Transcript
00:00:00 The following is a conversation with Vitalik Buterin, co creator of and author of the white
00:00:05 paper that launched Ethereum and Ether, which is a cryptocurrency that is currently the
00:00:11 second largest digital currency after Bitcoin.
00:00:15 Ethereum has a lot of interesting technical ideas that are defining the future of blockchain
00:00:20 technology and Vitalik is one of the most brilliant people innovating in the space today.
00:00:27 Unlike Satoshi Nakamoto, the unknown person or group that created Bitcoin, Vitalik is
00:00:34 very well known and at a young age is thrust into the limelight as one of the main faces
00:00:41 of the technology that may redefine the nature of money and all forms of digital transactions
00:00:47 in the 21st century.
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00:04:38 And now here’s my conversation with Vitalik Buterin.
00:04:44 So before we talk about the fundamental ideas behind Ethereum and cryptocurrency, perhaps
00:04:50 it’d be nice to talk about the origin story of Bitcoin and the mystery of Satoshi Nakamoto.
00:04:58 You gave a talk that started with sort of asking the question, what did Satoshi Nakamoto
00:05:04 actually invent?
00:05:06 Maybe you could say who is Satoshi Nakamoto and what did he invent?
00:05:10 Sure.
00:05:11 So Satoshi Nakamoto is the name by which we know the person who originally came up with
00:05:19 Bitcoin.
00:05:20 So the reason why I say the name by which we know is that this is an anonymous fellow
00:05:25 who has shown himself to us only over the internet just by first publishing the white
00:05:33 paper for Bitcoin, then releasing the original source code for Bitcoin, and then talking
00:05:39 to the very early Bitcoin community on Bitcoin forums and interacting with them and helping
00:05:46 the project along for a couple of years.
00:05:49 And then at some point in late 2010 to early 2011, he disappeared.
00:05:55 So Bitcoin is a fairly unique project in how it has this kind of mythical, kind of quasi
00:06:05 godlike founder who just kind of popped in, did the thing and then disappeared and we’ve
00:06:10 somehow just never heard from him again.
00:06:13 So in 2008, so the white paper was the first, do you know if the white paper was the first
00:06:18 time the name would actually appear, Satoshi Nakamoto?
00:06:22 I believe so.
00:06:23 So how is it possible that the creator of such an impactful project remains anonymous?
00:06:31 That’s a tough question.
00:06:34 There’s no similarity to it in the history of technology as far as I’m aware.
00:06:38 Yeah.
00:06:39 So one possibility is that it’s hellfinny because hellfinny was kind of also active
00:06:46 in the Bitcoin community and as hellfinny in those two beginning years.
00:06:53 Who is hellfinny, maybe you could say?
00:06:55 He is one of the people in the early cypherpunk community.
00:07:00 He was a computer scientist, cryptographers, people interested in technology, internet
00:07:12 freedom, like those kinds of topics.
00:07:14 Was it correct that I read that he seemed to have been involved in either the earliest
00:07:19 or the first transaction of Bitcoin?
00:07:21 Yes.
00:07:22 The first transaction of Bitcoin was between Satoshi and hellfinny.
00:07:25 Do you think he knew who Satoshi was?
00:07:28 If he wasn’t Satoshi, probably no.
00:07:31 How is it possible to work so closely with people and nevertheless not know anything
00:07:36 about their fundamental identity?
00:07:39 Is this like a natural sort of characteristic of the internet?
00:07:43 Like if we were to think about it, because you and I just met now, there’s a depth of
00:07:51 knowledge that we now have about each other that’s like physical, like my vision system
00:07:56 is able to recognize you.
00:07:58 I can also verify your identity of uniqueness, like it’s very hard to fake you being you.
00:08:05 So the internet has a fundamentally different quality to it, which is just fascinating.
00:08:11 This is definitely interesting as I definitely just know a lot of people just by their internet
00:08:20 handles.
00:08:21 And to me, when I think of them, I see their internet handles and one of them has a kind
00:08:26 of profile picture as this kind of face that’s kind of not quite human with a bunch of psychedelic
00:08:33 colors in it.
00:08:34 And when I visualize him, I could just visualize that.
00:08:37 That’s not an actual face.
00:08:40 You are the creator of the second, well, he’s currently the second most popular cryptocurrency
00:08:45 Ethereum.
00:08:46 So on this topic, if we just stick on Satoshi Nakamoto for a little bit longer, you may
00:08:53 be the most qualified person to speak to the psychology of this anonymity that we’re talking
00:08:58 about.
00:08:59 Like your identity is known, like I’ve just verified it.
00:09:03 But from your perspective, what are the benefits in creating a cryptocurrency and then remaining
00:09:10 anonymous?
00:09:11 Like if it can psychoanalyze Satoshi Nakamoto, is there something interesting there?
00:09:17 Or is it just a peculiar quirk of him?
00:09:20 It definitely helps create this kind of image of this kind of neutral thing that doesn’t
00:09:26 belong to anyone.
00:09:28 And that you created a project and because you’re anonymous and because you also disappear
00:09:36 or as unfortunately happened to Hal Finney, if that is him, he ended up dying of Lou Gehrig’s
00:09:42 disease and he’s in the cryogenic freezer now.
00:09:45 But if you pop in and you create it and you’re gone and all that’s remaining of that whole
00:09:55 process is the thing itself, then no one can go and try to interpret any of your other
00:10:03 behavior and try to understand like, oh, this person wrote this thing in some essay at age
00:10:13 16 where he expressed particular opinions about democracy.
00:10:16 And so because of that, this project is a statement that’s trying to do this specific
00:10:21 thing.
00:10:22 Instead, it creates this environment where the thing is what you make of it.
00:10:30 It doesn’t have the burden of your other ideas, political thought and so on.
00:10:35 So now that we’re sitting with you, do you feel the burden of being kind of the face
00:10:43 of Ethereum?
00:10:44 I mean, there’s a very large community of developers, but nevertheless, is there like
00:10:49 a burden associated with that?
00:10:52 There definitely is.
00:10:53 This is definitely a big reason why I’ve been trying to kind of push for the Ethereum ecosystem
00:11:00 to become more decentralized in many ways, just encouraging a lot of core Ethereum work
00:11:06 to happen outside of the Ethereum Foundation and of expanding the number of people that
00:11:11 are making different kinds of decisions, having multiple software limitations instead of one
00:11:17 and all of these things.
00:11:18 There’s a lot of things that I’ve tried to do to remove myself as a single point of failure
00:11:25 because that is something that a lot of people criticize me for.
00:11:31 So if you look at like the most fundamentally successful open source projects, it seems
00:11:37 that it’s like a sad reality when I think about it, is it seems to be that one person
00:11:43 is a crucial contributor often, if you look at Linus for Linux for the kernel.
00:11:51 That is possible and I’m definitely not planning to disappear.
00:11:56 That’s an interesting tension that projects like this kind of desire a single entity and
00:12:04 yet they’re fundamentally distributed.
00:12:08 I don’t know if there’s something interesting to say about that kind of structure and thinking
00:12:12 about the future of cryptocurrency, does there need to be a leader?
00:12:17 There’s different kinds of leaders.
00:12:20 There’s dictators who control all the money.
00:12:22 There’s people who control organizations.
00:12:25 There’s high priests that just have themselves other Twitter followers.
00:12:30 What kind of leader are you, would you say?
00:12:33 These days, actually a bit more in the high priest direction than before.
00:12:42 I definitely actually don’t do all that much of going around and ordering Ethereum Foundation
00:12:48 people to do things because I think those things are important.
00:12:52 If there’s something that I do think is important, I do just usually kind of say it publicly
00:12:58 or just kind of say it to people and quite often projects just going to start doing it.
00:13:05 So let’s ask the high philosophical question about money.
00:13:10 What at the highest level is money?
00:13:13 What is money?
00:13:15 It’s a kind of game and it’s a game where we have points and if you have points, there’s
00:13:21 this one move where you can reduce your points by a number and increase someone else’s points
00:13:24 by the same number.
00:13:26 So it’s a fair game, hopefully.
00:13:29 Well, it’s one kind of fair game.
00:13:32 For example, you can have other kinds of fair games.
00:13:35 You’re going to have a game where if I give someone a point and you give someone a point
00:13:38 and instead of that person getting two points, that person gets four points and that’s also
00:13:42 fair.
00:13:43 But, you know, money is easy to kind of set up and it serves a lot of useful functions
00:13:51 and so it kind of just survives in society as a meme for thousands of years.
00:13:57 It’s useful for the storage of wealth, it’s useful for the exchange of value.
00:14:04 And it’s also useful for denominating future payments, a unit of account.
00:14:09 A unit of account.
00:14:11 So what, if you look at the history of money in human civilization, just if you’re a student
00:14:18 of history, how has its role or just the mechanisms of money changed over time in your view?
00:14:26 Even if we just look at the 20th century or before and then leading up to cryptocurrencies,
00:14:30 that’s something you think about?
00:14:32 Yeah, and I think the big thing in the 20th century is kind of, we saw a lot more intermediation,
00:14:39 I guess.
