MEV Risks Stalling DeFi Adoption as Institutions Stay Away

• Maximal extractable value (MEV) practices increase transaction costs and deter institutional participation in DeFi.
• Lack of institutional involvement weakens liquidity and exacerbates market volatility, warns DEX Labs CEO Aditya Palepu.

On November 1, 2025, Cointelegraph reported that Aditya Palepu, the CEO of DEX Labs, issued a stark warning regarding the risks posed by maximal extractable value (MEV) to the adoption of decentralized finance (DeFi). MEV, which allows miners or validators to manipulate blockchain transaction order for profit, has emerged as a major hurdle for institutional investors. This manipulation fosters harmful practices like front-running and sandwich attacks, effectively imposing what Palepu likens to a “stealth tax” on users.

According to Palepu, these unethical practices not only undermine trust in DeFi platforms but also discourage institutional investors, who are vital to the sector’s growth. Their absence deprives DeFi ecosystems of crucial liquidity, leading to heightened market volatility and increased transaction costs. This situation creates a less competitive and riskier environment that impacts retail users as well.

A key driver of the MEV issue lies in the transparency of blockchain networks. Transactions are broadcast publicly in the mempool before they are validated, which gives malicious actors opportunities to exploit them. This inherent lack of privacy allows MEV tactics to thrive, creating a serious roadblock for the broader adoption of DeFi.

To combat the challenges of MEV, Palepu advocated for the use of trusted execution environments. These secure systems would encrypt transaction data on the client’s side and only decrypt them after the transactions are ordered, effectively eliminating any visibility that enables front-running and other manipulative actions. By addressing the vulnerabilities tied to transaction privacy, these solutions could restore confidence in DeFi platforms.

Some industry experts caution that neglecting the MEV issue might exacerbate centralization in the cryptocurrency space, a scenario fundamentally at odds with the ethos of DeFi. Palepu stressed that tackling MEV is crucial for building a stable and trustworthy ecosystem. He also highlighted the broader benefits of institutional participation, including improved liquidity, reduced market volatility, and lower transaction costs for all users — outcomes critical to ensuring the long-term success of decentralized finance.