51% Of Ethereum Blocks Censored. Should Flashbots Shut Down?

The Ethereum blockchain reached a new censorship milestone on Friday when 51% of the blocks generated over the previous 24 hours complied with the Office of Foreign Assets Control (OFAC) compliance recommendations.

As a result, the majority of blocks over the past day were delivered by relays that filtered out transactions associated with Tornado Cash, a service that anonymises transactions by mixing them, to comply with OFAC, which banned Americans from using the mixing protocol.

MEV refers to block creators’ and validators’ rewards for reordering transactions within a block. Flashbots, an Ethereum-based research and development team, has been developing MEV-Boost, a piece of software for validators to request blocks from a network of builders via an intermediary called a relay, to mitigate the potential harms of MEV extraction.

Anyone can construct a relay to transmit MEV-optimized blocks from builders to validators, who then propose them to the network.

The relay that Flashbots built and maintains is by far the most popular. The controversy lies in that, unlike some other relay providers, the Flashbots relay refuses to forward blocks containing transactions from sanctioned addresses.

In addition, only two of the five MEV-Boost relay providers, Manifold and bloXroute, offer non-censoring options.

57% of all blocks validated on the Ethereum blockchain used the MEV-Boost software. Moreover, nearly 81% of these blocks were executed through the Flashbots relay, excluding all Tornado Cash transactions.

Post-Merge daily OFAC-compliant Bbocks. Image: mevWatch.info

While it is still possible for sanctioned transactions to make it onto the Ethereum blockchain as it currently exists, this will become increasingly difficult as more validators (and relays) choose to remove them from the blocks they process. Uri Klarman, the chief executive officer 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 neighbourhood reacts

Martin Koppelmann, the co-founder of the Gnosis trading protocol and an outspoken proponent of uncensoring Tornado Cash, posted a screenshot of the 51% OFAC-compliant blocks on Twitter. “Dear Flashbots team – I spoke to many of you personally, and you committed to taking actions if censorship becomes worse – but if not now, when then?”

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

Matt Cutler, CEO and co-founder of Blocknative, which operates its relay, told CoinDesk, Flashbots has emerged as sort of the leading relay and the leading builder.” Cutler did not specify whether Blocknative’s relay would be censored. Still, he did say that it will be filtering on OFAC SDN (Specially Designated Nationals) addresses on the From to To. We are currently in the process of implementing this.

Chris Piatt, the co-founder of Eden Network, which also operates 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).” Concerning the continuous expansion of censorship on Ethereum, Piatt stated 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 was unaware of any plans on the part of our validator partners to do so and that Eden’s network of builders has no plans to support any such chain. They believed that it exceeded the scope of the regulations and was practically impossible.

To avoid further censorship on Ethereum, bloxRoute’s Klarman advised validators to “connect to non-censoring relays such as bloXroute’s “Ethical” and “Max-Profit” relays or Manifold’s relay.

For the time being, Ethereum does not appear resistant to censorship, and this issue will continue to gain momentum as more blocks comply with censoring Tornado Cash transactions.