The Marginal Effects of Ethereum Network MEV Transaction Re-Ordering

TL;DR

This paper analyzes how Ethereum block builders' transaction reordering and sandwich attacks generate significant profits, skewing rewards and impacting network participants, with potential reforms suggested.

Contribution

It provides an empirical estimate of MEV transaction reordering effects, highlighting the scale of profits and attack frequency in Ethereum.

Findings

Two builders produce 80% of blocks.

Sandwich attacks occur more than once per block.

MEV payments to validators amount to 15% of gas fees.

Abstract

Two MEV builders now produce nearly 80\% of Ethereum blocks. Block builders have the ability to reorder transactions on the blockchain in a way that can be harmful to participants. We estimate they would pay in the aggregate nearly \$14 million per month to ensure that they remained in the first quartile of the block. Sandwich attacks, in which a transaction is front-run, are frequent, averaging more than one per block. Gas fees on these transactions pay for nearly 15\% of the MEV payments to the validator. These attacks have especially large marginal effects and skew the distribution. Reforms such as gas fee priority or private transaction pools might be helpful.