enjoy this transcript of my conversation with vitalik buterin and naval ravikant.
vitalik buterin (@vitalikbuterin) is the creator of ethereum. he first discovered blockchain and cryptocurrency technologies through bitcoin in 2011 and immediately became excited about the technology and its potential. He co-founded bitcoin magazine in September 2011, and after two and a half years of looking at what existing blockchain technology and applications had to offer, he wrote the ethereum white paper in November 2013. He now leads the research team at ethereum, working on future versions of the ethereum protocol. In 2014, Vitalik was awarded the two-year Thiel Fellowship, tech billionaire Peter Thiel’s project that awards $100,000 to 20 promising innovators under the age of 20 so they can pursue their inventions in lieu of a post-secondary institution. you can find his website at vitalik.ca.
naval ravikant (@naval) is the co-founder and president of angellist. He is an angel investor and has invested in over 100 companies, including many mega-hits such as Twitter, Uber, Notion, OpenDoor, Postmates and Wish. You can subscribe to Naval, their podcast about wealth and happiness, on Apple Podcasts, Spotify, Overcast, or wherever you get your podcasts. you can also find his blog on nav.al.
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naval ravikant: tim, speak naval. Tim, thanks for having us. vitalik buterin accompanies us. vitalik is, i think he is now 27 years old, creator of ethereum, which is the most exciting cryptocurrency since bitcoin, and he has incredibly broad ambitions and capabilities. vitalik is a really interesting guy because he not only created or co-created ethereum, but he is also a multi-disciplinary scholar. his blog at vitalik.ca is packed with great ideas, insights and thoughts. he runs the ethereum foundation. he has contributed to all sorts of things like automatic market makers, roll-ups, social recovery wallets, decentralized finance, blockchain scalability, governance, all sorts of great ideas in the cryptocurrency space. he also thinks a lot about public goods, radical markets, wealth distribution. he has a very active twitter account where he kindly interacts with all sorts of people who are constantly trying to pick a fight with him, which is what people do on twitter. and yes, and we are very lucky to have it.
I would say that for me, along with nick szabo, who we interviewed here in 2017, who created bitgold and coined the term smart contracts, and along with zooko, who is the irrepressible founder of zcash, I’ve always found that vitalik, nick and zooko are the three people on twitter from whom I learned a lot about crypto.
So, welcome vitalik, and thanks for taking the time to tell us about yourself and ethereum.
vitalik buterin: thank you very much for the presentation, naval. it’s good to be here.
naval ravikant: yes. So I’m going to start right away, we’ll probably try to keep this level pretty basic and high. For those of you who are quite experienced with cryptocurrencies, this can be a very general conversation, but at the same time, I’m going to ask vitalik some tough questions. we’re not going to let him get away with just the PR angle.
but we’ll start with some basics. Suppose we know what cryptocurrencies are. And for those of you who aren’t that familiar with it, I suggest you go back to the podcast Tim and I did with Nick Szabo back in 2017. I think it’s called The Silent Master of Cryptocurrency.
tim ferriss: correct.
naval ravikant: so once you’re on top of that this one will make a lot more sense but we’re going to get straight into not what is crypto or what is bitcoin we’re going to get into what ethereum is. So how would you describe today, vitalik?
buterina vitalik: of course. so the one sentence explanation of ethereum i sometimes give is that it is a general purpose blockchain. so this of course makes more sense if you already know what a blockchain is. Right? it’s this decentralized network of many different computers that keep together this kind of ledger or, let’s say, a database. and different participants have very particular ways of connecting with that. they can detect transactions that do very particular things, but nobody can manipulate the system in a way that is outside the rules.
and ethereum expands on the bitcoin approach, it basically says, well, instead of having rules designed to support an application, we’re going to do something more general purpose where people can create their own applications and the rules for whatever application they created can be run, deploy on ethereum platform.
so one explanation i’ve heard one person give is that bitcoin is like a spreadsheet where everyone just controls their own five spreadsheet squares, but ethereum is a spreadsheet with macros. so each one controls their own accounts, which is their little part of this universe, but then these parts of the universe can have code and can interact with each other, according to pre-programmed rules. and you can build a lot of things on top of that like bitcoin builds a monetary system on top of that famous ethereum can build decentralized domain name systems again various decentralized financial contraptions prediction markets non-fungible tokens and all the different schemes that people have been thinking about.
the limit to what you build is basically your own creativity, but the main difference between building an app on ethereum and building it on some traditional centralized platform is this core idea that once you build your app, the app doesn’t need to depend on of you or any other person for its continued existence. and the application is guaranteed to continue to run according to the rules that were specified and does not have any ability to hack and tamper with it.
naval ravikant: That’s a great overview. and i liked that excel analogy of it being a spreadsheet with macros instead of a spreadsheet where you control your own cells. I’ll also try to articulate it in a few ways that I understand, around the edges, because I think ethereum is one of those things that’s a little bit bigger than you right now. it has probably evolved in ways that even you didn’t fully anticipate. so in a sense we are discovering ethereum and not just building it anymore.
I also like to think of it as an unstoppable application platform. so a platform for building unstoppable applications, like a world computer where let’s say we want to run very, very important computer programs where we don’t trust the computer itself and we don’t trust other people to run code on our behalf. then we create a single world computer where we verify code on the machines of many, many different people around the world who are duly incentivized to maintain a single computing state.
so if bitcoin is a shared ledger, then ethereum is a shared computer for everyone to run their most important applications. therefore, some of the apps that people are building on it are possibly among the most important apps of the future. so let’s talk a little bit about those applications, about what this trustless world computer is doing. What are the current applications that are most common and that you are most excited about?
vitalik buterin: so first of all i think eth the asset is a cryptocurrency and itself is an application and the first application of ethereum. Going a little bit beyond the financial stuff, I mentioned ens, the ethereum naming system. so, you can think of it as a decentralized naming system. for example when you go to ethereum.org, there’s dns, a domain name system that has this big table that keeps this mapping of, well, if a person comes in, if you’re on .com the server actually has to talk with it, to talk to the website as a particular ip address. and this dns system that maintains this public relationship is a fairly centralized system with a very small number of servers running it. so ens is a fully decentralized alternative that runs on the ethereum blockchain.
and you could use it not only for websites, right? as if you could use it only for accounts. so, for example, there was a messaging service called status. in terms of how it feels to use it, it’s a messenger, it’s similar to telegram or signal or whatsapp or any of those, but the difference is that it’s decentralized. and so there is no dependency on a single server or there is still a dependency on the state, the company, which is good because it makes everything much more resistant to censorship. it makes everything much more guaranteed to survive, regardless of the forces that wish for its existence or wish against its existence in the future. and stuff like that, this is really an important part because, well, if you have a chat app, I need to have a subname that I can refer to, like the users I want to talk to. right?
as I wanted so I could write and say I wanted to talk to the navy and things like telegram, signal and whatsapp, that mapping is usually like basically authenticated and controlled by a server. but while in the state, everything is done by the ethereum blockchain. Right. so that’s a good example. I think it’s not financial, but it’s still very important if you’re in an application. now, beyond those two cases, there are many more complicated things. then there’s the defi, the decentralized finance space, which is this big category that has all kinds of cool gizmos. so, for example, there is a prediction market. thus, a platform where you can bet on different outcomes, such as who will win any sports game or who will win any particular election.
and there have been very successful prediction markets running on the ethereum blockchain. there are only the markets for trading between different types of assets. there is what is called synthetic assets. so if you want to have access to some real world major asset like it’s all, or could be an example, but you don’t have to tell us. there are many other examples as well. there are versions of this that are purely virtual, simulated versions that exist purely within ethereum environments. so now there’s this whole kind of very powerful financial toolkit that exists within the ethereum ecosystem. in general, there are a lot of these interesting things that happen. I mean, there are even games that are based on ethereum. there are a lot of different things.
naval ravikant: yes. and defi, decentralized finance is this gigantic new category where entire companies and protocols are being built in a decentralized way that allow you to do a lot of things that would have required wall street, along with bankers, judges, lawyers, and accountants to run. but now it’s done through smart contracts that live on the ethereum blockchain. and these smart contracts are the core of the ethereum blockchain. and we talked about this on nick szabo’s podcast but he described it as a vending machine it’s an example of a smart contract where you put money in a certain slot, and there’s a certain set of rules and you press certain buttons and you get certain products in return. but these smart contracts, obviously now they’re getting a lot more complicated, they can actually be used, not just to build financial apps, but even apps that we don’t normally think of as financial.
One way to think about it, for those of you who are into computer programming, is to imagine if every part of a program, every function had an address from which anyone in the world could access it, an unique identification address. and it had a slot you could insert money into. so you could call any function anywhere in the world. you could insert money into it and it would do something on your behalf. and that gives ethereum applications this very interesting property called composability, where you can use them almost like lego blocks, each one is built on top of the rest. and so the end product defi ends up being very, very advanced. In the traditional world, when let’s say Robinhood builds their app and then Schwab builds another app and Wisdom Tree builds a mutual fund or an ETF. they can’t be combined with each other, but in the ethereum world of defi, all of these apps are open source, permissionless, programmable, and can connect directly to each other.
can be identified, called and paid without permission or trust. so the infrastructure that is built on defi and ethereum, while very hard to build and complex, once a piece is built it is available to everyone and stacks on each other almost to create one of those japanese style voltron robots that only gains in power. yes.
tim ferriss: may i? naval let me jump in here just as a representative. I’m not even a proxy. I am literally a listener in this case and I am happy to be the listener. so i’m both a representative and a real listener, but how do you think about intellectual property, if all these separate or previously separate apps etc are now lego pieces that are natively interconnected? is it a silly question? I just wonder if…
naval ravikant: no, that’s a very good question. I mean, my high-level point of view is that what blockchains do is through consensus, they protect data. so users own their own private data and then the public data that is needed for the blockchain to work. its integrity is protected by the blockchain and that is what blockchains do. they get a bunch of people to cooperate on what should be the canonical result. but the code itself is completely open. It’s a bit backwards from what we’re used to. we are used to closed source companies capturing value, but here all the value is created by open source. but yeah i’m sure vitalik has a different opinion on this but there are a lot of copycats and clones and there are hacks and forks etc. and it’s a wild west out there, but overall so far, it seems like the original products and the best products are having the best success. and they’re always on the market cap marker and transactions and usage, but yeah, it’s a wild west out there.
