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Circle, Tether Announce Sole Support for Ethereum POS Chain

Circle and Tether – issuers of the two largest stablecoin, USDC and USDT – have confirmed that they will only support redemptions on Ethereum’s proof of stake chain, post-merge. By contrast, any possible Ethereum forks that emerge in the aftermath will be left behind by both firms. 

Rejecting the Miner Revolt

Per Circle’s announcement on Tuesday, the company can only viably support a single version of the Ethereum state. “Our sole plan is to fully support the upgraded Ethereum PoS chain,” said the company. 

The upgrade, nicknamed “the merge”, will transition Ethereum’s consensus mechanism away from proof of work, and onto proof of stake. The protocol change was in the books since Ethereum’s 2015 launch. And, despite numerous delays, it should finally go live on September 19th. 

Circle said that it’s excited about the merge due to the “scaling opportunities” and “reduced energy consumption profile” that it will unlock. That’s because miners – users whose business is to burn energy to secure the network – will be rendered unnecessary in the aftermath.

But not all of those soon-to-be-homeless miners are onboard with the move. Members of the Chinese Ethereum mining community including Chandler Guo are planning a coordinated chain split at the time, to retain Ethereum’s proof of work. 

“We don’t speculate on the possibility of forks post-Ethereum Mainnet merge,” said Circle on the matter.

Pick a Side, Stablecoins

When contentious forks arise, stablecoins issuers can only pick one side. That’s because the issuer only holds enough reserves to offer redeemability for stablecoins on one state of the chain. Logically speaking, this would make the stablecoin tokens circulating on other chains lose their peg to the dollar. 

Ethereum co-founder Vitalik Buterin suggested that this dynamic poses a centralizing threat to the stability of future Ethereum upgrades. However, he did not expect it would be a big concern during the Merge. And Tether’s latest announcement reinforces that. 

“Tether will closely follow the progress and preparations for this event and will support POS Ethereum in line with the official schedule,” said the issuer, shortly after CIrcle’s announcement. 

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While not mentioning the technical implications of proof of stake, Tether’s justification for backing the merge was stability related. “We know it is our responsibility to reassure the community of our support for its development,” said the firm, noting that a smooth transition is “essential for the long-term health of the DeFi ecosystem and its platforms.”

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