Vitalik Buterin: Ethereum, Cryptocurrency, and the Future of Money

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Vitalik Buterin (03:55.640)

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Vitalik Buterin (04:00.720)

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Lex Fridman (04:38.800)

And now here's my conversation with Vitalik Buterin.

Lex Fridman (04:44.100)

So before we talk about the fundamental ideas behind Ethereum and cryptocurrency, perhaps

Vitalik Buterin (04:50.200)

it'd be nice to talk about the origin story of Bitcoin and the mystery of Satoshi Nakamoto.

Vitalik Buterin (04:58.520)

You gave a talk that started with sort of asking the question, what did Satoshi Nakamoto

Lex Fridman (05:04.080)

actually invent?

Lex Fridman (05:06.280)

Maybe you could say who is Satoshi Nakamoto and what did he invent?

Lex Fridman (05:10.000)

Sure.

Lex Fridman (05:11.000)

So Satoshi Nakamoto is the name by which we know the person who originally came up with

Lex Fridman (05:19.040)

Bitcoin.

Lex Fridman (05:20.040)

So the reason why I say the name by which we know is that this is an anonymous fellow

Vitalik Buterin (05:25.480)

who has shown himself to us only over the internet just by first publishing the white

Vitalik Buterin (05:33.640)

paper for Bitcoin, then releasing the original source code for Bitcoin, and then talking

Vitalik Buterin (05:39.440)

to the very early Bitcoin community on Bitcoin forums and interacting with them and helping

Vitalik Buterin (05:46.760)

the project along for a couple of years.

Lex Fridman (05:49.640)

And then at some point in late 2010 to early 2011, he disappeared.

Lex Fridman (05:55.840)

So Bitcoin is a fairly unique project in how it has this kind of mythical, kind of quasi

Vitalik Buterin (06:05.160)

godlike founder who just kind of popped in, did the thing and then disappeared and we've

Vitalik Buterin (06:10.800)

somehow just never heard from him again.

Lex Fridman (06:13.120)

So in 2008, so the white paper was the first, do you know if the white paper was the first

Lex Fridman (06:18.360)

time the name would actually appear, Satoshi Nakamoto?

Lex Fridman (06:22.160)

I believe so.

Lex Fridman (06:23.720)

So how is it possible that the creator of such an impactful project remains anonymous?

Lex Fridman (06:31.580)

That's a tough question.

Vitalik Buterin (06:34.280)

There's no similarity to it in the history of technology as far as I'm aware.

Lex Fridman (06:38.520)

Yeah.

Lex Fridman (06:39.520)

So one possibility is that it's hellfinny because hellfinny was kind of also active

Lex Fridman (06:46.200)

in the Bitcoin community and as hellfinny in those two beginning years.

Lex Fridman (06:53.800)

Who is hellfinny, maybe you could say?

Lex Fridman (06:55.920)

He is one of the people in the early cypherpunk community.

Vitalik Buterin (07:00.760)

He was a computer scientist, cryptographers, people interested in technology, internet

Lex Fridman (07:12.720)

freedom, like those kinds of topics.

Vitalik Buterin (07:14.880)

Was it correct that I read that he seemed to have been involved in either the earliest

Lex Fridman (07:19.040)

or the first transaction of Bitcoin?

Vitalik Buterin (07:21.960)

Yes.

Lex Fridman (07:22.960)

The first transaction of Bitcoin was between Satoshi and hellfinny.

Lex Fridman (07:25.760)

Do you think he knew who Satoshi was?

Lex Fridman (07:28.520)

If he wasn't Satoshi, probably no.

Lex Fridman (07:31.380)

How is it possible to work so closely with people and nevertheless not know anything

Lex Fridman (07:36.900)

about their fundamental identity?

Lex Fridman (07:39.860)

Is this like a natural sort of characteristic of the internet?

Vitalik Buterin (07:43.880)

Like if we were to think about it, because you and I just met now, there's a depth of

Vitalik Buterin (07:51.680)

knowledge that we now have about each other that's like physical, like my vision system

Lex Fridman (07:56.600)

is able to recognize you.

Vitalik Buterin (07:58.200)

I can also verify your identity of uniqueness, like it's very hard to fake you being you.

Lex Fridman (08:05.960)

So the internet has a fundamentally different quality to it, which is just fascinating.

Vitalik Buterin (08:11.360)

This is definitely interesting as I definitely just know a lot of people just by their internet

Lex Fridman (08:20.160)

handles.

Lex Fridman (08:21.160)

And to me, when I think of them, I see their internet handles and one of them has a kind

Vitalik Buterin (08:26.840)

of profile picture as this kind of face that's kind of not quite human with a bunch of psychedelic

Vitalik Buterin (08:33.080)

colors in it.

Lex Fridman (08:34.240)

And when I visualize him, I could just visualize that.

Vitalik Buterin (08:37.480)

That's not an actual face.

Vitalik Buterin (08:40.920)

You are the creator of the second, well, he's currently the second most popular cryptocurrency

Vitalik Buterin (08:45.960)

Ethereum.

Lex Fridman (08:46.960)

So on this topic, if we just stick on Satoshi Nakamoto for a little bit longer, you may

Vitalik Buterin (08:53.040)

be the most qualified person to speak to the psychology of this anonymity that we're talking

Lex Fridman (08:58.240)

about.

Vitalik Buterin (08:59.240)

Like your identity is known, like I've just verified it.

Lex Fridman (09:03.780)

But from your perspective, what are the benefits in creating a cryptocurrency and then remaining

Lex Fridman (09:10.420)

anonymous?

Lex Fridman (09:11.420)

Like if it can psychoanalyze Satoshi Nakamoto, is there something interesting there?

Lex Fridman (09:17.200)

Or is it just a peculiar quirk of him?

Vitalik Buterin (09:20.400)

It definitely helps create this kind of image of this kind of neutral thing that doesn't

Vitalik Buterin (09:26.920)

belong to anyone.

Lex Fridman (09:28.920)

And that you created a project and because you're anonymous and because you also disappear

Vitalik Buterin (09:36.720)

or as unfortunately happened to Hal Finney, if that is him, he ended up dying of Lou Gehrig's

Lex Fridman (09:42.360)

disease and he's in the cryogenic freezer now.

Lex Fridman (09:45.520)

But if you pop in and you create it and you're gone and all that's remaining of that whole

Vitalik Buterin (09:55.840)

process is the thing itself, then no one can go and try to interpret any of your other

Vitalik Buterin (10:03.940)

behavior and try to understand like, oh, this person wrote this thing in some essay at age

Lex Fridman (10:13.200)

16 where he expressed particular opinions about democracy.

Lex Fridman (10:16.880)

And so because of that, this project is a statement that's trying to do this specific

Lex Fridman (10:21.320)

thing.

Vitalik Buterin (10:22.320)

Instead, it creates this environment where the thing is what you make of it.

Lex Fridman (10:30.680)

It doesn't have the burden of your other ideas, political thought and so on.

Lex Fridman (10:35.320)

So now that we're sitting with you, do you feel the burden of being kind of the face

Lex Fridman (10:43.160)

of Ethereum?

Vitalik Buterin (10:44.160)

I mean, there's a very large community of developers, but nevertheless, is there like

Lex Fridman (10:49.860)

a burden associated with that?

Vitalik Buterin (10:52.200)

There definitely is.

Vitalik Buterin (10:53.500)

This is definitely a big reason why I've been trying to kind of push for the Ethereum ecosystem

Vitalik Buterin (11:00.260)

to become more decentralized in many ways, just encouraging a lot of core Ethereum work

Vitalik Buterin (11:06.740)

to happen outside of the Ethereum Foundation and of expanding the number of people that

Vitalik Buterin (11:11.860)

are making different kinds of decisions, having multiple software limitations instead of one

Lex Fridman (11:17.280)

and all of these things.

Vitalik Buterin (11:18.640)

There's a lot of things that I've tried to do to remove myself as a single point of failure

Lex Fridman (11:25.480)

because that is something that a lot of people criticize me for.

Lex Fridman (11:31.900)

So if you look at like the most fundamentally successful open source projects, it seems

Vitalik Buterin (11:37.640)

that it's like a sad reality when I think about it, is it seems to be that one person

Vitalik Buterin (11:43.480)

is a crucial contributor often, if you look at Linus for Linux for the kernel.

Lex Fridman (11:51.800)

That is possible and I'm definitely not planning to disappear.

Vitalik Buterin (11:56.680)

That's an interesting tension that projects like this kind of desire a single entity and

Lex Fridman (12:04.360)

yet they're fundamentally distributed.

Vitalik Buterin (12:08.800)

I don't know if there's something interesting to say about that kind of structure and thinking

Lex Fridman (12:12.940)

about the future of cryptocurrency, does there need to be a leader?

Vitalik Buterin (12:17.620)

There's different kinds of leaders.

Lex Fridman (12:20.800)

There's dictators who control all the money.

Vitalik Buterin (12:22.920)

There's people who control organizations.

Lex Fridman (12:25.120)

There's high priests that just have themselves other Twitter followers.

Lex Fridman (12:30.540)

What kind of leader are you, would you say?

Lex Fridman (12:33.680)

These days, actually a bit more in the high priest direction than before.

Vitalik Buterin (12:42.720)

I definitely actually don't do all that much of going around and ordering Ethereum Foundation

Lex Fridman (12:48.400)

people to do things because I think those things are important.

Vitalik Buterin (12:52.680)

If there's something that I do think is important, I do just usually kind of say it publicly

Vitalik Buterin (12:58.080)

or just kind of say it to people and quite often projects just going to start doing it.

Lex Fridman (13:05.120)

So let's ask the high philosophical question about money.

Lex Fridman (13:10.360)

What at the highest level is money?

Lex Fridman (13:13.160)

What is money?

Vitalik Buterin (13:15.420)

It's a kind of game and it's a game where we have points and if you have points, there's

Vitalik Buterin (13:21.120)

this one move where you can reduce your points by a number and increase someone else's points

Lex Fridman (13:24.560)

by the same number.

Lex Fridman (13:26.560)

So it's a fair game, hopefully.

Lex Fridman (13:29.880)

Well, it's one kind of fair game.

Vitalik Buterin (13:32.440)

For example, you can have other kinds of fair games.

Vitalik Buterin (13:35.040)

You're going to have a game where if I give someone a point and you give someone a point

Lex Fridman (13:38.280)

and instead of that person getting two points, that person gets four points and that's also

Lex Fridman (13:42.440)

fair.

Vitalik Buterin (13:43.440)

But, you know, money is easy to kind of set up and it serves a lot of useful functions

Lex Fridman (13:51.420)

and so it kind of just survives in society as a meme for thousands of years.

Vitalik Buterin (13:57.840)

It's useful for the storage of wealth, it's useful for the exchange of value.

Lex Fridman (14:04.120)

And it's also useful for denominating future payments, a unit of account.

Vitalik Buterin (14:09.560)

A unit of account.

Lex Fridman (14:11.440)

So what, if you look at the history of money in human civilization, just if you're a student

Lex Fridman (14:18.680)

of history, how has its role or just the mechanisms of money changed over time in your view?

Vitalik Buterin (14:26.000)

Even if we just look at the 20th century or before and then leading up to cryptocurrencies,

Lex Fridman (14:30.640)

that's something you think about?

Vitalik Buterin (14:32.160)

Yeah, and I think the big thing in the 20th century is kind of, we saw a lot more intermediation,

Vitalik Buterin (14:39.440)

I guess.

Vitalik Buterin (14:41.520)

The first part is kind of the move from adding more of different kinds of banking and then

Vitalik Buterin (14:49.800)

we saw the move from dollars being backed by gold to dollars being backed by gold that's

Vitalik Buterin (14:57.600)

only redeemable by certain people to dollars not being backed by anything to this system

Vitalik Buterin (15:05.440)

where you have a bunch of free floating currencies and then people getting kind of bank accounts

Lex Fridman (15:12.720)

and then those things becoming electronic, people getting accounts with payment processors

Vitalik Buterin (15:16.400)

that have bank accounts.

