Mev Protection Guide

MEV Protection Guide

MEV (Maximal Extractable Value) is profit that block builders and searchers extract by reordering, including, or excluding transactions. Understanding MEV helps protect your users' trades.

Types of MEV

1. Sandwich Attacks

The most common MEV attack on DEX swaps:

1. Attacker sees your swap in mempool
2. Attacker buys before you (frontrun) → pushes price up
3. Your swap executes at a worse price
4. Attacker sells after you (backrun) → profits from the price difference

Who gets hurt: Anyone swapping on DEXs with high slippage tolerance Typical loss: 0.3–2% of trade value

2. Frontrunning

A searcher copies your profitable transaction and submits it first with higher gas:

• Arbitrage opportunities
• NFT mints
• Liquidation calls

3. Backrunning

Searcher submits a transaction immediately after yours to capture resulting arbitrage:

• After large swaps (price impact creates arb opportunity)
• After oracle updates
• After liquidations

4. Just-In-Time (JIT) Liquidity

A sophisticated attack on V3 pools:

1. Searcher adds concentrated liquidity just before your swap
2. Your swap pays fees to the searcher's position
3. Searcher removes liquidity immediately after

5. Time-Bandit Attacks

Block proposers reorganize past blocks to capture MEV. Rare but possible with proof-of-stake.

Protection Strategies

For Users

1. Use Low Slippage Tolerance

Set slippage to 0.5% or lower. This limits how much the price can move against you, making sandwich attacks unprofitable.

Caution: Too-low slippage on volatile tokens may cause transactions to fail.

2. Private Transaction Submission

Send transactions through private mempools that hide them from searchers:

3. Use DEX Aggregators

Aggregators like 1inch, 0x, and Paraswap split trades across pools to minimize price impact and MEV exposure.

4. Gasless Limit Orders

Place limit orders that execute when conditions are met — no mempool exposure:

• 1inch Limit Order Protocol: EIP-712 signed, gasless
• No frontrunning possible (order isn't in mempool)

5. Batch Auctions

Protocols like CoW Swap use batch auctions where all trades in a batch get the same price, preventing sandwich attacks entirely.

Detecting MEV

Signs of a Sandwich Attack

Look for this pattern around your transaction:

1. Large buy of the same token (1–2 blocks before yours)
2. Your swap (at a worse price than expected)
3. Large sell of the same token (same block or next block)
4. Same address in steps 1 and 3

Checking Transaction Impact

Expected output (from quote): 1,000 USDC
Actual output (on-chain):       985 USDC
Difference:                      15 USDC (1.5% slippage/MEV)

If actual slippage significantly exceeds the pool's fee tier, MEV extraction is likely.

MEV by Chain

Arbitrum advantage: The centralized sequencer orders transactions FIFO (first-in-first-out), which significantly reduces sandwich attack opportunities. This is one reason Sperax chose Arbitrum for USDs.

Agent Tips

When helping users with swaps:

1. Always recommend low slippage — 0.5% for standard swaps
2. Large swaps (>$10K) should use private mempools or DEX aggregators
3. Check if their wallet supports Flashbots Protect — many do now
4. On Arbitrum: MEV is lower but not zero — still use reasonable slippage
5. If a swap fails: suggest slightly higher slippage but explain the tradeoff
6. Limit orders: for non-urgent trades, gasless limit orders eliminate MEV entirely

Links

• Flashbots Protect: https://protect.flashbots.net
• MEV Blocker: https://mevblocker.io
• Sperax (Arbitrum-native, lower MEV): https://app.sperax.io
• EigenPhi (MEV analytics): https://eigenphi.io