In the world of Virtual Assets, a storm is brewing.
Keir Finlow-Bates, on the back of the debacle with Binance, created a video about how most people’s perception of the expectations of what ‘decentration’ should deliver miss the point. Keir started out by saying he wanted to talk about ‘decentralization’ in terms of ‘risk of censorship’.
He went on to say.. of systems out there.. Bitcoin is probably the most decentralized.
Bitcoin will just keep ticking along.. there are enough people interested in keeping it running… there are enough miners making money to keep it running… yes, you could be ‘censored’ by a particular mining pool… there are enough mining pools out there, that eventually, as long as you are paying the transaction fee… someone will say ‘I want that money’ and your transaction will get processed..
‘When you get to ‘chains’ such as ‘Binance Smart Chain’ (BSC) the risk is much higher… the validators on that particular chain are smaller in number, and they are all controlled by one or two entities …. as we are seeing, Binance is now in trouble with regulators, there is a risk, they may wake up one day, and it’s not worth running this chain anymore, and then it’s gone… so there, you are back in the arena of centralized service providers.’
In his LinkedIn comments section, I added :
- All scaling solutions, L2+ and EVMs off Ethereum carry the same risks Binance do.
- Security from a hack vulnerability perspective is another issue running in parallel to censorship resistance, though generally, the poorer the censorship resistance of the model, the higher the potential for hacking as well, so they sort of run in tandem.
The comment garnered a positive reaction from Keir.
One could argue, as I pointed out in last weeks’ ‘Three Bites of the Cherry’ series, in the section:’ IS POLYGON NOW EXITING WEB 3, AND LEVERAGING NO BLOCKCHAIN AT ALL??’ that Polygon now has much much bigger problems than BSC, due to the implementation of their new PRC 20 protocol.
‘Adding additional layers to Ethereum blockchain protocol can increase the overall security risk. This is because each additional layer introduces new components and interfaces that could potentially be exploited by attackers. ’…
While the fulcrum of the Soban Raza post it was based on was:
‘Layer 2s are highly centralized’
So what we have, living inside this big virtual environment, encompassing blockchains, off-chain architectures, cryptocurrencies and web3, is some free and open blockchains like Bitcoin and Handshake on one hand..
and we have other highly centralized structures who can sensor us, control us, get hacked, lose our assets with no recourse, randomly get shut down driven by commercial imperatives, and are easily pushed around by the SEC and other bodies.
This is a great schism.
In the world of ‘legacy’ value instruments, we have another schism going on.
This is quite simply, a movement to forcibly replace cash with CBDC.
Austin Carstens, General Manager, BIS (Bank for International Settlements) – in cash, we don’t know for example, we don’t know who’s using a 100 dollar bill today… we don’t know who’s using a 1000 peso bill today… with CBDC.. we will have ABSOLUTE CONTROL to determine the use… and the technology to enforce that.
CBDC advocates, in particular the (unelected) President of the European Central Bank, Christine Lagard, want to sell it as super-efficient, and ‘bottleneck’ removing version of ‘cash’.
However, Kristina Lilieneke says: It will be programmable which makes it anything but ”cash-like”
In tandem with this, there is also a plan for a digital wallet, which can track other actions, for example, refusal to take a state rolled out vaccine. The means is there for the state to freeze access to funds, any time failing to act on a ‘request’ is refused. (See also, James Villar Substack Article courtesy – Jason Meyers)
In this way, many personal freedoms we take for granted, while they may exist in theory, will no longer exist in practice.
Unwillingness to accept CDBC in Canada, source: Magdalena Grownowska
Different nations have different plans, but there is an overall plan to phase out cash, either entirely, or reduce it to an impractical limit.
Earlier this year in Nigeria, a currency redesign program was ‘sold’ to the public in advance of the Presidential Election as a measure to curb attempts by political actors to bribe their way to electoral fraud with pre-stockpiled mountains of cash.
However, the process ground availability of cash over a period of around a month almost to a complete halt. It caused intense hardship. Some in hindsight, reflecting on those days, wonder if it was not an experiment to funnel the populous into using the CBDC. The ‘e-Naira’ is deeply unpopular and was a huge waste of funds at a significant cost to the tax payer. If it was an attempt at forced e-Naira adoption, then it dismally failed.
THE UNHOLY ALLIANCE
Behind the scenes, a company from the world of ‘networks built off Ethereum’ has had many meetings with actors behind the intended Euro CBDC. It cannot be named in this section for legal reasons.
So what we have is one of the highly centralized structures built off Ethereum who can sensor us, control us, get hacked, lose our assets with no recourse, randomly get shut down driven by commercial imperatives, and are easily pushed around by the SEC and other bodies… joining with the sovereign forces , or in this case, the unelected ECB, to eliminate cash, and help those other forces control us though CBDC.
This can have serious consequences, especially in countries in the global south, whose disaspora relatives are helping from abroad to keep family members surviving through difficult times. Family remittances is something a CBDC can be programmed to prevent happening either as a general rule, or singling out individuals.
Robert F. Kennedy Jr makes a political statement on what CBDC will bring – ‘financial slavery and political tyranny’
This is an example of one of the types of restrictions programmable in a cash-less or cash restricted society with CBDC, and commercial actors in extended layer 2 and scaling solution networks are helping make this a reality.
This may give some builders, NFT buyers and token speculators some pause for thought. If you are engaging with those networks in ways that give them business, you may be helping to bring CBDCs closer to reality, and everything bad that can come with them.
And perhaps this is about to become a war, that has Bitcoin, cash, and by extension Handshake, on the same side?
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