MEV Supply Chain

The MEV Supply Chain is the end-to-end process and ecosystem of specialized participants who identify, capture, and redistribute Maximal Extractable Value (MEV). It transforms raw blockchain transaction flow into a structured market, where value from transaction ordering—such as from arbitrage, liquidations, or front-running—is systematically extracted and distributed among searchers, builders, validators, and other intermediaries. This supply chain has evolved from simple, opportunistic bots into a sophisticated, multi-layered infrastructure critical to modern blockchain performance and economics.

Key participants form distinct roles in this chain. Searchers run algorithms to detect profitable MEV opportunities and create bundles of transactions to capture them. Builders are specialized block producers that compete to construct the most valuable block by aggregating bundles from searchers and ordinary transactions, often using complex optimization software. Validators (or their delegated proposers) ultimately select and propose the winning block to the network, typically choosing the builder's block that offers them the highest payment, known as the validator payment or bid.

The supply chain is governed by protocols like PBS (Proposer-Builder Separation), which formally separates the role of block builder from block proposer to mitigate centralization risks and ethical concerns. Builders submit bids to validators in a competitive auction. Relays act as trusted intermediaries in this process, receiving block bids from builders and forwarding the most valuable one to the validator, while preventing the validator from stealing the MEV contained within the block. This structure creates a market where MEV revenue flows from searchers to builders, then to validators via the relay.

Downstream, the supply chain also includes order flow auctions and MEV-sharing mechanisms. Platforms like Flashbots Auction or CowSwap's CoW Protocol allow users to auction their transaction order flow directly to searchers and builders, capturing some value for themselves. MEV smoothing protocols and distributed validator technology aim to redistribute extracted MEV more evenly among all network validators, reducing inequality and centralization pressures that arise from large, competitive block-building entities.

The evolution of the MEV supply chain has profound implications. It increases blockchain efficiency and liquidity by incentivizing optimal transaction ordering, but it also introduces complexities like centralization in block building, network congestion from spam bundles, and the need for robust MEV-boost middleware on networks like Ethereum. Understanding this supply chain is essential for developers designing dApps, analysts modeling validator revenue, and protocols seeking to protect their users from negative MEV like sandwich attacks.

The MEV supply chain describes the end-to-end process by which Maximal Extractable Value (MEV) is captured and distributed across a decentralized network of specialized participants. It transforms raw, unordered transactions on a public mempool into a final, ordered sequence in a block, with value extracted at various stages. Key roles in this chain include searchers who identify profitable opportunities, builders who construct optimized blocks, and validators who ultimately propose the winning block to the network.

The process begins with searchers running complex algorithms to scan the public mempool for arbitrage, liquidations, or other profitable transaction sequences. They bundle these transactions and submit them, along with a bid, to a block builder. The builder's role is to assemble the most profitable block possible by selecting and ordering transaction bundles from many searchers, often using private mempools or order flow auctions to access exclusive opportunities. The builder then submits this complete block to a relay, which acts as a trusted intermediary to prevent front-running and ensure the block's validity.

Finally, validators (or proposers) connect to one or more relays to receive the most lucrative block payloads. They select the block with the highest total bid, which includes the standard block reward and the additional payment from the builder (the MEV-Boost payment). Upon proposing this block, the validator earns the fee, the builder profits from the difference between the extracted value and their bid, and the searcher profits from their identified opportunity. This creates a competitive market that efficiently prices MEV but also centralizes block production in sophisticated builder entities.

Critical infrastructure like Flashbots' SUAVE (Single Unifying Auction for Value Expression) aims to decentralize this supply chain further. SUAVE proposes a separate, neutral network for processing and communicating preference orders (transaction bundles), reducing reliance on centralized builder monopolies and private order flow. This evolution highlights the supply chain's dynamic nature, constantly balancing efficiency, decentralization, and fair value distribution among network participants.

The MEV supply chain refers to the specialized, multi-layered ecosystem of actors and protocols that identify, extract, and redistribute Maximal Extractable Value (MEV). This value, derived from reordering, inserting, or censoring transactions within a block, is not captured by a single entity but rather flows through a sophisticated chain. Key participants include searchers who identify profitable opportunities, builders who construct optimized blocks, and validators (or block proposers) who ultimately select and propose blocks to the network. This specialization has evolved to maximize efficiency and profitability in MEV extraction.

At its core, the supply chain is driven by the separation of roles enabled by proposer-builder separation (PBS). In this model, block builders compete to create the most valuable block by aggregating transactions and MEV bundles from searchers. They then auction these blocks to validators, who simply choose the highest-paying bid. This specialization allows validators to earn revenue without engaging in complex MEV strategies themselves, while builders and searchers leverage advanced algorithms and infrastructure, such as Flashbots' MEV-Boost on Ethereum, to operate at scale. The result is a competitive marketplace for block space.

The future evolution of the MEV supply chain focuses on mitigation, redistribution, and democratization. Protocols like MEV smoothing and proposer commitments aim to distribute MEV revenue more evenly among validators to reduce centralization pressures. Encrypted mempools and fair ordering techniques seek to neutralize harmful forms of MEV like frontrunning. Furthermore, SUAVE (Single Unified Auction for Value Expression), envisioned as a decentralized block builder and mempool, aims to decentralize the supply chain itself, potentially returning control and value to users and reducing the dominance of centralized builder entities.