Vitalik Interview: Merger Not "Price In" Yet, Bitcoin and Ether Not Worthy of ETF Issuance

The founder of Ethereum was interviewed during EthCC, and in the approximately half-hour interview, he mentioned that ETH has not been "Priced In" yet, both psychologically and from a market perspective. He also discussed the current market situation, the potential benefits of Terra collapsing soon, and his expectations for the future of Ethereum.

The following content is compiled from Bankless, with the text sorted and condensed. For detailed content and discussion, please refer to the link.

This episode is hosted by Bankless founder David Hoffman as the interviewer.

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Thoughts on Winning the Best Style Award at EthCC?

Vitalik: This time, I wore Unisocks, a unicorn T-shirt, a kitty watch, and some interesting items. I think we should have more fun socks and T-shirts. I only have about eight, maybe one more T-shirt, but I really like these unicorn ultra-thin T-shirts.

Note: There is no such thing as the Best Style Award.

Views on the Current State of the Cryptocurrency Space?

David Hoffman: After the crazy year of 2021, we are back to a more subdued cryptocurrency space, a bear market. Depression is usually a negative term, but for many of us who entered the cryptocurrency space before 2021, including myself, it's like "Wow, things have finally quieted down a bit." Now that we are more than halfway through the year, have you noticed anything?

Bear Market Leads to a Return to Cryptocurrency's Roots

Vitalik: I definitely feel a sense of relief as everything has quieted down with the arrival of the bear market. I believe it's important to remember the lessons learned during the bull market bubble cycle. The cryptocurrency space has attracted a lot of attention in the past year, which is good, but some things have backfired, such as:

1. The cryptocurrency space has created the impression of "promising a lot of things" over the past year.
2. With too many promises, the higher the public's expectations, the greater the disappointment.
3. It has attracted too many undesirable individuals.
4. It has attracted more regulatory attention.

Therefore, I think it's a good thing to let the cryptocurrency space return to its own space and prepare well for the next breakthrough.

Vitalik's Technological Vision

Vitalik: Blockchain scalability is still far from enough, but we have seen a lot of progress, such as Rollups, sharding, Volidium, ZK-Rollups, zkEVM, and other developments.

Many things that I have emphasized over the past few years seem to be taken more seriously. For example, Optimism and Arbitrum are in progress. If we introduce more data compression mechanisms, Rollups are expected to reduce transaction fees by five times. The account abstraction proposal ERC-4337, which I have mentioned several times on this show.

Note: ERC-4337 is mainly used for recovery wallets, allowing users who have lost their private keys to contact their relevant private key guardians, sign specific transactions, and recover their wallets.

Is Ethereum's Development Iteration Getting Faster?

David Hoffman: It seems that Ethereum's iteration speed is getting faster and faster, with many updates being deployed in parallel at the same time. The pace of updates is almost so fast that I can't fully understand the content of each update. What is your rating and view on the deployment of updates?

Ethereum Development Is Both Fast and Slow

Vitalik: I think there are two different sources of pressure pulling in different directions. Ethereum as a community continues to attract more great researchers and developers who are committed to solving problems, which forces us to accelerate development progress.

On the other hand, we need to avoid mistakes, such as deploying updates to different clients and considering infrastructure, which puts pressure on us to slow down.

These two pressures coexist and are, to some extent, healthy, prompting Ethereum to accelerate development in the coming years and make some disruptive infrastructure changes, such as changing the consensus mechanism and introducing sharding. At the same time, we also hope that Ethereum as a public chain can settle down and move towards a more stable development path, focusing on technology and security.

How is the Morale of Ethereum Developers?

The Merge Has Not Been Priced In by the Market Yet

Vitalik: After experiencing the bear market of 2018 and The DAO fork incident, everyone was certainly a bit discouraged. But I think the morale displayed now is real, and as The Merge approaches, people's thoughts may be like, "Is this really going to happen?"

I also believe that not only from a market perspective, but from a psychological and narrative perspective, The Merge has not been priced in by the market yet. So when The Merge actually happens, I expect morale to further increase significantly. At that time, Ethereum will truly be Priced In.

Note: David Hoffman reminds Vitalik to be careful with his words, as this statement may be used as a headline by many media outlets. Vitalik responds: "Oh, okay, then I'll have to think of something more interesting to say: 'Everyone should go buy Bitcoin Satoshi’s Vision BSV.'"

Caution Regarding Blockchain Applications

David Hoffman: Let's talk about the Ethereum application layer. I think we have learned many lessons in this area, including the ICO frenzy and DeFi yield farming. What lessons do you think the Ethereum application layer has learned in 2021?

Terra Frustrates Principles-Oriented Individuals

Vitalik: If you are a principles-oriented person, you would say that anything offering over a 10% APY is best unsustainable and at worst, a scam project. Because in the fiat world, nothing can provide a stable 10% return with extremely low risk.

So why do we think cryptocurrencies can offer higher returns? Especially when these APYs have no real economic activity behind them. We have also seen high APYs and increasingly crazy liquidity mining in the past. I believe this has made everyone start to think:

Wait a minute, maybe this is a completely new paradigm, but it could also just be a place full of biases against the Web2 fiat world?

Hoping Terra Collapses Soon

Vitalik: The sudden collapse of Terra is like these high APY projects telling everyone, "Oh no, no, no, principles are still important to us, we need to return to reality."

I'm really glad that Terra collapsed in a timely manner. In fact, I wish it had happened a few months earlier. It might have only wiped out $5 billion instead of $50 billion, but it's better to happen now than later. This situation is like:

If it only wipes out $5 billion, it's not a big deal. Maybe it's just a group of wealthy geeks playing around, it's their problem. However, $50 billion would make everyone more fearful and make the situation in the cryptocurrency space even more difficult.

It can only be said that Terra collapsed before it grew too large, which made everyone realize the importance of principles and understand that a project that has been providing 6% returns for two years is far better than going to zero.

Bitcoin and Ethereum Are Not Worthy of ETF Issuance

Vitalik: These high APY activities are one of the reasons why I have not been very enthusiastic about the issuance of ETFs for Bitcoin and Ethereum. It seems that the cryptocurrency space needs a longer development cycle, partly due to self-inflicted reasons. The entire ecosystem looks like the so-called Wild West, where you could really lose everything you invest.

Expectations for the Community

David Hoffman: For the broader Ethereum community, beyond the core and protocol developers, what are your expectations for them? What can we do to become a better community? Also, in occasions like EthCC, where you may have to face hundreds of people wanting to pitch products and applications to you, how do you handle it?

Doing Meaningful Things

Vitalik: I think my advice has never changed, which is to create meaningful things. For example, the account abstraction proposal ERC-4337. The development team did not issue tokens or have deceptive marketing departments. I believe what they are developing could be revolutionary, significantly improving wallet security and L2 speed by three times. These people deserve some care.

Dealing with Enthusiastic Pitches?

Vitalik: It's good to talk to everyone to understand what they care about and are working on, but it's also good not to have too many people. Suppose they are developing a social platform, the focus should not be on issuing tokens, but on what interesting vision they have, such as reducing harmful, unproductive content through certain mechanisms.

But I think all of this is part of the Ethereum community. Sometimes they need attention, funding, or help finding people who are working on solving the same pain points. Sometimes they need some encouragement, and what I can do is provide assistance as much as possible.