Ethereum co-founder Vitalik Buterin published a blog post Monday looking at the development of various blockchain use cases over the past few years.
With years of experimentation behind the ecosystem, the developer has narrowed down a list of uses that he personally finds most noteworthy in crypto.
Money: The most important app
Buterin began by highlighting what he sees as blockchain’s most important — and first — application: the creation of new forms of money.
In particular, he noted that citizens of countries with high inflation, such as Argentinahave much to gain by storing their wealth in crypto and using the technology to facilitate interaction with the global financial system.
While transaction costs and speeds were once impractical for using crypto as a daily means of payment, upgrades such as the merging have helped encourage faster settlement times on Ethereum, and scaling technologies like rollups offer much cheaper remittances than previously possible.
Stablecoins are particularly beneficial as they offset crypto’s notorious short-term volatility. Buterin sees the future as a mix of centralized and DAO-driven stablecoins backed by real and crypto assets.
DeFi, DAOs and stablecoins
The programmer also believes that there will be a place for decentralized finance (Defi) in the future – as long as they follow relatively simple models centered around a few basic functions.
“Decentralized finance, in my opinion, is a category that got off to an honorable but limited start, [but] has morphed into some sort of overcapitalized monster that relied on unsustainable forms of yield farming,” he wrote. Despite his speculative past, Buterin called decentralized stablecoins “the most important defi product,” with prediction markets and other synthetic assets also worthy of mention.
“There is also room for using an asset as collateral to borrow against another asset, although such projects are most likely to be successful and non-teary if they keep leverage very limited (e.g. no more than 2x )”, he added .
Meanwhile, Decentralized Autonomous Organizations (DAOs) can serve as effective governance structures for applications/enterprises that need to be protected from external attackers or internal corruption.
MakerDAO is an example of such a model when applied to stablecoins — although ownership of its governance token is still fairly concentrated among a few holders. “This is a good model to launch a stablecoin, but not a good one over the long term,” Buterin said.
Other reasons for using decentralized governance may include greater efficiency in collecting input from many sources and better interoperability with other rigid, decentralized systems.
Buterin also mentioned decentralized identity solutions (ENS, PoH, etc.) and hybrid on-chain/off-chain applications (e.g. voting) as viable use cases for blockchain. Still, he believes that blockchain faces fundamental limitations and that most potential ideas for the technology have likely already been explored in some way.
“Industrial supply chain applications have gone nowhere. Decentralized Amazon on the blockchain didn’t happen,” he said.
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