Vitalik Buterin on Why Proof of Stake?

Transcript

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platform and not found in the legacy world check out cuenta.io if you're a developer or you just want to earn yield on your collateral go to www where you can stake your snx or eth and earn fees from synthetics agless nation we are pleased to bring you vitalik buterin again in front of the nation we are talking about a few things that are top of mind vitalik great to have you how are you doing thank you very much uh david and ryan that's um great it's uh great to be on bankwest again it is fun and i feel like this is a really good moment to be on bank list the first thing we want to talk about with you actually is this pretty

momentous maybe monumental in the history of ethereum achievement which is we hit the number 524 thousand 288 eth now deposited in the staking contract how does that feel it definitely feels great um okay and i think like for a long time in the first few weeks and we were definitely a bit worried because i know that the deposits were coming in slowly at the beginning and it seemed like oh no with only four days left when we had 20 percent and you know what the heck is going on here uh and i mean we even saw right that and there are a lot of people who are starting to get worried like and on our github thread and i saw eric opened up

um that github issue basically suggesting you know hey just in case there's never enough deposit so let's set a maximum date and there is a bunch of arguments around that um but um you know no the ethereum community came in and the ethereum community delivered and just like within the last 24 hours we ended up having more deposits than we had in the entire period before that like it's it definitely feels a little bit surprising though in retrospect it it should not be too surprising i guess uh the one kind of events that happened in the past that this reminds me of is um if you were here during the original ether sale back in 2014 um if you remember that uh whole event uh

it was it was this kind of six week long sale but then the first two weeks were this most important period because that was the period during which you could get the most favorable price for your if uh and there was like some amount of amount of deposits on the first day uh less on the second day and then it seemed like it was going really slowly and almost petering out at a couple of million dollars and then just suddenly in the last couple of days everyone just like whooshed in and uh pushed the whole thing up to close to 18 million dollars uh so and and like the curve feels kind of you're very similar to that um and i like i guess to some extent you should expect that because well why would someone participate earlier if they can just

wait until the end um but you know just seeing that if spike you just come first slowly and then all at once is definitely amazing and it's definitely a great testament to the uh ethereum community as a level of confidence that first time in in ethereum itself and then the second time in the uh proof-of-stake and charting uh stuff that we've spent so many years working on so vitalik what does this tell you uh about the ethereum community like as a result of this and because we like we hit the 524 thousand each but then we just blew past it by 200 000 more each like what does this if this is a litmus test for the community what is it telling you what like what are your big

takeaways about the ethereum community as a result of this event i i mean i think like first of all there's a definitely wide community buy-in and confidence in ethio in general and that's something that i think i definitely believes the whole time but it's uh definitely good to have just such a clear sign of it um no no 300 million dollars worth of uh people just locking up their ether potentially never to see it again unless the thing um you know either delivers or we find or or we find some kind of further thing to do um to do to make those their coins in the in in the deposits actually valuable

again so you know in some sense it's the ultimate bet on progress and and i think like uh i bet on progress is uh to some extent what ethereum is about i feel like it happened in the perfect way like in a very um like climactic way and really like fired the ethereum community up when it actually happened in the way that it did like it's almost fitting i would say that it that we weren't sure we were going to cross the threshold until the last you know 48 to you know 24 hours but i i'm curious about this number itself why was the number selected what kind of drove that number to begin with was it fairly arbitrary that we have to have some amount of stake and so you know why not this particular number or was there

some sort of rhyme or reason behind it i i guess uh like 524 000 was the end of the power of two that seemed like a relatively minimum acceptable threshold for an amount of deposits that we could have to ensure that the chain would actually be safe with that amount so like to give one example it's the smallest power of two that the ethereum foundation could not individually 51 attack uh so that was uh or you know the theory foundation has like slightly uh slightly above that but no it would have to put everything in and even then it would only be only be around 50 percent um so if we had less than just the number of actors that would have enough money to be able

to uh take over the thing individually it would just get higher and higher and so it actually would be like the chain would just not be that secure with a lower amount but on the other hand like at this level it's getting to the point where like there's a really very few individual actors that actually have the ability to and have put in um the funds to take over the chain and aside from the the foundation there's also obviously the major exchanges and maybe like consensus and a couple and and i don't know how much they have and a couple of whales and but and then if you go well if you go ahead of higher and we hope to go higher then it is going to get an out of reach of even those largest

holders but like realistically we don't have to and get up get up to those much higher levels immediately like this is still you know just the phase zero beacon chain there's nothing kind of completely relying on it and so we start at a and if a immediate level of safety and then and go up to the higher level over time as people naturally become more confident in the system so this uh process this getting to that number and exceeding the threshold of eth that sort of initiates the the rocket launch sequence right but um the the chain is not yet launched that will happen december 1st 12 correct 12 12 o'clock utc time um so what what kind of happens next what's the next milestone in the beacon chain

launch and in staking now that we've filled up the the deposit contract to its minimum threshold so the next milestone is obviously the thing that's happening in five and a half days after i'm saying this um december first the the launch itself um you know just it's you know we've done lots of test sets but this is still larger than any test that it's a different set of stakeholders than any test debt so just making sure that all goes smoothly uh then after that uh we would hope the proof of stake chain just to run smoothly for some amount of time and at some points we want to just uh start getting on to the task of kind of upgrading it and bringing on all the full functionality that we want youtube to have so

the big ticket items are one is sharding the second is and if the merge so bringing uh eth one into uh the e2 system removing the proof of work chain and kind of properly floating the uh the system back together and then there's also some smaller things that we want to do so like for example we want to add white client support uh fairly quickly so if you go into the uh give two specs at github there's already a uh pr that's uh we've been working on for about a a couple of weeks to add light client support uh and then there's some just efficiency improvements and some possible kind of economic tweaks um like one example of a like a type of economic tweak we might want to make is just that

making the chain more friendly to uh people who validators who stay online during in an activity week but don't stay online perfectly so like basically if you have ninety percent of performance during an activity a week where the people who are completely online who is forty percent like you should not lose four percent right really you should lose much less than four percent since you really were doing the best that you can so i have a proposal around fixing that uh just general efficiency improvements uh so basically the ef2 chain is uh just going to kind of get into this this you know progressing and upgrading uh mode and it's uh uh basically preparing for the the moments when uh the existing ethereum ecosystem can they have properly and fully fold into it

are you feeling a little bit vitally because so this is like the the uh launch sequence initiated right but but at some level we're all kind of standing close to the launch pad watching the you know the spacex rocket and it hasn't quite launched yet and that of course is maybe the the most nerve-wracking part right so are you is there any element of like you being nervous about december 1st or i mean what could happen december 1st uh could could we have a a failed launch could there be some issue i mean issues are always possible right so this is i think why uh we should hold off the full cell operation until yes it gets off the ground um but like you know like we've seen know what we've had

with different test nets um some of them launched perfectly some of them had issues even the ones that had issues they definitely all uh have managed to fix themselves within uh either a couple of hours or a day or so um i expect uh that in this time there's definitely more participants and potentially less less experienced participants so also maybe more experienced participants because like the people who participated in the test sets are also going to be in the main net and it's not going to be a first time for the for them anymore um we're not we're i don't think we're going to see the thing that we saw in some of the test that's where 40 percent

of people just never showed up uh because um you know this time we actually have a a profit motive um i yeah there's just always the possibility of random technical risk i suppose um but and you know we've done lots of testing at this point like the quality of the test nets has definitely just gone up and up over time um but um you know figures crossed and uh you know if it's it hasn't happened until what's happened uh so we're definitely hoping and eagerly awaiting everything going well so vitalik the eth2 research team recently did a uh a reddit ama that i thought was really fantastic and there's one question i recall in there i think somebody asked you the question about

maybe um you know eat issuance or something i created the context for the question you had this really i thought reflective reply where you talked about ethereum being you know while while ev2 is launching it's also a a technology and a network that is is somewhat in motion right there are going to be a large set of improvements over the the next two years right it's not necessarily going to be like instant scalability is here and both genes merge it's going to still be a process but at the end of that time um like the eth2 chain will be in a much

