Bankless - SotN#9 (PART 2) - Guest: VITALIK BUTERIN on ETH SUPPLYGATE!

Episode Date: August 14, 2020

STATE OF THE NATION #9 (PART 2) - Wednesday, August 13, 2020 Watch on the Bankless YouTube Channel SOTN PART 2: with Special guest Vitalik Buterin The State of the Bankless Nation is....PROPAGATING! And in this Part 2 we talk to Vitalik about ETH SUPPLYGATE! ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⚔️ GODS UNCHAINED - TRADING CARD GAME - you own the cards - start a free account, play and trade! 🧙‍♀️ POLYMARKET - BET ON CRYPTO - bet your beliefs! - use it to bet on DeFi outcomes!  🌈 AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK - earn some interest! 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY - learn about this experiment! ----- Covered: ETH SUPPLYGATE CURRENT GAS FEES PART 2: (COMING TOMORROW - ETH SUPPLY GATE) Special guest Vitalik Buterin We show:  Tweet from Pomp Never Get High on Your Own Supply --- Episode Actions: NA Also...subscribe to Bankless YouTube to watch State of the Nation every Tuesday! ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources 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 Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- 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 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.

This is episode nine. This is part two. So part one, we caught you up on what is going on with yams. It's still going on, as a matter of fact, as we're recording part two. Also, we gave you an update on Dex volume versus centralized exchange volume. In this special part two episode, we've got Vitalik Butrin. We're going to talk about something called Eith Supply Gate. David, what was your take on Vitalik's comment on Eth Supply Gate and everything he said? Yeah, there's just been so much going to on in Ethereum in the nation that we had to split this up into two categories. Like yams deserve their own episode. Honestly, Uniswap exploding deserved its own episode.

And also going through the nuances of ETH supply gate deserves its own episode. Ryan and I, we aren't really coders. And so we wanted to get someone who could speak on a more technical level. And so we just went straight to Vitalik. And Vitalik actually loves to talk about this stuff. So we got him on the state of the nation to help us get through some of the nuances of ETH supply gate. For those of you guys that aren't familiar with ETH supply gate, I believe it all started with Pierre Richard, not to name names, but I'm going to do it because it's kind of like

a call-out gotcha moment. So Pierre Richard, a famous Bitcoin maximalist, he's also an accountant, or an auditor, excuse me. So he's very much in this world and loves the fact that you can easily audit the Bitcoin supply. And it is a very big proponent of Bitcoiners running their own note. He's a bitcoiner to the fullest degree. And he spearheaded this eth supply gate effort where he realized that there's no internal function to the Ethereum blockchain that allows you to audit the eth supply. And so he made this public tweet asking like, okay, what's the supply of ether? Do we even know how much ether there is out there? Which coming from the camp of Bitcoin or sound money is like sacred, right? Like you must know what the supply of Bitcoin is because you check your

own node and you check and make sure because you run your own node and you do your own math, right? That's the, that's the Bitcoiner ethos. And they and the Pierre and other Bitcoiners, Bitcoin maximalists, I would, I would call them, realized that ETH doesn't really have this built into the clients, right? We don't really have that function. And so we actually didn't really have a quick and easy answer as to how much ETH is out there because it's not built into the system. Now, that doesn't mean that we, the amount of ether is unknown. It's just a, it's a, it's just a, it's a, it's, importantly, just a different way in construction between Bitcoin and Ethereum. And that's about as much as I know.

And so we'll pick it, we'll pick it up with Vitalik when we turn to Vitalik. There's just one last piece I wanted to bring up before we turn to Vitalik. And I got into the conversation as to like why Bitcoiners are doing this kind of like gotcha thing. Like it's a very gotcha moment. There's not real much substance behind it. Vitalik will explain more. But I asked Vitalik, like where is this motivation coming from? Like, why are so many Bitcoin maxis trying to, like, have this gotcha moment for Ethereum?

