[Paper Review] Time to Bribe: Measuring Block Construction Market

Anton Wahrstätter, Liyi Zhou+3 more|arXiv (Cornell University)|May 25, 2023

Facilities and Workplace Management4 citations

TL;DR

This paper presents a longitudinal analysis of Ethereum's block construction market post-Proof of Stake transition, measuring builder and relay market shares, MEV revenue dynamics, and the impact of crises on MEV payments. It introduces the MEV-Time Law, revealing a peak MEV bid at 2.78 seconds into a slot, and finds that events like the FTX collapse spiked MEV revenue by 400%.

ABSTRACT

With the emergence of Miner Extractable Value (MEV), block construction markets on blockchains have evolved into a competitive arena. Following Ethereum's transition from Proof of Work (PoW) to Proof of Stake (PoS), the Proposer Builder Separation (PBS) mechanism has emerged as the dominant force in the Ethereum block construction market. This paper presents an in-depth longitudinal study of the Ethereum block construction market, spanning from the introduction of PoS and PBS in September 2022 to May 2023. We analyze the market shares of builders and relays, their temporal changes, and the financial dynamics within the PBS system, including payments among builders and block proposers -- commonly referred to as bribes. We introduce an MEV-time law quantifying the expected MEV revenue wrt. the time elapsed since the last proposed block. We provide empirical evidence that moments of crisis (e.g. the FTX collapse, USDC stablecoin de-peg) coincide with significant spikes in MEV payments compared to the baseline. Despite the intention of the PBS architecture to enhance decentralization by separating actor roles, it remains unclear whether its design is optimal. Implicit trust assumptions and conflicts of interest may benefit particular parties and foster the need for vertical integration. MEV-Boost was explicitly designed to foster decentralization, causing the side effect of enabling risk-free sandwich extraction from unsuspecting users, potentially raising concerns for regulators.

Motivation & Objective

• To measure the evolution of market shares among block builders and relays in Ethereum’s Proposer Builder Separation (PBS) system post-PoS transition.
• To analyze financial flows within PBS, including bribes paid to proposers and revenue concentration across MEV transactions.
• To investigate temporal dynamics in MEV bidding, particularly timing variations among proposers and their strategic implications.
• To assess the impact of systemic crises—such as the FTX collapse and USDC de-peg—on MEV revenue levels.
• To evaluate the decentralization claims of PBS in light of implicit trust assumptions and potential for vertical integration.

Proposed method

• Conducted a longitudinal measurement of the Ethereum block construction market from September 1, 2022, to May 1, 2023, covering the PoS and PBS transition.
• Collected and analyzed transaction data, block headers, and MEV-Boost relay logs to track market shares of builders and relays over time.
• Developed the MEV-Time Law by modeling expected MEV revenue as a function of time elapsed within an Ethereum slot, identifying peak bid timing.
• Quantified monetary flows by measuring total ETH transferred to proposers via MEV-Boost (160k ETH, ~320M USD) and analyzed distribution across high-value transactions.
• Identified and correlated spikes in MEV payments with major market events, such as the FTX collapse and USDC de-peg, using time-series analysis.
• Evaluated proposer timing behavior by comparing slot-internal block submission times across different exchanges and networks.

Experimental results

Research questions

• RQ1 How have market shares of block builders and relays evolved in Ethereum’s PBS market from September 2022 to May 2023?
• RQ2 What is the temporal pattern of MEV bidding within an Ethereum slot, and when does expected MEV revenue peak?
• RQ3 To what extent do systemic crises such as the FTX collapse or USDC de-pegging amplify MEV revenue compared to baseline levels?
• RQ4 How do timing behaviors of different proposers vary, and what strategic incentives might underlie delays in block processing?
• RQ5 To what extent does the PBS architecture, despite its decentralization intent, rely on implicit trust and create opportunities for rent-seeking or vertical integration?

Key findings

• MEV-Boost achieved 90% market share within two months of PBS launch, indicating rapid adoption of the centralized intermediary model.
• Flashbots relay held over 60% market share in November 2022 but declined to ~25% by May 2023, suggesting evolving relay competition.
• The MEV-Time Law identifies a peak in average MEV bid at 2.78 seconds into a slot, where bids are 107% higher than at second -2.
• Total ETH paid to proposers via MEV-Boost amounted to 160,000 ETH (~320 million USD) over the measurement period.
• Only 1% of MEV transactions exceeded 1.36 ETH, yet 20% of the highest-value transactions accounted for 72% of total MEV revenue, indicating extreme concentration.
• The FTX collapse triggered a 400% spike in MEV revenue, while the USDC de-peg event caused a 1,000% increase in MEV payments over baseline levels.