"Fortune" Dialogue with Vitalik and His Son: Many People Are Overly Negative About Ethereum's Transition to PoS

Original author: Taylor Locke, Fortune Magazine

Compiled by: Cookie, Chain Catcher

Ethereum founder Vitalik is not worried about the current momentum of the cryptocurrency crash, and he does not like his creation to be used for speculation.

Vitalik's father is named Dmitry Buterin, commonly known as Dima. He is a Russian-born engineer and entrepreneur who later moved to Canada with his family, where Vitalik learned about Bitcoin from his father in his teenage years.

Vitalik and Dima told Fortune Magazine that they have become accustomed to the volatility of cryptocurrencies, but this Father's Day, this outstanding father-son duo in DeFi conveyed another message: what other use cases cryptocurrencies have.

Vitalik told Fortune Magazine, "Cryptocurrency has had significant ups and downs in the past, and it will rise and fall again in the future." "Downturns are certainly challenging, but they are often also periods for nurturing significant projects."

Despite being a billionaire, Vitalik explained that money has never been his focus or motivation. He does not like Ethereum to be used for speculation and believes that blockchain networks have more use cases beyond finance.

Both Vitalik and Dima hope to see more applications beyond finance while continuing to improve Ethereum and its technology, and they have already taken action. After Russian President Vladimir Putin announced the invasion of Ukraine in February, Vitalik and Dima supported The Ukraine DAO, a decentralized autonomous organization that raised millions of dollars to support Ukrainians during the war. Both father and son donated to the DAO, and Dima even serves as a multi-signature wallet administrator for the DAO.

At times, Vitalik shares his thoughts on the future of blockchain on his website. For example, he recently shared the idea of Soulbound Tokens, where records of personal credentials can be stored on-chain. Additionally, he wrote about the highly anticipated Merge upgrade, where Ethereum will transition from a proof-of-work mechanism to proof-of-stake, significantly reducing its environmental impact.

Ethereum co-creator Vitalik and his father Dima Buterin. Provided by Dima Buterin

In this interview, Vitalik and Dima discussed their journey in the crypto space, Ethereum's regrets and visions for the industry's future, the much-anticipated Merge, the collapse of the Terra ecosystem, and more with Fortune Magazine. The interview took place in early June, before the significant drop in cryptocurrency prices, and Vitalik and Dima also made comments on the crypto market on June 15.

Fortune Magazine: Dima, when did you first notice Vitalik's interest in numbers?

Dima: About when Vitalik was three years old. His grandfather was a very smart person, and he was teaching Vitalik math, letters, and things like that.

Just like people usually build buildings and other things with Lego blocks. Vitalik really enjoyed using them to construct numbers. It was fascinating to see that. I grew up in the Soviet Union, where access to toys was very limited. So as Vitalik was growing up, I wanted to buy him a lot of cool toys. I initially chose Lego because it's a very cool building set, and it was really interesting to see him build with it in a completely different way.

Vitalik: After coming to Canada, my dad bought me some books to learn programming, and I started programming. At first, I was making games for myself, and I clearly remember feeling that programming was very fun and being deeply attracted to it from the very beginning.

Fortune Magazine: Dima, the first cryptocurrency you introduced to Vitalik was Bitcoin, right? What initially attracted you to Bitcoin?

Dima: Well, I am very curious about new things and new technologies, and computers and their surroundings are one of the richest fields of human knowledge, exploring human curiosity. So, I was always listening to podcasts in this area. The podcast host was also a very curious person, touching on many different topics. One time on his podcast, I heard about Bitcoin, and it sounded very meaningful.

I was glad that Vitalik was curious about many things. For me, sharing new things that spark curiosity is always fun, "Oh, I found this interesting thing. Hey Vitalik, take a look. Maybe you'll be interested in it."

Image provided by Dima Buterin

Fortune Magazine: What did you think when Vitalik started working on building Ethereum?

Dima: I was impressed that we were at home, and Vitalik shared his white paper with me, which was very well written. I was really impressed; to be honest, I wasn't closely following cryptocurrencies, but when I read the Ethereum white paper, it made sense to me. I think that's one of Vitalik's talents. He can explain very complex things in an understandable way.

Vitalik: In December 2013, I returned to Toronto, and my father was very interested in my research, so I showed him the Ethereum white paper, and he found it fascinating.

