The Tornado Cash affair continues to cause tremors, and the question of true decentralisation is being asked more than ever. Vitalik Buterin, the co-founder of Ethereum (ETH), has indicated that he wants to burn the Ethers of depositors on the Beacon Chain who come into compliance with regulators such as OFAC.
The issue of Ethereum censorship
The recent banning of cryptocurrency mixer Tornado Cash by the Office of Foreign Assets Control (OFAC) is raising a lot of questions within the cryptocurrency ecosystem, and censorship doesn’t seem to be on everyone’s radar.
On Twitter, Lefteris Karapetsas, the founder of the portfolio tracker Rotki, questioned 5 of the Beacon Chain’s top depositors asking them what they would do if a regulator ordered them to censor certain transactions on Ethereum.
For the record, the Beacon Chain operates the Proof of Stake (PoS), and will join the Ethereum mainnet when the Merge is updated around 15 September 2022.
If regulators ask you to censor at the ethereum protocol level with your validators will you:
A) Comply and censor at protocol level
B) Shut down the staking service and preserve network integrity https://t.co/UYVR2L6tB1
– Lefteris Karapetsas | Hiring for @rotkiapp (@LefterisJP) August 14, 2022
” Will you : A) Comply and censor the protocol B) Shut down the staking and preserve the integrity of the network “
This tweet in question was itself in response to a tweet from @TheEylon, which noted that currently 66% of Beacon Chain filers were entities likely to comply with potential OFAC or similar sanctions.
Note that Lido has 31% of the ETH deposited on the Beacon Chain with over 129,000 validators, followed by Kraken with 1.2 million ETH deposited and Staked.us with 396,000 ETH deposited.
Vitalik wants to preserve the network
In turn, Eric Wall questioned the potential for censorship on the Ethereum network by proposing a poll to find out if the Ethereum community would adhere to a possible form of censorship from the previously mentioned entities, or if they would prefer to burn their staked Ethers, considering censorship as a form of attack to the blockchain.
Currently, the poll in question shows over 61% in favour of burning stashed Ethers, 9% opposed and 30% neutral. Vitalik Buterin, the co-founder of Ethereum, also contributed his voice:
fwiw I voted X in your above poll
– vitalik.eth (@VitalikButerin) August 15, 2022
“For what it’s worth, I voted X in your poll above. “
Vitalik Buterin is thus in favour of the burn of staked ETHs by any validator who wishes to comply with the regulators’ requirements. It should be noted that by doing so, regulators would opt for a selection of blocks to be validated, which could lead to disruptions.
Although this is only a response to a tweet, it seems clear that this issue needs to be resolved quickly not only for Ethereum, but also for all services that present themselves as decentralised.
This echoes Circle’s recent decision to freeze several wallets that interacted with the Tornado Cash protocol, which led the founder of MakerDAO to question the collateralisation of DAI, which is largely provided by the USDC.