Ethereum Foundation Ethereum Berlin Meetup May 2022, 25 May 2022

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From YouTube: Ethereum as a self sufficient ecosystem - Josef Jelacic

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Slides: https://drive.google.com/drive/folders/1ZLdT20HFyMu7E-DxXZfQNHpFetD0OOcp?usp=sharing

Berlin Ethereum Meetup on May 25, 2022:
Josef Jelacic on “Ethereum as a self-sufficient ecosystem”

Although the Ethereum ecosystem is flourishing and although it was even growing in the last years despite the crypto (speculative) winter, we are still miles away from a sustainable environment where we could simply rely on economic interest of the companies in the space to maintain and improve all necessary pieces of the Ethereum stack. What will happen after large treasuries behind funding ecosystem goods like the EF disappear? And should they disappear?

A

No I'll I'll start I'll start, even if you're noisy, I don't. I don't care all right here. You are.

B

A

uh So well, a thank thank everybody for coming. This is this is one of the the most packed meetups that I've seen in a long uh long while and thanks so much to the organizers of the berlin theater meetup. As far as I know, this is this is actually no my my journey. My journey into ethereum started in berlin. The first meetup I ever ever attended was in berlin in the old ef's office, and this is how I got involved in this ecosystem, and the same people are still around the same.

A

People are still organizing these. These meetups, which is which is just awesome. um So I'm going to talk about ethereum as a self-sufficient ecosystem and well sorry. This is going to be boring because, uh if I sell say self-sufficient, what I mean by that is, like you know, taking like an economic lens and looking at the ecosystem kind of from a high-level perspective, I'll mention a lot of projects. I won't get uh deep into those I'm happy to give you some context.

A

uh Hopefully it will make sense if not just like feel free to ask me later on. Even if you have like anything during the during the presentation, just raise your hand, I'm happy to quickly expand, but we don't have a lot of time. So, let's jump into it.

A

Okay, sorry for being a boomer uh uh content, so uh so first I was started like looking at the ecosystem kind of from uh from a high level perspective.

A

uh I will talk about, like my breakdown of the ethereum tech stack, um then I'll talk about like what's uh what's a safe baseline in terms of and again the boring part, the financing of the ecosystem, because uh this is this- is kind of the lens that I'm uh taking uh and I'm going to show you some like data about like the treasuries in the space and uh kind of the on-chain fees.

A

um And again, that's kind of the my viewpoint of self-sufficiency is from this like economic perspective of like hey is this: is this like crypto economy, the ethereum economy, big enough, so we can actually like uh sustain itself by just the the value that it brings to the current users. um I probably should have also mentioned. Who am I and what? What did I do before? I was part of the for the past several years I was working with a lot of r d projects.

A

um uh Part of the work was related to uh to overall funding within the ecosystem, um rather on a high level. I work with some of these teams like closely, but some of the numbers mentioned here or most of the numbers are just a napkin math. So don't take those don't think those like, um as you know, like a universal truth, some of those change as well. So obviously, uh it's not always up to date, but all the numbers that I'm going to disclose are also not secret.

A

I mean, like you, can guess those just be based on like basic math, like looking into these projects and kind of the number of people around those.

A

What's that, okay, I didn't have- I didn't know I didn't know this was part I didn't notice. This was part of the of the presentation, and now now you have to think I'm a complete boomer, so it's actually quite fun, so some numbers. uh So we have roughly like 2.5, 000 kind of people that we could consider core slash like shell developers, people who have like deep knowledge about the ethiopian ecosystem people who either develop clients tooling around the around it that understand on a very deep technical level.

A

uh What's what's going on, then we have roughly 200k kind of capable developers. You can see those as like the web tree cohort like people that are coming into the ecosystem. That came in the last like two years that know what's going on: they they are technical.

A

uh They don't follow like client development they're, mostly on kind of the application layer, but you know no dap. They could switch into like being core developers uh and kind of on a user level um defy, as an example, obviously like defy is like currently the the biggest use case for for ethereum. uh The estimates are that there's rough, like three million users, uh this doesn't you know, go into detail like how active they are just like three million souls that, like ever touch the stuff that the two point uh 2.5 k people actually created.

