Why MEV-Burn Mechanisms Are Impractical on Most L2s

MEV-burn is an L1 construct. It requires a unified, permissionless block production market, which Ethereum provides via its proposer-builder separation (PBS) ecosystem. L2s like Arbitrum and Optimism operate with centralized sequencers that produce blocks, eliminating the competitive auction dynamic that makes MEV-burn viable.

Sequencers capture value directly. A centralized sequencer does not need to burn MEV; it simply internalizes the profit. This creates a fundamental revenue model conflict. Protocols like Flashbots' SUAVE, designed for L1 PBS, have no clear integration path with a single-operator sequencer that already controls ordering.

The L2 stack lacks the tooling. MEV-burn on Ethereum relies on a mature builder/searcher ecosystem and tools like mev-boost. L2s lack this infrastructure. Implementing it would require forking the client and creating a new, complex market from scratch, which provides no marginal benefit to the sequencer operator.

Evidence: Over 95% of L2 transaction ordering is controlled by a single sequencer. The economic model for Arbitrum and Optimism treats sequencer revenue as a core subsidy for network security and development, making voluntary value destruction a non-starter.

MEV-burn requires a monopoly sequencer. Ethereum's EIP-1559-style burn works because a single, decentralized block proposer (the network) captures all transaction fees. On L2s like Arbitrum, Optimism, or zkSync, the sequencer role is either centralized or competitively fragmented, preventing a single entity from capturing and burning the full MEV surplus.

Sequencer decentralization breaks the model. A rollup with a decentralized sequencer set, like Espresso Systems or Astria, creates a market for block-building rights. This auctioned value is proposer extractable value (PEV), which the winning sequencer keeps as revenue. Forcing them to burn it destroys their economic incentive to participate in the network.

The solution is a fee market, not a furnace. Effective MEV redistribution on L2s will mirror CowSwap or UniswapX, using competition and auctions to return value to users. Protocols like SUAVE aim to create this cross-chain market. Burning MEV in a multi-sequencer world is like trying to tax a river with a thousand tributaries.

Sequencer Centralization Prevents Burn. L2s like Arbitrum and Optimism use a single, permissioned sequencer to order transactions. This sequencer captures MEV directly as profit, creating a critical revenue stream that funds protocol development and subsidizes low fees. Burning this value would destroy their economic model.

Cross-Chain Settlement is a Bottleneck. Validiums and other L2s with external DA cannot execute native burn. The proposer on L1 (e.g., an Ethereum validator) finalizes the L2 batch and would capture any burned value, not the L2 protocol. This creates a principal-agent problem where the L2 cannot credibly claim the burnt ETH.

Economic Incentives Are Misaligned. For an L2 like Polygon zkEVM, implementing MEV-Burn requires convincing the sequencer operator to voluntarily destroy its most lucrative revenue. This is a non-starter without protocol-owned sequencing, a feature only nascent L2s like Fuel or Aztec are architecting from first principles.

Evidence: Ethereum's PBS (Proposer-Builder Separation) enables burn because the protocol controls the block-building process. L2s lack this native, trust-minimized sequencing layer. The only viable path is a shared sequencer network like Espresso or Astria, which remains unproven at scale.

Sequencer Sovereignty is Non-Negotiable. L2s like Arbitrum and Optimism operate as independent state machines. Their sequencers must control block construction to guarantee execution speed and low fees. Mandating a burn mechanism requires a protocol-level consensus change that cedes this control, undermining the L2's operational autonomy and economic model.

The Data Availability Layer is Blind. The underlying L1 (e.g., Ethereum) only sees L2 state roots and calldata via bridges like Arbitrum's Nitro or Optimism's Bedrock. The L1 cannot observe or validate the internal transaction ordering that creates MEV, making it impossible to algorithmically enforce a burn on a foreign chain's internal auction.

Burn Enforcement Creates Centralization. A forced burn requires a single, protocol-mandated block builder (like a centralized sequencer). This eliminates the competitive builder market that protocols like Flashbots' SUAVE aim to create, reintroducing the exact single-point-of-failure and censorship risks that decentralized sequencing seeks to solve.

Evidence: The Proposer-Builder Separation (PBS) Precedent. Ethereum's PBS works because it's a native, consensus-layer mechanism. Attempting to graft this onto a separate execution layer like Polygon zkEVM or Base creates unsustainable complexity and security assumptions, as seen in the fragile integrations of early MEV-boost relays.