Decentralization or Favoritism? An Analysis of Ethereum Transactions and Maximal Extractable Value Strategies

Maximal Extractable Value (MEV) refers to the maximum value that can be extracted from block production beyond standard block rewards, by reordering, including, or excluding transactions in a block. This phenomenon is nowadays mainly connected to the increasing complexity of Decentralized Finance (DeFi) applications and the flexibility of blockchains like Ethereum. MEV can pose significant challenges to blockchain decentralization, particularly in Ethereum’s Proof-of-Stake ecosystem. This study aims to demonstrate these challenges by analyzing Ethereum, the most prominent blockchain where MEV extraction occurs. In fact, by analyzing the 220,993 blocks and therein 36,015,340 transactions from January 2024, this study reveals systematic favoritism-oriented behaviors in transaction ordering. MEV-related blocks demonstrate substantial transaction reordering, with significant evidence that the reordering often associates with favoring the transactions that were privately communicated to the block builders or even involved hidden payments made directly to those block builders. Moreover, we were most often able to track those transactions to speculative and malicious activities, characterized by very high economical values, and mostly encoded into bots that pursue MEV revenues in speculative fashion. Our findings suggest an emerging parallel economy that potentially undermines blockchain’s democratic principles, highlighting the need for governance mechanisms to preserve decentralization and user fairness.