A

What's come on.

A

That's that's an evil plot I did. I don't think I did that in the presentation, so some some other numbers. So we have. uh We have roughly like five teams working on execution layer, clients, uh five plus teams, working on uh consensus layer, clients like in the you know, kind of the e2, um um the pre to uh narrative, and we also have like more than five teams working on kind of the l2 scaling, um which you know that's like that's really kind of the the bottom like th these.

A

These are the pillars of like what everybody is building on top of um cool. I clicked, and there was no. There was an animation so who is building on room, like obviously there's like bunch of individuals but again taking the lens off like what actually like makes money on ethereum uh you see startups. You see a lot of d5 projects, you see like services for the ecosystem.

A

uh You know things like alchemy, like infrastructure providers like those are all associated projects that make money off ethereum in some way. um um You know it can be defy. It can also be like b2b solutions and so on. uh Then you have daos, like you have a lot of a lot of dows these days. um You know building uh building uh protocols um being somewhat like um self-organized, like those are not real companies um from perspective like entities, uh but they they make money.

A

There's a lot of projects in um in the space that um that are thousands and actually have the biggest treasuries. um And then you have large companies, like uh you know like it or not.

A

You have like projects like aws microsoft, uh these, like huge giants that uh actually have business associated with ethereum as such, uh so from my perspective and like some of those are obviously supporting the ecosystem by sponsoring and like bringing developers and so on, but in kind of from my perspective, those could be also considered as like potential uh funders of the ecosystem.

A

So just for comparison, this is data from open arts. uh The on the left- and you probably can't read this- this is a snapshot I took on um july 2021 uh on, on the right hand, side. There is the snapshot that I took uh 30 minutes ago. uh So what you're looking at here are the treasuries of of the kind of ethereum projects in the space, and obviously you have like unit swap on top with roughly like 2.5 billion dollars in your treasury. You have like compound uh ava and some other projects.

A

You can also see the differences um between like last year and now uh the good news is well. Obviously, some projects are gone, um crypto crashed, but not so much the treasuries. So roughly there's still.

A

It's driving me nuts, so roughly just from this data, and this doesn't consider ef uh and like a lot of other kind of like other companies in this space. This is literally just daos right. This is literally just the money that's sitting on chain. uh You have something over six billion dollars sitting in those treasuries like waiting to fund something in the ecosystem, which is good um cool. uh So now all right, so we we have. The ecosystem has deep pockets. That's a that's a good information!

A

uh Now, let's look at the stack and kind of like what the ecosystem could fund. uh So just you know for simplicity. I kind of like went with these four little little happy boxes, so you have like the main antenna protocol layer. You have some research and governance, uh languages, contracts and tooling. So uh in the protocol layer you have again like execution, clients, consensus clients uh on the research and governance, like you have a bunch of like core research around like hash functions and signing libraries. What not you have a bunch of ltu's.

A

You have like the internet like zkp, track, uh stateless, and you know also the eip process and kind of stuff connected to it. Then you have things like solidity and form of verification or like fee, and you know like other languages in the languages and contracts. um You also have ides um remix, some some plugins or some like smaller projects in the space.

A

Then, on the tooling side, you have like obviously a lot of like tooling on like the javascript side, the interior, like ethereum js, you have um all of the stuff that the python community creates and a lot and a lot of other tooling. So apologies if I didn't mention a particular project again, this is just a you know: super super quick uh run through.

A

So all right. We have these nice little boxes and that was the baseline like how much money do we need yearly to like fund things that fit into those boxes uh again? This is take this as a napkin mat, but um uh the execution because, like obviously a bunch of this data, isn't isn't available. You know it's private, I'm sure, like they're, the expenses like, for instance, on the um on the protocol protocol level side, I'm sure those are much bigger but as well. Arguably you can just take.

