Former Senior Engineer at Coinbase: The Potential Impact of Real-World Assets Like USDC on Hard Forks
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Former Senior Engineer at Coinbase: The Potential Impact of Real-World Assets Like USDC on Hard Forks
For the upcoming merger, USDC holds veto power over any significant changes to ETH.
Navigating Web3 tides with focused insightsWritten by: Blake West, former Senior Engineer at Coinbase
Compiled by: TechFlow
When it comes to major upcoming changes like The Merge, USDC holds a de facto veto power over ETH. The issue isn't with USDC itself—it's that anything tied to the real world cannot support forks, because doing so would undermine one of crypto’s core strengths. And I don’t think people fully grasp how significant this is.
First, some background: On September 15, The Merge is scheduled to take place—very likely followed by a hard fork of Ethereum preserving Proof-of-Work (PoW).
In the past, hard forks (like BCH or ETC) occurred due to disagreements in consensus or roadmap. These largely served as pressure valves—allowing people to stop arguing and start building separately.
But that was before stablecoins existed. Now, PoW supporters can build whatever they want—but unless Circle (the company behind USDC) supports it, none of it matters, precisely because of USDC’s ties to the real world.
In the real world, you can't "fork" physical assets. So when a PoW fork launches, the on-chain supply of USDC would instantly double. But of course, the dollars in Circle’s bank accounts wouldn’t.
Therefore, Circle must choose just one chain—and they’ve chosen “PoS.”
That single decision alone kills any meaningful chance for a PoW fork. Because if USDC immediately drops to zero value, the state of the chain becomes chaotic. Honestly, launching such a fork seems kind of foolish.
Maybe you support PoS anyway, so you think “no big deal.” But let’s do a thought experiment: what if Circle also happened to run the world’s largest PoW mining operation? How would the situation look then? Would they choose PoW? Would they delay PoS?
Stepping back—things in the real world that can’t be forked aren’t limited to just USDC. As crypto goes mainstream, links to the real world will become increasingly common. For example, Tiffany recently launched NFTs redeemable for real diamonds.
Do you think they’d hand out twice as many diamonds because of a hard fork?
They’d have to pick one chain too. The growing trend of “real-world” lending in DeFi faces the same problem. As crypto becomes more successful, this issue only gets more deeply entrenched.
Is that bad?
The future I worry about is one where Ethereum’s decentralization becomes theoretical—where a handful of large entities (or even many smaller ones) each hold the power to block changes they dislike, threatening chaos on-chain.
I’m not sure how to solve this problem. But it will definitely linger beneath the surface—until one day people realize it’s already become a real problem, even though it wasn’t considered one before.
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