MEV Supply Chain: Builders, Searchers, and Validators

From Gas Wars to the MEV Supply Chain

Maximal Extractable Value (MEV) — the profit extractable by controlling transaction ordering within a block — existed from Ethereum's early days, but its extraction was crude: competing bots would outbid each other in gas price auctions (the "priority gas auction" or PGA), wasting network resources and still resulting in failed transactions from bots that lost the gas war. The formalisation of MEV extraction into the current supply chain architecture represents one of the most significant structural changes in Ethereum's economic model — shifting from chaotic gas wars to a specialised three-layer market with distinct roles, professional participants, and formalised auction mechanisms.

Layer 1: Searchers — Finding Opportunities

Searchers are the first layer of the MEV supply chain — specialised bots and their operators that continuously scan the Ethereum mempool and on-chain state for profit opportunities:

Arbitrage: Price differences between DEXs for the same asset pair. When ETH/USDC trades at $3,000 on Uniswap V3 and $3,010 on Curve, an arbitrage bot can simultaneously buy on Uniswap and sell on Curve (or through a carefully constructed atomic transaction), pocketing the $10 spread. In efficient markets, these opportunities last milliseconds — creating an arms race in searcher latency, with competitive searchers co-locating servers in the same data centres as full nodes.

Liquidations: When a borrower's position in Aave, Compound, or similar becomes undercollateralised, a liquidation bot can atomically liquidate the position and claim the liquidation bonus (5–15% of the collateral). The first liquidator claims the entire bonus — creating intense competition and the need for direct block inclusion, not just competitive gas pricing.

Sandwich attacks: When a large pending swap is visible in the mempool, a sandwich bot places a buy order before it (frontrun — pushing the price up) and a sell order after it (backrun — selling the inflated price back to market), extracting the price impact of the victim's trade as profit. Sandwich attacks are zero-sum — the searcher profits by increasing the victim's slippage. They are the most ethically contested MEV type and the primary driver of DEX aggregators' MEV protection features.

Layer 2: Builders — Assembling Profitable Blocks

Block builders emerged as a distinct role post-Merge — sophisticated market participants who receive transaction bundles from searchers, combine them optimally with pending mempool transactions, and construct complete blocks that maximise total fee value while respecting searcher ordering requirements. Builders run simulation infrastructure that can evaluate millions of transaction ordering permutations per second to find the globally optimal block composition.

Block building is highly concentrated: as of 2025, the top 3–5 builders (Beaver Build, Titan Builder, rsync-builder) produce the majority of Ethereum blocks. This concentration reflects the economies of scale in builder operations — the infrastructure cost to run competitive block building simulation is significant, and large builders receive better order flow from searchers (who prefer builders with high inclusion rates). Builder centralisation is one of the primary concerns in Ethereum's ongoing PBS (Proposer-Builder Separation) research.

Layer 3: Validators — The Auction Winners

Ethereum validators propose new blocks — but post-Merge, most validators do not build blocks themselves. Instead, they use MEV-Boost (developed by Flashbots) — middleware that connects validators to a network of block builders through relays. The auction mechanism: builders submit their best block (with a bid representing how much ETH they'll pay the validator for proposing it) to relays, relays validate and aggregate bids, and the validator's MEV-Boost software selects the highest-paying builder block to propose.

MEV-Boost has enabled solo validators and staking pools to earn MEV rewards that would previously only accrue to sophisticated operators capable of running their own block building infrastructure. The typical MEV-Boost bonus adds 0.1–0.5 ETH per block above the base staking reward — material income that represents a significant fraction of total staking yield. As of 2025, over 90% of Ethereum validators use MEV-Boost.

Relays: The Trusted Intermediaries

Relays sit between builders and validators — they receive block bids from builders, verify that the block is valid and will actually pay the promised amount, and deliver the winning block to the validator without revealing its full contents until the validator has committed to proposing it (preventing validators from "sniping" the builder's MEV). Relay trust is the architectural vulnerability: a malicious relay could censor specific transactions, selectively favour certain builders, or reveal block contents prematurely. Current relay operators include Flashbots, BloXroute, Agnostic, and Manifold — each with different censorship resistance policies.

Centralisation Concerns and Attesting PBS (ePBS)

The current MEV-Boost architecture is an "out-of-protocol" PBS — it works but relies on relays as trusted third parties outside the Ethereum protocol. Enshrined PBS (ePBS) is Ethereum's roadmap solution: encoding the builder auction directly into the Ethereum protocol, eliminating the need for external relays and making the PBS mechanism trustless. Attester-Proposer Separation (APS), a related proposal, goes further by separating the attestation role from block proposal — reducing validator concentration incentives and improving censorship resistance.

Conclusion

The MEV supply chain represents the professionalisation of a market that was previously extractive in an unstructured, wasteful way. Searchers identify opportunities, builders optimise block composition, and validators receive MEV income through MEV-Boost's competitive auction — a more efficient equilibrium than the PGA gas wars that preceded it. For DeFi traders, understanding the MEV supply chain explains why DEX aggregators with MEV protection (CoW Swap's batch auctions, UniswapX's Dutch auctions) provide meaningfully better execution than direct DEX trades, and why slippage tolerance settings and transaction privacy matter for large trades.