Bankless Dialogue with Vitalik The great vision of ETH is to truly create an independent open technology stack.

Bankless Dialogue with Vitalik ETH's vision is to create an independent open technology stack.

Original Author | Bankless & Vitalik

Translation | Odaily Planet Daily 0xAyA

Editor’s Note: Bankless recently recorded a blog with Vitalik at a conference, discussing topics related to the independent ecosystem of ETH, new tracks, immortality, and the next bull market. Odaily Planet Daily has translated and summarized it as follows.

Summary Version

• Excited about the decentralized social track, Farcaster and Lens are doing well

  • Exploring DeFi Economic Models Design and Evolution of Incentive Mechanism
  • Layer2 Public Chain Token Valuation Model Analysis
  • Cosmos, Polkadot V.S Layer2 Stacks Chapter (1) Technical Solution Overview

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

• Building a “slide” that is user-friendly for new users is the holy grail of mass adoption

• Crypto can promote the secondary distribution of human society, and ETH can exist as a system that promotes distribution

• Asia’s contribution to Crypto is becoming unprecedentedly large

• The AA wallet track is a bit saturated, and Builder is optimistic about doing security, infrastructure, and enterprise-oriented stacks

• The most important thing in the next bull market is to achieve a balance between returns and security

Building a Completely Independent Ecosystem

B: DeFi has replaced traditional finance, stablecoins have replaced bank transfers, ENS domain names have replaced Twitter usernames. How do you balance improving existing things and opening up completely new things? Are we lacking in the 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 field, but sometimes I also feel that these new things are not imaginative enough to some extent.

We can see what this field has done in the past few years: cool DeFi, I have also traded various tokens on DEX, but it is still just a tool in the whole process, and this process still looks similar in many ways to before. And there are NFTs, NFTs are new, they are an extension, including art collections, game items, and so on – of course, each new concept brings something completely new to this field.

So far, I think all these examples have one thing in common, that is, they are independent components that are designed to fit into a previous ecosystem. What we have not successfully done yet is to create a completely new ecosystem where the various components have different complements to each other, right? This is one of the reasons why I am excited about decentralized social, and the current situation is better than I expected. I used to be very worried that we would only have 892 crypto-anarchist geeks like Cyberpunk, but if you look at Farcaster, it is actually very successful, and Lens is also performing well. Of course, what happened recently on Twitter also provides space for these alternatives to develop.

For example, Farcaster actually has a fairly cohesive community that has been around for quite a long time, not just a few geeks coming in for a few weeks and then leaving. But I think the long-term future here lies in the fact that it can actually be combined with everything else we’re doing. For example, a social network needs some form of anti-fake identity capability, where you need to make sure that behind those 894 likes are 894 real people, not fake accounts. The problem is that all existing ways of doing these things are very centralized and detrimental to privacy. Having more decentralized options to combat fake identities, having more decentralized options to recover accounts, having more decentralized options to determine if someone truly belongs to a community, these are all very important.

And these are things that the crypto space itself can do, like we have addresses and ENS, which are just very basic ways to prove that you at least spent $10 to post this message, we have POAP, and then we are also doing Zu Stamps. Zu Stamps are basically like POAP, but they are related to social recovery wallets, so there are many tools that can interconnect in a serious way and truly build on each other.

I think the grand vision here is to truly create an independent open technology stack. Think about traditional technology stacks, you have phone numbers, you have Google, you have Twitter. I would say China has an independent technology stack, you have WeChat, you have Alipay, you have CBDC, it’s the former, while 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, you have various recovery methods. And all of these can work together, right? I think there’s also an important part to be able to say in the crypto world, “Hey, you can just remember one thing.”

But I think the Holy Grail is trying to create a “slide”. If a newcomer joins here for the first time, then they can create an address – if your address is basically controlled by a Gmail account or something else, 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 it may be supported by their own key or multiple signatures. Your email is supported by your Ethereum address, basically giving people an intermediate opportunity, like sliding down a decentralized ladder. Finally, truly entering this completely independent stack, where all the different parts really work together. So I think it would be really cool to achieve this vision. And I think we really have the tools to do it, which didn’t exist a year ago. That’s one of the exciting things for me.

