Block building is now mitigation. The primary value of a builder is no longer just capturing MEV, but reliably managing the complex risks of execution, settlement, and censorship resistance that extraction creates.
mev-the-hidden-tax-of-crypto
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The Future of Block Building is in Mitigation, Not Extraction
Proposer-Builder Separation (PBS) is a stopgap. The real endgame is protocol-level mechanisms that mitigate MEV by design, redistributing value back to users through competition, not just optimizing its capture.
introduction
THE SHIFT
Introduction
The MEV supply chain is evolving from a zero-sum extraction game into a collaborative system focused on risk and execution management.
The market demands reliability. Protocols like UniswapX and CowSwap route user intents through a network of solvers and builders; their success depends on guaranteed execution, not just maximal revenue for a single block.
This creates a builder's dilemma. A builder optimizing purely for extractable value will lose to one that optimizes for execution certainty and risk-adjusted returns, as seen in the adoption of services like Flashbots Protect.
Evidence: The rise of shared sequencing layers (e.g., Espresso, Astria) and intent-based architectures proves the market prioritizes predictable settlement over ephemeral profit margins for validators.
thesis-statement
THE SHIFT
The Core Argument: Mitigation as a Protocol Primitive
The next evolution in block building is the systematic mitigation of externalities, transforming them into a core protocol service.
Block building is risk management. The current PBS/MEV-Boost model optimizes for extractable value, but the winning builder is the one that best mitigates the systemic risks of its bundle, not the one that extracts the most.
Mitigation is the new primitive. Protocols like UniswapX and CowSwap already abstract this for users via intents. The next layer is for builders to abstract it for the chain itself, managing cross-domain atomicity and liquidity fragmentation risks inherent in LayerZero or Across transactions.
The builder's edge is now operational security. A builder that guarantees atomic settlement across 5 chains using a Hyperlane-like attestation system provides more value than one with a 0.1% better price on Ethereum alone. This shifts revenue from pure extraction to reliability premiums.
Evidence: The rise of intent-based architectures and shared sequencers like Astria proves the market values execution certainty over marginal price improvement. Builders will compete on their risk engine's sophistication, not just their capital.
key-trends
THE NEW BUILDING BLOCKS
The Three Pillars of the Mitigation Thesis
The next generation of block builders will win by neutralizing MEV's negative externalities, not by maximizing extraction.
01
The Problem: Opaque, Extractive Order Flow
Users blindly sign transactions, surrendering control to a black-box supply chain of searchers and builders who extract ~$1B+ annually in value. This creates toxic latency races, front-running, and poor execution.
- Value Leakage: Users lose to sandwich attacks and poor slippage.
- Centralization Pressure: Builders with the best MEV connections win, not the best infrastructure.
$1B+
Annual Extract
>80%
Block Share
02
The Solution: Intent-Based Architectures
Users declare what they want (e.g., "swap X for Y at best rate"), not how to do it. Protocols like UniswapX, CowSwap, and Across solve for optimal fulfillment, shielding users from execution complexity.
- Better Execution: Solvers compete on outcome, not gas, finding ~3-5% better prices via DEX aggregation.
- MEV Resistance: Atomic settlement and batch auctions neutralize front-running.
3-5%
Price Improve
0 Gas
For Failed Txs
03
The Enabler: Encrypted Mempools & SUAVE
Privacy is the prerequisite for fair ordering. Encrypted mempools (e.g., Shutter Network) and shared sequencers like Astria hide transaction content until block commitment. SUAVE aims to decentralize the entire flow by creating a neutral, competitive marketplace for block building.
- Front-Running Proof: Transaction contents are hidden until inclusion.
- Builder Democratization: Separates block building from proposer selection, reducing validator centralization.
~500ms
Encryption Latency
100%
Content Hidden
deep-dive
THE INTENT-CENTRIC SHIFT
From Searchers to Solvers: The CowSwap Blueprint
The future of block building shifts from MEV extraction to user intent fulfillment, pioneered by protocols like CowSwap.
Block building is intent fulfillment. Traditional searchers in the PBS model extract value from user transactions. Solvers, as defined by the CowSwap model, compete to fulfill user-specified outcomes, making execution a commodity.
The solver network outsources complexity. Users submit signed intents, not raw transactions. Solvers like those on CowSwap or via UniswapX then compete across liquidity sources (Uniswap, Curve, 1inch) and bridges (Across, LayerZero) to find the optimal path.
