Builder Bid

In the context of Ethereum's MEV-Boost architecture, a builder bid is a data package containing a fully constructed block, a proposed execution payload, and a monetary offer. This bid is submitted to a relay, which acts as a trusted intermediary, during the slot auction process. The core component of the bid is the bid value, denominated in ETH, which represents the payment the builder is willing to make to the validator (proposer) for selecting and proposing their block. The builder's profit is derived from the Maximum Extractable Value (MEV) captured within the block's transactions, minus this bid payment.

The structure of a bid is critical. It includes the block's header hash, the execution payload (transactions and state changes), and a signature from the builder. Relays validate these bids for correctness—ensuring the block is valid, the transactions are properly ordered, and the bid value is backed by sufficient funds. The relay then presents the highest valid bid to the validator who is scheduled to propose the next block. This creates a competitive, permissionless marketplace where builders compete on bid price and block efficiency to have their blocks chosen.

Builder bids are the fundamental mechanism that enables proposer-builder separation (PBS). This design separates the role of the block proposer (the validator) from the block builder (the specialized entity). The validator's economic incentive is simplified: they select the bid with the highest fee. Meanwhile, builders compete on sophisticated transaction ordering and MEV extraction techniques. This specialization increases chain efficiency and can help democratize access to MEV profits, though it also centralizes block construction power among a small set of sophisticated builders.

From a validator's perspective, accepting a builder bid via a relay is a strategic choice. It allows them to capture a predictable, significant reward (the bid) without needing the infrastructure or expertise to construct optimal blocks themselves. This outsources the complexity of MEV extraction. However, validators must trust the relay to correctly validate bids and deliver the full execution payload. The health of the ecosystem therefore depends on relay diversity and transparency to prevent censorship or centralization risks at the relay layer.

The evolution of builder bids is closely tied to in-protocol PBS proposals like ePBS (enshrined Proposer-Builder Separation). These aim to move the bidding auction and trust assumptions from off-chain relays into the core protocol itself. This would mitigate relay centralization risks and create a more cryptographically secure and decentralized mechanism for block production, while preserving the economic benefits of specialized builders competing through their bids.

In the proposer-builder separation (PBS) architecture, a builder bid is the core mechanism for block production. A specialized entity known as a block builder constructs a candidate block, optimizing its contents—such as transaction order and MEV (Maximal Extractable Value) extraction—for maximum profitability. The builder then creates a bid, which is a cryptographically signed message containing the block header, the body of the block, and a bid value (the payment, often in ETH) to be sent to the validator (proposer) who selects it. This bid is submitted to a relay, which acts as a trusted intermediary to prevent certain attacks and facilitate the auction.

The auction process is typically a first-price sealed-bid auction. Builders submit their bids to the relay without seeing competing offers. The relay validates each bid, ensuring the proposed block is valid and the builder has sufficient funds to pay the promised bid value. It then forwards the highest valid bid to the current block proposer (validator). The proposer, often running software like mev-boost, simply selects the bid offering the highest payment, signs the block header, and returns it to the relay for propagation to the network. This separation allows validators to earn significant extra rewards without needing sophisticated block-building infrastructure themselves.

The structure of a bid is defined by specifications like those in EIP-1559 for the fee market and the builder API used by relays. Key components include the execution_payload (the actual block of transactions), the value field denoting the bid amount in wei, and the builder's signature. The promised payment is typically transferred via a smart contract call in the block's coinbase transaction. This process creates a competitive market for block space, where builders profit from MEV and transaction fees, and validators profit from the auction revenue, aligning economic incentives to improve network security and efficiency.

A builder bid is a cryptographically signed commitment from a block builder to a validator (the block proposer) to pay a specified amount for the right to have its block included in the blockchain. This bid is the core mechanism of the proposer-builder separation (PBS) architecture, designed to decentralize Maximal Extractable Value (MEV) extraction. The bid contains the proposed block's header, the fee (or "bid") to be paid to the validator, and a signature, but crucially not the full block body, which is withheld until the validator accepts.

The bid flow begins when builders, who aggregate and order transactions from the mempool, construct candidate blocks optimized for profit, often through MEV strategies like arbitrage or liquidation bundling. They then submit their builder bids to a relay, a trusted intermediary that validates the bid's contents and attestation before forwarding it to validators. The validator selects the highest-paying bid, signaling acceptance, which triggers the builder to reveal the full block to the relay for propagation to the network.

This auction process, often called a block space auction, ensures validators are compensated for their role while outsourcing the complex and potentially centralized task of MEV extraction to specialized builders. Key properties of a bid include its value (the payment), fee recipient (the validator's address), and the block hash commitment. The dominant implementation of this flow is seen in Ethereum's mev-boost middleware, which allows validators to connect to a network of competing builders via relays.

A builder bid is a formal offer in which a block builder proposes a fully constructed block of transactions to a validator (the block proposer) in exchange for a portion of the block's transaction fees and MEV (Maximal Extractable Value). The bid's core components are the execution payload (the block data) and the bid amount, which is the payment from the builder to the proposer. This mechanism is the economic engine of Proposer-Builder Separation (PBS), designed to decentralize block production by allowing specialized builders with sophisticated transaction ordering strategies to compete on a level playing field.

The bidding process typically occurs through a relay, a trusted intermediary that receives sealed bids from multiple builders and presents the highest one to the winning proposer. Builders craft their bids by optimizing the block's content to capture MEV through techniques like arbitrage and liquidations, ensuring their bid price is competitive. The proposer's role is simplified to selecting the highest-paying bid, which maximizes their rewards while outsourcing the complex and resource-intensive work of block construction. This separation aims to prevent centralization of MEV capture and reduce the hardware requirements for individual validators.

Builder bids are fundamental to Ethereum's post-merge roadmap, specifically implemented via MEV-Boost for proof-of-stake. They create a market for block space where builders compete on efficiency and proposers profit from this competition. Critically, the system relies on credible commitment; builders must trust that relays will correctly forward bids and that proposers will accept the highest one. The evolution of builder bids is closely tied to in-protocol PBS proposals like ePBS, which aim to bring these trust assumptions and economic incentives directly into the core protocol for greater security and decentralization.