Reducing Disorder: An Information-Theory Formulation of MEV

Ciaran Hughes

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arXiv · 2311.05367

Reducing Disorder: An Information-Theory Formulation of MEV

Ciaran Hughes

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Abstract

Maximal Extractable Value (MEV) has garnered significant attention in the cryptocurrency community. Such attention is a consequence of the revenue that can be generated from MEV, as well as the risks MEV poses to the fundamental value proposition of the underlying blockchain technology. In this work, we provide an information-theoretic formulation of MEV. With this formulation, we make common statements about MEV mathematically rigorous. For example, we show that i) all non-trivial blockchains and decentralised applications must generate MEV; ii) how MEV can be reduced at the expense of user expressibility; and iii) how MEV can be good or bad from an information theoretic standpoint.

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Ciaran Hughes. 2023-11-09. Reducing Disorder: An Information-Theory Formulation of MEV. https://arxiv.org/abs/2311.05367

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