Ethereum Censorship Concerns Raised as Block Builders Comply with OFAC Sanctions

A new report shows that today, five out of the six largest Ethereum block builders comply with the United States Office of Foreign Asset Control (OFAC) sanctions. A post on X by Toni Wahrstätter, an Ethereum researcher and data analyst, reveals that over the past few months, there has been a noticeable surge in censorship.

Notably, OFAC-compliant blocks are those that omit transactions involving parties sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control. Following the government’s sanctions on Tornado Cash transactions for U.S. citizens in August, the majority of blocks added to the blockchain adhered to OFAC compliance.

Ethereum’s Growing Censorship Concerns

The post by Wahrstätter underlines the multiple layers of censorship within the PBS stack. Validators may selectively include or exclude transactions in blocks or avoid attesting to specific validators, and relays can filter blocks based on certain rules. Lastly, builders can simply omit specific transactions.

New dashboard online – https://t.co/1Pnbe14NLG 🙌

May it shed light onto the extent of censorship and guide us towards implementing practical solutions for enshrining a strong form of censorship resistance.

More info 👇 pic.twitter.com/zyau9L3W1h

— Toni Wahrstätter 🦇🔊 (@nero_eth) September 26, 2023

While progress has been made on the relay front, thanks to Ultra Sound, Agnostic, and BloXroute relays, many top builders have begun implementing censorship. That means they do not include Tornado Cash transactions in their blocks, Wahrstätter mentioned.

Wahrstätter also highlighted that censorship resistance is crucial for maintaining political neutrality in blockchains. No single entity must have control over two-thirds of a blockchain’s content. Hence, decentralization is a fundamental principle; centralization at any stack layer can potentially harm the entire ecosystem.

The post also highlighted several promising solutions to address this issue. Inclusion lists can offer censoring entities deniability for including OFAC-sanctioned transactions or compel them to exit the ecosystem if they still don’t comply. Encrypted Mempools involving encrypting transaction data while still unconfirmed can also be employed, rendering it impossible for censoring parties to target transactions based on their content.

Meanwhile, Titan Builder remains the last large block builder, still including OFAC-sanctioned transactions, particularly those associated with Tornado Cash, in their blocks.

OFAC Compliance Among Ethereum Block Builders

Following OFAC’s sanctions on Tornado Cash, there was significant debate regarding whether validators should include these transactions. Since then, the Ethereum community has been advocating for a reversal of censorship.

Meanwhile, according to a March report from MEV Watch, nearly one in three blocks added to the Ethereum blockchain within a week were deemed OFAC compliant. That means around 30% of blocks did not include transactions subject to OFAC sanctions, particularly those involving Tornado Cash.

Just a month before this, Ethereum validators still censored around 50% of blocks that made it onto the blockchain. The last time Ethereum experienced such low levels of censorship was on September 24, 2022.