Invest in Web 3.0 Tokens with Ethereum OFAC Compliance Dipping to 45% Post-Merge Upgrade
Ethereum OFAC compliance dips to 45% post-Merge upgrade

The Impact of Ethereum’s Merge Upgrade on OFAC Compliance

The Merge upgrade of September 2022, which saw Ethereum shift from proof-of-work (PoW) to proof-of-stake (PoS), led to a decrease in compliance with standards set by the Office of Foreign Assets Control (OFAC).

This is because Ethereum blocks that follow OFAC regulations censor certain transactions, thus having a negative effect on the neutrality of the Ethereum ecosystem. In early August 2022, OFAC sanctioned Tornado Cash and related Ether (ETH) addresses due to their ability to obscure and anonymize transactions.

Prior to the Merge upgrade, Ethereum’s OFAC compliance had been rising steadily as entities such as crypto exchanges ran MEV-Boost relays on their validators. According to MEV Watch data, popular platforms such as Binance, Celsius Network, Bitfinex, Ledger Live, Huobi (HTX) and Coinbase are among the top offenders when it comes to censorship.

However, the general OFAC compliance of Ethereum blocks has been significantly reduced. In November 2022, 78% of all Ethereum blocks were in line with OFAC regulations, but now, on September 27, this number has dropped to 30%, a decrease of 57%.

OFAC Compliance and Web 3.0

In order to comply with OFAC regulations, operators must use relays that do not censor according to OFAC standards. Popular MEV-boost relays include Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, BlockNative, Manifold and Eden. However, not all of these systems adhere to OFAC compliance, according to MEV Watch. It is important to note that while all blocks built by OFAC-compliant relays will censor non-compliant transactions, not all blocks are censoring.

Validators outside of the U.S. should also consider running non-censoring relays for the benefit of the network. Recently, Grayscale decided to abandon all rights to PoW Ethereum tokens (ETHPoW) due to the lack of liquidity in the market.

Investors who are interested in Web 3.0 tokens should understand how to invest in them and the potential profit that could be made. To do this, they must learn how to use Web 3.0, buy Web 3.0 tokens, and be aware of Dynamic Web Module 3.0 requirements, which need Java 1.6 or newer.

On the contrary, some cryptocurrency investment firms such as ETC Group have made an effort to introduce dedicated EthereumPoW exchange-traded products (ETPs). This could be a great way to invest in web 3.0 tokens, as well as a way to make a profit from web 3.0, by buying web 3.0 tokens and using dynamic web module 3.0 which requires Java 1.6 or newer.

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