Paper 2021/1231

Estimating (Miner) Extractable Value is Hard, Let’s Go Shopping!

Aljosha Judmayer, Nicholas Stifter, Philipp Schindler, and Edgar Weippl

Abstract

The term miner extractable value (MEV) has been coined to describe the value which can be extracted by a miner, e.g., from manipulating the order of transactions within a given timeframe. MEV has been deemed an important factor to assess the overall economic stability of a cryptocurrency. This stability also influences the economically rational choice of the security parameter k, by which a merchant defines the number of required confirmation blocks in cryptocurrencies based on Nakamoto consensus. Unfortunately, although being actively discussed within the cryptocurrency community, no exact definition of MEV was given when the term was originally introduced. In this paper, we outline the difficulties in defining different forms of extractable value, informally used throughout the community. We show that there is no globally unique MEV/EV which can readily be determined, and that a narrow definition of MEV fails to capture the extractable value of other actors like users, or the probabilistic nature of permissionless cryptocurrencies. We describe an approach to estimate the minimum extractable value that would incentivize actors to act maliciously and thus can potentially lead to consensus instability. We further highlight why it is hard, or even impossible, to precisely determine the extractable value of other participants, considering the uncertainties in real world systems. Finally, we outline a peculiar yet straightforward technique for choosing the individual security parameter k, which can act as a workaround to transfer the risk of an insufficiently chosen k to another merchant.

Note: Artefacts available on GitHub: https://github.com/kernoelpanic/estimatingMEVishard_artefacts

Metadata
Available format(s)
PDF
Category
Cryptographic protocols
Publication info
Preprint. Minor revision.
Keywords
CryptocurrenciesMEV
Contact author(s)
ajudmayer @ sba-research org
History
2022-04-26: last of 2 revisions
2021-09-20: received
See all versions
Short URL
https://ia.cr/2021/1231
License
Creative Commons Attribution
CC BY

BibTeX

@misc{cryptoeprint:2021/1231,
      author = {Aljosha Judmayer and Nicholas Stifter and Philipp Schindler and Edgar Weippl},
      title = {Estimating (Miner) Extractable Value is Hard, Let’s Go Shopping!},
      howpublished = {Cryptology ePrint Archive, Paper 2021/1231},
      year = {2021},
      note = {\url{https://eprint.iacr.org/2021/1231}},
      url = {https://eprint.iacr.org/2021/1231}
}
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