The exciting future of Ethereum according to its founder

Dec 10, 2022

Vitalik is excited about the future of Ethereum (ETH) – More than seven years after its launch, the Ethereum blockchain continues to be a breeding ground for innovation. In his latest blog post, Vitalik Buterin, the co-founder of Ethereum, reveals the different application fields he is most excited about.

Retrospective on Ethereum

Launched in July 2015, Ethereum is the first blockchain to have democratized smart contracts. The latter differs from the programmability of Bitcoin thanks to its greater complexity.

These same contracts have allowed the development of numerous applications. Thus, we have witnessed the emergence of concepts such as decentralized finance (DeFi) or even a new type of decentralized organization through DAO.

Although some application ideas did not materialize, others did take their place. In addition, these seven years of experimentation have made it possible to identify certain limits of this ecosystem.

In a post on December 5, Vitalik Buterin returned to the Ethereum applications that excite him. However, to introduce his comments, he also highlights the limits of certain applications, particularly DAOs.

“We have also made progress in identifying the fundamental limits of space. Many DAOs have had their chance, with enthusiastic audiences ready to participate despite the inconvenience and expense. However, many underperformed. »”

A problem that, for example, has been identified by the Chainalysis company in a study published earlier this year.

However, the Ethereum co-founder is still excited about other applications.

Money: The Fundamental Application

First, Vitalik Buterin goes back to the fundamentals of cryptocurrency. Thus, he describes his jubilation over Ethereum as a currency.

To do this, he takes as an example his visit to an Argentine café in December 2021.

“When we walked in, the owner recognized me and immediately showed me that he had ETH and other cryptocurrencies in his Binance account. We ordered tea and snacks, and asked if we could pay in ETH. The cafe 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 the time, Ethereum was still in Proof of Work. Because of this, the transaction took a while to settle and cost a third of the amount in network fees.

However, 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 for stablecoins

Given the significant volatility of cryptocurrencies, stablecoins quickly established themselves as a fundamental tool in the ecosystem. However, the latter is in practice far from the founding ideals.

“There is a reality that today is not favorable to cypherpunk values: the most successful stablecoins are those that are centralized, mainly USDC, USDT, and BUSD. »”

Unfortunately, this centralization carries significant risks of censorship, via the creation of blacklists by broadcasting companies. At the same time, other more decentralized stablecoins like RAI or LUSD present more systemic risks.

This reflection led Vitalik Buterin to divide stablecoins into three categories, each with its advantages and disadvantages.

Centralized stablecoins

Governance: Traditional Legal

Advantage: Entity Highest Efficiency – Easy to Understand

Disadvantages: Vulnerability to Single Issuer, Single Jurisdiction Risks

Examples: USDC, USDT, BUSD

Stablecoin is governed by a DAO and backed by real assets

Governance: The DAO decides the types of warranties authorized and the maximum per type.

Advantage:

– Adds resilience by diversifying issuers and jurisdictions

– Still some capital efficiency

Disadvantages: Vulnerable to repeated issuer fraud or coordinated takedown.

Examples: DAI

Centralized stablecoins

Governance: oracle prices only

Advantage:

– Maximum resilience

– No external dependencies

Disadvantages:

– High requirements in terms of guarantees

– Limited scale

– Sometimes requires negative interest rates

Examples: RAI, the American dollar

“Either way, any kind of stablecoin that works well would be a boon to many kinds of money and savings apps that are already of practical use to millions of people today. »”