How Ethereum MEV Revenue Is Split and Why Apps May Reduce It
Summary
The document explains how maximal extractable value (MEV) arises when users transact on permissionless blockchains and how its proceeds are shared among searchers, builders, and validators. It distinguishes observable MEV, estimated through recognizable activity such as arbitrage, sandwiches, and liquidations, from harder-to-detect opportunities that make reported totals incomplete. The authors give a lower-bound estimate for annual Ethereum MEV and describe how competition can shift revenue from searchers toward validators, though less competitive, unobserved opportunities may leave searchers with more of the surplus.
It also considers who should receive MEV, including transaction originators, and discusses MEV-Share as a mechanism for users and applications to offer order flow to searchers. The central forecast is that applications will adopt auctions and safer settings to reduce value leakage: competitive liquidation auctions can lower borrower losses compared with fixed discounts, while warnings and pool-aware slippage can limit harmful trades. Some MEV, particularly arbitrage between venues, is harder to eliminate without protocol changes. The estimates and forecasts are uncertain because analytics miss long-tail, off-chain, multiblock, and probabilistic activity.
Key ideas
- MEV is value extracted from user transactions and is an inherent feature of permissionless systems.
- Observable estimates capture only identifiable MEV patterns and understate the total opportunity.
- Searchers, builders, and validators compete over revenue, with the split varying by opportunity and competition.
- Applications can use auctions and improved transaction settings to reduce user losses and value leakage.
- Some forms of MEV, including cross-venue arbitrage, may persist without changes to the underlying protocol.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.