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Cryptowhispers: Binance Token Listing Quote â 400 BTC, $2.5 Million
Tantalizing, unconfirmed rumors are bouncing from crypto Twitter, and this time itâs Expanse co-founder Christopher Franko leading the charge. Mr. Franko insists he was quoted 400 bitcoin core (BTC), roughly $2.5 million as of this writing, for a token listing on the exchange Binance. On the cross accusation that he is lying, Mr. Franko further insisted âI literally have nothing to gain from this.â Â
Also read: 15,000 Twitter Crypto Scam Giveaway Botsm, Reports Duo Security
Expanseâs Franko Tweets Binance is Charging Millions for a Token Listing
Expanseâs Christopher Franko took to Twitter this week, accusing popular cryptocurrency exchange Binance of quoting 400 BTC, $2.5 million at current prices, for token listings. As Mr. Franko tells it, âJust got a new @binance listing quote. 400 BTC,â he tweeted.
Binance is a relatively new international crypto exchange. Created summer of last year, the exchange has been on fire. Its CEO, Changpeng Zhao, is a hotshot figure in the space, appearing on splash pages for a long time, someone everyone wants to know more about. Binance is both an exchange and a token (BNB), which can lessen fees when used in conjunction â one of the first exchanges to use the âICO modelâ now all the rage.
Rumors have followed it as long as Binance has been in existence, including moving from China to Japan and Taiwan. It is dogged by accusations of false liquidity, especially as it has become one of the most profitable exchanges with well over $1 billion in revenue. Â
Reaction came fast and furious to the idea of what Mr. Franko considered a form of extortion by Binance. A lot of immediate commentary was of disbelief. Mr. Franko then produced a screenshot of the offending email. Still more commenters cried hacking or rogue employees. Mr. Franko seemed to bristle not only at the expensive quote but by the fact the exchange didnât respond. He tweeted again, âOk, @cz_binance if you are being genuine that it really doesnt cost 400 BTC to list @ExpanseOfficial there, then send me a DM with a real quote so we can clear this up. I believe you are probably an honorable person and the people want to know you are who you say you are.â
Anti-Binance meme found in comments.
Binance to Launch Decentralized Exchange
Mr. Franko further appealed to Reddit sub forums. His posts were deleted, moderated out of the discussion. Defenders of the exchange also seemed to deny Mr. Frankoâs claims. He explained it was the exchangeâs choice to make, âIf binance wants to charge 400 btc to get listed on their exchange that is their right to do so. They appear to have the most volume in the world. Getting listed there does usually result in higher awareness, but if that is the case.. just own it. âya its expensiveâ⊠why lie?â
Mr. Frankoâs company, Expanse, âis an open blockchain platform forked from Ethereum that lets anyone build and use decentralized applications that run on blockchain technology. Like Bitcoin and Ethereum, no one controls or owns Expanse â it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Expanse was designed to be adaptable and flexible. It is easy to create new applications on the Expanse platform,â according to its website.
Interestingly, Binance announced around the same time its effort at a decentralized exchange. And a decentralized exchange was also a plea many commenters made to Mr. Frankoâs issue with Binance. Â
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The Prophets of Cryptocurrency Survey the Boom and Bust
The Prophets of Cryptocurrency Survey the Boom and Bust
Not long ago, I was in Montreal for a cryptocurrency conference. My hotel, on the top floor of a big building downtown, had a roof garden with a koi pond. One morning, as I had coffee and a bagel in this garden, I watched a pair of ducks feeding on a mound of pellets that someone had left for them at the pondâs edge. Every few seconds, they dipped their beaks to drink, and, in the process, spilled undigested pellets into the water. A few koi idled there, poking at the surface for the scraps. The longer I watched, the more I wondered if the ducks were deliberately feeding the fish. Was such a thing possible? I asked the breakfast attendant, a ruddy Quebecer. He smiled and said, âNo, but it is what I tell the children.â
My mind had been marinating overnightâand for more than a year, reallyâin the abstrusities of cryptocurrencies and the blockchain technology on which they are built. Bitcoin and, subsequently, a proliferation of other cryptocurrencies had become an object of global fascination, amid prophecies of societal upheaval and reform, but mainly on the promise of instant wealth. A peer-to-peer money system that cut out banks and governments had made it possible, and fashionable, to get rich by sticking it to the Man.
Some of this stuff I understood; much of it I still did not. If youâre not, say, a computer scientist or a mathematician, the deeper you get into the esoterica of distributed ledgers, consensus algorithms, hash functions, zero-knowledge proofs, byzantine-fault-tolerance theory, and so onâthe farther you travel from the familiar terrain of âthe legacy world,â where, one blockchain futurist told me, pityingly, I liveâthe better the chance you have of bumping up against the limits of your intelligence. You grasp, instead, for metaphors.
Blockchain talk makes a whiteboard of the brain. Youâre always erasing, starting over, as analogies present themselves. So, Montreal bagel in hand, I considered the ducks and the carp. Let the pellets be a cryptocurrencyâkoicoin, say. Would the ducks then be currency miners? Every altcoinâthe catchall for cryptocurrencies other than bitcoin, the majority of which are eventually classified as shitcoinâhas its own community of enthusiasts and kvetchers, so perhaps the koi were this oneâs. The koicommunity. The breakfast attendant who had put out the pellets: heâd be our koicoin Satoshiâas in Satoshi Nakamoto, the pseudonymous and still unidentified creator of Bitcoin. Yes, the koicoin protocol was strong, and the incentives appeared to be well aligned, but the project didnât really pass muster in terms of immutability, decentralization, and privacy. Koicoin was shitcoin.
A few hours later, I was at lunch in a conference room in another hotel, with a table of crypto wizards, a few of them among the most respected devs in the space. (Devs are developers, and even legacy worlders must surrender after a while and ditch the scare quotes around âthe space,â when referring to the cryptosphere.) Four of these devs were researchers associated with Ethereum, the open-source blockchain platform. Ethereum is not itself a cryptocurrency; to operate on Ethereum, you have to use the cryptocurrency ether, which, like bitcoin, you can buy or sell. (Among cryptocurrencies, etherâs market capitalization is second only to bitcoinâs.) The devs were specimens of an itinerant coder Ă©lite, engaged, wherever they turn up and to the exclusion of pretty much everything else, in the ongoing construction of an alternate global financial and computational infrastructure: a new way of handling money or identity, a system they describe as a better, decentralized version of the World Wide Webâa Web 3.0âmore in keeping with the Internetâs early utopian promise than with the invidious, monopolistic hellscape it has become. They want to seize back the tubes, and the dataâour livesâfrom Facebook, Google, and the new oligarchs of Silicon Valley.
