Paper 2021/1231

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

Aljosha Judmayer and Nicholas Stifter and 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 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, to the best of our knowledge, currently no exact definition of MEV exists. In this paper, we provide a definition in accordance to its usage throughout the community and show that a narrow definition of MEV fails to capture the extractable value of other actors like users. Moreover, we show that there is no globally unique MEV which can readily be determined. We further highlight why it is hard, or even impossible, to estimate extractable value precisely, considering the uncertainties in real world systems. Finally, we outline a peculiar yet straightforward technique for choosing the security parameter k, which can act as a workaround to transfer the risk of an insufficiently chosen k to another merchant.