Ethereum Co-founder on Lack of Incentives for Public Projects and Possible Solutions

ethereum app on iphone

The world of finance is facing the possibility of a major shift ever since cryptocurrencies have been introduced on to the world stage. Bitcoin started off what may become regarded at some point in the future as an invention as significant as the invention of paper. Digital form of currencies that make use of cryptography to generate and verify transactions called cryptocurrencies are what this phenomenon is. Cryptocurrencies are free from any central authority to dictate their distribution and value. Their value is determined by the users on the network they operate in.

This revolutionary peer-to-peer payment system has since garnered a lot of popularity on the global scale. The first cryptocurrency, Bitcoin, is very successful but almost decade from when it was first introduced, it’s still just a currency. Using their blockchain network technology as their basis, others have sprung up here and there and they’re capitalizing on blockchain technology to distribute digital currency and more.

Enter Ethereum

Ethereum was started off in 2015 and is the second biggest player in the cryptocurrency-ecosystem right now. Ethereum’s not just a cryptocurrency but a proper infrastructure that uses Ether as the cryptocurrency within their business structure. Ethereum being open-source invites developers to introduce applications and smart contracts that can utilize Ether as a currency to operate their functions essentially increasing the utility of Ethereum as more than just another form of currency.

The co-founder of Ethereum, 23 year old Vitalek Buterin has however, been particularly vocal about the lack of incentives for the public open-source projects and for the developers that are contributing to Ethereum’s codebase and its scaling problems.

Core developers for all the public blockchain projects like Bitcoin and Ethereum take pay cuts and they work for salaries that are below what should be the market value in order to improve the protocols which are employed by the public blockchain networks.

Plasma

The open source development community in Ethereum is very active. A plethora of independent projects are hard at work coming together to solve the scaling problems and other underlying issues that Ethereum’s blockchain network is facing. Buterin Vitalek and Joseph Poon developed Plasma. It’s Ethereum’s solution for the privacy of their users and it addresses their scaling problems.

That being said, projects like Plasma are not for-profit applications and are not being developed for use commercially. They serve mainly to improve Ethereum’s scalability and providing two-layered scaling solutions so that the capacity of Ethereum’s network can see an increase. Since these projects aren’t looking to make profits, it’s actually quite difficult for them to gain the necessary funds in order to feed the growth of their development.

Addressing this problem, the 23 year-old Buterin made an announcement using his Twitter account that he has plans underway to form a private fund that will provide the necessary resources and capital to the open-source projects that are working hard to solve Ethereum’s scaling problems and developing two-layered infrastructures:

“I’m announcing that 100 percent of my OmiseGo + Kyber Network advisor shares will be either donated to charity (AMF, GiveD, SENS etc) or used to privately fund Ethereum second-layer infrastructure (state channels, multisig wallets etc), or some combination of the two. [Rules for funding Ethereum infrastructures are projects] must be 100 percent open source, no baked-in profit scheme (incl ICO token), must be good.”

As good as that is, Vitalek’s private funding campaign will not be able to suffice funding all the open source projects operating within Ethereum’s network that are working to develop the blockchain network without the use of launching an Initial Coin Offering. It will simple not be enough to incentivize all the developers working on it.

A Likely Solution?

EtherDelta is a decentralized currency exchange that was launched using the protocol provided by Ethereum. This application is considered to be the most successful application on Ethereum right now and accounts for 14% of all the transactions taking place on the Ethereum blockchain network right now (Roughly 40,000 transactions per day!). EtherDelta has not taken part in any sort of conduction for ICOs but has still managed to obtain an active user base of merchants and investors who are using EtherDelta’s platform to trade cryptocurrencies in a decentralized way.

What’s their secret? EtherDelta uses an incentivization model for developers that actually deserves more recognition that is being given to them. Buterin pointed out that EtherDelta’s model is underrated and he feels that the open source projects could actually make use of their model.

A lot of cryptocurrency exchanges charge their users a nominal fee for all the deposits, withdrawals and order placements they make. EtherDelta differs from the norm by providing a decentralized platform that does not charge them in the same way but they charge a 0.3% fee to the traders upon the execution of a trade.

“An important feature of EtherDelta is that placing an order doesn’t involve an Ethereum transaction. Placing an order involves signing a message, which doesn’t cost a gas fee. This means that placing an order on EtherDelta is completely free: there’s no Ethereum transaction fee, and there’s no fee if the order trades. The one and only platform fee EtherDelta charges is a 0.3% fee paid by the person executing an order (paid in the instrument being sold),” explained the EtherDelta team.

Buterin was impressed by this and insists that this more traditional model being used by EtherDelta provides them with the facility of generating a constant and stable source of revenue.

The future of Ethereum and other companies that make use of the blockchain network shows promising signs. This technology is still in its infant stages and is subject to the need to continuously grow. Adapting such an approach could make working on the constantly needed open source projects that will keep developing the Ethereum network a more feasible affair if not a profitable one. Developers will do a better job of working on these projects if they get this extrinsic stimulation rather than just relying on their internal motivation to do so since that can only take them so far.

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