Upgrading Ethereum to proof-of-stake (PoS) may make it more vulnerable to government intervention and censorship, according to lead researcher at Merkle Science.
Speaking to Cointelegraph following the Ethereum merger, Coby Morgan, a former FBI analyst and principal investigator at cryptocurrency forensics and enforcement firm Merkle Science, has weighed in on some of the risks posed by transitioning from Ethereum to PoS.
While centralization issues have been widely discussed before the merger, Moran suggested that the prohibitive cost of becoming a validator could lead to the consolidation of validator nodes into larger crypto firms like Binance, Coinbase, and Kraken.
To become a full validator on the Ethereum network, a staking of 32 Ether (ETH) is required, which is worth around $47,000 at the time of writing this article.
A pre-merger briefing from Nansen’s blockchain analytics platform earlier this month revealed that 64% of the ETH staked is controlled by just five entities.
Morgan went on to say that these larger institutions will be “subject to the whims of the world’s governments,” and when sanctioned addresses are identified by validator nodes, they may “be rewarded and eventually kicked out of the system,” preventing companies from interacting with them.
Either they comply and deflect that type of interaction […] or they run the risk of being fined, surveilled or potentially sanctioned.
Vitalik Buterin discussed this risk in a developer call on August 18, suggesting that one of the forms of censorship could be that validators decide to exclude or filter sanctioned transactions.
Vitalik went on to say that As long as some validators do not comply with the sanctions, these transactions would eventually be picked up in later blocks and the censorship would only be temporary.
On August 8, the cryptocurrency mixer Tornado Cash became the first smart contract to be sanctioned by a US government body.
As a reaction, Several entities have complied with the sanctions and have prevented the sanctioned addresses from accessing their products and services.
The development has had a huge effect on the Ethereum community; EthHub co-founder Anthony Sassano tweeted on Aug. 16 that he would consider Ethereum a failure and would go offline if permanent censorship occurs.
I want to be very clear on this:
If the Ethereum base-layer ends up engaging in *permanent* censorship then I will consider the Ethereum experience a failure and I will move on.
Thankfully, I believe the Ethereum community is strong enough to fight off base-layer censorship.
— sassal.eth (@sassal0x) August 16, 2022
I want to be very clear on this: If the Ethereum base layer ends up incurring *permanent* censorship, I will consider the Ethereum experiment a failure and move on to something else. Fortunately, I think the Ethereum community is strong enough to fight against base layer censorship.
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