MakerDAO’s Spark Protocol has faced backlash for its recent decision to block VPN users from accessing its lending platform. Initially, the ban was intended to prevent US-based users from accessing the platform, but it has been extended to all VPN users regardless of their location. This move has sparked strong reactions from privacy advocates who see it as a violation of personal privacy rights.
The controversy surrounding MakerDAO’s Spark Protocol began when the platform increased the yield on its DAI stablecoin from 3% to 8% through the Enhanced Dai Savings Rate (EDSR) implementation. On-chain data revealed a significant transaction involving the transfer of over 14.3 million DAO stablecoin into MakerDAO by a single participant. It was speculated that this transfer was made to take advantage of the 8% yield offered by Spark, MakerDAO’s lending platform.
While MakerDAO had already restricted access to its lending platform for users in the United States, the updated terms and conditions of Spark Protocol explicitly prohibited the use of VPNs to bypass this restriction. The notification stated that using a VPN to conceal a user’s US residence would result in permanent blocking of the platform for the associated blockchain addresses.
Spark Protocol, launched in May this year, was designed to offer users up to 8% in annual returns by lending DAI. It was created as a soft fork of Aave v3 by Phoenix Labs, a blockchain company rolled out by the Maker Foundation.
The decision to block VPN users has drawn criticism from DeFi analyst Chris Blec, who argues that it goes beyond restricting access for US residents and effectively prohibits VPN usage worldwide. Blec sees this as a significant infringement on the concept of privacy and a campaign against personal privacy rights.
Overall, MakerDAO’s Spark Protocol has faced backlash for its decision to block VPN users from accessing its lending platform. This move has raised concerns among privacy advocates who view it as a violation of personal privacy rights. The controversy highlights the ongoing tension between regulatory compliance and the desire for privacy in the cryptocurrency space.