Buterin also gave his opinion on some of the criticisms of the Proof-of-Stake method, ahead of Ethereum’s upcoming “Merge” event.
Fears over the future of bitcoin
On a September 2 interview with business writer Noah Smith, the creator of Ethereum said he is “worried [au sujet du Bitcoin] for two reasons.“He explained that he thinks Bitcoin could face long-term problems because of its fee model. Bitcoin currently distributes coins to miners as payment for securing the network, but because the protocol has a hard supply cap of 21 million, the network will end up relying solely on transaction fees to ensure its security. Buterin said this is a problem because bitcoin is “fails to achieve the level of fee revenue required to secure what could be a multi-trillion dollar system. “The amount of fees Bitcoin generates to other protocols has long been a hot topic of discussion in the crypto community. According to Crypto Fees bitcoin generated an average of $225,000 in fees in the past week, behind DeFi stalwarts like Aave and Uniswap. The biggest fee generator is the protocol created by Buterin, which brought in about $2.7 million in the same period.
Buterin said he also had fears for bitcoin because “Proof of work offers much less security per dollar spent on transaction fees than proof of take,“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 the Proof-of-Work method would “politically unfeasible“.
Buterin’s comments will likely spark outrage in the crypto community. Bitcoin’s most ardent supporters have long argued that proof-of-work is a fundamental part of the network’s design. Others have made remarks similar to Buterin’s regarding the pricing model for the highest-value crypto-currency, though since Bitcoin is expected to issue coins until about 2140, this issue is generally overlooked by its supporters.
Buterin defends the pre-merger Proof-of-Stake.
Debates over whether blockchains should achieve consensus through proof-of-work or proof-of-stake have raged for several years, particularly in recent months as Ethereum prepares The Merge Toward Proof of Stake. The merge is expected around September 15, after which Ethereum will be secured by validators putting their ETH tokens into play 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 that he believes such arguments are “simply wrong“. He stated that the critics have “a misconception that proof of work and proof of stake are governance mechanisms, when in fact they are consensus mechanisms.“In other words, stakers can validate transactions, but they cannot influence the future design of the network.
The critique of 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 issue, saying his company would stop staking rather than censoring transactions. Buterin also also spoke out stating that he would consider compliance with regulatory sanctions an attack on the network.
fwiw I voted X in your above poll
– vitalik.eth (@VitalikButerin) August 15, 2022
Vitalik Buterin also gave some rare insights into the crypto market over the past two years, commenting on the recent bull run that saw the global crypto market capitalization surpass $3 trillion in November 2021. He admitted that he was “surprised that the crash didn’t happen sooner“as manic phases tend to last a period of a few months before a rapid fall. While he acknowledges that prices are down across the board in 2022, he said that crypto “finally feels significantly useful.“