Adam Cochran, a crypto analyst, urges Coinbase, the largest cryptocurrency exchange in the United States by trading volume, to prioritize creating an insurance fund for its users instead of focusing on diversifying its ethereum client infrastructure.
Most importantly, Coinbase should have an insurance fund
In a post on X, Cochran believes the exchange's current approach to ethereum customer diversity is “inadequate.” Instead, the analyst recommends that Coinbase focus on mitigating the risks associated with ethereum's potential “supermajority” failure.
ethereum is a leading smart contract platform that allows users to transact and developers to deploy smart contracts that power applications, some with billions of total value locked (TVL). However, leading ethereum backend node operators rely on Geth, a validator client.
Data sample that the client is used by more than 75% of all node operators. Through open source software, ethereum is kept up to date and users can access funds and more. In addition to Geth, there are options including Besu and Nethermind.
The analyst noted that a “supermajority” failure, in which the majority of ethereum nodes fail simultaneously, could cause major outages and losses for Coinbase users. The failure of the “supermajority”, as the analyst points out, is if Geth fails, a possibility that would stop the operation of the network, even leading to a division. Cochran prioritizes creating an insurance fund or allowing users to use alternative ethereum clients to address this risk.
The insurance fund will allow Coinbase to compensate users in this case. Binance, the world's largest crypto exchange by trading volume, already has a insurance fund to compensate users in case of a hack. In addition to the fund, Cochran believes that giving users options to opt for alternative clients gives them more autonomy, allowing them to take charge of their security.
Nethermind Knocked Out by Bug, 8% of ethereum Node Operators Affected
This preview comes a day after Coinbase said it was looking to diversify its ethereum clients, expanding its base beyond Geth.
In a post on X, the exchange saying has been constantly testing customers since 2020. It plans to update the community on its next action step by the end of February.
On January 21, Nethermind, an ethereum client used by barely 8% of all node operators were temporarily removed due to error. As the reliability of some ethereum node operators using Nethermind decreased, the network penalized them.
Featured image from Canva, TradingView chart
