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 in permissionless systems, validator locations cannot be prescribed by protocol rules; instead, they emerge endogenously from economic incentives. 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 structurally favorable latency. In this paper, we design and implement an agent-based simulation framework to study how Ethereum's protocol design, particularly its block-building paradigms of local and external block building, interacts with validator and information-source distributions to shape geographical positioning incentives. Our simulations show that Ethereum's block-building architecture is not geographically neutral: both paradigms induce location-dependent payoffs and migration incentives, with asymmetric access to information sources amplifying geographical centralization. We further 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.