Bitcoin's SegWit update went live on the network this year as Bitcoin Core's answer to transaction malleability and scaling concerns. In the coming weeks, developers expect to activate Metropolis and
Bitcoin's SegWit update went live on the network this year as Bitcoin Core's answer to transaction malleability and scaling concerns. In the coming weeks, developers expect to activate Metropolis and integrate Plasma into Ethereum, upgrades designed to strengthen transaction privacy and speed through new cryptographic systems like zk-SNARKs. Litecoin and Ethereum Classic have pursued their own infrastructure improvements through similar fork-based upgrades.
The scaling challenge facing Ethereum has captured the attention of some of crypto's most prominent voices. Fred Ehrsam, who co-founded Coinbase after working as a trader at Goldman Sachs, published an extensive piece titled "Scaling Ethereum to Billions of Users" that laid out a blunt math problem. Ethereum would need to increase its capacity by a factor of one hundred to handle applications serving between one and ten million users. Ehrsam argued that this required a multi-layered approach using on-chain solutions, off-chain mechanisms, and two-layer networks to distribute the load across users, app developers, and businesses.
"Large apps can't run solely on chain and likely never will. They need off-chain scaling solutions. While it's tricky to make accurate estimates when combining scaling improvements, it's conceivable we could see a 100x improvement by the end of 2018, which would allow a 1–10m user app. Scaling is multidimensional," Ehrsam wrote.
Ehrsam shifted his focus to a more fundamental problem: the people building core blockchain infrastructure lack financial support. In a follow-up piece, he highlighted a troubling gap in how developers allocate their career choices. Bitcoin Core's developers command respect as one of the industry's most capable teams, but the work remains unsustainable for most. The opportunity costs are too high. Few developers can afford to contribute to open source blockchain projects when token launches and commercial ventures offer vastly different compensation.
In an interview with IT firm Itnig, Luis Cuende, co-founder of Aragon, an Ethereum project that raised over $30 million in its token sale, noted how Ethereum developers had become millionaires due to ICO market demand. "I don't know any good Ethereum developer that isn't a millionaire, and it's only a matter of time before it will become a gold rush among developers to learn the technology. After all, it's the programming language of money," he said.
The math was stark. Token launches had created a gravitational pull for talent, and the economics made the calculation straightforward. To sustain themselves financially, Ethereum developers could hold the token itself and hope its price climbed, or they could join the Ethereum Foundation. Neither path offered reliable income. By contrast, launching a token for a blockchain project could generate millions.
"The lack of incentives to work on core protocols is reflected in the large number of people working on Ethereum tokens vs. the small number working on Ethereum itself. Launching a new token has made many millionaires in the last 8 months, whether on paper or liquid. Meanwhile, if you contribute to the core Ethereum code base at best you 1) own a bunch of ETH personally and the price of them goes up a bit or 2) need to join the Ethereum Foundation and get paid some amount that wouldn't match the economics of a successful token launch," Ehrsam said.
Not everyone agreed the problem was insurmountable. Samson Mow, chief strategy officer of Blockstream, acknowledged that token projects held genuine appeal but pushed back against the idea that serious developers had abandoned core work. "Well, Fred is right that many developers would probably rather work on an ICO. After all, who doesn't want to get rich quick? However, that is only a subset of developers and many still contribute their time and effort on serious projects. It's really a question of which developers are driven by higher aspirations and ethics," Mow said.
Some projects had begun experimenting with solutions. Tezos launched a bounty program to compensate developers for core protocol work. Bitcoin Core operated through a sponsorship model that let established companies fund research and development. Blockstream took a different route, assigning staff members to work on Bitcoin Core itself, with one critical safeguard built into their employment contracts.
Austin Hill, Blockstream's former CEO, explained the setup in 2016. When Blockstream was founded, the Bitcoin Foundation had been the primary source of funding for core developers, but it lost credibility with the community and dissolved its commitments. Developers who had built Bitcoin suddenly had no income. Blockstream stepped in, but Hill insisted the company maintain strict boundaries.
"We believe that no company should have influence over core, however, core still needed to be funded, when we created Blockstream, the only other was the Bitcoin Foundation who were funding members of the team, but that went away when the community lost face in them and all of a sudden there were core developers with no income. We made a decision that we aren't going to hire any more core developers, instead, we'll have our team work on the open source project, but at no point will Blockstream the company dictate what we think is right for Bitcoin, so we developed this into our contracts including a clause where if we ever ask our developers to do anything which they feel goes against the principles of Bitcoin or if we try to push something that is to our advantage then they have the right to resign," Hill said.
That commitment remains in place. Blockstream assigns developers to Bitcoin Core work and respects the contractual clause protecting their independence. Other developers contribute on their own time as they choose.
"We still have that clause in contracts for the developers that are allocated to work on Bitcoin Core. Currently, we have developers working on Bitcoin Core, and others contribute in their own time as they choose. Blockstream uses the technology behind Bitcoin, so it's only natural that we contribute back, just like any open source contributor would do," Mow said.
