Bundle Merging

Bundle merging is the process by which a block builder or searcher combines multiple user transactions into a single, atomic bundle for submission to a validator. This allows for complex, interdependent operations—like arbitrage or liquidation—to be executed as a single unit, ensuring all succeed or fail together. It is a foundational technique for MEV extraction and transaction ordering optimization.

A searcher is a specialized network participant who scans the mempool and private order flows for profitable opportunities, such as arbitrage or liquidations. They construct a bundle of transactions to capture this value. Using services like a block builder API, they submit this bundle to a builder, who may then merge it with other transactions to construct the most profitable block for a validator.

The block builder is responsible for constructing a candidate block for a validator. They receive transaction bundles from multiple searchers and individual transactions from users. The builder's role is to merge these into a single, optimized block that maximizes revenue (e.g., through priority fees and MEV). Builders use sophisticated algorithms to order transactions, often operating through a builder marketplace like mev-boost on Ethereum.

A key feature of a merged bundle is atomicity. If any transaction within the bundle fails (e.g., due to slippage or insufficient gas), the entire bundle is reverted, preventing partial execution. This protects searchers from unfavorable outcomes. Builders must simulate bundles to ensure they are valid and profitable before including them in a block proposal.

A specialized infrastructure layer exists to facilitate bundle merging:

• Builder APIs: Endpoints (e.g., from Flashbots, BloXroute) for searchers to submit bundles.
• Relays: Trusted intermediaries that receive blocks from builders and forward them to validators, often verifying content and payments.
• Simulation Services: Tools that allow searchers to test bundle execution and profitability before live submission.

For end-users, bundle merging has dual effects. Positively, it can subsidize gas costs, as searchers pay high fees to have their bundles included. However, it can also lead to frontrunning or sandwich attacks, where a user's transaction is exploited for profit. Protocols like CowSwap use batch auctions and MEV protection to shield users from these negative externalities.

The total value that can be extracted from block production beyond the standard block reward and gas fees, by including, excluding, or reordering transactions. Bundle Merging is a direct response to the fragmentation and inefficiency caused by searchers competing for this value.

• Searchers: Entities that identify and propose profitable transaction sequences.
• Builders: Entities that construct complete blocks, often incorporating searcher bundles.
• Proposer-Builder Separation (PBS): A design pattern separating block proposal from construction, creating the market where bundle merging occurs.

A specialized node in networks like Ethereum (post-EIP-1559 & PBS) that aggregates transactions and searcher bundles to construct the most profitable block possible. The builder is the central entity that performs the Bundle Merging process, evaluating and combining incoming bundles to maximize their bid to the block proposer.

• Builder API: The endpoint through which searchers submit their transaction bundles.
• Simulation: The process a builder uses to validate a bundle's outcome and profitability before inclusion.

A package of one or more transactions, with associated conditions, submitted by a searcher to a block builder for inclusion in a future block. These are the fundamental units merged by the builder.

• Atomicity: All transactions in the bundle succeed or fail together.
• Bid: The fee (often via a priority fee) the searcher is willing to pay for bundle inclusion.
• Constraints: Rules like "must be in the same block as" or "must come before" another bundle, which the merger must respect.

A blockchain architecture that decouples the role of the block proposer (validator) from the block builder. This creates a competitive market for block space and is the essential infrastructure that enables Bundle Merging.

• Proposer: Chooses the highest-paying block header from builders.
• Builder Market: The competitive arena where builders source transactions and bundles to construct attractive blocks.
• MEV-Boost: Ethereum's out-of-protocol implementation of PBS, widely used before enshrined PBS (ePBS).

The sequence in which transactions are executed within a block, which directly determines state changes and potential MEV profits. Bundle Merging is fundamentally an advanced, automated transaction ordering problem.

• Frontrunning: A malicious ordering tactic where one transaction is placed before another to profit from its information.
• Backrunning: Placing a transaction immediately after a known event (e.g., a large DEX trade).
• Sandwich Attack: A specific MEV attack that involves both frontrunning and backrunning a victim transaction.

The current data of all accounts (balances, contract code, storage) on the network. Bundle Merging must ensure all merged bundles execute correctly against a consistent and predictable state.

• State Transition: The change from State N to State N+1 caused by executing a block's transactions.
• Simulation State: The hypothetical state builders use to test bundles before committing them.
• Conflict: Occurs when two bundles in a merger attempt to modify the same state element (e.g., a wallet's balance) in incompatible ways.