Blocknative discontinued its MEV-boost relay service on Ethereum last week. Although other relays remain, the vast majority of Ethereum transactions are now handled by just four entities.
Relays are responsible for connecting transactions between block builders and proposers. Without relays, the network would face delays in transaction confirmations, reduced efficiency and potential bottlenecks, disrupting the smooth processing of transactions.
This development not only raises centralization issues, but also highlights one of Ethereum’s main obstacles post-Merge: Relays provide expensive services without compensation.
Concrete blocks: Some funding approaches would solicit donations from the community to reward torchbearers while keeping the service free. Why didn’t you join this type of financing model?
Cutler: We are a US-based entity, which means OFAC SDN is a reality for us. We work very hard to be aligned with the ecosystem, and there are many hard positions regarding OFAC SDN compliance. A number of public goods funding approaches that were being discussed for relays explicitly anticipated OFAC SDN compliant relays, and I had extensive conversations with core developers at (Ethereum Foundation) who fundamentally believed that it was a black and white issue. .
By the way, each violation of the OFAC SDN carries a fine of up to $30 million and up to 30 years in prison, right? And every transaction can be considered an offense. So it’s like an infinite responsibility. We found ourselves in a sort of predicament where we couldn’t satisfy both.
Concrete blocks: Have you been told that compliance with OFAC will prevent you from receiving funds from the Community Bridge Funds currently in progress?
Cutler: Although this topic has been actively discussed, we have never gotten this far. I think from our perspective it’s not really about covering our costs. I mean, the costs are certainly substantial, but you know we’re trying to build a business here. And so just keeping the lights on and maybe not even paying engineers’ salaries isn’t really enough. We’re trying to drive growth, right?
Concrete blocks: One argument made against creating more revenue for relays is that charging fees creates a slippery slope where fees rise and users find ways to circumvent relays. What would you say to that?
Cutler: There is no other part of Ethereum’s core infrastructure that is actually funded as a public good, perhaps other than consensus customers, and it is funded quite massively. So why are we passing the buck for something that is operationally necessary?
I have always been an advocate of what I call “missed slot insurance.” There are many examples of relays, including Blocknative, that cause staking pools to be withdrawn due to missed slots. My response was that there should be a fixed fee with a concrete benefit. The biggest price is that you’ll pay into an insurance pool, and in the event that the relay network doesn’t do its job, you can expect insurance for missed slots. OK, conversely, if you use a relay that isn’t part of the structure, you can’t expect insurance, but it’s a good deal.
In reality, what the network expects from the relay network is not competition. He wants utility. I flip the switch, the lights come on, and I kind of understand that there’s a whole group of people who might be involved in providing the electricity, but I don’t want to think about any of it that. I don’t want to hear that, for example, oil came out of the ground in Bahrain and was then loaded onto a ship that got caught in the Suez Canal, and you have to call the shipping company. You’re like, “No, I just want the lights to come on,” right? You get huge benefits from our operations, and there should be some sort of pricing structure associated with it.
Concrete blocks: To zoom out for a second, why are torchbearers important? Ethereum and the worldview it is trying to promote?
Cutler: The idea is that we are building the foundation of the next economy that is fundamentally more equitable than the existing system, and perhaps it is inevitable to recreate it, right? This is something that concerns me.
Within the Relayer network, we now have four entities (two in the United States and two in Europe) that relay 93% of all blocks on Ethereum. There is no explicit economic incentive, so there are implicit economic incentives that are opaque. There are all kinds of economic incentives for doing things like co-living and all kinds of behind-the-scenes deals are possible and can even be made right now. The network is much more centralized than we think and tends to become so. This is going in the wrong direction, and hey, after Blocknative comes out we can decide if it’s a good thing or a bad thing or if it’s a non-event, but there’s no doubt that it’s now more centralized this week than last week.
This interview has been edited for brevity and clarity.
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