Lex Fridman (15:20.320)

So what do you make of that, that's such a fascinating philosophical idea that money

Vitalik Buterin (15:25.720)

might not be backed by anything.

Vitalik Buterin (15:29.940)

Is that like fascinating to you that money can exist without being backed by something

Lex Fridman (15:33.680)

physical?

Lex Fridman (15:35.480)

It definitely is.

Lex Fridman (15:36.480)

What do you make of that?

Lex Fridman (15:39.480)

How is that possible?

Lex Fridman (15:40.480)

Is that stable?

Vitalik Buterin (15:41.480)

If we look at the future of human civilization, is it possible to have money at the large

Vitalik Buterin (15:45.760)

scale at such a hugely productive and rich societies be able to operate successfully

Lex Fridman (15:52.480)

without money being backed by anything physical?

Vitalik Buterin (15:54.920)

I feel like the interesting thing about the 21st century especially is that a lot of the

Lex Fridman (16:01.200)

important valuable things are not backed by anything.

Vitalik Buterin (16:04.420)

If you look at tech companies for example, something like Twitter, you could theoretically

Vitalik Buterin (16:10.640)

imagine that if all of the employees wanted to, they could kind of come together, they

Vitalik Buterin (16:15.960)

would quit and start working on Twitter 2.0 and then the value of and just kind of build

Vitalik Buterin (16:27.760)

the exact same product or possibly build a better product and then just kind of continue

Vitalik Buterin (16:32.580)

on from there and the original Twitter would just not have people left anymore.

Vitalik Buterin (16:40.440)

There is theoretically kind of code and IP that's owned by the company but in reality

Vitalik Buterin (16:44.820)

like good programmers could probably rewrite all that stuff in three months.

Lex Fridman (16:48.820)

So the reason why the thing has value is just kind of network effects and coordination problems

Vitalik Buterin (16:56.560)

right like these employees in reality aren't going to switch all at once and also the users

Vitalik Buterin (17:01.640)

aren't all going to switch at once because it's just difficult for them to switch at

Vitalik Buterin (17:05.960)

once and so there's these kind of meta stable and of equilibrium in interactions between

Vitalik Buterin (17:14.560)

thousands of millions of people that are just actually quite sticky even though if you try

Vitalik Buterin (17:20.500)

to kind of assume that everyone's a perfectly rational and kind of perfectly slippery spherical

Lex Fridman (17:24.880)

cow they don't seem to exist at all.

Vitalik Buterin (17:28.160)

That stickiness.

Lex Fridman (17:29.160)

Do you have a sense, a grasp of the sort of the fundamental dynamic like the physics of

Lex Fridman (17:34.800)

that stickiness?

Vitalik Buterin (17:36.320)

It seems to work but and I think some of the cryptocurrency ideas kind of rely on it working.

Vitalik Buterin (17:43.760)

It's the sort of thing that's definitely been economically modeled a lot like one of the

Vitalik Buterin (17:51.880)

kind of analogy of something as similar that you often see in textbooks as like what is

Vitalik Buterin (17:59.840)

a government like if for example like 80% of people in a country just like tomorrow

Vitalik Buterin (18:05.620)

suddenly had the idea that like the laws that are currently the laws of the government that

Vitalik Buterin (18:11.020)

currently is the government are just people and some other thing is the government and

Vitalik Buterin (18:15.640)

they just kind of start acting like it then that would kind of become the new reality

Lex Fridman (18:19.580)

and then the question is well what happens if and if between zero and 80% of people start

Vitalik Buterin (18:27.020)

believing that and like what is the thing you also you see is that if there is one of

Vitalik Buterin (18:34.240)

these kind of switches happening is kind of revolution then if you're the first person

Vitalik Buterin (18:38.120)

to join then like you probably don't have the incentive to do that but then if you're

Vitalik Buterin (18:44.480)

the 55th percentile person to join then suddenly becomes quite safe too and so it's definitely

Vitalik Buterin (18:51.560)

is the sort of thing that you can kind of try to analyze and understand mathematically

Lex Fridman (18:56.960)

but one of the kind of results is that the sort of like when the switch happens definitely

Vitalik Buterin (19:06.980)

can be chaotic sometimes yeah but still like to me the idea that the network affects that

Vitalik Buterin (19:13.080)

the fact that human beings at a scale like millions billions can share even the idea

Vitalik Buterin (19:19.240)

of currency like yeah I'll agree that's just uh I know economists can model it I'm a skeptic

Vitalik Buterin (19:25.920)

on the economic and uh it's like uh so my my favorite sort of field maybe recreationally

Vitalik Buterin (19:32.080)

psychology is trying to understand human behavior and I think sometimes people just kind of

Vitalik Buterin (19:36.920)

pretend that they can have a grasp on human behavior even though we it's such a messy

Vitalik Buterin (19:42.120)

space that all the models that psychology or economics those different perspectives

Vitalik Buterin (19:46.200)

on human behavior can have are are difficult it's difficult to know how much that's wishful

Vitalik Buterin (19:53.060)

thinking and how much it is actually getting to the core of uh understanding human behavior

Lex Fridman (19:58.160)

but on that idea what do you think is the role of money in human motivation so do you

Vitalik Buterin (1:00:02.000)

coins then they get a kind of twice as big virtual miner they'll be able to create blocks twice as

Vitalik Buterin (1:00:07.200)

often so it tries to kind of do similar things to proof of work except instead of the thing

Lex Fridman (1:00:15.040)

and of rate limiting your participation being your ability to crank out solutions to kind of

Vitalik Buterin (1:00:22.000)

hash challenges the thing that really limits your participation is kind of how much coins you're

Vitalik Buterin (1:00:26.240)

kind of locking into this mechanism okay so interesting so that that limited participation

Vitalik Buterin (1:00:31.600)

doesn't require you to run a lot of compute does that mean that the richer you are so rich people

Vitalik Buterin (1:00:44.240)

um are more like their identities more right and this stable yeah verifiable or whatever

Vitalik Buterin (1:00:53.200)

whatever the right terminology is right and this is definitely a common critique i think my usual

Vitalik Buterin (1:00:58.880)

answer to this is that like proof of work is even more of that kind of system exactly yeah because

Vitalik Buterin (1:01:04.000)

i didn't mean it and that statement is a criticism i think you're exactly right that's equivalent

Vitalik Buterin (1:01:08.000)

the proof of work is the same kind of thing but in the proof of work you have to also use physical

Vitalik Buterin (1:01:14.320)

resources yes and burn computers and burn trees and all of that stuff is there um a way to mess

Vitalik Buterin (1:01:21.360)

with the system of the proof of uh proof of stake there is but you will once again need to have a

Vitalik Buterin (1:01:27.920)

very large portion of all the coins that are locked in the system to do anything bad got it

Vitalik Buterin (1:01:33.360)

yeah and just that maybe take a small tangent one of the criticisms of cryptocurrency is the fact

Vitalik Buterin (1:01:39.600)

that i guess for the proof of work mechanism you have to use so much energy in the world

Vitalik Buterin (1:01:44.080)

yes is one of the motivations of proof of stake is to move away from this definitely like what's

Vitalik Buterin (1:01:51.040)

your sense of the uh maybe i'm just under informed is there like legitimately environmental impact

Vitalik Buterin (1:01:57.040)

from this yeah uh so the latest thing was that bitcoin consumed as much energy as the country of

Vitalik Buterin (1:02:04.080)

austria or something like that yeah and then ethereum is like right now maybe only like

Vitalik Buterin (1:02:09.280)

half in order of magnitude smaller than bitcoin i've heard you talk about ethereum 2.0 so what's

Vitalik Buterin (1:02:15.120)

the what's the dream of ethereum 2.0 what's the the status of proof of stake is the mechanism that

Vitalik Buterin (1:02:22.400)

ethereum moves towards and also how do you move to a different mechanism of consensus

Vitalik Buterin (1:02:29.840)

within a cryptocurrency so ethereum 2.0 is a collection of major upgrades that we've wanted

Vitalik Buterin (1:02:36.400)

to do to ethereum for quite some time the two big ones uh one is a proof of stake and the other is

Lex Fridman (1:02:42.480)

what we call sharding um sharding solves another problem with blockchains which is a scalability

Lex Fridman (1:02:48.000)

and what sharding does is it basically says instead of every participant in the network

Vitalik Buterin (1:02:54.480)

having to personally download and verify every transaction every participant in the network only

Vitalik Buterin (1:02:59.440)

downloads and verifies a small portion of transactions and then you kind of randomly

Vitalik Buterin (1:03:04.000)

distribute who gets how much work um and because of how the distribution is random it still has the

Vitalik Buterin (1:03:11.120)

property that you need a large portion of the entire network to corrupt what's going on inside

Vitalik Buterin (1:03:16.160)

of any shard but the system is still in a very redundant and very secure that's brilliant how

Vitalik Buterin (1:03:23.680)

hard is that to implement and how hard is uh proof of stake to implement like on the technical level

Vitalik Buterin (1:03:30.480)

yeah software level proof of stake and sharding are both challenging um i'd say sharding is a bit

Vitalik Buterin (1:03:35.840)

more challenging the reason is that proof of stake is kind of just a change to the how the

Vitalik Buterin (1:03:40.640)

consensus layer works sharding does both that but it's also a change to the networking layer

Vitalik Buterin (1:03:46.800)

um the reason is that sharding is kind of pointless if at the networking layer you still

Vitalik Buterin (1:03:50.960)

do what you do today which is you kind of gossip everything which means that if someone publishes

Vitalik Buterin (1:03:55.680)

something every other node and the client hears it like from uh on the networking layer and so

Vitalik Buterin (1:04:01.200)

instead we have to have kind of subnetworks and the ability to quickly switch between subnetworks

Lex Fridman (1:04:05.360)

and have the subnetworks talk to each other and this is all doable but it's a more complex

Vitalik Buterin (1:04:11.040)

architecture and it's definitely the sort of thing that hasn't not yet been done in cryptocurrency

Lex Fridman (1:04:15.040)

so most most of the networking layer in uh cryptocurrency is you're shouting you're like

Vitalik Buterin (1:04:21.200)

broadcasting messages and this is more like ad hoc networks like yeah you're shouting within

Vitalik Buterin (1:04:26.800)

smaller groups smaller group but you have like a bunch of subnet like exactly then you have to

Vitalik Buterin (1:04:31.760)

switch between oh man i'd love to see the uh so it's a beautiful idea uh so from a graph

Vitalik Buterin (1:04:38.720)

theoretical perspective but just the software that like who's responsible is the ethereum

Vitalik Buterin (1:04:44.960)

project like the people involved would they be implementing like what's the actual

Vitalik Buterin (1:04:48.880)

you know this is like legit software engineering uh who like how does that work how do people

Vitalik Buterin (1:04:56.080)

collaborate build that kind of project is this like almost um like is there a software engineering

Vitalik Buterin (1:05:02.880)

lead is there it's like is it a legit almost like large scale open source project there is

Vitalik Buterin (1:05:08.960)

yeah so um we have uh someone named uh danny ryan on our team who's just been brilliant and

Vitalik Buterin (1:05:14.160)

great all around and he is a kind of de facto kind of development coordinator i guess it's like you

Vitalik Buterin (1:05:22.800)

have to invent job titles for this stuff the reason is that um like we also have this unique

Vitalik Buterin (1:05:28.480)

kind of organizational structure where the ethereum foundation itself kind of does research

Vitalik Buterin (1:05:32.560)

in house but then the actual implementation is done by independent teams that are separate

Vitalik Buterin (1:05:37.680)

companies and they're located all around the world and like fun places like australia and and

Lex Fridman (1:05:44.640)

and so uh you know you kind of just need a bunch of kind of almost nonstop cat herding to just

Vitalik Buterin (1:05:52.400)

keep getting these people to kind of talk to each other and kind of implement this back make sure

Vitalik Buterin (1:05:57.840)

that everyone agrees on kind of what what's going on and kind of how to interpret different things

Lex Fridman (1:06:02.960)

so how far into the future are we from these two mechanisms in ethereum 2.0 like what's what's your

