‘Scam’ or Iteration? At Devcon, Ethereum Diehards Still Believe in 2.0
- Ethereum’s creators now acknowledge the blockchain wasn’t built to scale as a mainstream transaction platform.
- A planned reboot meant to address some of those issues, known as Eth 2, is at least two years away.
- There is no plan for how or when to migrate tokens and smart contracts onto Eth 2, according to ethereum creator Vitalik Buterin, James Prestwich and other leading community members.
- Ethereum devotees at the network’s premier conference, Devcon, took all this in stride. Unlike the blockchain’s critics, they see iteration as inherent to development.
For ethereum’s critics in the bitcoin community, last month brought a “gotcha” moment.
Joseph Lubin, co-founder of the second-largest cryptocurrency by market cap, acknowledged onstage at Ethereal Tel Aviv that the network, in its original form, wasn’t built for mass adoption. “We knew it wasn’t going to be scalable for sure,” the ConsenSys CEO said.
Predictable cries of “scam” from ardent bitcoiners followed. But Lubin’s statement wasn’t scandalous in the least to the ethereum fans at Devcon – the community’s largest and most influential annual gathering – where roughly 3,000 attendees gathered this week in Osaka, Japan.
Even those who knew the first version wasn’t scalable don’t see early marketing claims as misleading. They see iteration as an inherent process.
“Bitcoiners are kinda like hardcore fascist Catholics that just think everything else is wrong,” Dean Eigenmann, a researcher at the ethereum startup Status, told CoinDesk. “I think [ethereum] underdelivered on its promises, but it has delivered.”
The sanguine vibe at Devcon highlights the difference between bitcoin and ethereum, which has emerged as its own force to be reckoned with: Bitcoin is an individualistic monetary asset while ethereum, convoluted as its path to mass adoption may be, is a communal promise to continue experimenting with smart contracts, together.
Summa co-founder James Prestwich, one of the leaders of a project aiming to create cross-chain capital flows between bitcoin and ethereum, told CoinDesk he believes all cryptocurrency narratives evolve. So even if a blockchain manifests something different than the original white paper, that doesn’t make it a scam.
“Something will exist in 10 years. It may not bear any resemblance to [the ethereum] that exists today. And there may not be good continuity,” Prestwich said. “But something named ethereum will be around in 10 years.”
Speaking of the Ethereum Foundation, led in part by ethereum creator Vitalik Buterin, Eigenmann added:
“The foundation hasn’t taken the money and run.”
So what have the ethereum founders delivered since they sold more than 7 million tokens to retail investors to kickstart the network in 2014?
For starters, they spawned a global lifestyle brand. There’s a distinct aesthetic that defines ethereum events, from rainbows and pastel palettes, vegan-friendly snacks and magician-themed group panels about financial inclusion.
Many of the attendees gathered on Tuesday were among the cohort who had previously put their money in communal pools governed by open-source software, including more than $537 million worth of crypto locked into decentralized finance (DeFi) applications. If bitcoiners harp on “freedom” from censorship, ethereum fans are focused on creating “open” and “collaborative” platforms with more egalitarian governance than traditional institutions.
The bottom line is, the original ethereum platform inspired billions of dollars worth of economic activity, from token sales to DeFi loans, and influenced the way regulators view cryptocurrencies that “decentralized” after fundraising. Ethereum also attracted a devoted following of more than 17,000 developers around the world, according to the startup Dappros.
But the jury is still out as to whether that accrued value will translate to the next version of the smart contract platform.
‘Lack of strategy’
Devcon attendees weren’t shy in discussing the road ahead, or who will fund this work.
According to Peter Mauric, ethereum client Parity’s head of communications, the bulk of ethereum-related funding programs will now prioritize creating a new blockchain, Eth 2. Sources with knowledge of such development plans estimated it would take at least two years to build this next version of ethereum.
“No one really knows what Eth 1 will look like once Eth 2 exists,” Mauric told CoinDesk. “There’s not a ton of new development going on in the current chain clients. Most of the ongoing work is maintenance.”
As Prestwich explained, the first phase of Eth 2 – called Phase 0 – is coming this winter:
“Ether moved to the Phase 0 chain will be converted to a new token. These tokens can’t be moved on-chain. At least six months after launch, a hard fork will add transfers. Until then, users are locked in.”
There’s no clear plan for how to migrate hundreds of ethereum-based tokens and smart contracts, including DeFi projects, to the new chain in the foreseeable future, according to Buterin, Prestwich and Mike Porcaro, head of communications at the MakerDAO Foundation.
Developer Jamie Pitts, contracted by the Ethereum Foundation, kicked off the opening ceremony on Tuesday by sharing his concerns.
“I feel like there’s a lack of strategy,” Pitts said. “I think there’s a lot of teams working on their ideas, but there’s a lack of coordination.”
According to James Beck, communications lead at ConsenSys, the Brooklyn-based venture studio helmed by Lubin, there are nine teams working on clients for the upcoming Eth 2 blockchain, including Protocol Labs, Chainsafe and the ConsenSys-owned startup PegaSys.
However, according to several sources with knowledge of ethereum infrastructure projects, the bulk of funds for Eth 1 and Eth 2 development still comes from either the Ethereum Foundation or ConsenSys, in addition to smaller funding mechanisms like the MolochDAO and the Meta Cartel, both of which also accept public donations. Pitts told CoinDesk this doesn’t concern him because these funders don’t control development choices.
