Vitalik: Centralized USDC could shape the future of controversial ETH hard forks


Ethereum co-founder Vitalik Buterin says centralized stablecoins such as Tether (USDT) and USD Coin (USDC) “could become a key decision maker in future controversial hard forks.”

Buterin spoke at the BUIDL Asia conference in Seoul on Wednesday, along with Near Protocol co-founder Illia Polosukhin, to discuss Ethereum’s upcoming Merge.

The Ethereum co-founder argued that centralized stablecoins could be a “key” decision maker of which blockchain protocol the industry would “respect” in hard forks.

A hard fork occurs when there is a radical change in the protocol of a blockchain network that effectively results in two versions. Usually one chain is preferred over the other:

“At the time of the merger you have two [separate] networking […] and then you have exchanges, you have Oracle providers, you have stablecoin providers that decide in a way which ones they respect.

“Because at that point you have USD 100 billion on one chain and USD 100 billion on the other chain, cryptographically – and so they have [Tether] should stop respecting any of them,” explained Buterin.

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However, Buterin stated that he had “not seen any indication” that such a claim would be a problem in the upcoming Ethereum merger, noting that the centralized stablecoin issue is more of a concern for future hard forks.

“I think that will definitely be a concern in the future. In short, the fact that USDC’s decision on which chain should be considered Ethereum could become a major decision in future controversial hard forks.

He added that Ethereum could see more controversial hard forks in the next five to 10 years where centralized stablecoin providers could carry more weight.

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“At that point maybe the Ethereum base will be weaker, maybe the ETH 2 client teams will have more power, and maybe someone like Coinbase would both have a stablecoin and have bought one of the client teams by then.” […] like a lot of things like that can happen,” he said.

As a potential antidote to centralized actors, Vitalik suggested opting for different types of stablecoins:

“The best response I can think of is to encourage the adoption of more types of stablecoins. Basically, you know, people could use USDC, but then they could also use DAI and like, at this point, I mean, like DAI took this kind of very decisive route by saying, ‘we’re not going purely crypto- economic we are going to be a wrapper for a whole range of real-world assets.’”

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Related: Ethereum Merge: How will the PoS transition affect the ETH ecosystem?

The Merge is one of the most critical technical updates that has happened to Ethereum since its inception as it moves from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism.

The merger is scheduled to go ahead after the successful integration of the Goerli testnet in mid-August, with Ethereum developers targeting September 19 as the eternal date for the merger of the current PoW chain with the PoS chain.