Vitalik enthusiastic about the future of Ethereum – More than seven years after its launch, the blockchain Ethereum continues to be a breeding ground for innovation. In his latest blog post, Vitalik Buterinthe co-founder of Ethereum, reveals the different fields of application for which he is most enthusiastic.
Retrospective on Ethereum
Launched in July 2015, Ethereum is the first blockchain to have democratized smart contracts. The latter differ from the programmability of Bitcoin thanks to more complexity.
These same contracts have enabled the development of numerous applications. We have thus seen the emergence of concepts such as that of decentralized finance (DeFi) or even a new type of decentralized organization via DAOs.
Although some application ideas did not materialize, others came to take their place. Also, these seven years of experimentation have made it possible to identify certain limits to this ecosystem.
In a publication dated December 5, Vitalik Buterin returned to the Ethereum applications that excite him. Nevertheless, to introduce his remarks, he also highlights the limits of certain applications, in particular DAOs.
“We have also made progress in identifying the fundamental boundaries of space. Many DAOs have had their chance, with enthusiastic audiences ready to participate despite the inconvenience and expense. Nonetheless, many underperformed. »
A problem that has, for example, been identified by the company Chainalysis in a study published earlier this year.
However, the Ethereum co-founder is still enthusiastic about other applications.
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Money: the fundamental application
First, Vitalik Buterin returns to the fundamentals of cryptocurrencies. Thus, this one describes his glee for Ethereum as a currency.
To do this, he takes as an example his visit to an Argentinian café in December 2021.
“When we entered, the owner recognized me and immediately showed me that he had ETH and other cryptocurrency in his Binance account. We ordered tea and snacks, and asked if we could pay in ETH. The café owner agreed and showed me the QR code of his Binance deposit address, to which I sent around $20 worth of ETH from my Status wallet on my phone. »
At that time, Ethereum was still in Proof of Work. Because of this, the transaction took a while to clear and cost a third of the amount in network fees.
Nevertheless, the use of ETH as a currency could be facilitated by the transition to Proof of Stake which implies that “transactions are included much faster and the chain has become more stable».
The case of stablecoins
Faced with the significant volatility of cryptocurrencies, stablecoins quickly established themselves as a fundamental tool in the ecosystem. Nevertheless, the latter are in practice far from the founding ideals.
“There is a reality that is not favorable to cypherpunk values today: the most successful stablecoins are those that are centralized, mainly USDC, USDT and BUSD. »
Unfortunately, this centralization entails significant risks of censorship, via the creation of blacklists by the issuing companies. At the same time, other more decentralized stablecoins such as RAI or LUSD present more systemic risks.
This reflection led Vitalik Buterin to divide stablecoins into three categories, each with their advantages and disadvantages.
| Governance | Advantages | Disadvantages | Examples | |
| Centralized stablecoins | Traditional legal entity | Maximum efficiency – Easy to understand | Vulnerability to risks from a single issuer and a single jurisdiction | USDC, USDT, BUSD |
| Stablecoin governed by a DAO and backed by real assets | The DAO decides on the types of guarantees authorized and the maximum per type. | – Adds resilience by diversifying issuers and jurisdictions – Still some capital efficiency | Vulnerable to repeated issuer fraud or coordinated takedown. | DAI |
| Stablecoin with minimized governance and backed by cryptocurrencies | oracle price only | – Maximum resilience – No external dependencies | – High requirements in terms of guarantees – Limited scale – Sometimes requires negative interest rates | RAI, USD |
“Either way, any kind of well-functioning stablecoin would be a boon to many kinds of money and savings apps that are already of practical use to millions of people today. »
DeFi: the field of possibilities
Obviously, among the subjects that interest Vitalik Buterin, we find the decentralized finance. However, this does not include everything and anything. As Vitalik points out, most existing protocols have “turned into an overcapitalized behemoth that relies on unsustainable forms of yield”.
Nevertheless, some DeFi applications continue to excite Vitalik Buterin:
- The predictive markets, these would be valuable as a tool for collective reflection. Vitalik expects these markets to grow steadily over time.
- The synthetic assets, namely assets that replicate real-world assets. Vitalik cites in particular the case of stock market indices and real estate assets.
Decentralized identities
In the rest of his publication, Vitalik Buterin presents his enthusiasm for applications adding a notion of identity. This also includes projects of the type ENSwhich enables on-chain identification.
In addition, Vitalik Buterin presents the advances made in terms of identification via protocols such as Sign In With Ethereum. Or the techniques of account recovery by social consensus, much more decentralized than the usual recovery methods.
Unfortunately, these apps will still feature significant limitations until they address privacy issues.
“The status quo involves putting large amounts of information on the channel, which is something that’s ‘good until it’s not’, and which will eventually become unpleasant, if not downright risky, for more and more people. »
A problem that could be solved in the future with the emergence of solutions integrating ZK-Snark or even the combination of on-chain and off-chain information.
DAOs: the decentralization of organizations
even though CAD have not yet achieved sufficient decentralization, their potential contribution can be significant.
“’DAO’ is a powerful term that captures many of the hopes and dreams that people have put into the crypto space to build more democratic, resilient and efficient forms of governance. »
However, it is necessary to succeed in identifying the cases where a DAO is interesting and those where it does not serve its purpose. It is particularly vis-à-vis their decentralization that this fails. Whether at the level of decentralized choices with a large group of people or at the level of the decentralization of the infrastructure of the DAO itself, things are not always rosy.
“When creating a DAO, the first thing is to determine whether or not it is worth structuring the project as a DAO, and the second thing is to determine whether the goal is robustness or reliability. effectiveness: if so, then further thinking about governance design is also needed, and if so, then either it innovates on governance via mechanisms like quadratic funding, or it should simply be a multisig. »
The current state of affairs
Thus, Vitalik Buterin is enthusiastic about the various topics that we have just discussed and particularly about their future developments.
“Many of these applications are in the works today, although they are not widely used due to the limitations of current technology. »
One of the main limitations identified by Vitalik is none other than the lack of privacy protection. Obviously, scalability constraints are also at the heart of concerns.
Fortunately, for each problem, solutions are imagined. Thus, the democratization of second-tier solutions such as rollups could solve the scalability problems. Secondly, technologies ZK-Snark could improve the protection of privacy.
So many areas that will be extremely exciting to follow in the coming months and years.
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