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A Critical Perspective on Ethereum: Too Much Tinkering 

The tinkering ratio of output can be improved to yield more mainstream products

I’m writing this critique with a deep and long historical perspective on Ethereum because I want Ethereum to succeed better. I’d like its ecosystem to get stronger. I’d like its apps and services to be more useful. I’d like its end-user experiences to be on par with what the mainstream consumer expects. 

At a time when many other L1 blockchain infrastructures are struggling for growth, Ethereum has a chance to clean up and solidify its position as the preeminent blockchain infrastructure. 

Whether changes happen or not depends to a great extent on what the Ethereum community does or doesn’t do. There is a limit to what the market can do to pick up the pieces and innovate on top of what is handed to them.

This comes at a time when a large part of the Ethereum community is getting ready to re-assemble in Waterloo where the first ETH Global event took place six years ago. I participated in that event, wrote From Waterloo to Zug, Retracing Ethereum’s Journey and made a presentation chronicling the then-emerging Ethereum ecosystem.

I’d like to talk about what Ethereum can do better. So, I’m going to focus on some parts that could be improved, in order to maximize Ethereum’s potential. 

There is no need to extol Ethereum’s strengths, as you all know them. But sometimes your strengths create a weakness. So we can start there. 

One of Ethereum’s strengths is the diversity of its ecosystem and how much development activity there is around it. It is undoubtedly the most vibrant laboratory for blockchain innovation. 

However, that strength has become a weakness because there is too much TINKERING in that ecosystem. 

Tinkering is not bad because it can lead to great things as you iterate. But when I said “too much tinkering”, I meant on a relative basis. 

Tinkering as a ratio of output can be improved. This means that we don’t necessarily need less tinkering, but we need more tinkering that results in fully deployable and usable solutions. And not just at the technical level. We need more end-user applications with user-friendly, mainstream-appeal types of applications.

If your tinkering doesn’t produce an end result, do you know what happens?

Other chains take your half-baked ideas and they add the last mile to it, and they deliver something usable. Sounds familiar?

One of the drawbacks of too much tinkering is that we tend to forget about tuning the end-user experience. 

Of course, the first level of the Ethereum ecosystem is mostly comprised of developers, and that’s a great thing. Developers typically work on infrastructure or they work on services for other developers to build applications on, or they work directly on applications.

The part that needs the most improvement is the last part, the part that touches the end user.

If Ethereum wants to be in the hands of one billion users, it needs to think more about the importance of mainstream user experiences. The mainstream user wants SIMPLICITY first, and two or three clicks to get impressed and hooked. That challenge, by the way, doesn’t only apply to the Ethereum community. It does also matter for the entire blockchain industry. I recently wrote, What The Blockchain Industry Can Learn From the Popularity of Artificial Intelligence pertaining specifically to the user experience.

Here are two related parts where Ethereum can improve.

First, the Ethereum development ecosystem needs more product managers. Product managers focus on getting the product to the market in its most usable form. Sadly, sometimes, they are the ones who realize that at one point, you need to shoot the engineers in order to get the product out. Product managers obsess about the user experience, user flows and user interactions. Product managers understand how to lay out a roadmap and prioritize features rollout accordingly. 

Second, the L2 layers fragmentation is another strength-turned-weakness. L2’s have been undoubtedly beneficial to Ethereum’s scalability, but from a user perspective, the experience is not ideal, because of the switching friction. As a user, imagine if you had to switch browsers to access different parts of the web. It would be unthinkable, yet we ask Ethereum users to decide which L2 to choose from. Furthermore, we make them jump through hoops and take security risks to bridge from one network to another if they seek to move assets across L2’s. 

I don’t have a solution for this fragmentation, and some believe it’s not an issue, but I do think it is. Therefore, I’m just laying out the challenge to elevate its visibility and importance. When there is less friction, there is more adoption.

I realize that the Ethereum ecosystem is obsessed with an extreme form of decentralization at all levels of the stack. But that also creates challenges, because as you unbundle various pieces in order to decentralize the system, you then need to re-bundle everything to properly assemble a solution. Then, you need a lot of coordination and making sure that many parts work together at the same level of readiness and response, and that’s not always so easily achieved. 

This challenge was validated in Vitalik’s last essay, The Three Transitions where he advocates there are three essential capabilities that need to work together in Ethereum: L2 scaling, wallet security, and privacy. There is nothing new with these individual features as they were part of the early vision of the Ethereum blockchain. However, with increased decentralization, there are increasing degrees of complexity that compound when you start to implement these three prongs simultaneously. 

