Ethereum’s Block Building Market Is Failing Validators
- Ethereum’s Block Building Market Is Failing Validators
- Our Solution: AVS Boost/Turbo + XGA Auction
- Validated Results
- Next Steps
If you’re operating validators on Ethereum, you’re likely earning significantly less than you should be. The current Proposer Builder Separation (PBS) framework has created a market where:
- Private order flows allow select builders to capture disproportionate value
- Information asymmetry enables builders to extract profits that should belong to validators
- A monopolistic builder market is forming, documented to reduce validator profits by up to 32%
- Your validators are leaving money on the table with each block proposed
As one recent research paper concluded: “PBS cannot achieve robust fairness. For builders with information and auction asymmetry, the emergence of a monopoly state is inevitable. The builder market always tends to a monopoly in the current PBS regime.”
Our Solution: AVS Boost/Turbo + XGA Auction
Over the past year, we’ve implemented and validated a system that directly addresses these market failures while increasing validator yields by approximately 1.5%. Our approach tackles the root causes of value extraction:
How It Works
- Bypassing Builder Monopolies: Our XGA Auction creates a parallel market that allows searchers to bypass centralized builders, connecting directly with validators.
- Splitting Block Structure: By dividing blocks into “Top of Block” and “Rest of Block” segments, we reduce information asymmetry and return more value to validators.
- Innovative Auction Design: Our modified uniform price auction with elastic supply scheduling prevents underpricing and addresses the “winner’s curse” issues present in traditional auctions.
Direct Benefits to Validators
- Increased MEV Revenue: Validators receive more ETH for their blocks than under the current Flashbots system
- Improved LST Liquidity: A portion of fees are used to LP the underlying validator’s LST/LRT, creating additional value
- Zero Operational Risk: AVS Boost can seamlessly fall back to existing MEV-Boost relays, ensuring you can never be worse off
Implementation Details
AVS Boost is our MEV Boost fork that implements an interface to support the XGA Auction. For validators, integration is simple:
- Compatible with Existing Infrastructure: Works as a drop-in replacement for MEV-Boost
- Already Integrated with Vouch: If you’re using Vouch, the implementation is ready for you
- Simple Sidecar Model: Minimal operational changes required
Validated Results
Our implementation has already been tested on mainnet with conclusive results:
- 1.5% yield increase compared to standard MEV-Boost setups
- Elimination of the 20% revenue loss attributed to builder bid behavior
- Reduction of the 9-12% loss due to Flashbots auction implementation details
The AVS Turbo extension further enhances these benefits by adding mev-pre-commit support and zkAVS support through a standardized AVS Sidecar interface.
Next Steps
Validators/Node Operators/LST’s/LRT’s can start benefiting immediately by reaching out to us to onboard onto the Holesky testnet. We anticipate main net for v2 by mid-April 2025 (less than 60 days from today). Contact us to get started testing now, we will reach out to you to onboard onto Holesky test net.
XGA v2 tokenomics regarding supported assets is now being considered. As the auction lives on a ‘based’ rollup, LST’s/LRT’s are the asset used, and are lent not deposited. Additional interest is accrued on the rollup such that users need not spend their principle to transact potentially.
By implementing this solution, you’re not just increasing your returns—you’re contributing to a healthier, more competitive Ethereum ecosystem that properly rewards those securing the network. This is what re-staking can really offer.
| Unit Economics | TODAY | XGA/AVS |
|---|---|---|
| ETH Quantity | 120,560,000 | 120,560,000 |
| ETH Staked Ratio (%) | 27.6% | 27.5% |
| ETH Staked Quantity | 33,678,112 | 33,678,112 |
| Total # of ETH Validators | 1,052,441 | 1,052,441 |
| Quantity of ETH Per Validator Node | 32 | 32 |
| Restaked Share of ETH Stake (%) | 10.0% | |
| # of Validators Opted-In for Restaking | 105,244 | |
| Restaked ETH Quantity | 3,367,811 | |
| ETH Staking | ||
| ETH Staking Yield (%) | 3.38% | 4.70% |
| ETH Price | $2,200 | $2,200 |
| ETH Staking Revenue | $2,380 | $3,309 |
| Restaking on EigenLayer | ||
| # of Networks on EigenLayer | 1 | |
| Individual Network Yield | 4.7% | |
| Total Yield Across All Networks (%) | 4.7% | |
| Yield Compression from More Validators (%) | -31.3% | |
| Total Net Yield Across All Networks (%) | 3.2% | |
| Restaking Gross Revenue | $2,272 | |
| Less: EigenLayer Fee (%) | 10% | |
| Restaking Net Revenue | $2,045 | |
| Total Node Operator Revenue | $2,380 | $5,354 |
| % of Revenue from EigenLayer | 0% | 38% |
| Staking APY Summary | ||
| ETH Staking APY | 3.4% | 3.4% |
| MEV-Boost | 0.6% | 0.6% |
| Restaking APY | 0.0% | 1.50% |
| Total APY | 4.0% | 5.5% |
| Growth in APY through EigenLayer | 0.0% | 37.5% |
| MEV Solution (e.g. MEV-Boost) | ||
| Weekly ETH Paid Out for MEV-Boost | 3,000 | |
| ETH Paid Out for MEV-Boost (Annualized) | 156,000 | |
| % of Validators Registered for MEV-Boost | 92.0% | |
| Registered Validators | 800,000 | |
| Annual ETH Paid Out Per Registered Validator | 0.20 | |
| APY from MEV-Boost | 0.6% | 0.6% |
| % of ETH Staking APY | 18.0% | 18.0% |
| Yield Compression Calculation | ||
| Restaked ETH Quantity | 3,400,000 | 3,367,811 |
| ETH Yield Curve on Restaked ETH Quantity | 9.0% | 6.2% |
| % Change in Yield vs. Today’s Assumption | N/A | -31.3% |
| Annual Revenue Comparison | Today | XGA/AVS Turbo |
| Restaking Revenue | $0 | $348,231,678 |
| ETH Staking Revenue | $2,504,304,408 | $3,482,316,781 |
| Total | $2,504,304,408 | $3,830,548,459 |
| % Restaking Revenue | 0% | 9% |
Derived from https://docs.google.com/spreadsheets/d/1W0JJc_BQxHMXQMQVpcNqMaSkOEnXOKGqNF1jWxOXjE0/edit?gid=347266829#gid=347266829 Not an endorsement/used for educational purposes only