Why Relayer Decentralization Is an Economic, Not Technical, Challenge

Running a permissionless relayer is a money-losing proposition. The economic model is broken.

• Costs are high: ~$50K/month for RPC endpoints, gas, and infrastructure.
• Revenue is low: Fees are competed to near-zero, creating a race-to-the-bottom.
• Result: Only centralized, VC-backed entities like LayerZero's default relayer or Axelar's validators can afford to operate, creating a de facto oligopoly.

Shift from altruism to enforceable financial stakes. Protocols like Across and Chainlink CCIP use a cryptoeconomic security model.

• Staked Capital: Relayers must post a $1M+ bond that can be slashed for misbehavior.
• Fee Capture: Honest relayers earn priority fees and MEV opportunities, aligning profit with performance.
• Verifier-Decoupling: Separates attestation (cheap) from execution (costly), allowing a decentralized set of verifiers to police a smaller set of bonded relayers.

Users don't care about node counts; they care about finality and cost. The market has voted with its wallet.

• Intent-Based systems (UniswapX, CowSwap) abstract the relayer entirely, auctioning off execution to the highest bidder.
• Liquidity Networks (e.g., Connext, Circle CCTP) use a small set of licensed, audited validators because capital efficiency and regulatory clarity outweigh decentralization theater.
• Takeaway: The "relayer layer" will consolidate into a few high-throughput, economically secure pipes, not thousands of hobbyist nodes.

Relayers must be paid to submit data, but their payment depends on the data being correct. This creates a circular dependency where economic security is bootstrapped from trust, not computation.

• Key Insight: Security requires staked capital to slash, but staking yields must outpace centralized profit margins.
• Economic Hurdle: A nascent network cannot generate $100M+ in slashing revenue to secure a $10B+ TVL system from day one.

Across uses a uniquely ordered relayer queue and a slow optimistic verification window to break the economic cartel. Speed is sacrificed for censorship resistance.

• Economic Design: The first relayer in queue gets the fee, forcing competition on latency to join the queue, not on censoring transactions.
• Trade-off: Introduces ~30 min latency for full decentralization, a direct economic cost paid for security.

LayerZero's ultra-light nodes push verification to the application layer, making relayers cheap to run. This enables permissionless participation but shifts the economic attack vector.

• Economic Risk: The Oracle and Relayer can collude cost-effectively, as the cost to bribe a small staker is low.
• Market Solution: Relayer reputation and application-level slashing (like Stargate's) must emerge to create sustainable penalty markets.

In intent-based systems like UniswapX or CowSwap, the relayer's role merges with searcher. Profit comes from order flow auction revenue, not user fees.

• Economic Alignment: Decentralization succeeds only if the MEV pie is large and contestable enough to support many players.
• Centralization Force: The relayer with the best JIT liquidity or private order flow wins, recreating validator centralization from Proof-of-Stake.

Using a threshold signature scheme (TSS) among relayers seems like a technical fix, but the key ceremony and coordination have steep economic costs.

• Hidden Cost: Running a 9-of-12 TSS network requires Sybil-resistant identities and continuous online presence, which is expensive to incentivize.
• Result: Projects often fall back to a 3-of-5 multisig run by known entities, because the marginal security gain isn't worth the economic overhead.

Bridge users prioritize liquidity depth and speed over theoretical decentralization. This creates a market where centralized, VC-backed relayers win.

• Market Reality: A bridge with $500M in liquidity and 5-second finality will outcompete a decentralized one with $5M liquidity and 5-minute finality, every time.
• Conclusion: Relayer decentralization is a superior good that the market will only pay for after base needs are met—an economic sequencing problem.

Running a permissionless relayer requires staking capital to post bonds and cover gas. This creates a massive liquidity opportunity cost for operators.

• Capital Efficiency: Capital is idle, not earning yield in DeFi.
• Barrier to Entry: Requires significant upfront capital, limiting the validator set.
• Economic Model: Solutions like EigenLayer restaking or Across' bonded LP model attempt to solve this.

Relayers capture value by reordering and bundling user transactions. This creates a natural centralizing force around the most efficient sequencer.

• Profit Motive: The entity with the best MEV extraction capabilities wins, creating a winner-take-most market.
• Fragmentation Risk: Attempts to decentralize can lead to latency and inefficiency, degrading UX.
• Protocols at Risk: UniswapX and CowSwap abstract this via solvers, but the solver market itself centralizes.

Shifting from transaction-based to intent-based systems (UniswapX, CowSwap, Anoma) changes the game. Users declare what they want, not how to do it.

• Decouples Execution: A decentralized network of solvers competes to fulfill the intent, breaking relayer monopolies.
• Better UX: Users get guaranteed outcomes, not failed transactions.
• Economic Shift: Value accrues to solvers and protocol, not a single block builder.

True decentralization requires separating the role of verifying correctness (cheap, parallelizable) from aggregating data/updates (requires capital, latency).

• LayerZero's Approach: Decentralized Verifier Network (DVN) for attestations vs. Executor for message delivery.
• Economic Scaling: Anyone can be a verifier with minimal stake; only specialized, bonded actors need to be aggregators.
• Security Foundation: Creates a cryptoeconomic security layer distinct from pure technical trust.