The US & EU Will OutLaw Smart Contracts Without Backdoors
Before hand I want to explain how they enforce what I'm about to explain through existing treaties and OECD diplomacy for banking surveillance or what they call tax compliance agreements. The US and G20 countries cooperative on aml-kyc and taxes.
This is all backed up with extradition and law enforcement treaties with most countries. If any country became a major hub of non-compliance, they are at risk of Sanctions and embargo like Yemen and Iran.
They can debank you, they can debank foreign non usa citizen teams, they can extradite non usa citizens who develop smart contracts, they can have other european companies imprison developers they don't like who don't go along with this process, they can debank these exchanges. They can put exchange executives on sanctions lists.
I keep telling you guys they want to put hard KYC into the smart contract itself.
The FIT Bill recently requested requires validators and front ends to do this, Elizabeth Warren's bill basically requires deep KYC onchain and on validators an forebades self custody, and 6050i from 2021 makes you a felon for using smart contract without KYC and backdoors, and the Treasury's new proposal at a minimum requires this white listing on frontends.
Because DeFi is so dependent on middleware and indexing nodes, frontends and clients, and advanced api's, there's a lot of attack vector for real time chain analysis to be built into any sort of appchain or api calling system.
Obviously any sort of frontend or middleware or api that can interact between a wallet and a smart contract is going to be able to run real time chain analysis which can and will increasingly look many hops back until your address gets geolocation tied to the known addresses, and you get banned from the Dapp. This will be the norm, but it gets worse.
They clearly have an intent to put the white list directly in validator, the L2 itself, the appchains themselves, they clearly intend to abstract their white list into zkstarks, it's easy plausible deniability on privacy, while still allowing them to financially exclude billions of people and imprison developers.
They can, let me explain-
Rust can be used to program white lists, there are now tooling kits for advanced software language writing on cosmos, solana, and eth layer 2, Rust and Cairo can work with Zkstarks to build these white lists.
White lists come from centralized exchanges and chain analysis companies, there are enough meta data tied to people's real identities to connect most addresses to real identity. They can create mass batches of geofenced addresses. They have enough machine learning on the backend to map things.
The new released paper on privacy pools by Vitalik and ameen shows that smart contracts can operate deeply with associative white lists and zkproofs of deposits, even without middleware, law enforcement can force developers to put this type of exclusion system to severely fragment liquidity or even outright block unwhite listed addresses.
It's dangerous because the associative white list themselves are hard geofences made beforehand by chain analysis companies. They're getting better at mass sweeping and classifying addresses. They can update these lists with the new data they get from middle ware as well.
This will work on Cosmos appchains and Eth Layer 2 and Solana, multisigs will be used to update the contracts with the white lists. They will likely try to use similar white listing tied to the middleware like Infura, RPC Nodes, and indexing nodes, servers, frontends, just same whitelists applied at each layer. They may even automate certain contract updates using new white list data obtained from surveillance.
They want deep geofencing geobans, they have plenty of meta data to do it and multisigs to make contract changes.
Why do they want this?
-It allows them to outlaw smart contracts that don't comply with civil security and commodity law
-It allows them to block DeFi products that would otherwise not be available in tradfi from usa users, to fully deprive them of DeFi
-It shuts down competition
-It requires licensing for contract deployment, and picks winners and losers and which smart contract to sanction and outlaw
So far they subpoena any development team globally running a non compliant front end, and so far it's working, it's bankrupting the industry