January 30, 2023

MakerDAO [MKR] It was claimed that much awaited Ethereum [ETH] A merger could do more harm than good to his network.

Maker, the creator of the stablecoin – DAI – has explained the implications of to merge In 22 tweets in a long thread on July 5.

Now, of course Proof of Work (PoW) to me Proof of Stake (PoS) The move was supposed to solve Ethereum’s scalability issues. However, MakerDAO claimed that the tokens could affect its system. Ergo, the question – how?

not enough

protocol explained That the merger could lead to permanent contract delays and negative financing. Additionally, MakerDAO stated that the launch itself could lead to selling pressure across the chains in the PoW.

Another risk highlighted was the potential for assets to become worthless on an already-pegged Ethereum (sETH). Maker considers this a major concern as they have run lending protocols using the system. In addition, he noted that the lending protocols risk getting higher rates on ETH deposits due to the increased liquidity due to the fork consolidation.

Other factors considered include potential insolvency with liquidity pool protocols and neglect of stablecoins such as Tether [USDT] It seems to be the only one that supports merging.

There is also the possibility of network disruption because not all Ethereum-based protocols will migrate to PoS using the Ethereum chain. In fact, Maker noted that this may affect users and transactions alike. Likewise, a replay attack on a DAI-fork or MKR-fork was not excluded from the options.

Maker went on to explain that the E1P-155 is not enough protection for him as it only works on the PoW series.

StarkNet can not help?

Previously, Maker announced that it was implementing a multi-chain strategy to promote faster withdrawals on StarkNet.

StarkNet is a decentralized, permissionless ZK network, running on the Ethereum Layer 2 (L2) network to achieve scalability. However, Maker stated that it was publishing the series on Layer One (L1) and L2 DAI platforms.

Despite publication, the follow-up release could have demonstrated that StarkNet development was unable to solve potential challenges. Interestingly, Maker did not list potential issues without matching them with suggested solutions.

Finally, Maker also noted that competitive price monitoring via ETH protocols can help challenge the deposit rate. Also, a potential increase in the liquidation ratio could be a solution to potentially higher volatility and liquidity risk.

With the Ethereum consolidation fast approaching, investors may consider Maker’s concerns to be legitimate. Moreover, it could overclock other protocols in the ETH chain regarding the potential effects of PoS migration.

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