SUAVE throughput alters Ethereum MEV dynamics

SUAVE and the MEV coordination layer

Flashbots’ SUAVE mainnet processed 2.3 million transactions this September. This coordination layer handles MEV-related computation while underlying chains like Ethereum handle settlement. Builders compete for access to this aggregated order flow through the messaging layer, and this capacity change shifts the weight of MEV towards the coordination layer. SUAVE provides a dedicated space where transactions and intents from multiple chains aggregate. The messaging layer transmits preferences to be executed while the settlement layer processes bonds. Builders use this to collect orderflow or collaborate with other builders. MEV-Boost remains the standard infrastructure for Ethereum validators. Most professional staking operations use the proposer-builder separation architecture to manage MEV. The current amount of ETH staked remains around 23% of the total supply, which equals approximately 56 billion USD at current prices. This concentration of assets is a major focus for the community. In low volatility periods, execution layer rewards account for about 25% of the total validator rewards. This proportion changes significantly during bull markets. For instance, when USDC traded at a discount on March 11, 2023, execution layer rewards accounted for 75% of validator rewards.

Economic redesign through mev-burn

The mev-burn mechanism changes how builders compensate proposers. A builder bid consists of a base fee that the block burns and a tip for the proposer. This design reduces validator rewards without protocol issuance changes. Tapered issuance burn proposals seek to limit the total amount of ETH staked. The proposal targets a saturation balance of 60.25 million ETH. When the staked amount reaches this level, the burn reaches 100% of consensus rewards. At a stake of 39 million ETH, all-in validator income falls from 2.862% to 1.476%. At 48 million ETH, income drops to 0.86%, which moves the incentive for staking away from pure yield. Builders face liquidity requirements to guarantee the proposer receives the tip. A builder who promises to burn 80 ETH and tip 20 ETH must be able to fully collateralize the 20 ETH tip at the top of the block, but can be bonded for a capped amount in the burn liquidity. If a builder fails to build a valid block that burns the full amount, their bond is slashed and the remaining amount is ignored. The mechanism aims to prevent the protocol from overpaying for security with unnecessary issuance.

Censorship costs and validator security

Mev-burn increases the cost of censorship for builders. A builder who censors a transaction must subsidize the base fee through their bid. If the top censoring bid is 0.04 ETH and a non-censoring bid is 0.05 ETH, the proposer faces the 0.05 ETH burn cost. This mechanic makes the cost of censorship the full fee of the victim transaction. The mechanism also reduces the incentive for validators to reorg the chain. When MEV burns, validators lose the incentive to ignore a previous block to steal MEV. The mev-burn implementation reduces the value and the variance of validator rewards while improving protocol resilience during mass MEV events. The Execution Tickets proposal introduces an auction for transaction ordering rights. This system forms a part of the Scourge phase in the Ethereum roadmap. This phase focuses on mitigating risks of economic and network centralization. The winner gains the right to sequence transactions within a block. All proceeds from these auctions go to a burn address, which shifts MEV value to the protocol instead of validator profits. This change aims to reduce the concentration of MEV among a small set of professional extractors. Do large staking pools maintain their dominance if MEV rewards disappear? You should observe the 18-month transition as it occurs.