Vitalik Buterin

the time he got to high school. At age seventeen, his father introduced him to bitcoin. He couldn't afford to buy it, so he wrote about it instead, and while he found bitcoin fascinating, he felt like he had an even better idea in metallic Butteran wrote the original white paper that conceived ethereum not just a digital currency, but

an entire network built on the blockchain. It's now worth more than three hundred billion dollars and the biggest believers claim it will send the rest of the cryptocurrency market into the ether. Joining me on this edition of Boomberg Studio at One Point Oh, the inventor of Ethereum metallic Peuterin. We're going to talk about Ethereum, but I want to

start first with how you got here. You were born in Russia, you emigrated to Canada with your parents when you were just six years old, and you started learning about bitcoin from your father. What is it about bitcoin that hooked you both? Bitcoin is really interesting because of how interdiscipline are it is. I was very interested in math and computer programming and cryptography and technology. I am was also very interested in economics and kind of politics

and philosophy. And bitcoin just happens to be this interesting fusion of all of these things, right and at the same time, Like it's not just a piece of code that that's there for fun. It's not even just an app, like it's uh, something that's really intended to have a very big and meaningful impact on how the world works um. And so I think just having both of those aspects together definitely made a bitcoin very interesting to both me

and my dad. As I understand it, you didn't have enough money to mind, so you wrote about it instead, and in you wrote the original white paper that became the basis for Ethereum. What was it that sparked that original vision? So I joined the bitcoin space in early two thousand and eleven, and I wrote the that Ethereum white paper at the end of two thousand and thirteen, if that was the time when things first blew up in and uh, it was clear that this was something

that's significance, right. Well, I remember going to the Bitcoin conference in San Jose, which had about a thousands people in it, and that was when I realized that, like, hey, this isn't just a bunch of weirdo school only exist on the internet, Like this is real. Elder's people trying to actually do things. There's people building businesses, a lot of which are actually pretty successful. What started happening then with people started thinking, well we have bitcoin? What next? Right?

So what else can you do with the blockchains? Like what would bitcoin two point o or cryptocurrency two point oh look like? As I understand it, it's it wants to be a whole new operating system like a new Apple iOS, which with a ton of apps built on top of the blockchain. And the simplest terms, what is ethereum and how is it different from bitcoin? So bitcoin is a blockchain that's designed for one application, right, which is maintaining and letting people use bitcoin the currency, Ethereum

is a general purpose blockchain. So instead of being a blockchain that's designed for one application, Ethereum is a blockchain that supports a built in a programming language, and whatever blockchain application you wants to build, you can just write the logic of that application in the programming language, upload that program to the chain in and this becomes what we call a smart contract, and anyone can then interact with your application, and the blockchain interprets the rules of

your application for you. So, instead of being something that's designed to do one thing, is designed to open up space for creativity to like basically let people do whatever the thing that they want to do on top of it. So is the idea then that the next Facebook or Twitter would not be owned by Jack Dorsey or Mark Zuckerberg, but be built on the blockchain and owned by everyone. There are multiple projects already trying to do that, and

lots of them are based on Ethereum. So yes, So then is ethereum a threat to established centralized companies and social networks like Facebook, like Twitter, like Google. I think it can be a threat, but it can also be an opportunity, Like I think even Jack Dorsey himself, right, he has the sub project it's called The Boys Guy, which is trying to figure out how it Twitter can

and incorporate decentralized elements. And I think a lot of these projects wants to actually do this right because I think a lot of them are realizing that being are kind of centralized focus of power and having control and of so much of everyone's data and all of these things. Like it's it's not just an asset, it can also be a liability as well. Now we still don't know who Satoshi Nakamoto is, whether that's even a single person

or a group of people. What is it like to be a known and visible figure behind such a popular technology. I mean there's definitely times when I want to be less visible um, but I guess that comes with the with the territory. Why do you want to be less visible? I mean one of the other Ethereum co founders, Anthony Delrio, recently announced he's quitting crypto because of safety concerns. I mean,

is that part of your concern as well? I mean it's not so much physical safety per se as just like I want to take the ability to also, you know, have a life and not just have like random people running up and saying, are you the metallic bouderin um? I don't know, I geah. There's definitely times when I find such things annoying, and so I don't know. I'm like, I'm likely to keep wearing my mask in lots of places in it. And that has nothing to do with COVID.

