Is Ethereum 2.0 at risk of centralization? and which stablecoin is safest.
Ethereum 2.0 may be at risk of censorship. What does it mean for Crypto?
Ethereum completed its merge successfully and lowered its power consumption of the network by 99%. While saving electricity is good for the earth, Proof of Stake creates an entirely new set of “environmental” issues for Ethereum governance. Arguably, the power consumption caused by Ethereum miners competing in economic game theory creates the healthy competition and decentralization needed to ensure Ethereum isn’t controlled by one small group driving their own narrative onto the network.
Post-merge, the majority of Ethereum holders are forced to stake their ETH through a centralized party unless they have the minimum threshold of 32 ETH required to stake independently. This is creating the centralization issue that was trying to be prevented during Proof of Work.
Most of the staked ETH is in users accounts on Kraken, Coinbase, Binance, and Lido. Lido, a platform designed for liquid staking, has almost 1/3 of all ETH staked on their platform. There is over $5.6 Billion in ETH on Lido alone.
It’s a centralization issue that brings problems for Ethereum now and in the future.
The SEC argued two days ago in a case where they are suing Crypto Influencer Ian Balina that they have jurisdiction over Ethereum because a lot of the network is being run within the country. As shown on Ethernodes, 44% of the Ethereum nodes are located in the USA.
Remember Ethereum is designed to be a global computer with no jurisdiction residing over the entire network. I think it’s currently a weak argument, but if centralization continues with Proof of Stake being handled by a few exchanges that reside in the USA, more trouble could be ahead for Ethereum.
With USDC transactions blocked in the recent past after the Tornado Cash takedown, it’s only a small step away from the SEC declaring their ownership over Ethereum and blocking ETH transactions.
Speaking of USDC as a stablecoin, below I speak with the creators of USDC this week on their thoughts on regulation and identity in blockchain.
Kim Hamilton Duffy, Director of Identity and Standards at Centre, came on the show. Centre is a consortium, consisting of Circle and Coinbase, which essentially created the USDC stablecoin.
Stablecoins are becoming an integral part of the blockchain ecosystem, especially for those looking to preserve value in a bear market where most cryptocurrencies are trending downwards.
However, after the Luna UST craze offered 20% stable yields and subsequent crash losing millions of dollars for retail investors, more regulation is coming for this type of crypto asset.
US House just proposes a two-year ban on algorithmic based stablecoins (Like UST), and I am betting they highly favour a stablecoin like USDC that works with regulators so closely (and even blacklisted all of the USDC addresses associated with Tornado Cash on demand when regulators asked).
I personally prefer USDT myself over USDC, however most use them interchangeably. Binance prefers their own BUSD coin and some prefer the more decentralized stablecoin DAI, though they may also run into issues if the US house bans algorithmic stablecoins.
The “best” stablecoin to use is a personal choice based on many factors like centralization, creator backing, liquidity, and community behind the projects. If you’re keeping a large amount of funds in a stablecoin understand who created it, what’s backing the coin, and any other risks associated.
While we discuss USDC, the main focus of this video is Centre’s second initiative, a decentralized identity (DID) called Verite.
Web3 identities are becoming an increasing popular topic as regulators want to attach identities to a blockchain address when used in business or finance to better associate funds with their owners.
Centre works closely with regulators and governments on building an identity system. We discuss down the road how this technology could build your entire identity into Web3 including work history, university degrees, drivers license, passports, birth certificates and more.
Eventually it will all be digitized, so why not learn about it now and take advantage of the opportunity.
Other Crypto & Market news:
Bitcoin News:
65% of Bitcoin's supply has not moved in over a year despite the 60% drop in price, showing long term holder strength.
MicroStrategy has purchased an additional 301 bitcoins for ~$6.0 million at an average price of ~$19,851 per bitcoin. As of 9/19/22 @MicroStrategy holds ~130,000 bitcoins acquired for ~$3.98 billion at an average price of ~$30,639 per bitcoin.
Nasdaq to launch institutional Bitcoin and crypto custody services
Colorado becomes first US state to accept bitcoin as payment for taxes
Royal Family of Dubai company partners with CoinCorner to facilitate Bitcoin
transactions in the UAE
Ethereum, DeFi & Other news:
Federal Reserve raises interest rates by 75bps.
SEC trying to claim jurisdiction over all #ethereum transactions since about 45% of the nodes are in the USA
Jesse Powell, CEO of Kraken Exchange, steps down.
Is Ethereum a security? "Even if a token is on a thousand computers, it is [more] about a group of developers in the middle." —Garry Gensler
SEC Charges Ian Balina for Promoting Unregistered ICO's: Court Filing
Wintermute was hacked for $160M in the DeFi operations.
Helium Signs Five Year Agreement with T-Mobile for 'Helium Mobile' Launch: CoinDesk
#Ripple signs The Climate Pledge, a commitment to reach net-zero carbon emissions by 2040.
Korean fintech giant, Dunamu, to create 10,000 Web3 jobs with $385 million of investment
Technical Analysis:
$ETH:
Besides the uneventful merge completion to ETH 2.0, there has been no good news for Ethereum in the recent week. it continues to trend down and could re-test the June lows, but I expect it to find more support at between $1000-$1,100.
$BTC:
The 1D chart for Bitcoin still shows a Bearish signal as Bitcoin hits its former support floor from the June lows. With the rise of interest rates by 0.75 bps from Jerome Powell at the FED in the past days, the market dipped further. The chart shows volume increasing in the recent weeks and it’s even more predominant on the 2D chart, which hopefully means a lot of smart people are buying the bottom. Do you try to time the bottom, or try a more conservative approach of Dollar Cost Averaging more Bitcoin each week?
$XRP:
XRP is one of the few coins defying the market. It is more of a short term trend, but with the SEC focusing on Ethereum more post-merge, the SEC case against Ripple XRP as a security may soon pass. XRP has been seemingly winning the court case and when it does finally succeed XRP price will likely rise immediately after the news. A favourable judgment is a short-to-mid term bet for XRP, but there are also those who consider it as a long term investment. Ripple Labs continues to grow many partnerships with banks and institutions for adoption of mainly their technology but also their coin. I’ve tagged some short term gain potentials in the chart below.
That’s all that we have for this weeks episode!
Ashton Addison
-CEO, Crypto Coin Show