Author: 0XNATALIE
The Current Centralized State of Ethereum Block Building
The current Ethereum block building market is facing a high degree of centralization, with approximately 92% of Ethereum blocks being constructed by MEV-Boost, of which about 94% are dominated by two major block builders (Beaverbuild and Titan).
The launch of Flashbots' MEV-Boost was intended to alleviate the scale effect of large staking pools on MEV extraction, preventing large validators from using more MEV earnings to expand their competitive advantage, which would force smaller validators to join larger staking pools, exacerbating the network's centralization. MEV-Boost, through the Proposer-Builder Separation (PBS) mechanism, separates the block proposal and construction processes, with block proposers (validators) responsible for proposing new blocks and block builders responsible for transaction ordering and block construction. This way, validators are no longer directly involved in block construction, but independent builders are introduced, redistributing MEV and reducing the monopoly of large staking pools.
However, with the popularity of MEV-Boost, the block construction market has become highly concentrated, with over 90% of blocks being constructed by two builders. This centralization not only erodes Ethereum's decentralized nature but also leads to a vicious cycle of high participation costs, manifested in two ways: First, the 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.), often accompanied by high fees. If these fees are not paid, builders will find it difficult to compete in the market. These exclusive agreements have led to a monopoly between a few builders and specific order flow providers, increasing the system's fragility, as the failure of any one builder could impact the stability of the entire system. Second, block construction requires a large amount of capital investment in infrastructure (such as relays), further raising the participation threshold.
BuilderNet: Reshaping the MEV Ecosystem
To address these issues, Flashbots, Beaverbuild, and Nethermind have jointly developed BuilderNet, a decentralized block construction network. By leveraging Trusted Execution Environments (TEEs) and multiple independent nodes collaborating to construct blocks, BuilderNet can improve Ethereum's censorship resistance, decentralization, and transparency, as well as redistribute MEV to ensure that all participants can fairly benefit from it.
Core Team
- Flashbots: A technical team focused on Ethereum MEV optimization, dedicated to enhancing the transparency and decentralization of the block construction market. Flashbots has developed protocols such as MEV-Boost and MEV-Share, providing more transparent and fair mechanisms for the block construction market.
- Beaverbuild: A major Ethereum block builder, currently one of the largest block builders, occupying around 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 the system's efficient operation and security.
Working Principle: TEE + Order Flow Sharing = Reward Distribution Based on Contribution
BuilderNet relies on a decentralized multi-party collaboration model. In the traditional model, a single node runs a block builder, while in the BuilderNet model, multiple nodes collectively run a block builder.
Within a block builder, each node can run an independent block construction instance in its own TEE. TEE is a hardware-level secure environment that can guarantee the confidentiality of transaction data, prevent operators from tampering with the transaction flow or leaking user data, and only authorized participants can 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 retrieves the order flow from the entire network and independently constructs a complete block, while also sharing the order flow with other instances within the same builder. All the blocks are then submitted to the MEV-Boost relay, and the winning block is selected through a bidding mechanism. The selected block will be distributed to the participants (such as applications, wallets, searchers, instances, etc.) who contributed to the order flow for that block, based on their respective contributions.
BuilderNet not only supports the Ethereum mainnet but also plans to introduce more functionality to L2 networks through Rollup-Boost. In the long run, as more users choose to use BuilderNet, large builders will also tend to join this platform. Increased transaction volume and more efficient operation will enable them to achieve more stable earnings.
Participants
- Users, Wallets, and Applications: Can participate by sending transactions to BuilderNet nodes and receive payouts based on their contributions.
- Searchers: Can submit transaction bundles to BuilderNet and receive payouts while enjoying privacy protection. This provides independent searchers with the same economic rewards and privacy protection as integrated searcher-builder models.
- Builders (Nodes): Independently run block construction instances, submit blocks to MEV-Boost, and receive rewards based on their contributions.
- Validators: In the initial phase of BuilderNet, the economic model for validators will not have a significant impact, as the existing MEV earnings are often not directly paid to validators. In the future, more MEV will be redistributed to validators.
- Operators: Responsible for managing and maintaining the infrastructure of BuilderNet nodes and ensuring the proper functioning of the TEE environment.
