PBS, Private Order Flow & Latency
How Proposer-Builder Separation, vertical builder integration, and timing games centralize liquidation access
Following the introduction of Proposer-Builder Separation (PBS) via MEV-Boost, MEV competition shifted from the public mempool into specialized block-builder auctions. This section reviews literature examining how builder monopolies, private order flow, and latency games shape execution fairness.
1. Structural Advantages for Integrated Builders in MEV-Boost
Citation: Mallesh Pai, Max Resnick. arXiv preprint, 2023.
Read Paper (PDF)
Core Takeaway (TL;DR)
Block builders vertically integrated with their own proprietary searcher operations enjoy unfair latency and informational advantages, turning what should be a fair open auction into an asymmetric game where independent liquidators face the "winner's curse".
Key Insights
- Asymmetric Auction Dynamics: Integrated searcher-builders can bid closer to block deadline because they face zero inter-entity network communication latency.
- First-Price vs. Second-Price Asymmetry: Independent searchers must submit fixed first-price bids to external builders, whereas integrated builders observe competitors' bundles in real time and bid just enough to win (effectively enjoying 2nd-price auction economics).
- Winner's Curse: Independent liquidators who bid too early risk market price movements making their liquidation unprofitable before block commitment.
Relevance to Reforge
Proves that simply relying on MEV-Boost / private builder relays does not solve unfair liquidation competition; it merely shifts the advantage to vertically integrated block builders. Reforge provides protocol-level batch clearing that neutralizes builder latency advantages.
2. Private Order Flows and Builder Bidding Dynamics
Citation: Shuzheng Wang, Tarun Chitra, Ciamac Moallemi et al. arXiv preprint, 2024/2025.
Read Paper (PDF)
Core Takeaway (TL;DR)
Private order flow (transactions bypassing the public mempool) accounts for 54.59% of total block value. The resulting feedback loop enables the top 3 block builders to capture over 95% of Ethereum blocks, threatening open market competition.
Empirical Findings (Jan 2023 – May 2024)
- Market Concentration: The top 3 builders regularly construct >95% of all Ethereum mainnet blocks.
- Mempool Exclusion: When liquidations are sent via private order flow to dominant builders, independent liquidators monitoring the public mempool are completely shut out from competing.
3. The Cost of Artificial Latency in the PBS Context
Citation: Umberto Natale, Michael Moser. arXiv preprint, 2023.
Read Paper (PDF)
Core Takeaway (TL;DR)
Validators can systematically increase their MEV revenue by intentionally delaying block proposal deadlines, waiting until the last possible millisecond for higher bids to arrive.
Key Analysis
- Strategic Slowness: Winning bids become increasingly valuable closer to the slot cutoff. Validators delaying proposals by 500–1000ms capture an estimated median 1.28% increase in MEV rewards.
- Systemic Risk: Strategic latency games increase the rate of missed slots, chain forks, and network-level instability.
- Liquidation Impact: Liquidators who can optimize millisecond-level network transit to late-proposing validators capture more liquidation volume.