Kind: captions
Language: en
the following is a conversation with
vitalik buterin
his second time on the podcast vitalik
is the co-founder of ethereum
and one of the most influential people
in cryptocurrency
and technology broadly defined quick
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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 the 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 ino if we can also known as sheba
token
code shib for contact shiba unu was
created in august 2020
modeled off of doshcoin by the anonymous
founder
known as ryoshi on may 10th
this year it had a market capitalization
of over 13 billion
and uh maybe you can explain this but in
a crazy move
you were given half of shibs uh
total supply you
uh burned aka destroyed 90
of it that's worth 6.7
billion dollars and you donated 10
that's worth 1.2 billion
at the time to an uh india covet 19
relief fund
saying you don't want to be the locus of
this much power
this is uh fascinating
why and how were you able to walk away
from this much money
and this much power so i i should
probably start by
yeah giving some of the backstory around
you know these coins and this concept of
giving me coins
uh so you know first of all you know
shiba inu as you said
is this kind of knockoff of dogecoin
right and deutsche coin was this
initial kind of fun coin that was
created back i think around 2014 or so
and it was just created by jackson
palmer and like put it out as a joke for
a couple of hours and a community formed
around it
and at the beginning people didn't take
it very seriously i actually remember
putting about 25 000
into doge sometime around 2016 and i
just remember
uh just thinking to myself like okay how
am i going to explain my to my mom
that i just invested 25 000 into dog
coins
and like what even are dog coins like
the only interesting thing about this
coin is that there's
you know a logo of a dog somewhere um
but you know of course that ended up
being one of the best investments i've
ever made
and it did really well and then at the
end of 2020
elon musk of course you know started
talking about dogecoin
and the market cap just like shot up to
about 50
billion dollars actually and it shot up
multiple times right like the first time
it went up from about
0.8 cents to about like seven cents
and this just happened all in one day
and i remember um this was when
i was still in singapore in the middle
of uh
kovid and you know i saw that the price
just went up by a thousand percent
and i was like oh my god my doge is
worth like a lot
and so i immediately called up some of
my friends and told them to like
drop everything in scramble and i just
sold half the dosh and
i got 4.3 million dollars donated the
proceeds to give directly
and a few hours after i did this the
price dropped back down from about seven
cents to four cents right so i managed
to sell the doge at the top and i
remember just uh
feeling like i was such an amazing
trader but then of course
you know the price went up from four
cents then to seven and then 50 and just
like doge becoming this big phenomenon
where there's even a lot of people that
have heard of those that have not heard
of ethereum is just like something
even i wasn't predicting right and so
after that of course you know we have
doge and then
people are thinking well you know if the
leading dog token is worth 50 billion
dollars then surely
the second largest dog token deserves
you know at least seven or eight billion
right
because i feel like that's the kind of
what the mindset of these
shiba people is um so that of course
they did this other gimmick right where
they gave me half the shiba
token supply um they were actually not
the first projects to do this uh so
around the end of 2020 there was this
weird project called teller
it's like t-e-l-l-o-r i think they're a
chain-link competitor or something like
this
but i remember they just like dumped
fifty thousand dollars worth of their
token into my wallet
and then they had their twitter arbi
just like basically run around saying
look look at vitalik's wallet vitalik
holds
towers he's one of us he's a supporter
and as soon as i discovered this i just
like
publicly sold the tower tokens on you to
swap and
this created a bit of a twitter splat
now the shiva people were more clever
the shiva people instead of dumping to
that wallet they dumped to my cold
wallet
right so in a cryptocurrency right
there's this concept of like cold
wallets and hot wallets basically
like the thing that actually owns euro
money is like this
80 digit number called a private key
right and a 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
on written down on a piece of paper or
it's uh
on a computer that's just never accessed
the internet right so cold is very
inconvenient but
cold is also much more secure right
because even if that computer has some
like viruses on it like it's it's like
air gap that's not actually going to be
able to upload it
so this cold wallet and like all the
money's out of the cold wallet so it's
safe for me to talk about my setup now
right but it was
a laptop that was sitting in canada and
i also had
um two pieces of paper where i wrote
down two numbers on those two pieces of
paper one was with me one was in canada
and if you add those two numbers
together you get the private key
so because of covid travel restrictions
and you know this is in this
cold wallets in canada like it's very
difficult for me to
actually access it right and i'm not