This inverts the MEV power dynamic. Instead of searchers frontrunning user flow, solvers are financially incentivized to optimize for the user's stated outcome. Bad execution loses the batch to a competitor.
Evidence: CowSwap processes billions in volume via this model, with ~70% of trades receiving positive MEV (better prices) refunded to users, proving mitigation creates superior economics.
THE BUILDER-USER DICHOTOMY
Extraction vs. Mitigation: A Protocol Design Comparison
A first-principles comparison of MEV strategy design, contrasting value extraction from users with value preservation for users.
| Core Design Metric | Extraction-First (Status Quo) | Mitigation-First (Emerging) | Hybrid Approach |
|---|---|---|---|
Primary Revenue Source | Arbitrage, Frontrunning, Liquidations | Order Flow Auctions, Searcher Tips | Mixed (Extraction + Protocol Fees) |
User Experience Impact | Slippage >0.5%, Failed Tx Rate >5% | Slippage <0.1%, Failed Tx Rate <1% | Slippage 0.1-0.3%, Failed Tx Rate ~2% |
Key Enabling Tech | Private Mempools (e.g., Flashbots) | Intent-Based Architectures (e.g., UniswapX, CowSwap) | Encrypted Mempool + OFA (e.g., Shutter Network) |
Censorship Resistance | Low (Centralized Builder Selection) | High (Decentralized Solver Networks) | Medium (Permissioned Builder Sets) |
Ecosystem Alignment | Adversarial (Builder vs. User) | Cooperative (Solver/Protocol vs. User) | Neutral (Protocol as Arbiter) |
Time to Finality | < 1 sec (for extracted tx) | 2-12 sec (for optimal routing) | < 2 sec (for all tx) |
Representative Protocols | MEV-Boost, Builder APIs | UniswapX, CowSwap, Across | SUAVE, Anoma, Espresso |
counter-argument
THE INEVITABILITY ARGUMENT
The Steelman: Isn't Efficient Extraction Inevitable?
Acknowledging that maximal extractable value (MEV) is a fundamental economic force, not a bug.
MEV is thermodynamic. It is the inevitable profit from reordering transactions in a public mempool. The debate shifts from elimination to managing its externalities, like network congestion and unfair user outcomes.
The future is mitigation. Protocols like Flashbots' SUAVE and CoW Swap's solver network formalize extraction into a competitive, transparent auction. This channels economic forces into public goods funding instead of hidden arbitrage.
Builder dominance is the real risk. The centralization pressure from specialized block builders like Titan Builder and beaverbuild creates systemic fragility. A single point of failure for a multi-billion dollar chain is unacceptable.
Evidence: After Ethereum's Merge, over 90% of blocks are built by entities using MEV-Boost, proving that professionalized extraction is the equilibrium state for a mature chain.
protocol-spotlight
FROM EXTRACTIVE TO PREVENTATIVE
The Mitigation Vanguard: Who's Building the Future
The next wave of block building innovation focuses on neutralizing MEV threats at the protocol level, shifting value from searchers and builders back to users and validators.
01
SUAVE: The Universal MEV-Aware Chain
Ethereum's proposed specialized chain to decentralize and democratize block building. It separates block building from proposing, creating a competitive marketplace for execution.
- Decouples block building from validation, breaking builder oligopolies.
- Enables cross-domain MEV capture (e.g., Ethereum → Polygon) without trusted relays.
- Provides a neutral, encrypted mempool where users can express intents.
100%
Decoupled
0
Trusted Relays
02
MEV-Boost++ & PBS Enshrined
The evolution of Proposer-Builder Separation (PBS) from an out-of-protocol middleware (MEV-Boost) to a core Ethereum protocol feature.
- Eliminates trusted relay requirements, a major centralization and censorship vector.
- Enforces credible commitments, preventing builder censorship and bid manipulation.
- Integrates with SUAVE for a full-stack, protocol-level mitigation strategy.
-99%
Trust Assumption
L1
Native
03
The Intent-Based Paradigm (UniswapX, CowSwap)
Shifts the burden of execution from users to solvers, abstracting away complexity and front-running risk. Users specify the what, not the how.
- Neutralizes front-running and sandwich attacks by design.
- Aggregates liquidity across all DEXs and private pools for optimal price discovery.
- Enables gasless, cross-chain swaps via off-chain auction mechanisms.
