#504: Vitalik Buterin, Creator of Ethereum, on Understanding Ethereum, ETH vs. BTC, ETH2, Scaling Plans and Timelines, NFTs, Future Considerations, Life Extension, and More (Featuring Naval Ravikant)

Vitalik Buterin, Creator of Ethereum, on Understanding Ethereum, ETH vs. BTC, ETH2, Scaling Plans and Timelines, NFTs, Future Considerations, Life Extension, and More (Featuring Naval Ravikant) | Brought to you by Wealthfront http://wealthfront.com/tim automated investing, Pique http://piquetea.com/Tim's Daily Immune http://piquetea.com/Tim (Vitamin C optimized for absorption), and Theragun http://theragun.com/tim percussive muscle therapy devices. Vitalik Buterin (@VitalikButerin https://twitter.com/VitalikButerin) is the creator of Ethereum. He first discovered blockchain and cryptocurrency technologies through Bitcoin in 2011, and was immediately excited by the technology and its potential. He co-founded Bitcoin magazine in September 2011, and after two and a half years looking at what the existing blockchain technology and applications had to offer, wrote the Ethereum white paper in November 2013. He now leads Ethereum’s research team, working on future versions of the Ethereum protocol. In 2014, Vitalik was a recipient of the two-year Thiel Fellowship, tech billionaire Peter Thiel’s project that awards $100,000 to 20 promising innovators under 20 so they can pursue their inventions in lieu of a post-secondary institution. You can find his website at vitalik.ca http://vitalik.ca/. Naval Ravikant (@naval http://twitter.com/naval) is the co-founder and chairman of AngelList https://angel.co/. He is an angel investor and has invested in more than 100 companies, including many mega-successes, such as Twitter, Uber, Notion, Opendoor, Postmates, and Wish. You can subscribe to Naval https://nav.al/, his podcast on wealth and happiness, on Apple Podcasts https://podcasts.apple.com/us/podcast/naval/id1454097755, Spotify https://open.spotify.com/show/7qZAVw03FuurfYnWIWwkHY, Overcast https://overcast.fm/itunes1454097755/naval, or wherever you get your podcasts. You can also find his blog at nav.al https://nav.al/. Please enjoy! * This episode is brought to you by Pique http://piquetea.com/Tim and their brand-new supplement, Daily Immune http://piquetea.com/Tim—Vitamin C optimized for absorption. Pique’s Daily Immune http://piquetea.com/Tim is maximized for absorption with liposomal encapsulation technology and Pique’s unique formula supports a healthy immune system. It’s so easy and tastes so good—think black European elderberries—you might choose to take it once or twice a day, as I do. Try it for yourself risk-free—with their 30-day satisfaction guarantee, you either love it or get your money back. Go to PiqueTea.com/Tim http://piquetea.com/Tim and use code TIM at checkout to get 5% off your first order plus free shipping when you purchase a bundle. * This episode is also brought to you by Theragun http://theragun.com/tim! Theragun http://theragun.com/tim is my go-to solution for recovery and restoration. It’s a famous, handheld percussive therapy device that releases your deepest muscle tension. I own two Theraguns, and my girlfriend and I use them every day after workouts and before bed. The all-new Gen 4 Theragun http://theragun.com/tim is easy to use and has a proprietary brushless motor that’s surprisingly quiet—about as quiet as an electric toothbrush. Go to Theragun.com/Tim http://theragun.com/tim right now and get your Gen 4 Theragun today, starting at only $199. * This episode is brought to you by Wealthfront http://wealthfront.com/Tim! Wealthfront http://wealthfront.com/Tim pioneered the automated investing movement, sometimes referred to as ‘robo-advising,’ and they currently oversee $20 billion of assets for their clients. It takes about three minutes to sign up, and then Wealthfront will build you a globally diversified portfolio of ETFs based on your risk appetite http://wealthfront.com/Tim and manage it for you at an incredibly low cost. Smart investing should not feel like a rollercoaster ride. Let the professionals do the work for you. Go to Wealthfront.com/Tim http://wealthfront.com/Tim and open a Wealthfront account today, and you’ll get your first $5,000 managed for free, for life http://wealthfront.com/Tim. Wealthfront http://wealthfront.com/Tim will automate your investments for the long term. Get started today at Wealthfront.com/Tim http://wealthfront.com/Tim. * If you enjoy the podcast, would you please consider leaving a short review on Apple Podcasts https://podcasts.apple.com/us/podcast/the-tim-ferriss-show/id863897795?mt=2/iTunes? It takes less than 60 seconds, and it really makes a difference in helping to convince hard-to-get guests. I also love reading the reviews! For show notes and past guests, please visit tim.blog/podcast https://tim.blog/podcast/?utm_source=podcast&utm_medium=podcast&utm_campaign=podcast-description. Sign up for Tim’s email newsletter (“5-Bullet Friday”) at tim.blog/friday https://go.tim.blog/5-bullet-friday-1/. For transcripts of episodes, go to tim.blog/transcripts http://tim.blog/transcripts. Discover Tim’s books: tim.blog/books http://tim.blog/books. Follow Tim: Twitter: twitter.com/tferriss https://twitter.com/tferriss Instagram: instagram.com/timferriss https://instagram.com/timferriss/ Facebook: facebook.com/timferriss https://www.facebook.com/TimFerriss/ YouTube: youtube.com/timferriss https://www.youtube.com/timferriss Disclaimer: I am not an investment adviser. All opinions are mine alone. There are risks involved in placing any investment in securities or in Bitcoin. None of the information presented today is intended to form the basis for any offer or recommendation or have any regard to the investment objectives, financial situation, or needs of any specific person. Past guests on The Tim Ferriss Show http://tim.blog/podcast include Jerry Seinfeld https://tim.blog/2020/12/08/jerry-seinfeld/, Hugh Jackman https://tim.blog/2020/06/26/hugh-jackman/, Dr. Jane Goodall https://tim.blog/2020/04/16/jane-goodall/, LeBron James https://tim.blog/2018/11/27/lebron-james-mike-mancias/, Kevin Hart https://tim.blog/2020/05/20/kevin-hart/, Doris Kearns Goodwin https://tim.blog/2018/09/07/doris-kearns-goodwin-leadership/, Jamie Foxx https://tim.blog/2015/12/06/jamie-foxx/, Matthew McConaughey https://tim.blog/2020/10/19/matthew-mcconaughey/, Esther Perel https://tim.blog/2017/05/21/esther-perel/, Elizabeth Gilbert https://tim.blog/2020/05/08/elizabeth-gilbert/, Terry Crews https://tim.blog/2017/12/20/terry-crews-how-to-have-do-and-be-all-you-want/, Sia https://tim.blog/2020/08/12/sia/, Yuval Noah Harari https://tim.blog/2020/10/27/yuval-noah-harari/, Malcolm Gladwell https://tim.blog/2016/06/21/malcolm-gladwell/, Madeleine Albright https://tim.blog/2020/05/27/secretary-madeleine-albright/, Cheryl Strayed https://tim.blog/2017/03/30/cheryl-strayed/, Jim Collins https://tim.blog/2019/02/18/jim-collins/, Mary Karr, https://tim.blog/2020/11/11/mary-karr/ Maria Popova https://tim.blog/2014/10/21/brain-pickings/, Sam Harris https://tim.blog/2020/05/15/sam-harris-2/, Michael Phelps https://tim.blog/2021/01/21/michael-phelps-grant-hackett/, Bob Iger https://tim.blog/2020/01/16/bob-iger/, Edward Norton https://tim.blog/2019/10/31/edward-norton-motherless-brooklyn/, Arnold Schwarzenegger https://tim.blog/2015/02/02/arnold-schwarzenegger/, Neil Strauss https://tim.blog/2014/06/24/neil-strauss/, Ken Burns https://tim.blog/2019/09/12/ken-burns/, Maria Sharapova https://tim.blog/2017/08/26/maria-sharapova/, Marc Andreessen https://tim.blog/2016/05/29/marc-andreessen/, Neil Gaiman https://tim.blog/2019/03/28/neil-gaiman/, Neil de Grasse Tyson https://tim.blog/2019/10/03/neil-degrasse-tyson/, Jocko Willink https://tim.blog/2016/09/21/jocko-willink-on-discipline-leadership-and-overcoming-doubt/, Daniel Ek https://tim.blog/2020/12/03/daniel-ek/, Kelly Slater https://tim.blog/2020/09/08/kelly-slater/, Dr. Peter Attia https://tim.blog/2019/11/27/peter-attia-fasting-metformin-longevity/, Seth Godin https://tim.blog/2016/02/10/seth-godin/, Howard Marks https://tim.blog/2018/09/25/howard-marks/, Dr. Brené Brown https://tim.blog/2020/02/06/brene-brown-striving-self-acceptance-saving-marriages/, Eric Schmidt https://tim.blog/2019/04/09/eric-schmidt/, Michael Lewis https://tim.blog/2020/05/01/michael-lewis/, Joe Gebbia https://tim.blog/2018/03/08/joe-gebbia-co-founder-of-airbnb/, Michael Pollan https://tim.blog/2018/05/06/michael-pollan-how-to-change-your-mind/, Dr. Jordan Peterson https://tim.blog/2021/03/01/jordan-peterson/, Vince Vaughn https://tim.blog/2017/05/31/vince-vaughn/, Brian Koppelman https://tim.blog/2020/04/23/brian-koppelman/, Ramit Sethi https://tim.blog/2019/05/07/ramit-sethi/, Dax Shepard https://tim.blog/2020/11/18/dax-shepard/, Tony Robbins https://tim.blog/2014/10/15/money-master-the-game/, Jim Dethmer https://tim.blog/2020/05/18/jim-dethmer/, Dan Harris https://tim.blog/2020/11/19/dan-harris/, Ray Dalio https://tim.blog/2017/09/13/ray-dalio/, Naval Ravikant https://tim.blog/2015/08/18/the-evolutionary-angel-naval-ravikant/, Vitalik Buterin https://tim.blog/2021/03/08/vitalik-buterin-naval-ravikant/, Elizabeth Lesser https://tim.blog/2021/03/16/elizabeth-lesser/, Amanda Palmer https://tim.blog/2019/04/18/amanda-palmer-2/, Katie Haun https://tim.blog/2021/02/18/katie-haun/, Sir Richard Branson https://tim.blog/2017/10/09/richard-branson/, Chuck Palahniuk https://tim.blog/2020/09/02/chuck-palahniuk/, Arianna Huffington https://tim.blog/2017/10/18/arianna-huffington/, Reid Hoffman https://tim.blog/2015/08/31/the-oracle-of-silicon-valley-reid-hoffman-plus-michael-mccullough/, Bill Burr https://tim.blog/2017/09/17/bill-burr/, Whitney Cummings https://tim.blog/2015/06/26/whitney-cummings/, Rick Rubin https://tim.blog/2015/05/15/rick-rubin/, Dr. Vivek Murthy https://tim.blog/2020/03/26/vivek-murthy/, Darren Aronofsky https://tim.blog/2017/09/09/darren-aronofsky/, and many more. 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Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tim Ferriss?

  We have an important preface, an important caveat, an important disclaimer before we get started. And here it is, provided from my lovely lawyers. Here we go. I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or in Bitcoin or in cryptocurrencies or in anything. None of the information presented today, or really anytime, since you might be listening to this anytime, is intended to form the basis for any offer or recommendation or have any regard to the investment objectives, financial situation, or needs of any specific person. That includes you, my dear listener. So, everything you're going to hear is for informational entertainment purposes only. And with that said, please enjoy.

• 0:43Tim Ferriss?

  Hello, boys and girls, ladies and germs. This is Tim Ferriss and welcome to another episode of The Tim Ferriss Show, where it is normally my job to interview world-class performers, to tease out the habits, routines, etc. that you can apply to your own lives. This episode is a special episode, and it is a very detailed, action-packed episode. At least it was for me. And in a sense, it pairs really well with an earlier episode. In 2017, I did an episode with Naval Ravikant, who joins me again in this round two, with Nick Zabo. And the title of that episode was "The Quiet Master of Cryptocurrency",

• 1:23Tim Ferriss?

  and it really covered everything related to Bitcoin. So BTC, smart contracts, all of those fundamentals. This volume two is going to cover everything Ethereum. And the two people joining me, I already named one, are Naval Ravikant, as I might have mentioned, and he is really the pilot for this conversation. So he takes the reins as the interviewer. You can find him on Twitter @Naval, N-A-V-A-L. He is the co-founder and chairman of AngelList. He is an angel investor and has invested in more than 100 companies, including many huge successes, including Twitter, Uber, Notion, Open Door, Postmates, and Wish, among many, many, many, many others.

• 2:06Tim Ferriss?

  You can subscribe to Naval, his podcast on wealth and Happiness on Apple Podcasts, Spotify, Overcast, wherever you get your podcasts. You can also find his blog at Naval, that's N-A-V dot A-L. The guest of honor and the real expert in this particular episode is Vitalik Buterin, on Twitter at Vitalik Buterin, V-I-T-A-L-I-K-B-U-T-E-R-I-N. Vitalik is the creator of Ethereum. He first discovered blockchain and cryptocurrency technologies through Bitcoin in 2011 and was immediately excited by the technology and its potential. He co-founded Bitcoin Magazine in September 2011 and after two and a half years, looking

• 2:48Tim Ferriss?

  at what the existing blockchain technology and applications had to offer, wrote the Ethereum White Paper in November 2013. It is hard to believe that it was so relatively recent. He now leads Ethereum's research team, working on future versions of the Ethereum protocol. In 2014, Vitalik was a recipient of the two-year Thiel Fellowship, tech billionaire Peter Thiel's project that awards $100,000 to 20 promising innovators under 20 so they can pursue their inventions in lieu of a post-secondary institution. And boy, oh, boy, did that award turn into a hell of a lot of value for the world and a lot of people.

• 3:30Tim Ferriss?

  And Vitalik, I believe, is now a ripe old 27 years old. You can find his writing and much more at vitalik.ca, that's V-I-T-A-L-I-K dot C-A. And for ease of reference and ease of finding, you can find the previous conversation with Nick Zabo on Bitcoin and smart contracts and other core concepts at tim.blog/bitcoin. And you can also find this current conversation with Vitalik on all things Ethereum at tim.blog/ethereum. That's E-T-H-E-R-E-U-M. Please enjoy this wide-ranging conversation with Vitalik Buterin and Naval Ravikant.

• 4:22Tim Ferriss?

