Dialogue with Vitalik (Part 2): Responding to questions about the foundation selling coins, the development direction of Memecoins, and whether personal influence will be abused?

Editor: Colin Wu

This episode of the podcast is the second part of Colin Wu's conversation with Ethereum co-founder Vitalik Buterin, primarily discussing the following questions: How can Memecoins develop to be more meaningful? What should we do about the malicious use of cryptocurrencies and blockchain, as discussed in the PumpFun live streaming controversy? Responding to community concerns about the Ethereum Foundation selling coins and the utilization of Vitalik's personal influence.

The first part of Wu's conversation with Vitalik (I): Reminiscing about Ethereum's story in China, how the Russia-Ukraine war changed me, and reflections on BCH's large blocks.

It should be noted that Vitalik was interviewed in Chinese, which is not his native language, so some expressions may not be entirely accurate; we ask for readers' understanding. The audio record was generated by GPT, so there may be some errors. Please listen to the complete podcast.

小宇宙

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How can Memecoins be meaningful? Why has progress been slow?

Colin: Let's switch to a lighter topic. Recently, Memecoins have become quite popular. You previously suggested that Memecoins could be combined with some public utilities or charitable actions, but it seems we haven't seen many good examples so far; many still seem to be for hype or profit. Do you have any suggestions or thoughts on this?

Vitalik: One reason Memecoins are popular is that everyone is thinking about what the next application scenario for blockchain will be. In 2017, ICOs brought many new coin projects, and in 2020 and 2021, there was the NFT craze. Now, in 2024, it seems there are no new applications emerging. Generally speaking, there are two types of blockchain applications now: the first type is idealistic, doing some good things but often lacking profitability; the second type is highly profitable but lacks real significance.

I have always hoped for applications that combine both. This topic is very important because I personally lean towards idealism, but I also know that decentralized applications have long-standing issues.

I remember when I was in high school, there was a decentralized Facebook project that raised $200,000 but ultimately failed. What did this failure teach us? If you can't be profitable, you can't hire better technical teams, nor can you compete with centralized projects. The interesting thing about blockchain is that it can provide opportunities for decentralized developers to make money.

There may be opportunities to develop decentralized projects that can be profitable and have strong technical teams. However, so far, most blockchain applications, especially non-financial ones, seem to have not found such successful cases.

For example, projects like DDocs (a decentralized Google Docs) and Farcaster are not making much money at the moment. And it seems that the most profitable ones are Memecoins. So, I am thinking: if everyone is just gambling or entertaining, can we do something more meaningful in the process? Essentially, this is not necessarily bad, but it can be dangerous for some people, while for most, if it's fun, there's no problem. But if the only large-scale application in blockchain is this speculative Memecoin, then what significance does my participation as a core developer and researcher have? Why not engage in work related to AI or biosciences?

So I started to think about whether the concept of Memecoins could be combined with something more meaningful. In March of this year, I wrote an article on how to make Memecoins more meaningful, proposing three ideas:

First, can Memecoins be donated to charitable organizations?

Even if most users might lose money, can we allow low-income users to earn a little money through participation? I remember in 2021, Axie Infinity was very popular in countries like Vietnam and the Philippines because many people earned income from games through "Play to Earn," and they felt very happy.

Therefore, second, can we consciously enable people in low-income countries to earn money through participation in Memecoins? Is this valuable for them?

Third, I believe that gambling is not a meaningful goal; we should do something more fun, at least create more interesting games.

So, I proposed these three methods. However, so far, it seems that not much progress has been made. At most, some Memecoins will donate some money to me, and I will then donate that money to biosciences or other meaningful causes. If they give me money, I think it's fair because it means they believe I will do something beneficial according to public values.

Why haven't most teams done something more meaningful? I think it's because there are two relatively separate groups: the first group knows how to make Memecoins, and the second group focuses on idealism and charitable topics.

This is similar to the debate I mentioned earlier about small blocks versus large blocks: one team can do something that finds users but has no significance for humanity; another team does something meaningful but cannot be profitable. The ideal situation is for these two parts to combine, finding a large number of users while also being beneficial to humanity. I think this is a problem we have yet to solve but need to address.

PumpFun live streaming controversy: How to deal with blockchain being exploited by bad actors?

