Ethereum’s Vitalik Buterin is “worried” about Bitcoin’s future for two reasons

Important Takeaway

  • Vitalik Buterin said he was “worried” about Bitcoin’s future.
  • The creator of Ethereum pointed to Bitcoin’s fee model and Proof of Work consensus mechanism, saying that it could leave Bitcoin vulnerable to attack in the long run.
  • Buterin also defended the proof of stake ahead of the upcoming Ethereum “merger” and shared his thoughts on the recent cryptocurrency bull market.

Buterin also offered his thoughts on some of the criticism of the proof of stake ahead of the upcoming Ethereum “merger” event.

Fear for the future of Bitcoin

Vitalik Buterin is concerned about the future of Bitcoin.

In a September 2 interview with financial writer Noah Smith, the creator of Ethereum said:Worry [about Bitcoin] For two reasons.” He explained that he believes that Bitcoin may face problems in the long term due to the fee model. Bitcoin is currently distributing coins to miners as payment to secure the network, but since the protocol has a fixed supply limit of 21 million, the network will ultimately rely solely on transaction fees for security. Buterin told Smith that this is a problem because Bitcoin”It failed to generate the level of fee revenue needed to secure what would be a multibillion dollar system.” The amount of fees that Bitcoin generates over other protocols has always been a hot topic of debate in the crypto community. According to Crypto Fees data, Bitcoin fees have averaged around $225,000 over the past week, lagging behind DeFi mainstays like Aave and Uniswap. The biggest fee generator is the protocol created by Buterin, which took in about $2.7 million in the same time frame.

Buterin said he is also afraid of Bitcoin because ofProof of Work offers significantly less security for every dollar spent on transaction fees than Proof of Stake.” Arguing that it would be difficult to have a $5 trillion network that only costs $5 billion to attack. Buterin also noted that Bitcoin’s shift away from Proof of Work would be “politically impossible.”

Buterin’s comments are likely to spark outrage in some corners of the crypto community. Bitcoin’s most ardent proponents have long argued that Proof of Work is an essential part of network design. Others have made similar comments to Buterin regarding the best crypto fee model, but since Bitcoin is scheduled to issue coins until around the year 2140, this question is usually ignored by its proponents.

Buterin defends proof-of-stake before merger

Debates over whether blockchains should achieve consensus through Proof of Work or Proof of Stake have raged for years, not least in recent months as Ethereum prepares to “merge” it into a Proof-of-Stake. The merger is slated to ship around September 15, after which Ethereum will be secured by validators who pool their own ETH tokens instead of miners.

Some of Ethereum’s most vocal critics have argued that proof of stake limits decentralization and allows larger stakeholders to control the network, but Buterin told Smith that he believed such arguments were “completely wrong.” He said critics have a “misconception that Proof of Work and Proof of Bet are governance mechanisms, when in fact they are consensus mechanisms.” In other words, undertakers can validate transactions, but they cannot influence the future design of the network.

Proof of stake criticism intensified last month after the Treasury sanctioned Tornado Cash, leading to arguments that governments might one day try to censor Ethereum. Coinbase CEO Brian Armstrong commented on the issue, saying that his company would stop placing transactions rather than censoring them. Buterene too weighedHe said he would view compliance with regulatory sanctions as an attack on the network.

Buterin also offered some rare insights into the cryptocurrency market in recent years, commenting on the latest buzz that saw the cryptocurrency market cap surpassing $3 trillion in November 2021. He admitted he was “surprised that the crash didn’t happen sooner” because the data tends to be months before the rapid fall. While acknowledging that prices have been dropping across the board in 2022, he said the cryptocurrency “finally looks meaningfully beneficial.”

Disclosure: At the time of writing, the author of this article owns ETH, AAVE, and several other cryptocurrencies. They also had exposure to UNI in a cryptocurrency index.

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