Vitalik Buterin: Web3 Vision Dimmed by Surging Crypto Transaction Fees

[TL; DR]

High transaction fees are threatening the achievement of web3 vision.

Buterin has called for the Ethereum community to abide by the following core values; open global participation, decentralization, censorship resistance, auditability and a cooperative mindset.

The Ethereum blockchain introduced rollups, account abstraction, light clients and zero knowledge proofs as part of its scaling solutions.

Introduction

Over the years we have witnessed various developments on the blockchain. Basically, new products like non-fungible tokens were introduced after the launch of Bitcoin. The introduction of new products on the blockchain has shifted the focus of various crypto projects. On the other hand, the increasing adoption of the blockchain has resulted in higher transaction fees for the Ethereum blockchain, for example.

Today, we focus on how some developments on the blockchain have resulted in shifting of the web3 vision. More interestingly, we shall analyze how surging crypto transaction fees have affected Ethereum’s vision.

Read also: Vitalik Buterin Endorses NFT Collection, Pumps Value on OpenSea

Surging Crypto Transaction Fees Dim Web3 Vision

In a recent blog, Vitalik Buterin, the co-founder of Ethereum blockchain, lamented the fading vision of the decentralized internet. According to him, there is a shift towards centralized solutions and the dominance of high-stake participants.

Also, many crypto projects are shifting from the core value of decentralization. In a blog post titled “Make Ethereum Cypherpunk Again,” Buterin explained that many members of the non-blockchain decentralization community view web3 as a distraction and not as an important stakeholder. As a result, they are unwilling to buy Ether and other cryptocurrencies.

Buterin wrote, “Few talk about consumer crypto payments. There is a large ideological rift where significant parts of the non-blockchain decentralization community see the crypto world as a distraction, and not as a kindred spirit and a powerful ally.”

In terms of payments, Buterin says that although some people use cryptocurrencies to make payments they do so through centralized means. For instance, they often transfer cryptocurrencies including ETH crypto on centralized exchanges. They also choose to make payments using stablecoins like USDT.

Buterin clarified that it was Gavin Wood, the other Ethereum co-founder, who coined the term web3. By web3, Wood referred to a set of technologies that would form a “more open internet stack.” However, starting from 2017 that vision has been fading.

Buterin Urges to Make Ethereum Cypherpunk Again

Buterin said that Ethereum should revert to being a cypherpunk again. In other words, the Ethereum blockchain should stick to its original vision and avoid “over financializing” the network.

As a fact, Ethereum’s core vision was to become a “public decentralized shared hard drive” that would leverage decentralized file storage and peer-to-peer messaging. Unfortunately, it was the blockchain’s new focus towards financialization that changed its original narrative.

Commenting on decentralized messaging and decentralized storage, Buterin wrote, “The former was heavily emphasized, but with the turn toward financialization around 2017 the latter was unfortunately given much less love and attention.”

He continued, “In the last couple of years, with the rise of decentralized social media we have an opportunity to revisit some of these tools.”

High Transaction Fees Caused the Shift in Ethereum’s Vision

Buterin believes that the main cause of the shift in Ethereum web3 vision is high transaction fees. He explained that if the transaction fee is very low many people would interact with the blockchain. However, if the fee is very exorbitant only high-valued investors will carry out transactions as they wish.

He perceived, “When the cost of writing to the chain is $0.001, or even $0.1, you could imagine people making all kinds of applications that use blockchains in various ways, including non-financial ways.”

He added, “But when transaction fees go to over $100, as they have during the peak of the bull markets, there is exactly one audience that remains willing to play.” In this case, he was referring to Ethereum whales and degen gamblers. Notably, the dominance of degen gamblers alters the public perception of cryptocurrencies and “the internal culture.”

Again, when the degen gamblers dominate the crypto sector the rest of the web3 community feels marginalized. This is because crypto degens are willing to pay high fees for crypto transactions. This pushes away new users from entering the sector.

Therefore, some of the marginalized crypto users, who normally form the diverse audience in the crypto community, become uninterested in cryptocurrencies and other digital assets.

Also, the deviation from decentralization to a sector dominated by high-risk players destroys the spirit of inclusivity that normally permeates the sector.

Commenting on the high-stake users, Buterin said, “Degen gamblers can be okay in moderate doses, and I have talked to plenty of people at events who were motivated to join crypto for the money but stayed for the ideals.”

Hope in Scaling Solutions

In his post, Buterin pointed out one of the greatest achievements the Ethereum blockchain has made during 2023. It is the advancement in the blockchain’s scaling solution that include rollups, second-generation privacy solutions, account abstraction, light clients and zero knowledge proofs.

These components create hope for the revival of decentralized ethos. The Ethereum co-founder said that these technologies, including Zero-knowledge proofs, help to “make at least a part of the Ethereum eco be the permissionless, decentralized, censorship resistant, open source eco that we originally came to build.”

He further explained, “In particular, the programmability of zero-knowledge proofs means that we can get past the false binary of ‘anonymous but risky’ vs. ‘KYC’d therefore safe,’ and get privacy and many kinds of authentication and verification at the same time.”

Core Values May Help Shift Web3 Back to its Vision

Buterin thinks that for cryptocurrency to achieve the intended aim there is need to reduce centralization and financialization. To do so the web3 community, especially the crypto holders, should adhere to certain core values that include open global participation, decentralization, censorship resistance, auditability, credible neutrality and a cooperative mindset.

Conclusion

Vitalik Buterin has blamed the fading of web3 vision on high transaction fees and unchecked financialization. Thus, in order to shift back to the web3 vision the crypto world should adopt the right technologies and adhere to several core values that include, decentralization, censorship resistance and a cooperative mindset.