SotN#9 (PART 2) - Guest: VITALIK BUTERIN on ETH SUPPLYGATE!

STATE OF THE NATION #9 (PART 2) - Wednesday, August 13, 2020 Watch on the Bankless YouTube Channel https://www.youtube.com/c/bankless SOTN PART 2: with Special guest Vitalik Buterin The State of the Bankless Nation is.... PROPAGATING! And in this Part 2 we talk to Vitalik about ETH SUPPLYGATE! ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⚔️ GODS UNCHAINED - TRADING CARD GAME https://bankless.cc/godsunchained - you own the cards - start a free account, play and trade https://godsunchained.com/! 🧙‍♀️ POLYMARKET - BET ON CRYPTO https://bankless.cc/polymarket - bet your beliefs! - use it to bet on DeFi outcomes https://bankless.substack.com/p/how-to-bet-on-defi-with-polymarket! 🌈 AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK https://bankless.cc/aave - earn some interest! 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY https://bankless.cc/AMPL-MINE - learn about this experiment! ----- Covered: ETH SUPPLYGATE CURRENT GAS FEES PART 2: (COMING TOMORROW - ETH SUPPLY GATE) Special guest Vitalik Buterin We show: Tweet from Pomp https://twitter.com/APompliano/status/1292090029028900865 Never Get High on Your Own Supply https://thedailygwei.substack.com/p/never-get-high-on-your-own-supply --- Episode Actions: NA Also...subscribe to Bankless YouTube https://www.youtube.com/c/bankless to watch State of the Nation every Tuesday! ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ryan Sean Adams?

  All right, everyone. Welcome to State of the Nation. This is episode nine. This is part two. So in part one, we caught you up on what is going on with yams. It's still going on, as a matter of fact, as we're recording part two. Also, we gave you an update on Dex volume versus centralized exchange volume. In this special part two episode, we've got Vitalik Buterin. We're going to talk about something called ETH Supply Gate. David, what was your take on Vitalik's comment on ETH Supply Gate and everything he said?

• 0:29David Hoffman?

  Yeah, there's just been so much going on in Ethereum in the nation that we had to split this up into two categories, like yams deserve their own episode. Honestly, Uniswap exploding deserved its own episode. And also going through the nuances of ETH Supply Gate deserves its own episode. Ryan and I, we aren't really coders. And so we wanted to get someone who could speak on a more technical level. And so we just went straight to Vitalik. And Vitalik actually loves to talk about this stuff. So we got him on the State of the Nation to help us get through some of the nuances of ETH Supply Gate. For those of you guys that aren't familiar with ETH Supply Gate, I believe it all started with Pierre Richard, not to name names, but I'm going to do it because it's kind of like a call out gotcha moment. So Pierre Richard, a famous Bitcoin

• 1:14David Hoffman?

  maximalist, is he's also an accountant, so he or an auditor, excuse me. So he's very much in this world and loves the fact that you can easily audit the Bitcoin supply and is a very big proponent of Bitcoiners running their own node. He's a Bitcoiner to the fullest degree. And he spearheaded this ETH Supply Gate effort where he realized that there's no internal function to the Ethereum blockchain that allows you to audit the ETH supply. And so he made this public tweet asking like, okay, what's this? What's the supply of Ether? Do we even know how much Ether there is out there? Which coming from the camp of Bitcoin or sound money is like sacred, right? Like, you must know what the supply of Bitcoin is, because you check your own node

• 1:59David Hoffman?

  and you check and make sure, because you run your own node and you do your own math, right? That's the Bitcoiner ethos. And Pierre and other Bitcoiners, Bitcoin maximalists, I would

• 2:10David Hoffman?

  Call them, realize that ETH doesn't really have this built into the clients, right? We don't really have that function. And so we actually didn't really have a quick and easy answer as to how much ETH is out there because it's not built into the system. Now, that doesn't mean that we, the amount of Ether is unknown. It's just importantly, just a different way in construction between Bitcoin and Ethereum. And that's about as much as I know. And so I'll, I'll pick it, we'll, we'll pick it up with Vitalik when we turn to Vitalik. There's just one last piece I want, wanted to bring up before we turn to Vitalik. And I got into the conversation as to like, why Bitcoiners are doing this kind of like gotcha thing, like it's a very gotcha moment. There's not real much substance behind it. Vitalik will explain more.

• 2:55David Hoffman?

  And, but I asked Vitalik, like, where is this motivation coming from? Like, why are so many Bitcoin maxies trying to like have this gotcha moment for Ethereum? And his answer, while we recorded it, might have gotten jumbled by the internet. So I'm just going to reiterate it here. But Vitalik answered that he thinks that there's a lot of people who are really insecure and worried that Ethereum is becoming completely legitimate in everyone's eyes. And so I'll leave it at that. Ryan, if you want to have any last comments before we hop into the Vitalik interview, let's hear them.

• 3:23Ryan Sean Adams?