One of them, Vlad Zamfir, a twenty-eight-year-old Romanian-born mathematician who grew up in Ottawa and dropped out of the University of Guelph, was scribbling equations on an electronic tablet called a reMarkable pad. He narrated as he scrawled. The others at the table leaned in toward him, in a way that recalled Rembrandtâs âThe Anatomy Lesson of Dr. Nicolaes Tulp.â To the two or three people at the table who were clearly incapable of following along, he said, earnestly, âSorry to alienate you with my math.â Zamfir is the lead developer of one strand of Casper, an ongoing software upgrade designed to make Ethereum scale better and work more securelyâan undertaking thought to be vital to its viability and survival. âItâs shitty technology,â Zamfir, whose Twitter bio reads âabsurdist, troll,â told a journalist two years ago.
Zamfir was showing the others some rough equations heâd worked out to address one of the thousands of riddles that need to be solved. This particular effort was an attempt (jargon alert) to optimize the incentive structure for proof-of-stake validationâthat is, how best to get enough people and machines to participate in a computing operation essential to the functioning of the entire system. âWeâre trying to do game theory here,â Zamfir said. The others pointed out what they thought might be flaws. âIt doesnât seem reasonable,â Zamfir said. âBut the math works out.â This summarized much of what Iâd encountered in crypto.
To his right sat Vitalik Buterin, Ethereumâs founder and semi-reluctant philosopher king. Buterin, who is twenty-four, occasionally glanced at Zamfirâs formulas but mostly looked into the middle distance with a melancholic empty stare, sometimes typing out messages and tweets on his phone with one finger. He was a quick study, and also he pretty much already knew what Zamfir had come up with, and to his thinking the work wasnât quite there. âWhen the models are getting overcomplicated, itâs probably good to have more time to try to simplify them,â he told me later, with what I took to be generous understatement.
Buterin had been working, simultaneously, on another version of Casper. So he and Zamfir were both collaborating and competing with each other. There seemed to be no ego or bitternessâin their appraisal of each otherâs work, in person, or on social media, where so much of the conversation takes place, in full view. Their assessments were Spockian, and cutting only to the Kirks among us.
They had first met before a conference in Toronto in 2014. Zamfir was amazed by Buterin, whom he called a âwalking computer,â and he joined Ethereum as a researcher soon after. Now good friends who meet up mostly at conferences and workshops, they had greeted each other the day before in the hotel lobby with a fervent embrace, like summer campers back for another year, before quick-walking to a quiet corner to start in on the incentive-structure-for-proof-of-stake-validation talk. Whenever and wherever Buterin and Zamfir convene, people gather aroundâeavesdropping, hoping for scraps of insight. The two are used to this and pay little heed. There were no secrets, only problems and solutions, and the satisfaction that comes from proceeding from one toward the other.
The first time I heard the word âEthereumâ was in April, 2017. A hedge-fund manager, at a benefit in Manhattan, was telling me that heâd made more money buying and selling ether and other cryptocurrencies in the past year than heâd ever made at his old hedge fund. This was a significant claim, since the fund had made him a billionaire. He was using words Iâd never heard before. He mentioned bitcoin, too, which Iâd certainly heard a lot about but, like most people my age, didnât really understand. Iâd idly hoped I might be just old enough to make it to my deathbed without having to get up to speed.
As the year wore on, that dream faded. The surge in the price of bitcoin, and of other cryptocurrencies, which proliferated amid a craze for initial coin offerings (I.C.O.s), prompted a commensurate explosion in the number of stories and conversations about this new kind of money and, sometimes more to the point, about the blockchain technology behind itâthis either revolutionary or needlessly laborious way of keeping track of transactions and data. It seemed as if language had been randomized. I started hearing those wordsâthe ones Iâd never heard beforeâan awful lot: âtrustless,â âsharding,â âflippening.â Explaining blockchain became a genre unto itself.
The dizzying run-up in crypto prices in 2017 was followed, this year, by a long, lurching retreat that, as the summer gave way to fall, began to seem perilous. As with notorious stock-market and real-estate bubbles, innocents had been taken in and cleaned out. But both boom and bust reflected an ongoing argument over what cryptocurrencies and their technological underpinnings might be worthâwhich is to say, whether they are, as some like to ask, real. Is crypto the future or a fad? Golden ticket or Ponzi scheme? Amazon 2.0 or tulip mania? And what is it good for, anyway? It sure is neat, but for now it lacks its killer app, a use that might lead to mass adoption, as e-mail did for the Internet. âWe need the hundred-dollar laptop, the iPod,â a blockchain apostle told me.
Now and then, legacy titans voiced their scorn. Jamie Dimon, the chief executive of J. P. Morgan, labelled crypto âa fraudâ; Warren Buffett used the phrase ârat poison squared.â Legions of skeptics and technophobes, out of envy, ignorance, or wisdom, savored such pronouncements, while the true believers and the vertiginously invested mostly brushed it aside. They had faith that a new order was nigh. They pumped but did not dump.
Among a certain subset, it was both fashionable and integral to ignore the fluctuations in price. The idea was to build and shore up a new systemâfor everything from payments and banking to health care and identityâthat was either a replacement for the old one, or at least an alternative to it, one that was borderless, independent of state control and of exploitation by Big Tech. âItâs definitely nice to try to eke out some completely parallel kind of world thatâs totally separate from the existing one,â Buterin said. âIt does interact with the rest of society, and the goal is definitely to help improve the mainstream world, but weâre on a different track.â Such an undertaking would, at best, take many years and likely span several economic and investment cycles. While the old armature rots, a new one rises alongside it, much as the new Tappan Zee Bridge, over the Hudson, gradually took shape next to the rusty old one it would one day replace. To Buterin, however, the benefits were already clear. âThe cryptocurrency space has succeeded at making certain aspects of the international economy more open, when politics is moving in the exact opposite direction,â he said. âI do think thatâs a meaningful contribution to the world.â
Buterin is a striking figure, tall and very lean, with long, fidgety fingers, sharp elfin features, and vivid blue eyes, which, on the rare occasions when he allows them to meet yours, convey a depth and warmth that you donât expect, in light of the flat, robotic cadence and tone of his speech. People often joke about him being an alien, but they usually apologize for doing so, because thereâs a gentleness about him, an air of tolerance and moderation, that works as a built-in rebuke to such unkind remarks. As we spoke, on the first afternoon of the Montreal conference (the crypto life is a never-ending enchainment of conferences, and is pretty much wall-to-wall dudes), he aligned some items in front of him: pens, Post-its, phone. He forgoes most social niceties and overt expressions of emotion but, when he finds questions or assertions agreeable, is generous with notes of encouragement: âYep, yep, yepâ; âRight, totallyâ; âYes, yes, exactly.â Arguable remarks elicit a mechanical âHmm.â He seems to anticipate your question before you even know quite what it is, but he forces himself to allow you to finish. He has a dry sense of humor.
