Bankless - 51 - 2020 Reflections on Crypto and Beyond | Vitalik Buterin

Episode Date: February 8, 2021

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/​ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI​ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/​ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/​ ----- 💪BECOME A BANKLESS PREMIUM MEMBER: http://bankless.cc/membership​ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave​ 🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini​  💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith​  📈 KWENTA - DERIVATIVES TRADING WITH INFINITE LIQUIDITY https://bankless.cc/kwenta​  ------ 51 - 2020 Reflections on Crypto and Beyond Guest: Vitalik Buterin We bring on Vitalik to digest the third of his recent posts on his website: Endnotes on 2020: Crypto and Beyond https://vitalik.ca/general/2020/12/28/endnotes.html  Vitalik wrote this post from Singapore, noting that 2020 was an extremely interesting year in which we faced “humanity’s first boss-level enemy since 1945.” However, it was also a year that brought much hope in areas like transportation, medicine, AI, and blockchains. We have observed a transition in the Political economy from physical to digital – 2020 served as a high-octane accelerant for these changes. A key piece of this change is shifting emphasis from physical private goods to digital public goods. This transition requires creative solutions to the challenges of effective governance. The phrase “digital nationalism” refers humanity’s recent tendency to polarize and how this extends to the internet. Both Bitcoin and Ethereum have undergone great schisms, resulting in hard forks like BCH and ETC. These phenomena in the rising political economy will likely continue. Vitalik walks through the tricky relationship between our financial and non-monetary social motivations. Culture and narrative can be incredibly powerful tools for innovation, but altruistic people are not the only ones with access to these things. Vitalik concludes with thoughts on the Big X - Big Government, Big Business, Big Tech, etc. This multidisciplinary “dense jungle” is populated by a variety of powerful groups with dynamic interrelationships, and blockchains & cryptocurrencies are set up to play a vital role. ------ Vitalik's Blog: https://vitalik.ca/  Vitalik on Twitter: https://twitter.com/VitalikButerin  ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/​  Visit the official Bankless website http://banklesshq.com/​  Follow Bankless on Twitter https://twitter.com/BanklessHQ​  Follow Ryan on Twitter https://twitter.com/ryansadams​  Follow David on Twitter https://twitter.com/TrustlessState​  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Welcome to bankless where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. I'm Ryan Sean Adams. I'm here with David Hoffman and we're here to help you become more bankless. David, we have Vitalik on once again. What topics do we cover? Yeah, we cover three of his most recent blogs on his Vitalik.ca blog. These are all fantastic reads. And in order to help amplify Vitalik's message and try and get out what he's trying to get out, we go through each of these blog pieces together. We start with his recap of 2020 and his forward-looking, kind of his forward-looking predictions into 2021.

That blog was particularly interesting. That's how we start the conversation. We move into his blog post called an incomplete guide to roll-ups. And he kind of helps us unpack what it is to be a roll-up, how we, as an Ethereum, L2 scaling, community landed on roll-ups as a construction and why they are so powerful. And then we also get into the topic of a social recovery wallet. So these are all relatively three different topics, but I would say they are all forward-looking topics that Vitalik sees as kind of like the logical conclusion of a lot of different forces, maybe a lot of them social, a lot of them political in his

first blog post that we get into. But then the second two are more technological and about the way that Ethereum, the landscape is going to manifest and mature over time. So again, a wide-ranging conversation, but still with a lot of awesome through lines. Absolutely. If you're listening on the podcast, of course, we have this on YouTube as well, where we actually go through the articles visually. If you're watching this on YouTube, you can check it out on the podcast and get it directly into your ears, make it more portable that way. David, we should just get right into the interview. But before we do, guys, we want to talk about the sponsors that made this episode possible.

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I'm great. How are you? I'm doing great. Good morning to you, sir. You know, we wanted to talk about three of the recent articles you put out. And I think the one to start with, maybe the one you kind of bookmarked on the end of 2020. 2020 was a crazy year. At least for me, it did not start in the, it did not go the way I had thought

it would go. And I think that's probably true for for a lot of people. So let's start with that article. We're also going to talk about your roll-ups article and then social recovery after that. But let's talk about 2020. Why was it such a strange year? Lots of things were strange. I mean, first of all, you know, the virus was strange. Then, you know, politics in a lot of countries were strange. Life moved on to the Internet very quickly, and that made things that were already strange, even more strange. So, I mean, first of all, just a whole bunch of things happened at the same time. But also, I think, in addition to some of the things that we saw that were in a fairly

exclusive to 2020, it was also this year that I think really accelerated a lot of the trends that we've seen just already moving pretty quickly over the last couple of decades, right? So some of the more important ones that I talk about, I mean, one of them is just to the internet becoming this much more important and of quickly primary force in our lives. I know you had Bologi on your podcast earlier and he talked about like the primary and the mirror and this was kind of the flippinging where the internet became the primary. And I think that was completely true. But I also think it's important to really think through some of the consequences of what that being true means. Because for a long time, you know, people have talked about things like

post-scarcity economics and zero marginal costs, you know, what a world where most value is of virtual and most things people care about our virtual actually means. But the effects actually are profound, right? And you don't, I think, kind of appropriately realize, like, just how much needs to be rethought until you actually experience it. So, and I've been, like, I highlighted a couple of things. Like I kind of talked about how important public goods are on the internet, for example. I talked about how important, even just like the different ways in which economics applies. So like basically the challenge with kind of online activity generally, right, is that it's just much more difficult to formalize

things that are going on, right? Because in the physical world, like we've done this fairly thorough job of kind of formalizing, you know, this is a transaction, this is a trade, this is private property,

this is me selling something, this is you buying something. But on the internet, and if the lines are inherently much more blurry, there's a lot of kind of complicated kind of psychology and mixing into everything else. And so it's very hard to even just mathematically model things that are going on, right?

Like in say the traditional world, I mean, you can use things like demand and supply curves and you can try to measure, you know, who, like what the price of apples is, how the price of apples will change if someone spins up a new farm or if an old farm shuts down. You know, even, you know, things like war, you can, you have things like Lancaster's laws and you can try to measure like how much damage an army will take if it fights another army. And in reality, there's a lot of noise, but like, you know, there's things that you can try to kind of make, make mathematical models of. But on the internet, it's just this incredibly chaotic space. And whether or not some particular tweet that someone makes gets 100 retweets or 1 million retweets,

that's something that often just completely cannot be predicted ahead of time. It's this environment where you just don't really know and there's this really complex set of interactions within this kind of primordial soup. And like, how do you even make, say, a mathematical model about like what Bitcoin maximalists are going to do on Twitter? Well, okay, realistically, you can just copy what they say at 12 months ago and then like maybe change like one or two words. but the results of those interactions are just something that's much more difficult to explain using tools that were optimized for explaining different things, basically. And so basically one of the ideas that I wanted to make is just that understanding different kinds of mass psychology has become more important. right? Like, you know, Twitter runs on mass psychology, political movements run on mass psychology, Bitcoin maximalism runs on mass psychology, and Ethereum maximalism runs on mass psychology.

And these aren't really tools that have been typically used to describe, like, say, meat space economies. But, like, realistically, if we want to understand, like, say, which cryptocurrencies are going to, going to be important 10 years from now, like you just can't, like, the psychological tours are even more important than the economic tools in terms of just understanding, like, what's actually going to happen there, right? And so, like, basically, I think it's just, I mean, just realizing kind of the relative importance of these different tools and how, like, we just need different ways of understanding this kind of world where everyone has, you know, is just so quickly interacting with everyone else and just the one action can have

like extremely large consequences very quickly is just something that's very important. Patelich, Ryan started off this conversation asking about, you know, he said that the trajectory of 2020 ended up being very far off from what he thought it was. And this is something I hear you echoing when you say like the calculation or the calculus behind predictions around a mess psychology is all haywire at this point. It's all very different. from what we expect. At the same time, I've heard other people give different attitudes about 2020, which is, you know, perhaps less that 2020 was a massive curveball, and there was perhaps less of a pivot of humanity than what we thought, but rather just an acceleration, right?

And I think that's the point of trying to make as well, right? Like, it's, these things were true well before 2020. It's just that 2020 was the year where we just like suddenly flipped the switch from being like, you know, maybe, like I'd say in 2018, a life was like, say, 20% internet. In 2019, it was 22% internet. And then in 2020, it just like flipped over to being like 60% internet. So there's definitely trends that were growing before and all these things did exist before. But the fact that we saw this sudden shift to the majority of a person's life experience, at least the part of a life experience that involves them interacting with other people being behind

the computer screen is something that's very significant. What characteristics or dispositions or just traits would you say would excel as a result of like the changes that we've seen in 2020? What types of people do you think are going to do really well in comparison to others in this decade coming. I think people who are not too stuck in existing ways of thinking. In institutions that were created relatively more recently, as opposed to much older ones, people who just generalists is another really important category.

I think, you know, we saw this with even just, you know, the coronavirus, for example, right? Like, you know, if you're an excellent epidemiologist, but you're terrible at understanding how human beings responds to messaging, then, you know, you're going to have bad predictions. If you're an expert at how humans respond to messaging, but you're, but, you know, you're a terrible epidemiologist and you don't, you don't have kind of the skills needed to just triangulate information from people who are good epidemiologists. then you're going to have bad predictions on the coronavirus. And so the fact that we have these forces just all densely interacting with each other basically means that there's a huge premium on and of being able to have your hand in pretty much all of them to at least some extent. And there's definitely people who I think do that well.

And it does get easier to see people who could do that less well. Yeah, I think that this was something that really shaped 2020 and it comes out in your article that actually understanding the world in 2020 or actually like even predicting the future required very much of this interdisciplinary approach, right? Like so you talked about the idea of like there's economics and there's politics, right? But there's also a blend, which is this idea of a political economy. And you talked about how in 2020 we saw governments acting much more like market actors. They were almost acting like companies, like market forces getting involved in that direct way. And then you had on the flip side, corporations acting like governments. And then I think the same sort of applies in crypto too.