  Yeah, that's absolutely, you know, just one point of clarification, of course, ETH supply was known, it's just not built into the geth and parity client. So like you can view it on EtherScan, you can view it in all block explorers. It's been charted over time, coin metrics, whether analytics firms chart it. It's just not a function in the geth or parity node. So that was really the point of contention. And you know what? I guess maybe I'll end with this and we'll jump to the interview. She's actually, I ask the question every week, you know, what, something cool you did in crypto this week, right? And last Saturday, Peer, Peer, Peer answered the question and he said, I helped Ethereum figure out its supply issues, something like that.

• 4:08Ryan Sean Adams?

  And I was like, you know what? I think this is helpful. This is part of going through the gates of what it takes to become a reserve asset and a money. And Ethereum should have a good answer to this question. And I think Vitalik does, quite frankly. And I believe we will see the, the click here for each supplied button in future Ethereum clients, whether it's ETH 1.0 or ETH 2. So with that, David, let's get to the interview with Vitalik.

• 4:36David Hoffman?

  All right, Vitalik, welcome to The Nation. We are doing this very quick episode to kind of just get right to the heart of things. For context, there has been this pretty avid movement in the Bitcoin maximalist camp. I would categorize them, not the Bitcoiners, the Bitcoin maximalists, who are going after the difficulty of auditing the ETH supply. And so there are a lot of different conversations to have that are relevant here, a lot of different nuances to get into. And Ryan and I aren't really all that technical. And so we're just going straight to the source of one of the guys that can speak the best about this subject.

• 5:19David Hoffman?

  So we're bringing on Vitalik to help us kind of dig through this kind of difficult and nuanced conversation. So Vitalik, thank you for coming on The State of the Nation.

• 5:29Speaker 02

  No, thanks. It's good to be back in The Nation again.

• 5:33Ryan Sean Adams?

  Awesome. Hey, Vitalik, I'm going to start with maybe a tweet that I saw. And this is not the only tweet, of course. This is just one of, you know, flavor of some of the conversations that have been going on. But I just happened to see this, I think, on the 8th, was that Saturday, Sunday, something? And it's basically this sentiment coming from, I think, members of the Bitcoin community, maybe more skewed maximalists. And it says something like this, "The Ethereum community can't figure out what the total outstanding supply of ETH is. This is a major problem and showcases why ETH is not good money." So comments like that, I guess, maybe like my first question, is that right?

• 6:16Ryan Sean Adams?

  Can the ETH community, Ethereum community, not figure out what the total outstanding supply of ETH is?

• 6:22Speaker 02

  No, and I think the Ethereum community definitely knows what the total outstanding supply of ETH is. And it's like about 112.1 million, right? And you can see that by just, in a whole bunch of ways. Like, there's all of the different scripts that have been run the past few days. There's, I mean, you definitely shouldn't trust them, but like the fact that all of the different ETH supply calculators on the internet are basically agree to the answer within a factor of about 100,000. You can even look at the Ethereum protocol and know what you know about on-call rates. And you can try to estimate the Ethereum supply from that, and you can get somewhere very close.

• 7:03Speaker 02

  No, no, the the ETH supply is about a hundred and a hundred and twelve point one million right now. Um, I think like the like people like this, they're definitely a kind of engaging in a very, very serious, I guess, mod and Bailey fallacy here. Are you familiar with that term? It's a kind of popular slightster codexism.

• 7:23David Hoffman?

  Yeah, please.

• 7:25Speaker 02

  Yeah, so basically, the idea is that this is a kind of old medieval terminology where kind of in a castle, like I think it's the mod is this kind of well-protected castle that, um, you know, you got the wall, you got the tower, you're like, it's very hard to invade. And then the Bailey is this kind of farmland below. And the idea is that normally everyone's kind of, you know, happily off farming the Bailey. Um, but then whenever someone attacks, everyone kind of retreats back to the mod, right? And so the idea is it's this kind of argumentative dark arts technique where basically you have one position, which is kind of the Bailey that you are going to state publicly. And it tends to be a much more extreme position.

• 8:07Speaker 02

  Um, and then if someone actually challenges you in the extreme position, you just kind of say, no, no, you don't get it. I just meant this, a kind of other smaller, totally reasonable thing. Um, and you know, you can see people in politics saying this sort of, uh, um, or being in this kind of pattern all the time, right? Um, but here, basically, the mod is that, you know, there doesn't exist a kind of convenience function that's very easily accessible from Ethereum clients that lets you kind of go and click and say, you know, the Ethereum supply is like one, one, two, zero, two, four, five, eight, nine point, or whatever it is.

• 8:46Speaker 02

  And that, but the mod that, or but the Bailey that they tried to, uh, kind of implicitly go after, I think, is this idea like, oh, my God, no one knows what the Ethereum supply is. Maybe someone snuck in an extra 25 million coins. And like.

• 9:03Speaker 02

  If someone actually did sneak in an extra 25 million coins, that, you know, yes, you probably should be kind of selling and shorting ETH because they're gonna do something terrible with that 25 million and probably dump it before everyone realizes what's going on. But, you know, nothing remotely close to that has happened, right? So, like, this is all basically this kind of dispute that has just been blown horribly out of proportion about a difference of, you know, like, really about, like, what was it? 100,000 coins, a few thousand coins, like, pretty much nothing, right? It was like 100,000 coins get issued every week.

