Formalizing MEV for Provable Security in Blockchain Protocols ∞ Research

A futuristic white satellite with blue solar panels extends across the frame, positioned against a dark, blurred background. Another satellite is visible in the soft focus behind it, indicating a larger orbital network

A prominent blue faceted object, resembling a polished crystal, is situated within a foamy, dark blue liquid on a dark display screen. The screen beneath illuminates with bright blue data visualizations, depicting graphs and grid lines, all resting on a sleek, multi-tiered metallic base

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.

Vivid blue crystalline formations, sharp and multifaceted, are bisected by smooth, white, futuristic conduits. This abstract composition visually articulates the complex genesis protocols underpinning decentralized ledger technologies

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.

A central metallic protocol mechanism, intricately designed with visible apertures, is depicted surrounded by a dynamic, luminous blue fluid. This fluid, resembling a liquidity pool, exhibits flowing motion, highlighting the metallic component's precision engineering

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.

The image showcases a high-precision hardware component, featuring a prominent brushed metal cylinder partially enveloped by a translucent blue casing. Below this, a dark, wavy-edged interface is meticulously framed by polished metallic accents, set against a muted grey background

Parameters

Core Concept ∞ Maximal Extractable Value
New Mechanisms ∞ Universal MEV, Bad MEV
Formal Model Components ∞ Abstract Contract Model, Adversary Model, Transaction Deducibility
Key Authors ∞ Massimo Bartoletti, Roberto Zunino
Publication Identifier ∞ arXiv:2302.02154v5

A clear cubic prism is positioned on a detailed blue printed circuit board, highlighting the intersection of physical optics and digital infrastructure. The circuit board's complex traces and components evoke the intricate design of blockchain networks and the flow of transactional data

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.

Smooth, abstract shapes in varying shades of blue and grey create a dynamic, fluid composition, featuring both matte and reflective surfaces. The central deep blue cavity provides a focal point, suggesting depth and internal processes within the interwoven forms

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