  This episode is brought to you by Theragun. I have two Theraguns and they're worth their weight in gold. I've been using them every single day. Whether you're an elite athlete or just a regular person trying to get through your day, muscle pain and muscle tension are real things. That's why I use the Theragun. I use it at night, I use it after workouts. It is a handheld percussive therapy device that releases your deepest muscle tension. So for instance, at night, I might use it on the bottom of my feet. It's helped with my plantar fasciitis. I will have my girlfriend use it up and down the middle of my back and I'll use it on her. It's an easy way for us to actually trade massages in effect. And you can think of it, in fact, as massage reinvented on some level.

• 5:05Tim Ferriss?

  Helps with performance, helps with recovery, helps with just getting your back to feel better before bed, after you've been sitting for way too many hours. I love this thing. And the all-new Gen 4 Theragun has a proprietary brushless motor that is surprisingly quiet. It's easy to use and about as quiet as an electric toothbrush. It's pretty astonishing. You really have to feel the Theragun's signature power, amplitude, and effectiveness to believe it. It's one of my favorite gadgets in my house at this point. So, I encourage you to check it out. Try Theragun, that's Thera, T-H-E-R-A-G-U-N. There's no substitute for the Gen 4 Theragun with an OLED screen. That's OLED, for those wondering. That's Organic Light-Emitting Diode Screen.

• 5:49Tim Ferriss?

  Personalized Theragun app, an incredible combination of quiet and power. So go to Theragun.com/Tim right now and get your Gen 4 Theragun today. Or you can watch the videos on the site, which show you all sorts of different ways to use it. A lot of runner friends of mine use them on their IT bands after long runs. There are a million ways to use it. And the Gen 4 Theraguns start at just $199. I said I have two. I have the Prime and I also have the Pro, which is like the super Cadillac version. My girlfriend loves the soft attachments on that. So check it out. Go to Theragun.com/Tim. One more time, Theragun.com/Tim.

• 6:31Tim Ferriss?

  This episode is brought to you by Peak, P-I-Q-U-E, and their brand new supplement, Daily Immune, vitamin C optimized for absorption. Americans are arguably famous for having the world's most expensive urine. So are you absorbing your vitamin C or just peeing it out? Studies have shown that you might absorb less than 50% of vitamin C when you consume amounts over 1,000 milligrams, also a gram. Those are the same thing. Peak's Daily Immune is maximized for absorption with liposomal encapsulation technology. Liposomes help deliver vitamin C to exactly where you need it, your cells, not just your bladder. And I've been using their packets now for a few weeks, have gone through a number of boxes,

• 7:13Tim Ferriss?

  and I typically take one to two per day as I would say a maintenance kind of support dose, and I'll take more than that if I feel any type of cold coming on or any symptoms thereof. Peak's unique formula supports a healthy immune system, and Daily Immune features a buffered, non-acid form of vitamin C that's gentle on your stomach. It is a powerful and absorbable vitamin C that fits in your pocket and tastes great. So I will often take a handful of these, just stick them in a jeans pocket for the day, and then every few hours, open up a packet. Plus, it contains just seven clinging ingredients, no preservatives, refined sugar, or additives. All you need to do is open and squeeze it into your mouth, no glass, water, or spoon needed. Personally, I like to have a small

• 7:57Tim Ferriss?

  chaser of water or carbonated water, but you don't need it. You can do it on the run. It's so easy and tastes so good. Think black European elderberries. That is the flavor I've been consuming. You might choose to take it once or twice a day or more, as I do. There's a reason Peak's products have more than 15,000 5-star reviews. People are very happy with their products. Try it for yourself, risk-free. With their 30-day satisfaction guarantee, you either love it or you get your money back. So go to peaktea.com/tim, that's P-I-Q-U-E-T-E-A.com/tim, and use code TIM at checkout to get 5% off of your first order, plus free shipping when you purchase a bundle. That's peaktea, one more

• 8:39Tim Ferriss?

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• 8:50Tim Ferriss?

  At this altitude, I can run flat out for a half mile before my hands start shaking.

• 8:55Speaker 01

  Can I ask you a personal question?

• 8:57Speaker 02

  No, it is an inappropriate time.

• 9:01Speaker 01

  I'm a cybernetic organism, living tissue over metal endoskeleton.

• 9:13Naval Ravikant?

  Tim, this is Naval speaking. Tim, thanks for having us. We're joined by Vitalik Biedrin. Vitalik is the, I believe now, 27-year-old creator of Ethereum, which is the most exciting cryptocurrency since Bitcoin, and has incredibly broad ambitions and capabilities. And Vitalik is a really interesting guy because not only did he create Ethereum or co-created it, he also is a multidisciplinary polymath. His blog at vitalik.ca is full of lots of great ideas and insights and thoughts. He runs the Ethereum Foundation. He's sort of contributed to all kinds of things like automatic market makers, rollups, social recovery wallets, decentralized finance, scalability of blockchains, governance,

• 9:57Naval Ravikant?

  all kinds of great ideas in the cryptocurrency space. He also thinks a lot about public goods, radical markets, wealth distribution. He runs a very active Twitter account where he good-naturedly engages with all kinds of people who are constantly trying to get into fights with him, which is kind of what people do on Twitter. And yeah, and we're very lucky to have him. I would say that for me, along with Nick Sabo, who we interviewed here in 2017, who created BitGold and coined the term "smart contracts", and along with Zuko, who is the irrepressible founder of Zcash, I've always found Vitalik, Nick, and Zuko to be sort of the three people on Twitter that I early on learned a lot about crypto from.

• 10:40Naval Ravikant?

  Welcome Vitalik and thanks for taking the time to talk to us about yourself and Ethereum.

• 10:44Speaker 02

  Thank you very much for the introduction, it's good to be here.

• 10:47Naval Ravikant?

  Yeah, so I'm gonna start just right off the bat, we're probably gonna try and keep this fairly basic and high level. For those of you who are quite experienced with cryptocurrencies, this may be a very general conversation, but at the same time, I'm gonna ask Vitalik some hard questions. We're not gonna let him get away with just the PR angle. But we'll start with some basics. Let's assume we know what cryptocurrencies are, and for those of you who are not that familiar with it, I would suggest you go back to the podcast that Tim and I did with Nick Sabo back in 2017. I believe that's titled "The Quiet Master of Cryptocurrency."

• 11:21Speaker 02

  Correct.

• 11:23Naval Ravikant?

  So, once you're kind of up to speed on that, this one will make a lot more sense. But we're gonna get right into not what is crypto or what is Bitcoin, we're gonna get into what is Ethereum. So, how do you describe it today, Vitalik?

• 11:35Speaker 02

  Sure. So, the one-sentence explanation of Ethereum that I sometimes give is it's a general-purpose blockchain. So, this of course makes more sense if you already know what a blockchain is, right? It's this decentralized network of many different computers that are together maintaining this ledger or this database together. Different participants have very particular ways of plugging into that. They can send transactions that do very particular things, but no one can tamper with the system in a way that's outside of the rules. And Ethereum expands on the Bitcoin approach, basically saying, well, instead of having rules that are

• 12:17Speaker 02

  designed around supporting one application, we're going to make something more general purpose where people can just build their own applications and the rules for whatever applications they build can be executed and implemented on the Ethereum platform. So, one explanation that I heard one person give is that Bitcoin is like a spreadsheet where everyone only controls their own five squares of the spreadsheet, but Ethereum is a spreadsheet with macros, right? So, everyone kind of controls their own accounts, which is kind of their own little piece of this universe, but then these pieces of the universe can have code and they can interact with each other according to pre-programmed rules, and you can build a lot of things on top of that, right? Like Bitcoin.

• 13:03Speaker 02

  Builds a monetary system on top, kind of famously Ethereum can build, you know, decentralized domain name systems, again, various decentralized financial contraptions, you know, prediction markets, you know, non-fungible tokens and all sorts of different schemes that people have been coming up with. And the limit for what you build is basically your own creativity. But like the core difference between building an application on Ethereum versus building it on, you know, some traditional centralized platform is this core idea that once you build your application, the application does not need to depend on you or any other single person for its continued existence. And the application is guaranteed to continue

• 13:48Speaker 02

  running according to the rules that were specified. And like you do not have any ability to kind of irregularly go in and tamper with it.

• 13:56Naval Ravikant?

  That's a great overview. And I like that Excel analogy of it's a spreadsheet with macros instead of just a spreadsheet where you control your own cells. I'll also try and articulate in a few ways that I understand it kind of around the edges, because I think Ethereum is one of those things that's now quite a bit bigger than you. And it probably has evolved in ways that even you didn't fully anticipate. So in some sense, we're discovering Ethereum and no longer just building it. I also like to think of it as kind of an unstoppable application platform. So a platform for building unstoppable applications, kind of like a world computer, where let's say that we want to run very, very important computer programs where we don't trust the computer itself, and we don't trust the other people to execute code in our behalf, then we create a single world computer where we check the code on

• 14:40Naval Ravikant?

  the machines of many, many different people all around the world who are properly incentivized to maintain a single computing state. So if Bitcoin is a shared ledger, then Ethereum is a shared computer for the entire world to run its most important applications. So some of the applications that people are building on it are among the possibly the most important applications of the future. So let's talk a little bit about those applications, about what this trustless world computer is doing. What are the applications today that are the most common and that you're most excited about?

• 15:14Speaker 02

  So first of all, I think if the asset is a cryptocurrency and it itself is an application and of the first application of Ethereum. Going beyond financial things a bit, I mentioned ENS, the Ethereum Name System. So ENS, you can think of it as a decentralized name system, right? So like for example, you know, when you go to ethereum.org, there's DNS, Domain Name System, which is this big, the kind of table that maintains this mapping of, well, you know, if a person enters ethereum.com, the server they actually have to talk to, to talk to the website is, you know, like some particular IP address.

• 15:53Speaker 02

  And this DNS system that maintains this kind of public relationship is a fairly centralized system with a very small number of servers running it. So ENS is a fully decentralized alternative that is running on the Ethereum blockchain. And you can use it not just for websites, right? Like you can use it just for accounts. So for example, like there is a messaging service called Status. It's like, in terms of like what it feels like to use it, you know, it's a messenger, it's similar to Telegram or Signal or WhatsApp or any of those. But the difference is that it is decentralized and so there is no dependence on any single server or like there's no dependence on Status, the company, which is nice because it makes

• 16:35Speaker 02

  the whole thing much more censorship resistant, it makes the whole thing just a much more guaranteed to survive, you know, regardless of what forces wish for for its existence or wish against its existence in the future. ENS is this really important part of it because, well, if you have a chat application, I need to have some name by which I can refer to, you know, like the users that I want to talk to, right? Like I want to like type in and say, I want to talk to Nava. And things like Telegram and Signal and WhatsApp, that mapping is generally basically

• 17:08Speaker 02

  Kind of authenticated and controlled by a server. But whereas in the status, it's all just done by the Ethereum blockchain. Right. So that is one good example, I think, of a kind of not financial, but still very important Ethereum application. Now, going beyond those two cases, there's a lot of kind of more complicated things. So there's the DeFi decentralized finance space, which is this big category that has all sorts of interesting contraptions in it. Like so, for example, there's prediction markets, so platforms where you can go and like bet on different outcomes. So like, you know, who's going to win some sports game or, you know, who's going to win some particular election.

• 17:52Speaker 02

  There have been very successful prediction markets running on the Ethereum blockchain. There's just markets for trading between different kinds of assets. There's what's called synthetic assets. And so if you want to have access to some mainstream real world asset, like, you know, a dollar could be one example, but, you know, you don't have to like dollars, like there's lots of other examples as well. There's versions of this that are kind of purely virtual, sort of simulated versions that exist purely, you know, within the Ethereum environment. Now, there's this entire kind of very powerful financial toolkit that exists within the Ethereum ecosystem. On the whole, like, there's just a lot of these interesting things that happen.

• 18:36Speaker 02

  I mean, there's even games that are based on Ethereum. There's a whole bunch of different things.

• 18:41Naval Ravikant?

  Yeah, in fact, DeFi decentralized finance is this gigantic new category in which entire companies and protocols are being built in a decentralized way that allow you to do a lot of things that would have required Wall Street, along with bankers and judges and lawyers and accountants to handle. But now it's done through smart contracts that are living on the blockchain, on the Ethereum blockchain. And these smart contracts are kind of at the core of the Ethereum blockchain. We talked about these in the Nick Sabo podcast, but he famously described it as like an automated vending machine as an example of a smart contract where you you put in money. In a certain slot and there's a certain set of rules and you press certain buttons and you get certain products in exchange.

• 19:24Naval Ravikant?

  But these smart contracts obviously now are getting far, far more complicated, can actually be used not just to compose financial applications, but even applications that we don't normally think of as financial. One way to think about it, for those of you who are into computer programming, is imagine if every piece of a program, every function had an address from which anyone in the world could reach it, a unique identifier address, and it had a slot into which you could insert money. So you could call any function, wherever it is in the world, you could insert money into it and it would do something on your behalf. And so that gives Ethereum applications this very interesting property called composability, where you can use them almost like Lego blocks, each one builds on the rest. And so the final product in DeFi ends up very, very advanced.

• 20:10Naval Ravikant?

  In the traditional world, when, uh, let's say like Robin Hood builds their application and then Schwab builds another application and Wisdom Tree builds a mutual fund or an ETF, those can't combine with each other. But in the Ethereum world of DeFi, all of these apps by default are open source, permissionless, programmable and can connect right into each other. They can be identified, called and paid for in a permissionless, trustless kind of way. So the, the infrastructure that gets built in DeFi and Ethereum, although it's, it's very difficult to build and it's complex, once a piece is built, it is available to everybody and sort of stacks on to each other, almost to create one of those Japanese style Voltron robots that just gains in power. Yeah.

• 20:54Tim Ferriss?

  Naval, let me jump in here just as a proxy. I'm not even a proxy. I am a listener, literally in this case, and I'm happy to be the listener. Uh, so I'm both a proxy and an actual listener, but how does one think about intellectual property if all of these otherwise separate or previously separate applications and so on are now Lego pieces that are kind of natively interconnected? Is that a silly question? I'm just wondering if.

• 21:22Naval Ravikant?

  No, no, it's a, it's a really good question. I mean, my high level view on it is that what blockchains do is through consensus. They protect the data. So the users own their own private data and then sort of the public data that's needed to make the blockchain work. Its integrity is protected by the blockchain and that's what blockchains do. They get a whole bunch of people to cooperate on what the canonical output should be. But the code itself is completely open. It is kind of backwards to what we're used to. We're used to closed source companies capturing value. But here, all the value is created by open source. But yeah, Vitalik, I'm sure has a different view on this, but you know, there's lots of copycats and clones and there's attacks and forks and so on.

