Ethereum 2.0 has not yet been born, but it could already be at the mercy of the US at this point. For platforms (rhythm) staking hits such a limit that Tornado Cache suffers, the network is completely compromised.
Tornado Cash was a platform that protected itself from the state behind the veil of “decentralization”. The aim was to make cryptocurrencies received by users more private and untraceable.However, under allegations that it was used by criminals, the U.S. Department of the Treasury decided to approve Tornado Cash, considering it a threat.
This restriction did not apply to any entity, but because it was a decentralized platform controlled by no one, some decentralized finance (DeFi) platforms were compliant with the U.S. government and everyone could own Tornado. You can now connect to any address associated with Cash. It also started censoring transactions. , this was the case of the USD Coin (USDC) Developer Circle who decided to freeze funds from addresses that used Tornado Cash.
ethereum is in trouble
In this context, the evolution of what will become Ethereum 2.0 will only complicate the situation. A deposit of 32 Ether (ETH) is required to become a validator nodeEquivalent to $60,000 USD today according to the cryptonoticia calculator. This effectively makes it inaccessible to anyone. Those looking to invest in staking choose cheaper solutions such as his pools with a minimum investment of 0.0001 ETH (less than US$1).
As a result, these platforms currently control around 70% of all ETH stake, or over 7 million ETH.
Please note that there is this amount in the pool, but it is not actually ETH. His ETH for staking comes from clients who invest in the platform.
Some claim it is a decentralized platform, Like Lido, staking was not controlled by the state. Tornado Cash is a perfect example of how this decentralization is unprotected from the government.
In addition to this Another danger within Ethereum 2.0 is the inability (yet) to withdraw staked ETH., the Ethereum 2.0 protocol stipulates that since the blockchain went live in December 2020, validators have been able to start working, but cannot withdraw ETH until the sharding phase is complete. It is expected to be operational in mid-2023.
If they all decide to withdraw their stake, about 68% of validator nodes will be shut down. About 7 million ETH will be liquidated, resulting in a loss of about US$16 billion to clients of these platforms. (The current ETH price is over $2,000).
Hypothetical Scenario: US Bans All Staking Pools
US sanctions are for “threats to national security”. Imagine if a stake in Ethereum became an economic “threat” to the United States. Therefore, we decide to approve these platformsin this case there are two possible scenarios for the staking pool. Force validators to close or censor transactions from approved addresses,
Taking Tornado Cash as an example, any other DeFi platform that trades with the United States or its allies (parts of Europe and Latin America) must comply with these obligations.
This is a hypothetical case, but Coinbase CEO Brian Armstrong HimselfThe company currently controls 14.1% of ETH’s total shares. In such scenarios, he said he would refrain from betting in lieu of censored transactions.,
With over 60% of stake in the hands of pools and state-enforced censorship of transactions, showing who can or cannot use Ethereum will completely collapse the network. .
Ethereum at the mercy of government good intentions
This current Ethereum crossroads was not brought about by any government. The same developer undermined the network with the intention of moving from Proof of Work (PoW) to Proof of Stake (PoS).
While it is possible to talk about hypothetical cases, the Tornado Cash case also led to the arrest of one of its developers. Ethereum Nods Away From Chaos,
If something like this happens, the network could either bet a significant portion of the ETH, or the transaction could start being censored. In both cases disconnect the network. With this, Ethereum needs mercy from the government.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of cryptonoticious.