the miner (or has an agreement with one), she can directly reorder these transactions to guarantee her advantage.

This kind of manipulation forms the foundation of MEV: the ability to profit by reordering or injecting transactions.

3. How the Mempool Enables MEV

The mempool is both a strength and weakness of blockchain transparency. On one hand, it allows open participation and auditability; on the other, it exposes everyone’s pending trades, which invites front-running and arbitrage.

In traditional finance, front-running is illegal because it gives insiders unfair access to trade information. In crypto, however, everything is public by design. Once a transaction enters the mempool, it can be observed and acted upon by anyone with a fast bot and capital.

This environment created a new industry of actors — MEV searchers — who constantly scan the mempool for profitable opportunities.

1. Common Forms of MEV

• •
  Arbitrage — The simplest and often least harmful form of MEV. Searchers exploit price differences between decentralized exchanges. Example: buying a token for $1.00 on SushiSwap and selling it for $1.02 on Uniswap in the same block.
• •
  Front-running — A bot detects a large pending trade and places its own transaction before it to profit from the resulting price movement.
• •
  Back-running — The opposite of front-running. A bot places its transaction immediately after another to benefit from the price impact it causes.
• •
  Sandwich attacks — A combination of the above two. The attacker places one transaction before and one after a victim’s trade, “sandwiching” it to capture price slippage at both ends.
• •
  Liquidation sniping — On lending platforms like Aave or Compound, searchers race to execute liquidations of under-collateralized loans. The fastest transaction captures liquidation fees.
• •
  Time-bandit attacks — Validators may even reorganize blocks retroactively if doing so yields higher MEV, though this is rare and highly destabilizing.

2. The Actors in the MEV Supply Chain

• •
  Searchers: Independent traders or algorithms scanning the mempool for opportunities. They construct profitable transaction bundles.
• •
  Builders: Entities that aggregate many searchers’ bundles into complete blocks and bid to have them included by validators.
• •
  Validators (or miners): The final gatekeepers who propose blocks to the network. They choose which builder’s block to accept, often based on the highest bid.

This multi-layered structure evolved because direct mempool competition became too chaotic. Instead of everyone spamming the network, coordination mechanisms emerged — most notably Flashbots.

1. Why MEV is Controversial

From one perspective, MEV is just a byproduct of free markets: if the system allows reordering, someone will exploit it. From another, it undermines fairness by giving insiders — those who can control or influence block production — an unfair advantage over regular users.

Users experiencing sandwich attacks often find their trades executed at much worse prices. During high-volatility periods, gas wars between bots can congest the network, driving up fees for everyone.

2. The “Dark Forest” of Ethereum

Developers often describe the mempool as a “dark forest” — a place where every move is hunted. This metaphor comes from a science-fiction novel where survival requires complete invisibility. Similarly, any visible transaction in the mempool risks being detected and exploited before it confirms.

Projects have tried to “hide” their transactions using private relays or encryption, but doing so reduces transparency and introduces new centralization risks.

3. Harmless vs. Harmful MEV

Not all MEV is bad. Some MEV activities, like arbitrage or oracle updates, actually keep markets efficient by aligning decentralized exchange prices. However, toxic MEV, such as sandwiching and time-bandit attacks, reduces user welfare and erodes trust.

The challenge is to separate productive MEV from extractive MEV — an ongoing research frontier in blockchain design.

1. How Flashbots Works

Flashbots introduced a new system where searchers can submit their profitable bundles directly to miners (later validators) through a private channel, instead of broadcasting them publicly in the mempool. This minimizes spam and reduces the chance of failed transactions.

With Ethereum’s shift to Proof-of-Stake, Flashbots introduced MEV-Boost, a middleware that allows validators to outsource block building to specialized builders via an auction system. Builders compete to offer validators the most profitable blocks, while validators simply pick the highest bid.

This structure formalized MEV into a three-layer economy:

• •
  Searchers find opportunities.
• •
  Builders package them efficiently.
• •
  Validators execute them and earn rewards.

