This article was originally written in Chinese. ↗︎ 中文版

Contents

  1. Spotlight on Regulation: The Policy Landscape Behind the Binance Incident
    1.1 Concerns Under Heavy Penalties
    1.2 The Prison of Regulation, The Mirror of Regulation
  2. On-Chain Censorship: The Battleground of Technology and Politics
    2.1 The Core Zone of Regulation and Anti-Censorship
    2.2 Trustworthy is Censorable
    2.3 Overview of On-Chain Censorship on Ethereum
  3. Censorship Beyond Ethereum: The Ubiquitous Sword of Damocles
  4. Cryptographic Anarchy: The Third World of Tomorrow
    4.1 Ethereum, "A Journey Out of America"
    4.2 Ethereum: Why It Needs Asia, Africa, and Latin America
    4.3 Asia, Africa, and Latin America: Why They Need Ethereum
  5. The Black Eyes of Crypto: The East is Already White

Footnotes

1. Spotlight on Regulation: The Policy Landscape Behind the Binance Incident

1.1 Concerns Under Heavy Penalties

In 2023, the fate of Binance and its founder Changpeng "CZ" Zhao seemed to enter an unavoidable vortex. This investigation, which began in 2018, ultimately reached a significant turning point in 2023.

At the beginning of the year, the scrutiny of the U.S. Congress turned to the world's largest cryptocurrency exchange. Questions from senators like Elizabeth Ann Warren not only focused on Binance's financial transparency but also involved a series of deeper compliance issues. In March, the Commodity Futures Trading Commission (CFTC) filed a major lawsuit against Zhao and Binance. Shortly thereafter, the Securities and Exchange Commission (SEC) followed suit with 13 serious charges against Binance. The reasons for the lawsuits from the CFTC and SEC against Binance included:

The CFTC accused Binance of violating the Commodity Exchange Act and CFTC regulations by illegally offering and executing commodity derivatives trading to U.S. persons, and failing to follow basic compliance procedures to prevent terrorist financing and money laundering.

The SEC accused Binance of operating a fraudulent network, conflicts of interest, lack of transparency, and evading legal actions.

As the investigation deepened, senior team members of Binance.US began to resign, which seemed to signal that a larger storm was brewing. By summer, Binance's license application in the Netherlands failed, and France also began an investigation into it. As autumn approached, the situation became increasingly severe. Binance was forced to stop accepting new customers in the UK, and its global influence and business scope were restricted. The Financial Crimes Enforcement Network (FinCEN), a department of the U.S. Treasury responsible for regulating financial transactions to prevent and combat financial crimes, including money laundering and terrorist financing, collaborated with the U.S. Department of Justice (DOJ) to investigate and regulate Binance.

In November, Zhao ultimately admitted to violations of U.S. anti-money laundering laws and agreed to pay $4.3 billion in fines and forfeitures to settle the DOJ and other federal agencies' long-term investigations into Binance. In the plea agreement reached with the DOJ and FinCEN, Binance made a series of unprecedented compliance commitments, including establishing new procedures to handle policies, procedures, and internal controls, customer and third-party relationships, and anti-evasion controls, among other improvements to meet stringent regulatory requirements. He resigned as CEO, with Richard Teng taking over.

Although Zhao is an engineer who grew up in China and Binance was initially established in China, the company's relocation of its operational headquarters and its global operations, combined with its relatively opaque corporate structure, made it difficult for China to accurately define and pursue Binance's legal responsibilities. Through the analysis of the Binance incident, it is not difficult to see that the U.S. possesses extensive extraterritorial jurisdiction, allowing it to exert legal influence over foreign entities conducting business or affecting its markets, even if those entities are not operating within the U.S.

Perhaps this legal storm has temporarily pressed the stop button, but there are already subtle concerns spreading:

Who will be the next Binance?

1.2 The Prison of Regulation, The Mirror of Regulation

Early Bitcoin contributor and cryptographic pioneer Hal Finney once said, "Bitcoin is the first financial mechanism in the world that is un-censorable." The revolutionary nature of cryptocurrencies in resisting censorship stands in stark contrast to the compliance and free-flowing currency issues involved in the Binance incident.

The distrust of the traditional financial system following the 2008 global financial crisis propelled the birth of Bitcoin. As the first decentralized digital currency, one of Bitcoin's original intentions was to provide a financial system not controlled by central authorities through blockchain technology. Following Bitcoin, the launch of Ethereum in 2015 became a milestone of this era. Ethereum is not only a digital currency but also a platform that allows smart contracts and decentralized applications (DApps) to run, greatly expanding the application scope of blockchain technology. Emerging cryptocurrencies and technologies have enhanced the anti-censorship characteristics of the entire crypto space. They provide users with more choices, making it more difficult for centralized institutions to control the transfer of funds and exchange of information. During this period, cryptocurrencies began to be used more widely for cross-border payments and tax evasion, attracting the attention of global financial regulators.

As cryptocurrencies became more popular and their application fields expanded, anti-money laundering (AML) and user identity verification (KYC) became the focus of regulation. For example, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) began closely monitoring cryptocurrency exchanges and ICO (Initial Coin Offering) activities to ensure these activities comply with existing financial regulations. Countries began to show significant differences in their legislation regarding cryptocurrencies, increasing the uncertainty and complexity of the cryptocurrency market.

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https://www.sec.gov/securities-topics/ICO

As the world's largest economy, the U.S. regulatory attitude towards cryptocurrencies is seen as a bellwether for global regulatory trends. In the U.S., cryptocurrency regulation is managed at the federal level by various agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), the Treasury Department (through the Internal Revenue Service (IRS)), the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN). At the same time, the regulation of cryptocurrency sales depends on whether the transactions are considered securities sales under state or federal laws or classified as money transmission under state laws, which will categorize sellers as money service businesses (MSB) at the federal level. Additionally, the CFTC also oversees market manipulation issues concerning crypto assets classified as commodities.

