MEV as a Market Design Problem

Maximal Extractable Value (MEV) emerges from competition over transaction inclusion and execution ordering.

In high-throughput, low-latency systems such as Solana, MEV is not primarily an application-level artifact. It arises from how markets for inclusion and ordering are designed under execution uncertainty.

MEV as a systems problem

Every MEV opportunity corresponds to an auction, whether explicit or implicit.

That auction is shaped by:

  • where bidding occurs relative to execution

  • how latency separates bidders, builders, and proposers

  • how execution outcomes are estimated rather than guaranteed

As the separation between bidding and execution increases, auctions degrade into expected-value (EV) selection games.

EV selection vs execution-close allocation

Under execution uncertainty, participants optimize for expected value:

  • higher nominal bids may lose to lower bids with higher execution probability

  • complex strategies are penalized by execution risk

  • inclusion and ordering decisions become probabilistic and opaque

This shifts allocation from price-based competition to risk-weighted heuristics.

When allocation is resolved close to execution:

  • bids map more directly to outcomes

  • execution risk is minimized or made explicit

  • ordering becomes more deterministic

Shiroi’s perspective

Shiroi treats MEV not as something to eliminate, but as something to constrain through system and market design.

The objective is not to maximize extracted value, but to:

  • reduce the distance between bidding and execution

  • limit probabilistic selection effects

  • keep inclusion and ordering decisions execution-close and protocol-compatible

From this perspective, auction quality is determined by execution proximity, not auction complexity.

Implications

Auctions placed far from execution amplify MEV externalities. Execution-close allocation localizes them.

Shiroi’s infrastructure is designed around this boundary.

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