better place i was wondering if you could i'm not presenting it the way the way you did the way you answered that question but i'm wondering if that jogs your memory and you could talk about um maybe that answer to to the question like what's the future for issuance what's the future for stability these two where are we going to be on the other side when all of this stuff is done and why should we hang with ethereum yeah no and i i definitely think i made that comment for a reason and and i think there's an important kind of insight to keep in mind there so like there's a lot of uh people uh who have been recently commenting about how oh you know i guess this ethe doesn't have a finalized issuance schedule or oh you know you can't calculate what the

current total supply is or what is the max supply and or you're now you're now you're changing things and and there's definitely at some extents to which like those uh queries are coming more from the bitcoin community than the ethereum community itself and so you know we should definitely kind of not uh i guess overrate the extents to which we uh care i really feel the need to kind of respond and satisfy all of those requests um but you know like the thing that we i think we need to just keep in mind is that just kind of being until actually honest about the state of ethereum like if you need a system which uh um

satisfies the property that it will stay the same as uh as it is today and it has existing properties that it's um that it's going to preserve then ethereum as it exists in 2020 is just as a matter of fact not the system for you for at least the next one to one and a half years right there's just a reality that there has been this big massive 2.0 transition that's been planned pretty much almost since the project's launch and now it's finally happening and then at the same time there are these massive transitions in economics so eib 1559 is a big one and also just uh activity moving from layer one to the layer twos uh is another big one and these things are going to fundamentally change how a lot of economic and

technical properties of ethereum work uh and so like any property of the ethereum or blockchain today may well change in those one to one and a half years and so if you're interested in long-term economic properties of the ethereum ecosystem like it matters less what are the properties of the system today and it matters more you know what are the properties of the thing that's uh slowly being built up over the next one and a half years right uh like and like what even is the point of uh being able to you know verify the current like the current proof of work issuance uh schedule like perfectly if uh the thing that we really should be verifying is the economic properties of the proof of stake schedule that are

going to be um you know guiding uh ethereum's economics for the 20 years after uh 2020 um two or you know one uh whenever the merge ends up happening uh so i think like just explicitly understanding that yes ethereum at the moment is a system in flux and yes if you want something that's not a system in flux then you know bitcoin may be the thing for you ethereum classic may be the thing for you though and ethereum classic itself is a kind of i think influx as a matter of necessity because it's immutability is being threatened by all these 51 attacks um but so that's one example where um you know in order to protect people's uh enough property rights you actually have to do

something other than standing still um so so vitalik if this is successful if we cross the bridge if we make it for the other side to the other side for for those that kind of stick with the project stick like the builders who who kind of stick with it the community that that sticks with it what's left for us on the other side what do we get in terms of issuance in terms of improvements in terms of uh security enhancements what's the reward there i i think great things are on the other side uh so number one is obviously proof of stake uh so much more um efficient much more secure much less re-killing uh form of like a much less issuance demanding uh form of consensus um

so uh you know issue and so is going to potentially go down by significant amount the efficiency of the network will go up by a lot and again ethereum is i basically are going to become what i think the 2020s will expect a modern blockchain to be uh so that's number one um number two is sharding um so sure and at the same time the layer 2 ecosystem so those things together are going to give us scalability in the tens of thousands of transactions per second which is a hugely important because ultimately mail we're looking to create a platform that can achieve mainstream adoption create a platform that actually can

provide enough security interest that guarantees to its users and actually scale that up to millions and potentially tens or 100 millions of users and not just like a very um a very small number like a couple hundred thousand that per day and i just prove of stake and sharding are the things that needs to be done to make that happen and so that's number two uh number three is um that uh just a better protocol economics uh so eip 5059 is the really big thing um i think the more you use ethereum the more you realize that like just gas estimation is such a stupid and archaic concept like i really think

uh that if all goes well in five years time like blockchains that rely on this first price auction model is just going to be looked at like caveman economics uh so i can i i'm really and i'm really looking forward to it and it seems like the model is already working well and increasingly being validated in flowcoin it's increasingly working well on the test net so really looking forward to that uh hitting the mainnet i think that could be one of the big stories of 2021 um also adjust general efficiencies within the ethereum system uh so replacing the hex tree with binary trees like uh allowing stateless clients um it should make it much more efficient to process and sync the chain

um it's a much more uh uh some of virtual machine improvements uh that would allow us to just not need any more pre-compiles and have and be able to have all the advanced cryptography that we want inside of uh ethereum so basically just everything that you could want if you're you know building some like privacy preserving application or some kind of more complicated smart contract system or something or some or roll up for scalability like you know the tools actually are going to be there and you'll have and you're not going to have to use kind of clever tricks to anywhere that's anywhere close to the same extent as you do now um also like client support uh so if you

were making taking a go at making it explicitly much more like client friendly uh and so um you know hopefully break the dependence on and if you're uh and uh kind of actually uh have uh you know make it so that other people's wallets actually can't be like clients uh so and vitalik do we get to that place not fixed issuance obviously like the bitcoin model but do we get to ever get to a place where we have more predictable issuance on the other on the other side what does that look like yeah uh so i think uh realistically if gold wants to wait around um you know one or two years after and probably even like the caucus starts ticking next week uh so just after phase zero and just verifying that

the current economic structure of proof of stake is sustainable i'm verifying that that economic structure can survive the addition of sharding the addition of the eth1 chain uh verifying that eibu 1559 is working as expected and then once all of those pieces are in place um then i think people are going to just have a much more clear and visceral understanding of you know this is how high um proof of stake issuance is this is how high the ap 59 burn is the this is the kind of historical variance of those two parameters and so um like the uh issuance in general and kind of change of the total supply level is going to look i think much more predictable a couple of years from now

and i think people are going to be very happy with the results last thing for you on this vitalik then we'll move on to something that is equally exciting in a way um if somebody is just built on the eth1 chain right now has all of their ether on the eth1 chain um do they have to worry about any of the stuff that like we were just talking about or does this merge somehow in the future good question uh the answer is they absolutely do not uh so one of the big compromises that we made for and of practicality is that while ethereum's consensus layer and scalability and all of these things are getting massive kind of revamps from the ground up ethereum's execution layer is actually remaining remarkably constant throughout the transition

so transactions that were valid before will be valid after uh smart contracts that executed in one way before will execute the same way after basically all applications contracts everything will just be kind of migrated from the one side to the eastern side automatically right and so you as a user or as an application developer basically do not need to worry i mean there are a couple of corner cases like for example if you relied on block hashes for randomness before then in proof of stake block hashes stop being secure randomness and so instead you would have to use like the rant out output as randomness but you know like these are block times are going to work slightly differently but no these are generally like issues that only affect a very tiny

portion of users so for basically it like the fast mass and fast majority of the of the user base i think they'll experience and have close to no change from an application perspective so vitalik the conversation about proof of work first proof of stake was really really big from what i can remember in in 2017 in 2018 or it should probably even bigger before that but i came into the world of crypto in 2017. and i actually think it's really valuable that people understand this debate and why and and understand the merits of proof of work and also understand the merits of proof-of-stake in order to understand like why is ethereum so committed to proof of sake like why do we want this and so you wrote this article on your blog vitalik.ca everyone should check it out called why proof of stake

and we kind of want to go through some of these points so we can help help the bankless nation like kind of come to understand the the terms that you use here and the the arguments of why proof of stake is inherently uh the right i'm not going to say superior but the right uh consensus mechanism for ethereum right because many bitcoiners will still say to the state that proof of work is the one true consensus mechanism um so let's go through some of uh some of the points that you that you wrote here proof of stake offers more security for the same cost like what does that mean and how does staking offer that so the basic uh idea here is that if you try to quantify security so the easiest way to quantify security is just how many dollars you need to spend to break

