Original: The Defiant
Vitalik Buterin wrote the Ethereum white paper at the age of 19. His goal is simple and comprehensive, to create a “world computer” that aims to be a flexible base layer for all online applications without the need for any third parties. Ethereum has become the most active and largest smart contract platform since its inception in 2015, but has it achieved its goal of being a “world computer”?
Vitalik said yes and no. In this interview, it seems to Vitalik that Ethereum will make it happen. The bigger concern is not whether the network becomes the settlement layer and decentralization engine for smart contracts used globally, but how much value and impact the applications running on it will bring.
Vitalik explained the importance of the impending merger between the Ethereum PoS chain and its application layer, introduced the different stages of the process, and provided guidance on when it will happen. We also discuss why decentralization is important, and whether web3’s user experience will become the core appeal of decentralized applications beyond censorship resistance. We discuss the current regulatory state of cryptocurrencies, and how, for him, this could fall into “tyranny of anarchy”
Vitalik also took the criticism and explained why he believes Ethereum’s design is a sustainable way forward. We discussed the trade-offs of a multi-chain future, the “cancel culture” that is permeating the Ethereum community, and the beliefs that kept him from resisting until the end.
This podcast is hosted by Camila Russo and edited by Alp Gasimov and Daniel Flynn. Text section edited by Samuel Haig.
Cami Russo :
Welcome, Vitalik, to The Defiant podcast. I’m glad to have you participate.
Thank you so much, glad to be here.
CR: I’ll start by introducing those who don’t know Vitalik, although I’m sure everyone who hears will know him. Vitalik Buterin wrote the Ethereum white paper in 2013, when he was only 19 years old. He inspired a group of visionaries to help him build this new blockchain, which is designed to be a flexible base layer on top of which to build decentralized applications — the so-called “world computer” , can run any program built on top of it, without the need for a third party.
Now, Vitalik, it’s been almost seven years since Ethereum launched in 2015, would you say it has managed to become the “world computer”?
VB: I think it’s definitely been successful at a lot of things. I think [Ethereum] has really succeeded in creating … most of the applications described in the original white paper are actually happening, people are actually able to use them and see what they actually look like. A lot of these apps are either used by people or are using them to do what they really need.
What Ethereum hasn’t really done is going to the whole world. If the concept of a world computer is a computer that anyone in the world can view, and has at least some basic ability to send programs to, not only read it, but write to it, I think ethereum has done that .
There is also a broader meaning, which I think a lot of people have heard, which is “the world only needs one computer right now, and it can be ethereum” – which was never what I meant, I think Gavin (Ethereum Co-Creation 1) also did not expect the word to appear.
But there is also an idea, included in the project from the very beginning, that Ethereum should be a platform that is truly available to the world, not only in theory, but in a very meaningful way that a lot of people can and are using it , and there are no major obstacles.
And I think there has definitely been considerable progress on this front. About a month and a half ago, I visited Argentina and saw firsthand that all sorts of people use Ethereum and other different types of blockchains as a regular part of their lives and businesses, as well as their attempts to save money, start new projects , paying people to do all sorts of routine things.
But at the same time, there are high transaction fees, all these usability hurdles, and all these problems still exist. I still think there’s a lot of work to be done if we want to really fully realize this vision – obviously we had hoped to do it now or even in 2016. Software development always takes longer than expected, so that’s okay. But obviously, the sooner we actually get all of this done, the better and closer Ethereum can get to actually realizing this larger part of its original vision.
CR : Yes, I totally agree with Ethereum fulfilling its vision of being the computer of the world, because it does enable most of the applications that you even listed in the original white paper. I just went back and looked at those applications – you said Ethereum is for token systems, derivatives and stablecoins, identity and reputation systems, decentralized file storage, DAOs, savings, insurance, decentralized data Price feeds, multisig, cloud computing, gambling, prediction markets and decentralized exchanges.
Maybe some applications are bigger than others, but all of them are built on Ethereum. Although I think you’re right that while Ethereum has become an infinitely flexible platform for builders, it’s not yet as much as you and all Ethereum builders hope everyone in the world can actually use.
This brings me to the next question, which is: the next phase of Ethereum, which aims to achieve this kind of scalability, the merging of the PoS consensus layer with the application layer on the current PoW chain, and of course this is a daunting Task.
Correct me if I’m wrong, but never really tried it before, right? Splicing blockchains together to form a new blockchain – super complex stuff – of course, that’s why it took us years to finally come close to seeing this happen.
So the point of doing this is to allow Ethereum to scale while increasing decentralization. So, what are the steps required for a merger to occur?
Progress on The Merge
VB: At this point, it’s basically testing. There are already some basic testnets and a full implementation of everything The Merge needs to happen. There are implementations of consensus clients and there are implementations of what we now call execution clients – so Geth and Nethermind are a lot of work.
Geth’s lead developer, Peter Salaggi, tweeted just a few days ago that Geth is basically one PR away from being ready for The Merge. A PR means “pull request” – it’s basically a chunk of code that was suggested to be added to the Geth project, which would then actually be added and included at some point in the near future. But obviously there is still quite a bit of testing to be done.
The part with the least testing and still some finishing touches is what we call the initial sync process. This is when a node joins the network for the first time, how do they download existing statistics, existing account balances, contracts, code and what all those things are so that they can become part of the network and go from there, and some Subtlety, how does the previous PoW party do this, and how does the PoS party do this interplay? So there’s a bunch of technical stuff out there, and there’s been huge progress in that as well.
I think people generally feel good about The Merge right now, all this is just a bunch of technical work, a bunch of tests, more tests, hopefully we’ll merge soon.
CR: Okay, obviously the big question is when do you think this will happen?
VB: Some say June, some say July or August – I don’t know.
CR: Once a merger happens, that doesn’t mean the developers can wrap up their work and pack up and go home, right? This is the first step in a multi-year and very complex process.
Can you summarize the different stages that will happen after a merger until you think: “Okay, Ethereum is finally done”? I don’t know if you can say that Ethereum was complete at that time, or at least in the current vision.
VB: I think the closest we came to summarizing the roadmap I released in December was about the five buckets I used to describe what was left to do:
- The Merge, which basically refers to PoS.
- The Surge, which is increasing the capacity of the chain, is basically sharding and doing more before that, and then doing some more.
- The Verge, or Verkle tree, is basically a technique to make validating chains easier, so nodes don’t have to be as heavy or as big computers as they used to be.
- The Purge, which makes the chain lighter and makes the code lighter by not requiring every node in the network to process and store all the old history.
- The Splurge, which includes everything else that’s left.
There’s a lot of different buckets in there, there’s an upgrade to the EVM, there’s the proposer-builder separation, and this pretty long list of upgrades with all sorts of buzzwords and all sorts of interesting projects. Then there are longer-term things like ZK-snarks, which may be ubiquitous in the Ethereum protocol in 5 or 10 years.
But a list of these things – switching to PoS, adding sharding so we can do some scaling, making sure we have a good rollup, actually leveraging sharding, making it easier for people to run nodes, making sure we don’t do it because of MEV and these centralizing the problem, trying to make the protocol less complex, not more complex over time, and then make the EVM better – I think if we do all of that, we do what we know we The things that have to be done today, then Ethereum will be in a position [even if] there is nothing else to do…then we’re already in a great place at this point.
If all we manage to do is PoS and sharding, then I still think we’re still in a good place. There’s a sense that we can do the basics, and then there’s the extras, and then there’s the extras. The more additional things we can do, the better and even simpler the Ethereum protocol will become in some ways.
Therefore, if we are willing to accept more ad hoc complexity during development, we may gain more long-term complexity in the protocol design. But if those aren’t done, that’s okay, so we can solidify as many parts of the protocol as there is value as quickly as possible so that people can feel safe and know how this is actually going to work out in the long term.
CR: So basically you have some must-haves and some better-haves throughout the roadmap. To be fair, half of the necessary is PoS and sharding, and the rest is icing on the cake?
VB: I think so.
CR: Do you think Ethereum at this stage will be able to become a single settlement layer for global economic activity when sharding is up and running and has Rollup to further improve scalability?
I think Ethereum must have been big enough back then to be able to do that. I mean obviously there is still the question of “Would everyone be willing to move all their activities to the same blockchain, or even any blockchain?”, but from a pure “it can handle transactions” perspective It seems that Ethereum at that time will be able to do it.
Is this the ideal outcome for you?
VB: That’s a good question, “What is the long-term desired outcome of Ethereum?” I think in addition to “Are people using Are you using ethereum?” actually getting a benefit from something on the blockchain and not something done some other way?
For example, there are a lot of projects that started making private blockchains, and these things basically just turned into basically creating centralized systems that you might like. There are a few extra signatures and a few extra hashes in a few places, but the user never really sees, and never really gets any real security, autonomy, or privacy, or any benefit from it.
Once ethereum becomes mainstream, then I’ll definitely start to care whether “30% of the world’s population is on ethereum or “10% of the world’s population is on ethereum” and more [about] ethereum through these applications Program [actual value that is being brought].
This is something I think is very important right now. The bigger Ethereum gets, the more important it is to keep thinking about this.
CR: So for you, the most desirable outcome for ethereum is not by looking at the number of people using ethereum or the percentage of the world’s population, but by what they use it for. What would you like to see people use Ethereum for?
VB: I think some of the things that people are already using with Ethereum…have a lot of value. One of those is obviously a monetary use case for Ethereum , I think a lot of people do have the need to pay people, move money between countries, save money, and while ETH alone provides a lot, there are obviously a lot of people who don’t want to deal with such a big volatility So stablecoins — whether it’s something like USDC or something more decentralized like DAI and RAI. I think they have a lot to offer people. So this is one.
Another is DAO . DAOs are used to pool funds together to do interesting and meaningful things. One of my favorite DAOs, CityDAO, is actually an attempt to legally own and manage a new city through Wyoming DAO laws. There’s also VitaDAO, which is funding life-extending research. I think a big one [recently] is AssangeDAO – it’s funding Julian Assange’s legal defense, and it looks like it’s making a lot of money, so it might even eventually expand beyond that, depending on what the community decides what will it be.
A constitutional DAO, I think is an interesting experiment, [but] I don’t think you know there’s a lot of immediate social value to have just by having a constitution, but just as a “hey, the crypto community can go out there and basically beat the Wall Street tycoons , winning and owning what’s important” – I think this is valuable as a demonstration, and I think hopefully can power things like CityDAO and all the other potentially very interesting experiments.
I would definitely like to see more different types of DAOs and DAOs being used to help people do things they couldn’t otherwise do.
Prediction Markets – I’ve been a fan of prediction markets for a long time, and I love using economic incentives to encourage people to make as accurate predictions as possible.
One of the big problems with just listening to the media right now is that people have these pressures…to make these very confident statements and make them sound like a really impressive alpha reporter who knows their stuff, but when six weeks later, It later turned out to be total nonsense and people really don’t remember it. I think prediction markets are a very valuable experiment to see [if we can] create something better and create a tool to help people understand what is more likely and less likely to happen in the future, it’s even more It is possible to give numbers that are actually sane and not totally crazy.
Ethereum Name Service (ENS), I’ve always loved this project. The concept of owning a domain name that doesn’t belong to any one company, be it the traditional DNS system, or Google, Facebook, or any existing company, a domain name that you can actually own and believe it will belong to you and that it doesn’t “depend on any authority” Institutions can continue to exist – I think it has clearly found a lot of use in the Ethereum ecosystem.
I mean, if someone wants to send me ETH for some reason, the so-called you and I don’t need it at all, if people want to, then they can enter Vitalik.ETH in their Ethereum wallet and it will automatically resolves to my address. This is powerful and really useful, but it’s also useful in a lot of other situations. Some chat apps are just your username, and many more.
Log in with Ethereum , a movement that has been growing over the past six months. Ability to log into products as your web identity using your Ethereum account, directly competing with Google identities, Twitter identities and Facebook identities. I think logging in with Ethereum is a very powerful tool because it’s combined with so many other things. For example, when people log in with Google, they’re usually not just looking for “is this the same account that’s logged into this account [and] created this profile correctly the first time” – they’re usually looking for anti-spam , they don’t want people to be able to create 100,000 accounts and use them to make fake posts or fake upload a whole bunch of stuff. And Google has this very weak form of KYC, so you can have two-five accounts, but it’s hard to have 100,000 accounts.
And that’s what the Ethereum ecosystem can provide, 100,000 accounts with ENS names – it’s really expensive to do that. It’s hard to get 100,000 Proof of Humanity files, it’s hard to get 100,000 Proof of Protocol participation tokens…
I just think logging in with Ethereum is a great example of how all the different applications are really starting to come together and build upon each other – so I think it’s really good and valuable.
Some privacy-preserving decentralized voting stuff, the CLR Foundation is an example, there are a lot of low-key experiments like this. They haven’t really gotten very far so far, but I think it’s also a great use case for blockchain, combined with some unique privacy-preserving zero-knowledge proof stuff to basically make better governance tools .
So I think the list of interesting things that is happening more and more in Ethereum is pretty big. If we had more capacity for people to use cryptocurrencies internationally, or use DAOs to organize – whether it’s a business, or a new city, or a local project, whether it’s a nonprofit, or a for-profit, or activism, or funding Scientific research, or whatever — I think it’s awesome to have that.
Another one I think I didn’t mention is NFTs , which are a very interesting double-edged sword. It’s fascinating that they both end up funding totally crazy stuff and creating these embarrassing multi-million dollar ads on the internet, and NFTs also fund a lot of very important things – they funded Scientific research, they fund activism, they fund artists, they fund writers, and I think all those things are very important as well.
I think these kinds of things are growing and I think being able to create applications that are really meaningful and valuable [but] also has an element of excitement for degens, which is a really cool thing, I’d love to see more, ether There’s more to be found in the Forum ecosystem.
Why decentralization matters to Ethereum
CR: It’s worth noting that all the things you mentioned have actually happened on Ethereum, because we could have had this conversation in 2017 when there was a lot of activity and a lot of speculation on Ethereum, but a lot of it was Just speculation – financing is a use case, but nothing more.
But now you mention all these things, a currency for cross-border transfers, remittances for stablecoins, DAOs, prediction markets, ENS, Ethereum logins, NFTs — all these things are happening. Even if some are small and just getting started, it’s very encouraging to see all of these use cases in action right now.
So to do all this activity on Ethereum, back to the previous question [about] what needs to happen to Ethereum to scale and support all the crazy demand for block space to support all these use cases – one might think “Why not just increase the Ethereum block size…and scale it right away?”
To sum up this idea, why is decentralization important? I would like to tie this question to your recent trip to Argentina – you mentioned the increasing adoption of cryptocurrencies in Argentina, but I heard you say in an interview that…a lot is happening on centralized exchanges.
So why is decentralization important? How do you balance the fact that for the builder and the people inside the space – for many of us, the reasons are clear – but for the end user, sometimes not?
VB: I think decentralization is one of those things that is hard to understand why it matters, until it suddenly becomes very obvious why it matters.
The most important thing is to be able to build on a platform and an ecosystem that you know won’t go in a completely different direction just because it’s in some small group or destroy everything or a group of people you’re trying to build on top of it people’s interests. Or even just because someone got lazy and decided to stop maintaining what they were maintaining.
So decentralization is about long-term stability, which I think is very important, especially decentralization as long-term stability, even in the face of often very strong incentives. So there are a lot of examples of people building on top of Twitter or Facebook, and they built their entire business around those companies’ APIs, and then suddenly the companies themselves decided they were going to shut down those APIs…for whatever reason…. .. and the careers of these people were completely destroyed. Even if that doesn’t happen, then when these things become very single, these single central points of failure, there are often these other forces that end up relying on them.
One of the challenges when you start having a lot of these centralized intermediaries is that there are a lot of people in the world who want many different types of people to be unable to transact and live a normal economic life. This group of people is much bigger than anyone who dares to write the law, write it as illegal, and the censored stuff is much bigger than the illegal stuff. There are a lot of very legitimate industries – whether it’s political activism, the sex industry, or psychedelics – that end up often being targeted through these very opaque and very undemocratic channels, they just rely on a few people being in the middle of some payment processor …often centralized companies decide not to serve entire countries because they just think the entire country is too risky for money laundering or whatever, which ends up hurting and excluding hundreds of millions of people. I mean, I was born in one of the countries that suffers from this kind of discrimination.
So if you’re on a decentralized system, then you know you’re not going to be singled out for who you are, or just because you end up vaguely in a category that others decide not to like. So I think if everything is reliant on centralization then I think it’s easy to have this kind of back pressure — five different people between every transaction and if you just rely on any one to give enough effort then people You will lose the ability to trade – that’s important.
Even without that pressure. I think just creating something that you know they’re going to be in the same form five years from now is something a lot of people underestimate, and I think it’s really valuable…I think the Internet Archive makes life easier for people , because sometimes someone writes something and then what someone writes becomes so important that everyone starts building on top of it. Then, for whatever reason – maybe even their hosting provider just went out of business, or some totally stupid reason – the page is not accessible for the next ten or fifteen years.
And often the link goes down, which is really sad, I think more decentralization, not necessarily the blockchain, but something like IPFS, can actually be solved. But you have the Internet Archive, at least you can go and find something that existed ten or fifteen years ago, but where is the Internet Program Archive? If I want to build some financial product and I want to build my financial product on top of Uniswap because my financial product just needs some ability to trade tokens, then if I know that Uniswap is definitely going to be around 5 or 10 years from now Years, I will feel easier. Because otherwise, for every dependency I add, I’m basically taking responsibility for: oh, they might decide to change or go away, and then I’m going to have to scramble to figure out something new to replace it. So I think it’s important for applications — it’s absolutely important for applications built on top of other applications.
So, all in all, I think decentralization is important to different people for different reasons, and I do think there is value in all of them. I think decentralization is more valuable, the closer you get to what you really need to make sure that what you’re doing continues to be possible two or five years from now. If you’re just doing something one-off, and if it stops working you can move on to another thing tomorrow, then you don’t actually need a lot of decentralization – maybe you just need competitiveness. You could say that competition is actually a kind of decentralization.
But on the other hand, if you’re doing something you need a long-term commitment, that’s even better. Especially if you know it’s something that a powerful interest might wish it didn’t exist, then decentralization works well for you. But if you’re doing something in a large community, it’s hard to agree on which centralized application authorities you should trust – this is where decentralization becomes increasingly important.
Does everyone need decentralization?
CR: So you mentioned all these reasons why decentralization is important, of course, for communities and populations in societies that are repressed or censored, for developers or builders who need to make sure their rules don’t get changed This is very important. In the future, or their app can run forever – that’s very important. But do you think there is a group of people or applications that don’t need decentralization at all? Because right now, I think it’s just a push…to put every application of the internet on top of a blockchain…do you think it’s necessary?
VB: There are definitely a lot of applications that don’t need decentralization. I think there are many more applications that could use partial decentralization, but probably don’t need a very pure “no servers, we do everything on IPFS and on-chain” approach.
Social media might be a good example. I think there could be a lot of benefits to creating some kind of social media ecosystem, if I make a post, the persistence of that post doesn’t depend on a company deciding if it should survive, and the post and hash of that post exist independently , other people can link to it, other people can like it, other people can retweet it, and you’ll have these different and often centralized algorithms and interfaces to interact with that content. But because they have different levels of control over the content, it’s easier to move between them – a vision that I think is valuable. But to get value, you don’t really need to go 100% decentralization – you can get a lot of value from 20% decentralization or 40% decentralization, and I think that’s totally fine.
Another example might be a website for booking flights, since what you end up buying is still a centralized thing – it’s a promise by a particular company to give you a seat. If one of the platforms doing this breaks or decides to censor you, you can keep using the other three or four, or more anyway. So when you’re just interacting with some kind of one-off thing, decentralization is usually not needed. If… you’re doing something that follows a very established model, is very similar to what a lot of other people are doing, and has a lot of mainstream support, and your whole life is like that – then you probably won’t benefit from decentralization then many.
But even there, you can propose that you should get an ENS domain name and start setting up your profile just in case this is something you want in the future, or you should put at least a few percent of your money in cryptocurrency . In case something happens to your local fiat currency. But there are definitely a lot of people out there who don’t really have…the tremendous value they get from blockchainizing their lives. And then there are others [who don’t know anything about blockchain]…I think this middle ground has a complete picture.
CR: Do you think there is a reason to use blockchain and web3 not because of its censorship-resistant properties, but because it is better [and] easier. For example…interacting with DeFi applications – for me this is better than having to have passwords and emails and your login codes for each different web 2.0 application. I can see that having this layer of composite value on the internet is better than having this separate financial system that is also divided by geographic regions – which is far more unwieldy than doing online transactions in a non-local online way.
So do you think there’s reason to think web3 might be better, even if some people don’t need the decentralized aspect?
VB : Yes. I think cryptocurrencies are generally already better than the banking system for international money transfers. I actually even had to deal with this recently [while] trying to send money to a friend who had a bank account with a smaller bank and you can’t easily send things directly to, so we had to use some corresponding bank stuff. I finally figured out how to do a bank transfer to get it out of my Singapore bank account, but it was really complicated – when I did, I wasn’t even sure I was doing it correctly, and it ended up being two weeks later The whole process is quite stressful. So I basically told them ‘hey, can you set up a channel to accept at least USDC or DAI or [another stablecoin]’.
Personally, even like people who donate a lot to charities, crypto is a better channel than anything in the banking system, even though [charities] don’t need censorship resistance.
You could obviously argue that in some ways it still indirectly benefits from censorship resistance because traditional finance is inherently dependent on all these different intermediaries. They’re in different countries, which adds some inherent friction – and the way encryption works is more based on ignoring all of that, and gaining very valuable efficiencies even for these rather simple and boring use cases.
I guess there are a lot of use cases that aren’t actively discriminated against by the financial system because they’re not being served because [these] systems are complex, it’s hard to fix it from the existing system environment, and there isn’t much incentive to do it.
For the account system and web3, I think I’m very bullish on the “Sign-In With Ethereum” thing. Actually, I think accounts are a centralized thing, there are theoretical arguments that people think “users are not very good at maintaining their own passwords”…or “their passwords can be stolen”, so you Need a friendly big brother to be able to restore your account if anything goes wrong. That’s the standard argument for why Google and Facebook accounts and all those things have their value.
But the problem with this theoretical argument is that it doesn’t actually match a lot of people’s lived experiences – even now, for me, my Amazon account was just suspended two days ago because when I was just about to buy one When they bought a new phone, their AI suspected some kind of fraud. And I don’t really have a good way to get my account back, which is inconvenient for me. I know some friends who just lost their Google account, forgot their password, they contacted support and they simply couldn’t recover it. So these friendly big brothers who are supposed to help you get everything back are surprisingly ineffective a lot of the time.
I think “login with ethereum” coupled with better wallet technology, so things like social recovery wallets, can create better products for a lot of people. It’s also…a great example of partial decentralization – you can still have a centralized account for a centralized website, but you can log in with your Ethereum account. I think it’s definitely a very valuable use case as well.
I do think things like logging in with ethereum are especially valuable for those who, for whatever reason, struggle to get a phone number. And a lot of these [centralized] systems [do not work as expected] – sometimes these phone number validators work well in major mainstream countries, but in smaller countries that people forget to consider, they end up not working, so I do think , it’s even more valuable if you’re the kind of person who relies on censorship resistance or on decentralized global accessibility. But it’s definitely one of those things that has at least some value for everyone.
CR: I agree. So the grassroots communities and private sector that you see in Argentina are increasingly adopting cryptocurrencies, and we’re even seeing that in the US. And in other countries, it comes more from the top down — El Salvador is adopting Bitcoin as legal tender, and other countries are evaluating whether to issue a CBDC.
So where do you think the biggest wave of cryptocurrency adoption in the future will come from? Will it come from these grassroots adoption and the private sector, or will it come from top-down governments adopting cryptocurrency as their national currency? How do these two things interact?
VB: I definitely wish the grassroots stuff was more effective. I think this year we’ve even seen things like .eth domains that go viral on Twitter and have a lot of people owning them. NFTs themselves [also] spread very widely.
So I think blockchain applications can easily explode as long as they find that niche and find a way that has both value and can really express and present this value to many people.
I can easily see this happening in more cases. For example, I can even see logging in with ethereum, which helps lead this big wave of ethereum, taking off and being used more as an identity.
[in] cryptocurrencies…I don’t really necessarily think we need a big coordination effort. I think when people find it valuable, they will find a way to use it and it will continue to grow organically over time. I do think there is value in coordinating efforts like creating a local area where all stores accept bitcoin, ethereum or whatever. As a community, it’s valuable to say, ‘Hey, this area is a crypto-heavy area right now, so people who are passionate about crypto — we’re all going to move there, and that can create these interesting networks. I do think there might actually be something of value, kind of like creating a city, but it’s a lighter version. But there is no other way to do this either, and I hope we can try all of them.
The whole crypto game is another thing trying to find its niche, and there’s a good chance it will explode into something pretty successful at some point soon – [I’ve seen] hundreds of different models, and Either way some of them might be really successful.
I think the biggest challenge with institutional adoption — I think the value that institutional adoption can provide is that it can really reduce friction and make organic adoption easier to happen. But institutional adoption itself, when there’s no organic will, I think it’s something that can easily spew out and stall. There are a lot of cases where these big companies start accepting crypto payments with great fanfare, and then a few years later they realize “wait, we have about 45 customers actually using that option.” So I think it’s different in different situations.
For a country like El Salvador, it’s totally mandatory, and that’s definitely something I’m more suspicious of and worried about — because when you… start to force people to accept it, you’re telling people who don’t care much about it, and They basically didn’t even choose to bypass it without actually caring about it. So exposing people in this way to stuff they don’t understand a lot – there are so many ways that it ends up going wrong and it just ends up causing people to lose money, get scammed, or even just get disillusioned. People even end up thinking that cryptocurrencies are equal to what these nasty right-wingers want to push, or whatever political tribes these nasty people are running a country that wants to push — so it might even end up being a bit negative for long-term adoption Influence.
But good things happen, and I think Wyoming’s DAO law is a great example of government-grade crypto support. They’ve just made this law that allows DAOs to be registered entities and legally own things, and there’s a lot of people building on it – CityDAO is building on it, a lot of projects are building on it – so definitely I hope people An example of a good model to follow.
Miami…it’s interesting…they have Francis Suarez as mayor that really helps, he’s a mayor who’s very passionate about technology being positive and moving all of these things forward. And MiamiCoin, and then there’s more and more of this audio-encrypted thing going on, so it’s nice to see what any of these experiments end up being like.
So I think there are many ways for institutions to have a mutually beneficial relationship with the crypto space. There are good methods, there are similar methods, and some methods can really backfire.
CR: I think that’s a very fair view. Thus, true adoption comes from grassroots individuals, groups of people, and communities that want to use cryptocurrencies. Institutions can then help achieve this by encouraging innovation, building infrastructure, investing in start-ups, or simply creating regulatory frameworks that encourage innovation. So institutions can help these grassroots adoptions by helping them thrive, but there’s also the wrong way to do it – and that’s pushing cryptocurrencies onto people.
Tough cryptocurrency regulation is a looming threat
CR: On a related note, I’d like to hear your thoughts on the regulatory environment surrounding cryptocurrencies in the US… Recently, many US lawmakers and politicians seem to be more negative, skeptical, or aggressive towards cryptocurrencies. So if the U.S. wants to really crack down on and limit the growth of cryptocurrencies, do you think they can limit its impact and force it to become this very niche thing? Or do you think cryptocurrencies are strong and decentralized enough that even with this very tough U.S. approach to cryptocurrencies, it can still grow into the mainstream elsewhere?
VB: I think if the U.S. takes a very hard line, a lot of very important crypto stuff is going to be difficult to do in the U.S. for sure, but it’s definitely going to continue to go all out.
Outside of the U.S., I think a world where many countries ban crypto and work very hard to ban it will definitely make it more difficult, especially if good things are built on top of crypto and try to stay connected to the existing world prosperity. I think one of the tragedies that the current state of regulation is likely to fall into is what you might call anarchist tyranny.
So anarchist tyranny is this political buzzword that people have been using – I forget who actually created it – and it’s been around for 50 years. But that’s basically the idea of this state of government, basically like anarchy that has bad meaning for people who do bad things, but a tyranny for people who try to do things that make sense.
Sometimes San Francisco is even described as such – so lenient even with those trying to steal from stores that they often have to lock everything up or even close their doors. However, if you’re thinking of opening a new restaurant, good luck getting through the $100,000 license. It’s a step backwards, right? We want robbers, not restaurants, to have to go through hundreds of thousands of dollars in permits, and hopefully robbers never get through.
The analogy in the crypto space is, if we just look at token financing, the problem is what happens a lot of the time is, we have projects that, in order to comply with securities laws, end up making it clear that “this is a token with no value. We’re with it There’s no connection, we don’t make any commitments, and if you buy it, you’re basically giving us a donation.” So the legal structure that basically prohibits this big class of things doesn’t go through this registration process which is basically for crypto projects It’s not possible to end up pushing a lot of projects into these alternative structures and they end up either not being open to the public at all or only open to this extremely limited group of investors – basically you have this situation where the rich go Up front, then open to the public, the public can only buy in at all-time highs, so the public is exploited anyway. Or they create these structures that are basically public, and instead of buying something they have an actual guarantee about something, they’re basically buying it where there is no guarantee at all other than the goodwill of the developer.
So in these well-intentioned DeFi projects, projects like Uniswap are getting subpoenas and spending huge sums on lawyers, but we have outright criminals stealing millions. I feel like if the opposite were the case – if DeFi projects didn’t have to deal with so many regulatory issues, but at the same time there was more work to do after all these multi-million dollar thefts – it would be a great deal for everyone better world.
But the challenge is that anarchic tyranny happens because they are easy. Because if you want to do something meaningful, then in a sense you have to make yourself vulnerable — you have to have a presence, you have to do things that require long-term planning, you have to have a team — So doing something meaningful makes you more vulnerable than just doing something totally destructive.
Basically, a trap that’s usually easy to fall into is a trap that’s harder to do the first thing than the second, and I think that’s a real risk, and I do see a lot of regulation coming in — in [Trap] that creates more obstacles in front of meaningful things.
Then face the reality of things like theft and scams that no one wants to see… The crypto community is willing to engage so there can actually be better options. It’s a hard problem — the reason I think it’s unsolved is that it’s a hard problem, but I do think it’s something that deserves more thought and research.
CR: It’s ironic that regulators criticize cryptocurrency as a Wild West — but that’s because they’re turning it into a Wild West. They just refuse to regulate it properly and don’t solve the problem, don’t create any structure around it, projects kind of have to do these weird structures, they guess what security is like, but no one has ever done that. So they do these things like you say — don’t give their investors proper ownership because it appears to be a security, and [say] these things, like “Oh, maybe it’s about future income, But not really” – it just leaves everyone unprotected, so I don’t know what the prospects are.
I don’t know if you agree, but it’s a bit bleak because there doesn’t seem to be a way forward – without anyone offering any guidance, we might get out of this, at least in the US.
VB: One answer might be that outside the US it might actually be easier to influence, suggest and actually try what’s better for everyone. So the only way to convince is through a successful demo – which may actually be one of the answers.
I think given that we both have a lot of [backgrounds] outside of the US, we’re definitely looking at those options better than [some] — a lot of the loudest voices in crypto are the ones who have basically spent their entire lives in America, doesn’t really think about anything outside of America.
I guess you either persuade with words or persuade with presentation. But the way you persuade with words that actually work at this point is basically suggesting some new alternative that enough people think it’s reasonable enough that it’ll be successful, it kind of smells like pushing the needle forward.
It also doesn’t have to be a federal level thing, maybe something can be done at the state level. As I mentioned, the way Wyoming created the DAO law… as far as I know, I don’t think it contributed to any bad things that wouldn’t have existed, but it contributed to a lot of meaningful things – as I mentioned Yes, CityDAO is a good example, and I think there will be many others.
So maybe it’s just a problem and we need more minds to pay attention and study.
Vitalik strikes back at Avalanche on L2 expansion
CR: So I recently recorded interviews with other guests, and I wanted to hear your thoughts on some of the arguments they made—arguments that are, in a way, against the way Ethereum works.
One of the guests was Emin Gün Sirer of Avalanche, who had a very provocative argument that “any layer 1 blockchain that relies on a layer 2 scaling solution has capitulated.” His argument was, Relying on L2 significantly reduces security and increases complexity, and he believes the blockchain should be able to scale from its core mainnet layer.
VB: To me, it sounds like any country that relies on companies to meet people’s basic needs is capitulating, right? To us, that sounds unrealistic.
L2 is part of a larger ecosystem of L1, I think the ecosystem is symbiotic with other ecosystems…I think the Arbitrum ecosystem is part of the Ethereum ecosystem, the StarkNet ecosystem is part of the Ethereum ecosystem, the optimism ecosystem is Part of the Ethereum ecosystem, same as the Loopring ecosystem and Polygon.
I don’t think there’s anything wrong with relying on this beneficial interaction between the different parts and the whole, and I even think it can have important benefits. For example, historically the Ethereum Foundation – business development has not historically been one of its strengths, you could say part of it is really wanting to keep you know neutrality and purity and other important things, but its Part of it may be that we don’t have some kind of talent ourselves.
Polygon, for example, actually does have a business, and they’ve had quite a bit of success with that recently. Not just them, there are many other L2 projects.
So I don’t think there is anything wrong with scaling via L2. We need to stop thinking of chains as chains and need to start thinking of them as ecosystems, and the different parts of the ecosystem can certainly provide important tools and complement each other. I think it’s very healthy and very good.
CR: Do you think this is a safe way to move forward and build?
VB: There is no technical reason why L2 is insecure. Technically, the logic by which they work – whether it’s Rollup or the Lightning Network – these things have been understood for years.
So I don’t really see the security risk of L2 extensions that don’t exist in Layer 1 extensions. Actually, I think L2 scaling is better for experimentation, because you can roll out different parallel scaling methods, and you don’t really need to put all your eggs in one basket to achieve the same degree. So yes, I don’t think that’s the problem.
CR: Okay, I think availability is the problem that L2 is facing right now?
VB: Yeah, I think that’s a real problem. I think we can definitely do more to improve it. I think we can do more to improve people’s ability to move assets between different L2s. There’s more we can do to improve people’s ability to move safely between different L2s. I think there’s a big difference on Loopring or Arbitrum versus Avalanche.
[With] Avalanche, you’re connecting to a separate L1, whereas with Arbitrum, you’re basically moving to a platform that’s actually secured by the underlying blockchain. Right now, Metamask and other browsers don’t really [do] a good job of clearly distinguishing to the user, and I think it’s important to be clear to the user…
There’s definitely more usability work that could be done. It’s both about plain old conventional usability of the ecosystem, making it easier for people to understand the concept of jumping between chains and what happens when they jump between chains, and usability…and making it more clear to users what’s going on What – and under what circumstances are they actually safe and under what circumstances they are not, but those are things a lot of people struggle with.
Security flaws in the cross-chain world
CR: So this is very related to an article you wrote recently where you said “the future will be multi-chain, but not cross-chain”.
You say that there are fundamental security constraints on bridges between chains. As you explained, you don’t think there are security implications for moving assets between Ethereum and L2, but there are security implications for moving between Ethereum and other chains. I’m guessing you were proven right on the wormhole bridge hack recently – that happened a few days after you posted, so it was like “oh, Vitalik was right”.
However, it makes sense that living in this cross-chain world is far more risky. But if so, the future lives in these L1s, and there are L2 scalability solutions, maybe there are different communities using different blockchains – are we going to lose this key feature of blockchain and crypto composability ? Aren’t we going back to another walled garden?
VB: I think the blockchain bridge is here to stay. As I mentioned in the post, one conclusion of this thinking is that there is this inverse network effect of bridge security, if a lot of people use them, bridges become less secure, but it also means that if not then Multiple people use them and they’ll be pretty safe.
So there will still be some people who use them. Even without any bridges, there will still be decentralized exchanges, so…it won’t be like that…with these walled gardens, you simply can’t move things between them. You’ll be able to own your Solana Tokens on Solana, then you’ll be able to trade them decentralizedly for ETH on Ethereum, and then for Bitcoin on the Bitcoin network – the more tools there are to do so More and more efficient, I think they will only continue to become more efficient.
So it’s definitely still possible to be a multi-blockchain hop guy, you have to do some things on some ecosystems and some other things on other ecosystems and you need to hop between them.
The only thing we won’t see much of is Ethereum native assets on applications on Solana and vice versa – but I don’t even think we necessarily need to.
If your app uses Ethereum-native assets, it can be on Ethereum, but if your app uses a lot of Solana-native assets, they can be on Solana. If people want to borrow both, they can just use an app that works on both. I don’t think we actually lose that much from this interoperability compared to the maximum interoperability where every asset can be delivered anywhere. Reduction of tail risk and systemic risk to the ecosystem is absolutely very important.
I think one way to think about that analogy is a way of doing a walled garden, if you use Twitter and Facebook, then you can have people have content snippets that point to content snippets created by other platforms. But another interoperability could be if Facebook was able to make an API call where you could retweet, you could see the second is more dangerous than the first.
In the case of cryptocurrencies, there is a difference between a message and an asset. Once you start transferring assets, you gain this higher level of trust.
This is a very complicated, interesting, technical rabbit hole. A lot of things in cryptocurrency are these technical rabbit holes and it’s hard to come to a single conclusion where we can say “yes, one word” and “shh, another word” — it really depends on the situation.
You can still interoperate, and you can interoperate in many ways, but this particular thing about jumping assets always comes with this unavoidable risk premium, and I guess that’s the conclusion.
Ethereum vs Bitcoin
CR: Yes, it makes sense. So another guest I had earlier was Edan Yago, who is building a DeFi application on top of Bitcoin. He… thinks Bitcoin is the only legal layer for web 3 decentralized applications because it’s the most trustworthy blockchain, it’s the most decentralized, it’s the most secure. So, for him, if we’re going to rebuild the financial system, it should be on top of the most secure blockchain – if he’s going to build his application on Ethereum, he’ll be using an unreliable foundation. I think this echoes a lot of Bitcoin minimalism.
VB: I think I have two ways of answering. One is that this is more of a provocation, the other is that the view makes sense.
It is a provocation because this year, Ethereum is moving to PoS, which is better and more secure. So after The Merge, Ethereum will actually be the most secure base layer. It’s trolls[ish] because Bitcoiners will just yell and say “we don’t agree with this”, but that’s my belief and I’ve written a lot of lengthy articles in many places about why.
Saying it makes sense is because I think there are some interesting differences – here’s an article I wrote a few years ago called “Base Layers and Functionality Escape Velocity”. The core idea is that decentralization of the base layer is not enough; the base layer also needs to be able to build things on top of it without adding additional centralization in the middle.
So a possible analogy is, imagine if you have a country that follows very real liberal rules about political morality — very strong property rights, and if you have a piece of property, you can do whatever you want on it want to do it. But a piece of property is indivisible, the only property parcel that exists is a city-sized property parcel, so currently the only parcel that exists and has property rights attached is ten by ten square kilometers in size, and you can’t separate them. The only thing you can do is you can enter into legal contracts that are enforced by the court system, but even there, people can go broke and weird things can happen.
In that world, it looks like the base layer fully respects property rights, and it looks like the base layer does everything that people who care about this sort of thing really want. But because the base layer only deals with these institutional chunks of property, they may not actually have that much freedom from the perspective of a person living in the country.
And the reason they don’t really experience that much freedom is because if they want to really live, they’re going to have to live in basically one of the probably thousands of private cities that may have their own Any rules you have, if the underlying culture is pretty authoritarian, if the culture is pretty conformist, then all these cities might actually be pretty bad, not doing a good job of respecting people’s rights.
So the moral is that even if your base layer is decentralized, it’s not functional enough in this particular case… to allow people to actually own their own properties, not just with owning these orders Incredibly big city-scale people build relationships with large plots of land. Because it doesn’t have that function, it turns out that the level of freedom and sovereignty and whatever you want to call it experience living in this country isn’t actually very high.
So I think Bitcoin is a bit similar in that the Bitcoin base chain doesn’t support complex scripts – it doesn’t support what we call rich state, so it’s not possible to create a Rollup on top of Bitcoin. The only scaling solution it can support is the Lightning Network, you can’t create a Rollup on top of Bitcoin, you can’t create a Plasma chain on top of Bitcoin, you can’t create complex smart contracts on top of Bitcoin.
So, for example, let’s say you take the Ethereum Foundation’s multisig. The way Ethereum Foundation multisig works is that with seven participants, you need four out of seven to transfer a large amount of money. But one in seven can withdraw a small amount of money every day, up to a certain amount. The problem is this “getting to a certain amount per day” thing – doing this requires being able to remember that you’ve made a trade and you’ve made a trade of that size. This is not something that the Bitcoin scripting language can really handle.
So if you want to build this design on top of Bitcoin, you have to build it on top of the system that exists on top of Bitcoin. But then the system actually has to add its own trust assumptions. So if you take Liquid as an example, Liquid is a multisig. It’s basically a permissioned consortium blockchain, but it’s run with permission by people trusted by the Bitcoin community, so it won’t be lumped in with what some banks are doing right.
CR: Is rootstock the same?
BV: I think, in its current form, yes. I believe their long term vision is that they actually want Bitcoin miners to strengthen the connection between Bitcoin and Rootstock, but I haven’t actually looked at Rootstock in a while. If you have invited the Rootstock people, we will be happy to get their correction.
But if they can get miners to agree on enough things to make Rootstock what I call “trustless”, then they’ll basically turn Bitcoin into something very different from what Bitcoin is today. It’s basically like doing a soft fork, which would be an interesting way to upgrade bitcoin, but we have to call it — it’s upgrading bitcoin, and if you upgrade bitcoin, then you can give it a Functionality Escape Velocity.
So I guess Bitcoin in its current form has no Functionality Escape Velocity. It does have a lot of true decentralization that a lot of chains really don’t have, but neither does Bitcoin. So because it doesn’t have this Functionality Escape Velocity, because it doesn’t have enough power to build whatever L2 you want, whatever L1 doesn’t do on top, the sovereignty experienced by the ego level user ends up being heavily mediated, much lower than the theoretical chain level provided. If Bitcoin wants to improve on this, it has to add functionality. I do know some people want to do this, and I think that’s fine, but that’s how it is today.
CR : It’s interesting because because of all these different features, they build on top of Bitcoin, but to do that they need to build on top of layer 2, and when they do, they drop those Features.
Is ‘undo culture’ gaining popularity on Ethereum?
CR: Before we wrap up this podcast, I want to get your thoughts on the latest Ethereum crypto Twitter controversy. People have made different tweets or statements or comments in the past that were racist or misogynistic or just something other people in the ethereum community disagreed with so that got them fired or removed People other than characters have come across these statements and so on – so basically “undo culture” came to Ethereum.
Probably the most notable case happened to someone at ENS you mentioned. In 2016, he said that homosexuality is evil, that transgenderism does not exist, that abortion is murder, and that contraception is perversion — all of which go against many of the values of many in the Ethereum community. So he lost his community role because of that statement.
I think this is a very tough question. I’m 100% a free speech advocate – I want everyone to have the right to say whatever they want without fear of reprisal. But at the same time, I’ve also seen people saying ‘These are public figures, they’re building for a community that wants to be inclusive, they speak out to many members of the community, they feel hurt and so on, they’re not Ethereum or they Good representation of the app in use. ‘Where is your position?
VB: Yeah, I think I must have some different, complex and nuanced views on this. I think one of them is that I think Brantley’s failure last week was definitely not just a point of view that a lot of people disagree with. I think his other big failure was that when the whole drama happened, he responded by first holding a Twitter Space where he not only doubled down on opinions, but doubled down on them in a very clumsy way — A lot hides behind “my religion tells me to believe this, so I believe this” and in a way that doesn’t really make people feel like he understands or participates in these opposing views.
At the end of the day, he’s the main representative, he’s the company representative, and he’s the representative inside the ENS DAO, and when you’re in a political role, it’s part of your job to be able to handle disputes well.
So I don’t think you can even claim that he was kicked out for something unrelated to his ability to do a good job – I think that’s true in some ways. This is a delicate point.
I guess another subtle point…what’s often overlooked here is that there’s an American-centric aspect to this culture that unfortunately gets exaggerated every time it happens. If you pay close attention to these recent deplatforming debates, you will see that the most vehement opponents of deplatforming are often foreigners, and often even foreign dissidents fleeing a culture of cancellation. Should we say even more drastic than what America has.
So Alexei Navalny, the Russian dissident who unfortunately has been struggling in prison for the past year or so, he was about a year ago One of the strongest opponents of Donald Trump being kicked out of Twitter because ultimately precedent does matter and when you do something you are usually legitimizing that behavior, including long-term Long-term actions performed by other people that you do not like and cannot control.
That’s something I think people need to keep paying attention to. Just from my own personal observations, I’ve seen ethereum community members in Latin America, there are some Chinese ethereum community members who have absolutely no knee-jerk hostile views on what’s going on, but definitely “OK, we need to be careful” this.
So when things like this are done, it’s important that they’re done in a way that clearly shows what’s actually being done, what’s the value behind what’s being done, and why this won’t set a precedent, for example, in the future, like the ENS DAO There may be protocol changes to remove .eth domains for people they think have bad opinions…
Few people want ENS to go in that direction – I certainly don’t want ENS to go in that direction – but it needs to be communicated clearly why what was done this week is not the first stepping stone to doing something similar. I believe this can be communicated clearly, but it has to be. That’s the second subtle point, I guess.
The third subtle point is that I personally favor a cooldown of at least 14 days before anyone gets fired for a scandal. I would personally like it if it was a general social rule that everyone has, and numbers even higher than 14 would be even better.
Yes, it does mean that some people will be very uncomfortable and they will only have to endure the discomfort for a while. But at the same time, I think it’s very healthy to sit in discomfort and not make knee-jerk decisions, and that’s… a muscle we need to work on, and I think that’s also better for communicating clearly to the community, What is done is the result of careful consideration.
But the fourth subtle point is that I think one of the great things about the Ethereum community is that it’s so diverse and it has these different sub-communities, [but] Ethereum doesn’t belong to any of its sub-communities. I think this does allow sub-communities to be more opinionated.
Some were de-referenced in certain Ethereum sub-communities, and those sub-communities did continue to prosper in other Ethereum sub-communities. Ameen might be a good example, there are plenty of sober people who don’t like him for various reasons. But at the same time, he has RAI, The Money God, and Moloch DAO—all those projects. There are a lot of people who are happy that he stuck with himself and that he continues to prosper that way.
So I think it’s important not to over-catastrophize and over-interpret the ethereum sub-community that behaves in a particular way [and think] ‘Oh, these are the values of ethereum right now. ‘Ethereum is big, ethereum is worth a lot, I don’t know’ don’t think myself or any ethereum sub-community really has the right to define what all ethereum stands for, I think it’s healthier that way. But it does…mean that we should be careful to protect the Ethereum base layer from getting caught up in such controversies.
For example, sometimes people agree that [we] should issue more ETH to fund some base layer public goods at the protocol layer. It’s actually a good argument, do we really want the entire ethereum community to go away…basically forced to create this big collective social signal that ethereum is standing in one direction or the other on an issue The direction, in the end, is entirely controversial globally.
I think a lot of people do come to Ethereum as a refuge from their local political issues. The world is big, and in many cases, taking refuge from your local political issues is a perfectly legitimate thing that should be totally unslandered, and Ethereum has become… a reflection of this very particular part of care The world of some specific problems but not others certainly also limits its potential.
So yeah, I don’t know – that’s unfortunate. I don’t wave flags like “Release Brantley” or “Leave Brantley” or “Come on, Brantley.” Unfortunately, [I] only have some complex views because the whole thing itself is complex.
CR: Yes, I agree. This is a topic that requires nuance – I don’t think there is a straight answer.
Finally, a quick question to close. So I keep asking each guest what makes them rebel. how about you?
VB: What made me resist? This is a good question. I feel like I despise a lot of things — I despise token voting governance, and I despise a lot of people wanting to take very short-term action to push the crypto space in a direction that looks good in the short-term but isn’t actually sustainable.
What have I been against recently? I think I challenged Avalanche on Twitter yesterday and it was definitely a challenge.
On the other hand, I feel like I don’t really represent that I’m radical because I just try to think differently and whatever my point of view is, that’s my point of view. The less likely it is to predict the opinions of others from their opinions, the more valuable those opinions are. So I’m definitely trying to really think things apart and not let anyone’s existing box guide me.
I don’t think I can give you a specific thing but you’re going to get a long list and if you want to know what that long list is then I’ve written a lot and tweeted about it for a while and I may continue to do so.
CR: Yes, please go ahead! These are the best.
Okay, Vitalik, this chat was great, I wish we had more time. Hope you’ll come back to The Defiant podcast in the future so we can continue this conversation. Really enjoyed chatting with you – everything was fun.
Thank you again for taking the time, thank you very much, see you soon!
VB: Thank you too.
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