Geographical Centralization Resilience in Ethereum's Block-Building Paradigms

Decentralization has an important geographic dimension that conventional metrics, such as stake distribution, often overlook. Where validators operate affects resilience to regional shocks (e.g., outages, natural disasters, or government intervention) as well as fairness in reward access. Yet major blockchain protocols do not encode geographical location in their rules; instead, validator locations emerge from a combination of economic incentives, regulatory constraints, infrastructure availability, and validator deployment choices. When certain locations offer systematic advantages, validators may strategically co-locate to maximize expected rewards, as observed in Ethereum, where validators cluster along the Atlantic corridor, which exhibits favorable latency. In this paper, we propose a formal model of validators' geographical positioning incentives under Ethereum's protocol design, capturing the interaction between its two block-building paradigms, local and external block building, and the geographical distribution of validators and information sources. We analytically characterize the model under a mean-field approximation and complement this analysis with an agent-based simulation calibrated with real-world latency data to quantify how these incentives translate into geographical concentration under heterogeneous geographic and infrastructural conditions. Our results show that Ethereum's block-building architecture is not geographically neutral. Both paradigms generate location-dependent payoffs and incentives to relocate closer to payoff-relevant parties in order to reduce propagation delays, although through different underlying mechanisms. Asymmetric access to information sources further amplifies geographical centralization. We also demonstrate that consensus parameters, such as attestation thresholds and slot times, modulate latency sensitivity and can amplify these effects, acting as protocol-level levers. Finally, we discuss the implications of our findings for protocol design and outline potential mitigation directions informed by our analysis.