Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Vitalik Buterin: Ethereum - MEV, Staking Derivatives and Privacy (EthCC 6)

Episode Date: July 22, 2023

We couldn’t miss EthCC 6 and we got to sit down with Vitalik Buterin to discuss hot topics from the Ethereum ecosystem: MEV, staking derivatives, privacy, decentralisation and future interoperability. Ethereum’s merge to proof-of-stake brought with it the emergence of liquid staking derivatives (LSD). Similarly to mining pools in proof-of-work consensus models, staking pools could pose a risk to Ethereum’s decentralisation. In terms of privacy preserving solutions, the advances in zero knowledge research were a big breakthrough, especially as EVM-compatibility became possible. Maximal extractable value (MEV) remains a pressing matter, but hopes are that the upcoming proposer-builder separation (PBS) will alleviate it.Topics covered in this episode:EthCC 6 updates and development across Ethereum’s ecosystemMEV and proposer-builder separation (PBS)Liquid staking derivatives (LSD), governance and decentralisationPrivacyZK proofs and decentralised identifiers (DID)Ecosystem interoperabilityCross-chain bridge securityConclusionsEpisode links:Vitalik ButerinEthereum Foundation on TwitterEthCC on TwitterThis episode is hosted by Sebastien Couture, Friederike Ernst & Brian Fabian Crain. Show notes and listening options: epicenter.tv/505

Welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization in the blockchain revolution. I'm Sebastian Quichu, and I'm here with my co-hosts. Hi, Vittica Anast. And Brian? Brian. Lovely to have you here. And we had this opportunity to be sitting down with... Vitalik put her in.

Hi. Hey, Vitalik. Thanks for doing this. Good to be here. Yeah, it's great. The last time we sat down at ATC was two years ago in 2021. Two years ago, not last year? No, we didn't do it. I don't think we did. Oh, right, right. There was a, you know, it was in this great studio, which remember like the screens and the whole camera setup and everything. Very different setup. But nonetheless, we're very fortunate to be here and we're very pleased to be in your presence. It was a different time. This was the height of the crypto euphoria. How have things been since then? And how do you, how do you feel about the ecosystem generally?

And, you know, it's definitely a little bit less euphoric now, but, you know, after the, you know, after the, you know, after the, you know, U4, you always have U5 and U6 and U7 and you just have to like, you know, do a bunch of hard work. And I feel like that hard work's actually been happening, like from a deaf perspective, you know, we, yeah, had the merge, then, you know, on the road to doing dang sharding. I mean, it's ZK EVMs kind of actually exist. Just the decentralized or semi-decentralized end of crypto-Etherian-based social media that I talked about at ECCC2 years ago kind of actually exists. Yeah, like it does actually feel like a lot of stuff has been done. So I don't know, I feel satisfied. Great. And what did you most appreciate about ECC this year? What are

major highlights? I felt like Yvese or I guess kind of greater EFCC. So like everything that's been happening in Paris this week did a good job of kind of being coherent. and being well-organized together. Like, I remember last year, there were a lot of cases where I had to, like, go Uber-bike 25 minutes to go to, like, some side event, and, like, that happened multiple times. And this time, like, everything is much closer together. But this time, there's, like, a bigger selection of interesting stuff. Like, it seems fairly, you know, plain doubts to kind of not interfere with each other too much, right? And, you know, there's a lot of different things for different people.

I mean, obviously, you know, the core of FCC itself has expanded a bunch. Like, you've taken over, like, the neighbor building too now, right? At least I saw that on the map. Yeah, there's now two buildings, which is. Yeah, no, no, that's. And an extra day. Good, yeah. Like, it feels like it's doing a good job of scaling while.

at the same time not becoming terrible, which is like a harder problem than it seems. But, you know, it seems like you're doing a good job of it. Has there been anything that, I don't know, surprised you or like new that you've learned that kind of has maybe, yeah, changed your thinking or arisen some kind of new curiosity? Well, last week, Justin told me about how you can do it. complicated ZK Stark Protocol is just using lookups and I thought that was really cool.

Oh, oh, you mean about the event? Yeah, no, no, it's a good question. Like, it's always, there's like never one thing. It's always a combination of a whole bunch of things, but like the general impression I get is just of, you know, continued ongoing progress and pretty much.

much every area. We talked about this before we started the interview. None of us has actually seen any talks other than our own. I assume... I have seen some. I mean, I saw a metallic start for a couple of minutes. Which ones did you see, Brian? I saw the Gnosis pay talk.

Oh, yeah. I saw the steakwise talk. Then we had two team members from Coroswongiev talks, one about staking and want some Eve staking tool. And I saw your talk. This is like five. There were a bunch of announcements, so are there anything where you feel like you'll need to catch up once you're like in your hotel room again? Good question. I'm sure I will. Yeah, I mean, I'm looking forward to, you know, hearing the things that have been announced while, you know, continuing to be in the process of talking, helping to coordinate the whole account obstruction effort and researching.

I'm getting a better understanding of proof of personhood protocols and doing a bunch of other stuff. But I will get to learning what the announcements are in acceptable to time, I promise. So maybe we can get into the topic that it feels like it's been kind of the dominant topic in crypto for a while. So the topic of MEV and this whole thing of like MEV pipeline and what this all look like. I'm curious, what is your, if you know, I kind of think, like zoom out and think far ahead and, you know, you think sort of in Ethereum in a state of, you know, maturity and stability and the sort of end game. What do you feel like that should look like? Yeah, too question. It's

definitely one that lots of people this week in various places have been talking a lot about. I mean, one of the big directions that we've been moving in for the last couple of months is the whole enshrined PBS thing. I'm actually taking this market where proposers can like basically auction off the contents of their block to other more specialized actors and put that whole thing into the core protocol so that we don't have to deal with the yet, you know, extra complexity and trust requirements of things like relays. So that is, I think, interesting and going to be important. There's the whole question of what the market will look like on the builder side and of like you'll have monolithic bird builders or builders and searchers coordinating with each other or something else. And like for that, I don't know.

