Why Consensus Layer MEV Mitigation is a Zero-Sum Game

Splits block production to separate the entity that builds a block (Builder) from the one that proposes it (Proposer). This centralizes block building to specialized searchers but democratizes revenue.

• Key Benefit: Reduces validator-level centralization by preventing the richest validators from capturing all MEV.
• Key Trade-off: Creates a new oligopoly of builders (e.g., Flashbots, bloXroute) who now control transaction ordering.

Hides transaction content from the public mempool until inclusion in a block, aiming to prevent frontrunning. Implemented by protocols like Shutter Network and EigenLayer's MEV Blocker.

• Key Benefit: Protects users from predictable sandwich attacks and harmful frontrunning.
• Key Trade-off: Shifts MEV advantage to validators/builders with decryption keys, potentially creating a new information asymmetry and adding ~500ms-2s latency.

Redirects MEV revenue from validators to the protocol treasury or a redistribution pool. EIP-1559 is a primitive form of MEV burn; MEV smoothing (proposed) distributes rewards evenly across all validators.

• Key Benefit: Reduces validator inequality and the economic incentive to run centralized, MEV-extracting infrastructure.
• Key Trade-off: Removes a critical subsidy for validator security, potentially making the chain less secure if issuance is too low, and does nothing to protect users.

All consensus-layer 'solutions' are fundamentally redistribution mechanisms. PBS redistributes from validators to builders. Encrypted mempools redistribute from public searchers to private ones. MEV burn redistributes to token holders.

• Key Insight: The MEV supply chain is a fixed pie; gains for one party are losses for another.
• Key Consequence: User protection is a secondary concern, often sacrificed for validator decentralization or protocol revenue.

Proposer-Builder Separation (PBS) centralizes power in a few builders like Flashbots and BloXroute. Validators are price-takers, creating a new oligopoly.

• >90% of Ethereum blocks are built by the top 3 builders
• Validator revenue is now a function of builder competition, not network health
• Creates systemic censorship and liveness risk if a dominant builder fails or misbehaves

Formalizing PBS in-protocol (e.g., Ethereum's ePBS) locks in economic assumptions and reduces adaptability. It's a permanent concession to extractive MEV.

• Fixes the builder market structure, preventing future innovation like SUAVE
• Increases protocol complexity and attack surface for marginal gains
• Transforms MEV from a market inefficiency to a baked-in, rent-seeking protocol feature

Consensus-layer MEV solutions like EigenLayer's shared sequencer or Cosmos' Interchain Scheduler create new cross-domain arbitrage vectors. Solving MEV on one chain exports it to another.

• Amplifies value of timing attacks across Layer 2s and app-chains
• Creates a meta-game for validators to optimize across multiple revenue streams
• Undermines the security budget of smaller chains via economic abstraction

MEV mitigation that relies on delaying finality (e.g., single-slot finality trade-offs, commit-reveal schemes) opens new liveness attacks. Adversaries can profit by manipulating the finality clock.

• Extends the vulnerable window for time-bandit attacks and chain reorgs
• Incentivizes validators to withhold attestations to create profitable uncertainty
• Contradicts the core value proposition of fast, deterministic settlement

Proposer-Builder Separation (PBS) outsources block building to a competitive market, but builder centralization is a natural equilibrium. The winning builder is the one with the most efficient MEV extraction and orderflow, creating a new oligopoly. This shifts power from validators to builders, but does not solve the core value extraction problem.

• Key Risk: Replaces validator MEV with builder MEV.
• Key Insight: Top builders like Flashbots and bloXroute dominate due to orderflow access.

Moving PBS into the protocol (e.g., Ethereum's ePBS) reduces trust assumptions but codifies the builder role. It makes the market more efficient and secure, but does not change the fundamental economics. MEV revenue becomes a formal, protocol-sanctioned reward for builders with the best data and algorithms.

• Key Benefit: Eliminates relay trust and censorship risks.
• Key Consequence: MEV becomes a hardcoded protocol incentive, potentially ossifying extractive practices.

Consensus-layer fixes are defensive. The offensive play is to build applications that minimize extractable value at its source. This means widespread adoption of private mempools (e.g., Shutter Network), intent-based architectures (e.g., UniswapX, CowSwap), and fair ordering protocols. These shift the game from hiding transactions to redefining transaction semantics.

• Key Shift: Move from obfuscation to reconstruction of user intent.
• Key Entities: Flashbots SUAVE, Anoma, Across with encrypted mempools.

Burning a portion of MEV (e.g., via base fee manipulation) transfers value from builders/validators to the protocol treasury or token holders. This can disincentivize some extraction but doesn't address the underlying value creation from ordering. It's a tax on MEV, changing who profits rather than eliminating the profit motive. The most aggressive searchers will still operate on the remaining margin.

• Key Outcome: Converts extractive value into protocol-owned value.
• Key Limitation: Does not protect users from frontrunning or poor execution.

Consensus-layer MEV mitigation (e.g., single-slot finality) aims to reduce reorgs. However, if the value of reordering a chain segment (MEV) exceeds the cost (slashing risk, orphaned block reward), rational validators will attack. This creates a security budget problem: you must make honest validation more profitable than attacking, which is impossible if MEV is unbounded. Mitigation is a constant economic arms race.

• Key Vulnerability: MEV can outpace staking rewards.
• Key Metric: MEV / Block Reward Ratio determines attack viability.

The most stable equilibrium may be the full commoditization of MEV. The protocol itself could run a centralized sequencing or verifiable delay function (VDF) to provide fair, random ordering as a primitive. This destroys the competitive search market but requires immense trust in the protocol's neutrality and resistance to manipulation. It's the ultimate admission that decentralized block building is inherently gameable.

• Key Trade-off: Fairness for Decentralization.
• Key Tech: VDFs, Threshold Encryption, DVT for sequencing.