For those providing liquidity, it protects their Bitcoins. For users, it's the assurance than none of the UTXOs are "tainted", whatever that means for the government.
None of the UTXOs may be tainted according to zkSNACKs, which since their pro-censorship "upgrade", they listen to a chain analysis company (and not only that, but they even pay for that censorship). However, there's nothing stopping the rest chain analysis companies from treating these UTXOs as tainted. There isn't only one that's governing the space. There's Chainalysis, Elliptic, CipherTrace, Elementus, CoinMetrics etc.
You shut down one of VPS providers and most of eth nodes are down, and that already happened before, so I am not speculating about that.
Not only centralization on a technical level. They've had an unfair coin minting from the beginning (70% the current supply straight up to Vitalik's and his buddies' pockets!), undecided monetary policy, which means developers (can) act accordingly to theirs and the big sharks' benefit, and now they're launching the "Merge" (which is ironically the "Split") moving from Proof-of-Work to Proof-of-Stake* with the corresponded consequences.
*or as I call it, from neutral consensus mechanism to feudalism-based mechanism that doesn't produce consensus.