The following is a conversation with Vitalik Buterin, his second time in the podcast.

Vitalik is the cofounder of Ethereum and one of the most influential people in cryptocurrency

and technology broadly defined.

Quick mention of our sponsors, Athletic Greens, Magic Spoon, Indeed, ForSigmatic and Better

Help.

Check them out in the description to support this podcast.

As a side note, let me say that Ethereum, Bitcoin and many other cryptocurrencies have

been taking a wild ride of prices going up and down in the past few months.

To me, the prices were never as important as the ideas, both technical and philosophical.

Cryptocurrency has the potential to empower billions of people to participate in a global

economy in a way that resists the manipulation by centralized power.

Also with smart contracts, Layer 2 technologies, data pools, NFTs and of course integration

of artificial intelligence into the whole thing, we have the opportunity to build tools

and worlds that transform physical and digital life as we know it, hopefully minimizing the

suffering in the world and maximizing the fun.

This is the Lex Friedman podcast and here is my conversation with Vitalik Buterin.

Let's first talk about Shiba Inu, if we can, also known as Shiba Token, Code SHIB.

For contact, Shiba Inu was created in August 2020, modeled off of Doshcoin by the anonymous

founder known as Riyoshi.

On May 10th this year, it had a market capitalization of over 13 billion and maybe you can explain

this, but in a crazy move, you were given half of SHIB's total supply.

You burned, a.k.a. destroyed 90% of it, that's worth $6.7 billion and you donated 10%, that's

worth $1.2 billion at the time to an India COVID 19 relief fund, saying you don't want

to be the locus of this much power.

This is fascinating.

Why and how were you able to walk away from this much money and this much power?

I should probably start by giving some of the backstory around these coins and this concept

of giving me coins.

First of all, Shiba Inu, as you said, is this knockoff of Doshcoin.

Doshcoin was this initial kind of fund coin that was created back around 2014 or so.

It was just created by Jackson Palmer and put it out as a joke for a couple of hours

in a community formed around it.

At the beginning, people didn't take it very seriously.

I actually remember putting about $25,000 into Dosh sometime around 2016.

I just remember thinking to myself, okay, how am I going to explain to my mom that I

just invested $25,000 into dog coins?

What even are dog coins?

The only interesting thing about this coin is that there's a logo of a dog somewhere.

Of course, that ended up being one of the best investments I've ever made.

It did really well.

Then at the end of 2020, Elon Musk, of course, started talking about Doshcoin and the market

cap just shot up to about $50 billion.

It shot up multiple times.

The first time, it went up from about 0.8 cents to about $0.7 cents, and this just happened

all in one day.

I remember this was when I was still in Singapore in the middle of COVID, and I saw that the

price just went up by 1,000%, and I was like, oh, my God, my doge is worth a lot.

I immediately called up some of my friends and told them to drop everything in scramble.

Then I just sold half the doge, and I got $4.3 million donated the proceeds to give directly.

A few hours after I did this, the price dropped back down from about $0.07 to $0.04.

I managed to sell the doge at the top, and I remember just feeling like I was such an

amazing trader.

Then, of course, the price went up from $0.04, then to $0.07, and then $0.50.

Doge becoming this big phenomenon where there's even a lot of people that have heard of doge

or should have not heard of Ethereum is just something even I wasn't predicting.

After that, of course, we have doge, and then people are thinking, well, if the leading

doge token is worth $50 billion, then surely the second largest doge token deserves at

least $7 or $8 billion.

I feel like that's what the mindset of these Shiba people is.

Then, of course, they did this other gimmick where they gave me half the Shiba token supply.

They were actually not the first projects to do this.

Around the end of 2020, there was this weird project called Teller.

I think they're a chain link competitor or something like this.

I remember they just dumped $50,000 worth of their token into my wallet, and then they

had their TwitterRB basically run around saying, look, look at Vitalik's wallet.

Vitalik holds Tellers.

He's one of us.

He's a supporter.

As soon as I discovered this, I just publicly sold the Teller tokens on you to swap.

This created a bit of a Twitter splat.

The Shiba people were more clever.

The Shiba people, instead of dumping to that wallet, they dumped to my cold wallet.

In cryptocurrency, there's this concept of cold wallets and hot wallets.

The thing that actually owns your money is this 80 digit number called a private key.

The hot wallet is when that private key is just stored in memory on your computer, on

your phone, really easy to access.

Cold wallet means it's either written down on a piece of paper or it's on a computer

that's just never accessed the internet.

Cold is very inconvenient, but cold is also much more secure.

Even if that computer has some viruses on it, it's air gapped.

It's not actually going to be able to upload it.

This cold wallet and all the money's out of the cold wallet, so it's safe for me to talk

about my setup now.

It was a laptop that was sitting in Canada.

I also had two pieces of paper where I wrote down two numbers on those two pieces of paper.

One was with me, one was in Canada.

If you add those two numbers together, you get the private key.

Because of COVID travel restrictions, this cold wallet's in Canada.

It's very difficult for me to actually access it.

I'm not sure if they knew this, maybe they just got lucky, but basically they sent a

lot of these dog tokens into this wallet where it was very difficult for me to access it.

I saw these dog tokens, I saw more and more people talking about them, and then at some

point I realized that these things are worth billions of dollars.

There's lots of really good things that you could do with that amount of money, and it

would actually be a waste to just see it go.

I made the decision that I would actually power through and figure out how to safely

basically get my private key.

I actually had to call up my family, tell them to read out their number off of their

piece of paper.

I entered that into a fresh laptop that I bought from Target.

Then I put in my other number on my piece of paper, added the two numbers together on

the computer, there's the key.

At the same time, just scrambled for two days, setting up a new wallet where I could move

my ETH to safely, getting people to be multisig partners, just doing all sorts of stuff that

10 years ago you would expect to just be part of a cyberpunk science fiction novel, but

now it's all real.

So you're doing this all by yourself, essentially?

Most of it by myself.

You have to keep it secret.

I needed my family to actually go and read the number on their piece of paper, and then

in my new multisig wallet, there's other people that are signatories, but I'm obviously

not going to reveal any details beyond that.

So I did this, and I actually managed to get the private key, make the first transaction

that would just move all my ETH to the multisig wallet so it's safe, and then put the private

key on my main computer, then started going in and just selling some of the dock tokens

and then just giving them to these different charities.

Now at the time, I actually did not even have any idea of how much you would be able to

get, because on paper, the dock tokens are $7 billion, but in reality, it's a very liquid

market.

Are you going to crash it after you sell 1 million worth?

Are you going to crash it after 10 million?

Might you actually be able to get an entire 200 million?

I had no idea.

So I definitely was just over the mindset, okay, I'll sell a bit, maybe I get some ETH,

and then donated some ETH to give well donated some to other groups, and then, okay, have

some dock tokens.

I don't have an easy ability to sell more myself, but then I'll just give them to these

groups and hopefully they'll do good things with them.

I actually donated at 20% and dumped 80%.

So the COVID India group got one batch and then there's another group that got another

batch.

I don't want to say who they are, because I think they want to announce themselves at

some point.

Sure.

But you can see the fact that these transactions were made on the blockchain, but it was just

very interesting and unexpected and just an insanely crazy situation.

It's been a couple of weeks.

First of all, thank you for helping me hang up some curtains.

This is a first for the podcast and shows that you're a truly a special person to be

willing to help.

But now, a couple of weeks later, do you regret any aspect of that decision?

I'm sure there are some things that I probably could have done better.

I was actually talking to some of these charities and I was impressed by just how much money

they managed to get out of selling some of these coins.

So I probably could have done better by just talking more with the traders and actually

ensuring that they can do a better job of maximizing the value of all of them.

But it was a very stressful time and I did have to act quickly.

I did manage to make a lot of the donations before, a few days before the great crypto

crash happened.

So it's difficult to, obviously, there's parallel universes in which I did better,

but at the same time, there's also lots of parallel universes where because I hesitated

more and tried to spend more time thinking I missed the opportunity.

So on that, it's like a luck of the draw and I'm just happy that everything was able

to turn out as well as it did.

But psychologically, you mentioned stress, how hard was it?

It was stressful, right?

I think, well, one of the really stressful parts was just the fact that I had to basically

move all of my funds, including the 325,000 ether from one cold wallet into another hot

wallet or sorry, into another multi sig wallet.

And maybe the multi sig wallet had a bug in it.

Maybe there's some mistake I'll make in the middle that causes the funds to get lost.

And that part was stressful and I was definitely stressing out for two days.

I mean, triple checking the new wallet, I even did a bit of an audit of the code myself.

I wrote my own JavaScript to DAP to make confirmations because Gnosis safe didn't work with the status

wallet well.

So that whole thing was definitely a bit of a marathon.

I was also definitely a bit worried about or uncertain, I guess, how the public and

including the coin community is what perceived the whole thing.

But I was actually impressed.

For every poster that was saying, no, why did Vitalik, like Ruggple on his wallet was supposed

to be a burn address.

There was like 10 people that were like, oh, I thought I was just in this because it's

a fun pyramid gambling thing.

But instead I ended up being part of this great public good thing for humanity.

And that's even more amazing.

So the amount of that that I got was very impressive.

So all in all, I think the doc people did great.

The doc people.

Is there something you can extend to the bigger picture of it in the principles you applied

to make in this decision?

Is there some principles, philosophies that you apply also to the decisions you make around

Ethereum?

I think a big one for me is just this idea that crypto isn't just an opportunity to

give people slightly better ways to save value in all of these things.

It's also an opportunity to basically create these new digital institutions that could

serve the public good in new ways.

And that's something that I've been interested in for a long time.

I actually even have this article in Bitcoin Magazine back in 2014 where I basically suggested

this idea that you would have coins that represent causes and people would just buy and accept

those coins because they support those causes.

So I think it's called markets, institutions, and currencies, a new form of social incentivization

or something like that.

And I'm sure you can find it in the links.

So that was interesting to kind of see becoming real.

In general, I think public goods are very important.

On the internet, public goods are even more important.

