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What a time to be alive...pt.2
Friday September 16, 2022 - Issue # 22
First, we’ve got to give it up for those that worked hard to ensure that the Ethereum Merge was successful. How did I know that it was successful? I woke up a few times in the wee hours of Thursday morning and saw that nothing really changed. Each time I checked it was a relief that I didn’t see a headline or tweet like “ETH down 50% after critical malfunction during the final phase of the transition” or something like that. A part of me though, even though I have a relatively heavy ETH bag, wanted to see some sort of fireworks. Sicko.
To follow up on my last article that outlined a pretty bearish case of possible implications of the Merge from PoW to PoS, I thought I’d describe a different side that is also pretty compelling. After thinking about the risks associated with large centralized entities like Coinbase, Lido Finance, and Binance dominating the ETH staking business, I’m wondering if it’s a miss to think that the Office of Foreign Assets Control’s (OFAC), and other agencies are chomping at the bit to clamp down at some point…
What I’m seeing is that most folks are concerned that these large “stakers” who have to comply with FinCEN, OFAC, etc., regulations will have to censor sanctioned transactions which will cause them to be slashed — Slashing happens when the network removes some or all of a validator’s staked ETH for proposing or confirming fraudulent blocks. This would cause a lot of problems.
You can see from the above tweet just how dominant these stakers really are…
However, after Ethereum’s leadership team pulled off the well orchestrated transition which has (at least for now) re-centralized the network, it begs the question: would regulatory agencies really want to risk driving activity away from regulated centralized platforms (forcing the Ethereum network to become more decentralized) by causing problems? I’m not sure that line of thinking makes a lot of sense. I’m thinking that they probably want the network to be as centralized as possible so that it stays within its grasp which, in turn, means this thing could have some legs.
So now that Ethereum has successfully transitioned to PoS, Bitcoin is now the sole network (of any real significance) using PoW. While at first, there’s going to be a ton of hoopla about Ethereum “going green” I think that this move has concretely separated the two which is arguably good for both networks.
Ethereum will continue down the path of complexity and tinkering of its tech and monetary policy, while Bitcoin remains simple, secure and reliable.
Ethereum is optimizing for being widely used as a technology platform | Bitcoin’s battle-tested PoW model and the fact that it cannot (easily) be changed seems destined to scale as the hardest, sovereign global money.
Here’s a mic drop moment for Andreas Antonopoulos when asked if he was concerned about Bitcoin’s PoW security:
Clearly, from my last post onto this one, I’m a bit torn regarding my feelings on Ethereum’s PoW to PoS transition as it pertains to how I view the crypto industry holistically.
One thing it has done for me, though, is build my unwavering conviction in Bitcoin even stronger.
Have a nice weekend and remember…what goes down must come back up again…at some point…I think.