The first layer of the Ethereal blockchain system is fully established and participants of the Rise conference in Hong Kong on 10 July heard the news first: phase two is underway and slated for implementation within the year.
Co-founder of Ethereum, Joseph Lubin, announced Ethereum is entering into a new phase of development where scalability will become a reality.
While engaged in a panel discussion with Arbor Ventures’ Melissa Guzy and Village Global’s Erik Torenberg, Lubin was noted as having said, “We’re moving into a space where Ethereum can serve as the layer one trust system, and built into Ethereum, we’ll have hundreds of thousands of transactions in the layer two systems and we’re going to see that ramified this year.”
By “layer two,” Lubin referred to a “trust layer” which would preserve the established infrastructure of the radically decentralized first layer of the core blockchain. The ability to add new layers or chain mechanisms means new technologies will add greater scalability to the offerings of Ethereum.
Before co-founding one of the top cryptocurrencies and blockchain systems, Joseph Lubin started his career with hands-on innovation technologies.
Lubin started out in robotics, machine vision, neural nets and software engineering. Like most advanced innovators, he branched out from one field into another, seemingly disparate sector of finance. He gained considerable experience building trading systems, working for Goldman Sach’s private wealth, and running a hedge fund. To further grease the wheels of creativity, Lubin included an asterisk in his resume to work in music management in Jamaica.
Inspired by the Satoshi Nakamoto Bitcoin white paper, Lubin had a larger vision for what blockchain could do for the world.
The opportunity for developing a shared infrastructure, as Lubin put it, would be “an organizing principle for Earth, the world, the planet.” He continued to do his homework and came across co-founder Vitalik Buterin’s November 2013 Ethereum white paper. Symbolically, a discussion between the founders on New Year’s Day solidified their joint vision and commitment to getting Ethereum off the ground and into the hands of those who believed in the potential of blockchain.
To elaborate on the upcoming second phase of Ethereum development, Lubin shared an example during the Rise conference to clarify the potential of the project.
The “layer two” for the ever-popular Bitcoin was developed by Joseph Poon; the system was called The Lightning Network and operated as an open channel payment protocol on top, so to speak, of the Bitcoin blockchain. Bitcoin saw this extra layer as a solution to the issues experienced with scaling. The setup involved a multi-signature wallet containing a portion of cryptocurrency while a separate wallet, similar to a savings account, would exist on the blockchain. With this arrangement, several entities would be enabled to make an unlimited number of anonymous transactions.
While The Lightning Network is not as secure as the blockchain itself, it decreases the strain on the blockchain for smaller transactions. For Ethereum, the on-chain scaling solution system is known as Plasma.
Torenburg sat alongside Lubin during the panel discussion and confirmed his belief the second layer would be accomplished this year. He was noted as having suggested, “if 2017 was the year of the [initial coin offering] ICO, then 2018 is for the building and delivery of products.”
Lubin’s claim to excellence involves the main attraction of cryptocurrency: heightened trust through the decentralized blockchain system.
Lubin noted blockchain provides a “natively digital world” in the midst of a society where trust is hard to find. He compared the approach of blockchain’s advantage to its technological counterpart, the internet, saying the Web began with a more “narrow” vision whereas blockchain has the advantage of initializing with a much wider offering of uses and applications.
The inevitable discussion of regulation and the differences between Asia and the United States resulted in the panel agreement on the “more developed differential” of cryptocurrency regulation in America.
Lubin made a point to bring up the statement issued by Bill Hinman of the U.S. Securities and Exchange Commission in which it was made clear how utility tokens are distinct from securities. The decentralized nature of cryptocurrency is what influenced Hinman’s leaning towards viewing it as separate from a security. To Lubin, this means cryptocurrency provides “a whole new model for delivering services and products to consumers – a networked business model held together by [digital] tokens.”
Lubin did not shy away from Hinman’s point in adding fraud is still inherent in the development of blockchain-based cryptocurrency. He noted how fraud is possible through ICOs and “we [do] need regulators to help us clean up the industry” while still holding the internal systems of regulation would be vital for cryptocurrency to thrive.
Ethereum is the second largest cryptocurrency, neck-in-neck with Bitcoin, and not likely to disappear any time soon.
Ethereum (ETH) has a market cap of around $44.5 billion and could be poised to topple the king of cryptocurrency with the completion of the second layer for scalability. Time will tell the success of the Ethereum innovations for 2018.