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In emerging markets and developing countries, such as Asia, Africa, and Latin America, cryptocurrencies are seen as catalysts for economic growth. In particular, in some regions of Africa and Asia, cryptocurrencies provide a means to bypass traditional financial systems, increasing financial inclusion. For example, many countries in Africa are utilizing cryptocurrencies for cross-border payments and remittances to address the shortcomings of their banking systems. At the same time, cryptocurrencies are also viewed as tools to promote economic growth and innovation, with young people and entrepreneurs in countries like Nigeria engaging in international transactions and investments through cryptocurrencies. In countries like Venezuela, cryptocurrencies are used to evade international sanctions, and they are also utilized by NGOs and dissidents to bypass government financial controls.

In the distant East, China's attitude towards cryptocurrencies has been characterized by strict regulation. In 2017, the Chinese government banned initial coin offerings (ICOs) within its borders and shut down all cryptocurrency exchanges, citing the need to reduce financial risks and combat financial fraud. This policy forced many cryptocurrency exchanges operating in China, such as Binance and Huobi, to relocate overseas. At the same time, China was once one of the world's largest Bitcoin mining countries, but due to environmental and energy issues, it began to impose strict restrictions on cryptocurrency mining in 2021. This led to a significant change in the geographical distribution of global cryptocurrency mining activities, with many miners relocating to the U.S., Central Asia, and Eastern Europe.

In the context of global political and economic dynamics, the Binance incident is like a butterfly flapping its wings, and the chain reactions it has triggered in the crypto world are still unfolding. In this narrative that transcends borders and cultures, the anti-censorship nature of cryptocurrencies is placed under the global spotlight, with each of its movements causing subtle ripples in the political and economic tides. The anti-censorship characteristic is both its shield and its sword. It protects individual privacy and freedom, shielding financial transactions from central authority interference, but it also raises concerns among regulators about financial security and stability. This dialectic of freedom versus order, innovation versus responsibility, reflects the most profound dilemmas and possibilities of the cryptocurrency era like a mirror.

2. On-Chain Censorship: The Battleground of Technology and Politics

2.1 The Core Zone of Regulation and Anti-Censorship

Unlike regulatory policies formed by the dynamic balance of geopolitical, national economic, and civil society factors from various governments, "on-chain regulation" is a battleground that is fiercely contested. It is the most direct area where regulatory policies exert influence and produce effects, and it is also the core zone that open-source values and technocrats strive to defend.

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What is on-chain censorship? In a Bankless podcast episode titled Ethereum Uncensored with Justin Drake, Justin Drake defined two different types of censorship: weak censorship and strong censorship. Weak censorship refers to a situation where some blocks choose not to include a transaction after reviewing it, while other non-censoring blocks accept it; a transaction may experience delays before ultimately being included on-chain. This delay can lead to a degraded user experience. In the case of strong censorship, a transaction will never be included on-chain: the network is taken over by a majority that censors every transaction, which can also be referred to as a 51% attack. According to Justin Drake's definition, most of the discussion in this article revolves around how to resist weak censorship.

In this context, the history of on-chain regulation is also a history of balance and compromise. Let's first look at some of the most direct examples of on-chain regulation: Beyond centralized exchanges (CEX), DeFi has always been at the forefront of regulatory pressure ("When regulators come knocking, DeFi answers the door."). Uniswap's response to regulatory pressure reflects the typical symptoms faced by the DeFi community: On July 23, 2021, Uniswap announced the delisting of certain tokens, using very cautious wording in its official statement: the team emphasized that these tokens only accounted for a small portion of Uniswap's total trading volume; the blocking behavior was consistent with actions taken by other DeFi interfaces; and that blocking front-end interactions did not affect the underlying open-source Uniswap interface code or other entry portals (including local runs).

Despite emphasizing these three points in the blog post, Uniswap still faced skepticism from the community. The most liked and commented reply to the tweet stated, "This blog post does not adequately explain why these tokens were removed from the front-end interface. It mentioned regulation, but understanding what kind of regulation would be very helpful for readers and the community. Many Synth tokens seem to have been removed (before the article was widely seen)." (@LefterisJP)

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This reply well represents the community's view on Uniswap's decision to publish such a decision without adequately communicating with the $Uni-holding community members. There are concerns that this could set a bad precedent for responding to SEC regulation. The crypto community has always been sensitive to regulation, and the front end is the part most easily compromised under regulatory pressure: Beyond Uniswap, Balancer once hid a $20 million liquidity pool; Metamask and Infura have both blocked specific wallet addresses based on Tornado Cash censorship. In the following sections, we will analyze the potential regulatory pressures that various operational links on-chain may face, starting from the front end.

2.2 Trustworthy is Censorable

"Every trust vector is a censorship vector." At the censorship.wtf conference held in Istanbul, Vitalik made this judgment. His keynote speech was titled "Strengthening the Ethereum Ecosystem from Different Levels," and he discussed the potential "censorship attacks" that the Ethereum ecosystem might face from six aspects: the interface layer, centralized node providers, L2 sorters, Cross-L2 bridging, P2P layer, and social layer.

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Thus, we can outline the potential regulatory censorship threats that Ethereum may face in chronological order based on the time blocks and transactions are generated. First, let's summarize this process: Users interact with wallets, and this process occurs at the front end; the next step is that transactions are temporarily stored in the Mempool, where Searchers search the Mempool; then we arrive at the block generation part, where under the PBS framework, Builders package and sort the blocks, and Proposers accept Builders' bids before seeing the main content of the block, signing, and finally putting the transactions on-chain. In this process, any link could potentially become a target of regulation.

