Cryptocurrency

Ethereum’s Hairball Moment



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In this video, I discuss a thought experiment in which Ethereum undergoes a contentious hard fork in the context of attempted OFAC censorship.

I demonstrate that large regulated entities like Circle, Coinbase, Kraken, etc would probably all side with the OFAC-compliant side of the fork, thus eviscerating the more cypherpunky side of the fork.

What this suggests is that DeFi and its main collateral USDC (combined with Ethereum’s move to proof of stake) make it highly likely that Ethereum eventually succumbs to government capture and censorship.

Not investment advice! Consult a financial advisor.

OFAC:
https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Control

Is Your Crypto Collaborating With Government Spy Coins?

ConsenSys and CBDCs:
https://consensys.net/solutions/payments-and-money/cbdc/

ConsenSys:
https://en.wikipedia.org/wiki/ConsenSys

Largest ETH stakers:
https://dune.com/hildobby/eth2-staking

DAI collateralization:
https://daistats.com/#/overview

USDC dominates the DeFi space:
https://www.circle.com/blog/usdc-stablecoin-crypto-defi-lending-interest-markets

Ethereum Classic (ETC):
https://coinmarketcap.com/currencies/ethereum-classic/

Ethereum (ETH):
https://coinmarketcap.com/currencies/ethereum/

Taro and stablecoins on Bitcoin:
https://bitcoinmagazine.com/technical/taro-launches-stablecoins-on-bitcoin

I am not being paid or otherwise compensated by any company or cryptocurrency project that I mention in my videos.

My opinion is not for sale. Please do not contact me with any affiliate or advertising deals.

#ethereum
#usdc
#bitcoin

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40 Comments

  1. Bitcoin University

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  3. Minion Kevin

    Question: I recently heard if Satoshi returns then Bitcoin would become a security and targeted by the SEC. Would this be true? Also great video, I sold my ETH over a year ago because you opened my eyes Thanks!

  7. jrfjosh

    Hey Matthew, I wondered what you thought of the Tangem hardware wallet? It looks like a nice balance of security and convenience for newer bitcoiners or less tech savvy bitcoiners. I respect your opinion a lot and wondered what you thought.

  8. Puppet Master

    Oh geez, more BTC Maxi fairy tales about Ethereum. No wonder nothing innovative seems to be coming out of the Bitcoin camp, too busy being butt hurt that ETH withdraw's are enabled and staking has been a huge success! Let's hear some whining about proof of Ethereum use cases and institutional adoption; "Franklin Templeton bets big on Ethereum by putting one of it's fund on Polygon". Next up for Ethereum – EIP-4844, or proto-danksharding increasing scalability and reducing gas fees! Next up for Bitcoin, how to shadow ban Ordinals / NFT's 😂

  13. Chris F

    Another great video. Thank you.
    Do you potentially see a different use case for Ethereum or another blockchain? Such as authenticating online content using nft technology. With the rise of AI and deep fakes, this seems likely. Or is this something the Bitcoin network could handle? With needing to scale so much content it seems like a very tall order.
    Thanks again. Really enjoy your content.

  14. HN HL

    While I do not question the thesis of the video (on the contrary, I agree with it), I'd like to have some clarification about Lido, the single largest ETH validator, which in theory is decentralized and thus should be immune to the sort of scenario described here. What/who are the soft targets in the Lido structure that could be susceptible?

  17. Leonard Britt

    Note that DEFI oans are typically in a stable coin such as DAI with the collateral being ETH or WBTC or LINK etc. Why would someone deposit USDC to borrow DAI other than possibly for a flash loan?

    However, if the US government were to require US Bitcoin miners to censor transactions, would there not be a similar pressure to be OFAC compliant or hard fork and become another BCH?

  18. jad1497

    I'm wondering how all this is going to play out in the future. It'll be interesting looking back in a few years at everything that will go down.

  30. Brendon

    Why does it matter that ETH is 'captured'? One of its main use cases is gaming with thousands of gaming ecosystems now built on it. Whether ETH is or isn't captured is meaningless to Bitcoin which is completely different. Please explain why it is such a threat to BTC? So much so you dedicate video after video after video to it. ETH is no threat to BTC if anything it shines a light on BTCs best properties. If you think a tiny minority who say it's hard money etc means anything maybe take a social media break. Many say it to trigger. Freedom is messy free markets trying to shutdown ETH is the opposite and just censorship and pro big government. Its puritanical Elizabeth Warren stuff.

  31. Kelvin Rodriguez

    ==*..Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals. you have to contend with inflation, recession, decisions from the Feds and all. I was able to increase my portfolio by $289k in months. You have to seek for help in the right places*==

  32. E Zy

    Bitcoin is the only true example of democracy in the world …. Ever
    Notice how it’s enemies are the western powers who wage wars in the name of democracy

  36. The paper vigilante

    You know why etherium doesn’t drop in price? Because Goldman Sachs is behind eth and Bitcoin since years ago. So even if it’s a complete mess it’s going to stay there for lots of years.

  37. X Poneke

    Do an episode explaining how much Bitcoin is lost every year and the longer term impact of that constant loss. You seem to be under the impression that as more Bitcoin is lost overtime that will make those that still hold their Bitcoin wealthier? This constantly shrinking amount of Bitcoin that will be available in the future is its Archilles heel not a beneficial feature.

  39. Gregory Doyle

    How would “home nodes” help prevent something like this from happening to BTC? Non-mining nodes do not facilitate transactions.

    Wouldn’t non-mining-home-nodes be forced to follow whatever protocol the miners choose?

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