Optimistic MEV Dominates L2 Blockspace with Speculative Arbitrage Probes ∞ Research

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Briefing

This paper addresses the understudied dynamics of Maximal Extractable Value (MEV) on Ethereum Layer 2 rollups, identifying a novel phenomenon termed “optimistic MEV.” This form of speculative, on-chain cyclic arbitrage, where smart contracts perform detection and execution logic, leads to persistent blockspace demand. The core breakthrough is the quantification and characterization of this optimistic MEV, demonstrating that it consumes over 50% of gas on certain L2s through “interaction probes” that frequently fail to execute profitable trades, yet disproportionately contribute to network congestion. This new understanding implies that low transaction fees on Layer 2s, while intended for scalability, inadvertently foster a high-frequency, low-value spam-like activity that fundamentally alters blockspace utilization and presents new challenges for network efficiency and equitable transaction ordering.

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Context

Prior to this research, the prevailing understanding of MEV largely focused on its manifestations on Layer 1 blockchains, such as front-running, back-running, and sandwich attacks, and their impact on transaction ordering and network security. With the rapid adoption of Layer 2 rollups for scaling Ethereum, securing over $40 billion in DeFi activity, the specific dynamics of MEV within these environments remained largely unexplored. The theoretical limitation was a lack of empirical data and a precise definition for how MEV adapts to and exploits the unique economic primitives and transaction ordering mechanisms of L2s, particularly their low-fee structures and varying sequencer designs.

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Analysis

The paper introduces “optimistic MEV” as a distinct mechanism for value extraction on Layer 2s. This mechanism operates through smart contracts that embed both the logic for detecting arbitrage opportunities and the execution of trades directly on-chain. Crucially, these bots submit transactions “optimistically,” meaning they attempt to execute a trade without prior off-chain verification of its profitability. This approach leads to a high volume of “interaction probes” ∞ transactions that consume gas by searching for arbitrage opportunities but often fail to result in a successful trade.

The fundamental difference from previous MEV approaches lies in this speculative, on-chain probing, enabled by the inexpensive blockspace of L2s. Instead of carefully pre-calculating profitable opportunities off-chain, optimistic MEV bots flood the network with numerous low-value attempts, effectively dominating blockspace and reshaping transaction activity.

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Parameters

Core Concept ∞ Optimistic Maximal Extractable Value (MEV)
Key Authors ∞ Solmaz, O. et al.
Target Networks ∞ Ethereum Layer 2s (Arbitrum, Base, Optimism)
Primary Strategy ∞ On-chain cyclic arbitrage
Observed Gas Usage (Q1 2025) ∞ >50% on Base and Optimism; 7% on Arbitrum
Transaction Nature ∞ Speculative, high-frequency “interaction probes”
Correlating Factors ∞ ETH price volatility, retail trading activity, DEX aggregator usage

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Outlook

This research opens new avenues for understanding and mitigating the impact of MEV on scalable blockchain architectures. Future work should explore refined mechanism designs for Layer 2 sequencers and transaction ordering protocols that can differentiate between high-value user transactions and speculative MEV probes, potentially through reputation systems or dynamic fee markets. The insights from this paper could unlock more efficient blockspace allocation, leading to truly scalable blockchains where user transactions are not crowded out by low-value, high-frequency bot activity. In 3-5 years, this could inform the development of L2s with more robust and equitable transaction inclusion policies, ensuring that the benefits of scalability are fully realized for all network participants.

This paper fundamentally redefines our understanding of MEV on Layer 2s, exposing a critical, previously unquantified source of network congestion that demands novel architectural and economic solutions for blockchain scalability.

Signal Acquired from ∞ arxiv.org