Maximal Extractable Value (MEV) is not an abstract concept; it is a direct tax on user transactions. This tax funds a centralized supply chain where a few dominant players like Flashbots and bloXroute control block production.
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The Cost of Centralization in Today's MEV Supply Chain
The MEV supply chain is dominated by a handful of entities, creating censorship risk, rent extraction, and systemic fragility. This analysis breaks down the hidden costs and why decentralized builders like SUAVE, Shutter Network, and EigenLayer are poised to exploit this vulnerability.
introduction
THE TAX
Introduction
The current MEV supply chain imposes a multi-billion dollar inefficiency tax on users by consolidating power in centralized searchers and builders.
Centralized block building creates systemic risk. The top three builders produce over 80% of Ethereum blocks, creating a single point of failure for censorship and chain stability that protocols like EigenLayer attempt to mitigate.
User intent is commoditized. Searchers exploit predictable transaction patterns on DEXs like Uniswap, extracting value that should belong to the user. This creates a permanent arbitrage tax on every swap.
Evidence: In 2023, over $1.3B in MEV was extracted on Ethereum alone, with a significant portion captured by a handful of entities. This represents a direct transfer of wealth from end-users to centralized intermediaries.
key-trends
THE HIDDEN TAX
Executive Summary
The MEV supply chain is a multi-billion dollar market dominated by centralized actors, creating systemic risk and extracting value from users and protocols.
01
The Problem: Opaque Cartels
~90% of Ethereum blocks are built by a handful of centralized builders like Flashbots, bloXroute, and beaverbuild. This creates a single point of failure and allows for censorship and rent-seeking.
- Centralized Order Flow: Relayers and RPC endpoints like Alchemy and Infura direct user transactions to preferred builders.
- Value Extraction: Searchers and builders capture ~$1B+ annually in MEV, a cost ultimately borne by end-users.
~90%
Centralized Blocks
$1B+
Annual Extract
02
The Solution: Permissionless Competition
Decentralizing the block building layer through protocols like EigenLayer, SUAVE, and Shutter Network introduces credible neutrality and breaks cartel control.
- Open Builder Markets: Enable anyone to become a builder, fostering competition that drives down costs.
- Trustless Order Flow: Protocols like Anoma and Flashbots' SUAVE aim to cryptographically route transactions, removing centralized gatekeepers.
0
Trust Assumptions
100%
Uptime SLA
03
The Payout: User Sovereignty
A decentralized MEV supply chain returns value and control to users and dApps, transforming MEV from a leak into a feature.
- MEV Redistribution: Protocols like CowSwap and UniswapX use intents and batch auctions to internalize and redistribute MEV back to users.
- Enhanced Security: Distributed validation and building, as seen with EigenLayer and Obol, reduce liveness risks and make censorship attacks economically non-viable.
-99%
Frontrun Risk
+User
Value Capture
market-context
THE COST OF CENTRALIZATION
The Current State: An Oligopoly in Plain Sight
Today's MEV supply chain is a centralized cartel that extracts value from users and threatens blockchain security.
The MEV supply chain is an oligopoly. A handful of entities like Flashbots and bloXroute control the majority of block-building and relay infrastructure, creating a centralized choke point for transaction ordering.
Centralized block building creates systemic risk. The reliance on a few builders and relays presents a single point of failure, enabling censorship and making networks like Ethereum vulnerable to regulatory capture or technical collapse.
Value extraction is institutionalized. This cartel captures billions in MEV annually, a direct tax on users that funds the infrastructure reinforcing its own dominance, creating a self-perpetuating cycle.
Evidence: Flashbots' MEV-Boost controls over 90% of Ethereum blocks post-Merge. This market share demonstrates the extreme centralization of a critical security function.
MEV SUPPLY CHAIN COST ANALYSIS
The Centralization Tax: Quantifying the Risk
Quantifying the explicit and implicit costs imposed by centralized MEV infrastructure on searchers, users, and protocol security.
| Cost Dimension | Centralized Builder (e.g., Flashbots) | Decentralized Builder (e.g., Titan, Shutter) | Idealized P2P Market |
|---|---|---|---|
Builder/Relay Capture Rate |
| <20% of Ethereum blocks | 0% |
Searcher Bribe Tax (Avg.) | 10-30% of MEV profit | 1-5% of MEV profit | 0% (Direct to Validator) |
Censorship Risk (OFAC) | High (Explicit Compliance) | Low (Technical Resistance) | None |
Latency Arbitrage (JIT) | Exclusive to Top 5 Searchers | Permissionless via Auction | Permissionless via Gossip |
Infrastructure Lock-in | High (Proprietary APIs) | Medium (Open Standards) | None (Open Protocol) |
Cross-Domain MEV Capture | Limited (Ethereum-First) | Emerging (via EigenLayer, Across) | Native (via Shared Sequencing) |
Validator Profit Share | ~15% of MEV Extracted | ~5% of MEV Extracted | ~90%+ of MEV Extracted |
deep-dive
THE SUPPLY CHAIN TAX
The Threefold Cost of Centralization
The current MEV supply chain extracts value through three distinct, compounding layers of centralization.
