The following is a conversation with Vitalik Buterin, co creator of an author of the white

paper that launched Ethereum and Ether, which is a cryptocurrency that is currently the

second largest digital currency after Bitcoin.

Ethereum has a lot of interesting technical ideas that are defining the future of blockchain

technology and Vitalik is one of the most brilliant people innovating in the space today.

Like Satoshi Nakamoto, the unknown person or group that created Bitcoin, Vitalik is

very well known and at a young age is thrust into the limelight as one of the main faces

of the technology that may redefine the nature of money and all forms of digital transactions

in the 21st century.

This is the Artificial Intelligence Podcast.

If you enjoy it, subscribe on YouTube, review it with 5 stars on Apple Podcast, support

it on Patreon, or simply connect with me on Twitter at Lex Freedman, spelled F R I D M

A N.

As usual, I'll do one or two minutes of ads now and never any ads in the middle that

can break the flow of the conversation.

I hope that works for you and doesn't hurt the listening experience.

Next summary of the ads, two sponsors, Masterclass and ExpressVPN.

Please consider supporting the podcast by signing up to masterclass at masterclass.com

slash lex and getting expressvpn at expressvpn.com slash lex pod.

This show is sponsored by masterclass.

Sign up at masterclass.com slash lex to get a discount and to support this podcast.

When I first heard about Masterclass, I honestly thought it was too good to be true.

For $180 a year, you get an all access pass to watch courses from experts at the top of

their field.

To list some of my favorites, Chris Hadfield on Space Exploration, Neil deGrasse Tyson on

Scientific Thinking and Communication, Will Wright, the creator of SimCity and Sims on

Game Design.

I love that game.

Jane Goodall on Conservation, Carlos Santana, one of my favorite guitarists on guitar.

Gary Kasparov on Chess, obviously I'm Russian.

I love Gary.

Daniel Negrano on poker, one of my favorite poker players, also Phil Ivy, gives a course

as well and many, many more.

Chris Hadfield explaining how rockets work and the experience of being launched into

space alone is worth the money.

By way of advice for me, the key is not to be overwhelmed by the abundance of choice.

Pick three courses you want to complete.

Watch each all the way through from start to finish.

It's not that long, but it's an experience that will stick with you for a long time,

I promise.

It's easily worth the money.

You can watch it on basically any device.

Once again, sign up at masterclass.com slash lex to get a discount and to support this

podcast.

This show is sponsored by ExpressVPN, download it at expressvpn.com slash lexpod to get a

discount and to support this podcast.

I've been using ExpressVPN for many years.

I honestly love it.

It's easy to use, press the big power on button and your privacy is protected.

And if you like, you can make it look like your location is anywhere else in the world.

I might be in Boston now, but I can make it look like I'm in New York, London, Paris or

anywhere else.

This has a large number of obvious benefits.

For example, certainly it allows you to access international versions of streaming websites

like the Japanese version of Netflix or the UK version of Hulu.

As you probably know, I was born in the Soviet Union, so sadly, given my roots and appreciation

of Russian history and culture, my website and the website for this podcast is blocked

in Russia.

So this is another example of where you can use ExpressVPN to access sites like the podcast

that are not accessible in your country.

ExpressVPN works on any device you can imagine.

I use it on Linux, shout out to Ubuntu, Windows, Android, but it's available everywhere else

too.

Once again, download it at expressvpn.com slash lexpod to get a discount and to support

this podcast.

And now here's my conversation with Vitalik Buterin.

So before we talk about the fundamental ideas behind Ethereum and cryptocurrency, perhaps

it'd be nice to talk about the origin story of Bitcoin and the mystery of Satoshi Nakamoto.

You gave a talk that started with asking the question, what did Satoshi Nakamoto actually

invent?

Maybe you could say, who is Satoshi Nakamoto and what did he invent?

Sure.

So Satoshi Nakamoto is the name by which we know the person who originally came up with

Bitcoin.

So the reason why I say the name by which we know is that this is a anonymous fellow

who has shown himself to us only over the internet just by first publishing the white

paper for Bitcoin, then releasing the original source code for Bitcoin, and then talking

to the very early Bitcoin community on Bitcoin forums and interacting with them and helping

the project along for a couple of years.

And then at some point in late 2010 to early 2011, he disappeared.

So Bitcoin is a fairly unique project in how it has this kind of mythical kind of quasi

godlike founder who just kind of popped in, did the thing and disappeared and we've somehow

just never heard from him again.

So in 2008, so the white paper was the first, do you know the white paper was the first

time the name would actually appear Satoshi Nakamoto?

I believe so.

So how is it possible that the creator of such an impactful project remains anonymous?

That's a tough question.

There's no similarity to it in the history of technology as far as I'm aware.

So one possibility is that it's Healthini because Healthini was also active in the Bitcoin

community and as Healthini in those two beginning years and Healthini, maybe he is one of the

people in the early Cypherpunk community.

He was a computer scientist, just computer scientists, cryptographers, people interested

in like technology, internet freedom, like those kinds of topics.

Was it correct that I read that he seemed to have been involved in either the earliest

or the first transaction of Bitcoin?

Yes.

The first transaction of Bitcoin was between Satoshi and Healthini.

Do you think he knew who Satoshi was?

If he wasn't Satoshi, you probably know.

How is it possible to work so closely with people and nevertheless not know anything

about their fundamental identity?

Is this like a natural sort of characteristic of the internet?

If we were to think about it, because you and I just met now, there's a depth of knowledge

that we now have about each other that's like physical.

My vision system is able to recognize you.

I can also verify your identity of uniqueness, like it's very hard to fake you being you.

So the internet has a fundamentally different quality to it, which is just fascinating.

Yeah, this is definitely interesting as I definitely just know a lot of people just

by their internet handles.

To me, when I think of them, I see their internet handles and one of them has a profile picture

as this face that's not quite human with a bunch of psychedelic colors in it.

When I visualize him, I just visualize that.

Not an actual face.

You are the creator of the second most popular cryptocurrency, Ethereum.

On this topic, if we just stick on Satoshi Nakamoto for a little bit longer, you may

be the most qualified person to speak to the psychology of this anonymity that we're talking

about.

Your identity is known, I've just verified it, but from your perspective, what are the

benefits in creating a cryptocurrency and then remaining anonymous?

If it can psychoanalyze Satoshi Nakamoto, is there something interesting there?

Or is it just a peculiar quirk of him?

It definitely helps create this image of a neutral thing that doesn't belong to anyone.

You created a project and because you're anonymous and because you also have disappeared or,

as unfortunately happened to Helfini, if that is him, he ended up dying of Lou Gehrig's

disease and he's in a cryogenic freezer now.

If you pop in and you created and you're gone and all that's remaining of that whole

process is the thing itself, then no one can go and try to interpret any of your other

behavior and try to understand, oh, this person wrote this thing in some essay at age 16 where

he expressed particular opinions about democracy.

Because of that, this project is a statement that's trying to do this specific thing.

That it creates this environment where the thing is what you make of it.

It doesn't have the burden of your other ideas, political thought and so on.

So now that we're sitting with you, do you feel the burden of being kind of the face

of Ethereum?

I mean, there's a very large community of developers, but nevertheless, is there like

a burden associated with that?

There definitely is.

This is definitely a big reason why I've been trying to push for the Ethereum ecosystem

to become more decentralized in many ways, just encouraging a lot of Ethereum work to

happen outside of the Ethereum foundation and of expanding the number of people that

are making different kinds of decisions, having multiple software limitations instead of one

and all of these things.

There's a lot of things that I've tried to do to remove myself as a single point of failure

because that is something that a lot of people criticize me for.

So if you look at like the most fundamentally successful open source projects, it seems

that it's like a sad reality when I think about it is it seems to be that one person

is a crucial contributor often if you look at Linus for Linux, for the kernel.

