MEV, Staking Centralization, Censorship: What Does the Post-merge Ethereum Look Like

Prior to the merge we talked about MEV (maximum extractable value) and what to expect from the controversial niche in DeFi.

[ Read our post on what MEV should look in Proof of Stake ]

There were three areas of contention before the merge:

  • Was staking getting too centralized?
  • Was flashbots and centralized block-producers going to lead to censorship problems?
  • Was MEV going to be a defining advantage in a PoS network?

Well over a month since the merge, we can revisit each of these with some additional data and see how the early PoS network has dealt with each.

MEV in Proof of Stake

As we predicted in our last piece on MEV, block producers in Proof of Stake are turning to mev-boost. The benefit of a distributed network of searchers maximizes the ETH rewards and has shown to be a key differentiator in realized yield for validators.

MEV, as before in proof-of-work, is a lucrative business.

Over 17k ETH has been paid out to validators due to MEV bribes and rewards for blocks. These rewards are all readily used on the execution layer, so represent a current real-yield on staking that makes using the flashbots system ever more enticing.

The net result is that the flashbots and associated relays are now responsible for over 50% of the blocks produced in the network.

But what does it matter if mev-boost is capturing a large share of block production?

Who is making the most so far?

As before, lots of MEV is coming from private transactions. To the extent that flashbots mev-boost relay is the default relay, we can expect that most private transactions submitted through

This plays out in the data. The flashbots builder has created well over 3 times as many blocks as the next closest competitor.

While this seems like a lot, also remember that the block builder has to payout a large portion of these rewards to the proposer. By combining the inflow from MEV bribes and the payout to proposers, we can hope to get a view into how profitable being a builder is.

A brief look at profitability data suggests that many builders are paying out more than they are making in income. However this doesn’t tell the whole story. Many of these are new markets and may be getting payment for order flow outside of the channels easily monitored on chain.

For example, Bloxroute gets payments outside of the typical builder workflow and therefore its builders can look like they are loosing money when they are actually profitable.

Which builders are most efficient?

For validators, an important question will be which relay and set of builders to use in order to maximize the yield through MEV in a way that aligns with the validators values.

For validators who don’t have the time or know-how to set up their own profitable block builder that takes advantage of MEV, using the flashbots relayers is a plug-and-play solution.

In this case, the flashbots mev-boost builder doesn’t come out on top. Instead, it looks like some custom builders have been able to carve out profitable niches. We can see this in the data on average payout to validators.

These unknown builders, while not reaching the scale in number of blocks, are shown to be more profitable for validators than the global average which is around .13 ETH per block.

While this data is fascinating, it only represents a small slice of what we can currently analyze from block building and validator payouts. It is possible there are many different configurations and that some validators are running their own profitable infrastructure that doesn’t show clearly on chain.

As proof of stake continues, it will be important to continue analyzing the profitability and network share of the top builders and the most profitable participants in the network.

The State Staking Centralization

Lido still remains the individual controller of staked ETH, well ahead of the centralized exchanges and the other competitors in the liquid staked derivative space.

Lido has well over twice the validator share of the next largest depositor.

In some ways we can see this as a win. A decentralized network of validators has captured the largest market share in a competitive market. The market for staked ETH management is lucrative. Coinbase for example, gets a large percent of their reveneues from their managed staked business. To see a crypto-native organization that is not a centralized exchange emerge as the early leader in the staked ETH game can be seen as a triumph for DeFi.

But there are still many concerns floating around the community. One of these is the ever-present regulatory risk for US-based crypto companies. Lido, Coinbase and other major validators are all based and incorporated in the US. This puts them in a tough spot, with a regulatory environment that is anything but clear. The worry is that one day action from US regulators may make these organizations act in a way that is harmful or deadly for the Ethereum network.

Critics of the validator centralization rightfully call out the regulatory risk and point to the current state of the network as proof.

Censorship Worries

The issue circles back to fears over censorship. Flashbots and the largest relayers, along with Lido, and other large validator networks, are US-based corporations, and subject to US regulation. This has lead them to take the pragmatic stance of not including sanctioned transactions in the blocks they produce.

In practice, this means excluding transactions that interact with the sanctioned Tornado Cash smart contracts.

The network has landed itself a bit between a rock and a hard place.

