Ethereum MEV Activity Surge: Recent Daily Profits Exceed One Million Dollars

In the Ethereum ecosystem, there has long been a phenomenon known as the "Dark Forest". Within this virtual space of transaction blocks, the Gas mechanism allows participants related to block validation to profit by manipulating the inclusion, exclusion, or reordering of transactions within the block; this profit is referred to as MEV(, or Maximum Extractable Value). In the year following the rise of DeFi, the MEV market size surged by 1113.21%, with the average Gas price consistently above 110 Gwei being considered one of the negative impacts brought about by the development of MEV.

Recently, the average Gas price of Ethereum has entered a continuous upward trend after staying below 50 Gwei for a long time, breaking through 100 Gwei for several consecutive days, reaching a high not seen in nearly a year. However, the on-chain transaction count, which is directly related to Gas prices, has remained relatively stable. So, is the driving factor behind this round of Gas price increase still MEV?

After a comprehensive analysis of on-chain transaction data, validated node submitted block data, and MEV transaction data, it was found that:

1. Since May 5th, the average daily Gas price of Ethereum has exceeded 100 Gwei for 6 consecutive days. This month's average Gas price has increased by 40.20%, and it has risen by 499.54% this year, showing a significant increase.

2. The total fees actually paid to nodes daily continue to grow, with the total daily fees this month increasing by 29.60%, and up 456.57% this year.

3. The number of active Ethereum nodes has reached approximately 565,100, with an increase of 3,441 this month. This may lead to a decline in staking rewards, thereby encouraging more nodes to adopt MEV. In less than a month, the number of certain MEV-Boost relay nodes has increased by a total of 66,000, with a total increase of 144,600 this year.

4. The number of blocks proposed by non-MEV nodes has decreased to 757, down 20.15% from the beginning of this month and a significant 51.88% decrease from one month ago, meaning that an increasing number of blocks are being proposed by nodes that utilize MEV. Currently, the total number of blocks proposed by the four major MEV-Boost Relayers accounts for 76.42% of the total for that day.

5. Recently, the number of blocks proposed by multiple MEV-Boost Relayers has increased, with a certain Relayer seeing an 80.83% increase in the number of blocks proposed in the last month, which is a significant rise.

6. In the past month, traders have generated a total MEV profit of approximately 13.0142 million USD through arbitrage, sandwich trading, and liquidation, with a cumulative occurrence of about 347,100 times. In the past month, the number of trades increased by 106.01%, and the total profit rose by 1943.50%.

7. Sandwich trading is currently the main MEV method, with a total profit of approximately $9.9267 million in the last month, accounting for about 76.28%. Since the beginning of this month, the daily profit from sandwich trading has accounted for no less than 61%.

Gas prices continue to run at high levels, and transaction fees have risen sharply

Recently, Ethereum Gas prices have risen rapidly. Since May 5, the daily average Gas price has exceeded 100 Gwei for six consecutive days, peaking at 155.8 Gwei, a very high level in nearly a year. This increase began on April 17, when the average Gas price was mainly fluctuating between 20-40 Gwei, then quickly broke through 40 Gwei, and after May surpassed 80 Gwei. As of May 10, the average Gas price this month has increased by 40.20%, and has risen by 499.54% this year, showing a significant increase.

The average Gas price increase has driven the Ethereum transaction fees to continue rising. On one hand, the daily burning amount is constantly increasing. On May 10, the total burning amount was approximately 9898 ETH, which is a 40.75% increase compared to the beginning of this month and a 555.45% increase compared to the beginning of this year. During this period, the highest daily burning amount once reached 14597 ETH, marking a very high level in nearly a year.

On the other hand, the total fees actually paid to nodes daily have also continued to grow. On May 10, the total transaction fees amounted to approximately 1677 Ether, which is an increase of 29.60% compared to the beginning of this month and an increase of 456.57% compared to the beginning of this year. Among them, the total daily fees on May 5 and 6 both exceeded 2000 Ether, approaching the highest level in the past year.

Typically, the change in Gas prices is positively correlated with on-chain transaction demand, meaning that when transaction demand increases, Gas prices rise accordingly. However, based on the recent changes in the number of transactions on the Ethereum chain, the reason for this recent increase in Gas prices does not stem from this. On May 10, the number of transactions on the Ethereum chain was approximately 1.0361 million, which is actually a decrease of 0.95% compared to the beginning of the month. Since the beginning of this year, the transaction count has remained relatively stable at around 1.01 million, with little variation. However, the recent popularity of MEME tokens may cause users to pay higher Gas fees in order to get ahead in transactions.

