Mining Pool Dominance: Bitcoin's MEV is a pool-level game. The hashing power concentration in pools like Foundry USA and AntPool dictates transaction ordering, creating a centralized extraction point distinct from Ethereum's searcher ecosystem.
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Bitcoin MEV and Centralized Miners
The rise of Ordinals and L2s has created a new MEV landscape on Bitcoin. This analysis reveals how extreme mining pool centralization creates a single point of failure, threatening the nascent DeFi ecosystem.
introduction
THE REALITY
Introduction
Bitcoin's MEV landscape is defined by centralized mining pools, not decentralized searchers.
Limited Searcher Activity: The lack of a generalized smart contract layer prevents the complex, automated arbitrage bots seen on networks like Solana. MEV extraction relies on simpler, manual strategies like transaction frontrunning within a block.
Evidence: Foundry and AntPool consistently command over 50% of Bitcoin's hash rate, giving them unilateral control over block construction and the implicit right to extract value from transaction ordering without competition.
key-trends
BITCOIN MEV & MINER CENTRALIZATION
Executive Summary: The Three Pillars of Risk
Bitcoin's security model is being tested by the rise of MEV and the concentration of hashrate, creating systemic risks that threaten censorship-resistance and fair value distribution.
01
The Problem: Opaque, Off-Chain MEV Auctions
Block template construction is a black box. Large mining pools like Foundry USA and Antpool run private mempools and auction block space to the highest bidder, extracting value that should go to miners and users.\n- Creates a $100M+ annual MEV market\n- Enables front-running and censorship\n- Centralizes profit to a few sophisticated searchers
$100M+
Annual MEV
2 Pools
>50% Hashrate
02
The Solution: MEV-Boost for Bitcoin
Adopt Ethereum's playbook: separate block building from block proposing. A neutral, open marketplace for block templates forces competition and transparency.\n- Flashbots SUAVE could be a model for cross-chain intent solving\n- Democratizes access to block space profits\n- Mitigates miner-driven censorship vectors
~90%
Eth Adoption
Open
Marketplace
03
The Systemic Risk: Miner Extractable Value (MEV)
MEV isn't just profit; it's a security liability. Concentrated MEV rewards incentivize hashrate centralization and enable time-bandit attacks, where miners reorg chains to steal settled transactions.\n- Undermines settlement finality\n- Creates economic asymmetry favoring large pools\n- Threatens the credible neutrality of the base layer
51%+
Attack Threshold
Critical
Security Risk
market-context
THE MEV FRONTIER
The New Bitcoin Transaction Stack
Bitcoin's transaction processing is evolving into a competitive, extractive layer dominated by centralized miners and sophisticated MEV.
Miners are the new centralized sequencers. Bitcoin's Proof-of-Work consensus outsources transaction ordering to a few large mining pools like Foundry USA and Antpool, creating a natural monopoly for block space allocation and value extraction.
Ordinals and Runes created a fee market. These protocols introduced inscription-based demand, shifting miner revenue from pure block rewards to priority transaction fees. This incentivizes miners to optimize for fee extraction, mirroring Ethereum's MEV dynamics.
The MEV supply chain is professionalizing. Entities like Luxor and Ocean now operate sophisticated transaction bundling services, allowing users to bid for front-running, back-running, or arbitrage opportunities within the mempool, similar to Flashbots on Ethereum.
Evidence: Foundry mined 47% of blocks. In Q1 2024, Foundry USA controlled nearly half of Bitcoin's hash rate, demonstrating the extreme centralization of transaction ordering power and its implications for censorship resistance and fair pricing.
