MEV is infrastructure. The extraction of Maximal Extractable Value is not a bug; it is a fundamental economic force in permissionless systems. Protocols like Flashbots and SUAVE are formalizing this force into a transparent, auction-based layer.
mev-the-hidden-tax-of-crypto
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The Future of MEV and Credible Neutrality
MEV is no longer an external tax but a core protocol resource. This analysis examines the architectural battle to capture and distribute it without creating systemic bias, protecting Ethereum's foundational principle of neutrality.
introduction
THE NEW FRONTIER
Introduction
MEV is evolving from a miner's secret tax into a programmable market, forcing a redefinition of credible neutrality.
Credible neutrality is dead. The original ideal of a passive, unbiased base layer is incompatible with active MEV markets. The new standard is credible neutrality through verifiability, as demonstrated by protocols like CowSwap and UniswapX.
The future is intent-based. Users will express desired outcomes, not transactions. Solvers on networks like Anoma and Across compete to fulfill these intents, abstracting away complexity and capturing MEV for the user.
Evidence: Flashbots' MEV-Boost captured over 90% of Ethereum's post-Merge block production, proving the market demand for structured MEV distribution.
thesis-statement
THE INEVITABLE SHIFT
Thesis Statement
The future of MEV is the commoditization of block production and the institutionalization of credible neutrality as a protocol-level primitive.
MEV is a tax on user transactions that protocol designers now treat as a system parameter to optimize, not a bug to eliminate. This shifts the focus from naive suppression to efficient, transparent extraction and redistribution.
Credible neutrality is a feature that protocols like Ethereum and Uniswap must engineer, not just claim. It requires formalizing rules for inclusion, ordering, and censorship-resistance that are verifiable and permissionless.
The endgame is specialized execution layers like Flashbots' SUAVE, which decouple block building from proposing. This creates a competitive market for block space, turning MEV into a commoditized resource.
Evidence: Ethereum's PBS roadmap and the 90%+ adoption of MEV-Boost demonstrate that credible neutrality requires explicit, protocol-enforced economic incentives, not social consensus.
key-trends
THE FUTURE OF MEV AND CREDIBLE NEUTRALITY
Key Trends: The MEV Supply Chain Matures
The MEV supply chain is evolving from a chaotic free-for-all into a structured, competitive market where credible neutrality is the ultimate moat.
01
The Problem: Private Order Flow Auctions
Exclusive deals between searchers and block builders create centralization points and opaque, extractive markets. This undermines the credible neutrality of the base layer.
- Centralizes Power: Top builders like Flashbots SUAVE or Titan can become unavoidable intermediaries.
- Reduces Competition: Searchers without private deals face a persistent disadvantage.
- Opaque Pricing: Users have no visibility into the true cost of their transaction inclusion.
~80%
PBS Blocks
1-2
Dominant Builders
02
The Solution: Permissionless Builder Markets
Open, on-chain markets for block building space commoditize the builder role and enforce neutrality through verifiable, open competition.
- Eliminates Gatekeepers: Any builder can compete for any bundle or transaction.
- Transparent Pricing: Inclusion costs are set by a public auction (e.g., EigenLayer's EigenDA model for data availability).
- Verifiable Neutrality: The protocol's rules, not off-chain relationships, determine block construction.
100+
Competing Builders
$0
Deal Premium
03
The Problem: Intents as a Centralization Vector
Intents-based systems (UniswapX, CowSwap) abstract complexity but often rely on a centralized solver network to fulfill them. This recreates the trusted intermediary problem.
- Solver Oligopoly: A small set of privileged actors captures most of the intent flow.
- Black-Box Execution: Users cannot verify they received the best possible outcome.
- Fragmented Liquidity: Solver competition is isolated within each application's walled garden.
~5-10
Dominant Solvers
10-30bps
Hidden Slippage
04
The Solution: Shared Settlement & Intent Auctions
A shared settlement layer (like a Unified Auction or SUAVE's mempool) allows any solver to compete for any intent, with the outcome settled on a neutral base chain.
- Open Solver Access: Breaks down application-specific solver monopolies.
- Cross-Domain MEV: Enables atomic execution across Ethereum, Solana, and Cosmos via bridges like LayerZero.
- Proven Optimality: Cryptographic proofs (e.g., ZK) can verify execution quality.
1000x
More Solvers
~100ms
Auction Latency
05
The Problem: MEV is an L1 Tax
Today, MEV revenue (frontrunning, arbitrage) is captured almost entirely by L1 validators and their affiliated builders. This drains value from application layers and their users.
