What Is MEV (Maximal Extractable Value)?

Enhancing Crypto Security: Rubic Integrates Private RPC Feature to Prevent MEV Bot Attacks

DEX trading is often associated with risks, ranging from non-reversible payments to MEV bots attacks. As the crypto community strives to make digital assets more ubiquitous, innovative solutions are emerging to ensure the safety of users’ funds. 

Rubic is proud to announce a progressive step in this direction – the integration of the Private RPC feature. Read on to discover how this advancement enhances security and protects your funds.

What Is MEV?

Maximal Extractable Value vs. Miner-Extractable Value

Maximal Extractable Value and Miner-Extractable Value are terms often used interchangeably, but they can have slightly different nuances in meaning. Let’s clarify the distinctions:

  1. Miner-Extractable Value (MEV):
    • Definition: It refers to the potential profit or value that miners can extract from the order and execution of transactions within a block.
    • How it works: Miners have the authority to choose the order of transactions in a block. MEV is realized when miners strategically manipulate this order to maximize their profits. This can involve practices like front-running, arbitrage, and taking advantage of liquidation events.
  2. Maximal Extractable Value (MEV):
    • Definition: It can be used more broadly to encompass the maximum value that can be extracted from the transaction ordering process in a blockchain, not limited to just miners. It includes the value that can be extracted by anyone who has the ability to influence or determine the order of transactions, which may also include validators, sequencers, or other network participants.
    • Expanding the scope: While Miner-Extractable Value initially referred to the profit opportunities for miners, the term Maximal Extractable Value has been expanded to recognize that other actors in different consensus mechanisms (beyond proof-of-work) may also play a role in transaction sequencing and, consequently, value extraction.

How Does MEV Work?

MEV bots operate in the DeFi space and exploit the opportunities arising from the ordering of transactions in a blockchain. In a blockchain network, transactions are bundled into blocks and processed in a sequential order. MEV refers to the potential profit that miners can extract by determining the order of transactions within a block.

MEV bots take advantage of the fact that miners have the authority to choose the order in which transactions are included in a block. By strategically placing transactions, these bots can front-run or back-run trades, manipulate DEXs, and capitalize on price discrepancies. Front-running involves placing a transaction ahead of another known transaction to exploit price movements, while back-running involves anticipating and reacting to transactions that have already been submitted but not yet confirmed.

These bots often target arbitrage opportunities, where they exploit price differences between different decentralized platforms. For example, if a user is trying to execute a trade on a DEX, a MEV bot may intercept the transaction, execute it more favorably on another DEX, and then submit the transaction to the original DEX at a higher price, pocketing the price difference.

Understanding MEV Bot Attacks

Before delving into the benefits of Private RPC, it’s crucial to understand the threat posed by MEV bots. A detailed exploration of MEV bots and their potential impact on users can be found in our previous article, “Demystifying MEV Bots: Your Guide to Self-Protection.” 

In summary, MEV bots exploit opportunities to maximize profits by manipulating transaction orders, engaging in activities such as front-running high-value transactions, back-running existing transactions, and executing sandwich attacks. These activities can lead to worse rates and increased transaction fees, resulting in financial losses for the user.

Common MEV Attacks

Front-Running:

  • Description: MEV bots observe pending transactions in the mempool and strategically place their own transactions ahead of others to exploit price movements.
  • Example: A user places a trade on a decentralized exchange (DEX), and a MEV bot intercepts the transaction, executes it more favorably on another DEX, and then submits the transaction to the original DEX at a higher price, profiting from the price difference.

Back-Running:

  • Description: MEV bots anticipate and react to transactions that have been submitted but not yet confirmed, aiming to benefit from price movements or other market conditions.
  • Example: A MEV bot observes a large transaction about to be included in a block, and it quickly submits transactions to take advantage of the anticipated price impact caused by the large trade.

