Bankless Dialogue with Vitalik: Cryptocurrency Promotes the Redistribution of Human Society

Original authors: Bankless & Vitalik

Compiled by: Odaily Planet Daily 0xAyA

Editor's note: Bankless recorded a podcast with Vitalik at a recent conference, discussing topics related to ETH's independent ecosystem, new tracks, immortality, and the next bull market. Odaily Planet Daily has compiled it as follows and summarized the key points.

Key Points

• Excited about decentralized social tracks; both Farcaster and Lens are doing well.

• The great vision of ETH is to truly create an independent open tech stack.

• Building a user-friendly "slide" for new users is the holy grail of mass adoption.

• Crypto can facilitate the redistribution of wealth in human society, and ETH can exist as a system that promotes this distribution.

• Asia's contribution to crypto is becoming unprecedentedly large.

• The AA wallet track is somewhat saturated; optimistic about builders focusing on security, infrastructure, and enterprise-oriented stacks.

• The most important aspect of the next bull market is achieving a balance between yield and security.

Building a Fully Independent Ecosystem

B: DeFi has replaced traditional finance, stablecoins have replaced bank transfers, ENS domains have replaced Twitter usernames. How do you view the balance between improving existing things and starting new ones? Are we lacking in our development of new things?

V: Let me try to think more deeply about this question. There are indeed many very new things in the cryptocurrency space, but sometimes I feel that these new things are not imaginative enough in some respects.

We can see what has been done in this field over the past few years: for example, cool DeFi, I have traded various tokens on DEXs, but it still remains just a tool in the whole process, and this process still looks quite similar to before in many ways. Then there are NFTs, which are new; they are an extension, including art collectibles, game items, etc. — of course, each new concept brings something entirely new to this field.

So far, I feel that all these examples have one thing in common: they are all independent components designed to fit into an ecosystem that is the same as before. What we have not succeeded in doing is creating a completely new ecosystem where the various components complement each other differently, right? That’s one of the reasons I’m excited about decentralized social, the current situation is better than I expected. I used to be very worried that we would only have 892 cyberpunk-like crypto-anarchist geeks, but if you look at Farcaster, it’s actually very successful, and Lens is also performing well. Of course, what has happened with Twitter recently has also provided space for these alternatives to grow.

For example, Farcaster actually has a fairly cohesive community and has been around for quite a while, not just a few geeks coming in for a few weeks and then leaving. But I think the long-term future here lies in its ability to actually integrate with everything else we want to do. For instance, a social network needs to have some form of capability to counter false identities; you need to ensure that those 894 likes are from 894 real people, not bots. The problem is that all existing ways of doing these things are very centralized, which is very detrimental to privacy. Having more decentralized options to counter false identities, having more decentralized options to recover accounts, having more decentralized options to determine whether someone truly belongs to a community — these are all very important.

And these are all things that the crypto space itself can do, like we have addresses and ENS, which is just a very simple basic way to prove that you’ve spent at least $10 to post this. We have POAP, and we are also doing Zu Stamps. Zu Stamps are basically like POAP, but they relate to social recovery wallets, so many tools can connect in a serious way and really build on each other.

I think the great vision here is to truly create an independent open tech stack. Think about the traditional tech stack: you have phone numbers, you have Google, you have Twitter. I would say China has an independent tech stack: you have WeChat, you have Alipay, you have CBDC, which is the former, and crypto can go in the opposite direction — more decentralized conversations, right? The foundation is that you have your Ethereum account, you have various protocols, various POAPs, you have your reputation, and you have various recovery methods. And all of these can work together, right? I think another important part is to do "Hey, you can just remember one thing" in the crypto world.

But I think the holy grail is to try to create a "slide," so that when a newcomer joins for the first time, they can create an address — if your address is basically controlled by a Gmail account or something, right? But they can always choose a smart wallet, especially an ERC-4337 smart contract wallet, right? You can upgrade it, change the logic without changing the address. And it’s no longer supported by a Gmail account but might be supported by their own keys or possibly by multi-signature. Your email is supported by your Ethereum address, essentially giving people an intermediate opportunity, like a decentralized slide. Ultimately, really entering this completely independent stack, where all the different parts truly work together. So I think achieving this vision would be very cool. And I feel we really have the tools to do this, which didn’t even exist a year ago. That’s one of the things I’m excited about.

The Role of ETH in the Future

B: To summarize what you said, Ethereum in 2023 already has many tools, like Farcaster and Zupass. You mean these tools are ready, and we just need to combine them and put them into a new context. One thriving context I currently see is Desci. During Zuzalu in Montenegro — a week-long event focused on decentralized science and crypto-related technologies. This event attracted leaders from various industries and fields who shared knowledge and experiences in areas like artificial intelligence, synthetic biology, and longevity. And my biggest takeaway from this time is that all these things are related to cryptocurrency. So, by gathering knowledge from different industries and leaders in the field of synthetic biology, what new insights or changes do you have regarding Ethereum and its role in the world and future industries?

V: I think I’ve gone through an evolution from very abstract to very concrete over the past 10 years. If you think back to the initial vision of DAO in 2013, it was very vague, just that we could have these automated companies. And the logic inside these automated companies was completely unclear, and many things were ambiguous.

Today, the situation in the cryptocurrency field itself and in related fields is starting to become more concrete. I think the role this field plays has several different aspects, one of which is existing as an alternative system.

For example, if you want to save and spend money in a country where the currency has completely collapsed, or if you just want to save money under certain regimes in a way that won’t be arbitrarily taken away, rather than being deemed suspicious by some lowest random monitoring system and having your account frozen — this is a problem that exists in many specific industries, and I’m not even talking about any regulatory issues. I’m referring to areas that intermediaries like PayPal don’t like. This is a pretty large category, with many people primarily in emerging economies, but even in places like the U.S., there are many people who are unbanked or functionally unbanked in various ways. And they are not choosing to be without bank accounts voluntarily; it’s just that they find it hard to obtain a bank account.

I think the second aspect is as a laboratory for testing new mechanisms and ideas, which can be truly tested and deployed first within a community focused on these ideas, and then these ideas can permeate into the broader world in various ways. I think some of the DAO experiments we’ve done in this context are a great example, as well as the work done in areas like Farcaster and ZK space. So, as you mentioned, Zuzalu and Zupass are great examples of technologies we can experiment with within our own decentralized enthusiast community.

Then, some ideas will inevitably permeate into the broader world in various direct or indirect ways. They essentially set a demonstration or standard that a more open, neutral, decentralized, and more favorable world for local sovereignty is possible and create a prototype showing how to achieve that goal.

Public Goods is definitely a very concrete use case; it’s a very specific use case of decentralized governance, as it fundamentally deals with decentralized decision-making and decision-making mechanisms. But Public Goods has some specific characteristics that make it worth considering as a separate field. One example is that I think making radical decentralized decisions in Public Goods makes more sense, whereas in many other types of decentralized governance, such decisions may not be as applicable. This is because the problems are different; if you let a DAO decide whether to make a website round or square, and then you compromise and get a rounded square, that may not be a better choice because such compromises often lead to worse outcomes.

One might argue that for certain specific types of decisions, what we really want is for one person or a few people to make and execute decisions thoughtfully, and sticking to one vision is better than trying to awkwardly compromise. But in the case of Public Goods, I think this happens less frequently. For example, giving $10 million to 10 different projects is usually better than giving one project $100 million. Of course, there may be exceptions, like if you want to go to Mars, giving one person $1 billion is better than giving a hundred thousand people $1,000 each because if you choose the latter, none of them have any chance of achieving that goal. But overall, this is a problem that is better suited to this approach. In the design field, I think viewing it as a matter of creating more diverse funding mechanisms to reduce the chances of important things being completely overlooked might be the right way.

Because what we see is that while governments often exist as founders, they often do not act as unnecessarily as textbooks suggest, because the free market cannot accomplish this task alone. Just like in many cases, the government is also a rather irresponsible founder to some extent. Sometimes crises can motivate people to take action, which is a heroic act and a good thing.

However, basically, once the first batch of vaccines and other related things appeared, the situation changed a bit. People felt fatigued; they were tired of being forced to take various measures to cope with COVID-19, which is very understandable. This fatigue even turned into an absurd fatigue towards various institutions (like the SPE) continuing to invest resources to address the still-existing and still-important COVID issues, and there is even a huge funding gap in this regard.

What I refer to as entrepreneurial Public Goods, I categorize longevity and anti-aging into this category. The market excels at entrepreneurial goods, like those that require visionaries to build, most people won’t even realize how valuable it is until it’s created. If you have an entrepreneurial Public Good, like something whose value people only realize after it’s achieved or until it’s achieved, both the market and the government often overlook it. So the question is whether some innovations in the crypto space can help. So far, the biggest people filling this gap we’ve seen are basically billionaires, like Sergey Brin, Elon Musk, etc. But we also see that even so, there are still some things being overlooked, right? For example, Brian Johnson is known for his Blueprint plan, spending millions of dollars each year and dedicating his entire life to maintaining health and optimizing his body as much as possible. This is great for cutting-edge scientific experiments, but it also raises a very obvious question: is there a version applicable to ordinary people? Will we see the rich enjoy all this while ordinary people remain stuck at age 77? This might be where the crypto space can truly help.

If most people are not billionaires and they actually see the need for something like Blueprint, it doesn’t require sacrificing your entire livelihood, nor does it require trying to achieve it with unrealistic amounts of money every month. Then, you try to do community-building work to genuinely incentivize the community to build up. I think you could call it a Blueprint for everyone, truly executing it, conducting a large number of experiments on a large scale, so that your sample size is no longer n equals 1, but actually n equals 500. Doing everything in an open-source way and collectively pushing things forward as a community has tremendous value. I think the crypto space has many ethical touchpoints with this approach, like we’ve seen a lot of exciting things about this method.

But another thing the crypto space can offer is actually trying to use the different tools we have to make it work on a technical level, so clearly there are public goods funding and tools built for distributing capital — capital itself is being allocated in a more decentralized way. We have secondary funding distribution, we have retrospective public goods funding, and there are thousands of different tools; we might need to have these three tools in every industry. Then, all these different tools are used to determine whose contributions ultimately become very valuable, and trying to use on-chain contributions and citation graphs, etc. I think the crypto space itself is the most natural experimental subject, and the DeFi space seems to be the second most natural experimental subject, so I think there are many spiritual touchpoints here that have the opportunity to translate into actual touchpoints. In this case, I think part of the reason is to create an alternative system because the existing social public goods funding infrastructure does not serve many of these very interesting scientific projects.

But I think my long-term goal is also to set an example, just like you don’t just want a $1 billion crypto market, but you want to put trillions of dollars of world capital into truly important things, I will truly help scale these are some of the things I hope to see.

Entrepreneurial Ideas Beyond Crypto

B: We are now very focused on Desci, but also on many other areas like AI, synthetic biology, longevity, etc., which are all very interesting. If Vitalik, you had a copy of yourself who wanted to start a company in these fields, which field would attract your attention the most? Where would you start a company?

V: Interesting question, what would I do? Maybe I would want to do a bit of full-time work, like one of the things I might run off to do another me.

B: Simply put, the answer is like Network state.

V: I understand you’re referring to the broad concept of Network state, which can develop in many different directions. It relates to a specific set of ideas but is adjacent and can develop in many different directions. I think in many ways, it relates to community-driven design because it involves organizing communities to collectively explore cutting-edge technologies. I think that’s also one of the goals people hope the Network state can achieve. But at the same time, there are also those who believe that a lot can be done without having to create a new country and fully engage in geopolitics. So this concept has a lot of exploratory space.

I can also see my "clone" from a year or two ago, like I really separated out and tried to do decentralized social. But I’m glad that projects like Farcaster, Lens, and some others exist to try different versions of this concept, and they seem to be developing in a direction that is quite consistent with values.

There’s still a lot of room for improvement. Interestingly, I think someone can find their place in the ecosystem and get permission anywhere. For example, the Farcaster team focuses on predictions, but you can totally create your own company, make your own interface, and follow completely different principles. This is an opportunity that still exists for many people. There are other interesting problems in this field that need to be solved.

For instance, I feel that sometimes the Oracle problem doesn’t get enough attention, meaning we have Oracles, but it’s important to rigorously look for things that optimize for security rather than speed. As a DeFi practitioner, your job is not to provide users with a 5% return instead of a 3% return, but to minimize the chances of users getting a -100% return. Fortunately, this lesson is clearer now than it was 12 months ago, but I think it can be made even clearer. Another issue is that we can push the development of zero-knowledge technology with full force. This is also a field I would love to participate in in some way. In the biological field, I think it’s very important to create a Blueprint applicable to everyone, and I think someone should do that. Overall, I think there are many very interesting things to do in this field.

Expectations for Builders

B: So for Web3 builders, what do you think they can adjust their focus to in the current Ethereum and broader crypto space?

V: That’s a great question. The answer six months ago might have been AA wallets. But now things have become very interesting. Almost everyone will use AA wallets. I’ve been traveling in East Asia for the past month, and I’ve spoken with at least four, if not five, teams that are building some form of AA wallet. Interestingly, these new technological fields create a sense of disruption, right? If you come in as a newcomer, you suddenly are no longer 10 years behind everyone else. So you actually have the opportunity; I think ZK EVMs and ERC-4337 are actually enabling these newcomers to do well in participation.

I remember five years ago, East Asia was indeed doing well in exchanges and mining but contributed little in development and research. And now the situation has changed dramatically, which is interesting, right? Because when ordinary crypto Twitter users say "Asia is back," they are actually referring to millionaires going to buy their favorite Dogecoin or something. But I feel Asia is indeed back, and this level of engagement and technical involvement even exceeds anything I’ve seen before, I mean before COVID or any recent bubbles. I want to say there are many opportunities to get involved, so the question is, what do you want to do now? In this regard, I feel wallets have started to become saturated. A slightly less saturated area is security software; I’m starting to see some of that, and I think delving into this field and building tools that help users understand what they are doing when interacting with DeFi might be an option.

