Decentralized builders are economically unviable. A builder's profit is its extracted MEV minus its costs. Centralized operators like Flashbots and bloXroute achieve economies of scale in data, computation, and latency that no decentralized consortium can match, creating an insurmountable cost advantage.
mev-the-hidden-tax-of-crypto
Blog
Why Decentralized Block Builders Are a Pipe Dream
An analysis of the structural economic forces—latency, capital, and data—that make a truly decentralized, peer-to-peer network of block builders an unattainable ideal in the current MEV landscape.
introduction
THE REALITY
Introduction: The Decentralization Mirage
The promise of decentralized block builders is structurally incompatible with the economic and technical demands of modern MEV extraction.
The latency requirement is fatal. Winning the Proposer-Builder Separation (PBS) auction requires sub-second execution of complex MEV bundles. A decentralized network with consensus overhead, like SUAVE's proposed design, adds hundreds of milliseconds, guaranteeing it loses every block to centralized builders.
The data is conclusive. Over 90% of Ethereum blocks are built by three entities. This isn't a temporary flaw; it's the Nash equilibrium for a system where speed and capital efficiency determine survival. Protocols like EigenLayer and MEV-Share attempt to redistribute value but cannot decentralize the core building function itself.
key-trends
WHY DECENTRALIZED BUILDERS ARE A PIPE DREAM
The Centralizing Forces at Play
The economic and technical realities of MEV extraction create natural monopolies that no consensus mechanism can overcome.
01
The Latency Arms Race
Sub-millisecond access to order flow is the ultimate moat. Decentralized networks can't compete with co-located, proprietary infrastructure.
- ~100ms is the competitive edge for a private mempool.
- Decentralized gossip protocols add 200-500ms+ of fatal latency.
- This creates a winner-take-most market, as seen with Jito on Solana and Flashbots on Ethereum.
<100ms
Winning Latency
200ms+
Decentralized Penalty
02
The Capital Sinkhole
Effective building requires massive, liquid capital to fund MEV opportunities and guarantee proposer payments. This creates an insurmountable barrier to entry.
- Top builders like Flashbots and Titan control >80% of Ethereum blocks.
- Requires $10M+ in on-demand liquidity for arbitrage and liquidations.
- Staking-as-a-Service providers like Figment and Lido naturally centralize with the highest-paying builder.
>80%
Market Share
$10M+
Liquidity Req.
03
The Data Advantage
Superior block building is an AI/ML problem, not a consensus problem. Centralized entities hoard proprietary data to optimize complex, multi-chain MEV strategies.
- Order flow auctions (OFAs) like those by UniswapX and CowSwap sell intent data to the highest bidder.
- Historical MEV data is a non-public competitive asset for simulation.
- Decentralized builders are data-poor, making their blocks less profitable and less attractive to proposers.
Proprietary
Data Assets
AI/ML
Core Tech
04
Regulatory Capture
The entities that can navigate KYC/AML and establish legal wrappers will capture institutional order flow, the most valuable kind. Decentralization is a legal liability.
- Coinbase and Kraken will route their flow to compliant, centralized builders.
- OFAC compliance requires identifiable entities, not anonymous networks.
- This institutionalizes the builder role within the existing TradFi regulatory framework.
KYC/AML
Requirement
Institutional
Flow Captured
05
The Coordination Tax
Decentralized builder networks like SUAVE introduce massive overhead. Every auction, every block, requires multi-party coordination, which is slow and leaks value.
- Consensus latency kills time-sensitive arbitrage.
- Fee splitting and governance disputes reduce net profits for participants.
- The system optimizes for fairness, not profit, which is why it loses to centralized profit-maximizers.
High
Overhead
Profit Leak
Primary Flaw
06
The Proposer-Builder Collusion
PBS separates building from proposing, but does not eliminate trust. Builders and proposers (especially large staking pools) form exclusive, off-chain relationships.
- Side deals and private payment channels bypass the public auction.
- Builders offer reliability guarantees that decentralized networks cannot.
- This creates a closed ecosystem where the top 3 builders service the top 3 proposers.
Off-Chain
Deals
Closed Loop
Ecosystem
deep-dive
THE INCENTIVE MISMATCH
The Trilemma of Decentralized Building
Decentralized block builders are economically unviable because they cannot compete with centralized actors on latency, capital efficiency, and data access.
Decentralization sacrifices latency. A decentralized builder network requires consensus for block assembly, adding 100ms+ of overhead that centralized builders like Flashbots do not have. This delay is fatal in a sub-second auction for MEV.
Capital efficiency is impossible. A decentralized builder must pre-commit capital for all possible blocks, while a centralized builder like Jito Labs can dynamically allocate capital across a rolling window, achieving 10x higher utilization.
Data access creates asymmetry. Searchers sell order flow to the highest bidder. Centralized builders with proprietary order flow (e.g., from Coinbase or Binance) have a persistent information advantage that a permissionless network cannot replicate.
