The Immutability of Blockchain and Growing Preference for Airdrops: A Discussion with Demian Brener

Demian Brener, co-founder, and CEO of Zeppelin has given views on blockchain immutability and the ability to update smart contracts over time. Speaking at the Unconfirmed podcast hosted by Laura Shin as a guest, he expressed the need to have an upgradeable, immutable blockchain.

He also shared some impressive views on why newer blockchain companies are opting for an airdrop rather than an ICO. He suggested it could be mainly because of regulatory hurdles in carrying out an ICO.

Upgradability Dilemma

Host Laura Shin asked Demian Brener to elaborate on a particular comment he had made on the topic. A dilemma had struck Demian when he was interacting with other like-minded investors, more specifically, the debate between blockchain immutability and upgradability. The Zeppelin co-founder acknowledged that blockchains have the property of being immutable and a significant reason for that is to avoid conflict and overwriting of existing data.

The point of contention, however, stands between whether blockchains and smart contracts should be upgradable or not. “Should blockchains be immutable forever or should blockchains and also smart contracts applications be upgradable over time is the real dilemma,” said Demian Brener

In any contract or legal agreement, there is always a clause which allows all related persons to make changes or upgrades to the contract. This can only be done when both parties arrive at a consensus to include modifications to the original contract.

However, there is no such provision for most blockchains and smart contracts. Failing to arrive at a consensus for change or updating the fundamentals of the main chain was one of the main reasons why Bitcoin and Ethereum have undergone hard forks.

Bitcoin Cash was a result of one such fork because the bitcoin community could not settle on whether increasing the block size and reducing the block interval of the blockchain was a good idea or not. Similarly, Ethereum Classic was born after the DAO hack fatally affected the Ethereum mainchain.

Demian hence stated that the immutability of blockchains should not become a problem for the future development of blockchain technology.

Updating dApps without a hard fork

Smart contracts built and launched on the Ethereum blockchain cannot be upgraded after their launch. The DAO, for instance, had a bug which was exploited by hackers to drain all Ethereum tokens in the wallet. Some believe that developers should be able to upgrade their decentralized applications if they find a bug in the code. In such a system, developers would also be able to add new functionality over time as required.

If the developer team finds a bug in their Ethereum mainchain based smart contract then, They need to kill the smart contract, redeploy a new instance, coordinate with exchanges and coordinate with token holders for all of them to upgrade or change to the latest version of the smart contract. “That’s a big hassle,” surmised Demian Brener.

Brener opined that there is a need to have different infrastructure layers which will make it easier for any smart contract to be upgraded over time. However, there must also be robust governance mechanisms in place to prevent developers from changing the program altogether.

Demian insisted on having a possibility to update smart contracts but also to safeguard investor holdings. Blockchain and cryptocurrency are still in their nascent stage. Many projects are trying to figure out the best possibility to allow smart contracts to be upgradable and Zeppelin is also working on the same mission.

Ultimately though, it depends on the native platform to support smart contracts. Demian and his team are working on a platform where developers do not need to carry out a hard fork for upgrading decentralized applications.

It could also be possible that someone may be working on creating a tool for simplifying the process of the hard fork. “I do not know if anyone is doing it, but maybe it makes sense for someone to try it,” said Demian.

Airdrops vs. ICO

Another observation made by Demain was that an increasing number of projects are choosing to host an airdrop rather than an ICO. He said that there could be two main reasons for such a move. One could be to raise direct capital for the funding of projects and also to distribute tokens within the community directly.

There have been legal complications with selling digital tokens to retail investors, especially in select geographies. This has led to a significant number of projects barring citizens of China and USA from participating in public sales.

This is because these countries have regulations to prevent the direct sale of tokens to retail investors. Ultimately, the companies miss out on quite a few critical markets. In a bid to circumvent these regulations, projects are going airdrops rather than the token sale.

In an airdrop, projects can distribute tokens without worrying about regulatory implications. The critical difference is that the companies are distributing tokens for free rather than using them as a means of raising funds.

In this way, the community may or may not be active in participating in the future development of projects. Several users hold on to these airdrop tokens and do not use them at all.

According to Demian, this could potentially affect the token supply of such blockchain projects.