00:14:41 The first part is kind of the move from adding more of different kinds of banking and then
00:14:49 we saw the move from dollars being backed by gold to dollars being backed by gold that’s
00:14:57 only redeemable by certain people to dollars not being backed by anything to this system
00:15:05 where you have a bunch of free floating currencies and then people getting kind of bank accounts
00:15:12 and then those things becoming electronic, people getting accounts with payment processors
00:15:16 that have bank accounts.
00:15:20 So what do you make of that, that’s such a fascinating philosophical idea that money
00:15:25 might not be backed by anything.
00:15:29 Is that like fascinating to you that money can exist without being backed by something
00:15:33 physical?
00:15:35 It definitely is.
00:15:36 What do you make of that?
00:15:39 How is that possible?
00:15:40 Is that stable?
00:15:41 If we look at the future of human civilization, is it possible to have money at the large
00:15:45 scale at such a hugely productive and rich societies be able to operate successfully
00:15:52 without money being backed by anything physical?
00:15:54 I feel like the interesting thing about the 21st century especially is that a lot of the
00:16:01 important valuable things are not backed by anything.
00:16:04 If you look at tech companies for example, something like Twitter, you could theoretically
00:16:10 imagine that if all of the employees wanted to, they could kind of come together, they
00:16:15 would quit and start working on Twitter 2.0 and then the value of and just kind of build
00:16:27 the exact same product or possibly build a better product and then just kind of continue
00:16:32 on from there and the original Twitter would just not have people left anymore.
00:16:40 There is theoretically kind of code and IP that’s owned by the company but in reality
00:16:44 like good programmers could probably rewrite all that stuff in three months.
00:16:48 So the reason why the thing has value is just kind of network effects and coordination problems
00:16:56 right like these employees in reality aren’t going to switch all at once and also the users
00:17:01 aren’t all going to switch at once because it’s just difficult for them to switch at
00:17:05 once and so there’s these kind of meta stable and of equilibrium in interactions between
00:17:14 thousands of millions of people that are just actually quite sticky even though if you try
00:17:20 to kind of assume that everyone’s a perfectly rational and kind of perfectly slippery spherical
00:17:24 cow they don’t seem to exist at all.
00:17:28 That stickiness.
00:17:29 Do you have a sense, a grasp of the sort of the fundamental dynamic like the physics of
00:17:34 that stickiness?
00:17:36 It seems to work but and I think some of the cryptocurrency ideas kind of rely on it working.
00:17:43 It’s the sort of thing that’s definitely been economically modeled a lot like one of the
00:17:51 kind of analogy of something as similar that you often see in textbooks as like what is
00:17:59 a government like if for example like 80% of people in a country just like tomorrow
00:18:05 suddenly had the idea that like the laws that are currently the laws of the government that
00:18:11 currently is the government are just people and some other thing is the government and
00:18:15 they just kind of start acting like it then that would kind of become the new reality
00:18:19 and then the question is well what happens if and if between zero and 80% of people start
00:18:27 believing that and like what is the thing you also you see is that if there is one of
00:18:34 these kind of switches happening is kind of revolution then if you’re the first person
00:18:38 to join then like you probably don’t have the incentive to do that but then if you’re
00:18:44 the 55th percentile person to join then suddenly becomes quite safe too and so it’s definitely
00:18:51 is the sort of thing that you can kind of try to analyze and understand mathematically
00:18:56 but one of the kind of results is that the sort of like when the switch happens definitely
00:19:06 can be chaotic sometimes yeah but still like to me the idea that the network affects that
00:19:13 the fact that human beings at a scale like millions billions can share even the idea
00:19:19 of currency like yeah I’ll agree that’s just uh I know economists can model it I’m a skeptic
00:19:25 on the economic and uh it’s like uh so my my favorite sort of field maybe recreationally
00:19:32 psychology is trying to understand human behavior and I think sometimes people just kind of
00:19:36 pretend that they can have a grasp on human behavior even though we it’s such a messy
00:19:42 space that all the models that psychology or economics those different perspectives
00:19:46 on human behavior can have are are difficult it’s difficult to know how much that’s wishful
00:19:53 thinking and how much it is actually getting to the core of uh understanding human behavior
00:19:58 but on that idea what do you think is the role of money in human motivation so do you
00:20:08 think money from an economics perspective from a psychology perspective is core to like
00:20:15 human desires money is definitely very far from the only motivator um it is a big motivator
00:20:23 and that’s uh one of the closest things you have to a universal motivator think because
00:20:30 ultimately in like almost any person in the world if you ask them to do something like
00:20:36 they’ll be more inclined to do it if you also offer some uh offer them money right and that’s
00:20:41 uh like there’s definitely many cases where people will do things other than things that
00:20:47 maximize how much money they have and that happens all the time but like though a lot
00:20:52 of those other things are kind of but much more specific to and of who that person is
00:20:57 and of what their situation is the relationship between the motive and the action and these
00:21:01 other things what do you think is the interplay of the other motivator from like Nietzsche
00:21:05 perspective is power do you think money equals power do you think those are conflicting ideas
00:21:11 do you think i mean that’s the one of the ideas that decentralized currency decentralized
00:21:16 applications are looking at is uh who holds the power yeah money is definitely a kind
00:21:23 of power and there’s definitely people who want money because it gives them power and
00:21:29 even if my money doesn’t seem to and if explicitly be about money a lot of things that people
00:21:37 spend money on are ultimately about a social status of some kind um so i mean i definitely
00:21:44 view those two things as an of interplaying and then there’s also money as just a way
00:21:50 of like measuring how successful you are like as a scoreboard right so this kind of gets
00:21:57 back to the game i mean like if you have four billion dollars then the main benefit you
00:22:04 get from going up one of the big benefits you get from going up to six million dollars
00:22:08 is that now instead of being below the guy who has five you’re above the guy who has
00:22:12 five so you think money could be kind of uh in the game of life it’s also a measure of
00:22:19 self worth it’s like how we it’s definitely how uh how a lot of people perceive it define
00:22:25 ourselves in the hierarchy of yeah and i’m not yeah not saying it’s kind of a healthy
00:22:30 thing that people uh define their self worth as money because it’s definitely kind of far
00:22:36 from a uh perfect indicator of how much you value you provide the society or anything
00:22:43 like this but i definitely think that like as a matter of kind of current practice so
00:22:49 much of people do feel that way so what does utopia from an economic perspective look like
00:22:56 to you what does the perfect world look like i guess the economist’s utopia would be one
00:23:04 where kind of everything is incentive aligned in the in the sense that there aren’t enough
00:23:12 conflicts between what satisfies your goals and kind of what is uh good for everyone in
00:23:20 the world in the world as a whole what do you think that would um look like does does
00:23:26 that mean there’s still poor people and rich people there’s still income inequality do
00:23:32 you think sort of uh marxist ideas are strong do you think sort of ideas of uh objectivism
00:23:41 like where the market rules is strong like what is there is the different economic philosophies
00:23:47 that just seem to be reflective what utopia would be so i definitely think that existing
00:23:55 economic philosophies do end up kind of systematically kind of deviating from the utopia in a lot
00:24:02 of ways yeah like one of the big things i talk about for example is public goods right
00:24:07 and public goods are especially important on the internet right because like the idea
00:24:13 is with kind of money as this game where you know i lose a few coin a few coins and you
00:24:18 gain the same number of coins is that this usually happens in a trade where i lose some
00:24:23 money you gain some money you lose a sandwich and i gain a sandwich and this kind of model
00:24:30 works really well when the thing that we’re using money to incentivize this kind of private
00:24:36 goods right things that you provide to one person where the benefit comes to one person
00:24:40 but the like on the internet especially but also many many contexts and if off the internet
00:24:48 there’s actions that kind of individuals or groups can take where instead of the benefit
00:24:53 going to one person the benefit just goes to many people at the same time and you can’t
00:25:00 control where the benefit goes to right so for example this podcast you know we publish
00:25:04 it and when it’s published you don’t have any fine grains control over like oh these
00:25:11 38 000 people can watch it and then like these other 29 000 people can’t it’s like once the
00:25:16 number goes high enough then you know people just like copy it and then when i write articles
00:25:21 on a blog then they’re just like free for everyone and that stuff’s even harder to prevent
00:25:26 anyone from copying so and aside from that things like you know scientific research for
00:25:33 example and even taking more pedestrian examples like climate change mitigation would be a
00:25:39 big one so there’s a lot of things in the world where you have these kind of individual
00:25:47 actions with enough concentrated costs and distributed benefits and money as a point
00:25:51 system does not do a good job of encouraging these things and one of the kind of other
00:25:58 things even kind of tangentially connected to crypto but kind of theoretically outside
00:26:05 of it that i work on is this sort of mechanism called quadratic funding and the way to think
00:26:10 about it is i kind of imagine a point system where if like if one person gives coin gives
00:26:19 coins to one other person then it works the same way as money but if multiple people give
00:26:26 coins to one person and they do so anonymously so it’s kind of not in consideration for a
