Ethereum is not neutral. Its state is defined by the highest bidder, not a canonical ordering of transactions. This creates a two-tiered system where searchers and builders with capital and infrastructure dictate outcomes.
the-ethereum-roadmap-merge-surge-verge
Blog
Why MEV Makes Ethereum Non-Neutral
Ethereum's promise of a neutral, credibly neutral base layer is being actively eroded by Maximal Extractable Value (MEV). This analysis deconstructs how MEV creates systemic advantages for sophisticated actors, examines the data proving it, and evaluates whether the Surge and PBS can fix it.
introduction
THE DATA
The Neutrality Lie
Ethereum's core promise of neutrality is broken by the economic reality of Maximal Extractable Value (MEV).
Proposer-Builder Separation (PBS) formalizes this. PBS outsources block construction to specialized builders like Flashbots and bloXroute, who compete to sell the most profitable block to the proposer. The chain's state is a financial auction.
The neutrality failure is measurable. In 2023, over $1.2B in MEV was extracted, with Jito Labs and Flashbots dominating the Solana and Ethereum landscapes. This revenue is concentrated, not distributed.
The counter-argument of 'credible neutrality' is flawed. While PBS separates block building from proposing, it centralizes power in the builder layer. The network's economic security now depends on a few opaque, profit-maximizing entities.
key-trends
HOW MEV BREAKS NEUTRALITY
The Evidence of Erosion
Maximal Extractable Value is not a passive tax; it's an active force that systematically distorts Ethereum's core promise of a level playing field.
01
The Problem: Censorship as a Service
Validators, influenced by OFAC compliance or private orderflow payments, can reorder or exclude transactions. This turns the base layer into a tool for external policy enforcement.
- Top validators controlling ~45% of stake have been observed censoring transactions.
- Creates a two-tiered system: compliant vs. non-compliant blockspace.
- Neutrality failure: The network's output is no longer a pure function of its consensus rules.
~45%
Stake Censoring
OFAC
External Policy
02
The Problem: The Time-Bandit Attack
Validators can intentionally orphan honest blocks to steal the MEV contained within, violating the protocol's liveness guarantees for profit.
- Makes block finality probabilistic even after confirmation.
- Incentivizes centralization as larger stakers can execute attacks more reliably.
- Neutrality failure: The canonical chain is no longer the most virtuous one, but the most profitable one to reorg.
7+ Blocks
Re-org Depth
Profit >
Honesty
03
The Problem: The PBS Endgame (Proposer-Builder Separation)
PBS formalizes the MEV supply chain but creates a powerful builder cartel. Builders win by having exclusive access to private orderflow from searchers and apps like UniswapX.
- Top 3 builders produce >80% of Ethereum blocks.
- Neutrality failure: Block construction is a private, opaque auction, not a public good. The "winning" state transition is the one that pays the proposer most, not the one that's most fair.
>80%
Builder Dominance
Opaque
Auction
04
The Solution: SUAVE (Single Unifying Auction for Value Expression)
A dedicated chain and mempool that aims to decentralize the block building market. It separates the roles of searcher, builder, and proposer into a competitive, permissionless ecosystem.
- Decentralizes computation: Anyone can become a builder.
- Enforces credibly neutral rules: Execution is bound by a pre-committed policy.
- Shifts power from centralized builder cartels back to a marketplace.
Universal
Mempool
Permissionless
Builders
05
The Solution: MEV-Boost++ & Encrypted Mempools
The next evolution of PBS. Encrypted mempools (e.g., using threshold decryption) prevent builders from seeing transaction content until after they commit to build a block.
- Removes the advantage of exclusive orderflow.
- Forces competition on execution quality, not information asymmetry.
- Protocols like Shutter Network are pioneering this approach.
Threshold
Encryption
Fair
Competition
06
The Solution: MEV Smoothing & Redistribution
Protocols like CowSwap and Across use intents and batch auctions to internalize and redistribute MEV. This reduces the extractable surplus available to third-party searchers.
- User gets better price: MEV is captured and returned as improved execution.
- Reduces negative externalities: Less incentive for harmful frontrunning or sandwich attacks.
- Aligns protocol incentives with user outcomes.
Internalized
MEV
User
Rebate
deep-dive
THE NON-NEUTRAL CORE
The Architecture of Advantage
Ethereum's permissionless design creates a predictable, extractable advantage for specialized actors, formalizing inequality into the protocol's economic layer.
Ethereum's economic neutrality is a myth. The protocol's open mempool and deterministic execution create a predictable profit landscape for searchers and builders. This isn't a bug; it's a structural feature of a transparent, permissionless system.
MEV formalizes first-price auctions. The right to order transactions becomes a commodity, auctioned via proposer-builder separation (PBS). This creates a professionalized extractive layer where entities like Flashbots and bloXroute compete on capital and latency, not just hash rate.
The advantage is architectural. Validators with the best MEV strategies earn higher yields, creating a self-reinforcing economic loop. This centralizes power in sophisticated entities like Lido and Coinbase, who can afford the infrastructure for optimal extraction.
