Centralized stablecoins can decide the future of Ethereum

Key facts:
  • USDC is the stablecoin with the largest number of tokens on Ethereum.

  • In a fork, any token will be duplicated on the new blockchain.

Vitalik Buterin, one of the founders of Ethereum, argues that stablecoins that live in the network can decide which chain resulting from a fork will be considered “real.” He focused specifically on USD Coin (USDC), whose coins have the largest market capitalization on Ethereum.

His words were delivered at the Buidl Asia 2022 conference, which will be held in Seoul, the capital of South Korea.

hard fork (hard fork, in English) when the blockchain makes a profound change to its protocol. in this change, Part of the network can decide to keep the old version, which will create two networks.

In the case of Ethereum, as reported by CriptoNoticias, Some intend to fork the network to be able to continue mining using the PoW algorithm.. Let’s remember that in mid-September, the merger is expected, and the network will start working with Proof of Stake (PoS).

In such a scenario, Stablecoins living in Ethereum will see their coin double, because these now exist on two block chains. Which could affect its parity with the dollar, given that there will not be enough monetary support for this new liquidity. For this reason, organizations that issue stablecoins are expected to support only one of the fork chains.

for this reason, Buterin considers the strength that USDC and Tether (USDT) can have in choosing over the hard fork as “significant”.. The decision they make may cause a large portion of the network market to migrate.

Vitalik Buterin
For Buterin (on the right of the image), the central stablecoin will play an important role in determining what “real Ethereum” will be. Source: Billy_kimshift / Twitter.

According to Etherescan data, The combined market value of USDC and USDT is around $100 billion. This is nearly half of the $200 billion capitalization of Ethereum’s original cryptocurrency, Ether (ETH).

Buterin, for now, sees no signs that either USDC or USDT will support a new Ethereum with PoW. However, the computer scientist points out that this power should be taken into account in the future fork, given that they are centralized stablecoins.

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