MEV: The Silent Black Hole Swallowing Trillions On-Chain

According to data from Flashbots, since 2020, MEV bots on Ethereum have extracted billions of dollars in value. One notorious bot, known as “JaredFromSubway,” has raked in over $22 million in profit through sandwich attacks alone. And that’s just the tip of the iceberg we can trace.

You might think you’re just doing a regular on-chain transaction — but in reality, you could already be someone else’s sandwich. Ever wondered why your big trade ends up executing at a much worse price than expected? Why does someone always manage to sweep that NFT floor right before you? Or why your transaction mysteriously fails, yet you still get charged gas fees? All these signs point to the same hidden force behind the scenes — MEV, or Maximal Extractable Value.

In this article, we’ll break down MEV in the most straightforward way possible, tearing away the mystery and showing you how it works, why it matters, and how to protect yourself from becoming easy prey.

What exactly is MEV

MEV, or Maximal Extractable Value, is essentially the “rent-seeking privilege” of block producers. In simple terms, it’s the extra profit that block producers — miners in PoW, validators in PoS — can earn on top of normal block rewards and gas fees, by reordering, inserting, or censoring transactions within a block.

So MEV works like an invisible tax system. When you submit a transaction, there may be some arbitrage opportunity created due to price movement or liquidity shifts. But you — the user — are often the one with the least power in the chain. Sitting upstream of you are multiple actors who can influence whether your transaction gets included, delayed, or manipulated.

If there’s value to extract, these actors will try every possible way to take it — and the “cost” of that may be passed down to you, through worse execution, failed transactions, or increased slippage. The scary part? This whole “predatory process” can happen without you even knowing it. That’s why MEV is often described as a second layer of invisible taxation on top of regular gas fees.

Now that we’ve covered the basic idea of MEV, let’s take a look at some of the common “taxation methods” MEV uses on-chain:

1. Sandwich Attack — this is your “slippage tax.”

When you try to swap a large amount of USDC for another token, MEV bots monitoring the mempool can detect your price-moving trade and act instantly: 

• Front-run: Before your transaction gets confirmed, a bot places a buy order for the same token, slightly pushing up the price — like a reseller buying up the goods just before you enter the store.
• Your transaction: Now you’re forced to execute your trade at a higher price, getting fewer tokens than expected. The difference you lose? That’s your slippage tax.
• Back-run: After your buy causes the price to move up even more, the bot sells the tokens it just bought, locking in a risk-free profit — completing a perfect “sandwich.”

Example: You try to buy Token A with 10,000 USDC. A bot spots your trade and buys 1,000 USDC worth of Token A just before you, pushing the price up by 0.5%. Your trade now executes at that 0.5% higher price, and you only get around 9,950 USDC worth of Token A. The bot then sells its tokens for a tidy profit. That 50 USDC you lost? That’s the sandwich tax you unknowingly paid.

2. Priority Gas Auctions — this is your “opportunity cost tax.”

Any on-chain opportunity with guaranteed profit can be front-run by MEV bots. This type of “tax” often shows up when you try to seize a time-sensitive, public opportunity.

Take NFT minting as an example. A hot NFT reveals metadata, and you spot that a certain token ID has a rare trait. You act fast and submit a transaction to buy it at floor price. But your intent is visible in the mempool — the “public lobby” — and an MEV bot picks it up. It copies your transaction, but attaches a higher gas fee, pushing its transaction ahead of yours and sniping the rare NFT.

You lose the rare item, and you still pay gas. That’s MEV turning your missed opportunity into someone else’s guaranteed win — and charging you in the process.

3. DEX Arbitrage — think of this as a “market balancing tax.”

This form of MEV is relatively neutral — it helps align prices across DEXs, but the profit still goes to a handful of professional bots.

Let’s say Token X is trading at $1.00 on DEX A and $1.01 on DEX B. A bot instantly spots this risk-free arbitrage gap. It might take out a flash loan (an uncollateralized, instant loan) of a large amount of USDC, buy Token X on DEX A at $1.00, then immediately sell it on DEX B for $1.01. After repaying the flash loan in the same block, it pockets the price difference — all within seconds, with no risk, and no room for manual traders to compete.

4. Liquidations — this is the “default penalty tax” for high-risk borrowers.

This is one of the most lucrative forms of MEV, commonly found in lending protocols, and it targets positions that are on the brink of liquidation.

For example, you borrow USDC against ETH on a lending platform. To avoid liquidation, you must maintain a safe collateral ratio. But if ETH’s price drops and your collateral becomes undersecured, your position is now vulnerable. Anyone on-chain can repay part of your debt and claim a chunk of your collateral as a “liquidation bonus.” MEV bots are especially good at this — they monitor vaults with extreme precision and, at the exact moment your position becomes eligible for liquidation, they submit a transaction with a high gas fee to front-run other liquidators and grab the bonus.

That “penalty fee” gets taken from your collateral — and ends up as clean profit for the fastest, most efficient bots on-chain.

Who’s keeping the scientists in check

At this point, it’s clear that MEV often works against regular users. So… is anyone out there actually trying to fix this? The answer is yes — and one notable example is Jito, a core MEV infrastructure project on Solana.

Jito’s approach is based on a simple idea: Instead of letting a handful of bots quietly profit off everyone else, why not build a fair, transparent system that shares the rewards — and reduces the damage? Here’s how it works:

• When a user sends a transaction using Jito’s infrastructure, it first goes to a relayer, a sort of waiting room.

• That transaction waits for about 200ms to be bundled with other transactions into a “block bundle.”

• The bundle is then sent to a block engine, where it’s sorted — based on priority fees.

• The highest-value bundles get processed first, and the fees are distributed to validators fairly.

It’s kind of like an on-chain Uber auction: whoever tips more gets picked up first. The whole process is transparent, and it prevents malicious bots from blindly front-running or sandwiching users.

How to “legally” dodge MEV taxes

Use MEV-protected protocols

Platforms like CowSwap let you submit an intention to trade, instead of an actual on-chain transaction. This intention doesn’t show up on-chain, so MEV bots can’t attack it. Instead, the trade request is routed to a network of professional market makers who execute it on your behalf — and may even directly match it with an opposite order, meaning zero slippage.

Switch your RPC

This is a wallet-level defense. Public RPCs are like crowded highways — everyone’s transaction is visible and vulnerable. But switching to a private or MEV-shielded RPC is like driving in a protected express lane. Your transaction is sent directly to block builders, who pack it into a block only after ensuring it hasn’t been tampered with.

Adjust your transaction settings

When trading on DEXs, lower your slippage tolerance. The smaller the slippage, the less room bots have to extract value. If your trade isn’t profitable for them, they’ll leave you alone.

End

MEV isn’t inherently evil — it’s a natural byproduct of on-chain transaction freedom. It’s just like high-frequency trading in TradFi: you can’t ban it, but you can be smart about it.

Know it exists. Understand how it works. And most importantly — don’t become someone else’s sandwich.

Disclaimer: This content is for educational purposes only and does not constitute financial advice. DeFi protocols carry significant market and technical risks. Token prices and yields are highly volatile, and participating in DeFi may result in the loss of all invested capital. Always do your own research, understand the legal requirements in your jurisdiction, and evaluate risks carefully before getting involved.