What Is Maximal Extractable Value (MEV)?

MEV, or "maximal extractable value," is a hot topic among crypto miners and validators

It refers to the profit they can gain by reordering and manipulating transactions in the validation process, often called the "invisible tax" in crypto economies

In a cryptocurrency system, pending transactions are held in a public waiting area called the mempool

Miners or validators select and order transactions to create a block, which is then added to the blockchain, regardless of the consensus mechanism used

The term "MEV" was coined in a 2019 paper by Phil Daian and his team, known as "Flash Boys 2.0"

They defined MEV as the total amount of ETH miners can extract from manipulating transactions within a specific time frame

Originally associated with proof-of-work consensus mechanisms, the term shifted to "maximal extractable value" when Ethereum transitioned to proof-of-stake

MEV extraction involves network members called "searchers" using bots to automate the detection and extraction of MEV opportunities

Miners benefit from receiving gas fees from searchers for including their transactions in a block

MEV extraction can cause delays and higher fees for some transactions, decentralized exchange arbitrage can make exchanges more efficient

Extracting MEV through DeFi liquidation is seen by some as capitalizing on the system, while others may face reputational damage or bans.