63% of Ethereum transaction blocks are now OFAC-compliant
Abiding by regulatory guidance, 63% of all transaction blocks on the Ethereum blockchain are compliant with OFAC sanctions, according to MEV Watch.
The greatest driver is the broad use of maximal extracted value relays, services that reorder blocks of transactions to maximize rewards. Still, the metric is all but assured to drive a continued debate over the use of MEV relays and the specter of transaction censorship on the openly accessible Ethereum network.
The most widely used among those relays — accounting for nearly 49% of the total MEV block market — is Flashbots, which said it would ignore transactions from the transaction mixing service, Tornado Cash, which was sanctioned earlier this year by the U.S. government.
Since The Merge, a growing number of proof of stake participants opted to use service providers to access validation rewards. The resulting consolidation from this trend, coupled with the dominance of Flashbots, has resulted in a growing number of OFAC-compliant blocks.
In the last month, the number of blocks proposed via the Flashbots relay nearly doubled, from 2,210 on Sept. 25 to just over 4,000 by Oct. 25, according to data from The Block Research.
Flashbots isn’t ignoring the issue. The company offered suggestions on how it might mitigate transaction censorship and announced a forthcoming protocol that aims to open source and progressively decentralize MEV code development.
The announcements came in the wake of the departure of co-founder Stephane Gosselin, who stepped down over disagreements with the team on the question of network censorship.
As many network participants look to Flashbots as a source of censorship, strategy lead Hasu recently said a lack of neutral relays and the reliance on vertical relays that also operate as builders who may favor their own blocks over others is a “failure of the ecosystem.”
Although the team’s remaining founder Phil Daian doesn’t see an outcome where Flashbots creates a fully censored Ethereum network by proposing 100% of blocks on Ethereum, the use of Flashbots continues in its upwards trend.
Over the month of October, the percentage of blocks proposed by Flashbots MEV-Boost Relay rose from 12% on Oct. 1 to 56% at the time of writing, according to Flashbots’ Transparency Dashboard.
© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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Author: Jeremy Nation