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Ocean mining pool refutes claims of censoring certain Bitcoin transactions

Dashjr rejected blame for accusations aimed against Ocean and asked Samourai Wallet to fix the bug "on your end."

Bitcoin (BTC) wallet provider Samourai Wallet has accused Bitcoin mining pool Ocean of censoring Whirlpool CoinJoin transactions and BIP47 notification transactions from Dec. 6. However, Ocean’s top executive has denied the claims while asking the Bitcoin wallet provider to fix a bug in their software.

On Dec. 7, Samourai Wallet claimed that a new policy enacted by Ocean mining pool censors certain Bitcoin transactions. In addition, the wallet provider accused X (formerly Twitter) and Block co-founder, Jack Dorsey, who is also an investor at Ocean, of a “hostile action.”

Samourai Wallet continues to accuse Dashjr of lying and deceiving community members by shifting the blame away from itself as it asks the community, “Don’t let them get away with this.”

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Lightning devs must ‘wake up’ and fix security bugs, not please VCs: Bitcoin dev

Antoine Riard, who left the Lightning Network in October, argues the Lightning Network is also at risk of becoming increasingly centralized and susceptible to single points of failure and censorship risks.

Developers working on the Bitcoin layer 2 Lightning Network have become less security-oriented and more focused on producing cash flow for their investors, argues a former Lightning Network developer.

Bitcoin core developer and security researcher Antoine Riard, made headlines last month after leaving the Lightning ecosystem over concerns about a new attack vector called “replacement cycling,” which exploiters could potentially use to steal funds by targeting payment channels.

At the time, Riard said the new class of attacks puts Lighting in a "perilous position" though some observers argued that 

Riard told Cointelegraph that he’s now working at the Bitcoin base layer to address the issue and urged Lightning developers to follow suit:

“[They need to] wake up, stop the sleepwalking and go to the whiteboard to design a robust and sustainable fix in hand with other developers at the base-layer, preserving the long-term decentralization and openness of Lightning.”

Riard also claimed that many Lightning-focused firms are compromising Lightning’s mission and security incentives for the sake of pleasing venture capitalists:

“The sad fact being most of them are working for VC-funded entities, or commercial entities with the same low-time preference, at the long-term detriment of end-users.”

Riard said it’s a classic example of the “tragedy of the commons” — where individuals and entities with access to a public resource act in their own interest and deplete it.

Decentralization appears to be a trade-off that these VC-funded Lightning firms are willing to make, which is a major concern to Riard.

“Centralized systems are great in the scale of efficiency, however they come with the downside of systemic single-point-of-failure and lower cost of user censorship, fundamental risks that one might wish to hedge against as a Bitcoiner.”

“I'm not sure this is an interesting Lightning future,” Riard said. In fact, it is something which he wants no part of, after departing from the Lightning ecosystem on Oct. 20:

“I do not wish to be associated with being in charge or accountable of the Lightning Network security, and the ~5,300 BTC exposed here. There is little [I and others] can do to halt the haemorrhage, without compromising the core values of censorship-resistance and permissionless of the Lightning Network.”

Related: Bitcoin Lightning Network growth jumps 1,200% in 2 years

The Lightning Network is the second-layer solution built over the Bitcoin blockchain. It is designed to improve the scalability and efficiency of Bitcoin

Through the Lightning Network, users can open payment channels, conduct multiple transactions off-chain, and settle the final result on the Bitcoin blockchain. The replacement cycling attack is a new type of attack that allows the attacker to steal funds from a channel participant by exploiting inconsistencies between individual mempools.

Cointelegraph reached out to Lightning Labs and other firms in the Lighting ecosystem but did not receive a response.

However, despite the security concerns and potential move toward centralization, Riard explained that Lightning hasn’t seen as many attacks as many Ethereum layer 2s because Lightning users typically only store a small amount of funds in their wallets at any given time.

A total of $194.1 million in BTC is locked in the Lightning Network, according to DeFiLlama.

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Decentralized file sharing, explained

Decentralized file sharing is a peer-to-peer network system where files are distributed across multiple nodes, eliminating the need for a central server.

The importance of decentralization in file sharing

Decentralized file sharing revolutionizes data access by eliminating dependence on centralized servers and utilizing P2P technology to distribute files across a network of nodes.

Distributing and accessing data without depending on a centralized server is possible with decentralized file sharing. Rather, files are kept on a network of linked nodes, frequently through the use of peer-to-peer (P2P) technology

To enable file sharing, each network user can provide bandwidth and storage space. BitTorrent and InterPlanetary File System (IPFS) are two well-known instances of decentralized file-sharing protocols.

