On the first day of Devcon3, ETHNews met with Vitalik Buterin, the 23-year-old creator of Ethereum. Clad in a bright green Doge t-shirt and rocking dark capris, Buterin offered insights into his personal interests, his leadership style, and the cryptocurrency bubble. He frequently speaks in binary hyperboles (“definitely” appears to be one of his favorite words), and in true programmer fashion, Buterin often analyzes circumstances using if/then statements.
This interview is condensed and lightly edited for clarity.
After exchanging pleasantries, we launched into the conversation.
M: What would you say is the culture of Ethereum?
V: With the community as big as it is, there are definitely lots of cultures of Ethereum. The number one thing I like is the general friendliness. People are interested in technological progress – and not just “oh, is this thing a soft fork or a hard fork?” and weird political stuff. There’s openness to good ideas from all different sides and an understanding that this is a technological work in progress. I also think there’s an emphasis on having a global community and trying to be as inclusive as we can in different ways.
M: Are there regions of the world that are underrepresented?
V: If you look at the Ether nodes map, then it’s obvious that it’s basically South America, Africa, and the Middle East [that are excluded]. I definitely think that a lot of interesting experiments can happen. It’s just that right now, they aren’t economic centers and so you’re not going to have 50 big projects pop up.
M: Would you be interested in having people from those regions join the development team?
M: What are you teaching yourself right now?
V: I’m trying to learn how zk-STARKS work. It’s like, just when you learn how zk-SNARKS work, then there’s a whole new and even more complex thing out there. Though, to my surprise, it’s actually less complex than SNARKS.
I’m also trying to stay up to date with life extension research. I think it’s a very important problem, and quite possibly the most important problem in the world. I’m extremely puzzled as to why more people don’t think the same way.
My simple argument is, imagine we live to 80. And imagine, let’s say, there was some particular continent where people lived to 40. And some people in that continent wanted to live to 80 instead of 40 – but other people said “No, no, no! Why do you care about this? Forty years is totally a fine and long life. Why are you trying to surpass humanity and become god?”
This continent actually exists and it’s called Africa, and in reality, if anyone tries to claim that increasing their life expectancy from 40 to 80 is not a good thing, we would laugh at them. I think there’s the exact same argument from 80 to 160, and 160 to 320, and even higher, pretty much all the way up to infinity.
M: Is there a point at which people are no longer productive members of society?
V: There are plenty of people that are not very productive as it stands. In general, as society becomes more complex and we have things like increasing automation, the barrier to entry and participating does keep increasing. But, on the other hand, our technologies for overcoming these barriers keep increasing, too.
For example, the ability to learn a language off your smartphone is something that totally did not exist 100 years ago. We have technologies that are helping people get up more and more quickly, but that’s definitely not going to cover everyone – and some solution where even people who don’t have the ability to meaningfully contribute can still have their basic needs met is important going forward.
M: What’s your dad’s influence been on your life?
V: He’s definitely a very interesting character in his own right. He’s always been very supportive of my interest in math and computer science. He was very supportive of my decision to drop out, very supportive of my decision to start Ethereum and just all those things. So that’s something that I’ve been very fortunate to have.
M: Are there any ideological differences between you and your dad?
V: (Long pause) My dad is a bit more capitalist than I am – to be fair, he has run a successful business and also he emigrated out of the Soviet Union, where the opposite system ended up working extremely horribly. Another cultural difference: my dad would not wear [Cheshire cat] watches and Doge shirts, though I have been dragging my entire family somewhat in that direction.
If you move beyond the ideological and [examine] personality differences, our styles of approaching certain kinds of problems are definitely different. He has a very good talent for dealing with people. Giving people the benefit of the doubt, creating environments that are friendly – he’s very interested in things like personal development. In his company, he really cares about helping his employees become the best people that they can be.
M: Is that something that you’ve tried to emulate?
V: That’s something that’s influenced me and it’s definitely something that I care about. Though I guess my own philosophy is more about trying to be nice without thinking about it explicitly. It’s about trying to have a strategy for helping people versus making it so that helping people is your nature. They’re both very realistic paths.
M: Why is the issuance of Ether capped at 18 million per year?
V: In the original whitepaper, we promised that it would not go above 15.6 million per year. In the actual implementation of Ethereum, it was 10.5 million per year and now it’s down to something like 6.3 million per year. Basically, the initial reason was that we wanted to have this fair system – where people who had Ether early on were not too privileged. Later on, we realized that proof-of-stake is possible – and so, in that [proof-of-work] environment, wasting a bunch of money to pay miners is just not really all that sensible.
Note: Per the Ethereum Foundation’s FAQ page, “According to the terms agreed by all parties on the 2014 presale, issuance of ether is capped at 18 million ether per year (this number equals 25% of the initial supply).”
M: Will the issuance cap change with proof-of-stake?
V: With proof-of-stake, the amount of issuance per year is definitely going to go down a lot. Possibly to zero, but we’ll see.
M: How would you value a token?
V: (heavy sigh) This is very complicated. About a week ago, I wrote a blog post on medium of exchange valuations. I argued that if a token is just used as a medium of exchange and it does not have sinks, then its valuation potentially becomes very unstable.
My concern with all these mediums of exchange is – first of all, if people don’t want to hold a token, then you can have ultra-efficient decentralized exchanges that make it possible for them not to hold the token.
So, if someone creates – I don’t know – the chair network and you have to buy chairs with chair coin, well guess what? Then I’m going to use Kyber and I’m going to convert one Ether into 100 chair coin, use the chair coin to buy the chair – and the seller of the chair is immediately going to use Kyber to convert his 100 chair coin back into Ether. Or replace Kyber with 0x or some on-chain, automated market-maker contracts. You can’t force people to hold coins.
M: What about fundamental valuations?
V: My formula for tokens that have sinks is – there’s the very simple economics formula, which is that the price is the net present value (NPV) of expected future revenue. With revenue, you have to substitute it with value of tokens that get burned. And I think that’s totally a fine place to get started.
Basically, you have to ask, “Is that fundamental value going to appear?” So, if you look at Ether, for example, transaction fees in Ethereum are already higher than $100,000 per day, so that’s $36.5 million per year. It actually does look like something that has legitimate fundamental value to it, whereas if you have a token where the market cap is $1 billion and transaction fees are $100, then that’s just – either people think that it’s something that will grow or it’s just pointless.
If you have tokens where tokens just get issued more and more and there are no sinks, it may well be the case that these tokens have no fundamental value at all, in which case, it’s just a matter of trying to guess how high the bubble will go. Bubble position guessing is something that you could try to become good at as a skill, but it’s a dangerous game.
M: What books do you enjoy?
V: In general, I tend not to do books as much. My general thinking is that if there’s a guy that has two big ideas, he can fill 20 pages with those two big ideas, but then he has to fill up 180 pages with mediocre stuff to make the book…
M: The publishers need money somehow I guess.
V: I tend to [read] a lot of blog posts. I read just about everything that Slate Star Codex writes. I follow quite a few economics bloggers, like the GMU [George Mason University] crowd like Cowen and Tabarrok, and so forth. And Steve Waldman on interfluidity. A lot of the time, I browse reddit and try to find interesting posts.
M: Are you scared of the hype around token offerings?
V: I feel like the bubble is kind of on a downward trend right now. But we’ll see how that goes. Basically, it is something that has to pop and stop eventually, and I think there is going to be a lull and a temporary decrease in interest and confidence. At some point, tokens are going to have to put up a lot more.
Two years ago, if you wanted to just make your own currency, the only thing that you really needed was a currency and to just say “we’re going to have a coin and we’re going to make it really successful.” Just tweak the mining algorithm, reduce the block time by 30 percent. Call it “American coin,” put an American flag on it. (Laughs)
Now, you need a whitepaper and you have to say that you have a team.
M: That still seems like a pretty low barrier to entry.
V: Yeah, but the bar is definitely rising. For every project that gets $100 million, there are thousands that think they’ll get $100 million and just get $20,000. I think that the quality requirements are continuing to go up and up, and they’ll continue to go even higher.
