Last week, Buterin participated in a nearly two-hour long Twitter Space, taking questions from Eric Wall and Udi Wertheimer, the self-identified ‘Taproot Wizards’ who recently started completely filling individual BTC blocks with large JPEGs to test the viability of the new Ordinals protocol.
This activity was hugely controversial in the BTC space, mainly because of the protocol’s notoriously constrained transaction capacity. One side viewed Ordinals as a sorely needed expansion beyond the protocol’s limited functionality as ‘digital gold,’ while purists complained about NFT transactions delaying pure payment transactions from making it into the next blocks on the chain.
Asked by the hosts about this divide, Buterin said his own experience with Ethereum taught him that “doing things in consensus is hard … it’s a property of social systems in general.” Buterin likened it to congested city traffic woes, saying it’s easier to for a small team to create Uber than for multiple committees to figure out the best way to solve public transit.
Buterin lamented the fact that BTC has effectively merged its technical and cultural systems, resulting in “really weird politics holding it back.” Buterin believes “maximalism is crazy. Sometimes people in [BTC-land] say things that go way too extreme, crazy and factually incorrect and falsifiable six months later. I wasn’t really into being part of that.”
Buterin turned the tables on his hosts, asking what the top-five arguments would be if he were a BTC Core developer who proposed an expansion of BTC’s block-size to 32Mb. The hosts acknowledged there simply wasn’t the political will within BTC for such a step, saying “it will be the first thing people reject, just as an instinct.”
Lightning in a very small bottle with a stubborn cork
The hosts suggested there was a mindset within BTC to “fully exhaust” second-layer (L2) solutions before being forced to admit that increasing the main layer’s block-size is the only way forward. “That would be a big failure case for BTC culture.” The hosts added that BTC has effectively “tied itself to the Lightning Network mast,” with the BTC Core developers having “basically given up on main layer” tinkering.
Buterin said “the Lightning Network criticism that made the most sense to me was that it doesn’t do enough.” Citing the BTC main layer’s seven-transactions-per-second limit, Buterin said it would take 80 years to onboard the global population onto Lightning, and that’s without factoring in existing Lightning users looking to do other transactions like rebalancing.
The hosts added that “even medium-sized Lightning payments fail so frequently that they’re looking to use AI to find better ways to predict which payment routes will work and which will fail. When someone tells me they need AI to make a transaction, then I feel something architecturally is too complex.”
Ethereum has dealt with its own scaling issues—which can result in transaction fees occasionally soaring to punitive heights—by imposing an ever greater array of L2 solutions, including Plasma, various types of roll-ups and sharding, which splits Ethereum’s main layer into multiple parallel-processing chains.
Buterin suggested a similar Rube Goldberg scenario might alleviate BTC’s concerns, saying “you could stack these things on top of each other, make Lightning on top of Plasma, a system in which all three exist as payment options,” leaving it up to the system “to find automatically which one actually works.” (Nothing like trying to solve a problem by creating ever more attack vectors and potential points of failure.)
The hosts wondered if this would just be “turning BTC into Ethereum,” suggesting that this was BTC’s “plan all along: observe Ethereum, let them deal with the growth pains and if it works, we’ll write a [BTC improvement proposal] and see if it gets consensus.”
Naturally, all this public shaming of Lightning’s numerous flaws didn’t sit well with Blockstream’s Adam Back, who tweeted that “we already told [Ethereum devs] things to avoid for security/complexity … in 2014 and they ignored us and did the opposite, so I’m not sure there’s that much to learn.”
Bear in mind that this is the same Back who has insisted for years that Lightning is perennially 18 months away from reaching critical mass. Despite Lightning’s original chest-thumping about eventually surpassing Visa and Mastercard in transaction volume, it remains a transaction cul-de-sac, in part because most BTC users bought their tokens as ‘digital gold,’ not the peer-to-peer electronic cash described in Bitcoin’s 2008 white paper.
Still, Lightning’s recent adoption by the compliance-averse Binance exchange will no doubt boost transaction volume, although the purpose of those transactions will likely be exposed as criminal/fraudulent once the U.S. Department of Justice completes its ongoing probe of Binance’s shady dealings.
Proof of crime
Keeping law enforcement in the dark re blockchain transactions was a key plank of Tornado Cash, Ethereum’s primary ‘mixing service’ that allowed users to obfuscate the origin of ETH tokens. The service was blacklisted last August by the U.S. Treasury Department, citing its use in aiding North Korea’s nuclear weapons program and its developers’ alleged ties to Russian security services.
Well and Wertheimer suggested that both BTC and Ethereum were “very far today from achieving base-layer privacy” for users, although they fingered Ethereum as even less private, because of the network’s embrace of smart contracts.
Buterin admitted that other blockchains have far greater privacy benefits but these chains’ tokens “end up getting delisted from exchanges” under pressure from financial watchdogs. Buterin somewhat grandiosely suggested that both BTC and Ethereum are “too big to fail. We have weight and so we shouldn’t be afraid to throw that weight around to protect people’s privacy.”
However, Buterin acknowledged that, despite the chains’ alleged ‘weight,’ achieving this goal would be “a tough political game, man.” He longed for a world in which governments and regulators “don’t ban the money, [instead] ban the things the money is being used for,” although he admitted that this cryptopian fantasy was a “very unrealistic longshot.”
Buterin offered a potential workaround that would permit coin-mixers to continue operating via a concept he called ‘proof of innocence.’ The general idea is that coins you funnel into a mixer could be distinguished from crime-connected coins by a “central party” who would be tasked with flagging coins/wallets of dubious character. This would “exclude large classes of bad people but still give backdoor-free actual privacy for everyone else.”
Buterin suggested Chainalysis and MetaMask as potentially filling these centralized coin-flagging roles, notably dodging any responsibility for the Ethereum Foundation. That’s a significant departure from 2016, when Buterin and the other major Ethereum developers intervened to hard-fork the network following the infamous hack of a decentralized (in name only) autonomous organization.
Nonetheless, Buterin bristled at the notion that Ethereum was considered “the intervention chain,” pointing out that other chains have occasionally taken steps to freeze or recover lost or stolen tokens.
Buterin further qualified his commitment to justice by noting that it would be up to chain users to decide whether or not they wanted to implement this ‘proof of innocence,’ and that there would be no “entrenched rules or authorities” on which to rely in times of need. Unless, of course, it’s the Foundation devs’ coins that are in need of rescue.
Things change quickly
The discussion wrapped with Buterin claiming that BTC’s Ordinals flirtation was “starting to bring back a culture of actually doing things … some kind of organic return to builder culture” that was a “real pushback to the laser-eye movement.”
Okay, but the BTC fundamentalists have fiercely resisted nearly every proposal to expand their one true faith beyond its current function-free ‘store of value’ state and there’s no guarantee that Ordinals will be able to shift that dial. And Buterin suggested there was “value” in BTC “making choices different from Ethereum so the two aren’t taken down by the same thing.”
That is, unless that ‘thing’ is regulatory authorities publicly acknowledging that both BTC and ETH are unregistered securities. The fact that current legal actions against U.S.-facing exchanges like Coinbase (NASDAQ: COIN) and Binance.US have yet to cite BTC or ETH as securities doesn’t rule out the possibility that more actions are in the pipeline.
As Buterin himself put it while describing the pace of change in the digital asset space, “things change quickly.” And depending on where you’re sitting, not always for the better.
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