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- A new report has revealed that 5 out of 6 top Ethereum block builders comply with OFAC sanctions.
- Market experts have been debating on whether the Ethereum blockchain is subject to sanctions that promote censorship, harming the ecosystem in the long term.
According to a new report, five out of the six largest Ethereum block builders comply with the United States Office of Foreign Asset Control (OFAC) sanctions. Specifically, the block builders are avoiding Tornado Cash transactions. Ethereum Researcher and data analyst Toni Wahrstätter highlighted the overwhelming censorship going on in the Ethereum blockchain.
In 2022, OFAC sanctioned Tornado Cash and Blender.io, which both provided mixing services to the Lazarus Group. It is now evident that Ethereum block builders are not including Tornado Cash transactions in their blocks. This goes against the core value of any decentralized blockchain which should be censorship resistance.
The analyst notes that there are multiple layers of censorship in the PBS stack: Validators may selectively include or exclude transactions in blocks, or avoid attesting to specific validators, relays can filter blocks based on certain rules, and builders omit specific transactions.
In the past months, the extent of censorship grew rapidly.
Today, 5 out of the 6 largest block builders comply with the OFAC sanctions.@titanbuilderxyz remains the last large builder including OFAC-sanctioned transactions (mainly those touching Tornado Cash) in their blocks.— Toni Wahrstätter 🦇🔊 (@nero_eth) September 26, 2023
Tornado Cash rose to fame last year after the US Treasury accused the protocol of aiding in the laundering of more than $7bn worth of virtual currency. The Lazarus Group, a well-known North Korean government-backed hacking group has reportedly used the service to launder at least $455m through the service. Earlier this year, the founders of the protocol including Roman Storm, Roman Semenov, and Alexey Pertsev were charged for helping move over $1 billion in virtual currency for criminal actors.
Related: Tornado Cash Co-Founder Pleads Not Guilty in US Court Amid Controversy
The case remains one of the most controversial in that while some organizations were quick to comply with OFAC sanctions applied on the project, some objected to the regulator’s reach. Decentralized finance (DeFi) aggregator 1inch, organized a rally to show support and protest the arrest of the founders of the protocol.
1/ Is it really a crime to be an open-source #blockchain developer nowadays ⁉️
>> Buy Ethereum (ETH) quickly and securely with PayPal, credit card or bank transfer at eToro. Visit Website <<Stand up for the right to build open-source software!
🛡 Help Alex Pertsev get out of jail!
🔗 Sign the petition: https://t.co/r5sdHaYKCN#FreeAlex #OpenSourceNotACrime #DeFi
Why is it important⤵️ pic.twitter.com/CqqD4Ds8AQ
— 1inch Network (@1inch) August 18, 2022
In 2022 after the sanctions were announced, Tether said the US treasury had failed to indicate that stablecoin issuers were expected to freeze secondary market public addresses published on the OFAC SDN list despite sanctioning Tornado Cash. On the other hand, crypto firms such as USDC stablecoin issuer Circle FTX and some crypto firms quickly moved on with blacklisting Tornado Cash addresses, while some like BUSD maker Paxos and DAI decided to hold back.
Interestingly, a March report from MEV Watch noted that one in three blocks added to the Ethereum blockchain within a week were OFAC compliant. This again demonstrates its censorship which is key for political neutrality in blockchains. Additional data from last month further showed that Ethereum validators still censored around 50 percent of blocks that are confirmed on the blockchain.
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