So, my name is Jonathan. I work at an exchange based in Tokyo called BitBank. And one of
the currencies that we currently list is Ethereum. I was the person that implemented the deposit
withdrawal system for Ethereum. And also, I originally was the person who ran the full
node that we have running in our backend. So, I currently don't work on Ethereum anymore.
I stopped working on it a little bit after CryptoKitties. But I am in close contact with
the person who is currently working on maintaining our full node, keeping it up. And we're all
on the same team. We're all aware of all the problems that are going on. So, I feel like
I'm qualified to speak about dealing with Ethereum from the perspective of an exchange.
Okay. Thank you for that. And finally, Jameson.
Yeah. So, I worked at BitGo for three years, basically building and maintaining infrastructure
that BitGo was using to help service enterprise clients and manage their multisig hot wallets.
So, that started off with Bitcoin only. And after I'd been there a year or so, we then
decided to work on Ethereum support, which took us about a year to get to the point that
we wanted. And we ran into a ton of challenges both on the running a node, running fully
indexed databases to help be able to look up transactions and balances, and then managing
the actual sending logic, and of course, the smart contract side and building a multisig
smart contract. So, I had firsthand experience getting paged whenever there were any issues
with the infrastructure and testing out different types of nodes, seeing what the performance
was. And while these days, I'm not actively maintaining or working on Ethereum infrastructure,
I do still manage the state and do a test on all of these things to see what the process
of the ecosystem is from the performance of their nodes.
Okay. Well, our involvement at Coinflux is really easy. We don't list it anymore because
of various issues, which we can talk about another time. The point is quite relevant
to my next question, which is the audience will have probably a range of different backgrounds
and experiences with Ethereum. But could you guys, in summarizing your mind, how you describe
Ethereum, what it is, and what you see are the greatest strengths, its weaknesses, and
what are the concerns and challenges that you have with it or had with it if you're
not going to be using it? Maybe we'll start with Jonathan.
Okay. Yeah. So, if I were to describe Ethereum in a very simple set of terms, whereas Bitcoin
is basically a single state of UTXOs, which are either spent or not spent, Ethereum is
a very complex global state where each account has all these different types of, you can
store values, you can store all of these things in it. And because of that, there are a lot
more game theoretical aspects to Ethereum. And also, it makes it much more difficult
to run as compared to something like Bitcoin. So, I think that one of the biggest weaknesses,
although a lot of people would probably argue that running a full node is not important,
I would assume that everyone or almost everyone at this conference is probably of the mind
that running a fully validating node is something that is important to cryptocurrency. With
Ethereum, that is exceedingly difficult day by day. We have to increase our budget for
running our full node almost every month. It's very difficult to run. However, its strengths
are the network effect. And one thing that I think a lot of people see as a negative,
which I think is actually a positive from a network effect point of view, because of
the fact that so many smart contracts are open source, where the source is openly available.
A lot of people feel like they can just grab a contract from a popular, like let's say
Uniswap or something, and then change the name, redeploy it, and then all of a sudden
they have a clone, which it can be a good thing or a bad thing. But one thing that it
definitely is, is it really does help the network effect of developers. Whereas when
you're building a Bitcoin wallet or an application based on Bitcoin, it's very like even if you
copy paste the source code, the Bitcoin applications are usually very, there's a lot more than
just the code. Whereas in Ethereum, if you copy paste an ERC-20 and you change the name
of the coin, suddenly you have just a new ERC-20 that is named whatever you named it.
And you don't have to do anything else. And everyone else can use Metamask or whatever.
So it's very streamlined for developers, which I think is a great thing, because one thing
that I find difficult, especially when we're hiring for developers, is a lot of people,
they've touched Ethereum and Solidity because it's so easy to just copy and paste. And as
we all know, developers are basically just copying pasting machines. So a lot of people
have touched Ethereum, whereas not many people have deep experience with other cryptocurrencies
such as Bitcoin and whatnot. So I do find that it's really good for getting developers
on board with the ecosystem and starting developing tools and things like that, whether or not
it's useful or whether or not it's decentralized or whether or not it's all these other things
which are putting the cart before the horse. That's a different topic, but I definitely
do think it does get developers excited and it makes them feel like they have a good understanding
of Ethereum because they were able to copy and paste and get something running really
quickly without needing to train for five months or have a deep understanding of cryptography
or anything like that. So that's the strong point.
