Block Builder

What Is a Block Builder?

A block builder is an entity responsible for assembling transactions into a complete block. Rather than having a single party both construct and propose blocks, modern blockchain architectures separate these roles: builders construct blocks, and proposers (validators) select the most valuable one. This division of labor emerged because optimizing transaction ordering for maximum value requires specialized software, access to private order flow, and significant computational resources.

The block builder role became prominent on Ethereum after the Merge in September 2022, when the network transitioned from proof of work to proof of stake. Under proof of work, miners handled both block construction and proposal. Under proof of stake, validators propose blocks but lack the specialized infrastructure to optimally order transactions. This gap created the block builder market: a competitive ecosystem where builders bid for the right to fill each 12-second slot with their optimized block.

How It Works

Block building on Ethereum operates through MEV-Boost, an out-of-protocol system developed by Flashbots. Approximately 90% of Ethereum blocks are produced through this mechanism. The process involves four participants: searchers, builders, relays, and proposers.

1. Searchers identify MEV opportunities (arbitrage, liquidations, backrunning) and submit transaction bundles to builders
2. Builders aggregate searcher bundles with transactions from the public mempool, constructing complete blocks optimized for maximum total value
3. Builders submit sealed bids (block header plus payment amount) to one or more relays, which validate the block and hold its contents in escrow
4. The relay forwards only the bid amount (not block contents) to the proposing validator
5. The proposer selects the highest bid and signs the block header, committing to it
6. Only after the proposer commits does the relay release the full block body for propagation

This is a first-price sealed-bid auction. Builders compete on value: the builder who can extract the most MEV while still offering a competitive payment to the proposer wins the slot. The proposer never sees the block contents before committing, which prevents them from stealing MEV strategies.

How Builders Extract Value

Builders profit by capturing the spread between the total block value (fees plus MEV) and the amount they bid to the proposer. Their optimization strategies include:

• Arbitrage: capturing price differences between decentralized exchanges by placing trades at optimal positions within the block
• Liquidations: triggering and capturing value from undercollateralized lending positions on protocols like Aave or Compound
• Backrunning: placing a transaction immediately after a large trade to capture the resulting price movement
• Sandwich attacks: placing a buy before and a sell after a user's trade to profit from the price impact (considered harmful to users)

Builders typically place profitable MEV bundles at the top of the block, where execution order matters most, and fill the remainder with high-fee public mempool transactions.

The Role of Relays

Relays serve as trusted intermediaries between builders and proposers. They validate that a builder's block is valid and that the bid amount is accurate, then escrow the block contents. Major relays include Ultrasound, BloXroute, and Titan Relay. The trust requirement on relays is one reason the Ethereum community is pursuing enshrined PBS (ePBS), which would move this mechanism into the consensus layer and remove the need for external relays.

Builder Market Concentration

The block builder market on Ethereum is highly concentrated. As of mid-2026, the top two builders (Titan and Quasar) construct roughly 73% of all blocks. Including the third and fourth largest builders (Eureka and BuilderNet) brings that figure above 95%. The Herfindahl- Hirschman Index (HHI) for the builder market has been measured at approximately 3,892, well above the 1,800 threshold that defines a "highly concentrated" market.

This concentration stems from network effects in order flow: dominant builders receive more exclusive transaction bundles from searchers, which makes their blocks more valuable, which wins more auctions, which attracts even more order flow. Exclusive order flow agreements between searchers and specific builders reinforce this cycle.

Concentration matters because a small number of builders could theoretically censor transactions by refusing to include them. Some relays already filter transactions based on OFAC sanctions lists, and a dominant builder adopting similar policies could effectively block specific addresses from transacting.

Comparison: Ethereum vs Bitcoin

Bitcoin does not have a separate block builder role. Bitcoin miners construct their own blocks by pulling transactions from their mempool, ordering them by fee rate (satoshis per virtual byte), and assembling them into a block template. The miner then attempts to find a valid proof-of-work hash for that template.