Sandwich Attacks:

  • Description: MEV bots place transactions before and after a targeted transaction to manipulate the market price.
  • Example: A user attempts to buy a large amount of a token on a DEX, and a MEV bot places a sell order just before and after the user’s buy order. This can result in the user getting a less favorable price for their trade.

Arbitrage Exploitation:

  • Description: MEV bots target price discrepancies between different DEXs or liquidity pools to profit from market inefficiencies.
  • Example: Identifying a price difference between two DEXs for the same asset, a MEV bot executes a buy on the cheaper DEX and a simultaneous sell on the more expensive one, capturing the price spread.

Transaction Reordering:

  • Description: MEV bots manipulate the order of transactions in a block to their advantage.
  • Example: By reordering transactions, MEV bots can prioritize their own transactions to maximize profits, especially in situations where the order of execution impacts the outcome.

Dust Attacks:

  • Description: MEV bots create small transactions (dust) to influence the order of transactions in a block and extract value.
  • Example: MEV bots may submit numerous small transactions to strategically influence the ordering of transactions, allowing them to profit from subsequent trades.

    MEV: Pros and Cons

    Pros:

    1. Profit Opportunities:
      • Pro: MEV provides an opportunity for miners and traders to extract value from the order of transactions, leading to potential profits.
    2. Incentive for Miners:
      • Pro: MEV acts as an additional incentive for miners to include transactions in a block in a way that maximizes their revenue, contributing to the security and sustainability of the blockchain network.
    3. Market Efficiency:
      • Pro: MEV can contribute to market efficiency by allowing participants to capture arbitrage opportunities, leading to fairer and more accurate pricing across decentralized exchanges and liquidity pools.
    4. Dynamic Ecosystem:
      • Pro: MEV creates a dynamic and competitive ecosystem where participants are constantly innovating to gain an edge, fostering development in areas such as decentralized finance (DeFi) and blockchain technology.

    Cons:

    1. Unfair Advantage:
      • Con: MEV can give certain participants, particularly well-funded and sophisticated actors, an unfair advantage over other users who may not have the same resources to engage in MEV strategies.
    2. Security Risks:
      • Con: MEV introduces security risks, as certain MEV strategies, such as front-running, can potentially manipulate market prices and compromise the integrity of decentralized systems.
    3. Lack of Transparency:
      • Con: The opacity of MEV practices may lead to a lack of transparency in the market, making it challenging for regular users to understand and trust the transaction ordering mechanisms within blockchain networks.
    4. Negative User Experience:
      • Con: MEV activities, such as front-running, can negatively impact the user experience for retail traders by causing slippage and higher transaction costs, making it less attractive for small-scale participants.
    5. Centralization Pressures:
      • Con: MEV activities may contribute to centralization pressures, as large and well-funded entities have the resources to develop and deploy sophisticated MEV strategies, potentially concentrating power within the network.
    6. Ethical Concerns:
      • Con: Some MEV practices, especially those that take advantage of information asymmetry, raise ethical concerns within the crypto community and may lead to calls for the development of more fair and transparent transaction ordering mechanisms.

    How Can Defi Users Protect Themselves From MEV Attacks?

    MEV Protection: Private RPC as a Solution

    Remote Procedure Call (RPC) is a request-response communication protocol used to initiate processes on remote systems, such as local systems or servers in blockchain networks. With Private RPC, your transactions on Rubic will no longer be publicly visible in the mempool, safeguarding you from bots and MEV searchers.

    Benefits of Private RPC:

    • Front-Running Prevention and Enhanced Trading Rates
    • Securing Transactions with Unparalleled Speed
    • Confidentiality of Transactions
    • Reduced Attack Surface 

    bloXRoute Integration: Fortifying Fund Security with MEV Protect Engine 

    Rubic’s integration of the Private RPC feature marks a significant step towards fortifying the security of users’ funds and ensuring better rates. With measures in place to prevent front-running, enhance transaction rates, and prioritize user privacy, Rubic continues to contribute to the advancement of a safer and more secure crypto ecosystem.

