On the Future of Ethereum by Eric Sui

Transcript

Um, I'll I'll explain the the confusing part. Why Why do I have two jobs? Um, I'm currently in the midst of transitioning from the Ethereum Foundation to Etherealize. I'll explain what Etherealize is later. TLDDR, think Red Hat for Ethereum. Um, so, uh, I I was assigned this topic like two or 3 days ago. I wasn't ready to pull together the whole Ethereum road map. So, I thought I'd make this a little bit different. We're going to take a little bit uh a bit of a mini journey through the past. So, where have we been in Ethereum? I'll talk a little bit about where I think we are today and then maybe a sneak preview on

where I think we're going. These are just my opinions. I don't speak on behalf of the EF or Etherealize. I put that disclaimer so I can say whatever I want. So, uh, I'm going to speed through this initial part. I I'm a bit of an oddball at the EF. We don't actually have that many Trafi people. I might be the only one. Um, so yeah, and most of the foundation, it's either academics, computer scientists, so I I am about as strange and as corporate as they come at the EF. This um I had a lot of fun putting together this slide. This is a bit of like a reflection on how my life has changed. Uh it's still the same stuff

though. So, uh a little detour through the past. Uh zooming out, I think it's very easy to get caught up in the day-to-day of crypto, but if you zoom out and look at maybe the past decade, there's really only been three breakthroughs or moments that have mattered. The first one was Bitcoin. We invented money and it was magical and it was on the internet. This is money you can self-custody. You can move. No one can stop you. Theoretically, you can't do anything with it. Next, we invented smart contracts. Now, you can do things with the money. The third one, I'm going to call it prog crypto. Um, it's a shorthand. I think Zerox Park or maybe

Vitalic came up with it. It stands for programmable cryptography. And this encapsulates things like MPC, FHE, ZK. Just think fancy math lets you do things with data um that you couldn't normally otherwise do. So these are the primitives. The primitives let you do things with them. These are the things you can do with these three breakthroughs. The first one, I'll call it digital bearer assets. This is a fancy term. Some people might call it store of value. Some people might call it uh commodity money. Some people just call it money. But there's there's three main things you can do with them. One is you move them. Second, you do nothing

with them. You just hold them. Third, I'm going to call it record cuz I couldn't think of a better word for it, but the word that should come to mind is ledger. This it is money. You can use it to keep track of things. Smart contracts, they let you do a lot more. These are the these are the known use cases that I think we found. Unclear if they're going to last, but I'm pretty confident a couple of them will last. Uh you're you're familiar with most of these actions, right? So trading, think unis swap, borrow lend, think maker, think a compound. The next one, um I couldn't find a great word for this. Um I guess it's predict. Uh but

think polyarket. It lets you bet on uh things Trump is going to do basically. Uh the next one I'll call it identify. So the things that should come to mind here would be decentralized identities or DIDs. Uh there's a bunch of interesting projects doing Quark ID is the one that comes to mind. They're doing some cool stuff in Argentina and Mexico. It's all CK. It's moon math magic. I have no idea how it works, but it works. um authenticate and authorize. Basically this is saying who are you and then can you do the thing with the money or the action.

So first we started with money then money grew into something useful. We call that finance and then to access finance we kind of need to know or it's helpful to know who you are if you want to access certain systems that where you can't just let everyone in. So we'll call that identity. The last one, again, proc crypto. Uh, I'm going to call this magic because I'm not a cryptographer. I'm not a mathematician, and frankly, most engineers I speak to also have no idea how this stuff works. They just assume the library and the math is correct. And there's a couple confusing things you can do with it. Uh, these these verbs are very confusing. I'm not going to explain any of them, but just

think ZK, MPC, and FH. Uh, you can prove things about data. You can compress data, you can conceal it, uh you can secure it. So for security, it might be things like NPC or a whole host of threeletter acronyms. Um so moving on. So where where did this what was the point of all of this and what was the genesis? It was these two papers. The first one came out in 2008.