Colin: The next few questions may be of concern to the Chinese community. These might be the last few questions since time is running long, and you might be getting tired. The first question is about the recent vulgar live streaming on PumpFun that may have drawn attention. I don't know if you've noticed. Many people have raised questions, asking how a decentralized, censorship-resistant blockchain and network should respond to those doing bad things. For example, some people use cryptocurrencies for money laundering, extortion, or like the recent live streaming on PumpFun. How do you think we should respond to this situation? How do we balance decentralization with malicious behavior?

Vitalik: This question is very important. I believe that every field has different solutions. First, we can discuss this issue from the perspective of decentralized social media. I think the most important function of social media now is not merely to provide a platform for publishing content; in fact, the most important service is "ranking." Many platforms need to decide which content should be prioritized for you to see.

Now we can publish anything on the blockchain; on the Ethereum chain, you can post a transaction, write what you want to say, publish images, videos, etc. There is nothing wrong with these actions themselves. The problem arises when the platform's ranking algorithm tends to push some bad content to the forefront while good content is pushed to the back, making the platform potentially problematic. Many centralized platforms aim to increase "engagement," encouraging users to spend more time on the platform rather than providing high-quality information. This leads to videos like those on PumpFun being pushed to the front, even though most people dislike or do not want to watch them; due to high engagement, such content gets prioritized.

Therefore, many platforms have issues where their algorithms lead to erroneous and harmful content being displayed, while the high-quality information that users truly need is overlooked.

Of course, centralized platforms can solve these problems in certain ways, but using centralized methods to address these issues has its own flaws. If a platform intervenes based on its team's viewpoints, those who do not trust these viewpoints will consider the platform untrustworthy.

We saw this situation in the U.S. In 2020, many social platforms shut down accounts of Trump and others, leading many to lose trust in American social platforms. So I believe the ideal way is to develop a more decentralized, open algorithm that prioritizes content quality rather than merely the quantity of interactions.

Recently, I have often mentioned "Community Notes." If you use Twitter, you should know that if a tweet has many retweets and replies but its content is incorrect, Twitter will label it with "Community Notes" below, indicating that the information is wrong and providing relevant links to understand the correct situation. The algorithm for Community Notes is actually a relatively democratic algorithm; many participants can vote, and if the majority believes a piece of information is incorrect, it will be flagged.

This algorithm works well, and most people appreciate the results of Community Notes. Therefore, I have always hoped for more similar decentralized algorithms aimed at allowing users to see more correct, high-quality information.

But the PumpFun team clearly won't do this because they are entirely focused on finding users and increasing traffic, with no idealistic components. So the solution to this problem will not come from their side.

Regarding privacy issues, especially in cases like Tornado Cash, I believe that the lack of privacy protection on public chains is unsustainable. The absence of privacy will make it unacceptable for many individuals and companies. Because if you conduct transactions, others can see your entire transaction history, so privacy protection is very necessary.

For another issue—I have two viewpoints. First, I believe that governments having too much power and information is very dangerous. I come from Russia, so I am very aware of how the Russian government treats opposition figures.

The second viewpoint is that even if the government has access to information, this information can be hacked. For example, last year, a journalist from a U.S. intelligence agency discovered that many communication records were hacked, including databases that were also attacked. Almost all countries' databases could be vulnerable to hacking. Therefore, while some governments believe they can control this information, ultimately, this information may also be hacked, endangering the safety of ordinary citizens.

So, I support a solution that can protect privacy while balancing transparency. Platforms like Tornado Cash can provide certain transparency while protecting privacy. For instance, when users deposit cryptocurrencies on the platform, they can prove they are legitimate depositors without exposing their identities. But if the source of the deposit is illicit funds, such as money stolen from DeFi projects, users can also prove they are not the thieves.

I believe that only through this approach can we reduce large-scale illegal capital flows while protecting the privacy of ordinary users.

For early cypherpunks, they had a saying: "Privacy for the weak, transparency for the powerful." This means that ordinary people need privacy to protect themselves, while those in power, like national leaders or executives of large companies, should maintain transparency to society because their actions have significant impacts on society.

Zero-knowledge proof technology (ZK) is very useful here. Through ZK technology, we can find a balance between privacy and transparency. In the past, privacy protection projects were either completely private or completely public, while ZK technology allows us to flexibly choose what information to prove or expose. We can adjust the relationship between privacy and transparency according to our needs.

