Crypto
Vitalik Buterin Says Elon Musk’s Plan for Scaling Crypto is ‘Fundamentally Flawed’
Elon Musk’s claims of Dogecoin’s superiority and potential of scaling have sparked a discussion on scaling from Ethereum’s co-founder.
Ethereum co-founder Vitalik Buterin has posted a lengthy paper on the limits to blockchain scalability, criticizing statements made by Elon Musk, while answering questions such as:
“Just how far can you push the scalability of a blockchain? Can you really, as Elon Musk wishes, “speed up block time 10X, increase block size 10X & drop fee 100X” without leading to extreme centralization and compromising the fundamental properties that make a blockchain what it is? If not, how far can you go? What if you change the consensus algorithm?” and more.
The article Buterin published on his personal blog on Sunday, May 23, explains how increased scalability would negatively affect the decentralization, blockchains most coveted quality. The article comes as a direct response to Elon Musk’s tweet saying that Dogecoin will emerge victorious as long as it manages to scale and drop fees immensely:
“Ideally, Doge speeds up block time 10X, increases block size 10X & drops fee 100X. Then it wins hands down.”
“As it turns out, there are important and quite subtle technical factors that limit blockchain scaling, both with sharding and without. In many cases there are solutions, but even with the solutions there are limits. This post will go through what many of these issues are,” says Buterin.
Buterin said there are two ways to try to scale a blockchain: fundamental technical improvements, and simply increasing the parameters, which is what Musk’s proposition kind of sounds like. “Increasing the parameters sounds very attractive at first: if you do the math on a napkin, it is easy to convince yourself that a consumer laptop can process thousands of transactions per second, no ZK-SNARKs or rollups or sharding required. Unfortunately, there are many subtle reasons why this approach is fundamentally flawed,” he continued.
Buterin further questioned Musk’s proposition, by doubting the possibility to achieve a sharp increase in scalability and throughput “without leading to extreme centralization and compromising the fundamental properties that make a blockchain what it is.”
Buterin stressed the need for decentralization to eliminate the risk of a network having a single point of failure and the protections that a widely distributed network enjoys against coordinated attacks and potential for abuse. He stressed that true decentralization cannot be achieved without regular users being able to run nodes, without the need for a hefty investment, reserved for the biggest players only.
“For a blockchain to be decentralized, it’s crucially important for regular users to be able to run a node, and to have a culture where running nodes is a common activity.”
Buterin mentions that sharding, Ethereum’s current solution for scaling, can facilitate comparable scalability to that offered by many centralized chains, and predicts, based on the current state of the Ethereum network, that a sharded Ethereum could “probably process one a million transactions per second with the full security of a blockchain.”
“But it’s going to take work to do this without sacrificing the decentralization that makes blockchains so valuable,” he added, which is also one of the reasons Ethereum 2.0 is a lengthy project and no major changes happen overnight. Quality and security over quantity and reckless speed.
When Elon Musk tweeted “Canada, USA, Mexico”, spelling out an acronym “CUM”, many assumed he was referring to the “United States–Mexico–Canada Agreement” (former NAFTA), but with an Elon Musk twist. Because you know… it would make for a totally better acronym than what they came up with (USMCA).
Or maybe it was just me?
Low and behold, barely a day later Musk decides to bless us with yet another tweet, this time dispelling any doubts one might’ve had regarding the meaning of his previous tweet.
CumRocket To the Moon
Within literal minutes of his “Cum Rocket to the moon” tweet on June 5, CumRocket (CUMMIES) skyrocketed from $0.067 to $0.284 (+330% instant gain) before crushing back down to $0.114 some half hour later, and is currently trading at $0.1746 (+168.95% 24hr gain).
As reported by El Economista, the Spanish parliament has voted in favor of a controversial new law that will require Spanish citizens to report their overseas crypto holdings, as the government appears ready to impose more control and regulation over the growing crypto sector.
According to an official government release, the new law will require Spaniards “to report their holdings and operations with cryptocurrencies,” on crypto held both domestically and abroad if the transactions “affect Spanish taxpayers.”
According to the release, information will be required on the balances and holders of the coins, as well as on all types of operations that have been carried out with them.
“Due to their proliferation and popularity among investors and savers, it is necessary to take greater control over cryptocurrencies”
The new regulations will make it “mandatory to inform” the tax body on annual declarations of assets and property.
The bill, named the ‘Law on Prevention and Fight Against Tax Fraud’ (Ley de Medidas de Prevención y Lucha contra el Fraude Fiscal), also contains other provisions intended to fight tax avoidance, and will give tax bodies the power to conduct spot checks on “homes and businesses”.
The bill has been in the works since last year, when the Council of Ministers gave it the green light, and still needs to be ratified, now that the senate voted in favor in a majority vote.
Once ratified, it will see “overseas” crypto holdings integrated into the often criticized Modelo 720 system, which requires Spaniards to complete exhaustive declarations of their overseas real estate holdings.
While Cardano (ADA) supporters like to refer to it as an Ethereum killer, Charles Hoskinson, founder of Cardano, said that Ethereum is actually “killing itself” by replacing the current proof of work (PoW) version with Ethereum 2.0, a new proof of stake (PoS) iteration.
When asked if Ethereum 2.0 could also be seen as a Cardano killer, now that it’s switching to PoS as well, Hoskinson said that he does not see it like that since Cardano is the market leader in PoS, implying hat their longer experience with PoS gives it an upper hand over Ethereum in PoS space:
“We are leading that fight. We were first to the market… Engine doesn’t make a BMW a BMW. It’s a part of it, but you need a whole ecosystem, a whole collection of things.”
CHARLES HOSKINSON, MAY 26, 2021
Subjective: Assigning such prominence to the fact that Cardano was the first to market with PoS over Ethereum sounds like a weak argument seeing as Ethereum, along with Bitcon is becoming a household name, whereas Cardano… well, is not yet. So this whole argument of “first to market” that is based solely on the validation protocol being used falls somewhat short and makes us seriously wonder why Mr. Hoskinson would spit in his own cup by implying that being first to market carries such weight, seeing as ETH is actually the grandfather of smart blockchain and the true pioneer of the said space.
Fun fact: The first cryptocurrency to adopt the PoS method was Peercoin. Next, Blackcoin, and ShadowCoin soon followed suit.
Governance, interoperability, and user bases
The creator of Cardano also touched the topic of governance, saying that Ethereum 2.0 has bowed out, which he said would make it hard for the ecosystem to evolve once its founders retire or lose prominence, whereas enabling on-chain governance is a vital part of Cardano’s roadmap.
He also compared Bitcoin (BTC), the largest cryptocurrency by market capitalization, and the grand father of all cryptocurrency, to a “wood-powered steam engine” due to its slow evolvement.
“You have those Bitcoin core developers who desperately want to evolve the system: even though core developers want to implement multiple improvements like smart contracts and side-chains, they can’t get anything done.”
CHARLES HOSKINSON, MAY 26, 2021
Hoskinson also pointed out that Ethereum is not as interoperable for now as some other similar blockchain projects such as Cardano, Cosmos and Polkadot (among others) that made sidechains available on their network.
And finally, he claims that Eth 2.0 and Cardano on top of different technologies and philosophies also have different user bases:
“We are bringing millions of people in Africa that simply Ethereum doesn’t seem to care about… outside of South Africa and a few well developed places in Africa.”
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