It's really the multidisciplinary thinker that understands this space. and succeeds in this space. And you talked a little bit about crypto as a social system too. Why is it so important, I guess, to be a multi-disciplinary thinker in thinking, in predicting the world of 2020 as it gets more complicated? And then why is that also important in crypto? Is it just that all of these systems are so interrelated together that you have to think of them as a holistic system and you can't kind of like,

carve out the pieces? Right. Crypto definitely is a social system. And, you know, as one of our favorite quotes goes, layer zero is people. Like, there is that layer. And then there's also the layer of the economics and, you know, things like how staking works, things like, you know, how the various defyke interactions work. and all of these things interact with each other, right?

So this is also just another example where it's 2020 is more of a trend acceleration. Like I've been trying to point out some of these things for a long time, right? So one example of this as just collusion. So like what in terms of, let's say, can collusion break, say, proof of work mining, right? Like from an economic analysis point of view, we have answers, right? 51% can do whatever the whole they want, and 33% can salvage money. But then there's this, so that's basically about as far as economics can get you. Now, then there's a question.

Well, let's suppose that the network is broken up into one pool that has 9%, one pool that has 8%, one pool that has 7% one pool that has 6% in one pool that has 5% and then a bunch of smaller pools. So the top five pools together make, you're going to make, make up 35% right. Now, 35% is greater than 33% can those five pools together? Salish Mine. Well, that actually depends on whether or not those five entities are able to work together. And that is a question of cultural issues much more than it is a question of economic issues. So, you know, you have to answer questions like, well, are, like, what is the internal structure of those pools?

Are those pools owners friendly with each other? Do they all go to the same bars? Are they in the same chat groups? Are they all Chinese? Or are they all American? Or are some of them Chinese and some American and some from Guatemala? So do they all speak the same language? Do they have the same political opinion on some random meat spaces?

issue. You know, you just like, you have to start going to think thinking about all of these questions in order, like, because they all just have an influence on whether or not those five pools actually can't get along in order to make an attack. And then, of course, there's a question of, well, like, you know, what are the moral values in the community? And, you know, are any of those pools going to be morally averse to attacking? Are any of the pools going to try to whistle blow if they get called up to participate in this collusion. And so issues about kind of morality and like just what people's ethical views are actually starts to become very important when you start talking about coordination. And so like basically there is some

amounts that the economics can say and then there's this other amounts like which usually you can kind of sum up to kind of which like which actor. actually are only going to act as separate actors in which actors can work together and kind of approximate one larger actor. And you have to just ask about all these cultural and social forces if you want to the answer to that second question. And of course, all these systems do interact with each other. Right. Right. So like what you're saying, Vitalik, is like you can't, economics doesn't measure all of these other things, right? It doesn't necessarily measure some of the social factors. And you ask the question about like,

what actually motivates human beings. And it turns out that money is one motivator. Maybe it's even sort of a useful motivator because it's a common denominator type motivator. But it's far from the only motivator of human behavior. There are so many other motivators of human behavior. I liked a tweet that you put out recently. Something that effect of even a billion dollars of capital can't compete with a project having a soul, right?

So like, that wasn't a tweet. That was part of the article. It was part of the article. Okay. So like that is, that that's kind of what you're saying is like there's actual tangible value in a project having a culture and a set of beliefs. Can you get into that a little bit more? So like what do you mean about why is it important to understand what motivates us in

order to understand crypto economic systems? So I think. the thing that's important to remember is that most like all open source ecosystems and internet ecosystems more generally rely on a huge amount of free and uncompensated labor right and like there's many kinds of free and uncompensated labor right so like there's things like no no writing blogs and just um answering to people's post when they ask for help on Reddit or in some Discord chat, there's participating in GitHub discussions.

There's even just like help educating people about whatever project you're in on Twitter. There's running meetups, just answering other people's questions in meetups. That's how I got my start in this space. Absolutely. There's writing code. writing patches to other people's code, there's just this really long list of behaviors. And if you don't have people that are just doing those things because they love the project, then you're just going to have an extremely hard time. And I think we see this with a lot of these VC chain projects.

Like they often take this very proprietary route. They're going to say, no, we're going to lock 50 professionals together in a room and pay them all like $500,000 a year. just they get them to build an awesome blockchain and an awesome client in six months. And, you know, sure, that can, like, build a software package, but, like, that's not going to build an ecosystem, right? That's not going to build all of these kind of things that go around the software that people don't even realize are important. And if you build your thing that way, then, like, eventually you're just going to have to burn even more money trying to kind of pay people to do all of that as well.

And so, you just, if you treat building a software project purely as a, like, the way that a centralized company would treat it, then like, you're just leaking inefficiency pretty much everywhere, right? You just, you basically have to pay people to do all of this work. And like, but that's work that, you know, people like, under the right circumstances, what actually just a lot of doing, right? And like, it's important to remember what those circumstances, what those circumstances are, right? Like, people do need to have, like, some, like, a feeling that they're not being exploited,

a feeling that they're participating in a system, which is, kind of good for them. I mean, good for other people, good for other people as well. And there are projects that are just, like, doing a good job of this, right? I mean, even just things like air drops, for example, or one example of this, right? You just kind of, like, sprinkle a bunch of tokens, like, basically for free to an entire community. And you just swapped in this great. And I thought that was a kind of great move to get this kind of community engagement. And so, like, you just basically, as an open, open source project, like, you just have to kind of make sure, like, just create an environment where, you know, people are interested in participating, people are willing to participate.

And where, you know, people, like, in some sense, feel like the community that they're contributing to belongs to them, right? and not just the company that's kind of theoretically most theoretically in charge of building the thing or ideally that company doesn't even need to be in charge of a, there doesn't need to be a single company in charge of the thing. I think the best and most salient example to back this up is like the absolute gargantuan amount of free marketing that both Bitcoin and Ethereum receive from their respective communities, right? Bitcoin podcasts are just done for your purposes, you know, financial purposes. You know, Peter McCormick and his podcast is a very well-financed podcast.

But he also has huge clout in the community. And so do all the other Bitcoin podcasts. And the Ethereum media ecosystem, which Bankless is a part of, is also like following in those footsteps. Like Bankless, Eth Hub, the Defiant, like Ethereum media is doing really, really well. And I think one of the reasons why these public blockchains received so much, of so much tailwinds from all this free marketing is what you alluded to just A, just now, but B also in your article as neutrality.

Bitcoin and Ethereum have neutrality. Maybe you could talk about how neutrality plays a role in people's desires to commit their time and energy and human capital into these systems. Right, so neutrality basically just to be, or I prefer even using the word credible neutrality, but kind of emphasize us the social, psychology aspect of it, which is that it's not just about like convincing me that something is

neutral. It's about convincing each of us that each other will make and consider the system to be neutral. And so it's something that makes lots of people can get behind at the same time. And I think that neutrality is just important basically and a big factor of it is just like people are willing to contribute, but people don't want to feel like they're exploited and they don't want to feel like all that they're doing is to just enrich some special interest. Another part of this is that, you know, people wants to contribute to a system where they can feel kind of some degree of personal ownership over it. Also, just people would prefer to participate in a system where they have some guarantee that, you know, the system is not going to unfairly go against them.

in the future. And all of these things are just much easier to accomplish when you have a system that actually is neutral, right? Like when, you know, you have something like an open source project or a blockchain or is generally something that has kind of the rules set up in such a way that you actually can make some kind of case that it does treat everyone fairly. And that's something that centralized systems just do end up failing out all the time, right? Like when they make any kinds of just decisions about lots of things, like, you know, it's just hard to figure out whether some decision actually is a needed technical future or whether it's just to like preserve the company's business model or something like that. And so, like in, like if you have a project

where there is a, this kind of centralized company that feels like it's controlling things and it's getting most of the benefit, then you know, you just lose the ability to kind of get these other benefits. I was thinking Vidalek earlier used the term love, right? You said, you know, that, you know, people in order to tell others or volunteer, like answering questions or writing blog posts, they have to really love the project, right? Love. And I was just thinking to myself, okay, I know that there are people who love Bitcoin, right? It's very easy to see Bitcoin passion. I know there are people who love a thing. I know there are people who love a I myself love Ethereum. There's elements of Bitcoin. I love too. And I was trying to think,

like, what do I love so much about it? And definitely credible neutrality is sort of part of it. And even more broadly than that, for me, it's about kind of the value system that I really identify with. Right. So there's something about Ethereum and to a lesser extent Bitcoin that I believe is net positive for the world. Right. I think. think the thing that we're building with a decentralized capital coordination, human coordination tools is going to reap the world my kids, our grandkids, future generations, some net benefit. I believe that the world is skewed much more towards centralized systems, and we need to kind of like balance the force at some level, right? It's this set of values that would honestly,

like I would work for Ethereum for free, right? Like, you know, and book David and I, we have in the past. Yeah, we both started it that way. Right. And here's the thing is like, you couldn't, you couldn't pay me enough upside to invest in some crypto projects out there. Like, there's no amount of, there's no amount of money you could pay me to put a dime into Tron. Like, I just, I don't care how much money I'd make. I just don't adhere to the value system.

RX standard. So what is it about like, I guess how do you create a culture like that? It's even sometimes hard to articulate exactly all of the values that Ethereum has. But how important are values and how do you foster that? How do you create that in a community? Or does it just happen organically? Can you not like create these things? I don't know.

