35 - Designing Ethereum | Vitalik Buterin

Transcript

[Music] welcome to bankless where we explore the frontier of internet money and internet finance this is how to get started how to get better and how to front run the opportunity this is ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david how are you feeling after this episode absolutely stoked for the future of ethereum as i usually am ryan when we started this podcast the first 10 or so episodes was really about getting people onboarded into the bankless world into

the world of crypto monies and you know protocols as financial institutions and then d5 blew up really hard really fast and we had to uh you know we had to we had to answer for that there was a lot of excitement going on but we never got to the topic of values as they are baked into the systems that we are using at specifically at the base layer of ethereum itself right and this is what that episode was for this episode is about learning about the design choices of the ethereum protocol and how different values have been baked into how we have chosen to build ethereum and how we have chosen to build ethereum into the future yeah if you're looking to understand what ethereum is and what its future road map is this is the episode for you

i i hope this becomes kind of a canonical episode for anyone who wants to learn about uh ethereum and who better to explain it than vitalik um he has fantastic explanations sometimes they go into some technical detail but hang with that and you'll get a perfect picture as to what the value system is for ethereum and how it's going to shape up in the coming years you know one thing i was struck by david is we call it eth 2.0 this whole new initiative the like the next i guess phase the phases of the ethereum roadmap but there's really no ethereum 2.0 it's all one ethereum network it's all one ethereum value system and social contract and the thing that we call eth1 and eth2 will eventually merge anyway and i saw that

very clearly as we talked to vitellik that that was that was going to happen there's one ethereum there's one community there's one a set of value systems that we all kind of abide by and uh it's just really exciting to see that level of unity yeah i really like that framing there's one collective of the ethereum hive mind right and the blockchain is just one component of that you know the the off chain component are you know people like you and me people like the listeners of this podcast people that discuss and communicate values around sort of as this like super layer upon what we all perceive ethereum to be which you know right now is ethereum one dot x and then also is about to be phase zero of ethereum which you know as you alluded

to will start off as a test net and then slowly kind of roll into actually being real life ethereum uh so that's a that's a good point there isn't one canonical version of ethereum there's just the values that we have and the code that we use to express it you know david i'm really proud of something too at one point we asked the question of vitalik like hey who decides what our values are as ethereum like we keep using this term our values but how do we know what our values even are and you know i'm really excited that the bankless nation has been part of that structuring of of value systems right i think the bankless nation our value systems are very clear we want self-sovereign money we want to remove intermediaries we want to remove the bankers that control your life and

we are part of the value system we determine partially the values of a system like ethereum it's just one big social contract uh in one conversation and bankless absolutely plays a role there so thank you listeners for keeping these values close to your heart communicating them spreading the word spreading the message that what we want and what we need is a decentralized money system for the people by the people this is our longest podcast yet it goes on for almost two hours and that's because we really take our time going through every single facet of ethereum proof of stake sharding eip1559 rollups the transition and then we also

do a fun uh rollups around at the end where we ask some vitalit we ask vitalik some some quick questions so use this episode as a tool to reference it's long because it is dense there should be something in here for everyone so i hope you guys enjoy this episode all right david before we jump into the episode let's talk for a minute about our fantastic sponsors one of the tools i've started to use recently is zapper for those of you that were part of the 2017 bull market it was characterized by just opening up blockfolio and refreshing it over and over and over again and also anytime you ever made a trade you would have to go into blockfolio and manually input that trade information to make sure that your portfolio that you think that you have matches what you actually have with

zapper you don't have to do any of that anymore because all you have to do is zapper is input your ethereum addresses and then zapper will give you a really elegant report as to where all your money is so there will never ever be any disconnects between the money that you think that you have and the money that zappa reports to you zapper looks directly on chain and gives you a nice portfolio summary of all your assets and how many assets and all of your debt and all of your lending positions all of your positions all at once so there's no more editing your portfolio because zapper just does it for you one thing that i thought was really useful about zappers was when i plugged my wallets in i found that i had submitted liquidity to uniswap forever ago and without zapper i would have probably lost that

forever because zapper knows where your money is better than you do it's also the gateway to investing your money into this ever expanding list of available d5 platforms like curve balancer uniswap yearn in the bankless nation there is this growing number of money legos and keeping track of them all is just super overwhelming which is why you could just go to zapper and zapper will will solve the problem of there just being too many money legos to choose from so check them out at zapper.phi enter your ethereum addresses and check out your portfolio and see if there's anything that you missed nation do you want to go fully bankless but in the real world monolith is the defy account that you need it wraps your eth address in a bankless visa card and

it does so much more it closes the loop from fiat to d5 so you can onboard fiat to die on monolith with zero fees then you can convert that die to a die which is an interest bearing savings account again zero fees and then you can spend that interest in the real world on a visa card so you can finally buy your cup of coffee with interest earned in d5 guys this is magic this is the closest thing to the holy grail crypto card and monolith gives you all of it you need to download the app at monolith.xyz to get your bankless visa card it's optimized for european listeners they'll be coming to the us soon and when you get that visa card the monolith card tweet about it when you do i love seeing people on packaging they're beautiful

bankless visa cards it makes me realize that the revolution is here search monolith in the app store okay let's get to the episode with vitalik bankless nation we want to welcome back vitalik buterin who is the founder of ethereum a researcher at the ethereum foundation of course he needs no introduction to the bankless nation he's been here before i'm sure you know of his work we brought him here to talk about the why of eth2 though we want to dig deep into the design decisions that were made and also the values that were embedded in ethereum 2.0 it is coming up fast and why we care about these values

vitalik it's great to have you welcome to bankless thank you very much ryan it's good to be here again all right well i'm gonna start with this skeptics have been saying eth2 will never ship for a very long time about as long as i've been in this space before that they were probably saying eth1 wouldn't ship um i think they're wrong but my question is a little bit different is ethereum 2 going to ship as advertised i think so um and i think each two yeah and so first of all a phase zero is uh in test that has been in tested for a while is a very close to being released and phase zero offers everything that phase zero was always stated that it

would provide and it's got the proof of stake it's a chain it's uh running you can use it um and then phase one uh provides a shorting and shorting is uh going to be there um as uh advertised and then scalability from applications and you just uh combined together the sharding with uh roll ups and i know i've got 100 000 tps which is i think almost exactly the same as among the crazier of the numbers that i've uh thrown around during the good old days around 2050 into 2016. so both an end to a mining and an introduction to a stake based consensus

and ultra high scalability are both going to be within the hands of ethereum users i think much sooner than a lot of people think so we want to uh zoom out and have this be sort of a canonical like what is eth2 episode and why so i want to want to zoom out and talk about this question what political values is ethereum going for in eth2 and how did that really constrain the design space for eth2 architecture there's uh two ways to look at what eth2 is trying to accomplish um one is to look at what it's trying to add that each one doesn't have and why

and number two is what is that if too unwilling to give up in order to achieve that right uh so uh from the first uh point of view uh so what is youtube trying to achieve that eth1 does not have uh and the two major parts to this are one is a proof of stake and the other is uh sharding and i mean proof of stake is a fairly uh kind of philosophically complex thing that does combine together multiple objectives uh one of the really important ones i think is just moving away from the extreme levels of uh waste and energy in inefficiency that uh you can find in

proof of work systems i'm also trying to move away from some of the centralization risks that we've been seeing in uh i mean both ethereum and even more so in bitcoin with its kind of much more mature asic ecosystem uh and also a proof of stake tries to be kind of maximally democratic and open to participate and not just as a user but also as a staker all right um sharding is a scalability solution and so the goal is to try to just increase the number of transactions that the ethereum blockchain can handle from the status quo which is about 15 if uh we're talking about actual transactions that

are on average that people send or 45 if we just assume everyone only cares about sending youth transfers up to uh some number between 1 000 and 100 000 depending on which phase you're talking about and uh what kind of application it is and increasing scalability is valuable because we believe in ethereum as being this uh kind of publicly accessible open uh global architecture that people should be able to interact with without um and of doing so through centralized intermediaries right like we believe that and if the base layers of the new internet should be a kind of

open thing that is expected for regular people to be able to participate in uh and if you don't do a scalability then the alternative is to basically take some approach where you know you have some master networks that only a fairly powerful institutional actors participate in and then you start having trusted kind of side chains and most people would live in trusted side chains and that's not really the kind of world that i wants to be building i mean just basically because i think if intermediation becomes the norm there's a lot of uh just historical examples of how intermediate

institutionalized intermediation can very easily be kind of seized and that turn into a tool of control by people that the original creators of those systems were absolutely not expecting and so that's why a kind of increasing tbs is valuable um and then the uh the next question is and what what properties are we not willing to sacrifice so one of the properties that we really care about in eth2 and i think perhaps the level of insistence on this maybe makes ethereum stand out alone relative to some of the other chains um is this principle that you know we do not want to have super node dependence

right like we want ethereum to be a system that can run and up fully operate without relying on some kind of super powerful computer like we want this in the system to if need be be able to operate entirely just as a collection of consumer laptops and this is something that at least i personally uh strive to stick to uh very closely um because like i do i i do believe in a lot of the bitcoiner ideas um around big things um like you know if you let the chain and just to be kind of controlled by a small number of institutions then you know

you're creating a small number of actors that could uh potentially take it over and start and pulling it in unfavorable directions um i want to even encourage a enough culture of active participation in a kind of proof-of-stake uh by regular users for example uh and that's something that if you take uh one of the these paths that just say oh let's rely on supernodes that you just can't do right like if you have a chain that relies on supernodes as a a lot of these other blockchains are doing so where you just rely on every node in the network to have a very powerful computer then you're going to have a relatively small

number of participants and if a large portion of those participants come together and say you know from start next month uh starting from then we are going to just start enforcing different rules and if you don't like it screw you there is a kind of much less of an uh sort of institutional barrier against them doing that sort of thing because there's a much smaller number of participants that would need to collude and there's a much smaller number of people whose nodes would just kind of break by default if that happens um so decentralization is in a very significant part about avoiding those kinds of situations so that's why we've been uncomfortable with supernode assumptions also uncomfortable

