Compile | Wu Blockchain about blockchain
In response to this question on August 25, Vitalik gave several detailed responses.
Question: I recently watched the latest episode of SteadyLads with Kain. I must admit, I had no idea that Vitalik and EF didn’t like DeFi …
It's almost unbelievable.
The vast majority of ETH’s value comes from its use as collateral in DeFi, so why would anyone want to see fewer DeFi protocols developed?
I sincerely hope this isn’t true. Honestly, I’d be a little disappointed if it were true because I often see Vitalik praising USDC, and I don’t find USDC’s adoption in crypto to be that impressive.
It’s almost ironic that while promoting something like USDC (which actually undermines ETH as a store of value and chain neutrality), you are also calling for a reduction in DeFi (which is ETH’s most important source of value).
If I were to sympathize with this view, I would say that perhaps Vitalik is a purist who believes that a lot of our current DeFi is not really DeFi because it relies on trusted oracles and multi-signatures (this criticism is valid), and he might encourage more "pure DeFi", such as DeFi without external dependencies like Uniswap.
But I can’t read Vitalik’s mind, so I don’t know what he really thinks. I just find it hard to believe that he is really that pessimistic about DeFi, and if that is the case, it will be very frustrating for those of us who defend ETH on the timeline and use this chain.
If you are in contact with V, I ask you to pass this on to him. I still don’t quite believe his claim that he doesn’t like DeFi, but I would rather hear the answer from him personally.
Vitalik responded:
The types of applications I want to see are those that are (i) sustainably useful, and (ii) do not sacrifice fundamental principles (such as permissionlessness, decentralization, etc.).
I think decentralized exchanges (DEXs) are awesome and I use them every week.
I think decentralized stablecoins like RAI are also really great.
I think Polymarket is pretty cool too.
I think USDC is not as good as RAI, but in reality we have to admit that it is very convenient and a lot of people use it. For me personally, USDC is much more convenient than bank transfers when making international donations. Our goal here is to make the global economy and society more open and free, and in emerging markets, people using stablecoins to trade freely is a real use case. USDC transactions on Ethereum are also much better than transferring between accounts within centralized exchanges, which is also a common situation. If a large number of people use USDC, this will create an environment where it is easier for people to switch to other more decentralized stablecoins.
The things I don't respect are basically things whose appeal comes from some temporary source that has no sustainability. For example, I don't get any excitement about the liquidity mining craze that's popular in 2021, because it's obvious that it's driven by token issuance, which is temporary in nature.
If someone tells me “you can get a nice yield on your coins by storing them here”, I always ask, “where is that yield coming from?”. Who is on the other side of the transaction, and who is paying that yield? In cases where there is a clear answer and there is good reason to believe that it will still be true in 5 years, I will certainly be excited about it.
We should all agree that finance alone is not enough. There are too many rapidly growing points of centralization and threats in today’s world of technology:
Ongoing political attacks on encrypted communications;
Centralized identity systems and credit scores;
Vulnerabilities /backdoors in insecure/proprietary operating systems;
Social media — both government-imposed censorship and the opacity and centralization of the platforms’ own algorithms;
A few powerful countries gaining more and more power by cutting off parts of the internet, thereby disenfranchising people on the other side of the world;
Risks of surveillance, de-platforming, and economic domination from centralized AI;
Similar concerns about upcoming mind-reading technology (brain-computer interfaces, BCIs);
And so on and so forth.
Even if you could magically make finance perfect, the world would still be in a very bad place if we got these other things wrong, especially on all the philosophical levels that we care about when we get into crypto.
At the same time, finance is a critical part of any strategy to combat these trends. If your payment method isn’t private, then it’s not truly anonymous, so I’m very grateful to the RAILGUN project for giving me a way to do that (and excited about 0xbowio’s work in expanding privacy while minimizing the number of bad actors benefiting from these protocols, all without backdoors). Polymarket is part finance, but not just finance. Farcaster is social, but uses a financial component to prevent spam. I suspect a sustainable monetization strategy for decentralized social will involve decentralized finance (ads are inherently more limited when anyone can build a client, so you have to try other approaches).
As a result, I think the intersection between DeFi and other decentralized technologies is going to be really important. And “other decentralized technologies” is an area that doesn’t naturally get hundreds of millions of dollars in VC funding, so I think it needs explicit high-level support today, although my ideal scenario would be that we could find a steady feedback loop to foster its development.
Wu Blockchain Colin asked: What if tokens or products based on permissionlessness and decentralization are inevitably exploited by criminals, scammers or kidnappers? Or is this just a cost we have to accept, like an inevitable double-edged sword?
Vitalik responded: Our field needs to lead the construction of anti-fraud technology in a principled way (because if we don’t, a centralized version will be imposed on us in an unprincipled way).
“Principled” basically means:
(i) On-device scanning does not send any information to Big Brother (corporate or government) and (ii) Users can choose very granularly which scanners they accept and which they do not accept, with scanners produced by a variety of organizations in a competitive market with different structures (for-profit, community organizations, etc.) and with different national or political leanings.
To reduce cryptojacking, wealthy crypto holders should be encouraged to keep their funds in multi-signature accounts that they cannot directly access through information or objects on their person. I do this, and I have been advocating others to do this for ten years (hence my focus on smart contract wallets and account abstraction).
