MEV is the primary revenue stream for sophisticated network participants. This profit motive creates a powerful incentive for searchers, builders, and validators to vertically integrate their operations.
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Why MEV Revenue Streams Inevitably Lead to Vertical Integration
An analysis of the economic incentives driving MEV capture, demonstrating how profit maximization necessitates controlling user transactions, block construction, and validation, leading to a landscape dominated by integrated entities.
introduction
THE ECONOMIC FORCE
Introduction: The Invisible Hand of MEV
Maximal Extractable Value (MEV) is the dominant economic force reshaping blockchain infrastructure, driving a natural consolidation of the stack.
The MEV supply chain consolidates to minimize latency and maximize capture. Searchers become builders (e.g., Flashbots), builders become validators, and validators become block producers, collapsing the traditional modular stack.
This is not a bug but a market efficiency. The invisible hand of MEV optimizes for profit, not decentralization, mirroring the vertical integration seen in traditional high-frequency trading.
Evidence: Flashbots, which started as a research collective, now operates a dominant private mempool and builder network, capturing a significant share of Ethereum's post-merge MEV.
key-trends
THE MEV GRAVITY WELL
The Vertical Integration Playbook: Three Dominant Strategies
MEV revenue is the ultimate gravitational force, pulling protocol logic, block building, and user access into consolidated stacks.
01
The Problem: The Unbundled Stack is a Leaky Sieve
In a modular world, value leaks between layers. The protocol (e.g., Uniswap) creates MEV, the searcher captures it, and the builder/proposer extracts it. The protocol's own treasury sees none of this value, creating a massive incentive misalignment.
- Value Leakage: Searchers and builders capture >90% of DEX-originated MEV.
- User Harm: Front-running and sandwich attacks degrade UX and increase costs.
- Fragmented Control: No single entity can guarantee execution quality or fairness.
>90%
Value Leak
0%
Protocol Capture
02
The Solution 1: Own the Execution Layer (The Flashbots Path)
Control the block builder and proposer to internalize MEV and guarantee execution. This is the most direct vertical integration, turning a public good (block space) into a private revenue stream.
- Revenue Capture: MEV-Boost relays and builders like Flashbots and bloxroute capture $500M+ in annualized MEV.
- Quality Control: Enforce rules (e.g., censorship resistance, fair ordering) at the source.
- Strategic Moats: Control over block building is a defensible infrastructure position, as seen with Jito on Solana.
$500M+
Annualized MEV
100%
Builder Control
03
The Solution 2: Own the Searcher/Resolver (The UniswapX Path)
Bake the searcher/resolver logic directly into the protocol layer. Instead of exposing raw transactions to the public mempool, users submit intents, and a dedicated network fills them. This abstracts MEV away from the user.
- Intent-Based Flow: Protocols like UniswapX and CowSwap use solvers (searchers) competing to fill user intents.
- MEV Re-capture: The protocol can tax solver profits or run its own solver to capture value.
- UX Primitive: Users get better prices and guaranteed execution, turning MEV from a bug into a feature.
~$10B
Monthly Volume
0 Slippage
User Guarantee
04
The Solution 3: Own the User Access Point (The Robinhood/Coinbase Path)
Control the wallet or front-end that aggregates user flow. By being the default gateway, you can batch transactions, route to proprietary infrastructure, and capture the spread and MEV internally.
- Flow Aggregation: Wallets like Coinbase Wallet or dApp browsers can route all user transactions through their own sequencer or builder.
- Order Flow Payment (OFP): Monetize transaction flow, a model perfected by Robinhood in TradFi and emerging in crypto via entities like bloxroute.
- Closed Ecosystem: Creates a seamless but potentially walled-garden experience, maximizing capture per user.
Millions
Captive Users
100%
Flow Control
deep-dive
THE INCENTIVE
The Economic Logic of Full-Stack Control
MEV revenue creates an economic imperative for infrastructure providers to own the entire user transaction stack.
MEV is the ultimate subsidy. The predictable, recurring revenue from transaction ordering and arbitrage subsidizes the cost of providing other services like RPC endpoints and block building.
Control begets more control. Owning the block builder, like Jito or bloXroute, is insufficient. To guarantee execution, you must also control the searcher network and user-facing RPC, as Flashbots’ SUAVE architecture demonstrates.
Vertical integration is inevitable. The alternative is revenue leakage. A standalone RPC provider like Alchemy cedes value to external builders; a standalone builder like MEV-Share loses to integrated stacks that see user intent first.
Evidence: Flashbots, after dominating Ethereum MEV, is building a full-stack intent network. This mirrors the vertical integration seen in L2s like Arbitrum, where the sequencer captures all on-chain value.
