📝 Editor’s Note:
Welcome to OurNetwork's latest. Today we're digging into maximal extractable value, or MEV, a term for the reordering of transactions in between the time users submit them and they are actually included in the blockchain. The reorderings — also insertions and deletions— are carried out by programmed bots for profit and typically come at the expense of transactions' original sender.
Coined originally as Miner Extractable Value in 2019, MEV has evolved into an under-the-radar industry of its own, with major players generating millions in profits, and billion-dollar R&D operations like Flashbots, which aim to "mitigate the negative externalities posed by MEV."
SKALE Labs, an OurNetwork partner, is taking a different approach in the battle against MEV and is looking to eliminate it entirely in order to make its platform fair for end users. In service of this goal, the team behind SKALE has developed a solution called Blockchain Integrated Threshold Encryption, or BITE, which encrypts transactions' instructions until they are confirmed onchain.
That's what we'll be looking into today.
– ON Editorial Team
Eliminating MEV With BITE Protocol 🛡️
📈 Mev as Nine-Figure Zero-Sum Game
As stated above, MEV has moved from a cottage industry to a major force in the crypto space. That's not to say it isn't complicated to measure — it's not always easy to discern whether transactions are true MEV. Still, the European Banking Authority (EBA), the primary regulatory body of the banking sector in the EU, cited a Flashbots estimate that extracted MEV to have been $675M from January 2020 to September 2022.
MEV hits crypto's largest blockchains. For example, sandwich attacks, one of the most common MEV attacks, are present in over 30% of blocks on Ethereum, according to a query by the well-known researcher Hildobby.
Solana too, has an MEV ecosystem which is costing users — sandwich attacks have generated over $350,000 for their creators in the past 30 days, according to sandwiched.me.
And according to a report from EigenPhi, which specializes in MEV analysis, a single address generated over $40M in revenue in a three month period in 2023.