To Compete or Collude: Bidding Incentives in Ethereum Block Building Auctions

• DOI: 10.1145/3677052.3698629
• Publication Date: 2024-11-14T11:38:06Z
• Authors: Fei Wu; Thomas Thiery; Stefanos Leonardos; Carmine Ventre

The block-building process on the Ethereum network has changed significantly with an upgrade of its consensus protocol. Network participants access blocks through block building auctions at a decentralized financial market, termed builder where builders vie for right to build and earn Maximal Extractable Value (MEV) rewards. This paper employs empirical game-theoretic analysis examine builders' strategic bidding incentives in auctions, MEV-Boost auctions. We study various scenarios different auction game settings evaluate how critical elements such as connectivity MEV opportunities impact incentives. Through our analyses, we highlight challenge creating yet competitive market.