The company’s stablecoin USDC is currently the second largest in terms of market capitalization, totaling USD 54.2 billion. The long-awaited transition to Ethereum aims at enhancing the network’s scalability and security by switching from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one.
Circle’s Move
Circle has recently announced its intention to fully support Ethereum’s shift towards a PoS chain following the anticipated merge event scheduled for September 19, 2022. This change signifies that USDC will continue to operate on the updated Ethereum blockchain post-merge.
Proof-of-Stake vs. Proof-of-Work
CoinDesk provides a clear explanation of the distinction between PoW and PoS: both mechanisms serve as consensus protocols, ensuring that participants in the network act honestly to prevent fraud such as double spending. In PoW, validation occurs through mining, involving extensive decentralized computing resources globally. Conversely, PoS selects validators based on the stake they hold in the blockchain, thus requiring less computational power.
Ethereum, originally a PoW blockchain, is set to transition to PoS, rendering traditional miners obsolete. Consequently, some mining groups have initiated a movement against this change, advocating for what’s known as an Ethereum fork that would retain the PoW mechanism. Key figures like Chandler Guo are leading this effort, proposing a new cryptocurrency called ETHPOW and even launching futures contracts on BitMEX to allow speculative trading.
Next Steps
Circle remains committed to the changes and will continue to support USDC on the new Ethereum network. Despite the speculation around potential forks, Circle is not engaging in such speculation post-merge. The move aligns with ongoing investor interest in Ethereum, which has seen increased investment as it approaches the merge.
The Merge marks the first of five planned upgrades for Ethereum, potentially boosting transaction speeds by 10% through reduced block times. However, it lays the groundwork for future improvements, notably the ‘Surge,’ expected to increase TPS capabilities significantly in the coming months.
