The maximum mineable value (MEV), the process by which miners or validators redefine transactions in a block to extract revenue, prevents financial institutions from adopting decentralized finance (Defi), which hurts retail users, according to Aditya Palepu, CEO of DEX Labs, the leading contributor to the decentralized crypto derivatives exchange derivadex.
All electronically traded markets are suffering maximum amount that can be obtained or similar issues inherent in information asymmetry in the ordering of trading transaction data, Palepu told Cointelegraph.
The solution is to prevent order flow data from being seen before execution by processing transactions in trusted execution environments, which hold transactions privately through a funded vault or some other mechanism, Palepu said. He added:
“What makes them stronger is that they can process orders privately. So your trading intentions are not broadcast to the world before execution. They’re on board with the client, and they’re decrypted inside a secure enclave after they’re sequential.”
This makes front-end transactions “impossible,” he said, protecting users from things like “sandwich attacks,” a form of market manipulation in which validators or miners insert transactions before and after a user’s order to manipulate the price and take profit.
The presence of MeV as a key infrastructure in crypto and defi has caused intense debate Among industry executives and protocol founders, as they try to address MEV potential to increase centralizationdrive costs, and stifle mass adoption.
Related: How Batched Threshold Encryption Can End Extractive MeV and Make Defi Fair Again
Institutions that stay out of the def game hurt retail users
The lack of transaction privacy Prevents financial institutions from adopting defI because it exposes them to market manipulation and upfront risks from broadcasting transactions before they are executed, Palepu told Cointelegraph.
“When institutions cannot participate effectively, everything suffers, including retail,” Palepu told Cointelegraph, adding that institutions create “passages and roads” or the necessary trading infrastructure for financial markets to function properly.
This includes the unattractive Arbitrage trading opportunities The destruction of price volatility and keep asset prices at or near consistency with exchanges, he added.
“Exchanges, like any market, need vibration and diversity of participation,” said Palepu, adding that the lack of institutional involvement can cause liquidity, volatility to spike, market manipulation to increase, and transaction costs to advance.
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