Discover the Benefits of Ofac Block Rejection with bloXroute Labs’ MEV Relays

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On December 18th, bloXroute Labs, one of the largest producers of censorship-resistant blocks on Ethereum, announced a complete u-turn in policy and will start censoring OFAC-sanctioned blocks across all of its MEV relays in compliance with local laws.

An “OFAC transaction,” as defined by bloXroute Labs, is any transaction that interacts with a wallet that has been sanctioned by the United States Office of Foreign Asset Control, or OFAC.

All of bloXroute Labs’ relays, including the “bloXroute Max Profit” relay, the second largest censorship-resistant MEV relay with over 380,000 blocks produced since the Ethereum Merge on September 15, 2022, will be affected by the policy change. According to data shared with Cointelegraph by Australian blockchain development firm Labrys.

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Despite the news, bloXroute Labs insists on preserving the decentralized and permissionless nature of Ethereum, while still adhering to the law.

Nevertheless, some Ethereum community members contend that stricter compliance requirements are now obstructing the path to a credible neutrality on Ethereum.

“This is a worrying precedent for the industry,” said Lachlan Feeney, CEO of Labry, to Cointelegraph. “Similar to the internet, censorship should be evaded [at the protocol level] and instead, rules and regulations should be applied at the application level,” Feeney added.

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Given Ethereum is a global infrastructure, Feeney expressed his concern that more countries will enforce their own sanctions, potentially making it “impossible” to construct a block that complies with all regulatory regimes around the world.

As per MEVWatch.info, currently 36% of blocks are censored due to those blocks containing OFAC-sanctioned transactions, which is a decrease from the peak of 78% on Nov. 20. It has mostly been around 30-40% since March.

MEV relays are used by validators to extract value from a blockchain network by adding, removing, or changing the order of transactions in a block. Consequently, MEV-Boost relays were introduced to minimize the harm to ordinary users caused by MEV profits.

When Ethereum transitioned to proof-of-stake on Sept. 15, 2022, censorship on the platform became a concern. A month prior to that, the United States Office of Foreign Asset Control started sanctioning certain wallet addresses linked to criminals and transactions from cryptocurrency mixers, such as Tornado Cash.

This has posed a difficult dilemma for many MEV relays around the world, whether to remain Ethereum’s impartiality or abide by the local regulations.

Feeney said that it is uncertain if bloXroute was obliged to comply, however he is certain that the decision was not taken lightly, as the firm accepted that it would decrease the success rate of their relays.