51 - 2020 Reflections on Crypto and Beyond | 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 i'm ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david we have vitalik on once again what topics do we cover yeah we cover three of his most recent blogs on his vitalik.ca blog these are all fantastic reads and in order to help

amplify vitalik's message and try and get out what he's trying to get out we go through each of these blog pieces together we start with his recap of 2020 and his forward-looking um kind of his forward-looking predictions into 2021 uh that blog was particularly interesting that's how we start the conversation we move into his blog post called an incomplete guide to rollups and he kind of helps us unpack what it is to be a roll up how we as an ethereum l2 scaling community landed on rollups as a construction and

why why they are so powerful and then we also get into the topic of a social recovery wallet so these are all relatively three different uh topics but i would say they are all forward-looking uh topics that vitalik sees as kind of like the logical conclusion of a lot of different forces um perhaps maybe a lot of them social a lot of them political in his first uh in his first blog post that we get into uh but then the second two are more technological and about the way that ethereum um the the landscape is going to manifest and mature over

time so again a wide ranging conversation but still with a lot of awesome through lines absolutely if you're listening on the podcast of course we have this on youtube as well where we actually go through the articles visually if you're watching this on youtube you can check it out on the podcast and get it directly into your ears make it more portable that way david we should just get right into the interview but before we do guys we want to talk about the sponsors that made this episode possible if you want to live a bankless life you need to get a

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we wanted to talk about three of the recent articles you put out and i think the the one to start with uh maybe the one you kind of bookmarked on the end of 2020 2020 was a a crazy year at least for me it did not start in the it did not go the way i had thought it would go and i think that's probably true for for a lot of people um so let's start with that article we're also going to talk about your roll-ups article and then social recovery after that but let's

talk about 2020. why was it such a strange year lots of things were strange it mean like first of all you know the virus was strange um then and politics in a lot of countries were strange um life moved onto the internet very quickly and that made things that were already strange even more strange uh so i mean first of all just a whole bunch of uh things that have happened at the

same time but also i think kind of in addition to some of the things that we saw that were in a fairly exclusive to 2020 it was also this year that i think really accelerated a lot of the trends that we've seen just already moving pretty quickly over the last couple of decades right so some of the more important ones that i talk about i mean one of them is just to the internet becoming this uh much more important and and of quickly primary force in our lives and i know

you had biology on your podcast earlier and he talked about like the primary and the mirror and this was kind of the flipping where the internet became the primary and i think like that was completely true but i also think it's important to like really think through some of the consequences of what that being true means right because for a long time you know people have talked about things like post-scarcity economics and of zero marginal costs um

you know what a world where most value is a virtual and most things people care about over or virtual actually means um but i think the effects actually are profound right and you don't i think kind of appropriately realize kind of just how much needs to be rethought um until you actually experience it um so and i've been i like i highlighted a couple of things like i yeah and i've talked about how

important public goods are on the internet for example i um talked about how um import um even just like the different ways in which uh economics applies uh so like basically the the the challenge with kind of online activity generally right is um that um like it's just much more difficult to formalize uh kind of things that are going on right like

because in the physical world like we've done this in a fairly um thorough job of kind of formalizing you know this is a transaction this is a trade this is private property this is me selling something this is you buying something but on the internet and if the lines are inherently much more blurry there's a lot of kind of complicated kind of psychology mixing into everything else and so it's very hard to even just mathematically model things that are

going on right like in say the traditional world i mean you can use things like the demand and supply curves and you can try to measure um you know who um like what the price of apples is how the price of apples will change if someone spins up a new farm or if an old farm shuts down um you know you even you know things like war you can you have things like lancaster's laws and you can try to measure like how much damage an army will take if it fights another army and in reality there's a lot of noise but like you know

there's things that you can try to kind of make um make mathematical models of uh but on the internet it's just this incredibly chaotic space right and whether or not some particular mess um tweet that someone makes gets 100 retweets or one million retweets that's something that often just completely cannot be predicted ahead of time right it's so this environment where you just don't really know and there's this really complex set of interactions

within this kind of primordial soup and like how do you even make say a mathematical model about like what bitcoin maximalists are going to do on twitter well okay i mean realistically you can just copy what they say at 12 months ago and then like maybe change like one or two words but uh the you know the the results of those uh intern of those interactions uh dude or just something that's like much more difficult to explain using tools that

