According to Cointelegraph, the Ethereum network is facing increasing centralization in its maximal-extractable value (MEV) practices, as arbitrageurs tighten their control over transaction ordering. A recent research paper highlights that these arbitrageurs, referred to as "searchers," are often in-house or have exclusive contracts with MEV builders responsible for block construction on the network. MEV represents the profit blockchain validators or participants can earn by reordering transactions within a block before finalization, often involving strategies like arbitrage, front-running, or sandwich attacks.
The paper, titled "Measuring CEX-DEX Extracted Value and Searcher Profitability: The Darkest of the MEV Dark Forest," examines how arbitrageurs exploit price discrepancies between centralized (CEX) and decentralized (DEX) crypto exchanges, often front-running smaller users. The authors note that three builders—beaverbuild, Titan, and rsync—dominate the Ethereum builder market, with two vertically integrating their own CEX-DEX searchers. This vertical integration raises concerns for Ethereum's decentralization and security, fostering economies of scale that strengthen dominant players, enabling monopoly pricing that causes proposer loss, and increasing vulnerability to censorship and commitment attacks.
The researchers conclude that the centralization of CEX-DEX arbitrage through exclusive agreements with block builders exacerbates "centralization pressures" within the Ethereum ecosystem, which must be considered when planning the future direction and growth of the layer-1 network. Under Ethereum's Proposer-Builder Separation (PBS), block proposers can outsource block construction to entities known as builders, a move intended to promote censorship resistance. However, critics, including the authors of the research paper, argue that PBS centralizes the network and creates unfair market conditions for smaller participants.
In March, pseudonymous Ethereum researcher Malik672 proposed democratizing Ethereum block building to allow thousands of participants to contribute, enhancing network decentralization. The researchers note that 80% of blocks are currently proposed by just two entities, compromising decentralization and fairness. Ethereum co-founder Vitalik Buterin has previously suggested mitigating MEV by developing alternative infrastructure, including crypto exchanges, and minimizing MEV by starving arbitrageurs of the onchain data they rely on for complex trades and transaction reordering.
