Resisting Censorship: Why Beam Wallet runs DApps Locally versus on the Web
TLDR; Existing crypto censorship-resistance systems are compromised and built on weak infrastructure, allowing censors to exploit projects.
Strong censorship resistance systems are imperative in fulfilling crypto’s vision to become a global decentralized free economy.
Learn how Beam builds its technology to provide Beamers with the best-in-class user privacy and censorship-resistance solutions.
A brief context on Censorship Resistance and Bitcoin:
Censorship resistance refers to the features of a network that prevent parties from altering or blocking data on it. Once the data is added, it should be virtually impossible to remove or alter it, making it and the network permanent.
Research from the University of Waterloo cites “Internet censorship resistance systems (CRSs) have so far been designed in an ad-hoc manner. … Future censorship resistance systems should be built from strong theoretical underpinnings and based on empirical evidence.”
Since the 2010s, Bitcoin has been the poster child for a revolutionary censorship-resistant global currency, that is fully decentralized, nor governed by any single institution or entity. This is powered by the underlying blockchain technology that stores all transactions in a transparent, publicly verifiable, and immutable data ledger. Bitcoin has an anonymous founder, no governance model, or controlling entity.
Therefore, it is impossible to censor the network, i.e. no entity can prevent the network from running or force it offline unless a coordinated attack is planned. The proof of Bitcoin’s success is in the pudding; it is the best-performing asset of the decade, up 230% in returns each year.
The idea is that no nation-state, corporation, or third party has the power to control who can transact or store their wealth on the Bitcoin network. Censorship resistance ensures that the laws that govern the network are set in advance, programmed into the code, and cannot be altered retroactively to fit specific agendas.
Censorship-Resistance for Crypto Projects
The cryptocurrency landscape is differentiated into two main types of players: centralized and decentralized. The key difference is that decisions in centralized projects are made behind closed doors by a handful of people, whereas decentralized projects are governed by on-chain community voting on publicly-created proposals.
Centralized:
“We are seeing wider adoption of cryptocurrencies globally and the need for clearer regulatory frameworks in different countries. More regulations are, in fact, positive signs,” Binance CEO, Changpeng Zhao
The prime example of a centralized player is Binance; the world’s largest crypto exchange by trading volume, the second-largest DeFi blockchain, and the third-largest cryptocurrency by market capitalization (as of August 2021).
For Binance to operate in various national jurisdictions, it must comply with all authorities and regulatory frameworks. Despite Binance CEO’s embracing stance on adopting compliance, it still often comes under national regulators’ spotlight with published warnings and announced investigations. Binance had to suspend trading of its tokenized stocks after an international crackdown from regulatory officials in the U.K., Hong Kong, Germany, and Italy as the tokens can be constituted as securities.
Decentralized:
Uniswap is self-described as a “fully decentralized protocol for automated liquidity provision on Ethereum.” As of writing, Uniswap is the largest DEX by trading volume and the tenth-largest cryptocurrency by market capitalization.
In July 2021, 129 tokens were removed from Uniswap’s DAPP interface ahead of anticipated regulatory scrutiny by the US SEC. The tokens removed can be considered to be tokenized securities such as Synthetix tokens, Tether Gold, and UMA tokens.
Uniswap users can still swap these tokens via accessing specific smart contracts connected to the Ethereum blockchain as the tokens were removed only from Uniswap’s main web interface which is hosted on Amazon Web Service. Uniswap does not have a locally hosted DAPP, so only the most tech-savvy users can access these removed tokens.
The main concern that needs to be addressed regarding the token removal is Uniswap’s self-description as a “fully decentralized protocol”; it should not be possible to alter such a protocol without consensus from UNI governance token holders.
Implications of Censorship in the Crypto Space:
One of the biggest operational risks web-only DApps face is getting blacklisted or de-platformed by any centralized entities like App Store developers (Google or Apple), internet service providers (ISPs), and even cloud providers hosting the DApp (such as Microsoft Azure or Amazon Web Service), etc.
Imagine a user has placed a leveraged position on the multichain lending Dapp Aave and the website suddenly becomes blocked in the user’s jurisdiction. Aave also does not currently have a locally run Dapp. This website outage could cause great financial loss to users and permanently damage the trust and reputation of a DAPP. The analogy would be similar to obstructing a traditional bank from operating by cutting access to electricity or the Internet.
If the biggest DeFi player in the game can be subject to censorship, this sets a dangerous precedent and poses a red flag for all the smaller “decentralized” players, who currently do not have local DAPPs yet. The ability to add or remove data or community-created crypto pairs goes against the fundamental principle of cryptocurrencies being decentralized, censorship-resistant, or at the very least the protocol is changed through community governance.
Examples of projects that have successfully built decentralized censorship-resistant DAPPs include Rotki, a locally hosted crypto portfolio tracker and analytics platform.
Beam: The solution for a censorship-resistant blockchain and DeFi ecosystem
Beam’s mission is to build the most confidential and censorship-resistant blockchain. Beam has refined, implemented, and adopted various privacy protocols such as Mimblewimble, Dandelion & Lelantus-MW. BeamX is the smart contracts layer built on top of the Beam blockchain that enables a truly confidential DeFi ecosystem.
While Beam is built to protect Beamers from privacy and censorship adversaries, it is designed to comply with auditors for accountability and transparency. Beam Wallet will also feature an optional opt-in auditability mechanism that allows auditors to verify user transactions for asset proof of ownership and taxation purposes.
The DAPPs on Beam Wallet run locally on a user’s machine through an integrated node, instead of on the Web, connecting Beamers directly to smart contracts and DAPPs on the Beam blockchain. This makes it virtually impossible to be censored as there are no intermediaries (such as Binance or Uniswap Labs) or centralized web servers (such as Amazon Web Service, and Google Cloud).
In the future, the BeamX protocol will feature permissionless DAPP deployment allowing users to create and publish DApps directly from the Beam Wallet.
Beam solves the existing problems many blockchain projects face when it comes to user anonymity, true decentralization, and censorship resistance. As human rights activist Deeyah Khan puts it, “Censorship in all its forms must be challenged.”. The team at Beam agrees wholeheartedly and remains committed to channeling this vision by building censorship resistance and user confidentiality into the foundation of Beam.
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