Vitalik talks to OKX Star Xu: In 2017, ETH was rejected for listing, and I didn't expect someone to spend millions on monkey pictures

Editor: Wu Says Blockchain

Content Summary:

This dialogue is a discussion at the Token2049 conference in Singapore featuring Ethereum co-founder Vitalik, OKX founder and CEO Star Xu, CMO Haider Rafique, and Circle co-founder and CEO Jeremy Allaire about the development trends of the cryptocurrency industry over the next three years. Vitalik reviewed the birth and evolution of Ethereum, emphasizing the significant impact of decentralized technology globally; Star Xu shared his history of collaboration with Vitalik and explained the reasons behind OKX's transformation from an exchange to a Web3 technology company and the importance of self-custody; Jeremy discussed the transition from trading to the stablecoin sector and looked forward to the future potential of USDC. The participants unanimously agreed that Layer 2 solutions, programmable money, and the promotion of decentralized applications (dApps) will bring more practical and inclusive blockchain applications to ordinary users in the coming years.

Here is the dialogue content:

Harider: I think what we want to talk about this time is the trends in the cryptocurrency industry over the next three years. Vitalik, I want to start with you. Eleven years ago, you were a 19-year-old computer programmer. You wrote a white paper on Ethereum, which ultimately led to the birth of a new world and asset class, and today in 2024, its market value has reached $290 billion. Some of the largest asset management companies, like Blackrock, hold Ethereum. Is this what you envisioned when you walked into Star's (Star Xu) office eleven years ago?

Vitalik: Well, I have to admit that eleven years ago, I was completely uncertain about where all of this would go. Yes, that is true. I did see the enormous potential of Bitcoin, and even back in 2013 when I attended the API conference in San Jose, I realized that this was not just five random people playing around online; there were entire enterprises, and many very serious people had invested their entire lives into this. And at that time, regarding Ethereum, actually, initially, when I first published this idea, I was thinking that if no one had thought of this before, there must be some fundamental reason that made this idea unfeasible, right? I thought there would be five very smart cryptographers who would quickly come out and tell me why I was completely wrong, but that didn't happen.

In fact, by the time I first visited China to meet Star at OKX, the Ethereum project had already been launched for a few months and had existed for more than half a year. At that time, I felt that this project would become significant and had a clearer direction. If you look back at the Ethereum white paper from that year, it mentioned stable value cryptocurrencies, and today we have stablecoins; it mentioned financial derivatives, and today we have DeFi; it mentioned decentralized domain name systems, and today we have ENS; it mentioned agricultural insurance, and today there are indeed parts of DeFi doing these things. The only thing that was not predicted was NFTs, sorry, those things where people spend three million dollars on pictures of monkeys, that's your choice. But I feel that many large categories have indeed started to materialize, but the scale and speed at which they are expanding have continued to shock me over the years.

Harider: Great, Star, now it's your turn. This is your first time on the main stage of Token2049. I know you have known Vitalik for a long time, and you have shared many interesting stories with us. I want to hear how you met Vitalik and your memories of your first meeting with him.

Star Xu: Yes, we met many times in 2013 and 2014. The story that impressed me the most was in 2017 when Vitalik came to me and said, "Star, can we list this project?" At that time, I said no, it was an altcoin, and our exchange didn't want to list altcoins. So I felt ashamed about that.

I believe that to this day, the issuance of Ethereum is one of the most important infrastructures in the blockchain ecosystem. Vitalik proved his vision and built a community, and we at OKX are also committed to contributing to the Ethereum ecosystem. We work hard to contribute to the infrastructure.

Harider: Thank you. Jeremy, it's your turn now. You are no stranger to trading business. I remember you were operating an exchange in the very early days.

Jeremy: We were the first to support Ethereum, long before these guys.

Harider: So tell us about the transition from trading to the stablecoin sector. What drove this transition, and why make such a change?

Jeremy: There are several reasons. First, when we started in 2013, we were inspired by many ideas that had yet to be realized. For example, the concept of smart contracts, the idea of placing a virtual machine on a blockchain network, and the concept of issuing other assets on these networks. The idea behind the company was to establish a protocol for dollars on the internet and build programmable money. This was our initial goal. Back in 2013, when we started designing this project, in 2014 there was actually only Bitcoin. We were very frustrated with the technological progress in executing these early ideas. In fact, after the white paper was published, I met Vitalik in our Boston office, and he was clearly doing what we thought was necessary.