• 9:43Speaker 02

  So, that's, so that's a kind of, I guess, the core of how I see this. Like, another analogy I might add is, you know, in neither Ethereum nor Bitcoin nor most cryptocurrencies, can you estimate, say, the Gini coefficient, right? And the Gini coefficient is important, you know, the Gini coefficient is really important because you want to, like, if you're gonna create a new monetary system, it's important to know, you know, how much inequality the monetary system has. Because if it's introducing a really huge amount, then maybe that's not a monetary system that you want to support. And cryptocurrencies are, of course, pseudonymous, and you can have many people sharing an account. You could have one person having many accounts, and there's just, like, not a good way of actually estimating this number.

• 10:27Speaker 02

  And so, could you just, like, you know, you could imagine a proponent of fiat currency are kind of just pressing really hard on this point and, you know, going around asking, "What is the Gini coefficient of Bitcoin? What is the Gini coefficient of Bitcoin?" You don't know, then how do you know that you're not, that you're not introducing a plutocratic dystopia on the order of North Korea?

• 10:55Speaker 02

  Obviously, that argument's crazy. And we have ideas roughly about what kind of inequality and concentration there is in these systems. And, you know, we actually know that, for example, as far as all the cryptocurrencies go, Bitcoin and Ether are actually both among the more equal ones. You know, a lot of the other big, heavily pre-mined and heavily non-transparently ICOed altcoins, they tend to be very, very concentrated, and you know, in BTC and Ether or not. But that's one analogy, right? So the mod that they can claim, like the thing that they basically are claiming is

• 11:36Speaker 02

  that the total supply of ETH just is this parameter that, you know, clients just haven't created this convenience function for because they have a... there just hasn't been much demand for it, right? Now, one thing you might say is like, "Well, if we don't have this auditing, if we don't have this convenience function, does that mean that there is actually a significant risk that someone will, you know, somehow sneak 25 million ETH into the system?" Like, okay, maybe right now it's a disparity of 100,000, but if we're not auditing, maybe someone will sneak in 25 million? And I think that kind of completely misunderstands the security model of Ethereum, and I would

• 12:20Speaker 02

  even argue the security model of cryptocurrency generally. Like, basically, I think this is a kind of a bit of a deeper, kind of rapid-holy philosophical point, but I think a lot of people think of verification of cryptocurrency as, if wrongly, being a kind of very piecemeal, a kind of fact-by-fact thing, when in reality, verification of a blockchain is all or nothing. And to give a totally different example of this, like, there were some older blockchain scaling protocols that basically said things like, you know, "We're going to create a scalable blockchain that makes it easy for you to verify the presence of your own coins", right?

• 13:03Speaker 02

  So basically, you know, imagine like a highly scalable blockchain, you know, even Bitcoin SV size or something like completely insane like that, but where you have a light client protocol that makes it very easy to just verify kind of the history and...

• 13:18Speaker 02

  Providence of your own coin, right? You know, you have your ETX. So here's the two parents. Here's the three grandparents. Here's the five great grandparents and and so on and so forth. Right? And all the way back to Genesis and like that's going to be a substantial amount, but maybe a few hundred megabytes, but you can verify it. The reason why that kind of verification is just totally stupid and pointless is because in order to verify that your coin is valid, in order to verify that kind of your point will be accepted by people, but you don't just have to verify the prominence of your coin. You have to verify that your coin is part of a chain where the entirety of that chain is valid. Right? Because even if the prominence of my coin is completely valid, you know,

• 14:00Speaker 02

  if your coins in there and your coin got double spent and the double spending got accepted by the network, then that is a chain which is fundamentally kind of invalid and corrupted. And so that is a chain that once people figure that out is just going to get rejected by the ecosystem. Right? And so like the fact that I have a coin that's totally valid within the context of a chain that's totally invalid and it's going to be rejected like that's worth pretty much nothing. Right? And so the only verification that matters is verifying that the entire chain and all the rules of consensus have been kind of fully satisfied. And it's the same situation here, right? Like basically there's no value in kind of privileging one specific rule, you know, whether it's the rules about issuance or whether it's the

• 14:45Speaker 02

  rules about, you know, were the ECU signatures all correct or whatever, whatever, like you have to basically verify all the rules, right? And that's what clients do. You know, they verify all the rules. And so the like, basically, if like, the reality is that if he wants to verify that Ethereum is a system that satisfies the goals of being a blockchain that satisfies the goals of being a valid kind of substrate for ETH as money and for DIA as money and for whatever other money you like that's on Ethereum, then like you have to like, there's no value in looking at one single consensus rule in isolation, right? You would also have to verify, you know,

• 15:26Speaker 02

  verify that smart contracts have never been illegally hacked. You might have to verify that transactions without valid ECU signatures were never included. You have to verify that your coins were never invalidly taken away. You have to verify that everyone else's coins were never invalidly taken away. So

• 15:45Speaker 02

  Like specifically verifying that,

• 15:51Speaker 02

  you know, this one consensus rule has been satisfied as a kind of, you know, it's just, it's focusing on one specific thing when in reality you have to focus on everything together and you really have to think about it in kind of two parts, right? The first part is were the consensus rules that we think the consensus rules are actually followed? And the way that we know that is while there's a whole bunch of clients and a whole bunch of clients have processed it. And there's lots of people in the Ethereum ecosystem that have run those clients. So like I talk about the concept of herd immunity here, right? Like, you know, fortunately it's 2020 and herd immunity is an analogy that like pretty much everyone understands.

