RecentEthereumCo-founder Vitalik Buterin took part in an interview with blogger Lex Freedman about cryptocurrencies, regulation, MEV (miners can extract value), Ethereum 2.0, PoS Security, Layer 2 (Rollups), Big Merger,Polygon and so on. The interview is about 3 hours long, this article is compiled from some of the content of this interview, the full content of please refer to this interview video. The following is taken from parts of this interview:
Lex Fridman:Shiba Inu was created in 2020 to mimic Dogecoin, where you were given 50% of the total supply of Shiba, and then you "destroyed" 90 percent of the gift, worth $6.7 billion, and gave 10 percent (then worth $1.2 billion) to the Indian COVID-19 Relief Fund, saying you didn't want to have that much power.
Vitalik:Let me start with the background of these coins and the stories that gave me them. Dogecoin was originally created around 2014 as a "joke" and was not taken seriously at first. I invested $25,000 worth of Doge in 2016 and I was thinking about how to explain to my mom how I invested my money in these dog coins, and the only interesting thing about this coin was that it had a dog logo and it turned out to be one of my best investments. Then, at the end of 2020, Elon Musk started talking about Degecoin, and then its market value skyrocketed to $50 billion, and it soared several times, such as the first time it rose from 0.8 cents to about 7 cents, which happened in a day. I remember I was in Singapore and I saw the price skyrocket by more than 100%, and then I thought I had a lot of money in Dege, and then I sold half of my Doge, got $4.3 million and donated it directly. Within hours, its price had dropped from about 7 cents to 4 cents. So I sold Doge at a high point and thought I was a great trader. Then Doge went from 4 cents to 7 cents and then 50 cents. Doge became an influential thing, and many people who had never heard of Ethereum had heard of Doge. This is something I didn't expect.
And then some people think, since Doge has a market capitalization of $50 billion, then you should be able to make billions of dollars in other currencies that mimic it, and I think that's what creating Shiba people thinks. But they gave me 50% of Shiba's supply directly, but they weren't the first item to give me coins. Around the end of 2020, there was a prophetic project, Tellor, and I thought it was going to be Chainlink's competitor, and I remember them just calling me $50,000 and they were advertising, "Look! Vitalik owns our Token and he is one of our supporters. Realizing this, I publicly sold their Token through Uniswap and put an end to the rumor.
Then Shiba, these people are smarter, they don't hit the coin into my address, they hit the coin into my cold wallet. Then I noticed a lot of people talking about it, and I was donated billions of dollars, and then after I got my cold wallet key, I started selling some coins and donating some directly to several charities. I actually sold 80% of Shiba and donated the ETH I received to organizations and then donated 20% of Shiba directly, including the Indian COVID Rescue Fund and other agencies.
Lex Fridman:What do you think of blockchain regulation? What is the best and worst case scenario?
Vitalik:At best, blockchain continues to thrive, and then we find a way to extend blockchain so that people can do all sorts of things on the blockchain, that's all the incredible things people've been talking about, and then there's a lot of good applications running on the blockchain, like DAOs that allow people to interact in better ways, making artists better benefit, and so on, and then getting enough public support to make people realize that cryptocurrencies can do a lot of good things and other innovation potentials that need to be understood.
At worst, people suddenly think the technology is being used by some bad people, but I don't think the government can stop blockchain, but they have the ability to marginalize it, such as banning all exchanges and banning all mainstream employers from accepting and using cryptocurrencies to make payments less impactful. Obviously I wanted a good situation to happen.
Lex Fridman:Let's talk about Ethereum 2.0. How will Eth2 make Ethereum more scalable, secure and sustainable?
Vitalik:Actually, we've stopped emphasizing the term Eth2 lately, and the reason behind it is that at first we envisioned a big, grand vision that all the good things would happen at the same time: a whole new blockchain and a whole new protocol. Later we slowly adjusted the roadmap to a more step-by-step format, with PoS and sharding occurring over time, as did all features and features, although the average Ethereum user felt a seamless experience that might be more complex than previous hard fork upgrades, but not so complex from a user's point of view.
Once considered two flagship features of Ethereum 2.0, it is now considered the next flagship feature of Ethereum's evolution: PoS and Sharding. PoS is a consensus algorithm, or consensus mechanism, that is, the way in which a network node chains which block or which transaction in what order, ensuring that once a block is chained, it can no longer be reversed.
Blockchains such as Bitcoin and Ethereum currently use PoW, basically because there are a lot of computers (nodes) in this network that agree on which block to accept, and sometimes both blocks are published at the same time, so a consensus needs to be reached on the order of the chunks, so a "voting game" is needed. But who has a greater voting weight cannot vote "one person, one vote" because a bad guy might have 100 billion virtual computers on his computer, so he has 10 billion virtual nodes, and then probably has 99% of the network nodes and control everything on the network.
To prevent this from happening, both PoW and PoS determine your voting rights proportionally based on how much economic resourcesyou contribute to the network. So in PoW, you have to prove how much economic resources you have, that is, how many computers you have and how many computers you run them 24x7, which really works because if you want to attack the network, you need to invest more computers and more money and power, and the cost is very high.
In PoS, unlike in PoW, which contributes computing power by 24x7, you only need to pledge a certain amount of money into the system as an economic resource. I've loved PoS for many years because it requires less resources, it doesn't need to buy mining equipment from manufacturers and consume a lot of energy like PoW, and PoS only needs to run on a commonly used PC, and you can run PoS authenticator nodes on the normal PC you're using. This approach is therefore less resource-intensive and less burdensome to the environment. Another reason is that, based on PoS, blockchain doesn't have to pay as much to the people (miners) who maintain the network as PoW does, and Bitcoin and Ethereum currently provide about 4% of the total supply to miners each year, Ethereum issues approximately 4.7 million ETH per year, with a total supply of 115 million ETH. But with PoS, we expect an additional about 500,000 to 1 million ETH per year, which means that the total supply will not increase too quickly.
Lex Fridman:How secure do you think PoS is?
Vitalik:I think PoS is very secure because if you want to successfully attack an Ethereum network, then basically you need to have the same amount of ETH as you pledge across the network, like now we have 5 million ETH pledged (in the beacon chain) and then you (the attacker) need to have 5 million ETH and join the network, and these ETH values are about 150 I think it's more expensive than attacking the Bitcoin network; second, PoS recovers more easily from an attack than PoW, and we have a lot of measures in PoS to target the attack, such as we have an automated slashing mechanism that destroys the money pledged by the perpetrator, and the community can respond to (successful) attacks by coordinating soft forks, and the attacker will lose a lot of money in the new chain."
Lex Fridman:Some people think meV (miners can extract value) is a threat to Ethereum, what is MEV and how to deal with it?
Both Vitalik:P oW and PoS have MEV (Miner Extractable Value) issues, or Block Explorer Extract Value( PBEV, which is the value that block proposers can extract). The basic meaning is that if you have the ability to package a block in what order, you can use this advantage to reap economic benefits, not just through transaction fees, such as by running away or trailing other people's trades, so that block proponents get a percentage of the proceeds.
This behavior is a challenge because, first of all, it sometimes reduces the user experience, dispromising the user's trading, and the greater risk is that the economies of scale that MEV brings to miners or validators may lead to PoW mining or more centralization of PoS validation. As a result, the ecosystem has taken MEV seriously, and projects such as Flashbots are already in progress. It's a real risk, but we're doing something right now.
Lex Fridman:Let's talk about the concept of expansion, specifically Layer 1, Layer 2 and the interaction between the two, and the concept of sharding.
Vitalik:There are two paradigms for extended blockchain, layer 1 extension and Layer 2 extension. L1 extensions are mechanisms that enable the blockchain itself to handle more transactions, although the blockchain itself has some performance limitations; In Ethereum, the most popular L2 paradigm is Rollups, and the most popular L1 expansion paradigm is sharding.
Lex Fridman:One way to extend blockchain is to increase the block size, and before you talk about Sharding, can you talk about the block size debate?
Vitalik:This is a trade-off between writing to the blockchain (that is, trading on the blockchain) and better reading the blockchain (that is, having the node verify that the transactions on the chain are correct). Both are equally important in terms of decentralization. If the reading cost of a blockchain is high, this means that people need to trust a small number of nodes that can change the rules of the blockchain without the consent of others, and if the write (transaction) of a blockchain is very expensive, then everyone moves to a very central secondary system.
So I think it's going to take a balance between the two, and favouring one side would lead to the blockchain going unhealthy. I think there are two main reasons why Bitcoin's block size of 1 M is that they think it's really important to be able to read blockchain, and the other is that a lot of people are defending the principle of not forking it hard. Larger block sizes mean that blockchains will become more central because fewer people will be able to run nodes and may also result in hard forks.
