MEV

⭐ 1. WHAT IS MEV? (Deep Explanation)

MEV = profit extracted by controlling the ordering of transactions inside a block.

Meaning:

Who controls the order of transactions controls the profits.

Because different order = different outcome.

FOR EXAMPLE:

If Alice buys ETH
and one second later Bob buys ETH
the price is different.

So the person ordering transactions can:

insert their own transaction
reorder others
censor some
bundle multiple txs together

…and make money.

⭐ 2. WHY DOES MEV EXIST?

Because:

Blockchains allow:

Public mempools
Deterministic state machine
Known execution rules
Transparent AMMs

Since everything is public,
anyone can predict what will happen next if a transaction were executed.

That means:

✔ If someone does a big Uniswap swap → price will jump
✔ If someone is liquidatable → someone will liquidate them
✔ If someone creates arbitrage → someone will execute it

Therefore:

There is money to be made just by ordering transactions correctly.

⭐ 3. MEV = SPECIFICALLY ABOUT TRANSACTION ORDERING

Not about contract bugs
Not about rugpulls
Not about scams

MEV = ordering transactions to extract profit.

⭐ 4. WHO EXTRACTS MEV?

Before Ethereum Merge (PoW):

Miners extracted MEV
Searchers sent bundles to miners via Flashbots

After Ethereum Merge (PoS):

Block proposers (validators) extract MEV
MEV-Boost introduced a new system:
- Searchers
- Builders
- Relayers
- Validators

⭐ 5. MEV ACTORS AND THEIR ROLES

🔷 1. Searchers

Independent bots scanning mempool for opportunities.

They:

Detect arbitrage
Detect liquidations
Build transaction bundles
Simulate profits
Send bundles to builders

🔶 2. Builders

Collect bundles and normal txs → construct the MOST profitable block possible.

Their job:

reorder bundled transactions
insert searcher’s txs
maximize MEV
produce block body

🔵 3. Relayers

Middleware ensuring:

Builder cannot lie about block
Proposer cannot steal searcher’s MEV
Deliver block header proofs to validators

🔴 4. Proposers (Validators)

They sign the block that builder gives them.

They get:

Tips
MEV share
Priority fees

This system is called PBS (Proposer–Builder Separation).

⭐ 6. WHERE MEV COMES FROM (REAL SOURCES)

MEV categories:

⭐ A. ARBITRAGE MEV

(DEX to DEX, cross-DEX)

Example:

Uniswap price = 2000
Sushiswap price = 1990

Searchers quickly buy at Sushi + sell at Uniswap.

MEV: profit from price difference.

⭐ B. SANDWICH ATTACKS

User sends a big swap:


User wants to buy ETH

Attacker does:


Front-run: buys ETH first → price up
User swaps at higher price
Back-run: sells ETH → profit

This is gas bidding → private mempools reduce this.

⭐ C. LIQUIDATIONS (AAVE, Compound)

User loan becomes liquidatable if collateral falls.

Liquidator bots:

monitor oracle feed
detect liquidations
submit liquidation tx
profit from liquidation bonus

This is HUGE MEV.

⭐ D. BACKRUNS (internal pools arbitrage)

Example:

User swap changes Uniswap price
→ now there is arbitrage between Uniswap and Sushi
→ bot performs backrun swap

⭐ E. AMM–AMM arbitrage

Between:

Uniswap v2
Uniswap v3
Curve
Balancer
DEX aggregators

Very common.

⭐ F. NFT arbitrage

Buying undervalued NFT → quick relist.

⭐ G. CEX–DEX arbitrage (Cross exchange)

EVM bots detect price misalignment.

⭐ 7. HOW MEV ACTUALLY WORKS IN THE BLOCK LIFECYCLE

Let’s take you through the REAL sequence:

⭐ Step 1 — User broadcasts transaction

It enters the public mempool.

Everyone sees it.

⭐ Step 2 — Searchers simulate it

Searchers simulate:


if USER swaps 1000 ETH…
what arbitrage does that create?

If they detect profit, they create a bundle:


[
  tx1 (front-run bot),
  tx2 (user),
  tx3 (back-run bot)
]

⭐ Step 3 — Builder selects best bundles

Builder chooses combination of:

searcher bundles
normal txs
optimal ordering

Builder constructs the most profitable block.

⭐ Step 4 — Builder submits to relayer

Relayer:

verifies block
ensures builder cannot steal searcher’s MEV
ensures proposer cannot steal builder’s MEV

⭐ Step 5 — Validator (proposer) signs block

Validator gets priority fees + MEV cut.

⭐ 8. WHY MEV IS INEVITABLE?

Because ANY deterministic blockchain with a public mempool MUST allow:

arbitrage
liquidations
backruns
pricing inefficiencies

You cannot prevent MEV.

But you can mitigate harmful MEV.

⭐ 9. TYPES OF MEV

✔ Good MEV (benign)

arbitrage
liquidations
price alignment
oracle stability

❌ Bad MEV (toxic)

sandwich attacks
time bandit attacks
frontrunning
generalized frontrunning
gas sniping

This distinction is important.

⭐ 10. MEV PROTECTIONS

✔ Private mempools (Flashbots Protect)

Hide user tx from attackers.

✔ Intent-based systems (CoW Protocol)

Users submit “what they want”, not raw tx.

✔ DEX MEV protection (UniswapX, CowSwap)

Orderflow auctions reduce sandwiching.

⭐ 11. SUMMARY OF MEV (Deep Understanding)

MEV is the value extracted by:

controlling tx ordering
inserting txs
removing txs
simulating mempool
building most profitable blocks

Searchers → build profitable bundles
Builders → create most valuable block
Proposers → sign it
Relayers → ensure fairness

MEV is the economic engine that:

keeps DeFi prices aligned
performs liquidations
keeps AMMs efficient

MEV can be both good and harmful.

MEV

MEV