vitalik buterin

Vitalik Buterin offers lessons for crypto in wake of the FTX collapse

Ethereum co-founder Vitalik Buterin said the collapse of FTX has illustrated once again that the problem lies in people, not technology.

Ethereum co-founder Vitalik Buterin has spoken out in the wake of the FTX collapse, offering his thoughts and some positives from one of cryptocurrency’s biggest black swan events.

In a Nov. 20 Bloomberg interview, Buterin said that the collapse of FTX contains lessons for the entire crypto ecosystem.

He acknowledged that the underlying stability of distributed ledger and the technology powering the crypto asset economy has not come into question. The problem in this instance (and several before it) has been people, not technology.

Buterin also labeled the FTX collapse as a “huge tragedy,” but added that it reaffirms the position of many in the Ethereum community concerning centralization:

“That said, many in the Ethereum community also see the situation as a validation of things they believed in all along: centralized anything is by default suspect.”

He added that this ethos includes trusting in open and transparent code above humans. Over the weekend, Buterin posted a guide to having a “safe CEX” with proof of insolvency.

He said rather than relying solely on “fiat methods” such as government licenses, auditors, corporate governance and background investigations of people running exchanges, the exchanges could create “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.”

The problems for FTX are understood to have stemmed from the exchange’s use of customer deposits for other purposes. After a large influx of withdrawal requests came to the exchange earlier this month, it found itself unable to meet withdrawal demand with its current liquidity. 

Related: FTX fiasco means coming consequences for crypto in Washington DC

Vitalik Buterin is not the only industry leader recently speaking out about the FTX fallout. On Nov. 17, Binance CEO Changpeng Zhao said that while regulation is necessary, it is more important for industry players to lead by example.

During the Indonesia Fintech Summit 2022, Zhao said the entire FTX saga is likely to have set back the crypto industry by “a few years,” and will likely see regulators scrutinize the industry “much, much harder, which is probably a good thing, to be honest.”

Vitalik Buterin calls out FTX for virtue signaling: ‘Deserves what it’s getting’

While acknowledging the damage caused by FTX, Buterin believes that FTX CEO Sam Bankman-Fried, as a person, deserves love.

The sudden fall of FTX revealed the need for fresh reforms aimed at protecting investor funds against manipulation and misdirections. The co-founder of Ethereum, Vitalik Buterin, believes what FTX did was a bigger fraud when compared to the infamous Mt. Gox and Terra collapses.

Buterin believed that people running Mt. Gox and LUNA ecosystems “looked” sketchy and did not try too hard to whitewash themselves enough to change investor perspectives. On the other hand, Buterin said that “FTX was the opposite and did full-on compliance virtue signaling.”

While virtue signaling relates to the practice of publicly demonstrating one’s good character, Binance CEO Changpeng “CZ” Zhao showed disappointment in FTX for misappropriating user funds, which according to him, has set the industry a few years back in terms of regulatory acceptance and mainstream adoption.

Considering the negative impact caused by FTX’s wrongdoing, Buterin spoke against FTX CEO Sam Bankman-Fried:

“SBF the public figure deserves what it’s getting and it’s even healthy to have a good dunking session to reaffirm important community values.”

However, given their length of acquaintance, Buterin believed that Sam, as a person, deserved love and support, adding that “I hope he has friends and family that can give it to him.”

However, not everybody was willing to cut some slack for the troubled entrepreneur. Dogecoin (DOGE) creator Billy Markus believed that SBF also deserved some jail time — a point of view resonating with small investors who recently lost their funds.

Related: Sam Bankman-Fried is ‘under supervision’ in Bahamas, looking to flee to Dubai

To avoid an FTX-like situation from happening, the crypto community has proactively begun cross-checking the cold storage funds and has started demanding clarifications for the on-chain anomalies.

Most recently, the community questioned Crypto.com’s intent to transfer 320,000 ETH from an in-house cold wallet to Gate.io. However, Crypto.com CEO Kris Marszalek clarified that the funds were accidentally sent to a whitelisted address on Gate.io that was owned by Crypto.com.

