Ethereum Has Layer 0 Power. But It Could Still Blow It

If there is ever a theme you can detect from my writing and point of view, it’s that the technology world loves a standard, and Ethereum has become that standard.

Additionally, as I never tire of pointing out, once a standard gains a large foothold, it’s remarkably difficult to dislodge it, even when something better comes along. From operating systems to paper checks (or cheques if you’re in the U.K.), once something becomes “good enough”, tools and pathways are built around them.

There are a few illustrations of the power of technology standards and path dependency that can match the enduring existence of paper checks in the U.S. financial ecosystem.

Paul Brody is EY’s global blockchain leader and a CoinDesk columnist.

Once upon a time, the infrastructure that supported paper checks included networks of overnight flights and all-night data processing centers in banks. Those are all gone today, in favor of digital image processing systems. It’s not uncommon to both send paper checks from your bank through online banking and bill pay and then deposit received checks by scanning them with your smartphone. The absurdity of going from digital to analog to digital to close the loop on a payment made between two entirely digital banking systems is truly testament to the power of path dependency.

Ethereum is certainly on a path to becoming not merely a global standard but a deeply entrenched one in the global business and financial infrastructure. However, it’s not quite there yet, and the ecosystem needs to carefully avoid what I think are three risks that could make a significant opening for an alternative solution. All of these involve negotiating a middle path between extremes.

Avoid centralization

1. The most important and urgent path for Ethereum is to avoid either excessive centralization or decentralization. The entire value proposition of blockchain technology is built upon decentralization. For the more politically inclined, they see it as censorship resistance. For those of us in business, the value proposition is about monopoly resistance. We live in a world of extractive technology monopolies we don’t need anymore.

The current risks posed to Ethereum by immensely powerful staking systems are a case in point. Even well-intentioned entities that inadvertently develop…