Blaine
@blainemalone
1/8) 've officially been priority ordering pilled. Why? Two words: MEV Taxes. What the hell are MEV taxes, and why should you care? After reading through @paradigm's 'Priority Is All You Need' article by @danrobinson and @davewhite it’s clear: - MEV taxes capture a cut of extracted MEV and redirect it to the app layer. - Protocols can start leveraging this today. Especially with @unichain's launch. To understand MEV taxes, we first need to look at how MEV is extracted when priority ordering isn’t enforced. Here’s a classic example: An MEV searcher sandwiches a victim’s trade by placing a buy order before and a sell order after their transaction. Notice how the block isn’t ordered by priority fees. Instead, the block builder reorders transactions to maximize MEV profits. ref: https://paradigm.xyz/2024/06/priority-is-all-you-need
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Blaine
@blainemalone
2/8) For those who need a refresher, here’s a quick recap of the key players: Searchers find MEV opportunities and compete to extract them. Block builders control transaction ordering, deciding who actually profits. Since searchers must bid high fees to win, builders prioritize the highest bidders, and those fees ultimately go to the block proposer.
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Blaine
@blainemalone
3/8) How do MEV searchers compete when priority ordering isn’t enforced? They bid priority fees, but not too much. They bid just below the break-even point, where the MEV extracted is still greater than the fee paid. MEV extracted > priority fee paid = profit ✅ MEV extracted ≤ priority fee paid = no profit ❌ More bidding = higher priority fees, which flow to the block proposer, while builders profit by selling the most valuable block.
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