Time Magazine: Ethereum's Vitalik Buterin is worried about the future of cryptocurrency

In a few minutes, techno music will throb, stuffed animals will be tossed into the air, women will appear spinning colorful hula hoops, and a mechanical bull will spring into action, knocking off one delighted rider after another. This is the closing night of ETHDenver, a weeklong cryptocurrency conference dedicated to the blockchain Ethereum. For days, people have lined up around the block. Now, on this Sunday night in February, the dizzying energy is at its peak.

But as the crowd pressed inside, a lean man with elfin features was sprinting out of the venue, past surprised selfie-takers and venture capitalists. Some shouted, pleading with him to stay; others even chased him through the streets, on foot and on motorcycles. Yet the man outran them all and disappeared alone into the privacy of the hotel lobby.

The most influential man in crypto, Vitalik Buterin, didn’t come to Denver to party. He doesn’t drink and doesn’t particularly enjoy crowds. Not that the 28-year-old creator of Ethereum didn’t have much to celebrate. Nine years ago, Buterin dreamed up Ethereum as a way to leverage bitcoin’s underlying blockchain technology for a variety of purposes beyond currency. Since then, it has become what advocates say is the bedrock layer of a new, open-source, decentralized internet. The platform’s native currency, ether, has become the second-largest cryptocurrency after bitcoin, powering a trillion-dollar ecosystem that rivals Visa in terms of the money it moves. Ethereum has brought thousands of the world’s unbanked into the financial system, allowing capital to flow across borders unhindered and providing the infrastructure for entrepreneurs to build all sorts of new products, from payment systems to prediction markets, digital exchange conferences to medical research hubs.

Photo by Benjamin Rasmussen for Time

But Ethereum has made itself unfathomable to a few white men, spewing pollutants into the air and becoming a vehicle for tax evasion, money laundering and mind-boggling scams.“Cryptocurrency itself has a lot of dystopian potential if it’s not implemented correctly,” the Russian-born Canadian explained in an 80-minute interview in his hotel room the morning after the party.

Buterin worries about the dangers of overeager investors, soaring transaction fees and shameless displays of wealth that have come to dominate public perception of cryptocurrencies. “The danger is that you have these $3 million monkeys and it becomes just another kind of gambling,” he said, referring to the Bored Ape Yacht Club, a super-popular NFT collection of garish primate cartoons that has become a digital-age status symbol for millionaires including Jimmy Fallon and Paris Hilton, which have traded for more than $1 million. “There are definitely a lot of people who are just buying yachts and Lambos.”

Buterin wants Ethereum to be a launching pad for all sorts of sociopolitical experiments: fairer voting systems, urban planning, universal basic income, public works projects. Most of all, he wants the platform to serve as a check on authoritarian governments and upend Silicon Valley’s stranglehold on our digital lives. But he acknowledges that his vision for Ethereum’s transformative power is at risk of being overtaken by greed. So he’s reluctantly begun taking on a larger public role in shaping its future. “If we don’t exercise our voice, the only things that get built are the things that are immediately profitable,” he says, his voice rising and falling as he fidgets with his hands between the cushions of a lumpy gray couch. “And those are often far from what’s actually best for the world.”

Ironically, despite his reputation, Buterin may not have the power to stop Ethereum from going off track. That’s because he designed it to be a decentralized platform that responds not only to his own vision but also to the wishes of its builders, investors, and expanding community. Buterin is not the official leader of Ethereum. He fundamentally rejects the idea that anyone should have unilateral power over its future.

Buterin wearing Shiba Inu pajamas on stage at ETHDenver

Benjamin Rasmussen

That leaves Buterin dependent on a limited set of soft-power tools: writing blog posts, giving interviews, conducting research, speaking at conferences where many attendees want nothing more than to bask in the glow of their newfound wealth. “I’m always yelling, and sometimes that yelling feels like howling in the wind,” he says, his eyes scanning the room. Whether his approach works (and how much influence Buterin has over his own ideas) could be the difference between a future in which Ethereum becomes the foundation for a new era of digital life and one in which it’s just another financial speculation tool — a credit default meets a utopian swap.

Three days after the music went off at ETHDenver , Buterin’s attention turned around the world, back to the region where he was born. Cryptocurrency almost immediately became a tool of resistance in Ukraine during the war unleashed by Russian President Vladimir Putin. In the first three weeks of the invasion, more than $100 million in cryptocurrency was raised for the Ukrainian government and non-governmental organizations. Cryptocurrency also provided a lifeline to some fleeing Ukrainians who were unable to access banks. At the same time, regulators worried that it would be used by Russian oligarchs to evade sanctions.

