As Ethereum (ETH) nears its merger, the debate over its transition to a proof-of-stake (PoS) network seems to be growing. Many people have expressed concerns about the current centralization of Ethereum’s validator nodes, arguing that moving to a PoS system would make matters worse.
This has led to an increase concerns among crypto investors that the current proof-of-work (PoW) system may not be as secure as it should be, and that a switch to PoS would mean that a single entity, with a 51% chance, could attack the network.
For years, the transition to proof of stake for Ethereum has been delayed. “We thought it would take a year to put POS in place, but it’s taken about six years,” Ethereum co-founder Vitalik Buterin said
According to a chirping by Maggie Love, co-founder of Web Cloud, “Ethereum cannot be decentralized if the stack is not decentralized.” She points out the 69% of nodes hosted on the ETH network, “with over 50% of that coming from Amazon Web Services (AWS), over 15% from Hetzner and 4.1% from OVH.”
In anticipation of the upcoming merger, various platforms using the Ethereum blockchain have announced their contingency plans. Under the PoS system, crypto investors stake a specific amount of their cryptocurrency on the standard network, rather than using large amounts of electricity to generate more cryptocurrency.
Ethereum Merge on stablecoin
Even if none of these issues come up, the future of stablecoins still represents a major challenge for the decentralized finance (DeFi) sector. With centralized stablecoins dominating decentralized protocols, many DeFi projects have considered algorithmic stablecoins. But there are still potential rules for stablecoins that could affect DeFi after the Ethereum merger.
The stablecoin market is huge, with a market cap of more than $100 billion, and the use of public blockchains like Ethereum has grown significantly, making them integral to DeFi operations. However, as the Ethereum network approaches the merger, the stability of these assets becomes more important than ever.
The Ethereum merger, set for September 15, could potentially affect the stability of digital assets that are tied to real currencies. Most DeFi applications can be hosted on the Ethereum blockchain after it switches from its current PoW consensus mechanism to PoS. The upcoming Ethereum fork to replace the PoW consensus system with a PoS is expected to accelerate the development of Ethereum towards institutional investment.
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