Vitalik on BTC's shrinking security budget “You can't make crazy assumptions about security models"

we will have an opportunity to take some questions after this and we'll come to you after that I just wanted to thank each global first for inviting me to have this conversation with Vitalik this is an honor to be at eath Waterloo so yeah let's get started so it's been two years since the first eath Waterloo at the time crypto was approaching the peak of a bubble which later burst a theorem had really a front-row seat in this roller coaster and it's come a long way since then so Oh first everyone can hear me right ok ok so going back to that time in 2017 it seemed like I SEOs were probably the main use case for for etherium obviously regulators came and crack down on that market are you disappointed that happened or maybe relieved I mean I guess there is like two ways to interpret that question one is am I happy that then that the amount of attention is decreased in general and the other is am I happy with the way in which the regulatory crackdown proceeded I'm definitely more positive on the first in the second like so like one negative consequence of say the way that the regulatory crackdown proceeded for example is that it gave people the idea that doing in ICO is not okay doing a private sale and launching a VC coin and getting a bunch of rich people in the ground-floor and then doing some work one one and a half for one and a half years and then watching a [ __ ] coin and having retail investors buy the [ __ ] coin at 100x higher valuation is illegal and so people do the second thing instead are the first independents quite possibly even more exploitative so like this is one example of a thing I'm not happy about but I mean the fact that kind of ICO is in that particular format in general or NIC much less of a focus now is definitely something that makes me super happy basically I mean I think first of all it's like icos the mechanism are even though they're theoretically for launching decentralized projects and they're accepting decentralized cryptocurrencies they're really kind of out of touch with the spirit of what ball chains are about is like block chains are in among other things they're about decentralization and trust minimization and in ICO basically says hi I am a centralized King you should give me 100 million dollars because you trust me and I will build this crypto project and I will make it great so it is like philosophically it's not aligned at all you might remember at the beginning of 2018 release to this introducing diem instead of racing into directly into the creator's wallet you would race into a smart contract that would release the funds over time and then more recently there is this post on research called public interest projects and there's our tie which as far as I can understand is basically the same thing that also does another spin on that so kind of contribute money over time and use smart contracts instead of contributing money all at once and I think like trying to use the tools that the crypto space provides us to try to solve Nick the real like incentive problems within the crypto space is something that's much more my own and I'm definitely happy that there's more people kind of thinking about that and there is less people doing the hey guys I'm I'm a centralized can't give me a hundred million dollars and trust me sort of thing and I hope we continue not seeing watch over the first and we see more of the second so maybe this face kind of my turn to realizing crowdfunding is not a bad thing on etherium it just needs to be more aligned with kind of the ethos of the network great and also going going back to to that time you were very vocal about how you know there wasn't much actual value being created to justify the super high valuations with ease now below two hundred dollars Bitcoin below 10,000 and the whole space at around 240 billion do you think that's still the case I I definitely think that the amount of concrete value produced by the space has really improved a lot over the last few years a few years ago I think people's expectations we're definitely getting far ahead of the reality and now on the one hand the hype is lower but on the other hands the reality is better and and I think that's good on both fronts and I think we've made a lot of progress and and there's a lot of things that are have been and are being built over those last few years like whether we talk about scalability improvements user interface improvements and if progress to word proof of sneek progress on all day these defy Firenze progress on these other applications then I think this base is considerably closer to creating a lot of real value now and I'm looking forward someone in it starts doing that on a much larger scale would you go as far to say that maybe the space or just each specifically is undervalued at this point no comment [Laughter] you know I'll argue that in the in the past few years much of this value has been created by defy finance or open finance you know it's the some group of financial services that are being created on top of cerium and you know some people have argued that III would be successful even if it's just kind of a financial chain what's your view on that I mean is is defined maybe kind of the last wave of aetherium applications you know I definitely hope not because I mean in terms of like what I as a person care about definitely be sad if kind of finance was the end of it though I mean at the same time like aetherium is an ecosystem and I'm like supposed to be not the dictator so you it doesn't like perfectly reflect my values that I'm not supposed to be allowed to complain but like there's definitely a lot of value that's come that can come out of creating and doing and a really good job of making me not just payments but also there are different financial tools like