MEV Crypto: How Validators Extract Value from Your Transactions

TL;DR MEV (Maximal Extractable Value, translatable as Maximum Extractable Value) is the additional profit that validators, miners, and other participants derive by reordering, including, or excluding transactions in a block. This practice is particularly common on blockchains with complex smart contracts like Ethereum. On one hand, MEV accelerates price corrections on DEX, while on the other hand, it creates serious problems for ordinary users: inflated prices, greater slippage, and skyrocketing gas fees.

How MEV Works: Behind the Scenes of Blockchain

When talking about blockchain, those who create blocks ( miners in Proof of Work, validators in Proof of Stake) have enormous power: to decide which transactions to include and in what order to insert them. This choice is not random.

Block producers gather all pending transactions from the mempool and organize them in order of convenience, primarily based on gas fees. Those who pay more get processed first. But this is where the real game begins: when transactions become complicated (loans, swaps on DEX, derivatives trading), validators can make strategic choices to extract extra profits beyond the standard rewards.

For example, they can order transactions to amplify price movements, or deliberately exclude a transaction if it is not beneficial for them to include it. There is no rule that requires them to follow a fixed order. This is where crypto MEV comes into play.

In 2022, when Ethereum transitioned from Proof of Work to Proof of Stake (the Merge), the term was updated from “Miner Extractable Value” to “Maximal Extractable Value” because the issue did not disappear—the validators continue to do it.

Who Are the MEV Researchers and How Do They Make Money

Not only validators profit from MEV. There are also “searchers”: sophisticated bots and traders who constantly analyze the blockchain in search of profitable opportunities. When they find one, they pay astronomical gas fees to ensure they are included in the right block at the right time.

The competition among searchers is ruthless. In the case of arbitrage on a DEX, searchers often give up 90-99% of their profit in gas fees, paying them to the validators. It is a bidding war where the highest bidder wins. The maximum extractable value mainly ends up in the pockets of those who control the order of transactions.

Three MEV Strategies That Directly Impact Your Wallets

Liquidations: The Silent Risk of DeFi Loans

In DeFi, you can borrow cryptocurrencies by depositing collateral. If the price crashes and your collateral falls below a safety threshold, your loan is liquidated. When this happens, a smart contract issues a liquidation reward.

Searchers and validators use bots to identify these impending liquidations and place their liquidation transaction before anyone else in the block, capturing the entire reward. While your loan ends up in liquidation, others are already profiting from the disaster.

Arbitrage: Taking Advantage of Price Differences

On two different DEXs, the same token has different prices. A bot notices this and buys at a low price on one DEX, selling at a higher price on another. A legitimate opportunity, right? But if a validator or a searcher notices this incoming transaction, they can insert their own arbitrage transaction before the original one, snatching the opportunity away from the user who discovered it first.

This is MEV. You see the opportunity, but someone else with privileged access takes it away from you.

Front-Running and Sandwiching: The Legalized Theft

It's the worst. A large buy order is pending in the mempool. A validator or a searcher sees it and places a buy order first, driving up the price. Then your large order buys at a higher price. Finally, they place a sell order after yours, pocketing the difference. You end up paying more, the price rises artificially, and the MEV extractor profits from your own transaction.

It's “sandwiching”: your order is the filling, and you are paying to be squeezed.

The Positive Side (Yes, It Exists)

Not everything is negative. MEV plays a role in correcting market inefficiencies. Searchers competing for arbitrage opportunities have an interest in seizing them quickly, correcting prices on DEXs in record time. Without the push of MEV, prices would remain misaligned for longer, causing even more harm to retail users.

Similarly, MEV-driven liquidations in DeFi mean that risky loans are quickly brought back to safety, protecting the system from cascading defaults. The competition among MEV bots, as harsh as it is, accelerates certain market processes.

The Real Problems: Why MEV Threatens the Network

But the benefits do not outweigh the damages.

First: Users are being exploited. Front-running, sandwiching, artificial slippage—the crypto MEV extracts billions from the wallets of regular users every year. Ethereum sees billions of MEV extracted just from swaps on Uniswap and MakerDAO.

Second: Congestion and costs. Searchers compete by paying increasingly higher gas fees to ensure their transactions. This inflates the gas price for everyone, making the blockchain more expensive for those who have no interest in MEV.

Third: The fundamental risk. If the value that a validator could gain by reordering previous blocks exceeds the rewards for creating new blocks, it would become economically rational to perform a chain reorganization, or a “reorg”. This would jeopardize the consensus and the very security of the blockchain.

Fourth: Centralization. The only ones who can effectively compete in the MEV are the large operators with the best bots and the largest reserves. Retail users and small searchers are always left at a disadvantage in this game.

What the Community Does to Solve the Problem

Research on MEV solutions has become central in crypto. Some projects are experimenting with:

• Builder-proposer separation (BPS): Separating those who build blocks from those who propose them, reducing the power of a single actor.
• MEV burn: Burn (destroy) the extracted MEV instead of leaving it to the validator
• Private mempools and mempool encryption: Hiding transactions until they are included in the block.
• PBS ( Proposer-Builder Separation ) on Ethereum: Already in study for the upcoming upgrades

Ethereum and other blockchains are investing significant resources to limit crypto MEV, but it is not a completely solvable problem. Research continues.

The Reality: MEV Will Remain, But You Can Defend Yourself

MEV will not disappear. It is a logical consequence of having someone ordering the transactions, and as long as blockchains operate this way, it will exist.

But you can reduce the risk: use DEXs that implement protections against front-running ( like order flow auctions ), set conservative slippage tolerances, avoid large orders on a single DEX, and monitor your collateral positions in DeFi to avoid being caught off guard by liquidations.

The Maximum Withdrawable Value is here to stay. Understanding it is the first step to not becoming a victim of it.