• 22:01Naval Ravikant?

  And it's kind of a Wild West out there, but generally, so far, it does seem like the original products and the best products are succeeding the best. And they're sort of always in the scoreboard of market cap and transactions and usage. But yeah, it's a Wild West out there.

• 22:16Speaker 02

  Yeah, and I think the blockchain environment is definitely one that operates under somewhat different rules than the traditional environments, right? Like, just one example of this is the idea of forking, right? So, one story that happened around the beginning of last year that I just love to tell because of how it kind of combines together the values of the space so nicely is there was this platform called Steam and in Steam, there's Steam the platform and then there's Steam the company, right? And like Steam was its own blockchain and Steam the company, like they did have some Steam tokens, but like they didn't have the right to like just do whatever they want with Steam the platform because it was a decentralized thing.

• 23:01Speaker 02

  But you know, they had some tokens and then Steam the platform had a voting mechanism and holders of Steam tokens could vote on changes. But then the Steam the company got bought out by Justin Sun, you know, the infamous Tron person. And Justin Sun, like basically Like started doing some things to increase his control over the Steam platform. The community was very unhappy with him and then he even took advantage of some of the voting mechanisms and some coins held in exchanges to seize control of at least the formal rules of the platform even further. But then what happened was that the users rebelled, right? What the users said is, well, we're creating a new platform called Hive and Hive is just

• 23:46Speaker 02

  a fork of Steam. It is going to have, start with the same, or mostly the same rules as Steam and we're even going to copy over most of the balances of the Steam tokens, except if you participated in the attack, then your balance goes to zero in the new fork. And most of the users basically collectively moved over to this new fork and Justin Sun had this full control of an empire, but then nobody cared about that empire anymore because everyone now cared about Hive, right? So forking is this primitive that exists and because of it, you do have this ability for just communities to exert collective agency and basically protect themselves from

• 24:30Speaker 02

  being exploited. But at the same time, if you as a project team are good to your community, then those same effects work in your favor, right? So those effects work in your favor because our community is willing to support your project. If someone makes a copycat, then generally very few people are willing to support and provide any assistance to that copycat project unless of course you do something to betray the community's trust, in which case those kinds of situations are the situations that the copycat is for. I think legitimate developers have plenty of ability to build projects, to gain from

• 25:11Speaker 02

  those projects becoming successful and there's a lot of ways in which the crypto space does end up assuring that. But at the same time, it's also not an environment where anyone's level of control is infinite and in some ways that's the other beautiful thing about the space.

• 25:29Naval Ravikant?

  Vitalik has this great line in his blog where he said, "We wanted digital nations, but we got digital nationalism." And there's a lot of truth in that. But basically, these are like digital nations. And one of the analogies that I use for DeFi is that these are like crypto castles made of math that are freely trading with each other. Just imagine like people are building applications on top of Ethereum. They're protected by mathematics. Those are the walls in those castles and there are moats which are rivers of cryptography. But then they have free trade policy with each other. So that creates a lot of innovation. But if one of them starts misbehaving, then people can leave and go to the next crypto castle. Or this is where the analogy breaks down. They can actually replicate it, just create a copy and move to that one, like in the Steam and Hive example.

• 26:14Tim Ferriss?

  Well, that also is, I mean, it has comparables outside of the world of blockchain and cryptography in so much as if we look at, say, WordPress as an open source project, you have companies like Automattic and Matt Mullenweg. People may notice that M A T T in the middle of Automattic, two Ts, which layers then these for-profit services on top of an open source platform. And technically, someone could create a competitor. But like you said, there are these questions of viability, value add, and moral leadership and so on, right? So there are sort of certain elements that contribute to the Ethereum ecosystem,

• 26:59Tim Ferriss?

  so to speak, that you can perhaps compare to other things to help educate people as well. I was just sort of connecting some of those dots.

• 27:08Naval Ravikant?

  That's a good analogy with WordPress. The place where the analogies diverge is that WordPress, it's kind of a single player game, like each person owns their own blog.

• 27:17Tim Ferriss?

  Right.

• 27:17Naval Ravikant?

  Whereas in Ethereum world, you could use Ethereum to build a Twitter that everybody owns. And it requires social consensus to operate, but multiple people can put their data in. So it's this really weird thing where it's decentralized, it's open source, but it's still used to coordinate and bring people together. Blockchain's combined this really weird combo of individualism and individual control and the ability to leave, along with consensus and community and cooperation and build this giant public good. So it is its own thing. It's hard to figure out, but it's worth figuring out because this is the next phase of the internet after mobile.

• 27:53Tim Ferriss?

  Yeah, let me, if I could jump in, just to kind of be the kid in the corner of the class, in the back of the class, asking questions. I would love to hear from you, Vitalik. What was the initial vision for Ethereum? And what has most surprised you, if anything? You know, I was doing a bit of reading just on the genesis story. And first of all, I mean, maybe separately, maybe for another conversation, it seems like a lot was done right in the beginning. And I was reading a quote from a Wired piece in 2016. And it's, and this, please feel free to fact check if it's not accurate, but it says, you know, when I came up with Ethereum, my first thought was, okay, this thing is too good to be true. And I'm going to have five professional cryptographers raining

• 28:36Tim Ferriss?

  down on me and telling me how stupid I am for not seeing a bunch of very obvious flaws. But, you know, dot, dot, dot, two weeks later, I was extremely surprised that none of this happened. As it turned out, the core Ethereum idea was good, fundamentally, completely sound. I'd love to hear what the core idea was. Maybe we've already stated it and it's redundant, but the initial vision, and if anything, has been really surprising to you that has transpired since those early days.

• 29:02Speaker 02

  So I think the core idea is to make a general purpose blockchain, and to kind of open the gates for people to build what they want to build on top of it, right? Like, the background kind of story for when Ethereum was starting to be formed was that this was just the time when the idea of a blockchain, and Bitcoin was just starting to gain legitimacy. And people were just starting to realize that, you know, there are these applications for blockchains, other than just them running a currency. And it would be nice to build a platform that can actually support them. And so, at the beginning, right, you had single purpose blockchains. You had Bitcoin for currency. You had Namecoin for domain

• 29:44Speaker 02

  names. You would have like, single purpose protocols, like covered coins for issuing assets. The second step is what I call the Swiss Army knife protocols. So a Swiss Army knife protocol basically says, well, here's a list of, you know, 25 different applications that we've identified as being important, and let's build a blockchain to support all of them. So like Mastercoin was one example of what I call the Swiss Army knife protocol. And the problem with the Swiss Army knife protocol is that two weeks later, you know, some 14 year old teenager in Finland comes up with a 26th application. You have to go hard work the protocol. So. The next, the natural step is this kind of general purpose approach where instead of your blockchain supporting 25 applications, your blockchain supports a programming language.

• 30:29Speaker 02

  And whatever system with whatever rules he wants to build, you write that in a piece of code and the nodes in the network can all execute the code and the network kind of helps to collaboratively enforce the rules of this code for the objects that are in your particular application. So that was kind of the technical perspective. And then there was also the perspective of, well, you know, what did I envision people building on top of it? It's actually surprising how it hasn't changed that much. I'm like, I remember some of the very earliest applications included financial gadgets. So contracts for difference were one example, which is, you know, one very particular subset of the thing

• 31:12Speaker 02

  that today we call DeFi, decentralized file storage, kind of like, you know, pay people to store a gigabyte of your data was one thing I was excited about. Decentralized name systems was excited about those, you know, decentralized trading between different assets. Like a lot of the examples of just things that people wanted to do with blockchains at the time, like they're just are the same as what people are doing today. Though there are also new applications, right? So like non-fungible tokens that I briefly mentioned, NFTs. The idea here is basically just create a token that, you know, represents something other than a financial asset. And one example of this could be that an NFT can represent video game assets.

• 31:56Speaker 02

  An NFT could represent like a digital work of art where he wants to sell kind of like basically branding rights as being the original owner of it. And, you know, there's a lot of these different use cases. And these, right now, the NFT ecosystem has been extremely successful. And about a week ago, there was a Nyan Cat NFT that got sold for the equivalent of about $580,000. And so that's an example of a new thing. Another example of an old thing is DAOs, decentralized autonomous organizations. And so the idea here is, well, you know, let's build an organization where the rules for the decision making in that organization, you know, the equivalent of like shareholder or board voting or whatever you want to use,

• 32:39Speaker 02

  could just be written as rules in a smart contract. And then the program that executes those rules can be directly in control of whatever assets the organization is supposed to control. And, you know, we've seen a couple of examples of kind of simple DAOs in action. A MakerDAO, which kind of maintains, you know, DAI, the stablecoin that algorithmically targets a price of $1 is one example. I mean, now there's also RAI, you know, there's a lot of examples of this. A lot of things that we expected from the beginning, prediction markets also have been part of, you know, what we were excited about using blockchain's force since 2014, and they're still around today. So a lot of old things and also some new things as well.

• 33:24Tim Ferriss?

  Thank you. Extremely helpful.

• 33:26Naval Ravikant?

  Yeah, I mean, yeah, some of the ones that Vitalik just laid out, like I think your recent guest Katie Haun mentioned NFTs as nifties is what she called it.

• 33:34Tim Ferriss?

  Oh, no, I did, because I wanted to try to force that. I wanted to try to force that into the lexicon.

• 33:39Naval Ravikant?

  Got it. Okay. Well, you won. Nifties. Yeah. So nifty, nifties are this crazy idea that like owning a digital copy of something and having your name stamped to it somehow gives it more value. But it seems to work. It works with collectible trading cards. It seems to work with digital art. And then because of the composability of the Ethereum infrastructure, you can reuse these nifty items across different games, different museums, different virtual worlds. And so you own it in one place and you own it everywhere, which is a very powerful concept. So digital scarcity was born with Bitcoin, but now extending into things that are not fungible, that are not exchangeable with each other. And that's been frankly, for me, a surprising thing that has emerged in Ethereum. Ethereum, it's funny because you're asking Vitalik,

• 34:24Naval Ravikant?

  like, what did he expect and what did he not expect? I remember when Ethereum first launched that a lot of computer scientists I spoke with privately said it would never work because it's kind of this crazy idea that the way we're going to get a trusted computer in the cloud is we will each run a copy of all the computations on all of our computers and then we'll sync it up and make sure it matches. So that's the recipe for building the slowest computer in the world. But somehow we've gotten away with it. And so I think the big debate now about Ethereum has shifted from will it work to will it scale? And when I talk to my friends in the crypto community and I say, hey, what do you want me to ask Vitalik? They send me a list of many, many questions, but the centerpiece is always the same.

• 35:07Naval Ravikant?

  And like, how the heck is this thing going to scale? And I would like to get in that conversation. That is a more complicated conversation. It's technically sophisticated, but basically we're saying, hey, we're going to have one giant mainframe computer in the cloud running everyone's applications so that we can all trust the computer instead of trusting each other. But how is that going to scale? Isn't that going to be the slowest computer of all time? And so now we're in a situation where Ethereum, it's actually cleverly named, it runs on so-called gas, quote unquote, and there's a limited amount of gas per block in the Ethereum blockchain. And frankly, the gas, the price of gas has gone up. These decentralized finance applications, they can be very lucrative. They're trading large amounts of money and people are eager to use them, but the price of each of these transactions is going up.

• 35:52Naval Ravikant?

  I was trying to do a small DeFi transaction the other day and it was a hundred dollar transaction and the price was $25 just to execute the transaction. And that's a very, very high transaction fee. And I know Vitalik and Krupin working for years on the Ethereum 2 project to bring that cost down. By the way, as an aside, that is one place where Ethereum really differs from Bitcoin. Bitcoin is saying, we're digital gold, this thing is immutable, don't change it. And the fights in the past have been about changing Bitcoin or not. There was a big famous schism over that. But now with Ethereum, you know, the question is, the philosophy is we do change it, we do improve it, we do make it better. But in the process, there is a greater chance that things can go wrong, that it can break. So now we're entering Ethereum 2, which is the scalable version of Ethereum.

• 36:34Naval Ravikant?

  So Vitalik, do you want to give us a quick overview of Ethereum 2 at a very high level? And then we can kind of dig into the pieces.

• 36:41Speaker 02

  Sure. So I think one other thing that's important to kind of add just to, you know, give a complete picture of scaling is that there is these two families of scaling, layer one scaling and layer two scaling, where layer one scaling basically says, well, let's make the blockchain itself better. And layer two scaling says, well, let's come up with protocols that are going to sit on top of the blockchain and that use the blockchain in more clever ways to provide the same kinds of security guarantees that a blockchain has, but that provide much more scalability because you're not just kind of dumbly sticking like literally everything and doing everything on a blockchain directly. And so like Bitcoin, for example, you know, especially after the scaling war is focused very exclusively

• 37:26Speaker 02

  on layer two, right? Whereas, you know, say Bitcoin Cash is very layer one focused.

• 37:30Naval Ravikant?

  And this is a, this is a classic thing in computing. Like, so for example, when I go to a website, the domain name system is at a different layer, the DNS servers, and then the HTTP server is a server of the web page or another layer on top. And then there's a caching layer where some of the data might be kept closer to me. And then on my own computers where I run the JavaScript, because I don't want to run that JavaScript way back on the HTTP server or the DNS server. So there is a long, rich history in computing of stacking layers upon layers. As you get closer to the point of the user, that's the point at which you use more compute and you execute more and more of the code. So basically, the idea here is decentralize only what you need to

• 38:12Naval Ravikant?

  decentralize. And so Ethereum is going to split into, or it's going to have multiple layers. And I think what you're saying is layer one is really Ethereum, and that's the least scalable part, but that's where the security comes in. And layer two is where the code is run. And that's, that has different properties, which you're going to get into.

• 38:29Speaker 02

  Right. Well, the way that I would describe it is like in comparison to, you know, Bitcoin, which is very layer two focused, and Bitcoin Cash, which is very layer one focused, Ethereum takes a moderate approach. So we do both kinds of scaling, right? So there is the ETH2 effort, which you mentioned, which, you know, it is layer one scaling, right? It is basically saying, well, we're going to make this big upgrade of the Ethereum blockchain. We're going to Move it from a proof of work to a proof of stake, where you know, proof of work is this current consensus mechanism that keeps the blockchain secure, that runs on having a large number of computers just constantly cranking out these kind of mathematical hash

• 39:09Speaker 02

  solutions 24/7. And proof of stake is a much more energy efficient alternative. There's also sharding, which is a layer one scaling solution that says that instead of every node in the network having to download and process everything, every node in the network only has to download and process a small portion of all of the data. You know, the blockchain protocol is designed in a clever way that still ensures a kind of safety despite having that constraint. So think of it as, you know, combining at least some of the advantages of, you know, a Bitcoin style blockchain and Bitcoin, right? Like Bitcoin is very layer one scaled. Like there's, there's nobody who downloads, you know, every movie or even like an index of every movie.