“If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away,” warned CZ.

Vitalik Buterin ‘kinda happy’ with ETF delays, backs maturity over attention

Sharing his opinion around crypto regulations, Buterin spoke against the regulations that have an impact on the inner workings of a crypto ecosystem.

The co-founder of Ethereum, Vitalik Buterin, believes that the crypto ecosystem needs to mature and be in tune with the regulatory policies that allow crypto projects to operate internally freely.

Sharing his opinion around crypto regulations, Buterin spoke against the regulations that have an impact on the inner workings of a crypto ecosystem.

Considering the current circumstances, he believed it was better to have regulations that allow inner independence to crypto projects, even if it hampers mainstream adoption. Buterin opined:

“I’m actually kinda happy a lot of the exchange-traded funds (ETFs) are getting delayed. The ecosystem needs time to mature before we get even more attention.”

The use of Know Your Customer (KYC) on decentralized finance (DeFi) frontends was another concern pointed out by Buterin. However, he highlighted the need for KYC on crypto exchanges, which has seen wide-scale implementations. According to the entrepreneur:

“It (KYC on DeFi frontends) would annoy users but do nothing against hackers. Hackers write custom code to interact with contracts already.”

In this regard, Buterin made three recommendations, as shown below.

On an end note, Buterin recommended using zero-knowledge proofs to meet regulatory requirements while preserving users’ privacy, stating that “I would love to see rules written in such a way that requirements can be satisfied by zero knowledge proofs as much as possible.”

Related: The Merge brings down Ethereum’s network power consumption by over 99.9%

Google recently added a search feature that allows users to view Ether (ETH) wallet balances by searching their addresses.

Acknowledging the recent Ethereum Merge upgrade, Google embedded a countdown ticker dedicated to Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism.

Zuckerberg’s $100B metaverse gamble is ‘super-sized and terrifying,’ shareholder says

In an open letter, Altimeter Capital’s CEO and founder recommended the tech giant cut its Metaverse investments from $10-15 billion a year to $5 billion.

A shareholder’s open letter to Meta CEO Mark Zuckerberg has labeled the tech giant’s investment into the Metaverse as “super-sized and terrifying.”

The shareholder has urged the company to scale down its investment in the Metaverse and its related technology arm amid a significant fall in its stock price over the last 18 months. 

The open letter was published on Oct. 24 and was directed at Zuckerberg and the board of directors. It was authored by Brad Gerstner, CEO and founder of technology investment firm Altimeter Capital, which owns roughly a 0.11% share in Meta, according to Hedge Follow.

Gerstner said that Meta’s foray into the Metaverse, while important, should not command as much investment from the company as it currently does.

He said the company has announced investments of $10 billion to $15 billion per year into its Metaverse project, including AR/ VR tech and Horizon World, but “may take 10 years to yield results,” explaining: 

“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”

Rather, he has urged the company to focus more on artificial intelligence (AI) and less on the Metaverse, as it “has the potential to drive more economic productivity than the internet itself.”

“While most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better,” he added.

Gestner’s comments come on the same day the Bank of America downgraded Meta from a “buy” to “neutral” valuation, partly due to its Metaverse investments likely to remain an “overhang” on the stock because of the “lack of progress” and “new competition from Apple.”

Gerstner added that over the last 18 months, Meta’s stock has fallen 55% compared to an average of 19% for its “big-tech peers,” which he suggests “mirrors the lost confidence in the company, not just the bad mood of the market.”

Related: Facebook is on a quest to destroy the Metaverse and Web3

Gerstner isn’t the only person to think the future of the Metaverse is a relatively “uncertain” one either.

On Jul. 30, Ethereum co-founder Vitalik Buterin said that while “the Metaverse will happen,” corporate attempts such as those by Facebook will “misfire” because “it’s far too early to know what people actually want.”

The share price for Meta Platforms Inc (META) has plummeted 60.53% over the last year to $129.72 at the time of writing – a far greater fall in the current bear market than the likes of Apple, Amazon and Google.

