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Ethereum PoS case. An example of an opportunity for ETC and BCH in the future.

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Written by   292
5 months ago

Ethereum has been in the spotlight lately because they are going to change from proof of work to a proof of stake (PoS) algorithm, developers are getting things ready, and they are supposed to make the change around Sept. 15, 2022, if everything goes according to plan. The hope for this change is that transaction costs on the network get cheaper, that DeFi tools continue to develop in the PoS chain and that users continue to flock to the ETH network so that holders benefit from transaction fees and the utility the network may provide. But not everything is perfect in this world, and at times, you must read the fine print to find the details.

Source: Nansen.

The government sanctioned the Tornado Cash protocol, and even its developer is in jail now. We don't know the details yet, but at first glance, it seems like if you develop something legal today, tomorrow it can become illegal, and you could go to jail. And the centralized aspect of the crypto world has started censoring transactions coming from that mixer or privacy tool. And I must add that Coinbase is already censoring transactions coming or that at some point got tainted with the Tornado Cash privacy tool; remember, this will be important next.

Once Ethereum goes PoS, large pools of Eth will get together on staking pools, and those staking pools will be the ones that will process transactions, and they will have the power to censor transactions at the protocol level. Those same entities censoring Tornado Cash transactions today promise that they will not censor ETH transactions in the future. If the US government sanctions individual wallet addresses, Coinbase pool will have no choice but to comply because they are a business with a physical address, employees, and shared holders. They are lying when they say they will not comply, and the Ethereum community has been relatively quiet because greed is motivating them at this point. Those that hold ETH are blind by desire, which is why they can't see how PoS will make their network centralized.

Eth miners are proposing a fork called wETH, but Eth is a fork of ETH classic. ETC has been improving itself, and it is the original chain. Not to mention all centralized stablecoin issuers will be only honoring the PoS tokens, so it means corporations are already choosing winners and losers. Just in case you don't think ETH is not centralized already. And the fact that the ETH blockchain is huge will mean fewer users can run their validator nodes and rely on centralized parties like Coinbase.

Ethereum classic may have a shot at becoming the new ETH. Centralized parties are already taking steps to ensure their new fiat cryptocurrency chain can be censored. Ethereum will become sanctionable and a government tool by enforcement if stakers can't be punished for bad behavior at the protocol level.

Bitcoin Cash could have the same opportunity once high transaction fees show their ugly face in the future, on-chain transactions go beyond $50, and the LN reserve fee becomes unbearable by any regular user that doesn't have at least 0.03 in liquidity.

Lightning Network liquidity reserves are 2% of the total liquidity locked; if your channel is 0.003, both parties must lock up at least 0.00006, and the on-chain fee to close the channel. I have a 0.03 LN channel, 0.0006 is reserved 50/50, plus the on-chain cost that today is only 285 satoshis, but once on-chain fees go to the level of 2017, that fee could be at least 0.003, if not more. And that is when people will realize LN has a huge problem: the limit on the blocksize, and it won't happen a minute sooner. Until that pain comes to pass, Bitcoin Cash will continue to be ignored, and its price could continue to go down until that time comes to pass.

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