2. The Benefits and Drawbacks

The benefits are clear:

• •
  Reduced network spam
• •
  More transparent MEV auctions
• •
  Broader participation opportunities

However, risks remain:

• •
  Builders and relays introduce new centralization points.
• •
  Validators depend on external infrastructure.
• •
  Private relay systems may lead to censorship or selective inclusion.

Despite these tradeoffs, Flashbots marked a huge leap in the institutionalization of MEV — turning chaos into coordination.

Solana

Solana’s high-throughput design leads to speed-based MEV, where high-frequency bots compete at sub-second timescales. Its architecture allows for transaction “localization,” meaning that MEV extraction often occurs within validators’ mempools before propagation. Solana’s MEV tends to mirror traditional high-frequency trading rather than slow on-chain arbitrage.

Binance Smart Chain (BSC)

BSC inherits much of Ethereum’s DeFi ecosystem, and thus, its MEV behaviors are similar. However, due to its more centralized validator set, MEV coordination is often less chaotic, though still present.

Layer-2 Networks

Arbitrum, Optimism, and zkSync introduce new layers where transaction ordering happens off-chain or within rollup sequencers. These sequencers act as centralized MEV controllers, deciding transaction order before batches are finalized on Ethereum. This raises both opportunities (simpler mitigation) and risks (trust assumptions). Some rollups are experimenting with decentralized sequencing to distribute MEV more fairly.

Cosmos and Modular Chains

In the Cosmos ecosystem, MEV plays out differently because each app-chain controls its own block space. Projects like Skip Protocol are building shared MEV markets to prevent harmful extraction while sharing revenues with validators and stakers.

Across all ecosystems, MEV has become a universal phenomenon — proof that wherever there’s block production, there’s value to extract.

Private Order Flow

Protocols such as Eden Network, Taichi Network, and MEV-Blocker allow users to submit transactions privately, bypassing the public mempool. This prevents front-running and sandwich attacks but introduces tradeoffs: users must trust the private relay to act honestly.

Auction-Based Systems

Instead of random ordering, some designs propose first-price or sealed-bid auctions for transaction slots. Users or searchers bid directly for inclusion priority. While this formalizes the process, it can also amplify gas competition if poorly implemented.

Cryptographic Fairness

Research is advancing into cryptographic methods like:

• •
  Threshold encryption, where transactions remain encrypted until block finalization.
• •
  Verifiable delay functions (VDFs) to randomize transaction ordering.
• •
  Fair Ordering Service (FOS), ensuring temporal fairness regardless of who submits first.

These techniques aim to preserve openness while eliminating informational asymmetry.

Proposer-Builder Separation (PBS)

Ethereum’s roadmap envisions native PBS, where the protocol itself separates block proposers from builders. This reduces centralization risk and ensures validators cannot censor or front-run transactions directly. MEV extraction becomes a transparent, protocol-level market.

Shared Sequencers in Modular Systems

In the emerging modular blockchain landscape, shared sequencers will handle transaction ordering across multiple rollups. This could democratize MEV by spreading revenue and decision-making among participants rather than concentrating it in one sequencer.

1. Intent-Based Architectures

The next evolution of blockchain UX is “intent-based architecture.” Instead of broadcasting specific transactions, users express intents — what they want to achieve (e.g., swap token A for B at the best price). Specialized solvers then compete to fulfill these intents optimally, removing the open-mempool problem altogether. Systems like Anoma, CowSwap, and SUAVE aim to turn MEV from a hidden tax into an efficiency mechanism.

2. MEV as a Shared Resource

Rather than viewing MEV as individual profit, some designs treat it as a collective good. For instance, validator-operator networks may share MEV proceeds with token holders, staking pools, or protocol treasuries. This “MEV redistribution” aligns incentives across the ecosystem.

3. Regulatory and Ethical Dimensions

As MEV increasingly resembles high-frequency trading, regulators may take interest. The debate will center on whether MEV constitutes market manipulation or legitimate algorithmic arbitrage. Clear standards around transparency, access, and fairness will be crucial.

4. The Road Ahead

Over the next decade, MEV will likely evolve from a “bug” into a core feature of blockchain economics — one that protocols design around rather than merely tolerate. Its management will define how decentralized finance scales sustainably.