What is MEV Crisis and how does Shardeum eliminates MEV Crisis
What Is Miner Extractable Value (MEV)?
Miner extractable value (MEV) is a measure of the profit a miner (or validator, sequencer, etc.) can make through their ability to arbitrarily include, exclude, or re-order transactions within the blocks they produce.
One of the first forms of MEV that users suffered from was front running done by bots that merely replicated users transactions with a higher gas price so that miners would pick their more expensive transactions over others. Although front running has evolved, and it’s no longer represented in that form, miners are now taking advantage of such attacks. Front running occurs when miners are making a profit by placing their specific transaction right before the users, making the later one fail while the miners transaction is successful and profitable. This occurs because the miners are able to reorganize transactions at their own will, using their position of privileged information to execute a trade first by taking advantage of the trading opportunities the users transactions signal.
Alongside front running, the most common MEV attacks also include back running, which refers to miners making a profit by taking advantage of how the execution of the users transactions will change the market conditions and placing their specific transaction right after the users.
A sandwich attack is the combination of the above two to specifically make a profit and take advantage of the users’ submitted transaction.
All of these forms of MEV can only be executed by miners, as they are the only ones who have the power to organize transactions within a block. This type of value extraction can occur because of the Ethereum mempool design, since the only motivation for miners to include transactions into a block is the amount of rewards they will obtain.
How does Shardeum SOLVES the crisis of MEV?
Miner extractable value (MEV) is only possible because ethereum and other networks have the ability to include, exclude or reorder transactions within the blocks they produce by submitting the trasaction with a slightly higher gas prices. In Shardeum the transactions are processed on First-come, First-serve basis (FCFS), with the same gas rate to ensure fairness. Since in Shardeum there is no priority transaction and all transactions are processed on FCFS, the Miner extractable value or front running or back running is not possible.
Front running has fundamentally and unfortunately, evolved into a multi-billion-dollar ethical malpractice of entering into equity, option, futures contract, derivative or security based swap to capitalize on advance, non-public knowledge of a large pending transaction that will influence the price of underlying security or coin/asset.
Swapped Finance is also safe with the fundamental feature of Shardeum Blockchain upon which the Swapped Finance is developed, safeguarding it’s users from MEV and it other forms such as front running and back running.
References: https://coinmarketcap.com/alexandria/glossary/miner-extractable-value-mev, Moneycontrol, Shardeum