On Decentralization, Crypto and Blockchain with COO Bohdan Prylepa by@Sergeenkov

On Decentralization, Crypto and Blockchain with COO Bohdan Prylepa

Andrey Sergeenkov HackerNoon profile picture

Andrey Sergeenkov

Cryptocurrency researcher

It has been an impressive year for cryptocurrencies. From Bitcoin soaring to as high as $41.9k in early January 2021, to Ethereum rising above its Jan 2018 high, and Cardano reaching a new three-year high, investors are upbeat. 

The impact of regulators is also being felt. Ripple (XRP) prices may be recovering. However, the United States Securities and Exchange Commission (SEC) alleges that the native currency of the XRPL, XRP, is a security. Ripple, a for-profit company, promises to fight back, explaining that it is a utility just like ETH and BTC.

Admittedly, cryptocurrency as a new asset class leverages an emerging technology, the blockchain. The sphere currently commands billions in market cap, and institutions are interested. Nonetheless, there is more to be done, especially on consensus refinement, decentralization, and efficiency.

Bohdan Prylepa is the Chief Operating Officer (COO) and co-founder of Prof-it Blockchain Ltd. In today's interview, we'll pick Bohdan's mind and get his view on crypto, decentralization, and the impact of regulation on consensus algorithms. We'll also touch on Ethereum, DeFi, and the future of blockchain.

A New Year, A New Age, Bitcoin at over $30k? What Do You Think is Driving this Rally?

Thank you for inviting me. That’s been a splendid year for cryptocurrencies and Bitcoin specifically. I must say that this rally is different. Institutions are getting involved, and I think this is massive not only for Bitcoin but for crypto. They will probably take it on a case-by-case basis, analysis projects for possible investment.

In my view, this crypto rally is because of central banks’ actions. Their incessant money printing is causing jitters in institutions and high net-worth investors. They are now seeking value-preserving havens of which Bitcoin emerges as a prime candidate with better qualities than gold.

Absolutely. There Is Capital Flowing From Gold To Crypto, Specifically Bitcoin; Will This Trend Continue? 

With high certainty, yes.

Bitcoin is built on a transparent layer with known supply. The coin’s digital nature and censorship-resistant arms it with unique properties unlike gold. Accompanying the crypto rally which began in Q3 2020 was this stagnation of gold prices and a marked expansion of BTC’s. This hinted at capital injection, a sign of confidence, and a possible reassessment of BTC as a replacement of gold as a go-to store of value.

Bitcoin’s Progress Is, According To Observers, Impeded By Its Consensus Architecture, Does This Need To Change?

Yes, there are obvious scalability limitations in Bitcoin, routed directly to the Proof-of-Work consensus algorithm. With increasing concerns on environment preservation and conservation, alternate consensus algorithms must be designed.

I’m particularly interested in the one that places the end use at the center. There are several models present but the one that combines Leased Proof-of-Stake (LPoS) and Proof-of-Authority (PoA) dubbed UPoS appear robust without compromising security or impacting decentralization.

The Community is Curious, How Is UPoS Different from Proof-Of-Work (PoW)?

The problem with Proof-of-Work (PoW) is foundational. There is no way Bitcoin will process 2,000 transactions every second--or more unless there is change. It is not even mentioning how disastrous mining is for the environment.

Do you know that the network dispenses 664.65 kWh in electrical energy for every Bitcoin transaction to be confirmed? This is unsustainable. UPoS, on the other hand, veers clear from the electricity-consuming approach of PoW and handpick validators based on their commitment to ensuring that the network maintains a healthy state. 

Why Now? Bitcoin Supporters Are Brushing Off These Concerns Arguing That Most Mining Firms Are Using Renewable Energy and Not Coal.

That may be true, but data shows otherwise. There are still mining farms in China that rely on coal for mining. Separate data shows that the Bitcoin network leaves a Carbon Footprint equivalent to that of New Zealand. Also, what happens when each miner consumes an unreasonable amount of power? Centralization.

And it is the antithesis of blockchain and Bitcoin. As mentioned earlier, we reckon that the end-users are demanding cheap and better services. They want to send money faster with full knowledge that the network is decentralized, has better throughput, and is, most importantly, cheaper. 

These Are Obvious Limitation and Technical Challenges; A Reason Why Ethereum Is Shifting to A New Consensus Algorithm?

Absolutely, and it was a matter of when. Compare Ethereum with Bitcoin, for instance. Both are Proof-of-Work networks and are one of the most active. What you'll immediately notice outside of centralization concerns are the unreasonably high transaction fees. Ethereum is the more active of the two, processing over one million transactions every day.

Its throughput may be a little bit higher, 15 TPS, but that's not preventing Gas fees from rising through the roof to unsustainable levels. Ethereum is moving to a new consensus algorithm, Proof-of-Stake, for better decentralization and adoption, especially in DeFi.

Talking of DeFi, Is the WSB Reddit Pump of GameStop A Tip of An Iceberg?

