The Economist - USA (2022-01-22)

TheEconomistJanuary22nd 2022 Finance&economics 67

the virtue of being able to conduct transac­
tions securely and without centralised in­
termediaries.  But  gains  in  scale  could
come  at  a  price,  by  making  the  platform
less  secure,  or  less  decentralised.  Pooling
transactions  before  they  reach  the  block­
chain tends to be done by centralised enti­
ties.  And  it  might  be  easier  for  hackers  to
attack  a  single  shard  of  a  blockchain  than
the entire thing. As a result, Ethereum de­
velopers have been slow to make changes.
This  sluggishness  has  made  the  net­
work vulnerable in a different way—by en­
couraging rivals. In early 2021 nearly all of
the assets locked in DeFi applications were
on Ethereum’s network. But in a recent re­
search  note  JPMorgan  Chase,  a  bank,  esti­
mates  that  the  share  of  DeFi  applications
using  Ethereum  fell  to  70%  by  the  end  of

2021. A growing number of networks, such
as  Avalanche,  Binance  Smart  Chain,  Terra
and Solana, now use proof of stake to run
blockchains  that  do  the  same  basic  job  as
Ethereum,  but  much  more  quickly  and
cheaply.  Avalanche  and  Solana,  for  in­
stance, both process thousands of transac­
tions a second.
The  experience  of  usdCoin  illustrates
these  shifts.  The  token  was  launched  on
Ethereum just over three years ago, but has
since been launched on a number of com­
petitor networks, including Algorand, He­
dera  and  Solana.  Mr  Allaire  says  that
whereas  transactions  on  Ethereum  are
subject to cost and speed limitations, those
on Solana can handle “Visa­scale volumes”
with “settlement finality in about 400 mil­
liseconds and a transaction cost of about a
twentieth of a penny”. Other DeFi applica­
tions, like SushiSwap, an exchange found­
ed  on  Ethereum,  have  also  launched  on
several other blockchains. 
With the planned changes to Ethereum
likely  to  take  at  least  a  year,  if  not  longer,
“the  risk  is  that...the  Ethereum  network
will  lose  further  market  share”,  wrote  Ni­
kolaos Panigirtzoglou of JPMorgan. For Mr
Allaire,  the  picture  is  pleasingly  competi­
tive:  “Just  like  with  the  web,  where  Win­
dows,  ios and  Android  all  compete,  there

arecompetingblockchainplatforms,too.”

Hethinkstheultimatevictorwillbethe

platformthatattractsthebestdevelopers

tobuildapplicationsandthereforereaps

networkeffects.

But the operating­system metaphor

mayonlyextendsofar,inpartbecauseof

the nature ofopen, public blockchains.

Anyonecanaccessthedatatheyproduce

andviewtheiroperatingcode,makingit

possibletobuild bridgesorapplications

that work across many blockchains, or

whichaggregateinformationfromdiffer­

entblockchains.Someapplications,like

1inch,alreadyscanexchangesonseveral

blockchainsinordertofindthebestexecu­

tionpricesforvariouscryptotransactions.

“Multi­chain” blockchains,like Polkadot

andCosmos,actlikebridgesbetweendif­

ferent networks, making it possible to

workacrossthem.

For as long as decentralised finance

holdspromise,competitiontobethenet­

workofchoicewillnaturallybefierce.But

theideathattheeventualwinnerwilltake

everything, gaining overall control over

thedigitaleconomyandhowitdevelops,

mayonedaycometoseemasoutdatedas

thevideocassette.n

DeFi-ing gravity

Total assets committed to decentralised-finance

applications, $bn

Source: DeFi Llama

250

200

150

100

50

0

2020 21 22

Other

Ethereum

EmployeebenefitsinAmerica

On the fringe

T

he pandemic has fundamentally

transformedtheAmericanworkplace.

Morepeoplethaneverareworkingfrom

home.Meetingshavemovedfromoffices

to screens.Employees arequitting their

jobsindroves,pushingjobvacanciestore­

cordhighs.Amidwidespreadlabourshort­

ages,firmsarehandingoutpayrisesand

bonusestoattractworkers.Butwhatabout

otherperks,whichmakeupa bigchunkof

employees’overallcompensation?Ifyou

listentobosses,firmshaveexpandedben­

efitplansinthewakeofthepandemic,pro­

vidingworkerswithmoreflexiblehours,

emergencysickleaveandmental­health

services.Butofficialstatisticsshowonly

modestgainsinfringebenefitssincethe

startofthepandemic.Althoughthevalue

ofnon­wagecompensation forlow­paid

workersgrewfasterthanthatforbetter­

paidemployeeslastyear,thedisparityin

thelevelofprovisionremainsvast.

Healthinsurance,paidleave,pensions

andother“fringe”benefitsdoledout by

private­sectorfirmsaccountedfor29%of

totalcompensation,onaverage,in2021,up

from20%in1970,accordingtotheBureau

ofLabourStatistics(bls).Ifperkssuchas

freefoodweretobeincluded,thefigure

wouldbehigherstill.Although theyare

hardertomeasure,amenitiessuchasflex­

ibleworkinghoursarevaluable,too.Apa­

per publishedin 2018 by researchers at

HarvardMedicalSchool,theUniversityof

California,LosAngeles,andtherandCor­

porationanalysed survey data andcon­

cludedthatthefreedomtosetone’sown

scheduleiswortha payincreaseof9%,and

theabilitytoworkfromhomeiswortha

raiseof4.1%.

But such benefits, much like wages,

tendtobeunevenlydistributed.Some94%

ofprivate­sectorworkersinthetopquar­

tileoftheincomedistributionhaveaccess

tohealthinsurancefromtheiremployer,

comparedwithjust40%ofworkersinthe

bottomquartile,accordingtothebls. Sim­

ilardisparitiesexistforlifeinsurance(84%

v25%),retirementbenefits(90%v44%)

andpaidsickleave(94%v52%).Differ­

encesinworkingconditionsmakethings

evenmorelopsided,accordingtonewre­

searchbyJasonSockinoftheUniversityof

Pennsylvania.UsingdatafromGlassdoor,

a websitethatletsuserspostanonymous

reviews of their employers, Mr Sockin

findsthathigh­payingfirmstendtooffer

betteramenities,therebyexacerbatingla­

bour­marketinequality.

Effortstoimprovebenefitsduringthe

pandemicappeartohavedonelittletoex­

Labourshortageshavedonelittleto

boostperksforworkers

Perking up

United States, private-sector employees with benefits, by income group, %

Source:BureauofLabourStatistics

Bottomquartile

(Poorest)

Second

Third

Topquartile

(Richest)

1007550250

Paidsickleave

201 2021

50250

Paidfamilyleave

50250

Flexible hours