He said, âI definitely donât have the kind of single-minded C.E.O. personality that a lot of Silicon Valley V.C.s lionizeâthat thing of being ambitious and wanting to win at all costs, like, basically, Mark Zuckerberg.â He was dressed that day, as on the day before and the day after, in a gray turtleneck, black track pants, and laceless Adidas sneakers over turquoise socks. He often wears T-shirts with unicorns and rainbows. He likes to cite Lambosâas in Lamborghini, the cryptobro trophy ride of choiceâas shorthand for the excessive trappings of wealth, which do not interest him. Heâs about as indifferently rich as a man can be. Although he sold a quarter of his bitcoin and ether well before the prices began to soar last year, he is said to be worth somewhere in the vicinity of a hundred million dollars. (He recently gave away a couple of million dollars to a life-extension research project.) He has no assistants or entourage. He owns little and travels light. âRecently, I reduced my bag size from sixty litres to forty,â he said. âForty is very tolerable. You can go on fifteen-kilometre walks with it.â The Adidas, he said, were his only pair of shoes. âActually, I have another pair thatâs in one of the many places I call home.â These are friendsâ apartments, where he sometimes sleeps for a few nights at a stretchâin Toronto, San Francisco, Singapore, Shanghai, Taipei. He especially likes East Asia. He speaks fluent Mandarin.
After Montreal, he was headed to Berlin and then Switzerland. His home, really, is the Internet. At one point, I referred to an Ethereum outpost in San Francisco, which Iâd read about, as a âbase of operations,â and he rejected the term: âHome. Base of operations. The more you invent your own life style, the more you realize that the categories that have been invented are ultimately, at best, imperfect devices for understanding the world, and, at worst, fake.â
Iâd been trying for months to talk to Buterin. In January, I reached out to his father, Dmitry, who reported back that Vitalik was not interested in an interview. âHe is trying to focus his time on research,â Dmitry said. âHeâs not too excited that the community assigns so much importance to him. He wants the community to be more resilient.â Dmitry Buterin, forty-six, is from Grozny, in Chechnya. He studied computer science in Moscow and then started a financial-software business, before emigrating to Canada, when Vitalik was six. Dmitry settled in Toronto, with Vitalik; Vitalikâs mother, a financial analyst, chose Edmonton. Vitalik, when he was three, got an old PC and began fiddling around with Excel. By ten or eleven, he was developing video games. âVitalik was a very smart boy,â his father said. âIt was not easy. His mind was always racing. It was hard for him to communicate. He hardly spoke until he was nine or ten. I was concerned, but at some point I realized it is what it is. I just gave him my love.â
He also gave Vitalik his first glimpse of Bitcoin. It was 2011, somewhat early, but Dmitry was an avowed anarcho-capitalist, a cynical child of Soviet and post-Soviet Russia. For many others like him, especially in those early days, the first encounter with Bitcoin was like a religious epiphanyâpowerful, life-altering, a glimpse of an entirely different and perhaps more agreeable way of ordering human affairs. âBitcoin looks like moneyâs dream of itself,â the technology journalist Brian Patrick Eha wrote, in âHow Money Got Free.â
âBefore Bitcoin came along, I was happily playing World of Warcraft,â Vitalik told me. He had already been nursing some inchoate ideas about the risks and intrinsic unfairness of centralized systems and authority. He once told a journalist, âI saw everything to do with either government regulation or corporate control as just being plain evil. And I assumed that people in those institutions were kind of like Mr. Burns, sitting behind their desks saying, âExcellent. How can I screw a thousand people over this time?â â Bitcoin scratched this itch. But in many ways what drew him in was the elegance of the system, invented, it seemed, by a rogue outsider out of thin air. It suited a world view, a dream of a fluid, borderless, decentralized financial system beyond the reach of governments and banks, inclined as they inevitably are toward corruption and self-dealing, or at least toward distortions of incentive. Buterin said, âIf you look at the people that were involved in the early stages of the Bitcoin space, their earlier pedigrees, if they had any pedigrees at all, were in open sourceâLinux, Mozilla, and cypherpunk mailing lists.â These were subversives and libertarians, ranging in political affinity from far left to weird right, as often as not without institutional or academic stature or access. âI found it immensely empowering that just a few thousand people like myself could re-create this fundamental social institution from nothing.â
In the eighties, cryptographers and computer scientists began trying to devise a foolproof form of digital money, and a way to execute transactions and contracts without the involvement (or rent-seeking) of third parties. It was the man, woman, or group of humans known as Satoshi Nakamoto who, with Bitcoin in 2008, solved the cruxâthe so-called double-spend problem. If you have ten dollars, you shouldnât be able to pay ten dollars for one thing, then spend the same ten for another. This requires some mechanism for keeping track of what you have, whom you gave it to, and how much they now have. And that was the blockchain.
Definitions of blockchain are as various as the metaphorsâbingo, Google Docs, a giant room of transparent safesâthat people use to try to illustrate them. Broadly speaking, a blockchain is an evolving record of all transactions that is maintained, simultaneously and in common, by every computer in the network of that blockchain, be it Ethereum, Bitcoin, or Monero. Think, as some have suggested, of a dusty leather-bound ledger in a Dickensian counting house, a record of every transaction relevant to that practice. Except that every accountant in London, and in Calcutta, has the same ledger, and when one adds a line to his own the addition appears in all of them. Once a transaction is affirmed, it willâtheoretically, anywayâbe in the ledger forever, unalterable and unerasable.
Historically, records have been stored in one placeâa temple, a courthouse, a serverâand kept by whoever presided. If you distrust central authority, or are queasy about Google, this wonât do at all. With blockchains, the records, under a kind of cryptographic seal, are distributed to all and belong to no one. You canât revise them, because everyone is watching, and because the software will reject it if you try. There is no Undo button. Each block is essentially a bundle of transactions, with a tracking notation, represented in a bit of cryptographic code known as a âhash,â of all the transactions in the past. Each new block in the chain contains all the information (or, really, via the hash, a secure reference to all the information) contained in the previous one, all the way back to the first one, the so-called genesis block.
