Builder

The builder's primary function is to assemble the most profitable execution payload. This involves:

• Transaction Selection: Curating transactions from the mempool based on fee priority.
• MEV Extraction: Identifying and capturing Maximal Extractable Value through arbitrage, liquidations, and DEX trades.
• Simulation: Running local simulations to ensure the proposed block is valid and profitable before committing.

Builders compete in a block auction by submitting sealed bids to validators (proposers). The bid includes:

• Execution Payload: The fully constructed block.
• Bid Value: The amount of ETH the builder is willing to pay to have its block accepted.
• Bid Signature: A cryptographic commitment to the bid terms. The highest valid bid typically wins the right to have its block proposed.

Builders do not communicate directly with validators. They submit their bids through a trusted, neutral intermediary called a Relay. The relay:

• Validates Blocks: Ensures the builder's payload is correct and the bid is backed by sufficient funds.
• Prevents Censorship: Operates a neutral marketplace, though relay trust assumptions are a key design consideration.
• Broadcasts Bids: Forwards valid bids to validator clients for selection.

The dominant implementation is MEV-Boost, middleware that enables Ethereum validators to outsource block building. It enforces Proposer-Builder Separation (PBS), which:

• Decouples Roles: Separates block proposal (consensus) from block construction (execution).
• Reduces Centralization Risk: Allows solo validators to access sophisticated block production.
• Enhances Revenue: Validators capture value from MEV without needing complex infrastructure.

Builders operate within a system of critical trust assumptions:

• Relay Trust: The relay must be honest in validating and forwarding bids. Data Availability of the winning block is crucial.
• Builder Reputation: Validators prefer builders with a history of reliable, high-value blocks.
• Censorship Resistance: The builder-relay-validator pipeline must resist transaction censorship, a topic of ongoing protocol development.

The builder landscape includes both independent entities and teams affiliated with major protocols. Prominent examples include:

• Flashbots: The pioneer, operating the Flashbots Relay and open-source SUAVE initiative.
• bloXroute: A performance-focused relay and builder network.
• Blocknative, Eden Network, and Manifold are other key players. Builders are a core component of the MEV supply chain.

Searchers are actors who identify profitable MEV opportunities (like arbitrage) and create transaction bundles. They submit these bundles to builders, who then incorporate them into a candidate block. This creates a two-layer market:

• Searchers compete on finding the best opportunities.
• Builders compete on assembling the most valuable block from all available bundles and public mempool transactions. The builder's role is to be a bundle aggregator and block construction optimizer.

The current PBS model via MEV-Boost is an out-of-protocol solution. Enshrined Proposer-Builder Separation (ePBS) is a proposed upgrade to the Ethereum protocol itself that would formalize the builder role. Goals include:

• Further reducing validator hardware requirements.
• Enhancing censorship resistance guarantees.
• Formally defining the block auction mechanism within consensus rules. This represents the potential future evolution of the builder concept into a core protocol primitive.

The builder model is expanding beyond Ethereum Mainnet. Layer 2 rollups (Optimism, Arbitrum, zkSync) and other chains are exploring similar separation of roles to optimize sequencing and value capture.

Key variations include:

• Sequencer-Builder Separation: Analogous to PBS on L2s.
• Shared Sequencer Networks: Builders/sequencers serving multiple rollups.
• App-Chain Builders: Specialized block construction for specific application ecosystems. This shows the builder archetype becoming a fundamental component of modular blockchain stacks.

The Builder role can lead to centralization if a few entities control most block construction, creating a censorship vector. A dominant builder can exclude transactions from the mempool, potentially enforcing OFAC sanctions or other filters. This undermines the permissionless nature of the base layer. Mitigations include credible neutrality in block building and the use of MEV-boost relays that enforce specific policies.

Builders compete to extract Maximal Extractable Value (MEV) by reordering and including transactions. While competition can benefit users via block rewards, it also creates risks:

• Value leakage from users to sophisticated builders.
• Potential for time-bandit attacks where builders reorganize chains to steal MEV.
• Sandwich attacks and other predatory strategies executed at the builder level, which can degrade user experience and trust in the network's fairness.

In PBS designs like Ethereum's, Builders submit blocks to Relays, which are trusted intermediaries. This creates a trust assumption:

• The relay must faithfully deliver the builder's block to the proposer.
• The relay must not censor builders or reveal block contents prematurely (frontrunning).
• Relay failure or malicious activity can break the PBS pipeline. Solutions aim for minimal trust or trustless verification of relay behavior.

Builders may form cartels to manipulate the market for block space and MEV. Collusion risks include:

• Bid rigging to lower payments to proposers (validators).
• Exclusionary practices against independent builders.
• Uniform censorship policies across the network. Monitoring builder market share and promoting decentralized builder networks are key countermeasures to preserve a healthy, competitive ecosystem.

A Builder must provide a complete and valid execution payload. Key technical risks:

• Withholding attacks: A builder provides a header but withholds the block body, making the chain unusable.
• Invalid state transitions: A malicious builder could construct a block that leads to an invalid state, though this is slashed in proof-of-stake systems.
• Data unavailability can halt chain progress, emphasizing the need for Data Availability Sampling (DAS) and fraud proofs in rollup-centric architectures.

As a centralized point of transaction ordering, Builders present a clear regulatory attack surface. Authorities may target builders to enforce transaction blacklists, compromising network neutrality. This differs from targeting individual validators. The legal status of block building as a service is undefined, creating operational risk. Enshrined PBS and permissionless builder sets within the protocol are potential long-term mitigations to distribute this legal risk.