The Protocol: Ethereum Developers Warn on 'Diversity Problem'

In this week's issue, we're covering crypto developers' renewed focus on the Ethereum blockchain's controversial overreliance on a single software "client" called Geth, and the grumbles of crypto users who were hoping for a bigger token airdrop from the Manta project.

We've also got:

ETHEREUM'S DIVERSITY PROBLEM. In the blockchain tech context, "client diversity" refers to the goal of having multiple software programs – known as "clients" – available for node operators and validators to access networks; as the thinking goes, if one of these clients goes down, due to a bug or some other mishap, there are plenty of other clients that would remain largely unaffected, preserving the blockchain's uptime. Ethereum's problem, based on a debate that erupted on the social-media platform X over the past few days, is that it's heavily reliant on the client software Geth, which powers around 85% of the blockchain's validators. As our Sam Kessler reported this week, a bug on the "minority" client software Nethermind, which powers around 8% of the validators that operate Ethereum, knocked out a chunk of those operators on Sunday. Since the share was relatively small, the blockchain kept running as designed. But some experts took the opportunity to point out how bad things could have gotten if Geth had gone out. Cygaar, a crypto educator, noted in an X post that "Ethereum has terrible client diversity," adding that, "A critical issue in Geth can lead to potentially millions of ETH being destroyed from validators running Geth." DCinvestor, a pseudonymous crypto investor with a large social media following, claimed in an X post that they were pulling their staked funds from Coinbase until the company switches its validator operations to a system that relies less on the Geth client: "I can't ignore the risks." Per the website, ClientDiversity.org, which billboards the mantra, "Diversify Now," the goal is for no individual client software to have more than a 33% market share.

MANTA RAID: So much of the drama in the blockchain industry revolves around the pursuit of airdrops – token giveaways to early adopters, designed to incentivize growth and build community. Rarely do these things come with hard-and-fast expectations; there's a leap of faith; users ape into protocols, hoping they'll get rewarded. Last week's airdrop of MANTA tokens to users of the Ethereum layer-2 network Manta shows what it looks like when the airdrops fall short of expectations. According to The Defiant, Manta allocated 3% of its total supply to early users, quickly derided as "the most disappointing of the year." CoinDesk's Shaurya Malwa reported that, as the rewards trickled out, the network was hit with a distributed denial of service (DDoS) attack, leading to longer-than-expected withdrawal times and a slow network. "We know the community has mixed feelings right now, and we are very thankful to those that have reached out to support and help us get through this," a representative of the project tweeted on Jan. 18. The project, for what it's worth, describes its new Manta Pacific network as "the first Ethereum L2 using Celestia" for data availability – a coup given how large Celestia looms in the increasingly dominant "modularity" push among blockchain developers.

ALSO:

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

See the entire Protocol Village list from this past week here.

Ripple Labs CTO David Schwartz is hailed as a guru in some corners of the cryptocurrency industry – especially among the XRP Army, comprised of fans of the cryptocurrency XRP.

But the XRP Ledger, the blockchain that Ripple Labs created, has had critics ranging from Bitcoin and Ethereum purists to the U.S. Securities and Exchange Commission.

When Ripple scored a win six months ago in its years-long legal battle with the SEC, the result capped off years of limbo for the blockchain tech firm. The lawsuit made it difficult for Ripple Labs to attract banks and other customers to its institution-focused RippleNet – a cross-border payments platform powered by the XRP Ledger and the XRP cryptocurrency. But it's not just Ripple Labs' legal drama that hampered adoption: Since inception, Ripple and the XRP Ledger have failed to break into the same developer zeitgeist as Bitcoin, Ethereum and other crypto mainstays. Ripple's legal victory could draw more developers into its fold.

All this and more was on the table when Schwartz sat down for an interview last week with The Protocol. Schwartz discussed the aftermath of Ripple's SEC win, his method for dealing with XRP's rabid fanbase, the XRP Ledger's approach to decentralization, and much more.

For the full Q&A by David Schwartz, please go here

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Data and Tokens

Electric Capital, an investment firm, came out with its annual report on crypto developer activity in 2023, providing a sweeping view of the overall ecosystem – including which projects are up, and which ones are down. Usually we just provide one chart in this section of the newsletter, but since the Electric Capital report is viewed as an industry benchmark, we decided to include a few of the key slides. (Hey there were 181 in all!) The big picture emerging from last year's crypto winter shouldn't be surprising to regular readers of The Protocol, who were subjected to our regular updates on just how many jobs were getting cut at some of the largest blockchain projects. But here's what the final tally looked like – a 24% drop in the total number of active developers to 22,411:

Not surprisingly, Ethereum (blue in the chart below) and Bitcoin (orange) accounted for a big percentage of all crypto developers:

Among larger ecosystems, defined as those with at least 150 developers, these were the fastest-growing, led by the Ethereum layer-2 "zkEVM" network Scroll: