Study reveals over 90% of Ethereum blocks produced by three builders, highlighting urgent need for decentralization and fair competition.
Ethereum, one of the most popular blockchain platforms, is facing concerns about its decentralization. A recent study has revealed that three builders are responsible for producing over 90% of Ethereum's blocks. This high degree of centralization is alarming for a network that aims to be decentralized and open to all participants.
In blockchain technology, block production is a crucial process. Blocks are batches of transactions that are verified and added to the blockchain. The more decentralized the block production, the more secure and resilient the network is against attacks or manipulation. Ideally, block production should be spread out among many participants to ensure fairness and security.
To address issues related to Maximal Extractable Value (MEV), Ethereum introduced a builder market mechanism called MEV-Boost auctions. MEV refers to the maximum value that can be extracted from block production, often through reordering, including, or excluding transactions. MEV-Boost aims to make the process more transparent and fair by allowing builders to bid for the right to produce blocks.
Despite the introduction of MEV-Boost, the study found significant barriers to entry for new builders. High costs and the need for access to private order flows make it difficult for new participants to compete. This results in a few builders dominating the block production process, leading to centralization.
The study also highlighted inefficiencies in the MEV-Boost auction system. Only 79% of the auctions were deemed efficient, meaning that a significant portion of the process is not functioning as intended. These inefficiencies further contribute to the centralization problem by making it harder for new builders to compete effectively.
The findings of the study underscore the urgent need for measures to reduce centralization and promote fair competition among builders on the Ethereum network. Ensuring a more decentralized block production process is essential for the security and resilience of the Ethereum blockchain.