The decentralization of file sharing has completely transformed the way users access and store digital content. In contrast to conventional centralized file-sharing systems, which store files on a single server, decentralized file-sharing uses a P2P mechanism. Dispersing files among a network of linked nodes promotes a more robust and secure system.

Key components of decentralized file sharing

Decentralized file sharing depends on a number of essential elements to allow for a dispersed and safe data exchange. 

Firstly, P2P networks, which enable direct user contact in the absence of a centralized server, are the backbone of a decentralized file-sharing system. By doing this, a robust system where participants directly share files is fostered.

Blockchain technology is essential to maintaining integrity and trust in decentralized file-sharing networks. It improves the general security of transactions and file transfers by enabling transparent and impenetrable record-keeping. Smart contracts are self-executing contracts with pre-established rules that automate tasks like access control and file verification.

Furthermore, files are distributed throughout a network of nodes using decentralized storage systems, which often use protocols like BitTorrent or IPFS. This approach eliminates the need for a central server and enhances the availability and reliability of data due to its redundant nature.

Cryptographic methods also protect the integrity and privacy of data. User confidence in decentralized file-sharing systems is increased by end-to-end encryption, which guarantees that only authorized parties may view the content. Together, these elements essentially provide a safe and dispersed setting for easy file sharing via the decentralized web.

How does decentralized file sharing work?

Decentralized file sharing operates on P2P networks by leveraging a distributed architecture rather than relying on a central server.

Peer discovery

Participants in the network (peers) need a way to discover one another, which is accomplished by using distributed hash tables (DHTs) or decentralized protocols. Peers build a network without a central authority by keeping track of other peers with whom they are linked.

DHTs are decentralized systems that enable distributed storage and retrieval of key-value pairs across a network, while decentralized protocols enforce communication rules that enable peer-to-peer interactions without relying on a central authority or server.

File distribution

A file is split up into smaller parts where every component is dispersed among several network peers. This approach enhances file availability, as it is not stored in a single location, ensuring better accessibility and reliability.

Dispersed storage

By distributing file portions over several nodes, decentralized storage systems lessen reliance on a single server. For instance, IPFS employs a content-addressed approach, in which files are recognized by their content as opposed to their physical location.

Peer interaction

Peers request and share file portions directly with one another. The coordination of file transfers no longer requires a central server, thanks to this direct connection. Every peer participates in the file distribution process by serving as both a client and a server.

Blockchain and smart contracts

Blockchain technology is incorporated into several decentralized file-sharing systems to increase security and transparency. Smart contracts are self-executing contracts with pre-established rules that can automate tasks such as access restriction and file verification and reward participants with tokens.

Often, decentralized file-sharing systems use cryptographic techniques like end-to-end encryption to provide privacy and security for the shared files. This ensures that the content can only be accessed and deciphered by authorized users.

Working of a decentralized storage system

Advantages of decentralized file sharing

The benefits of decentralized file sharing include enhanced resilience, improved privacy, scalability and censorship resistance.

By removing a single point of failure, it improves reliability and resilience. In a peer-to-peer network, where files are dispersed among several nodes and peers, the system continues to function even in the event that some nodes go down.

Also, decentralized file sharing, by its very nature, offers enhanced security and privacy. By ensuring that only authorized users can access and decode shared content, cryptographic solutions like end-to-end encryption help lower the danger of unauthorized spying or data breaches.

Better scalability can also be attained as the network expands. In decentralized networks, more users add to the network’s capacity, allowing it to accommodate more demand and traffic without requiring modifications to the centralized infrastructure.

Additionally, decentralized file sharing encourages resistance against censorship. It is harder for any organization to censor or limit access to particular files or information because there isn’t a single entity in charge of the network.

Furthermore, decentralized file sharing frequently incorporates incentive mechanisms through token economies or other reward systems to encourage users to contribute resources like bandwidth and storage, thereby creating a cooperative and self-sufficient environment. 

Challenges and limitations of decentralized file sharing

Challenges associated with decentralized file sharing involve scalability issues, consistency concerns, user adoption complexities, security risks and regulatory uncertainties.

Firstly, as the network grows, scalability issues become more pressing. A poor user experience may result from increased involvement if it causes slower file retrieval times and greater bandwidth requirements.

Moreover, in decentralized systems, problems with consistency and coordination could surface. It may be difficult to maintain consistency in file versions throughout the network in the absence of a central authority, which could result in conflicts and inconsistent data.

