Miner Extractable Value, or MEV. This concept is really at the heart of one of the biggest risks facing blockchain systems today. The original idea behind blockchain was to incentivize miners – the folks who order transactions – by rewarding them with freshly minted coins (the block subsidy) and transaction fees paid by users to get their transactions confirmed. Those were initially the only ways miners earned revenue.

But things have evolved. Now we have more complex smart contracts and protocols that let people create and trade different digital assets directly on the blockchain. These contracts are designed to be open to everyone. If you have the right assets and meet the exchange conditions, you can jump in and trade with the contract yourself.

Because miners are the ones who ultimately decide the order of transactions in blocks, they have an advantage. They can essentially “cut in line” when interacting with these contracts. This becomes a real problem, especially as extracting value from these contracts becomes more complex.

The more complicated these contracts and protocols get, the more pressure it creates for mining to become centralized. Think about it: miners *could* capture all this MEV, but to do it, they need to analyze the current state of these complex contracts. The harder the contract is to understand, the more complex and expensive this analysis becomes, which pushes miners towards centralization.

And that’s terrible for censorship resistance.

Proposer Builder Separation

Ethereum really stands out as a prime example of MEV gone wild. The contracts on Ethereum are incredibly complex, leading to massive amounts of MEV on that network. So naturally, they’ve been looking for solutions to deal with this issue.

One approach is Proposer Builder Separation, or PBS. It aims to reduce the centralization risks of MEV by splitting up the two main jobs in blockchain operation. “Builders” are responsible for putting transactions together into blocks. “Proposers” (like miners or stakers) then choose from the available block templates, picking the one that looks most profitable. The idea is to contain the centralization to the block template creation process, while keeping miners and stakers less affected. The hope is that a competitive market for creating block templates will keep things secure.

But in reality, that’s not quite how it’s played out. It turns out there are only a few truly competitive Builders. And when these top Builders decide to censor certain transactions in their templates, it effectively means censorship by almost every miner or staker who chooses to use those profitable templates. Since it’s economically smarter to pick the most profitable option, PBS hasn’t really solved the censorship risk problem.

MEVpool

The MEVpool proposal, from Matt Corallo and 7d5x9, is designed to tweak the PBS idea for Bitcoin. Their goal is to actually address the censorship risks more effectively.

The key difference between PBS and MEVpool is that MEVpool doesn’t completely hand over block creation. Miners still build the final block template themselves. They just outsource the tricky part: figuring out which transactions to include to maximize MEV, even within their own blocks. This is meant to let miners grab a good share of MEV while still being able to include any transactions they want. It avoids the stark choice under PBS where you either accept censorship for maximum profit, or give up profit to avoid censorship.

This proposal involves setting up marketplace relays. Think of them as order books where MEV extractors post their transaction proposals and the fees they’ll pay miners to include them in a block. Extractors can set conditions, like only paying if their transaction is the very first to interact with a specific contract in the block. These marketplaces would also handle “sealed” and “unsealed” bids. Sealed bids are when the actual transaction isn’t revealed to the miner until they mine the block.

How does that sealed bid thing even work? Well, miners only need a transaction hash to put in the Merkle tree to start mining. They don’t need the full transaction until right before broadcasting a valid block. But they *do* need to be sure the transaction is valid beforehand. That’s what the marketplace relays are there to guarantee.

There are really two ways to handle this. The simplest is to have the relays act as trusted third parties. MEV extractors would send their transactions to these relay operators, and miners would connect to the relays. Then, miners would request lists of sealed and unsealed bids from the relay, including the hashes for sealed bids, and their software builds the block template. Once a miner finds a valid block, they send the block (missing the sealed transaction data) to the relay.

The relay then fills in the full sealed transactions, broadcasts the complete block itself, and sends the miner the full sealed transactions so the miner can also broadcast it. Throughout this process, the fee promised by the MEV extractor is held in escrow by the marketplace relay and only released to the miner after they find a valid block.

This approach relies heavily on trust in the relays, both from miners and the MEV extractors who are paying.

The second option involves using a Trusted Execution Environment, or TEE. This TEE would handle block template construction for miners and manage the encrypted sealed bids. Miners would run their block-building software and a Bitcoin node inside this secure TEE. After getting sealed and unsealed bids and constructing their block, the TEE would sign an attestation verifying the block and give the marketplace relay a session key.

Then, the marketplace would encrypt the sealed transactions and a payment transaction for the miner’s fee using that session key. Once the miner finds a valid blockhash, the TEE decrypts the sealed transactions, allowing the miner to broadcast the full block and get their fee from the MEV extractors. In this case, everyone involved needs to trust that the TEE is secure.

The End Result

In my view, the likely outcome is going to be similar to PBS on Ethereum. We’ll probably end up with just a few big Builders creating MEV-optimized templates for miners, and they’ll be getting transactions directly, bypassing the public mempool. MEVpool marketplace relays, in both forms, are supposed to publicly share fee info about the orders they receive. This is important so regular users can estimate transaction fees properly. If large marketplaces managed to attract a lot of exclusive transactions and kept that fee data private, it could harm regular users.

Also, even though miners get to choose their own non-MEV transactions, there’s still a risk. Large marketplaces with access to private transaction submissions could still exert influence. They could pressure miners to censor other transactions by holding back their order book data if there wasn’t a competing marketplace with the same information.

Ultimately, I don’t see this as a complete solution to the MEV problem. It’s more like a temporary fix, a way to lessen some of the worst consequences. It doesn’t eliminate the pressures and risks of centralization entirely, but it does make things better in some areas.

This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.