Maximal Extractable Value in Decentralized Finance: Taxonomy, Detection, and Mitigation

TL;DR

This paper provides a comprehensive survey of Maximal Extractable Value (MEV) in DeFi, including its taxonomy, detection methods, mitigation strategies, and the challenges faced, aiming to improve security and fairness in DeFi ecosystems.

Contribution

It introduces a novel taxonomy of MEV transactions, critically analyzes detection and mitigation approaches, and discusses challenges and potential solutions in managing MEV in DeFi.

Findings

Effective detection approaches vary in accuracy for different transaction types.

Current mitigation strategies have limitations in preventing MEV exploitation.

Understanding MEV taxonomy aids in developing better detection and mitigation tools.

Abstract

Decentralized Finance (DeFi) leverages blockchain-enabled smart contracts to deliver automated and trustless financial services without the need for intermediaries. However, the public visibility of financial transactions on the blockchain can be exploited, as participants can reorder, insert, or remove transactions to extract value, often at the expense of others. This extracted value is known as the Maximal Extractable Value (MEV). MEV causes financial losses and consensus instability, disrupting the security, efficiency, and decentralization goals of the DeFi ecosystem. Therefore, it is crucial to analyze, detect, and mitigate MEV to safeguard DeFi. Our comprehensive survey offers a holistic view of the MEV landscape in the DeFi ecosystem. We present an in-depth understanding of MEV through a novel taxonomy of MEV transactions supported by real transaction examples. We perform a critical comparative analysis of various MEV detection approaches, evaluating their effectiveness in identifying different transaction types. Furthermore, we assess different categories of MEV mitigation strategies and discuss their limitations. We identify the challenges of current mitigation and detection approaches and discuss potential solutions. This survey provides valuable insights for researchers, developers, stakeholders, and policymakers, helping to curb and democratize MEV for a more secure and efficient DeFi ecosystem.