the thing then if you look at the ratio of security to cost where cost just means like how many rewards you have to put um you have to push out to the participants then the ratio of the security level to the two of the ecam amount you pay for the security just is much more favorable on the previous state side than it is for any version of proof of work uh and i think the way that you can look at this right is that if you look at just first of all start off with a comparison between gpu based proof of work and asic-based proof of work uh so this is a comparison that and even bitcoin people make all the time right when they defend why the their asic-based group of work is better than the basic resistance algorithms it's basically that in the gpu case the

cost of mining is only operating costs and there's basically no capital cost right because like you can rent gpus um if you buy a gpu you can always sell it after even if the blockchain disappears gpus continue to be useful and so if he wants to attack a gpu based chain all you have to do is just rent some gpus for six hours or what however long he wants to do an attack and so the cost of an attack is basically going to be just exactly the same as the cost of the rewards during the time period that you're attacking and and if you as an attacker receive block rewards then the cost of the attack even drops to zero or it becomes profitable all by itself right so for gpus like while gpu proof of work mining has a big advantage in terms of being decentralized

from a security perspective it actually is quite weak and we've seen this right as i mentioned in an ethereum classic has been getting a lot of 51 attacks recently now if we look at asic-based proof-of-work asic-based proof-of-work is considerably more secure because asic-based birth of work has not only ongoing costs but also capital costs right and an analysis i did a few years ago suggests that it's about one-third ongoing cost and about two-thirds capital costs um maybe that ratio changes over time i actually have no idea which direction it's going to change into but like that's roughly what it is approximately right and if u.s then if you uh kind of make some assumptions about how long an asic lasts you can actually kind of reverse engineer what the capital costs are kind of from the amount of money that

you're paying for rewards right so the idea basically is that if your your chain is paying one dollar a day in rewards uh then out of that one dollar one third will be operating costs two-thirds of the capital costs and you can think of the two-thirds capital costs as being a kind of amortized over the entire period of time during which that miner is mining right and so if you assume that an asic lasted about two years i think now it's a little bit more it's a little bit more than two years um but you know moore's law in increasing efficiency wear and tear all of these things and so at the two year level right all you have to do is you basically take the amounts per day that they're spending on the asic and then multiply that by the number of

days in two years and that's the cost of the asic right and so if your model of an attack is that an attacker just has to buy up as many a successful legitimate network then you can use this to kind of get an estimate for the cost of the a6 needed to attack the network and so here you get about fortunately 86 dollars and so that's the cost of breaking proof of work if you have asics right so already much better than gpus but asics have a cost of centralization so now if we go to proof of stakes before we say can i get you to comment on ethereum one would you if if ethereum won if that was the chain that would just carry on into the into the future forever would you have been in favor of it being gpu based or would you have been interested

in making an asic version of ethereum so at the beginning i was definitely much more pro gpus but i think more recently i've well i it's not so much that i've become more pro asic it's that i've become less pro gpu and and so it's just like it just feels like a kind of a tragic choice between two differently bad options to be honest but gpus did have this nice property in the early days that it was a much more um egalitarian decentralized way to distribute the tokens which arguably that's kind of what ethereum was looking for in like the first part of its life yeah i agree and i think that's very important and i think ethereum is definitely better as a result of uh

having that gpu mining for the first few years of its existence as somebody who came into ethereum because it was able to be gpu mined i have to say thank you for making that choice but not as secure compared to asics is the point at least from an economic security perspective and the thing to keep in mind is that the longer we like i i think the chain even like ha manages to be um a gpu mind up until this day only because people realize that proof of stake is coming right like if you ju like basically the reason why there isn't much more work on building asics is that people realize that any asics that get built would only survive like uh i mean either a year or potentially even a few months like

potentially in response to the chain getting taken over by asics we could even just rush the entire transition um and uh just like do the merge and uh in a couple of weeks right like it like doing that sort of thing would totally uh be extremely disruptive to the ethereum ecosystem but you know doing something extremely disruptive in response to an already extremely disruptive attack is the sort of thing that would happen right and so like people i think realize that it's just too risky to build asics because like there's just no guarantee that you're actually going to have enough of a period of time during which you're go you're going to be profitable and that's why the chain continues to be gpu friendly right and so the facts that like this gpu friendliness has been possible to this

day should not at all be taken as evidence that gpu friendliness is a stable equilibrium going into the long term right makes sense um shall we get into proof of stuff yeah so proof of stake um so basically the way that i view proof of stake is i view proof of stake as combining the efficiencies of uh or this capital cost property of asics but really cranking that property up to the extreme um and at the same time having the kind of open accessibility of gpus right so basically proof of stake is almost entirely capital cost right the cost of like operating a node is fairly small and and the difference is though is that in the case of asics the capital cost is only kind of amortized over the course of um

you know about two years so it's about like 50 percent a year but unlike asics deposited coins do not depreciate deposited coins there you can deposit them you can stake for a bit and you can get them back and so you actually don't even need that high of a rate of return to motivate people to stake um so here i was actually i think understating the case right because like kiara's saying oh you know imagine a fifteen percent rate of its turn is enough to motivate people to be willing to lock up their money and stake but and i think fifteen percent is roughly the rate of return that we're going to see in this initial phase of youth too like i think with the current level of deposits it's about 18 um but you know we're gonna see more deposits

but i think in the long run especially when it's possible to just deposit um steak for a bit and then we'll straw and get your money back within a day like i fully expect that the rate of hurts the rate of return will just drop to something closer to 10 or even 5 percent and so but even with 15 percent a 15 rate of return on capital that basically means that you know one dollar per day of rewards is going to attract point six six seven worth of worth of uh deposits right or basically like if you have uh to if you um stick uh twenty four hundred dollars in as a deposit then your annual return would be twenty four hundred dollars multiplied by fifteen percent um which would be around um you know close to three hundred and sixty five

and so 365 dollars a year is equal to one dollar a day right so if we assume 15 rate of return per year then every one dollar of day in rewards is going to correspond to 2 43 dollars of deposits that's at current um rates if the rates drop to five percent and the sum probably so it goes up to 7 500. right now if we assume that um only ninety percent of the costs are capital costs and there's still ten percent that are operating costs then the twenty four thirty three goes down to about 21.89 but basically even still right we have five times more deposits that are paid for by the same rewards improve at stake as compared to asic-driven proof-of-work uh so and this is now in the long-term like i expect it to go up to something like 10

000. so it'll be 25 times stronger than that proof of work so does the security is so is that summarized as the security of proof-of-stake comes from the fact that ether the asset doesn't deprecate in the same way that asic a machine does and so ether gives you a on year return where an asic gives you a year on year deprecation devaluation of the unit right and so that's the fundamental component of where proof of stake gets its security from yes that's definitely an excellent way of standing the point cool all right so where we've come so far is we have gpu uh based proof of work work which ethereum is on now that means you can use a gpu card and like your nvidia like gaming machine to to mine a

little bit um and that total cost of attack is um like fairly cheap like it you can attack that fairly easily lower economic security and then bitcoin has asic based proof of work which is uh a bit more expensive to attack so higher economic security and that's why economic security comes from the fact that the asic is only doing one job that's only possible to do one job which is mine bitcoin it's dedicated so it's all sunk capital costs basically you are locked in so and now proof of stake because it's like ultra sunk costs that's the only thing you can really like kind of you know do with do with it it's almost like a tokenized asic on on steroids if if you

will that's even more efficient and how would you quantify this is this like a a 5x more efficient like bank for the bank for the security for the dollar or is it a 10x uh like according to the kind of back on my back of the envelope numbers here it's 5x in the short term and up to 20x in the long term wow so i i think of this you know dave and i have you know often sort of analogized these sort of chains to nation states and almost this is like the security force this is the the defense right and so it's almost like you're upgrading your military from calvary and horses to like pans or tanks here right like like trying to think like what what what's a good a good analogy like okay so here's a

really fun and dumb analogy so um gpu based proof of work is you have to like basically hire soldiers out every ev every day to patrol your borders to make sure the enemy army doesn't get in and you have to keep on paying them basic base proof of work is um the great the great wall of china then proof of stake is imagine a gra a great wall of china that has the property that the way that this wall is constructed is that when people are not staying in their own houses they just teleport the walls the walls of their houses and they make it part of the they make it part of the great wall so whenever you're not in your house whenever you're like going off on vacation you just click a button and your house teleports to being part of

