Key Takeaways
- The Ethereum community is debating whether large validators may end up being forced to censor transactions following the Merge.
- Ethereum creator Vitalik Buterin believes transaction censorship would amount to an attack against the network.
- Some Ethereum projects have already started blacklisting sanctioned addresses.
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With the upgrade to Proof-of-Stake rapidly approaching, the Ethereum community is debating whether the recent sanctions against Tornado Cash may end up endangering the blockchain itself.
Merge Hype Overshadowed by Tornado Cash
The Ethereum community is concerned about censorship.
Only a month remains before Ethereum switches away from its Proof-of-Work consensus mechanism to Proof-of-Stake. The transition, colloquially known in the crypto space as the “Merge,” is expected to reduce the network’s energy consumption by 99% and slash token emission rates by 90%. Delayed multiple times in the past, the highly-anticipated upgrade looks set to take place next month on September 15.
Dampening the community’s excitement, however, came the recent decision from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) to add the popular privacy protocol Tornado Cash to its sanctions list, asserting that the app was primarily a money-laundering vehicle for cyber criminals. The move is unprecedented in that it is the first time a piece of open-source code has been added to a sanctions list. Following the move, Dutch authorities arrested a Tornado Cash developer in connection to a separate investigation into the privacy protocol.
Upon news of the Tornado Cash ban, several companies such as stablecoin issuer Circle, software version management platform Github, and Ethereum infrastructure provider Infura promptly complied with the sanctions, blacklisting Tornado Cash affiliated Ethereum addresses listed in the OFAC statement. The Tornado Cash case sets a worrying precedent, and now the crypto community has deep…