There was a lot of debate early on about what Ethereum could be, would be, should be for profit, nonprofit? Nonprofit? One out, and I know that that was really important to you. Why did you want Ethereum to be a nonprofit and how did you come to that decision. It was just a very importance to me that, like, this is a technology that decentralized infrastructure that's meant to be not controlled and not owns by anyone, and it's a

platform that's for the world. And so for that platform to be connected to a company that had a very small number of shareholders, I think is something that could really centralize the ecosystem. And so something that I thought would be very was a very unhealthy and one it's to really avoid now. N f teas in particular have really helped bring new users into the crypto tent. We saw you at Ashton Kutcher and Mila Kunas's kitchen table Let's Ethereum, So Ethereum is a general purpose of watching.

You also were not happy about Kim Kardashian getting involved, and I'm curious where do you draw the line when it comes to celebrity endorsement. The thing that I was unhappy with about Kim Kardashian was that she basically like shields something like Etherium Max. That was I think, you know, I'd call it a borderline scam. Right. It seems like this project so that's basically just like at best, a pure money grab that's not really providing much of value.

This is my conversation with the co founder of Ethereum, Vitalic Buterin up next. Now that Ethereum has blown up, how does it get past the growing pains to truly become the world's computer And what are buterans concerns about scams and cyber attacks in the crypto space. I'm Emily Chang, this is Bloomberg Studio. At one point out stay with us. Ethereum has had some growing pains, whether it is high transaction costs, traffic jams, front running. Why do these problems exist?

This is the scalability problem. Everyone's been talking about the scalability problem for at least five years now, and and in basically it's like a simple supply and demand problem, right like, if the number of people who want the cent transactions goes up, but the amount of space for transactions on chain doesn't go up, then all of these people who want the cent transactions are bidding against each other, and only the ones that are willing to pay a

really high amounts can actually get in. The Only way to solve this is to just improve the technology to increase the number of transactions that the system can process. And it's why we're doing We've been doing just all kinds of incremental improvements to the blockchain clients and the protocol and the code. Over the last five years. ETHEREM scalability has increased by about a factor of five since

so the project started. And then there are some problems that are not like just just scaling problems per se, But there's still technology problems, right like, there are problems that have to do with the facts that like, this entire ecosystem has blown up and gotten big fairly quickly, there's a lot of aspects of it where people are still true to know their states, like what is the correct way and what is the safest way to do these things, like, for example, the state of just security

auditing for blocking protocols like it. It has gotten much better since the dal hack back in right, but you know, at the same time challenges continue to exist, and that's normal in any space when you know you have I guess that usage growing faster and then the technology catches up. Can you contrast proof of stake with proof of work? Why do you think that's so much better? The reason why blockchains need to have a proof of something, right

is because like these are decentralized systems. So for example, and proof of work, like the system actually measures how much computing power is being put into blook and so in order for an attacker to take over the network, they actually have to have more computing power than the rest of the network combines. Right, Like, so you can't just spin up a billion virtual machions on one computer.

But the probably is that it requires a huge number of computers to be constantly running seven So it works, but it's very expensive. Proof of steak it works differently right, So proof of steak works by instead using coins as the economic resource. So if you have coins inside of the system, then you just sign messages with those coins, and for an attack or to take over, they have to basically have like more coins than the rest of

the network put together. So it does the same thing, but it avoids the need to have these computers running seven and that's where the efficiency comes from. You're planning major upgrades meantime, and East two point oh is well underway. What will that accomplish? What problems will it solve? So I think what people call eath two point oh as UH has two big parts, right, One big part is

the switch the proof of steak. So after a full transition to proof of steak UM, there will not be more any more mining ethereums energy a consumption will go down from by like a factor of more than one thousands, so it will go from being a big problem to basically not a problem at all UM and the channel become more secure, more secure, it will become more efficient.

