Chris Blec is a content creator on YouTube whose channel specializes in Ethereum decentralized finance, or DeFi, topics.
In recent months, Blec has earned a reputation for holding various Ethereum projects to account in the interest of users, particularly on the issues of decentralization, privacy, and beyond.
The decentralized exchange Uniswap is completely decentralized, for instance — no admin can manipulate it.
However, Blec has recently focused a beacon on other top DeFi projects like Compound Finance, which currently has an admin structure that could be abused in worst-case scenarios, however unlikely.
One of Blec’s latest beacons came on February 20th, when he publicly asked Circle, the payments company behind the USDC stablecoin, whether using the Tornado.cash privacy tool on Ethereum was grounds enough to violate that stablecoin’s terms of service.
— Chris Blec (@ChrisBlec) February 20, 2020
Within a few days, Joao Reginatto, the Product Lead with the USDC team, responded with some interesting clarifications.
First, What’s Tornado?
Tornado is a mixer system built on Ethereum that is underpinned by zk-SNARKS privacy tech, or “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” transactions.
This dApp allows users to have a non-custodial interface through which they can mix their ether (ETH) so as to make anonymize their activities on Ethereum.
And of course, it’s not that everyone has something to hide, but rather that everyone has a reasonable expectation to financial privacy. Industry publication Decrypt just published an investigation into the Ethereum Name Service (ENS), for example, which showed how these names made it extremely easy to track users’ activity on Ethereum.
Tornado is an early and promising solution on the flip side, which allows users to obscure their ETH payments in order to maintain privacy.
Yes, You Can Use USDC With Tornado
Blec’s aforementioned query was picked up on February 24th by USDC’s Reginatto, who responded on Twitter with a series of comments to provide context on how Circle’s leadership was approaching this nuanced privacy issue.
For context, some cryptocurrency companies have recently moved against users they’ve determined have used mixers, particularly via bitcoin; accordingly, some users in the Ethereum space have been concerned that activities on Tornado might similarly draw ire.
As such, Reginatto made a major clarification to USDC users when he followed up with Blec, saying:
“I can tell you that to date, we have not considered any Circle USDC customer using the current TornadoCash tool to be in breach for the single reason of interacting with TornadoCash. We of course assess every customer’s compliance with our terms on a case by case basis.”
At least as things stand then, that’s a major win for USDC users and a score for Blec’s advocacy efforts. In a separate and related comment, Reginatto noted that while USDC’s smart contract did have a blacklist function, that function had never been used to date, with the suggestion being that USDC’s centralized backers had been provably conservative so far. On that point, he added:
“As the ecosystem and the technology evolve, blacklisting in its current form might likely prove too blunt or simply impractical. Believe me, we think a lot about this topic and are always engaged in collaboration with regulators around the world to conceive better solutions.”
Accountability Is Good for Everyone
It’s not easy to ask the tough questions, but when done in good faith, the results can be extremely productive. Blec’s query to the USDC team and Reginatto’s responses are just one such example.
Furthermore, beyond Blec and USDC, Tornado is a big winner from this episode. A major crypto company just revealed that it had no direct qualms with the privacy tool, which is obviously legitimizing, and other firms may follow suit in kind.