The Role of ETH in the Future

B: To summarize what you said, by 2023, Ethereum has already had many tools, such as Farcaster and ZuLianGuaiss. You mean that these tools are already ready and just need to be combined together and put into a new context. And the vibrant background I currently see is Desci. During the Zuzalu in Montenegro – a week-long event focused on decentralized science and technology related to cryptocurrency – leaders from different industries and fields gathered and shared knowledge and experiences in areas such as artificial intelligence, synthetic biology, and longevity. And the biggest takeaway I got from this experience is that all these things are related to cryptocurrencies. So, by bringing together knowledge from different industries and leaders in the field of synthetic biology, do you have any new insights or changes regarding Ethereum and its role in the world and future industries?

V: I think in the past 10 years, I have experienced an evolution from very abstract to very specific. If you think back to the initial vision of DAO in 2013, it was very vague, just that we can have these automated companies. And the internal logic of these automated companies was completely unclear, a lot of things were not clear.

But today, both in the cryptocurrency field itself and in fields related to cryptocurrencies, things are starting to become more specific. I think the role this field plays has several different aspects, one of which is to exist 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 be able to save money in a way that cannot be arbitrarily deprived under certain systems, instead of having your account frozen because it is deemed suspicious enough by some lowest random monitoring system – this is a problem that exists in many specific industries, and I’m not even talking about any regulatory concerns. I’m talking about areas that intermediaries like LianGuaiyLianGuail don’t like. This is a fairly large category, with many people mainly in emerging economies, but even in places like the United States, there are many people who are unbanked or functionally unbanked in various ways. And they are not choosing to be unbanked, but it is difficult for them to get a bank account.

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

Then, some ideas inevitably permeate into a broader world in various direct or indirect ways. They basically set a demonstration or standard that a more open, neutral, decentralized, and locally sovereign world is possible, and create a prototype that shows how to achieve this goal.

Just like Public Goods is definitely a very specific use case, it is a very specific use case of decentralized governance as you mentioned, because it is basically about decentralized decision-making and decision-making mechanisms. However, Public Goods has some specific characteristics that make it worth considering as a separate domain. One example is that I think in Public Goods, radical decentralized decision-making makes more sense, while in many other types of decentralized governance, this kind of decision-making may not be applicable. This is because the problem is different, if you let a DAO decide whether to make a website round or square, and then compromise to get a square with rounded corners, it may not be a better choice, because such compromises often lead to worse results.

Some people may say that for certain types of decisions, what we really want is for one or a few people to make and execute the decisions after careful consideration, and sticking to one vision is better than clumsily compromising. 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 $100 million to one project. Of course, there may be exceptions, such as if you want to go to Mars, giving $1 billion to one person is better than giving $1,000 to a million people, because if you choose the latter, none of them have any chance of achieving this goal. But overall, this is a problem that is better suited for this approach. In the design field, I think it is correct to see it as a problem of creating more diverse funding mechanisms to reduce the chance of important things being completely overlooked.

Because what we see is that although governments often exist as founders, they often are not as unnecessary in practice as textbooks say, because the free market cannot accomplish this task alone. Just as in most cases, governments are also a fairly irresponsible founder to some extent. Sometimes, crises can motivate people to take action, which is a courageous act and a good thing.

However, basically, once the first batch of vaccines and other related things appear, the situation changes a bit. People feel tired and they are tired of being forced to take various measures to deal with the new crown epidemic, which is very understandable. This fatigue has even turned into a ridiculous fatigue towards various institutions (such as SPE) continuing to invest resources in solving the still existing and still important new crown issues, and there is even a huge funding gap in this regard.

Just like what I call entrepreneurial Public Goods, I categorize longevity and anti-aging as this category. The market is good at entrepreneurial goods, such as goods that require visionary people to build, most people will not even realize its value until it is manufactured. If you have an entrepreneurial Public Goods, such as a Public Goods that people only realize the value after it is realized or until it is realized, both the market and the government often ignore it. So the question is, can some innovations in the encryption field provide help? So far, the biggest people we have seen filling this gap are basically billionaires, such as Sergei Brin, Elon Musk, and so on. But we also see that even so, something is still being ignored, right? For example, Brian Johnson is famous for his Blueprint plan. He spends millions of dollars a year and devotes 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 leaves a very obvious question, is there a version that is applicable to ordinary people? Will we see again that the rich enjoy all this while ordinary people are still stuck at the age of 77? This may be where the encryption field can really help.