On one hand, there are clear incentives to go with centralized staking providers and sanction-compliant MEV solutions. MEV in particular is a massive boost to a validator‘s staking rewards, and we can assume more will join the relayer network in time. This creates something of a flywheel where more stakers get more rewards from MEV, adding to their stake, increasing the number of share that censors transactions.

The fear is that at some point, a user won’t be able to get a “bad” transaction through the network, compromising on one of the network’s prime selling points. Censoring transactions does not a credibly-neutral base layer make.

But not everyone in the community thinks that this is an issue. Many argue that as long as there are some non-censoring validators, all transactions will eventually be included in the network.

That the issue has become a hot topic around the community is an encouraging sign. While the current economic incentives seem to lean slightly towards pushing centralization and censorship, there are lots of good proposals on how to address things to keep Ethereum as a neutral settlement layer. In the end, we likely need more time to evaluate whether there is a credible threat to the Ethereum network.


Integral Insights


April 1st, 2024

Integral Insights March ‘24

We achieved several important milestones, including a new all-time-high daily volume for Arbitrum and the addition of four new pools on the Ethereum mainnet.


March 4th, 2024

Integral Insights February ‘24

Another milestone was reached on February 21st when Integral processed over $2 billion in cumulative volume.


February 1st, 2024

Integral Insights: January ‘24

Our initial launch with the ETH-RPL pool was a success, quickly elevating us to the second most utilized liquidity pool for this pair’s trading.


January 17th, 2024

Is Liquidity Fragmentation Really That Bad?

When the token evolves into a store of value, it attracts outside traders, focusing on trading costs and slippage. This is when concentrated liquidity truly shines.


January 2nd, 2024

2023 Review

At Integral, our focus remains on developing a sustainable product for on-chain trading, serving both traders and liquidity providers.


December 12th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees on Ethereum Mainnet

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


December 6th, 2023

Integral Insights: November ‘23

During November, Integral processed an average of approximately 6 million in volume with around 1.5 million in TVL. The system’s overall capital utilization sits at around 350%. It is the 10th most used DEX on Ethereum.


November 28th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


November 15th, 2023

How Do University Blockchain Societies Gain So Many Votes?

Explore how university blockchain societies like FranklinDAO and Michigan Blockchain have grown into influential players in DAO governance, utilizing delegated votes and strategic partnerships to shape the future of DeFi protocols like Uniswap, Compound, and Aave.


November 6th, 2023

Integral Insight: October ‘23

We give an update for our work in October and highlight a profitable LP position from a long-term user.


October 26th, 2023

Understanding the Stakes in Lido’s Growing Share of Staked ETH

The community is arguing whether a protocol may have too much control over the Ethereum network. Lido controls a large percentage of staked ETH, which could have consequences for the network’s future security and neutrality.


October 14th, 2023

Changes to Staking and Farming

Looking back at our progress so far and to the future with new updates to staking and farming.


October 11th, 2023

Integral Insight: September ‘23

We give an update for our work in September with utilization going up on higher volume for our new pools.


October 11th, 2023

The Hottest Narratives of the Summer

What were the hottest narratives of the summer? Our DeFi research team delves into the growth of trading bots, RFV traders and more in this overview.


October 2nd, 2023

Uniswap Governance: A Deep Dive

Governance is considered a critical component for the decentralization and community-driven development of DeFi protocols. We take a look at one of the largest goverance ecostystems in DeFi, Uniswap. In this blog post, we'll discuss the landscape of Uniswap's governance, pulling data from empirical research to dissect the system's delegates and proposals, revealing some interesting findings.


September 19th, 2023

What is the DAI Savings Rate (DSR)?

Our research team takes a look at the DAI Savings Rate and its influence on various yield dynamics in DeFi.


September 15th, 2023

Integral Insight: August ‘23

We give an update for our work in August with cheaper gas fees and the launch of the Integral Relayer on Arbitrum!


September 7th, 2023

Integral Relayer Launches on Arbitrum

We are excited to announce the launch of the Atomic Relayer on Arbitrum. This will bring the efficient and tested system for atomic trades to the Arbitrum Layer 2 network!


August 26th, 2023

How CRV Got Sold OTC

In this post we cover how the Curve founder sold large amounts of CRV in over-the-counter trades in order to prevent a potentially catastrophic liquidation event in DeFi.


August 18th, 2023

Integral Insight: July '23

Sharing our progress in July: preparations for atomic swaps on Arbitrum, trading SIZE with lower gas fees and more.