That is possible and I'm definitely not planning to disappear.

That's an interesting tension that projects like this kind of desire a single entity and

yet they're fundamentally distributed.

I don't know if there's something interesting to say about that kind of structure and thinking

about the future of cryptocurrency, does there need to be a leader?

There's different kinds of leaders.

There's dictators who control all the money.

There's people who control organizations.

There's high priests that just have themselves as their Twitter followers.

What kind of leader are you, would you say?

In these days, actually a bit more in the high priest direction than before.

I definitely actually don't do all that much of kind of going around and ordering Ethereum

Foundation people to do things because I think those things are important.

If there's something that I do think is important, I do just usually kind of say it publicly

or just kind of say it to people and quite often projects just kind of start doing it.

So let's ask the high philosophical question about money.

What at the highest level is money?

What is money?

It's a kind of game and it's a game where we have points and if you have points, there's

this one move where you can reduce your points by a number and increase someone else's points

by the same number.

So it's a fair game, hopefully.

Well, it's one kind of fair game.

For example, you can have other kinds of fair games like you're going to have a game where

if I give someone a point and you give someone a point instead of that person getting two

points that person gets four points and that's also fair.

But money is easy to set up and it serves a lot of useful functions and so it kind of

just survives in society as a meme for thousands of years.

It's useful for the storage of wealth.

It's useful for the exchange of value.

And it's also useful for denominating future payments, a unit of account.

A unit of account.

So if you look at the history of money in human civilization, just if you're a student

of history, how has its role or just the mechanisms of money changed over time in your view?

Even if we just look at the 20th century before and then leading up to cryptocurrencies, that's

something you think about?

And I think the big thing in the 20th century is we saw a lot more intermediation, I guess.

The first part is the move from adding more of different kinds of banking and then we

saw the move from dollars being backed by gold to dollars being backed by gold that's

only redeemable by certain people to dollars not being backed by anything and if you have

a bunch of free floating currencies and then people getting bank accounts and then those

things becoming electronic, people getting accounts with payment processors that have

bank accounts.

So what do you make of that?

That's such a fascinating philosophical idea that money might not be backed by anything.

Is that fascinating to you that money can exist without being backed by something physical?

It definitely is.

What do you make of that?

How is that possible?

Is that stable?

If we look at the future of human civilization, is it possible to have money at the large

scale at such a hugely productive and rich societies be able to operate successfully

without money being backed by anything physical?

I feel like the interesting thing about the 21st century especially is that a lot of the

important valuable things are not backed by anything.

If you look at tech companies, for example, like something like Twitter, you could theoretically

imagine that if all of the employees wanted to, they could have come together, they would

quit and start working on Twitter 2.0 and then they have value and just build the exact

same product or, of course, possibly build a better product and then just continue on

from there and the original Twitter would not have people left anymore.

There is theoretically code and IP that's owned by the company, but in reality, good

programmers could probably rewrite all that stuff in three months.

The reason why the thing has value is just network effects and coordination problems.

These employees in reality aren't going to switch all at once and also the users aren't

all going to switch at once because it's just difficult for them to switch at once.

There's these metastable and equilibrium interactions between thousands of millions of people that

are actually quite sticky even though if you try to assume that everyone's a perfectly

rational and perfectly soliparist, spherical cow, they don't seem to exist at all.

That stickiness.

Do you have a sense, a grasp of the fundamental dynamics, like the physics of that stickiness?

It seems to work, and I think some of the cryptocurrency ideas kind of rely on it working.

It's the sort of thing that's definitely been economically modeled a lot.

One of the analogy of something similar that you often see in textbooks is what is a government,

if 80% of people in a country just tomorrow suddenly had the idea that the laws that are

currently the laws in the government are just people and some other thing is the government

and they just start acting like it, then that would become the new reality.

The question is, well, what happens if between zero and 80% of people start believing that?

Another thing you see is that if there is one of these kind of switches happening, this

kind of revolution, then if you're the first person to join, then you probably don't have

the incentive to do that, but then if you're the 55th percentile person to join, then suddenly

becomes quite safe too.

This definitely is the sort of thing that you can try to analyze and understand mathematically.

One of the results is that the sort of when the switch happens definitely can be chaotic

sometimes.

Yeah, but still, to me, the idea that the network affects the fact that human beings

at a scale like millions, billions can share even the idea of currency, all agree.

I know economists can model it, I'm a skeptic on the economic, so my favorite sort of field,

maybe recreational, these psychology is trying to understand human behavior and I think sometimes

people just kind of pretend that they can have a grasp on human behavior even though

it's such a messy space that all the models that psychology or economics, those are different

perspectives on human behavior, can have are difficult, is difficult to know how much that's

wishful thinking and how much it is actually getting to the core of understanding human

behavior, but on that idea, what do you think is the role of money in human motivation?

So do you think money from an economics perspective, from a psychology perspective is core to like

human desires?

Money is definitely very far from the only motivator.

It is a big motivator, and that's one of the closest things you have to a universal motivator.

Because ultimately, almost any person in the world, if you ask them to do something, they'll

be more inclined to do it if you also offer them money.

There's definitely many cases where people will do things other than things that maximize

how much money they have and that happens all the time, but a lot of those other things

are kind of much more specific to and of who that person is and of what their situation

is, the relationship between the motive and the action and these other things.

What do you think is the interplay of the other motivator from like Nietzsche in respect

to his power?

Do you think money equals power?

Do you think those are conflicting ideas?

I mean, that's one of the ideas that decentralized currency, decentralized applications are looking

at is who holds the power?

Money is definitely a kind of power, and there's definitely people who want money because it

gives them power, and then even if money doesn't seem to explicitly be about money, a lot of

things that people spend money on are ultimately about social status of some kind.

I definitely view those two things as interplaying, and then there's also money as just a way

of measuring how successful you are as a scoreboard, so this kind of gets back to the game.

If you have $4 billion, then one of the big benefits you get from going up to $6 million

is that now instead of being below the guy who has five, you're above the guy who has

five.

So you think money could be kind of in the game of life, it's also a measure of self

worth.

It's like how we...

It's definitely how a lot of people perceive it.

Define ourselves in the hierarchy of society.

Not saying it's a healthy thing that people define their self worth as money because it's

definitely far from a perfect indicator of how much value you provide to society or anything

like this, but I definitely think that as a matter of current practice, so much of people

do feel that way.

So what does utopia from an economic perspective look like to you?

What does the perfect world look like?

I guess the economists say utopia would be one where kind of everything is an incentive

aligned in the sense that there aren't kind of conflicts between what satisfies your goals

and kind of what is good for everyone in the world as a whole.

What do you think that would look like?

Does that mean there's still poor people and rich people?

There's still income inequality?

Do you think sort of Marxist ideas are strong?

Do you think sort of ideas of objectivism, like where the market rules is strong?

Is there different economic philosophies that just seem to be reflective of what utopia

would be?

So I definitely think that existing economic philosophies do end up systematically deviating

from the utopia in a lot of ways.

One of the big things I talk about, for example, is public goods, and public goods are especially

important on the internet.

The idea is with money as this game where I lose a few coins and you gain the same number

of coins, is that this usually happens in a trade where I lose some money, you gain

some money, you lose a sandwich and I gain a sandwich.

This kind of model works really well when the thing that we're using money to incentivize

this kind of private goods, things that you provide to one person or the benefit comes

to one person.

On the internet especially, but also many, many contexts off the internet, there's actions

that individuals or groups can take where instead of the benefit going to one person,

the benefit just goes to many people at the same time and you can't control who the benefit

goes to.

For example, this podcast, we publish it and when it's published, you don't have any fine

grains control over these 38,000 people can watch it and then these other 29,000 people

can't.

