149 - Ethereum in 2023 with Vitalik Buterin

✨ DEBRIEF | Unpacking the Episode: https://shows.banklesshq.com/p/vitalik-buterin-2023-debrief ------ Vitalik Buterin is your friendly neighborhood Ethereum developer, an alfalfa male who thinks we should rename Gas to Mana. In today’s episode, Vitalik unpacks his recent essay, “What in the Ethereum application ecosystem excites me,” and his thoughts around why crypto villains are getting worse, what Ethereum’s most scalable use case is, why he plans to say ‘Ethereum’ rather than ‘crypto’ in 2023, how Ethereum solves the big bad identity problem, and why he thinks “simple DeFi good, complicated DeFi bad.” Every episode with Vitalik is a must-listen and this one is no different. ------ 📣 Kraken | The Crypto Exchange for Everyone https://bankless.cc/kraken ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/?utm_source=banklessshowsyt 🎙️ SUBSCRIBE TO PODCAST: https://availableon.com/bankless ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 👯 DESO | DECENTRALIZED SOCIAL BLOCKCHAIN https://bankless.cc/Deso 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 📡 TRUEFI | CRYPTO FINANCIAL HUB https://bankless.cc/TrueFi 👾 SEQUENCE | ALL-IN-ONE PLATFORM https://bankless.cc/Sequence ⚡️FUEL | THE MODULAR EXECUTION LAYER https://bankless.cc/fuel ------ Topics Covered 0:00 Intro 7:44 Vitalik’s 2022 Crypto Reflections 17:31 Was 2022 More Unusual? 25:58 Esperanto, Linux, & Crypto 34:57 Advice for the Crypto Space 38:31 Permissionless Commons Criticism 45:54 2022 Lessons Learned by Vitalik 52:22 Vitalik’s Recent Blog Post 1:00:00 Why Do We Need Crypto Money? 1:10:29 Where the Opportunity in Crypto is 1:13:52 Identity 1:24:29 DAOs & Governance Innovation 1:31:05 Hybrid Applications 1:36:30 Accelerating the Good Things 1:41:05 Vitalik’s Role in 2023 1:44:48 Action Items & Disclaimers ------ Resources: Vitalik https://twitter.com/VitalikButerin What in the Ethereum Application Ecosystem Excites Me - Vitalik https://vitalik.ca/general/2022/12/05/excited.html Why I’m Less Than Infinitely Hostile to Cryptocurrency - Astral Codex Ten https://astralcodexten.substack.com/p/why-im-less-than-infinitely-hostile Vitalik’s Other Bankless Appearances https://www.youtube.com/results?search_query=bankless+vitalik ----- 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 video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:00Speaker 00

  I think it's important to just remember 2022, both not just for the massive failures, but also for the amazing technological and adoption backdrops that we've had. And I think even the first inklings of cryptocurrency and double watching spaces abilities that actually have very significant positive impacts on the world.

• 0:25Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Ethereum in 2023, best guest to talk about this. Vitalik Buterin on the podcast today. We talk about what in the Ethereum application ecosystem. It's the title of his blog post. What excites Vitalik going into 2023? And a lot of optimism dropped in this episode that you got to stay tuned for. Before we get in, first, a little bit of housekeeping for Bankless listeners. We are revamping our sponsor strategy going into the next year, and we're going to be putting a focus more on the sponsors and the projects and the companies that are playing

• 1:10Ryan Sean Adams?

  long-term games in crypto. And so we're excited to be building out a strategic relationship with Kraken. The reason David and I like Kraken is because they're one of the few crypto exchanges that didn't rug us last year, right, David?

• 1:23David Hoffman?

  Yeah, they've also implemented proof of reserves before anyone ever asked them to. So they have been leading the frontier of centralized crypto exchanges that can use cryptography to check themselves. And so implementing proof of reserves before they were asked to just indicates that Jesse and the rest of the Kraken team are here to do good by crypto and to leverage the powers that make crypto awesome. So thank you, Kraken, for sponsoring this, and we're excited to build out a strategic relationship with Kraken in 2023.

• 1:55Ryan Sean Adams?

  A few things to look out for in this episode, as always. Number one, why Vitalik thinks our villains are getting worse, actually worse, every single cycle. This being the maybe the worst cycle of villains of all. Number two, why he plans to say Ethereum. Ethereum rather than crypto moving forward in 2023 to describe the industry and set of applications built on top of it. Number three, why he thinks simple DeFi good, complicated DeFi bad. There's a lot of nuance to that take that we get into. Number four, how he thinks Ethereum can actually solve the internet's big bad identity problem. How do you determine who are the bots and who are the humans? How do you keep identity decentralized? Vitalik's actually bullish that Ethereum has a massive role to play there.

• 2:39Ryan Sean Adams?

  And finally, his answer to the question, what is Ethereum's most scalable use case? That's an answer, David. I don't think either you or I expected, and you'll have to stay tuned for that in the episode as well. What should people pay attention to as we dive in here?

• 2:54David Hoffman?

  I think the big question that is the overarching theme about this episode is how proliferated are some of the use cases that many, many people and definitely us talk about? For example, DAOs. How much of a Cambrian explosion will there be with DAOs? How many DeFi apps are there actually going to be? Are there going to be as many DeFi apps as there are websites? Or are there just going to be a few DeFi apps? How many DAOs are there going to be? And this is one of the conversations that we start off this podcast with Vitalik. He gives the example of Esperanto, an esoteric language that was meant to be a universal language for everyone to adopt that would help support global peace.

• 3:35David Hoffman?

  And then also Linux, fantastic technology with a medium amount of adoption in some specific cases versus the internet, which is the most adopted piece of technology of all time. How much of crypto adoption will there be in contrast to these three anchor points? And what can we do to help make crypto be adopted as much as the internet and not be left to some esoteric hobbyist group who thinks the Esperanto language is cool? And so we talk about this frame of reference in the application layer, in the DAO layer, and the identity layer, and how Ethereum can really change the game and hopefully how we can move the needle in 2023 and look back on 2022 and take some of the lessons out of 2022 to make sure that we don't repeat them, Ryan.

• 4:19Ryan Sean Adams?

  Look guys, every episode with Vitalik is must-list, and this is certainly no exception. And David, I'm excited to explore some of those topics with you in the debrief as well. That's the show we record after the show for our premium members. And in that, David, I think I want to talk to you about this idea of crypto maybe being a niche versus going mainstream, something like the internet. And also this theme that Vitalik kept coming back to in this episode, which was, we actually have a role to play. We can make crypto bigger and better, and we can actually build towards a future where crypto is a technology adopted like the internet and not just some esoteric niche. So we'll be talking about that in the debrief too. Guys, we're going to get right to our episode with Vitalik. But before we do, we want to tell you about these tools to help you go bankless.

• 5:01David Hoffman?

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• 6:28David Hoffman?

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• 7:44Ryan Sean Adams?

  Bankless Nation, Vitalik Buterin is on the podcast today. Vitalik is your friendly neighborhood Ethereum developer. He's an elf alpha male who thinks we should rename Gas to Man. I didn't know that, actually. Vitalik, welcome back to Bankless. How you doing?

• 7:58Speaker 00

  Thank you so much, guys. It's great to be here.

• 8:00Ryan Sean Adams?

  Vitalik, 2022 has been an absolutely crazy year.

• 8:05David Hoffman?

  Disastrous.

• 8:06Ryan Sean Adams?

  Yeah, and like the industry is hurting, the community's feeling a lot of pain. I just, maybe just to kick this thing off, can you just give your thoughts and reflections on this? Like, was this unexpected? What's your assessment of the crypto community after this crazy year we've had?

• 8:26Speaker 00

  2022 has been, I think, a complicated year, right? I think a lot of people are remembering the year for all of the terrible stuff that's happened and within the crypto space for all of the multi-billion dollar blowups. But I think it's also important to remember all of the various positives that the crypto space has seen, right? So the merge, I think, is the most recent one, but the big one, right? This is something that Ethereum has been waiting for pretty much since its inception, right? And it's been delayed and complexified and turned out to be more complex than we thought. And lots of things have happened, but now, finally, as of September 15th, I think it

• 9:09Speaker 00

  was 06:45 UTC, you know, we actually have a proof of stake chain, right? And, you know, doesn't it just feel good to be able to say, like, no, not Ethereum is going to reduce its energy consumption by 99.9%, but Ethereum has reduced its energy consumption by 99.9%, right? Like, we're literally talking about going from a level of electricity consumption similar to the entire country of Austria to a level of electricity consumption similar to the entire country of, I don't know, maybe San Marino, maybe Vatican, like one of those, right? So, you know, huge success also from the just protocol security point of view, even

• 9:53Speaker 00

  a huge success from the usability point of view, right? So, like, a lot of people don't realize this, but the merge was actually a transaction inclusion time decrease, right? And this happened for a couple of reasons. One of those reasons is actually the easier one to understand, which is that, you know, blocks have thousands of attestations that are coming on top of them, and so you have thousands of confirmations happening in parallel. And what that basically means is that a few seconds after one single block comes, you have the equivalent of what would in proof of work lanes be considered hundreds of confirmations, right? Like, if you go to etherscan.io/blocks/forks, right? And the most Recent forked block was six days ago.

• 10:38Speaker 00

  In the proof of work era, there would be multiple of these every hour, right? So that's the first reason. The second reason is that because of block times now are instead of being this like very random PoS on distribution thing where you know, sometimes you have a block every two seconds, sometimes you have a block when we after a minute. Here we have a block in a nice regular pattern of 12 seconds. And what this means is that on average, you only have to wait six seconds for a transaction to get included, right? Now, this all sounds theoretical, but just from my own very practical experience, like my experience using Ethereum has just improved massively. It's like, you know, night and day compared to, let's say, yeah, you know, July 2020 before all of this stuff ends, before EIP 1559 happens, right?

• 11:23Speaker 00

  Like, these days, when I send a transaction, I click send, I wait a couple of seconds, and then I see, oh, that transaction got included into one block and it already has one confirmation. Like, it's not quite competitive with, you know, Web 2, oh my god, let's pay $35 million, so the latency is 184 milliseconds instead of 212 milliseconds as standards. But it's like, already good enough to be competitive with, say, credit card point of sale systems, right? And that's something that I think is really important to appreciate. Like, there's been just this massive increase in the usability of the base Ethereum chain that's happened pretty much under our noses. And EIP 1559 was the first half of this, the merge was the second half of this.

