PBS is an information asymmetry game. The builder with the most accurate view of pending transactions and MEV opportunities wins the block auction. This creates a direct incentive to build superior private mempools and orderflow networks.
prediction-markets-and-information-theory
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Why Proposer-Builder Separation is an Information Arms Race
PBS didn't decentralize MEV; it changed the battlefield. The competition is no longer about raw hashrate but about securing exclusive data streams and faster information, creating new centralization vectors around order flow.
introduction
THE ARMS RACE
Introduction
Proposer-Builder Separation (PBS) has evolved from a scaling solution into a high-stakes information war.
The race centralizes around data. Builders like Flashbots and bloXroute compete on proprietary data access, not just computational speed. This centralizes block production power with entities that control the best information pipelines.
The endpoint is the new battleground. RPC providers like Alchemy and QuickNode are critical infrastructure because they are the primary source of raw transaction data. Control the endpoint, influence the builder.
key-trends
PROPOSER-BUILDER SEPARATION
The New Battlefield: Three Data-Centric Trends
PBS isn't just about MEV; it's a fundamental shift where block production becomes a high-stakes information game.
01
The Problem: Opaque MEV Supply Chains
Builders operate as black boxes, obscuring the origin and fairness of extracted value. This creates systemic risk and centralization pressure.
- Hidden Order Flow: Searcher-to-builder deals are private, preventing proposer-side optimization.
- Trust Assumption: Proposers must trust builder outputs without visibility into transaction ordering logic.
~90%
Blocks Opaque
$1B+
Annual MEV
02
The Solution: Builder Transparency & Commit-Reveal
Protocols like EigenLayer and Espresso are forcing builders to cryptographically commit to block contents before selection.
- Verifiable Execution: Proposers can cryptographically verify a builder's claimed state root and fees.
- Fair Ordering: Commit-reveal schemes reduce last-second manipulation, enabling fairer MEV distribution.
0-Latency
Reveal Proof
100%
Verifiable
03
The Arms Race: Real-Time Data Feeds
Winning the builder auction requires sub-second access to global state. This has spawned a parallel infrastructure war.
- Mempool APIs: Services like BloXroute and Blocknative sell privileged transaction stream access.
- Cross-Chain Arb Feeds: Builders for Polygon, Arbitrum, and Base must ingest data from competing L1s to capture arbitrage.
<100ms
Data Latency
10x
Edge Advantage
deep-dive
THE INFORMATION ARMS RACE
From Hashrate to Dataflow: The Centralization Engine
Proposer-Builder Separation (PBS) shifts the centralization bottleneck from raw compute to privileged information flow.
PBS creates a new oligopoly. The separation of block building from block proposing creates a market where specialized block builders compete to create the most profitable block. This market rewards builders with the most sophisticated transaction order flow (TxOF) data and MEV extraction algorithms, not just hashrate.
The winner is the best-informed. A builder's edge comes from seeing more private order flow than its competitors. This creates an information asymmetry where entities like Flashbots and Jito Labs that dominate private mempools or have exclusive partnerships with DEX aggregators like UniswapX or CowSwap consistently win auctions.
Centralization is a data problem. The builder market centralizes because data is a network effect. The most profitable builder attracts the most order flow, which improves its data advantage, creating a positive feedback loop. This is more insidious than PoW centralization because it's opaque and based on proprietary information, not just capital expenditure.
Evidence: On Ethereum, the top three builders consistently produce over 80% of post-merge blocks. This concentration is driven by their exclusive access to private transaction bundles and sophisticated MEV-Boost relays, demonstrating that data access, not hardware, is the new moat.