Relay Dominance creates a single point of failure and censorship. Builders like Flashbots, bloXroute, and Titan control over 90% of Ethereum blocks, forming a de facto cartel that dictates transaction inclusion and ordering.
Proposer-Builder Separation (PBS) fails in practice, as builders vertically integrate with staking pools. Lido and Coinbase stake large validators, enabling them to run internal builders and capture the full MEV value chain, negating PBS's decentralization goal.
Cross-chain MEV extraction is the final frontier, where centralized sequencers on Arbitrum and Optimism act as the sole source of ordering, allowing them to front-run and sandwich user transactions before they even reach Ethereum.
Evidence: Flashbots' MEV-Boost relays have processed over 5.5 million Ethereum blocks, demonstrating the systemic reliance on a handful of centralized entities for core chain security and liveness.
protocol-spotlight
THE COST OF CENTRALIZATION
The Decentralized Counter-Offensive
The current MEV supply chain is a cartel of centralized actors extracting billions in value, creating systemic risk and user harm.
01
The Problem: The Searcher-Builder Cartel
A handful of dominant builders like Flashbots and bloxroute control >80% of block production. This centralization creates a single point of failure and enables censorship.\n- >80% of blocks are built by 3-5 entities\n- $1.2B+ in MEV extracted annually\n- Censorship risk for OFAC-sanctioned transactions
>80%
Blocks Controlled
$1.2B+
Annual Extract
02
The Solution: Decentralized Block Building
Protocols like EigenLayer, SUAVE, and MEV-Share aim to break the cartel by creating open, competitive markets for block space.\n- Permissionless participation for builders\n- Fair ordering via cryptographic commit-reveal schemes\n- Value redistribution back to users and validators
0
Single Point of Failure
+30%
Validator Yield
03
The Problem: Opaque User Exploitation
Users unknowingly lose 5-20%+ of swap value to MEV like frontrunning and sandwich attacks. This is a direct tax on DeFi usability.\n- Sandwich attacks target predictable DEX trades\n- No recourse for stolen value\n- Erodes trust in on-chain finance
5-20%+
Value Lost
Millions
Daily Victims
04
The Solution: Intent-Based Architectures
Systems like UniswapX, CowSwap, and 1inch Fusion let users express what they want, not how to do it. Solvers compete to fulfill the intent, capturing MEV for the user.\n- MEV becomes a rebate, not a loss\n- Better price execution via competition\n- Gasless user experience
MEV Rebate
User Benefit
Gasless
UX
05
The Problem: Relayer Centralization in Bridges
Cross-chain bridges like Wormhole and LayerZero rely on centralized relayers and oracles. This creates a $2B+ honeypot for hackers and enables transaction censorship.\n- Single entity can halt all transfers\n- >60% of bridge hacks target relayers\n- Fragmented liquidity across chains
$2B+
Hack Risk
>60%
Attack Vector
06
The Solution: Light Client & ZK Verification
Networks like Cosmos IBC and ZK-light clients (e.g., Succinct, Polygon zkEVM) enable trust-minimized bridging by verifying state proofs, not trusting signatures.\n- Cryptographic security, not social consensus\n- Censorship-resistant message passing\n- Unified liquidity via shared security models
Trust-Minimized
Security Model
Native
Interoperability
counter-argument
THE TRADE-OFF
The Centralized Defense: Efficiency vs. Sovereignty
The current MEV supply chain centralizes around a few dominant actors, trading network sovereignty for operational efficiency.
Centralized block building is dominant. Builders like Flashbots SUAVE, BloXroute, and Titan control over 90% of Ethereum blocks. This concentration creates a single point of failure for the entire network's transaction ordering.
Sovereignty is the primary cost. Reliance on centralized builders and relays like BloXroute and Agnostic cedes control of censorship resistance and liveness. The network's security model now depends on these entities' integrity.
Efficiency is the sole benefit. Centralized builders achieve maximum extractable value (MEV) optimization through private orderflow and sophisticated algorithms. This creates a Pareto frontier where higher yields for stakers require accepting centralization risk.