vitalik buterin: yeah, I know and I think the blockchain environment definitely operates under a little bit different rules than traditional environments, right? as just one example of this is the idea of forking, right? so the one story that happens early last year that I love to tell because of how it meshes with the values of the space so well is that there was this platform called steem and on steem, there’s the steem platform and then there’s steem, the company, No? and steem was their own blockchain and steem the company they had some steem tokens but they didn’t have the right to do whatever they wanted with this platform steem because it was kind of decentralized but they had some tokens and then steem the platform had a voting mechanism as steem token holders could vote on changes.
but then steem the company was bought by justin sun the infamous tron and justin sun basically started doing some things to increase their control over the steem platform. the community was very unhappy with him. and then even took advantage of some of the voting mechanisms and some coins on the exchanges to take control of at least the formal rules of the platform even more. but then what happened was that the users rebelled, right? what users said is, “well we are creating a new platform called hive and hive is just a fork of steem, it will start with the same, or mostly the same rules as steem. and we’re going to copy most steem token balances, except if you participated in the attack, then your balance goes to zero within the new fork.
and most users basically collectively moved to this new fork. and justin sun was in full control of an empire, but no one cared about that empire anymore because everyone cared about hive now, right? just as bifurcation is this [inaudible] that exists. and so you have this ability for the righteous community to exercise collective agency and basically protect themselves from being exploited. but at the same time, if you as a project team are good for your community, then those same effects work in your favor, right? then those effects work in your favor because a community is willing to support your project. if someone does a knockoff, usually very few people are willing to support and assist that knockoff project unless of course they do something to betray the trust of the community, in which case you know that like those kinds of situations are the situations for which it is the imitator.
so I think legitimate developers have a lot of ability to create projects that benefit from the success of those projects. and there are many ways that the crypto space ends up ensuring that. but at the same time, it’s also not in environments where anyone’s level of control is infinite. And somehow that’s the other beautiful thing about space.
naval ravikant: yes. vitalik had this great line on his blog where he said we want digital nations but we have digital nationalism. and there is a lot of truth in that. but basically they are like digital nations. and one of the analogies he uses for defi is that these are like crypto castles made of math that are freely exchanged with each other. just imagine that people are building applications on top of ethereum, they are protected by mathematics, those are the walls and those castles and their moats, that are rivers of crypto. but then they have a free trade policy with each other. that creates a lot of innovation but if one of them starts to misbehave then their people can leave and go to the next crypto castle or this is where the analogy breaks down. in fact, they can replicate it, just create a copy and move to it, like in the steem and hive example.
tim ferriss: well, that is too; i mean it has comparables outside of the world of blockchain and crypto to the extent that if we look at say wordpress as an open source project you have companies like automattic and matt mullenweg. and people may notice that m a t t in the middle of automattic, which puts these for-profit services on top of an open source platform. and technically someone could create a competitor, but as you said, there are these issues of viability, added value and moral leadership and so on. Right. so there are certain elements that contribute to the ethereum ecosystem, so to speak, that you can maybe compare to other things, to help educate people as well. I was just connecting some of those dots.
naval ravikant: yeah, well that’s a good wordpress analogy. The place where the analogies diverge is that WordPress is a single player game. as if each person has their own blog, whereas in the ethereum world you could use ethereum to create a twitter that everyone owns, and it requires a social consensus to operate, but multiple people can enter their details. so it’s a really weird thing where it’s decentralized, it’s open source, but it’s still used to coordinate and bring people together. blockchains combine this really weird combination of individualism and individual control and the ability to go out together with consensus and community and cooperation and build this giant public good. so it’s its own thing. it’s hard to understand, but it’s worth it because this is the next phase of the internet after mobile devices.
tim ferriss: yes. Let me, if I could participate just to be the kid in the back of the class, asking questions. i would love to hear from you vitalik, what was the initial vision for ethereum? and what has surprised you the most, if anything. I was reading a bit about the genesis story. and first of all, I mean maybe separately, maybe for another conversation, it seems like a lot was done early on. and i was reading a quote from a wired article in 2016 and feel free to check if it’s not accurate but it says “when ethereum came to me my first thought was ok this is too good to be true and i’m going to having five professional cryptographers raining down on me and telling me how stupid I am for not seeing a bunch of very obvious flaws but… two weeks later I was really surprised that none of that happened as it turned out, the core idea of ethereum was good, fundamentally, completely solid.”
I’d love to know what the main idea was. maybe we’ve already said it and it’s redundant, but the initial vision, and if anything has been really surprising to you, has happened since those early days.
vitalik buterin: So I think the core idea is to create a general purpose blockchain and open the doors for people to build whatever they want to build on top of it, right? as the backstory to when ethereum was just starting to form was that this was just the time that the idea of a blockchain beyond bitcoin was starting to gain legitimacy. and people were just starting to realize that there are these applications for blockchain as well as running a coin and in the end it would be nice to build a platform that can actually support them. and so in the beginning you had single purpose blockchains, you had bitcoin for currency, you had namecoin for domain names. would have as single-purpose protocols, like colored coins to issue assets.
The second step is what I call the swiss army knife protocols. so a swiss army knife protocol basically says, well, here’s a list of 25 different applications that we’ve identified as important and let’s build a blockchain to support them all. mastercoin was an example of what I call the swiss army knife protocol. and the problem with the swiss army knife protocol is that two weeks later a 14 year old in finland files a 26th application and then you have to forge the protocol. so the natural next step is this general purpose approach, where instead, if you’re a blockchain that supports 25 applications, your blockchain supports a programming language and whatever system with the rules you want to build, you write that in a code and all nodes in the network can execute the code.
and thus the network helps to collaboratively enforce the rules of this code for objects found in your particular application. so that was the technical perspective. and then there was also the prospect of, well, what did I envision people building on top of that? It’s actually surprising how much hasn’t changed. I remember that some of the first applications included financial devices. so contracts for difference, for example, a very particular subset of what we call defi today, decentralized file storage, like paying people to store a gigabyte of their data, was something that excited me. decentralized naming systems, he was excited about decentralized trading between different assets. a lot of the examples of things that people wanted to do at the time, or with blockchains at the time, are the same things that people are doing today, although there are also new applications, right? as well as non-fungible tokens i briefly mentioned nfts. the idea here is basically to create a token that represents something other than a financial asset.
An example of this could be that an nft might represent video game assets and an nft might represent as a piece of digital art that you want to basically sell as bragging rights as the original owner of it. and there are a lot of these different use cases. and these right now, the nft ecosystem has been extremely successful. About a week ago, there was a Nyan Cat NFT that sold for the equivalent of about $580,000. and that is an example of something new. another example of an old thing is the daos, decentralized autonomous organisms. so the idea here is, well, let’s build an organization where the rules for decision making in that organization, the equivalent of shareholder or board voting or whatever you want to use, are written as rules in a smart contract . .
and then the program executing those rules can directly control any assets that the organization needs to control. and we’ve seen a couple of examples of simple damage in action. makerdao, which maintains, dai, the stablecoin that algorithmically targets a price of $1 is one example. now there is also rai. There are many examples of this. So, a lot of things that we expected from the beginning. prediction markets, some have also been a part of what got us excited about using blockchains since 2014 and still exist today. so a lot of old stuff and also some new stuff.
tim ferriss: thank you. extremely useful.
naval ravikant: yes. i mean yeah some of the ones that vitalik just introduced as i think his recent guest katie haun mentioned nfts as nifties that’s what he called it.
tim ferriss: oh no, I did that because I wanted to force that into the lexicon!
naval ravikant: got it! Okay. well, you won. she got stuck. so the clever ones are this crazy idea that having a digital copy of something and having your name stamped on it somehow gives it more value, but it seems to work. works with collectible cards. seems to work with digital art. and then, because of the compatibility of the ethereum infrastructure, you can reuse these nifty items in different games, different museums, different virtual worlds. and so you own it in one place and you own it everywhere, which is a very powerful concept. so digital scarcity was born with bitcoin, but now it extends to things that are not fungible that are not interchangeable with each other.
and that has been, frankly, to me, an amazing thing that has come up on ethereum. ethereum, it’s funny because you’re asking vitalik, what did he expect and what didn’t he expect? i remember when ethereum first launched a lot of computer scientists i talked to privately said it would never work because it’s a crazy idea that the way we’re going to get a reliable computer in the cloud is that we each run a copy of all the calculations on all of our computers and then we’ll sync it up and make sure it matches. that’s the recipe for building the world’s slowest computer. but somehow we got away with it. and so I think the big debate right now about ethereum has shifted from whether it will work to whether it will scale. and when I talked to my friends in the crypto community and said “hey, what do you want me to ask vitalik?”
They send me a list of many, many questions, but the centerpiece is always the same. and like, how the hell is this going to scale? and I would like to participate in that conversation, that is a more complicated conversation. it’s technically sophisticated, but basically we’re saying, “hey, we’re going to have a giant mainframe computer in the cloud, running everyone’s applications so we can all trust the computer instead of trusting each other.” but how are you going to scale that? Isn’t that the slowest computer of all time? and now we’re in a situation where ethereum has a clever name, it’s powered by so-called “gas” and there’s a limited amount of gas per block on the ethereum blockchain.
And frankly, gasoline, the price of gasoline has gone up. These decentralized finance applications can be very lucrative. they are exchanging large amounts of money and people are eager to use them, but the price of each of these transactions is going up. I was trying to do a little defi trade the other day, and it was a hundred dollar trade and the price was $25 just to execute the trade. And that’s a very, very high transaction fee.
and I know that the vitalik team has been working on the ethereum 2 project for years to reduce that cost. btw, aside, that’s one place where ethereum really differs from bitcoin. bitcoin says we are digital gold, this is immutable, don’t change it. and the fights in the past have been over exchanges, bitcoin or not, there was a famous big schism over that. but now with ethereum, the question is: the philosophy is that we change it. we improve it. we do it better, but in the process, there is a greater chance that things will go wrong, that it will break. so now we are getting into ethereum 2 which is the scalable version of ethereum. so vitalik, you want to give us a quick overview of ethereum 2 at a very high level, and then we can dig into the pieces.
buterina vitalik: of course. so I think another thing that’s important to add just to give a complete picture of scaling is that there are these two families of scaling, layer 1 scaling and layer 2 scaling, where layer 1 scaling basically says, well, let’s improve the own blockchain. . and layer 2 scaling says, well, let’s come up with protocols that sit on top of the blockchain and use the blockchain in smarter ways to provide the same kinds of security guarantees that a blockchain has, but that provide much greater scalability. because you’re not just double-sticking like literally everything and doing everything on a blockchain directly. and just like, bitcoin, for example, especially after the scaling war focuses exclusively on layer 2, right? whereas for example bitcoin cash is very much layer 1 focused. so —
so basically the idea here is to decentralize only what you need to decentralize. and then ethereum will be divided into, or have multiple layers. and i think what you’re saying is layer 1 is really ethereum and that’s the least scalable part but that’s where security comes in. and layer 2 is where the code is executed. and that has different properties that you’re going to mess with.
buterina vitalik: correct. well the way i would describe it is like compared to bitcoin which is very focused on layer 2 and bitcoin cash which is very focused on layer 1. ethereum takes a moderate approach. so we do both types of scaling, right? then there’s the eth2 effort, which you mentioned, which is layer 1 scaling, right? it basically says that we’re going to do this big upgrade to the ethereum blockchain, and we’re going to go from a proof of work to a proof of stake where the proof of work is this current consensus. mechanism that keeps the blockchain secure, that scales by having a large number of computers, just constantly generating these kinds of mathematical hash solutions and it works 24/7 and proof of stake is an alternative much more efficient from an energy point of view.
