Ethereum: The Anti-Fragile Hydra

Just a few of the many heads of Ethereum, more are growing each day.

The Mythical Hydra

Anti-Fragility is a response to a stressor or source of harm, leading to a positive sensitivity to increase in volatility, variability, stress, dispersion of outcomes, or uncertainty.

- Nassim Nicholas Taleb

Ethereum, the Anti-Fragile Hydra

I will attempt to explain and highlight a few of the episodes where Ethereum was mortally wounded, but bounced back stronger than ever thanks to its anti-fragile nature.

Ethereum Foundation ‘Co-Founder’ Leaves but an Ethos Grows

The Ethereum Foundation has since become an incredible supporter for the Ethereum ecosystem, granting millions of dollars to different teams across the globe and spearheading some of the most important cutting edge research.

Ethereum Foundation Centralization Risk but Consensys Sprouts

In October of 2014, Joseph Lubin sprouted Consensys. The organization is now present in over 30 countries worldwide, helping everyone from developers to NGOs to Global 2000 companies launch real-world blockchain solutions based on Ethereum technology. They are even behind critical infrastructure like MetaMask, Truffle, Infura and more.

In addition to the Ethereum Foundation and Consensys, Ethereum has many other stakeholders including Coinbase, Ernst & Young, Santander Bank, Gemini, the entire Ethereum Enterprise Alliance, and more.

Ethereum (ETH) is Volatile but MakerDAO Appears

In 2015, MakerDAO appeared with the promise of “building a better money.” Through their novel technology, they allowed the creation of Dai, the world’s first unbiased currency. Maker was one of the first Decentralized Autonomous Organizations (DAOs) built on Ethereum and is currently the backbone of the New Open Financial System.

In 2018, the MakerDAO system was battle tested as Ethereum dropped more than 94% from peak to trough. This proved that Dai truly is a revolutionary invention that is already helping some Argentinian citizens avoid hyper-inflation according to Mariano Conti.

The DAO is Destroyed but Evolved DAOs are Summoned

By June of 2016, The DAO (which had not been properly audited) was hacked and all of the funds were drained. It’s important to understand that Ethereum itself was not hacked, but just this one application built on top of Ethereum. This was a critical wound to Ethereum but the community rallied and got through this painful period which will be forever remembered.

Flashing forward, anti-fragile Ethereum now has many successful DAOs running, each having learned from the errors of The DAO Hack. These include but are not limited to MakerDAO, DigixDAO, MolochDAO, MetaCartel, KyberDAO and soon a resurrection of The DAO, known as The LAO.

Parity is Killed but Gnosis Builds

In July of 2017, a vulnerability was found on the Parity Multisig Wallet that allowed an attacker to steal over 150,000 ETH (~30M USD). While this was tragic, the final decapitation came just a few months later.

In November of 2017, the entire wallet was killed which created losses of over 500,000 ETH ($150 million USD), including over 300,000 ETH from the Web3 Foundation (Parity) team.

Luckily, the Anti-Fragile Hydra has an entire ecosystem building towards the future. There were and still are many other great choices when it comes to securing Ethereum based value. The most notable is provided by the team Gnosis who not only have one of the best Ethereum multi-sig wallets, but are helping to pioneer the future wave of Smart Wallets as well.

EtherDelta Shuts Down but DEX Protocols Flourish

The first prominent DEX with meaningful use came through EtherDelta. During the 2017 mania, EtherDelta serviced everyone from raging retail speculators to VCs dumping their ICO coins. There were many coins that you could not get access to anywhere other than EtherDelta due to it having an open listing policy, which brought it to prominence.

Unfortunately in 2018, the Securities Exchange Commission (SEC) forced the founder Zachary Coburn to shut down the exchange and charged him with violating US securities laws. This vicious blow decapitated the head of the most prominent DEX and left investors scurrying to find a replacement. Hydra Ethereum did not even flinch as just a few months after the shut down Uniswap was announced by Hayden Adams. Uniswap is the first fully decentralized exchange and is immune to the issues faced by EtherDelta since even Hayden himself can’t take down the protocol. Uniswap allows anyone in the world to not only trade in a decentralized, censorship resistant and transparent manner but also submit liquidity to the pool in order to generate fees.

