Key points to remember
- Vitalik Buterin said he was “worried” about Bitcoin’s future.
- The creator of Ethereum pointed to Bitcoin’s pricing model and proof-of-work consensus mechanism, saying they could leave Bitcoin vulnerable to long-term attacks.
- Buterin also defended proof-of-stake ahead of the upcoming Ethereum “merger” and shared his thoughts on the recent crypto bull market.
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Buterin also gave his thoughts on some criticism leveled at Proof-of-Stake ahead of Ethereum’s upcoming “Merge” event.
Bitcoin Future Fears
Vitalik Buterin is concerned about the future of Bitcoin.
In an interview on September 2 with economics writer Noah Smith, the creator of Ethereum said he was “concerned [about Bitcoin] for two reasons. He explained that he thinks Bitcoin may face long-term issues due to its pricing model. Bitcoin currently distributes coins to miners as payment for securing the network, but since the protocol has a strict supply cap of 21 million, the network will end up relying solely on transaction fees for security. Buterin told Smith that this is a problem because Bitcoin is “failing to raise the level of revenue required to secure what could be a multi-trillion dollar system. The amount of fees Bitcoin generates for other protocols has long been a hot topic of discussion in the crypto community. According Crypto fees data, Bitcoin averaged around $225,000 in fees over the past week, trailing DeFi stalwarts like Aave and Uniswap. The biggest fee generator is the protocol created by Buterin, which brought in around $2.7 million over the same period.
Buterin said he also had fears for Bitcoin because “Proof of work offers far less security per dollar spent in transaction fees than proof of stake,” arguing that it would be problematic to have a $5 trillion network that only costs $5 billion to attack. Buterin also pointed out that Bitcoin’s abandonment of proof-of-work would be “politically unfeasible.”
Buterin’s comments will likely spark outrage in some corners of the crypto community. Bitcoin’s most ardent proponents have long argued that proof of work is a fundamental part of network design. Others have made similar points to Buterin regarding the best crypto fee model, although since Bitcoin is expected to issue coins until around 2140, this issue is generally ignored by its proponents.
Buterin defends proof of stake before merger
Debates over whether blockchains should achieve consensus via proof-of-work or proof-of-stake have raged for several years, especially in recent months as Ethereum prepares for its “merger” with the proof of participation. The merger is expected to ship around September 15, after which Ethereum will be secured by validators staking their ETH tokens rather than 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 he thinks those arguments are “quite does wrong”. He said critics make “the misconception that proof-of-work and proof-of-stake are governance mechanisms, when in reality they are consensus mechanisms.” In other words, actors can validate transactions, but they cannot influence the future design of the network.
Criticism over proof-of-stake intensified last month after the Treasury Department sanctioned Tornado Cash, leading to arguments that governments may one day try to censor Ethereum. Coinbase CEO Brian Armstrong commented on the matter, saying his company would stop staking rather than censor transactions. Buterin too weighedclaiming that he would view compliance with regulatory penalties as an attack on the network.
Buterin also gave some rare insights into the crypto market over the past couple of years, commenting on the recent bull run that saw the global crypto market cap surpass $3 trillion in November 2021. He admitted he was “surprised the crash didn’t happen sooner” as manic phases tend to last for a few months before a rapid downfall. Although he acknowledged that prices were down across the board in 2022, he said crypto “finally feels really worthwhile.”
Disclosure: At the time of writing this article, the author of this article owned ETH, AAVE, and several other cryptocurrencies. They were also exposed to UNI in a cryptocurrency index.