We are in an unprecedented time of social, political and economic turmoil. As the decentralized financial infrastructure, worth billions of dollars and building thousands of businesses, grows, we need to recognize the instability around us. The systems, protocols, and incentives we are in place now may be less prone to censorship, transgressions of government, and misinformation.
The design of Ethereum 2.0 has a number of attractive features that make it exceptionally well positioned to work reliably through the troubled waters as a neutral infrastructure rather than a biased platform. Individuals, companies and governments can rest assured that Ethereum 2.0 will continue to function even in the event of attacks at the individual or state level. It is a solid foundation for building an economic and financial infrastructure.
Connected: Ethereum 2.0: Less is more … and more is coming
The characteristics of Eth2 are particularly relevant when viewed in a broader socio-economic context:
- Governance through broad consensus.
- Robust and performant in view of the censorship.
- Reliable money for the decentralized economy.
- Enables and enables self-sovereignty.
Eth2 is credibly neutral
Vitalik Buterin, co-founder of Ethereum, wrote a compelling post suggesting credible neutrality, or “a fundamental effort to be fair,” which should be a guiding principle when drafting the protocol:
“Note that not only is neutrality required here, but also credible neutrality. That is, it is not enough if a mechanism is not designed to favor certain people or results over others. It is also vital that a mechanism can convince a large and diverse group of people that the mechanism is making at least these basic efforts to be fair. “
He continues: “Mechanisms like blockchains, political systems and social media are designed to facilitate collaboration between large and diverse groups of people. In order for a mechanism to actually serve as this kind of common substrate, every participant must be able to see that the mechanism is fair, and every participant must be able to see that everyone else can see that the mechanism is fair because everyone involved is safe want everyone else not to give up the mechanism the next day. “
If there is one thing today that people (at least in the US) tend to agree on, it is that “the economic system wrongly favors the powerful”. To avoid this fate and remain credibly neutral, Eth2 is following in Ethereum’s footsteps and avoiding chain governance in favor of technical governance through rough consensus.
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This design decision has two nice features:
- Eth2 has a broad consensus (general agreement, not a simple majority rule) and a lack of on-chain governance (rejection of the plutocratic rule). This makes it difficult to capture Eth2 governance. By nature, it is much more difficult for companies to force Eth2 to favor or censor others.
- Keeping the community together is one of the top priorities of any broad consensus. A rough consensus largely avoids controversial or controversial changes whenever possible as it is difficult to find a rough consensus on them. This leaves the decision-making space of a rough consensus on mostly technical issues that are based on fact and logic and try to minimize controversy.
A rough consensus does not only apply to the core developers or is decided by them, but to the entire community. There have been many times in Ethereum’s history where the community has commented on important issues to influence the direction of Ethereum. Programmatic Proof-of-Work (ProgPoW) is the most recent example: core developers achieved broad consensus on implementation, but the community did not, so it was not implemented.
In an increasingly polarized world, Eth2 cannot favor or disadvantage any individual, entity or group as there is absolutely no mechanism by which it can do this.
Eth2 is robust and high-performance against censorship
Cypherpunks have always been concerned about government censorship, but recent evidence has shown that censorship can also come from individuals, companies and institutions. Eth2 is starting to underpin an entire parallel financial system, making it more important than ever that Eth2 stay viable in the face of these types of attacks.
Most importantly, Eth2 prioritizes liveliness over correctness. Ethereum 2.0 researcher and technology developer Carl Beekhuizen explained how Eth2 can continue to produce blocks even if there is a massive disruption that takes a large number of validators offline and prevents the network from becoming final. This robustness enables key business functions to continue working with Eth2 despite massive network disruptions.
Robustness is also why it is so important that the Eth2 design is incredibly forgiving of downtime. Brief uncorrelated downtime (minutes or even days) has relatively little impact on the rewards. Validators can change setups or trustfully migrate their nodes in the event of deplatforming, service interruptions, or attacks.
In Eth2, validators are anonymous by default with no delegation. When someone tries to censor, they find it difficult to force a sufficient number of globally distributed and mostly anonymous validators to carry out their will over a longer period of time.
Eth2 is reliable money for the decentralized economy
In a time of irresponsible money pressures and rampant wealth inflation, experts disagree on how best to protect yourself and where to invest your savings. The Federal Reserve has repeatedly stated that “the Federal Reserve has an infinite amount of cash” and that it can digitally print at will, leading many to question the long-term viability of the dollar and the safety of their savings.
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Ether (ETH) promotes participation in the Ethereum through mining bonuses. It also serves as the underlying asset for the decentralized economy built on top of Ethereum by acting as a base trading pair, loan collateral, and more.
The design of Eth2 builds on the monetary properties of ETH and extends them in two ways:
- Eth2’s inflation rate is expected to be below 1%, one of the lowest inflation rates of any protocol and much lower than the dollar.
- EIP-1559 (which will likely be active before the transition to Eth2 on Ethereum) will make ETH scarcer and therefore potentially more valuable as Eth2 usage increases.
Connected: Proposal to improve Ethereum 1559: is the squeeze worth the juice?
The Ethereum community has a minimum spending policy to protect the chain from attacks such as double spending. This approach is very different from today’s economies, where central banks have tremendous control over monetary policy. Users, businesses, and governments can feel safe working with Eth2 as the base unit’s output is only used for one purpose: security and that Raison d’être cannot be repurposed to serve alternative ends. In addition, all monetary policy is known and public, so everyone has equal insight and access to understand all protocol rules.
Eth2 strengthens and enables self-sovereignty
Many people across the political spectrum feel disempowered today, as politics and economics seem to be completely independent of the real world and our everyday lives. For many, the promise of crypto is to turn this dynamic on its head and restore power to the individual. Eth2 in particular shines here.
With Eth2, any person, company, or government can run validators, actively opt for the rules of the protocol, and enforce them for all other participants. It enables a feeling of personal responsibility, trust and self-sovereignty that is only more difficult to achieve as a consumer. It also enables all entities to trustlessly build and verify the state, which leads us all to work on the same facts – a rare occurrence in today’s world.
Eth2 does not limit the active set of the validator and only requires 32 ETH to power up a validator. While this sum is not equally accessible to everyone, it is not unreasonable, as running a validator enables a company to support the decentralized economy over the long term while achieving the crypto-equivalent of risk-free returns. And those with less than 32 ETH (most people) can pool their funds at any time using Kraken, Rocket Pool, or other services to join Eth2.
This article does not contain any investment recommendations or recommendations. Every step of investing and trading involves risk, and readers should conduct their own research in making their decision.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The author thanks Vitalik Buterin for the feedback on this piece.
Viktor Bunin leads log operations at Bison Trails, a blockchain infrastructure provider recently acquired by Coinbase. He previously worked at ConsenSys, a crypto venture studio, where he advised clients on blockchain strategy and designed economic incentives for network stakeholders. Viktor believes the community is the killer feature and helped organize ETHDenver, ETHNewYork, Lightning Summit and other gatherings.