Maximal Extractable Value (MEV) on Ethereum 2.0
Ethereum’s successful Merge between its mainnet on the now obsolete proof-of-work chain and the Beacon Chain of its new proof-of-stake Consensus layer (Ethereum 2.0) marked the first significant step of a series of upgrades intended to improve the network in terms of scalability and decentralization.
The main goal of the Merge was to transition Ethereum from the energy-intensive proof-of-work (PoW) algorithm to the less energy-demanding proof-of-stake (PoS). As a result, miners who were once the backbone of Ethereum were replaced by validators who are now responsible for storing data, processing transactions and adding new blocks to the chain.
However, running Ethereum on a proof-of-stake algorithm still allows validators to carry out a profitable practice commonly used by proof-of-work miners known as Maximal Extractable Value (MEV).
In this article, we explore the following:
- The definition of Maximal Extractable Value (MEV)
- How MEV can lead to validator centralization on Ethereum 2.0
- How MEV on Ethereum 2.0 is not limited to validators
- Examples of MEV practices that are potentially harmful to Ethereum users
- The benefits and drawbacks of MEV in the Ethereum DeFi ecosystem
- Solutions to MEV, including private mempools and proposer-builder separation (PBS), suggested and implemented by the team at Flashbots
Please read all about it in our blog article through the link below.
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