And his answer, while we recorded it, might have gotten jumbled by the internet. So I'm just going to reiterate it here. But Vitalik answered that he thinks that there's a lot of people who are really insecure and worried that Ethereum is becoming completely legitimate in everyone's eyes. And so I'll leave it at that. Ryan, if you want to have any last comments before we hop into the Vitalik interview, let's hear him. Yeah, that's absolutely. You know, just one point of clarification, of course.

supply was known. It's just not built into the geth and parity clients. So like you can view it on ether scan. You can view it in all block explorers. It's been charted over time. Coin metrics, other analytics firms chart. It's just not a function in the getther parity nodes. So that was really the point of contention. And you know what? I guess maybe I'll end with this and we'll jump to the interview. Actually, I ask the question every week. You know, what's something cool you did in crypto this week, right? And last Saturday, peer, peer, peer, peer answered the question and he said, I helped Ethereum figure out its supply issues, something like that. And I was like, you know what? I think this is helpful. This is part of going through the gates of what it takes to become a

reserve asset and a money. And Ethereum should have a good answer to this question. And I think Vitalik does, quite frankly. And I believe we will see the click here for each supply button in future Ethereum clients, whether it's ETH1.0 or ETH2. So with that, David, let's get to the interview with Vitalik. All right, Vitalik, welcome to the nation. We are doing this very quick episode to kind of just get right to the heart of things. For context, there has been this pretty, pretty avid movement in the Bitcoin maximalist camp. I would categorize them, not the Bitcoiners, the Bitcoin maximalists, who are going out. after the difficulty of auditing the ETH supply.

And so there are a lot of different conversations to have that are relevant here, a lot of different nuances to get into. And Ryan and I aren't really all that technical. And so we're just going straight to the source of one of the guys that can speak the best about this subject. So we're bringing on Vitalik to help us kind of dig through this actually kind of difficult and nuanced conversation.

So Vitalik, thank you for coming on the state of the nation. No, thank you. Thanks. It's good to be back in the nation again. Awesome. Hey, Vitalik, I'm going to start with maybe a tweet that I saw, and this is not the only tweet, of course. This is just one of, you know, a flavor of some of the conversations that have been going on. But I just happened to see this, I think, well, on the 8th was that Saturday, Sunday, something. And it's basically this sentiment coming from, I think, members of the Bitcoin community, maybe more skewed maximalists. And it says something like this. The Ethereum community can't figure out what the total outstanding supply of ETH is.

This is a major problem and showcases why ETH is not good money. So comments like that. I guess maybe like my first question, is that right? Can the ETH community, Ethereum community, not figure out what the total outstanding supply of ETH is? No, and I think the Ethereum community definitely knows what the total outstanding supply of ETH is. and it's like about 112.1 million, right? And you can see that by just in a whole bunch of ways. Like there's all of the different scripts that have been run the past few days.

There's, I mean, you definitely shouldn't trust them, but like the fact that all of the different ETH supply calculators are going to on the internet to basically agree to the answer within a factor of about $100,000. You can even look at the Ethereum Protocol and know what you know about Uncle. rates and you can try to estimate the Ethereum supply from that and you can get somewhere very close. So, no, no, no.

The Yves supply is about $112.1 million right now. I think, like, the, like, people like this, they're definitely kind of engaging in a very serious, I guess, modern Bailey fallacy here. Are you familiar with that term? It's a kind of popular slate-star codexism. Yeah, please. Yeah. So basically the idea is that this is a kind of old medieval terminology where kind of in a castle,

like I think it's the mod is that a sign of well-protected castle that, you know, you got the wall, you got the tower, like it's very hard to invade. And then the bailey is this kind of farmland below. And the idea is that normally everyone's kind of, you know, happily off farming the bailey. But then whenever someone attacks, everyone kind of retreats back to the mod, right? And so the idea is that it's this kind of argumentative dark arts technique where basically you have one position, which is kind of the Bailey, that you are going to state publicly. And it tends to be a much more extreme position. And then if someone actually challenges you in the extreme position, you just kind of say, no, no, you don't get it.

I just meant this a kind of other smaller, totally reasonable thing. And you can see people in politics saying this sort of, or being in this kind of pattern all the time, right? But here, basically, the mod is that, you know, there doesn't exist a kind of convenience function that's very easily accessible from Ethereum clients that lets you kind of go and click and say, you know, the Ethereum supply is like 112.24-589, or whatever it is. But the Mott that, but the Bailey that they tried to, I kind of implicitly go after, I think, is this idea like, oh my God, no one knows what the Ethereum supply is. Maybe someone snuck in an extra 25 million coins. Right.

Like, if someone actually did sneak in an extra 25 million coins, that, you know, yes, you probably should be kind of selling and shorting Eiff because they're going to do something terrible with that $25 million and probably dump it before everyone realizes what's going on. But nothing remotely close to that has happened, right? So, like, this is all basically this kind of dispute that has just been blown horribly out of proportion about a difference of, you know, like, really about, like, what was it, 100,000 coins, a few thousand coins, like pretty much nothing, right?