insurance smart contracts and kind of this whole suite of things available to the entire world it definitely seems like aetherium has been making a lot of headway there and I also exceed why Finance has been the kind of initial application that people focus on like it's and both the one that brings in it brings in money in the short term and it's also one where like finances the one sector we are existing centralized solutions are the most terrible like sending emails from country to country is trivial but sending money from country to country is still something that takes a significant amount of effort whereas if you just do it over a cryptocurrencies I give you an address over any of these messengers and then you said you send money and it's done and it's like much simpler so like I see the value of behind the you know the the defy wave and I'm happier to see a lot of people building all of these things I mean I'm obviously wants to kind of repeat my caveat about like guys remember that these smart contracts might have bugs and guys remember that half of these things are running with Oracle's that fall far short of my and probably your standards of what constitutes adequate decentralization and we needs to kind of work harder and keep improving but assuming that gets solved over time I definitely think it's great and going beyond finance I definitely think there's a lot of things that other things that block chains can do like I view block chains more generally as being this kind of economic substrate for mechanism design and that includes lots of things it includes incentives it include storing information it includes keeping track of like public keys like data that you that users have published things like ENS things like just using aetherium as a as an identity layer and I saw there's some recent projects like doing the whole kind of sign-in with aetherium thing and that's actually something that I think is like I it's not like super 50 million dollar glamorous but it's like the reason I'm interested in it is because like so first of all who here has been sim swaps a bunch of people right and so like one like a common kind of belief that people have in the back of their minds is that like decentralized systems are generally useful in contexts that require like censorship resistance or like evading powerful governments and these things because centralized systems are generally more efficient and better for normal people's use cases but in reality the whole cell phone sim swapping thing and just generally identity it's like a great example of why that's not the case so like basically you know just any Rando and go and just socially engineer one of these telephone companies and get them to just turn over control of your account anything that you and we started over the last ten years have creeped into using cell phone numbers as a centralized identity system and so if you capture someone's cell phone then you capture their identity you can capture pretty much any online accounts where they use their phone number as a backup and it's like all very terrible and so here's the key just want to finish the case for you centralizing the thing right so another one of the things that I've been like actively pushing for if like said this has pretty much every kind conference' smart smart contract wallets so things like social key recovery multi SIG's like going beyond kind of like one key being the thing that defines your ownership of assets and my theory is that like these kinds of techniques have to exist in a decentralized cryptocurrency land because this is this kind of hostile trial-by-fire environments where there's huge incentives to steal people's money there is huge losses if your money gets stolen huge losses if your money so lost and so if we make solutions that are good enough for this environment then we can also kind of export these solutions and make them useful just as accounts for logging into other things and now we have kind of crypto based and if I killed management as a base layer and you start building things on top of that and now you've started kind of recreating more of this more of the stack on a decentralized base I've talked for enough so I guess do you think kind of the next wave of aetherium innovation or applications will be kind of identity linked to to privacy applications hmm I don't think there will be one next dominating wave I think it'll be many waves right okay and then wanted to touch on something else you mentioned at a conference which is you know this question of whether ethers money you said ethers money if the community wants it to be so what's your opinion on that do you want easy to be money and if you do if you do how good do you think eath is at being money so in you'd Kowski and rational west culture which is my religion there are these there's there is this like I know the thing that you're supposed to do which is kind of taboo in your words right so when people have a disagreement about whether or not X is a y like try and people and ugh it seems intractable like try to it's figure out your disagreement without using the word Y because chances are a lot of the time what happens is that people don't actually disagree on substance they just like have different ideas on what this word is and money is this funny word that lots of people have different meanings for so like okay who here thinks that money and currency are synonyms who here thinks that money and currency are not synonyms okay I saw every I hands race for both looks so we can't even agree on that right so like clearly the is eath money question me very well like not even points to any kind of substantive disagreement effect so like what can it be used for and can it be used for as a way of holding of holding value and sending that value between people yes in the etherion foundation has even years that used if that Williams