The Inevitable Centralization of Proposer-Builder Separation

PBS centralizes block production by design. It separates the role of the block proposer (validator) from the block builder (specialist), creating a market for block space. This market favors builders with superior MEV extraction capabilities and cross-chain data access, which are not evenly distributed.

Builders become natural monopolies. A builder with better order flow from UniswapX or CowSwap and sophisticated arbitrage bots will consistently outbid smaller players. This creates a feedback loop where winning builders attract more order flow, further entrenching their position, similar to the Flashbots dominance on Ethereum post-Merge.

The validator's role is neutered. In a PBS system, the proposer's job is reduced to selecting the highest-paying header from a builder marketplace. This cedes protocol governance influence and censorship resistance to the builder cartel, as seen in the OFAC-compliance debates surrounding Flashbots' mev-boost relays.

Evidence: Post-Ethereum Merge, over 90% of blocks are built by just three entities via mev-boost. This is not an anomaly; it is the structural endpoint of any efficient PBS design where economic incentives override decentralization goals.

Builder specialization creates moats. Professional builders like Flashbots SUAVE and Titan Builder invest millions in proprietary MEV extraction algorithms and private orderflow deals, creating an insurmountable data advantage for new entrants.

MEV revenue drives consolidation. The largest builders can afford to pay the highest bids to validators, creating a positive feedback loop where revenue funds higher bids, which captures more blocks, which generates more revenue.

Relay cartels enforce centralization. Critical infrastructure like the BloXroute and Ultrasound relays act as gatekeepers; their block validation rules and whitelists determine which builders can participate, creating a permissioned layer.

Evidence: Post-Merge Ethereum data shows the top three builders consistently produce over 80% of blocks, a concentration that has increased, not decreased, since PBS implementation.

PBS centralizes block building. The builder role demands specialized MEV extraction and data availability optimization, creating a capital and expertise moat. Validators, now just proposers, rationally outsource to the highest-bidding builder.

The proposer's dilemma is real. A validator's profit is the builder's bid. Their incentive is to select the highest bid, not the most decentralized builder. This creates a race to the bottom for proposer agency.

Builders like Flashbots and bloXroute dominate. They win by aggregating order flow and running sophisticated MEV strategies. Smaller builders cannot compete on bid size, leading to a natural oligopoly.

Evidence: Builder market share. The top three builders consistently produce over 80% of Ethereum blocks post-PBS. This is not a bug; it is the direct economic outcome of PBS design.

PBS relocates centralization, not eliminates it. The protocol outsources block construction to a competitive market, but builder centralization is inevitable due to economies of scale in MEV extraction and data availability.

Builder dominance creates systemic risk. A handful of entities like Flashbots, bloXroute, and beaverbuild control the majority of blocks. This recreates the single-point-of-failure problem PBS was meant to solve.

Enshrined PBS codifies this power. The protocol's reliance on a centralized builder set for liveness and efficiency makes their dominance a permanent, protocol-level feature, not a temporary market phase.

Evidence: Post-merge Ethereum data shows >80% of blocks are built by three entities. This concentration is higher than the pre-PBS validator centralization it aimed to mitigate.

Builder cartels are inevitable. The MEV supply chain's economies of scale and data advantages will consolidate power with a few dominant players like Flashbots SUAVE and Jito Labs, replicating mining pool centralization.

Regulation targets builders, not validators. Regulators like the SEC will classify block building as a security because it involves order flow aggregation and profit distribution, creating legal asymmetry in the PBS model.

Mitigations shift to economic attacks. The primary threat moves from censorship to builder-level extractable value (BLEV), where cartels manipulate transaction ordering to extract value from protocols like Uniswap and Aave directly.

Enshrined PBS becomes mandatory. By 2025, Ethereum's PBS roadmap (e.g., ePBS) will be non-optional to enforce credibly neutral block-building rules at the protocol level, reducing builder discretion.

Evidence: Builder market share on Ethereum already shows a >80% dominance by the top three builders, a concentration metric that precedes full cartelization and demands protocol-level intervention.