Why Coinbase Might Be a Problem For Ethereum Merger?

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The Ethereum Merge has officially started with the ETH 2.0 client releasing Bellatrix and the Mainnet Update. The Ethereum 2.0 client Teku released a required update v22.8.1 for all Mainnet users in order to prepare them for the Merge. Essentially, the update contains the Bellatrix upgrade and Merge transition configuration. 

All Ethereum Mainnet users have been required to upgrade to the newer version before September 6, which is the date of Bellatrix activation on the Mainnet.

Finally, after multiple delays, the Ethereum Merge is closer than ever- scheduled for September 15. 

Coinbase May have a Huge Role to play after Ethereum Merge! 

CNBC crypto trader and founder of the Crypto Banter, Ran Neuner, believes that Coinbase has a significant role to play in the Ethereum ecosystem post the merge. Coinbase will be one of the biggest validators in Ethereum 2.0 as per Neuner.

Ethereum will be making a transition from a Proof-of-work based consensus mechanism to a proof-of-stake mechanism, in an effort to lower the energy consumption, and carbon footprint produced by the traditional PoW mechanism.

Basically, Proof-of-stake depends upon validators for verifying transactions in order to keep the system running. The validators are supposed to stake some amount of the native token that they hold. However, with the validators behaving dishonestly, the stake will be slashed.

According to Neuner, Coinbase has a lot of Ethereum holdings and hence, it will be one of the biggest sources of validators.

Several others share the same viewpoint. Kenneth Worthington, a JP Morgan analyst, revealed that the crypto exchange will portray to be a meaningful beneficiary of the merge. According to his estimates, Coinbase has about a 15% share in Ethereum assets.

Could Coinbase Dependency be Detrimental to Ethereum? 

Problems could surface because of the possible legal ramifications of the Tornado Cash sanction. Neuner feels that Coinbase will allow institutions to stake Ethereum, and hence, they will become validators of the transactions. He expressed doubt and questioned what would happen if a transaction is carried out via Tornado Cash.

As per Neuner, transactions verified by Coinbase could be under the surveillance of the Office of Foreign Assets Control (OFAC), which is a department of the US treasury that sanctioned Tornado Cash. Also, he believes that if Coinbase refuses to verify such transactions, Ethereum will end up being worthless. 

Ethereum 2.0 is already being attacked due to potential centralization and censorship issues.

Ethereum Client Teku Released Upgrade to support ETH 2.0 Merge

On August 22, Ethereum 2.0 client Teku disclosed the release of v22.8.1, a required update that prepares the market for the Bellatrix upgrade on September 6 and the final merge.

Mainnet nodes are required to upgrade both Teku and the execution client to prepare for the Merge. A “Merge transition configuration error” will be reported with Teku in case of failing to upgrade execution clients. The local terminal total difficulty (TTD) and terminal block hash mismatch with remote execution client values will disapprove the transition on the Mainnet node. Clearly, it has become a requirement to upgrade to the newer version to avoid any inconvenience.