All right, welcome everybody. Back to the podcast. We have with us, hasib Qureshi who's a partner. Dragonfly. Has he been? I used to work together back when I was more active in crypto land and vitalik is, of course, a polymath ingenious. Although, he may bristle at that description who created aetherium, which is the first smart contract blockchain to gain any volume and change the face of blockchain computing. As we know it. I see if you want to give us a quick one paragraph background on
yourself. So I'm sovereignty by background. I'm now an investor I run dragon.
Fly Capital, which is a global crypto fund. We only invest in new crypto. And I've been doing this for a little bit over four years. Now, it's funny because when I first got into crypto, I remember, I was actually at ic3 this academic crypto conference. It just left my job at Airbnb is software engineer and I met metallic for the first time and I asked you, what do you think is the most important? Problem solving crypto and the time your answer was something about wallets then you were like, I think it's important to build more wallets and at that time I had a vague understanding of
That meant to build wallet. There was what triggered by dive down the rabbit hole theory of and I remember in the very early days. Whereas first really dive deep into crypto. I remember coming away with a very strong feeling after that. I see three conference that Bitcoin was going to die. And the reason why I thought Bitcoin was going to die as I was like, look at the obvious, massive Delta in the intellectual energy and character of what's going on in the etherium world, which is everything that I saw it. I see three versus what I saw in the Bitcoin world.
It was a whole lot of religious anger and fervour and not a whole lot of innovation and I turned out to have a very simplistic understanding of that time. But that was how I first got into practical time through that small interaction that you and I had back then
and you also have a background as a poker player. If I remember
correctly. That is also correct in a former life. Before I got into the technology world that used to be a professional poker player for about five years.
They're extremely large number of us who were either in Magic the Gathering or in poker before we got in the Crypt or World of Warcraft. Maybe it's just Geeks and gamers.
Thing is big in that I had a steering that you and I have talked about before every generation. There is some hustle that if you're really smart, very aggressive and looking for edges and not afraid of looking weird. There are ways to get ahead early or to make a lot of money in a way that's not obvious to most people, and is maybe even slightly subversive the kind of thing, your parents would raise their eyebrows. If you were spending a lot of time on in my day, that was poker. There's a time when it became fantasy sports and became crypto that it became defy, and the quiddity mining that it became nft.
Eating two years from now, there will be something else when ftes are very professional eyes. And there's not that much Alpha to be made training in a fifties. There was something else that young really hungry people who are not afraid of looking down. We're going to be doing to make a lot of money
vitalik. You want to give us a quick background, born in Russia moves to Canada when he was 6 at the time. I had already been doing a lot of math. A lot of programming and I had been halfway through high school and I Came Upon This interesting Bitcoin thing. It fascinated me immediately because of how it combines.
Gather all of my interests, at the time, Bitcoin has the mathematical aspects. It has the cryptography. It has the computer science, the code. It's all open source software. I had been very into open source software at the time. And then also, there is these economic and political aspects. I had been following Austrian economics, a little already and then Bitcoin just hit all of those buttons. I started trying my best to join the Bitcoin Community. They started scouring through the Bitcoin forums looking for jobs. That would
pay me in Bitcoin because if it grew to the point of Bitcoin is a response to earn it. I found someone willing to pay me 5 Bitcoins which back then was $4 per article to write articles for his blog. I did this for a few months then eventually a poker player by Romania name's Amy. Hi Alicia. I reached out to me and said that he was starting a Bitcoin magazine and wanted me to be the first writer. I immediately agreed and I became the first writer for liquid magazine, kept doing that for about two weeks, started doing more and more.
Bitcoin related writing learning about Bitcoin, eventually, more programming related projects, did some work for a covered coins, the library called Bitcoin X and started getting deeper and deeper into the space. Then in mid 2013. I decided that I would go on this Bitcoin trip. Take half a year off of University and go around the world. Visit all of the Bitcoin Community. Zara could understand to the community, is he, whatever one is up to eventually, after a few months of this? I came upon these people the word.
Trying to take the blockchain and extend it to do things other than cryptocurrency. So if there's this project called covered coins, that it existed for a long time, which was trying to use the blockchain as this database layer. It's an issue, other kinds of assets on top. So you could issue shares on the blockchain, you could issue digital dollars on the blockchain. There is a project called Master coin that was trying to extend that even further to create a full Financial system. Do what we call defy today, but this very early
Version of that. And after I spent enough time in these circles, I eventually had my own idea for how to create a more general purpose version of all of these ideas. Instead of a blockchain for one application, a blockchain that you can build any application on top of and that's where the theorem came from. So the theorem is a blockchain on which you can build any application and Bitcoin is obviously limited to trying to be new money or a new Reserve currency or nowadays. Some people say digital gold. So you are the original
Along with a team who coded it up and You released it. How old were you, when you did that 19? And how long had you been in computers at that point? When did you first start? Programming thickness started programming when I was around 10 or so. And what are you mostly self-taught? Or did you go to school for this? What's the secret here? Besides the obvious genetics. I just grew up programming video games for myself to play a so I would make a video game played until I got tired. Then make another video game and then played until I got tired. And that's pretty much how I learnt all the way up until High School.
