Understanding MEV: Market Impact and Mitigation Approaches

Research question and scope

This article asks three questions: what MEV structurally is and why it exists, how large and how concentrated measured MEV extraction has actually been documented to be on Ethereum, and what the three main mitigation approaches each do and don't address. It draws on a primary technical explainer from Flashbots (the organization that built the dominant MEV infrastructure) and a peer-reviewed-style academic measurement study, rather than general secondary summaries alone. It does not track live, present-day MEV-extraction figures for any network.

Background: why MEV exists

On a blockchain where a single party (a miner under proof-of-work, or a validator under proof-of-stake) decides which transactions go into a block and in what order, that party can profit from the ordering decision itself — for example, by inserting its own trade immediately before and after a large pending trade it can see in the public transaction queue. Flashbots' own account of this describes MEV as creating "an incentive for block producers to vertically integrate with trading firms to boost their returns," and notes that as direct block-reward subsidies shrink over time, MEV becomes a proportionally larger share of total validator revenue. This is a structural property of how permissionless block production works, not a bug introduced by any single protocol.

Methodology: what the two primary sources actually establish

Flashbots' "Why run mev-boost?" (writings.flashbots.net, by Hasu and Stephane Gosselin) explains why the organization built mev-boost: it is middleware that lets a validator auction its block space to a competitive marketplace of outside block builders, rather than depending on a single builder. The article describes the market as evolving in three stages — Flashbots operating as a vertically-integrated proof-of-work builder, the current out-of-protocol mev-boost auction, and a future "enshrined" in-protocol version it estimated at roughly two years out as of its 2022 publication. Separately, "Time to Bribe: Measuring Block Construction Markets" (Wahrstätter et al., arXiv:2305.16468) is an independent empirical study that directly measured 1,624,885 Ethereum blocks over an eight-month window (September 2022–May 2023) to quantify how this market actually behaved, rather than describing its intended design. Both are read here as primary sources for their own specific claims; this article does not claim either source's figures describe the market as it stands today.

What MEV represents

Maximal extractable value (MEV) is additional value a block producer (or a sophisticated third party working with them) can capture by strategically ordering, including, or excluding transactions within a block, beyond standard fees and block rewards.

How it affects ordinary users

• A sandwich attack can give an ordinary trader a meaningfully worse execution price than expected.
• Front-running can let a sophisticated party profit from acting ahead of a visible, pending transaction.

Measured evidence: scale and concentration

The arXiv measurement study reports that across its eight-month sample, proposers received roughly 160,000 ETH in MEV-Boost payments — about $320 million at the study's time of writing — and that MEV-Boost's share of all Ethereum block proposals rose to roughly 90% within about two months of its rollout. The study also finds MEV extraction is highly uneven rather than a steady background flow: by its Lorenz-curve analysis, roughly 20% of MEV payments captured about 72% of total MEV revenue, and during acute market stress — the November 2022 FTX collapse and the March 2023 USDC de-peg — measured MEV revenue spiked by roughly 400% and 1,000% respectively for several days. At the builder layer, no single builder held more than about 20% market share at any point the study measured; but at the relay layer (the trusted intermediary between builders and validators), the Flashbots relay alone reached over 60% market share in November 2022 before falling to roughly 25% by May 2023.

Documented mitigation approaches

• Private transaction submission (bypassing the public mempool) can prevent a transaction's details from being visible to potential MEV extractors before it's included.
• Batch auctions, which settle multiple orders at a single clearing price, can reduce the advantage of transaction-ordering manipulation for included orders.
• Proposer-builder separation (PBS) — the design Flashbots' mev-boost implements — lets a validator auction its block space to a competitive market of builders instead of building blocks itself, on the stated logic that a competitive market needs only one non-censoring builder to remain non-censoring (what Flashbots' own writing calls a "1/N security model").

Independent critical analysis

Flashbots' "1/N security model" argument for PBS assumes that censorship resistance only requires one honest, non-censoring builder to exist somewhere in a competitive field — implying that builder-layer concentration is the risk to watch and that a diverse builder market solves it. The measurement study's own data complicates that framing in a way the mitigation-approach description alone doesn't surface: builder-layer concentration was indeed modest (no builder above ~20%), but relay-layer concentration was substantially higher — one relay operator held over 60% of the market at a single point. Since relays, not builders, are the parties that see and can selectively withhold block content before it reaches a validator, a security argument framed entirely around builder diversity leaves the actually-more-concentrated relay layer under-examined. Separately, the Lorenz-curve finding that roughly a fifth of MEV payments account for roughly three-quarters of MEV revenue suggests that "MEV extraction" is better understood as a small number of large, episodic events (clustered around market dislocations like the FTX collapse and USDC de-peg) rather than a continuous background tax evenly distributed across all transactions — a distinction that matters for anyone trying to estimate their own likely exposure to it from an "average" MEV figure.

Comparing the mitigation approaches

Limitations of this comparison

• The quantitative evidence here is drawn from one eight-month Ethereum measurement window (September 2022–May 2023); it is not a live, present-day figure and should not be read as describing today's MEV market, builder landscape, or relay concentration.
• This article covers Ethereum specifically. MEV exists conceptually on other chains with discretionary transaction ordering, but the measured figures above are not claimed to generalize to them.
• No single mitigation approach eliminates MEV entirely — each reduces specific attack surfaces, not the underlying structural condition that gives a block producer ordering discretion in the first place.
• Flashbots' own writing is a primary source for its own design intent and claims, but it is also an interested party in the market it describes; its framing (e.g., the "1/N security model") is presented here as its stated position, not as independently adjudicated fact.

Implications and research conclusion

MEV is a real, structural feature of how public blockchains order transactions, with documented negative effects on ordinary users' execution quality. The measured evidence from Ethereum's 2022–2023 MEV-Boost market shows the problem is neither negligible (hundreds of millions of dollars in measured payments, with spikes of several hundred percent during market stress) nor evenly distributed (a small share of events capturing most of the value, and the relay layer — not just the builder layer that mitigation designs tend to emphasize — showing the highest observed concentration). Private transaction submission, batch auctions, and proposer-builder separation are documented mitigation approaches, each addressing a different part of the problem, but none closes it entirely; this remains an active, unsolved research area rather than a settled one.

References

Primary sources (read directly for this article): Hasu & Stephane Gosselin, "Why run mev-boost?", Flashbots (writings.flashbots.net/why-run-mevboost, published 2022-06-07) — Flashbots' own account of mev-boost's design and rationale. Wahrstätter, A., Zhou, L., Qin, K., Svetinovic, D., & Gervais, A., "Time to Bribe: Measuring Block Construction Markets", arXiv:2305.16468 (submitted 2023-05-25) — an independent empirical measurement of 1,624,885 Ethereum blocks over September 2022–May 2023.

Secondary sources (background only, not relied on for the quantitative claims above): general technical explainers on MEV-boost and proposer-builder separation surfaced via search synthesis, used only to orient the background section and not cited for any specific figure.