• 16:30Speaker 02

  But like, you know, the idea is that, you know, if you have like a thousand people like in a whole bunch of places in the community that have run a node and have verified each individual piece of the chain, then you know, realistically the chain's valid. And like, it's incredibly unrealistic that an invalid chain is just going to sneak through all of them. Right? So I mean, like this is the sort of thing that we could kind of rabbit hole deeper if we want to talk about, you know, the philosophy of sharding, for example, but no, that's a whole other topic. But no, that's the first thing, right? The verifying that the consensus rules were followed and we have multiple implementations, you know, lots of implementations. So lots of them have, you know, sunk the chain at one point or another. Lots of them have, you know, verified any individual block.

• 17:15Speaker 02

  And then the second piece is, okay, well, given that we know these consensus rules, let's take the consensus rules and let's figure out what the supply is going to be today and what the supply is going to be at kind of different realistic points in the future that we care about. So, and if we want to estimate what the supply is today, you know, we can run some of those scripts that determine exactly how many uncles there are. You can do estimates based on kind of like basically the more exact the number you want, the more kind of work you have to do. And if you're willing to actually process the entire chain, you can get a number down to the last way. But you know, the value down to the last way is not very useful because 14 seconds later, there's going to be another 2.0 something ETH introduced. And but you know, if you want that number, you can get it.

• 17:59Speaker 02

  But if you're okay with like five or six decimal places, you can do a bit less work. And if you're okay with three decimal places, you can do even less work. And so like, there you go.

• 18:09David Hoffman?

  Okay, so Vitalik, I'm going to try and recap all of this as short of a bit as possible. So Bitcoiners and the Bitcoin blockchain has this function built into it that just does the audit of Bitcoin, right? And it's built into the protocol, which is really aligned with Bitcoin or values because they really like auditability. That's part of the whole proposition of Bitcoin.

• 18:31Speaker 02

  It's a function that's built into the Bitcoin client. If Ethereum clients wanted to, they could build in that function too. It wouldn't even take a hard fork.

• 18:40David Hoffman?

  Right, okay. And so Bitcoiners found out that there isn't this function in Ethereum clients. And so they found this opportunity to nitpick about that. When in reality, the reason why we know that no one has slipped in any ether in any ways that don't fit the rules of consensus is because we haven't hard forked the chain. We haven't had a hard fork. If somebody wanted to slip in ether in a way that would be invisible to people, it would result in a hard fork and that thing either being invalid or there being a hard fork, which we would have known about.

• 19:20David Hoffman?

  And so this kind of then goes into the second criticism, which after you pressed, not you specifically, but also you specifically, but also people like Chris Bernisky and Eric Voorhees and Andreas Antonopoulos, after they brought up the issue that this is mostly a non-issue, it's kind of like this gotcha moment, the conversation then kind of turned to, well, Ethereum's don't even run their own node because that's just not in their culture, which I agree is actually not really in our culture to run our own node. I don't run my own node. I haven't in a while. I don't think Ryan runs his own node. But what you're saying, oh, you do, pardon me. But what you're saying, Vitalik, is there's this herd immunity where not every single

• 20:04David Hoffman?

  individual needs to run their own node. We just need to have enough individuals so to the point where we get sufficient decentralization. Was all of that accurate?

• 20:11Speaker 02

  Yeah, I think so. And I definitely think that it would be nice if we could get more of a node running culture in Ethereum in the future. But I think like... We do have to kind of think pragmatically about this, right? Because right now, I think a lot of people don't run Ethereum nodes because Ethereum nodes are expensive. And Ethereum nodes are expensive because we have these big hulking blocks with 12.5 million gas. And the reason we have big hulking blocks with 12.5 million gas is because right now, the gas prices, well, I think an hour ago when I checked, it was like, what was it, 240 Gua or something? And if we had not done those increases, it would probably be like 2,000 Gua. Or more realistically, everyone would have left Ethereum and everyone would be on Ethereum Classic

• 20:55Speaker 02

  or Neo or one of these other chains. So like, in the short term, there is this unfortunate kind of trade-off that we do have to make. And I do think that the Ethereum community, you know, the Bitcoin community really values the accessibility of reading the chain, but I think the Ethereum community also really values the accessibility of writing to the chain, right? So accessibility of reading the chain means, you know, like, how much does it cost to run a node, basically, accessibility of writing the chain? How much does it cost to send a transaction? And those two are in conflict because the more space there is, the cheaper the transactions, but the harder it is to run a node, the less space, the more expensive the transactions, but the easier it is to run a node.

