Unchained - Vitalik Buterin, Creator Of Ethereum, On The Big Guy Vs. The Little Guy

Episode Date: January 9, 2018

Love Unchained? Please take this extremely brief survey to help us obtain more sponsors: https://survey.libsyn.com/unchained The 23-year-old whiz dives into who blockchains will someday help, how we transition from Ethereum for digital cats to higher social impact, and why even big companies like JPMorgan, Microsoft and BP are using Ethereum. He also walks through some important technical challenges Ethereum faces with scaling and the shift from a proof-of-work consensus algorithm to proof of stake. And he reveals why he isn't a big believer in on-chain governance. Plus, he talks about his worries and gives us his predictions for 2018. Show notes: http://www.forbes.com/sites/laurashin/2018/01/09/vitalik-buterin-creator-of-ethereum-on-the-big-guy-vs-the-little-guy/ Some of Vitalik's blog posts that we discussed: On token sales: http://vitalik.ca/general/2017/06/09/sales.html Interactive coin offerings: https://people.cs.uchicago.edu/~teutsch/papers/ico.pdf Blockchain governance: http://vitalik.ca/general/2017/12/17/voting.html Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Season 4 of Unchanged, the podcast where we hear from innovators, pioneers, and thought leaders in the world of blockchain and cryptocurrency. I'm your host, Laura Shin, a senior editor at Forbes covering all things crypto. If you love Unchanged, please give the show a positive rating or review on iTunes. Those ratings and reviews help people find out about the show. Also, spread the word on Facebook, Twitter, Slack, Telegram, and wherever you discuss crypto. And don't forget to follow me on Twitter. at Laura Shin. This episode is brought to you by OnRamp.

Your branding and website are the first things your users will see. And in the current wild west of ICOs and blockchain startups, you need to stand out from the pack. OnRamp is a full service creative and design agency that will help amplify your brand with a perfect website, logo, collateral, or custom design project. Get big results in no time by visiting think onramp.com. My guest today is Vitalik Boutarin, creator of Ethereum. Welcome, Vitalik. Thank you. It's good to be here.

So you wrote the Ethereum white paper a little over four years ago, and Ethereum has been live now for about two and a half years, and it's now a project worth about $90 billion. What were your feelings, expectations, and vision when you first conceived of the project, and how has the reality of Ethereum compared to what you initially thought? So honestly, when I came up with the idea, and first of all, I thought that the idea clearly made sense. And the second thought I had is well, okay, so this is clearly

the next logical step to take with blockchains. If we can go from blockchains to one application to the blockchains to five applications to blockchains with built-in general purpose programming languages. So, next thought is, why hasn't anyone done it yet? And

my response to that fact was, well, it has to be because there is some kind of fatal flaw in the design. And basically, something that as soon as I released the white paper, you know, like five very smart cryptographers would come in, email me and basically tell me why I'm completely stupid and even suggesting something like this. And to my surprise, this just totally ended up not happening.

And a lot of the cryptographers, like, yeah, respected at the time, actually said the emails saying that, you know, wow, this is a great idea. I'm excited to be following the progress. So that was my first reaction. then once it became a bit more clear that the idea made sense to at least try working on, I thought, okay, well, this is an interesting project, I'll work on it for a few months, and then once it's kind of out there, it'll be its own thing, and I'll go back to doing Bitcoin magazine, and it might go back to university. Then, a bit later, you know, there was the Miami conference in January 2014, and that was when I basically, basically, we realized, oh, wait, this is vastly bigger than I ever imagined it would be, and I'm probably

going to end up spending a bit more of my time on it. And the kind of community interest and the growth of the project just kind of kept on going up and up from there. And I've been pretty much surprised by each step. And wait, just to go back to that, so when you thought that you would put this out there and then go back to university and stuff like that, like what exactly were you envisioning. Why did you think that you wouldn't need to be involved and how small did you think this would be? And I don't even know what you're what you're picturing there or what you were picturing then. So first, the first version of Ethereum that I had conceptualized was actually much less ambitious than what I ended up coming up with a few months later. And it's definitely

not as ambitious as what I'm thinking about right now. Right. Like, I don't know, if you're familiar with protocols like MasterCoin. These are protocols that existed back in 2013 where they're not their own independent blockchains. They are kind of meta-protacles on top of another protocol. So the idea would be that you would

run a node of another blockchain, so it could be Bitcoin. In my case, it was Prime Coin or something else. And then you would also run this other node, and this other node would just kind of tell you a different way of interpreting the transactions in the underlying blockchain. So it's kind of like embedding

your language inside of another language. And the reason why I did this originally is that I thought that this would be something that would be worked on mainly by myself and possibly a couple of other people, and I wanted to be just kind of as limited and simple as possible. So basically, I would make something as simple as possible that works, then get it out there, and then, you know, get it done fairly quickly, and it would be fairly autonomous. And that's what I kind of naively thought at the time. obviously that ended up being totally wrong.

Now, as the amount of interest in Ethereum grew all the way through December, 2013 and January 2014, so just those first couple of months, I realized, oh, wait, there's this entire kind of small army of 10 to 20 people who would be willing to help develop this sort of thing. And building Ethereum as a meta protocol is a good design decision for saving work, but it's not really a good design decision for making a protocol because there's just a whole bunch of good reasons why meta protocols like that

just aren't that good an idea. And at that point, you know, I made the decision, okay, we're not doing that, we're going to make Ethereum a separate blockchain, and that already increased the workload, and in part because it's actually harder and in part because it unlocks a whole bunch of other

possibilities, and it just kind of kept growing from there. after Miami I mean the workload did continue kind of outperforming my expectations but that's mostly probably just myself not really having good intuitions about how long stuff is supposed to take and you know in general in software development it's a rule that pretty much everything takes three times longer than you expect and so we were saying that Ethereum has continued to surprise you as you've gone along and

it's turned out much different from your expectations. So what are some of the other ways that it's differed as you've gone along? I mean, this is now, you know, four years ago that you're talking about, so I'm sure your vision of what it would be and how it's turned out has been quite different over this time period. Yeah. And I would say just the sheer scale of, you know, attentions, application, usage, pretty much everything is vastly bigger than I ever thought it would be. And I would say that's on two fronts, where the first front is kind of Ethereum's role inside of crypto, and the second role is just the sizes of crypto itself, including Bitcoin, including liquid and the various alt coins, including Bitcoin Cash and so forth. Nick, I was definitely not expecting, you know, $15,000 prices.

So that's one very big thing that I was surprised about. Another thing that I was surprised about is probably just the various set of specific challenges we ended up happening. So things like the various set of logistical issues that setting up the foundation, the Delfork, DOS attacks, scaling challenges. And when I was thinking of Ethereum, it wasn't. really thinking too deeply about a lot of that stuff. And over time, it's just certain things ended up happening. Yeah. Well, we'll get into. Oh, the third major thing, actually, I wanted to bring up as, sorry, is what Ethereum would be used for. So, like, the very first vision, right,

was basically a general purpose platform for financial contracts. You know, if X happens, then send $5 to account. Why? If Z happens, then send $5.00. dollar rest of account B. That was basically what I thought no, Ethereum would be for. And over time, you know, as the amount of attention grew, the amount of attention also became wider, right? And people started talking

about, oh, let's use Ethereum for IoT stuff. Oh, let's use Ethereum to implement democracy on the blockchain. Oh, let's use Ethereum to implement identity systems, supply chain stuff. It's, you know, like internet infrastructure,

like domain name systems. so on and so forth. And like that list just kept on growing very quickly. So that's probably the third thing I should really mention. I was surprised by. Well, so one other thing I wanted to ask you about when we talk about kind of initial vision versus reality. I did see in a 2016 wired article that you talked about how blockchains will empower the little guy and also disempower the big guy. And there was a quote in the article, you said, And personally, I say, screw the big guy. They have enough money already. But, you know, if I look at kind of all the different things that Ethereum's doing, the Ethereum Enterprise Alliance counts companies like JP Morgan, BP, Microsoft as members. So why form an alliance like that that would enable the big guy to use your technology? How do these kinds of companies figure into your vision for what Ethereum can bring about? that's definitely a good question.

