Ethereum co-founder Vitalik Buterin says that centralized stablecoins like Tether (USDT) and Circle USD (USDC) could be “an important deciding factor in future controversial hard forks.”
Buterin spoke at the BUIDL Asia conference in Seoul on August 3 along with Ilya Polosukhin, co-founder of Near Protocol (NEAR), to discuss the upcoming Ethereum merger.
The co-founder of Ethereum argued that centralized stablecoins could be an “important” factor in determining which blockchain protocol the industry will “respect” in hard forks.
A hard fork occurs when there is a drastic change in the protocol of a blockchain network, effectively resulting in two versions. Usually one chain is preferred over the other.
“At the time of the merger, you will have two [separate] networks […] and then you have exchanges, you have Oracle providers, you have stablecoin providers who sort of decide who they respect.”
“Because at that point you will have $100 billion on one chain and $100 billion on another chain, cryptographically — and so they [Tether] you need to stop respecting one of them, ”Buterin explained.
However, Buterin stated that he “didn’t see any indication” that such a disagreement would be an issue in the upcoming Ethereum merger, noting that the issue of a centralized stablecoin is more of a concern for future hard forks.
“I think it will definitely become a bigger problem in the future. In essence, the fact that USDC’s decision on which chain to consider Ethereum could be an important deciding factor in future controversial hard forks.”
He added that Ethereum could face more contentious hard forks in the next five to 10 years, in which centralized stablecoin providers could have more weight.
“At this point, perhaps the Ethereum foundation will be weaker, perhaps the ETH 2 client teams will have more power, and perhaps someone like Coinbase will launch a stablecoin and buy one of the client teams by then. […] how many of these things can happen,” he said.
As a potential antidote to centralized actors, Vitalik suggested using different types of stablecoins:
“The best answer I can think of is to encourage the adoption of more stablecoins. Basically, you know, people could use USDC, but then they could also use DAI and, for example, at this point, I mean that DAI took such a very strong path, saying: “We are not going to be purely crypto-economic “. we’re going to be the shell for a whole bunch of real world assets.”
Ethereum Merge: How Will PoS Switching Affect the ETH Ecosystem?
The merger is one of the most important technical upgrades to come to Ethereum since its inception as it transitions from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) consensus mechanism.
The merger is scheduled to take place following the successful integration of the Goerli testnet in mid-August, with Ethereum developers targeting September 19 as an indefinite date for the merger of the current PoW chain with the PoS chain.
Credit : cointelegraph.com