I guess we'll see it. The cross-domain MEV issue is interesting, right? Like, that was always described as, like, the big reason why you might need to, like, share proposer infrastructure across different domains and, like, why you might need even more complicated MEP constructions than, like, I feel like there's some probability that that's true and there's always some probability that it just turns out not to be a problem. Like, basically, yeah, the intuition for why would be that, like, MEV involving a price discrepancy between arbitrament optimism can always be decomposed until, like, a separate price discrepancy between arbitrarment and binom. and the price discrepancy between optimism and finance. And so you don't actually have to be on both chains. You just have to be on one chain and be on finance. And like that's always been sort of the theoretical argument for why it might matter less than it sort of theoretically seems.

But like I don't know, right? Like it's possible that in two years, you know, the centralized exchanges will all be like either banned or dead for various reasons. Or they'll just fail and be outcompeted even if you want to be on the bright side. and the price discovery itself would happen on chains, in which case that would look even more different. Yeah, I think it's important still to keep an open minds to future possibilities of how the market turns out and try to create infrastructure that's as robust of those different possibilities as possible.

You know, what are sort of the desirable characteristics of that end state? You know, does it, you know, for example, in terms of economic value, or I don't know, some other properties that you want to be maintained. I guess, like, I've never been much of a finance guy in the sense that, like, I honestly don't give a damn if the trading spreads for a million for converting a million dollars of EF to USC are 0.2% or 0.43%. My biggest concern is, like, whether or not this creates an externality that will, you know, accentualize staking. like basically, yeah, if it creates incentives by which, you know, larger stakers are benefited disproportionately from power stakers, that creates pressure to create bigger staking poles, it creates pressure to join existing ones.

It might even create pressure for the decentralized staking balls to become less decentralized, like it creates all kinds of nasty effects, right? And this is all part of a, yeah, larger picture, right, because the MIVI ecosystem is not the only thing of threatening staking decentralization, right? like just the existing, I mean, a bad user experience of staking as it exists today, which can only be improved with, like, basically improvements to technology and just, like, a better code and better interfaces. There is the whole restaking issue and, I mean, the whole issue of using stake as collateral.

And, like, the whole question of, like, whether or not, you know, staking large amounts can be safe and, like, does it involve distributed validators, right? like there's all of those concerns, and I feel like the MV ecosystem is only one of them. And so I really hope that we can continue to make a highly decentralized staking ecosystem possible. And it's like importance to, you know, recognize all of the pressures that might be going against that and do as good a job as we can of addressing them. Do you think consolidation is not like is inevitable though? I mean, look at the way global finance is consolidating, major corporations are consolidating

sort of in the traditional world. Do you think that those dynamics are also, you know, to some extent, inevitable on chain? Like, basically the question of, you know, whether or not decentralization is fundamentally impossible. Yeah. Yeah. I think, well, I mean, the thing that is possible is that, like, maintaining decentralization will require incentives other than in protocol hard-quoted

incentives. I mean, just the morals of ecosystem participants is like one example. Another example of things that can cause more decentralization is, I mean, sometimes regulatory pressure causes it. Sometimes, like, if protocols end up, you know, having things like public goods funding, then, like, that funding can, you know, intentionally subsidize everything but the largest staking pool. So like there definitely is a possibility where like hard-coded stuff is not enough.

And we have to like start actively doing more, I guess, soft-coded things. Yeah. So I think what we've seen a lot is kind of people are going for liquid staking solutions because you get liquid staking derivatives, which you can then use again, something, which is a very tangible benefit that you don't have if you kind of stake yourself or stake with a very, very small staking provider. Do you think there's a way of kind of making a consulate? of kind of home stakers and small stakers and so on, that they can kind of issue their own

liquid staking tokens. And so kind of preserving the decentralization while at the same time not putting opportunity costs on the people who are actually there to be the decentralization. Yeah. And I think it's the challenge with that, right, is that you would have to have some kind of like trust system involving who is allowed to participate, right? Because that's like, from the point of view of an attacker who wants to break the chain, right? And so, you know, you, like that attacker would of course want to join this system. And they'd because if they join this system then like they would be able to go and like use the thing as collateral, like take out some other stuff and then they would not like suffer the full cost of being slashed anymore. Right.

Yeah. So if they do that, like if they're able to do that then like, you know, basically attacking the protocol becomes much cheaper. And the, of course, in that case, the state, protocol itself is going to end up losing a lot of money, right? Like, basically all the honest participants would, right? So in that case, you would need to have some off-chain way of, like, filtering out, like, basically trying to only let, make one way to frame it is to let good guys and don't let bad guys into the staking protocol, but like, another way to frame it is to, like, put a max on the participation per person, right? Like, that's another good risk reducer because, you know, an attacker is likely not going to be 10,000 people.

And then the totally other possibility is like if there's some like change to staking economics that we haven't understood yet. And like, I mean, Justin is like a big fan of one-time signatures, for example, which is like right now, you know, Utopian total far-out cryptography. But five years ago ZK. Evams were utopian far-out cryptography. So, you know, like I'm... What are one-time signatures? Basically, it's this quantum technique that allows you to create a key. where essentially it's like for every nonce, you're only able to make one signature. Because when you make your first signature, like that actually destroys the superposition,

so you're not able to sign any other message. But what is the significance of that? The significance of that is that it makes double spending like literally, or like self-slashing inconsistency, like literally impossible. Quantum slashing prevention. That sounds like it's more than two years out, though. Oh, it's all. But how would that impact the staking ecosystem?

Oh, because, like, you would literally not be able to sign two conflicting blocks. And so if a block gets finalized, like, whoever finalized it, they would just literally not be able to finalize something competing. So then the advantage would be there's no slashing needed or... Well, right. Exactly. Or if it's used on chain, like, or if it's used off-chain, then, like, you... as a staker would be able to use this key scheme and you'd be able to prove to other people that like you're not slashable and so everyone would accept you in their pool.

