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Max Keiser: 'Ethereum is recreating fiat money'

·8-min read

Watch: 'Bitcoin will eat into global finance until it's $1m per coin' | The Crypto Mile

Ethereum's merge to proof of stake "is essentially a recreation of the fiat money system", a leading bitcoin maximalist has claimed.

Bitcoin pioneers Max Keiser and Stacy Herbert appeared on Yahoo Finance's The Crypto Mile and ridiculed Ethereum's merge to a low energy consumption proof of stake method of validating transactions.

Since last week's successful upgrade to a new way of verifying transactions on the Ethereum blockchain that uses 99.95% less energy, pressure has been placed on the bitcoin (BTC-USD) community to quit its high-energy consumption 'proof of work' consensus mechanism and follow in Ethereum's footsteps.

The use of fossil fuels to power the generators that feed proof of work mining operations has become a contentious issue considering the rapidly worsening climate crisis.

Check: Crypto live prices

However, the less energy-intensive proof of stake method is not without its detractors. There are concerns that the Ethereum blockchain (ETH-USD) could be compromised if nefarious operators exploit 'proof of stake' and accumulate the greatest amount of staked ether, therefore gaining control of the blockchain.

Control of the blockchain by a centralised entity is the antithesis of what every blockchain has been attempting to emulate since Satoshi Nakamoto released the Bitcoin Whitepaper in 2008.

Read more: Three major risks connected to the Ethereum merge

This method of ensuring maximum democracy and autonomy is called decentralisation and is achieved by spreading the validator nodes of a blockchain across the globe.

The more individual and independent validator nodes there are the more secure the network is in the long term.

But in a proof of stake system, this concentration of validator nodes could be achieved by those who can stake the most ether (ETH-USD), and this is a point that was not overlooked by fervent bitcoin advocate Max Keiser.

On this week's The Crypto Mile Keiser said: "Ethereum has nothing to do with bitcoin and it's proof of stake method is essentially a recreation of the fiat money system.

"The Ethereum Foundation can change the code on a whim many times, it's completely insecure and now it's even worse.

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"This is putting a spotlight on bitcoin and attracting capital into bitcoin. Ethereum selling off versus bitcoin."

The television presenter who has been called 'the high priest of bitcoin' by Micrstrategy's Michael Saylor added: "I think that trend of selling of ethereum will continue and we'll see if ether trading at zero versus bitcoin.

"This is what we will see for all the altcoins because none of them offer anything that would attract capital for any serious reason."

DENVER, CO - FEBRUARY 18: Ethereum co-founder Vitalik Buterin speaks at ETHDenver on February 18, 2022 in Denver, Colorado. ETHDenver is the largest and longest running Ethereum Blockchain event in the world with more than 15,000 cryptocurrency devotees attending the weeklong meetup. (Photo by Michael Ciaglo/Getty Images)
Ethereum co-founder Vitalik Buterin. Photo: Michael Ciaglo/Getty Images.

Speaking to Yahoo Finance about the centralisation concerns on the Ethereum network after the merge senior security advisor at Halborn Limaris Torres said: "Many users and developers are concerned about the dominance of some players in the ETH ecosystem.

"Namely, players like Coinbase and Lido who validated an estimated 46% of blocks post merge and the Flashbots relay which has delivered an estimated 82% of blocks since the merge.

Read more: North Korea's crypto activity dangerously underestimated

"The point of the decentralised network was to have a monetary system that could not be controlled by a government but in light of recent OFAC sanctions related to Tornado Cash, ecosystem users are worried that major players like would be forced to comply with regulatory bodies and blacklist certain user addresses. If this were to occur it would defy the very ethos of the ecosystem."

Torres added that the point of a decentralised network is that it cannot be controlled by any government, like the current fiat money system, so people all over the world will have the ability to send payments across borders regardless of differences in regimes or politics.

Federal reserve building, the headquater of Federal reserve bank. Washington DC, USA.
Federal reserve building, the headquater of Federal reserve bank. Washington DC, USA.

What is the fiat money system?

The fiat money system that Keiser refers to is the system of global currencies which are produced by central banks and backed by governments rather than anything of intrinsic value such as precious metals or commodities.

The present fiat monetary system is ruled by the US dollar and has been in existence since Richard Nixon removed the dollar from its gold backing in 1971.

Read more: Ethereum price drops 20% as SEC declares control over network

The so-called Nixon Shock saw the cancellation of the direct international convertibility of the United States dollar to gold.