Fortune Magazine: As Ethereum gained more attention and people started using it, were you surprised? Did you anticipate what it would become?

Vitalik: No. At first, I thought it was just a small project that we would finish in three or four months, and then I would go back to university. But in January, I saw that people were very interested in the project, and it clearly needed more time, so I realized we had to replan.

Another thing I completely didn't expect was how much the crypto space would change in 2017 and 2021. The rapid growth was definitely a big surprise for me.

Fortune Magazine: What are your thoughts on the current market situation? Do you have any concerns or thoughts about the future?

Vitalik: The crypto industry has had significant ups and downs in the past, and it will rise and fall again in the future. Downturns are certainly challenging, but they are often also periods for nurturing significant projects. I am confident that the Ethereum ecosystem will become a more mature and successful blockchain ecosystem that meets the hopes and dreams of millions of people in the crypto space over the next decade.

Dima: The market is cyclical, especially the crypto market. I have been following cryptocurrencies for over a decade, and it will rise again and fall again.

In terms of its long-term potential, nothing has changed for me. I believe that cryptocurrency is now entering an era of mass adoption.

The growth curve has never been a straight line. It is not that smooth. Right now, there is a lot of fear in the global market, a lot of questions. There is a war happening in Ukraine. The Federal Reserve is raising interest rates, etc. But humans are adaptable and resilient, so we will experience market downturns and then build more things. Ethereum will merge into proof-of-stake. This is very exciting. In terms of the crypto outlook, nothing has changed for me. There is some short-term fear in the market, speculators will be eliminated, yes, there will be some growing pains in the crypto space.

Fortune Magazine: Since the collapse of the Terra ecosystem, there have been concerns that systemic risks will spread. Has its domino effect impacted all crypto ecosystems, and are there any aspects that are still lacking in discussion?

Vitalik: I think, overall, the Luna collapse is one of the important moments in cryptocurrency; it reminds people that you can't just build a financial system and pretend that negative situations will never happen. People can't just think about interest rates in the short term; they must also consider long-tail effects and these very specific situations. I believe this insight will ultimately bring stability to the crypto ecosystem.

Additionally, I think whenever something like this happens in the crypto space, at least in my experience, there is always a line of leaders who come out to clarify morally. You can see how different people in the market react, which helps better understand their character and what they are actually like.

Dima: The Luna collapse was a very painful event for many people; they lost a lot of money in the collapse.

I hope we don't limit ourselves to "Let's restrict. Let's ban. Let's stop all of this." These slogans. There are various challenges on the path forward for the crypto industry, and we can learn from them to keep moving forward instead of trying to keep ourselves safe by standing still.

Fortune Magazine: What benefits do you see in cryptocurrency? What aspects are you most passionate about?

Dima: I was deeply impressed by the support for Ukraine from the crypto community when Russia announced the invasion (like The Ukraine DAO). They effectively used cryptocurrency to raise funds and then concentrated the funds in a specific city, where there was already infrastructure for people to exchange it for local currency, so that was really cool.

Another aspect of crypto that I am very passionate about is that people anywhere on Earth can access the internet to connect to their economic systems. For me, this is a huge advancement. People can earn money, participate in companies, DAO organizations, sell their art around the world, build crypto finance projects, etc. So I am very passionate about this aspect because I grew up in the Soviet Union, where it was very isolated from the rest of the world.

Finally, I have to say that the new organizational structure, namely DAOs—I think there are still many questions to clarify about how they govern, how they control resources, make decisions, and other aspects. But for me, this is the future of how humans organize themselves.

Vitalik: I absolutely agree.

One thing I noticed during my trip to Argentina at the end of last year is that the regulators there have a different attitude toward cryptocurrency. Generally, in the West, even supporters sometimes subconsciously think of it as a rich person's gambling game. But in places like Argentina, it is a lifeline for local residents. People there sometimes use cryptocurrency to save money, and sometimes to buy and sell things. There are projects like Proof Of Humanity that are trying to use crypto technology to establish UBI (Universal Basic Income) there. Some projects are experimenting with DAOs and decentralized arbitration and all these other technologies.

So, I think there is indeed a lot of this demand in many corners of the world. NFTs are definitely a great example.

