TL;DR
Maximal Extractable Value (MEV) represents the additional profit that can be extracted from block production by including, excluding, or changing the order of transactions in a block. With the significant growth in DeFi and NFT activities on Polygon, MEV opportunities have increased. Marlin's MEV-bor, a fork of Polygon's Bor client, was introduced to address the challenges and implications of MEV in the ecosystem. By processing Flashbots bundles, MEV-bor aims to increase validator income, protect user transactions, and prioritize MEV searchers' bundles, contributing to a more secure, efficient, and equitable blockchain ecosystem for all participants.
With over 53,000 decentralized applications (dApps) and a total value locked of $1.06 billion on Polygon as of April 28, 2023 (according to DeFi Llama), the blockchain ecosystem has experienced a surge in DeFi and NFT activities.
This increase has led to the generation of significant Maximal Extractable Value (MEV) opportunities. To address the challenges and implications of MEV with the current total extracted MEV on Polygon (excluding liquidations) reaching $45.64 million, Marlin introduced the Flashbots architecture for Polygon through MEV-bor in 2021.
In this article, we will explore the concept of MEV, its potential consequences, and how Marlin's MEV-bor is creating a more secure, efficient, and equitable ecosystem for all participants in the Polygon network.
What is MEV?
In the world of blockchain and cryptocurrency, Maximal Extractable Value (MEV) — before the merge, known as Miner Extractable Value — refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block. The goal of MEV is to make as much additional profit as possible. Block producers are best placed to do this as they have the ability to select and order transactions.
However, other network participants (known as searchers) can also pay fees to place transactions should they see an MEV opportunity, such as arbitrage, front-running, or liquidation. Arbitrage is the process of taking advantage of price differences between different markets or exchanges, while front-running involves a party exploiting its position to conduct a transaction before others. Liquidations occur when collateralized positions in decentralized finance (DeFi) platforms become under-collateralized, allowing other users to liquidate them for a profit.
The presence of MEV can potentially lead to negative consequences, such as increased network latency and unfair advantages for certain players in the ecosystem. Various solutions and tools, like Flashbots and Marlin's MEV-bor, have been developed to address these challenges and help democratize the extraction of MEV. For more information on MEV, visit: https://academy.binance.com/en/articles/what-is-maximal-extractable-value-mev
What is MEV-bor, and how does it work?
Marlin, a decentralized network providing high-performance infrastructure for Web 3.0, has developed MEV-bor, a fork of Polygon's Bor client that processes Flashbots bundles based on mev-geth. This development aims to increase the income of validators, protect users' transactions from frontrunning, and prioritize MEV searchers' bundles.
Marlin's MEV-bor enables validators to process Flashbots bundles atomically, without requiring extensive gas price manipulation. Additionally, the spec guarantees that reverting bundles will not be included in the block, preventing unnecessary gas usage. Marlin also runs a private relay to protect against bundles from being disclosed or sandwiched in the public mempool.
Bor is a crucial component of the Polygon ecosystem, responsible for validating and proposing new blocks. By implementing MEV-bor, Marlin enhances the capabilities of the Bor client, making it more efficient and profitable for validators while maintaining the security and integrity of the network.
MEV searchers are network participants who actively seek MEV opportunities by analyzing and identifying profitable transactions. They submit groups of transactions called bundles to validators in hopes of having them included in a block. Bundles are essentially ordered sets of transactions designed to maximize MEV extraction for both the searchers and validators.
Looking towards the future, Marlin's upcoming Oyster update is expected to further streamline the MEV extraction process by enabling MEV searchers to establish a direct connection with the closest relay node and deploy bots within the cluster. This update is expected to enhance the efficiency of the MEV extraction process and provide a more seamless experience for users, further contributing to the growth and adoption of the Polygon network. As the ecosystem continues to evolve and mature, solutions like MEV-bor will play a crucial role in promoting fairness, security, and efficiency for all participants in the blockchain ecosystem.
For more information on MEV, watch Supragya's (Marlin contributor) presentation on MEV extraction on Polygon & follow their socials to stay up to date!