Has Ethereum Beat Censorship? – Last September, the Ethereum network finalized its transition from Proof of Work to Proof of Stake. Unfortunately, this transition has not had only positive effects. In effect, Ethereum then became a fearsome censorship machine. What about eight months later?
Censorship on Ethereum
There MEV (Maximum Extractable Value) is a practice that appeared in the summer of 2020, in parallel with the DeFi Summer. MEV is a concept that refers to the maximum value that an actor, usually a minor or validator, can extract from a block taking advantage of its privileged position. This may include rearranging transactions or excluding certain transactions to gain financial advantage.
With the transition to Proof of Stake, the MEV has evolved. Indeed, PoS was accompanied by a separation of roles in the production of blocks. This was introduced by Vitalik Buterin in a proposal entitled “Propose-Builder Separation”. This involves a separation of validators who offer the blocks and producers (Block Builders) who create blocks; the MEV of these blocks having been previously optimized.
Unfortunately, in the months following the transition, the majority of block producers were based in the United States. Consequently, the latter had no choice but to apply the Sanctions put in place by OFAC about the platform Tornado Cash.
Result: in November 2022, 78% blocks produced by the Ethereum network respected the OFAC recommendations. Therefore, they were systematically censoring transactions related to Tornado Cash.
Obviously, many Internet users and Ethereum users have pointed the finger at this systematic censorship.
Resistance has set in on Ethereum
Quickly, the community realized that this censorship was mainly due to the centralization of block production around the company’s Block Builder Flash Bots.
Aware of the situation and the harmful effects for the network, the FlashBots teams reacted. Thus, in November 2022, Flash Bots announced theopening the source code of its two flagship solutions : FlashBots Relay and the Block Builder.
This opening of the source code made it possible to launch a new competition in the middle of creating blocks. In addition, this has allowed the emergence of a multitude of Block Builders based outside the United States, who do not have to comply with OFAC’s recommendations.
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A situation under control
Eight months after the switch to Proof of Stake, things have evolved a lot. Indeed, the results of the open sources of FlashBots products were quickly felt.
As of November 2022, the share of blocks respecting the OFAC recommendations on Ethereum has been steadily fall. So well, that they now only representa quarter of the blocks produced on the network.
A victory for decentralization and for Ethereum, which could have faced a major problem in the event of a generalization of censorship.
However, many entities, including third parties that offer staking servicescontinue to apply this censorship, more or less systematically. So, if you want to stake your ETH, while not participating in this censorship phenomenon, we advise you to avoid the following service providers – find the complete list on mevwatch.info.
In the end it is preferable to use the decentralized staking servicessuch as Lido or RocketPool, in order not to participate in this censorship.
At the same time, the network Ethereum reached an important milestone with the deployment of the Shanghai hard fork. This opened the possibility of withdrawing ETH in staking as well as benefiting from the accumulated rewards.
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