• 12:08Speaker 00

  And, you know, the third half of this, of course, is going to be rollups that have preconfirmations, which is coming next year. And later on, we'll talk about how I think 2023 is going to be the year of rollups actually hitting stage one of trustfulness, which will make a mean that Ethereum actually finally is in its scalable era, right? But before that, so the merge happened and the Merge was amazing. 2022 was also the year of ZK EVMs, right? So five years ago, the zeitgeist basically was that, oh, there is this fancy thing called ZK Sinark technology and like maybe theoretically it could make abstract proofs and you can turn

• 12:51Speaker 00

  things into polynomials and like put stuff on top of stuff and maybe eventually verify an Ethereum block, but like, come on, it's so high overhead that's going to take like literally four weeks to make a proof and four years to actually audit the code to do any of that, right? But fast forward to 2022 and we have multiple ZK EVM implementations that are all promising some kind of mainnet launch next year. Like, this is amazing, right? Like, ZK EVMs have just gone from being a non-existent pipe dream to being the, I think, clear manifest long-term and possibly even medium-term future of scaling Ethereum, right? So that's number two.

• 13:34Speaker 00

  Then, you know, on the adoption front, right? Sign-in with Ethereum has seen massive, you know, gains in adoption. Ethereum, I think, goes in a great position to take advantage of people's desire to explore the various alternative Twitters, alternative social media platforms, right? So Farcaster signed into that with an Ethereum account, Lens signed into that with an Ethereum account, and I've used, you know, Farcaster and Lens, and they're actually great. Fast-forwarding to earlier in the year, I feel like, you know, a lot of crypto people have forgotten about this, but it's still super important to remember the invasion of Ukraine in February, right?

• 14:18Speaker 00

  Which is definitely an extremely tragic event overall, but the part of it that is, I think, quite happy is obviously that they succeeded in defending themselves far beyond most people's expectations, but I think, you know, cryptocurrency payments actually worked for them when nothing else worked. And, you know, they've actually, starting from that very first tweet that the country's official Twitter account, you know, made on the morning or the day after the invasion, you know, cryptocurrency actually has been a lifeline for the country, a lifeline for a lot of civilians and the people, right? And...

• 15:00Speaker 00

  You know, tha- that's just like one example. And then, you know, you have all these various small examples like, you know, continuing adoption happening in places like Latin America, for example. You know, I came to Argentina last year, I came to Argentina this year, and the level of sophistication has improved by a lot, right? And, you know, we've been, one of the things I saw, for example, is when I visited just recently, there is a group, I forgot their name, I think it was called either DeFi Latam or something vaguely called like this, right? But this was a, yeah, just a really lovely person from Venezuela.

• 15:41Speaker 00

  And he was basically saying like, hey, you know, the FTX situation is, you know, helps me realize that DeFi actually is important. And like, I want to help Latin Americans, you know, who need crypto, actually interact with crypto in ways that are decentralized and that involve self custody. And, you know, this person actually knew a huge amount about, you know, Layer 2 protocols, a huge amount about,

• 16:10Speaker 00

  you know, different forms of self custody and all of these things. And so all of those things are, you know, continuing to move forward. Cryptocurrency got used for, is continuing to get used for philanthropy a lot. So the, last year was the year of, you know, Crypto Relief India getting its money. But, you know, this year Crypto Relief India continued spending some of its money. Also, Bulvy, it's this group that like I helped spin up that used some of the money to put money into these more, it's more experimental, but potentially much more high payoff options in terms of protecting people now and in the future against viruses.

• 16:49Speaker 00

  And that's funded amazing stuff like, you know, UV lamps, open source vaccine projects and a whole bunch of things. And like, Cryptocurrency as a international payment instrument for philanthropy has just been huge there, right? So I think it's important to just remember 2022, both not just for the massive failures, but also for the amazing technological and adoption backdrops that we've had. And I think even the first inklings of cryptocurrency and double watching spaces abilities like actually have very significant positive impacts on the world. But no, that's to hear. So.

• 17:32David Hoffman?

  Well, Vitalik, thank you so much for coming into this with your optimist hat on and just reminding us that sometimes the bad definitely drowns out the good. As someone who's been through multiple market cycles, like every single market cycle has the bad year, right? The down year, right? 2018 was my first one. There was one prior to that. Is 2022 unusual in any respects? Or is this kind of par for the course of like, yeah, this is what happens at the latter half of April market? We have a lot of bad stuff, but meanwhile, there is relentless adoption regardless, no matter what year it is. Is 2022 unusual for you in contrast to other years of crypto?

• 18:15Speaker 00

  I'm trying to compare 2022 against the kind of early to mid bear market periods of the previous cycles, right? Actually, if you want to show people visuals, one great visual to show right now was the Bitcoin price from 2011 to now. Bitcoin, just because of Ethereum, unfortunately didn't exist in 2011. But if you look at that, right, you know, you see one of the great cycles, right? And you know, you have 2011 and then the really big one at the end of 2013, and then the even bigger one is 2017, and then the super big one in 2021, right? And see, the very first one at the left, it's like so low that we don't even notice it, right?

• 18:59Speaker 00

  Like if you just click, if you just click the log button, wow. And so. The 2015, right? So if you go down the flat part after the first peak, that's when Ethereum launched, right? So then 2018, that's the flat and the kind of cup and handle after the second bull market. That's when Uniswap was created and started existing for the first time. Now let's look at the flat and slightly decreasing line after the third bubble.

• 19:32Speaker 00

  That's when the merge happened and we had multiple ZK EVMs and we're starting to see serious layer two adoption. So the

• 19:44Speaker 00

  post-peak periods are always periods in which there actually are some pretty significant technological progress that is happening. They are periods where I mean, often it's easier for people to get back to work because the numbers aren't giving them dopamine hits every six hours anymore. And there are periods where a lot of real work gets done and even periods where the good gets separated from the bad, right? So one of the other reasons I wanted to make that analogy is that if you go back to 2014, right? The FTX of 2014, kind of, Mt. Gox, I actually kind of don't want to even call

• 20:25Speaker 00

  Mt. Gox the FTX of 2014 because I just feel like the way like Mark R. Palace did a whole, did a bunch of horrible stuff, but I actually feel like the way that he has handled himself post-blow up has actually been kind of vulnerable. Like, you know, he hasn't tried to give himself a Yasuji style redemption arc or, you know, and like kind of give himself attention on Twitter. He just kind of, you know, what Quiet for a while just diligently worked on helping people get their money back and, you know, working on, on, on Gox and other, and other things, right? Like that's

• 20:59Speaker 00

  It's like our villains are getting lower quality now, right? It's like Mark, I think, you know, he has actually like improved in ways that like I just unfortunately, um, you know, don't expect people like Sue, like Sue and Kyle to improve even a decade from now. Yeah, but very much hope I'm wrong, though. I think I'm, you know, I, I, I'm always happy when people positively outperform my expectations. Uh, right, but the Mel Gox blow up in 2014, it did feel like an existential crisis for the crypto space. It felt like a huge crisis for Bitcoin. It felt like a huge crisis for legitimacy. It was an invitation for regulators to swarm around the space.

• 21:41Speaker 00

  And it, uh, hmm, did have a lot of bad consequences in all kinds of places. And it made a huge number of people very unhappy. Uh, 2022, uh, you know, a lot of very similar things are happening, except, you know, now we have, I think I'm much more interconnected crypto space and we have a lot more sophistication. And so, you know, on the other hand, a lot more fragility and contagion happening, right? Though I think it's, it's important to remember that like in 2014, there was fragility and contagion too. Right? Because Mel Gox, when it collapsed, it was both the thing causing the crypto price, uh, prices to crash.

• 22:21Speaker 00

  And also the thing that people were used to as being the place where prices moved up and down. And so the market will had to like basically crash and change where it, uh, where its numbers were coming from at the same time. Right? And here, you know, this year we had the double whammy of, uh, you know, obviously first Luna, uh, coming back down to earth. And Terra going back to down to somewhere much, much lower than earth. Uh, and, uh, you know, six months later, obviously, yeah, FTX blowing up. And then a month after that, I think, um, BlockFi is like in bankruptcy or something like that now. Right? Uh, so.

• 22:58Speaker 00

  It's definitely echoes of a similar situation. But at the same time, like, I don't want to all be rosy about it because I think the other thing that's important to remember now that I think will make 2022 harder to recover from than 2014 is that I think a community having like this very high variance and like both high excitement and high turnoff approach to existing is something that's a very good strategy when you're trying to increase adoption from 0.1% to 10%, but it's a terrible strategy when you're trying to increase adoption from 10% to 70%, right? I think this is a criticism I would have made of Bitcoin maximalism some time ago too, right?

• 23:43Speaker 00

  That if you're just a small community, then if you say incredibly over the top things about how the US government is the primary source of all evil in the world and money printing is the reason why, you know, we have some kind of military statist dystopia instead of, you know, Switzerland like happy land for everyone, then it's, you know, you're going to turn off a lot of people who clearly kind of see through those attitudes and realize that there is a lot more complicated stuff going on in the world. But at the same time, there is going to be some portion of the population that like really believes in the thing you believe or is really receptive to the thing you believe.

• 24:27Speaker 00

  And they're attracted to the passion with which you say it. And so they're going to, you know, wants to come along with you. And, you know, being in this kind of siege mentality where they are one of the few brave soldiers pushing forward the future, even if, you know, huge portions of the mainstream world and the Paul Krugmans and the Elizabeth Warrens and all those characters are, you know, rabid against them, like. There is a group of people to whom that like being in that position of the siege narrative really appeals to them, right? But that's how you get from 0.1% to 10%. And crypto is no longer in the stage of getting from 0.1% to 10%. So I think there have been adoption charts and like estimates that people have attempted

• 25:12Speaker 00

  to make. And in some countries, ownership of cryptocurrency is like literally at the 10% of the population level. So now the space is at the level of trying to get from 10% to 70% and that requires different strategies. And strategies where, you know, this really crazy stuff that keeps losing people $5 billion keeps happening are like the exact opposite of what the space wants and needs to do, right? So I, you know, I wanted to give the message of optimism, but also give this kind of important message that there is a lot of work that needs to be done. And, you know, the status quo, even if it's a status quo, that's like kind of secretly exciting and fun for a lot of us, like that's, you know, not the sort of thing that we want

• 25:55Speaker 00

  crypto to continue to be for years from now, if we actually wanted to succeed.

• 25:59Ryan Sean Adams?

  Is it, is it possible we just get stuck in that niche of that 0 to 10%? We never, I mean, I know it's possible, but do you think that's a, like a high probability outcome?

• 26:10Speaker 00

  It's a good question. Back in, I think, 2011 or 12, one of the earliest articles that I wrote for Bitcoin Weekly, it was called something like Bitcoin Esperanto Linux or the Internet, basically comparing Bitcoin to like three different things that started off as being these very idealistic movements to replace the existing system with a totally different and much better system, right? So Esperanto was this constructed language invented by Ludwig Zemanhoff in the late 19th century. The goal basically being to create a language which is easier to learn because it has much simpler and more regular spelling and grammar.

