{"id":14935,"date":"2022-11-29T06:02:58","date_gmt":"2022-11-29T06:02:58","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/dont-forget-the-importance-of-censorship-resistance-op-ed-bitcoin-news\/"},"modified":"2022-11-29T06:02:58","modified_gmt":"2022-11-29T06:02:58","slug":"dont-forget-the-importance-of-censorship-resistance-op-ed-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/dont-forget-the-importance-of-censorship-resistance-op-ed-bitcoin-news\/","title":{"rendered":"Don\u2019t Forget the Importance of Censorship Resistance \u2013 Op-Ed Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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Since people are once again talking about self-custody as one of crypto\u2019s unique strengths, I would like to remind everyone about an equally important fundamental value proposition of crypto that, in the early days, was touted as the killer feature. I\u2019m talking about censorship resistance.<\/strong><\/p>\n

The following opinion editorial was written by Bitcoin.com CEO Dennis Jarvis.<\/em><\/p>\n

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\u201cAlmost all blocks since The [Ethereum] Merge.\u201d Red represents censored blocks. Image and text from @takenstheorem<\/a> on Twitter.<\/figcaption><\/figure>\n

The Three Pillars of Censorship Resistance<\/h2>\n

In the financial context, censorship resistance is the ability to carry out financial actions despite the wishes of any third party.<\/p>\n

In crypto, the three pillars of censorship resistance are:<\/p>\n

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  1. The freedom to transact.<\/strong> This means third parties cannot prevent you from sending or receiving assets.<\/li>\n
  2. The freedom from confiscation.<\/strong> Third parties cannot take away or freeze your assets.<\/li>\n
  3. The immutability of transactions.<\/strong> It is impossible for third parties to change or revert transactions after the fact.<\/li>\n<\/ol>\n

    Troubling actions increasingly taken by centralized entities in the public and private sector demonstrate the importance of censorship resistance. Let\u2019s look at some examples:<\/p>\n

    Public Sector Censorship<\/h2>\n

    Governments have shown an increased willingness to exert control of financial institutions while also ratcheting up their crypto regulatory efforts. Earlier in the year, Trudeau\u2019s Canadian government took the unprecedented step<\/a> of invoking emergency powers to freeze or suspend the bank accounts of Canadian citizens without court orders. Their crime? Donating funds to fellow citizens participating in the Freedom Convoy protests.<\/p>\n

    The U.S. Treasury Department\u2019s watchdog the Office of Foreign Asset Control (OFAC) made headlines this summer by banning<\/a> and sanctioning addresses that used Tornado Cash, a decentralized application that improved privacy for users by \u201cmixing\u201d ETH<\/a>.<\/p>\n

    The U.S. Securities and Exchange Commission (SEC) increased crypto regulatory actions, best exemplified by this quote<\/a> from SEC Chairman Gary Gensler who said, \u201c\u2026the SEC will serve as the cop on the beat. As with seat belts in cars, we need to ensure that investor protections come standard in the crypto market.\u201d This isn\u2019t merely empty rhetoric, the SEC nearly doubled<\/a> the size of the Division of Enforcement\u2019s Crypto Assets and Cyber Unit in 2022.<\/p>\n

    Private Sector Censorship<\/h2>\n

    Post-merge, a majority of Ethereum\u2019s blocks are compliant with OFAC. This is a potential problem because OFAC-compliant relays will not include any transactions that interact with the Tornado Cash smart contract or other sanctioned wallet addresses as designated by OFAC. Not all blocks built by OFAC compliant relays are censoring, however, all blocks built by OFAC compliant relays will censor when non-compliant transactions are broadcast to the network. As Martin K\u00f6ppelmann, the co-founder of Gnosis, noted<\/a> about the state of OFAC compliant relays, \u201c[t]his means if the censoring validators would now stop attesting to non-censoring blocks they would eventually form the canonical, 100% censoring chain.\u201d<\/p>\n

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    Image from mevwatch.info<\/a><\/figcaption><\/figure>\n

    Centralized stablecoin companies Tether (USDT<\/a>) and Circle (USDC)<\/span> have<\/span><\/a> a<\/span> history<\/span><\/a> of cooperating with law enforcement requests to freeze assets. Circle<\/span> complied<\/span><\/a> with <\/span>OFAC\u2019s <\/span>Tornado Cash sanctions<\/a> by banning \u201ctainted\u201d USDC. So far Tether has decided to not comply, but that can change (and probably will, given sufficient pressure) in the future.<\/p>\n

    Outside of crypto, Paypal made<\/span> international news<\/span><\/a> when it released an updated policy that let Paypal fine users $2,500 for spreading \u2018misinformation.\u2019 Paypal quickly retracted the policy in public, though much of the language remains. This includes $2,500 fines that have existed since<\/span> September 2021<\/span><\/a> for the very vague \u201cpromotion of hate, violence, racial or other forms of intolerance that is discriminatory\u2026\u201d<\/span><\/p>\n

    While Paypal was almost universally condemned, its actions are consistent with a growing number of web2 companies, such as Twitter, Youtube, and Facebook, who are using their platforms to punish behavior they deem \u201cbad\u201d through levers like demonetization, suspensions, and bans.<\/span><\/p>\n

    Censorship Resistance Is the Antidote<\/h2>\n

    Censorship resistance is one of the main value propositions of decentralized finance in general and Bitcoin specifically because it fundamentally separates the technology from any traditional financial tools. In fact, censorship resistance is so strong in Bitcoin as to render it an economic freedom enhancing technology. This dramatization powerfully demonstrates why:
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