THE INFORMATION ARMS RACE
Builder Market Share & Data Advantage
Comparison of leading MEV-Boost builders by market share and the proprietary data advantages that drive their dominance.
| Core Competitive Metric | Flashbots (SUAVE) | Titan Builder | beaverbuild | rsync |
|---|---|---|---|---|
Q1 2024 Market Share (Blocks Built) | 28.5% | 22.1% | 9.8% | 8.3% |
Proprietary Order Flow Source | ||||
Access to Private Mempool | ||||
Cross-Domain (L2) MEV Capture | ||||
Avg. Payment to Proposer (Last 30d) | 0.32 ETH | 0.29 ETH | 0.25 ETH | 0.21 ETH |
Blocks with Censorship Compliance | 100% | 0% | 0% | 0% |
Real-Time Arbitrage Signal Latency | < 50ms | < 100ms | ~300ms | ~500ms |
Integrated with Own Relayer Network |
counter-argument
THE INFORMATION ARMS RACE
The Bull Case: Isn't This Just Efficient Markets?
Proposer-Builder Separation (PBS) formalizes an information asymmetry arms race that already exists, creating a more transparent and efficient market for block space.
PBS formalizes existing asymmetry. The information advantage of knowing the full block's composition before proposing it already exists in today's MEV supply chain via private mempools like Flashbots Protect. PBS simply makes this explicit and contestable.
The market becomes transparent. PBS moves the competition from hidden, off-chain deals to an explicit, on-chain auction. This creates a verifiable price discovery mechanism for block space, similar to how UniswapX outsources routing to a competitive solver network.
Builders are specialized execution engines. They compete on their ability to source transactions from private channels (e.g., bloXroute, Eden), optimize gas usage, and integrate with cross-chain systems like LayerZero or Axelar for maximal value extraction.
Evidence: Post-merge Ethereum blocks show over 90% are built by specialized builders, not the proposing validator. This proves the economic specialization is inevitable; PBS just provides a structured framework for it.
risk-analysis
WHY PBS IS AN INFORMATION ARMS RACE
The Slippery Slope: Risks of Information Monopolies
Proposer-Builder Separation (PBS) outsources block construction to specialized builders, creating a new, opaque market for transaction ordering rights.
01
The Black Box of MEV
Builders win auctions by promising the highest bid, derived from extracting Maximum Extractable Value (MEV). Their proprietary algorithms and private mempools create an information asymmetry where only they see the full transaction landscape.\n- Key Risk: Opaque order flow auctions can hide toxic arbitrage or front-running.\n- Key Metric: Top builders like Flashbots and bloXroute control the majority of Ethereum blocks.
>80%
Block Share
$1B+
Annual MEV
02
The Centralizing Force of Data
Superior block building requires superior information. This incentivizes builders to form exclusive partnerships with searchers, DEX aggregators (1inch, 0x), and CEXs to secure priority order flow.\n- Key Risk: Creates a feedback loop where the data-rich get richer, centralizing power.\n- Key Metric: A few entities can dominate the relay network, the critical channel between builders and proposers.
~5
Dominant Relays
Exclusive
Order Flow
03
The Censorship Vector
Builders are the ultimate gatekeepers of transaction inclusion. A dominant builder or cartel can censor transactions (e.g., OFAC-sanctioned addresses) by simply excluding them from their blocks.\n- Key Risk: Regulatory pressure can turn a technical optimization into a compliance tool.\n- Key Metric: Post-Merge, >50% of Ethereum blocks have been OFAC-compliant at times, driven by builder policy.
>50%
OFAC Blocks
Single Point
Of Failure
04
The Protocol-Level Response
The endgame is enshrining PBS and anti-censorship measures directly into the protocol. Ethereum's PBS roadmap and crLists aim to neutralize builder power by giving proposers tools to enforce inclusion.\n- The Solution: Protocol-level rules that separate economic power from censorship power.\n- Key Entity: Vitalik Buterin's proposed enshrined PBS design.
Post-Danksharding
Timeline
crLists
Mitigation Tool
05
The Builder Cartel Threat
Builders can collude via off-chain agreements to split markets, suppress auction bids, and share order flow, effectively forming a block-building oligopoly.\n- Key Risk: Reduces proposer revenue and entrenches anti-competitive behavior.\n- Key Metric: Just three builders often account for over 70% of blocks in a given week.