So basically, it's technically, the infrastructure is far more complex than Bitcoin, but the
offering to a developer is much lower entry requirements. And so you can get adoption
more quickly, whether that's a good thing or not, or gives a full sense of capability
is a different question. Let me pass the question on to Jameson.
Yeah, I mean, in general, I would say that Ethereum's strengths are its weaknesses. It
is simply making a different set of trade-offs than Bitcoin has made. And the result is,
you do have this quote unquote world computer where you could say Bitcoin and Ethereum are
the same in the sense that they are distributed ledgers. They are a new type of distributed
append-only database, but Ethereum provides much more, I guess, developer ease of use
when it comes to manipulating that database in a variety of ways. And so the trade-off
is that developers can create more rich applications that live entirely on this network without
having to build things outside of the network. Really, it seems that Bitcoin is more focused
on validating and doing more things off-chain and then having the smallest amount of data
necessary on-chain to validate whatever those off-chain operations were. Whereas Ethereum
is allowing you to do a lot more on-chain, which makes it a lot easier for developers,
easier for people to get into and start using these apps without needing the other infrastructure.
But really what it's doing is putting a lot more load on the network itself. And that's
where the network operators, whether it's individual enterprises, are end up having
a lot more pain trying to keep the network going.
Yeah, I think it's so trade-offs. The question is, do some of those trade-offs over the long
time, long run lead to potentially centralization risks to a greater degree than potentially
Bitcoin? Andreas?
Yeah, I mean, I'd say most of the important points were brought up already. The main difference
between Bitcoin and Ethereum is that Bitcoin is what we call you-takes-all-based, which
means if Jameson sends me one Bitcoin and I would like to send half a Bitcoin to OBI,
I would then send the one Bitcoin out to the networking transaction, where half goes to
OBI and half goes back to me as change. And then I can spend my half Bitcoin for something
and OBI can spend his half for something.
Well, in Ethereum, it's what we call account-based or non-spaced, which is similar to what we
know from Ripple and Stellar, and I believe also maybe EOS. And I'm not sure why they
made that decision when Ethereum was made, but not using the you-takes-all-based system
has a lot of weaknesses, especially if you are sending transactions rapidly or if the
fee landscape is uncertain. So I'm sure even pretty normal users of Ethereum today jumping
on the DeFi train, they end up in a situation where you're staring at your metamask and
the transaction you're trying to send is not going through because the fee was high enough.
And then you try to send another one. Now, that one is not going to go through because
the first one must come from first. And you end up in this really nasty situation.
Well, in Bitcoin, this is not a problem because if I do send the one Bitcoin to the half Bitcoin
to OBI and half back to myself, then I can immediately spend the half Bitcoin and send
it to Jameson without the initial transaction getting confirmed. So it might take a while,
but it will confirm eventually. And all of my transactions will confirm at the same time
then. So I would say that's the major downside of Ethereum that we're seeing today for normal
users without touching on the difficulties of operating a full node of Ethereum in a
professional wallet. Yeah, I think actually on a recent What Bitcoin
did Peter McCormack podcast, Vitalik and Andrew Polstrow were discussing the account-based
versus the UTXO-based trade-offs. And Vitalik admitted that if he realized the complexities
related to that, he might have taken a different path. And challenges like the ones you've
mentioned and others have meant that over the coming few months and years, Ethereum
is set to go through a number of major updates, culminating in the move to what they're referring
to as Ethereum 2. Not all of you are using it, but what are your thoughts on Ethereum
2, how it differs from Ethereum 1, and what's your thoughts on the viability of this approach?
And if you are planning to be using it in your systems, how are you going to plan the
transition from Ethereum 1 to Ethereum 2? Jameson?
