Blockchain technology, often hailed as one of the most transformative innovations of the 21st century, powers an ever-growing ecosystem of decentralized financial services, supply chain management solutions, digital identity frameworks, and a host of other applications. At the heart of a blockchain’s operation is its capacity to maintain a secure, immutable, and transparent ledger of transactions. This is accomplished through the continuous addition of data structures known as “blocks.” While many are familiar with the concepts of miners, validators, or node operators, fewer understand the nuanced role of the “block builder.” Yet, block builders are an increasingly important component within emerging blockchain architectures, especially those that distinguish between block construction and block validation, such as Ethereum’s evolving ecosystem after its shift to Proof of Stake.

In this article, we’ll examine what a block builder is, how it differs from traditional roles like miners or validators, and explore why separating block building from block validation is such a pivotal development for blockchain scalability, efficiency, and fairness.

To fully appreciate the concept of a block builder, it helps first to understand the different roles that nodes can play in a blockchain network:

• Full Nodes: These nodes store the entire ledger history and propagate transactions across the network.
• Validators (or Miners in Proof-of-Work): Responsible for proposing new blocks and securing the network, validators (and previously miners in PoW systems) follow the consensus rules to determine which block becomes part of the canonical chain.
• Light Clients: Nodes that do not store the entire blockchain state but rely on other nodes for succinct proofs in minimizing resource requirements.

Traditionally, the same entity both constructed and proposed blocks. For instance, in a Proof-of-Work blockchain like Bitcoin, the miner that finds the correct hash (solving the cryptographic puzzle) simultaneously selects which transactions to include in the block and then “proposes” that block to the network. However, as blockchains evolved and complex financial markets sprouted around them—like the rise of Maximal Extractable Value (MEV) on Ethereum—protocol designers recognized that decoupling the block-building process from block proposal could yield important benefits.

A block builder is a specialized participant in the blockchain network whose primary task is to assemble a set of transactions into a well-formed block. Instead of also being the entity that finalizes or proposes that block to the rest of the network, block builders can focus solely on efficiently aggregating and ordering transactions, optimizing for certain criteria—such as maximum fees, minimal latency, or extraction of MEV—without worrying about the complexities of consensus and staking requirements.

This division is often associated with a broader architectural framework called Proposer-Builder Separation (PBS). In PBS, the “proposer” is the entity chosen by the consensus protocol (e.g., a validator in a Proof-of-Stake system) to finalize and broadcast a block. At the same time, the “builder” is an external party that compiles the transaction list and assembles the block structure. The proposer and builder roles, while distinct, work in tandem through a marketplace or auction-like mechanism that ensures the proposer obtains a block template from the builder that offers the highest value or meets other desired criteria.

This separation emerged as a means to address several challenges faced by modern blockchains:

When one party both builds and proposes a block, there may be incentives—either economic or political—to censor certain transactions. By separating these roles, transaction inclusion becomes more market-driven. Multiple builders compete to produce the most “valuable” block, giving the proposer choices and reducing the likelihood of systematic censorship.

Maximum Extractable Value (MEV) refers to the profit a node operator can make by reordering, inserting, or censoring transactions within a block. Previously, validators or miners with the power to reorder transactions could extract significant MEV. By introducing a marketplace for block building, more specialized and competitive builders emerge, reducing the concentration of MEV extraction in the hands of a few and spreading it across more participants. This decentralization can lead to a more equitable ecosystem, where MEV is channeled into the broader builder marketplace rather than hoarded by block proposers.

The skills and infrastructure needed to assemble a highly optimized block effectively differ from those needed to participate in consensus. Builders, often well-capitalized and technologically adept, can specialize in complex strategies—like searching for arbitrage opportunities across decentralized exchanges—while proposers focus on maintaining reliable, secure consensus infrastructure. This creates a more efficient division of labor, driving innovation and optimization in both domains.