What are your thoughts here? I think founders are important. and the very early kind of influential members in a community are important. Like basically, the way that the community is near the beginning, like basically just kind of it sets the focal points. Like, you know, it just, like, it sets the standard for like, this is a community of people who believe these things. And if you're an outsider and you think you believe roughly those things,

then, you would feel inclined and then of welcome to join the community. and if you don't believe those things, then you would feel inclined to go join other communities. So I think once that kind of seed has been planted, then it's easier to maintain it. Though it does still take work to maintain it, right? Like it is still possible, I think, for a community to just like drift over time into being something much less interesting. But the really important work, I think, is. is just creating that seat at the beginning. And if you don't have that seat at the beginning,

then that's something that's extremely hard to create retroactively. Do you know what you're talking about, Vitalik, almost reminds me of sort of like the way a religion might be founded, right? There's this set of values and people self-select. No one's forcing you necessarily into a religion, at least, you know, in most areas of the world, that's not the case. But you kind of subscribe to a set of value systems and then you find yourself like pulled into that, into that. specific religion or way of thinking. And I guess that's the social element here too. But you also address in your article how this can kind of take a dark turn too. And you said, we thought we were building nations and it turns out what we got was digital nationalism, right? So this idea of like

maximalism, how can how can cultures kind of turn a little bit dark? And I guess I don't know a word for it, but like small, senile, small in their thinking, small tent, and close-minded might be some words to describe it. What are some of the negative effects of this social dynamic in crypto? And I think, like, first of all, like, one of the points that I feel like I tried to get across is that, like, we saw even down to a very big, a very fine level of detail phenomena happening in cryptocurrencies. that seem to almost perfectly mirror phenomena that we see in like political systems, right? Like we see things like, you know, the civil war between, you know, you have a civil war inside of country X and then eventually country X splits in half. And then you have one country that's called like, you know, like Democratic Republic of X

and the other country that's called People's Republic of X or like whatever the word permutations are. And then you have some other country Y and that country Y supports like the, you know, the one that looks more like an offshoot and people and the other one think that country why is only supporting them because they want to drive a wedge and attack the first country but people in-country-wide think that they're that well know the other one is just more aligned with their values and then you know the story goes on right and in cryptocurrency land like we've basically replicated that exact phenomenon like down to very fine levels of detail, just basically within 10 years. And I thought that was interesting, right? It's like,

interesting because, like, if some, if something can just appear twice in these completely different contexts with completely different kind of laws for what systems are and how they interact, then, like, this is a very kind of deep and fundamental kind of primitive of, like, basically mass. some, so, a, and of social interaction that is just, like, is, is going to be very hard to kind of move beyond completely. Now, what you're talking about just for the listener is you're talking about the Bitcoin, Bitcoin Cash, Civil War, and then you're also talking about the Ethereum, Ethereum, classic split.

Correct. Yeah. So the, um, now, in terms of, you know, in terms of, you know, now, in terms of, you know, of like I think which community is are more healthy and which community is are less healthy. I mean, so one of the quotes, and this is one that I did make on Twitter a while ago, is like I think evil comes mostly not from greed, but from fear, right? Like, like we have a culture, I think, of, you know, thinking about greed as being kind of the ultimate evil and talking about, you know, evil villains who wants to

take over the world and, you know, evil banksters who wants to make like billions of dollars by defrauding people and all of these things. But I think like the reality is that people are much more easily able to convince themselves to do the worst things when they feel like they or their communities are under existential threat. And I mean, like this is something that you see if you study interactions between countries and political parties and like history more generally. And I think this is something that we see in the crypto space as well. Right. Like I think, you know, the Bitcoin community for example, or let's say the Bitcoin small blockers,

for example, I think like genuinely felt like they were under, or they and their values were under existential threat from the big blocker movement that was trying to push a hard fork to increase the block size. I think the Ethereum community was at its worst, maybe, in one example, one of the times was right after the Ethereum Classic hard fork, where a lot of people are basically arguing that, you know, any, like, there's no legitimate reason to oppose the Dow fork. And if you oppose, like, the people who are,

or there's no legitimate reason to support Ethereum Classic. And if you support Ethereum Classic, chances are you'll probably just, the Bitcoin show, which I think, like, you know, a lot, I think in a lot of cases, it just ended up being completely false. And like, and I even believed some of those things myself at that time. But like, the reason why everyone was kind of whipped up into a frenzy is because that this was the first time that that kind of hard fork in Ethereum happened. And it felt like, you know, like Eith had got down from $12 to $8, right? And ETC was gone, it had gone down from $0 to $4. And it felt like there was this existential

possibility that the ETC situation would basically just completely wreck Ethereum as we know it. And so when your community is just is faced with that kind of threat, then people are just going to act worse, right? And I think it's true with Bitcoin. I think it's true with Ethereum as well. It's, I think, true with basically any community. And if I guess the kind of Norman of conclusion from this, I think, is that if you want to have better relations between a community, then, like, basically, community is just, like, need to be able to convince each other that they are not interested in kind of violating each other's, like, most fundamental, like, existence, basically, right? That they're not interested in creating a scenario that would

leads to the complete annihilation of the other one. And that's harder than it seems, right? Like you can't just kind of have a couple of leaders go out and say it because there's inevitably some other people in the community who would go out and say something else. And then someone gets into a Twitter fight and to say something that gets quoted for, you know, six months or five years. But like that feels something like that kind of feels like it's one of like basically the only way to have less of that sort of thing. And like sometimes it is hard, right? Like sometimes it's hard because the problem isn't just like the way people behave.

The problem is just like fundamentally what the things are. Right. So like I like for example, if you're a Bitcoin person and you believe that Bitcoin only has like only has value because of the network effect and because of being number one, then you know, you perceive any other cryptocurrency getting too big relative to yourself. as being an existential threat. Because if you become number two, then from your point of view, like three months later, you're going to be number 200. And that, like, that's, I mean, Ethereum itself has kind of some risk of believing that if, you know, like, someday other smart contract platforms that have become popular.

So, like, creating a, like, space and kind of creating intent to have an ecosystem that allows multiple crypto communities and even a kind of multiple blockchains to survive, I think is like this is one of the reasons why I'm kind of, it tends to be fairly anti-maximalist. Like I think it's just kind of necessary to have peace, right? If the more people believe winner takes all, then like, you know, the corollary of winner takes all is, you know, loser, loser, loses everything. And if you, like, if people think that if they're the loser, they'll lose everything, then they're going to be willing to do just like the worst things in order to like increase their chances of winning. And that's something that I don't want to see.

There's an element of what you're saying in what you wrote, which was, which was kind of, like new system, same problems. You know, the, the same sort of fragmentation and tribalism and nationalism that we see in political systems, we are now seeing play out in crypto in remarkably similar ways. Does that make you a bit pessimistic about crypto in any way? So we've got a new system, but have we ported those same problems over? And is that reason to be pessimistic? I don't think so. I think, well, I think like pretty much almost inevitably from the beginning I was expecting crypto to be a process of kind of starting off with very wild dreams, but a very small scale. And inevitably kind of scaling back on its dreams somewhat and kind of

figuring out what parts of what it wants to accomplish are actually realistic, while at the same time, you know, actually becoming a significant force that can impact, you know, global affairs and the future of humanity. and I think like, you know, we're on that trajectory, right? Like we're on that type of trajectory where it's clear that there's some things that crypto's not going to do and some things that crypto is not going to solve. But at the same time, you know, it's gone up from being this tiny little bubble that nobody cares about to be in this big thing that, you know, just all sorts of like mainstream figures and artists and intellectuals are starting to really follow and care about.

what what about the ethereum community or ethereum and culture gives you pause or what something what about the ethereum community would you criticize that you would like to see changed or just be worked on into the future i remember you asked me this question almost a year ago uh yeah i think um one of the things i answered is just this kind of perception that um you know bitcoin has a like a strong and kind of focused narrative whereas Ethereum does not. And I think my answer was something like, well, you know, definitely in less certain terms, but because I guess it's hard for me to say it in less certain times because I believe it more certainly now. It's like, you know, focus is overrated.

And the whole point of Ethereum is that it's like it's not a missile. It's a, it's a jungle. And, you know, the point of Ethereum is that it's not trying to. to accomplish this one single thing of, you know, replacing global fiat currencies with EIF and using the power of Austrian economic theory to ensure that this definitely brings human prosperity and, you know, it doesn't lead to like mass inequality if it happens over the course of three years or whatever. But, like, I think, you know, Ethereum instead was, it's like there's many dreams, right? Like there's obviously, I think Ethereum does inherit the kind of Bitcoin dream of just

creating this kind of independent asset that people can directly own and control without any reference to, you know, banking institutions or governments. I mean, there's also this dream of us enabling, you know, decentralized financial applications. There's also this dream of being. this kind of common interaction layer for just like different kinds of open source software, right? Like, you know, we had open source and now we have open state. And you can have these kind of applications that don't have a dependency on one single owner

and but that can still interact with each other in kind of much more interesting ways. We still have the dream of like experimenting with, I know, decentralized governance and decentralized applications. We have things like prediction markets, and prediction markets have been, you know, very exciting over the last a couple of months. And I think I've outed myself a couple of times as a proud entrum of wail. And, you know, that was interesting. Like it's, that was the first, even one of the first times when, you know, the Ethereum blockchain was like providing direct value to me as a user that I would just not be able to get on any, on any other platforms. platform. But by the way, just for their own listeners, N-Trump whale means that someone who is

buying tokens that pay $1 if Trump does not win the election. And importantly, you were buying them for less than a dollar. After the election, correct. After the election was done, you were buying N-Trump tokens, which pay out a dollar if Trump doesn't actually win, and you were buying them for less than $1. For $0.85, yes. For $0.85, that's a, that is a shred. So that was, so I think like the, and then there's this big long tail of applications, I mean, using them for like some kind of like identity management, like using them for, I mean, we'll talk about social recovery wallets later, but one of the ideas, the longer term

ideas that I have is that I think you can have social recovery wallets for accessing web two services. So like accessing centralized services and they like it would be nice to have ways of logging into centralized services that are not dependent on other centralized actors like Google or Facebook, but or Twitter. But that's kind of skipping ahead, right? That's also a blockchain application. And then, you know, there's all of this like identity. There's like certificate related stuff. There's just like money, just transfers remittances, donating to charity. So there's this just a long, interesting tale of applications. And, you know, there's plenty of people in Ethereum land who believe in some of those applications and don't believe in other applications.

And that's like a thing that I realized is that, you know, that's healthy, right? Like, you know, like, no, Ethereum is not a missile that is a jungle, right? It's like, there is no single part of it that has to succeed for the whole thing to succeed. And, you know, It is just like creating this new set of kind of tools and this sort of technological and economic substrate for a new kind of economy. And like that is the vision. And that's something that I think like was less clear to me a year ago, but it's becoming much more clear over time. And I know, I feel like it's becoming much more clear to the Ethereum community itself as well over time. So I think like just kind of improving on kind of telling that.

story well is one thing that I think is just continues to be important. I think it's just it's just importance to kind of, you know, strike back against these kind of memes that some people give, which is that like, you know, Ethereum has no values or that, that recent article from Lynn Alden where I think, well, she just said that, you know, Bitcoin culture has more of this ethos and Ethereum culture as more gamers and I know that makes baseball a bit. You know, nothing against gaming, but you know, the

vision is much broader than just gaming, but I think we've definitely been doing a not good enough job of properly articulating it. And then so that was one thing. The other thing, of course, is

like it would be nice if we can find some way to kind of communicate Ake and narrative to other crypto projects to just convince them that Ethereum is not an existential threat to them. And that they like basically that, you know, Ethereum is not an everything killer, right? And I think like it's true that Ethereum is not an everything killer. And there's lots of other projects that have managed to exist and various kinds of kind of symbiosis with Ethereum, and I think that's great. So if the more we can kind of get other

community, other communities and their energies to be working with the ecosystem instead of them just very understandably feeling forced like they're like they have to compete against it, and then the better. As our conversation around this particular blog post comes to close, I'd like to read out some of your conclusions that you put in the last paragraph. And by the way, to the listeners, this conversation that we're having with the Vitalik here is a great supplement to the blog post, but absolutely not a replacement. So you can definitely go and read the blog post yourself at Vitalik.ca. You will find it there. In your conclusion, Vitalik, you write three short bullets. And I would like to read them here and we can go over them.

One-to-one interactions. This is your predictions for like or your assessment for the current state of the world. So we have a world where one-to-one interactions are less important, one-to-many, and many-to-many interactions are more important. And then the next bullet, the environment is much more chaotic and difficult to model with clean and simple equations. Many-to-many interactions particularly follow strange rules that we still do not understand well. And then lastly, the environment is dense, and different categories of powerful actors are

forced to live quite closely side-by-side with each other. We've talked about some of these topics already here so far in this conversation, but I just like to turn the mic over to you and kind of get you to expand on some of these thoughts, predictions and how the evidence that you saw play out in 2020 kind of led you to these conclusions. Sure. So for the first one, and I think, like I talked about this a bit, right? Like traditional economics tends to deal more with these one-to-one interactions where, you know, there's one buyer and there's one seller. and you just have this series of transactions where Alice sells an apple to Bob, Alice sells a different apple to Charlie, and if Bob has the money but Charlie doesn't, then Bob gets the apple and Charlie doesn't.

And so you have this economy that you can kind of fairly easily decompose into these fairly small interactions. And we have things like these fundamental welfare theorems, you know, supply demand curves, just all of these long list of economic principles for dealing with those things. But on the internet, the average interaction is not one-to-one, right? We are recording this podcast, but then lots of people are going to be listening to it, right? That in itself is like a three to ten thousand interaction. Every time I write an article, that's a one to ten thousand interaction.

Every piece of code that gets uploaded to an Ethereum client is a few-to-many interaction. A conversation on Twitter is a many-to-many interaction. Even just like the mass of psychology and economics of these sort of self-referential crypto markets is a many-to-many interaction. So those more complicated forms of behavior are just becoming more important pieces of understanding the world as it's going to be. And then an important result of this is just that the environment is much more chaotic, right? There's a lot of universe consequences of these interactions that are just hard to predict,

hard to understand. Sometimes we don't yet have good tools for understanding them. Sometimes there just are no good tools for understanding them. And it's just more challenging to understand, you know, what the results of these things are. And so we just need to kind of keep a more open mind toward these things. And then the last one, I think, is also important, right? Like, this goes back to the section that's right before the section of the end, right? This idea that we, the world in general is this kind of dense environments where we have these different categories of powerful actors.

So one of the things that I talked about is basically, you know, did the kind of, you know, the cyphor punk movement as defined by things like these 1996 and of crypto anarchists to documents succeed or fail. And the question is basically, it turns out the answer depends on is, is your goal eliminating big government or is your goal created? big something other than government, right? If your goal is the first one, then you failed, and if your goal is the second one, then you completely succeeded. Right. Like, you know, in the 2020, like, big government is still strong, but the big business is, like, strong at the same time, right? Like, you know, we, yeah, the, you know, it's definitely at least looking like the, the U.S. space program at this point is basically Elon Musk. And, you know, that's something, that I think

might have been even difficult to foresee even 10 years ago, right? But, you know, at the same time, like, we, especially with, you know, the virus situation and like both, you know, things like lockdowns and things like

vaccine distributions, governments are clearly this, continue to be this big and important force. And then there's also kind of big things other than governments. Like there's just like big amorphous, just mobs, you know, big ideologies, big movements. And so, like, there's just all of these different kind of large-scale forms of human in coordination, both centralized and decentralized. And they're just all, like, at all-time highs of power at the same time, right? And

that's not really a frame that I think most people were thinking about 10 years ago, right? I think most people 10 years ago would have been thinking about the frame of being, well, it's a kind of neither can live while the other survive a situation. And it turns out that, well, no, both of them live and both of them, or all of them are living and all of them are surviving and even thriving. And, you know, yes, the interactions between them are kind of just very complicated. And I think, like, this is also a bit of a harbinger to toward the kind of role that I expect crypto to play. Right. Like I don't expect crypto to just kind of like wash away all of these existing even more centralized forms of coordination. I expect it to kind of compliment and provide an alternative to them. And like and I think that's something that it's so well on the way to doing quite successfully. Well, Vitalik, this has been a fantastic deep dive into your article. You know, one last question that is maybe more in the current event camp. But I think maybe fits the mold of this.

this article before we move on to roll-ups. So, Heath Price just recently hit all-time high. And of course, we talked about how these crypto systems are very much psychological systems as well as social systems and all of these things. Do you think ETH at all-time high is good for the collective psychology and community of Ethereum or bad? Because I think, you know, somebody could make the case for either or. What's your take? Good question. And I think all-time highs are definitely and a psychologically good for a community. It's the thing I think that's like in general, I feel like whenever there is a bull run, the first half of the bull run is very healthy. The second half of the ball run is very unhealthy. And oh crap, did I just corner myself into a price prediction by implicitly calling now the first half of the bull run? That's the first ever Vitalik price prediction.

Don't. Well, okay, what I will say is that to me, the present moment kind of psychologically feels like the first half of a bull run, but then again, like at the same time, these are in some ways fundamentally new and uncharted waters, and the trend can easily break, and it could easily be one of those bull runs that just like abruptly ends during the first half, right?

like that happens all the time. Like the XRP Bull Run definitely abruptly ended when, you know, the SECM land of delightfully sent the thing crashing down. But so in terms of kind of people's psychological experiences, I think it definitely kind of feels like it's in this sort of relatively kind of healthy phase right now. but it is one of those things that inevitably ends up like kind of flipping into a less a less psychologically healthy phase, especially if like it goes on long enough

that people start feeling like they're entitled to it. And like that's always happened historically, right? And there's always been these periods where people just like almost stop working because they're just too focused on the price. And then also, Like in addition to the effects on the psychology, there's also things that happen in bull runs like, you know, transaction fees going up really high. And that's definitely something that I'm hoping that crypto, sorry, that the Ethereum ecosystem, kind of solves very soon. And we already have the technology, right? ZK. Roll-ups have been running for months.

