MEV Overview and Economic Impact

MEV (Maximal Extractable Value) refers to the profit that can be made by ordering or selecting certain transactions in a block. Common sources of MEV include arbitrage (e.g., DEX price differences), liquidations of leveraged positions, frontrunning lucrative trades, and backrunning (capturing value left in transactions). In a naive setting, independent arbitrage bots (searchers) might fiercely compete to exploit an opportunity, often by spamming the network with multiple transactions with increasing gas fees, hoping one of them gets included first. This can lead to network congestion and wasted gas. Moreover, if validators (block proposers) act selfishly, they could reorder transactions or include their own transactions to grab these profits, potentially excluding regular users or creating unfair outcomes. Unmitigated MEV thus has negative externalities: it can worsen user experience (via higher fees or failed transactions), concentrate wealth with a few actors, and even pose security risks (in extreme cases like chain re-orgs to capture MEV).

However, when harnessed properly, MEV can be turned into a net positive for the ecosystem. By capturing MEV in an orderly way and redistributing it, one can boost overall validator/staker rewards (making the network more secure by attracting more stake) and reduce incentive for bad behavior. The economic impact is significant: MEV can sometimes equal or exceed base block rewards on active chains. Capturing even a portion of it for stakers can increase yields noticeably. Additionally, a fair MEV system can neutralize the advantages of spamming transactions or running malicious MEV strategies, leading to a healthier network. For example, Jito’s MEV system on Solana showed that by auctioning off block space to MEV searchers instead of letting them spam, the network eliminated spam transactions and validators earned higher fees. Transactions got prioritized by economic value in a transparent way, making pointless spam bots ineffective. HyperFlash aims to bring similar improvements: extract MEV efficiently, minimize spam and unfair play, and share the benefits widely.