149 - Ethereum in 2023 with Vitalik Buterin

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Ethereum in 2023. Best guest to talk about this Vitalik Buterin on the podcast today. We talk about what in the Ethereum application ecosystem, it's the title of this blog post, what excites Vitalik going into 2023? And a lot of optimism dropped in this episode that you got to stay tuned for. Before we get in, first a little bit of housekeeping for bankless listeners. We are revamping our sponsor strategy going into the next year, and we're going to be putting a focus more on the sponsors and the projects and the companies that are playing long term games in crypto. And so we're excited to be building out a strategic relationship with Kraken. The reason David and I like Kraken is because they're one of the few crypto exchanges that didn't rug us last year, right, David?

Yeah. They've also implemented proof of reserves before anyone ever asked them to. So they have been leading the frontier of centralized crypto exchanges that can use cryptography to check themselves. And so implementing proof of reserves before they were asked to just indicates that Jesse and the rest of the Kraken team are here to do good by crypto and to leverage the powers that make crypto awesome. So thank you, Kraken, for sponsoring this.

A few things to look out for in this episode, as always. Number one, why Vitalik thinks our villains are getting worse. Actually, worse. Every single cycle. This being the maybe the worst cycle of villains of all. Number two, why he plans to say Ethereum rather than crypto moving forward in 2023 to describe the industry instead of applications built on top of it. Number three, why he thinks simple DeFi good.

Complicated DeFi bad. There's a lot of nuance to that take that we get into. Number four, how he thinks Ethereum can actually solve the internet's big bad identity problem. How do you determine who are the bots and who are the humans? How do you keep identity decentralized? Vitalik's actually bullish. That Ethereum has a massive role to play there. And finally, his answer to the question what is Ethereum's most scalable use case? That's an answer, David. I don't think either you or I expect it. And you'll have to stay tuned for that in the episode as well. What should people pay attention to as we dive in here?

I think the big question that is the overarching theme about this episode is how

proliferated are some of the use cases that many, many people, and definitely us, talk about. For example, DAOs.

How much of a Cambrian explosion will there be with DAOs? How many DeFi apps are there actually going to be? Are there going to be as many DeFi apps as there are websites? Or are there just going to be a few DeFi apps? How many DAOs are there going to be? And this is one of the conversations that we start off this podcast with Fitalik. He gives the examples of Esperanto, a esoteric language that was meant to be a universal language for everyone to adopt that would help support global peace. And then also Linux, a fantastic technology with a medium amount of adoption in some specific cases, versus the internet, which is the most adopted piece of technology of all time. How much of crypto adoption will there be in contrast to these three anchor points? And what can we do to help make crypto be adopted as much as the internet and not be left to some esoteric hobbyist group who thinks the Esperanto language is cool? And so we talk about this frame of reference in the application layer, in the DAO layer, and the identity layer, and how Ethereum can really change the game and hopefully how we can move the needle in 2023 and look back on 2022 and take some of the lessons out of 2022 to make sure that we don't repeat them, Ryan.

Look, guys, every episode with Vitalik is muscless, and this is certainly no exception. And David, I'm excited to explore some of those topics with you in the debrief as well. That's the show we record after the show for our premium members. And uh in that, David, I think I want to talk to you about this idea of crypto maybe being a niche versus going mainstream, something like the internet. And also this theme that Vitalik kept coming back to in this episode, which was we actually have a role to play. Yes. We can make crypto bigger and better, and we can actually build towards a future where crypto is a technology adopted like the internet and not just some esoteric niche. So we'll be talking about that in the debrief too. Guys, we're going to get right to our episode with Vitalik.

Bankless Nation, Vitalik Buterin, is on the podcast today. Vitalik is your friendly neighborhood Ethereum developer. He's an elf alpha male who thinks we should rename gas to mana. I didn't know that, actually. Vitalik, welcome back to Bankless. How are you doing?

Thank you so much, guys. It's great to be here.

Vitalik, 2022 has been an absolutely crazy year. Disaster.

Tris.

Yeah. And like the industry is hurting, the community is feeling a lot of pain. Maybe just to kick this thing off, can you just give your thoughts and reflections on this? Like, was this unexpected? What's your assessment of the crypto community after this crazy year we've had?

Twenty twenty-two has been uh I think a complicated year, right? I think uh a lot of people are remembering the year for all of the uh terrible stuff that's uh happened and uh within the crypto space for a all of the uh multi billion dollar blow ups. But I think it's uh also important to remember all of the various positives that the uh crypto space has seen, right? Um so

um

The merge, I think, is uh the most recent one, but the big one, right? This is something that uh the Ethereum has been uh waiting for pretty much since its inception, right? And it's been uh delayed and complexified and turn out to be more complex than we thought, and uh lots of things have happened, but you know, now finally, um as of uh September 15th, I think it was uh 0645 uh UTC, um, you know, we uh actually have a proof of stake chain, right? And uh, you know, doesn't it just like feel good to be able to say, like, you know, not Ethereum is going to reduce its energy consumption by 99.9%, but Ethereum has reduced its energy consumption by 99.9%, right? Like uh we're literally talking about going from

a level of electricity consumption similar to the entire country of Austria to a level of uh electricity consumption similar to the entire country of uh I don't know, maybe San Marino, maybe Vatican, like one of those.

Right? Uh so

Huge success also from the uh just protocol security point of view. Um, even a huge success from the usability point of view, right? So like a lot of people

don't realize this, but the merge was actually a uh transaction inclusion time decrease, right? And this happened for a couple of reasons. One of those reasons is actually the easier one to understand, which is that blocks have thousands of attestations that are coming on top of them, and so you have thousands of confirmations happening in parallel. And what that basically means is that a few seconds after one single block comes, you have the equivalent of what would in proof of work lanes be considered hundreds of confirmations, right? And

The most recent forks block was six days ago. In the proof-of-work era, there would be multiple of these every hour, right? So that's the first reason.

The second reason is that because uh block times now are instead of being this like very random plus on distribution thing where uh you know what sometimes you have a block every uh two seconds, sometimes you have a block only after a minute, here we have a block in a nice regular pattern of 12 seconds. And what this means is that on average, you only have to wait six seconds for a uh transaction to get included, right? Now, this all sounds theoretical, but just from my own very practical experience, like my experience using Ethereum has just improved massively. It's like you know, night and day compared to let's say, yeah, you know, July 2020 before um all of this stuff and before EAP 1559 happens, right? Like

These days, when I send a transaction, I click send, I wait a couple of seconds, and then I see, oh, that transaction got included into one block and it already has one confirmation. Like it's not quite competitive with um, you know, Web2, oh my god, let's pay $35 million, so the latency is 184 milliseconds instead of 212 milliseconds as standards, but

it's like already good enough to be competitive with, say, credit card point of sale systems, right? And

That's something that I think is uh really important to appreciate. Like there's been just this massive increase in the usability of the base Ethereum chain that's happened pretty much under our noses. And uh EAP1559 was the first half of this, the merge was the second half of this, and

the third half of this, of course, is gonna be roll ups that have uh pre confirmations, which is coming next year. And uh later on we'll talk about how I think uh 2023 is going to be the year of uh roll ups actually uh hitting stage one of trustlessness, which will mean that Ethereum actually finally is in its scalable era, right? But before that, so

The merge happened and the uh

merge was amazing. Um 2022 was also the year of ZKEVMs, right? So

five years ago, the zeitgeist basically was uh that oh there is this fancy thing called ZK Synark technology, and like maybe theoretically it could make abstract proofs and you can turn things into polynomials and like put stuff on top of stuff and maybe eventually verify uh an Ethereum block, but like come on, it's so high overhead that's gonna take like literally four weeks to make a proof and uh f four years to actually audit uh the code to.

Do any of that, right? Um, but fast forward to 2022, and we have multiple ZK EVM implementations that are all promising some kind of mainnet launch next year. Like, this is amazing, right? Like ZK EVMs have just gone from being a non existent pipe dream to being the, I think, queer and manifest uh long term and uh possibly even medium term uh future of scaling Ethereum. Right? So that's number two. Then, you know, on the adoption front, right, uh sign in with Ethereum has seen massive uh

Mino gains in adoption. Um Ethereum, I think, I was in a great position to take advantage of uh people's desire to explore the various alternative Twitters, alternative social media platforms, right? So uh Farcaster sign into that with an Ethereum account, Lens sign into that with an Ethereum account, and I've used uh MinoFarcaster and uh Lens, and uh they're actually great.

Um, fast forwarding to earlier in the year, I feel like,

you know,

a lot of crypto people have forgotten about this, but it's still super important to remember the uh invasion of Ukraine in February, right? Which is uh definitely an uh extremely tragic event overall. But the part of it that is uh I think quite happy is um obviously that they succeeded uh in uh defending themselves far beyond most people's expectations, but I think uh

Cryptocurrency payments actually worked for them when nothing else worked. And uh you know, they've actually uh starting from that very first tweet that uh the country's official Twitter account uh you know made on the

the morning or the day after the uh invasion, uh you know, cryptocurrency actually uh has been a lifeline for the country, a lifeline for a lot of civilians and the people, right? And and

You know, that that's just like one example. And then, you know, you have all these various small examples, like uh, you know, continuing adoption happening in places like Latin America, for example. You know, I came to Argentina last year, I came to Argentina this year, and uh

the level of sophistication has improved uh by uh

a lot, right? And uh you know, one of the things I saw, for example, is uh when I uh

Visited just uh recently. There was a group, I forgot their name, I think it was called either DeFi Latiam or something uh vaguely uh called like this, right? But this was a uh just a really lovely person from Venezuela, and he was basically saying, like, hey, you know, the FTX uh situation is um you know helps me realize that

DeFi actually is important, and like I want to help uh Latin Americans um, you know, who need crypto actually interact with crypto in ways that are decentralized and that uh involve self custody. And um, you know, this uh person actually knew a huge amount about uh you know layer two protocols, a huge amount about uh

You know, different forms of self-custody and all of these things. So

all of those things are continuing to move forward. Cryptocurrency is continuing to get used for philanthropy a lot. Last year was the year of um, you know, Crypto Relief India getting its money, but um, you know, this year Crypto Relief India continued spending some of its money. Um, also Bulvi, it's this uh group that I helped uh spin up that used some of the money to uh put money into these more.

More experimental, but potentially much more high payoff options in terms of protecting people now and in the future against viruses. And that's funded amazing stuff like UV lamps, open source vaccine projects, and uh a whole bunch of things. And like

cryptocurrency as a uh

international payment instrument for philanthropy has just been huge there, right? So

I think it's important to just remember uh 2022, both uh not just for the uh massive uh failures, but also for all the uh amazing technological and adoption backdrops that we've had. And I I think even the first inklings of cryptocurrency and dev Washing's spaces ability to like actually have very significant positive impacts on the world.

Um but

you know, that's the year. So

Well, Vitalik, thank you so much for coming into this with your optimist hat on and just reminding us that sometimes the bad definitely drowns out the good. As someone who's been through multiple market cycles, like every single market cycle has the bad year, right? The down year, right? 2018 was my first one. There was one prior to that. Is 2022 unusual in any respects? Or is this kind of par for the course of like, yeah, this is what happens at the latter half of a bull market. We have a lot of bad stuff, but meanwhile, there is relentless adoption regardless, no matter what year it is. Is twenty twenty two unusual for you in contrast to other years of crypto?

I'm trying to compare 2022 against the uh kind of

Early to mid bear market periods of the previous cycles, right? Actually, if you want to show people visuals, one great visual to show right now is uh the Bitcoin price from uh 2011 to now. Bitcoin just because Ethereum unfortunately didn't exist in 2011. Um but if you look at that, right, you know, you see kind of the great cycles, right? And uh you know, you have 2011,

um, and then uh the really big one at the end of 2013, and then the even bigger one in 2017, and then the uh and a super big one in 2021.

Right, and

there we go. Um

wow. See the very first one at the left, it's like so low that we don't even notice it, right? Like if you just click the log button, wow. And so

the 2015, right? So if you go down that flat part after the first uh peak, that's when Ethereum launched.

Right.

So

then 2018, uh that's uh the uh flat and the kind of cup and handle after the second uh