MEV is an execution tax. It is not a bug but a structural feature of blockchain ordering. The design of the execution layer—its block building, ordering, and settlement mechanisms—dictates who captures this value and at what cost to users.
the-modular-blockchain-thesis-explained
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The Future of MEV is Inextricably Linked to Execution Layer Design
Execution layer architecture—sequential vs. parallel, private mempools, and block building—is the primary determinant of MEV extraction and distribution, not just a secondary consideration.
introduction
THE INEVITABLE CONVERGENCE
Introduction
The design of the execution layer is the primary determinant of MEV's future distribution, complexity, and economic impact.
Execution layers are MEV markets. A monolithic chain like Ethereum Mainnet centralizes MEV capture with proposer-builder separation (PBS) and builders like Flashbots. A parallelized, modular chain like Solana or Sei v2 creates a fragmented, high-frequency MEV landscape for arbitrage bots.
Intent-based architectures invert the paradigm. Protocols like UniswapX and CoW Swap abstract execution away from users, turning MEV from a user cost into a solver's revenue stream. This shifts the competitive battleground from the public mempool to off-chain solver networks.
Evidence: Ethereum's PBS funnels over 90% of block production through a few dominant builders, while intent-based systems like Across Protocol route over $10B in volume by internalizing MEV for user benefit.
key-trends
EXECUTION IS THE NEW BATTLEFIELD
Executive Summary
MEV is not a bug to be patched, but a fundamental resource whose flow is dictated by the architecture of the execution layer.
01
The Problem: Opaque Auctions and Value Leakage
Traditional block-building creates a black-box auction where searchers and builders capture most value, while users and validators get the residual. This misalignment leads to ~$1B+ annual MEV extraction and systemic instability.
- Value Leakage: Users pay for sandwich attacks and failed arbitrage.
- Centralization Pressure: Specialized builders (e.g., Flashbots, bloXroute) dominate.
- Network Instability: Time-bandit attacks threaten chain reorganizations.
$1B+
Annual Extraction
>80%
Builder Dominance
02
The Solution: Enshrined Proposer-Builder Separation (PBS)
Formalizing the builder-proposer market in-protocol (e.g., Ethereum's roadmap) aligns incentives and democratizes access. It turns MEV from a dark forest into a transparent, credibly neutral commodity.
- Credible Neutrality: Validators commit to the highest bid, removing discretion.
- Reduced Centralization: Opens the builder market to more participants.
- User Benefits: Revenue can be directly shared via proposer payments or burned.
100%
Auction Transparency
Protocol Revenue
New Yield Source
03
The Frontier: SUAVE - A Universal MEV Market
Flashbots' SUAVE envisions a decentralized preference layer separate from any chain. It decouples block building from consensus, creating a competitive, cross-chain marketplace for execution.
- Cross-Chain Arbitrage: Unifies liquidity and MEV opportunities across L1/L2s.
- Specialized Execution: Enables complex intent settlement (e.g., UniswapX, CowSwap).
- User Sovereignty: Express preferences (e.g., privacy, slippage) directly to the market.
Cross-Chain
Market Scope
Intents-Based
New Primitive
04
The Architect's Mandate: Build for MEV-Awareness
Next-gen chains (e.g., Monad, Sei, Fuel) are designing execution layers where MEV considerations are first-class. Parallel execution, native order flow auctions, and fast finality are now core performance metrics.
- Parallel Execution: Mitigates frontrunning by processing non-conflicting txns simultaneously.
- Native OFAs: Bake auction mechanisms (like CowSwap's solver competition) into the protocol.
- Fast Finality: Reduces the profitable window for time-bandit attacks to near zero.
10,000+
TPS Potential
~500ms
Finality Target
thesis-statement
THE EXECUTION CONSTRAINT
The Core Thesis: Architecture is Destiny
The design of the execution layer fundamentally determines the type, scale, and distribution of MEV, making it a primary architectural variable.
Execution defines MEV surface. A monolithic chain like Ethereum consolidates block building, ordering, and execution, creating a single, high-stakes MEV auction. Rollups like Arbitrum and Optimism separate these functions, pushing complexity and MEV capture into their sequencers.
Parallel execution reshapes extraction. Solana's Sealevel runtime and Sui's object model enable parallel transaction processing, which atomizes the block space and fragments traditional frontrunning opportunities, forcing new MEV strategies.
Intent-centric architectures bypass it. Protocols like UniswapX and CowSwap abstract execution into declarative intents, shifting MEV from public mempools to private solver networks, fundamentally changing the economic layer.
Evidence: Over 90% of Ethereum blocks are built by Flashbots, bloXroute, and Manifold, proving that execution layer control is the ultimate MEV leverage point.