Buterin has also taken action to direct hundreds of thousands of dollars in grants to disaster relief efforts   , and publicly slammed Putin’s decision to hack in. “The silver lining of the situation over the past three weeks is that it has reminded a lot of people in the crypto space that the ultimate goal of crypto is not to play games with million-dollar monkey photos, but to do things that can accomplish meaningful impact in the real world,” Buterin wrote in a March 14 email to TIME .

His outspoken advocacy marks a shift for a leader who has been slow to find his political voice. “One of the decisions I made in 2022 was to try to be more adventurous and less neutral,” Buterin said. “I’d rather Ethereum offend some people than turn into something that means nothing.”

The battle is personal for Buterin, who is of Russian and Ukrainian descent. He was born outside Moscow in 1994, a few years after the collapse of the Soviet Union, to two computer scientists, Dmitry Buterin and Natalia Ameline. The monetary and social systems had collapsed; his mother’s parents had lost their life savings due to inflation. “Growing up in the Soviet Union, I didn’t realize that most of the good things I was told in school, like communism, were propaganda,” Dmitry explains. “So I wanted Vitalik to question traditions and beliefs, and he grew up to be a very independent thinker.”

The family initially lived in a college dorm with a shared bathroom. There were no disposable diapers, so his parents washed him by hand. Vitalik grew up with a turbulent, energetic mind. Dmitry says Vitalik learned to read before falling asleep, and his sentence formation was slow compared to his peers. “Because his mind was moving so fast,” Dmitry recalls, “he actually had a hard time expressing himself verbally for a while.”

Instead, Vitalik gravitated toward the clarity of numbers. At age 4, he inherited his parents’ old IBM computer and began playing with Excel spreadsheets. At 7, he could memorize more than a hundred digits of pi and would shout out math equations to pass the time. At 12, he was coding in Microsoft Office Suite. Isolation from his peers was exacerbated by a move to Toronto in 2000, the same year Putin was elected in his first election. His father describes Vitalik’s upbringing in Canada as “lucky and naive.” Vitalik himself uses the term “lonely and isolated.”

Buterin at his IBM

Courtesy Dmitry Buterin

In 2011, Dmitry introduced Vitalik to Bitcoin, which was created in the aftermath of the 2008 financial crisis. After watching the financial systems in Russia and the United States collapse, Dmitry was intrigued by the idea of ​​an alternative global source of money that was not controlled by the authorities. Vitalik soon began writing articles exploring the new technology for Bitcoin Weekly magazine, for which he earned five Bitcoins at a time (about $4 at the time; today, worth about $200,000).

Even as a teenager, Vitalik Buterin proved to be an incisive writer, able to express complex ideas about cryptocurrency and its underlying technology in clear prose. At 18, he co-founded Bitcoin Magazine and became its lead writer, gaining a following both in Toronto and abroad. “A lot of people think of him as a typical technical engineer,” says Nathan Schneider, a professor of media studies at the University of Colorado Boulder who first interviewed Buterin in 2014. “But the core of his practice is more about observation and writing — it helps him see a cohesive vision that others haven’t seen.”

As Buterin learned more about the blockchain technology that built Bitcoin, he came to believe that using it purely for money was a waste. He argued that blockchains could serve as an effective way to protect all kinds of assets: web applications, organizations, financial derivatives, non-predatory lending programs, even wills. Each of these could be operated through "smart contracts," pieces of code that can be programmed to conduct transactions without the need for intermediaries. For example, a decentralized version of the ride-sharing industry could be built that directly sent money from passengers to drivers, without Uber taking a cut of the proceeds.

In 2013, Buterin dropped out of college and wrote a 36-page white paper outlining his vision for Ethereum: a new open-source blockchain on which programmers could build any kind of application they wanted. (Buterin removed the name from Wikipedia’s list of science fiction elements.) He sent it to friends in the Bitcoin community, who passed it around. Soon, a handful of programmers and businessmen around the world approached Buterin, hoping to help him make it a reality. Within months, the eight men who would later be known as Ethereum’s founders were sharing a three-story Airbnb in Switzerland, writing code and courting investors.