There are other words that are sometimes included in the definition of blockchain, but they are slippery, and grounds for endless parsing, asterisking, and debate. One is âdecentralized.â (Some blockchains are more decentralized than others.) Another is âimmutableââthe idea that, in theory, the past record canât be altered. (This is different from having your crypto stolen or hacked, when itâs stored in an online âwallet.â That happens all the time!) Then thereâs âprivacy.â The aspiration is for a digital coin to have the untraceability of cash. Because bitcoin was, at the outset, the dark Webâs go-to tender for the purchase of drugs, sex, weaponry, and such, many assumed that it was private. But it isnât. Every transaction is there in the ledger for all to see. It is, fundamentally, anonymous (or pseudonymous, anyway), but there are many ways for that anonymity to be compromised.
The odds are high that someone, somewhere, has attempted to make an explanation like this one to you. The chain-splainer is a notorious date spoiler and cocktail-party pariah. Here he comesâyouâre trapped. You should have known better than to ask about mining.
Mining is a reward systemâcompensation for helping to maintain and build a blockchain. The work of establishing and recording whatâs legit takes machinery, memory, power, and time. Cryptocurrency blockchains require that a bunch of computers run software to affirm (or reject) transactionsâitâs a kind of automated convocation. During this ritual, the computers in the network are competing, via brute guesswork, to be the first to get the answer to a really difficult math problem. The more computational power you have, the more guesses you can make, and the more likely you are to get the answer. The winner creates a new block and gets a reward, in, say, bitcoinânew bitcoin, which has not previously been in circulation. (Satoshi ordained that there be a finite number of bitcoin ever createdâtwenty-one millionâso that no one could inflate away the value of existing bitcoin, as, say, the Federal Reserve does with dollars. Other cryptocurrencies, including ether, donât necessarily have finite supplies.)
This system is known as Proof of Work. The problem-solving exercise is proof that the computers are doing the work. This approach has serious and, some would say, fatal, flaws. First, it requires a tremendous amount of electricity. This year, it is said, the Bitcoin network will use as much energy as the nation of Austria, and produce as much carbon dioxide as a million transatlantic flights. Mining rigsâcomputers designed specifically to do this workâare thirsty machines. Mining farms tend to sprout up where juice is cheap (typically, in proximity to hydropower projects with excess capacity to unload) and where temperatures are low (so you donât have to burn even more electricity to keep the rigs cool). There are open-air warehouses in remote corners of sub-Arctic Canada, Russia, and China, with machines whirring away on the tundra, creating magic money, while the permafrost melts. Second, a small number of mining conglomerates, or poolsâmany of them Chineseâhave wielded outsized influence over the network and the decisions that get made. Last month, one of the biggest of these, Bitmain, confirmed plans to go public.
The alternative, which Zamfir and Buterin were working on in Montreal, is called Proof of Stake. In this scenario, the holders of the currency in question become the validators, who typically take a small cut of every approved transaction. Theoretically, the more crypto you have, the more influence you have, so PoW partisans consider PoS to be plutocratic as wellâa new gloss on the old problem of too much in the hands of too few.
In 2013, Buterin travelled to San Jose for a Bitcoin meet-up, and felt that heâd encountered like-minded people for the first time in his lifeâa movement worth devoting himself to. âThe people that I had been searching for the whole time were actually all there,â Buterin told me. Zooko Wilcox, a cryptographer, recalled Buterin telling him, âThis is the first technology Iâve ever loved that loves me back.â Buterin had been writing blog posts about it for five bitcoins per post. Together, he and Mihai Alisie, a Romanian blockchain entrepreneur whoâd read his posts, founded Bitcoin Magazine. Buterin had a knack for explaining thingsâat least to an audience already primed to understand. But, as he travelled around the world to Bitcoin meet-ups, he began to think that the technology was limited, that attempts to jury-rig non-money uses for this digital-money platform was the computational equivalent of a Swiss Army knife. You basically had to devise hacks. He envisaged a one-blade-fits-all version, a blockchain platform that was broader and more adaptable to a wider array of uses and applications. The concept behind Bitcoinâa network of machines all over the worldâseemed to be a building block upon which to construct a global computer capable of all kinds of activities.
In..
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The Prophets of Cryptocurrency Survey the Boom and Bust
The Prophets of Cryptocurrency Survey the Boom and Bust
Not long ago, I was in Montreal for a cryptocurrency conference. My hotel, on the top floor of a big building downtown, had a roof garden with a koi pond. One morning, as I had coffee and a bagel in this garden, I watched a pair of ducks feeding on a mound of pellets that someone had left for them at the pondâs edge. Every few seconds, they dipped their beaks to drink, and, in the process, spilled undigested pellets into the water. A few koi idled there, poking at the surface for the scraps. The longer I watched, the more I wondered if the ducks were deliberately feeding the fish. Was such a thing possible? I asked the breakfast attendant, a ruddy Quebecer. He smiled and said, âNo, but it is what I tell the children.â
My mind had been marinating overnightâand for more than a year, reallyâin the abstrusities of cryptocurrencies and the blockchain technology on which they are built. Bitcoin and, subsequently, a proliferation of other cryptocurrencies had become an object of global fascination, amid prophecies of societal upheaval and reform, but mainly on the promise of instant wealth. A peer-to-peer money system that cut out banks and governments had made it possible, and fashionable, to get rich by sticking it to the Man.
Some of this stuff I understood; much of it I still did not. If youâre not, say, a computer scientist or a mathematician, the deeper you get into the esoterica of distributed ledgers, consensus algorithms, hash functions, zero-knowledge proofs, byzantine-fault-tolerance theory, and so onâthe farther you travel from the familiar terrain of âthe legacy world,â where, one blockchain futurist told me, pityingly, I liveâthe better the chance you have of bumping up against the limits of your intelligence. You grasp, instead, for metaphors.
Blockchain talk makes a whiteboard of the brain. Youâre always erasing, starting over, as analogies present themselves. So, Montreal bagel in hand, I considered the ducks and the carp. Let the pellets be a cryptocurrencyâkoicoin, say. Would the ducks then be currency miners? Every altcoinâthe catchall for cryptocurrencies other than bitcoin, the majority of which are eventually classified as shitcoinâhas its own community of enthusiasts and kvetchers, so perhaps the koi were this oneâs. The koicommunity. The breakfast attendant who had put out the pellets: heâd be our koicoin Satoshiâas in Satoshi Nakamoto, the pseudonymous and still unidentified creator of Bitcoin. Yes, the koicoin protocol was strong, and the incentives appeared to be well aligned, but the project didnât really pass muster in terms of immutability, decentralization, and privacy. Koicoin was shitcoin.