Every single experiment podcast is just on YouTube and anyone can go and see it.

There's no way for you to sell it so that some people can see it, but then other people

can't see it.

You could do that, but then you'd obviously be reducing your impact.

So thank you for making the amazing live experiment podcast so freely available.

Well, that's actually a tense thing is how do you do it in a way that's not controlled

in a centralized fashion because actually YouTube feels free and open, but it nevertheless

is one company making centralized decisions.

The first time I realized YouTube is not forever is when a lot of the Joe Rogan experience

library was pulled from YouTube as part of the Spotify deal and it made me realize we

need to...

It's like the realization that fiat money is centralized is realizing that this is not

forever and you might want to come up with schemes to distribute it, to decentralize

the control of it in a way that audio for podcasts is with just an RSS feed.

Exactly.

One of the philosophical things that I hope to achieve is decouple the concept of public

goods which are incredibly important and are the lifeblood of modern civilization from

the idea that there is or can be one central organization that represents the public and

perfectly understands and can impose their idea of what is the good.

When people talk about public goods, it just often comes with this baggage of either centralization

or conformism and I think it doesn't have to.

Often the most important public goods are the ones that are created by the crazy individualists

that disagree with everyone else.

Trying to make this kind of synthesis where you combine the values of decentralization

and the values of open source but you're not naive about it and you realize that for these

things to be produced, there needs to be a way for it to be sustainable.

There needs to be some way of supporting people who are working these projects but at the

same time you want to avoid that turning into a vector of centralization.

Trying to get all of the good things without the bad things.

To me, that's a big part of what my grand experiment in crypto is about.

We are doing things in different kinds of things for this.

The Gitcoin grants quadratic funding in the Ethereum ecosystem, there's obviously these

dog coins that just happens accidentally, there's other projects that, for example, Uniswap

has their Uniswap DAO that just has a huge amount of funding.

We haven't seen yet how that's going to be deployed but it could be potentially deployed

to do lots of really good and amazing things.

Do you see Ethereum as essentially a mechanism to fight for social causes?

I definitely see Ethereum as being a mechanism to fight for definitely some specific things

that are social causes, just the fact of creating an open financial system that anyone can participate

in no matter where they are in the world.

That's a social cause, just giving people the ability to organize and create projects

even if it's five people in five different countries.

That kind of inclusiveness, I think that's a social cause and it's a core crypto value.

But then at the same time, the other important part of the magic of Ethereum that you have

to balance that against is that it is also this open platform where ultimately the things

that are on Ethereum is just the things that the community makes of it.

Well, you briefly opened the door so let's go there.

When it comes to government regulation of crypto, what's the best case scenario?

What's the worst case scenario?

In terms of, as you've mentioned, Ethereum challenges the power centers of the world

and how do you see the interplay between governments and this new technology that resists centralized

power?

The best case and worst case.

The best case is that blockchains continue to prosper and we figure out scalability so

that people can actually start doing things on block, all of the amazing use cases that

people have been talking about instead of today where a lot of the great stuff gets

priced out because transaction fees are at $5 to $10.

And then we see a lot of different amazing applications happening on blockchains.

It could be DAOs creating new ways for people to interact and organize with each other,

new ways for artists to get funded and all sorts of these amazing things.

And there's just enough public support and just enough people that see that what crypto

is truly doing a lot of good things.

There are definitely areas where there's tensions, but in those areas where there's tensions,

there could be some kind of creative and interesting approaches that get figured out.

The concept of corporate taxes, for example, that would disappear as a revenue stream if

theoretically corporations just all get replaced by DAOs.

But maybe there's some other creative way by which DAOs themselves can have some kind

of encoded governance that ensures that they have at least some kind of bias towards serving

the global public good.

Maybe DAOs can do enough of that that people are happy with it.

There are going to be things that people are unhappy about.

There's always going to be the people that wants to surveil everyone.

But if the effect of crypto from just empowering people is greater than that and greater than

that in a way that people can just easily see, then that would be a good scenario.

And we'll just become incorporated and accept it the same way as happened with the internet.

But in the worst case scenario would, of course, be just people suddenly flipping and going

into moral panic mode and just, oh my god, this technology is used by insert bad group

over the day.

And then I don't think governments have the ability to ban crypto to the extent of just

preventing blockchains from existing, but they definitely have the ability to really

marginalize it.

If you just ban all exchanges and ban all links from the fiat ecosystem to crypto and

ban all mainstream employers from accepting or paying in cryptocurrency, then you can

successfully turn it into a fairly kind of niche countercultural thing that has much

less impact than otherwise would.

So it's somewhere between the good scenario and the bad scenario.

I'm obviously hoping for the good.

Well, that's interesting also the tension between governments and companies, like if

you have a bunch of billionaires or a bunch of companies like Tesla investing in Bitcoin

and then governments resisting that.

It's interesting who wins out in that worst case scenario.

And almost when companies and rich, quote unquote, respectable people embrace cryptocurrencies

Bitcoin, Ethereum, so on, even the dog coins, it's almost sends a signal to everybody else

that this is a revolution that's here to stay.

On this one little tangent that you brought up, this is almost an outdated idea, but it's

still with us, which is cryptocurrencies are used for illegal activity, for drugs, for crime

and so on.

Is there some sense that worries you that if cryptocurrency, if Ethereum runs the world,

then making money from crime will be easier?

There's always that possibility, but at the same time, I think if you look at the world

as a whole and the way all the other technological trends are going, in person surveillance is

just going up every year.

If you commit a crime in meat space, it's getting harder and harder to get away with

it.

If you want to do something, and this is something that's just happening as a result of better

technology and information transparency, a lot of it's hard to prevent even if you really

tried.

So, the world where things go dark as the police hawks sometimes like to say to such

an extent that, oh my God, the criminals are committing crimes with impunity and we can't

see anything.

That just seems unlikely, but on the other hand, the world where there just is no privacy,

for example, or the world where there just is no ability to act outside of the confines

of mainstream institutions, that's something that's more realistic and that seems like

something that could lead to a lot of scary things.

Even from a government's point of view, governments over the last few years, a lot of them, they're

very worried about sovereignty, they're worried about if their country's economy is in social

environments, they're just completely dependent on basically foreign tech companies controlled

by foreign governments.

Governments are not on team government.

It's like the Indian government is on team India, the Russian government is on team Russia

and so forth.

They don't want the US to be able to have this big backdoor into everything.

So I do think that a balance is needed, but at the same time, I do think, I guess I definitely

worry more about the possibility that just without things to like crypto, acting outside

of institutions becomes too impossible and I don't even necessarily mean outside of governments,

but just outside of corporations becomes too impossible and there's just terrible things

that come as a result.

Things going in the other direction, it obviously is a risk, but at the same time, I think in

the long term, a crypto can potentially even offer defenses as much as a tax against that

sort of thing.

Yeah.

Throughout history, many of the most destructive things came from centralized institutions

versus sort of from the people operating in the shadows and I've been talking to a bunch

of psychedelics folks that people doing researches like Rick Doblin in Johns Hopkins, there's

a lot of exciting research on psychedelics and one thing you could say about operating

at the edge of legality, it could actually accelerate the adoption of particular things

like whether it's marijuana or psychedelics, they can help people out.

It almost accelerates the policy.

It forces the policy to catch up to where the people stand, so there's a positive way

of doing things that are in the gray area of legality and creating a market that allows

people to in a safe way be able to participate in this gray area of legality.

The other thing to keep in mind, of course, is that the set of the kinds of things that

just payment processors as companies try to restrict people you from is much larger than

the set of things that's illegal.

Part of that is because they want to be super conservative and the more layers you have,

the more they're conservative because they're scared of what the layer below them will do

to them.

Sometimes they have their own moral opinions of various kinds.

They go after lots of people.

They make life really hard for sex workers, for example, psychedelics as you mentioned.

There's a lot of activity, including stuff that is totally legal, that just there's

this shadow paypal credit card government or whatever you want to call it that makes

it just hard to participate in this stuff.

I think reducing the number of intermediaries is definitely normally a good thing.

All right, let's talk about one of the most exciting technologies, like technically, philosophically,

like socially, financially in every way, which is Ethereum 2.0.

There's a million things to talk about, but at the step one is probably a good thing to

do, which is can you briefly summarize your vision, how Ethereum 2.0 will make Ethereum

more scalable, secure, and sustainable?

Sure.

I think recently we've actually been kind of deemphasizing the ETH 2.0 branding, I guess.

The reason behind that was that originally we envisioned something more like a big grand

event where all the good things would happen at the same time, and it would be a new blockchain,

and it would be a new protocol, and people would have to take a lot of effort to migrate

over.

Later, we've slowly changed the roadmap over to something that's much more incremental.

Proof of stake happens kind of over time, and then charting gets added over time, and

all these features get added over time.

The experience for just a regular Ethereum user still feels very seamless.

It's maybe a little bit more complex than the hard forks that we've already done from

a user's point of view, but not by that much.

The big two things that are happening, these are what used to be considered the two flagship

features of ETH 2.0, and now they're just the flagship features of the next evolution

of Ethereum, as proof of stake and charting.

Proof of stake is a consensus mechanism, I should say.

The difference is that an algorithm is something that you run by yourself, a mechanism as interactions

between people, and it could even include incentives and all of that.

You can sense this mechanism by which nodes in the network agree on which blocks came

in, which transactions came in, and what order.

Make sure that once a block gets accepted, it can't get reverted, and all of these things

that we expect from a blockchain.

Existing blockchains, including Bitcoin, including the Ethereum of today, and including

a lot of them, the use proof of work.

So, the reason why we need proof of anything is because they serve this function that I

call an economic civil resistance.

That's obviously a big word, especially if you've never heard of civil as before.

The basic idea is that you have a network and you have lots of computers that agree

on which blocks you accept, and sometimes you get two blocks that get published at the

same time, and you just have to agree on an order.

There has to be some kind of voting game.

But then the question is, well, in this voting game, who gets to vote?

Who gets to participate?