sure if they knew this maybe they just
got lucky but basically they
you know sent a lot of uh these dog
tokens
into this wallet where i it was very
difficult for me to access it but then i
saw these dot co
tokens i saw more and more people
talking about them and then at some
point i realized i
realized that like hey these things are
worth billions of dollars
and like you know 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 like see it go so i made
the decision that like i would actually
power through and
figure out how to like safely like
basically get my private key
um i actually had to call up my family
tell them to read out
their number off of their piece of paper
i uh
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
and at the same time like just scrambled
for two days
setting up a new wallet for to where i
could move my youth to safely
like getting people to be multi-sig
partners just like doing
all sorts of like stuff that you know 10
years ago you would expect to just be
part of a cyberpunk
you know science fiction novel but you
know now it's all real so you're doing
this
all by yourself i essentially most of it
by myself so
you have to keep it secret right and i
needed my family to
um actually like go and read the the
number on their piece of paper
and then i am in my new multisig wallet
like there's
other people that are signatories um but
you know
i'm obviously not going to reveal any
details beyond that about
so i did this right and i actually
managed to
make get the private key make the first
transaction that would just move all my
ether to the multisig wallet so it's
safe
and then second transact put the private
key on my main computer then started
you know like going in and just selling
some of the dark tokens and then just
like giving them to these
different charities now at the time i
actually
did not even like have any idea of how
much you would be able to get right
because like
on paper the dog tokens are seven
billion dollars but like in reality it's
a very liquid market you know
are you going to crash it by yeah and
after you sell 1 million worth you're
going to crash it after 10 million
are you might you actually be able to
get like an entire
200 million i had no idea um
so i definitely was just of the mindset
like okay i mean i'll sell a bit
maybe i get some eth and then you know
donated some yeast to give well donated
some to other groups and then
okay have some dog tokens like i don't
have an easy ability to sell more myself
but then i'll just
like give them to these groups and like
you know hopefully they'll do good
things with them
um it was actually um i actually donated
at 20
and dumped 80 percent um yeah so the
cove
the coved um india group got one batch
and then there's
another group that got another batch and
i don't want to say who they are because
i think that
they want to announce themselves at some
point sure yeah but it's uh
you know you you can see the fact that
these transactions were made on the
blockchain
um but it was uh just
very intriguing interesting and
unexpected and just an insanely crazy
situation it's been a couple weeks
first of all thank you for uh helping me
uh hang up some curtains this is
this is a first for the podcast and uh
shows
uh that you're truly a special person um
to be willing to help but now a couple
weeks later do you
regret any aspect of that decision um
i'm sure there are some things that i
probably could have done better like
i i was actually 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 i probably could have done better
by just like
talking more with the traders and
actually ensuring that
you know that they can do a better job
of maximizing the
the value of uh of
uh all of them but like you know it was
a
very stressful time and i did have to
act quickly like i yeah
i did manage to you know make a lot of
the donations before
like a few a few days before the great
crypto crash happened
uh so it was and
it's difficult to like 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 uh
so you know on that it's like a luck of
the draw and i'm just
you know happy that uh it was
everything was able to turn out as well
as it did but psychologically
you mentioned stress how hard was it
uh 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
you know including the 325
000 ether from one cold wallet into
another hot wallet or sorry into another
multi-sig wallet um and you know maybe
the multisig wallet had a bug in it
maybe
there's like some mistake i'll make in
the middle that causes the the funds to
get lost like you know that's
that part was stressful and i i was
definitely stressing out for two days
i'm you know triple checking the new
wallet i even did a bit of an audit of
the code myself
i wrote my own javascript to adapt to
make confirmations
because gnosis safe didn't work with the
status wallet well
um so there was definite
that whole thing was definitely a bit of
a marathon um i was also
a kind of definitely a bit worried about
or
uncertain i guess how the public and you
know including the coin communities
would perceive the whole thing
um but i was actually impressed like i
yeah for every poster that was saying
like no
you know why yeah why did vitalik like
rugby on ice he was simple
his wallet was supposed to be a burn
address you know there's like 10 people
that are like
oh you know i thought i was just in this
because it's a
it's a fun pyramid gambling thing but
instead i ended up being part of this
