Vitalik Buterin Responds to Brewing Ethereum Collapse Criticisms “Economic Abstraction”
Earlier today, TechCrunch published an article titled “The collapse of ETH is inevitable.” The article written by Jeremy Rubin goes into details on the factors that are not only hampering the biggest Altcoin’s progress currently but also diminishes their early mover’s advantage in the near future.
In the article, Rubin goes as far as saying that in the foreseeable future, ETH — the asset, not the Ethereum Network itself will go to zero. There are already many who are prophesying that due to the network’s failure to scale, to utilize more secure contract authoring practices, or to out-compete its competitors, ETH will not see much real adoption.
Let us take a closer look at the points Rubin uses to scrutinize Ethereum.
The collapse of ETH is inevitable
Before we dive into Jeremy’s reports it is important to remember that he is a technical advisor for Stellar and a Bitcoin Core Contributor. Although he makes relevant points, there is always an incentive for him to be biased.
Gas has no future: The Ethereum network is like a shared car. When a contract wants to be driven by the shared car, the car uses up fuel, which you have to pay the driver for. How much gas money you owe depends on how far you had to be driven, and how much trash you left in the car. Gas is a nice metaphor, but the metaphor is insufficient as an argument to support non-zero $ETH prices. Gasoline actually burns inside an internal combustion engine; an internal combustion engine will not work without a combustible fuel. $ETH as Gas is a metaphor for how gasoline is consumed; there is no hard requirement for Gas in an Ethereum contract.
ERC20 tokens don't increase the network’s worth: Suppose a person is building a new coin that follows an ERC-20 Token template. Every transaction for the new coin will require Gas to be paid in ETH. Instead of paying for Gas in ETH, we could make every transaction deposit a small amount of the coin directly to the block’s miner’s address to pay for the contract’s execution. Paying for Gas in a non-ETH asset is sometimes referred to as economic abstraction in the Ethereum community. The revised contract has no functional dependence on ETH. Miners are incentivized to mine transactions without paying any fees in ETH whatsoever.
Vitalik’s reply to the critics
The author goes on in details on refuting economically abstracting Ethereum.
“There are four main counterarguments to economically abstracting Ethereum: the lack of software support for economic abstraction; difficulty in pricing many tokens; the existence of contracts not tied to tokens; and the need for ETH for Proof-of-Stake. While nuanced, all four arguments fall flat.”
Buterin, in a Reddit post meticulously refuted these criticisms.
— vitalik.eth (@VitalikButerin) September 3, 2018
In Ethereum as it presently exists, this is absolutely true, and in fact, if Ethereum were not to change, all parts of Rubin’s argument would be correct. However, the community is strongly considering two proposals, both of which have the property that they enshrine the need to pay ETH at the protocol level, and furthermore, the ETH gets burned, so there's no way to de-facto take it out of the loop by making the medium-of-exchange loop go faster. The proposals are:
- The modified fee market described in the draft paper here, where average gas usage is targeted to 50% of a (2x higher than today) gas limit, using a self-adjusting minimum transaction fee to do the targeting, where the minimum fee gets burned. This fee would be charged to the block proposer, so the block proposer could charge fees in spankchain tokens or whatever other ERC20, but the block proposer would still be responsible for coming up with the ETH to pay the minfee.
- Storage maintenance fees: Pay N Wei per byte per block to keep data in storage, or else it gets “hibernated” and you need to submit a Merkle proof to revive it. This fee also gets burned.
It is estimated that well over 2/3 of transaction fees paid could end up being burned through these mechanisms.
Things are getting exciting in the crypto space. The competition is fierce to the race on top and no one gets off the hook easy. However, it is a breath of fresh air to see Vitalik not only take critiques like a sport but taking time to give his opinions on the topic for the world to view.
To check out the original article by TechCrunch visit here.