The main purpose of Ethereum when it was born was to herald the next generation internet. Its creation was based on building a peer-to-peer network without the control of a single entity or group by positioning the community at the center of the global system.
2020 has allowed the power of this network to flourish through innovative and industry-changing projects such as Yearn.finance, Aave, Synthetix, Nexus Mutual and many others. In fact, the top 10 decentralized apps on Ethereum are now attracting more than 1 million users per month.
Many successful projects based on Ethereum are committed to the community or focus on it. They collect donations to eventually share with various stakeholders. But we have also seen the emergence of “get rich quick” programs that, as a result, freeze collateral. Most of the time, the community-based posts are an afterthought that is explored during times of great growth.
Can we create a system that will continue to benefit community projects and that is built into the core infrastructure of these protocols?
If we are to create such a network based on the original ethos of Ethereum, the community must now look to long-term sustainability that will benefit the entire ecosystem when it comes to quick profits. In 2021, we will be able to provide long-term solutions using advanced decentralized technology to integrate financial returns for the network into the infrastructure of our projects.
Connected: Digital decentralization is just the beginning. The real world will follow
The rise of DeFi is welcomed but comes with complications
DeFi’s meteoric rise in 2020 has brought promising and even bigger investments to the industry. However, the booming interest in making quick money through new techniques such as crop farming has left the network with overloads and unsustainable projects. Some users moving large amounts of cryptocurrency pay thousands of gas fees to transfer Ether (ETH). This creates a financial barrier for many who want to use DeFi applications but don’t yet have large crypto holdings.
In some cases, projects saw a steep surge in fame followed by a sudden decline, largely due to an unsustainable or short-sighted business model that never really looked past the next listing, fundraiser, or first coin offering. While an increase in the capital and the interest that flows into projects based on Ethereum is a positive development, it is not intuitive if projects do not hold up in the long term.
Achieving sustainability: Eth2 and Layer Two solutions
Many approaches and projects aim to make the Ethereum network scalable and more efficient using the Layer 2 infrastructure, including knowledge-free rollups and optimistic rollups.
With Ethereum 2.0 taking shape, we need to bring the community ethos back to the heart of the network and build financial returns into the underlying design that maintains the network and its infrastructure – this is where community-driven Layer Two solutions are becoming increasingly important.
Connected: Ethereum 2.0: Less is more … and more is coming
We can achieve this scalability by creating profitable projects that will give the community back by scaling and generating constant revenue for a year, two or five years – not just after a successful bull run, ICO or fundraise.
Layer two solutions that follow a donation receipt network not only solve problems at the layer level, but also correspond to the original mission that Vitalik Buterin initiated at the beginning.
As a decentralized tendering mechanism, proof of donation reinvents the protocols and teams that build projects based on Ethereum.
This type of mechanism invites network coordinators to bid to win the right to build the next batch and collect transaction fees. Such a concept comes to life when a percentage of the income generated by the auction process is reinvested in community projects based on Ethereum.
We need to build these funding mechanisms directly into the second tier infrastructure. In this way, the entire community automatically benefits from the operation of the network, not just in times of rapid growth or high profits.
I’m looking forward to
In summary, the Ethereum community needs to develop long-term sustainable projects from which the entire community and network benefit through the quick profits.
Bitcoin’s (BTC) rally price hit an all-time high of $ 24,000 this month as ether surged above $ 730, which the world took note as current financial systems continue to disappoint, exploit and exclude.
We now have the means and the ability to create a sustainable network of decentralized applications that empowers all of us, not just a few elites. Let’s not miss this opportunity.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Paul Lansky heads the ecosystem development at Hermez Network. He is a decentralization maximalist who is excited about the potential of these technologies to challenge the status quo for the better. First people, then technology.