you know great public good thing for
humanity and that's like even more
amazing
uh so the i the amount of that that i
got was
very impressive so you know all in all
let me know i think
the dog people did great the dog people
is there something you can extend
to the bigger picture of it in the
principles you apply to making this
decision
is there some principles philosophies
that you apply
also to uh the decisions you make around
ethereum um um i think uh
a big one for me is just this idea that
crypto you know isn't just an
opportunity
to give people like slightly better ways
to sit to
save value and all these things like
it's also an opportunity
to like basically create these like new
digital institutions that could
serve the public good in new ways and
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 know you
would have coins that represent causes
and like people would just like
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 oh my god
and i'm sure you can find it and throw
it in the links um yeah
the so that was interesting to kind of
see becoming real and like in general i
mean i think
you know public goods are very important
and on the internet public goods are
even more important right like every
single lex friedman podcast is just
on youtube and you know anyone can go
and see it like there's no way for you
to like
you know sell it and so that some people
can see it but other people can't see it
like you know you could do that but then
you'd obviously be you know reducing
your impact so thank you for making the
uh the amazing lex freeman podcast still
freely available
well that's actually a tense thing is uh
how do you do it in a way that's not uh
controlled in a centralized fashion
because actually
youtube feels free and open but it
nevertheless is one company making
centralized decisions and
the first time i realized youtube was
not forever
is when a lot of the joe rogan
experience library was pulled from
youtube as part of the spotify deal
and he made me realize we need to uh
it's like the realization that fiat
money is centralized
is uh realizing that you know they
this is not forever and you might want
to come up with schemes to distribute it
to uh decentralize the control of it in
a way that audio for podcasters was just
an rss feed
exactly yeah and i think one of the kind
of philosophical things that i hope to
achieve is kind of
decouple the concept of public goods
which are
incredibly important and are the
lifeblood of modern civilization
from the the idea that there nick
is there can be one central organization
that represents the public and
like perfectly unders uh understands and
can impose their idea of what is the
good
right like it's when people talk about
public goods
it just often comes with this baggage of
uh you know either centralization or
conformism
and i think like it doesn't have to
right like uh often
the most important public goods are the
ones that are created by
you know the crazy individual that's
that disagree with everyone else
so 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 like
you know you realize
um 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
like trying to sort of get all of the
good things without the bad things
to me that's a yeah a big part of
sort of what my grand experiment in
crypto is about and and
like we are doing things in different
kinds of things for this right like
there's
the the git coin grants quadratic
funding in the ethereum ecosystem
um there's i mean obviously these uh dog
coins that just happens
like i guess accidentally um there's
other projects
um that like for example you know
uniswap has um
their uniswap dao that just has a huge
amount of funding
and like we haven't seen yet how that's
going to be deployed but
you know it could be potentially
deployed to do lots of really good and
amazing things
do you see ethereum as essentially a
mechanism
to uh fight for social causes
um i definitely see ethereum as
being a mechanism to
fight for definitely some some specific
things that are
um that are social causes um like
just you know 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
i'm just you know giving people the
ability to
organize and create projects even if
it's five people in five different
countries i think
that kind of inclusiveness i think
that's a social cause
and it's a core a core crypto value
um but then at the same time like the
other
important kind of part of the magic of
ethereum that you have to balance that
against is that it is also this
open platform where ultimately you know
the thing that go
the things that are on ethereum is just
the things that the community makes of
it
well you kind of briefly open the door
so let's go there
when it comes to uh government
regulation of crypto
uh what's the best case scenario what's
the worst case scenario
in terms of uh you know as you've kind
of mentioned
ethereum challenges the the the power
centers of the world
and uh how do you see the interplay
between govern
governments and this new technology that
resists centralized power
best case and worst case the
the best case is um that um
you know blockchains continue to prosper
and we figure out scalability is so that
people can actually start
doing things on block all you know 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 you know transaction fees are at
five to ten dollars
and then we see a lot of different um
amazing applications happening on
blockchains you know it could be