I would say that, I mean, I don't remember the exact context in which I made the quote. And I do really think that blockchain's primary value is in empowering people that don't have access to, you know, basically, like, in part finance, in part contracting ability, in part, just the ability to make other people trust them and things like that already. As far as we are a big company's can fit in, I do think that they have a role, and I do think the kind of smart ones that take the first step and are willing to kind of play with the technology rather than against it, I can survive and even benefit from the whole process. So one example I could give very practically is if you look at something like Microsoft, for example, you know, like you might notice that Microsoft, you might notice that Microsoft, kind of role in and kind of position in the space as the space being just the tech space as a whole has really changed it in the last 20 years where in the 1990s there were they were this kind of evil big bad bad monopolist that was constantly suing people and constantly abusing its monopoly position in various ways and the kind of you know open source free

software culture zeitgeist is basically that these people are the the devil and, you know, Linux is going to come in and save us. Now, I mean, I say this as a continued, proud Linux user, but, like, over the last few years, it seems as though people emphasize, like, the desktop proprietary side much less, because basically everything's moved over to the web. And on the web, you know, what you have is basically a kind of proprietary software that's actually even worse, because with something like Microsoft Windows, sure you don't have the source code, and sure it could be doing all sorts of crazy stuff to you.

But at least it's running on your computer. At least people can kind of analyze it. At least you have basic control over things like, oh, if you run this program on an offline computer, then it has no way of screwing you over by deciding your personal data to anyone. But with online software as a service, you know, things like Facebook, you really have even less control and basically none whatsoever. And initially, people didn't realize this as much because the software as a service companies were a kind of new and shiny thing, and they had this kind of positive image.

But especially over the last couple of years, I think the tides are really turning and people are realizing, you know, oh, wait, that's the actual problem. And this is where a lot of the kind of yearning around things like self-sovereign identity systems comes from, you know, this idea that, oh, wait, you know, Google, Facebook and Twitter basically control your identity, and there are these big, unaccountable kind of centralized deba homelots that even if the people are, I mean, some of the people inside of them have good intentions, you know, the founders that came up with a don't be evil slogan are still kind of heavily involved, but even still, their kind of incentive and their pressure isn't one that's kind of naturally on the side of those things. And with Microsoft, on the other hand. First of all, I think

their culture has improved a lot, especially with Satya and Della becoming CEO. And, you know, you notice that they've become very actively interested in blockchains. They have a growing open source divisions and they, yeah, and

inside of Azure, they're even willing to play nice with Linux distributions. Now, I mean, things are very far from perfect, but it still seems like Microsoft as a company at this point actually is quite naturally aligns to be, you know, like, on the side of people controlling their own stuff. And the basic reason is that, you know, like, web companies are, you know, you are not their

customer, therefore you are their product. Whereas with Microsoft, well, you're still their customer. So they have, you know, a bit more of a kind of willingness and an incentive to do, to basically refuse to completely sell out your data. So, like, that's just one kind of fairly intricate an example of how I think, you know, there are big guys that are fairly well positioned to be on the right side of things. And so as far as corporations go, there's a lot more of those. And, you know, there's a lot of other examples of companies that are kind of fairly neutral, but in terms of their positioning, but that, you know, it could still be quite helpful to the industry and to the technology. So even just at JP Morgan as one example, you know, it just,

happens that they've been actually quite helpful in building out quorum. So I think the thing that I learned there is that I stopped viewing large corporations over the last few years as kind of singular evil behemus. And as I've come to understand them more, I've come to realize more that these are, you know, very complex institutions that are staffed by real people. And even if there's a lot of sociopaths in there, there's also a lot of other people, people in there. And, you know, like, realistically speaking, if you have a company of 50,000 people, there's, you know, there's no chance at hell there's not going to be at least a few

hundred, you know, a rabbit blockchain enthusiast inside of there, right? And, you know, that's part of why you have, you know, GP more connectedly contributing to quorum, all, you know, all of these, like, even oil companies having internal blockchain projects, like, Microsoft, in part doing a lot of things and so forth. Though, I mean, in the Microsoft case, I do really think that the excitement about Ethereum and blockchain really does go pretty high up to the top. So that's there. As far as governments go,

that's definitely a kind of interesting and multifaceted story because they are on the one hand, people that have the ability to regulate the technology. And even though it's theoretically meant to resist their censorship, You know, practically speaking, I think right now the industry is really benefiting from kind of quite a bit of, you know, like, lenience on their side over top of, you know, like, anything that we expected three to five years ago. And I think that maintaining that as much as possible as good. And also, you know, there are people in these governments that do want to be users of active users of the technology. So, you know, like, when I visited, like, Taiwan a few weeks ago, for example, you know, if there's a policy.

politician who I, are a member of parliament, I think, Jason Schu, who visited these, the meetups. And, you know, like, he seemed excited about the possibilities of just using blockchains to, you know, like, improve their democratic political system. So, like, these things exist. Well, I was going to ask you, like, you know, here in the U.S., Vladimir Putin doesn't have the best reputation. And I wanted to ask why you met with him. So do you also kind of count him in the same bucket as what you were just describing? or why did you meet with him? And I think the meeting with him in particular was probably a bit overhyped because it was basically,

we ended up talking for maybe one or two minutes. And I met him and I got to kind of see his personality a bit and let him know that, you know, what Ethereum and blockchain technologies and so forth exist. And, you know, and what we're up to. And he's like, okay, great. you know, like people are building Russian people are building cool tech to improve the economy.

And I think that inside of the Russian government in particular and like there are kind of people lower down who are more interested and there are people lower down who are less interested. So like one of the kind of champions of the space, for example,

is the more active ones is Herman Greff from Sparebank. And like if you look at, him up, he actually probably has, you know, at least in the U.S., one of the highest reputations out of people in the kind of top-level Russia establishment. I think he might have even been involved in getting Russia into the WTO about 15 years ago, if I remember correctly. So it's, once again, the sort of place that, on the one hand, you know, Russia has a great tech talent, and it does have, like, all of the, like, people who

are really kind of thirsty for positive change. And on the other hand, there's a side that, you know, like, starts stupid wars in Ukraine. So you have to kind of take one side without, and, you know, I hope the other side doesn't do too much damage. I mean, I guess the reason why I'm involved is, in part, is basically just, I think we do have a large community there. And, you know, there's also just the angle that, you know, with myself being a Russian citizen, I just have the practical ability to have these people listen to me more and accept the ideas more. So I figure, you know, if that exists, then it's still positive to try to take advantage of it and push things in a good direction. Okay. Well, speaking of pushing things in a good direction, you recently tweeted about how the market cap of all

cryptos had reached more than half a trillion dollars. And I think now it's like around 700 million or billion. But then you said, oh, you know, I don't know if the companies earned it. And you gave some examples of, you know, like for instance, you were wondering how many unbanked people have been banked or how many Venezuelans were protected from hyperinflation. And, you know, here on the other hand, when we look at the actual things people are using crypto for, it's things like initial coin offerings and crypto kitties. So how do you think we will get from these particular applications of crypto that basically benefit the already privileged to the world-changing ones that you kind of idealized in your tweets? Yeah. So first of all, I definitely will say that if I was worried at $500 billion, at $7.40 billion, I'm even more worried. I'd say that a large part of it is that right now there is a lot of expectation that stuff will be built.

there are people who are building stuff. You know, like, there's that, like, UN World Food Program that I keep talking about. There is that, you know, like, various identity projects. There's various stuff in all these various different countries. Some of those things are private blockchains, though, right? They're not. Are they public? Oh, okay.

A lot are. But, like, one of the key reasons why a lot of it's going private is because public blockchain scalability is total crap. And, you know, like, basically the, Yeah, like there's a lot of stuff that's being built and a lot of stuff that people wants to build, but it's really because of the technical obstacles that they can't do it at this point. And like I personally think, I'm sorry, so does that mean that you think some of these things will will actually flourish more in private blockchains or do you think it's just happening for now? Yeah, so I think in the short term, a lot of these things will definitely flourish more in private blockchains. In the medium term, I really hope that we can make public blockchain scalability be good enough that. even the kind of naturally private chainy and institution inside just ends up being moved on to public blockchains and or public blockchain based layer two is just because the scalability is good enough and why not. So one example of this is, look, there is this technology called plasma that I'm sure you've heard a lot about that Joseph Poon came up with a few months ago. And this basically allows you to kind of have, you know, what the Bikwin people were promising, back in 2013, which is kind of private chains anchored into a public chain.

But we are in the case of plasma. I know the anchoring actually is meaningful. And, you know, there's a good, you know, mathematical understanding of what the anchoring is, which basically is that if you have one coin inside the plasma chain, then even if the plasma chain totally breaks, then you can use that to recover one coin inside the public chain. And so, you know, coins in the plasma chain are kind of actually equal to coins in the public chain. without transactions in the plasma chain

taking up actual public chain space. And so I came up with something a few days ago that I called minimal viable plasma, which is basically a way to take that protocol and maybe simplify it by a factor of five and still keep the basic properties. And this is something that I actually think will be developed very quickly,

and I really hope that a lot of these is a kind of institutional token projects can just quickly spin up and basically start using it. So if that happens, right, then I think we'll have something really interesting because, like, even just that as a product basically means that you have a system

that can be used for issuing just tokens at enterprise scale, whether it's companies, whether it's, you know, governments, whether it's random individuals, whatever. You know, also whether it's chat applications, without or while paying very low public chain transaction fees. So the public chain transaction fees would be pretty much negligible compared to the software development work.

And at the same time, you would get a lot of the public chain benefits, which are basically interoperability and security. So, yeah, so that's an example of something that I think could be, you know, fairly valuable. And wait, so just so I understand, actually, in what you're describing, it sounds like you think the way we're going to get to these world-changing applications. of blockchain is by having these institutions that already provide many of those types of services, you know, like the World Economic Forum or, you know, other institutions like that, having them implement programs on, on blockchains. Is that how you think we'll get there? There's both paths, right? So there's some, first of all, there, the reason why the institutions can be helpful is because they have existing customers and or existing users.

and so they can adopt stuff very quickly. And I, like, the aspect of, you know, just people, regular people being able to just kind of transact with each other peer to peer, I think is, that is the really transformative. I mean, the more transformative thing. I mean, I think the institutional aspect is transformative as well because you're basically convincing companies to build applications where you do not have to trust the company in order to trust the application. And, you know, like, this is something that existing institutions really are not used to at this point. But, you know, like, the kind of more peer-to-peer side, I think, is just going to come or scale a bit later because it doesn't depend on just a few people changing their minds. It depends much more on this kind of slower and more organic growth and kind of people, you know, changing their culture and changing their expectations. And, like, that's already happening on its own, right?

like Ethereum blockchain has 1.15 million transactions happening on it every day. So that's more transactions than, for example, there's rides on Uber. And that's happened without, you know, a single mainstream use case being adopted, right? That's just a collection of a large number of little use cases. And, you know, just added up together, it ends up to a very significant amount of economic impact. that's doing 13 operations a second, and that's valuing the Ethereum blockchain enough to be paying something like half a million dollars every day in transaction fees. So there clearly is stuff happening, and I think it clearly is true that if we just enable

more scalability, then more stuff will happen. Right, and is that why you announced these grants for groups working on scaling solutions? Yeah, right, exactly. So the kind of conclusion of all this is basically that there is, There's all these institutions that want to do stuff, and there's just regular people that want to do stuff. And for both of them, the bottleneck right now basically is scalability. And yeah, and like the grant program is definitely a large part in our kind of multi-pronged strategy that we're rolling out in 2014 to just deal with that. Okay.

So we're going to talk about ICOs and governance and other fun topics, but first I'd like to take a quick break to tell you about our fabulous sponsor on ramp. If you're starting up a new project or need some design or branding help on an existing one, OnRamp has you covered. OnRamp is a full service creative agency that has helped numerous companies, including many in the crypto space, maximize their brand awareness, gain traction, and accelerate growth. OnRamp has a passion for assisting brands and boosting business results and can help with everything from website and logo design to social and content strategy. Focus on your core technology and leave the rest to OnRamp.

To learn more and see how they've helped passionate entrepreneurs achieve their dreams, go to think onramp.com. I'm speaking with Vitalik Boutteran, the creator of Ethereum. So one thing I wanted to ask you about was you're going to be moving Ethereum to a proof of stake algorithm. So I want you to describe from me the security pros and cons of proof of stake versus proof of work and why you're choosing to switch Ethereum to proof of stake. With MX Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually,

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They even put it in the creamy garlic sauce on your McMuffin. The McDonald's Frank's Red Hot menu. They put that shit on everything. Breakfast available until 11 a.m. participating Canadian restaurants for a limited time. Franks Redhot is a registered trademark of the French's food company LLC. Okay. So for proof of steak, I would say the pros are number one.

I think that it can have higher security. And what I mean by that is that basically that I think proof of steak can be designed so it's more expensive to attack it. And I think proof of state can be designed so that it's easier to recover from an attack. So with proof of work, for example, if someone, has, you know, more computing power than the rest of the network combined, they can't just double spend once, right? What they can do is they can do what I call a spawn camping attack, where they basically just kind of keep on, like, preventing any other blocks from getting into the blockchain

forever, and, you know, just mining empty blocks forever, and just continually rendering the blockchain unusable. And if you do that, then the only remedy... How does that work? they just they just continually have more power and basically no so the way that you would do this is like you would let's say you have all of your hypothetically 51% hash power just on one

laptop I mean in reality it's much bigger but for a kind of simplicity we'll say that then you disconnect your laptop from the internet then you mine for two hours then you reconnect it to the internet published all the blocks immediately that'll just totally erase all the other work that's been done in the last two hours, and it'll make your chain be the longest chain,

then turn the laptop back off, then mine another two hours, then keep on going, and then just repeat this forever. So what that does is that first of all, it ensures that only your blocks are going to be part of the chain. And the second thing is it ensures that, like, basically any other miner who participates, like, there will be times when it looks like they can mine, but then their blocks will still just be reverted anyway, so it just waste all their time. So if this kind of attack happens on proof of work, the only possible approach is to change the proof of work algorithm. But then if you change the proof of work algorithm to kind of basically make the attacker's ace excuseless, then if the attacker has just a bit more resources, then the attacker can just do the attack again. And the second time around, you know, your algorithm is going to be one that said that there hasn't been enough time for kind of special purpose hardware to develop.

