Why Builder Centralization Threatens Ethereum's Core Values

Builder centralization breaks neutrality. The Proposer-Builder Separation (PBS) model, designed to distribute power, has instead created a cartel of dominant builders like Flashbots and bloXroute. These entities control the ordering of transactions, enabling Maximal Extractable Value (MEV) capture and creating a privileged financial layer.

Censorship is now a protocol-level risk. Following OFAC sanctions, compliant builders like Flashbots and Relayooor systematically excluded Tornado Cash transactions. This demonstrated that a handful of entities can enforce blacklists, undermining Ethereum's credibly neutral base layer.

The economic model is broken. The pay-to-play auction for block space favors sophisticated, capital-rich actors. This creates a feedback loop where centralized builders capture more MEV, reinvest in infrastructure, and further entrench their dominance, sidelining solo validators.

Builder centralization is inevitable under the current PBS model. The proposer-builder separation (PBS) framework outsources block construction to specialized entities that compete to deliver the most valuable block to a validator. This creates a winner-take-most market where scale and data access determine profitability, leading to the dominance of a few builders like Flashbots' SUAVE and Jito Labs.

Control follows economic logic. The entity that assembles the block dictates transaction ordering and inclusion. This block-building monopoly grants de facto censorship power, enabling builders to exclude transactions from protocols like Tornado Cash or prioritize their own private orderflow from searchers. Validators, incentivized by maximal revenue, become passive rubber stamps.

Ethereum's credibly neutral base layer is compromised. The network's foundational promise was a level playing field. Concentrated builder power reintroduces trusted intermediaries, allowing a small cabal to manipulate DeFi arbitrage opportunities on Uniswap or Aave, effectively taxing all users. This is the antithesis of permissionless innovation.

Evidence: Flashbots' mev-boost relay has consistently commanded over 90% of post-merge Ethereum blocks. This demonstrates the extreme centralization pressure in builder markets, where a single entity's software stack becomes the de facto standard.

Builder centralization is market failure. The efficient market hypothesis assumes many independent actors. The builder market has collapsed to a few entities like Flashbots and Jito Labs, creating an oligopoly that extracts maximal value from users.

Ethereum commoditizes, builders privatize. The base layer's credible neutrality is a public good. Builders privatize this value by controlling transaction ordering, turning a permissionless system into a pay-to-play auction for MEV.

Evidence: MEV-Boost dominance. Over 90% of Ethereum blocks are built via MEV-Boost relays. This creates systemic risk where a handful of entities, not the protocol, dictate transaction finality and censorship resistance.

Builder centralization is censorship risk. The dominance of a few builders like Flashbots and bloXroute creates a single point of failure. A state-level actor or colluding cartel can censor transactions by controlling these entities, breaking Ethereum's core promise.

MEV extraction erodes neutrality. Builders prioritize profit, not fairness. This creates a two-tiered system where users paying for private order flow via services like Tornado Cash or CoW Swap receive better execution, violating the principle of equal access.

Proposer-Builder Separation (PBS) is the designed fix. PBS formally separates the role of block proposal (validators) from block building (specialized entities). This prevents validators from seeing transaction order, mitigating centralization pressure and censorship.

In-protocol PBS is years away. Current implementations like mev-boost are off-protocol, creating a fragile, trusted relay layer. The delay in enshrining PBS in the protocol leaves the network vulnerable to the exact centralization it aims to solve.