Vitalik Buterin (1:06:08.080)

sense of the timeline keeping in mind the previous comment you made about the sort of uh general

Vitalik Buterin (1:06:16.160)

curse of software projects so ethereum 2.0 is split into three phases so phase zero just

Vitalik Buterin (1:06:24.720)

creates a proof stake network and it's actually separate from kind of proof of uh the proof of

Vitalik Buterin (1:06:30.080)

work network at the beginning just to kind of give it time to grow and improve itself

Vitalik Buterin (1:06:34.960)

do people get to choose sorry to interrupt do people get to choose i guess yes they get they

Vitalik Buterin (1:06:39.200)

get to choose to move over if they want to then phase one adds sharding but it only adds sharding

Vitalik Buterin (1:06:45.280)

of data storage and not sharding of computation and then after that there is kind of the merger

Vitalik Buterin (1:06:51.520)

phase which is where the uh and if the accounts uh kind of smart contracts like all of the activity

Lex Fridman (1:06:58.960)

and uh the existing eth1 system just kind of gets cut and pasted into eth2 and then the proof of

Vitalik Buterin (1:07:04.480)

work chain gets forgotten and then and things all the things that were living there before just

Vitalik Buterin (1:07:09.760)

kind of continue living inside of the proof of stake system so for timelines um phase zero has

Vitalik Buterin (1:07:18.080)

been uh kind of almost fully implemented um and now it's just a matter of uh a whole bunch of

Vitalik Buterin (1:07:26.960)

security auditing and testing um my own experience is that right now it feels like we're at about a

Vitalik Buterin (1:07:33.280)

phase comparable to when we were doing uh the original ethereum launch when we were maybe about

Vitalik Buterin (1:07:40.720)

four months away from launch so that's just a hunch then that's just a hunch yeah so how you

Vitalik Buterin (1:07:47.440)

know it took it took like over a decade for people to move from python 2 to python 3 uh how do you see

Vitalik Buterin (1:07:54.720)

the move from like this phase zero of for for different consensus mechanism do you see there

Vitalik Buterin (1:08:01.600)

being a a drastic phase shift in people just kind of jumping to this better mechanism so in phase

Vitalik Buterin (1:08:09.280)

zero i don't expect too many people to do much because in phase zero in phase one the new chain

Vitalik Buterin (1:08:15.520)

the get of deliberately enough doesn't have too much functionality turned on it's there just like

Vitalik Buterin (1:08:20.400)

if you want to be a proof of stake validator you can get things started if you want to store data

Vitalik Buterin (1:08:24.800)

for other blockchain applications you can get started but existing applications will largely

Vitalik Buterin (1:08:30.400)

keep living on eth1 and then when the merger happens then the merger is a operation that

Vitalik Buterin (1:08:38.160)

happens all at once so that's kind of one of the benefits of a consensus system that like on the

Vitalik Buterin (1:08:43.520)

one hand you have to coordinate the upgrade but on the other hand the upgrade can be coordinated

Lex Fridman (1:08:48.960)

so what's casper ffg by the way um casper ffg is the consensus algorithm that we are using for

Vitalik Buterin (1:08:56.640)

the proof of stake is there something interesting uh specific about casper ffg

Vitalik Buterin (1:09:01.200)

like some beautiful aspect of it that's uh there is so casper ffg combines together kind of two

Vitalik Buterin (1:09:09.200)

different schools of a consensus algorithm design uh so the general two different schools of the

Vitalik Buterin (1:09:14.800)

of this design are right one is uh 50 fault tolerant but dependent on network synchrony

Lex Fridman (1:09:23.040)

so 50 fault tolerant but it didn't tolerate up to 50 of faults but not more but it depends on

Lex Fridman (1:09:30.240)

an assumption that all of the nodes can talk uh talk to each other within some

Vitalik Buterin (1:09:34.640)

kind of limited period of time like if i send the message you'll receive it within a few seconds

Lex Fridman (1:09:40.320)

and the second school is 33 fault tolerant but safe under asynchrony which means that

Vitalik Buterin (1:09:47.200)

like if we agree on something then that thing is finalized and even if the network goes horribly

Vitalik Buterin (1:09:53.360)

wonky the second after that thing is finalized there's no way to revert that thing um and that's

Vitalik Buterin (1:10:00.240)

fascinating how you would make that happen it's uh definitely quite clever um i'd recommend the

Vitalik Buterin (1:10:06.720)

uh casper ffg paper if you just search like archive as in like arxiv casper ffg it's that's

Vitalik Buterin (1:10:12.880)

that's an archive the paper is an archive yeah yeah who are the authors um myself and uh virgil

Vitalik Buterin (1:10:18.480)

griffith that's awesome i take a small tangent this idea of just putting out white papers and

Vitalik Buterin (1:10:25.600)

papers and putting them on archive and just putting them publicly is that is that at the core

Vitalik Buterin (1:10:31.840)

is that a necessary component of the currency is that the tradition started with uh uh satoshi

Vitalik Buterin (1:10:38.240)

nakamoto's what do you make of it like what do you make of the future of that kind of sharing of

Vitalik Buterin (1:10:42.320)

ideas i guess so yeah and it's definitely something that's kind of mandatory for crypto because like

Vitalik Buterin (1:10:50.640)

crypto is all about making systems where you know you don't have to trust the operators to

Vitalik Buterin (1:10:56.160)

trust that the thing works and so if anything behind our system works is closed sourced and

Vitalik Buterin (1:11:02.080)

that kind of uh kills the point and so there is the kind of a sense in which the fundamental

Vitalik Buterin (1:11:09.680)

properties of the category of the thing we're trying to build just kind of forces openness

Lex Fridman (1:11:14.640)

but also openness just has proven to be a really great way to collaborate and then there's actually

Vitalik Buterin (1:11:19.680)

had a lot of kind of innovation and academic collaboration that's just kind of happened

Vitalik Buterin (1:11:24.640)

ad hoc in the crypto space the last few years so like for example we have this forum called

Vitalik Buterin (1:11:31.280)

eth research that's like e th r e s e a r and then dot ch um and there we publish kind of just

Vitalik Buterin (1:11:40.000)

ideas in a form that's kind of half formal like it's halfway in between like it's it's a kind of

Vitalik Buterin (1:11:46.640)

a text write up and then you can have math in it but it's often and of much shorter than a paper

Lex Fridman (1:11:52.480)

and it turns out that the great majority of new ideas like they're just kind of fairly small

Vitalik Buterin (1:11:58.880)

nuggets that you can explain in like five to ten lines and they don't really they don't need the

Vitalik Buterin (1:12:03.360)

whole formality of a paper exactly they don't require the kind of like 10 pages of a filler

Lex Fridman (1:12:08.400)

and so introduction conclusion is not needed yeah and so instead you just kind of publish the idea

Lex Fridman (1:12:15.040)

and then people can go comments on it and that's brilliant yeah this has been great for us i think

Vitalik Buterin (1:12:20.160)

i interrupted you was there something else on casper ffg that's just casper ffg is just kind

Vitalik Buterin (1:12:26.560)

of combines together these two schools um and so basically it creates this system where if you have

Vitalik Buterin (1:12:36.720)

more than 50 that are honest then and you have network synchrony then the thing kind of goes

Vitalik Buterin (1:12:44.080)

as a chain but then if network synchrony fails then kind of the last few blocks in the chain

Vitalik Buterin (1:12:48.640)

might um kind of get replaced but anything that was finalized by this kind of more asynchronous

Vitalik Buterin (1:12:54.880)

process uh gets uh can't be reverted and so you essentially get a kind of best of both worlds

Vitalik Buterin (1:13:02.320)

between those two models okay so i know what i'm doing tonight i'm going to be reading the casper

Vitalik Buterin (1:13:07.600)

fg paper uh apologize for the romanticized question but what to you are some or the most

Vitalik Buterin (1:13:15.760)

beautiful idea in the world of ethereum just something uh surprising something beautiful

Vitalik Buterin (1:13:21.360)

something powerful yeah i mean i think the fact that money can just emerge out of a database if

Vitalik Buterin (1:13:27.360)

enough people believe in it i think is definitely one of those things that's up there um i think one

Vitalik Buterin (1:13:33.840)

of the things that i really love about ethereum is also this concept of composability so this is the

Vitalik Buterin (1:13:39.520)

idea that like if i build an application on top of ethereum then you can build an application that

Vitalik Buterin (1:13:45.760)

talks to my application and you don't even need my permission you don't even need to talk to me

Vitalik Buterin (1:13:51.360)

right so one really fun example of this is there was this game on ethereum called crypto kitties

Vitalik Buterin (1:13:57.440)

that just involved kind of breeding digital cats yes and someone else created a game called crypto

Vitalik Buterin (1:14:03.520)

dragons where the way you play crypto dragons is you have a dragon and you have to feed it crypto

Vitalik Buterin (1:14:08.720)

kitties um and they just uh created the whole thing just like as an ethereum contract that you

Vitalik Buterin (1:14:17.840)

would send these uh these tokens that are defined by this other ethereum contract and for the

Vitalik Buterin (1:14:23.920)

interoperability to happen like the projects didn't don't really need to like the teams don't

Vitalik Buterin (1:14:29.360)

really need to talk to each other you just kind of interface with the existing program so it's

Vitalik Buterin (1:14:35.040)

arbitrarily composable in this kind of way so you have different uh you know different groups that

Vitalik Buterin (1:14:39.200)

could be working and so you could see it scaling to just outside of dragons and kitties it could

Vitalik Buterin (1:14:44.320)

be you could build like entire ecosystems of software yeah and in the i mean especially in

Vitalik Buterin (1:14:50.480)

the decentralized finance space that's been popping up the last two years there has been

Vitalik Buterin (1:14:56.320)

a huge amount of really interesting things happen as a result of this is a particular kind of like

Vitalik Buterin (1:15:02.160)

financial applications kind of thing yeah i mean there's like stable coins so this is a kind of

Vitalik Buterin (1:15:08.480)

tokens that retain a value equal to one dollar but they're kind of backed by a crypt uh cryptocurrency

Vitalik Buterin (1:15:16.160)

um then there's decentralized exchanges um so when as far as the decentralized exchanges goes

Vitalik Buterin (1:15:22.640)

there's this uh really interesting construction that um has existed for about one and one and a

Vitalik Buterin (1:15:29.520)

half years now called uniswap so what uniswap is it's a smart contract that holds the balances of

Vitalik Buterin (1:15:37.200)

two tokens we'll call them token a and token b and it maintains an invariance that the balance

Vitalik Buterin (1:15:42.720)

of token a multiplied by the balance of token b has to equal the same value and so the way that

Vitalik Buterin (1:15:47.680)

you trade against the thing is basically like you have this kind of curve you know like x times y

Vitalik Buterin (1:15:53.280)

equals k and yeah before you trade it's at some points on the curve after you trade you just like

Vitalik Buterin (1:15:58.800)

pick some different any to any other points on the curve and then whatever the delta x is that's the

Vitalik Buterin (1:16:03.520)

amount of a tokens you provide whatever the delta y is that's the amount of b tokens you get or vice

Vitalik Buterin (1:16:08.080)

versa and that's just and then kind of the slope at the current points on the curve kind of is the

Vitalik Buterin (1:16:14.720)

price um and so that just is the whole thing and that just allows you to have this exchange for

Vitalik Buterin (1:16:24.720)

tokens and even if there's very few participants and the whole thing is just like so simple and

Vitalik Buterin (1:16:32.800)

it's just very easy to set up very easy to participate in and it just provides so much value

Vitalik Buterin (1:16:39.280)

to people so and uh the uh the fundamental the the distributed application infrastructure allows

Vitalik Buterin (1:16:48.160)

that somehow yes so this is a smart contract meeting this is all a computer program that's

Vitalik Buterin (1:16:53.680)

just running on ethereum smart contracts too are just fascinating they are okay do you think

Vitalik Buterin (1:17:01.040)

cryptocurrency may become the main currency in the world one day so where do you think we're headed

Vitalik Buterin (1:17:06.880)

in terms of the role of currency the structure type of currency in the world i definitely expect

