The Ethereum blockchain reached a new censorship milestone Friday when 51% of the blocks produced over the last 24 hours followed the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) compliance recommendations.
With that, the majority of the blocks over the past day were delivered by relays that screened out transactions associated with Tornado Cash – a service that mixes transactions to make them anonymous – to comply with OFAC after it banned Americans from using the mixing protocol.
Maximal extractable value (MEV) refers to the rewards that block builders and validators receive from reordering transactions within a block. Flashbots, an Ethereum-based research and development team, has been working on ways to curb the potential harms of MEV extraction by building MEV-Boost, a piece of software that allows validators to request blocks from a network of builders via a middleman called a relay.
Anyone can build a relay to pass MEV-optimized blocks from builders to the validators that propose them out to the wider network.
The most popular relay by far is the one built and maintained by Flashbots itself. And herein lies the controversy – unlike some other relay providers, the Flashbots relay refuses to pass along blocks containing transactions from sanctioned addresses.
Moreover, of the five MEV-Boost relay providers only two of them, Manifold and bloXroute, provide non-censoring options.
While it is still possible for sanctioned transactions to make it onto the Ethereum blockchain as it exists currently, this will become more difficult as more validators (and relays) opt to strike such transactions from the blocks they process. Uri Klarman, CEO of bloXroute Labs, told CoinDesk: “The fact we reached 51% of blocks excluding OFAC transactions is an important watershed moment, which we should pay attention to.”
The community reacts
On Twitter, Martin Köppelmann, the co-founder of the Gnosis trading protocol and a vocal advocate for uncensoring Tornado Cash, shared a screenshot of the 51% OFAC-compliant blocks. Köppelmann pleaded: “Dear Flashbots team – I spoke to many of you personally and you committed to take actions if censorship becomes worse – but if not now, when then?”
Matt Cutler, the CEO and co-founder of Blocknative, which runs its own relay, told CoinDesk, “Flashbots has emerged as sort of the leading relay and the leading builder.” Cutler wouldn’t explicitly say if Blocknative’s relay would be censoring, but did say that it “will be filtering on OFAC SDN (Special Designated Nationals) addresses on the From to the To. That is something that we are in the process of implementing.”
Read more: What’s Going On With Ethereum’s MEV-Boost?
Chris Piatt, the co-founder of Eden Network, which also runs a censored relay, told CoinDesk, “I don’t think anyone who is deep in the Ethereum ecosystem is satisfied with the status quo (including Flashbots).” As for the continuous growth of censorship on Ethereum, Piatt added that his team has “no plans to change the way we attest to blocks that other validators/ builders have built on the validators that we run.” He added that he is “unaware of any plans on the part of our validator partners to do so” and has no plans to support any such chain from Eden’s network of builders. “We believe this is outside the scope of the regulations, and practically speaking, infeasible.”
Klarman of bloxRoute told CoinDesk that in order to avoid more censorship on Ethereum, validators should “connect to non-censoring relays like bloXroute’s ‘Ethical’ and “Max-Profit'” relays, or to Manifold’s relay.
Ethereum doesn’t seem to show any signs of censorship resistance for now, and it seems this issue will continue to gain momentum as more blocks adhere to censoring Tornado Cash transactions.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.