A Study of MEV Extraction Techniques on a First-Come-First-Served Blockchain
Maximal Extractable Value (MEV) has become a significant incentive on blockchain networks, referring to the value captured through the manipulation of transaction execution order and strategic issuance of profit-generation transactions. We argue that transaction ordering techniques used for MEV extraction in blockchains where fees can influence the execution order do not directly apply to blockchains where the order is determined based on transactions' arrival times. Such blockchains' First-Come-First-Served (FCFS) nature can yield different optimization strategies for entities seeking MEV, known as searchers, requiring further study.
This paper explores the applicability of MEV extraction techniques observed on Ethereum, a fee-based blockchain, to Algorand, an FCFS blockchain. Our results show the prevalence of arbitrage MEV getting extracted through backruns on pending transactions in the network, uniformly distributed to block positions. However, on-chain data do not reveal latency optimizations between specific MEV searchers and Algorand block proposers. We also study network clogging attacks and argue how searchers can exploit them as a viable ordering technique for MEV extraction in FCFS networks.
| Attribute | Value |
|---|---|
| Address | Avila, Spain |
| Authors | Burak Öz , Filip Rezabek , Jonas Gebele , Felix Hoops , Prof. Dr. Florian Matthes |
| Citation | @inproceedings{10.1145/3605098.3635990, author = {\"{O}z, Burak and Rezabek, Filip and Gebele, Jonas and Hoops, Felix and Matthes, Florian}, title = {A Study of MEV Extraction Techniques on a First-Come-First-Served Blockchain}, year = {2024}, isbn = {9798400702433}, publisher = {Association for Computing Machinery}, address = {New York, NY, USA}, url = {https://doi.org/10.1145/3605098.3635990}, doi = {10.1145/3605098.3635990}, abstract = {Maximal Extractable Value (MEV) has become a significant incentive on blockchain networks, referring to the value captured through the manipulation of transaction execution order and strategic issuance of profit-generation transactions. We argue that transaction ordering techniques used for MEV extraction in blockchains where fees can influence the execution order do not directly apply to blockchains where the order is determined based on transactions' arrival times. Such blockchains' First-Come-First-Served (FCFS) nature can yield different optimization strategies for entities seeking MEV, known as searchers, requiring further study.This paper explores the applicability of MEV extraction techniques observed on Ethereum, a fee-based blockchain, to Algorand, an FCFS blockchain. Our results show the prevalence of arbitrage MEV getting extracted through backruns on pending transactions in the network, uniformly distributed to block positions. However, on-chain data do not reveal latency optimizations between specific MEV searchers and Algorand block proposers. We also study network clogging attacks and argue how searchers can exploit them as a viable ordering technique for MEV extraction in FCFS networks.}, booktitle = {Proceedings of the 39th ACM/SIGAPP Symposium on Applied Computing}, pages = {288–297}, numpages = {10}, keywords = {blockchain, maximal extractable value, first-come-first-served, al-gorand, arbitrage, clogging}, location = {, Avila, Spain, }, series = {SAC '24} } |
| Key | Oz24b |
| Research project | |
| Title | A Study of MEV Extraction Techniques on a First-Come-First-Served Blockchain |
| Type of publication | Conference |
| Year | 2024 |
| Publication URL | https://dl.acm.org/doi/10.1145/3605098.3635990 |
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