How to Safeguard Your Crypto Trades with MEV Protection

Cryptocurrency trading has seen amazing growth over the last few years, although with an increase in market also come risks. One of the biggest fears of crypto traders is Maximal Extractable Value (MEV). On the one hand, blockchain networks are designed to provide transparency and decentralization. On the other hand, they allow the market. Trojan on Solana offers built-in MEV protection, ensuring that traders can safeguard their trades from exploitation and maintain fair results. MEV protection plays a significant role in protecting your trades and in fair results. 

In this article, we will discuss what MEV is, what potential impacts it has on crypto traders, and how to safeguard your trades against MEV exploitation.

What is MEV (Maximal Extractable Value)?

MEV refers to the estimated earned profits of miners (in the proof by work) or validators (in the proof by stake) who can reorder transactions, add or remove transactions to a block. Basically, MEV is a transaction fee that is not visible; that is why it is called an invisible cost of the trade. This will come about in a situation where the miners or representatives will take into consideration the profitable transactions, or, in most cases, take unfair advantage of the regular traders to serve their selfish interests.

Extraction of MEV is most usually performed by the following methods:

• Front-running: In this situation, a bot can trace an impending order and enter an order before the original order, thus guaranteeing a profit.
• Back-running: A bot could trade after an activity by a user and act on the price iteration.
• Sandwich attacks: A bot lies before and after a user trade to move the price so that the user is obliged to trade at a price disadvantage.

How MEV Affects Crypto Traders

MEV is a big concern for regular traders. You may not know what MEV is and how to prevent it, and this might cost you a lot of money. The following are some of the typical instances under which MEV can affect traders:

   1. Liquidation of Loans

DeFi facilities permit anyone to liquidate the loans when the value of the collateral falls short of a specific value. MEV bots actively seek to capitalize on these arbitrage opportunities and derive profits through selling loans, although he or she might not be a direct party to the initial exchange.

   2. Uncle Bandit Attack

At some point in a blockchain, when two miners validate a transaction at the same time, one block will be canonical, with another discarded (uncle block). To generate an arbitrage profit, bots may use the fact that the details about the transaction are in the uncle blocks.

   3. NFT MEV

Similar to trading in cryptocurrency, MEV bots can interfere with the purchase and sale of NFTs by rearranging the order of transactions. This causes price manipulation, especially in gas wars.

How MEV Protection Can Be Used

MEV protection tools and strategies focus on securing traders and preventing exploitation by minimizing the possibility of being victims of price manipulation or unreasonable activity. Some of the ways that can protect your crypto trades are:

• Low Slippage Tolerance

When you set the slippage at a lower amount, this will reduce the extent of the price impact that can occur perform to the MEV bots on your transactions. Although that can help avoid some of the exploitation, by not being set high enough, it can break transactions.

• MEV-Geth

The software enables one to skip the mempool and submit their transactions to the validators directly. MEV-Geth allows your transactional details to be kept confidential, hence the difficulty of the bots dominating the market.

• Protection with MEV on RPC Endpoints

Special RPC endpoints can utilize protection of transactions before being added to the mempool. These RPCs minimize the possibility of exploitation by evaluating outstanding transactions and thwarting any opportunity that may exist of MEV. They also have the capability of rearranging transactions and foil MEV bots to make the trade more secure.

Conclusion

With the cryptocurrency world still being developed, it is only now that blocking MEV exploitation on your trades is of utmost importance. Traders can protect their transactions using MEV protection measures such as low slippage tolerance, MEV-Geth, and dedicated RPC endpoints. Also, tools such as MEV Blocker and CoW Protocol will provide an advanced solution to a safe trading process. With knowledge and the right tools, crypto traders have a chance to reduce the risks and increase their chances of success in this high-speed market.

The crypto world is promising, yet one must be active when it comes to securing funds. Protect your trades by embracing MEV and feel the difference of trading in a non-manipulated environment, whether in a centralized or a decentralized setup.