TL;DR: ePBS adds an in-protocol, sealed-by-default first-price channel for builder–proposer payments. We expect relays to survive, but the in-protocol channel reshapes what they can offer. We predict that trustless payments in-protocol will ossify a first-price block auction. Whether and how bids are shared publicly post-Glamsterdam is more subtle: the trustless payment channel generally pushes the block auction to a sealed-bid format, but there are scenarios where proposers may want to publicly share (possibly through a relay) bids they have received. Two factors matter: 1) how many “fast” builders are there that you can give a last look? 2) can the proposer credibly commit to not reveal bids?

joint work with @BrunoMazorra and Minghao Pan.

EIP-7732 is coming to Ethereum soon with the Glamsterdam update. The EIP consists of two major features 1) pipelining 2) trustless builder-proposer payments in protocol. We have extensively commented on pipelining feature through our “free option” work. In a new paper, we analyze the trustless payment feature from an auction and relay-design perspective and want to share our main insights in this post.

Let us start with the familiar picture of the current block building architecture.

The builder-proposer interaction is organized out-of-protocol through trusted intermediaries, relays, that organize an open-bidding first-price auction with the default implementation of MEV-boost (there are also modifications of that auction including commit-boost). ePBS changes this architecture, by offering an in-protocol path for the builder-proposer exchange. Builders can become a staked entity in-protocol. The builder sends a signed commitment to a payload and a bid to the proposer. In case the proposer selects this bid, payments are enforced in-protocol by deducting it from the builder’s staked balance and paying it to the proposer’s withdrawal address. The builder is responsible for revealing and delivering the payload to the network. It only becomes canonical if it is seen by a particular deadline by the Payload-Timeliness Committee (PTC).

There are several ways for the proposer to communicate with builders in ePBS. While bid submission over the P2P-layer is supported, it seems likely that the preferred channel to bid in-protocol is for proposers to ping a list of builders who reply with a signed bid. This would effectively make the auction sealed, unless the proposer forwards these bids to other parties. The resulting system would look roughly like this:

We leave the relay-path in the graph intentionally: It is of course hard to predict the future without risking to look silly later. Still we dare to predict that relays will remain to exist in some shape or form post Glamsterdam. There are several reasons:

Un-collateralized or Under-collateralized bidding: even if builders can bid in protocol, they might (sometimes) prefer an out-of-protocol way of bidding to avoid maintaining large staked balances in-protocol or to register as a builder in-protocol altogether. Relays support un-collateralized bids (through simulating the payload) or under-collateralized bids (in their optimistic relaying path). This is attractive to builders that only build occasionally and for which staking balances to cover their bids for the rare case in which they are selected is wasteful. But it is also a generally useful feature to support large bids, for occasional high value blocks without staking large balances in-protocol.
additional features: relays offer additional features that facilitate the life of builders. They can help with builder discovery, in case a builder is not known and thus not pinged for a bid by proposers. Moreover, they can help with fast payload distribution through the relay and relay-proxies.
innovation and builder-relay convergence: the previous two items argued that some features that relays offer today will remain to be useful in an ePBS world. It seems entirely plausible, moreover, that relays will innovate beyond the status-quo to remain attractive in an ePBS world. For example, relays could offer block-merging features. A recent post of the blockspace forum describes the vision of a multi-party block production pipeline. These innovations may lead to convergence of the relay and builder role with a spectrum of architectures in-between being possible.

Even though we predict that relays will remain to exist in an ePBS world that doesn’t mean that a trustless payment channel in-protocol wouldn’t shape what relays can and can’t do going forward. The availability of an outside option (even if hardly used) can fundamentally change a market. We explore this in two dimensions:

Pricing rule: given that the in-protocol channel is first-price by construction, can a competing relay enforce any other pricing rule among its bidders?
Information sharing: can some form of open bidding survive? In particular, does the proposer have an incentive to forwards bids that they receive to other parties - builders or relays? Can the relay enforce open bidding among its bidders?

Trustless payments forces a first-price

It could be attractive for the relay to run a “second-price” feature where the relay forwards the second highest rather than the highest bid to the proposer as payment, as long as the SP outbids the best competing bid through an outside channel. An implementation of this feature in the current PBS world is Ultrasound’s bid adjustment. The in-protocol bidding channel of ePBS would compete with any such “second-price” relay. Furthermore, in contrast to the current PBS world with open bidding, the in-protocol path does not leak bids to the second-price relay, unless the proposer explicitly wants to leak these bids. Thus, the second-price relay does not know which price to beat from the first-price in-protocol channel. In the paper we show that this makes the second-price relay unravel completely: If the proposer does not forward their max bids to the second-price relay and keeps the in-protocol auction sealed, then bidders have an incentive to bid through the first-price channel in-protocol rather than through the second-price relay channel.

Theorem: If there are competing second-price and first-price (sealed-bid) bidding channels, then in any symmetric equilibrium the winning bid will almost surely be submitted through the first-price channel. This holds both in the single-homing case - the second-price relay can enforce that bidders that bid with them are not allowed tp bid through the other channel - and in the multi-homing (multi-plexing) case - bidders can submit bids to both bidding channels simultaneously. A second-price relay auction will unravel.

The multi-plexing case has additional subtleties: if a relay can’t enforce that bidders bid with them exclusively they might also not be able to enforce that bidders send multiple bids through different identities to them. That would allow bidders by themselves to turn the second-price into a first-price by e.g. submitting two matching bids. In the paper, we expand more on this,...

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