What You Should Know About MEV and How It Affects Gas Costs

APR 15, 2021 • 7 Min Read

Ashwath Balakrishnan Ashwath Balakrishnan

MEV, or miner extractable value, refers to the opportunity for a miner to increase their earnings by choosing the order of transactions in a block. Over the past year, we’ve seen an explosion in MEV thanks to large amounts of capital flowing through Ethereum. Naturally, several businesses emerged around this to capture the opportunity.

The name “miner” extractable value is a tad misleading because it’s not necessarily miners who extract this value. When an arbitrage opportunity exists on-chain, arbitrage bots compete with each other to seize this opportunity. Each arbitrageur submits an identical transaction to the Ethereum mempool.

Arbitrageurs constantly monitor the mempool to see if any competing bots have submitted the same transaction. More often than not, two or more arbitrageurs compete for the same transaction. Whichever arbitrageur is willing to pay more fees to miners to get their transaction included before the others eventually wins.

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