Value Extraction Limits define the maximum amount of profit or advantage that can be gained by participants through specific actions within a decentralized system. They represent boundaries on the economic benefits that can be obtained by exploiting protocol mechanics or transaction ordering. These limits are crucial for maintaining fairness and preventing excessive arbitrage or manipulation. They constrain potential predatory behavior.
Context
Value extraction limits are a central topic in the ongoing research and development around Maximal Extractable Value (MEV) in decentralized finance. News often reports on efforts by blockchain developers and researchers to design protocols that reduce the opportunities for MEV or distribute its benefits more equitably. The discussion aims to create more efficient and fair markets by minimizing the potential for exploitative value capture.
Mechanized formalization of MEV using the Lean theorem prover provides machine-checked proofs of extraction bounds, fundamentally securing DeFi protocol logic.
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