Vitalik Buterin (1:17:14.160)

um fiat currencies to continue to exist and continue to be strong and i definitely expect

Vitalik Buterin (1:17:20.560)

kind of fiat currencies to also digitize in their own way over the next couple of decades what's

Vitalik Buterin (1:17:25.040)

fiat currency by the way oh just like things like us dollars and like dollars and euros and yen and

Vitalik Buterin (1:17:31.120)

these other things and they're sort of backed by governments yes but i also expect kind of

Vitalik Buterin (1:17:36.640)

cryptocurrencies to play this kind of important role in just making sure that people always have

Vitalik Buterin (1:17:43.120)

an alternative if fiat currencies start breaking so like if or if you're in you know some very

Vitalik Buterin (1:17:51.280)

high inflation place like venice will for example or if uh your country just kind of gets cut off

Vitalik Buterin (1:18:01.440)

from um cut off from other financial systems because of like something the banks do

Vitalik Buterin (1:18:06.400)

uh if any kind of if there's even like some major trade disruption or something worse happens then

Vitalik Buterin (1:18:14.160)

like cryptocurrencies are the sort of thing that just because of their kind of global neutrality

Vitalik Buterin (1:18:18.800)

they're just kind of always there and you can keep using them it's interesting that you're quite

Vitalik Buterin (1:18:23.600)

humble about the possibilities of the future of cryptocurrency you don't think there's a possible

Vitalik Buterin (1:18:29.120)

future where it becomes the main set of currency because it feels like it feels like the centralized

Vitalik Buterin (1:18:38.560)

control by governments of currency is limiting somehow maybe my naive utopian view of the world

Vitalik Buterin (1:18:45.920)

it's uh i mean it's definitely very possible uh i mean i think like for cryptocurrencies being

Vitalik Buterin (1:18:53.920)

the main form of value to kind of work well like you do need to have some much more price stability

Vitalik Buterin (1:19:04.080)

than they have today and i mean there are now stable coins and there are kind of cryptic

Vitalik Buterin (1:19:08.640)

cryptocurrencies that try to be more stable than existing things like bitcoin and ether but

Lex Fridman (1:19:13.520)

and that just is to me the kind of the main challenge do you think oh that's do you think

Vitalik Buterin (1:19:19.520)

that's a characteristic of this just being the early days it's such a young concept the 10 years

Vitalik Buterin (1:19:25.280)

is nothing in the history of money yeah and i think it's a combination of two things right one

Vitalik Buterin (1:19:31.200)

is um it's uh uh it's still early days but the other is a kind of more durable any kind of

Vitalik Buterin (1:19:37.520)

economic problem which is that like demand for currency is volatile right because of like

Vitalik Buterin (1:19:43.440)

recessions booms changes to technology lots of things and if people's demand for how much

Vitalik Buterin (1:19:49.360)

currency they want to hold changes and if you have a currency that has a fixed supply

Vitalik Buterin (1:19:54.640)

then the change in demand has to be entirely expressed as a change in value of the currency

Lex Fridman (1:20:00.400)

and so what that means is that kind of the volatility of demand becomes entirely translated

Vitalik Buterin (1:20:04.960)

into volatility and ahead of prices of things that dominated in that currency but if you have

Vitalik Buterin (1:20:10.720)

a currency where instead the supply can change and so the supply can kind of go up when there's

Vitalik Buterin (1:20:15.840)

more demand then you have the supply and of absorbing more of that volatility and so the

Vitalik Buterin (1:20:22.000)

price of the currency would absorb less of the volatility on that topic so bitcoin does have a

Vitalik Buterin (1:20:26.640)

limited supply a specific fixed supply yes uh what's what's the idea and ethereum doesn't but

Lex Fridman (1:20:33.920)

can you clarify just in the comments you just made is ethereum qualify to the kind of currency

Vitalik Buterin (1:20:41.520)

that you're talking about and being flexible in the supply i mean it's a bit more flexible but

Vitalik Buterin (1:20:46.000)

kind of the thing that you would really want is something that's kind of specifically flexible

Vitalik Buterin (1:20:53.520)

in response to how valuable the currency is and and i'd recommend you to look at stable coins

Vitalik Buterin (1:21:00.560)

as well so like things like die for example it's a new like how you spell that da i and what uh

Vitalik Buterin (1:21:07.840)

what's stable coins is it a type of cryptocurrency it is a type of cryptocurrency it's um a type of

Vitalik Buterin (1:21:14.160)

cryptocurrency that's issued by a smart contract one of these ethereum computer programs that um

Vitalik Buterin (1:21:21.040)

where the smart contract holds a bunch of ether and then it is basically like that people deposit

Lex Fridman (1:21:27.360)

and then it issues die and the reason why people deposit is because they want to kind of go high

Vitalik Buterin (1:21:32.160)

leverage on their ether and so it kind of pairs these two sets of users one that wants stability

Lex Fridman (1:21:37.040)

and one that kind of wants extra risk together with each other and it basically creates some

Vitalik Buterin (1:21:45.520)

or gives one set of participants a guarantee that they'll be that they have this asset that can

Vitalik Buterin (1:21:52.240)

that can be later converted back into ether but and like specifically at kind of the one dollar

Vitalik Buterin (1:21:56.640)

rate and it has some kind of uh stabilizing network effects yeah it has this yeah it has

Vitalik Buterin (1:22:03.440)

many kinds of stabilizing mechanisms in it that's fascinating okay this is this world is awesome

Vitalik Buterin (1:22:08.800)

technically just from a scientific perspective is an awesome world uh that i i often don't see from

Vitalik Buterin (1:22:14.160)

an outsider's perspective what i often see is kind of uh maybe hype and a little bit if i may say so

Vitalik Buterin (1:22:21.600)

like charlatanism and you don't often see at least from my outsider's perspective the beautiful

Vitalik Buterin (1:22:28.080)

science of it and the engineering of it i mean maybe is there a comment you can make of who to

Vitalik Buterin (1:22:35.920)

follow how to learn about this world without being um interrupted by the charlatans and the hype

Vitalik Buterin (1:22:45.040)

people in this space i think you do need to just know the specific kind of just people to follow

Vitalik Buterin (1:22:51.760)

like there's you know there's all the kind of the cryptographers and the researchers and there's

Vitalik Buterin (1:22:57.760)

just like even just the ethereum research crew like myself you know like dan grad danny justin

Lex Fridman (1:23:03.840)

and of the other people were and then and of the academic cryptographers and like before um

Vitalik Buterin (1:23:12.400)

this today i was at stanford and stanford has the center for blockchain research and of dan bonet

Vitalik Buterin (1:23:18.080)

this and really a famous and great cryptographer um was uh running it and there's a lot of other

Vitalik Buterin (1:23:25.680)

people there and there's people working on zero knowledge proofs for example and um zuko from

Vitalik Buterin (1:23:33.360)

zcash has one other person that i respect so i think if you follow the technical you crawl along

Vitalik Buterin (1:23:41.840)

that yeah yeah you just start with the theory group and then look at the academics day bonet

Lex Fridman (1:23:45.680)

and so on and then just cautiously expand the network of people you follow yeah exactly and

Vitalik Buterin (1:23:51.520)

like if someone seems too too self promotional then just like remove them is there books

Vitalik Buterin (1:23:58.320)

that are so there's these white papers and we just discussed about about ideas being

Vitalik Buterin (1:24:03.680)

condensed into really small parts is there books that are emerging that are kind of

Vitalik Buterin (1:24:09.200)

good uh introductory material so for historical ones and there's like nathaniel popper's digital

Vitalik Buterin (1:24:15.360)

gold which is just about the history of bitcoin there's like one and then matthew leising announced

Vitalik Buterin (1:24:20.720)

that there's one about the history of ethereum um for technical ones and there's andreas hansenopoulos

Vitalik Buterin (1:24:26.320)

is mastering ethereum great so um let me ask you sort of uh sorry to to pull back to the

Vitalik Buterin (1:24:35.280)

the idea of governments and decentralized currency

Vitalik Buterin (1:24:40.800)

you know there's a tension between decentralization of currency and the power of nations

Vitalik Buterin (1:24:46.240)

um the power of governments you um what's your sense about that tension can is there some rule

Vitalik Buterin (1:24:53.920)

for regulation of currency you yeah is there like is the government the enemy of digital currency

Vitalik Buterin (1:25:02.720)

of distributed currency or can they be like cautious friends i mean i think like

Vitalik Buterin (1:25:11.120)

like the one thing that people forget is that it's clearly not entirely an enemy because i think

Vitalik Buterin (1:25:18.400)

if uh there hadn't been so much government regulation on and if centralized uh issuing

Vitalik Buterin (1:25:27.360)

centralized digital currencies then i like we'd be seeing things people like google and facebook

Lex Fridman (1:25:32.880)

and twitter just kind of issuing them left and right and then like if that was the case then

Vitalik Buterin (1:25:37.280)

decentralized currencies would still appeal to some people but they definitely would appeal to

Vitalik Buterin (1:25:41.120)

less people than today so even in that sense i think it's uh clearly been kind of more of a help

Vitalik Buterin (1:25:49.600)

just kind of set the stage for the end of the existence as a of the sector in some ways but

Vitalik Buterin (1:25:57.040)

also and i think some of both you know like there's definitely things that governments

Lex Fridman (1:26:03.280)

and if can do in some cases have done to have hurt the spread of uh and of growth of uh of

Vitalik Buterin (1:26:10.240)

blockchains there's uh things that they've done to help and they've uh in some cases definitely done

Vitalik Buterin (1:26:17.200)

a good job of kind of going after fraudulent projects and going after some of the projects

Vitalik Buterin (1:26:23.440)

that have some of the kind of craziest and most misleading marketing um there's uh also the

Vitalik Buterin (1:26:30.160)

possibility that governments will end up using blockchains for a lot of different things like

Vitalik Buterin (1:26:35.920)

you know governments yeah i mean they do a lot more than just regulating right like there's also

Vitalik Buterin (1:26:40.960)

like they have the kind of identity records and they have kind of like property registries

Vitalik Buterin (1:26:49.680)

even just their own currency is like secure like lots of different kind of things that they're

Vitalik Buterin (1:26:56.240)

operating and there's even blockchain applications in a lot of those yeah and they can you know they

Vitalik Buterin (1:27:02.400)

can leverage technology do a lot of good for our societies it is a little unfortunate that

Vitalik Buterin (1:27:08.480)

governments often lag behind in terms of their acceptance and leverage of technology if you look

Vitalik Buterin (1:27:14.560)

at the autonomous vehicle space ai in general they're uh they're a few years behind it'd be

Vitalik Buterin (1:27:22.160)

nice uh to help them catch up that's a that's that's a always ongoing problem you um met

Vitalik Buterin (1:27:29.280)

vladimir putin to discuss the centralized currency here you're born in the where were you born

Vitalik Buterin (1:27:35.440)

columbia it's a city about 115 kilometers south of moscow in russia yes yeah i grew up in moscow

Vitalik Buterin (1:27:44.320)

i mean that's vladimir putin is a is a central figure in this part of the world so what was

Vitalik Buterin (1:27:49.360)

that like meeting or meeting him what was that experience like he's taller in photos than in

Vitalik Buterin (1:27:56.240)

person yeah he's yeah that's right he's 57 i think 58 maybe yeah that's uh unfortunately we

Vitalik Buterin (1:28:07.120)

didn't actually kind of have too much of a chance to talk to him like i managed to see him for about

Vitalik Buterin (1:28:11.920)

one minute at the end of this meeting and i did get a chance to see a lot like some of the other

Vitalik Buterin (1:28:17.600)

end of government ministers and like he recommended some and uh some of them are are actually

Vitalik Buterin (1:28:24.240)

kind of interested in trying to use um like blockchains to like for various government

Vitalik Buterin (1:28:30.880)

use cases they kind of limit corruption and other things and i have like it's hard to tell from one

Vitalik Buterin (1:28:36.640)

conversation kind of what things are genuine and what things are just like oh blockchain is cool

