Thread by @Rob_Daykin

Maximum Extractable value (MEV) Is the ability for miners or validators to extract the max amount of value from each block by including, excluding and changing the order (queue) of transactions. Let's take a closer look at MEV in this🧵and how #IOTA is solving this issue #DeFi👇

MEV has a significant impact on #DeFi users, according to data from explore.flashbots.net MEV has cost users $747m from 01/01/20 to date and that is only tracking #ETH and certain #Dapps, the true cost is much higher when including flash loan attacks and other chains #BSC #SOL

But what are these attacks?

Sandwich attacks: ordering a transaction before and after a transaction on a Dex. This has the effect of either inc or dec the price on an order, which for large transactions or high slippage can run into $1,000s in lost value for the user ☹️

Liquidator Bots: extract MEV value from unsuspecting borrowers by liquidating their loans before they can repay the debt, then profit by selling the borrowers’ collateral

Time Bandit attacks: In certain scenarios, a miner could identify an opportunity to mine previously mined blocks and attempt to destabilise the order consensus to extract an arbitrage opportunity

Flash Loan Attacks: flash loan attacks are only possible because they are able to sequence multiple transactions within the same block in a set order. Flash Loan attacks have accounted for Billions in $ of hacks within #DeFi

The frustrating thing about MEV and lost value for users are that this is invisible at first glance and difficult for the average user to understand they have lost value in the transaction due to manipulative actors

But let's be objective here, MEV does have some advantages, one of which is the use of Flash Loans and their ability to be used by bots to arbitrage the cost of assets across CEXes and Dexes (similar prices per asset on multiple marketplaces)

The other advantage is that users can prioritise their transactions by paying a higher fee, thereby guaranteeing their transactions within a block. Although I'd prefer to pay nothing

My belief is the disadvantages of having MEV outweigh the advantages and #IOTA is right to remove this feature.

Evaldas of the IF explains how ISCP does not have MEV in detail here

https://twitter.com/lunfardo314/status/1459433143585624066

My take is validator nodes cannot control what can be put into the block, transactions randomize the order of the block in a way unpredictable for less than 2/3 of validators. So, sandwiching and frontrunning are prevented

Many protocols are trying to solve this issue on existing EVM chains such as #MIST (MC of over $100m) which hopes to implement with Uni soon, however, this will cost additional gas to implement and fees will be due to Mist. #ISCP will solve this within the protocol

Having no MEV also opens up the opportunity to combat sniping liquidity bots which is a GIGANTIC issue for Fair Launch projects (imagine a bot taking all new projects tokens and dumping them on real investors) which I'll go into more detail nearer the launch of #ISCP

If you enjoyed this thread and want to hear more about similar topics on ISCP and IOTA, please like and follow me. I'm going to be providing more DeFi entry-level content soon, but please feel free to ask any Qs, I may not have the answers but I reckon I'll know someone who does

I'm also very keen to hear from anyone building on #ISCP whether that's #DAO, #DeFi, #NFTs or #Gamefi