with honest majority assumptions um this is one of those things that i think kind of unites uh some ethereum philosophy and a lot of bitcoin philosophy right like bitcoin philosophy is all about you know you validate the chain yourself um because otherwise you're just trusting the minor majority and the minor majority is not necessarily that friendly and eth2 is also increasingly designed to offer strong kind of robustness and security guarantees even in the face of a dishonest majority right so i guess to kind of wrap up and summarize things again i would say number one just energy efficiency not being an environmental catastrophe and all of those nice things number two

making it possible for regular people to directly participate in the blockchain as a writer to the blockchain uh by which i mean a transaction center and number three making it possible for regular people to participate in the blockchain as a reader of the blockchain as a direct reading of the blockchain without relying on any kind of trusted apis and number four making it possible for regular people to participate in via blockchain as a participant in the consensus and if you take two three and four together then you can get a very high level of censorship resistance and of robustness uh resistance to social and political attacks even at a very large

scale so so you mentioned you know like i i guess a couple words i would use to summarize some of that is permissionless uh decentralized you know non-neutral those are important values kind of embedded in the design what what type of um constraints i guess did you have like it it's trickier to design a system that embodies those values and it's easier to take shortcuts and i guess some of the question that that some of the eth killers and other alternative layer one chains are sort of asking is well do people really care about these things vitalik is it is it fine just to have you know maybe a little bit of decentralization like why did ethereum choose to be

at one of one end of the spectrum in the way that it did right i mean i think trying to take a more centralized path is the sort of thing that works well in the short term but it ends up really biting you in the long term um so like you know we have seen real live examples of kind of centralization vectors of chains being used to do things that are very and have disapproved of by their users right and i think a lot of the most egregious examples we can see in the context of some of the dpos chains so one example

of this being how steam got uh taken over by uh justin sun um and who then proceeded to kind of establish and cement control over the delegates um and one of those uh users uh started to rebel uh the um justin and you know the people he was like colluding with uh just ended up doing a lot of just increasingly authoritarian things on the chain until eventually the users uh ended up having to fork away and and in the context of eos for example we've seen a lot of kind of bribing attacks between different delegates so i think like

core participants of a blockchain ecosystem becoming unfriendly and colluding against their users interests is something that is not just theoretical it's something of which uh we have seen in a very real examples and like there's very real things that you know people potentially might want to do right like people might want to uh push through with some unpopular and of hard fork where they and just give themselves coins for example right like that like kind of political uh arguments and manipulation around things like developer funds is something that we have seen um so you think uh absolutely even just from

the evidence that we can see yet today there's uh just a lot of signs that show that uh creating a blockchain where all you're doing is just creating a kind of voting scheme between you know somewhere between 10 and 50 fairly large actors actually in the long run is potentially a pretty dangerous thing so you do think in a nutshell that that users in the long run will very much value these characteristics of permissionlessness decentralization and neutrality absolutely i think these the importance of these characteristics i think does sometimes takes time to reveal itself uh because like there's this phenomenon uh that

when a uh and if community is harmonious and when times are good and if all governance mechanisms say tends to give the same result and it's a good one um right so you know regardless of whether you have a market or a democracy or a dictatorship or whatever else when kind of times are happy and people are roughly on the same page uh then um you know just all of these mechanisms are just going to lead to and if the same thing because everyone knows what everyone is going for and you know there just is one result so no matter what path you take and it's and it's a fairly happy one but it's so when there are disagreements and disputes that uh you start to see a lot of these uh differences emerge right and when there are disagreements and

disputes which is something that is going to happen to every chain eventually then uh the differences between you know truly decentralized systems so like uh you know bitcoin and ethereum and things um like these much more centralized chains it just is going to reveal itself very strongly and a lot of people are going to potentially get nasty surprises are you seeing any other chains that embrace these values besides like a bitcoin or an ethereum uh there are some um so like one example of this uh i think like coda or and it renamed itself i think because of some stupid trademark thing um

so they are trying to create a blockchain that's uh you know just fully uh zk provable uh so the idea would be that instead of having having to personally verify the chain you would be able to just use one zika snark to kind of fully verify the validity of the thing and i think that kind of approach is fully in line with those principles because it basically means that no matter how much activity is happening there is no way to sneak an invalid chain through because while you can't generate a fake proof um i mean mimble rumble is another example of this and there's a lot of smaller chains in the kind of bitcoin course um expanded universe so to speak

that are trying to implement these values to various extents um [Music] and then in the case of ethereum and i think uh ethereum classic is um also one chain that you know values these things though they're taking a kind of even more purist approach to them kind of not doing sharding for example seriously considering reducing block numbers and so forth so it definitely is a niche that some projects are going towards though i think the number of projects that try to access that need destination that the market can sustain is a much smaller than the number of uh kind of quote unquote feature projects that the

market can support and basically because if you make a future project there's lots of different features that you can go after but if you kind of embrace neutrality and you embrace user sovereignty and embrace freedom then there's like a much more limited number of ways in which that can happen um so i do expect that uh the number of uh you know more decentralization focus chains is going to be small but i think the chains that can't take the path and they can stick to it are going to be very successful backing up vitalik we have these principles right that we've just gone over like we need a blockchain to be adequately decentralized for obvious reasons or else there any any centralization is a vector for attack we

also need a blockchain to be scalable because if it can't be scalable then then as you alluded to that leaves room for you know a new form of centralization to come in you know usually through some form of of intermediary and you know it back in 2015 when ethereum 1.0 was was rolled out we had we the the the social contractor around ethereum had picked out some long-term solutions to you know changing ethereum from what it was about to be in uh to what it wanted to be in the long term mainly proof of stake and sharding and if it you know correct me if i'm wrong but i think proof of stake and charting were kind of more or less uh chosen as uh strategies for improving ethereum even

before ethereum 1.0 was rolled out how how did we have such strong assurances that these were the right solutions at the time um so i definitely think that uh you know a large portion of the community considered proof of stake in charting to be part of the social contract from all the way back in 2015 or potentially even earlier the dow fork might have been the moments that have cemented those things because uh a lot of the people that really seriously oppose that proof of stake in sharding um ended up also really seriously opposing the dow fork and so they ended up going to the etc side um as for why we are sure uh i think one thing that's important to note is that it took a while for us to

be sure right like if you go back to the very first uh proof of stake related blog post that i made uh this is the blog post that's uh introducing slasher then um and you read what that blog post says so you know you see a disclaimer right at the top the purpose of this post is not to say that ethereum will be using slasher and voice of dagger as its main mining function rather swasher is a useful construct to have in our war chest in case bureau of stake mining becomes substantially more popular or a compelling reason is provided to switch uh swash may also benefit other currencies that wish to exist independently of ethereum thanks to taco time for inspiration and for jack walker for improvement suggestions so now if you go back to january 2014 we're absolutely not certain that proof of

stake does not have fundamental flaws in it right um and um if you look at the posts uh that we had are trying to figure out shorting and shorting was uh described as an unsolved problem and it was described in a list of unsolved problems along with other problems that we recognize today are you know either unsolvable or unsolvable without very fundamental tradeoffs um so the post i'm thinking about here was uh one from 2014 uh that was called something like hard problems in cryptocurrency uh so this was early 2014 then all the way throughout 2014 uh the big kind of philosophical expedition that we went on is like trying to figure out

basically whether or not proof of stake can get around the nothing at stake problem and eventually um we came to this conclusion that uh i expressed in my blog post called the how i learned still of week subjectivity and basically said no no it's not possible with proof of stake to get exactly the same properties as a proof of work but it's possible to get something that's reasonably close and here are some strong or strong arguments for why i think it's close enough right and so that was probably you know the first major step and then the second major step was uh around 2016 to 2017 when we kind of really wrapped our heads around how the kind of other

major class of a consensus mechanism sort of academic um you know import uh d dworkland chess stockmeyer pbft style bft consensus algorithms worked and and really kind of deeply understood like basically how they actually work and how they fit into a proof of stake security model in a proof of stake context so i think after those two discoveries uh together uh proof of stake was kind of basically set and the question was just discussing the details and on the sharding side it was uh largely a question of like what security models that we were comfortable with uh so around 2015 or so this when

we started thinking about random sampling which was the first step major and of breakthrough toward making sharding work and then in 2017 there was that major breakthrough of data availability proofs that allows the shortened blockchains to be secure even in a dishonest the majority i'm sorry uh context so even in the co in the context of a 51 attack an attacker can't force an invalid chain throw so after those uh discoveries i think we were pretty set that you know sharding is a reasonable strategy and at that point and i think people were broadly comfortable with both of those i mean major pieces and then if things kept proceeding from there

so if you could put yourself in your own shoes of your 2015 version and in july july 2015 the ethereum blockchain rolls out at that time uh how far away did you think that proof of stake was going to be i think we were definitely expecting something like one to one and a half years um which is of course uh proves to be wildly over optimistic as uh a lot of timing things ended up proving to be wildly over optimistic in all parts of uh the crypto space um you know whether it's uh things in ethereum or things in the landing network or things in some of the quote ethereum killer projects um but i think uh in 2015 we were definitely and of confidence that uh we

will arrive at a proof real estate system and be able to implement it and also also at that time i do want to hang on proof of stake uh for a little bit more but also at that time when the ethereum blockchain was just rolling out what was the sort of uh consensus around the you know monetary policy of ether or the issuance schedule or was this even like a big subject at the time uh it was uh and the conclusions that we had then are actually quite different from the conclusions that we have now so if you go back and read the ethereum white paper and there's a proposed issuance schedule that basically says that there would be about 16 million if it gets issued every year and this issuance would continue forever and the rationale for this was uh one

