- ConsenSys has advocated for approving a spot Ethereum ETF with the SEC.
- ConsenSys has argued that Ethereum’s PoS system offers stronger security than Bitcoin’s PoW.
- ConsenSys has maintained that Ethereum’s security measures are superior to those of approved Bitcoin ETFs.
The ongoing saga of cryptocurrency exchange-traded funds (ETFs) in the United States has a new chapter. ConsenSys, the company behind the popular crypto wallet MetaMask, has submitted a public comment letter to the Securities and Exchange Commission (SEC) advocating for the approval of a spot Ethereum ETF.
Ethereum Security System Debated for ETFs
This move comes in response to the SEC’s request for public comments issued earlier in March. The SEC is particularly interested in understanding whether Ethereum’s unique security mechanism, Proof-of-Stake (PoS), poses any challenges that could impact the viability of an ETF.
ConsenSys argues that Ethereum’s PoS system offers superior security compared to Bitcoin’s Proof-of-Work (PoW) system, which is the foundation for already approved Bitcoin ETFs. The letter details how launching a successful attack on the Ethereum network is significantly more expensive and time-consuming than on Bitcoin.
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According to ConsenSys, estimates suggest an attack on Ethereum would cost nearly $34.39 billion (based on December 2023 Ether prices) and take almost six months to execute. In contrast, attacking the Bitcoin network, which primarily relies on computing power and electricity, could cost anywhere between $5 billion to $20 billion and potentially happen much faster.
Unveiling Advantages of Ethereum’s PoS System
Beyond cost, ConsenSys emphasizes several other advantages of Ethereum’s PoS system. These include faster block finality (confirmation of transactions), a decentralized and randomized validation process, and a built-in penalty system for validators who break the network’s rules.
These features, combined with Ethereum’s energy efficiency and transparent community structure, according to ConsenSys, create a robust network that is less susceptible to manipulation and fraud.
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The letter concludes with a strong urge for the SEC to recognize the advanced security measures built into Ethereum’s design. ConsenSys argues that these safeguards meet and surpass those found in Bitcoin-based ETFs already approved by the commission.
On the Flipside
- PoS systems may become more centralized over time, as a limited number of validators with large stakes could hold significant power.
- Regulations around PoS and cryptocurrency, in general, are still evolving. The SEC’s view on PoS and its suitability for ETFs could change in the future.
- There are currently no successful, long-term examples of established ETFs based on PoS cryptocurrencies.
Why This Matters
This push by ConsenSys is the latest development in the ongoing debate surrounding cryptocurrency ETFs in the US. With several Bitcoin ETFs already receiving the green light, the focus now shifts to Ethereum and whether its distinct PoS system will be deemed secure enough for a similar ETF product.
Curious about the impact of Ethereum reaching 1 million validators? This article explores the potential benefits and drawbacks of this milestone. Read Here:
Ethereum Reaches 1M Validators: Will It Boost the Network?
Wondering what BlackRock CEO Larry Fink said about Ethereum ETFs? This article dives into his comments on the SEC’s hesitancy:
How ETH ETF Works with Security Label According to Larry Fink