If most people are not billionaires, and they actually see the need to have something like a blueprint, it doesn’t require sacrificing your entire livelihood, nor does it require trying to achieve it with an unrealistic amount of money every month. Then, you try to do community building work and motivate the community to truly establish itself. I think you can call it everyone’s blueprint, really implement it, conduct 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. Do everything in an open source way and jointly promote things as a community. This approach has tremendous value. I think there are many ethical points of convergence in the encryption field, for example, we have seen many exciting things about this approach.

But another thing that the encryption field can provide is actually trying to make it work at the technical level using different tools we have, so obviously there are public interest funds and tools built for the allocation of capital—the capital itself is being allocated in a more decentralized way. We have secondary capital allocation, we have traceable public interest funds, and there are thousands of different tools, and we may have these three tools in each industry. Then, all these different tools are used to determine who contributes, eventually becoming very valuable, and trying to use on-chain contributions and reference graphs, and so on. I think the encryption field itself is the most natural object of experimentation, and the DeFi field seems to be the second most natural object of experimentation, so I think there are many points of spiritual convergence here, and there is an opportunity to transform into actual convergence. In this case, I think part of the reason is to create an alternative system because the existing social public interest fund infrastructure does not serve many of these very interesting scientific projects.

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

Entrepreneurial Ideas Beyond Cryptocurrency

B: We are now very focused on Desci, but also include many other areas, such as AI, synthetic biology, longevity, and so on, all very interesting. If you had a clone of yourself, and this clone wanted to start a business in these fields, which field would attract your attention the most? Where would you start a business?

V: Interesting question, what else would I do? Maybe I would want to do some full-time work, just like one of me might run off to do another me.

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

V: I understand what you mean by the broad concept of Network state, it can develop in many different directions. It is related to a specific set of ideas, but also adjacent and can develop in many different directions. I think in many ways, this is related to community-driven design, as it involves organizing the community to explore cutting-edge technologies together. I think this is also one of the goals people hope Network state can achieve. But at the same time, some people also believe that in fact, a lot can be done without creating a new nation and fully participating in geopolitics. Therefore, this concept has a lot of room for exploration.

I can also see myself a year or two ago as a “clone”, just like I really separated and tried to do decentralized social media. But I’m glad that projects like Farcaster, Lens, and others exist, where different versions of this concept can be tried, and they seem to be developing in a direction that is quite consistent with values.

What I am most worried about is, especially for projects supported by VCs, they may be told by some “adults”: hey, cryptocurrency can only exist as a decoration, you must use an email account to back up everything, you must use a phone number to verify everything, you must rely on centralized servers to run transactions. And then at some point, they will tell you, hey, actually you can’t let the internet see everything I see, because then the AI system will read it. And then you will further chaos. So I’m really glad that Romero, Richard, and Nicole didn’t turn out that way, I think that’s great. And Lens itself is also very focused on the theoretical nature of accounts and has a very aggressive attitude towards it from the beginning.

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

For example, I feel that sometimes Oracle issues do not receive enough attention. That is to say, we have Oracle, but it is important to rigorously search for things that prioritize security rather than speed optimization. As a DeFi practitioner, your task is not to provide users with a 5% return instead of a 3% return, but to minimize the possibility of users getting a negative 100% return. Fortunately, this lesson is now clearer than it was 12 months ago, but I think it can be even clearer. Another issue is that we can fully promote the development of zero-knowledge technology. This is also an area that I am very interested in participating in in some way. In the field of biology, I think it is very important to develop a blueprint that is applicable to everyone, and I think someone should do it. In summary, I think there are many interesting things to do in this field.

Expectations for Builders

B: So, for Web3 Builders, where do you think they can shift their focus in the current Ethereum and broader crypto field?

V: That’s a good question. The answer six months ago might have been AA wallets. But now the situation has become very interesting. Almost everyone will use AA wallets. I have been traveling in East Asia for the past month, and I have had conversations with at least four or maybe five teams that are building some form of AA wallet. Interestingly, these new technological areas create a disruptive feeling, right? If you come in as a newcomer, you suddenly don’t lag behind others by 10 years anymore. So you actually have an opportunity, and I think ZK Evms and ERC-4337 actually allow these newcomers to participate well.