there is a belief that you need ongoing issuance for security um there was definitely no certainty that proof of stake could come in and offer security at a much lower cost than proof of work we were assuming proof of work forever um and three there was this fairness argument that said that um you know we want uh if to be accessible to people who exist in the future and not just people who exist in the present and so those were one of the major arguments that we had at the time uh and since then obviously both the ethereum community and i think a lot of us have come around to this uh and if issuance minimalist or minimum viable issuance i guess is the frame philosophy

and we've come around to proof of stake and we've come around to issuance reductions and i think a couple of things happened there right so one of the things that happens there is just us becoming convinced that proof of stake was feasible and proof's sake was necessary but another thing that happened was uh the dream of a proof of work being an egalitarian distribution model uh just like slowly kind of suffocated and died over the last few years i guess right like in 2010 to 2013 proof of work was this very democratic thing where one of the selling features of bitcoin is that you know you yes you can go turn on your computer and you can get a few units and you know compare with uh how a fiat currency works where to issue

it you need to be a large you know commercial or central bank here anyone on their own computer can make some bitcoin and i think this was a major appeal of proof of work it was a major appeal of bitcoin but the reality is that that was never a long-term technologically stable equilibrium because as soon as you have a large source of revenue eventually people specialize and people will optimize their way to like to get at it before everyone else does right and in bitcoin we saw the gpu revolution then right after that the fpga revolution then right after that the asic revolution and in the case of uh ethereum uh we uh deliberately designed the proof-of-work algorithm to be a sick

resistance um with uh the goal of preserving the egalitarianism of ethereum mining basically but then over time um you know we saw both um how even a gpu-based system can become more and more uh resource and money dependent over time and also just growing risks that eat hash itself would get asics at some point and so we just recognized that uh and if this dream of being am egalitarian by uh being a proof of work system was something that was just not feasible regardless it's a benefit that was no longer there and so without that that uh benefit then you know the

question is well do you issue eth to a class of existing rich people or do you issue a less ether try to not issue with at all and so the second started uh looking more attractive the assumption being made is that any proof of work system ultimately uh moves towards asics no matter what right and i think this is pretty much a a true assumption that any any proof of work system if there's value there there is therefore the incentive to design such a computer that is harder and harder to be accessed by retail right and this is why ethereum chose uh gpu mining as a starting point right because gpus you can buy in your you know in your local

consumer hardware store a lot of people already own them in their gaming computer and as a function of decentralization if you can validate the blockchain on gpus there are more possible people that can validate the blockchain but the worry here was that you know especially with ether issuance the worry was that you know people specialists were going to come in and turn this into a business that would out-compete individuals right and if we are continuing to issue ether at a rate which also the goal of issuing ether was to also get ether into the hands of many people right through distribution through issuance but the concern was that the ether being issued was just only going to go to the people that had specialized in mining and would you say that this is

a comp uh a persistent critique of mining regardless of the blockchain or is this specific to ethereum i think it's a critique of mining regardless of the blockchain like i think bitcoin mining is basically plutocratic already for ethereum mining realistically it's only a matter of time um and uh were there not this uh dangling threat of moving to either brock power or some other algorithm or just the accelerating proof of stake then it may well have been a much more strong way already and i think um any algorithm that tries to be asic resistant unfortunately only has some shelf life within which that continues to be true so at this time this decision was being

made uh was it clear that proof of stake would actually enable the reduction of eth issuance by being able to provide you know more or equal levels of security with less less issuance of ether and when we released the white paper as part of the sale we definitely knew that proof of stake was something we were very interested in and was a possibility but we were definitely not confident enough in the eventual possibility of a proof of stake to market it as a certainty which is a big part of why we made the decision to advertise if at the time as something that would have an issuance of a 16 million tokens a year forever one of the really good things that i like about how ethereum has rolled out is as

a proof-of-stake system is that it started as a proof-of-work system specifically started as a gpu mining system like gpu miners to this day are still viable and as a system for distributing ether i think this has been really good it's been a great way to like you know sprinkler around a bunch of ether around the world to people that are running gpus right it's good for ether distribution which is important for decentralization especially in proof of stake because the distribution of ether is a centralization vector that we have to pay attention to but it seems that in proof of stake ethereum we have um sacrificed this uh wonderful feature of ether distribution in the name of you know securing proof

of stake it would it would you like to see a way for you know a different way for further ether distribution or are you relatively satisfied with how distributed it is today i think uh the challenge with uh cryptocurrency distribution mechanisms is that coming up with mechanisms that are incredibly neutral is a hard um right like the thing with proof of work that's so nice is that it's an algorithm and so it's incredibly neutral because um well people know what the algorithm is anyone can verify that someone made a valid solution um whereas if you were to try uh some other alternative like for example one thing

that a ripple did was they just had a bunch of giveaways through um you know social media channels other kind of week a week identity channels and the problem there is well you know do you know is that actually uh did they actually do it honestly did they cheat in some way did some hacker who had ten thousand accounts cheat in some way um were they being fair by using these platforms and forgetting about the chinese platforms or about the indian platforms and um you know if you try to basically get to some kind of per person based issuance you just start running into all these quagmires so that you really don't want to see a base layer blockchain that necessarily getting involved in whereas the proof of work issuance is

much more neutral the improved sneaky issue it's just much more neutral as well though it's not really a distribution mechanism because proof of stake just uh distributes to existing holders so it's a good strategy for uh paying holders to do things like helping secure the network but you know it's not gonna make the the currency more widely distributed in any way uh so that like the lack of a credibly usual distribution mechanism other than a proof of working period of stake is one of the challenges um and then the other challenge is that any new components to the distribution is just bound to be a controversial and potentially difficult to get accepted um right so between those two challenges i think it definitely is difficult to

add a new issuance components but we'll see one critique i often hear of proof of stake is that it locks people in to a certain extent right like if you are a staker you know at genesis of of proof of stake you can be a staker for the rest of time in stark contrast if you are a bitcoin miner you always have to be you know keeping up to date with technology keeping update up to date with efficiency always updating your system and improving over time and if you don't do that then you get wiped out by other miners who do do this right so stakers are locked in forever and bitcoiners don't really like that because it it kind of it seems uh similar to the the cantelon effect where you know maybe the

stakers are closer to the issuance of new ether than the rest of the uh the rest of the world and so they have you know undue uh access to the the issuance of new ether uh and you know they if you are a staker today you can be a staker you know in 50 100 uh maybe a thousand years uh and so like there isn't really this churn of new sets of stakers that are able to come in without you know having to purchase a bunch of of ether is this bad uh so and i do think that there is something to that critique like i definitely don't think that proof of stake is you know 100 better than a proof of work in every way like i think it's maybe you know 80 and 85 or 90 better and this is one of those areas

where proof of work does have a kind of genuine advantage in terms of uh reducing the possibility of long-term capture um the things uh that i would uh say in response to that though is uh so one uh the proof of work industry right now is fairly young so of course it's gonna see disruptions once every year or a couple of years but uh you know there's no evidence that a mature proof of work industry is going to continue having the same properties uh in fact one of the things that bitcoin people talk about in the long run is this concept of a thermodynamic limit that there is this cap of like basically a minimum cost of uh generating a valid hash solution and once uh miners start

getting close to this cap then well you know it's physically impossible to get even more efficient than that right so like uh what do you do right so like even in the medium term there's definitely a possibility that the industry of generating this hardware is going to ossify more so that's critique number one uh critique number two is that uh even though proof of stake and being a staker is uh kind of quote being closer to the uh the faucet of a new money um it's uh also something that's open for any eath holder to participate in oh right so if you have 32 east you can go and stake it if you have less than 32 if you can go join some others and that starts taking through a pool

whereas in a proof of work context like unless you have tens or hundreds of million dollars to start creating an asic farm you know you can't kind of get at this tab yourself right so that's probably the second thing um so uh you know isn't that uh much of a wealth cod situation risk if anyone can participate number three is that uh rewards in proof of stake are much lower in an absolute sense right like we're talking about now maybe 15 percent if uh only one percent of youth holders are participating but then if more people start participating then it starts going down to five percent three percent two percent uh and so the rate at which uh of wealth grows if uh everyone starts taking is much

smaller than the kinds of income that you could potentially get as a proof-of-work participant and so i guess that's a summarize uh there is definitely this genuine advantage of uh proof-of-work having this kind of built-in insurance property but at the same time you know the fact that this churn is high today uh is absolutely not evident so that it's going to continue to be high tomorrow uh number two is um that uh in proof of stake just getting in and becoming part of this set of validities yourself is much easier and more accessible i mean number three it just matters much less because the revenue of being a staker is much much lower than the

revenue of being a miner and then number four a really important thing is like well you know if someone does end up just like sitting there for a long time and eventually getting to more than 51 percent of all the hash power all the steak like what can they do about it and proof of stake opens much more recourse for a community to recover from a 51 attack than proof of work does and this is i think another one of those important topics that's a advantage of proof of stake that i think a lot of people don't appreciate which is that in a proof-of-work system if 51 of the miners attack what can you do right you just let the attack happen like maybe uh you have soft fork it out well if you stop working out okay fine you know the

attacker can just attack the chain again right and then you can attack the chain again and again um i call this uh a spawn camp attack and that's the terminology that i used to have a reference to a spawn camping and i know like world of warcraft and so forth but we just uh just keep attacking the chain you just keep making it dead um and the only way to recover from a spawn campaign attack is to change the proof of work algorithm right but then if you change the proofwork algorithm one problem is that you're not just breaking the attackers miners you're also breaking all of the good guys miners uh so it's a more kind of expensive and higher collateral damage strategy and the second problem is that you can only change the proof of work algorithm once right because if you change it once then

nobody's gonna have an asic for the u algorithm and then if the attacker manages to also corner the market on cpus or gpus then they can spawn camp a second time and the second time you can't break out at all right so in proof of work recovery from uh persistent 51 attacks is actually kind of bleak in a proof of state context that's a very different story because if there's a 51 attack on a proof stake system what you can do is you can have a fork and in uh this fork uh any kind of minority coordinated user activated soft fork that basically consists of the victims of the 51 attack getting together and continuing the original chain and ignoring the attacker box in that fork you can just basically delete the attackers coins and you don't

