Maximal Extractable Value (MEV) refers to the maximum additional value that can be captured from block production beyond normal block rewards and transaction fees. It arises because the party assembling a block, or those influencing that process, can choose which transactions to include, exclude, or place first, effectively shaping outcomes in smart contracts and DeFi.
How MEV is created
MEV is most visible on networks with transparent mempools, where pending transactions are publicly visible before they are confirmed. Traders, bots, or validators can observe an upcoming swap on a decentralized exchange and attempt to profit from it by changing execution order. A common example is a “sandwich” trade: a bot buys just before a large swap pushes the price up, then sells immediately after, capturing the price impact while the original trader receives worse execution. Another major source is arbitrage, where a searcher detects price differences between venues and reorders transactions to capture the spread. Liquidations in lending protocols can also create MEV, since being first to liquidate an undercollateralized position may earn a bonus.
Who captures MEV and how it’s mitigated
While the concept began as “miner extractable value,” proof-of-stake systems broadened it to validators and other actors in the supply chain. In practice, specialized “searchers” often find MEV opportunities, then pay for inclusion through priority fees or private order flow. On some networks, proposer builder separation and services like out-of-mempool auctions aim to reduce harmful frontrunning, improve execution quality, and limit incentives for disruptive behavior such as reorgs.