While the Ethereum Merge was significant due to introducing Proof-of-Stake, there was another major shift made possible by the upgrade that is worth highlighting. The Merge allowed the network to take its first step toward a new protocol feature that minimizes compute overhead for Ethereum validators and promotes network decentralization via modularity.
This concept is proposer/builder separation (PBS) and it is set to become arguably one of the most important threads in Ethereum’s development.
Today, we’ll cover what PBS is, why it’s important, how it's implemented on post-Merge Ethereum, and the future developments that are set to make PBS a permanent fixture of the network.
What is Proposer/Builder Separation?
Proposer/builder separation (PBS) is a blockchain design feature that divides the roles of block proposers and block builders. Block proposal is the action of submitting a block of transactions for the approval of network validators, while block building is the action of transaction ordering.
When a blockchain protocol separates these two actions, it simplifies the process of completing each task and allows actors to specialize in one or the other. On most blockchains, a singular actor completes this task. For example, before Ethereum completed The Merge moving from Proof-of-Work to Proof-of-Stake, there was no proposer/builder separation and miners had sole control of both building and proposing new blocks of transactions.
Why is PBS Important?
So why was the decision made to introduce PBS during Ethereum’s Merge? Vitalik covers the logic behind the prioritization as the following:
In the current transaction market, the block proposer (today: a miner, post-merge: a validator) directly chooses which transactions to include in the next block by looking at which transactions in the mempool pay the highest priority fee. This puts the block proposer in a position to use sophisticated strategies to choose which transactions to include, or even include their own, to take advantage of opportunities such as DEX arbitrage and liquidations (hereinafter just called “MEV” for simplicity) to maximize their profits. The complexity of these strategies creates a high fixed cost in running an effective miner or validator, and advantages centralized pools that take on this task on behalf of their participants.
Proposer/builder separation (PBS) fixes this by splitting the block construction role from the block proposal role. A separate class of actors called builders build exec block bodies (essentially an ordered list of transactions that becomes the main “payload” of the block), and submit bids.
Essentially, PBS is important to the decentralization of Ethereum because it minimizes the compute overhead that is required to become a validator. By doing this, the network lowers the barrier to entry for becoming a validator and incentives a more diverse group of participants.
PBS also reflects an overall goal of The Merge to move Ethereum’s network towards a more modular future. Specifically, the transition to PoS is an aggressive move towards decentralization through modularity.
When you break apart the different pieces of block construction, you can decentralize them individually. This allows different actors with different specialties to focus on their particular strengths. The net result is a more capable network with fewer external dependencies and a lower threshold for participation.
PBS and the Ethereum Merge
While proposer/builder separation promotes decentralization of Ethereum’s network, it would have been cumbersome to implement before the move to PoS. Because of the opportunities created in revamping the network’s consensus client during the process of The Merge, it became attractive for Ethereum’s core developers to use this window to also implement PBS.
Nonetheless, it was clear to the developers that The Merge was a hard enough goal to tackle without also engineering a way to enshrine PBS (ePBS) within the protocol design itself. Therefore, the community opted to launch optional proto-PBS via a sidecar for validators that allows them to outsource block building on demand. This sidecar is known as MEV-Boost.
The MEV research and development organization Flashbots spearheaded the design of MEV-Boost and continues to maintain it as an open-source project. The project’s GitHub page describes it as such:
“mev-boost can connect to relays that aggregate multiple builders. The builders prepare full blocks, optimizing for MEV extraction and fair distribution of the rewards. The Consensus Layer client of the validator proposes the most profitable block received from mev-boost.”
Image sourced from Flashbots GitHub
Since The Merge occurred, MEV-Boost has seen significant adoption with roughly 60% of the network optionally utilizing PBS via the sidecar. A full breakdown of metrics is available via https://www.mevboost.org/.
Blocknative is proud to support this important milestone in Ethereum development via our MEV-Boost block relay. Until the network fully enshrines PBS within its protocol, block relays are fundamental to the proto-PBS created directly post-Merge. We plan to support this relay and the open-source software it is built with, Dreamboat, as a way of driving block builder diversity and equitable value recirculation throughout the web3 transaction supply chain.
The Future of Proposer/Builder Separation
While post-Merge MEV-Boost, relays, and decentralized block building are a great start, Ethereum developers will now need to prioritize how to move towards the end goal of in-protocol PBS.
It is likely that, on the surface, this protocol-native PBS will look very similar to what is currently in place. The only difference will be that instead of an optional route for validators to enable proto-PBS via MEV-Boost, it will be a requirement at the protocol level that validators receive their blocks via specialized builders.
Under the surface, the permanent implementation of PBS will likely be extremely complex compared to what is currently in production. The current estimate for the earliest potential launch of in-protocol PBS is 6 months to a year. Ethereum developers will need a significant amount of research and testing to reach this goal.
The introduction of in-protocol PBS would also make it easier for Ethereum to introduce danksharding—the network's newest proposed sharding design. Danksharding would open the door to massive increases in network scalability. Vitalik outlines the relationship between these two designs as the following:
The main innovation introduced by Danksharding (see also: [1][2][3]) is the merged fee market: instead of there being a fixed number of shards that each have distinct blocks and distinct block proposers, in Danksharding there is only one proposer that chooses all transactions and all data that go into that slot.
To avoid this design forcing high system requirements on validators, we introduce proposer/builder separation (PBS) (see also: [1][2]): a specialized class of actors called block builders bid on the right to choose the contents of the slot, and the proposer need only select the valid header with the highest bid. Only the block builder needs to process the entire block (and even there, it’s possible to use third-party decentralized oracle protocols to implement a distributed block builder); all other validators and users can verify the blocks very efficiently through data availability sampling (remember: the “big” part of the block is just data).
The road to in-protocol PBS and the network upgrades that it makes possible are undoubtedly some of the most exciting ongoing developments in the world of Ethereum. The story of how the community tackles these goals will be critical to cementing the foundation of web3’s decentralization and scalability.
Building With Blocknative
Our goal is to drive block builder diversity and equitable value recirculation throughout the web3 transaction supply chain. To this end, we offer a specialized suite of pre-chain infrastructure. This includes an easy-to-use MEV-Boost relay and validator resources.
If you are interested in web3 developer tools and joining the proposer/builder conversation, contact us today or join our Discord community! To learn more about becoming an Ethereum validator, we recommend our Lighthouse/Geth setup guide.