Once the number goes high enough, then people will just copy it and then when I write articles

on a blog, then they're just free for everyone and that stuff's even harder to prevent anyone

from copying.

Aside from that, things like scientific research, for example, and even taking more pedestrian

examples like climate change mitigation would be a big one.

There's a lot of things in the world where you have these individual actions with concentrated

costs and distributed benefits and money as a point system does not do a good job of encouraging

these things.

One of the other things even, tangentially connected to crypto but theoretically outside

of it that I work on is this mechanism called quadratic funding and the way to think about

it is imagine a point system where if one person gives coins to one other person, then

it works the same way as money.

But if multiple people give coins to one person and they do so anonymously, so it's not in

consideration for a specific service to that person themselves, then the number of coins

that are received by that person is greater than just the sum of the number of coins that

are given by those different people.

So the actual formula is you take the square root of the amount that each person gave,

then you add all the square roots and then you end up square the sum and then you give

that.

And the idea here would basically be that if, let's say for example, you would just start

going off and kind of planting a lot of trees and there's a bunch of people that are really

happy that you're planting trees and then so they go and all kind of throw a coin your

way, then there is basically the fact that you get more than the sum, you get this kind

of square root of these tiny amounts, that this actually kind of compensates for the

tragedy of the commons.

There's even this kind of mathematical proof that it sort of optimally compensates for

it.

What is the tragedy of the commons?

This is just this idea that if there is this situation where there's some public good that

lots of people benefit from, then no individual person wants to contribute to it because if

they contribute, they only get a small part of the benefit from their contribution, but

they pay the full cost of their contribution.

In which context is this, sorry, what is the term quadratic?

Quadratic funding.

Quadratic funding.

In which context is this mechanism useful?

Obviously, you said to combat the tragedy of the commons, but in which context do you

see it as useful actually to practice speaking?

Yeah, theoretically, public good is in general, right?

Like services, what are we talking about?

What's the public good?

Within the Ethereum ecosystem, for example, we've actually tried using this mechanism.

I wrote a couple of articles about this on Vitalik.ca where I go through some of the

most recent rounds and it's been really interesting.

Some of the top ones that people supported, there were things like just online user interfaces

that make it easier for people to interact with Ethereum.

There was documentation, there were podcasts, there were software clients, implementations

of the Ethereum protocol of privacy tools, just lots of things that are useful to lots

of people.

When a lot of people are contributing, funding a particular entity, that's really interesting.

There's something special about the quadratic, the summing of the square roots and the taken

square.

Another way to think about it is imagine if N people each give a dollar, then the person

gets N squared.

Each individual person's contribution gets multiplied by N because you have N people.

That perfectly compensates for the N to 1 tragedy of the commons.

I just wonder if the squared part is fundamental.

It is.

I'd recommend you go on Vitalik.ca, I have this article called Quadratic Payments a Primer

and I highly recommend it, at least my attempt so far of explaining the intuition behind

this.

The intuition.

If we could, can we go to the very basic, what is the blockchain or perhaps we might

even start at the Byzantine generals problem, the Byzantine fault tolerance in general,

that Bitcoin was taking steps to providing a solution for it.

The Byzantine generals problem, it's this paper that Leslie Lamport published in 1982

where he has this thought experiment where if you have two generals that are camped out

on opposite sides of a city and they're planning when to attack the city, then the question

is how could those generals coordinate with each other and they could send messengers

between each other, but those messengers could get sniped by the enemy on the road.

Some of those messengers could end up being traitors and if things could end up happening.

With just two mess generals, it turns out that there's no solution in a finite number

of rounds that guarantees that they will be able to coordinate on the same answer.

But then in the case where you have more than two generals that then Leslie analyzes cases,

are the messengers just oral messengers, are the messengers signed messengers so I could

give you a signed message and you can pass along that signed message and the third party

can still verify that I originally made that message.

Depending on those different cases, there's different bounds on given how many generals

and how many traitors among those generals and under what conditions you actually can

agree on to launch an attack.

It's actually a big misconception that the business in general's problem was unsolved,

so Leslie Lamport solved it.

The thing that was unsolved though is that all of these solutions assume that you've

already agreed on a fixed list of who the generals are.

These generals have to be semi trusted to some extent.

They can't just be anonymous people because if they're anonymous, then the enemy could

just be 99% of the generals.

Among the 1980s and the 1990s, the general use case for distributed system stuff was

more enterprisey stuff where you could assume that you know who the nodes are that are running

these kind of computer networks.

If you want to have some decentralized computer network that pretends to be a single computer

and that you can do operations on, then it's made out of these 15 specific computers.

We know who and where they are, so we have a good reason to believe that at least 11

of them would be fine.

It could also be within a single system, almost a network of devices, sensors, so on like

in airplanes and I think flight systems in general still use these kinds of ideas.

That's the 80s.

That's the 80s and 90s.

The Cypherpunks had a different use case in mind, which is that they wanted to create

a fully decentralized global permissionless currency.

The problem here is that they didn't want any authorities and they didn't even want

any kind of privileged list of people.

Now the question is, well, how do you use these techniques to create consensus when

you have no way of measuring identities?

You have no way of determining whether or not some 99% of participants aren't actually

all the same guy.

The clever solution that Satoshi had, this is kind of going back to that presentation

I made at DEF CON a few months ago where I said that the thing Satoshi invented was

crypto economics, is this really neat idea that you can use economic resources to kind

of limit how many identities you can get.

If there isn't any existing decentralized digital currency, then the only way to do this is

with proof of work.

With proof of work, the solution is just you publish a solution to a hard mathematical

puzzle that takes some kind of clearly calculable amount of computational power to solve, you

get an identity.

You solve five of those puzzles, you get five identities.

These are the identities that we run the consensus algorithm between.

So the proof of work mechanism you just described is the fundamental idea proposed in the white

paper that defines Bitcoin.

What's the idea of consensus that we wish to reach?

Why is consensus important here?

What is consensus?

So the goal here in just simple technical terms is to basically kind of wire together

a set of a large number of computers in such a way that they kind of pretends to the outside

world to be a single computer where that single computer keeps working even if a large portion

of the kind of constituents, the computers that make it up break in kind of break in

arbitrary ways.

Like they could shut off, they could try to actively break a system, they could do lots

of mean things.

So the reason why the cypherpunks wanted to do this is because they wanted to run one

particular program on this virtual computer and the one particular program that they

wanted to run is just a currency system, right?

It's a system that just processes a series of transactions and for every transaction

it verifies that the sender has enough coins to pay for the transaction, it verifies that

the digital signature is correct and if the check's passed then it subtracts the coins

from one account and adds the coins to the other account roughly.

So first of all, the proof of work idea is kind of, I mean, at least to me, seems pretty

fascinating.

It is.

I mean, that's a kind of revolutionary idea.

Is it obvious to come up with that you can use, you can exchange basically computational

resources for identity?

It actually has a pretty long history.

It was first proposed in a paper by McSinthea Dwork in 1994, I believe.

And the original use case was combating email spam.

So the idea is that if you send an email you have to send it with a proof of work attached

and this makes it reasonably cheap to send emails to your friends but it makes it really

expensive to send spam to a million people.

Yeah.

That's a simple, brilliant idea.

So maybe also taking a step back, so what is the role of blockchain in this?

What is the blockchain?

Sure.

So the blockchain, my way of thinking about it is that it is this kind of system where

you have this kind of one virtual computer created by a bunch of these nodes in the network.

And the reason why the term blockchain is used is because the data structure that these

systems use at least so far is one where they have different nodes in the network periodically

publish blocks and a block is a kind of list of transactions together with a pointer, like

a hash of a previous block that it builds on top of.

And so you have a series of blocks that nodes in the network create where each block points

to the previous block and so you have this chain of them.