A few hours later, I was at lunch in a conference room in another hotel, with a table of crypto wizards, a few of them among the most respected devs in the space. (Devs are developers, and even legacy worlders must surrender after a while and ditch the scare quotes around âthe space,â when referring to the cryptosphere.) Four of these devs were researchers associated with Ethereum, the open-source blockchain platform. Ethereum is not itself a cryptocurrency; to operate on Ethereum, you have to use the cryptocurrency ether, which, like bitcoin, you can buy or sell. (Among cryptocurrencies, etherâs market capitalization is second only to bitcoinâs.) The devs were specimens of an itinerant coder Ă©lite, engaged, wherever they turn up and to the exclusion of pretty much everything else, in the ongoing construction of an alternate global financial and computational infrastructure: a new way of handling money or identity, a system they describe as a better, decentralized version of the World Wide Webâa Web 3.0âmore in keeping with the Internetâs early utopian promise than with the invidious, monopolistic hellscape it has become. They want to seize back the tubes, and the dataâour livesâfrom Facebook, Google, and the new oligarchs of Silicon Valley.
One of them, Vlad Zamfir, a twenty-eight-year-old Romanian-born mathematician who grew up in Ottawa and dropped out of the University of Guelph, was scribbling equations on an electronic tablet called a reMarkable pad. He narrated as he scrawled. The others at the table leaned in toward him, in a way that recalled Rembrandtâs âThe Anatomy Lesson of Dr. Nicolaes Tulp.â To the two or three people at the table who were clearly incapable of following along, he said, earnestly, âSorry to alienate you with my math.â Zamfir is the lead developer of one strand of Casper, an ongoing software upgrade designed to make Ethereum scale better and work more securelyâan undertaking thought to be vital to its viability and survival. âItâs shitty technology,â Zamfir, whose Twitter bio reads âabsurdist, troll,â told a journalist two years ago.
Zamfir was showing the others some rough equations heâd worked out to address one of the thousands of riddles that need to be solved. This particular effort was an attempt (jargon alert) to optimize the incentive structure for proof-of-stake validationâthat is, how best to get enough people and machines to participate in a computing operation essential to the functioning of the entire system. âWeâre trying to do game theory here,â Zamfir said. The others pointed out what they thought might be flaws. âIt doesnât seem reasonable,â Zamfir said. âBut the math works out.â This summarized much of what Iâd encountered in crypto.
To his right sat Vitalik Buterin, Ethereumâs founder and semi-reluctant philosopher king. Buterin, who is twenty-four, occasionally glanced at Zamfirâs formulas but mostly looked into the middle distance with a melancholic empty stare, sometimes typing out messages and tweets on his phone with one finger. He was a quick study, and also he pretty much already knew what Zamfir had come up with, and to his thinking the work wasnât quite there. âWhen the models are getting overcomplicated, itâs probably good to have more time to try to simplify them,â he told me later, with what I took to be generous understatement.
Buterin had been working, simultaneously, on another version of Casper. So he and Zamfir were both collaborating and competing with each other. There seemed to be no ego or bitternessâin their appraisal of each otherâs work, in person, or on social media, where so much of the conversation takes place, in full view. Their assessments were Spockian, and cutting only to the Kirks among us.
They had first met before a conference in Toronto in 2014. Zamfir was amazed by Buterin, whom he called a âwalking computer,â and he joined Ethereum as a researcher soon after. Now good friends who meet up mostly at conferences and workshops, they had greeted each other the day before in the hotel lobby with a fervent embrace, like summer campers back for another year, before quick-walking to a quiet corner to start in on the incentive-structure-for-proof-of-stake-validation talk. Whenever and wherever Buterin and Zamfir convene, people gather aroundâeavesdropping, hoping for scraps of insight. The two are used to this and pay little heed. There were no secrets, only problems and solutions, and the satisfaction that comes from proceeding from one toward the other.
The first time I heard the word âEthereumâ was in April, 2017. A hedge-fund manager, at a benefit in Manhattan, was telling me that heâd made more money buying and selling ether and other cryptocurrencies in the past year than heâd ever made at his old hedge fund. This was a significant claim, since the fund had made him a billionaire. He was using words Iâd never heard before. He mentioned bitcoin, too, which Iâd certainly heard a lot about but, like most people my age, didnât really understand. Iâd idly hoped I might be just old enough to make it to my deathbed without having to get up to speed.
As the year wore on, that dream faded. The surge in the price of bitcoin, and of other cryptocurrencies, which proliferated amid a craze for initial coin offerings (I.C.O.s), prompted a commensurate explosion in the number of stories and conversations about this new kind of money and, sometimes more to the point, about the blockchain technology behind itâthis either revolutionary or needlessly laborious way of keeping track of transactions and data. It seemed as if language had been randomized. I started hearing those wordsâthe ones Iâd never heard beforeâan awful lot: âtrustless,â âsharding,â âflippening.â Explaining blockchain became a genre unto itself.
The dizzying run-up in crypto prices in 2017 was followed, this year, by a long, lurching retreat that, as the summer gave way to fall, began to seem perilous. As with notorious stock-market and real-estate bubbles, innocents had been taken in and cleaned out. But both boom and bust reflected an ongoing argument over what cryptocurrencies and their technological underpinnings might be worthâwhich is to say, whether they are, as some like to ask, real. Is crypto the future or a fad? Golden ticket or Ponzi scheme? Amazon 2.0 or tulip mania? And what is it good for, anyway? It sure is neat, but for now it lacks its killer app, a use that might lead to mass adoption, as e-mail did for the Internet. âWe need the hundred-dollar laptop, the iPod,â a blockchain apostle told me.
Now and then, legacy titans voiced their scorn. Jamie Dimon, the chief executive of J. P. Morgan, labelled crypto âa fraudâ; Warren Buffett used the phrase ârat poison squared.â Legions of skeptics and technophobes, out of envy, ignorance, or wisdom, savored such pronouncements, while the true believers and the vertiginously invested mostly brushed it aside. They had faith that a new order was nigh. They pumped but did not dump.