You can't say one person, one vote.

The reason why you cannot say one person, one vote is because you need some kind of

authority or some kind of mechanism to say who the humans are.

If you don't have that, then a bad guy could just come in with a virtual machine or with

a computer that has on it 10 billion virtual machines that have 10 billion virtual nodes,

and then just say, look, I'm 99% of the network, I should control everything.

To prevent this, what proof of work and proof of stake both do is they basically say, well,

the weight of your vote, how much influence your votes have in the consensus, is proportional

to what quantity of economic resources you bring in.

In the case of proof of work, you prove what economic resources you have because your economic

resources are computers, and you prove that you have them by just running them 24 seven

using these hash algorithms.

This does solve the problem because in order to attack the network, you have to come in

with more computers and more money invested into computers and electricity than the rest

of the network puts together, and that's extremely expensive.

In proof of stake, instead of relying on people with computers that are just constantly cranking

out hashes 24 seven, as your unit of economic resources, you just use holdings of coins

inside the system.

All of these blockchains, they have some kind of coin in them.

Bitcoin has Bitcoin, Ethereum has Ether, they all have a coin, so why not just use that

as the economic resource that you're using to measure participation?

That's the core distinction between proof of work and proof of stake.

I like proof of stake, and I've liked proof of stake for many years basically because

it just requires much less ongoing resource consumption.

With proof of work, you have to actually go and buy these physical computers.

These days, they have specialized hardware, ASICs, application specific integrated circuits.

You have to go produce them, you have to go buy them, and unless you have millions of

dollars, you have to buy them from one of these other people who creates them, and those

other people often end up taking a huge cut of the profits themselves, and then you have

to plug them in, you have to just burn all of this electricity that's just running 24

seven.

It consumes a huge amount of energy, and not just energy, it also just to create the hardware.

People focus a lot on energy, but actually about half the cost of proof of work mining

is the cost of the hardware.

Proof of stake is a very big deal too, and you need this really big and powerful, very

specialized hardware, another kind that fills up these big warehouses.

Proof of stake, you don't really need that much electricity, you just need just a little

bit to run a regular computer.

You can run proof of stake validators on computers that you already have.

It's just much less resource intensive, and this is good for a few reasons.

One is the kind of environmental rationale that you're not breaking the environment.

The second is that you're not taking away electricity and other resources from other

people.

I think just today I saw a story about Iran wanting to shut down some Bitcoin mining because

it was just grabbing up so much electricity that it was outbidding the nearby towns and

they didn't have enough.

Then there was Chia, the one that's doing proof of hard disk mining, is just grabbing

up so many hard disks that there's a shortage.

That's the second reason.

The third more selfish reason is that because participating in consensus does not require

so much energy expenditure, you don't need to pay people as much to participate.

Bitcoin and Ethereum, they both issue somewhere around 4% of the total supply area right now

to miners.

Ethereum is about 4.7 million ether, and the current supply is about 115 million.

With proof of stake, we expect it'll be somewhere between 500,000 and 1 million per year.

That means the supply doesn't have to increase so quickly.

One of the pros that people argue for the proof of work is that it is secure because

it's much more difficult to, as you've highlighted, it's difficult to participate.

What are your thoughts about the security of the proof of stake mechanism?

Is there ways to make it secure?

I think proof of stake is very secure because in order to be able to attack the system,

you need to have basically as much stake as the rest of the network.

Right now, for example, we have 5 million ETH staking, so you have to come up with 5

million ETH and then join the network.

The other 5 million ETH is a lot.

It's like, how much is it now, like $15 billion.

That's actually more than, I believe, the cost of attacking the Bitcoin network.

The second thing is that recovering from attacks is much easier in proof of stake than in proof

of work because in proof of stake, first of all, for many kinds of attacks that you do

against this network, we have this concept of automatic slashing, which basically means

that in order to revert a finalized block, so if there's one block that's accepted by

the network and you try to convince the network to revert that block and accept a different

block, in order to make that attack, you basically have to have a big portion of your validators

signed to conflicting messages.

This is something that once these messages are on the network, you can go and prove.

Look, these people did it.

We have this feature in the protocol called slashing, where you basically take all these

people who provably misbehaved and you burn their coins.

You don't burn anyone else's coins.

There are other cases like, for example, if instead of reverting blocks, the attack just

tries to censor everyone, then everyone who got censored would just basically create the

minority chain and then the community would basically have to do a soft fork.

They would just have to say, look, this chain is clearly attacking us.

This chain is the one not attacking us, and so we're going to join this chain.

Then what happens is that on that new chain, the attackers also lose a lot of coins.

The difference between proof of stake and proof of work is that in a proof of stake

system, you can identify specific participants and you can say, this isn't a human going

in and saying, I don't like you.

I don't like you.

I don't like you.

I don't like you.

This is automated.

The slashing process is automated.

Yes.

There are ways it can go wrong, so that's a painful process where the coins are burned.

It is painful, yes.

The one big unknown, of course, is if an attack actually happens and if an attack happens

that requires the community to actually choose one of these minority forks, then what would

the community actually successfully coordinating on this look like?

We can talk about it and we can write science fiction novels about it, but until it's happened,

you don't really know the details of what it looks like and how difficult it is.

What are the channels of communication for the community if you can enlighten me a little

bit?

In many ways, in the political realm, Twitter is often used as a way to have these emergent

phenomena of large groups of people coming to a consensus about a particular idea, and

then there's battle for consensus.

What's in the Ethereum community, what are the sources of natural language based communication

that have an emergent belief structure that you would say?

Or is it all through money?

Is it all through trading that the communication happens?

There's definitely talking as well.

We have to agree on protocol changes somehow.

There's Twitter, there's Reddit, there's GitHub, there's all of the various Ethereum

forums, Ethereum magicians, Ethereum research.

There's just in person communication.

Then there's just the hidden web of everyone talking to everyone on Telegram or Signal.

It's some of everything, but I think the thing to emphasize around, can you actually come

to consensus on whether or not to fork the chain because the attacker is answering everyone,

for example, is everyone who's running a node is going to see almost the same thing.

They're going to be off by a few seconds, and maybe they'll disagree by a few minutes,

but if it's a serious attack, people are going to know.

It's not one of those things where, oh, we're trying to agree on, did Epstein kill himself

or some random political fact where in reality no one knows a single thing about what's actually

going on and they're all speculating.

It is much more visible.

We do have that, but at the same time, I'm happy to admit that these are fairly untested

mechanisms, but at the same time, they're also untested mechanisms in proof of work.

In proof of work, it's even harder because in proof of work, you don't have the ability

to identify and say, I'm going to, these miners attacked, and so we're not going to let these

miners in, these miners did not attack, so we're going to keep them in.

You have to pretty much either take out none of the miners or you do a fork that changes

the proof of work algorithm, which takes out all of the miners.

The economics of recovering from attacks in proof of work, at least to me, actually do

seem more unfavorable, but I'm sure the proof of work people you talk to will give very

different and contradictory opinions, and that's totally fine and amazing.

Some people describe MEV, minor extractable value, as an existential risk to Ethereum.

What is MEV?

How important is it to solve an MEV?

If it's important, what ideas do you have?

Sure.

How about after this one?

We'll also talk about sharding because it's amazing and it's part of the review too.

We'll return back to sharding, which is, we'll return to the big picture of the scaling

problem, as you mentioned.

I love this conversation, you know, depth first search instead of breadth first.

Basically, okay, MEV, minor extractable value, it is not different in proof of work and proof

of stake, right?

If you want to call it block proposal or extractable value, it sounds less sexy, but we can call

it BPEV instead of MAV, who cares?

This is a problem in both proof of work and proof of stake.

The basic idea is that if you have the ability to choose which transactions go into a block

and in what order, then you have the ability to take advantage of that position for economic

gain in a lot more ways than just collecting transaction fees, right?

For example, there's decentralized exchanges on chain like Uniswap.

Let's say the price of ETH versus USDC was $2,700 the previous block, but then there

was a bit of a market drop and now it's $2,680, where you can go on Uniswap and you can just

gobble up the entire part of the automated order book that's between $2,700 and $2,680.

Then at the same time, you run a bot and you buy some ETH back at $2,680 and you've just

made about $10 of profit, right?

Well, $10 times whatever the depth is, right?

There's lots of little things like that.

There's also things that involve front running other people's transactions.

One example of this would be that if someone sends a transaction that says, buy me five

ETH for whatever price that you can get, but with a maximum of, let's say $15,000, then

you can go and you can put a transaction right in front of that transaction and you can buy

up that ETH first and then you resell it to him at $15,000 minus one.

Then you get to make a little bit of money that way.

Exactly.

There's a lot of these different arbitrage front running, back running, these different

tricks that allow block proposers to get some percentage on top like overhead.

Exactly.

The reason why this is a challenge is because first of all, it sometimes degrades user experience

because users get less favorable trades, but there are sometimes ways to mitigate that

for applications.

Sometimes it's not that bad, but the bigger risk that I think some people consider more

existential is that there's just much more economies of scale in figuring out how to

extract all this revenue because if you're just collecting transaction fees, there aren't

really economies of scale.

There aren't really benefits to centralizing because it's a very simple formula.

You just grab up the transactions that pay you the most, but with MEV, there's all these

sophisticated algorithms, and if you have lots of money, then you can hire really smart

people to make amazing algorithms, and then you can use the other half of your money to

get a lot of mining power, a lot of stake, and you get a lot of opportunities to use

your even better algorithms.

There's this risk that as a result of this, mining is basically, or even validating, improve

of stake is going to centralize.

I think the ecosystem is best replied to this sort of risk, and it's the direction

where projects like flashbots are going already is if you can't eliminate the centralization,

then you try to firewall it.

The way that you firewall it is, you basically say, we're going to try to deliberately create

a marketplace where people can just do the complicated work of creating what are called

bundles, like the bundles of transactions that are very profitable.