00:26:32 specific service to that person themselves then the number of coins received by that
00:26:38 person is kind of greater than just the sum of the number of coins that have given by
00:26:43 those different people so the actual formula is you take the square root of the amount
00:26:48 that each person gave then you add all the square roots and then you kind of square the
00:26:51 sum yeah and then you give that and the idea here would basically be that if let’s say
00:26:58 for example you just start going off and kind of planting a lot of trees and there’s a bunch
00:27:05 of people that are really happy that you’re planting trees and then so they go and all
00:27:09 kind of throw a coin your way then the like there is like basically the fact that kind
00:27:16 of you get more than the sub you get this kind of square of sum of these of square roots
00:27:21 of these tiny nodes that this actually kind of compensates for the tragedy of the commons
00:27:27 right this there’s even this kind of mathematical proof that it’s sort of optimally compensates
00:27:31 for it what is the tragedy of the common this is just this idea that like if there is this
00:27:38 situation where there’s some public good that lots of people benefit from then no individual
00:27:45 person wants to contribute to it because if they contribute they only get a small part
00:27:49 of the benefit from their contribution but they pay the full cost of their contribution
00:27:54 in which context is this sorry what is the term quadratic what quadratic funding like
00:28:01 what’s in which context is this mechanism useful so obviously you said to combat the
00:28:08 tragedy of the commons but you know in which context do you see it as useful actually practically
00:28:13 yeah theoretically public goods in general right so like like services like what are
00:28:18 we what are we talking about what’s a public yeah so within the ethereum ecosystem for
00:28:23 example like we’ve actually tried using this mechanism like yeah wrote a couple of articles
00:28:28 about this on vitalik.ca where i go through some of the most recent rounds and it’s been
00:28:33 really interesting um some of the top ones that people supported there were um things
00:28:40 like kind of just online user interfaces that make it easier for people to interact with
00:28:46 ethereum um there was a documentation there were podcasts um there were kind of software
00:28:57 kind of clients like kind of implementations of the ethereum protocol of privacy tools
00:29:03 just like lots of things that are kind of useful to lots of people when a lot of people
00:29:10 are contributing for like funding a particular particular entity yeah that’s really that’s
00:29:15 really interesting is there something special about the quadratic the the the summing of
00:29:20 the square roots and yeah so another way to think about it is like imagine if n people
00:29:25 each give a dollar then the person gets n squared right um and and so each individual
00:29:32 person’s contribution gets multiplied by n right because you have n people and so that
00:29:37 kind of perfectly compensates for the kind like kind of n to one uh tragedy of the commons
00:29:41 i just wonder if the the squared part is yeah fundamental no it is um and i’d uh recommend
00:29:49 you go to on vitalik.ca i have this article called quadratic payments a primer and highly
00:29:56 recommended it’s kind of at least my attempt so far kind of explaining the intuition behind
00:30:01 this intuition so if we could can we go to the the very basics what is the blockchain
00:30:09 or perhaps we might even start at the uh the the byzantine generals problem and byzantine
00:30:16 fault tolerance in general that i i uh bitcoin was taking steps to uh providing a solution
00:30:24 for so the byzantine generals problem it’s this uh paper that leslie lamport published
00:30:32 in 1982 where he has this thought experiments where if you have two generals that are kind
00:30:38 of camped out on opposite sides of a city um and they’re planning when to attack the
00:30:43 city then uh the question is and if how could those generals coordinate with each other
00:30:50 and they could send messengers between each other but those messengers kind of could get
00:30:56 sniped by the enemy on the road road some of those messages could end up being traders
00:31:01 and if things could end up happening and with just two mess generals it turns out that there’s
00:31:11 kind of no solution in a finite number of rounds that guarantees that they will be able
00:31:17 to kind of coordinate on the same answer but then in the case where you have more than
00:31:22 two generals that then leslie analyzes cases like um are the mess messages kind of just
00:31:28 oral messages um are the messages kind of signed messages so i could give you a signed
00:31:34 message and you can pass along that signed message and the third party can still verify
00:31:38 that i originally made that message and depending on those different cases there’s kind of different
00:31:44 bounds on like given how many generals and how many traders among those generals and
00:31:51 if what like under what conditions you actually can’t agree when to launch an attack uh so
00:31:59 it’s actually a big misconception that the byzantine generalist problem was unsolved
00:32:03 so let’s say lamport solved it the thing that was unsolved though is that all of these solutions
00:32:09 assume that you’ve already agreed on and have fixed the list of who the generals are and
00:32:14 these generals have to be kind of semi trusted to some extent they can’t just be anonymous
00:32:18 people because if they’re anonymous then like the enemy could just be 99 percent of the
00:32:22 generals uh so right the um in the 1980s and the 1990s kind of the general use case
00:32:32 for distributed system stuff was more kind of enterprisey stuff where you could kind
00:32:38 of assume that uh you know you know who the nodes are that are running these kind of computer
00:32:45 networks so if he wants to have some kind of decentralized computer network that pretends
00:32:50 to be a single computer and that you can kind of do do kind of operations on then it’s made
00:32:55 out of these kind of 15 specific computers and we know kind of who and where they are
00:33:00 and so we have a good reason to believe that say at least 11 of them would be fine and
00:33:05 it could also be within a single system exactly almost a network of devices sensors so on
00:33:11 like in airplanes and i think uh like flight systems in general still use these kinds of
00:33:16 ideas yep yep um so that’s the 80s that’s the 80s and 90s now the cypherpunks had a
00:33:23 different use case in mind which is that they wanted to create a fully decentralized global
00:33:28 permissionless currency and the problem here is that they didn’t want any authorities and
00:33:34 they didn’t even want any kind of privileged list of people and so now the question is
00:33:39 well how do you use these techniques to create consensus when you have no way of kind of
00:33:46 measuring identities right you have no way of kind of determining whether or not some
00:33:52 99 of participants aren’t actually all the same guy and so the clever solution that satoshi
00:33:58 had this is uh kind of going back to the that presentation i made at defcon a few months ago where i said that the
00:34:05 things that satoshi invented with crypto economics um is this uh really neat idea that you can
00:34:11 use economic resources to kind of limit identity how many identities you can get and the uh
00:34:20 if there isn’t any existing decentralized digital currency then the only way to do this
00:34:25 is with proof of work right so with proof of work the solution is uh just uh you publish
00:34:33 a solution to a hard mathematical puzzle that takes some uh kind of clearly calculable amount
00:34:40 of computational power to solve you get an identity and then you solve five of those
00:34:45 puzzles you get five identities and then these are the identities that we run the consensus
00:34:50 algorithm between so the proof of work mechanism you just described is like the fundamental
00:34:55 idea proposed in the in the white paper that defines bitcoin uh what’s the idea of consensus
00:35:05 that we wish to reach why is consensus important here what is consensus so the goal here in
00:35:15 just simple technical terms is to basically kind of wire together a set of a large number
00:35:22 of computers in such a way that they kind of pretends to the outside world to be a single
00:35:27 computer where that single computer keeps working even if a large portion of the kind
00:35:32 of constituents the computers that make it up break and kind of break in arbitrary ways
00:35:36 like they could shut off they could try to actively break a system they could do lots
00:35:41 of mean things so the reason why the cypherpunks wanted to do this is because they wanted to
00:35:49 run one particular program on this virtual computer and the one particular program that
00:35:54 they wanted to run is just a currency system right it’s a system that just processes a
00:35:58 series of transactions and for every transaction it verifies that the sender has enough coins
00:36:05 to pay for the transaction it verifies that the digital signature is correct and if the
00:36:10 checks pass then it subtracts the coins from one account and adds the coins to the other
00:36:14 account roughly so first of all the the the proof of work idea is kind of i mean at least
00:36:21 to me seems pretty fascinating it is i mean that’s a it’s kind of a revolutionary idea
00:36:27 i mean is is it is it obvious to come up with that you can use uh you can exchange basically
00:36:33 computational resources for for identity it’s uh it actually has a pretty long history it
00:36:41 was uh first proposed in a paper by uh mc cynthia dwork and nixon naor in 1994 i believe
00:36:51 and the original use case was uh combating email spam so the idea is that if you send
00:36:55 an email you have to send it with a proof of work attached and like this makes it reasonably
00:37:00 cheap to send emails to your friends but it makes it really expensive to send spam to
00:37:04 a million people yeah that’s a simple brilliant idea so maybe also taking a step back so what
00:37:10 is the role of blockchain in this what is the blockchain sure so the blockchain my way
00:37:18 of thinking about it is that it is this kind of system where you have this kind of one
00:37:24 virtual computer created by this a bunch of these nodes in the network and the reason
00:37:31 why the term blockchain is used is because the data structure that these systems use
00:37:37 at least so far is one where they um different nodes in the network periodically publish
00:37:45 blocks and a block is a kind of list of transactions together with a pointer like a hash of a previous
00:37:54 block that it builds on top of and so you have a series of blocks that that nodes in
00:38:01 the network create where each block points to the previous block and so you have this
00:38:04 chain of them is a fault tolerance mechanism built into the idea of blockchain or is it