Meta is set to report its third-quarter 2022 results on Oct. 26.

Zuckerberg’s $100B metaverse gamble is ‘super-sized and terrifying’ — Shareholder

In an open letter, Altimeter Capital’s CEO and founder recommended the tech giant cut its metaverse investments from $10 billion–$15 billion a year to $5 billion.

A shareholder’s open letter to Meta CEO Mark Zuckerberg has labeled the tech giant’s investment into the Metaverse as “super-sized and terrifying.”

The shareholder has urged the company to scale down its investment in the metaverse and its related technology arm amid a significant fall in its stock price over the last 18 months. 

The open letter was published on Oct. 24 and was directed at Zuckerberg and the board of directors. It was authored by Brad Gerstner, CEO and founder of technology investment firm Altimeter Capital, which owns roughly a 0.11% share in Meta, according to Hedge Follow.

Gerstner said that Meta’s foray into the metaverse, while important, should not command as much investment from the company as it currently does.

He said the company has announced investments of $10 billion to $15 billion per year into its Metaverse project, including AR/ VR tech and Horizon World, but “may take 10 years to yield results,” explaining: 

“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”

Rather, he has urged the company to focus more on artificial intelligence (AI) and less on the metaverse, as it “has the potential to drive more economic productivity than the internet itself.”

“While most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better,” he added.

Gerstner’s comments come on the same day the Bank of America downgraded Meta from a “buy” to “neutral” valuation, partly due to its Metaverse investments likely to remain an “overhang” on the stock because of the “lack of progress” and “new competition from Apple.”

Gerstner added that over the last 18 months, Meta’s stock has fallen 55% compared to an average of 19% for its “big-tech peers,” which he suggests “mirrors the lost confidence in the company, not just the bad mood of the market.”

Related: Facebook is on a quest to destroy the Metaverse and Web3

Gerstner isn’t the only person to think the future of the metaverse is a relatively “uncertain” one either.

On July 30, Ethereum co-founder Vitalik Buterin said that while “the Metaverse will happen,” corporate attempts such as those by Facebook will “misfire” because “it’s far too early to know what people actually want.”

The share price for Meta Platforms Inc has plummeted 60.53% over the last year to $129.72 at the time of writing — a far greater fall in the current bear market than the likes of Apple, Amazon and Google.

Meta is set to report its third-quarter 2022 results on Oct. 26.

Mango Market exploiter brags after rug-pulling Mango Inu ‘shitcoin’

Avraham Eisenberg is at it again, following up his exploit of Mango Markets by deploying a new shitcoin named Mango Inu to purportedly swipe liquidity from bot traders.

In just over a week after pulling off the $117 million exploit of Mango Markets, Avraham Eisenberg is now boasting about making $100,000 rug-pulling a “shitcoin” called Mango Inu, again claiming he “did nothing wrong.”

Eisenberg recently ousted himself as one of the persons behind the recent $117 million exploit of the Solana-based decentralized finance (DeFi) platform Mango Markets, which he has also claimed was “legal.” 

 In an Oct. 23 post on Twitter, Eisenberg said the scheme involved deploying a “shitcoin” named Mango Inu, which he suggests was aimed at “exploiting bots” that gobble up newly launched tokens.

Eisenberg said the strategy involved deploying tokens, adding liquidity and then “rug” right after the bots buy the token. 

“Talked to someone who would deploy coins, add liquidity, and rug right after the bots bought, was a good low capacity strat last year when the bots bought anything that moved,” he said.

Much like the Mango Markets exploit, when people on Twitter questioned the morality and legality of the whole ordeal, Eisenberg argued that he hadn’t broken any laws, as there was no promotion of the token: 

“What part? Mango Inu is definitely not a security (no marketing, etc), no promises were made, just open market liquidity transactions.”

Eisenberg said the token managed to get over $250,000 “invested/gambled” within half an hour with “absolutely no promotion,” and that the fact that it occurred meant that “we’re still so far away from the bottom.”

He also explicitly warned not to buy the token, as “if you buy this you will definitely lose all your money.”

