What is Miner Extractable Value (MEV)?

illustrator Businessman digging tool in the rock with coin vector .

The full name of MEV, Miner Extractable Value, has become a topic of discussion for traders as well as Ethereum developers, mainly because DeFi continues to develop on the blockchain ecosystem. On the block it is decided when and where to place the transaction, using miner extractable value (MEV), synonymous with the miner’s ability, to decide which transactions are placed in each block by the miners. The ordering of the blog is done to generate additional revenue, which can prove to be quite beneficial. You can make more profit with miners, you can easily use techniques like back-running, sandwiching and front-running to take advantage of cow transactions done with blocks. If you are interested in bitcoin trading you must gain understanding of bitcoin trading bots .

How Miner Extractable Value (MEV) works?

A chain of blocks can be added to the blockchain only if there is a complete consensus on the transaction order given by the validator. Blocks are created by a single user and only users have control over it, depending on where they want their transactions to be placed in the specified block. MEV allows transactions with miners to place blocks in a selective order where they can profit from transactions with demand for higher gas fees. In addition, validators who fully agree to blocks with higher gas fees are seen to be more likely to manipulate a chain of blocks. Front-running, sandwiching and back-running are some of the ways you can use to make more money through miners MEV. Let’s see how miners can make money from sandwiching and front-running.

  • Sandwiching: Sandwiching is a kind of technology with which you can make a profit by mining miners with which transaction sequencing is used. This is quite different from front-running so miners are placed in the middle of the transaction rather than at the front. One must consider a decentralized exchange with Ethereum, the transaction itself has caused the price to drop if the reason is that the opportunity to earn thousands of dollars to make a profit can be seen. It recognizes miners before the transaction is executed and can ‘sandwich’ the trade with them in between their buy and sell transactions. Transactions with which the gas fee is increased, allowing miners to reap the benefits at no additional cost.
  • Front-running: Front-running refers to the phenomenon by which miners place their transactions in a block in front of another, to help them reap the benefits. With a DEX transaction involving a large amount, the impact of miners and the upcoming fluctuations in its price can be predicted. This helps them capitalize on the opportunity of ‘front-running’ by putting their transactions ahead. To get the shares for his client, a certain number of shares are bought with the broker, as soon as the share price goes up the broker will sell the shares to make a profit.

How to Counter MEV?

To counter the cases of MEV, you can work on the design of your blockchain application, so that the unexpected reward chances must be reduced, which can pose a great threat to price volatility. Another way to ensure stability is using the Proof-of-stake method that eliminates the mining fee and gas cost and also saves electricity consumption. However, many types of research have been going around to strengthen the consensus mechanism of the blockchain.

Final Thoughts

MEV extraction can be a good opportunity for miners to create additional revenues, but it must also be kept in mind that it can lead to many unfavourable events like selfish mining and higher gas prices, so to keep this thing in check, the consensus mechanism must be changed and also, we must check the efficiencies of the protocols.

LEAVE A REPLY

Please enter your comment!
Please enter your name here