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Ethereum and its complications

Ethereum has always been complicated. That’s one of the things I love about it.

It makes it hard, though, to explain it to people in concrete ways, to bring new users into the fold. Heck, it was complicated for its inventor Vitalik Buterin. As he told me for my book, he was on a long walk around San Francisco, trying to put all the pieces together to fulfill his vision of a next-generation blockchain, when he realized he needed gas in the larger Ethereum machine. In other words, a fuel that would cost money and be necessary to deter unlimited spamming of the network that’s also required to run any transaction. This is what became Ether, the native cryptocurrency of the Ethereum blockchain, and the key to unlocking the larger puzzle for Vitalik.

A lot of people who don’t grasp the innovation of blockchain seem to have difficulty assigning it any actual utility. It’s the NFT-is-just-a-jpeg crowd.  I can understand that because blockchain-powered applications haven’t hit the mainstream, and appear, to me, to be at least a few years away from prime time. Beyond prices moving up and down, a lot of people still view crypto as theoretical – and because of the price-only action, often go further to say it’s all a Ponzi scheme of fake Internet money.

Bitcoin is instructive here because I think it neatly puts to rest the argument that there’s no there there. A global payment network that’s decentralized and distributed among nearly twenty thousand computers all over the world is a hell of a thing to have. Banks can’t touch it. Governments can’t touch it. I honestly can’t see why people don’t find that valuable.

It’s trickier to validate Ethereum, as I was saying. It’s a stark departure from Bitcoin, a leap off of Satoshi’s brilliant breakthrough that was intended to spread the decentralized modus operandi to any type of code or contract. Ethereum is why a digital file can now be authenticated and sold based on a public chain of ownership (NFT). It’s also why more than 2.4 million separate cryptocurrencies have been created – the code to create a new coin is something an eight-year-old could handle (shitcoins). Always with the good and the bad, this Ethereum.

It’s also a global payment network. Like Bitcoin, you can use Ether to pay people or merchants. Yet hopefully a time is coming where the wider world understands that Ethereum promises to be the foundation for a new global smart-contract-based ecosystem. I was speaking to Paul Brody about this recently. He’s the global lead for blockchain at consultancy EY, and he thinks of Ethereum’s development in terms of decades, not years or bull cycles. In one of his more sobering assessments, he believes there’s no guarantee that if Ethereum becomes wildly popular that Ether itself will be hugely valuable.

It’s too early -- and if there’s a cliché more hoary in crypto I don’t know it -- but it’s still unfortunately true. We just don’t know what a fully developed Ethereum ecosystem will look like. Yet what I love are the knock-on effects, I guess, of what blockchain allows. As Brody said to me, decentralization is a natural deterrent to monopoly. It’s very hard to accrue power when nodes are spread widely, just as it’s a natural conclusion of popular centralized systems like Spotify to consolidate power and market over time. Once that consolidation is in place, users get screwed. Wash rinse repeat.

Decentralization is also a powerful tool for artists and musicians to connect directly with their fans. This likely could be a path to mass adoption if you imagine a day when Taylor Swift creates a blockchain-based fan club. She could do worse than check out a heavy metal band from Huntington Beach, California that’s pulling this off.

They’re called Avenged Sevenfold, and lead singer M. Shadows went down the crypto rabbit hole once he realized how the NFT collection Bored Ape Yacht Club was creating a powerful glue to hold its community together. The band is performing in Orange County in October exclusively for its fan club, whose members have all created digital wallets on Metamask in order to buy a Deathbat NFT. The band has abstracted away a lot of scary crypto terms and made sure to reward Deathbat holders with exclusive merch, skip the line privileges, meet and greet chances, ownership of the NFT intellectual property and early ticket access. In a savvy move, they also prevented speculators from access to Deathbats and focused on giving their fans what they already wanted, just with a blockchain backbone.

The band’s Discord server, where fans and Avenged Sevenfold talk all things crypto, has 61,000 members. It’s a great model in large part because a lot of the complicated parts of Ethereum have been smoothed over. Fans still have to get a wallet, of course, but if that’s going to be a barrier to entry for crypto mass adoption we’re all in trouble.

Ethereum keeps going, it’s chugging along on its path to creating a global decentralized infrastructure. Maybe Ether will go to the moon, or maybe it’ll be a utility token allowing access to an alternative model for finance, culture and commerce. Ethereum will always be complicated, because at its core that’s what it is. The trick going forward is to hide that part of it and make it as easy to use as clicking a few buttons on a smart phone. — Matthew Leising, editor in chief, Decential Media

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.