South Korea has been seeking to outperform global competitors with many futuristic innovations, but cryptocurrency is not one of them.
Alarmed by the massive price fluctuations of bitcoins, the Korean government has taken a cautious approach toward cryptocurrencies. Their trading has yet to show full signs of recovery since the government banned initial coin offerings in 2017.
The measure had sparked intense debate over how to treat blockchain technology that underlies cryptocurrencies. While the government said tight regulations are needed to avoid financial scams, opponents have claimed that “excessive restrictions” could dampen the emerging technology.
Ethereum co-founder Joseph Lubin has not shied away from weighing in on the issue with his experience of running one of the world’s biggest blockchain-based platforms. His argument has been quite simple: however legitimate the concerns may be, it is not an excuse for “killing” the technology.
“Go after the people who are using the technology badly, and don’t throw the revolutionary database technology because your country will suffer very badly if you do so,” Lubin told The Korea Herald at Deconomy: Seoul 2019, an international blockchain conference held in Seoul in April.
“Cryptocurrencies are a very narrow use of blockchain technology, and there are many other uses of the platform. … The less governments around the world understand that, there is a danger that they will be left behind.”
|Ethereum co-founder Joseph Lubin (ConsenSys)|
According to Lubin, who now runs ConsenSys to help startups build an Ethereum network, said the currency market is destined to fluctuate to some extent. Given the underlying blockchain network’s profound potential for business, people cannot help but follow a “fear and grief cycle.”
Following a dramatic plunge from record-breaking prices, bitcoin’s value is showing signs of recovery. Coindesk data showed the world’s biggest cryptocurrency has reached its highest level since November, with its price hovering at around $5,750 in March.
While Lubin said he does not know exactly what caused the rebound, he forecast that things would become more positive in the cryptocurrency market. He predicted the market would see another rise soon -- as early as by the second quarter of this year.
“It seems very unlikely that an April Fools’ Day joke would have moved hundreds of millions of dollar worth of value,” said Lubin, dismissing suggestions that the recent bitcoin rally was spurred by fake news about the US government’s approval of two bitcoin exchange-traded funds.
On the other hand, concerns persist over how secure cryptocurrencies are against hacking attempts. According to a study by Independent Security Evaluators, 38,000 Ethereum coins -- worth more than $54 million -- were stolen by an unknown entity in 2018.
Given the nature of “information asymmetry” between platform users and operators in the blockchain-based projects, Lubin acknowledged there is a chance that naive investors could be taken advantage of by unscrupulous people.
As there is an inherent danger associated with the technology, he said it is much better to come up with a mechanism for self-regulation rather than relying on external authorities to prevent fraudulent activities.
“Information asymmetry here is very, very big,” said Lubin, explaining it is because blockchain-based platforms are often operated on a global scale with barriers being lowered. “You can copy and paste a website and attack somebody’s Telegram channel.”
“Those schemes are very hard to find and police. In the blockchain ecosystem, when things start to become better self-regulated, I think it would be very difficult to do a project that anyone on the internet or anyone who cares about blockchain things won’t be aware of.”
One of the self-regulation methods could be provided by the Ethereum-based platform called TruSet. Lubin said. The platform is designed to incentivize people with tokens when they provide primary sources of data or correct misinformation.
Despite all the hype surrounding technological breakthroughs, there appears be one question that has weighed on many people’s minds: How can blockchain technology be used to actually improve our daily lives?
While applications are not so sophisticated for consumers and companies yet, Lubin said the next big wave could come from the gaming and finance industries. Artists and journalists could also benefit from the decentralized nature of blockchain technology that prevents intermediaries from taking a cut.
“Each new wave brings a new cohort of interested people and pretty exciting stuff. Things are much faster than before. … I can’t even imagine (how) these waves of growth will happen way faster and probably repeatedly.”
To expand applications, each blockchain platform should be able to process the network faster without compromising the principle of decentralization. To address what is called the “scalability problem,” efforts are underway to upgrade the current Ethereum network to Ethereum 2.0.
Lubin said in about a year from now, his team will be able to complete a beta version of Ethereum 2.0. A total of four phases are needed to complete the upgrade, and it would take about 18 months to finish the task.
Once the upgrade is completed by 2021, an upgraded version of Ethereum can conduct hundreds of thousands of transactions per second. While it varies by the type of transactions, Ethereum is able to process 15 transactions per second, with a maximum of 27, he said.
“Ethereum 2.0 will bring thousand times more scalability by the end of this year. It is the next generation of Ethereum that will enable it to be much more scalable. … Basically, it takes all the goodness of Ethereum and multiplies it by a thousand.”