You've probably read it and if you haven't read it, you've probably read the chat GPT version of it. This was Satoshi's paper, peer-to-peer digital cash. Um, the second one came out half a decade later. Vitalik wrote this. I think he was 18 when he wrote this and he presented it at Miami. This was basically uh Bitcoin but programmable and he we called it smart contracts back then. So, money and then things to do with that money. And the promise of these two papers it was it was very big at the time there they made very grandio statements. The first one made the statement of we can replace money around the world. The second one made the statement of we can uh replace all

applications in the world with this new system. And so this was many years ago right? The first one was almost two decades ago. the second one almost exactly a decade ago. And so how how let's do a check-in on how far we've gone. So th this is a meme that a friend at um an MEV project sent me. He uh he's unfortunately he has to do product management at an MEV project. Uh which often means you you kind of just guess you just guess at things that might make money. That's a lot of me. Uh and and he sent me this meme and he was he was particularly fed up that day and he was

like, "You know, Eric, my my day often feels like a Monte Carlo simulation. Um we have no idea what product market fit is, so let's just throw random things at the wall." And so a a lot of crypto actually resembles this, which is not a knock against it. We should be experimenting, but often the experimentation looks a little it'll look a little silly, especially for your friends who are not in the industry. they'll feel like, "What are you guys doing over there?" And so here here's a little walk down memory lane of some things that either did not work in the case of DeFi 2.0 that was decidedly not a good idea.

Um, some other things that maybe haven't had their moment yet. Gaming is one that comes to mind. Reddit absolutely hates crypto gaming. Uh, and and honestly, so does most of the gaming industry. prediction markets were basically a nothing until the US elections last year. Identity and O is good in theory. There has been no breakout application and more importantly there's been no breakout application that makes money uh until someone bundles it. Maybe one of you guys can do that.

But that said, there's a lot of things that have worked, right? And so I'm going to show you a lot of charts that go up and to the right. Um, you don't have to actually read any of these charts. Just know this is DeFi and it's all up and to the right. So one chart is stable coin supply. That's the one everyone loves pointing to. the one next to it uh I think also from Artemis that's borrow lend volume and so you'll see a in there I think a is the purple one and then there's compound and then there's TVL on the bottom left and then there's DEX volume and then that other that other chart that looks a little

different that's just Google trend data so clearly something is working right seems to be working and according to Google some people are paying attention I just did Ethereum, but if you looked at Bitcoin or crypto, it'd be the same. But what this doesn't show you is this just shows you the absolute number, right? It does not show you what the relevant denominator is, which is to say, let's take the stable coin one that what is what number is that? It's a little over 200 billion USD that's in stable coin supply. What that doesn't tell you is what what are you comparing that against, right? Like how it's been

10 years. How far have we actually gone? Which is why I say don't celebrate yet. And so I'm going to show you some numbers that should uh depending on how you view it is either cause for extreme sadness and giving up or it should be a call to action that there's a lot more work left to do. So remember this is what we promised to the entire world. We were going to replace cash and digital money. We were going to replace all applications with onchain applications. So keep that promise in mind. We made this promise two decades ago. This is how far we have come on stable coins. So we are roughly 1%

penetrated. What is the denominator? Um, it's tough to figure out the exact comparison for stable coins, but the closest thing you might be able to find it's this uh arcane metric called M2. This is M2 money supply. What that comprises is that is cash. So, paper cash plus all the coins in circulation like physical metal coins plus bank deposits. So, whatever you have in your savings account, a certificate deposit or money market fund. But basically, think of this. This is the stuff that Tether is supposed to hold in their treasury supposedly. And this is what Circle holds in their treasury. This is the thing that backs the stable coin.

Total stable coin supply is 200 billion. Total M2 is 20 trillion. So, it's been 10 years. We've gotten to 1%. The numbers get lower from here. Dex volume. This is when you open up your MetaMask or your Phantom and you ape into the thing. We are under one. We are a tenth of 1% of all I'll call it relevant assets there. You can make this number even lower if you start adding weird stuff like real estate or wine or fine art or worships. You can trade all that.

