With the U.S. Treasury Department sanctioning coin mixer Tornado Cash earlier this month and the long-awaited Ethereum merger on the horizon, blockchain technologists believe government regulation will affect Ethereum’s basic operations and post-merger proof of stake. I am increasingly concerned that it may affect consensus. mechanism.
Coinbase CEO Brian Armstrong responded to a hypothetical scenario on Twitter today, stating that in the event of regulatory threats, his company would turn to Ethereum staking services to maintain the integrity of the blockchain network. said to stop.
The question was posed on Sunday by Lefteris Karapetsas, founder of open source crypto analytics and accounting app Rotki. Karapetsas tagged several of his major Ethereum players and asked them to choose between two options if government regulators demanded that certain addresses be censored.
“A) Comply and censor at the protocol level? [or] B) Suspend staking services and maintain network integrity,” he asked in a tweet, tagging Coinbase, Kraken, Lido, Staked and Bitcoin Suisse. At the time of this writing, in a responsive scenario.
“This is a hypothesis and I hope we never run into it in practice,” Armstrong replied. .”
He noted that a better third option could be presented, or that a legal challenge “could help us reach a better outcome.”
Mr. Armstrong’s response is particularly noteworthy. Because Coinbase has bet much of its future on a profitable staking service, calling it a “big win” for the company. And just this week, JP Morgan analysts said in a note that the Ethereum merger should be bullish for Coinbase and its shares (COIN), thanks to Ethereum’s staking service.
“In early August, we began offering Ethereum staking to institutional investors for the first time,” Coinbase told shareholders a little over a week ago. “We will continue to add more assets for staking for both our retail and institutional clients.”
Investors and analysts at Web3 are concerned that the merger will likely cause large institutional investors that offer Ethereum staking services to succumb to pressure from government regulators. With so many validators under control, their absence could threaten the entire network.
Eylon Aviv of blockchain and cryptocurrency investment firm Collider VC estimates that these large players will be lined up if US regulators call for censorship of transactions.
“here, The Ethereum ecosystem has not reached sufficient social decentralization and is charting in highly dangerous state-occupied territories,” he wrote.
When news of the Tornado Cash ban broke last week, Armstrong tweeted: “
“Obviously, we always follow the law,” he added.
At the time, Armstrong pointed to a Feb. 4 Coinbase blog post he wrote to clarify the company’s “philosophy on account deletion and content moderation.”
“Decentralization is the ultimate customer protection,” he wrote. “The decentralized nature of cryptocurrencies offers significant protections of its own here. These protections are strengthened the more decentralized the product is.”
Armstrong said that without the protection of a decentralized system, Coinbase’s moderation policy could “be adopted over time, succumb to pressure, or fall upon us playing judge and jury.” says there is
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