Yeah, thankfully, I get to just sort of watch this as a passive observer now. And I forget
how many years we've been watching it happen so far. I think it's still going to be at
least another year or two before enterprises really have to worry about starting to transition
their infrastructure. But I certainly have a lot of questions around how that's going
to end up working. The short version of all of it is from the technical diagrams and articles
that I've seen, it appears that Ethereum 2 will be adding a fairly significant amount
of complexity to the operation of the system. And one major question will be how feasible
it will then become for any individual or any entity, even enterprises, to fully validate
the state of the system. You then get into even lower level questions of having to worry
now about different shards and what's operating on different shards and whether or not different
enterprises are going to have to essentially start building this cross-shard management
logic into their system.
Okay. And Jonathan?
Yeah. So similarly to what Jameson was talking about, as far as we are concerned, right now
we kind of have our hands full with Ethereum 1.0. And kind of, you know, we have been messing
around with some of the, you know, dev, the testnet and whatnot for staking and all that
stuff. But to be quite honest, right now we list Ethereum. And if Ethereum 2.0 is going
to be a different coin that has like backwards compatibility by making the old network into
a single shard on the multi-shard network or whatever, I personally think that it's
going to be an interesting social experiment for the, for the crypto community to decide,
okay, so what exactly is Ethereum? So is Ethereum something that is a balance that is given
to you by value granted to you on the global state of the Ethereum blockchain? Okay. What
is the Ethereum blockchain? You know, what about the old Ethereum 1.0, 2.0? Are they
going to have different prices? Are they going to be different coins or, you know, there's
a lot of questions I think that the, that as a community we'll need to answer moving
forward. And I'm sure a lot of people who are very into the community are like, of course
it's going to be the same coin or they might already have their opinions set. But we also
have a lot of due diligence that we need to do for these coins, where if the, if some
hard fork completely changes the attributes of a coin, then we need to make sure that
it's something that we are able to secure so that our customers who are giving us their
coins do not need to worry about, you know, some bug in the system destroying a whole
bunch of the ether that we're holding for them or something like that. So yeah, for
2.0, whether or not 2.0 is the same coin as Ethereum or not is going to be one of the
main things that we're watching moving forward. And if it turns out it's going to be a different
coin with a, you know, different, theoretically a different price, and it's not tightly coupled,
then we would have to go through all the regulatory hoops and basically do everything we did for
Ethereum with Ethereum 2.0 or whatever they call it. So right now we don't have any specific
plans, but we have been testing the testnet stuff for 2.0 and we've been playing around
with it. And it looks like it's going to be a little bit more difficult to run a what
they call archive node currently. And I don't even know if an archive node would be possible
moving forward. I'm not exactly sure how we're going to 100% verify everything to make sure
that we're not getting screwed over. So that's our stance right now.
And Andres?
Yes. So the word sharding has been brought up a bit and without being explained. So I
can just do that quickly. It's sharding is what we call in computer science, especially
distributed computing, which is very similar to if you use Facebook. So I mean, Facebook
cannot store everybody's information on every server they have, right? It's like hundreds
of thousands of service, I'm sure. So what they do is they try to figure out who you
interact the most with, which is for most people as people who live in the same town.
So they will store information about people interact with each other a lot on the same
server. So that's what you call a shard. And for special cases like celebrities who everybody's
following or newspaper, they will be stored on sort of a global shard or like a global
server that everybody can interact with quite easily. And the issue with sharding is
if my Facebook is really tuned to me talking to people, you know, in the same country I
live in, and I then want to interact with people in a very different country for some reason,
then internally at Facebook, it's a real pain for them to keep transferring data between the
servers, between the server my profile is mainly on, and the server where whatever discussion I'm
involved in now is on. So this has been figured out a long time ago. And in Ethereum, they call
this crossing sharding, cross shard interaction. And it'll just be very expensive to interact with
smart contract that is not living on the same shard as your contract. But I think the more
important point is proof of stake. Because I don't believe that proof of stake works at scale
and can stand up to attacks. I believe it's similar to, you know, having a spaceship that runs on
magic instead of a propellant. So, yeah, I mean, in proof of work, you know, you burn electricity,
which we call an externality. And that gives value to your Bitcoin. But if Ethereum switches
to proof of stake, then it's a completely closed loop. So you are using your Ethereum inside of
your ether inside of Ethereum to get more ether inside of Ethereum. And you're also using your
ether in Ethereum to prove to others that you're not being malicious. And that's never been proven.
