MEV in Ethereum: How Searchers, Builders and Validators Compete for Transaction Value

MEV, or maximal extractable value, is the value available from changing transaction inclusion or order during block production—by including, excluding, or reordering transactions—beyond standard block rewards and gas fees. In Ethereum’s proof-of-stake system, the opportunity is generally associated with validators and specialized block-production participants.

Its supply chain divides the work: searchers identify valuable transaction patterns, builders assemble full blocks and bid for the right to have them proposed, and validators select a bid while retaining their consensus responsibilities. The value is not an automatic single payment to validators; it comes from competition over block contents and sequence.

Ethereum.org’s MEV documentation describes the same mechanism as the ability to alter transaction inclusion and ordering.

How transaction ordering creates MEV

A block is more than a batch of transactions waiting in a neutral line. Where transactions are placed can change their economic outcome, particularly when smart contracts react to the state created by earlier transactions. A transaction can also be left out of a particular block altogether. Those choices are the source of MEV.

Decentralized-exchange arbitrage provides a compact example. Suppose the same asset can be bought more cheaply on one exchange protocol and sold at a higher price on another. A searcher can submit transactions to perform both trades, seeking to have them executed in an order that preserves the price difference. If other pending trades would erase that difference first, the searcher’s ordering and inclusion are central to whether the opportunity exists.

That is distinct from gas. Gas fees pay for transaction execution and compete for block space, whereas MEV concerns additional value that may be available because a participant controls, or successfully bids for, ordering. The opportunities identified by searchers include arbitrage, liquidations, frontrunning and backrunning, according to Ethereum.org.

Searchers find opportunities; builders turn them into block bids

Searchers are independent participants, typically using algorithms and bots, that monitor transactions and on-chain conditions for opportunities. They submit their own transactions or bundles of transactions for inclusion. A bundle can express a desired sequence, allowing the searcher to offer a block builder a package whose value depends on that sequence being maintained.

Builders occupy a different position. They aggregate ordinary user transactions alongside searcher bundles, decide on an ordering, construct a complete execution payload and make bids to have that payload included in Ethereum. Their task is not simply to choose the highest-fee transactions one by one. They optimize an entire candidate block, which can include value from bundles as well as conventional transaction fees.

This specialization matters because no single participant needs to perform every task. A searcher may be particularly effective at detecting a fleeting exchange-price discrepancy, while a builder can compare many proposed bundles and regular transactions to produce a more valuable block. The roles can therefore be understood as a chain: users and searchers provide transactions, builders package the execution payload, and a validator ultimately proposes the selected block.

The arrangement does not mean every form of MEV is benign. Arbitrage can help align prices across venues, but the same ordering capability can support behavior that disadvantages another trader. The economic mechanism is the same: execution order has value. The effect on a user depends on the strategy and circumstances.

How validators select a block through MEV-Boost

Validators are Ethereum’s proposers under proof-of-stake. When it is a validator’s turn to propose, it must fulfill consensus responsibilities and provide a block. Rather than construct the most profitable execution payload entirely on its own, a validator can use a proposer-builder separation workflow in which builders compete for that opportunity.

MEV-Boost is an external implementation of that approach. Builders provide bids and blinded execution-payload headers. The validator can assess and select a profitable valid bid without first seeing the full payload, and the completed payload is delivered through a relay-mediated process after selection.

Blinding is an important part of the division of labor. It is intended to stop the proposer from simply copying the builder’s block contents before choosing a bid. The builder, meanwhile, has an incentive to offer enough payment to win the proposer’s selection. The validator receives the winning payment while retaining its consensus duties.

Relays sit within this workflow as intermediaries for the exchange of blinded headers, bids and completed payloads. They are not the same as builders or validators. For a user, the practical consequence is that a transaction may reach a builder through ordinary transaction flow or arrive as part of a searcher’s bundle, then compete within a block-building auction before a validator proposes the eventual block.

