In blockchains, by simply rearranging transactions or leveraging opportunities across multiple exchanges, a miner can extract more value than just collecting block rewards and transaction fees. This additional value is known as Maximal Extractable Value (MEV) (formerly referred to as Miner Extractable Value). However, extracting MEV requires additional resources and has given rise—especially in blockchain markets like Ethereum—to entities called builders. A builder collects publicly known transactions as well as transactions purchased from wallet service providers and constructs blocks designed to maximize MEV extraction. Such extraction amounts to millions of dollars annually.
This gives rise to two key questions:
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Do builders receive fair compensation for their work?
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Do transaction creators receive any reward for their transactions generating MEV?
In this talk, we show that a cooperative game theory approach is better suited to model this situation. For the first question, we demonstrate that the Shapley value can enhance fairness in the system, and that a cooperative approach can lead to higher MEV extraction than the traditional competitive methods. While computing the Shapley value is generally computationally challenging, we derive a closed-form solution that can be computed in polynomial time.
For the second question, we model a separate cooperative game based on the revenue generated, involving wallet service providers, and transaction creators. If builders' valuations are additive, one can easily deduce that the Shapley values of the transactions. However, we conjecture that if valuations are single-minded, then computing the Shapley value becomes a SUBEXP problem. To address this, we present a simple sampling algorithm with PAC (Probably Approximately Correct) guarantees for approximating Shapley values.
Short Bio:
Currently, Dr. Sujit Gujar is working as an Associate Professor at the International Institute of Information Technology, Hyderabad (IIITH). He holds the CA Technologies Faculty Chair position at IIITH. His expertise is in Game Theory, Blockchains and distributed AI. He has co-authored 100+ international peer-reviewed publications and has filed 15+ patents in US. Prior to IIITH, he was a post-doctoral researcher with Prof Boi Faltings, LIA, EPFL, Lausanne (Jan'14-Oct'15), and a Sr Research Associate with Prof Y Narahari (Nov'15-Apr'16). He also has an expereience as a Research Scientist at Xerox Research Centre India (Jan'11-Nov'13). He completed his Ph.D. in the Department of Computer Science and Automation @ the Indian Institute of Science, Bangalore. He worked with Prof Y Narahari, in the Game Theory Lab. He is a recipient of the Alumni Medal of IISc for the Best Thesis in CSA for the academic year 2011-12' for his Ph.D. Dissertation.
