How MEV Works and Why It Matters for Everyday Users in 2025

The Mempool Dark Forest

MEV is the invisible tax that everyday DeFi users pay, and if you’ve ever traded on a decentralized exchange and ended up with a much higher fee than expected, you’ve likely already felt its impact.

This happens because the mempool (the public waiting room for unconfirmed blockchain transactions) is a kind of dark forest, filled with sophisticated bots constantly scanning for profitable opportunities. They can see your transaction before it’s confirmed and use that information to extract value from you.

MEV (Maximum Extractable Value) is the maximum amount of value a blockchain miner or validator can extract from a given DeFi protocol or smart contract by including, excluding, or rearranging the order of transactions. Previously known as Miner Extractable Value before Ethereum’s network upgrade in 2022, it is now called Maximum Extractable Value since validators took over the miners’ role.

MEV is basically about having intel that others do not have. When you submit a transaction to the blockchain, it does not process right away. Instead, it sits in the mempool, where everyone on the network can see it. Advanced actors can track when you are about to buy crypto, see which tokens you are targeting, or monitor your maximum acceptable price change (slippage tolerance).

For example, on Ethereum, proposer-builder separation (PBS) now shapes how blocks are created. PBS uses economic incentives to manage and strategically order transactions while spreading power across searchers, builders, relayers, and validators.

Information flow during block creation using PBS. Source: Financial Conduct Authority (FCA) Review of Maximal Extractable Value & Blockchain Oracles

The key point is that transactions do not always execute in the order they are sent. Validators and block builders decide the exact order of transactions in each block, allowing them to profit from analyzing your actions. As a result, understanding how MEV works is the first step toward protecting your assets by ensuring that they are not silently losing value.

This article will provide a clear and non-technical explanation of MEV. We will explore the different types of MEV, how it affects everyday users, and the new solutions that are emerging to protect users from this invisible tax.

The Most Common Types of MEV

MEV shows up in several forms, such as the Sandwich Attacks, Front-Running, and Arbitrage, and each affects everyday users in different ways. Knowing these types helps you recognize when MEV is targeting you and how to protect yourself.

The Sandwich Attack

The sandwich attack is the most common MEV pattern users encounter. It unfolds in a simple sequence that advanced bots repeat millions of times daily. A searcher bot scans the mempool and spots your large buy order for a token. Because your transaction is expected to push the token’s price up, the bot acts first. It submits a buy transaction just before yours, driving the token price higher. Your transaction then executes at this worse price, giving you fewer tokens than expected.

Your transaction is completed, but because the token is now more expensive, you get fewer tokens than you would have gotten otherwise. Right after your trade settles, the bot submits its second transaction, selling the tokens it just bought and making a profit from the price increase. Consequently, you’d have been sandwiched between the bot’s buy and sell transactions, and would pay the cost by getting a worse price.

To see how this affects your real money, imagine you are trying to buy Ethereum at the rate of $3,000 USDC/ETH through a decentralized exchange. Your transaction would normally result in receiving 1 ETH for $3,000 USDC. However, a sandwich attack bot detects your transaction and jumps ahead to buy ETH first, driving the price up to $3,100 USDC per ETH. Your trade now executes at the inflated price, leaving you with 0.967 ETH instead of 1 ETH.

The bot then sells its ETH for a profit, and you’re left with the shortfall, which translates to a loss of approximately 0.032 ETH due to the sandwich attack.

Front-Running and Back-Running

Front-running is a broad category of MEV where a bot profits by inserting its own transaction before a user’s transaction once it detects it in the mempool. On the other hand, back-running is the opposite, which is placing a transaction after a known transaction observed in the mempool to exploit the resulting price movement.

Both of these strategies rely on one key advantage: bots can see your transaction before it is confirmed. They pay higher gas fees to secure priority in the block, getting ahead (or just behind) your trade to capture value.

For example, a front-running bot might see that you are about to buy a rare NFT and immediately submit the same transaction with a much higher transaction fee (gas fee) to make sure it gets into the block before your transaction. Once the bot gets the NFT first, it can immediately sell it at a higher price to someone else. The result of this event is that you miss out on the NFT entirely, and the bot makes money from the opportunity that you originally found.

