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Predictive MEV on Aptos

· 5 min read
Kofi Finance
Kofi Finance
Kofi Finance

Maximal Extractable Value (MEV) has become a crucial concept in the blockchain world, with implications that are particularly relevant for emerging networks like Aptos. As the blockchain ecosystem evolves, understanding MEV is essential to exploring resilient and innovative infrastructure on platforms that are shaping the future — and Aptos is at the forefront.

Understanding MEV​

Maximal Extractable Value refers to the maximum value that can be extracted from block production beyond standard block rewards and gas fees. This potential is realized when block producers — whether they are miners or validators — manipulate the ordering, inclusion, or exclusion of transactions in a block to secure additional profit.

Originally coined as "Miner Extractable Value" in 2014 by a pseudonymous trader, this concept predicted that miners could leverage transaction ordering for gain. It was later formalized in the seminal 2019 research paper "Flash Boys 2.0," which drew parallels between blockchain transaction manipulation and the practices of high-frequency trading in traditional finance.

A brief timeline for the evolution of MEV​

In essence, MEV is extracted through the reordering of transactions within a block, and the methodology of said has evolved over time. Let's take a look at its evolution.

  1. Miner Bribing (2015-2022): In the early days of Ethereum's Proof of Work era, users could attempt to influence miners to include or order their transactions in specific ways. This was often done through smart contracts that offered additional rewards to miners for favorable transaction placement.

  2. Gas fee reordering (ordering not guaranteed) (2015-2021): Miners typically ordered transactions based on gas fees, with higher-fee transactions getting priority. Users could increase their gas price to improve their chances of earlier inclusion, though this didn't guarantee a specific order.

  3. Priority fee reordering (ordering not guaranteed) (2021-present): Introduced with EIP-1559 in August 2021, the priority fee allowed users to directly incentivize miners (later validators) to include their transactions. While higher priority fees increased the likelihood of quicker inclusion, they still didn't guarantee a specific order.

  4. Flashbots / Bundling (2020-present): Flashbots introduced a more sophisticated approach to MEV extraction. It allowed users to submit bundles of transactions with specific ordering requirements, providing a more reliable method for transaction ordering and MEV extraction.

  5. MEV on Solana: JITO (2022-present): As MEV concepts expanded beyond Ethereum, other blockchains like Solana developed their own MEV solutions. JITO on Solana represents an adaptation of MEV extraction techniques to Solana's unique blockchain architecture and consensus mechanism.

  6. MEV on Aptos: ???

Aptos Architecture and MEV Potential​

The architectural design of Aptos, particularly its BFT consensus mechanism and Block-STM parallel execution engine, introduces significant challenges and changes to how MEV (Maximal Extractable Value) can be extracted. These design choices fundamentally alter the landscape of MEV extraction compared to traditional blockchain architectures.

AptosBFT Consensus and MEV​

Aptos uses AptosBFT, a consensus algorithm based on HotStuff, which implements a round-by-round consensus and block chaining mechanism according to Chorus One's analysis. This approach has several implications for MEV:

  1. Faster Finality: AptosBFT's design allows for quicker transaction finality ~0.9s, potentially reducing the window of opportunity for MEV extraction.

  2. Validator Rotation: The consensus mechanism rotates proposers (aka validator leaders), making it more challenging for a single entity to consistently control transaction ordering.

Block-STM Parallel Execution and MEV​

The Block-STM parallel execution engine introduces a paradigm shift in how transactions are processed, significantly impacting MEV extraction:

  1. Dynamic Reordering: The engine may reorder transactions across one or more blocks to optimize concurrency—meaning that the order of transactions might change dynamically between blocks, as explained in the Aptos whitepaper. MEV extractors will need to adapt their strategies to account for both sender-aware and use-case-aware shuffling, potentially reducing the effectiveness of certain MEV extraction techniques that rely on precise transaction ordering.

  2. Conflict-Induced re-execution: When conflicts occur, transactions may be re-executed, altering the state that subsequent transactions interact with and potentially invalidating MEV extraction strategies.

  3. Ripple Effect: When a transaction aborts due to a conflict, all higher transactions in the block are scheduled for re-validation. This cascading effect introduces further unpredictability in the final transaction order and state.

Why MEV Matters for Aptos​

Understanding and proactively managing MEV is critical for ensuring the success and integrity of the Aptos ecosystem:

As we continue our exploration into MEV infrastructure on Aptos, future discussions will dive into tailored strategies, potential challenges, and innovative solutions to ensure a secure and efficient blockchain environment.