Centralized stablecoins on decentralized blockchains

Some background:

What happened?

The CENTRE Consortium blacklisted an Ethereum address for the first time due to a law enforcement request, essentially freezing $100,000 worth of USDC. The stablecoin is issued on a decentralized permissionless Ethereum blockchain, but in order to transfer USDC tokens users have to use a smart contract controlled by CENTRE — an open source project bootstrapped by Circle and Coinbase.

Shortly after the news made headlines in cryptocurrency media, an Ethereum researcher at Horizon Games, Philippe Castonguay, pointed out that Tether has banned 40 Ethereum addresses since 2017. More than $7 million worth of USDT were frozen just this year.

In response to the blacklisting procedures, Stuart Hoegner, General Counsel at Bitfinex — a sister company of Tether — claimed that Tether is assisting international law enforcement agencies in their investigations, according to The Block.

These incidents once again reminded about the limitations of services built by regulated businesses, on top of decentralized technologies.

51% attack

Bitcoin Gold has been attacked again

Bitcoin Gold (BTG) has experienced an extremely long 51% attack, in which an adversary was secretly mining a separate chain with rented hashrate for 9 days straight, before releasing it to the network. According to the developers, the attacker was renting computing power from cloud mining marketplace NiceHash, which was previously used to perform a similar 51% attack on Bitcoin Gold and other blockchains.

The team behind BTG detected the attack attempt early on, and decided to upgrade its software by introducing a checkpoint at block 640650, stopping the attacker from reorganizing the blockchain in his favor. Such move may be considered the equivalent of asking people to follow the so-called “honest” chain instead of the longest one, basically censoring the attacker’s blocks. Controversy about decentralization and censorship-resistance of Bitcoin Gold network sparked immediately after in the crypto community.

It is worth noting, that a 51% attack is a potential attack in which a miner controls more than 50% of the network’s hashrate, allowing him to reverse transactions in order to double-spend his coins. Bitcoin Gold (BTG) is a fork of Bitcoin (BTC) that runs on a modified Proof-of-Work mining algorithm called Equihash.

This was the third attack of this kind on Bitcoin Gold network since 2018.

In other news

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