Finally, the block building pipeline.

In Glamsterdam, Ethereum is getting ePBS, which lets proposers outsource to a free permissionless market of block builders.

This ensures that block builder centralization does not creep into staking centralization, but it leaves the question: what do we do about block builder centralization? And what are the _other_ problems in the block building pipeline that need to be addressed, and how? This has both in-protocol and extra-protocol components.

FOCIL

FOCIL is the first step into in-protocol multi-participant block building. FOCIL lets 16 randomly-selected attesters each choose a few transactions, which _must_ be included somewhere in the block (the block gets rejected otherwise). This means that even if 100% of block building is taken over by one hostile actor, they cannot prevent transactions from being included, because the FOCILers will push them in.

"Big FOCIL"

This is more speculative, but has been discussed as a possible next step. The idea is to make the FOCILs bigger, so they can include all of the transactions in the block.

We avoid duplication by having the i'th FOCIL'er by default only include (i) txs whose sender address's first hex char is i, and (ii) txs that were around but not included in the previous slot. So at the cost of one slot delay, only censored txs risk duplication.

Taking this to its logical conclusion, the builder's role could become reduced to ONLY including "MEV-relevant" transactions (eg. DEX arbitrage), and computing the state transition.

Encrypted mempools

Encrypted mempools are one solution being explored to solve "toxic MEV": attacks such as sandwiching and frontrunning, which are exploitative against users. If a transaction is encrypted until it's included, no one gets the opportunity to "wrap" it in a hostile way.

The technical challenge is: how to guarantee validity in a mempool-friendly and inclusion-friendly way that is efficient, and what technique to use to guarantee that the transaction will actually get decrypted once the block is made (and not before).

The transaction ingress layer

One thing often ignored in discussions of MEV, privacy, and other issues is the network layer: what happens in between a user sending out a transaction, and that transaction making it into a block? There are many risks if a hostile actor sees a tx "in the clear" inflight:

There has recently been increasing work on network-layer anonymization for transactions: exploring using Tor for routing transactions, ideas around building a custom ethereum-focused mixnet, non-mixnet designs that are more latency-minimized (but bandwidth-heavier, which is ok for transactions as they are tiny) like Flashnet, etc. This is an open design space, I expect the kohaku initiative @ncsgy will be interested in integrating pluggable support for such protocols, like it is for onchain privacy protocols.

There is also room for doing (benign, pro-user) things to transactions before including them onchain; this is very relevant for defi. Basically, we want ideal order-matching, as a passive feature of the network layer without dependence on servers. Of course enabling good uses of this without enabling sandwiching involves cryptography or other security, some important challenges there.

Long-term distributed block building

There is a dream, that we can make Ethereum truly like BitTorrent: able to process far more transactions than any single server needs to ever coalesce locally. The challenge with this vision is that Ethereum has (and indeed a core value proposition is) synchronous shared state, so any tx could in principle depend on any other tx. This centralizes block building.

"Big FOCIL" handles this partially, and it could be done extra-protocol too, but you still need one central actor to put everything in order and execute it.

We could come up with designs that address this. One idea is to do the same thing that we want to do for state: acknowledge that >95% of Ethereum's activity doesn't really _need_ full globalness, though the 5% that does is often high-value, and create new categories of txs that are less global, and so friendly to fully distributed building, and make them much cheaper, while leaving the current tx types in place but (relatively) more expensive.

This is also an open and exciting long-term future design space.