I remember that five years ago, East Asia did well in exchanges and mining, but contributed little in terms of development and research. And now there has been a huge change, which is interesting, right? Because when ordinary cryptocurrency Twitter users say “Asia is back,” they are actually referring to millionaires buying their favorite Dogecoin and the like. But I do feel that Asia is indeed back, with this level of engagement and technical involvement surpassing anything I have seen before, I mean before Covid or any recent bubble. What I want to say is that there are many opportunities to join in here, so the question is, what do you want to do now? In this regard, I think wallets have started to become saturated. A slightly less saturated area is security software, and I am starting to see some of these existences. I think it may be a choice to delve into this field and build tools that can help users understand what they are doing when interacting with DeFi.

Another issue is to build infrastructure to drive the Ethereum Layer1 ecosystem towards Layer2. One example is the Merkel Proof Verifier, which basically allows you to fully decentralized verify ENS names on Layer2. But as far as I know, they currently only verify signatures from centralized providers, but if you do Merkel Proof verification, you can get rid of centralized providers, and because of off-chain calls, you actually don’t need to consume any gas, and that’s an example.

But I think there are many other examples of well-constructed infrastructure. If we really want to drive this ecosystem from being completely centralized to truly participating in Layer2, the third example is a stack-oriented towards enterprises, encouraging existing centralized transaction companies to build decentralized solutions instead. Let me expand on this. Do you remember the time from 2014 to 2019 when everyone was excited about permissioned consortium chains? Do you remember that?

B: I do remember—IBM Hyperledger.

V: Exactly. There were many examples like that, but we failed. I personally think the reason people were interested and then failed is because they instinctively felt that in many applications, you want to 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, but on the other hand, compromising by completing all operations on the chain actually completely destroys privacy, is not scalable, and requires people to completely rewrite their software, right?

What people want is a win-win compromise that consortium chains offer, but I think what we ultimately got was a compromise that minimizes vested interests, right? The reason is basically that first, you are still building a blockchain, so you still need most of the costs associated with building a blockchain. Then you have a lot of costs associated with community building, but because of centralization, this actually becomes even more difficult, right? I see a pattern happening over and over again, where someone creates a consortium, the first five members happily join the consortium and start collaborating, but the 6th to 20th members eventually 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 why this approach shouldn’t succeed.

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

This way, you can prove that the database has been updated in a valid manner. This is just something that can run continuously on the chain, and once these hashes and proofs are on the chain, individual users can interact with the program and obtain a Merkle tree proof of their current balance. You can perform all of these operations, and it can basically be seen as a compromise between decentralization and centralization—having the benefits of decentralization while maintaining transaction efficiency, without having to pay gas fees for every transaction, and even without telling your IT staff 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 offers the advantages of both rather than the disadvantages. There is actually a weaker version that has started to be used, namely debt proofs, right? Like debt proofs, I think it is a semi-successful enterprise use case. With debt proofs, you can publish data on the chain to prove certain things about your database, such as the fact that the amount of user balance you actually own will not exceed the amount in your wallet, so I think this is a starting point.

This can be applied in games, potential use cases for social media algorithm types, and supply chain management. – In short, it can be applied to many different fields. I mean, supply chain management is interesting because if you have these records, there are some financial aspects, like short-term loans, that can be directly associated with these records. So, there are a lot of interesting things that can be done, right? However, the software stack to achieve all of this is only now possible because it relies entirely on zero-knowledge proofs.

So now we’ve reached a point where regular developers can build things on ETH without needing to understand what it is, and I think that’s a very valuable thing that we’re starting to build now. I think overall, new tracks like this will continue to 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 shift our focus to the present. I think in the past few months, people in the crypto world have been readjusting their perspectives, starting from cleaning up the mess of 2022, because I think that process has gone fairly smoothly. We can believe good things are about to happen, and now our focus is on what’s coming next – everyone is cautiously awaiting the arrival of the bull market, but what are some things we as a crypto community should avoid or possibly pay attention to in order to successfully navigate the next bull market, if the cycle theory is correct, if 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 where people can invest and get returns, even if it’s just a 2% annual interest rate, but still feel comfortable, without risking losing all their funds in that year with a 1/50 chance. I think this is achievable, but it requires a mindset that is very different from the mentality of pursuing maximum returns at all costs, so security needs to be increased for DeFi protocols, wallets, chains, and ecosystems. That’s one aspect of it. On the other hand, we need to pursue this goal in an uncompromising manner, that is, if you really want security, you almost have to deposit your funds in Coinbase or have all your activities protected, and I think if we can achieve this, we will be able to go further.

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