Because, like, 100,000 coins get issued every week. So that's, I think. So that's kind of, I guess, the core of how I see this. Like, another analogy I might add is, you know, in neither Ethereum nor Bitcoin nor most cryptocurrency is can you estimate, say, the genie coefficient, right? And the gene coefficient is important. You know, the gene coefficient is really important because you want to, like,

if you're going to create a new monetary system, it's important to know how much inequality the monetary system has, because if it's introducing a really huge amount, then maybe that's not a monetary system that you want to support. And cryptocurrencies are, of course, pseudonymous, and you can have many people sharing an account. You can have one person having many accounts, and there's just, like, not a good way of actually estimating this number. And so, could you just, you know, you could imagine a proponent of fiat currency, a kind of just pressing really hard on this point and, you know, going around asking,

what is the genie coefficient of Bitcoin? What is the GD coefficient of Bitcoin? You don't know. Then how do you know that you're not introducing a plutocratic dystopia on the order of North Korea? Obviously, their argument's crazy. And we have ideas roughly about what kind of inequality in concentration there is in these systems. And, you know, we actually know that, for example, as far as all the cryptocurrencies go, Bitcoin and Ether actually both among the more equal ones.

A lot of the other big heavily pre-mines and heavily non-transparently I see old coins, they tends to be very, very concentrated in, you know, BTC and Ether not. But like that's one analogy, right? So the mod that they can claim, like the thing that they basically are claiming is that the total supply of ETH just is this parameter that, you know, clients just haven't created this convenience function for because they have a, there just hasn't been much demand for it, right? Now, one thing they might, you might say is like, well, if we don't have this auditing and we don't have this convenience function, does that mean

that there's actually a significant risk that someone will, you know, somehow sneak 25 million Ethan to the system. Like, okay, maybe right now it's a disparity of 100,000, but if we're not auditing, maybe someone will sneak in 25 million. And I think that kind of completely misunderstands the security model of Ethereum, and I would even argue the security model of kind of cryptocurrency generally. Like, basically, I think this is kind of a bit of a deeper kind of rapid, holy philosophical points, but I think a lot of people think of verification of cryptocurrency as in of wrongly being. a kind of very piecemeal, a kind of fact-by-facts thing, when in reality verification of a blockchain is all or nothing. And to give a totally different example of this, like there were some older

blockchain scaling protocols that basically said things like, you know, we're going to create a scalable blockchain that makes it easy for you to verify the presence of your own coins, right? So basically, you know, imagine like a highly scalable blockchain, you know, even Bitcoin SVE, size or something like completely insane like that, but where you have a light client protocol that makes it very easy to just just verify kind of the history and the kind of provenance of your own coin, right? You know, you have your ETCO, here's the two parents, here's the three grandparents, here's the five great-grandparents, and so on and so forth, right? And all the way back to Genesis and like that's going to be a substantial amount that maybe a few hundred megabytes,

but you can verify it. The reason why that kind of verification is just totally stupid and pointless is because in order to verify that your coin is valid, in order to verify that kind of your coin will be accepted by people, but you don't just have to verify the prominence of your coin. You have to verify that your coin is part of a chain where the entirety of that chain is valid, right? Because even if the prominence of my coin is completely valid, you know, if your coin's in there and your coin got double spent and the double spending got accepted by the network, then that is a chain which is a fundamentally kind of invalid and corrupted. And so that is a chain that once people figure that out is just going to get rejected by the ecosystem, right? And so like the fact that I have a coin that's totally valid within the context of a chain that's totally invalid and it's going to be rejected, like that's worth pretty much nothing, right? And so the only verification that matters is verifying that the entire chain and all the rules of consensus have been kind of fully satisfied. And it's the same situation here, right? Like basically there's

no value in kind of privileging one specific rule, whether it's the rules about issuance or whether it's the rules about, you know, were the ECSA signatures all correct or whatever, whatever. Like, you have to basically verify all the rules, right? And that's what clients do. No, they verify all the rules. And so the, like, basically if, like, the reality is that if you want to verify that Ethereum is a system that's satisfies the goals of being a blockchain that satisfies the goals of being a valid kind of substrate for ethas money and for dyes money and for whatever other money you like that's on ethereum then like you have to like there's no value in looking at one single consent this role in isolation right you would also have to verify you know verify that smart contracts have never been illegally hacked you might have to verify that transactions without valid ECDSA signatures were never included you have to verify that

