Ethereum 2.0 is not born yet, but already at this point it may find itself at the mercy of the United States. if platform (rythm) staking were to achieve restrictions such as those suffering from Tornado Cache, the network would be completely compromised.
Tornado Cash was a platform that protected itself against the state behind a veil of “decentralisation”. Its purpose was to enhance the privacy of the cryptocurrencies that users receive, preventing them from being traceable., However, under the argument that it was used by criminals, the United States Treasury decided to approve the Tornado Cash, considering it a threat.
Although this restriction did not apply to any entity, as it was a decentralized platform that was not controlled by anyone, some decentralized finance (DeFi) platforms became US government compliant and allowed anyone to connect to any address associated with Tornado Cash. also started censoring transactions. , This was the case of USD Coin (USDC) Developer Circle, which decided to freeze funds from addresses that used Tornado Cash.
Ethereum is in trouble
In this context, the evolution of what will be Ethereum 2.0 is only complicating its situation. Being a validator node requires a deposit of 32 Ether (ETH)Today’s equivalent of USD 60,000, according to the cryptonoticia calculator. This makes it virtually inaccessible to anyone. Those looking to invest in staking opt for cheaper solutions such as pools that offer a minimum investment of 0.0001 ETH (less than USD 1).
This has led these platforms to currently control about 70% of all ETH stakes: over 7 million ETH.
It should be noted that while the pool has this amount, it is not actually their ETH. The ETH in staking comes from its clients who invest in the platform.
While some have argued that decentralized platforms Staking, like Lido, was not controlled by the state, Tornado Cash was a perfect example of how this decentralization does not protect them from governments.
Added to this, Another danger within Ethereum 2.0 is that ETH in stake cannot be withdrawn (yet), The Ethereum 2.0 protocol stipulates that, although validators have been able to start working since the blockchain was operational in December 2020, they will not be able to withdraw their ETH until the sharding phase is completed. It is planned to run in mid 2023.
If they all decide to drop stake, about 68% of validator nodes will be shut down. About 7 million ETH will be liquidated, causing a loss of approximately 16,000 million USD to the clients of these platforms (Current price of ETH above $2,000).
Fictional scenario: USA bans all staking pools
Since US sanctions are against any “threat to national security”. Let’s imagine that the stake in Ethereum has become an economic “threat” for the US. So you decide to approve these platforms, In this case, two scenarios can be considered for the staking pool: Force validators to close or censor transactions from accepted addresses,
Taking Tornado Cash as an example, any other DeFi platform doing business with the US or its allies (part of Europe and Latin America) must comply with these obligations.
Although this is a hypothetical case, Coinbase CEO Brian Armstrong himselfwhose company currently controls 14.1% of all ETH stake, said that, in such a scenario, it would forgo betting instead of censored transactions,
Since more than 60% of the stake is in the hands of pools, which are forced by the state to censor transactions, this would completely break down the network by saying who can and cannot use Ethereum. .
Ethereum is at the mercy of the good faith of governments
This current intersection in Ethereum was not brought about by any government. The same developers, in their intention to shift from Proof of Work (PoW) to Proof of Stake (PoS), have weakened the network.
Although it is possible to speak of hypothetical cases, the Tornado Cash case also led to the arrest of one of its developers, Ethereum stays a nod away from chaos,
If something like this happens, the network could bet a substantial portion of ETH or transactions will begin to be censored. In both cases, they will break the network. This leaves Ethereum in need of mercy from governments.
Disclaimer: The views and opinions expressed in this article are those of its author and do not necessarily reflect the views of cryptonoticious.