Builder Extractable Value (BEV)

The builder reorders transactions within a block to maximize arbitrage and liquidations. This is the most direct form of BEV, where the builder positions its own profitable transactions (e.g., a DEX arbitrage) immediately after a large, price-moving trade to capture the price difference. The builder's privileged view of the pending transaction pool (mempool) is key to this strategy.

• Example: A large swap on Uniswap moves the price of an asset. The builder places its own arbitrage trade right after it to profit from the temporary price dislocation before other traders can react.

The builder inserts its own transactions into a block that would not otherwise be included. This is often used for Cross-Domain MEV, where an opportunity spans multiple blockchains (e.g., Ethereum and a Layer 2). The builder can guarantee execution on one chain by controlling block production, enabling complex, risk-free arbitrage.

• Example: An arbitrage opportunity exists between a DEX on Ethereum and a DEX on Arbitrum. The builder, also operating a relayer, can insert the Ethereum-side transaction into its block while simultaneously submitting the Arbitrum transaction, capturing the spread.

The builder selectively excludes (censorship) or delays transactions from the block. This can be used to protect the builder's own extractable value strategies or to comply with regulatory demands. Censorship prevents competing arbitrageurs or liquidators from executing before the builder's own transactions.

• Example: To secure a profitable liquidation, a builder may censor all other liquidation transactions for a specific position from the mempool, ensuring only its own liquidation transaction is included in the block.

A sophisticated strategy where a builder intentionally withholds a produced block to see if a more profitable block can be created based on new transactions arriving in the mempool. If a more profitable block is found, the builder reorgs the chain by releasing it, causing the original block to be orphaned. This undermines chain finality and is generally considered malicious.

• Key Mechanism: Relies on the ability to withhold blocks from propagation and the possibility of chain reorganizations within a certain depth.

The builder leverages its role across multiple connected ecosystems (e.g., Ethereum and its rollups) to capture value that depends on atomic execution across domains. By controlling block production on one chain and using fast relayers or other coordination mechanisms, the builder can guarantee the multi-chain transaction sequence, unlocking unique arbitrage and liquidation opportunities.

• Infrastructure Dependency: This strategy requires the builder to operate or have agreements with cross-chain relayers and sequencers on Layer 2 networks.

Builder Extractable Value (BEV) is the profit a block builder captures by strategically ordering, including, or excluding transactions. This is distinct from Miner Extractable Value (MEV) as it occurs after the separation of block building and block proposing roles (e.g., in Proposer-Builder Separation (PBS) architectures). The builder, who constructs the block's contents, can extract value through techniques like arbitrage and sandwich attacks before selling the block to a proposer.

BEV exists within the MEV supply chain enabled by Proposer-Builder Separation (PBS). The flow is:

• Searchers identify profitable opportunities and create transaction bundles.
• Builders compete to construct the most profitable block by including these bundles.
• Relays act as trusted intermediaries, receiving blocks from builders and forwarding them to proposers.
• Proposers (Validators) simply select the block with the highest bid, often blind to its contents. This specialization allows builders to become the primary extractors of MEV, which is then rebranded as BEV.

Builders extract value using the same fundamental techniques as traditional MEV, but with greater efficiency and scale:

• Arbitrage: Exploiting price differences for the same asset across decentralized exchanges (DEXs) within a single block.
• Sandwich Attacks: Placing transactions before and after a victim's large trade to profit from the resulting price movement.
• Liquidations: Triggering and capturing rewards from undercollateralized loans in lending protocols.
• Time-Bandit Attacks (theoretical): Attempting to reorganize the chain to steal a profitable block, though mitigated by consensus finality.

BEV centralizes economic power with sophisticated builders, creating potential risks:

• Proposer Centralization: Validators are incentivized to use the builder offering the highest bid, leading to reliance on a few dominant builders.
• Censorship: Builders can exclude transactions from their blocks, potentially censoring specific applications or users.
• Network Stability: High BEV can distort staking rewards and validator incentives. However, PBS also has benefits: it can democratize MEV access for validators and potentially reduce negative externalities like failed arbitrage transactions clogging the network.

MEV (Miner/Validator Extractable Value) is the broader concept of profit from transaction ordering. BEV is a subset of MEV that emerges specifically in PBS systems.

The original concept from Proof-of-Work (PoW) blockchains, where miners control transaction ordering and can extract value by including, excluding, or reordering transactions. BEV is the direct successor in Proof-of-Stake (PoS) systems, where validators (or their designated builders) perform the same role.

• Key Difference: MEV is extracted by the block proposer after the block is built. BEV is extracted by the block builder before the block is proposed.

A design paradigm that formally separates the roles of block building (creating a block with transactions and order) and block proposing (signing and publishing the block). PBS is the architectural foundation that enables the BEV market.

• Builders: Compete to create the most profitable block, capturing BEV.
• Proposers: Simply choose the most valuable block from builders, receiving a payment (the bid). This reduces the centralization and ethical risks of MEV.

The theoretical maximum total value that can be extracted from a given set of pending transactions through optimal ordering and inclusion. MEV and BEV are subsets of this total potential.

• Scope: Includes arbitrage, liquidations, and any other profit opportunity inherent in the transaction pool.
• Importance: This is the 'pie' that searchers, builders, and validators compete to capture. The efficiency of this extraction impacts overall network costs for users.

Independent agents or bots that identify profitable MEV/BEV opportunities (like arbitrage or liquidation chances) and submit transaction bundles to builders.

• Role: They perform the complex analysis and simulation to find value.
• Relationship to BEV: Searchers pay builders (via the bundle bid) to include their profitable transactions. This payment is a primary source of the builder's revenue (BEV).

The two fundamental methods of value extraction within BEV.

• Inclusion: The builder profits by adding a profitable transaction (e.g., an arbitrage bundle from a searcher) that wouldn't otherwise be in the block.
• Exclusion (Censorship): The builder profits by omitting certain transactions, often to benefit a competing transaction or to comply with external mandates (e.g., OFAC sanctions). This is a significant concern for network neutrality.