Etherеum

Is Ethereum Under Attack? Unpacking the MEV-Boost Censorship Controversy

Ethereum’s neutrality is being put to the test by MEV-Boost relays, which have had the power to censor transactions in about a quarter of all blocks issued since September 15.

MEV Censors

Ethereum is facing a censorship problem.

According to MEV Watch, since Ethereum transitioned to Proof-of-Stake, almost 25% of its blocks were built by MEV-Boost relays that have openly stated they’d censor transactions related to Tornado Cash.

On August 8, the Office of Foreign Assets Control (OFAC) added Ethereum-based privacy protocol Tornado Cash to its sanctions list, arguing the program was being used for money laundering. The ban sent a shockwave through the Ethereum ecosystem, with major service providers like Circle and Infura immediately moving to blacklist Ethereum addresses associated with the protocol. 

MEV research organization Flashbots also quickly complied with the sanctions. MEV stands for “Maximal Extractable Value”; the term refers to arbitraging on-chain trading opportunities by reordering transactions within a block while it is being produced. Flashbots aims to streamline the practice and mitigate its negative impacts by offering an off-chain block-building marketplace in the form of MEV-Boost.

Flashbots’ decision to censor Tornado Cash transactions was met with outcry from the crypto community, which prompted the organization to make the MEV-Boost software open source. There are now various MEV-Boost relays, meaning different projects using the same code. MEV Watch claims that, since September 15, 86% of MEV-Boosted blocks have been processed by relays that have stated their intent to censor Tornado Cash transactions, including Flashbots, BloXRoute Regulated, Eden, and Blocknative. BloXRoute Max Profit, BloXRoute Ethical, and Manifold have declared they would not be censoring. 

Crypto Twitter Reacts

Censorship at Ethereum’s base layer was a hotly debated topic in the wake of the Tornado Cash sanctions. Community members expressed concerns that OFAC may force major staking entities such as Coinbase or Kraken to refuse to include Tornado Cash transactions in the blocks they produced. The Ethereum development team responded to these fears by pointing out that, should large validators attempt to censor transactions, the network could set up a user-activated soft fork and burn their stakes (effectively destroying billions of dollars worth of ETH).

Prominent members of the Ethereum community called for similar measures against censoring MEV-Boost relays. “I am in favor of Ethereum core devs creating slashing tools into the protocol so that we can slash anyone choosing to censor, no matter who it is,” stated NFT collector DCInvestor. “That will be one way to kill off volume in MEV networks real fast, and force people into forks which are not preemptively ‘compliant’.”

Quite surprisingly, the notion seems to be supported by Flashbots co-founder Stephane Gosselin. “An idea which is underexplored is requiring relays to stake a significant amount of value and using programmatic censorship slashing based on [a] censorship monitoring prototype.” 

Another suggestion has been for MEV-Boost relays to return to building partial blocks instead of full blocks. When Ethereum still used a Proof-of-Work consensus mechanism, Flashbots would only build a small portion of a block while miners built the rest locally. However, according to Flashbots product lead Robert Miller, under Proof-of-Stake, the partial block design would “cut off solo stakers from the system, which ultimately was deemed too high of a cost after public discussion with the Ethereum community and its stakeholders.”

Other crypto natives have called for a boycott of censoring relays or for them to shut down entirely. But, as highlighted by Gnosis co-founder Martin Köppelmann, a core issue is that Flashbots is a highly competitive MEV-Boost builder, meaning that it offers higher rewards than other, non-censorious relays. Therefore market forces are likely to incentivize validators to choose relays that are detrimental to Ethereum’s censorship resistance.

Crypto Briefing’s Take

One of the key criticisms leveled against Flashbots and other so-called “OFAC compliant” relays is that OFAC has never specifically instructed MEV-Boost relays to censor Tornado Cash transactions. These relays are effectively complying to laws that presently do not exist. This is why neither Coinbase nor Kraken has tried to censor Tornado Cash transactions since Ethereum became a Proof-of-Stake chain. Furthermore, the Treasury Department recently released clarifications surrounding the sanctions that indicated a certain softening in its stance. So far, the U.S. government has shown almost zero interest in blockchain service providers, only in cybercriminals and money-launderers.

Flashbots has also yet to explain its reasoning behind the censorship. The organization’s communication has been opaque, and its leaders are generally reluctant to publicly address the issue. Hasu, arguably Flashbots’ most well-known contributor, has not participated in the last few days’ online debate at all. Crypto Briefing has reached out to both Gosselin and Miller for comment: they had yet to respond at press time.

While it’s important to note that only a few Ethereum blocks have, in fact, been censored so far (for a short while, as non-censoring validators ultimately picked them up), the fact that 24.94% of Ethereum blocks in the last fourteen days could have faced censorship is a serious threat to the network’s integrity. The yields provided by MEV-Boost largely overshadow the ones from non-MEV validators, meaning that demand for relays is likely to keep rising. Developers will most likely need to implement features making censorship impossible—or punish the relays guilty of it.

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.

   

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