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Beyond the protocol

Proposer–Builder Separation and relays

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Barnabé Monnot

Robust Incentives Group (RIG), Ethereum Foundation

CBER Forum Conference — 23/05/2024

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Protocol rights

Protocol endows validators with rights and duties:

  • Consensus duties (previous talk)
  • Execution duties (this talk)
    • Make a block containing some list of pending transactions

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Ethereum protocol

Network of validators

Consensus

Execution

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Validator delegation

Yet some validators choose not to exercise their rights themselves, and delegate them to third-parties…

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Ethereum protocol

Network of validators

Consensus

Execution

Builders

Execution

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Builder-supplied blocks market share

About 90% of blocks were built by external builders since ~Dec. 2022

Median payment over last sixty days: ~$120 per block�=> ~$1,000,000 paid out daily

Plots from mevboost.pics

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Today

  • Why use builders? MEV and searchers.
  • How to use builders? Relays + in-protocol solutions.
  • Zooming out on the economic organisation.

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Why use builders?

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Naive model of block production

Validator-as-producer runs a mempool (pending txs).�When their turn comes, make a block� including highest fee-paying transactions.

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Validator-as-producer

Users

Txs

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Last look and producer privilege

Producers include user transactions in their blocks�Last look ⇒ Producers can capture value from externalities

⚖️ Arbitrage�User makes a swap order for token A against token B on a market 1� ⇒ Creates price imbalance with another market 2�Producer buys B low on 1 ⇒ Producer sells B high on 2� ⇒ Price imbalance is resolved, Producer pockets the difference

Producer privilege => MEV

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Searchers and bundles

In practice, producers may not know where the value is…�Searchers surface opportunities for the producer.

Classic model if searcher trusts producer to keep bundle atomic.

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Validator-as-producer

Users

Searchers

Swap

Swap

Arb

Bundle

Mempool txs

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If producer is untrusted…

The searcher doesn’t want to send their bundle to the producer.�Producer can “unbundle”, replace with own transactions.

Idea: Let a builder make the whole block� Validator-as-proposer blind-signs it.

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Validators-as-proposers

Builders

Users

Searchers

Txs

Bundles

Block

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How to use builders?

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Block production service: Fair exchange

  • Proposer wishes to obtain a good block from a builder.
  • Builder wishes to obtain payment from proposer.

Fair exchange! Can’t do it without trusted third party.

The trusted third party today: a MEV-Boost relay.�MEV-Boost protocol organises market interactions.

​

MEV-Boost protocol

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Validators-as-proposers

Builders

Users

Searchers

Relays

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The role(s) of the relay

  1. Validate builder payloads (or optimistic: arbitrate if fault).
  2. Forward headers + bids to proposer.
  3. Receive signed header from proposer, release full block.

Some relays are free, some have revenue models.�eg, ultra sound “bid adjustment” (keeps diff b/w 1st and 2nd bids)

MEV-Boost protocol

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Validators-as-proposers

Builders

Users

Searchers

Relays

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Rewards

Penalties

Ethereum protocol

Network of validators

Network of builders

Delegate

Block construction

👀

🙈

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Rewards

Penalties

Network of validators

Block construction

Network of builders

Delegate

Ethereum protocol

👀

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Economic organisation

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Fundamental asymmetry of services

Protocols offer services:

  • A consensus mechanism finalising state/accounts
  • An execution engine interpreting user txs, moving state
  • A block production service, electing parties to make blocks

Not all of these services have the same requirements!

  • Some require a decentralised set, honest majority defence.
  • Some require one party to do a good job.

How do we ensure this party does a good job?

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Endgame?

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Validators 

Builders 

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Builder market shares

Clearly three dominant builders at the moment.

Plot from mevboost.pics

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Endgame?

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Validators 

Builders 

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Re-inserting proposer preferences

Leverage validator decentralisation to align builders. Examples:

  • Prevent builder special interests: Inclusion lists.
  • Increase market competitivity: Partial building.
  • Reduce third-party dependencies: Enshrinement.

… while also amplifying validator decentralisation:

  • Deeper separation: “Attester-Proposer Separation”.
  • Staking mechanisms improvements: “MaxEB”, DVT.�

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Thank you!

https://rig.ethereum.org