Pointless tokens continue to arise

The Mango Inu token is another example of a token that has gained questionable market takeup recently despite not having any utility — a symptom usually associated with bull markets.

Earlier this month, a memecoin named THE token was created in response to a satirical Oct. 14 Twitter post from Ethereum co-founder Vitalik Buterin, calling for the creation of an easily shillable project called The Protocol.

THE was subsequently launched on Ethereum and the BNB Smart Chain right after Buterin’s tweet, and pumped 77% by Oct. 20, though it has since dropped back down 60% to sit at $0.015 at the time of writing.

Related: 3Commas issues security alert as FTX deletes API keys following hack

The token, which was listed on exchanges such as Uniswap v3, MEXC Global and Bitget, appears to serve no other function than the actualization of a joke made by Vitalik to foster wild speculation.

Blockchain cybersecurity firm PeckShield has urged caution with this token.


Ethereum solo validators that censor blocks should ‘be tolerated’ — Buterin

Speaking about a hypothetical scenario, the Ethereum co-founder said censorship should be tolerated depending on the case.

Ethereum co-founder Vitalik Buterin believes that solo validators that choose not to include certain transactions should “be tolerated” to stop the Ethereum community from becoming the “morality police.”

Vitalik Buterin made the comment in reply to a Twitter poll from latetot.eth, discussing a hypothetical scenario whereby a validator censors a transaction that doesn’t align with their beliefs.

The thread, published on Oct. 17, asked what should happen if a solo validator, in a country at war with another, decides not to process a block because it includes donations to the opposing military force. 

According to Ethereum’s co-founder, the answer for a censorship case should be aligned with the level of transgression.

The post attracted notable attention, as Vitalik explained in the thread that any other answer would potentially lead to turning the Ethereum community into morality police: 

In Ethereum proof-of-stake (PoS), validators decide what transactions to include in their blocks if any. PoS is a modern consensus method that powers decentralized finance (DeFi) projects and cryptocurrencies.

Also answering the thread, Martin Köppelmann, co-founder of Gnosis and a long-time Ethereum decentralized application developer, said he agreed with tolerating the validator in that situation while warning about how MEV-boost censorship rising in Ethereum following the Merge. 

Although the thread discusses a hypothetical scenario, concerns about censorship in the Ethereum network surged last week, with 51% of Ethereum blocks being compliant with the United States Office of Foreign Assets Control (OFAC) standards as of Oct. 14, as MEV-Boost relays take over market share one month after the Merge. 

Related: Ripple wants to bring Ethereum smart contracts to the XRP Ledger

MEV-Boost relays are centralized entities acting as trusted mediators between block producers and builders. All Ethereum PoS validators can outsource their block production to other builders. Due to Ethereum’s upgrade to a PoS consensus, MEV-Boost has been enabled to a more representative distribution of block proposers, rather than a small group of miners under proof-of-work (PoW).

As noted in a recent opinion piece, Slava Demchuk, CEO and co-founder of AMLBot, the Ethereum upgrade could bring modifications in Anti-Money Laundering (AML) and Know Your Customer (KYC) practices in the crypto industry. He stated:

“U.S. regulators are increasingly expressing concerns about the huge sums circulating in DeFi without any control. As the Ethereum blockchain serves as the primary chain for most tokens, its recent shift from PoW to PoS may be used as an argument for their attempts to influence (at least a part of) the decentralized market.”

Ethereum co-founder Vitalik Buterin defends DAOs against critics

Buterin believes collusion and corruption can be minimized when deciding power is in the hands of the entire group rather than an individual or small minority.

Ethereum co-founder Vitalik Buterin has reiterated his support for decentralized autonomous organizations (DAOs), arguing that in some circumstances, they can be more efficient and fairer than a traditional corporate structure.

In theory, DAOs are collectively owned and managed by their members and have no central leadership. All decisions relating to aspects such as the usage of treasury funds or protocol improvements are made via voting on proposals submitted to the community.

