Proposer-Builder Separation (PBS)

Proposer-Builder Separation (PBS) is a blockchain architecture that formally separates the role of the block proposer (or validator) from the block builder. In this model, the proposer is responsible for selecting and publishing the next block in the chain, but does not construct its contents. Instead, specialized actors known as builders compete in an open market to create the most valuable blocks by including transactions and MEV (Maximal Extractable Value) opportunities. The proposer's role is reduced to selecting the most profitable block header from builders via a commit-reveal scheme or a direct auction, such as a sealed-bid auction.

The primary motivations for PBS are to democratize access to MEV and reduce the centralization risks associated with validator operations. Without PBS, validators who can run sophisticated MEV extraction software gain a significant economic advantage, creating a centralizing force. PBS externalizes the complex and resource-intensive task of block building to a competitive marketplace. This allows validators with modest resources to earn revenue from MEV by simply selecting the highest-bidding builder's block, while builders compete on efficiency and access to transaction flow. This separation is a core component of Ethereum's post-merge roadmap, implemented via proposer-builder separation (ePBS).

PBS is typically implemented through a two-phase protocol. In the first phase, builders create full blocks and submit bids (cryptographic commitments) to the proposer. The proposer then selects the bid with the highest attached payment. In the second phase, the winning builder reveals the full block body, and the proposer publishes it to the network. Critical to this design is crlist-censorship resistance, which ensures builders cannot censor transactions by forcing them to include all transactions from a publicly known list. PBS also introduces new entities like relays, which act as trusted intermediaries to prevent frontrunning and ensure bid privacy during the auction process.

The ecosystem around PBS has given rise to a builder market dominated by specialized firms and MEV-boost software, which is the interim, off-protocol implementation of PBS used by most Ethereum validators today. Builders aggregate transactions from users, searchers (who identify MEV opportunities), and blockchain APIs to construct optimized blocks. The economic dynamics of this market are complex, involving priority fees, inclusion lists, and competition for order flow. The long-term goal is to formalize these mechanisms directly into the consensus layer protocol, enhancing security and decentralization while mitigating risks like builder cartel formation or relay centralization.

Proposer-Builder Separation (PBS) is a protocol design that formally splits the block production process into two distinct roles: the block builder and the block proposer (or validator). The builder is responsible for constructing a block's contents—ordering transactions and extracting MEV—while the proposer is solely responsible for selecting and attesting to the most profitable or desirable block from a competitive marketplace. This separation prevents a single entity from controlling both transaction ordering and consensus, mitigating the centralization pressure caused by sophisticated MEV extraction.

The mechanism typically operates through a commit-reveal scheme or a direct marketplace. Builders create full blocks, compute a bid (often the tip to the proposer), and submit a commitment (like a hash) to the network. Proposers, often chosen via the underlying consensus algorithm, then select the block with the highest bid from a public mempool or a private relay. The winning builder's full block is revealed only after the proposer has committed to it, ensuring the proposer cannot steal the builder's transaction ordering strategy.

A primary implementation is Ethereum's PBS via MEV-Boost, an out-of-protocol (or "enshrined") solution used post-Merge. Here, validators (proposers) run MEV-Boost software to connect to a network of builders and relays. Builders construct blocks, relays validate them and forward the header with a bid, and the proposer signs the most profitable header. This allows validators with modest resources to capture MEV revenue without operating complex, centralized MEV infrastructure themselves.

The long-term goal for many protocols is enshrined PBS, where the separation is baked directly into the consensus layer. This provides stronger cryptographic guarantees, reduces reliance on trusted relays, and further decentralizes the building process. Enshrined PBS designs, such as those proposed for Ethereum's future upgrades, aim to create a more permissionless and competitive building market through mechanisms like builder auctions conducted in-protocol.

Key benefits of PBS include decentralization (reducing validator centralization from MEV), efficiency (specialization leads to optimized block construction), and fairer revenue distribution. However, it introduces new trust assumptions, particularly in the relay layer in interim solutions, and can create a centralized builder market if not carefully designed. The evolution of PBS is central to managing the economic and security implications of MEV in modern blockchain ecosystems.

The term Proposer-Builder Separation (PBS) emerged from the Ethereum research community around 2019-2020 as a proposed solution to the centralizing forces of Maximal Extractable Value (MEV). It describes a market-based design that formally splits the role of a block producer into two distinct, specialized parties: the block proposer (who selects the block) and the block builder (who constructs it). This separation was conceived to mitigate the risks of validator centralization and to create a more transparent and competitive market for block space.

Historically, the need for PBS became acute with the rise of sophisticated MEV extraction techniques like arbitrage and liquidations. In a naive system, the entity proposing the next block (the validator) also has the sole power to order transactions, creating a massive profit incentive to run complex, centralized infrastructure. This led to the growth of MEV relays and builder networks, which were informal, off-protocol precursors to PBS. The Flashbots research collective played a pivotal role in popularizing these concepts and building initial implementations like MEV-Boost for Ethereum's post-merge Proof-of-Stake chain.

The etymology reflects its functional decomposition: 'Proposer' refers to the validator's canonical role of signing and proposing a block header, while 'Builder' denotes the new, competitive role of assembling the most valuable block body. 'Separation' is the key innovation, enforcing a clear market boundary. This design is philosophically aligned with modular blockchain architecture, promoting specialization—builders compete on execution efficiency and MEV capture, while proposers focus on consensus and security.

PBS represents a formalization of a market dynamic that was already occurring off-chain. Its implementation, particularly through enshrined PBS in future Ethereum upgrades, aims to bring this activity on-chain with cryptoeconomic guarantees. The historical context is thus a transition from opaque, centralized MEV extraction toward a transparent, permissionless auction for block-building rights, fundamentally altering the validator's economic role and the landscape of blockchain infrastructure.