Did your parents do anything or to the environment? Do anything uniquely to Foster your development and programming? My parents did buy me a lot of programming books. They did find some programming classes for me and some math classes as well. So, they were definitely very supportive and we're you in the gifted program, or just the Normal public school system, or private school. I was in the gifted program or the public school up until grade 8. And then, for high school, my parents moved over to a private school. And I found the private school to be a much better experience.
Where most of your collaboration colleagues met online or was there a physical place that you were at where they were all hanging out and you stumbled into them pretty much entirely online. The Bitcoin world lived on a forum, unless you were in one of the major cities like, New York, or San Francisco or / that had a community which started almost from the beginning. So Bitcoin magazine was a fully remote company from day one Bitcoin weekly the blog before Bitcoin magazine also fully remote from day one and to this day most of your collaborators you
Pretty much spread out all over the world. Isn't that correct? Pretty much. Yeah. So if you're in came out to the world in 2014, I think if I remember correctly, you'd been developing it for a few years before that. There was a public sale, lot of people got involved and then 2017. There was a boom around people building assets and top of etherium different kinds of coins. And then, of course, gaming and ftes and defying. All of those things came along. Let's just go through the evolution of aetherium. What is the etherium do at a core level? What does it do? Well, and today, what does it do poorly? What is the need to get better?
Right, I think of this area as a general-purpose blockchain. So instead of being a blockchain for one application. It's a gel Block Chain that you can build any application on top of and the way that you do this on a theory. I'm is you write a piece of code and you create a digital transaction that contains that piece of code and publish it. And when you publish this transaction and that transaction gets included into a block on the watch, in this creates, an object called a contract. And this is a
Objects that the blockchain keeps track of a contract is an object that contains a piece of code. Now the blockchain has this object that has a piece of code and that is a little application that the ethereum blockchain maintains from that point forward. So then anyone after that point can send another transaction that says, I wants to talk to this object. So step one. I created a transaction that creates this object will call that object, X then step two, you wants to use my application. So you send
a transaction in your transaction. You say I wants to talk to Smart contract apps, and here is a little piece of data. That says, here's what I want to do, what that application when that transaction gets acquitted, a block the piece of code that I first published runs taking as input, the data from your transaction and interprets it in. Whatever way it was. So we can make this more concrete with an example, right? So, let's save. I have a company and I want to issue shares on the watch it. I am going to create a transaction that
In the program and the rules of that program are going to say, well, what can you do with shares will just say you can transfer your shares to someone else and you can vote, right? So the program is going to interpret any data that it c is either as an instruction to transfer your shares to someone else, or as an instruction to make a vote. I published this transaction like initializes the whole thing and as part of that transaction, I might say the file has 50 shares her. See, it has 100 shares and I have 25 shares. So now
resist, aegon the watch it and it has a piece of code and it has its own little memory that says, I have 25 assume has 100 and of all has 50. So then now Vol is feeling generous and wants to give half his shares to me. So in the Vols is going to create a transaction and that transaction is going to have some data. It's going to encode. This idea that I know Vol wants to send 25 of my shares divots, a look. So you create a transaction that encodes this, send it to the network. It gets included to into a block and then once it gets included, the
Is of code runs in the piece of code. C is the transaction? It C is okay. Clearly. I have to transfer 25 shares from the vaults of its outlook before in the fall had 50. I'm going to subtract 25 now out of all has 25 before, vitalik had 25. Now, The Telecast 50. So I'm going to write down the drizella cast, 15L and that's it. The transaction got processed. Why do all this in the cloud in this? Very convoluted way, this very complicated blockchain and I just use a normal computer when I just sent an email. This creates this very transparent public record.
