A report published recently disclosed about 253 crypto addresses were blocked by decentralized exchange (DEX) Uniswap because they were allegedly connected to government sanctions or crimes.
Banteg, the software developer, discovered the information from Uniswap’s server and saved the shared logs.
Transparency
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Yearn Finance contributor and software developer, Banteg, started a Twitter thread on August 19th in which he said that 253 crypto addresses were blocked by Uniswap.
He stated that the level of transparency shown by Uniswap was unusual. The DEX had partnered with TRM Labs in mid-April and the company blacklists addresses that might be associated with crypto crimes or sanctions.
Reports had appeared in the same month showing that the gated front end of TRM Labs had affected some of the innocent users of Uniswap.
However, at that point, no one had been sure about the number of crypto addresses that had been blacklisted.
According to Banteg, this number stands at 253 and 30 of the addresses are ENS domain names. He also highlighted there are 2 risk levels and 7 risk factor categories that exist.
He said that ownership of the address is checked and whether it is a counterparty of a ‘bad’ address. Only then a decision about blocking is made.
Tornado Cash
The US government had recently imposed a ban on the Ethereum mixer service Tornado Cash, which leverages ZKsnark and Coinjoin technology.
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This resulted in the arrest of an open source developer, while Github had its code erased and codebase distributors of Tornado Cash were also suspended.
In addition, the Discord server of the project was also deleted. But, Coin Center, the non-profit focusing on policy issues on crypto assets, is looking into the legalities.
It said that the OFAC (Office of Foreign Asset Control) of the US Treasury Department had overstepped its authority in implementing the ban.
DeFi teams taking precautions
While Uniswap has updated its front end thanks to TRM Labs, there are a number of other protocols in the decentralized finance (DeFi) space and crypto companies that are opting for the same measures.
Banteg had disclosed on August 8th that Centre Consortium had blacklisted about 75,000 USDC that had been owned by users of Tornado Cash.
The developer had said at that time that it was the first instance where it was not an individual account that was frozen, but an entire pool.
The issues that have occurred with Tornado Cash and the precautions that have been taken by Uniswap and other DeFi teams highlight the underlying weakness of the space.
There has been a lot of debate on whether these protocols are truly ‘decentralized’ as they claim to be. Even before Tornado Cash had been banned, the developers had blacklisted an Ethereum address.
In addition, Uniswap also received criticism back in July 2021 when it blocked about 100 tokens from its interface.
During these situations, users had discussed how they could bypass these restrictions through Uniswap’s smart contracts and Tornado Cash code.