your coins were never invalidly taken away. You have to verify that everyone else's coins were never invalidly taken away. So, like, specifically verifying that, you know, this one consensus rule has been satisfied as that kind of, you know, it's just, it's focusing on one specific thing, when in reality, you have to focus on everything together, and you really have to think about it in kind of two parts, right? The first part is, were the consensus rules that we think the consensus rules are actually followed? And the way that we know that is, well, there's a whole bunch of clients and the whole bunch of clients have processed it. And there's lots of people in the Ethereum ecosystem that have run those clients. So, like, I talk about the concept of herd

immunity here, right? Like, you know, fortunately, it's 2020 in herd immunity is an analogy that, like, pretty much everyone understands. But, like, you know, the idea is that, you know, if you have, like, a thousand people in a whole bunch of places in the community that have run a note and have verified each individual piece of the chain, then, you know, realistically, the chain's valid, and, like, it's incredibly unrealistic that an invalid chain is just going to sneak through all of them, right? So, I mean, like, this is the sort of thing that we could kind of rabbit hole deeper if we want to talk about, you know, the philosophy of sharding, for example, but, you know, that's a whole other topic, but, you know, that's the first thing, right?

The verifying that the kids are the rules were followed, and we have multiple implementations, you know, lots of implementations, lots of them have, you know, sunk the chain at one point or another. Lots of them have, you know, verified any individual block. And then the second piece is, okay, well, given that we know these consensus rules, let's take the consensus rules and let's figure out what the supply is going to be today and what the supply is going to be at kind of different realistic points in the future that we care about. So, and if we want to estimate what the supply is today, you know, we can run some of those scripts that determine exactly how many uncles there are.

You can do estimates based on basically the more exact number you want, the more kind of work you have to do. And if you're willing to actually process the entire chain, you can get a number down to the last way. But, you know, the value down to the last way is not very useful because 14 seconds later there's going to be another 2.0 something you've introduced. But, you know, if you want that number, you can get it. But if you're okay with like five or six decimal places,

you can do a bit less work. And if you're okay with three decimal places, you can do even less work. And so, like, there you go. Okay, so Vitalik, I'm going to try and recap all of this in as short of a bit as possible. So Bitcoiners, and the Bitcoin blockchain has this function built into it that just does the audit of Bitcoin, right? And it's built into the protocol, which is really aligned with Bitcoin or values because they really like auditability. That's part of the proposition of Bitcoin.

It's a function, right. It's a function that's built into the Bitcoin clients. If Ethereum clients wanted to, they could build in that function too, it wouldn't even take a hard fork. Right. Okay. And so Bitcoiners found out that there isn't a dysfunction in Ethereum clients. And so they found this opportunity to nitpick about that.

When in reality, the reason why we know that no one has slipped in any ether in any ways that don't fit the rules of consensus, is because we haven't hard forks the chain. We haven't had a hard fork. If somebody wanted to slip in ether in a way that would be invisible to people, it would result in a hard fork and that thing either being invalid or there being a hard fork, which we would have known about. And so this kind of then goes into the second criticism,

which after you pressed some of not use specifically, but also you specifically, but also people like Chris Berniske and Eric Borges and Andreas Antonopoul, after they brought up the issue that this is mostly a non-issue, it's kind of like this gotcha moment, the conversation then kind of turned to, well, Ethereum's don't even run their own node because that's just not in their culture, which I agree.

It's actually not really in our culture to run our own node. I don't run my own node. I haven't in a while. I don't think Ryan runs his own node. But what you're saying, oh, you do, pardon me. But what you're saying, Vitalik, is there's this herd immunity where not, every single individual needs to run their own node,

we just need to have enough individuals so to the point where we get sufficient decentralization. Was all of that accurate? Yeah, I think so. And I definitely think that it would be nice if we could get more of a node running culture and Ethereum in the future. But I think, like, we do have to kind of think pragmatically

about this, right? Because right now, I think a lot of people don't run Ethereum nodes because Ethereum nodes are expensive. And Ethereum nodes are expensive because we have these big hulking blocks with 12.5 million gas. And the reason we have big hulking blocks with 12.5 million gas is because

right now the gas prices, well, I think an hour ago when I checked, it was like, well, it was it 240 Gway or something. And if we had not done those increases, it would probably be like 2,000 Gway. Or more realistically, everyone would have left Ethereum and everyone would be on, you know, Ethereum

Classic or Neo or, you know, of one of these other chains. So, like, in the short term, there's this unfortunate kind of trade-off that we do have to make. And I do think that the Ethereum community, you know, the Bitcoin community really values the accessibility of reading the chain, but I think the Ethereum community also really values the accessibility of writing to the chain. Right.

