The censorship level on the Ethereum network reaches 85%, you understand

With Ethereum’s migration from Proof-of-Work (PoW) to Proof-of-Stake (PoS), many pointed out that the network would become increasingly vulnerable. centralized and prone to censorship. The warnings were not empty. According to data, 85% of ‘block builders’ censor Ethereum transactions linked to the US Office of Foreign Assets Control (OFAC) list.

Among the censored transactions are transactions related to Tornado Cash, a decentralized mixer that works at the protocol level. Therefore, those who carry out these transactions are at risk of facing legal proceedings.

According to the website Censorship.pics, there are 29 ‘block builders’ on Ethereum and only 6 of them (20%) would not censor transactions. However, only 5 of these 29 are responsible for 92.5% of the work.

Ethereum block builders.  The further to the left, the more transactions are censored by each entity.  Source: Censorship.pics.
Ethereum block builders. The further to the left, the more transactions are censored by each entity. Source: Censorship.pics.

One of the exceptions is Titan Builder. There is a prominent message on their website “Our builder is maximum profit. No form of filtering”. In other words, they earn all the transaction fees ignored by their competitors.

Speaking to CoinDesk, Gnosis co-founder Martin Köppelmann stated that censorship could be over 90% if it weren’t for Titan Builder. “We’re essentially just one builder away from some pretty heavy censorship on Ethereum”he noted.

As recently as September, this censorship reached 85.1% among these block builders. About a year ago that was only 20%, but it has increased considerably since June.

Censorship on Ethereum by block builders reaches 85%.  Source: Censorship.pics.
Censorship on Ethereum by block builders reaches 85%. Source: Censorship.pics.

In defense of these entities that censor transactions, Toni Wahrstätter, researcher at the Ethereum Foundation and creator of the website censorship.pics, explains that block builders are normal people.

“Block builders are also people like you and me (who have families, who might want to move to the US, etc.). It is understandable that they would try to minimize the risk to themselves, both as individuals and to their business.”

How far does Ethereum censorship go?

Being a decentralized network, it is enough that just one entity ignores US sanctions for Ethereum to continue confirming transactions related to Tornado Cash and others of this type. However, it is clear from the above data that the pressure from the US government is working.

Before these builders, these transactions also go through validators and relayers. As the name suggests, the role of these builders is to assemble the blocks, as if it were a Lego transaction, in order to maximize profits.

After all, transaction fees are not the best metric because a transaction may pay a higher fee, but it may take the place of other transactions that would together yield a higher return on that block.

As for censorship by validators, who deploy and validate blocks, this number is less than 10%. However, only 10% of them compose their own blocks, making the previous data no longer important.

Censorship on the Ethereum network by validators.  Source: Censorship.pics.
Censorship on the Ethereum network by validators. Source: Censorship.pics.

The top names in this category include brokers such as Coinbase, Binance, KuCoin, Poloniex, Huobi, OKX and BitFinex, as well as other well-known names such as Lido, Celsius and Stakefish.

These entities are used by investors who do not have enough Ethers to be validators or by those who simply prefer courtesies. The level of censorship varies for each of them, as seen below. The list continues with smaller validators.

Top Ethereum validators and their censorship level on the network.  Source: Censorship.pics.
Top Ethereum validators and their censorship level on the network. Source: Censorship.pics.

Finally, we also have relayers, which pass transactions between builders and validators. At the end of 2022, the censorship level by these transmitters reached 77.8%, but is now already below 30%.

Censorship on Ethereum by relayers is decreasing.  Source: Censorship.pics.
Censorship on Ethereum by relayers is decreasing. Source: Censorship.pics.

However, this number becomes a concern again when we see the low number of relayers. At the moment there are only eight. Five of them control 97.6% of the network, making them easy targets for US authorities.

There are only 8 relayers on the Ethereum network.  Source: Censorship.pics.
There are only 8 relayers on the Ethereum network. Source: Censorship.pics.

Bitcoin could face similar censorship issues

Although it uses Proof-of-Work and there are some differences in the model, Bitcoin may face similar issues as Ethereum. For example, a researcher recently revealed that a pool is already censoring Bitcoin transactions.

According to data from Mining Pool Stats, three of the five largest Bitcoin pools are American. In total, Foundry, ViaBTC, and Binance own approximately 48.2% of the network’s hash rate. In other words, they may comply with the censorship of the US Foreign Assets Control Agency (OFAC).

Largest Bitcoin Pools.  Source: MiningPoolStats.
Largest Bitcoin Pools. Source: MiningPoolStats.

In any case, as long as a single pool does not censor transactions, these censorships are irrelevant. At most, these transactions will require paying higher fees and waiting longer before being confirmed.

Finally, there are some solutions to limit this risk, such as Stratum V2, a protocol that gives miners more control over block assembly and that pools like Ocean are looking to adopt. In other words, the risks of censorship are virtually nil, but the topic is always welcome.

Source: Live Coins