To dive deeper, check out the complete article from original source:
https://droomdroom.com/maximal-extractable-value-explained/
🔥 Maximal Extractable Value (MEV) is a key concept in blockchain that affects transactions on public networks like Ethereum and Solana. It refers to the extra value miners or validators extract by reordering, including, or excluding transactions in a block.
đź’ˇ Originally known as Miner Extractable Value in Proof-of-Work (PoW) systems, MEV has evolved with Proof-of-Stake (PoS), where validators now perform these roles. It can boost network efficiency and serve as an additional reward for validators but also leads to higher gas fees, slippage, and network congestion.
🔍 How MEV Works: When users submit transactions, they enter a mempool where miners or validators pick and arrange them, prioritizing those with higher gas fees. This transparency allows searchers to identify profitable opportunities like arbitrage, front-running, and liquidation.
Types of MEV:
Arbitrage: Profiting from price differences across decentralized exchanges (DEXs).
Front-running: Placing transactions ahead of large trades to benefit from price movements.
Liquidation: Taking advantage of falling collateral values in lending protocols.
Sandwich Attacks: Manipulating token prices by placing trades before and after a user’s transaction.
🚀 MEV’s Impact: While MEV improves price efficiency and creates revenue streams, it also increases gas costs, causes network congestion, and leads to unfair trading practices.
đź”— As blockchain evolves, understanding MEV is crucial for users and developers to mitigate risks and leverage opportunities. Awareness is key to navigating this complex but unavoidable aspect of crypto transactions.