ARCHITECTURAL TRADEOFFS
Execution Layer Design vs. MEV Profile
How core execution design choices dictate MEV extraction vectors, user costs, and validator incentives.
| Design Feature / Metric | Sequential Execution (e.g., Ethereum, Solana) | Parallel Execution (e.g., Aptos, Sui) | Pre-Confirmation / PBS (e.g., Flashbots SUAVE, Shutter) |
|---|---|---|---|
Execution Model | Single-threaded, in-order | Multi-threaded, optimistic or Block-STM | Auction-based, off-chain ordering |
MEV-Boost Adoption |
| Not applicable (native parallel) | In-protocol objective |
Dominant MEV Type | Arbitrage (>60%), Liquidations | Arbitrage, Concurrent DEX Swaps | Cross-domain / Interchain Arbitrage |
Avg. Priority Fee per Tx | $0.50 - $5.00 (high variance) | < $0.10 (predictable, low) | Bundled; user pays 'solver' fee |
Frontrunning Surface | High (public mempool) | Medium (parallel non-conflicts) | Low (encrypted mempool via TEEs) |
Validator MEV Revenue Share | ~10-15% (via builder tips) | ~100% (captures all in-block MEV) | 0% (separate proposer-builder roles) |
Time to Finality Impact | Increased by 12s slots & reorgs | Minimal (fast finality, no reorgs) | Decoupled (pre-confs before on-chain finality) |
User Cost Predictability | Low (volatile gas auctions) | High (fee markets per shard) | Fixed (quoted intent price) |
deep-dive
THE EXECUTION LAYER
From Flashbots to Parallel Futures
The future of MEV is determined by the design of the execution layer, not just the auction mechanism.
MEV is an execution problem. Flashbots' SUAVE aims to decentralize the auction, but the parallel execution engines of Solana, Monad, and Aptos fundamentally change the MEV landscape. These architectures expose new forms of cross-shard and intra-block arbitrage that sequential EVMs cannot see.
Parallelism fragments the mempool. A global, ordered mempool is impossible in a parallelized state machine. This forces intent-based architectures like UniswapX and CowSwap to become the primary liquidity source, as solvers compete on execution quality, not just gas price.
The validator's role shifts. In a parallel chain, the validator's primary job is scheduling and state access management, not ordering. This moves MEV extraction upstream to the solver/sequencer layer, as seen in Arbitrum's BoLD or Optimism's upcoming fault proofs.
Evidence: Solana's Jito validators earn ~$2M monthly from MEV, but this is dominated by arbitrage between its parallelized DEXs like Raydium and Orca, a pattern impossible on Ethereum's sequential execution.
risk-analysis
EXECUTION LAYER DESIGN
Architectural Risks and Centralization Vectors
The design of the execution layer is the primary determinant of MEV supply, capture, and distribution, creating fundamental trade-offs between performance, decentralization, and censorship resistance.
01
The Proposer-Builder Separation (PBS) Dilemma
PBS is a necessary evil that outsources block construction to specialized builders, creating a new centralization vector. The relay becomes a single point of failure and censorship.
- Risk: Top 3 relays control >90% of Ethereum blocks.
- Solution: Enshrined PBS or permissionless relays like Flashbots SUAVE aim to commoditize trust.
>90%
Relay Control
1
Critical Chokepoint
02
Fast Finality as a Centralizing Force
Sub-second finality (e.g., Solana, Sui) requires extreme hardware and network conditions, pushing validation out of reach for home operators.
- Result: Validation becomes the domain of ~10-20 institutional entities per chain.
- Trade-off: The pursuit of user experience (UX) via speed directly compromises Nakamoto Consensus decentralization.
<1s
Finality Time
~15
Validators
03
The Exclusive Order Flow (EOF) Economy
Builders compete for profitable transaction bundles, leading to off-chain deals and payments for order flow. This creates a two-tier market.
- Problem: Users/traders with high-MEV transactions are extracted or excluded unless they pay for privacy (RIP-7560, Shutter Network).
- Outcome: MEV revenue concentrates in a few builder pools, reinforcing their dominance.
$500M+
Annual MEV
Opaque
Auction Market
04
Outsourced Sequencing as a Service
Rollups (L2s) often outsource sequencing to a single entity or a small committee for simplicity, reintroducing L1-level centralization risks.
- Vulnerability: A malicious or captured sequencer can censor, reorder, or steal MEV.
- Mitigation: Shared sequencing networks (Espresso, Astria) and based rollups that use L1 for sequencing are emerging alternatives.
1
Default Sequencer
High
Censorship Risk
05
Intent-Based Architectures Shift Trust
Solving MEV for users (via UniswapX, CowSwap) moves complexity and trust to a new layer: solvers. This creates a solver market prone to centralization.
- Risk: Solver competition depends on capital and data access, favoring large players.
- Observation: The 'MEV problem' transforms from validator-level to solver-level, without eliminating centralization pressure.
Minutes
Execution Window
Solver Oligopoly
New Risk
06
Hardware Arms Race and ASIC-ification
Maximizing MEV extraction requires low-latency, high-throughput infrastructure, sparking a hardware race akin to Bitcoin mining.
