Why Private Order Flow Will Centralize Ethereum

Private order flow deals between large traders (like Wintermute) and dominant builders (like Flashbots) create a two-tiered market. Public mempool users face strictly worse execution and subsidize the profits of private channels.

• ~90% of Ethereum blocks are now built by entities with private order flow access.
• Searchers pay ~80% of their profits in priority fees to these builders for inclusion.
• This centralizes block production power and erodes the credibly neutral base layer.

Aims to break the monopoly by separating the roles of expression, execution, and settlement. It creates a neutral, chain-agnostic mempool where users express intents, and a decentralized network of executors compete to fulfill them.

• Decouples information advantage from block production.
• Enables cross-domain MEV (Ethereum → Arbitrum, etc.) without centralized relays.
• Turns MEV from a rent-extraction tool into a public good for better price discovery.

PBS, while designed for decentralization, inadvertently created the builder market where information asymmetry is the primary competitive moat. Without enforceable commitments, builders with exclusive order flow win the auction.

• Leads to vertical integration (e.g., Coinbase Base bundling its builder, relayer, and exchange).
• Creates a data moat where the builder with the best private flow has the highest bid, creating a feedback loop.
• Makes crticial infrastructure (like mev-boost) dependent on a few centralized entities.

The logical conclusion is the rise of intent-based architectures (UniswapX, CowSwap, Across) and solving networks (like Anoma). Users submit outcome-based desires ('get me the best price'), not transactions, shifting power from block builders to competitive solver networks.

• Removes the need for users to navigate complex execution strategies.
• Solver competition theoretically returns MEV value to the user as better prices.
• However, risks consolidating into a few dominant solver networks, replicating the builder monopoly at a higher layer.

PBS separates block proposal from construction, but builders need a competitive edge. That edge is exclusive access to user transactions.\n- Private Order Flow (POF) is the new oil: Builders pay searchers and applications for the right to execute transactions first.\n- This creates a winner-take-most market: The builder with the most POF sees more arbitrage opportunities, can pay validators more, and attracts even more flow.

The capital and data advantages of large builders create an unassailable moat, centralizing block production.\n- Relay-Builder Integration: Dominant players like Flashbots (via SUAVE), bloXroute, and Blocknative control both the relay (the communication channel) and the builder, creating a vertically integrated stack.\n- Data Asymmetry: A builder seeing ~50% of order flow has a massively superior view of the market, allowing for more profitable bundles that outbid smaller, "blind" competitors.

Major dApps and wallets are incentivized to auction their users' transaction flow to the highest bidder, bypassing the public mempool entirely.\n- UniswapX, CowSwap, and 1inch already route orders off-chain to specialized solvers.\n- This stealth liquidity never hits the public mempool, starving permissionless searchers and entrenching the POF ecosystem. The public block space becomes a secondary, less profitable market.

The proposed universal solution, SUAVE, aims to decentralize the auction for order flow itself. However, its design likely reinforces centralization.\n- It requires validators to also run complex MEV infrastructure, a high capital and expertise barrier.\n- In practice, specialized SUAVE chain validators will emerge, recreating the builder oligopoly on a new chain. The entity controlling the dominant execution market wins.

Maximal Extractable Value (MEV) rewards create a powerful financial incentive for validators to centralize.\n- Staking Pools & CEXs (like Lido, Coinbase) can run in-house builders/relays, capturing MEV for their stakeholders and offering higher yields.\n- This leads to proposer-builder collusion: A dominant staking pool partners with a dominant builder, creating a closed loop that extracts maximum value and further marginalizes solo validators.

As MEV becomes institutionalized and quantifiable, it attracts regulatory scrutiny, forcing centralization for compliance.\n- OFAC-sanctioned transactions are already a factor; builders filtering them gain favor with large, regulated validators.\n- The path of least resistance is a licensed MEV marketplace operated by a few compliant entities, turning Ethereum's block production into a financial utility governed by traditional law.