And then at the other side of the market, you just have block proposes or miners that

are just dumb notes, and they go and ask what are called searchers, the bundle creators,

and they just ask, hey, how much can you give me if I put in your bundle, and then they

just take the highest offer.

So you sort of separate out the task, and you have the easy part, and then you have

the hard part, and you have this special class of actor called a searcher that does the hard

part, and then the easy part, the people doing the easy part, which is just miners and validators,

they just talk to all the different people doing the searching, and they just accept

the highest bidder.

So this is just an interesting example of economic design philosophy.

Sometimes you can't just make centralization go away, sometimes it's inevitable, but at

least you can try to contain it, you can direct it, or you can even firewall it away from core

consensus, the parts that really do need to be decentralized.

But you don't see it as an existential risk, it's just a bit of a problem that has to be

constantly dealt with.

It's a risk.

There's obviously a risk that it's a very severe problem, and that even this FlashBots

approach has some fatal flaw or whatever, but we're definitely approaching it with the

mindset of this is a problem, and yes, we do have to do some work to solve it, but we're

doing it, and so far it's being solved.

Okay, let's talk about the other really, really fascinating part of the future of Ethereum.

Let's not call it Ethereum 2.0, but the future of Ethereum that also may require a hard fork.

I don't know, you can correct me on this.

Is, well, broadly, ideas for scaling and more specifically Layer 1 and 2 intersection ideas

of how to achieve scaling, and at the core of that is the idea of sharding.

First, what is sharding?

There's two major paradigms for scaling blockchains, as you said, Layer 1 and Layer 2.

Layer 1 basically means make the blockchain itself capable of processing more transactions

by having some mechanism by which it can do that, despite the fact that there's a limit

to the capacity of each participant in the blockchain, and Layer 2 says, well, we're

going to keep the blockchain as is, but we're going to create clever protocols that sit

on top of the blockchain, that still use the blockchain, and that still inherit things

like the security guarantees of a blockchain, but at the same time, a lot of things are

done off chain, and so you get more scalability that way.

In Ethereum, the most popular paradigm for Layer 2 is rollups, and the most popular paradigm

for Layer 1 is sharding.

One way to achieve Layer 1 scaling is to increase the block size, hence the block size, wars,

quote, unquote, and you actually tweeted something about, people are saying that Vitalik changed

his mind about the, he went from being a small...

No, I went from being big to small.

Big to small, but you said I've been a medium blocker all along, so maybe you can also comment

on the very basic aspect before we even get the sharding of where you stand on this block

size debate.

Sure.

The way that I think about the trade off is I think about it as a trade off between

making it easy to write to the blockchain and making it easy to read the blockchain,

so when I say read, I just mean have a node and actually verify it and make sure that

it's correct and all of those things, and then by write, I mean send transactions.

I think for decentralization, it's important for both of these tasks to be accessible,

and I think that they're about equally important.

If you have a chain that's too expensive to read, then everyone will just trust a few

people to read for them, and then those people can change the rules without anyone else's

permission.

But if on the other hand, it becomes really expensive to write, then everyone will move

on to basically second layer systems that are incredibly centralized, and that takes

away from decentralization and self sovereignty as well.

This has been my viewpoints pretty much the whole time.

You need this balance and going in one direction or the other direction is very unhealthy.

In the Bitcoin case, basically what happened was that Bitcoin originally, at the very beginning,

it didn't really have a block size.

It just had an accidental block size limit of 32 megabytes because that just happens

to be the limit of the peer to peer messages.

Interesting.

I didn't even know that part.

But then Satoshi back in 2010 was worried that even 32 megabyte blocks would be too

hard to process.

He put the limit down to one megabyte, and I think the...

If I put, you mean, sneaked in there.

Yeah, just made an update to the Bitcoin software that made blocks bigger than what I think

it's a million bytes invalid.

I think the impression that most people had at the time is that this is just a temporary

safety measure, and over time, as we become more confident in the software, that limit

would be raised somewhat, but then when the actual usage of the blockchain started going

up and then it started going up first to 100 kilobytes per block, then to 250 kilobytes

per block, then to 500 kilobytes per block, there started a kind of coming out of the

woodworks, this opinion that like, no, that limit should just not be increased.

Then there were all of these attempts at compromising, first there was a proposal for 20 megabyte

blocks, then there was the 248 proposal, which is a bit ironic because the 248 proposal started

off being a small block negotiating position, but then when the big block people came back

and said, hey, aren't we gonna do this, they're like, no, no, no, we don't want the block

size increases anymore.

There were these two different positions, the small blockers, I think they valued one

megabyte blocks for two reasons.

One is that they just really, really believe in the importance of being able to read the

chain, but two is that a lot of them really believe in maintaining this norm of never

hard forking.

The difference between a hard fork and a soft fork is basically that in a soft fork, any

block that's valid under the new rules was still valid under the old rules.

If you have a client that verifies according to the old rules, then you'll still be able

to accept the chain that follows the new rules, whereas with a hard fork, you have to update

your code in order to stay on the chain.

They have this belief that soft forks are either less coercive than hard forks, which

by the way, I completely disagree with.

I actually think soft forks are more coercive because basically they force everyone who

disagrees to go along by default.

Or they have this opinion that it's more difficult to abuse soft forks to do really

mean things or that completely violate people's expectations like increasing the supply, which

is again, I think there is some truth to that.

Because of these reasons, they just say, we're only going to do soft forks and we want to

just not do any hard forks.

They eventually discovered this idea called segregated witness that allows for a very

tiny block size increase to the equivalent of about two megabytes with a soft fork.

This is a really weird and devious trick.

Basically what they do is they take the signatures of transactions and then they put them outside

of the block.

Then they add an extra rule that says that every block to be valid, the block has to

come with a separate extension block that contains all of the transaction signatures.

When you measure it according to the old rules, like, hey, it adds up to less than a million,

but actually there's this extension block that the old protocol doesn't even know about.

It's a hack that seemed to work in a small way, then besides the block size.

Small block size was happy with these very low levels of block size and then the big

block size wanted to expand to at the very least go to four megabytes, then maybe 820.

There's disagreements within there as well.

I definitely was favoring the big side the whole way through, as you can probably tell.

Even though the argument against the big is that it makes things more centralized.

Because fewer people can run and know that verifies the chain and also because any of

these things would require a hard fork and hard forks are inherently risky.

Do you think there's truth to that?

I'm pro hard fork.

I think hard forks are actually in a politically economic sense, they're better than soft

forks.

I think that's a beautiful principle as stated that soft forks may be more coercive than

hard forks.

This is not just about cryptocurrency, this is about politics and life.

That's fascinating.

You're okay with hard forks.

In fact, you think hard forks is the right way to make changes because then everybody's

forced to make a decision.

Do you accept this change or not as opposed to ideas being sneaked in behind the door

and the decisions forced on you?

Exactly.

Yeah.

But hard forks, some people say, this is when they talk about Ethereum, is there's some

aspect to a hard fork where you're trying to upgrade what is it, airplane while it's

flying?

I think soft forks are also upgrading an airplane while it's flying.

But it's just smaller upgrades.

There's some truth to that, there's definitely a bit more risk of a split as a result of

a hard fork than as a result of a soft fork.

And the split is highly undesirable, right?

Well it depends.

If it's a split because of a bug, then that's horrible.

If it's a split as a result of political differences, then I think a split is better

than one side being forced to basically just suck it up and accept the majority position

even if it really hates it.

What there's also political connections throughout the history of the United States is sometimes

groups of people that strongly disagree with each other should be forced to work it out

even when a split seems like an easy thing in the short term.

And it depends.

For blockchains in particular, the costs of people being able to peacefully go off and

do their own thing are much lower.

If you have a country and you have two groups, then often enough fighting out the new rules

requires a civil war requires everyone to move and so forth, but on a blockchain, the

costs are lower.

So if you were to look at the way things worked out with the block size wars and there was

a split, what is it, Bitcoin Cash and Bitcoin.

Like you looking, putting on your historian hat, you mentioned offline you like Dan Carlin.

So if Dan Carlin wanted to do an episode on the block size wars, do you think it could

have turned out better or are you okay with the way it turned out?

I'm definitely disappointed with what happened with the big block side.

I think the source of my disappointment is that one of the things that you notice when

just looking at this political disagreements generally, especially when you have environments

where they're authoritarian or a single party dominated and then there's some opposition

party and the opposition often has very legitimate grievances, but at the same time, the thing

you notice is that often enough, the opposition just sucks.

It just doesn't have political capacity, it doesn't have the ability to come up with policy

because its entire culture is designed around resisting much more and then it's designed

around actually debating serious policy trade offs.

And I worry, or I guess not so much worry because it's already happened, I unfortunately

think that Bitcoin Cash ended up being a victim of this, right?

Like first there was a split with Bitcoin Cash and then of course, Craig Wright came

in and you know, Craig Wright was this basically scammer who just keeps on pretending that he

is Sato Shinakamoto, the inventor of Bitcoin.

Hey, Craig Wright's legal team, do you hear me?

Yes, I still think your client is a scammer.

So sue me.

This is definitely going to be depth first search because I got to ask you, Craig, because

this people have been contacting me and I'm trying to figure out like what is up with

this human being.

So for people who don't know, there's somebody who is, let's start, there's Sato Shinakamoto,

who is the creator of Bitcoin who's anonymous and actually most really big people in the

cryptocurrency space do not like yourself and others do not dare claim that they are

even for fun Sato Shinakamoto.

In fact, if Sato Shinakamoto is still alive and is like, if say you were Sato Shinakamoto,

it seems like the thing he would do is probably or she is trying to remain anonymous.

On the flip side of that, there's a guy named Craig Wright who continually keeps claiming

that he is in fact Sato Shinakamoto and keeps suing a lot of people.

So on him, if we could just linger on him, what do you make of this character?

What are we supposed to make of this character?

Should he be ignored?

Is there any possible truth to his claims?

What do you make of him?

The analogy that's at the top of my head will get a bit political, but that's fine.

You've had Michael Ballas.

