Is The Future of Ethereum Centralised and Censored?

Thomas Thierry emphasizes the need to preserve Ethereum's permissionlessness and social resistance amid growing concerns about censorship. He discusses the block selection process, which involves 16 randomly chosen validators reviewing the public mempool to create transaction lists. A block that fails to include these transactions is not considered canonical, a feature designed to enhance censorship resistance and mitigate Miner Extractable Value (MEV) risks.

Censorship poses a significant challenge for Ethereum, particularly with MEV leading to centralization risks. While Proposal Builder Separation (PBS) aimed to address these issues, it has inadvertently resulted in dominant builders centralizing block production, threatening the blockchain's decentralized nature. Thierry stresses the importance of upholding Ethereum's core principles in the face of these challenges.

MEV allows for manipulation of transaction placement within blocks, with searchers competing to create transaction bundles for builders. This competitive environment creates economic barriers, as access to valuable data and relationships becomes crucial. The auction process for block selection is mediated by a relay, where proposers typically select the highest bid, benefiting the proposer significantly. A notable portion of transactions bypass the public mempool, with 30-40% of transactions and over 50% of block value going directly to builders, often from MEV searchers or private order flows.

The trade-off between trust and visibility influences transaction submission choices. While the public mempool is trustless and visible, private auctions require trust in the managing party, leading to a preference for public submissions despite their downsides. The evolving landscape of MEV extraction highlights ongoing complexities within the Ethereum network.

Builders hold significant power but face pressure from proposers and searchers. The competition among builders is intense, with a few dominant players controlling over 80% of blocks. New builders like Quasar, capturing 10-15% of the network, illustrate the challenges of decentralization in block building. Relayers, initially seen as mechanical gates, also exhibit centralization, with a few dominant players managing most transactions. All entities—builders, relayers, and proposers—hold varying degrees of censorship power, impacting transaction inclusion.

Current censorship on Ethereum is relatively low, but incidents like the Tornado Cash censorship by Flashbots MEV Boost raise concerns about motivations and future censorship potential. The limited number of builders and relayers means that if a few dominant entities decide to censor, it can significantly affect transaction inclusion. Concerns about competition exist, as builders might censor transactions to gain an advantage, which could slow down competitors.

Fossil proposes a decentralized validator set that randomly selects validators to create transaction lists from the public mempool, imposing constraints on builders to include all transactions from the validators' lists in their blocks. While transactions can be censored if 16 entities collude, consistent censorship is unlikely unless the entire attestor set colludes. If at least one of the 16 proposers includes a transaction, it must be included in the block, ensuring that one honest proposer guarantees inclusion.

The discussion also highlights challenges posed by private transactions regarding MEV, as including a private transaction would require it to become public. Mempool encryption allows transactions to be encrypted before entering the public mempool, providing temporary privacy and protecting against MEV, but does not guarantee censorship resistance. The conversation emphasizes the importance of network blindness for effective censorship resistance, with total privacy offering the best protection.

An update on the FOSSE EIP reveals it was not included in the upcoming Glamster Dam fork due to scope limitations. Future forks will involve selecting major EIPs for inclusion, which may delay the process. Although smaller than EPBS, FOSSE is significant and under consideration for the next fork. Concerns about failure modes are minimal, but careful implementation is crucial due to its potential impact on fork choice.

If FOSSE is included, the speaker intends to continue research and development, focusing on dev nets and implementations. The Ethereum Foundation is actively working on enhancing security through various initiatives, including transitioning to post-quantum security and improving network resilience. Efforts to improve network security are ongoing, with a focus on technical enhancements and addressing the centralization of RPC services.