More and more Ethereum blocks are being produced by censorious MEV-Boost relays, the most notable of which is Flashbots. If it really has Ethereum’s best interests at heart, perhaps the MEV organization should consider winding down its operations until developers can implement a long-term solution.
Ethereum’s MEV censorship problem is getting worse by the day.
According to MEV Watch, 51% of Ethereum’s blocks produced yesterday were built by so-called “OFAC compliant” MEV-Boost relays, meaning relays that have openly stated their intention to censor transactions related to Tornado Cash or other protocols targeted by the U.S. Treasury in the future.
MEV, or “Maximum Extractable Value,” is a term used to describe arbitrage opportunities found by reordering transactions within a block while it is being produced. Flashbots and other MEV-Boost relays essentially provide off-chain block-building marketplaces for on-chain traders and validators. According to Flashbots data, MEV has extracted more than $675 million from blockchain users since January 2020.
Since Ethereum transitioned to a Proof-of-Stake consensus mechanism, Flashbots and other MEV-Boost relays have been responsible for building an increasing amount of Ethereum blocks. Per MEV watch data, 90% of blocks were produced on September 15 without using MEV-Boost relays; that number has dropped to 43% as of October 14. This is expected, as validators can achieve substantially higher yields by outsourcing their block-building duties to MEV-Boost relays.
The problem is that the largest MEV-Boost relays, especially Flashbots, have openly stated they would refuse to include transactions related to Tornado Cash in the blocks they produce. The reason for that is that the Office of Foreign Assets Control (OFAC) added the privacy protocol to its sanctions list on August 8, arguing it was solely being used by money launderers and North Korean cybercriminals.
Following the ban, major crypto centralized services like Circle and Infura moved to blacklist Ethereum addresses, and Flashbots was among the organizations to quickly declare its “OFAC compliance.”
Pushback from the Ethereum community prompted Flashbots to release its relay code as open-source; however, the Flashbots relay is still responsible for almost 80% of all MEV-Boost relay block production. In the 24 hours before the time of writing, more than 57% of all Ethereum blocks were produced by MEV-Boost relays; of these, 88% openly stated they would refuse to include transactions in any way related to Tornado Cash. As previously stated, that effectively means that 51% of all blocks were produced by relays comfortable with censoring Ethereum if need be.