Miner extractable value (MEV) refers to a miner’s ability to dictate when, how and where a transaction is placed into a block.
Also called maximal extractable value, MEV can be used to garner additional revenue per block by sequencing transactions in different ways inside each block. The ability to sequence transitions has implications for trade settlement, particularly for decentralized exchanges (DEXs) that must settle trades in a specified manner. It's often referred to as the blockchain’s version of Wall Street front running.
For example, imagine Alice wants to close a trade on-chain. However, Bob sees the trade when Alice pushes it to the miners and quickly copies it with a higher fee. Miners will often select the trade with a higher fee, which negates Alice’s trade in favor of Bob.
MEV trades can take on a variety of styles, each with its own set of tactics. Backrunning, frontrunning and sandwich trades make up the majority of types of MEV.
In order to protect trades, many miners and traders have established secondary “relay” networks to communicate trades privately. Mining networks often gain additional profit from these networks at set prices.
To date, MEV has mainly been found on smart contract blockchains such as Etheruem. However, it is expected that MEV could be a future source of revenue for miners on Bitcoin as secondary applications develop, such as the Lightning Network.