Of what the rules are. And this guarantee that all of the interactions with the this application that I created followed the rules. There is no actor that has a back door key. It's a trusted computer in the cloud that each of us can verify all of the activity. We can audit all of it and we know that nobody cheated. Nobody else moved, my fans. I was the one who moved the funds and everyone can authenticate. The code was exactly the code that was supposed to be run and they're obviously sacrifices for this, right. This is not free. Exactly. Even I as the
Her of the contract. In this example. I do not have the ability to later go in and say, oh, I changed my mind. I'm going to give myself 400 shares once I created, and once I publish it, I have no more privileges than anyone else. The application. Does it even have an owner? So that's power for white. Completely use rolled completely transparent visible treats. Everyone equally according to what the rules are. Now, what do you sacrifice for this one? Big thing that you sacrifices efficiency, the way that all of these block chains including Bitcoin and etherium,
Work, is that you have this network of tens of thousands of computers, Each of which help to verify the transaction. So when I broadcast this transaction that transaction goes out to every single computer on the network and every single computer on the network, runs that piece of code, every single computer, in the network. There are fights and every single keep you at all the network processes at parallel Computing, was I take my coat and I split across 1,000 computers and each one runs 1000. Now, I sent into a thousand computers and all thousand computers run my code exactly. Yes. At the
It different kind of computing. The way it took intuitively. Think about why it makes sense. Is it a text to audio and video? So right now we're recording a podcast and the podcast has some audio bike SSM video. And to see each other on video. There's hundreds of thousands of bites that are flowing around between us every second. But technically, those hundreds of thousands of lights, do not necessary. If you wanted to, we could just do the whole thing over a text conversation, but there are some benefits from us being able to
To hear each other's voices and see each other's Expressions. So there's already lots of very high overhead computation that people do. With their computers. Video is a great example, audio is a great example, the things that happen in the blockchain are more similar to text like the fall - 25 vitalik +25, it's this extremely simple. Extremely efficient stuff. So, it is perfectly viable to have many thousands of users and even millions of users activity. All get verified by one single computer.
As the blockchain doesn't do everything the blockchain just does this Core Business logic and but the Core Business logic is not actually all that
complex. This is because of the constraints of blockchains. It's a function of the constraints of all the redundancy you have to have when you're on blockchains that. We can only afford to put the nerve all -25 italic +25 on the blockchain. The goal in the long run is that we want to make it more and more kinds of low value computations can also be happening on the blockchain, but right now,
Adam is Sessa T. Only high-value transactions can afford to pay the cost.
So to back up for a second. What you've done is you've built a computer in the cloud. A virtual computer that stitched out of thousands or tens of thousands of real computers. And that computer is very inefficient. It's very slow. It's going to move at a very slow speed. So comparing it in throughput to your home computer or to a supercomputer is nonsense is besides the point, but any piece of code running on this is very trustworthy and you know, it hasn't been hacked and now you no longer need a government.
You no longer need a single actor in the middle, like a Mark Zuckerberg running. Facebook to tell you which transactions are valid, which contracts are valid, which programs are valid and which ones, aren't you have done away with the need for trusted third parties and you've replaced it with a trusted computer that is being audited verified and checked by thousands or tens of thousands of computers. The technological complexity comes in scaling this making this computer faster, keeping it secure creating incentives both economic and technological and
Theoretically prevent people from hacking it and breaking it, and having incentive mechanism in there. So that people want to add computer system Network and also having a disincentive mechanism to use the network. You have to pay for it. Otherwise, you can easily overwhelm it. This giant Contraption is aetherium people have, of course, come along and created other smart contract blockchains. But even though we call it a smart contract blockchain, it's really a trusted computer in the cloud that can in theory, run any application, but it trades off.
Performance in exchange for security and that security can be measured through decentralization. In other words. No, single entity can control the computer. It can be measured in terms of how secures the code can it be hacked or not, etc, etc. And there's a lot of subtle and beautiful elements that come out of it. A turn-on obvious because we're used to thinking of computers as, okay. Facebook runs some computers. These are Central Computers run by Mark Zuckerberg and crew and the code is not open. Of course. I'm not entitled to see the code. I'm just a you
User, I don't own my data. They own the data. It's sitting in that database and I don't have access to the database to read a right from it. I have to go to Facebook and ask them to read or write from the database. But now you've created computer where the code is all open. In fact, even the data is open, but some of its encrypted, some of its not some data, anyone has access to see some data. You actually need to have your encryption decryption key to get access to and anyone can read or write from it, if
Have the proper permissions. This is the mind-blowing Lee crazy concept. It is a truly shared database with no owner and permissions at a very granular user level, where the users actually own the data. And in fact, the users on the network that is now run by this database. So if someone built the next Facebook application on top of the etherium, they could engineer in such a way that users actually own that application. This is the remarkable achievement underlying etherium and it's hard to encapsulate in a few words, but one way that I
I'd to do it was I said smart contracts are castles made of math freely trading with each other castles. These are impregnable. Encryption is very strong and creates a strong defense, but they're made out of mathematics very much like the video games that you are programming in your youth. These are constructs put together by anyone anonymously or pseudonymous lie around the world and they're engaging in free trade with each other. Where the owner of each caste is deciding what? Trade happens with somebody else. Now, there are obviously substantial limitations to this.
