Maximum Extractable Value (MEV)

How MEV Works in the Mempool

When you submit a transaction to a public blockchain (like Ethereum or Solana), it first sits in a public waiting room called the Mempool.

Automated algorithms (MEV Searcher Bots) scan the mempool in real time to spot profitable trading opportunities before transactions are finalized.

Common Types of MEV Exploits

1. Frontrunning: A bot spots your large buy order, pays a higher priority fee to have its own buy order executed immediately before yours, and profits from your price impact.
2. Sandwich Attacks: The bot places a buy order immediately before your transaction and an automated sell order immediately after your transaction, extracting guaranteed profit from your high slippage tolerance.
3. DEX Arbitrage: Bots equalize price imbalances across multiple decentralized liquidity pools within the exact same block.

How MEV Affects Regular Users

1. Worse Execution Prices: Retail traders receive fewer tokens due to artificial price slippage caused by sandwich bots.
2. Network Congestion: Bidding wars between automated bots drive up transaction fees for all regular network participants.

How to Protect Your Wallet Against MEV

1. Tighten Slippage Settings: Never trade with default 5 or 10 percent slippage on decentralized exchanges. Keep slippage under 0.5 to 1.0 percent whenever possible.
2. Use Private RPC Endpoints: Route transactions through MEV protection tools (such as Flashbots Protect or Jito on Solana) that bypass the public mempool.
3. Use DEX Aggregators: Use platforms like Jupiter or 1inch that feature built in smart routing and anti sandwich protection.

Learn how to audit transactions and navigate DEX markets in our Complete Guide to Onchain Analysis and DEX Trading.