Ethereum’s MEV Relay rethinks censorship.
In an unexpected policy change, bloXroute Labs, known for its key role in Ethereum block production, has decided to censor blocks containing transactions approved by the U.S. Office of Foreign Assets Control (OFAC). This move by bloXroute Labs, a key player in the Ethereum blockchain, marks a departure from its previous stance on censorship resistance and is sparking controversy among Ethereum enthusiasts.
Ethereum community reaction
BloXroute’s announcement indicates that its Maximal Extraction Value (MEV) relay will no longer accept block bids for OFAC-approved transactions. These transactions are linked to wallets identified by the U.S. government for sanctions. This policy covers all MEV relays under bloXroute, especially the “bloXroute Max Profit” relay, which is the leading MEV relay after the Ethereum Merge.
The fine line between regulation and resistance
BloXroute Labs claims commitment to the decentralized and permissionless spirit of Ethereum. However, companies are currently navigating the complex interplay between complying with local laws and maintaining the fundamental principles of blockchain resistance to censorship. The decision has sparked debate about the feasibility of maintaining these core principles while complying with local regulations.
Industry Impact and Global Concerns
Lachlan Feeney, CEO of Labrys, expresses concern about the precedent this policy sets for the blockchain industry. He advocates regulation at the application level, similar to internet governance, rather than at the blockchain protocol level. Ethereum’s global reach raises questions about the potential for various international sanctions and challenges the creation of universally compatible blocks.
Ethereum’s censorship environment
Approximately 36% of Ethereum blocks are currently censored due to OFAC-approved transactions, down from the previous high of 78%. This issue became prominent after Ethereum switched to proof-of-stake. Discussions about censorship on the Ethereum network have intensified following US OFAC sanctions on certain wallets, particularly those associated with cryptocurrency mixers such as Tornado Cash.
Role and regulatory issues of MEV relays
MEV Relay, which plays a critical role in extracting value from blockchain transactions, has faced criticism for its negative impact on regular users. The introduction of the MEV-Boost relay was an attempt to mitigate these effects. BloXroute Labs’ decision highlights the complex balance between censorship resistance and regulatory compliance in blockchains while impacting the relay’s odds of winning.
This development highlights ongoing challenges for the blockchain sector, particularly Ethereum, as it struggles to align its principles of decentralization and censorship resistance with its legal obligations. The choices made by organizations like bloXroute Labs have significant implications for the future of the blockchain ecosystem.
Although bloXroute’s decision complies with legal requirements, it casts a shadow over the ideals of a free and unbiased blockchain network.