I would like to remind everyone of an equally important underlying value proposition of crypto that was touted as a killer feature back in the day. I’m talking about censor resistance.
The following article was written by Dennis Jarvis, CEO of Bitcoin.com.
The Three Pillars of Censorship Resistance
In the context of finance, censorship resistance is the ability to carry out financial actions regardless of the wishes of third parties.
The three pillars of censorship resistance in cryptocurrencies are:
- Freedom of Trade. This means that third parties cannot interfere with the sending or receiving of assets.
- Freedom from confiscation. Third parties cannot take or freeze your assets.
- Transaction immutability.It is not possible for a third party to change or reverse the transaction after the fact.
The increasingly nasty actions taken by centralized organizations in the public and private sectors demonstrate the importance of resisting censorship. Let’s look at a few examples:
Public Sector Censorship
Governments are increasingly willing to control financial institutions, while their efforts to regulate cryptocurrencies is being strengthened. Earlier this year, the Canadian government in Trudeau took the unprecedented step of exercising emergency powers to freeze or suspend bank accounts of Canadian citizens without a court order. their crime. Donate funds to fellow citizens participating in the Freedom Convoy protests.
The US Treasury Department’s oversight agency, the Office of Foreign Assets Control (OFAC), this summer willban Tornado Cash, a decentralized application that improves user privacy. made headlines by authorizing an address to ETH
The U.S. Securities and Exchange Commission (SEC) has tightened regulatory action on cryptocurrencies. This is best illustrated by the words of SEC Chairman Gary Gensler. beat cops. Similar to car seatbelts, the cryptocurrency market should allow investor protection to become the norm. This is no mere speculation, the SEC nearly doubled the size of its Enforcement Division’s crypto assets and cyber unit in 2022.
Private Sector Censorship
Combined, the majority of Ethereum blocks are OFAC compliant. This is a potential problem, as OFAC-compliant relays do not include transactions to and from the Tornado Cash smart contract or other authorized wallet addresses designated by OFAC. Not all blocks built by OFAC-compliant relays are censored, but all blocks built by OFAC-compliant relays are censored when non-compliant transactions are broadcast to the network. Gnosis co-founder Martin Köppelmann states , OFAC-compliant relay states: It’s a legitimate 100% censored chain.
Centralized stablecoin company Tether (USDT) and Circle (USDC) have a history and cooperated with law enforcement requests to freeze assets. Circle complies with OFAC’s Tornado Cache Sanctions and is ‘polluted’ Banned USDC. So far, Tether has decided not to comply, but that may change in the future (and possibly with enough pressure).
Outside of cryptocurrencies, Paypal released an updated policy that allows Paypal to fine users up to $2,500 for disseminating “false information.” 101} made international news. Paypal immediately withdrew. Many of the languages remain, but the policies are public. Since September 2021 this includes the very vague “discriminatory hatred, violence, racial or other forms of intolerance and the $2,500 fine imposed for “facilitating…”
Paypal was almost universally criticized, but its actions are consistent with the growing number of Web2 companies such as Twitter, Youtube, and Facebook. “bad” by disabling, suspending, banning, or other means of monetization;
Censorship resistance is the antidote
This is because they are physically separated. In fact, Bitcoin is so censorship resistant that it has become a technology that enhances economic freedom. This dramatization powerfully illustrates why:
It has helped to refocus attention on resistance to censorship. increase.
Bitcoin, once the incarnation of virtual currency, has become obsolete, derided as bad rather than boring.
It’s great to see this start to revert as people inside and outside of crypto rediscover their seemingly simple power.
More and more people are noticing the slow penetration of features such as speed and cheap transactions. For example, the aforementioned he warns that prominent developers like Martin Köppelmann need to fix the percentage of blocks that are OFAC compliant. It’s also good to see that the debate about censorship resistance is starting to take more oxygen within the broader crypto community. I enjoyed your article on the powerful nature of defi.
This is not to say that all cryptocurrency projects must withstand censorship. In fact, censorship resistance itself exists on the spectrum. Still, it is important that some cryptocurrency projects remain robustly censorship-resistant. Bitcoin.com is proud to offer tools like the Bitcoin.com Wallet. their bitcoin and other cryptocurrencies. As an industry, let’s take what happened last year to remind us how important censorship resistance is. Let’s not sacrifice the attributes that define this industry for short-sighted gains.
Image Credits: Shutterstock, Pixabay, Wiki Commons