2.3 Overview of On-Chain Censorship on Ethereum

In the front-end part, where users interact directly and which is easiest to modify and control, there have already been cases like Uniswap and Balancer that have compromised with real regulation. Since the front end does not directly affect interactions with contracts, the issue is more about the dissemination of technology, with various solutions available: such as decentralizing the front end, or using aggregators like Zapper, 1Inch; or open-sourcing front-end code (Uniswap has already open-sourced); using IPFS to host static content front-end domains, and The Graph to host dynamic content front-end; as well as using decentralized domain services (like ENS instead of DNS).

Following the front-end issues is the crisis lurking within node service providers like Infura. Infura, as one of the largest RPC service providers, is the access point for most DApps to access real-time data on the Ethereum chain, significantly reducing the cost of developing DApps and holding over half of the market share. In March 2022, Infura responded directly, stating that due to U.S. regulatory policies, it restricted the use of MetaMask in Iran, North Korea, Cuba, Syria, and the Crimea, Donetsk, and Luhansk regions. **Similar service providers, such as Pocket Network and Ankr, have already marked clear decentralization paths in their roadmaps; Infura also stated in September 2022 that it would launch a decentralized version by the end of this year (2023). Given its important position in the ecosystem and the potential for single points of failure, the potential impact of Infura being controlled or attacked is also significant. One solution to centralized RPC endpoints like Infura is to establish lightweight clients, i.e., "building a local version of Ethereum," and sending requests to those full nodes. This is a way to bypass Infura's control, reflecting a more personal sovereignty and the native spirit of blockchain, and the popularization of lightweight clients has always been one of Ethereum's ongoing efforts, significantly impacting the overall decentralization of Ethereum.

We move to the next step: the regulatory issues of cloud service providers in the node hosting process. According to data from Ethernodes.org, about 60% of Ethereum nodes run through cloud hosting (like Amazon). The German company Hetzner once posted in 2022 that they were "not suitable" for hosting Ethereum nodes, even though nearly 15% of Ethereum nodes were hosted on Hetzner at that time. Although there is no outright ban, the pressure from cloud hosting service providers still looms overhead. In theory, AWS, Hetzner, and Google Cloud service providers can stop services at will. However, it is somewhat reassuring that the exit and migration costs of node hosting are relatively low, and they will not be locked into specific cloud servers. After Ethereum's The Merge, creating one's own node has become easier, such as through Raspberry Pi and Avado (Plug & Play solutions), and it is not an irreversible process.

On September 15, 2022, The Merge marked Ethereum's official transition from the POW era to the POS era, and the names of blockchain validators changed from miners to stakers. Ideally, stakers will take on the role of neutral participants verifying blocks. As of November 2023, among Ethereum's 1 million staked validators, 55% come from six companies: Lido, Coinbase, Kraken, Binance, Bitcoin Suisse, and Staked us. Lido, as the leading company, currently has 29 operational nodes, but 29 seems far from the decentralized threshold people expect, raising concerns about validator centralization.

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The distribution of the top 55% of stakers, image source: Alon Muroch's presentation at the censorship.wtf conference

In an article discussing ETH2.0 validator failures, CarlBeek and adiasg proposed the concept of SSV (Secret Share Validator), which later evolved into the current technical solution for validator centralization, DVT (Distributed Validator Technology). The core idea is to fragment private keys and distribute them among different validators, allowing multiple parties to validate a single node, thereby reducing the risk of censorship caused by excessive validator centralization. Currently, a network based on DVT technology, the SSV network, is becoming the infrastructure for Ethereum under the POS mechanism. Lido has conducted multiple DVT tests since October 2022, and on November 15, 2023, announced that the proposal to enable a simple DVT module has passed, believing that "this proposal may significantly diversify Lido node operators and promote future innovations in the Ethereum staking ecosystem."

After addressing issues related to the front end, node services, and node hosting, the next step is to enter the Mempool, the database of pending transactions. Here we also arrive at the deep game zone centered around MEV (Miner Extractable Value). In the processes of block sorting, packaging, manufacturing, and verification, if a mechanism that can achieve a delicate balance is not formed, various roles abusing power to gain excessive profits is imminent, and the profits will ultimately flow to those with more complex algorithms and greater computing power on the centralized side. This is not what the on-chain ecosystem wants to see. The PBS proposal (Proposer-Builder Separation) is proposed in this context, aiming to create a dedicated Builder role (or to separate the Validator role into two independent roles), separating the rights of sorting, bidding, and signing on-chain.

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Due to the technical complexity of PBS, it will still take several years to be applied at the protocol level. Before PBS is fully implemented, MEV-Boost (developed by Flashbots) provides a temporary and effective solution by adding Relay (relayers). MEV-Boost allows Validators to obtain data from transaction order flows and efficiently extract profits by auctioning the most profitable blocks to the Ethereum network, thus helping those validators who do not have MEV extraction algorithm conditions, and is often seen as creating a more equal and transparent profit market, reducing the variance of MEV captured by each Validator. The flip side is that, according to recent research by Ethereum Foundation researcher Toni Wahrstätter (who has been highly focused on censorship issues and is the maintainer of censorship.pics), as of the writing of this article, about 72% are now considered "censored," whereas in November 2022, this figure was about 25%. This means that a significant portion of Ethereum's relay blocks have been censored based on OFAC standards regarding Tornado Cash transactions. However, this is not an unchangeable strong censorship, but rather a form of "weak censorship" that delays time and extends processes, ultimately still likely to be included on-chain through non-censoring relays.