So after that, the next major milestone is what's called the merge um, which is when basically the proof of work chain it just stops running and all of the applications on the proof of work chain get moved over to the proof of state chain and continue running inside of the proof stake chain from there. Now, while you're working on all of this, Ethereum has developed an unseemly

reputation as a fertile ground for scams. And I wonder how concerned you are about a crackdown like we saw with I c o S. What are the longer term consequences. There's definitely going to be a crackdowns on things happening on blockchains, just like there's crackdowns on things happening on

the Internet. I do think that the state of the industry, in the state of things is improving, But if you just compare it to the way that the space was like five or eight years ago, right, like remember um Mount Cox just like collapsed and half a billion dollars disappeared. Like basically, I think we still don't know where most of it iss and like things do continue to happen from time to time. But just like as a fraction of the scale of the space, I do think that

it keeps getting smaller and smaller. One big consequence, of course, is that mining is moving out of China, which I mean there's a there's definitely a silver lining there in terms of decentralization and that you don't have as much hash power located in one country anymore. Um. But at the same time, you know, the mining farms there were you know, real companies with real employees and real people. Some a degree of regulatory action is happening, but it's

not looking like, you know, anything close to um. You know, at the level of like say, what people feared ten years ago, there's concerns about Russia being behind a spate of cyber attacks and cryptocurrency being used as a tool of extortion. How do you think about the intersection of crypto and cyber warfare? To me, I think that this

is a temporary phase. Like I think what's happened is that just like even like the Internet as a whole, it grew a huge amount over the last twenty years, and for most of that twenty years, people just did not take security seriously. It's even the wrong thing to

be doing, to be trying to blame attackers. Ultimately, the things that's at fault is the fact that there are these excellent tools within cryptography and like within you know, the technology behind cryptocurrency itself that allow you to be much more secure against these kinds of things. And I mean my personal hope is that people like at least see like the level of attacks that are happening now as a wake up call and that we get a massive effort to just improve the level of security is

just across every industry and across the world. Because if if that doesn't happen right like, then you know, it's not it's not even ransomware attackers or that are going to be a problem. Like, it's at some point, you know, whenever the first like full scale cyber war happens, if people are not prepared, it's something that could end up, you know, being really being something really bad for the world.

You're listening to my conversation with Vitalic Brant, co founder of Ethereum, coming up with flocks of new users coming into the crypto universe, legacy companies like Facebook and Twitter or paying attention well does butter and think about big text crypto efforts including Square, Jack Dorsey and Defy. I'm Emily Chang. This is Bloombrook Studio. At one point, Oh,

stay with us. Right now, it is mostly finance apps that are built on Ethereum aside from n f t s, And I'm wondering what is the killer app for ethereum that could lead to widespread adoption, much like email was for the Internet. I think there's a few candidates. UM, so defy is obviously one of them. UM. I think that like blockchain based financial things have always been attractive because like the traditional financial system just sucks more than

traditional centralized tech. Right, Like if I send to an email to um, you know, someone in Guatemala, then they're going to receive it in one second. With with finance, you can't even say that. A lot of people in companies even today just to use grupt the currency to send money internationally outside of finance. Yeah, think one interesting area that I where I think blockchains might go. Here. You notice some that in order to access your assets

in ethereum, he needs to have an account. We're getting to the point where there's a lot of work that's been done on making these accounts very secure, and so instead of just being accounts that hold money like these these turned into like fully fully blown profiles, right, and once you have profiles and you can start doing decentralized social media. On top of that, the social and financial things that you that you can do with that given working together, um is something that I think could be

really big. Now, whether Bitcoin, ethereum or the blockchain really are changing the world seems to be an ongoing debate. Is crypto the future or is it a fad? I think it's the future that contains fads, much like the Internet was the future in the Internet contained fads um. You know, there's definitely specific kinds of applications that do get overhyped from time to time, like um I, c O s back in and then there is certain kinds of DeFi right now. But at the same time there's

other de hy projects that really are valuable. There's a combination of both, right adds figuring out which is which is. Maybe it's something that's difficult to see ahead of time and it's something that you know, we as an ecosystem we're going to find out. So the crypto skeptics, many people that you know are admired in the financial world,

Jamie Diamond, Warren Buffett, Are they just wrong? A lot of them have definitely been just the wrong already, right like they expected even back in twenty thirteen to fifteen, at least some of them to see blockchains that were currency fail and go down to zero and price just not get any more interested completely. And even today they've already been far more successful than any of them expected.

