The “Dark Forest” of Ethereum

MEV (Maximal Extractable Value) refers to the maximum value that can be extracted by adding, removing, or reordering specific transactions within a block, beyond the standard block reward or gas fees.

For example, arbitrage opportunities frequently appear on the blockchain, and specialized searchers are dedicated to identifying these opportunities. However, the transactions they submit must pay gas fees to be included on-chain. When multiple searchers discover the same arbitrage opportunity, they often compete to increase gas fees, and ultimately, only the highest-bidding transaction can be included in the block. For validators, this process represents an opportunity to maximize their profits.

However, in reality, implementing MEV is much more complex. Due to the cumbersome and specialized process of identifying, bundling, and executing these opportunities, the MEV ecosystem has split into different roles: searchers find MEV opportunities, builders bundle these opportunities into complete “blocks,” relays transmit these blocks to validators, and validators ultimately create new blocks. Thus, the modern MEV ecosystem operates as follows:

Source: techflowpost

A competitive mechanism resembling a “dark forest” exists within this ecosystem. For example, searchers must guard against validators intercepting arbitrage opportunities directly, bypassing the searchers. For ordinary decentralized exchange (DEX) users, slippage settings often apply when trading, such as allowing a 1% price increase during a purchase. However, searchers can exploit this, raising the transaction price by 0.8%, paying higher gas fees to extract the maximum value within the slippage range, and selling at a higher price to profit.

Flashbots: Using Blind Auctions to Tackle MEV Challenges

Flashbots is a research and development organization in the Ethereum ecosystem dedicated to mitigating the negative impacts of Maximal Extractable Value (MEV) on blockchains, such as high gas fees and transaction delays. By providing tools like MEV-Boost (a neutral middleware allowing any builder to compete to create the best block openly) and Flashbots Protect (a service protecting user transactions from MEV manipulation), Flashbots aims to create a permissionless, transparent, and sustainable MEV ecosystem.

Specifically, Flashbots provides an MEV auction market for searchers. This market determines transaction priority through internal auctions rather than broadcasting transactions directly, avoiding potential front-running attacks. The auction adopts a “first-price sealed bid” (also known as “blind bid”) model, where each participant can submit only one bid without knowing others’ bids. This mechanism effectively reduces price competition and lowers gas fees.

Because of this auction market, validators no longer need to bear the costs of searching for MEV opportunities and packaging transactions; they only need to accept the highest MEV packaging results from builders. Since its launch, Flashbots has quickly become the preferred tool for most Ethereum validator nodes, forming a core part of Ethereum’s block creation infrastructure.

Source: mevboost.pics

Monopoly Concerns in the MEV Market

Flashbots’ original goal was to mitigate the scale effects of large staking pools, preventing massive validators from expanding their competitive edge by capturing more MEV profits, which would force smaller validators to join large staking pools, further exacerbating the centralization of the block creation network. To address this, Flashbots redistributed MEV profits by separating block sorting, transaction packaging, and validation, aiming to reduce the monopoly of large staking pools over the market.

However, Flashbots’ immense success has also brought new issues. Today, most Ethereum blocks are built using Flashbots’ MEV-Boost, with about 90% of those blocks controlled by two companies—Beaverbuild and Titan. This centralization stems from multiple factors.

First, MEV extraction relies on more sophisticated algorithms, larger computational power, and capital investment, naturally creating scale effects that lead to the market being dominated by a few major companies.

Second, the value of blocks depends on order flow. Builders often sign exclusive agreements with trading platforms to obtain this critical order data. For example, in April 2023, Titan reached an exclusive order flow agreement with Banana Gun, a trading bot operating on Telegram, primarily for token transactions on the Ethereum network. These exclusive agreements further drive market monopolization.

Source: mevboost.pics

BuilderNet: A Decentralized Effort to Counter Centralization Trends

Source: buildernet.org

To address the centralization issues in the MEV market, Flashbots, Beaverbuild, and Nethermind joined forces to launch BuilderNet, a decentralized block-building network. By combining Trusted Execution Environments (TEE) and a multi-party collaboration model, BuilderNet not only enhances the security of block building but also redistributes MEV profits fairly based on contributions, encouraging order flow holders to share their data and improving the decentralization of the Ethereum network.

Collaborative Block Building Across Multiple Nodes

Unlike traditional block-building models, BuilderNet introduces a mechanism where multiple nodes collaborate to build blocks. Each node independently runs a block-building instance within its Trusted Execution Environment (TEE). TEE is a hardware-level secure environment that ensures transaction data privacy, prevents tampering or leaks, and only allows authorized participants to access and verify encrypted transaction data.

In BuilderNet’s model, each block-building instance fetches order flow from the network and independently constructs a complete block. These instances share order flow among themselves, collaborating to complete block-building tasks. Ultimately, all generated blocks are submitted to MEV-Boost relays, and the final block is selected through a bidding mechanism.

Fair Distribution of Order Flow Holder Profits

BuilderNet optimizes the block-building process and ensures that all participants can benefit through a fair profit distribution mechanism. The selected block’s profits are distributed proportionally based on participants’ contributions (such as applications, wallets, searchers, etc.) to the order flow of the block. This approach prevents monopoly by a single builder and strongly supports decentralized block construction.

Conclusion

Source: buildernet.org

As blockchain technology continues to evolve, the decentralization issues in the MEV market are becoming increasingly complex. BuilderNet, introduced by Flashbots, represents a significant innovation in block building. It addresses centralization trends through technical means and brings a more transparent and fair ecosystem structure to the Ethereum network. BuilderNet’s roadmap indicates plans to gradually upgrade the network through multi-party collaboration and contribution-based profit distribution, making it more permissionless, distributed, and resilient.

Although this mechanism is still in its early stages, it offers new hope to the blockchain community, driving the MEV ecosystem toward a more balanced and sustainable future. BuilderNet is undoubtedly a critical step worth following in the decentralization process of the MEV market.