- Value Extraction: Apps on Ethereum subsidize validator profits with every user trade.
- No Alignment: Validators have no incentive to minimize MEV; they profit from it.
- Inefficient Redistribution: MEV burn or redistribution (via EIP-1559) is a blunt instrument.
$1B+
Annual Extraction
0%
App Rebate
06
The Solution: App-Chain MEV Captures
Sovereign rollups and app-chains (using Celestia, EigenDA) can internalize their MEV supply chain, capturing value for the protocol treasury and users.
- Sovereign Auctions: The app-chain's sequencer/validator set runs its own MEV auction.
- Protocol-Owned Liquidity: MEV profits fund POL or direct user rebates.
- Custom Rules: The chain can enforce MEV-minimizing rules (e.g., FBA - Frequent Batch Auctions) at the protocol level.
90%+
Value Capture
Protocol
Treasury Funded
CREDIBLE NEUTRALITY THREAT MATRIX
MEV Market Concentration: The Builder Dominance
Comparison of market structures and their impact on censorship resistance, decentralization, and protocol neutrality.
| Critical Metric | Current State (Builder Oligopoly) | Ideal State (Distributed Builders) | Regulated State (OFAC-Compliant Cartel) |
|---|---|---|---|
Top 3 Builders' Market Share |
| < 33% |
|
Proposer-Builder Separation (PBS) Adoption | |||
Censorship Resistance (Tx Inclusion) | Conditional (Excludes OFAC) | Unconditional | Censored (Enforces OFAC) |
Avg. Builder Profit per Block | 0.2 - 0.5 ETH | < 0.1 ETH | 0.3 - 0.7 ETH |
Cross-Domain MEV Extraction (e.g., via SUAVE) | |||
Relay Centralization Risk (Top 3 Relays) | High (Controls > 75% flow) | Low | Critical (100% compliant) |
User Surplus Capture (vs. Builder/Validator) | 15% User / 85% Builder+Val | 50% User / 50% Builder+Val | 5% User / 95% Builder+Val |
deep-dive
THE CREDIBILITY CRISIS
Architectural Fork in the Road
The MEV supply chain is fracturing into two incompatible architectural paradigms: centralized sequencer extraction versus decentralized, credibly neutral block building.
Centralized sequencers are extractive. Rollups like Arbitrum and Optimism operate single sequencers that capture MEV as a revenue stream, creating a structural conflict of interest with user welfare. This model mirrors the pre-DeFi exchange era where the platform is the primary beneficiary.
Shared sequencing is the alternative. Projects like Espresso and Astria propose a neutral layer for ordering transactions, separating execution from consensus. This architecture enables credible neutrality by preventing any single entity from controlling transaction order for profit.
The fork determines value flow. The centralized path funnels MEV to the L2's treasury. The decentralized path, via shared sequencers or SUAVE-like blockspace auctions, redistributes value to validators, searchers, and users, realigning incentives with the base layer's ethos.
Evidence: Flashbots' SUAVE is the canonical experiment in neutral infrastructure. It aims to become a universal mempool and decentralized block builder, explicitly designed to separate MEV extraction from chain governance, a direct challenge to incumbent rollup models.
protocol-spotlight
THE FUTURE OF MEV AND CREDIBLE NEUTRALITY
Protocol Spotlight: Contenders in the Neutrality Race
The fight for the sequencing layer is a fight for the soul of the block space market. These are the architectures vying to define it.
01
The Shared Sequencer Fallacy
Decentralizing the sequencer role doesn't inherently solve MEV extraction; it just changes who gets to do it. The core problem is the lack of a neutral, verifiable ordering rule.
- Key Benefit: Political decentralization of block production.
- Key Risk: Economic centralization of MEV profits to a new validator cartel.
- Example: Espresso Systems, Astria.
~2-5s
Finality Latency
O(n²)
Coordination Cost
02
Enshrined PBS & Proposer-Builder Separation
Ethereum's core roadmap bakes neutrality into the protocol. By separating block building from proposing, it commoditizes builder competition and makes censorship a publicly verifiable fault.
- Key Benefit: Credibly neutral base layer via in-protocol auctions.
- Mechanism: Builder bids for block space, proposer chooses highest bid.
- Outcome: MEV revenue is democratized to validators, not sequencers.
