Game theory and bad architecture
Hello everyone, today I have a different topic in mind. Let's dive into the Goerli blockchain economy.
As usual, before we proceed: This article is not meant to be financial advice, I strongly suggest you do your own research and take decisions solely based on what you have found…
(while writing, im listening to this song :)
Will a baited fish still covet the hook?
The “Actors” of blockchain, the people that are actually doing things on the blockchain are usually stubborn and strong in their beliefs. Much respect to them though, we wouldn’t be here if it wasn’t for them. One thing (and most likely the only one)that all Ethereum developers all agree on, it’s the free market of testnet blockchains. Quite literally, this market should be free, and should also operate without constraints. The architecture of Testnets have been designed to run with little friction, and tokens are easily accessible through faucets.
To my favorite concussed goldfish, here is a reminder of what is Goerli Testnet: “Testnets, in general, are essential in blockchain development as they provide safe environments for developers to test their dapps and Web3 project without committing to a mainnet. As such, developers can utilize the Goerli testnet in their Ethereum development endeavors to save an abundance of both time and money”
What makes Goerli special though is its “cross-client” compatibility, which basically makes Ethereum development more seamless and straightforward, since developers can use the same tools for different programming languages, including the Testnet.
Goerli played an important part for the “Merge” of Ethereum, serving as a playground to see if everything was functioning well. Today Goerli is one of the most prominent Testnet, if not THE most prominent Testnet. Since Goerli is the default network for executing staking and validation tests, it has a lot of importance, way more than you think, and that I initially thought.
If you didn’t get it by now, Testnets are essential for blockchain development: they provide a safe environment for developers without having to endure congested networks and absurd fees. Goerli is vital to the Ethereum blockchain, without it, new products, innovations and upgrade of contracts would take ages. Goerli has the same architecture as Ethereum but its use is considered to be a public good, everything should be “free”.
The right and the Wrong
I’m writing this just after finishing my exams. If there is one thing worth remembering among all the crap needed to get good grades, it is that economic participants are always selfish and act for their own good before anything else, even when using a public good. Yes.. we are again drawing a parallel to the psychology of market participants again… What I mean is that it is in human nature to serve oneself first. very. Single. Time.
Guess what? Goerli is a copypaste of Ethereum (or the latter is). What happens when you run a system that has been specifically designed to work with monetary incentives for free?
Have you ever heard of compulsive hoarding? It’s pretty common. “Compulsive hoarding, also known as hoarding disorder or Plyushkin's disorder, is a mental disorder characterized by accumulation of possessions due to excessive acquisition of or difficulty discarding them”. Ethereum Foundation thought it was clever to distill GETH (Goerli ETH) through faucets, but the retards simply created bot to harvest more and more useless tokens. And this is just the tip of the iceberg, what about network attacks (faucets counter that but at what cost…), gas fees…? When supply is free, an inadequate architecture can lead to total chaos.
What happens next, could be summarized with three main characters. First the Righteous, true to this name he is here to improve the Ethereum network and hold no flaws that could harm the Testnet. More than that he is prone to helping solve internal problems. His nemesis, the Hoarder, is here to harvest and collect supplies for whatever reason. Maybe because it makes him happy, maybe because he has a hidden agenda? no one really knows… Last but not least the Brain, this is probably the smartest guy in the room. Where there are conflicts, he finds an adequate solution, no matter how unethical that solution might be, it is always the right one.
‘…Six months ago, the Righteous raised the issue once again: Most of the supply has been already distributed and things will run out soon if nothing is done. Goerli is the only place to test validators, yet 90% of the supply is either locked in contracts or “circulating” OTC (over the counter). In short, there aren’t enough tokens for everyone and even less for future developers.’
His friend interrupted his thoughts:
-“Well this is basic supply and demand synergy, as long as there is limited supply and unlimited demand, even if the supply is free, it’s not sustainable at all”
‘Was he implying that the supply should be unlimited? If there was one thing that the Righteous was confident of, it was that making supply unlimited would sooner or later break the chain. Either by spamming the network and denying others the use of it or by spinning up a large number of validators and breaking the consensus layer with different levels of majority in the validator set.’
- “…the obvious solutions would be to limit supply and/or set a price above free to testnet ETH. A lot of effort and energy has been spent in trying to limit supply and find a fair way to distribute, and look where we are now. I think it’s finally time to put a price on testnet tokens in the market.”
The righteous raised his head and looked more closely at his friend. ‘How could anyone suggest such a blasphemous idea? Testnet has always been free, all developers must be given the opportunity to work in a cost-free environment, it’s not that it should be free, it literally must be free.’
He was about to reply to the Brain when something or rather someone caught his attention. It was the lunatic, the Hoarder was walking towards them with a broad smile on his face.
Architecture
-”I’ve heard of you, Brain, and I think we should work together”.
‘What could the moron do to help? All he has done for years is to keep and steal supply from faucets. I have to say something before it is too late’
-”Guys, listen to me, you cannot do this. Monetizing worthless tokens is wrong. Do you understand that pricing this token implies that it has real value, therefore it incentivizes even more faucets to be drained, supply to be held and selfish behavior? The whole idea of a testnet is to provide a free, frictionless environment for everyone, no one wants to pay for it.”
The Brain and the Hoarder looked at each other for a second, then burst out laughing the moment the Righteous ended his tirade. The Brain spoke first:
-”Listen, monetizing a testnet token is only wrong when its architecture wasn’t designed to hold monetary value. Did you say valueless tokens? Does Goerli have no value now? Be realistic, Goerli is absolutely vital for the health of Ethereum and with its current limited supply, it is only a matter of time before someone else puts a price on testnet tokens”
The Hoarder shook his heads
-”There is no way to get a large amount of tokens nowadays. Friction-less you say? Nah, we’ve been doing OTC deals for a long time now. There is no real market, but most of us pay for testnet tokens. Urgency has a cost you see, that faucets cannot satisfy. As long as faucets don't deliver enough tokens, there is and there will be a market for GETH tokens.”
The righteous, disappointed and disgusted, left the room. With the only hope that long-term consequences for Goerli Testnet won't be too dramatic.
Final words
I don’t think there is a good solution to this problem, there will always be people who are not happy with the current policy. I think making a market for GETH is fair and should help more than hurtiTestnets and its users. I might be wrong though, time will tell.
My only question is, now that we have a way to bet on Testnet tokens, can it be used as a proxy play for Ethereum congested network? If activity on the mainet grows exponentially, will it result in the increase of gas fees/tokens spent on testnet as well… (or the other way around?). It hurts to say this, but unless something is done about GETH supply, its price is bound to increase sooner or later.
But when problems arise, innovation blooms too. I’m still rooting for an open market for gas fee/block space. Scalability is still unresolved as of now, there will be an increased need for a market to hedge/cover expenses in gas fees as crypto markets gain more adoption.
Small words from White. Hey, It’s been a while right? I enjoyed writing this, this time finishing this article does not leave a bitter taste in my mouth, I think I covered everything I wanted to talk about. Fantastic topic, it was very interesting to think about. It opened up more questions than answers but that’s okay, I have to be patient! I also hope that you enjoyed this different style of writing, I’m not sure if it’s good but I couldn't come up with a better idea of illustrating the problem =)
Lil kiss ~White
Thanks to @0x_groova for making this mess readable