MEV set of strategies that allow blockchain participants to extract additional profit by controlling the order in which transactions are included in a block.
In other words, it refers to monetizing the right to determine:
which transactions are included in a block,
in what order they are processed,
which operations are excluded
The concept first emerged in 2019 on the Ethereum network. At that time, Ethereum operated on the Proof-of-Work consensus mechanism, where blocks were created by miners*. Therefore, MEV originally stood for Miner Extractable Value.
* Miners are participants in a blockchain network who create new blocks and validate transactions in Proof-of-Work systems. They use computational power to solve complex problems and receive rewards for successfully adding blocks.
After Ethereum transitioned to Proof-of-Stake in 2022, control over block production shifted to validators*, and the MEV (Maximal Extractable Value) model became accessible to a broader range of participants, including specialized operators known as MEV searchers.
* Validators are network participants who verify transactions and create new blocks in Proof-of-Stake systems. Unlike miners, they do not rely on energy-intensive computations; instead, they validate blocks based on the amount of cryptocurrency they have staked in the network.
Mechanics of MEV
In blockchains, transactions are not added to the ledger immediately. First, they enter the mempool*, where they wait to be processed.
* A mempool is a queue of unconfirmed transactions on a blockchain. When a user submits a transaction, it first enters the mempool and waits until a validator or miner includes it in the next block.
At this stage, the key opportunity for extracting MEV arises: network participants can analyze incoming transactions and influence their priority.
The MEV ecosystem typically includes two categories of participants:
Validators — create blocks and manage transaction ordering, extracting additional revenue through fees and optimization of execution order
MEV searchers — use algorithmic strategies to identify profitable opportunities and submit their own transactions with higher priority
The key tools are MEV bots, which scan the mempool in real time and respond to market opportunities.
Main MEV strategies
1. Arbitrage (profit from price differences)
Arbitrage* occurs when the price of the same asset differs across decentralized platforms. An MEV bot captures this difference by executing a series of trades: buying on the cheaper platform and selling on the more expensive one.
* Arbitrage is a strategy of generating profit from price differences of the same asset across exchanges, protocols, or liquidity pools. For example, an asset can be bought cheaper on one platform and almost immediately sold at a higher price on another.
In addition to generating profit, such activity helps equalize prices and improves market efficiency.
2. Liquidations (forced position closure)
In lending protocols such as Aave, users can borrow funds against crypto collateral. This means that to receive a loan, a user must first deposit collateral whose value typically exceeds the loan amount.
Each position has a liquidation threshold — the minimum acceptable ratio of collateral value to debt. If the market moves against the borrower (for example, the price of the collateral drops), the position becomes less stable.
The process works as follows:
The user deposits collateral (e.g., ETH) and takes a loan in another asset.
The protocol continuously monitors the collateral-to-debt ratio.
If the collateral price falls and the ratio drops below the required level, the position becomes “at risk.”
Once a critical threshold is reached, liquidation (forced closure) is triggered.
During liquidation, part of the collateral is automatically sold to repay the debt.
MEV bots track such states and initiate liquidation transactions first, receiving rewards for maintaining the protocol’s solvency.
3. Front-running (transaction preemption)
The front-running strategy is based on the fact that all unconfirmed transactions are visible in the mempool in advance. The mechanism works as follows:
Trade detection. An MEV bot monitors the mempool and identifies a large transaction — for example, a token purchase on a decentralized exchange (such as Uniswap). Large trades almost always move the price, especially in pools with limited liquidity.
Price impact estimation. The bot calculates how the transaction will affect the market. If a price increase is expected, a profit opportunity emerges.
Inserting its own transaction “ahead.” The bot submits its own buy transaction with a higher fee so that the validator includes it first.
Execution of the original trade. The user’s transaction is then executed. Since the price has already increased due to the bot’s action, the user buys at a worse price than expected (this is called slippage*).
Profit realization. The bot then sells the asset at the higher price and captures the difference as profit.
* Slippage is the difference between the expected transaction price and the actual execution price. It usually occurs because prices change between the moment a transaction is submitted and when it is confirmed.
As a result, the original transaction is executed at a less favorable price, while the front-runner secures profit.
Front-running can be used as a standalone strategy, but more complex schemes can be built on it. One such scheme is the sandwich attack: in this case, the MEV bot places two transactions — one before and one after the user’s trade. This allows it not only to influence execution price but also to immediately lock in profit. Therefore, sandwich attacks are considered a more aggressive form of transaction ordering manipulation.
Impact of MEV on the market
MEV cannot be strictly classified as either negative or positive — its effects are dual.
Positive aspects:
improved price efficiency
elimination of arbitrage imbalances
enhanced stability of DeFi protocols
Negative consequences:
increased slippage
worse conditions for retail users
Higher competition for transaction priority, leading to increased fees
Conclusion
MEV is a fundamental property of public blockchains, arising from the transparency of the mempool and competition for transaction inclusion in blocks.
On one hand, MEV improves the efficiency and resilience of decentralized financial systems. On the other hand, it creates asymmetry between technically advanced participants and regular users.
As DeFi continues to develop, understanding MEV mechanisms is an essential part of professional work with blockchain infrastructure.