00:38:10 a lot of possibilities of different ways to make sure there’s no funny stuff going on
00:38:16 there are indeed a lot of possibilities um so in a kind of just simple architecture as
00:38:22 I just described the way the fault tolerance happens is like this right so you have a bunch
00:38:26 of nodes and they’re just happily and have occasionally creating blocks building on top
00:38:30 of them each other’s blocks and let’s say you have kind of one block we’ll call it kind
00:38:35 of block one and then someone else builds another block honestly you’ll call it block
00:38:41 two then we have an attacker and what the attacker tries to do is the attacker tries
00:38:46 to revert block two and the way they revert block two is instead of doing the thing they’re
00:38:50 supposed to do which is build a block on top of block two they’re going to build another
00:38:54 block on top of block one um so you have block one which has two children block two and then
00:39:00 block two prime now this might sometimes even happen by random chance if you know two nodes
00:39:07 in the network just happen to create blocks at the same time and they don’t hear about
00:39:10 each other’s things before they create their own but this also could happen because of
00:39:14 an attack now if this happens you have an attack then the uh no in the bitcoin system
00:39:22 uh the nodes follow the longest chain um so if um this um attack had happened uh and when
00:39:30 the original chain had more than two blocks on it so if it was trying to kind of revert
00:39:35 more than more than two blocks then everyone would just would just ignore it and everyone
00:39:41 would just keep following the regular chain but here you know we have block two and we
00:39:44 have block two prime and so the two are kind of even and then whatever block um the next
00:39:50 block is created on top of so say block three is now created on top of block two prime then
00:39:56 everyone says uh agrees that block three is the new head um and block two prime is just
00:40:03 kind of forgotten and then everyone just kind of peacefully builds on top of block three
00:40:06 and the thing continues so how difficult is it to mess with the system right so how like
00:40:12 if we look at the general problem like how many what fraction of people who participate
00:40:19 in the system have to be bad players in order to mess with it truly like what’s your is
00:40:26 there is there a good number there is um well depending on kind of what your model of the
00:40:31 participants is and like what kind of attack we’re talking about it’s anywhere between
00:40:36 23.2 and 50 of what of all of the computing power in the network sorry so 22 and 23 point
00:40:47 between 23.2 and 50 and 50 can be compromised so like once your once your your portion of
00:40:58 the total computing power in the network goes above the 23.2 level then there’s kind of
00:41:04 things that you could mean things that you can potentially do and as your percentage
00:41:08 of the network kind of keeps going up then the your abilities as you mean things kind
00:41:12 of goes higher and then if you have above 50 then you can just break everything so how
00:41:17 how hard is it to achieve that level like it seems that so far historically speaking
00:41:23 it’s been exceptionally difficult so this is a challenging question um so the economic
00:41:29 cost of acquiring that level of stuff from scratch is fairly high i think it’s uh somewhere
00:41:36 in the low billions of dollars and when you say that stuff you mean computational resources
00:41:42 yeah so specifically specialized hardware and of asics that people use to solve these
00:41:48 puzzles to do the mining these days small tangent uh so obviously i work a lot in deep
00:41:54 learning with gpus and asics for that application and i tangentially kind of hear that so many
00:42:00 of these you know sometimes nvidia gpus are sold out because of this other application
00:42:07 like what do if you can comment i don’t know if you’re familiar or interested in this space
00:42:12 what kind of asics what kind of hardware is generally used these days for to do the actual
00:42:18 computation for the proof of work sure so in the case in bitcoin and ethereum are a
00:42:23 bit different so in the case of bitcoin there is an algorithm called sha256 it’s just a
00:42:28 hash function and so the puzzle is just coming up with a number where the hash of the number
00:42:33 is below some threshold and so because the hashes are designed to be random you just
00:42:38 have to keep on trying different numbers until one works and the asics are just like specialized
00:42:45 circuits that contain and if circuits for evaluating this hash over and over again and
00:42:51 you have like millions or billions of these hash evaluators and just stacked on top of
00:42:56 each other inside of a box and you just keep on running the box 24 7 in the asics there’s
00:43:01 literally specialized hardware designed for this yes oh this is a little bit an amazing
00:43:05 world another tangent i’ll come back to the basics but uh does quantum computing throw
00:43:11 a wrench into any of this very good question so uh quantum computers have two main uh kind
00:43:19 of families of algorithms that are relevant to cryptography one is shor’s algorithm and
00:43:24 shor’s algorithm is one that kind of completely breaks the hardness of some specific kinds
00:43:31 of mathematical problems so the one that you’ve probably heard of is it makes it very easy
00:43:35 to factor numbers so figure out kind of what prime factors are the kind of that you need
00:43:41 to multiply together to get some number even if that number is extremely big shor’s algorithm
00:43:46 can also be used to break elliptic curve cryptography it can break like any kind of hidden order
00:43:54 groups it breaks a lot of kind of cryptographic nice things that we’re used to but the good
00:44:00 news is that for every kind of major use of things that shor’s algorithm breaks we already
00:44:07 know of quantum proof alternatives right now we don’t use these quantum proof alternatives
00:44:12 yet because in many cases they’re five to ten times less efficient but the crypto industry
00:44:20 in general kind of knows that this is coming eventually and it’s kind of ready to take
00:44:25 the hit and switch to that stuff when we when we have to the second algorithm that is relevant
00:44:31 to cryptography is grover’s algorithm and in grover’s algorithm might even be kind of
00:44:38 more familiar to ai people that’s basically usually described as solving search problems
00:44:44 but the idea here is that if you have a problem of the form find a number that satisfies some
00:44:51 property then if with a classical computer you need to try and if n times before before
00:44:58 you find a number then with a quantum computer you only need to do square root of n computations
00:45:03 and grover’s could potentially be used for mining but there’s two possibilities here
00:45:12 one is that grover’s could be used for mining and whoever creates the first working quantum
00:45:18 computer that could do grover’s will just mine way faster than everyone else and we’ll
00:45:22 see another round of what we saw when a6 came out which is that kind of the new hardware
00:45:27 just kind of dominated the old stuff and then eventually it switched to a new equilibrium
00:45:32 but by the way way faster not exponentially faster quadratically faster quadratically
00:45:37 faster which is not sort of it’s not game changing i would say it’s like a6 like you
00:45:44 said it would be exactly yeah so it would not necessarily break proof of work as a that’s
00:45:50 right yeah now the other kind of possible world right is that quantum computers have
00:45:55 a lot of overhead there’s a lot of a complexity involved in maintaining quantum states and
00:46:00 there’s also as we’ve been realizing recently making quantum computers actually work requires
00:46:07 kind of quantum error correction which requires kind of a thousand real qubits per logical
00:46:12 qubit and so there’s the very real possibility that the overhead of running a quantum computer
00:46:17 will be higher than the speed up you get with grover’s which would be kind of sad but which
00:46:22 would also mean that the given proof of work will just keep working fine so beautifully
00:46:28 put so so proof of work is the core idea of bitcoin is there other core ideas before we
00:46:33 kind of take a step towards the origin story and ideas of ethereum is there other stuff
00:46:39 that were key to the white paper of bitcoin there is proof of work and then there’s just
00:46:43 the cryptography is just kind of public keys and signatures that are used to verify transactions
00:46:49 those two are the big things so then what is the origin story maybe the human side but
00:46:56 also the technical side of ethereum sure so i joined the bitcoin community in 2011 and
00:47:04 i started by just writing i first wrote for this sort of online thing called bitcoin weekly
00:47:09 then i started writing for bitcoin magazine um and uh sorry to interrupt you have this
00:47:16 funny kind of uh story true or not is uh that you were disillusioned by the downsides of
00:47:24 centralized control from your experience with wow world of warcraft is this true or you’re
00:47:29 just being witty uh i mean the event is true the fact that that’s the reason i do decentralization
00:47:35 is witty maybe just a small tangent do have you always had a skepticism of centralized
00:47:42 control is that sort of degree yeah has that feeling evolved over time or has that just
00:47:49 always been a core feeling that decentralized control is the future of a human society it’s
00:47:55 definitely been something that felt very attractive to me ever since i could have learned that
00:47:59 such a thing is possible it’s possible even yeah so great so you’re you joined the bitcoin
00:48:05 community in 2011 you said you began writing so what’s next started writing uh moved from
00:48:12 high school to university halfway in between that and spent a year in university then at
00:48:20 the end of that year i dropped out to do bitcoin things full time and this was a combination
00:48:27 of continuing to write bitcoin magazine but also increasingly work on software projects
00:48:33 and i traveled around the world for about six months and just going to different bitcoin
00:48:37 communities like i went to first in new hampshire then spain other european places israel and
00:48:44 then san francisco and along the way i’ve met a lot of other people that are working
00:48:48 on different bitcoin projects and when i was in israel there were some very smart teams
00:48:54 there that were working on ideas that people were starting to kind of call bitcoin 2.0
00:49:00 so one of these were colored coins which is basically saying that hey let’s not just use
00:49:06 the blockchain for bitcoin but let’s also like kind of issue other kinds of assets on
00:49:10 it and then there was a protocol called master coin that supported issuing assets but also
