Decentralized Proposer-Builder Separation Resolves Builder Centralization Risk ∞ Research

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Briefing

The core research problem is the systemic centralization risk introduced by current Proposer-Builder Separation (PBS) designs, which consolidate block-building power and facilitate unchecked Maximal Extractable Value (MEV) extraction and censorship. The foundational breakthrough is the introduction of a Decentralized Proposer-Builder Separation (DPBS) mechanism that uses an on-chain, sealed-bid auction to dynamically allocate the block-building right for each slot. This new mechanism fundamentally re-aligns incentives by ensuring that the economic value of the sequencing right is captured by the decentralized set of proposers, rather than a few centralized builders, thereby establishing a more robust and fair transaction ordering environment for the future of blockchain architecture.

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Context

Prior to this research, the primary solution to mitigate the centralizing effects of MEV was the original Proposer-Builder Separation (PBS) design, which decoupled block proposing from building. However, this established model introduced a new, critical point of centralization ∞ the block-building market itself. Builders with privileged access to private order flow or superior latency were able to dominate the market, creating a positive feedback loop that led to near-monopolistic control over block construction, effectively trading one form of centralization for another.

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Analysis

The core mechanism is a continuous, slot-by-slot auction for the right to construct the block payload. The new primitive is the “Auctioned Builder Slot,” which fundamentally differs from previous models by making the block-building right a public, tradable good rather than a fixed role. Conceptually, the proposer publishes the block header, and a decentralized set of potential builders submit sealed bids, representing the MEV they are willing to pay.

The highest bidder wins the right to build the payload. This auction is secured by cryptographic commitments or a multi-slot design that ensures all bids are revealed simultaneously and fairly after the deadline, preventing front-running and guaranteeing the highest possible payment to the proposer.

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Parameters

Private Order Flow Percentage ∞ 12% ∞ This small fraction of private transactions accounts for over 54% of total block rewards, illustrating the disproportionate centralization driver in the current PBS design.
Top Builder Dominance ∞ 95%+ ∞ The top builders capture over 95% of winning auctions, retaining a profit margin greater than 27%, which highlights the systemic monopoly risk this new mechanism directly addresses.

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Outlook

This theoretical framework opens new avenues for research into decentralized sequencing across Layer 2 rollups, where a single sequencer currently presents a significant centralization risk. In the next three to five years, this DPBS mechanism is likely to be integrated as a foundational primitive into base-layer protocols, enabling a truly decentralized transaction ordering market. This will unlock the potential for MEV-aware protocol governance, where the extracted value can be systematically redirected to fund public goods or subsidize transaction fees, moving MEV from a systemic risk to a programmable resource.

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Verdict

The formalization of Decentralized Proposer-Builder Separation via auction design represents a decisive, necessary evolution of consensus architecture, fundamentally resolving the centralization risk inherent in the current MEV supply chain.

decentralized sequencing, proposer builder separation, block building auction, maximal extractable value, transaction ordering fairness, cryptoeconomic security, mechanism design, on-chain auction, builder centralization, censorship resistance, slot allocation, verifiable delay function, protocol governance, sealed bid auction, MEV mitigation, decentralized block production, economic incentive alignment, trustless sequencing, auction mechanism, payload construction, proposer payment Signal Acquired from ∞ arXiv.org