Talk about the limitations. We've already talked about how this computer network is going to move at the speed of roughly one computer, at least until we get into some of the ways to scale it and to grow it. But what are other limitations of this network? Can you give us some concrete applications of what's good for in where you wouldn't use it? So aside from scaling, the other big performance. So limit on it is latency. So when I send a transaction I have to wait, maybe about half a minute for the transaction to get included and to get a confirmation back. Now, in the
Future of this is going to get somewhat more efficient, maybe like 10 or 12 seconds is going to be realistic soon. But this isn't is real-time thing. That you would stick real-time video game logic on to, for example, you could use it for payments, but you probably don't want to use it for things that are more real time than image need to be. That's one limitation. Another limitation is each transparency repartees. This probably is one of those places where we might have to get into some of the cryptography weeds, but basically the block
And by itself is fully transparent, right? Everyone can see everything that's going on. If we go back to the example and we issue the shares of this company on the blockchain, then blend of Allah sends me his 25 shares. Everyone in the world is going to be able to see that. Now, there might be some cases where that's totally fine, but there might be some cases where you want some privacy and this is one of those areas where you often can get privacy and security. At the same time. There's this extra cryptographic math.
Don't need to get into an in-depth, but it's worth saying the name. It's zero, knowledge proof, the way that I described zero knowledge proof SAR, that it's a way of proving something about a piece of information without revealing that piece of information. Let's say we're going to have the same application, the shares of my company on the blockchain except instead of the blockchain recording, the numbers 25 50 and 100. The blockchain is going to record an encrypted version of 25 and encrypted version of 50 and an encrypted version of 100. And then
When the Vol sends me his 25 shares, he's going to say here, is the encryption of the number of shares. I have right now. Here is the encryption of the new number of shares. I'm going to have here is the encryption of the number of shares. I'm giving this Outlook and then here is this magic cryptographic proof that says that the numbers line up, it says X Plus y equals Ed and I'm not trying to give away more than I actually have. You can verify that everything is following the rules without verifying which specific thing.
A particular transaction is doing in with what parameters. So, there are ways to get back here as security and privacy. At the same time. There are still some limits to how much privacy you can get. For example, even in this case, people can see when people are interacting with this particular application, at all. If you just use up watching, you lose a lot of privacy. If you use up watching plus zero dollars proofs and plus other kinds of cryptography. You can often get back a lot of privacy and you can potentially get even more.
See the in the centralized case because any traditional centralized system. There is the Facebook, that runs everything and then sees everything. But with these kinds of systems, there is no one at the center. All the reasons this mathematical Castle in this guy, verifying the proofs. So, in theory, we could get digital cash, which is anonymous one. Step further. We could even get Anonymous smart contracts, where maybe you can tell you, and I interacted with a smart contract, but the details beyond that are lost. Not even in theory. This is something that's existed. Is, you cash has been
Around for more than five years now, Z cash is a blockchain that is built around zero knowledge proof for all the transactions. The recipients in the sender's can be anonymous. Truly Moon math. Is this a? So let's fast forward a bit 10 years from now, 20 years from now. I know that's really long out in blockchain land because Bitcoin Ali came around 2009 and eith only came around the early teens, but let's say 10 or 20 years from now, we've done all the hard engineering that we need. We built as much technology as we can. Imagine. What are the limits of blockchain scalability and privacy? Where do we end up doing?
End up with every transaction we want to have private is private, or do you think a lot of them stay public? Do you think that we're using blockchains for almost all cloud computing, or is still limited into the financial and high value domain? One of the things, so it's important to mention is that the scalability of watching Z is improving and it's going to improve pretty rapidly the way the block chains work today is I send a transaction, the transaction gets on the network and every single computer on the network, has to verify the transaction.
There are scaling techniques. Once again, we don't have to get into the weeds but things like Roll-Ups charting. These are technologies that allow you to use blockchains in a more clever way. Where you still have a lot of very redundant computation happening, but it's much more efficient. So what are the different techniques? This is go through those. So centralized system, send a transaction. You send it to a Facebook, Facebook has one computer, one computer your files, it a blockchain, you have hundred thousand computers use.
Your transaction all has your towels like computers verified sharding, set your transaction, the system randomly chooses, 1,000 computers out of 100,000 computers always, 1,000, computers verified and the transaction gets accepted. So, instead of all hundred thousand computers, verifying only 1,000 computers verifying when you have lots of transactions being accepted into the system, every single computer, in the network, on average is only going to have to verify, like maybe 1% of all the activity. You can actually crank out the efficiency even
Higher, eventually, you could say, every computer, doesn't even have to verify 1%. Every computer. Maybe only has to verify 0.1%, think of how bits are it works. Right? Bit towards is also like a highly distributed network. If you want to download the really popular movies, you generally can, but on BitTorrent, you don't literally have every computer, download every movie because that's totally crazy on average. The movies were going to have a few hundred Cedars, maybe a few thousand Cedars. So that number is big enough that you have the redundancy and you can generally get the
You want, but it's not so redundant that it just becomes crazy. And efficient. The question is, can you create a network that works the way that b artworks from the point of view of data distribution and efficiency, but create something that still has the same verification properties and watches do. That is what charting does one of the weaknesses of shortages that it is more technically complicated. You have to actually do the work to figure out what exactly are the rules by which these transactions to get split apart between two nodes. How do you make them all talk to each?
