MEV is economic coordination. It is not a bug but a feature, representing the financial incentive that aligns block builders, searchers, and validators to process transactions efficiently. This incentive structure is the market-driven settlement layer for decentralized finance.
the-ethereum-roadmap-merge-surge-verge
Blog
MEV Infrastructure Is Economic Plumbing
MEV isn't a bug; it's a feature. The infrastructure capturing it—builders, relays, searchers—forms the economic plumbing of Ethereum. This system dictates validator profits, user costs, and network security through the Merge, Surge, and Verge. We dissect the pipes, the pressure, and the future leaks.
introduction
THE ECONOMIC ENGINE
The Contrarian Hook: MEV Isn't Parasitic, It's Foundational
MEV is the fundamental mechanism for price discovery and liquidity allocation across decentralized networks.
Liquidity follows MEV flows. Protocols like UniswapX and CowSwap formalize MEV into their design, using it to source the best prices across venues. This transforms a chaotic backroom auction into a public, competitive service for users.
Infrastructure dictates market structure. The rise of Flashbots' SUAVE, bloXroute, and Jito proves MEV is now a core infrastructure vertical. These systems manage the extraction and redistribution of value, becoming essential plumbing for any high-throughput chain.
Evidence: MEV-Boost dominates Ethereum. Over 99% of Ethereum blocks are built via MEV-Boost relays, demonstrating that professionalized block building is not optional. This infrastructure now processes billions in annualized extractable value.
key-trends
FROM EXTRACTION TO INFRASTRUCTURE
Executive Summary: 3 Trends Defining MEV Plumbing
MEV is no longer just about searcher profits; it's the economic plumbing that determines blockchain efficiency, user experience, and protocol security.
01
The Problem: Unbundling Is Inefficient
Traditional MEV supply chains are fragmented. Searchers, builders, and proposers operate in silos, leading to latency, redundancy, and missed optimization opportunities. This creates a ~$1B+ annual economic surplus that is inefficiently captured.
- Key Benefit 1: Vertical integration (e.g., Jito, bloXroute) reduces latency from ~12s to ~500ms.
- Key Benefit 2: Consolidated order flow increases fill rates and reduces failed transactions.
~1B+
Annual Surplus
-90%
Latency
02
The Solution: Intents Abstract Complexity
Users shouldn't need to be MEV experts. Intent-based architectures (e.g., UniswapX, CowSwap, Across) let users declare what they want, not how to achieve it. Solvers compete to find the optimal path, internalizing MEV.
- Key Benefit 1: Better prices via competition among solvers and coincidence of wants.
- Key Benefit 2: Improved UX with gasless transactions and guaranteed execution.
10-50 bps
Price Improvement
0 Gas
User Cost
03
The Frontier: Shared Sequencing as a Utility
Rollups currently outsource sequencing, creating fragmented liquidity and MEV islands. Shared sequencers (e.g., Astria, Espresso, Radius) provide a neutral, high-performance layer for ordering transactions across multiple L2s.
- Key Benefit 1: Enables atomic cross-rollup arbitrage and composability.
- Key Benefit 2: Democratizes access to block building, reducing centralization risks from entities like Flashbots SUAVE.
<100ms
Cross-Rollup Latency
1 -> N
Sequencer Model
deep-dive
THE ECONOMIC PIPELINE
Deep Dive: How The Plumbing Works (And Where It Leaks)
MEV infrastructure is the economic plumbing that routes value extraction from users to validators, creating systemic risks.
MEV is a tax on users. Every arbitrage, liquidation, and sandwich attack extracts value from retail transactions, which is ultimately captured by block producers. This creates a perverse incentive for validators to maximize this revenue stream.
The supply chain is opaque. The path from a user's transaction to a finalized block involves builders like Flashbots, relays like Titan, and proposers. This separation of roles centralizes power in a few sophisticated entities.
Proposer-Builder Separation (PBS) centralizes power. PBS outsources block construction to specialized builders, creating a cartel of capital where only the largest players can compete. This risks censorship and reduces chain neutrality.
Evidence: Over 90% of Ethereum blocks are built by three entities post-Merge. The MEV-Boost auction mechanism funnels billions in annual revenue through this narrow pipeline.