- Evidence: Jito validators on Solana use optimized clients; Ethereum builders use FPGAs for bundle simulation.
- Consequence: Geographic centralization near data centers and capital requirements exclude smaller players, undermining permissionless participation.
~100ms
Latency Edge
ASIC-like
Specialization
future-outlook
THE MEV-EXECUTION NEXUS
The 2024-2025 Execution Layer Battleground
The design of the execution layer directly dictates who captures value and who bears risk in the MEV supply chain.
MEV is an execution problem. The sequencer's role in ordering transactions is the primary source of extractable value. This makes the execution layer design the central control point for MEV distribution, not just block production speed.
Proposer-Builder Separation (PBS) is table stakes. Native PBS, as seen in Ethereum's roadmap and Arbitrum BOLD, is the minimum requirement. It separates block building from proposing to prevent centralized value capture and enable competitive builder markets.
The real fight is over the block builder. Execution layers like Monad and Sei v2 are competing to build the fastest, most efficient block-building engine. Superior execution attracts the most sophisticated builders, which maximizes chain revenue and user experience.
Shared sequencers fragment MEV liquidity. Networks like Espresso and Astria create a new trade-off. While they offer cross-rollup atomic composability, they also split the traditional block-building market, potentially reducing extractable value per chain.
Evidence: After implementing a permissioned sequencer auction, Arbitrum captured over $3M in MEV revenue for its DAO in Q1 2024, proving execution layer design directly monetizes MEV.
takeaways
EXECUTION IS THE NEW FRONTIER
Key Takeaways for Builders and Investors
The battle for user value and chain sovereignty is moving from consensus to execution. Here's what that means for your stack.
01
The Problem: Opaque, Extractive Order Flow
Public mempools are a free-for-all, exposing user transactions and enabling >$1B/year in extracted value via frontrunning and sandwich attacks. This degrades UX and forces protocols like Uniswap to build defensive systems (e.g., UniswapX).
- User Cost: Predictable trades are exploited, increasing slippage.
- Protocol Cost: Defensive R&D and complexity to mitigate MEV.
- Chain Cost: Inefficient block space usage from competing bots.
>$1B/yr
Value Extracted
~15%
Slippage Increase
02
The Solution: Encrypted Mempools & SUAVE
Execution layers must cryptographically hide transaction content until execution. This shifts the competitive landscape from information discovery to execution quality. Flashbots' SUAVE is the canonical attempt to create a neutral, decentralized execution environment.
- Builder Benefit: Competition on execution quality (speed, price) not on spyware.
- User Benefit: Transactions are private and less exploitable.
- Chain Benefit: More efficient block production from coordinated execution.
0ms
Frontrun Window
1-of-N
Trust Model
03
The Architecture: Intents Over Transactions
The endgame is users submitting desired outcomes (intents) instead of rigid transactions. Systems like UniswapX, CowSwap, and Across aggregate and solve for optimal fulfillment. This abstracts execution complexity from users and creates a market for solvers.
- Builder Opportunity: New solver networks and intent-centric AMMs.
- Investor Signal: Value accrual shifts to solvers and coordination layers.
- Risk: Centralization pressure on a few dominant solver networks.
30-80%
Gas Savings
Multi-Chain
Native Scope
04
The Mandate: Execution Clients Are Now Product
Geth's dominance created a monolithic execution monoculture. Post-Merge, client diversity is critical. Execution clients like Reth, Erigon, and Besu must compete on performance (latency, sync speed) and integrated features (MEV bundling, privacy).
- Builder Play: Integrate high-performance clients for lower latency arbitrage.
- Investor Lens: Value in client teams that capture order flow or enable new primitives.
- Ecosystem Imperative: Avoid single-client risk which threatens chain liveness.
<100ms
Target Latency
>20%
Client Diversity Goal
05
The Vertical: App-Chains as Execution Specialists
General-purpose L1s/L2s cannot optimize execution for all use cases. App-specific chains (e.g., dYdX, Aevo) can implement custom sequencers, order matching engines, and MEV capture/redistribution tailored to their domain.
- Builder Case: Full control over transaction ordering and fee market.
- Investor Case: Equity-like exposure to a vertical's fee revenue.
- Trade-off: Sacrifices composability for performance and economic control.
10-100x
Throughput Gain
100%
MEV Recapturable
06
The Metric: Time-to-Finality Is the New TPS
Throughput (TPS) is a vanity metric if settlement is slow. The real competition is minimizing time-to-usable-finality—how long until a user can trust a transaction is irreversible. This is a function of consensus and execution layer coordination.
- Builder Focus: Optimize for single-slot finality and instant pre-confirmations.
- Investor Filter: Discount chains with slow or probabilistic finality.
- Reality Check: Fast finality enables real-world asset settlement and CEX-like UX.
<2s
Target Finality
$10B+
TVL in Fast Chains
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