A theoretical basis for MEV

TL;DR

This paper develops a formal theoretical framework for understanding Maximal Extractable Value (MEV) in blockchains, providing proofs of security and addressing the lack of rigorous foundations for these economic attacks.

Contribution

It introduces a formal, abstract model of blockchains and smart contracts to establish a theoretical basis for MEV and prove security against such attacks.

Findings

Formal theory of MEV established

Proofs of security against MEV attacks provided

Addresses gap in theoretical understanding of MEV

Abstract

Maximal Extractable Value (MEV) refers to a wide class of economic attacks to public blockchains, where adversaries with the power to reorder, drop or insert transactions in a block can "extract" value from smart contracts. Empirical research has shown that mainstream DeFi protocols are massively targeted by these attacks, with detrimental effects on their users and on the blockchain network. Despite the increasing real-world impact of these attacks, their theoretical foundations remain insufficiently established. We propose a formal theory of MEV, based on a general, abstract model of blockchains and smart contracts. Our theory is the basis for proofs of security against MEV attacks.