A

You know like uh five clients um and uh divide like seven million dollars into five clients, and it should like give you, I guess, like good enough like number of people that can can actually work on that for a year, so you have roughly 17 million dollars on the vertical side. You have like roughly 17 million dollars on the uh on the research and governance side, where a good portion of that goes into zkp's and l2, so scaling in general. um uh You have uh roughly five million dollars on kind of language and contract side.

A

uh You have um roughly like full four million dollars on on the tooling side and obviously again like this is this is a baseline. There is like there is much more money that could be like utilized in all of those boxes or any of these projects, but we just need an anchor so so again like things things that are not considered, so that's the entire, like wallet ecosystem. That's the application layer, education and events, operations and kind of like compliance stuff. None of that is considered within that number.

A

So this is just like pure devs and, like you know, people uh building stuff.

A

Why is that happening? So all right, uh that's 42, surprise, surprise, point eight million dollars, let's say if well, we need roughly like 50 million dollars currently uh to sustain that kind of like basic stack around ethereum. um That's a lot of money, um but we as well have this like six billion dollars like sitting in treasuries, and I'm not saying you know like it- should just like go entirely into this. There's like a lot of stuff that can be funded, but it still kind of feels safe.

A

So, but you know just like having having deep pockets, wouldn't really get you get you anywhere I mean like it could get you far, but you couldn't couldn't consider that to be like anything, self-sufficient self-sustainable, and um you know it's kind of like also also the case of like ef, which you know is an organization that has been a huge resource resource allocator in this space for a long time, uh but it doesn't have any income. It's just like the like. Ef is magic like it's. It's a is this like huge.

A

You know like surprise for everybody where all of a sudden uh there's this non-profit, which doesn't have to worry about uh about like income for the organization itself, um because it like happened to be part of this like magic event of uh emergence of like this new uh new dimension of programmable money, and it happened to have that money. So, um but that's that's, definitely something that you cannot expect to happen on a daily basis.

A

So uh let's look into on-chain fees and into actually it this, like economic demand um on the network and like what people are actually willing to pay to use ethereum.

A

So again, two snapshots last year july, uh 30 minutes ago. um Well, we are in a bear market, um so the numbers are slightly lower uh and you can also see like bunch of projects again like disappearing and appearing, uh but it's not too bad. This is still. This is still like again like napkin math. um It's like seven million dollars every day uh in fees for the different protocols um or using ethereum. As such.

A

uh That's that's a huge that's actually like a decent economic demand and, like you just need couple of days for the intro system to work to be able to fund the 50 million dollar uh ticket uh that allows it to run and it allows it to to you know kind of like progress, um so things that are not considered in this number again, like um uh mining, rewards, uh yield farming uh and all of the like d5 kind of above um the basic fees.

A

So these are literally just the fees um and like any coming to the enterprise sector like there are no like consultancy fees like anything that actually the you know the kind of associated um businesses that are utilizing ethereum uh in a different way. So again, that was just on-chain fees and obviously exchanges. That's also like a lot a lot of, like um you, know, money, flow and fees that the the exchanges get and obviously exchanges are also beneficiaries of the of the ethereum ecosystem.

A

So I mean this: this number is already outdated, but you can do the math. uh You have roughly like 1.5, like 2 million dollars. Obviously this fluctuates um generated or paid right paid in on chain fees on a tea room. um So yeah, that's my conclusion: we are. We are fine, uh it's I mean like it. It's a bear market. I was surprised myself. I mean we are in a bear market, uh but um um we are fine. I mean like uh we. We can.

A

I mean if you know, like my point of reason, why I started digging into the data is like uh we can. We can rely on deep pockets and I like what I would like to see, and that was the reason why I got involved in like multiple initiatives.

A

What I would like to see is uh like the ecosystem, not just relying on the treasuries, but the ecosystem, rather like relying on the the social standard of like people actually giving back to the core developers and giving back to you know the people who actually uh make this possible and that like help this ecosystem to progress, so I think that if we can like establish social standards, that the projects that like benefit of ethereum, give just a very like tiny fraction of the fees into uh into the development uh of the curve protocol or the associated like two stack, um you know I think like ethereum can actually run for like decades or like, if not you know, hundreds of years as the technology.

