Written by: 0xNatalie
Tina, the founder of Flashbots, said on Twitter that the term MEV has been censored, and 99% of discussions about MEV use the term casually, either to describe the problems that the product can solve or to criticize Ethereum, which they don't like. So should the definition of MEV include the potential extractable value or the actual extracted value? Are all extraction behaviors counted, or are only extractions by pests considered MEV?
Views from all sides: The debate over the definition of MEV
Last week, Fastlane CEO Thognad expressed his views on the definition of MEV on Twitter. He believes that the MEV problem cannot be solved at all, because as research deepens, new value methods will be introduced to promote reconstruction and be included in the definition of MEV, making this definition continue to expand. This view has triggered discussions in the community.
In this regard, Nathan Worsley, consultant to Flashbots, said that the definition of MEV should be limited to the value that blockchain proposers can observe and utilize before the blockchain finally becomes part of the consensus. If the definition is too broad, it will lead to management complexity. However, Thognad believes that this limitation only focuses on the role of supporters in MEV and ignores other possible ways to realize value.
The Ethereum researcher team joined the discussion, arguing that MEV is any value that can be extracted from a privileged position within the system. Thognad further refined this: Any player who has a privileged position within the system and actively exploits system vulnerabilities or design flaws through this position to obtain additional value beyond what the participating players can obtain should be considered MEV. And proposed a baseline assumption of "zero MEV", that is, if a block builder only selects transactions from the public transaction pool to build a block in accordance with transaction fees and time order, without performing any other operations, this should be considered zero MEV. mteam responded that because there are multiple blockchains, there are differences in network speed and connection quality, and different nodes may see different transaction orders and contents, so it is difficult to set a unified standard. He believes that the only useful definition is "MEV of dinosaurs."
Tina retweeted the question mteam mentioned in the discussion: Should MEV be regarded as the value that can be theoretically extracted from the blockchain system, and REV (Realized Extractable Value) as the actual extracted value distinguished from the theoretical value? Tina pointed out that discussions about MEV on Twitter usually ignore the formal definition of MEV, and are more based on personal opinions and convenience, using this term conveniently, which has led to serious confusion in the market's definition and understanding of MEV.
Tina further mentioned that a GitHub issue discussion on MEV classification (closed in December 2021) may clarify the definition and classification of MEV and provide a systematic solution. And consider whether this discussion should be reopened to better clarify the definition and classification of MEV, thereby promoting a deeper understanding of MEV.
Discussion on MEV classification
Although this GitHub discussion failed to reach the above final unified conclusion, it proposed multiple directions to improve the definition and classification of MEV. It can be divided into the following key points:
How to distinguish the potential achievable value of a region from the actual realized value:
Extractable Value: refers to the ability to identify all possible value opportunities by analyzing the transactions of the previous block in the current state of the blockchain. This includes the theoretical ability to achieve the maximum value through transaction reordering, insertion, etc.
Extracted Value: refers to the value actually extracted in a specific block, that is, the value obtained by miners or other participants through actual operations (such as transaction reordering). This is an actual and quantifiable value.
How to distinguish good from bad MEVs:
For example, arbitrage operations may be considered "good MEV" by helping the market reach equilibrium, while manipulating the order of transactions to cause market slippage or unfair trading may be considered "bad MEV". Such distinctions help identify the social impact of MEV and propose corresponding countermeasures for different types of MEV.
Redefine the term:
Some participants have proposed introducing new terms such as realized extraction distinction (REV) to clarify the value actually extracted and the theoretically extractable value, and dark MEV to describe those controller behaviors that are difficult to detect, such as those carried out through market interventions such as Stanford.