A Noob Friendly Breakdown of Tuur Demeester’s Epic Ethereum Rant

Tuur Demeester, founder of Adamant Capital and editor-in-chief at Adamant Reach, an economic research firm primarily focusing on cryptocurrencies, is well-known for his sustained crusade against Ethereum. On Friday, Dec 28, Demeester once again took the opportunity to launch a tirade against the popular cryptocurrency — only this time, his relentless criticism consists of an epic 50 post strong tweetstorm, bashing everything from the Ethereum community to Vitalik Buterin himself. Although appearing somewhat biased, the respected crypto analyst’s rant does touch on several harsh truths about the project — though, many of his points might go over the head of those not intimately clued-up on Ethereum.

Trouble is Brewing

Referencing his history of regularly bashing Ethereum, Demeester begins his tweet storm with some justification — setting the tone for things to come. Ethereum is generally considered a ‘blue chip’ — a term typically used to describe companies that are safe bets, or at least less-risky investments. Having followed Ethereum since its very early stages, Demeester believes that this label skews the opinion of the inexperienced, and is, in fact, false, as Ethereum is actually overvalued at its current $13 billion market capitalization and should be considered more of a science experience. https://twitter.com/TuurDemeester/status/1078682804345548800

Early Warnings – Thou Shalt not Scale

Demeester then began highlighting issues with the network capacity of Ethereum, currently estimated to somewhere around 20-30 transactions per second (tps) — massively lower than the 20,000+ tps that many experts estimate will be required to achieve global adoption and scaling similar to Visa. To back up his claims, he references a tweet from Vlad Zamfir, one of the developers working on the impending Ethereum Caspar update, intended to improve the throughput of the Ethereum blockchain — among other things. https://twitter.com/TuurDemeester/status/1078682805268373505 Demeester goes on to mention that the Ethereum scaling issue has been known for years and that sharding — a scaling concept that essentially splits a blockchain into several fragments, or ‘shards,’ to massively improve the number of transactions it can handle — remains to be seen, despite supposedly being just an engineering challenge. While sharding is considered an ‘on-chain’ solution, meaning all transaction data is handled on the Ethereum blockchain, other development groups are also working on ‘off-chain’ or ‘2nd layer’ solutions — which, essentially, move part of the transaction workload off-chain before finalizing the transaction on-chain. 2nd layer solutions, however, were not spared in the rant, as Demeester turned his attention to Ethereum’s version of the Bitcoin lightning network — known as ‘state channels.’ State channels are widely considered to be one of the most promising scaling solutions for Ethereum, essentially allowing users to transact with one another ‘off-chain,’ reducing the resources required to move ether around. However, citing an extensive overview of the current progress in state channels published by Coinfund, and comparing this to the smooth progress of Bitcoin’s lightning network, Demeester argues that Ethereum developers are facing challenges that may undermine the viability of the solution entirely. https://twitter.com/TuurDemeester/status/1078682810708312067 Demeester didn’t stop there. After all, sharding and state channels are just two of several proposed solutions to the Ethereum scaling problem. The third most popular concept is known as ‘Plasma’ and is also similar to the Bitcoin Lightning network but, instead, moves assets across a side chain, or ‘plasma chain,’ that interacts with the Ethereum main chain to finalize transactions with a reduced computational burden. However, work on the Plasma concept did not proceed as many hoped, with the project ultimately failing to achieve meaningful gains for the blockchain due to what may be insurmountable challenges. To sum it up, Demeester appears to believe that Ethereum is not as simple to scale as it was previously imagined and that all current major attempts are facing significant challenges.

Just The Beginning

After thoroughly dismantling the current attempts at scaling Ethereum, Demeester looked to sink his teeth elsewhere — in particular, by disparaging Ethereum’s plan to switch from proof-of-work (POW) to a proof-of-stake (POS) consensus model. To add some backstory, the first blockchains released, such as Bitcoin (BTC) and Litecoin (LTC), used proof-of-work to secure the integrity of the blockchain while maintaining its decentralized nature via several thousand nodes. However, many cryptocurrency experts, including Ethereum co-founder Vitalik Buterin, believe that proof-of-work is poorly suited to scaling, due to the extreme energy burden such a network would require at scale, with the Bitcoin network currently consuming more electricity than several small countries. A more recent consensus model known as proof-of-stake was devised as a solution, requiring trusted validators to stake a fixed amount of collateral to participate in the transaction review and coin minting process. Arguably, this model most of the benefits of proof-of-work and is easier to build upon. In the following tweets, Demeester argues that switching from proof-of-work to proof-of-stake undermines some of the principles Ethereum was built upon — namely censorship resistance and decentralization. https://twitter.com/TuurDemeester/status/1078682817339539457 Demeester goes on to state that the core concepts of proof-of-stake have been around since at least 1998 with B-money, a digital currency system that vaguely resembles modern proof-of-stake cryptocurrencies. He remarked that Ethereum is essentially just churning through old concepts without thoroughly vetting them before making claims.

Marketing the Machine

Not content with challenging the future of the project, Demeester then went for the heart, arguing that the entire value proposition of Ethereum is utopian and that its current success can mostly be attributed to deceptive statements and marketing. Comparing Ethereum-ism to Marxism, Demeester argues that practically the entire future of Ethereum relies on being saved by unproven technology (proof-of-stake). In addition to this, he argues that the idea of social consensus — a system which sees members of a community vote on proposed changes — is an unrealistic concept. https://twitter.com/TuurDemeester/status/1077603662371930112 Demeester continues this section of his rant by criticizing Vitalik Buterin’s response to his above arguments, saying that Buterin failed to address any of his points, before raising his own rebuttal in which he disagrees that single layer solutions are just a phase.

An Inconvenient Truth

Getting into the second half of what can only be described as an onslaught, Tuur decided to lay down a few of inconvenient truths — beginning with the fact that the current Ethereum proof-of-work protocol includes a system in place that will force miners to transition to the proof-of-stake system in future. This system — known in the Ethereum community as the ‘difficulty bomb’ — refers to the exponentially increasing difficulty levels that miners are battling with, gradually making Ethereum increasingly more difficult to mine and unpractical, at a certain point. Instead, miners are expected to stop supporting the old proof-of-work system and begin supporting the new proof-of-stake system while Ethereum transitions from proof-of-work to fully proof-of-stake with a hybrid consensus system between. Demeester then begins to slam Ethereum for initially marketing itself as javascript on the blockchain, indicating that smart contracts could be easily developed by those with knowledge of javascript. In truth, what was actually provided is arguably a closed ecosystem with developers initially being forced to write smart contracts in Solidity, a javascript-like programming language designed for the creator of smart contracts that can operate within the Ethereum virtual machine. https://twitter.com/TuurDemeester/status/1078687257035296769

Bloated

Not satisfied with his previous assault on Ethereum’s scaling issues, Demeester returned to the topic — this time unleashing a flurry of words towards Ethereum’s bloat. Bloat, in the context of Ethereum, refers to the fact that all data is immutably stored on the Ethereum ‘world computer.’ Since nothing is ever deleted, and as the number of DApps deployed on Ethereum increase, the data size of the Ethereum blockchain is growing at an unsustainable rate. Demeester and several other blockchain analysts in the past have argued that data permanence is simply not feasible for a truly scalable blockchain and will ultimately lead to a very slow and clogged up system, as he puts it. https://twitter.com/TuurDemeester/status/1078687260802015233 He highlighted a report that calculates that the Ethereum distributed computing platform is around 400 million times more expensive than Amazon’s AWS when it comes to simple tasks like adding two numbers together with a fixed number of times. As it stands, the Ethereum blockchain is more than 1Tb in size — several times larger than the Bitcoin blockchain and large enough that it makes running a full node client challenging, as few users have the spare resources for a 1Tb (and rapidly growing) data set. Besides this, Demeester makes the argument that running an Ethereum node in warp mode, while massively reducing the disk space required, increases the centralization of the network — exactly the opposite of its value proposition. https://twitter.com/TuurDemeester/status/1078687262999830530

DAO Disaster

Since decentralization is critical to censorship resistance, Tuur elaborated the issue further by revisiting the controversy surrounding the Ethereum DAO. The Ethereum Decentralized Autonomous Organization (DAO) was a type of investor directed investment fund, where Ethereum users would submit funds to the DAO which would be used to finance both for-profit and non-profit ventures based on the votes of investors. In June 2016, just months after the DAO was launched, a mystery thief exploited a loophole in the DAO code, allowing him or her to drain 3.6 million ether — at the time worth around $70 million. Shortly following the hack, the Ethereum community voted on the next course of action — deciding to either fork the blockchain to return the stolen funds as opposed to leaving it unchanged, as per the Ethereum Classic tenet that ‘code is law.’ After around six percent of ether holders voted, the decision was made to implement a hard fork, reversing the DAO hack and at the same time and demonstrating more centralization than ever before. https://twitter.com/TuurDemeester/status/1078687266439118851 Demeester also argues that the apparent move to semi-closed (private) meetings and signing a deal with the Russian government are further indications of increasing centralization, and hence weakened censorship resistance. This combined with the suspected lack of talent in the ETH development community appears to place Ethereum in a predicament. Though few can doubt the potential and promise of the platform, if done right, actually achieving that requires technical expertise and the concerted effort of the development community.

The Epilogue

Why might somebody launch such a relentless crusade you might ask? Could it be revenge or a conflict of interest? Well, according to Demeester’s last few tweets, it appears not. Demeester appears to be genuinely concerned about the project and the people investing their time and money into it. As one of the first crowdfunded coins, Ethereum raised more than $18 million back in 2014, offering each ether (ETH) at a minimum rate of $0.311 each. Although we don’t imagine many investors are complaining about the return on their investment, Demeester argues that the technology should have been tested for viability before selling it to the masses and that Ethereum is, in turn, responsible for the capital invested into the hundreds of useless ICOs during the 2017 boom. https://twitter.com/TuurDemeester/status/1078687274869628928 What are your thoughts on Tuur’s tweetstorm? Is he justified in his criticism of Ethereum, or does the project genuinely have the potential to achieve its goals? Let us know your thoughts in the comments below!