Market Analysis Report (17 Oct 2022)

Around 51% of newly found blocks on the Ethereum blockchain are now following the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) compliance recommendations,  which means they are actively censoring transactions associated with mixing service Tornado Cash.

These blocks are being delivered by relays that screen out transactions associated with the mixing service to comply with OFAC after it banned Americans from using Tornado Cash. Network validators use maximal extractable value (MEV) services to reorder transactions with a block to boost rewards.

Flashbots, an Ethereum-based research and development group, has been working on ways to curb the potential harms of MEV by building software that allows validators to request blocks from a network of builders via a middleman, called a relay.

The most popular relay is one built by Flashbots itself, which refuses to pass blocks containing transactions from sanctioned addresses. Out of five MEV-boosting relay providers, only two provide non-censoring options.

At the time of writing, 51% of blocks are enforcing OFAC compliance

Censorship at the protocol level is seen as a disadvantage, with the cryptocurrency community calling to keep “Ethereum credibly neutral.” Some have asked validators to “connect to non-censoring relays.”