Covalent CEO Warns Ether Spot ETFs Could Raise Security Risks for Ethereum

Covalent CEO Warns Ether Spot ETFs Could Raise Security Risks for Ethereum

Ether Spot ETFs: Potential Security Risks for Ethereum In a recent interview, Covalent CEO Ganesh Swami expressed concerns over the potential security risks that Ethereum (ETH) spot exchange-traded funds (ETFs) could pose to the network. According to Swami, these ETFs have sacrificed staking capabilities to gain approval from the U.S. Securities and Exchange Commission (SEC). This decision could leave the network vulnerable in the long run. Centralization and Operational Risks Swami highlighted the risks associated with multiple ETFs using the same custodian, such as Coinbase. He explained that this concentration of ETH holdings exposes the network to operational risks like collusion. In the case of Bitcoin spot ETFs, 90% of assets under management are currently held by Coinbase. Impact on Ethereum's Security As Ethereum operates on a proof-of-stake consensus algorithm, the ETH held by ETFs cannot be staked. This could compromise the security of the network as fewer validators actively participate in securing it. Swami emphasized the importance of staking in ensuring Ethereum's resilience. Call for Caution Swami urged policymakers and investors to proceed with caution regarding Ether spot ETFs. He stressed the need to consider the long-term implications for Ethereum's security before approving such products.