The regulatory stuff is probably reducing the bubble, but it’s also been fairly counterproductive because, often enough, the token models that make the most sense look like securities, and the tokens that make the least sense are actually these medium of exchange tokens that are horrible, bubbly crap.
In order for this industry to work well, there has to be some kind of better model. I have been talking to some governments that want to come up with some kind of sandbox, and that could easily end up doing a lot of good if it does well. Until then, it concerns me that the interest in compliance is not translating into an interest in sustainability.
M: In a perfect world, where do you see the Ethereum ecosystem 20 years from now?
I just hope that Ethereum can be used very widely to do lots of interesting things. I hope that the platform will be technologically ready to support whatever people want to build on top of it. I hope some of the ideas around applications themselves become much more mature.
I hope that we get to see a lot of these new mechanisms that get tried. In general, I’m excited about decentralized governance and algorithmic governance, all these new forms of social organization. I’m looking forward to seeing Ethereum get used for stuff like that. The time when we become successful at that is the time when people in the communities that are already interested in that start moving to Ethereum without having any prior interest in cryptocurrency itself. And I think we’re already starting to move toward that stage.
When we see Ethereum-based decentralized approaches to improve markets, build ride-sharing systems, build reputation systems, build identity systems, come up with voting or other forms of governance ... One area that I’m interested in seeing the community tackle is: can we use crypto-economic systems to make forms of media that are less exploitable? Because things like upvotes and retweets are currently very trivial to buy and as we’ve learned over the last few years, internet media is totally exploitable in a thousand ways. And this is going to be a major attack vector over the next century.
I feel like crypto-economic approaches might be some part of the solution and there are a few good reasons why blockchains are a good partner for that sort of a thing. I’m excited to see that space grow and see a couple of credible things come out of there.
M: Do you foresee quantum computing as a problem?
V: It’s a moderate problem. There are misconceptions. Quantum computers are not these magical devices that can solve every problem or try every answer for a problem at the same time. Quantum computers can solve a certain, specific class of problems like classical computers cannot solve efficiently. They can break RSA, they can break elliptic curve cryptography. Now, what they cannot do is break hashes. They can do proof-of-work mining somewhat faster, possibly. Quantum computing actually is a substantial risk to proof-of-work. But this is one of the secondary reasons why we’re contemplating the proof-of-stake switch. There is such a thing as post-quantum secure digital signature algorithms.
The way we’re designing Casper, it’ll be friendly to that right from the start. One of the technological goals I have with Ethereum is to make the system not be dependent on any cryptography except for SHA-3 and information theory. If we do that, then I think that’ll be really nice in a bunch of ways. The solutions to all this stuff are almost ready right now. We just have to implement them.
M: What would you like to see covered more by cryptocurrency journalists?
V: Just interesting technology. Like state channels, Joseph Poon working on Plasma, even just our own research team. In general, companies in the Ethereum space, especially some of the smaller ones.
I think most of the interesting projects have nothing to do with a coin. They deserve more interested attention.
M: Are there any projects that are especially promising right now?
V: I’ll focus on things that I think are under-hyped. There’s AMIS out of Taiwan, which made the Istanbul PBFT thing for Geth. L4, they have a state channels project out of Toronto. There is the Perun network. There was a reputation protocol based on zk-SNARKS that got released yesterday. Also, academics, in general, I think, love being paid attention to. Those are my immediate guesses.
M: On a lighter note, what’s your favorite subreddit?
V: Inside of crypto, I sometimes love poking into r/bitcoin and r/btc and seeing how they respond to the same story. Outside of crypto, I follow some of the economics ones. I like r/badeconomics. It’s actually a subreddit of economists that criticize bad economics made in other subreddits. There’s also another one called r/badmathematics. It’s just an entire series of bad math. They’re all great.
M: Let’s finish with a little game. You get two passes.
M: On behalf of ETHNews, it was a pleasure. Thank you for your time.
V: Happy to have you around.