EP - 5
The Future of Ethereum w/ Vlad Zamfir
with
Vlad Zamfir
researcher at the Ethereum Foundation
Jul 16, 2021
The crypto space is constantly evolving, with new applications and innovations emerging daily. To navigate this complex landscape, This Ledger podcast episode features Vlad Zamfir, a leading researcher at the Ethereum Foundation, and Jerome Dutcher, Ledger’s Global Head of Client Success and President of Ethereum France.
The episode dives deep into Ethereum’s evolution from a decentralized peer-to-peer payment system to a world computer and the significant challenge of scalability necessary to onboard the next billion users.
“Ethereum revolutionized the blockchain space by becoming a world computer and creating the so-called application layer, giving birth to dapps, DeFi, NFTs, and numerous other innovations” – Mo Sayed
Key Highlights:
Ethereum: From Peer-to-Peer Payments to a World Computer
What started as a decentralized peer-to-peer payment system has now become a world computer with thousands of applications disrupting almost every field.
Addressing Scalability: The Role of Sharding
A primary challenge for Ethereum, especially in its goal to onboard the next billion users, is scalability. The classic answer to this is sharding.
Vlad Zamfir describes sharding as a method to increase scalability by dividing a blockchain’s state and workload among different groups of nodes for parallel processing.
While current models use a central hub or beacon chain, Zamfir envisions a future hubless architecture that would require more advanced technology.
Proof of Stake vs. Proof of Work: Selecting the Next Block Creator
The episode delves into Proof of Stake (PoS) and Proof of Work (PoW), two mechanisms for selecting which node creates a new block in a blockchain network.
- Proof of Work (PoW): Miners compete in a high-power lottery, using massive computing horsepower (and electricity) to solve puzzles for the right to add the next block.
- Proof of Stake (PoS): Validators are chosen based on how much crypto they lock up (“stake”), so instead of burning electricity, you simply put ETH on the line, making PoS far more energy-efficient than PoW.
The Risk of Centralization and the Importance of Self-Custody
A significant concern with Proof of Stake is the potential for centralization, particularly if exchanges or centralized entities end up holding and staking the majority of coins.
- Vlad Zamfir’s Stance: Vlad argues strongly against this, stating that much can be done to combat centralization, including making it unlawful for exchanges to stake user funds.
- Jerome Dutcher’s View: Jerome echoes crypto’s core principle: “not your keys, not your coins”.
Depositing coins on an exchange means you’re giving up ownership; if they lose your private keys or lack proper insurance, you bear the loss. Whereas true decentralization lets anyone with a modest stake, basic technical know-how, and simple hardware run a validator and keep full custody of their assets.
EIP-1559 and the Ultrasound Money Narrative
The discussion touches upon EIP-1559, an Ethereum Improvement Proposal, which some people claim will transform Ethereum into ultrasound money capable of competing with Bitcoin.
They view EIP-1559 as turning Ethereum into ultrasound money, but Vlad dismisses the deflationary ultrasound narrative as hype and a sell-out tactic to beat Bitcoin maximalists; he stresses that 1559’s real value lies in better microeconomics for transaction fees, not any macroeconomic deflation magic.
Meanwhile, Jerome notes that bundling 1559 with other changes makes it hard to accept one upgrade without the others; and almost ensures 1559’s adoption.
Cryptoeconomics and Ethereum’s Broader Impact
Jerome Dutcher defines cryptoeconomics as a new field of research focused on designing systems where property right is enforced inside the system with certainties. He believes it opens up many new ways of automating things and constructing new places for users to interact with each other. He expresses a personal hope for the future:
“I hope I have a proper way to store a private key in my phone in 10 years.” – Jerome Dutcher
Unlike Bitcoin, where the protocol is in service of the currency, Ethereum’s currency is in the service of the protocol.
“Ethereum has a much wider mandate than Bitcoin.” – Vlad Zamfir
Ethereum’s goal is to apply blockchain and public blockchains to everything, extending beyond just markets and finance. Its culture, which embraces diverse subgroups and viewpoints, offers much more room to maneuver and adapt compared to Bitcoin.
Watch the episode here
The Future of Ethereum w/ Vlad Zamfir
Ultimate Tip for Newcomers: Focus on Understanding and Self-Custody
Both Vlad and Jerome offer essential advice for anyone venturing into the Ethereum ecosystem:
- Vlad Zamfir:
- Understand Cryptography and Private Keys: The most crucial step is to “understand cryptography and the nature of private keys and to be sure that they don’t lose access to their keys. He strongly recommends using hardware wallets to keep 12-word seed phrases safe.
- No Privacy by Default: New users should be aware that their actions on Ethereum are extremely public and transparent
- Jerome Dutcher:
- Beware of Influencers: Do not “ollow blatant influencers, as this often leads to too many FOMOs and and bad situations where people invest massively in some protocols.
- Focus on Technology, Not Speculation: Remember that behind blockchains are dedicated researchers like Vlad that dedicate their life to improving a certain type of consensus algorithm. It’s vital to look at it as a technology rather than as a social movement that’s suddenly going to burst into billions of dollars.
- Prioritize Security: Always stay safe with your coins and ensure you have reliable backups, using tools like your Ledger device.
Understanding Ethereum’s future is like trying to map out the growth of a sprawling, self-organizing city. Bitcoin might be like a tightly governed, single-purpose fortress, its strength lies in its limited scope.
Ethereum, however, is a vibrant metropolis, constantly building new districts (dApps), experimenting with new infrastructure (sharding, PoS), and facing the challenges of managing immense growth and diverse populations.
You can try to understand it by watching from afar, but to truly grasp its nature, you must walk its streets, engage with its inhabitants, and participate in its daily life, always ensuring you know where your own home (private keys) is safely located within its ever-expanding boundaries.
Reading List: