How Verus Solved MEV (Maximal Extractable Value) in DeFi
Imagine a DeFi world without front-running, back-running, or sandwich attacks. A world where every user gets a fair price, and transaction fees don’t suddenly skyrocket. This isn’t a distant dream — it’s the reality with Verus. MEV (Maximal Extractable Value) is rampant on VM-based blockchains like Ethereum, causing users to lose money and suffer unfair trading practices. But Verus has changed the game with its innovative protocol design, making MEV attacks a thing of the past. Let’s explore how Verus is redefining DeFi with its MEV-resistance at the protocol layer.
MEV and its Consequences
Maximal Extractable Value (MEV) is the maximum value that can be extracted from block production in cryptocurrency networks, beyond the standard block rewards.
A block producer, whether a miner or staker, can make a profit by their ability to arbitrarily include, exclude or re-order transactions within the blocks they produce. There are also bots that continuously search the pool of pending transactions (the mempool) for profitable opportunities. This behavior by block producers and bots leads to users being front-run, back-run or sandwich attacked on their transactions.
Front-running involves placing a transaction before a target transaction, while back-running places one immediately after. Sandwich attacks combine both, surrounding a target transaction. This behavior takes advantage of the time between when a transaction is announced (it’s in the mempool) and when it’s processed, allowing manipulators to benefit from price movements caused by the target transaction.
This malicious behavior leads to worse-than-expected execution prices and high transaction fees for regular users doing swaps or trades on AMMs (automated market makers) or DEXs (decentralized exchanges). A sudden high transaction fee can also lead to failing transactions, costing users gas fees without completing the intended trade. At worst, it can even lead to protocol instability.
Another thing to keep in mind is the possible problematic merger of traditional finance and decentralized finance. Front-running, and back-running are illegal practices in traditional finance but common in DeFi. Regulators are likely to view these tactics as unacceptable market manipulation, especially when applied to RWAs (real-world assets). VM-based blockchains have to balance the open, permissionless nature of the blockchain with the expectations of fairness and protection that come with mainstream financial adoption. The giant elephant in the room asks… Can blockchain protocols where MEV is endemic be used for mainstream adoption?
MEV Resistance in Verus
How Verus is MEV-resistant is actually really simple and doesn’t need complicated ways that try to mitigate it. It is inherently not in the protocol by forward-looking protocol design.
You can find Verus DeFi within the consensus layer of the protocol. All currencies (e.g. tokens, liquidity pools) are accounted for by the miners and stakers. This is very different from Ethereum, for example, where only ETH is accounted for by the stakers, and where ERC-20s are not. On VM-based blockchains DeFi is programmed at the smart contract layer, which has many vulnerability surfaces, and what is happening in those smart contracts is not verified by the block producers.
No Transaction Ordering
All VM-based blockchains solve transactions sequentially. This is their fundamental design flaw. Because of this, transactions can be ordered, by either block producers or bots paying higher gas fees to “skip the line.” This is what makes MEV possible.
Unlike VM-based blockchains that solve transactions sequentially, Verus, a UTXO-based blockchain, solves transactions simultaneously. Front-running, back-running and sandwich attacks are impossible since there is no “front” or “back”. Transactions (and thus conversions) are not ordered.
Conversions are solved simultaneously within 1 to 10 blocks, depending on how many conversions are made. The conversions are triggered when there are 10 transactions made, or 10 blocks have passed if it’s not busy. If it’s busy all the time, then conversions are solved every 2 blocks. This leads to a MEV-resistant protocol, but also to fair pricing and enhanced liquidity through offsetting.
Fair Pricing and Enhanced Liquidity
Because all transactions (conversions) are solved simultaneously (1 to 10 blocks), all conversions on the same “trading pair” get the same fair price. Keep in mind that there can be many “trading pairs” that are the same, but when they are in different basket currencies, they are treated as separate.
Important to note is that orders are offset against each other. For example, if one user wants to sell 100 currency X (for Y) and another wants to buy 80 currency X with Y, 80 of that currency is directly matched, leaving only 20 to affect the overall market price. This also means there is reduced price impact, and thus less slippage.
Another benefit is enhanced liquidity. Instead of each conversion drawing from or adding to the liquidity pool sequentially, the net effect is applied, making more efficient use of the available liquidity. The actual liquidity in the pool might not change, but the offsetting effect makes it behave as if there was more liquidity available because offsetting orders are matched directly, reducing the need to draw from or add to the pool.
Then you also have the market arbitrageurs, who now not only make a profit for themselves, they also stabilize the market overall, giving all participants a fair price. With a very low fee of 0.025% or 0.05% of the conversion (without gas fees), it is a great system for all kinds of market participants.
Verus DeFi protocol wide volume in July 2024 was close to $14M. Source: on-chain metrics.
Real Fair DeFi
Whatever market participant you are, you are best served with the Verus Protocol. Verus DeFi is fully functional on mainnet for everyone to use.
- No MEV (no front-running, back-running or sandwich attacks)
- Truly decentralized (it’s a credibly neutral protocol — not a business, company or otherwise rent-seeking)
- The same fair price for all market participants within 1–10 block(s)
- Secured at the protocol level
- Low conversion fees of max. 0.05%
- Permissionless launching of liquidity pools
- Bridged to Ethereum (all ERC-20s can be bridged to the Verus Protocol, in a non-custodial and trustless manner, and vice versa)
- Decentralized crowdfund mechanisms for your currency (e.g. token, liquidity pool, native PBaaS coin), such as pre-launch discounts, pre-launch carveouts and pre-allocations
💡 Bridge Your Community to Verus
If you are in a community that has an ERC-20 as a token consider moving over to Verus. Not only do you get fair, MEV-resistant DeFi, you can also tap into the self-sovereign identity protocol (VerusID) and experience unlimited scale (no more high gas fees). You can do it permissionlessly!
Join the Discord, the worldwide community is happy to answer any questions and help you assist.
In the meantime you can try Verus DeFi on your mobile and desktop now. Download Verus Mobile on Google Play and App Store.
🛠️ Build dApps with Verus
Look up the complete command list here. Go to docs.verus.io to get guidance on some API commands (e.g. launching currencies, tokens & liquidity pools).
