From Competition to Centralization: The Oligopoly in Ethereum Block Building Auctions
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arXiv
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| Hauptverfasser: | , , , |
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| Format: | Preprint |
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2024
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| _version_ | 1866915523258744832 |
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| author | Wu, Fei Thiery, Thomas Leonardos, Stefanos Ventre, Carmine |
| author_facet | Wu, Fei Thiery, Thomas Leonardos, Stefanos Ventre, Carmine |
| contents | Block production on the Ethereum blockchain has adopted an auction-based mechanism known as Proposer--Builder Separation (PBS), where validators outsource block creation to builders competing in MEV--Boost auctions for Maximal Extractable Value (MEV) rewards. We employ empirical game-theoretic analysis based on simulations to examine how advantages in latency and MEV access shape builder strategic bidding and auction outcomes. We find that a small set of dominant builders leverage these advantages, consolidating power, reducing auction efficiency, and heightening centralization. Our results underscore the need for fair MEV distribution and sustained efforts to promote decentralization in Ethereum's block building market. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2412_18074 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | From Competition to Centralization: The Oligopoly in Ethereum Block Building Auctions Wu, Fei Thiery, Thomas Leonardos, Stefanos Ventre, Carmine Computer Science and Game Theory Block production on the Ethereum blockchain has adopted an auction-based mechanism known as Proposer--Builder Separation (PBS), where validators outsource block creation to builders competing in MEV--Boost auctions for Maximal Extractable Value (MEV) rewards. We employ empirical game-theoretic analysis based on simulations to examine how advantages in latency and MEV access shape builder strategic bidding and auction outcomes. We find that a small set of dominant builders leverage these advantages, consolidating power, reducing auction efficiency, and heightening centralization. Our results underscore the need for fair MEV distribution and sustained efforts to promote decentralization in Ethereum's block building market. |
| title | From Competition to Centralization: The Oligopoly in Ethereum Block Building Auctions |
| topic | Computer Science and Game Theory |
| url | https://arxiv.org/abs/2412.18074 |