The report noted that Ethereum Merge could affect the stability of stablecoins as it hosts the majority of DeFi applications. The Merge, scheduled for September 15, will see the Ethereum blockchain move from its PoW consensus mechanism to PoS.
MakerDAO, Grayscale Concerns
The tweet about potential problems also explained how it planned to solve them. Some issues identified include negative funding, perpetual contract backwardation, network downtimes, replay attacks, etc.
Additionally, digital currency investment firm Grayscale also expressed worries that the Merge could impact ERC-20 tokens. This is especially possible if there are hard forks, which will likely happen.
According to Grayscale, the Merge could cause a situation where tokens locked in smart contracts might be locked in forever, forcing holders to start liquidating their tokens before the Merge.
Ethereum Merge Should not Affect Network’s Operations
However, Ethereum developers appear to have considered all these possibilities and made provisions for them. There is a strong belief that the Merge will not affect the network as it will happen on the base layer.
Also, most DeFi protocols are not concerned about these potential issues either. Uniswap is one of them as it said its service wouldn’t be interrupted by the Merge.
Stablecoins Future Remain Contentious
Even if none of these issues come up, the future of stablecoins still represents a major challenge for the DeFi sector.
With centralized stablecoins dominating decentralized protocols, many DeFi projects have been considering algorithmic stablecoins, according to the report.
But there are still potential regulations for stablecoins that could impact DeFi after the Ethereum merge.
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