I mean, we have some other proof of stake coins that's been around for a while. I know it's what's
still alive, but I think most of them are dead. So I don't think that's going to work. And I also
believe the Ethereum miners of today will probably rise up and stick to the proof of work fork.
Most of the proof of stake coins that have been in existence have either died or they've ended up
having to implement other trade offs, checkpoints and stuff. Centralized take pointing out. Yeah,
so one of the issues that I think proof of stake or proof of stakers are going to have to deal with
is sort of the liveness issue where when you're mining, if anything goes wrong with your mining
infrastructure, then sure, you're losing out on some potential profit, but you're not going to get
wrecked and have your money taken away from you. Whereas if you're staking and something goes wrong
and you're no longer able to participate, something will basically cause you to violate one of the
staking rules. And now you have to worry about getting slashed and actually reducing the amount
of money. The slashing is an issue for miners, but for a normal user who's just installing an
Ethereum wallet on his computer, he has no way to establish which chain is the correct chain on
proof of stake. He must speak to a centralized checkpoint authority to establish the fork he's
supposed to be on. And from then on, he can use staking as a proof of what is the correct chain.
And well, that's sort of the idea. It's a challenge. I think in summary of Ethereum 2,
there's three major change. One is the virtual machine. That's the equivalent of moving everybody
from Windows to Mac OS X. It's possible, very difficult. Next level up, we've got proof of
stake. Some would argue that proof of stake pre-existed proof of work in some form, and we
have not been able to get it to work up until today. Maybe they will also fix that one and be
the first to get it to work. And finally, sharding. Well, we've seen the challenges even at MCCVR.
We've had a sharding issue that caused a delay. It's not an easy problem to solve. In fact, in
database engineering, the idea of a database that's distributed, that can be sharded and be
read and be written to and read from multiple locations has been something that everybody who
develops a distributed database has wanted for 40 years. No one's been able to do it. Maybe
Ethereum will fix all three of those problems in one go over the next year or two. I'm a doubter,
and it sounds like all three of you are as well. So, next, a second to last question.
Does Ethereum, if they can fix all these problems and make it work, compete with or
complement Bitcoin? Just yesterday, for example, Free Arrows Capital completed the single largest
issuance of new wrapped Bitcoin tokens by a merchant, minting nearly 2,500 wrapped Bitcoin.
And a week earlier, Alameda Research said the previous record of 2,000 wrapped Bitcoin.
So, it could almost be argued that Ethereum is morphing into a highly functional, complementary
sidechain of Bitcoin rather than a competitor. But what are your thoughts?
Let's go with Andreas.
Yeah, I mean, I'm going to have to object to sidechain because that means something specific
where you actually have cryptography deciding if the coins that are not on Bitcoin anymore,
but on Ethereum are valid or not. But if we can call it like a companion, I think it's fantastic.
I mean, in Bitcoin, we've been struggling for as long as I can remember to attract new developers
because, you know, it's not that exciting. You get a private key and an address and your friends
can send you some money and you can send money to your friends. That's not very enticing for,
you know, the 16 year old developer out there looking to just flip the world upside down.
So, for those guys, the smart contracting, and you can see how they're doing it in DeFi,
where they're actually composing smart contracts so that smart contracts made by different people
are actually interacting and creating this kind of absurd but really interesting financial system.
So, I think Ethereum is great for Bitcoin. We're getting in all these new developers and
even if Ethereum does work out or becomes too expensive, you know, these guys are probably
going to save their money in B2C and not in Ether. So, I would say everybody wins.
Okay. Thank you. And Jonathan?