or in only four years value with inspired contracts yes that's a way of paying for transaction fees yes is something that I recommend as a replacement for US dollars next year even ten years from now I'll probably no it depends on kind of what your objective is here okay and then going to an another topic to developer experience two years ago it was a lot harder to build something on Ani theorem over a weekend like all of these people here are going to do in the next two days how do you how do you think a developer experience compares this year with with 2017 I definitely think in a lot of things have gotten better like first of all just a lot of the different tools that people have been using have improved more and more more over time unlike development environments like even just the ability to access the block access to block Sheen and run a full node efficiently has gotten better documentation has gotten better compilers have gotten better things that you can integrate with I'm Yoona swap now exists and lots of applications plug-in to eunice wobbly more mature so a deaf formal verification infrastructure is another big one that's made significant strides zero knowledge proof infrastructures so there's definitely a lot of infrastructure that exists now and a lot of things that have gotten easier now that we're not there in and also just kind of knowledge inside people's heads in the community so and I definitely think there's been a lot of progress so what do you think is missing like what are the big pieces what are the big pieces so this is the sort of question that where my answers have been kind of the same for about five years and we have been get we have been making a lot of progress though right so one is scalability make transactions are too expensive and now you know we have the the the new cool thing is roll-ups apparently and then of course that's a new the short term you cool thing in the medium term cool thing is sharding and those are made huge progress another one is just a collegian see of transactions and this is just for you for user experience reasons like when I send a transaction it should be in ideally in Bitcoin was like 10 minutes to an hour than etherium got that down to like a couple of minutes but like block time is 12 seconds but because of like fee markets weirdness you most of the time people set their fees low and they often have to wait wait longer and I'm hoping like EAP 1559 can fix that and get most transactions included in the next block proof of stake I'm just we're kind of providing more consistent block times also with the way that cat like LMT ghost provides basic 100 confirmations in parallel so with eath 2.0 we get no more confirmation sooner that'll solve some other more you access years privacy I mean snark based stuff needs to continue to get better I think we just need like more incremental improvements on things like improving time for example so that's signing a transaction or generating a zero knowledge proof can be can be just a little bit faster I'm also better developer tools for privacy-preserving anything security and kind of more user-friendly form of irrigation infrastructure is always go ahead so all of those things put together like it's really your hand if a bunch of these incremental so logs where I gif we make a lot of progress on each of them I think will do a great job okay and then speaking of things missing I think going back to what early 2017 some people like then maybe would have expect that serenity would have lodged by now what do you say to those critics who you know criticize etherium for for not having lunch if 2.0 yet considering you know some vid cleaners use that as an excuse to say it is a scam and yeah I mean I guess like first of all means yes like I definitely was over optimistic about the timing of eath - you know at the same time like a thing I've said is that the property is that easy to like has continued to get better and better and like every time we make an action that looks like over going back to the drawing board that happens it looks a less and less drawing board iam so like the most recent thing the switch from thousand and twenty four shards with cross-linking every epoch 264 shards with cross waking every SWAT substantial reorganization of how charting works but it doesn't really smell down developments it actually like it's a really substantial simplification and enabled a bunch of things that we thought we would not be able to have before and we've continued to have all these improvements of that type and so but you poi know final products that is definitely much better than the eath 2.0 that I was saying four years ago we would have two years so you know there's there's the bad but also but also the good in general like there's proof of steak house test net saying we're gonna get much larger public yes that's what gets across client test that's we're gonna get to launch a phase zero and I got some points I think the critics are just going to have to kind of face reality and they're like look guys there is a proof of stake chain it's running and it's the other thing is not a scam yeah you know I think it'll definitely make me very happy to see that day and like who knows maybe five years from now even Bitcoin will be looking at perverse take a little more favourably ya know that's an interesting point I don't know if you when I expand more on that is a little bit of topic but yeah considering kind of I mean between switching to proof of stake it's an interesting notion oh yes yes yeah I love these I mean okay so yeah go into like joyful heretic mode so I guess like the challenge is right that like there's this kind of looming elephant in the room over I mean a lot of different cryptocurrencies that kind of committed to a cap - ooh and schedule and the like really committed to this idea that issuance is evil and we must have a hard cap and because a hard cap is the Austrian way and we must take a strong stance that we are not like those hyperinflation estat gold bugs and the but the problem is that like you need to pay miners for security and the story has always been what we'll use transaction fees for this right but if you look at reality right so right now like in think in Bitcoin for example last time I checked it was about the the daily block reward was about seven million dollars the daily transaction fees were about 140,000 that's about a factor of 50 difference in etherium the block reward is about tooie from the transaction fees are about somewhere between like 0.03 and 0.