Uh we are 0.1% of public equities, public debt which is government debt, private debt which is corporate bonds and commodities. So oil futures, orange juice futures, uh bacon futures and they they get even lower. So this is onchain borrow volume. So if you summed up a and compound and morpho and the salana forks of these things um you you get to this number it's it's that number whatever it is I don't remember it over total secured debt and this is debt that is backed by collateral mortgages whatot we are a drop in the bucket so we've come a long way right

like this has caused for some celebration we have a lot left to go. So this is a 100x. This is a,000x. Uh someone else has to do this math. It's more than a,000x. Uh there which is why I say if you want to build this is your opportunity. If you want to celebrate, this is not cause for celebration. So this is um this is one of my favorite memes. This is from Mad Men. Uh the bottom is crowdfi and that's Don Draper. He does not think about DeFi and and often when you talk to banks and you

come in and you're unis swap or you're a and you're like look at all my TVL and look at all my trading volume they will frequently say we do that in 1 hour this doesn't matter you can leave my office now and so the other way to show it this might be an unfair comparison I just did Google trends again this is the search trends for bank Ethereum crypto and bitcoin And at at no point in history have any of these terms overtaken the word bank. Bank is a normal noun. These others are proper nouns. We want to become an actual noun. So why why has this taken so long?

Right? Like it's been two decades nearly. Why why are these numbers not higher? Right? Because it makes a lot of sense to us that this is clearly a better system. If you ever try to send an international wire or process a check at your local bank branch, it is awful. It is an awful experience. So, what why has the entire world not moved to this? I'm going to give you some answers that you won't typically hear on the podcast circuits. It's not scalability. It's not due to privacy. It's not due even to things like custody or wallet experience. It's actually

something there's some more fundamental things. So the first one I call it professional services but think in in normal tech you typically will have systems integrators. They'll they'll go in they'll deliver to you the entire solution. They will hold your hand and ship the whole thing. We don't currently have this developed in crypto yet. And so if you think the central bank of the US is going to look at your GitHub repo and just fork it and just do the thing or download MetaMask or Rabby and start trading the entire balance sheet of the US on Ethereum mainet, you uh you may

need a reality check. They need a lot of help to do these. Um, the second one I I'll call it naval gazing, but I think you know what what is ironic is a lot of conferences like this are are often very naval gazy. It is crypto people talking to crypto people. Uh, I I realize the irony of me doing this at you, but we we should we should make an effort to not do this or do less of it. The the third one, ETH Denver comes to mind for the third one.

And I don't know if you've ever seen the the Doge Lamborghini that's typically parked outside of the main ETH Denver venue, but for every one of those, I'll estimate we lose a 100 users permanently. Um, we we should also do less of that. Uh, it's it's most of you here, I assume, are builders or devs or engineers. I'm sure you don't like being associated with the cringe side of the industry. Um, I I would I would suspect that's actually not a majority of the industry. It's just they get the headlines and when we all go home and talk about our jobs frequently, this is the topic that comes up. It is the cringe factor. Uh, they they they don't care about your your open PRs. They care

about what they saw uh on, you know, MSNBC. Uh, the last one, the last one's just time, right? It t it's going to take the world's comfort to get used to these ideas that are very normal to us. No one knows what censorship resistance means. It's a confusing term. No one knows what decentralized means. That's also a confusing term. So, we need to get them up the education s curve. We need to stop being a little less cringe, please.

