MEV (Maximal Extractable Value)
In simple terms
Because pending transactions are public and someone chooses their order, there is money to be made by inserting, reordering or dropping them. That value is called MEV, and ordinary users pay for it through worse prices.
Definition
Value that block producers can capture by choosing the order, inclusion or exclusion of transactions.
In depth
MEV is the value extractable by an entity with control over transaction ordering within a block, beyond block rewards and fees. Benign forms include arbitrage and timely liquidations, which keep prices aligned and protocols solvent. Extractive forms include sandwiching and certain liquidation races. The modern supply chain separates roles: searchers identify opportunities and bid for inclusion, builders assemble optimal blocks, and proposers sell the right to build. Mitigations include private transaction relays, batch auctions and encrypted mempools.
How does MEV (Maximal Extractable Value) work?
Searchers watch the public mempool for profitable patterns and submit bundles specifying an exact ordering, bidding part of the profit to have them included. Builders assemble the most valuable block from competing bundles, and the proposer takes the highest bid. The effect on a user is indirect but real: a large swap sent to a public mempool is visible before it executes, and the price it receives can be worse because of it.
An example
A user submits an illustrative $50,000 swap with a generous slippage tolerance. A searcher buys immediately before it, letting the user's own trade push the price up, then sells straight after. The user still fills within their tolerance and receives materially less than they would have, and the difference is the extracted value.
Figures are illustrative only.
What beginners get wrong
- Setting a high slippage tolerance to make a trade go through. A wide tolerance is an invitation, because it defines how much can be taken.
- Assuming MEV is purely an attack. Arbitrage and liquidation are MEV, and both are necessary for DeFi to function.
- Sending large trades through a public mempool when a private relay is available.
Related terms
Part of
How do crypto scams work, and how do you avoid them? — the subject page for security and scams, with all 17 of its definitions in one place.
Educational only — not financial advice.