Blockchain Censorship

TL;DR

This paper analyzes the impact of censorship on permissionless blockchains, revealing significant censorship practices influenced by sanctions, and demonstrating how censorship delays threaten blockchain security and expose fundamental protocol limitations.

Contribution

It formalizes and quantifies blockchain censorship, assesses its security impact, and proves inherent limitations of PoS and PoW protocols against censorship resilience.

Findings

46% of Ethereum blocks were censored by actors complying with OFAC sanctions

Censorship delays increased transaction inclusion time by 85% after Ethereum's PoS transition

Fundamental limitations of PoS and PoW protocols against censorship resilience are proven

Abstract

Permissionless blockchains promise to be resilient against censorship by a single entity. This suggests that deterministic rules, and not third-party actors, are responsible for deciding if a transaction is appended to the blockchain or not. In 2022, the U.S. Office of Foreign Assets Control (OFAC) sanctioned a Bitcoin mixer and an Ethereum application, putting the neutrality of permissionless blockchains to the test. In this paper, we formalize quantify and analyze the security impact of blockchain censorship. We start by defining censorship, followed by a quantitative assessment of current censorship practices. We find that 46% of Ethereum blocks were made by censoring actors that intend to comply with OFAC sanctions, indicating the significant impact of OFAC sanctions on the neutrality of public blockchains. We further uncover that censorship not only impacts neutrality, but also security. We show how after Ethereum's move to Proof-of-Stake (PoS) and adoption of Proposer-Builder Separation (PBS) the inclusion of censored transactions was delayed by an average of 85%. Inclusion delays compromise a transaction's security by, e.g., strengthening a sandwich adversary. Finally we prove a fundamental limitation of PoS and Proof-of-Work (PoW) protocols against censorship resilience.