Vitalik Buterin Hopes To Burn ETH of Stakers Who Comply With Censorship

The Tornado Cash saga has sent shivers down the entire Web3 community, that to, just before the much awaited Ethereum PoS merge that is scheduled to take place on September 15th 2022.

Questions are being asked on whether blockchains truly are “censorship” resistant? While the debate continues, Vitalik Buterin, co-founder of Ethereum (ETH) and Chief Scientist at Ethereum Foundation, has pointed towards a solution. In a recent Twitter poll Vitalik Buterin voted to burn the staked ETHs of validators complying with regulatory censorship, indicating the direction Ethereum PoS would be taking in the future.

Backstory: Tornado Cash Saga

On 8th August, the United States Treasury Department’s Office of Foreign Assets Control (OFAC) issued sanctions against Tornado Cash for processing transactions worth more than $1.5 billion on behalf of illicit actors, including North Korean cybercriminals. OFAC has banned, US individuals and companies including crypto exchanges and financial institutions, from transacting with addresses which has links to Tornado Cash.

This regulatory compliance caused major cryptocurrency institutions including institutions active in DeFi to blacklist addresses linked to Tornado Cash, which caused a panic in the market. Parent company of USDC, Circle, has been heavily criticized by the DeFi community for freezing wallets linked to Tornado Cash.

Currently the Top 4 stakers on the ETH Beacon Chain are US based DAO/companies – Lido Finance (US founders, DAO), Coinbase, Kraken, Staked US making them entities that could comply with possible sanctions from OFAC or an organisation of the same order. Together they account for 66% of the total staked ETH giving them a lot of power in commanding transactions on Ethereum blockchain.

Question for @LidoFinance, @coinbase, @krakenfx, @stakedus, @BitcoinSuisseAG

If regulators ask you to censor at the #ethereum protocol level with your validators will you:

A) Comply and censor at protocol level
B) Shut down the staking service and preserve network integrity https://t.co/UYVR2L6tB1

— Lefteris Karapetsas | Hiring for @rotkiapp (@LefterisJP) August 14, 2022

Preserve The Network

With PoS around the corner, the cryptocurrency community is wondering in which direction will Ethereum head. Currently, around 66% of the stakers are most likely inclined to comply with censorship to avoid sanctions.

In turn, influencer Erica Wall took to Twitter to conduct a poll to find out whether the Ethereum community will consider censorship as an attack on Ethereum network or tolerate the censorship. If censorship by the stakers is considered as an attack, then the Ethereum protocol can burn the staked ETH of the validators.

https://twitter.com/ercwl/status/1559265839723040769

Vitalik Buterin also took part in the poll and voted for the first choice, that is “Consider the censorship an attack on Ethereum and burn their stake via social consensus”. While this is only a poll and doesn’t necessarily mean that the staked ETH will burned, it shows that the Ethereum Dev team is  aware of the censorship problem, and the threat it posses to the future of decentralization.

fwiw I voted X in your above poll

— vitalik.eth (@VitalikButerin) August 15, 2022

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