Optimism announced the kind of their very first limited main net last week. But we do just needs to get to the point where these scaling techniques, roll-ups in particular, are just actually able to absorb even the existing demands, right? Because, like, right now, transaction fees are high. Like, I tried out the social recovery wallets for, like, urgent, and I looked at the transactions, and, like, the recoveries cost $50, and that's just crazy, right? Like, no, no, no, this stuff needs to move on to roll-ups very quickly. If you are looking for a product that connects your Fiat bank account with defy tokens and products,

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Here you can see me getting a 200 USDC loan against my portfolio of a number of different defy tokens and ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock that interest rate in permanently. One of Avey's V2 features is the ability to swap collateral without having to withdraw your assets, trade them on uniswap and then deposit them back into ave avey does all of this for you all in one seamless transaction so you don't have to repay loans in order to change the collateral you have backing them check out the power of ava at aave.com that's aa vee.com this is an incomplete guide to roll-ups so vitalic can we go through the incomplete guide to roll-ups it may be direct this to someone who has heard about the

buzz that maybe roll-ups are Ethereum's next big scaling solution, right? And it's kind of the promised land of reducing gas fees. Tell us what are roll-ups? Where would you like to start with this? Sure. So roll-ups are a member of this family of scalability solutions that we call the layer two scaling. And so like there's this long-running dichotomy between layer one scaling and layer two scaling where layer one scaling says we increase how many transactions we can process by making the blockchain able to process more transactions. And layer two scaling says we increase the number of transactions we can process by moving work off chain. And instead of like running everything on chain directly, we only run kind of more limited verification activities on chain. And so we use

these more clever contraptions to reduce the need to use the chain in the first place. And, you know, in the case of Bitcoin, like this was basically the topic of their Civil War. But in the case of Ethereum, you know, we're basically doing layer one and layer two scaling at the same time, right? We have sharding for layer one scaling. But we also have this very kind of healthy and rich layer two scaling ecosystem. And I talk about the three scaling approaches. So there's channels, I mean, plasma and roll-ups. And channels are this method for optimizing one-to-one interactions. So, for example, channels are really good at the use case of, like, let's say, I'm selling you an internet connection and you want to pay me per per megabyte, right? And then,

like, well, what happened is that, like, I would start for giving you an internet connection, and then every time it would reach one megabyte, like, you would just say, you would just send me these off-chain messages that I call tickets, right? So your first ticket would be a signed message that just says, I'm paying you 0.001. Your second ticket would be a message that says, I'm paying you 0.002 and so forth. And the way of this works is that I only needs to actually put on-chain the very last ticket or the highest value ticket that you send, right? And so basically what you're doing is you're just, you're making these payments,

but we're not yet committing them. and you just constantly keep paying more by just replacing these payments with higher value payments. And then when I publish the last payments on chain, I'm basically kind of settling all of these payments at the same time, and it's happening in one transaction. And there is a bit the smart contract implements this kind of interaction game. We are basically, like let's say if you try to submit one of your tickets that has a smaller payment, then I can challenge and I can send your ticket that has to hire. payment or if I just disappear completely, then you can send your own payment or your own ticket to close the channel and get your money back and so on. So channels are good for bidirectional payments and there are things like the Lightning Network and Radin that tried to expand that out to

broader payment networks, but they also do have some weaknesses, right? They're fairly complicated to deal with. They have these high capital requirements and so forth. Then there's plasma. And plasma is this very technically clever construction that, you know, it turns out plasma is like really amazing for dealing with the non-fungible tokens. Because it's just like the whole idea with plasma is that you basically like assign every unit of an asset a different ID. And then you have this kind of Merkel tree contraption where you basically, if an asset has some ID X, then the transaction that corresponds to that address goes into Merkle tree at index X, then you publish the Merkle Groups on chain,

and then if someone who has some asset X wants to withdraw it, then they would publish an operation on chain, and then they would have to provide that Merckle branch, and if someone else wants to challenge them, well, they can do that, and then all the challenges happen just by providing these Merckle branches. So Plasmus is a really clever thing. it's good for asset transfers, it's good for payments that can be used, can be used for exchange. So the OMG network has been doing a great job of kind of pushing the plasma vision

toward its logical conclusion is basically doing as great a job as can possibly be done with it. So very happy that their work exists. But then we move on to the third solution, which is roll-ups, right? And roll-ups are a fascinating class of technology because in some ways, they're not a full layer two scheme, right? And what I mean by that is that in a traditional layer two scheme, all the data and all the computation of at least each additional transaction is fully off-chain, right? Like in plasma, you do have to publish Merkel routes on chain, but that's 32 bytes. It's 32 bytes if there's 10 users, and it's 32 bytes if there's 10,000 users. In a roll-up, you have to publish, like, it looks like somewhere around like 10 to 15 bytes of data on-chain for every transaction.

Now, you are able to move all the computation off-chain, and you are able to move most of the data off-chain, but you do need to have, like, some amounts of data on-chain for every transaction. And it turns out that the ability to have data on chain basically just gets around some very fundamental game theory issues that have to do with data availability. And in my blog post, I linked to this YouTube video that I made. I think it was in some Stanford conference or meetup or one of those where I just talk about why data availability is hard and like why there's these complicated game theory issues. around like you just like basically you can't have a fraud proof system for data the same way you can have a fraud proof system for computation and roll-ups or plasma and channels kind of get around this issue by relying on this explicit concept of owners that basically says that like every asset has an owner and if the owner for that asset misbehaves then the system can fail but the system can

fail in only one direction and that direction basically is that the owner loses the asset but in a roll up, you actually can just make a hard guarantee that says the state definitely will be processed correctly. And it turns out that that's really important if you want applications to become more general purpose, right? Because in more general purpose applications, like, it's just you can't map assets to owners, right? Like, who is the owner of Uniswap is the easiest example, right? Like, there is no single actor who's kind of the logical beneficiary of everything that happens inside of uniswap. It's just this like automated thing that exists on chain and it benefits everyone and it's owned by no one. So then I get into like basically what is how does the roll up work,

right? And the core idea of a roll up is basically that there is a smart contract on chain and that smart contract maintains a state route. It maintains basically a Merkel hash of all this state inside the roll-up. So that means all the account balances, all the contracts code, everything inside the roll-up. you have this Merkel hash and that Merkel hash gets maintained by the roll-up contract. Anyone can publish what we call a batch. And a batch is basically this collection of transactions in this very compressed form, together with basically a record of the previous state route and a record of the new state route. So a batch is basically a claim that says,

if you start here, if you start from this state route, and you apply these transactions, then this is the new state route. Now, in reality, the batch does buy its own. itself does not have enough information to fully compute the state, the new state route, because if you want to actually compute that, you need to have the Merkel branches. And of course, you don't actually want to compute all this stuff on chain. So instead, what happens is that the roll-up just believes the batches by default. And then you have one of two mechanisms for proving that these batches are correct, right? So one of them is optimistic roll-ups and the other is ZK

roll-ups. And here's where we get to the core difference between these two great families of a roll-ups, right? In an optimistic roll-up, what you have is a system where you basically kind of trust but verify, right? So the smart contract kind of trusts the batches by default, and it just accepts the results of the batches by default. But then if so, like, there are nodes in the network that actually do run the full computation, and if one of them discovers that something is wrong, then they can publish a challenge. And if they get challenged correctly, then the badge that's incorrect gets reverted. And whoever submitted the badge who loses their deposit and the challenger gets a reward, and then you kind of continue from there.

So optimistic basically says trust by default, but if someone challenges, then if the thing the challenge is incorrect, then you reverted. And as long as you trust that there's at least somebody online who can revert, then the mechanism works. Now, ZK roll-ups, they use validity proofs, right? ZK. Roll-ups use these fancy cryptographic proofs that we call ZK Snarks, and they basically prove directly that the post-state route is a correct result of executing the batch on top of the pre-state route.

And the way that these proofs work is really complicated. I've tried to make a couple of explanations of this. I'm sure I'll try making more explanations. of this in the future. But these are just incredibly powerful and just incredibly clever mathematical contraptions that actually let you make a proof of a computation that takes a long time to compute where that proof itself can be verified extremely quickly. And this is what ZK roll-ups rely on. So there's these fairly complicated trade-offs between optimistic and ZK roll-ups, right, in terms of like the fixed gas cost of each batch, which influences how frequently batches can

be published the withdrawal period. So, ZK optimistic roll-ups, the fixed cost for batch is much smaller, which means batches can be published much more frequently. ZK. Roll-ups have instant withdrawals. Optimistic roll-ups have withdrawals that take one week. But the thing that you can do if you want optimistic roll-ups to have instant withdrawals is you can basically have a kind of third-party market. So basically, like, if I have, say, one-eth that's being withdrawn in progress, then if you were validating the roll-up and you are perfectly confident that that withdrawal is correct, then what you can do is you can just buy that by my right to one-eath for, say,

one-eath minus a fee. You can just buy up my withdrawal rights for, say, 0.99-eath. I would get my 0.999-eath immediately. and then you would just wait a week and then you would get your one-eath at the end, right? So. Or you're 0.000-1-eath. No, no, sorry. I would get-

I see. Sorry. I sacrifice my right to one. Instead, I get 0.0.0.9-99 immediately. You as to buy a earth of the withdrawal, pay me 0.9999-im immediately, and you get the full one at the end. So, like, this is a technique that's available for optimistic roll-ups to have instant-wrestrolls, but it does have capital costs. And importantly, it doesn't work with NFTs because with NFTs inherently,

like there is nobody who has like a second copy of the same NFT that can collateralize. But for coins, it works amazingly. Complexity of technology, optimistic roll-ups are simpler. Generalizability, optimistic roll-ups are easier to have kind of full general purpose EVM computation for. And this is something that's really important, right? Like there already are ZK rollups that are live. And ZK rollups, like there's ZK Sync, there's loopering, there's the diversify, and those can be application specific.

But it's very hard to make them support much more general purpose computation. Whereas with an optimistic roll-up, like, well, we already have one on Mainnet that's basically running EVM code on layer two. So, and then per transaction on-chain gas costs. So this basically means, like, are the on-chain costs so that you have to pay per transaction? So this is basically paying for the 16 bytes. It turns out that there's technical reasons why for certain types of transactions, you need more bytes than an optimistic roll-up than a ZK roll-up.

And then there's off-chain computation costs, which are actually lower for optimistic roll-ups than they are for ZK roll-ups. So there's complicated trade-offs, but my kind of opinion summing it all up is that I think in the short term, optimistic roll-ups are likely to win for general-purpose EVM computation. ZK roll-ups are likely to win for simple payments and like some very specific use cases. But I do think that, you know, on a five to 10-year time horizon, ZK roll-ups are going to be winning out in all use cases. I think the facts that, you know, teams like optimism and arbitram are doing optimistic

roll-ups today is perfectly fine. And I think it's completely the correct path in order to just get some kind of scaling out for Ethereum in 2021. But in like, in the, there is going to come a time when ZK. Rolop tech, ZK. Snark technology improves. And ZK. Snark's are capable of moving actually verifying EVM computation. Now, expect to see demos of CK SNARCs, you know, doing things like verifying solidity code this year. But just keep in mind that there's a big difference between a demo and a production implementation, right? Like, because once you have a demo, like, you still have to, you have to security audit it. You have to debug it.

You have to really make sure that the verifier is correct. And those things are hard, right? Like I personally would much rather trust, you know, $10 million of my own money to an EVM optimistic rollup than to an EVM ZK rollup for at least the next couple of years. But in the long-term ZK roll-ups are, I think, are going to be everything. And so, like, my advice to teams like optimism and arbitram is that I think they should start kind of ZKifying themselves fairly soon. Like, you know, it's not so, it's not so.

urgent that like people should lose interest in projects that are optimistic roll-ups today. But I think projects that are optimistic role-ups today should have the attitude that they are not going to be optimistic role-ups forever. And they should have the, they should start putting together their strategies for ZKing themselves. So then I talk kind of more technically about what is a fact. If I could cut in here, Vitalik, I would just like to clarify one. thing between optimistic roll-ups and ZK roll-ups. What would you say is the defining characteristic difference between optimistic and ZK. Roll-ups that makes you long-term belief in ZK. Roll-ups.

What's the real separation between those two things that makes you optimistic about ZK. Roll-ups long-term? Sure. So one is like just ZK. Roll-ups have instant withdrawal even and without any collateral requirements. Another is, that ZK roll-ups do not have this kind of one of an online requirements in order for someone to be able to publish a fraud proof. And that's valuable because like it opens the door for ZK roll-ups to be able to go up and process things like, you know, tens of thousands of transactions per second where in an optimistic roll-up once you start having that many transactions, then, you know, it starts, like, it's use, it starts becoming less obvious that there will always be enough honest to nodes that are checking the, that all the computations are done correctly.

Also, the, the data efficiency, right, like the fact that, so I have a table a bit further below where I look at the mixer example and the, it's one table further below. there it is, right? And the mixer only has a 77x scalability gain and optimistic roll-up, but a 570x scaling gain in a ZK roll-up. And the reason why this is true is because ZK roll-ups allow you to have less data on-chain, because in a ZK roll-up, you only need to have enough data on chain to update the state tree. Whereas in an optimistic roll-up, you have to have enough data on-chain to verify the full computation, which is a slightly larger amount of data.

So, like, I don't, now to be, to be very clear, right, I don't think that these advantages are decisive in 2021. And like I think in 2021, like optimistic roll-ups and Zika roll-ups are both totally fun.

We're going to have these withdrawal markets. I mean, we're going to have ways for people to withdraw from, you know, things like optimism and arbitrage from instantly. And in 2021 and in 2020 and even going a bit further, the fact that optimistic roll-ups just rely on clean EVM verification, and like, they have surprisingly simple of fraud-proof verifiers, I think is a decisive advantage as opposed to ZK roll-ups, which needs to have just like this much larger and the complicated compiler code. to convert solidity or Viper or EVM into arithmetic representations, and there's just much more attack service for bugs in there.

But over the longer time horizon, those issues will get resolved and the calculus is like solely going to shift toward the ZK side. So I like to take a stab at trying to go through the history of this to lead into my next question. Ethereum L2 scaling started with state channels, which were, and the great thing about state channels is that, you know, it's just between two parties, two parties, you can make any number of transactions without committing anything to the blockchain.

And then to wrap up your day, you commit something to the blockchain that state channel ends. And then you bundle up, you know, 10,000 plus transactions into just one little packet of data submitted to the blockchain. That's great. And that's great for two parties or just a low number of parties. Plasma was an attempt to have one to many or many to many type of interactions of various types. And there are different constructions of plasma that did different things. but it ended up being weak because of this thing called this data availability problem, which in short is that it's hard for Ethereum in the blockchain to know about the plasma L2 chains and reason and know about how to manage that without making assumptions.

And assumptions, we don't like assumptions in the world of cryptography. That's not how we play in the world of crypto economics. We like things to be secure. And then so then that turned into the roll-ups revolution of the optimistic and ZK flavor where there was a compromise made where we figured out we could actually just regularly submit some data to the Ethereum blockchain to solve that data availability problem. And so it's not we aren't getting like millions of transactions per second. We are still generally bottlenecked. But the actual bottlenecks are actually still pretty wide. And there's lots of optimizations there that can make them even wider.

And that's kind of where we are today. How do we know that we aren't, how do we know that we are towards the end of this research and development process? How do we know in like 2021 and 2022 we're not going to come up with this new scaling system? What indications or evidence do we have that we have approached the end of this research and development phase? That's hard to tell for certain. Like there's no theorem that says that like these are the only scaling mechanisms that exist and there are no others. But I think, like, there are kind of heuristic arguments that suggest this. One of them is just the windy arguments, right?

Like, we've had channels and plasma and roll-ups and basically nothing else for something like four years now. I'm a roll-ups themselves, like, they were, like, in their current form, they were kind of created in 2018 to 2019, but there was this much earlier kind of thing of shadow chains that I published back in 2014 that, uh, kind of, is a prelude to roll-ups. So we've had a kind of long and growing time span within which we've known about these three techniques and we've seen no others. Another thing that arguments that you can make is this mathematical arguments that basically says,

like if there are end users, how much data gets published on chain, not taking into accounts, deposits, and withdrawal is and fraud. And you can classify them very easily. right? In a channel, the answer is zero. In a plasma, the answer is O of 1. So just the one Merkel root, regardless of how many uses there are. And in a roll up, it's O of N. So there's a bit of data per transaction. And so that basically covers the space, right? Now you might say, well,

are there things between one and N? Are there things that are like square root or like logarithm or some weird thing in between? And I think my intuitive answer there, is just probably not because that just means that eventually you have less than one bit on chain for transaction and how much can you actually do with that. But intuitively, it just feels like those three numbers, like zero one and just kind of cover the whole range. And, you know, you can tell how with the increasing on-chain load, you have increasing capability, right? Like plasma gives you increasing capability from channels, the particular thing being just the ability to send off-chain to new users who have not yet been inducted into the system.

And then going from one to end, you have this other gain of capability, which is being able to go general purpose. So there is that kind of heuristic intuitive reason to potentially believe that, like, you know, these three options just are the options out there and that everything we're going to see from here is just like different permutations on that. So I think roll-ups are definitely very exciting. What's also exciting is we can begin using them now, right? So this is no longer hypothetical, theoretical, like loop ring has one in production.

Synthetics just released their version on optimism. So it's going to be very exciting to see how both the optimistic roll-ups and the ZK roll-ups play out. I had one other question for you, and then maybe we can move on to social recovery wallets. But just last question on roll-ups, how does ETH-2 kind of, just to tie this out, how does the ETH-2 roadmap fit with the roll-up roadmap? I understand that ETH-2 is going to provide a way to provide consensus on a sharded data layer, which is going to make more space, more sort of bandwidth, I guess, for roll-ups in the future. what's that going to look like and what's that going to do for Ethereum's holistic scalability story here? Great question. It's definitely very important to end up to answer this one. Basically, so we have this thing called the roll-up centric roadmap, which basically says that,

in the short term, we recognize that there is massive fee pressure and roll-ups are the only thing that can relieve the fee pressure no matter what we do. And, and, At the same time, we recognize that for sharding, providing sharding of just data, so just having sharded blocks that just contain these blobs where, you know, you might have whatever data you want, but there's no kind of on-chain processing of it is an easier problem to solve than sharded computation. And so if you take those two facts together, the thing that you realize is basically that, well, what's the roll-ups need?

Roll-ups need data. And what's the scalability element of a roll-up? The scalability element of roll-up is basically, well, how much data space is there that the chain has a consensus on. And with the current Ethereum chain, that limit is somewhere around 500 kilobytes a block. But with the sharded system, you basically have like 500 kilobytes for one, for each of these 64 blocks in every slot, right? So there's just going to be this much larger amount of space.

And within that space, you just, you know, you can use that. to potentially go up to something like 100,000 transactions per second just with roll-ups, right? And I have some numbers. I definitely encourage people reading the post. It's also on fatalic.ca. And I talk about some of the tricks that we use for data compression and some of the math that shows like how many data, how many bytes you need for a transaction of different types and how much scale and gain you can get on a regular roll-up and or, or, you know, on a roll-up on ETH-1, and then multiply that by another 64 to get the scaling gains for roll-ups on ETH-2. And just to clarify here, Vitalik, so this charted data layer, is this going to be available to use for

roll-ups before the ETH-1 and ETH-2 merger? It can be. There is work that needs to be done for that to happen. Basically, we need an ETH-2-like client inside of E-Eth-1. and that technically requires like some EIPs on Heath One to be done, which I think are in the pipeline, I believe for like soon after Berlin or something like that. Got it. Cool.

All right, well, excellent. This has been a fantastic article. So, of course, an incomplete guide to roll-ups. I didn't feel like that was incomplete. What about you, David? I felt like that was a very complete guide to roll-ups, at least for me. Maybe that's a good question, Vitalik. what would a complete guide to roll-ups?

Yeah. One thing I say is that the guide is already wrong. So one of the tables line four, general purpose EVM roll-ups are already close to main net. Well, as of now, the optimism roll-up already is on mainnet, at least for synthetics. So that's progress. And I think, like, this is just evolving technology, and people are going to come up with new and more clever tricks. And I wrote this blog post with the goal of it being something that people can kind of go back to

and just get their primer on what the heck roll-ups are even for years into the future. So I expect there to be more and more things that end up just inevitably not being part of the post, but that continue improving a roll-up people, a role-up user's experience. Well, excellent. Well, thank you for that guide. All right. Let's flip to our third and last subject for today. This is all around the subject of social recovery wallet.