Evidence: The builder market is a natural monopoly. Post-PBS, Flashbots consistently commands >40% of Ethereum blocks, demonstrating that scale and speed consolidate, not fragment, market share.
THE CENTRALIZATION TRAP
Builder Market Share & Dominance Metrics
Comparing the operational and economic realities of major block builders, demonstrating the structural barriers to decentralization.
| Metric / Feature | Flashbots SUAVE (Ideal) | Top 5 Builders (Reality) | Solo Builder (Theoretical) |
|---|---|---|---|
Median Relayer Market Share (30d) | 0.0% (Not Live) |
| < 0.1% |
Required Capital for Competitive Bids | Shared Pool (Theoretical) |
|
|
Exclusive Order Flow Access | |||
PBS Compliance (enshrined proposer-builder separation) | |||
Cross-Domain MEV Capture (L1->L2, L2->L1) | |||
Time-to-Finality Impact from Builder Failure | None (Decentralized) | ~12 sec delay | None (Ignored) |
Censorship Resistance (OFAC Compliance) | Programmable |
| Programmable |
Monthly Revenue (Est.) | $0 | $10M - $50M | < $10k |
counter-argument
THE PIPE DREAM
Steelman: The Case for Decentralization
A first-principles analysis of why decentralized block builders face insurmountable economic and technical barriers.
Decentralization destroys economic efficiency. A decentralized builder network fragments block space value, creating a tragedy of the commons where no single participant captures enough value to justify the massive capital expenditure required for competitive MEV extraction and latency optimization.
Latency is a centralizing force. Sub-second block times and network propagation create a winner-take-most dynamic; decentralized consensus on block ordering adds fatal milliseconds, ceding all profitable arbitrage opportunities to centralized, co-located builders like those on Flashbots.
The builder market is already commoditized. The real value accrues to searchers who find MEV and validators who propose blocks. Decentralized builders like SUAVE attempt to insert a new, unnecessary layer, a strategy that failed for decentralized order flow in 0x and is failing for intents in UniswapX.
Evidence: The dominant builder on Ethereum, run by Flashbots, consistently wins over 90% of blocks in times of high MEV, demonstrating that centralized coordination and capital outcompete decentralized ideals.
takeaways
THE REALITY CHECK
Key Takeaways for Builders & Validators
Decentralized block builders promise censorship resistance but face insurmountable economic and technical hurdles in today's MEV landscape.
01
The Economic Infeasibility of Permissionless Building
Decentralized builders cannot compete with the capital efficiency of centralized, vertically-integrated entities like Flashbots. The race is won by who can source and hedge MEV fastest.
- Capital Requirements: Require massive, liquid bond pools to win auctions, creating a centralizing force.
- Latency Arms Race: Sub-100ms coordination needed for cross-domain MEV is antithetical to decentralized consensus.
- Result: The market consolidates around a few capital-rich, low-latency actors, replicating the current searcher/builder hierarchy.
>90%
Builder Dominance
$1B+
Required Bond
02
The Data Availability Bottleneck
A decentralized builder network requires sharing the mempool to find arbitrage, but public mempools are dead. Private order flow is the real asset.
- Private Order Flow: Entities like Coinbase, Binance, and UniswapX sell their flow to the highest bidder (e.g., Flashbots).
- Trusted Setup: Sharing this flow requires trusted relays, re-introducing a central point of failure and censorship.
- Reality: The value is in the exclusive data, not the building logic. Decentralizing the latter without the former is meaningless.
~0%
Public Arb
5-10 Firms
Flow Controllers
03
Sufficient Decentralization Lies in Proposer-Builder Separation (PBS)
The pragmatic win is enforcing a clean separation between block building and block proposing, not decentralizing the builder role itself.
- Validator Sovereignty: With enforced PBS, validators (proposers) can choose from multiple competing builder markets (e.g., Flashbots, bloXroute, Eden).
- Censorship Resistance: If one builder censors, the proposer can select an uncensored block from another. Competition at the proposer level is the safeguard.
- Builder-agnostic Protocols: Focus on standards like EIP-4844 for data and ERC-4337 for account abstraction that work with any builder output.
Multi-Market
Proposer Choice
Protocol-Level
Real Solution
04
The Searcher is the Real Builder
Sophisticated MEV extraction requires complex, stateful strategies across chains (e.g., LayerZero, Axelar). The entity crafting the optimal bundle is the effective builder.
- Vertical Integration: Top searchers like Jito Labs and Baron run their own builders to minimize latency and maximize capture.
- Decentralization Theater: A 'decentralized builder' that merely executes bundles from a centralized searcher is a redundant middleman.
- Focus Shift: Innovation is in cross-domain MEV coordination and secure sequencing, not replicating basic builder software.
~500ms
Cross-Chain Window
Vertical Stack
Winning Model
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall