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Shining A Light On MEV | Tarun Chitra, Justin Drake

Bell Curve

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The Importance of Auction Theory

Auction theory states that whatever prices people pay in an auction are equal to the total externality you cause on all the other players. And so auctions have this sort of nice property that at least formally, if you could audit and verify all the steps leading up to them, that the price cleared is actually a true measure of the negative externality caused by a particular user. But I think there is this necessary thing of like really being able to audit and verify that everything happened was true amidst a transaction supply chain that's getting way more complicated right now.

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