MEV is now a staking yield component. Validators with superior infrastructure, like Lido and Coinbase, extract more value than solo stakers, creating a structural advantage.
liquid-staking-and-the-restaking-revolution
Blog
The Future of MEV Is Governed by Staking Pools
The narrative of decentralized MEV is collapsing. Liquid staking derivatives (LSDs) and restaking pools now dictate builder selection, transaction ordering, and fee distribution, creating a new axis of centralized control over blockchain economics.
introduction
THE POWER SHIFT
Introduction
The capture of MEV is shifting from independent searchers to the capital and infrastructure of liquid staking pools.
The future is pooled execution. This centralizes block-building power, moving the competitive edge from algorithm design to capital scale and relay relationships.
Evidence: Lido validators earn ~20% more MEV than the network average, a gap that widens with specialized tools like Flashbots SUAVE.
key-trends
STAKING POOLS AS THE NEW EXTRACTORS
Executive Summary: The New MEV Power Brokers
The $80B+ staking economy is no longer passive; it's the primary battleground for MEV. Control over validator keys is control over block production, and the entities that aggregate stake are becoming the new, centralized power brokers of decentralized finance.
01
The Problem: Lido's 32% Market Share
The largest liquid staking provider controls a super-majority of Ethereum stake, centralizing block proposal rights and MEV revenue. This creates systemic risk and a single point of failure for the network's economic security.
- >30% of Ethereum blocks are proposed by Lido validators.
- ~$25B+ in TVL gives it immense governance and economic power.
- Opaque MEV flow to node operators creates principal-agent problems.
32%
Stake Share
$25B+
TVL
02
The Solution: MEV-Smoothing Pools (e.g., Rocket Pool)
Protocols that explicitly redistribute MEV rewards to all stakers, not just the proposing validator, democratize extraction and reduce variance. This aligns incentives and makes solo staking economically viable.
- Reduces reward variance for small stakers from ~12% to ~1%.
- Creates a competitive moat against centralized pools by offering fairer economics.
- Transparent accounting via on-chain or cryptographically verifiable proofs.
-90%
Variance
3.5%+
Stable APR
03
The Arbiter: SUAVE by Flashbots
A decentralized block builder and mempool that aims to separate block building from proposing. It commoditizes the builder role, allowing staking pools to auction their block space to the highest bidder without running complex MEV infrastructure.
- Decouples power between proposers (staking pools) and builders (searchers).
- Creates a liquid market for block space, maximizing revenue for stakers.
- Mitigates censorship by enabling permissionless, competitive building.
~500ms
Auction Window
100%+
Revenue Boost
04
The Endgame: Vertical Integration (Coinbase, Kraken)
Centralized exchanges with institutional staking businesses are building full-stack MEV supply chains. They control the order flow, the block building, and the validator keys, capturing nearly 100% of the MEV value chain.
- Captures off-chain & on-chain value from user trades to block rewards.
- Poses an existential threat to decentralized staking pools' competitiveness.
- Forces regulatory scrutiny on MEV as a core exchange revenue stream.
~15%
Combined Stake
$1B+
Annual MEV
market-context
THE INCENTIVE MISMATCH
Market Context: The PBS Promise vs. The Pool Reality
Proposer-Builder Separation (PBS) was designed to democratize MEV, but economic reality has concentrated power in a handful of dominant staking pools.
PBS created a new oligopoly. The protocol-level separation of block building from proposing outsources complexity to specialized builders like Flashbots, bloXroute, and Titan. Validators, often aggregated in pools like Lido and Rocket Pool, simply select the highest-paying header.
Staking pools govern MEV flow. A pool's market share dictates its bargaining power with builders. Large pools like Lido command premium revenue shares and influence builder competition, while smaller validators get standardized, non-negotiable payouts.
The promise of permissionless building is theoretical. In practice, builder reputation and capital requirements create high barriers. The result is a builder market dominated by ~5 entities, making PBS a centralized bottleneck for MEV extraction, not distribution.
Evidence: Lido validators propose over 28% of Ethereum blocks. Builder markets like mevboost.pics show the top 3 builders consistently win over 80% of blocks, illustrating extreme concentration.
STAKING POOL GOVERNANCE MATRIX
The Concentration of MEV Governance Power
Comparison of governance models for MEV distribution and block production control among major staking entities.
| Governance Dimension | Lido DAO (Stakewise) | Coinbase (cbETH) | Rocket Pool (rETH) | Solo Staker |
|---|---|---|---|---|
Voting Power Over MEV-Boost Relay Selection | ||||
Ability to Enforce MEV-Smoothing Pools | In Development | |||
Protocol-Level MEV Revenue Share to Stakers | 90% via stETH rebasing | 50% via cbETH rewards | 100% to rETH holders | 100% to staker |
Node Operator Set Size & Decentralization | ~30 Permissioned Operators | 1 Centralized Operator | ~2,500 Permissionless Operators | 1 Operator |
Slashing Risk for MEV Extraction | Pooled & Socialized | Centralized Custody | RPL Bond Backstop | Individual Full Risk |
Avg. Proposal Voting Participation (TVL-Weighted) | 5-15% | N/A (Corporate) | 40-60% | N/A |
Influence on PBS Roadmap (e.g., EigenLayer, SUAVE) | High via Lido Contributors | Medium via VC & Partnerships | High via RPIP Process | Negligible |
deep-dive
THE POWER SHIFT
Deep Dive: How Pools Dictate the MEV Stack
The architecture and governance of staking pools are becoming the primary determinant of MEV capture and distribution.
