Block Building Markets: What Actually Happens

Public mempools are toxic. Searchers run front-running bots and sandwich attacks, extracting over $1B annually from users. This creates a negative-sum game where latency and capital, not fairness, determine transaction outcomes.\n- User Cost: Extractable value is a direct tax on every swap and trade.\n- Network Inefficiency: Blocks are not built for optimal chain state or user value.

Decouples block building from block proposing. Specialized builders (e.g., Flashbots, BloXroute) compete in a sealed-bid auction to create the most valuable block, paying the validator (proposer) for the right to include it.\n- Efficiency: Builders optimize for maximum extractable value (MEV), increasing validator revenue.\n- Censorship Resistance: Proposers are blind to transaction content, mitigating regulatory pressure.

Block building is not a commodity. It requires high-frequency trading infrastructure, exclusive order flow (EOF), and cross-domain MEV strategies. This has led to a winner-take-most market.\n- Top Builders: Flashbots (via mev-boost) and BloXroute command dominant market share.\n- Risk: Reliance on a few builders recreates centralization and creates new points of failure.

The next evolution moves the auction on-chain. SUAVE (Single Unifying Auction for Value Expression) is a dedicated chain for preference expression and block building. Transactions are sent to SUAVE in encrypted bundles, preventing front-running.\n- User Sovereignty: Intent-based transactions where users express goals, not raw calldata.\n- Market Structure: Creates a neutral, decentralized marketplace for block space across multiple chains.

Outsourced builders are not neutral; their primary incentive is to capture Maximum Extractable Value (MEV) for themselves and their searcher clients. This turns block production into a rent-seeking business.

• Value Leakage: An estimated 90%+ of arbitrage and liquidation profits are extracted from regular users.
• Opaque Auctions: The winning bid in a builder auction is often the one that pays validators the most, not the one with the best public mempool inclusion.
• Centralization Force: Top builders like Flashbots and bloXroute dominate, creating systemic risk.

A centralized builder market creates a single point of control for transaction filtering. Compliance with OFAC sanctions lists by major builders like Flashbots demonstrates this risk.

• Protocol-Level Censorship: Over 70% of Ethereum blocks have been OFAC-compliant post-Merge, largely due to builder behavior.
• Gatekeeping Power: Builders decide which transactions enter the chain, undermining credibly neutral base layer guarantees.
• Regulatory Attack Surface: Governments can pressure a handful of corporate entities instead of a decentralized validator set.

The competition for MEV has spawned a latency arms race, privileging builders with proprietary infrastructure and colocation next to validators.

• Barrier to Entry: Requires millisecond-level latency and custom hardware, pushing out smaller, diverse participants.
• Geographic Centralization: Builders cluster in specific data centers (e.g., Ashburn, Virginia), creating physical centralization risks.
• Relay Dominance: The relay (e.g., Flashbots Relay) that connects builders to validators becomes a critical trusted party, often run by the builder itself.

Formalizing the builder market at the protocol level (e.g., Ethereum's enshrined PBS) can mitigate outsourced risks by making the auction trust-minimized and permissionless.

• Credible Neutrality: The protocol itself runs the auction, removing the trusted relay and reducing builder-validator collusion.
• Permissionless Entry: Anyone can participate as a builder without needing approval from a centralized entity like Flashbots.
• Builder Commitments: Builders must cryptographically commit to block contents, making censorship detectable and provable.

Initiatives like Flashbots' SUAVE aim to decentralize the builder role itself by creating a specialized chain for preference expression and execution.

• Decentralized Memory Pool: A shared, encrypted mempool (SUAPP) to break information asymmetries.
• Competitive Execution: Multiple executors compete to fulfill user intents, reducing single-builder dominance.
• Cross-Chain Vision: Aims to become a universal plug-in for block building across Ethereum, Arbitrum, Optimism, and others.

Innovations in validator software and cryptoeconomics are emerging to rebalance power. MEV-Boost++ introduces commit-reveal schemes, while EigenLayer enables validators to enforce slashing conditions on builders.

• Partial Block Bids: Allows validators to see block headers before commitment, reducing information asymmetry.
• Enforceable Commitments: Using restaked ETH as collateral, builders can be slashed for malicious behavior (e.g., withholding blocks).
• Validator Empowerment: Gives the validator set (proposers) more tools to audit and control the builder market.