In the lengthy Tuesday post on his website, Buterin outlined that critics often argue that DAO governance is inefficient, that DAO idealists are naïve and that traditional corporate governance structures with boards and CEOs are the optimal methods for making key decisions.

However, the Ethereum co-founder believes “this position is often wrong” and argues even naive forms of compromise are, on average, likely to outperform centralized corporate structures in certain situations. Although, he does believe it depends on the decision type, which he says falls into two categories: convex and concave.

Examples of convex decisions include pandemic response, military strategy and technology choices in crypto protocols, while concave decisions include judicial matters, public goods funding and tax rates.

“If a decision is concave, we would prefer a compromise, and if it’s convex, we would prefer a coin flip,” he wrote.

According to Buterin, when decisions are convex, decentralizing the decision-making process can lead to “confusion and low-quality compromises.” However, when they are concave, “relying on the wisdom of the crowds can give better answers:”

“In these cases, DAO-like structures with large amounts of diverse input going into decision-making can make a lot of sense.”

DAOs usually embrace decentralization to defend themselves from external attacks and censorship. Due to the nature of the space and the remote and online nature of some projects, it can be more difficult to “do background checks and informal in-person ‘smell tests’ for character.”

Buterin argues that this is exactly why DAOs are necessary, arguing the decentralized world needs to “distribute decision-making power among more deciders, so that each individual decider has less power, and so collusions are more likely to be whistleblown on and revealed.”

He does concede that DAOs are not without their issues, though. In certain situations, a more centralized structure is required, such as when an organization operates with a central core leadership and has separate groups all working independently.

The core leadership is decentralized, but Buterin says it can be necessary for the individual groups to follow a clear hierarchy, adopting a “clear opinionated perspective guiding decisions.”

Related: Ethereum co-founder Vitalik Buterin shares vision for layer-3 protocols

“A system that was intended to function in a stable and unchanging way around one set of assumptions, when faced with an extreme and unexpected change to those circumstances, does need some kind of brave leader to coordinate a response.”

Buterin elaborates further, saying in some cases, DAOs may need the “use of corporate-like forms” to “handle unexpected uncertainty.“

He concludes by saying that for some organizations, even in a crypto world that “much simpler and leader-driven forms of governance emphasizing agility are often going to make sense:”

“But this should not distract from the fact that the ecosystem would not survive without some non-corporate decentralized forms keeping the whole thing stable.”

Ethereum co-founder Vitalik Buterin shares vision for layer-3 protocols

While layer-2 protocols have been focused on “scalability,” layer-3 protocols would serve a much different purpose, says Ethereum co-founder Vitalik Buterin.

While Ethereum-based layer-2 solutions have been focused on hyperscaling the network, Ethereum co-founder Vitalik Buterin believes layer 3s will serve a far different purpose — providing “customized functionality.” 

Buterin shared his thoughts in a Saturday post, providing three “visions” of what layer 3s will be used for in the future.

The Ethereum co-founder said a third layer on the blockchain makes sense only if it provides a different function to layer 2s, which have been used mainly to enhance scaling via zero-knowledge (zk) Rollup technology:

“A three-layer scaling architecture that consists of stacking the same scaling scheme on top of itself generally does not work well. Rollups on top of rollups, where the two layers of rollups use the same technology, certainly do not.”

But, “a three-layer architecture where the second layer and third layer have different purposes, however, can work,” said Buterin.

One of layer 3’s use cases would be what Buterin describes as “customized functionality” — referencing privacy-based applications which would utilize zk proofs to submit privacy-preserving transactions to layer 2.

Another use case would be “customized scaling” for specialized applications that don’t want to use the Ethereum Virtual Machine (EVM) to do computation.

Buterin also said that layer 3 could be used for “weakly-trusted” scaling through Validiums, a zk-proof technology. Buterin said this may be beneficial for “enterprise blockchain” applications by using “a centralized server that runs a validium prover and regularly commits hashes to chain.”

But, Buterin added that it’s still unclear whether layer-3 structures will be more efficient than the current layer-2 model when it comes to building customized applications on Ethereum.