Another issue is building infrastructure to push the Ethereum Layer 1 ecosystem towards Layer 2. One example is Merkle proof validators, which essentially allow you to fully decentralize the validation of ENS names on Layer 2. But as I understand it, they are currently basically just validating signatures from centralized providers, but if you do Merkle proof validation, you can get rid of centralized providers, and due to off-chain calls, you actually don’t need to consume any gas, which is one example.

But I feel there are many other reasonable examples of built infrastructure. If we really want to push this ecosystem from being completely reliant on centralization to truly participating in Layer 2, a third example is enterprise-oriented stacks that encourage existing businesses doing centralized transactions to turn to build decentralized solutions. Expanding on that. Do you remember the period from 2014 to 2019 when everyone was excited about permissioned consortium chains, right? Do you remember that?

B: I remember that — IBM Hyperledger.

V: Exactly right. There are many such examples, but we failed. I personally think the reason people were interested and then failed is that they instinctively felt that in many applications, you want to strike some compromise between centralized and decentralized approaches. It’s like you want to adopt a decentralized approach because it enables trusted collaboration between different market participants, while the compromise on the other side, which is to do everything on-chain, actually completely undermines privacy, is not scalable, and requires people to completely rewrite their software, right?

What people want is the win-win compromise that consortium chains offer, but I think what we ended up with is a compromise that minimizes the interests of the vested parties, right? The reason is basically that you’re still building a blockchain, so you still have most of the overhead of building a blockchain. Then you also have a lot of community-building overhead, but due to centralization, it actually becomes even more difficult, right? I see a pattern happening over and over again where someone creates a consortium, and the first five members happily join the consortium and start collaborating, but the 6th to 20th members ultimately lose interest because they don’t want to join an ecosystem that feels dominated by the first five members, so there are many structural reasons explaining why this approach shouldn’t succeed.

But I think a method that can work is Validiums, right? Validiums are basically rollups that do not put data on-chain, or another way is centralized systems, but the hash of the database is put on-chain, and every time the database is updated, a new hash is put in, and zero-knowledge proofs are used to prove that the updates are valid. So you can use existing centralized systems and then just add an additional payment function for reading the database, hashing it, and understanding the execution logic for generating zero-knowledge proofs, and then uploading it to the chain.

In this way, you can prove that the database has only been updated in a valid way. This is just something that can run continuously on-chain; once these hashes and proofs are on-chain, individual users can interact with that program and obtain Merkle tree proofs of their current balance. You can do all these operations, basically saying this is a compromise between centralization and decentralization — it has the benefits of decentralization while maintaining efficiency, and you don’t have to pay gas fees for every transaction, nor do you have to tell your IT personnel to completely rebuild the system because you can keep the software and just run additional software alongside it. I think this is actually a 50% compromise that provides the advantages of both rather than the disadvantages. There’s already a weaker version that people are starting to use, which is proof of solvency, right? Just like proof of solvency is what I consider a semi-successful enterprise application case, through proof of solvency, you can publish that data on-chain to prove something about your database, namely that the amount of user balances you actually have does not exceed the amount in your wallet, so I think this is a starting point.

This can be applied in gaming, it can be applied to potential social media algorithm-type use cases, it can be applied in supply chain management. — In short, it can be applied in many different fields. I mean, supply chain management is interesting because if you have these records, there will be some financial aspects, like short-term loans, that can be directly associated with these records. So there are many interesting things to do, right? But the software stack to achieve all this is only now becoming possible because it relies entirely on zero-knowledge proofs.

So now we’ve reached a stage — ordinary developers can build things on ETH without needing to deeply understand what it is, and I think that’s something very valuable we are starting to build now. I think overall, new tracks like this emerge every six months, so there are many opportunities to get involved.

Views on the Next Bull Market

B: As we wrap up this conversation, I want to turn our attention to the present. I think in the past few months, people in the crypto world have readjusted their perspectives, starting with cleaning up the chaos of 2022, as I think this process has gone quite smoothly. We can believe that good things are about to happen, and now our focus shifts to what will happen next — everyone is cautiously anticipating the arrival of the bull market, but what are some things we hope the crypto world should not do or might need to pay attention to so that we can successfully navigate the next bull market? If the cycle theory is correct, and we experience another bull market, what should we strive to accomplish? As a community, as a culture, what should we do to ensure we don’t mess it up again?

V: For me, it’s important to find a balance between increasing security and decentralization, building an ecosystem that allows people to invest funds and receive returns, even if it’s just a 2% annual interest rate, but still feel comfortable that they won’t risk losing 1/50 of their funds in that year. I think this is achievable, but it requires a mindset that is completely different from that of pursuing maximum returns at all costs, thus requiring increased security for DeFi protocols, wallets, chains, and ecosystems. That’s one aspect. On the other hand, we need to achieve this in a way that doesn’t require giving up, meaning if you really want security, you almost have to deposit funds into Coinbase, or have all your activities protected. I think if we can achieve this, we will go further.