Can We Return the MEV Left Behind by a Swap to the User?
· 10 min read
In 2022, a DeFi swap could finish in seconds. Its economic effects did not.
A user makes a large swap through an automated market maker (AMM), a trading pool whose reserves determine its price. The reserve ratio moves, opening a price gap against another decentralized exchange (DEX). A searcher, a participant looking for profitable trading opportunities, follows the swap and earns a profit by narrowing that gap. This kind of following trade is called a backrun.
The user bears price impact and gas costs, while someone else receives the arbitrage left behind. At the end of 2022, we began with this question:
Could the arbitrage run inside the user's transaction and return what remains after costs to the user?