00:49:15 supported many other things like financial contracts like domain name registration and
00:49:21 a lot of different things together and i spent some time working with these teams and i quickly
00:49:30 kind of realized that this master coin protocol could be improved by kind of generalizing
00:49:36 it more right so the best the analogy i use is that the master coin protocol was like
00:49:40 this swiss army knife you have 25 different transaction types for 25 different applications
00:49:46 but what i realized is that you could replace a bunch of them with things that are more
00:49:52 general purpose so one of them was that you could replace like three transaction types
00:49:57 for three types of financial contracts with a generic transaction type for a financial
00:50:03 contract that just lets you specify a mathematical formula for kind of who how much money each
00:50:08 side gets by the way it’s a small pause what’s you say financial contract just the terminology
00:50:14 what is the contract what’s a financial contract so this is just generally an agreement where
00:50:21 kind of either one or two parties kind of put collateral kind of in and then they depending
00:50:29 on kind of certain conditions like this could involve prices of assets this could involve
00:50:35 the actions of the two parties it could involve other things but they kind of get different
00:50:40 amounts of of assets out that just depend on things that happened so a contract is really
00:50:46 a financial contract is at the core it’s the it’s the core interactive element of a financial
00:50:52 system yeah there’s yeah there’s many different kinds of financial contracts like there’s
00:50:57 things like options where you kind of give someone the right to buy a thing that you
00:51:02 have for some specific price for some period of time there’s uh contracts for difference
00:51:08 where you basically are kind of making a bet that says like for every dollar this thing
00:51:13 goes up i’ll give you seven dollars or for every dollar that thing goes down you give
00:51:16 me seven dollars or something like that and but the main idea that these contracts have
00:51:21 to be enforced and trusted them yes exactly you have to trust that they will work out
00:51:27 in a system where nobody can be trusted yes this is such a beautiful complicated system
00:51:34 okay so uh so you were seeking to kind of generalize this basic uh framework of contracts
00:51:40 um so what does that entail so what what technically are the steps to creating ethereum
00:51:48 sure so i guess just to kind of continue a bit with this master coin story um so started
00:51:54 by kind of giving ideas for how to generalize the thing and eventually um this turned into
00:52:00 a much more kind of fully fledged proposal that just says hey how about you scrap all
00:52:04 your futures and instead you just um put in this programming language and i gave this
00:52:09 idea to them and their response was something like hey this is great but this seems complicated
00:52:16 and it seems like something that we’re not going to be able to put onto our roadmap for
00:52:19 a while and my response to this was like wait do you not realize how revolutionary this
00:52:24 is well i’ll just go do it myself and then i what was the name of the programming language
00:52:29 i just called it ultimate scripting great uh so then i kind of went through a couple
00:52:37 more rounds of iteration and then the idea for a theorem itself started to form
00:52:43 um and the idea here is that you just have a blockchain where the core unit of the thing
00:52:51 is what we call contracts it’s these kind of accounts that can hold assets um and like
00:52:57 they have their own internal memory but that are controlled by a piece of code and so if
00:53:03 i send some ether to a contract the only thing that can determine where that kind of ether
00:53:10 the currency inside ethereum and it goes after that um is the code of that contract itself
00:53:16 and so basically kind of sending assets to computer programs becomes this kind of paradigm
00:53:24 for creating these sort of agreements self executing agreements self executing it’s so
00:53:30 cool that code is sort of part of this contract so that that’s what’s meant by smart contracts
00:53:36 yeah so how hard was it to build this kind of thing harder than expected um and originally
00:53:43 i actually thought that this would be a thing that i would kind of casually work on for a
00:53:47 couple of months publish and then go back to university um then i released it and a bunch
00:53:55 of people or i released the white paper the white paper the idea is there the idea the
00:53:59 white paper um a whole bunch of people came in offering the help a huge number of people
00:54:03 and have expressed interest and this was something i was totally not expecting and then i kind of
00:54:10 realized that this would be something that’s kind of much bigger than i had ever um thought
00:54:15 that it would be and then we started on this kind of much longer development slog of making
00:54:23 something that lives up to this sort of much higher level of expectations what are the some
00:54:28 of the is it fundamentally like software engineering challenges it was their social
00:54:34 okay so there’s social so so what are the biggest interesting challenges that you’ve learned about
00:54:41 human civilization and in in software engineering through this process
00:54:47 so i guess one of the challenges for me is that like i’m one of the kind of apparently unusual
00:54:54 geek schoolers and i’ve never treated with anything but kindness in school yes um and so
00:55:00 when i got into crypto i kind of expected everyone would just kind of be the same kind
00:55:06 of altruistic and nice in that same way um but the um kind of the algorithm that i used for
00:55:14 finding cofounders for this thing was not very good it was sort of literally one computer
00:55:18 scientist called the greedy algorithm it’s sort of the first 15 people who replied back offering
00:55:23 to help kind of are the cofounders oh you mean like literally the the the people that for will
00:55:29 form to be the the founders cofounders of the community the algorithm i like how you call it
00:55:34 the algorithm yeah um and so what happened was that uh these um like especially as the project
00:55:43 got really big like there started to be a lot of this kind of infighting and there were a lot of
00:55:48 like i wanted the thing to be a non profit and some of them wanted to be a for profit
00:55:53 uh and then there started to be people who were just kind of totally unable to work with each
00:55:58 other there were people that were kind of trying to get an advantage for themselves in a lot of
00:56:04 different ways and this uh just about six months later led to this big governance crisis and then
00:56:12 we kind of reshuffled leadership a bit and then uh the project kept on going then nine months
00:56:18 later there was another governance crisis and then there was a third governance crisis and so
00:56:23 is there a way to if you’re looking at the human side of things is there a way to optimize this
00:56:30 aspect of the cryptocurrency world it seems that there is uh from my perspective there’s a lot of
00:56:36 different characters and personalities and egos and like you said uh i don’t know if you know i
00:56:43 also like to think that most of the world most of the people in the world are well intentioned
00:56:50 but the way those intentions are realized may perhaps come off as uh yeah as as negative like
00:56:56 what uh is there is there a hopeful message here about creating a governance structure for
00:57:03 cryptocurrency that uh where everyone gets along and after about four rounds of reshuffle like i
00:57:09 think we’ve actually come up with something that seems to be pretty stable and happy um i think uh
00:57:18 i mean i definitely do think that most people are well intentioned i just think that like one of the
00:57:25 reasons why i like decentralization is just because there’s like this thing about power
00:57:30 where power attracts people with egos and so that just allows us a very small percentage of people
00:57:35 to just ruin so many things you think ego has a you think ego has a use like is ego always bad
00:57:44 it seems like sometimes does but then the ethereum research team i feel like we’ve found
00:57:50 also kind of a lot like a lot of very good people that are just kind of primarily just interested
00:57:58 in things for the technology and uh things seem to just generally be going quite well
00:58:06 yeah when you’re when the focus and the passion is in the tech so on the so that’s the human side
00:58:11 of things but the technology side like what have you learned what have been the biggest challenges
00:58:16 of bringing ethereum to life on the technology side so i think first of all just uh you know
00:58:25 there’s like the first law of software development which is that when someone gives you a timetable
00:58:30 i switch the unit of time to the next largest unit of time and add one and like we basically
00:58:35 fell victim to that um and uh and so instead of taking like three months it ended up taking like
00:58:44 20 months to watch the thing um and that was just i think underestimating the sheer technical
00:58:51 complexity of the thing um there are research challenges like so for example one of the things
00:58:57 that we’ve been saying from the start that we would do one is a switch from a proof of work
00:59:02 to a proof of stake um where proof of stake is so this uh alternative consensus mechanism where
00:59:08 instead of having to waste a lot of computing power on solving these mathematical puzzles
00:59:13 that don’t mean anything you kind of prove that you have access to coins inside of the system and
00:59:18 this uh then it gives you some level of participation in the consensus can you
00:59:23 maybe elaborate on that a little bit i understand the idea of proof of work
00:59:27 um i know that a lot of people say that the idea of proof of stake is really appealing can you
00:59:32 maybe linger on it longer explain what it is sure uh so basically the idea is like if i kind of lock
00:59:41 up a hundred coins then i turn that into a kind of quote virtual miner and the system itself kind
00:59:49 of automatically and randomly assigns that in a virtual miner the right to create blocks at
00:59:56 particular intervals and then if someone else has 200 coins and they walk on the walk there’s 200
01:00:02 coins then they get a kind of twice as big virtual miner they’ll be able to create blocks twice as
01:00:07 often so it tries to kind of do similar things to proof of work except instead of the thing
01:00:15 and of rate limiting your participation being your ability to crank out solutions to kind of
01:00:22 hash challenges the thing that really limits your participation is kind of how much coins you’re
01:00:26 kind of locking into this mechanism okay so interesting so that that limited participation
01:00:31 doesn’t require you to run a lot of compute does that mean that the richer you are so rich people
01:00:44 um are more like their identities more right and this stable yeah verifiable or whatever
01:00:53 whatever the right terminology is right and this is definitely a common critique i think my usual
01:00:58 answer to this is that like proof of work is even more of that kind of system exactly yeah because
01:01:04 i didn’t mean it and that statement is a criticism i think you’re exactly right that’s equivalent
01:01:08 the proof of work is the same kind of thing but in the proof of work you have to also use physical
01:01:14 resources yes and burn computers and burn trees and all of that stuff is there um a way to mess
01:01:21 with the system of the proof of uh proof of stake there is but you will once again need to have a
01:01:27 very large portion of all the coins that are locked in the system to do anything bad got it
01:01:33 yeah and just that maybe take a small tangent one of the criticisms of cryptocurrency is the fact
01:01:39 that i guess for the proof of work mechanism you have to use so much energy in the world
01:01:44 yes is one of the motivations of proof of stake is to move away from this definitely like what’s
01:01:51 your sense of the uh maybe i’m just under informed is there like legitimately environmental impact
01:01:57 from this yeah uh so the latest thing was that bitcoin consumed as much energy as the country of
01:02:04 austria or something like that yeah and then ethereum is like right now maybe only like
01:02:09 half in order of magnitude smaller than bitcoin i’ve heard you talk about ethereum 2.0 so what’s
01:02:15 the what’s the dream of ethereum 2.0 what’s the the status of proof of stake is the mechanism that
01:02:22 ethereum moves towards and also how do you move to a different mechanism of consensus
01:02:29 within a cryptocurrency so ethereum 2.0 is a collection of major upgrades that we’ve wanted
01:02:36 to do to ethereum for quite some time the two big ones uh one is a proof of stake and the other is
01:02:42 what we call sharding um sharding solves another problem with blockchains which is a scalability
01:02:48 and what sharding does is it basically says instead of every participant in the network
01:02:54 having to personally download and verify every transaction every participant in the network only
01:02:59 downloads and verifies a small portion of transactions and then you kind of randomly
01:03:04 distribute who gets how much work um and because of how the distribution is random it still has the
01:03:11 property that you need a large portion of the entire network to corrupt what’s going on inside
01:03:16 of any shard but the system is still in a very redundant and very secure that’s brilliant how
01:03:23 hard is that to implement and how hard is uh proof of stake to implement like on the technical level
01:03:30 yeah software level proof of stake and sharding are both challenging um i’d say sharding is a bit
01:03:35 more challenging the reason is that proof of stake is kind of just a change to the how the
01:03:40 consensus layer works sharding does both that but it’s also a change to the networking layer
01:03:46 um the reason is that sharding is kind of pointless if at the networking layer you still
01:03:50 do what you do today which is you kind of gossip everything which means that if someone publishes
01:03:55 something every other node and the client hears it like from uh on the networking layer and so
01:04:01 instead we have to have kind of subnetworks and the ability to quickly switch between subnetworks
01:04:05 and have the subnetworks talk to each other and this is all doable but it’s a more complex
01:04:11 architecture and it’s definitely the sort of thing that hasn’t not yet been done in cryptocurrency
01:04:15 so most most of the networking layer in uh cryptocurrency is you’re shouting you’re like
01:04:21 broadcasting messages and this is more like ad hoc networks like yeah you’re shouting within
01:04:26 smaller groups smaller group but you have like a bunch of subnet like exactly then you have to
01:04:31 switch between oh man i’d love to see the uh so it’s a beautiful idea uh so from a graph
01:04:38 theoretical perspective but just the software that like who’s responsible is the ethereum
01:04:44 project like the people involved would they be implementing like what’s the actual
01:04:48 you know this is like legit software engineering uh who like how does that work how do people
01:04:56 collaborate build that kind of project is this like almost um like is there a software engineering
01:05:02 lead is there it’s like is it a legit almost like large scale open source project there is
01:05:08 yeah so um we have uh someone named uh danny ryan on our team who’s just been brilliant and
01:05:14 great all around and he is a kind of de facto kind of development coordinator i guess it’s like you
01:05:22 have to invent job titles for this stuff the reason is that um like we also have this unique
01:05:28 kind of organizational structure where the ethereum foundation itself kind of does research
01:05:32 in house but then the actual implementation is done by independent teams that are separate
01:05:37 companies and they’re located all around the world and like fun places like australia and and
01:05:44 and so uh you know you kind of just need a bunch of kind of almost nonstop cat herding to just
01:05:52 keep getting these people to kind of talk to each other and kind of implement this back make sure
01:05:57 that everyone agrees on kind of what what’s going on and kind of how to interpret different things
01:06:02 so how far into the future are we from these two mechanisms in ethereum 2.0 like what’s what’s your
01:06:08 sense of the timeline keeping in mind the previous comment you made about the sort of uh general
01:06:16 curse of software projects so ethereum 2.0 is split into three phases so phase zero just
01:06:24 creates a proof stake network and it’s actually separate from kind of proof of uh the proof of
01:06:30 work network at the beginning just to kind of give it time to grow and improve itself
01:06:34 do people get to choose sorry to interrupt do people get to choose i guess yes they get they
01:06:39 get to choose to move over if they want to then phase one adds sharding but it only adds sharding
01:06:45 of data storage and not sharding of computation and then after that there is kind of the merger
01:06:51 phase which is where the uh and if the accounts uh kind of smart contracts like all of the activity
01:06:58 and uh the existing eth1 system just kind of gets cut and pasted into eth2 and then the proof of
01:07:04 work chain gets forgotten and then and things all the things that were living there before just
01:07:09 kind of continue living inside of the proof of stake system so for timelines um phase zero has
01:07:18 been uh kind of almost fully implemented um and now it’s just a matter of uh a whole bunch of
01:07:26 security auditing and testing um my own experience is that right now it feels like we’re at about a
01:07:33 phase comparable to when we were doing uh the original ethereum launch when we were maybe about
01:07:40 four months away from launch so that’s just a hunch then that’s just a hunch yeah so how you
01:07:47 know it took it took like over a decade for people to move from python 2 to python 3 uh how do you see
01:07:54 the move from like this phase zero of for for different consensus mechanism do you see there
01:08:01 being a a drastic phase shift in people just kind of jumping to this better mechanism so in phase
01:08:09 zero i don’t expect too many people to do much because in phase zero in phase one the new chain
01:08:15 the get of deliberately enough doesn’t have too much functionality turned on it’s there just like
01:08:20 if you want to be a proof of stake validator you can get things started if you want to store data
01:08:24 for other blockchain applications you can get started but existing applications will largely
01:08:30 keep living on eth1 and then when the merger happens then the merger is a operation that
01:08:38 happens all at once so that’s kind of one of the benefits of a consensus system that like on the
01:08:43 one hand you have to coordinate the upgrade but on the other hand the upgrade can be coordinated
01:08:48 so what’s casper ffg by the way um casper ffg is the consensus algorithm that we are using for
01:08:56 the proof of stake is there something interesting uh specific about casper ffg
01:09:01 like some beautiful aspect of it that’s uh there is so casper ffg combines together kind of two
01:09:09 different schools of a consensus algorithm design uh so the general two different schools of the
01:09:14 of this design are right one is uh 50 fault tolerant but dependent on network synchrony
01:09:23 so 50 fault tolerant but it didn’t tolerate up to 50 of faults but not more but it depends on
01:09:30 an assumption that all of the nodes can talk uh talk to each other within some
01:09:34 kind of limited period of time like if i send the message you’ll receive it within a few seconds
01:09:40 and the second school is 33 fault tolerant but safe under asynchrony which means that
01:09:47 like if we agree on something then that thing is finalized and even if the network goes horribly
01:09:53 wonky the second after that thing is finalized there’s no way to revert that thing um and that’s
01:10:00 fascinating how you would make that happen it’s uh definitely quite clever um i’d recommend the
01:10:06 uh casper ffg paper if you just search like archive as in like arxiv casper ffg it’s that’s
01:10:12 that’s an archive the paper is an archive yeah yeah who are the authors um myself and uh virgil
01:10:18 griffith that’s awesome i take a small tangent this idea of just putting out white papers and
01:10:25 papers and putting them on archive and just putting them publicly is that is that at the core
01:10:31 is that a necessary component of the currency is that the tradition started with uh uh satoshi
01:10:38 nakamoto’s what do you make of it like what do you make of the future of that kind of sharing of
01:10:42 ideas i guess so yeah and it’s definitely something that’s kind of mandatory for crypto because like
01:10:50 crypto is all about making systems where you know you don’t have to trust the operators to
01:10:56 trust that the thing works and so if anything behind our system works is closed sourced and
01:11:02 that kind of uh kills the point and so there is the kind of a sense in which the fundamental
01:11:09 properties of the category of the thing we’re trying to build just kind of forces openness
01:11:14 but also openness just has proven to be a really great way to collaborate and then there’s actually
01:11:19 had a lot of kind of innovation and academic collaboration that’s just kind of happened
01:11:24 ad hoc in the crypto space the last few years so like for example we have this forum called
01:11:31 eth research that’s like e th r e s e a r and then dot ch um and there we publish kind of just
01:11:40 ideas in a form that’s kind of half formal like it’s halfway in between like it’s it’s a kind of
01:11:46 a text write up and then you can have math in it but it’s often and of much shorter than a paper