So accessibility of reading the chain means, you know, like how much does it cost to run a node, basically accessibility of writing the chain? How much does it cost to stand a transaction? And those two are in conflict because the more space there is, the cheaper the transactions, but the harder it is to run a node, the less space, the more expensive of the transaction. but it's easier it is to run a node.

So in the short term, there's not much that we can do, but at the same time, you know, like, this gets back to one of these other weird talking points that I saw yesterday, that, you know, people were kind of gotcha quote tweeting this tweet for myself like four years ago, and I said, the internet of money should not cost five cents a transaction.

And I'm like, yeah, you're right, it shouldn't. And, you know, the fact that it costs more than five cents a transaction right now is terrible. And that's exactly why we've been working on charting and possible and roll-ups and all this stuff for the past years. You know, if you send a transaction in, like, loop ring or ZK sync or one of these systems,

like I think, I mean, we can calculate the transaction cost on one of those right now. Like, what's the Eif gas station gas price right now? Like, is it 220, 240, one of those? The last I checked, it was 273. Oh, wow. That's a zero-gla-celia. So, excellent.

Okay. So, okay, let's like round it up to 300 and be like Spartans that are lazy at math. And, you know, 300 multiplied by about, let's say, 500 gas per transaction that happens inside of a roll-up. And so we get to 15,000 Gway. And then 15,000 Gway multiply by, was it about $400? dollars and we get about six million and this is all in units of one over a billion and so it's about zero point zero zero six dollars so even in the context of today's sky high gas prices if you personally today are living inside of lub ring or zk sync then you know in optimal conditions you get

transaction fees of zero point six cents if the batches are a bit smaller you might get transaction fees of like three or four cents but like Basically, you know, the internet of money is still alive, and it's called highly scalable Ethereum layer twos. And so these are a thing, like basically the future that we're working toward, you know, where we have roll-ups, where we have scaling. Another one that hasn't been given enough love is the OMG network. You know, they were kind of very hyped up a couple of years ago, and then I think a lot

of people got the impression that they kind of went away and were dead. But, you know, no, they have a beta running on main net, and you can go and use it. And I think Tether is planning on a migraine. to it soon. So, like, after we have these scaling solutions, then, like, we can consider, we will be able to have both very high scalability and a low cost of running a node. Like, for example, the cost of running an ETH2 node is definitely already, like, much lower than the cost of running an ETH1 node. So that's exactly the sort of thing that I think we're working towards, and I think we can't have more of in the future. So, Vitalik, this conversation,

came out of that tweet from a big somebody who I would classify in the Bitcoin Maxi camp and it was another one of these gotcha tweets and this whole East Supplygate thing has been classified by a number of people like Andrea Santonoblos is one of the people that I think is the person that coined the whole thing the gotcha the Heathgate gotcha moment gotcha question and so it seems to be like there's a certain camp of people coming out of the Bitcoin Maxxon Bitcoin Maxxie maximalist cohort that are trying and going for these gotcha things for whatever reason. And so it delves back into this whole tribal mentality where there are a couple bitcointers who are really loud out there trying to poke holes in the Ethereum value proposition.

Like what's your take on that? Like why are there so many people that seem to be motivated with like these gotcha things without actually contributing anything of real value either to the ecosystem or to the conversation going on? Like, what's up with this? I think people are scared that Ethereum is getting legitimate. So I'm a Bitcoin hat on for and play a devil's advocate. So here's a devil's advocate here. So fact that Ethereum is five years old

does not have a ETH supply calculation function in parity or guess. Does that about the priority? I can picture maybe somebody saying that. Because Ether didn't write calculating supply in its clients as an easy button that you press, its priority is not to be a fixed supply sort of asset. I mean, the reason you can imagine someone saying that is perhaps because I said that myself on Twitter, I think about two days ago as an attempt to kind of summarize what I thought the best argument of the camp was.

Oh, so you did summarize that. Okay, I didn't read that. Like, my words were something like, you know, the facts that Ethereum clients don't, or, and the community doesn't seem to care about having a convenience function for calculating the Ethereum total supply just shows that Ethereum is kind of much less interested in. of the sound money religion. I use the term religion mutually, by the way. So like if you're in the good point are both part of the Cyphaport religion, for example.

And, you know, if you want a sound money, then, you know, it's better to have a money whose community is kind of subscribes to the sound money religion, right? Which is, you know, a fair argument. Like, I think that's one way to kind of understand a lot of their positions. Like, you want to have a money

whose community subscribes to the sound money. money religion you want to money whose community subscribes to the immutableism religion and you know so on and so forth right it's that kind of that kind of you know Richard Nixon kind of rationally crazy sort of a sort of line where you know being incredibly attached to something can be a an advantage if it basically kind of makes it more difficult to kind of push a certain thing through someone or through a group of people. So I think that's fair. I mean,

Ethereum's definitely value the sound money religion less than people in the Bitcoin camp to. And, I mean, to be fair, like the whole ethos money meme is like barely a year old for us. The Bitcoin is money meme is, I don't have many years old. So I think, like, first of all, if Ethereum people want to,

that's something can change over time. But second, I think it's important to note that there's a limit to the extent to which we can comply with some of these values while the Ethereum 2.0 roadmap is not yet complete. And this is another thing that I think is important to understand, right? Because, you know, we have this looming transition to proof of stake and then sharding and then killing the proof of work chain. and during that whole transition, we're going to see massive changes to the reward formula. We're also going to see fee market reform, a.k.a. E.P. 1559 implemented at some point. We're going to see, actually see for the first time, like, how many people are willing to stake and what exactly the actual issuance rates and what exactly the actual burning rates are.

And out of this, we know it could end up being that the EF supply growth rate is negative, right? And if these continue the way they are today, the ETH supply growth rate is definitely going to be negative. In which case, you know, the analogy I made is like, if a zero growth rate is sound money, then, you know, what does the negative growth rate mean? Does it mean even supersonic money? So that's, but like this is all future stuff and this is all kind of unknown. And there's definitely aspects to the Ethereum culture that they're kind of explicitly understand, right? That, like, as I think I summarized a couple of years ago, like, Bitcoin people think Bitcoin is 80% complete. Ethereum people think Ethereum is 40% complete.

I think now maybe instead of 40%, it's more somewhere between kind of 50% and 60%. But, you know, it's that kind of mentality, right? And so people understand that there is this technological roadmap. ahead, there are these economic unknowns ahead. And it definitely is something that aspires to have certain economic protocols. But like, what's the point of verifying that the current rules are being, uh, kind of, you know, I'm satisfied to this extreme extent of having kind of all of these different functions for verifying it if we know that these are things that are going to change in one or two years anyway. And after the one or two years, uh, I think, uh,

people, and after the economics get nailed down, that's something that people can and will take very seriously. And people are taking very seriously, right? So like, for example, people, you know, we see these ETH2 staking reward calculators and we see these EF2 issuance calculators. And there is this growing community of people that do take EF2 economics kind of extremely seriously because they see that, you know, the EF2 economic model is something that's been made with kind of a lot of care and love. and it's this thing that's theoretically meant to kind of stick with us for the long haul. So, yeah, and we do, basically, we need to take this a kind of more long-termist perspective. And, you know, well, it's funny to say, yeah, caring about what will happen three years from now as a long-termist. But, you know, that's, like, basically, if you do will change things. Yeah, and, you know, also another narrative that pops up, David, David mentioned one, which is,

you know, Bitcoiners or Maximus will say, hey, Ethereum don't run their nodes, and that's a big problem, which many do, by the way. But another, I guess, narrative that gets put out there is that Vitalik and insert, you know, dev overlords here, act as a, you know, federal open market committee, basically, the FOMC of the U.S. And they set issuance. They set supply. Can you talk about that? I mean, what's to prevent the FOMC of Ethereum, you know, as they would, as they would phrase it, from, you know, increasing issuance to something and maybe like funding a yacht or funding your favorite charity or funding, I don't know, ETH2 development even? Sure.

So I think people kind of further away from the Ethereum community definitely, in the, definitely overestimate the Lord dictator Vitalik, but they also overestimate even the Ethereum line of FOMC. So first of all, you probably remember this yourself, right? When the issuance reduction from three-Eth per block to two-Eth per block was happening, that was not Cordef driven, that was not Def-driven. That was not even driven by like Ethereum community members that were in what was maybe not yet called, but starting to become the Ethan's money camp, right? Does that sound accurate to you? Yeah, you know, from my recollection, I think people who are holding Heath and who are believers more in the idea that ETH is a sound collateral sort of drive those

sorts of changes. And they'd have a lot to say, I know I would. I can speak to David too, if issuance were to increase for something that was outside of the social contract, for instance. Right, exactly. Now let's look at another dimension. Gas limit increases. So gas, has a little increases. The interesting thing is, like, so if you go right now to etherscan.io slash chart slash gas limit, right, open up that page. You see like the graph, right, and it looks like a bit like a kind of city skyline, you know, it's got pop, blah, blah, blah, I guess I'll wait for you to open that up. Sorry, what was that URL one more time? Etherscan.io slash chart slash gas limit.

