On 18th July, Vitalik Buterin got together on a podcast with Tyler Cowen. The podcast “Conversations with Tyler” is a learning channel on Apple Music. Buterin spoke about the sheer effectiveness of cryptocurrency, its economics and about the future of blockchain and its applications.
According to Buterin, cryptocurrency “by itself” is basically costless. He said that the only expense that occurs is the production process of the cryptocurrency which gets evened out when people who trust the cryptocurrency participate in transactions. This ‘club’ of people ensures that a constant cycle of token production takes place which balances the value thereby preventing hyperinflation of any single cryptocurrency.
“It is possible to join the club, but joining the club requires that you undertake some kind of costly signaling expenditure — in some ways burn capital, burn resources, or consume something unique — which is just difficult enough that it prevents people from doing it willy-nilly to the point where all the cryptocurrency hyperinflates.”
Buterin went on to comment about ‘cryptoeconomics’, a term coined by him to describe the economics that happens in the cryptocurrency sphere. According to him, cryptocurrency follows the same set of rules that are set by economic standards in the society.
He states that whatever transactions that occur on a blockchain have to follow the protocols set by, not a judge or a judicial body, but by the computer programmer responsible for developing the blockchain. He has remarked that there are some protocols that do not work in the field of ‘cryptoeconomics’ and these are the hard and fast rules set by the societal economics.
He was quoted as saying:
“For example, you can’t say in cryptoeconomics, “It’s illegal to bribe people,” because there’s really no simple way to define what a bribe is. If someone really wants to bribe someone else, he can just go and do that outside of the protocol, and the protocol would have no way to tell.”
He went on to comment about the anonymity of the users in the field of cryptocurrency. This anonymity according to him ensures that the person is not penalized for any wrongdoings because he or she can just change their virtual addresses and move on with another identity. He states that this is in stark contrast with what happens in the real world, thereby setting them apart on opposite poles.
Buterin believes that all cryptocurrency users are trying to figure out how the economics of transactions works by learning from the individual properties of each and every cryptocurrency attribute.
Cowen went on to ask Buterin about the concept of blockchain and how it can easily be explained to someone. Buterin replied comparing blockchain to a “world computer”, an analogy he draws from his comic book fandom. He stated:
“The idea, basically, is that a blockchain, as a whole, functions like a computer. It has a hard drive, and on that hard drive, it stores what all the accounts are. It stores what the code of all the smart contracts is, what the memory of all these smart contracts is.”
He reiterated the reason as to why blockchain should be preferred over traditional means of transfer as he stood firm on the fact that once blockchain is implemented on a large scale, no industry will crash because of illegal activities conducted by others or because of a large-scale hack.
Buterin also commented on what should be done starting now to ensure blockchain technology is a prevalent industry. He touched up on the issue of scalability of blockchain capacity and stated a specific example.
“Ethereum blockchain’s capacity right now is about 15 transactions per second. If you even consider something like putting all of the Uber rides on the blockchain, that’s 12 transactions per second already . If you talk about moving PayPal over, that gets into the hundreds, and then anything more complex starts moving into the many thousands.”
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