The issuers of the most popular stablecoins — cryptocurrencies pegged to a pool of reserves like the U.S. dollar — came out on Tuesday in favor of a “consolidation” of Ethereum.
Consolidation is a highly anticipated upgrade that will move Ethereum from a proof-of-work consensus model to a proof-of-stake model and significantly reduce its environmental impact.
Circle, the creator of the leading stablecoin USD Coin (USDC), wrote in a blog post today it “intends to fully and exclusively support” the post-merger Ethereum proof-of-stake chain.
Soon after, Tether, the entity behind another popular USDT stablecoin, also published a blog post titled “USDT Supports ETH Proof-of-Stake Conversion,” details how Tether hopes the merger will not be “weaponized to confuse and harm” the Ethereum ecosystem, applications and its investors.
This happened after several Ethereum miners shared a common interest trying to do a hard forkor a blockchain split, post-merger, since miners have something to lose after Ethereum moves to proof of stake: Their earnings.
Currently, with proof of work, Ethereum miners use electricity to validate transactions on the network and thus, earn token rewards. To do this, miners have also invested thousands of dollars in purchasing the necessary equipment and computing power, betting heavily on the proof-of-work model. With proof of stake, Ethereum will rely on a trusted network of validators to process alternative transactions, effectively eliminating the need for miners.
While miners may want to try and continue Ethereum’s proof-of-work chain for this reason, their odds of success are highly unlikely — especially now that major stablecoin providers are reporting signal their support for the union.
Getting the likes of Circle and Tether to support the proof-of-stake chain is critical to the success of the merge because, if a fork occurs after the merge, the projects will have to determine which chain — proof-of-stake or miner-proof-of-work—retains value. Since stablecoins are so important to most decentralized finance (DeFi) applications that work on Ethereum, how projects assign value is critically important and will provide insights into which chains will exist.
Along with stablecoin providers, endorsements from crypto exchanges and other major projects can hold a lot of weight for both chains, which is why the Ethereum community may consider the Support from Circle and Tether is an important step towards proof-of-stake adoption, even if a fork occurs.
Ethereum Creator Vitalik Buterin acknowledged this on Friday in a press conferencenotes that “If a proof-of-work fork gets big, then there are bound to be a lot of applications that will have to choose one way or the other,” he said.
However, Buterin expressed that he’s not worried about a fork hurting Ethereum and its merger, adding that most of the major apps have already shown support for proof of stake and the fork promoters are just “a few outsiders who basically have exchanges and most just want to make a quick buck,” he said.
Similarly, most in the crypto community have agreed online.
“No one in the ETH community other than miners wants to continue using proof of work,” said Flashbots strategist and research associate at Paradigm known as Hasu. tweeted over the weekend. “This fork chain is going to be a huge retail trap. Miners, exchanges, traders are all trying to speak for themselves for their own self-interested reasons.”
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