The application of PBS does not mean that all regulatory issues are resolved in one fell swoop. In terms of resisting censorship, we have also seen other solutions on the roadmap, with the basic idea being to limit the powers of different roles in the block manufacturing process. One is to limit the powers of Builders: that is, to establish censorship resistance lists (crlists), granting Proposers the ability to publish lists of those "believed to be under censorship," and further, a Forward Inclusion List, which forces proposals to include certain transactions to combat censorship (not mandating that proposals directly include certain transactions, but rather allowing Builders to be compelled to use these underutilized spaces when there is excess block space). This is also referred to as a "Hybrid PBS."

Another limiting solution targets Proposers, namely MEV Smoothing. The essence of MEV Smoothing is to only allow Proposers to propose the highest bidding blocks; if Proposers do not propose the most profitable blocks that have been built for them, it indicates that they may not want to earn more profit for other reasons, likely due to censorship. The "Smoothing" in MEV Smoothing aims to equalize the MEV profits of all Proposers, eliminating the motivation for censorship among Proposers in a fully effective market.

In addition, in the MEV gaming segment, using encrypted Mempools (encrypting users' transaction contents and sending/receiving addresses before entering the mempool, and only decrypting them on-chain), advocating for fully altruistic self-building (not outsourcing block construction) are also ways to resist censorship. The former's solution is still immature, while the latter is more about how the spirit of blockchain fundamentalism can influence anti-censorship outside of the system. However, Ethereum is not a religion that can develop healthily solely based on fundamentalism; we still need to make unremitting efforts in mechanisms.

3. Censorship Beyond Ethereum: The Ubiquitous Sword of Damocles

Shifting our gaze to the crypto lands beyond Ethereum, what issues and answers does anti-censorship present? Among the many public chains, we look at the Bitcoin network, which has the longest history of resisting censorship, and the recently controversial Solana.

On November 20, 2023, a Bitcoin network developer 0xB10C published an article titled "Six OFAC Sanctioned Transactions Missing: The First to Yield to U.S. Sanctions Was Actually an Asian Mining Pool?" The article once again drew attention to the topic of anti-censorship in the Bitcoin network. The blog mentioned that the Asian Bitcoin mining pool F2Pool filtered out four transactions sanctioned by the U.S. Subsequently, F2Pool co-founder Chun responded on Twitter (and later deleted), "Why are you surprised that I refuse to confirm transactions from criminals, dictators, and terrorists? I have the right to refuse to confirm any transaction, don't I? Meanwhile, Changpeng Zhao (founder of Binance) sold his soul for money. He deserves it." The words pointed to the recent Binance incident while also showcasing a strong awareness of censorship.

In this incident, F2Pool is currently the third-largest Bitcoin mining pool, accounting for about 14% of the Bitcoin blocks mined in the past year, ranking third, only behind Foundry USA's 30% and AntPool's 22%. Mining pools are collaborative gathering points in the Bitcoin network, and the proportion of leading pools (as mentioned earlier) and the geographical distribution of miners (as shown below) reflect the centralization of the Bitcoin network. The high resource threshold required to create a mining pool and the physical nature of pools make migration difficult, thus making pools a part of the industry prone to monopolization and regulatory scrutiny.

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Image source: The Bitcoin Mining Network by CoinShares, data as of January 2022.

Currently, there are some solutions to mining pool centralization, such as miners being able to easily switch pools; if a pool faces regulatory and censorship pressure, miners can switch to uncensored pools and continue mining without being affected. Additionally, decentralized mining pool protocols like Stratum have launched v2 to further address the issue of mining pool centralization, allowing miners to choose transaction sets (previously controlled by the pool) and increase decentralization. However, under the Stratum v2 model, miners' operating costs increase while their profits decrease, making sustainability difficult to guarantee.

Looking at Solana, from its debut as the "Ethereum Killer" to its later reputation as the "Downtime Chain" and "Rebuilding After FTX," Solana was born in the era of new public chains but has raised concerns about its centralization and stability due to the sensational FTX collapse and multiple downtime incidents, leading to questions about its anti-censorship capabilities.

Starting from the ubiquitous Sword of Damocles hanging over all networks—the centralization of validators—we can gain insight into the operational status of the Solana network. In October 2023, the Solana Foundation routinely released a validator health report. The following image shows the current number of validators/Bitcoin coefficients/client numbers for Solana and some chains, with Solana having the most validator nodes and the highest Bitcoin coefficient (one of the indicators measuring decentralization).

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The potential risk regarding validators is that Solana validator nodes require high-performance machines, leading many individuals to rent third-party services, which may result in third parties holding a significant proportion of nodes and potentially launching attacks on the network, as seen in November 2022 when the server provider Hetzner blocked Solana nodes. Solana's response to this was to split and monitor data based on the Autonomous System Numbers (ASN) of major data centers and publicly available data, encouraging users to transfer their staking funds to other data centers to reduce control by a single entity; at the same time, validators on Solana are divided into different groups, each with a leader responsible for determining the order of transactions, with all validators in the group voting on the validity of transactions. Each validator takes turns serving as the leader, ensuring security is not compromised by a single malicious actor.

Despite these measures, from March to September 2023, the proportion of Solana staking nodes within the U.S. has significantly increased, rising from 23.5% to 29.2%. The road to decentralization remains long.