Vitalik Buterin (1:28:41.360)

let's do blockchain right but you know when i when i listen to like um barack obama talk about

Vitalik Buterin (1:28:48.640)

artificial intelligence there's certain things i hear where okay so he might not be an expert in

Vitalik Buterin (1:28:55.680)

ai but he know he like actually studied it carefully enough to think about it like he

Vitalik Buterin (1:29:02.160)

internally like uh even if he's just reading a wikipedia page like he really thought about what

Vitalik Buterin (1:29:08.080)

this technology means did you get a sense that uh putin or some of the ministers like thought about

Vitalik Buterin (1:29:15.040)

blockchain like thought about the fundamentals of technical like understand it intuitively

Vitalik Buterin (1:29:19.680)

are they too old school to try to grasp it some are old school some are more new school

Vitalik Buterin (1:29:26.720)

it depends it's it's definitely like depends on who you talk to i mean that's an open question

Vitalik Buterin (1:29:31.680)

for me with putin because putin has said i don't know i've only talked to him for about one minute

Lex Fridman (1:29:37.680)

so but sometimes you can pick up sort of insights there's a quick comment there they're about maybe

Vitalik Buterin (1:29:44.720)

you can correct me on this but they're about 3000 cryptocurrencies being actively traded yes uh and

Vitalik Buterin (1:29:50.960)

ethereum is one of you know a lot of people believe that there will be the the main cryptocurrency i

Vitalik Buterin (1:29:56.080)

think bitcoin is currently still the main cryptocurrency but ethereum very likely might

Vitalik Buterin (1:30:00.800)

become that the the main one um is this kind of diversity good in the crypto world do you see it

Vitalik Buterin (1:30:07.520)

sticking around should there should there be a winner like should there be some consensus globally

Vitalik Buterin (1:30:12.800)

around uh bitcoin or around ethereum like what's your what's your sense i definitely think the

Vitalik Buterin (1:30:18.320)

diversity is good and i definitely think also that there's probably too many people trying to

Vitalik Buterin (1:30:23.840)

make separate blockchains kind of right now the number should definitely be greater than one and

Vitalik Buterin (1:30:29.040)

probably greater than two or even five um not three thousand not three thousand yeah and also

Vitalik Buterin (1:30:35.280)

not even like 40 high quality platforms that try to do the same thing i mean there's definitely

Vitalik Buterin (1:30:40.320)

this range from just like one person who just like wrongly thinks that you can create a cryptocurrency

Vitalik Buterin (1:30:48.240)

in like 12 hours and uh doesn't even think about kind of the community aspects of maintaining it

Vitalik Buterin (1:30:53.680)

going to uh people actually trying but only creating a really tiny one to like scammers

Vitalik Buterin (1:31:01.280)

to people like making something that's actually successful and then there's a lot of different

Vitalik Buterin (1:31:09.440)

categories of blockchain and you have project in terms of what it's trying to do and what

Vitalik Buterin (1:31:13.120)

applications it's for um and i think the experimentation is definitely healthy

Vitalik Buterin (1:31:18.560)

if you look at the two worlds it might be a little bit disjoint but uh the distributed

Vitalik Buterin (1:31:24.160)

applications cryptocurrency and then the world of artificial intelligence do you see there's some

Vitalik Buterin (1:31:29.440)

overlap between these worlds that both worry about centralized control is there some overlap that's

Vitalik Buterin (1:31:36.560)

interesting that you think about do you think about ai much yeah and i think uh definitely

Vitalik Buterin (1:31:42.800)

i'd have thought about things like in like the ai and if control problems and alignment problems and

Vitalik Buterin (1:31:48.640)

all of those things do you worry about the existential threat of ai it's definitely one

Vitalik Buterin (1:31:52.800)

of the things i worry about they think um block there's a lot of uh kind of common challenges

Vitalik Buterin (1:32:01.520)

because in in both cases what you're ultimately trying to do is you're trying to kind of get a

Vitalik Buterin (1:32:07.600)

simple system to direct a more complex system like in the case of uh this is drawing ai's the

Vitalik Buterin (1:32:14.240)

idea would be that the simple system is people and the complex system is well whatever um thing

Vitalik Buterin (1:32:20.080)

uh the people uh the people end up kind of unleashing on the universe that'll hopefully be

Vitalik Buterin (1:32:24.240)

a great thing um and in the case of blockchains and of the complex well the simple thing is uh

Vitalik Buterin (1:32:32.400)

the algorithm which is a piece of static and fully open source code and the more complex thing is

Vitalik Buterin (1:32:36.800)

just the all of the different possible kind of human actors and the end of the strategy is that

Vitalik Buterin (1:32:44.640)

they might end up used to participate in the network do you think about your own mortality

Vitalik Buterin (1:32:50.960)

like what you hope to accomplish in your life oh i definitely i definitely think about ending my

Vitalik Buterin (1:32:56.400)

own mortality so that's if i gave you the option to live forever would you depends a lot on what

Vitalik Buterin (1:33:03.440)

the fine birds is but i mean you know if it's one of those things where i'm going to be kind

Vitalik Buterin (1:33:08.720)

of like floating through empty space for 10 to the 75 years then no if it's uh um forever worth

Vitalik Buterin (1:33:16.880)

of uh and of having you know fulfilling life with uh and of meaning like with with friends to uh to

Vitalik Buterin (1:33:26.240)

spend the time with with kind of meaningful challenges to explore and individual interesting

Vitalik Buterin (1:33:32.560)

things to be working on then i think absolutely move that's uh beautifully put live forever

Lex Fridman (1:33:40.000)

but uh you'd have to check the fine print i think there's no better way to end it vitalik

Vitalik Buterin (1:33:45.920)

thank you so much for talking to us so exciting to follow your work from a distance and uh thank

Vitalik Buterin (1:33:52.080)

you for creating a revolutionary idea and sticking with it and building it out and doing some

Vitalik Buterin (1:33:56.800)

incredible engineering work and thanks for talking today yeah thank you thanks for listening to this

Vitalik Buterin (1:34:01.680)

conversation with vitalik buterin and thank you to our sponsors express vpn and masterclass please

Vitalik Buterin (1:34:08.640)

consider supporting the podcast by signing up to masterclass at masterclass.com slash lex

Lex Fridman (1:34:14.720)

and getting express vpn at express vpn.com slash lex pod if you enjoy this podcast subscribe on

Vitalik Buterin (1:34:23.120)

youtube review it with five stars on apple podcast support it on patreon or simply connect with me on

Vitalik Buterin (1:34:28.800)

twitter at lex friedman and now let me leave you with some words from vitalik buterin the thing

Vitalik Buterin (1:34:36.240)

that i often ask startups on top of ethereum is can you please tell me why using ethereum blockchain

Vitalik Buterin (1:34:43.200)

is better than using excel and if they can come up with a good answer that's when you know you've

Vitalik Buterin (1:34:48.880)

got something really interesting thank you for listening and hope to see you next time

Vitalik Buterin (20:08.440)

think money from an economics perspective from a psychology perspective is core to like

Vitalik Buterin (20:15.720)

human desires money is definitely very far from the only motivator um it is a big motivator

Lex Fridman (20:23.480)

and that's uh one of the closest things you have to a universal motivator think because

Vitalik Buterin (20:30.200)

ultimately in like almost any person in the world if you ask them to do something like

Vitalik Buterin (20:36.040)

they'll be more inclined to do it if you also offer some uh offer them money right and that's

Vitalik Buterin (20:41.080)

uh like there's definitely many cases where people will do things other than things that

Vitalik Buterin (20:47.460)

maximize how much money they have and that happens all the time but like though a lot

Vitalik Buterin (20:52.240)

of those other things are kind of but much more specific to and of who that person is

Lex Fridman (20:57.360)

and of what their situation is the relationship between the motive and the action and these

Vitalik Buterin (21:01.000)

other things what do you think is the interplay of the other motivator from like Nietzsche

Vitalik Buterin (21:05.800)

perspective is power do you think money equals power do you think those are conflicting ideas

Lex Fridman (21:11.960)

do you think i mean that's the one of the ideas that decentralized currency decentralized

Vitalik Buterin (21:16.520)

applications are looking at is uh who holds the power yeah money is definitely a kind

Vitalik Buterin (21:23.160)

of power and there's definitely people who want money because it gives them power and

Vitalik Buterin (21:29.600)

even if my money doesn't seem to and if explicitly be about money a lot of things that people

Vitalik Buterin (21:37.800)

spend money on are ultimately about a social status of some kind um so i mean i definitely

Vitalik Buterin (21:44.880)

view those two things as an of interplaying and then there's also money as just a way

Vitalik Buterin (21:50.480)

of like measuring how successful you are like as a scoreboard right so this kind of gets

Vitalik Buterin (21:57.280)

back to the game i mean like if you have four billion dollars then the main benefit you

Vitalik Buterin (22:04.200)

get from going up one of the big benefits you get from going up to six million dollars

Vitalik Buterin (22:08.040)

is that now instead of being below the guy who has five you're above the guy who has

Vitalik Buterin (22:12.200)

five so you think money could be kind of uh in the game of life it's also a measure of

Vitalik Buterin (22:19.080)

self worth it's like how we it's definitely how uh how a lot of people perceive it define

Vitalik Buterin (22:25.660)

ourselves in the hierarchy of yeah and i'm not yeah not saying it's kind of a healthy

Vitalik Buterin (22:30.400)

thing that people uh define their self worth as money because it's definitely kind of far

Vitalik Buterin (22:36.480)

from a uh perfect indicator of how much you value you provide the society or anything

Vitalik Buterin (22:43.880)

like this but i definitely think that like as a matter of kind of current practice so

Vitalik Buterin (22:49.500)

much of people do feel that way so what does utopia from an economic perspective look like

Vitalik Buterin (22:56.200)

to you what does the perfect world look like i guess the economist's utopia would be one

Vitalik Buterin (23:04.920)

where kind of everything is incentive aligned in the in the sense that there aren't enough

Vitalik Buterin (23:12.640)

conflicts between what satisfies your goals and kind of what is uh good for everyone in

Vitalik Buterin (23:20.440)

the world in the world as a whole what do you think that would um look like does does

Vitalik Buterin (23:26.820)

that mean there's still poor people and rich people there's still income inequality do

Vitalik Buterin (23:32.420)

you think sort of uh marxist ideas are strong do you think sort of ideas of uh objectivism

Vitalik Buterin (23:41.320)

like where the market rules is strong like what is there is the different economic philosophies

Vitalik Buterin (23:47.120)

that just seem to be reflective what utopia would be so i definitely think that existing

Vitalik Buterin (23:55.140)

economic philosophies do end up kind of systematically kind of deviating from the utopia in a lot

Vitalik Buterin (24:02.640)

of ways yeah like one of the big things i talk about for example is public goods right

Lex Fridman (24:07.720)

and public goods are especially important on the internet right because like the idea

Vitalik Buterin (24:13.440)

is with kind of money as this game where you know i lose a few coin a few coins and you

Vitalik Buterin (24:18.920)

gain the same number of coins is that this usually happens in a trade where i lose some

Vitalik Buterin (24:23.140)

money you gain some money you lose a sandwich and i gain a sandwich and this kind of model

Vitalik Buterin (24:30.680)

works really well when the thing that we're using money to incentivize this kind of private

Vitalik Buterin (24:36.680)

goods right things that you provide to one person where the benefit comes to one person

Lex Fridman (24:40.680)

but the like on the internet especially but also many many contexts and if off the internet

Vitalik Buterin (24:48.040)

there's actions that kind of individuals or groups can take where instead of the benefit

Vitalik Buterin (24:53.960)

going to one person the benefit just goes to many people at the same time and you can't

Vitalik Buterin (25:00.200)

control where the benefit goes to right so for example this podcast you know we publish

Vitalik Buterin (25:04.600)

it and when it's published you don't have any fine grains control over like oh these

Vitalik Buterin (25:11.120)

38 000 people can watch it and then like these other 29 000 people can't it's like once the

Vitalik Buterin (25:16.800)

number goes high enough then you know people just like copy it and then when i write articles

