Why Bundlers Are the New Rent-Seekers

Bundlers compete in real-time auctions to include user operations, but the winner's fee is pure rent extracted from user urgency.\n- Mechanism: Sealed-bid auction where the highest bidder's fee is burned, not returned to the user.\n- Extraction: Users pay for speed, but the surplus value (the 'bid') is captured by the protocol, not the bundler.

Bundlers have a privileged view of the pending operations mempool, enabling classic extractive strategies.\n- Frontier: Identifying profitable DEX swaps to sandwich or arbitrage.\n- Scale: A single bundler processing thousands of ops/day can aggregate small inefficiencies into significant revenue, competing with Flashbots-style searchers.

Bundlers act as liquidity providers for gas fees, capturing spreads and on-chain arbitrage.\n- Solution: Users pay in ERC-20 tokens; the bundler pays in ETH, profiting from the exchange rate and gas price oracle inaccuracies.\n- Extraction: This turns gas abstraction into a market-making business, where the bundler's capital and execution speed determine margins.

Bundlers with >60% market share can extract value by frontrunning, censoring, or imposing high fees. This recreates the miner extractable value (MEV) problem from L1s, but now at the sequencer/bundler layer.

• Single Point of Failure: Reliance on a few providers like Alchemy, Blocknative.
• Opaque Auctions: Users have no visibility into how their transactions are ordered or priced.

Ethereum's proposed decentralized block building layer. It separates the roles of transaction creation and execution, creating a neutral marketplace.

• Decentralized Mempool: Transactions and intents are routed to a shared, competitive marketplace.
• Permissionless Builders: Anyone can become a block builder, breaking bundler monopolies.

Shifts the paradigm from specifying how to execute to declaring what you want. Users submit signed intents, and a network of solvers competes to fulfill them optimally.

• Competition on Results: Solvers compete on net output, not just fee priority.
• MEV Resistance: Intents are private until execution, reducing frontrunning risk.

Decentralized networks that provide sequencing-as-a-service for multiple rollups. They enable cross-rollup atomic composability and prevent single-rollup sequencer monopolies.

• Economic Security: Staked operators replace trusted entities.
• Interoperability: Enables seamless transactions across different execution layers.

Rollups are incentivized to use their own centralized sequencer to capture maximal value. This leads to high, non-competitive fees for users and stifles innovation at the infrastructure layer.

• Captive Users: Hard to switch sequencers without a hard fork.
• Value Leakage: Fees that could fund public goods are captured by a single entity.

Protocol-level mandates, like EIP-4844's inclusion lists, that allow users to force transactions into a block. Combined with permissionless proposing, this breaks bundler/sequencer censorship.

• User Sovereignty: Guarantees transaction inclusion, even against a malicious sequencer.
• Credible Neutrality: The base layer enforces fairness, not a profit-seeking intermediary.

Bundlers are not neutral relays; they are sophisticated MEV extractors. By controlling transaction ordering and inclusion, they capture value that should flow to users or applications.\n- Primary Revenue Source: Backrunning and frontrunning user intents via private mempools.\n- Market Reality: Top-tier bundlers operate at >30% profit margins, comparable to traditional HFT firms.

To defend margins and control flow, leading bundlers like EigenLayer (EigenDA), AltLayer, and Sonic are integrating the full stack. This creates walled gardens that threaten interoperability.\n- Builder Strategy: Own the sequencer, the data availability layer, and the bundler.\n- Investor Takeaway: Value accrual is shifting from L1/L2 tokens to infrastructure equity and governance tokens of these integrated stacks.

The counter-trend is permissionless, competitive bundling markets. Protocols like EigenLayer's EigenSolver and Flashbots' SUAVE aim to commoditize the function.\n- Mechanism: Open auctions for bundle construction and execution.\n- Outcome: Drives fees toward cost-plus models, returning MEV to users via better execution (e.g., UniswapX, CowSwap).

Bundlers operating in the US face significant regulatory risk as potential unregistered broker-dealers or money transmitters. This creates a moat for offshore/well-capitalized entities.\n- Compliance Cost: $5M+ annual legal/operational overhead.\n- Investor Filter: Favor teams with explicit regulatory strategy and jurisdiction arbitrage (e.g., based in Dubai, Singapore).

Smart contract architects must design systems that are not dependent on a single bundler's behavior or availability.\n- Critical Pattern: Intent-based architectures that separate declaration from execution.\n- Implementation: Use ERC-4337 entry point with multiple fallback bundlers and ERC-7579 modular smart accounts.

Investors are over-valuing application tokens while the underlying infrastructure (bundlers/sequencers) captures the real economics.\n- Analogy: Valuing a toll road based on car traffic, not the toll booth operator.\n- Due Diligence: Map the fee flow. If >20% of an app's fees leak to a third-party bundler, the token model is broken.