Why PBS Creates More Problems Than It Solves

PBS is a flawed solution to MEV extraction, trading validator decentralization for a new cartel of specialized builders. The protocol's design outsources block production to a competitive auction, creating a winner-take-most market dominated by entities like Flashbots and bloXroute.

Builder centralization is inevitable under PBS, as economies of scale in MEV extraction and data availability favor large, capital-rich players. This recreates the exact mining pool centralization problem Proof-of-Stake was designed to solve, shifting power from validators to a new opaque layer.

The relay is a single point of failure. The trusted relay, required for censorship resistance, becomes a centralized chokepoint. Its compromise or malicious action can censor transactions or manipulate the auction, as seen in debates around MEV-Boost's reliance on a few dominant relays.

Complexity creates attack surfaces. PBS adds multiple new components (builders, relays, proposers) and communication channels, increasing the protocol's attack surface for latency attacks, denial-of-service, and governance capture compared to a unified validator model.

PBS redistributes centralization risk. It moves the power to censor and order transactions from validators to a new actor: the builder. This creates a builder oligopoly where specialized firms like Flashbots and bloXroute dominate.

The economic model is extractive. Builders compete to capture Maximal Extractable Value (MEV). This competition funnels value to sophisticated players, increasing costs for end-users and simple DApps.

It creates systemic fragility. The protocol now depends on a trusted relay layer to connect builders and proposers. This introduces a new point of failure and censorship, as seen in OFAC compliance debates.

Evidence: Post-Merge Ethereum data shows over 90% of blocks are built by just three entities. This is not decentralization; it's a concentration of power in a different part of the stack.

PBS centralizes block production. The separation creates a specialized builder market where capital and data advantages create unbeatable economies of scale. This leads to a cartel of dominant builders like Flashbots, bloXroute, and Titan controlling the majority of blocks.

Builders become the new validators. The entity ordering transactions holds the real power, not the proposer who merely signs the header. This recreates the miner centralization problem PBS aimed to solve, just with different actors.

MEV extraction becomes institutionalized. The builder market formalizes and optimizes MEV capture, creating persistent economic pressure to censor transactions or engage in time-bandit attacks for profit, undermining network neutrality.

Evidence: Post-PBS, over 90% of Ethereum blocks are built by three entities. The builder cartel now dictates transaction inclusion, proving the protocol's decentralization is a facade for a centralized core.

PBS centralizes block production. It creates a professional builder market where only entities with sophisticated MEV extraction software and capital can compete, leading to an oligopoly like Flashbots' dominance.

The relay is a single point of failure. This trusted component, which intermediates between builders and proposers, becomes a critical censorship vector and a target for regulatory capture or technical attack.

It misaligns validator incentives. Validators outsource their core duty, becoming passive fee collectors. This erodes the credible neutrality of the base layer and concentrates systemic risk in a few builder entities.

Evidence: Post-Merge Ethereum block data shows over 90% of blocks are built by a handful of builders via relays, creating a de facto cartel that dictates transaction inclusion and ordering.