Ethereum Blockchain Reached a New Censorship Milestone

Ethereum blockchain censorship reaches a new limit in the last week

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. This service 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, 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 to the broader 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. As of writing, 57% of all blocks validated on the Ethereum blockchain used the MEV-Boost software. And of those blocks, nearly 81% of them were done via Flashbots' relay, meaning they all excluded Tornado Cash transactions.

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."