like dao is creating new ways for people
to
inter interact and organize with each
other new ways for artists to get funded
and
just all sorts of these amazing things
and
there's just enough public
um public support and just enough people
that see that you know look crypto is
clearly
doing a lot of good things and and you
know there are definitely areas where
there's tensions
but in those areas where there's
tensions like there could be some kind
of
creative and interesting approaches that
get figured out right like
you know the concept of corporate taxes
for example right like
you know it does it that would disappear
as a revenue stream if theoretically
corporations just all get replaced by
taos but
i know like maybe there's some other
creative
way by which dao
like dao's themselves can kind of be co
you know have some kind of encoded
governance that ensures that they
have at least some of us some kind of
bias towards serving the global public
good
and you know maybe it does enough of the
daos can do enough of that that people
are happy with it and and
you know there are going to be things
that people are unhappy about there's
always going to be the people that
you know wants to surveil everyone but
if
on the the kind of 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 you know that would be a good
scenario right and we'll just
like become incorpor kind of
incorporated and accepted the same way
as happened uh with the internet um
but the work in the worst case scenario
would of course be
just like people like suddenly you know
flipping and going into moral panic mode
and just
you know oh my god like this technology
is used by like you know
insert bad group of the day and then i
don't think governments have the ability
to
ban crypto to the extent of just
complete like preventing
blockchains from existing but they
definitely have the ability to really
marginalize it right
like if you just ban all exchanges i can
ban all links from the fiat ecosystem to
crypto
and you know you ban all kind of
mainstream employers from
accepting or paying in cryptocurrency
then like you could
you can successfully like turn it into a
like you know a fairly kind of niche
counterculture thing that
has much less impact than otherwise
would so it's
somewhere between the good scenario in
the bad scenario i'm obviously hoping
for the good
well that's interesting also the tension
between governments and
uh 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 uh rich quote unquote respectable
people
embrace uh cryptocurrencies bitcoin
ethereum
so on even the dot coins uh it's
almost sends a signal to everybody else
that this is
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
uh if cryptocurrency if ethereum runs
the world
then crime making money from crime will
be easier
there's always that possibility like at
the same time i think if you look at you
know
the world as a whole and like the way
all the other
technological trends are going like you
know in-person surveillance is just
going up every year
right yeah like the if you commit a
crime in you know meat space it's
getting harder and harder to get away
with it
so like you know if he wants to do
something
and and this is something that's just
like happening as a result of
you know just better technology
information and information transparency
like
a lot of it's hard to prevent even if
you really tried
um so i the world
where like things go dark to such an ex
you know as the the one the police hawks
sometimes like to say um to such an
extent
that like you know oh my god the
criminals are committing crimes with
impunity and we can't
see anything like that just seems
unlikely um but you know on the other
hand like
the world uh where there just
you know is no privacy for example or
um the world where there just like is
no no ability to uh kind of act
outside of the the confines of you know
mainstream institutions like
it's uh some that's something that's
more realistic and that seems like
something that uh could lead to a lot of
kind of
a lot of scary things right and like
even from a government's point of view
right like i think
governments over the last few years a
lot of them they're very worried about
sovereignty you know they're worried
about like if
their um country is economies and you
know social
environments they're just completely
dependent on basically foreign tech
companies
controlled by foreign governments like
you know governments are not on team
government right that's like you know
the indian government is on you know
team india
you know the russian government is on
team russia and so forth right so
like you know they don't want the us to
be able to like have this big backdoor
into everything
uh so i mean i do think that a balance
is needed but
at the same time i uh
do and think um i guess
i i definitely like worry more
about the messiah the possibility that
just like without things like crypto
uh kind of acting outside of
institutions becomes too impossible
and i don't even necessarily mean
outside of governments even just you
know outside of corporations like
becomes too impossible and there's just
like terrible things that come as a
result
um and if things going in the other
direction like
it obviously is a a risk but
you know at the same time i think in the
long term like a crypto can
potentially even like offer defenses as
much as attacks against that sort of
thing
yeah many throughout history many of the
most destructive things came from