Complicated interfaces and user acceptance present another difficulty. When compared to centralized options, decentralized file-sharing platforms frequently have a higher learning curve, which may put off consumers who are not familiar with P2P networks or blockchain technology.

Furthermore, security vulnerabilities still exist, especially in the early phases of decentralized file-sharing deployments. As these systems grow more widely used, they are targeted by different types of attacks, which makes the continuous development of strong security measures necessary.

Regulatory uncertainty is another difficulty. The adoption and long-term viability of decentralized file-sharing platforms may be impacted by the changing legal environment surrounding cryptocurrency and decentralized technology.

The future landscape of decentralized file sharing

The future of decentralized file sharing involves blockchain technology, P2P networks and tokenization for secure, efficient and collaborative data exchange, which challenge traditional models.

Decentralized file sharing is expected to bring about a more inclusive, secure and productive environment. Distributed ledger and blockchain technology will be essential in guaranteeing tamper-proof and transparent transactions and facilitating file sharing among users without depending on centralized intermediaries. 

Decentralized protocols powering peer-to-peer networks will enable direct data transmission between users, cutting down on latency and reliance on centralized servers. Strong encryption techniques will allay privacy concerns and provide consumers with more control over their data. 

Furthermore, tokenization could encourage resource sharing among users, resulting in the development of a collaborative ecosystem. Innovative file-sharing services will probably proliferate as decentralization gains pace, upending established paradigms and promoting a more robust and democratic digital environment.

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Ethereum OFAC compliance dips to 45% post-Merge upgrade

The list of top censorship offenders is populated by popular platforms such as Binance, Celsius Network, Bitfinex, Ledger Live, Huobi (HTX) and Coinbase.

The historic Merge upgrade from Sept. 2022 — which marked Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS) — resulted in the overall decline in compliance with standards laid down by the Office of Foreign Assets Control (OFAC). 

Ethereum blocks adhering to OFAC compliance censor certain transactions, which has a negative impact on the neutrality of the Ethereum ecosystem. In early August 2022, OFAC sanctioned Tornado Cash and several Ether (ETH) addresses associated with it due to its ability to mask and anonymize transactions.

Before the Merge upgrade, Ethereum’s OFAC compliance increased exponentially as entities such as crypto exchanges opted to run censoring MEV-Boost relays on their validators. The list of top censorship offenders is populated by popular platforms such as Binance, Celsius Network, Bitfinex, Ledger Live, Huobi (HTX) and Coinbase, according to MEV Watch data.

List of entities running censoring MEV relays on their validators are actively harming Ethereum’s credible neutrality. Source: MEV Watch

However, the overall OFAC compliance of Ethereum blocks has declined significantly. In November 2022, 78% of the total Ethereum blocks complied with OFAC regulations. As of today, Sept. 27, Ethereum’s OFAC compliance dropped to 30%, recording an overall reduction of 57%.

Post-Merge daily OFAC-compliant Ethereum blocks. Source: MEV Watch

Countering OFAC compliance requires operators to use relays that do not censor according to OFAC compliance requirements. There are seven major MEV-boost relays that are most commonly used: Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, BlockNative, Manifold and Eden. However, not all systems adhere to OFAC compliance, according to MEV Watch:

“Of the 7 available major relays only 3 do not censor according to OFAC compliance requirements.”

It is also important to note that not all blocks built by OFAC-compliant relays are censoring; however, all blocks built by OFAC-compliant relays will censor when non-compliant transactions are broadcast to the network.

While OFAC regulations primarily target United States-based organizations, validators outside the U.S. must consider running non-censoring relays for the benefit of the network.

Related: US Treasury sanctions Ethereum wallet tied to cartel over ‘illicit fentanyl trafficking’

Amid Ethereum’s reduced OFAC compliance, Grayscale made the decision to abandon all the rights to PoW Ethereum tokens (ETHPoW). However, the decision was attributed to lack of liquidity in the market. According to an official announcement:

“As such, it is not possible to exercise the rights to acquire and sell the ETHPoW tokens, and on behalf of the record date shareholders, Grayscale is abandoning the rights to these assets.”

On the other hand, some cryptocurrency investment firms like ETC Group have attempted to launch dedicated EthereumPoW exchange-traded products (ETPs).

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Paypal USD: Boon for Ethereum but not decentralization, says community

Proponents say PayPal’s PYUSD could see Ethereum become the money layer of the internet, while opponents argue that it’ll act like a poorly designed CBDC.

Paypal’s new Ethereum-based stablecoin, PYUSD has been seen as bittersweet news for the crypto community.

While it could finally see Ethereum find its place in mainstream adoption, it could also spell trouble for decentralization and personal control of assets, warns the community.

The new stablecoin, Paypal USD, was launched on Aug. 7 and is issued by Paxos Trust Co. — the firm behind Binance USD (BUSD). It’s built on Ethereum and “designed for digital payments and Web3,” with the firm saying it will soon be available to United States customers.

The launch has been seen as a boon for Ethereum adoption. Ethereum bulls Anthony Sassano and Ryan Sean Adams believe the ERC-20 stablecoin will push the blockchain closer towards becoming the money layer of the internet.

The number of daily active users on Ethereum currently hovers between 300,000-400,000, according to Etherscan.

However, Sean Adams noted that 430 million accounts actively use the online payment processor, which means that over 5% of the world’s 8 billion people could theoretically be onboarded onto Ethereum through PayPal’s new stablecoin.

Martin Koppelmann, the CEO and co-founder of Gnosis, added that by launching PYUSD on Ethereum’s base layer, Ethereum layer-2s will be able to interact with PYUSD too.

Others, including lawmakers, have seen it as another example of larger institutions embracing crypto, breathing new life into the traditional payments system.

In an Aug. 7 statement, Patrick McHenry, Chair of the United States House Committee on Financial Services said stablecoins like PayPal’s PYUSD “hold promise as a pillar of our 21st century payments system.”

However, not everyone is convinced about PayPal’s new stablecoin.

Several smart contract auditors highlighted that PYUSD’s smart contract contains a 'freezefunds' and 'wipefrozenfunds' function which they claim is a textbook example of a centralization attack vector in Solidity contracts.

This concern was echoed by cryptocurrency researcher Chris Blec, who believes that PayPal will use the controversial functions where necessary.

Digital asset lawyer Sarah Hodder believes many characteristics of PayPal’s stablecoin resemble that of a censorship-enabled central bank digital currency. Another smart contract auditor noted that PYUSD’s smart contract can be changed by PayPal at any time.

In October, PayPal was slammed for a controversial policy that could’ve seen users fined $2,500 for spreading “misinformation.” The firm later backpedalled, claiming the policy update was published “in error.”

Related: PayPal’s crypto holdings increased by 56% in Q1 2023 to nearly $1B

Meanwhile, Blockchain engineer Patrick Collins took a slightly more neutral view, suggesting that PayPal’s PYUSD could have been “epic” but believes some of the engineering choices were suboptimal — such as choosing an outdated version of Solidity to program the contract, making the contract upgradeable and not making it gas efficient.

Sassano also explained in a separate post that while PayPal's stablecoin is centralized, Ethereum users are free to choose whether they wish to use it or not.

PayPal said PYUSD will be rolled out within the next few weeks.

ETH is currently priced at $1,825 which is approximately the same price at the time of PayPal’s announcement about 10 hours ago, according to CoinGecko. Only minor fluctuations have been observed in ETH’s price since then.

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Twitter suspends memecoin-linked AI bot after Elon Musk’s ‘scam crypto’ claim

"Explain This Bob," the popular AI-powered Twitter account also linked to a memecoin, was suspended shortly after Elon Musk alleged it was a "scam."

Twitter has suspended the account of the popular memecoin-linked artificial intelligence-powered bot “Explain This Bob” after Elon Musk alleged it was a “scam crypto account.”

Musk alleged the account was a scam in a tweet on June 18 in areply to the bot, the account was seemingly suspended soon after.

The Explain This Bob account reportedly amassed over 400,000 followers before its suspension. The bot was created by Prabhu Biswal from India and used OpenAI’s GPT-4 model to comprehend and provide responses to tweets by those who tagged the account.

The project was also linked to the ERC-20 memecoin Bob Token (BOB) that was launched in April 2023. The suspension sent the price of BOB down over 30% according to CoinGecko.

The suspension is a U-turn on Musk’s earlier impression of the bot, who tweeted “I love Bob” in response to one of its tweets on April 20, a tweet which also prominently features on the project’s website.

Twitter has not taken action against the account for Bob Token, however. The project’s team humorously responded to the news of the suspension, sharing a meme of Musk monitoring a distraught “Bob” in a prison.

Observers believe Musk is of the view that Explain This Bob is being used as a marketing tactic to prop up BOB’s price.