There we go. Yep. Okay, you see the city skyline. So let's look at that chart kind of very closely, right? So one of the things that you might notice is if you look at kind of the beginning stages of that chart, like open up and search on Google images, U.S. historical income tax rate. Like, images? Yeah, images. Let's see if we can find a good one, just the second one. the second, marginal tax rates, right?

So see how, like, the chart, like, kind of jump back and forth between the two, right? Just, like, look at the ether scan, look at the, back to the taxes, ether scan, taxes. So I actually made this point in a blog post, kind of, actually. This is another one of my points when I was, like, being kind of self-critical of Ethereum governance them a few years ago, where basically these charts, both look kind of similar, right? They have this pattern of like staying very, very cleanly at one exact position for a long time and then jumping, and then staying very horizontal and then jumping. And this is a property of basically a magic number that gets constantly renegotiated by a committee

of technocrats, right? Like if you have a number that's constantly renegotiated by a committee of technocrats, then, you know, this is what it looks like. So the, now let's look at the chart more recently. If you look at specifically what happens after January 2019, right, like look at the last kind of bar like there and then kind of after. So notice, zoom out again, I might just refresh maybe, notice how that last 20% of the chart looks much less clean than the first 80%. Do you see that? Yeah, the first 80% looks, you know, the first 80% looks incredibly clean and then after that it gets very choppy. So here's what's happening, right?

Basically, what's happening is that the first, the gas limits at the beginning, they actually were essentially set by a committee that sets magic numbers, right? Basically, the Ethereum Foundation, maybe one time Lord dictator, the Vitalik, said, hey, guys, maybe we should increase the gas limit. And all the miners were like, yes, my lord, we should raise the gas limit. And they changed their setting for the clients and they raised the gas limit. And, you know, this was how, this was admittedly how governance worked in the earlier days of Ethereum and when we were able to kind of pull off the Dow fork in these other things, right? So that, but more recently what's been happening was the latest two gas limit increases were minor driven, right?

Basically, there was very little input from the, from Lord of a Teller, there was very little input from the Federal Open Markets Committee. it was basically miners initiating, and in some cases, miners disagreeing. Like, a couple of mining pools switched from $8 million to $10 million, a couple of other mining pools stayed at $8 million. And so you saw the gas limit kind of bouncing up and down. And even when it got to $10 million, if you look at kind of the daily average, it wouldn't be $10 million. It would be maybe $9.9.8 million,

because there was this kind of ongoing disagreements in the gas limit would still be kind of bobbing up and down a lot, right? And the most recent one, the rise from $10 to $2 million, 12.5, like you can see even more clearly how bungled that was, right? Basically, what happened was that I remember back in May, I think it was a spark pool. I think I remember it was Shin reached out to me. And he basically said, you know, hey, Vitalik, we're considering maybe we should increase the gas limit because transaction fees are getting a bit higher. This was back when it was about 20 to 30 way, right? And I replied at the time, you know, maybe no, we shouldn't because

that'll get Lord Peter Salagi and I'm sure I'm bugling the name, I'm angry, and you know, Lord Peter Solaj is doing a lot of great work and, you know, we should not be making his life harder because, you know, he's been doing a lot of, I mean, he and his team have been doing a lot of great work on kind of making Geph work more efficiently. and if we're just going to go and kind of undo those efficiency gains with a stroke of a pen, that's not a very good thing. And that could cause kind of DOS issues and all of this stuff. Now, six weeks later, the transaction fee situation got way more serious.

And I guess the mining pools by themselves, you know, they talked among each other. They talked in each other, you know, like in their Wichad groups and the telegram and, you know, discussed had some discussions and they started kind of bumping it up from 10 to like maybe it was like 12 or 12 and a half and this happened without permission from myself without permission from the federal open markets committee without permission from any of these people and I learned about it when I saw some message on Twitter and I checked on ether scan like oh my god there's a block with a gas limit of like 10.4 million and it's rising now. And indeed, Peter was not happy. And indeed, yes, Peter was not happy.

