Bitcoin vs Ethereum: OFAC Censorship

Decentralized block production: Any entity with hardware can become a miner without identity verification. This makes it economically and technically infeasible for a single jurisdiction (like OFAC) to enforce a block-level transaction blacklist. Miners are selected based on hash power, not a whitelist.

This matters for protocols requiring maximum sovereignty, like sovereign wealth funds or uncensorable payment rails.

Concentrated mining pools: While anyone can mine, ~90% of hash power is controlled by 4-5 large pools (Foundry USA, Antpool, etc.). These are identifiable entities that could theoretically be pressured to censor transactions at the mempool or block template level.

This matters for risk models assessing single points of failure. The network's censorship resistance relies on pool operators' willingness to resist coercion.

Validator diversity and MEV relays: While validators are identifiable, the ecosystem has developed anti-censorship tools like MEV-Boost with multiple relays. The community successfully socially coordinated to reject OFAC-compliant blocks post-Merge, maintaining <5% censored blocks.

This matters for ecosystems that prioritize adaptability and can leverage complex protocol-layer (PBS) and social-layer solutions.

Staking requires KYC/AML exposure: To stake at scale (e.g., via Coinbase, Lido, or Kraken), entities face regulatory identification. Large staking pools (~33% of stake) are clear targets for regulatory pressure to censor transactions.

This matters for protocols where the legal attack surface of core infrastructure is a primary threat model. The risk is protocol-level, not just infrastructure-level.

Decentralized, permissionless mining: No entity can stop a valid transaction from being included in a block. Miners are globally distributed and anonymous, making coordinated censorship by a single jurisdiction like the U.S. Treasury (OFAC) practically impossible. This matters for sovereign value transfer and protocols that must guarantee transaction finality under any political condition.

Minimal programmability reduces attack surface: While base-layer transfers are robust, Bitcoin's limited scripting (e.g., simple multisig) means there are fewer complex DeFi or application-layer transactions that could be targeted. The censorship resistance debate is simpler but also less tested against sophisticated protocol-level sanctions compared to Ethereum's vast dApp ecosystem.

Proactive, coordinated defense: The Ethereum community has demonstrated willingness to fork (e.g., Tornado Cash sanctions) and tools like MEV-Boost relays with censorship resistance are actively developed. High client diversity (Prysm, Lighthouse, Teku) prevents a single client team from imposing rules. This matters for protocols that value adaptable governance to counter centralized pressure.

Staking pool and relay centralization: Major staking services (Lido, Coinbase) and MEV-Boost relays (Flashbots, BloXroute) are identifiable entities subject to OFAC regulations. This has led to periods where >50% of blocks were OFAC-compliant, creating a tangible censorship vector. This matters for high-value institutional DeFi where regulatory compliance could conflict with network neutrality.