On-chain value extraction refers to the process of obtaining economic gains from transaction ordering and execution opportunities within a blockchain. This often involves techniques like front-running, arbitrage, or liquidations that capitalize on temporary market inefficiencies. Such extraction can occur legally or exploit protocol design flaws. It represents a significant economic force within decentralized finance ecosystems.
Context
The phenomenon of on-chain value extraction, commonly associated with Miner Extractable Value (MEV), is a critical area of study and debate in blockchain research. Efforts to mitigate its negative impacts and redistribute its benefits are ongoing. Monitoring new protocols designed to address MEV offers insight into the evolution of fair and efficient decentralized markets.
A new axiomatic framework formalizes Maximal Extractable Value using an abstract blockchain model, enabling provable security guarantees for mechanism design.
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