Or how do you do this distributed verification? Then approach that is simpler from a protocol perspective is to just say we're going to require every node in this network to be really powerful. So instead of a laptop being able to be a node would require every node to be almost a supercomputer. If you do that, then you can make blockchains that still work the way that they work today, but liquid process more transactions, maybe instead of being able to process 50 a second. We might be able to process a thousand a second or 5,000.
Second, the weakness of this approach and the reason why a theorem is not taking this approach, is that it leads to more centralization. Write the number of people who can actually verify, what's going on decreases. The number of people who need to collude to try to push through some changes to the protocol that the users might not want becomes much smaller. It's still much more decentralized and Facebook, but it becomes much less decentralized and it could be. And maybe in some cases. That's the right approach. If you want to make like a
Decentralized video game, you wanted to be decentralized but it's not the sort of thing where if it gets captured people lose hundreds of millions of dollars and maybe this more centralized approach is actually totally fine. There is this whole spectrum of applications in the Middle where it's fine. But if you want something that's high Assurance, then you do wants to create the decentralization up closer to the maximum and the current etherium does provide that it does provide, this very high level of decentralization and high level of verifiability, but at the expense of scaling, so, what we're trying to
Shorting is we're trying to say can you provide this high level of decentralization and high level or verifiability and still have a higher level of scaling. At the same time?
I want to probe a little bit further on this decentralisation question. A lot of folks were coming in a crypto, especially if they don't have a lot of experience. They noticed that decentralization is important. It's hard to end up in crypto without believing that decentralization matters some degree, but the question is why here you show up and there's a cultural slider about how much decentralization is
The right amount and the theorem is like you have to be able to verify if they're in my laptop. And the question is, why a laptop
the larger? The number of users that are verifying by default the more secure a blockchain is because in the extreme if Nobody verifies by default, except 10 different, staking poles, then all that you need to try to force a change to the rules. That the users might not like is 10 stating both to come together and agree on it. But if on the other hand, you have 10,000 users where
A way that those users interact with the Chain, by default is a verify locally and lie except blocks. If they see those walks as being valid, if someone wants to try to push some change to the rules, they actually have someone go to the users and they have to convince the entire set of users to go along with it. That's a much higher bar.
Let's say that I'm Solana. Solana is super high, throughput blockchain as much higher Hardware requirements than what the theorem has. If I were a salon, a proponent. I might say. Look here IAM has 5000 some odd nodes something.
Ballpark Solana might have. Let's say for sake of argument, one-tenth, the number of nodes to actually get everybody in Solana to somehow failed. To notice that there's been some fundamental failure or safety violation within Solana would be very difficult. Yes. It's one-tenth. The number of nodes in the theory of etherium, just has some number of nodes Alana has some number of nodes. They're all pretty large and they're all large enough communities. That they would notice. If something were to go wrong. What is your counter argument to the Solana? Advocate who says, look, it's consumer.
It's expensive consumer Hardware, but it's still consumer hardware and somebody's sufficiently motivated can still go out and verify Solana transactions
in the way that I think about this as it's not just about what is the level of technical capability of running. A notice once to gets to the point where running a node is so easy that people are comfortable doing it by defaults, right? If running a node is hard, but possible that there just is, this constant pressure to try to save time and point yourself to
Another node, potentially even some of the people participating in the approved State consensus are going to start pointing to the same node. I think that actually happens in chios a couple of years back right now, doesn't the so on a foundation even have to explicitly do whole bunch of work to actively encourage people to run nodes.
All these new layer ones have a lot of subsidies that go out to most of the no
providers, right? So the question is, when the subsidies disappear is the network, still going to work that way. There's actually two aspects to us. One aspect is the technical.
Usability and Technical feasibility is is running a node easy enough that people are going to keep doing it as a hobby even with etherium. There's a lot that we can do to make running a node even easier than it is today and a lot of the scaling things that we're doing and a lot of the protocol changes that we're doing over the next couple of years, aren't trying to be in that direction. For example, there is this feature called stateless clients. The goal of sales client says that it becomes possible to verify the chain without having more than a very tiny amount of information on your hard drive, right?
Right now in aetherium know the takes up half my hard drive. After sales, clients will start going to take up any of my hard drive Bitcoin is in a very good place already from a node running e is point of view. Bitcoin is in a better place than a theorem but Bitcoin does obviously Sacrifice by having significantly lower throughput. Then the theorem does. So technical feasibility is one aspect. Another important aspects is culture. People need to deal like it is this very ingrained responsibility that there's lots of this very independent verification.
Oh
my God, and that's something that is difficult to cultivate. It is one of those things, where if you lose, it is fairly difficult to try to get it back and I do think Bitcoin has that. I do think that in etherium with the steak and culture. It's actually been improving recently and I wanted to keep improving, but it is the sort of thing that needs to be a highly valued. The two things going into each other. If you have a culture that values running nodes, then you have a culture that's going to Value making protocol changes to make it easier to run a node.