While some of the other founders mixed work and play — watching Game of Thrones, convincing friends to bring beer in exchange for ether IOUs — Buterin spent most of his time alone, coding on his laptop, according to Laura Shin, a recent book on the history of Bitcoin. Ethereum, Cryptopians . Over time, it became clear that the group had very different plans for the emerging technology. Buterin wanted a decentralized, open platform on which anyone could build anything. Others wanted to use the technology to start businesses. One idea was to build a cryptocurrency equivalent to Google, in which Ethereum would use customer data to sell targeted ads.   The men also bickered over power and titles. One co-founder, Charles Hoskinson, named himself CEO — Buterin was unimpressed, joking that his title would be C-3PO, after the robot from Star Wars.

The ensuing conflict left Buterin with a culture shock. In a matter of months, he had gone from a reclusive life writing code and technical articles to a policymaker battling a bloated ego and power struggles. His vision for Ethereum hung in the balance. “The biggest disagreement was definitely that a lot of these people care about making money. For me, that’s not my goal at all,” he said.   A spokesperson confirmed public records on the blockchain that his net worth is at least $800 million.   “In the beginning, I was even negotiating to lower the percentage of ether that myself and other top founders would receive so that it was more equal. It really upset them.”

time

Buterin said the other founders tried to exploit his naivety to push their own ideas about how Ethereum should be run. “People used my fear of regulators against me,” he recalled, “saying we should have a for-profit entity because it’s a lot simpler legally than being a nonprofit.” As tensions grew, the group pleaded with Buterin to make a decision. In June 2014, he asked Hoskinson and Amir Chetrit, two co-founders who had pushed Ethereum to become a business, to leave the group. He then initiated the creation of the Ethereum Foundation (EF), a nonprofit organization to protect Ethereum’s infrastructure and fund research and development projects.

Over the next few years, all the other founders left one by one to pursue their own projects, either in partnership with Ethereum or as direct competitors. Some of them remain critical of Buterin’s approach. “In the dichotomy between centralization and anarchy, Ethereum seemed to be heading toward anarchy,” said Hoskinson, who now leads his own blockchain, Cardano. “We think there’s a middle ground in creating some kind of blockchain-based governance system.”

As the founders split, Buterin emerged as ethereum’s philosophical leader. He holds a seat on EF’s board and has the clout to shape industry trends and move markets with public statements. He’s even known in China as “V God.” But he hasn’t exactly stepped into a power vacuum. “He’s not good at bossing people around,” said Aya Miyaguchi, EF’s executive director. “He’s immature from a social navigation perspective. He probably still hates conflict,” said Danny Ryan, EF’s lead researcher. Buterin called his struggles for the role of organizational leader “my curse in the first few years of ethereum.”

It’s not hard to see why. When you meet Buterin, he still doesn’t display stereotypical leadership qualities. He sniffles, stutters, walks stiffly and struggles to maintain eye contact. He pays little attention to his clothes, mostly wearing Uniqlo T-shirts or clothes given to him by friends. His dishevelled appearance makes him an easy target on social media: He recently shared insults from online hecklers who said he looked like a “Bond villain” or an “alien lunatic.”

Yet almost everyone who has spoken to Buterin at all has a starry face. Buterin is incredibly funny and almost entirely free of ego or pretension. He’s an unabashed geek whose eyes sparkle when he sees one of his favorite concepts, whether it’s quadratic voting or futarchy governance systems. Just as ethereum was designed to be a do-it-all machine, Buterin is a do-it-all thinker, fluent in subjects ranging from sociological theory to advanced calculus to the history of land taxation. (He’s currently using Duolingo to learn his fifth and sixth languages.) He doesn’t talk down to people, and he steers clear of security details. “The emotional part of me says that once you start going down this path, specialization is another word for losing your soul,” he says.

Buterin, as seen via ETHDenver’s monitor

Benjamin Rasmussen

Alexis Ohanian, a co-founder of Reddit and a major cryptocurrency investor, said being around Buterin gave him “a similar vibe to when I first met Sir Tim Berners-Lee, the inventor of the World Wide Web.” “He’s very thoughtful and humble,” Ohanian said, “and he’s giving the world some of the most powerful Legos it’s ever had.”

For years, Buterin has grappled with how much power to exercise in Ethereum’s decentralized ecosystem. The first major test came in 2016, when a newly created Ethereum-based fundraising vehicle called the DAO was hacked for $60 million, more than 4% of all ether in circulation at the time. The hack tested the crypto community’s values: If they truly believed that no central authority should take over the code that governs smart contracts, then thousands of investors would have to eat their losses — which in turn would encourage more hacks. On the other hand, if Buterin chose to use a tactic called a hard fork to reverse the hack, he would be exercising the same centralized authority as the financial system he was trying to replace.