• 39:53Naval Ravikant?

  Yeah. So before we get to layer two, so, so layer one is, you're saying is proof of stake, which is moving from proof of work to proof of stake and sharding, which is breaking it into pieces and having, you know, different pieces do different things and then try to reconcile them. On the proof of stake side, I mean, that itself is a whole big debate that could take up the entire podcast.

• 40:15Tim Ferriss?

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• 41:45Tim Ferriss?

  So the proof of work I'm familiar with, proof of stake, could we just define what that means?

• 41:50Speaker 02

  The core idea basically is that in any decentralized consensus system, where you know, you don't have a central registry that keeps track of who the different humans are, you need some way for people to like basically vote on like which blocks and which transactions got included in the network. And you need for that vote to be secure against what's called a civil attack. A civil attack is when one attacker just pretends to have one million different accounts. Normally like in, you know, like Reddit and like Google accounts and Twitter and all of these centralized systems, like this is done using centralized mechanisms, right? Like they sometimes require phone number verification and then phone numbers themselves.

• 42:35Speaker 02

  Some often end up having some kind of KYC on top of them. There's various kind of AI techniques that try to detect bots. But in a decentralized system, you know, we don't have this kind of centralized registry of who gets to be an actual user, right? And we don't want to have that. And so to prevent this civil attack, right? To prevent one person from just generating a billion accounts and outvoting everyone else, the solution is economics, right? The solution is basically that the extents to which you can vote on just this very limited question of which transactions get included in what order is proportional to how many economic resources you put in.

• 43:15Speaker 02

  So in the case of proof of work, those economic resources come in the form of computing M hardware that you're running, right? Like when You're running this mining software on your computer. You're cranking out these hash solutions. Every hash solution gives you the right to generate a block. And the number of hash solutions that you can generate is proportional to how many computers you put in. In proof of stake, it works a little differently, but the core principle is that your ability to participate in creating the outcome is proportional to how many coins that are in the system that you're staking. And so the reason why proof of stake is efficient is because in proof of work, like the way that you're basically proved that you have a computer to the system is by just like

• 43:59Speaker 02

  running the software on that computer 24/7 and generating hash solutions, right? Like, that's the only way to safely do it, because if you did not have to run the computer 24/7, like if you only had to run it 12/7, well, then, you know, you could have one computer that just pretends to be two different computers. But with proof of stake, if you have coins, those coins are saved in an account. That account has an associated public and private key, and you can just make a digital signature with a private key. So you don't have to, like, run any computer for longer than a few milliseconds. That's the kind of core principle.

• 44:31Tim Ferriss?

  That's supremely helpful. Thank you.

• 44:33Naval Ravikant?

  Yeah, this is beyond the scope of this podcast, but it is actually hotly debated how much more efficient proof of stake is, because there's also, these blockchains, they have to issue coins to, in exchange for the security, to the so-called miners or validators in the case of proof of stake. And people will, you know, spend a dollar to get a dollar, so to speak. If you're giving out free coins in the blockchain, then people are going to hustle in any which way possible. And in proof of work, they'll do it by buying more computing equipment to run more hashes to get the new coins coming out. And proof of stake, they'll have to lock up funds or they'll have to obtain funds to do it, and there's a cost to doing that, to obtaining those funds. So there's no real free lunch, but there are arguments for efficiency with proof of stake, especially as you get to securing very large amounts.

• 45:18Speaker 02

  The way that I would just briefly summarize the proof of stake case there is that like proof of stake can actually survive, at least you know, in the opinion of proof of stake supporters, with much lower rewards than a proof of work can. And the reason is, and like because of how proof of stake works, the ratio between the cost of attacking a system and the cost of just running it like becomes like more favorable. But you know, this is a long debate. I've written on it. I have a post on vitalik.ca. If you just scroll down the most recent one called proof of stake and then you know, proof of work proponents have their own posts as well. So encourage you to read all of them.

• 45:54Naval Ravikant?

  So going back, so this is all layer one scaling. Switch from proof of work to proof of stake, start sharding the blockchain. And this gets you some tens of times improvement, like you know, 20 times, 25 times improvement.

• 46:06Speaker 02

  A hundred times.

• 46:07Naval Ravikant?

  Hundred times, fantastic. So then there's layer two, which stacks on top.

• 46:12Speaker 02

  Yes, so layer two, as I mentioned, is about creating protocols that live on top of the blockchain that only use the blockchain in very particular ways. So there's lots of techniques for this, right? Like the simplest layer two to explain, I think, is a very special purpose kind of layer two called a payment channel. And so the idea behind the payment channel is like, let's say I am, you know, selling you Naval and an internet connection and you're paying me per megabyte. Like let's say you're paying me, you know, like one cent per megabyte. Now, if we want to do this over the blockchain, the naive way to do it is every time a megabyte of data passes through the connection, you just make an on-chain transaction and you send me one cent.

• 46:56Speaker 02

  The problem is this requires lots and lots of transactions and the transaction fees are actually much more expensive than one cent. So it's just completely economically unviable. So here's what we do instead. You put $10 into a smart contract, right? So you send $10 on the blockchain to an address where according to the rules of the Ethereum network, once those funds are at that address, those funds are controlled not by a human, but by a computer program. And that computer program will then have some rules that I'll explain later. Right. So at the beginning, you send $10 to this contract. And so far, you actually haven't made any payments because, as I'll explain, the contract has rules that will allow you to get your money out.

• 47:40Speaker 02

  Now, here's what you do after one megabyte. After you, uh, no, we have one megabyte worth of internet data passing between us. You create an off-chain message and you digitally sign that off-chain message that just has the number one cent just written on it. Right. So you will just write the, you know, the number one cent and you attach your signature and you send this to me. None of this goes on chain. Then one more megabyte happens. You write out a digital message that has the number two cents and you digitally sign it, you send it to me. Oh, sometime later, every time a megabyte happens, you just send me one more of these messages. So you keep on incrementing the number. And let's say after a few hours of this,

• 48:23Speaker 02

  in total, we've had 347 megabytes worth of a communication and you've sent me a message that says $3.47 and you are now, like, no longer wants to use my internet. You know, you're signing off for the day and so, you know, we're done. So now here's what happens. I can then take your message and your message that says $3.47. I can attach my own signature to it and I can publish it as a transaction going to the smart contract and you have your $10 in it. The smart contract has a rule that says, if I send one of your off-chain messages, I, I, I call them tickets. If I send one of your tickets, if I kind of wrap one of your tickets in an actual transaction

• 49:08Speaker 02

  and I actually kind of publish your ticket to the blockchain, then whatever amounts of money is on your ticket goes to me and the remainder gets refunded to you. Right. So I get my $3.47 and you get your $6.53 back. Now, It's actually incentive aligned, right? Because I always have the ability to use the most expensive ticket that you the most recent ticket that you sent me. And I don't really have any reason to use one of your older tickets. Right? So I'm always going to pick your later ticket. And so I'm always going to claim all of the money that I'm owed and you get your money back. Now, if I disappear, then after some period of time, you have the ability to just go in and take the money back for yourself. Right?

• 49:53Speaker 02

  So the idea is that it's this contraption where, you know, in reality, you've made a payments to me 347 times. Right? Like you, we've had 347 interactions during which the amount of money that's entitled to me goes up and the amount of money that's entitled to you go down. But actually, there's only two actual blockchain transactions that are visible to and needs to be processed by the rest of the network. Right? So we make 347 payments, but the blockchain only sees two of them. And that's, you know, a factor of 178 to improvement there.

• 50:31Naval Ravikant?

  Yeah. So if I can summarize this for a second for kind of our listeners. Basically, what you're saying is, let's say that you and I have a long-lived contract for some service. Rather than publishing every little aspect of that contract onto the Ethereum blockchain and flooding it, we go off to the side. We do a whole series of transactions, but every time we do a transaction, each of us like stamp it and say, yeah, that little piece was done. And we update the transaction between the two of us. And then when we're finished, either one of us can go back to the blockchain and submit the, the, the record of all the transactions and say, look, it's signed by both of us. So this is valid, but either one of us can submit it and the blockchain executes it. So the blockchain only needs to know when we left with how much money staked on this transaction

• 51:16Naval Ravikant?

  and when we came back and what the total change was. It doesn't need to keep track of all the intermediate pieces.

• 51:21Speaker 02

  Exactly. Yes, that's a good summary. Now, channels are, I think, the simplest kind of layer two, but they're also the least powerful layer two. They can only do payments. They have a hard time doing many kinds of smart contracts. Channels exist and they are being used for more and more things. And they're great. But the thing that the Ethereum ecosystem is the most excited about is something called rollups. Now, I don't want to actually, you know, go in and fully explain rollups because they're even more complicated than channels. But for those who are interested, I do have an article. Once again, you know, go to italic.ca, scroll down like a, I think it's called "An Incomplete Guide to Rollups." And so I describe channels and also this thing called plausible and then also rollups.

• 52:05Speaker 02

  And rollups are really powerful because they can support not just payments. They can support the full generality of applications, like exactly the same applications that you can run directly on the Ethereum blockchain itself. But if you do those things inside a rollup, they become 100 times cheaper. So it's this very powerful scalability technology. And the Ethereum community loves rollups because they're very easy to upgrade to. Because if you run an application on Ethereum, you can just run the exact same application inside of an Ethereum virtual machine compatible rollup, of which a couple of projects exist. And actually, I think a couple of days ago,

• 52:46Speaker 02

  Optimism announced that they're going to launch their mainnet fairly soon.

• 52:51Naval Ravikant?

  Yeah, rollups are fascinating. I've been looking into them a little bit and they're worth learning about. It's basically the idea is just that there's these very complex machines that are not on the blockchain, that are off the blockchain, that are running the transactions. But then they're submitting different kinds of proofs back to the blockchain to say, "Don't worry, this was a valid transaction." And the two different approaches, optimism is optimistic, where basically optimistic rollups say, "We assume people are doing the right thing, but we're watching. And if someone commits fraud or makes a mistake, then they get punished for that fraud." Whereas there are these zero-knowledge-based rollups, you know, pioneered by Starkware and others, which are basically saying, "Hey, actually, we're going to submit proofs, which are much shorter than the actual computation,

• 53:35Naval Ravikant?

  that the computation was done properly." But I think these give together, what, another 100x speedup? So if you combine the ETH2 layer one speed up and the layer two rollup speed up, then you get the 10,000 times speed up?

• 53:49Speaker 02

  Exactly. You can get like some somewhere over 100,000 transactions a second. And one other really nice feature of sharding, by the way, is that like it's quadratic, right? So if the efficiency of computers increases by a factor of two, then like you the you can support twice as many shards and each shard can be twice as large. And so your the capacity of the whole system increases by a factor of four, right? And so we actually expect that capacity to increase like going even far beyond 100,000 over, you know, the next couple of decades.

• 54:26Naval Ravikant?

  So is it a stretch to say then that it would that sharding that sharding increases capacity is a square of Moore's law as opposed to just at Moore's law?

• 54:34Speaker 02

  Yes, that this is the.

• 54:36Naval Ravikant?

  Now, if you get to 100,000 plus transactions per second, that's a lot. I mean, to give a give a comparable metric, there's a there's about 100,000 tweets per second at Twitter during peak times. And obviously, these transactions are going to be much more sophisticated than or could be much more sophisticated than a single tweet. They can actually be arbitrary computer programs running on the side. So that's quite a bit of scalability. So so then I think the question comes up, well, well, where is it? You know, a lot of people I know who are building apps on top of ETH have now had to come up with backup plans. There are competitive blockchains that are coming up, which trade off decentralization and security for speed. So what they'll do is they'll say, well, we'll only have 20 validators run by our friends or maybe like 100 people that we know and trust. But in exchange, it's a lot faster.

• 55:19Naval Ravikant?

  Like now, we don't have to get consensus from unknown people all over the internet. We don't need these complicated contraptions. And then they can basically run much faster. So a number of projects are looking at these as as backup plans. But I know that they don't necessarily want to use these because these are less decentralized. They don't really fully live up to the original promise of blockchains to the same extent. So the real question, I think, in everybody's minds is like, is there a timetable for these? You know, can we can we reliably target a date for certain kinds of improvements? Because people are betting their businesses on this.

• 55:49Speaker 02

  Great. And the very important question. So I mean, I'll start off with the progress of ETH2. So I think it's important to reiterate because I think a lot of people haven't fully absorbed this, the ETH2 chain is already running, right? So there's already a proof of stake chain. It does not yet have sharding, but the proof-of-stake system is running. The thing that has not yet happened is the event that we call the merge, which is where we basically actually take the existing activity on Ethereum and we fully move it over from the proof-of-work chain to the proof-of-stake chain. And then the proof-of-work chain just basically becomes irrelevant from there. The reason why we took this kind of multi-step approach, where we first start the proof-of-stake system and then,

• 56:32Speaker 02

  you know, we let both run in parallel for some time and then we merge at the end, is just to give proof-of-stake some time to prove itself before the entire ecosystem is asked to upgrade over. You know, the proof-of-stake thing exists. It's been stably running ever since launch. And at some point fairly soon, you know, we are going to actually go and merge all of the proof-of-work activity onto it. So sharding is also going to happen. And sharding right now is in the... There's a spec, there's prototypes of parts of it. I will admit that we were actually prioritizing the merge kind of even more than sharding recently. The reason why for this actually has to do with the other thing, which is rollups, right?

• 57:17Speaker 02

  Like, the thing to remember is that if you have rollups, but you do not have sharding, you still have 100 X-factor scaling, right? You still have the ability for the blockchain to go up to somewhere between 1,000 and 4,000 transactions a second, depending on how complex these transactions are. And so with rollups, as I mentioned, the optimism, you know, fully EVM-capable rollup is likely to launch an initial mainnet release in around a month or so. There's also a project called Arbitrum, which is also an EVM-capable rollup. There is actually simpler rollups that are only capable of processing simple transactions

• 58:00Speaker 02

  and exchanging between assets, like Loopring and ZK Sync. And those rollups have already been running stably for about a year, right? So rollups aren't even theory. They've been a practical part of scalability of Ethereum for a few users for... Almost a year and the thing that's left is basically taking that same model and just fully extending it to not just support transactions, but also arbitrary applications. Right. So rollups are coming very soon and we're fully confident that by the time that we need any more scaling than that, that, you know, sharding will have already been ready for a long time by then.