the wall and you know the government pays you some small amount of money to do this and you're happy to collect the reward uh and then as soon as you want to move back into your house you just click a button again and the balls teleport back at their part of your house again right so basically it just like you don't even need to kind of create these separate resources you're just kind of taking advantage of existing resources and you're moving over moving them over to a different purpose when people know that they don't need them for a long time so much more capital efficient so so the idea is that the great wall this version of the great wall of china would theoretically be a lot higher because of the incentive for everyone to allocate the walls of their house into the walls of the great wall of china in the moments that they are not inside their

house using their house as a house exactly yeah the interesting thing so is i think here um you talked about this in the article right so we're talking about a 5 to 20x gain in proof of stake potentially and the question is what do we do with this efficiency gain as a social contract for ethereum can you talk about that because it seems like there are like you know maybe two options here of what to do with this drastically improved military drastically improved great wall yes so one of them is to keep the military budget the same but have much higher security and the other one is to have the same security but cut the military budget

down uh and i guess the reason why i think we're taking the second approach is actually best i gotta even describe to the next section right like i think we like ethereum has enough security today especially if attacks become much easier to recover from and we actually don't even need to have like too much spending going into i keep going into keeping the wall up um because um you know if it it turns out that basically eve even if someone successfully invades like you can do this clever move clever move where you just like hard fork and you and you delete their army uh so so is that so that i want to get into that just to to to to link folks into

what you're talking about like so um the way ethereum right now the way bitcoin right now pays for their military is generally through block reward through issuance through supply right so and bitcoin's approach is to cut that military budget at least military budget denominated in bitcoin every four years cut it in half every four years so we're we're the bitcoin protocol government every four years you know what it's forced on you we're gonna slash your military like like by by four right um at least denominated in bitcoin by two by two excuse me um ethereum's approach is basically to do something that's maybe more what the social contract is kind of called

minimum necessary issuance or minimum viable issuance where it's like hey like maybe we can drop this a whole lot more because we have a a stronger defense system and so that that issuance essentially is what goes to pay for the military and maybe that could be slashed maybe that could be cut right now it's a four four and a half percent or so and we could go to something less than one percent absolutely and yeah one of the theories i've had about uh one of the reasons why proof of stake is is more more secure in the long term is that with that reduced issuance that reduction of issuance actually compounds as a benefit over time and i

want to get your take on this because i don't know if this is real or not and this is the same same dynamic is present in eip1559 the more ether that's burned in eip1559 the more ether is unable to be leveraged in an attack against stakers right the the less ether we can make available to the secondary market the less ether there's available for attackers to be able to grab and use that to attack the ethereum network is that is that a real thing so like the less ether that we issue is that over time adding to security that's definitely an interesting and a kind of novel way to think about it and i guess and generally yes like the less ether the areas and um

and even like the the higher the price goes so the the harder it is for an attacker to buy enough to successfully make an attack and that's definitely one of the factors that contributes to security and if you have miners that are just constantly selling millions of coins every year then you know some of those coins are going to end up in the in the hands of people that might be interested in attacking it at some point so let's go into one of the grand ways that say somebody did somehow manage to get their hands on some enough ether to attack the chain uh we actually have a way around this uh and so one of one of the sections in this pieces is titled um attacks are much easier to recover from in proof of stake now maybe we can talk about like the aft after an attack happens what paths to

maintaining or you know restoring security does ethereum have yeah so i think in the gpu case the only defense is basically just waiting and hoping the attacker goes away which has worked so far right but like as soon as an attacker comes that's persistent you're basically screwed and you have to try to figure out something else in an asic based system you do have one form of defense which is you uh just change the proof of work algorithm and what that does is it basically kind of bricks like all the asics it renders them useless but it bricks both the attackers a6 and the honest miners asics right but if the attacker is willing to suffer that initial expense then at that point it just turns into a gpu mines coin up up until um you know after a

couple of years where people build asics for the new algorithm again and so it just turns into the kind of the into the first paragraph and the attacker can just continue the attack really cheaply for as long as they want and in fact i would even argue that it's worse than this because if an attacker starts doing this and if the attacker commits to continuing to attack then it actually takes away from the incentive to build asics for the new algorithm because anyone building the a6 knows that if the attacker is going to continue then potentially those a6 could get bricked the second time um so like basically the fact that breaking hurts both the attacker and honest miners actually and can really makes the game theory behind all of this

even worse so in the product state case um basically it's uh it gets much better right because uh like we have this concept of swashing right so if you contribute to breaking the chain uh you get slashed and even if you contribute to breaking the chain as part of a 51 attack you get swatched now there are attacks that are hard to detect and hard to slash for so a big one is like a 51 coalition censoring everyone else but you can get around this by using um this wonderful trick that the bitcoin people invented in 2017 called the uasf the user activated soft fork right basically just users coordinate on um participating in a minority chain and they just abandon the majority chain that's uh censoring

them and actually because of the way that the casper ffg rules work the attacker cannot legally uh kind of move over to the minority chain without um contradicting themselves and getting slashed and so the attacker just gets weak and they lose about half their points right so basically no matter how you attack the chain it's going to be very expensive for the attacker not very expensive for everyone who's not an attacker and so the game is very asymmetric right like every time the attacker attacks they lose a huge amount of money um and potentially like the the amount of coins that are burned as a result of an attack would eve could even mean that an attack would cause the price of eth to go up so like one of my favorite features about proof-of-stake is that if an attacker attacks ethereum it makes all

of the stakers rich by by default well not by default but but it's highly likely that the price of ether goes up because of somebody's buying up all this ether um one question i had when i had about this like using this as a defensive mechanism in proof of stake this is relying on the social layer right this is in this moment security has migrated away from the actual code and moved into the social layer which maybe it perhaps is one day if this ever does happen it would be coordinated via something like twitter or reddit can you talk about that dynamic uh yeah so there's definitely a lot of kind of discomfort in relying on the social layer for consensus but actually i i wrote about this quite a bit in my original 2014 article the one where i'd say i called like how i

learned still of weak subjectivity um if you actually even just go in and i could google for that now you can probably find it um um so basically the arguments that i make is that relying on social consensus um okay like is actually reasonable occasionally it's just that consensus is a social consensus is not something that you want to kind of keep on keep leaning on forever right so the idea is basically that like i mean even bitcoin relies on social consensus to some extent right like even you know the uasf that was proposed in uh 2016 was ultimately a form of social consensus overriding mining uh so basically um you know hard forks are done with uh social consensus um

even the idea that if miners push a blockchain that would increase the the supply to beyond 21 million then people would reject that blockchain as like is ultimately secured by social consensus the difference between um a uh a malicious protocol change and a bug fix is social consensus so relying on social consensus on in these kind of extreme matters where um and especially on matters where there's clearly one side which is an attack and one side which is just trying to push the chain forward is i think actually a reasonable thing to do the thing that you don't want to do is you don't want to rely on social consensus too often right and the thing to keep in mind is that if

you even think about like how a an attack on proof of work would be responded to right like even like defenders of uh 86 based proof of work will say oh if our 51 percent attack happens we can just break the a sick and we can change the algorithm right like if you press them on it they will say that this is what this is a defense um but that defends as well it's also social consensus like changing the work algorithm is also a form of social consensus overriding the uh overriding the code uh so it's also strike it's also striking that the price of bitcoin the price in itself is one layer of social consensus too it is indeed yeah um and we've seen we've seen this uh the idea of breaking asics that's played out a number of times i believe in the