By 2017, we could really start executing this idea. We did all the work to obtain licenses so that we could transfer funds between the existing fiat system and the blockchain, and we worked with regulators to enable us to operate with dollars, euros, and pounds on the Bitcoin network. Although the product was good, it was actually a workaround. However, once we realized we could truly execute this idea, we abandoned other ongoing projects, sold some different products, and focused all our energy on USDC. By 2019, I think we had found a good product-market fit. We worked closely with many Ethereum DeFi protocols and projects, which was crucial for finding product-market fit, as developers wanted to build with it. And for us, it was clear that the entire future of the company would be built on this foundation.

Harider: Very interesting. Vitalik, back to you. We can agree that there is a lot of turmoil globally, and economic and political instability affects each of us. What do you think about Ethereum's contribution to the cryptocurrency industry over the next three years and how it can make the world a better place?

Vitalik: I think what is truly special about the crypto space is its level of internationalization. I think this was particularly evident even during the ICO era. Back then, it was common to launch a new project that would have a community in the US, a community in China, a community in Japan, and a community in Europe. It would intentionally gather people from all over the world who were interested in this project. This way, you would see these projects allowing many people who would not normally communicate with each other to participate. I feel that the fact that the ecosystem is now more dominated by venture capital is somewhat regressive, but the projects themselves still retain this value. In an era of increasing physical boundaries, economic barriers, and internet firewalls, the crypto ecosystem remains resolutely globalized, which is a very important value it provides. Whether in meeting the basic needs of those who are isolated from the financial system due to various challenges or in maintaining the connectivity of all humanity, Ethereum is doing its best.

Harider: Star, you may be one of the most resilient entrepreneurs in our industry. Recently, you made the decision to transform your trading business into a Web3 technology company. I know you are very passionate about self-custody, and I think everyone would like to hear your views on the importance of self-custody in the future, especially in the context of global economic and political turmoil.

Star Xu: In the traditional financial system, the company structure or business structure typically separates trading, custody, and brokerage services. I don't think the crypto industry will simply replicate this traditional structure. The crypto industry is still a technology-driven industry, and many new technologies will make these typical market structures unnecessary. Self-custody is a great technology in human history spanning thousands of years. In the past, we kept our money (like gold or silver) at home, and in the digital age, there are third-party agents to help us manage these funds. I believe self-custody technology provides a choice for human society, allowing you to hold your own funds, "not your keys, not your coins." I believe this is a very beautiful future. Self-custody does not mean no regulation or compliance. We believe that the nature of being on-chain is transparent, and the industry can do better than traditional finance, such as activity monitoring. So we at OKX believe that self-custody is the future and will make it one of our most important strategies.

Harider: Circle, USDC is now, at least in my view, the most trusted settlement layer in the crypto industry. When you think about the next three years, it is clear that we have a use case for stablecoins today, which is settlement and value transfer. So what other applications do you envision after the widespread adoption of stablecoin networks? What do you hope to see in the next three years?

Jeremy: Yes, I think three years will pass quickly. But as I often say, we have just reached what we consider the 1.0 version of this field, which means a world where the marginal cost of storing and transferring value is close to zero, and the user experience of transacting through these mediums is as simple and seamless as the user experience we have with major software tools on the internet. Although we have not fully reached this level, we are very close. So I think in the next year or so, we can achieve this in terms of practicality.

Then I think things will get very interesting. When internet tools make the marginal cost of storing and moving information zero, or make the marginal cost of establishing communication connections with others zero, or make the marginal cost of effectively distributing software close to zero, this change will lead to an exponential increase in the output of the entire world. I think the same is true for money and transactions. As we approach this point, the liquidity of global currency will significantly increase—just like the growth of information, communication, and software, the liquidity of money will also become very high. And once the liquidity of money increases, the economic opportunities that people benefit from will increase dramatically.

What I am particularly interested in is that we are also in the early stages of programmable money and programmable money use cases. While there have been significant advances in the DeFi space, we are still only scratching the surface. I am particularly interested in what people will invent in terms of intermediation of value, which has never been invented before. I compare it to the situation when the iPhone first appeared—although there were many ideas about mobile at that time, many things only became possible once there was a vehicle to realize those ideas. I believe we are approaching a point where there is mature infrastructure to write code for intermediation of value, and for users, it is almost frictionless and seamless.

I am very excited to see what will happen. One area I am particularly interested in is on-chain credit and credit intermediation. For me, true economic output is the conversion of the time value of money, which is the core driver of economic growth. Currently, we have not done much in this area on-chain. And I believe this is where the most profound transformation can occur in terms of people's economic prosperity. If we can move unsecured credit and other forms of credit onto these networks, it will be very meaningful.

Harider: So, Jeremy, regarding enterprise use cases, like Silicon Valley. I know their developers work within our industry, but how do developers outside the industry view stablecoins or USDC, especially considering you are regulated? What do you think the possibilities for enterprise use cases will be in the next three to five years?

