Rekindling the Cypherpunk Spirit: The Ideal Societal Model of Blockchain and Ethereum According to Vitalik, Integrating Speculation and Development

Vitalik Buterin published an article on his blog yesterday titled “Make Ethereum Cypherpunk Again,” which reiterates the ultimate goal of cryptocurrencies to pursue Web3 values. However, he believes that the increasing financial attributes and speculation have made it more challenging. Nevertheless, he suggests considering how to integrate these conflicting aspects rather than simply rejecting one another.

Web3 Ideal World
The True Goal of the Cryptocurrency World
Why Web3 Is Important
What Is Web3
The Gap between Reality and Ideal
Web3 Industry Reality: Financialization and Speculation
Why Does the Gap Exist
Ethereum’s Social Layer Experiment
The Value of Ethereum’s Social Layer
Conclusion: Web3 Will Eventually Integrate Token Incentives Moderately
Cryptocurrencies and blockchain have a deeper vision beyond creating isolated tools and games; they aim to establish a more free and open society and economic environment, which is Web3. This requires the integration of various dimensions, including technology, society, and economy, to have a chance of achieving it.

The Fundamental Concept of the Cryptocurrency Community: Web3
The term Web3 was initially coined by Gavin Wood, and from a technical perspective, its goal is to constitute a more open network stack.

Why pursue Web3? It is to extend the spirit of openness and freedom into modern life. Even if the underlying code of an application is open source and free, users’ data is still communicated through centralized servers controlled by entities that can read the data, change the rules, or exploit user value at any time.

If we want to expand the spirit of open-source software into the modern world, we need programs that can access content that requires multiple people to modify, and Ethereum is one important system for that.

So, specifically, what should ideal Web3 technology and applications look like? Vitalik provides several characteristics:

Permissionlessness: Theoretically, anyone in the world should be able to participate.

Decentralization: The program should continue to operate even if core developers disappear, minimizing dependence on any one participant.

Censorship Resistance: Centralized power should not be able to interfere with the operations of users or applications. Concerns about bad actors should be addressed at higher levels of the technology stack rather than at the protocol level.

Auditability: Anyone should be able to verify the logic and actions of an application to ensure that it operates according to the rules claimed by developers. However, user experience is another matter.

Neutrality: Anyone should be able to see the neutrality of the infrastructure, even without trusting the developers.

Tool, Not Empire: Empires try to capture users and keep them within walled gardens, while tools complete their tasks and interact more widely with other open ecosystems.

Collaborative Mindset: Even in a competitive relationship, various projects in the ecosystem should collaborate in sharing code repositories, research findings, security, community infrastructure, and other valuable areas.

Unfortunately, since 2017, these visions have gradually faded from people’s sight. There are many examples that prove the current state of many industries in the cryptocurrency ecosystem does not adhere to the above values:

Although people do use cryptocurrencies for remittances and savings in many countries, they usually use centralized methods, only performing internal transfers in centralized exchanges or trading USDT on Tron.

There are systems claiming to be Layer2 solutions, but in reality, they are centralized systems protected by multisig, with no plans to switch to more secure designs.

There are simpler account abstraction systems than the ERC-4337 standard, eliminating the need for a public mempool but introducing trust assumptions, thus reversing priorities.

Many existing NFT projects store image and metadata on centralized servers, making them more vulnerable than storing them on IPFS.

There are projects that create staking interfaces unnecessarily redirecting users and liquidity to the largest staking pool in the market, increasing centralization.

Vitalik even sarcastically mentions Sun Yuchen and Tron as the most decentralized blockchain.

Vitalik believes that the main culprit for this phenomenon is the rising transaction fees, resulting in excessive financialization and speculation. When the cost of on-chain transactions is $0.001, people can imagine creating creative applications using blockchain in various ways. However, when transaction fees exceed $100, only one audience is still willing to participate in this game: degenerate gamblers who make themselves rich through speculative operations and corresponding applications. As a result, products and user groups on the blockchain become increasingly financialized and speculative.

Therefore, resisting these issues is challenging, but if we don’t try, we may lose the unique value of the cryptocurrency ecosystem and turn into a replica of Web2 with additional inefficiencies and steps.

Although Vitalik also believes that moderate speculation is not a problem and that many people join the cryptocurrency ecosystem for financial reasons, ultimately, they will stay for the ideal. However, when these gamblers become the largest group using blockchain, it changes the perception of the internal culture of cryptocurrencies and has many negative effects.

Regarding the above issues, the industry is indeed making progress through continuous trial and error and has already solved many past problems, including improving blockchain performance, social recovery of private keys, preventing fraud infrastructure, and resisting MEV transactions. It demonstrates technological progress and hopes that users will explore more possibilities through it.

However, these are only technical solutions, and achieving the ideal cryptocurrency concept still requires social consensus and how users act with blockchain technology and attitude.

Regarding the excessive financialization and capitalization in the cryptocurrency field, Vitalik believes that integration is needed, not exclusion. Vitalik’s vision is to integrate the ideal and chaotic parts of the cryptocurrency world, transforming differences into symbiosis. For example, use the incentive mechanism of cryptocurrencies to drive the development of decentralized open-source projects, which was previously difficult to achieve. He gives three examples:

Incentive measures of cryptocurrencies change social attitudes. In the past, PGP wanted to put encryption keys in everyone’s hands but failed because no one adopted it. Later, with cryptocurrencies, millions of people suddenly had key pairs and could start developing decentralized applications, such as encrypted emails, fulfilling PGP’s ideals.

Cryptocurrencies promote the development of decentralized industries. Previously, open-source decentralized projects often faced funding shortages in the long term. However, now, blockchain-based projects can more easily obtain funding through token issuance or derivative ecosystem token rewards (Gitcoin Grants, Optimism RetroPGF).

Interest-driven network consensus. Ethereum’s security comes from the $20 billion market value of ETH staking. This security does not come from the benevolence of stakeholders but from self-interest.

But incentives alone are not enough. How to perfectly integrate financial attributes into the Web3 concept remains a challenge. Currently, anyone can easily attract stakers through incentive measures, but motivating stakers to be decentralized is much more difficult.

Purely using protocol-level methods, relying solely on technological development, may not be able to achieve the vision of “perfect integration of incentive measures.” Many critical parts of the decentralized stack lack viable business models.

Referring back to Ethereum, its governance itself is non-financialized. It does not use token staking for voting rights but relies on various capable core development teams for discussions. This makes Ethereum more powerful than other financially governed ecosystems.

Ethereum has a strong social layer that can enforce its values where pure incentive measures cannot, without creating a centralized concept like the “Ethereum Alliance,” thus becoming a new form of political correctness.

How can this integration be truly achieved in various protocols in the future? It emphasizes incentives while not being consumed by them. Vitalik believes that the answer may not exist in a simple solution but in a series of accumulated technological iterations and cohesive social consensus, which is already a valuable part of the Ethereum network.

Vitalik’s ultimate goal in the face of speculation in Ethereum is integration, not elimination. He believes that people join for their interests but stay for the ideals, thereby promoting the ideal Web3 world better and faster.

The specific means can be learned from the Ethereum protocol itself. Ethereum’s governance relies on balancing interests and expertise, enabling numerous development teams to collaborate and advance the protocol in the ideal direction. This is where Ethereum’s value lies. In the future, other protocols may be able to take inspiration from this.

Vitalik
Web3
Speculation