• 58:39Naval Ravikant?

  So you're basically saying fully very confident that something like, you know, an optimism or a ZK-based rollup will be solving 100x scalability problem within the next few months?

• 58:50Speaker 02

  I think so. I mean, I think like there's definitely a lot of people who are not going to be comfortable moving over just because, you know, it's new technology and new technology always has risks, but I expect there will be plenty of applications and possibly even non-financial applications like the nifties and, you know, don't be names and so forth to start off just because like the risks are lower if things do break and then kind of creeping up to higher and higher value things as people become more comfortable over time.

• 59:19Naval Ravikant?

  So do you think that Ethereum could have a scaling schism like Bitcoin did? Bitcoin split famously into Bitcoin and Bitcoin Cash over the block size debate a few years back, which is all around scaling and people, some people were saying Bitcoin should be digital cash and so therefore it needs these big blocks and it needs to handle more transactions. And other people said, no, no, Bitcoin is a Swiss bank account. It's digital gold and it needs to be secure and lots of small nodes have to be able to run it. So we care more about security than we do about handling small transactions and the, the small block people won and so Bitcoin forked. And now of course, what we call Bitcoin is a small block Bitcoin that won that debate. Do you think that there's a possibility that miners, some miners and people will stay on ETH1 instead of ETH2?

• 1:00:03Speaker 02

  I think so, except I do think that the risks are much lower. A big part of the reason why is because we've been very open about proof of stake and sharding being the vision basically from the first day. And Ethereum did already have this schism, right? Of Ethereum and Ethereum Classic and a lot of the proof of work proponents did actually move over to Ethereum Classic already because they recognized that Ethereum Classic community and ideology was one that's more aligned with continuing proof of work forever. And so, you know, why stay on the chain where the... Core developers and lots of people are eagerly expecting a proof of state change if you can just move on to a platform already that accepts your values.

• 1:00:47Speaker 02

  So I think that was one of the factors that did actually end up making the ETH2 transition a bit more secure. Another thing also is that I don't really think there is a deep schism of ideologies within Ethereum in the way that there was in Bitcoin. Like, I think in Ethereum, everyone is roughly on board with the idea that you have some layer one scaling and you have some layer two scaling. There are some kind of longer term disagreements, like, you know, Justin Drake, one of our researchers, for example, is much more into making layer one more powerful, whereas I'm more in favor of a simpler layer one and having layer two is do more things.

• 1:01:28Speaker 02

  That's not a kind of extremely deep and fundamental disagreement, like, you know, either approach is gonna have lots of scalability and it's gonna deliver a great environment sets for Ethereum users.

• 1:01:42Naval Ravikant?

  So that's interesting. You don't even really run Ethereum. You have disagreements with developers and they could even change it in a way that you don't like. Has that happened yet? Has there been a case where something has been implemented into Ethereum that maybe the community or the other developers wanted, which you sort of disagreed with?

• 1:01:57Speaker 02

  There's definitely been changes that I wanted to push forward that, I mean, I gave up on fairly quickly because enough core developers or the community ended up disagreeing on them. There's been changes that were kind of pushed forward by some people who are not myself and then where I just kept completely silent. So like block reward decreases, for example, I was completely silent or mostly silent. Proccpao was mostly silent as though it was obvious that the Proccpao side was losing. Things that I was trying to push forward. I mean, those are harder to find just because like I tend to just naturally understand what the community would accept and I don't really.

• 1:02:41Speaker 02

  Try to push things that I don't think would be successful. Uh, I mean, there's like some minutia around, um, you know, scaling strategies and statelessness and state management strategies where myself and some other core developers have some different opinions. And so there's a lot of back and forth where we try to sort of satisfy each other's concerns.

• 1:03:02Naval Ravikant?

  Yeah, my sense from afar is you're more coordinating than dictating and you're doing what? Are you running the Ethereum Foundation? Is there an organization you're part of, or are you just kind of a roving individual with a laptop and a few friends who just kind of writes blog posts and submits proposals?

• 1:03:18Speaker 02

  I mean, some of both. And I do, you know, I do the proposal submitting. I have do, you know, some, some writing proof of concepts. Um, and, you know, in Python, I do some, uh, kind of trying to coordinate people. The Ethereum Foundation as an organization exists. So the executive director of that is, um, Ayame Agurci. Um, she has been doing a lot of the logistical things for about the past three years and has done an amazing job. And, and I end up, uh, kind of coordinating and working with her quite a lot on, uh, various things. But even the Ethereum Foundation, like it has an important role because it has this kind of a large pool of capital and this kind of high level of kind of public

• 1:04:02Speaker 02

  legitimacy, but it's not nearly the only organization within Ethereum, right? Like there's a lot of proposals that got initiated on the outside. Um, there's a lot of proposals that got a really huge amount of community support coming from the outside, even organizations other than Ethereum Foundation that have a lot of resources within Ethereum ecosystem. So like, for example, for the first few years, consensus did quite a lot. In consensus is still doing a lot, but now we, there's also Uniswap, whose treasury has just grown a huge amount and they are even wealthier than the Ethereum Foundation is. So I think in practice, it does end up being this kind of loose collaborative effort between a lot of different groups.

• 1:04:43Naval Ravikant?

  So Uniswap is interesting. Uniswap is, for those of you who don't know, it's an application built on top of Ethereum, but it has its own token. And it's one of the first automated market makers, a decentralized platform for exchanging cryptocurrencies with each other without having to use a centralized authority like a Coinbase or a Gemini or a Coinlist. Instead, you just go on to, you go to Uniswap and it's a smart contract. It's not owned or run by anybody except the community and a few developers and there's a token associated with it, but you can just automatically trade with this smart contract to turn, say, your Ethereum into a stable coin to get the equivalent of dollars or back. This shows how the Ethereum ecosystem is very different than the Bitcoin ecosystem. In the Bitcoin ecosystem, there's only one coin, there's Bitcoin, and they don't really

• 1:05:28Naval Ravikant?

  tolerate other tokens in their orbit, whereas with Ethereum, you have a lot of other tokens in the orbit. And you'll see blockchains that are competing with Ethereum that are trying to, you know, they're making different trade-offs and, you know, whether it's Flow or Ava or Near or whatever, there's a whole bunch of those. But then there's also people who are built on top of you, like Balancer and Curve and Uniswap and whatnot. And so what's your view on all these other tokens? How many tokens are there going to be? How do you determine which one makes sense and which one doesn't? And do other blockchains make sense at layer one? Or should other tokens only emerge at layer two now that Ethereum exists?

• 1:06:03Speaker 02

  No, this is definitely a very important topic. Tokens are one of those things that's really like playing with fire, right? Like, on the other hand, fire is crucial to human civilization, but on the other hand, fire is, if you're evil, it can burn up your family if you're not careful. So the thing with tokens, right, is that the crypto space is not the only space that tried to build decentralized things, right? Like, there are a lot of decentralized projects that are outside the crypto space, like Diaspora, the decentralized alternative to Facebook that people tried to build around 2010 is one good example.

• 1:06:43Speaker 02

  But the challenge with this kind of pre-blockchain or non-blockchain decentralization or crypto is that it's harder to kind of align the incentives and motivate people to actually wants to participate in, you know, building and growing the community at a large scale. Like, you can get idealists, but the problem with idealism is that... Idealism is not very socially scalable. Cryptocurrency, on the other hand, you know, can appeal to a lot of universal values, right? Like where, you know, the real universal value is getting rich for a lot of people.

• 1:07:15Naval Ravikant?

  Yeah, and it seems with ETH you've done a bit of both. You've got a bit of both. You've got people who have ETH to getting rich and then there's also a movement.

• 1:07:22Speaker 02

  Yeah, right, exactly. And I like, I think that balance is important, right? Like, I think the failure of a lot of non-blockchain crypto shows the inability to do things at scale without that financial incentive. But at the same time, you know, the project, a lot of the more, at least in my opinion, amoral projects within crypto that just care about, you know, the pump and the volume and, you know, getting a powerful and expensive token that they can get rich off of. Like, those projects end up not really doing well in the long term either, right? And there's been plenty of projects where just like VC funds gave, you know, hundreds of millions of dollars of capital to them.

• 1:08:05Speaker 02

  But, you know, the reality is that like hundreds of millions of dollars of capital just can't buy you a soul, right? And so a lot of people end up kind of stumbling and falling on that to some extent.

• 1:08:17Naval Ravikant?

  Yeah, I think some of that is just driven by the pre-mine phenomenon where Bitcoin had a so-called fair launch, although you can debate how fair it was, but you know, how fair the distribution is today. But everyone sort of started mining at the same time, or everyone who was aware of it. Where a lot of coins that have come subsequently, the team has a pre-mine where they get a bunch of the coin in advance. And as the amount of the pre-mine goes up and the competition moves from, hey, let's mine as much Bitcoin as possible to, hey, let's just create the winning blockchain and then get the big pre-mine. So it's just move the competition from mining to creating or forking. So it's almost sort of inevitable, once pre-mines became a little bit accepted, that there would be so many different blockchains.

• 1:09:00Speaker 02

  Yeah, no, I think that's. Definitely fair too. Ethereum, once again, is a kind of fairly moderate there. There was a pre-mine, but the pre-mine was only about 12% of, actually about 10% of the total supply. And people did have the opportunity to mine or to buy in the sale. And so a lot of people had the opportunity to become part of the ecosystem. But I do think that the less monetary, the less movement aspects of this is important. Like, if you just go to CoinMarketCap and you look at some of the top 10 coins other than, like, say Bitcoin and Ethereum, you can't always give a good answer for what values does that token represent.

• 1:09:43Speaker 02

  Whereas for Bitcoin, you can, for Ethereum, you can, for Zcash, for example, I think you can. So I think there definitely is this complicated balance between different factors. Basically, the coin can help, but too much emphasis on just the coin can hurt. And it's challenging. I think Uniswap actually did really well with their coin. Because on the one hand, you could criticize it and say, "Oh, this was only just a measure that it was reactionary, that was reacting to Sushi Swap trying to swoop in and basically try to push everyone to quickly migrate over and they had a coin." And so people got into Sushi Swap because they just wanted to get rich off of it.

• 1:10:29Speaker 02

  And so Uniswap reacted by making their own coin. But at the same time, they did this one really cool thing, which is a big part of the initial distribution was this very egalitarian airdrop. Like, basically, if you had used Uniswap even once before the airdrop had began, you would get 400 uni tokens. So at the time, those uni tokens were worth about $3.5. And so the joke was like, "Uniswap actually delivered on giving everyone a stimulus check." You know, people really loved that. And the supply distribution of uni was going to very widely dispersed. And the whole thing was this kind of DAO where a lot of people could participate in decision making.

• 1:11:14Speaker 02

  So I think there's ways to do tokens well and there's ways to do tokens poorly.

• 1:11:19Naval Ravikant?

  Yeah, the backdrop on Uniswap, Sushi Swap is Uniswap was this automated market maker, this decentralized exchange that launched and then they sort of got attacked. They got cloned by this other one called Sushi Swap, you know, Jokan Uni Sushi. And then they tried to like steal the Uniswap community by saying, hey, come here and we'll pay you more by giving you tokens. And then Uniswap was forced to actually create a token, which we then gave away to their community, which are called airdrops. It's like helicopter drops of money, except now it's made up tokens. So there's all this interesting stuff that goes on in crypto where trying to build and maintain communities, you have to figure out how to distribute the spoils. But contrast how this is compared to say Facebook or Twitter. You don't see Mark Zuckerberg airdropping Facebook stock on the users and you don't

• 1:12:01Naval Ravikant?

  see Jack Dorsey airdropping Twitter revenues on the users, but that's exactly what happens in blockchain land. And Ethereum might have had a small pre-mine, but I do remember early on looking at Ethereum. And I think I talked to Balaji Srinivasan, one of your other guests about it, Tim, where we were looking at ETH back in the day when it was first launching and we were just really confused because it seemed like there was this one brilliant technical guy surrounded by like 15 other people who all had the title co-founder. And it was very confusing to evaluate as an investor. So we ended up not investing to our detriment. But that's my way of saying that this was not a Vitalik get rich quick scheme. I don't think Vitalik even had, you know, was even the single largest token holder. I think there were many other people who frankly, you know, had a lot less to do with

• 1:12:45Naval Ravikant?

  Ethereum's success, who ended up holding a huge number of tokens. So to the extent that Vitalik is the one who's working on it and pushing it forward, it's a labor of love. And I've always been super impressed by how his team is very altruistic and really kind of wants to make the world a better place. Maybe they're young and naive, but it's, you know, it's refreshing to see that. So I think, you know, in terms of branding, a lot of people look at Ethereum as like Lyft to Bitcoin's Uber, right? There's sort of a crypto right wing libertarianism versus a crypto left wing sort of libertarianism.

• 1:13:14Tim Ferriss?

  Naval, let me jump in for one second here if I may ask a naive question or a novice question maybe. And if I'm completely looking at this the wrong way, I'd love to be corrected. Thinking of Ethereum. And comparing it to, say, Bitcoin and considering the possible regulatory threats to Bitcoin. And I think probably a stronger focus on cryptocurrency than blockchain by regulators. And just by extension, if we're thinking of Ethereum on some level as both cryptocurrency, but also as a world computer, maybe as if Amazon had its own cryptocurrency, right?

• 1:13:55Tim Ferriss?

  Bizonians or whatever they might call it. And then AWS, that even if there were a crackdown on currencies, that Ethereum would have some resilience and anti fragility in that respect, does it mean that Ethereum in its entirety is less subject to regulatory threat? Or that it can thrive in the face of regulatory threat along the lines of that which Bitcoin could face?

• 1:14:27Speaker 02

  I mean, comparing the regulatory situation of Ethereum and Bitcoin, and I think like both benefit from being highly international, right? Like Bitcoin has a strong community in the US, it has a strong community in China, it has a strong community in the EU and lots of other places. Ethereum is very similar in that regard. You know, there's these very strong communities in lots of different countries, you know, including countries that are not kind of geopolitically on the same page with each other. So there's a lot of resiliency in that sense. Now, of course, the other kind of aspect of politics is that

• 1:15:12Speaker 02

  it's not just about what they can do, it's also about like what they want to do. The reality is that regulators have cracks down on cryptocurrency significantly less than they theoretically could, right? Like they theoretically could like make something like Coinbase illegal overnight.

• 1:15:29Tim Ferriss?

  Right.