Jeremy: Yes, I think there are many leading payment companies, like Stripe, or some emerging banks and other companies, that are starting to use stablecoins, which is great. But this use is still very small in scale within enterprises, especially among large companies. We still need to do one key thing, and the good news is that it is happening, which is that stablecoins need to be viewed as legitimate electronic money and treated as cash equivalents on balance sheets so that accountants or finance personnel in companies can say, "Okay, this is digital cash, I can book it and report it." Once it legally becomes a valid form of currency and is recognized consistently worldwide, I believe every type of institution will adopt it in large quantities. You need the practicality of technology in place, and I think we are addressing this issue; you need legal certainty to encourage people to adopt it. In fact, there are many large companies that, when it comes to this issue, say, "I don't know what this is, and it's hard for me to account for it, so I won't do anything." Even though the technology is already strong.

Harider: What do you think we need to do to reach that point?

Jeremy: Basically, stablecoin legislation is being passed in major financial market centers around the world or will come into effect in the next 12 months. So I think this is happening, which is good news. I believe that technological advancements, improvements in infrastructure and user experience, and legal certainty have created conditions for widespread adoption that goes beyond current use cases.

Harider: Very good, thank you, Jeremy. Vitalik, what do you think about the rapid rise of Layer 2 recently? At the most basic level, is it good or bad for Ethereum?

Vitalik: I think without them, Ethereum could not have reached where it is today. I feel that the Ethereum Layer 2 ecosystem has brought tremendous talent to the entire ecosystem, not only in building foundational technologies, including proof systems, zero-knowledge proofs, and even client implementations, but also in attracting all different types of people into the Ethereum ecosystem who might not have come otherwise. Essentially, Ethereum can have dozens of such sub-ecosystems, each independently attracting users, with a scale comparable to a first-tier blockchain, and all these activities still being part of the larger Ethereum ecosystem.

So so far, this has been very positive for Ethereum. And I think the Layer 2 ecosystem has done so much work in scaling that it has also given core developers more time to do other things, like completing the merge, which was completed around this time two years ago, so happy second birthday to proof of stake! Additionally, there has been significant progress in account abstraction and EVM upgrades.

I do believe there are some challenges, such as the fragmentation issue that people mention, which is real. To address these issues, there have actually been many initiatives underway. For example, yesterday at the Ethereum event, I discussed cross-chain asset movement, using liquidity providers for cross-chain client transfers between Layer 2s, and other things that can be better standardized between Layer 2s. In fact, I will continue to discuss the alignment issue between local Layer 2s and the Ethereum main chain at the API Ethereum event today. This is an ongoing topic of discussion, and I believe that both the projects and the Ethereum Foundation are taking these challenges very seriously and have been working hard to continue addressing these issues this year.

Harider: Star, we talked earlier about your hope to see more applications under Web3 infrastructure, but the front end can take the form of Web2. Can you talk about this idea?

Star Xu: Yes, I believe that over the past decade, the crypto industry has created many successful assets, such as Bitcoin, which is one of the top ten assets by market capitalization in the world. Bitcoin ETFs have made investing in Bitcoin easier. But in fact, over the past decade, the entire industry has been discussing crypto applications. There are indeed some successful applications, like Aave and Compound, which are DeFi protocols. But why has the development of crypto applications been so slow? In my view, there are two main obstacles. The first is on-chain currency, which Jeremy's company has done very well in the past few years. Now you can imagine that we can use on-chain currency in applications, and stablecoins have solved this problem.

The second one I believe is wallets. Most crypto wallets, like OKX's Web3 wallet and MetaMask, are still native wallets aimed at on-chain users. You need to back up your private keys, and you can never forget or lose your private keys for your entire life. I think the second reason is compliance issues. If any financial company builds applications through the current infrastructure, their regulators will ask them two main questions: Who are your customers? How do you manage activities on the platform? So I believe that in the next three years, the crypto industry needs to create some easy-to-use wallets that also comply with traditional financial regulations.

We at OKX have our strategy, and other companies like Coinbase are also doing similar things. I believe there are many new technologies, such as multi-signature, abstract wallets, key passes, etc., based on these new technologies, that can build very easy-to-use wallets with a Web2 experience but are fundamentally Web3 wallets. Additionally, new technologies like zero-knowledge proofs can also allow wallets to use ZK-KYC to verify users, so applications can choose, for example, "I only serve users in Singapore" or "I do not serve users in Singapore." These new technologies will make these needs possible.

So I believe that in the next three years, crypto finance will undergo a great revolution. Every company, bank, and insurance company can develop applications based on the current infrastructure. Furthermore, I believe that stablecoin payments will also become a very successful application in the future. We at OKX also have a strategic project in this area. So I believe that three years from now, when we look back at today, the crypto industry will not just be about asset trading; crypto will truly become the infrastructure of our lives. Massive retail users will be able to easily use KYC-compliant wallets for activity monitoring, easily make payments, and interact with different applications developed by banks. So the next three years will be very exciting.