Is a fault tolerance mechanism built into the idea of blockchain or is there a lot of

possibilities of different ways to make sure there's no funny stuff going on?

There are indeed a lot of possibilities.

So in a kind of just simple architecture as I just described, the way the fault tolerance

happens is like this, right?

So you have a bunch of nodes and they're just happily occasionally creating blocks, building

on top of each other's blocks.

And let's say you have one block, we'll call it block one, and then someone else builds

another block, honestly, we'll call it block two, then we have an attacker.

And what the attacker tries to do is the attacker tries to revert block two.

And the way they revert block two is instead of doing the thing they're supposed to do,

which is build a block on top of block two, they're going to build another block on top

of block one.

So you have block one, which has two children, block two, and then block two prime.

Now this might sometimes even happen by random chance if two nodes in the network just happen

to create blocks at the same time and they don't hear about each other's things before

they create their own.

But this also could happen because of an attack.

Now if this happens, you have an attack, then in the Bitcoin system, the nodes follow the

longest chain.

So if this attack had happened when the original chain had more than two blocks on it, so if

it was trying to revert more than two blocks, then everyone would just ignore it and everyone

would just keep following the regular chain.

But here we have block two and we have block two prime, and so the two are kind of even.

And then whatever block, the next block is created on top of.

So say block three is now created on top of block two prime, then everyone agrees that

block three is the new head, and block two prime is just kind of forgotten, and then

everyone just kind of peacefully builds on top of block three and the thing continues.

So how difficult is it to mess with the system?

So if we look at the general problem, what fraction of people who participate in the

system have to be bad players in order to mess with it truly?

Is there a good number?

There is.

Well, depending on kind of what your model of the participants is and what kind of attack

we're talking about, it's anywhere between 23.2 and 50%.

Of what?

Of all of the computing power in the network.

Sorry.

So between 23.2 and 50%.

And 50% can be compromised.

So like once your portion of the total computing power in the network goes above the 23.2 level,

then there's kind of things that you can mean things that you can potentially do.

And as your percentage of the network kind of keeps going up, then your abilities as

you mean things kind of goes higher, and then if you have above 50%, then you can just break

everything.

So how hard is it to achieve that level?

Like it seems that so far historically speaking, it's been exceptionally difficult.

This is a challenging question.

So the economic cost of acquiring that level of stuff from scratch is fairly high.

I think it's somewhere in the low billions of dollars.

And when you say that stuff, you mean computational resources?

Yeah.

So specifically specialized hardware and of ASICs that people use to solve these puzzles

to do the mining business.

Small tangent.

So obviously I work a lot in deep learning with GPUs and ASICs for that application.

And I tangentially kind of hear that so many of these, you know, sometimes NVIDIA GPUs

are sold out because of this other application.

Like what do, if you can comment, I don't know if you're familiar or interested in the

space, what kind of ASICs, what kind of hardware is generally used these days for to do the

actual computation for the proof of work?

Sure.

So in the case, in Bitcoin and Ethereum are a bit different.

So in the case of Bitcoin, there is an algorithm called SHA256, it's just a hash function.

And so the puzzle is just coming up with a number where the hash of the number is below

some threshold.

And so because the hashes are designed to be random, you just have to keep on trying

different numbers until one works.

And the ASICs are just like specialized circuits that contain and circuits for evaluating this

hash over and over again, and you have kind of like millions or billions of these hash

evaluators and just stacked on top of each other inside of a box, and you just keep on

running the box 24x7.

In the ASICs, there's literally specialized hardware designed for this.

Yes.

This is living in an amazing world.

Another tangent, I'll come back to the basics, but does quantum computing throw a wrench

into any of this?

Very good question.

So quantum computers have two main families of algorithms that are relevant to cryptography.

One is Shor's algorithm, and Shor's algorithm is one that kind of completely breaks the

hardness of some specific kinds of mathematical problems.

So the one that you've probably heard of is it makes it very easy to factor in numbers.

So figure out kind of what prime factors are that you need to multiply together to get

some number, even if that number is extremely big.

Shor's algorithm can also be used to break elliptic curve cryptography.

It breaks a lot of cryptographic nice things that we're used to.

But the good news is that for every major use of things that Shor's algorithm breaks,

we already know of quantum proof alternatives.

We don't use these quantum proof alternatives yet because in many cases, they're five to

10 times more efficient, but the crypto industry in general kind of knows that this is coming

eventually and it's ready to take the hit and switch to that stuff when we have to.

The second algorithm that is relevant to cryptography is Grover's algorithm.

And Grover's algorithm might even be more familiar to AI people that's basically usually

described as solving search problems.

But the idea here is that if you have a problem over the form, find a number that satisfies

some property, then if with a classical computer, you need to try and if n times before you

find a number, then with a quantum computer, you only need to do square root of n computations.

And Grover's could potentially be used for mining, but there's two possibilities here.

One is that Grover's could be used for mining and whoever creates the first working quantum

computer that could do Grover's will just mine way faster than everyone else and we'll

see another round of what we saw when ASICS came out, which is that kind of the new hardware

just kind of dominated the old stuff and then eventually it switched to a new equilibrium.

By the way, way faster, not exponentially faster quadratically faster, which is not sort of

it's not game changing, I would say it's like ASICS, like you said, it would be exactly.

Yeah.

So it would not necessarily break proof of work as a thing.

That's right.

Yeah.

Now, the other kind of possible world, right, is that quantum computers have a lot of overhead.

There's a lot of complexity involved in maintaining quantum states.

And there's also, as we've been realizing recently, making quantum computers actually

work requires kind of quantum error correction, which requires kind of a thousand real qubits

per logical qubit.

And so there's the very real possibility that the overhead of running a quantum computer

will be higher than the speed up you get with Grover's, which would be kind of sad,

but which would also mean that given proof of work, we'll just keep working fine.

So the beautifully put, so proof of work is the core idea of Bitcoin.

Is there other core ideas before we kind of take a step towards the origin story and ideas

of Ethereum?

Is there other stuff that were key to the white paper of Bitcoin?

There's proof of work and then there's just the cryptography, just kind of public keys

and signatures that are used to verify transactions.

Those two are the big things.

So then what is the origin story, maybe the human side, but also the technical side of

Ethereum?

Sure.

So I joined the Bitcoin community in 2011, and I started by just writing.

I first wrote for this sort of online thing called Bitcoin Weekly.

Then I started writing for Bitcoin Magazine, and sorry to interrupt, you have this funny

kind of story, true or not, is that you were disillusioned by the downsides of centralized

control from your experience with, wow, World of Warcraft.

Is this true or you're just being witty?

I mean, the event is true, the fact that that's the reason I do decentralization is witty.

Maybe just a small tangent.

Have you always had a skepticism of centralized control?

Is that sort of has that feeling evolved over time, or has that just always been a core

feeling that decentralized control is the future of a human society?

It's definitely been something that felt very attractive to me ever since I could have

learned that such a thing is possible.

It's possible, even technically.

So great.

So you joined the Bitcoin community in 2011, you said you began writing.

So what's next?

I started writing, moved from high school to university halfway in between that and

spent a year in the university.

Then at the end of that year, I dropped out to do Bitcoin things full time.

This was a combination of continuing to write Bitcoin Magazine, but also increasingly work

on software projects, and I traveled around the world for about six months and just going

to different Bitcoin communities.

I went to first in New Hampshire, then Spain, other European places, Israel, then San Francisco,

and along the way I met a lot of other people that are working on different Bitcoin projects.

When I was in Israel, there were some very smart teams there that were working on ideas

that people were starting to kind of call Bitcoin 2.0.

So one of these was Colored Coins, which is basically saying that, hey, let's not just

use the blockchain for Bitcoin, but let's also kind of issue other kinds of assets on

it.

