{"id":683121,"date":"2025-01-24T17:59:54","date_gmt":"2025-01-24T17:59:54","guid":{"rendered":"https:\/\/uniquehot.com\/?post_type=press_release&p=683121"},"modified":"2025-01-24T17:59:54","modified_gmt":"2025-01-24T17:59:54","slug":"zenmev-explains-mev-and-its-impact-definition-examples-and-ripple-effects","status":"publish","type":"press_release","link":"https:\/\/uniquehot.com\/press-releases\/zenmev-explains-mev-and-its-impact-definition-examples-and-ripple-effects\/","title":{"rendered":"ZENMEV Explains MEV and Its Impact: Definition, Examples, and Ripple Effects"},"content":{"rendered":"
What is it?<\/h3>\n
MEV (Miner Extractible Value or Maximal Extracticle Value) is the income miners can make by changing the order of transactions according to their benefit. They can strategically order transactions within the blocks they mine and use various techniques to make more money. This practice has become so common among miners that hundreds of millions of dollars worth of Ethereum has been extracted via MEV.<\/p>\n
Types and Examples<\/h3>\n
There are plenty of strategies that miners and validators can use, often simultaneously, to extract gains via MEV. Let us look at some of them.<\/p>\n
Front-running <\/strong>is a technique wherein one tries to profit from knowing about upcoming transactions before they happen. Imagine you had insider information that a stock would shoot up and buy it. When the price of the stock rises, you can see it if you wish to, and you\u2019ll make a profit. This is exactly it.<\/p>\n
Miners and validators constantly scan the list of upcoming transactions called the mempool. When they spot a potential opportunity (a large transaction), they put their transactions in the queue with a higher fee so that they are processed before the original transaction. Once the original transaction is carried out, the value of the item they purchased will rise.<\/p>\n
Sandwich Attack<\/strong> combines front-running with back-running, which means the attacker places two transactions \u2013 one before the victim\u2019s transaction and one after. Before the big transaction goes through, the attacker buys the asset, causing its price to go up. Then, after the big transaction pushes the price even higher, the attacker sells the asset back at a profit.<\/p>\n
To avoid these tricky maneuvers, traders resort to using DEX aggregators, adjust their slippage tolerance, or opt for some private trading channels.<\/p>\n
Liquidations – <\/strong>If you borrow to buy a certain cryptocurrency, and its value goes down, you may need to sell your assets to cover the losses. When the value of the cryptocurrency goes lower than your collateral, any third party (such as an MEV bot) can buy the collateral at a discount, thereby getting an opportunity to resell it at market price for a profit.<\/p>\n
\u00a0<\/strong>Arbitrage <\/strong>– When you find a good deal in different markets and profit from the price differences, it\u2019s called arbitrage. There are multiple cryptocurrency exchanges, and one can buy a cryptocurrency at a lower price on one and sell it for a higher price on the other.<\/p>\n
<\/p>\n
For instance, if Ethereum is priced at $1995 on one platform and $2005 on another, an arbitrager can buy it at the lower price and sell it at the higher price, making a profit of $10 per Ethereum (after subtracting the fee).<\/p>\n
Bundled Transaction Processing – <\/strong>MEV bots can do this to make their transactions more efficient. Be it for a sandwich attack or arbitrage, MEV bots will have to place a lot of transactions. Grouping multiple transactions and executing them simultaneously gives them an edge by lowering gas fees.<\/p>\n
For example, if an MEV bot detects an arbitrage opportunity, it can send two transactions that will complete the arbitrage opportunity directly into the mempool or to a block builder. Sending these transactions as a bundle offers searchers a significantly greater chance of success than using the mempool. This is because bundles allow searchers to provide higher direct payments to validators for the same MEV opportunities.<\/p>\n
The list doesn\u2019t end here, of course. As the cryptocurrency landscape evolves, new approaches will keep emerging.<\/p>\n
Impact<\/h3>\n
MEV is a highly debated concept in the crypto world. While it can provide opportunities for profit via the strategies we just discussed, it also raises concerns about fairness, market manipulation, and the overall health of decentralized systems.<\/p>\n