Ethereum’s Vitalik Buterin “concerned” about Bitcoin’s future for two reasons

Buterin also gave his thoughts on some criticisms of Proof-of-Stake ahead of Ethereum’s upcoming “Merge” event.

Fears for Bitcoin’s Future

Vitalik Buterin is worried about Bitcoin’s future.

In a Sept. 2 interview with economics writer Noah Smith, the Ethereum creator said he is “worried [about Bitcoin] for two reasons.” He explained that he believes Bitcoin could face problems in the long term due to the fee model. Bitcoin currently distributes coins to miners as payment to secure the network, but as the protocol has a hard supply limit of 21 million, the network will eventually rely on transaction fees alone for security. Buterin told Smith that this is a problem because Bitcoin is “fail to obtain 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 data, Bitcoin averaged around $225,000 in fees in the past week, following DeFi backers such as Aave and Uniswap. The biggest fee generator is the protocol Buterin created, which took in about $2.7 million over the same time frame.

Buterin said he also has fears about Bitcoin because “Proof-of-Work provides much less security per dollar spent on transaction fees than Proof-of-Stake.” argues that having a $5 trillion network that only costs $5 billion to attack would be problematic. Buterin also pointed out that Bitcoin switching away from Proof-of-Work would be “politically impossible.”

Buterin’s comments are likely to spark outrage in some corners of 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 similar comments to Buterin regarding the fee model of the top crypto, but since Bitcoin is scheduled to issue coins until around 2140, this issue is usually overlooked by its supporters.

Buterin defends Proof-of-Stake ahead of merger

Debates about whether blockchains should achieve consensus through Proof-of-Work or Proof-of-Stake have raged for several years, not least in recent months as Ethereum prepares for its “Merge” to Proof-of-Stake. The merger should ship around September 15, after which Ethereum will be secured by validators staking their ETH tokens instead of miners.

Some of Ethereum’s most vocal critics have argued that Proof-of-Stake limits decentralization and empowers larger stakeholders to control the network, but Buterin told Smith that he believed such arguments were “completely wrong.” He said critics make “a misconception that Proof-of-Work and Proof-of-Stake are governance mechanisms, when in reality they are consensus mechanisms.” In other words, stakers can validate transactions, but they cannot influence the future design of the network.

Proof-of-Stake criticism intensified last month after the Treasury Department sanctioned Tornado Cash, prompting arguments that governments could one day try to censor Ethereum. Commenting on the issue, Coinbase CEO Brian Armstrong said his firm would stop staking rather than censor transactions. Buterin too weighed inand said he would consider compliance with regulatory sanctions an attack on the network.

Buterin also provided some rare insights into the crypto market over the past couple of years, commenting on the recent bull run that saw crypto’s global market capitalization top $3 trillion in November 2021. He admitted he was “surprised the crash didn’t happen sooner” because mani-phases tend to last a few months before a rapid decline. While acknowledging that prices are down across the board in 2022, he said crypto “finally feels meaningfully useful.”

Disclosure: At the time of writing, the author of this piece owned ETH, AAVE, and several other cryptocurrencies. They also had exposure to UNI in a cryptocurrency index.