14 Sep 2021 1:08 PM +00:00

The Ethereum Oracle: An Interview with DARMA Capital’s Andrew Keys

With Ethereum 2.0 set to bring a swathe of major changes to the ecosystem, there have never been more eyes on the future of Ethereum. While it is difficult to tell what’s in store for Ethereum, one man seems to have found success in predicting where Ethereum could go next.

Andrew Keys is the co-founding managing partner of DARMA Capital, and has gained a reputation as the ‘Ethereum Oracle’ for his blockchain predictions.

Last week, Planet Crypto sat down with him to discuss the future of Ethereum and the wider cryptocurrency sector.

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Note: This interview has been edited for clarity.

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The Future of Ethereum

Planet Crypto: In a past prediction, you stated Ethereum will overtake Bitcoin’s market capitalisation in 2022. Do you still stand by that?

Andrew Keys: Yeah, I think so. And I would say that there are other metrics besides price that determine the health of a network. If you look at the GitHub repositories, the implementation of Ethereum has just surpassed Kubernetes, which is Google’s largest open-source project for comits. So, I think that’s a pretty cool statistic.

You can look at the total value locked, you can look at the emergence of the NFT space, and the decentralised financial space. I would say 95% of anything being built, it's being built using an Ethereum Virtual Machine (EVM) compliant network, such as Nahmii. Either on Layer 1 of Ethereum, but I think the trend of the architecture will be to build on top of a Layer 2 that is anchored by the security of Ethereum, which is basically Nahmii architecture.

PC: We can’t let this call go by without asking if you, the Oracle of Ethereum, have any new predictions?

AK: So, I think we’re going to see a full transition to proof-of-stake by mid-Q2 2022, which is going to basically shut proof-of-work mining off.

If you shut off proof-of-work, it relieves all that mining sell pressure. With proof-of-work, you’ve got to pay for the electricity, pay for the hardware, and pay for the monthly real estate. With staking, it [costs] much less, so you’re going to have that and an increase in the yield.

All that staking income, or the mining income, will be transferred to stakeholders, which I believe will create a virtuous cycle where more people will want to stake. So, I think it’s going to be another positive catalyst.

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Ethereum Killers

PC: Proof-of-stake is not a new protocol – other networks do use it. The term 'Ethereum Killer' is thrown around a lot. We know you aren’t a fan of that term, and have said that these will fizzle out in the future. In this past month, Cardano and Solana seem to have exploded. Do you think they will fizzle out and it will all lead back to Ethereum, or is there space for more than one DeFi platform out there?

AK: Great question. I think that all of these networks can optimise for different outcomes. And I think that Solana optimised for speed at Layer 1 at the sacrifice of decentralisation. And I think that is fine for Layer 2, but for these networks to work in a decentralised peer-to-peer fashion, you need many nodes. Not a trivial amount of nodes to validate the network.

While we’re in the growing wonder years of the youth of Layer 1 networks, I think that if you have apples-to-apples comparisons and Ethereum grows up to have the same benefits and speed of Solana-like networks at L2 that can anchor into Ethereum and L1 in a couple of years, I think everything is going to trend towards the massively decentralised network. Internet vs Intranet.

And I’m sorry to say, it seems that Cardano is dead on arrival. You can’t peer review actual use cases. It’s been very heavily researched, but they did a two-week testnet, and the first smart contract-based application imploded. And I’m sure that can be fixed, but it seems like there’s a lot of research, and not much implementation or experimentation, and I think they better get out of the lab and get their hands dirty.

Image of Cardano/ADA coin on a brown, wooden background
click to enlarge
Credit: Ruben Hanssen
Cardano is now the third-largest cryptocurrency by market cap, behind second-place Ethereum. Its Alonzo hard fork went live on September 12.

The Crypto Lobby

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PC: You’re quite outspoken against Bitcoin on Twitter, where there is a big divide between the Bitcoin community and the Ethereum community. The Senate Infrastructure Bill caused quite a lot of controversy in both communities. There was talk of these two groups having to put aside their issues, to unite against those who don’t think any cryptocurrency has a future, rather than thinking just one cryptocurrency has a future. Thoughts?