• 21:35Speaker 02

  So in the short term, there's not much that we can do, but at the same time, you know, like, this gets back to one of these other weird talking points that I saw yesterday, that, you know, people are kind of gotcha quote tweeting this tweet for myself like four years ago, and I said, "The Internet of Money should not cost 5 cents a transaction." And I'm like, "Yeah, you're right, it shouldn't." I mean, you know, the fact that it costs more than 5 cents a transaction right now was terrible. And that's exactly why we've been working on charting and Bosman rollups and all this stuff for the past years. You know, if you send a transaction in like Loopring or ZK Sync or one of these systems, like, I think, I mean, we can calculate the transaction cost on one of those right now. Like, what's the Eve gas station gas price right now?

• 22:20Speaker 02

  Like, is it 220, 240, one of those?

• 22:22David Hoffman?

  I checked, it was 273.

• 22:24Speaker 02

  Oh wow, that's zero, zero degrees Celsius, so excellent.

• 22:31Speaker 02

  So, okay, let's like round it up to 300, like Spartans that are lazy at math. And, you know, 300 multiplied by about, let's say, 500 gas per transaction that happens inside of a rollup. And so we get to 15,000 Gway. And then 15,000 Gway multiplied by, was it about, about $400? And we get about 6, 6 million. And this is all in units of one over a billion. And so it's about $0.006. So even in the context of today's sky-high gas prices, if you personally today are living

• 23:16Speaker 02

  inside of Loopring or ZKSync, then, you know, in optimal conditions, you get transaction fees of 0.6 cents. If the batches are a bit smaller, you might get transaction fees of like 3 or 4 cents. But like, basically, you know, the Internet of Money is still alive and it's called highly scalable if you're ML or TOS. And so these are things, like basically the future that we're working toward, you know, where we have rollups, where we have scaling. Another one that hasn't been given enough love is the OMG network. You know, they were kind of very hyped up a couple of years ago. And then I think a lot of people got the impression that they kind of went away and were dead. But, you know, no, they have a beta running on mainnet and you can go and use it. And I think Tether is planning on migrating to it soon.

• 23:59Speaker 02

  So like after we have these scaling solutions, then like we can consider, or we will be able to have both very high scalability and a low cost of running a node. Like, for example, the cost of running an ETH2 node is definitely already like much lower than the cost of running an ETH1 node. And so that's exactly the sort of thing that I think we're working towards and I think we can have more of in the future.

• 24:25David Hoffman?

  So Vitalik, this conversation came out of that tweet from a big, somebody who I would classify in the Bitcoin maxi camp. And it was another one of these gotcha tweets. And this whole ETH supply gate thing has been classified by a number of people, like Andreas Antonopoulos is one of the people that I think is the person that coined the whole thing, the gotcha, the ETH gate gotcha moment, gotcha question. And so it seems to be like there's a certain camp of people coming out of the Bitcoin maximalist cohort that are trying and going for these gotcha things, for whatever reason. And so it delves back into like this whole

• 25:07David Hoffman?

  tribal mentality, where there are a couple Bitcoiners who are really loud out there trying to poke holes in the Ethereum value proposition. What's your take on that? Like, why are there so many people that seem to be motivated with like these gotcha things without actually contributing anything of real value either to the ecosystem or to the conversation going on? Like, what's up with this?

• 25:29Speaker 02

  I think people are scared that Ethereum is getting legitimate.

• 25:36Ryan Sean Adams?

  So I'm a Bitcoin hat on and play devil's advocate. So here's a devil's advocate here. So fact that Ethereum is five years old and does not have a ETH supply calculation function in parity or depth, does that about the prior? I can picture maybe somebody saying that. Because Ether didn't write calculating supply in its clients as like an easy button that you press, its priority is not to be a like a fixed supply sort of asset.

• 26:21Speaker 02

  I mean, the reason you can imagine someone saying that is perhaps because I said that myself on Twitter, I think about two days ago, as an attempt to kind of summarize what I thought the best argument of the camp was.

• 26:32David Hoffman?

  Oh, so you did summarize that? Okay. I didn't read that.

• 26:36Speaker 02

  Like the the my words were something like, you know, the fact that Ethereum clients don't or and the community doesn't seem to care about having a convenience function for calculating the Ethereum total supply just shows that Ethereum is a kind of much less interested in the sound money religion. I use the term religion neutrally, by the way. So like, if you're into Bitcoin, are both part of the cypherpunk religion, for example. And, you know, if you are want a sound money, then, you know, it's better to have a money whose community is a kind of subscribes to the sound money religion, right, which is, you know, a fair argument. Like, I think that's one way to kind of understand a lot

• 27:20Speaker 02

  of their positions. Like, you want to have a money whose community subscribes to the sound money religion, you want a money whose community subscribes to the immutableism religion, and, you know, so on and so forth, right? It's a kind of that kind of, you know, Richard Dixon, kind of rationally crazy sort of, sort of line where, you know, being incredibly attached to something can be a an advantage if it basically kind of makes it more difficult to kind of push a certain push a certain thing through someone or through a group of people. So I think that's fair. I mean, Ethereum's definitely value the

• 28:03Speaker 02

  sound money religion less than people in the Bitcoin camp too. And, I mean, to be fair, like, the whole ethos money meme is like barely a year old for us. The Bitcoin is money meme is, I don't know, many years old. So I think, like, first of all, if Ethereum people want to, that's that's something can change over over time. But second, I think it's important to note that, like, there is a limit to the extent to which we can comply with some of these values while the Ethereum 2.0 roadmap is not yet complete, right? And this is another thing that I think is important to kind of understand, right?