Vitalik Buterin (25:21.400)

on a blog then they're just like free for everyone and that stuff's even harder to prevent

Vitalik Buterin (25:26.940)

anyone from copying so and aside from that things like you know scientific research for

Vitalik Buterin (25:33.020)

example and even taking more pedestrian examples like climate change mitigation would be a

Vitalik Buterin (25:39.200)

big one so there's a lot of things in the world where you have these kind of individual

Vitalik Buterin (25:47.320)

actions with enough concentrated costs and distributed benefits and money as a point

Vitalik Buterin (25:51.620)

system does not do a good job of encouraging these things and one of the kind of other

Vitalik Buterin (25:58.920)

things even kind of tangentially connected to crypto but kind of theoretically outside

Vitalik Buterin (26:05.320)

of it that i work on is this sort of mechanism called quadratic funding and the way to think

Vitalik Buterin (26:10.400)

about it is i kind of imagine a point system where if like if one person gives coin gives

Vitalik Buterin (26:19.880)

coins to one other person then it works the same way as money but if multiple people give

Vitalik Buterin (26:26.940)

coins to one person and they do so anonymously so it's kind of not in consideration for a

Vitalik Buterin (26:32.160)

specific service to that person themselves then the number of coins received by that

Vitalik Buterin (26:38.240)

person is kind of greater than just the sum of the number of coins that have given by

Vitalik Buterin (26:43.020)

those different people so the actual formula is you take the square root of the amount

Vitalik Buterin (26:48.600)

that each person gave then you add all the square roots and then you kind of square the

Vitalik Buterin (26:51.640)

sum yeah and then you give that and the idea here would basically be that if let's say

Vitalik Buterin (26:58.480)

for example you just start going off and kind of planting a lot of trees and there's a bunch

Vitalik Buterin (27:05.520)

of people that are really happy that you're planting trees and then so they go and all

Vitalik Buterin (27:09.320)

kind of throw a coin your way then the like there is like basically the fact that kind

Vitalik Buterin (27:16.680)

of you get more than the sub you get this kind of square of sum of these of square roots

Vitalik Buterin (27:21.640)

of these tiny nodes that this actually kind of compensates for the tragedy of the commons

Vitalik Buterin (27:27.420)

right this there's even this kind of mathematical proof that it's sort of optimally compensates

Vitalik Buterin (27:31.480)

for it what is the tragedy of the common this is just this idea that like if there is this

Vitalik Buterin (27:38.120)

situation where there's some public good that lots of people benefit from then no individual

Vitalik Buterin (27:45.640)

person wants to contribute to it because if they contribute they only get a small part

Vitalik Buterin (27:49.040)

of the benefit from their contribution but they pay the full cost of their contribution

Vitalik Buterin (27:54.880)

in which context is this sorry what is the term quadratic what quadratic funding like

Vitalik Buterin (28:01.320)

what's in which context is this mechanism useful so obviously you said to combat the

Vitalik Buterin (28:08.800)

tragedy of the commons but you know in which context do you see it as useful actually practically

Vitalik Buterin (28:13.000)

yeah theoretically public goods in general right so like like services like what are

Vitalik Buterin (28:18.080)

we what are we talking about what's a public yeah so within the ethereum ecosystem for

Vitalik Buterin (28:23.440)

example like we've actually tried using this mechanism like yeah wrote a couple of articles

Vitalik Buterin (28:28.440)

about this on vitalik.ca where i go through some of the most recent rounds and it's been

Vitalik Buterin (28:33.280)

really interesting um some of the top ones that people supported there were um things

Vitalik Buterin (28:40.760)

like kind of just online user interfaces that make it easier for people to interact with

Vitalik Buterin (28:46.880)

ethereum um there was a documentation there were podcasts um there were kind of software

Vitalik Buterin (28:57.680)

kind of clients like kind of implementations of the ethereum protocol of privacy tools

Vitalik Buterin (29:03.740)

just like lots of things that are kind of useful to lots of people when a lot of people

Vitalik Buterin (29:10.120)

are contributing for like funding a particular particular entity yeah that's really that's

Vitalik Buterin (29:15.600)

really interesting is there something special about the quadratic the the the summing of

Vitalik Buterin (29:20.560)

the square roots and yeah so another way to think about it is like imagine if n people

Vitalik Buterin (29:25.720)

each give a dollar then the person gets n squared right um and and so each individual

Vitalik Buterin (29:32.180)

person's contribution gets multiplied by n right because you have n people and so that

Vitalik Buterin (29:37.200)

kind of perfectly compensates for the kind like kind of n to one uh tragedy of the commons

Vitalik Buterin (29:41.880)

i just wonder if the the squared part is yeah fundamental no it is um and i'd uh recommend

Vitalik Buterin (29:49.120)

you go to on vitalik.ca i have this article called quadratic payments a primer and highly

Vitalik Buterin (29:56.280)

recommended it's kind of at least my attempt so far kind of explaining the intuition behind

Vitalik Buterin (30:01.040)

this intuition so if we could can we go to the the very basics what is the blockchain

Vitalik Buterin (30:09.740)

or perhaps we might even start at the uh the the byzantine generals problem and byzantine

Vitalik Buterin (30:16.080)

fault tolerance in general that i i uh bitcoin was taking steps to uh providing a solution

Vitalik Buterin (30:24.480)

for so the byzantine generals problem it's this uh paper that leslie lamport published

Vitalik Buterin (30:32.400)

in 1982 where he has this thought experiments where if you have two generals that are kind

Vitalik Buterin (30:38.040)

of camped out on opposite sides of a city um and they're planning when to attack the

Vitalik Buterin (30:43.400)

city then uh the question is and if how could those generals coordinate with each other

Lex Fridman (30:50.080)

and they could send messengers between each other but those messengers kind of could get

Vitalik Buterin (30:56.320)

sniped by the enemy on the road road some of those messages could end up being traders

Lex Fridman (31:01.560)

and if things could end up happening and with just two mess generals it turns out that there's

Vitalik Buterin (31:11.080)

kind of no solution in a finite number of rounds that guarantees that they will be able

Vitalik Buterin (31:17.640)

to kind of coordinate on the same answer but then in the case where you have more than

Vitalik Buterin (31:22.120)

two generals that then leslie analyzes cases like um are the mess messages kind of just

Vitalik Buterin (31:28.520)

oral messages um are the messages kind of signed messages so i could give you a signed

Vitalik Buterin (31:34.040)

message and you can pass along that signed message and the third party can still verify

Vitalik Buterin (31:38.240)

that i originally made that message and depending on those different cases there's kind of different

Vitalik Buterin (31:44.720)

bounds on like given how many generals and how many traders among those generals and

Vitalik Buterin (31:51.640)

if what like under what conditions you actually can't agree when to launch an attack uh so

Vitalik Buterin (31:59.120)

it's actually a big misconception that the byzantine generalist problem was unsolved

Lex Fridman (32:03.800)

so let's say lamport solved it the thing that was unsolved though is that all of these solutions

Vitalik Buterin (32:09.160)

assume that you've already agreed on and have fixed the list of who the generals are and

Vitalik Buterin (32:14.680)

these generals have to be kind of semi trusted to some extent they can't just be anonymous

Vitalik Buterin (32:18.440)

people because if they're anonymous then like the enemy could just be 99 percent of the

Vitalik Buterin (32:22.960)

generals uh so right the um in the 1980s and the 1990s kind of the general use case

Vitalik Buterin (32:32.480)

for distributed system stuff was more kind of enterprisey stuff where you could kind

Vitalik Buterin (32:38.920)

of assume that uh you know you know who the nodes are that are running these kind of computer

Vitalik Buterin (32:45.480)

networks so if he wants to have some kind of decentralized computer network that pretends

Vitalik Buterin (32:50.160)

to be a single computer and that you can kind of do do kind of operations on then it's made

Vitalik Buterin (32:55.880)

out of these kind of 15 specific computers and we know kind of who and where they are

Lex Fridman (33:00.840)

and so we have a good reason to believe that say at least 11 of them would be fine and

Vitalik Buterin (33:05.240)

it could also be within a single system exactly almost a network of devices sensors so on

Vitalik Buterin (33:11.600)

like in airplanes and i think uh like flight systems in general still use these kinds of

Vitalik Buterin (33:16.920)

ideas yep yep um so that's the 80s that's the 80s and 90s now the cypherpunks had a

Vitalik Buterin (33:23.160)

different use case in mind which is that they wanted to create a fully decentralized global

Vitalik Buterin (33:28.320)

permissionless currency and the problem here is that they didn't want any authorities and

Vitalik Buterin (33:34.560)

they didn't even want any kind of privileged list of people and so now the question is

Vitalik Buterin (33:39.520)

well how do you use these techniques to create consensus when you have no way of kind of

Vitalik Buterin (33:46.760)

measuring identities right you have no way of kind of determining whether or not some

Vitalik Buterin (33:52.080)

99 of participants aren't actually all the same guy and so the clever solution that satoshi

Vitalik Buterin (33:58.680)

had this is uh kind of going back to the that presentation i made at defcon a few months ago where i said that the

Vitalik Buterin (34:05.560)

things that satoshi invented with crypto economics um is this uh really neat idea that you can

Vitalik Buterin (34:11.740)

use economic resources to kind of limit identity how many identities you can get and the uh

Vitalik Buterin (34:20.800)

if there isn't any existing decentralized digital currency then the only way to do this

Vitalik Buterin (34:25.360)

is with proof of work right so with proof of work the solution is uh just uh you publish

Vitalik Buterin (34:33.640)

a solution to a hard mathematical puzzle that takes some uh kind of clearly calculable amount

Vitalik Buterin (34:40.800)

of computational power to solve you get an identity and then you solve five of those

Vitalik Buterin (34:45.380)

puzzles you get five identities and then these are the identities that we run the consensus

Vitalik Buterin (34:50.580)

algorithm between so the proof of work mechanism you just described is like the fundamental

Vitalik Buterin (34:55.920)

idea proposed in the in the white paper that defines bitcoin uh what's the idea of consensus

Vitalik Buterin (35:05.040)

that we wish to reach why is consensus important here what is consensus so the goal here in

Vitalik Buterin (35:15.800)

just simple technical terms is to basically kind of wire together a set of a large number

Vitalik Buterin (35:22.640)

of computers in such a way that they kind of pretends to the outside world to be a single

Vitalik Buterin (35:27.280)

computer where that single computer keeps working even if a large portion of the kind

Vitalik Buterin (35:32.380)

of constituents the computers that make it up break and kind of break in arbitrary ways

Vitalik Buterin (35:36.720)

like they could shut off they could try to actively break a system they could do lots

Vitalik Buterin (35:41.480)

of mean things so the reason why the cypherpunks wanted to do this is because they wanted to

Vitalik Buterin (35:49.780)

run one particular program on this virtual computer and the one particular program that

Vitalik Buterin (35:54.240)

they wanted to run is just a currency system right it's a system that just processes a

Vitalik Buterin (35:58.880)

series of transactions and for every transaction it verifies that the sender has enough coins

Vitalik Buterin (36:05.840)

to pay for the transaction it verifies that the digital signature is correct and if the

Vitalik Buterin (36:10.080)

checks pass then it subtracts the coins from one account and adds the coins to the other

Vitalik Buterin (36:14.200)

account roughly so first of all the the the proof of work idea is kind of i mean at least

Vitalik Buterin (36:21.080)

to me seems pretty fascinating it is i mean that's a it's kind of a revolutionary idea

Vitalik Buterin (36:27.800)

i mean is is it is it obvious to come up with that you can use uh you can exchange basically

Vitalik Buterin (36:33.440)

computational resources for for identity it's uh it actually has a pretty long history it

Vitalik Buterin (36:41.800)

was uh first proposed in a paper by uh mc cynthia dwork and nixon naor in 1994 i believe

Lex Fridman (36:51.320)

and the original use case was uh combating email spam so the idea is that if you send

Vitalik Buterin (36:55.960)

an email you have to send it with a proof of work attached and like this makes it reasonably

Vitalik Buterin (37:00.520)

cheap to send emails to your friends but it makes it really expensive to send spam to

