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A Red Letter Day - The Daily Gwei #524
Things just got (very) serious.
As I’m sure you’re all well aware of by now, the U.S Treasury Department has sanctioned Ethereum-based privacy tool Tornado Cash and associated addresses. On top of this, Circle has frozen all the USDC that had been deposited into Tornado Cash’s smart contracts. Obviously this is one of the strongest moves a government body has made against something in crypto and it may unfortunately just be the beginning.
First off, and as I said in my tweet above, this move from the treasury department really just reinforces the fact that we need to decentralize everything in crypto. From the front-ends to the RPCs to the smart contracts themselves - if any layer in the stack is centralized, then the whole app/service becomes compromised and easily censorable. I also think that Tornado Cash wouldn’t of been sanctioned like this if the app itself didn’t work - clearly it works very well as a privacy-preserving tool and it’s something that has probably given U.S law enforcement grief in the past (hence the move to sanction the app).
There are inevitably people pushing the same old line we’ve all heard before - “if you’ve got nothing to hide then you’ve got nothing to fear”. But valuing privacy has little to do with having “nothing to hide” and everything to do with not wanting people snooping around your business - especially not the government. I mean, we all very readily gave up our financial privacy by switching to digital banking instead of using cash for most transactions but I believe this is because we had little choice in the matter (aka we had no alternative). Crypto is that alternative that gives us the choice to have a fully-private digital financial life if we want to - that’s incredibly powerful and obviously scary for governments since they like having total view of everyone’s financial life (for a number of reasons).
So, where to from here? Well I’m no legal expert so I’m not sure what’s going to happen in the legal/regulatory arena - will we see a reversal of this decision from the U.S or will they double down and start applying sanctions to other privacy tools like Aztec, Zcash and Monero? Will they go even further and make it illegal for people to use non-KYC’d exchanges like Uniswap? Or will they go even further than that and force centralized exchanges to not allow withdrawals to people’s own Ethereum address? Sadly, at this time, I think that anything is possible.
I know at times like this it’s somewhat difficult to “keep the faith” in our ability to continue to build and use decentralized apps & services, but I think it’s now more important than ever for us to do so. The path we are on was never going to be easy - we are building things that the powers that be would rather not see built - but if you read some history you’ll notice that this has always been the case.
And as I’ve said before, the only way to test if something is truly decentralized is to have nation states try to control it.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.