Ethereum Co-Founder Vitalik Buterin on Lack of Incentives for Public Projects, Possible Solutions

Vitalik Buterin, the co-founder of Ethereum, has been vocal about the lack of incentives for public open-source projects and developers contributing to the open-source codebase of Ethereum and its scaling solutions.

Core developers for public blockchain projects such as Bitcoin, Ethereum, and Litecoin generally take pay cuts and work for salaries below industry standards to improve public blockchain protocols and their infrastructures. In Bitcoin, for instance, the Bitcoin Core development team and its open-source community of contributors have overseen the development of Bitcoin for many years, implementing necessary scaling solutions and pursuing public projects to provide better infrastructures for businesses, app developers, and users.

The Ethereum open source development community is very vibrant and active. Many independent projects are collaborating to solve some of the Ethereum blockchain’s underlying issues and scalability problems. Plasma, the scaling, and privacy solution for Ethereum users developed by Buterin and Bitcoin’s Lightning co-author Joseph Poon is an example of an ongoing scaling project within the Ethereum development community.

But, projects like Plasma are not in development for commercial use, or to become profitable applications. Their main purpose is to improve the scalability of Ethereum by providing on-chain, off-chain, and two-layer scaling solutions to expand the capacity of the Ethereum network. Unlike initial coin offerings (ICOs) and blockchain startups running ICO campaigns, open-source projects like Plasma can struggle to raise sufficient capital to sustain their ongoing developments.

Last month, Buterin announced his plans to form a private fund to provide resources and capital to open-source projects focusing on scaling the Ethereum blockchain network and developing second-layer infrastructures. He stated:

“I’m announcing that 100 percent of my OmiseGo + Kyber Network advisor shares will be either donated to charity (AMF, GiveD, SENS etc) or used to privately fund Ethereum second-layer infrastructure (state channels, multisig wallets etc), or some combination of the two. [Rules for funding Ethereum infrastructures are projects] must be 100 percent open source, no baked-in profit scheme (incl ICO token), must be good.”

Still, Buterin’s private fund can’t fund every single project within the Ethereum development community and without raising funds via an ICO, it’s challenging to raise money and ensure that developers are fully incentivized.

Earlier this week, it was revealed that EtherDelta, the decentralized cryptocurrency exchange launched on top of the Ethereum protocol, is the most successful decentralized application in Ethereum to date, accounting for 14 percent of the network’s total transactions, or 40,000 transactions per day. More importantly, EtherDelta has not conducted an ICO and has secured an active user base of traders and investors utilizing the platform to trade cryptocurrencies in a decentralized manner.

Buterin pointed out that EtherDelta’s incentivization model for developers is underrated, and that open-source projects could follow the model of EtherDelta to finance their operations and developers.

Dissimilar to most cryptocurrency exchanges, EtherDelta as a decentralized platform does not charge a fee for deposits, withdrawals and order placements. But, it charges a 0.3 percent fee to traders upon the execution of a trade.

“An important feature of EtherDelta is that placing an order doesn’t involve an Ethereum transaction. Placing an order involves signing a message, which doesn’t cost a gas fee. This means that placing an order on EtherDelta is completely free: there’s no Ethereum transaction fee, and there’s no fee if the order trades. The one and only platform fee EtherDelta charges is a 0.3% fee paid by the person executing an order (paid in the instrument being sold),” explained the EtherDelta team.

Buterin emphasized that this more traditional model enables the EtherDelta development team to generate a consistent revenue stream which can be used to fund its operations and developers.