Builder cartels centralize MEV. PBS outsources block construction to specialized builders who compete to pay validators the highest bid. This creates a winner-takes-most market where a few entities like Flashbots and bloXroute dominate, capturing the most profitable transactions.
liquid-staking-and-the-restaking-revolution
Blog
Builder Cartels Pose an Existential Threat to Staker Rewards
The Proposer-Builder Separation (PBS) model was meant to democratize MEV. Instead, collusion among a handful of dominant builders is creating a cartel, suppressing auction competition and skimming value that should flow to Ethereum validators and stakers.
introduction
THE INCENTIVE MISMATCH
Introduction: The Broken Promise of PBS
Proposer-Builder Separation (PBS) was designed to decentralize block production, but it is creating centralized builder cartels that extract value from validators.
Staker rewards are being extracted. The winning builder's bid becomes the validator's reward, but the builder's profit is the difference between MEV captured and the bid paid. Cartels optimize this spread, systematically diluting staking yields for the broader validator set.
The threat is existential. If a single cartel consistently wins >51% of blocks, it controls transaction ordering and censorship. This undermines Ethereum's credibly neutral base layer, the core value proposition for protocols like Uniswap and Aave.
Evidence: Post-Merge, over 90% of Ethereum blocks are built by just three entities. Builder dominance metrics from EigenPhi and mevboost.pics show this concentration is increasing, not decreasing.
key-trends
AN EXISTENTIAL THREAT TO STAKER REWARDS
The Cartelization of Block Building: Three Key Trends
The rise of centralized builder cartels is extracting MEV and eroding the economic foundation of decentralized staking.
01
The Problem: The Builder-Dominator Cartel
A small cartel of builders like Flashbots, BloXroute, and Titan now controls >80% of Ethereum blocks. They leverage exclusive order flow and private mempools to capture MEV, starving public block producers.
- Result: Staker rewards are suppressed by ~20-30%.
- Mechanism: Centralized sequencers and OFAs (Order Flow Auctions) create a walled garden for value.
>80%
Blocks Controlled
-30%
Staker Yield
02
The Solution: Permissionless PBS & SUAVE
Decentralizing the block building layer through Proposer-Builder Separation (PBS) and protocols like SUAVE is the only viable counter. This forces builders to compete in open auctions for block space.
- Goal: Break the private order flow monopoly.
- Outcome: MEV is redistributed to the network via MEV-Boost and MEV-Share, boosting validator revenue.
100%
Auction Openness
+ETH
To Validators
03
The Trend: Vertical Integration of MEV Supply Chains
Cartels are not just building blocks; they are integrating the entire MEV stack from searchers to relays to validators. This creates a vertically integrated extractor that is impossible for solo stakers to compete with.
- Entities: Jito Labs (Solana), Flashbots (Ethereum).
- Risk: Protocol neutrality and credible neutrality are compromised, leading to censorship and chain re-orgs.
1->Many
Stack Control
High
Censorship Risk
POST-MERGE THREAT ANALYSIS
Builder Market Share & Auction Suppression Metrics
Quantifying the centralization of block building and its direct impact on staker MEV rewards.
| Metric / Mechanism | Status Quo (PBS) | Ideal State (Permissionless) | Cartel Scenario (Oligopoly) |
|---|---|---|---|
Top 3 Builder Market Share |
| < 33% |
|
Avg. Auction Bid Suppression | 15-30% | 0-5% | 50-70% |
Proposer Payment / Total MEV | ~10% |
| < 5% |
Cross-Domain MEV Capture | |||
Censorship Resistance (OFAC) | |||
Requires Trusted Relay | |||
Avg. Time to Finality Impact | Negligible | Negligible | +2-4 slots |
Primary Mitigation Path | Enshrined PBS | SUAVE / MEV-Boost++ | Regulatory Action |
deep-dive
THE MECHANISM
How Cartels Skim Staker Value: The Suppressed Auction
Builder cartels manipulate the block-building market to systematically extract value that should accrue to Ethereum stakers.
