Ironically Ethereum dApps are Centralized: Willy Woo.

Willy Woo believes that Ethereum might already be under the control of the US government.
69% of Ethereum blocks already comply with OFAC.
AWS hosts 52% of Ethereum nodes.

Ethereum, the world’s leading blockchain platform, might already be under the control of the United States government. Willy Woo, an On-chain analyst, says in his tweet that the majority dApps built upon the second-largest blockchain are centralized, and almost all the transactions on Ethereum are subjected to censorship. The liquidity metric pushes the point that Ethereum DeFi Apps are becoming more and more centralized.

Willy also included a screenshot in his tweet. He stated that 69% of Ethereum blocks are already in compliance with the Office of Foreign Asset Control (OFAC), as it has been three months since the Merge upgrade, which took place in September.

Is this right? Only 3 months after ETH goes PoS, 69% of blocks are OFAC compliant?
Meaning Ethereum is already under control by the US government.
This means all DeFi apps running on ETH are not decentralised finance. And transactions are not censorship resistant. pic.twitter.com/VqNWuTXepn
— Willy Woo (@woonomic) December 23, 2022

OFAC enforces United States economic sanctions. In the month of October 2022, the percentage of blocks compliant with the agency instantaneously rose from 9% to 51%. The said compliance has to do with Maximum Extractable Value (MEV) – Relays, on which the production of ETH blocks is outsourced.

Ethereum blocks went from 9% OFAC compliant to 51% OFAC compliant in the past month, as mev boost (block outsourcing) takes market share. https://t.co/SYiVHPlTf4
— Lyn Alden (@LynAldenContact) October 14, 2022

Ethereum becoming centralized is a cause of concern for the entire crypto community. Along with this, people worry that almost 52% of Ethereum nodes are hosted by Amazon Web Services (AWS), which is a prominent and powerful infrastructure provider. Advertisements related to co-founder of Input Output Global Inc. Charles Hoskinson’s trolls on Ethereum Proof-of-Stake (PoS) model mention a comic by Scott Adams.

After the merge implementation, only two entities have been under control out of 50% of the Ethereum network, namely Lido and Coinbase. The place where almost 50% of all staked ETH are held, 30.24% and 14.44%, respectively. A piece of good news here could be that Lido is a Decentralized Autonomous Organization (DAO); thus, it allows anyone to join and become a part of one of the largest entities on the Ethereum Network.

After Effects.

Woo has analyzed the liquidity ratio for two Ethereum-based dApps, MakerDAO and Compound. Where the liquidity ratio is a parameter of how easily and quickly an asset can be converted into cash.

Willy discovered that, although MakerDAO is still decentralized, Compound is slowly becoming centralized. This can be asserted as the liquidity ratio for the Compound is 10 times as compared to MarketDAO. This indicates that it is much harder to exchange DAI, MarkDAO’s stablecoin, for ETH than it is converted into USDC for ETH.

Now this ongoing trend towards centralization, especially after the demands for regulations to protect users and investors after recent market turmoils, including the FTX collapse. Have the possibility of alarming DeFi developers and users equally.

“The risk of losing a valuable decentralization property increases as centralized entities grow in use and importance.”

The inception of cryptocurrency was done to provide a decentralized alternative to the centralized financial system. And with things slowly being brought under the umbrella of centralization, it somehow defeats the whole purpose.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing