Block Builder

A block builder is a specialized participant in a blockchain network, particularly in Proof-of-Stake (PoS) systems like Ethereum, whose primary function is to assemble a candidate block. It selects transactions from the mempool (the pool of pending transactions), orders them, and packages them into a block template. This role is distinct from that of a block proposer (or validator), who is randomly selected to propose the final block to the network. The separation of building from proposing is a core component of proposer-builder separation (PBS), designed to decentralize power and mitigate Maximal Extractable Value (MEV).

The builder's process involves sophisticated transaction selection algorithms to maximize the value of the block it creates. This includes optimizing for transaction fees and strategically capturing MEV opportunities—such as arbitrage or liquidations—by ordering transactions in a specific sequence. Builders often run complex software like MEV-Boost on Ethereum, which allows them to submit their block templates to a competitive marketplace. Proposers then choose the most profitable block to sign and propose, with the builder and proposer sharing the rewards.

The rise of professional block builders has led to significant centralization concerns, as a few large entities often control a majority of the block-building market. This concentration can pose risks to network censorship resistance and fairness. In response, protocol-level solutions like enshrined proposer-builder separation (ePBS) are being researched to formalize and decentralize this role within the core protocol, reducing reliance on off-protocol markets and mitigating the centralizing influence of advanced MEV extraction.

A block builder operates in the proposer-builder separation (PBS) model, acting as a specialized entity distinct from the validator (or block proposer). Its core function is to assemble a candidate block from pending transactions in the mempool. The builder's goal is to create the most valuable block possible by strategically selecting and ordering transactions to maximize extractable value (MEV), which includes both transaction fees and any arbitrage or liquidation profits that can be captured within the block's execution. This optimized block is then offered to validators in a competitive marketplace.

The builder's process involves sophisticated transaction analysis and simulation. It runs complex algorithms to identify profitable MEV opportunities, such as arbitrage between decentralized exchanges or liquidations in lending protocols. The builder must also ensure the block is valid—adhering to consensus rules, gas limits, and state transitions—and often employs techniques like transaction bundling and frontrunning protection. Builders typically submit their candidate blocks to a relay, a trusted intermediary that receives blocks from multiple builders and forwards the most profitable one to the validator, ensuring the proposer cannot see the block's contents before committing to it.

This separation of roles enhances network efficiency and decentralization. By outsourcing block construction to competitive, specialized builders, validators can focus on consensus duties without needing expensive MEV-extraction infrastructure. The PBS model, facilitated by mechanisms like eigenlayer or inherent in protocols like Ethereum post-EIP-1559, aims to democratize MEV profits and reduce the centralizing pressure of maximal extractable value. However, it also creates a market where builder centralization and relay trust become new points of consideration for network security and fairness.

Proposer-Builder Separation (PBS) is a blockchain design paradigm that decouples the role of the block proposer (or validator) from the block builder. In this model, specialized actors called builders compete in an open marketplace to construct the most valuable blocks by including transactions and maximizing MEV (Maximal Extractable Value). The winning builder's block is then cryptographically committed to a proposer, who simply attests to and proposes it to the network. This separation creates a more efficient and specialized market for block production.

The flow begins with builders receiving transaction streams from users and the public mempool. Using sophisticated algorithms, they assemble candidate blocks, optimizing for fee revenue and arbitrage opportunities. These builders then submit block bids to a relay, which is a trusted intermediary that receives bids, validates them, and forwards the highest-value bid to the proposer. The relay ensures the builder's block is valid and that the attached payment is guaranteed, preventing malicious behavior.

The proposer, typically a validator in a Proof-of-Stake system, selects the highest-paying bid from the relay via a process called crList (censorship resistance list)-enabled auction. Upon selection, the proposer receives a block header and a commitment to the full block. The proposer then signs and broadcasts this header to the network, effectively proposing the builder's block without ever seeing its full contents until it is revealed and executed by the network, ensuring the proposer cannot censor or manipulate transactions.

This architecture addresses key challenges: it reduces the centralizing force of MEV by distributing profit opportunities, lowers the hardware requirements for validators, and enhances censorship resistance through cryptographic commitments. PBS is implemented in practice through mechanisms like mev-boost on Ethereum, which allows validators to outsource block building to a competitive marketplace, significantly increasing their staking rewards while upholding network security and decentralization.