Fairness vs. Frontrunning: Rethinking the Role of MEV in Web3

MEV(Maximal (or Miner/Validator) Extractable Value) refers to the additional value validators, builders, or searchers can capture by reordering, inserting, or censoring transactions within a block they produce. Some in the crypto space defend MEV as a reflection of market efficiency or the natural workings of permissionless systems - after all, doesn’t market freedom include the freedom to outbid or outmaneuver others? But that view misses a point. MEV, in its toxic forms, isn’t healthy competition; it lets  sophisticated actors extract value at the expense of ordinary users leading to a structural imbalance.

In April 2024, a 12-second block on Ethereum rewrote the conversation around blockchain security and fairness. Two brothers, both MIT-educated, used their validator access to exploit a subtle flaw in Ethereum’s MEV-Boost infrastructure, draining over $25 million from trading bots in a single block proposal. It wasn’t a protocol hack. It wasn’t even illegal code. It was a surgical manipulation of transaction ordering.

What made the exploit so alarming wasn’t just the speed or the scale, but the simplicity. By manipulating how relays exposed transaction bundles, they front-ran the frontrunners-rewriting a block, swapping in their own trades, and walking away with eight figures. It was the first criminal MEV exploit-and a wake-up call for the entire ecosystem.

Because if this kind of extraction is possible by design and not by accident, we need to ask: is MEV a clever feature of permissionless markets or a fundamental bug in how DeFi works?

Every transaction on a blockchain starts its life in the mempool-a kind of public waiting room where unconfirmed transactions sit until a validator includes them in a block. These mempools are transparent, open to all, and form the battleground where users, bots, and validators compete for priority.

But not every transaction gets in. Blockspace is scarce and each block has a fixed size. So, when demand surges, only the highest-value (or highest-fee) transactions make the cut. This is where ordering becomes everything.

Unlike TradFi’s FIFO (first-in, first-out) rules, blockchains let validators reorder transactions however they want. That flexibility opens the door for sophisticated actors-like MEV bots-to front-run, back-run, or sandwich less-informed users. If you're not paying the most, you might be paying the price.

In a world of permissionless markets, transaction order determines outcomes. Who gets in first, who gets squeezed, and who captures the upside-all of it flows through the mempool.

And that’s where MEV comes in.

The story of MEV starts back in 2017, when Ethereum blockspace became a bidding war. During peak congestion, users would spam gas prices to outbid each other in what became known as priority gas auctions (PGAs)-a chaotic race for inclusion. Fees spiked, UX suffered, and bots began to dominate.

By 2019, Flash Boys 2.0 put a name to the madness. Researchers showed how MEV (Maximal Extractable Value) was a byproduct of competition which became an emerging threat. Bots were bidding higher, but they were also frontrunning trades, reordering blocks, and squeezing users.

Then came Flashbots in 2020. Instead of public fee wars, searchers now submitted MEV bundles privately, paying validators off-chain “tips” to execute profitable strategies. The Merge in 2022 formalized this market: block production passed to validators, and a new builder layer emerged, fueled by MEV-Boost.

By 2024, blockspace was no longer neutral. A small group of builder-searchers held disproportionate influence over transaction ordering-and, by extension, over who captures value in DeFi. 

Not all MEV is created equal. In practice, MEV spans a spectrum-from activities that improve market efficiency to those that actively degrade user experience and network trust.

Some strategies, such as cross-DEX arbitrage, help align prices across liquidity pools and reduce fragmentation. These are widely viewed as healthy for the ecosystem. Others, like liquidations, fall into a grey area. They’re essential for protocol solvency but can be ruthlessly optimized for maximum extraction.

Then there’s the toxic end of the spectrum: sandwich attacks that front-run retail users, and time-bandit attacks that re-org blocks for retroactive MEV. Beyond just exploitation, they threaten the very assumptions of network neutrality and consensus.

Understanding this spectrum is key. MEV may not be inherently evil, but some forms do cross that line.