• 26:53Speaker 00

  And it's, the theory was that everyone would learn Esperanto in addition to their national language and everyone could speak Esperanto with each other and that would be the path to world peace, right? And Esperanto ended up not really succeeding, right? It's this fairly niche interest community at this point. And, you know, there are speakers, but it's like enthusiasts that are just You know, in it as a hobby, like even more, much more than a pragmatic communication tool or an actual attempts to make world peace at this point, right? And which is like sad, you know, I personally love, like I never learned Esperanto super deeply, but you know, it's, it's a really cool language.

• 27:37Speaker 00

  I think the world probably would have been better if it got much more adopted.

• 27:39Ryan Sean Adams?

  What's cool about it, by the way, just to nerd out for just a second? Is it a combo of kind of like, is it some sort of Latin derivative? Or this is really based from scratch? They, they, they built a new language from the ground up, so it's different.

• 27:52Speaker 00

  It's Esperanto is interesting. So like, I mean, I have this like combination of very like positive and critical views of it. Um, I think the, the critical view is basically that it's a language that's drove to be universal, but actually ended up being like very European specific. So like, for example, the way that you make a plural in Esperanto is you add a J. And a J is pronounced U, right? So like kind of like how in Eastern European languages or, or in German, right? So if you want to say some, if you want to, I think what like, try and think of like a good, good examples for nouns in Esperanto.

• 28:35Speaker 00

  This is like, I think homo is a, is like a person and homoi is people. Let me just check that quickly. But, and then you have like the N, which is an, which is the accusative case, right? The accusative case is like the same, like you know how in English you like, if you're doing something, you say, I am doing something. If someone's doing something to you, you say someone's doing something to me. So I is the nominative and me is the accusative. So a lot of European languages have that for nouns and as well as pronouns. And Esperanto has that for nouns as well. So it has a lot of these very European specific features, but at the same time, the good is that it is extremely regular.

• 29:15Speaker 00

  So it's even things like, so like English, for example, right? Like you have words like who, what, where, when, why? And then you have like, well, that, because, therefore, at that time, right? And so.

• 29:36Speaker 00

  Or if you want like the negative, then you have no one, never, for no reason, right? And like you have this kind of two by two table that's really complicated. In Esperanto, it's like a really, it's an incredibly clean system where like, I think it's the, like, the first half of the word is like, do you mean which? Do you mean, uh, do you mean that? Do you mean no one? And then the second half of the word is like, are you referring to a person? Are you referring to a time? Are you referring to a place?

• 30:01Speaker 00

  So it's got a lot of regularity in the grammar. It's got a lot of regularity in the spelling, right? So English has a lot of these, uh, you know, really dumb spelling rules and you have to memor- uh, you know, memorize spellings of a lot of words really thoroughly, um, in- including the word thoroughly, which like makes totally no sense.

• 30:19Ryan Sean Adams?

  But I guess that's the point, right? Even if you designed the most perfect language from a technical perspective, that's not how you actually get adoption for a language, right? So there's like the theoretical perfection.

• 30:30Speaker 00

  Right, so this is, this is the analogy, right? It's, uh, you know, it has all these beautiful technical properties, but the adoption or that basically went nowhere, right? And instead, like, English had too much of a network effect and, uh, you know, especially post-World War II, where pretty much every major country except for the, uh, U- United States, uh, got turned into ruins. Um, you know, that I think, uh, set English on a path to dominance. And, uh, I, I don't really think anything else is in a position to challenge it now, right? So that's Esperanto. Now, Linux is an interesting middle case, right? So Linux is interesting because it's kind of succeeded and it kind of has not succeeded, right? So Linux is this, um, open source operating system.

• 31:14Speaker 00

  So it's, uh, an alternative to things like Mac and Windows. Uh, so I'm speaking right now through a, uh, computer that is running a Linux, uh, distribution. But Linux has had this, uh, interesting mixture of success and failure. So Linux on the desktop is mostly a failure. So it is a, uh- Products that is continuing to be developed and it is very usable and I use it and I think it's great. But it just doesn't quite appeal to the majority of people, right? But on the other hand, Linux has become this really important backend thing. So Android, for example, which a lot of phones use runs on the Linux kernel. A huge portion of all the servers run on Linux. A huge portion of developers, like people, including people who write the Ethereum codebase.

• 31:59Speaker 00

  Not all, but it's a very significant portion. Their computer, they run Linux on their computers because Linux is just very developer friendly, right? So there's a lot of like specific communities and specific applications in which Linux is very entrenched. And then there's this permanent dream of Linux as an open source operating system becoming this thing that really takes over forever. But that just ends up never quite succeeding, right? And then the third is the internet and the internet is just obviously, you know, completely taken over everything, right? And so my question back in 2011 is, is Bitcoin going to look more like Esperanto, more like Linux or more like the internet?

• 32:39Speaker 00

  And I kind of was willing to accept all three possibilities as being likely and I wasn't sure yet. I think today cryptocurrency is way past being Esperanto, right? But the question is like, how Linuxy is it going to be or how internet-y is it going to be? And I don't know. I mean, it's very possible that it's going to be in the middle, right? So like, it's very possible that, well, just one example, in developed countries, it's going to be like Linux on the desktop. But in the developing world, it's going to become like ubiquitous. It's very possible that in both worlds, it's going to be something that's organized or concentrated around a few particular industries.

• 33:23Speaker 00

  That where like, say, yeah, reversibility of credit card transactions and other things just like totally makes no sense. And cryptocurrency is the best thing that works. It might just be something that people have as a store of value without really using day to day. And when a big crisis comes, it just becomes suddenly really important for people and people appreciate it, right? Or it's possible that, you know, the next Basically, all of the infrastructure of the next wave of technology is going to be built around Linux. Oh, sorry, built around cryptocurrency, right? Hopefully cryptocurrency and Linux.

• 33:55Ryan Sean Adams?

  That would be more the web three, that last piece is like, what would the web three mean?

• 34:00Speaker 00

  Yeah, so which one is it going to be? I don't know. And I mean, I am a definite optimist on this. I think which one it's going to turn out to be depends crucially on how hard we try and what we try to do.

• 34:12David Hoffman?

  Interesting. So you actually think that we have a lot of agency over the outcome of whether or not a crypto actually replaces the Internet or just provides a few very useful applications?

• 34:23Speaker 00

  I think absolutely. I think it's actually really important for like good people in the Ethereum space to recognize that they have agency and exercise it. Because I think if good people act passive, then the things that take over just are going to be, you know, the drama queens of the world, right? And like, I think we as people trying to do a bit of actually meaningful things, you know, have a responsibility to work hard to drown out the drama queens. And that's a challenge. And I think sometimes the way you had to work, sometimes we do better, but you know, we got to try.

• 34:57Ryan Sean Adams?

  That is a challenge, Vitalik, but that like I I'm almost tempted to to turn this into like, give us some personal advice here, like, how do we do that? All right, so I I'm leaving partially 2022, again, feeling embarrassed that I'm in crypto. Oh, you have a crypto podcast at your next.

• 35:15Speaker 00

  How's that going for you, bro?

• 35:16Ryan Sean Adams?

  How's that going for you? And, you know, mainstream people outside, sort of the the normies, the people who are in the 90%, not the the 10%, they're looking at this industry and being like, what is this just run by a bunch of kind of clowns and scammers? Like, where are the adults? Are the, I thought you guys, you preach crypto values and then I see all of this. And so I'm feeling a little down at the end of of 2022, but also reflective in in terms of like, why could we have done better? What lessons could we learn? Do we need to like?

• 35:47Ryan Sean Adams?

  I mean, I know we've talked before about like how you call out, you know, scammers and kind of the social layer. And you can, you can veer too far to one extreme or another. But yeah, what are your, what are your thoughts, advice for us in general? And then maybe we can, we talk about like lessons for the entire community.

• 36:03Speaker 00

  So just to kind of start slowly moving into the blog post, we wanted to talk about a bit. The, we'll start with the first eight words of it, right? So the title, I intentionally said, what in the Ethereum application ecosystem excites me? Instead of what in the crypto space excites me? This is an experiment I've been trying, right? Basically, like using the word crypto less and using the word Ethereum more. And this is like a subtle thing. I mean, it's still an early stage experiment, so I'm not entirely sure what all, what all of the consequences of emphasizing Ethereum in particular much more would be.

• 36:44Speaker 00

  But like the theory here, like it, so first of all, it's not maximalist, right? So it's not saying like, you know, focus on Ethereum to the exclusion of everything else. It's more saying, we are not going to implicitly ally with you just because you are a cryptocurrency by default. Right? The problem with the crypto space is that the crypto space is an ungovernable commons that has no barrier to entry. Right? So if you remember, you know, the basics of Eleanor Ostrom's theory of the commons and what commons is great tragedies of the commons and what commons is can be governed. One of the basic ingredients for a commons to be governed is gatekeeping, right?

• 37:24Speaker 00

  Like you have to actually be able to, you know, say, you know, this is us and this is not us. And actually be able to like have some level of enforcement or filtering in the thing that is us. With, with the crypto space, like the only qualification to be able to call yourself part of the crypto space and not have people complain is to just like somehow use cryptography and to have some kind of changed data structure somewhere. Like those are literally the qualifications, like you don't even need decentralization, right? Like I forget, has IOTA even gotten rid of their coordinator yet? I forget now.

• 37:58David Hoffman?

  No, the answer is no.

• 38:01Speaker 00

  But like XRP, right? Like, you know, they're like still completely centralized and.

• 38:09Speaker 00

  But you know, at the same time, they are, you know, on coin market cap and, you know, still, I think, haven't apologized for writing documents into the, to the US government, basically saying that they should be favored over Bitcoin and Ethereum because Bitcoin and Ethereum are China-controlled.

• 38:30Ryan Sean Adams?

  So Vitaly, when you have a permissionless commons, you're saying the role of gatekeeper is essential, and that role is essentially a kind of a social layer type role. Let me, let me throw the criticism at you that you might expect to see, you probably won't expect to hear that now, but like, earlier this year, you would have, would have expected to hear that. If you talk about the Ethereum ecosystem, well, that makes you an Ethereum maximalist, okay? And crypto is much broader than Ethereum, and we live in a multi-chain world here. And so...

• 39:01David Hoffman?

  And you're just pumping your bags.

• 39:02Ryan Sean Adams?

  And you're just pumping your bags, and decentralized values can exist outside of Ethereum, or the so-called crypto values can exist. So stop limiting yourselves to Ethereum. That was kind of the jujitsu move some, some pulled whenever you start trying to like redefine the boundaries and start to do a little bit of gatekeeping.

• 39:19Speaker 00

  Okay, so this is a good point. So here is my analogy. So suppose that you have an American politician who goes on CNN, and he says, you know, here is a package of policies, here are some things that I want to deregulate, here are some things that I want to subsidize, and here are some things that I want to encourage, and the combination of these ideas is needed to reinvigorate American prosperity into the 21st century. If you hear someone saying this from the perspective of a non-American, does that sound America maximalist?