even need to have a heart uh any explicit hard fork to delete the attackers coins like actually the ethereum protocol just like does this by default because of how the inactivity leak works right like in a minority fork whoever the majority is just loses half of their ether to inactivity weeks before finality happens and so every time there's a 51 attack even if it succeeds uh if the attacker loses a lot of money uh and if they want a 51 attack a second time they have to lose a lot of money again and so the economics are just incredibly unfavorable to an attacker in a way they just aren't in a proof-of-work context so

that's probably the fourth and kind of more underestimated rebuttal which is that like if someone does get to 51 attack well you know so what like if they end up doing anything bad with their powers they just always run the risk of the community getting angry and just like forking them out and ends up burning half their money it feels like an example of some hidden social recovery that actually exists in a proof of stake system like ethereum and and i think what you're saying is like something like bitcoin is it's harder to recover you know socially from an attack like that um i'm kind of struck by some of the the language we've used we've all used so far right when when we talk about you know some of the things have changed

you were talking about issuance early earlier where you thought originally you know um and people in ethereum thought originally that we would have some sort of perpetual issuance to eth and then we said you know we we decided or we've used terms like like r values um to to make changes to minimum viable issues and things like that i guess my question is this how do we even know what our values are good question and i think uh the biggest way that we can be sure about what our values are is just by talking about them uh so this is something that i think you know we're doing right now in this podcast that's something that i do in my writings and blog posts it's something

that a lot of other ethereum developers do in their you know writings and their posts and their presentations and you know just understanding you know what we're trying we kind of care about and what's important to us and we're trying to accomplish i think is just an important step in uh kind of getting everyone onto on the same page um and then and i think beyond that like once there's uh some a kind of level of basic basic agreements on the priorities or when you know there's priorities that some people feel really strongly about other people care less about well no

usually we can still kind of do some thinking and do some research and engineering and come up with a design that ends up getting out of the properties that everyone is going is going after at the same time which i think is something that ethereum 2.0 for example has managed to accomplish on at least several occasions it also appears to be the case that when we kind of state our values as an ethereum community and even as the bankless community this is this is kind of similar we start to draw other people in who also embrace those values so it seems to be sort of a magnet and then what we end up doing is we start embedding those values into into code and then people who subscribe to that value set can then opt in is that kind of how it works

absolutely i think uh you know the applications that you use are definitely another important way of uh expressing your values and kind of helping your values succeed within the bankwest nation right one example of this is uniswap right so uniswap is definitely itself a very values-driven project it started as a project that was just trying to build a maximally simple uh easy-to-use decentralized exchange at a time when all of the other projects were going for complexity they were going for a certain kinds of theoretical cleanness or they were going for

you know for just centralization and uniswap in some ways that just kind of said screw you to a lot of things that people thought were fundamental to an exchange like even the concept of an order book and uh you know they were criticized there for this but they just kind of pulled through and published this thing that was just a contract anyone can go interact with the contract no dependents on servers you know very kind of purist about it it's just a web page that talks to a contract people can go use it and uh over time more and more people did use it and in 2020 unit swap has taken over even many major centralized exchanges in volume and it's become a mainstay of the

ethereum ecosystem um so i think even just things like that also uh help to express and cement the kinds of things that the ethereum ecosystem considers to be important this is also why i know vitalik you've spoken on kind of chain maximalism in the past and i i agree with you know pretty much everything you've said on that subject but there's also something i think that's permissious with pernicious in kind of the the broader crypto community which is like chain relativism right so not all chains and not all projects even on ethereum embrace the same value sets and we kind of like like we kind of have to choose by using an application or using a chain what our values actually are do

you think that there is a risk of chain relativism where everyone's like yeah every chain is the same tron is the same as ethereum and they all are like public blockchains and that sort of thing um is that a risk we run should we make our values a bit more explicit what's your take on that um uh i think uh there definitely is a higher risk from chains that just care less about values to try to kind of market the idea that the those values are not really that important um and i mean to some extent you could argue that that's kind of symmetric to things that ethereum is doing relative to the bitcoin ecosystem for example so

like um you know ethereum has proof of stake bitcoin has proven four cans ethereum people do argue that uh you know the kind of quote objectivity uh that proof of work provides is actually not that much better than the you know quote weak subjectivity that bruvistic provides and this is one of those uh kind of big academic uh debates where and i think from the bitcoin point of view it definitely gets uh i'm sure interpret it as a second of trying to dilute the concept of decentralization into nothingness but ultimately like whether or not uh an instance of that is uh kind of reasonable or not reasonable like you can't figure it out from the abstract you have to like actually uh dig into

the technical arguments and actually understand what's going on right and i think uh within a technical audience i think people understand you know what bitcoin is going for and what ethereum is going for and uh they understand that things uh that uh tron is uh trying to do for example are just you know fundamentally not interesting like okay it has more scalability because it's more centralized that kind of whoopty and whatever right and so there are kind of less technical people that still get drawn in which is i think definitely a big concern um and i definitely do think that the ethereum ecosystem can

be uh just that kind of more forceful and more clear about you know what are the important properties that make uh ethereum applications be ethereum applications um though at the same time like i i do feel like uh within at least out of the more technically inclined porsche portion of the community that that message is uh already getting through to a large extent uh i mean there's definitely also the kind of entire spectrum of projects uh that are kind of more centralized than ethereum but are not kind of outright scammy in the way that tron is um and you know you have all of the various chains that are making a serious effort at doing you know 5000 on-chain tps without

sharding at the cost of a decentralized verifiability um and i think uh you know in addition to the debate that's happening within the ethereum ecosystem there's definitely a uh kind of crypto ecosystem why that debate that's um happening um both on the level of people arguing and uh on the level of just real life events happening uh that is uh about you know to what uh to what extent are kind of different values important to making a blockchain project successful in the long term and i don't think there's any way around this other than just to recognize that you know the theory of

ecosystem um is a participant in the debate and uh you know we have kind of some some particular positions and we think that those positions are kind of the correct ones and we should both kind of be vigilant and make sure that we have the correct positions and if we and if we don't sort of be even be open to changing our minds on certain issues which i think we have on um a couple of occasions but you know where we are correct uh just like make sure that we can uh kind of explain to the broader ecosystem and the world why we've made the tradeoffs that we have your ethereum address is a bankless bank account but here's the problem it

doesn't have a human readable name it's represented by this long hexadecimal string that no one can read unstoppable domains has the solution to that problem it provides a domain name for your ethereum address so instead of telling someone to send you funds to 0xe3ba blah blah blah you can tell them to send funds to yourname.crypto a domain name for your ethereum address at unstoppabledomains.com you can search for blockchain domains like this and find tools to easily launch websites on decentralized web technology like ipfs you can even have unstoppable domains help you manage your dot crypto or dot eth or even zil domain name addresses at their unstoppable domains manager

websites have domain names.com.org your bankless bank account on ethereum should have a domain name too so go to unstoppabledomains.com register a domain name for your ethereum address now unstoppable domains.com lion is defy's first self-building project on ethereum focused on producing products for those who are interested in earning yield in d5 y iron's various products are all built to suit each individual investor's preferred level of risk from various vault strategies that leverage defy tokens to the safer urn system which relies on stable coins vaults are aggressive yield farming robots each with a unique strategy that is designed to maximize the yield of the

deposited asset iron employs some of the most informed developers in d5 to keep the vault strategies updated with the various yield farming opportunities on ethereum for customers who are more risk adverse the iron's earned product may be for you earn is a yield aware dynamic money market that automatically seeks the best interest rates across the various d5 protocols and regularly migrates your deposited stable coins between the d5 protocols that are returning the best yield at the present moment iron is a system that is just a little over four months old so things are still very much an experiment however this hasn't stopped people from depositing over 700 million dollars worth of assets into the y iron system in order to find yield on ethereum perhaps the people that deposited all this money were tired of constantly

making daily transactions to follow the best defy interest rates and maybe the gas fees that they were paying ended up eating too much into their profits with wiring it doesn't remove the risk of these various protocols that it leverages but it does remove the overhead of constantly trying to make sure you're finding the best yield and also so that you don't have to pay for gas to switch up your assets check out the products that iron has to offer at yearn.finance that's y-e-a-r-n dot finance i want to go back and wrap up the proof-of-stake conversation because staking is one of the ways to best signal alignment with values that we're discussing right like if somebody is uh

if their values are aligned with ethereum they're likely to be a staker right and part of ethereum requires people to be staking and people to be staking in their homes more or less so vitalik why should people stake why why should someone feel the responsibility or to express their their values by staking ether on proof of stake ethereum yeah and i view uh staking as being a kind of a sort of declaration that you're a type of a citizen of the ethereum network i guess you know it's definitely not the only type of being a citizen of of the ethereum network um and there's lots of ways to participate

if you have a less than 32 eth well even if you have less than 232ef you can still uh stake as part of a pool but you know there's definitely other things that you can do but neither just running a node signals long-term dedication to whether to the network and an interest in of helping to keep the network and maximally decentralized and secure uh and at the same time it's a source of ongoing revenue and it's a kind of source of ongoing incentive alignment with the security of the ethereum blockchain and the success of the ecosystem so for people that aren't staking should they

still be running a node or is it more uh relevant for you know some types of people to run a node versus others so i definitely believe in the idea that even if you're not staking um you should be trying to validate the ethereum blockchain as much as possible um and i talk about why validation is important um in a couple of posts right so if you go to vitalik.ca one of the more recent ones is a philosophy of blockchain validation one of the ones earlier uh was um engineering security through coordination problems and then hardwork software's defaults and coercion and in some of these posts i talk about the uh reasons why um i think it is