So I can see how people in a traditional finance or at least some of them, can be inclines to kind of not see the value of blockchain based finance immediately, because there's a lot of people even in traditional banks that see the value that blockchains provide and have been trying to come up with things and work with them. One of them is Jack Dorsey. Jack Dorsey recently announced Square is creating a new business focused on decentralized financial

services based on bitcoin using bitcoin. What have you learned about Jack Dorsey's plans. Does it seem like he's building

something that sounds a lot like ethereum. I'm skeptical about these, uh decentralized finance on top of bitcoins projects, So basically because like the difference between bitcoin and ethereum, right, this is a is um that on ethereum, there's like native functionality that allows you to essentially directly put either ether or etherorium based assets into these smart contracts into these walk boxes, when where there's then arbitrary conditions of any

kinds that can then govern how those assets get released. Bitcoin does not have that functionality to the same extent. Like Jack is basically going to have to essentially create his own system that enforces those rules and then on the Bitcoin alway, or the bitcoins will just have to be owned by probably a multi sigual it controlled by either Jack or just or the participants in the system.

It looks similar, but it'll end up being something with a much weaker trust model, right Like, I really think that, like this is the whole reason why Ethereum started as an independent system in the first place. Right Like, there's there's technical limits to your ability to a kind of graft new functionality onto a system that's not powerful enough to support that new functionality. Facebook Mark Zuckerberg is also

making some big moves behind the metaverse. And you know, what do you make of them waiting into this decentralized world. Could they replicate some of the same problems that we see in Facebook and Twitter today? I think Marcus clearly trying to figure out what the next stage after the Internet is and like actually get into it and created um. But you know, before the rest of the I get the world goes in some different direction, and Facebook is sort of you know, left in the dust and begins

becomes one of these kind of previous generation old world companies. UM. So you know, we we've seen Facebook try to get into the crypto space with Libra though, and I think in you know, in the end, like Libra did end up being possibly the wrong approach because like the problem that someone like Facebook has, right is that a lot of people mistrust them and so building their own platform, Like I know, I know, they tried really hard to

create something that's a consortium with all these different industry participants, but at the same like even that was not enough, right, and there's just a huge amount of mistrust of them. But with the metaverse, I guess the thing that happens during the pandemic is that we've basically very quickly switched from a world where the physical world was people's kind of primary center of experience and the Internet was this new add on to a world where the internet really

is a center of people's experiences. And so we basically are spending most of our time in a virtual world, And the question is just like what level of quality does that virtual world have so ethereum in five years and ten years, where is it? I mean hopefully running the metaverse, but I guess we'll see how it goes. You've got a lot of people out there, a lot of people who are trying to understand cryptocurrency, who are

placing their bets. What's your prediction for Bitcoin? Does it replace the dollar doesn't exist in in fifty years or is it something else? And then similarly, what's your prediction for etherory m Because a lot of investors are choosing

to hold both or one or the other. I think replacing that olver completely is unlikely just because like there's things that the dolver provides, like price stability for example, that Bitcoin is I'm not going to provide, Like I think even in a theoretical world where the US dollar collapses, like even then, I think Bitcoin is not going to be able to provide the level of stability that users and businesses expects to be able to set prices in um.

And in that kind of world, look, we we would need something else, like like it could be decentralized stable coins, it could be something us but we'll see it um so. But at the same time, I think curbtocurrency can still have a very powerful and important role alongside existing currencies. Ethereum seems to have this reputation of being a community of creative engineering types who like rainbows and cats and mythical creatures. I know you have some fun t shirts yourself.

Is that a fair depiction of the community. The community is a diverse place, and um, you know, it has many different kinds of people, and you know, you definitely has. It's it's fair share of cat people and and dog people in unicorn people as well. And I think that's awesome, and I think it's uh, I mean, it's really healthy to yess and not take yourself it's too seriously. And that's definitely something that the the Ethereum community strives to do.

You know, remember that U the world is supposed to be a place to have fun too, all right, talent Peter and inventor of Ethereum, thank you so much for joining us. I learned so much. I appreciate you taking the time to talk to us and talk to people around the world about what you're working on and how important it could be. Thank you Bloomberg Studio. A One Point was produced and edited by Kevin Hines and Lauren Ellis. Our managing editor is Daniel Culbertson, with production assistance from

malorye Abelhausen. If you like our show, please share it or write a review on Apple Podcasts or wherever you get your podcasts. Those reviews really help. I'm Emily changing your host and executive producer. This is Bloomberg