01:11:52 and it turns out that the great majority of new ideas like they’re just kind of fairly small
01:11:58 nuggets that you can explain in like five to ten lines and they don’t really they don’t need the
01:12:03 whole formality of a paper exactly they don’t require the kind of like 10 pages of a filler
01:12:08 and so introduction conclusion is not needed yeah and so instead you just kind of publish the idea
01:12:15 and then people can go comments on it and that’s brilliant yeah this has been great for us i think
01:12:20 i interrupted you was there something else on casper ffg that’s just casper ffg is just kind
01:12:26 of combines together these two schools um and so basically it creates this system where if you have
01:12:36 more than 50 that are honest then and you have network synchrony then the thing kind of goes
01:12:44 as a chain but then if network synchrony fails then kind of the last few blocks in the chain
01:12:48 might um kind of get replaced but anything that was finalized by this kind of more asynchronous
01:12:54 process uh gets uh can’t be reverted and so you essentially get a kind of best of both worlds
01:13:02 between those two models okay so i know what i’m doing tonight i’m going to be reading the casper
01:13:07 fg paper uh apologize for the romanticized question but what to you are some or the most
01:13:15 beautiful idea in the world of ethereum just something uh surprising something beautiful
01:13:21 something powerful yeah i mean i think the fact that money can just emerge out of a database if
01:13:27 enough people believe in it i think is definitely one of those things that’s up there um i think one
01:13:33 of the things that i really love about ethereum is also this concept of composability so this is the
01:13:39 idea that like if i build an application on top of ethereum then you can build an application that
01:13:45 talks to my application and you don’t even need my permission you don’t even need to talk to me
01:13:51 right so one really fun example of this is there was this game on ethereum called crypto kitties
01:13:57 that just involved kind of breeding digital cats yes and someone else created a game called crypto
01:14:03 dragons where the way you play crypto dragons is you have a dragon and you have to feed it crypto
01:14:08 kitties um and they just uh created the whole thing just like as an ethereum contract that you
01:14:17 would send these uh these tokens that are defined by this other ethereum contract and for the
01:14:23 interoperability to happen like the projects didn’t don’t really need to like the teams don’t
01:14:29 really need to talk to each other you just kind of interface with the existing program so it’s
01:14:35 arbitrarily composable in this kind of way so you have different uh you know different groups that
01:14:39 could be working and so you could see it scaling to just outside of dragons and kitties it could
01:14:44 be you could build like entire ecosystems of software yeah and in the i mean especially in
01:14:50 the decentralized finance space that’s been popping up the last two years there has been
01:14:56 a huge amount of really interesting things happen as a result of this is a particular kind of like
01:15:02 financial applications kind of thing yeah i mean there’s like stable coins so this is a kind of
01:15:08 tokens that retain a value equal to one dollar but they’re kind of backed by a crypt uh cryptocurrency
01:15:16 um then there’s decentralized exchanges um so when as far as the decentralized exchanges goes
01:15:22 there’s this uh really interesting construction that um has existed for about one and one and a
01:15:29 half years now called uniswap so what uniswap is it’s a smart contract that holds the balances of
01:15:37 two tokens we’ll call them token a and token b and it maintains an invariance that the balance
01:15:42 of token a multiplied by the balance of token b has to equal the same value and so the way that
01:15:47 you trade against the thing is basically like you have this kind of curve you know like x times y
01:15:53 equals k and yeah before you trade it’s at some points on the curve after you trade you just like
01:15:58 pick some different any to any other points on the curve and then whatever the delta x is that’s the
01:16:03 amount of a tokens you provide whatever the delta y is that’s the amount of b tokens you get or vice
01:16:08 versa and that’s just and then kind of the slope at the current points on the curve kind of is the
01:16:14 price um and so that just is the whole thing and that just allows you to have this exchange for
01:16:24 tokens and even if there’s very few participants and the whole thing is just like so simple and
01:16:32 it’s just very easy to set up very easy to participate in and it just provides so much value
01:16:39 to people so and uh the uh the fundamental the the distributed application infrastructure allows
01:16:48 that somehow yes so this is a smart contract meeting this is all a computer program that’s
01:16:53 just running on ethereum smart contracts too are just fascinating they are okay do you think
01:17:01 cryptocurrency may become the main currency in the world one day so where do you think we’re headed
01:17:06 in terms of the role of currency the structure type of currency in the world i definitely expect
01:17:14 um fiat currencies to continue to exist and continue to be strong and i definitely expect
01:17:20 kind of fiat currencies to also digitize in their own way over the next couple of decades what’s
01:17:25 fiat currency by the way oh just like things like us dollars and like dollars and euros and yen and
01:17:31 these other things and they’re sort of backed by governments yes but i also expect kind of
01:17:36 cryptocurrencies to play this kind of important role in just making sure that people always have
01:17:43 an alternative if fiat currencies start breaking so like if or if you’re in you know some very
01:17:51 high inflation place like venice will for example or if uh your country just kind of gets cut off
01:18:01 from um cut off from other financial systems because of like something the banks do
01:18:06 uh if any kind of if there’s even like some major trade disruption or something worse happens then
01:18:14 like cryptocurrencies are the sort of thing that just because of their kind of global neutrality
01:18:18 they’re just kind of always there and you can keep using them it’s interesting that you’re quite
01:18:23 humble about the possibilities of the future of cryptocurrency you don’t think there’s a possible
01:18:29 future where it becomes the main set of currency because it feels like it feels like the centralized
01:18:38 control by governments of currency is limiting somehow maybe my naive utopian view of the world
01:18:45 it’s uh i mean it’s definitely very possible uh i mean i think like for cryptocurrencies being
01:18:53 the main form of value to kind of work well like you do need to have some much more price stability
01:19:04 than they have today and i mean there are now stable coins and there are kind of cryptic
01:19:08 cryptocurrencies that try to be more stable than existing things like bitcoin and ether but
01:19:13 and that just is to me the kind of the main challenge do you think oh that’s do you think
01:19:19 that’s a characteristic of this just being the early days it’s such a young concept the 10 years
01:19:25 is nothing in the history of money yeah and i think it’s a combination of two things right one
01:19:31 is um it’s uh uh it’s still early days but the other is a kind of more durable any kind of
01:19:37 economic problem which is that like demand for currency is volatile right because of like
01:19:43 recessions booms changes to technology lots of things and if people’s demand for how much
01:19:49 currency they want to hold changes and if you have a currency that has a fixed supply
01:19:54 then the change in demand has to be entirely expressed as a change in value of the currency
01:20:00 and so what that means is that kind of the volatility of demand becomes entirely translated
01:20:04 into volatility and ahead of prices of things that dominated in that currency but if you have
01:20:10 a currency where instead the supply can change and so the supply can kind of go up when there’s
01:20:15 more demand then you have the supply and of absorbing more of that volatility and so the
01:20:22 price of the currency would absorb less of the volatility on that topic so bitcoin does have a
01:20:26 limited supply a specific fixed supply yes uh what’s what’s the idea and ethereum doesn’t but
01:20:33 can you clarify just in the comments you just made is ethereum qualify to the kind of currency
01:20:41 that you’re talking about and being flexible in the supply i mean it’s a bit more flexible but
01:20:46 kind of the thing that you would really want is something that’s kind of specifically flexible
01:20:53 in response to how valuable the currency is and and i’d recommend you to look at stable coins
01:21:00 as well so like things like die for example it’s a new like how you spell that da i and what uh
01:21:07 what’s stable coins is it a type of cryptocurrency it is a type of cryptocurrency it’s um a type of
01:21:14 cryptocurrency that’s issued by a smart contract one of these ethereum computer programs that um
01:21:21 where the smart contract holds a bunch of ether and then it is basically like that people deposit
01:21:27 and then it issues die and the reason why people deposit is because they want to kind of go high
01:21:32 leverage on their ether and so it kind of pairs these two sets of users one that wants stability
01:21:37 and one that kind of wants extra risk together with each other and it basically creates some
01:21:45 or gives one set of participants a guarantee that they’ll be that they have this asset that can
01:21:52 that can be later converted back into ether but and like specifically at kind of the one dollar
01:21:56 rate and it has some kind of uh stabilizing network effects yeah it has this yeah it has
01:22:03 many kinds of stabilizing mechanisms in it that’s fascinating okay this is this world is awesome
01:22:08 technically just from a scientific perspective is an awesome world uh that i i often don’t see from
01:22:14 an outsider’s perspective what i often see is kind of uh maybe hype and a little bit if i may say so
01:22:21 like charlatanism and you don’t often see at least from my outsider’s perspective the beautiful
01:22:28 science of it and the engineering of it i mean maybe is there a comment you can make of who to
01:22:35 follow how to learn about this world without being um interrupted by the charlatans and the hype
01:22:45 people in this space i think you do need to just know the specific kind of just people to follow
01:22:51 like there’s you know there’s all the kind of the cryptographers and the researchers and there’s
01:22:57 just like even just the ethereum research crew like myself you know like dan grad danny justin
01:23:03 and of the other people were and then and of the academic cryptographers and like before um
