MEV — From Concept to the Reshaping of On-Chain Market Structure

MEV Basics: Extractable Value Derived from Ordering Rights

At its core, MEV is a power dividend that comes from transaction ordering. When an actor controls transaction ordering (such as validators, miners, or builders), they can rearrange transactions to generate extra profits for certain actions.

For block producers, MEV isn’t a bug—it’s the monetizable value of block space.

Common MEV sources include but are not limited to:

• Arbitrage opportunities (AMM price differences)
• Liquidations (triggered by collateral ratios in lending protocols)
• Sandwich attacks (targeting large user swap transactions)

Historical Evolution of MEV: From Miner Extractable to Maximal Extractable

MEV has evolved alongside public chain architecture and economic activity, with its definition expanding over time.

Initially, in the PoW era:

• Miner Extractable Value referred to miners using ordering rights to capture arbitrage.

With the rise of PoS, PBS (Proposer-Builder Separation), and cross-chain economies:

• MEV is no longer exclusive to miners—it now includes validators, builders, searchers, and more.
• The miner role is no longer dominant; value extractors are more diverse, thus evolving into Maximal Extractable Value.

This evolution reflects a reality: MEV has become a part of on-chain market structure, not a system flaw.

Key Participants in On-Chain Economy

MEV activities require multiple roles working together to form a complete ecosystem, with each role’s incentives determining how MEV is ultimately distributed.

1. Users: Searchers, Arbitrageurs

They discover value—usually by scanning the chain with programmatic strategies for price differences, liquidation opportunities, and arbitrage paths, then sending transaction bundles to builders.

2. Validators / Block Producers

They hold final block proposal rights. In PBS architecture, validators don’t order transactions directly but still choose which builder’s block to accept and earn rewards.

3. Relayers, Builders, RPC Providers

• Builders: Construct blocks, order transactions, and maximize MEV revenue.
• Relayers: Serve as intermediaries between builders and validators, ensuring block content is trustworthy and tamper-proof.
• RPC / Infrastructure providers: Control traffic entry points and may influence user transaction flows, becoming part of the MEV distribution chain.

These roles form an MEV value chain—a new kind of dark pool ecosystem for blockchain.

Why Has MEV Changed Blockchain Market Structure?

MEV has moved from a technical issue to an economic and institutional one because it directly alters price discovery, transaction ordering logic, and resource competition on-chain.

Key market structure impacts include:

• Incentive redesign: Block producers increasingly rely on MEV revenue instead of just block rewards or gas fees.
• On-chain liquidity redistribution: Arbitrageurs and searchers maintain price consistency and boost market efficiency.
• Infrastructure upgrades: PBS, MEV-Boost, shared sequencers, and other structures emerge.

MEV transforms blockchain from a first-come-first-served model into a market that maximizes value through ordering.

MEV’s Dual Impact: Efficiency Gains vs. Attacks and Congestion

MEV isn’t simply good or bad—it brings both positive and negative effects. This section presents its core aspects through paragraphs and bullet points.

Positive Effects: Increased On-Chain Efficiency

• Arbitrageurs maintain price consistency across DEXs for more stable price discovery.
• Liquidation bots ensure lending protocols operate healthily and reduce bad debt risk.
• Efficient ordering boosts resource utilization, giving validators higher economic incentives.

All these make on-chain financial activity more robust.

Negative Effects: Worsened User Experience and Network Burden

MEV also causes notable problems such as:

• Front-running: Buying ahead of user transactions and forcing users into worse prices.
• Sandwich attacks: Placing trades before and after users’ orders to profit directly from slippage.
• Gas wars: Searchers outbid each other, driving up network-wide gas fees.
• Network congestion: Nodes compete for MEV, causing peak congestion periods.

In summary: MEV is both an engine for market efficiency and a source of degraded user experience and resource competition on-chain.