important to have a culture where as many users as possible um actually run nodes that personally validate the chain in various ways and there's different levels of validation that you can have right so like in a shorting context for example you're not going to be literally checking every single thing yourself but there's techniques like you know data availability validation for example where you can probabilistically validate correctness um you can validate the beacon chain chart um you can be checking fraud proofs you can run a stairless client you can even run a light client which is a better than uh no trusting subserver and it definitely is i think healthier for the ecosystem the more people do those things uh and it's healthier for the ecosystem the more we do to make it easy

for people to do those things like i for example am definitely unhappy with the fact that you know metamaska for example is just a uh client that directly talks to interfere or whatever i mean i recognize that kind of the reality is that there isn't really much of a better way right now but this is uh absolutely something that we should be trying to kind of engineer our way past and there's a lot of good great projects that are trying to engineer their way past it and even that if two for example is designed to have a much simpler and a better light client than eth1 does so we hope that things like metamask and things like status i can end up adopting it over time vitalik we've spent a lot of time talking about um proof of stake and the origins of it um

can you talk about maybe the origins of of sharding it was theorized as the most likely candidate for ethereum scaling kind of narrowed down it sounds like as you evaluated and eat researchers evaluated other alternatives but but how was this determination made like like why sharding and thinking about shorting uh definitely started uh as early as 2014. and i think the mindset there was just it was fairly obvious right from the beginning that everyone validating every transaction is the simplest and dumbest thing that you can do um in terms of creating a blockchain that satisfies the

security property that uh for a block to get accepted it needs to be valid uh valid and available and there was a natural desire to just like see well you know maybe if we can do some research and do some hard thinking there is a much more efficient and a better approach and in general i think uh i was kind of inspired by uh the out of computer science um that i had learned over the last couple of years and one of the things that my computer science second of really instilled on me is that like in a lot of computer computing problems there's a very simple um algorithm that can achieve a one level of efficiency but then there usually is

an algorithm that's only somewhat more complex that can achieve something close to a kind of per um optimal efficiency right like one example of this is if you look at just like sorting right like if you have a list of numbers um can you rearrange them in that kind of lowest uh greatest order and uh if you just ask someone who's never heard of sorting before to come with a sorting algorithm they generally come up with an algorithm that says something like you know walk through the list take the lowest number take it out walk through the list again take the lowest number take it out and keep going until the list becomes empty and that kind of algorithm has a runtime of what's called o of n squared right so like whatever the length of the list is square that number and that's how long

it takes to run if you have a list of length 10 it'll take 100 steps if you have a list of like 20 it'll take 400 steps if you have a list of like the thousand will take a million steps and so forth but um quadratics are kind of o n squared sorting is not the most efficient way of sorting right and it turns out that there are these kind of medium clever techniques uh there's merge sort quicksort a whole bunch of other sorts that instead of taking uh n square time they take kind of analog end time right so ammo again like a simple kind of non-matthew we're thinking about is like n multiplied by the number of digits in n right so for example if the list has a length of 100 then it'll be like a hundred times uh three because the number 100 has three

digits and then if you have a thousand items um it would take four thousand steps because a thousand times the number of digits in a thousand is four and in reality it's not like decimal digits it's binary digits so it'll be a couple of times longer than that but you know that's basically what you get to right and you can see um how these algorithms like if you understand how they work they still feel very kind of mathematically clean and neat uh they definitely are somewhat more complex than the naive ones but and they do take care of a lot of conceptual thinking to get to them uh and so the kind of vague hope that we had in 2014 is well if you imagine just naively validating every block as being the

equivalent of insertion sort right the equivalent of one of these naive sorting algorithms that take n squared time where if you have a thousand item list it takes a million steps to run then you know what is the equivalent of like quicksort or merge sort what is the equivalent of this uh other algorithm that takes uh a lot of brain power to figure out only a medium amount of brain power to understand but that gives have much better results like what what is the equivalent of that and uh kind of can we search for it and get at it and starting quickly emerged as being uh [Music] one of the kind of idealist strategies or categories of strategies in this

regard and it was kind of obvious right because well if you want to do something better than everyone valuing everything then you need everyone to only validate a few things so then the question is well how do you make it be secure against kind of what we call one percent attacks where an attacker with a small amount of hash power tries to concentrate their hash power on one particular subset of the chain and just caused that subset of the chain to break and so we did a lot of thinking and you know eventually we actually did come up with a couple of uh quite clever strategy is to get around those kinds of risks and like basically that's where shorting came from and basically sharding is kind of like replicating the ethereum main chain right in the eth2 design it's you know uh currently like 64 kind of rep

replicas all sort of governed by a uh a beacon chain just add a bit the really important thing that makes shorting tick is the concept of uh that you don't have everyone for validating every committee that you have on bridge every node only and gets assigned to validate a small portion of the blocks and the transactions like either they get assigned to a shard or they get reassigned to a different chart every block or they have to say validate one transaction from from each block and they get assigned to a random transaction index or something like that right so the key is to move away from everyone validates to uh a smaller number of randomly selected actors validate which is the secret why why vitalik do some people still think

sharing is impossible i hear that a lot still i think there's a few different uh kind of classes of critics so there's one class of critic i think that's just the they're not very intellectual type that doesn't really understand the concepts of like indirect validation probabilistic validation all these things and the it tends to have a very binary uh sort of thinking and they say you know either you're validating or you're not and either you're personally evaluating everything where the thing is centralized which one are you um and then there's the more kind of intellectual and nuanced critics that tend to is express skepticism about well you know what are these added assumptions that these are shorting

verification mechanisms are introducing and you know do they potentially introduce kind of a lot of brittleness in reality uh so i mean i could give one example of where the like this kind of brittleness might actually exist um so if you look at um fraud proofs for example right so fraud proofs are this idea that you know instead of everyone validating everything then you would have a small number of actors that validate some computation and attest to the result of a computation and the word a test here basically means they would publish a digitally signed message that contains the results and this signed message can be verified by anyone that's coming from

them and they have some if that's deposited in a smart contract on the ethereum chain and if they attest to something incorrect then someone else can challenge them and if there's a challenge that execution actually happens on the ethereum chain and if it turns out that they actually are wrong then their deposit gets taken away right and so the idea is that um like you know how in a lot of legal context that you would say things like i swear under penalty of perjury that no i believe blah blah is true right and then like if you uh make one of those statements and you swear under penalty of perjury but you swear on your penalty of perjury to something that's totally false you know some of the time you'll get away you'll get away with it but some of the time uh

someone will kind of catch you um and they might potentially kind of like points to the fact that you know hey you actually said this um and look it turns out it's not true and like let's have a court case about this and then that could end up like either hurting your interests like really seriously in some legal case or potentially it could be used to kind of independently punish you pretty seriously in some way and so forth right um and so the idea is basically that it's the same kind of principle that you replace direct uh verification of everything with this more scalable approach of kind of trust but probabilistically verify right um and so okay so that's what fraudbridge do

the problem with fraudberg's the problem with fraud proof sen is basically the synchrony assumption right is basically the assumption that there exists an active network and if someone sends something and they claim that that thing is valid then that thing actually will reach one of these uh century nodes that's that's checking everything and then if the century node discovers that it's wrong um and they broadcast the frog proof that that broad proof actually will reach and to make it onto the blockchain so there is this assumption that basically the network is working and in a lot of cases that the network is working sufficiently quickly and if this assumption is violated then the fraud proof scheme stops working right like it's um you know the equivalent of um well you

know if you um attest to some statements in in a court and then the court makes a bunch of decisions based on that statement and then you know 20 years later they discover that you just lied and everything but by that time you're already dead it's um so the equivalent of that in blockchain land uh basically is kind of what would happen if uh you know there's uh some a large network failure or the chain that got it got censored by 51 percent attacker or something similar and so basically if you can avoid those kinds of assumptions you should right and the interesting thing with sharding is that i feel like we actually have been really reducing the number of assumptions that we rely on over time so for example before sharding relied on

less majority assumptions now it doesn't rely uh nearly as much on honest majority assumptions so you can't get an invalid shorted block past someone even if you control two-thirds of the validators and so there's been a lot of hard work that's been done on kind of reducing these new assumptions that these scaling techniques introduce um but there are still some assumptions that end up remaining fraud by the way um if we use zk roll ups then we can get rid of the need for any fraud groups we can have sharding without fraud proofs which is just amazing and something we did not even think was possible two years ago um so and there's like basically there definitely are some kind of intellectual critics that do kind of get into the weeds of

each of these things and they say oh well you know decentralization is really really really important and is even 100x gain and scalability worth it if the price of that gain and scalability is that you introduced this completely new category of unknown unknown that would otherwise not exist so i think like there is some legitimate critique but like over time we have i think been addressing more more and more of it and so we have been more and more confident that shorting is a good trade-off so vitalik you recently uh posted something on each research a a kind of a thought piece called roll up centric road map with a question mark and that provoked another sound bite that was sort of interesting people asking is sharding cancelled vitelli and

you know i i'm interested in your your answer on that i think it's probably going to be no but um i guess a follow-up question on that is how are roll-ups actually different than shards so the answer of course is no um but um i mean i can answer why the answer is no uh so i so first of all uh sharding is not cancelled and the reason why shorting is not cancelled is that phase one which provides sharding of data is not cancelled and phase one is shorting right because phase one is a mechanism where each participant in the network only needs to download and verify a small portion of the data which is the definition of sharding and then from a user experience and like what people actually get perspective shorting is also not canceled because the concept

of ethereum's tps going up from 50 into many thousands is not cancelled and in fact it's going to come even sooner than people thought it would so shorting is coming and shorting is coming sooner as a result of these refocusings in my opinion um what was the other question again how rollups are actually different than shards yeah yes this is a definitely good question uh so and it's an interesting question right because like a lot of the time people get hung up on and confused about the word sharding because they think of a shard as being a cluster of notes but that's never how we thought of charting right the way that

