Rolling in the Shadows: Analyzing the Extraction of MEV Across Layer-2 Rollups

TL;DR

This paper investigates the prevalence, impact, and potential exploitative practices of MEV across Ethereum and Layer-2 rollups, revealing widespread MEV activity, lower profits on rollups, and potential for cross-layer attacks.

Contribution

It provides the first comprehensive analysis of MEV on rollups, compares it with Ethereum, and introduces novel cross-layer attack strategies with significant profit potential.

Findings

MEV is widespread on rollups with trading volume comparable to Ethereum.

MEV profits are significantly lower on rollups despite lower costs.

Potential for cross-layer sandwich attacks could have earned attackers around 2 million USD.

Abstract

The emergence of decentralized finance has transformed asset trading on the blockchain, making traditional financial instruments more accessible while also introducing a series of exploitative economic practices known as Maximal Extractable Value (MEV). Concurrently, decentralized finance has embraced rollup-based Layer-2 solutions to facilitate asset trading at reduced transaction costs compared to Layer-1 solutions such as Ethereum. However, rollups lack a public mempool like Ethereum, making the extraction of MEV more challenging. In this paper, we investigate the prevalence and impact of MEV on Ethereum and prominent rollups such as Arbitrum, Optimism, and zkSync over a nearly three-year period. Our analysis encompasses various metrics including volume, profits, costs, competition, and response time to MEV opportunities. We discover that MEV is widespread on rollups, with trading volume comparable to Ethereum. We also find that, although MEV costs are lower on rollups, profits are also significantly lower compared to Ethereum. Additionally, we examine the prevalence of sandwich attacks on rollups. While our findings did not detect any sandwiching activity on popular rollups, we did identify the potential for cross-layer sandwich attacks facilitated by transactions that are sent across rollups and Ethereum. Consequently, we propose and evaluate the feasibility of three novel attacks that exploit cross-layer transactions, revealing that attackers could have already earned approximately 2 million USD through cross-layer sandwich attacks.