ECONOMIC PLUMBING
The Pressure Gauge: MEV Infrastructure Metrics
Comparing core infrastructure layers that extract, redistribute, and mitigate MEV. This is the plumbing that determines who profits from blockchain inefficiencies.
| Metric / Capability | Searcher Infrastructure (e.g., Flashbots SUAVE) | Protocol-Level Order Flow (e.g., CowSwap, UniswapX) | Cross-Chain Relays (e.g., Across, LayerZero) |
|---|---|---|---|
Primary Economic Function | Backrunning & Arbitrage Execution | Batch Auction Coordination | Cross-Domain Arbitrage & Messaging |
Latency to Finality (Target) | < 1 sec | ~5-30 sec (batch window) | 2-30 min (dest. chain finality) |
Fee Capture Mechanism | Priority Gas Auction (PGA) bids | Surplus maximization (CoW) / filler competition | Relayer bid for inclusion & speed |
User MEV Protection | ❌ | ✅ (via batch auctions & solver competition) | Partial (depends on quoting) |
Extractable MEV Volume (Est. Annual) | $500M+ (Ethereum only) | $100M+ (on-chain DEX flow) | Data Unavailable (embedded in bridge premiums) |
Centralization Pressure (Relay/Sequencer) | High (Oligopoly of builders) | Low (Permissionless solver sets) | High (Approved relayer sets) |
Requires Native Token for Access | ❌ (Pay in chain gas) | ❌ | ✅ (e.g., $ZRO, $ACX for certain privileges) |
Key Innovation | Trusted Execution Environment (TEE) for block building | Intent-based order settlement | Optimistic verification for cross-chain commits |
roadmap-analysis
THE ECONOMIC PLUMBING
The Roadmap Stress Test: Merge, Surge, Verge
Ethereum's roadmap upgrades are a stress test for MEV infrastructure, forcing a re-architecture of block building and transaction ordering.
Proposer-Builder Separation (PBS) is the mandatory foundation. The Merge introduced MEV-Boost as a temporary PBS, but the Surge's data sharding requires a native, in-protocol PBS for sustainable scaling. This shifts power from validators to specialized builders like Flashbots and bloXroute.
MEV supply chains fragment across layers. Post-Surge, MEV extraction migrates to L2s like Arbitrum and Optimism, creating isolated markets. This necessitates new cross-domain MEV solutions, turning protocols like Across and SUAVE into critical economic routers.
The Verge's statelessness breaks current searcher tooling. Verkle proofs and state expiry invalidate today's mempool snooping. Searchers must adapt to a zero-knowledge proof paradigm, where transaction simulation relies on proof validity, not state access.
Evidence: Post-Merge, over 90% of Ethereum blocks are built by MEV-Boost relays, proving centralized builder reliance. The roadmap dismantles this model, forcing decentralization into the builder layer itself.
risk-analysis
MEV INFRASTRUCTURE IS ECONOMIC PLUMBING
Leak Detection: Critical Risks in the Pipes
The systems that extract and redistribute MEV are the financial plumbing of blockchains; a leak here drains value directly from users and protocols.
01
The Problem: Centralized Sequencers as Single Points of Failure
Rollups like Arbitrum and Optimism outsource sequencing to a single entity, creating a massive, trusted MEV extraction point. This centralization risks censorship, liveness failures, and predictable value leakage.
- Risk: A single sequencer controls transaction ordering for $10B+ TVL.
- Consequence: Users pay a 'sequencer tax' on top of base fees and MEV.
1
Trusted Entity
$10B+
TVL at Risk
02
The Solution: Shared Sequencing & Proposer-Builder Separation (PBS)
Decouple block building from proposing to break monopolies. Ethereum's PBS via mev-boost and shared sequencer networks like Astria or Espresso create competitive markets for block space.
- Benefit: Builders compete on execution quality, pushing value back to proposers/users.
- Outcome: Reduces the 'winner-takes-all' leakage in traditional mempools.
90%+
Eth Blocks via PBS
Multi-chain
Sequencing
03
The Problem: Opaque Searcher-Bot Wars
The public mempool is a dark forest where generalized frontrunning bots like those from Jito Labs or Flashbots engage in wasteful, zero-sum gas auctions. This congestion directly leaks value from user trades into bot profits.
- Cost: Gas spikes during popular mints or liquidations can be 10-100x normal rates.
- Inefficiency: Network throughput is consumed by arbitrage, not user utility.
10-100x
Gas Spikes
Zero-Sum
Extraction
04
The Solution: Private Order Flow & Encrypted Mempools
Direct user order flow to trusted builders via Flashbots Protect or BloxRoute's Private Transactions. Future encrypted mempools, like Shutter Network's implementation, aim to neutralize frontrunning by default.
- Benefit: Users avoid toxic MEV, capturing more of their trade's value.
- Shift: Moves competition from latency races to execution quality guarantees.
-99%
Frontrun Risk
Direct
Order Flow
05
The Problem: Application-Level MEV is a Protocol Tax
DEX arbitrage, liquidation cascades, and NFT mint sniping are not abstract—they are a direct, predictable tax on Uniswap LPs, Aave borrowers, and NFT communities. Protocols leak value by design.