AK: I would love to clarify that I’m not against Bitcoin. I think Bitcoin is kind of the patriarch of the asset class. I also think Bitcoin, in the gaming lexicon, is the Atari. It proved that we could have a peer-to-peer globally decentralised ledger that could record transfer-of-value. I think that’s a very narrow use case, and it's very cost and energy inefficient.

Having a general-purpose virtual machine, like the EVM, or like WebAssembly, versus a purposely dumbed down UTXO virtual machine like Bitcoin that can really only accomplish one task, which is peer-to-peer. It’s extremely important, and a no brainer.

That said, I think that the blockchain digital asset crypto-economy ecosystem really had a wake-up call when we saw the legislation introduce this pay for us, for the egregious spending spree that the US Government has gone on recently. We are still very early in this space; I think there are lots of common threads that can be lobbied and thought tanked by various DC entities. You’re going to have these overarching themes, and a lot of it will be education at first.

But then, you’re going to have particular issues. There was a part in [the Senate Infrastructure Bill] where they were going to be permissive of proof-of-work, but they weren’t going to be permissive of proof-of-stake. I don’t think any of them really know what that was. I’d love to find five congressmen or congresswomen that understood the difference between proof-of-work and proof-of-stake.

I think you’re going to get kind of the ESG (Environmental, Social and Governance) considerations where you have proof-of-work mining, which is tremendously energy consumptive, versus proof-of-stake – this next generation that doesn’t need all that electricity.

You’re going to have different aspects of DeFi with AML KYC (Anti-Money Laundering, Know Your Customer) considerations that are going to have specific lobbying needs that bitcoin may or may not lead. You’re going to have lobbying specifically to the SEC for security constraints, and the CFTC for commodity constraints. So, I think there’s going to be this kind of underswell of education, and then you’re going to have to pinpoint specific issues for legislative granularity.

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In a later conversation about the upcoming Nahmii L2 project, Andrew expanded on this:

AK: Now we need to create an ontology or a taxonomy for tokens, because not all tokens are created equal.

Some represent prizes – what’s a sword worth, $10? Whereas some represent securities that are registered with the SEC. Some may be considered unregistered securities, which would be illegal if you were the issuer. Some represent commodities, there are tokens that represent bars of gold and currencies.

The legislative powers that be, 99% of them when they hear token, think of bitcoin as this abstract concept, versus this is a technology that can enable the tokenisation of all assets. Whether it’s a song, a stamp, a bar of gold, or a barrel of oil.

What regulatory compliant frameworks do we apply to the sword that maxes out at a $10 or $1000 value, versus the bar of gold that’s being used in a derivative trade?

PC: The cryptocurrency lobby doesn’t seem like it’s going away, especially with big names coming into the industry. I know you’re not the biggest fan of Jack Dorsey, but he does seem to be making a splash in the eyes of the mainstream.

AK: Yeah, that’s fair. I am a fan, but I think that sometimes he’s missing the trees for the forest. He doesn’t represent that he wants to maintain Twitter working properly, but you could have a decentralised version of Twitter which I think would be much more powerful, because we’re seeing them algorithmically censor particular points of view, and I think that’s wrong.

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Just adding a tipping bot to something that’s algorithmically censoring one point-of-view over the other, I don’t think is really in the spirit of what we’re trying to do with decentralisation – it’s really just adding the monetary aspect. This is democratising our voice as a society versus, just adding a tipping feature. I think adding a tipping feature is lovely, but you could still do that with Venmo, so the architecture is not that interesting, per se.

That’s the half-step. But really, creating a decentralised Twitter, where you could have provable identities that are unique, cryptographic attestations to their reputation, and you could have it provable that there’s non-censorability, I think is a much more unique concept, and really where we want to go. But I guess maybe he’s thinking in quarter steps and half steps.

Read More: NVIDIA GPU Prices Are Back On The Rise - But Is Ethereum To Blame?