MEV stands for “Miner Extractable Value,” which refers to the profits that miners or validators can potentially extract from the order execution sequence in blockchain networks. MEV type “sandwich” is a specific strategy employed by miners to exploit the transaction ordering process and profit from price manipulation.
In a MEV type sandwich, a miner takes advantage of the inherent transaction ordering priority in blockchain networks. They strategically place their own transactions within a block to manipulate the price of a specific token or asset. The sandwich strategy typically involves three main steps:
- Identify the Target: The miner identifies a target transaction that is about to be included in the next block and contains a large trade or significant order execution for a particular token.
- Front-Running: The miner then quickly places their own transactions ahead of the identified target transaction. These transactions usually involve buying the target token at a lower price or selling it at a higher price, depending on the desired price manipulation.
- Back-Running: After executing their own transactions, the miner includes the target transaction in the block, thereby manipulating the price in the desired direction. This allows the miner to profit from the price movement caused by their front-running transactions.
MEV type sandwich strategies can be used to exploit market inefficiencies and profit from the predictable behavior of other participants in the blockchain ecosystem. However, it is worth noting that MEV extraction strategies, including sandwich attacks, have been a subject of debate due to their potential negative impact on market fairness and transparency.
