Proposer-Builder Separation (PBS)

Proposer-builder separation, or PBS, is a concept in Ethereum that aims to enhance the scalability and security of the network by separating the responsibilities of block building into two distinct roles: block proposers and block builders.

What Is Proposer-Builder Separation?

The proposer-builder separation framework splits these responsibilities into two roles. Block builders handle building the content of a block, including transaction ordering and validation. Block proposers are in charge of proposing new blocks to be added to the blockchain.

Responsibilities of Block Proposers and Block Builders

Block proposers take the block bodies from block builders and create a complete block by adding necessary metadata like the block header, which includes details such as the parent block's hash, timestamp, and other information. They also verify the blocks' validity by checking the correctness of the block body provided by the builders.

How Could Proposer-Builder Separation Impact Maximal Extractable Value (MEV)?

Proposer-builder separation could alter the MEV dynamics by redistributing MEV between the roles, potentially changing incentives and rewards. With block builders handling transaction ordering and inclusion, they may establish new strategies or promote competition that enhances efficiency and a fairer MEV distribution across the network.

Proposer-builder separation might also reduce frontrunning and other negative practices, although it may not entirely eliminate MEV-related issues.

Scaling With Proposer-Builder Separation and Danksharding

Danksharding, a term coined by Ethereum co-founder Vitalik Buterin, describes a sharding approach within the Ethereum 2.0 upgrade. Sharding splits the blockchain into multiple smaller chains (shards) that can process transactions and smart contracts independently, significantly increasing transaction throughput.

Both Proposer-builder separation and Danksharding aim to enhance Ethereum's scalability, security, and efficiency. PBS separates block proposer and builder roles, while Danksharding divides the blockchain into shards for parallel transaction processing.

Proposer-builder separation and Danksharding complement each other in scaling Ethereum. While Danksharding boosts network capacity by processing transactions across shards, PBS optimizes resource use and enhances network performance by segmenting block creation and validation roles.

What Are the Benefits of Proposer-Builder Separation

Proposer-builder separation could enhance efficiency and scalability as roles specialize in particular tasks. It may increase decentralization by involving more participants in block creation and lead to fairer MEV distribution, reducing negative repercussions. Enhanced competition under PBS can improve resource utilization and network performance.

PBS may foster better efficiency and more equitable MEV distribution, alleviating MEV-associated issues. It promotes competition among builders to produce attractive block bodies for proposers, enhancing overall network performance.

What Are the Limitations of Proposer-Builder Separation

Introducing PBS adds complexity to the blockchain network. While it redistributes MEV between builders and proposers, it may not fully eliminate MEV-related repercussions. Addressing MEV extraction dynamics effectively under PBS may require further research and development.

PBS's division of labor may result in a few specialized builders and proposers dominating the network, posing centralization risks. Barriers to entry or economies of scale could hinder smaller players from effectively participating in these roles.

Effective coordination between block builders and proposers in PBS could introduce latency or performance bottlenecks. Designing suitable incentive structures for both parties is crucial to ensure fair compensation, though balancing these incentives can be challenging given the evolving MEV dynamics.