NewsletterEthereum Has A Big Coinbase Problem, Here’s Why
The Ethereum Merge is only a few days away. Ethereum developers have revealed that the date for the merge will be 15th September, however, the exact date might depend upon the hash rate.
The Merge will be a highly bullish event for the crypto ecosystem. However, the second largest cryptocurrency might have a Coinbase problem.
How Coinbase Impacts Ethereum
Ran Neuner, a CNBC crypto trader and founder of the Crypto Banter, believes that Coinbase has a huge role to play in the Ethereum ecosystem post-merge. According to Neuner, Coinbase will be one of the biggest validators in Ethereum 2.0.
Ethereum will transition from a Proof-of-work based consensus mechanism to a proof-of-stake mechanism. Proof-of-stake depends upon validators to verify transactions and keep the system running. The validators stake some amount of the native token. However, the stake will be slashed if validators behave dishonestly.
According to Neuner, Coinbase, which has a lot of Ethereum, will be one of the biggest validators. A JP Morgan analyst Kenneth Worthington revealed that the crypto exchange will be a meaningful beneficiary of the merge. He also estimated that Coinbase has about a 15% share in Ethereum assets.
Ethereum’s Coinbase Problem
The issue arises because of the potential legal ramifications of the Tornado Cash sanction. Neuner believes Coinbase will allow institutions to stake Ethereum, and they will become validators of transactions. He poses the question as to what happens if a transaction is done through Tornado Cash.
Neuner believes that if Coinbase verifies the transaction, it could be under the radar of OFAC. The Office of Foreign Assets Control is a department of the US treasury that sanctioned Tornado Cash.
On the other hand, if they refuse to verify such a transaction, it could make Ethereum worthless. According to Neuner, Ethereum is worthless if Coinbase refuses to verify certain transactions.
Ethereum 2.0 has already been under fire due to potential centralization and censorship issues.
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