Ethereum and Decentralisation - discussion

Intro*: I have a small channel on Telegram called the Swiss Crypto Club where I post for my small group of followers. I posted something recently that I want to bounce off of the larger community as a sanity check. Here is the post…*

I want to say something about Ether. Please keep in mind as you read this that my opinions are based on my own research and analysis - you should do your own and not blindly trust mine.

I have lost some faith in Ethereum. And I only see that I will lose more going forward. Why?

It’s because of the reality of POS blockchains. Not just Ethereum but all POS blockchains. I won’t go into what POS and POW are here. I am going to assume you know this.

Ethereum (and all other POS blockchains) offers a passive income to those that own ETH and stake it. Since ETH finally ended its vesting schedule and encountered no serious problems to redeeming natively staked ETH, the risks around staking ETH have greatly reduced.

(As an aside: During that long vesting period, many staking protocols appeared that allow you to stake your ETH and get a derivative ETH that can be traded. According to all accounts, this works smoothly and was widely adopted during this vesting period where natively staked ETH was locked. This unlocked new ways in which POS tokens can be staked and traded at the same time, accelerating the returns and flexibility, and thus the attraction of POS chains)

Back to ETH

If Ethereum’s POS consensus algorithm remains largely unchanged (likely) and continues along its path to become the default smart contract chain in the market, I see that its decentralisation will only diminish over time. Why?

Its because whales just get bigger without taking on more risk. Eventually these whales will be the ETF issuers, i.e. the traditional whales. Eventually we are back to the shady games of Wall Street, now turbocharged with the powers of crypto.

It would be a very lamentable state of affairs.

And despite being an investor, my charting of Ethereum’s current trajectory, leads squarely toward that outcome.

I came to crypto to become rich, but along the way I learnt about things I was not expecting. How the traditional financial system really works. How it gently applies the brakes on all our personal economic endeavours and transfers that energy to accelerating those of the whales. They made these rules precisely for this outcome. Bitcoin breaks their rules and levels the playing field for us all.

In their current state, POS blockchains emulate these rules rather than breaking them.