Okay. Yeah. But then one thing to note about that scheme is like slash, like self like self, uh, contradiction is one way to get slashed, but the other way to lose your money is in activity leaks, right? And it's like sometimes making yourself, uh, more defensible against one, sort of like weakens your ability in the other case. And, yeah, like, you have to like, you have to like,

make sure we have both covered. Okay, and what do we do until then? So basically it sounds like you were talking about morals of the ecosystem and so on. You think there should be like a social consensus that we do not do liquid staking and we do not do restaking? It's a good question. I mean, what I would prefer to see is, I mean, I think just like tell, like in the, you know, in a Djan heavy ecosystem, just telling people not to do stuff doesn't work. We can work harder to make versions of these things that have the properties that we want

and possibly make some tradeoffs until we're ready with the technology to sort of do them fully properly, but that try to provide those properties, right? So with one time signatures, for example, the utopian thing is the quantum stuff, the thing today that makes tradeoffs would be keys and trusted hard. hardware, right? And like, you could imagine a system where you as a stake are only allowed to join a staking pool if you put your key in, or if you prove to the thing that your key is in a trusted hardware module that prevents you from like signing two conflicting messages and in one epoch. So, like, that is an option. Another option is to like make, like, look at all of the major

applications of LSTs and basically create alternatives or possibly can, like, help the, yeah, existing ones. It could be designed themselves in a way that's still a staking friendly. So right now, right, Lido is very dominant when it comes to liquid staking. And it seems sort of their strategy is, you know, one, to view that, okay, liquid staking is a sort of, you know, winner-take-all type market. And then, you know, obviously Lido wants to be that winner. And then to then try to sort of, you know, minimize the protocol and try to, you know, minimize the

protocol and try to, you know, minimize the role of governance and stuff like that. So obviously that would be like one outcome that's possible, right? Where like maybe that happens, like it becomes very dominant. And of course there are like other outcomes that could play out when it comes to this liquid staking marketplace. What do you think would be, you know, most desirable? And what are some scenarios that you're worried about? Yeah, good question.

I think like what the desirable outcome is we don't, like, like, I think we can admit that we don't fully know yet. What the scenarios to avoid are, I mean, one is, you know, if Lido governance ends up, like, dominating and, like, one is, like, Lido governance could get attacked, right? The other, you know, the Lido smart contract system has a bug would be another one. A third would be like it's like Lido government tries throwing its weight around in some kind of protocol, no decision. And I think if Lido goes one way and the community goes the other way, then like, you know, the researchers are fully intent on like stamping their foot down and saying like, no, we're doing this. And if 64% of the stakers disagree, but the community agrees, then like, guess what the 64% of the stakers are just going to go in activity leak themselves, right? I think

there's like within all of the people I've talked to there's definitely a strong willingness to like say like let the too big to fail people fail

I mean that would be like a hard fork basically right like it would not be a hard fork like I like to be clear I don't mean like a hard fork like targeted to like you know like a burn eth of these systems or anything right like I'm against social swashing

right I mean a hard for like if there's just some like hard for work on some governance issue that's controversial for other reasons, right? Like things that the community cares about that. Like, let's say, for example, if the community is, you know, more on the Lunar Punk side and wants to preserve the capability, you know, improve capabilities of strong privacy, improve anti-censorship, and improve all those things.

And it just so happens that dominant, eth holders end up being, like, Black Rock types who want to, like, submit to the iron will of the governments or whatever. whatever. And, you know, a, if a hard fork comes along, like, some EIPs come along that are popular, that we're, you know, that improve the chain's censorship resistance, for example, and, you know, large ETH holders are against it, and they try to, like, coordinate against it by, you know, doing proof of stake 51% attack and stuff, then, like, in that case, basically, like, they'll be ignored. Right. That's, like, I think there's a, yeah, like, at least in my observation, there's a strong consensus among, uh, developers, researchers, community people that I've talked to about that. So you, you've talked about, mentioned this briefly at the beginning, decentralized social networks and, you know, your enthusiasm to seeing those become reality.

Mm-hmm. You know, one of the issues there and is, is the data, the potential for data harvesting. And I, I wonder if, you know, broadly as an ecosystem, we're, I mean, obviously, privacy is a big component of, you know, crypto research. But do you think that privacy is being sufficiently prioritized in development roadmaps across all blockchains? Not only for social, for social media applications, but I think there's a broader implication that privacy is to some extent essential for the functioning of capitalism, because capitalism exists because of the... It's also...

It's also essential for the functioning of democracy. Correct. Are we going in a direction where privacy is not being prioritized enough for these things to become mainstream? It's a good question, and it is something that I worry about. And, I mean, I've obviously been pushing hard for privacy protocols to continue to be developed. I think there's definitely a big...

need for this stuff to happen and like even just zooming out from beyond the crypto space, right? Like, we're basically in a situation right now where stuff all around the world is being rapidly digitized. And a lot of the time, that digitization comes with forms of privacy that our civilization has had for thousands of years, just suddenly being erased within a decade, right? And like, you know, we saw examples of that during COVID. There's examples of that in the context of the whole casualty society, you know, transition that a lot of governments are pushing and I mean, CBCD is potentially being a part of that. The way, you know, the proliferation of KYC for a whole bunch of use cases, right?