we've thought of shorting is that a shard is a kind of logical subset of the blockchain and nodes get assigned to shards and the number it could be part of one shot it could be part of two shards or it could be part of all the shards and so in the case of a rollup what happens is that it's uh it has some of the properties of shorting but not all of the properties of sharding right so one of the properties of the charting that it has is there's a property that computation gets split apart right that if you have many different rollups then computation in each of these roll-ups is done separately by separate kind of subsets of participants uh and

this is kind of the key thing that's responsible for getting them scalability so that's um one place in which ropes are kind of like shorting another place where rollups are like shorting i think you guys actually talked about this in one of your previous episodes i think it was either with haydn or someone or or a paradigm person or someone else i'm talking about uh kind of the future of uni-swap and market makers in a shorted context um where you know you're talking about kind of you know the earthquake ethereum chain is being like manhattan then you have your suburbs and roll-ups and shards actually from that economic standpoint to have a very a similar functionality because

they are both the new terminology that we could use is a domains right and what a domain is it's a kind of collection of accounts or kind of a region of state where you can have synchronous interaction between accounts within that region but you can only have asynchronous interaction uh between that region and other regions right so like what i mean by synchronous interaction is like for example uh being able to um you know take out a uh um a cdp from uh like maker or compound then i use some coins i stick them into unit swap then do some arbitrage trade then take the output then stick that into ave and then do some other thing and just do a bunch of fancy stuff within one transaction um and then get the results and if like something breaks

then you just immediately revert everything right like for that kind of fancy magic to be possible you need to be within the same domain you need to be within the same environment where what we call synchronous execution is possible asynchronous execution is like i send a transaction and that transaction gets in over here and it's going to have an effect over there but that effect is delayed like for example i send some eth from chard a to shard b i i lose the eth immediately but you get the ethan chard and b like once a lot later or two slots later um and synchronous execution is possible within charts synchronous execution is possible within roll-ups but only asynchronous execution is possible between charts and only asynchronous execution is easy to

implement between roll-ups it's you have more leeway to potentially design roll-ups we can sometimes do synchronous execution between them but uh it's it's still a challenge right so that's another way in which shards and roll-ups are similar um one way in which shards and roll-ups are different is the security model right so in the case of just uh using rollups roll-ups all rely on the same data layer and that data layer gets uh at least by you know in the current eth1 system downloaded by everyone and verified by everyone so there is still something which is being verified by everyone and that something allows you to avoid some of the trade-offs that are inherent in a yasha shortage system

um so that's um so that's one example of an area where shards and roll ups are different so i guess suggesting kind of summarizing again like there are some similarities there are some differences to the end user shards and roll-ups definitely feel very similar another really fun thing going down the road is that when we have eth2 and roll up some at the same time and you have the roll-ups on top of these two then you know different roll-ups might end up using different shards you could have one roll-up that uses five shards you could have five roll-ups that are sharing the same shard um so in that case uh shards become this technical um distinction that that's just about kind of grouping data into blogs and roll-ups are the more relevant uh kind of

distinction in terms of like domains that's some uh that's more relevant to the experiences of individual users so keeping on this rollup centric roadmap uh post i read the post and uh i thought it was fantastic like um very very exciting i would say but could you describe like kind of what that post actually means about the the role of um the role of rollups in an eth2 world and what are the wins for the east community in a roll-up-centric road map um so i think i am just this is a good opportunity to kind of cycle back a bit into the conversation on ethereum values uh and i think you know i talked a lot about how ethereum values and bitcoin

values have similarities um one uh place where there might be more difference uh at least you know i feel and then you know i'm sure people will accuse me of bias for this and so on and so forth but like if the ethereum community really values pragmatism um and just evaluating you know making decisions that make sense um given just the context that's uh standing right in front of us and what people and application developers need and like this has played out in a couple of ways like one way for example is that ethereum miners actually have been willing to raise the gas limit somewhat uh and so instead of the burden of uh increase the demand for usage falling entirely on users uh facing higher

transaction fees some of the burden falls on users paying trends higher transaction fees some of the burden falls on users having higher validation costs and so you know on net it's probably a better trade-off than if we had just that kind of stuck a gung-ho to keeping one uh block size um but in this context like basically the post had kind of two main themes to it well the first main theme is just you know hey look at reality and so what i mean by that is if you look at the current reality of uh you know where ethereum is what kind of scaling is needed and what kind of scaling is there like we see a few facts in front of us right one fact is that there's a dire need for scalability to increase and there's a dire need for

this to happen quickly gas prices over the last couple of months have hit all the way up to 700 way on a couple of occasions now they're a bit lower but they're still you know hovering around in the in the tents going up to 100 from time to time so gas prices are still by historically standards astronomically high and they're high enough to um kick out many classes of applications that in many cases represent uh what we think if ethereum is there to accomplish and especially on the non-financial side and so scheming is very important so that's the one fact scaling is important scaling is urgent the second fact is that the technology that is available today

in or in the realistic near term to alleviate scaling is roll-ups right roll-ups are the game now there are channels but channels are very application specific there is plasma plasma works for payments but it doesn't work well for general purpose contracts and so roll ups are just the centerpiece of the game and so we need to be serious about the fact that if we want medium-term scalability people are going to be moving to roll-ups and like this isn't even a suggestion this is just a uh recognition of the of the reality that's facing us um and then the second uh really interesting thing is that if you look at the uh a combination of uh roll ups with just the way that the if e2 roadmap is rolling

out right these two roadmap is rolling out of these multiple phases where phase zero is proof of stake phase one is shorting of a data and phase two is shorting of execution and it turns out that phase one shouting of data is actually the only thing that you need to put roll ups on top of sharding and give us just really really massive scalability and so it turns out that if we're willing to kind of move over onto rollups then not only will we get the scalability we directly need it today but we will also just get extremely huge scalability beyond our wildest streams as soon as phase one and so given these facts um there is both the once again the recognition of reality that roll-ups are the game for the medium-term future but also the there is

the proposal that the ethereum ecosystem should basically just dedicate itself to roll-ups as a strategy and that the ethereum ecosystem should not try to have its own base layer execution and should just like rely on rollups as being its main mechanism for scaling applications and i give two reasons for this one of them is that rollups are going to be here sooner and they'll have higher scalability so why sacrifice the higher scalability thing for the lower scalability thing and the second reason that i give is uh that uh rola if we have a base chain that is more kind of enrichment and more focused

then we can reduce the number of new security assumptions that we have right and in particular we can avoid committee and fraud proof assumptions and this would significantly increase the security of the youth to chain which is uh wonderful uh and uh it would allow the kind of roll-up ecosystem to basically just kind of do its own thing and then the third uh kind of once again our kind of pragmatic part of this roadmap is basically the fact that you know there is this kind of ethereum satellite ecosystem of uh as a matt feinstein recently said in his great post kind of i think it was ethereum helpers or ethereum enablers and even ethereum killers who are

respecting to being ethereum enablers which is just awesome um and so basically if we adopt this if you're this roll up focused roadmap then instead of uh if two uh kind of positioning itself to squash these projects the eth2 would be positioning itself to cooperate with these projects and to kind of be a platform where those projects can end up helping to just be its uh execution scaling layer on top which creates a lot of synergy it also creates a lot of room for these projects to kind of do more experiments um also potentially do more public goods funding for the ethereum ecosystem and do a lot of other wonderful things that would not be possible for ethereum to do by itself ryan started off this conversation asking the question you know how are shards and roll-ups really all that

different right and you know part of the answer is that roll-ups represent sort of this um you just said satellite kind of like the satellite away from the main chain that has like a direct one-to-one bridge with the main chain and i think what you just alluded to is that that same relationship can also happen with the quote-unquote eath killers right turning them into ethan enablers ethereum enablers and so to me and at the same time we've also seen almost every single ethereum app announce some sort of l2 system some sort of roll up that they are going to leverage right um and and this happens you know every single day there's like a news like oh we're hopping on to an l2 and so when so many different

systems applications on ethereum or you know side chains or ethereum killers are able to uh link into ethereum directly via a roll-up via some sort of l2 system how does that change the character characterization of the l1 right because that turns it into a place where everyone seems to be transacting you know sending tokens buying selling on uniswap you know the people are all living on l1 and it seems to be pushing them into living on l2s so how does this change how we are going to have our our relationship with the l1 of ethereum so it definitely will be the case that a user's primary base is going to be generally an l2 system right so like i

think in the long run there may well be even be users that just go years uh using ethereum without ever touching l1 without ever setting up an account inside of an l1 the main reason why a users might want to use an l1 one is as part of moving between 102 and another though even there you can save a lot on transaction fees by creating kind of optimized mass exit mechanisms uh and a two would be if some kind of l2 potentially breaks um and three would be that there are some applications where it might make sense to have a kind of the core of the application be registered on the base chain and then have that application um sort of have satellites of itself so to

speak exist on the l2 side right so one example of this might be a token and so if you issue a token i like i'm predicting that the main way to issue a token is still going to be to have the base registry be on the ethereum base chain directly and but then you know users and kind of intermediaries will just end up depositing that token into the l2 systems and then you'll have a lot of people just doing things with that token directly on the l2 side so i definitely think that those sec those kinds of things are going to happen a lot and there's definitely going to be some i don't know if level of people figuring out well exactly what is that going to look like you know for any given application do they want their

application to live on a particular rule so they want it to be close across scroll up and so on um and that's one of those things that we're just going to have to figure out over the next and a few months or a year a year or two um but i'm confident uh that we'll be able to like this is going to be a slow transition and we're going to see more and more applications start to migrate so layer 2 is over time users are going to migrate more and more of their activity to layer 2 is overtime and i i think we'll get through it i think we'll be fine earlier in this podcast you discussed how scalability is important because without scalability you allow for the entrance of middlemen right and and what