centralized institutions versus
sort of from the people operating in the
shadows
and you know i've been talking to a
bunch of psychedelics folks
that people doing researchers like greg
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
right 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 to uh
in a safe way be able to participate in
this gray area
yeah i mean the other thing to keep in
mind of course is that the
the set of like the kinds of things that
just like payment processors as
companies try to restrict
people you from is much larger than the
set of things that's illegal right
right like part of that is because they
want to be super conservative and like
the more layers you have the more
they're like
kids conservative because they're scared
of what what the layer below them will
do to them
sometimes they have their own you know
moral opinions of various kinds
you know they go after lots of people
right like they make life really hard
for
you know like sex workers for example
and like you know psychedelics as you
mentioned
there's uh like a lot of
activity even including stuff that is
totally legal that just you know there's
this like
you know shadow like paypal credit card
governments or whatever you want to call
it and
no no that makes it just hard to
participate in this stuff so i think
like reducing the number of
intermediaries is definitely
normally a good thing all right let's
talk about one of the most exciting uh
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
so i think recently we've actually been
kind of de-emphasizing the
eth 2.0 branding i guess so the reason
behind that was that
originally we envisioned something more
like a big grand event
where you know 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
but later we've slowly changed the
roadmap over to something that's much
more incremental
right so you know proof of stake happens
kind of over time and then sharding gets
added over time and all these features
get added over time
and so the experience for just a regular
ethereum user
still feels very seamless right it's
like maybe a little bit more complex
than the hard forks that we've already
done but from a user's point of view but
like
not by that much right uh so like
the big two things that are happening
right these are
what used to be considered the two
flagship features of use 2.0 and now
they're just you know
the flagship features of the you know
the next uh
evolution of ethereum yeah as uh proof
of stake
and sharding right so proof of stake is
a consensus algorithm
it's the or it's not just mechanism i
should say um it's
the difference is that like an algorithm
is something that you run by yourself a
mechanism
is like it involves interactions between
people and it could even include
incentives and all of that
uh so the consensus mechanism
uh so by which nodes in
the network agree on you know which
blocks came in which transactions came
in in what order
uh make sure that once a block gets
accepted it can't get reverted and all
of these
things that we expect from a blockchain
um so existing blockchains you know
including bitcoin including the ethereum
of today and including
a lot of them they use proof of work
right uh so
the reason why we need proof of anything
is be it is because like they serve this
function that i call kind of economic
civil resistance
so that's obviously you know a big word
for
especially if you've never heard of
sybil's before but like the basic idea
is right that you have a network and you
have lots of computers that
agree on like which block to accept and
sometimes you get you know two blocks
that get published at the same time and
you just have to agree on an order so
there has to be some kind of voting game
yeah but then the question is well in
this voting game you know who get who
gets a vote who gets to participate
now the pro you can't say one person one
vote right the reason why you cannot say
one person one vote is because
you need some kind of like authority or
some kind of mechanism to say you know
who the
the humans are like and 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 you know virtual nodes
and then just like say look i'm 99 of
the network i should control everything
uh so to prevent this what proof of work
and proof of stake both do
is they basically say well the weight of
your vote like how much influence
your votes have in the consensus
is proportional to like what quantity of
economic resources you bring in
so 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 7 using
these hash algorithms right so this does
solve the problem right 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 7
you
as you're like a unit of economic
resources you just use
like holdings of coins inside the system
right so all of these blockchains they
have some kind of coin in them
bitcoin has bitcoin ethereum has ether
um you know they all have a coin
so why not just use that as the economic
the economic resource that you're using
to like measure participation
um so that's like the quarry
distinction between proof of work and
proof of stake um
i like proof of stake and i've liked
proof of stake for many years
basically because like it just requires
much
less ongoing resource consumption right
like with proof-of-work
um you know you have to like actually go
and buy these physical computers
and these days um you know yeah they
have specialized hardware asics um
application specific integrated circuits
you have to go produce them you have to
