Value Flow in Ethereum's MEV Supply Chain

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🤑 $32.5M, that's searchers' revenue of #MEV on #Ethereum in Jan and Feb of 2023. In the same MEV supply chain, builders' income reached $67.21M, out of which validators took the most: $62.58M. This research shows you how the value flows thru the whole stream.

📊 Here is the big picture illustrating the benefits flow for different parties, specifically builders and validators under the current PBS scheme. One liner: MEV Accounts for 51.6% of Builders' Revenue, and Validators Stand as Top Beneficiaries. Let's dive deeper. 🕵️‍♀️

⚡️During the 2 months, EigenPhi identified 975,290 txs involving MEV payments. Our algorithm classified 64% of these transactions as originating from three types of MEV, which generated a profit of $7.3 million collectively and contributed $18.9 million toward MEV payments.

💰 The remaining 36% of txs, with undefined types, accounted for $15.8 million in MEV payments. These yet-to-be-strictly defined categories include Just-In-Time (JIT) transactions, statistical arbitrage, DEX-CEX arbitrages, and private orders, among others.

👷 Of these MEVs, $23.1 million is directly transferred to the builder's address through coinbase.transfer(), while the remaining $11.6 million is paid to the builder as priority fees.

💸 MEV accounts for 51.6% of the builder's revenue, with the remaining 48.4% coming from priority fees paid by regular transactions.

🤯 Builder’s explicit revenue for first 2 months of 2023: only $4.4M. 93% of $67.3M was allocated to compensate validators, who received $62.6M.

💵 Considering only the MEV part and assuming that the builder transfers all regular transaction fees to the validator, it remains essential to allocate 88% of MEV to validators to guarantee that the builder's block is successfully proposed.

Now you've got the bigger picture. And you might want to ask: who exactly are these builders and validators that have the biggest piece of the 🍰? Our 2nd part of the analysis has the answer: the oligarchs.

The market competition between builders and validators exhibits an apparent oligopoly effect, with @LidoFinance claiming a 30% market share, and the top three contenders, being builders and validators at the same time, securing about 50% of the total profits.

. Currently ranking first, @LidoFinance amassed $21M in profits in 2 months, claiming a 30% market share. Meanwhile, the runner-up, tagged as Coinbase by mevboost.pics, occupies 15% of the market share.

Lido's market share in terms of profits also aligns with its staking weight and the probability of proposing new blocks. @DuneAnalytics shows @LidoFinance has staked a total of 6,038,112 ETH with 189k validator nodes, accounting for 31.9%. dune.com/hildobby/eth2-staking

Our data exhibit that Lido's share of proposing blocks on their own or obtaining auctioned blocks from Relay is around 30%. Assuming 1 ETH equals 2,000 USD, the block's transaction fees and MEV revenue generate approximately 1% annualized return for Lido.

That's it! Wanna to find out more about the gains of Searchers, Builders, and Validators, please visit: eigenphi.substack.com/p/value-allocation-in-mev-supply-chain And would love to have inputs from Giga Brains: @christine_dkim, @drakefjustin, @0x94305, @uriklarman, @sui414, @ellen, @jon_charb, @bertcmiller