Why Proposer-Builder Separation is a Political Compromise, Not a Solution

PBS is a political compromise. It appeases the community by separating block production from validation, but it does not decentralize the underlying capital or hardware requirements for staking. The core problem of capital concentration in entities like Lido and Coinbase remains.

The builder market centralizes power. Specialized builders like Flashbots and bloXroute dominate MEV extraction, creating a new, highly centralized layer. This shifts the centralization risk from validators to a smaller, more opaque cartel of builders and relays.

Evidence: Post-Merge, over 90% of Ethereum blocks are built by just five entities. The relay cartel controls censorship resistance and transaction ordering, making PBS a reallocation, not a reduction, of systemic risk.

PBS is a redistribution, not a solution. It surgically separates the role of block proposal from block construction, creating a new market for block space. This does not destroy the inherent MEV extraction monopoly; it merely outsources its execution to specialized actors like Flashbots SUAVE and Jito Labs.

The political bargain appeases validators. By guaranteeing validators a minimum bid for their block proposal rights, PBS transforms them from active, extractive participants into passive economic rent collectors. This neutralizes their opposition to MEV reform by making them direct beneficiaries.

Builders become the new centralizing force. The competitive advantage in block building shifts to entities with the best data, fastest connections, and most sophisticated MEV strategies. This creates a natural oligopoly, concentrating power in a few firms like Flashbots and BloXroute.

Evidence: The post-Merge Ethereum block space market is already dominated. Over 90% of blocks are built by a handful of builders, with the top three often controlling more than 60% of blocks. This is the predicted centralization, realized.

PBS is a cartelization mechanism. It separates block production from block validation, creating a specialized builder market. This professionalizes MEV extraction, moving it from a chaotic free-for-all to an institutionalized, high-stakes competition dominated by a few.

The compromise trades censorship for stability. PBS accepts that MEV is inescapable and centralizes it into a manageable, auction-based system. This prevents consensus instability from validator-level MEV wars but creates a new centralized choke point at the builder layer.

Builders are the new power brokers. Entities like Flashbots (SUAVE), bloXroute, and beaverbuild now control transaction ordering. Their sophisticated infrastructure and exclusive order flow deals create a significant barrier to entry, replicating TradFi's market-maker oligopoly on-chain.

Evidence: Post-PBS Ethereum sees >90% of blocks built by just five entities. This concentration gives builders outsized influence over transaction inclusion and network latency, fundamentally altering the trust model of the base layer.

PBS is a governance patch. It addresses the symptom—centralized block production—by formalizing the split between proposers and builders. This creates a regulated market but does not solve the root economic incentives for MEV extraction.

The builder market centralizes power. Specialized entities like Flashbots and bloXroute dominate with superior data and algorithms. This creates a new, entrenched oligopoly that controls transaction ordering and censorship.

Outsourcing creates moral hazard. Validators (proposers) cede block-building responsibility, becoming passive rent-seekers. Their incentive shifts from network health to maximizing builder bids, weakening protocol-level accountability.

Evidence: Post-PBS Ethereum sees >90% of blocks built by a handful of builders. This mirrors the pre-PBS miner centralization problem, proving PBS redistributes—not eliminates—centralized power.

PBS is damage control. It surgically addresses the MEV-driven centralization of validators by splitting block production from block proposal. This prevents staking pools like Lido from directly extracting value, a key political win for decentralization.

The compromise trades one problem for another. It centralizes power in a new professional builder market, but this is a known, monitorable oligopoly. The alternative is the opaque, integrated monopoly of a mega-validator.

Builders enable complex execution. Systems like Flashbots' SUAVE and protocols like UniswapX require sophisticated block construction that solo validators cannot replicate. PBS creates a market for this expertise.

Evidence: Post-merge, over 90% of Ethereum blocks are built by just five entities. PBS makes this concentration explicit and contestable, unlike the hidden centralization of MEV-boost today.

PBS is a political patch. It addresses validator centralization pressure from MEV by outsourcing block building, but it creates a new centralized builder cartel. The protocol's core actors—proposers and builders—now have misaligned incentives.

The real problem is MEV distribution. PBS does not eliminate extractable value; it professionalizes and centralizes its capture. Builders like Flashbots and bloXroute compete on efficiency, creating a winner-take-most market for block space.

Post-PBS solutions target the source. Protocols like SUAVE and Osmosis are exploring encrypted mempools and threshold encryption to neutralize frontrunning at the transaction source, moving the competition from block building to execution quality.

Evidence: Flashbots controls over 90% of Ethereum's MEV-Boost relay market. This builder dominance proves PBS shifts, rather than solves, the centralization problem, creating a critical dependency for the network.