Ethereum is approaching its ten-year mark on its original inception. It’s time that we polish the ongoing tinkering in its base infrastructure and services so that apps can prosper on top of it. 

I’m looking forward to seeing more product managers and entrepreneurs drive the Ethereum ecosystem in addition to the base technology developers who are obsessed with technology tinkering. 

What The Blockchain Industry Can Learn From the Popularity of Artificial Intelligence

The A.I. industry’s approach to user adoption could prove instructive in the area of user friendliness

Image generated by DALL-E

In my third Fortune Crypto column, What Blockchain Can Learn from A.I., I contrast and compare how artificial intelligence burst onto the scene and is being adopted by end-users a lot faster than blockchain products have.

A primary reason is that A.I. has nailed the user experience, especially on a relative basis while blockchain products continue to miss their appeal to mainstream users.

A.I. refrained from overhyping itself prematurely, allowing ample time for development and refinement over the past decade, before it was ready for prime time. During that gestation period, developers dedicated themselves to fine-tuning the technology, tackling intricate challenges, and only now are we witnessing the true impact of A.I. on the average consumer.

In contrast, the blockchain industry continues to expose its tinkering to the public, resulting in a large gap between hype and reality. Several participants in that industry persist in promoting unproven products or exaggerated business models, exposing their experimental ventures to public scrutiny and inviting criticism or skepticism.

As a long-time blockchain enthusiast, this makes me incredibly jealous. I think A.I. can teach the blockchain a few lessons.

Here’s the link to the article (no paywall), A.I. exploded in popularity because it’s so easy to use. Here’s what blockchain developers can learn from that.

How Will Crypto Wallets Lead Us To The Wild World of Blockchain Apps? 

We’re a long way from the wallet becoming the next browser. But there’s more than one way to get there.

I wrote another article that was published on the week-end in Fortune, entitled The growth of Web3 depends on crypto wallets—and how we choose to use them.

The article discusses the question, Will the popularity of wallets lead users to a Web3 world, or will current web apps move more quickly in that direction by first incorporating built-in wallet functionality?

It’s a bit of a trick question because both paths will be valid, in my opinion.

Having more built-in wallets inside apps is inevitable, and that trend is going to increase. In these cases, the app itself is the main attraction, and the wallet takes a second-class position to it. In these cases, there is tight integration between the app and wallet experiences.

Then what happens when you own a variety of cryptocurrencies? You will need a multi-currency wallet to hold them. That’s where the standalone wallet comes in. In that standalone category, there is more than just holding currency. These wallets also function as a bridge to “decentralized apps”, ones that use the wallet as a user login or for authentication and pseudo-identity purposes, such as for Decentralized Finance.

Today, we have an abundance of choices in standalone wallets, while there is a shortage of useful apps that use the built-in wallet in a significant and essential way.

With that backdrop as a set-up, I invite you to click on the link and read (no paywall) the full article, The growth of Web3 depends on crypto wallets—and how we choose to use them.

P.S. The image above was generated by starryai with the prompt “A bridge depicted by cryptocurrency wallets.” I was pleasantly surprised that it also included the hamburger menu alluding to apps, although I didn’t give it that directive.

Formal Disclosures Are Coming to Token-based Projects and Protocols

Disclosures not only serve to protect consumers, but they also help institutional investors feel more comfortable with digital assets.

I’ve just written an Opinion piece published in Fortune yesterday, entitled Public companies obey strict disclosure rules—it’s time for crypto projects to do the same

In this piece, I argue the crypto industry currently lacks proper disclosure practices at the level that regulators (and serious investors) will expect in the future.

“No proper disclosures” has been a refrain used by the SEC in their attempt to paint the industry’s non-compliance. 

You can read it on the above link (no paywall) as a preamble to my additional commentary on this topic.

I’ve poured over 3 recent significant legislations pertaining to digital assets: 

Each one of these recently published regulatory actions mentions the disclosure aspect several times and offers some guidelines for meeting them. However, none of them were detailed enough, nor specific enough about the peculiarities of digital assets and emerging (or established) projects that depend on the token’s utility. 

Last month, Paradigm published an excellent essay, The Current SEC Disclosure Framework Is Unfit for Crypto. Although it is clear the current framework and practices do not squarely apply, what would proper disclosures entail? That is where we should be focused, going forward.

Of course, several cryptocurrency projects claim to be sufficiently decentralized, and beg the question: are disclosures necessary? However, being decentralized is not a cop-out for the avoidance of responsibility to disclose comprehensive information about the performance and evolution of a given project. 

My counter-argument here is that even the most decentralized tokens such as Bitcoin and Ethereum could benefit from more cohesive disclosures about their evolution via performance metrics and indicators to prove their market status. 