There’s also sharding, which is a layer 1 scaling solution that says instead of each node on the network having to download and process everything, each node on the network only has to download and process a small part of all data. and the blockchain protocol is designed in a smart way that still guarantees security tokens despite having that restriction. so think of it as a combination of at least some of the advantages of a bitcoin-style blockchain over bittorrent. bittorrent is scaled to layer 1. as if there is no one downloading all the movies or even as an index of each movie.
naval ravikant: yes. so before you get to layer 2, layer 1 is, you’re saying it’s proof of stake, which is moving from proof of work to proof of stake and sharding, which is breaking it into pieces and having different pieces do different things and then try to reconcile them. On the proof-of-stake side, I mean that in itself is a huge discussion that could take up the entire podcast.
tim ferriss: so proof of work that I’m familiar with, proof of stake, could we define what that means?
vitalik buterin: Basically, the core idea is that in any decentralized consensus system where you don’t have a central registry that keeps track of who the different humans are, you need some way for people to basically you vote which blocks were obtained and which transactions were included in the network. and you need that vote to be secure against what is called a sybil attack. a sybil attack is when an attacker just pretends to have a million different accounts. and normally in reddit and google and twitter accounts and all these centralized systems, this is done using centralized mechanisms, right? sometimes they require a phone number verification and then the phone numbers often end up having some kyc on top of them. There are various AI techniques to try to detect bots, but in a decentralized system, we don’t have this centralized record set of who gets to be a real user.
and we don’t want to have that. and so to prevent this sybil attack, right? To prevent one person from generating a billion accounts and outvoting everyone else, the solution is economics, right? the solution is basically that the extent to which you can vote only on this very limited question of which transactions are included in what order, is proportional to the amount of financial resources you invest. So, in the case of proof of work, those economic resources come in the form of computation and hardware that you’re running, right? when you are running this mining software on your computer, you are generating these hash solutions. each hash solution entitles you to generate a block. and the number of hash solutions you can generate is proportional to the number of computers you install. in proof of stake, it works a little differently, but the core principle is that your ability to participate in creating the outcome is proportional to how many coins are in the system that you are staking.
so the reason proof of stake is efficient is because in proof of work the way you basically prove that you have a computer on the system is just by running the software on that computer 24 hours a day , 7 days a week. and generating half solutions, right? that’s the only way to do it safely, because if you didn’t have to run the computer 24/7, if you only had to run it 12/7, then you could have a computer that just pretends to be two different computers. . but with proof of stake, if you have coins, those coins are held in an account. that account has a public and private key associated with it and can only make a digital signature with the private key. so you don’t have to run any computer for more than a few milliseconds. and that is the fundamental principle.
tim ferriss: yes. I will say that this is extremely helpful. thanks.
naval ravikant: yes. this is beyond the scope of this podcast but it is actually hotly debated how much more efficient proof of stake is because these blockchains also exist, they have to issue coins in exchange for the security of so called miners or validators. in the case of proof of stake, and people will spend a dollar to get a dollar, so to speak. if you are giving free coins on the blockchain, then people will rush in any way possible. and in proof of work, they will do so by buying more computer equipment to run more hashes, to get the new coins out. in the proof of stake, they will have to block funds or they will have to get funds to do it and there is a cost to do it, to get those funds. thus, there is no real free lunch, but there are arguments for efficiency with proof-of-stake, especially when it comes to securing very large amounts. so in any case —
vitalik buterin: yes, the way I would briefly summarize the proof-of-stake case is that proof-of-stake can actually survive at least in the opinion of proof-of-stake supporters with much lower rewards than a proof of work. and the reason is, and because of how proof of stake works, the ratio between the cost of attacking a system and the cost of running it becomes more favorable. but this is a long discussion. i have written it i have a post on vitalik.ca but if you just scroll down to the most recent one called proof of stake and then proof of work advocates also have their own posts. so I encourage you to read them all.
naval ravikant: so coming back to this, this is all layer 1 scaling, switch from proof of work to proof of stake, start sharding the blockchain, and this gives you some tens of times better, like 20 times, 25 times better —
buterina vitalik: 100 times.
naval ravikant: 100 times. fantastic. then there is layer 2, which is stacked on top.
buterina vitalik: yes. So layer 2, as I mentioned, is about creating protocols that we have on top of the blockchain, that just use the blockchain in very particular ways. so there are many techniques for this, right? the simplest layer 2, to explain i think is a very special purpose layer 2 called payment channel. So the idea behind a pay channel is, let’s say, I’m selling you, naval, an internet connection and you’re paying me per megabyte. let’s say you’re paying me a penny per megabyte. now if we want to do this through the blockchain, the naive way to do it is every time a megabyte of data passes through the connection, it would just do one transaction on the chain and send me a penny. the problem is that this requires lots and lots of transactions.
and the transaction fees are actually much more expensive than a penny. so it is completely economically unfeasible. so this is what we do instead. you put $10 into a smart contract, right? so you send $10 on the blockchain to an address where, according to the rules of the ethereum network, once those funds are at that address, those funds are controlled, not by a human, but by a computer program. and that computer program will have some rules that I’ll explain later, right? so, at the beginning you send $10 to this contract. And so far you haven’t made any payments because, as I’ll explain, the contract has rules that will allow you to get your money out. now, this is what you do after a megabyte. after we have a megabyte of internet data passing between us, it will create an off-chain message and digitally sign that off-chain message that only has the number one cent written on it, right? so just write down the number one cent and attach your signature and send this to me. none of this is chained. then one more megabyte occurs.
You write an additional message that has the number two cents and digitally sign it. you send it to me some time later, every time a megabyte passes, you send me one more of these messages. you keep increasing the number. and let’s say after a few hours of this total, we had 347 megabytes of communication and you sent me a message that says $3.47. and now you don’t want to use my internet anymore. You’re saying goodbye to the day, and we’re done. so now this is what happens. so i can take your message and your message that says $3.47. I can attach my own signature and I can post it as a transaction that goes to the smart contract that has their $10 in it. This smart contract has a rule that says, if I send one of their messages off-chain, I call them tickets.
If I send one of your tickets, if I wrap one of your tickets in a real transaction, and I actually post your ticket through the blockchain, then whatever money is in your ticket belongs to me and the rest is reimbursed to you, right? I get my $3.47 and you get your $6.53 back. now, it’s actually aligned with the incentives, right? because I always have the possibility to use the most expensive ticket, the most recent ticket that you sent me and I really have no reason to use one of your oldest tickets, right? so I’m always going to pick your later ticket. therefore, I will always claim all money owed to me and you will get your money back.
Now if I go missing, after a period of time, you have the ability to go in and get the money back, right? So the idea is that it’s this contraption where you’ve actually made payments to me 347 times, right? we have had 347 interactions during which the amount of money due to me increases and the amount of money due to you decreases, but there were actually only two actual blockchain transactions that are visible and need to be processed by the rest of the network . Right? so we make 347 payments, but the blockchain only sees two of them. and that’s a factor of 178 to improve there. right?
naval ravikant: yes. So if I can wrap this up for a second for our listeners. basically what you’re saying is, let’s say you and I have a long-term contract for some service, instead of publishing every little aspect of that contract under the ethereum blockchain and flooding it, we go to the side, we we do a whole series of transactions, but every time we do a transaction, each one of us seals it and says, “yeah, that little part was done”. and update the transaction between the two. and then when we’re done, either one of us can go back to the blockchain and send the record of all the transactions and say, “look, it’s signed by both of us. so this is valid.” but any of us can send it and the blockchain executes it. therefore the blockchain just needs to know when we left with how much money we staked in this transaction and when we came back and what the total change was. you don’t need to keep track of all the intermediate pieces.
buterina vitalik: exactly. yes, that’s a good summary. now, channels are, I think, the simplest layer 2, but they’re also the least powerful layer 2, right? they can only make payments but they have a hard time doing many kinds of smart contracts so the channels exist and they are being used for more and more things and they are great but the ethereum ecosystem is the most important thing. excited is something called rollups. Now, I don’t want us to go into and fully explain rollups because they’re even more complicated than channels, but for those of you who are interested, I have an article. again, go to vitalik.ca. scroll down i believe it’s called an incomplete guide to summaries. and so I describe channels and also this thing called plasma, and then also rollups.
