Ethereum’s upgrade to proof-of-stake (PoS) may lead to making it vulnerable to government intervention and censorship, according to the lead investigator of Merkle Science, as reported by Cointelegraph.
On the basis of information by Cointelegraph, Coby Morgan, a former Federal Bureau of Investigation (FBI) analyst and the lead investigator for cryptocurrency compliance and forensic firm Merkle Science, spoke on his opinions regarding risks posed by Ethereum’s transition to PoS. While centralisation issues have been broadly talked about which lead to the Merge, Morgan emphasised on the prohibitive cost of becoming a validator that could lead in the consolidation of validator nodes to cryptocurrency firms such as Binance, Coinbase and Kraken. For becoming a full validator on Ethereum network, one is needed to stake 32 Ether (ETH), which is around a valuation of $47,000 at the time of publication’s writing.
Insights from Cointelegraph stated that a pre-Merge report from blockchain analytics from Nansen reportedly unveiled that 64% of staked ETH is coordinated by five entities. Morgan mentioned that these institutions will be subjected to government-based regulations.
“Either you will comply and you will siphon off that sort of interaction […] or you run the risk of being fined, being scrutinized, or potentially being sanctioned yourself,” Morgan added.
Moreover, Cointelegraph noted that Vitalki Buterin suggested one of the forms censorship could result in excluding or filtering sanctioned addresses. Buterin further said that as long as certain validators are not agreeing with the sanctions, these transactions would eventually be selected in later blocks and the censorship would happen for a definite period of time. On August 8, cryptocurrency mixer Tornado Cash became the first smart contract sanctioned by a United States government body. As a result, various entities have complied with the sanctions and prevented the sanctioned addresses from getting access to their products and services.
(With insights from Cointelegraph)