Tracking Ethereum Like an Insider

Transcript

[applause] >> Thanks for coming to this talk. As Kartik mentioned, I am going to talk about how to track Ethereum like an insider. I'm going to basically talk and show you my trade secrets for how I do what I do. And for those of you who don't know me, a little bit of a track record for why I am qualified to talk to you about how to track Ethereum like an insider, I have been tracking Ethereum development and governance for the past 8 years. I was one of the first people to start regularly covering the Ethereum developer calls, the ACD calls. And now I run independently

um an Ethereum development newsletter and a Bitcoin development newsletter. I also host a podcast on the topic of Bitcoin and Ethereum development. And I also uh run a small research and advisory firm to help businesses building on Ethereum and Bitcoin. Another thing that I did was I launched something called the ACD and the BTC toolkits. And these are the series that I'm actually going to be talking about today. I have deprecated that series and I'll explain a little bit about why I did later on in this talk, but the framework that I used to build the ACD and BTC toolkit is really still relevant

to all the work that I do today. So, let me tell you a little bit about that framework for the ACD toolkit in particular. The [snorts] framework and my basis for understanding Ethereum core development and governance comes from the way that I answered these three questions. The first is how does Ethereum governance work? The second is who are the key players involved? And last but not least, where and when do they meet to discuss and decide matters related to Ethereum?

All of the insights that I have about Ethereum are based on how I answer these questions. And the way that I've answered these questions have actually changed over the years as the Ethereum protocol has evolved and as the governance and the development of Ethereum has also evolved. So, let's get started by teaching you all how I answer these three questions for Ethereum. Starting with the first, how does Ethereum governance work? Ethereum governance is like an onion. It has many layers and the first one is pretty easy to understand. It's pretty easy to unpack.

There are these formal processes that are defined by EIPs, these documents that some of them can be updated, especially the governance ones, but there are other EIPs that are supposed to be static. So, certain EIPs like EIP1 defines the EIP process, the process for proposing a change, a code change to the Ethereum protocol. >> [snorts] >> There's other EIPs like EIP 7723 that defines different labels that you can give these EIPs to define what stage in the governance process that EIP is. So, you might have heard on X or some of these ACD calls, these labels like CFI,

PFI SFI DFI all the eyes. And those really stand for terms like declined for inclusion, scheduled for inclusion, considered for inclusion in an upgrade and this document tries to clearly define when an EIP is considered for inclusion into an upgrade and how that differs from say an EIP being scheduled for inclusion in an upgrade. Um so those are the formal processes. You can read up about them. You can have AI summarize them. It's not too hard to understand what the formal process is of Ethereum governance is. The harder part and the more important part are the informal processes. These are the norms that drive Ethereum governance that is

not defined in any document. It's something that you really only pick up on when you track an Ethereum upgrade in real time or track the life cycle of an EIP in real time. Uh the more that you do this, the more that you start to pick up on forces that are driving decision-making on Ethereum that nobody has ever clearly defined, but it's definitely there. So a couple examples of this are things like how votes and decision-making um happens, especially when it's very contentious. You'll find that on ACD calls generally when there's a contentious decision, every single client team gets one vote. On the call,

the ACD moderator is saying, "Okay, Reth, what's your vote? Besu, what's your vote? Geth, what's your vote?" And it doesn't really matter that a client team might have 40% market share or less than 1% market share. Their votes are counted equally. And [snorts] another kind of interesting norm that you'll pick up on if you're really tracking an upgrade in real time is that it's not enough often to have a majority of these votes um be in favor of a decision. You need some kind of a supermajority. And the more contentious that decision is, that supermajority kind of varies.

Um for contentious decisions, you need a little bit of a higher supermajority for that decision to get made than um other non-contentious decisions. And even for really non-contentious decisions, you don't you maybe even just need a majority, not even a super majority. Um so, these are the kinds of trends that you can pick up on. They're not really black and white um and they're not formalized into any process, but they're very important to understanding Ethereum governance. So, it's important to know both the formal processes and the informal processes. The other part about Ethereum governance that I think is also really important to understand when you're tracking Ethereum like an insider is that these processes change more often than you would think. Um it's

very important to regularly check in on Ethereum governance because of how um over the past like two upgrades, entirely new formal processes have emerged for determining how Ethereum develops. For example, the headliner process, that's only something that has really been implemented since the Fusaka upgrade um which I believe was really just the last upgrade >> [laughter] >> on Ethereum. Um and often times some you'll find that developers will make a formal process like the Ethereum protocol upgrade process and in the process of implementing that formal process, they'll realize, "Actually, we

don't really like that formal process. There's different policies in there that we don't we can't really adhere to. So, let's change that. Let's update that." Um and that's why it's really important to know that that yes, Ethereum governance is like an onion, but it's also growing and changing. Um and it's important to to update um on a regular basis. So, that's the first part. The second part is knowing who's who. I really want to stress on this slide that it's not enough to know about who the stakeholders are in Ethereum development and governance as a category.

