It hits those who need crypto the most: the dominant Ethereum wallet MetaMask and the predominant NFT marketplace OpenSea have blocked users from sanctioned countries such as Iran and Venezuela. The incident casts an ugly light on how vulnerable Ethereum is to control by key players.
In the past few days, there have been increasing reports that users from Venezuela and Iran have been blocked by the Ethereum wallet MetaMask. The same has been said of the NFT platform OpenSea.
Such a blockage is not trivial. Both MetaMask and OpenSea are by far the market leaders in their fields. Above all, MetaMask as the Swiss army knife of Ethereum wallets, whether as an app or browser plugin, is an indispensable part of the ecosystem. The fact that a “self-hosted” wallet, i.e. a wallet in which the user manages the private keys themselves, is now introducing blockades sounds like a mockery of the promise of cryptocurrencies to empower users.
And when users from Venezuela and Iran are also blocked, it hits those who need cryptocurrencies the most. Is Ethereum failing to deliver on the promise of an uncensorable, decentralized Web3?
It is now known to some extent what is behind the two incidents. The situation is easiest with OpenSea. Although the platform does not manage users’ coins or tokens, it does act as a central interface to organize NFT trading. With some users it happened that their account on OpenSea was deactivated and collections and transaction history disappeared. However, no tokens were confiscated.
NOT A gm AT ALL
Woke up to my @opensea trading account being deactivated/deleted without notice or any explanation, hearing lots of similar reports from other Iranian artists & collectors.
What the hell is going on?
Is OS straight up purging its users based on their country now?— Bornosor.eth (@Bornosor) March 3, 2022
A spokesman for OpenSea now told Coindesk straight out: Yes, the platform is indeed blocking users and territories based on US sanctions lists. “If we find out that individuals are violating our sanctions policy, we will quickly take action and remove the accounts.” The sanctions that are currently at stake apparently relate to Iran. It is not yet known whether there is a connection to the sanctions against Russia.
The situation at MetaMask is a little more tricky. While OpenSea is a centralized platform that can only be expected to implement sanctions, MetaMask is an open wallet. If everything goes right, it shouldn’t even be able to support sanctions. But apparently that is exactly what happened.
Not only @opensea
But MetaMask itself is also BANNING every wallet associated with an Iranian IP address.? THIS IS NOT A DRILL ?
Iranian People are losing access to their NON CUSTODIAL Wallets with this update.
This is UNACCEPTABLE! pic.twitter.com/qDEBcezJba— Bornosor.eth (@Bornosor) March 3, 2022
MetaMask reportedly blocked any wallet associated with an Iranian IP address. There are similar reports from Venezuela.
Not only @opensea
But MetaMask itself is also BANNING every wallet associated with an Iranian IP address.? THIS IS NOT A DRILL ?
Iranian People are losing access to their NON CUSTODIAL Wallets with this update.
This is UNACCEPTABLE! pic.twitter.com/qDEBcezJba— Bornosor.eth (@Bornosor) March 3, 2022
This means that users from Venezuela and Iran can no longer access their money stored on MetaMask. Ether, dollar tokens, NFTs, DeFi investments – everything is basically frozen. Quasi, because the users still have the private key and are able to export it and import it into another wallet. But frozen because this is not trivial and because very few users are able to work directly with the Ethereum blockchain.
However, the reason for this does not lie directly with MetaMask. The wallet is a kind of interface between the user and full nodes. By default, MetaMask connects to a full node of the Infura network. The Infura nodes now rejected the connection if the MetaMask user had an IP address from Venezuela or Iran.
According to Infura’s Twitter account, it was a mistake – an accident.
In response to the concerns we have been hearing, we want everyone to know that we corrected the problem that so many of you have pointed out. In changing some configurations as a result of the new sanctions directives from the United States and other jurisdictions, we
— Infura (@infura_io) March 3, 2022
“We have solved the problem. We changed some configurations after new sanctions directives from US and other jurisdictions. We accidentally set the settings wider than necessary.”
This statement leaves one stunned. What does Infura do with the sanctions lists? Doesn’t it allow people from sanctioned regimes to use an Infura node professionally? Did the company “only” block citizens of the countries who want to pull up a dapp? And if an accident excludes users from certain regions, what if the US or the EU or China really want it?
Infura is more or less Ethereum’s central point of failure. Almost everyone uses it – but “99 percent of users have absolutely no idea about it,” complained Anthony Sassal after the incident. “They had a rude awakening after the events of the last 24 hours.”
Sassal points out something “extremely important”: “Centralized infrastructure providers like Infura are not the Ethereum network itself, and when these providers exercise centralized control, that doesn’t make Ethereum itself centralized.” The network runs on thousands of full nodes around the world, and Infura has no control over the protocol itself. However, the incident demonstrates how dependent users are on centralized agents like Infura. Therefore, Sassal demands that alternatives be used.
However, that is not very easy. You could point MetaMask at your own full node, but running one for Ethereum is anything but easy. Finding another, foreign full node is not for everyone.
In the case of Infura, the situation is even more unfavorable than it appears at first glance: Infura is provided by ConsensSys, the New York Ethereum startup that, in addition to Infura, also – you fear and suspect – is developing MetaMask. And as if that wasn’t bad enough, a recent court case shows that major bank JP Morgan holds a significant stake in ConsensSys.
The magazine Protos reports on the case. The details are quite confused and probably not yet clear. However, it could be that the majority stake in ConsenSys was more or less secretly sold to a subsidiary of JP Morgan. Like I said, it’s confusing and I haven’t worked my way through it. But the assumption alone casts an even uglier light on an already less than beautiful location.
