Advocating for a return to Cypherpunk! Vitalik's vision of blockchain and Ethereum as an ideal societal form, integrating speculation and development.

Vitalik Buterin published an article on his blog yesterday titled "Make Ethereum Cypherpunk Again", advocating for Ethereum to return to its cypherpunk roots and emphasizing the ultimate goal of cryptocurrency to pursue Web3 values. He acknowledged the challenges posed by the increasing financial attributes and speculative nature of the industry, but suggested exploring ways to integrate both aspects rather than simply rejecting one in favor of the other.

This article is compiled and translated. For any doubts, please refer to the original text.

Web3 Ideal World

The Real Goal of the Cryptocurrency World

The deeper vision behind cryptocurrencies and blockchain is not just to create isolated tools and games, but to establish a more free and open social and economic environment, known as Web3, which requires a harmonization of various aspects including technology, society, and economics to have a chance of achieving.

The term Web3 was originally coined by Gavin Wood, and in technical terms, the goal is to constitute a more open web stack.

Why Web3 Matters

Why pursue Web3? To extend the spirit of openness and freedom into modern life. Even if the underlying code of applications is open-source and free, user data is communicated through centralized servers run by entities, allowing the company to access user data, alter rules, or engage in platformization at any time to extract more user value.

If we want to extend the spirit of open-source software to the world today, there needs to be a program that can access content that requires multiple modifications, and Ethereum is one of the key systems for this.

What is Web3

So, specifically, what should ideal Web3 technology and applications look like? Vitalik has outlined several key features:

• Permissionless: In theory, anyone in the world should be able to participate.
• Decentralized: Even if core developers disappear, the program should continue to operate, minimizing reliance on any one participant as much as possible.
• Censorship-resistant: Centralized powers should not have the ability to interfere with the operations of any user or application. Concerns about bad actors should be addressed at higher levels of the technology stack rather than at the protocol level.
• Auditable: Anyone should be able to verify the logic of an application and its ongoing operations to ensure that the service operates according to the rules claimed by the developers. For example, anyone can access comprehensive information by running a full node for complete transparency. (Note: User experience is another matter.)
• Trustworthy Neutrality: Anyone should be able to see the neutrality of the underlying infrastructure, even without trusting the developers.
• Tools, not Empires: Empires attempt to capture users and confine them within walled gardens; tools accomplish their tasks and can interact more broadly with other open ecosystems in other areas.
• Collaborative mindset: Even in competitive relationships, various projects in the ecosystem will share code repositories, research findings, security, community foundations, and other valuable areas for collaboration.

The Gap Between Reality and Ideal

Web3 Industry Reality: Financialization, Speculation

Unfortunately, since 2017, these visions have gradually faded from people's view. Many things in the current crypto ecosystem do not adhere to the above values. There are many examples that illustrate the current state of many industries:

• While people do use cryptocurrencies for remittances and savings in many countries, they often do so in a centralized manner, only transferring internally in centralized exchange accounts or trading USDT on Tron. (Note: Vitalik believes Tron and USDT are not decentralized enough.)
• Systems claiming to be Layer2, but are actually centralized systems protected by multisigs, with no plans to switch to a more secure design. (Note: Likely referring to the Blast design.)
• A simpler account abstraction system than the ERC-4337 standard, eliminating the public memory pool (mempool), introducing trust assumptions, thus reversing priorities.
• Many existing NFT projects store images and other metadata on centralized servers, making them more vulnerable than storing them on IPFS.
• Projects establishing staking interfaces unnecessarily diverting users and liquidity to the largest staking pools in the market, increasing centralization attributes.

Why Does the Gap Exist

Vitalik believes that the primary culprit for this phenomenon is the increase in transaction fees, leading to excessive financialization and speculation.

When the cost of on-chain transactions is $0.001, one can imagine people creating creatively innovative applications using blockchain in various ways. However, when transaction fees exceed $100, only one audience remains willing to participate in this game—the degenerate gamblers—who, through speculative operations and corresponding applications, make themselves wealthy, leading to products and user groups on the blockchain gradually becoming financialized and speculative.