- Scale: DEX arbitrage extracts >$1B annually from LPs.
- Systemic Risk: Liquidations can trigger destabilizing feedback loops.
>$1B
Annual LP Leakage
Protocol Tax
Design Flaw
06
The Solution: MEV-Aware Protocol Design & Redistribution
Bake MEV management into the protocol layer. CowSwap uses batch auctions to eliminate DEX MEV. EigenLayer restaking enables shared security for MEV redistribution. SUAVE envisions a decentralized block builder network.
- Benefit: Turns a leak into a recyclable resource for protocol sustainability.
- Vision: Aligns extractor incentives with long-term network health.
100%
MEV Capture
Recycled
Value
future-outlook
THE ECONOMIC LAYER
Future Outlook: Replumbing the System
MEV infrastructure is evolving from a niche exploit into the foundational economic plumbing for all on-chain activity.
MEV is the economic layer. It is not a bug but a fundamental property of permissionless systems where transaction ordering creates value. Protocols like Flashbots' SUAVE and CoW Swap treat this as a design primitive, not an externality.
Intent-based architectures will dominate. Users will declare outcomes, not sign transactions. This shifts complexity from wallets to a solver network, as seen in UniswapX and Across Protocol, abstracting MEV competition away from end-users.
Cross-chain MEV is the next frontier. The real arbitrage and liquidation value exists between chains. Infrastructure like LayerZero's OFT and Stargate creates the pipes, but the economic engines are specialized searchers and block builders.
Evidence: Flashbots' dominance on Ethereum post-Merge shows proposer-builder separation (PBS) is inevitable. Builders now process over 90% of Ethereum blocks, proving the specialization of capital and computation.
takeaways
MEV INFRASTRUCTURE IS ECONOMIC PLUMBING
TL;DR: Key Takeaways for Builders & Investors
MEV is not a bug; it's a fundamental market force. The infrastructure built to manage it now determines who captures value and who gets rekt.
01
The Problem: MEV is a Tax on Users
Uncaptured MEV is a direct cost to end-users and a security risk. It manifests as front-run arbitrage, sandwich attacks, and failed transactions, siphoning billions annually.
- Cost: Estimates of $1B+ extracted from users yearly.
- Friction: Failed transactions and poor slippage degrade UX.
- Centralization: Miners/validators have asymmetric power to censor or reorder.
$1B+
Annual Extract
>10%
Slippage Tax
02
The Solution: Intents & SUAVE
Shift from transaction-based to outcome-based execution. Users express what they want, not how to do it. UniswapX, CowSwap, and Across are early leaders.
- Efficiency: Solvers compete for best execution, improving price.
- Privacy: Hides transaction details, mitigating front-running.
- Future: Flashbots' SUAVE aims to be a decentralized, shared mempool and executor for intents.
~20%
Better Prices
0
Sandwich Risk
03
The Problem: Fragmented Liquidity & Execution
L1s, L2s, and app-chains create isolated liquidity pools and MEV opportunities. Cross-chain MEV is complex, risky, and often centralized through bridges like LayerZero.
- Inefficiency: Arbitrage delays between chains leave money on the table.
- Security: Naive cross-chain arbitrage is vulnerable to oracle manipulation.
- Complexity: Builders must manage infrastructure across multiple environments.
100+
Chains
$100M+
Cross-Chain Arb
04
The Solution: Shared Sequencing & Cross-Chain PBS
Decentralized sequencers (e.g., Espresso, Astria) and cross-chain block-building networks create a global marketplace for block space and execution.
- Atomicity: Enable secure cross-domain arbitrage bundles.
- Revenue: Sequencers capture and redistribute cross-chain MEV.
- Neutrality: Prevents a single L2 sequencer from being a central point of failure/censorship.
~500ms
Finality
Shared
Revenue Pool
05
The Problem: Opaque Builder Markets
Proposer-Builder Separation (PBS) is incomplete. Most Ethereum blocks are built by a small oligopoly (Flashbots, Titan, beaverbuild). This leads to centralization risks and reduced competition.
- Censorship: Top builders comply with OFAC lists.
- Barriers: High capital and data requirements for new entrants.
- Opacity: Users and proposers cannot verify builder fairness.
~80%
Top 3 Builders
OFAC
Compliance Risk
06
The Solution: Enshrined PBS & MEV-Boost++
Formalize PBS at the protocol level and enhance transparency. Ethereum's EIP-7547 (Slot-Based Execution) and MEV-Boost++ with commit-reveal schemes are critical paths.
- Decentralization: Lowers barriers for new builders.
- Auditability: Cryptographic proofs of builder execution.
- Resilience: Protocol-level resistance to censorship.
Protocol
Level PBS
100%
Auditable
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