Many times you'll hear even in the governance understanding of the governance of other protocols, this like theoretical of an understanding that the balance of power is the validators or miners. And then you've got the developers, and then you've got the end users, and you've got the client teams. And they're all thought to have different motivations and different reasons for participating in development and governance. But when you look a little bit deeper at not the category of the stakeholder, but who that individual is participating on the governance

decisions, participating in decision-making, what company they are employed by, and how that company gets funding, you start to get a bit more of an accurate picture of what is actually driving Ethereum development and governance. And a really good example of this is when you think about client teams. Many times you think about client teams as the people that are really the ones developing Ethereum. They're at the forefront, and they're this independent group of developers that just really love Ethereum and and are sourcing feedback from the entire community about what they should do, what are the best code changes for Ethereum to be implementing it at this time.

But when you look a little bit deeper into who funds the client teams, you'll realize that some of the client teams are actually funded by layer two protocols. Some of the Some of the client teams are themselves validator node operators. They help also secure Ethereum. Some of the client teams are funded by VCs. And I don't know if many of this room knows this, but most of the client teams for Ethereum were seeded and funded in part by the Ethereum Foundation. And that should tell everyone in this room a lot about why the Ethereum Foundation plays such a pivotal and and like leadership

role in the coordination of Ethereum development and governance. Um recently, of course, the Foundation has announced that they're downsizing and that they're going to be you know, having a bit of a more narrow focus. Um but that also opens up the question of as the Ethereum Foundation no longer is the one that drives the funding for client diversity, it does open to ask and to question what will happen as client development is funded by more diverse sources.

Um and is there a source of funding that becomes dominant again? That is maybe not the foundation. And how does that impact governance and development? So these are questions that you would only be asking if you dig a little bit deeper beyond the theoretical categorical understanding of who plays a part in governance and really start start like participating in on the calls, um tracking an upgrade in real time, and knowing and doing a little bit of research on who's who behind the calls. Doing a little bit of of research behind the company um of that individual and where that company is based and how that company is funded.

So that's the second part. And last but last not least, the third pillar for this framework is being in the room where the decision-making happens. Um and all of these pillars, you can think about it as being synergistic. So if you are tracking an EIP uh through its life cycle, you're going to naturally be looking for the places where that EIP is being discussed. And on that call, you'll naturally be hearing voices and and people on those calls and considering, okay, who is this person? Why are they in the room? Uh what is their motivation? Um so you don't have to think about these as sequential.

They're all very synergistic to understanding. If you know who's who, it'll help you understand more about governance. If you know more about governance, it'll naturally help you understand a little bit more about where governance takes place. Um, I highlight these three ACD calls because they're one of the most important for decision-making on Ethereum. It tells you exactly the decisions that are being made for the next immediate Ethereum upgrade. And these ACD calls, um, similar to what I mentioned about Ethereum governance being evolving, this is another really great example of the decision-making forums also evolving pretty rapidly. Um, when I first started covering Ethereum, um, all the decisions and the and the

asynchronous coordination was happening on Gitter. Now it happens in Discord. Back then, developers were only meeting once every 2 weeks to coordinate and decide on certain, um, changes. But when then when the merge happened and Ethereum became doubly complexity, developers started to meet every single week. They added in another call and said, "Okay, we've got to coordinate every single week." And then over the over the course of another couple years since the merge, developers got a bit more ambitious saying that we want to keep changing Ethereum in pretty big ways and we want to get faster at it. We want to do two upgrades a year. So then they added in another call and now developers are meeting twice, um, a week to really make sure that they're trying to meet their development goals. Um, but aside from these calls,

there's other breakout calls, there's other um different meetings, uh, that take place for trying to work on initiatives that are longer term beyond the next immediate upgrade. So there's certain calls that happen around the lean roadmap. There's certain calls that happen around quantum security. Which I guess, yeah, lean and quantum, they're a little bit intertwined in certain ways. There's also certain calls that happen around standardizing the JSON RPC, which is not necessarily like a consensus breaking feature, but it is very important to um developers to want to improve the UX of um the software that they're building.

Um and this these rooms, these decision-making platforms are the most accurate way to understand what is being prioritized in the Ethereum development roadmap. I argue that it is even more accurate than the straw map. It is more accurate than all of the discussion and talk that is happening on X. It's more accurate than any kind of marketing that you're going to get from any type of Ethereum company out there. If you listen in on these calls and see what developers are actually working on and implementing, that will give you the most up-to-date information on what is really being prioritized in the Ethereum development roadmap. So, very important

stuff, um the people, the places, and the process. The The That is the framework for having a good understanding of uh Ethereum and tracking Ethereum like an insider. That is why I created the ACD toolkit. I created three posts that comprehensively answer all of these questions. I implemented my entire knowledge for the past 8 years into these three posts. I updated it every single week. Um I also used it every single week to generate the insights that I was putting into my Ethereum newsletters.

