Buterin was specifically bullish on the rise of decentralized blockchain identities to enhance user privacy.
In a blog post dated Dec. 5, Ethereum (ETH) co-founder Vitalik Buterin wrote that money, blockchain identities, decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and hybrid applications were the top developments he was excited about in the Ethereum ecosystem. Buterin then described his experience in using Ether as a means of payment in a cafe in Argentina:
"When we walked in, the owner recognized me, and immediately showed me that he has ETH and other crypto-assets on his Binance account. We ordered tea and snacks, and we asked if we could pay in ETH. The coffee shop owner obliged, and showed me the QR code for his Binance deposit address, to which I sent about $20 of ETH from my Status wallet on my phone."
Buterin continued that due to side effects of The Merge, "transactions get included significantly more quickly, and the chain has become more stable, making it safer to accept transactions after fewer confirmations." The Ethereum co-founder then contrasted it with his earlier coffee experience, where at the time, network fees accounted for one-third of the transaction, and funds took several minutes to arrive.
Then, speaking of the rise of DeFi, Buterin commented that the industry started off honorable and limited but quickly became "an overcapitalized monster that relied on unsustainable forms of yield forming." However, he added that DeFi is in the "early stages of setting down into a stable medium, improving security, and refocusing on a few applications that are particularly valuable."
Honestly I think we emphasize flashy defi things that give you fancy high interest rates way too much. Interest rates significantly higher than what you can get in traditional finance are inherently either temporary arbitrage opportunities or come with unstated risks attached.
— vitalik.eth (@VitalikButerin) June 20, 2020
Next, Buterin praised the rise of blockchain identification methods, such as the Sign In With Ethereum (SIWE), and their ability to enhance user privacy. "[SIWE] it allows you to interact with a site without giving Google or Facebook access to your private information or the ability to take over or lock you out of your account," wrote Buterin. Furthermore, he said such protocols could also be used to prove eligibility in events like governance or airdrops without compromising users' personal data.
Regarding the topic of DAOs, Buterin said while they "captures many of the hopes and dreams that people have put into the crypto space to build more democratic, resilient and efficient forms of governance," greater work needs to be done to improve censorship resistance and susceptibility to internal organization. Highlighting the example of MakerDAO, Buterin wrote:
"MakerDAO has $7.8 billion in collateral, over 17x the market cap of the profit-taking token, MKR. Hence, if governance was up to MKR holders with no safeguards, someone could buy up half the MKR, use that to manipulate the price oracles, and steal a large portion of the collateral for themselves."
Finally, the Ethereum co-founder noted the potential of merging Ethereum blockchain technology with off-chain processes, such as voting. In one scenario, Buterin wrote: "Votes are published to the blockchain, so users have a way independent of the voting system to ensure that their votes get included. But votes are encrypted, preserving privacy, and a ZK-SNARK-based solution."
As for the next steps, Buterin stuck to his belief of prioritizing projects with long-term value propositions rather than those fixated on short-term profits. "Many of the more stable and boring applications do not get built because there is less excitement and less short-term profit to be earned around them: the LUNA market cap got to over $30 billion, while stablecoins striving for robustness and simplicity often get largely ignored for years," he wrote. Post-Merge, Ethereum's next major anticipated update is the Shanghai Upgrade, which would enable users to withdraw their staked Ether. The Upgrade is scheduled for the second half of 2023.
I propose the term "alfalfa leak" for something that doesn't give you an easy path to short term profit, but is still ultimately good for you.
— vitalik.eth (@VitalikButerin) December 5, 2022
