Censorship Concerns: 51% of Ethereum Blocks Now OFAC Compliant
According to new data, over half of the blocks on the Ethereum network now reportedly comply with the US Treasury OFAC’s standards. This comes roughly a month after the platform’s monumental merge update.
Phasing Out Tornado Cash
The Office of Foreign Assets Control is the intelligence and enforcement agency of the US Treasury Department. Indeed, the OFAC administers and enforces US financial sanctions. A prime example of this is the recent, highly-publicized ban on crypto mixer Tornado Cash.
According to data from leading blockchain solutions firm Labrys, 51% of Ethereum’s blocks are OFAC-compliant. As such, the blocks in question restrict certain operations on the network. Indeed, these blocks have refused to process transactions connected to Tornado Cash creating doubt about the network’s neutrality.
Labry’s data noted that MEV-boost relays are responsible for the production of the aforementioned blocks. These relays are under OFAC regulation which explains the censorship.
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In the month since the Merge, Ethereum has continued to see an increased reliance on MEV-boost relays for block production. Notably, only 43% of the network’s blocks as of Oct 14, did not come from MEV-boosts compared to Sept 15’s 90%. At the moment, 57% of Ethereum blocks are relay-produced.
Flashbots’ Relays Censor Transactions
With relays, Ethereum PoS validators can confer their block production duties to the highest bidder. The main goal of MEV-boost relays is to mitigate the dangers of Maximal extraction. The term MEV, Maximal extractable value, describes the earning opportunities block builders and validators gain from reordering block transactions.
MEV-Boost relays on the other hand are centralized entities that function as a trusted intermediary between block producers and block builders. Labrys explains that this allows the market to accommodate more builders, creating competition and ultimately increasing validator earnings. They also noted that the MEV-boost relay should also cause better censorship resistance for Ethereum.
However, as stated earlier, a whopping 51% of Ethereum blocks comply with OFAC sanctions. It is worthy of note that research firm Flashbots introduced and manages the largest and most popular of Ethereum’s relays. The company’s relay makes up nearly 80% of all Ethereum relay-produced blocks meaning Flashbots’ relays all censored Tornado Cash transactions.
Labrys’ report stated that the network has 7 top MEV-boost relays. These include Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, BlockNative, Manifold, and Eden. Only 3 of these relays produce sanction-resistant blocks.
Community Responses
The crypto community has expressed its dissatisfaction with the situation, as Gnosis co-creator Martin Köppelmann put it. Köppelmann described the recent milestone as an unfortunately unwanted one.
We reached another sad milestone in censorship: 51%
This means if the censoring validators would now stop attesting to non-censoring blocks they would eventually form the canonical, 100% censoring chain. pic.twitter.com/JrYUjowLpt— Martin Köppelmann (@koeppelmann) October 14, 2022
The Gnosis co-founder addressed the Flashbots teams claiming he had reached out earlier requesting a solution to the censorship issue. According to his tweet, they pledged to take action if the situation worsened.
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BUY NOWLikewise, Uri Klarman, CEO of bloxRoute labs recommends that validators connect to non-censoring relays like bloXroute’s ‘Ethical’ and “Max-Profit” relays, or to Manifold’s relay. This, he claims, should help mitigate censorship.
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