28 depending on like which day it is and whether or not some fair winner some other crazy application is burning a million dollars in fees because of bad mechanics or whatever but in general there seems to be this kind of a bed factor of 50 difference between issue and cynthia's and it's not at all clear that he is are going to be able to kinda like wait basically it's not at all clear that ball chains are gonna get to him to be secure when issuance is 50 times over that or once this the the the amount going to security providers or miners or sneakers is 50 times so lower than it is now and like I do think that proof of stake does better than proof of work with lower security budgets but even with proof of stake like I'm not confident that etherium would prove a stake with zero issuance is something that it is guaranteed to be able to survive example which is why even past proof of steak like we're decreasing the issuance heavily but there is still some issuance so the I mean one of the common replies to this of course is like Oh cryptocurrencies are obviously going to be a hundred times bigger in ten years since and that'll cancel things out but number one you're not allowed to make crazy super optimistic assumptions if you're gonna argue that about the security of a system that protects people's life savings and number two that's not even a correct argument because if a system gets 50 times bigger then ensure the security budget becomes 50 times bigger but the size of the attackers who care about breaking it becomes 50 times bigger so I think the relative actually matters more than the absolute and that's an area where kind of the people that focus on the absolute being canceled out by growth of the ecosystem are just wrong so like my view on so I think Rufus inch proof of stake is important and it doesn't even have to be foolproof sake it could even be hybrid proof of stake is a good way of just getting more security with kind of a lower much much lower rewards and issuance which i think is like important especially for PF people kind of value these things like having having low issuance or potentially even zero issuance and so forth but then also I mean like my own views on my monetary policy for example like this is some look this is the question where people ask like why doesn't a theorem do a hard cap or why doesn't a theory I'm like you mid to a specific schedule or like something like this and I remember there was a panel at Edie Khan in mathilde and Sydney six months ago where like this was this kind of controversial issues panel at them at the conference and I asked a bunch of theory em community members do you guys support a hard cap in the answer I got was universally no and the reason why is basically because like people seem to and have appreciate a more kind of pragmatic up and one that basically says that like instead of optimizing for predictability of issuance we're gonna optimize for predictability of security because the platform's surviving is the most important thing and if the platform doesn't survive we're all screwed anyway so predictability of security is really important and the problem is that right that like we don't we don't know the ratio of security of security like that's just a variable that the real world has and what we don't we we might learn things about at five or ten or twenty years from now so if we have to choose between like stabilizing issuance and stabilizing security and we want to stabilize security that does mean that there is going to be kind of some people would like but like that's something that like to like a lot of Bitcoin people for example as but a lot of people I've talked to I just seem seem fine with it okay maybe theorem will prove to be a good example of proof of stake for eight corners to look at it and see how it works maybe you go coffee it sounded line yeah I mean it's not just about Bitcoin to be clear like I hope like coin adopts prefer stake as well I mean I hope pick when cash adopts proof of stake and I hope bitcoins to say whooshes vision adopts proof of stake like I mean I think the thing is a scam but I think scams running proof of stake is still like less environmentally harmful than scams running proof of work like you know like harm reduction is supposed to be the mature attitude to have so like whatevs okay and then I think yeah wrapping up and just looking forward once aetherium is running with this better proof of stake and sharding and it's more scalable why do you think it can achieve in the next decade hmm I still think there's a lot of unknowns and I think good I mean decentralized finance is kind of the lowest risk thing which is a funny thing to say because the crypto sector as a whole is still kind of much higher risk than some people often give it give it credit for but you know just creating like system that people can and if people can access to people can have savings then people can engage in contracts get things like insurance just to get kind of services that are difficult for them to get using kind of traditional centralized tools I think even that is you know I very much hope that's not the only thing if the area does but even that is something that's very valuable all by