Maximal Extractable Value (MEV) has gained attention in Ethereum due to increased Decentralized Finance activities, focusing on block proposer fee payments. In First-Come-First-Served (FCFS) networks like Algorand, MEV extraction emphasizes latency optimizations similar to High-Frequency Trading. An arbitrage detection algorithm specific to FCFS networks is introduced, demonstrating the necessity of timing in finding arbitrage opportunities. Analysis indicates that pursuing MEV at the block state level is ineffective on Algorand. Network-level findings suggest essential strategies for transaction prioritization to reduce latency with well-connected relays.
Maximal Extractable Value (MEV) searching has gained prominence on the Ethereum blockchain since the surge in Decentralized Finance activities. In Ethereum, MEV extraction primarily hinges on fee payments to block proposers.
This paper illustrates the dynamics of the MEV extraction game in an FCFS network, specifically Algorand. We introduce an arbitrage detection algorithm tailored to the unique time constraints of FCFS networks.
Our analysis reveals that while the states of relevant trading pools are updated approximately every six blocks on median, pursuing MEV at the block state level is not viable on Algorand.
Critical transaction prioritization strategies for Algorand's FCFS network include reducing latency in connections with relays that are well-connected to high-staked proposers.
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