Why the future is decentralized
Millionaire crypto king on what’s next for Etherium
Vitalik Buterin, the 25-year-old cofounder of bitcoin rival, Ethereum, is something of a pioneer in the cryptocurrency world.
Fortune Magazine ranked the “skinny visionary” 22nd on its latest “40 Under 40” list.
In 2014, Buterin was awarded a $100,000 Peter Thiel Fellowship for his work in developing the Ethereum platform and associated digital currency, Ether, along with an open-source programming language that lets developers create decentralized blockchain applications.
Born in Moscow and raised in Toronto, the researcher, programmer and writer currently has an estimated net worth somewhere between $50 million and $150 million, with most of his wealth in the form of Ether.
He spoke during the Blockchain Futurist Conference at the Port Lands last week and talked to the Star about the cryptocurrency journey.
Does the industry need to do a better job of explaining the risks and potential public benefits?
Vitalik Buterin: One of the big things that needs to be communicated is the
fact that, five years ago, the blockchain was just about bitcoin, but now it’s much bigger than just bitcoin. It’s split off into separate spaces that have a lot of different visions.
For bitcoin, the idea is that you have decentralized cryptocurrency running on blockchain and protected from corporate and state control that’s not going to deflate on you and it’s not going to get confiscated. The blockchain is just a tool to make that specific thing possible.
That’s the bitcoin side. For Ethereum, what we care about is taking the blockchain technology behind bitcoin that makes decentralized cryptocurrency possible and making it more general purpose so that other things can be decentralized in the same way. What other things? V.B.: One of the earliest examples of decentralized things happening on Ethereum that’s not a currency is DMS, which is a kind of decentralized alternative to the domain name system — basically decentralizing the URL phone book.
Another example is this project called OpenCerts. They take records of university degrees and other sorts of certificates and save them on Ethereum blockchains, so if you want to verify someone’s certificate, you can scan blockchain and check that it exists and that it has not yet been revoked.
A third example is the DAO (decentralized autonomous organization, a form of a smart contract where the bylaws of the decentralized organization are embedded into code, bitcoin and Ethereum). The idea is that you have these fairly complicated computer programs that are implementing the logic of different kinds of organizations’ application systems.
Another important space is enterprise watching. The idea says let’s use special purpose blockchain versions — sometimes called private blockchains — that are only half decentralized.
You might have smaller industry consortiums that allow different companies in the same industry to collaborate and interoperate on a more open playing field.
It’s less radical than let’s replace everything and more incremental, but it’s the kind of fish that gets institutions on board more easily.
Is that the path of least resistance?
V.B.: It depends. Historically there have been times when both paths have been successful. I go and talk to companies and governments quite a bit, and institutions are increasingly warming up to public chains. What institutions? V.B.: Microsoft would be an example. In some cases, banks. I’m not aware of Canadian banks that are doing active applications on blockchains. I know that, historically, RBC has had some interest.
What is the role of government? Is there a place for regulation?
V.B.: Governments do have a role, and one of the roles is regulation. The usual concerns are about cryptocurrency exchanges, where the basic idea is to do fundraising for a new project by directly selling tokens on the blockchains. There are debates whether specific kinds of ICOs (initial coin offerings) are legally categorized as securities.
So the regulators are grappling with the issue?
V.B.: The regulators are definitely grappling. They are undecided in many ways. The other area is governments as users of the technology. There has been exploration into central banks issuing digital currencies and using blockchains for different kinds of government records. What are the roadblocks to more widespread adoption of cryptocurrencies?
V.B.: Scalability is a big bottleneck because the Ethereum blockchain is almost full. If you’re a bigger organization, the calculus is that if we join, it will not only be more full but we will be competing with everyone for transaction space. It’s already expensive, and it will be even five times more expensive because of us. There is pressure keeping people from joining, but improvements in scalability can do a lot in improving that. How do you improve scalability?
V.B.: The main problem with the current blockchain is this idea that every computer has to verify every transaction. If we can move to networks where every computer on average verifies only a small portion of transactions, then it can be done better. Can that be done without sacrificing security?
V.B.: There would be a sacrifice, but it would be fairly modest.
Would scalability bring costs down?
V.B.: By a lot — by a factor of over 100 for every transaction. Would that be enough to trigger mainstream adoption?
V.B.: Scaleability is not the only problem. There are still challenges with usability, with account security and with privacy that are improving. It’s also improving from a technical point of view, but even if the tech is there — how do you turn it into something people will use?
Are the risks being reduced?
V.B.: There has been a lot of work in tracking. Instead of having a wallet that you hold in a cryptocurrency app with the app being controlled by one computer key — which is risky — you have a smart program using more complicated mechanisms, using multiple keys so a lot of things would have to be hacked at the same time for you to lose your account. There is also the fear that the price will drop to zero, but that’s not a technical issue. I believe people will gain confidence over time.