Likewise, in token markets, a bot may see that your large order will cause a price movement. It executes a trade just before you (front-running), benefits from the price change your order creates, then exits right after (back-running). This often results in you receiving worse execution or higher slippage than expected.

Arbitrage: The Less Harmful Form

Arbitrage is often seen as the least harmful type of MEV. An arbitrage bot finds price differences for the same asset between different decentralized exchanges. For example, one exchange might have Ethereum listed at $3,000 and another exchange at $3,010. An arbitrage bot buys at the cheaper exchange and immediately sells at the more expensive one, keeping the $5 difference per token.

While arbitrage does take value from the system, many people see it as a healthy form of market activity. Bots here actually help the market work better after making sure that crypto prices stay consistent across different exchanges.

Their activity, to some degree, helps prevent extreme or confusing price differences that could hurt everyday users. When arbitrage bots are working well, you are more likely to get fair and stable prices when you trade.

Liquidation

Liquidation MEV occurs primarily in lending and borrowing platforms like Aave, Compound, Venus, Radiant, or any protocol where users borrow against collateral. When a borrower’s health factor falls below the protocol’s threshold, their position becomes eligible for liquidation. Liquidators compete to seize the collateral at a discount, and whoever wins the race earns a liquidation bonus.

Bots constantly scan the mempool and price oracles for under-collateralized positions. Once identified, they quickly execute liquidation transactions to secure the profit. The faster the bot, the higher the chance of capturing the bonus.

For instance, a trader borrowed $10,000 in USDC using $15,000 worth of ETH as collateral. The lending protocol liquidates accounts when the collateral value drops to the equivalent of $12,000. If ETH suddenly dips and the trader’s collateral falls to $11,900, their position becomes liquidatable.

A liquidation bot detects this instantly. It sends a transaction to liquidate the borrower’s position, repays part of their loan, and receives a portion of their ETH at a discount, say 5%. If the bot liquidates $2,000 worth of the loan, it may receive $2,100 worth of ETH in return. The $100 difference is pure profit.

From the trader’s perspective, their collateral is sold off at a discount, and they incur losses, while the bot earns from the forced sale.

Why it Matters for You: The Invisible Tax

The effect of MEV on everyday users is both direct and significant. Understanding these effects clarifies why MEV has become such an important topic in the crypto community and why developers are trying to solve it.

You Get Worse Prices on Trades

The most obvious effect of MEV is that you receive worse prices when you trade. In a sandwich attack, you are directly paying a hidden fee to the bot that initiated the attack. This was the case in the Ehereum scenario used earlier, where the trader initiated a $3,000 for 1 ETH trade but received 0.967 ETH, losing the difference to the MEV bot.

MEV-related activities impact a significant portion of all blockchain transactions, with yearly value extracted reaching billions of dollars globally. MEV attacks particularly represent a real problem for the Ethereum blockchain, with over $663 million estimated to have been extracted in just over 2 years.

Your Transactions Can Fail Unexpectedly

MEV can also make your transactions fail in ways that seem entirely random or unexplained. Imagine you set a maximum acceptable price change (slippage tolerance) of 1 per cent, meaning you are willing to accept a price that is no more than 1 per cent worse than the expected price.

A sandwich attack bot may drive the price up by 2 per cent. Your transaction then fails because the actual final price is higher than your tolerance setting. You are left thinking that the transaction simply did not go through, when in reality, it failed because MEV pushed the price beyond your acceptable range.

This type of failure is especially frustrating because it is not clear what happened. You do not see the attack occur. You do not understand why your transaction failed. From your point of view, the decentralized exchange simply did not work correctly.

In reality, MEV made it impossible for your transaction to run under the safety settings you applied.

Your Wallet Security Matters

The way you handle your crypto wallet also affects how much MEV can hurt you. If you use a wallet that sends your transactions to the public mempool, you are more exposed to MEV attacks because everyone can see your intentions. On the other hand, if you use a wallet that sends transactions through a private mempool or an MEV-protection service, you get much better protection.