Among a certain subset, it was both fashionable and integral to ignore the fluctuations in price. The idea was to build and shore up a new systemâfor everything from payments and banking to health care and identityâthat was either a replacement for the old one, or at least an alternative to it, one that was borderless, independent of state control and of exploitation by Big Tech. âItâs definitely nice to try to eke out some completely parallel kind of world thatâs totally separate from the existing one,â Buterin said. âIt does interact with the rest of society, and the goal is definitely to help improve the mainstream world, but weâre on a different track.â Such an undertaking would, at best, take many years and likely span several economic and investment cycles. While the old armature rots, a new one rises alongside it, much as the new Tappan Zee Bridge, over the Hudson, gradually took shape next to the rusty old one it would one day replace. To Buterin, however, the benefits were already clear. âThe cryptocurrency space has succeeded at making certain aspects of the international economy more open, when politics is moving in the exact opposite direction,â he said. âI do think thatâs a meaningful contribution to the world.â
Buterin is a striking figure, tall and very lean, with long, fidgety fingers, sharp elfin features, and vivid blue eyes, which, on the rare occasions when he allows them to meet yours, convey a depth and warmth that you donât expect, in light of the flat, robotic cadence and tone of his speech. People often joke about him being an alien, but they usually apologize for doing so, because thereâs a gentleness about him, an air of tolerance and moderation, that works as a built-in rebuke to such unkind remarks. As we spoke, on the first afternoon of the Montreal conference (the crypto life is a never-ending enchainment of conferences, and is pretty much wall-to-wall dudes), he aligned some items in front of him: pens, Post-its, phone. He forgoes most social niceties and overt expressions of emotion but, when he finds questions or assertions agreeable, is generous with notes of encouragement: âYep, yep, yepâ; âRight, totallyâ; âYes, yes, exactly.â Arguable remarks elicit a mechanical âHmm.â He seems to anticipate your question before you even know quite what it is, but he forces himself to allow you to finish. He has a dry sense of humor.
He said, âI definitely donât have the kind of single-minded C.E.O. personality that a lot of Silicon Valley V.C.s lionizeâthat thing of being ambitious and wanting to win at all costs, like, basically, Mark Zuckerberg.â He was dressed that day, as on the day before and the day after, in a gray turtleneck, black track pants, and laceless Adidas sneakers over turquoise socks. He often wears T-shirts with unicorns and rainbows. He likes to cite Lambosâas in Lamborghini, the cryptobro trophy ride of choiceâas shorthand for the excessive trappings of wealth, which do not interest him. Heâs about as indifferently rich as a man can be. Although he sold a quarter of his bitcoin and ether well before the prices began to soar last year, he is said to be worth somewhere in the vicinity of a hundred million dollars. (He recently gave away a couple of million dollars to a life-extension research project.) He has no assistants or entourage. He owns little and travels light. âRecently, I reduced my bag size from sixty litres to forty,â he said. âForty is very tolerable. You can go on fifteen-kilometre walks with it.â The Adidas, he said, were his only pair of shoes. âActually, I have another pair thatâs in one of the many places I call home.â These are friendsâ apartments, where he sometimes sleeps for a few nights at a stretchâin Toronto, San Francisco, Singapore, Shanghai, Taipei. He especially likes East Asia. He speaks fluent Mandarin.
After Montreal, he was headed to Berlin and then Switzerland. His home, really, is the Internet. At one point, I referred to an Ethereum outpost in San Francisco, which Iâd read about, as a âbase of operations,â and he rejected the term: âHome. Base of operations. The more you invent your own life style, the more you realize that the categories that have been invented are ultimately, at best, imperfect devices for understanding the world, and, at worst, fake.â
Iâd been trying for months to talk to Buterin. In January, I reached out to his father, Dmitry, who reported back that Vitalik was not interested in an interview. âHe is trying to focus his time on research,â Dmitry said. âHeâs not too excited that the community assigns so much importance to him. He wants the community to be more resilient.â Dmitry Buterin, forty-six, is from Grozny, in Chechnya. He studied computer science in Moscow and then started a financial-software business, before emigrating to Canada, when Vitalik was six. Dmitry settled in Toronto, with Vitalik; Vitalikâs mother, a financial analyst, chose Edmonton. Vitalik, when he was three, got an old PC and began fiddling around with Excel. By ten or eleven, he was developing video games. âVitalik was a very smart boy,â his father said. âIt was not easy. His mind was always racing. It was hard for him to communicate. He hardly spoke until he was nine or ten. I was concerned, but at some point I realized it is what it is. I just gave him my love.â
He also gave Vitalik his first glimpse of Bitcoin. It was 2011, somewhat early, but Dmitry was an avowed anarcho-capitalist, a cynical child of Soviet and post-Soviet Russia. For many others like him, especially in those early days, the first encounter with Bitcoin was like a religious epiphanyâpowerful, life-altering, a glimpse of an entirely different and perhaps more agreeable way of ordering human affairs. âBitcoin looks like moneyâs dream of itself,â the technology journalist Brian Patrick Eha wrote, in âHow Money Got Free.â
âBefore Bitcoin came along, I was happily playing World of Warcraft,â Vitalik told me. He had already been nursing some inchoate ideas about the risks and intrinsic unfairness of centralized systems and authority. He once told a journalist, âI saw everything to do with either government regulation or corporate control as just being plain evil. And I assumed that people in those institutions were kind of like Mr. Burns, sitting behind their desks saying, âExcellent. How can I screw a thousand people over this time?â â Bitcoin scratched this itch. But in many ways what drew him in was the elegance of the system, invented, it seemed, by a rogue outsider out of thin air. It suited a world view, a dream of a fluid, borderless, decentralized financial system beyond the reach of governments and banks, inclined as they inevitably are toward corruption and self-dealing, or at least toward distortions of incentive. Buterin said, âIf you look at the people that were involved in the early stages of the Bitcoin space, their earlier pedigrees, if they had any pedigrees at all, were in open sourceâLinux, Mozilla, and cypherpunk mailing lists.â These were subversives and libertarians, ranging in political affinity from far left to weird right, as often as not without institutional or academic stature or access. âI found it immensely empowering that just a few thousand people like myself could re-create this fundamental social institution from nothing.â
In the eighties, cryptographers and computer scientists began trying to devise a foolproof form of digital money, and a way to execute transactions and contracts without the involvement (or rent-seeking) of third parties. It was the man, woman, or group of humans known as Satoshi Nakamoto who, with Bitcoin in 2008, solved the cruxâthe so-called double-spend problem. If you have ten dollars, you shouldnât be able to pay ten dollars for one thing, then spend the same ten for another. This requires some mechanism for keeping track of what you have, whom you gave it to, and how much they now have. And that was the blockchain.
Definitions of blockchain are as various as the metaphorsâbingo, Google Docs, a giant room of transparent safesâthat people use to try to illustrate them. Broadly speaking, a blockchain is an evolving record of all transactions that is maintained, simultaneously and in common, by every computer in the network of that blockchain, be it Ethereum, Bitcoin, or Monero. Think, as some have suggested, of a dusty leather-bound ledger in a Dickensian counting house, a record of every transaction relevant to that practice. Except that every accountant in London, and in Calcutta, has the same ledger, and when one adds a line to his own the addition appears in all of them. Once a transaction is affirmed, it willâtheoretically, anywayâbe in the ledger forever, unalterable and unerasable.
