Auctioning Time Advantage Optimizes MEV Capture on Automated Market Makers → Research

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Briefing

This paper addresses the pervasive challenge of Maximal Extractable Value (MEV) within blockchain systems, where the strategic inclusion and ordering of transactions yield significant profits. It proposes and rigorously analyzes a novel “time advantage mechanism” that auctions off preferential transaction inclusion, moving beyond conventional first-come-first-serve or priority fee models. This foundational breakthrough offers a structured approach to MEV capture, particularly within Automated Market Makers (AMMs), by enabling these protocols to adapt and internalize a portion of the value previously extracted by arbitrageurs. The most important implication is the potential to redesign blockchain transaction environments, fostering more equitable value distribution and enhancing the economic stability of decentralized applications by integrating MEV capture directly into protocol design.

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Context

Before this research, the prevailing theoretical limitation in MEV concerned the inherent difficulty for protocols to capture or mitigate value extraction that arises from transaction ordering. Existing mechanisms, such as simple priority fees or first-come-first-serve queues, often left significant value on the table for external actors like arbitrageurs. This created an adversarial dynamic where external searchers could exploit predictable transaction ordering, leading to a substantial transfer of value away from protocols and users, posing a challenge to the economic security and fairness of decentralized systems.

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Analysis

The paper’s core mechanism introduces an auction for a “time advantage” in transaction inclusion. This fundamentally differs from previous approaches by formalizing and monetizing the timing aspect of transaction execution, which is a critical component of MEV. Instead of a race or a static fee, this model allows participants to bid for the opportunity to have their transactions included with a guaranteed temporal lead.

The research then analyzes the optimal strategies for arbitrageurs operating within this new framework, specifically on Automated Market Makers (AMMs). It demonstrates how AMMs can be adapted to participate in or benefit from this auctioned time advantage, thereby capturing a share of the MEV that would otherwise be extracted by external entities.

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Parameters

Core Concept → Time-Advantaged Arbitrage
Mechanism → Auctioned Time Advantage
Focus Area → Automated Market Makers (AMMs)
Key Authors → Robin Fritsch et al.
Publication Date → October 14, 2024 (v1), April 23, 2025 (v2)

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Outlook

This research opens new avenues for mechanism design within blockchain protocols, particularly for capturing MEV. Future work could explore the optimal design of such time advantage auctions across diverse DeFi primitives beyond AMMs, or investigate the long-term game-theoretic implications for network participants and validators. In 3-5 years, this theory could unlock real-world applications where protocols actively participate in and benefit from MEV, leading to more robust and economically sustainable decentralized applications. It could also inform the development of next-generation transaction ordering systems that are more resilient to exploitative MEV practices.

This research decisively shifts the paradigm of MEV capture, offering a principled framework for protocols to reclaim value through structured time advantage auctions, thereby enhancing the foundational economic security of blockchain systems.

Signal Acquired from → arxiv.org