When engaging active cryptocurrency traders in discussions about MEV, the dialogue often centers on the acronym 'Miner Extracted Value,' portraying it as a means through which miners gain additional profits by manipulating DeFi protocols. However, a more nuanced perspective reveals MEV as 'Maximal Extractable Value,' encompassing the earnings derived from altering the sequence, censoring, or introducing transactions during block production.

Contrary to common belief that MEV primarily manifests on Ethereum or Solana, MEV has a historical presence on Bitcoin, being the pioneering blockchain to witness MEV dynamics.

MEV on Bitcoin: The Era of Full RBF

In the contemporary mempools, where transactions queue up for inclusion in blocks, pool operators typically prioritize transactions with the highest fees. However, this wasn't the initial protocol.

Bitcoin's initial block construction policy, known as 'First Seen,' reflected the altruistic ethos among early miners who prioritized the sequence of transactions as they were received. This approach stemmed from a collective desire to enhance the user experience for merchants embracing Bitcoin payments.

During that period, figures like 'Bitcoin Jesus' Roger Ver advocated for Bitcoin adoption among small businesses, promoting point-of-sale terminals and applications. Miners, aligning with the community's vision for seamless on-chain payments, committed to including transactions in the order they were received.

The 'First Seen' Paradigm

Under the 'First Seen' policy, merchants could monitor the public mempool, verify customer transactions, and promptly provide goods or services, trusting miners to confirm these transactions in subsequent blocks, notwithstanding the average 10-minute block time.

While advantageous for merchants, the altruism of 'First Seen' soon faced challenges as rogue miners embraced Replace By Fee (RBF) transactions. This tactical move involved replacing lower fee-bidding transactions with higher fee-bidding ones, introducing the concept of MEV to Bitcoin.

MEV in Practice

MEV, in practical terms, denotes the supplementary earnings achieved by manipulating node software defaults during block production. Miners, by modifying their Bitcoin Core nodes to prioritize higher fee-bidding transactions (RBF), initiated Bitcoin's MEV era.

This practice rapidly gained traction, with Full RBF becoming prevalent and displacing the 'First Seen' policy. Presently, mining pools routinely acknowledge RBF flags, prioritizing higher fee-bidding transactions regardless of their chronological arrival.

The Evolution of MEV

Early Bitcoin miners, observing the evolution from 'First Seen' to Full RBF, identified this practice as Miner Extracted Value, setting a precedent for MEV extraction. Over time, what was once considered exceptional has become a standard industry practice.

In summary, MEV in Bitcoin signifies a strategic maneuver where miners extract additional value by reordering transactions based on fee incentives, a testament to the dynamic nature of blockchain protocols and their economic intricacies.