In addition to Uniswap, there are more than 20 other DEXs built on Ethereum, including entire protocols like Kyber Network and 0x Protocol. The DEX ecosystem will continue to grow and mature until it circumvents many centralized exchanges.

Crypto Kitties Clog but Scaling Technology Breeds

By December 4th, 2017 the kitty mania was at its peak and ended up clogging Ethereum due to transaction volumes. While this can be seen as a victory from a user acquisition perspective, it showed that Ethereum has much to grow before scaling for world wide adoption.

The Ethereum community had already been working on scaling solutions but this pushed many teams into hyperdrive. There are now many 2nd layer scaling solutions coming to Ethereum through things like Optimistic Roll Ups, SKALE Architecture, Connext Network, Counterfactual, Raiden Network, Funfair Technologies, Offchain Labs and multiple Plasma implementations. One solution that has been driven by Gods Unchained, shows their solution already handles significantly more transactions than Crypto Kitties and has not clogged caused any slowing of the Ethereum network. These second layer solutions do not include base layer scaling which is an entire animal of its own with things like raising the Gas Limit, Sharding and more.

ICOs Boom and Bust but Open Finance Composes

While many were quick to call Ethereum “good for nothing other than for ICOs”, that is very far from the truth. While this was the first time Ethereum proved itself as a decentralized and censorship resistant platform, there will be many more revolutionary episodes in the future.

Open Finance has always been brewing in the background of Ethereum but it’s certainly the next large wave within the Ethereum ecosystem. The benefit of Open Finance is that it allows the composability of protocols in order to create new novel use cases. If you want to learn more, please refer to the following articles A New Open Financial System and Network Effects and Friendly Developer Moats.

Synthetix is Attacked but Oracles Mature

In June of 2019, the Synthetix Oracle was attacked which resulted in a loss of 37 Million Synthetix Ether. Oracles have always been a talking point within the Ethereum ecosystem but creating a decentralized and robust oracle is not easy. While teams like MakerDAO have had great success with their oracle, even they have decided to pivot to a new model. As the history of Ethereum shows, each time there is an attack, one or more backup replacement options come to save the day. After evaluating most of the oracles on the market, Synthetix decided to partner with the clear leader in the space — Chainlink.

Chainlink has risen to fame within the crypto asset community due to obtaining the most high profile partnerships we have seen in the space. While most of the partnerships can be found here, the most prominent was their partnership with Google in order to connect BigQuery to Ethereum. Chainlink is dedicated to the Ethereum Open Finance ecosystem, which is not only shown through the Synthetix partnership but through their announcement at DevCon 2019 that they plan to support seven new price reference oracle networks on Ethereum.

Parity Shrinks but Ethereum 2.0 Spreads

Parity's dedication and loyalty to Ethereum has been under question for some time. Not only was their code the cause of the largest Ethereum financial loss to date (wallet incident), but their team frequently has had significant delays and even saw one team member leave Ethereum due to conflicts of interest. While they may truly remain dedicated in the long run, many Ethereum community members have their doubts.

Ethereum 2.0 is the next evolution of Ethereum and while two main client implementations in the past has been nice, the future is much more bright. This light comes on behalf of teams like Trinity, Sigma Prime, Prysmatic Labs, Status, Chain Safe Systems, Ether Camp, PegaSys, Parity and the Yeeth Team. They are all actively working on Ethereum 2.0, with 6 teams already live in test-net environments.

While we may see some merging and/or consolidation from teams, we will likely see at least 3 live client implementations in the next generation of Ethereum, which is only growing bigger and more powerful over time.

Future Battles

Many things are apparently man-made but grow on their own to reach some kind of self-organization. They may not be strictly biological, but they resemble the biological in that, in a way, they multiply and replicate. — Nassim Nicholas Taleb

Ethereum, the Anti-Fragile Hydra, will undoubtedly face many more battles in the coming years but it will continue to regenerate its wounds and come back stronger each and every time.

About the Author

Educating people about blockchain technology, crypto assets and the future of finance.

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