Undoubtedly the Merge will be a defining moment in the history of blockchain, and Vitalik Buterin could be nothing else but happy that his network pulled off such a massive upgrade successfully.
Transitioning Ethereum’s core mechanism from a Proof-of-Work to a Proof-of-Stake protocol without causing downtimes in the network is a huge achievement. Ethereum’s developers engaged in around two years of testing to maintain the network that houses crypto exchanges, non-fungible tokens, and several other decentralised applications running while switching its core. Crypto specialists compared the process to changing a car’s gas engine for an electric one while driving it on the highway.
Vitalik Buterin, the spiritual leader and visionary of Ethereum, included all the steps the blockchain will go through in its original White Paper, including the Merge. By transitioning the entire network to a Proof-of-Stake consensus, Buterin reduced the blockchain’s carbon footprint by 99,9% and boosted its security. The event directly affected the altcoin’s value, as one could easily see in Ethereum price chart, and it’s expected to have a long-time influence on its evolution.
However, the Merge isn’t the only thing that excites Buterin about Ethereum. He revealed that features like the network’s decentralisation, identity, stablecoins and financial resources bring him the greatest gratification. According to Buterin, there’s little left unexplored when it comes to the network’s potential, which has triggered a change in perspective for him because he is no longer excited for Ethereum’s undiscovered potential but rather for its unique use cases that are getting stronger by the day.
Decentralisation
When decentralised finance was first launched on the market, it had limited use. But as more people recognised its potential, it became an overcapitalised monster that took advantage of unsustainable yield farming methods.
Vitalik Buterin observed that the DeFi sector has started to migrate towards a stable era, focusing on improved security and bringing forward a series of valuable applications. He states that while decentralised stablecoins will remain the primary DeFi product, others could also serve the public.
According to Ethereum’s leader, prediction markets have the potential to grow at a slow but steady pace without triggering extreme revenue but benefiting the market. The formula behind stablecoins can serve real-world assets like real estate and stock indices. DeFi products can function as layers between the assets housed on-chain that people want to trade.
Identity
When we discuss Ethereum’s identity, we refer to a series of elements, such as its name, attestations, basic authentication, and proof of parenthood. Buterin stated that it’s hardly achievable to develop a centralised platform that could feature all these elements from scratch. He believes that an organic approach that includes multiple individual projects designed for completing particular tasks has greater success chances.
But it’s crucial to increase their interoperability over time to meet the final goal. Buterin argued that this is what happened with Ethereum and offered examples like the soulbound tokens, proof of attendance protocols, Sign In With Ethereum, Ethereum Name Service, and Proof of Humanity. All these applications have individual uses, but they achieve greater power when they come together.
However, interoperability comes with some issues like scaling, which can be handled through validiums and rollups, according to Buterin. He believes that a future challenge for Ethereum’s ecosystem is its privacy – each application requires individual attention.
Stablecoins
Stablecoins were created due to digital currencies’ high volatility and are popular among pragmatic investors. Buterin stated that the present reality doesn’t align with the present cypherpunk because the most successful stablecoins are the centralised ones like BUSD, USDT, and USDC.
He believes that we should split stablecoins into three categories:
- Governance-minimised crypto-baked tokens
- DAO-governed real-world-asset backed tokens
- Centralised digital currencies
Vitalik Buterin thinks that DAO-governed stablecoins could perform well if developers make them work well because they are a combination of scalability, censorship resistance, robustness, and economic practicality.
DAOs
When talking about Ethereum’s features, Buterin wanted to highlight the meaning of the word decentralised, which is often used to refer to structures that depend on the decisions a large group of users take or structures developed on decentralised networks like a blockchain and aren’t dependent on a state or nation legal system.
Buterin presented three theories of decentralisation.
Decentralisation for robustness
If a stablecoin lacks governance safeguard, someone can buy half of the available tokens and use it to manipulate its price. A decentralised stablecoin requires innovation in decentralised governance to prevent this issue.
Decentralisation for efficiency
According to Buterin, decentralised implementation is valuable because it’s more cost-effective and efficient than conventional legal-system-based tools. This kind of decentralisation maintains the ability to pivot and act efficiently when required.
Decentralisation for interoperability
Ethereum’s developer highlighted that it’s safer and easier for blockchain things to interact with other blockchain elements than to engage with systems outside the network – which would require the presence of a bridge layer that could pose security issues.
Hybrid apps
Hybrid applications that collaborate with blockchain technology and other systems to improve trust models are found in supply chain management, games, corporate accounting, and government registries. Buterin recognised that Ethereum deals with some challenges like unsafe wallets, scalability, and long transaction times.
He believes decentralised solutions like Rollup technology, account abstraction wallets, ERC-4337, and holding funds could boost scalability.
Vitalik Buterin promotes a stealth address system to improve Ethereum’s privacy
As mentioned earlier, Buterin is aware the blockchain is struggling with some privacy issues, and he promotes the stealth address system as a solution that could simplify and improve the workflow for boosting privacy. In a blog post, he presented stealth addresses as privacy solutions that create new addresses for every transaction a user completes.
Buterin proposes a system that includes wallets that create stealth meta-addresses that allow people to receive funds using a secret spending key that only the receiver can access. The receiver can share it with the sender, who needs to provide an ephemeral pubkey for the receiver to verify the address’ ownership.
The Ethereum creator admits that the blockchain still deals with some issues, but he’s excited about the features that differentiate it from the other networks.
