The year was 2019. I went to Toronto’s Rebel nightclub for the Futurist cryptocurrency conference. It was a bear market at the time, and crypto prices were falling. People were talking about how Ethereum, the big-name blockchain platform, was moving to a proof-of-stake mining algorithm, a major developmental milestone.
On Wednesday, I went to the same venue for the same conference, which was held in-person for the first time since 2019. Yet again, crypto was in a bear market and — surprise, surprise — Ethereum was still moving to proof-of-stake.
Ah, the great rhyme of history.
Adding a poetic twist, this time the event’s keynote speaker was none other than the principal Ethereum co-founder, Vitalik Buterin.
Toronto is both Buterin’s hometown and the place where the billion-dollar network was initially developed. On Thursday, Buterin was back at ground zero, speaking about a project that some critics say, despite its enormous valuation, has barely left the ground.
Ethereum is arguably the biggest thing in crypto after bitcoin. Even if you haven’t heard of it, you’ve probably heard of all the things that run on it, such as NFTs (non-fungible tokens), the really expensive digital pictures.
Launched in 2014, Ethereum is a sort of base-layer infrastructure on which anyone can build blockchain-based games and apps, peer-to-peer financial instruments and even entire currencies. The network aims to use bitcoin’s decentralized principles to build the next Internet, in which Big Tech does not hold power over users. Web3. Yay.
In February, one estimate put the total value of all the applications and assets on it at US$585 billion — if it were a publicly traded company, it would have been among the 10 most valuable in the world.
But what has Ethereum actually done?
Buterin had asked the crypto world a similar question during the 2017 bitcoin boom, when the value of all cryptocurrencies crossed the half-trillion mark.
Buterin tweeted: “So total cryptocoin market cap just hit $0.5T today. But have we *earned* it? …
“How many dapps (decentralized applications) have we created that have substantial usage. How much value is stored in smart contracts (a core Ethereum component) that actually do anything interesting…. How many Venezuelans have actually been protected by us from hyperinflation?”
On Wednesday, the crowd cheered as Buterin gave updates on Ethereum’s move to proof-of-stake, which is scheduled to be completed around the middle of September. And people laughed when Buterin acknowledged the “weird directions” in which Ethereum has led crypto.
“We have billions of people with crypto wallets.… Why? Well, because they want to trade monkey pictures,” he said.
“You have these really kind of deep and philosophical arguments” in trying to get people on board with crypto, Buterin said. But there’s also, “’Hey, look, it’s a monkey!’ Guess which one works better?”
NFT transactions have routinely clogged Ethereum’s network, slowing down some aspects of it.
Ethereum’s move toward proof-of-stake, considered not only more environmentally friendly but also a way to let the network scale up and handle more activity, has been talked about for years but been put off by delay after delay.
The move has been so troubled that critics have talked about essentially creating another Ethereum that preserves the status quo, harkening back to a 2015 event in which the network split in two after developers controversially undid some transactions.
That proof-of-stake move had also resulted in the establishment of a new crypto market, in which coins could be locked onto the future Ethereum network to earn the equivalent of interest, and their derivatives can be traded on the current one. The now-bankrupt crypto lender Celsius had heavily participated in that whole game, leading some observers to say that the delays to the move bore some responsibility for the recent crypto meltdown.
Meanwhile, crypto games such as Axie Infinity have ended up with the emphasis on crypto rather than the game. Critics have called them repetitive and boring, and with in-game objects having value outside it, users have been going through the motions of the games to make money rather than because they actually like playing.
And two days before Buterin spoke, the U.S. government applied unprecedented sanctions on Tornado Cash, a decentralized application on Ethereum that obscures transactions, often for illegal means.
So, what has Ethereum actually done? The sanction on Tornado Cash makes for an uncomfortable answer, and has wider implications. When a dapp can be sanctioned by governments just like anything else, how revolutionary can decentralized finance, or DeFi, really be?
Five years after Buterin had asked whether the crypto world had “earned” the money that was sloshing about, that question, too, remains no less relevant.
In an era of increasing Big Tech dominance, Ethereum represents a vision and promise that is badly needed.
But for how much longer will Ethereum be hailed simply for its potential?
Ethan Lou is a journalist and author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.