The Ethereum blockchain underwent a significant transformation with The Merge, transitioning from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This shift reset the MEV (Maximal Extractable Value) infrastructure, democratizing access and redistributing roles across validators, builders, and searchers. Here’s an analysis of the evolving MEV supply chain over the past year, highlighting key trends and data insights.
1. Rapid Adoption of MEV-Boost
Pre-Merge Challenges:
- MEV risks threatened PoS Ethereum’s neutrality, potentially centralizing profits among validators with advanced infrastructure.
- Solution: MEV-Boost, a protocol-agnostic Proposer-Builder Separation (PBS) sidecar, was introduced to decentralize MEV access without core protocol changes.
Post-Merge Impact:
- 90% of validators adopted MEV-Boost within two months.
- Validators outsourcing block construction earned comparable median rewards, mitigating centralization pressures.
👉 Explore MEV-Boost adoption metrics
Key Events in Proposer Revenue
Three major volatility periods drove MEV payouts:
- November 2022: FTX collapse triggered $14.5K ETH in MEV/Gas fees.
- March 2023: SVB bank run led to $7.6K ETH payouts.
- July 2023: Vyper exploit resulted in a 570 ETH single-transaction payment, the second-highest in Ethereum history.
2. Relay Market Dynamics
Censorship Concerns
- Post-Merge, OFAC sanctions caused relays like Flashbots to censor Tornado Cash-related transactions.
- At its peak, censored relays processed 79% of blocks.
Market Diversification
- Content-agnostic relays (e.g., Agnostic, Ultra Sound) emerged, reducing Flashbots’ dominance to <25%.
- Current top six relays handle 90% of blocks, with no single entity exceeding 25% share.
Optimistic Relaying: Ultra Sound Relay reduced latency by 100ms, improving bid win rates by 3x.
👉 Learn about relay innovations
3. Builder Competition Evolution
Post-Merge Trends:
- Flashbots Builder initially won 95% of blocks but dropped to <30% as competitors like Beaverbuild and rsync gained traction.
- Strategies: Vertical integration (searcher-builders), order flow sharing, and private flow acquisition intensified competition.
Data Insight: Exclusive order flow constitutes 25-35% of transactions but 80% of block value.
4. Searcher Profitability Shifts
Atomic vs. Non-Atomic MEV
- Atomic MEV: Proposers capture 50-95% of profits (e.g., arbitrage, liquidations).
- Non-Atomic MEV: Higher margins for searchers, with proposers receiving 37-77%.
Example: CeFi-DeFi arbitrage generated $37.8M** vs. atomic strategies’ **$25M in Q1 2023.
5. Future Outlook
PBS Guild & Transparency
- PBS Guild: A $1M R&D fund to support decentralized relay operations and MEV research.
- Mempool Dumpster: Flashbots’ initiative for public mempool data access.
Community Focus: Ethereum’s neutrality depends on ongoing innovation to counter MEV centralization.
FAQ Section
Q1: How does MEV-Boost democratize MEV access?
A1: By separating block proposal and construction, it allows solo validators to compete equally.
Q2: What’s optimistic relaying?
A2: A latency-reduction tactic where blocks are forwarded without prior simulation, backed by builder collateral.
Q3: Why did builder market share diversify?
A3: Open-source tools and new entrants (e.g., Beaverbuild) fragmented Flashbots’ initial dominance.
Q4: How do OFAC sanctions impact relays?
A4: Some relays censor sanctioned-address transactions, though such blocks constitute <2% of total.
Q5: What’s next for Ethereum’s MEV ecosystem?
A5: Protocol-in PBS research and tools like MEV-Share aim to balance transparency and decentralization.