When Ethereum finally moved from a Proof-of-Work (PoW) mechanism to a Proof-of-Stake (PoS) mechanism, it was done with much fanfare in the community. Most celebrated the new promise of better efficiency and significantly lower power consumption. However, just a few months after the update, a new problem has arisen and that is that it is much easier to sanction ETH transactions.
60% of Ethereum blocks follow OFAC
In August, the US Office of Foreign Assets Control (OFAC) imposed sanctions on multiple decentralized applications (DApps) on the Ethereum blockchain. These sanctions were primarily focused on cryptocurrency mixers such as Tornado Cash and Blender, which were accused of providing North Korean hackers with a way to launder money they stole from cryptocurrency investors.
Tornado Cash was said to have been used to launder over $7 billion worth of crypto in three years since it was created. The sanctions led to the eventual closure of Tornado Cash and one of the developers was arrested by the Dutch authorities.
Now, three months later, the majority of Ethereum blocks are now compliant with OFAC sanctions. This graph below MEV Clock It shows, for every 100 blocks, how many apply OFAC censorship, and it turns out that more than 60% of the blocks are OFAC compliant.
Over 60% of ETH blocks are OFAC compliant | Source: MEW Watch
This means that most Ethereum blocks do not aggregate transactions that have interacted with sanctioned applications like Tornado Cash, raising criticism of the network and how truly decentralized it is if this happens.
a new threat
There have been numerous allegations that moving Ethereum to a proof-of-stake mechanism made it easier for authorities to control the transactions that can be made on the network. MEV Watch lists the top seven mev-boost relays, of which four were currently operating and censoring transactions in accordance with OFAC sanctions.
These relays which do not include any transactions from wallets or smart contracts that have been sanctioned by OFAC deal a significant blow to the decentralization of Ethereum. If all relays met these requirements, it would mean that the government could successfully blacklist a wallet on a blockchain that is meant to be decentralized and prevent that address from being able to transact, just like with a bank account. on the blacklist.
To successfully circumvent this full censorship threat, validators must ensure that when configuring their mev-boost configuration, they do not add these relays that censor transactions in accordance with OFAC requirements. The more validators add redaction-aware relays to their configurations, the more transactions are redacted.
Leaderboard of censorship-compliant entities | Source: MEV Watch
The MEV Watch website also includes a list of what it calls the “Censorship Violator Leaderboard” which lists entities running censorship-compliant mev streams on their validators. The top 5 of these are StakeHound, Celsius Network, Ether Capital, Cream Finance, and Bitstamp.
ETH price trending at $1,200 | Source: ETHUSD on TradingView.com
Featured Image from Analytics Insight, Chart from TradingView.com