BITCOIN MEV & MINING POWER
The Centralization Problem: By the Numbers
Quantifying the centralization risks in Bitcoin's mining ecosystem, focusing on MEV capture and pool dominance.
| Metric / Vector | Top 2 Mining Pools | Solo Miner | Theoretical Decentralized Ideal |
|---|---|---|---|
Hashrate Control (Q2 2024) |
| <0.001% | Distributed |
MEV-Capturing Infrastructure | Private mempools, OFAC compliance | Public mempool only | Encrypted mempool, PBS |
Avg. Block Proposal Latency | < 100ms |
| N/A |
Censorship Capability (Tx Filtering) | |||
Proposer-Builder Separation (PBS) Adoption | Emerging (e.g., Ocean) | Required | |
Historical 51% Attack Feasibility | High (if colluding) | None | None |
Avg. MEV Extraction per Block (Est.) | $2K - $10K | $0 - $100 | Redistributed/ Burned |
deep-dive
THE REALITY
How Centralized Miners Extract Bitcoin MEV
Bitcoin's MEV landscape is dominated by a few large mining pools that control transaction ordering and block template construction.
Mining Pool Dominance defines extraction. Pools like Foundry USA and Antpool control over 50% of the network's hash rate, giving them unilateral power to order transactions within their blocks. This centralizes the ability to front-run or sandwich trades on protocols like the Lightning Network or Sovryn.
Block Template Construction is the primary mechanism. Miners run proprietary software that scans the mempool for profitable transaction reordering opportunities before sealing a block. This process, analogous to Ethereum's MEV-Boost but without a public marketplace, creates opaque, off-chain revenue streams.
Time-Bandit Attacks represent a unique Bitcoin vector. A miner with sufficient hash power can secretly mine a longer, alternative chain to replace a published block, stealing its transaction fees and any embedded MEV. This requires significant capital but demonstrates the systemic risk of consolidation.
Evidence: Foundry USA and Antpool have consistently commanded >40% of the network's hash rate for over a year, a concentration that enables the described extraction strategies and poses a long-term threat to network credibly neutrality.
risk-analysis
MEV & MINER CENTRALIZATION
Systemic Risks for Bitcoin Builders
Bitcoin's simplicity is its security, but its nascent DeFi ecosystem is vulnerable to the same extractive forces that plague Ethereum, now concentrated in a few mining pools.
01
The Problem: Opaque Miner Extractable Value
Bitcoin MEV is not a future threat; it's a present reality. Without a public mempool, miners and their affiliated pools can front-run, censor, and reorder transactions with impunity. This creates a toxic environment for DeFi protocols like Liquid, Stacks, and Rootstock.
- Front-running on DEX arbitrage and oracle updates.
- Censorship of transactions from sanctioned addresses or competing pools.
- Time-bandit attacks to reorg profitable blocks, undermining finality.
~$1B+
Annual MEV
0s Latency
Private Mempool
02
The Solution: Encrypted Mempools & Fair Ordering
To combat opaque MEV, builders must adopt cryptographic techniques to level the playing field. This involves encrypting transaction content until inclusion and using commit-reveal schemes for fair ordering, similar to Shutter Network or Flashbots SUAVE concepts.
- Threshold Encryption prevents miners from seeing transaction intent pre-execution.
- Fair Sequencing Services decouple block building from transaction ordering.
- Proposer-Builder Separation (PBS) on Bitcoin, though complex, is the endgame.
>99%
MEV Reduction
PBS
Endgame
03
The Problem: Antpool & Foundry's Dominance
Two mining pools, Antpool and Foundry USA, consistently command >50% of Bitcoin's hash rate. This concentration creates a single point of failure for transaction censorship and enables sophisticated MEV extraction that smaller pools cannot compete with.
- 51% Attack Threshold is perpetually within reach of a coalition.
- Vertical Integration with proprietary mining hardware and software stacks.
- Regulatory Pressure on centralized entities can compromise network neutrality.
>50%
Hash Power
2 Pools
Critical Control
04
The Solution: Decentralized Block Building Markets
The antidote to centralized mining power is creating a competitive, permissionless market for block building. This separates the role of hashing (miners) from block construction (builders), allowing specialized entities like MEV-Boost relays to emerge for Bitcoin.
- Open Relay Networks allow any builder to submit blocks to any miner.
- Reputation Systems penalize builders for censorship or malicious reorgs.
- Stratum V2 adoption is a critical first step, enabling job negotiation.