So I guess I view Craig Wright as being kind of like a Donald Trump figure in that he's

not very intellectual, but I think he gets a big audience because he says things that

like play to the resentments that people have and he says things that people wants to hear.

Like in the wake of this block size war, the big blockers did feel very disenchanted.

They felt that Bitcoin always had this vision that we were supposed to just keep increasing

the block size and Bitcoin is peer to peer cash.

It says so in the white paper.

And then this elitist clique of core devs just like came in and said, no, no, no, we're

going to impose this totally different vision.

And if you ever want your scalability, you'll have to wait for us to create this totally

unproven fancy technology called the lightning network that works on your completely different

principles.

And, you know, they were very angry at this and I think a lot of that anger is justified.

But at the same time, you know, when people are in that mental state, like it's very easy

for you to just kind of like latch on.

And if you find someone who expresses anger at the same things that you're angry at and

also like it seems like someone who's strong and seems like someone who, you know, might

be good to rally around.

It's very easy to just like get behind that.

But that extra part about where he's touching the ground, I don't understand why that's

necessary.

I think that he could have done it without that, but that, I mean, that just it's a marketing

strategy like it sort of gives him more salience.

Like there's other big block personalities, right?

Well, what's the difference between with Greg, right?

He's not just a big block personality.

He's potentially Satoshi.

And he did say all the big block things, right?

Like he talked about how, oh, the concept of a fee market is fundamentally like economically

wrong and it should be, it should be a free market and you should be able to have blocks

as big as you want.

Like he repeated all the talking points.

And so a lot of people were kind of sucked into that, right?

And so he unfortunately was able to basically dominate a big part of the Bitcoin cash community

for a long time.

And then eventually, of course, more and more people started to catch on.

He would just say technical things that are completely wrong, right?

Like one example of this that I remember is that he mixed up the concept of 256 bits and

two to the power of 256 bits, right?

So the difference is, it's like the difference between 80 and the concept of 80 digit numbers,

right?

And because of this, like he made this argument that said that Bitcoin's elliptic curve is

friendly to cryptographic pairings, like you don't have to understand what that is.

But if you want to know, I have articles on both at Vitalik.ca, but basically he made

this like technical argument that really hedged on this point.

And then when people pressed him on it, it's like, yes, what?

No, no, like what?

Look, exactly.

The height is like two to the 256 bits.

That's a very tiny amount of information.

No, no, no, two to the 256 bits is more than the amount of information in the universe.

And like he equivocated and kind of like preyed on people's inability to understand that mathematical

new lens.

And I called him out.

And eventually, I even called him out in person at this conference in Seoul.

Like I just stood up and asked, hey, conference organizer, why are you letting this fraud

speak at this conference?

And I remember even some big blockers at the time getting angry at me.

But, you know, eventually they did get rid of him and then Craig, well, basically Craig

Wright was forced to split off because the rest of the community refused to accept some

network change that he wanted.

And so then there was the BCH and BSV.

And then in the Bitcoin Cash community, there was this drama of, are they going to add a

developer fund where they redirect 12.5% of the revenue from the miners to the devs?

And according to the libertarian, not aggression principle is this technically theft.

Like his understanding of the technical depths of cryptocurrency was lacking in a way that

you, Satoshi Nakamoto, certainly would not.

Yes, exactly.

But the point is that even after Craig Wright got expunged, the Bitcoin Cash community kept

having these disagreements, right?

And now after this development funds dispute, there was a further split between Bitcoin

Cash and ABC.

But so, you know, the, the, the branching tree continues to extend, right?

So.

So in that way, it's disappointing to see those kinds of splitting.

There was never a result.

It is.

I would have definitely like wanted to see more of a kind of like the principled coin

with a, like tries to be Bitcoin, but, but, you know, follows consistent big block values.

But I know, maybe I should just like stop expecting projects that I have no involvement

in to be care at all about what my values are and, you know, like maybe Ethereum just

like is.

I think you have a powerful voice and you can inspire other projects to do, to, to, to

live up to their best possible selves.

Okay.

So that's the level, that's the layer one approach.

The other layer one within Ethereum is the idea of sharding.

Yes.

What the heck is sharding?

Okay.

What is the future of sharding look like?

So to summarize that big, long tangent that we just, uh,

It's a beautiful tangent, by the way.

It's the basic tangent.

And I think like crypto is just one of the most underrated aspects of crypto is I think

how you can like analyze the, you know, the sociology and the politics and the anthropology

and like, yeah, and I'm sure Dan Carle would have fun exploring the space at some point.

But like the core tradeoff, right, is that if you scale blockchains the dumb way just

by increasing the parameters, then eventually you just make it harder and harder to participate

as a node and you end up with a system where there's like 20 computers running the whole

thing and it's just very centralized.

So sharding basically says, well, instead of just increasing the parameters, what we're

going to do is we're going to change the blockchain architecture in such a way that each individual

node in the blockchain only needs to store a small portion of the data and only needs

to process a small portion of the transactions.

So you can think about it as being like inspired by BitSorrent, right, like on BitSorrent,

there's no such thing as a BitSorrent full node that has every movie, right?

And, you know, the work is like split up among a huge number of computers and like that makes

sense.

That's, you know, the only sane way to scale a system like that.

And if they actually tried making a version of BitSorrent that required full nodes to

that store every movie, then, you know, it would have like zero censorship resistance

and it would just like, you know, be dead in an instant.

So the challenge with taking that model and applying it to blockchains, right, is that

blockchains aren't just about like spreading data around.

They're about agreeing on exactly what data was spread around and ensuring that everything

that you agree on actually is correct.

And so you have this paradox where let's say you want to have a system that supports

10,000 transactions a second, but each computer in the network can only personally verify

100 transactions a second.

So how can each computer get a guarantee about the other 9,900 without actually going and

verifying them themselves?

And it turns out that there are some like a bundle of different tricks that can do that,

right?

So like one of them is just random sampling.

So the idea behind random sampling is like, let's say for simplicity, this is a proof

of stake chain and you have 10,000 validators, validators like, you know, the stakers.

And like for simplicity, we'll assume they all have the same number of coins, right?

If someone has more coins, we'll just kind of split them up and pretend they're 10 stakers.

Then you use like some random shuffling and you basically say, these random hundred validators

are assigned to validate this block.

These random hundred validators are assigned to validate this block.

These random hundred validators are assigned to validate this block.

And so each individual computer only gets assigned to validate like a small piece.

But then the way that the information about like what's valid gets passed around, right,

is that when these hundred participants validate a block, they all sign a message basically

saying like, yes, we agree that this block is valid.

And then like they combine that signature into one, and then they broadcast that signature.

And then everyone else, instead of verifying the blocks directly just verifies that signature.

And so if I see the signature, I'm not directly convinced that that block is valid.

But what I am convinced of is that out of this committee of this randomly selected group

of a hundred validators, let's say at least 70 of them agree that this block is valid.

And so if I trust that the majority of these participants are all honest, then because it's

all randomly selected, the attacker can't just like force themselves into one committee.

And so the attacker is going to be evenly spread out too.

And so if the entire set of validators is mostly honest, every committee is going to

be mostly honest.

And so like bad blocks are not going to go through, right?

So that's like one simple form of sharding.

There's also other more clever things that you can do.

So for example, there's this concept of a ZK snark, right?

I'll call it as your knowledge proofs.

So this is the idea that you can make a cryptographic proof that says, I verified or I ran some

complex computation on this piece of data and I got this answer.

And so if you make these kinds of proofs, then like if you see a ZK snark that says

some block is valid, then you're convinced that that block is valid.

And even if everyone in that committee is evil, they have no way of making a valid proof

for a bad block, right?

Because the proof itself, it is a proof that you did the computation where that proof is

much easier to verify than just running the computation yourself.

And there's once again, super awesome mathematical cryptographic magic behind making ZK snark's

work.

So it gives you a little bit of a leg up over the 51% honest assumption.

So it's a little hack that improves upon the random sampling thing.

Exactly.

And like there's other hacks, right?

Like there is another hack called data availability sampling that allows you to make sure that

the data in the blocks was actually published.

But like basically, like if you stack a couple of these tricks on top of each other, you

can create a system where like I as an individual participant can be convinced that everything

that's going on in this distributed blockchain thing is correct without actually personally

checking more than like a percent of it.

So that's sharding.

That's sharding.

But as I understand, maybe correct me on this, is in the space of Ethereum, the sharding

happens on some fixed number, like the split is on some fixed number.

I think it's 64 is the currently sort of proposed number.

So how does that help scaling?

Is it just a fixed constant scaling by 64?

And is that a way to achieve those crazy, the crazy amount of scaling that seems to

be required to use cryptocurrency for purchasing?

So doing like competing with credit cards and visa and so on.

So first, I think like the 64 can be hard forked up over time.

So we have set it so that like there's theoretically space in the data structure for a thousand

and twenty four shards.

It's just that 64 of them are turned on.

There are challenges with having more shards because you have to have logic that just like

checks and manages all of those shards.

And if there's too many of them, then that becomes too expensive.

But you know, even still, you can improve quite a bit.

And then the other thing that we're doing is if what we're getting maximum scalability

by combining rollups and sharding.

So this might be a good time to talk about rollups.

What are rollups?

Okay.

We're going into layer two ideas.

Yes.

So the idea behind a rollup is basically that so instead of just publishing transactions

directly on chain and having everyone, you know, do all of the checking of those transactions,

what you do is you create a system where users send their transactions to some part like

a central party called an aggregator and like, well, theoretically you can have a system

where like the aggregator switches around or anyone can be an aggregator.

So you know, it's still like permissionless to send things.

Then what the aggregator does is they strip out all of the transaction data that like

is not relevant to helping people update the state.

So when I say the state, this is like, this is a very important kind of technical term

from blockchains.

I mean, like account balances, code, like things that are like memory, internal memory

of smart contracts, like basically everything the blockchain actually has to keep track

of and remember, right?

So you just put in, you take all these transactions, strip out all the data that's not relevant

to telling people how to update the state.

And then you take the data that's needed to update the state and then you're like really

compress it, right?

