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Bitcoin as a Censorship-Resistant Currency
Bitcoin, the world’s most popular blockchain, is perhaps the best example of a censorship-resistant network. Nobody can take down Bitcoin because it is now running on thousands of computers worldwide. Nobody can prevent you from transmitting Bitcoin to another address, provided you have access to the Internet and understand how to build your own wallet. And, as much as airport security agents would prefer not to accept it, no one can prevent you from bringing $1 billion worth of Bitcoin into another nation on a piece of paper if you happen to be a whale.
Millions of people have gained new financial opportunities as a result of the evolution of the cryptocurrency space. Aside from Bitcoin, we now have all kinds of magic, such as flash loans and instant lending, made possible by Ethereum’s sprawling DeFi ecosystem. DeFi is also supposed to be permissionless, yet issues such as dYdX’s compliance with US rules and MetaMask’s wallet blocks on some users have exposed system weaknesses.
Due to recent world events, the importance of censorship resistance in crypto has become a prominent subject this year. In February, Canada’s Prime Minister Justin Trudeau sparked outrage by threatening to freeze the assets of people who protested against COVID-19 vaccine mandates. Following a GoFundMe fundraising campaign ban, Canada went so far as to target a number of cryptocurrency wallets associated with the so-called “Freedom Convoy,” prompting crypto aficionados such as Kraken’s Jesse Powell to criticise the government’s severe stance towards dissenters.
A few weeks after the collapse of the Freedom Convoy, Russian President Vladimir Putin directed his military forces to begin bombing Ukraine. As a result, the West imposed a slew of sanctions on Russia, sending the ruble plummeting. Companies such as Netflix and Coca-Cola have pulled out of the country as a result of the sanctions, and Russian athletes have been barred from competing in major sporting events.
Cryptocurrency rapidly became a part of the story after officials warned that Russians may use Bitcoin to circumvent sanctions. Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, who led the country’s crypto fundraising campaign, even called for exchanges to block Russian users, sparking outrage from many enthusiasts and prompting top executives such as Brian Armstrong and Changpeng Zhao to speak out in defence of Russian citizens.
Last week, Binance announced that it would restrict services to Russian users transacting more than €10,000 in order to comply with EU penalties. This is the first exchange to announce such a move, and it certainly will not be the last. After all, these are for-profit businesses; they will, of course, adhere to regulations. “Binance gave its word to the global community that we would implement any and all sanctions actions, and we are living up to that commitment,” Zhao said in a note on the subject. “World leaders need to do what is necessary to put an end to this brutal conflict and bring peace to the region for our users, employees, and countless other blockchain community members.”
1/3 I feel the need to address our announcement yesterday regarding regarding the EU’s new crypto sanctions. We believe a crypto exchange should not have the power to unilaterally freeze an entire nation’s user accounts. And it must follow all sanction rules, old and new.
— CZ 🔶 Binance (@cz_binance) April 22, 2022
While little can prevent exchanges and other centralised firms from complying with regulatory restrictions, let’s hope DeFi does not follow suit. Many people were taken aback when MetaMask’s Infura accidentally blocked Venezuelan users. We should work towards a future in which anyone in the United States, United Kingdom, Venezuela, or Russia can take out a loan on Aave if they so desire. This is the purpose of permissionless networks; we cannot simply settle for a halfway house of censorship resistance when it suits us.
As the popularity of cryptocurrency has grown, regulators and governments around the world have taken notice. Aside from watching DeFi, one of the reactions has been a push to embrace CBDCs, which are similar to the digital yuan used in China today. Crypto enthusiasts are already concerned about the possibility of a CBDC world, and more ordinary people should be concerned: if a government issues and controls a digital currency, it could theoretically be programmed to exclude certain citizens. This may sound like a Black Mirror dystopia, but there are signs that it is on its way.
In the midst of all of this, Elon Musk, the world’s richest person, has been publicly playing 4D chess to acquire a 100% stake in Twitter. Elon says he wants to restore free speech, which has enraged some, who argue that if Twitter is left unmonitored, it will become a platform for hate speech. Elon has received a lot of support from crypto enthusiasts, which isn’t surprising given that many of them share similar ideologies.
Whatever happens with Russia, DeFi in the future, and social media platforms like Twitter, we can be certain that Internet money will continue to be a powerful tool for financial inclusion (and who knows, maybe Web3 social really will take off with it). Despite the fact that exchanges are now subject to unprecedented sanctions, no one is going to put a stop to Bitcoin anytime soon.