Since this time dollars can be created freely by the Federal Reserve, without having to be backed by gold reserves.

Visual representation of the digital Cryptocurrency. The crypto market has been battered this year with nearly $2 trillion wiped off its value since its peak. In Brussels - Belgium on 10 September 2022.  (Photo Illustration by Jonathan Raa/NurPhoto via Getty Images)
Bitcoin. Photo: Jonathan Raa/NurPhoto/Getty.

Bitcoin forecast

Bitcoin was born in January 2009 when the 'genesis block' was mined by pseudonymous creator Satoshi Nakamoto.

This event happened in the wake of the last global financial crisis when the declining value of a small set of assets spread rapidly and caused cascading failures among interlinked financial institutions across the globe.

Now the world's foremost cryptocurrency could be about to taste a new financial crisis.

But, this time it will face a financial crisis as a mature asset that institutional, as well as retail investors, have embraced.

Stacy Herbert and Max Keiser are renowned for their conviction that bitcoin will supersede fiat currencies, including the all-dominant US dollar.

Read more: Crypto: Stablecoins scramble for safe havens as sanctions threat escalates

They see its target addressable market as the total sum of global finance and forecast the digital asset will eat the incumbent financial system until it creates a new paradigm and becomes the reserve asset of the globe, and so forms a new 'Bitcoin Standard', that follows in the footsteps of gold.

Speaking to The Crypto Mile, Keiser doubled down on his conviction that the world's largest digital asset by market cap will prevail in the long-term against the dominance of the dollar and the emergence of altcoin challengers, such as ethereum.

Taking the total sum of the global financial system, the American broadcaster and filmmaker announced enthusiastically that this is the true target for bitcoin.

Keiser said: "Ultimately the total addressable market for bitcoin would be $400 trillion. That's the total sum of the global financialised world.

"Bitcoin will eat that essentially, so we're going to see a lot higher prices of $1m or $2m per bitcoin."

SAN SALVADOR, EL SALVADOR - SEPTEMBER 05: Detail of a Bitcoin acceptance sign on September 5, 2022 in San Salvador, El Salvador. On September 7, El Salvador commemorates it's first year with Bitcoin as legal tender. (Photo by Kellys Portillo/APHOTOGRAFIA/Getty Images)
Bitcoin acceptance sign in San Salvador, El Salvador. Photo: Kellys Portillo/Aphotografia/Getty.

El Salvador's Bitcoin Law

It is now one year since bitcoin was made legal tender in El Salvador and mass media and economists around the world are unanimous in their belief that the Central American nation's experiment with bitcoin has been a failure.

Bitcoin has fallen almost 70% in value from its all-time high in November 2021 of $68,000 per coin.

Stacy Herbert and Max Keiser have spent long periods in El Salvador, and The Crypto Mile asked them how bitcoin adoption is progressing from their first-hand experience on the ground.

Herbert replied: "I believe that El Salvador is winning and they're winning big, and that is why the headlines say otherwise.

"Just like the mainstream media headlines say, America is winning by destroying the dollar, and that Europe is winning by freezing to death this winter.

A general view shows the National Palace building and the National Cathedral in downtown San Salvador, El Salvador April 25, 2022. Picture taken with a drone. REUTERS/Jose Cabezas
A general view shows the National Palace building and the National Cathedral in downtown San Salvador, El Salvador April 25, 2022. Picture taken with a drone. REUTERS/Jose Cabezas

"El Salvador is winning in a way that is hard to quantify because it's not measured in fiat necessarily."

Keiser then claimed that since El Salvador enacted its Bitcoin Law and made the digital asset legal tender on September 7, tourism, GDP, and inward investment are all increasing.

Read more: Bitcoin becomes legal tender in El Salvador amid suspicion and protest

He added: "Bitcoin as legal tender has been extraordinary and continues to show what can be done when you have a courageous leader who's willing to turn his back on the global central banking establishment like the IMF, and to give his people sovereignty."

Bitcoin was created in the last recession of 2008, because of distrust in central banks and the financial system.

But, since then we have had over 12 years of buoyant markets with interest rates at near zero and equities blooming, so bitcoin's reason to exist had yet to be realised.

Bitcoin has never been tested in the conditions that it was born in. Now the digital asset could be about to face a financial crisis that it was designed to respond to, will it become the promised store of value?

Watch: 'Digital assets will be as big as the internet itself': Senator Cynthia Lummis