Permissionless PBS

Permissionless PBS formally separates the block proposer (validator) from the block builder (specialized entity). The proposer's role is simplified to selecting the most valuable block from a public marketplace, while builders compete to construct optimal blocks by including transactions and MEV opportunities. This specialization increases chain efficiency and decentralizes block production power.

A builder is a specialized node that constructs execution payloads (blocks). Its key functions are:

• Aggregating transactions from the mempool.
• Extracting and optimizing Maximal Extractable Value (MEV) through arbitrage and liquidation bundles.
• Submitting a block bid to the proposer, which includes the block and an associated payment. Builders compete in an open auction, incentivized by profits from transaction fees and MEV.

A relay is a neutral, auditable intermediary that facilitates PBS. It receives blinded block bids from builders and presents them to the proposer. Critical functions include:

• Bid Privacy: Keeping bids hidden to prevent front-running.
• Bid Guarantee: Ensuring the winning builder's block is valid and delivered.
• Censorship Resistance: Relays can be monitored for transaction inclusion, with proposers able to choose relays based on performance. The ecosystem relies on a permissionless network of competing relays.

PBS can be implemented through different architectural paths:

• Out-of-Protocol (Current): Implemented via the builder API and relays (e.g., Flashbots, bloXroute). This is the current, dominant model but relies on extra-protocol trust.
• In-Protocol (Future): Aims to bake PBS directly into the consensus layer for stronger guarantees. Key proposals include ePBS (enshrined PBS), which uses crLists (censorship resistance lists) to allow proposers to force inclusion of certain transactions, enhancing anti-censorship properties.

Key Benefits:

• Censorship Resistance: Proposers can choose from many builders/relays, making transaction censorship harder.
• Validator Economics: Democratizes MEV revenue, allowing small validators to capture value.
• Efficiency: Specialized builders create more optimal blocks, improving network throughput.

Ongoing Challenges:

• Relay Centralization Risk: Trust and reliance on a handful of major relay operators.
• Builder Centralization: The rise of dominant, sophisticated builder entities.
• Complexity: Increases protocol and operational complexity for node operators.

Enshrined PBS (ePBS) refers to the long-term goal of building proposer-builder separation directly into the Ethereum protocol's consensus layer. This aims to eliminate reliance on external, semi-trusted relays and create a more cryptoeconomically secure and neutral infrastructure.

Key design challenges include:

• Creating a commit-reveal scheme for block bodies.
• Designing a builder payment channel within the block proposal mechanism.
• Ensuring the protocol can enforce builder commitments without adding complexity or latency.

The builder is a specialized node that constructs full blocks by aggregating transactions and optimizing for value. Builders compete in an open auction, submitting their blocks and a fee to relays.

Builder Strategies Include:

• Backrunning & Frontrunning: Capturing value from predictable DEX trades.
• Arbitrage: Exploiting price differences across decentralized exchanges.
• Complex Bundles: Executing multi-transaction, multi-contract sequences submitted by searchers.

This competition theoretically drives value to the network's validators and users.

A relay is a critical, semi-trusted component in current PBS systems like MEV-Boost. It acts as an intermediary between builders and proposers with two main functions:

1. Validation: Receiving full blocks from builders, checking their validity (signatures, gas, state transitions).
2. Auction: Running a first-price sealed-bid auction and delivering the winning block header to the proposer.

Trust Assumptions: The proposer must trust the relay to:

• Censor-resistance: Not withhold the winning block body after the header is committed.
• Correctness: Have correctly validated the block. This creates a centralization vector that enshrined PBS (ePBS) aims to remove.

Searchers are independent agents who identify and capture MEV opportunities. They submit transaction bundles directly to builders or builder marketplaces. A bundle is an atomic set of transactions that must be included in a block entirely or not at all.

Bundle Characteristics:

• Atomicity: All transactions succeed or fail together, protecting the searcher's strategy.
• Order Dependence: Transactions are executed in a specified sequence.
• Payment: Includes a fee to compensate the builder and proposer. This creates a layered ecosystem where searchers innovate on strategy, builders optimize execution, and validators secure the chain.

A permissionless builder market can still be vulnerable to censorship if a dominant builder or cartel refuses to include certain transactions. This undermines credible neutrality. Mitigations include:

• Inclusion lists from proposers to mandate specific transactions.
• Cryptographic commit-reveal schemes to hide transaction content until after the block is won.
• Reputation systems that penalize builders for non-inclusion.

The competitive builder market inherently optimizes for Maximal Extractable Value (MEV). This can lead to:

• Builder centralization, as entities with superior MEV strategies and data access outcompete others.
• Time-bandit attacks, where builders reorg chains to capture profitable MEV opportunities, threatening chain finality.
• Economic pressure that favors sophisticated, well-capitalized players over solo builders.

The relayer is a critical, trusted component that receives the builder's signed block and forwards it to the winning proposer. This creates a single point of failure for:

• Denial-of-Service (DoS) attacks, where an attacker floods the relayer to prevent block delivery.
• Censorship, if the relayer filters which builders can participate.
• Withholding attacks, where a malicious relayer fails to deliver the block, causing the proposer to miss their slot.

The first-price sealed-bid auction model in PBS is susceptible to strategic manipulation:

• Bid sniping, where a builder observes the market and submits a bid just above the current highest.
• Collusion between builders to keep bids artificially low, reducing proposer revenue.
• Sandwich attacks on the auction itself, though mitigated by commit-reveal schemes for bids.

While PBS separates roles, it cannot eliminate all collusion. A proposer and builder can secretly coordinate to:

• Bypass the open auction, depriving other builders of a fair chance.
• Split excess MEV profits off-chain, undermining the transparency of the on-chain payment.
• Execute time-bandit attacks more effectively with the proposer's cooperation. Cryptographic proofs of honest execution are a key research area to counter this.

Introducing PBS significantly increases protocol complexity, creating a larger attack surface:

• New smart contracts for auctions and payments must be formally verified.
• Cross-domain security between consensus and execution layers becomes more critical.
• Bridging vulnerabilities in the payment flow from builder to proposer could lead to stolen funds. A bug in the PBS mechanism could stall block production network-wide.

The dominant out-of-protocol implementation of PBS for Ethereum, used by the majority of validators. It is middleware that allows an Ethereum validator (proposer) to connect to a network of external relays and builders. By using MEV-Boost, a proposer can outsource block construction to specialized parties, significantly increasing their staking rewards by capturing MEV that would otherwise be lost.

The planned evolution of PBS, where the separation of proposers and builders is enforced and managed directly by the Ethereum protocol's consensus layer. Key goals include:

• Eliminating trust assumptions on external relays.
• Enhancing censorship resistance guarantees.
• Reducing protocol complexity by formalizing the auction mechanism.
• This is a core part of Ethereum's endgame roadmap for scalability and decentralization.

The competitive process at the heart of PBS. Builders submit sealed bids to relays, specifying the payment (the bid) for including their constructed block. The relay selects the highest valid bid and presents it to the proposer. The proposer typically chooses this highest-bid block, collecting the payment, while the builder earns the transaction fees and MEV contained within the block they built.

A fundamental property that PBS architectures aim to preserve. It ensures that no single entity can prevent a valid transaction from being included in the blockchain. In PBS, relays and builders could theoretically censor transactions. Mitigations include:

• Permissionless relay entry to prevent gatekeeping.
• Builder diversity to avoid monopolies.
• In-protocol PBS (ePBS) designs that enforce inclusion lists or other cryptographic commitments.