Ethereum (ETH) co-founder Vitalik Buterin argued that, like Ethereum, Bitcoin (BTC) has its own potential bombs waiting to explode.
The ecosystem around Ethereum could see failures and hacks, discussed the participants of The Tim Ferriss Show yesterday. To this, Buterin said: “I think the Bitcoin ecosystem does have its own […] ticking time bomb demons too, like Tether is one example.”
He did not elaborate on this any further.
Tether is the issuer of the most popular stablecoin, tether (USDT) and is being criticized for the lack of transparency. However, as reported, in a recent settlement with the New York Attorney General’s office, Tether was obliged to disclose how its stablecoin is backed in more detail. “These will be published on a quarterly basis. We anticipate that these will be published on Tether’s website,” Stuart Hoegner, General Counsel at Tether said.
The NYAG investigation also confirmed that:
- Tether had no access to banking
- held no reserves
- wasn’t backed by the dollar
- and covered up massive losses.
That said, according to analysts at JPMorgan, if traders were to lose faith in tether, the bitcoin market would likely suffer “a severe liquidity shock.” Around 50%-60% of bitcoin trades for USDT since 2019, it said.
However, USDT is also being used in the ETH trading. For example, the ETH/USDT trading pair on major crypto exchange Binance is responsible for 5% (USD 1.5bn) of the total ETH trading volume in the past 24 hours. In comparison, BTC/USDT hit 6.7% (USD 3.8bn).
Meanwhile, back to the podcast with Buterin, he described Ethereum as “a general-purpose blockchain.” It expands on the Bitcoin approach, Buterin said, wherein instead of having rules that are designed around supporting one application, Ethereum aimed to make “something more general-purpose where people can just build their own applications, and the rules for whatever applications they built can be executed, implemented on the Ethereum platform.”
The value of ETH depends on the Ethereum network being useful, whereas BTC “derives value from bitcoin the currency,” according to Buterin. “Bitcoin the blockchain is this thing off in the side that, ‘Well, okay. Fine. It has to exist,” he added.
Comparing the regulatory situation of Ethereum and Bitcoin, Buterin stated that both benefit from being highly international, and having strong communities in the US, Europe, and China, among other places. This includes countries that are not geopolitically on the same page with each other, he said, adding:
“There’s a lot of resiliency in that sense.”
The regulators have cracked down on crypto “significantly less than they theoretically could,” Buterin said, as “they theoretically could make something like Coinbase illegal overnight.” But they don’t, he concluded, partly because regulators “see a lot of the positive value that’s coming out of these platforms.”
Article Written by Sead Fadilpašić