Updates to MEV. Maximal extractable value (MEV) refers to the profit that validators can earn via their ability to order (and re-order) transactions in a block. Some forms of MEV are neutral or even relatively benign like buying and reselling discounted ETH during liquidations of margin-called loan positions. This can help ensure price stability in the market. MEV can also take advantage of arbitrage opportunities between exchanges, which can help improve price discovery. However, other forms of MEV can be seen as malicious, like front-running trades or sandwich attacks. The latter is a more aggressive form of front-running that levers users market orders to artificially inflate prices for designated sellers, causing price slippage for the networks users. Ethereum Gas Price (RHS) Payouts to klock Proposers Chart 20. REV is tightly correlated with increased onchain activity 80 Sep 2023 1000 60 120

ETH Jul 2023 May 2023 A validator proposing blocks in one epoch may be able to earn a lot of MEV, while in another epoch, a different validator may only earn a negligible amount. Larger validator sets may benefit because they can smooth MEV rewards among all stakers, but solo stakers could either be very lucky or unlucky with regards to the uneven distribution of their MEV rewards. 5000 41 See Flashbots. Modelling Realised Extractable Value in Proof of Stake Ethereum published September 2022. Sources: Flashbots, Etherescan, and Coinbase. 0 Nov 2023 42 40 See Flashbots. Quantifying Realized Extractable Value published May 15, 2021. 140 40

Gwei Jan 2023 4000 Solutions for minimizing the negative externalities of MEV are being developed at various levels ranging from the base Ethereum protocol to application design changes. At the base protocol level, there is an active and ongoing discussion on incorporating MEV-burn dynamics into the enshrined proposal builder separation (ePBS) proposal, which may obviate the need for a separate MEV-Boost system, but may still require out-of-protocol relays.

At least 366,000 ETH of value has been extracted from the ecosystem since The Merge, translating to a daily payout to block proposers of approximately $1M in realized extractable value (REV) a term coined by Flashbots to quantify the observed value extracted from the blockchain from REV opportunities.40 As onchain activity (measured by gas price) increases, so too does REV.41 (See Chart 20.) Measuring payouts to block proposers is generally a conservative floor for estimating the amount of REV capture in a system, as other creative ways to capture value are difficult to measure consistently. 160 3000