• 39:59Ryan Sean Adams?

  No. Well, yeah, no, it doesn't.

• 40:03Speaker 00

  Right. Like, it does, it does get a little bit complicated, right? Because like, like, there is definitely, like, I think, a real effect where there's like, some Americans that sort of act like the non-America world doesn't exist, but I think like, just, you know, the, the sentence that I just said, like, you know, it is totally innocuous, right?

• 40:20David Hoffman?

  I think the difference, though, is that being, people are frequently born into America, and then that's just like, not actually their choice. Whereas when you come into the crypto space, you're kind of like a blank slate, and you get to choose your chain or tribe that you align with. So I think that's the main, biggest difference there.

• 40:38Speaker 00

  That is true, though I think, I don't know, I feel like the whole, like, I've even seen immigrants to America like be on both sides of the, you know, we love American prosperity discourse. But I think, you know, even still, like, sometimes like, oh, like, the point that I want to make about Ethereum, right, is that I think that there should be a way to talk about Ethereum that doesn't implicitly, you know, lend credence to the, you know, the Lunas and the XRP's and the IOTAs and the Bitcoin Satoshi's visions of the world, but that still does leave room for a kind of

• 41:18Speaker 00

  valuing the good and the honorable things that are happening in other ecosystems, right? So, like, I'm happy to say that, you know, I think the Cosmos ecosystem, for example, I, you know, I deeply respect it because it is one of the few that's actually trying a very different region of design space and, you know, they have this vision of, you know, a larger number of blockchains, each of those blockchains has a smaller number of validators, they use these protocols to talk to each other, you know, and they give up on shared security, but they give up on tight coupling, but they have modularity, and, you know, here's their arguments for why this might be a good idea. And like, I really respect the fact that, you know, they have a technical vision, they push a technical vision first.

• 42:02Speaker 00

  They, in my view, have not been pump and dump it, you know, they have not done any, they have not bought any stadiums, they, you know, have not put the face of their founder up on cylinders all over San Francisco. So, like, that's something I respect. You know, the Zcash ecosystem, I think I've talked about them consistently many times. You know, Bitcoin, I value the self custody ethos and the decentralization ethos, and I think that's one that we have a lot to learn from, right? So The thing that I'm getting at is that I think there should be a way to like both talk about Ethereum

• 42:44Speaker 00

  and even talk about Ethereum, like non-Ethereum projects that we still think are contributing to good. But in a way where like we're not extending alliance to everyone by default. And so this is a like, this is one of the things that I'm in the process of thinking through, right? Like basically, yeah, what exactly what is the the right formula for doing that? As like, if you think about things from that perspective, right? Like in 2022, what's the worst thing that happened in Ethereum land?

• 43:18Ryan Sean Adams?

  I would say probably like, see, this also depends on how you define Ethereum land. Because NFTs, Bored Apes, for example, right? Some people would point to that and say, look, celebrity endorsements, kind of pump and dump NFT. Where's the NFT? Well, that was an ERC 721 on what on Ethereum? So is Ethereum ecosystem? Question mark? I don't know. Maybe something like that I would point to.

• 43:41David Hoffman?

  I think if Bored Apes are the worst thing that happened in Ethereum in 2022, that's

• 43:47Ryan Sean Adams?

  Yeah, I agree with that, too.

• 43:48Speaker 00

  Yeah, okay. What's what's the worst thing that happened in Cosmos in 2022?

• 43:54David Hoffman?

  I don't, oh, oh, except for Terra.

• 43:56Ryan Sean Adams?

  I mean, do you consider Terra Luna Cosmos?

• 43:58David Hoffman?

  Yes, yes, you do.

• 43:59Speaker 00

  That is true. That is a, yeah.

• 44:02Ryan Sean Adams?

  It's why these boundaries are so difficult.

• 44:04Speaker 00

  Right, it's a good point, right? See, the this is why I'm kind of intentionally hedging this as a kind of thought in progress, right? Because I think like ultimately, there definitely is a trade off between being permissionless in the good sense and being permissionless in the sense of like letting literally anyone who wants to come in and borrow your social credibility, which is the type of permissionless that we don't want. And there's probably some kind of balance to draw between those.

• 44:32David Hoffman?

  Well, so that's actually an interesting case to unpack because like I feel like no one blames Cosmos, the ecosystem at all for the Terra collapse. By the nature of the app chain model, everything's kind of like compartmentalized, right? And so while there is composability risks, as in the Value of U S T that got spread across the chains and Cosmos all went to zero. No one really blames Cosmos as a whole for that by the nature of how app chains come together. Perhaps one of the worst things to answer to after I've thought about the question, what's the worst thing that happened in the Ethereum ecosystem? I'm pretty sure the Wonderland drama, which was kind of Ethereum's microcosm of Terra. It was an algorithmic stablecoin. Stablecoin went to zero.

• 45:13David Hoffman?

  Turns out Zero Xifu was the ex-Quadringa perpetual fraudster scammer person. That did happen on Ethereum, in Ethereum DeFi. And so that was on our chain. That was inside of our borders.

• 45:27Speaker 00

  This is true, but I guess the saving grace is like the Ethereum influencer elite never treated Daniel Acosta with the slightest dose of respect, right?

• 45:37David Hoffman?

  Yeah, yeah, I fought with him for sure.

• 45:40Speaker 00

  Yeah, and I'm pretty sure even like the Cosmos influencer elite. Did they ever treat Terra with that much deep respect? I actually don't know.

• 45:50David Hoffman?

  I don't remember any instance of this.

• 45:52Speaker 00

  Right.

• 45:54David Hoffman?

  So Vitalik, one of the main reasons to bring you on the show today is because of a recent fantastic blog post. I want to connect these conversations that we've had to this blog post first with this first question. One of the things that I've been personally thinking about is, and as a result of your blog post is, one of the main euphoric statements that I echoed and many people in crypto in 2021 echoed is like, there's going to be a Cambrian explosion of DAOs. There will be so many DeFi apps, NFTs and NFT projects for absolutely everyone. And then, and that was like, okay, this is Web 3 is replacing the internet. We have this internet thing and where it's going to completely be replaced by Web 3.

• 46:38David Hoffman?

  So earlier we were having this conversation. It's like, all right, is crypto Esperanto, Linux or the internet? And you're like, well, definitely not Esperanto. Hopefully more than Linux, perhaps as big as the internet, but TBD. And then when I was reading some of the components of your blog post, which is, like you said, titled, "What applications in Ethereum that I believe in?" I was thinking like, oh, maybe actually in the DeFi landscape, there's only a handful of very strong, very useful DeFi applications, things like exchange DEXs like Uniswap and Sushi Swap, things like borrowing and lending services like Aave. And then, you know, beyond that, a few more, but not too much more after that. And then also, there's a conversation

• 47:23David Hoffman?

  on DAOs. Are there, are there going to be a Cambrian explosion of DAOs where me and my group chat form a DAO? And so does like every other group chat in the world form a DAO? We have all these bajillion DAOs out there, DAOs for every single stated purpose that exists? Or is decentralization much more surgically applied to a few more use cases? And so, these are some of the lessons that I'm thinking of, and this is going to think, I think, be an overarching theme for the rest of this podcast. But before we dive into specifically your article, I just want to ask you, as a whole, what lessons do you think we learned as an industry in 2022, now that we are in December, looking backwards? Like, what lessons did you personally learn, Vitalik? And what lessons do you think we should all make explicit here on this podcast, so that we can know to not do them

• 48:08David Hoffman?

  again in 2023 and beyond?

• 48:12Speaker 00

  Yeah, I think the big takeaway is that I think the crypto space is at its most honorable, only insofar as it actually takes its own core principles seriously. So, like, what those core principles are should be pretty obvious, right? It's, you know, decentralization, openness, self custody, being transparent with people, right? And those are all values that FTX did the exact opposite of, pretty much since the beginning, right? And those are, I would say, even values that Terra violated to some extent. I mean, I think Terra is a more complicated case, because Terra was a hybrid of a mechanism that was

• 48:56Speaker 00

  open and transparent, but it was just bad with a mechanism that, the rescue funds, which was completely opaque. But...

• 49:09Speaker 00

  That was FTX, I think, definitely, you know, the exact opposite of openness and trustlessness.

• 49:18Speaker 00

  A lot of the applications that grew a lot, but then ended up completely failing. They probably tried too hard to kind of integrate with the mainstream and doing that by compromising toward the mainstream ways of doing things. And eventually you just get to the point where you realize there was just no point in having a blockchain left, right? So one of the examples of this might be like the supply chain blockchain trial. I think it was ASX or one of those groups that did it and it just shut down recently. Right? There's just a lot of these enterprise blockchain projects that have quietly shut down over the last couple of years.

• 50:01Speaker 00

  And even the blockchain enterprise projects that were not shutting down, they generally went into the direction of, hey, how about we're going to be more public chain now, right? That's a trend that I feel like we've been talking about for a few years already.

• 50:16Speaker 00

  So what kinds of things have succeeded, right? So Uniswap has succeeded, RAI has succeeded. DAI, you know, in the middle of a very complicated governance discussion, wish it success. You know, the Ethereum base layer succeeded, ENS succeeded, right? Smart contract wallets, rising, account abstraction, rising. Privacy technology, I think it's obviously hit a speed bump with the various legal issues. But that's, I think, something that is going to continue, it is going to pick up again next year and over the next couple of years.

• 51:00Speaker 00

  There's just a lot of different things that like actually are blockchainy and open and decentralized and trusted that basically survived the whole situation completely unscathed, right? And it's the centralized stuff where everyone is wondering like, you know, hey, am I ever going to get my money back? Right? And this, like, there's actually different ways of having this perspective, right? So like, the more crypto negative way of having this perspective would be to say that like, oh, crypto was more honorable when it understood that it was like a very niche gray market thing, kind of like the Pirate Bay, and it just tried to be that. But then the speculators came in and tried to turn it into something

• 51:42Speaker 00

  much, much bigger than what it was supposed to be. And that's where all of the biggest harms are coming from, right? So like, that's a view that you definitely hear from a certain tribe of like more crypto negative people. But in some ways, that's basically saying the same thing, right? So, you know, whether you believe the more crypto positive kind of like slant on that, or the more crypto negative slant on that, like, the core idea that the parts of the crypto space that are honorable are the parts of the crypto space that actually try to stay true to its values, I think, is something that there is a very broad agreement on. And that's the thing that I want to double down on.

• 52:22Ryan Sean Adams?