Buterin took a middle ground. He consulted with other Ethereum leaders, wrote blog posts advocating for a hard fork, and saw the community vote overwhelmingly in favor of the option through forums and petitions. When Ethereum developers create a fork, users and miners can choose to stick with the hacked version of the blockchain. But they overwhelmingly chose the forked version, and Ethereum quickly recovered its value.

For Buterin, the DAO hack embodies the promise of a decentralized approach to governance. “Leadership must rely more on soft power than hard power, so leaders must really consider the feelings of the community and respect them,” he said. “Leadership positions are not fixed, so if a leader stops working, the world will forget about them. Conversely, it’s easy for new leaders to come to power.”

Over the past few years, countless leaders have risen in Ethereum, building various products, tokens, and subcultures. In 2017, there was the ICO boom, with venture capitalists raising billions of dollars for blockchain projects. In 2020, there was the DeFi summer, with new trading mechanisms and derivative structures sending money around the world at super-speed. Last year also saw the explosion of NFTs: tradable digital items such as avatars, art collectibles, and sports cards that have soared in value.

Skeptics scoff at the utility of NFTs, where a multibillion-dollar economy is built on the perceived digital ownership of simple images that can be easily copied and pasted. But they have quickly become one of the most used components of the Ethereum ecosystem. In January, NFT trading platform OpenSea hit a record $5 billion in monthly sales.

Conference attendees line up to ask questions after Buterin's keynote speech

Benjamin Rasmussen

Buterin didn’t predict the rise of NFTs, but he has watched the phenomenon with interest and anxiety. On the one hand, they’ve helped boost the price of ether, which has grown more than tenfold in value over the past two years. (Disclosure: I bought less than $1,300 worth of ether in 2021.) But their numbers have overwhelmed the network, causing congestion fees to skyrocket, as bidders trying to nab rare NFTs, for example, pay hundreds of dollars in extra fees to ensure their transactions speed up.

These costs destroy   The 2018 edition of the Proof of Humanity Foundation lists some of Buterin’s favorite projects on the blockchain. Take Proof of Humanity, which distributes a universal basic income — currently about $40 a month — to anyone who signs up. Depending on the week, the network’s congestion fees can make it prohibitively expensive to pull money from your wallet to pay for basic needs. “The fees are such that now,” Buterin said, “it’s really getting to the point where financial derivatives and gambling stuff are starting to price in some cool stuff.”

Inequality has spread to the crypto space in other ways, including a severe lack of gender and racial diversity. “It’s not one of the things I put a lot of intellectual effort into,” Buterin acknowledged of gender equality. “The ecosystem there really needs to improve.” He scoffed at the dominance of token voting, which Buterin believes was a “very important” process for the DAO.   It’s just a new version of plutocracy, where wealthy venture capitalists can make self-interested decisions with little pushback. “It’s become the de facto standard, and that’s the dystopia I’ve seen over the last few years,” he said.

These issues have sparked a backlash within and beyond the blockchain community. As cryptocurrencies move toward the mainstream, their esoteric jargon, idiosyncratic culture, and financial excesses have been widely disdained. Meanwhile, frustrated users are turning to newer blockchains like Solana and BNB Chain, driven by the prospect of lower transaction fees, alternative building tools, or different philosophical values.

Buterin understands why people would want to stay away from Ethereum. Unlike almost any other leader in a trillion-dollar industry, he says he’s fine with it — especially given that Ethereum’s current problems stem from the fact that it has too many users. (Losing his vast fortune doesn’t faze him too much: Last year, he threw away $6 billion worth of Shiba Inu tokens that had been gifted to him, explaining that he wanted to donate some to charity and help maintain the meme coin’s value before surrendering his role as a “center of power.”)

Meanwhile, a representative confirmed that he and EF, which holds nearly $1 billion worth of ether reserves, are taking multiple approaches to improve the ecosystem. Last year, they distributed $27 million to Ethereum-based projects, up from $7.7 million in 2019, with recipients including smart contract developers and educational conferences in Lagos.

