Ethereum: What 50% OFAC censored blocks mean for the ETH blockchain

Ethereum [ETH], as of 14 October, witnessed a never-seen-before surge in censorship as over 50% blocks created over the past day. These blocks came under the purview of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) following compliance recommendations.

Source: MEV Watch

The development meant that more than half of the blocks developed during this period were delivered by relays. These relays can be considered as those that ceased facilitating transactions over Tornado Cash. Furthermore, the relay or tool was an open-source, non-custodial, fully decentralized cryptocurrency tumbler that ran on Ethereum Virtual Machine-compatible networks.

In August 2022, OFAC recommended and urged Americans to abstain from using Tornado Cash and cryptocurrency ecosystems. However, post the Merge, the emergence of MEV Boost led to a rise of OFAC-compliant blocks.

Maximal extractable value or MEV are rewards received by validators once they reorder transactions over a block. An R&D team called Flashbots has been developing MEV Boost so that the possible fallouts of MEV extraction can be tackled.

There are a lot of relays in operation currently and the one created and managed by Flashbots proved to be the most popular. However, the Flashbots relay banned transactions on blocks that have been sanctioned.

Most other relays, so far, have not put in force this ban. However, as more and more relays begin to enforce the OFAC rule, it may get difficult for sanctioned transactions. These include those on the Ethereum blockchain, to make it to the Ethereum blockchain.

Other relays such as Blocknative are also considering filtering the designated addresses as per OFAC recommendations.

No action from ETH’s end

Members from the cryptocurrency community were quick to react to the development. Martin Köppelmann, the CEO of Gnosis Ltd, an Ethereum-based DeFi infrastructure development firm, took to Twitter to say that this is a sad milestone in censorship.

Köppelmann wondered when the Flashbots team was going to take any action. Klarman said that validators should connect to non-censoring relays like bloXroute’s relays. These include Ethical and Max-Profit if they want to evade the censorship on Ethereum.

As of now, there seems to be no intention of the part of Ethereum to evade censorship with regards to Tornado Cash.