There is no good reason for Ethereum to exist, other than that it already does. Despite this, both the blockchain world and mainstream media seem determined to make it work somehow, whatever it takes. TIME magazine’s lengthy profile in March of “Vitalik Buterin, the most influential person in crypto” contains many of the myths and tropes that have become familiar, such as “decentralization” and energy consumption. It mixes those in with techno-utopian favorites like “equality” and trusting in the visions of those more fixated on the future than examining the past.
The article does take a critical look at Ethereum’s structure and its problems with costs and scaling, as well as attitudes surrounding the industry in general.
— TIME (@TIME) March 18, 2022
Underlying all this is the fact Bitcoin can do everything Ethereum does, at a fraction of the cost and by using far-more-secure proof of work (PoW) block confirmations. It had this ability at its launch in 2009. The disabling of Bitcoin script and data-handling functions led to the BTC we see today. Buterin used that script to build Ethereum in the early 2010s, which now struggles to scale—whereas the Bitcoiners at BSV simply restored the original Bitcoin protocol.
Both Ethereum and Vitalik himself have something of a cult following in the tech world. Their inner workings are delightfully complex and esoteric to non-developers. Conferences and events are unashamedly geeky, and the founder’s appearance and solitary-genius image make for great media/memes. Buterin’s Russo-Ukrainian family also helps paint him as a man of the moment.
Best of all, this whole package can make you money without needing to fully understand it all! In a way, Ethereum has everything that appeals to the 21st century’s “don’t bother yourself with the details, just trust the experts” information market.
Except that, as much as our current era likes to deny it, fundamental details do still matter. Ethereum (and Buterin’s) image as wild-eyed tech experimenter has created an overly expensive “hobby platform” where any value created lives at the mercy of untested ideas and uncertain futures.
Borrowing from the best of Bitcoin… badly
Buterin’s popular child prodigy status also overlooks a few key facts. He created Ethereum from deleted Bitcoin script features, but he invented neither blockchain technology nor the concept of digital currency. Ethereum has struggled to scale because the idea of performing computational processes on-chain (as opposed to recording and verifying their results) isn’t practical.
No one is suggesting Buterin lacks intelligence. However, his comments often demonstrate he lacks the breadth of understanding and experience necessary to guide development of a working infrastructure for the digital economy. He is a frequent critic of Bitcoin (BSV) and its creator Dr. Craig S. Wright, despite the fact Wright invented a system in 2009 that does everything Ethereum has failed to do since. Resorting to random technobabble and personal attacks on Dr. Wright’s character only highlight Buterin’s inexperience and Ethereum’s technical shortcomings.
In leading the creation of Ethereum, Buterin (to put it kindly) “borrowed” ideas from the original Bitcoin Satoshi created and implemented them haphazardly.
The article does make some useful points, noting that Buterin is the “philosophical leader” of Ethereum rather than its lead developer. It points out a few of Buterin’s disturbing transhumanist tendencies. It highlights some of the problems with speculative NFT trading and greed, blockchain’s energy inefficiently, Ethereum’s attempt to be “an everything machine” and its controversial 2016 blockchain “rollback,” and that “Ethereum’s current problems stem from the fact that it has too many users.” It also notes that El Salvador’s official adoption of BTC as legal currency “has been riddled with identity theft and volatility.”
However, if one of your system’s biggest problems is having too many users, there’s probably something wrong with your system. Ethereum’s real problem here is that it can’t handle a large number of users. Ethereum (and also BTC) supporters claim they’re revolutionizing business and the world, yet neither could scale to support global adoption.
NFTs (and, a few years previous, ICOs) made Ethereum popular. But even these have caused problems due to sluggish performance, high fees, and issues of what buyers actually own. Thanks to the network’s scaling problems, Ethereum-based NFTs usually don’t contain any of a token’s actual data, meaning buyers “own” a token containing a hash pointing to its data. Since this is off-chain, it can be moved or deleted, leaving a buyer holding nothing of even speculative value.
Whose interests does Ethereum really serve?
Significantly, TIME’s article refers to the conflicts between Ethereum’s early investors/leaders who were more interested in returns and shares of Ethereum pre-mine distribution than Buterin was, with his technological curiosity and more egalitarian ideals.
Bitcoin was launched in 2009 with no value, no investors and no expectations of returns for anyone who joined in. That’s very different to a pre-mined launch where digital asset shares were foremost on early investors’ minds. It suggests ETH is in fact an unregistered security, promoted as such illegally.
TIME’s article downplays Buterin’s role in the 2016 hard fork, which saw days of blockchain records erased in order to restore millions in funds lost to himself and key investors from an exploit on The DAO project. Leaving aside the issues of trust in blockchain records, this incident highlighted that a small group of core developers could write code (and “convince” miners to implement it through social pressure) that benefited themselves and their associates. No court order forced Ethereum developers or miners to take this action. Instead, developers and “philosophical leaders” exerted control over the code and the system, benefitting some investors at the expense of others. This set a precedent that blockchain developers could act as fiduciaries, making decisions that impact investors to this day and for which they could still be held liable.
Buterin is “scornful of the dominance of coin voting” despite Ethereum switching to a proof of stake (PoS) block confirmation model. Most PoS arguments focus on lower energy consumption. This uses issues more relatable to 2022’s media talking points to mask the fact that PoS actually reduces decentralization by placing more power in the hands of “whale” asset holders. These large stakers can transfer assets in any amount in seconds, meaning no one ever knows for sure which wealthy holders are voting to enforce new decisions on the development roadmap.
As Dr. Wright and others have described in the past, PoS is neither secure nor a solution to scaling problems. He has described it instead as “equity control” and “a back-door creation of a digital bearer share.”
Bitcoin operates using a proof-of-work-based consensus mechanism that many individuals have falsely claimed to limit the ability for the system to scale. As a result, proposals based on proof of stake are misleadingly being promoted…
— Dr Craig S Wright (@Dr_CSWright) March 18, 2022
Ironically, the article mentions a “new type of NFT, based not on monetary value but on participation and identity.” This is exactly what proof-of-work is, a system at odds with Ethereum’s convoluted transition to the “coin voting” model PoS delivers.
The Ethereum Foundation represents Ethereum’s other public face. It (in its own words) “is not a company, or even a traditional non-profit. Their role is not to control or lead Ethereum.” The EF may not be the only organization funding Ethereum development, but it has handed out over US$27 million to project developers, giving them a large degree of control over what gets developed and by whom.
Tested and trusted, not radical and uncertain
Buterin is just one man, but he remains influential and public discourse today loves to spotlight individuals and their personal characteristics. He is attractive-freaky to the media in a similar way to Mark Zuckerberg and Facebook, which attract similar types of admiration and disdain.
Zuckerberg’s social network (which, it should be mentioned, he didn’t invent himself) was famous for its “move fast and break things” ethos, attracting a high user base before worrying about fixing fundamental problems.
Ethereum is like Facebook in that sense. It is also, in some ways, like NYC’s Citigroup Center—a skyscraper with a radical new design completed in 1977, but which needed extensive internal retrofitting a year later (while the building was in use) to prevent it from toppling over in high winds.
The difference is that Ethereum’s engineers still haven’t found the magic formula to keep their structure standing, creating multiple new layers and solutions over several years with a “fingers crossed” approach. Citigroup literally bolted on solutions to their building’s problem, but they were based on sound engineering principles and the structure still stands. Ethereum’s future is less certain. A shift in focus away from the exciting and new, and back to systems (like Bitcoin) that apply technology to millennia-old principles, would provide more stability.
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