Then there was a protocol called Mastercoin that supported issuing assets, but also supported

many other things, like financial contracts, domain name registration, and a lot of different

things together.

I spent some time working with these teams, and I quickly realized that this Mastercoin

protocol could be improved by kind of generalizing it more.

The analogy I used is that the Mastercoin protocol was like this Swiss Army knife.

You have 25 different transaction types for 25 different applications, but what I realized

is that you could replace a bunch of them with things that are more general purpose.

One of them was that you could replace three transaction types for three types of financial

contracts with a generic transaction type for a financial contract that just lets you

specify a mathematical formula for kind of how much money each side gets.

By the way, just a small pause.

What's, you say financial contract, just the terminology.

What is the contract?

What's the financial contract?

So this is just generally an agreement where kind of either one or two parties kind of

put collateral kind of in, and then depending on certain conditions, like this could involve

prices of assets, this could involve the actions of the two parties, it could involve

other things, they kind of get different amounts of assets out that just depend on

things that happened.

So a contract is really a financial contract, is it the core interactive element of a financial

system?

Yeah, there's many different kinds of financial contracts, like there's things like options

where you kind of give someone the right to buy a thing that you have for some specific

price for some period of time.

There's contracts for difference where you basically are kind of making a bet that says

like, for every dollar this thing goes up, I'll give you $7 or for every dollar that

thing goes down, you give me $7 or something like that.

What the main idea that these contracts have to be enforced and trusted them?

Yes, exactly.

You have to trust that they will work out in a system where nobody can be trusted.

Yes.

This is such a beautiful, complicated system.

Okay, so you were seeking to kind of generalize this basic framework of contracts.

So what does that entail?

So what technically are the steps to creating Ethereum?

Sure, so I guess just to kind of continue a bit with this master coin story.

So started by kind of giving ideas for how to generalize the thing.

And eventually this turned into a much more kind of fully flushed proposal that just says,

hey, how about you scrap all your futures and instead you just put in this programming

language.

And I gave this idea to them and their response was something like, hey, this is great, but

this seems complicated and this seems like something that we're not going to be able

to put onto our roadmap for a while.

And my response to this was like, wait, do you not realize how revolutionary this is?

Well, I'll just go do it myself.

And then I...

What was the name of the programming language?

I just called it ultimate scripting.

Great.

So then I went through a couple more rounds of iteration and then the idea for Ethereum

itself started to form and the idea here is that you just have a blockchain where the

core unit of the thing is what we call contracts, it's these, and if accounts that can hold

assets and they have their own internal memory, but that are controlled by a piece of code.

And so if I send some Ether to a contract, the only thing that can determine where that

kind of Ether, the currency inside Ethereum and of course after that is the code of that

contract itself.

And so basically kind of sending assets to computer programs becomes this kind of paradigm

for creating these self executing agreements.

Self executing.

It's so cool that code is sort of part of this contract.

So that's what's meant by smart contracts.

So how hard was it to build this kind of thing?

Harder than expected.

And originally I actually thought that this would be a thing that I would kind of casually

work on for a couple of months, publish and then go back to university.

Then I released it and a bunch of people, or I released the white paper.

The white paper, the ideas there.

The idea, the white paper.

A whole bunch of people came in offering to how about a huge number of people and have

expressed interest.

And this was something I was totally not expecting.

And then I kind of realized that this would be something that's kind of much bigger than

I had ever thought that it would be.

And then we started on this kind of much longer developments log of making something that

lives up to this kind of much higher level of expectations.

What are some of the, is it fundamental like software engineering challenges?

It was.

Social?

Okay, so there's.

And social.

So what are the biggest interesting challenges that you've learned about human civilization

and software engineering through this process?

So I guess one of the challenges for me is that like I'm one of the kind of apparently

unusual geek schools that have never treated with anything but kindness in school.

And so when I got into crypto, I kind of expected everyone would just kind of be the same kind

of altruistic and nice in that same way.

But the algorithm that I used for finding cofounders for this thing was not very good.

It was literally one computer scientist called the greedy algorithm.

It's kind of the first 15 people who applied back offering to help kind of are the cofounders.

Oh, you mean like literally the people that will form to be the cofounders of the community?

The algorithm.

I like how you call it the algorithm.

And so what happened was that these, especially as the projects got really big, like there

started to be a lot of this kind of infighting and there were a lot of, like I wanted the

thing to be a nonprofit and some of them wanted to be a for profit and then there started

to be people who were just kind of totally unable to work with each other.

There were people that were kind of trying to get an advantage for themselves in a lot

of different ways.

And this just about six months later led to this big governance crisis.

And then we kind of reshuffled leadership a bit.

And then the project kept on going then nine months later, there was another governance

crisis and then there was a third governance crisis.

So is there a way to, if you're looking at the human side of things, is there a way to

optimize this aspect of the cryptocurrency world?

It seems that there is, from my perspective, there's a lot of different characters and personalities

and egos.

And like you said, I don't know, I also like to think that most of the people in the world

are well intentioned, but the way those intentions are realized may perhaps come off as negative.

Is there a hopeful message here about creating a governance structure for cryptocurrency where

everyone gets along?

Here about four rounds of reshuffle, I think we've actually come up with something that

seems to be pretty stable and happy.

I think, I mean, I definitely do think that most people are well intentioned.

I just think that like one of the reasons why I like decentralization is just because

there's like this thing about power where power attracts people with egos and so that

just allows us a very small percentage of people to just ruin so many things.

You think ego has a, you think ego has a use, like is ego always bad?

It sometimes does.

But then the Ethereum research team, I feel like we've found also kind of a lot of very

good people that are just, and if primarily you're just interested in things for the technology

and things seem to just generally be going quite well.

Yeah.

When you're, when the focus and the passions and the tech, so on the, so that's the human

side of things, but the technology side, like what have you learned?

What have been the biggest challenges of bringing Ethereum to life on the technology side?

So I think first of all, just, you know, there's like the first of all software developments,

which is that when someone gives you a timetable, switch the unit of time to the next largest

unit of time and add one, and like we basically fell victim to that.

And so instead of taking like three months, it ended up taking like 20 months to launch

the thing.

And that was just, I think, underestimating the sheer technical complexity of the thing.

There are research challenges, like so for example, one of the things that we've been

saying from the start that we would do, one is a switch from a proof of work to a proof

of stake, more proof of stake is this alternative consensus mechanism where instead of having

to waste a lot of computing power on solving these mathematical puzzles that don't mean

anything, you kind of prove that you have access to coins inside of the system.

And this, then it gives you some level of participation in the consensus.

Can you maybe elaborate on that a little bit?

I understand the idea of proof of work.

I know that a lot of people say that the idea of proof of stake is really appealing.

Can you maybe link Garner to longer explain what it is?

Sure.

So basically the idea is like, if I kind of lock up a hundred coins, then I turn that

into a kind of quote, virtual miner.

And the system itself kind of automatically randomly assigns that in a virtual miner is

a right to create blocks at particular intervals.

And then if someone else has 200 coins and they lock and lock those 200 coins, then they

get a kind of twice as big virtual miner they'll be able to create blocks twice as often.

So it tries to kind of do similar things to proof of work, except instead of the thing

and of rate limiting your participation being your ability to crank out solutions to kind

of hash challenges, the thing that real limits your participation is kind of how much coins

you're kind of locking into this mechanism.

Okay.

So interesting.

So that that limited participation doesn't require you to run a lot of compute.

Does that mean that the richer you are so rich people are more like their identities

more right in this stable?

Yeah, verifiable or whatever, whatever the right terminology is.

Right.

And this is definitely a common critique.

I think my usual answer to this is that like proof of work is even more of that kind of

system.

Exactly.

Yeah.

I didn't mean it in that statement as a criticism.

I think you're exactly right.

That's equivalent to proof of work is the same kind of thing.