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your fingertips go to monolith.xyz and sign up to get your monolith visa card today so let's move on to one of my favorite subjects which is how proof of stake is more decentralized than asics some people would call this a bold claim vitalik why can you make such a claim so and i think we do need to uh right like break up proof of work into two categories at gpus and asics uh so you know like there is a very decent case gpu-based temperature work is quite decentralized and i'm happy to admit this like my my qualm against the gpu mining is not about the decentralization it's about the security right now the problem with asics on the other hand is that in order to make an asic you need millions of dollars of capital

right now you could say oh you know you don't have to make your own asic you could buy an asic but the reality is that if you're buying an asic though the side that's making the most profit is not going to be you it's going to be the easy manufacturer right people selling the shovels exactly like in the long run it's like the the game is very much one that's kind of skewed to benefit uh whoever can sell the best level and um you know whoever can sell the best shovel has a a lot of like they can potentially even like sneak and code that could allow that asic to be bricked remotely like they could do all sorts of real evil things that are harder to do with if you're running the thing on general purpose

hardware uh so basically like asic based mining really does uh rely very heavily on this very small number of these uh very uh uh wealthy and uh kind of powerful manufacturers and so like basically if proof of stake means the rich gets richer well guess what asic mining also means the rich get richer except the bar that you needs to pass in order to get richer in in the case of asic mining is something like 10 million dollars but in the case of proof of stake it's 20 thousand dollars today and much less than 20 thousand dollars in the future once taking portals become possible so one of the i i've been chewing around the ideas of staking pools and there's a bunch of different design parameters um but i think the staking pool that

retains as much ethos of ethereum as possible which i think that there is a spectrum of how much does a a protocol or company on ethereum retain the original ethos of the of the system there's something to be said for that uh and that that's kind of where i turn my attention to rocket pool where rocket pool's trying to become a staking pool for people to decentralize the number uh the amount of uh people that can participate in staking by being a pool and then also decentralizing the nodes by making more uh total nodes available to be part of the ethereum proof-of-stake consensus mechanism when you think of rocket pool is that what you think of uh yeah i think is definitely one of the good examples of someone trying to do a

good job um the ether protocol is really explicitly designed to make a stake decentralized staking with things like multi-party computation as easy as possible so that's definitely the sort of direction that we're looking into there's also this sub argument that you made here vitalik that proof of stake is more censorship resistant and that's basically because it's not on the electric electricity grid right for instance like a in the way that a gpu mining or asic mining footprint might be is that the is that the main argument here yes exactly like if you imagine um you know you're you want you're living in say venezuela and you want to participate in the ethereum network then if you're a proof of work miner then you

know realistically you're consuming huge amounts of electricity you have to get huge amounts of hardware if the government wants to find you they can find it right like it's it's not hard to see someone can see like consuming that much electricity like these are techniques that they have already perfected for years to figuring out finding people who are growing the wrong kind of plants in their backyard or so um you know this is fearless it does make you wonder how long it would take a motivated government body like the united states or some other government body maybe let's not name different governments here to go seek out all of the major mining bitcoin mining or even ethereum mining facilities in the world and just confiscate them take them over by for by

physical force these arrived now yes it's just um it i think it's kind of a little bit of a game maybe that that um some in crypto play uh as if we've already faced off against these nation states that are actually actually trying to censor its realities they're just not even trying yet so um yeah that is that is an advantage that may come into play but there are also some advantages that you talked about here vitalik of proof of work and i think we'd be remiss if we didn't mention the the ways proof of work actually is superior because there are some tradeoffs can you talk about these yeah so and these are like what i think are the two best arguments in favor of

proof of work like one is this critique that proof of stake feels more like a closed system like there isn't this kind of new source of issues that kind of brings fresh economic blood in the into the ecosystem and so um and uh like this like it feels like the system has this kind of natural kind of introvert pressure to just be more of the same people by default um and [Music] this is definitely something that does kind of concern me to some extent and the best rebuttal that i have is that in proof-of-stake the rewards in general are going to be fairly low right like i think if proof-of-stake rewards were say percent of like annually then like i could see that very quickly lead to a

few stakers very quickly i'm having uh i fear a very large portion of uh the entire supply and demand meeting everything but here we're talking about validated rewards equal to like up to 0.5 to 2 probably closer to 0.5 percent of the total supply and the more validators are staking the lower the interest rates get right and so the amount of time needed for this factor to like cause a large amount of concentration is is huge right it's potentially over a century and on on such time scales like doesn't really matter much but like people want to spend money they want to distribute their money among their children they want to give their money to charity and so like aren't the like basically if there are any natural economic

pressures toward deconcentration at all then like they're going to have an effect that's larger than 0.5 every year is basically the arguments whereas if that rate was instead of 0.5 percent something like 4.5 then and i think this argument would actually have a much stronger case so this is one of the reasons why i'm pushing for lower rewards and the reason people make this argument is of course is as we stated earlier um stake death is is almost like a an everlasting asic there's no depreciation there's no capital depreciation unlike a real world and it doesn't glaze exactly exactly and notably the the people that see that crypto has like accidentally inadvertently made really wealthy are largely people that

i'm guessing this is my gut take that weren't wealthy beforehand right and so like what's the point of hanging on to you every single last denomination of ether if you like you can't sell it and like have like kind of a nice more comfortable lifestyle like the people that have large supplies of ether are going to have to sell if they ever want that material impact to do something real in their lives and so that's kind of what i think what you are alluding to vitalik is that the rewards the passive income rewards to ether accrue slower than people's uh people find ways to sell their ether to buy a new house or new car or something and so there's like this natural sort of incentive to let go of your ether well yeah but what about the second

point metallic uh we talked about weak subjectivity earlier does does anything bear repeating here now weak subjectivity is this uh extremely fascinating topic and i think it's been really the center of the debate almost like ever since the beginning and up until this day like basically and weak subjectivity is this really subtle thing where like the idea is that um in proof of work um you know you have this property that you have your client and uh you can just start it at any time and even if you've been offline for 10 years you could just start it up and you can stick to the value chain and you have all or the canonical chain and you have all of these economic guarantees in proof-of-stake like you can kind of still do that but it depends on what

guarantees you want right so like if you're gearing if the guarantees that you care about or are in an honest majority model um so you just assume that the majority of people are nice then you can still do that but if you want to have a hard economic guarantee so you want to have a guarantee that says um you know tricking you requires the attacker to burn a huge amount of money the way the proof of stake kind of promises a strong economic guarantee is then you lose this property to some extent right and the reason why you lose this property to some extent is basically because um like if an attacker just create like who has say 51 of the stake uh creates a fake chain and they can get and they convince you that this fake shane is the real

chain then like normally the uh the the way that they would get punished for this is it would be slashed right like if you create a fake chain that conflicts with the real chain that you already contributed to making then you know some large portion of you of the validators intersect you can make proofs and you can publish those proofs into both chains and you can burn the attacker's money uh so right we've this is just like standard you know prostate periods like how swashing works but the problem is what if the attacker has already withdrawn their the the deposits that they used to make the attack um by the time that uh they actually need to do the attack right so what if someone has been offline for a year and you feed them a

chain that looks like a vowel chain from the perspective of their client that was uh um off um offline or online for the last time a year ago but back in present-day reality you've already taken out all your coins and so whatever slashing happens can't actually hit you right so you could still trick them and you would not get swatched for it and so if you want to be resistant against this attack basically you just have to log on and kind of be online often enough that um basically the time difference between uh any two times during which you come online is less than uh the time that it takes for like something like one third of the validator set to be replaced right

which is and that number depends on the size of the validator set it's like somewhere between a couple of days and a couple of months depending on how many people are participating uh so like that that like that requirement the requirement that in order to have a really kind of economically guaranteed level of security on which chain you're getting uh you need to log on um with your client at least once every few months like that is the the this week's objectivity requirement and the reason why like a lot of people feel uncomfortable about this is because it basically means that like if you're like if you're just joining the system for the first time then uh you know you for the first time that you log on you need to basically find some third-party source that basically tells you like