Related: A PR expert’s tips for memecoin projects

Since the suspension, the hashtag “FREEBOB” has circulated on Crypto Twitter. Most observers take the view that BOB isn’t a scam coin and the suspension is unwarranted as the launch of the token was “fair” in addition to BOB being “fully decentralized” with a 0% tax mechanism.

Another claimed the team didn’t provide themselves with any tokens or airdrops prior to the Bob Token launch in April.

Cointelegraph contacted Biswal and Twitter for comment but did not receive an immediate response.

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Midjourney AI users find workaround amid ban on Chinese President’s images

Midjourney AI bans the creation of Chinese President Xi Jinping’s images, but users find ways to create deepfakes.

Midjourney, an artificial intelligence (AI) service that generates images from natural language descriptions, recently banned the making of pictures of Chinese President Xi Jinping, much to the dismay of its users. However, the ban has not deterred its users from finding a workaround by creating deepfakes of Xi, which are manipulated digital representations produced by sophisticated machine-learning techniques.

Last week, Midjourney took action to prevent the proliferation of deepfakes on its platform by disabling access to its free trial version. Although the platform still allows the creation of images featuring world leaders, the Chinese President is notably excluded. Any attempt to generate an image with his likeness or even mention his name in a prompt is strictly prohibited by Midjourney.

According to a tweet by a user of the text-to-image AI generator, “It is still possible with /imagine, if you provide the full URL of an existing photo of Xi in the prompt. Or you can use /blend with two existing photos.” Another user said there was the alternative of using MidJourney v5’s blend function between two images but expressed fear of it being policed eventually.

An AI-generated image of Pope Francis wearing a puffer coat caused controversy over the advancement of fake imagery. Source: Twitter

Critics, like Sarah McLaughlin, senior scholar at the Foundation for Individual Rights and Expression (FIRE), have argued that the ban constitutes a form of censorship, undermining the fundamental principles of free speech and expression.

Related: Italian regulator draws criticism for blocking AI chatbot ChatGPT

In messages exchanged on the chat service Discord last autumn, Midjourney’s founder and CEO, David Holz, revealed that the firm had received complaints from local users about “various topics in different countries,“ prompting them to block numerous related words. However, according to chat logs examined by The Washington Post, Holz refrained from listing the prohibited terms to prevent unnecessary controversy.

In his Discord comments, Holz mentioned that the prohibited words were not solely connected to China. Nonetheless, he recognized that China was a particularly sensitive matter, as political humor might put Chinese users at risk. Holz attempted to explain the reasoning behind his actions by stating, “Our decision was not motivated by financial gain, and in this scenario, it is evident that ensuring access to this technology for Chinese individuals is for the greater good.“

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Original Bitcoin Wizard Artist Raises Nearly $150,000 in BTC via Lightning, Despite Criticism From Bitcoin Maximalists

Original Bitcoin Wizard Artist Raises Nearly 0,000 in BTC via Lightning, Despite Criticism From Bitcoin MaximalistsOn Monday, crypto proponent Udi Wertheimer shared a story on Twitter explaining how he and the Taproot Wizards helped an artist who created the original 2013 bitcoin wizard meme raise nearly $150,000 in bitcoin. While the minting and sale were successful, Wertheimer explained that bitcoin maximalists and the r/bitcoin moderator Bashco disliked it. Artist Who […]

Nebraska Man Faces 50 Years for Multi-Million Dollar Cryptojacking Scheme

Bitcoin Records Largest Mined Block to Date, 4 MB Block Containing NFT Causes Unease Among Small-Block Supporters 

Bitcoin Records Largest Mined Block to Date, 4 MB Block Containing NFT Causes Unease Among Small-Block Supporters Amid the controversy surrounding the Ordinals project and the debate over what types of data should be stored on the Bitcoin blockchain, the network mined its largest block, nearly 4 MB in size, containing just 63 transactions. One of the transactions was a 3.94 MB Ordinal inscription featuring an image of a wizard, and the […]

Nebraska Man Faces 50 Years for Multi-Million Dollar Cryptojacking Scheme

Don’t Forget the Importance of Censorship Resistance

Don’t Forget the Importance of Censorship ResistanceSince people are once again talking about self-custody as one of crypto’s unique strengths, I would like to remind everyone about an equally important fundamental value proposition of crypto that, in the early days, was touted as the killer feature. I’m talking about censorship resistance. The following opinion editorial was written by Bitcoin.com CEO Dennis […]

Nebraska Man Faces 50 Years for Multi-Million Dollar Cryptojacking Scheme