Who Wins Ethereum Block Building Auctions and Why?

TL;DR

This study addresses centralization risk in Ethereum's MEV-Boost block-building auction by empirically analyzing six months of activity and introducing a transaction-labeling framework that separates transparency and order-flow signals. By computing $TV$, $VP$, $BP$, and $PM$, the authors quantify true block value, validator payments, and builder profitability, enabling a rigorous assessment of which flows and strategies correlate with market share and profits. The key findings show that block market share tracks order-flow diversity (higher entropy), while profitability aligns with access to exclusive providers and certain flows (e.g., exclusive signal, non-atomic arbitrages, Telegram bot flow), revealing a chicken-and-egg dynamic that raises barriers for new entrants. The work discusses implications for maintaining Ethereum's censorship resistance and outlines potential paths forward, including sealed-bid auctions, decentralized builders, and encrypted mempools to reduce centralization pressures in the block-building market.

Abstract

The MEV-Boost block auction contributes approximately 90% of all Ethereum blocks. Between October 2023 and March 2024, only three builders produced 80% of them, highlighting the concentration of power within the block builder market. To foster competition and preserve Ethereum's decentralized ethos and censorship-resistance properties, understanding the dominant players' competitive edges is essential. In this paper, we identify features that play a significant role in builders' ability to win blocks and earn profits by conducting a comprehensive empirical analysis of MEV-Boost auctions over a six-month period. We reveal that block market share positively correlates with order flow diversity, while profitability correlates with access to order flow from Exclusive Providers, such as integrated searchers and external providers with exclusivity deals. Additionally, we show a positive correlation between market share and profit margin among the top ten builders, with features such as exclusive signal, non-atomic arbitrages, and Telegram bot flow strongly correlating with both metrics. This highlights a "chicken-and-egg" problem where builders need differentiated order flow to profit, but only receive such flow if they have a significant market share. Overall, this work provides an in-depth analysis of the key features driving the builder market towards centralization and offers valuable insights for designing further iterations of Ethereum block auctions, preserving Ethereum's censorship resistance properties.

Figures (14)

• Figure 1: Bubble plot illustrating MEV-Boost builders' profit margin (average block value kept by the builder) on the x-axis and total profit in ETH on the y-axis. Bubble size represents the builder's market share, measured by the total number of blocks built. Color indicates profitability, with a 15% profit margin threshold distinguishing high-profit margin builders. Builders with less than 0.01% market share or a profit margin below -50% are omitted for brevity.
• Figure 2: MEV-Boost block production process. Users (blue) submit transactions to the public mempool, accessible to every builder. EOF providers (orange), including searchers and valuable order flow bots, monitor user transactions and bundle them with their own transactions or directly submit individual transactions to builders. Builders (purple) submit blocks with bids to the relays (yellow), which make them available to the proposer (green) through the mev-boost middleware.
• Figure 3: Taxonomy of transaction transparency and order flow labels. Every transaction has a transparency label (orange) based on its visibility on the network level and an order flow label (purple) determined by its objective. The gray labels stemming from the order flow labels represent the detailed categories we consider or popular providers of such order flow.
• Figure 4: Trends in the market share, profits, and profit margin of the top three builders with highest market share, , over time. \ref{['fig:market_share']} is an area plot highlighting the changes in market share owned by and the aggregated, remaining builders, denoted as "Others" in the legend. \ref{['fig:cum_profits']} is a line plot showing the cumulative ETH profits of the same entities. \ref{['fig:pm_over_time']} displays the daily profit margin changes of . The area below 0 on the y-axis is filled with red to indicate days when the builder was, on average, unprofitable.
• Figure 5: \ref{['fig:transparency_value']} and \ref{['fig:transparency_gas']} are area plots highlighting the share of value provided and blockspace consumed (in gas) by each transparency label over time. \ref{['fig:of_transparency']} is a horizontal bar plot showing the transparency of each order flow label, measured in total transaction volume. \ref{['fig:builder_transparency']} is a horizontal bar plot indicating the share of value that the top ten builders with the highest market share receive from each transparency label. Builders on the y-axis are ordered in ascending order based on their market share, with the builder with the highest share listed at the bottom. The legend in \ref{['fig:transparency_value']} applies to all figures.