MEV Infrastructure After the Merge

Proposer-Builder Separation (PBS) centralizes power in a few elite builders (e.g., Flashbots, Titan, bloXroute), creating a new layer of rent extraction. The protocol-level solution is enshrined PBS, but until then, MEV-Boost relays act as centralized gatekeepers controlling ~90% of Ethereum blocks.

• Key Benefit: Protocol-level PBS reduces trust in relays.
• Key Benefit: Democratizes block building for smaller validators.

Atomic arbitrage between L1, L2s (Arbitrum, Optimism), and alt-L1s (Solana) is the new frontier. This requires sophisticated infrastructure for cross-domain message passing and liquidity bridging, dominated by players like Across and LayerZero.

• Key Benefit: Captures inefficiencies across fragmented liquidity pools.
• Key Benefit: Drives demand for fast, reliable cross-chain bridges.

Moving from transaction-based (push) to intent-based (pull) systems. Users declare a desired outcome (e.g., "swap X for Y at best price"), and a solver network competes to fulfill it. This abstracts away complexity and can reduce MEV leakage. See UniswapX, CowSwap, Anoma.

• Key Benefit: Better UX and improved price execution for users.
• Key Benefit: Transfers competition from the public mempool to a private solver network.

The fight for transaction privacy pre-execution. Projects like Shutter Network (threshold encryption) and EigenLayer's MEV Privacy aim to create a sealed-bid environment for transactions, neutralizing frontrunning. The battle is between decentralized sequencers and centralized private RPCs (e.g., Flashbots Protect).

• Key Benefit: Protects users from sandwich attacks and predatory arbitrage.
• Key Benefit: Creates a more level playing field for searchers.

Proposer-Builder Separation (PBS) was meant to democratize block building, but in practice, a few dominant builders like Flashbots SUAVE, bloXroute, and Titan control >80% of blocks. This recreates the miner centralization problem at the builder layer, creating a new point of failure and censorship.

• Builder dominance leads to predictable, extractable order flow.
• Vertical integration risks (e.g., relay-builder-censorship bundles).
• Staking pools like Lido and Coinbase default to top relays, cementing the oligopoly.

The plan for protocol-level PBS (ePBS) is a multi-year roadmap. By the time it's implemented, the current market structure will be entrenched. Interim solutions like MEV-Boost have ossified into the de facto standard, making the ecosystem dependent on off-chain, trust-minimized relays that are now points of centralization.

• Timeline risk: ePBS is a 2025+ event.
• Path dependency: The entire DeFi stack (Uniswap, Aave, Compound) is optimized for today's PBS.
• Relay trust: Validators must trust relay attestations, a new security assumption.

The MEV supply chain now spans multiple chains via bridges like LayerZero, Wormhole, and Axelar. This creates arbitrage opportunities but also systemic risk: an exploit in a cross-chain MEV bundle can drain liquidity across ecosystems. Searchers use these bridges as a hedging layer, but they introduce new trust assumptions and latency arbitrage.

• Bridge oracle risk is now part of the MEV stack.
• Latency races create unsustainable infrastructure spend.
• Hedging complexity turns simple arbitrage into multi-chain derivative exposure.

Solutions like Flashbots SUAVE and Shutter Network aim to encrypt transactions to prevent frontrunning. However, encrypted mempools add latency, reduce block space efficiency, and can be gamed by sophisticated searchers who infer intent. This creates a bifurcated market: efficient/public vs. private/slow, fragmenting liquidity.

• Latency penalty: Encrypted auctions add 100-500ms of delay.
• Complexity attack surface: New cryptographic assumptions (TEEs, FHE).
• Liquidity fragmentation: Breaks the atomic composability DeFi relies on.

The most centralized points of the new stack—builders and relays—are the easiest to regulate. A OFAC-compliant relay like Flashbots already censors transactions. If regulatory pressure increases, compliant builders could form a cartel, effectively creating a sanctioned DeFi ecosystem. Validators seeking maximum yield are economically incentivized to join it.

• Censorship leverage: Regulators target ~3 entities, not 1M validators.
• Economic coercion: Highest MEV yield flows through compliant builders.
• Protocol neutrality failure: Ethereum's credibly neutral base layer is compromised by its application layer.

Large staking pools like Lido and Coinbase run their own MEV infrastructure (relays, builders) and capture value for their stakeholders. This creates a feedback loop: more stake → more MEV capture → better staking yields → more stake. It directly challenges the decentralized validator ideal and turns MEV into a tool for stake centralization.

• Vertical integration: Lido's ssv.network + secure relays.
• Yield feedback loop centralizes stake.
• Protocol-level conflict: Ethereum's security vs. pool profitability.

Proposer-Builder Separation (PBS) is the architectural north star post-Merge, designed to democratize access and prevent validator centralization. It's not optional; it's a network survival mechanism.

• Key Benefit: Unbundles trust, allowing specialized builders (e.g., Flashbots, bloXroute) to compete on execution quality.
• Key Benefit: Protects validators from regulatory risk and operational complexity of running MEV software.

Flashbots' SUAVE is a bet to own the entire MEV supply chain—from user intent to cross-chain settlement. It's a vertically integrated play that makes current searcher/builder models look primitive.

• Key Benefit: Centralizes liquidity and order flow into a universal mempool, capturing value currently leaked to UniswapX and CowSwap.
• Key Benefit: Native cross-chain intent execution threatens standalone bridges like Across and LayerZero.

Running a validator is no longer just about staking yield; it's about optimizing MEV revenue via relay selection and builder markets. This creates a new SaaS layer for staking providers.

• Key Benefit: Top relays (Flashbots, bloXroute, Titan) compete on payment reliability and censorship resistance, creating a ~15-20% boost to validator APR.
• Key Benefit: New middleware (e.g., mev-boost, EigenLayer) lets validators outsource block building while maintaining slashing safety.

Generalized frontrunning is dead. Post-Merge MEV is about hyper-specialized strategies (NFT arbitrage, DEX-CEX arb, liquidations) and access to private order flow via Flashbots Protect or similar services.

• Key Benefit: PBS creates a transparent auction, shifting competition from gas wars to algorithm efficiency.
• Key Benefit: Privacy-preserving tech (e.g., shutterized auctions) is mandatory to prevent strategy theft, benefiting projects like Shutter Network.

OFAC compliance is no longer abstract. Relays and builders that censor transactions create systemic risk, forcing protocols to design for censorship resistance from day one.

• Key Benefit: Drives innovation in crLists, inclusion lists, and enshrined PBS as anti-censorship levers.
• Key Benefit: Creates a market for 'credibly neutral' infrastructure, a moat for builders like Titan and Ultrasound Money.

Users won't submit transactions; they'll declare outcomes. This shift from transactions to intents, powered by UniswapX and CowSwap, turns the MEV supply chain into a service layer for user satisfaction.

• Key Benefit: Captures value at the point of intent, making traditional DEX frontends mere order flow aggregators.
• Key Benefit: Enables cross-chain atomicity natively, a direct challenge to intent-based bridges like Across.