Layer-2 Vs Layer-3 Network Architecture. Source: StarkWare.

Related: A beginner’s guide to understanding the layers of blockchain technology

“One possible argument for the three-layer model over the two-layer model is: a three-layer model allows an entire sub-ecosystem to exist within a single rollup, which allows cross-domain operations within that ecosystem to happen very cheaply, without needing to go through the expensive layer 1,” Buterin said.

But, Buterin said that because cross-chain transactions can be executed easily and cheaply between two layer 2s that have committed to the same chain, building layer 3s may not necessarily improve the efficiency of the network.

Buterin’s comments on possible layer 3 use cases come as StarkWare’s newly produced recursive validity proofs appear to have possibly put an end to Ethereum’s scalability concerns.

Declan Fox, the product manager at Ethereum software firm ConsenSys, recently told Cointelegraph that “with recursive rollups and proofs, we theoretically can infinitely scale.”

These recursive proofs have been well tested in production, with StarkWare co-founder Eli-Ben Sasson recently telling Cointelegraph that its recursive proofs have rolled up as many as 600,000 nonfungible token mints in a single transaction on Immutable X and that 60 million transactions could soon be on the cards “with more engineering and tweaking.”

‘Green ETH’ narrative to drive investment and adoption, says pundits

Post-Merge Ethereum has now detached itself from the “crypto mining is bad for the environment” narrative, following its transition to proof-of-stake.

The shedding of Ethereum’s energy-intensive proof-of-work (PoW) system is expected to see Ether (ETH) “flow into the institutional world,” according to a number of fund managers and co-founders.

On Sept. 15, Ethereum officially transitioned to a proof-of-stake (PoS) consensus mechanism, which is expected to cut energy consumption used by the network by 99.95%, according to the Ethereum Foundation.

The upgrade effectively ended the need for the Ethereum network to rely on miners and energy-guzzling mining hardware to validate transactions and build new blocks, as these functions are now replaced by validators who “stake” their ETH.

In a statement to Cointelegraph, Charlie Karaboga, CEO and co-founder of Australian fintech company Block Earner said the network’s transition to PoS would “drive the future of money to be more internet-based.”

He said that Ethereum would become “the settlement layer that everyone will accept and trust — especially when the spotlight is shining brighter than ever on the issue of sustainability in crypto mining.”

Markus Thielen, Chief Investment Officer of digital asset manager IDEG said that he had been in discussions with sovereign wealth funds and central banks to help build their digital asset portfolios, but direct investment had often been “voted down due to energy concerns.”

But now that the Ethereum network has transitioned to PoS, this issue is much less of a concern, he said:

“While demand has been strong, the missing link has been an underlying zero-emissions, financial infrastructure. With Ethereum moving to PoS, this clearly solves this last pillar of concern.”

Henrik Andersson of Apollo Capital told Cointelegraph that ESG had become a “big factor” behind institutional investment decision making in the last few years.

Andersson said he believes the 99.95% energy consumption cut on Ethereum would dramatically improve ETH’s ESG score, which in turn would “make it more appealing for institutional investors” over the long-term.

Blockworks co-founder Jason Yanowitz told his 92,900 followers on Sept. 15 that “Green ETH” will be the “best narrative” in crypto’s history, with crypto mining and PoW long plaguing the industry.

Related: How blockchain technology is used to save the environment

Yanowitz noted that until now, the “Bitcoin is bad for the environment” narrative has been “so impactful,” adding it spread like wildfire” and “has probably had the most negative impact on the asset’s performance.”

“Most large institutions now have ESG mandates,” said Yanowitz.

“Fidelity, BlackRock, Goldman, etc… whether or not they like it, they now have to consider the environmental impacts of their portfolios.”

But that is now old news for Ethereum, with Yanowitz adding that the most important takeaway from the Merge is that “Ethereum becomes green” which becomes highly appealing to large corporations who have ESG mandates to comply with:

“This will be the best narrative crypto and ETH has ever seen. It will flow into the institutional world, where investors will buy ETH because it satisfies their ESG mandate.”