Why MEV Validator Selection Is an Antitrust Issue

PBS separates block building from proposing, but not from validator selection. Builders can now vertically integrate by operating their own validators or forming exclusive alliances, creating a closed loop.

• Builder cartels can guarantee their blocks are proposed, bypassing the open relay market.
• This creates a two-tiered system: affiliated validators get premium MEV bundles, independents get crumbs.
• The threat is rent extraction shifting from searcher-to-proposer to builder-to-validator.

The protocol's long-term answer is Enshrined PBS (ePBS) within the consensus layer. However, interim solutions like MEV-Boost++ and MEV-Share attempt to mitigate cartelization by redesigning the relay.

• Commit-Reveal schemes can hide block content until after validator selection, preventing favoritism.
• Permissionless relays and builder reputation systems aim to keep the market open.
• The core tension: any off-chain coordination layer (like a relay) can itself become a cartel.

Regulatory compliance has become a vector for anti-competitive behavior. Major builders like Flashbots censoring OFAC-sanctioned transactions created a de facto cartel of compliant blocks.

• Validators selecting only compliant builders reduces network neutrality and creates a compliance moat.
• This demonstrates how non-technical criteria can be used to exclude competitors and control validator selection.
• The result is soft cartelization under the guise of regulatory adherence.

Universal MEV auctions like SUAVE aim to break builder dominance by decentralizing the block building process itself. It proposes a separate mempool and execution network for MEV.

• Decouples preference from execution, preventing builder-validator exclusive deals.
• Turns MEV into a commoditized resource auctioned on a neutral platform.
• If successful, it makes validator selection irrelevant to MEV capture, dissolving the cartel's leverage.

The rise of dominant, vertically-integrated MEV-Boost relays like BloXroute and Flashbots creates a bottleneck. These entities control which transactions are included, effectively forming a cartel that can censor, front-run, and extract maximal value.\n- >90% of Ethereum blocks are built by a handful of relays.\n- Creates a single point of failure for OFAC compliance and network neutrality.

Major Liquid Staking Derivatives (LSD) providers like Lido and centralized exchanges control vast validator sets. Their selection of MEV relays is not neutral; it's a business decision that can favor affiliated builders, stifling competition.\n- Lido commands ~30% of Ethereum stake, a critical threshold for network security.\n- Creates a conflict of interest where staking returns are prioritized over chain health and decentralization.

Entities like Coinbase and Kraken operate as validators, block builders, and CEXs. This vertical integration allows for cross-product data advantages and internalized MEV flows, raising classic antitrust 'tying' concerns.\n- Enables cross-venue arbitrage unavailable to independent operators.\n- Regulatory precedent from TradFi (e.g., payment for order flow) suggests this is a prime enforcement target.

Protocols and VCs must preemptively architect for decentralization to mitigate antitrust risk. This involves enforced client diversity, credible neutrality in relay selection, and support for Permissionless Builder Markets like EigenLayer's MEV Burn or SUAVE.\n- Mandate relay rotation in staking pool smart contracts.\n- Fund and integrate minimal-trust PBS (Proposer-Builder Separation) implementations.

The economies of scale in MEV (data, infrastructure, capital) create a winner-takes-most dynamic. Top validators like Lido, Coinbase, Figment can run sophisticated searcher-builder networks that smaller players cannot match, leading to >33% market share for a few entities. This isn't just efficiency; it's a structural barrier to entry.

The antitrust fix is protocol-level. Proposer-Builder Separation (PBS) and architectures like Flashbots' SUAVE aim to separate block building from proposing. This commoditizes the validation role and creates a competitive, permissionless market for block space assembly, preventing vertical integration of MEV capture.

• Decouples Power: Validators propose, builders compete.
• Transparent Auction: MEV revenue is publicly visible.
• Censorship Resistance: Mitigates OFAC-compliance risks.

Regulatory action has already exposed the antitrust risk. When >50% of Ethereum blocks complied with OFAC sanctions via entities like Flashbots, BloXroute, it demonstrated a small group's ability to control transaction inclusion. This isn't just about ethics; it's a coordination failure that proves a cartel exists and can act in unison, a key test for antitrust regulators like the DOJ or EU Commission.

Move value away from the vulnerable transaction layer. Systems like UniswapX, CowSwap, and Across use intent-based architectures and RFQ systems that settle via MEV-robust mechanisms. This shifts the competitive battlefield from validator selection to solver networks, reducing the extractable surface area for validator cartels.

• User Sovereignty: Express outcomes, not transactions.
• Solver Competition: Solvers bid for best execution.
• Cross-Chain Native: Works with LayerZero, CCIP.

The core trade-off. A chain is live if it produces blocks, but censorship-resistant only if it includes all valid transactions. Current Total Value Locked (TVL) and APR metrics for validators measure liveness, not censorship resistance. Architects must monitor inclusion lists, OFAC compliance rates, and builder market share as primary health indicators, not just uptime.

The sustainable equilibrium. Validator selection should be as consequential as picking an AWS region—a decision based on cost and latency, not on the ability to extract value or censor. This requires fully enshrined PBS, distributed builder networks, and credible slashing for liveness faults. The goal is to make MEV a public good auctioned by the protocol, not a private rent extracted by a cartel.