Speaking at EthCC in Paris last night on “things that matter outside of DeFi,” Ethereum creator Vitalik Buterin discussed the potential for Ethereum to make an impact on other sectors of society, using social media as his primary example.
The Ethereum blockchain and ETH prices are currently seen to be deriving value from the nascent decentralized finance (DeFi) ecosystem. But Ethereum was created for much more than DeFi, and Buterin shared his concerns that the smart-contract blockchain was being defined by users’ desire for profit rather than its potential to create value and utility in other centralized fields.
Ethereum, Buterin said, “has always been about taking these ideas of decentralization and trust minimization, experimenting with building and implementing, using many different kinds of mechanisms to areas that go far beyond just finance.”
Why finance defines Ethereum
Dressed in a brown T-shirt and blue knee-length shorts, Buterin — a rockstar in the blockchain world — began his talk on the main stage of EthCC in an auditorium full of rapt audience members. He joked that he would be talking about “rabbits” as the fuzzy creatures are something that exists outside of DeFi, before getting down to business.
Featuring more than 250 international experts as speakers this year, EthCC is the largest and one of the most talked about annual Ethereum events in Europe. Being non-profit, its main aim is to share knowledge efficiently for a more positive and fertile Ethereum ecosystem, and giving back to the community — parallel to Buterin’s beliefs in Ethereum.Despite Buterin’s larger vision for Ethereum beyond DeFi, the nascent sector is still considered the smart contract blockchain’s main use. DeFi has grown exponentially over the last two years, and there is now nearly US$100 billion in total value locked in DeFi protocols,. according to DefiLlama. Ethereum currently hosts over 96% of DeFi, and for many in the space, the potential to make profits through DeFi lending protocols, staking tokens, providing liquidity and yield farming are what attracts them to Ethereum.
While recognizing the exponential growth of DeFi, Buterin explained that Ethereum “has to expand” beyond the sector, and the original vision was to use the blockchain to reinvent many centralized facets of society, such as the delivery of information, sovereign identity and supply chains.
Explaining why financial applications have come to dominate the Ethereum space, Buterin reasoned that is only because “finance is just the area where centralized technology sucks the most.”
“I can send you a centralized email and you will get it within one second. And maybe various intelligence agencies will read it, but at least you can read it one second from now,” Buterin said. “International bank wires do not work that way. They’re still notoriously annoying and inefficient. And there is a lot of these extra frictions that persist in the financial system.”
Can Ethereum decentralize social media?
Moving away from DeFi, Buterin focused on Ethereum’s potential use in decentralizing social media, referencing a tweet by Stani Kulechov — the founder and CEO of Aave, an open-source DeFi protocol — suggesting that Aave build “Twitter on Ethereum.” Buterin said that building out the Ethereum social media ecosystem is something he personally cares about as there is a “widespread belief that existing social media platforms suck, and we need better ones.”
According to Buterin — who published the Ethereum White Paper as its sole author in 2013, when he was 19 years old — the list of problems plaguing today’s centralized social media are “arbitrary censorship and manipulation” along with the “low quality of discourse” and the concepts and kinds of social engagement that are favored by centralized providers that are “very misaligned with quality.” There is also the issue of users creating multiple accounts and using them to spam social media platforms with promotional content or spread misinformation.
The issues that plague centralized services create viable options for the Ethereum community to explore mechanisms to combat them, Buterin said. For example, a decentralized sybil resistance can be developed to combat bot spam accounts. In blockchain, a sybil attack is similar to bot spam account creation, as it refers to the attacker creating a large number of pseudonymous identities and using them to gain a disproportionately large influence in the blockchain. One mechanism Buterin suggested was a ”proof of humanity consensus” — a kind of reverse Turing test, to verify that the user is in fact human.
Ethereum as a decentralized login service
In his talk, Buterin also argued that using Ethereum as a decentralized login service could give users more control of their identities and accounts instead of relying on centralized social media companies’ that have ultimate control over accounts on their platforms. He also argued that social recovery wallets — a new type of smart contract wallet that is primarily used to enhance security and aid in the recovery of lost or stolen addresses — could present a better alternative should you lose control of your account.
“If you screw up, then maybe the big centralized daddy can help you. Well, it turns out that from my first-hand and second-hand experience is that big centralized daddies are often too lazy to actually help you. If you lose your accounts in a lot of these services, often it’s extremely hard to actually get it back.” Buterin said, “So, Ethereum accounts that are social recovery wallets potentially can outcompete the centralized providers and the decentralized providers on both fronts. So you have both better self-sovereignty and better recovery.”
Buterin explained that the growing non-fungible tokens (NFTs) space could also simplify the process of using your Ethereum address to log in, specifically referencing the decentralized naming app Ethereum Name Service. The service lets users convert their alphanumeric Ethereum addresses in a human-readable format; which are then issued as ERC-721 NFTs.
“Ethereum ecosystem has to expand beyond just making tokens that help with trading tokens,” Buterin said.
He added that while profit-generating activities like yield farming are useful, they are only “valuable up to Layer 1 and Layer 2.” Buterin was referring to additional yield protocols built on top of Ethereum’s base layer as “Layer 1.” Layer 2 solutions, like Polygon, can be added on top of the base layer to alleviate traffic on the Ethereum network to improve the scalability of native apps.
Buterin warned that going beyond these layers, continuing to try to stack profits on top of profits “to infinity” could harm Ethereum in the long run and create financial instability with “the risk that this whole thing is going to collapse and potentially get a couple of regulators angry.”