Cryptocurrencies should be unstoppable. But when the US Office of Foreign Assets Control (OFAC) sanctioned the privacy-focused protocol Tornado Cash on Aug. 8, the conception of crypto as an unobjectionable financial network came into question. Could the crypto ecosystem withstand government bans? When a number of DeFi apps blocked addresses after the OFAC sanctions, it looked like they didn’t.
Table of Contents
Antithetical to the concept of crypto
Apps in general have blocked addresses on their frontend. That is, at the UI level, not at the smart contract level. So while more technical users can get around the restricted list, it’s clear that average users can be cut off from DeFi at the front-end level, which some believe is antithetical to the mission of digital assets. This spurred debate in the DeFi community about how to respond to this new threat. In addition, it sent technologists and founders looking for new ways to redesign business models and ways to interact with users.
banned users
The dYdX derivatives trading protocol was one of those that banned users at the front-end level. Antonio Juliano, founder of dYdX, rephrased the question from “why are DeFi frontends banning users” to “why are these frontends able to ban users”, in twitter. “There was massive resistance to DeFi frontends banning users,” he tweeted. “The standard question is, why are you giving in to the government and banning users? I thought this was DeFi! A better question would be: Why can you ban users?!”
as suggested Juliano, the solution may be to decentralize, or distribute control of the front-ends of DeFi apps. This would make them as resistant to censorship as many of the smart contracts they interact with. It’s complicated as there are different technologies that make up a front end. There is, for example, file storage. There is also the Domain Name System (DNS), which works like a premium phone book. Also, if a website requires more than static files, cloud services are also needed.
The Blockchain Layer
To further understand the world of decentralized frontends, The Defiant spoke to Daniel Helm. He is a former developer supporter of the recently closed Skynet Labs, a company that contributed to the decentralized data protocol. Helm listed a number of front-end technologies beyond data storage that already had blockchain decentralization. According to Helm, web browsers are not well equipped to facilitate decentralized front ends. “Given that our browsers are not designed to understand the protections of these protocols, we are still a long way from seeing a user experience that matches the level of protection we see in the blockchain layer,” he said. Other technologists who specialize in the decentralized frontend problem see different challenges. Joe Deng, for example, the social media manager at Akash Network, a peer-to-peer provider, sees education as the main obstacle to decentralized frontends. “It’s much easier to use the frameworks that already exist,” he told The Defiant. “If you are a cloud engineer on a project, you probably grew up with [Amazon Web Services].”
A lot of money
While decentralized frontends have taken a backseat in hot areas like DeFi and NFTs, interest in the industry is growing, Deng said. He cited issues such as hosting provider Hetzner banning activity regarding mining on its servers as another reason for decentralization.
Nikita Rykov, who claims to be a key member of Handshake, aims to decentralize DNS. Rykov echoed Deng in telling The Defiant that decentralized front-end technologies are attracting more attention. “Some projects are willing to pay a lot of money to make their frontends fully decentralized and against all censorship,” Rykov said. The developer is working on a solution called Elymus, which will allow other developers to build what he said are truly decentralized apps.
public trust
Others, like Skynet Labs’ Helm, aren’t sure of the potential profitability of decentralized frontends. “I doubt there is a straightforward business model for decentralized frontends as they exist now,” he said, adding that it is best to view decentralized frontends as a public good to further the crypto industry’s goals of developing a system. without permission. “This will be an essential part of increasing public trust in the ecosystem, even if most users don’t know what a ‘decentralized front end’ is,” he said.
on the front end
Meanwhile, Helm sees a workaround for the technical hurdles of decentralized frontends — don’t build one. “That means users will have to use other products to interact with their smart contracts from the browser,” he said. “Given the current regulatory environment, I can’t blame the teams for doing this, but I think it puts users in a more uncertain position as to which products to trust.” At least one project has already put Helm’s idea into practice. Liquity, a loan protocol with $545 million in total blocked value (TVL) according to The Defiant’s Terminal, launched in 2021 without deploying a front-end.
Instead, Liquity encourages other ‘devs’ to build frontends by rewarding them with the native LQTY token. So far, 18 front-ends for Liquity have been built, according to the project’s website.
As Bojan Peček, head of operations at Liquity, told The Defiant, the team behind Liquity chose the decentralized front-end model as part of an overall strategy to create a lending protocol optimized for resilience.
Forms of Resilience
“When you decentralize the front end, you still only have one target,” said Peček. “By decentralizing operators, you get a lot.” Not that Liquity’s head of operations is against front-end decentralization on a technical level. Peček said he supports all forms of resilience, whether it’s a decentralized front-end or a distributed model like Liquity’s.
sector is united
Either way, the crypto community seems united in its desire to see not only smart contracts but also front-ends reaching higher degrees of decentralization. For example, David Vorick, who founded Sia, another decentralized storage system whose Siacoin has a market cap of $208 million, thinks decentralization is close to an all-or-nothing imperative. “Decentralization is not something you can stop at halfway through,” he told The Defiant. “So it’s like a leaky boat: if half the boat has holes, the whole boat will sink.”
Warning: The text presented in this column does not necessarily reflect the opinion of CriptoFácil. Also read: Interest in the expression ‘buy Bitcoin’ on Google drops to 2-year minimum Read also: The Sandbox and Renault partner to bring new experiences to the metaverse Also read: NFT collection in honor of singer David Bowie will be released next week
