MetaMask and OpenSea blocked multiple users in Iran and Venezuela this week. Infura inadvertently blocked some users in response to U.S. sanctions and later fixed the issue.
The ability to censor crypto users based on their jurisdiction exposes centralization in Web3 and strengthens Bitcoin’s value proposition.
Web3 has a chance to become more decentralized, but users will need to be willing to make a compromise rather than settle for convenience.
The crypto community’s reliance on single points of failure like MetaMask, OpenSea, and Infura shows that Web3 is still a long way off achieving true decentralization, Chris Williams argues.
MetaMask and OpenSea Censor UsersWhat a week. While the Russia-Ukraine conflict intensifies with clear ramifications for the crypto world, blockchain advocates got another big shock Thursday when Venezuelan and Iranian MetaMask users found that they had been locked out of their accounts. As the reports surfaced, eagle-eyed MetaMask followers noticed that the ubiquitous Web3 wallet—which has become the most popular option for accessing apps on Ethereum and other EVM chains like Fantom and BNB Chain—had a note on its website clarifying that its service provider Infura was unavailable in certain jurisdictions “due to legal compliance.” MetaMask and Infura later confirmed that it had fixed the issue, adding that it had inadvertently cut Venezuela loose while “changing some configurations as a result of the new sanctions directives from the United States.”
Both MetaMask and Infura are products of ConsenSys, the Ethereum software company founded by one of the top smart contract network’s co-founders, Joe Lubin. With over 20 million monthly active users, MetaMask is the one most people have heard of, but Infura is just as vital to the Ethereum ecosystem. It runs full nodes so that regular users don’t have to go through the hassle and provides an interface for developers to access Web3. It’s arguably Ethereum’s most vital piece of infrastructure, sometimes described as the blockchain’s AWS equivalent.
While perhaps not as widespread as the MetaMask ban, multiple Iranian NFT artists also reported that their OpenSea accounts had been wiped on the same day. That means all their minted work and stuff they’ve collected is lost, anyone who bought their art can’t view it on OpenSea any more, and they effectively need to start over.
Worse still, the top NFT marketplace, which has always had a shoddy track record on customer service, reportedly targeted users by blood rather than location—going as far as blocking people who have since moved overseas—without even issuing a warning or follow-up. “How can they ban an account without any notice or email?” the popular NFT photographer Domiri Ganji wrote in a private message to Crypto Briefing. “And can they know or be sure someone lives in a specific place without even asking us for our ID or proof of residency?” he added.
I’m about as bullish on Ethereum as it gets, but I can’t pretend that incidents like this don’t dishearten me. As several top Twitter accounts like Autism Capital warned, they offer a glimpse into a possible dark future in which decentralization is a distant myth. “Veterans in the space are terrified as they see everything playing out the way they speculated many years ago,” the based anons running the account wrote. “Censorship, KYC, single points of failure, etc. A fragile dream. Newcomers see JPEGs and think “this dog has a cool hat looks rare” Ignorance is bliss. We miss innocence.”
If Infura buckles at U.S. sanctions, that could set a precedent in which other apps and infrastructure block specific users under regulatory pressure. That would mean crypto becomes a permissioned system rather than the “permissionless” one people like to sell it as.
While it’s true that companies can move outside the States, everyone can run their own node, and platforms like LooksRare and X2Y2 exist now, most people default to the easiest option. As a result, Web3 isn’t as decentralized as it aspires to be. And people don’t like to admit this, but very few users care. How else did Binance’s Ethereum clone thrive as soon as gas fees soared in late 2020 through early 2021?
Certain members of the “Web3” crowd—politically-driven Ethereum newcomers who made their presence felt and established their profiles over the course of the 2021 bull run—also have a big part to play in the decentralization myth, and not only because many of them spend their days trading JPEG avatars on OpenSea and shilling their bags to their social media followers. The same people have watched Silicon Valley giants like Andreessen Horowitz extend a firm grip over DeFi and rallied to drag veteran builders in the space through the mud on Twitter and governance boards over offensive tweets posted years ago.
Of course, this problem doesn’t completely write off crypto per se. In fact, dare I say, it only strengthens the value proposition for Bitcoin, the first crypto and only one that had a truly immaculate conception. While BTC the asset is mostly unusable without custodian services like Kraken, Bitcoin is by far the most decentralized crypto network, you can carry your holdings anywhere in the world on a piece of paper, and still none of us know who Satoshi was. From a philosophical standpoint, Web3’s reliance on centralized entities partially validates those who believe in the one true coin thesis.
If all of this sounds like doom speak, it’s not intended to be. The Ethereum community still has time to fix its issues and achieve decentralization; there are already several alternatives to Infura, and it’s a sure bet that decentralized competitors to MetaMask will emerge.
It’s important to note that regulators will push hard for KYC and other restrictions, though; recent events in Canada have made that obvious. If you would prefer to live in the world of censorship resistant freedom money like Satoshi envisioned, now is the perfect time to get to grips with Silk Road-era TOR and VPNs, running nodes, and of course cold storage wallets. Decentralization will always be a myth if you take the easy route.
Disclosure: At the time of writing, the author of this feature owned ETH, FTM, and several other cryptocurrencies.
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