|Ethereum Mining 7th Nov 21
Buterin has watched the world he created evolve with a mixture of pride and dread. Ethereum has made a handful of white men unfathomably rich, pumped pollutants into the air, and emerged as a vehicle for tax evasion, money laundering, and mind-boggling scams. “Crypto itself has a lot of dystopian potential if implemented wrong,” the Russian-born Canadian explains the morning after the party in an 80-minute interview in his hotel room.The quote “Crypto itself has a lot of dystopian potential if implemented wrong” reveals two of Buterin's delusions. First, the idea that the dystopian effects of cryptocurrencies are a future potential, not a current reality. And second, that the dystopian effects are merely a symptom of improper implementation, rather than fundamental attributes.
Chow reports Buterin's ideas for cryptocurrencies implemented right:
Buterin hopes Ethereum will become the launchpad for all sorts of sociopolitical experimentation: fairer voting systems, urban planning, universal basic income, public-works projects. Above all, he wants the platform to be a counterweight to authoritarian governments and to upend Silicon Valley’s stranglehold over our digital lives. But he acknowledges that his vision for the transformative power of Ethereum is at risk of being overtaken by greed.Again, this ignores the realities. These utopian dreams fuel the gaslighting that covers up the real-life casino and "wretched hive of scum and villany" that cryptocurrencies have become. The idea that, at some time in the future, the Ethereum ecosystem is "at risk of being overtaken by greed" is laughable to everyone outside the cult. And, in particular, Buterin ignores the fact that the big winners from the explosion of Ethereum-based applications are Silicon Valley VCs such as Andreesen Horowitz. How does Buterin plan to mitigate the effects of greed?:
he has reluctantly begun to take on a bigger public role in shaping its future. “If we don’t exercise our voice, the only things that get built are the things that are immediately profitable,” he says, ... “And those are often far from what’s actually the best for the world.”Even if "we" do "exercise our voice", it will be drowned out by the billions of dollars A16Z and the other Silicon Valley VCs are deluging the ecosystem with. They aren't doing that for anything that isn't "immediately profitable".
It isn't as though Buterin doesn't see that Ethereum has real problems right now:
Buterin didn’t predict the rise of NFTs, and has watched the phenomenon with a mixture of interest and anxiety. ... their volume has overwhelmed the network, leading to a steep rise in congestion fees, in which, for instance, bidders trying to secure a rare NFT pay hundreds of dollars extra to make sure their transactions are expedited.
The fees have undermined some of Buterin’s favorite projects on the blockchain. Take Proof of Humanity, which awards a universal basic income—currently about $40 per month—to anyone who signs up. Depending on the week, the network’s congestion fees can make pulling money out of your wallet to pay for basic needs prohibitively expensive. “With fees being the way they are today,” Buterin says, “it really gets to the point where the financial derivatives and the gambley stuff start pricing out some of the cool stuff.”
I give Buterin and the Ethereum team much credit for their well-intentioned and careful effort to replace Proof-of-Work with Proof-of-Stake:
The EF research team is also working on two crucial technical updates. The first is known as the “merge,” which converts Ethereum from Proof of Work, a form of blockchain verification, to Proof of Stake, which the EF says will reduce Ethereum’s energy usage by more than 99% and make the network more secure. Buterin has been stumping for Proof of Stake since Ethereum’s founding, but repeated delays have turned implementation into a Waiting for Godot–style drama. At ETHDenver, the EF researcher Danny Ryan declared that the merge would happen within the next six months, unless “something insanely catastrophic” happens. The same day, Buterin encouraged companies worried about the environmental impact to delay using Ethereum until the merge is completed—even if it “gets delayed until 2025.”But Chow quotes Buterin as being:
scornful of the dominance of coin voting, a voting process for DAOs that Buterin feels is just a new version of plutocracy, one in which wealthy venture capitalists can make self-interested decisions with little resistance. “It’s become a de facto standard, which is a dystopia I’ve been seeing unfolding over the last few years,” he says.The difficulty here is that the extreme Gini coefficients of cryptocurrencies mean that Proof-of-Stake has the same problem that coin voting does. In 2017's The Meaning of Decentralization Buterin identified one of the risks of decentralization as:
In a proof of stake blockchain, 70% of the coins at stake are held at one exchange.This was prophetic, as three years later Justin Sun conspired with three exchanges, staking their customers coins to take over the Steem Proof-of-Stake blockchain. Exchanges such as Coinbase and services such as Figment stake on their customer's behalf, raising the possibility of similar attacks.
To Buterin, the worst-case scenario for the future of crypto is that blockchain technology ends up concentrated in the hands of dictatorial governments. He is unhappy with El Salvador’s rollout of Bitcoin as legal tender, which has been riddled with identity theft and volatility. The prospect of governments using the technology to crack down on dissent is one reason Buterin is adamant about crypto remaining decentralized. He sees the technology as the most powerful equalizer to surveillance technology deployed by governments (like China’s) and powerful companies (like Meta) alike.And:
The potential for centralized digital technology to reduce the costs of shutting down groups of people you find annoying is definitely very real. I do think crypto has a very important place in its ability to be a system without intermediaries. And being without intermediaries makes it harder to kind of like quietly shut people down without checks and balances.Good luck with "remaining decentralized" and "without intermediaries"! Even if cryptocurrencies were actually decentralized, that wouldn't stop governments cracking down on dissent. China has effectively made cryptocurrencies illegal behind the Great Firewall, except for their nascent central bank's version (a wonderful tool for social control). The February 8th arrest of Ilya Lichtenstein and Heather Morgan shows how effectively law enforcement can exploit the inevitable vulnerabilities in cryptocurrency networks and intermediaries to track activity of which they disapprove.
Buterin shares some of Molly White's concerns about the potential for abuse:
But at the same time, crypto itself has a lot of dystopian potential if implemented wrong. One of the big risks is the total lack of privacy, if we get into an equilibrium where using crypto in privacy-preserving ways automatically flags you as suspicious. We would end up having much more visibility into people’s actions than before, and it’s not just governments: you could have internet mobs or journalists with that visibility.It Isn't About The Technology being implemented wrong. These problems arise from the fundamental attributes that advocates like Buterin, and many less thoughtful, prize:
The defense is to ensure that the reward for a successful Sybil attack is less than the cost of mounting it. Thus participation in a permissionless blockchain must be expensive, meaning miners must be reimbursed for their costly efforts. There is no central authority capable of collecting funds from users and distributing them to the miners in proportion to these efforts. Thus miners' reimbursement must be generated organically by the blockchain itself; a permissionless blockchain needs a cryptocurrency to be secure.This ensures that the dominant factor driving the evolution of a cryptocurrency and its underlying blockchain will be economics, not technology.
Because miners' opex and capex costs cannot be paid in the blockchain's cryptocurrency, exchanges are required to enable the rewards for mining to be converted into fiat currency to pay these costs. Someone needs to be on the other side of these sell orders. The only reason to be on the buy side of these orders is the belief that "number go up". Thus the exchanges need to attract speculators in order to perform their function.
Thus a permissionless blockchain requires a cryptocurrency to function, and this cryptocurrency requires speculation to function.