Considering the current ban on crypto mixing tool Tornado Cash and also the subsequent arrest from the Tornado Cash developer, there’s been an increasing debate over whether crypto services providers would choose decentralization or censorship as type of compliance.
The issue is becoming more prominent as Ethereum is moving from the current proof-of-work (Bang) blockchain to some proof-of-stake (PoS) mining consensus. Using the transition under per month away, a person noticed that greater than 66% of validators around the Beacon Chain (Ethereum PoS chain) will follow the U . s . States Department from the Treasury’s Office of Foreign Assets Control (OFAC) rules.
Begin with the large, current one.
Presently it appears as though over 66% from the beacon chain validators will stick to OFAC rules, @LidoFinance @coinbase @krakenfx @stakedus @BitcoinSuisseAG pic.twitter.com/qyq23tPnqV
— eylonverse X (@TheEylon) August 14, 2022
When requested whether Coinbase yet others would choose to stick to compliance demands and impose protocol-level censorship or shut lower staking services, Brain Lance armstrong, the Chief executive officer of Coinbase, find the latter. Lance armstrong stated:
“It’s a hypothetical we hopefully will not face. But when we did we’d opt for B I believe. Got to pay attention to the larger picture. There might be some more sensible choice (C) or perhaps a legal challenge too that may help achieve a much better outcome.”
First number of centralized #ethereum validators to reply to my question say they’d rather wind lower their staking program than enable on-chain censorship in the protocol level within the ethereum blockchain. https://t.co/pKG8X50hDa
— Lefteris Karapetsas Hiring for @rotkiapp (@LefterisJP) August 17, 2022
There is growing speculation concerning the actions of Coinbase, Kraken along with other prominent crypto exchanges which are also key ETH validators around the Beacon Chain.
Related: Tornado Cash ban could spell disaster for other privacy protocols — Manta co-founder
Many thought that centralized crypto exchanges would take the easiest way out and impose protocol-level censorship instead of block individual transactions from banned crypto mixers for example Tornado Cash.
U.S. validators (including very effective Coinbase) are gonna push for protocol-level censorship
They cannot self-help by just staying away from facilitation of blocks that contains U.S.-sanctioned txs, because under certain conditions they could be dramatically slashed from doing this.
— _gabrielShapir0 (@lex_node) August 13, 2022
The present dilemma originates from the OFAC sanctions which have considered all Tornado Cash transactions illegal. However, decentralized finance (DeFi) experts accept is as true has complicated the problem. Rather of sanctioning a specific address or country, the regulators have made the decision to ban the protocol.
Here’s their email list of Tornado Cash sources which were banned
– Tornado Cash @GitHub organization
– personal @GitHub accounts of TC contributors
– all $USDC on Tornado Cash contracts @circlepay
– @infura_io RPC
– @AlchemyPlatform RPC
– https://t.co/SHvgEjTOMV domain @eth_limo— ️ Tornado.cash ️ (@TornadoCash) August 9, 2022
Experts believe a choice to ban would discourage many protocols and exchange operators from engaging with anything associated with Tornado Cash, including ETH transacted with the mixer, which can lead to unnecessary censorship.