100%
Ethereum L1
Post-Dencun
Roadmap
03
SUAVE: The Universal MEV Market
Flashbots' attempt to abstract MEV infrastructure into its own decentralized chain. It aims to be the neutral, shared mempool and block builder for all chains.
- Key Benefit: Breaks the vertical integration of searcher-sequencer-builder.
- Mechanism: Cross-domain intent expression and execution.
- Risk: Becomes the very centralized MEV hub it seeks to replace.
All Chains
Target Scope
TBD
Centralization Risk
04
Based Sequencing & L1 Finality
Rollups that outsource sequencing directly to the underlying L1 (e.g., Ethereum). The ultimate credible neutrality: you inherit the security and liveness guarantees of the base chain.
- Key Benefit: Zero additional trust assumptions for sequencing.
- Trade-off: Higher latency (~12s) vs. dedicated sequencers.
- Adopters: Optimism's 'Law of Chains', Fuel, Aztec.
L1 Secure
Trust Model
~12s
Block Time
05
Threshold Encryption: The Privacy Fix
MEV exists because transactions are public in the mempool. Encrypting the mempool until execution prevents frontrunning and enables fair ordering.
- Key Benefit: Eliminates harmful MEV like frontrunning and sandwich attacks.
- Challenge: Requires a decentralized key management network (e.g., DKG).
- Implementations: Shutter Network, Ferveo (used by Anoma).
>90%
Attack Reduction
High
Implementation Cost
06
The Intent-Based Endgame
Abandoning transaction sequencing entirely. Users submit desired outcomes (intents), and a decentralized solver network competes to fulfill them optimally. This is the architecture of UniswapX and CowSwap.
- Key Benefit: User gets optimal execution; MEV is internalized as solver profit.
- Architecture: Off-chain auction for intent fulfillment.
- Future: The natural bridge architecture for chains like Anoma and Essential.
User Optimal
Execution
Solver Market
MEV Capture
counter-argument
THE INCENTIVE MISMATCH
Counter-Argument: Is Neutrality Even the Goal?
Credible neutrality is a philosophical ideal that directly conflicts with the profit motives of core infrastructure operators.
Neutrality is not profitable. The entities building the most critical infrastructure—like Lido, Flashbots, and major L2 sequencers—are businesses. Their fiduciary duty is to capture value, not to be passive utilities. The credible neutrality of Ethereum's base layer is a luxury subsidized by its non-profit ethos, which is not replicable in a competitive, venture-backed landscape.
Protocols optimize for extractable value. The design of intent-based architectures like UniswapX and CowSwap explicitly routes orders to solvers who pay for the right to extract MEV. This is a feature, not a bug. The goal shifts from preventing extraction to creating a fair auction for it, which is a more economically sustainable model than naive neutrality.
Evidence: Lido commands over 30% of Ethereum's stake. Its dominance creates a centralization risk that directly stems from its commercial success. This proves that in practice, market share and revenue generation consistently trump neutrality as a design priority for operators.
risk-analysis
THE FUTURE OF MEV & CREDIBLE NEUTRALITY
Risk Analysis: What Could Go Wrong?
The pursuit of MEV extraction and credible neutrality is creating new, systemic risks that could undermine the very blockchains they aim to optimize.
01
The Centralizing Force of PBS
Proposer-Builder Separation (PBS) outsources block construction to specialized builders, creating a new layer of centralization. This risks creating a builder cartel that can censor transactions or manipulate the base fee.
- Risk: Builder market dominated by 2-3 entities like Flashbots, bloXroute, and Titan.
- Consequence: Builders become the new validators, with proposers reduced to passive slot renters.
>80%
Builder Dominance
0
Proposer Agency
02
Sovereign Rollup MEV Escalation
Rollups like Arbitrum and Optimism currently outsource sequencing, creating a single point of MEV capture. As they move to decentralized sequencing, they risk replicating Ethereum's MEV wars on a smaller, more volatile scale.
- Risk: In-protocol auctions (e.g., Espresso, Astria) could lead to chain reorgs for profit.
- Consequence: L2 users face worse latency and unpredictable finality as sequencers compete for extractable value.
~2s
Finality Risk
$100M+
L2 MEV Pool
03
Intent-Based Systems as New Rent Extractors
Architectures like UniswapX, CowSwap, and Across shift complexity from users to solvers. This creates a risk that solver networks become monopolistic meta-validators that extract surplus value from every user transaction.
- Risk: Solver competition collapses to a few players with the best JIT liquidity and private mempool access.