Resisting the above problems is difficult, but if not attempted, there is a risk of losing the unique value of the crypto ecosystem, potentially transforming it into a replica of Web2 with added inefficiency and steps.

Vitalik also acknowledges that moderate speculation is not a problem, as many people join the crypto ecosystem for financial reasons but ultimately stay for the ideals. However, when these gamblers become the largest group using blockchain, it changes external perceptions of crypto culture and generates many negative effects.

Ethereum Social Layer Experiment

In response to these issues, the industry is indeed making progress through continuous trial and error, having resolved many past issues, including improving blockchain performance, recovering social keys, preventing fraud infrastructure, combating MEV transactions, demonstrating technological progress, and encouraging users to explore more possibilities.

However, these are only technical solutions. To achieve the ideal crypto concept, social consensus is equally crucial, that is, how users utilize blockchain technology and their attitudes in action.

Social Layer Interest Alignment is Not Entirely the Problem

Regarding the excessive financialization and capitalization in the crypto space, Vitalik believes that what is needed is integration, not exclusion. Vitalik's vision is to integrate the ideal and chaotic parts of the crypto world, turning differences into symbiosis, such as using the incentive mechanism of cryptocurrency to drive the development of decentralized open-source projects, something that was difficult to achieve in the past. Here are three examples:

• The incentive measures of cryptocurrencies change social attitudes. In the past, PGP wanted to distribute encryption keys to everyone, but ultimately failed because no one adopted it. Later, with cryptocurrencies, suddenly millions of people had key pairs, allowing them to start developing decentralized applications using these key pairs, such as encrypted emails, fulfilling PGP's original ideals.
• Cryptocurrencies drive the development of decentralized industries. Previously, open-source decentralized projects often faced long-term funding shortages, but now blockchain-based projects find it easier to obtain funding, whether through token issuance or derivative ecosystem token bonuses like Gitcoin Grants and Optimism RetroPGF.
• Interest-driven network consensus. Ethereum's security comes from the $20 billion market value of ETH staked, which security is not due to the benevolence of stakeholders but rather their self-interest considerations.

Technology Cannot Solve the Side Effects of Integrated Incentives

However, incentives alone are not enough. How to perfectly integrate financial attributes into the Web3 concept remains a challenge. Anyone can easily attract stakers with incentive measures, but motivating stakers to decentralize is much more difficult. (Note: Just look at the current situation with Lido to understand.)

Lido occupies over 30% of the liquidity staking market! Does the Ethereum network really need a 22% verification limit?

Relying purely on in-protocol methods, i.e., solely on technological development, may not be able to achieve the vision of "perfectly integrating incentive measures," as many critical parts of the decentralized stack lack viable business models.

The Value of Ethereum's Social Layer

Looking back at Ethereum, its governance itself is non-financialized, not using token staking for voting rights but allowing various competent core development teams to discuss collectively, making Ethereum more robust than other financially governed ecosystems.

Ethereum has a strong social layer that can enforce its values where pure incentives cannot, without creating a centralized concept like the "Ethereum Alliance," thereby avoiding becoming a new form of politically correct.

How can this integration be truly achieved in various protocols in the future? Emphasizing incentives while not being consumed by them. Vitalik believes the answer may not exist in a simple solution but in a series of cumulative technological iterations and consolidated social consensus, which is something the Ethereum network has already achieved and is highly valuable.

Conclusion: Web3 Will Eventually Moderately Integrate Token Incentives

Faced with the speculation in Ethereum, Vitalik's ultimate goal is integration rather than elimination, believing that people will join for financial gain but ultimately stay for the ideals, thus advancing the ideal Web3 world better and faster.

The specific means are based on the Ethereum protocol itself. Ethereum's governance balances interests and expertise, enabling numerous development teams to collaborate and advance the protocol towards the ideal direction, which is the value of Ethereum. Perhaps in the future, other protocols can draw inspiration from this.