Introduction

What is MEV Zone?

MEV Zone is a solution designed to address Maximal Extractable Value on the Avalanche network. It operates through three primary roles.

1. Searchers analyze the mempool to identify profitable opportunities, such as arbitrage or liquidations, and construct bundles of transactions aimed at exploiting these opportunities. These bundles are submitted to the network along with bids that incentivize their inclusion in a block.

2. Block Builders aggregate these bundles into candidate blocks, determining the ordering of transactions based on the bids offered.

3. Validators then evaluate the candidate blocks produced by competing Block Builders and finalize the one that offers the highest total reward for inclusion on the Avalanche C-Chain.

Why is MEV Zone useful?

MEV Zone introduces significant advancements in the management of Maximal Extractable Value (MEV) on Avalanche. It employs a competitive auction mechanism, enabling searchers to compete for block inclusion based on the bids attached to their transaction bundles. This process ensures fairness and efficiency in MEV extraction while maximizing rewards for network participants.

In addition to optimizing economic incentives, MEV Zone incorporates robust user protection through a private transaction submission mechanism. By keeping transaction details confidential until block finalization, the system significantly reduces the risk of front-running and other forms of malicious transaction reordering.

A unique feature of MEV Zone is its integration of a burn mechanism that removes a portion of AVAX derived from MEV activities. Validators prioritize blocks proposed by supported Block Builders based on both profitability and the amount of AVAX burned, ensuring that MEV extraction benefits the network as a whole. This burn mechanism enhances the deflationary properties of AVAX, aligning MEV activity with the long-term economic health of the Avalanche ecosystem, while redistributing rewards equitably among validators, block builders, and delegators.

How does the bid system work?

The bid system functions by allowing searchers to specify the value they are willing to pay to secure early inclusion of their transaction bundles in a block. Searchers identify profitable transaction strategies and encapsulate these strategies in bundles accompanied by their respective bids. The Block Builder evaluates incoming bundles and orders them in descending order of bid size, constructing a candidate block designed to maximize overall fees by incorporating both high-bid bundles and public transactions from the mempool.

In addition to maximizing fees, the system integrates a burn mechanism that removes a portion of AVAX derived from MEV activities. Validators assess the candidate blocks proposed by Block Builders and select the block that provides the highest total reward, factoring in bid amounts, regular transaction fees, and the amount of AVAX burned.