itself but in general and I think in very vague terms like the vision is this idea that you can use crypto economic and decentralized systems to create kind of incredibly neutral kind of social institutions and mechanisms and this can create platforms that more people can trust and more people feel comfortable trusting and kind of reach across barriers more usefully you mean like those Saudis are one example of this right and and like I'm very interested in Dallas in the long term I definitely think that like present-day technology you know I agree with Vlad's opinions here that like there's a like present-day doubts are not super interesting what Dallas could be a super interesting and I really wants to see you kind of that gap being filled I think I think in the in general there's this whole branch of kind of economic research into how do we do things like funding public goods for example like I've like I've been a big kind of evangelist for quadratic funding people might have seen my recent and a blog post where I kind of described so I get coins recents a quadratic finding around as a way of kind of detecting and finding public goods for the etherium ecosystem governance of kind of common shared resources even things like Oracle's like all of these problems those are one valuable thing financial protocols obviously another valuable thing the whole the space of kind of combining together kind of crypto components we have kind of social media platforms I think it's kind of an interesting thing like I mean PBS for example like I've talked about a few times if you look at things like steam it for example like this is something that I mean it's like theoretically part of a o solely on so we're kind of theoretically supposed to not consider it legitimate but like they've done a decent job at like creating this kind of Krypton one centralized platform for a new content generation and at least getting it actually actively used by a user a user base of some size and I think like the mechanism design can be improved by a lot but and I think like things things like that and trying to kind of solve problems with just present day systems in a lot of cases that kind of incorporate elements of using block chains as a base way or incorporate elements of mechanism design but mechanism design done well and not just like slapping payments on top of everything and whatever without thinking through the consequences there's a lot of good things that can happen I mean prediction markets as another kind of big category of things that I find interesting too broad range of things that you know if you can disrupt probably okay and then just quickly to wrap up if there's one thing you could tell Vitalik sitting in eath Waterloo 2017 what would it be hmm I mean I mean the realistic and boring answer will be a crypto prices will go down sell and buy later this is like this is how we gotta miss the answer these time-travel questions right like provide a bits drink of like what the stocks will do really well and then like hopefully use the earnings for good but like otherwise no I like to think about kind of not only me answers to this question I mean the other kind of lame answer is just like here's all the bat here's all the baddies two ideas like skip straight past them and go to the good ones other thing in terms of like things that I could have done better if I had kind of better models of like the crypto space back then I don't know I mean I think there was like I don't think there's a single big thing I think they're just saying of a lot of little decisions about things that we could have that we could have focused on earlier and yeah start sewing is a grievance [Laughter] [Applause] [Music] we'll we'll actually do three questions from the audience and if you have a question raise your hand we'll come to you and we'll just pass you the mic am i picking Thanks Vitalik question for you that's wrong immutability you put on this on Twitter a few weeks back yes what's your thoughts based on the feedback you got from the community on immutability and what would happen if there was a massive attack my theory I'm rolling back so on and so forth what's the feedback I got from the community on immutability issues hmm I think the thing that I underestimated is that like it's not clear that guy never on the same page in terms of the framing of the issue so like one framing of the issue and the one that I kind of had it from the beginning is like okay there exists like like if there exists some hack that we could use a state intervention forked like reverse and and like get money back from a hacker or like stop a bug or do something some other thing then like on the one hand there is good consequences which are that like people get their money back yeah on the other hand there's a bad consequence which is and it's kind of a fixed-size bad consequence which is we kind of erode the immutability principle more and you just you have to kind of weigh the cost and the benefits and like there's some int number at which the benefits become greater than the costs but I mean it seems like it's and like there is all there is kind of a lot of different different variables at stake so like things that I probably wasn't thinking about enough are like one is like I said like the number of people affected and what kinds of and what kinds of behaviors were they participating in like were they participating in things where they realistically expect it should have expected danger or was this something that was advertised as kind of the wallet that people should use another and also just measuring kind of the harm not just by looking at the amount of money stolen but like the number of people affected another thing is like how disruptive would the intervention actually need to be for like and how many people would be harmed by disruptive intervention is there some is there some