Following last month’s upgrade to Proof-of-Stake (PoS), Ethereum block compliance with the Office of Foreign Assets Control (OFAC) recently hit a new high of 51%.
The development marked a significant step toward censorship. Ethereum’s decentralization could become a joke if more blocks are being monitored.
OFAC is in charge of enforcing US economic sanctions. Recently, it prohibited Americans from using Tornado Cash. This is a service that anonymizes transactions by mixing them. OFAC-compliant MEV-Boost relays currently exclude most transactions from the mixing protocol.
Note that in Ethereum’s post-merge network, MEV-Boost relays take market share. These relays are centralized entities. They act as trusted intermediaries between block validators and block builders.
There are seven major relays available. But only three do not censor in accordance with OFAC compliance requirements.
BloXroute Ethical, BloXroute Max-Profit, and Manifold relays are the only non-censoring relays. Validators have to connect to them to avoid further censorship on Ethereum blocks. But this may be challenging. Censoring relays like Flashbots control the highest market share.
Sanctioned transactions can still be added to the Ethereum blockchain as it stands. But over time, this process will get more challenging. More validators (and relays) could decide to remove such transactions from the blocks they process.
Blocknative is one of the other available relays. Coindesk reached out to CEO and co-founder, Matt Cutler, to know his stand. But he failed to clearly state whether or not Blocknative's relay would be censoring.
But he stated that Blocknative “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.”
Ethereum is not showing signs of censorship resistance. Considering this fact and positions like Matt's, the network’s censorship could hit a new high. This should be expected as more blocks comply with censoring sanctioned transactions. As of press time, the figure has risen to 53%.
Users have also reacted to the development. Many expressed concerns over the network’s future. Gnosis trading protocol co-founder, Martin Köppelmann, expressed his view on Twitter.
He noted that censoring validators can form a 100% censoring chain. This will happen if they stop validating non-censoring blocks. Köppelmann is also known to be a vocal supporter of un-censoring Tornado Cash.
This rising censorship issue further highlights Bitcoin's superiority in the cryptocurrency industry. Bitcoin miner, Derek Ross, supports this opinion. He said the growing censorship should demonstrate to Ethereum users how the chain differs from Bitcoin.