  Yeah, agreed. And yeah, the things that did stay true to those decentralization values are still left standing at the end of 2022. So let's talk about this, because you wrote this post, what in the Ethereum application ecosystem excites me? And you broke it into kind of five different categories: money, DeFi, identity, DAOs, and hybrid applications. And I know you picked these five for a reason. So let's talk about each. And it's actually interesting because that you put money as the first, because I think maybe it was, a lot of what you were saying, I think, the last time you came on the Bankless Podcast, or maybe a couple of times ago, Vitalik was like, hey, money is one use case, and that's

• 53:06Ryan Sean Adams?

  cool. But I'd love to expand outside of money. And yet, money is the very first use case. So could you talk about this? Is this a proven thing? What do you see in the money use case that's actually exciting in Ethereum?

• 53:20Speaker 00

  No, you make a good point. So like, I think there has been this contradiction in the Ethereum space almost since the beginning between a vibe that wants to try to be more than just money, in part because it wants to try to be more than just Bitcoin. Versus, I mean, other reality that's just obvious from the outside of the space, which is that cryptocurrency as currency just is far more proven than all of the more speculative stuff. I actually think, though, that the two perspectives are more compatible than it might seem. And the reason why they're more compatible than it might seem is because the

• 54:02Speaker 00

  application category that I spent the least time on in this post is DeFi, right? Like, I think the vibe that I was reacting to when, for example, I made that presentation in Paris about a year and a half ago was one where there was not too much attention on money, a huge amount of attention on all kinds of incredibly complicated DeFi things, and then a tiny amount of attention on, you know, non-money and identity and social stuff, right? And my view on DeFi that we'll get into in this post is basically that I think simple DeFi, good, complicated DeFi, bad, right?

• 54:45Speaker 00

  Like, by far the most important applications in the DeFi space in terms of actually being able to provide value to people are just incredibly simple stuff, like, for example, stablecoins, right? Stablecoins are DeFi. They do involve significant financial engineering, especially if they are something like DAI or RAI that tries to work without centralized external collateral. But they provide a service that's very simple and dumb to the point where you don't even realize that it's DeFi, but, you know, they are DeFi at the same time. Uniswap is DeFi, but it's just so simple and we've had it for like five years now, right? Prediction markets are DeFi, but we've had them for five years.

• 55:29Speaker 00

  Like generally, I think DeFi that we've had for four years is generally a better kind of DeFi, the DeFi that emerged in the last two years is my general take, right?

• 55:43David Hoffman?

  And you're not saying that that's just because of how old they are. You're talking about there's a certain kind of product that came out of the early cohort of DeFi that new DeFi is fundamentally just different from. It's not about the time, right?

• 55:55Speaker 00

  Exactly. I think, well, it's a product of the time, but it's not about the time, right? It's a product of the time because the applications that emerged in the more old school period were applications that really cared about providing like these specific forms of utility that are very clear to people and in this like very abstract way where they're clear, even if you're not part of the ecosystem already. Whereas the newer stuff, it's like, oh, well, we're going to build a thing and you can liquidity farm it. And it looks like you can maybe get 11.4% APR interest. And you know, hush, hush, we're not going to talk too much about whether or not the 11.4% APR is sustainable.

• 56:40Speaker 00

  So it just, the newer stuff basically tends to be more often justified by like short-term evidence of what it does. And that's a very bad epistemology in the DeFi space because it's just so easy to get short-term good performance by sacrificing long-term performance, right? Whereas the categories of applications that existed for four years, like if they did not have long-term value, people would have forgotten about them by now. So that, although I would say like honestly, four years ago, even the Ponzi's were more honorable.

• 57:17Speaker 00

  What do you mean by that? You know, you know, there were some pretty sophisticated games four years ago, right? Where, uh, you know, there are the, the, these, uh, experiments where people would like stick their money in and then the first person to take their money out would lose some percentage and though you'd have to hold your other coins in the system for longer than everyone else. So you'd have these games where if you're the last person to touch the thing before no one touches it for 12 hours, you get a special reward. And like, it was just actually fun.

• 57:45Ryan Sean Adams?

  It was like, it was like transparent. The Ponzi was transparent. Everyone knew what they were doing rather than this fakery.

• 57:52David Hoffman?

  Well, yeah, so the game I'm pretty sure you're referring to is called Just Game, just dot game. I think that actually migrated to Tron because Justin Sun paid them to. But it was very explicitly like, uh, a Ponzi. It was a Ponzi game, but huge emphasis on the word game. It was a casino game that would be a great and awesome and fun casino game. And it made no intentions on promising any sort of outcome if you lost. And I think that's what you're talking about Vitalik is like, it was more honorable in the sense that like, no, no one is like, if you partake, well, partake in it, like that's on you if you lost money.

• 58:29Speaker 00

  Exactly. Whereas the new stuff, it's like, there's a lot of obfuscation. Like there's, uh, often even layers of obfuscation going on. Like there is obfuscation, uh, trying to, uh, against VCs, obfuscation against regulators, obfuscation against, uh, token holders, against early participants and late participants. And sometimes it's this kind of layered game where like, oh, everyone understands that this thing refers to this thing. And, um, you know, you have these arguments about like, well, why it has to be this way. But then the problem with that, with doing things in that way is that it basically creates no way to distinguish, uh, or no way for good projects to distinguish themselves from things where the thing that they're obfuscating is that their entire project disappears mid-scan.

• 59:16Speaker 00

  Like the good, the good side of what emerged in 2021 basically turned out to be unsustainable and ended up just kind of like slowly offering lower and lower rates over time. And the bad side of what launched in 2021 just ended up blowing up completely. So, so in both cases, it was over optimistic in terms of what it promised. But you know, one of the, some of it degraded gracefully and some of it degraded very not gracefully. And so what I want to go back to is just more doubling down on and refining the kind of fewer, but really important ingredients that we have already known for quite a few years are actually really valuable and important to people.

• 59:56Ryan Sean Adams?

  So you are still bullish on simple DeFi, complicated DeFi, not so much. Can, can we go back to kind of the money for a second? And just maybe from somebody who's outside the crypto industry's perspective, like, why are you, why are you still excited about the money use case in general? Like, why do we need crypto money, Vitalik? Like, digital money, a central bank, digital currency could do that, right? We could, we could scale out what PayPal is doing or, you know, some other kind of, aren't you just talking about digital money? Why, why is this crypto money different or important?

• 1:00:29Speaker 00

  Well, I personally have used like cryptocurrency as money huge numbers of times over this year, right? And like for me, the use case basically is like medium scale investments and charity donations, right? Like, you know, just sending a couple hundred thousand dollars to some charity that's, you know, giving money to poor people or supporting healthcare in Africa or somewhere like that, just like quickly routing money to medical organizations that are based in all kinds of countries. These are, you know, investing in, investing in startups. These are all cases where cryptocurrency is actually significantly more efficient

• 1:01:14Speaker 00

  than the existing banking system. And like, I don't think that it's temporary. Like, I think that there's structural reasons why cryptocurrency is better at surviving as a frictionless international thing than like fiat, traditional banking systems do, right? And so I think it's actually is an open question whether or not CBDC is even, will be able to compete against that in that same way, right? Like, if, you know, China launches a DCEP and does a really good job of it, then like that could easily get a lot of adoption in China, but would people be willing to use it in Vietnam or Singapore? I don't know, right? So whereas cryptocurrency, you know, is a thing that actually has like this very international

• 1:01:59Speaker 00

  reach already even today, right? So that's one thing, and that's just to be.

• 1:02:05David Hoffman?

  It's kind of in a way trying to fulfill a very similar goal as the Esperanto language, which is like, you know, F every single nation state currency because of the borders, but let's make a brand new currency and everyone can use that instead.

• 1:02:21Speaker 00

  Exactly, right? Like, for a, from the point of view of a country's government, having 10% of your national economy suddenly be carried out in cryptocurrency is much less scary than 10% of your economy suddenly being carried out in US dollars, right? Because in the second case, the US government has power over you. In the first case, it doesn't. So there definitely is this structural aspect where because of its neutrality, cryptocurrency has an advantage that fiat currencies cannot have, right? And like, there are countries that have a reputation for neutrality, but the problem is that all the countries that have a reputation for neutrality don't have scale.

• 1:03:04Speaker 00

  Once a country has scale, it starts to have interests.

• 1:03:07David Hoffman?

  When, if they have neutrality, they get eaten up by the countries that don't have neutrality, because the countries that don't have neutrality have the larger armies.

• 1:03:14Speaker 00

  Exactly. Right, or potentially just like the larger economies and the larger will to kind of bully them into going along with the local block. I mean, you know, these are things that happen all the time. Certainly. Right, but that's just me, right? So like I interact with lots of people around the world, but I, you know, I'm still ultimately a well-connected rich country person. But then if you go out away from that and you go to, you know, all kinds of places in Latin America, Africa, Middle East, Southeast Asia, and those kinds of places. Like there, the financial system is often not even well-connected to rich country financial systems, right?

• 1:03:55Speaker 00

  Like often enough cryptocurrency just is by far the easiest way to send money home to people's families. Cryptocurrency can be even the easiest way to make payments. It could be the easiest way to save money that is

• 1:04:12Speaker 00

  much more guaranteed to not, you know, drop by, you know, like a factor of two every year for pretty much forever, right? Like, there are a lot of places where existing fiat currencies are very unstable and existing fiat financial systems are very unconnected and where, you know, the banking system doesn't necessarily even wants to connect or wants to connect it, right? Like basically because there's just almost no incentive for them to. So those are the kinds of places where I think cryptocurrency is just has clear use cases even today. And where I expect it's more valuable to succeed in the long term.

• 1:04:55Speaker 00

  And where if you go to the places and you go to the meetups and you talk to the people, the culture there just feels much more genuine and more real, right? Like it's not talking about these kinds of issues theoretically. It's, you know, you have people saying like, hey, I'm from this country. And in my country, there actually was a hyperinflation. And because I was able to put money into Bitcoin and ETH, I was actually able to protect my savings. And like, these are actual experiences that you regularly hear from people there, right? And I think. A culture that is animated by those kinds of goals is just much healthier than a country where the like the thing that is animated by is like, oh, look, uh, you know, I have a thirty six thousand dollar monkey and that's my pass to get into some kind of

• 1:05:39Speaker 00

  elite New York City nightclub. Right? It's like if I were to go to a New York City nightclub, I'd almost want to, let's see, what would I want out of a New York City nightclub? But one is that I would want it to open at four AM instead of closing at four AM. Because I think people who have the discipline to wake up in the morning are probably are possibly more interesting. Um, I would want to possibly exclude people who have a monkey that costs more than thirty thousand dollars. Um, or I, you know, pretty much the exact opposite of, um, what the, the New York City monkey scene is, is doing right now. All right? So that's, uh, you know, the, you know, you're just not going to get a, a great culture

• 1:06:23Speaker 00

  when you have people that just don't have problems for themselves personally that are, uh, that, that cryptocurrency can solve other than get, getting rich off of other people's problems. Right? Um, and so have like the cryptocurrency communities that are best, I think, are the ones that are not in that position. And like developing world is one example. And then I think another good example is like developed world, but, um, you know, the more like activist scene or like, you know, certain like, you know, industries that get deplatformed by banks and payment systems all the time and those kinds of things. Um, so that's, uh, you know, like those kinds of places are the places where I actually

• 1:07:07Speaker 00

  expect the most interesting work to happen over time. Um, and those are the places that are in a lot of cases using blockchains and cryptocurrency already. Right? And I think the main challenge there is that today, a lot of the time people are using cryptocurrency by interacting with finance accounts. And it would be ideal if these people had more, more decentralized options available to them too. And that's, uh, one of the reasons why I'm. You know, really excited about the social recovery wallet and, you know, smart contract wallet and account abstraction ecosystem. You know, why I'm excited about later to technology to bring fees down. And, you know, excited about privacy technology and all of these other things.

