The Future of MEV Distribution: From Dark Forests to Public Goods

Sealed-bid auctions on L1 concentrate value in a few validator pools, creating systemic risks like chain reorgs and frontrunning. The result is a hidden tax on every transaction.

• >90% of MEV is captured by a handful of actors.
• Reorgs and latency wars degrade network stability.
• User experience suffers from unpredictable slippage and failed trades.

Proposer-Builder Separation (PBS) and architectures like Flashbots' SUAVE formalize the auction, enabling MEV to be redistributed back to the protocol or its users.

• Credible neutrality: Separates block building from proposing.
• Revenue recycling: MEV can fund protocol treasuries or staking rewards.
• Efficiency gains: Specialized builders optimize for ~10-15% higher block value.

The future is intent-based flows and decentralized sequencing layers that bake fair distribution into the protocol layer.

• Shared Sequencers (e.g., Espresso, Astria) decouple execution from settlement, creating a competitive market for block space.
• Intent Architectures (e.g., UniswapX, CowSwap) let users express goals, not transactions, shifting MEV competition off-chain.
• Result: MEV becomes a public good revenue stream, not a predatory extractor.

Private order flow auctions (OFAs) like those from Flashbots and bloxroute create information asymmetry. This fragments liquidity and still leaves >90% of MEV captured by a few searchers, failing to return value to users and protocols.

• Inefficient Price Discovery: Bids are hidden, preventing fair competition.
• Protocol Revenue Leakage: Value extracted from Uniswap or Aave pools doesn't flow back to them.
• Centralization Pressure: Reliance on a few dominant block builders.

Protocols like CowSwap (via CoW Protocol) and UniswapX internalize the auction. They act as order flow aggregators and settle batches off-chain or in a dedicated domain, capturing MEV for users.

• User Value Return: MEV becomes a discount via surplus or improved prices.
• Composability Killer: Reduces reliance on external DEX aggregators.
• Intent-Based Future: Users specify what they want, not how to execute it.

Networks like EigenLayer and Espresso are creating shared sequencing layers that democratize block building. MEV is captured at the protocol level and redistributed.

• Proposer-Builder Separation (PBS) Enforced: Prevents vertical integration of validators and builders.
• Credible Neutrality: Sequencing is a commodity, not a competitive edge.
• Funds Public Goods: MEV revenue can be directed to protocol treasuries or developer grants via mechanisms like EigenLayer's shared security.

Flashbots' SUAVE aims to decentralize the entire MEV supply chain. It's a specialized chain for preference expression, block building, and execution, creating a transparent marketplace.

• Unbundles the Stack: Separates searchers, builders, and executors into distinct roles.
• Cross-Chain Native: Designed to handle MEV across Ethereum, rollups, and alternative L1s.
• Competitive Pricing: Open bidding should drive costs toward marginal gas fees.

Bridging assets via LayerZero, Axelar, or Wormhole creates new arbitrage vectors. Searchers exploit price differences between native and bridged assets, a risk Across Protocol mitigates with its optimistic bridge.

• Liquidity Fragmentation: Every new chain is a new venue for extraction.
• Bridge-Specific Risks: Vulnerabilities in relayers or oracles can be exploited.
• Requires New Primitives: Needs cross-domain block builders and shared sequencers to manage.

Protocols that fail to capture and redistribute their own MEV will become economic subsidies for extractors. The future is intent-based, batch-auctioned, and credibly neutral.

• Winners: Protocols that own their order flow (UniswapX, CowSwap).
• Infrastructure: Shared sequencers (EigenLayer, Espresso) and dedicated chains (SUAVE).
• Losers: Simple AMMs and protocols reliant on naive transaction mempools.

L2s like Arbitrum and Optimism currently run centralized sequencers, granting them a privileged, rent-extracting position. This creates a single point of failure and control, directly contradicting decentralization promises.

• Risk: Sequencer can front-run, censor, and extract >99% of chain MEV.
• Consequence: User trust degrades, making L2s feel like a bank, not a blockchain.

While PBS (e.g., Flashbots SUAVE, EigenLayer) decentralizes block building, it centralizes block proposal into a few high-stake validators. On L2s, this risks recreating Ethereum's builder cartels at a smaller, more fragile scale.

• Risk: MEV profits accrue to capital-rich entities, not users or the protocol.
• Consequence: Vertical integration between builders and sequencers creates new opaque power structures.

User demand for privacy will kill the open mempool model. Protocols like Shutter Network and Ethereum's Pectra upgrade (EIP-7266) enable encrypted transaction bundles, neutralizing front-running and sandwich attacks at the source.

• Solution: MEV is transformed from predatory extraction to coordination fee for complex bundle construction.
• Future: Builders compete on service quality, not latency, reducing the dark forest to a public park.

The only sustainable endgame is for the protocol itself to capture and redistribute MEV. Optimism's RetroPGF and EigenLayer's shared sequencer models point the way: MEV revenue funds developer grants, protocol treasury, or user rebates.

• Mechanism: A credibly neutral auction (e.g., CowSwap-style batch auctions) determines block building rights.
• Outcome: Value accrues to the L2's ecosystem, aligning incentives for long-term health.

Sealed-bid auctions and private mempools like Flashbots Protect and Titan Builder have privatized MEV, creating an opaque tax on users. This centralizes power with a few sophisticated actors and erodes trust in fair sequencing.

• ~$700M+ extracted annually, largely captured by top builders.
• Creates negative externalities like front-running and sandwich attacks.
• Centralizes block production, undermining decentralization guarantees.

Protocols like EigenLayer, Espresso, and SUAVE are creating markets to redirect MEV revenue. This transforms value capture into value distribution, funding network security and public goods.

• EigenLayer restakers can opt into sequencers that redistribute profits.
• MEV-Boost+ and MEV-Share enable proposer-builder separation (PBS) with revenue sharing.
• Creates sustainable funding for protocol treasuries and developer grants.

The endgame shifts from transaction execution to intent declaration. Systems like UniswapX, Anoma, and Flashbots SUAVE let users express desired outcomes, while encrypted mempools (e.g., Shutter Network) prevent front-running.

• Intents abstract complexity and capture MEV at the application layer.
• FHE/TEE-based mempools enable fair ordering before execution.
• Transforms MEV from a bug into a verifiable, auctioned resource.

Success is measured by the Redistribution Ratio: the percentage of captured MEV returned to users, validators, or the public. Protocols that optimize this will win.

• High Ratio attracts users and stake, creating a virtuous cycle.
• Requires cryptoeconomic security to prevent re-centralization.
• MEV-aware L2s like Arbitrum and Optimism are building this in from day one.