so there is only going to be general purpose hardware mining on it. And so if the attacker gets 51% of that, then you're basically screwed. So, like, I don't think that proof of work has very good properties in terms of recovery from attacks. With proof of stake, what you can do is basically, if the attacker does a 51% attack, then you can coordinate a minority soft fork, and that basically takes away the attacker's money. Then if the attacker gets more money, they attack again, then you can do another soft fork. at the end take away the attacker's money again, and you can repeat that process pretty much forever. So basically, if it's a kind of battle between, you know, the attacker and the community,

then the community can pretty much just keep on winning every single time. And eventually, you know, this attacker is going to get tired of burning like $500 million every two days or whatever the amount is. So that's a part of why I think grew up state it has higher security. It also has lower costs, so you don't need some. to pay, like, very high block rewards. You just need to pay a fairly low interest rate. A third thing is, obviously, just the environmental friendliness aspect.

So I'd say those are probably the main pros. And do you worry at all... Sorry, do you worry at all about switching it this late in the game? Like, with... Oh, I definitely worry about it, and we're definitely going through the process fairly slowly and carefully. But, like, I personally do think that Proustache is part of, you know, like, making... This overarching philosophy I have.

of how blockchains are going to or can succeed. Like basically, I think, like, there's a couple of philosophies here, right? Like, the way that I would describe kind of proof-of-work Bitcoin philosophy is they say, yes, blockchains are very expensive, and blockchains are very expensive by design because you need to be very expensive in order to get censorship resistance. And therefore, the only blockchain applications that are really going to succeed are those applications that really, really need censorship resistance over and above everything else. So, like, you can probably find, you know, like, lots of, kind of proof of work advocates

discussing this pretty explicitly. My philosophy that, and that focuses on, you know, like, proof of stake and scalability with sharding is that if you make blockchains that just focus on the, the really censorship resistance requiring stuff, then, like, first of all, you know, like, the establishment is going to make your life very, very hard. And even if you feel, you feel, you theoretically technologically can win against them. Practically speaking, you know, because that's like, their interference is still going to be very successful at basically

cutting your, cutting down your potential user base by a factor of 10. So it's, like you can't just kind of sail directly against the wind and say, you know, rah, we're going to be, you know,

like very just proudly opposing anyone who tries to stop us and we're just going to say technological, not technologically you can't catch me. and like just basically, you know, do whatever you want that way. I think if you want to achieve real impact, then ultimately you are going to have to win kind of public acceptability. And part of the way that you win public acceptability is by providing value to people other than these applications that would literally get shut down by banks and governments

if those applications didn't have blockchains to run on. Now, then the next part of that, theory is that therefore blockchains absolutely need to have applications where even though they benefit from blockchains, they benefit from blockchains a medium amount, right? So they don't benefit from blockchains enough to justify, you know, $10 billion a year of proof of work mining and like $23 transaction fees or whatever it is that Bitcoin has today. So basically, you need the cost of consensus to be much lower and you need the cost per transaction to be much lower. And I don't even mean like the, you know, like five to ten cents low as Ethereum has now.

I mean, you know, is zero point one cents low. So the first of those two things, which is that Consentis needs to be much cheaper in order for these systems to be long-term sustainable. That implies proof of stake. And the second part, that each transaction needs to be cheaper, that implies our very heavy scalability focus. So, you look, that's basically where I see the pros of proof of stake being. As far as the cons, I would say the main one is that it is a different. security model. And it's a different security model that basically says that in order to securely authenticate the blockchain, you have to log on to the internet at least once every

few months. And if you don't do that, then in order to bootstrap yourself to the chain again, you basically have to trust some group of people who have. And I think that in reality, this is a totally fine security model because people basically already trust that security model for software updates. So, you know, even like Bitcoin Core, you know, like Ethereum, Bitcoin Cash, like any major cryptocurrency or blockchain

implementation does release software updates, you know, like every few months, half year, at most a year. And people are just totally happy to just trust these software updates. So basically, why can't, you know, we require users to log on, basically

as often as they log on already to receive you versions of the software? So that's my response to that criticism. People also bring up this kind of rich get richer aspects that, oh, isn't proof of stake just basically paying people who have a lot of coins and giving them interest rates that give them even more coins? My response to that is, first of all, well, proof of work does that already. If you look at where the proof of work mining farms are, it's basically just a few big guys with a huge amount of money and a huge amount of hash power. and the second part is that with proof of stake, we can kind of limit that aspect because, you know, if proof of stake paid, you know, like 15% annual interest rates, then I think that would be horrible and that would be a really legitimate criticism. But I'm looking at seeing if we can knock those interest rates down to, you know, something like 1 to 3%.

And if they're at that level, then, you know, that's basically less than, you know, the difference between, like, what's talking about. and bonds pay, so it's not nearly as large a contribution to, you know, the kind of undesirable kinds of inequality that people are worried about. So that's probably how I'd address that argument. There are a lot of other various fine distinctions. Like, I think, look, one of the nice things about proof of work is that it's simple to implement, and so that it's, has, like, easy, like, coin protocols. You know, like, I do think that's actually a genuine advantage of proof of work. So, you know, there are genuine weaknesses where the only thing I can say for proof of stake is, well, just suck it up and deal with it because the benefits are much larger. But in general, I do believe

that the benefits are much larger than the costs. Interesting. I think what's interesting to me is just to hear you describe all this. It sounds like your vision is maybe a little bit more pragmatic, whereas like some of the rhetoric I maybe hear from some of the other blockchains or at least from people such as like Bitcoin maximalists or something is a little bit more anti-establishment, but you, it sounds like, are having kind of a more pragmatic, user-friendly focus and, and just having a vision of, you know, a large swath of society, whether it's like institutions and wealthy people, as well as kind of the little guy that we talked about at the beginning using the blockchain. So actually to move to like a slightly different topic,

you have all these new competitors smart contract networks that are popping up such as DFINITY TAZOS, KADO, EOS, and several of them aim to solve problems that the Ethereum network is currently dealing with in terms of scaling, governance, lack of formal verification and smart contracts, which for listeners who don't know is a way of sort of mathematically proving that the smart contract will run as the programmer intends, which was in issue in the Dow. So how much of a threat do you believe that these other platforms pose to Ethereum? I mean, I think that they're definitely going to get some adoption, though I do think that a lot of them are targeting somewhat different properties than what Ethereum does. So, for example,

like one piece of technology that a lot of these platforms rely on is something called DPOS, a delegated proof of stake, which is basically a system. where the entire network is run by something like 20 to 40 computers. And the only way that other participants in the system can have an influence is basically by voting on who the participants are. And this basically is, you know, the entire security model of the system, right? Like, it's basically a consortium chain where people with coins get to control who the consortium is. I personally believe that, look, this is nowhere near decentralized enough for. for a public, for a public blockchain system to really stay public in the long term.

