Payment Methods

To further classify the payment methods, we can consider the broader context of Ethereum block building, including both traditional and MEV-Auction scenarios as it relates to payment mechanisms.

This classification covers a range of payment methods from the simplest direct payments to more complex arrangements involving smart contracts and off-chain agreements.

1. Direct Payment Method

2. Description: The most straightforward method where the block proposer (validator) receives the transaction fees directly from the transactions included in the block.

3. Use Case: Commonly used in standard Ethereum block building.

4. Coinbase Transfer Payment Method

5. Description: In this method, the transaction fees and MEV rewards are transferred directly to the block proposer's address via the coinbase transaction.

6. Use Case: Utilized in both traditional and MEV-Auction scenarios.

7. Indirect Address Payment (IAP) Method

8. Description: The builder uses a different address to pay the proposer through an end-of-block transaction, separate from the address receiving the block’s transaction fees.

9. Use Case: Specific to MEV-Auction, where builders and proposers are distinct entities.

10. Intermediate Transfer Payment (ITP) Methods

11. Description: Involves a two-step process where the builder first transfers the payment to an intermediary address, which then sends it to the proposer.

12. Use Case: Also specific to MEV-Auction, particularly when involving smart contracts or third-party addresses.

13. Smart Contract-Based Payment Method

14. Description: Payments are handled through a smart contract, which can programmatically distribute rewards based on predefined rules.

15. Use Case: Useful in decentralized block building scenarios or when complex payment distributions are required.

16. Off-Chain Payment Method

17. Description: Payment occurs outside the Ethereum blockchain, possibly through other cryptocurrencies or traditional banking systems.

18. Use Case: Might be used in private agreements between parties involved in block building.

Builder Payment Methods

Builder payment patterns in the context of MEV payments to the validators

Indirect Address Payment (IAP) Method

This method involves the builder using a different address to pay the proposer through an end-of-block transaction. In this pattern, the builder first sets its own address to receive the block’s transaction fees and then employs a different address to remunerate the proposer in the end-of-block transaction.

Intermediate Transfer Payment (ITP) Method

In this method, the builder pays the proposer through an end-of-block transaction, initially transferring the amount to an alternate address, which then initiates an internal transaction to send the funds to the proposer. This involves a two-step process where the payment is first sent to an intermediary address (like a smart contract) before reaching the proposer.