way of compensating them so like there's a lot of these kind of other kind of complicated factors and the key there's an like even like argue for if we look at kind of arguments against doing doing an intervention like there's like it's not just about kind of breaking the principle or weakening the principle it's also about other things like just disrupting activity of the blockchain like how much activity would be disrupted in these other things so that was one thing another thing is that like a lot of things a lot of people don't have I think kind of either individually clear or kind of collectively clear mental models of like what principles as a thing are and like why and like in what ways principles as a thing or valuable so like I made this tweet where I basically asked like do you think it's it's possible for a principle to like literally have infinite weights so like it's never poetic it's never okay to give up that principle and they're like absolutely any circumstance and like to me the answer is like obviously no principle has an literally infinite weight like if there was if there was an alien invasion coming and the only way we could stop the the alien invasion was by like some making making it illegal to criticize blue-eyed people then like I love freedom of speech but if like breaking freedom of speech would stop any alien invasion and like sure I totally do it and like I have similar positions with respects to kind of pretty much pretty much every every principle I mean including blockchain immutability so kind of my model of this was like this this principle is really important but it's not infinitely important but I mean first of all like there's people who sort of say that it's infinitely important but like I'm not sure that I kind of under reflection they would actually like they would actually hold on to this opinion there's also kind of like a Bitcoin aetherium cultural divides of extent to this because every tiny maker Twitter all Polar's all good there's always like people from these other community is that kind of step in to show their opinions I mean I don't know it's complicated and like I'm definitely of the school of thought that says it's good to discuss it more and not of the school of thought that that says that like the fact that we're even willing to discuss it shows show us that the etherium community does not value mutability and their and therefore were the [ __ ] coin like I think that school of thought is like terrible and we should like not listen to it at all yeah I'm Pro I'm Pro discussing things and like holding two principals for a reason so that we've kind of properly reflected on okay we'll do one more question the question about dows so talking about the gap between the you know so we we could be with the functionality of in the output of them versus where we are now obviously we did the first experiment it was really like okay let's just do the Dow and then we all put money into it now looking at some of the more experimentation on the mark side was sort of marked out itself and now marketing Dow they're just low intermediate Cacho a lot of the others it's this more like slow iterative process what do you think about the difference in large Dow structure and fixing things like that versus the small down structure and fixing things like that the differences between large Dow structure and small down structure well and like the value in terms of like solving these problems right so so initially was not it with a huge one and now we're doing this more iterate over small towels are definitely more tractable like one of the reasons why melaka was more tractable is because it's made up of people who kind of large we know each other and who are kind of trusted to not do nasty things like automatically vote for whoever pays them the most money and in like that I think if you like kind of do towers in contexts where kind of some level of social trust already exists then the problem is more tractable whereas if you do it in context where social trust doesn't exist or where people aren't even on the same page in terms of like what okay contact is and what okay contact essence then the problem becomes more difficult like we saw this with yo s for example right lik with yo s Simeon like the whole thing quickly collapsed into people bribing each other to vote for each other and like creating this sort of plutocratic cartel where you have a fairly small number of people just like help based vote for each other and like pH of the B Block producers and at the beginning like I saw a lot of people arguing that like hey like bribing people like buying people's votes is not illegitimate behavior like because of it because like isn't this the free market and aren't we about building a free market system and like when you're when you have a system where like people don't even like this kind of layer of shared moral expectations is it even there at the beginning then you're relying on kind of just the raw economics you know in a much more stronger way than you normally are and so the problem is more difficult so I could some ways I'm happy that kind of the simpler cases are being tried first and then we can kind of expand the scale more and more over time I mean I'm definitely like one of the reasons I'm not in favor of on chained governance at all for example is because it's basically saying that like hey let's make a Dow and let's start with a really big Dow and oh by the way we're gonna make the day I would be so systemically important that we give it control of layer one like this like it's basically kind of combining all of the kind of ways of doing irresponsible doubt developments together whereas this sort of start small and develop and have lots of little experiments approach I think is going to be sort of more fruitful over the long term okay thank you so much guys [Music] [Applause] [Music]