Like, there are huge amounts of privacy that are very quickly being lost and no one is really presenting an alternative. And I think the place where the crypto community really shines is like it is in a place where it actually can provide a. credible alternative with enough execution power to actually execute on it. But it needs to actually do that, right? And so examples of that are, I mean, one is obviously payments, right? Like we, you know, we've got to solve the most basic payments privacy problems first. And again, a couple of, I guess, over the last, you know, a couple of years, the whole tornado cash situation happens. And I think there, there's in, there's definitely

people who were kind of scared off from participating in, no, privacy protocols entirely, which I think is, I mean, in some sense, it's a huge overreaction, just, because like, even, you know, if we look at the law itself, right, like, there's, you know, lawsuits against the government's ongoing, challenging their ability to do what they did. But more generally, there's,

a, like, zero knowledge proof technology creates a lot of opportunities to create privacy protocols that are kind of even sort of stronger and better for everyone in a lot of respects, right? Like one very simple example of this, this is the proof of innocence approach that, you know, chainway, yeah, this lovely company from Turkey created and, you know, I mean, Soleimani has been a fan of and lots of other companies, where basically, yeah, when you are, when you are, withdrawing from a tornado cache type system, you would be able to specify which subset of deposits your withdrawal came from, right? And you basically be able to say, like, hey, I'm a participant in this scheme. And by the way, I am not one of these 35 recognized defy hackers. And if you do that, and if you make that be a default, then basically almost everyone will be excluding the 35 defy hackers.

And so 35 DFI hackers will end up actually having a much tinier anonymity set, right? And so there's techniques like this which are being actively worked on. And I think, you know, really should be working on them a lot more. There's right now on Ethereum, this stuff is happening more at the application layer. And I think one of the big reasons not to do that on base layer right now is because we just don't know enough about the underlying technology for it to solidify that much. Right. Like all these schemes, they use G. Snarks.

And like, we don't even agree among the experts whether Nova is the future or whether 64-bit Goldilocks, Starks are the future or whether the lockup singularity is the future, right? So, like, how, you know, which technology stack are even going to use, right? How much do you think this is a cultural problem? Because basically, I mean, you know, I'm the eternal optimist. I think we can build almost anything if we put our minds to it. But basically, how much do you think the average person actually cares about, these privacy issues because basically if you look at kind of the track record of kind of the revelations of the last say 10 to 15 years it seems I mean there was like a little bit of an outcry at first but then everyone kind of it was yesterday's news right and basically now it's kind of just the status quo and most people do not feel very strongly about this it's a good question I mean I feel like in some ways this kind of resignation about privacy is sort of mirrors the resignation of the resignation of the resignation of the

to the designation toward like biological death from aging, for example, which is like, people end up sort of thinking like, okay, yeah, it's fine because they don't see a viable alternative in front of them. And the, yeah, like, one part of that is like, the alternative has to present itself. And the alternative has to present itself in a way that it does not require, like, massive sacrifices of inconvenience, right? It's, like, it's, you know, like, it's, I'm making the comparison between privacy and aging here, intentional. right? Because there's the whole, you know, Twitter, uh, sort of a meme that like, oh, you know, these people are getting up in the morning and having their 84 minutes saunas at 67.2 degrees and then

eating 500 pills and then eating 300 and 25 milliliters of, uh, um, vegetable pudding and like, you know, you're living longer, but like, what kind of life do you have, right? And like, there's, in all, a lot of these idealistic things, there is like a big dimension of, like, sort of turning people off by sort of putting front and center the options favored by the geeks that involve huge amounts of work. When like we know the real solution is like for this sort of stuff to be adopted, it has to be affordable in terms of money, it has to be affordable in terms of time. It has to be like basically automatic and the defaults, right? And so I am fully on board with privacy becoming automatic and a default in the Ethereum ecosystem. That I don't think

that involves privacy being on literally on layer one because the default isn't the chain. The default is the wallets, right? And so if you have major wallets that support it, then, you know, users can go and send things to rule privacy contracts, right? Let's talk about wallets and account abstraction and privacy and kind of how to kind of, so basically smart contracts and privacy is notoriously difficult to kind of marry. Yeah. But at the same time, kind of smart contract, wallet's in terms of account abstraction and so on, seem to be the go-to.

What do we do? What do we do about what problem? Smart contracts and digital identity. Oh, I see what you mean. Identity is a complicated word because it like mixes at least four different problems into the same concept, right? So there was like identity just in the sense that I prove that like I, the entity that did this previous action, time ago also did this action, right? And that's like the most basic form of entity. That's a, you know, like a cryptographic key. Then there is identity in the sense of like, I actually attest

specific things about someone else, right? You can, like, this could be well-bust or you could have centralized versions of this and like the, and that starts getting into things like government K-YC, which is probably big enough that, you know, it's a third category. And then, you know, you have the unique proof of personhood problem where you care about someone being a human and not a bot, but you don't really mind exactly which human you are and you're trying to keep that private. Right. Like there's this whole range of things that people put in the identity box.

There's like, you know, sort of roots of authentication. Like, you know, if you lose your account for one service, like what service do you use to recover it? And like a lot of the time that's been, you know, Google or Twitter or WeChat or some, or phone numbers or some of those. And in that case, centralized alternatives are actually pretty terrible, right? Like, you know, there is this culture of using phone numbers for things by defaults,

but then like sim swapping attacks happen all the time, right? And like even these Google accounts, like if you lose your password or password a lot of the time, like, sure, theoretically centralized services are better because you can always, you know, go and call the company and get it. But like in practice, I've personally known people who have tried to do them. they've literally failed, right? So there's, I think the way that I look at this is that, like, we as, you know, in the crypto space, like, we should be ambitious in the sense of, like, we're literally trying to create a separate stack, right? Like, basically, think, like, literally trying to

create an alternative to the centralized tech stack to the same level of depth that, like, for example, you know, in China, there is a Chinese tech stack, right? Except in this case, instead of being more centralized, it's less centralized. And so, you know, we've got to replace Google, you know, kick out Google, put in sign in with Ethereum. You got to, you know, replace PayPal, put in, you know, crypto payments. You know, you have to put in actual privacy solutions. Replace KYC put in, like, you know, whatever your favorite proof of humanity is, right? Like, actually be ambitious and, like, build that stack. And identity is a, you know, a big part of that. And I think that like that will be able to both solve problems within the