Evidence: The proposer-builder separation (PBS) model, while elegant in theory, has led to a builder oligopoly. Flashbots' data shows the top three builders consistently produce over 80% of post-Merge blocks, demonstrating the market's natural consolidation.
investment-thesis
THE COST OF CENTRALIZATION
Why This Matters for Capital Allocation
The current MEV supply chain extracts billions in value from users and protocols, creating a structural inefficiency that misallocates capital.
Centralized MEV extraction is a multi-billion dollar tax. The current supply chain, dominated by a few searcher-builder cartels, captures value that should accrue to users and protocols. This creates a capital allocation inefficiency where yield is siphoned into private hands instead of funding protocol growth.
Protocols subsidize their own inefficiency. Projects spend heavily on liquidity incentives, yet a significant portion is immediately extracted by generalized front-running bots on Uniswap or sandwich attacks. This forces a capital recycling loop where protocols must constantly outspend extractors to maintain user experience.
The builder market is an oligopoly. Over 80% of Ethereum blocks are built by just three entities. This centralized control allows builders to maximize their own profits by prioritizing transactions from a handful of large searchers, not the network's best interest.
Evidence: Flashbots' MEV-Share initiative and protocols like CowSwap demonstrate that reclaiming MEV is possible. MEV-Share's first month redirected ~$2.5M in value back to users, proving the scale of the leakage.
takeaways
THE COST OF CENTRALIZATION
Key Takeaways
The current MEV supply chain is a multi-billion dollar market dominated by a handful of centralized actors, creating systemic risk and extracting value from users and protocols.
01
The Problem: Opaque Sealed-Bid Auctions
Today's dominant MEV-Boost auction is a black box. Builders submit sealed bids to relays, creating an information asymmetry that prevents searcher competition and inflates costs. This centralizes power in the relay operator, who can censor or manipulate the auction.
- ~90% of Ethereum blocks are built via this opaque system.
- Relays act as gatekeepers, controlling access to block space.
- Searchers overpay due to lack of price discovery.
~90%
Blocks Opaque
0
Price Discovery
02
The Problem: Builder Monopolization
A cartel of ~5 major builders controls the vast majority of Ethereum block production. This concentration creates single points of failure and enables vertical integration, where builders also run proprietary searchers and order flow auctions (like Jito, bloXroute).
- Top 3 builders control >70% of MEV-Boost blocks.
- Centralized order flow is bundled and sold, extracting maximal value.
- Protocols like UniswapX and CowSwap are forced to route through these monopolies.
>70%
Market Share
~5
Dominant Entities
03
The Solution: Credible Neutral Infrastructure
The antidote is infrastructure that is permissionless, verifiable, and credibly neutral. This means open-source builders, transparent auctions, and decentralized relay networks that anyone can audit and participate in. Projects like SUAVE, Shutter Network, and Osmosis are pioneering this approach.
- Eliminates trusted intermediaries and gatekeepers.
- Enables fair price discovery through open competition.
- Reduces systemic risk from centralized cartel collapse.
100%
Verifiable
0
Gatekeepers
04
The Solution: Intents & Encrypted Mempools
Shifting from transaction-based to intent-based architectures (UniswapX, Across, Anoma) decentralizes execution. Pair this with encrypted mempools (Shutter) to prevent frontrunning and level the playing field for searchers. This breaks the builder's information monopoly.
- Users express goals, not specific transactions.
- Searchers compete on execution quality, not just gas fees.
- Mitigates >$1B/year in predatory MEV like frontrunning.
> $1B/yr
MEV Mitigated
100%
Execution Competition
05
The Cost: Value Extraction & Censorship
Centralization directly extracts value from the ecosystem. Users pay higher fees, protocols lose control over their order flow, and the chain becomes vulnerable to regulatory capture and censorship. The OFAC-compliance of major relays is a stark warning.
- Billions in MEV revenue is captured by centralized entities.
- Protocols subsidize builder profits via arbitrage and liquidations.
- Network integrity is compromised by external legal pressure.
$B+
Value Extracted
High
Censorship Risk
06
The Future: Autonomous Auctions & Shared Sequencing
The endgame is a fully decentralized supply chain. Autonomous on-chain auctions (like those proposed for EigenLayer) and shared sequencer sets (from rollups like Arbitrum, Optimism, and Espresso) will commoditize block building. This returns value and control to validators and users.
- Turns block space into a commodity via open markets.
- Shared sequencers prevent fragmentation and MEV leakage.
- Aligns incentives with network security, not private profit.
0
Private Profit
100%
Network Aligned
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