Chain Reaction - 15th August 2022
Have we opened up a Pandora's Box?
Howdy everyone, hope you’ve had a great weekend! It’s been another great week productivity-wise without the need to go to too many after-work events (though it was fun heading to the NFT Sydney rooftop party on Friday).
Last Monday we had our weekly Twitter Spaces (and I remembered to hit record) so folks can check out the replay. We were honoured to have a special guest in Steve Vallas, ex-CEO of Blockchain Australia and now running a new venture called Blockchain APAC. It’s mission is to join the dots and be the connective tissue for blockchain from a regional perspective. It’s an exciting time and we’ll watch on in earnest.
Additionally, we were able to provide some commentary for The Defiant after the Tornado Cash sanctions by OFAC (Office of Foreign Assets Control) came out early in the week. The view I put forth was that this is a pretty big event but governments and regulators should look more towards understanding this space more and seeing it for its positive potential rather than it’s negatives (which are small in comparison). See article and video below:
Another scary thing here is the precedent this sets for the ability of a centralised storage solution like GitHub to enact an enforcement on users as has happened to the GitHub repository for Tornado Cash. This could come back to bite us in the ass later but for now, we’ve seen calls for decentralised code repositories with an example of this in Radicle.xyz
Also, if you want to know more about the implications of using Tornado Cash - here’s one of the first threads to come out on it shortly after it all happened:
As the week played out we also saw some great insights on the ramifications of OFAC sanctions with this video from CoinDesk. Given that anyone caught with crypto coming from sanctioned addresses would have issues, someone was smart enough to demonstrate out how nonsensical this is by “dusting” celebrity addresses with ETH coming from Tornado Cash wallets. Whilst this was only a small amount (and likely ignored), imagine in future how a more significant amount could be used to taint the addresses of non-criminals. A potential Pandora’s Box right here.
Worse yet, is that these sanctions are not against individuals but against code. It puts into question whether we need to consider freedom to code just like we do freedom of speech and another CoinDesk video dives into this.
It highlights issues like in future, if transferability between non-whitelisted and whitelisted addresses becomes impossible, the implications this could have for crypto overall (and we’ve already seen USDC is capable of being frozen - and Maker’s DAI could be affected as well - https://thedefiant.io/tornado-impact-makerdao-dai).
Additionally, on Friday we saw the creator of Tornado Cash arrested in Holland - so it’s not just code they’re going after, it’s people to https://www.cnbc.com/2022/08/12/dutch-detain-suspected-developer-of-crypto-mixer-tornado-cash.html
This issue is still unravelling and whilst the total amount on Tornado Cash was only around $400+ million ETH, it’s likely to open up bigger issues and this is only just getting started.
What the Tornado Cash news has overshadowed is the Ethereum Merge which should come around September 15-16. This is a few days before the Aussie Crypto Conference on the Gold Coast on the 17th 18th of September (see here for details and tickets https://auscryptocon.com/). There was also news out of Chainlink highlighting they would only support the main Ethereum chain after The Merge. So, any PoW (proof of work) forks of Ethereum will not be covered and any dApps on those need to get themselves and users ready for the coming change
https://cointelegraph.com/news/chainlink-ditches-ethereum-pow-forks-for-pos-after-the-merge
There’s also the effect this would have on Ethereum miners who now have to find another way to make a living.
In other news, it’s not all negative. We saw that capital raises continued to grow stronger, despite the natural headwinds of being in a bear market - https://bitcoinist.com/despite-crypto-winter-fundraising-in-2022-overshadows-previous-years-record/
In regulatory news, we saw the Reserve Bank of Australia (RBA) announce it would trial a digital currency/CDBC - https://www.abc.net.au/news/2022-08-09/reserve-bank-of-australia-to-trial-digital-currency/101313556
Additionally, we saw ASIC announce the need for consumer protection in the space which is unsurprising but strengthens the argument for those that believe we’re going to get regulated - https://www.itnews.com.au/news/australian-crypto-ownership-warrants-consumer-protection-says-asic-583890
In further support of the crypto space, we also saw Blackrock dive into the crypto ecosystem with the launch of their Bitcoin Private Trust - https://www.blackrock.com/institutions/en-us/insights/bitcoin-private-trust
Additionally, it was great to dive into more meetings and we’re seeing a lot of interesting insights. More web3 projects are relooking at how to do things better as the bull market has forced many to relook at the utility they provide. Additionally, it’s heartening to have more conversations with folks in web2 who are looking to embrace the power of blockchain tech.