The Hidden Cost of Builder/Proposer Enmeshment

Builder-Proposer Separation (BPS) is a flawed solution to MEV centralization. It outsources block construction to specialized searcher-builder entities like Flashbots, creating a new, more opaque layer of centralization. The protocol's security now depends on a handful of actors who control the mempool and final block assembly.

Enshrined PBS creates a cartel. The economic incentive for proposers to sell their block space to the highest-bidding builder is rational, but it concentrates power in the builder layer. This creates a single point of failure where builders like Titan, bloXroute, and Rsync can censor transactions or extract maximal value, undermining the network's credibly neutral base layer.

The hidden cost is systemic risk. This symbiosis trades validator decentralization for temporary efficiency and profit. The resulting architecture, visible in post-merge Ethereum, makes the network vulnerable to builder collusion or capture, a risk that protocols like EigenLayer's restaking inadvertently amplify by further concentrating economic stake.

Enmeshment destroys neutrality. PBS assumes builders and proposers are independent, adversarial actors. When a single entity like Flashbots or Jito Labs controls both roles, it creates a vertically integrated monopoly that dictates block content and ordering.

The auction becomes a facade. The competitive builder market is the core PBS mechanism for fair value extraction. Enmeshment allows the integrated entity to bypass this auction, capturing MEV value internally and starving the public mempool.

It centralizes physical infrastructure. Control over both building and proposing requires massive, co-located staking and compute resources. This creates an insurmountable moat, pushing the network towards the Lido dominance problem seen in consensus.

Evidence: The MEV-Boost Relay Cartel. The current reliance on a handful of trusted relays like BloXroute and Ultrasound demonstrates how enmeshment centralizes power. A fully integrated builder-proposer eliminates even this fragile check.

Vertical integration is rational. Combining block building and proposing eliminates coordination overhead, reducing latency and maximizing MEV capture for a single entity. This mirrors the efficiency gains seen in traditional high-frequency trading.

The market selects for performance. A dominant integrated entity like Flashbots SUAVE or Jito will consistently outbid fragmented competitors by offering proposers higher yields, creating a self-reinforcing feedback loop of market share.

Decentralization is a tax. The PBS (Proposer-Builder Separation) ideal introduces communication rounds and trust assumptions that directly reduce extractable value and finality speed. In a competitive market, this tax gets arbitraged away.

Evidence: The rapid adoption of MEV-Boost proved builders win. Over 90% of Ethereum blocks are now built by a handful of specialized entities, demonstrating the market's preference for this model despite its centralization.

Builder cartels are inevitable. The MEV supply chain's economies of scale guarantee that builders like Flashbots SUAVE, BloXroute, and Titan will consolidate power. This creates a new, unregulated financial layer with opaque order flow auctions.

Enshrined PBS is a protocol-level solution. It bakes the builder role directly into the Ethereum consensus layer, removing the need for trusted relays. This eliminates the centralization vector of private mempools and off-chain deals.

Managed cartels are the pragmatic alternative. This approach accepts builder centralization but regulates it via EigenLayer AVS slashing or Cosmos-style governance. It's faster to implement but requires constant vigilance.

Evidence: Flashbots currently controls over 90% of Ethereum's MEV-Boost blocks. This single-point-of-failure risk is the primary argument for enshrining PBS, despite its multi-year development timeline.