    Solution Details

    MEV Protect Engine by bloXroute, the latest addition to Rubic’s arsenal, aims to improve the DeFi ecosystem on Ethereum, BNB Smart Chain and Polygon by introducing the Frontrunning Prevention feature to professional and retail traders in scale and benefit the contributors in the process.

    bloXroute connects you directly with validator nodes to securely hand off your transactions to protect you from frontrunning.

    Important to note, that it works only for swaps on and from Ethereum, BNB Smart Chain & Polygon

    This is how it works: 

    • 1. Private Transaction Submission:
      • Users submit private transactions on Rubic.
    • 2. bloXroute Processing in BDN:
      • bloXroute, within its Blockchain Distribution Network (BDN), processes private transactions.
    • 3. Direct Routing:
      • Private transactions are routed directly to specific destinations:
    • Ethereum: Sent to the partner block builder.
    • BSC: Sent to bloXroute’s block builder.
    • Polygon: A just-in-time delivery mechanism is used to reduce the chance of frontrunning.
    • 4. Avoiding Public Mempool (For Ethereum and BNB Chain):
      • Private transactions are not propagated to the public mempool.
      • This mitigates the risk of frontrunning and sandwich attacks.
    • In essence, bloXroute processes private transactions, routes them to designated destinations, labels them as private, and ensures they are not exposed to the public mempool, enhancing security against frontrunning and sandwich attacks.

    Conclusion: Rubic’s User-Centric Approach

    At Rubic, we prioritize simplicity and user-friendliness in every aspect of our platform. To ensure a seamless experience, we have introduced an effortless switch on process for Private RPC.

    When you engage in a swap exceeding $1,000, our platform takes a proactive approach to safeguard your funds. A specially designed window will automatically appear, presenting you with the option to activate Private RPC for enhanced fund protection.

    Activating Private RPC is as easy as flipping a switch. No complex procedures or unnecessary steps – just a straightforward, user-friendly experience. Refer to the screenshot below for a visual guide.

    User Benefits:

    • Enhanced Security Measures: Activate Private RPC to fortify the security of your funds, especially for high-value swaps.
    • User-Friendly Controls: A simple switch is all it takes to enable this advanced security feature, ensuring a hassle-free experience for every user.
    • Transparent Security Options: The special window provides clear and transparent options, empowering you to make informed decisions about your fund protection preferences.

    Rubic is committed to provide the best user experience, and MEV-bot protections is another significant step in building this. We want you to feel confident while swapping by automating the process for big amounts’ swaps and easily activating the feature in our app’s UI. Your security is our priority, and with Private RPC, we ensure that protecting your funds is both intuitive and effective.

    ABOUT BLOXROUTE

    bloXroute Labs is a leading blockchain software company. The 5-years old Chicago-based tech startup is on a mission to bring transactions and data transmission on blockchain to the next level. bloXroute’s proprietary blockchain distribution network (BDN) with hyper-connectivity on Ethereum, BNB Chain, Polygon and Solana enables ultra low-latency DeFi with unmatched speed and performance to actors in DeFi and MEV ecosystems.

    Over 350 DeFi trading firms connect their trading infrastructure to bloXroute’s BDN to get the fastest mempool data in the industry for more trade opportunities and substantially increases their chance of winning trades with high inclusion rate and the most competitive transaction propagation speed.

    ABOUT RUBIC

    Rubic aggregates 70+ blockchains and testnets, while it enables swaps of 15,500+ assets with the best rates, highest liquidity, and transaction speeds — in one click, thanks to the integration of 220+ DEXs and bridges.

    Users no longer have to roam across Web3 to compare rates and liquidity; they can make cross-chain and on-chain swaps of any available token to any other one on https://app.rubic.exchange/.  

    We also provide tools for dApps to enable cross-chain swaps. Rubic’s functionality can be implemented by any crypto project willing to become interoperable, with an easy-to-install widget and fully customizable SDK.