MEV SUPPLY CHAIN CONSOLIDATION
The Integration Spectrum: From Wallet to Finalized Block
A comparison of the control points and revenue capture across the MEV supply chain, demonstrating the economic pressure for vertical integration.
| Control Point / Metric | Isolated Wallet (e.g., MetaMask) | Integrated Searcher (e.g., Jito Labs) | Fully Integrated Chain (e.g., Solana) |
|---|---|---|---|
User Intent Visibility | |||
Transaction Ordering Influence | 0% | 100% (in its own bundle) | Protocol-level control |
MEV Revenue Capture | 0% |
| ~100% via priority fees/burns |
Latency to Block Producer |
| <50ms (private RPC) | <10ms (integrated client) |
Cross-Domain MEV Capture | Limited (requires bridges like layerzero) | ||
Protocol Revenue from MEV | 0% | 0% (searcher keeps) | Up to 100% (e.g., EIP-1559 burn) |
Integration Depth | User Interface Only | Searcher-Builder-Validator | Wallet-Searcher-Client-Consensus |
counter-argument
THE CENTRALIZATION TRAP
Counterpoint: Can Protocols and PBS Save Us?
Proposer-Builder Separation and protocol-level solutions create a new, more durable form of vertical integration.
PBS formalizes the cartel. Proposer-Builder Separation (PBS) explicitly separates block building from block proposing, creating a specialized builder market. This market is won by entities with the best data, fastest connections, and most sophisticated MEV extraction software, which are capital-intensive advantages.
Protocols become extractive partners. On-chain systems like Flashbots SUAVE or UniswapX aim to route user intents for optimal execution. To succeed, they must integrate directly with dominant builders and searchers, creating a protocol-builder cartel. The revenue share from MEV becomes a core protocol incentive, aligning their interests with the extractors.
Vertical integration is the equilibrium. The economic pressure to capture MEV revenue forces protocols and builders into tight, exclusive relationships. This is a more durable vertical integration than simple miner collusion, as it's codified in protocol logic and market structure. The end state is a cartel of specialized firms controlling the flow of value.
Evidence: Builder dominance metrics. Post-EIP-1559 and the Merge, a handful of builders like Flashbots, bloXroute, and beaverbuild consistently produce over 80% of Ethereum blocks. This concentration demonstrates that the PBS market centralizes, it does not decentralize.
takeaways
VERTICAL INTEGRATION IS INEVITABLE
TL;DR: Implications for Builders and Investors
MEV revenue creates powerful economic incentives that force infrastructure layers to consolidate, reshaping the competitive landscape.
01
The Problem: Application-Level MEV is a Leaky Bucket
DApps like Uniswap and Aave generate massive MEV but cannot capture it, leaking value to external searchers and builders. This creates a fundamental misalignment between protocol revenue and security spend.
- Value Leakage: Billions in arbitrage and liquidations are extracted, not retained.
- Security Subsidy: Protocols pay for block space (gas) but don't monetize the embedded extractable value.
- Adversarial Dynamics: Searchers profit at the direct expense of the protocol's end-users.
$1B+
Annual Leakage
0%
Protocol Capture
02
The Solution: Own the Stack, Own the Flow
The logical endpoint is vertical integration: protocols will internalize the MEV supply chain from user intent to block production. This is the Flashbots SUAVE thesis, applied per-vertical.
- Intent Capture: Native order flow aggregation (see UniswapX, CowSwap) bypasses public mempools.
- Execution Control: Integrated block building ensures optimal settlement and revenue recycling.
- New Business Models: MEV becomes a core, predictable revenue line, funding protocol incentives and security.
50-80%
Revenue Capture
Native
Order Flow
03
The Consequence: Winner-Take-Most Markets
Vertical integration creates unassailable moats. The entity controlling the full stack accrues compounding advantages in liquidity, data, and capital efficiency.
- Liquidity Begets Liquidity: Integrated venues offer better execution, attracting more volume in a flywheel.
- Data Advantage: Private order flow provides superior market intelligence for product and risk management.
- Capital Efficiency: Recycled MEV can subsidize yields or reduce fees, creating a powerful price weapon.
10x+
Advantage Gap
Flywheel
Network Effect
04
The Investment Thesis: Bet on Aggregators, Not Isolated Layers
Investors must shift focus from modular, interchangeable components to integrated aggregators that capture full value streams. The future belongs to app-chains and super-apps, not standalone shared sequencers or solvers.
- Look for Full-Stack Capture: Protocols with a clear path to internalizing execution (e.g., dYdX Chain, Aevo).
- Avoid Pure Middleware: Standalone builders, solvers, and bridges (e.g., Across, LayerZero) face commoditization and margin compression.
- Vertical-Specific Rollups: The most valuable L2s will be those purpose-built for a dominant application, not general-purpose.
App-Chain
Dominant Model
Commoditized
Middleware Risk
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