Yeah. As far as Ethereum and Bitcoin and how they would relate with each other moving forward,
I think you also need to make a distinction of Ethereum the coin and Ethereum like the EVM,
the Ethereum virtual machine. So, I think that even though the EVM, the Ethereum virtual machine,
like the actual like runtime that runs the smart contracts and basically just commits
into the blockchain that is being currently run by proof of work and is planning on going
to proof of stake, the EVM itself I think is an interesting system for kind of optimizing
computations on a distributed system. It is kind of, it's still not very mature,
but I do think that it is something that is very interesting that even, you know, protocols like
let's say currently the RGB protocol, which is basically trying to create a kind of like a
smart contract platform slash token platform on top of UTXO based blockchain, so like Bitcoin,
and even they're planning on supporting Lightning Network. So, you would be able to make state
changes in the smart contracts that are only verifiable by the two people in the channel of
the Lightning channel. So, some sort of system like that could use something like the EVM,
and because it's all open source, I mean, you know, we would be able to basically just
piggyback off of all of the solidity contracts that have been written so far and we would be
able to use them on a system like that. That said, as far as Ethereum, the currency goes,
you know, I am of the personal opinion that I think that Bitcoin is like gold, and Bitcoin is
like the cryptocurrency that I personally think is going to be kind of like the leader of the
space for pretty much the rest of all time, as far as cryptocurrency time goes, whenever that ends or
ends or whatever. But for Ethereum, I think that as long as the network is useful, and some people
are using it for something, like whether that be DeFi or whether it be some token or, like you said,
some like wrapped BTC or wrapped something rather, as long as the network is being useful in some
capacity, regardless of whether it's actually decentralized or there's some weird way to attack
the consensus algorithm to basically kind of mess around with the state, I think people will still
use it in spite of those difficulties, even if there's some way that you could attack it to kind
of mess around with the state. So I think that Ethereum is not going to go away for a significant
amount of time, at least. And in the best case scenario, I think they will definitely become a
big platform moving forward. But as far as whether it complements Bitcoin or not, I am not of the
mind that these wrapped Bitcoin things are being kind of basically minted by centralized parties
using a tool called Ethereum. So it's nothing really new than just basically having an exchange
hold on to your Bitcoin and giving you a number on your login screen that says you have 10 Bitcoin,
except now you can use Metamask. And that's about it. So I don't think that the wrapped Bitcoin
thing is really a complement of Bitcoin in that specific example. But I do think that Ethereum
is experimenting with all these new things like how to properly do proof of stake, if there is a
way to do that, and how to kind of do these adversarial complex state smart contracts
in a decentralized network by studying those things that can eventually help Bitcoin or Bitcoin
related projects like let's say RGB or risk or whatever. And in the end, I think it would help
out Bitcoin and I think Bitcoin will help out Ethereum. So I think open source in general,
we're all going to help each other. And I think a lot of the tribalism is unwarranted personally.
Okay. Well, and you sort of effectively pretty much answered my last question, but
I'll put the last question to Jameson first. But first of all, Jameson, the last question is
to finish up is what do you think the future holds for Ethereum? Jameson, can you answer that? But
first of all, give us your view on the previous question. And then finish up with where you think
Ethereum is going over the following years? And what's the future for Ethereum?
Well, you know, the complexity of interactions between these different networks, I think will
continue to increase. People will try to find ways to reduce the friction like hop between them. So
you can argue about what that really means. I would say you can make an argument that we have
Ethereum on Bitcoin and we have Bitcoin on Ethereum from the sense that, you know, there is
a merge mind chain now RSK, which has the EDM and has the ability to peg Bitcoin into it. Well,
I believe that's still a federated peg. So Andreas will probably object to calling RSK a side chain.
Well, I do believe they would like to eventually become a drive chain, which more people would
probably consider a side chain. And on the flip side, until recently, the Bitcoin quote unquote
on Ethereum has really just been an IOU token that has generally been with a third party custodian.
