Ethereum: Will USDT, USDC hinder the future of The Merge?

By August 5, 2022Ethereum
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Source: Yahoo Finance

The BUIDL ASIA 2022 conference kickstarted in Seoul on 4 August and was attended by a host of global blockchain market leaders including Ethereum’s founder Vitalik Buterin, NEAR Protocol’s co-founder Illia Polosukhin, and DSRV’s CEO Kim Ji-Yoon.

The Ethereum founder, whose speech was one of the most awaited, went on to talk about the future of the Ethereum base layer, the Merge upgrade, and L1-L2 co-existence, among other things. However, his opinion on how centralized stablecoins like USDC could determine the fate of plausible upcoming Ethereum hard fork managed to garner a lot of attention.

Per Buterin, centralized stablecoins like USDT and USDC might play “an important decider in long term contentious laborious forks.” He further contended that such stablecoins will be a “significant” decider of which blockchain protocol would be respected by the community during forks.

“At the moment of the merge, you will have two [separate] networks […] and then you have exchanges, you have Oracle providers, you have stablecoin providers that are kind of deciding in a way, which one they respect.”

The Merge and stablecoins

With the Merge approaching, there has been a lot of chatter going on around the consequences of a potential Ethereum hardfork. Here, however, it should be noted that no official announcement has been made regarding the same, and the community has just been speculating on ‘what ifs’. In fact, the same was discussed in an article yesterday.

Per crypto investment manager Galois Capital, stablecoin providers like Tether and Circle will remain on Ethereum’s Proof of Work network if at all a fork happens. Justifying the said stance, Galois Capital stated that bugs on the new PoS network could potentially lead to stablecoin liability and lawsuits. Tether’s Paolo Ardoino, however, claimed that,

“It’s not about what I/we prefer between PoW/PoS. Stablecoins should act responsibly and avoid disruption for users.”

In fact, he went on to re-assert the fact that Tether plans to “support” ETH2.

Will things change in the future for Ethereum?

In fact, in the conference, Buterin contended that he “had not seen any indication” that any sort of contention would be an issue in Ethereum’s upcoming Merge. However, he did state that the same might concern in the future.

“I think in the further future, that definitely becomes more of a concern. Basically, the fact that USDC’s decision of which chain to consider as Ethereum could become a significant decider in future contentious hard forks.”

He further went on to say that in the next 5-10 years, Ethereum may see more contentious hard forks where centralized stablecoin providers could carry more weight.

“At that point, maybe the Ethereum foundation will be weaker, maybe the ETH 2 client teams will have more power, and maybe someone like Coinbase, would both run a stablecoin and have bought up one of the client teams by then […] like lots of those kinds of things could happen.”

The Merge, on its part, is one of the most significant upgrades that the Ethereum network is set to undergo. The network is prepping for its last testnet merge before ‘The Merge’ of the Ethereum network. And, if all things go per the plan, he added,

“… the mainnet merge will happen in mid-to-late September.”

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