And rollups are really powerful because they don’t just support payments. they can support the full generality of applications, exactly the same applications that you can run directly on the ethereum blockchain itself. but if you do those things inside a digest, they become 100 times cheaper. so is this very powerful scalability technology and see the ethereum community and the ethereum community loves rollups because they are very easy to update because if you run an application on ethereum you can run the exact same application inside a compatible virtual machine with ethereum summary of which there are a couple of projects. and actually, I think a couple of days ago, the optimism now is, instead, they’re going to release their main one pretty soon.
naval ravikant: the rollups are fascinating. I have been researching them a bit and they are worth knowing. basically the idea is just that there are these very complex machines that are not on the blockchain, that are off the blockchain, that execute the transactions, but then they send different types of proofs to the blockchain to say : “don’t worry, this was a valid transaction.” and the two different approaches, optimism is optimistic where basically optimistic summaries say, “we assume people are doing the right thing, but we’re watching. and if someone commits fraud or makes a mistake, then they are punished for that fraud” while that there are these zero knowledge base rollups started by starkware and others, which basically say, “hey, actually, we’re going to present evidence, which is much shorter than the actual calculation, that the calculation was successful.” but I think these together give what, another 100x speed boost?
buterina vitalik: mm-hmm (affirmative). yes.
naval ravikant: so if you combine the eth2 layer 1 speedup and the layer 2 stack speedup, you get a 10,000x speedup.
buterina vitalik: exactly. you’ll get, some were over 100,000 transactions per second, and another very nice feature of fragmentation by the way, is that it’s quadratic, right? thus, if the efficiency of computers increases by a factor of two, then it can support twice as many shards and each shard can be twice as large. and then the capacity of the entire system increases by a factor of four, right? so we actually expect that capacity to grow well beyond 100,000 in the next two decades:
naval ravikant: so is it an exaggeration to say that fragmentation increases capacity as a square of moore’s law, rather than just moore’s law?
vitalik buterin: yes, this is the — mm-hmm (affirmative).
ravikant naval: So if we get to over 100,000 transactions per second, that’s a lot. I mean, to give you a comparable metric. there are about 100,000 tweets per second on twitter during peak hours, and obviously these transactions are going to be much more sophisticated or could be much more sophisticated than a single tweet. they may actually be arbitrary computer programs running on the side. so that’s a bit of scalability. so I think the question arises, well, where is it? many people I know who are building applications on top of eth have now had to come up with backup plans. Competitive blockchains are emerging, trading off the security of decentralization for speed.
so what they’re going to do is say, “well we only have 20 validators run by our friends, or maybe like 100 people we know and trust, but a trade is so much faster. now we don’t have to get the consensus of unknown people on the internet. we don’t need these complicated contraptions, and then basically they can work a lot faster.” so in a number of projects, we’re looking at them as backup plans, but I know they don’t necessarily want to use them because they’re less decentralized. actually they don’t deliver on the original promise of blockchains to the same extent so the real question that I think is on everyone’s mind is is there a timeline for this can we set a reliable date for certain types of improvements, because people are betting their businesses on this?
vitalik buterin: great and very important question. so i mean i’ll start with eth2 progress. so I think it’s important to reiterate, because I think a lot of people haven’t fully absorbed this. the eth2 chain is already running, right? so there is already a proof of stake chain. You don’t have sharding yet, but the proof of stake system is running. what hasn’t happened yet is the event we call a merge, which is where we basically take existing activity on ethereum and move it entirely from the proof-of-work chain to the proof-of-stake chain. . and then the proof of work changes, it basically becomes irrelevant from there. the reason we take this multi-step approach, where we start the proof of stake system first, and then let both run in parallel for a while, and then merge at the end is just to give proof of stake at some point to prove their worth before the entire ecosystem is asked to upgrade. but basically, proof of stake exists, has been stable, running since launch, and sometime soon enough, we’re going to merge all proof-of-work activity into it.
so fragmentation will also occur. and fragmentation at the moment, there is a specification, there are prototypes of parts of it. I’ll admit we were actually prioritizing merging even more than sharding recently. the reason this actually has to do with the other thing, which is the update rollups, right? what you need to remember is that if you have summaries, but no chunking, you still have a 100x scale factor, right? it still has the capacity of the blockchain to reach between 1,000 and 4,000 transactions per second, depending on how complex these transactions are. and so with the rollups, as I mentioned, the optimistic rollup, fully evm compatible, is likely to be released, with the initial release being in about a month or so. there’s also a project called arbitrage, which also has an evm compatible rollup.
Actually, there were simpler summaries that are only capable of processing simple transactions that are exchanged between assets, unlike looping and zksync. and those rollups have been running stable for about a year already, right? so rollups aren’t even theory. they have been a practical part of even: an ethereum scalability for some users for almost a year now. and what’s left is to basically take that same model and just fully extend it to not only support transactions, but also arbitrary applications. Right? so the summaries will be coming very soon and we’re pretty sure that by the time we need more scaling of that, sharding will have been done for a long time by then.
naval ravikant: so basically you’re saying you’re very confident that something like a zk-based bullish or digest will solve a 100x scalability problem in the next few months.
vitalik buterin: yes, I think so. I mean, I think there’s definitely a lot of people who won’t feel comfortable moving around just because it’s a new technology and new technology always has risks, but I hope there will be a lot of applications. I mean possibly even non-financial applications like nifty ones, and domain names etc to start with just because the risks are less if things break and then creep into more and more valuable things as people feel more comfortable over time.
naval ravikant: so do you think ethereum could have a schism of scale, like bitcoin did? bitcoin split into bitcoin and bitcoin cash or the block size debate a few years ago that it’s all about scaling and some people were saying bitcoin should be digital cash and so it needs these big blocks and it needs to handle more transactions. and other people said, no no, bitcoin is a swiss bank account. it is digital gold and must be safe. and many small nodes have to be able to run it. therefore, we care more about security than handling small transactions and the small block that people won. and so bitcoin was forked. and now of course what we call bitcoin is a small block bitcoin that won that debate. do you think there is a chance that some miners and people will stay on eth1 instead of eth2?
vitalik buterin: I think so, except I think the risks are much lower. a big part of the reason is that we’ve been very open about proof of stake and sharding being the vision basically since day one. and i mean, ethereum already had this schism, right? of ethereum and classic ethereum. and many of the proof of work advocates have actually already moved over to ethereum classic because they recognize that the ethereum classic community and ideology were more aligned with that proof of work going on forever. So why stay on the chain where core developers and many people eagerly await a proof-of-stake change if you can simply move to a platform that already accepts your values? so i think that was one of the factors that finally made the transition to eth2 a little bit safer.
Another thing too is that I really don’t think there’s a deep schism of ideologies within ethereum in the way that there was in bitcoin, right? i think on ethereum, everyone is more or less in agreement with the idea that you have layer 1 scaling and layer 2 scaling. there are some longer term disagreements, like justin drake, one of our researchers, for example, he’s much more interested in making layer 1 more powerful, whereas I’m more in favor of a simpler layer 1 and layer 2 doing more things. but that is not an extremely deep and fundamental disagreement. Either approach will have a lot of scalability and offer great environments for ethereum users.
naval ravikant: that’s interesting. you don’t even run ethereum. you have disagreements with the developers and they might even change it in a way you don’t like. has that already happened? Has there ever been a case where something was implemented on ethereum that the community or other developers wanted, that you didn’t agree with?
vitalik buterin: There have definitely been changes I wanted to push and I gave up pretty quickly because there weren’t enough core developers or the community ended up disagreeing with them. there have been changes that were pushed by some people other than me. and then where I was completely silent. therefore the block reward decreases, eg I was completely silent or mostly silent. progpow was mostly silent. it was obvious that the progpower side was losing. things I was trying to push. I mean, those are harder to find just because I tend to naturally understand what the community would accept and I don’t really try to push things that I don’t think will be successful. I mean, there are some minutiae around scaling strategies and statelessness and state management strategies that I and other core developers have differing opinions on. therefore, there is a lot of back and forth as we try to accommodate each other’s concerns.
naval ravikant: yes. my feeling from afar is that you are more coordinating than dictating and what are you doing? are you running ethereum foundation? Is there an organization you are part of? Or are you just an itinerant person with a laptop and a few friends who just writes blog posts and submits pitches?
buterina vitalik: a bit of both. and I send the proposal, I do some writing concept tests and in python, I do some trying to coordinate people. the ethereum foundation as an organization exists. so the CEO of that is aya miyaguchi. she has been doing a lot of logistical stuff for the last three years and has done an amazing job. and I ended up coordinating and working with her quite a bit on various things. but even the ethereum foundation has a big role because it has this big pool of capital and this high level of public legitimacy, but it’s not the only organization within ethereum, right?
There are many proposals that began abroad. there were many proposals that got a lot of community support from abroad. even organizations other than the ethereum foundation that have a lot of resources within the ethereum ecosystem. so for example for the first few years consensys did quite a bit and consensys is still doing a lot but now there is also uniswap whose treasury just grew hugely and they are even richer than the ethereum foundation. So, and I think in practice, it ends up being an informal collaborative effort between many different groups.
naval ravikant: so uniswap is interesting. uniswap is, for those of you who don’t know, it’s an app built on top of ethereum, but it has its own token. and it’s one of the first automated market makers and decentralized platform to trade cryptocurrencies with each other without having to use a centralized authority like a coinbase or a gemini or a coin list instead just go uniswap and it is a smart contract. It is not owned or managed by anyone except the community and a few developers, and there is an associated token, but you can automatically trade with this smart contract to convert, for example, your ethereum into a stablecoin to get the equivalent of dollars. or back and this shows how the ethereum ecosystem is very different from the bitcoin ecosystem.
In the bitcoin ecosystem, there is only one currency, there is bitcoin. and they don’t really tolerate other chips in their orbit. whereas with ethereum, you’ve got a lot of other tokens in orbit and you’re going to see blockchains that are competing with ethereum that are doing different tradeoffs and whether it’s flo or ava or neo or whatever, there’s a bunch of those. but there are also people that are built on top of you, like balancer, curve, uniswap and all that. and so what is your opinion on all these other tokens? How many chips will there be? How do you determine which makes sense and which doesn’t? do other blockchains make sense at layer 1, or should other tokens be merged only at layer 2 now that ethereum exists?
vitalik buterin: no, this is definitely a very important topic. chips are one of those things that really is like playing with fire, right? on the other hand, fire is crucial for human civilization, but on the other hand, fire is very bad. It can burn your family if you’re not careful. so the thing about tokens, right, is that the crypto space is not the only space that tried to build decentralized things, right? there were a lot of decentralized projects that are outside of the crypto space, like diaspora, the decentralized alternative to facebook that people tried to build around 2010, is a good example. But the challenge with this pre-blockchain or non-blockchain decentralization or cryptography is that it’s harder to align the incentives and motivate people to actually want to participate in building and growing the community at scale. you can have idealists, but the problem with idealism is that idealism is not very socially scalable. and so cryptocurrency, on the other hand, can appeal to universal values, right? where the true universal value is to get rich for many people.
naval ravikant: and it seems that with eth you have been a bit of both. you have a bit of both.
buterina vitalik: exactly.
naval ravikant: you have people who have ethics to get rich, and then there is also a movement.
buterina vitalik: correct. exactly. and I think balance is important, right? I think the failure of many non-blockchain cryptocurrencies shows the inability to do things on a large scale without that financial incentive. but at the same time, much more, at least in my opinion, a moral project within crypto that only cares about the pump and the volume and getting a powerful and expensive token that they can get rich off of. Those projects don’t end up working well in the long run, either. Right? And there have been many projects where VC funding alone gave them hundreds of millions of dollars of capital, but the reality is that hundreds of millions of dollars of capital just can’t buy you a soul. Right? and so, I think a lot of people end up tripping and falling into it to some degree. So, crypto, yes.
