Ethereum MEV: The Alarming Rise of Centralization Threatening Decentralization

Key Points

1. MEV refers to the maximum value that can be extracted by including, excluding, or reordering transactions within a block, often through arbitrage between centralized and decentralized exchanges.

2. A recent study reveals that MEV extraction is increasingly concentrated among a few dominant players, raising concerns about centralization.

3. Centralization of MEV undermines Ethereum's decentralization, censorship resistance, fairness, network security, and innovation.

4. Block builders play a pivotal role in MEV extraction, and their concentration exacerbates centralization issues.

5. Potential solutions include protocol-level changes like enshrined Proposer-Builder Separation (ePBS), MEV-burn mechanisms, and MEV-smoothing to distribute rewards more evenly.