📌 MEV (Miner Extractable Value) Summary
MEV, or Miner Extractable Value, refers to the extra profits that blockchain miners or validators can earn by choosing the order and inclusion of transactions in a block. This happens because some transactions are more valuable than others, often due to price changes or trading opportunities. By reordering, including, or excluding certain transactions, miners can gain additional rewards beyond the usual block rewards and transaction fees.
🙋🏻♂️ Explain MEV (Miner Extractable Value) Simply
Imagine you are the referee at a school race and you get to decide the starting positions for each runner. If you let your friends start closer to the finish line, they have a better chance of winning. In blockchains, miners can choose which transactions to process first, and sometimes they pick the ones that help them or pay them more.
📅 How Can it be used?
A real-world project could use MEV awareness to design fairer transaction ordering systems for decentralised finance platforms.
🗺️ Real World Examples
A miner on Ethereum notices a large trade about to happen on a decentralised exchange. By placing their own trade just before it, they make a quick profit from the price change caused by the large trade. This process, called front-running, lets the miner earn extra money beyond normal transaction fees.
Validators can bundle multiple arbitrage transactions into a single block, profiting from small price differences across exchanges. This allows them to capture value that would otherwise go to other traders.
✅ FAQ
What exactly is Miner Extractable Value and why does it matter?
Miner Extractable Value, or MEV, is the extra profit that miners or validators can earn by picking and arranging transactions in a block in a certain way. This matters because it can affect how fair and predictable blockchain transactions are, as some users might end up paying more or waiting longer for their transactions to go through if miners prioritise ones that are more profitable for themselves.
How do miners or validators actually make extra money from MEV?
Miners or validators can make extra money from MEV by reordering, including, or leaving out certain transactions in the blocks they create. For example, if there is a chance to profit from a sudden price change, a miner could put their own transaction ahead of others to take advantage of it. This lets them earn more than just the usual transaction fees and block rewards.
Does MEV affect regular users on a blockchain?
Yes, MEV can affect regular users. If miners or validators focus on their own profits by reordering transactions, it can lead to higher fees, slower transaction times, or less predictable outcomes for everyday users. This is especially noticeable during busy periods when lots of people are trying to make transactions at the same time.
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