naval ravikant: I was going to say that I think some of that is just due to the pre-mine phenomenon where bitcoin had a so-called fair launch, although how fair that is can be debated. it was, but how fair is the distribution today. but they all started mining at the same time or everyone in the know. while a lot of coins came later, the team has a pre-mine where they get a bunch of coins up front. and as the amount of pre-mining increases and the competition goes from, hey, let’s mine as many bitcoins as possible to, hey, just create the winning blockchain and then get the big pre-mined. so it’s just about moving the competition from mining to creating or forking. so it’s almost inevitable once pre-mining gets a bit accepted there will be so many different blockchains.
vitalik buterin: yeah no, I think that’s definitely fair too. ethereum once again that’s pretty moderate there. there was a pre-mine but no, the pre-mine was only about 12 percent, actually about 10 percent of the total supply. and people did have the opportunity to mine or get ahead in the sale. and so many people had the opportunity to be part of the ecosystem. but I think the less monetary, the movement aspect of this is important, right? if you just go to coinmarketcap and look at some of the top 10 coins besides bitcoin and ethereum, you can’t always give a good answer as to what values that token represents. whereas, for bitcoin, you can, for ethereum, you can, for zcash, for example, I think you can.
so I think there’s definitely this tricky trade-off between different factors. Basically, currency can help, but too much emphasis on just one currency can be detrimental. and it is challenging. I think uniswap really did very well with their coin because on the one hand you could criticize and say, “oh this was just a measure”. who was reactionary. which was reacting to sushiswap, trying to get in and basically trying to push everyone to migrate quickly and they had a coin. and so people got into sushiswap because they just wanted to get rich off of it. and so uniswap reacted by making its own currency”. but at the same time, they did something really cool, which is, a big part of the initial distribution, it was this very egalitarian airdrop, right?
Basically, if you had used the uniswap even once before the airdrop, how it started, you would get 400 uni tokens. so at the time those uni tokens were worth about $3.50. so the prank was uniswap actually delivered by giving everyone a stimulus check. and people really loved that. and the uni supply distribution was very scattered, and everything was this dao where many people could participate in decision-making. so I think there are ways to get tokens right and ways to get tokens wrong.
naval ravikant: yes. the background of sushiswap is that uniswap was this automated market maker, this decentralized exchange that was launched and then attacked. they were cloned by this other one called sushiswap. joke about uni sushi. and then they tried to steal the uniswap community by saying “hey come here and we will pay you more by giving you tokens”. and then uniswap was forced to create a token, which they then gave away to their community, called airdrops. It’s like throwing money from a helicopter, except now it’s made-up chips. so there’s all these cool things that happen in crypto where it’s about building and maintaining communities you have to figure out how to distribute the loot but contrast how this compares to facebook or twitter you don’t see mark zuckerberg pitching from the air. facebook shares on users and you don’t see jack dorsey throwing twitter revenue on users but that’s exactly what happens in blockchain land. and ethereum might have had a little pre-mine but i remember early on looking at ethereum and i think i talked to balaji srinivasan one of your other guests about that tim where we were looking at eth on the day it launched for the first time. and we were really confused because it seemed like there was a brilliant technician surrounded by 15 other people who had the title of co-founder and it was very confusing to assess him as an investor.
so we end up not investing, to our detriment. But that’s my way of saying this wasn’t some vitalik get-rich-quick scheme. I don’t think vitalik was even the biggest chip holder. I think there were a lot of other people who frankly had a lot less to do with the success of ethereum, who ended up having a lot of tokens. insofar as vitalik is the one who was working on it and pushing it forward, it’s a labor of love. and I’ve always been very impressed with how his team is very selfless and really wants to make the world a better place. maybe they are young and naive, but it is refreshing to see that. I think in terms of branding, a lot of people see ethereum as lyft for bitcoin’s uber, right? there is a crypto libertarianism of the right versus a crypto libertarianism of the left.
tim ferriss: naval, let me jump in for a second here, if I can ask a naive question, maybe a beginner question. and if I’m looking at this completely wrong, I’d love to be corrected. thinking about ethereum and comparing it to say bitcoin and considering potential regulatory threats to bitcoin and I think regulators are probably going to focus more on crypto than blockchain. and just by extension if we’re thinking of ethereum on some level as a cryptocurrency but also as a world computer maybe like amazon has its own cryptocurrency right bezonians or whatever they call it and then aws, that even if there was a coin crackdown, that ethereum would have some resilience and antifragility in that regard. Does it mean that ethereum as a whole is less subject to regulatory threat, or that it can thrive in the face of regulatory threat similar to what bitcoin might face?
vitalik buterin: comparing the regulatory situation of ethereum and bitcoin, I think they both benefit from being highly international, right? bitcoin has a strong community in the united states, it has a strong community in china. it has a strong community in the eu and in many other places. ethereum is very similar in that regard. in other words, these very strong communities in many different countries, including countries that are not geopolitically on the same page with each other. there is a lot of resilience in that sense. now, of course, the other aspect of politics is that it’s not just about what they can do. it’s also about what they want to do. The reality is that regulators have cracked down on crypto far less than they theoretically could, right? they could theoretically make something like coinbase illegal overnight.
tim ferriss: correct.
vitalik buterin: and I think the reality is that they don’t, partly because they see a lot of positive value coming out of these platforms, right? there are even regulators who want to use public blockchains and even things like ethereum to build applications on top of them. they see value in some of the advantages that things like stablecoins, for example, could provide and non-financial applications of various kinds.
naval ravikant: yes. if i wanted to build a fraud proof voting app i would probably do it on ethereum.
vitalik buterin: it would be interesting.
naval ravikant: yes. cryptocurrencies are inherently designed to be sovereign resistant, right? they are designed to be stateless. and so geographic redundancy is one aspect of it. and some countries try to ban it. I think for a while, people think China tried to ban it and failed. and right now india is talking about banning it and that will end in tears right? that’s not going to work out if you shut your country out of innovation for the next 10 years, so I hope they don’t. but there is also redundancy in terms of design. for example, going proof-of-stake is a different kind of redundancy than just being proof-of-work. you’re not subject to the same kinds of attacks that I think are used for all kinds of applications.
tim ferriss: naval, could you talk about that?
naval ravikant: yes. proof of work is shutting down hardware and equipment miners and miners, where they live, right. they need a physical presence, while proof of stake as validators, we only need an internet connection. and so they are harder to stop and harder to find in theory. And then what applications run on these platforms? if you’re just running digitalgoal that’s an app but if you’re also running like vitalik said working prediction markets public goods financial systems voting systems gaming systems nifty tokens art galleries right and all that kind of stuff, then it becomes very difficult to turn it off. and in fact I think that eventually, all internet traffic will be encrypted and everything will require cryptocurrencies to allocate scarce resources. even today, there are things we do on the internet that are centralized, like caching and routing and spam filtering, that should be decentralized and involve crypto payments for efficiency.
and once we start accessing those applications, it will be very difficult to deactivate cryptocurrencies without disconnecting the internet. It is the native money of the internet. therefore, if you remove transfer of value from the internet, the internet as we know it will be stunted at best and more likely to stop working at some levels.
tim ferriss: thank you. back to you naval.
naval ravikant: yes. oh Yes Yes Yes. not at all. No. Yes. there are an infinite number of rabbit holes we can go down. just going back to ethereum for a second. there’s bitcoin, which is clearly digital gold. there is ethereum, which is the world computer. and with digital gold, the high price is good. you want your gold to rise in value, except to the extent that these days digital gold, bitcoin, has been going up, but it actually gives me some trepidation. I tell people it’s like my insurance policy, it’s getting more valuable, my life insurance policy, right?
I don’t know how I feel about it. but with eth, it’s not clear if the price going up is always that good for adoption. it’s good for people who pump and hold, but is it as good for people who try to use it? do you have any idea about the price of eth and how much? for example, we don’t even know exactly how much eth there will be in the future, right? the supply curve is a little undefined and some people say, “oh, it might be too big. this thing will inflate.”
while there are other arguments that say, “no, there are certain applications we’re going to have for which you have to block eth or even destroy eth to use these applications. eth may end up being more valuable. do you have a… what is your current view on where the eth supply is going and what the price of eth means for the ecosystem?
buterina vitalik: yes. one thing that i think you alluded to a little bit, is that there is this proposal called eip-1559, which redesigns how your transaction fee market works. and there’s a lot of very weird economic math as to why the specific changes make sense but one of the consequences of that change is that most of the fees instead of going to the miner or corporate creates the block we would get burned it would just be removed literally of existence. and thus if the demand for ethereum usage is high enough, then more eth would actually be destroyed than created. so the joke i sometimes make is, if bitcoin knows if the fixed supply is sound money, then if it has a decreasing supply, does that give us some ultrasound money? and it’s actually not even such a far-fetched possibility. if you look at the transaction fees for the last month, they have actually been on many days higher than the block rewards for that day.
It’s interesting because it basically creates this more direct connection between people using the ethereum and eth blockchain that has some value, right? in the beginning, the way eth was even described when we were doing the sale, is that this is like gas. you are buying this token which you need to use if you want to extend transactions. and if the token is actually a consumable, right, then it actually behaves even more like… well, I guess gasoline, like the original metaphor, right. if people want to use it, they would actually have to consume it. and so eth: the value of this is actually something that depends on the ethereum network being useful. and it’s a little difference, a guiding principle of something like bitcoin, right, where bitcoin just derives value: bitcoin, the currency, derives value from bitcoin, the currency, and bitcoin, the blockchain is this thing on the side that, ” good, good. fine. it has to exist.”
While ethereum is much more of a system where the blockchain is the dot and eth is the asset, it gains value from the blockchain successfully doing its job.
naval ravikant: is interesting. bitcoin, the value is in the currency or in bitcoin itself. whereas in eth, the value is in the blockchain that is being used and the eth is the by-product of it. yes to use my forced castles made of mathematical analogy i think bitcoin is the great impregnable citadel of fort knox where you are putting your gold and it has high walls and is very well protected. And they don’t change much. and it’s the same as 2009 or 2011 so no one can get in but eth has this dynamic network of small city states that trade with each other so the more trade there is the freer the flow of information and goods, the more valuable the entire system becomes, but no point is necessarily so impregnable.
