Ethereum co-founder Vitalik Buterin discussed developments across the wider Ethereum ecosystem in a Q&A today at the Ethereal conference.
Talking with Ejaaz Ahamadeen, lead token architect at Digital Assets, a part of the Brooklyn incubator ConsenSys (which also funds Decrypt), Buterin discussed the big gains made by privacy tools in recent weeks, the potential of decentralized finance (DeFi) and the roadmap of Ethereum 2.0.
Focusing on phase zero, Ethereum 2.0’s first stage of development, he said everything was “finalized except for things that come up during the security audits. The clients are now talking to each other. The next step is to make sure they can maintain a public network at scale.”
The process he was referring to, dubbed Eth2Beaucoup, involves seven Ethereum 2.0 clients (versions of the upcoming blockchain platform upgrade) linking up and running in sync with each other. It’s regarded as a significant milestone in this phase of Ethereum’s development.
“The next step is to make sure they can maintain a public network at scale. We’re talking about potentially hundreds of thousands of validators aggregating a huge number of transactions,” Buterin said.
The conversation also touched upon the rewards given to validators—those who are willing to have a large amount of Ethereum locked up in smart contracts) to help validate transactions on the network. Critics have said the rewards on Ethereum 2.0 will be too low to incentivize validators to keep the network running.
“There have been a lot of misconceptions there. There are people throwing around the 1 percent statistic. In reality, the maximum reward is 1.7 percent per year, only in the case where literally everyone is staking. In the case that a smaller number of validators are staking, the rewards go up a bit,” Buterin said.
Buterin was referring to the interest validators earn on their staked ether. The interest rate is linked to how many validators there are on the network. If everyone becomes a validator, each person will receive 1.7 percent interest on their holdings. But if only one percent of the network are validators, the interest rate for those validators goes up to 17 percent. But Buterin added that the specific numbers are still under discussion.
Better privacy on the blockchain
When asked about recent developments on privacy technology (specifically zero-knowledge proofs, used by privacy coin Zcash, and others), he said, “Zk-SNARKs in general have really made a huge leap of progress over the last three weeks, in a way a lot of people aren’t realizing.”
He pointed to Plonk, a new way to create zero-knowledge proofs, set to be rolled out by Aztec Protocol—a ConsenSys-backed project focused on bringing privacy to Ethereum—in October. The concept reduces the complexity of creating a zero-knowledge proof, making it more accessible to more people. “This means it’s really easy for thousands of people to participate,” he said.
The promise of DeFi
Unsurprisingly, Buterin was enthusiastic about the emerging world of decentralized finance, largely being built on Ethereum.
“I’m very excited about the potential DeFi offers in principle. The idea that just anyone, anywhere in the world, can have access to a system that lets them pay each other, and choose their own financial exposure, is a really powerful thing. It’s something that a lot of people don’t have access to,” he said.
He went on to suggest that DeFi could offer a way of preventing blockchain founders from raising a ton of money and disappearing. “Public interest projects” where users stake a portion of their coins, use the interest generated of the staked coins to raise funds that could be used to build projects. It’s like a DeF-ICO.
The crucial difference here is that the projects receive a smaller, constant flow of money (from the interest generated) that is dependent on the project’s continuing success–as opposed to a huge sum of money upfront. If a project starts to look a bit scammy, investors can withdraw their money, and funding slows to a trickle.
“It’s not about maximizing returns for yourself. It’s about taking the returns and pumping the returns into a project that you support,” he said, adding, “This could really mitigate a lot of concerns of fraud we’ve had in the ICO space.”
But Buterin was quick to point out DeFi’s growing pains: Explicit centralized backdoors and oracles.
Centralized back doors are when a centralized party has complete control over everything happening on a decentralized application—as was recently found with Compound. Oracles, meanwhile, are the way in which blockchains access real-world data.
“The decentralization isn’t going to do much if the oracle is being set by one guy, who can set the price what he wants, liquidate and front run everyone, and steal a bunch of money that way,” he said.
But he added that good progress is happening on finding decentralized oracles. (Many projects are integrating Chainlink while Compound is building its own decentralized oracle, too.
Ahamadeen closed out proceedings by asking Buterin about his love of World of Warcraft. On Buterin’s own webpage, he speaks about his love of the game, before Blizzard Entertainment—the game’s developers—changed some of the settings of one of his characters. “I cried myself to sleep and on that day I realized what horrors centralized services can bring.”
Last month, developers released an original version of the game, World of Warcraft Classic, that rolled back 15 years of updates–a bit like Ethereum Classic. Ahamadeen asked whether Buterin would go back to his first love now that things had gone back to how they were.
Buterin replied, “If World of Warcraft moves onto Ethereum, I’ll consider it.”