Monday 26 September 2022
Home / none / Ethereum may now be more vulnerable to censorship — Blockchain analyst

Ethereum may now be more vulnerable to censorship — Blockchain analyst

Ethereum’s upgrade to proof-of-stake (PoS) may make it more vulnerable to government intervention and censorship, according to the lead investigator of Merkle Science.

Speaking to Cointelegraph following the Ethereum Merge, Coby Moran, a former FBI analyst and the lead investigator for crypto compliance and forensic firm Merkle Science, expressed his thoughts on some of the risks posed by Ethereum’s transition to PoS.

While centralization issues have been broadly discussed leading up to the Merge, Moran suggested the prohibitive cost of becoming a validator could result in the consolidation of validator nodes to the bigger crypto firms like Binance, Coinbase and Kraken.

In order to become a full validator for the Ethereum network, one is required to stake 32 Ether (ETH), which is worth around $47,000 at the time of writing.

A pre-Merge report from blockchain analytics platform from Nansen earlier this month revealed that 64% of staked ETH is controlled by just five entities.

Source: Nansen

Moran continued to say that these larger institutions will be “subject to the whims of governments in the world,” and when validator nodes identify sanctioned addresses they can “be slashed rewards and then eventually kicked off the system,” with businesses prevented from interacting with them:

“Either you will comply and you will siphon off that sort of interaction […] or you run the risk of being fined, being scrutinized, or potentially being sanctioned yourself.”

Vitalik Buterin spoke about this risk in an Aug. 18 developer call, suggesting one of the forms censorship could take is validators choosing to exclude or filter sanctioned transactions.

Vitalik went on to say that as long as some validators do not comply with the sanctions, then these transactions would eventually be picked up in later blocks and the censorship would only be temporary.

On Aug. 8, crypto mixer Tornado Cash became the first smart contract sanctioned by a United States government body.

Related: Rep. Emmer demands an explanation of OFAC’s Tornado Cash sanction from Sec. Yellen

In reaction, various entities have complied with the sanctions and prevented the sanctioned addresses from accessing their products and services.

The development has had a large effect on the Ethereum community, with EthHub co-founder Anthony Sassano tweeting on Aug. 16 that he would consider Ethereum a failure and move on if permanent censorship occurs.

Original Article

About Jude Savage

Check Also

Reversible transactions could mitigate crypto theft — Researchers

Stanford University researchers have come up with a prototype for “reversible transactions” on Ethereum, arguing it could be a solution to reduce the impact of crypto theft. In a Sept. 25 tweet, Stanford University blockchain researcher Kaili Wang shared a run down of the Ethereum-based reversible token idea, noting that at this stage it is not a finished concept but more of a “proposal to provoke discussion and even better solutions from the blockchain community,” noting: “The major hacks we've seen are undeniably thefts with strong evidence. If there was a way to reverse those thefts under such circumstances, our ecosystem would be much safer. Our proposal allows reversals only if approved by a decentralized quorum of judges.”The proposal was put together by blockchain researchers from Stanford, including Wang, Dan Boneh, Qinchen Wang, and it outlines “opt-in token standards that are siblings to ERC-20 and ERC-721” dubbed ERC-20R and ERC-721R. However, Wang clarified that th..

Leave a Reply

Your email address will not be published. Required fields are marked *