MEV 101 guide: what is MEV and how FRB uses it

Who should read this MEV 101 guide?

This MEV 101 reference is for MEV searchers, operations teams, and analysts who need a single explainer before touching production capital. It covers how pending transactions flow, what block builders care about, and why governance artifacts (refund policy, telemetry, security notes) matter as much as raw strategy.

Pair it with the MEV learning hub, the MEV strategies guide, and our benchmark library so every reader sees theory, tactics, and live telemetry together.

• MEV searchers will learn the vocabulary and guard rails expected from institutional desks.
• Compliance and procurement teams can anchor due diligence conversations around these definitions.
• New hires can jump from this MEV 101 article directly into the Quickstart checklist.

MEV explained

MEV (Maximum Extractable Value) describes the extra value you can pull from block production beyond normal rewards and gas fees. Validators (and miners before them) change transaction order, include private bundles, or drop noisy payloads to capture that spread.

The core idea stays simple: every pending transaction represents optionality. Whoever controls ordering can re-arrange those transactions to unlock value, so strategies live or die by latency, fee discipline, and the trust they earn with block builders.

• Call MEV “miner extractable value” when citing legacy proof-of-work documentation.
• Use “maximal extractable value” when validators and shared sequencers enforce policies.
• Track both terms inside runbooks so stakeholders follow the glossary.

MEV basics revolve around managing the transaction fee per bundle and understanding miner extractable behaviors. Modern block producers / validators use relay infrastructure to curate MEV opportunities from the mempool and private order flow, so searchers need to respect their sequencing preferences and communicate desired order of transactions clearly.

Types of MEV opportunities

Analysts usually categorize types of MEV opportunities into three buckets so risk owners know what to expect. The wording varies per desk, but the controls stay consistent.

Listing the types of MEV in this format keeps the briefing readable and helps compliance teams model exposure on a per-route basis.

How Does MEV Extraction Work?

MEV extraction typically involves several steps:

1. Mempool Monitoring: Bots scan the public mempool (pending transactions) for profitable opportunities
2. Opportunity Identification: Algorithms identify arbitrage, liquidation, or front-running opportunities
3. Transaction Construction: Bots construct optimal transactions to capture the identified value
4. Execution: Transactions are submitted with appropriate gas fees to ensure inclusion in the next block
5. Profit Capture: The difference between input and output value represents the extracted MEV

Coordinated MEV extraction often includes private relay handshakes so block producers / validators can commit to the preferred order of transactions, helping you land high-confidence bundles even when pending transactions spike.

Proof of work roots vs proof of stake reality

Early MEV playbooks formed under proof of work rules where miners could reorder blocks with little coordination. Validators now dominate the flow, yet the same incentives appear whenever they run relays, shared sequencers, or decentralized builders.

• Proof of work miners focused on hash power and latency; MEV was a side effect.
• Proof of stake validators operate policy-heavy pipelines, so reporting needs better audit trails.
• Shared sequencers and rollups import both worlds, which is why FRB tracks relay guarantees per route.

Whenever you answer “what changed since proof of work?”, emphasize the operational guard rails: bundle simulation, refund triggers, and human-in-the-loop reviews. That context reassures governance teams that MEV remains intentional, not accidental.

Common MEV Strategies

1. Arbitrage

Exploiting price differences of the same asset across different decentralized exchanges (DEXs) or liquidity pools. When a large trade creates a price imbalance, arbitrage bots can buy low on one exchange and sell high on another.

2. Liquidation

Identifying undercollateralized positions in lending protocols and executing liquidations to earn liquidation bonuses. This requires fast execution and accurate price feeds.

3. Front-Running

Seeing a profitable transaction in the mempool and submitting a similar transaction with higher gas fees to execute first. This allows the front-runner to capture the profit opportunity before the original transaction.

4. Sandwich Attacks

Placing two transactions around a target transaction: one before (front-run) and one after (back-run). The first transaction moves the price in a favorable direction, and the second captures the profit.

5. Back-Running

Executing a transaction immediately after a large trade to capture price movement benefits. This is generally considered less harmful than front-running as it doesn't interfere with the original transaction.

Flashbots and Private Bundles

Flashbots is a research and development organization that works on mitigating the negative externalities of MEV extraction. They provide infrastructure for private transaction bundles that bypass the public mempool.

Private bundles offer several advantages:

• Reduced front-running risk
• Lower gas costs through direct miner/validator communication
• Ability to execute complex multi-transaction strategies
• Better privacy for trading strategies

Learn more about Flashbots in our Flashbots Tutorial.

