Cryptocurrency exchange Coinbase said ahead of the Ethereum merger that the community could face economic, technical and operational risks after the network transitions to PoS.
The American trading platform refers to economic risks primarily as a surge in Ether borrowing, as investors try to accumulate as much ETH as possible before the merger. The outcome of the “borrowing frenzy” is not yet known, the report says, but it has already forced DeFi project developers Aave to issue a proposal to temporarily suspend borrowing Ethereum.
In addition, after the transition of Ethereum to the Proof-of-Stake (PoS) algorithm and the likely maintenance of Proof-of-Work (PoW) forks by miners, all ETH holders will be able to receive coins formed by forks that will have no value. It is not yet clear what impact this will have on the market.
According to Coinbase analysts, the technical risks are the need to run two types of clients that interact through the Engine API – this is the weakest place where the blockchain can fail. Among the operational risks, the exchange names the decrease in network bandwidth, which was previously observed after the activation of the Bellatrix update.
“The participation rate dropped from 99% to 95%. This suggests that Bellatrix has given some validators problems. For example, they were unable to update the client. But the participation rate is back. And that is reassuring,” Coinbase said.
According to the exchange’s analysts, the decrease in network activity was insignificant. In addition, the throughput of the blockchain immediately increased. This means the validators have been hard at work trying to fix any related issues.
Earlier, the community monitoring the impact of the Bellatrix update on Ethereum stated that the number of blocks not confirmed from the first time on the network has increased significantly and is alarming. The Ethereum developers responded that this is because not all validators have updated the client and there is no threat in this, since they will update their nodes soon.
The head of cryptocurrency aggregator CoinGecko, referring to the history of Bitcoin forks, warned that the mining community is capable of creating a lot of “useless ETHPoW”.
Source: Bits
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