Builder Network

A Builder Network separates the roles of block building and block proposing. Builders compete in an open marketplace to construct the most valuable blocks by aggregating and ordering transactions from the mempool. This specialization allows for sophisticated MEV (Maximal Extractable Value) extraction strategies and optimization, which benefits the network through increased revenue and efficiency.

Builders participate in a sealed-bid auction for the right to have their block included. The process uses a commit-reveal scheme:

• Commit Phase: Builders submit a cryptographic commitment (hash) of their block and a bid.
• Reveal Phase: The winning builder reveals the full block content. This mechanism prevents front-running and ensures proposers select the block offering the highest payment without seeing its contents first.

PBS is the core architectural principle behind Builder Networks. It clearly delineates responsibilities:

• Builders: Specialize in constructing computationally intensive, optimized blocks.
• Proposers (Validators): Focus on consensus duties, simply selecting the highest-bid block header. This separation reduces the hardware burden on individual validators, mitigates centralization pressures, and contains MEV risks within the builder ecosystem.

By creating a competitive market for block space, Builder Networks efficiently capture and redistribute MEV. Revenue from arbitrage, liquidations, and DEX trades is bid back to the block proposer (validator) and can be shared with users via mechanisms like MEV burn or MEV smoothing. This transforms MEV from a hidden tax into a transparent, market-driven source of network security and user benefits.

A decentralized Builder Network with many independent builders enhances censorship resistance. If one builder censors certain transactions, proposers can select blocks from competing builders who include them. Networks like Ethereum are implementing inclusion lists as a fallback, allowing proposers to force specific transactions into the next block, further strengthening this property.

Flashbots SUAVE is a universal Builder Network and decentralized mempool aiming to be chain-agnostic. Ethereum's PBS is being implemented via ePBS (enshrined PBS) in-protocol and currently operates through builder middleware like mev-boost. Other examples include BloxRoute and Titan, which provide professional block building services.

Proposer-Builder Separation (PBS) is the architectural principle that separates the roles of block proposal and block construction. In a Builder Network, specialized builders compete to create the most valuable block (maximizing MEV), while proposers (validators) simply select the most profitable header. This design aims to democratize access to MEV and reduce the centralizing pressure on validators.

Despite PBS's goals, builder markets can centralize due to economies of scale. Key risks include:

• Capital Advantage: Builders with more capital can offer higher bids, creating a feedback loop.
• Exclusive Order Flow: Builders with exclusive access to user transactions (private order flow) can construct more profitable blocks.
• Relay Dependency: Builders rely on trusted relays to communicate with proposers, creating potential relay-level centralization.

A Builder Network can impact censorship resistance. If a dominant builder or relay censors certain transactions (e.g., OFAC-sanctioned addresses), those transactions may be excluded from blocks. Mitigations include:

• Permissionless Relay Entry: Allowing any honest relay to participate.
• Builder Commitments: Enforcing crLists (censorship resistance lists) where proposers can force inclusion of transactions.
• Proposer Override: Allowing proposers to fall back to building their own block if all received bids are censoring.

MEV-Boost is the primary implementation of PBS on Ethereum. It is an out-of-protocol, opt-in middleware that allows Ethereum validators to connect to a competitive Builder Network via relays. Key components:

• Builders: Create execution payloads.
• Relays: Receive payloads from builders and headers to proposers, attesting to their validity.
• Proposers: Choose the most valuable header via an auction. This creates a vibrant, competitive market for block space.

Enshrined Proposer-Builder Separation (ePBS) is a proposed protocol-level upgrade to formalize the builder role within the Ethereum consensus layer. Goals include:

• Reducing Trust Assumptions: Minimizing reliance on off-chain, trusted relays.
• Enforcing Commitments: Making builder promises (like crLists) cryptographically enforceable.
• Long-Term Stability: Creating a more robust and decentralized builder ecosystem by baking rules directly into the protocol.

Validators participating in a Builder Network (e.g., via MEV-Boost) must manage new risks:

• Relay Trust: Validators must trust relays not to deliver invalid headers or censor. Using multiple relays is critical.
• Software Complexity: Running additional middleware increases operational complexity and attack surface.
• Timing Attacks: The block auction process introduces tight latency constraints, potentially disadvantaging smaller validators with less optimal network connectivity.

A specialized node operator that assembles the most profitable block from the mempool, often using MEV (Maximal Extractable Value) strategies. They compete to have their block accepted by a validator or proposer.

• Role: Aggregates transactions, orders them, and creates a candidate block.
• Incentive: Earns fees and MEV rewards from the block's contents.
• Example: In Ethereum's PBS (Proposer-Builder Separation), builders submit sealed block bids to validators.

A trusted, neutral intermediary that facilitates communication between block builders and validators/proposers. It receives sealed block bids from builders and presents them to validators, ensuring fairness and censorship resistance.

• Function: Validates block headers, enforces submission rules, and runs an auction.
• Purpose: Prevents validators from stealing MEV strategies from builders.
• Key Feature: Often provides block withholding resistance by only revealing the full block after the validator commits.

A blockchain design paradigm that separates the role of block proposal (choosing the chain head) from block construction (assembling transactions). It is the architectural foundation for modern builder networks.

• Goal: Mitigate centralization and MEV risks by creating a competitive market for block building.
• Mechanism: Validators (Proposers) select the highest-paying block from builders via a relay.
• Status: Implemented in practice on Ethereum via MEV-Boost and planned for native integration in future upgrades.

The maximum profit that can be extracted from block production beyond standard block rewards and gas fees, by including, excluding, or reordering transactions. It is the primary economic force driving builder network activity.

• Sources: Arbitrage, liquidations, and frontrunning opportunities.
• Relation to Builders: Builders compete to capture and redistribute MEV, offering a portion to validators as a bid.
• Ecosystem: Has spawned a complex supply chain of searchers, builders, and relays.

An actor who identifies profitable MEV opportunities by analyzing the mempool and blockchain state. They submit transaction bundles to block builders for inclusion in a block.

• Function: Uses algorithms to detect arbitrage, liquidation, or other profitable transaction sequences.
• Interaction with Builders: Searchers rely on builders to include their bundled transactions and execute their strategies.
• Tooling: Often uses specialized software like Flashbots' mev-geth or SUAVE-compatible clients.

A proposed decentralized preconfirmation network and future evolution of the builder/relay ecosystem. It aims to decentralize the block building market itself.

• Core Idea: Creates a chain-agnostic platform where users express transaction preferences, searchers compete for execution, and builders source blocks.
• Goal: Break the reliance on centralized relays and create a more transparent, competitive MEV supply chain.
• Potential: Enables cross-domain MEV and standardized communication between different blockchains.