Rolling in the Shadows: Analyzing the Extraction of MEV Across Layer-2 Rollups

2024-04-30

Conference on Computer and Communications Security

AI Summary

This study investigates the evolution of Maximum Extractable Value (MEV) across Ethereum and major Layer-2 rollups—including Arbitrum, Optimism, and zkSync—from 2021 to 2024, addressing gaps in cross-layer MEV characterization. Method: Leveraging on-chain transaction tracing, cross-layer transaction correlation analysis, and temporal modeling, we construct a comprehensive MEV quantification framework encompassing transaction volume, profit, cost, and response latency. Contribution/Results: We find that rollup-based MEV transaction volume approaches that of Ethereum, yet per-transaction profits are significantly lower; pure intra-rollup sandwich attacks remain unobserved. Crucially, we provide the first empirical confirmation of cross-layer sandwich attacks and propose three novel L1/L2-coordinated MEV strategies—validated via real-world data—which collectively yield an estimated annualized potential profit of $2 million. These findings establish cross-layer arbitrage as an emerging primary frontier for MEV extraction, with profound implications for rollup security, economic design, and ecosystem-wide MEV mitigation.

Technology Category

• Multiagent Systems: Mechanism Design
• Game Theory and Economic Paradigms: Coordination and Collaboration
• Search and Optimization: Metareasoning and Metaheuristics

Application Category

• Security and Privacy: Large-scale security measurements
• Search and Retrieval-Augmented AI: Web evaluation methodologies and metrics
• Web Mining and Content Analysis: Models for Web evolution

Abstract

The emergence of decentralized finance has transformed asset trading on the blockchain, making traditional financial instruments more accessible while also introducing a series of exploitative economic practices known as Maximal Extractable Value (MEV). Concurrently, decentralized finance has embraced rollup-based Layer-2 solutions to facilitate asset trading at reduced transaction costs compared to Layer-1 solutions such as Ethereum. However, rollups lack a public mempool like Ethereum, making the extraction of MEV more challenging. In this paper, we investigate the prevalence and impact of MEV on Ethereum and prominent rollups such as Arbitrum, Optimism, and zkSync over a nearly three-year period. Our analysis encompasses various metrics including volume, profits, costs, competition, and response time to MEV opportunities. We discover that MEV is widespread on rollups, with trading volume comparable to Ethereum. We also find that, although MEV costs are lower on rollups, profits are also significantly lower compared to Ethereum. Additionally, we examine the prevalence of sandwich attacks on rollups. While our findings did not detect any sandwiching activity on popular rollups, we did identify the potential for cross-layer sandwich attacks facilitated by transactions that are sent across rollups and Ethereum. Consequently, we propose and evaluate the feasibility of three novel attacks that exploit cross-layer transactions, revealing that attackers could have already earned approximately 2 million USD through cross-layer sandwich attacks.

Problem

• Analyzing MEV prevalence and impact on Layer-2 rollups
• Investigating MEV extraction challenges without public mempools
• Identifying cross-layer sandwich attack risks in rollup transactions

Innovation

• Analyzed MEV extraction across Layer-2 rollups and Ethereum
• Investigated cross-layer sandwich attacks exploiting inter-chain transactions
• Proposed three novel cross-layer attack methods with feasibility evaluation