Historically, records have been stored in one placeâa temple, a courthouse, a serverâand kept by whoever presided. If you distrust central authority, or are queasy about Google, this wonât do at all. With blockchains, the records, under a kind of cryptographic seal, are distributed to all and belong to no one. You canât revise them, because everyone is watching, and because the software will reject it if you try. There is no Undo button. Each block is essentially a bundle of transactions, with a tracking notation, represented in a bit of cryptographic code known as a âhash,â of all the transactions in the past. Each new block in the chain contains all the information (or, really, via the hash, a secure reference to all the information) contained in the previous one, all the way back to the first one, the so-called genesis block.
There are other words that are sometimes included in the definition of blockchain, but they are slippery, and grounds for endless parsing, asterisking, and debate. One is âdecentralized.â (Some blockchains are more decentralized than others.) Another is âimmutableââthe idea that, in theory, the past record canât be altered. (This is different from having your crypto stolen or hacked, when itâs stored in an online âwallet.â That happens all the time!) Then thereâs âprivacy.â The aspiration is for a digital coin to have the untraceability of cash. Because bitcoin was, at the outset, the dark Webâs go-to tender for the purchase of drugs, sex, weaponry, and such, many assumed that it was private. But it isnât. Every transaction is there in the ledger for all to see. It is, fundamentally, anonymous (or pseudonymous, anyway), but there are many ways for that anonymity to be compromised.
The odds are high that someone, somewhere, has attempted to make an explanation like this one to you. The chain-splainer is a notorious date spoiler and cocktail-party pariah. Here he comesâyouâre trapped. You should have known better than to ask about mining.
Mining is a reward systemâcompensation for helping to maintain and build a blockchain. The work of establishing and recording whatâs legit takes machinery, memory, power, and time. Cryptocurrency blockchains require that a bunch of computers run software to affirm (or reject) transactionsâitâs a kind of automated convocation. During this ritual, the computers in the network are competing, via brute guesswork, to be the first to get the answer to a really difficult math problem. The more computational power you have, the more guesses you can make, and the more likely you are to get the answer. The winner creates a new block and gets a reward, in, say, bitcoinânew bitcoin, which has not previously been in circulation. (Satoshi ordained that there be a finite number of bitcoin ever createdâtwenty-one millionâso that no one could inflate away the value of existing bitcoin, as, say, the Federal Reserve does with dollars. Other cryptocurrencies, including ether, donât necessarily have finite supplies.)
This system is known as Proof of Work. The problem-solving exercise is proof that the computers are doing the work. This approach has serious and, some would say, fatal, flaws. First, it requires a tremendous amount of electricity. This year, it is said, the Bitcoin network will use as much energy as the nation of Austria, and produce as much carbon dioxide as a million transatlantic flights. Mining rigsâcomputers designed specifically to do this workâare thirsty machines. Mining farms tend to sprout up where juice is cheap (typically, in proximity to hydropower projects with excess capacity to unload) and where temperatures are low (so you donât have to burn even more electricity to keep the rigs cool). There are open-air warehouses in remote corners of sub-Arctic Canada, Russia, and China, with machines whirring away on the tundra, creating magic money, while the permafrost melts. Second, a small number of mining conglomerates, or poolsâmany of them Chineseâhave wielded outsized influence over the network and the decisions that get made. Last month, one of the biggest of these, Bitmain, confirmed plans to go public.
The alternative, which Zamfir and Buterin were working on in Montreal, is called Proof of Stake. In this scenario, the holders of the currency in question become the validators, who typically take a small cut of every approved transaction. Theoretically, the more crypto you have, the more influence you have, so PoW partisans consider PoS to be plutocratic as wellâa new gloss on the old problem of too much in the hands of too few.
In 2013, Buterin travelled to San Jose for a Bitcoin meet-up, and felt that heâd encountered like-minded people for the first time in his lifeâa movement worth devoting himself to. âThe people that I had been searching for the whole time were actually all there,â Buterin told me. Zooko Wilcox, a cryptographer, recalled Buterin telling him, âThis is the first technology Iâve ever loved that loves me back.â Buterin had been writing blog posts about it for five bitcoins per post. Together, he and Mihai Alisie, a Romanian blockchain entrepreneur whoâd read his posts, founded Bitcoin Magazine. Buterin had a knack for explaining thingsâat least to an audience already primed to understand. But, as he travelled around the world to Bitcoin meet-ups, he began to think that the technology was limited, that attempts to jury-rig non-money uses for this digital-money platform was the computational equivalent of a Swiss Army knife. You basically had to devise hacks. He envisaged a one-blade-fits-all version, a blockchain platform that was broader and more adaptable to a wider array of uses and applications. The concept behind Bitcoinâa network of machines all over the worldâseemed to be a building block upon which to construct a global computer capable of all kinds of activities.
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The Prophets of Cryptocurrency Survey the Boom and Bust
The Prophets of Cryptocurrency Survey the Boom and Bust
Not long ago, I was in Montreal for a cryptocurrency conference. My hotel, on the top floor of a big building downtown, had a roof garden with a koi pond. One morning, as I had coffee and a bagel in this garden, I watched a pair of ducks feeding on a mound of pellets that someone had left for them at the pondâs edge. Every few seconds, they dipped their beaks to drink, and, in the process, spilled undigested pellets into the water. A few koi idled there, poking at the surface for the scraps. The longer I watched, the more I wondered if the ducks were deliberately feeding the fish. Was such a thing possible? I asked the breakfast attendant, a ruddy Quebecer. He smiled and said, âNo, but it is what I tell the children.â
My mind had been marinating overnightâand for more than a year, reallyâin the abstrusities of cryptocurrencies and the blockchain technology on which they are built. Bitcoin and, subsequently, a proliferation of other cryptocurrencies had become an object of global fascination, amid prophecies of societal upheaval and reform, but mainly on the promise of instant wealth. A peer-to-peer money system that cut out banks and governments had made it possible, and fashionable, to get rich by sticking it to the Man.
Some of this stuff I understood; much of it I still did not. If youâre not, say, a computer scientist or a mathematician, the deeper you get into the esoterica of distributed ledgers, consensus algorithms, hash functions, zero-knowledge proofs, byzantine-fault-tolerance theory, and so onâthe farther you travel from the familiar terrain of âthe legacy world,â where, one blockchain futurist told me, pityingly, I liveâthe better the chance you have of bumping up against the limits of your intelligence. You grasp, instead, for metaphors.