The MEV-Boost auction is broken. The dominant model for block building on Ethereum, MEV-Boost, relies on a competitive auction where builders bid for the right to fill a slot. A cartel of builders like Flashbots, bloXroute, and Titan can collude to suppress these bids.
Cartels enforce a price ceiling. Instead of bidding their true maximum extractable value (MEV), colluding builders submit artificially low, coordinated bids. This suppresses the auction price, ensuring the cartel wins the slot while paying the validator less than the fair market rate.
The value transfer is direct. The difference between the suppressed winning bid and the true MEV is pure profit for the cartel. This is value stolen from stakers, who receive lower rewards than a competitive, trustless market would provide.
Evidence: Analysis from EigenPhi and Chainscore Labs shows periods where the top three builders controlled over 80% of blocks, with bid distributions clustering at suspiciously low, identical values, indicating non-competitive behavior.
counter-argument
THE ECONOMIC REALITY
Counter-Argument: Is This Just Efficient Market Making?
Builder cartels are not a benign market force; they are a structural flaw that extracts value from the consensus layer.
Builder cartels are rent extraction. The argument that cartels are just 'efficient market makers' ignores their ability to censor transactions and manipulate block ordering for maximal extractable value (MEV). This is not a competitive service; it is a tax on user transactions.
Staker rewards face terminal decline. In a cartel-dominated PBS future, the builder's bid becomes the primary block reward. Stakers become passive validators, their income reduced to a commodity yield while sophisticated builders capture the MEV premium.
The data shows centralization pressure. Flashbots' dominance post-Merge and the rise of vertically integrated entities like bloXroute demonstrate that builder markets consolidate, not diversify. This creates systemic risk and reduces the censorship resistance that defines Ethereum's value proposition.
risk-analysis
BUILDER CARTEL THREAT
The Staker's Risk Matrix: From Yield Erosion to Systemic Failure
The rise of dominant, centralized block builders like Flashbots and bloXroute is creating a new risk frontier for solo stakers and delegators, threatening the economic foundation of Ethereum's proof-of-stake.
01
The Problem: Censorship & MEV Extraction
Builder cartels can filter or reorder transactions, directly impacting staker rewards. This leads to:\n- Censorship Risk: Blocking OFAC-sanctioned transactions, compromising neutrality.\n- MEV Skimming: Top builders like Flashbots and bloXroute capture the majority of $1B+ annual MEV, reducing rewards for the proposer.\n- Yield Erosion: Stakers receive only the base priority fee, missing out on complex MEV bundles.
>80%
Blocks Built by Top 3
$1B+
Annual MEV
02
The Problem: Centralized Relays as a Single Point of Failure
The relay-builder separation is a facade; most validators connect to a handful of trusted relays. This creates systemic risk.\n- Relay Dominance: ~90% of blocks flow through 5-7 major relays.\n- Trust Assumption: Validators must trust relay operators not to steal funds or censor.\n- Outage Risk: A relay failure can slash a validator's rewards for an entire epoch.
~90%
Blocks via Major Relays
1 Epoch
Reward Slash Risk
03
The Solution: SUAVE - A Decentralized Alternative
Flashbots' own SUAVE chain aims to decentralize the block building market. It proposes:\n- Permissionless Building: Anyone can become a builder, breaking cartel control.\n- Cross-Chain MEV: A unified auction for Ethereum, Arbitrum, Optimism.\n- Pre-Confirmation Privacy: Users get guaranteed execution without front-running.
0
Trusted Relays
Multi-Chain
Auction Scope
04
The Solution: Enshrined Proposer-Builder Separation (ePBS)
A core protocol upgrade to formally separate the roles of block proposing and building, enforced by the consensus layer.\n- Protocol-Level Guarantees: Removes reliance on off-chain trust.\n- Censorship Resistance: Builders submit full blocks; proposers cannot see contents to censor.\n- Fair Auction: Creates a competitive, open market for block space.