Why proposer-builder separation spreads rewards but centralizes construction

Proposer-builder separation, often shortened to PBS, responds to a difficult incentive problem. If extracting MEV requires sophisticated infrastructure, privileged transaction flow and constant optimization, validators that build their own blocks may face a competitive disadvantage. That can create pressure for validation itself to consolidate among the best-equipped operators.

Validators, including solo stakers, would be able to receive competitive block revenue without becoming expert block builders, as specialized builders compete to construct the blocks. Ethereum.org’s PBS roadmap material presents the intended approach as a way to reduce MEV-driven centralizing pressure while distributing rewards across a broader validator set.

That trade-off shifts rather than eliminates concentration risk. Block construction can become its own highly specialized market because builders benefit from better optimization, access to searcher bundles and the ability to make attractive bids. A validator can be broadly distributed while the entities assembling many of its blocks are comparatively few.

It is also useful to distinguish the concept of PBS from a particular software implementation. MEV-Boost operates outside Ethereum’s core protocol as an implementation of proposer-builder separation. “Enshrined” PBS refers to proposals to incorporate relevant separation and constraints more directly into protocol design; it is not interchangeable with the current external workflow.

Diagram illustrating the MEV supply chain and value flows among users, searchers, builders, relays, and proposers. — Source: Ethereum Research — MEV Resilient Ethereum

Builder concentration, censorship and harmful ordering

The builder layer’s market structure is therefore a material issue, not an abstract concern. Research from the Ethereum Robust Incentives Group found that three builders produced approximately 80% of blocks between October 2023 and March 2024. That historical measurement does not establish a permanent market share, but it illustrates why a competitive validator set does not alone guarantee dispersed block construction.

Concentration can heighten concerns about censorship, because a small set of dominant builders may have greater influence over which transactions are included. More broadly, Ethereum’s MEV research identifies transaction censorship, frontrunning, sandwiching and incentives for chain reorganizations among the risks associated with MEV.

A sandwich is not ordinary DEX arbitrage. In a typical sandwich strategy, transactions are placed around a user’s trade so that the earlier transaction moves the price and the later one seeks to capture value from the changed price. Cross-venue arbitrage, by contrast, seeks to exploit a price difference between venues. Both depend on ordering, but the sandwich directly uses a victim transaction’s execution context.

Ethereum researchers have explored constraints rather than assuming market competition will resolve these problems. EIP-7547 discusses inclusion lists, a mechanism intended to help constrain builder censorship, while enshrined proposer-builder separation is another area of research aimed at improving censorship resistance and limiting builder power. These are proposed design directions, not proof that MEV’s trade-offs have been settled.

Frequently Asked Questions

Is MEV the same as Ethereum gas fees?

No. Gas fees are payments for transaction execution and block space. MEV is extra value that may arise when transactions can be included, excluded or sequenced in a profitable way.

Who receives MEV revenue on Ethereum?

Searchers may earn from the strategies they identify, builders may earn from constructing valuable blocks, and validators receive the payment from the winning builder bid. The precise allocation depends on the transactions, bundles and auction outcome.

Do validators personally reorder transactions?

They can participate in block production, but a validator using an MEV-Boost-style workflow generally selects from bids submitted by builders. Builders are the specialists that assemble and optimize the complete execution payload.

Is MEV-Boost part of Ethereum’s protocol rules?

MEV-Boost is an external implementation of proposer-builder separation. It supports a relay-mediated process for blinded payload headers and builder bids rather than being the same thing as protocol-level, or enshrined, PBS.

Why are sandwich attacks treated differently from DEX arbitrage?

Arbitrage can capture a price discrepancy between markets. A sandwich strategy places transactions before and after another user’s trade, seeking to profit from the price movement associated with that trade.

Does proposer-builder separation solve MEV centralization?

While leaving block construction to specialists, it can broaden access to competitive block revenue for validators, including solo stakers—but the builder market can itself concentrate, as the cited 2023–2024 study demonstrates.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.