A space to discuss the ‘MEV marketplaces’ market sector available on Token Terminal.
What are decentralized exchanges MEV marketplaces?
MEV marketplaces allow searchers or arbitrageurs to pay miners or validators to get their specific set of transactions included in a block.
What problems do MEV marketplaces aim to solve?
As onchain economies grow in size and complexity, the opportunities for arbitrage increase as well. This means that the user experience for normal users might become worse as a result of activities such as frontrunning. MEV marketplaces aim to bring this arbitrage activity into the light, and distribute its proceeds more fairly among network participants.
How do MEV marketplaces solve those problems?
MEV marketplaces offer specialized third parties (searchers or arbitrageurs) a venue to offer MEV-optimized blocks for block builders (the person/entity that forms a block of newly created transactions). The block builder then relays the blocks to the miners or validators.
Why is now the right time to build and invest in MEV marketplaces?
The MEV market was initially dominated by arbitrageurs that engaged in priority gas auctions, bidding up gas prices when competing for the opportunity to include profitable transactions into blocks. This was extremely lucrative for miners who earned more fees, but the UX for normal users became considerably worse. MEV marketplaces move the bidding offchain and relay only the most profitable transaction bundles to the miners or validators. As a result, the arbitrageurs win (no wasted bids), the miners or validators win (maximize rewards), and the users win (no unnecessary gas competitions).
What is the business model of MEV marketplaces?
The primary business model for MEV marketplaces is to generate revenue by taking a cut of the fees paid by arbitrageurs or searchers. That is, the MEV marketplace takes a portion of the miners’ or validators’ revenue.
Where can I view the current and historical (financial) performance of MEV marketplaces?
MEV marketplaces dashboard: MEV marketplaces | Markets | Token Terminal
Methodology for MEV marketplace-specific metrics
Total value locked: N/A.
Transaction volume: transfer volume of blocks built by the MEV marketplace’s builder.
Fees: total fees paid by searchers.
Supply-side fees: share of fees that goes to the miners or validators.
Revenue: share of fees that goes to the protocol (and its tokenholders).
Token incentives: value of governance tokens distributed to searchers and/or validators.
Daily active users: daily distinct searcher and validator addresses interacting with the builder.
Example project documentation