And if it's possible to run a node just technically speaking that it's more likely that you're going to have that kind of culture, people sometimes ask us. Hey, why not crank up the parameters by a factor of five and why not require people to have 10 0, B, hard drives. And a lot of people in aetherium, core developments are actively resisting this. So I think it's only a theory em and Bitcoin almost that have cultures that are rolling to actively make sacrifices for decentralisation. So that same extent, I've always taken the point of view at the most decentralised coins will win in the end because the whole point of blockchains is
Centralization. Otherwise, you wouldn't need them in the first place. That said, it does seem that every wave that happens in crypto where new users come in and there's a boom in a bull market. The new users tend to go for a minimum viable decentralisation. They don't care about decentralization until the bogeyman shows up, and start stomping them. Out of existence, even decentralized finance. A lot of these are decentralized in name, only the running centralized front ends. The teams are in well, known locations. They're probably found the Howey test and some level or another. And we're going to find out just how far
Events are going to go to test the decentralization metric. But privacy. The same people don't value privacy until somebody goes to jail over it and then they're like, oh wait, I want privacy or someone gets D platform right now. We're in a bull market phase. And when the risks aren't as high people, sort of ignore decentralization and privacy, but after a couple of incidents, you will see people start paying attention to decentralization and privacy and at some level the oh, jeez know this because the most money is still locked up in Bitcoin Ethan, some of that has momentum, but some of that is also security. You can put
The into Bitcoin Ethan, forget about it for a long time. I'm not convinced you can do that in a lot of the other protocols that are not completely decentralized privacy. Everyone just seems to be ignoring for now. Well, sir, they do cash exists. Do you see tornado cash in aetherium? Staying at a separate layer or separate application or do you ever see being folded into a theorem that a core level realistic way? It'll stay at a separate layer because if they are a philosophy in general, is to try to be simple at the base and for a lot of them extra features to be something that gets built.
It on top, there is a lot of other blockchains that. Take different philosophy. Is once again an EOS, their default wallet, type has social recovery in it or something
like that. But you gotta update your references. Everything,
if you're dirty, this talking about that chain, we should get into social recovery. Social recovery is a really interesting concept. The basic idea. Is that your wallet? Because now, you have to be your own bank, if you really want to be a crypto head, it's scary. So some of us have to trust third-party custodians, but then your back into normal banking, so if you want to
Tell yourself then social recovery W or where you can share your wallet with your friends or family or other trusted people. So that when you need to recover it, it takes 2 out of 3 or 3 out of 5 or whatever keys and Bitcoin has native support for this ether now, has products like gnosis safe and others that lend support to this. So the wallets are getting better Security's. Getting better. We didn't talk about the whole ecosystem, which is interesting. We were talking about scalability. The point I got was that eith is a decentralization culture. It's going
to go for decentralisation first, which actually makes it attractive for high value applications, like decentralized Finance. If you're trading a 10,000 dollar trade, you'll pay the fifty dollars in fees for the security. By the one thing that we didn't talk about. Is that a blockchain runs a market for Block space. There is limited block space because there's limited computing power. So you're always participate in auction and you're paying to get your execution of your application included in the current run of the blockchain. And so to do that, you're buying block, space and etherium.
Space has gotten quite expensive. So things like sharding and adding these things called roll up some layer to which we haven't talked about. These are ways of creating more block space, Bringing Down the cost of blocks. But even if aetherium stays very expensive than the high value applications will stay on the etherium. Those people will just pay more. If you're building Wall Street, you want rule of law, you want equal protection of the law, you want property, right? So you pay for that. Whereas, if you're just building a game and you're trading magic, axes and swords, and they're worth a couple of dollars each. Maybe you just
Go to a blockchain that doesn't value decentralisation as much. So perhaps the applications break down that way but one of the things we haven't talked about is this incredible ecosystem of all these people building on it and around it. And my personal view is that if got saved if you look at Bitcoin, there's not been a lot of innovation in Bitcoin. Sure. The core developers have done some good work, but now the meme and Bitcoin is no no, we don't change anything because we're trying to be the reserve currency here. We're trying to be digital gold. So we don't want to change anything. Everything is fixed Immaculate Conception.
It was mostly right at the beginning. We made a few tweaks. It's good to go. We'll fix a few little things, but you can rely on this because it doesn't need to change. It already does a job and it does it well, and I kind of buy that argument, but I don't buy the Maximus argument, that is the end goal of all blockchains. There are other blockchain things you can do. And then eith, we're doing a lot more than just that. But even there, I noticed that there's an incentive mechanism around coins. When you create a blockchain, you create these coins to regulate access to the network.
Now in a theory you reward the people who are doing the hard work around the block chain. So your reward the miners were securing the Block Chain or the stickers were securing the blockchain and it's been hard to reward the developers. I know Z cash had a founders award which was controversial. Satoshi has 5% of the Bitcoin blockchain. The Geocache founders award is like 10% of the blockchain, some of the modern blockchains 70, 80 90 99 % is going to the initial teams and investors. And these are the VC chains. So how do you incent people to build on?
