Tolerate Ethereum Solo Validators Who Censor - Well, so says Vitalik !

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Fresh on the heels of last week's news that 51% of Ethereum blocks are now OFAC compliant which translates into censorship, Buterin now comes forward telling us that solo validators who censor blocks should be tolerated. Now wait one minute - I thought the goal was to do away with censorship....

Ethereum co-founder Vitalik Buterin believes that solo validators that choose not to include certain transactions should 'be tolerated' to stop the Ethereum community from becoming the 'morality police.' Vitalik Buterin made the comment in reply to a Twitter poll from latetot.eth, discussing a hypothetical scenario whereby a validator censors a transaction that doesn’t align with their beliefs. [Pereira, A.P. Ethereum solo validators that censor blocks should ‘be tolerated’ — Buterin. (Accessed October 18. 2022)]

The twitter poll Buterin responded to was published on October 17, 2022 and "asked what should happen if a solo validator, in a country at war with another, decides not to process a block because it includes donations to the opposing military force" [Id].

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In response, Buterin stated:

I would say 'be tolerated'. Slashing or leaking or socially coordinated anything should only be considered for massive reorging of other people's blocks, not making wrong choices about what to put in your own. Any other answer risks turning ETH community into morality police.

[Buterin, V. Tweet. (Accessed October 18, 2022)].

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"Also answering the thread, Martin Köppelmann, co-founder of Gnosis and a long-time Ethereum decentralized application developer, said he agreed with tolerating the validator in that situation while warning about how MEV-boost censorship rising in Ethereum following the Merge" [Pereira, supra]

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And twitter user mao (@5t4rman) added:

Validators are allowed to decide what transactions to include in a block. what we shouldnt do, is encourage staking services like Exchanges or Lido that are so huge and centralized that they can easily be coerced into cencoring by governments or other third party agents.

[Mao (@5t4rman). Tweet. (Accessed October 18, 2022)

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"Although the thread discusses a hypothetical scenario, concerns about censorship in the Ethereum network surged last week, with 51% of Ethereum blocks being compliant with the United States Office of Foreign Assets Control (OFAC) standards as of Oct. 14, as MEV-Boost relays take over market share one month after the Merge" [Pereira, supra].

"But while Ethereum developers definitely need to figure out a way to change the blockchain’s infrastructure to patch this vulnerability, it’s hard not to criticize Flashbots and other MEV-Boost relays for their behavior throughout this controversy [...] Flashbots is largely seen as a positive force when it comes to MEV. The organization has driven gas prices lower by bringing MEV bidding off-chain, and as it states on its website, it has helped mitigate the “negative externalities” of MEV for Ethereum users. But the threat Flashbots poses to Ethereum’s neutrality is arguably more important than the services it currently provides. Simply put, Flashbots isn’t essential to Ethereum’s survival" [Carreras, T. 51% of Ethereum Blocks Can Now Be Censored. It's Time for Flashbots to Shut Down. (Accessed October 18, 2022); see also, Nagoda, K. Uh-oh - 51% of Ethereum Blocks are now OFAC Compliant - Can you say Censorship?. (Accessed October 18, 2022)].

It should be noted that in an opinion piece written for Cointelegraph, Slava Demchuk, CEO and co-founder of AMLBot, raised the issue of censorship under the veil of regulator's 'influence'. Demchuk, believes that the post-merge upgrade functions could trigger changes in KYC/AML practices, he stated:

It shouldn’t surprise anyone if regulators begin telling node validators to impose KYC and AML requirements on users staking Ether. Over the last few years, the cryptocurrency industry has been a primary target for regulators in the United States [...] U.S. regulators are increasingly expressing concerns about the huge sums circulating in DeFi without any control. As the Ethereum blockchain serves as the primary chain for most tokens, its recent shift from PoW to PoS may be used as an argument for their attempts to influence (at least a part of) the decentralized market.

[Demchuk, S. KYC to stake your ETH? It's probably coming to the US. (Accessed October 18, 2022)].

Accordingly, the issue of censorship in the Ethereum ecosystem has become a 'hot' topic within the cryptoverse as of late.

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As long as the issue is only with not including certain transactions in your own blocks I don't see a problem. Hive nodes can also drop transactions for whatever reason and as a result not propagate them further through the network or not include them in the block when the node happens to be an active witness.
The problem would start if the majority clique of validators decided that blocks produced by someone else are invalid just because they contain some (valid) transactions that the clique does not like. With only small advantage in numbers that would lead to network split, but it might suffice if exchanges decide to only follow the clique-approved version. The danger only grows if more validators decide to fall in line.