Vitalik Buterin (37:04.080)

a million people yeah that's a simple brilliant idea so maybe also taking a step back so what

Vitalik Buterin (37:10.880)

is the role of blockchain in this what is the blockchain sure so the blockchain my way

Vitalik Buterin (37:18.740)

of thinking about it is that it is this kind of system where you have this kind of one

Vitalik Buterin (37:24.600)

virtual computer created by this a bunch of these nodes in the network and the reason

Lex Fridman (37:31.680)

why the term blockchain is used is because the data structure that these systems use

Vitalik Buterin (37:37.080)

at least so far is one where they um different nodes in the network periodically publish

Vitalik Buterin (37:45.680)

blocks and a block is a kind of list of transactions together with a pointer like a hash of a previous

Vitalik Buterin (37:54.160)

block that it builds on top of and so you have a series of blocks that that nodes in

Vitalik Buterin (38:01.320)

the network create where each block points to the previous block and so you have this

Vitalik Buterin (38:04.560)

chain of them is a fault tolerance mechanism built into the idea of blockchain or is it

Vitalik Buterin (38:10.640)

a lot of possibilities of different ways to make sure there's no funny stuff going on

Vitalik Buterin (38:16.400)

there are indeed a lot of possibilities um so in a kind of just simple architecture as

Vitalik Buterin (38:22.220)

I just described the way the fault tolerance happens is like this right so you have a bunch

Vitalik Buterin (38:26.880)

of nodes and they're just happily and have occasionally creating blocks building on top

Vitalik Buterin (38:30.520)

of them each other's blocks and let's say you have kind of one block we'll call it kind

Vitalik Buterin (38:35.720)

of block one and then someone else builds another block honestly you'll call it block

Vitalik Buterin (38:41.000)

two then we have an attacker and what the attacker tries to do is the attacker tries

Vitalik Buterin (38:46.320)

to revert block two and the way they revert block two is instead of doing the thing they're

Vitalik Buterin (38:50.640)

supposed to do which is build a block on top of block two they're going to build another

Vitalik Buterin (38:54.760)

block on top of block one um so you have block one which has two children block two and then

Vitalik Buterin (39:00.280)

block two prime now this might sometimes even happen by random chance if you know two nodes

Vitalik Buterin (39:07.240)

in the network just happen to create blocks at the same time and they don't hear about

Vitalik Buterin (39:10.920)

each other's things before they create their own but this also could happen because of

Vitalik Buterin (39:14.960)

an attack now if this happens you have an attack then the uh no in the bitcoin system

Vitalik Buterin (39:22.400)

uh the nodes follow the longest chain um so if um this um attack had happened uh and when

Vitalik Buterin (39:30.520)

the original chain had more than two blocks on it so if it was trying to kind of revert

Vitalik Buterin (39:35.160)

more than more than two blocks then everyone would just would just ignore it and everyone

Vitalik Buterin (39:41.040)

would just keep following the regular chain but here you know we have block two and we

Vitalik Buterin (39:44.480)

have block two prime and so the two are kind of even and then whatever block um the next

Vitalik Buterin (39:50.720)

block is created on top of so say block three is now created on top of block two prime then

Vitalik Buterin (39:56.120)

everyone says uh agrees that block three is the new head um and block two prime is just

Vitalik Buterin (40:03.160)

kind of forgotten and then everyone just kind of peacefully builds on top of block three

Lex Fridman (40:06.740)

and the thing continues so how difficult is it to mess with the system right so how like

Vitalik Buterin (40:12.640)

if we look at the general problem like how many what fraction of people who participate

Vitalik Buterin (40:19.040)

in the system have to be bad players in order to mess with it truly like what's your is

Vitalik Buterin (40:26.080)

there is there a good number there is um well depending on kind of what your model of the

Vitalik Buterin (40:31.600)

participants is and like what kind of attack we're talking about it's anywhere between

Vitalik Buterin (40:36.480)

23.2 and 50 of what of all of the computing power in the network sorry so 22 and 23 point

Vitalik Buterin (40:47.560)

between 23.2 and 50 and 50 can be compromised so like once your once your your portion of

Vitalik Buterin (40:58.200)

the total computing power in the network goes above the 23.2 level then there's kind of

Vitalik Buterin (41:04.120)

things that you could mean things that you can potentially do and as your percentage

Vitalik Buterin (41:08.440)

of the network kind of keeps going up then the your abilities as you mean things kind

Vitalik Buterin (41:12.740)

of goes higher and then if you have above 50 then you can just break everything so how

Lex Fridman (41:17.440)

how hard is it to achieve that level like it seems that so far historically speaking

Vitalik Buterin (41:23.800)

it's been exceptionally difficult so this is a challenging question um so the economic

Vitalik Buterin (41:29.680)

cost of acquiring that level of stuff from scratch is fairly high i think it's uh somewhere

Vitalik Buterin (41:36.680)

in the low billions of dollars and when you say that stuff you mean computational resources

Vitalik Buterin (41:42.040)

yeah so specifically specialized hardware and of asics that people use to solve these

Vitalik Buterin (41:48.200)

puzzles to do the mining these days small tangent uh so obviously i work a lot in deep

Vitalik Buterin (41:54.160)

learning with gpus and asics for that application and i tangentially kind of hear that so many

Vitalik Buterin (42:00.960)

of these you know sometimes nvidia gpus are sold out because of this other application

Vitalik Buterin (42:07.360)

like what do if you can comment i don't know if you're familiar or interested in this space

Lex Fridman (42:12.440)

what kind of asics what kind of hardware is generally used these days for to do the actual

Vitalik Buterin (42:18.520)

computation for the proof of work sure so in the case in bitcoin and ethereum are a

Vitalik Buterin (42:23.440)

bit different so in the case of bitcoin there is an algorithm called sha256 it's just a

Vitalik Buterin (42:28.960)

hash function and so the puzzle is just coming up with a number where the hash of the number

Vitalik Buterin (42:33.880)

is below some threshold and so because the hashes are designed to be random you just

Vitalik Buterin (42:38.880)

have to keep on trying different numbers until one works and the asics are just like specialized

Vitalik Buterin (42:45.040)

circuits that contain and if circuits for evaluating this hash over and over again and

Vitalik Buterin (42:51.320)

you have like millions or billions of these hash evaluators and just stacked on top of

Vitalik Buterin (42:56.240)

each other inside of a box and you just keep on running the box 24 7 in the asics there's

Vitalik Buterin (43:01.000)

literally specialized hardware designed for this yes oh this is a little bit an amazing

Vitalik Buterin (43:05.520)

world another tangent i'll come back to the basics but uh does quantum computing throw

Vitalik Buterin (43:11.560)

a wrench into any of this very good question so uh quantum computers have two main uh kind

Vitalik Buterin (43:19.080)

of families of algorithms that are relevant to cryptography one is shor's algorithm and

Vitalik Buterin (43:24.520)

shor's algorithm is one that kind of completely breaks the hardness of some specific kinds

Vitalik Buterin (43:31.520)

of mathematical problems so the one that you've probably heard of is it makes it very easy

Vitalik Buterin (43:35.560)

to factor numbers so figure out kind of what prime factors are the kind of that you need

Vitalik Buterin (43:41.280)

to multiply together to get some number even if that number is extremely big shor's algorithm

Vitalik Buterin (43:46.920)

can also be used to break elliptic curve cryptography it can break like any kind of hidden order

Vitalik Buterin (43:54.480)

groups it breaks a lot of kind of cryptographic nice things that we're used to but the good

Vitalik Buterin (44:00.320)

news is that for every kind of major use of things that shor's algorithm breaks we already

Vitalik Buterin (44:07.720)

know of quantum proof alternatives right now we don't use these quantum proof alternatives

Vitalik Buterin (44:12.680)

yet because in many cases they're five to ten times less efficient but the crypto industry

Vitalik Buterin (44:20.280)

in general kind of knows that this is coming eventually and it's kind of ready to take

Vitalik Buterin (44:25.580)

the hit and switch to that stuff when we when we have to the second algorithm that is relevant

Vitalik Buterin (44:31.680)

to cryptography is grover's algorithm and in grover's algorithm might even be kind of

Vitalik Buterin (44:38.240)

more familiar to ai people that's basically usually described as solving search problems

Lex Fridman (44:44.520)

but the idea here is that if you have a problem of the form find a number that satisfies some

Vitalik Buterin (44:51.600)

property then if with a classical computer you need to try and if n times before before

Vitalik Buterin (44:58.840)

you find a number then with a quantum computer you only need to do square root of n computations

Lex Fridman (45:03.800)

and grover's could potentially be used for mining but there's two possibilities here

Vitalik Buterin (45:12.840)

one is that grover's could be used for mining and whoever creates the first working quantum

Vitalik Buterin (45:18.480)

computer that could do grover's will just mine way faster than everyone else and we'll

Vitalik Buterin (45:22.800)

see another round of what we saw when a6 came out which is that kind of the new hardware

Vitalik Buterin (45:27.920)

just kind of dominated the old stuff and then eventually it switched to a new equilibrium

Lex Fridman (45:32.320)

but by the way way faster not exponentially faster quadratically faster quadratically

Vitalik Buterin (45:37.680)

faster which is not sort of it's not game changing i would say it's like a6 like you

Vitalik Buterin (45:44.960)

said it would be exactly yeah so it would not necessarily break proof of work as a that's

Vitalik Buterin (45:50.200)

right yeah now the other kind of possible world right is that quantum computers have

Vitalik Buterin (45:55.160)

a lot of overhead there's a lot of a complexity involved in maintaining quantum states and

Vitalik Buterin (46:00.440)

there's also as we've been realizing recently making quantum computers actually work requires

Vitalik Buterin (46:07.600)

kind of quantum error correction which requires kind of a thousand real qubits per logical

Vitalik Buterin (46:12.200)

qubit and so there's the very real possibility that the overhead of running a quantum computer

Vitalik Buterin (46:17.920)

will be higher than the speed up you get with grover's which would be kind of sad but which

Vitalik Buterin (46:22.540)

would also mean that the given proof of work will just keep working fine so beautifully

Vitalik Buterin (46:28.220)

put so so proof of work is the core idea of bitcoin is there other core ideas before we

Vitalik Buterin (46:33.640)

kind of take a step towards the origin story and ideas of ethereum is there other stuff

Vitalik Buterin (46:39.160)

that were key to the white paper of bitcoin there is proof of work and then there's just

Vitalik Buterin (46:43.880)

the cryptography is just kind of public keys and signatures that are used to verify transactions

Vitalik Buterin (46:49.880)

those two are the big things so then what is the origin story maybe the human side but

Vitalik Buterin (46:56.120)

also the technical side of ethereum sure so i joined the bitcoin community in 2011 and

Vitalik Buterin (47:04.360)

i started by just writing i first wrote for this sort of online thing called bitcoin weekly

Vitalik Buterin (47:09.760)

then i started writing for bitcoin magazine um and uh sorry to interrupt you have this

Vitalik Buterin (47:16.500)

funny kind of uh story true or not is uh that you were disillusioned by the downsides of

Vitalik Buterin (47:24.440)

centralized control from your experience with wow world of warcraft is this true or you're

Vitalik Buterin (47:29.660)

just being witty uh i mean the event is true the fact that that's the reason i do decentralization

Vitalik Buterin (47:35.120)

is witty maybe just a small tangent do have you always had a skepticism of centralized

Vitalik Buterin (47:42.640)

control is that sort of degree yeah has that feeling evolved over time or has that just

Vitalik Buterin (47:49.600)

always been a core feeling that decentralized control is the future of a human society it's

Vitalik Buterin (47:55.760)

definitely been something that felt very attractive to me ever since i could have learned that

Vitalik Buterin (47:59.920)

such a thing is possible it's possible even yeah so great so you're you joined the bitcoin

Vitalik Buterin (48:05.440)

community in 2011 you said you began writing so what's next started writing uh moved from

Vitalik Buterin (48:12.800)

high school to university halfway in between that and spent a year in university then at