This difference exists for several reasons. Bitcoin's UTXO model and limited scripting language produce minimal MEV: there are no decentralized exchanges with arbitrage opportunities, no liquidatable lending positions, and no complex DeFi interactions to sandwich. Transaction ordering on Bitcoin is largely a matter of selecting the highest-fee transactions that fit within the block size limit. Mining pools like Foundry, AntPool, and ViaBTC construct templates using software like Bitcoin Core's getblocktemplate RPC or the Stratum protocol.

That said, the rise of Ordinals, Runes, and BRC-20 tokens on Bitcoin has introduced limited MEV opportunities, such as sniping rare inscriptions or front-running token mints. These remain far smaller in scale than Ethereum's MEV market.

Recent Developments

The Ethereum community is actively working to address builder centralization and relay trust assumptions:

• BuilderNet: launched by Flashbots, this decentralized block building network uses Trusted Execution Environments (TEEs) so no single operator can see all order flow. Beaverbuild, a formerly dominant centralized builder, retired its solo operation to join BuilderNet
• Enshrined PBS (EIP-7732): a protocol-level implementation of proposer-builder separation that eliminates reliance on trusted third-party relays by embedding the auction mechanism directly into Ethereum's consensus layer
• FOCIL (EIP-7805): Fork-Choice Enforced Inclusion Lists allow validator committees to force the inclusion of transactions that have been waiting too long, providing protocol-level censorship resistance even when builders attempt to exclude specific transactions
• SUAVE: Flashbots' proposed decentralized mempool and auction system designed to neutralize exclusive order flow advantages and redistribute MEV value to users and validators

Why It Matters

Block builders sit at the heart of how value flows through blockchain networks. The efficiency of block construction directly affects transaction inclusion times, user costs, and network fairness. For users, builder behavior determines whether their transactions are included promptly or delayed, and whether they face adverse ordering like sandwich attacks.

For layer-2 networks and payment systems, builder dynamics on the base layer influence settlement costs and confirmation reliability. Solutions like Spark and the Lightning Network move transactions off the base layer entirely, avoiding block builder dynamics for everyday payments while still relying on base-layer block inclusion for channel opens, closes, and dispute resolution.

Understanding block builders is essential for evaluating the decentralization and censorship resistance properties of any blockchain network. A system where a handful of builders control most block construction introduces systemic risk, regardless of how many validators exist to propose those blocks.

Risks and Considerations

Censorship Risk

Concentrated builder markets create censorship vectors. If a small number of builders construct most blocks and choose to exclude certain transactions (whether due to regulation, sanctions compliance, or malicious intent), affected users may experience significant delays in transaction confirmation. Protocol-level mitigations like inclusion lists aim to bound the maximum censorship delay, but the risk remains as long as the market stays concentrated.

MEV Extraction and User Harm

While some MEV strategies like arbitrage improve market efficiency, others directly harm users. Sandwich attacks impose invisible costs on traders by worsening their execution price. The total value extracted from users through MEV on Ethereum has exceeded billions of dollars since the Merge. Builders have a financial incentive to include harmful MEV bundles because they increase the block's total value.

Relay Trust Assumptions

The current MEV-Boost system relies on relays to honestly escrow block contents and accurately report bid values. A compromised or malicious relay could steal builder strategies, misrepresent bids, or selectively censor blocks. While relay operators are generally reputable, this trust dependency is a known weakness that enshrined PBS (ePBS) aims to eliminate.

Barrier to Entry

Competing as a block builder requires significant infrastructure: low-latency connections to relays, sophisticated simulation engines to evaluate transaction bundles, and established relationships with searchers for exclusive order flow. This high barrier reinforces market concentration and makes it difficult for new builders to gain meaningful market share.

This glossary entry is for informational purposes only and does not constitute financial or investment advice. Always do your own research before using any protocol or technology.