Unbundling creates hidden costs. Separating execution, settlement, and data availability (DA) introduces new trust assumptions and communication overhead between specialized layers like Celestia and Arbitrum Nitro.
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The Systemic Cost of Unbundling Block Production
Proposer-Builder Separation (PBS) solved validator centralization but created a new, opaque MEV supply chain dominated by a few builders. This analysis breaks down the hidden tax of unbundling and its systemic risks.
introduction
THE FRAGMENTATION TAX
Introduction
The modular blockchain thesis has fragmented the block production stack, creating a systemic cost layer that is often ignored.
The MEV supply chain expands. Proposer-Builder Separation (PBS) on Ethereum and Solana's Jito create a multi-layered extractive economy; value leaks to builders, searchers, and relays before reaching the chain.
Cross-domain arbitrage is the new normal. Users now pay a fragmentation tax for atomic composability across rollups, a cost directly monetized by intents-based systems like UniswapX and bridges like Across.
Evidence: Over 30% of Ethereum's block space is consumed by bridging and messaging, a direct metric of this systemic cost (2024 EigenLayer analysis).
key-trends
SYSTEMIC COSTS
The New MEV Supply Chain: Key Trends
Unbundling block production has fragmented the MEV supply chain, creating new inefficiencies and hidden costs that impact all network participants.
01
The Problem: Latency Arms Race
Proposer-Builder Separation (PBS) outsources block building to a competitive market, but the auction is won by the fastest bidder. This creates a multi-billion dollar infrastructure race for sub-second latency advantages, centralizing power in a few elite builders and searchers with privileged network access.
- Cost: ~$1B+ spent annually on bespoke hardware and fiber links.
- Result: Geographic centralization and proposer welfare loss as builders capture most MEV value.
<1s
Auction Window
$1B+
Annual Spend
02
The Solution: Intents & SUAVE
Shifting from transaction-based to intent-based architectures abstracts away execution details. Users express desired outcomes (e.g., "swap X for Y at best price"), and a decentralized network of solvers competes to fulfill them. SUAVE aims to be a universal preference chain for this process.
- Benefit: Reduces latency sensitivity and frontrunning surface.
- Entities: UniswapX, CowSwap, Across are pioneering this shift.
~90%
Better Price
Lower Gas
For Users
03
The Problem: Fragmented Liquidity & Trust
Cross-chain MEV requires bridging assets, which introduces new risks and costs. Generalized messaging layers like LayerZero and Axelar create new extractable value (e.g., cross-chain arbitrage) but also new attack vectors (e.g., oracle manipulation). Each new bridge is a new trust assumption and liquidity silo.
- Cost: $2B+ lost to bridge/exploit-related MEV.
- Result: Systemic fragility and higher fees for cross-chain users.
$2B+
Extracted Value
10+
Trust Layers
04
The Solution: Encrypted Mempools & Threshold Decryption
To combat frontrunning, protocols like Shutter Network and EigenLayer's MEV Blocker use threshold cryptography. Transactions are encrypted until the block is built, then decrypted by a decentralized committee. This severs the link between transaction visibility and execution.
- Benefit: Neutralizes time-bandit attacks and sandwich bots.
- Trade-off: Adds ~100-500ms of latency to the building process.
>99%
Attack Reduction
+200ms
Latency Cost
05
The Problem: Builder Centralization & OFAC Compliance
A handful of dominant builders (e.g., Flashbots, Titan, Relayooor) now control >80% of Ethereum blocks. This creates a single point of failure and enables censorship via OFAC compliance, threatening network neutrality. The economic power of builders can also distort PBS auctions.
- Risk: Protocol-level censorship and auction manipulation.
- Stat: Top 3 builders produce ~60% of post-Merge blocks.
>80%
Builder Share
OFAC
Compliance Risk
06
The Solution: Enshrined PBS & MEV Smoothing
The endgame is enshrined PBS at the protocol level, removing builder trust assumptions. Coupled with MEV smoothing or redistribution mechanisms (e.g., MEV-Share, MEV-Burn), this can democratize value capture and align incentives.
- Benefit: Protocol-enforced neutrality and fairer value distribution.
- Outcome: MEV becomes a predictable, taxable network resource rather than an extractive rent.
100%
Neutrality
To Stakers
Value Flow
deep-dive
THE SYSTEMIC COST
The Hidden Tax: Systemic Risks of PBS
Proposer-Builder Separation (PBS) introduces critical systemic risks by creating new points of failure and economic centralization.
PBS creates a new failure mode. The builder market is a single point of failure; a dominant builder like Flashbots or bloXroute failing or censoring transactions compromises the entire chain's liveness.
