Labrys CEO Lachan Feeney stated that approximately 45% of all Ethereum blocks being validated currently use MEV-boost relay Flashbots and comply to United States sanctions.
In an interview with Cointelegraph on Sept. 30, Feeney stated that although reports claim that 25% of all blocks have been validated since the Merge conforms to US sanctions, this indicator is not reliable and the current figure is likely closer to one of every two blocks.
Feeney noted that MEV-Boost relays, which are often U.S.-based, are regulated businesses and “censor certain transactions in blocks that they create, especially transactions from Tornado Cash.”
Additionally, the CEO noted that validators have a financial incentive for MEV-Boost relays to be used, which would lead to an increase in their use.
The problem is that these guys are being paid by the validators to do this. If you want to make more, just turn on this feature and you can boost your yield as a validator.
MEV-Boost relays, centralized entities that are dedicated to efficient Maximum Extractable Value (MEV), extraction, are called MEV-Boost relays. Flashbots are the most widely used, so MEV-Boost relays allow validators to outsource block production to other entities and then sell the right to construct a block to the highest bidder.
Labrys has released the MEV Watch tool, which can be used to inform validators which MEV-Boost relays are in compliance with Office of Foreign Assets Control sanctions (OFAC). Feeney spoke about the motivation for the tool.
“We’re trying to raise awareness for people who don’t know that running this software could lead to network censorship.”
Feeney pointed out that there is a worst-case scenario, often called hard censorship. In this case, “nodes would have to be forced by regulation basically to discard any transactions with these blocks in them.”
He explained that this would mean that no matter how long it took or how much you paid, there would never be a point when sanctioned transactions are included in the blockchain.
He also noted that even in soft censorship where sanctioned transactions would eventually become valid, it could take hours to validate them and may require a high priority payment, leading to a sub-par user experience.
Related: MEV Bot earns $1M, but then loses all to a hacker one hour later
Toni Wahrstatter (ETH researcher) has confirmed these findings. She published research Sept. 28 indicating that none of the 19,436 blocks verified using Flashbots MevBoost Relay contained a Tornado Cash transaction.
What percentage of MEV Boost Relays blocks contain Tornado Cash transactions? Source: Toni Wahrstatter.
Before The Merge, there were many fears about censorship. Cointelegraph was contacted by Coby Moran, the lead investigator of crypto compliance and forensic firm Merkle Science. He suggested that the prohibitive cost to become a validator could cause the consolidation of validator nosdes to larger crypto firms, who are more vulnerable to being influenced under government sanctions.