✅ Master MEV Economics
Understand arbitrage, sandwich attacks, and ecosystem impact
Discover how bots profit from transaction ordering
Your Progress
0 / 5 completedKey Takeaways
You've learned how MEV extraction works, from identifying opportunities to calculating profitability and understanding ecosystem impacts. Let's review the key concepts before testing your knowledge.
💰 MEV Fundamentals
MEV (Maximal Extractable Value) is profit extracted by manipulating transaction ordering. Since Ethereum's merge, over $1.4 billion has been extracted through various strategies.
- •Four main strategies: arbitrage (65%), liquidations (20%), sandwich (10%), JIT liquidity (5%)
- •Supply chain: Searchers → Builders → Relays → Validators
- •90% of MEV now flows through Flashbots MEV-Boost
🎯 Extraction Strategies
Each strategy requires different technical skills, capital, and infrastructure:
- •Arbitrage: Exploit price gaps across DEXes ($50-$5k profit, very high frequency)
- •Liquidation: Repay underwater loans for 5-15% bonus ($100-$50k, high frequency)
- •Sandwich: Front-run and back-run large trades ($20-$2k, ethical concerns)
- •JIT Liquidity: Add liquidity just-in-time ($500-$100k, requires huge capital)
📊 Profit Calculation
Profitability requires careful accounting of all costs and risks:
- •Formula: Net Profit = Revenue - Gas Cost - Slippage - Competition
- •Gas optimization is critical—every 1000 gas = $0.06 saved at 30 gwei
- •Use Flashbots bundles—failed transactions don't cost gas
- •Success rate matters: 60-80% typical, calculate expected value
🌐 Ecosystem Impact
MEV has both positive and negative effects across the ecosystem:
- ✓Positive: Arbitrage maintains price efficiency, liquidations protect lenders, MEV-Boost increases validator APY by 60%
- ✗Negative: Sandwich attacks cause 5-10% slippage, network congestion, centralization pressure, information asymmetry
- →Solutions: Flashbots Protect (private mempool), MEV-Share (user rebates), CoW Protocol (batch auctions), threshold encryption
🔮 Future Outlook
MEV landscape continues evolving with new technologies and solutions:
- •Cross-chain MEV: Arbitrage across L2s and bridges becoming major opportunity
- •Protocol-level solutions: SUAVE, encrypted mempools, fair ordering coming to Ethereum
- •MEV redistribution: More protocols implementing MEV-Share style rebates to users
- •Regulation: Governments viewing toxic MEV as market manipulation, expect scrutiny