Currently, there are some second-generation privacy projects in development that can effectively address issues like DeFi hacks, and I am very optimistic about these projects.

Why does the Ethereum Foundation sell coins on-chain? Will it cause panic?

Colin: I saw you previously replied to a question on Twitter regarding why the Ethereum Foundation sells coins on-chain instead of through OTC. Some people believe this method may cause market panic. My understanding is that this is mainly to maintain transparency, right?

Vitalik: Yes, the Foundation does face some issues when doing these things. Sometimes, the expectations people have for the Foundation are conflicting. Some people want the Foundation to remain transparent and disclose all operations; others hope the Foundation will not publicly sell Ether; and some want the Foundation to have enough budget and even hope it can pay core developers higher salaries to avoid relying on selling coins for funding. These three expectations are actually difficult to satisfy; they form a contradictory triangle.

Moreover, many people misunderstand certain actions of the Foundation. A few days ago, an account from lookonchain posted a message saying that the Ethereum Foundation account sold over 5,000 Ether. However, this account is not one we control and is completely unrelated to us. In fact, this was money we paid to a developer a long time ago, and he transferred it to another account.

The 35,000 Ether we sold in August was actually completed through OTC channels. We handed these Ether over to OTC services from platforms like Kraken, so they could sell them over a longer period in a more cautious manner, avoiding a significant impact on the market. Therefore, we did not sell all 35,000 at once but processed them in batches through their OTC services.

We chose this method to maintain public transparency and also to show the public that our trading methods are more prudent and controllable.

Indeed, one of the problems we face is that although much information is public, there is a lack of a centralized place to display it. We released a transparency report before DevCon, detailing our specific funding usage. The report mentioned how our funds are allocated and the flow of funds in some of the Foundation's large accounts and other accounts. For example, we have a wallet for our Berlin office used to pay some developers' salaries and other expenses.

Although this information is public, it has not been well centralized in one place for display. This is also an area we are working to improve.

Now that we are aware of this, we are considering how to better address this issue. While increasing transparency, we must also acknowledge that fully meeting everyone's needs is very difficult. For example, the Foundation has a certain budget and needs to pay developers enough salaries to prevent other better-funded companies from poaching our researchers.

This is indeed a dilemma: to pay developers reasonable salaries while not selling too much Ether to raise funds is almost impossible. Therefore, the Foundation faces the challenge of continuously adjusting and meeting different requirements during the improvement process.

How to avoid personal influence being misused by project parties and others

Colin: Lastly, there's a question that in the Chinese community, everyone calls you "V God," which is quite a special title. Although you might not like being called that, some people may think that those who approach you or try to curry favor with you might gain certain benefits. What do you think about this phenomenon? Or do you think that those who have a good relationship with you might receive some benefits? (Although personally, I do not agree with this accusation from the community)

Vitalik: Recently, I have started to refuse more. Most of the time, I will decline those who want to take pictures with me. Five years ago, I started saying that I would no longer be an advisor for any token projects, and this year I also made it clear that I do not invest in tokens. If I want to support a certain field, I will do so through some organizations rather than doing it myself.

For example, if I want to support a certain field, some people will help me think about which projects in that field are worth supporting or what rules we can use to support these projects.

I think this is a natural transition from a small ecosystem to a larger one. When the Ethereum community was small, with few teams, it was very important to directly support each team. If a team is doing something valuable, it should be supported.

Additionally, I need to stay connected to the real world. I cannot become a scholar in an "ivory tower" who does not understand what is happening in the real world. But as the community grows, this becomes another issue. With more projects, everyone wants to discuss with me, and many people hope I will invest in their projects. So, in a small community, my task is to accept, but in a larger community, my task is to refuse. Therefore, in the past year or two, I have started to refuse to directly support certain projects more often.

Sometimes, if a project is quite good, I might support it a little, but I won't maintain a long-term relationship; instead, I will consider whether there are more neutral ways to expand this ecosystem.

However, there is also a balance issue here; I need to participate in this world. If I do not engage with any applications, I will become increasingly distant from our ecosystem. So, this balance needs to be adjusted, and indeed requires some adjustments.