worm optimized form explaining different things basically right and so that basically the one of the ideas that i wanted to kind of make is just that like understanding different kinds of mass psychology has become more important right like you know twitter runs on mass psychology political movements run on mass psychology uh bitcoin maximalism runs on mass psychology and ethereum maximalism runs on mass psychology um and these aren't really tools that have been

typically used to describe like say meat space economies um but like realistically if we want to understand like say you know which cryptocurrencies are going to going to be important 10 years from now like you just can't like the psychological tours are even more important than the economic tools in terms of just um understanding like what's actually going to happen there right and and so like basically i think it's just just realizing kind of the some the

relative importance of these different tools and how like we just need the different ways of uh understanding this kind of world where everyone is just uh so quickly interacting with everyone else and just the one action can have like extremely large consequences very quickly is just something that's very important metallic ryan started off this conversation uh asking about you know the he said that the trajectory of 2020 ended up being very far off from what he thought it was and this is uh something

i hear you echoing when you say like the the the calculation or the calculus behind predictions around mass psychology is all haywire at this point it's all it's all very different from what we expect at the same time i've heard other people give different attitudes about 2020 which is you know perhaps less that 2020 was a massive curveball and there was perhaps less of a pivot of humanity than what we thought but rather just an acceleration right right and i think that's i think that's the point i'm trying to make as well right like it's these

things were true well before 2020 it's just that 2020 was the year where we just like suddenly flipped the switch from being like you know maybe like let's say in 2018 we life was like say twenty percent in our internet and in 2019 it was 22 internet and then in 2020 it just like flipped over to being like 60 internet so there's definitely trends that were growing before all these things did exist before um but the fact that we saw this sudden shift

to the majority of a person's life experience um at least the part of a life experience that involves interacting with other people being behind the computer screen is something that's very significant what characteristics or dispositions or just traits would would you say would excel as a result of like the changes that we've seen in 2020 if who do you what types of people do you think are going to do really well in comparison to others

in this decade coming um and i think uh people who are not too stuck in existing ways of thinking um in institutions that were created um relatively yeah more recently um as opposed to as opposed to much older ones um people who just like generalists is another really important category um like i think you

know we saw this with even just you know the coronavirus for example right like you know if you're an excellent epidemiologist but you're terrible at understanding how human beings respond to messaging then you know you're going to have bad predictions if you're an expert at how um humans respond to messaging but you're but you know you're a terrible epidemiologist and you don't uh you don't have kind of the skills needed to just triangulate information from people who are good epidemiologists then you know

you're going to have bad predictions on the coronavirus and so the fact that we have these forces just all densely interacting with each other basically means that like there's a huge premium on and of being able to have your hand in pretty much all of them to always some extent um and there's definitely people who i think do that well and then it does get easier to see people who do that less well

yeah i think that that this was something that really shaped 2020 and comes comes out in your article that actually understanding the world in 2020 or actually like even predicting the future required very much of this interdisciplinary approach right like so um you talked about the idea of like there's econ economics and there's politics right but but there's also a blend which is this idea of a political economy and you talked about how in 2020 we saw governments acting much more like

market actors they were almost acting like like companies market like market force is getting involved in that direct way and and then you had on the up flip side corporations acting like like governments um and then i i think the same sort of applies in in crypto too it's really the multi-disciplinary thinker that understands this space and succeeds in this space um and you talked a little bit about crypto as a social system too why is it why is it so important i guess

to be a multi-disciplinary thinker in in thinking in predicting the world of 2020 as it gets more complicated and then why is that also important in in crypto is it just that all of these systems are so interrelated together that you have to think of them as a as a holistic system and you can't kind of like carve out the pieces right again crypto definitely is a social system and you know as one of our favorite quotes goes uh layer zero is people

you know look there is that layer and then there's also the layer of uh the economics and um you know things like how staking works um things um like uh you know like how the various dfi contraptions work and all of these things interact with each other right uh so this is also just another example where 2020 is more of a trend acceleration like you can i've been i've been trying to point out some of these things for a long time right so like one example of this as just collusion um so

like what in terms of um let's say can collusion break uh say proof of work mining right like from an economic analysis point of view we have answers right 51 can do whatever the hell they want and 33 can salvage money um but then there's this so that's basically about as far as economics can get you now then there's the question well let's suppose that the network is broken up into one pool that has nine percent one pool that has eight percent one pool that has seven percent one pool that has

uh you know six percent in one pool that has five percent and then a bunch of smaller pools so the top five pools get together make um they're going to make up 35 right now 35 is greater than 33 can those five pools together selfish mine well that actually depends on whether or not those five entities are able to work together uh and that is a question of uh like cultural issues much more than it is a question of economic issues right because so you know you have to answer

questions like well are like what is the internal structure of those pools um are those pool are those pools um owners uh friendly with each other um you know do they all go to the same bars are they in the same uh chat groups um are they all chinese or are they all american or are some of them chinese and some american and uh some from guatemala so the you know do they um all speak the same language do they have the same

political opinion on you know like some random meat space issue like you know you just like you have to start uh kind of think thinking about all of these um questions in order because they all just have an influence on whether or not those five pools actually can't get along um in order to make an attack and then of course there's a question of well like you know what are the moral values in the community and you know are any of those pools going to be morally averse to attacking are any

of the pools going to try to whistle blow if they get called up to participate in this collusion and and so issues about kind of morality and like just what people's ethical views are it actually starts to become very important when you start talking about coordination and so like basically there is some amounts that the economics can say and then there is this other amount like which usually you can kind of sum up to kind of which like which

actors actually are um only going to act as separate actors and which actors can work together and kind of approximate one larger actor and you have to just ask about all these cultural and social forces if you want to the answer to that second question and of course all these systems do interact with each other right right so like what you're saying vitalik is like you you can't economics doesn't measure all of these other things right it doesn't necessarily measure some of the social factors and you ask the question about like what actually motivates human

beings and it turns out that money is one motivator maybe it's even sort of a useful motivator because it's a common denominator type motivator but it's far from the only motivator of human behavior there are so many other motivators of human behavior i i liked a tweet that you put out recently uh something to the effect of even a billion dollars of capital can't compete with a project having a soul right so like that wasn't a tweet that was part of the article it was part of the

article okay so um like that is that that's kind of what you're saying is like there's actual tangible value in a project having a culture and a set of of beliefs can you get into that a little bit more so like what do you mean about why is it important to understand what motivates us in in order to understand crypto economic systems um so i think um the thing that's important to remember is that most like all open source ecosystems and

internet ecosystems more generally rely on a huge amount of free and uncompensated labor right there's many kinds of free and uncompensated labor right so like there's uh things um like um you know writing blogs and uh just i'm answering to people's posts when they ask for help on reddit or or in some discord chat there is um participating in github discussions um there's even just like

help educating people about you know whatever project you're in on twitter um there's uh running meetups um just answering other people's questions in meetups yeah that's how i got my start in this space absolutely there's uh writing code writing patches to other people's code there's just this really long list of behaviors and if you don't have uh people that are just doing those things because they

love the project then you know you're just going to have an extremely hard time right and i think like we see this with a lot of these you know vc chain projects like they often take this very proprietary route they're going to say you know no we're going to like lock um 50 professionals together in a room and pay them all like 500 000 a year and just they get them to build an awesome blockchain and an awesome client in six months and you know sure that can like build a software package but like that's not going to build an ecosystem right that's

not going to build all of these kind of things that go around the software that people don't even realize are important and if you build your thing that way then like eventually you're just gonna have to burn even more uh money trying to kind of pay people to do all of that as well um and so i mean you just if you treat uh building a product a software project purely as a like the way that a centralized company would

treat it then like you're just the leaking in efficiency pretty much everywhere right like you just you basically have to pay people to do all of this work um and like but that's work uh that um you know people like like under the right circumstances would actually just love doing right and like it's important to remember what their circumstance um what those circumstances are right like people do need to have like some a feeling that they're not being exploited a feeling

that they're participating in a system which is kind of good for them and good for other people good for other people as well uh and there are projects that are just like doing a uh um a good job of this right i mean even just things like air drops for example are one example of this right you just kind of like sprinkle a bunch of tokens basically for free to an entire community and you just swapped it this uh great and i thought that was a kind of great move to um

get this kind of community engagement uh so like you just basically as an uh open uh open source project like you just have to kind of make sure just create an environment where you know people are interested in participating people are willing to participate and and where you know people like in some sense feel like the community that they're contributing to belongs to them right and not just them