- Consequence: The promised better prices for users are captured as solver profit, recreating the MEV problem at a higher abstraction layer.
90%+
Solver Win Rate
Hidden
Fee Obfuscation
04
Credible Neutrality as a Marketing Slogan
The term 'credible neutrality' is weaponized by protocols like EigenLayer and Celestia to justify permissioned sets or governance capture. The risk is that economic security becomes a commodity, and the most 'credible' chain is simply the one with the best marketing.
- Risk: $15B+ in restaked ETH creates a systemic conflict of interest for validators.
- Consequence: Security is no longer a public good but a pay-to-play service, undermining decentralization.
$15B+
Restaked TVL
Oligopoly
Security Providers
future-outlook
THE MEV ENDGAME
Future Outlook: The 2024-2025 Playbook
The MEV supply chain will fragment into specialized, credibly neutral infrastructure, forcing a re-evaluation of chain design.
Specialized MEV infrastructure wins. Generalized block builders like Flashbots SUAVE will fail to dominate. The future is a fragmented landscape of application-specific searchers, solvers, and fillers optimized for niches like DEX arbitrage or NFT liquidation, similar to how UniswapX and CowSwap operate.
Credible neutrality is a protocol feature. It is not a branding exercise. Chains like Solana and Arbitrum will bake MEV management into their core protocol design, using techniques like timelock encryption and fair ordering to externalize the trust problem away from validator cartels.
MEV will become a public good. Protocols will formalize MEV redistribution through mechanisms like MEV burn or MEV smoothing. This follows the trajectory of EIP-1559, transforming a negative externality into a sustainable subsidy for network security and user rebates.
Evidence: The rise of intent-based architectures from Across, Anoma, and Essential demonstrates the market demand for abstracting MEV complexity. These systems treat user intents as the primitive, not transactions, fundamentally altering the economic layer.
takeaways
THE NEW FRONTIER OF BLOCK SPACE
Executive Summary
MEV is evolving from a dark forest exploit into a core, programmable primitive, forcing a reckoning with credible neutrality.
01
The Problem: Extractive MEV is a Tax on Users
Front-running and sandwich attacks drain ~$1B+ annually from DeFi users. This creates a toxic UX where users can't trust their transaction outcomes, undermining the promise of decentralized finance.\n- Erodes Trust: Every swap is a potential target.\n- Centralizes Power: Profits flow to a few sophisticated searchers/validators.
$1B+
Annual Extract
-100%
User Trust
02
The Solution: Intent-Based Architectures
Shift from transaction-based (what to do) to intent-based (what you want) execution. Protocols like UniswapX, CowSwap, and Across abstract complexity, letting solvers compete to fulfill user goals.\n- Better Prices: Solvers compete on execution quality.\n- MEV Resistance: Front-running becomes impossible by design.
10x+
Solver Competition
~0
Sandwich Risk
03
The Enabler: Proposer-Builder Separation (PBS)
Separates block building (by specialized builders) from block proposing (by validators). This is the foundational infrastructure for a competitive, neutral block space market.\n- Credible Neutrality: Proposer chooses the highest bid, not the most profitable attack.\n- Efficiency Gains: Enables complex, optimized block construction.
90%+
Ethereum PBS
>1s
Build Time
04
The Frontier: Encrypted Mempools & SUAVE
Privacy for transactions pre-execution. Flashbots' SUAVE aims to be a decentralized, cross-chain mempool and block builder, making MEV extraction a transparent, auction-based service.\n- Levels the Field: Prevents exclusive order flow deals.\n- Cross-Chain: Unifies liquidity and MEV markets across Ethereum, layerzero, etc.
~0ms
Info Leak
All Chains
Scope
05
The Risk: Centralization in Builder Cartels
PBS creates a new centralization vector: a few dominant builders (e.g., bloXroute, Titan) could control transaction ordering. This recreates the trusted intermediary problem PBS was meant to solve.\n- New Oligopoly: Top 3 builders control >50% of blocks.\n- Censorship Risk: Builders can exclude transactions.
>50%
Top 3 Share
High
Censorship Risk
06
The Endgame: MEV as a Public Good
Redirecting MEV revenue from extractors to protocol treasuries and stakers. EigenLayer restaking enables specialized "enshrined" services like decentralized builders, creating sustainable, aligned infrastructure.\n- Value Recapture: MEV funds protocol development.\n- Institutional-Grade: Creates verifiably neutral execution layers.
$100M+
Annual Redist.
Enshrined
Neutrality
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