~3
Dominant Builders
>70%
Market Share
06
The Searcher's Dilemma
Searchers must choose: sell profitable MEV bundles to a top builder for guaranteed inclusion, or risk them being stolen via time-bandit attacks. This funnels the most valuable MEV to the largest builders.\n- Key Risk: Innovation in MEV extraction becomes captive to builder monopolies.\n- Key Entity: Flashbots SUAVE aims to decentralize this by creating a shared mempool and execution market.
SUAVE
Proposed Fix
Time-Bandit
Attack Risk
future-outlook
THE INFORMATION ARMS RACE
The Next Front: Intent-Based Architectures and Encrypted Mempools
Proposer-Builder Separation has created a zero-sum game for transaction data, making the mempool the new battleground for MEV.
PBS creates data asymmetry. Validators outsource block construction to specialized builders who compete on execution quality. The winning builder's private mempool contains the most valuable transaction flow, creating an informational advantage that centralizes MEV capture.
Encrypted memools are a countermeasure. Protocols like Shutter Network and EigenLayer's MEV Blocker encrypt transactions until inclusion. This neutralizes frontrunning by builders, but shifts the competitive edge to those with superior intent-solving algorithms.
Intent-based architectures bypass the fight. Systems like UniswapX, CowSwap, and Across do not broadcast executable transactions. Users submit desired outcomes (intents), and solvers compete off-chain to fulfill them, moving the MEV auction out of the public view.
Evidence: Flashbots' SUAVE aims to be a decentralized block builder, but its success hinges on attracting order flow away from private channels dominated by entities like Jito Labs, illustrating the entrenched nature of this data war.
takeaways
THE PBS ARMS RACE
TL;DR for Protocol Architects
Proposer-Builder Separation isn't just about decentralization; it's a high-stakes competition for information asymmetry and MEV capture.
01
The Problem: The Dark Forest of Private Orderflow
Builders win by seeing transactions first. This creates a zero-sum game where searchers and users sell their orderflow to the highest bidder (e.g., Flashbots Protect, bloxroute). The result is a fragmented, opaque market where the proposer's role is commoditized.
- Centralization Vector: Builders with exclusive orderflow win >90% of blocks.
- Latency Arms Race: Infrastructure spend shifts from validation to sub-100ms message passing.
- Protocol Risk: Core auction logic (e.g., Ethereum's PBS) depends on this opaque off-chain market.
>90%
Blocks Won
<100ms
Latency Edge
02
The Solution: Enshrined PBS & Credible Neutrality
Protocols must enforce neutrality at the consensus layer. Ethereum's ePBS aims to do this by making the block-building market a protocol primitive, not an off-chain cartel. This shifts competition from information hoarding to execution efficiency.
- Levels the Field: All builders bid on a public, in-protocol channel.
- Preserves Decentralization: Proposer's role remains simple and accessible.
- Mitigates MEV Externalities: Enables native solutions like proposer commitments and MEV smoothing.
In-Protocol
Auction
0 Trust
Required
03
The Frontier: SUAVE - A Universal Block Building Chain
Flashbots' SUAVE is the logical endpoint: a dedicated chain for preference expression and block building. It attempts to centralize the arms race into a single, specialized venue, turning competition into a commodity service.
- Unifies Liquidity: Aims to aggregate all private orderflow into one cross-chain mempool.
- Specialized VM: Optimized for complex auction logic and MEV extraction.
- New Centralization Risk: Replaces many builders with one dominant building network.
Cross-Chain
Mempool
Single
Auction Layer
04
The Architect's Dilemma: Build or Integrate?
Your protocol's design dictates your PBS strategy. Rollups (Optimism, Arbitrum) can outsource to shared sequencers like Astria or Espresso. App-chains must choose between a custom PBS stack and the liquidity of a larger builder network.
- Cost vs. Control: Running a competitive builder requires ~$1M+/year in infra and data feeds.
- Integration Risk: Relying on Ethereum's ePBS or SUAVE creates systemic dependencies.
- Timing: The market will consolidate around 2-3 dominant builder networks by 2025.
$1M+
Annual Cost
2-3
Final Networks
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