Harider: Thank you, Jeremy. The demand for banking and crypto varies by region. For example, I grew up in Pakistan, where the economic situation is very different from elsewhere. What do you think about the adoption of stablecoin networks? In the US, people may have different views, and the banking system works well, but in a country with hyperinflation or a large unbanked population, what trends might emerge? What differences do you expect in the adoption of these different regions and markets over the next three to five years?

Jeremy: Yes, there are a few points. First, people anywhere in the world have never used such a form of electronic money before, where the marginal cost of storing and moving is zero, and it is fully programmable with verifiable, provable code. This is a new innovation, whether you are in the US, Europe, or Pakistan; this is a brand new human innovation, and applications built on it will bring a lot of practicality.

But specifically regarding different needs, clearly, people around the world want a stable unit of value, which is an efficient medium of exchange. I think dollar stablecoins provide exactly that. Therefore, we have seen accelerated demand for stablecoins in many regions of the world over the past few years, as people just want to trade using this new, more efficient medium, and they want to maintain their value in dollars, including businesses, individuals, and families. I believe that once we solve the user experience issue, as we discussed earlier, liquidity will become more seamless, and this is something we are working on with others in the industry.

I refer to stablecoins as "over the top money," the concept of "over the top" is similar to software delivery, communication, and television coverage; once there is a protocol that allows anyone to use software applications to accomplish these tasks, the user base will become very large, with billions of people able to use it, changing the economic model, and in many cases, governments will have to respond and adjust. Now we have "over the top money," which is accelerating, and my long-term view is that in the scale of internet economic activity, this form of currency will force governments to change fiscal and monetary policies. I don't think the world needs so many currencies; there will be competition between different currencies, but the end result may be fewer widely adopted stablecoins and their networks.

Harider: Very good, thank you, Jeremy. I know we are short on time, and I want to give you a quick opportunity for a final question. Our industry has experienced a lot of volatility over the past few years, and while the crypto ecosystem has also seen healthy growth, there has also been some growth that we may not need. Vitalik, I’ll start with you; how do we achieve healthy growth in the coming years?

Vitalik: I feel that my answer is quite similar to what I said half an hour ago. We are still early; the time when blockchain is truly affordable for ordinary people has not yet arrived. If you think about those $3 million monkey pictures or other applications that people often criticize, those things can run at a cost of 5 cents, and they can also run at a cost of $500. But on the other hand, for people in countries with unstable political environments to have their own independent savings and engage in economic activities and transactions with the rest of the world, a cost of 5 cents is feasible, but if the cost reaches $200, they will give up.

Moreover, the cost of security issues is also very high. If you add up the money people lose on transaction fees and the money lost due to stolen cryptocurrencies, it could be about the same, or even the security losses could be greater. The technology to reduce these two types of losses has advanced a lot. So I think the technology is now at a point where it can improve the lives of ordinary people—even just ordinary people making $10 or $20 transactions with family members—now that we have this scale, we need to continue building the entire ecosystem and leverage it.

Harider: Star, from an engineering perspective, how can we achieve better growth in the crypto industry in the coming years?

Star Xu: I believe that in the next three years, from a personal perspective, there may be billions of users obtaining a Web3 wallet, which will be an easy-to-use wallet with a Web2-like experience but fundamentally a self-managed wallet. This wallet can also comply with regulatory requirements. From a business perspective, more and more companies will choose to develop decentralized applications (dApps) or shift their business models from centralized server models to decentralized models. These business applications will be transparent, and all crypto wallet users will be able to interact with different companies' dApps, forming a great crypto financial ecosystem.

Harider: Thank you, Star. Jeremy, I think stablecoins, at least in my view, can bring healthier growth compared to more speculative assets. What’s your perspective? How can we ensure attracting and achieving healthy growth in the crypto industry three years from now?

Jeremy: Yes, that’s interesting. I am very optimistic about the substantial progress we can bring to most people. This is the result of countless developers in our industry working hard to solve issues related to privacy, security, identity, naming, efficiency, and scalability. So as a technologist, I am very optimistic. I think we just need to continue doing these things. If we have legal clarity and continue to address these issues.

I believe that three years from now, we will enter a very unusual period, much like in 2004 when the internet finally did what people wanted it to do, and it has not stopped growing and transforming since then. I think the crypto industry is approaching that point.

Harider: Thank you, Jeremy. I could talk for another 30 minutes, but the big screen is reminding us to wrap up. I want to thank Vitalik, thank you very much. Star, thank you for joining us. Jeremy, thank you for the discussion. Thank you all for listening.