Maximal extractable value (MEV)

On Ethereum a swap waits in a public queue, the mempool, before a validator includes it in a block. A bot that sees a large swap there can buy just before it and sell just after it, so the swap fills at a worse price and the bot keeps the difference. This is called a sandwich attack. The same queue lets bots act first on liquidations and price gaps between exchanges.

A payment firm that converts euro and dollar stablecoins on a decentralized exchange can limit the cost in two ways. A slippage limit caps the price move a swap accepts, and private channels such as Flashbots Protect send the order to block builders without passing through the public mempool. For client orders, the best execution page covers the MiFID II duty to obtain the best possible result.

The ESMA report collects several estimates. Flashbots measured realized extractable value of 526,207 ETH, about 1.1 billion dollars, between September 2022 and June 2024. EigenPhi counted 963 million dollars of revenue and 417 million dollars of profit between December 2022 and January 2025, and Sorella put the figure at 1.26 billion dollars.

Most of the gain goes to the validator. Since Ethereum moved to proof of stake, specialized searchers find the opportunities, builders assemble blocks and validators choose among them through MEV-Boost. ESMA reports that searchers pay up to more than 90 percent of their gain to the block proposer and that two builders produced 88 percent of Ethereum blocks in October 2024.

ESMA writes that MEV "raises serious transparency concerns" and "may go against the principles of fairness and integrity". Title VI of MiCA, Articles 86 to 92, bans insider dealing and market manipulation in crypto-assets, and ESMA notes that under the draft technical standards MEV-related conduct may have to be reported in suspicious transaction and order reports. In May 2024 the US Department of Justice charged two brothers who, according to the indictment, used an MEV exploit to take 25 million dollars in 12 seconds. The crypto market abuse page covers surveillance, and DeFi risks the other attack types.

Finance Loop supported the Bybit EU Crypto Evening at TechQuartier in Frankfurt on crypto compliance topics. Trading on decentralized exchanges was the subject of the DEX vs CEX panel at the German Blockchain & AI Week 2025, which Finance Loop supported, and Finance Loop is a partner of the Crypto Assets Conference in Frankfurt.

Maximal extractable value is the value a validator or another party can take by adding, dropping or reordering transactions in a block. On Ethereum it comes mainly from arbitrage, liquidations and sandwich attacks.

A bot places one trade before a victim's swap and one after it. The first trade moves the price, the victim's swap fills at that worse price, and the second trade takes the profit.

It can set a tight slippage limit, split large swaps and send orders through a private channel such as Flashbots Protect, so they do not wait in the public mempool.

MiCA bans market manipulation in crypto-assets but does not name MEV. ESMA writes that MEV may go against the principles of fairness and integrity and that some MEV conduct may have to be reported as suspicious.