New post on EthResear.ch! Builders' Defection and Incentive Compatibility By: - @nuconstruct 🔗 ethresear.ch/t/25400 Highlights: - PBS creates an imperfect-commitment problem: builders observe all bids and full payloads, and nothing cryptographically forces them to honor the auction outcome rather than replicate/profit from bundles. - In a repeated-game model, honesty is incentive-compatible only if the one-shot defection gain (Δ) is smaller than the expected discounted loss from being caught: Δ ≤ p * (δ/(1−δ)) * π_h; low detection probability p or low patience δ makes defection rational. - Empirically (libmev panel, Sep 2024–Aug 2025), replication-style defection is likely hard to detect on-chain, implying low p (plausibly 0.01–0.1), under which incentive compatibility fails for every major non-TEE builder unless the builder is extremely forward-looking. - The potential economic scale is large: the paper estimates roughly $26M/year of counterfactual defection surplus available to non-TEE builders in the panel, and ~$49M total exposure when including BuilderNet’s TEE-neutralized share. - Therefore commitment must be restored architecturally, not reputationally: prevent builders from learning usable bid/payload details (e.g., TEEs like BuilderNet, commitment-based settlement designs, or cryptographic approaches such as threshold-encrypted mempools / commit-reveal / ZK), while noting ePBS (EIP-7732) and FOCIL (EIP-7805) don’t address this replication/confidentiality channel. ELI5: Ethereum blocks are often built by a “builder” who gets to see everyone’s secret trading plans (bids + transaction bundles) before deciding what goes in the next block. Even if the builder runs an auction and promises to include the winning bundle, it can secretly copy the best bundle for itself and keep the profit. The paper asks: can we rely on the builder’s reputation (fear of losing future business) to stop this? The answer is usually no, because copying is hard to detect and the one-time profit can be big. So the fix should be technical: design the system so the builder can’t reuse what it sees (using TEEs or cryptography), instead of hoping it behaves.

Ethereum Is All You Need In this episode of Deeply Intents (🎙️, 🎧), I chat with 0xprincess @0x9212ce55 [mev extractor 🦄 and founder of @nuconstruct]. If you enjoy MEV discourse, want the alpha on TOOL and 🤍 Ethereum, you'll vibe with this episode. 👸🏼 0xprincess slayed the recording. It just hits different. Links below. [sponsored by @anoma] In this episode we discuss: - MEV - TOOL - ePBS - EIP process - Ethereum - Pseudo-anon game Timestamps 0:00 - @nuconstruct origins 3:14 - DEX to DEX arbitrage 4:15 - Into the dark forest 8:30 - MEV competition today 13:28 - Liquidity network effects 19:42 - Trustless Orderflow Operations Layer (TOOL) 23:06 - Leader based consensus 29:06 - Open auction for orderflow 30:55 - Early confirmations and 1s block times 36:00 - Trust Domain Extensions (TDX) 43:09 - Validator adoption of TOOL 47:30 - Fundraising 53:08 - Product mindset 57:28 - EIP-7732: ePBS 1:03:58 - Improving the EIP process 1:07:08 - Product discovery 1:16:34 - EIP Process is well polished 1:18:03 - Ethereum ossification risks 1:22:50 - Ethereum has credibility 1:29:24 - Price is not correlated with tech 1:33:00 - Anon and pseudo-anon culture 1:40:34 - The TOOL is live! (testnet)