Briefing
The increasing real-world impact of Maximal Extractable Value (MEV) attacks on public blockchains, particularly within DeFi protocols, highlights a critical gap → the absence of sufficiently established theoretical foundations to prove smart contracts MEV-free. This research addresses the challenge by proposing a formal, abstract, and general theory of MEV, complete with a detailed adversary model and a precise definition of transaction deducibility. A key innovation is the explicit differentiation between “good” and “bad” MEV, a distinction crucial for nuanced security analysis. This foundational formalization is an essential first step towards constructing robust analytical tools for MEV-freedom, thereby enabling provable security for smart contracts and fostering more resilient and equitable blockchain architectures.
Context
Prior to this research, the understanding of Maximal Extractable Value (MEV) primarily relied on empirical observations, focusing on heuristics for value extraction, quantitative impact assessments, or mitigation techniques. The academic and industry communities lacked a comprehensive, rigorous formal definition of MEV, which is indispensable for applying cryptographic security proofs to smart contracts. Existing partial definitions frequently encountered difficulties in accurately characterizing adversarial powers and in distinguishing between economically beneficial and malicious forms of MEV, leaving a significant theoretical void in the pursuit of provable security for decentralized applications.
Analysis
The paper’s core mechanism establishes an abstract model of contracts as state transition systems, meticulously defining fundamental economic concepts such as “wealth” and “gain.” Central to this framework is a formalized adversary model that precisely delineates “transaction deducibility,” accounting for both private and mempool knowledge. This rigorous foundation enables a formal definition of MEV as the maximal gain an adversary can achieve. A pivotal contribution is the introduction of “universal MEV,” which is designed to be agnostic to the specific identity and current token balance of actors, alongside a formal distinction between “good” MEV, like beneficial arbitrage, and “bad” MEV, exemplified by sandwich attacks. This approach fundamentally diverges from previous empirical or partially formalized efforts by providing a comprehensive, axiomatic definition of MEV, including sophisticated modeling of adversarial knowledge and token redistribution, thereby facilitating formal proofs of MEV-freedom and overcoming the limitations of prior, less universally applicable models.
Parameters
Outlook
This formalization of Maximal Extractable Value represents a critical advancement, laying the groundwork for the development of automated analytical tools capable of rigorously assessing smart contracts for MEV-freedom. This theoretical breakthrough holds the potential to unlock the design of provably MEV-resistant DeFi protocols and smart contracts within the next three to five years, significantly enhancing their security, fairness, and overall robustness. Future research avenues include extending the model to encompass long-range attacks spanning multiple blocks, integrating the complexities of computational adversaries, and incorporating transaction costs, which will further refine the understanding and mitigation of MEV in increasingly intricate blockchain environments.
Verdict
This foundational formal theory of Maximal Extractable Value establishes a rigorous framework for provable security against economic attacks, fundamentally advancing blockchain security analysis.
Signal Acquired from → arxiv.org
