Interesting links

Ethereum 2.0 analysis

A recent blog post by BitMEX research on Ethereum 2.0 caught our eye recently and we though it was worth sharing.

A while ago we noted that Cardano had a window of opportunity before Ethereum moved to Proof of Stake. It looks like that window may be longer than we initially anticipated.

The blog post (which is worth reading in full) goes into great detail analysing the likely transition path from Ethereum 1.0 (Proof of work) to the new system and finishes:

For the Ethereum 2.0 network to succeed, the proof of stake and sharding system need to work and be compelling enough to attract the economically significant components of the Ethereum ecosystem over to it. Smart contracts and DeFi systems would need to choose which shard is appropriate for them and invest in upgrading their technology to be compatible with the complexities and limitations of a sharded system. Therefore it will be many years before a significant part of the Ethereum ecosystem can make the switch. Ethereum 2.0 is an incredibly ambitious project and we consider it highly unlikely that it will succeed as planned, without major hiccups.

It concludes:

In writing this report there is one thing that stands out to us above everything else, Ethereum 2.0 is exceptionally complicated. With so many committees, shards and voting types it seems reasonably likely that something will go wrong and that there will be significant further delays. However, despite all these potential issues, Ethereum 2.0 is still probably still worth a try. If this does succeed, the potential rewards are considerable.

Our take? Cardano has been superbly engineered. The staking system is flawless, exceptionally stable and easy to use, secure, and correctly aligns delegator and stake pool operator incentives.

It makes the proposed Ethereum 2.0 system looks clunky, complex and prone to failure. It also requires funds to be locked unlike the Cardano approach (the Cardano approach opens some very interesting DeFi options for yield that haven’t even been mentioned yet).

It reminds us how hard it is to change course once a design has been adopted, and why it is so important to build from a strong research foundation and principles (remember who spent a long time doing just that).

While we still need Hydra for scaling (due in 2022), Cardano looks to be in a very very strong position as we head into the New Year.