As of recently, with the new launch of each project, I believe we finally have a way to
cryptographically peg Bitcoin to Ethereum. So that might be more interesting for some of the more
hardcore folks who would like to minimize their trust as much as possible. So where is this all
going? I don't think Ethereum is going away anytime soon. It will mostly be interesting to
continue to watch how it feels as it's growing pains. And so we've already seen what has really
gone on with the DeFi boom this year, kind of similar and reminiscent to what happened in 2017
with Bitcoin, where the continued demand for gas and blockchain space and these limited resources
in this distributed system have been pricing out a lot of the lower end use cases. So you could make
the argument that while DeFi may be marketing itself as a narrative of being available for
unbanked and whatnot, really, at this point, with the current level of demand and constrained
resources, it's mainly the players that are playing around. And in my opinion, most of the
games that they're playing are just overcomplicated, obfuscated forms of gambling, and in many cases,
hoodlinking and rug pulling. That is, from a really high level, I would say a lot of the
financial system is just various forms of complicated gambling. So it shouldn't really
be that much of a surprise to people. So there's certainly demand and utility for this type of
stuff. And I guess the real interesting question will be whether or not it will be able to get to
the point that it can actually handle mainstream demand and can handle more mainstream day-to-day
utility rather than just rampant, wanting speculation. Thank you for that. And Andreas,
and then Jonathan, just a brief words on to sum up, what do you think the future holds for Ethereum?
Andreas? Yeah, you put me in a tough spot here because Jameson had all the good points.
Yeah, like, you know what, if the market cap of Ethereum overtakes Bitcoin, I wouldn't be
surprised at all. But to some of us, that's not what it's about. We're kind of more long term.
And yeah, maybe Ethereum will see some competition from a UTXO based network,
like you mentioned, RSK, that can run the Ethereum code, which most people know as Solidity,
but in a bit more sensible way. And yeah, also gonna have to agree with Jameson again on,
you know, when you have a coin like Bitcoin or Ethereum, where there's a free market,
which means there's not unlimited block space. So we're all competing for it. And then the
question is, who can afford to pay the most? And that's, of course, going to be people who
are doing gambling. If you look online, who's buying the expensive ad spaces, even a coin
market cap, they're all scams. It's because they run with such high margins that they have
unlimited money. So yeah, we can end up in a situation where Ethereum is completely clogged
by real degenerate gambling, for better or worse, and that the real use cases like
Augur, which is a prediction market, and these kind of things will just be completely squeezed out,
maybe to their own shard, but also maybe just out of the network.
Interesting. And Jonathan, just a quick summary. I'm getting the calls from the backstage.
What do you think the future holds?
Sorry about that. Can you hear me?
Yeah, I can hear you.
Okay. All right. Yeah. So basically, I think I already kind of went over what I think is
going on in the future. I don't think that Ethereum is going to go away anytime soon.
I don't think it's going to implode. I think the transition to 2.0 has some
possibility to create some trouble, maybe have some incidents that might cause problems for
some people. But if it turns out to be the same coin, or to be considered the same coin by the
community, I think we will pretty much be forced to run a validating node to validate the Ethereum
2.0. And if it's decided by the community that it's a separate asset, then we'll have to run
through the regulators and do all that stuff and decide whether or not we want to list it or not,
which is a different subject all on its own. I definitely think that Ethereum is doing some
interesting experiments that I think will eventually be good for Bitcoin. And I think that
Bitcoin has a lot of things that Ethereum can learn from. And obviously, it has learned from.
So, yeah, that's what I think about the future of Ethereum.
I think that's a very good way to finish this talk. The summary is Bitcoin and Ethereum can
potentially complement each other. Ethereum, most people's view is that it's not going anywhere
anytime soon. It has a number of technical and social challenges to overcome. But as an
experiment and as popcorn-inducing, popcorn-eating interest, entertainment value, Ethereum will be
an interesting space to look at over the coming years. I'd like to thank all of our panelists,
Jameson, Jonathan and Andreas. And thank you to the audience for bearing with us. And hopefully,
you'll enjoy the rest of MCCVR today and tomorrow. Thank you very much.
Thank you.