So we're talking about scalability, I suppose, with roll-ups. And a typical Ethereum user feels that pain when they pay for a $20 uniswap transaction, right? Another pain point that Ethereum users feel is around securing your private keys. And this is definitely a hindrance to mainstream adoption. I think a lot of crypto ends up in exchanges just because people are uncertain. They don't feel like they have the tools or the competency to secure their own crypto. And of course, is like a right of passage coming into this industry, which is definitely something that we should have a band-aid for. Yeah, absolutely.

And of course, you know, not your keys, not your big, not your crypto, as as I'm, our friend Andreas says, and certainly, if you want to become bankless and go bankless, you can't keep your private keys inside of a crypto exchange. So right now, best practice is we have things like Metamask, which is an extension of the driver. If you want to be a bit more secure, you can use a hardware wallet. But Vitalik, you're presenting kind of this, maybe this third way, this idea of a social recovery wallet.

So could you give us a quick synopsis on. what a social recovery wallet is and why it's important. Where do you want to start with this one? Sure. And I guess you can just start off with what the thing is. So if you scroll down to Control F, social recovery is better. Then there's a diagram. A bit further down.

There we go. Yeah. So basically the idea is that a social recovery wallet is a smart contract wallet. So if you use a social recovery wallet, your account is a smart contract and your assets would be in that smart contract. And the smart contract has these rules that say that there is a signing key, and that signing key can be used to approve transactions. And then you have this concept of guardians, right?

And the idea is that there's a set of some number of guardians, at least three, I recommend even going up to five or seven, if you know enough crypto people. And of these guardians, a majority of them can cooperate to change the signing key of an account if you lose your signing key. So the goal of this is basically just account recovery, right? And account recovery is just something that everyone ends up needing from time to time. And it's something that, like, lots of services really don't do well, right?

So, like, if you lose your Google or account, then I have to go through customer service. And often it's even just very hard to recover your account. and like I've known people who are just never able to do that. And in the case of crypto, of course, you know, if you just use a regular wallet, well, if you lose your password, you're screwed. And there's just so many examples of people who just lose access to their account and they end up being completely screwed, whether they lose it because they forget a password or because like something, they lose their computer and they just never had a backup anyway.

or because they reinstall their operating system and they forget to copy over the files that happen to contain some of their keys. There's just this kind of whole set of reasons. Their funds are on a paper wallet, but they forget the piece of paper. Their funds are on a hardware wallet and something happens to that hardware wallet. There's just lots of reasons why you can lose your funds. And so social recovery basically says, well, you can identify some set of guardians. And this could be institutions. This could be friends or family. This could even be just other devices owned by yourself. And the majority of these guardians has the ability to basically reset your team.

So this is a pretty simple idea, quite honestly, right? So, you know, problem that we're solving is a custody of private keys is hard. And people can lose them. And if they lose them, it's a disaster. You lose your entire crypto. So solution is twofold. You have a smart contract-based wallet. And then you have this squishy meat space idea of guardians. And people who have a Google account are probably used to this. You know, there's a setting in your Gmail account where you can set, you know, your spouse or a friend's email address to recover your password, right? This is a similar idea.

Only you're delegating that guardianship possibly to some other private keys. And this could be friends and family. This could be other devices, that sort of thing. This feels very squishy, though. Really importantly, not one of one. It's M of M of N, right? Okay. That's a huge difference between, like, say, Gmail's recovery email future.

Right. So it would be a set of guardians that would then, when they come together, their powers combined, they can restore your wallet. So interestingly enough, WeChat already does this, right? Like if you spin up and like if you just wants to log on to your account and, you know, you don't have a password or you don't have some other authentication, then you can create the account. And then what it does is it basically requires you to like it gives you some contacts.

I think I believe it's something like they just automatically choose of some context that you frequently interact with. And it sends them a confirmation code. and they have to give you the confirmation code, or you know, you have to give them the confirmation code and they have to like type in a chat with you. I forget it's one of those two. And so like basically,

if you can like multiple of your frequent contacts, like type in these confirmation codes, then you can access your account, right? So two things I'd be worried about with this, Vitalik, right? So the first is, okay, you said you're essentially putting your, private keys inside of a smart contract wallet, right? And there have been smart contract, not your private keys. Right. So this is basically saying

instead of your private keys controlling funds, the smart contract is controlling funds. Ah, right. Yes. The ability to replace your private keys if you lose your credit. I see. Right. And that's a, that's an important distinction. However, there could be a bug in a smart contract wallet. there could be an issue with that smart contract wallet, it introduces some additional code complexity in the process. So that's the first question I'd have for you. How can we get comfortable around that?

The second is it does at first glance feel kind of squishy to start trusting meet space, social relationships with this sort of thing. Like people are probably thinking as they're hearing you talk, okay, who are the like five to seven people in my life that I would actually trust with something like this and how much do I actually trust those relationships. Can you talk about both of those, I guess, security vectors? Right. So good, important question. So I think as far as security of a smart contract wallets goes, one important thing to keep in mind is that I think that the security of the the code needed to implement this recovery mechanism is very small, right?

It's maybe even just something like 10 lines of code. And the reason is that you can already abstract out the multi-sig part into a separate mechanism, right? And we've already had multi-sig wallets so that work for years. There's the multi-sig wallet that stores the $600 million or whatever it is of the Ethereum Foundation's money. There's the more recent Gnosis safe wallet that stores lots of projects money, and it's been formally verified and audited many times. So that's been increasingly trusted by the community. And so the majority of the code is something that,

or like you can just delegate to a multi-sig wallet, and that's already been tested. And then the rest of it, like it is something that would need to be written, and it is something that would need to be audited and verified, but it is a relatively small kind of 30 line of code. job relatively speaking and not, you know, some really complicated thing. So that's one thing to answer. And the other thing to keep in mind is that I'll talk about this a bit further down, but realistically, all of this stuff is going to happen inside of roll-ups. And I can even expect,

like, a roll-up project to just, like, incorporate some form of multi-sig or social recovery wallet just natively. And I think they should do that. Like I think the move to roll-ups is a great time to start moving people onto these more secure paradigms. So that's one answer. And then in terms of like you, the question of like, do you trust your social relations? I have a paragraph a bit further down, right? Where I basically say that there's this really nice security thing that you can do, which is that your guardians, number one, they don't have to be publicly known. And number two, they don't even need to know each other's identities, right? So like you, for example, could use as your guardians, like, you know, your mom, if you work for a company, your boss, then some institution, some, you know, friend from high school.

And these can be, like, you want to use guardians from different social circles that you have, right? You want to have guardians that ideally do not even know each or at the very least don't closely talk to each other. And basically, like, the reason why this can be accomplished, right, is because like either you don't need to publish guardians addresses on chain until you actually do a recovery or even more securely you can just have each guardian generate a new single purpose address that they would use for each upper, well, for each wallet. that they're guarding. So, and I mentioned, like, it's recommended to choose a diverse collection of guardians from different social circles. One institutional guardian would be nice, though there are privacy reasons why you might not want to do that either. And, like, this basically would just make it very hard for these different guardians to collude, right? So, like, for example, you know, like, I know, like, for you, Ryan, right? Like, if you become a guardian for David, then, like, how the

how would you even start figuring out, like, who of David's other contacts they're going to collude with to steal all this money? That's a good question. I'm thinking about that now, Vitalik. Who, who indeed? Question one, do you even know? And question two, once you start poking around and asking, what's the probability that you're going to get up to four of seven before one of these people rats you out to David and

David just, like, switches over his guardians to someone else that cuts off contact with you? Yeah, that's probably pretty accurate. Considering David and I have never met in real life, though we have spent hours upon hours in digital life together, means I don't actually know some of his IRL relationships and friends and family. And it's going to stay that way. Yeah. Well, so Vitalik, do you think this kind of solves private key management or this could solve private key management, basically? I think it's the best solution that we have right now. I think you'll be great for the ecosystem if we can make a kind of strong push toward implementing this kind of technology.

And we do have some of this today with Argent is one. Definitely bankless listeners will be familiar with. Loop ring you mentioned is another. So there are attempts with it right now. And you mentioned, I think earlier in our discussion that you tried to do a recovery with, with Argent just to sort of test that out. And it was like pretty expensive. There's like a $50 gas fee associated with it. So maybe we could just tie this off with what you're talking about earlier is migration to layer two and rollups can kind of solve their remaining challenges.

So you said some roll up solutions might even be able to have to ship basically a social recovery wallet right out of the box, which would be super cool. It sounds like rollups have the capacity to innovate faster and try new things that the main chain really doesn't have that capability. But what did you what did you have in mind about this intersection of synergy between layer two and social recovery wallets? Yes. So there's a I think a couple of problems that roll-ups solve at the same time. And so one of them is that Ethereum has this very subtle technical weakness, which has this kind of the fact that only externally owned accounts can initiate transactions. And that was just... Sorry, could you define externally owned accounts for our listeners?

Yes. It is an account which is controlled by a private key. If an account that's not an external owned account is a smart contract. So there's only two types of accounts. There's accounts that addresses with private keys and then there are addresses that are smart contracts. Correct. Cool. So, and only EOAs can initiate transactions. There's no ways to initiate a transaction from a SMART contract. So this creates problems, right? And like actually, I know, have either you used the tornado cache before? I have, yes.

