Maximum Extractable Value (MEV)

Maximum Extractable Value (MEV) is the profit that an entity responsible for transaction ordering can extract. Generally, these entities are block producers responsible for processing transactions and can arbitrarily include, exclude, or re-order transactions within the blocks they produce. MEV is the value extracted above the standard block reward and ordinary fee revenue.

MEV may be a significant threat to blockchains as it can lead to unequal node participation due to the complexity of extracting MEV, reducing the decentralization of the network maintenance and, thus, its trustlessness. The concept of MEV is comparable to that of front-running in traditional markets, where a participant has inside knowledge of a future transaction that will substantially affect its price. The industry has collectively allocated various resources to combat MEV and reduce its impact.

The term initially referred to miner extractable value in reference to Ethereum miners, where the phenomenon was first actively discussed before Ethereum transitioned from Proof of Work to Proof of Stake. MEV is not specific to any particular blockchain and is a discussion point for most layer one networks today, however.