Cypherpunk Is Dead, Long Live Cypherpunk

Transcript

[applause] >> Can you please raise your hand if you know what Cypherpunk is? Okay, there are some people who don't know. So, I'm going to mention this. So, Cypherpunk is the movement that started in 80s and 90s that was saying that we need to build systems and protocols the base on values privacy and cryptography. And Ethereum started partially based on those values. And right now Cypherpunk is dead.

Long live Cypherpunk. This is one of those phrases that we usually say in the history when we go through an important cultural transition. The king is dead. Long live the king. So, Ethereum and crypto entering their institutional era. And it looks like the end of revolution for some people. I would like to argue this is just the beginning. So, in the next 15 to 20 minutes, I'm going to talk a little bit about why I think this is not the end and how we can work together with institutions.

You never change things by fighting the existing reality. To change something, build a new the existing model. So, these are the words from Buckminster Fuller. As that we want to build new systems and then the old systems decay. I think we need to build bridges. This is the first step. Instead of burning bridges like some other previous cultural movements, we need to find a way to work together with new institutions that entering the crypto ecosystem. And adoption is not the end of Cypherpunk ethos.

The previous era of crypto may be over, but I think we're entering in a new era of permissionless and programmable money. And the third part is that it might be the beginning of what community cares about on the new way of building it. I sense some sentiment in the community listening to podcasts and talking to that people saying Wall Street is taking over and our values are behind. And honestly, I also feel some nostalgia from 2018 being in room 77 in Berlin building hard forks sitting in hoodies.

And some people saying it's color shirt era, but Ethereum is for everyone. So, you can wear shirt, you can wear a hoodie, and it's going to be the same substrate for everyone. But we have a problem. We have problem with security, privacy, and identity. And these vulnerabilities are architectural. This is a design problem. Security and privacy are not nice to haves. This is an unnegotiable state to secure these digital assets on chain. We have the systems that we built for the last 20 years that centralized data in honeypots.

And the problem is right now the intelligence becomes more abundant and it's much easier to find vulnerabilities both in the client-server architecture and also at the edges of blockchain systems and bridges for staking and cross-chain messaging. And this is just not words. We have seen in this year a lot of attacks much more sophisticated than before. Recently, a $292 million vulnerability in Kelp DAO.

In 48 hours, $13 billion were withdrawn from Aave protocol, one of the most resilient protocols in the space. And over $800 million were stolen only in this year. This is something we need to take seriously because if you want to bring this technology to new businesses and new users, we need to build security and privacy on different design paradigm. I wrote about it in my article called sovereignty paramount. It was the first stress test for DeFi and it failed.

AI is rewriting and rewiring the threat model. So, with machine machine intelligence growing exponentially, the bugs will be found much faster. These are some numbers and some data that the cost is going down, the percentage of amount of bugs found is going up. And for example, recently a bug in Zcash was found that was sitting there since 2022. And only AI was able to found this find this. And pretty soon Mytha's from Anthropic will be released and nobody knows how many vulnerabilities will be found.

So, all institutions are slow and they were built for human attackers. And that assumption is gone and all systems going to get smarter. So, we need to bring new ways of working uh to Ethereum and new ways of protecting our data and asset. So, for agentic internet, we need to build system where we don't verify, we trust we don't trust, we verify. Sorry for that. So, in the old model the reputation legal system were built for a handful of known actors.

JP Morgan works with you, works with other institutions. If something goes wrong, they can read the logs, they can audit, they can reverse the transactions. Now, change and take a different point point of view. We have billions of agents executing trillions of different transactions 24/7 at light speed. And the old institutions simply cannot keep up with this. The service agreements they're going to write going to be a joke for agents because they simply cannot handle the amount of transactions and the load they will bear.

And so, the only answer that we have is cryptography. Specifically zero knowledge cryptography that allows you to prove without revealing the input and the data that the computation was done correctly. And this is something that institutions need to pay attention to. The data stays with the users without revealing it and at the same time you can prove the computation was done correctly. This is math. This is not natural language. And we cannot rely on the natural language anymore.

Cypherpunk technology is what Wall Street needs, any new technological substrate. So, paradoxically a lot of people are saying Cypherpunk is dead. And now I'm saying long live Cypherpunk because exactly the architectural decisions and systems that Cypherpunks have been building since '80s and '90s are the ways that institutions can rely on. The properties like decentralization creating systems without no single point of failure.

The properties like credible neutrality that allow everybody to play by the same rules. This is essentially in finance for institutions that counter party risk. They are looking at are my assets secure and safe? Our users will be able to access it 24/7. Can we withdraw assets at any moment? And verifiability, so anyone can independently check the rules were followed. No intermediary and no trust. And Ethereum has proven this with 11 years without zero downtime.

Prove that this property is also operational resilience. So, how do we keep Ethereum running for the next 100 years? This properties can only persist if they are funded. What are we observing right now in Ethereum ecosystem is that the role of Ethereum Foundation, the main organization funding Ethereum and pushing the development forward is narrowing down. This is probably a natural development, especially taking into account the amount of assets that they have to fund things going forward.

So, they're going to narrow down their focus, but it requires new coordination. It requires coordination from the community. And we need new models for decentralized funding. And we need new sources to build self-sustaining systems. That's going to preserve Cypherpunk ethos both for the community and for the institutions that are coming on chain. And so, we need collective power. DATs, that stands for digital asset treasuries, the new emerging type of structure where those organization hold significant amount of ETH and other assets and other large token holders who can power the new chapter of

long-term funding of Ethereum. Octant build a self-sustaining engine for funding Ethereum ecosystem and around other ecosystems. This is the project we've been building for the last 3 years. It's powered by Ethereum proof-of-stake staking rewards, not donations or token sales. 100,000 ETH is staked by organization called Golem Foundation to generate sustainable revenue stream and funds ecosystem grants.

It funds projects and covers Octon's costs. This is not just a model. It's a sustainable model and it's proven in the last 3 years that the yield funding works. And if you are interested in your worst cases can sustainably fund the public goods and ecosystem growth. So, this is a very high-level overview of how it looks like. Golem Foundation deploys assets into Ethereum to generate rewards in ETH and those ETH are given to users and the projects and the users can decide decide how the assets are distributed. I want to you to have a look at

100,000 ETH stays intact. And this is the exactly the property that we want and as we see as new organization, large organizations emerging like Chainlink, Bitmain and others, they are all addressing this problem. How we're going to fund the future long-term? So, we need to use systems that based on yield funding where assets are deployed and the sustainable revenue stream exist to fund ecosystem and business development. In the last 3 years, we funded over 130 projects and distributed approximately $18 million to projects and community.

So, this model model has proven 100,000 ETH stays intact and zero downtime in last 11 years that both powers Ethereum ecosystem and allows the capital to keep working. So, grants flow to Ethereum aligned projects and builders and we can work together with an ecosystem to build new self-sustaining models. Some products that we have that can power the same model called Octan Vaults.

Octan Vaults operate as perpetual endowments for the things you care about. If you're familiar with DeFi, there's a standard called 4626. This is a standard vault that exists across DeFi that allows depositors to deploy the capital and generate yield streams. What we have done, we created a model that basically replicate and down. Different parties can deploy capital into those vaults and it sustainably generates streams and funds things that are defined as a commitment.

So, they create funding stream. And we can deploy cap different DeFi strategies and returns flows to the direction that you choose. An allocated yield acts kind of like insurance. This property doesn't exist in other vaults. So, the yield that is still stays in a contract can act as insurance against loss, which is an interesting property that protects the capital that depositors deploy. And so, it creates a new model that is called yield power giving.

Fund what's important to you continuously without ever spending your principal. Now, the product, our Octan Grants. This is an allocation layer. This allocation layer allows um deploy after the assets are deployed, it allows users and capital providers to choose where the funding goes. So, there are different ways how the allocation can be decided. There are different community voting models. They can be just budget allocation by capital providers something called quadratic funding where the user voice matters independent of their ticket size.

And the capital providers speak what model is. The next week we're going to launch our first funding event on upgraded V2 ecosystem. So, V2 turns deploy assets into sustainable funding streams. The one of the last thoughts I want to leave you with is we usually say that or there's like a sentiment that the first generation of web was about reading, the second was about reading and writing, and the third generation is about reading, writing, and owning.

I have a different take. I don't think it's about ownership per se. I think it's about co-ownership. Might be surprised for some, but you don't actually own your assets on chain. What you own is the key that up lock unlocks access to your asset. When you operate with a bank you operate on the agreement between two different parties that is regulated by the legal system and enforced by it. On the blockchains it's a public state that is copied to a thousands of different computers.

And only because this is funded, this public infrastructure is funded and developed by software developers from Ethereum ecosystem institutions can come and chain. Users can keep accessing their assets 24/7 at light speed. So, that's why I'm saying this is about co-ownership of the shared state. So, in order to keep the network neutral and sustainable access has to stay open for everyone. This is why I think that we need to preserve the same properties that existed in the ecosystem for the last 10 years.

And then build on top of this. Ethereum is building all right now the most secure ZK-EVM ecosystem that's going to come in the next upgrades in the next one or two years. That will allow people to prove the computation. The AI will come on top of this. And if two or three years ago proving the inference of AI so the computations are correct was mostly hot. Right now, this is a reality. And this is the only way we can actually both build the ecosystem that exists with the on-chain assets and uses agentic internet together with Ethereum ecosystem.

So, the moment is right and ripe for institutions to come and chain. But it doesn't mean that the community has to sacrifice the properties and principles that we built it on. I'm going to repeat that I think these are the properties that those institutions need. And they will provide them confidence that the counterparty risk is lower than existing systems, especially when the abundance of intelligence going to grow.

So, the user-owned financial system and Wall Street can build together the most secure 24/7 credibly neutral settlement layer. So, let's keep Ethereum sustainable and neutral. And everyone can keep can keep accessing their assets 24/7 for the next thousand thousand years. That's what Eigen funds. Thank you. >> [applause]