Author: 0XNATALIE

Current Centralization Status of Ethereum Block Construction

Currently, the Ethereum block construction market faces a significant centralization problem, with approximately 92% of Ethereum blocks built by MEV-Boost, and about 94% of those blocks dominated by two main block builders (Beaverbuild and Titan).

Flashbots launched MEV-Boost to alleviate the scale effect of large staking pools on MEV extraction, avoiding larger validators from leveraging more MEV profits to expand their competitive advantage, thus forcing smaller validators into large staking pools and exacerbating network centralization. MEV-Boost separates the proposal and construction process of blocks through the Proposer-Builder Separation (PBS) mechanism, where block proposers (validators) are responsible for proposing new blocks, and block builders are responsible for transaction ordering and block construction. This way, validators no longer participate directly in block construction but instead introduce independent builders, redistributing MEV and reducing the monopoly of large staking pools.

However, with the popularity of MEV-Boost, the block construction market has instead faced a problem of high centralization, with over 90% of blocks built by two builders, which not only erodes Ethereum's decentralization characteristics but also leads to a vicious cycle of high participation costs, mainly reflected in two aspects: First, order flow; the value of a block is determined by the order flow. To obtain this transaction data, builders need to sign exclusive agreements with order flow providers (such as users, wallets, applications, etc.), which often come with high fees. Without paying these fees, builders find it difficult to compete in the market. Such exclusivity agreements create monopolies between a few builders and specific order flow providers, increasing the system's vulnerability, as the failure of any single builder may impact the stability of the entire system. Second, block construction requires significant capital investment to support infrastructure (such as relays), further raising the participation threshold.

BuilderNet: Reshaping the MEV Ecosystem

To address these issues, Flashbots, Beaverbuild, and Nethermind jointly developed BuilderNet, a decentralized block construction network. By utilizing trusted execution environments (TEE) and multiple independent nodes to collaboratively construct blocks, BuilderNet enhances Ethereum's censorship resistance, decentralization, and transparency, while redistributing MEV to ensure all participants can benefit fairly.

Core Team

  • Flashbots: a technical team focused on Ethereum MEV optimization, committed to enhancing the transparency and decentralization of the block construction market. Flashbots has developed protocols like MEV-Boost and MEV-Share to provide a more transparent and fair mechanism for the block construction market.

  • Beaverbuild: the primary Ethereum block builder and one of the largest block builders, holding approximately 50% of the market share.

  • Nethermind: a company providing Ethereum client and infrastructure solutions, focusing on the implementation, performance optimization, and security of the Ethereum protocol. Nethermind provides crucial technical support for BuilderNet, ensuring efficient operation and security of the system.

How it works: TEE + Order flow sharing = Profit distribution based on contribution

BuilderNet relies on a decentralized multi-party collaboration model. In the traditional model, one node runs one block builder, whereas in the BuilderNet model, multiple nodes jointly run one block builder.

In a block builder, each node can run an independent block construction instance in its own TEE. TEE is a hardware-level secure environment that ensures the confidentiality of transaction data, preventing operators from tampering with transaction flows or leaking user data, with only authorized participants able to verify and send encrypted transaction flows to these TEE instances. This ensures the privacy of transaction data and the security of the system. Each instance obtains order flows from the entire network and independently constructs a complete block while sharing the order flows with other instances in the same builder. Then, all blocks are submitted to the MEV-Boost relay, and a bidding mechanism is used to select which block is ultimately included on the chain. The selected block will distribute refunds based on the contributions of each participant who provided order flows for that block (such as applications, wallets, searchers, instances, etc.).

BuilderNet not only supports the Ethereum mainnet but also plans to introduce more features into L2 networks through Rollup-Boost. In the long term, as more users choose to use BuilderNet, larger builders will also be inclined to join this platform. Increased transaction volume and more efficient operations will enable them to achieve more stable profits.

Participants

  • Users, wallets, and applications: can participate by sending transactions to BuilderNet nodes and receive refunds based on their contributions.

  • Searchers: can submit transaction bundles to BuilderNet and receive refunds while enjoying privacy protection. Independent searchers are provided with the same economic returns and privacy protection as integrated searcher-builders.

  • Builders (nodes): independently run block construction instances, submit blocks to MEV-Boost, and receive corresponding rewards based on contributions.

  • Validators: In the early stages of BuilderNet's launch, the economic model for validators will not have a significant impact, as existing MEV profits are usually not directly paid to validators. More MEV will be redistributed to validators in the future.

  • Operators: responsible for managing and maintaining the infrastructure of BuilderNet nodes and ensuring the normal operation of the TEE environment.