crypto space that we sometimes use the word identity to describe, but also hopefully serve as a demonstration to the wider world of like here's an example of all of these technologies is kind of working together in a coherent way and solving those problems in a way that like actually does protect privacy. So one example of this is, uh, So in Zuzolu, this kind of pop-up mini-city that we did in Montenegro in the spring, one of the applications that we worked on while there was this thing called Zupass, right? So I can actually take it out and show it for our video listeners right now. Okay, I got to switch to my profile because it's on GraphinoS that takes five seconds,

but it's still much more convenient than I expected. Open up the app, Zupass.org, and one, two, circle rotating, and this is a QR code. This QR code is a zero-knowledge proof, like it is A ZKSnark. I believe Groff 16, but I'm not exactly sure. It could be a plug proof or something else, too. And this proof proves that I am one of the residents of Zuzulu without revealing which one, right? And this is all done within this nice, really convenient application. Like, it has a QR code and, you know, people, like, even just, you know, like security guards with, like, one hour of training or less, like, they can, you know, go and scan it and verify it.

You can, there's an online component. You can use this to log into websites. There's a system called Zupil where you could use this to do anonymous voting. So, like, only people authorized by the system can vote, but you can only, like, but you can't, nobody, not even. even the operator of the system can tell who vote, like which specific person made, which specific vote because like ZK. Snarks kind of break that link, but they have the same, but they preserve the property that only authorized people can vote and voters can only vote once, right? And like, this is basically, like, you can think of it as a small scale e-government solution, right? And this

was applied to like, about, like, 500 people. And then once you go up from there, then the next step is, well, can we, you know, apply something like this at Ethereum conference. ecosystems and then it's 10,000. And then can we go up from there and we'll talk about small countries and get up to a million, right? And so there is, I think, an opportunity for the yeah, community to try to work together and, like, actually demonstrate to this whole stack working. And, like, I think to be clear, like, this is not going to happen just because of economic incentives. And this is not going to happen because, like, like, I'm not expecting, like, literally, you know, like, more than 50% or even more than like 5% of even ECC attendees to be willing to like put significant amounts of effort into,

you know, kind of, you know, bearing, like, highly inconvenient applications just because, you know, this stuff is cool and ideologically important, right? I'm expecting, you know, groups of developers who do tend to be passionate about all these causes to build things. and for, you know, the ecosystem to adopt it. And, you know, once these kinds of things become adopted and once these kinds of things become default, then, you know, more and more people can start participating. And, like, it's not just a kind of accept annoyance because you value privacy that much thing, right? It's also a cultural thing.

It's like, you know, we do need to, I think, make, like, all of these privacy, so we like a really, you know, it was important and, like, well part of the good side of crypto culture, right? So, like, this is one of the things I'm hoping to see happen. And then, you know, at the same time in the protocol with payments, there's a huge amount of technical work that's left. And a lot of this stuff is only viable on L2 because of transaction fees. And so users have to actually move to layer two. But, you know, fortunately, a lot of these privacy systems are launching on layer 2s now. So it's, it feels like things are moving in a good direction, and it feels like there is momentum, but like that momentum definitely needs to be created and

maintained. And if the people who could maintain that momentum don't, then like things, this could very easily slide into being a lost opportunity, which would be, you know, really tragic. And like we too could totally end up being in a no privacy world 15 years from now. So hopefully we don't. So yeah, you're talking about Zuzalou and I guess this sort of alludes to the larger topic, at least one way of I guess phrasing this is this sort of kind of network state type idea. And you know, you mentioned this identity thing as kind of like one experiment that's happening there. I'm curious like what are some other experiments happening in this area that you think are really promising.

Yeah. So I think, I mean, there's a lot of things that are valuable in, or that like could be done in like these things like Zosol, like basically, yeah, like the category is kind of communities that start online and then materialize offline, right? Which could be temporary, could even be permanent, right? Um, is that there's just a lot of things that become easier to do when there is a, yeah, community that is, like, an actual in-person community. does all of them together, right? I mean, the easiest example of this, I think, is universities,

right? Like, people have been excited about, like, using Coursera to displace in-person universities for, like, 15 years, right? I mean, I remember when the first MOOCs were coming out, like, I literally participated in the very first ones on machine learning and artificial intelligence, rabbiah, Sebastian Theron and Andrew Eng, right? And, like, I think 10 years later, like, that's partially happened, but there's still a large, extends to which it hasn't. And like, there's definitely an extent to which part of that is just, you know, the old world being credentialist and there being all kinds of slow moving policies that favor old stuff. But there is definitely like a large component of this, which is that like,

well, actually, you know, in-person learning has all kinds of advantages, right? Like it's, you know, this sort of like very disciplinary kind of, you know, environment. It's an environment where like everyone around you is pursuing the same cause. It's the sort of thing that, you know, if a journalist from Mars would come in and possibly describe as a cult, and yet at the same time, it's like super effective in a lot of contexts that actually teaching people, right? And, you know, like if you're having trouble with problem number 17, you could, you know, go talk to your friend or go talk to your professor and those options just like exist by default, right? And so, like, that's why. That's one sort of pro propo example. Another good proto example is Linux, especially back in the

good old days of the 90s, like, you know, before it started like really trying this kind of mainstream path and, you know, get a Gubon to adopt it at all of those things. It's like Linux was intense and you needed to be intense to be a Linux person, right? But they had like these often in-person user groups in many cities. And like if you have a problem and, you know, if you're earnestly trying to become a Linux person, like you could just go and like they had. They actually help you figure things out, right? And so I think creating environments like that, like environments and environments where things can be tested out, like not just, I mean, you know, separate individuals, but like actually inside of a community and you could actually kind of,

you know, run through the full workflow and make sure that like everything works, right? So like similar to how, you know, we used like Zupass and Zupol, right? Like it's not just a bunch of separate people that are like, ooh, ah, I can vote on. things. It's like you have an actual community where people make polls, people vote on polls, people talk about the results of the polls, things happen because of the results of the polls. If, you know, something spicy happens in the polls, people know about it and talk about it, right? And like, you get this sort of much more holistic picture of, you know, like all of the good things, all of the bad things, all of the frustrating things as, you know, I try to open up the app and, you know,