01:23:12 this today i was at stanford and stanford has the center for blockchain research and of dan bonet
01:23:18 this and really a famous and great cryptographer um was uh running it and there’s a lot of other
01:23:25 people there and there’s people working on zero knowledge proofs for example and um zuko from
01:23:33 zcash has one other person that i respect so i think if you follow the technical you crawl along
01:23:41 that yeah yeah you just start with the theory group and then look at the academics day bonet
01:23:45 and so on and then just cautiously expand the network of people you follow yeah exactly and
01:23:51 like if someone seems too too self promotional then just like remove them is there books
01:23:58 that are so there’s these white papers and we just discussed about about ideas being
01:24:03 condensed into really small parts is there books that are emerging that are kind of
01:24:09 good uh introductory material so for historical ones and there’s like nathaniel popper’s digital
01:24:15 gold which is just about the history of bitcoin there’s like one and then matthew leising announced
01:24:20 that there’s one about the history of ethereum um for technical ones and there’s andreas hansenopoulos
01:24:26 is mastering ethereum great so um let me ask you sort of uh sorry to to pull back to the
01:24:35 the idea of governments and decentralized currency
01:24:40 you know there’s a tension between decentralization of currency and the power of nations
01:24:46 um the power of governments you um what’s your sense about that tension can is there some rule
01:24:53 for regulation of currency you yeah is there like is the government the enemy of digital currency
01:25:02 of distributed currency or can they be like cautious friends i mean i think like
01:25:11 like the one thing that people forget is that it’s clearly not entirely an enemy because i think
01:25:18 if uh there hadn’t been so much government regulation on and if centralized uh issuing
01:25:27 centralized digital currencies then i like we’d be seeing things people like google and facebook
01:25:32 and twitter just kind of issuing them left and right and then like if that was the case then
01:25:37 decentralized currencies would still appeal to some people but they definitely would appeal to
01:25:41 less people than today so even in that sense i think it’s uh clearly been kind of more of a help
01:25:49 just kind of set the stage for the end of the existence as a of the sector in some ways but
01:25:57 also and i think some of both you know like there’s definitely things that governments
01:26:03 and if can do in some cases have done to have hurt the spread of uh and of growth of uh of
01:26:10 blockchains there’s uh things that they’ve done to help and they’ve uh in some cases definitely done
01:26:17 a good job of kind of going after fraudulent projects and going after some of the projects
01:26:23 that have some of the kind of craziest and most misleading marketing um there’s uh also the
01:26:30 possibility that governments will end up using blockchains for a lot of different things like
01:26:35 you know governments yeah i mean they do a lot more than just regulating right like there’s also
01:26:40 like they have the kind of identity records and they have kind of like property registries
01:26:49 even just their own currency is like secure like lots of different kind of things that they’re
01:26:56 operating and there’s even blockchain applications in a lot of those yeah and they can you know they
01:27:02 can leverage technology do a lot of good for our societies it is a little unfortunate that
01:27:08 governments often lag behind in terms of their acceptance and leverage of technology if you look
01:27:14 at the autonomous vehicle space ai in general they’re uh they’re a few years behind it’d be
01:27:22 nice uh to help them catch up that’s a that’s that’s a always ongoing problem you um met
01:27:29 vladimir putin to discuss the centralized currency here you’re born in the where were you born
01:27:35 columbia it’s a city about 115 kilometers south of moscow in russia yes yeah i grew up in moscow
01:27:44 i mean that’s vladimir putin is a is a central figure in this part of the world so what was
01:27:49 that like meeting or meeting him what was that experience like he’s taller in photos than in
01:27:56 person yeah he’s yeah that’s right he’s 57 i think 58 maybe yeah that’s uh unfortunately we
01:28:07 didn’t actually kind of have too much of a chance to talk to him like i managed to see him for about
01:28:11 one minute at the end of this meeting and i did get a chance to see a lot like some of the other
01:28:17 end of government ministers and like he recommended some and uh some of them are are actually
01:28:24 kind of interested in trying to use um like blockchains to like for various government
01:28:30 use cases they kind of limit corruption and other things and i have like it’s hard to tell from one
01:28:36 conversation kind of what things are genuine and what things are just like oh blockchain is cool
01:28:41 let’s do blockchain right but you know when i when i listen to like um barack obama talk about
01:28:48 artificial intelligence there’s certain things i hear where okay so he might not be an expert in
01:28:55 ai but he know he like actually studied it carefully enough to think about it like he
01:29:02 internally like uh even if he’s just reading a wikipedia page like he really thought about what
01:29:08 this technology means did you get a sense that uh putin or some of the ministers like thought about
01:29:15 blockchain like thought about the fundamentals of technical like understand it intuitively
01:29:19 are they too old school to try to grasp it some are old school some are more new school
01:29:26 it depends it’s it’s definitely like depends on who you talk to i mean that’s an open question
01:29:31 for me with putin because putin has said i don’t know i’ve only talked to him for about one minute
01:29:37 so but sometimes you can pick up sort of insights there’s a quick comment there they’re about maybe
01:29:44 you can correct me on this but they’re about 3000 cryptocurrencies being actively traded yes uh and
01:29:50 ethereum is one of you know a lot of people believe that there will be the the main cryptocurrency i
01:29:56 think bitcoin is currently still the main cryptocurrency but ethereum very likely might
01:30:00 become that the the main one um is this kind of diversity good in the crypto world do you see it
01:30:07 sticking around should there should there be a winner like should there be some consensus globally
01:30:12 around uh bitcoin or around ethereum like what’s your what’s your sense i definitely think the
01:30:18 diversity is good and i definitely think also that there’s probably too many people trying to
01:30:23 make separate blockchains kind of right now the number should definitely be greater than one and
01:30:29 probably greater than two or even five um not three thousand not three thousand yeah and also
01:30:35 not even like 40 high quality platforms that try to do the same thing i mean there’s definitely
01:30:40 this range from just like one person who just like wrongly thinks that you can create a cryptocurrency
01:30:48 in like 12 hours and uh doesn’t even think about kind of the community aspects of maintaining it
01:30:53 going to uh people actually trying but only creating a really tiny one to like scammers
01:31:01 to people like making something that’s actually successful and then there’s a lot of different
01:31:09 categories of blockchain and you have project in terms of what it’s trying to do and what
01:31:13 applications it’s for um and i think the experimentation is definitely healthy
01:31:18 if you look at the two worlds it might be a little bit disjoint but uh the distributed
01:31:24 applications cryptocurrency and then the world of artificial intelligence do you see there’s some
01:31:29 overlap between these worlds that both worry about centralized control is there some overlap that’s
01:31:36 interesting that you think about do you think about ai much yeah and i think uh definitely
01:31:42 i’d have thought about things like in like the ai and if control problems and alignment problems and
01:31:48 all of those things do you worry about the existential threat of ai it’s definitely one
01:31:52 of the things i worry about they think um block there’s a lot of uh kind of common challenges
01:32:01 because in in both cases what you’re ultimately trying to do is you’re trying to kind of get a
01:32:07 simple system to direct a more complex system like in the case of uh this is drawing ai’s the
01:32:14 idea would be that the simple system is people and the complex system is well whatever um thing
01:32:20 uh the people uh the people end up kind of unleashing on the universe that’ll hopefully be
01:32:24 a great thing um and in the case of blockchains and of the complex well the simple thing is uh
01:32:32 the algorithm which is a piece of static and fully open source code and the more complex thing is
01:32:36 just the all of the different possible kind of human actors and the end of the strategy is that
01:32:44 they might end up used to participate in the network do you think about your own mortality
01:32:50 like what you hope to accomplish in your life oh i definitely i definitely think about ending my
01:32:56 own mortality so that’s if i gave you the option to live forever would you depends a lot on what
01:33:03 the fine birds is but i mean you know if it’s one of those things where i’m going to be kind
01:33:08 of like floating through empty space for 10 to the 75 years then no if it’s uh um forever worth
01:33:16 of uh and of having you know fulfilling life with uh and of meaning like with with friends to uh to
01:33:26 spend the time with with kind of meaningful challenges to explore and individual interesting
01:33:32 things to be working on then i think absolutely move that’s uh beautifully put live forever
01:33:40 but uh you’d have to check the fine print i think there’s no better way to end it vitalik
01:33:45 thank you so much for talking to us so exciting to follow your work from a distance and uh thank
01:33:52 you for creating a revolutionary idea and sticking with it and building it out and doing some
01:33:56 incredible engineering work and thanks for talking today yeah thank you thanks for listening to this
01:34:01 conversation with vitalik buterin and thank you to our sponsors express vpn and masterclass please
01:34:08 consider supporting the podcast by signing up to masterclass at masterclass.com slash lex
01:34:14 and getting express vpn at express vpn.com slash lex pod if you enjoy this podcast subscribe on
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01:34:28 twitter at lex friedman and now let me leave you with some words from vitalik buterin the thing
01:34:36 that i often ask startups on top of ethereum is can you please tell me why using ethereum blockchain
01:34:43 is better than using excel and if they can come up with a good answer that’s when you know you’ve
01:34:48 got something really interesting thank you for listening and hope to see you next time