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During a recent Korea-based tech conference, BUIDL Asia, Vitalik Buterin shared his views on the future of stablecoins.
In his statement, the Ethereum co-founder asserted that centralized assets such as USDC and USDT could play key roles in certain prospective hard forks.
How Centralized USDT Could Tie into Hard Forks
The event took place on Wednesday, August 3rd, and saw Buterin in attendance to speak about Ethereum’s approaching update, the Merge. Illia Polosukhin, co-founder of Near Protocol was also present at the event in Seoul.
During the upgrade in question, Ethereum’s current proof-of-work (POW) protocol will merge with the Beacon Chain proof-of-stake (POS) system. This will call for a hard fork in the Ethereum ecosystem after which the network will employ the proof-of-stake consensus.
Buterin’s core argument was that centralized stablecoins could be instrumental in how the industry deals with blockchain protocols, post-hard fork. Hard forks take place when a blockchain protocol experiences a major change, usually splitting into two versions.
Throughout crypto history, communities have typically favored one chain over the other after a hard fork. Buterin pointed out some components that influence the decision between 2 separate networks. These are oracle providers, and stablecoin providers, both of which get to choose a chain they “respect.”
Buterin illustrated this with a possible Tether fork, similar to Terra’s recent debacle:
Because at that point, you’ll have 100 billion of USDT on one chain and 100 billion of USDT on the other chain, cryptographically — and so, they [Tether] need to stop respecting one of them,” Buterin stated.
Not Yet a Problem For Ethereum
At the moment, a contentious hard fork isn’t a problem Buterin and Ethereum are facing. The Russian-Canadian developer says there are no signs that the Merge will see any such issues. His theory about centralized stablecoins majorly centers around hard forks that will occur later on.
The Ethereum co-founder is positive that problems of this nature will arise in the future. He anticipates that in the next decade or less Ethereum will undergo some disputed hard forks.
He noted a few potential variables, for example, the Ethereum foundation may not have such pull. Indeed ETH 2 client teams may have greater influence. A platform like coinbase may run a stablecoin and have bought up one of the client teams by then.
Like lots of those kinds of things could happen,” he said. However, Buterin holds firm that in time, centralized stablecoin networks will be influential.
Vitalik suggests holding stablecoins from multiple providers to avoid giving a centralized actor so much sway. He explained that while USDC has several users, these same individuals could purchase DAI. The developer commented on DAI’s “decisive route,” highlighting how they don’t focus solely on the crypto economy.