a few months ago and it would take like 15 seconds to actually load the QR code and it wasn't fast enough for me to actually like I had to wait beside the security guard to verify it and then I basically complained and then

like you know two days later they're like oh yeah like you know we used the like some of the newer browser technology now and now things will much more quickly and it did right and so I think Zupass is like the beginning like I would love to tried a whole bunch of other cool stuff. Like, we need to make crypto payments come back, right? Like,

you remember back in 2013, there was a lot, this big enthusiasm about Bitcoin payments. Like, when I started my Bitcoin nomading tour, when I was visiting the, you know, northeastern US, mainly New Hampshire, because all of the fun libertarians were there, but like also Boston, there were exactly two places that accepted Bitcoin. There was Thelonious Munkfish and there were Veggie Galaxy. I'm not sure whether these two still accept Bitcoin or even still exist, right? But there was like, You know, like I would really know it took pilgrimages to most of these places. I took pilgrimages to many Bitcoin accepting restaurants. In Berlin, there was this thing called Bitcoin Keats, where basically they convinced a whole bunch of restaurants in a small region of Kreuzberg to accept Bitcoin at the same time.

And like we'd go on pilgrimages to Room 77, which was the most famous one of these. I think actually the family theory. Yeah, room 77. Yeah. Yeah. Yeah. It's closed. Right.

It's closed now. Right, but I think wasn't even the one who started that whole thing? He was, yeah. Yeah, and like... My first Bitcoin there. It's not crazy. That was like super cool, right? Like, I want to...

And the first mobile wallet, right, in Bitcoin is basically created by this guy because he... Yeah, exactly, because he wanted to pay with his phone in 277. Yeah. Yeah, like, so that stuff is like cool. And I feel like now that we have layer twos and like cheap payments are again on the horizon. and, you know, the benchmark I gave that the internet ended up, you know, memorializing of, you know, that the internet of money should not cost more than five cents a transaction. And I guess, you know, first people thought that it's a joke. And, you know, now it's like, hey, yeah, actually even back in 2020, a loop ring made a payment-specific ZK roll-up where the transaction fee actually was lower than five cents, right? Because if it makes something payment-specific, you can make it really simple and you can only, you can do compression, like use indices, and you can make. payments be only like 16 bytes total. And like that's only a tiny amount of call data. Right. So like, I want to do like more of these cool things and like have communities to be able to do more of

these cool things and like really you know progress and level up on this stuff like much faster and better. Did you see the Nosis Pay announcement? I did not. At least tell me about it. So basically it's the way to kind of connect a visa card to a self-carsodial wallet. And basically you custody until you tap wherever visa is accepted. And it takes it right out of your wallet at that point. And so basically it's kind of infrastructure. So we're issuing cards ourselves.

It's the Nosis card. But also we are offering this as a service to other wallets. So say, one inch can offer one inch card. Zerion can offer Xeroon card. Metamask can offer Metamask card. And it's a way to kind of make your funds accessible in the larger word. Because, I mean, crypto, super self-referferential. and true, right? So basically because

it's difficult to kind of on and off-ram and then kind of, yeah, just I didn't, I didn't intend to shit it here. But you forgot the part, you forgot the really cool part, which is that if the payment terminal accepts Nosis Pay, the payment is a crypto payment. Yeah, so basically what you can do is you can do like

a native P2B transfer. So it's, yeah, no, no, no. I think that's super cool. I don't know, we should do more of it. Let's maybe talk a little bit about the broader ecosystem. Sure. As before we wrap up here, you know, I gave this talk yesterday about interoperability between

Ethereum and other ecosystems. And, you know, there were, there were some conversations also and some debates about, you know, layer two's versus multi-chain. Where do you see the, where do you see things going from the perspective of, you know, the layer two thesis versus a, you know, app chain cosmos-like thesis? and what are the biggest challenges to interoperability that need to be solved? Yeah, I mean, I think it's like good to sort of talk a bit separately about like chains and ecosystems, right? Like there's like Bitcoin is an ecosystem that basically has like Bitcoin and like maybe liquid, right? And then Ethereum is, you know, has Ethereum and then everything which aspires to be in the same security zone as Ethereum, which I mean, it would be in. it, like, it reverts if Ethereum reverts, or it doesn't make progress until Ethereum finalizes,

and, you know, it would have to hard fork if Ethereum hard forks and all of those things. And then there's, like, other ecosystems and, you know, it seemed like Cosmos is trying to be an ecosystem and, like, do a lot of shared security. And it feels to me like there's, like, I do expect consolidation between ecosystems, right? Like, I don't expect, you know, there to be like a large number of meaningful like totally independent things happening. I, uh, I mean, I do expect, you know, there to be a lot of like chain interrupt happening within Cosmos just because like that's what Minot Cosmos promotes as a wafer of, like, moving around Cosmos land and talking to things. I mean, the main, the main, the main, the main,

technical differences between these are. I mean, obviously one of them is just like security, especially in more extreme circumstances. Like if a 51% attack does happen, right? It's like how much breaks. And then another one would, I mean, yeah, like on the flip side be like, okay, well, what happens if one of these things makes a governance decision? And like, does one make a governance decision mean it'll imply a cascade of other governance decisions? Or does that mean that there need to be a kind of multi-sig bridge that sort of relays the governance decision to other ecosystems. And like these different properties have different tradeoffs, I guess, right? And yeah, like, it's like you could have more adaptability or you could have more shared security

or you could find ways to move a little bit more on the shared security spectrum, but then that ends up like sacrificing a little bit of adaptability. I think it's a, I mean, it's an interesting technical discussion. though I also think that only part of the problem is technical, like the other part of the problem is just a question of like which ecosystems are, you know, successfully able to survive

and grow over time. I think one interesting thing that I've been thinking about a lot and I'm trying to sort of predict where things will happen is currently the interoperability discussion is very much happening I think the lower protocol there in the state layer. Right. And if you look at the way, so you mentioned Linux earlier, like the way interoperability happened between macOS, Windows, and Linux wasn't really at the application layer. It happened because of the web. We created interoperability of applications at a higher layer of the stack. And I wonder if this vision that we have for interoperability, the IBC like state, like state cross-chain, state verification and transport layer actually is what ends up happening. Or if we just end up having interoperability at the smart contract there. higher application on roll.