which chain is the canonical one that you should be following now most of the time this actually isn't a big deal because most of the time there aren't going to be 51 attackers trying to use their old keys to screw people over and so there is really going to be like one chain that has enough signatures right but in the extreme case where there are attackers that can like buy up people's old keys then basically in order to they do it you do need to find someone to trust to give you that information and i think fans of proof-of-work say that you know oh my god this is trust this is fatal what what are you doing you've completely destroyed the point of cryptocurrency but my argument uh is basically that like this level of trust is a level of trust that we already have so like for example

you already trust developers to tell you the most recent hard fork version um you know you already trust them to fix books you already get software updates from them once every um you know half a year or so and so why not just like leverage that existing level of trust and i use it for uh proof of stake checkpointing as well um so that's basically so with with proof of work and nakamoto consensus we have the ability to actually legitimately and concretely verify the amount of work that is done on a particular chain we don't have that with proof of stake because we're not doing work we are and so they're we're verifying signatures that are signed by validators and in order to recognize that those validators actually are real

you have to look at the state of the blockchain itself like at the time uh you know a couple of months ago to a year ago right so this like the security of a proof of stake chain is definitely more kind of it's not like it's not circular it's more like a spiral right it's like the security of the system today depends on the validity of the chain six months ago and the security of the chain six months ago depends on the validity of what happened 12 months ago and so like if you skip one of those steps then uh like and if you're on offline for longer than that period of time then you do you do need some uh way to kind of help you disambiguate and come back online but if you're there more often than like basically staying in sync with the chain is more of this like necessarily dynamic process right

right so here's kind of i guess my takeaway to just sort of summarize uh this article and uh you guys jump in if you have some other things if you are willing to get past this edge case weak subjectivity requirement and you made some compelling arguments why that that makes sense or it's less important than others think and if you're willing to get past this issue that stake never depreciates and so there is the the capability for people in the system to continue recruit accruing wealth and you sort of mitigate again that against that with lower rewards overall then what you end up with is a chain that is much more economically secure uh and also more efficient in that economic security so you can do things like reduce issuance

reduce the cost to actually secure that network essentially security per dollar exactly that's that's what proof of stake uh that's what proof of stake provides at least under ethereum right because there are other flavors of proof of steak but um yes would you add anything to that metallic no i don't think in general that's a great summary very cool and vitalik when a lot of the design design decisions behind proof of stake and when you uh when you you know verbalize your arguments and kind of just like thought out loud about these the weighing the pros and cons uh the way that you did that turns to our the next uh article that we want to talk about which is convexity versus concavity um yeah and and so like and

we're just burning through your articles here so you can put out a blog post faster than anyone uh and and i totally aligned with this article and ryan and i chewed on it together and had some conversations about like the implications of this before we get into those conversations maybe you can kind of give us the synopsis on like convex versus concave dispositions uh yeah so i think the core idea here is basically that like whenever there's a trade-off and there's like a choice between kind of taking one path and taking another path um one of the kind of more subtle differences between how people view that trade-off is basically like do they uh is how they view the kind of extremes as opposed to what like

the the options in the middle right so basically do they view it as the sort of a situation where a a moderate op the moderate option is kind of more likely to be better than the extreme options or did they view it as this scenario where you know it is one or the other and if you try to mix the two together then it just completely does it doesn't make any sense and like you know it really is either this or that uh and so like those two graphs that are right there like they do a good job of kind of showing what the perspective is right like basically like oh the graph on the left like the concave world view is like kind of like you have a yeah a graph that's kind of sloped downward so it's kind of like a hill right like so there's there's

always some option in the middle that's best but you know whether it's uh kind of in the middle but much closer to the left or in the middle much closer to the right that's something you can legitimately argue on but then uh you know as you go further to the extremes um then eventually on either side it just uh start starts becoming worse versus the convex worldview which looks less the chart looks less like a hill and more like a valley where you know he pretty much you wants to be either on one side or the other side in the middle is the worst place to be so again like this starts off being very abstract but and if you go like once we uh kind of go forward and go a few paragraphs down like we can see where uh it starts becoming more

concrete and we could see some like specific examples of like what concave and convex means right so here i just like give us some examples of like what kinds of things someone with a concave might cause disposition versus a convex disposition might say so like one of them uh so like one kind of concave statement uh going to the extremes has never been good for us you can die from being too hot or to or too cold we need to find the balance between the two that's just right um if you implement only a little bit of a philosophy you can pick the parts that are the best and avoid the parts that are risky but if you insist on going to the extremes then once you've picked the low hanging fruit um the next fruit that you have to pick or but you'll be forced to work harder and harder you'll have smaller

and smaller benefits and the risks might multiply and outweigh the whole thing um the opposing philosophy the philosophy that you favor less probably has some value too and so you should generally try to combine the benefit the best parts of both and definitely avoid things that the opposing philosophy continues to consider to be extremely terrible um you know it's just in case they have more of a point than you realized and then some examples of our convexa statements uh one is uh we need to focus otherwise we risk becoming a jack of all trades master of none um another example of a convex concept is the kind of the slippery slope concept so if we take even a few steps down that road it'll become a slippery slope and um only pull us down even further until we end up in the abyss there's only two stable positions either

here or there uh and we want to stay here um if you give an inch it'll take a mile whether we're following this philosophy or that philosophy we should just be following something and stick to it stick to it i'm making a wishy-washy and a mix of everything doesn't make sense um and so so after this like i get into what's probably the kind of motivating example of this idea for me which is basically the bitcoin versus uh kind of ethereum you know like before before before we get there like i feel like i've met these two types of people right like i i've met the the you know the binary thinker the convex disposition thinker where it's just like you're with me or against me kind of

individual right and then i've definitely met the the concave disposition which is a bit more the pragmatist i could see it this way i could see it that way why don't we find the balance in between um and one of those definitely sounds like more of an ethereum not a stereotype and one of those sounds definitely more like a bitcoin or again not to stereotype part of me wonders how much people are just hardwired into these modes like from like birth and genetics and like whatever happens to them in the in the in the early ages because i don't know like i definitely met these types of people and i'm not sure how much they can kind of help it and it's definitely noted in the crypto industry like when you come into this world you find yourself quickly moving into a camp of sorts like usually

bitcoiners or aetherians and like you kind of find yourself in to be one or the other and there never really seems to be any of this like moment of flux where people are confused they just kind of come to find themselves aligned with one of their particular communities and it's i think you've totally tapped onto a very real parameter of personality that i think would predispose someone for one community or the other no definitely i think right again it's a it's definitely a really interesting question like to to what extent someone uh someone's a disposition toward this like is you know either genetic or just like some cultural thing that's like so deep like 5 000 year old or whatever that might as well be genetic um like

if that's true then you know that does mean that for example even if you personally like ethereum more than bitcoin that there you're there's just no way that you're ever going to convince 100 of the world population to also be in that same camp and so like you just have to acknowledge that bitcoin is going to continue to exist and there will always be some constituency that it appeals to and if you're a bitcoin person then you'll have to kind of pretty much admit the opposite um so you know if people really are different in that way then that does also just like say something for a kind of maximalism versus pluralism in the world and i guess just one of the nice things about cryptocurrency as opposed to say traditional nation states is that it's

just so much easier to kind of sort yourself into the community that reflects your values more so what i want to ask you about your opinion as to the scalability of these social organizations that people find themselves in so the way that i interpreted the convexity versus concavity graphs like one is a u shape and one is a n shape right and so if you put a ball on one of on both of those on the on the con cavity it rolls off to the edges right it fall it falls off to the edge and then there's like a pit that the ball would fall into like a uh and my mind goes to what amin suleimani calls a moloch trap right a little trap where people like fall into where the convexity is uh it's a valley right you you of rocks that fall down to the

bottom of the valley the center of the valley so my gut take is that a convex worldview or convexity is a more scalable group of coordinated people with the same opinions because they tend to converge upon pragmatism they tend to converge upon the same idea ideologies whereas the concavity seems to find itself in falling into a thousand different traps in different directions uh would you actually i think just one quick way to fix your analogy unfortunately i think please it's it's their concave world view right that's the one that's more inclined to stay in the middle like the problem is that like in economics the concept of utility is like positive utility is better right and so like the graph here is like how good whereas the gravity

