When Priority Fails: Revert-Based MEV on Fast-Finality Rollups

TL;DR

This paper analyzes the strategic use of transaction reverts in Ethereum rollups, revealing systematic patterns, economic incentives, and inefficiencies in current fee markets, and proposes the need for protocol reforms.

Contribution

It uncovers the systematic nature of reverts in rollup MEV, models their economic incentives, and highlights the inefficiencies in current priority fee auctions.

Findings

Over 80% of reverted transactions are swaps, mainly on USDC-WETH pools.

Priority fee auctions are inefficient, with mis-ordered transactions and spam inflating fees.

Reverts disproportionately benefit sequencers' revenue, shifting welfare away from users.

Abstract

We study the economics of transaction reverts on Ethereum rollups and show that they are not accidental failures but equilibrium outcomes of MEV strategies. Using execution traces from major L2s, we find that over 80% of reverted transactions are swaps, with half targeting USDC-WETH pools on Uniswap v3, v4. Clustering reveals distinct bot archetypes, including split-trade arbitrageurs, atomic duplicators, and end-of-block spammers, demonstrating that reverts follow systematic patterns rather than random noise. Empirically, we show that priority fee auctions on rollups do not allocate blockspace efficiently: transaction placement is mis-ordered, round-number bidding dominates, and duplication spam inflates base fees. As a result, reverted transactions contribute disproportionately more to sequencer fee revenues than to gas consumption, shifting welfare from users to sequencers. To explain these dynamics, we develop a model proving that trade-splitting and duplication strictly dominate one-shot execution under convex adversarial loss. Our findings establish reverts as a structural feature of rollup MEV microstructure and highlight the need for protocol-level reforms to sequencing, fee markets, and revert protection.