ryan and i have been discussing with with bankless is that you know we like bitcoin bitcoin's fantastic but we are concerned that it is going to be a system that is basically gated through bitcoin banks right because if bitcoin gets adopted uh completely and holistically then there's not enough scale on on bitcoin for every single individual to be able to transact on the l1 and therefore you know people get pushed into like hey i'll send you bitcoin through coinbase and coinbase just settles with their own internal ledger rather than being on like the trustless permissionless open bitcoin blockchain it seems to be that opt that rollups and l2s like them

offer you know ethereum level capabilities of scale and execution environments and trustlessness that is exactly what you were talking about with like well with increased scale we don't have to rely on centralized ledgers we can use roll-up ledgers and so is it the conversation around roll-ups and reducing intermediaries is that kind of what you were referring to at the beginning of this podcast uh yeah and i think um like basically either people are going to be on a decentralized lawyer too or people are going to be an essential on a centralized lawyer too i mean coinbase is obviously one of the more blatant examples of a centralized way or two but there's also more subtle examples like you know there's permission consortium chains some like an overseeing liquid

for example um and even in the ethereum casing there's definitely some applications that are moving to you know either something like x-die um or in the case of uh the the dark forest game on i think it was either the uh roxton or girly or one of those test nets and it's completely understandable why that's happening because the just the scalability for a kind of properly ethereum connected system is not there yet um but it um it is something where we want to make the kind of properly decentralized interest results are end of actually available so what about the possibility one of the things that everyone's concerned about with you know the the sharding and also

with rollups is composability because with uh d5 currently composability is kind of like our big thing right let you you mentioned a possible transaction where you know there's a flash loan from ave that's trading on uniswap and dydx and does everything at once right and you know sharding gets in the way of that but then also rollups also gets in the way of that as well um so i was hoping you could kind of just go through some of the strategies for uh retaining composability and then also is there a possible way for you know each individual roll-up to have you know a direct connection with each other that doesn't leverage the l1 sure um so uh i guess uh first of all and there are some kind of application

specific strategies that can get you many maybe most of the benefits of nf composability even in an asynchronous context so one thing that i talk about for example is the concept of yanking so the uh kind of big example problem that i often use to talk about the synchronous composability is and i i credit andrew and miller for this and i think andrew miller himself credits basically mainstream undistributed systems textbooks is the trade-in hotel problem and the trade-in hotel problem basically says if you have a train on chart a um or if so if you have a trained ticket booking contract on chardet and the hotel

booking contract on chart b then how do you um book the train and the hotel in such a way that you ensure that you're booking uh either both the train in the hotel or neither right because you don't want to have the train right off the hotel um and you don't want to have the hotel without the trade and if the train under contract in the hotel contractor on the same chart this is easy because uh you just uh send the transaction which does like step one book the train steps you booked the hotel and if either of those fails you revert and reverting cancels both in an asynchronous context this is much harder right um and what you can do though is this mechanism called yanking so the way yanking works is you design the train booking and hotel booking contract in such a way that you

represent the permission to book a particular seat um as a kind of separate discrete contract right so then step one as you call the train booking contract on chardet and you basically create this kind of separate contract represents the right to book a particular seat uh step two you do the same on the hotel side step three you take the train seat booking contract and the hotel booking c contract and you move them both to uh whatever chart you're on right then step four now that you're both of those are on the same chart as you are just you do your synchronous transaction and you book both the train and the hotel and if either one fails then you uh are gonna revert both

now the reason why this approach works is because it is definitely possible that you know because of asynchrony blah blah something happens on one side but not on the other side their train gets booked or the hotel gets booked but until you do that final step where you already have both of those contracts on the same chart you actually haven't booked anything right so if you know you do this kind of separation and then someone else snaps up the train or someone else snaps off the hotel uh then you know that's fine you abort um and uh you would just basically wait some time and you try again and so it's or alternatively if you bring the train and the hotel into your shard but then you go offline then there might be a timeout and then someone else can go

book the train in the hotel right so you still have this kind of safety property um because you're basically kind of doing a asynchronous pre-processing step where you kind of drag the permission to do whatever thing you want to do onto the same shard and then only at the final step you do everything on all of the kind of final commit steps at the same time on that one chart and you might ask well why do we care about trains and hotels but it turns out that this is a kind of excellent technical metaphor for a very wide class of you know decentralized exchange and like other d5 things that people actually care about doing so sometimes you can do on the things like that um and if you can then this is wonderful now if you can't there is another alternative that will also want

us to and that alternative is basically that you know we just accept that some roll-ups are going to be more focused on high-value applications and defined they'll have higher gas prices and other roll-ups or uh are going to be focused on applications that have lower fees but i do not have synchronous connections to the high value stuff um and the other fun thing that you can do is like especially post sharding you can have a single roll up that talks to multiple shots right so you can have a single row up that uses the data from multiple shards and so you can potentially have a rollup that has scalability that combines together multiple shards which is potentially um really amazing and if you do that then

you could imagine this kind of d5 focused roll up as having scalability of you know many thousands of transactions per second in which case it could just easily be enough for the kind of bulk of the important high value activity to happen on there so yeah and i guess in summary you know there's a kind of combination of these different approaches and kind of yeah i think any one of them can now work well and i think the market will kind of gravitate toward the thing that makes sense so vitalik to wrap up this rolex roll-up centric road map uh section like i guess some of the takeaways the wins for the ethereum community is you know a you said it's pragmatic this is happening now um two it seems like speed right so th this can happen as soon as eth phase

eth2 phase one uh which is maybe a year away uh my timeline not yours that's an estimate um the the last thing i guess i'm facing i'm a bit hazy on though in this roll-up centric road map view what changes in eth2 phase two so do we even need state execution across these these 64 shards we have sharding in this data availability layer and we're scaling with roll-ups um does eth2 phase two get a lot more simple right and so in the extreme version of the roadmap you just don't need e3 phase two at all right you just say phase one and then the merge and then you know for the base chain that's the end of history like you can do some incremental upgrades like upgrade to uh casper cbc

and maybe do some zero knowledge proof stuff but you don't need to fundamentally change it again that's the extreme version of the road map the somewhat less extreme version says you know well maybe things are going to be safer and more convenient if base chain gas prices are still somewhat more affordable and if that's true then you know maybe instead of one execution chart maybe we can have like four or eight execution charts so it's still theoretically possible for one user to run all the execution charts if they have to but it's a little bit harder so that is an intermediate path that we could potentially take another intermediate path that we could take is having phase two come much later when we have uh the ability to just use zika snarks to zero knowledge proof the evm

at which point we actually will be able to just do a kind of base chain execution without relying on any fraud proof assumptions um so there's different versions of phase two that become possible and we don't have to commit to any specific one of them for quite some time so we preserve the optionality right but the nice thing about this is like the the haziest part of the eth2road map and you know what kind of design is um eth2 phase two really um so if you kind of don't need that in order to scale with roll-ups then scalability on ethereum happens a whole lot faster yes exactly and if two phase two is definitely not necessary for um users to get scalability i mean that's never been

true like it's i think it's the the facts that you could do of sharding a plus roll-ups to get really high scalability has been true um as a property of the road map for a long time but i guess it's only been in the last couple of weeks and people have like properly realized that it's true vitalik i want to turn the conversation to eip1559 and for eip155 like its utility or its beauty it's kind of in the eye of the beholder yeah you know for some for some people it changed the monetary policy of ethereum and that's its greatest feature for others it uh makes transacting on ethereum much more easy it's just a better experience because they don't users don't have to worry about gas there's also the conversation of minor extractable value and how eip1559 can help mitigate the

instability that minor extractable value can cause so when you think of eip1559 what what do you see almost the way i see all of those things like ap1559 was definitely originally created as a fee market improvement uh proposal that basically said well instead of having this really horrible free market that we have today where users have to send transactions either with really high fees or they have to wait a random and unknown a noble amount of time for no reason and we'll have this market where we have kind of less volatility on the fee side and admit a little bit more volatility on the block size side um and so this ends up again just being much safer for the network so that was uh one motivation um

and at the same time in org and i wrote this big long paper um uh where i talk about this uh out of different benefits another one is like getting rid of the inefficiencies of a first price auction um and then the list kind of goes longer and longer i mean another one is getting rid of uh some safety issues of a uh of a dominant blockchain so there's a lot of problems that uh fee market reform ends up solving and then the other side of all this of course is you know the burn um and the burn is of course this thing that uh a lot more people end up focusing on right and like there definitely is this kind of dynamic where

you have some people that are interested in fe market reform for the more technocratic reasons some people are interested in tea market reform for the more kind of quote populist reasons and then there's people who see the value of both which is a camp that i would definitely put myself in uh and like i think that is um probably debate one of the bigger reasons why it's so powerful right like it does just somehow kind of hit the jackpot in terms of having this fairly large set of uh benefits for ethereum all at the same time one of the things i really like about eip1559 is how it uh well in my opinion it adds

to the credible neutrality of ether the asset right and especially its relationship to ethereum as the way that ethereum comes to be validated in proof of stake we were talking earlier about you know ether distribution and kind of the question of who should get ether issuance um in the in how ethereum becomes validated right and you know well we just decided that you know it's kind of unfortunate that proof of stake is not a distribution mechanism but that also comes with the benefit of you know proof-of-stake being really really secure and instead of ether being a distribution mechanism i think eip1559 reduces the political nature of ether

issuance by socializing ether burn ether because instead of having the transaction fees sent to these stakers who you know could be a quote unquote privileged party those transaction fees are sent to all ether holders everywhere do you see this as a a de-politicizing or credible neutrality uh boosting force for the monetary policy of ether uh yeah so i think um one uh important thing about uh the uh eap five one five five nine and a particularly the fee boarding property is that it just establishes the centrality of uh ether within the uh the ethereum economic ecosystem so

what i mean by this is that if you don't have this and then in some ways ether becomes a kind of the most anti-privileged asset on the network and what i mean by this is that like ultimately you know you can do things with eth or you can do things with other assets and especially if we have roll-ups then you could even imagine a roll-up where the sequencer pays our transaction fees with if uh but then all the users pay the fees their fees to the sequencer and like die or whatever else and eventually the roll-up uh sequencer could just have private agreements with mining pools and they could just use paypal or um avoid eth entirely and so the problem that you get is that if doesn't really kind of have special