Buddy, else's blockchain because the incentive is becoming. Well, that's a great Block Chain. You got there. It's open source. Let me for Kit. Let me make a copy of it and run, it myself. Or I've seen game developers were saying I don't need Solana level security. I'll just for can existing block changes. Make it my own and my own users were running. The game will also run the blockchain. So the incentives aren't there for developers to build on somebody else's blockchain. I got in trouble for saying this in 2017, but I still stand by it. There is a free rider effect on blockchains. There is a
wrong incentive to Fork a chain and build your own rather than to build on existing chain. There's a couple of brilliant things that maybe by accident, may be deliberately happened on eith that have allowed an ecosystem of innovation on eat their zrc 20, which is people are building their own tokens. And then there's these roll up some layers where people are building on top of eith. And in theory, they're going to issue their own token. So I would argue that the one place where the eith innovation has been the slowest and maybe because it's technically the hardest has been at your own layer. It's been at least
One, where the East foundation is working, where the sharding is supposed to take place. And where youth to is supposed to get built. That's where the schedule has been the furthest behind words on Roll-Ups on layer. 2. Things are moving very, very fast on ERC 20 other assets built. On top of eith things. Are moving very, very fast. And I wonder if it's just as simple as incentives. Have you thought about how do I incent the people working at layer? 1 to move fast, maybe if they got their own token, somehow, the hearing Foundation does have like a bunch of Youth and it uses used to pay people.
By working on layer 1, a few months ago. We announced a client developer reward for basically every one of the team's that's building a piece of software that understands and talks to the ethereum protocol and can run an Ode to gets some amount of years that was in the form of E that. So walked up in the proof of stake system, that is not fully connected to the rest of your theory am yet. So if you're in the house to have fully switched over to proof of stake, in order for them to be able to withdraw that money. So that kind of incentive exists.
It's not even so much about incentives. The application layer in the layer to has been faster because building at those layers is permission list. You don't have to coordinate with anyone to build a layer to it. You don't have to coordinate with anyone to build an application. Whereas if you wants to change V, aetherium protocol, that's one of the most permission things out there. You have to just get lots of people to agree. Have to get an entire Community to buy into a protocol change for the theorem later ones. Here's an interesting question. Imagine. We froze layer one today.
Day, you can make small changes like the Bitcoin folks do. But you couldn't make big changes. But the layer two people continue innovating permissionless lie, they keep building all their Roll-Ups and all associate Technologies, but you're still on proof-of-work. You're still not charted at layer 1. Could eat still work could later to carry it along for a while it cut. I don't think people would be happy about it because people in ethereum, do you love proof of stake in? Want to get over to it quickly just to give some concrete numbers today. If your am is on average,
You will about 15 to 20 transactions a second. But if we just move slowly or to is, then we could go up to about five thousand transactions as you keep the same Block Chain, but instead of using the blockchain directly, you use these extra protocols, that package up the information and use the blockchain, a different ways. So that you're still doing the same stuff. You're still getting the same security guarantee is, but you're using the blockchain more efficiently, there's more compression and more of the computation is being done off Chan, through other protocols. So there is
100x improvements can't happen with lawyer to is done. Well that has not happened yet. Now we are to as they exist today. They're very far from perfect. Instead of 100x gain, you might only be 10x gain or even a bit less at the moment. But some role technology is improving all of these things are improving. So if Fleer one did not change and if all we could do is just a moral, your twos, we could get up to five thousand transactions. A second that would definitely be a pretty good etherium already that layer to execute.
And is code, what about the data? But the data is still all have to stay on the layer, 1 blockchain. So ways that Roll-Ups work is that they do the code execution of chin. So there are these cryptographic protocols where the execution gets done off chain and then verified on Jane and the verifying is much faster than the original computation and then the data has to be on chain, but the data can be on chain in a very compressed form. Instead of putting transactions on chain. You put like a zip file of the transactions on Jan. It's
like doing a data for computation trade-off. You have less data, but then you have to do more computation, but we're okay with doing more computation because we could do more computationally efficient way off chain. If you do a roll up super efficient way, and then you only need to put a build 16 bytes on chain per transaction today on average transaction. So I can hundred to two hundred bytes. So 16, bytes on chain and then decompression, verification computation happens off. Chain, everything happens often except for this tiny amount.