So like for example, if we say, you know, I Vitalik have an account that's 0xab58 blah,

blah, blah, blah, blah and it's 20 bytes, well, instead we can say, well, I have an

account that is number 1874224 in the tree, right?

And that goes down from 20 bytes to just like an index and a position, which is three bytes,

right?

So you use all sorts of these fancy compression tracks and you basically just, instead of

publishing all these transactions, you publish this like tiny compressed blob, right?

So the amount of data that goes on chain goes down by maybe about a factor of 10, right?

And then the second thing is that you don't do the computation on chain.

Instead you do the computation off chain and there's one of two ways to do this, right?

One is called a ZK rollup, which is you just provide a ZK snark that basically says, hey,

look, I did this computation and I have this proof that here's some hash of the result

and it's correct.

And then you stick it on chain and everyone verifies this one proof instead of verifying

all these transactions.

And then the other approach is called an optimistic rollup, which is basically made of the scheme

where like, first someone says like, hey, this is what I think the result of applying

these transactions is.

And then someone else can say, I disagree, the result is different.

And only if two people disagree, do you actually do it on, do you actually just like publish

all of the data and run the whole, that whole blog on chain.

So if there's disagreements, then you just like run everything on chain and whoever was

wrong, like loses a lot of money, right?

So like disagreements are very rare and they're very expensive.

And then a ZK rollup, you don't even rely on this like challenging game at all.

You just rely on a proof.

So now the core principle is basically that instead of lots of transactions and all the

trends that everyone verifies every transaction, it is you take the transactions, you strip

it, strip them down and compress them as much as possible, then stick that on the blockchain.

You do need to stick something on the blockchain just so that everyone else can like keep it

through, like keep up to date with the state.

So they know, you know, what all the contracts are, what all the balances are in all of this,

but it's a very small amount of data.

And then you use some one of these other off chain games, you know, could be this optimistic

game could be a ZK snark to just prove that somebody out there did the computation and

the result is correct.

Right.

So you're pushing like 90% of the work off chain and then, you know, well, 90% of the

data and 99% of the computation off chain.

And then you still have 10% of the data and 1% of the computation on chain.

And so, you know, your scalability goes up by a factor of about 100.

So these systems are already live for, for some applications, right?

So there's something called loop ring, which is just a ZK roll up for payments, right?

So you can have, you know, assets inside of, inside of the loop ring system, and you can

go around and transfer them.

But what you, and you get like much lower transaction fees, right?

Like instead of $5, you'd have to pay like less than five cents.

But the only problem is that this only supports a couple of applications right now, like making

one that supports anything that you can do on Ethereum just takes a bit more work, but

that's being done as well.

Right.

So like within a few months, I'm expecting, you know, fully Ethereum, capable rollups

to be available as well.

So then it's a rollups, just summarizing, you know, do most of the work off chain, put

only a little bit on chain, factor of a hundred scaling, sharding and other factor of a hundred

scaling, a hundred times a hundred factor of 10,000, you know, hundreds of thousands

of transactions a second and like, you know, there's your scalability.

Okay.

So it's your scalability.

You can do a large number of transactions very quickly and the cost to do those transactions

are much lower.

You wrote that in the long term, ZK rollups are going to win in terms of layer two technology.

Specifically, you wrote, in general, my own view is that the, in the short term, optimistic

rollups, as you were saying, are likely to win out of general purpose EVM computation

and ZK rollups are likely to win out for simple payments, exchange and other application

specific use cases, just as you were saying, but in the medium to long term, ZK rollups

will win out in all use cases as ZK snark technology improves.

Why do you think ZK rollups are going to win the big picture battle over layer two technologies?

So I think ZK rollups, like once you accept that the technology works are just like conceptually

simpler and they have nicer properties.

The reason is that they do not have this concept of a challenge game, right?

Like as I mentioned in an optimistic rollup, the way that you ensure that the results are

correct is that you let one person submit and like they just submit with no proof.

They just say, here's what I think the result is.

And then if someone else disagrees, they make their own submission and then if you have

two disagreeing submissions, then you actually publish it on chain and you see who's right.

But for this to work, like you need to actually wait for someone to disagree, right?

So like, for example, if I have an asset inside of an optimistic rollup and I want to withdraw

it, then I actually have to wait a week to withdraw it because like if the block that

contains my withdrawal turned out to be invalid, then there needs to be space for someone to

disagree with it.

Right?

Whereas with a ZK rollup, like you don't need time for disagreeing because you just have

a proof, right?

As soon as a block is submitted, there's a proof and like, you know, it's correct.

So disagreements, especially in the long term or sparse, then then you don't want to do the

optimistic, the game theoretic thing.

You want to do the ZK snark.

Right.

The ZK stuff is just like, you can win a ZK rollup, you can withdraw immediately.

You don't have to like worry about the economics of proving as much, right?

There's just like fewer issues.

The reason why ZK rollups are not winning everywhere today is because, you know, ZK

snark is still a crazy new technology, right?

Like this is something that 10 years ago, you know, it existed only in theory and there

was none in practice.

Then, you know, eight years ago, people were just getting excited about it in Bitcoin conferences

for the first time, like four years, starting four years ago or three and a half years ago

even, that was the first time you were able to make any ZK snark based anything on Ethereum.

And then people started making them and ZK technology has only really become efficient

enough to do a lot of things within the past maybe one and a half years.

So it's, it's new technology.

It's crazy technology.

It's admittedly scary technology.

If you want to learn more, I also have an article about this on Vitalik.ca.

It's actually really, really good.

You're, most of your writing, it's a, it goes, it's technical, but it's accessible.

I highly, highly recommend to check out Vitalik's articles and blogs, whatever, whatever you

call them.

Yeah.

It's brilliant summary of the work.

Actually Ethereum documentation period is really good.

I think that's somewhat crowdsourced that that documentation is really, really accessible

and brilliant.

So let me ask about sort of other approaches to layer two, like side chains.

So the one popular one is polygon.

What are your thoughts about polygon, which is a layer two network?

Is it positive?

Is it negative for Ethereum?

Is it both?

Does it have a future?

Which is its own chain, but it's using Ethereum.

It's like based on Ethereum, essentially, or maybe you can describe what it is.

So I think there's a really big and important difference in security models between rollups

and side chains, which is basically that a rollups inherit from the security of Ethereum.

So like if I have coins inside of a loop ring or optimism or arbitrage room or ZK sync,

then even if everyone else in the world who is participating in these ecosystems, so like

hates me and wants to steal my money, I can still personally make sure that no matter

what happens, I get my money out.

It might be a bit expensive for me to get my money out and I have to do transactions

on the main chain, but I'll be able to do it.

Whereas in polygon, which is a side chain, and so instead of being secured by Ethereum,

it's also in part secured by its own proof of stake consensus with its own token.

So if 70% of the whole or even 51% of the holders of polygon tokens wanted to take my

money in polygon, they can.

So that's the, and like to be fair, like there aren't even like the supply, I don't think

is even that widely distributed, right?

So like potentially you could, this idea of 51% of the token holders coming together

and stealing everything, like it's not impossible, right?

Where does the scaling of polygon come from?

Like why is it able to process much more transactions than the Ethereum main chain?

What's the idea there?

I think in part, I imagine, I'm not sure exactly what its capacity level is, but like I imagine

it has a higher capacity because it's a bit more willing to take centralization tradeoffs.

And then another thing is that like if the Ethereum ecosystem, like even if it did not

do that, right?

If you think about an Ethereum ecosystem hypothetically scaling with side chains, then you would have

a hundred copies of polygon and you know, they would each have their own tokens, they

would each have their own chains.

And so even if each one of those chains was only as scalable as Ethereum, you know, you

could still, like the total sum of them would still be a hundred times more than Ethereum.

The thing that I want to say in Polygon's favor just to be very fair to them, like,

I really, you know, I definitely really, you know, respect the work that they're doing.

So, you know, start with a bit with that word of not criticism caution, right?

Like it's that they made this kind of deliberate tradeoff for very pragmatic reasons, which

is that the Ethereum ecosystem needs to scale now.

And there are applications that want to do something now.

And you know, if there aren't Ethereum friendly options for them, then like they're not going

to just wait peacefully and do nothing for 12 months.

And they're going to go to, you know, either Binance Smart Chain or, you know, one of some

other system or potentially something that just has totally no alignment with Ethereum

values whatsoever.

But whereas, you know, with Polygon, like the best thing that you can say in Polygon's

favor and against optimism is that, you know, optimism is not live and Polygon is live,

right?

Like it just takes more work to create a system that has these extra rollups, security features.

And so Polygon just said, we're going to be the system that makes the pragmatic tradeoff.

We're going to go, you know, functionality first and then, you know, we can talk about

adding back the security later.

So I've talked to them and like in principle, I think they're very, you know, open to the

idea of like adding more security and becoming a rollup or at least adding a Polygon chain

that's a rollup at some point in the future, which is definitely something I think they

can, you know, absolutely should follow through on.

But the fact that like they exist now and so, you know, applications can kind of bootstrap

now on a chain that, you know, even though its security isn't perfect, at least it exists

and people can go use it.

And then over time, you know, the chain matures as the applications mature, like, you know,

I think of a very reasonable strategy and I'm definitely, you know, really happy that

they're part of the ecosystem.

Yeah, it's kind of interesting.

The history of cryptocurrency has this tension of really good ideas that are hard to implement.

So they take longer to implement and ideas that are not as good, but are faster to implement.

This is like the story of like, you have like JavaScript that basically took over the world

because it was quick to implement within 10 days.

And then like later kept fixing itself.

I don't know what to make of that, sort of from the engineering perspective, I'm more

and more becoming comfortable and accepting the fact that our whole world will run a technology

that's not as good as it could have been just because the crappy solution is faster to implement

and it sticks.

What do you make of that tension?

I think the compromise that we've been taking within Ethereum is like when we have to take

the crappy solution, we look for crappy solutions that are forward compatible with becoming

good over time, right?