Fortune Magazine: Is the speculative aspect of Ethereum what you dislike the most? I know you can't control how humans use Ethereum, but do you regret any of its uses? How do you feel when you see less favorable use cases?

Vitalik: Yes, I have no interest in a lot of financial speculation. I think sometimes Ethereum is indeed closely tied to emerging things—like NFTs. I know there are many artists around the world participating in the global economy through NFTs, which they couldn't participate in before, but at the same time, there are rich people selling $3 million monkeys to other rich people.

I think Ethereum is an open system. This means that no one can finely control who can use it and who cannot. We should actively support many applications that better reflect our values, but that said, if the system is fully decentralized, you have to trust people's choices.

Dima: Humans are very lonely; we are always seeking love and recognition from others. Like, "I have a Lamborghini. I have a bored ape NFT. I have a lot of money." Deep down, we might think, "Oh, I suck, but if I show the world all these cool things I have, maybe people will love me and build relationships with me."

Fortune Magazine: Vitalik, I saw you recently asked your Twitter followers to share where they most disagree with you. What inspired that idea?

Vitalik: I was curious. I just wanted to understand the opinions of different groups of people and give my followers a space to talk equally, as they might be afraid to express differing opinions to me. It was an interesting experiment. I think some of the answers were definitely interesting.

Fortune Magazine: What was the biggest takeaway?

Vitalik: I don't think there was any big takeaway. There were a lot of smaller feedbacks.

I had some disagreements with my followers regarding longevity. Additionally, a few people complained about my fashion style.

Some said I shouldn't get involved in politics, or that I should get less involved in politics. Others said, "No, you actually shouldn't strive for neutrality so hard; when you believe in something, you should be willing to express your views more openly."

You can't please everyone.

Fortune Magazine: Would you donate to political organizations or parties?

Vitalik: I think the challenge with donating to political parties is that politics is a very complex and chaotic system. It is easy for donations to have effects that are completely different from their intended purpose. I just don't understand how the American political machine works internally.

My view is that I will focus on other areas, and so far, things are going well.

Fortune Magazine: Many people also hold differing opinions on your posts about Soulbound Tokens. How do you respond?

Vitalik: There are definitely a lot of positive, interesting discussions, and many people misunderstood the concept. But that's okay. I think it's a problem that needs to be addressed because what needs to happen will happen.

One interesting dynamic I see, and I think people misunderstood some things, is that people tend to define debates as choosing between two pre-packaged solutions; they like to compare all the benefits and costs of the two solutions. What I prefer in a debate is: let's break down the problems one by one.

I think there are always many choices, far more than just two. And in the discussion about Soulbound Tokens, people imagine that this thing called Soulbound Tokens exists, but it is just a collection of ideas in a PDF document.

Sometimes doing things on-chain is more beneficial, and sometimes it is off-chain. We should figure out in what situations to choose on-chain or off-chain and strive to come up with the best solutions.

Dima: One of the areas where blockchain technology has yet to be fully explored is reputation systems, and I think we will see more happening in that area. As Vitalik described, Soulbound Tokens are almost a collection of thoughts and ideas. It is too early for us to talk about specific methods, which is fascinating, so let's continue to explore this.

Portrait of father and son Dmitry Buterin and Vitalik Buterin. Image provided by Dima Buterin

Fortune Magazine: Regarding the highly anticipated Ethereum Merge, why is proof-of-stake a better mechanism?

Vitalik: I think there are many benefits to Ethereum switching to proof-of-stake. In terms of environmental issues, it allows the Ethereum ecosystem to consume fewer resources. Additionally, the proof-of-stake mechanism can enhance the security of the system. It makes the cost of attacks more expensive and makes it easier to recover the network from attacks, which is something people haven't thought of. Furthermore, the proof-of-stake mechanism is more resistant to censorship, as the computers running the validating nodes make it easier for miners to detect and shut down programs. Therefore, the proof-of-stake mechanism has a range of different advantages.

I think the goal of transitioning Ethereum to proof-of-stake was a clear plan around the end of 2014. I think since early 2014, it was described as a possibility, and we would be very happy if a new algorithm was discovered. By the end of 2014, we had enough confidence in this information and were ready to start development.

Dima: The significant reduction in energy consumption is obviously beneficial, and of course, there is the security of the network. Based on all the research papers I've seen, I firmly believe this is a good thing. It is very important for the network.