But in the proof of work, you have to also use physical resources.

Yes.

And burn computers and burn trees and all of that stuff.

Is there a way to mess with the system of the proof of proof of stake?

There is, but you will once again need to have a very large portion of all the coins

that are locked in the system to do anything bad.

Got it.

Yeah.

And just to that, maybe take a small change in one of the criticisms of cryptocurrencies,

the fact that it gets for the proof of work mechanism, you have to use so much energy in

the world.

Yes.

Is one of the motivations of proof of stake is to move away from this?

Definitely.

What's your sense of that?

Maybe I'm just under informed.

Is there like legitimately environmental impact from this?

Yeah.

So the latest thing was that Bitcoin consumed as much energy as the country of Austria or

something like that.

Yeah.

And then Ethereum is like right now, maybe only like half in order of magnitude smaller

than Bitcoin.

I've heard you talk about Ethereum 2.0.

So what's the dream of Ethereum 2.0?

What's the status of proof of stake as a mechanism that Ethereum moves towards?

And also, how do you move to a different mechanism of consensus within a cryptocurrency?

So Ethereum 2.0 is a collection of major upgrades that we've wanted to do to Ethereum

for quite some time.

The two big ones, one is proof of stake and the other is what we call sharding.

Sharding solves another problem with blockchains, which is scalability.

And what sharding does is it basically says instead of every participant in the network

having to personally download and verify every transaction, every participant in the network

only downloads and verifies a small portion of transactions, and then you kind of randomly

distribute who gets how much work.

And because of how the distribution is random, it still has the property that you need a

large portion of the entire network to corrupt what's going on inside of any shard.

But the system is still very redundant and very secure.

That's brilliant.

How hard is that to implement and how hard is proof of stake to implement?

Like on the technical level, software level?

Proof of stake and sharding are both challenging.

I'd say sharding is a bit more challenging.

The reason is that proof of stake is kind of just a change to how the consensus layer

works.

Sharding does both that, but it's also a change to the networking layer.

The reason is that sharding is kind of pointless if at the networking layer you still do what

you do today, which is you kind of gossip everything, which means that if someone publishes

something, every other node in the client hears it from on the networking layer.

And so instead, we have to have subnetworks and the ability to quickly switch between

subnetworks and other subnetworks, talk to each other.

And this is all doable, but it's a more complex architecture, and it's definitely the sort

of thing that has not yet been done in cryptocurrency.

So most of the networking layer in cryptocurrency is you're shouting, you're like broadcasting

messages, and this is more like ad hoc networks.

Yeah, you're shouting within smaller groups.

Smaller groups, but you have like a bunch of subnetwork.

Exactly.

And you have to switch between, oh man, I'd love to see the, so it's a beautiful idea

from a graph theoretic perspective, but just the software that, who's responsible?

Is the Ethereum project, like the people involved, would they be implementing?

What's the actual, this is like legit software engineering.

How does that work?

How do people collaborate, build that kind of project?

Is this like almost like, is there a software engineering lead?

Is there, is it legit, almost like large scale open source project?

There is, yeah.

So we have someone named Danny Ryan on our team, who's just been brilliant and great

all around.

And he is a kind of de facto kind of development coordinator, I guess.

It's like, you have to invent job titles for this stuff.

The reason is that, like we also have this unique kind of organizational structure where

the Ethereum foundation itself does research in house, but then the actual implementation

is done by independent teams that are separate companies and they're located all around the

world and fun places like Australia.

And so you kind of just need a bunch of almost nonstop cat herding to just keep getting these

people to talk to each other and kind of implement this back, make sure that everyone agrees

on what's going on and kind of how to interpret different things.

So how far into the future are we from these two mechanisms in Ethereum 2.0?

What's your sense of the timeline keeping in mind the previous comment you made about

the sort of general curse of software projects?

So Ethereum 2.0 is split into three phases.

So phase zero just creates a proof of stake network and it's actually separate from kind

of proof of the proof of work network at the beginning, just to kind of give it time to

grow and improve itself.

Do people get to choose?

Sorry to interrupt.

Do people get to choose?

I guess.

Yes, they get to choose to move over if they want to.

Then phase one adds sharding, but it only adds sharding of data storage and not sharding

of computation.

And then after that, there is the merger phase, which is where the accounts, smart contracts,

all of the activity on the existing ETH1 system just kind of gets cut and pasted into ETH2

and then the proof of work chain gets forgotten and then all the things that were living there

before just kind of continue living inside of the proof of stake system.

So for timelines, phase zero has been kind of almost fully implemented and now it's just

a matter of a whole bunch of security auditing and testing.

My own experience is that right now it feels like we're at about a phase comparable to

when we were doing the original Ethereum launch when we were maybe about four months away

from launch.

But that's just a hunch.

That's just a hunch.

So how it took over a decade for people to move from Python 2 to Python 3.

How do you see the move from this phase zero for different consensus mechanisms?

Do you see there being a drastic phase shift in people just kind of jumping to this better

mechanism?

So in phase zero, I don't expect too many people to do much because in phase zero and

phase one, the new chain doesn't have too much functionality turned on.

It's there just like if you want to be a proof of stake validator, you can get things started

if you want to store data for other blockchain applications, you can get started.

But existing applications will largely keep living on ETH1.

And then when the merger happens, then the merger is a operation that happens all at

once.

So that's one of the benefits of a consensus system that on the one hand you have to coordinate

the upgrade, but on the other hand, the upgrade can be coordinated.

So what's Casper FFG, by the way?

Casper FFG is the consensus algorithm that we are using for a proof of stake.

Is there something interesting specific about Casper FFG, like some beautiful aspect of

it?

There is.

So Casper FFG combines together kind of two different schools of like it's not sale

growth I'm designed.

So the general two different schools of the design are right.

One is 50% fault tolerant, but dependent on network synchrony.

So 50% fault tolerant, but it tolerate up to 50% of faults, but not more, but it depends

on an assumption that all of the nodes can talk to each other within some of a limited

period of time.

Like if I send a message, you'll receive it within a few seconds.

And the second school is 33% fault tolerant, but safe under a synchrony.

Which means that if we agree on something, then that thing is finalized.

And even if the network goes horribly wonky the second after that thing is finalized,

there's no way to revert that thing.

That's fascinating how you would make that happen.

It's definitely quite clever.

I'd recommend the Casper FFG paper.

If you just search like archive as in like ARX, IV, Casper FFG, it's right there.

That's an archive.

The paper's an archive.

Yeah, yeah.

Who are the authors?

Myself and Virgil Griffith.

That's awesome.

Take a small tangent.

This idea of just putting out white papers and papers and putting them on archive and

just putting them publicly, is that at the core?

Is that a necessary component of the currency?

Is that the tradition started with Satoshi Nakamoto?

What do you make of it?

Like what do you make of the future of that kind of sharing of ideas?

I guess so, yeah.

And it's definitely something that's kind of mandatory for crypto because like crypto

is all about making systems where you don't have to trust the operators to trust that

the thing works.

And so if anything behind how a system works is closed sourced, then that kind of kills

the point.

And so there is the kind of a sense in which the fundamental properties of the category

of the thing we're trying to build just kind of forces openness.

But also openness just has proven to be a really great way to collaborate.

And then there's actually a lot of innovation and academic collaboration that's just kind

of happened ad hoc in the crypto space the last few years.

So like for example, we have this forum called ETH research that's like ETH, R E S E A R

and then dot CH.

And there we publish kind of just ideas in a form that's kind of half formal.

Like it's halfway in between.

It's kind of a text write up and then you can have math in it, but it's often out of

much shorter than a paper.

And it turns out that the great majority of new ideas, like they're just kind of fairly

small nuggets that you can explain in like five to 10 lines and they don't really need

the whole formality of a paper.