For example, I expect we’ll see more hacks, break-ins and failures in the ecosystem as a whole, not in eth itself but in the ecosystem around eth, than in the ecosystem around bitcoin necessarily, but at the same time, eth is dynamic, growing, and adaptable, making it an evolving creature.
buterina vitalik: yes. I agree with that, with one reservation, which is that I think the bitcoin ecosystem also has its own time bomb demons, like tether being an example.
naval ravikant: yes. there are pieces in the bitcoin ecosystem that are semi-centralized or of unknown trustworthiness and depend on trusted third parties, I should say, but as the bitcoin folks say, “not your keys, not your coin.”
buterina vitalik: correct.
naval ravikant: and trusted third parties are security holes. they are aware of that. I think the bitcoin maximalists, which I think is a term that you coined, the bitcoin maximalists would say, “well that’s not bitcoin, is it? that’s something else.”
buterina vitalik: correct.
naval ravikant: one of the things to think about here, and I think you care about this more than most people in crypto, which is good, is that you seem to care about wealth inequality, the gini coefficient, and the distribution of currencies. and one of the critiques of crypto that I see a lot is like, “well, okay. you’re getting rid of the old oligarchs for this new financial system, but you’re just replacing them with new oligarchs, who are the original holders of bitcoin and eth.”
and how do you think about the distribution of wealth in a cryptocurrency based economy compared to a fiat currency, also known as the US dollar and euro based economy?
vitalik buterin: This is definitely, I think, one of the most challenging questions facing the community. this is actually one of the reasons why i really like ethereum’s welcoming multi-coin ecosystem, right? sure, it’s ok. you have eth and there is a limited set of opportunities to get new eth directly from the faucet. and at some point the supply will level off and if you’re buying eth you’re buying eth from previous people but at the same time there are these new apps that are launching you have your uni, as I mentioned, where the distribution was, I thought, pretty equal, right? As I mentioned, the $400 uni stimulus checks that only go to everyone who has ever used the app, at least once and could go to great lengths not to favor wealthy users too much.
and then tornado cash had an airdrop a couple of weeks ago. more of these assets are coming in. And I think that kind of abandonment is healthy. it breathes new life into the ecosystem and it breathes new life into the distribution of wealth and it creates opportunities for new people to come in and participate on an equal footing as well but if we want to compare all of this to the fiat ecosystem it’s a hard comparison to make , just because the institutions are very different and it’s hard to compare one with the other, right?
Fiat currency is: It’s basically created by a combination of the central bank and the commercial banking ecosystem. and in terms of where the newly generated value goes in, both sides essentially get a piece. and there are bad things that come out of that. there are also good things that come out of it. I know this is a controversial position among libertarians, but I actually like the idea that if you have fiat currency, then the government can print it and use it as a source of government revenue. the reason i like it is because i think that if governments could get money through discreet means it reduces the extent to which they have to rely on getting money through more intrusive means and rely on taxes and more direct :
naval ravikant: the problem is when it is discreet, it is very easy to do it very secretly.
buterina vitalik: correct.
naval ravikant: and these taxes need to be collected now, while printing may leave the can on the road for the next person to sort out.
buterina vitalik: good, good. this is the argument in the other direction.
naval ravikant: there is a moral hazard there. and I think we’re watching him play. where we printed $8 billion last year, and who’s going to pay for it?
vitalik buterin: well, the good thing about cryptocurrencies, of course, is that the ecosystem is much more transparent. and so it is easier to analyze and understand what the rules are. and within the context of a crypto ecosystem, as I mentioned, you can still do very egalitarian things. you can still reward people who were very important early contributors on things that ended up being very important. you could still do all those things. and we have a responsibility to get the balance right, but the environment is inherently more open and honest, just because these are decentralized systems and everyone does it – they see exactly what’s going on.
naval ravikant: yes. it is certainly more transparent. you can tell what the eth money supply is at any given time, good luck doing that with the US dollar money supply. or you can know what the inflation is in eth at a given point. and as you say there are opportunities to build more apps besides eth and maybe eth is the app store for decentralized apps but some of those apps can capture as much value and create as much value as eth itself.
buterina vitalik: yes.
naval ravikant: I think it will be like this: the really interesting development in the last year is just seeing applications other than eth that actually create, capture and generate a lot of wealth and value. and in that sense, this run-up to 2021 and 2020 seems a little different to me than the run-up to 2017, which was based on a lot of hype, frankly. As we’ve seen crypto develop, he’s also had some very interesting thoughts on everything from radical markets to political philosophy to what happened in 2020 and so on. and we could spend an entire podcast on that, but only on a very high level, you had a really good post on your blog saying endnotes in 2020. and it was about a lot more than just crypto. What else are you really interested in these days? is it agi? is it life extension? Are they public goods? Are they different types of voting schemes? what are you really worried about that is not directly related to cryptocurrencies?
buterina vitalik: some of all that. I think the changing way the economy works is definitely one of those really big issues, right? there are a couple of different changes that are happening. one of the ones I talked about is that public goods are becoming more important, right? A lot of the ways that people thought about the economy 50 or a hundred years ago, they just focus on private goods, like cars, houses, food, things like that, but there are also public goods, right? a large, unselective group of people.
and so no single person who benefits has the incentive to personally fund the whole thing and it’s hard to pressure people into paying for it because you can’t deny the benefits of the thing to people who don’t. they pay. is, for example, correct. therefore, scientific research is an example of a public good. my blog is an example of a public good. open source software is an example of a public good. and on the internet, public goods are even more common than private goods. and so our economy simply has to take that fact seriously. and a lot of what has been going on in the blockchain space is somehow just the crypto world trying to deal with those things.
naval ravikant: basically, these public goods are aware that costs are concentrated. if I want to finance scientific research, I do it out of my own pocket, but it benefits all of humanity. profits are shared.
buterina vitalik: exactly.
naval ravikant: and therefore tend to be out of stock. they tend to be very few.
buterina vitalik: yes.
naval ravikant: so there are schemes to address some of them. I think you’ve talked about quadratic funding as an example.
buterina vitalik: yes.
tim ferriss: what is quadratic financing?
vitalik buterin: quadratic funding is this interesting mechanism that basically says that anybody can donate money for public goods through the mechanism, but to compensate for this according to the arrangement you’re talking about, the mechanism provides a subsidy to all public goods. and that subsidy depends not only on the amount that was contributed but also on the total number of people who contributed, right? For example, if there are two projects, they both got $100 but one of them got, say, $80 from one person and $20 from another person. and the second project just received $1 from each of the hundred people, the second public good is much more public than the first public good. and the tragedy of the commons on the second, is much more correct.
And so the fact that the second one made it to $100 despite the tragedy of the 100-way commons, implies that it’s a really important project. and so the quadratic funding mechanism actually gives a much larger subsidy to the $1 of each hundred-person project than to the project that received only one hundred dollars from a two-person split. and that’s why we’ve been experimenting with quadratic funding. there’s a thing called gitcoin grants that happens several times a year and has had about seven or eight rounds already, i forgot the exact number, just for public goods within the ethereum ecosystem. and that has worked very well. that’s been one of the interesting experiments I’ve been following.
tim ferriss: a quadratic funding question, just to jump in here, as I’m involved in a few different types of scientific research. are those funders in those experiments you’ve done anonymized or anonymised because I’m thinking about the example you gave and how there are other plausible explanations for why there could be two funders. I’m just thinking, for example, of the reputational risk associated with certain types of scientific research.
buterina vitalik: correct.
tim ferriss: There are other plausible explanations, but they rely heavily on named names rather than being anonymous.
buterina vitalik: yes, of course.
tim ferriss: what do you think about other contributing factors, depending on how you’re running the experiments?
buterina vitalik: of course. first of all, in quadratic financing, unfortunately, you need to have some kind of identity model because you need to prevent the two people from pretending they are 100 people.
tim ferriss: correct.
vitalik buterin: but with crypto, you can actually do fancy things that give you most of the benefit of having anonymity, despite needing to have an identity system. basically you can have a system where people can make all these contributions and it’s done in such a way that the system identifies how many unique contributors there are to each project, but where the system doesn’t have a clue, no one actually has a clue. of exactly which particular person donated how much money to which particular project, correct. and this is done using this really important and fascinating topic of zero-knowledge proof cryptography. and zero-knowledge proof cryptography: basically the idea is that it allows you to cryptographically prove that some statement is true. I can do a cryptographic test that says I have 100 coins or that you assigned a message that contains some data about me and it was signed with your key and you can do these tests but where the test doesn’t reveal the content of the thing. Which is proven, right.
For example, I can prove that I have an account that has at least 100 coins, but I don’t have to prove which account it is. I don’t have to prove exactly how many coins I have. and there’s a lot of this very sophisticated mathematical magic that basically creates this protocol where if you give me a proof then I know the statement is true because if the statement is false you would have had no way of generating the proof but if I just have the proof , I can’t learn anything else other than the fact that that particular statement is correct. this is an incredibly powerful crypto, it’s behind zcash for example.
There are also ethereum applications, like tornado cash that are using it. zero knowledge tests also have these really good scalability tests. tests are very quick to verify, even if the statement they’re proving is incredibly complex and zk-rollups, like some of these scaling solutions, actually end up benefiting from using them. very powerful technology. and I think it’s also very significant from a societal perspective because we have this broader debate about anonymity versus accountability, right, of the benefits of privacy versus the benefits of basically persistent reputations and zero-knowledge cryptography is really powerful because it can in many cases allow us to get both good things at the same time. it could give us the benefits of things like persistent reputations while also getting many of the benefits of anonymity.
tim ferriss: looks very powerful. Just to continue on that, with scientific research in mind, I’m going to ask you what areas you might have a particular personal interest in. i know you have some interest in life extension as evidenced by the dragon slang parable on your website or that you link to from your twitter bio, but it seems to me that quadratic funding experiments would also rely heavily on a equally simplistic or simplified communication of competing scientific studies, not necessarily competing but contrasting, just because there are some cases just in my experience where scientific studies that require a lot of scientific knowledge or due diligence would have fewer funders compared to others, but that doesn’t necessarily reflects less importance or potential for impact.
buterina vitalik: yes. no, this is also a very important point. and I think the solution to this is that quadratic funding alone doesn’t solve all the problems and you have to combine quadratic funding with other mechanisms. I can give two examples. An example of how you could do this is to simply set up an organization where the organization has some smart people and those smart people do a good job of picking out who are the scientists who are really worth funding. and then that organization gets a history of five or ten years. and people see that, “oh. yes, this organization has a surprisingly good track record of funding studies that actually end up being significant five years later.”
and then people will just contribute through the quadratic funding scheme to this organization and the organization will be able to leverage its own reputation. now if that organization ends up doing bad things and abusing the public trust it has earned, then people could easily stop contributing and start contributing to another group. that’s one approach.
