02 Jan We need to bring community and sustainability back to the heart of Ethereum
We must leave behind the “cash grab” behaviors associated with DeFi in 2020 and work toward creating long-term sustainable projects.
The core purpose for Ethereum at its birth was to herald the next generation internet. Its genesis was based on building a peer-to-peer network with no single entity or group in control by positioning the community at the center of the global system.
2020 has seen the power of this network thrive through innovative and industry-changing projects like Yearn.finance, Aave, Synthetix, Nexus Mutual and many others. In fact, the top 10 decentralized applications on Ethereum now attract more than 1 million users per month.
Many successful Ethereum-based projects are committed to or centered around the community, raising funds to eventually share with various stakeholders. But we have also seen the emergence of “get rich quick” schemes, locking up collateral as a result. More often than not, the community-based contributions are an afterthought explored in times of large growth.
Can we create a system that benefits community projects on an ongoing basis that is built into the core infrastructure of these protocols?
If we are to create such a network based on the original ethos for Ethereum, the community must now look to long-term sustainability that benefits the whole ecosystem over quick profits. In 2021, we have the power to deliver long-term solutions using advanced decentralized technology to build financial returns for the network into the infrastructure of our projects.
The rise of DeFi is welcomed but brings its complications
The meteoric rise of DeFi in 2020 has brought great promise and even greater investment to the industry. However, the booming interest in making a quick buck through new techniques like yield farming has afflicted the network with congestion and unsustainable projects. Some users that move large amounts of cryptocurrency are paying thousands in gas fees to transfer Ether (ETH), creating a financial barrier for many looking to use DeFi applications but not already possessing huge crypto holdings.
In some instances, projects have enjoyed a steep rise to glory followed by a sudden decline due mostly to an unsustainable or shortsighted business model that never really looked beyond the next exchange listing, fundraise or initial coin offering. While an increase in capital and interest flowing into Ethereum-based projects is a positive development, it is counterintuitive if projects fail to sustain themselves in the long term.
Achieving sustainability: Eth2 and layer-two solutions
Many approaches and projects are aiming to make the Ethereum network scalable and more efficient using layer-two infrastructure including zero-knowledge rollups and optimistic rollups.
As Ethereum 2.0 begins to take shape, we must bring the community ethos back into the heart of the network and build financial returns into the underlying design that maintains the network and its infrastructure — this is where community-driven layer-two solutions are becoming increasingly important.
We can achieve this scalability by creating profitable projects that give back to the community as they scale and consistently return revenue for one, two or five years — not just after a successful bull run, ICO or fundraise.
Layer-two solutions that follow a proof-of-donation network not only resolve issues at the layer level, they also comply with the original mission that Vitalik Buterin initiated at the very beginning.
As a decentralized bidding mechanism, proof-of-donation reinvents the protocols and teams building projects that run on top of Ethereum.
This type of mechanism invites network coordinators to bid to win the right to create the next batch and collect transaction fees. A concept such as this comes alive when a percentage of earnings generated by the auction process are reinvested back into Ethereum-based community projects.
We need to build these funding mechanisms directly into layer-two infrastructure. This way, the entire community automatically benefits as the network operates, not only in times of rapid growth or high profits.
In summary, the Ethereum community must go toward creating long-term sustainable projects that benefit the whole community and the network over the quick profits.
The rallying price of Bitcoin (BTC) reached a historical record of $24,000 this month as Ether rallied to over $730, which caused the world to take notice as current financial systems continue to disappoint, exploit and exclude.
We now have the means and ability to create a sustainable network of decentralized applications that empower us all, not just a few elite. Let’s not waste this opportunity.
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