Eigenmann, the one-man Eth 2 team at Status among the nine Beck referenced, told CoinDesk this work isn’t a priority for him because he doesn’t have funding from the aforementioned players. As such, one Parity staff member stood up during the opening ceremony and said finding “more ways to get funding for protocol design” was imperative.
Then, during an afternoon panel about the transition from Eth 1 to Eth 2, Buterin said there will “eventually” be a roadmap for transitioning tokens to the new system with “close to no disruption at all.” The audience asked several questions about the price of the new tokens on Eth 2, what will happen regarding price variations on the open market between these assets and how exchanges might support liquidity during the transition.
There were no definitive responses from the panel of ethereum core developers, including Buterin.
While there are still many unanswered questions about how the project will diversify beyond reliance on funding from its founders, Josh Cincinnati, director of the Zcash Foundation, told CoinDesk ethereum has achieved a significant level of decentralized participation from the bottom-up.
“Something Ethereum has proven to be really good at is making exotic financial contracts approachable for developers.”
Since Eth2 won’t be the first time the ethereum community created a new chain, many fans believe it will be possible for both ethereum ecosystems to remain healthy simultaneously.
Back in 2016, differing opinions of how to address The DAO hack led to a community rift that split the chain into Ethereum Classic (ETC, the real “original” ethereum) and the chain we now call just “ethereum” (Eth 1). Today, CoinMarketCap lists ETC as having a global market cap worth more than $525 million, while ethereum itself is listed at $19.5 billion.
Likewise, Tomasz Kajetan Stańczak, founder of the startup Nethermind, told CoinDesk his team plans to continue maintaining a client for the current version of ethereum as long as people use it.
“We believe that will be, to some extent, forever,” he said, adding that out of $150,000 his startup as earned since 2017, at least a third of that funding came directly from the Ethereum Foundation. “At the moment, we are showing [prospective] funders in the community that we deliver an important and high-quality product that will benefit both ethereum and DeFi long-term.”
Stańczak said his company also plans to build infrastructure for Eth 2, as he believes the community always knew Eth 1 couldn’t scale to a point of satisfying user demands.
“As with internet connection bandwidth, I do not expect ethereum users to ever be satisfied with the capacity,” he said. “I see ethereum as a limited resource. … There are plenty of ideas around the corner that will greatly optimize the platform’s usability.”
Indeed, ethereum’s blockchain space is a limited resource. Due to the system’s congested bottleneck, transaction fees skyrocketed to $350,000 per day in late September. And as a report by Coin Metrics pointed out, blocks were nearly 94 percent full, with scant capacity to support growing demand.
Plus, this overloaded system is already propped up with reliance on corporate infrastructure providers like Google Cloud and Amazon Web Services.
According to a survey by the blockchain startup Chainstack, more than 57 percent of ethereum nodes run on such cloud hosting providers. So if any of these corporations stopped supporting professional node operators, the blockchain would lose much of its capacity.
However, this doesn’t concern ethereum fans. They are less focused on minimizing trust than their bitcoiner counterparts.
Mauric told CoinDesk there’s “almost no reason” for individuals to run their own full nodes. He expects most of this work will continue to be outsourced to service providers like the ConsenSys project Infura.
Plus, he argued that a pruned ethereum node with limited capabilities could still verify transactions in the rare circumstances where this is needed.
From Buterin’s perspective, Eth 1 was a successful experiment that paved the way for Eth 2, which will require a focus on incentives, through proof-of-stake, before live transactions.
“I’d argue it has done a lot of good. The ICO boom has pretty much single-handedly funded research into all of these general cryptography things,” Buterin told CoinDesk, referring to the 2017 explosion of initial coin offerings, many of them conducted with ethereum tokens.
As for layer-two solutions, which allow a high number of transactions to take place off-chain and reserve the ethereum ledger for final settlement, Buterin said some are proceeding “slower than expected. Raiden hasn’t gotten too far too fast and Plasma hasn’t gotten too far too fast. But people are still iterating and working on that.”
Buterin also mentioned pressure from businesspeople who discouraged him from speaking openly about these scaling challenges, which, as noted, many felt were obvious.
“You’re not supposed to say your own platform has limitations,” Buterin said.
The nonprofit foundation, led day-to-day by director Aya Miyaguchi, has at least six years of runway left to fund development and continue growing the community, Buterin said.
“There’s a lot of new faces,” he added:
“Most of the Eth 2 development teams, most of them weren’t even around before 2018.”
Once Phase 0 activates the “beacon chain” this winter, kicking off the first stage of building Eth 2, holders will be able to cash in their original ether and “stake” them to run the new chain. This will, theoretically, incentivize the community to work on the new chain until it is usable.
Mauric estimated it would take a “few years” to make cross-chain tooling. Porcaro, of the MakerDAO Foundation, told CoinDesk his project’s leadership is interested in learning more around the migration to Eth 2. Yet his foundation declined to offer any statement about the future of the ethereum-backed DeFi system, at least at this stage.
Likewise, many token fans expect the current ethereum system will endure even after its primary sources of funding – the Ethereum Foundation and ConsenSys – pivot to focus resources on building the new platform.
“I believe that ethereum will remain the major platform for DeFi and many other blockchain solutions for a very, very long time,” Stańczak said, concluding:
“It will grow and it will be ever stronger.”
Ethereum Foundation community manager Hudson Jameson speaks at Devcon5, Osaka, Japan, Oct. 8, 2019, image via Leigh Cuen for CoinDesk