These private services hide your trade details until they are confirmed, preventing bots from sandwiching you. Many leading wallets now have built-in MEV protection features that automatically keep users safe from these attacks.

The Solutions: Protecting Yourself from MEV

The good news is that the tools for defending yourself against MEV, including private mempools and intent-based architectures, are rapidly improving. These approaches work by removing your transaction from the public mempool, hiding your intentions from the digital bots that hunt for profitable opportunities in the blockchain’s “dark forest.”

Each method has its strengths and limitations, but together they represent the strongest line of defense for everyday DeFi users.

Private Mempools

Private mempools allow users to send transactions directly to a block builder or validator, bypassing the public mempool entirely. Because your transaction never appears publicly, MEV bots cannot see, analyze, or exploit it. It’s like using a secret delivery service for your trade at a stipulated and reasonable fee.

How It Helps:

• Your transaction is hidden, so bots cannot front-run, back-run, or sandwich your trade.
• You get more predictable execution results with fewer price shocks.
• Some private mempool services even offer MEV refunds by sharing captured value with users.

Trade-Offs:

• You rely on the honesty and reliability of the private mempool provider.
• Not every blockchain or trading interface supports private routing yet.
• Private mempools typically work best for trades or activities where timing matters.

Still, for most regular users, routing high-value trades through a private mempool is one of the most straightforward ways to dramatically reduce MEV exposure.

Intent-Based Architectures

Intent-based systems are a more advanced and increasingly popular MEV protection approach. Instead of submitting a transaction with exact steps, you simply tell the system your intent, for example, “Swap 2000 USDC for the best amount of ETH.”

Your intent is then sent to a network of solvers who compete to execute the trade with the best possible outcome. The solver internalizes any potential MEV and delivers you a guaranteed result.

How It Helps:

• You declare what you want, not how to do it, thereby removing exploitable information from the mempool.
• Solvers absorb MEV instead of extracting it from you.
• You get better price guarantees, even during volatile market conditions.

Trade-Offs:

• Requires trust that the solver network is competitive and not colluding.
• Works best with markets and protocols that support intent-based execution.
• More complex under the hood, though simple for users.

For intermediate traders, intent systems can feel like using a smart aggregator that shields you from the worst MEV effects while still securing efficient trades.

Conclusion: Don’t Be a Victim

MEV remains an invisible tax that quietly drains value from everyday DeFi users, often without them ever realizing it. Sophisticated bots exploit the mempool’s “dark forest” to reorder, front-run, or sandwich transactions, turning normal user activity into profitable opportunities for themselves.

While MEV is complex and deeply rooted in how blockchains process transactions, new protection tools such as private mempools, intent-based systems, and MEV-shielded wallets are rapidly improving and shifting power back to users. The future of DeFi is moving toward safer, more transparent trading where MEV extraction is minimized rather than silently tolerated.

Don’t be a victim of the invisible tax. Trade securely on Digitap, a regulated, custodial trading platform, where your transactions execute off-chain, far away from MEV bots and mempool exploitation.

FAQs (Frequently Asked Questions)

What is MEV?

MEV (Maximal Extractable Value) refers to the maximum profit a validator or searcher can extract from a block by reordering, inserting, or excluding transactions. It exists because validators control the execution order of transactions, not the order in which they are broadcast.

What is a sandwich attack?

A sandwich attack occurs when a bot spots your pending transaction in the mempool and places two of its own transactions around it. The bot first buys the token to push the price up, causing your transaction to execute at a worse rate. It then sells immediately after, locking in a profit while you suffer the loss.

How can I protect myself from MEV?

You can protect yourself from MEV by using private mempools, MEV-protection services, intent-based architectures, or wallets with built-in MEV protection. These solutions keep your transaction hidden from bots and help you benefit from MEV.

Is all MEV bad?

Not all MEV hurts everyday users. Arbitrage MEV helps make the market work better by making sure prices stay the same across different exchanges. However, sandwich attacks and front-running clearly hurt users and represent money taken from you and given to the bot.

What is a private mempool?

A private mempool is a service that collects transactions from users and sends them to the blockchain in a way that stops MEV extraction. Your transaction stays hidden from bots until it is added to a block.