go buy them and unless you have millions
of dollars you know 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
uh and then you know you have to plug
them in you have to just
burn all of this electricity that's just
um running 24 7. so
it consumes a huge amount of energy
right and it gets not just energy it
also
you know just to create the hardware
right like people focus a lot on energy
but like actually
about half the cost of proof of work
mining is the cost of the hardware
um so hardware is a very big deal too um
and you know you need
this like these this really big and
powerful with very specialized hardware
another kind that fills up these big
warehouses
so proof of stake you don't you don't
really need that much electricity you
just need just a little bit to run right
to run a regular computer
um you can run proof-of-stake validators
on computers that you already have
um so it's just much
less resource intensive and like this is
good for a few reasons right like one is
you know the kind of environmental
rationale that
you know you're not breaking the
environment um the second
is that you're not taking away
electricity
and like other resources from other
people i mean like right now there's
i think just today i saw a story about
like iran wanting to shut down some
bitcoin mining because
it was just grabbing up so much
electricity that it was you know
outbidding the nearby towns and they
just
didn't have enough um and then there was
like chia that was the one that's doing
proof of like hard disk mining basically
it's just like grabbing up so many hard
disks
there's a there's a shortage right so
that's the second reason and then
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
right so like bitcoin and ethereum they
both issue
somewhere around four percent of the
total supply every year right now
to miners so ethereum is about 4.7
million ether
and the current supply is about 115
million but with proof of stake like we
expect it'll be somewhere between
500 000 and one and one million per year
um so so that means you know this
the supply doesn't have to you know
increase so quickly
um so one of the pros that uh
that people sort of argue for the proof
of work is that uh it is secure because
it's much more difficult
to sort of as you've highlighted is
difficult to participate
is there um is what are your thoughts
about the security
of the proof-of-stake mechanism
is is there ways to make it secure so i
think proof of stake is very secure uh
because
in order to be able to attack the system
you need to have like
basically as much stake as the rest of
the network right
so that means like right now for example
we have five million each staking so you
have to come up with five million each
and then join the network
and then the the other so five million
ethers a lot right it's like um
how much is it now like 15 billion
dollars so that's actually more than
i i believe the cost of attacking the
bitcoin network
and then the second thing is that
recovering from attacks is much easier
in proof-of-stake than proof-of-work
right because
in proof-of-stake you have like first of
all we have for many kinds of attacks
that you do against this network
we have this concept of like automatic
slashing right which basically means
that
in order to like revert a finalized
block so if there's one block that's
like
accepted by the network and you try to
convince the network to
kind of revert that block and accept a
different block in order to make that
kind of attack
you basically have to have your
validator
like a big portion of your validators
signed to conflicting messages
and this is something that like once
these messages are on the network you
can go and prove like
look these people did it and so we have
this feature in the protocol
called slashing where you basically take
all these people who provably misbehaved
and you burn their coins
right and you don't burn anyone else's
coins now there are other cases like for
example
if instead of reverting blocks the
attack just tries to censor everyone
right then what you do everyone who got
censored would just like basically
create the minority chain
um and then the community would
basically have to do a soft fork right
they would just have to say like look
this chain
is clearly attacking us this chain is
the one not attacking us and so we're
going to join this chain
and then what happens is that on that
new chain the attackers also lose a lot
of coins
right yeah so the difference between
proof of stake and proof of work
is that in a proof-of-stake system like
you can identify specific participants
and you can say you know
these and like this isn't like you know
a human going in and saying i don't like
you i don't like you i don't like you
this is like automated right
you can so the slashing process is
automated yes
is there ways it can go wrong so that's
a painful process where the coins are
burned
um it is painful yes i think uh
i mean the one big unknown of course is
like if
an attack actually happens and like if
an attack happens that requires the
community to actually choose one of
these minority forks
then like what would the the community
actually successfully coordinating on
this look like right like
it's like you know we can talk about it
and we can you know write
like science fiction novels about it but
like until it's happened you don't
really know the details of like 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 like what you