Like when you build the quick and dirty thing, like you would still already have ideas in

your head about what the more complete thing with all the security features added on would

look like, right?

Even if it requires a hard fork?

Yes.

Like even so, like for example, we're sharding, right?

Like, yeah, I think it's the likely that the first version of sharding that comes out like

is not going to have, you know, ZK start send data availability sampling, for example.

But we know what these technologies are.

We feel like we, you know, have wrapped our heads around them.

And so we know how to build a system where we can put all the pieces in place so that

it becomes very easy to bolt those components on in the future.

So like if you do things that way, right?

Then at the beginning, you can have your system that has the functionality, but say has less

security or like less sustainability or less of something else.

But then over time, like it's designed in such a way that it has this easy on ramp to

adding those things.

Right, and if you don't think explicitly about like being future compatible, then you do

often end up with a quick and dirty solution that backs you into a corner.

And then there are definitely cases where like, I think the Ethereum ecosystem has suffered

from that.

And we have had to like expand pretty significant effort on, for example, removing features

that we didn't realize that we actually can't sustain.

Right.

Like one big example is just increasing the, yeah, the gas costs.

So like making some operations more expensive when they, because they should be expensive

because they actually take a lot of time in the process.

So that's making something's more expensive, kind of like taking some functionality away.

So if you can like be cognizant of where you're likely going into the future.

And if you don't know, like even be cognizant of both the most likely paths that you'll

take in the future and coming, like thinking about your roadmap and coming up with a roadmap

where you know that like if you want to do either of those things, then you have a clean

path toward it.

That's probably the best kind of practical way to get the best of Worthworlds that we

have.

Okay.

Let's talk about this wonderful process of merging.

Okay.

So there's the main net, which is the Ethereum 1.0 chain or the chain, what should we say?

The chain that uses proof of work as a consensus mechanism.

And then there is what is it called?

The beacon chain that uses the proof of stake mechanism.

And I believe the beacon has been deployed successfully is working.

So that was in December of 2020.

There's a bunch of questions around that that's fascinating as well.

But I think the most fascinating question is about merging those two.

When do the two chains, one that's proof of work, one that's proof of stake, merge?

And what are the most difficult parts of this process?

Right.

So as you've said, right, the way that we have set up this proof of stake transition

is that at first the proof of stake chain just launches on its own, right?

And this is the thing that happened in December.

And the proof of stake chain has been running for close to six months now.

I mean, by the time people watch this, it might actually be six months.

But it isn't actually coming to consensus on anything except for itself, right?

So the idea behind that is to just give the proof of stake chain time to mature, time

for people to build the ecosystem around it, time to make sure that there aren't any bugs.

And just prove to the community that proof of stake actually is real and a full transition

is realistic because the thing that you're transitioning to already exists and already

works.

And then at some point in the future, you have this event called the merge where you

basically take the activity that's being done inside of the proof of work chain and

you actually move it over into the proof of stake chain so you get rid of the proof of

work side completely.

So the way that the merge will work is, it's definitely gone through a few different iterations.

Like the earlier versions of this actually required more work for users and more work

for clients.

It was much more like, oh, there's this new chain, there's this old chain, and then everyone

has to like migrate from the old chain to the new chain.

And then at some point, we'll forget about the old chain.

The new version is designed to be much more seamless for users.

So basically what actually happens is that the old chain basically becomes embedded inside

the new chain.

So starting from the merge transition block, every proof of stake chain block is going

to contain a block of what we consider to be the Ethereum chain today, but we'll call

it the execution chain.

And then at the same time, to create one of these blocks, you're not going to need proof

of work anymore.

So basically at the same time, you would both get rid of the proof of work requirements

for one of these blocks to be valid, but instead you require these blocks to be embedded inside

of the proof of stake blocks.

So you basically have like a chain inside a chain.

And this is, from an architecture perspective, you might think it's a little bit suboptimal,

but it actually has some nice properties and makes it easier to kind of think about the

consensus and think about the, what we call the execution layer, like transactions and

contracts kind of separately and upgrade them separately.

And it also just means that the upgrade process is extremely seamless, right?

Because from the point of view of a client that's following the chain, you basically

have to update nothing, right?

You're still following the same chain and follows the same rules, except instead of checking

proof of work, you'll switch to checking that these blocks are embedded inside of blocks

of the proof of stake chain.

So there'll be this merge block that will mark this transition.

And over time, I guess the new chain will contain the full record of all the transactions

that's ever happened on the previous chain, on the old chain.

So maybe I'm asking a dumb question here, but in this process, is the new chain going

to have all the information of the past transactions?

The new chain is not going to hold information from what happened in the Ethereum chain before

the merge, right?

So like Ethereum clients that people are going to use around the time of the merge and soon

after the merge, they're probably just going to sync and check the proof of work chain

up to the merge, and then they're going to check the proof of stake chain, but at some

point in the future, I think people will just stop bothering checking the proof of work

before the merge.

Got it.

So that old history information is not important for the future.

Like if you're operating actively on the new chain, that history is not important to you.

It's not important.

So it's not strictly important for just like any smart contract or just like applications

that run on the blockchain.

It can be important to users and it can be important for some applications, but we're

basically saying that like maintaining and serving that is not going to be simultaneously

the responsibility of every Ethereum node.

If you want that information, there can be separate protocols for backing it up.

And like these other protocols actually exist, right?

Like there's something called the graph, which is doing some history retrieval.

Potentially you can just take that entire chain and stake it on BitTorrent.

Like there's lots of ways to like archive it and create kind of customized search protocols

for it.

So what's your sense why, so there's a Python 2 and Python 3 and it took forever for people

to switch.

What's your sense why this merge has been taking longer than perhaps was expected?

I think the biggest reason is just we've been underestimating the technical complexity.

There's a lot of technical complexity in making a successful proof of stake chain.

There's a lot of technical complexity in actually figuring out the transition process.

So that's bigger than social complexity.

So the technical complexity, you would say is the bigger reason for the any delays than

the social complexity.

I actually think so, I think we've been very fortunate to not have too much social complexity

around the merge.

So not much drama.

No.

I think the biggest part of the reason is just because we have been talking about proof

of stake and sharding as being part of the roadmap since almost the very beginning of

the project.

Like the very first proof of stake blog post from January 2014, which was two months after

the project started and maybe even a day after the announcement.

So proof of stake was not something that we kind of put on anybody by surprise.

And then when the Dow fork happened and the people on the ETC side split off, I think

it also just happens that a lot of the people that were not willing to stomach the Dow fork

and the join the ETC side, they were the more Bitcoin types and the more Bitcoin types do

also tends to like proof of work more.

And so that also sort of ended up purifying the communities on both sides, I guess.

So Ethereum Classic is not switching to proof of stake and they're happy with their setup.

And by the time that it came to the beacon chain launching and now I think the community

is very strongly in favor of the proof of stake switch.

But let me ask the question that no engineer wants to hear, which is the question of timeline.

When do you think the merge will happen?

Do you have a sense it might happen this year?

Do you have a sense it might be pushed towards next year, 2022 or even beyond?

I think early 2022 is the most realistic.

There's definitely still an optimistic case of it happening this year, but the realistic

thing to count on is definitely the early part of next year.

Is there specific things that stand out to you that make you feel good about progress

if you see it happening?

So the thing that we had last month is we had this online hackathon called Rayonism

where basically a bunch of the different client developers that are going to be part of the

transition like hacks together some test nets of the post merge Ethereum chain.

So these were only test nets of what would happen after the merge.

There were not test nets of the transition itself.

So the thing that people are working on now actually is the transition.

So having a full specification of both the transition and post transition.

We have specifications now, but in a realistic way, they'll probably need to have a couple

of changes and have things that continue to be ironed out.

And then have a test net that does both the transition and the post transition.

And then once you have a test network, then you just have to do a lot of testing and audited.

And then do some runs on not just a specialized test network, but on, say, an existing test

network like Robson or Rinkeby that Ethereum people already significantly use.

And if it works, then you can deploy the transition on mainnet.

Just as a quick comment, because this is fascinating.

In August of last year, there was this medalla, I believe it's pronounced Medasha.

It's a South American subway station.

I forget where.

But spelled the two L's.

Yeah.

Yeah.

Cause that's, you know, that's how Spanish works.

Right.

Like the two L's have.

Medasha.

Yeah.

Okay.

Cool.

Anyway, but I read about it in middle of August, August 14th, there was an incident

on that test net.

What, how does this process work?

Like, what do you learn from those kinds of incidents when stuff goes wrong in the test

process?

I think that incident was that there was a consensus failure of some kind, as I remember

basically, just different clients interpreting things in different ways.

And then one of them getting kicked off the network.

And then it ended up taking a while to actually like get everyone to get back online.

Like a big part of the reason why it took weeks to resolve, right, is because it's

on a test network, like the coins are valuable.

And so there's not really this big push of any kind for people to actually, you know,

going down with a new client so they can start participating again.

And so, you know, it definitely took a while until the chain started finalizing again.

But and then also, like there was, I think, another round of just not finalizing in October,

as I remember that, I mean, there were definitely things that we learned.

Like there were a lot of things, especially that client developers just learned about

like optimization and how to build their clients in a way that they can process things efficiently.

There's a lot that we learned from just like seeing the full life cycle of what happens

when more than a third of the validators go offline and then finalization stops.

And then that kind of weird, unusual state of the chain continues for a while.

And then eventually everyone who is not participating just gets enough of their stake.

Like, we don't use the word slash, we use the word leaked for this, but like basically

also burned until, you know, the people who are participating go back up to two thirds

and then the chain goes back to finalizing.

So just seeing all of those edge cases play out live, I think actually helped a lot and

probably helped to really contribute to making us feel better about mainnet.

I mean, there's also an incident just recently in April 24th of 2021, where this was on Beacon,

I guess, there was a bug discovered in the software client prism that prevented roughly

70% of validators on the network from producing blocks.

I mean, maybe you can comment on what happened, but broadly, like the big picture, what kind

of stuff are you worried about in terms of problems that might arise?

