According to the head researcher at Merkle Science, putting in place proof-of-stake (PoS) could make it easier for the government to interfere with and censor Ethereum.
In an interview with Cointelegraph after the Ethereum Merge, Coby Morgan, a former FBI analyst and the Lead Investigator for crypto compliance and forensics firm Merkle Science, talked about some of the risks posed by Ethereum’s switch to PoS.
Concerns about centralization have been talked about a lot in the run-up to The Merge, but Moran said that the prohibitive cost of becoming a validator could lead to the consolidation of validator nodes among the largest cryptocurrency firms, such as Binance, Coinbase, and Kraken.
To become a full validator on the Ethereum network, you must stake 32 Ether (ETH), which at the time of writing was worth about $47,000.
Earlier this month, a report from the blockchain analytics platform Nansen showed that only five entities control 64% of staked ETH.
Morgan went on to say that these larger institutions will be “subject to the whims of the world’s governments” and that when validator nodes find sanctioned addresses, their rewards will be cut and they will eventually be kicked off the system, making it impossible for businesses to work with them.
” 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.”
Vitalik Buterin talked about this risk during a developer call on August 18. He said that validators could exclude or filter transactions that have been approved as a form of censorship.
Vitalik went on to say that as long as some validators don’t follow the sanctions, these transactions will eventually be added to subsequent blocks, and the censorship will be temporary.
On August 8, Tornado Cash became the first U.S. government-approved smart contract.
In response, many places have followed the sanctions and made it harder for the sanctioned addresses to use their products and services.
The event has had a big impact on the Ethereum community. On August 16, EthHub co-founder Anthony Sassano tweeted that if permanent censorship happens, he will consider Ethereum a failure and move on.
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