The Tornado Cash case continues to rattle, and the question of true decentralization 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 to comply with the requirements of 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 provides proof-of-stake (PoS) operations, and will join the Ethereum mainnet when the Merge is updated around September 15, 2022.
“Will you: A) Comply and censor the protocol B) Shut down staking and preserve the integrity of the network.”
The 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 then 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 stated entities, or if they would prefer to burn their stashed Ethers, effectively considering censorship as a form of attack to the blockchain.
Currently, the poll in question presents more than 61% of votes in favor of a burn of staked Ethers, 9% of votes that are opposed to it and 30% neutral. Vitalik Buterin, the co-founder of Ethereum, also contributed his voice:
“For what it’s worth, I voted X in your poll above.”
Vitalik Buterin thus shows his support for the burn of staky ETH by any validator who would like to comply with the requirements of regulators. Note that by doing so, the latter would thus 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 obvious that this problem must be solved quickly not only for Ethereum, but also for all services that present themselves as decentralized.
In particular, this echoes Circle’s recent decision to freeze several wallets that interacted with the Tornado Cash protocol, which had led the founder of MakerDAO to question the collateralization of DAI, which is largely provided by the USDC.