The EF Research team is also working on two major technical updates. The first, dubbed “the merge,” will switch Ethereum from proof-of-work (a form of blockchain validation) to proof-of-stake, which EF says will reduce Ethereum’s energy usage by more than 99% and make the network more secure. Buterin has been pushing for proof-of-stake since Ethereum’s inception, but repeated delays have turned implementation into a Waiting for Godot -style drama. At ETHDenver, EF researcher Danny Ryan announced that the merge will happen within the next six months, barring “crazy, catastrophic events.” The same day, Buterin encouraged companies concerned about environmental impact to hold off on using Ethereum until the merge is complete — even if it’s “delayed until 2025.”

ETHDenver attendee Brent Burdick checks his phone in the NFT gallery room.

Benjamin Rasmussen

In January, Moxie Marlinspike, co-founder of the messaging app Signal, wrote a widely read critique noting that despite collectivist rhetoric, so-called web3 had coalesced around centralized platforms. As he often does when faced with legitimate criticism, Buterin responded with a thoughtful, detailed post on Reddit. “The world of properly validated decentralized blockchains is coming, and closer to here than many think,” he wrote. “I see no reason why the future would need the same technology as it does today.”

Buterin realizes that the utopian promises of cryptocurrency sound outdated to many, and calls the race to implement sharding in the face of competition a "ticking time bomb." "If we don't have sharding fast enough, then people might start migrating to more centralized solutions," he said. "If it's still centralized after all of this happens, then yes, there's a stronger argument that there's a big problem."

With the technical issues resolved, Buterin turned his attention to the larger sociopolitical issues he believes blockchain can solve. On his blog and Twitter, you’ll find essays on housing; on voting systems; on the best way to distribute public goods; on city building and longevity research. While Buterin has lived in Singapore for much of the pandemic, he’s increasingly been living as a digital nomad, writing on the road.

Those familiar with Buterin have noticed a philosophical shift over the years. “He’s gone on a journey from being more sympathetic to anarcho-capitalist thinking to Georgian thinking,” said economist Glen Weyl, one of his close collaborators, referring to a theory that holds that the value of the commons should be equal to all members of society. A recent post by Buterin called for the creation of a new type of NFT, one based not on monetary value but on participation and identity. For example, the distribution of votes in an organization might depend on an individual’s commitment to the group rather than the number of tokens they own. “NFTs can be more about who you are than just what you can afford,” he wrote.

While Buterin’s blog is one of his primary tools for public persuasion, his posts are not intended to be edicts, but rather intellectual explorations that spark debate. Buterin often dissects the flaws of obscure ideas he once wrote about with enthusiasm, such as the Harberger tax. His blog is an example of how leaders can approach complex ideas with transparency and rigor, exposing the messy process of intellectual growth for all to perhaps learn from.

Some of Buterin’s more radical ideas might raise alarm bells. In January, he caused mild outrage on Twitter for advocating for artificial wombs, which he said could close the pay gap between men and women. He has predicted that someone born today has a good chance of living to 3,000 and taking the anti-diabetes drug metformin in hopes of slowing his body’s aging, though studies on the drug’s effectiveness have been mixed.

As government agencies prepare to wade into the encryption space—in March, President Biden signed an executive order seeking a   Federal plans to regulate digital assets — Buterin is increasingly being courted by politicians.   At ETHDenver, he spoke privately with Colorado Gov. Jared Polis, a Democrat who supports cryptocurrency. Buterin is anxious about the political valence of crypto in the U.S., where Republicans are generally more eager to embrace it. “There are definitely signs that crypto seems to be on the verge of becoming a right-wing thing,” Buterin said. “If that happens, we’re going to sacrifice a lot of the potential that it offers.”

For Buterin, the worst-case scenario for crypto’s future is that blockchain technology ends up centralized in the hands of authoritarian governments. He was unhappy with El Salvador’s launch of Bitcoin as legal tender, which is rife with identity theft and volatility. The prospect of governments using the technology to crack down on dissent is one of the reasons Buterin insists cryptocurrencies remain decentralized. He sees the technology as the greatest equalizer against surveillance technology deployed by governments (like China) and powerful companies (like Meta).

Buterin argues that if Mark Zuckerberg shouldn’t have the power to make era-changing decisions or control user data for profit, then neither should he — even if that limits his ability to shape the future of his creations, sends some people to other blockchains, or allows others to use his platform in unsavory ways. “I want an ecosystem with a lot of good crazy people and bad crazy people,” Buterin said. “Bad crazy is when a lot of money is siphoned out and all it does is subsidize the hacker industry. Good crazy is when technical jobs, R&D, and public goods come out of the other end. So there’s this battle. We have to be intentional and make sure more of the right things happen.”

--Nik Popli and Mariah Espada/Washington