I guess I've kind of, I mean, I did literally kind of make a similar point one and a half years ago, right, where I basically argued against bridges and in favor of, and against, you know, the whole concept of assets homed on one security zone being used in other security zones and in favor of like just, like having dexes, right? And I think that's, you know, totally fine. Yeah, like in general, I think it's, like, we don't want to, you know, create links to that end up turning into something ugly if like something on one side or the other goes badly, right? And in, like, I think there's a lot of value that you could get from that kind of

interoperability. Right. And the question is almost like, well, you know, what do you even not get, right? Like, you could say, yeah, you know, it's like, okay, fine, you know, every asset is homes in one ecosystem. And if you want to use it in that ecosystem, then like, you need to go have an actual client of that ecosystem. But that's like, okay. fine. Like, right? Like, we, yeah, there's, there's, there's, like, as soon as wallets of any of these ecosystems become standardized and become libraries, like someone's going to wallet that just have a wallet that includes a copy of all of them, right? And then, if you want to move to one, from one to the other, you use a Defts, and if you want to use a defy thing, they'll just be a copy of

every important thing in each one of those ecosystems, and that's fine, right? Like, that's, uh, in a lot of ways I think it's a totally okay way to do things. But do you think that's the way that we see happen? Good question. I think, let's see what do I think. I do think that like the ongoing instances of crazy hacks of bridges or what my guess is that they're turning huge amounts of people off from that concept, right? And I mean, obviously there could be, there could be different black swans in the future and there could be a black swan like on the, you know, layer two side, for example, right? But like the, I definitely get the impression right now that like people are, you know, more skittish about holding their funds in complicated constructions than they were before just like because of, you know, how many of these weird $180 million incidents we've seen. But I guess we'll see.

I'm totally with you that we need better bridge infrastructure. That goes without saying. But, yeah, I mean, so basically we're kind of close to the event of like, I mean, we have trust minimized bridges. We will probably have like trustless bridges, bridges like soonish. Would that in your mind change things? Because basically, if we look at kind of the bridge exploits that we've seen in the last year and a half or so, only a minority of them would have actually been prevented from the, the, the, the, the, um, the, the, the, um, the, the, the, the. networks actually being in L2, right? So basically those are mostly the compromise keys kind of situations, not the smart contract bugs.

Yeah, I mean, bug risk is definitely one of the issues. And then, I mean, the other issue, of course, is like, if you have a, like, even if you have a ZK bridge, like that's between, or I guess, like a synarch validity proof of consensus bridge or whatever, right? Like, that's still creates the possibility that there is like a 51% attack on one of these systems that actually leads to stealing coins, right? And like when you have a VC chain or whatever where like half the coins are literally controlled by four people, then like the difference between that and a multi-sig becomes more of just kind of being nearly philosophical, right? So this is, I mean, like this sort of stuff is less of a problem between big ecosystems

and it's more of a problem between small ecosystems, right? It's kind of like how, like, But sometimes we like to trust that, you know, like, oh, if there's governance, then like surely governance is like going to at least be fine. And then like a year ago there was that incident where there was like literally an $80 million hack within a flash loan because somebody borrowed a bit of money and then used that to buy up half of a governance token and then voted to give themselves the treasury and they made like a huge amount of profit. Right. So yeah, I guess, you know, we'll see and I'm glad that like that technology is. being developed. Though, of course, we do need to, you know, also be realistic about timelines and, like, you know, be realistic about, like, when we actually hand, you know, hand over the keys and, you know, when we, yeah, have the power to do upgrades and, like, all of these things. But we'll see. Cool.

Well, thanks so much, Vitalik, for joining us today. It's been really fantastic to talk of you again. And in this, you know, a special moment here in Paris for FCC, I'm super excited to see. you know how if you're going to develop in the next few years so thanks so much yeah thank you guys too it was fun thank you thank you yeah so that was interesting with vitellic what do you guys think i mean it's it's always interesting um interviewing vitalik i i feel like i could have asked some questions for like another hour um but yeah very grateful that we get to have this time with him it's like yeah it's pretty cool that we get to sit down with him so yeah thanks for setting us up

ask any questions. I could also do another hour. So for those you don't know, this is Mr. Joseph's right. From the Ethereum Foundation. And one time Epicenter co-host? Twice if you count the DevCon 6 wrap.

Yes. Okay. And if you count this one, it's the third. It's a charm. But the weeks are very long, you know, so it's these things have changed a lot, but at the same time it's nice to see what what is surviving and what is thriving?

So if it gets harder to do these, it means more people keep showing up. You started off the interview by saying there's more buildings, there's more days. Yeah. So it's nice to see that even in, you know, what the rest of the world considers a lull,

we have this. Yeah, it's a weird bear market. It's like, I remember like the 2015 bear market. When we went to Berlin and we were at that second Bitcoin conference that they had in Berlin and like compared to the one that they had just before it, it was so dead and the enthusiasm was at zero and, you know, obviously there's been other cycles since then, but I just always go back at that moment where like this conference room was just filled with

people that just were not enthusiastic about what was going on versus what happened to the year before. And this is not really that sort of in that sort of situation. But this is a builder conference, right? So basically if you go to business conferences, I think it's slightly different. And also, when you talk with the builders in depth, a lot of them fear the pain that it's really difficult to raise right now. So basically, I've heard this time and time again this time.

