Dominance of Ethereum Block Creation by Beaver and Titan

Dominance of Ethereum Block Creation by Beaver and Titan

Recent developments in the Ethereum ecosystem reveal a concentrated power dynamic as two companies, Beaver and Titan, dominate block creation. Together, they account for over 90% of the blocks produced on the Ethereum network. This phenomenon is primarily rooted in the launch of MEV-Boost by Flashbots at the end of 2022.

What is MEV-Boost?

MEV-Boost is a revolutionary software designed for Ethereum L1 validators. It enables these validators to acquire transaction blocks from third-party builders, thereby enhancing their revenue potential. The introduction of MEV-Boost led to a swift adoption by almost all Ethereum L1 validators, seeking to maximize their earnings from block creation.

The Rise of Competition

Initially, Flashbots stood as the single builder in this arena. However, the competitive landscape escalated over the subsequent months. By April 2023, Titan had secured an exclusive order flow agreement with Banana Gun, a prominent Telegram trading bot. This strategic partnership allowed Titan to create more lucrative blocks for L1 validators, tapping into higher-reward transactions that were exclusively accessible to them.

The Impact of Titan and Beaver on Ethereum Transactions

As a result of Titan and Beaver's agreements and operational strategies, a significant portion of Ethereum L1 transactions is now routed through them. Data collected up to August 2023 highlights a remarkable performance by these two companies:

• Flashbots: Created approximately 550,000 blocks, earning 16.7 ETH.
• Titan: Constructed around 600,000 blocks, earning 13,151 ETH.

This translates to a notable profit margin of $44 million at current market prices.

Unanswered Questions Around Titan and Banana Gun

Despite these intriguing financial insights, several critical questions linger without definitive answers. For instance, why did Banana Gun opt to channel its services predominantly through Titan, given that Titan held less than 1% of the market share? Was there an initial multi-million dollar deal struck between Titan and Banana Gun aimed at boosting Titan’s market presence? Furthermore, might there have been any incentives or promise of rebates to the Banana Gun team that could potentially impact user interests?

Chain Abstraction and Future Profitability

These questions remain largely speculative and evoke considerable interest within the crypto community. Austin King, co-founder and CEO of Omni Network, emphasizes the relevance of these transactions. They illustrate the potential for enhanced profitability via chain abstraction. As the market progressively shifts towards improving the overall crypto user experience, it is anticipated that the next wave of users will be less concerned with the technical intricacies of transactions, such as gas fees or the underlying chain utilized.

Unlocking New Revenue Streams

This paradigm shift towards abstraction may unlock various opportunities for networks to generate substantial revenue streams. The focus will increasingly be on facilitating an effortless experience for users, sidestepping the complicated aspects that have traditionally deterred broader adoption.