I was talking about small bugs, I was talking about like emergent, social, unexpected social

bugs.

You know, what are the things that worry you about the future of Ethereum that you want

to make sure you construct mechanisms that prevent those things from happening?

So one of the lucky things there was that this particular bug only prevented, proposed

those self blocks, it did not prevent attestations.

So attestations is just a mechanism for voting on blocks.

And it's the attestations that are actually responsible for the chain finalizing.

So like coming to this more permanent agreement on blocks, right?

So the chain was actually quite stable all the way through.

I think the thing that we generally learn from these experiences is just how valuable

it is to have this multi client network.

So this is one of these areas where I think Ethereum distinguishes itself from like Bitcoin,

for example, right?

That in Ethereum, we don't have one single client that everyone just runs, right?

There's multiple implementations of the protocol.

And these multiple implementations, they all process and verify the blocks that each other

can verify, right?

So they all speak the same language.

Now, sometimes when there's a bug, they disagree.

And when two clients disagree because of a bug, we call this a consensus failure.

And consensus failures are pretty serious, right?

And when you have clients monoculture like Bitcoin does, then it's more rare to have

consensus failures.

You still have them, actually, Bitcoin had a consensus failure between two different

versions of the same client back in 2013.

But they're less likely to happen.

But the interesting thing is that the multi client architecture has actually, I think,

saved Ethereum much more than it's heard it.

So even in this most recent incident, right?

Like Prism was not producing blocks, but all the other clients were still producing

blocks.

There's four others, right?

Yes.

Prism, Nimbus, Tecru, and the Lighthouse.

And then also Ethereum back in 2016 had this fun event that we call the Shanghai DOS attacks.

They're called that because the attacks started right on the first day of our annual conference

at DEF CON that happens to be in Shanghai that year.

So what happened basically was that someone came up with a way to create blocks that were

very slow for one client to process, but not the other client.

So at that time, there were basically two Ethereum clients.

They were called Geth and Parity.

Right now, I think the top three ones are Geth, Nethermind, and Beisu.

But what happened as a result of us having two clients is that the attacker was just

not able to come up with blocks that both clients were completely failing at processing.

And so a lot of the miners and a lot of network participants, they just kept on switching

between the two implementations depending on which one worked, and that actually really

helped the chain survive through that month of attacks as the attacker just kept on hammering

at our system and identifying all of the weaknesses and just forcing our clients to do this rapid

sprint of just optimizing the hell out of everything and make sure there aren't any of those DOS

bugs remaining.

So that was another example, and then as a counter example, so something that also shows

the point from the other side, Bitcoin had this bug in 2010, the balanced overflow bug.

Basically someone created a transaction that had two outputs, and those outputs were both

of a few billion Bitcoin, so about two to the power of 63 Satoshis.

And then if you add those numbers together, you'll go above to the power of 64.

And of course, computers, once you go above to the power of 64, you wrap around.

And so the Bitcoin nodes thought that there was enough money to pay for the transaction

because it was asking for, let's say, a billion Satoshis or something, but actually it was

asking for to the power of 64 plus a billion.

And so the attacker just managed to create billions of Bitcoin out of thin air.

And this was not only discovered and fixed after something like 12 hours.

But if Bitcoin had been a multiple implementation system, then what almost certainly happened

is one of the clients would have bugged out, but the other clients would have probably

actually had a check for that.

And so there would have been a consensus failure, but at least that would have alerted everyone

that there is a problem very quickly.

And it also would have given everyone just obvious social permission to go and pick whichever

one of the chains is correct and solve the problem.

So that's, I think, a big learning that we've had from multiple of our experiences in the

Ethereum ecosystem, just like validating this multi client model.

And to be fair, it's a model that we get criticized for a lot.

Bitcoin people talk about the risk of consensus failures that this creates.

VC types are like, well, isn't it expensive and wasteful to fund three software teams

where you could just be making one quote focused effort?

They love the word focused and Ethereum is not that, but it's amazing, despite not being

that.

Basically, yeah, so that was interesting.

And then there have definitely been other learnings as well, just from seeing the chain

live and seeing what actually is the staking experience, like what are the actual incentives

for all the different participants.

So I definitely feel like we're gaining a lot from this sort of one year of trial running

the chain before we actually make all of Ethereum depend on it.

Let me ask perhaps a strange question, but proponents of Bitcoin will say things like

Bitcoin fixes everything.

So why do we need Ethereum versus like Bitcoin plus Lightning Network for scalability?

And then using Bitcoin with this proof of work for security.

So it is perhaps sort of a strange question, but it's a high level question.

Why do we need another technology?

Yes, it has a bunch of nice features, but doesn't Bitcoin fix everything already?

So the thing that always attracted me about Bitcoin is these values of decentralization

and creating these open, provisional systems that anyone can participate in and that aren't

just going to flop over and die if whoever created them gets bored and that are resistant

to whoever runs them, breaking the rules and all of these things.

And I think that pretty strongly that these principles are really valid and important

to much more things than just money.

Bitcoin is the blockchain for money and Ethereum is built from the start as a general purpose

blockchain.

There is ether of the asset on Ethereum, but then you can also make decentralized financial

things, what we call DeFi today.

You can make like ENS, the decentralized domain name system.

You can make prediction markets on it.

You can make totally nonfinancial systems that just keep track of whether or not some

certificate was signed or whether or not some cryptographic key got revoked.

This big long list of just interesting things that you could use about blockchains to do.

Basically, they are sort of the missing piece that we are without them, the kinds of things

that a decentralized computer network can do as we are limited.

And once you have them, a lot of those limitations end up going away.

So Ethereum was always from the beginning about that.

It's about, hey, this isn't just money.

There's so much more that you could do if you could just go ahead and make any infrastructure

or digital institution or DAO or whatever you want to call it, where the base layer

of the logic is just executed in this open and transparent way where everyone can see

what's going on.

Or if you like your zero knowledge proofs, at least everyone can see proofs that prove

to you that what's going on follows the rules and you don't need to just constantly keep

trusting centralized actors.

Hence, the smart contracts as being a core technology as part of Ethereum.

Yes, exactly.

Smart contracts, the computer programs that are running on Ethereum, they are the core

of what makes Ethereum general purpose.

So I do think that there's a lot more wrong with the world than just money.

I'm not one of these people who thinks that if you get rid of fiat currency and you replace

it with cryptocurrency, then suddenly wars are going to go away because, like, first

of all, like, seniorized revenue is only a small portion of government revenue.

It's like what, 5%, 10%, something like that.

Second of all, if you are the sort of, this is one of the things I don't even get about

their philosophy.

Let's say you're the sort of person who is an extreme and very distrusting libertarian

and you think that these governments are terrible.

We know today that governments find a combination of things like welfare and things like the

military that goes and bombs people in Afghanistan.

So the question you have to ask is, okay, you, with your new magic newfangled cyber

currency that takes over the world, take away the government's ability to have seniorized

revenue and so you reduce the government's revenue by 10%.

If the government is that evil, which portion of its expenses is it going to take that 10%

from?

Is it going to stop the bombing people in Afghanistan or is it going to cut welfare?

If you think it's the first, you have a very optimistic view of the government, right?

So that's, I guess, my perspective on, like, why the whole, you know, we're going to save

the world and create peace by, like, denying governments the right to stealth taxation kind

of perspective doesn't really make much sense for me.

And I do think that there is real value that comes from a decentralized and open currency,

like just the fact that there is a financial infrastructure that anyone in the world can,

you know, go ahead and use, right?

Like, it's, that's something that can easily be a big boon for people, right?

There's a lot of places where the currency is much less stable than the dollar.

And, you know, these people, like, well, if they use Bitcoin, their only option is to

get Bitcoins, right?

Which, you know, are also pretty volatile.

If they use Ethereum, then, you know, they can get Ether, but then they can also get

stablecoins, right?

And you might think that, you know, oh, you're not being ideologically pure, now you're giving

them stablecoins, which are mirroring dollars, and obviously, dollars are going to collapse

too.

But the reality is that dollars are vastly more stable than the Venezuelan Bolivar.

So, like, there are really, like, meaningful and beneficial things that you can give to

people by having a global and open financial system.

But I think if you want to actually do that, like, you have to have much more than just

a currency, right?

And then if you want to go beyond financial things, then, you know, you have to, obviously,

have much more than a currency.

And then, you know, you also have to actually take scalability seriously because nonfinancial

applications, like, nobody's going to pay $5 a transaction for them.

Can we return to dogs?

Sure.

No, no, no, no, no, no.

The other one's categorically forbidden?

Yeah, categorically forbidden.

Is there any cryptocurrency based on cats, actually?

I think there are.

Like, there was cat coin, there was NAND coin.

For some reason, they just didn't catch on as much as the dog coins did.

Okay, so let's talk about Dogecoin and Elon Musk.

Elon said that, quote, ideally Doge speeds up block time 10x, increases block size 10x,

and drops fee 100x.

Then it wins hands down, end quote.

You said in the blog post, partially responding to that, that there are subtle technical reasons

why this is not possible.

To this, Elon said that you, quote, fear the Doge.

So let's talk about this.

What are the technical hurdles for Dogecoin that prevent it from becoming one of the primary

cryptocurrencies of the world, and do you, in fact, fear the Doge?

I definitely feel obligated to correct the record.

I definitely do not fear the Doge.

Okay.

No, I love the Doge.

I actually visited the Doge in Japan a few years back.

She's an amazing dog.

She's still alive.

Wait.

The original Doge?

Yeah.

Wow.

We accept Doge every year for our annual DEF CON conferences.

I definitely don't think Ethereum is opposed to dog coins.

I kind of want to feel like Ethereum is at least a little bit in spirit itself a dog coin.

And then, as I mentioned, I love Doge, I bought a bunch of Doge, I still hold a bunch of Doge.

On the scalability question, the challenge basically is the limits, scalability, and

the tradeoffs with centralization.

If you just increase the parameters without doing anything else, then it just becomes