Arthur Hayes Questions PoS Ethereum’s Decentralization, Suggests Rising Price
27 Setembro 2022 - 6:57AM
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The controversial Arthur Hayes asks a burning question in his
latest blog post. Is the PoS Ethereum prone to centralization? The
former BitMEX CEO compares it to the Binance Smart Chain, that’s
famously and admittedly centralized. Arthur Hayes also describes
how the validator’s disagreements with the majority are going to
go, and predicts disaster for the dApps that build over a platform
that doesn’t prioritize censorship resistance. In the short term,
though, he’s bullish on Ethereum. Related Reading: Former BitMEX
CEO Arthur Hayes Says “Prepare” For A Massive Bitcoin Rally Before
getting into all of that, Artur Hayes describes a concerning
reality that many people in crypto Twitter have noticed and
discussed. It has to do with the validators: “As of 21 September,
Lido Finance, Coinbase, and Kraken together control slightly over
50% of all ETH staked on the beacon chain. This means they are the
most powerful validators and, in essence, they could censor what
sorts of transactions are processed. What do all three of these
centralized entities have in common? They are all US-owned
companies or DAOs with major investments from US venture
capitalists.” For those keeping score, that’s a centralizing factor
and a few single points of failure. All of those companies are
under US jurisdiction, one of the most restrictive in the world.
And of course, Arthur Hayes recognizes “protections in place
to help ensure decentralization” and that the system punishes
validators that censor transactions. Nevertheless, the PoS system
seems fragile. Big institutions that the government can sue are the
validators. And the biggest validators will control the whole
system. Arthur Hayes Sees Centralization How will the
slashing mechanism that punishes unruly validators play out?
According to Arthur Hayes, this is how the system will deal with
rebels: “There is a way to slowly lose your ETH if < 33%
of the network refuses to attest to blocks. Slowly losing your ETH
means that a validator is punished by reducing the deposit on a
node. Should the deposit drop below 16 ETH, that validation node is
removed from the network. This capital becomes dead capital as for
the foreseeable future you cannot unstake ETH.” “There is a fast
way to lose your ETH if > 33% of the network refuses to attest
to blocks. The penalties get exponentially worse quickly such that
opposing validators quickly fall below the 16 ETH threshold and are
booted from the network.” Hayes predicts that everyone will let
that happen again and again, and compares it to the original DAO
story. Ethereum’s developers decided to fork and “everyone at the
time tacitly went along with the devs who forked the protocol so
that folks could get their money back, rather than staying true to
Ethereum’s supposed “code is law” ethos.” ETH price chart on OkCoin
| Source: ETH/USD on TradingView.com Bullish On Ethereum Short-Term
Don’t get Arthur Hayes wrong, despite the criticism of the platform
and PoS systems, he still thinks Ethereum will do well in relation
to the dollar. “ETH as a financial asset — fully tethered to
the US-led financial system and under the pretense of
“decentralization” — could still do extremely well in the near
future. The issue that I wrestle with is whether truly
decentralized financial and social dApps can exist at scale (i.e.,
with hundreds of millions of users)” Related Reading: BitMEX
Mastermind Arthur Hayes Pleads Guilty, Avoids Jail Time In the end,
it all goes back to the most important factor: scarcity. According
to Hayes, the only thing that matters in the next three to six
months is “how ETH issuance per block falls under the new
Proof-of-Stake model. In the few days post-merge, the rate of ETH
emissions has dropped on average from a +13,000 ETH per day to -100
ETH.” If this continues, Arthur Hayes is optimistic: “The
price of ETH continues to get smoked due to deteriorating USD
liquidity, but give the changes in the supply and demand dynamics
time to percolate. Check back in a few months, and I suspect you’ll
see that the dramatic reduction in supply has created a strong and
rising floor on the price.” Is the former BitMEX CEO right about
this? We’ll find out soon enough. Featured Image by GuerrillaBuzz
Crypto PR on Unsplash | Charts by TradingView
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