Consensys has submitted a comment letter to the US Securities and Exchange Commission (SEC) advocating for the approval of Ethereum-based exchange-traded funds (ETFs). I
In a recent request for public comments on Nasdaq’s application for a rule change to allow trading of the iShares Ethereum Trust, the SEC specifically asked about unique concerns related to ether’s proof-of-stake consensus mechanism and concentration of control or influence. Consensys responded to these concerns by explaining that Ethereum’s PoS model includes robust mechanisms to combat fraud and manipulation.
One of the key benefits highlighted by Consensys is faster block finality. With Ethereum moving to PoS, transaction finality is achieved within a shorter period of time, making it more secure against potential attacks. The company also emphasizes the distributed and randomized validation process used in Ethereum PoS, which prevents large stakeholder control and serves as a check against manipulation.
Consensys further addresses the concept of Byzantine Fault Tolerance (BFT), which measures the minimum fraction of network validators required for system integrity. Researchers have found that the BFT cost of Ethereum to attack the network is significantly higher than Bitcoin, reducing the likelihood of network compromise. In addition, Ethereum’s PoS model includes a reduction in penalties for validators who violate protocol rules, acting as both a deterrent and a punitive measure.
The comment letter highlights the environmental benefits of Ethereum’s PoS model compared to Bitcoin’s PoW. With significantly lower energy consumption, Ethereum demonstrates its commitment to sustainability.
Consensys highlights Ethereum’s decentralized community and transparency as additional safeguards. An active and significant developer community combined with public development work makes Ethereum more resistant to attacks and enables comprehensive monitoring of network activities.
In conclusion, Consensys is urging the SEC to recognize the advanced safeguards inherent in Ethereum’s design. The company claims that Ethereum’s PoS implementation meets and exceeds the exemplary security and resilience safeguards that underpin Bitcoin-based ETPs previously approved by the SEC. Consensys views its comment letter as a step toward driving progress and providing relevant and useful information to the public. The Company looks forward to a continued, constructive dialogue with the SEC and its staff.
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