um we need to reach out and we need to actually ship the products and actually hold hold their hand and show them this is how you do it and integrate with legacy systems. This is not the sexy work. This won't get you a VC check. Um but it might get you revenue which is something we probably need as an industry. So so far we've covered where we were. This is where we are now. But I didn't want to end on this. I think things are looking up. So we'll get into the actual topic which is what is coming up next. So one big I mean this won't hold

for every ecosystem. This is generally an approach taken by ecosystems like Ethereum or Bitcoin and Celestia. But generally I I'll call this the the trend of small boxes. watching very big boxes and you see this phenomenon all over the place. This is actually the entire L1 L2 architecture. You have a very big server which is the L2 sequencer and the L2 nodes. You have many many L1 nodes and validators. They all enforce and watch that big box in the middle. You see this in me. This is how PBS works. You see this with provers and verifiers. Provers are typically GPU

farms. Verifiers are the laptops you have in front of you. We have collapsed on this as most likely the correct way to scale a system like this. And tomorrow you can extrapolate that. What is the small box? The small box is Ethereum and the big box are things that happen in the real world. So if we do our job right, it might be finance, it might be elections, and it might be actual events. So this will be things like poly market. These are things that I didn't want to make slides for at 3:00 a.m., but these also matter. You can ask me about them. You probably know what some of them

are. And so these are probably the highlights of what's coming next for Ethereum from a technical standpoint. You'll see these on all the various Vitalic road maps. They'll touch on some or all of these. Here's a part I want to get to that you won't typically find in an EF talk, but I think it matters just as much, if not more. Um, the left hand side I'll call maybe a business model shift. Um, I this is what I would like to see. I don't know if it will happen.

I hope it does, but we need folks that can actually deliver and integrate these systems. So, in in trad Well, Mackenzie probably shouldn't be on there. They just make really nice slides. But you'll have firms like DXC, Accenture, Cognizant, and Palunteer. They don't just sell SAS. They sell you the the whole thing. They will show you how to install these systems, maintain it. They'll show you what you can do with it, and they will customize it. And we need the exact equivalents for for crypto. Uh consensus has been doing this for a very long time. They've they've pushed Ethereum very far. Um and we need we need more efforts doing this. Second, uh it feels ironic

saying this at token Dubai, but we need smarter capital markets. A lot of the issue with crypto is we don't have smart capital markets. And so we have misinformed capital chasing misinformed business models. And it's all it it all, you know, you can trace things upstream and and ask the question, who's the one that keeps these funds in line? It is it is the people that fund them, the LPs. And so we we actually just need to get smarter across the board.

Um, okay, we'll stop here. Uh, I put up some questions that I thought I didn't cover at all in this. You can ask me what's on here. You can ask me anything you want. Um, there's my contacts. So, do we have any questions in the room? Anybody want to ask a question to Eric about the Ethereum Foundation, about the future, about linear and Jira? Anything? Ask me about linear here. Here, here. Use a mic about it realize. Can you tell us a bit? Uh,

yeah. Yeah. So I think the way I would explain Etherealize it's think Red Hat for Ethereum or something more like Palunteer for Ethereum. So delivering some version of Ethereum that's actually usable for institutions, governments traffic. Yeah. So uh I was also a coder. Raia code on ether like eight years ago. I mean start with very previous solidity.

So nowadays I saw I mean onboard institution is very important just like you said. So what will I mean compared to Sonana and Su we see a lot of them they are trying to get the clients get the the government get the enterprise. So what do you think about Ethereum next step? I I know there's Ethereum enterprise aliens or something. They have some consortium stuffs. So for the next competitions, what do you think about how Ethereum can win with the onboard institution like the mass adoption or something? Oh, got it. So the question was on the competition for enterprise amongst different blockchains. Yeah, I think so. It's an interesting thing. I

think if you pay attention to the cryp the typical crypto info flows like Twitter or the block or block works or podcasts, you will get the impression that it's actually very competitive for that stuff. When you go into the field and you talk to these institutions, it's actually deeply uncompetitive. As in, let's say you're the government of this country or you're the government of any country or you are a large US investment bank. And then your your CISO is like, "Hey, uh, crypto person in my firm, find me three blockchain ecosystems that we can evaluate." In every single scenario that

I found, Ethereum is always one of the three and then the other two is kind of a a grabag, right? Sometimes it's Ripple, sometimes it's Ava Lab, sometimes it's Hyera Hashgraph. I don't know what that is, but I've heard that one before. and then some random L1 you've never heard of, Ethereum is always there. The the issue historically has been while a lot of these other ecosystems at their foundation, they'll typically have a BDish, they won't call them BD, but they're essentially BD.

