MEV and Fair Value Distribution in Ethereum

Workshop Structure

This hands-on technical workshop is divided into three sections:

Part 1: Understanding MEV (45 minutes)

What is MEV?

• Historical context: From miner extractable value to maximal extractable value
• Common MEV strategies: front-running, sandwich attacks, liquidations, arbitrage
• Real-world case studies and their impact

Economics of MEV

• The mempool as a common-knowledge game
• Gas auctions and priority ordering
• Validator incentives and potential misbehavior

Measuring MEV

• On-chain MEV detection techniques
• Quantifying extracted value
• Hidden MEV and measurement challenges

Part 2: Current Mitigation Approaches (45 minutes)

Flashbots and MEV-Boost

• How sealed-bid auctions work
• Builder-proposer separation
• Benefits and limitations

Application-Layer Solutions

• Batch auctions and frequent batch auctions
• Order flow auctions (OFA)
• Time-weighted average price (TWAP) mechanisms
• Encrypted mempools and private transaction pools

Protocol-Level Innovations

• Fair ordering protocols
• Threshold encryption for transaction privacy
• Commit-reveal schemes

Part 3: Designing Fair Protocols (60 minutes)

The FairFlow Protocol

• Architecture for equitable MEV distribution
• Combining fair ordering with value redistribution
• Technical implementation details
• Security and liveness guarantees

Hands-On Analysis

• Analyzing MEV in real transactions (using block explorers and data)
• Simulating different ordering mechanisms
• Evaluating fairness metrics

Open Problems and Discussion

• Cross-domain MEV
• MEV in Layer 2 rollups
• Long-term sustainability of fair value distribution
• Regulatory considerations

Prerequisites

Participants should have:

• Understanding of Ethereum transaction lifecycle
• Familiarity with smart contracts and DeFi protocols
• Basic knowledge of game theory and mechanism design (helpful but not required)

Materials Provided

• Slide deck with technical diagrams
• Code examples for MEV detection
• Dataset of real MEV transactions
• Links to open-source tools and resources

Key Takeaways

Attendees will:

• Understand how MEV extraction works at a technical level
• Be able to identify MEV opportunities and risks in DeFi protocols
• Know the current state of MEV mitigation techniques
• Understand design principles for fairer blockchain protocols
• Have practical tools for analyzing MEV in production systems