ITSA DeFi Insight: Miner Extractable Value (MEV)

How MEV works?

First, we need to understand how blockchains work. In the context of DeFi, users often look for arbitrage opportunities. If a user spots a such opportunity, they create and submit their transaction to the mempool. The mempool is the place where all unconfirmed transactions get collected. Miners pick the transactions with the highest gas price and order them by gas spent in the block they produce. Transactions are then executed by their order. If two equal transactions end up in the block, the one paying higher fees gets executed, and the second one fails. Miners indirectly profit from the traders’ transaction fees since even failed transactions pay for gas, leading to higher fee revenues for miners.

  • Front-running: the ability of miners or bots to insert transactions before a victim transaction for profit.
  • Back-running: placing a transaction in a block directly after a user transaction.
  • Sandwich trading: Execute trades both before and after a user. Sandwich attacks commonly occur on DEXs (Decentralized Exchanges), where they involve the front-running of an order to manipulate the price against it, followed by a back run enabling the attacker to profit at the victim’s expense.
  • Censorship attacks: An adversary may spam the blockchain with transactions to prevent users and bots from issuing transactions. An example attack would be preventing a user from liquidating a debt position where the collateral drops below the safe levels. By spamming transactions, an adversary might force-liquidate the targeted user.
  • Non-Fungible Tokken (NFT) MEV: Following the growth of the NFT ecosystem, we can observe NFT-specific attacks. Bots can be programmed to be the first in line to buy new NFT collections.
Figure 1: Cumulative Extracted MEV — Gross Profit (source:
Figure 2: Extracted MEV Split by Protocol source: (


A number of organizations, companies, and researchers are working on solutions for MEV extraction. In general, there are two camps. Some believe that MEV should not be tolerated and banned; others believe that MEV will exist in the future and the way forward will be to democratize MEV to prevent centralization.


The proposed Fair Sequencing Service (FSS) by Chainling is a mechanism that enables Decentralized Finance (DeFi) systems to reduce transaction sequencing issues and costs. The idea behind FSS is to have an oracle network order the transactions sent to a particular contract.


Flashbots is a research and development organization focused on the impact MEV.

MEV Boost

MEV-Boost is an implementation of proposer-builder separation (PBS) built by Flashbots for Ethereum’s Proof-of-Stake (PoS) algorithm. MEV-Boost allows validators to maximize their staking rewards by selling blockspace on an open market place. Like Flashbots this solution tries to democratize MEV extraction.


Arbitrum is an Ethereum optimistic rollup that has committed to a zero MEV extraction. Arbitrum offers a First Come First Serve (FCFS) ordering of transactions which are collected by a so-called Sequencer. The Arbitrum flagship chain will eventually have a distributed set of independent parties controlling the Sequencer.

Shutter Network

Shutter allows users to send encrypted transactions in a way that protects them from front runners.

The classification of Ethereum (ETH) according to the ITC:

Figure 3: The ETH Tokenbase entry (Source:


The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.


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International Token Standardization Association

International Token Standardization Association

The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.