tl;dr: Crypto is better, but it’s not perfect. It can still be gamed. Welcome to MEV.
I’d been hearing the term “MEV” a few times. First on Twitter, then in a conversation, but I didn’t know what it was.
Fortunately, a little digging turned up this gem, “What is Miner Extractable Value?”
MEV, in a nutshell, applies to proof-of-work blockchains and refers to the discretion that miners have in
- choosing which transactions from the mempool (the list of pending transactions) to include in a block
- choosing the order which transactions are set into the block
The benefit of #1 is that they will choose the transactions that have paid the highest fees (why not, right?)
And the benefit of #2 is that, since they have visibility into all of the transactions (particularly trades as opposed to transfers), they have the option to “front run” the transaction and insert their own order prior to the one they see, allowing them to profit from a trade that the “know” is coming.
Obviously, this isn’t fair to users of blockchains and miners, as rational actors, will continue to do so.
So, chalk this up to another reason why mainstream use isn’t quite on the horizon.
Eventually, this gets solved through the use of zk-snarks and encryption so that miners can’t see the content of a transaction, but for now, MEV is a real thing.
