Ethereum has the power of Layer-0, but…


Paul Brody, EY Global Blockchain Leader, recently shared an article about Ethereum. According to him, the infrastructure that supported document inspections in the past included a network of night flights and served as a night data processing center for the banking industry. But today, all of that has disappeared, replaced by more sophisticated digital image processing systems, and almost all transactions rely on digitization.

Paul Brody – Global Blockchain Leader, EY

Paul Brody, EY Global Blockchain Leader

Talking about Ethereum, he said that the cryptocurrency will definitely become not only a global standard but also a solid standard for global financial and business infrastructure. However, the future is not yet in that good shape, so Brodie also lays out three risks we need to avoid in order to create significant opportunities for new alternatives.

avoid centralization

The most important and urgent path for Ethereum is to avoid over-centralization. The entire value proposition of blockchain technology is based on decentralization. For those who are politically inclined, they see this as a protest. For business people, this provides antitrust protection. We live in a world with a monopoly on mining technology that we no longer need.

The risk that the current staking system brings to Ethereum is a good example. Anything, no matter how well-intentioned, can inadvertently become a point of failure if it grows too much and becomes a factor that disrupts the balance of an ecosystem in many ways. Systems such as quadratic voting can and should be used to prevent any one individual from achieving excessive ecosystem control and domination.

The risks associated with over-decentralization are smaller, but still present. Ecosystems without large organizations or high-profile individuals may struggle to find leaders or fall prey to lobbying for constructive change.

avoid idealism

Ethereum is ideologically redundant. In its glory days, the Internet was considered by many to be the perfect tool to democratize business and personal activities. However, this goal was extinguished. Governments and large corporations create significant exceptions, establish monopolies, filter content, and promote online content. Idealists might view this as a complete failure, but in reality it was only a partial success.

There is also a major risk that as regulators and governments crack down on illegal securities sales and money laundering in the cryptocurrency ecosystem, idealists will resist any legal proceedings or efforts to combat illegal securities sales and money laundering in the cryptocurrency ecosystem. limit. The result sounds like a win, but it will make it harder for businesses, the public sector, charities and public banks to adopt Ethereum.

If Ethereum were taken over by idealists, we would definitely have a world based on centralized, state-controlled blockchains rather than global public blockchains. The internet we have today is far from the borderless global ecosystem of free speech and free enterprise we once hoped for, but everyone must use it every day on a private or government network that is heavily regulated. The same thing happened with Ethereum.

Avoid technical calcification

The final risk for Ethereum is technological calcification – stagnation and no development. Ethereum doesn’t have to be a vibrant tech startup, but it doesn’t have to stop either. The criterion for winning technology is not necessarily the best technology, but technology that continues to improve and evolve.

So while Ethereum (and technology standards like desktop operating systems) are not necessarily the best, they cannot stand still. The technical standards that survive are the ones that are adaptable, not necessarily fast, but adaptable.

The cool features introduced by today’s beginners are finally integrated into the core platform. Ethereum, for example, wasn’t a pioneer in the Proof-of-Work (PoW) algorithm, nor did it get there quickly, but it eventually did. Without continuous improvements, current standards from TCP/IP to IBM mainframes are unlikely to remain dominant for long.

Ethereum has been successful in all of these tests so far, and no failures of any kind are predicted; the above simply emphasizes guarding against risks. In fact, the potential power of Ethereum is very similar to the power of the Internet. This is what people call Layer-0 power: social networking as the foundation of technology. Time and time again, individuals within the Ethereum ecosystem come across as the perfect combination of visionary, intelligent, and rational.

To win, Ethereum must continue to carve a path through these minefields. Adaptable, open-minded, rational people are more important than any technology or strategy.

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