DT Context: Whilst we will take a more forward focused approach this year, we still believe you need to understand the past to help address the future. Justin Bons shares the good word...
1/28)
This year has been one of constant progress
Despite the negative headlines, cryptocurrency development thrives!
From sharding, enshrined roll-ups, PBS & the Merge
Away from the exuberance of the bull market, diamonds are created under pressure
A retrospective on 2022:
2/28)
We have seen a lot of progress in on-chain scaling:
As cryptocurrencies such as EGLD, NEAR & more are making massive strides in the development of execution sharding
A technology I consider vital for the development & further mass adoption of cryptocurrency in the world
3/28)
As execution sharding allows for horizontal scalability
Allowing us to scale to meet demand without it being an exponentially harder problem to solve over time
Sharding allows us to add more shards over time instead of hitting the wall we are now all too familiar with
4/28)
Even though I am a vehement supporter of on-chain monolithic scaling such as the before-mentioned sharding
The development of roll-ups in the ETH ecosystem is still incredibly significant for the entire design space
Though maybe not for the reason most people think;
5/28)
I do not entirely agree with the direction that ETH is taking in terms of its scaling roadmap;
Relying purely on others building out an open ecosystem of L2 solutions
This, in my view, will inevitably lead to a terrible UX & excessive fragmentation
6/28)
As each individual L2 has different trust & security trade-offs
This is why I will continue to advocate that ETH pivots back to its original plans of execution sharding
However, roll-ups themselves are still extremely compelling from the monolithic scaling perspective
7/28)
What is required is an “enshrining” of specific L2s by the L1
This would transform a roll-up-centric approach from modular to monolithic
As using the technology of roll-ups as a type of sharded scaling approach makes a lot more sense
8/28)
As “enshrining” roll-ups in this way solves the UX & fragmentation issues of the L2 modular approach
I hope that ETH will be able to pivot and adopt this approach instead of the course it is currently on
In the absence of that pivot; we do have blockchains such as XTZ:
9/28)
XTZ is piggybacking off ETH's research in this area & is enshrining their roll-ups natively into the L1
This form of scaling has comparable trade-offs to straight monolithic execution sharding
Unlike the roll-up centric modular scaling, which I am so critical of
10/28)
A less well-known but critically important development is PBS (Proposer Builder Separation)
Currently exclusively developed within Ethereum & Polkadot, as far as I am aware
This is another technology we should expect all high-quality blockchains to adopt in the future
11/28)
PBS makes blockchains far more censorship-resistant by separating the roles of validation & TX ordering into separate entities
This shift can be compared to the historical separation of miners & nodes in the early days of Bitcoin's history
When all nodes were miners
12/28)
As ecosystem roles become increasingly specialized & efficient in that process
This is important because it removes the compliance demands on validators by separating this out into a new class of entity
Solving what we have witnessed in the form of OFAC regulations
13/28)
As OFAC regulations were forcing ETH validators to create compliant blocks
Even though this has not led to any actual censorship at all, exactly as it was designed to behave
A strengthening of censorship resistance is still very welcome in the face of that potential risk
14/28)
As censorship resistance has always been a critical aspect of a cryptocurrency's value proposition
It is important to consider that this vulnerability is inherently present in all blockchains
ETH was just the first where this was noticed due to high economic activity
15/28)
The Merge has proven to the entire world that Ethereum’s new security & economic model works!
Solving the long-term security dilemma of BTC while making any asset applying this model far more scarce & secure
Resolving one of the biggest problems in the blockchain space!
16/28)
This is achieved by combining a tail emission (supply inflation) with fee burning
This ensures that the ETH blockchain remains secure during periods of low & high economic activity
While making the ETH token more scarce based on the underlying usage of the ETH token
17/28)
The best of both worlds Striking a perfect balance between security & scarcity
A problem other chains, such as BTC, are still facing & are unable or unwilling to solve, creating a clear divide between winners & losers
All cryptocurrencies should now follow this standard
18/28)
We should not view failures such as FTX, 3AC, & Celcius as failures that are endemic to cryptocurrency
But instead, as failures that are endemic to centralized systems
This is why we have the financial regulation that we do within our world;
19/28)
These laws come from a long history of jurisprudence over more than a century of financial history
We see the same failures occurring over centralized “cryptocurrency companies"
Because they are not different from the traditional system, except for the lack of regulation
20/28)
True cryptocurrency-based financial systems do not require oversight & regulation as the protections against such fraud are inherently built-in
This is why we have to create a strong distinction between centralized “cryptocurrency companies" & decentralized systems
21/28)
As decentralized finance is the solution to the woes of centralized financial institutions
Like the failures, we witnessed again in the collapse of FTX, 3AC & Celcius
That is the irony, when cryptocurrency is dragged down by the very systems it was invented to replace
22/28)
This last year has been a tumultuous one, to say the least
Nonetheless, from a Fundamental Analysis perspective:
We can easily make a case for constant progress as cryptocurrency's technology & governance keep improving
Regardless of the boom and bust cycle
23/28)
Historically some of the most important technologies & projects have been developed during bear markets;
This year has been no exception to this phenomenon
Fundamental breakthroughs often go unnoticed, only appreciated years after their invention
24/28)
The same is true for cryptocurrency, as 2022 was filled with huge leaps in capability
Preparing us to continue to take the world by storm as this cycle inevitably reverses.
Our belief in cryptocurrency is founded on the fundamental merits of this technology:
25/28)
Requiring a token of value for existing in a permissionless & decentralized state:
The most valuable quality of any cryptocurrency is enabling massive utility with tangible & measurable economic benefits by removing middlemen
This is why I focus on value investing
26/28)
Progress is not going to slow down & is likely to only accelerate into the new year
As a cryptocurrency researcher;
I understand that we are still just scratching the surface of the potential we are gradually unlocking in this field
27/28)
I am sure that just like the internet in 1996, cryptocurrency will continue to exceed the imaginations of what is possible
What I can already see was enough reason to dedicate most of my remaining life to this movement
While it continues to exceed our expectations;
28/28)
In sometimes unexpected ways Of course, there are pitfalls, unexpected problems & failed experiments
But that is part of what makes it such an exciting movement to be a part of
In that sense, we are all blessed to be a part of making this cryptocurrency history together
OG link
https://nitter.net/justin_bons/status/1607824483699822592?s=12&t=kOkWqBrqZG4NoOM1Dfed9w
