Convenient Story Telling
Tomer Strolight’s History of Ethereum by Analogy
Last year Tomer Strolight released an article that landed well with Bitcoiners entitled “The Problem with Ethereum.” By analogy, Tomer compares a class system to the Ethereum community. He labels the pre-sale purchasers of ETH in 2014 as the “wealthy class” and core developers (including Vitalik) as the “ruling class.” By characterizing Ethereum as a class system, Tomer can conveniently tell a story of the oppression of the “working class” (the miners).
In telling this story, Tomer correctly identifies the alignment problem of Proof-of-Work (PoW). Mining companies have overhead costs and therefore they are structural sellers of any PoW system. They are by definition incentivized primarily by profits and nothing else. In a sense, in a PoW system, the community (users/holders/devs) is on a different team than the miners.
Importantly, Tomer can’t present his case directly to the reader, because reality doesn’t align with his narrative. When a reporter or a historian recounts events, they needn’t retell the facts through a story or by analogy. Only charlatans pandering to their audience — telling them what they want to hear — have to frame and mold facts to fit their narrative.
But Tomer’s retelling is really a common Bitcoiner framing of Ethereum as ‘the same old financial system Bitcoin was designed to escape.’ While the story is palpable to the wannabe die-hard, anarchical, cipher-punk Bitcoiner, it is merely a fiction fitting his beliefs.
For one, Tomer’s idea that Ethereum’s transition to Proof-of-Stake (PoS) is an attack on the miners is demonstrably ludicrous. The explicit goals of Ethereum are enumerated in the whitepaper. Most notably, the paper defines an Ethereum core tenet, “Agility,” as follows:
Agility: details of the Ethereum protocol are not set in stone. Although we will be extremely judicious about making modifications to high-level constructs, for instance with the sharding roadmap, abstracting execution, with only data availability enshrined in consensus. Computational tests later on in the development process may lead us to discover that certain modifications, e.g. to the protocol architecture or to the Ethereum Virtual Machine (EVM), will substantially improve scalability or security. If any such opportunities are found, we will exploit them.
So from the beginning, it was known that development and changes would occur. And Vitalik openly started to propose the viability of Proof-of-Stake as early as 2014. Thus, as opposed to being the victimized “working class” of the Ethereum blockchain, miners have had more than 7 years of profiting enormously off of PoW. In fact, miners leading up to the transition to PoS are arguably some of the most well-positioned for the change.
Like the previous claim, most of Tomer’s logic doesn’t survive first contact. For example, one of Tomer’s main claims is that the Ethereum ruling class consistently and arbitrarily reduces the compensation of miners. While it is true, that delays in PoS development gave cause to these reductions, they were neither unforeseen nor unreasonable. In fact, the same development delays Tomer categorizes as “ruling class” inept and evil, actually provided miners with many years of mining in preparation for the Merge.
Perhaps most ironically, by Tomer’s logic, Bitcoin’s halving of block rewards every four years is an equally ‘cruel attack on miners’ by the Bitcoin “ruling class.” The reality is that block reward reductions in both Bitcoin and Ethereum are quite beneficial to miners as seen in the miner revenue chart below:
Tomer’s Conclusion
Tomer ends his article by imploring the reader to find conclusive the following statement:
everyone should now see is that Ethereum is not a decentralized peer-to-peer system. It is a system with an unaccountable ruling class exploiting the working class, making promises they can’t keep, while spinning a wonderful narrative
Tomer is conflating, as is common with maximalists in this space, the protocol’s decentralization with the decentralization of the social consensus layer (layer 0 or L0). The lack of organization of Bitcoin’s L0 is touted as better decentralization than the perception that Ethereum’s Vitalik Buterin is Ethereum’s “king.” But Bitcoin has much more organizational and individual entities than Tomer would like to admit. Each has plenty of influence on Bitcoin: Bitcoin Core Devs, Blockstream, Adam Back, Saylor, and Dorsey to name some.
Regarding promises, EIP-1559 shipped when many said it never would, and the Ropsten test-net Merge was a major success much to Tomer’s chagrin. The following overhasty tweet displays Tomer’s compromised thinking regarding anything Ethereum:
The testnet Merge happened about an hour later. By all accounts, an overwhelming success.
The Real “Wealthy Class”
Let’s dispel the Bitcoiner notion that miners have no power in Bitcoin. One needn’t look further than the blocksize debate for which the Miners were integral.
Bitcoiner values and miner values are fundamentally opposed. Contrary to Satoshi’s Whitepaper entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System,” maximalists like Tomer would have you believe that Bitcoin’s true purpose is as a Store of Value (SoV). Therefore, as an SoV, Bitcoiners describe themselves as holders and buyers only. Meanwhile, Bitcoin miners must sell Bitcoin daily to pay for electricity and depreciating hardware.
There are few individual miners left because mining businesses that benefit from economies of scale at every level price out small operations. Worst of all, these miners are structural sellers. They take advantage of the Bitcoin holder and Bitcoin demand to profit in fiat.
If Tomer were on the other side of this argument he might spin some tale of a victimized Bitcoiner in Zimbabwe: ‘A young man in Zimbabwe just wants to control his destiny and free himself from the insane money printing of Zimbabwe’s central bank. Yet, every day, the evil Bitcoin miners put immense sell pressure on Bitcoin and cash out to USD.” I’ll refrain from telling such fictions here.
Bitcoin Proof of Stake 2023
There is an elegant solution that will soon become unignorable to Bitcoiners: Proof of Stake. PoS solves the unalignment problem — the value contradiction between holders/users and those that secure the network.
If there is some doubt that Bitcoiners would ever consider PoS, consider the existential crisis for Bitcoin if ETH’s market cap flips BTC. Consider retail’s sentiment when they begin to understand ETH cash flows are positive in PoS.
I wrote about this last year: “Bitcoin Fork Planned for 2023.”
In conclusion, it’s important to realize that ideologues like Tomer primarily pander to their following for engagement to support their blog/books/companies/ego with narratives that spike the dopamine levels of every maximalist. However, the true driver of narratives is price action, not the reverse. One can theorize about hyperbitcoinization and wallow in the perceived high ground of unadulterated immutability, but when cash flows don’t support theory the fickle sentiment of most market participants will always tend towards profit rather than ideology.
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