know uh in many ways in the political
realm
twitter is often used as a way to kind
of have these emerging phenomena of
large groups of people coming to a
consensus right about a particular idea
and then there's battle for consensus
what's uh
in the ethereum community how do people
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 um i
mean like we have to agree on protocol
changes somehow right like there's
twitter there's reddit
there's um github there's uh
all of the various ethereum forums
ethereum magicians ethereum research
there's just in-person communication
then there's just kind of like the
hidden web of everyone talking to
everyone on telegram
um or signal uh so it's like some of
everything
right but i think like the thing to
emphasize around like
can you actually come to consensus on
you know whether or not to
fork the chain because the attacker is
censoring some everyone just for example
is like
you everyone who's running a node is
going to see
almost the same thing right like they're
going to be off by a few seconds and
like maybe they'll be off by a few
they'll disagree by a few minutes but
like if it's a serious attack you know
people are gonna know right it's not
like one of those things where you know
oh
it we're trying to agree on like i don't
know did epstein kill himself or like
some you know
read the political facts for like in
reality no one knows a single thing
about what's actually going on and
they're all speculating
like it is much more visible right so we
do have that
but you know at the same time i'm happy
to admit that like
these are fairly untested mechanisms but
like at the same time they're also
untested mechanisms and proof of work
right
and like in proof of work it's even
harder because in proof of work you
don't have the ability to like identify
and say
like you know i'm going to these miners
attacked and so we're not going to let
these my um
these miners in these miners do not
attack so we're going to keep them in
like you have to pretty much you know
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 right so
the the economics of like recovering
from attacks and proof of work at least
to me
actually do seem more unfavorable
but you know i'm sure the proof of work
people you talk to will give a 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 mvv
if it's important what ideas do you have
sure how about after this one we'll also
talk about sharding because that's
amazing and it's part of the return back
to sharding and
which is no no return to the big picture
of the scaling problem as you mentioned
i love this conversation you know depth
first search instead of brett first
so uh basically okay ebbyv
minor extractable value um it is not
different in proof of work and proof of
stake right so like if you want to call
it
you know block proposal extractable
value like it sounds a lot sexy but you
know we can call it bpef instead of math
who cares
um but so this is a problem in both
proof of work and proof of stake
yes so 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 like take
advantage of that position for economic
gain
in a lot more ways than just collecting
transaction fees right
like for example there's decentralized
exchanges on chain like uniswap
and like let's say the price of eth
versus usdc was 2700
the previous block but then there was a
bit of a market drop and now it's 26.80
where you can go on unit swap and you
can just like gobble up the entire part
of
um you know the automated order book
that's like between 2700 and 26.80 right
and that's
and then at the same time you like run a
bot and uh
you know you buy some yeast back at
26.80 and you've just like made about 10
dollars of profit right so
or well 10 dollars times you know
whatever the depth is right so and
so there's lots of um little things like
that there's also things um that involve
like front running other people's
transactions so one example of this
would be
that if someone sends a transaction that
says
buy me five eth for um
whatever price that you can get um then
but with a maximum of
let's say yeah uh 15 000 then you can go
and like
you can send each put a transaction
right in front of that transaction
and you can like buy up that east first
and then you resell it to him at you
know fifteen thousand dollars minus one
yeah so there's then you get to make a
little bit of money though exactly so
there's a lot of these different like
arbitrage front running back running
these different tricks
that allow block proposers to to get
some percentage
on top like overhead exactly and the
reason why this is um
a challenge is because um
it's like first of all it's some it
sometimes degrades
user experience because users get you
know less favorable uh
trades but there are sometimes ways to
like mitigate that for applications
sometimes it's not that bad
but like 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 i mean because if you're just
collecting transaction fees
there aren't really economies of scale
there aren't really benefits to
centralizing right because it's a very
simple formula you just like grab up the
transactions that pay you the most
but with mev you know you ha 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
so there's this risk that like as a
result of this
mining is basically or or even
validating proof of stake is going to
centralize
um so i think the ecosystems best reply
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 right and the way that you