Okay, so you remember how when you do a withdrawal from tornado cash, you have to select a relayer, right? And you're not signing a transaction. You're like signing a message. And then, or actually, I think you're not, or even. signing the message, you're just like providing the note and someone else sends the transaction, right? So the reason why that happens is because what's happening in a tornado cash withdrawal is that you're trying to withdraw money in zero knowledge to a completely new address. And so you do not already have funds in that address. So you have no way of paying the transaction fees

from an EOA. And the money you're trying to withdraw is coming from a contract. And so the transaction it has to start from some EOA, and that EOA has to be provided by a third party, right? And the real layer is that third party. It just do this as a service in exchange for a fee. Now, this is inefficient, and it added significant complexity to tornado cash. And it also adds significant complexity in the smart contract wallets. I think it might be the biggest UX barrier that smart contract wallets have. And a big reason we don't have more of them is so like Argent, like they basically run their

own relay, right? And, you know, loop ring, well, they're a roll-up over, so they're in a part of the solution here. And I'm definitely hoping that Argent is going to start doing things with roll-up soon. But if you have any of these wallets, that's a smart contract that's not on a layer two, then either you need a relayer or you need this kind of somewhat bulky scheme where you need an account that has most of your assets, and then an account that has the rest of the of your assets to pay fees, and that account has to have quite a bit of ETH, just in case, transaction fees get very high, and so it just gets annoying. So there's two ways of solving this problem. One of them is a kind of decentralized

general purpose relay network, and the gas station network is doing a great job of this. But the other thing is that you can just move to roll-ups, and roll-ups can just have better support for just allowing transactions to start from smart contracts directly. So that's the first problem. And then the second problem is the high transaction fees, right? Like you can't have, you know, roll-up recoveries cost $50. But, you know, in a layer two system, if everything is done inside of a layer two, recoveries could potentially only cost a few cents. So like in general, like I think the move to layer two is this great opportunity to just do lots of things in a way that's just much better than, you know,

and what we've been doing before. Smart contracts by default are a great example of this. Optimism have already kind of taken some steps in this direction, which is nice. I think every account in optimism is by default a simple smart contract wallet that can be that the user, if they want, you can replace with a different one. So, yeah, there's an excellent synergy between,

layer 2's and better security. So in, oh, sorry, go ahead. I just wanted to say, I just say I did also want to at some point circle back to kind of the relationship between social recovery and crypto values. Maybe that's where we can tie this conversation off. But before we get there, I do want to ask, does that mean that your, you believe that the trend for the average individual who engages with Ethereum is going to move towards layer two smart contract wallets?

Yes. Interesting. Interesting. And people will just perhaps be able to execute L1 transactions from their layer two smart contract wallet by proxy. So like they'll make a transaction with their smart contract wallet. And if they want something to happen on chain on the Ethereum L1, it can be initiated from that point. Interesting. Right. Well, so we have to distinguish between like layer one smart, like smart contract wallets that are on layer one versus smart project wallets that are being signed roll-ups, right? So, like, I think smart contravolts are better either way, but, like, they're definitely much better inside roll-ups. And I definitely expect more and more people to be, like, over time, to move toward being inside roll-ups natively. So just being able to do lots of things and just, like,

do all of the Ethereuming that they wants to do just by, like, floating between, you know, optimism and Arbitrum and ZKSink and loopering. And I think we're going to have better and better techniques for moving between those systems without having to hop onto the main chain first. And that will also reduce transaction fees massively, which will give an opportunity for this social recovery stuff to happen better. David, our kids may not even use the main chain. That's what is Alex saying, right? Like they might live their whole DFI Ethereum life on a layer two chain completely.

So, well, that kind of begs the question. say I have a smart contract wallet on the L2, and I'm there because of just all the UX benefits that it provides me. And I want to swap tokens for one token for another because of whatever reasons that people do that. And the uniswap L1 is perhaps not necessary because on loop ring, there is another AMM that because I'm, perhaps I'm on the loop ring and L2, I just use that exchange feature there instead. So then at that point, what does, Does the, if all the economic activity is kind of put into L2s, what does the L1 do? Like what kind of economic activity would you expect to see on the main Ethereum L1 if that

becomes the case? In the short to medium term, I expect like high value users to stay on L1 just because they, they can afford to pay the fees and that they, the fees are a lower cost than the, the risk that people perceive of L2 is breaking. But, you know, in the longer term, there are the risk of, you know, the risk of, you know, of L2 the breaking is going to subside. And in which case, L1s are mainly going to consist of, like, layer two is publishing these batches and batches and proofs and, like,

users moving between roll-ups in some cases. That's extremely interesting. That kind of makes my head turn to the whole scaling metaphor of Xbox games, where people, or Xbox games when the Xbox first came out, were like kind of the graphics were rudimentary, the very basic. But then Xbox games towards the end of the Xbox lifecycle, and I'm specifically talking about the Xbox 360 here, like the big Xbox that took off the most amount of time, games towards the end of the Xbox 360 lifestyle were far more efficient, far more graphically, like beautiful and complex and rich. But yet it was the same

hardware. It was the same hardware all through and through. And that seems to be kind of how what you are alluding to with the Ethereum L1 over time is that we are, actually just making better use of the same computational capacity that Ethereum offers. Is that kind of where you're getting at? And then my other question is, the Ethereum, of course, is a place of Legos. We have different things, different applications that we can plug into each other. What we're talking about here is the Lego between a smart contract wallet and an L2, talking about the efficiencies and Ux benefits that we get there.

What about the Lego of decentralized identity? How does the combination of decentralized identity in smart contract walls? How do those things interact? I guess, I know good question. I've talked about identity in a lot of different contexts. I guess the question is like there's different kinds of identity, right? Like there's identity of like you just authenticating yourself as being the same actor who did some other interaction previously, which is just like,

maintaining a persistent account. There's identity as in proving things about who you are in the real world. There is identity as in kind of the unique human problem, creating accounts that each person can only have one of. And like those are all, they are kind of different primitives that have somewhat different properties. So I view like social recovery wallets as being like and a big step forward for the first kind of identity, this kind of maintaining some kind of persistent thing that you can represent yourself as to services and other people.

So, like, and as I mentioned before, this is something that, like, could potentially end up kind of going, like, even being used for just centralized Web2 services, right? Like right now, if you log into many services, a lot of the time you're logging in with Google or you're logging in with Twitter or logging in with Facebook. And you're basically using an identity that's controlled by Google or Twitter or Facebook as the mechanism by which you interact with all of these services. But here, like the thing that I think could eventually happen is people using blockchain social recovery wallets. or wallets with like some kind of other recovery mechanism of their choice as that identity. Right.

It's like ultimately, if we can create something that's like as secure in terms of like anti-f theft and anti-laws properties as centralized services provide, which I think we can because I think people overrate how good these centralized services are anyway, then we can create something that makes sense for even people to use to just interact with all of these other things too. So I guess, yes, you know, this stuff is a strong path towards solving, at least like one of the problems that we put in the identity bucket. So, Vitalik, thanks so much for guiding us through social recovery. Let's tie up the discussion with this critique, maybe address the person who's thinking, well, you just introduced something that I thought blockchain was going to remove this.

this idea of trusting people, right? Now we're back to trusting people again, Vitalik. That feels like a betrayal. What's your response to that critique? Right. So I think this kind of comes, like really ties into kind of this difference in perspectives about what, you know, crypto is for and like the kind of ideology and vision that different projects have. And I've always interpreted Ethereum as, you know, not being about this kind of mountain man, I'm going to do everything, my self mentality. It's more about this idea that, you know, we're going to use like cryptography and economic building blocks, like, you know, ETH as the monetary layer and general purpose code and the ability to write these contracts that can control things. And these tools are basically going to empower people to

and give them choice in creating mechanisms, right? And they can empower people to give choice in, like, whom to trust, also creating constrained forms of trust that basically say, I trust you to do some things, but I don't trust you to do everything. And this is something that I think, like, we've been seeing in Ethereum more broadly, and it's like this big kind of design philosophy, right?

that it's not about trying to eliminate trust completely. It's about basically saying, well, we have these technological tools, and we can create systems that have these much lower levels of trust, and we're going to create, but where trust is still this important ingredients, but we just use it in ways that's, that's, that's, that's, that's, that's, that's, that's, that's, that's, that's, that's, like, right, so one, minimize it, two, try to use it more, I'm trying to use it more intelligently, and three, as much as possible give people a choice of, like, what basically, what tradeoffs they take.

And, like, this is something that, like, Ethereum is, like, move doing on the, the blockchain layer as well, right? Like, there's this discussion around proof of stake and weak subjectivity and how proof of stake makes this tradeoff that, know, if you're logging onto the network for the first time or if you've been online for like a very long number of months, then like you do have to kind of get your view of which chain to follow from somewhere. And but the thing that you get in exchange for this is just this vastly more efficient blockchain with a much less resource consumption. Right. And I think here at the same, it's also this very similar principle, right? Like it's basically saying that, you know, we're going to moderate, but we're also going to say that just this is this, like, this is this playground for just

building different ways for people to interact with each other. And so, like, let's just actually use it and let's just build really interesting things with that. Well, Vatak, I want to thank you for being so generous with your time and coming on the program and talking about all these various subjects with us. I know that like historically in the past you would put out a blog post and then people would kind of become woke to it like one or two years later as like, oh, like we finally integrated what Vitalik was talking about, you know, two years ago. And I actually hope, I think that I see that there is actually a faster iteration cycle between some of the things that are coming out on your blogs and some of the development that we're actually seeing out in the world of Ethereum

and the greater world of crypto. I hope that actually some of these conversations that we're putting out on the bank list program are helping with speed up speeding up that iteration cycle. But anyways, I do totally agree with you that the future of 2020 and maybe 2021 or that the future of 2021 and beyond is very dominant in the world of, you know, very strong, sexy UX of smart contract wallets as well as the integration of, you know, the ease of L2s and and all the other things that you have written on your blog post. So thank you for coming on and sharing those ideas with us. Happy to be here.

All right, guys, as always, want to end with this. None of this was financial advice, of course, eth is risky. So is defy. So is crypto. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone.

But we're glad you're with us on the bankless journey. Thanks a lot.