• 1:15:30Speaker 02

  And I think the reality is that, you know, they don't, in part because they do see a lot of the positive value that's coming out of these platforms, right? There's even regulators that wants to use, you know, public blockchains and even things like Ethereum to build applications on top of them, you know, they see value in some of the kind of advantages that the

• 1:15:57Speaker 02

  Things like stablecoins, for example, could provide, or even, you know, non-financial applications of various kinds.

• 1:16:03Naval Ravikant?

  Yeah, if you wanted to build a fraud-proof voting application, you'd probably do it in Ethereum.

• 1:16:10Speaker 02

  That'll be interesting.

• 1:16:11Naval Ravikant?

  Yeah, cryptocurrencies are inherently designed to be sovereign-resistant, right? They're designed to be stateless, and so the geographic redundancy is one aspect of it. And some countries try to ban it, like, I think, for a while, people think China tried to ban it, and that sort of failed. And right now, India's talking about banning it, and that will end in tears, right? That's not going to go well when you leave your country out of the innovation in the next 10 years, so hopefully they don't do that. But there's also redundancy in terms of design. For example, going to proof-of-stake is a different kind of redundancy than being just all proof-of-work, so you're not subject to the same kinds of attacks. I think being used for all kinds of applications. Naval, could you speak to that? Yeah, so proof-of-work is you shut down miners, and miners have hardware and equipment, and you know where they live, right?

• 1:16:54Naval Ravikant?

  They need a physical presence, whereas proof-of-stake is validators, who just need an internet connection. And so they're kind of harder to stop and harder to find, in theory. And then you also have just what applications are running on top of these platforms. So if you're just running digital gold, that's one application, but if you're also running, as Vitalik said, you know, functioning prediction markets, public goods, financial systems, voting systems, gaming systems, nifty tokens, art galleries, right? And all those kinds of things, then it gets very hard to shut it down. And I actually think eventually, all internet traffic will be encrypted, and all of it will require cryptocurrencies to kind of just allocate scarce resources. Like, even today, there are things that we do in the internet that are centralized,

• 1:17:38Naval Ravikant?

  like caching and routing and spam filtering, that should be decentralized and involve crypto-payments for efficiency. And once we sort of start getting to those applications, it'll be very hard to turn off crypto without turning off the internet. It's the native money of the internet. And so if you take away value transfer from the internet, the internet as we know it will be stunted at best and more likely just cease to function at some levels.

• 1:18:01Tim Ferriss?

  Thank you. Back to you, Naval.

• 1:18:02Naval Ravikant?

  Yeah. Oh, yeah, yeah, yeah. No, not at all. No, yeah, it's, I mean, there's, there's, there's, there's an infinite number of, of rabbit holes we can go down. Coming back to Ethereum for a second. So there's Bitcoin, which is clearly digital gold. There's Ethereum, which is the world computer. And, you know, with digital gold, high price is good. You want your gold to go up in value, except to the extent these days, digital gold Bitcoin has been going up. But it actually gives me some trepidation. I tell people, it's like my insurance policy is becoming more valuable, my life insurance policy, right? I don't know how I feel about that. But with ETH, it's not clear that the price going up is always that good for adoption. It's, it's good for the people who are pumping and holding, but is it so good for the people who are trying to use it? I mean, well, do you have any thoughts on the price of ETH and how much? For example, we don't even know exactly how much ETH there is going to be in the future,

• 1:18:47Naval Ravikant?

  right? The supply curve is a little bit undefined. And some people say, oh, it could be too big. This thing will get inflated, whereas the other argument is saying, no, there's certain applications we're going to have for which you have to lock up ETH or even destroy ETH to use these applications. So ETH may end up being more valuable. Do you have a, what is your current point of view on where the ETH supply heads and what the ETH price means for the ecosystem?

• 1:19:09Speaker 02

  Yeah. So one thing that I think you alluded to a little bit is that there's this proposal called EIP 1559, which kind of redesigns how the transaction fee market works. And, you know, there's a lot of kind of very wonky, a kind of economic math for kind of why the specific changes that it makes, that makes sense. But one of the consequences of that change is that the majority of fees, instead of going to the miner, whoever creates the block, would get burned. Like it would just literally get deleted out of existence. And so if demands to use Ethereum is high enough, then there would actually be more ETH than there are being destroyed and is being created. And so, you know, the, the jokes that so we sometimes make is, you know, if Bitcoin,

• 1:19:53Speaker 02

  no, if fixed supply is sound money, then, you know, if you have a decreasing supply, does that make us some ultrasound money? And it actually is not even that far-fetched a possibility. Like, if you look at the transaction fees for the last month, like, they actually have been on a lot of days greater than the block rewards for that, for that day. So. It's interesting because like it basically creates this more direct connection between people using the Ethereum blockchain. And um you know ETH um having some value, right? Like um at the beginning, the way that ETH was even described when we were doing the sale is that this is like gas. You know, you're buying this token that you need to use and if you want to spend transactions. And if the token is actually a consumable, right?

• 1:20:38Speaker 02

  Then it actually behaves even more like um, well, I guess, you know, gasoline as the original metaphor, right? Like uh if people wants to use it, they would actually have to consume it. And so the value of it is actually something that kind of depends on the Ethereum network being useful. And let's say, yeah, like it's a bit of a different um kind of guiding principle than something like Bitcoin, right? Where Bitcoin just derives value from, you know, Bitcoin, the currency derives value from Bitcoin, the currency. And Bitcoin, the blockchain is this kind of thing off in the side that, well, okay, fine, it has to exist. Um whereas in Ethereum, like it's much more of a system where the blockchain is the point.

• 1:21:17Speaker 02

  Um and you know, the ETH, the asset gains value from the blockchain um doing its uh it its job successfully.

• 1:21:25Naval Ravikant?

  That's interesting. So Bitcoin, the value is in the currency or in the Bitcoin itself. Whereas in ETH, the value is in the blockchain being used and the ETH is the byproduct of it. Yeah, to use my strained castles made of math analogy, you know, I I I I think of it as Bitcoin is like the big impregnable citadel, the Fort Knox, into which you're putting your gold and you and the thing has high walls and is guarded really well and they don't change much. And you know, it's the same as it was in two thousand nine or two thousand eleven so that no one can break in. But ETH is sort of this dynamic network of little city-states that are trading with each other. So the more trade there is, the more free flow of information and goods, the more valuable the whole system becomes. But no single point of it is necessarily as impregnable.

• 1:22:07Naval Ravikant?

  Like, for example, I do expect that we'll see more hacks and break-ins and failures in the ETH ecosystem as a whole. Not in ETH itself, but in the ecosystem around ETH than we will in the ecosystem around Bitcoin necessarily. But at the same time, ETH is dynamic and growing and adaptive, which just makes it more of a uh, you know, an evolving creature.

• 1:22:27Speaker 02

  Yeah, I mean, I I'd agree with that with one reservation, which is that, I mean, I think the Bitcoin ecosystem does have its own uh kind of ticking time bomb demons too. Um like Tether is one example.

• 1:22:38Naval Ravikant?

  Yeah, there are pieces around the Bitcoin ecosystem that are semi-centralized or of unknown trustworthiness and do rely on untrusted third parties, I should say. But you know, as the Bitcoin people say, like, not your keys, not your coin, right? And trusted third parties are security holes. So they're aware of that. I think the Bitcoin maximalist, which I believe is a term that you co-coined, the Bitcoin maximalists would say, well, that's not Bitcoin, right? That's something else. So, I mean, one of the things to think about here, and I think you care about this more than most people in crypto, which is nice, is that you do seem to care about wealth inequality, the Gini coefficient, and the distribution of coins. And one of the criticisms about crypto that I see a lot is like, well, okay, so you're

• 1:23:23Naval Ravikant?

  getting rid of the old oligarchs with this new financial system, but you're just replacing them with new oligarchs who are the original Bitcoin and ETH holders. And how do you think about the distribution of wealth in a crypto-run economy as opposed to a fiat currency, AKA the US dollar and, you know, the Euro-run economy?

• 1:23:41Speaker 02

  This is definitely, I think, one of the challenging kind of questions for the community to grapple with. This is actually one of the reasons why I kind of really like Ethereum's kind of more, you know, multi-currency welcoming ecosystem, right? Like, you know, sure, okay, you have ETH, and there is a limited set of opportunities to kind of get new ETH directly from the tap, and at some point, you know, the supply is going to stabilize, and if you're buying ETH, you're just, you're buying ETH from a previous people. But at the same time, there are these new applications that are launching, you know, you have your uni, as I mentioned, where the distribution was, I mean, I thought quite egalitarian, right?

• 1:24:25Speaker 02

  Like, as I mentioned, you know, the 400 uni stimulus checks that just go to everyone who ever used the application at least once, and they could try really hard to not favor wealthy users too much. And then there's, I think, Tornado Cash had an airdrop a couple of weeks back. There's more of these assets coming in, and I think like, that kind of churn is healthy, like, it, you know, it breathes new life into the ecosystem, you know, it breathes, again, new life into the wealth distribution, and it does. Create opportunities for new people to be able to come in and kind of participate on a somewhat level footing as well.

• 1:25:08Speaker 02

  But then if we want to compare all of this to the fiat ecosystem, like it's a difficult comparison to make just because, you know, the kind of institutions are so different and it's kind of difficult to, you know, match one up against the other, right? Like fiat currency is, you know, they basically get created by kind of a combination of, you know, the the central bank and the commercial banking ecosystem. And in terms of where the the kind of new newly generated value comes in, like, you know, both sides of that gets some share essentially. And like, there's bad things that come out of it. There's also good things that come out of it. So like,

• 1:25:48Speaker 02

  I mean, I know, like, this is a controversial position among libertarians, but like, I actually like the idea that, you know, if you have a fiat currency, then the government can print it and just use that as a source of government revenue. And the reason why I like it is because I think if the governments can earn, can get money through unobtrusive means, that reduces the extents to which it has to rely on getting money through more intrusive means and, you know, rely on like taxation and kind of more direct.

• 1:26:17Naval Ravikant?

  Right. The problem is when it's unobtrusive, it's very easy to do it very sneakily.

• 1:26:22Speaker 02

  Right.

• 1:26:22Naval Ravikant?

  And these taxes taxes have to be collected now, whereas printing can kick the can down the road for the next person to solve.

• 1:26:29Speaker 02

  Right, right. This is an argument in the other direction.

• 1:26:32Naval Ravikant?

  Yeah, there's a there's a more there's a moral hazard there. And I think we're watching it play out where we printed eight trillion dollars last year and who's going to pay for it?

• 1:26:40Speaker 02

  Right. Now, the nice thing about cryptocurrency, of course, is that like the ecosystem is much more transparent. And so, you know, it's easier to analyze and understand what the rules are. And like within the context of a crypto ecosystem, you know, as I mentioned, you can still do very egalitarian things. You can still, you know, reward people who were very important early contributors to things that ended up being very important. So, you know, you can still do a kind of. All of those things and you know, we do have a responsibility to get the balance right, but the environment is just inherently a more kind of open and honest one, just because, you know, these are decentralized systems and everyone does just they see exactly what's going on.

• 1:27:26Naval Ravikant?

  Yeah, it's certainly more transparent. Like you can tell what the money supply of ETH is at any given point. Good luck doing that with the US dollar money supply, or you can tell what the inflation on ETH is at a given point. And as you say, there's opportunities to build more applications on top of ETH and maybe ETH is the app store for decentralized applications. But some of those applications can go on to capture just as much value and create just as much value as ETH itself. So I think that'll be, it, the really interesting development in the last year is just to see applications on top of ETH really creating and capturing and building lots of wealth and value. And so in that sense, this 2021 and 2020 run up seem a little different to me than the 2017 run up, which was based

• 1:28:08Naval Ravikant?

  on just, you know, a lot of hype, frankly. So as we see sort of crypto playing out, you've also had some very interesting thoughts on everything from radical markets to political philosophy to kind of what happened in 2020 and so on. And we could spend a whole podcast on that, but just at a very high level, you had a really good post on your blog saying end notes on 2020. And it was about a lot more than just crypto. So what else are you really interested in these days? I mean, is it AGI? Is it life extension? Is it public goods? Is it different kinds of voting schemes? What's really on top of mind for you that's not directly crypto related?

• 1:28:46Speaker 02

  Some of all of those. So like, I think the changing kind of way in which economics works is definitely one of those really important topics. There's a couple of different kind of changes that's happening. Like one of them that I talked about is just public goods becoming more important, right? Like A lot of the ways that like people thought of economics like fifty or a hundred years ago, they just that kind of focused on private goods like cars, houses, food, you know, things like that. But there's also public goods, right, which are projects that benefit a large and unselective group of people. And so no individual person who benefits has the incentive to personally fund the whole thing. But it's hard to push

• 1:29:31Speaker 02

  people to pay for it because like you can't, you know, deny the benefits of the thing to people who don't pay for it, for example, right? And so scientific research is one example of a public good. My blog is one example of a public good. Open source software is an example of a public good. And like on the internet, public goods are even more common than private goods are. And so like our economics just has to, you know, just take that fact seriously. And a lot of what's been happening in the blockchain space in some ways just is, you know, the crypto world trying to grapple against those things.

• 1:30:09Naval Ravikant?

  So basically, these public goods are where the costs are concentrated. Like if I want to fund scientific research, I do it out of my own pocket, but it benefits all of humanity. So the benefits are distributed. And so these tend to be undersupplied. There tend to be too few of them. And so there are there are schemes out there to tackle some of them. I think you've talked about quadratic funding as an example.

• 1:30:29Speaker 02

  Yes.

• 1:30:30Tim Ferriss?

  What is quadratic funding?

• 1:30:32Speaker 02

  So quadratic funding is this interesting mechanism that basically says anyone can donate money to public goods through the mechanism. But to compensate for this under provision that you talk about, the mechanism provides a subsidy to every public good. And that subsidy depends not just on the amount that was contributed, but also on the total number of people who contributed, right? So like, for example, if there's two projects, they both got a hundred dollars, but one of them got, I say, eighty dollars from one person and twenty dollars from another person, and the second project just got one dollar from each of a hundred people. The second public good is much more public than the first public good. And the tragedy of the commons on the second one is much

• 1:31:17Speaker 02

  greater, right? And so the fact that the second one managed to get to a hundred dollars despite the one hundred way tragedy of the commons implies that it's a really important project. And so the quadratic funding mechanism actually. Gives a much greater subsidy to the, you know, one dollar from a hundred, each of a hundred people project than it does from the project that got just a hundred dollars from, you know, a split between two people. And so we've been experimenting with quadratic funding. There's this thing called Gitcoin Grants that happens a few times a year. And that's had about a seven or eight rounds by now, I forget the exact number, just for public goods within the Ethereum ecosystem, and that's worked really well.

