MEV (Maximal Extractable Value)
The maximum value that can be extracted from block production beyond standard block rewards and gas fees by including, excluding, or reordering transactions within a block. MEV is extracted by validators and specialized 'searchers' who identify profitable opportunities like arbitrage, liquidations, and sandwich attacks. The MEV ecosystem has evolved to include builder-searcher separation (MEV-Boost) to reduce negative externalities.
“MEV searchers run bots that monitor the mempool and compete to capture arbitrage opportunities, liquidation bonuses, and sandwich attack profits. On Ethereum, MEV-Boost creates an auction where builders compete to construct the most profitable block for validators.”
Front-Running
The practice of placing a transaction ahead of a known pending transaction to profit from the anticipated price impact. In crypto, front-runners monitor the mempool for large pending trades, then submit their own transaction with a higher gas fee to be included first. This is a primary form of MEV extraction and is often considered predatory, as it extracts value from regular users by worsening their execution prices.
Sandwich Attack
A form of MEV exploitation where an attacker places two transactions around a victim's pending swap on a DEX — buying the token just before the victim's trade (front-run) to push the price up, then selling immediately after (back-run) once the victim's large order has further increased the price. The victim receives fewer tokens due to the artificially inflated price, and the attacker profits from the price difference.
Arbitrage
The practice of profiting from price differences for the same asset across different markets or exchanges. In crypto, arbitrage opportunities arise due to fragmented liquidity across hundreds of exchanges and DEXs. Common forms include exchange arbitrage (same token, different prices), triangular arbitrage (cycling through three trading pairs), and cross-chain arbitrage (same token, different blockchains).
Validator
A network participant in a Proof of Stake blockchain that is responsible for proposing new blocks, attesting to the validity of blocks proposed by others, and maintaining the integrity of the network. Validators must stake a minimum amount of the native token as collateral and run node software continuously. They earn rewards for honest participation and face slashing penalties for misbehavior.
Mempool
The 'memory pool' — a holding area where unconfirmed transactions wait before being included in a block by miners or validators. Each node maintains its own version of the mempool. Transactions with higher fees are typically prioritized, which is how MEV searchers and front-runners identify profitable opportunities.