4. Cryptographic Anarchy: The Third World of Tomorrow

4.1 Ethereum, "A Journey Out of America"

Geopolitics is the elephant in the room. From the day of its inception, cryptography has been a royal art, widely used in war intelligence. Blockchain, as a product of the countercultural hippie movement and the internet open-source movement, is a banner against the old world's hegemony and monopolization. Bitcoin originated from "cypherpunk," a thought and technology movement that emerged in the late 1980s and early 1990s, aimed at using cryptography to protect privacy and personal freedom against government surveillance and corporate data collection. It is not only a breakthrough in cryptography but also a symbol of hacking and anarchy. Most participants remain anonymous, primarily being technology enthusiasts who do not care about their identities, backgrounds, or geographical locations. These individuals gather together, sharing radical views on traditional political and economic systems.

However, from the initial radical movement to the present, as talent infiltrates and compliance advances, blockchain has become a technology track centered around the Ethereum ecosystem, dominated by entrepreneurs from Europe and the U.S., reconciling with Silicon Valley capital, and the past hostility has dissipated, with discussions revolving around technological innovation. On one hand, a mature path for an industry inevitably experiences a curve from niche to mainstream. More projects have adopted traditional fund financing paths from the primary market, with capital fueling a more prosperous blockchain entrepreneurial market. However, since VCs primarily operate in economically stronger regions, resources have begun to pour into projects in these areas on a large scale. On the other hand, even within the industry, there has been a polarization between the "crypto circle" and the "chain circle." The Ethereum ecosystem focuses on technical issues like scalability, vigorously developing L2, ZK, and other directions, attracting many elite technical talents with backgrounds from prestigious universities or PhDs, primarily residing in the U.S. However, the more financially-oriented DeFi track and the token markets of various altcoin projects belong to the silent majority who are grassroots but wish to change their fate.

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It is worth mentioning that a16z, a leading capital player in the crypto primary market, is a quintessential American fund. Its perspective is particularly patriotic, not only waving the flag for "Make America Great Again" but also advocating for American-style technological optimism and pragmatic construction. As early as during the pandemic in 2020, Marc Andreessen from a16z discussed how to solve problems in the domestic social and political system from an American perspective through building. They even took substantial action two years later, establishing a fund called "American Dynamics" with over $500 million to restore the American dream. The backdrop of this narrative is the "Thucydides Trap" between China and the U.S.—the backlash from the U.S. following China's rise has occupied a mainstream position in U.S. political and economic discourse since Trump's presidency. Populism has risen, while globalism has declined, with nations acting independently. It is hard to imagine that an industry that should end national hegemony is captured by a patriotic fund.

"A so-called crypto elite," Vitalik Buterin said in a recent interview with renowned African activist Magatte Wade, "is usually an American with some Chinese friends or a Chinese with some American friends; rarely do we hear of people having African friends." This is a situation that people tend to avoid discussing, yet it has reached a consensus among groups. Chinese individuals gained an advantage during the Bitcoin and exchange era due to their financial intuition. The U.S., on the other hand, has firmly dominated the discourse of industry development during the Ethereum era, relying on top technical talents. Blockchain, born to disrupt traditional paradigms, is gradually showing the Matthew effect of elites versus grassroots. Thus, it appears that blockchain, like all industries, is gradually following the rules of the traditional world.

But we know this is not a vague industry; it clearly has its edges. The world pattern is turbulent, with various forces vying for dominance, and in this struggle, undercurrents are surging. Cryptocurrencies have become a third party in the power games between nations, seemingly never leaving the stage. From the day Ethereum was born, it has carried complex international relations: an elite team from North America, founders with immigrant backgrounds, developing products in Europe, expanding markets in Asia, undergoing U.S. scrutiny, and supporting communities in Africa. We will trace back to the past to look forward to the future, peeling back the layers to understand Ethereum's current community strategy of "entering Asia, Africa, and Latin America."

4.2 Ethereum: Why It Needs Asia, Africa, and Latin America

Ethereum was proposed by Vitalik Buterin. He published a white paper in 2013 outlining the concept of a universal blockchain, a platform that not only supports transactions like Bitcoin but can also run so-called smart contracts. The main founder, Vitalik Buterin, is a prodigy who grew up in Toronto, Canada, and was educated at the University of Waterloo. At that time, his vision received support from many professionals, including Gavin Wood, a computer PhD from the UK, and Joseph Lubin, who graduated from an Ivy League school and worked in investment banking. The founding team had eight members, all white males, and the active core contributors primarily came from Canada, the U.S., and the UK. Aside from Vitalik, the team mostly consisted of experienced, accomplished middle-aged professionals. It can be said that Ethereum's team composition aligns with people's imagination of first-world elites.

However, Vitalik is not a child born and raised in Canada with a limited perspective confined to developed countries. He was born in 1994 in Kolomna, Russia, to computer scientists with Russian-Ukrainian backgrounds, and his family immigrated to Toronto when he was six. His immigrant identity has left a profound mark on him. Vitalik exhibited mathematical talent from a young age, but unlike others who were enamored with technology itself, his life experiences endowed him with sensitivity to political and economic issues. This is why, after exploring many programming fields, Vitalik fell in love with Bitcoin in high school and chose it as his lifelong career: "I discovered Bitcoin halfway through high school, and what fascinated me was that it combined all my interests: mathematics, cryptography, computer science, the open-source movement, and political economy." As he grew up and became a thought leader, Vitalik did not shy away from expressing his political views and has consistently used his personal influence to advocate for marginalized countries. After Russia invaded Ukraine in 2022, Vitalik publicly condemned Russia's aggressive actions, actively supported Ukraine, and donated cryptocurrencies to support projects in the country. On the first day of the invasion, he tweeted, "Ethereum is neutral, but I am not," calling Russia's attack a crime against the people of Ukraine and Russia. RT (Russian Today) editor Margarita Simonyan claimed that those who felt ashamed of Russia's actions were not true Russians ("If you feel ashamed of Russia's actions, don't worry, you are not a Russian."). In response to Simonyan's tweet, Vitalik said, "Go f*** yourself" ("иди на хуй"). At the same time, Vitalik has supported several projects helping Ukraine through "crypto philanthropy," including UkraineDAO. His father, Dmitry, who was born during the Soviet era, has publicly condemned Russian atrocities and is also a signatory of UkraineDAO, participating in its multi-signature crypto vault. As the soul of Ethereum, Vitalik has fully integrated his beliefs in decentralization and anti-totalitarianism into Ethereum's technical architecture.