Um there's usually someone to call, right? Historically, there's been no one to call at the EF. And so Ethereum is just there, but there's no one to deliver the solution. And so maybe the way to tie that together is the the opportunity has been there. No one has picked it up. And so I would say it's actually very uncompetitive. But I think if Ethereum doesn't do anything, you lose the advantage. And the advantage is very very large right now. Like mind share wise there is nothing else that comes close in terms of decentralized apps.

uh right like I if any other chain comes up it's always in the context of why wouldn't we use Ethereum um just for my conversations any other questions anybody well if you're not going to raise your hand for a question can you put your hands together for Eric Sui from Oh wait we got someone Oh, you faked me out over here.

Hi, thank you so much. Uh, amazing presentation. Maybe I bit late here, but I missed how Palanteer uh working with Ethereum for better financial markets. Can you please clarify? Thanks. Oh, sorry. to to clarify what what was the question? H how volunteer volunteer yeah connected with ah yes all of them and uh goes with consensus and ethereum for better or smarter capital markets. Yeah. Yeah. So the the thing I was trying to so the

topic of the talk was what's the future of Ethereum. I think typically these talks will focus on things like scalability or where the road map is going. You will rarely get people I think that attempt to lay out where they think the industry is going like in terms of what what are actually the missing parts of the supply chain in Ethereum that we need now right and typically at least for enterprise tech for SAS or cloud or is any of these things you you will have pure technology vendors they just build the software they hope someone buys it they might even sell it to you uh you have hybrid firms that do that and then also build and customize it for you. And then and

some of those are the ones here. Uh you're probably familiar with some of them. And then there are some that look more like classical consulting firms. So what they will do is they will tell you like let's say you're the CISO and you're like, "Hey, I need an ERP." You'll probably call up one of these firms and they will explain these are the five things you should choose. These are the criteria you want. we think you should choose this and by the way we will implement it for you. Uh so the analogy I was trying to draw is we we don't really have an entire industry of those in crypto and I don't it is not as simple as opening up L2B or Ether Scan and downloading a wallet and and trying to

onramp like this is not how enterprises operate. They need someone to call. They need someone to yell at. They need someone to ask and guarantee SLAs's. They need a DevOps person who's up 247. Poor poor DevOps. Um, like you you actually need to service these systems. And you you typically will see this in open source. Uh, Red Hat was probably the most famous example. There's many many others, but this is a class that we we haven't really found yet in crypto. My theory is because we've been very R&D focused and probably purely product focused, but we we actually when you deploy these systems at scale, like think if you wanted to replace the voting system of a

country, you can't just fork a GitHub repo and deploy into an S3 bucket. You you actually you you need to service these things and to customize them. And so I I think my hope is that that class of actors will be filled by any number of folks. Consensus has been doing this for a very long time. Gateway.fm they do great work. They recently did a thing with Microsoft and apparently they did very well. Um Lambda is Lambda class. They do a ton of excellent work. Uh Etherealize out of the four is definitely the new kid on the block. We are specifically doing this but for US crowdfi

um so we're building systems for brokerage desks large hedge funds um all using public Ethereum smarter capital markets the point I was just making is uh markets in crypto are not very smart um you can just open the top 10 list and you can see what I mean uh there's things that shouldn't belong there and you might ask the question why are they dumb Uh, and the answer, it's a multifaceted answer, but the cleanest answer is to figure out, well, how smart are the people that are giving them money? And I would reckon they're not as smart as their Trafy equivalents. So, we just need an upgrade across the board. This is my

opinion. All right, anyone else? Going once, twice. Put your hands together for Eric Sui. Thank you for coming out.