There is a lot of talk going on about Ethereum switching to proof-of-take at some point in the future. While this will significantly reduce the inflation in the ecosystem, it will also pose a new set of challenges. To put this into perspective, Coinbase and GDAX now control 3.5% of the entire Ethereum supply. This is rather worrisome for the ecosystem as well, though.

Coinbase Can Become A Big Staker

When switching from proof-of-work to proof-of-stake, there is always a risk factor involved. Even though one could argue large mining farms control the network during a proof-of-work stage, the same dangers apply to PoS. Users who hold large amounts of coins will take more often than others, which will result in unfair stake distribution rewards.

With Coinbase controlling 3.5% of all Ethereum in circulation right now, this also goes to show how many people rely on an exchange wallet. While it may seem secure to trust a registered company with one’s money, that is far from the case, as anything could happen to them at any time. Cryptocurrency is designed to put the end user in full control of their funds at all times.

Some people in the Ethereum community argue this will have no effect on the ecosystem once the switch to proof-of-stake is made. At the same time, there is an option for Coinbase to effectively take these balances and earn a healthy profit from doing so. However, that would mean customers are unable to withdraw funds, which is not a solid business strategy.

At the same time, others are raising the point of how Coinbase is highly incentivised to make the network scalable. One option would be to update their user account management system so customers can choose whether or not they want their balances to take while in Coinbase control. It is doubtful such a system will be developed, though.

People have to keep in mind that Coinbase can take coins as long as they reside in user wallets, without ever issuing the interest generated to its customers. They are not legally obligated to do so. No one is saying that will be the default outcome, but it is an option that should not be dismissed easily either. Moving funds off these two exchange platforms before switching to PoS remains the best course of action, though.

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