you know the company that's uh kind of theoretically most theoretically in charge of building the thing or i mean ideally that company doesn't even need to be in charge of uh like there doesn't need to be a single company in charge of the thing i think the the best and most salient example to back this up is like the absolute gargantuan amount of free marketing that both bitcoin and ethereum receive from their respective communities right bitcoin podcasts are just done for your purposes you know

financial purposes you know peter mccormack and his podcast is a very well financed podcast but he also has huge clout in the community and so do other all the other bitcoin podcasts and the ethereum media ecosystem which bank list is a part of is also like following in those footsteps like bankless eth the defiance like ethereum meters do media is doing really really well and i think one of the reasons why these public blockchains receive so much of so much you know tailwinds from all this free marketing is what you alluded

to it just a just now but b also in your article as neutrality bitcoin ethereum has neutrality maybe you could talk about how neutrality plays a role in people's um desires to commit their time and energy and human capital into these systems right so neutrality basically just to be or i i prefer even using the word credible neutrality uh what kind of emphasizes the social psychology aspect of it which is that it's not just about like convincing me that something is neutral it's about convincing each of us

that each other will i make and consider the system to be neutral and so it's something that i think lots of people can um get behind at the same time and and i think um that you know neutrality is just important basically and a big factor of it is just like people are willing to contribute but people don't want to feel like they're exploited and they don't want us to feel like all they're doing is to like just enrich some special interest

um another part of this is um that you know people wants to contribute to a system where they can feel kind of some degree of personal ownership over it um also just people would prefer to participate in a system where they have some guarantee that you know the system is not going to unfairly go against them in the future and and all of these things are just much easier to accomplish when you have a system that actually is neutral right like when

you know you have something like an open source project or a blockchain or is generally something that has kind of the rules set up in such a way that you actually can make some kind of case that it does treat everyone fairly and that's something that you know centralized systems just do end up failing at all the time right like when they make any kinds of uh just decisions about lots of things like you know it's just hard to figure out whether some decision

actually is a needed technical feature or whether it's just to like preserve the company's business model or something like that and and so like in like if you have a project where there is a this uh kind of centralized company that feels like it's controlling things and it's getting most of the benefit then you know you just lose the ability to kind of get get these other benefits i was thinking vitalik earlier used the term uh love right you said you know that you know people in order to tell others or volunteer

like answering questions or writing blog posts they have to really love the project right love and i i was just thinking to myself okay i know that there are people who love bitcoin right it's very easy to see bitcoin passion i know there are people who love ethereum i myself love ethereum there's elements of bitcoin i love too and i was trying to think like what do i love so much about it and definitely credible neutrality is is sort of part of it and even even more broadly than that for me it's about kind

of the the value system that i really identify with right so there's something about ethereum and to a lesser extent bitcoin that that i believe is net positive for the world right i think the thing that we're building with decentralized you know capital coordination human coordination tools is is going to reap the world my kids our grandkids future generations some net benefit i believe that the

world is skewed much more towards uh centralized you know systems and we need to kind of like balance the force at some level right it's this set of values that would honestly um like i would work for ethereum for free right like you know when it and book david and i we started off yeah you suppose started that way right and here's the thing is like you couldn't you couldn't pay me enough upside to invest in um some crypto projects out there like there's no amount of there's no amount of money you

could pay me to put a dime into tron like i just i don't care how much money i would make i just don't adhere to the value system so so what what is it about like um i guess how do you create a a culture like that what it's even sometimes hard to articulate exactly all of the values that that ethereum has but how important are values and and how do you foster that how do you uh create that in a community or does it just happen organically can you not

like you know create these things i don't know what are your thoughts here i think founders are important um and like the or the very early kind of influential members in a community are important like basically the way that the community is near the beginning like basically just kind of it sets um the focal point so like you know it just like it sets the standard for like this is a community of people who believe these things and if you're an outsider and you think you believe roughly those things then you know you

would feel um inclined and then if welcome to join the community and if you don't believe those things then you would feel inclined to go join other communities uh so i think once uh that kind of seed has been planted then like it's easier to maintain it though it does still take work to maintain it right like it is still possible i think for a community to just like drift over time into being something much less interesting um but um