And I wrote a blog post about this a few weeks ago. Like, one of the examples I got into was how, like, one of these blockchains, some el-lisk ended up basically being captured by two political parties that basically bribe everyone to vote for them. Right. So there, you know, there's, like, basically, you know, if you think that the just voting is enough to ensure a system decentralization, you know, come look at U.S. politics is the line that I usually give them. Yeah. So I think that there's, like, these systems can get some users,

but at the same time, you know, like with Ethereum, we are also trying to kind of aim for this angle of, you know, higher decentralization, which in our case basically means, like, anyone's, like, we want the system to be able to process, you know, like, 50,000 transactions per second, while only running on a collection of nodes running on people's laptops. So this is one of our kind of informal design goals. And so, you know, like, avoiding the need for just, you know, like, various kinds of, like, master nodes with superfiant with, you know, fancy specialized hardware. And also designing systems where, you know, like, the systems actually do have, you know,

a substantial degree of this kind of trustlessness and kind of emphasis on, you know, basically algorithmic kind of governance rather than, you know, like, heavy political processes. Like, I mean, like, you know, like, as you said, we're pragmatic and we don't believe that any of those things can go away 100 percent. But at the same time, we're not willing to use that as an excuse to basically lean on that sort of stuff exclusively in our security bottle. Well, to speak about governance and your blog post, I was wondering how you plan to implement governance in Ethereum because, you know, as we just discussed some of these blockchains, they have on-chain governance and you wrote in your blog post, I'll just quote this for people who didn't read it.

The abstract says that you believe, quote, tightly coupled on-chain voting is overrated. And I have a feeling there you're referencing things like Tazos. You also said the status quo of, quote, informal governance as practiced by Bitcoin, Bitcoin Cash, Ethereum, Zcash, and similar systems is much less bad than commonly thought. You also said people who think that the purpose of blockchain is to completely expunge soft, mushy human intuitions and feelings in favor of completely algorithmic governments. As emphasis on completely are absolutely crazy. I really liked that phrasing there. And then you also said loosely coupled voting as done by carbon votes in similar systems. systems is underrated. So why do you think, why do you have all these opinions and how do you

think people should be thinking about blockchain governance? Yeah. So basically, one of the, there's a few examples that I use in my post. And so regarding tightly coupled on chain voting being overrated, I think my main argument against it basically is that. I think it's, like, it really runs the risk of creating a system where people believe that like basically, If the governance algorithm outputs the decision, then the decision is legitimate. But there is plenty of situations where a decision that's approved by 60% of coin holders really should be viewed as an illegitimate one. So even something like, like, if there's some convenient way to separate 60% of coinholders

into group A and 40% into group B, well, you could imagine a decision that just finds some way to double the coin holdings of everyone who's part of group A, and then the 60% who are part of group A you're going to vote for it. This is like, you know, the standard, like, two wolves and a sheep voting on what's for dinner problem. And, like, basically, I worry that if you have a blockchain that, like, really deeply enshrines tightly coupled governance, then that sort of stuff just will end up happening. And possibly even worse stuff will end up happening. Like I mentioned, like, these bribing attacks that happen to risk. And, like, I do think that there's, like, basically five or ten different ways that various, you know, more or less subtle for.

forms of bribing attacks can happen. And I basically view this in the same way that, you know, like, Bitcoiners view the the nothing at stake problem and prove of stake. Like, I personally, you know, like, don't think that the requirements to log on every year is an issue. They think that this is something that, you know, even if it works okay for a while, ultimately kind of is the death knell of decentralization. And there I disagree.

But, like, that's the kind of opinion that I have about this kind of on-chain voting stuff. As far as the status quo of informed, uh-huh, go ahead. Oh, just one thing I wanted to add there was about the on-chain voting is it is sort of one of those things where if you know what is going to, you know, be the threshold, then you can game the

system. So, you know, people will always be trying to do that, yeah. Totally, yeah. So as far as informal governance goes, like, I basically, I think that people like don't, often don't realize the extent to which

the systems alternative formal governance actually have governance and the governance actually does work quite well at both ensuring that the protocol changes that are made are changes that are good and preventing one person from having too much power over the system. So, you know, on the one hand, people say, for example, that Ethereum is completely centralized around myself. and it's true, for example, that I run the long-term research agenda, but if you look at the actual process that we've institutionalized, you know, between the guest, like, C-Boss, Boss, parody and harmony developers for actually taking, you know, changes that people in the research, you know, either on the research team have come up with or people in the community have come up with and turning them into things that get implemented and become part of the protocol. That actually is something that has been fairly institutionalized, is, you know, meaningfully decentralized. It actually works quite well, right? Like, basically, we have these open court developer calls that happen every two weeks and participants from every one of the major implementations, they like death parody and so forth, participate in the calls. We discussed them and generally end up adopting changes by consensus. and it ends up, I would say, you know, working fairly well.

And people who are actually part of the process or who actually watch it closely tends to be fairly happy with it. So. Well, so, but this is something I was going to ask you about because like, you know, I do see this criticism of how Ethereum is governed. And, you know, sometimes it's people just saying, oh, Vitalik's a benevolent dictator. But then other people saying, oh, he's a single point of failure for Ethereum. do you think that you are? And like, for instance, you know, you did say in Twitter the other day, oh, if things continue in this immature fashion, I'm going to leave. Like, let's say you just really did decide to leave and you were so angry. You didn't put any succession, you know, a process in place.

Like, what would happen then? So first of all, I want to correct the record on a small thing, which is I didn't say that I will leave if things continue being immature. I said that I will leave if price memes and people. people being immature continue to be the only thing that gets accomplished. Okay. There's a really key difference between those two that people didn't capture. Right. Like, I am definitely not going to, you know, abandon the refugees in Jordan that, you know,

the UN World Food Programme applications on top of Ethereum are working on feeding just because there's people saying stupid stuff on Twitter. What I am going to, where I am going to leave is if the. that stuff doesn't materialize and people keeps, and the only thing that's happening is people saying stupid stuff on Twitter. Yeah, well, I'm with you there. I will stop covering the space also if the same thing happens. So I think we both agree on that.

Okay. As far as what happens if I do leave, I would actually say that the extents to wish I'm a single point of failure is probably dropping fairly rapidly. So, for example, over the last like six months, we've really scaled up our research team. And, you know, we have a team in Python that's developing the sharding specification, that's pretty much fairly, has a fairly high degree of autonomy at this point.

And I personally have, like, actually quite a bit of confidence in these people. And, like, I think that if I get run over by a bus tomorrow, I really do believe that they'll be able to carry, you know, version one of basic sharding to completion, basically on their own. It's, as far as, like, proof of stake, you know, we have the Alpha Proof Casper, FFG test. it. So the algorithm is very close to basically being what it needs to be. If we have on the

plasma side, the situation is fairly similar. So, like, we are definitely trying hard to, like, basically make sure that we have, you know, like, a large and growing core group of people that understand

the ideas and understand the vision enough that, like, basically any of them can kind of execute it through regardless of what happens. But is there like a governmental kind of like infrastructure around you? Like three years from now, what will the Ethereum Foundation's organizational structure look like? Right. Okay. So I guess like if we kind of take that question, replace that question a bit with the question of, you know, like basically is, is Ethereum meaningfully independent of myself?

there's like two kind of threat models that you can have, right? The first is, what if I disappear? You know, what if I get kidnapped? What if I get run over by a bus? And the second is, what if I, you know, become corrupt or evil in some way? And for the first one, I think, like, I basically answered that question by basically saying that, you know, the research team is growing. We're rapidly adding smart people. And this is basically the only way to really solve the problem.

