The Ethereum network's transition from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism through "The Merge" event is not simply a technical change in how the network is secured but also a comprehensive restructuring of the block production process. According to the expert team at Tan Phat Digital, in this new architecture, the appearance of Block Builders has become a core component, acting as the chief architect of the blockspace.
Block Builders are not just simple technical entities; they are sophisticated economic agents operating in a fiercely competitive market aimed at maximizing Extractable Value (MEV). Understanding who Block Builders are and how they operate within the MEV supply chain is key to embracing the future of decentralization, censorship resistance, and economic efficiency of the Ethereum blockchain. At the beginning of 2026, the Ethereum network is maintaining a stable performance of about 7,170 blocks per day.
MEV Supply Chain and Separation of Roles in PoS
In the traditional block production model of PoW, miners play both roles: building block content and proposing that block to the chain. However, the growing complexity of MEV has led to a crisis of decentralization. Large miners with enough resources to operate complex transaction optimization algorithms will earn significantly higher profits than small miners, thereby creating a strong tendency towards centralization. To solve this problem, the Ethereum community introduced the concept of Proposer-Builder Separation (PBS - Proposer and Builder Separation).
Multi-layer structure of the MEV Supply Chain
The modern MEV supply chain is composed of a chain of specialized entities. Tan Phat Digital has re-systemized this process as follows:
Orderflow:
Entity: Users / RPCs.
Main function: Create original transactions from the intention to swap, lend or transfer money.
Business dynamics Economy:Efficient trade execution, low slippage.
Searchers:
Entity: MEV Bots.
Main functions: Use algorithms to detect arbitrage, liquidation or sandwich opportunities.
Economic Dynamics Economic: Profit from extracting MEV.
Builders:
Entity: Block Builders.
Main function: Collect bundles from searcher and transactions from mempool into an optimal block.
Economic motivation: Transaction fee and remaining MEV after bidding.
Relayers:
Entity: MEV Relays.
Main function: Trusted intermediary validates block validity and manages the auction process.
Economic Dynamics Economy: Maintains the reputation and neutrality of the network.
Validators:
Entity: Proposers.
Main function: Selects the block with the highest bid to sign and add to the blockchain.
Economic driver: Part block rewards and bids from the Builder.
In this structure, the Block Builder stands at the center, acting as the final "aggregator" of all MEV activities and user transactions before they are officially proposed.
See also: What is Miner Extractable Value (MEV)? In-depth Solutions for Miners 2026
Block Builder: Nature, Functions and Technical Process
Block Builders are highly specialized entities, often possessing powerful hardware infrastructure and proprietary algorithms to solve combinatorial optimization problems in real time. Their task is to create an execution payload that has the highest possible value within the gas limit of a block. Notably, in the 2026 Glamsterdam upgrade roadmap, the gas limit is expected to increase sharply to 200 million, allowing more transactions in each block.
Detailed operating process of a Block Builder
The operation of a Builder takes place in an extremely short cycle, corresponding to each 12-second slot of Ethereum. This process includes the following strict steps:
Orderflow Collection: It starts with the Builder connecting to Ethereum nodes to listen to the public mempool. However, the real competitive advantage lies in private order flows received from services like Flashbots Protect or direct agreements.
Transaction Simulation: Searcher sends "bundles" directly to Builder. Builder must simulate each of these bundles to ensure they are error-free and truly profitable.
Block Optimization: This is the core of Builder value. They must choose a set of transactions and bundles that maximizes the total gas fee and resulting MEV value, often using algorithms such as Knapsack.
Block Auction and Submission (Bidding and Submission): After completing the block construction, the Builder creates a block header with a bid and sends it to the Relayer.
Infrastructure and Technology Requirements technology
Becoming a Block Builder requires a large investment in technology:
Microprocessor (CPU): 32-64 cores / 64-128 threads. Needed to simulate thousands of bundles and transactions in parallel.
Internal memory (RAM): 128 GB - 256 GB. Helps keep the state of the entire blockchain in memory for quick access.
Hard Drive: NVMe SSD 4-8 TB (Ultra high read/write speed). Access status data and continuous transaction logging.
Network: 1-10 Gbps (Low latency). Receive transactions and send blocks to Relayer as fast as possible.
Proposer-Builder Separation (PBS) and MEV-Boost Mechanism
Ethereum implements PBS through MEV-Boost, allowing Validators to outsource block building.