$10B+
Volume
0
Sandwich Risk
04
Threshold Encryption (Shutter Network)
Encrypts transaction content until it is included in a block, blinding searchers and builders to the transaction's details and value.
- Prevents front-running and malicious inclusion ordering (time-bandit attacks).
- Maintains composability, unlike private mempools that fragment liquidity.
- Leverages Distributed Key Generation (DKG) for decentralized, trust-minimized decryption.
100%
Blinded
DKG
Decentralized
05
Fair Sequencing Services (Espresso, Astria)
Decentralized sequencers that order transactions based on time of arrival, not gas price, before they reach the builder layer.
- Guarantees fair, first-come-first-serve transaction ordering.
- Creates a neutral base layer for rollups, preventing L2-level MEV extraction.
- Interoperates with shared sequencer networks for cross-rollup atomic composability.
~500ms
Finality
FCFS
Ordering
06
Protocol-Enforced Redistribution (MEV-Share, MEV-Smoothing)
Mechanisms to detect extracted MEV and redistribute a portion of that value back to the users who generated it or to the protocol treasury.
- Turns MEV from a user tax into a protocol revenue stream or rebate.
- Incentivizes user participation through explicit order flow auctions (like MEV-Share).
- Smooths validator rewards, reducing the variance that pushes staking towards pools.
>50%
Redistributed
Smoother
Staking APR
future-outlook
THE STRATEGY SHIFT
The Next 24 Months: Mitigation Goes Vertical
The competitive edge in block building will shift from pure extraction to mitigating user and application pain points.
Mitigation is the new extraction. Builders will compete on solving MEV toxicity, not just capturing it. This creates a direct alignment with end-user experience and application success.
Vertical integration is inevitable. Generic builders like Flashbots' SUAVE will lose to specialized chains with native mitigation. A rollup for gaming will bake MEV protection into its sequencer logic.
The market demands application-aware execution. Users on Uniswap want protection from sandwich attacks, not just low fees. Builders that guarantee this via private mempools or fair ordering win.
Evidence: The rise of intent-based architectures like UniswapX and CowSwap demonstrates that users will pay a premium for execution that mitigates MEV risk and slippage.
takeaways
THE POST-MEV ERA
TL;DR for CTOs and Architects
The MEV supply chain is maturing. The next competitive edge isn't in extracting more value, but in building systems that mitigate its negative externalities for users and applications.
01
The Problem: MEV is a Tax on Every Transaction
Arbitrage and liquidation bots extract ~$1B+ annually from users, creating systemic risks like front-running and failed transactions. This is a direct cost passed to your users and a reliability nightmare for your protocol.
- User Experience: Transactions fail or get front-run, eroding trust.
- Protocol Design: Forces architects to design around MEV, not user needs.
- Network Health: Encourages centralization in block building.
$1B+
Annual Extract
~15%
Failed Tx Rate
02
The Solution: Intents & Encrypted Mempools
Shift from transaction-based execution to outcome-based intents. Users specify a desired end-state (e.g., "swap X for Y at best price"), and specialized solvers compete to fulfill it off-chain. This requires encrypted mempools (e.g., Shutter Network) to prevent front-running.
- Better Execution: Solvers optimize for price, not just inclusion.
- User Sovereignty: Privacy is restored; transactions are hidden until execution.
- Architectural Shift: Protocols like UniswapX and CowSwap are already intent-native.
~90%
Price Improvement
0ms
Front-Run Window
03
The New Stack: SUAVE & Shared Sequencing
A dedicated, neutral block-building layer like SUAVE (Single Unified Auction for Value Expression) decouples the auction for block space from execution. Combined with shared sequencers (e.g., Espresso, Astria), this creates a competitive marketplace for block building.
- Decentralization: Breaks the Jito/BloxRoute oligopoly.
- Efficiency: Builders see the full cross-domain MEV opportunity.
- Composability: A universal preference layer for all chains.
10x+
Builder Competition
-40%
Extracted MEV
04
The Endgame: Proposer-Builder Separation (PBS)
Ethereum's PBS is the canonical blueprint. It formally separates the role of the block proposer (validator) from the block builder (specialized entity). This is non-negotiable infrastructure for credible neutrality and scaling.
- Censorship Resistance: Builders cannot censor transactions without proposer collusion.
- Specialization: Builders optimize for complex execution; validators for consensus.
- Regulatory Clarity: Isates staking from the complexities of MEV extraction.
100%
Required for Scaling
~0%
Censorship Risk
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