Staking pools control block building. The validator's role as the block proposer is the ultimate MEV gateway. Pools like Lido and Rocket Pool decide which block builders and relays (e.g., Flashbots SUAVE, bloXroute) their validators connect to, directly shaping the MEV supply chain.
Pool governance is MEV policy. A pool's choice to run MEV-Boost, its relay selection, and its fee structure constitute a de facto MEV strategy. This outsources critical network security decisions from the protocol layer to decentralized autonomous organizations (DAOs) with varying incentives.
Vertical integration creates moats. Leading pools are building proprietary MEV infrastructure to capture more value. For example, Lido's upcoming solo staking module and in-house relay network aim to internalize MEV profits, challenging neutral public goods like the Flashbots relay.
Evidence: Lido commands ~30% of Ethereum's stake. Its governance decisions on MEV relays and builder selection directly influence the profitability and censorship-resistance of a critical network segment.
protocol-spotlight
THE STAKING POOL ERA
Protocol Spotlight: The Architects of Control
As MEV supply chains mature, the power to govern extraction is consolidating in the hands of large, sophisticated staking pools.
01
Lido's Siren Call: The Liquidity Monopoly
The Problem: Solo stakers cannot compete with the capital efficiency and MEV expertise of mega-pools. The Solution: Lido's $30B+ TVL creates a dominant block-building entity, allowing its node operators to capture and redistribute MEV at scale. This centralizes the power to decide which transactions are included and in what order.
- Key Benefit: Democratizes staking yield via stETH.
- Key Risk: Creates a single point of failure and censorship.
$30B+
TVL
~32%
Ethereum Stake
02
Rocket Pool's Minipool Model: Permissionless Counterweight
The Problem: The need for a decentralized, credibly neutral counterbalance to monolithic liquid staking providers. The Solution: Rocket Pool's 8 ETH minipools lower the barrier for node operation, distributing block production and MEV capture across a wider set of actors. Its Smoothing Pool aggregates and redistributes MEV rewards to reduce variance.
- Key Benefit: Preserves decentralization and censorship resistance.
- Key Trade-off: Lower capital efficiency than monolithic pools.
8 ETH
Node Barrier
3.5%+
Protocol Share
03
MEV-Boost Auctions: The Pool's Revenue Engine
The Problem: Stakers need to maximize yield in a competitive block space market. The Solution: Pools run MEV-Boost, auctioning their block space to specialized builders like Flashbots, bloXroute, and Eden. This outsources complex MEV extraction, turning staking into a proposer-builder-separated (PBS) business.
- Key Benefit: Unlocks >100%+ APR for stakers from MEV.
- Key Consequence: Relinquishes transaction ordering control to third-party builders.
>90%
Blocks Via Auction
100%+
APR Boost
04
The Inevitable Cartel: Pool-Operated Builders
The Problem: Why outsource your most valuable asset—block space—and pay a margin to external builders? The Solution: Top staking pools like Coinbase, Figment, and Kiln now operate their own in-house block builders (e.g., cbBuilder). This vertical integration captures the full MEV supply chain, from user flow to final block.
- Key Benefit: Maximizes extractable value for the pool's stakeholders.
- Key Risk: Accelerates centralization and potential for toxic MEV strategies.
Vertical
Integration
Full
Supply Chain Capture
05
Enshrined PBS: The Protocol's Last Stand
The Problem: The current MEV-Boost free market is leading to builder centralization and potential censorship. The Solution: Ethereum's roadmap includes enshrined Proposer-Builder Separation (ePBS), moving the auction mechanism into the core protocol. This aims to cryptographically enforce neutrality and prevent pools from forming exclusive deals.
- Key Benefit: Protocol-level guarantees for credibly neutral inclusion.
- Key Challenge: Complex consensus-layer changes with a 2-3 year timeline.
L1
Enshrined
2-3yr
Timeline
06
The Sovereign Sorter: EigenLayer's Restaking Play
The Problem: Even with ePBS, who governs the transaction ordering within a block? The Solution: EigenLayer restakers can opt into "sovereign" services that act as decentralized sorters for rollups like Fraxtal or Mantle. This creates a new market for ordering rights, potentially competing with traditional builder markets.
- Key Benefit: Decentralizes the "sorter" role, a new MEV primitive.