Another approach is that there could be clever ways to combine quadratic funding with venture capital. the idea here is that imagine if when people make a public good, they create a currency associated with that public good and just let people buy the currency. and when people buy the coin, the proceeds only go to the people who issue it. and then what you can do with quadratic funding is basically you can collectively buy these coins, right? you can simply say, “okay, this coin is a coin that represents a project that gave the world, say, a million dollars worth. so let’s quadratically fund a million dollars in the currency.”
and then anyone who bought that coin could benefit, right? So the idea is that if there are smart investors who can recognize that something will be valuable 10 years from now, they’ll basically be able to make a profit on it. And over time, if the market becomes more efficient, then if someone could have something that might be difficult for the general public to determine if it’s valuable at first, but then is likely to lead to some important outcome that everyone recognizes that it is really valuable. at some point in the future, then these investors can fill the void, right? you have these two approaches. you can trust reputation and do it retrospectively or you can trust this combination of quadratic funding with tokens and investments and do it prospectively. I think both are really interesting.
tim ferriss: I love this possibility of combining too, right? you could potentially have all the elements you described combined.
buterina vitalik: yes.
tim ferriss: and naval, you sound like you want to jump.
naval ravikant: I was thinking campaign finance works a bit like this. maybe accidentally, maybe the system just navigated to it through some complex systems level intelligence, but if you look at campaign finance by the time people run for office, there’s a maximum limit they can get per donor , TRUE? and so an individual can only give a certain amount to a congressman or a senator or a presidential candidate. and then the feds also have matching funds on top of that. it’s a combination of these schemes because by limiting the amount a person can give, you’re creating a quadratic, even though it’s not really a quadratic. someone very rich, I guess could give a lot more through a secondary vehicle, but that’s less efficient because they’re not allowed to coordinate with the main campaign. there is a very poorly implemented version of quadratic matching dollar financing that already exists in federal campaign finance.
tim ferriss: that’s a good point.
naval ravikant: yes.
tim ferriss: vitalik, what areas of scientific inquiry or research are on your short list of the most personally interesting at the moment?
buterina vitalik: yes, no. you mentioned life extension. life extension is definitely very important to me. and the coronavirus has even had the positive side effect of accelerating this somewhat, but there’s a lot of extremely promising things happening in biotech, right? And I think there’s a very significant chance that where we are today is basically for biotech, the equivalent of where computers were in 1950, right? So if you imagine the difference between the eniac and a modern laptop or smartphone, that’s the difference we’ll see between the biotech of 2020 and the biotech of 2090.
so, if at this point, we can already find vaccines for a virus, well, it’s a year from the start of the implementation, but in reality, everything happened much faster. and most of the delay can be attributed to bioconservatism, but that’s another discussion. if you go even from there and then add 70 years of progress to that, it’s very easy to see. even the aging process becomes something that becomes reversible and it is normal for people to live a century and a half, two centuries and then go even further. no, I think there’s a huge and nice humanitarian outcome that can come from that. basically the concept of your grandmother dying slowly out of public consciousness in the same way that the concept of getting lost in a city slowly out of public consciousness over the last 25 years as we got better cell phones, and I think that’s a really beautiful world and much better to spend a lot of resources to target.
naval ravikant: do you think that’s realistic, given all the three-letter agencies that slow development experimentation? because I’m worried that it’s more like nuclear power where they can’t tolerate a single death, so innovation isn’t really allowed.
vitalik buterin: okay, this is where I say something controversial, and that is I think I’m very happy that the coronavirus has helped delegitimize bioconservatism to the extent that it has. .
naval ravikant: yes, I agree with that. the modern vaccine was ready on January 13.
buterina vitalik: yes. and even things like human challenge studies as the default, I think the bioethical opinion about a year ago was like “oh my god this is unethical.” And now, like in the UK, they’re actually happening. no, this is great.
naval ravikant: yes, it’s good if it breaks bioconservatism to some extent, because the rate of innovation is too low. it’s like what we’ve done to nuclear power if we do that to biotech and we’ve already done that to some extent but if we do it even more then there’s no chance grandma will live forever there’s not even a chance that I live another 50 years, let alone Grandma living forever. you are 27; I’d love to see where you are at 47. You’re going to be a really interesting guy. you already are, but you’re going to be an even more interesting guy.
tim ferriss: even more interesting in 447.
vitalik buterin: but I hope you can both come to my thousandth birthday party.
naval ravikant: well, are you on some kind of calorie restriction or intermittent fasting?
vitalik buterin: Until now I do the intermittent fasting of the poor, which is that I normally don’t eat breakfast. I go back to doing the usual exercise, nothing too elaborate. like at least a couple of the basic supplements that the cool life extension people are recommending. nothing much fancier than that so far, though I’m watching this space very closely and then I’m sure I’ll end up doing a lot more stuff 10 or even five years from now.
tim ferriss: do you take rapamycin?
buterina vitalik: I do not take rapamycin. Metformin is the one I take. ashwagandha is another one I take,
tim ferriss: and just for those people listening, who should know this. Number one, none of this is medical advice. number two, metformin, just as an example, none of these things should be taken without the advice of a medical professional, metformin is used in the treatment of type two diabetes, glucophage, but I’m also aware of it. how do you decide what to implement versus not to implement for you personally?
vitalik buterin: just asking a lot of people in the life extension community. I read the studies while looking at what some of the high-level results are, and then boil it down to a couple of things.
tim ferriss: It’s remarkable how many people in various subcommunities have been using many of these interventions longitudinally. I remember when I was working on my second book researching trans-resveratrol and found out that, even at the time this was 2008, 2009, people who had been using it for years were saying 500 milligrams a day. so he was able to identify certain long term effects and side effects given anecdotally, but still have a n of, I don’t know, maybe a thousand people on this forum. so there is a lot to learn from these groups.
naval ravikant: yeah, there’s even a new one floating around. glucagon-like peptide glp one. I’m sure you’ve seen some study going around about it, but yes, these things are very unknown; I wish these were more out there and there was a very, very strong anti-aging research community that was openly operating, exchanging notes on what works and what doesn’t, and able to run some sort of trials more efficiently because fighting Anti-aging is a very time-sensitive task.
vitalik buterin: it is, yes. that is literally half the deaths of World War II for every year it is delayed, or yet that many lives saved for every year it is brought forward.
naval ravikant: An analogy I heard I liked was, “we are all billionaires born with billions of seconds to live.” and then we spent them and now you get to someone like warren buffett and i’m sure he would trade a hundred billion dollars for more billions of seconds but he can’t can he? indeed, health care is the ultimate inelastic good. on your deathbed you will spend any amount of money to live even one more hour. so certainly the financial incentives are there, the personal incentives are there, but because of this concept that people who don’t know what they’re doing are going to hear something and run off and ingest some substance and then die, drink bleach, or taking too much rapamycin, because of that kind of fear we are not allowed to make any real innovations or discoveries and it is literally killing us completely.
and if we also reframed it, no, it’s not that we’re dying of aging, we’re dying because they don’t let us innovate, do research, it could adopt a different perspective. but actually I was a little disappointed with the coronavirus response because I thought we would have had faster trials of the vaccines but the fact that they were still a little bit slow and even now the rollout is being delayed because we have to create these perfect packages of delivery of vaccines instead of just some kind of quick and dirty vaccination. and we have to go through these very regimented protocols instead of just saying “everybody line up and we’re going as fast as we can.” because we insist on doing things in this bureaucratic and overly controlled way, we are still holding things up. And if the coronavirus won’t get us to accelerate our normal processes into a war situation, then what will?
tim ferriss: yes, I also want to add that given my experience in a highly stigmatized field of scientific research, which is psychedelics and psychedelic compounds for intractable or difficult-to-treat psychiatric conditions, I think that life extension or the community itself and its advocates could spend a lot of oxygen and calories trying to convince regulators and three-letter acronyms to classify aging as a disease and therefore allocate funding, and I think that is going to be very difficult and possibly wasteful compared to decentralized or distributed funding from citizen philanthropists or donors of various kinds. I think a lot of it will come down to independent funding, as that has been the case, even down to phase three trials for compounds showing tremendous effect sizes in treating depression and post-traumatic stress disorder, etc. /p>
buterina vitalik: yes. I think another important thing is also international reach and more connections because ultimately the united states is not the center of the universe and there are a lot of very smart people in the eu like singapore, china, india, canada, everywhere else. and there’s a lot of great talent out there that I think could also benefit from helping all of humanity solve problems faster. so if we can work together on the problem more, hopefully we’ll prevent stupid nationalism from adding too much friction between things.
naval ravikant: yeah, I think a lot of the new generation, instead of being patrons of the arts, are trying to figure out how to become patrons of science. and instead of just doing venture capital, we’d all like to find a model for venture research because we need more science, right? science is upstream of technology and the faster we can move science, the more it will benefit us across the board. so i don’t know where else you want to go this time, but i have some more kind of closing questions for vitalik. if you’re ready for that.
tim ferriss: I want to take this wherever you want to take this, naval.
naval ravikant: good. yeah so one question i have is all the tumultuous change in 2020, because the coronavirus was a trigger, but it was a trigger to speed up a lot of things that were already happening, where do you think the world is headed in the next few? years when your peers may not agree with you? what are your opposing views or your kind of unique individualistic views on how things will play out that are not yet a consensus? and this is unfair because growing old was good. you made a solid, you took a risk.
vitalik buterin: well, aging is one example that is kind of the opposite of the world, but I guess definitely not in my circles.
naval ravikant: When I went through your writing, the idea that there will be many blockchains and many tokens, right, is quite different. the idea that the internet has increased the amount of public goods rather than the amount of private goods is actually quite counterintuitive because we think of it as more and more private property, but on the internet it’s one-to-many, so they’re all these public goods. and I think you were the first to drive home that point in a big way. and then I think that this aging thing is another. so I’m just digging to see if there are more.
vitalik buterin: yes, no, another thing that might have been iconoclastic two years ago, but isn’t today, would be a kind of geographic decentralization, right? even with ethereum we made a very active effort not to make it too centralized in any country or city anywhere. and i feel like we’ve benefited a lot from that but now of course they’re all decentralizing geographically and coinbase has announced that none of their managers live in san francisco etc.