• 28:42Speaker 02

  Because, you know, we have this looming transition to proof of stake, and then sharding, and then killing the proof of work chain. And during that whole

• 28:55Speaker 02

  Transition, we're gonna see massive changes to the reward formula. We're also gonna see fee market reform, AKA EAP 1559 implemented at some point. We're going to see, actually, we see for the first time, like, how many people are willing to stake? And I don't know what exactly the actual issuance rates and what exactly the actual burning rates are. And out of this, we know it could end up being that the supply growth rate is negative, right? And if fees continue the way they are today, the supply growth rate is definitely gonna be negative. In which case, you know, the analogy I made is like, if a zero growth rate is sound money, then you know, that's what does the negative growth rate mean? Does it mean even supersonic money?

• 29:38Speaker 02

  So that's like, but like, this is all future stuff, and this is all a kind of unknown. And there's definitely aspects to the Ethereum culture that are kind of explicitly understand, right? That, like, as I think I summarized a couple of years ago, like Bitcoin people think Bitcoin is 80% complete. Ethereum people think Ethereum is 40% complete. And I think now, maybe instead of 40%, it's more somewhere between like, kind of 50 and 60%. But, you know, it's that kind of mentality, right? And so people understands that there is this technological roadblock ahead. There are these kind of economic unknowns ahead. And it definitely is something that, you know, aspires to have certain economic protocols.

• 30:23Speaker 02

  But like, what's the point of verifying that the current rules are being, uh, uh, kind of,

• 30:31Speaker 02

  you know, I'm satisfied to this extreme extent of having, uh, kind of all of these different functions for verifying it? If we know that these are things that are gonna change in one or two years anyway. And after the one or two years, uh, I think people, and after the economics get nailed down, that's something that people can and will take very seriously. And people are taking very seriously, right? So like, for example, people, you know, we see these ETH2 staking reward calculators, and we see these ETH2 issuance calculators. And there is this growing community of people that do take ETH2 economics kind of extremely seriously, because they see that, you know, the ETH2 economic model is something that's been made with, you know, a lot of care and love.

• 31:12Speaker 02

  And it's, um, this thing that's theoretically meant to, uh, kind of stick with us for the long haul.

• 31:20Speaker 02

  So. Yeah, I mean, we do. Basically, we need to take this kind of more long-termist perspective. And, you know, look at, well, it's funny to say, yeah, caring about what will happen three years from now is a long-termist. But, you know, that's like, basically, ETH will change things.

• 31:36Ryan Sean Adams?

  Yeah, and, you know, also, another narrative that pops up. David, David mentioned one, which is, you know, Bitcoiners or Maxximus will say, hey, Ethereum's don't run their nodes. And that's a big problem, which many do, by the way. But, but another, I guess, narrative that gets put out there is that Vitalik and insert, you know, dev overlords here act as a, you know, federal open market committee, basically, the FOMC of the US. And they set issuance, they set supply. Can you talk about that? I mean, what's to prevent the FOMC of Ethereum, you know, as they would, as they would phrase it,

• 32:21Ryan Sean Adams?

  from, you know, increasing issuance to something? And maybe like funding, funding a yacht, or funding your favorite charity, or funding, I don't know, ETH development even?

• 32:34Speaker 02

  Um, sure. So I think people kind of further away from the Ethereum community definitely, and they definitely overestimate the Lord Dictator Vitalik, but they also overestimate even the Ethereum line of FOMC. So first of all, and you probably remember this yourself, right? When the issuance reduction from three ETH per block to two ETH per block was happening, that was not core dev-driven, that was not Vitalik-driven. I think that was even driven by like Ethereum community members that were in what was maybe not yet called, but starting to become the ETH's money camp, right? Does that sound accurate to you?

• 33:11Ryan Sean Adams?

  Yeah, you know, from my recollection, I think people who are holding ETH and who are believers more in the, the idea that ETH is a sound collateral, sort of drive those sorts of changes. And they'd have a lot to say, I know I would, I could speak to David too, if issuance were to increase for something that was outside of the social contract, for instance.

• 33:34Speaker 02

  Right, exactly. Now, let's look at another dimension, gas limit increases. So, gas limit increases. The interesting thing is, so if you go right now to etherscan.io chart slash gas limit, right, open up that page. You see like the graph, right, and it looks like a bit like a kind of city skyline, you know, it's got

• 33:56Speaker 02

  I guess I'll wait for you to open that up.

• 33:58David Hoffman?

  Sorry, what was that URL one more time?

• 34:00Speaker 02

  etherscan.io chart slash gas limit.

• 34:07David Hoffman?

  There we go. Yep.

