Andrew Hinkes, partner at K&L Gates and adjunct professor at NYU, and Martin Köppelmann, cofounder of Gnosis, talk about the sanctions on Tornado Cash, how they will impact Ethereum on the base layer, and the likelihood of having two chains. 

Show highlights:

  • the legal meaning of the OFAC sanctions on Tornado Cash and why it is causing complications
  • how legislation is built for the fiat world, and how in DeFi and crypto there’s no clarity 
  • how miners have changed their behavior prior to the Merge
  • whether a proof of work chain or a proof of stake chain would be more censorship resistant
  • whether laws apply to validators in a PoS chain
  • the ways in which the government could provide more clarification 
  • the different entities involved in Proof of Stake
  • the liabilities for each entity in PoS and what secondary liability is
  • how the task of the bidder can be described as a mathematical optimization problem
  • whether Lido is exposed to US regulations
  • how long would it take for a large staker like Coinbase to stop being a validator
  • how a user-activated soft fork works and the conditions in which a fork could happen
  • whether social slashing is enforceable considering it is not in the protocol
  • the likelihood of Ethereum becoming a permissioned system
  • the role of Flashbots’ relay code and what it means for Ethereum’s censorship resistance
  • how DeFi’s exposure to US-based institutions can affect the likelihood of the chain complying with sanctions
  • whether DAI is just wrapped USDC
  • how MakerDAO is trying to be more independent of USDC
  • why US-based companies will choose a conservative path, considering the lack of guidance
  • the importance of educating the regulators 
  • how cash and crypto are the only remaining private payment methods 

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Ava Labs:







Previous Coverage of the Tornado Cash Sanctions on Unchained:

Social Slashing and Censorship on ETH

Axios summary of the situation:

BitMex research on how the sanctions affect Ethereum:

Ethermine banning transactions:

Nic Carter’s article:

Eric Wall’s article on social slashing:

CoinDesk article:

Hetzner banning Ethereum users:

Tornado Cash



Proposer-Builder separation:


Read the episode transcript here