A tug-of-war between decentralized network nodes and a central structure, symbolizing the battle for blockchain decentralization.

Blockchains at a Crossroads: Can Decentralization Survive the Centralizing Forces?

Kai Mendoza in Tech & Innovation December 2025 • 4 min read.

"Uncover the critical insights into how blockchain technology can preserve its core principles of decentralization despite the growing pressures of centralization."

Blockchain technology promised a revolution: a decentralized world where power and control are distributed, not concentrated. Yet, as blockchain networks evolve, they face increasing pressures that threaten this core tenet. From the economics of block production to the rise of specialized builders, the forces pushing towards centralization are becoming hard to ignore.

Centralization in blockchain can manifest in several ways. A small number of entities might control a large share of the network's stake, or a few powerful players could dominate block production, extracting disproportionate value. This concentration of power undermines the trust and security that decentralized systems are designed to provide, potentially leading to censorship, manipulation, and a loss of user autonomy.

This article dives deep into the heart of the debate around centralization in blockchain, based on the rigorous research outlined in the paper 'Centralization in Block Building and Proposer-Builder Separation'. We'll explore the key factors driving centralization, examine potential solutions like proposer-builder separation (PBS), and discuss what it all means for the future of decentralized technology.

What's Driving Centralization in Blockchains?

A tug-of-war between decentralized network nodes and a central structure, symbolizing the battle for blockchain decentralization.

Several factors contribute to the centralizing forces in blockchain networks. Understanding these dynamics is crucial for anyone invested in the future of decentralized technologies. One major factor is the economic incentive for block producers. Those with greater skills, knowledge, or access to resources can extract more value from block production, leading to a concentration of power.

Another element pushing towards centralization is the rise of Maximal Extractable Value (MEV). MEV refers to the profit that can be extracted from a block by strategically including, excluding, or reordering transactions. As MEV opportunities grow, specialized block builders with sophisticated algorithms gain a competitive advantage, further concentrating block production.

Heterogeneity in Skills and Knowledge: Not all block producers are created equal. Those with superior knowledge, better algorithms, or private access to transaction flow can earn more, leading to a concentration of stake.
MEV and Private Order Flow: The ability to extract MEV and access private order flow gives some block producers an edge, allowing them to outcompete others and accumulate more resources.
Long-Run Dynamics: Block producers who earn more can reinvest their rewards into additional stake, further increasing their control over the protocol and exacerbating centralization.

But what happens when block producers outsource this complex work to specialists. The rise of proposer-builder separation (PBS) has been proposed as a solution to mitigate centralization. In PBS, the role of building blocks is separated from that of proposing them, allowing for more diverse participation.

Can Decentralization Prevail?

The future of blockchain hinges on addressing the centralizing forces that threaten its core principles. While challenges remain, ongoing research and development offer hope for a more decentralized future. By understanding the economic incentives, technical complexities, and strategic considerations that shape blockchain networks, we can work towards solutions that promote a more equitable and resilient ecosystem.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2401.1212,

Title: Centralization In Block Building And Proposer-Builder Separation

Subject: cs.gt cs.cr cs.dc econ.th

Authors: Maryam Bahrani, Pranav Garimidi, Tim Roughgarden

Published: 22-01-2024

Everything You Need To Know

What are the primary threats to decentralization within blockchain technology?

The primary threats to decentralization in blockchain technology stem from the economics of block production, the rise of Maximal Extractable Value (MEV), heterogeneity in skills and knowledge among block producers, private order flow, and long-run dynamics where successful block producers reinvest rewards, further increasing their control. These factors can lead to a concentration of power, undermining the trust and security that decentralized systems are meant to provide. If left unchecked this can result in censorship, manipulation, and a loss of user autonomy.

How does Maximal Extractable Value (MEV) contribute to centralization in blockchain networks?

Maximal Extractable Value (MEV) contributes to centralization by providing a competitive advantage to specialized block builders who have sophisticated algorithms to strategically include, exclude, or reorder transactions for profit. As MEV opportunities grow, these specialized block builders gain more power and resources, leading to a concentration of block production among a smaller number of entities. This dynamic makes it more difficult for smaller, less sophisticated participants to compete, accelerating the trend towards centralization.

What is Proposer-Builder Separation (PBS), and how does it aim to address centralization in blockchains?

Proposer-Builder Separation (PBS) is a proposed solution to mitigate centralization in blockchain networks. It separates the role of building blocks from the role of proposing them. This separation allows for more diverse participation by allowing specialized builders to focus on efficiently constructing blocks, while proposers focus on validating and ordering them. PBS aims to reduce the advantages held by large, integrated entities, thereby promoting a more decentralized and equitable ecosystem. The idea is to disaggregate roles so power is not concentrated.

What are the long-term implications of centralization in blockchain networks for the average user?

Centralization in blockchain networks can lead to several negative consequences for the average user. A concentration of power can result in censorship, where certain transactions or types of content are blocked. Manipulation becomes easier, potentially leading to unfair or biased outcomes. Users may experience a loss of autonomy as their ability to participate in and influence the network diminishes. Ultimately, a centralized blockchain undermines the fundamental principles of decentralization, trust, and security that are essential for user empowerment. Blockchains can become permissioned systems without decentralization.

Besides Proposer-Builder Separation (PBS), what other potential solutions or strategies can help maintain decentralization in blockchain technology, considering factors like 'Heterogeneity in Skills and Knowledge' and 'MEV'?

To combat 'Heterogeneity in Skills and Knowledge', educational initiatives and open-source tool development can level the playing field, enabling more participants to effectively contribute to block production. To mitigate the centralizing effects of 'MEV', strategies include developing fairer MEV distribution mechanisms, implementing transaction ordering policies that reduce MEV extraction opportunities, and exploring technologies like threshold encryption to limit the ability of block producers to exploit MEV. Additionally, community governance models that actively monitor and address centralization risks are crucial for maintaining a decentralized future.