As far as solving the second issue goes, I think that part of that is going to resolve itself over time because as the research and development teams grow, they're going to inevitably start having their own opinions that they contribute to discussions and will get harder for any one person to force things through. And the second thing that I mentioned is that even if the research agenda is still run by this kind of very informal process that's still between a few people, like myself, you know, Vlad, like Carl and a few other developers. It's the part of the

agenda that actually decides what changes get implemented into the Ethereum protocols. That part, I think, is really meaningfully decentralized already and probably more decentralized than a lot of other blockchain projects. As far as the Ethereum

Taoitation goes, and that's something that, you know, we have been working on, and we do want to give better governance to the Ethereum Foundation already, though that's only one of two tracks, right? The second of two tracks is making sure that Ethereum can kind of grow and prosper even independently of the Ethereum Foundation if necessary. So, like, for example, the Ethereum Enterprise Alliance being a separate organization

is part of that kind of vision of decentralizing the ecosystem a bit. There's also going to be other kind of what I would informally call sister organizations to the Ethereum Foundation that I think are, some of which are already being kind of quietly developed and you can probably look forward to announcements fairly soon. There's some, so that's part of it. And another part is that, you know, Ethereum is fairly unique in that we have this large number of it of full client implementations. So, Geph, parity, harmony, harmony, C-Boss, Python, and so forth. And that was a deliberate strategy to ensure decentralization of the development layer, right? Because, like, basically there isn't one repo that controls the entire project. There isn't one core deaf team that controls the entire project.

And, you know, if the Go Ethereum team becomes evil, then we have parity. If the parity team becomes evil, then we have Go. If both become evil, then we can put some more resources into Harmony, and people can switch to that. So I think, like, the actual kind of implementation, and release side of the cycle really does have, you know, there's kind of meaningful decentralization that people are looking for, are looking for already. And, you know, part of the reason why we split up this grant program in the foundation

is to help support that. Though, I mean, I do agree that, you know, governance of the foundation itself is something that can also improve a lot. Okay. So I want to go back to what we were talking about earlier in the conversation about how Ethereum is actually being used and how that, you know, maybe had differed from what you imagined. So obviously this past year, we saw that initial coin offerings.

It just really, really took off. And Ethereum was the main platform where they were holding those ICOs. And especially now when we're seeing so many of them. And also, there are a number where maybe you might say they're at the very least unsurious and at the very worst scams. How do you feel about the fact that Ethereum is, the main platform for this activity? It's, I would say that, and first of all, it's in every single scam that's happening is definitely

unfortunate, but it's kind of an inevitable part of a new and rapidly evolving economy. So it's, like, in the cryptocurrency and ICO space, like, basically, you know, very few people and, you know, that's including, you know, regular people on the street. read, including regulators, including just, you know, like people, even in fairly deep into the space a lot of the time have a good idea of how to judge many of these projects. And that basically means that, you know, projects that, in my opinion, really shouldn't proliferate, do end up proliferating for some time. And I think that up until now, like, I definitely don't think that scams are like the majority of projects that are being kind of that are taking

place and especially among the successful ones. You know, like, I do think that a lot of the stuff that's being funded actually is a genuine innovation that's hopefully, you know, going to mature and come out over the next couple of years. And I personally do think that the space actually is growing up more and more. So I'd expect that, you know, like, in, you know, like, in, 2018, 2019, like, for example, like any new ICOs that ended up happening during this space, I think, like, first of all, art's going to raise as much money as the previous ones did very likely. Probably even despite the fact that right now their cryptocurrency prices are three times higher than they were before. Also... And why do you think that?

Just because there's too much noise, or why? Because I think, like, basically the kind of, like, if there is, like, an extremely, yeah, kind of, you know, kind of... a good one than possibly, but in general, there's already less hype and people are already noticing that, you know, oh, wait, the first round of these projects, like, basically, like, didn't do remotely as well as the, as the, as the, as the, as the cryptocurrencies of people gave up, gave up in order to participate. And I think, like, that's having a fairly significant effect. And also, I mean, regulation is definitely having a significant effect. And also, like, the just increasing number of these projects is having an increasing effect. Like, basically, it's some, like, it's a lot easier to argue that you have a 1% chance of changing the world when there's only four other projects out there than when there is 40 other projects out there. So, like, I do think that, you know, the future of these, of, of these projects is going to end up being smaller. The other reason why I think, I think that's the case is that a lot of these, like, fairly early, stage projects are projects by people who have already spent a lot of time establishing themselves

in this space in 2014 and 2015. And I think that most of the people that have that property have basically figured out what they're doing at this point. So, like, projects that are run by people just totally new coming into the space, I think, are likely to be less successful. That's just my own opinion. Yeah. Although, frankly, it's been a little bit dispiriting to see how some of the, you know, some

the people hovering these ICOs that really don't have a background in the space are still able to raise a lot of money? Yeah, I agree. Yeah, but so to go back to, you know, what I mentioned earlier about the Ponzi schemes and scans that are going on. So here we've seen this year that, or last year now, that there's been a lot of debate over how much responsibility platforms like Facebook and Twitter have in monitoring things like fake news or trolls on their sites. So do you think should Ethereum or the Ethereum community, do they have a responsibility to monitor or audit the different projects that launch ICOs on Ethereum? Ethereum platform definitely no, Ethereum community, yes. And what do you mean by that?

I mean, like, if the Ethereum platform itself starts kind of actively policing what applications are built on it, then, you know, that basically kills the whole idea of censorship resistance, you know, like, way more than anything, anything. anything that happened to the Dow did. And so, like, that's basically just a non-starter, you know, like, both philosophically and probably technologically as well, because, like, actually implementing something like that would require, you know, like hard forks pretty much every day to weed stuff a project that we disapproved of. So, you know, we're not even going there, I think, is the general lesson that we learned. the other as far as the community goes I think there are a lot of things that the community can do

to encourage good projects to appear and um and um and you know get more attention and encourage bad projects to get less attention so one i think key example of this just is you know what kinds of things to people at the top say right so you know like do people at the top go around like pumping every single like every single I see under the sky do they talk about you know like how you like buying whatever cryptocurrency is going to make them super rich or you know do the do they emphasize other things

there's I mean there's even just like the culture of people who participate on the subredits so you know like it's what gets upvoted on the Ethereum subreddit what gets downvoted what do people talk about at conferences what are people allowed to talk about a conferences what to conference is what to conference organizers emphasize, what do the people who end up going to conferences choose to talk about.

