Who gets the Maximal Extractable Value? A Dynamic Sharing Blockchain Mechanism

Pedro Braga, Georgios Chionas, Piotr Krysta, Stefanos Leonardos, Georgios Piliouras, Carmine Ventre

Abstract: Maximal Extractable Value (MEV) has emerged as a new frontier in the design of blockchain systems. MEV refers to any excess value that a block producer can realize by manipulating the ordering of transactions. In this paper, we propose to make the MEV extraction rate part of the protocol design space. Our aim is to leverage this parameter to maintain a healthy balance between block producers (who need to be compensated for the service they provide) and users (who need to feel encouraged to transact). We design a dynamic mechanism which updates the MEV extraction rate with the goal of stabilizing it at a target value. We analyse the evolution of this dynamic mechanism under various market conditions and provide formal guarantees about its long-term performance. The main takeaway from our work is that the proposed system exhibits desirable behavior (near-optimal performance) even when it operates in out of equilibrium conditions that are often met in practice. Our work establishes, the first to our knowledge, dynamic framework for the integral problem of MEV sharing between extractors and users.