And the interesting thing about the rise was that apparently they did not even agree on whether they would rise to 12 or 12.5, right? Like I remember when the gas moment went up, it rose and then it actually, I think it might have even like briefly gone above 12 million and then below 12 million and it kind of bounced around. And it seemed clear that there were some people voting tens. Some people voting 12. Some people voting 12.5. And then, like, if you go back to EtherScan, like, you could see the kind of, like, the EtherScan-Chared gas limit. I could see the day-by-day volatility in the gas limit because there was this kind of gas limit voting war going on. And after another couple of weeks, I guess one of the mine aprils that was voting 12, relented and went up to 12.5, and now we have 12.5, right?

So this whole thing was initiated, driven, carried through by miners without cordial. deaf permission without Lord Vitalik permission without any of this stuff. And so, like, in light of this, like, how can you call Ethereum governance centralized, right? Like, it's clearly this kind of complicated multipolar kind of tug of, usually cooperation, occasionally a bit of more, between these multiple, like, kind of highly independent and kind of diverse people from diverse backgrounds. And, like, realistically, I think, like, issuance is similar, right? Like, issuance is not going to go up just because, like, one group of people wills it.

And I think there's definitely a strong enough constituency that will just fight to the death against issuance increases that, you know, people can feel, like, kind of safe and sound that issuance increases are not going to happen. I think the answer to the question of Italic as to how you can call Ethereum governed and centralized. is by just totally foregoing your anyone's one person's responsibility to understand nuance and kind of just cater to their audience and tell people what they want to hear. So in light of all that, Vateluk, I commend you for keeping your head above all the mess that you can easily find in the depths of Twitter. And I thank you for being a sober voice in a very loud, messy conversation. I'm always glad to say stuff. All right. Ryan, do you have any last questions before we wrap this up?

No, Vitalik. That was super helpful. Thank you. I think folks will be interested to hear all this. I guess maybe one last question just because it's super topical and we will be releasing this sometime today. Today is back to those gas prices. they are going vertical right now.

There's craziness, something called a yam token, which is going crazy. There's always something happening in DFI. It appears like Ethereum block space is becoming more and more valuable. Some of that value is driven from speculative value at this point. Like, is that going to continue to be the case? Are you seeing any hope around the corner with some of this layer two scalability before EVE II ships?

Oh, a very good question. I think I have a bit of an answer, which has to do with roll-ups and specifically optimistic roll-ups. So we know, right, that there's the two families of roll-ups. There's a ZK. There's the optimistic. The ZKs are alive already,

but the optimistics are still a few months away. And the reason why the optimistics are a few months away is because they're trying to do something much more complicated than the ZKs, right? The ZKs are just trying to support payments and maybe a Dex. The optimistic ones are just, trying to support full EVM execution inside of a roll-up.

And there's a lot of a kind of devilishly hard challenges involved in that. So what basically the one of the silver linings of this, though, is that I think optimistic roll-ups are going to be ready for a kind of non-financial applications and for, you know, like natively issued assets and some of these other things before they're ready for defy. And the reason for this is that for a roll-up to be useful for defy, it has to be like really security-wise nailed down, right? And if the security breaks, then, you know, hell breaks loose and people kind of lose a whole bunch of money. But if you just want to use a roll-up, say, for like Reddit community points or, you know, like some other kind of lower value thing,

then the nice thing is that the security requirements on the roll-up are much lower, right? And the reason is that if it turns out that the roll-up smart contract is broken, then as long as your roll-up scheme is only using a kind of assets that are native to that protocol, so it's not using external assets. All you need to do is just deploy a new smart contract, and that new smart contract can have the fixes, and everyone can just be told to kind of pay attention to the new smart contract and accept the new smart contract as being a kind of the canonical definition of those assets instead. right and so basically kind of when you're using an application that only has native assets so like an example of this would be like if you imagine a version of augur that only uses rep for everything right because the rap is kind of defined by the urea protocol and if augur breaks that and if augur works that way then if augur would break then they can just hard fork rep then so for those kinds of applications like the security requirements are lower and so i expect those things to be among the first use cases of some of the optimi role-ups that are coming out. And I'm looking forward to those optimistic roll-ups, and I think they are going to come out quite soon. So we've got ZK right now with loopering and others that's happening right now, optimistic of the type that you were talking about. Are we weeks, months away, do you think? I think the optimistic roll-up teams that I know are definitely saying

like a couple of months, but I do think we'll have a kind of test versions even before that. Very good. Well, it does seem like the high gas fees are pushing and accelerating, hopefully, some of these efforts, because it is becoming very urgent and kind of center point for the Ethereum community right now. Vitalik, this has been absolutely fantastic. Thank you so much for joining the Bankless Nation in this special session.

We appreciate it. Thank you. It's been good to be here. Take care.