• 1:07:50David Hoffman?

  Arbitrum One is pioneering the world of secure Ethereum scalability and is continuing to accelerate the Web three landscape. Hundreds of projects have already deployed on Arbitrum One, producing flourishing DeFi and NFT ecosystems. With a recent addition of Arbitrum Nova, gaming and social dApps like Reddit are also now calling Arbitrum home. Both Arbitrum One and Nova leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM compatible. On Arbitrum, both builders and users will experience faster transaction speeds with significantly lower gas fees. With Arbitrum's recent migration to Arbitrum Nitro, it's also now 10 times faster than before. Visit arbitrum.io, where you can join the community, dive into the developer docs,

• 1:08:35David Hoffman?

  bridge your assets, and start building your first app. With Arbitrum, experience Web three development the way it was meant to be. Secure, fast, cheap, and friction free. Trufi is DeFi's largest credit protocol, connecting global lenders with institutional-grade lending opportunities. Trufi has completed over $1.7 billion in originations and paid out nearly $35 million to lenders, proving that DeFi is ready to take its next big leap into the $8 trillion credit market. Trufi gives lenders like you access to sustainable, high-yield opportunities backed by real-world investments, usually reserved for high net worth individuals. At the same time, fund managers use Trufi's financial infrastructure to bring their portfolios on-chain, benefiting from the global liquidity, cost savings, and transparency of DeFi. Trufi is a decentralized financial utility.

• 1:09:20David Hoffman?

  The protocol is owned and governed by the Trufi DAO, and Trufi is here to bring DeFi into the golden age, bridging the power and access of crypto with institutional-grade lending opportunities and portfolio tooling. Explore the diverse financial opportunities available on Trufi or launch your own portfolio at trufi.io.

• 1:09:37David Hoffman?

  If you've been listening to Bankless, you know that we're fans of the modular blockchain thesis. The idea that blockchains will separate execution from data availability and consensus, allowing all three to become the best versions of themselves. And Fuel has built the fastest modular execution layer in the industry. By supporting parallel transaction execution, Fuel unlocks significantly faster throughput for the Web3 world. Fuel also goes beyond the limitations of the EVM with its own Fuel VM, which is more efficient and optimized, opening up the design space for developers. And lastly, Fuel brings a powerful developer experience with its own domain-specific language, Sway, and a supportive tool chain called Fork. With Fuel, you can have the benefits of smart contract languages like Solidity while adopting the improvements made by the Rust tooling ecosystem,

• 1:10:21David Hoffman?

  letting the Fuel development environment go beyond the limitations of the EVM. If you want to learn more, there's a link in the show notes to see how you can get involved with a Fuel network. I want to hop back over to the DeFi conversation before we tie a bow on the money in DeFi conversations and move on to the identity conversations. But on the DeFi conversation,

• 1:10:40David Hoffman?

  to me, we're in this limbo period where we don't really know if there's going to be a Cambrian explosion of DAOs, a brand-new wave of DeFi apps. And one of the things that Ryan and I would previously communicate on the Bankless podcast is that the application layer, the DeFi layer, is always the frontier. While there's not that much room for Layer 1s and Layer 2s out there, there can't be as many blockchains as there are applications. There will naturally be more applications than there are blockchains. And a large part of the wealth generation of the protocol layer is not completely over, but we've gone through that adoption wave.

• 1:11:22David Hoffman?

  Ethereum is half a trillion dollars, or maybe a quarter trillion dollars.

• 1:11:28David Hoffman?

  And so, one of the things we've communicated is that the application layer is where a lot of the wealth is left to create. There's a lot of wealth creation on the application layer. And so, maybe you were too late to explore the rise of the protocols, but the rise of the applications will never stop coming, right? There will always be new applications on the frontier to explore. And that is where, that's why some of the concentration of wealth in Ethereum, I don't think is the biggest problem. Because the application layer is this natural diffusing mechanism. Because new DeFi apps, new tokens, tokens go up and down, and a new place to establish wealth. But if we're, if I'm now kind of considering that there's actually fewer DeFi applications than there really needs to be.

• 1:12:12David Hoffman?

  And instead of there needing to be thousands and thousands of DeFi apps, there really only needs to be like 10 or 15 to really be comprehensive. Now I'm starting to worry that like, there is less churn and there is less opportunity out there. Do you have any thoughts or reflections on this?

• 1:12:29Speaker 00

  There's definitely less low hanging fruit out there, right? And I think that's important to just recognize. And I think there is a huge amounts of opportunity, right? Like if you can make a wallet that a billion people use, that's a huge opportunity. If you can make a stablecoin that can actually survive, you know, anything up to and including a US dollar hyperinflation. And, you know, Doge forbid, the US dollar hyperinflation actually ends up happening. Then, you know, that's a huge opportunity as well. If you can, you know, create something that can actually, you know, be a lifeline for everyone going through that situation.

• 1:13:08Speaker 00

  If you can get sign in with Ethereum to work and you can like unseat Facebook and, you know, Google and Twitter. As they kind of login over lords of the internet, that itself is a huge opportunity, right? And there's, there are still huge things that are left unclaimed that still can be built, but they're harder to build, right? Like you can't just build, you know, obfuscated casinos and get people to throw $13 million in and just have a fairly quick path to victory. So.

• 1:13:42Speaker 00

  That's the place where I think the space is in now. And I think the people that are going to be more successful are the people that are actually willing to put that kind of hard work in.

• 1:13:52David Hoffman?

  Next on your list of applications that you believe in is identity. And there's a line in your article that I'd really like to pull out where you say, "For a long time, I have been bullish on blockchain identity, but bearish on blockchain identity platforms." Can you unpack the difference between those two things? What's the difference between blockchain identity versus an identity platform?

• 1:14:16Speaker 00

  Sure. And so, identity is a complicated term that refers to a whole bunch of different ideas, right? So, the concept of authentication, just proving that the identity that you are using to sign a particular message, to post a particular message, to send a transaction, is the same identity that you registered at some point before, right? Even if it's totally pseudonymous, like even if it's a PHP public key. That is part of identity. Attestations. I attest that, you know, David Hoffman and Ryan Sean Adams are both participants in this thing called Bankless. That's a part of identity.

• 1:14:59Speaker 00

  The Government of Canada tests that I have a Taliban border and I'm a citizen. That's part of identity. Domain names or .eth names, like vitalik.eth, also parts of identity. Proof of personhood, proving that I'm a unique human and this is the only account that belongs to me in the system. That's part of identity, right? Like, identity is this very nebulous bubble term that refers to all of these things. And sometimes when people say they need an identity solution, they might be referring to any one of those or any combination of them. And those problems are very different problems. There are problems that have very different properties. Like they have, for example, very different properties in terms of the level of centralization they might require in terms of the

• 1:15:44Speaker 00

  level, the extents to which the problems are social, the extents to which you can make a solution that works for a small number of people that doesn't grow beyond that small number of people. And these are all actual use cases and they're all specific needs that people have. But the problem is that for the last decade, I've also noticed like this very abstract blockchain identity discourse, where there were people that have been intentionally trying to create identity platforms, like there are people who tried to create identity blockchains. And I'm by default and you know, have been and still am very not bullish on a lot of those, right? Because basically, they just trust,

• 1:16:28Speaker 00

  have the mindset of starting from the point of view of identity as an abstraction, as opposed to starting from the point of view of a concrete set of use cases that people care about, regardless of whether or not they can later narrativize those those use cases into being part of some grander space that they can call identity, right? It's like meme first as opposed to problem first. And problem first is the approach that I think is more viable there and I think it's more viable everywhere.

• 1:16:58Speaker 00

  And I think Ethereum is the place where identity solutions, in the sense of solutions to all of these specific problems that I identify are happening and are pretty rapidly growing.

• 1:17:11David Hoffman?

  I think part of your answer is that identity isn't something that you can go headfirst at. You can't make an identity app. You can't have an identity startup. Identity is something that is emergent. It is something that is naturally composed from many different sources of inputs that are, that may or may not be able to interoperate with each other. Is that a fair assessment?

• 1:17:35Speaker 00

  Yep.

• 1:17:36Ryan Sean Adams?

  I mean, it almost has to be like a byproduct of the thing that you're building, right? Like, in a certain way, like, why is there sign-on with Google or sign-on with Facebook? It's not because they started with the identity solution, but it's because Google made Gmail just so damn valuable and its app ecosystem. And so everyone has a Gmail account, and now you can use that to sign in. I'm just wondering how you think like, identity solutions, again, we could have the Esperanto problem for just a microcosm of identity, where we create all these great identity solutions. We're like, hey, world, come use it. And the world's like, we don't care. We'll just use English. It's fine. Like, how do you think identity actually happens as an export from the crypto world?

• 1:18:19Ryan Sean Adams?

  Like, practically, how does this bottom-up emergent thing manifest?

• 1:18:25Speaker 00

  I think you had it exactly right in that whatever the thing is that gets the network effect, has to get the network effect for some other reason first, right? One example that I think is good to zero in on is Ethereum wallets versus PGP keys, right? PGP keys have for a long time been the number one cypherpunk meme, right? Like, we have a cypherpunk world when everyone has a PGP key, and when people could use these PGP keys to sign and encrypt messages to each other.

• 1:18:55Ryan Sean Adams?

  And that's been around since, what, like, the early 90s?

• 1:18:58Speaker 00

  Yeah. People tried really hard to have key signing parties and attest to each other, and have PGP encrypted email, and even have all kinds of apps to make it easier, and all of these different overlay layers. But just, none of them have really worked well. And what has worked well? Well, guess what? We have Ethereum accounts now. And what is an Ethereum account? Well, it's a private and public key pair. And so now, guess what? You can sign into stuff with an Ethereum key. You can encrypt stuff to people's Ethereum keys with a tiny bit of extra work, right? And so you just get all of this.