• 34:09Speaker 02

  See, okay, you see the city skyline. So, let's look at that chart in a very close way, right? So, one of the things that you might notice is if you look at kind of the beginning stages of that chart, like, open up and search on Google Images, US historical income tax rate.

• 34:32Speaker 02

  Like.

• 34:34David Hoffman?

  Images?

• 34:35Speaker 02

  Yeah, images. Let's see if we can find a good one, just the second one, the second marginal tax rates, right?

• 34:43Speaker 02

  So, see how like the chart like kind of jump back and forth between the two, right? Just like, look at the etherscan, look at the, get back to the taxes, etherscan taxes. So, I actually made this point in a blog post, kind of, actually, this is another one of my points when I was like being kind of self-critical of Ethereum governance a few years ago, where basically, these charts both look kind of similar, right? They have this pattern of like staying very, very cleanly at one exact position for a long time, and then jumping, and then staying very horizontal, and then jumping. And this is a property of basically, a magic number that gets constantly renegotiated by a committee of technocrats, right?

• 35:27Speaker 02

  Like, if you have a number that's constantly renegotiated by a committee of technocrats, then, you know, this is what it looks like. So, the...

• 35:36Speaker 02

  Now, let's look at the chart more recently. If you look at specifically what happens after January 2019, right? Like, look at the last kind of bar, like, there, and then, kind of, after. So, notice, zoom out again. I might just refresh, maybe. Notice how that last 20% of the chart looks much less clean than the first 80%. Do you see that?

• 36:01David Hoffman?

  Mm-hmm.

• 36:02Speaker 02

  The first 80% looks incredibly clean, and then after that, it gets very choppy. So, here's what's happening, right? Basically, what's happening is that the first, the gas limits at the beginning, they actually were essentially set by a committee that sets magic numbers, right? Basically, the Ethereum Foundation, maybe, maybe one time, or dictator, the Vitalik, said, "Hey, guys, maybe we should increase the gas limit." And all the miners were like, "Yes, my lord, we should raise the gas limit." And they changed their setting for the clients, and they raised the gas limit. And, you know, this was how, this was admittedly how governance worked in the earlier days of Ethereum, and when we were able to, kind of, pull off the Dal forking these other things, right?

• 36:45Speaker 02

  So, that, but more recently, what's been happening was

• 36:55Speaker 02

  the latest two gas limit increases were miner-driven, right? Basically, there was very little input from the, from Lord Vitalik. There was very little input from the Federal Open Markets Committee. It was basically miners initiating, and in some cases, miners disagreeing. Like, there are a couple of mining pools, um, just, um, switched from 8 million to 10 million. A couple of other mining pools stayed at 8 million. And so, you saw the gas limit, kind of, going, bouncing up and down. And even when it got to 10 million, if you look at, kind of, the daily average, it wouldn't be 10 million, it would be maybe 9.9 or 9.8 million, because there was this, kind of, ongoing disagreement, and the gas limit would still be, kind of, bobbing up and down a lot, right? And the most recent one, the rise from 10 to 12.5,

• 37:37Speaker 02

  like, you can see even more clearly how bungled that was, right? Basically, what happened was that I remember back in May, I think it was a spark pool, I think, I remember it was Shin reached out to me. And he basically said, you know, hey Vitalik, we're considering maybe we should increase the gas limit because transaction fees are getting a bit higher. This was back when it was about 20 to 30 quay. Right? And I replied at the time, you know, maybe no, we shouldn't because that'll get Lord Peter Salagi or Salaj, and I'm sure I'm buggling the name, angry and, you know, Lord Peter Salaj is doing a lot of great work.

• 38:18Speaker 02

  And, you know, we should not be making his life harder because, you know, he's been doing a lot of, I mean, he and his team have been doing a lot of great work on kind of making GEF work more efficiently. And if we're just gonna go and kind of undo those efficiency gains with the stroke of a pen, that's, you know, not a very good thing. And that could cause kind of DOS issues and all of this stuff. Now, six weeks later, the transaction fee situation got way more serious. And I guess the mining pools by themselves, you know, they talked among each other, they talked in each other, you know, like in their WeChat groups and the Telegram and, you know,

• 38:59Speaker 02

  discussed, had some discussions and they started kind of bumping it up from 10 to like, maybe it was like 12 or 12 and a half. And this happened without permission from myself, without permission from the Federal Open Markets Committee, without permission from any of these people. And I learned about it when I saw some message on Twitter and I checked on EtherScan, like, oh my God, there's a block with a gas limit of like 10.4 million and it's rising now.

• 39:27Ryan Sean Adams?

  And indeed, Peter was not happy.

• 39:30Speaker 02

  And indeed, Peter was not happy. And the interesting thing about the rise was that apparently they did not even agree on whether it was, they would rise to 12 or 12.5, right? Like I remember. When the gas limit went up, it rose and then it actually, I think it might have even like briefly gone above 12 million and then below 12 million and it kind of bounced around. And it seemed clear that there were some people voting 10, some people voting 12, some people voting 12.5. And then, like if you go back to EtherScan, like you could see the kind of like the EtherScan chart gas limit, you could see the day by day volatility in the gas limit. Because there was this kind of gas limit voting war going on.

