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What Excites Vitalik the most in Ethereum ecosystem?
Vitalik Buterin, the founder of Ethereum released a blog post on the 5th of December wherein he gave insights on what excites him in the Ethereum ecosystem.
Vitalik addressed the FTX collapse situation and reiterated the fact that due to the collapse of the exchange various users have been sensitised towards the advantages of decentralisation.
Concerning the crash, he highlighted the importance of choosing the correct style of governance.
The article’s focus primarily revolves around five areas ie. Money, DeFi, Digital identity, Decentralised Autonomous Organization (DAO) and Hybrid applications.
Vitalik has always been in the favour of digital identity but the primary focus should not rest on unifying various identity processes based on blockchain into a single platform. Instead, we should concentrate on the function of interoperability across various projects. He described various ongoing projects related to digital identity such as.
Ethereum Name Service (ENS)
ENS helps a user craft a legible, readable name for his Ethereum address. To retain the name the user has to pay a fixed amount of money
Sign in with Ethereum (SIWE)
SIWE helps a user to utilise his Ethereum address as a means for logging into any website. It helps the user to log on to the website while protecting his user information.
Talking about digital identity he highlighted the fact that the primary issue associated with decentralised identity revolves around user privacy. To maintain on-chain privacy he talked about the development of ZK-SNARKS.
Vitalik talks about the bifurcation between decentralised implementation and a governance structure which is decentralised. While focusing on implementation talks about user participation concerning voting for decisions. The latter aspect focuses on decentralised platforms. He further elaborates how a balance is required between these two aspects because improving decentralised implementation might hamper the overall progress of the entire project. Therefore a balance should be achieved between both aspects based on the nature of the project.
Concerning money Vitalik described his visit to a cafe in Argentina wherein he paid for his order with the help of Ethereum through a digital QR code connected to the owner’s Binance deposit address.
Further, he described the entire process to lack pragmatism because the transactions occurred when Ethereum used a Proof of Work model which resulted in heavy transaction fees and slow movement of funds. He further reiterated the fact that after the Merge the entire process requires low transaction fees and occurs swiftly.
He also talked about stablecoins turning into a new payment method which have paired various digital processes with privacy as good as cash. But these stablecoins which possess a centralised mechanism cannot turn into a long-standing alternative. Instead, various risk-weighted asset (RWA) based stablecoins which are controlled by a DAO can be considered as a proper alternative.
While talking about Defi, Vitalik mentioned the fact that the entire industry had turned into an overcapitalised financial vehicle which would rely on various forms of yield farming which would prove to be unsustainable. However, he said that currently, the industry is in the process of slowing down and has started accepting various mechanisms required to turn it into a stable entity. To stabilize itself Defi has started focusing on improving security and prioritising various applications that possess inherent value.
He mentioned the fact that flashy Defi processes which focus on providing users with heavy interest rates which are beyond the scope of the market are risky ventures which are either temporary arbitrage mechanisms or possess unwanted risks.
Discussing the hybrid mechanism Vitalik talked about the possibilities of developing Ethereum by including voting which is technically an off-chain process. He further described the process whereby the votes which would be encrypted in nature with the help of ZK-SNARK-based solutions would be included in the blockchain process.
Apart from that, Vitalik highlighted the fact his primary priority is focusing on long-term based value projects instead of running behind short-term profits. He described the fact that people tend to ignore projects with higher stability because they are stereotypically considered boring. Re-establishing the fact, he said that while the total market cap of LUNA went beyond $30 Billion. various stablecoins in the ecosystem with robust mechanisms and simple processes were continuously ignored.