Censorship is often prevalent in centrally-controlled environments. Things should differ where blockchains like Ethereum are concerned. Unfortunately, there is still a strong focus on enforcing OFAC compliance and censoring specific transactions.
Ethereum Remains OFAC Compliant
A blockchain environment relies on network nodes to propagate and validate transactions. In most cases, nodes will relay all network information to other participants. Transactions get approved, assuming the cryptography and math checks out. Unfortunately, that is not how Ethereum works. The network has a history of not being immutable, and it now contends with censorship, too.
That censorship is nothing new, though. Several MEV-Boost relays continue to censor specific addresses or transactions. As a result, those who validate transactions through their software may “choose” which addresses can send and receive transactions. However, another aspect is that the MEV-Boost relay software is more profitable than other tools. The censorship aspect is a “side effect” more than anything else.
MEV-Boost is developed as a relay network between Ethereum block producers and validators. Many different iterations of the software exist, leading to more decentralized block production. However, the OFAC compliance aspect is part of the equation, which became more apparent when Ethereum switched to proof-of-stake. The result is fairly apparent: 57% of relays remain OFAC compliant and censor transactions.
The Biggest “Offenders”
As several entities help validate and secure Ethereum, their role in censorship is easily tracked. Interestingly, several entities censor MEV relays through their validators at an alarming rate. The big offenders are StakeHound, Gate.io, and Ether Capital. They all have a 97%-100% censorship rate, and seemingly no intention of doing something about it. However, Celsius Network is also high on this list, and barely above Binance’s 96% censorship.
The big issue with Binance is how it represents over 14,500 validator nodes. Those come from funds deposited by exchange users through this centralized entity. However, nearly all of them must comply with OFAC requirements because Binance does so. These users have no say unless they move their coins off the platform.
Lido, the popular liquid staking provider, ranks high at 66%. It is slightly ahead of the Coinbase exchange at 65%. All of this confirms users need to stake Ethereum through self-custodial solutions. Relying on third parties is not the answer, especially if you care about censorship.