So I think there's a lot of these kind of smaller social decisions that really can kind of basically be the deciding factor between whether and, you know, projects that are less reputable or, and probably even outright scam,

they end up succeeding or whether they just end up being like completely ostracized and kicked out. And like, in general, I do think that the Ethereum community has been doing a reasonable job on a lot of that. So, like, for example, if you look at most cryptocurrency subredits, you know, like, you basically see a lot of, like, just, you know, like, oh, you know, cryptocurrency is going to, X is going to the moon, everyone, you know, like, buy, buy, buy, huddle, you know, like,

you're a fool for selling, you know, like, yay, invest more of your, all of your life savings, take out of loan and invest more and things like that. but you know like on if you look at the ethereum subreddit that just doesn't happen at all right like that's um like you know there is kind of our east trader which has this kind of sandbox in a quarter where a lot of that stuff gets pushed to but it's that's you know like one step removed from our ethereum which tends to you know like actually be focused on uh be uh technical discussion and that's i think at something that a community decision that we're fairly proud of and that I think has been quite successful. So that's one example of a thing that can be done. And one other thing that I wanted to ask you about was you've written about the difficulties with having ICOs in terms of kind of, you know, ensuring a wide distribution, but then also ensuring that people can participate or that they can get

in the valuation that they think is reasonable. So you wrote about interactive coin offerings. What are those and what problems are they solving for ICOs? So what problems are interactive coin offering solving for ICOs? Sure. So I think, so the idea is, right, that there is two kinds of ICOs. There's a capped ICO and an uncapped ICO. And in a capped sale, the main challenge basically

is, oh, what happens if the sale ends in one minute? And, like, basically whoever is the best at sending the transaction and first wins. And I think that's an approach that's just incredibly unfair. It's incredibly inefficient. And the long-run equilibrium, I think, is basically that miners are going to get, are going to always be the ones that get in ahead. The other kind of sale is an uncapped one. And in an uncapped sale, I know that's also bad because people just have no certainty

about what the valuation is that they're participating at. So the kind of compromise between the two is these kind of dynamic cap or kind of interactive or interactive models where people can't basically in an interactive ICO send in, you know, ETH into a smart contract. Then when they send ETH, they also have to specify what is the maximum valuation the role to participate at. and as soon as you have you know X dollars worth of people that are willing to participate at valuation X like basically that is the value that that is the valuation and people who are okay with that valuation can basically at the contract accepts them and they end up participating

and people who specify that they wanted a lower valuation their coins end up getting refunded so the idea is that the contract just basically calculates what the supply demand interception is and this accepts everyone who was okay with a higher price and doesn't accept people who wanted a lower price. So with that kind of model, I think that we can solve at least some of both problems from both sides. Now, like, that's one of my ICO ideas. I also have other ICO ideas that are interesting. So like I talk a lot about what I call the DAICO. So this is like a decentralized autonomous interactive coin offering slash organization. And the idea here is basically it's like a mini

special purpose DAO where people throw their money in. But then instead of the money immediately going to the team, the money goes into a DAO. And at that point, all of the people who who participated or all the token holders have to vote on like basically what is the email that the team, that the team can spend per month. So basically the voting mechanism has two levers that it can press. The first lever that it can press is give the team more money. And the second lever that it can press or give the team more money in the sense of increase the amounts that the team could get per month. And the second lever that it can get or that it can press is basically decide that the team sucks, the project doesn't going well, and they want to have all the money be refunded.

So basically people could vote on kind of pressing this kind of nuclear button that just basically ends the project. So the idea there is basically that you have a mechanism where the team only like has certainty that, you know, if they continue performing reasonably, then they are going to have an ongoing budget. But at the same time, it's a reasonable budget and it's not like they have access to, you know, $25 million immediately. and at the same time, you know, there's this kind of ongoing accountability to the people that participated in the sale. So this is, you know, just another example of how, you know, smart contracts can help in reducing some, or solving some of the issues with existing ICOs. So it's basically incorporating some DAO elements, but also not going all the way into a DAO, so because it's still designed around one project. and the benefit that you get out of that is that it basically makes a lot of the game theoretic issues much simpler.

Oh, I really like that. I actually hadn't heard that one before, and I really like how it solves yet another trust issue with the ICO space where you might think that a project sounds really good, but if you put your money in, there's no guarantee that the developers, you know, they could have just painted some lovely picture, but then have no real intention to actually carry it through.

So I wanted to actually ask you, What types of blockchain applications do you think will be the first mainstream breakout we'll see, like with wide adoption? Well, CryptoKitties has clearly already had a breakout. But I mean really mainstream. Like that's, I don't know if it's quite big enough. It's, right. I think it's, well, it's going to happen in stages, right? So I think like there's stuff that, like, of one of the stuff that's happening right now, I think has the chance of really breaking out it to the

stream, but basically usability has to go up and transaction fees have to go down. So if those two issues are solved, then things like cryptocurrency payments, things like cryptocurrency or cryptocurrencies, things like ENS, things like

and why? Why CryptoKitties? Like when you say things like Cryptocities, what is it about that that you think will take off? So I actually think that, you know, the idea of digital collectibles is a totally fine idea. And it seems to be something that, like, it's gotten my non-technical family members using Ethereum

DAPs for the first time. And, you know, when you see that, then, you know, you realize you have something that actually has best market potential. I mean, now, granted, it's not a kind of feed the, you know, feed the poor, bring world peace, save the world sort of thing. But at the same time, you know, it is something, it is something real. It is something that gets people excited. And it is something that I think that, like, I do think is a great example of something that kind of benefits from the blockchain to a moderate extent, right?

Because, like, it's, like, it's not the sort of thing that would get, you know, literally shut down by governments if it was on a centralized server. But at the same time, the idea of a collectible just really does just become more interesting if it's not dependent on a single company for its ongoing existence. So it's, like, that's just one reason why I think. it's an interesting kind of example to look as to look as an example of a paradigm. And what do you think would be the first type of blockchain application that would go mainstream, but also provide a social good? I think, I mean, like cryptocurrency payments and remittances and things like that, I think, are starting to be useful already.

I think that some of the identity stuff, I think, is, going to get out fairly soon. Also, once some of the decentralized exchange infrastructure comes out, there's some project, so I talk about it when you say go a lot. So the idea there is that it's a

project that's trying to use a public blockchain based to decentralized exchange in order to improve interoperability between various different digital payment wallets in developing countries. and that's something that actually really does benefit from being on a decentralized platform that's not controlled by any one company.

And that's an example of something that's looking to launch at least a basic version next year. So I think things in the payment and identity space are definitely something to look toward. Another thing I'm personally interested in is the intersection of blockchain and strong cryptography. So this includes things like blockchain-based of privacy preserving polling systems based on things like ring signatures and zero-knowledge proofs. And I'm actually thinking of, you know, even right now trying to look for applications that would be willing to be the first to benefit from that sort of thing.

Yeah, well, I was going to ask you that. So Ethereum is going to add privacy. but so why do you think it's important to add that when we already have privacy coins like zcash monaro and dash so like zcache monaro and dash add privacy to money um ethereum's like advanced cryptography experiments can add privacy to you know all the other applications other than money uh okay yeah so just like examples that include things like um like as i mentioned privacy preserving polling systems on the blockchain privacy preserving smart contract systems, and privacy preserving digital identity layers.

