Staker Governance Must Extend to the MEV Supply Chain

Staker governance is incomplete. Validators and delegators control consensus but not the MEV supply chain—the network of searchers, builders, and relays that extracts and distributes value from transaction ordering. This creates a governance deficit where the most profitable activity is outsourced.

The MEV economy is a parallel state. Protocols like Flashbots SUAVE and Jito Labs operate critical infrastructure that determines final state outcomes, yet their incentives are not aligned with the underlying chain's staker collective. This is a systemic risk akin to letting a central bank operate independently of its government.

Control follows economic gravity. If ~90% of Ethereum blocks are built by a few builders, then stakers who merely propose those blocks are ceding sovereignty. Real governance requires authority over the block production pipeline, not just the final signature.

Governance ends at consensus. Today's stakers vote on protocol upgrades but exert zero control over the MEV supply chain that extracts value after blocks are proposed. This creates a governance moat around the most profitable activity on-chain.

Sovereignty requires full-stack control. True validator sovereignty means governing the entire value flow, from transaction ordering to cross-chain settlement via LayerZero or Axelar. Without this, stakers are landlords who don't control the toll road on their land.

The precedent is Uniswap. Just as Uniswap governance controls the fee switch and treasury, Ethereum stakers must control the economic rules for block building and bridging. The technical primitives, like SUAVE and MEV-Share, now make this feasible.

Evidence: The 90% Leak. Over 90% of Ethereum's MEV is captured by searchers and builders, not the validating stakers who provide the finality. This is a direct result of the governance gap in the stack.

Staker governance is incomplete. Validators control block production, but the MEV supply chain—searchers, builders, and relays—determines transaction ordering and final value extraction. This creates a governance blind spot where the most critical economic decisions happen off-chain.

Abstraction enables capture. Protocols like Flashbots Protect and CowSwap abstract MEV complexity from users, but centralize routing power. This creates a single point of failure where a few entities like Jito Labs or BloXroute can influence chain economics without on-chain accountability.

The counter-intuitive fix is protocol-level integration. Stakers must govern the proposer-builder separation (PBS) auction and relay selection, not just the validator set. Ethereum's enshrined PBS is the model; without it, MEV cartels form and capture value meant for stakers.

Evidence: Builder dominance. Post-Merge, two builders frequently produce over 50% of Ethereum blocks. This centralization metric proves that without staker-governed PBS, the MEV supply chain consolidates power and erodes the decentralized security model.

Complexity demands sovereignty. Abstaining from MEV governance cedes critical protocol security and economics to opaque third parties like Flashbots and bloXroute. DAOs already manage complex treasury diversification and smart contract upgrades; MEV is a comparable technical surface.

Delegation is the scalable model. DAOs do not need to become searcher experts. They delegate via standardized frameworks like MEV-Share or MEV-Boost relays, setting policy for permissible extraction. This mirrors how Lido DAO governs node operators without running infrastructure.

The cost of ignorance is higher. Unmanaged MEV flow creates systemic risks like chain reorgs and validator centralization, as seen in past Ethereum incidents. Proactive governance mitigates these externalities before they force reactive, costly protocol forks.