In Ethereum‘s earlier Proof of Work or Proof of Stake model, miners or validators took on the task of suggesting new blocks and assembling their contents, which involved arranging and verifying transactions. What is Proposer-Builder Separation?
The proposer-builder separation framework splits these duties into two separate roles. Block builders focus on creating the actual contents of a block, which includes arranging and validating transactions. Meanwhile, block proposers are in charge of suggesting new blocks to be incorporated into the blockchain.
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Block builders come together to gather, validate, and put transactions into a block body. They check the mempool, make sure the transactions meet requirements like gas limits and nonce, and create a data structure that holds the transaction data. Block builders also take care of arranging the transactions to make the best use of block space and gas. After that, they provide the block body to block proposers.
Block proposers receive the block bodies from the block builders and put together a complete block by adding essential metadata, like the block header. This header contains information such as the hash of the parent block, the timestamp, and other relevant data. They also verify the blocks’ validity by checking the accuracy of the block body given by the builders.
The Benefits
Separating the proposer and builder roles might boost efficiency and scalability since it lets each role focus on and refine its specific tasks. PBS can also promote decentralization by allowing more people to take part in block creation.
With PBS, we could see greater efficiency and a fairer spread of MEV throughout the network, helping to lessen the adverse effects of MEV. Ultimately, the increased competition that comes with PBS results in better resource use and improved network performance, as builders work hard to make more appealing block bodies for proposers.
The Limitations
Introducing PBS brings an extra layer of complexity to the blockchain network. While PBS redistributes MEV between block builders and proposers, it might not completely remove the negative effects tied to MEV extraction. PBS could lead to new strategies and dynamics in MEV extraction, and tackling these challenges effectively may need more research and development.
The division of labor in PBS might result in fewer specialized block builders and proposers taking over the network, which could pose centralization risks. This is especially true if there are significant economies of scale or barriers to entry that hinder smaller players from effectively participating in either role.
Finally, PBS depends on smooth coordination between block builders and proposers, which could bring about latency or other performance issues. Creating suitable incentive structures for block builders and proposers can also be tricky, as it needs to ensure that both parties are justly rewarded for their contributions. Finding the right balance in these incentives may prove challenging, especially considering the potential for shifting dynamics in MEV extraction.