Proof of stake in Ethereum will be “as centralized as possible”.
There are no possible ways out of the censorship the network would be subject to, says Mow.
Samson Mow, chief strategist at Bitcoin solutions developer Blockstream, spoke harshly about Ethereum and its economic policy. From merge (the merger) and its transition to Ethereum 2.0, it will become totally vulnerable to government censorship and majority staking pools, he says.
Through a thread on the social network Twitter, Mow explained why he thinks ether (ETH), the cryptocurrency of the Ethereum network, is “a shitcoin”. First of all, he began, “Ethereum’s problems are caused by the constant optimization of tokenomics (economic policy) over decentralization, security and resilience.”
According to the CEO of Jan3, who participated as an advisor in El Salvador’s plan to adopt bitcoin (BTC) as legal tender, the merge and PoS “will lead to complete regulatory capture by exchanges and staking platforms, and there is no way out.”
The arrival on this stage was possible, from his perspective, for a fundamental reason. The decision to introduce in the protocol the requirement to have 32 ethers (ETH) to be a validator was key, says Mow.
It is that from mergeEthereum 2.0 will no longer work with proof of work (proof of work or PoW) to validate new blocks, but instead will use proof of stake (Proof-of-Stake or PoS). “That made PoS as centralized as possible,” Mow analyzes.
Why would Ethereum 2.0 be centralized?
His explanation is that “66% of validators need to adhere to OFAC regulations (United States Office of Foreign Assets Control). This is because most of the validators in Etheruem 2.0 are US-registered staking pools, such as Coinbase and Lido, and must abide by US laws.
It should be noted that these are the same regulators that a week ago they banned the Ethereum Tornado Cash transaction mixer. This resulted in several decentralized applications blocking transfers of funds that have previously passed through that protocol.
On the other hand, Mow stresses that Deposited ETH cannot be withdrawn until after merge, because the functionality is not in the code yet (“because of tokenomics”). Added to this, he believes that Ethereum users don’t have the culture.”not your keys, not your coins (if it’s not your keys, it’s not your coins) of Bitcoin.
A fork is not possible to fix centralization
In the face of a centralized and reprehensible scheme like the one described by Samson Mow, alternatives such as a UASF (user-activated soft fork) could emerge. Namely, updating consensus standards without the need to split the blockchain. An example could be the activation of Taproot in Bitcoin.
Nevertheless, in Ethereum this cannot be donesays Mow. “First, because users don’t run their own nodes, and second, because most services rely on Infura,” he explains. But there is a bigger problem, he narrates.
It is true, says the specialist, that a possible fork (which he named Pyongyang, after the capital of North Korea), could avoid the problem of sanctions on certain transactions. Nevertheless, Pyongyang developers could be arrestedas happened to the developer of the Tornado Cash transaction mixer or to Virgil Griffith, both cases reported by CriptoNoticias.
By this, Mow means that if it is a developer or a group of independent developers who propose and execute a fork to break with centralization, governments could take measures to prevent it. The fact of having a few majority validators (which are also companies based in one country) allows States to exercise greater influence over them.
About these episodes, Samson Mow stated that “arresting developers for writing code is horrible and sets a terrible precedent.”
Finally, it remains to be seen who would run Pyongyang, he assures. “Coinbase, Kraken, Bitcoin Suisse and the others that make up the majority 66% (of validators) definitely won’t,” says Mow.
Penalizing Coinbase is also not feasible
I may be a pathetic Bitcoin maximalist, but I researched 10 minutes and found that there isn’t a way to make it slashing to Coinbase«. It is called slashing to the penalties received by Ethereum 2.0 validators. According to Mow, this punishment can only be applied in case of inactivity or double spending, but not for other reasons.
Thus, says Mow, one arrives again in need of the Pyongyang fork, which no one will write or run. “And even if it could be done, there is no way for users to withdraw their ETH. And even if they could remove them, it doesn’t matter, because only Infura matters », he questions, pointing again to the centralization of the network.
Samson Mow’s conclusion on Ethereum 2.0
Finally, Mow concluded his thread by noting that if there was an effective method for users to lock out Coinbase, this would would imply that minority validators would be able to “arbitrarily punish the majority”. “That will not work in the long term,” says the expert.
“This is why I call Ethereum a shitcoin,” he confirmed. “It is an exercise in futility, full of egregious design choices and intended for the sole purpose of pumping the token,” she concluded.