The frequency of new hacks indicates that some very smart people spend a lot of time examining contracts for vulnerabilities.
But this unforgiving environment pales in comparison to the mempool (the set of pending, unconfirmed transactions). If the chain itself is a battleground, the mempool is something worse: a dark forest.
MEV creates systemic consensus-layer vulnerabilities…
Over $750 Million worth of MEV extracted over the past 18 months.
You could know a good bit about Ethereum and still not know much at all about Maximum Extractable Value, (MEV). Well, now is as good a time as any to study up! Simply put, Maximum Extractable Value (MEV), formerly referred to as Miner Extractable Value, is a measure of the total value that can be extracted permissionlessly (without any special rights) from transaction ordering. It first appeared in Flash Boys 2.0, an extensive smart contract research paper focussing on inherent weaknesses of mempool functionality, and their exploitation by bad actors using sophisticated arbitrage bots to execute transaction attacks like ‘front-running’ or ‘back-running’ or a combination of both ‘sandwiching’.
Enter Flashbots and the MEV Explorer!
MEV-Explore v0 presents empirical evidence of the MEV activities occurring on the Ethereum blockchain. It is a public dashboard created and managed by the Flashbots team that tracks in near real-time, aggregate metrics on MEV, and the latest MEV transactions on Ethereum.
Flashbots is a research and development organization formed to mitigate the negative externalities and existential risks posed by miner-extractable value (MEV) to smart-contract blockchains. We propose a permissionless, transparent, and fair ecosystem for MEV extraction to reinforce the Ethereum ideals.
MEV-Explore is meant to help the community understand and quantify the significance of these activities and their impact on the Ethereum network. We aim to preserve Ethereum’s transparency by providing data that is accessible and comprehensible to every user.
Our efforts are currently centered around providing open-source example implementations and toolings for third-party MEV searchers within the Flashbots community.
Our approach to mitigating the MEV crisis can be broken down into three parts: Illuminate the Dark Forest, Democratize Extraction, and Distribute Benefits. We believe each part is necessary for Flashbots to succeed.
MEV arbitrage opportunities have become so prevalent on the Ethereum blockchain that inefficiencies like network and blockspace congestion are taking a heavier and heavier toll. One of the primary causes of this blockspace congestion is the large number of failed MEV transactions. This is due to the multiple MEV extractors competing against each other to get their transaction included, but in the end only one will ‘win’ while all the others will fail. A massive amount of useless, failed transaction data, now being stored on the Ethereum blockchain forever. Consequently, major financial impacts are currently being passed on to participants of the Ethereum blockchain. Users are basically being priced out, at least in part, because they are either unwilling or unable to pay the high gas fees that are being caused more and more by MEV exploitation.
Over $12.5 Million in fees spent on Failed MEV Transactions in the past 18 months. Without Flashbots we might not be nearly as aware of this matter...
While Flashbots understands what is happening here as well as anybody they have chosen not to participate in MEV extraction. Instead, their unselfish, community-first initiative is really something to be applauded. MEV-Explore is selflessly providing us essential light in this dark forest. In fact, these tools are already being utilized by the amazing Alchemist community developers to create the mistX DEX!
With the help of mistX, you can continue to take full advantage of Uniswap & Sushiswap liquidity pools without being exposed to the risk of frontrunning.
Nice familiar swap interface. What’s not to like?!
Sandwiched.wtf enables users to directly see the impact that sandwich-attackers have on them, and thus the whole ecosystem. For users that are reading this and are asking “but what is a Sandwich attack?”; a sandwich-attack is when a transaction is both front- and back-run, with the user sandwiched in between (hence a ‘sandwich’-attack). These actions occur at the cost of the user’s position/price action.
Over the past weeks, we’ve seen some very interesting sandwiches rolling through, with examples of users being victims of sandwich attacks worth 50+ ETH and up. Imagine going to swap or trade and “losing” this amount. Ouch!
Now, aren’t you glad you took some time to study up on MEV? I sure am!