It that's where the efficiency comes through. I'll save you and your team recently did an analysis where you tried to look at the actual throughput on these different smart contract chains, but you didn't do the decentralization party yet. So obviously if looks the worst because it's the most decentralized. Let's also talk about how much of that is because it's Legacy and how much of it is because it just chose to be the most decentralized
to the talents Point. Usually, when people Benchmark blockchains, they tend to choose benchmarks that make them look good. That produce, big numbers and the
Most obvious way to do that is to just Benchmark transfers, especially with a lot of these newer blockchains. They tend to Benchmark transfers that are done in a test net or done in a Dev environment where you can always get crazy gigantic numbers that aren't reflective of reality. We'd seen so many ridiculous claims being thrown around about what kinds of throughput blockchains could do. Then we thought, okay, why don't we develop a clearly objective Benchmark as a way to verify, what can these blockchains do? When you compare them apples to apples in terms of a common type of transaction that all blockchains?
And the most common one which is how almost all training happens today. Blockchains is a unit swap style. Amm trade. Amen. Automated Market maker. It's a very simple, mathematical way to trade two assets. Most of these you can just simulate by looking at the gas limit and looking at the Block time and don't need to do a whole lot. Others of them. You have to verify empirically because the way the gas computer doesn't tell you enough to verify whether the blockchain could actually get that in production. So what we found is that the theorem can do about 10 trades per second sell o can do about 25. A vax can do about that.
Already, but it has much higher ceiling. Polygons can do about 50 and by net smart change to do about 200 and then Solana, which famously claims that he can do in the thousands to tens of thousands of transactions per second. It's a lot I can do about 280 but part of the reason why a theory and performance is where it is, is to Patel. It's Point earlier that etherium has enshrined a certain level of decentralization. This is important as a norm as an institution that we make sure that a theorem is accessible to anybody on the laptop and most of these newer blockchains.
Have chosen that they choose different points on the decentralization, performance spectrum. And my view is that it's totally sensible to have blotches to choose a different point on that trade-off curve. It's really important to have a theorem and to have Bitcoin, which go all the way to the left, but it's sensible that some people should have luxuries that are tuned for different trade-offs. But within tuning to a different kind of you better get really high performance, if you're going to be not very decentralized, my point is that if you're going to make that big trade-off, you'd better be getting a lot of bang for the buck when you're doing
it. Not only that, but I think the hive
The applications are going to end up on bitcoin and etherium in that case and the highest value application is just money. I'm curious metallic. If you think longer term money is a use case of eith is if the token and if the coin price, a byproduct of something you need to run the network or is it itself a core value? That each should be a store of value and should be a place where people can put their money in and forget about it for ten years.
Ultimately, that's a question for the community to decide, and I think over time the community is more and more deciding. Yes. If is an important asset and you can use, 'if as a store of value, you can use these as a money. You can use these to make transactions because ultimately, it is equipped to currency. It's a cryptocurrency that whose value is in some ways supported and backed by all of the activity that's happening on the etherium chain with efe 1559 make up the big portion of the transaction fee from every transaction.
Which is paid in Eve, has to get burned. Once we have proof of stake, its projected that will even have - issuance. So if is positions to be fairly unique in that way, but to be it's not an either/or. If the asset and if you're a application, while your ecosystem are synergistic. With each other, the stronger the application layer ecosystem is the stronger Earth is and the strawberry thing is as an asset, the stronger, the application layer ecosystem.
People often compare Bitcoin to gold or to the dollar as a store of value, but the biggest stores, the value in the world are not Bitcoin and gold their factories stocks houses. Real estate actual productive assets. Oil is another one Commodities, Etc. People store value in all kinds of weird places art and FTS. So it's absolutely possible that there will be multiple stores of value. If anything, what's more decentralized and having dozens of viable coins that you can store in running, thousands or tens of thousands or millions of
So you can store and that's true. Decentralization. So you don't have a point of view on it. You're just like whatever the community wants that makes the network run but isn't there a tension between trying to be welcoming to newcomers and new applications and highly scalable? And letting everyone use your network and constantly innovating and changing and trying new things versus preserving the value. For the people who are already there in preserving the value, that's already been built. There's an inherent tension there. There's definitely some tension, one of the big benefits only if you're a
Ecosystem the Sawyer two aspects to it. The pluralist aspects the way in which the ecosystem has many sub ecosystems, is that it is in many cases able to satisfy both but if all you want to do is you want to have your Ethan, you want to hold your ether, you can do that. And there's even some is ERM applications that value stability, almost as much as a theorem itself. Does makers owl might be one good example. The awry might be another good example, the Earth, some of the algorithmic stable coins, but then if you want,
Go and do wild crazy stuff then if there are M. Lets you do wild crazy stuff too. And if you need more scalability to do wild crazy stuff that you can go do, the wild crazy stuff on a roll up. So if you're in as an ecosystem, does try hard to have a place for many different kinds of participants in that way, which is definitely something that's hard to accomplish a lot of the other blockchains either. You adjust to the additional rock or you're just a platform but there isn't the digital rock. That keeps the whole thing solid. And if you're a, we do value solving the
Problem of both having the ecosystem that can do a lot of stuff and having the digital Rock in the middle to keep it solid. Whether or not we'll succeed is of course, up to the next decade of world history to decide.
