Some are wondering if the crypto bear market is over, as the bitcoin price has recovered back to the $24,000 level. A cascade of liquidations led to bankruptcy and insolvency issues at a variety of crypto institutions. However, it seems that the worst may be over. However, there are still plenty of worrying developments in the crypto space this year. Especially, when it comes to regulation.
This past week, the U.S. Treasury sanctioned the privacy-focused decentralized application Tornado Cash, which is an unprecedented move. At a base level, Tornado Cash exists as nothing more than a smart contract on the Ethereum network. However, various governments all over the world do not want this technology to be in use. In use by countries like North Korea to steer clear of sanctions.
The crypto market has started to recover over the past few weeks. Many have pointed out that the world’s number two crypto asset, ether, has been outperforming bitcoin. Indeed, much of the chatter on social media, specifically Twitter, has been a debate. A debate around the merits of Bitcoin maximalism as an ideology. Have the proponents of a bitcoin-only investment philosophy been proven wrong? Let’s take a closer look.
U.S. Treasury Sanctions Tornado Cash
To understand the issues around the Tornado Cash sanctions, you must also understand the history of the Crypto Wars. Strong encryption first became available to the general public. Also, many governments worldwide—even western democracies—did not think this sort of technology should be in use by just anyone.
For example, encryption tools were originally in regulation as munitions in the United States. This is which means it was illegal to export computer code outside of the country. Eventually, the free speech implications of this sort of regulation was mock by protestors who wore shirts that display the source code for an encryption tool. For the time, it was clear that code was speech, and someone could not be lock or charge with a crime for simply writing open-source software or sharing it with someone else.
With all that said, it’s clear that the Crypto Wars may be making a return in the 2020s. Tornado Cash is another example of software that is nothing more than open-source code. However, the code has been publish on a blockchain this time. Anyone who runs an Ethereum node can access the Tornado Cash app, which means there is no central authority behind the project. In their press release regarding the sanctions against Tornado Cash, the U.S. Treasury notes that the financial privacy app has been in use by a hacking group in connection to North Korea.
North Korea is said to have used Tornado Cash to launder proceeds from various hacking attacks over the years. While Tornado Cash is hosted on the Ethereum blockchain, the reality is there is also a large amount of infrastructure built around the project in a more centralized manner. It is these points of centralization that are easy for governments to regulate.
For most apps in the decentralized finance (DeFi) space, a web app is a critical aspect of improving ease-of-use. This is because it allows anyone with a Metamask wallet in their browser to easily access the application.
On top of the sanctions against Tornado Cash, one of the developers behind the project has also been in arrest in the Netherlands. The full implications of the actions taken against Tornado Cash are unknown at this point, but this case could have huge implications for internet privacy at large.
While Tornado Cash has undoubtedly been the top story of the past week, it’s also worth noting the debate over bitcoin maximalism that is taking place on Crypto Twitter. Bitcoin maximalism is a difficult term to define, as it means different things to different people. Some say Bitcoin must be the only asset of any kind that is held as savings, while others say that the maximalist concept must only apply to the realm of digital money.
It is the former of those two ideologies that has come under fire lately, as many crypto market commentators have pointed out that there is clearly demand for crypto assets other than bitcoin. Additionally, there is a large amount of interest in Ethereum particularly right now. This is mainly due to the crypto network’s upcoming move to proof-of-stake. This which is in expectation to take place next month. All-in-all, the talk of a potential end of bitcoin maximalism appears to be in focus. This is on some of the more toxic aspects of the crypto community.
Bitcoin moderates are attempting to bring the world’s first and most popular cryptocurrency into the greater crypto ecosystem. However, while some of the more ardent bitcoin maximalists see everything that isn’t bitcoin to be nothing more than a scam. There are plenty of scams to be in the crypto market. Some members of the Bitcoin community are distancing themselves from the bitcoin-only ideologues. The ones who scream scam every time someone mentions an alternative crypto asset. It seems clear that bitcoin is still by far the most preferred form of digital money on the market. However, there may also be room for other crypto tokens that are able to enable different types of functionality for their users.
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