Vitalik Buterin (48:20.640)

the end of that year i dropped out to do bitcoin things full time and this was a combination

Vitalik Buterin (48:27.720)

of continuing to write bitcoin magazine but also increasingly work on software projects

Lex Fridman (48:33.360)

and i traveled around the world for about six months and just going to different bitcoin

Vitalik Buterin (48:37.760)

communities like i went to first in new hampshire then spain other european places israel and

Vitalik Buterin (48:44.520)

then san francisco and along the way i've met a lot of other people that are working

Vitalik Buterin (48:48.880)

on different bitcoin projects and when i was in israel there were some very smart teams

Vitalik Buterin (48:54.600)

there that were working on ideas that people were starting to kind of call bitcoin 2.0

Lex Fridman (49:00.880)

so one of these were colored coins which is basically saying that hey let's not just use

Vitalik Buterin (49:06.480)

the blockchain for bitcoin but let's also like kind of issue other kinds of assets on

Vitalik Buterin (49:10.080)

it and then there was a protocol called master coin that supported issuing assets but also

Vitalik Buterin (49:15.320)

supported many other things like financial contracts like domain name registration and

Vitalik Buterin (49:21.160)

a lot of different things together and i spent some time working with these teams and i quickly

Vitalik Buterin (49:30.920)

kind of realized that this master coin protocol could be improved by kind of generalizing

Vitalik Buterin (49:36.480)

it more right so the best the analogy i use is that the master coin protocol was like

Vitalik Buterin (49:40.480)

this swiss army knife you have 25 different transaction types for 25 different applications

Lex Fridman (49:46.880)

but what i realized is that you could replace a bunch of them with things that are more

Vitalik Buterin (49:52.040)

general purpose so one of them was that you could replace like three transaction types

Vitalik Buterin (49:57.960)

for three types of financial contracts with a generic transaction type for a financial

Vitalik Buterin (50:03.080)

contract that just lets you specify a mathematical formula for kind of who how much money each

Vitalik Buterin (50:08.640)

side gets by the way it's a small pause what's you say financial contract just the terminology

Lex Fridman (50:14.400)

what is the contract what's a financial contract so this is just generally an agreement where

Vitalik Buterin (50:21.960)

kind of either one or two parties kind of put collateral kind of in and then they depending

Vitalik Buterin (50:29.920)

on kind of certain conditions like this could involve prices of assets this could involve

Vitalik Buterin (50:35.360)

the actions of the two parties it could involve other things but they kind of get different

Vitalik Buterin (50:40.840)

amounts of of assets out that just depend on things that happened so a contract is really

Vitalik Buterin (50:46.640)

a financial contract is at the core it's the it's the core interactive element of a financial

Vitalik Buterin (50:52.920)

system yeah there's yeah there's many different kinds of financial contracts like there's

Vitalik Buterin (50:57.600)

things like options where you kind of give someone the right to buy a thing that you

Vitalik Buterin (51:02.000)

have for some specific price for some period of time there's uh contracts for difference

Vitalik Buterin (51:08.120)

where you basically are kind of making a bet that says like for every dollar this thing

Vitalik Buterin (51:13.520)

goes up i'll give you seven dollars or for every dollar that thing goes down you give

Vitalik Buterin (51:16.720)

me seven dollars or something like that and but the main idea that these contracts have

Vitalik Buterin (51:21.840)

to be enforced and trusted them yes exactly you have to trust that they will work out

Vitalik Buterin (51:27.600)

in a system where nobody can be trusted yes this is such a beautiful complicated system

Vitalik Buterin (51:34.000)

okay so uh so you were seeking to kind of generalize this basic uh framework of contracts

Vitalik Buterin (51:40.640)

um so what does that entail so what what technically are the steps to creating ethereum

Vitalik Buterin (51:48.320)

sure so i guess just to kind of continue a bit with this master coin story um so started

Vitalik Buterin (51:54.880)

by kind of giving ideas for how to generalize the thing and eventually um this turned into

Vitalik Buterin (52:00.720)

a much more kind of fully fledged proposal that just says hey how about you scrap all

Vitalik Buterin (52:04.800)

your futures and instead you just um put in this programming language and i gave this

Vitalik Buterin (52:09.920)

idea to them and their response was something like hey this is great but this seems complicated

Lex Fridman (52:16.640)

and it seems like something that we're not going to be able to put onto our roadmap for

Vitalik Buterin (52:19.920)

a while and my response to this was like wait do you not realize how revolutionary this

Vitalik Buterin (52:24.480)

is well i'll just go do it myself and then i what was the name of the programming language

Vitalik Buterin (52:29.840)

i just called it ultimate scripting great uh so then i kind of went through a couple

Lex Fridman (52:37.920)

more rounds of iteration and then the idea for a theorem itself started to form

Vitalik Buterin (52:43.520)

um and the idea here is that you just have a blockchain where the core unit of the thing

Vitalik Buterin (52:51.440)

is what we call contracts it's these kind of accounts that can hold assets um and like

Vitalik Buterin (52:57.600)

they have their own internal memory but that are controlled by a piece of code and so if

Vitalik Buterin (53:03.680)

i send some ether to a contract the only thing that can determine where that kind of ether

Vitalik Buterin (53:10.000)

the currency inside ethereum and it goes after that um is the code of that contract itself

Lex Fridman (53:16.800)

and so basically kind of sending assets to computer programs becomes this kind of paradigm

Vitalik Buterin (53:24.640)

for creating these sort of agreements self executing agreements self executing it's so

Vitalik Buterin (53:30.560)

cool that code is sort of part of this contract so that that's what's meant by smart contracts

Vitalik Buterin (53:36.480)

yeah so how hard was it to build this kind of thing harder than expected um and originally

Vitalik Buterin (53:43.040)

i actually thought that this would be a thing that i would kind of casually work on for a

Vitalik Buterin (53:47.200)

couple of months publish and then go back to university um then i released it and a bunch

Vitalik Buterin (53:55.200)

of people or i released the white paper the white paper the idea is there the idea the

Vitalik Buterin (53:59.200)

white paper um a whole bunch of people came in offering the help a huge number of people

Lex Fridman (54:03.840)

and have expressed interest and this was something i was totally not expecting and then i kind of

Vitalik Buterin (54:10.720)

realized that this would be something that's kind of much bigger than i had ever um thought

Vitalik Buterin (54:15.920)

that it would be and then we started on this kind of much longer development slog of making

Vitalik Buterin (54:23.280)

something that lives up to this sort of much higher level of expectations what are the some

Vitalik Buterin (54:28.800)

of the is it fundamentally like software engineering challenges it was their social

Vitalik Buterin (54:34.480)

okay so there's social so so what are the biggest interesting challenges that you've learned about

Lex Fridman (54:41.840)

human civilization and in in software engineering through this process

Lex Fridman (54:47.280)

so i guess one of the challenges for me is that like i'm one of the kind of apparently unusual

Vitalik Buterin (54:54.400)

geek schoolers and i've never treated with anything but kindness in school yes um and so

Vitalik Buterin (55:00.160)

when i got into crypto i kind of expected everyone would just kind of be the same kind

Vitalik Buterin (55:06.960)

of altruistic and nice in that same way um but the um kind of the algorithm that i used for

Vitalik Buterin (55:14.800)

finding cofounders for this thing was not very good it was sort of literally one computer

Vitalik Buterin (55:18.480)

scientist called the greedy algorithm it's sort of the first 15 people who replied back offering

Vitalik Buterin (55:23.440)

to help kind of are the cofounders oh you mean like literally the the the people that for will

Vitalik Buterin (55:29.200)

form to be the the founders cofounders of the community the algorithm i like how you call it

Vitalik Buterin (55:34.240)

the algorithm yeah um and so what happened was that uh these um like especially as the project

Vitalik Buterin (55:43.920)

got really big like there started to be a lot of this kind of infighting and there were a lot of

Vitalik Buterin (55:48.320)

like i wanted the thing to be a non profit and some of them wanted to be a for profit

Vitalik Buterin (55:53.280)

uh and then there started to be people who were just kind of totally unable to work with each

Vitalik Buterin (55:58.400)

other there were people that were kind of trying to get an advantage for themselves in a lot of

Vitalik Buterin (56:04.720)

different ways and this uh just about six months later led to this big governance crisis and then

Vitalik Buterin (56:12.320)

we kind of reshuffled leadership a bit and then uh the project kept on going then nine months

Vitalik Buterin (56:18.720)

later there was another governance crisis and then there was a third governance crisis and so

Vitalik Buterin (56:23.760)

is there a way to if you're looking at the human side of things is there a way to optimize this

Vitalik Buterin (56:30.000)

aspect of the cryptocurrency world it seems that there is uh from my perspective there's a lot of

Vitalik Buterin (56:36.080)

different characters and personalities and egos and like you said uh i don't know if you know i

Vitalik Buterin (56:43.520)

also like to think that most of the world most of the people in the world are well intentioned

Lex Fridman (56:50.080)

but the way those intentions are realized may perhaps come off as uh yeah as as negative like

Lex Fridman (56:56.640)

what uh is there is there a hopeful message here about creating a governance structure for

Vitalik Buterin (57:03.440)

cryptocurrency that uh where everyone gets along and after about four rounds of reshuffle like i

Vitalik Buterin (57:09.440)

think we've actually come up with something that seems to be pretty stable and happy um i think uh

Vitalik Buterin (57:18.960)

i mean i definitely do think that most people are well intentioned i just think that like one of the

Vitalik Buterin (57:25.600)

reasons why i like decentralization is just because there's like this thing about power

Vitalik Buterin (57:30.880)

where power attracts people with egos and so that just allows us a very small percentage of people

Vitalik Buterin (57:35.760)

to just ruin so many things you think ego has a you think ego has a use like is ego always bad

Vitalik Buterin (57:44.560)

it seems like sometimes does but then the ethereum research team i feel like we've found

Vitalik Buterin (57:50.160)

also kind of a lot like a lot of very good people that are just kind of primarily just interested

Vitalik Buterin (57:58.080)

in things for the technology and uh things seem to just generally be going quite well

Vitalik Buterin (58:06.720)

yeah when you're when the focus and the passion is in the tech so on the so that's the human side

Vitalik Buterin (58:11.360)

of things but the technology side like what have you learned what have been the biggest challenges

Vitalik Buterin (58:16.400)

of bringing ethereum to life on the technology side so i think first of all just uh you know

Vitalik Buterin (58:25.040)

there's like the first law of software development which is that when someone gives you a timetable

Vitalik Buterin (58:30.640)

i switch the unit of time to the next largest unit of time and add one and like we basically

Vitalik Buterin (58:35.600)

fell victim to that um and uh and so instead of taking like three months it ended up taking like

Vitalik Buterin (58:44.800)

20 months to watch the thing um and that was just i think underestimating the sheer technical

Vitalik Buterin (58:51.200)

complexity of the thing um there are research challenges like so for example one of the things

Vitalik Buterin (58:57.840)

that we've been saying from the start that we would do one is a switch from a proof of work

Vitalik Buterin (59:02.240)

to a proof of stake um where proof of stake is so this uh alternative consensus mechanism where

Vitalik Buterin (59:08.080)

instead of having to waste a lot of computing power on solving these mathematical puzzles

Vitalik Buterin (59:13.040)

that don't mean anything you kind of prove that you have access to coins inside of the system and

Lex Fridman (59:18.880)

this uh then it gives you some level of participation in the consensus can you

Vitalik Buterin (59:23.600)

maybe elaborate on that a little bit i understand the idea of proof of work

Vitalik Buterin (59:27.360)

um i know that a lot of people say that the idea of proof of stake is really appealing can you

Vitalik Buterin (59:32.320)

maybe linger on it longer explain what it is sure uh so basically the idea is like if i kind of lock

Vitalik Buterin (59:41.840)

up a hundred coins then i turn that into a kind of quote virtual miner and the system itself kind

Vitalik Buterin (59:49.680)

of automatically and randomly assigns that in a virtual miner the right to create blocks at

Vitalik Buterin (59:56.560)

particular intervals and then if someone else has 200 coins and they walk on the walk there's 200