I am really glad to see this come to fruition because I have seen many people put in tremendous effort for this.

However, having a proof-of-stake mechanism does not mean, "We have arrived. This is the ultimately perfect technology." At some point, the proof-of-stake mechanism may be replaced; although we don't know when that will be, it is inevitable.

Fortune Magazine: Do you have any concerns about the Merge, such as Lido Finance and centralization risks? Is this what you think is the most important thing after the Merge?

Vitalik: Yes, I am definitely concerned. I think this is one of the bigger issues we are considering as we try to figure out how to change the proof-of-stake mechanism in the long term. But I also think it is important not to catastrophize this issue; many people are being overly negative right now.

For example, even if Lido has about one-third of the staked deposits on the Ethereum Beacon Chain, first, if an attacker holds another one-third of the staked deposits, we cannot recover the Beacon Chain or anything else. But in reality, the worst thing an attacker can do is to stop the Merge for about a day, which is annoying but not that terrible. So, that’s one thing.

Another thing is that Lido is not a single staking node. I think they have about 21 nodes representing these validators running within Lido, and they have achieved decentralization among them. It’s like an attacker sending a fully armed team into a building to conduct a kidnapping; the attacker could take all the staked ETH from Lido, but they would have to go to 21 different locations, some of which might not even know where they are. So, Lido is very different from centralized staking platforms or centralized mining pools.

I think even things like this today are easy to manage, and it is still a healthy, decentralized proof-of-stake system. At the same time, I think in the Ethereum community, we have indeed set very high standards for ourselves, and a higher level of decentralization is definitely a goal we are actively striving for.

Fortune Magazine: Looking back at the entire crypto space, do you think the benefits outweigh the drawbacks?

Vitalik: I would say yes.

I think the most prominent crypto applications are not the most common ones. There are people trading bored ape NFTs for $3 million, and there are projects that occasionally get hacked for $20 million; these events are real. But I think what cryptocurrency does on a daily basis is not like that; it is not like active applications or what activists say about using cryptocurrency to protect themselves, but rather like the crowds around the world who now find it easier to use cryptocurrency to transfer funds internationally, allow businesses to collaborate across borders, or accept their payments, etc. Some people are quietly doing these things, but these are also very real use cases.

Dima: When we try to evaluate the good and bad of anything, it is very complex. The crypto space has many different things, projects, people, etc. Everything has various different outcomes. Therefore, we have these great crypto applications, but there will also be speculation, scams, and so on. That’s life.

Fortune Magazine: In summary, how can Ethereum and the crypto space develop in a better direction?

Vitalik: Clearly, I think one of the important things is to continue improving the technology of Ethereum.

Thus, transitioning Ethereum to a proof-of-stake mechanism makes it a more environmentally friendly and secure system; adding some scalability improvements, such as sharding and Rollup, will significantly reduce transaction costs for people; finally, making the ecosystem affordable enough for ordinary people to use it—just doing a lot of work to make the blockchain ecosystem safer, more user-friendly, and easier for many different types of people to participate. I really hope we can regain some of the constructive experimental capabilities we had in 2015 and 2016.

Additionally, I am glad to see different types of applications emerging, especially those beyond finance, which is the real growth of the crypto space. I believe DAOs can greatly improve human collaboration, organization, and working together. This indeed requires us to conduct a lot of experiments and figure out what kind of DAO mechanisms make sense. This is what people are doing, and they are making great progress in this area. In the future, we will see more amazing experiments and successes.

Besides DAOs, Ethereum identity, and Soulbound Tokens, there are also applications based on proof of attendance protocols or proof of humanity—there are many remarkable things happening within the Ethereum ecosystem, and it will only get better.

Image provided by Dima Buterin

Fortune Magazine: Dima, do you have any parental wisdom to share with Vitalik this Father's Day?

Dima: Being a parent is one of the greatest challenges humanity faces. Besides Vitalik, I have two younger daughters. Supporting another person's growth is a wonderful yet challenging thing for humanity, with so much growth and so many difficulties. I want to wish all parents a happy Father's Day.

Whatever you do, you may face failure. We all strive to create the best future for our children, but the future is full of hope and uncertainty. Ultimately, it is not about our thoughts on the future, but about how we as parents can live more in the moment, how we can love our children more, and gain as much support as possible. So, I want to celebrate the concept of being a parent.