Searchers drive extraction. Independent bots identify profitable on-chain opportunities like DEX arbitrage or liquidations. They compete by crafting optimal transaction bundles using tools like Flashbots' MEV-Boost to bypass the public mempool.
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Inside Ethereum's MEV Supply Chain
From dark forest arbitrage to institutionalized PBS, we map Ethereum's MEV ecosystem. This is the technical reality of value extraction, redistribution, and the looming centralization risks post-Merge.
introduction
THE SUPPLY CHAIN
The MEV Industrial Complex
Maximal Extractable Value (MEV) has evolved from opportunistic arbitrage into a formalized, multi-layered supply chain that extracts billions from Ethereum users.
Builders centralize execution. Professional builders like bloXroute and Beaver Build aggregate searcher bundles, constructing the most profitable block. They leverage private order flow from RPC providers like Alchemy to gain an informational edge.
Validators finalize the profit. Validators, running MEV-Boost software, outsource block construction to builders via a relay network. They select the highest-paying block, capturing the majority of the MEV value as a bid.
Evidence: Over $1.3B in MEV was extracted on Ethereum in 2023, with builders like Titan and Rsync controlling over 80% of block space during peak periods.
key-trends
INSIDE THE SUPPLY CHAIN
The Post-Merge MEV Landscape: Three Structural Shifts
The Merge and PBS didn't eliminate MEV; they formalized and restructured its supply chain, creating new power dynamics and business models.
01
The Problem: Proposer-Builder Separation is a Cartel
PBS created a professional builder market, but economic incentives have led to consolidation. ~90% of blocks are built by just three entities, creating systemic risk and censorship vectors.\n- Builder dominance centralizes block production power.\n- OFAC compliance becomes trivial to enforce at the builder level.\n- Relay trust is now a critical, unproven assumption.
~90%
Block Share
3
Dominant Builders
02
The Solution: SUAVE is a Vertical Integration Play
Flashbots' SUAVE aims to vertically integrate the MEV supply chain by creating a decentralized mempool and block builder network. It seeks to democratize access and capture value from searchers and builders.\n- Universal mempool breaks the Ethereum-centric model.\n- Preference auction decouples transaction privacy from execution.\n- Native chain creates a new revenue moat for the protocol.
1
Chain to Rule
100%
Fee Capture
03
The New Battleground: Cross-Chain MEV is the Frontier
Atomic arbitrage across chains like Ethereum, Solana, and Avalanche is the next trillion-dollar opportunity. This requires new infrastructure for message sequencing and execution coordination.\n- LayerZero and Wormhole enable the cross-chain state proofs.\n- Specialized searchers operate on sub-500ms latency requirements.\n- Intent-based systems (UniswapX, Across) abstract complexity from users.
$1T+
Opportunity
<500ms
Latency
deep-dive
THE PIPELINE
Anatomy of the Supply Chain: From Intent to Block
The MEV supply chain is a competitive pipeline that transforms user intents into finalized blocks, extracting value at every stage.
User Intent Origination begins the chain. A user signs a transaction, creating a signed intent for a specific outcome, like a swap on Uniswap. This raw intent is broadcast to the network's public mempool, exposing it to extraction.
Searcher Competition defines the next layer. Automated bots (searchers) from firms like Flashbots and Jito Labs scan the mempool for profitable opportunities. They bundle, reorder, and insert their own transactions to capture value via arbitrage or liquidations.
Builder Aggregation centralizes block construction. Builders like bloXroute and Titan receive bundles from searchers. They assemble the most profitable block possible, often using private orderflow from RPC providers like Alchemy to gain an informational edge.
Validator Finalization is the auction. Builders submit their blocks to validators/proposers in a PBS (Proposer-Builder Separation) auction. The highest-bidding block, paying the most to the validator, gets proposed and finalized on-chain, completing the value extraction cycle.
ECOSYSTEM CONTROL POINTS
MEV Supply Chain Power Metrics
Quantifying the influence and economic capture of key infrastructure providers in the Ethereum MEV supply chain.
| Metric / Feature | Builders (e.g., Flashbots, Titan) | Relays (e.g., BloXroute, Agnostic) | Searchers (e.g., JIT Bots, Arbitrageurs) |
|---|---|---|---|
Avg. Block Market Share (Q1 2024) |
| N/A (Builder-specific) | N/A |
Primary Revenue Source | Priority Fees + MEV Kickbacks | Builder Payments / Subsidies | Extracted MEV Profit |
Can Censor Transactions? | |||
Avg. Time in Supply Chain (Block Proposer -> Builder) | < 1 sec | ~500-800 ms | N/A |
Avg. Profit per Unit (Est.) | $5-20 per block | $0.05-0.20 per block | $100-1000+ per opportunity |
Direct Protocol Governance Influence | High (via token voting) | Low to Medium | Low (economic only) |
Requires Staked ETH (32 ETH) | |||
Key Dependency / Risk | Validator Trust / Relayer Uptime | Builder Adoption / Latency | Strategy Alpha / Gas Optimization |
risk-analysis
THE ARCHITECTURE
The Centralization Trilemma: Builders, PBS, and enshrined MEV
Proposer-Builder Separation (PBS) solves validator centralization by creating a new, more powerful centralization point: the block builder.