analogy is like you know he wants to fall down right and so down as like the the direction of the tendency or like preference if he wants to like uh talk about fundamental physical forces that way uh so like look at it upside down i guess if you want to analogize it that way but yes and i think that but like module that it's definitely a great way of uh looking at the issue because like i think one of the challenges with the the convex world view is that basically that um like if your world view was that right now we're on the top of a mountain and we are going to fall on the left side of the mountain versus the right side of the mountain then your first instinct is going to be well which side of the

mountain uh see or that so seems less bad to fall down and we're just gonna fight like hell to make everyone fall down that side as fast as possible to avoid the greater evil of people falling down the uh uh falling down the other side of the mountain and then if you have people on both sides they're both thinking that way then you know you basically end up getting into a target of war uh so and i think that like that's definitely a very kind of good consequence of that intuition pump and so for for for those uh listening in who maybe um haven't seen that yet do we have some examples from the bitcoin community for from the ethereum community to kind of maybe maybe prove this out i consider you almost in this article like it's a

little bit philosophy but it's a little bit anthropology as well right where you're like studying the culture of bitcoin and the decisions that the culture has made and contrasting that to the um the decisions and the culture that that ethereum has but what are some of the good examples of this like for was the block size debate a good example of this cultural temperament um absolutely uh so basically uh and if you remember the block size debate like basically the block size at the beginning was one megabyte and then there were all of these arguments about you know do we make blocks unlimited do we make them 20 megabytes to make them eight megabytes do we do some 248 sort of thing and eventually

the side that ended up winning is very close to the extreme small block side it basically says i mean the blocks are one megabyte and then there's just one uh kind of soft fork called segweight which de facto increases the block size to 2.3 megabytes and then there's basically no increase kind of going from there right and if you remember during the block size debate in the big block camp there were a lot of people who are were in favor of moderate increases so people who were in favor of you know eight but not twenty or four but not eight um and there were people who are in favor of just not having a block size limit at all because they felt that um you know the system just needs to be able to support as much capacity as the needs are like the market should be deciding block size and like

there's a bit of a tangent about how that particular claim is crazy because the mechanism isn't really a market but and basically like you did have like these people who wanted very big and i remember like one of the arguments that that the very big block people would make is basically that well you know if you oppose that like uh what the small block people are trying to do that you should follow that thinking to the quote logical conclusion and you should realize that ultimately the correct approach is no block size limit at all right and i remember being fascinated by that because like okay so basically if you're saying that um you know moving from um like point x to point x plus one uh like if you support moving from x to x

plus one then you should also support moving from x to x plus ten to x plus eleven like no i don't believe that at all and so that was uh convex people on the big block side right and then convex people on the small block side like they're like i argued against someone in a lot of places like reddit whatever all the time right like a lot of the smaller blockers would say things so i i i would say oh no you know see we need to compromise and we need to make sure that it's possible to read the uh to read the blockchain and it's also possible to write to the blockchain you need to send the transaction and transactions to the blockchain i'm at affordable rates and we need to

find some way to compromise between those two and they're like no you know either the system is decentralized or it isn't and if it's 95 decentralized then really that just means it's on the track toward not being decentralized at all and either you can verify the thing or you can't and everyone should be verified everyone should be totally verifying yet anything that involves any degree of trust just is trust and you know we should all just dismiss any any level of trust as being basically the same as just using paypal uh and i remember also finding this this worldview like very unreasonable and dogmatic as well and actually yeah on that specific issue i wrote another vitalik.ca article recently if

you remember the one that is called on trust models uh this was from august right like this is the one where i talk about the differences between yeah if you have a philosophy section i think it's there uh third one there it is 2020 august 20. um basically you know there's n of n trust models there's n over two event trust models there's one event trust or zero of interest scroll down a bit you see the graph right there it is uh so basically the the thing that i argued is that one event trust is actually much much closer to zero of interest than it is to not have two of interest right and like on the graph like it really does seem like it is much uh like much closer but a person who has a convex perspective on trust would say no no no either you're

at zero of n or your trust and if you're trust then you're on team paypal and well okay paypal is going to support ethereum now so we know we can't keep my uh paypal i don't know who are we supposed to hate um well but what's interesting about it is because this convex um bent at at first blush it looks um very strong because the community absolutely stands for things there shall be only 21 million thou shalt not print more bitcoin ever but then when you like when you kind of look at it a little bit more and maybe this is just the the concave in me kind of speaking but you also see this brittleness like i wonder quite frankly what the convex bitcoiner

community is going to do if it finds out that it needs more security than 21 million bitcoin at some point as these happenings continue into the future does it does does that convex uh like mode just tear at the center and become brittle does the community completely fracture apart because it can't make any compromise on anything at all it has to stick with sort of this this maximalist type of ideology and philosophy so it's weird because it appears that there's a strength to this like philosophy but there's also a brittleness to it and i'm not sure how to i'm not sure how to see that no and i definitely think that's a very good way

of describing the trade-off like the this concept of shelling fences and just setting heart boundaries and saying we're just never ever going beyond them that's like that's definitely a powerful thing it's a uh it's definitely can be a scalable form of social coordination it can be very emotionally appealing as well but yes you know it is brittle and as soon as you enter into a kind of territory that you were not expecting it can easily end up backfiring on you uh so like in the case of bitcoin right like if they discovered that transaction fees are not enough they basically have three choices like one of them is uh print more than 21 million the second is a switch to proof of stake and then the third is just

accepts that the blockchain will get 51 attack from time to time and uh you know like you'll just have like people uh like sometimes days worth of transactions being reverted and it's surprised to be to an insane extreme extents just how many people are willing to accept the third option right right like have you seen any of this like even on twitter like oh no no no no no no you don't understand that like transactions being ever being final was never one of the intended properties of bitcoin here pier richard makes this exact argument that it's no big deal right like when you wait days for transactions to finalize would you characterize this as a moloch

trap good question um is this a uh is this a moloch trap i guess well a molag trap would be a situation where like everyone or most people want the situation to go in a certain direction but just because they can't get along and ends up going in in the opposite direction i guess in that bitcoin case like would it be a moloch trap like one possibility would be that like people actually literally genuinely prefer the blockchain breaking once every few weeks to uh violating either one of the core tenants but i think what would happen in reality is that there's a small minority that genuinely feels that way but the average bitcoiner i think is more pragmatic and

they really would rather switch to a proof of stake or add a small amount of issuance and then accept that state of affairs and so like i could i could definitely see just like coordination failures between those two leading to like a split or weed or um just taking a really long a really long time to resolve the situation and i definitely categorized that as being monologue well a split is not necessarily involved but right so vitalik it was very obvious to me when you were writing this that uh it was coming from the design philosophy of blockchains um the line the design philosophy of cryptoeconomic networks but on the bankless program ryan and i talk about how these cryptoeconomic networks are very comparable to like a neo nation

a new a new generation of a nation right and so when we're talking about design philosophy of a blockchain network we're also kind of talking about the design philosophy of a new type of social organization a new kind of nation and so when ryan and i resonated with the concave view it seemed to be out of an endeavor and it and also when we uh kind of come to the came to the conclusion that ethereum seems to be resonating with the concave view that ethereum is trying to offer this uh credibly neutral layer and what is credible neutrality other than being in the middle being a pragmatist about uh the middle of a curve and so when a good nation state to me allows people to go about their day and

achieve their personal goals without having the any any sort of convexity of the design dispositions of a nation state or a crypto economic network getting in the way of this individual's goals right like we want to empower the individual but it's important to have an organization where the whims of one individual doesn't impact the whims of another individual in achieving their daily goals and so that's where the neutrality of a nation state or the neutrality of a cryptoeconomic network comes into play in order to really empower the individual without enabling them to get in the way of of empowering others is it was this kind of what you were thinking about when you when you wrote about this yeah and i think this kind of concrete versus icon