fire wallet 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 bundles of
transactions that
like are very profitable right and then
at the other side of the market you just
have like block proposes reminders that
are just dumb nodes
and they go and ask the what are called
searchers the bundle creators
and they just ask like hey like how much
can you give me if i put in your bundle
and then they just take the highest
offer
right so you sort of separate out the
task and you know you have
the easy part and then you have the hard
part and you have like 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 kind of
just talk to all the different people
doing the searching and they just you
know accept the highest bidder right
so and this is also just like
interesting uh an interesting example of
like economic design philosophy
right like sometimes you can't just like
make centralization go away sometimes
it's inevitable but
you know at least you can try to kind of
contain it you can direct it
or you know you can even sort of
firewall it away from
you know core consensus the parts that
really do need to be decentralized
so but you don't see it as an
existential risk it's just incredible
it's a bit of a problem that it has to
be constantly dealt with
it's a i mean it's a risk like there's
obviously a risk that you know there it
it's a very severe problem and that even
this flashbots approach has some fatal
flaw or whatever
um but i'm definitely like
we're definitely approaching it with the
mindset of you know this is a problem
and like yes we do have to do some work
to solve it but we're doing it and uh
so far it's being solved okay let's talk
about the other
really really fascinating part of uh
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 yes and more
specifically
sort of uh layer two or uh
layer one and two intersection ideas of
how to achieve scaling
and at the core of that is the idea of
sharding so
first what is sharding okay
uh so there's two major paradigms for
scaling blockchains right as
you said layer one and layer two and
layer one basically means
make the blockchain itself like capable
of processing more transactions by
having you know some
mechanism by which you can do that
despite the fact that there's a limit to
the capacity of each participant in the
blockchain
and then layer two says well we're gonna
keep the blockchain as is
but we're gonna create clever protocols
that sit on top of the blockchain
that still use the blockchain and then
still kind of 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 um so
in ethereum the most popular paradigm
failure too is rollups and the most
popular paradigm for
one is sharding so one way to achieve
layer one scaling is to increase the
block size
yes hence the block size wars quote
unquote and uh you actually tweeted
something about
uh people are saying that vitalik
changed his mind about the in it
he went from being a small i went from
being big to small
big small of them and uh but you said
i've been a medium
blocker all along so maybe you can also
comment on on where
on the very basic aspect before you even
get the sharding of where you stand on
this block
size debate sure so 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
right so when i say read i just mean you
know have a node and actually verify it
and make sure that it's correct and all
of those things
and then by right i mean send
transactions so like
i think for decentralization it's
important for both of these tasks to be
accessible
and i think that they're like about
equally important right if you have a
chain that's too expensive to read then
everyone will just trust a few people to
like 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 like that takes away
from
you know decentralization and
self-sovereignty as well so
this has been my viewpoints like pretty
much the whole time right it's that like
you know you need this balance and going
in one direction or the other direction
is very unhealthy
in the bitcoin case um basically what
happens was that
bitcoin originally like at the very
beginning it didn't really have a block
size it just had
an accidental block size of 32 meg or a
block size limit of 32 megabytes because
that just happens to be the limit of the
peer-to-peer messages
um but that's interesting i didn't even
know that part yeah but then
um satoshi back in 2010 was worried that
even 32 megabyte blocks would be too
hard to process so he
uh put the limit down to one megabyte
and you know i think
the i put you mean sneaked in there yeah
just like made an update to the bitcoin
software that made blocks bigger than
one i think it's
a million bytes um invalid and
i think the impression that most people
had at the time is that you know this is
just
a temporary safety measure and over time
you know though as we become more
confident in the software that limit
would be
and like raised some uh somewhat
um but ba then
of 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
um you know they're started kind of
coming out of the woodworks this opinion
that like no that limit should just not
be increased
and and you know then there are all of
these attempts at compromising right
um you know first there's like a
proposal for 20 megabyte blocks then
there was the 248 proposal
which is um a bit ironic because the 248
proposal started off being
like a small block negotiating position
but then when the big black people came
back and said like hey where are we are
we gonna