• 1:19:39Speaker 00

  Immediate benefit, that's only possible because you already have a user base of billions of people that have Ethereum wallets, which they got originally for like basically financial reasons, right? Because they wanted to hold cryptocurrency or do DeFi stuff and occasionally NFT stuff with it.

• 1:19:57David Hoffman?

  So one question I have about this model, how, I think it requires a significant amount of standardization across attestations, and specifically the attestation side of things, like Vitalik attests that Ryan and David do this bankless thing, the country of Canada attests that Ryan was once a citizen there, sorry for doxing you, Ryan, America attests that I'm a citizen of America, Spotify attests that I'm a huge fan of the sheepdogs. How do we, do these things need to be the same standards? Or how do we make this, the identity of all of these different attestations all composed together so that we have like my identity, rather than just like a bunch of disparate systems that don't really talk to each other?

• 1:20:41Speaker 00

  I think standards will emerge over time, right? Like the Pope protocol exists and lots of people use it. And Pope, I think, has so far been more successful within the Ethereum ecosystem than anything that calls itself an attestation protocol, right? Like they've, you know, actually gone out there, they have the network effect, lots of people have Popes, I have dozens of Popes. And, you know, the thing works and the thing is continuing to grow, right? So that's the, that's just like one example of something that I think is succeeding. And I think there's definitely room for a couple of other things to succeed as well. And then, at some point, they're going to grow to the point where they have

• 1:21:23Speaker 00

  to talk to each other. And at some point, they're probably going to agree on like aligning cryptographic standards or something like that. And, you know, hopefully we'll get to something reasonably sane.

• 1:21:33David Hoffman?

  Wise identity in the crypto space, it's a huge conversation. We all, everyone comes into crypto and they kind of get this vague semblance of an idea that like something about crypto has to do with identity. Then they learn about like, oh, my Ethereum address can represent me. But why is this better than my nation state identity? What is lacking in nation state identities that Ethereum or private key identities really brings to the table? Like, why is this not a meme? And why is this actually a good product?

• 1:22:03Speaker 00

  Hmm. I mean, it solves problems that people actually have, right? Like, people, I think, obviously wants to have an identity in the sense of like just wanting to have an identifier, like a username that other people can use to talk to each other. Crypto, in addition to being a useful set of products, is an ecosystem and a community, and people in that community want to talk to each other. So it serves that need too. People, I think, wants to be able to do stuff on the internet without that stuff being dependent on, you know, Google or Facebook or Twitter, being able to do whatever they want with their

• 1:22:45Speaker 00

  accounts, or even just like seeing the, all of the actions that they're taking. So there's this like queer value that I think speaks to things that people in the crypto space want to do, and even to dreams that people outside of the crypto space have had for a long time, right? Like, this is, you know, making the internet more decentralized in a way that I think a lot of people have wanted to for like decades at this point. And so I think it's in a great place to actually get that kind of adoption.

• 1:23:21David Hoffman?

  I think one of the one things that really excites people about identity and crypto and, you know, really Ethereum, this whole like sign in with Ethereum movement is that it's actually really easy to envision login with Facebook, login with Google, login with MetaMask, or Rainbow Wallet, or something. Is that, is that the goal that we're looking for? Is that like when you said like the decentralization of the internet, is that one of the parts of the internet that we can actually decentralize with Ethereum? Is that like the explicit vision that you kind of have?

• 1:23:48Speaker 00

  I think absolutely.

• 1:23:50David Hoffman?

  Okay. All right. Well, Bankless Nation, you got your work cut out for you.

• 1:23:54Ryan Sean Adams?

  Look, man, I think, actually, I think on an identity, this is going to be seen as a big win for nation-states. While there's a portion of nation-states who are a little bit like, uh, don't step into the money thing, we have that covered. I mean, what, what kind of nation-state doesn't want the bot problem mitigated on the internet? And to help identify who the Who the humans are and who the robots. And by the way, the nation state answer to this is a social security number and a driver's license that you have to like and like a selfie. Come on, that is not internet native at all. So there's some low hanging fruit here if we can do this. But let's talk about DAOs for a minute, Vitalik. So we think about DAOs, the use case. You said you're still bullish on them. Are DAOs going to replace corporations?

• 1:24:39Ryan Sean Adams?

  Is there, is there something less that that they will do? Why, why are you still excited about DAOs as an application? And what function do you think they can fulfill?

• 1:24:49Speaker 00

  Yeah, so ironically enough, I think DAOs are well said to replace a lot of things other than corporations, right? Like corporations are actually one of the forms that I kind of specified that DAOs are less likely to be able to replace. And the reason for that is that I think corporations benefit from the ability to pivot. And ability to pivot is like almost the inherent opposite of a certain type of decentralization that people really want. But also corporations are not, they are big enough that they can afford to set up like more regular infrastructure, like legal infrastructure and security infrastructure and so forth.

• 1:25:32Speaker 00

  And so they don't really benefit well from the other architecture, which is like, hey, let's just not bother with that stuff and have a multi-sig of seven people. Right? So my view is basically that, you know, there's two architectures that make sense. One of those architectures is like, let's quickly speed up a multi-sig of seven people. And the other architecture is a, yeah, let's think really hard and create something that's like very credible neutral, very able to resist all kinds of takeover attacks and use it to run really important stuff that we want to last for many decades. Right? Whether that's ENS or whether that's a stablecoin or, I don't know, something like proof of humanity or something like Claros.

• 1:26:17Speaker 00

  Like let's figure out how to make that extremely robust. Right? So that's something where I think a DAO makes a lot of sense. And then the multi-sig of seven people use cases are use cases where I think. Something that you could call a DAO makes a lot of sense, right? But it's like a DAO where you're not really emphasizing the smart contract logic. You're emphasizing more the decentralization of just like very open and spontaneous collaboration patterns that can be very agile between fairly small groups of people. And the smart contract side of things is actually pretty minimal, right? So those are the two architectures that I'm more bullish on. Architectures that try to do something else I'm less bullish on, right?

• 1:26:59Speaker 00

  So like, things like, you know, the, like, the original DAO trying to be a DAO that is a VC fund, like, yeah, the more time goes on, the more I think, like, yeah, actually, that doesn't really make a huge amount of sense, right? And those kinds of cases, like, you're getting the disadvantages of decentralization, which are that you move slower and that you open up things that other people in a competitive environment can use against you. But you're not really getting too many benefits from decentralization either. So like, if you want to do that kind of VC fund, you're just spinning up a VC fund, right? Whereas, you know, a DAO for MakerDAO or a DAO for Proof of Humanity or a DAO for ENS, like, that's something where that kind of value makes sense.

• 1:27:43Speaker 00

  And then a DAO in the sense of, you know, a group of five or seven people that just wants to, like, quickly collaborate without bothering bothering with a legal entity. Like, that's also something that makes a lot of sense.

• 1:27:53Ryan Sean Adams?

  And do you think, Vitalik, there's going to be some innovation in the governance structure of DAOs? Or do you think we've basically discovered all possible governance that, you know, that could work with DAOs?

• 1:28:03Speaker 00

  I think we need innovation. So this gets into one of the other topics I've been really big on over the last year, right? Which is non-financialized governance, like, governance that can resist attacks from, like, say, 51% of the token holders, or the token holders getting bribed, or those kinds of situations. And I even argue that it's the financial use cases where de-financialized governance is the most important, right? Like, if you look at a stablecoin, for example, like MakerDAO, it has, I think, what were the stats? I think I have them in a poster. 7.8 billion dollars of collateral, but the market cap of the Maker token itself is like somewhere around 500 million dollars, right?

• 1:28:44Speaker 00

  And so if Maker Dow really was governed by Maker holders in an unrestricted way, then you could just go and buy up half the Maker tokens and then use that to manipulate the Oracles and you could steal a huge portion of all the collateral. And that would just be a really big and profitable multi-billion dollar attack, right? Now, the reason why that hasn't happened to Maker Dow specifically is because Maker holdings are fairly concentrated and there's like maybe a dozen people that have more than half the total supply. And it just so happens that those dozen people are kind of fairly aligned on the vision and they're, you know, either honest or at least they have enough other interests that would be really hurt if they did something like that, right? But in the long term, that's not the sort of thing that you really want to rely on, right?

• 1:29:29Speaker 00

  And so I think it's obvious that if you want a stable coin that scales, the collateral has to exceed the market cap of the profit-taking token and probably by even more than 17x. But if you want to do that, you have to have some kind of governance that's not financialized or some kind of governance where there's some kind of intentional friction or speed bump that prevents MKR holders or the token holders of the system from being able to quickly implement whatever goal they want and take over the system.

• 1:29:59Ryan Sean Adams?

  As you're talking about all of this, I just want to, you know, remind listeners to a bankless mental model that's at least helped me think through this. And this is like from games like Civilization that maybe some of you have played where you have this concept of as you're leveling up your Civilization, you have like a tech tree, right? And you have to learn the basics of like mathematics before many generations later in the tech tree, you can build nuclear reactors with your Civilization or launch someone to the moon. Like you need your math before you get your physics, before you get your nuclear reactors. And the question people have outside of crypto is like, okay, cool. You've been talking about this forever. How come you haven't done it? Well, think about the tech tree, right? You sort of need the money DeFi use case in order to build the network effect for identity to be valuable.

• 1:30:43Ryan Sean Adams?

  And then once you have identity, you can start to tweak. Governance, because some of the non-financial governance cases that you just mentioned really aren't very possible without identity and knowing who's a human who's not on-chain. And so this is all kind of a big Ethereum tech tree that we're kind of building out in peril. That's what this reminds me of anyway, which lends me to kind of the last piece of what you wrote, Vitalik, this category for hybrid applications. What are hybrid applications? Can you just tease that out for us for a minute?

• 1:31:16Speaker 00

  Hybrid applications are applications that are not entirely on-chain, but that benefit from being connected to a chain, right? So basically, think of it as centralized services that use the chain and commitments published to a chain as a way to constrain their behavior and keep the system honest. So the nice thing about hybrid applications is that they... I mean, obviously scalability challenges basically don't exist with them, right? Like, as long as you can make, you know, ZK snarks that are powerful enough, you can make some of these applications already. So scalability challenges don't exist. Privacy challenges are a lot smaller, especially if you can trust the provider.

• 1:31:59Speaker 00

  And sometimes even if you can't trust the provider even. And the deployments challenges are much simpler, because in a lot of these cases, it's not even something that requires changing the workflow of the user. It's like purely an overlay that runs on the side, and only people who want to interact with the overlay have to, right? So probably the simplest example of this actually is making centralized exchanges safer with proof of solvency protocols, right? Like, if you have exchanges that actually, you know, publish commitments to, say, the... all of their user liabilities, that's...

