Ethereum founder Vitalik is not worried about the current collapse of the cryptocurrency, and he does not like his creation for speculation.
Vitalik’s father was named Dmitry Buterin, commonly known as Dima. A Russian-born engineer and entrepreneur whose family moved to Canada, Vitalik learned about Bitcoin from his father as a teenager.
Vitalik and Dima told Fortune they’re used to the volatility of cryptocurrencies, but this Father’s Day, the most prominent father-son duo in DeFi has another message for us : Where else can cryptocurrencies be used.
“Cryptocurrencies have had their big ups and downs before, and they’re going to have them again, ” Vitalik told Fortune . “Downturns are certainly challenging, but they’re also often times for nurturing major projects.”
Although he is already a billionaire, Vitalik explained that money was never his focus or motivation. He dislikes Ethereum for speculation and believes that blockchain networks have more use cases than finance.
Both Vitalik and Dima want to see more applications beyond finance while continuing to improve Ethereum and its technology, and have already done so. After Russian President Vladimir Putin announced an attack on Ukraine in February, Vitalik and Dima backed The Ukraine DAO, a decentralized autonomous organization that raised millions of dollars to support Ukrainians in the war. Both father and son have donated to the DAO, and Dima is even a multi-signature wallet administrator for the DAO organization.
From time to time, Vitalik posts his thoughts on the future of blockchain on the website. For example, recently he shared the idea of Soulbound Tokens, where records of personal credentials can be recorded on-chain. Additionally, he wrote about Ethereum’s much-anticipated merger upgrade (The Merge), which will transition from proof-of-work to proof-of-stake and significantly reduce its environmental impact.
In this interview, Vitalik and Dima speak to Fortune about their journey in the crypto space, Ethereum’s regrets and vision for the future of the industry, the much-anticipated merger, the collapse of the Terra ecosystem, and more. The interview took place in early June, just before the cryptocurrency fell sharply, and Vitalik and Dima also commented on the crypto market on June 15.
FORTUNE: Dima, when did you start noticing Vitalik’s interest in numbers?
Dima: About three years old at Vitalik. His grandfather was a very smart guy and he was teaching Vitalik math, alphabets and stuff.
Like people usually build buildings and other things out of Lego bricks. Vitalik really enjoys building numbers with them. It’s really fascinating to see this. I grew up in the Soviet Union and had very limited access to toys. So as Vitalik was growing up, I wanted to buy him a lot of cool toys. I started with Lego bricks because Lego bricks are such a cool building set and it was really fun to see him build them in a very different way.
Vitalik: After I came to Canada, my dad bought me some books to learn programming, and I started programming. I started programming to make games for myself, and I distinctly remember finding programming fun and fascinated from the very beginning.
FORTUNE: Dima, the first cryptocurrency you introduced to Vitalik was Bitcoin, right? What drew your attention to Bitcoin in the first place?
Dima: Well, I am very curious about new things and new technologies, and computers and their surroundings are one of the most fertile areas of human knowledge to explore human curiosity. So, I’ve been listening to podcasts on this. The podcast host is also a very curious person who touches on a lot of different topics. Once on his podcast, I heard about Bitcoin and it sounded like a lot of sense.
I’m glad Vitalik is curious about many things. It’s always fun for me to share curious new things like, “Oh, I found this interesting thing. Hey Vitalik, check it out. Maybe you’ll be interested in it.”
Fortune: What did you think when Vitalik started working on building Ethereum?
Dima: I was impressed that Vitalik shared his white paper with me when we were at home and it was very well written. I’m really impressed, and frankly, I don’t follow cryptocurrencies that closely, but when I read the Ethereum white paper, it made sense to me. I think that’s one of Vitalik’s talents. He can explain very complex things in an easy-to-understand way.
Vitalik: In December 2013, I came back to Toronto and my dad was interested in my research, so I showed him the Ethereum white paper and he thought it was fascinating.
FORTUNE: As Ethereum gains more traction, are you surprised when people start using it? Did you anticipate what it would turn out to be?
Vitalik: No. At first I thought it was just a small project that we would finish in three or four months and then I went back to college. But in January, I saw a lot of interest in the project, and it was obviously taking longer, and I realized it had to be re-planned.
Another thing I didn’t expect at all was how much the crypto space changed in 2017 and 2021. The rapid growth was definitely a big surprise for me.
FORTUNE: How do you feel about the current state of the market? Have any concerns or thoughts about the future?
Vitalik: The crypto industry has had big ups and downs, and there will be ups and downs in the future. Downturns are certainly challenging, but they are also often times to nurture major projects. I am confident that the Ethereum ecosystem will become a more mature and successful blockchain ecosystem, fulfilling the hopes and dreams of millions of people in the crypto space over the next decade.
Dima: The market is cyclical, especially the crypto market. I’ve been watching cryptocurrencies for over a decade, it’s going to go up again and it’s going to go down again.
Nothing has changed for me in terms of its long-term potential. I think cryptocurrencies are now entering an era of mass adoption.
A growth curve is never a straight line. It’s not that smooth. Right now, there is a lot of fear in the global market, and there are a lot of questions. There is a war going on in Ukraine. The Fed is raising rates and more. But human beings are adaptable, so we go through the market down and build more stuff. Ethereum will be merged into Proof of Stake. This is very exciting thing. As far as the crypto landscape is concerned, nothing has changed for me. There are some short-term fears in the market right now that speculators will be wiped out and yes, there will be some pain in the crypto space.
FORTUNE: Since the collapse of the Terra ecosystem, there have been fears of systemic risk spreading. Its domino effect has had an impact in all crypto ecosystems. Are there any aspects that are lacking in discussion?
Vitalik: I think in general, the Luna debacle was one of the big moments in cryptocurrencies, a reminder that people can’t just build a financial system and pretend that negative things will never happen. One can’t just think about the level of interest rates in the short run, but also the long tail and these very special cases. I think this insight will ultimately bring stability to the crypto ecosystem.
Also, I think whenever this happens in the crypto space, at least in my experience, there’s always a front-line leader coming out to clarify morally, and you can see how different people within the market react, which is more Get a good understanding of their personalities and what kind of people they actually are.
Dima: The Luna crash was a very traumatic event for a lot of people who lost a lot of money in the crash.
I hope we’re not limited to “Let’s limit. Let’s forbid. Let’s stop this.” These slogans. There are all sorts of conundrums along the way for the crypto industry that we can learn from and keep us going, rather than trying to keep us parked and safe.
Fortune: What are the benefits of cryptocurrencies for you? What are you most passionate about?
Dima: When Russia announced an attack on Ukraine, I was very impressed by pro-Ukraine crypto community organizations (like The Ukraine DAO). They use cryptocurrencies very efficiently to fundraise and then pool the funds in a specific city where there is already infrastructure for people to convert it into their local currency, so that’s really cool.
Another aspect of encryption that I’m very passionate about is that anyone anywhere on the planet will be able to access the internet to connect to their economy. For me, this is a huge improvement. People can use the encrypted blockchain to make money, participate in companies, DAO organizations, sell their own art all over the world, build projects such as encrypted finance. So I’m passionate about that. Because I grew up in the Soviet Union, which was very isolated from the rest of the world.
Lastly, I have to say that the new organizational structure, the DAO – I think there is still a lot to figure out about how they are governed, how they control resources, make decisions, and more. But to me, this is the future of how humans organize.
Vitalik: I definitely feel the same.
One thing I noticed during my trip to Argentina late last year is that the regulators there have a different attitude towards cryptocurrencies. Often in the West, sometimes even supporters subconsciously see this as a rich man’s gambling game. But in places like Argentina, it’s a lifeline for local residents. People there sometimes use cryptocurrencies to save money and sometimes to buy and sell things. There are projects like Proof Of Humanity that are trying to build UBI (Universal Basic Income) there using crypto. There are projects that are experimenting with DAOs and decentralized arbitration and all these other technologies.
So, I think there is really a lot of this demand in many corners of the world. NFTs are definitely a good example too.
Fortune: Is your least favorite part of ethereum speculative? I know you have no control over how humans use ethereum, but do you regret any way ethereum is being used? How do you feel when you see not-so-good usage scenarios?
Vitalik: Yes, I have no interest in a lot of financial speculation. I think that sometimes Ethereum is really tied to emerging things – like NFTs, I know there are a lot of artists around the world who are using NFTs to participate in the global economy that they wouldn’t otherwise be able to participate in, but at the same time there are rich people selling 300 to other rich people million dollar monkey.
I think Ethereum is an open system. This means that no one has granular control over who can and cannot use it. We should actively support many applications that better reflect our values, but then again, if the system is to be fully decentralized, you have to trust people’s choices.
Dima: Humans are very lonely and we are always looking for love and approval from others. Like, “I’ve got a Lamborghini. I’ve got Boring Ape NFTs. I’ve got a lot of money.” Inside of us it’s like, “Oh, I suck, but if I show the world I have all these cool things, maybe People will love me and build relationships with me.”
FORTUNE: Vitalik, I saw you recently asked your Twitter followers to share what they disagreed with most about you. What caused this idea?
Vitalik: I’m curious. I just want to hear the opinions of different groups of people and give my fans an equal space to talk, who may be afraid to disagree with me. This is an interesting experiment. I think some of these answers are definitely interesting.
Fortune: What’s the biggest takeaway?
Vitalik: I don’t think there is a big gain. There is a lot of less impactful feedback.
I have some disagreements with the fans on extending life. Also, several people complained about my fashion style.
Some people say that I should not be involved in politics, or that I should be less involved in politics. Still others said, “No, you shouldn’t actually try so hard to be neutral, you should be willing to be more open about your opinion when you believe something.”
You can’t please everyone.
FORTUNE: Would you donate to a political organization or party?
Vitalik: I think the challenge with donating to political parties is that politics is a very complex and very messy system. It is easy to have a completely different effect than the purpose of the donation. I just don’t quite understand how the American political machine works internally.
My opinion is that I’ll focus on other things, and it’s going well so far.
Fortune: A lot of people also disagree with your post on Soulbound Tokens. What do you think of the response?
Vitalik: There’s definitely been a lot of positive, interesting discussions and a lot of people misunderstanding the concept. But that’s okay. I think that’s something that has to be addressed because what’s supposed to happen happens.
An interesting dynamic I’ve seen and think people are misunderstanding something, I’ve noticed that people tend to define debate as choosing between two prepackaged solutions, people like to compare all of the two solutions benefits and costs. And the style of debate I like is: let’s break it down one by one.
I think there are always many options, far more than two. And in the discussion of soul-bound tokens, people imagine that this thing called soul-bound token exists, but it is just a collection of ideas in a PDF document.
Sometimes it’s more beneficial to do things on-chain, and sometimes it’s off-chain. We should figure out when to choose on-chain or off-chain and work towards the best solution.
Dima: One of the areas where blockchain technology has not been fully explored is reputation systems, and I think we will see more of that happening in that area. Soulbound tokens are pretty much a collection of thoughts and ideas, as Vitalik describes them. It’s too early to talk about specific methods, it’s fascinating, let’s move on to explore this.
FORTUNE: Why Proof of Stake is the Better Mechanism for the Highly Anticipated Ethereum Merger?
Vitalik: I think there are a lot of benefits to Ethereum switching to Proof of Stake. In terms of environmental issues, the Ethereum ecosystem can be made to consume less resources. In addition, the proof-of-stake mechanism can improve the security of the system. It makes the attack more expensive and makes it easier to recover the network from the attack, which people didn’t expect. Additionally, the proof-of-stake mechanism is more censorship-resistant, and the computers running validating nodes make it easier for miners to detect and shut down programs. Therefore, the proof-of-stake mechanism has a different set of advantages.
I think the goal of converting Ethereum to Proof of Stake is a clear plan around the end of 2014. I think it’s been described as a possibility since early 2014, and it would be nice to discover a new algorithm. At the end of 2014, we had enough confidence in this information and were ready to start development.
Dima: Significant reductions in energy consumption are obviously beneficial, and of course the security of the network. Based on all the research articles I’ve seen, I firmly believe this is a good thing. This is very important for the network.
I’m really happy to see this come to fruition because I’ve seen a lot of people put a lot of effort into this.
But having proof-of-stake doesn’t mean, “We’re here. This is the ultimate perfect technology.” At some point, proof-of-stake may be replaced, and while it’s not known when, it’s inevitable of.
FORTUNE: Do you have some concerns about mergers, such as Lido Finance and the risk of centralization? Is this the most important thing in your opinion after the merger?
Vitalik: Yes, I’m definitely worried. I think that’s one of the bigger questions we’re thinking about as we try to figure out how to change proof-of-stake over the long term. But I also think it’s important not to look at this in a catastrophic way, many people are overly negative at the moment.
For example, even Lido owns about a third of the staking deposits on the Ethereum beacon chain (Beacon chain). First, if an attacker holds another third of the pledged deposits, then we cannot restore the beacon chain or anything. But really, the worst thing an attacker can do is stop the merge for about a day or so, which is cumbersome, but not that scary. So, it’s one thing.
Another thing is that Lido is not a single staking node. I think they have something like 21 nodes representing running these validators inside Lido, and they are decentralized between them. It’s like an attacker sending a team of heavily armed men into the building and kidnapping, the attacker can take all of Lido’s staked ETH, but have to go to 21 different locations, some of which don’t even know where they are. So, Lido is very different from a centralized staking platform or even a centralized mining pool.
I think even something like this today is easy to manage and it’s still a healthy, decentralized proof-of-stake system. At the same time, I think in the Ethereum community, we do set very high standards for ourselves, and a higher level of decentralization is definitely something we are actively working towards.
Fortune: Looking back at the crypto space as a whole, do you think the good outweighs the bad?
Vitalik: I would say yes.
I don’t think the most flashy encryption application is the most common encryption application. Somebody traded Boring Ape NFTs for $3 million, and some projects were occasionally hacked for $20 million, all of which are real. But I don’t think that what cryptocurrencies do on a day-to-day basis is not like that, not like active apps, not like those activists say using cryptocurrencies to protect themselves, but like people all over the world who are now finding Using cryptocurrencies makes it easier to transfer money internationally, allow businesses to collaborate across borders or accept payments from them, and more. There are people doing these things silently, but this is also a very real use case.
Dima: When we try to assess the quality of anything, it’s very complicated. There are a lot of different things, projects, people, etc. in the crypto space. Everything has various outcomes. So we have these great crypto applications, but also speculation, scams, and so on. This is life.
Fortune Magazine: To sum up, how can Ethereum and even the crypto space develop in a better direction?
Vitalik: Obviously, one of the things that I think is important is to continue to improve the technology of Ethereum.
So switch Ethereum to proof-of-stake to make it a greener and more secure system; add some scalability improvements like sharding and rollup, which will drastically reduce transaction fees for people; and finally, let the ecosystem Get it cheap enough for ordinary people to use it — just do a lot of work to make the blockchain ecosystem more secure, user-friendly, and easier to engage many different types of people. I really hope to get back some of the constructive experimentation we had in 2015 and 2016.
Also, I’m excited to see different types of applications emerge, especially outside of finance, which is a real growth in the crypto space. I think DAOs can greatly improve human collaboration, organizing, and working together. It really took us a lot of experimentation and figuring out what kind of DAO mechanism would make sense. This is what people are doing and have made great strides in. We will see more amazing experiments and successes in the future.
In addition to DAOs, Ethereum identity and soul-bound tokens, there are things like proof-of-attendance protocols or proof-of-humanity-based applications – I think there are a lot of really amazing things happening inside the Ethereum ecosystem, and only become better.
FORTUNE: Dima, do you have any parental words of wisdom for Vitalik this Father’s Day?
Dima: Parenting is one of the greatest challenges facing humanity. Besides Vitalik, I have two daughters who are younger. Supporting the growth of another human being is a wonderful and challenging thing about being human, with so much growth and so much difficulty. I want to wish all parents a Happy Father’s Day.
No matter what you do, you may face failure. We are all trying to create the best possible future for our children, but the future is full of hope and unknown. At the end of the day, it’s not about how we think about the future, it’s about how we as parents can live more in the present, how we can love our children more and get as much support as possible. So, I want to celebrate this concept of parenting.
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