So basically, you know, like if you think about the original pitch of Ethereum is like, oh, Bitcoin does money, name coin does domain, names, Ethereum does everything. And then you can think of it as, you know, oh, you know, Zcash is general purpose, or sorry, Zcash is privacy for money and Ethereum's privacy experiments are privacy for the other stuff. One other thing I was going to ask you was how disruptive do you think crypto will be to governments? I think it's definitely going to be disruptive in some ways. I often talk about the kind of philosophy behind at least cryptocurrency as being to make national borders as irrelevant for payments as they are for email. And practically speaking, yeah, that's a very disruptive thing.

though and I do think that you know governments are going to have to change a lot of the a lot of the ways in which they think about things things that they think about right now

though I mean especially with you know like the internet and sharing economy applications I think they they've had an opportunity to get to get used to at least at least part of like or the first wave of this sort of thing

and I think blockchains blockchain-based applications are to some extent going to end up being kind of the second wave of a similar trend. So similar in some ways, but also, you know, different in other ways because you don't have the kind of big corporations at the center controlling everything. There's also ways that I think governments can use blockchain technology. So, like, there's a lot of interest that I've had,

even for people inside governments, on things like, you know like this state issued cryptocurrencies that would be used inside of governments in order to improve transparency of finance or you know improving you know like the security in various kinds of voting systems

like I mean I when I voting systems are something that you have to be very careful when you talk about because basically if you try to add technology to a voting system it's very easy to accidentally make things worse but like I'm not even thinking about national elections I'm even thinking about like much smaller stuff

So, you know, the U.S. equivalence would be the, like, the petition website that Barack Obama put out, I think, around five to seven years ago. So, like, even kind of lower grade, lower scale, things like that are, I think, possibly very good for kind of first targets for, like, blockchainification. What do you worry about? I worry about, well, first of all, the possibility that the speculative side of cryptocurrencies will continue to kind of grow and succeed without the practical value of cryptocurrencies, kind of growing and catching up to compensate. I worry about a lot of the time about the wealth distribution consequences that some of that might have. So basically where you just have, you know, like totally random people who happen to have bought a few thousand Bitcoins in 2010. And, you know, now they basically end up being multimillionaires and they could be all on their way to becoming billionaires without really having done any work. And I do worry about, you know, like, the kind of effects that will have on society.

And, like, I notice that there's a lot of people who kind of cheer the wealth redistribution that's coming from cryptocurrency because they think, oh, you know, old, it's old, money that's being disempowered and, you know, like, flashed a new tech money that's being empowered. But I'm skeptical that people who are involved in cryptocurrency are better people than people who are involved in the banking system. Like, I think if crypto succeeds, it's not because it empowers better people. It's because it empowers better institutions. And, you know, like, better incentives structure and better ways for existing people to interact with each other. Like, I know, I used to believe, you know, like, if you saw, some of the things that I wrote maybe four years ago that, like, the idea that crypto distributes

wealth to what I thought are better people is going to be a large, a large positive social consequence. But after watching just the way that Bitcoin maximalist Street Ethereum, the way that the Bitcoin scaling debate has happened, the way that all of these, you know, like various, like, scam projects are going, like, I've just realized that, like, no, it's definitely absolutely no not true that you know crypto people are

any better than people anywhere else in the world and I am yeah I mean I actually you know really do worry about what happens if you know

wealth transfer to these people and like the resulting kind of super empowerment of these kinds of people ends up being the largest or only social consequence of the blockchain space I also worry

about the just that the the possibility that the growth of the amount of interest and the technology will outpace the technology's ability to scale enough to meet the demand. And, you know, we have had, I mean, probably the big, one of the big stories of 2017 was, Bitcoin's transaction fee crisis. And Ethereum's transaction fees are definitely not in crisis mode, but they definitely have started to go up to. would I consider uncomfortably high levels.

So those, like, basically, I do worry about the possibility of those things are not going to be fixed on time. But, you know, we'll see. And it's, you know, I do think that, like, we are going to start and we'll continue to engage in a very aggressive scaling strategy for 2018 that I hope will end up, you know, delivering very real and massive transaction volume growth. them, you know, especially through things like plasma within the scope of this year. And do you have any crypto predictions for 2018?

Um, hmm. Crypto predictions are very hard to make because, like, a lot of the predictions I end up making just continue and end up being consistently wrong. And the stuff that ends up happening just ends up being stuff that's totally unexpected. So. Right, like the Dow, Ethereum Classic. Well, the Dow. I'm sure.

Yeah. I mean, like the stuff, like, if you look at the big stories of 2017, right? Well, okay, I did successfully predict Bitcoin splitting into core into cash. So that's one place where I was successful. I probably did predict Bitcoin dominance continuing to decline. I mean, I did not predict that transaction fees would go all the way up to $20. I did not predict. I think they're higher.

I think they're like 30 or 40, by the way. Oh, yeah, totally. I didn't, I mean, actually, there was this kind of sad moments that I had about a few weeks ago where I just paid something like a $6 transaction fee in order to use Bitcoin to reload my name cheap account. And that transaction ended up being delayed by a couple of hours. And once I delayed, I basically just said, screw that, I'm using my credit card. And I'm like, okay, well, you know, when cryptocurrency is inferior to credit cards for just simple payments and buying stuff on the internet, you know, I really kind of deeply inside kind of feel and know that the space has, you know, kind of lost its way to some extent. So that's, I mean, as far as, I mean, I definitely did not predict the price increases. I definitely did not predict

in a lot of the stuff that's happened outside of the Ethereum space. I definitely did not predict the sheer size and scale of the various ICOs, for example. So for 2018, I guess my concrete predictions

are like, I mean, I do think that ICOs are going to be quieter through 2018 than they have been through 2017. I think that Bitcoin dominance is probably going to continue to erode and the space is going to continue to diversify. I would predict, like basically I think the conversation in the public mind is already, you know, rapidly moving toward, you know, it's not one thing, it's an asset class,

and that's something that 2018 is really cemented, and I think that's something that 2018 is going to continue to cement further. I predict that, you know, plasma will be out and, you know, there will be, there will be meaningful things running on it. On the, I predict, you know, ongoing great progress on the Casper and Sharding side. I mean, if it's the case that Casper is not out by 2018, it'll be because we made a strategic decision to prioritize sharding over Casper. So that's something that I think totally could end up happening. Though I do think that proof of stake and scalability are both important. I would predict that, you know, there are going to be more applications that come out,

but there's also going to be more kind of on the institutional side, just kind of fake blockchain applications. So applications that claim to run on a blockchain, but actually aren't meaningfully decentralized in any way. And like, those exist already, right? There's plenty of, you know, there are applications. Like, there's a few I know about in China. I'm sure there's some in other countries where they claim to have a blockchain running for over a year in production, but actually all the servers are run by one company.

So I think we'll end up just seeing more of that from, you know, the portion of the institutional space that likes blockchain as a buzzword but really doesn't get it. Well, I will add one prediction that isn't my own, but that I saw both Fred Wilson and Olaf Carlson, we have Polytechn Capital made on TV. and both of them said that they thought that we would see the market cap of Ethereum surpassing that of Bitcoin. So that's out there for listeners. One other thing I would add is also Olaf was on the podcast and he was a fantastic guest. You should go back and listen to that episode. Vatalik, is there anything I didn't ask you that you want to mention?

Anything that, you know, has been like floating around your brain that you haven't gotten a chance to talk about? I know. I think we've gone through everything. Okay. All right. Well, it's been fantastic having you as a guest. Where can people get in touch with you or see your work? Yeah, thank you very much. It was great to be here. Okay. And do you want to give your Twitter or anything like that? Well, Vitalik Buder and just my name.

Okay. Well, thanks for coming on the show. Thanks so much for joining today's episode. To learn more about Vitalik and to find previous episodes at the show with other innovators in the blockchain and crypto space, check out my Forbes page. Forbes.com slash sites slash Laura Shin. Also be sure to follow me on Twitter at Laura Shin. New episodes of Unchained come out every other Tuesday. If you haven't already, please rate, review, and subscribe on iTunes or wherever you get your podcasts. If you like this episode, share it with your friends on Facebook, Twitter, or LinkedIn. Unchained is produced by me, Laura Shin with help from Elaine Zelby and Fractual Recording. Thanks for listening.