The number of validation nodes using MEV continues to increase

If the reason for the rising Gas prices does not come from the transaction demand side, could it possibly come from the transaction validation side? Since Ethereum opened withdrawals, more funds have entered staking activities under the high interest rates of LSD and LSDFi, and the number of active nodes has steadily increased, reaching about 565,100 on May 10, with an increase of 3,441 this month. However, according to Ethereum's built-in monetary economic system, the increase in the number of staking nodes will lead to a decrease in staking rewards. This means that active staking activities after withdrawals actually cause the staking rewards for nodes to decline. To improve rewards, nodes are motivated to adopt MEV, which may push up Gas prices.

Statistics show that the number of new registrations for certain MEV-Boost relay nodes has continued to increase this year, with the weekly additions exceeding 12,000 after April 16, significantly higher than previous levels, indicating a remarkable increase in recent growth. In less than a month, from ( April 16 to May 11 ), the number of MEV-Boost relay nodes has accumulated an additional 66,000, bringing the total new additions this year to 144,600.

The daily distribution of block proposing nodes also reflects a rapid growth trend in the number of nodes adopting MEV robots. On May 10th, the number of blocks proposed by non-MEV nodes had dropped to 757, a decrease of 20.15% from the 948 blocks at the beginning of the month, and a significant decline of 51.88% from 1573 blocks a month ago. Overall, there is a significant downward trend, with more and more blocks being proposed by nodes using MEV.

Currently, the four major Relayers among the mainstream MEV-Boost Relayers account for 76.42% of the total blocks proposed on that day. From the growth trend, the number of blocks proposed by multiple Relayers has increased recently, indicating a rise in adoption rate. Among them, the number of blocks proposed by a certain Relayer has increased by 80.83% in the last month, showing a significant growth.

MEV profits continue to grow, sandwich trading remains the main profit-making method

In 2021, when MEV was rapidly growing, only 12% of the profits were obtained by miners, while the remaining 88% were gained by traders. Therefore, beyond nodes, a broader range of traders may acquire MEV, driving up Gas prices. Currently, the main ways for traders to obtain MEV are through arbitrage, sandwich trading, and liquidation.

Statistics show that in the past month, traders have obtained a total MEV profit of approximately $13.0142 million through these three methods, with a cumulative occurrence of about 347,100 times, and it is on an upward trend. On May 11, a total of 14,800 MEV transactions were monitored, with a total profit of $697,500. The number of transactions increased by 106.01% compared to a month ago, and the total profit surged by 1943.50%. In the past month, the total profit exceeded $1 million on three separate days, with the highest total profit reaching $1.2805 million on April 19.

From the profit share of the three acquisition methods, sandwich trading is currently the main MEV method. In the past month, traders have gained a total profit of approximately $9.9267 million through sandwich trading, accounting for about 76.28%. Since the beginning of this month, the daily profit share from sandwich trading has not been lower than 61%.

Sandwich trading profits are obtained through front-running transactions. In the past month, the highest cumulative profit from sandwich trading for a single address was approximately $7.339 million. The other nine addresses with the highest profits had profit levels ranging from $70,000 to $370,000, with significant differences in profit levels among individual addresses.

After considering costs, through sandwich trading, the maximum profit that a single address can obtain for every 1 dollar of cost can reach 21.37 dollars, but most addresses make a profit of basically below 2 dollars for every 1 dollar of cost, with multiple addresses under 0.5 dollars. Overall, the sandwich trading method requires a certain scale of capital investment.

The popular pools for sandwich trading are mainly concentrated on popular trading pairs of a certain well-known DEX, such as USDC/WETH, USDC/USDT, PEPE/WETH, etc., with a small amount coming from popular trading pairs of another well-known DEX. In the past month, the highest profit from a single sandwich trade reached $138,700, with a trading cost of only $725. From the perspective of high-profit individual trades, most achieved "small bets for big gains", with profits generally exceeding $30,000, while costs were often less than $1,000.

Although the market generally views MEV negatively, with current MEV activities causing ordinary trading users to suffer losses and driving up Gas prices, MEV is indeed a double-edged sword. Apart from its negative impacts, it can also expand trading volume and promote the development of DeFi. One analysis shows that in the entire year of 2022, arbitrage and sandwich bots contributed a total trading volume of 328 billion USD to DEX, accounting for about 49% of the annual trading volume. It is evident that MEV bots have become an indispensable part of the DeFi ecosystem, and ordinary users need to gain a deeper understanding of MEV to make more appropriate trading decisions.