MEV on existing Yield Optimizers

Every yield aggregator found in the space typically go through the same process: harvest rewards, swap using one DEX, and compound that capital into more liquidity tokens.

Although this route is straightforward, there remains one issue—MEV. In this scenario, we can derive two opportunities in which MEV can extract value from the yield optimizer.

The first opportunity would be a sandwich attack. Given that a yield optimizer does not protect its slippage (which many do not), a sandwich attack may be used to inflate the price of a token a block before the harvest and sell the token again at a higher price point.

The second opportunity would be arbitrage. Given that liquidity isn’t sufficient, the effects of a harvest may incur a price impact, large enough to open arbitrage. Arbitrage is the act of balancing out liquidity across pools. For example, if the price of a token is significantly higher on DEX A than DEX B, the user can buy the token on DEX B to sell on DEX A to balance out the price, profiting from the difference in price.