Decentralised computing system Ethereum is outgrowing itself and parts of the project are looking at various for-profit activities, which include exploring a vast potential in China. Ethereum's inventor, Vitalik Buterin, recently answered consternation about the funding of Ethereum and losses to its Foundation precipitated by a drop in the price of Bitcoin with a candid blog post.
The core of Ethereum is a public blockchain with a built-in Turing-complete programming language to allow users to build any kind of application on top - something many people in the crypto-community are protective of.
Buterin has talked about ways members of the Ethereum Foundation can explore alternative revenue streams. He told IBTimes UK: "Maybe some developers from inside Ethereum are planning on starting some for-profits of their own and they are generally doing one of a few things.
"It could be building applications, stuff for people to use directly. Or working with businesses; so banks, IoT companies, private markets is one of the more popular recent applications. A third thing could be basically working on the front end. Just as a theoretical example, one of projects that Ethereum Foundation is starting and is continuing to work on is Mist, the Ethereum browser.
"In theory stuff like that is completely monetisable. If you look at Firefox and Mozilla for example they get like 80% of their revenue basically from giving the spot to be their default search engine to the highest bidder. When you control the interface there's just so many different models to choose from."
Buterin explained that the Ethereum ecosystem has out-grown the Foundation very quickly. He said that for instance Consensys based in New York already has more Ethereum developers than the Foundation does.
"In a lot cases even like pushing out better code and doing things we wanted to do and it turns out they have already done it. And they are not the only ones – you've got Augur, a few others as well," said Buterin.
The price of Bitcoin
A headline-grabbing figure of $9m has apparently been lost from the Ethereum Foundation's funds thanks to the fall in Bitcoin's value. IBTimes asked Buterin if he expected the price to go up or down in the coming months.
"I'm pretty uncertain about that. I think it's very possible it will go up; it's also very possible it drops and breaks below $200 and crashes pretty far down. It's very possible it will stay where it is for another year.
He said that over the past year interest in Bitcoin has been overshadowed by the concept of blockchains, including Ethereum, as well as different sidechain applications, prediction markets, private chains and (D)apps – interest in these has grown far beyond anyone's expectations in the past 18 months, he said.
"Bitcoin itself, and that includes both Bitcoin as a currency and for payments and Bitcoin as a store of value – it really hasn't grown. The price is down 80%. BitPay has had to fire a number of employees a couple of weeks ago, and there's a few other companies that are definitely struggling.
"Changetip is pivoting to US dollars, Circle is pivoting to US dollars. So Bitcoin as a payment system is definitely not doing as well as a lot of people had hoped."
Buterin added that Bitcoin as a payment system could happen after 10 years. But this could also fail, and the technology and applications end up going forward. The other possibility is that Bitcoin could completely fail as a payment method, but still succeed as a store of value.
"So imagine for example the Russian Rouble started hyper inflating even more, or let's say there is a major financial crisis in the US, in Europe maybe Grexit happens with the Euro dropping substantially.
"Or even the exact opposite, say very large negative interest rates, capital controls, any of those types of things. Theoretically black swan type things could reignite attention to Bitcoin. For Ethereum you get the same sort of thing, especially with Ether and the Ethereum ecosystem in particular.
"It's entirely possible to see the Ether price go far up and the ecosystem kind of stagnate, and it's entirely possible to see the price go down and the ecosystem do really well. We have been realising that those kinds of things are less tied together than everybody thought in just about every project."
Buterin also made some extremely positive announcements about Ethereum's explorations in China. Part of this is a $50m blockchain fund involving Chinese auto giant Wanxiang, and the launch of a blockchain lab to educate the community about crypto 2.0. The deal which also involves long time crypto veteran Bo Shen, co-founder of BitShares, saw an investment in $500k worth of Ether to get things going.
Buterin explained this project began about four months ago during a long trip to China back in May and June. The plan was to get a picture of what the Chinese Ethereum community was like.
"I was interested in seeing what the potential for Ethereum there was. There actually was a substantial amount of interest and even - which really positively surprised me - from people who didn't come to it through Bitcoin."
Buterin said that back in 2013 he became aware of Bo Shen, whom he gravitated towards as an outpost in China doing blockchain beyond currency; looking at things like crowdfunding, mortgages, even the possibility of the government willing to do some sort of land registry trial. He added that there are definitely others looking at blockchains as well, citing a fairly active community in Beijing, and another one in Shenzhen.
Buterin said the idea of Blockchain Labs specifically is a non-profit, with $1m per year funding and two primary focuses: research and development, and education. The R&D stuff could be Ethereum, or could be any kind of complimentary protocols, anything in the crypto 2.0 ecosystem, he said.
The education part is basically about trying to get developers to really understand all the concepts so they can sit down and start working on applications. The VC fund is for investing in for-profit businesses in the same space. Plus there are few smaller projects, such as a Blockchain conference in Shanghai happening in two weeks. The focus of the event will be in part finance and in part other applications generally: government applications, IoT, supply chain tracking, potentially even decentralised cloud storage.
Buterin named a few companies and groups in China in the Crypto 2.0 space, including a project called AntShares, which is basically a private consortium blockchain thing targeting either regulated securities trading or corporate applications. He also mentioned E-Dollar which is trying to create a dollar-pegged currency, stabilised at kind of one dollar on top of Ethereum; it's an international project with some people from China and some from the US.
Hong Kong, he said, is also exploring blockchains and has a very active community, and is hosting a conference with "a smart contracts for smart cities" workshop. Beijing is also fairly active, added Buterin, citing on collective that is not a company at this point, but just a group of people that are interested in looking at these non-financial applications.
It's interesting that the Chinese Ethereum tie-up involves a car maker, and Shanghai Steel are also mentioned along with a focus on supply chain utility.
Regarding these sorts of uses, Buterin said: "There is definitely a lot of potential. It's still kind of under-explored I think. It's actually something that I'm personally going to continue to explore for the next year or so."
Private versus public
Back in the fintech friendly towers of Canary Wharf and Wall Street it's all about permissioned blockchains. IBTimes asked Buterin for his thoughts on the public/private bifurcation.
"There is definitely a lot of banks that are interested in private blockchains. In some cases they are happy with public blockchains as well. The opposition to just doing things on a public blockchain is definitely smaller than some of the strongest detractors think.
"The private approach seems safer for them and it does have a lot of benefits. One of the attractions of the private approach is also basically privacy. And what's going to be interesting over the next I think three years is that there's a lot of other technologies that can also provide privacy.
"So there's Hawk, there's Enigma, different sorts of conjoined type of systems. Once those systems on top of public blockchains actually start working, then does some of the appeal of the private approach decrease?"
Buterin believes that once that happens the situation becomes more about control and also more about speed. From a technical standpoint, he said there are basically three differences between private and public.
"One is that private can be more efficient, that it can scale more. I personally have a sort of technological roadmap by which I think we make public blockchains scale thousands of times more within half a decade.
"Then there is the other issue with privacy; now I think privacy will be to a very large degree dealt with using these zero-knowledge proof type of protocols. And then there's speed. Now with speed, that's the one the technology can't fix because Moore's Law doesn't make the speed of light go up by a factor of two every two years.
"So if you want a ledger that basically gives you settlement finality in three seconds instead of 30 seconds then private might be the way to go. So that's a complicated set of technical questions that people are battling between internally. I'm not entirely sure how it's going to get resolved - it could be different for different applications."