Evidence: Post-Merge, over 90% of blocks are built by a handful of professional builders. The MEV-Boost relay network is the de facto standard, demonstrating that extraction is not ancillary but core to validator economics.
ETHEREUM POST-MERGE
The Builder Oligopoly: By the Numbers
Quantifying the centralization of block production and MEV extraction among the top 5 builders, demonstrating how economic incentives break network neutrality.
| Metric / Entity | Top Builder (e.g., beaverbuild) | #2-#5 Builders | All Other Builders (100+) |
|---|---|---|---|
Avg. Block Market Share (30d) | 30.5% | 45.2% | 24.3% |
Proposer-Builder Separation (PBS) Reliance | Required | Required | Optional |
Avg. MEV-Boost Relay Usage | 99.8% | 98.5% | 72.1% |
Avg. MEV Extracted per Block | 0.35 ETH | 0.28 ETH | < 0.1 ETH |
Censorship Compliance (OFAC) | |||
Exclusive Access to Private Orderflow | |||
Avg. Builder Payment to Proposer | 0.1 ETH | 0.08 ETH | 0.05 ETH |
future-outlook
THE MEV PROBLEM
Can the Roadmap Re-Neutralize Ethereum?
Ethereum's neutrality is compromised by MEV, which allows block builders to censor and reorder transactions for profit.
MEV is censorship. The transition to Proposer-Builder Separation (PBS) outsourced block production to specialized builders like Flashbots. These builders, optimizing for profit, filter transactions through private mempools, enabling targeted censorship of addresses or applications.
Neutrality requires randomness. A truly neutral network processes transactions in the order they arrive. MEV extraction, driven by searchers and builders, systematically reorders transactions to capture arbitrage on DEXs like Uniswap or liquidations on Aave, violating this first-come, first-served principle.
The roadmap's technical fixes. EIP-4844 and danksharding increase data availability, reducing the advantage of centralized data. PBS enshrined in-protocol aims to formalize and regulate the builder market. Proposer commitments could enforce rules against censorship.
Evidence: Over 90% of Ethereum blocks are built by a cartel of three entities, demonstrating extreme centralization. MEV revenue has extracted billions from users, a direct tax on network usage that the protocol never intended.
takeaways
THE EXTRACTION ECONOMY
Why MEV Makes Ethereum Non-Neutral
Maximal Extractable Value (MEV) is not a bug but a structural feature that systematically advantages sophisticated actors, undermining the network's foundational promise of neutrality.
01
The Problem: Frontrunning as a Tax on Users
Every pending user transaction is public data, creating a zero-sum game where searchers and bots profit at retail's expense. This manifests as:\n- Sandwich attacks extracting ~$1B+ from DEX traders\n- Failed transactions due to gas price bidding wars\n- Latency arbitrage favoring co-located infrastructure
$1B+
Extracted
~50%
Failed TXs
02
The Solution: Private Order Flow & Intents
Shielding transactions from the public mempool neutralizes the advantage of speed. Protocols like Flashbots SUAVE, CowSwap, and UniswapX aggregate and batch orders off-chain.\n- Fair ordering via commit-reveal schemes\n- Batch auctions for uniform clearing prices\n- Cross-domain intent routing via Across and LayerZero
100%
Mempool Privacy
~0ms
Latency Edge
03
The Problem: Validator-Cartel Capture
Proposer-Builder Separation (PBS) has centralized block building. A few dominant builders (e.g., Flashbots, BloXroute, Titan) control ~80%+ of blocks, creating a trusted relay cabal.\n- Censorship of OFAC-sanctioned transactions\n- Central point of failure in the relay network\n- Economic capture by the highest-bidding searcher
80%+
Blocks Controlled
1
Relay Failure
04
The Solution: Enshrined PBS & Decentralized Builders
Moving PBS into the protocol layer (e.g., Ethereum's ePBS roadmap) and fostering decentralized builder markets are critical.\n- Protocol-enforced credibly neutral ordering\n- Permissionless builder sets to break cartels\n- In-protocol payment rails eliminating trusted relays
L1 Native
Guarantees
0
Trusted Relays
05
The Problem: L2 MEV Replication
Rollups inherit and often exacerbate MEV. Centralized sequencers (e.g., many early Optimistic Rollups) act as sole block builders, creating a regulated monopoly.\n- No competitive bidding for block space\n- Opaque ordering with no user recourse\n- Cross-rollup MEV opportunities go unexploited
1
Sequencer
100%
Control
06
The Solution: Shared Sequencing & MEV-Aware Rollups
Networks like Astria, Espresso, and Radius provide decentralized shared sequencing. Rollups like Fuel and Aztec design for MEV resistance from first principles.\n- Economic security from validator stake\n- Pre-confirmations for fast, fair ordering\n- Encrypted mempools by default
Decentralized
Sequencing
Encrypted
Mempool
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall