Episode 1

Is Crypto Here for Good?

Ethereum and its ilk are imagining a new future based on decentralization, but is that good?

By Zack Guzman

November 7, 2022


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For almost all of history, philosophers and inventors have promised better alternatives to the worn-out status quo.

Tired of tyrants? Try democracy. Fed up with riding horses? Check out this automobile. Even as evidenced by more recent innovation like the iPhone, it's never just about selling the world on a better product — it's about selling the world on a better idea.

For Steve Jobs taking on BlackBerry, it was all about selling the idea of what a phone could be. Apple didn't launch the iPhone with the App store already chock-full of all our favorites today, but instead unleashed the power of its product by attracting some of the world's best developers to build on top of it.

In a way, that's exactly what Ethereum has set out to do in building crypto's utopia: The idea of what a decentralized society could be.

Following in the footsteps of Bitcoin, Ethereum was created in 2015 as a more programable blockchain by a then-teenager named Vitalik Buterin and a team of co-founders. It was faster and gave developers more tools to use than what was available with Bitcoin. And yet, at its core, a lot of Ethereum's same tenets of immutability, decentralization, and the creation of a native token to powers transactions on its network looked almost exactly the same.

As Bitcoin slowly became seen as "decentralized money," Ethereum set itself up to become "decentralized ... everything else." And over the last few years, some of the most promising crypto projects have been built atop it — all requiring Ethereum's native token, ETH, to power them.

By almost every metric, Ethereum's community is in a league of its own. The project has also somehow managed to straddle the pros and cons of being decentralized enough while still also having its community work together to be sufficiently efficient at shipping network upgrades. Case in point: After more than a few delays, Ethereum finally shifted from the electricity-heavy proof-of-work consensus method to proof-of-stake to secure its network. The so-called "Merge" upgrade dropped Ethereum's energy consumption by 99.95%, according to the Ethereum Foundation.

For those in the ecosystem, the Merge was another piece of proof that Ethereum can continue to improve itself as a "decentralized computer."

"Ethereum has a very ambitious roadmap and it needs to demonstrate as an ecosystem that it can continue to ship," says Matt Cutler, the CEO of Blocknative, a company improving data around blockchain transactions. "The Ethereum ecosystem proved it can ship and betting against its ability to not achieve its objectives is not a great bet."

Matt Cutler, the CEO of Blocknative, joins Coinage to discuss Ethereum's ethos of decentralization and what makes it so commonly emulated by the rest of crypto.
Matt Cutler, the CEO of Blocknative, joins Coinage to discuss Ethereum's ethos of decentralization and what makes it so commonly emulated by the rest of crypto.

And as much as Vitalik Buterin and other Ethereum figureheads have managed to champion some of those upgrades on the roadmap, anyone in the ecosystem is also able to make propositions of their own.

"He is literally just another voice," Cutler tells Coinage. "And so while a prominent voice, he doesn't have any sort of power over the network which is not commensurate with anybody else."

If there is something from Ethereum's young history that might prove that to be true, it could be the way it handled the infamous DAO hack. The DAO was set up in 2017 to function as something akin to a decentralized venture fund. But as it amassed nearly 15% of all ether at the time, a hacker swooped in to start draining it. The community then faced a choice: "Undo" the hack and wipe it from history, or just move on. In the end, the community chose the former and in doing so, violated the idea that all transactions on-chain are immutable. It might seem nuanced, but that was a huge deal. If people could vote to change transactions, then you can see very quickly how the whole experiment falls apart.

"I think one of the things that the Ethereum ecosystem has demonstrated repeatedly over time is a bias towards pragmatism and a bias towards basically outcomes that are in-line ... with what the ecosystem thinks is within its long-term best interests or its health," Cutler said.

Of course, with Ethereum's shift to proof-of-stake, some have voiced concerns that some of the larger validators might come to mount outsized influences of the network. In fact, earlier this year a majority of staked ETH was controlled by just a few power players. Cutler refutes some of those concerns by noting that even large entities with staked ETH aren't monoliths. Liquid staking pool Lido, for example, is controlled by a number of smaller pieces and wouldn't act unilaterally, he says.

As Ethereum grapples with its own commitments to decentralization as a foundation of its ethos, it's also battling with other projects that have made different tradeoffs to move quicker. As Coinage has documented, so-called "Ethereum-Killers" have sprouted up in recent years to offer completely separate tech for developers. One often-cited critique of those "Ethereum-Killers" is that they aren't as decentralized. But, by making that tradeoff, they can often move quicker with tech upgrades. As Cutler sees it, technology is one thing. But when it comes to building network effects, it's not the only thing.

"That's one of the fun parts of technology is in the early days of any ecosystem ... there is a competitive race that happens and it can be difficult or challenging to pick winners or losers," he said. "The thing I pay attention to more than anything, and I would encourage anyone out there too, is watch the developers just just watch where the developers are and researchers as well, particularly from academia, because they're the ones that determine what gets built."

So far, Ethereum has established itself as the leader in crypto with one of the most robust research and developer communities. Perhaps with so much attention put on "the next Bitcoin," or "the next Ethereum-Killer" it's worth remembering what almost all of crypto is itself trying to kill: Centralized power.

If there is any utopia that crypto unlocks, it's a world where there is no such thing as a centralized authority running things. In the end, the ethos of decentralization is guiding most of what's built in the space writ large, and often the thread between all of crypto's projects.

"History shows that over a long enough time horizon, you'll have someone incompetent or someone corrupt in that central position and a small set of actors can then implement changes or policies that affect many, many people and their economic reality," Cutler says. "And so at the end of the day, if you want a society which is truly free, you need a society which is free largely of centralized control that can exert undue forces and pressures on people's individual liberty."

Coinage is a community-owned show answering crypto's biggest questions. You can apply to co-own the show with us, and weigh in on what we're building at Coinage.Media/join.