PBS Governance

PBS Governance is the formal and informal system for making collective decisions about the Proposer-Builder Separation (PBS) protocol. This includes establishing the technical specifications (like those for MEV-Boost), updating relay and builder software, managing the builder registry, and setting policies for censorship resistance and validator obligations. Unlike core protocol upgrades managed by Ethereum Improvement Proposals (EIPs), PBS governance often operates through a combination of client developer coordination, relay operator consensus, and broader community signaling.

A central challenge in PBS governance is balancing decentralization with efficiency. Key entities involved are relay operators, who curate the builder marketplace and must be trusted for liveness and censorship properties, and block builders, whose competitive landscape is governed by economic rules. Governance decisions here directly impact validator rewards (through MEV extraction), network latency, and the resilience of the chain against centralization risks. The community uses forums, research calls, and client implementations to debate and steer these components.

The governance process is critical for the in-protocol PBS (ePBS) roadmap, where today's off-chain coordination via MEV-Boost will be formalized into the core consensus layer. Current governance focuses on proposer commitments, such as the builder-registration API and the potential for inclusion lists, which are rules validators can enforce to guarantee transaction inclusion. These mechanisms are debated and refined through the governance process to ensure the final protocol design aligns with Ethereum's core values of neutrality and permissionlessness.

PBS governance is distinct from the core blockchain protocol's governance and focuses specifically on the builder-proposer marketplace. Its primary function is to define the rules of interaction between block proposers (validators) and block builders (specialized entities), including how builders bid for block space, how proposers select winning bids, and how the mev-boost relay network or similar infrastructure is managed. This governance layer ensures the marketplace remains competitive, transparent, and resistant to centralization or manipulation.

Key governance decisions include setting parameters for the builder registry, establishing slashing conditions for malicious builders, defining the requirements for relay operators, and potentially overseeing the development of in-protocol PBS implementations. These decisions are typically made by a consortium of stakeholders, which may include core protocol developers, major validator pools, builder representatives, and researchers, often through an Ethereum Improvement Proposal (EIP) process or dedicated working groups like the Ethereum Protocol Fellowship.

A central tension in PBS governance is balancing decentralization with efficiency. Overly restrictive rules can stifle builder innovation and reduce maximal extractable value (MEV) redistribution to validators, while overly permissive rules could lead to builder cartels and censorship. Governance processes must also adapt to emerging threats, such as the potential for time-bandit attacks or builder collusion, requiring continuous research and iterative protocol upgrades to maintain system integrity and fairness for all participants.

The evolution of PBS governance traces the development of the rules, mechanisms, and stakeholder roles that oversee the market where block builders compete to construct blocks and proposers (validators) select the most profitable one. Initially proposed to mitigate Maximal Extractable Value (MEV) centralization risks, its governance has progressed through distinct phases: from off-chain, trusted relay-based models to the ongoing development of in-protocol PBS (ePBS), which aims to enshrine the auction logic directly within Ethereum's consensus layer. This shift fundamentally changes who controls the critical auction mechanism and how its parameters are updated.

Early PBS implementation relied heavily on off-chain governance by relay operators. Centralized relays like Flashbots acted as trusted intermediaries, setting rules for builder registration, censorship resistance (e.g., inclusion lists), and data transparency. This period was characterized by rapid iteration but also centralization risks, as relay operators held significant power over market access and rules. The governance of this system was informal, driven by individual relay policies and community pressure, highlighting the need for a more robust, protocol-native solution.

The current evolutionary direction is toward enshrined PBS (ePBS), which moves the core auction and governance into the Ethereum protocol itself. Key governance questions for ePBS include: Who controls the crList (censorship resistance list) mechanism? How are builder registration and slashing conditions determined? How are protocol parameters like auction fees adjusted? Governance of these elements is intended to fall under Ethereum's existing consensus-layer upgrade process, involving researchers, client developers, and ultimately stakeholder votes via the Ethereum Improvement Proposal (EIP) process, making the system more transparent and decentralized.

A critical governance challenge throughout this evolution is balancing competing interests: proposer welfare (maximizing rewards), builder competition (ensuring a healthy market), censorship resistance (guaranteeing transaction inclusion), and protocol simplicity. Different governance models allocate control over these trade-offs differently. For instance, a proposer-driven model might let the validator choose the crList, while a builder-driven model might assign that duty to the winning builder, each with distinct implications for decentralization and efficiency.

The endpoint of this governance evolution is a stable, decentralized system where the rules of block construction and proposal are as resilient as the blockchain itself. Success means achieving a sustainable equilibrium where MEV is efficiently redistributed without creating new centralization vectors, and where updates to the PBS mechanism are governed by the broad Ethereum community rather than a few off-chain entities. This represents a major step in maturing Ethereum's core economic infrastructure.