privileges in the ethereum network but it does have a special burden and the special burden is that it's if and only if that has to suffer the expense of more of it being printed um in order to secure the network right uh and uh the transaction fee burn basically fixes this problem because if does have this unique burn but it also has the unique benefit that it is this asset that is kind of ultimately indispensable if you want to pay fees on the or get transactions included on the ethereum network like even if a user ends up paying and die there's like some intermediary that's going to have to get some ef and actually burn the if in order to get the transaction included um

and so that actually does i think kind of bring the economics of the ethereum ecosystem somewhat more in imbalance and the last variable that's related here is minor extractable value and the minor extractable value is in in summary the value that a minor or also a validator can extract as their privilege role of being able to order transactions right and and also be being able to insert their transactions in that order as they see fit that allows them to extract value and a way to kind of quantify minor extractable values to look at the fees being paid to ethereum in any particular block and during the field farming mania we saw you know

ether blocks having you know you know three four five eight ether as reward for fees on time oh yeah twelve that's crazy on top of just the two ether that's issued every single block now with ip1559 it's an elegant solution because a lot of that fee a lot of those fees would just get burned and that that's the credible neutrality that we were talking about but the combination of minor extractable value and eip1559 means that we're going to be burning a a lot of eth proportionally does this change the relationship between ether and ethereum in any meaningful way and as i think i just kind of mentioned

it does kind of reinforce the uh centrality of um eth um just uh you know because there just is a lot of youth that's going to have to like really properly go out of circulation um every time one of these uh transaction v spikes ends up happening uh in terms of minor extractable value i mean i think uh the one of the challenges is that there's a different kinds of minor extractable value like fees are obviously one kind of mev and that's important and uh with the ep1559 the fees are going to be largely captured by the protocol um another kind of muv though is like arbitrage right like if you have the kind of right of first refusal to put transactions into a block

then if the price of like any token moves you could be the first to claim all of the unison arbitrage for example right and that's another privilege that miners have and it's a privilege that currently miners are not very good at claiming but in a roll-up-centric roadmap that privilege is going to be largely claimed by basically roll-up sequencers and roll-up projects themselves which is um actually a really interesting equilibrium i mean i actually like this because it basically means that you know not all the value is gonna get captured to pay for security there's some value that could potentially be captured and directed to pay for other public goods like uh i definitely you know encourage you to like talk to jing from the um optimism team at some point um um

in terms of kind of some of her thoughts on using uh minor extractable value to pay for other kinds of uh just ethereum a lot of level and potentially even wider a public goods um so there's a lot there that can be explored as well um but yeah and i think the ethereum ecosystem is going to get kind of better and better at sort of plugging the loop and basically i'm ensuring that you know any opportunity to capture value becomes uh directly linked to opportunities to deploy that value for productively for the good of the whole ecosystem we do have a podcast with carl and jingle on from optimism slated sometime

into the future so that absolutely will be discussed yay so vitalik let's let's talk about this kind of i guess last piece of um ethereum 2.0 and we we've spent the the entirety of the conversation kind of going through all of the pieces and and the values and the decisions as to to why and i guess ignoring eth2 phase two right there is this notion with kind of roll-ups that we brought up where if we get to ethereum uh to phase you know 1.5 where we're actually merging eth1 and eth2 together um that gets us a lot of what we need for scalability so i want to talk about that and like one thing

that strikes me is um you know the whole concept of eth2 as sort of a separate network is almost a misnomer or at least it's it's temporary um i think you've called like eth2 previous to all of this previous before it got memed into eth2 serenity as sort of the next launch and that's when we really start to see that this is this has always been one cohesive road map when eth1 and e2 face together together so ignoring like e2 phase two how will the transition work when we merge these chains together uh so just kind of repeating the road map right so first we have phase zero which is coming very soon when uh the proof of stakes part is going to start then phase

one where that uh the new new proof of stake beacon chain gets extended with data shards then um we have the merge um and this is the critical part right what happens in the merge is basically that we take the existing ethereum state so the accounts balances smart contracts code smart contract storage all that stuff and we kind of just cut and paste it into from the ether1 system into the e3 system and then from then on if you have an ethereum client it will stop looking at these one chain and it will start looking at the institution so the kind of the place where you would need to put transactions if you want to interact with those applications after that point on will be in the e2 chain and it will be

the e2 chain that processes the transactions that kind of executes the state transitions and that does sell on all of those things right so basically kind of the core um engine then well i shouldn't say the engine the engine is more like the work and the proof stake the core kind of thing that is being maintained is going to be uh sort of transported from these one system directly into the e2 system it's the engine um that will like kind of before was that proof of work but and after the transplants it will be living as a part of the proof of stake system that will have been already running for over a year by that time so if you're a user you don't really need to worry too much the transition

will happen uh largely automatically and you don't need to do anything special to you know move your coins over or move your contracts over like everything just then moves over by default um and then if you're a client developer then you know the transition is you can think of it as just being like a special type of hard fork basically and at that point the eth1 chain will effectively be no longer useful it will die correct what eip features do we need an eth one before it freezes eip1559 is there anything else i mean theoretically the roadmap would work um if we uh changed nothing about ethernet between now and the merge but there are things that would be good to uh to include right so

eip 1559 them certainly uh i mean eth2 has its own a kind of built-in form of eip1559 um but then uh the eth2 version focuses on like bytes because eth2 was just a data environment but you know we wanted to have it for gas as well uh and another nice thing to have would be stateless execution um so the ability to kind of execute blocks without having the full state um and this is something that eth one is slowly moving towards like there's a any ep to change to a binary tree there is uh an eip to increase the gas cost of some operations that have a really heavy a witness cost

um and so on and so forth um so there's definitely things that would be really nice to get included in eth1 before then and then obviously just generally efficiency improvements um like oh really a lot of things and even the important things like theoretically it could happen before or after the switch vitalik we want to thank you for giving us your time this has been a very insightful very helpful podcast to go through why we are doing what we are doing here in the ethereum world and we want to we want to finish up with a roll-up round if you are game all right so first first roll-up question phase zero 2020 or 2021 i think 2020. next question zk roll-ups or optimistic roll-ups who do you love more

short-term optimistic uh long-term i expect kind of zk to inch into a better and better position over time as ek roll-ups become better at doing more general purpose things vitalik what does moloch mean to you uh molok is the rationalist god of coordination failure it's kind of the representation of uh all that is wrong with the world uh that can possibly not be wrong if we could uh just uh learn to find ways to cooperate better and uh slaying moloch is one of the major things that i think the theory of ecosystem can be about china versus the united states in the current digital currency race who wins um

i mean i guess china definitely seems kind of more on top of the game in terms of uh just getting dcep um out there uh i think uh i mean in the long term and i don't think that the interesting question is like government a versus government b so much as it is like you know the category of kind of governments doing their cbdc is in that particular way versus uh alternative approaches um like i mean what first question you know is dcp even going to succeed at like beating out existing uh kind of centralized fiats like wechat pay which is already very convenient um and then a second question is like in other places um you know what

advantages are cbdc is going to end up having relative to other forms of digital payments and then finally are they going to be the primary way that people end up actually doing international commerce or do a fully decentralized currency is stand the chance of kind of capturing um a lot of market share there either directly or as a kind of glue layer between these nationalist systems i think uh seeing um just where the equilibrium lands up there just like in terms of you know the category of uh kind of nation states doing things directly versus nation estates uh kind of interacting with the commercial banking sector versus just crypto as a separate gulu layer or

potentially um nation states coming up with cbdc is that i can like interact with the crypto layer more closely that and i don't know we'll see there is at the time of recording 142 000 btc tokenized in various different ways on the ethereum network how would you describe the long-term relationship between bitcoin and ethereum and i definitely expect raps bitcoin on the ethereum side to grow over time my main concern that i've raised multiple times and they keep raising is the trust model like a lot of these wrapped bdc is so they kind of hide what their trust model is or they don't talk about it openly or they talk about what their

trust model is going to be in five years but not what it is today and they're often end up being fairly centralized in practice and this really worries me i want to see more decentralized uh rapper tokens that have at the very least a multi-sig trust model um and then see if we can do even better than that does t btc from the keep project fit into that category it's definitely one of the more interesting trust models um though i mean one challenge is that the kind of collateral costs of um having uh ether be there to back the btc are significant and so it won't look it will be forced to charge like some kind of um interest charge i think on the on on deposits at

some point um but which uh some of the more centralized ones are likely not going to be able to uh we're not going to have to do but i don't know we'll see vitalik say phase zero ships in 2020 as you predict do you think that regular people regular eath holders should start staking at the eth2 launch or should they wait some time i think if you're an intrepid enthusiast you should stake at the beginning um if not then you should wait some time and i think that's okay like i we actually want to have a relatively smaller number of people sticking at the beginning and i've increased that over time as people get more comfortable metallic it has been a pleasure to have you on bank list thanks so much for sharing your thoughts on why

eth2 and the value set that drives this very important project in the creep in the crypto ecosystem thank you this has been great all right guys action items vitalik included a bunch of articles that he referenced in this conversation we will include those articles including slasher a punitive proof of stake algorithm and his philosophy in the show notes so you can click on those and read up on that material also we've included vitalik's post on eth research on the roll-up centric roadmap that is fantastic reading if you're trying to get familiar with how the ether2 roadmap is shaping up lastly we have a guide on eth2 staking we're going to be putting more guides on eth2 staking as it uh as it becomes

available i think we're close now so we've included a link to that guide and you can check it out there risks and disclaimers of course crypto is risky so is eth this is not financial advice defy is risky you could lose what you put in so be careful out there but we are headed west this is the frontier it's not for everyone but thanks for joining us [Music]