Ethereum Merge: How Severe is the ‘Regulatory Capture’ Threat?

Blockchain networks want to build and enhance security, decentralization, and scalability. However, leading networks such as Ethereum have discovered that balancing the trio isn’t easy.

Ethereum has battled to maintain decentralization since the platform rollback, which erased the DAO attack. The latest events also triggered the question about decentralization’s compromise.

Will that impact the platform after transitioning into a PoS (proof-of-stake) mechanism? Former Blockstream executive Samson Mow trusts most of ETH’s issues come from focusing on tokenomics than decentralization. Also, the analyst believes the PoS migration would smoothen regulator network control.

Moreover, Mow stated that limiting the minimum validator requirement to 32 $ETH restricts the validator count. That makes the platform more centralized than the PoW model. He added that validators cannot un-stake their Ethereum. That makes them act under OFAC rules, making it smooth to shift interest via regulation.

Live Long to Be the Villain

The impact of ETH’s decentralization compromise appears visible already. For example, the latest instances are about censorship. The platform’s leading miner, Ethermine, reportedly halted Tornado transactions. That raises concerns about ETH’s censorship evolving in the coming few years.

One of the leading concerns about the decentralization compromise remains its effect on users. Some economists have expressed worries about regulatory capture plus the emergence of unfavorable commands that hurt users.

ETH has so far displayed a commitment to profitability instead of the blockchains’ core pillars – decentralization, scalability, and security. However, these compromises seem to protect investor interest. That means they’re often lucrative.

Meanwhile, ETH has witnessed attractive growth over the past years regardless of these compromises. The migration to PoS targets increased demand for services.

Ethereum’s market journey (so far) shows the challenges of trying to satisfy the three pillars. The question remains, will the compromises ultimately open a path for more obstacles down the road?

The crypto market struggled to control the latest downside spree. Most leading cryptos noted brief declines within the past 24 hours. Meanwhile, upcoming actions remain unpredictable as tides could resort to either side. Time will reveal upcoming market actions.

Stay tuned for upcoming developments in the crypto space.