Miner Extractable Value. That phrase is essentially one of the biggest fundamental risk spaces that exist for blockchain based systems. The original conception of a blockchain included incentives for miners (or other consensus participants deciding transaction ordering) to earn revenue based on whatever initial block subsidy is entered into circulation each block in addition to fees paid by users to have their transactions confirmed.
These two things are no longer the only sources of revenues that incentivize the actions of miners. More complicated contracts and protocols now exist to facilitate the creation of, and exchange between, different assets hosted on a blockchain. These contracts, by design, allow open access to anyone. If you have a required asset, and can fulfill the exchange conditions specified, any user can unilaterally interact with the contract or protocol to exchange assets.
Given that miners ultimately decide what transactions are accepted into blocks, this gives miners preferential access to “jump the line” in interacting with such contracts and protocols. This presents a serious problem, depending on the degree of complexity involved in successfully extracting value from different contracts or protocols.
This creates a huge centralization pressure on mining the more complicated these contracts and protocols become. Miners have the ability to collect all of this value, but in order to do so they actually need to analyze the current state of these contracts. The more complex the contract, the more complex and costly the analysis, and the more centralization pressure it creates for miners.
This is horrible for censorship resistance.
Proposer Builder Separation
Ethereum is the poster child of MEV gone wrong. Due to the high complexity of contracts deployed on Ethereum, the amount of MEV created on that chain has been very large. Naturally they have come up with attempted solutions in response to the issue.
Proposer Builder Separation sought to mitigate the centralization risks of MEV by creating separation between the two roles involved in moving the blockchain forward. Builders (block template creators) handle the role of actually assembling transactions into blocks, and Proposers (miners/stakers) choose between the available block templates to select the most profitable one. The idea behind the proposal is that we can let the centralization affect template producers, but safeguard miners/stakers from it. As long as there is a competitive market for template production, things should still be secure.
In practice this isn’t what has happened. The reality is that only a few competitive Builders exist, and when the most profitable template producers decide to censor something, it is effectively censored by every miner/staker that chooses to use those profitable block templates. Given that it is economically irrational to not choose the most profitable template, this doesn’t truly…
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