Tornado Cash censorship: do Ethereum blocks comply with US sanctions?

Ethereum victim of censorship? – The network Ethereum recently completed its transition from Proof of Work to Proof of Stake. However, this has raised many concerns about decentralization. Concerns that may well be well founded.

Tornado Cash: the protocol to beat

Tornado Cash is a decentralized finance protocol that offers to make anonymous transfers. To do this, it uses a technique called mixing. This consists of mixing the tokens of several users. The objective is to remove the link that exists between the sending address and the receiving address.

Unsurprisingly, this tool has frequently been used by DeFi hackers to launder their funds or cover their tracks.

A situation that will not have failed to attract the attention of the US Treasury. Indeed, at the beginning of last August, the Office of Foreign Assets Control has publicly accused Tornado Cash of facilitating money laundering. In total, OFAC accuses the platform of having allowed the laundering of more than 7 billion dollars.

Following these accusations, many entities have decided to wage a censorship war against Tornado Cash. So, in turn, the site and then the GitHub of the project have been taken offline. Subsequently, other entities such as Infura began to censor transactions to Tornado Cash.

Obviously, this widespread censorship has revived the debate around the decentralization of Ethereum and its dependence on centralized entities like Infura.

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Flashbots censor Tornado Cash

Obviously, The Merge did not correct this problem. The situation may even have gotten worse.

Indeed, on September 27, the researcher Toni Wahrstatter has published the results of a search conducted on Flashbots.

“The data shows that Flashbots MEV-Boost Relay censors Tornado Cash transactions. Since The Merge, not a single transaction interacting with Tornado Cash contracts has been included in their MEV-boost blocks. »

Thus, he discovered that Flashbots’ MEV relay was censoring transactions related to Tornado Cash. As a result, none of the 19,436 blocks offered through the Flashbots MEV Relay contained Tornado Cash-related transactions. Conversely, other competing MEV Relays have multiple Tornado Cash-related transaction occurrences.

Comparison between different relays and the Tornado Cash related transactions they process.

However, this situation is not surprising. Indeed, last August, Hasuthe strategic manager of Flashbots had already announcement that Flashbots relay and builder would be compliant with OFAC regulations.

So far, this phenomenon represents 23% of the blocks products on Ethereum. Although this does not prevent the use of Tornado Cash, the presence of censorship on the Ethereum blockchain is nothing reassuring.

MEV and MEV-Boost: what is it?

The MEV Where Maximum Extractable Valuerepresents the maximum value that can be extracted when producing a block. This value is derived from modifying, adding or deleting transactions in a block.

Normally this discipline falls within the domain of minors or validators. However, some network players wanted to take part. This is how the Flashbots project was born. This independent project offers an add-on to the geth client, allowing MEV transactions to be submitted directly to miners or validators.

With the arrival of Proof of Stake on Ethereum, the Flashbots teams have developed a new product: Mev-Boost.

In short, Mev-Boost allows validators to access a marketplace of blocks already built and whose MEV has already been optimized.

“The constructors produce blocks containing the order of the transactions and a remuneration for the validator who will propose the block. Separating the role of proposers and block builders promotes greater competition, decentralization, and censorship resistance for Ethereum. »

A very surprising definition proposed by the Flashbots teams, especially when we know that this same product is at the origin of censorship on Ethereum.

For their part, miners are the big losers in the transition to Proof of Stake. According to the latest estimates, 8 out of 10 miners were forced to unplug their machines.

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Tornado Cash censorship: do Ethereum blocks comply with US sanctions?


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