Writing about crypto is a very interesting experience, we all have our unique perspective and way of seeing things. We all have a vision of what the future might be, based on what we observe around us and our understanding of these facts. At the same time, as humans, we tend to defend these views and be vicious against those who challenge them.
So I ask my dear reader to keep this in mind as you continue on with my writings, and take this for what they are, my opinion, and the way I see what is going on and where this might take us. Use it to inform your worldview if you find it compelling, or disregard it if you don’t. I am not here to take sides, pick fights or try to win a narrative contest.
This is a really interesting time for the Ethereum world, a mixture of different events have collided to create an uncertain future for the largest smart contract platform in the world.
1- USDC blacklists Tornado.Cash users.
For those of you that don’t know (many articles of what happened have been written so I won’t go into too much detail), Tornado.Cash is a platform that allows users to mix their transactions with other people, this makes it harder to track the transfers of tokens, and thus improves privacy for those who participate. The platform and service itself is decentralised and it operates without judging it’s users, it is trustless and permission less.
Circle, the company behind USDC, blacklisted addresses that used coins involved with Tornado.Cash, siding with OFAC. This truly shows the dangers of centralization and why the ethos of blockchain since its inception has been to go against it.
It is an extremely dangerous weapon, especially when considering that a lot of USDC holders never even heard of Tornado.Cash, they were just unlucky enough to have goten coins which at some stage, went through it.
This symbolises an endemic risk inherent in the Ethereum ecosystem. The biggest issuer of stablecoins, is starting to dictate how people can and can’t use the tokens they are currently self custodying.
2- The creator of Tornado.Cash gets thrown in Jail.
A dangerous precedent has been set, an innocent man who did nothing illegal, is now in jail. All he did was write a piece of code and make it available for people online. The allegations are that the protocol was used to launder money, that may be so (we actually don’t know if or to what extent this is true). Yet it makes me wonder how many times Big Banks have been found guilty of money laundering, without anyone going to jail.
The fact that from this day on, no developer can be sure that anything they build will come back to haunt them worries me, since it may dissuade programmers from creating these tools that we sorely need.
3- Lido, USDC and The Forks.
I am not the first person to express worry about Lido and USDC gaining a large percentage of influence on the network. Especially when thinking about what could happen in case of a hard fork. If these two entities decided to support one chain over the other, even if it went against what the community felt was better, they could still get away with imposing their view on others.
For a decentralised protocol this poses a great threat. These signs, to my eyes, are not great.
This would take a lot more time to explain and compare POW against POS, I might do so in a future article. In short, I really like POW and have my doubts on POS, I’m unsure a system like that can function as it should. I still hold an open mind and will seek to observe the outcome and learn as much as possible from it. There has never a cryptocurrency as big as Eth making such a big change in their consensus mechanism.
Here is one of my concerns, there is an interesting dynamic on POW that is missing from POS.
In POW you get coins for validating and securing the network, these coins by themselves wouldn’t give you any more power though. In order to gain more hashrate you need to buy machines and spend electricity, so you’ll need to spend the coins.
Basically as a miner you can decide either to keep the coins and not increase your hashrate or, spend your coins and get the tools to mine more. This helps to keep the balance between coin holders and miners. To my understanding, in POS you get more coins and you can use those coins to gain more voting power, and essentially have both at the same time.
I’m concerned that this will make the already established big players gain more and more power over the network.
This by itself wouldn’t be so worrying if we hadn’t already seen them blacklisting of addresses and taking actions that go against the essence of what blockchain and distributed technology is supposed to be.
I am a big supporter of Bitcoin, I think it is the most neutral and decentralised of all the blockchains out there, and the one which has best embodied the ethos of freedom money. At the same time, unlike a traditional maximalist, I think Smart Contracts are a really powerful technology. One that if done right could benefit and free humanity from a lot of our current problems.
This is why I am devoting a lot of my time to studying the Bitcoin layer 2 ecosystem, and how it could be possible to create DEFI platforms and stablecoins on Bitcoin, while avoiding the mistakes Eth has done.
It is my personal belief that most, if not all of what Altcoins are doing today will be replicated on a second layer of Bitcoin. Either through sidechains like Rootstock (RSK) or by the implementation of Drivechains, many people are currently working on this solution. I expect to see a lot of innovation in the space in the coming years.
I think Ethereum has been a phenomenal driver of innovation, but it requires to be grounded on the stable, secure and distributed immutable ledger that is Bitcoin.
I know many of us disagree on things, but I hope we can agree that we should aim to build a fairer and freer world for everyone. We can all discuss ideas freely, share our thoughts, learn together, and build towards that noble goal.