naval ravikant: yes. it is very difficult to associate ethereum with a single country. I think it was created mainly by Canadians and your blog has a .ca on top of the domain.
buterina vitalik: well, it depends. I am Canadian, but my blog has a .ca, the foundation is Swiss and now there is also a Singaporean entity. many of the initial developers were German. many developers are also from the united states, one of the most efficient eth2 clients is based in australia. so I feel like we really took those values seriously and got it right.
naval ravikant: and the foundation has spent a lot of time in east asia. i think i’ve seen you go from conference to conference in east asia and korea and japan and places like that spreading the word so it’s pretty decentralized geographically what advice do you have for someone who wants to get in? ethereum, and you don’t just want to go and buy the token, do you? who really wants to dive into the ecosystem? what should a person do to get involved in the ethereum community and ecosystem? where are the leverage points?
vitalik buterin: I think you’re learning how to build an application, and actually trying to build an application is, I think, a great place to start. if that’s the kind of thing you’re interested in even if you don’t become a full time developer it’s like forcing yourself through the process it still helps you understand what the different pieces are and actually what function they fulfill. ? there’s another approach – well obviously they’re temporarily on hold but in general there’s a lot of local communities that meet in person and all that that people can be a part of and that’s often a great opportunity to get to meet other ethereum people.
there are many materials online. though in general I’m much more of a fan of hands-on learning. so kind of learning by doing instead of learning by assimilating information. so I highly recommend trying to make an app, for many people. and then otherwise there are a lot of different communities and you just have to come in and start participating in them.
naval ravikant: yes, for those of you who are curious, I think vitalik’s blog has spawned some of the stuff in the secret ethereum ecosystem. I think it was one of your reflections that led to the creation of uniswap. and, recently, he’s been talking about roll-ups, social wallets, and all sorts of other things that we build on top of. though maybe this is the first year where i feel like the community is outdoing your ideas, like with the nifty ones, and with some of the games that are coming up over eth, etc. There seems to be a lot of innovation going on. it’s hard to keep up. it’s really, really hard to keep up, but that’s a good thing.
for those of you also looking for what’s next down the rabbit hole, vitalik briefly mentions zero knowledge proofs. I would say that the beginning of the rabbit hole, the entrance is bitcoin. then you go a little further down, you find eth, but then when you find zero knowledge proof, that’s the big mind blowing moment when you realize what crypto is capable of. and there are analogies of what crypto can do that almost can’t be done in the real world.
It’s kind of like when you go to physics and when you come across quantum mechanics, it makes you rethink that no, not everything necessarily corresponds to exactly how I look at it the same way when you get to zero knowledge proofs. you realize that the levels of creativity and crypto that it enables are greater than what we could have had before crypto. so that’s also an interesting space to learn. and I think zero-knowledge proofs have probably been incorporated into an emerging ethereum ecosystem even more than we expected, right? because a lot of people called it lunar math from the beginning. it was deemed too difficult to be practical, but people have been removing it.
vitalik buterin: yeah, lunar math is definitely significantly less lunatic than it was a year or two ago, even zk-snarks, another term for zero-knowledge proofs, have gotten considerably simpler . sometime about a year and a half ago. I might even try to make another post. I could modify my most recent ones on vitalik.ca where I tried to talk about how roughly zk-snarks work. and I actually feel like I need an explanation that at least the high school version of myself would have understood, I mean, it’s still not perfect, but it’s significantly more understandable than any of the above. so I feel like ideas are definitely percolating. so I have another answer to the question of what contrary things or what things are you thinking about that other people aren’t thinking about yet.
I think this is taking a kind of cultural and social context seriously, right? which sounds obvious, but somehow it’s really not right? Even within the crypto space, I feel like a lot of people insert into their models “is bitcoin going to beat governments?” or “are these things going to be censorship resistant?” they tend to see it purely from a technical point of view, and are basically implicitly assuming that governments will try as hard as they can. and the crypto space will try as hard as it can. and it will be a battle and one side and that person’s preferred side is going to win. but the reality is that governments don’t try as hard as they can.
and a big part of the reason is that government isn’t so much an entity as it is a battlefield, right? And how do soldiers fight on the battlefield? A lot of this is just cultural movements and a lot of the success of cryptocurrencies and blockchains I think really has to do with how they’ve interacted with a lot of the big cultural trends of the last 10 years. Including things like people’s mistrust of financial institutions after 2008, I think people’s mistrust of centralized tech companies after 2020 will also play a role. Also, another fascinating thing, I think, is one thing that surprised me is how cryptocurrency managed to attract a lot of people who wouldn’t normally consider themselves libertarians.
And that’s something that I think ended up surprising a lot of people. and the reason why that happens has to do with very deep and specific aspects of how people think and how people think ideologically, right? Many people think of authoritarians, for example, as people who hate freedom and want to restrict things. but the reality is that there are many people who are in favor of very specific restrictions or even in favor of restrictions that benefit their own team. but they are very easy to switch to being very pro-freedom when they know it is their own team that is being threatened. or even when you just take things out of the cultural context of what governments should do and put them in the cultural context of how technology should work.
so there are a lot of these very subtle effects that determine whether blockchains and some of the ideals behind blockchains succeed or fail. and these are very subtle properties of how humans think and even how humans interact with each other are extremely important in many ways. and the reason they’re important is that they only determine how effectively people can coordinate, right? humans are naturally very attuned to one type of social trend and humans have many motivations that have to do directly with the position they have within social trends and the contexts created by other people.
And this is just one space where the blockchain and cryptocurrency space is going to navigate well. and if you navigate poorly, then I think governments will stop blockchains, or not stop altogether, but the amount of usage can easily be over 90 percent lower than it would be otherwise. but, on the other hand, if blockchains can successfully show a big enough kind of coalition that this is valuable, and this is a good thing for the world, then they can be very successful. this is something the space needs to better understand and take seriously.
naval ravikant: yes. I think there are many good points that you just mentioned. one that I like is that the government is not an entity or an enemy on the battlefield. it may simply be the battlefield where all these factors can win simultaneously. I think he made this point on his blog in a place where he said that in 2020, big government won, big social media won, big centralized apps won, but also decentralization won. so you can have multiple winners. these are either not necessarily or he has also made an argument in one of his blog posts, which is also beyond the scope of this podcast. but I think it’s worth digging into for people interested in game theory, where you’re basically pointing out that a lot of the toy models we consider when we’re evaluating how these things will end up have a so-called nash equilibrium.
they have a solution in game theory because many people make decisions independently, but because majority coalitions rule and people can collude, or they can form coalitions that end up in these unstable cycles where the majority wins a round , and then the majority definition is rearranged and then they win the next round. and so we see this in politics where it seems like, well, now the Democrats are in charge forever. wow, no now the republicans are in charge forever oh no, now the democrats are in charge forever again, and subtly underneath what’s going on is a definition of democrat and republican that’s shaky. they are just coalitions that form and reform as needed. so yeah, these are a lot of great, thought-provoking points. I would really love to get in touch with a 37-year-old vitalik, the advanced age of 37 of the thousand years of his life as a Methuselah, and see where you’ve come.
tim ferriss: very naval, I don’t know if you have any questions. I really only have one question, and that is a curiosity of mine. is really language learning. so you’ve studied quite a few languages. I watched a clip of you answering questions in q and at some point, I don’t know the year in Mandarin. and I was very impressed. i went to two universities in china and [tim says something in mandarin.] so i wanted to ask, if you could give me some advice now, having tried many things, used many approaches, for someone who wants to learn mandarin, what would be their current recommendations be for them?
buterina vitalik: of course. so for any language, my usual approach is: I think at first, you need some kind of explicit program. so one thing i have used is pimsleur podcasts. so that’s p-i-m-s-l-e-u-r so that’s just a series of these 90 minute podcasts sorry 90 30 minute or 2700 minute or about two days total you’ll listen to one of them every day and they’ll just help you learn the language from nothing to a very basic level over the course of these 90 episodes. so you start with that, but even after that, you don’t have enough to understand anything. so from there you can sometimes find other podcasts and eventually you move on to regular podcasts in that language.
so things that aren’t even optimized for language learning. Well, at first, you want to find resources that are optimized for learning. Flash card apps have specifically helped the Chinese memorize characters, or at least the first 500 or so thousand or so. and there are many flashcard applications.
all are equally as good. and then once you get past some level, you get to a level where the best way to get even better is to just talk to people. another kind of path that works a little bit at first is if you just go to a city and start by reading various signs on the street and doing your best to understand what they mean. I mean, if you see a word you don’t understand, you’ll look it up. that’s usually helpful. I also use Duolingo. that has been helpful in some cases. so it’s just a combination of these techniques. and you have to do it: when you start it’s hard, and then when you get past some points, you get to a point where you can level up just by talking to people there.
tim ferriss: yes, great advice. and i will add that google translate with image translation can be an amazing savior in lands where you don’t understand spelling. so, in japan, my brother doesn’t speak japanese, but we traveled there and he was able to more or less accurately translate kanji, hans, and chinese characters using google translate: it was remarkably accurate. has improved a lot. and as i understand another thing you have done is watch now i would like to clarify here is it watch movies in other languages or is it watch movies in english with subtitles in your target language which is also something i have done
vitalik buterin: is watching movies in other languages. sometimes with English subtitles.
tim ferriss: got it. Thank you. naval would like to finish, would like —
naval ravikant: no thanks. thanks vitalik, it really has been an honor. i think along with nick szabo, hal finney, wei dai and some other very influential people, and zooko and so on, they’ve been incredibly influential in the development of blockchain. And I think blockchain is the third wave of the internet after the web and mobile devices. and they are quite fundamental to the way the internet works and will work in the future. and in reality you are probably the youngest of that group. so you’re going to be involved in this for a long time. and it’s going to change computing as we know it, I’m betting on it. I know many people are. so thank you for your work and thank you for taking the time to help bring this to a wider audience.
vitalik buterin: I think I’m not even the youngest. i mean hayden from uniswap is even younger than me. and you know, the uniswap treasury has more funds than the ethereum foundation treasury. and so this revolution moves fast, man.
naval ravikant: yes. When I was starting my first company, I remember being 25 years old and the CEO and the company were highly valued. and the ct of the company, he was in his thirties, he said, “eh”. he said, “so you’re used to being the smartest kid in the room, right? just wait until you get old.” and here we are. Thank you gentlemen.
buterina vitalik: thank you.
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