At this point, it’s clear that not all MEV is equal, but some of it is deeply broken. Toxic MEV exploits protocol-level mechanics like public mempools and transaction reordering to extract value from users, not with them. That’s not a feature, but a design bug.

By “bug,” we mean an unintended failure mode-something that undermines fairness, decentralisation, and user trust. Toxic MEV creates perverse incentives, degrades UX, and threatens network security. Its existence signals a flaw in how blockchains handle ordering and incentives. Let’s see why.

> market-fairness violation

In TradFi, front-running is banned under SEC Rule 10b-5. On-chain, it’s routine. Public mempools let MEV bots reorder or sandwich user trades purely for profit without even needing insider access. This creates an unfair playing field where everyday users consistently lose out. When the protocol enables tactics considered manipulative in regulated markets, it's not a feature but a structural issue.

> negative-sum gas wars

Toxic MEV drives wasteful fee bidding. Competing bots overpay for priority, burning a large share of potential profit as gas. In some cases, more than half the value in play is lost. No user benefits from this. It’s not value creation but inefficiency hardcoded into how blockspace is sold.

> centralisation creep

MEV extraction isn’t plug-and-play. It takes serious infra, custom builders, and private relay deals. As a result, a small cartel of searcher-builders now wins a dominant share of profitable blocks. This concentration weakens decentralisation and introduces systemic risk. When the rules reward power consolidation, the system is no longer credibly neutral.

The response to MEV hasn’t been passive. Over the past five years, the ecosystem has iterated through multiple design layers-from public mempool chaos to intent-based execution and encrypted block construction.

> 2019:

Flash Boys 2.0 formally defined MEV, revealing how bots exploited PGAs (Priority Gas Auctions) to frontrun retail flow and trigger gas wars.

> 2020–2021:

Flashbots introduced off-chain bundle submission via private relays-reducing on-chain spam, but opening the door to builder centralisation.

> 2022–2023:

The Merge shifted extraction power from miners to validators. Ethereum introduced Proposer-Builder Separation (PBS) with MEV-Boost, creating open builder markets-but reinforcing reliance on a few dominant actors.

> 2023–2025:

New primitives emerged: batch auctions (CoWSwap), threshold encryption (BITE), encrypted mempools (Shutter), and intent-based flow (UniswapX, SUAVE). MEV-burn and reward smoothing aim to realign validator incentives at the protocol level.

Fortunately, toxic MEV is a solvable coordination challenge. A new wave of research and infrastructure is focused on making transaction flow harder to exploit and more aligned with user outcomes. Here’s what’s gaining traction: 

Each approach tackles MEV from a different angle: privacy, auction mechanics, or incentive realignment. While none are complete fixes on their own, together they represent meaningful steps toward a fairer, more efficient execution layer.

While MEV isn’t disappearing, the way we architect around it will define the next cycle of DeFi adoption. The question is whether we keep optimizing for extraction, or evolve toward mechanisms that align incentives across users, validators, and protocols.

> two futures diverge:

Fairness isn’t optics but a competitive moat. Clean execution layers will define the protocols that scale.

As an ecosystem, it’s time to coordinate: support MEV-aware infra, adopt ethical ordering norms, and back public goods that make blockspace safer for everyone.

Toxic MEV is a bug as well as a protocol-level exploit that lets searcher-builders reorder blockspace for rent, draining retail flow and skewing validator incentives. In TradFi this is front-running; on-chain it’s just bad design.

The fix is in the architecture: threshold-encrypted blocks (BITE), shared sequencers like SUAVE, batch auctions, predictive MEV-burn, and increasingly, private mempools that shield transaction flow from predatory actors. At aarnâ, we use solutions such as QuickNode Protect to keep our execution MEV-resistant-minimizing exposure to sandwiching and latency sniping in the public mempool. These primitives hard-cap extraction and push value back to users and protocols.

Fair ordering is pure alpha. Clean flow tightens UX, unlocks real institutional size, and rewards validators for security over short-term tips.

Next-generation DeFi will ship MEV resistance by default, if we coordinate around open tooling and ethical ordering now.

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