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https://x.com/VitalikButerin/status/1498012161439932430

During Ethereum's entrepreneurial period, they embarked on a digital nomad lifestyle. At that time, Vitalik insisted that Ethereum should be a non-hierarchical, non-commercial nonprofit organization. They compared tax policies in various countries and ultimately registered Ethereum as an NGO in Switzerland, renting a small wooden cabin base nicknamed "Spaceship" where a group of people lived together, working day and night to develop Ethereum's public chain, determining core products and the founding team at the spaceship base. Subsequently, the C++ language technical team led by Gavin Wood worked in Berlin, while the Go language technical team led by Jeff Wilcke operated in Amsterdam, with Ethereum's development primarily based in Europe. It was also in the Berlin office that Ethereum held its first DevCon (developer conference), thus launching its globally spread community summits. After Ethereum's crowdfunding success and core development completion, Vitalik led the team to develop international communities worldwide. This was during the peak of blockchain development in Asia, with markets in China, Singapore, South Korea, and Japan thriving, becoming key battlegrounds for Ethereum. Vitalik also experienced personal growth, beginning to embrace commercialization. In October 2016, Vitalik registered a for-profit legal entity in Singapore, marking a new phase for Ethereum. Tracing back to its past, it is not difficult to see that Ethereum has grown on the Eurasian continent, never choosing to establish its base in the U.S.

An important hurdle that Ethereum needed to overcome in its early days was the SEC, the U.S. Securities and Exchange Commission. During their crowdfunding preparations, the SEC had just ruled that Bitcoin entrepreneur Erik Voorhees was guilty of selling illegal securities, which undoubtedly served as a warning to the Ethereum team. Their lawyer in Switzerland argued for the non-security classification of Ether based on the decentralized nature of crowdfunding, but the SEC was clearly a more formidable opponent. At a critical moment, legal advisor Steven Neraoff came up with the idea that users needed to pay for computational power (Gas Fee), proposing that Ethereum was essentially a product rather than a security. This battle was a great success, and Vitalik excitedly declared in his blog post, "We ultimately did not give up on the U.S. market, great!" However, interestingly, years later, the lawyer who initially helped Ethereum enter the U.S. legally, Neraoff, came forward with recorded evidence accusing Ethereum of colluding with the SEC to evade compliance, making the situation appear murky. Despite Ethereum being registered in Europe and Asia and operating globally, it is essentially not an American company. However, due to the U.S.'s notorious "long-arm jurisdiction," which allows the government to exercise international sanctions if its commercial activities involve U.S. users, U.S. scrutiny transcends borders and is omnipresent. After FTX and Binance, people are increasingly aware that the long arm of this "world police" is threatening the very foundation of this industry—U.S. regulation is the Sword of Damocles hanging over Ethereum. We can conclude that any blockchain company faces the risk of being captured by the U.S. government, which means founders could end up in prison, data and capital could be confiscated, and decentralized blockchains could turn into American alliance chains. Considering Ethereum's origins, it is not difficult to see that it possesses North American thinking while also adhering to anti-hegemonic fundamentalist beliefs. In other words, it can understand U.S. strategies, thus maintaining a constant awareness and vigilance against censorship.

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Vitalik Buterin, the man behind Ethereum, talks crypto and the U.S. crackdown

Thus, Ethereum needs Asia, Africa, and Latin America. Not only does it require its products to find landing scenarios, but it also needs to maintain a certain distance from the U.S. in geopolitical terms; a natural internationalist should not be captured by individual countries. Among numerous blockchain projects, Ethereum has achieved a high degree of decentralization of validator nodes at the cost of sacrificing some performance. Moreover, it has been dedicated to building a global Ethereum community since its early entrepreneurial days. On its official website, you can see the community activities section prominently displaying bold letters: "Every month, there are major Ethereum events around the world." Vitalik once applied for a gap year during his studies to travel the world and visit various Bitcoin communities. He also transformed this experience into Ethereum's unique global community and "never-setting sun" monthly summits, inspiring many subsequent projects to imitate.

4.3 Asia, Africa, and Latin America: Why They Need Ethereum

As a technical ecosystem, Ethereum maintains neutrality in political discourse, but Vitalik's personal views are more pronounced. Since founding Ethereum, he has not rested in any city, drifting between various countries like a migratory bird. In an interview with CNBC in September this year, he expressed a more cautious stance towards geopolitics: "Three years ago, there were many countries I was very willing to visit, but now I feel more concerned about those places. Even in countries that are still considered relatively normal by mainstream standards—I am more worried about those places." As he matures personally and the industry evolves, Vitalik's political sensitivity has quietly sharpened.

kotor-1536x1024


George Kedenburg III/Kotor, Montenegro, https://www.palladiummag.com/2023/10/06/why-i-built-zuzalu/

One example is the Zuzalu co-living experiment initiated by Vitalik this year. Zuzalu is located in Montenegro, a young country that has just gained independence from Yugoslavia a little over a decade ago. Due to the instability of the new regime and its weak position without monetary sovereignty (Montenegro belongs to the Eurozone but not to the EU), all of this has led Montenegro to seek more radical political and economic leverage. Local politicians connected with Vitalik and quickly offered him citizenship as a gesture of goodwill, brewing deeper policy explorations in the crypto field. Vitalik reciprocated by holding this experiment, inviting 200 people to co-live for two months. However, during the opening ceremony's "Do you know Montenegro?" segment, it was evident from the audience's raised hands that the vast majority of participants had never heard of this country before joining Zuzalu. This did not prevent Vitalik from enthusiastically supporting local crypto education, even organizing a group to visit the university in the capital to patiently explain the cryptocurrency industry to students.

