Ethereum's Glamsterdam Update: How In-Protocol Auctions Restructure PBS

A recent paper on arXiv (2606.06633) by Bruno Mazorra, Minghao Pan, and Christoph Schlegel dives deep into competing auctions in intermediated markets, using Ethereum's proposer-builder separation (PBS) as the primary case study. The authors model a seller (the proposer) selecting among parallel mechanisms (relays) for selling a single good (block space). Key results: when an intermediary enforces single-homing on bidders, sealed-bid second-price intermediary auctions fully unravel into the sealed first-price principal auction. Open-bidding format intermediaries unravel only partially, collapsing into first-price in equilibrium under symmetric latency, and sorting fast bidders to the intermediary under asymmetric latency. The paper also shows that any last-look advantage is removed through the availability of a credible sealed bidding channel. These results extend to multi-plexing environments without enforcement.

The main motivation is Ethereum's forthcoming Glamsterdam update, which introduces an in-protocol (first-price) bidding channel. The analysis suggests that this severely limits the design space for out-of-protocol auctions by relays and other intermediaries. However, the credibility of such a sealed first-price channel is problematic: the seller may have an incentive to leak information. The paper finds that a first-price auction is leakage-resistant in the presence of a single fast bidder but not against two or more. Critically, if the seller can credibly commit to not leak bids, it is optimal for them to do so. This work provides a rigorous game-theoretic foundation for upcoming Ethereum protocol changes, warning that in-protocol auctions could centralize power if not carefully designed with leakage resistance in mind.