Crypto staking protocol Figment says it will support maximal extractable value (MEV) when Ethereum is fully up and running as a proof-of-stake network, the company announced on Tuesday.
MEV refers to the maximum value that miners or validators can extract from a transaction block based on their ability to determine the order of transactions on the blockchain. This value is in excess of the standard block reward and gas fees.
Explaining its MEV strategy, Figment stated that it would prioritize fair MEV extraction. The crypto staking firm defined fair MEV as one that ensured increased staking on the network and maximum reward for clients while guarding against centralization risks.
“MEV is inevitable, but there are ways to democratize access to the value that is extracted. The most obvious path towards democratization is through sharing rewards with our delegators, which we intend to do on every network where we participate in MEV in order to create more secure and efficient blockchains,” Figment stated in the announcement.
According to Tuesday’s announcement, Figment says it will leverage Flashbot’s MEV-Boost solution for its validator list on Ethereum 2.0. The decision to use the Flashbot tool is to ensure a higher reward rate for its clients.
As a staking service, Figment locks up cryptocurrency on behalf of its users (delegators) to earn yields in the form of staking rewards, including gains from MEV. The protocol runs a set of validators that process transactions on proof-of-stake blockchains. Figment shares these staking rewards with its delegators.
Figment closed a $50 million Series B funding round in August 2021, as reported by The Block. The company is also one of the backers of institutional staking platform Alluvial.
Why does MEV exist?
MEV comes about as a result of people looking to exploit profit-making opportunities that can arise in the decentralized finance space. These opportunities include potential arbitrage when someone is doing a high-value token swap.
These opportunistic profiteering endeavours require faster than normal execution. As such, people looking to make these trades pay higher fees to miners and validators to place their transactions before others.
MEV is also exploited for transactions like sandwich attacks and frontrunning. The latter involves the exploiter forcing their transaction to go through before a high-value transaction to earn profit. The former is a special type of frontrunning where the attacker sandwiches the target transaction in between two of their trades to make a profit.
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