Similarly, at Zuzalu, Vitalik also showed fervent support for the African community. He not only personally invited many African community leaders but also actively attempted to address the visa issues faced by Africans traveling abroad (which ultimately failed due to excessive complexity, becoming Vitalik's biggest headache during the organization of Zuzalu). In fact, as early as 2020, Vitalik had already publicly expressed concern about visa issues, tweeting, "The global inequality in travel convenience is still very severe. I look forward to the day when Africans, Asians, and everyone else can travel the world as easily as we in developed countries." In February of this year, he also made high-profile appearances in several African countries, supporting crypto community projects aimed at uniting African consensus, such as Afropolitan and Borderless Africa.

Using Montenegro and Africa as case studies, we can further analyze why Asia, Africa, and Latin America also need Ethereum. In the Montenegrin scenario, it represents a country in a weak position within the political landscape, seeking to use cryptocurrencies as leverage in its games with other countries. Similar countries include those in Latin America that have experienced severe local currency inflation due to dollar hegemony, such as Venezuela, which has made Bitcoin its national currency, and Honduras, which has opened special economic zones supporting cryptocurrencies. There are also countries like Japan, which nearly faltered after the bubble crisis and missed the Web 2.0 internet, now wanting to overtake in the Web 3.0 crypto era. According to Reuters, Argentina's inflation rate has reached 124% this year. In its intense election this year, Javier Milei, who positioned himself as an anarcho-capitalist, became president, and Grayscale stated that Milei's government would pave the way for Bitcoin's development in Argentina, vigorously promoting the future of cryptocurrencies in this major South American country. In these types of countries, it is politicians who wish to promote the local establishment of the crypto industry, seeking a possibility for the future.

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Market Byte: Bitcoin Surges as Milei Wins Presidency in Argentina, grayscale.com

However, Africa represents another scenario. In that impoverished southern scorched earth, there are government incompetence and police brutality left over from colonial history, with corruption being a widespread issue. The income of the people largely depends on their dispersed relatives abroad, and the significant exchange rate differences make remittances a substantial material guarantee. However, the backward financial system and corrupt government institutions force Africans to prioritize decentralized payment methods, making cryptocurrencies their ideal solution. Therefore, in terms of market penetration, African countries rank high; for instance, in Statista's data from 2019-2023, Nigeria has maintained the top position for several consecutive years. The reasons behind this include the highly depreciated local currency and the high proportion of young people in the population (53.7% of Nigerians are aged between 15–65). Out of concern for capital outflow, the Central Bank of Nigeria issued a ban on cryptocurrencies in February 2021; at the same time, to address the issue of currency withdrawal, it actively promoted the launch of its local digital currency to address urgent needs. These actions sparked widespread dissatisfaction among the people, leading to large-scale protests and riots across the country. Even though the government has explicitly banned the circulation of cryptocurrencies, it cannot stop the widespread usage among the people. In these types of countries, it is the people who wish to promote the local establishment of the crypto industry, driven by genuine survival needs, yearning for a decentralized currency.

5. The Black Eyes of Crypto: The East is Already White

In the blockchain field, compliance and anti-censorship are two important and challenging issues. Gavin Wood, co-founder of Ethereum and founder of Polkadot, once said, "Blockchain technology offers tremendous potential in decentralization and transparency."

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https://research.google/pubs/beyondcorp-a-new-approach-to-enterprise-security/

Anti-censorship and decentralization are basic consensus principles that rank as the highest priority. They ensure that all transactions are public and transparent, and no one can modify or delete transaction records. This transparency creates an irreplaceable "sense of security" for those involved. Google published the "BeyondCorp: A New Approach to Enterprise Security" white paper in 2014, detailing how they restructured their network security architecture and protected user data based on the "Zero Trust" model—emphasizing that no internal or external system should be trusted by default, and identity and permissions should always be verified. This project not only enhanced the transparency of network security but also granted users greater control over their data.

Openness, transparency, and the absence of monopolistic authority are incredibly important in modern business.

With the recent resignation of CZ and the "change of ownership" of Binance, it is hard to say that blockchain can still provide users with "peace of mind" in the U.S.—when a national machine swings its arm, the once seemingly equal protection of every individual can easily show cracks.

We also find that Ethereum's community strength in Asia, Africa, and Latin America, along with China's unique position, seems to become the starting point for new possibilities.

In the Asia, Africa, and Latin America regions, the international power struggle is complex and ever-changing. Whether in developing or underdeveloped areas, there are various intertwined interests, such as those of politicians, national economic interests, and the people's interests. Former South African President Nelson Mandela emphasized the importance of education throughout his life, and his famous quote, "Education is the most powerful weapon to change the world," is widely circulated. As a form of technological philosophy and social reflection, blockchain technology can influence individual lives and gradually impact entire communities, potentially accelerating and even changing the political and economic landscape in such complex environments.

In China, although the government is cautious about Web3, it possesses a vast internet user base, strong technological capabilities, and policy support from places like Hong Kong, providing immense imagination for the development of Eastern-style Web3.