Saying that a given protocol is open, therefore anyone can see their on-chain data is not enough, and certainly not a good reason for stopping to disclose a comprehensive view about the ecosystem. The problem with blockchain related data is that information is disjointed, tough to read and not cohesive enough for human comprehension or interpretation. Granted, a flury of analysts publish their own spins on given projects, but the quality of many such reports can be improved, and they don’t replace the requirement for base level data and information.

Furthermore, given the realtime nature of the blockchain, disclosures could be continuously available, and not a one-time regularly scheduled event. And the silver lining behind this approach is that decentralized protocols could disclose their performance autonomously, as I’ve explained in that previous blog post.

Disclosures don’t only protect consumers against excessive and unchecked promotion, they also allow for better correlation between success realities of projects and their market valuations. In essence, disclosures help make token holders and institutional investors better informed and more comfortable with digital assets. 

The formalization of disclosures is coming to crypto projects, whether decentralized, centralized or nascent. We should better prepare for it and embrace it. 

The Race to Change the SEC Course and Some Breakthrough Scenarios

It is unlikely the US Congress will pass significant crypto-related legislation soon in order to foil the SEC’s path of killing that industry. 

As I wrote last week, 81 crypto-related Bills have been proposed so far, but none have yet to pass. One of the most hopeful Bills pertaining to Stablecoins had to be re-written as the previous one died on the vine. Another “comprehensive” Bill is being promised by Rep. McHenry as a joint effort from the House Financial Services Committee and the Agriculture Panel.

The SEC has momentum, and they can move much faster than Congress, sadly. The only way to make headways is to throw the SEC a curveball, distract them, think out of the box, do something different, or wait for an unexpected event to change the variables.

Some candidate ideas could have a faster gestation period than passing a Bill. 

1/ Sideline Gensler’s Power

Statutorily, the SEC’s Chair reports to the US Congress. Rep. Warren Davidson is preparing a Bill he will introduce in May that might limit the powers of the Chair, and give the Commissioners more voice.

2/ The Coinbase Legal Battle

There are two interrelated parts to Coinbase’s situation. First, the much-publicized Wells Notice and their response to it. Second, is their filing of a “narrow action” asking the SEC to answer their 2022 petition. The silver lining in this situation is something called “The Major Questions Doctrine” as it might be used to argue that digital assets are not within the SEC scope, and that Congress should give that mandate.

3/ XRP (Ripple) Lawsuit

It can go either way, and the type of outcome will determine how significant this might be for the industry. 

4/ State Legislation Mess

In the absence of federal agencies’ leadership, several states are enacting legislation touching pieces of the blockchain industry. Although this patchwork of local regulation may or may not be congruent with the national strategy, it’s possible that one such Law might tip the attention and create a new sense of urgency. Notable mentions are California’s DAO Bill, Texas’ Mining Bill,  Florida’s proposal to ban CBDCs, Wyoming’s Bill on private crypto keys, etc. Regardless, this underscores the mess this is creating.

5/ Self-inflicted Event 

The SEC’s arrogance was asserted when they either sued or fined the top four US actors, Ripple (XRP), Coinbase, Kraken, and Gemini. It’s possible that something starts to crumble under Gensler’s dictatorial and domineering style of leadership. 

6/ A Major US Bank Endorsement

Although major US banks have been absent from any crypto cheerleading, that can change on a dime. These banks are under pressure to become more open-minded about the inevitability of the blockchain and cryptocurrencies. If one of them makes a bold move, others will be fast followers.

7/ Unexpected Turn in the FTX Trial

The trial is set for October, but it could get delayed, or we might see a speedy outcome. There hasn’t been a shortage of unexpected twists and turns, and that will probably continue as more layers of the onion get peeled.

8/ The US Dollar Tumbles

Many are sounding the alarm bell on the continuing weakness of the US dollar versus other world currencies, some of which are competing to replace its supremacy. Then you need to compound the US Fed’s insatiable appetite to print more USD, and the theory that cryptocurrency is a good alternative hedge against the devaluation of the dollar. The chart to keep an eye on is the US Dollar Index (DXY), which has been on the decline, dropping from 110.88 in November 2022 to 101.61 in early May 2023. 

9/ Senate Flip 

Midterm elections could flip the Senate toward a Republican majority which might embolden the US House to act more aggressively pertaining to cryptocurrency.

Of course, the probabilities are low for some of these scenarios, but everything is possible. We need a breakthrough because the current path for change is very slow.

And breakthroughs often come as a result of unexpected surprises.

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