By fostering a competitive builders market, users can benefit from lower transaction fees, faster transaction inclusion, and a more transparent transaction ordering process. Over time, this can lead to a healthier ecosystem where no single builder or proposer has outsized control over how blocks are formed.

A block builder’s workflow can be broken down into several key steps:

1. Transaction Collection and Filtering:

Builders monitor the mempool (the set of unconfirmed transactions broadcast by network participants) and possibly private transaction pools. Their sophisticated algorithms analyze which transactions are most profitable to include based on fees, MEV opportunities, or other strategic considerations.

2. Ordering and Optimization:

The builder arranges the selected transactions to maximize value. This might involve placing high-fee transactions first or identifying complex opportunities to reorder transactions for arbitrage between DeFi protocols. The builder’s methods can be proprietary and highly competitive, representing the “secret sauce” of their business model.

3. Constructing the Block Template:

Once the builder has determined the optimal transaction set and order, they package these into a proper block structure—calculating the Merkle tree root, incorporating correct references to the previous block, and ensuring all protocol rules are followed.

4. Broadcasting Bids to Proposers:

After the builder finalizes a block template, they present it to potential proposers. In a proposer-builder separation model, proposers run auctions to determine which builder offers the best block template, often measured by the block’s expected rewards. The builder places “bids” representing how much value (like the fees after paying the proposer’s share) the proposer stands to gain by choosing their block.

5. Inclusion and Finalization:

The proposer, upon receiving multiple builder proposals, selects the block template that meets their criteria—usually, the one that maximizes their rewards or adheres to certain network policies. The chosen block is then broadcast, validated, and added to the chain by the network’s consensus process.

The distinction between “good” and “bad” block builders is multifaceted and depends on factors like technical capability, transparency, adherence to network rules, and ethical considerations. While the blockchain ecosystem does not enforce universal moral judgments, participants and the market ultimately decide a builder’s reputation. Key dimensions include:

A good builder is technically adept at identifying and efficiently including high-value transactions. They have well-optimized algorithms and robust infrastructure that enable them to quickly process large volumes of mempool transactions, execute complex arbitrage or MEV strategies without causing network delays, and produce well-formed blocks with minimal errors.

Oppositely, a bad builder may struggle to produce blocks that incorporate the most profitable or user-important transactions. Their systems might be inefficient, slow, or error-prone, leading to suboptimal blocks that miss valuable transactions or include incorrect or malformed data. Poor optimization results in lower returns for proposers and missed opportunities for network participants.

Consistency in availability and performance is crucial. A good builder offers near 100% uptime, responds quickly to market conditions, and continuously updates its strategies in sync with changing market dynamics. Their block templates are delivered on time so proposers can confidently rely on them.

Good builders operate in line with protocol standards, avoid including invalid transactions, follow the network’s consensus rules, and comply with any relevant policies that may reduce censorship or promote fair inclusion. They do not exploit protocol bugs or engage in activities that threaten network security. On the other hand, a bad builder might try to push blocks with invalid transactions, break protocol rules, or exploit vulnerabilities. Such misbehavior not only risks punishment—through slashing conditions if the ecosystem provides for it—but can also erode trust, prompting proposers and other market participants to blacklist their services.

While builders are often profit-driven, a respected builder may take steps to minimize blatant forms of exploitation, such as extreme transaction censoring or predatory MEV extraction that severely disadvantages users. They may also be transparent about their strategies and refrain from selective exclusion of transactions based on personal biases or coercive pressures.

Some “bad” builders might continuously front-run users, reorder transactions in a way that undermines user trust, or engage in explicit censorship. Over time, these behaviors can attract negative scrutiny from the community and lead proposers, as well as users, to seek more ethical or community-minded builders.

At their core, block builders are driven by economic incentives, though other strategic or reputational considerations can also play a role. Key incentives include:

Fee Revenue: The primary incentive for a builder is to maximize the total transaction fees and MEV that can be captured within a block. By selecting transactions that pay high fees or by structuring transaction order to unlock MEV (e.g., arbitrage opportunities, sandwich attacks), builders stand to earn substantial revenue.