Getting Started with MEV Trading

If you're interested in MEV trading, here's a step-by-step guide:

1. Learn the Basics: Understand blockchain mechanics, transaction ordering, and gas fees
2. Set Up Infrastructure: Deploy low-latency nodes and WebSocket connections
3. Choose Your Strategy: Start with simpler strategies like arbitrage before moving to complex ones
4. Use Simulation Mode: Test your strategies in simulation before deploying real capital
5. Implement Risk Controls: Set slippage limits, gas caps, and budget constraints
6. Monitor and Optimize: Continuously monitor performance and refine your strategies

Check out our MEV Strategies Guide for detailed strategies and best practices.

Risks and Considerations

MEV trading involves significant risks:

• Gas Costs: Failed transactions still consume gas, which can exceed profits
• Competition: Other bots may front-run your transactions
• Smart Contract Risks: Vulnerabilities in protocols can lead to losses
• Market Volatility: Rapid price changes can turn profitable opportunities into losses
• Regulatory Uncertainty: Regulations may change and affect MEV trading legality
• Technical Failures: Infrastructure issues can cause missed opportunities or losses

Always start with small amounts, use proper risk management, and never invest more than you can afford to lose.

How to use this MEV 101 guide in your workflow

Treat this as the briefing document for any MEV bot rollout. Attach it to onboarding tickets, link to the sections you completed (mempool monitoring, private bundles, block builder coordination), and record open questions so mentors can respond asynchronously.

1. Share the article with stakeholders who approve budgets or manage pending transactions.
2. Pair each lesson with hands-on tasks in the dashboard or simulation environment.
3. When you are ready to execute, install FRB and revisit the MEV 101 checklist monthly so nothing drifts.

MEV Across Different Networks

MEV opportunities exist across multiple blockchain networks:

• Ethereum - Largest MEV market with deep liquidity
• BNB Chain - Lower fees, good for high-frequency strategies
• Polygon - Fast and cheap transactions
• Base - Layer 2 with growing MEV opportunities
• Arbitrum - Low fees with Ethereum compatibility
• Optimism - Another Layer 2 with MEV potential

Benchmarks, comparisons, and FAQs

Keep these reference pages handy when you brief teammates or prepare governance packets—each one answers the common “where do I find…” question without leaving this MEV 101 guide.

• Validate Polygon decisions with the Polygon MEV benchmarks dashboard.
• Review cross-chain telemetry inside the core MEV benchmarks hub.
• Drill into latency and refund data on the Flashbots benchmarks slice and the BNB MEV benchmarks.
• Share the BNB Chain MEV bot guide whenever teams rotate liquidity away from Ethereum.
• Compare playbooks with FRB vs Telegram MEV scripts or the FRB vs DIY MEV bots breakdown.
• Answer repeat objections faster by pointing stakeholders to the FRB FAQ.

Frequently Asked Questions

Define MEV in practical terms

MEV (Maximum Extractable Value) refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.

How does MEV extraction work?

MEV extraction involves identifying profitable opportunities in the mempool (pending transactions), such as arbitrage, liquidations, or front-running opportunities, and executing transactions to capture that value before others.

What is front-running in MEV?

Front-running occurs when a trader sees a pending transaction in the mempool and submits their own transaction with higher gas fees to execute first, capturing the profit opportunity.

What are Flashbots bundles?

Flashbots bundles are private transaction bundles submitted directly to miners/validators, bypassing the public mempool. This reduces front-running risk and allows for more complex MEV strategies.

Is MEV trading legal?

MEV trading itself is legal as it operates within the rules of blockchain networks. However, traders should ensure compliance with local regulations and understand the risks involved.

What are the risks of MEV trading?

Risks include gas costs exceeding profits, front-running by other bots, smart contract vulnerabilities, regulatory changes, and market volatility. Proper risk management and testing are essential.

How do I get started with MEV trading?

Start by understanding blockchain basics, learning about mempool scanning, setting up low-latency infrastructure, and using simulation mode to test strategies before deploying real capital.

What networks support MEV trading?

Major networks include Ethereum, BNB Chain, Polygon, Base, Arbitrum, and Optimism. Each network has different characteristics, fees, and MEV opportunities.

Next Steps

Ready to dive deeper? Explore these resources:

• MEV Strategies Guide - Advanced strategies and techniques
• Flashbots Tutorial - Learn to use private bundles
• Try FRB Agent - Start trading with our MEV agent
• Gas Calculator - Calculate optimal gas prices
• Profit Estimator - Estimate MEV opportunities