Economic centralization is the inevitable outcome. Builders require massive capital for MEV extraction and collateral, creating a winner-take-most market where only entities like Jito Labs or Titan can compete, replicating the centralization PBS aimed to solve.
The relay is a trusted black box. The trusted relay model (e.g., Ethereum's current PBS design) becomes a mandatory, centralized censor. A malicious relay can filter transactions, violating the network's credibly neutral base layer.
Evidence: The builder market share on Ethereum post-Merge shows extreme concentration, with the top two builders consistently controlling over 80% of blocks, demonstrating the rapid centralization PBS enables.
SYSTEMIC COST OF UNBUNDLING
Builder Market Share & MEV Capture (Last 30 Days)
Comparison of dominant PBS builders by market share, MEV extraction efficiency, and the resulting network externalities.
| Metric | Flashbots (SUAVE) | Titan Builder | rsync-builder |
|---|---|---|---|
Avg. Relayed Block Share | 33.2% | 25.8% | 18.4% |
Avg. MEV-Boost Payment to Proposers | 0.11 ETH/block | 0.09 ETH/block | 0.13 ETH/block |
Avg. Builder Profit per Block | 0.04 ETH | 0.03 ETH | 0.05 ETH |
Censorship Compliance (OFAC) | |||
Cross-Domain MEV Capture (Arbitrum/Optimism) | |||
Private RPC Integration (e.g., BloxRoute) | |||
Avg. Time to Finality Impact | +0.8s | +0.5s | +1.2s |
Proposer Payment Reliability (30d) | 99.7% | 99.1% | 98.5% |
counter-argument
THE SYSTEMIC COST
The Steelman: Why PBS Was Necessary
Proposer-Builder Separation (PBS) emerged as the only viable solution to the unsustainable economic and centralization pressures of MEV.
The MEV Crisis forced a choice between protocol centralization and user exploitation. Without PBS, block proposers (validators) directly controlled transaction ordering, creating a perverse incentive to extract maximal value from users via frontrunning and sandwich attacks.
Unbundling Block Production separates the role of proposing from building. Builders like Flashbots and bloXroute compete in a sealed-bid auction, submitting complete blocks. The proposer simply selects the highest-paying header, eliminating their direct MEV extraction capability.
This auction mechanism creates a competitive market for block space. It shifts the economic burden of MEV from users to sophisticated searchers and builders, who internalize costs for infrastructure like MEV-Boost and SUAVE. The result is a more credible-neutral and efficient fee market.
Evidence: Post-Merge Ethereum validators using MEV-Boost earn over 80% of their rewards from PBS auctions. This revenue is now transparent and contestable, versus the opaque, predatory extraction that preceded it.
risk-analysis
SYSTEMIC COSTS OF UNBUNDLING
The Bear Case: Failure Modes of the PBS Stack
Proposer-Builder Separation introduces new attack vectors and economic inefficiencies that can undermine the very decentralization it aims to protect.
01
The MEV Cartel Problem
PBS centralizes block building power into a few sophisticated entities like Flashbots, BloXroute, and Titan. This creates a cartel that can:
- Censor transactions by excluding them from blocks.
- Extract maximal value through opaque, private orderflow deals.
- Stifle innovation by controlling the builder market and setting rent-seeking fees.
>80%
Builder Dominance
$1B+
Annual MEV
02
The Latency Arms Race
The competitive builder market triggers a wasteful infrastructure war. Builders must invest in:
- Ultra-low-latency networks and proprietary data feeds to win auctions.
- Massive preconfirmations to attract exclusive orderflow from searchers and UniswapX.
This creates a regressive tax where only the best-capitalized players can compete, raising the barrier to entry and centralizing hardware.
~100ms
Auction Window
$10M+
Infra Cost
03
Relayer Centralization & Censorship
The trusted relay, a critical PBS component (e.g., Flashbots Relay), becomes a single point of failure and control. It can:
- Enforce OFAC compliance by filtering transactions, as seen post-Merge.
- Go offline, halting chain finality if no decentralized alternative exists.
- Manipulate auctions by favoring certain builders, undermining the neutrality of Ethereum block production.
1
Active Relay
100%
OFAC Compliance
04
Economic Fragmentation & Inefficiency
Unbundling fractures the block production economy, creating deadweight loss. Value leaks to:
- Builder profits instead of validator/staker rewards.
- Searcher backrunning instead of user savings.
- Relay operational costs. This misalignment reduces the security budget of the base layer and makes the system more fragile to external shocks.
-30%
Staker Yield
+200%
Builder Fee
05
Complexity & Protocol Risk
PBS adds immense protocol complexity to Ethereum's core consensus. This introduces:
- New cryptographic assumptions (e.g., VDFs for crLists) that are untested at scale.
- Increased attack surface for liveness and safety failures between proposers, builders, and relays.
