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Price of MEV: Towards a Game Theoretical Approach to MEV

Published: 07 November 2022 Publication History

Abstract

Maximal (also miner) extractable value, or MEV, usually refers to the value that privileged players can extract by strategically ordering, censoring, and placing transactions in a blockchain. Each blockchain network, which we refer to as a domain, has its own consensus, ordering, and block-creation mechanisms, which gives rise to different optimal strategies to extract MEV. The strategic behaviour of rational players, known as searchers, lead to MEV games that have different impacts and externalities in each domain. Several ordering mechanisms, which determine the inclusion and position of transactions in a block, have been considered to construct alternative games to organise MEV extraction, and minimize negative externalities; examples include sealed bid auctions, first input first output, and private priority gas auctions. However, to date, no sufficiently formal and abstract definition of MEV games have been made. In this paper, we take a step toward the formalization of MEV games and compare different ordering mechanisms and their externalities. In particular, we attempt to formalize games that arise from common knowledge MEV opportunities, such as arbitrage and sandwich attacks. In defining these games, we utilise a theoretical framework that provides groundwork for several important roles and concepts, such as the searcher, sequencer, domain, and bundle. We also introduce the price of MEV as the price of anarchy of MEV games, a measure that provides formal comparison between different ordering mechanisms.

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Cited By

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  • (2025)Mecon: A GNN-based graph classification framework for MEV activity detectionExpert Systems with Applications10.1016/j.eswa.2025.126486269(126486)Online publication date: Apr-2025
  • (2024)Piecing Together the Jigsaw Puzzle of Transactions on Heterogeneous Blockchain NetworksProceedings of the ACM on Measurement and Analysis of Computing Systems10.1145/37004248:3(1-27)Online publication date: 10-Dec-2024
  • (2024)Blockchain Bribing Attacks and the Efficacy of CounterincentivesProceedings of the 2024 on ACM SIGSAC Conference on Computer and Communications Security10.1145/3658644.3670330(1031-1045)Online publication date: 2-Dec-2024
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cover image ACM Conferences
DeFi'22: Proceedings of the 2022 ACM CCS Workshop on Decentralized Finance and Security
November 2022
80 pages
ISBN:9781450398824
DOI:10.1145/3560832
Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Publication History

Published: 07 November 2022

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Author Tags

  1. defi
  2. game theory
  3. mev

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  • Research-article

Funding Sources

  • Nokia Bell-labs
  • Flashbots

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CCS '22
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Cited By

View all
  • (2025)Mecon: A GNN-based graph classification framework for MEV activity detectionExpert Systems with Applications10.1016/j.eswa.2025.126486269(126486)Online publication date: Apr-2025
  • (2024)Piecing Together the Jigsaw Puzzle of Transactions on Heterogeneous Blockchain NetworksProceedings of the ACM on Measurement and Analysis of Computing Systems10.1145/37004248:3(1-27)Online publication date: 10-Dec-2024
  • (2024)Blockchain Bribing Attacks and the Efficacy of CounterincentivesProceedings of the 2024 on ACM SIGSAC Conference on Computer and Communications Security10.1145/3658644.3670330(1031-1045)Online publication date: 2-Dec-2024
  • (2024)Unraveling the MEV enigmaFuture Generation Computer Systems10.1016/j.future.2023.11.014153:C(70-83)Online publication date: 16-May-2024
  • (2023)Maximal extractable value (mev) in blockchain networks and its impact on blockchain ecosystemUkrainian Journal of Information Technology10.23939/ujit2023.02.0605:2(60-71)Online publication date: 2023
  • (2023)LOProceedings of the 24th International Middleware Conference10.1145/3590140.3629108(98-110)Online publication date: 27-Nov-2023

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