In the seemingly boundless web of policies, the Asia, Africa, and Latin America regions are less touched lowlands; the global digital economy sparkles under the macroeconomic night sky, and the Asia, Africa, and Latin America regions are dark stars with enough burning heat; amidst the rapid flow of information, the Asia, Africa, and Latin America regions have just taken their first steps on a nascent path.

The broad road may not be bright, but the narrow path may lead to tranquility. The new flame needs to find a new field for itself. Time continues, and the "black eyes" of the indigenous people of crypto are forever searching for the first bright and transparent dawn. Will the next dawn be ignited in the East?

Acknowledgements

The writing of this article benefited from the prior reading and editing suggestions of Kenway, Guo Yu, and Nicholas. Thank you for their help in making this article more accurate and fluent.

Footnotes

[1] Binance settles with US government: Timeline of enforcement actions" by CoinTelegraph.

[2] "What’s happening at Binance? A 2023 timeline" by Finextra.

[3] Ethereum Foundation. "Ethereum Whitepaper." Ethereum.org.

[4] U.S. Securities and Exchange Commission. "Spotlight on Initial Coin Offerings (ICOs)." SEC.gov.

[5] Financial Action Task Force. "Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers." FATF-GAFI.org.

[6] U.S. Commodity Futures Trading Commission. "CFTC Charges." CFTC.gov.

[7] European Central Bank. "Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures." ECB.europa.eu.

[8] Reuters. "Binance's Zhao pleads guilty, steps down to settle US illicit finance probe." Reuters.com.

[9] Xinhua News Agency. "China cracks down on illegal ICOs." Xinhuanet.com.

[10] South China Morning Post. "China’s Bitcoin mining ban." SCMP.com. https://www.scmp.com/tech/policy/article/3148850/chinas-bitcoin-mining-crackdown-reaches-northern-province-surrounding

[11] Drake, J. (Host). (January 13, 2023). 134 - Ethereum Uncensored with Justin Drake [Video]. YouTube. https://www.youtube.com/watch?v=azjpYTB7PVE&ab_channel=Bankless

[12] Uniswap unsupported.tokenlist.json https://github.com/Uniswap/interface/blob/main/src/constants/tokenLists/unsupported.tokenlist.json

[13] Beaconcha.in Network Charts https://beaconcha.in/charts/pools_distribution

[14] Preventing Eth2.0 Validator Failure, Aditya Asgaonkar, Carl Beekhuizen Ethereum Research https://notes.ethereum.org/@adiasg/preventing-eth2-validator-failure#Proposals-for-SSV-protocols

[15] Forward inclusion list https://notes.ethereum.org/@fradamt/forward-inclusion-lists

[16] Six OFAC-sanctioned transactions missing reported by 0xB10C https://b10c.me/observations/08-missing-sanctioned-transactions/

[17] Blockchain.com Hashrate Distribution https://www.blockchain.com/explorer/charts/pools

[18] Validator Health Report: October 2023 by Solana Foundation https://solana.com/news/validator-health-report-october-2023

[19] 1,000 Solana validators go offline as Hetzner blocks server access by Osato Avan-Nomayo https://www.theblock.co/post/182283/1000-solana-validators-go-offline-as-hetzner-blocks-server-access

[20] Vitalik Buterin on Effective Altruism, Prosperity in Africa, and Crypto，https://www.youtube.com/watch?v=Sp5u6hbGP_Y

[21] Vitalik: Ethereum, Part 1 - Naval，https://www.youtube.com/watch?v=g87ZSTomZDY

[22] Ethereum Creator Vitalik Buterin Calls Russia Invasion a 'Crime'，https://decrypt.co/93695/ethereum-creator-vitalik-buterin-calls-russia-invasion-crime

[23] Buterin to Chief of Russian Media Giant: “Go F*ck Yourself” ，https://www.investing.com/news/cryptocurrency-news/buterin-to-chief-of-russian-media-giant-go-fck-yourself-2773698

[24] Vitalik Buterin's Dad on Ukraine, Censorship and Decentralization，https://www.coindesk.com/layer2/2022/03/22/vitalik-buterins-dad-on-ukraine-censorship-and-decentralization/

[25] The Cryptopians， by Laura Shin (Author)，PublicAffairs (February 22, 2022)，ebook

[26] Who is Steven Nerayoff and What Does ETHgate Recording Mean for Ethereum and Buterin? https://www.ccn.com/news/ethgate-who-is-steven-nerayoff-ethereum/

[27] Vitalik Buterin, the man behind ethereum, talks crypto and the U States crackdown，https://www.cnbc.com/2023/09/22/vitalik-buterin-cnbc-interview-ethereum-founder-on-us-crypto-crackdown.html

[28] AFROPOLITAN HOSTS VITALIK BUTERIN'S VISIT TO GHANA，https://www.afropolitan.io/newsletter/afropolitan-hosts-vitalin-buterins-visit-to-ghana

[29] Argentine Shoppers Face Daily Race Deals，https://www.reuters.com/markets/argentine-shoppers-face-daily-race-deals-inflation-soars-above-100-2023-09-13/

[30] Argentina's new president could 'supercharge' nation's use of crypto，https://www.theblock.co/post/263865/argentinas-new-president-could-supercharge-nations-use-of-crypto

[31] Share of respondents who indicated they either owned or used cryptocurrencies in 56 countries and territories worldwide from 2019 to 2023，https://www.statista.com/statistics/1202468/global-cryptocurrency-ownership/

[32] An overview of cryptocurrency regulations in Nigeria - Crypto Potato，https://cryptopotato.com/why-bitcoin-nigeria-faces-violent-protests-amid-cash-scarcity/

[33] Why Bitcoin? Nigeria Faces Violent Protests Amid Cash Scarcity https://cointelegraph.com/learn/crypto-regulations-in-nigeria