Attack 2: Centralized Relayer
I am going to describe how PBS incentivizes centralization around a private relayer. This is a generalized attack on decentralization.
MEV auctions are highly competitive because the mempool is public. There is nothing to differentiate one searcher from another beyond their ability to extract MEV from the same set of transactions. As a result, searchers bid each other up and give the majority of their profits to the miners in order to win blocks.
A far easier way for a searcher to dominate block auctions and profit is to have access to a private pool of transactions which only they can exploit. Quite simply, having more gas available for their block proposals than their competitors means they can afford a higher bid. Here is a simple spreadsheet model demonstrating this.
Crucially, the extra profit from transactions sent through their private relayer is theirs to keep, they don’t need to pay it to the miners because other searchers can’t compete for it.
This creates a very strong economic incentive for searchers to operate private relayers. Something similar is already happening with initiatives like Flashbots Mev Protect, MistX and Eden, for example.
A private relayer would be wise to invest a lot upfront in advertising, PR, token drops, offers of MEV protection and even gas subsidies. As with the censorship market, there are strong network effects and feedback loops around private relayers once a critical mass is achieved. People will use the private relayer that wins blocks most of the time, which in turn means that they can win blocks more of the time, which means more people use them, and so on.
Once dominant, the private relayer has monopolistic gatekeeping powers that will be extremely difficult to challenge.
A private relayer is fully compatible with a secondary censorship market which they must also run to remain competitive.
The mempool is increasingly redundant, along with the decentralization, transparency and accountability it provides, so any additional manipulations the dominant extractor performs are hard to track.
A single, opaque organization with no requirement to have any stake in Ethereum will have ownership of the majority of the order flow in the network, with no protocol enforced limitations on how it is used.
Mempool Griefing
The following is not necessary for private relayer dominance, but we can expect behaviour of this kind.
The mempool is a threat to the private relayer because it is public and the gas it contains raises competitor bids. Therefore they are incentivized to harm the mempool if at all possible.
Once dominant, the relayer may start censoring low value mempool transactions, or at least delaying them. This happens naturally anyway as the relayer has a larger choice of transactions for their block proposals and blockspace is limited. But they may also do it deliberately to punish users for not sending transactions through them. Even a one block delay is -ev for DEX transactions, for example. More cheaply they can put mempool transactions at the end of the block.
If the relayer sees a transaction in the mempool that was also sent to them privately, they treat it as a mempool transaction, and may similarly penalize the user for allowing other searchers to include it in their proposals.
As you suggested, users may try to grief the relayer by raising the tip of their mempool transactions. This backfires as the relayer then includes those that overpay in their blocks, for which they win the gas. They then use this to advertise how much cheaper their services are than the mempool which serves to further reinforce their dominance.
It’s a game of balancing the cost of censoring/delaying low value transactions with the extra profit from users overpaying for mempool inclusion or using their relayer instead. They will only do this if it is cost effective in furthering their dominance or profits, but if it is possible to do, the dominant relayer will do it.
They may be able to use this mechanism to increase their profits by raising gas fees overall.