• 1:32:40Speaker 00

  And then they have assets on chain and by having assets on chain, they're proving that they actually have the assets that match the user liabilities. Like that is an example of an application that does use the chain and even use a cryptocurrency. But it is also a centralized application and that application could keep the workflow of being a centralized application, but still get a lot of benefits from being hooked into and kind of being shackled by the decentralized system. Games are another example, right? Like you can have game servers that are post the state to chain using zero knowledge proofs. And that basically binds them to actually follow the rules that they committed to.

• 1:33:22Speaker 00

  The Dark Forest game, right, is probably one example of this. Voting, I mentioned as an example, there's many different kinds of voting, even going all the way down to something as simple as like Twitter polls, for example, right? Like you could imagine a blockchain based Twitter, like Farcaster says, and Ethereum based Twitter, like Farcaster. Make a poll where you use one of these fancy voting mechanisms to vote in the poll. And the voting is totally private, the voting is even coercion resistance, and that's also hooked into popes. And so you can limit the poll to a certain group of people, right?

• 1:34:03Speaker 00

  But then, well, Farcaster is like, I guess, not quite a hybrid application because Farcaster is aiming to be a decentralized system. But you know, you could imagine something kind of centralized, like also plug those kinds of components in, right? And so you get kind of the efficiency of centralization and the robustness benefits of decentralization at the same time, right? So I think there's a really huge number of applications in this category. Like on some level, almost anything can be improved by requiring it to submit roots to chain and requiring it to be open about when it changes its rules, right? And that's just something that you can just like go and add on. And you know, it might not have benefits at first, but it might have benefits that appear years down the line.

• 1:34:47Speaker 00

  And just the cost of doing it is in the long run so low that I think there's a bunch of applications where it makes sense.

• 1:34:55David Hoffman?

  Yeah, I actually haven't really spent too much time thinking about this, but this is actually really kind of mind blowing in the sense that it's actually doing some of the things that we're already doing in other parts of the Ethereum landscape. Like, what do Layer 2s do? They post data to the Ethereum Layer 1 that forces the Layer 2 to play by the rules, right? And this is kind of the same model for what you're saying. You can see so many other use cases. What is Proof of Reserves? It's a centralized company that's not really changing much else about this business, but it's posting data to a public blockchain that allows people to check on itself. And so you're just saying that the general purpose utility of centralized companies, centralized teams, centralized projects, whatever, can just publicly post data to

• 1:35:39David Hoffman?

  a chain that allows humans to check on whether or not that company or team or whatever is doing the thing that they originally committed to doing? And really, what is the original ethos of a blockchain to begin with? The whole idea of a chain, a blockchain, is to like, check on human folly, right? Make sure that humans are not being bad and being able to verify that. And I think the flexibility that this model offers, which is just like, hey, you have a centralized company that requires human trust, well, you can prove that trust with a blockchain, is like, probably, I think, the most broad utility, broad way to provide

• 1:36:23David Hoffman?

  blockchain assurances to the world that I can really think of.

• 1:36:27Speaker 00

  Yep, absolutely. That's their goal.

• 1:36:31David Hoffman?

  So, the broader question, I think really, really, the reason of how that will actually end up is just like, at some point, the companies that do this just have a competitive advantage versus the ones that don't. That's like, perhaps, like, the capitalism market forces argument for why this will happen. But I want to kind of zoom back into the near term and also go into one of the last sections in your article, Vitalik, which is, "How do we get there?" And then a quote from your article I want to read is that, "The Luna market cap got over to $30 billion, while stable coins that were striving for robustness and simplicity are often ignored for..." Years. Non-financial applications often have no hope of earning 30 billion because they do not have a token at all. But it is these applications that will be the most valuable for the ecosystem in the long term,

• 1:37:15David Hoffman?

  and that will bring the most lasting value to both their users and those who build and support them. This paints this picture that all these flashy scams, like the Luna's, the Wonderland's, FTX, will always get more attention and more adoption than like these boring hardened, basic primitives that like crypto so desperately needs. And so this kind of lends itself a tally to like one of my existential crises I've been having recently, is that like crypto might actually not be good in the short term. Because it takes longer for these hardened, real protocols to get built out. Meanwhile, we can generate like 10,000 APY Ponzi's along the way for three bull markets in a row. Do you think that this illustration of crypto is true?

• 1:38:00David Hoffman?

  And how do you how do you suggest that we accelerate the good things that we can take and show our moms?

• 1:38:06Speaker 00

  This is, you know, where we get back to one of my points a bit earlier, right? Like, we have to recognize, you know, our own agency, right? Like, we, I think, all just needs to work much harder at, you know, both doing all that we can to help those applications and doing, doing less that we can to help applications that even if they look shiny in the moment are not actually all of that, all that meaningful long term. You know, just being willing to get excited about stuff other than making huge amounts of money.

• 1:38:44Speaker 00

  As the, you know, organizations in the space can do much more to explicitly support some of those projects, right? Like, I

• 1:38:56Speaker 00

  Like even just, you know, giving grant, like a few million dollars worth of grants to people who are honestly trying to make wallets that properly solve the self custody problem, right? Like, these are, try to get to the point where like the, how hard you have to work to get, to get funding as a wallet developer is like, at least comes close to approaching how, how easy it was if you were just running a DeFi project. And it's just, also just like talking about the, yeah, some of the problems that these projects are solving and why it's, why it's so important to solve them.

• 1:39:37Speaker 00

  And I think it's the best that we can do for now is a combination of all of those things. Another important thing that I think is important for the space to do is like, continue the conversation with regulators and not just in the United States, but you know, regulators around the world, right? I think it's important to get out the message that like, what we as the Ethereum space want is not even necessarily a regulatory environment that's friendly to everyone, but a regulatory environment that satisfies the requirements of being friendly, maximum friendly to like, say, people building account abstraction wallets or working on zero knowledge proof protocols, but without being friendly to Duke One, right?

• 1:40:20Speaker 00

  And like, what does that even look like? It's another one of the conversations that I think is worth,

• 1:40:30Speaker 00

  worth having and trying to figure out, right? And because I think at this point, the, you know, well, the political appetite to make an environment that's friendly to Duke One is like definitely close to zero at this point, right? And so I think it's important to kind of take the lead in the conversation of like, how to be friendly to, you know, people making account abstraction wallets, specifically without being friendly to Duke One. And that's, it's a more difficult one.

• 1:40:56Speaker 00

  Definitely something that I'll keep thinking about too.

• 1:40:58Ryan Sean Adams?

  Yeah, I completely agree. By the way, I'd love to see a Vitalik regulatory post sometime on Vitalik.ca. I think that would be a cool post. Vitalik, thanks a lot. We appreciate you coming on and talking about all these things. Maybe just sort of final question on a little bit of a personal note. I'm just curious for you. So we are ending 2022, entering 2023. It's been a big year certainly for Ethereum, a lot to be excited about. At the end of 2022, shipping the merge, all of these things. But what do you see your role in crypto as, as we move into 2023 and beyond? You know, the old office space, what is it that you'd say that you do here?

• 1:41:41Ryan Sean Adams?

  Vitalik, like what's kind of your role? How would you describe yourself?

• 1:41:48Speaker 00

  I feel like the answer is still some of everything, right? Like I think that might change over time, you know, that might be other things too, right? But for now, you know, it's

• 1:42:01Speaker 00

  definitely some combination of like increasingly trying to help projects that I like that are building good applications succeed. And you know, helping to explore and understand the application space better. You know, still a lot of important Ethereum protocol stuff better. And you know, participating in the discussion on like scaling, trying to kind of push the EVM in a good trajectory. So it gets, you know, functionality that people want without getting the complexity that people don't want.

• 1:42:38Speaker 00

  Trying to, I guess, continue to interact and connect with the various Ethereum communities around the world. I've made it a goal next year to spend some time visiting places that I have historically not spent much time visiting. Visiting. I mean, that was my goal for this year too, right? And I did end up spending, I mean, months in Latin America, but next year, other places too. So that's like, you know, right now, definitely some of everything and some of just like.

• 1:43:09Speaker 00

  Letting other good people, you know, continue doing great work and I guess helping the Ethereum ecosystem move over to being this like a very stable and self and self-supporting thing that just keeps going forward on its own.

• 1:43:28Ryan Sean Adams?

  Vitalik, are you really trying to turn gas into mana? Is that really a thing?

• 1:43:34Speaker 00

  It's a good question.

• 1:43:34David Hoffman?

  I was gonna ask, what do you think the odds of your ability to do this is?

• 1:43:38Speaker 00

  I have thought about this, right? And I think like, the one place where we could do that is in the context of multi-dimensional EAP1559, right? This is the proposal where I could, instead of having just one gas limit, we have one limit for computation and then one for like data and one for, I mean, maybe storage operations, like one of the dimensions could just be called mana. And I think that would be cool and fun. I like, I like Ethereum being fun. But if it's going to be anywhere, that would be the place, the place where it is, but we'll see.

• 1:44:10Ryan Sean Adams?

  That's awesome. Wait, was there a World of Warcraft, was mana a thing in World of Warcraft? I don't remember my wild days.

• 1:44:15Speaker 00

  Yeah, yeah, mana is like the primary like limited resource for like anyone using magic.

• 1:44:20Ryan Sean Adams?

  This was the game all along. Vitalik wanted to create mana in this decentralized ecosystem, all the way back to his nerfed World of Warcraft character. It's come full circle.

• 1:44:30Speaker 00

  Indeed. Like, you know, you have Ethereum, you have soulbound tokens.

• 1:44:35Ryan Sean Adams?

  We're getting closer.

• 1:44:39David Hoffman?

  Vitalik, this is a Diablo maxi podcast, by the way.

• 1:44:42Ryan Sean Adams?

  Yeah, it's true. It's true. I gotta confess.

• 1:44:46Ryan Sean Adams?

  Still Blizzard though. Same company? Used to be. Vitalik, thanks a lot. We really appreciate it.

• 1:44:53Speaker 00

  Yeah, no, thank you guys too. It's been great.

• 1:44:55Ryan Sean Adams?

  Action items for you, Bankless Nation. Another fantastic Vitalik podcast. We've got a few more in the queue. We'll, we'll throw, sorry, a few more from the archive. We'll throw links to those in the show notes. Also, you gotta read what in the Ethereum application ecosystem excites me by Vitalik. We'll include a link in the show notes. There's also another article I want to draw some attention to. It's an article that was posted earlier, by the time you listen to this, last- Last week from Astral Codex 10, it's called "Why I'm Less Than Infinitely Hospital to Cryptocurrency." "Why I'm Less Than Infinitely Hostile to Cryptocurrency." I think a great article from an outsider's perspective, looking into the space and very rational as to which use cases have succeeded.

• 1:45:38Ryan Sean Adams?

  So, go read those and that's it. Gotta end with this as always. None of this has been financial advice. It never is on bankless, of course. Ethereum is risky. You could lose what you put in, but we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

• 1:45:57David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcasts, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders,

• 1:46:38David Hoffman?

  Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.