Why 'Fair' MEV Distribution is a Myth

Fairness is economically impossible. MEV is a property of permissionless, transparent blockchains. Any attempt to redistribute it creates new, more opaque forms of rent extraction, as seen in the shift from public to private mempools.

Builders, not protocols, capture value. Protocols like Uniswap and Aave generate MEV, but specialized builders like Flashbots and Jito Labs capture it. The value flow is from protocol activity to sophisticated capital, not to end-users.

The 'fair' distribution debate is a distraction. Focus must shift from redistribution to minimization and transparency. Solutions like CowSwap's batch auctions and SUAVE aim to reduce extractable MEV, not reallocate it.

Evidence: Over 90% of Ethereum blocks are now built by a handful of professional entities using MEV-Boost, demonstrating that centralization is the equilibrium state, not an aberration.

Fairness is economically inefficient. MEV extraction is a competitive market where searchers invest capital in infrastructure and information. Any redistribution mechanism, like a proposer-builder separation (PBS) auction, creates a tax that distorts this market. The most efficient outcome is the one that maximizes validator revenue, not user equity.

Redistribution creates new MEV. Protocols like Flashbots' SUAVE or CowSwap's solver auctions attempt to internalize MEV. This merely shifts the extraction point from the public mempool to a private auction, creating auction MEV. The entity controlling the auction (e.g., a centralized sequencer) captures the value, redistributing only what is politically expedient.

User intent is not a commodity. Projects like UniswapX and Across use intents to abstract complexity. However, bundling user orders for 'fair' distribution requires a centralized coordinator to match and settle. This coordinator becomes the new extractor, deciding which 'fairness' algorithm maximizes its own profit, replicating the original problem.

Evidence: In Ethereum's PBS model post-EIP-1559, over 95% of MEV rewards go to block builders and proposers (validators). User-facing 'fair' distributions, like MEV burn or MEV smoothing, are marginal rebates that fail to address the core incentive capture by the network's capital-heavy infrastructure layer.

Fair MEV is a logical contradiction. MEV is a byproduct of block production and ordering, a function that is inherently centralized to a single sequencer or proposer. Distributing its profits after extraction does not decentralize the power to extract it. Protocols like Flashbots SUAVE attempt to separate ordering from execution, but the ordering market itself becomes the new capture point.

Modularity fragments the MEV stack. Separating execution, settlement, and data availability creates multiple new fee markets for value capture. Rollup sequencers, shared sequencer networks like Astria, and cross-domain MEV relays each insert a toll. The 'fair' distribution is a rebate on a tax levied by a new intermediary.

The rebate model centralizes power. Systems that promise to redistribute MEV, like EigenLayer's restaking for shared sequencers, create governance cartels. The entities controlling the redistribution mechanism—validators, DAOs, or staking pools—become the ultimate arbiters of 'fairness', replicating the centralization they claim to solve.

Evidence: On Arbitrum and Optimism, over 95% of transaction ordering power resides with a single, centralized sequencer. Proposed 'decentralized' sequencer sets for these L2s will be selected and governed by the same foundation-controlled DAOs, proving that distribution is a political, not technical, outcome.

Fairness is a vector for centralization. Any protocol that attempts to redistribute MEV, like a proposer-builder separation (PBS)-inspired auction, creates a new extractable resource. Sophisticated actors will optimize to capture this value, leading to the same centralized cartels the system aimed to dismantle.

The builder market proves the point. Ethereum's PBS, via mev-boost, was designed to democratize block building. The result is a builder oligopoly dominated by a few entities like Flashbots, bloXroute, and Titan, who control over 90% of blocks. Fair distribution is a myth; value flows to the most efficient capital.

User intents are the real commodity. Protocols like UniswapX and CowSwap abstract MEV by handling user intents off-chain. This shifts the competition from validators to solvers and fillers, but the economic pressure to centralize simply moves up the stack to these new roles, creating solver oligopolies.

Fair distribution is impossible because MEV is a race. Any protocol-enforced delay or redistribution mechanism creates an arbitrage opportunity for faster, private actors. This is the time-value of information.

Redistribution creates new MEV. Systems like MEV-geth/PBS attempt to socialize profits, but they introduce new attack vectors like bundle censorship or validator collusion. The economic surplus moves, but does not disappear.

Specialized capital always wins. Compare a retail user in a CowSwap batch auction to a Flashbots searcher. The searcher's infrastructure and data advantages guarantee they capture value, regardless of the market structure.

Evidence: On Ethereum post-PBS, over 90% of block space is built by a handful of professional builders. Proposer-Builder Separation formalized the specialization, proving that efficiency concentrates rewards.

Fairness is a thermodynamic myth. Any system with value extraction creates gradients; capital and information asymmetry ensure sophisticated actors like Jump Crypto or Wintermute capture value. Protocol-level redistribution schemes, like MEV-Burn or MEV-Smoothing, are leaky abstractions that introduce new attack surfaces.

The goal is harm reduction. The pragmatic focus shifts from 'fairness' to minimizing negative externalities for end-users. This means prioritizing censorship resistance, transaction ordering predictability, and front-running prevention over redistributing profits. Protocols like Flashbots SUAVE and CoW Swap exemplify this by protecting user transactions.

Infrastructure beats ideology. Building robust, verifiable public goods—like shared sequencer networks (e.g., Espresso, Astria) and intent-based standards—creates a neutral substrate. This allows competition among extractors, which drives efficiency and transparency more effectively than any mandated 'fair' split.

Evidence: Ethereum's PBS (Proposer-Builder Separation) adoption exceeds 99%. This proves the market chose specialized, efficient builders over a naive 'fair' model, reducing worst-case MEV like time-bandit attacks and improving chain stability.