Maximal Extractable Value (MEV) is the profit that can be captured by whoever has the right to order transactions inside a block, historically miners, now block builders and validators.
MEV captures a wide spectrum of activity:
- Arbitrage between DEXes that converges price.
- Liquidations of unhealthy lending positions.
- Sandwich attacks that wedge a victim trade between two attacker trades.
- Front-running and back-running of oracle updates and large swaps.
MEV is not all extractive, arbitrage and liquidations are necessary for DeFi to function. But sandwiching ordinary users is a regressive tax that protocols increasingly try to mitigate.
The infrastructure around MEV (Flashbots, MEV-boost, builder/relayer separation, PBS) is one of the most active areas of Ethereum research. For a protocol team, the practical question is: does my users' worst-case execution include being sandwiched? If yes, what am I doing about it?