How could the merge lead to "base layer" censorship?

Could there be a soft fork and competing PoS Ethereum chains?

Our analyst @MattFiebach breaks down the facts (1/16)🧵

"MEV is Maximal Extractable Value. It is the profit a block proposer (miner or validator) can make through their ability to arbitrarily include, exclude, or re-order transactions from the blocks they propose." - FlashBots
In PoS Ethereum, larger validator operators could create sophisticated/proprietary methods to extract more MEV out of each block than single validators.

With liquid staking derivatives (Lido) and decentralized pooling, validators may extract MEV without sharing with stakers.
The Solution: Proposer Builder Separation

Validators don't order blocks / extract MEV themselves. Instead they rely on a market where outside actors produce complete blocks accompanied with a fee for the validator.

The validator proposes the block that nets the highest fee.
There are 3 main players in PBS

Builders: Organize blocks in order to achieve the most revenue for Validators (highest MEV). They take a cut off the top.

Relayers: Circulate builders' blocks to proposers.

Proposers: Validators, submit blocks.
Relayers are the key to the castle. They abstract block ordering (so that validators can't copy ordering while removing the builder's cut) and choose which blocks to show validators.

This is where it gets interesting.
MEV Boost is an implementation of PBS built by Flashbots.

It will run their own Flashbots relayer by default but, likely, other relayers will be available at Merge too.

Relayers must be trusted by validators and builders. They can both censor blocks and front run.

Let's say Coinbase or other significant size validators decide they won't produce blocks that include txns to/from government sanctioned addresses.

They will choose a relayer whose blocks don't include sanctioned addresses.
If most validators choose the same route, block builders who include "bad" transactions won't see their blocks published on chain.

In other words, block builders will have to stop including sanctioned transactions in order to make money.
This is the "base layer" censorship many are hysterical about.

There has been a ton of FUD that Flashbots Relayer, which is currently closed source, will censor transactions.

This tweet leads me to believe that is probably not the case.
Other FUD surrounds how a massive portion of validators have already opted to comply with censorship.

I have seen no confirmations of these claims (yet).
Rather, some argue that most validators believe in Ethereum's permissionless nature and will support censorship resistance at all costs.
In the scenario enough validators (>51%) take the path of censorship, it will be time for a user activated soft fork (UASF) by those that oppose censored Ethereum (probably most).

But this is where things get really tricky.
Will Circle (USDC) support the censored chain or the not censored one? If they choose the censored one (as is likely), well, we might be screwed my permissionless-supporting friends.
Thanks for sticking with me through this novel. It took me a while to understand what was going on and I wanted to make sure I covered the bases.

Let us hope optimism surrounding validators' fighting for censorship resistance has some truth.
Side note: Base layer censorship is impossible due to the potential for DoS attacks.

The threat vector is relayer level censorship that could effectively have the same result.…

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