Competitive Advantage: Builders invest heavily in infrastructure and research to outcompete rivals. A builder that can reliably produce blocks with higher net returns earns the loyalty of proposers, potentially securing consistent revenue streams.

Long-Term Relationships with Proposers: A block builder that consistently delivers high-quality blocks gains a reputation for reliability and profitability, attracting more proposers to choose their block templates. This can lead to improved long-term revenue and a strong position in the builder marketplace.

Community Trust and Compliance: A builder's ethical stance can become a differentiator in environments where the user community and developer ecosystem value fair practices. Goodwill can translate into more stable relationships with proposers, lower risk of being excluded from markets, and potentially better deal flow over time.

Predictable Earnings: Builders that refine their strategies to minimize risk—such as avoiding the inclusion of questionable transactions or exploiting unsustainable strategies—enjoy more predictable and stable earnings. Steady profits can allow them to invest in better hardware, software, and R&D, reinforcing their competitive edge.

Avoiding Regulatory or Community Backlash: In some jurisdictions, regulatory scrutiny may discourage malicious MEV tactics or censorship. Builders that maintain ethical and legal compliance are less likely to face punitive measures or community-driven boycotts, thus preserving revenue streams in the long run.

Staying Ahead of Technological Curves: With evolving technology—such as rollups, Layer-2 solutions, and changes to consensus protocols—block builders that invest in innovation can handle more complex data processing, tap into new markets, and maintain a leading position as the ecosystem grows.

Synergies with Other Services: Some block builders may integrate additional services—like private transaction pools, multi-block MEV strategies, or partnerships with DeFi protocols—that enhance their overall value proposition. This strategic positioning can increase profitability and resilience against competition.

Before Ethereum’s transition from PoW to PoS (referred to as “The Merge”), miners performed both the block-building and block-proposing roles. After The Merge, validators replaced miners as proposers but still primarily controlled block construction. Subsequent upgrades and research (such as Ethereum Improvement Proposals related to PBS) envision a world where specialized external builders handle the intricacies of block creation. This not only aims to distribute MEV more evenly but also to promote a thriving, competitive builder marketplace, leading to more transparent and efficient block construction.

As networks implement vertical and horizontal scaling solutions (like sharding, rollups, and sidechains), the complexity of a single block can increase. Managing transactions from multiple shards or rollups may require advanced algorithms and infrastructure. Block builders, with their specialized focus, are well-positioned to handle these increasingly complex workloads efficiently, thereby playing a critical role in scaling the blockchain to handle thousands—or even millions—of transactions per second in the future.

While block builders bring a host of potential benefits, the concept also raises certain challenges and open questions:

If only a few entities possess the resources and expertise to build highly optimized blocks, the builder market may become concentrated in the hands of a few players, potentially reintroducing a form of centralization. Mechanisms to ensure fair builder competition are critical.

Builders may employ opaque strategies for transaction ordering, potentially leading to user mistrust. Establishing transparency and auditability—while respecting builder trade secrets—remains an active area of research.

Ensuring that builders, proposers, and the network as a whole have aligned incentives is no small feat. Protocol designers must carefully structure reward mechanisms, slashing conditions (for validators), and bidding auctions to avoid unintended exploitative behavior.

The notion of a block builder represents a significant milestone in the evolution of blockchain infrastructure. By decoupling the block creation process from the block proposing function, networks can foster increased specialization, promote healthy competition, and better distribute economic benefits among participants. This shift has profound implications for network fairness, efficiency, MEV distribution, and scalability—critical objectives as blockchains continue to mature into foundational infrastructure for a globally interconnected, decentralized digital economy.

In sum, block builders are neither miners nor validators but a new breed of participants in the blockchain ecosystem, dedicated entirely to the art and science of crafting highly optimized, value-dense blocks. As the field evolves, we can expect further refinements in their roles, responsibilities, and operational frameworks—ultimately shaping the next generation of blockchain architectures.