MEV 101

This post (meant as a starting point) displays curated resources gathered through personal readings and conversations that would help you get started if you are new to the MEV world. I am also working on a more advanced resources list.

Introduction material

Why does MEV matter?

A great read to get started: Why run mev-boost? by hasu and thegostep (from Flashbots).

Definitions

Bundles: Bundles are groups of transactions searchers submit. Those transactions must be included in the order submitted, and either the whole bundle is included, or nothing is. A bundle should never be split up.

To read the definitions of searcher, builder, relay and validator, and get an overview of the trust assumptions between them, read this article by ladislaus.eth.

Overview of MEV strategies

Front-Running
Sandwich Attacks - more on this here
Back-Running
Liquidations
Time-Bandit Attacks - more on this here and you can listen to a podcast on on this here
Uncle Bandit Attack - interesting to note that the surface of MEV isn’t limited to the mempool, it extends into uncled blocks as well.

You can read more here.

How does it work?

Execution client build block and consensus client propose block to the network

Beyond the first separation of concerns (Consensus layer vs Execution layer) that we are seeing in Ethereum architecture post-Merge, different roles, historically done by Eth1 clients (pre-Merge mining clients) will be externalized. An interesting example of that is the separation between block builders and block proposers (PBS). A block can be built by any independent actor (“searcher”) in a way that is more financially relevant by ordering transactions to extract maximum value from them. We call this MEV and it already represents more than 600 millions dollars since January 2020 on Ethereum.

Historically, builders and validators have been the same logical entity. The introduction of Block Proposer / Builder Separation (PBS for short) to the Ethereum roadmap and the development of rollup centric data availability chains aim to separate these roles. As Vitalik describes in his Endgame post, such a separation aims to maximize validator decentralization.

Read more on this from Mevwaifu.eth on mev-boost, relays, self-sovereignty.

MEV supply chain

User - The user is anyone with an intention to enact a state transition on a blockchain.
Wallet - The wallet is the user interface which helps the user encode their intent into a transaction that the blockchain can understand.
Searcher - Searchers have a simple job: extract all the MEV possible for themselves.
Builder - Builders have many names today, but their job is to aggregate transactions from various sources and construct a block. In Ethereum today, execution clients are performing the builder role. In a L2 execution system, the sequencer is the builder as they construct rollup payloads to submit to the L1.
Validator - Validators perform consensus duties which include validating and finalizing blocks.

Read The MEV Supply Chain: a peek into the future of this industry by thegostep. You can also read MEV: An Intro to Value Extraction.

More advanced concepts

The Builder API

It's like the Engine API but for builders. Here is a post on ethresearch that explain the design for a marketplace for block building aka Flashbots architecture - with some useful terminology and sequence diagram.

Flashbots Auction process

Flashbots Auction provides a private transaction pool + a sealed bid blockspace auction mechanism which allows block proposers to trustlessly outsource the work of finding optimal block construction. Read more about how it works on the flashbots documentation website.

Data - illuminating the Dark Forest

MEV - what's next?

Putting back the user in the MEV value chain - see MEV rebate idea with Blocknative team.
Cross chain MEV
- Polygon MEV
- L2 MEV
Multi block MEV
Partial block auctions
PBS in protocol and why? see these open problems by RIG- and this ethresearch post by Barnabe.

Other considerations

Good MEV vs Bad MEV? Should we forbid or fight against MEV?
MEV utopia vs distopia
Destructive vs constructive MEV
Censorship, private order flow, vertical integration
Is the Block Building market doomed to monopoly?
Builder centralization this post - also touches on inclusion lists, and this shorter post.
We Live In A Mempool: Backrunning the MEV Crisis
MEV law and regulation - see this post on flashbots forum.
Preserving Block Proposer Agency with MEV-Boost using EigenLayer

Interesting material

Flashboys paper or read here
Videos by Phil Daian

This is not an exhaustive list so feel free to submit a PR, or to drop me a note on twitter to suggest an improvement or have a resource referenced.