#14 - Vitalik on Ethereum

Balaji Srinivasan (0:00)

Vitalik, welcome. There's plenty to talk about. First, you want to give some remarks on, I don't know, the state of Ethereum, what's on your mind that we can do it to specific things.

Vitalik Buterin (0:08)

From the technical perspective, all of the pieces are finally like actually in place to make it viable to do the kinds of things that we've been talking about doing for a really long time, right? And we can give a few different examples of that, right? So one of them is obviously scale, right? So in 2017, CryptoKitties, 2021, DeFi, like what broke all of those things is basically eventually there was so much excitement it hit against the wall of fixed usage and then the transaction fees went to 50-50 dollars and a bunch of people got angry. Layer 2s are collectively doing about 250 TPS and with Pectra, there's the upcoming hard fork in two weeks. The blob count will double, it'll go up to 500 and then there's a pathway to increase that to about 5000 For Layer 2s, basically, there's a pretty credible path to get to many thousands of TPS over the course of the next year or so. And for the base layer, there's been this growing research direction around basically asking, how do we super-optimize the L1 and in particular, how do we basically, one, actually formalize some of our criteria in terms of preserving the network's decentralization, in preserving the network's resilience, making sure that we're not just like 25 servers. And then turning that into something where we actually have a very clear idea of what the constraints are so we can super-optimize around them, right? And so there's a collection of EIPs that are planned for 2026 that look like, they have a very plausible story for scaling the L1 gas limit by 10x. And then after that, we of course have ZKVMs, and that's a story for scaling up even higher. And so in terms of scale, like we've basically 10xed already, right? But then, and then the question is, how do we go further and how do we improve interoperability of things that already exist, right? And so from a scale point of view, like things that could not be done two or three years ago can be done now, right? So that's scale. Another interesting dimension is security, right? So if you think about DeFi, right? Then if you think about the question, well, would you confidently with your straight face recommend to an average person to use DeFi as a savings and a wealth building vehicle, right? I think honestly, three or four years ago, the answer just had to be an unambiguous no. And the reason basically is that like, what the hell is the point of even talking about 6% APY versus 4% APY, when the thing that really matters to people is not getting minus 100% APY, right? And so, but the thing that we've seen since then, right? I'm actually, this is, I mean, interesting. Like, if you look at the statistics, right? If you go and like, ask the bot, like basically, give me the total dollar number of DeFi hacks divided by the total number of DeFi TVL, I asked, and the answer it gave us is less, is I think 0.53%, right? So basically, in a randomly selected DeFi protocol, the chance that you'll lose money from being hacked is only half a percent. And that feels a little uncomfortably high, but number one, that's only for risky protocols. And if you like things like Aave-

Balaji Srinivasan (3:20)

Has that been trending down over time?

Vitalik Buterin (3:21)

Yes, it has.

Balaji Srinivasan (3:22)

That's a great graph.

Vitalik Buterin (3:23)

Yes.

Balaji Srinivasan (3:23)

Okay.

Vitalik Buterin (3:25)

And then if you look at things like Aave, like basically the sturdy stuff, like that's-

Balaji Srinivasan (3:30)

Can I make a comment on that? Yeah, I never did any yield farming or anything like that because you'd be quote, investing with the expectation of 6% return, but you're actually risking your entire principle because there could be a smart contract hack, you could go to zero, right? So instead, I'd only risk principle in like an angel investment where I knew that could go to zero, and I just held back and waited till DeFi matured, and now it started to mature.

Vitalik Buterin (3:55)

Yeah. So basically, for mature protocols, it's even lower than half a percent, right? And then on top of that, the other risk, of course, is like the risk that you personally screw up because something happens to your wallet, and then this is why I've been pushing for social recovery, multi-sigs, account abstraction, all of this stuff non-stop for the last 10 years. And the thing that did happen, right, is like the safe front end got hacked, right? But if you were using an alternative UI, then you were fine. If you were checking the transactions you were signing, you were fine. And obviously you can't expect regular people to do that, right? But basically, the infrastructure keeps on hardening, and there's like 10 alternative UIs that you can use, right?