Lex Fridman:So what is sharding? What are the characteristics of shards?
Vitalik:Sharding does not increase parameters as it does block size, but rather changes the architecture of the blockchain so that a single node in the network only needs to store a portion of the data for the entire network and process some of the transactions. The challenge of adopting this model and applying it to blockchain is that blockchain is not just about spreading data across the network, but about building consensus on the data that is spread across the network and ensuring that the data that is agreed upon is correct. So there's a paradox, like assuming you need a blockchain that can handle 10,000 transactions per second, but each computer node in the blockchain can only process 100 transactions per second, so how can a single computer trust another computer without validating all transactions?
There are several ways to do this, such as by shuffling (disrupting) the authenticator at random, such as having 10,000 validators (pledgers) in a PoS chain, and for simplicity, we assume that each validator Bet the same amount of money, then randomly disrupt the authenticator, assign 100 validators (form a committee) to validate one block, and 100 validators are assigned to verify another block, and so on. Effective information is broadcast in such a way that when a 100 validator validates a block, it signs it to indicate that he or she agrees with the validity of the block, and then all signatures for the block are aggregated into one signature and broadcast to other authenticators on the network, and the other validators simply validate the signature without having to directly verify the transactions in the block. When other validators see the signature, they do not directly believe that the block is valid, but rather that most of the validators in the block agree that the block is valid. So if I believe that most of the validators in the block are honest (because these authenticators are randomly assigned, the attacker cannot cede all the authenticator nodes he controls into the same committee, that is, the nodes controlled by the attacker are randomly disrupted), then the illegal block blocks will not be included in the blockchain. This is a simple sharding form.
There are other, more sensible forms, such as the concept of zk-SNARKs, a zero-knowledge proof, which is the idea of generating encryption proofs that generate a proof by running some complex operations on a piece of data. If you generate such proof, such as when you see a zk-SNARKs certificate that a block is valid, you can trust that the block is valid. There is also a type called data availability sampling that lets you be sure that the data in the chunk has been published. Basically, if you stack these methods, you can create a blockchain system that allows individual participants to believe that everything that's happening in that chain is right without having to verify it yourself. This is Sharding.
Lex Fridman:As far as I know, Ethereum is proposing to implement 64 shards, how does this achieve capacity expansion? Is this number fixed? Is this to achieve its capacity-expanding competition with a credit card or Visa?
Vitalik:Over time, the number of these 64 shards can be increased by hard forks, and theoretically 1024 shard chains can be implemented. More sharding chains can present challenges, such as the need for a logic to examine and manage all of these shards, and if there are too many shards it can be more expensive, but you can still improve slightly. And the other thing we're doing is combining Sharding with Rollups.
Lex Fridman:Oh, Rollups. So let's talk about the idea of L2,
Vitalik:Rollup's basic philosophy is that the user sends the transaction to a central aggregator, which in theory could be an aggregator in a Rollup, a model that does not require a license. What Aggregator does is they will cull all trading data that is not related to the update status, and then retain the data needed to update the status and compress it, so they simply publish these very small compressed data on the chain without having to publish all the trading data. The amount of data published on the chain may be reduced tenfold.
There is also the calculation not on the chain, but under the chain. There are two ways to do this, one is zk-Rollup, which provides a zk-SNARK certificate to indicate that "I calculated, this is proof of my computational hash" and then submitted the certificate to the chain, and then everyone verifies the certificate without verifying all of these transactions; Then another person can object and claim that the outcome of the transaction is different, and if there is such a disagreement, then the entire block of data needs to be published on the chain and verified, and the wrong party will lose a lot of money.
As a result, Rollup can chain 90 percent of the data and 99 percent of the calculations, and then put 10 percent of the data and 1 percent of the calculations in the chain, so the magnification can increase by about 100 times. Now that these systems are online for applications such as Loopring, a zk-Rollup-based payment platform, you can trade at very low transaction fees, such as 5 cents (instead of $5), by depositing money into the Loopring system. Although Rollups on Ethereum now support only a few apps, it is expected that in a few months there will be fully Ethereum-compatible Rollups. As a result, combining Rollups and sharding results in 10,000x increased capacity, resulting in thousands of tps.
Lex Fridman:So this capacity-expanding processes a lot of transactions faster and at a lower cost.