Builder Centralization Risk in Ethereum

Three entities—Flashbots, bloXroute, and Titan—consistently build over 80% of Ethereum blocks. This centralization creates a single point of failure for transaction ordering and censorship.

• Flashbots alone often commands 40-50% of block share.
• OFAC compliance by dominant builders risks network-level censorship.
• Vertical integration with relays and searchers creates opaque, privileged lanes.

Ethereum's core protocol upgrade to formally separate block building from proposing, removing trust from the current PBS marketplace.

• Cryptographic commits force builders to reveal blocks before proposers choose.
• In-protocol slashing penalizes builder misbehavior (e.g., withholding).
• Levels the playing field by making the builder role permissionless and verifiable.

The most profitable MEV opportunities (e.g., DEX arbitrage, liquidations) are captured by a closed ecosystem of searchers and private mempools, starving the public mempool.

• Orderflow auctions (OFAs) like those by CowSwap and UniswapX sell user intent directly to builders.
• Searcher-Builder-Preferential Relays create a vertically integrated extractive stack.
• Result: Regular users get worse execution and subsidize sophisticated players.

Flashbots' ambitious attempt to decentralize the block building market itself. SUAVE is a separate chain acting as a preference and execution marketplace.

• Decentralizes memory: Users express intents, builders compete to fulfill them.
• Unbundles the stack: Separates preference collection, execution, and block building.
• Open marketplace: Aims to break the vertical integration of today's dominant builders.

Builders submit blocks to validators via relays, which have become centralized gatekeepers. They can censor transactions, go offline, or be compromised.

• Top 3 relays mediate ~99% of builder-proposer communication.
• Single point of failure: Relay downtime means validators miss blocks.
• Opaque filtering: Relays can silently drop blocks or transactions based on opaque rules.

Cutting out the trusted relay middleman by having builders broadcast blocks directly to validators over a P2P network.

• libp2p gossip: Leverages Ethereum's existing peer-to-peer layer for block distribution.
• Reduces latency and eliminates relay downtime risk.
• Increases resilience: A truly decentralized network of block distributors is harder to censor or attack.

Top-3 builders (e.g., Flashbots, bloXroute, Titan) consistently win >80% of blocks. This concentration creates systemic risk:\n- Censorship: Builders can exclude transactions from OFAC-sanctioned addresses.\n- Extraction: Dominant builders can extract maximal MEV, reducing user yields.\n- Collusion: A small group can manipulate block ordering for profit.

If PBS fails to decentralize builders, validators become order-takers, not block-producers. This inverts Ethereum's security model:\n- Validator Passivity: No incentive to run sophisticated block-building software.\n- Builder Capture: A single malicious builder could exploit a bug to reorg the chain.\n- Protocol Stagnation: Core devs must design for the weakest builder, not the strongest validator.

The long-term solution is protocol-enforced PBS and a neutral marketplace like Flashbots' SUAVE. This moves trust from entities to cryptography:\n- Credible Neutrality: Encrypted mempools and commit-reveal schemes prevent frontrunning.\n- Permissionless Building: Anyone can submit a block bundle, breaking cartel control.\n- Cross-Chain MEV: SUAVE aims to become a decentralized block builder for all chains.

Rollups (Arbitrum, Optimism, Base) inherit and amplify builder risk. Their sequencers are single-operator builders by default:\n- Forced Centralization: Users must trust the L2's sequencer for fair ordering.\n- MEV Leakage: L2 MEV is often extracted by the L1 builder, creating misaligned incentives.\n- Fragmented Liquidity: Each rollup has its own mini-builder monopoly.

Major staking providers (Lido, Coinbase) run their own builders, creating vertical integration risk. This merges consensus power with execution power:\n- Toxic Alignment: The entity that proposes the block also builds it, negating PBS.\n- Staker Lock-in: Delegators may be forced to accept the pool's builder for maximum rewards.\n- Regulatory Target: A single entity controlling >33% of stake and build could trigger intervention.

Full danksharding with EIP-4844 blobs reduces builder power by making data cheap and abundant. This shifts leverage from builders to proposers:\n- Cost Collapse: Builders can't gatekeep block space with high data costs.\n- Level Playing Field: Smaller builders can compete without massive capital for calldata.\n- Verifier's Dilemma Solved: Light nodes can verify data availability, reducing trust assumptions.