# MEV The question this note answers: what happens when transaction ordering becomes a market? MEV — maximal extractable value — is the value that can be captured by controlling which transactions get into a block, and in what order. To see why such value exists at all, walk through the canonical example. ## The canonical example 1. A user submits a swap: buy token X. 2. A searcher spots it sitting in the public mempool. 3. The searcher buys X first. 4. The user's trade executes, pushing the price up. 5. The searcher sells into the higher price. This is a sandwich attack, and the user effectively paid a tax for being visible. Notice what made it possible: nothing exotic. Pending transactions are public, and execution is deterministic — so anyone can simulate the future and bid for the right to rearrange it. If you come from databases, here's the framing that transfers: transaction ordering is normally a scheduler's internal detail that nobody profits from. Make the scheduler's choices public and auctionable, and an industry appears around influencing them. That's MEV. ## The extraction pipeline And an industry did appear. What started as ad-hoc front-running has specialized into a supply chain: ```text user -> mempool -> searchers find opportunities -> builders assemble optimal blocks -> proposers sell blockspace to the highest builder ``` Proposer-builder separation (PBS) is the protocol acknowledging that this market exists and trying to contain its centralizing pressure, rather than pretending it away. ## Responses - Private mempools / order flow auctions - Proposer-builder separation - Encrypted mempools - Batch auctions (everyone in a batch gets one clearing price) - Fair-ordering protocols It's worth noticing that none of these eliminate MEV. They redistribute who captures it, and how visibly — which is sometimes an improvement and always a tradeoff. ## Where this matters - [[06 Transaction Lifecycle and MEV]] — the full path from signature to inclusion - [[04 Consensus]] — proposers hold the ordering pen - [[11 DeFi, Stablecoins, and Governance]] — AMMs and liquidations are the richest MEV sources - [[12 Security and Incentive Design]] — MEV as an incentive-design problem