The Future of Builder-Block Proposer Separation on Layer 2

Arbitrum's BOLD protocol enforces builder-proposer separation by moving fraud proofs on-chain, making the sequencer role permissionless and contestable.\n- Key Benefit: Sequencer decentralization via permissionless challenge protocol.\n- Key Benefit: Enables trust-minimized, multi-entity sequencing for Nitro chains.

Optimism's design focuses on PBS to prevent value extraction that harms users, integrating with systems like MEV-Share and MEV-Boost.\n- Key Benefit: Proposer can enforce ethical rules on builder blocks (e.g., front-running protection).\n- Key Benefit: Revenue redistribution to users and the protocol treasury via MEV smoothing.

Espresso provides a shared sequencer layer where rollups can outsource sequencing to a decentralized network, with PBS at its core via a timely auction.\n- Key Benefit: Cross-rollup atomic composability enabled by a shared sequencer.\n- Key Benefit: Economic security from staked proposers and competitive builder bidding.

Today, most L2s run a single, centralized sequencer. This creates censorship risk, creates a liveness bottleneck, and centralizes all MEV capture.\n- Consequence: Users have no guarantees against transaction reordering or exclusion.\n- Consequence: Creates a massive, opaque MEV pool controlled by one entity.

Protocols like Astria and Radius are building dedicated PBS layers that multiple rollups can plug into, separating block building from proposing.\n- Key Benefit: Instant atomic cross-rollup arbitrage becomes native.\n- Key Benefit: Economies of scale in security and decentralization efforts.

The endgame is a verifiable, on-chain auction where the highest bidder (builder) wins block space, and the proposer's only role is inclusion. This mirrors Ethereum's PBS trajectory.\n- Key Outcome: MEV is commoditized, pushing profits to the protocol and users.\n- Key Outcome: Censorship resistance is enforced at the protocol level.

Top-tier builders like Flashbots SUAVE and BloXroute could dominate L2 block space, replicating Ethereum's PBS centralization. This creates a single point of failure and censorship risk.

• Risk: Builder market share exceeding 50% for a single entity.
• Consequence: Transaction censorship and extractive MEV becomes the norm, not the exception.

Builders with visibility across L1 and multiple L2s (e.g., EigenLayer, Across) can orchestrate sophisticated attacks. A malicious builder could force an L2 reorg to profit on a correlated L1 derivative.

• Risk: Time-bandit attacks targeting L2's shorter finality windows (~12s vs. Ethereum's 12 min).
• Consequence: User transactions are reverted, breaking atomic composability guarantees.

L2 sequencers/proposers can collude with a preferred builder to capture all MEV, turning the protocol into a rent-seeking cartel. This defeats the purpose of separation.

• Risk: Opaque, off-chain deal-making between proposers and builders.
• Consequence: User fees remain high despite technological improvements, eroding L2 value proposition.

If a malicious builder withholds transaction data after proposing a block, the L2's fraud proof or validity proof system cannot function. This is a fatal flaw for optimistic rollups.

• Risk: Builder acts as a single point of failure for data availability.
• Consequence: The L2 halts or requires a centralized operator intervention, breaking trustless assumptions.

Adding a PBS-like layer introduces massive protocol complexity. Bugs in the builder market or relay infrastructure (see Ethereum's mev-boost bugs) could lead to network instability or stolen funds.

• Risk: New attack surfaces in bidding logic, relay attestations, and block validation.
• Consequence: Catastrophic failures that are harder to audit and recover from than a monolithic sequencer.

Builders complying with OFAC sanctions will censor transactions, forcing L2s to choose between decentralization and legal compliance. This fractures the network and creates compliant vs. non-compliant chain splits.

• Risk: Legal pressure forces builders like Flashbots to filter L2 blocks.
• Consequence: A two-tiered system emerges, undermining credible neutrality and permissionless access.

L2 PBS shifts MEV extraction from a sequencer's private domain to a competitive, open market. This commoditizes block space and forces a re-evaluation of value flows.

• Key Benefit: Democratizes access to L2 MEV, creating new revenue streams for proposers.
• Key Benefit: Increases economic security by aligning validator incentives with chain liveness.

Centralized sequencers are a single point of censorship. PBS introduces a credibly neutral proposer layer that can enforce inclusion lists, a critical feature for L2s aiming for true decentralization.

• Key Benefit: Enables compliance with Ethereum's roadmap (e.g., EIP-4844 blob inclusion).
• Key Benefit: Mitigates regulatory risk by separating transaction ordering from execution.

Generalized L1 builders (like Flashbots SUAVE) will be outcompeted by L2-native builders optimized for specific VM architectures (zkVM, OP Stack, Arbitrum Stylus).

• Key Benefit: ~500ms latency optimizations for fast L2 finality.
• Key Benefit: Custom preconfirmations and intent-solving for apps like UniswapX and CowSwap.

PBS infrastructure will not be siloed. Builders serving Optimism, Arbitrum, and zkSync will form a cross-L2 network, leveraging shared liquidity and MEV opportunities via bridges like Across and LayerZero.

• Key Benefit: Unlocks cross-domain MEV arbitrage as a new asset class.
• Key Benefit: Reduces capital fragmentation, increasing builder profitability.

Decentralizing the proposer role does not absolve builders from regulatory scrutiny. OFAC-compliant block building will become a service, creating a compliance premium and potential fragmentation.

• Key Benefit: Clear separation allows compliant and non-compliant chains to coexist.
• Key Benefit: Provides investors with a measurable 'decentralization score' for due diligence.

PBS is a stepping stone to shared sequencer sets (like Espresso or Astria), where a decentralized network of proposers orders transactions for multiple L2s simultaneously, achieving atomic cross-rollup composability.

• Key Benefit: Eliminates bridging latency for native cross-L2 DeFi.
• Key Benefit: Creates a unified security and liquidity layer, challenging monolithic L1s.