- Key Unknown: Security vs. liveness trade-offs of restaked sorters.
$15B+
Restaked TVL
New
Primitive
counter-argument
THE ARCHITECTURAL SHIFT
Counter-Argument: Isn't This Just Efficient Delegation?
Staking pool governance is a systemic upgrade over simple delegation, creating a new market structure for MEV.
Delegation is passive, governance is active. Delegation transfers voting power but not execution responsibility. A governed staking pool like Lido or Rocket Pool actively builds infrastructure for proposer-builder separation (PBS) and signs off on blocks built by specialized entities like Flashbots. The delegation model ends at the validator client; the governance model begins there.
The counter-intuitive outcome is vertical integration. Efficient delegation fragments stake. Efficient governance consolidates execution expertise and capital into a few dominant pools. This creates a two-sided market where builders (e.g., Jito Labs, bloXroute) compete for pool orders, and pools capture value via priority fees and MEV smoothing for their stakers.
Evidence: Ethereum's post-merge trajectory proves this. Over 40% of stake is in liquid staking tokens, with Lido's node operators required to run MEV-Boost. The MEV-Boost relay network is now the default block production layer, a market created and enforced by the governance of large staking entities, not individual validators.
future-outlook
THE CONSOLIDATION
Future Outlook: The Slippery Slope to Validator Cartels
The future of MEV is governed by staking pools, where economic incentives create systemic risk through validator centralization.
Staking pool dominance dictates MEV flow. The largest validators, like Lido and Coinbase, control block production and can internalize MEV via private orderflow deals with searchers. This creates a feedback loop where higher yields attract more stake, further centralizing power.
MEV-Boost is a temporary, not permanent, solution. Its permissionless relay model prevents censorship but does not prevent economic centralization. The largest staking entities operate their own relays, creating a closed-loop system that sidelines smaller validators.
Cross-chain MEV exacerbates the problem. Protocols like LayerZero and Wormhole enable generalized message passing, allowing cartels to coordinate value extraction across ecosystems. A validator cartel on Ethereum can influence settlement and pricing on Avalanche or Solana.
Evidence: Lido commands over 32% of Ethereum's stake. A single entity controlling >33% of stake can theoretically censor transactions or finalize conflicting blocks, a risk directly amplified by MEV profitability.
takeaways
THE STAKING POOL POWER SHIFT
Takeaways: What This Means for Builders and Investors
The centralization of block production within large staking pools fundamentally redefines the MEV supply chain and its economic incentives.
01
The Problem: Fragmented MEV is Inefficient and Opaque
Individual validators lack the scale and data to compete with professional searchers, leading to extracted value leakage and a suboptimal network.\n- >90% of MEV is captured by a handful of sophisticated actors.\n- Builders and proposers operate in a zero-sum game, creating systemic instability.
>90%
MEV Capture
Zero-Sum
Game Theory
02
The Solution: Staking Pools as Integrated MEV Hubs
Large pools like Lido, Rocket Pool, and Coinbase become natural MEV aggregators. They internalize the supply chain from searcher to proposer.\n- Enables cross-domain MEV capture via shared liquidity (e.g., Ethereum → Cosmos).\n- Drives protocol revenue back to stakers, improving yields and loyalty.
$30B+
Pool TVL Leverage
+200 bps
Yield Boost
03
The New Risk: Centralized Points of Failure
MEV governance by pools creates systemic censorship risk and regulatory attack surfaces. A few entities control transaction ordering.\n- OFAC-compliance becomes trivial to enforce at the protocol level.\n- Creates a single point of failure for chain liveness and neutrality.
~3 Entities
Control Risk
Protocol-Level
Censorship
04
The Builder Mandate: Design for Pool Economics
Successful dApps will bake MEV redistribution into their core mechanics, aligning with pool incentives. Look to UniswapX, CowSwap, and Across for intent-based models.\n- Proposer-Builder Separation (PBS) becomes a business development channel.\n- Fair ordering protocols become a premium feature for user acquisition.
PBS
Key Interface
Intent-Based
Design Trend
05
The Investor Thesis: Bet on Vertical Integration
Value accrual shifts from pure execution layers to entities that control stake and block space. MEV middleware is a feature, not a product.\n- Invest in staking pools with native MEV infrastructure (e.g., MEV-boost relays, solver networks).\n- Avoid standalone MEV startups vulnerable to pool disintermediation.
Vertical Stack
Value Capture
Middleware
Feature Risk
06
The Endgame: Sovereign Staking Pools and Appchains
Pools with dominant MEV shares will launch their own app-specific rollups or L2s, creating walled gardens of optimized value flow. This mirrors the Celestia modular thesis.\n- Enables custom fee markets and MEV auction designs.\n- Fragments liquidity but optimizes for specific use cases (DeFi, Gaming, Social).
App-Specific
Rollup Trend
Walled Garden
Liquidity
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall