Eth2 is the neutral facility of our future finance

Source | Cointelegraph

Author | Viktor Bunin

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We are now in a period of unprecedented social, political and economic turmoil. DeFi is powering billions of dollars in value and building thousands of companies, and as DeFi grows, we need to recognize the instability of the environment around us. We can now create systems, protocols, and incentives that are less susceptible to censorship, government overreach, and misinformation.

The design of Ethereum 2.0 has a number of attractive attributes that make it well suited to be a reliable neutral infrastructure for an uncertain future, rather than a biased platform. Individuals, businesses, and governments should have confidence that Ethereum 2.0 will continue to function in the face of individual or state-level attacks. It is a solid foundation for building economic and financial facilities.

The features of Eth2 are especially valuable when viewed in a broader socio-economic context:

➤ Governance by majority consensus

➤ Be robust and perform well in the face of scrutiny

➤ Reliable Funding for the Decentralized Economy

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Ethereum co-founder Vitalik Buterin wrote a powerful article advocating reliable neutrality, or “fundamental efforts to achieve fairness,” which should be the guiding principle of protocol design:

"Please note: What is required here is not just neutrality, but reliable neutrality. That is to say, the design of a mechanism will not only not favor specific people or results, but it is also crucial that most, People from different backgrounds are convinced that this mechanism will at least make a basic effort to achieve fairness."

As Vitalik continues: “Mechanisms like blockchains, political systems, and social media are designed to enable large-scale, diverse groups of people to collaborate. In order for a mechanism to truly be this common ground, everyone involved Everyone has to be able to see that everyone else can see that the mechanism is fair, because everyone involved wants to make sure everyone else isn't throwing away the mechanism the next day."

Today, if there’s one thing everyone tends to agree on (at least in the US), it’s that “the economic system very unfairly favors the strong”. In order to avoid this fate and maintain reliable neutrality, Ethereum 2.0 followed the pace of Ethereum, deliberately avoiding on-chain governance, but tending to conduct technical governance through the consensus of the majority.

This design decision has two nice features:

➤ Eth2 has a rough consensus (find a general consensus, not a simple majority rule) and no on-chain governance (reject plutocracy). This makes the governance of Ethereum 2.0 difficult to control. It is designed so that it is difficult for any entity to force Ethereum 2.0 to favor or censor others.

➤ Keeping the community together is one of the highest consensus priorities. Majority consensus usually avoids very controversial changes as much as possible, because it is often difficult to achieve majority consensus on these issues. This leaves the majority-consensus decision-making space primarily on technical issues, based primarily on facts and logic, and seeking to minimize controversy.

(Editor's Note: Rough consensus was first used by the Internet Engineering Task Force and IETF to describe the use of the mainstream opinion in the working group when making decisions without the consent of all participants.)

The majority consensus doesn't just apply to the core developer group or have them decide, but the community as a whole. There have been many times in the history of Ethereum to have a voice on important issues and influence the direction of Ethereum development. Programmatic Proof-of-Work, or ProgPoW, is the most recent example: there was a majority consensus among the core developers to implement it, but the community disagreed, and in the end it was never implemented.

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Cypherpunks have always worried about government censorship, but recent events have shown that censorship also comes from individuals, businesses, and institutions. Ethereum 2.0 is starting to support another full financial system, which makes it more important than ever that Ethereum 2.0 remains operational in the face of this type of attack.

Most importantly, Ethereum 2.0 puts liveness before correctness. In his article, Ethereum 2.0 researcher and technology developer Carl Beekhuizen outlines how Eth2 can continue to produce blocks despite severe outages that take a large number of validators offline and the network cannot finalize blocks. This robustness allows the extremely important transaction functions on Eth2 to keep running even in the face of large-scale network outages.

Robustness is also why Eth2 is designed to be so forgiving of offline time. Brief, irrelevant offline time (minutes, even days) has relatively little effect on rewards. In the event of leaving the platform, service interruption, or encountering attacks, validators can modify settings or migrate nodes with peace of mind.

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In an age of irresponsible money printing and asset inflation, experts disagree on how best to protect your fortune and where to invest your savings. The Fed has repeatedly stated that "the Fed has unlimited cash," meaning it can print as many dollars as it wants, leading many to question the long-term economic profitability of the dollar and the safety of their savings.

Ether (ETH) incentivizes people to participate in Ethereum through mining rewards. It is also the fundamental asset of the decentralized economy built on Ethereum, serving as the underlying trading pair, lending collateral, etc.

Eth2 is designed on this basis and also extends the currency characteristics of ETH in two ways:

➤ The inflation rate of Eth2 is expected to be less than 1%, one of the lowest inflation rates in the protocol, and of course much lower than the US dollar.

➤ EIP-1559 (likely to launch on the Ethereum mainnet before the transition to Eth2) will make ETH more scarce and thus likely more valuable as Eth2 usage increases.

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Today, many people across the political spectrum feel powerless because politics and economics seem completely disconnected from real life. For many, the promise of the crypto world is changing the dynamics, returning power to the individual. Eth2, in particular, shines here.

Eth2 allows any individual, business, or government to run a validator node, actively join the rules of the protocol, and enforce those rules for other participants. It enables a sense of ownership, confidence and self-sovereignty that is hard to come by simply as a consumer. It also allows all entities to build and verify state trustlessly, which allows us all to work from the same set of facts - which is very rare in today's world.

Eth2 does not set an upper limit on the validator set, and only needs 32 ETH to start a validator. While not everyone can participate equally, this total amount is not unreasonable, since running a validator is equivalent to allowing an entity to support this decentralized economy in perpetuity, while earning ETH at a risk-equivalent rate of return. For those who hold less than 32 ETH (the majority), they can pool their funds to participate in Eth2 using Kraken, Rocket Pool, or other staking services.