Web3 engineers are in a continuous race to safeguard users from evolving threats. But for Web3 to become mainstream, it’s important to ensure these protections are strong and dependable. 

One of the main concerns in the DeFi world is Maximal Extractable Value (MEV). While blockchains are often competitive environments, it’s necessary for developers to prioritize safe experiences for users.  

Diving into the complexities of MEV, this article will explain how Oasis’ technology is specifically designed to counter MEV threats and possible MEV-related vulnerabilities.

What is MEV?

MEV is a concept that refers to a variety of mechanisms for capturing value from the block creation process of a blockchain network that is in excess of revenue received through normal validation rewards and network fees. Onchain liquidations, decentralized exchange (DEX) arbitrage, sandwich trades, and NFT minting are all emergent examples of MEV although not every method is equally popular or profitable. 

The term MEV (sometimes called “Miner Extractable Value”) was coined in a 2019 paper by Phil Daian and some colleagues from Cornell, but its conceptual origins date back to earlier in the 2010s. MEV has become an increasingly popular and important focal point for Web3 development since “DeFi Summer” in 2020 when the decentralized financial ecosystem reached escape velocity within the broader crypto industry. As the number of blockchains, their interoperability, and the types of applications they support all continue to increase, the opportunities for MEV increase as does the need to protect against MEV. 

Before continuing, here are a couple key definitions for understanding MEV: 

• Block Producers: A block producer collects and stores transactions and related verification information, which are then processed and built into new blocks to be added to the blockchain. Block builders often receive significant payments from searchers – usually in the form of high gas fees to guarantee their transactions are processed – when MEV opportunities are found. 
• Searchers: A “searcher” is the name assigned to a MEV participant who maintains bots and various onchain monitoring tools to identify and exploit profitable opportunities. Searcher strategies can vary significantly in both their complexity and profitability. 

‍The Good, The Bad, and The Future of MEV

Much of the MEV landscape is still unexplored and unknown. But some aspects are clearly either harmful or potentially useful with certain caveats, and the nuances of these ideas are important.

Considering the “good” of MEV, it is important to understand that extracting value from an onchain economy is not inherently bad. In a universally decentralized system, every user has an incentive to extract value wherever they can. Also, some forms of MEV (e.g. arbitrage) are inherently stabilizing mechanisms for any market. But an important qualifier to MEV benefits is to build a system that ensures generated value is equally distributed among those who participate. So, while MEV today is largely accessible to a privileged few, a future where the benefits of MEV reach the broader participant base is desirable.

The disadvantages of MEV (at least in the status quo) are obvious. Web3 users who want to swap tokens, mint collectibles, or use another type of dApp can be sandwiched, front-run, or attacked in other negative ways. These problems compound in the current Web3 landscape where MEV strategies now span multiple blockchains and with DeFi activity significantly increasing relative to centralized exchange use. Also, education about MEV – let alone tools for democratizing its accessibility – is not universal, which only helps to delay real solutions to the problematic side of MEV.

The future of MEV will likely look quite different than it does today. For one thing, multiple teams throughout Web3 are building products to address some prevalent negative aspects of MEV. But more broadly, dApp developers are becoming more aware of their role in the MEV landscape. The architecture of a particular dApp plays an enormous role in the manifestation of MEV, and new design paradigms are being adopted to avoid present vulnerabilities.

Solutions to MEV won’t build themselves, but the persistent focus to develop substantial changes to the Web3 landscape instead of ephemeral speculations about fixing existing weaknesses should be seen as an encouraging signal. 

MEV Protection with the Oasis Network

Most dApps are built on blockchains that reveal all user data (e.g. wallet addresses, wallet balances, wallet transfer histories), and this information can be used by others for profit at the expense of an unsuspecting user. So, researchers and engineers at Oasis are thinking about and building for a safer DeFi environment, protecting users from MEV. 

Web3 applications built with Oasis technology can provide MEV protection by default, saving their users from hacks, exploits, and value extraction strategies of various types. This protection applies to lending, staking, swapping, and more. 

From a user-facing product perspective, more robust and thoughtful dApps designs can minimize the adverse aspects of MEV for Web3 natives and “normies.” For example, integrating confidential tools like the Oasis Privacy Layer (OPL) – a framework for EVM chains to access the benefits of Oasis Sapphire – allows messages and assets to be privately communicated and passed between users and the application they interact with. 

Searchers and attackers hide in public mempools waiting to extract value, so a hidden mempool can also reduce their effects. The focus of a confidential mempool that leverages technologies built by Oasis can run in Trusted Execution Environments (TEEs), making them resistant to front-running and other attacks. This element is not applicable to all blockchains given their open configuration, but it can be applied to Oasis Sapphire and interacted with from cross-chain dApps through the OPL framework. 

The solution to MEV from a user’s perspective is for the onchain, public environment to primarily be used for verification. But the bulk of the computation is executed in a separate, confidential and MEV-resistant environment, which would eliminate the bulk of MEV exploitations. Environments that feature programmable confidentiality like Sapphire provide this capability. 

‍Learn More About MEV Protection

Average users who explore Web3 should not have to care about MEV bots, inputs, and other onchain mechanics, which is why communities like Oasis are providing solutions for dApp developers to use web3 account abstraction as the solutions to this problem. But as Web3 is today, self-education about MEV is never a bad thing. 

Here are a few basic resources for continued reading on this topic. 

1. Ethereum is a Dark Forest
2. Maximal Extractable Value (MEV)
3. What is MEV?

Join the official Oasis Discord to chat with other users and the Oasis team about MEV!