When starting a blockchain or cryptocurrency project, censorship resistance is crucial. Since the start, it’s been an essential part of crypto. It’s also one of the major reasons the entire crypto movement came into being in the first place.
Censorship resistance means that so long as a participant in a blockchain network goes along the fixed criteria to conduct a transaction, no one can prevent it – even law enforcement agencies.
Hence, it shouldn’t come as a surprise that the crypto billionaire and owner of crypto exchange FTX, Sam Bankman Fried, stirred up controversy after publishing an article on crypto regulation.
Sam Bankman-Fried Writes Controversial Piece on Crypto Regulation
In the piece, he spoke mainly about implementing blocklists. These would be a list of wallet addresses that are banned from engaging with a blockchain.
The main reason for them being banned is that they’re suspected of being used for malicious purposes.
The piece also mentions respecting the sanctions list published by the US Office of Foreign Assets Control. This can be done by keeping an on-chain list of sanctioned addresses, which would then be maintained by a responsible party such as the OFAC.
Getting Rid of Censorship Resistance Eliminates Whole Point of Crypto
However, the downside to this is that removing censorship resistance eliminates the whole value proposition and purpose of cryptocurrency.
When the movement first began, digital assets were supposed to be about giving users open access to financial tools and empowering them. Thus, it would give banking services to those without them.
According to the main opponents, there’s no value in developing the same old financial system that created all these issues in the first place.
The only difference will be that it’s labeled as cryptocurrency, but it will welcome censorship as well.
Censorship Already Being Undermined
Despite the fact that Sam Bankman-Fried is only now speaking on what crypto regulation should look like in the future, censorship resistance never got the importance it deserves.
On the Ethereum network, the latest upgrade, titled the Merge, has led to over half of the blocks in a day being processed based on OFAC compliance guidelines.
Even today, there’s no lack of skeptics who claim that digital assets are one big Ponzi scheme. Nevertheless, there has been adequate empirical and anecdotal evidence to prove the point that cryptocurrencies, particularly Bitcoin, are highly useful.
Leading crypto analysts believe that the main reason for Bitcoin’s usefulness and value is that it is censorship resistant.
That being said, Bankman-Fried also adds a crucial hedge to the proposal, explaining that requiring an allowlist to transact causes the breakdown of all commerce.
He even included a reasonable point that various analysts would agree with. In the proposal, Bankman-Fried mentions that preserving the freedom of P2P transfers and decentralized blockchains is highly necessary.