Yeah, I mean, I think sort of this situation is right, that there's still, though there was a lot of money in the space. And of course, people motivated, they keep building. So even though it's a bare market, right, there's a lot of, what Vitalik said, right, a lot of technical progress, a lot of work that's being done. and now of course I guess there is a question what is going to happen right

because I think we saw you know there's recently people showing like statistics about the funding from VC funds which is down something like basically to almost nothing right so from like 95% or something right so basically the crypto VC funds

are raising basically no money and then of course that will now trigger like you know what you said right much harder fundraising environment And that, of course, with the lack that people have, whatever, maybe two years runway. So I do think that, right, if this bear market does continue, right, another year and another two years, then I think it could very well get super hard.

I mean, if as a startup you have two years of runway, you're actually in a very comfortable situation. I've actually spoken with lots of people who say, look, we're running out of money this quarter. Yeah, of course. Yeah, yeah, yeah, of course. I mean, three years of runways maybe after fundraising, right? but maybe how long are you in? And of course, not everyone has that situation either. There was, you mentioned this 2015 sort of Bitcoin cycle.

It's very interesting to see what is fluff, peer speculation, versus what is a little bit more in the way of substance. Because when hype goes away, but it was nothing but a speculative ecosystem, then the rest of it also goes away. And I think one of the key differences between that time, 15, 16. And what we saw in, let's say, 1819 was even as the world moved on from this ICO era, those conferences, those research conferences started to get bigger and bigger and bigger. And it's interesting about this is that, okay, I come from this organization that doesn't organize this conference. ETH France does ETHC and ETH Denver is doing the thing in Denver and Global does the global thing. There's a venture that does Lisbon and apparently posted Prague and on and on and on and on. And here we start to see these different verticals start to grow on their own.

The ZK folks and the enterprise people and it's less fluff. It's not, you know, there's an NFT conference followed by a DFI thing and that's kind of it. And this is where I think you can tell that there are enough in the way of planted seeds that there will be substance to follow. It's just there's a matter of patience to get there based on how far you figuratively fell because of a lot of some of that funny business that goes on when there's too much attention on the industry, money included. Yeah. I mean, patience is the key, I think, right now. I mean, like we're raising a fund and much like the crypto companies that are having a hard time raising, we're, you know, we have some traction because we're in an ecosystem that, you know, obviously in Cosmos that has a lot of

a lot of interest. But it's not easy to raise. But like counter that to like look at all these sponsors. Yeah. But there's a lot of like this guy. Yeah. I mean all these people are paying and I mean we're organizing the other summit next week. We were able to fund the conference

and like make a little bit of money. Teams are reluctant to sponsor but they're still interested in sponsoring. One thing that I think a lot of people hope is different. the next time that the world chooses to pay attention to this industry is that some of those resources stay with substance. As we go around, I've been telling a funny story for the last day of the folks that do tend to find help are really needs to ones that we hope get that funding.

So maybe as things get quieter and the ones that are still able to bootstrap builders themselves come from build land, the things that can, yeah, not just survive, but thrive are also from a place of substance. That's the hope at least. We all want to see it get to a point where the next time again the world pays attention, we're not embarrassed after the fact that we can start to do some of the substantive things that we want to do.

Cool, so lightning round, favorite moments at ECC this year. Those moments where I wasn't running around to divert meetings. You had those moments? No, actually, I think I want to say the highlight, because I didn't go to many side events and I didn't see very range fox. But of a few things that I did this week, the NOSIS event on the Eiffel Tower was very nice. Aw.

And the NOSPAe announcement was, I think, a really, like, it's a great milestone, you know, that we have bridged the technological gap, you know, but also there's probably like lots of regulatory gaps that you guys have bridged. in order to make that happen. So yeah, congratulations. It's really, really cool to see that. Wow, thank you.

I can't wait to get a card. What about you too? Oh, one thing was nice. It was like, be the talk yesterday. It's the first time doing a talk here, which was sort of about orbit, which was really nice. Yeah.

And then otherwise, it's just out of, yeah, I enjoyed quite a few talks. I think the talks are all great. I think the content generally seems to have been, like, you know, really good. And then, yeah, otherwise, it's a lot of things around staking. And I think that there's a lot going on, right? I think it's bear market or not, right?

There's so much work to do. Yeah. And you? Highlight. You can't say your own event, though. No, that's right. I actually really like the new venue setup. So, I mean, this building is always kind of where it's been at.

But basically the upstairs stories, they were. are always less well laid out because there's no air conditioning and so on. But I think now the venue around the corner with the garden and basically where you can sit under the trees and the cloisters and I love it. I absolutely love it. So I never grow up. I always want to collect the most interesting swag. So this is point one. But an actual conference programming thing. I also wasn't able to get to many talks, but one thing that I hadn't seen done before was a lightning debate room. So those were, I was, I was in one of those. Yeah, you just put super fun, you know, what's a lightning debate? You take two people that, uh, put us in a room for a 15 minute period

and then say, you know, what is a more decentralized ecosystem? Do cosmos versus nosis chain? And, uh, then the crowd has to cheer after the fact for who won. One of them clears out. The next two come in. you debate the next thing. That is hilarious. I would like to see that done at another conference. We're going to do that at Nambrilar. I take notes for DapCon here.

So it's a... We need more spice. I mean, like, you know, panels, one of the things about ECCs, they don't, you know, they famously don't do panels and, like,

Zerom has a policy about no panels. But I think debates are really good alternative to panels. This is also one thing. So basically, I think panels, they kind of, they stand and fall with the whole,

and whether they can kind of poke the attendees and kind of just the right way to kind of make them kind of, you know, to pitch them against one another because you want to make them fight, right? So basically if everyone kind of gets to say their bit, it's a bit boring. So it's like hockey. It's only interesting until the gloves comes off. Absolutely. Cool.

So until next year. Yeah. Next year at ECCC 7. Thanks so much for listening. Bye. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever

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