Exactly.

They don't require the kind of like 10 pages of a filler.

And so introduction conclusion is not needed.

Yeah.

And so instead you just kind of publish the idea and then the people can go comments on

it.

That's brilliant.

Yeah.

This has been great for us.

I think I interrupted you.

Was there something else on Casper FFG?

No, just Casper FFG is just kind of combines together these two schools.

And so basically it creates this system where if you have more than 50% that are honest

then and you have a network synchrony, then the thing kind of goes as a chain, but then

if network synchrony fails, then kind of the last few blocks in the chain might kind

of get replaced.

But anything that was finalized by this kind of more asynchronous process can't be reverted.

And so you essentially get a kind of best of both worlds between those two models.

Okay.

So I know what I'm doing to them.

I'm going to be reading the Casper FFG paper.

Apologize for the romanticized question, but what do you are some or the most beautiful

idea in the world of Ethereum?

Just something surprising, something beautiful, something powerful.

Yeah.

I mean, I think the fact that money can just emerge out of a database if enough people believe

in it, I think is definitely one of those things that's up there.

I think one of the things that I really love about Ethereum is also this concept of composability.

So this is the idea that if I build an application on top of Ethereum, then you can build an

application that talks to my application and you don't even need my permission, you don't

even need to talk to me.

So one really fun example of this is there was this kind of game on Ethereum called CryptoKitties,

they're just involved in breeding digital cats.

And someone else created a game called CryptoDragons, where the way you play CryptoDragons is you

have a dragon and you have to feed it CryptoKitties and they just created the whole thing just

like as an Ethereum contract that you would send these tokens that are defined by this

other Ethereum contract.

And for the interoperability to happen, the projects don't really need to, the teams don't

really need to talk to each other, you just kind of interface with the existing program.

So it's arbitrarily composable in this kind of way, so you have different groups that

could be working in.

So you could see it scaling to just outside of dragons and kitties, you could build like

entire ecosystems of software in this kind of way.

Yeah, especially in the decentralized finance space that's been popping up the last two

years, there has been a huge amount of really interesting things happen as a result of this.

Is it a particular kind of like financial applications kind of thing?

Yeah, I mean, there's like stable coins.

So this is kind of tokens retain value equal to $1, but they're kind of backed by cryptocurrency.

Then there's decentralized exchanges.

So as far as decentralized exchanges goes, there's this really interesting construction

that has existed for about one and a half years now called Uniswap.

So what Uniswap is, it's a smart contract that holds the balances of two tokens, we'll

call them token A and token B. And it maintains an invariant that the balance of token A multiplied

by the balance of token B has to equal the same value.

And so the way that you trade against the thing is basically like you have this kind

of curve, you know, like X times Y equals K. And before you trade, it's at some points

on the curve.

After you trade, you just like pick any other points on the curve.

And then whatever the delta X is, that's the amount of A tokens you provide, whatever

the delta Y is, that's the amount of B tokens you get or vice versa.

And that's just kind of the slope at the current points on the curve kind of is the price.

And so that just is the whole thing.

And that just allows you to have this exchange for tokens and even if there's very few participants

and the whole thing is just like so simple and it's just very easy to set up, very easy

to participate in and it just provides so much value to people.

And the fundamental, the distributed application infrastructure allows that somehow.

Yes.

So this is a smart contract meeting.

This is all a computer program that's just running on Ethereum.

Smart contracts too are just fascinating.

They are.

Okay.

Do you think cryptocurrency may become the main currency in the world one day?

So where do you think we're headed in terms of the role of currency, the structure type

of currency in the world?

I definitely expect fiat currencies to continue to exist and get in to be strong and I definitely

expect kind of fiat currencies to also digitize in their own way over the next couple of decades.

What's fiat currency by the way?

Oh, just like things like US dollars and like dollars and euros and yen and these other

things.

And they're sort of backed by governments.

Yes.

And I also expect kind of cryptocurrencies to play this kind of important role in just

making sure that people always have an alternative if fiat currencies start breaking.

So like if or if you're in, you know, some kind of very high inflation place like Venezuela,

for example, or if your country just kind of gets cut off from other financial systems

because of like something the banks do, like if any kind of, if there's even like some

major trade disruption or something worse happens, then like cryptocurrencies are the

sort of thing that just because of their kind of global neutrality, they're just kind of

always there and you can keep using them.

It's interesting that you're quite humble about the possibilities of the future of cryptocurrency.

You don't think there's a possible future where it becomes the main set of currency

because it feels like fiat, it feels like the centralized control by governments of

currencies limiting somehow, maybe my naive utopian view of the world.

It's definitely very possible.

I mean, I think like for cryptocurrencies being the main form of value to work well,

like you do need to have some much more price stability than they have today.

And I mean, there are now stable coins and there are kind of cryptocurrency is the try

to be more stable than existing things like Bitcoin and Ether.

But that just is to me the kind of the main challenge.

Do you think, oh, that's, do you think that's a characteristic of just being the early days

is such a young concept that 10 years is nothing in the history of money?

Yeah, and I think it's a combination of two things, right?

One is it's it's still early days, but the other is a kind of more durable any kind

of economic problem, which is that the demand for currency is volatile, right?

Because of like, recessions, boom, changes to technology, lots of things, and if people's

demand for how much currency they want to hold changes.

And if you have a currency that has a fixed supply, then the change in demand has to be

entirely expressed as a change in value of the currency.

And so what that means is that kind of the volatility of demand becomes entirely translated

into volatility and ahead of prices of things that are dominated in that currency.

But if you have a currency where instead the supply can change, and so the supply can go

up when there's more demand, then you have the supply ahead of absorbing more of that

volatility.

And so the price of the currency would absorb loss of the volatility.

On that topic, so Bitcoin does have a limited supply, a specific fixed supply.

Yes.

What's, what's the idea and Ethereum doesn't, but can you clarify?

Just in the comment you just made, is Ethereum qualified to the kind of currency that you're

talking about and being flexible in the supply?

And it's a bit more flexible, but kind of the thing that you would really want is something

that's kind of specifically flexible in response to how valuable the currency is.

And I'd recommend, you know, look at stable coins as well.

So like things like dye, for example, that's like,

How do you spell that?

DAI.

And what's stable coins?

Is it a type of cryptocurrency?

It is a type of cryptocurrency.

It's a type of cryptocurrency that's issued by a smart contract, one of these Ethereum

computer programs, that where the smart contract holds a bunch of ether, and then it issue,

basically, like that people deposit, and then it issues DAI and the reason why people deposit

is because they want to kind of go high leverage on their ether.

And so it kind of pairs these two sets of users, one that wants stability and one that

kind of wants extra risk together with each other.

And it basically creates or gives one set of participants a guarantee that they'll be

paid, that they have this asset that can be later converted back into ether, but specifically

at kind of the one dollar rate.

And it has some kind of stabilizing network effects.

Yeah, it has this, yeah, it has many kinds of stabilizing mechanisms in it.

That's fascinating.

Okay.

This world is awesome technically.

At least from a scientific perspective, it's an awesome world that I often don't see from

an outsider's perspective.

What I often see is kind of maybe hype and a little bit, if I may say so, like Charltonism.

And you don't often see, at least from my outsider's perspective, the beautiful science

of it and the engineering of it.

Maybe, is there a comment you can make of who to follow, how to learn about this world

without being interrupted by the Charlton's and the hype people in this space?

I think you do need to just know the specific kind of just people to follow.

Like there's, you know, there's all the kind of the cryptographers and the researchers

and there's just like, even just the Ethereum research crew, like myself, like Dan Cradd,

Danny Justin and the other people.

And then, and of the academic cryptographers, and like before this today, I was at Stanford

and Stanford has the Center for Blockchain Research and of Dan Bonet, that's really famous

and great cryptographer is running it and there's a lot of other people there.