• 1:32:01Speaker 02

  So that's been one of the interesting experiments that I've been following.

• 1:32:05Tim Ferriss?

  Question on quadratic funding, just to hop in here, since I'm involved with a few different types of scientific research. Are those funders in those experiments that you've run anonymized or de-anonymized? Because I'm thinking through the example you gave and how there are other plausible explanations for why there might be two funders. I'm just thinking about, for instance, reputational risk associated with certain types of scientific research.

• 1:32:35Tim Ferriss?

  There are other plausible explanations, but those largely hinge on named names versus them being anonymous. So how do you think about other contributing factors, depending on how you're conducting the experiments?

• 1:32:47Speaker 02

  Sure. So first of all, like in quadratic funding, unfortunately, you do need to have some kind of model for identity because, you know, you need to prevent the two people from just pretending that they are 100 people.

• 1:32:59Tim Ferriss?

  Right.

• 1:33:00Speaker 02

  But with cryptography, you actually can do fancy things that give you most of the benefit from having anonymity despite needing to have an identity system. Basically, you can have a system where people can make all of these contributions and they're, you know, done in such a way that the system identifies like how many unique contributors there are for each project, but where the system does not get an idea, like nobody actually gets any idea of exactly which particular person donated how much money to which particular project. This is done using this really important and fascinating topic of a zero-knowledge proof cryptography. In zero-knowledge proof cryptography,

• 1:33:44Speaker 02

  Like basically, the idea is that it allows you to make cryptographic proofs that some statement is true. And so like I can make a cryptographic proof that says that, you know, I have one hundred coins, or that you signed a message that contains like some, some fact about me and it was signed with your key. And you can make these proofs, but where the proof does not reveal the contents of the thing that it's proving, right? So like, for example, I can prove that I have an account that has at least one hundred coins, but I don't have to prove which account it is, I don't have to prove exactly how many coins I have. And there's a lot of this very fancy mathematical magic that basically creates this protocol

• 1:34:26Speaker 02

  where if you give me a proof, then I know that the statement is true, because if the statement is false, you would have had no way to generate the proof. But if I have just a proof, I can learn nothing else beyond the fact that that particular statement is correct. So this is incredibly powerful cryptography. It's, it's behind Zcash, for example. There's also with urine applications like tornado cash that are using it, there's zero knowledge proofs also have these really nice scalability proofs. So the proofs are very quick to verify, even if the statement that they're proving is incredibly complex. And ZK rollups, like some of these scaling solutions end up really benefiting from using them. So very powerful technology, and I think it's also very significant from a social

• 1:35:11Speaker 02

  perspective, because, you know, we have this broader kind of anonymity versus accountability debate, right? Of like, you know, the benefits of privacy versus the benefits of like basically persistent reputations. And zero knowledge cryptography is really powerful, because it may, in a lot of cases, allow us to get both good things at the same time. Like you could get us the benefits of the things like persistent reputations, while at the same time getting a lot of the benefits of anonymity.

• 1:35:39Tim Ferriss?

  Seems very powerful. Just to follow up on that, thinking of scientific research, I'm going to ask you what areas you might have particular personal interest in. I know you have some interest in life extension, as evidenced by the dragon slang parable on your website, or that you linked to from your Twitter bio. But it strikes me that the quadratic funding experiments would also be heavily dependent on equally simplistic or simplified communication of competing, not necessarily competing, but contrasted scientific studies, right? Because there are some instances, just in my experience, where scientific studies that require a lot of scientific

• 1:36:22Tim Ferriss?

  knowledge or due diligence would have fewer funders compared to others, but that doesn't necessarily reflect less importance or impact potential.

• 1:36:33Speaker 02

  Yes. Now, this is also a very important point, and I think the solution to this is that quadratic funding by itself doesn't solve all the problems, and you have to combine quadratic funding with other mechanisms. So I can give two examples. One example of how you could do this is you could just set up an organization where that organization has some smart people, and those smart people do a good job of picking who the scientists are that are really worth funding. And then that organization gets a five or 10 year history, and people see that, oh, yes, this organization does have a surprisingly good track record of funding, you know, the studies that actually do end

• 1:37:12Speaker 02

  up turning out to be meaningful five years down the line. And then people will just contribute through the quadratic funding scheme to this organization, and the organization will be able to leverage its own reputation. Now, if that organization ends up, you know, doing bad things and abusing, it's this kind of public trust that it's earned, then, you know, people could very easily just stop contributing to it and start contributing to it to another group. So that's one approach. Another approach is that there could be clever ways to combine quadratic funding with venture capital. So the idea here is that imagine if, when people make a public good, they create a coin associated with that public good, and they just let people buy the coin. And when people buy the coin, the revenues just go to

• 1:37:57Speaker 02

  the people who issue it. And then what you can do with quadratic funding is you can basically kind of collectively buy out these coins, right? So you can just say, okay, you know, this coin... Is a coin that represents a project that gave the world, say, a million dollars worth of value. And so we're going to quadratically fund a million dollars into the coin. And so anyone who bought that coin would be able to benefit, right? And so the idea is that like, if there are intelligent investors that are able to recognize that something will be valuable, you know, 10 years in the future, then like, basically, they will be able to make a profit off of this. And if anyone has something that like, is maybe difficult for the kind of wider public to determine is valuable at the beginning,

• 1:38:42Speaker 02

  but then is likely to lead to some important outcome that just everyone recognizes is really valuable sometime in the future, then, you know, kind of these investors can fill the gap, right? So like, you have these two approaches, like, you can either rely on reputation and kind of do it retrospectively, or you can rely on this kind of combination of quadratic funding with, you know, tokens and investment to do it prospectively. So I think both of those are really interesting.

• 1:39:10Tim Ferriss?

  I love this possibility to combine also, right? I mean, you could potentially have all of the elements that you described combined. And Noel, you sound like you want to jump in.

• 1:39:23Naval Ravikant?

  I was just thinking that the campaign financing kind of works a little bit like this, maybe accidentally, maybe the system is just navigated to it through kind of a complex systems level intelligence. But if you look at campaign financing for when people run for office, there's a maximum limit they can get per donor, right? And so an individual can only gift a certain amount to a congressman or to a senator or presidential candidate. And then the feds also have matching funds on top of that. So it's a combination of these schemes, because by limiting the amount that any one person can give, you're sort of creating a quadratic, although it's not truly quadratic, like, you know, someone very wealthy, I guess they could give a lot more through a side vehicle, but then that's less efficient because they're not allowed to coordinate with the main campaign. So

• 1:40:06Naval Ravikant?

  there's kind of a really badly implemented version of quadratic funding with matching dollars already in existence in federal campaign financing.

• 1:40:13Tim Ferriss?

  Hmm. That's a good point.

• 1:40:16Naval Ravikant?

  Yeah.

• 1:40:16Tim Ferriss?

  Yeah, Vitalik, what areas of scientific inquiry or research are on your shortlist of most personally interesting at the moment?

• 1:40:28Speaker 02

  Yeah, so you brought up life extension. Life extension is definitely really important to me. Like, I think the coronavirus has actually even had the positive side effect of kind of speeding this along in some ways. But there's a lot of extremely promising things happening in biotech. I think there's a very significant chance that where we're standing today is basically is for biotech the equivalent of where computers were in 1950. And so if you imagine the difference between the Enniag and a modern laptop or a smartphone, that's the difference that we're going to see between the biotech of 2020 and the biotech of 2090.

• 1:41:08Speaker 02

  And so if right now we can already come up with vaccines for a virus, well, a year for deployment to start, but really the whole thing actually happens much faster. And most of the delay can be blamed on bioconservatives, but that's a whole other discussion. If you go from even there and then add 70 years of progress to that, it's very easy to see even the process of aging turning into something that just becomes reversible and it being a regular thing for people to live one and a half, two centuries and then go even further from there. There's just a huge, nice humanitarian outcome that can come from that.

• 1:41:50Speaker 02

  Basically, the concept of your grandmother dying is just going to slowly leave the public consciousness, the same way that the concept of getting lost in a city slowly left the public consciousness over the last 25 years as we got better cellphones. And I think that's a really lovely and just much better world to spend a lot of resources to shoot for.

• 1:42:11Naval Ravikant?

  Do you think that's realistic, though, given all the three-letter agencies that slow down experimentation and development? Because I worry it's more like nuclear power, right? Where they can't tolerate a single death, so the innovation isn't really allowed.

• 1:42:23Speaker 02

  Right, so this is where I say a controversial thing, which is, I think I'm very happy that the coronavirus has helped to delegitimize bioconservatism to the extent that it has.

• 1:42:33Naval Ravikant?

  Yeah, I agree with that. The Moderna vaccine was ready on Jan 13th.

• 1:42:37Speaker 02

  Yes. And like even things like human challenge studies, right? Like the default, I think, bioethics opinion around a year ago is like, you know, oh my God, this is unethical. And, you know, now like in the UK, they're actually happening. No, this is great.

• 1:42:49Naval Ravikant?

  Yeah, no, it is good if it breaks down bioconservatism to some extent because the pace of innovation is too low. It's like what we've done to nuclear power, if we do that biotech and we kind of have already to some extent, but if we do it even more, then there's no chance of, you know, grandma living forever. There's not even a chance of me living, you know, 50 years longer, let alone grandma living forever. You know, you're 27. I'd love to see where you're at 47. You're going to be a, you know, really interesting guy. You already are, but you're going to be an even more interesting guy.

• 1:43:18Tim Ferriss?

  Even more interesting at 447.

• 1:43:21Speaker 02

  Oh, well, that'll be fun.

• 1:43:24Speaker 02

  But I hope you guys can both come to my 1,000th birthday party.

• 1:43:28Naval Ravikant?

  Well, are you, are you on some kind of caloric restriction or intermittent fasting?

• 1:43:32Speaker 02

  So, so far, I, yeah, well, I do like the poor man's intermittent fasting, which is that I just usually don't eat breakfast. I do, again, the usual exercise, nothing too fancy. I eat kind of at least a couple of the basic supplements that the life extension cool people are recommending. Nothing too much fancier than that so far, though, you know, very closely watching the space. And then I'm sure I'll end up doing much more things, you know, like 10 or even five years from now.

• 1:44:05Naval Ravikant?

  Do you take rapamycin?

• 1:44:07Speaker 02

  I do not take rapamycin. Midformin is the one that I take. Ashwagandha is another that I take.

• 1:44:14Naval Ravikant?

  And just for those people listening who...

• 1:44:17Tim Ferriss?

  Who should know this? Number one, this, none of this is medical advice. Number two, Metformin, just as an example, none of these things should be taken without advice of a medical professional. Metformin is used in the treatment of type 2 diabetes, glucophage. But I'm also familiar with it. How do you decide what to implement versus not implement for yourself personally?

• 1:44:40Speaker 02

  Um, I just, um, I ask around to a lot of people in the life extension community. I, you know, read the studies, you know, look at, um, just what are some of the high level results, um, and then just kind of narrow down to a couple of things.

• 1:44:57Tim Ferriss?

  It is remarkable how many people in various sub-communities have been using a lot of these interventions longitudinally. I remember when I was working on my second book, looking into transverse veratrol and finding, even at that time, this was 2008, 2009, people who had for years been using, I want to say 500 milligrams per day. So you were able to identify certain long-term effects and side effects, granted anecdotally, but still having an N of, I don't know, maybe a thousand people on this forum. So there, there is a lot to be gleaned from these, from these groups.

• 1:45:37Naval Ravikant?

  Yeah, there's even a new one making the rounds, glucagon like peptide GLP-1. I'm sure you've seen some study floating around on that. But yeah, these things are very unknown. I wish these were more out in the open and that there was a very, very strong anti-aging research community that was functioning out in the open, that was trading notes on what works and what doesn't, and able to run some kind of human trials, you know, more efficiently, because fighting aging is a, is a very time-sensitive task.

• 1:46:03Speaker 02

  It is, yeah. It's, uh, half the deaths of, yeah, so literally half the deaths of World War II for every, um, a year that, you know, it gets delayed, or how are that number of lives saved for every year that gets brought earlier.

• 1:46:16Naval Ravikant?

  Yeah, one analogy I heard that I liked was, you know, we're all born time billionaires with billions of seconds of life and then we spend those and now you get to someone like Warren Buffett and I'm sure he would trade $100 billion for more billions of seconds. But he can't, right? In fact, healthcare is the ultimate inelastic good. On your deathbed, you'll spend any amount of money to live even an hour longer. So certainly the economic incentives are there, the personal incentives are there, but because of this concept that, you know, people who don't know what they're doing are gonna hear something and run out and like ingest some substance and then die, you know, drink bleach or take too much rapamycin. Because of that kind of fear, we're not allowed to do any real innovation or discovery and it's literally killing us outright. And if we just reframed it as, well, no, it's not

• 1:47:00Naval Ravikant?

  that we're dying of aging, we're dying because you won't let us do the innovation, do the research, it might take on a different take. But I was actually a little disappointed with the coronavirus response because I thought we would have had faster trials of the vaccines. But the fact that they were still kind of slow and even now, the deployment is being held up because we have to create these perfect vaccine delivery packages instead of just a kind of quick and dirty vaccination. And we have to go through these very regimented protocols rather than just saying, everybody just line up and let's just go as quickly as possible. Because we insist on doing things in kind of this bureaucratic, overly controlled way, we're still slowing things down. And if coronavirus would get us to accelerate our normal processes into a wartime footing, then what will?

• 1:47:43Tim Ferriss?

  Yeah, I also just want to add that I think, given my experience with a highly stigmatized field of scientific research, which is psychedelics and psychedelic compounds for intractable or difficult to treat psychiatric conditions, I think that life extension or the community itself and proponents thereof could spend a lot of their oxygen and calories trying to convince regulators and three-letter acronyms to classify aging as a disease and therefore allocate funding. And I think that that is going to be very difficult and possibly

• 1:48:21Tim Ferriss?

  wasteful compared to decentralized or distributed funding from citizen philanthropists or donors of various types. I think a lot of it's going to come down to independent financing, since that has been the case, even all the way up to phase three trials for compounds that show tremendous effect sizes in the treatment of depression and PTSD and so on.

• 1:48:46Speaker 02

  I think another important thing also is just kind of international outreach and more connections because ultimately, you know, the US is not the center of the universe. And there's plenty of very smart people in, you know, the EU, like Singapore, China, India, Canada, whatever other places. You know, there's a lot of great talent there that I think could help all of humanity solve these problems faster. So if we can just work together on the problem more, hopefully prevents stupid nationalism from adding too much friction between things.