Proposer-Builder Separation (PBS) is Ethereum's architectural fix for validator centralization. It splits block proposal from block construction, preventing validators from directly capturing MEV. This creates a competitive market for specialized block builders like Flashbots, bloXroute, and Titan.
Builder centralization is the new risk. The builder role requires immense capital, data access, and optimization. This favors a few elite players who can offer validators the highest bid, creating a winner-take-most market similar to proof-of-work mining pools.
Enshrined PBS (ePBS) is the protocol-level solution. It moves the auction mechanism into the core protocol, reducing trust in external relays. The trade-off is increased protocol complexity and a slower, more rigid upgrade path compared to in-protocol solutions like MEV-Boost.
Evidence: Over 90% of Ethereum blocks are built via MEV-Boost, with the top three builders consistently producing >50% of blocks. This demonstrates the rapid centralization pressure PBS introduces, making ePBS a necessary, albeit complex, endgame.
takeaways
INSIDE THE MEV MACHINE
TL;DR for Protocol Architects
Ethereum's MEV supply chain is a multi-billion dollar shadow economy that dictates transaction ordering, finality, and user costs. Understanding its layers is non-negotiable for protocol design.
01
The Problem: Searchers Extract, Users Pay
The permissionless mempool is a public hunting ground. Searchers run bots to front-run, back-run, and sandwich user transactions, extracting ~$1B+ annually. This creates negative externalities: user slippage, failed transactions, and network congestion.
- Cost: Users pay inflated gas and implicit MEV tax.
- Inefficiency: Public bidding wars waste gas on reverted bundles.
$1B+
Annual Extract
>90%
Arb/Sandwich
02
The Solution: Proposer-Builder Separation (PBS)
PBS formally separates block building from block proposing. Specialized builders (e.g., Flashbots, Titan) compete to create the most profitable blocks, selling them to validators. This creates a structured market.
- Efficiency: Centralizes complex computation off-chain.
- Revenue: Validators capture MEV revenue via auctions.
- Enshrined PBS is a core goal of Ethereum's roadmap.
~99%
PBS Blocks
0 ETH
PBS Tax
03
The Builder's Toolkit: SUAVE
Flashbots' SUAVE is a dedicated chain for MEV. It aims to become the decentralized, neutral marketplace for block building and cross-chain intent expression.
- Decentralization: Moves trust from a single entity to a network.
- Cross-Chain: Aims to aggregate liquidity and intents across Ethereum, Arbitrum, Optimism.
- Privacy: Encrypted mempool prevents front-running on the chain itself.
1 Chain
Unified Auction
Multi-Chain
Intent Scope
04
The Application Layer: MEV-Aware Design
Protocols must architect to minimize extractable value and protect users. This requires moving beyond naive transaction submission.
- Use Private RPCs: Routes like Flashbots Protect or BloXroute avoid the public mempool.
- Adopt MEV-Resistant AMMs: Designs like CowSwap (batch auctions) or UniswapX (intent-based) resist sandwiches.
- Integrate MEV Sharing: Protocols like MEV-Share or MEVBlocker can redistribute captured value back to users.
~0%
Sandwich Risk
User Rebate
Value Return
05
The Cross-Chain Frontier: Interchain MEV
MEV is no longer an L1-only problem. Bridges and liquidity networks between Ethereum, Avalanche, Solana create new arbitrage vectors. This is the domain of LayerZero and Wormhole oracles, and generalized solvers like Across.
- Complexity: Requires coordination across heterogeneous state machines.
- Risk: Increases attack surface for cross-domain sandwich attacks.
- Opportunity: Largest future MEV pools will be cross-chain.
Multi-Chain
Attack Surface
$B+
Future Pool
06
The Endgame: Intents & Solving
The paradigm is shifting from transactions (specifying how) to intents (specifying what). Users submit signed constraints, and a competitive network of solvers (e.g., UniswapX, CowSwap, Anoma) fulfills them optimally.
- Efficiency: Solvers find optimal cross-domain execution paths.
- User Experience: Abstracts away gas, slippage, and chain complexity.
- Centralization Risk: Solver networks may become new choke points.
Intent-Based
New Paradigm
Solver Network
Execution Layer
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