Relayer's role in the PBS model
Relayer is a trust intermediary Trust:
Check block validity: Make sure block complies with EVM rules.
Bid validation: Check Builder's bid goes to Validator.
Content security: Relayer only sends block header to Validator to avoid MEV theft.
Auction MEV-Boost: A Game of Game Theory
The auction process leads to a Nash equilibrium, where Builders must bid a large portion of MEV profits to Validators. Perfect competition (Bertrand competition) can force Builder profits to a minimum.
Economic Dynamics and Builder Market Concentration
According to data updated in January 2026 from Tan Phat Digital, the Block Builder market still maintains high concentration:
Titan Builder:
- 27.99%.
- 2026.
Algorithms and Mathematical Models in Block Construction
Block construction is an NP-hard problem. Builders often use:
Greedy Classic: Choose the transaction with the highest fee/gas ratio. Fast but easy to miss the optimal combination.
Knapsack Greedy: Greedy combination with forced insertion of the largest transactions. Performance is about 15% higher.
Binary Linear Programming (BLP):Uses a mathematical solver to find the most optimal solution but processing speed is slow.
Impact of Block Builder on Users and DeFi
Block Builder is the executor of strategies like Sandwich Attack. A Searcher can front-run and back-run a user's transactions to capture the difference. To protect users, solutions such as MEV-Share have been applied, allowing up to 90% of MEV profits to be returned to the very users who created the opportunity.
See more: What is Proof of Stake (PoS)? Complete 2026 Mechanics and Trends
Censorship and Network Neutrality
Currently, approximately 28-29% of execution blocks comply with OFAC regulations, leading to delays in sanctioned transactions (like Tornado Cash). Builder diversity is vital to maintaining network neutrality. Vitalik Buterin has emphasized that 2026 will be the year Ethereum regains its position in personal autonomy and absolute trust, reversing the previous trend of centralization.
Looking to the Future: ePBS and the Glamsterdam Upgrade
Ethereum's 2026 roadmap focuses on key upgrades:
Enshrined Proposer-Builder Separation (ePBS): Planned integration via EIP-7732 in the Glamsterdam upgrade, eliminating dependency on external Relayers.
Payload Timeliness Committee (PTC): A council of validators will oversee the Builder publishing data on time (at t=4 seconds for payload and t=10 seconds for blobs).
Responsible for collecting transactions from mempool and bundle from searcher to assemble into a complete block with the highest value.What is the difference between Builder and Validator? Builder focuses on optimizing block content for maximum profit, while Validator (Proposer) is responsible for proposing and signing the block to the blockchain to secure the network.
What is MEV-Boost? This is middleware that allows Validators to connect to an external Builder market to receive blocks with high MEV values instead of building the block themselves locally.
Where does Block Builder make profit? Profit comes from the difference between the total value of transactions in the block (including gas fees and extracted MEV) minus the bid amount they have to pay to Validator and the cost of operating the infrastructure.
What is a Sandwich Attack? This is a form of malicious MEV, where the bot "clamps" a user's trade with a buy order first (front-run) and a sell order immediately after (back-run) to benefit from the price change.
Why is the Builder market centralized? Due to strict requirements for low latency technical infrastructure, complex algorithms, and especially access to private orderflows that small builders do not have.
What problem does ePBS (EIP-7732) solve? ePBS integrates the proposer and builder separation mechanism directly into the Ethereum protocol, eliminating the dependency on intermediary Relayers and increasing decentralization.
What role does the Relayer play in MEV-Boost? The Relayer is a trusted intermediary that helps validate the block from the builder, keeping the block content safe until the validator signs the header, preventing the validator from stealing the MEV strategy.
How can users avoid MEV extraction? Users can use secure RPCs like Flashbots Protect, set low slippage tolerance, or participate in MEV redemption protocols like MEV-Share.
What is outstanding about the Glamsterdam 2026 upgrade for Builder?This upgrade is expected to sharply increase the gas limit to 200 million and introduce parallel transaction processing, creating a larger block space and requiring the builder to have even more powerful computing capabilities.
Block Builder has been reshaping the nature of the Ethereum blockchain. They bring efficiency to the block space market but also create new centralization challenges. Tan Phat Digital believes that with the emergence of ePBS and the determination of the community in 2026, the role of Block Builder will become increasingly transparent and better serve the interests of end users. We will continue to update MEV Supply Chain's latest movements to provide strategic insight to investors and developers.
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