Upcoming Ethereum upgrade could do more harm than good to crypto sector worth over $140,000,000,000: DappRadar
A new report from decentralized application intelligence platform DappRadar warns that Ethereum’s (ETH) upcoming merger could cause damage to a key sector of the crypto industry.
Citing crypto investment giant Grayscale, the report says stablecoins, which currently have a market cap of $142.82 billion, could be an unintended casualty of Ethereum’s transition to a proof-of-stake mechanism.
“Greys expressed concern over the potential impact of the merger, particularly on tokens that run natively on Ethereum. The crypto investment firm believes that the merger could lead to a fork that could have unexpected and adverse outcomes.
Grayscale’s concern is that the merger could create a scenario where stablecoins and tokens locked in smart contracts may not be redeemable.
The crypto investment firm also notes that token and stablecoin holders may panic and start liquidating their holdings. Such a result will create significant selling pressure.”
According to the report, the decentralized autonomous organization MakerDAO (MKR) is another party that is pessimistic about the Ethereum merger.
“MakerDAO (MKR), the builder of stablecoin DAI, has argued in a Twitter thread that the merger could do more harm than good.
They explained that the merger could lead to perpetual repayment of contracts and negative financing.
In addition, MakerDAO mentioned that the launch could trigger selling pressure across chains that exist on proof-of-work.”
Backwarding and negative funding refer to a market situation where futures prices are lower than the expected spot prices.
According to the DappRadar report, MakerDAO is also concerned that the Ethereum network’s security and performance could be adversely affected by the upcoming upgrade.
“There is also the potential for network downtime because not all Ethereum-based protocols will move to PoS with the Ethereum chain. Maker noted that this could affect both users and transactions. Likewise, a repeat attack on the DAI fork or MKR- fork omitted from options.”
A replay attack is an exploit on a blockchain where two disguised cryptoassets are considered valid across chains.
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