I also applied that framework to Bitcoin. I started um covering Bitcoin core development about like a year ago. And I used that framework to create uh versions of the same documents uh covering Bitcoin core governance, uh its people, and where the meetings take place. I updated those weekly, um made it as comprehensive as possible, kept adding to it. But as I kind of mentioned in the beginning of the talk, I did deprecate the ACD and BTC toolkits earlier this year. Um and it was not because I thought that the framework was faulty.

Um the two main reasons that I deprecated it was because the number one, the medium wasn't that ideal. Uh these were written posts that I had to manually update and just kept getting longer and longer and longer over time. And with this kind of dense information, it wasn't easy for my readers to be able to know when an update or a new change was being made to that post. And I was inspired by other websites and other tools that track Ethereum development like Forecast to consider maybe repackaging this information into more automated interactive dashboards, which haven't gotten time to really get to yet, but that was really the direction that I was heading.

Um which leads me to my second point for why I deprecated them. Um I am one person with um a couple newsletters and a podcast and a bit of an advisory work on the side. Uh and most of my clients tell and uh most of my readers really just wanted the actionable insights. They didn't really care to know how the sausage is made, so so to speak. They didn't really care to know all the nitty-gritty in the weed details of how Ethereum development works. Um and they much preferred getting from me the insights of the latest news headline of like the Clarity Act or why ETH price is down, things like that. Um which is why I started to shift my time and my focus

a little bit more to just generating more insights. Um even though all of those insights, as I've shared with you today, are based on the underlying framework for how I answer those questions. And again, as I mentioned at the top, the way that I answer those questions is evolving. And as the way that I answer those questions evolve, one of the things that I I to highlight is that this framework has been extremely useful for me to understanding the change in the value proposition of Ethereum.

And also considering how Ethereum is differentiated from other blockchains and from traditional finance. If you are able to track the development of a particular protocol from a more insider's perspective, you get a very clear lens for the values that are driving or the forces that are driving the the value of that blockchain. Um and so I I want to kind of end off this talk by taking a little bit of a step back and for people in this room that are either building a protocol or using a protocol um to kind of stress and and like appeal to you guys to at least

consider using the framework for at least like one protocol and seeing what kind of answers you find and how that impacts your understanding of the value of that protocol. Because addressing a little bit of the elephant in the room in the time and the place that we are with crypto. Um obviously crypto is growing a lot in institutional adoption and value. But as that's happening, I think there's a lot of questions being asked about what is the true value of these protocols. And it's quite clear that while many of us may have started in this industry or had thought initially when they came into

this industry that these decentralized protocols were going to lead to greater permissionlessness and um credible neutrality in the financial services that we're interacting with, it's quite clear that many of the protocols that have been built on Ethereum, built on Bitcoin are not really decentralized for these ends. They're really more decentralized to the end of having a bit more operational resiliency and uptime by having some of the operators be located in different jurisdictions and geographies. And I think we've also seen a little bit of like decentralization theater in trying to align with the industry's ethos and values of decentralization. A certain protocols relying on federations and multi-sig and saying that, you know, my

federation is six members and so it's more decentralized than yours which has five or this is a three of then multi-sig which is more decentralized than a two of then multi-sig. Which yes, I mean you could say technically that's great. That is a little bit more decentralized, but it's not really to the end and the purpose of making that protocol more credibly neutral or permissionless or censorship resistant. Um especially if that kind of coordination comes from a central source or a central funder. Which begs the question of okay, then what is the real value or the end of these decentralized technologies? And when you're considering that, you can really think about other ends like transparency.

Um you can think about uh whether or not a blockchain is is significantly more verifiable or accountable in terms of the financial activity that happens on that chain compared to other traditional sources. But these are the kinds of questions that I promise you you can find a clearer answer to if you start to track the development and the governance of these chains because they're still such new and nascent technologies. Um and I just highlight that it's never been easier or more important to track public blockchain development now. Um I hope this framework will be able to help you guys. I think there's a lot of AI resources as well. Um and especially with the amount of again institutional adoption and uh value that we're seeing

in this industry, um I think we do need a lot more people that are insiders on this protocol and sharing what they know. Um so if you want to get started with either Bitcoin or Ethereum, those tool kits as I mentioned in my talk today are available on my Substack. Um, and if you're interested in digging deeper on some of these topics, I'm going to be hosting a happy hour tomorrow, um, which you can find out more information about on my Substack. Thanks. >> [applause]