vaccine definitely has uh implications going far beyond uh uh out of crypto uh uh politics and i think like nation state issues are definitely one place where that this uh becomes uh um also a really a really important concern i mean down the road line i even give examples around uh like nation state issues like dealing with the coronavirus and taxation and how convexity and concavity and war like and how they end up kind of affecting those uh and one philosophical thing that you could argue is that like even the concept of freedom is to some extent a fundamentally concave concept right because uh like one way to think about freedom is that like if side a is my way of life is

better and everyone should should live according to my way of life inside b as your way of life is better and everyone should live according to your way of life then and i know the freedom basically says well people who like my way of life live according to my way of life and people who like your way of life live according to your way of life and that act like that is in some way a compromise between those two options right uh so and yeah you could definitely look at a second of concavity in that way but then and as we see there's a lot of kind of different layering here you can look at concavity in a lot of different ways uh i mean you can even look at concavity versus convexity as something um affecting your personal decisions so like a bit further above uh in the case

of my bitcoiners right yeah the carnivory thing was uh one great example of this is like proof that this actually does get into like like this is convexity right like you know like a concave person would say oh you know you should eat a balanced diet and you should make sure to have like some uh have some salad have uh some good beater fish or whatever you like have so uh um have some grains but a uh convex person would say no no there's one thing that's healthiest and you should you should figure that out using research and you should just hate it right so carnivores are convex vegans are also convex um but uh you know on the other hand um you know normal people end up being being

more concave and on the diet issue i find myself work on cave too what a coincidence um it's it's funny because um i think this this is the type of article that you have to kind of like chew on and um you can apply to so many areas of life but i i will tell you that one gift it gave me is actually understanding crypto twitter and understanding bitcoin or culture and ethereum culture because for so long vitalik like i just didn't understand it to be honest like i didn't understand the perspective where you kind of explain something or you talk about something and there'd be still such a chasm such a delta and it's because of these totally different worldviews like once you see it it kind

of explains everything i'm curious where you where you got this mental model of the world um i mean have you seen anything like this elsewhere were you influenced by anything when you were when you were thinking about concave versus convex i haven't seen anything quite that illustrates it in this way yeah i'm not sure if like this exact presentation like existed in some literature before um like again the like concavity and convexity are definitely like things that you would understand in mathematics and like like concavity is definitely a thing in economics like for example and like i talk about taxes below and that's like one of those examples there um but like and i think it just like

took years of brushing up against this kind of like a versus b logic and eventually just like figuring out like you know like yes this is where the divide is so what are the implications here does does this mean that um at some level that ethereans should try less hard to explain their positions to people who are very convex in thinking because there's just going to be a delta there that can't be passed and maybe we should focus more on finding the other concave people in the world is that one implication what are your thoughts on the implications here it could be um like i think there's definitely people people who i think are just

attracted to the the convex perspectives in a way that would be very hard to kind of get them to find the ethereum camp appealing and um you know maybe that's okay and uh again that's just like one property of like of uh opposition to uh you know like bitcoin maximalism that you know i guess there can be a multiple ecosystems and they can all kind of prosper within their communities um and and i think ultimately uh you know for crypto to become mainstream like yes it does needs to just to kind of reach out to the wider world and got to explain its perspective to the wider world more i do think that we should continue uh

kind of making the case for ethereum and um i think uh one of the ways in which uh i i think the philosophy here can help is that i think ethereum sometimes gets framed as not having values because it's not willing to just dogmatically take a direction and stick to it but i think like i don't think that like that's not necessarily true right because like i think if you're in past values it has things that it's that it's pushing toward but a concavity is a good mental model to explore explain how like it's possible to believe in something but at the same time be moderate about it and at the same time it's possible to actually have this as a as something you believe and not just

like something you are because you because you just don't know what you are so say for say we fast forward into 20 30 years into the future and ethereum is maximally successful to the degree that we all hope that one day it becomes do you attribute that success to a con a concave mindset on behalf of ethereum i definitely think the concave mindset is a very good one too for at least what ethereum's goals are which i think involve a kind of broad adoption and uh bringing uh decentralization and permissionlessness to like basically report large groups of regular people uh

and on the bitcoin side it's interesting right because i think bitcoin is kind of of two minds in terms of what its goal is like one of its minds is basically replacing gold and like becoming the new digital gold um whereas the other one is like let's be let's focus specifically on censorship resistance wealth transfer for people in like authoritarian regimes or in general people and every regime is authoritarian to some non-zero extent um so like people who brush up against that side of things and like having a convex approach like it can definitely buy you a kind of success in that second side of things because you know there really are people who just need fairly fairly extreme trade-offs though i mean at the same time i do think that

ethereum is also fairly capable of satisfying those trade-offs except ethereum's approach is different and it relies more i think on just creating this uh uh thing that provides broad value for and of much of larger groups of people even if like in some cases the average value per person could um it could end up being a bit lower than um you know literally saving your life uh rescuing your life savings and like ethereum can still literally rescue your life savings in some context but like the median use cases are i guess a little bit more closer to it to um average people's experiences you know there's an element too i i wonder i must in the bitcoin culture community if um that second pool

that you mentioned that that convex pool who has formerly been uh ardent supporters of um you know censorship resistance if if that's not being being driven out a little bit too because it just seems like this narrative and this this need for like price go up um yeah has has driven out a lot of the original values and maybe i'm being a little harsh on bitcoin or culture but it just seems this embrace of kind of crypto banks if you will and um like custody and institute like that wasn't part of the the original convex plan for for bitcoiner so it there's almost this hollowing out effect where you get this convex um culture around things like 21 million right and number go up

and when ate everything else when our friend nick nick carter talked uh on bloomberg about uh the happening being priced in and he was absolutely crucified because apparently that's not canon with you know some convex members of the bitcoiner community um like it's those types of things that have become more important than elements of censorship resistance so there's almost like this hollowing out type of effect of the values that at least i thought used to matter in in bitcoin or culture i don't know if you guys observed that but it's something that has been surprising to me these are not necessarily the extremists die for the cause martyrs that maybe they once were i'm not sure maybe that's harsh yeah no and i like the one of the kind of big fault lines i'm seeing is basically that

so the store the the story that small blocker values were originally sold under right is that you don't need that much security on the base chain because the lightning network can basically make up for it right and they bring a lot of their kind of heart and soul into the lightning network but what's been happening over the last couple of years is that the lightning network has only received fairly limited adoption and instead we're seeing uh middle liquid start taking off and liquid is of course a permissioned consortium chain so basically the same sort of thing that they denounced as evil back in 2014 um uh people are just like they're cheering on um you know etfs and like being the same kind of institutional adopt like adoption that doesn't actually

translate to any kind of decentralization and like some of those things like some level of those things is definitely a kind of natural and good and like good for adoption but it does seem like the problem for me is when it gets to the point where it's so extreme that like these people are literally like start excusing the like the the growing lack of accessibility of fully self-sovereign options right like basically like when they start saying oh it's totally fine if like centralized intermediaries become used for most things that's when it really starts kind of turning me off uh so it feels like it's uh kind of just letting the like it feels like it's the letting the winds of uh kind of technical uh kind of historical defaults

push it in a direction and then retroactively kind of retconning the narrative to say that it always was that direction all along right um and like there's definitely a big part of that that's kind of difficult for me to relate to like you know if they had like i think someone who is honest about maximizing censorship resistance would realize that intermediary minimization is a pragmatic and needed part of censorship resistance and if you want to minimize intermediaries you need to have the base chain be able to provide more things potentially even at some level of risk to that making another that making the base chain a bit heavier um but like if you're just care if you just care about permission what's this of the

base chain but you don't care as much about the ability to do trustless and permissionless things on top then like definitely gets to the point where it starts losing me um metallic i i i really appreciated your your post because it allows me to put so many of your other posts into perspective right like i understand your proof of stake post better because i've read your your concavity verse convexity post so thank you for for producing this work and also thank you for coming on the the bankless bankless show to share some of that work in a new format to it to a new audience so and and also congratulations on the east to deposit contract genesis as well thank you very much it was good to be

here thanks vitalik see you later