A

Obviously that's a that's. A bad stake always like never make these these sets of takes, but in terms of the economic demand, um the future is bright. Like I'm, you know, I'm I'm not worried at all, and with that, it's it's actually nine. So there was those bit. Let's, let's see this the last last animation here: no, it wasn't there uh yeah. So that was it. Thank you.

A

So actually, there's one more thing: uh um there's like obligatory shield of if prague, which is a hackathon conference happening in prague in june. So in a couple weeks, um please sign up uh the the speaker. Slots are already filled, there are still hacker slots that are open. There is a. There is a wait list, uh but you know it's like tradition, that, like uh people who get free tickets kind of don't show up. So uh we are overbooking slightly.

A

uh So please sign up for each brock and just like show up to brock in in two weeks, and I think we have questions over there.

C

As I understand it, like the foundation score or like what I also said is kind of like to like give basically like, of course, the ethers going down in the foundation every year like and and of course it might not go down and it might not have gone down in in dollar terms over the last five years, because ethan went up.

C

But um I think what do you think about like kind of like if one thing's really long term, you want to kind of have still money in 100 years in the foundation and to make it more like an endowment where, for example, like the foundation stakes, all its ethereum and only uses the staking rewards for protocol which could like fund it in perpetuity? Probably so, like my, my question is more like, as I understand vitalik and I and like the foundation, is that it actually philosophically wants to go down to zero.

C

But I think it might be a risk to the ecosystem if it doesn't have money in 50 or 100 years to support ecosystem.

A

Yeah so so, first of all like I'm, um I left the foundation, so I no longer speak on behalf and the the fact that it's still there is just a reminiscence of the presentation. um So I can only give you, like my opinion, my subjective view on this. um um But um yeah I mean it's it's more complicated because, like.

A

You know, like the in my opinion, like the the neutrality kind of like also comes from the fact that, like you, just don't pick like projects in the ecosystem and you say like hey, this is the way to do things like you. Don't want to, like ef, at least to me was like very credible in the sense that it it wasn't aping into stuff. It was always this, like kind of like a actually quite conservative. You know like unit, and I think, there's some value in that.

A

Like you know like you, don't you don't want to you don't want to put all of your eggs into this into one basket, uh so I actually think like strategically it's it's a good decision um to the question of um like.

A

Could we sustain ourselves from just like running like or getting like stickers taking rewards and like funding the ecosystem? From that um I mean I would actually love to. There was a lot of a lot of conversations about, like kind of like taxing block rewards. You know that's like two three years back, I'm glad that didn't happen.

A

uh I don't, and I don't want- I don't want there to be like a programmed way uh for for this to happen, uh and, in my opinion, like you know, if, like ef did that that would kind of get into that direction. You would just like expect. This is here to stay and like um you, wouldn't you wouldn't need these like new champions to step up, like you know like folks at bitcoin like they do amazing work in like showing their alternative ways like the ecosystem can be funded.

A

um So I think, like the way to to actually like still sustain the ecosystem, isn't true, like one organization such as ef, like throwing like a a huge pile of money into something that could generate returns and like funding everything from that, uh but I would actually say it has to come from the projects in the indian in the ecosystem.

A

You know, even even if, like some of those are programmed like, if there is a doubt that says well all right, we just like have a vote and we give like five percent of the fees like to this. uh You know um to this contract that will distribute the money towards like uh these five teams that build the build the clients like. I I think that's actually there's actually a better approach because, like you, will you'll gain like more resilience in the system.

A

If it's, if it's just not, you know if it's not expected, but it actually happens.

D

Okay, oh yeah. Thank you. um I would have a question and um I will put my question into an analogy. So the the housing market, 2009 2007, there was also a system, and you know the the first people who couldn't pay off their debt and you just need fifty percent of these people to uh break down the system, and here I was wondering: is it possible that the bigger projects belong to the smaller projects and in these you know like crypto winters?