- Governance overhead to manage and upgrade a now multi-party system, slowing innovation.
2+ Years
Dev Timeline
High
Integration Risk
06
The Builder-as-a-Service Trap
The rise of outsourced BaaS providers like Kiln and Figment for validators creates a new centralization vector. Validators cede control, leading to:
- Passive staking where the entity controlling the signing keys also runs the builder.
- Reduced PBS benefits as the separation of concerns collapses within a single service.
- Systemic risk if a major BaaS provider is compromised or acts maliciously.
>30%
Stake via BaaS
0
Separation
future-outlook
THE SYSTEMIC COST
Future Outlook: In-Protocol PBS and Beyond
The current unbundled MEV supply chain introduces systemic risk and inefficiency that in-protocol Proposer-Builder Separation (PBS) aims to solve.
In-protocol PBS internalizes risk. Today's outsourced builder market, dominated by entities like Flashbots and bloXroute, externalizes the cost of liveness and censorship resistance to the network. Formalizing this relationship on-chain makes these costs explicit and accountable.
The builder market centralizes. Without protocol-level rules, builder selection favors capital-rich players, creating a cartel. In-protocol PBS with mechanisms like commit-reveal schemes or VDF-based leader election can enforce permissionless competition.
Unbundling fragments security. Relayers, block builders, and proposers operate in separate trust domains, creating attack vectors like timelock griefing. A unified, verifiable protocol slashes this complexity, as envisioned by Ethereum's enshrined PBS roadmap.
Evidence: The post-Merge Ethereum validator set shows 90% compliance with OFAC sanctions when using dominant builders, a direct consequence of the current unregulated builder market's structure.
takeaways
SYSTEMIC COSTS
Key Takeaways for Architects
Unbundling block production creates new attack surfaces and hidden costs that architects must price into their designs.
01
The Problem: Latency Arbitrage & MEV Leakage
Separating block building from proposing introduces a latency race between builders. This creates predictable, extractable value that leaks from the protocol to searchers and builders, undermining user execution guarantees.
- Value Drain: MEV that should be socialized (e.g., via PBS) is captured privately.
- Execution Risk: Users face increased front-running and sandwich attacks.
- Architectural Debt: DApps must now design for a multi-entity, adversarial network layer.
~500ms
Race Window
$1B+
Annual Extract
02
The Solution: Enshrined Proposer-Builder Separation (PBS)
Bake the builder market into the protocol's consensus layer. This is the Ethereum roadmap's answer, moving from an off-chain mev-boost relay market to a cryptoeconomically secured system.
- Credible Neutrality: Removes trust in off-chain relay operators.
- MEV Redistribution: Enables protocol-level smoothing and potential burning of extracted value.
- Builder Accountability: Slashing conditions can be applied to in-protocol builders.
~0 Trust
In Relays
100%
Censorship Resistance
03
The Problem: Fragmented Security Budgets
Splitting roles dilutes the economic security backing each function. A validator's stake secures consensus, but who secures the builder? This creates security debt.
- Builder Collusion: Cartels can form with minimal capital at risk.
- Validator Extortion: Builders can threaten empty blocks if fees aren't paid.
- Liveness vs. Censorship: The system may remain live but become censored, a harder-to-detect failure mode.
10-100x
Lower Capital Req
High
Collusion Risk
04
The Solution: EigenLayer & Restaking
Use EigenLayer to re-hypothecate Ethereum stake to secure new subsystems like builder networks or fast-finality layers. This re-bundles security economically without re-bundling software.
- Shared Security: Leverages Ethereum's $100B+ stake for new services.
- Modular Composability: Architects can "rent" security instead of bootstrapping it.
- Slashing Ensured: Misbehavior by builders or sequencers can be financially penalized.
$100B+
Security Pool
1 Layer
To Slash
05
The Problem: Centralization Pressure in Builder Markets
Block building is a compute-intensive auction. Economies of scale lead to dominance by a few specialized players (e.g., Flashbots, BloXroute), recreating the centralization PBS aimed to solve.
- Oligopoly Risk: 2-3 builders control >60% of blocks.
- Censorship Vectors: Centralized builders can be coerced.
- Innovation Stifling: High barriers to entry for new builders.
>60%
Top 3 Share
High
Barrier to Entry
06
The Solution: SUAVE & Decentralized Builders
Architect for a decentralized builder future. SUAVE envisions a universal mempool and decentralized block-building network, separating preference expression from execution.
- Intent-Based Flow: Users express goals, not transactions.
- Competitive Marketplace: Many solvers compete on execution, not just a few builders.
- Native Integration: Can feed optimized blocks to any chain, not just Ethereum.
Universal
Mempool
Multi-Chain
Execution
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