• 1:49:24Naval Ravikant?

  Yeah, I think a lot of the newer generation, rather than just being patrons of the arts, they're trying to figure out how to become patrons of science. And instead of just doing venture capital, we'd all like to figure out a model for venture research because we need more science, right? Science is upstream of technology and the faster we can move science, the more it'll benefit us across the board. So I don't know where else you want to take this, Tim, but I have some kind of more of the closing questions type for Vitalik, if you're ready for those. I want to take this where you want to take this, Neville. Okay. Yeah, so one question I kind of have is, given all the tumultuous change in 2020 because coronavirus was a trigger, but it was a trigger for accelerating a lot of things that were already happening, like where do you think the world heads in the next few years where maybe your peers might disagree with you?

• 1:50:09Naval Ravikant?

  What are your contrarian views or your kind of uniquely held individualistic views on how things are going to play out that are not yet consensus? And this is unfair because aging was a good one. You made a solid, you went out on a limb on aging.

• 1:50:22Speaker 02

  Aging is an example that's like contrarian in the world, but definitely not contrarian among my circles, I guess.

• 1:50:30Naval Ravikant?

  Yeah, when I went through your writings, I mean, the idea that there will be many blockchains and many tokens, right, is quite different. The idea that the internet has increased the number of public goods rather than the number of private goods is actually quite contrarian because we think of it as going more and more private property, but on the internet it's one to many. So there's all these public goods. And I think you were the first one to really hammer that point home in a big way. And then I think this aging thing is another one. So I'm just digging, seeing if there's any more.

• 1:50:57Speaker 02

  Yeah, no, another thing might like. That might have been iconic classic two years ago, but is very much not today would be kind of just geographic decentralization. Even with Ethereum, like we made, we took a very active effort of, you know, not making it too centralized in any one country or anywhere or any one city in any one place. And I feel like we benefited a lot from that. But now, of course, you know, everyone is geographically decentralizing and Coinbase has announced that like none of its management still live in San Francisco and so forth.

• 1:51:31Naval Ravikant?

  It's very hard to associate Ethereum with a single country. I think it was created by mostly Canadians and your blog has a dot C A.

• 1:51:39Speaker 02

  Well, it depends. Well, I'm Canadian, but then my blog has a dot C A. The foundation is Swiss and now there's a Singaporean entity as well. A lot of the initial developers were German. You know, a lot of developers are from the U S as well. One of the most efficient of two clients is based in Australia. So I feel like we kind of actually like took those values seriously and did it well.

• 1:52:08Naval Ravikant?

  And Ethereum has spent, the foundation has spent a lot of time in East Asia. I think I've seen you kind of going from conference to conference in East Asia and Korea and Japan and places like that, spreading the word. So it is quite decentralized geographically. What advice do you have for someone who wants to get into Ethereum and doesn't just want to go and buy the token, right? Who actually wants to dive into the ecosystem? What is a person to do to get involved in Ethereum community and the ecosystem? Where are the points of leverage?

• 1:52:37Speaker 02

  I think what is learning to build an application and actually trying to build an application is, I think, one great place to start if that's the sort of thing that interests you. Like even if you don't turn it out as a. Full-time developer, it's like forcing yourself through the process still helps you just understand that, you know, what are the different pieces and actually what function do they serve? Another example, another approach, there's, well, now obviously you're kind of temporarily suspended, but generally, there's a lot of local communities that, you know, like, kind of in-person meetups and all that, that people can be part of, and that's often a great opportunity

• 1:53:19Speaker 02

  to get to meet other Ethereum people. And there's a lot of materials online, although generally I am a much more big fan of hands-on learning, so kind of learning by doing instead of learning by taking in information. So, you know, highly recommend like just trying to build one application for a lot of people. And then, otherwise, yeah, there's just a lot of different communities and like you do have to just like go in and start taking part in them.

• 1:53:48Naval Ravikant?

  Yeah, for those of you who are curious, I think Vitalik's blog has spawned quite a few of the things in the Ethereum ecosystem. Like, I think it was one of your musings that led to the creation of Uniswap. And you'd recently been talking about rollups and social wallets and all kinds of other things that we built on top. Although I, maybe this is the first year where I feel like the community is outpacing your ideas with Nifties and with some of the games that are coming up on top of ETH and so on. It does seem like that there's a lot of innovation going. It's hard to keep up. It's very, very hard to keep up. But that's a good thing. For those of you also looking for what's next down the rabbit hole, Vitalik briefly mentioned zero knowledge proofs. I would say that, you know, the beginning of the rabbit hole, the entrance is Bitcoin, then you go a little further down, you find ETH, but then

• 1:54:33Naval Ravikant?

  when you find zero knowledge proofs, that's the big mind-blowing moment where you realize just what crypto is capable of, and there are analogs for what crypto can do that almost cannot be done in the real world. It's sort of like when you go into physics and when you encounter quantum mechanics, it sort of makes you rethink that, no, not everything necessarily maps onto exactly how I observe it. The same way when you get to zero knowledge proofs, you realize that the levels of creativity in crypto that enables are greater than what we might have had pre-crypto. So that's also an interesting space to kind of learn about. And I think zero knowledge proofs have probably been incorporated into an emergent Ethereum system, ecosystem even more than we expected, right? Because a lot of people called it moon math early on. It was considered too hard to be practical, but people have been chipping away at it.

• 1:55:18Speaker 02

  Yeah, the Moon Math is definitely significantly less Moony than it was even one or two years ago. Like even Snarks, another term for these zero knowledge proofs, have just become considerably simpler. Sometime around one and a half years ago, I even tried to make another post, one of my most recent ones, on evetalk.ca where I tried to talk about like how roughly how is the case Snarks work. I actually feel like I need an explanation that at least the high school version of myself would have understood, which is like, it's still not perfect, but it's significantly more understandable than any of the previous ones have been. So I feel like the ideas are definitely trickling down.

• 1:55:57Speaker 02

  Oh, so I do have another answer to the question of like, what things are you thinking about that other people are not thinking about yet? I think this is kind of taking a kind of cultural and social context seriously, which sounds obvious, but in some ways it really isn't, right? Like even within the crypto space, I feel like a lot of people in their models of, you know, is Bitcoin going to beat governments or are these things going to be censorship resistant? They tend to look at it purely from a technical point of view. And they basically are kind of implicitly assuming that, you know, governments are going to try as hard as they can. And the crypto space is going to try as hard as it can and it'll be a battle and one side and, you know,

• 1:56:42Speaker 02

  that person's preferred side is going to win. But the reality is that governments are not trying as hard as they can. And a big part of the reason why is that government is not even so much an entity as it is a battlefield, right? And like what are the soldiers fighting on the battlefield? A lot of it is just the cultural movements. And a lot of the success of cryptocurrency and blockchains, I think they really have to do with the way that they have kind of interplayed with a lot of the important cultural trends of the last 10 years. Like this, including things like people's distrust of financial institutions after 2008. I think people's distrust of centralized tech companies after 2020 is also going to play a big part.

• 1:57:28Speaker 02

  Also, just another fascinating thing, I think, is even like one thing that surprised me is how cryptocurrency managed to appeal to a lot of people who would not normally think of themselves as libertarians. And that's something that I think like did end up even blindsiding a lot of people. And the reason why that happens has to do with kind of very deep and specific aspects of like how people think. I mean, it's kind of how people think ideologically, right? Like, a lot of people think of, like, say, authoritarians, for example, as just people who hate freedom and want to restrict things. But like, the reality is, there's lots of people who are in favor of very specific

• 1:58:10Speaker 02

  restrictions, or even in favor of restrictions that benefit their own team. But they're just as easy, very easily flipped to being very pro-freedom when, you know, it's their own team that's being threatened. Or even when you just kind of take things out of the cultural context of, you know, what should the governments do, and into the cultural context of, well, you know, like, how should technology work? So, there's a lot of these kind of very subtle effects that determine, you know, whether blockchains and some of the ideals behind blockchains kind of succeed and fail. And these are kind of very subtle properties of like how humans think and even how humans interact with each other are extremely important in a lot of ways.

• 1:58:52Speaker 02

  And the reason why they're important is they just determine the effectiveness with which people can coordinate, right? Like, you know, humans are naturally kind of very attuned to a kind of social trends, and humans have a lot of motivations that have to do directly with, you know, what position they have within a kind of social trends and contexts that are made up by other people. And this is just a space that the, you know, blockchain and cryptocurrency space is going to navigate well. And if it navigates it poorly, then I think blockchains will be stopped by governments. Or like, they won't be stopped entirely, but you know, the amount of usage can easily

• 1:59:34Speaker 02

  be more than 90% lower than in otherwise would be. But on the other hand, if blockchains can, you know, successfully show to a kind of large enough coalitions that this is a valuable and this is a good thing for the world, then they can be very successful. And like, this is just something that, you know, the space needs to have a better understanding of and take seriously.

• 1:59:57Naval Ravikant?

  Yeah, I think there's a lot of good points you just made. One I like is that government is not an entity or an enemy on the battlefield. It may just be the battlefield, that all of these factors can kind of win simultaneously. I think you made this point in your blog in one place where you said that in 2020, you know, big government won, big social media won, big centralized applications won, but decentralized also won. So you can have multiple winners. These aren't necessarily either or. You've also made an argument in one of your blog posts, which is also beyond the scope of this podcast, but I think is worth digging into for people interested in game theory, where you basically point out that a lot of the toy models that we consider when we're evaluating how these things will end up have a so-called Nash equilibrium.

• 2:00:40Naval Ravikant?

  They have a solution in game theory because a lot of individuals are making decisions independently, but because majority coalitions rule and people can collude or they can form coalitions, that you end up in these unstable cycles where you have a majority win one round and then the definition of the majority reshuffles and then they win the next round. And so we see this in politics where it seems like, okay, now the Democrats are in charge forever and oops, no, now the Republicans are in charge forever and oops, no, now the Democrats are in charge forever again. And subtly underneath what's going on is the definition of Democrat and Republican is unstable. They're just coalitions that are being formed and reformed as needed. So yeah, these are lots of great thought provoking points. I'd really love to touch base with a Vitalik who's 37, you know, ripe old age of 37 out

• 2:01:25Naval Ravikant?

  of his thousand year Methuselah like lifespan and see where you've gotten to.

• 2:01:32Tim Ferriss?

  So Naval, I don't know if you have questions remaining. So I really just have one question, and that is a pet curiosity of mine. It's related to language learning. So you have studied quite a few languages. I looked at a clip of you answering questions in a Q and A at some point, I don't know the year, in Mandarin, and I was very impressed. I went to two universities in China and

• 2:01:58Tim Ferriss?

  So I wanted to ask if you could give advice now, having tested many things, used many approaches, for someone who wants to learn Mandarin, what would your current recommendations be to them?

• 2:02:13Speaker 02

  Sure, uh so for any language, my usual approach is like, I think at the beginning, like you do need some kind of uh explicit program. So like one thing that I've used is the Pimsleur podcasts, uh so that's P I M S L E U R. Uh so it's just a series of these ninety minutes, uh oh sorry, ninety thirty minute podcasts, or twenty seven hundred minutes, or about two days in total. That, you know, you'll listen to one of them every day and they just like teach you the language from nothing up to, you know, some very basic level. Um over the course of these ninety episodes. So you start from that, but then even after that, you don't have nearly enough to understand anything.

• 2:02:50Speaker 02

  Um so from there, sometimes you can find other um podcasts, like, and eventually you graduate to just like regular podcasts in that language. So like things that are not even optimized for language learning. Well, like at the beginning, you do wanna find like resources that are optimized for learning. Flashcard apps, I'm helped for Chinese specifically for um memorizing the characters. Or at least, you know, the first amount of, you know, five hundred or a thousand or so, and there's plenty of flashcard apps, they're all about equally good. And then, once you uh kind of get past some level, then you get to a level where the best way to get even better is to just talk to people. Another um kind of path that works somewhat at the beginning actually is like if you just go into like, you know, a city.

• 2:03:34Speaker 02

  And you just like start like reading various signs on the street and you try your best to just understand what, you know, what they mean. I mean, if you uh see a word that you don't understand, you look it up, like that's um often useful. I also use Duolingo as well, uh it's uh been helpful in some cases. So it's just like a combination of these uh techniques and like you have to, you know, when you start, it's difficult. And then when you get past some points, like you, you get to a point where you can just like kind of level up just from uh talking to people from there.

• 2:04:06Tim Ferriss?

  Yeah, great advice. And I'll just add to that that Google Translate with image translation can be a incredible savior in lands where you don't understand the orthography. So in Japan, my brother doesn't speak Japanese, but we traveled there and he was able to more or less accurately translate kanji, the汉字, the Chinese characters using Google Translate. It was remarkably accurate. It's improved a lot. And as I understand it, you know, another thing that you've done is, is watching. Now, I'd like to clarify here, is it watching films in other languages? Or is it watching English language films with subtitles in your target language, which is also something I've done?

• 2:04:48Speaker 02

  It is watching films in other languages, sometimes with subtitles in English.

• 2:04:52Tim Ferriss?

  Got it. Thank you. Naval, would you like to wrap up?

• 2:04:56Naval Ravikant?

  No, thank you. Thank you, Vitalik. It's really been an honor. I think along with, you know, Nick Sabo and Hal Finney and Wei Dai and a few other, you know, very influential people and Zuko and so on, you've just been incredibly influential in the development of blockchains. And I believe that blockchains are the third wave of the internet after the web and mobile. And they're quite fundamental to how the internet does and will operate in the future. You're probably the youngest one of that group. So you're going to be involved in it for hopefully a very long time. And it's going to change the computing as we know it. I'm betting on it. I know many people are. And so thanks for your work and thanks for taking the time to help bring this to a broader audience.

• 2:05:37Speaker 02

  I think I'm not even the youngest already. Like, hiding from Uniswap is even younger than I am. And like, you know, the Uniswap Treasury has more funds in it than the Ethereum valuation treasury. So this revolution proceeds fast, man.

• 2:05:52Naval Ravikant?

  Yeah, when I was first starting out, my first company, I remember I was 25 and CEO and company was valued highly. And the CTO of the company, he was in his mid 30s, he said, huh, he said, so you're used to being the smartest young guy in the room, right? Just wait till you get old. And here we are. Thank you, gentlemen.

• 2:06:10Speaker 02

  Thank you.

• 2:06:12Tim Ferriss?

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• 2:06:55Tim Ferriss?

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