And there's people working on zero knowledge proofs, for example, and Zuko from Zcash

has one other person that I respect.

So I think if you follow the technical, you crawl along with the Ethereum group and then

look at the academics, Dave Bonet and so on, and then just cautiously expand the network

of people you follow.

Yeah, exactly.

And like if someone seems too self promotional, then just like remove them.

Is there books that are, there's these white papers and we just discussed about about ideas

being condensed into really small parts.

Is there books that are emerging that are kind of good introductory material?

So for historical ones, and there's like Nathaniel Popper's Digital Gold, which is

just about the history of Bitcoin.

There's like one, and then Matthew Lysing announced that there's one about the history

of Ethereum.

For technical ones, and there's Andrew Asensinopoulos's Mastering Ethereum.

Great.

So let me ask you sort of, sorry, to pull back to the idea of governments and decentralized

currency, you know, there's a tension between decentralization of currency and the power

of nations, the power of governments, you, what's your sense about that tension?

Is there some rule for regulation of currency?

Yeah, is there like, is the government the enemy of digital currency, of distributed

currency, or can they be like cautious friends?

I mean, I think like, the one thing that people forget is that it's clearly not entirely

an enemy because I think if there hadn't been so much government regulation on centralized

digital, issuing centralized digital currencies, then we'd be seeing things people like Google

and Facebook and Twitter just kind of issuing them left and right.

And then like, if that was the case, then decentralized currencies would still appeal

to some people, but they definitely would appeal to less people than today.

So even in that sense, I think it's clearly been kind of more of a help, just kind of

set the stage for the end of the existence as a sum of the sector in some ways.

But also, and I think some of both, you know, like there's definitely things that governments

kind of can do in some cases have done to have hurt the spread of growth of blockchains.

There's things that they've done to help and they've in some cases definitely done a good

job of going after fraudulent projects and going after some of the projects that have

some of the craziest and most misleading marketing.

There's also the possibility that governments will end up using blockchains for a lot of

different things, like, you know, governments, you know, they do a lot more than just regulating,

right?

But there's also like, they have the identity records and they have kind of like property

registries, even their own currency is like secured, lots of different kind of things

that they're operating and there's even blockchain applications in a lot of those.

Yeah.

And they can, you know, they can leverage technology to do a lot of good for our societies.

It is a little unfortunate that governments often lag behind in terms of their acceptance

and leverage of technology.

If you look at the autonomous vehicle space, AI in general, they're a few years behind.

It'd be nice to help them catch up.

That's always an ongoing problem.

You met Vladimir Putin to discuss the centralized currency here.

You're born in, where were you born?

Kolomna.

It's a city about 115 kilometers south of Moscow.

In Russia.

Yes.

Yeah.

I grew up in Moscow.

I mean, that's, Vladimir Putin is a central figure in this part of the world.

So what was that like meeting, meeting him?

What was that experience like?

He's taller in photos than in person.

Yeah.

Yeah.

That's right.

He's five, seven, I think, five, eight, maybe.

Yeah.

And that's, unfortunately, we didn't actually kind of have too much of a chance to talk

to him.

Like I managed to see him for about one minute at the end of this meeting and I did get a

chance to see a lot, like some of the other end of government ministers and like he recommended

some.

And some of them are actually interested in trying to use like blockchains to look for

various government use cases, the kind of limit corruption and other things.

And I have like, it's hard to tell from one conversation kind of what things are genuine

and what things are just like, oh, blockchain is cool, let's do blockchain.

But, you know, when I listen to like Barack Obama talk about artificial intelligence,

there's certain things I hear where, okay, so he might not be an expert in AI, but he

like actually studied it carefully enough to think about it, like even if he's just

reading a Wikipedia page, like he really thought about what this technology means.

Did you get a sense that Putin or some of the ministers like thought about blockchain,

like thought about the fundamentals of technology, like understand it intuitively?

Or are they too old school to try to grasp it?

Summer old school, summer more new school.

It depends.

It's definitely like depends on who you talk to.

I mean, that's an open question for me with Putin because Putin has said stuff about AI.

I don't know.

I've only talked to him for about one minute, so.

But sometimes you can pick up sort of insights.

As a quick comment, they're, they're about, maybe you can correct me on this, but they're

about 3,000 cryptocurrencies being actively traded.

Yes.

And Ethereum is one of, you know, a lot of people believe that there will be the main

crypto currency.

I think Bitcoin is currently still the main cryptocurrency, but Ethereum very likely might

become that, the main one.

Is this kind of diversity good in the crypto world?

Do you see it sticking around?

Should there, should there be a winner?

Like should there be some consensus globally around Bitcoin or around Ethereum?

Like what's your, what's your sense?

I definitely think the diversity is good.

And I definitely think also that there's probably too many people trying to make separate

blockchains kind of right now.

The numbers should definitely be greater than one and probably greater than two or even

five.

Not 3,000.

Not 3,000, yeah, and also not even like 40 high quality platforms that try to do the

same thing.

And there's definitely this range from just like one person who just like wrongly thinks

that you can create a cryptocurrency in like 12 hours and doesn't even think about kind

of the community aspects of maintaining it, going to people actually trying, but only

creating a really tiny one to like scammers, to people like making something that's actually

successful.

And then, you know, there's a lot of different categories of blockchain and of project in

terms of what it's trying to do and what applications it's for.

And I think the experimentation is definitely healthy.

If you look at the two worlds, there might be a little bit disjoints, but the distributed

applications, cryptocurrency, and in the world of artificial intelligence, do you see there's

some overlap between these worlds that both worry about centralized control?

Is there some overlap that's interesting that you think about, do you think about AI much?

Yeah.

And I think definitely kind of thought about things like the AI and if control problems

and aligned to problems and all of those things.

Do you worry about the existential threat of AI?

It's definitely one of the things I worry about.

I think there's a lot of kind of common challenges because in both cases, what you're ultimately

trying to do is you're trying to get a simple system to direct a more complex system.

In the case of strong AI, the idea would be that the simple system is people and the

complex system is whatever thing the people end up unleashing on the universe that will

hopefully be a great thing.

In the case of blockchains, the simple thing is the algorithm, which is a piece of static

and fully open source code, and the more complex thing is just all of the different possible

and if human actors and the strategy is that they might end up used to participate in the

network.

Do you think about your own mortality?

What you hope to accomplish in your life in the context?

I definitely think about ending my own mortality.

If I gave you the option to live forever, would you?

It depends a lot on what the fine bridge is.

If it's one of those things where I'm going to be kind of like floating through empty space

for 10 to the 75 years, then no.

If it's forever worth of having a fulfilling life with friends to spend the time with,

with meaningful challenges to explore and interesting things to be working on, then

I think absolutely.

That's beautifully put.

It's forever, but you'd have to check the fine print.

I think there's no better way to end it, Vitalik.

Thank you so much for talking to us.

So exciting to follow your work from a distance and thank you for creating a revolutionary

idea and sticking with it and building it out and doing some incredible engineering work.

Thanks for talking today.

Thank you.

Thanks for listening to this conversation with Vitalik Buterin, and thank you to our

sponsors ExpressVPN and Masterclass.

Please consider supporting the podcast by sending up to masterclass at masterclass.com

slash lex and getting expressvpn at expressvpn.com slash lex pod.

If you enjoy this podcast, subscribe on YouTube, review it with five stars on Apple Podcasts,

support it on Patreon, or simply connect with me on Twitter at lexfriedman.

And now let me leave you with some words from Vitalik Buterin.

The thing that I often ask startups on top of Ethereum is, can you please tell me why

using Ethereum blockchain is better than using Excel?

And if they can come up with a good answer, that's when you know you got something really

interesting.

Thank you for listening and hope to see you next time.