After Chainlink, the two largest stablecoin providers Tether and Circle have now announced support for the upcoming Ethereum merge.
Both Tether and Circle published a public statement on the upcoming Ethereum merge on August 9, 2022, in which the consensus mechanism of the blockchain will be switched from proof-of-work (POW) to proof-of-stake (POS). This could mean the end of ETH mining, as more and more participants in the ecosystem are advocating for the POS consensus mechanism.
USDC and Tether prefer POS
USDT and USDC are the two largest stablecoin providers on the market and at the same time the third and fourth largest cryptocurrencies by market capitalization (about $ 66 billion and $ 54 billion). USDC is also the ERC20 token with the largest market capitalization. Both stablecoins play a significant role for the DeFi ecosystem. Because the stablecoins allow traders and users to protect themselves from the strong volatility of cryptocurrencies.
With the Ethereum merge, a so-called hard fork takes place, in which two almost identical versions of the Ethereum blockchain are created. The problem: This also copies the stablecoins that are backed by assets and real fiat currencies. USDC is clearly in favor of the new proof-of-stake version of Ethereum. In the official statement it says:
“While we are not speculating on the possibility of forks after the Ethereum Mainnet Merge, USDC as an ETH asset can only exist in a single valid “version”, and as mentioned earlier, our only plan is to support the updated Ethereum PoS chain, without exceptions.”
Tether is also behind the new consensus mechanism in order to “one of the most important moments in crypto history” there is no need to create an attack surface or confusion and is clearly in favour of the new consensus mechanism.
Ethereum Merge: The End for ETH Miners?
As it stands, the era of Ethereum miners could soon be over. With the old proof-of-work consensus mechanism, mining was still necessary to validate ETH transactions. After the merge, only 10% of the miners will be active for security reasons. After that, all ETH transactions will be processed via proof-of-stake.
Since the two largest stablecoin providers will not support an ETH fork that uses the old POW consensus mechanism, it would be extremely difficult for ETH miners to build a new Ethereum ecosystem via a new fork. However, not only the stablecoin providers, but also numerous other participants in the previous ecosystem clearly spoke in favor of the new consensus mechanism.
Ethereum: A picture of BeInCrypto.com
For example, the Oracle service provider Chainlink stated that it no longer wanted to support POW. Chainlink is one of the most important data service providers in the ecosystem and provides other crypto projects with the necessary data for processing programs and smart contracts.
Ethereum co-founder Vitalik Buterin explained that apart from “some outsiders”, there are no participants in the ecosystem who will support POW:
“From what I’ve seen, they’ll all prefer the proof-of-stake side.”
Nevertheless, Buterin believes that ETH miners could find a new home at Ethereum-Classic. Buterin, however, does not expect that there will be a mass-capable ETH adoption based on POW:
“So I don’t expect it (POW) to be widely accepted in the long term. Simply because I think Ethereum Classic already has a better community and a better product for people with proof-of-work.”