• 40:11Speaker 02

  And after another couple of weeks, I guess, one of the mining pools that was voting 12 relented and went up to 12.5 and now we have 12.5, right? So this whole thing was initiated, driven, carried through by miners without Core Def permission, without Lord Vitalik permission, without any of this stuff. And so like in light of this, like, how can you call Ethereum governance centralized, right? Like it's clearly this kind of complicated, multipolar kind of tug of usually cooperation, occasionally a bit of war between these multiple like kind of highly independent and kind of diverse people from diverse backgrounds.

• 40:51Speaker 02

  And like realistically, I think like issuance is similar, right? Like issuance is not going to go up just because like one group of people wills it. And I think there's definitely a strong enough constituency that will just fight to the death against issuance increases that like people can feel like they're safe and sound that issuance increases are not going to happen.

• 41:15David Hoffman?

  I think the answer to the question Vitalik as to how you can call Ethereum governance centralized is by just totally foregoing your, anyone's, one person's responsibility to understand nuance and kind of just cater to their audience and tell people what they want to hear. So in light of all that, Vitalik, I commend you for keeping your head above all the mess that you can, you can easily find in the depths of Twitter. And I thank you for being a sober voice in a very loud, messy conversation.

• 41:49Speaker 02

  But I'm always glad to say stuff.

• 41:55David Hoffman?

  All right, Ryan, do you have any last questions before we wrap this up?

• 41:59Ryan Sean Adams?

  No, Vitalik, that was, that was super helpful. Thank you. I think, I think folks will be interested to hear all this. I guess maybe one last question, just because it's super topical and we will be releasing this sometime today.

• 42:13David Hoffman?

  Today.

• 42:13Ryan Sean Adams?

  Is back to those gas prices, they are going vertical right now. There's craziness, something called a YAM token. It's just going crazy. There's, there's always something happening in DeFi. It appears like Ethereum block space is becoming more and more valuable. Some of that value is driven from speculative value at this point. Like, is that going to continue to be the case? Are you seeing any, any hope around the corner with some of this layer two scalability before Eve two ships?

• 42:47Speaker 02

  Oh, a very good question. And I think I have a bit of an answer, which is that, which has to do with rollups and specifically optimistic rollups. So we know, right, that there is the two families of rollups. There's the ZK, there's the optimistic, the ZKs are live already. But the optimistics are still a few months away. And the reason why the optimistics are a few months away is because they're trying to do something much more complicated than these ZKs, right? The ZKs are just trying to support payments and like maybe a DEX. The optimistic ones are trying to support full EVM execution inside of a rollup. And there's a lot of kind of devilishly hard challenges involved in that.

• 43:23Speaker 02

  So what basically the, one of the silver linings of this, though, is that I think optimistic rollups are going to be ready for a kind of non-financial applications. And for, you know, like natively issued assets and some of these other things before they're ready for DeFi. And the reason for this is that For a rollup to be useful for DeFi, it has to be like really security wise nailed down, right? And if the security breaks, then you know, hell breaks loose and people kind of lose a whole bunch of money. But if you just want to use a rollup, say for like Reddit community points,

• 44:03Speaker 02

  or you know, like some other kind of lower value thing, then the nice thing is that the security requirements on the rollup are much lower, right? And the reason is that if it turns out that the rollup smart contract is broken, then as long as your rollup scheme is only using a kind of assets that are native to that protocol, so it's not using external assets, all you need to do is just deploy a new smart contract, and that new smart contract can have the fixes, and everyone can just be told to kind of pay attention to the new smart contract, and accept the new smart contract as being a kind of the canonical definition of those assets instead, right? And so basically, kind of when you're using an application that only has native

• 44:45Speaker 02

  assets, so like an example of this would be like if you imagine a version of Augur that only uses wrap for everything, right? Because the wrap is kind of defined by the Ethereum protocol, and if Augur breaks, and if Augur works that way, then if Augur were to break, then they can just hard fork wrap, then so for those kinds of applications, like the security requirements are lower, and so I expect those things to be among the first use cases of some of the optimistic rollups that are coming out. And I'm looking forward to those optimistic rollups, and I think they are going to come out quite soon.

• 45:17Ryan Sean Adams?

  So we've got ZK right now with Loopring and others that's happening right now, optimistic of the type that you were talking about. Are we weeks, months away, do you think?

• 45:29Speaker 02

  Um, I think the optimistic rollup teams that I know are definitely saying like a couple of months, but I do think we'll have a kind of test versions even before that.

• 45:42Ryan Sean Adams?

  Very good. Well, it does seem like the high gas fees are pushing and accelerating, hopefully, some of these efforts, because it is becoming very urgent and kind of center point for the Ethereum community right now. Vitalik, this has been absolutely fantastic. Thank you so much for joining the Bankless Nation in this special session. We appreciate it.

• 46:07Speaker 02

  Thank you. It's been good to be here.

• 46:09Ryan Sean Adams?

  Take care.

• 46:10Speaker 02

  Thank you.