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The Day a Ban Highlighted DeFi’s DeFi-Ness

Uniswap’s move to ban 10 countries from its platform ironically highlights how decentralized finance can broadens access to all users.

On Friday the automated market maker blocked Belarus, Cuba, Iran, Iraq, Côte d'Ivoire, Liberia, North Korea, Sudan, Syria, Zimbabwe from its site, uniswap.exchange.

Image source: Uniswap Exchange

The move appears to contradict the very ethos of decentralized finance, the reason why this stuff is useful in the first place, which is to give access to financial tools to anyone, anywhere. Deciding who can and can’t access a platform is what centralized exchanges -not dexes- do.

The so-called geo-fencing was apparently spotted by a change on the code posted on GitHub, not by an official announcement from Uniswap. Hayden Adams, the company’s founder, declined to comment.

Image source: GitHub

Some speculated Uniswap, whose team is based in New York, excluded countries the U.S. government prohibits transacting with to remain compliant with U.S. laws. Most of the platform’s now blocked countries (except for Liberia) are part of OFAC’s sanctioned nations. Not all of OFAC’s countries were banned though, for example, Venezuela, Yemen and Somalia weren’t on Uniswap’s list of blocked countries.

The move follows similar actions from decentralized exchanges in the past, such as Bancor, ShapeShift and IDEX, which included know-your-customer processes or excluded some countries from their platforms.

But Uniswap is comprised of a front-end used to access the Uniswap protocol, and the protocol itself, which is built with smart contracts hosted on the Ethereum blockchain. The Uniswap team controls the front-end, but doesn’t control the underlying protocol, which can be freely accessed and copied. This means anyone can create a point of access to the platform.

Soon after the 10 countries were banned, this is exactly what happened, and a couple of new versions of Uniswap popped up. It happened in a few hours, and users excluded from the original front-end could now access a site that looked and worked almost the same. At least one of these sites was hosted on IPFS, a peer-to-peer network.

Image source: Uniswap front-end on IPFS

The move that initially looked so against the core of DeFi, ended up highlighting one of its key strengths. Even in the case of a project that decided to exclude some users, developers were still able to give them access. Needless to say, this could never happen in traditional finance.

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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.