100+
Potential Builders
Stratum V2
Protocol Key
05
The Problem: L2s as MEV Amplifiers
Bitcoin Layer 2s and sidechains like Lightning Network, Merlin Chain, and Babylon introduce new, faster state transitions. This creates rich, low-latency MEV opportunities (e.g., Lightning channel jamming, rollup sequencer exploits) that can be exploited by miners with privileged network access.
- Cross-Layer MEV where miners attack L2 finality guarantees.
- Sequencer Centralization on rollups recreates the miner problem.
- Data Availability bottlenecks can be manipulated for censorship.
~500ms
Attack Window
L2 TVL
Attack Surface
06
The Solution: Bitcoin-Native MEV Research & Tooling
Ethereum's Flashbots ecosystem didn't emerge overnight. Bitcoin builders must fund and adopt similar public goods: transparent MEV auctions, simulation environments, and standardized data feeds. This makes extraction visible and contestable.
- MEV-Share Models that redistribute extracted value back to users.
- Open-Source MEV Bots to democratize access and expose strategies.
- Canonical MEV Data from firms like Chainscore to quantify the problem.
$0
Current Tooling
Public Goods
Required Investment
future-outlook
THE EXECUTION
The Path Forward: Solutions and Realities
Bitcoin MEV solutions must navigate the unique reality of centralized mining power and a conservative ecosystem.
Solutions require miner cooperation. Permissionless MEV extraction on Bitcoin is impossible without miner collusion. Proposals like MEV-boost for Bitcoin or Flashbots SUAVE must integrate with mining pools like Foundry USA or Antpool, not bypass them.
The primary MEV is front-running. Unlike Ethereum's complex DeFi arbitrage, Bitcoin's dominant MEV is transaction front-running on large OTC trades and exchange deposits. This creates a simpler, more extractable value surface for centralized entities.
Privacy is the ultimate mitigator. Protocols like Cashu for ecash or zkSNARKs via BitVM obfuscate transaction intent. This reduces the informational advantage that enables front-running, shifting power from miners to users.
Evidence: Over 55% of Bitcoin's hashrate is controlled by two pools. Any MEV solution that ignores this centralized reality is theoretical. The path forward is through them, not around them.
takeaways
BITCOIN MEV LANDSCAPE
TL;DR for Protocol Architects
Bitcoin's MEV is structurally different from Ethereum's, dominated by a few centralized mining pools and limited by its UTXO model and lack of smart contracts.
01
The Problem: Opaque, Centralized Extraction
Mining pools like Foundry USA and Antpool control >50% of hashrate, enabling them to censor transactions and extract value through transaction ordering and time-bandit attacks without on-chain visibility. This creates a black-box MEV market.
>50%
Pool Control
Opaque
MEV Market
02
The Solution: Ordinals & Inscriptions
The Ordinals protocol and BRC-20 tokens created a new, high-fee transaction class, forcing miners to compete for block space. This inadvertently democratized revenue, shifting power from pools to users who can attach high fees. It's a fee market hack for miner incentives.
- Creates transparent fee competition
- Reduces pool-level arbitrage power
$2B+
Ordinals Market Cap
>20 BTC
Block Rewards
03
The Constraint: UTXO vs. Account Model
Bitcoin's UTXO model and lack of a mempool for complex state transitions severely limits generalized MEV (e.g., arbitrage, liquidations) compared to Ethereum. MEV is mostly simple reordering and censorship, not DeFi arbitrage. This changes with layers like Stacks or sidechains.
- No flash loans or DEX arbitrage
- Limits bot sophistication
Limited
MEV Complexity
UTXO
Core Constraint
04
The Future: Layer 2s & Drivechains
Scaling solutions like Lightning Network, Stacks, and proposed Drivechains (via BIP-300) will import Ethereum-style DeFi and its MEV problems. Architects must design for fair ordering and miner extractable value from day one, learning from Flashbots and SUAVE.
- Anticipate cross-layer MEV
- Design for pre-confirmation privacy
Inevitable
L2 MEV
Pre-emptive
Design Required
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Protocols Shipped
$20M+
TVL Overall