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What is MEV?

Maximal Extractable Value (MEV) is the additional value that can be extracted by reordering and inserting transactions within a block. Although MEV is most commonly associated with arbitrage, liquidations.

Arbitrage

MEV in arbitrage occurs when bots detect price discrepancies for the same token across decentralized exchanges (DEXs). For example, if a token is priced lower on one exchange and higher on another, a MEV bot can quickly execute a series of trades to buy the token at the lower price and sell it at the higher price, capturing the price difference as profit.

Liquidations

MEV from liquidations is prevalent in lending protocols like Aave or Benqi. When a borrower's collateral becomes insufficient to cover their debt due to price fluctuations, bots compete to liquidate the position. This involves repaying the borrower's debt to seize their collateral and earn a liquidation bonus.

Sandwich Attacks

MEV through sandwich attacks exploits large trades in DEXs. When a MEV bot detects a large pending transaction, it submits a buy transaction with a higher gas fee to front-run the original trade, driving the asset's price higher. After the original trade is executed at the inflated price, the bot sells the asset at the new, higher price, profiting from the price impact caused by the victim's transaction. These attacks harm traders by increasing slippage and costs.

Mev Zone addresses these challenges by creating a formal, transparent mechanism for capturing MEV while also offering user protection through private transaction flows.