Prof. Kanye Ye WANG
Journal of Financial Economics
Prof. Kanye Ye WANG, Assistant Professor in Department of Computer and Information Science at the Faculty of Science and Technology at the University of Macau (UM) and member of the Financial Innovation Team and Smart Tourism Team at APAEM, published an article entitled “Maximal extractable value and allocative inefficiencies in public blockchains” in collaboration with Prof. Agostino CAPPONI and Prof. Ruizhe JIA in Journal of Financial Economics (UTD 24, FT50, ABS4*).
Abstract:
The blockchain settlement layer facilitates systematic frontrunning, resulting in inefficient block-space allocation. Private transaction pools can reduce these inefficiencies and enhance welfare. However, full adoption is limited by misaligned incentives between users and validators. Validators are reluctant to forgo rents they earn from frontrunning – referred to as maximal extractable value – leading to a partial adoption equilibrium in which frontrunning persists. Our empirical analysis of Ethereum’s Flashbots private pool supports these findings: validators earn higher revenues, users facing greater frontrunning risk are more likely to use the private pool, and attackers’ cost-to-revenue ratios in private pools converge to one.
For details: https://doi.org/10.1016/j.jfineco.2025.104132