It could be. Coincidentally, the WSB and AMC pump and the alleged involvement of the White House and the FBI in barring retailers from buying this stock called into question the layout of traditional finance. DeFi is the new foundation of finance reliant on smart contracts and a secure, transparent base layer.

The sphere is open and censorship-resistant. Investors can participate without accreditation. There is no way facilitating ramps can censor any investor from profiting when a token is rallying. The system is transparent and, from the on-set, tuned to be investor-facing.

Mike Novogratz, The Billionaire Investor Behind Galaxy Digital, Said DeFi Will Replace Global Banks And Centralized Bourses, What’s Your View On This?

The current pace of innovation is fast. Two years ago, few people were banking on decentralized exchanges and lending protocols to give a bank a run for their money. Yet in 2019 and the better part of 2020, everyone was talking about Uniswap, Maker, Aave, DyDx, and all these decentralized finance protocols that may be rudimentary but are laying the framework for the future.

A new foundation is being laid and while I expect resistance especially from governments who want to maintain control of money, the future is likely to be a hybrid system with bankers fulfilling their primary roles while DeFi acts as a support system, supplementing legacy networks.

What's Ethereum Doing to Address Rising Gas Fees Hampering DeFi Adoption?

So far, developers have taken a two-prong approach. The activation of the Beacon Chain mainnet sets the ball rolling for Eth2 and Serenity. A full transition may happen in the next two years. However, the eventual rollout can be fast-tracked. Meanwhile, Vitalik Buterin and the Ethereum Foundation are focused on Layer-2 solutions like Optimistic Rollups.

These solutions rollup transactions off-chain with confirmation done on the mainnet, relieving the base layer. Several DeFi protocols like Synthetix have already launched the Optimistic Staking with Optimistic swapping set for activation in the coming months. Outside of Optimistic Rollup, there are Layer-2 solutions like state channels, sidechains, ZK-Rollups, and more.

Will Rising Gas Fees Affect ETH Prices?

I doubt not. Gas fees fluctuate depending on demand. The higher the demand, the more ETH prices rise. This is directly linked. Therefore, as long as users wish to pay more to participate in DeFi and other dApps, the higher ETH prices will be. But this is not to say Gas fees must remain at these excessive levels.

Layer-2 eliminates the need to pay high Gas fees by bundling transactions off-chain. Eventually, Layer-2 solutions will pick up, causing ETH prices to rip even higher since there will be more adoption of Ethereum and DeFi.

What are Your Thoughts on Cardano? ADA Prices Are Through the Roof.

Cardano is an exciting project whose valuation keeps rising as the team continues to build. I'll be watching Cardano closely and see whether it shall attain the same decentralization levels as Ethereum as Charles Hoskinson, the co-founder, claims.

An interesting bit about Cardano, in the immediate term, is the impending activation of native assets by the end of February 2021. In the long-term, projects launching on Cardano and minting new assets will pay fees denominated in those assets, not ADA, Cardano's native currency. It will be interesting how this will do to ERC-20 projects which pay Gas fees in ETH.

We’ve Seen The Likes Of Polkadot And Cosmos Rising Up The Market Cap Table, What’s Happening?

The future of blockchain is interconnection and these two projects are forward-looking, providing requisite rails for interoperability. Both are active, at different stages of development. Cosmos recently launched the Inter-Blockchain Communication (IBC) while Polkadot is working on its main Hub. These two stand out from the crowd and will provide the infrastructure necessary for inter-chain DeFi, gaming, and more. This is why these continue to attract partners and funding. I expect this trend to continue. 

What's Your Take on the Ripple and SEC Lawsuit?

It is not very easy, but another highlight of how crypto success is reliant on country-specific regulations. The SEC alleges XRP is a security and Ripple, Brad Garlinghouse, and Chris Larsen sold unregistered securities. Ripple lawyers are firing back, saying they didn't hold an ICO. Owning XRP doesn't imply obligations of Ripple to share revenue and profits with coin holders. They also rope in Ethereum and the Ethereum Foundation. I'm closely watching this even though the case may lag for months, if not years. However, the regulatory clarity that comes after that, even if it's settled out of court, will be massive for Ripple—as a for-profit company, and XRP—the digital asset.

Do You Think The Wave Of Exchanges Halting The Trading Of XRP Warranted?

Exchanges that delisted XRP are centralized and unfortunately most decisions were knee-jerk. Therefore, depending on their relationship with regulators, they may take the safer route of suspending trading until there is regulatory clarity. The painful, inevitable result is low liquidity and partners recoiling. In my view, traders and the crypto community couldn’t do anything except watch as events unfold. It may be months before the case is concluded but luckily, there are exchanges that are adamant, listing XRP until when the case is determined.

Any Parting Shot and Bitcoin Prediction for 2021?

We are in a very early stage of a financial revolution. Cryptocurrencies offer superior solutions amid central bank money printing and inflation woes. Control is essential, and that's the main value proposition of digital assets. Instead of mentioning numbers, I'll instead predict that 2021 is a year where institutions position themselves in Bitcoin and crypto. Overly, this will help drive awareness and adoption, a net positive for the crypto ecosystem.


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