Logo
ScienceStack
Table of Contents
Fetching ...
Sign In

Searcher Competition in Block Building

Akaki Mamageishvili, Christoph Schlegel, Benny Sudakov, Danning Sui

TL;DR

The paper develops a core-based framework to analyze MEV distribution in block-building markets, showing that validators capture most value as searcher competition intensifies. Under submodular value and passive proposers, the searcher-optimal core aligns with the VCG outcome and can be implemented in dominant strategies; a stochastic model clarifies when validators or searchers dominate value capture. Empirical validation with MEV-Share data supports core-based predictions, and the MCP extension reveals core emptiness with multiple concurrent proposers, highlighting market instability. Overall, the work provides a robust, mechanism-agnostic lens for MEV value distribution and lays groundwork for core-based allocation mechanisms.

Abstract

We study the amount of maximal extractable value (MEV) captured by validators, as a function of searcher competition, in blockchains with competitive block building markets such as Ethereum. We argue that the core is a suitable solution concept in this context that makes robust predictions that are independent of implementation details or specific mechanisms chosen. We characterize how much value validators extract in the core and quantify the surplus share of validators as a function of searcher competition. Searchers can obtain at most the marginal value increase of the winning block relative to the best block that can be built without their bundles. Dually this gives a lower bound on the value extracted by the validator. If arbitrages are easy to find and many searchers find similar bundles, the validator gets paid all value almost surely, while searchers can capture most value if there is little searcher competition per arbitrage. For the case of passive block-proposers we study, moreover, mechanisms that implement core allocations in dominant strategies and find that for submodular value, there is a unique dominant-strategy incentive compatible core-selecting mechanism that gives each searcher exactly their marginal value contribution to the winning block. We validate our theoretical prediction empirically with aggregate bundle data and find a significant positive relation between the number of submitted backruns for the same opportunity and the median value captured by the proposer from the opportunity.

Searcher Competition in Block Building

TL;DR

The paper develops a core-based framework to analyze MEV distribution in block-building markets, showing that validators capture most value as searcher competition intensifies. Under submodular value and passive proposers, the searcher-optimal core aligns with the VCG outcome and can be implemented in dominant strategies; a stochastic model clarifies when validators or searchers dominate value capture. Empirical validation with MEV-Share data supports core-based predictions, and the MCP extension reveals core emptiness with multiple concurrent proposers, highlighting market instability. Overall, the work provides a robust, mechanism-agnostic lens for MEV value distribution and lays groundwork for core-based allocation mechanisms.

Abstract

We study the amount of maximal extractable value (MEV) captured by validators, as a function of searcher competition, in blockchains with competitive block building markets such as Ethereum. We argue that the core is a suitable solution concept in this context that makes robust predictions that are independent of implementation details or specific mechanisms chosen. We characterize how much value validators extract in the core and quantify the surplus share of validators as a function of searcher competition. Searchers can obtain at most the marginal value increase of the winning block relative to the best block that can be built without their bundles. Dually this gives a lower bound on the value extracted by the validator. If arbitrages are easy to find and many searchers find similar bundles, the validator gets paid all value almost surely, while searchers can capture most value if there is little searcher competition per arbitrage. For the case of passive block-proposers we study, moreover, mechanisms that implement core allocations in dominant strategies and find that for submodular value, there is a unique dominant-strategy incentive compatible core-selecting mechanism that gives each searcher exactly their marginal value contribution to the winning block. We validate our theoretical prediction empirically with aggregate bundle data and find a significant positive relation between the number of submitted backruns for the same opportunity and the median value captured by the proposer from the opportunity.
Paper Structure (13 sections, 10 theorems, 37 equations, 5 figures, 1 table)

This paper contains 13 sections, 10 theorems, 37 equations, 5 figures, 1 table.

Table of Contents

  1. Introduction
  2. Glossary of Terms
  3. Related Literature
  4. Examples and Model
  5. Examples
  6. Model
  7. Analysis
  8. Implementation
  9. Independent Bundles and Competing Searchers
  10. Stochastic Model
  11. Empirical validation
  12. Multiple Concurrent Proposers
  13. Conclusion

Key Result

Lemma 1

Let ${A}\subseteq {B}\subseteq\mathcal{S}$. Then, for decreasing marginal value functions, the following inequality holds:

Figures (5)

  • Figure 1: A schematic representation of the Ethereum block building process.
  • Figure 2: A schematic representation of an order flow auction.
  • Figure 3: Number of submitted bundles for the same target transaction. Data is grouped into bins of 5, so that the first bar corresponds to the number of transactions receiving 0-4 backruns, the second to the number of transactions receiving 5-9 backruns etc.
  • Figure 4: Median profit (log-scale) in ETH as a function of number of submitted bundles for the same target transaction.
  • Figure 5: Median profit (log-scale) in ETH as a function of number of submitted bundles for the same target transaction .

Theorems & Definitions (25)

  • Lemma 1
  • proof
  • Definition 1
  • Definition 2
  • Remark 1
  • Proposition 1
  • proof
  • Corollary 1
  • Proposition 2
  • proof
  • ...and 15 more