Each of our collective, whether developer, growth, or product, is passionate about freedom of choice and decentralization. Throughout January, The Tinkering Society will be sharing six concepts it believes will drive change across 2024.
The term meteoric rise is a clunky phrase. The original Greek word meteōros roughly translates as “high up or suspended from the ground”, but of course we are now critically aware that meteors do indeed fall.
It’s really something that’s been allowed to filter through generations of language without ever being questioned. Fortunately, we’re becoming more in-tune with the notion of challenging the status quo, particularly around our global financial systems.
The next big hurdle will be to remain fixed on the ideals that brought us to this point. A passive attitude towards maintaining fair power distribution and network participation in our decentralized systems could easily see us back at square one, especially as more global entities and investment funds pitch up.
Ethereum decentralization is under the microscope. The network’s Shanghai / Shapella upgrade in April last year, which sealed a switch to a proof-of-stake model (POS), has implemented a key alteration that allows validators to withdraw staked $ETH.
A number of protocols began building off the back of this upgrade to introduce liquid staking, further ramping up centralization concerns. Zooming out we can see that staked $ETH has continued to grow across the year while the circulating supply has consistently decreased.
Credit: @hildobby
One protocol - Lido DAO - has led this race to bolster Ethereum staking. A side effect of its prominence in the market is that it has become a risk in itself, with any form of staking dominance meaning that an entity has the potential to affect network finality.
There is also a risk for stakers if Lido’s node operations are slashed for misbehavior - one such incident took place in early October at a cost of ~25 ETH. There is a tightly-wound circle of trust in place that could snap if even a handful of bad actors enter the frame.
Credit: @hildobby
We’re seeing a clampdown on DeFi activities under the guise of “consumer protection”. The reality is that governments still have not grasped just how to effectively regulate a space which they know so little about, or how to regulate a market that is built on the precepts of personal responsibility and finality.
Downward pressure from official departments has seen the proposal to capture unprecedented levels of data from crypto users, not to mention attempts to force DeFi protocol developers into implementing KYC as a standard. It begs a question around why the US government seems so keen to completely wipe out crypto whilst seemingly also going to great lengths to tax it.
The detention of Tornado Cash devs, Roman Semenov and Roman Storm, highlights an aggressive shift in attitude towards Web3 builders. It’s still not entirely clear whether the intention here is to try and cut the legs off illicit hacking or set a new standard for blockchain protocol development.
DeFi Summer certainly saw protocols play fast and loose with regulations. The current temperament from builders is much more considered in what feels like a game of cat and mouse, with projects like Celestia going to lengths to ensure that the geofence around their airdrop was even able to block VPNs.
The non-inclusion of transactions when there is available block space is a contentious subject. Ethereum, after all, has for some time been considered and promoted as censorship resistant.
A strong metric for measuring this is tracking OFAC-compliant blocks. For background: OFAC (Office of Foreign Assets Control) is an agency of the U.S. Treasury Department that has implemented sanctions on Ethereum addresses. Blocks that include transactions to or from OFAC-restricted addresses and transactions are deemed non-compliant, and vice versa.
Credit: censorship.pics
The crux of this issue is that the more Ethereum becomes OFAC-compliant the less decentralized it is. We can see above that compliance from Block Builders and Relays currently overshadows Validators by a significant margin.
Credit: mevwatch.info
It’s been almost two years since Vitalik shared in-depth research on the state of proposer/builder separation (PBS), and has continued to share developing ideas through to late last year. In that time, the post-merge OFAC-compliance stats haven’t painted an inspiring picture and suggest the network could be approaching a tipping point.
Early compliance, directly after the merge, was particularly high but has since dipped to a fluctuating watermark at around 30-40%. If we looked at this chart through the lens of price action momentum, something that most crypto users understand comfortably, would it signal a long-term bullish trend on censorship resistance?
Collect this post as an NFT.
Hmm. I do not understand all of the details here yet...but this is a thought-provoking article. thanks.