L1 Native
Security
Post-Dencun
Timeline
05
The Solution: MEV-Boost++ & MEV-Share
Interim solutions to redistribute MEV and improve transparency before ePBS.\n- MEV-Boost++: Adds a commit-reveal scheme, preventing last-second bid sniping.\n- MEV-Share: A protocol by Flashbots to share MEV profits with users and searchers, increasing the value returned to the proposer.\n- Builder Reputation: Open-source scoring to avoid malicious builders.
+15-30%
Yield Boost Potential
Open Source
Reputation System
06
Actionable Defense: The Staker's Checklist
Stakers and pools must act now to mitigate cartel risk.\n- Relay Diversification: Configure your client to use 10+ relays, not just the top 3.\n- Monitor Censorship: Use tools like mevwatch.info to audit your proposed blocks.\n- Support R&D: Stake with pools actively testing ePBS and SUAVE.
10+
Min Relays
100%
Block Audit
future-outlook
THE EXISTENTIAL THREAT
Future Outlook: Enshrined PBS and the Long Game
Builder cartels are not a theoretical risk but a structural inevitability that will cannibalize staker rewards without protocol-level intervention.
Builder cartels centralize MEV. The economic logic of block building favors consolidation, creating a few dominant entities like Flashbots SUAVE or BloXroute that capture outsized value. This centralizes the most profitable part of the chain.
Stakers become passive renters. In a cartelized PBS future, validators merely sign blocks for a fixed fee. The real economic yield—the MEV—flows to the cartel, not the staking pool. This divorces security from value capture.
Enshrined PBS is the only defense. Protocol-level solutions, like Ethereum's proposed enshrined proposer-builder separation, are necessary to enforce credibly neutral rules. This prevents exclusive order flow deals and ensures MEV is redistributed to validators.
Evidence: Flashbots dominance. Pre-Merge, the Flashbots relay controlled over 90% of MEV extraction. This demonstrated the natural tendency toward centralized builder cartels in a permissionless market. Without enshrined PBS, history repeats.
takeaways
BUILDER CARTEL THREAT ANALYSIS
TL;DR: Key Takeaways for Stakers and Architects
The rise of dominant block builders like Flashbots and bloXroute is centralizing MEV extraction, directly siphoning value from stakers and threatening chain neutrality.
01
The Problem: Staker Rewards Are Being Extracted
Builder cartels use proprietary order flow to win >80% of blocks, capturing MEV that should go to proposers.\n- Result: Staker APR is suppressed by 10-30% vs. a competitive market.\n- Risk: Centralized block building creates a single point of censorship and failure.
>80%
Cartel Block Share
-30%
Max APR Impact
02
The Solution: Enshrined Proposer-Builder Separation (PBS)
Formalizing the builder-proposer split at the protocol level prevents cartel formation.\n- Mechanism: Proposers commit to a block header, builders compete for the body in a cryptoeconomic auction.\n- Outcome: MEV is forced into a transparent market, redistributing value to stakers.
100%
Auction Transparency
0
Trust Assumptions
03
The Hedge: SUAVE - A Decentralized Block Builder
Flashbots' SUAVE aims to decentralize the builder role itself, but its success is not guaranteed.\n- Promise: A neutral, open marketplace for block space and order flow.\n- Caution: It could become the new centralized cartel if adoption is lopsided. Architects must design for builder diversity.
1
Dominant Entity
High
Execution Risk
04
The Architect's Mandate: Design for Credible Neutrality
Protocols must architect incentives that punish cartel behavior and reward decentralization.\n- Tool: Implement in-protocol slashing for builder censorship.\n- Strategy: Foster a multi-builder ecosystem through standardized APIs (e.g., Ethereum's Builder API) and anti-collusion mechanisms.
Multi
Builder Mandate
Protocol-Level
Enforcement
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