Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
When cars first started to appear in the 19th century, they were a truly ridiculous sight. Clunky, noisy and big, it was hard to imagine for most contemporaries that these machines would ever be good for anything. Worst of all? There just was not much use for them. After all, most roads were not in a state to support cars. Fast forward 100 years and the picture had changed.
Looking back, the rise of blockchains and Ethereum as the foundation of the new financial system will seem equally inevitable. Last week, Ethereum developers launched the new Dencun upgrade. It significantly reduces the cost of transactions on so-called ‘Layer 2s.’ While the upgrade itself was a major milestone, it also shows that the Ethereum roadmap is progressing towards scalability, security and decentralisation. In the public perception of many, blockchains may live somewhere between memecoin gambling and vaporware. This is similar to how cars were seen before the advent of infrastructure designed to support them. But some of the best computer scientists and cryptographers in the world are busy building these roads.
The endgame for blockchains seems to be a so-called modular approach: different Layer 2s with their own setups provide varying degrees of speed and decentralisation. Corporations might gather around ‘permissioned’ Layer 2s where participants have to go through KYC. Specific applications that require large throughput might use their own Layer 3, a so-called ‘app-chain.’ Ethereum’s Market Cap of close to $500 billion provides substantial economic security for this ecosystem. It will also be built around Ethereum’s ethos of credible neutrality and permissionless-ness at Layer 1. Eventually, the ability to have finance ‘natively’ built into the digital world will allow use-cases that we cannot even imagine today. From machine-to-machine payments, a more equitable global financial system and hundred times lower cost of trade finance and cross-border payments, the transition to blockchain-based finance will happen slowly, then suddenly.
The main challenge on the way is to ensure that all these blockchain ‘modules’ keep the main benefits of the system. These are the shared liquidity that enables financial use-cases on a large scale. It is also the composability that allows programmers to connect with applications across all platforms. But as Dencun’s successful launch shows once again, Ethereum is quietly executing on its roadmap.