D

If the smaller programs breaks down um the bigger projects might not get enough fees, etc, etc? So is it possible how what's what's your take.

A

um So I'm not sure I understood a question correctly, but is it like? If, if um I don't know there is a there's all of a sudden like something wrong with, I don't know like abba or something or like someone who builds on top of avid and like this would disappear.

D

For example, if other depends on on 20 other smaller projects, because they are running on rv and they don't have enough funding and breaks down, then ave wouldn't get the fees from these projects and would go down as well.

A

um Yeah I mean it's it's kind of it's kind of like a black swan. It sounds to me, as kind of like a black swan scenario where- um and we probably saw this like multiple times for like certain projects, um I mean the the good news and kind of like the stuff that I was trying to showcase is that um I basically showed you show you only the data which is kind of like easy to get you can.

A

You can like look at look into these like multisigs that hold these treasuries um and, in my opinion, there's actually like much more money in in the ecosystem than like what you what you've seen here. um So I mean I'm not saying it's impossible.

A

uh I think it's like unlikely to some extent, because there is a lot of a lot of like deep pocketed teams and there's like, but you know even the stuff that you see around yourself like take gnosis, for instance like like this, this place was started by gnosis right, I mean I'm sure, I'm I'm kind of like missing some context. Some historical context, but like gnosis, is one of the great examples of a project that like started early in the ecosystem, and now they kind of like deliver more and more value across the board.

A

Not not just you know, in prediction markets, uh I'm not actually sure anyone associates diagnosis with production markets these days. um So um I I think there there can. There already are multiple like champions in the ecosystem, so I'm not as worried, obviously like something can happen and like people can all of a sudden like change the direction completely, and they say like all right that was this was this was all like, like you know, magic internet money like forget about it, it could happen, I'm I'm not.

A

You know, like we've seen what happened like during covet. We see what's happening now like um uh in ukraine and other places like I could imagine those scenarios before I'm not saying it's it's impossible. I feel like it's unlikely.

B

All right, maybe we have time for one last question: if it's a if it's a short one.

E

uh So the thing that occurred to me is, if you go back to the list of all the treasuries that you had right like a lot of those treasuries. Aren't, aren't that's not their money right, so like ave or uni, swap or whatever right, like. That's someone else's money, that's trading, but then, when you went to the fees thing, it's also kind of not all their fees right because they're giving a lot of the fees back to the users. So I was just kind of trying to think through.

E

But what is interesting that you mentioned is like if you look at uni, swap labs right. So these projects that manage to generate a lot of fees for a long time, they're not spending any of them and they just kind of pile up in these treasuries right and then yeah.

E

I think, like uni, swap in the last years, kind of really come out and said: like we're gonna just start, you know funding stuff, and so I I would encourage, I don't know the answer, but to really kind of dig down and figure out like where is the free capital right and then what are? What are dows and what are organizations doing with it right because I it seems like most of them are trying to somehow promote something. That's not super, like I'm gonna get my money back right away, um yeah anyway.

E

That was my thought.

C

E

They do, I think they take, don't they take some.

A

I mean as a dow right like.

E

Take some percent of the fees.

A

So so that goes to the liquidity providers. I mean, like you, you're you're, right, um um obviously like there's like I'm, not saying it's like five people or like five organizations that like make these decisions, there's like there are masses of people behind those fees or masses of people behind those dows I mean, like all of these are or dao's. If I'm not wrong.

A

um The point is um there definitely is this like collective interest in like making sure that this thing runs, and it obviously makes a lot of money um not too like few companies but to like a lot of people across the board, um but the other. The other kind of like underlying part, is um it's like it's it's disproportionately more than what I feel is is kind of a safe baseline of what the ecosystem needs.

A

So I'm sure that, even if you know with like a whole bunch of rounding errors and like just wrong math uh that I might have used like uh you know getting these numbers or like even I'm not sure if these are correct, I didn't check like every single treasury. I just trusted. uh So, even if there is there is, there is a lot of place for uh for failure in here. So that's that's kind of my point.

B

All right yeah. Thank you very much. Joseph.