Thank you for contributing @kelvin.
Thank you for confirming that a direct relayer censorship attack is probably sustainable- I like the way you framed it in terms of being a stable equilibrium.
Have you considered the economics of the censorship market in a similar way?
Let me illustrate how this could work in the OpenSea NFT market:
- Bob has bid $10k on an NFT on OpenSea.
- Alice is prepared to pay up to its true value of $50k, but leaves her bid to the last 10 mins (this is rational as the protocol extends the auction by 10 mins for each new bid).
- Bob can now:
- (a) outbid Alice for a loss of $40k from his current position (let’s assume he knows the NFTs true value is $50k)
- (b) aim to block her bid on the censorship market for 10 mins (50 blocks)
- Bob will breakeven on (b) even if he ends up having to pay $800 per block (and as we all know, NFTs can go for a lot more than $50k and if Alice left it to the last minute Bob could afford even $8000 per block to censor)
- Let’s say Bob ends up paying $200 per block to censor Alice
The results are:
- Bob (acting badly) is rewarded with a $30000 saving on the NFT
- The censorship market (acting badly) is rewarded with $10000
- Alice (acting well) loses out on ownership of the NFT she should have rightly won
- The artist (acting well) is punished with a -$40k loss
It’s worse than this though. The censorship market is incentivized to help Bob, because Bob is making money for them and is a proven user of their services. At a certain point, it will become +ev for them to help subsidize Bob’s censorship. As well as being true in any individual case, the more effective they can make their censorship market, the more people will use it long term.
To help them with this, the censorship market allows bids on n block censorship (in this case 50), or even using a specialist OpenSea censorship order. This reveals the censoring users intentions which they can use to calculate at what point it is worth subsidizing them.
One very cheap (for them) thing they could do is simply ban Alice from protecting herself after a few minutes. This would pressure Alice to raise a protecting bid early on. It may make the outcomes more predictable for the customers of the censorship market, while also getting them to pay more upfront and earlier on.
It’s very complex to model, and there are clearly a lot of actions Alice, Bob, the relay and other users can take that I haven’t included.
The crucial observation here is that the incentives of bad acting users are aligned with the then most powerful actor in Ethereum, the dominant private relay and their censorship market. My intuition is that this alignment of bad incentives makes censorship market attacks like this sustainable.