Blockchain talk makes a whiteboard of the brain. Youâre always erasing, starting over, as analogies present themselves. So, Montreal bagel in hand, I considered the ducks and the carp. Let the pellets be a cryptocurrencyâkoicoin, say. Would the ducks then be currency miners? Every altcoinâthe catchall for cryptocurrencies other than bitcoin, the majority of which are eventually classified as shitcoinâhas its own community of enthusiasts and kvetchers, so perhaps the koi were this oneâs. The koicommunity. The breakfast attendant who had put out the pellets: heâd be our koicoin Satoshiâas in Satoshi Nakamoto, the pseudonymous and still unidentified creator of Bitcoin. Yes, the koicoin protocol was strong, and the incentives appeared to be well aligned, but the project didnât really pass muster in terms of immutability, decentralization, and privacy. Koicoin was shitcoin.
A few hours later, I was at lunch in a conference room in another hotel, with a table of crypto wizards, a few of them among the most respected devs in the space. (Devs are developers, and even legacy worlders must surrender after a while and ditch the scare quotes around âthe space,â when referring to the cryptosphere.) Four of these devs were researchers associated with Ethereum, the open-source blockchain platform. Ethereum is not itself a cryptocurrency; to operate on Ethereum, you have to use the cryptocurrency ether, which, like bitcoin, you can buy or sell. (Among cryptocurrencies, etherâs market capitalization is second only to bitcoinâs.) The devs were specimens of an itinerant coder Ă©lite, engaged, wherever they turn up and to the exclusion of pretty much everything else, in the ongoing construction of an alternate global financial and computational infrastructure: a new way of handling money or identity, a system they describe as a better, decentralized version of the World Wide Webâa Web 3.0âmore in keeping with the Internetâs early utopian promise than with the invidious, monopolistic hellscape it has become. They want to seize back the tubes, and the dataâour livesâfrom Facebook, Google, and the new oligarchs of Silicon Valley.
One of them, Vlad Zamfir, a twenty-eight-year-old Romanian-born mathematician who grew up in Ottawa and dropped out of the University of Guelph, was scribbling equations on an electronic tablet called a reMarkable pad. He narrated as he scrawled. The others at the table leaned in toward him, in a way that recalled Rembrandtâs âThe Anatomy Lesson of Dr. Nicolaes Tulp.â To the two or three people at the table who were clearly incapable of following along, he said, earnestly, âSorry to alienate you with my math.â Zamfir is the lead developer of one strand of Casper, an ongoing software upgrade designed to make Ethereum scale better and work more securelyâan undertaking thought to be vital to its viability and survival. âItâs shitty technology,â Zamfir, whose Twitter bio reads âabsurdist, troll,â told a journalist two years ago.
Zamfir was showing the others some rough equations heâd worked out to address one of the thousands of riddles that need to be solved. This particular effort was an attempt (jargon alert) to optimize the incentive structure for proof-of-stake validationâthat is, how best to get enough people and machines to participate in a computing operation essential to the functioning of the entire system. âWeâre trying to do game theory here,â Zamfir said. The others pointed out what they thought might be flaws. âIt doesnât seem reasonable,â Zamfir said. âBut the math works out.â This summarized much of what Iâd encountered in crypto.
To his right sat Vitalik Buterin, Ethereumâs founder and semi-reluctant philosopher king. Buterin, who is twenty-four, occasionally glanced at Zamfirâs formulas but mostly looked into the middle distance with a melancholic empty stare, sometimes typing out messages and tweets on his phone with one finger. He was a quick study, and also he pretty much already knew what Zamfir had come up with, and to his thinking the work wasnât quite there. âWhen the models are getting overcomplicated, itâs probably good to have more time to try to simplify them,â he told me later, with what I took to be generous understatement.
Buterin had been working, simultaneously, on another version of Casper. So he and Zamfir were both collaborating and competing with each other. There seemed to be no ego or bitternessâin their appraisal of each otherâs work, in person, or on social media, where so much of the conversation takes place, in full view. Their assessments were Spockian, and cutting only to the Kirks among us.
They had first met before a conference in Toronto in 2014. Zamfir was amazed by Buterin, whom he called a âwalking computer,â and he joined Ethereum as a researcher soon after. Now good friends who meet up mostly at conferences and workshops, they had greeted each other the day before in the hotel lobby with a fervent embrace, like summer campers back for another year, before quick-walking to a quiet corner to start in on the incentive-structure-for-proof-of-stake-validation talk. Whenever and wherever Buterin and Zamfir convene, people gather aroundâeavesdropping, hoping for scraps of insight. The two are used to this and pay little heed. There were no secrets, only problems and solutions, and the satisfaction that comes from proceeding from one toward the other.
The first time I heard the word âEthereumâ was in April, 2017. A hedge-fund manager, at a benefit in Manhattan, was telling me that heâd made more money buying and selling ether and other cryptocurrencies in the past year than heâd ever made at his old hedge fund. This was a significant claim, since the fund had made him a billionaire. He was using words Iâd never heard before. He mentioned bitcoin, too, which Iâd certainly heard a lot about but, like most people my age, didnât really understand. Iâd idly hoped I might be just old enough to make it to my deathbed without having to get up to speed.
As the year wore on, that dream faded. The surge in the price of bitcoin, and of other cryptocurrencies, which proliferated amid a craze for initial coin offerings (I.C.O.s), prompted a commensurate explosion in the number of stories and conversations about this new kind of money and, sometimes more to the point, about the blockchain technology behind itâthis either revolutionary or needlessly laborious way of keeping track of transactions and data. It seemed as if language had been randomized. I started hearing those wordsâthe ones Iâd never heard beforeâan awful lot: âtrustless,â âsharding,â âflippening.â Explaining blockchain became a genre unto itself.
The dizzying run-up in crypto prices in 2017 was followed, this year, by a long, lurching retreat that, as the summer gave way to fall, began to seem perilous. As with notorious stock-market and real-estate bubbles, innocents had been taken in and cleaned out. But both boom and bust reflected an ongoing argument over what cryptocurrencies and their technological underpinnings might be worthâwhich is to say, whether they are, as some like to ask, real. Is crypto the future or a fad? Golden ticket or Ponzi scheme? Amazon 2.0 or tulip mania? And what is it good for, anyway? It sure is neat, but for now it lacks its killer app, a use that might lead to mass adoption, as e-mail did for the Internet. âWe need the hundred-dollar laptop, the iPod,â a blockchain apostle told me.
Now and then, legacy titans voiced their scorn. Jamie Dimon, the chief executive of J. P. Morgan, labelled crypto âa fraudâ; Warren Buffett used the phrase ârat poison squared.â Legions of skeptics and technophobes, out of envy, ignorance, or wisdom, savored such pronouncements, while the true believers and the vertiginously invested mostly brushed it aside. They had faith that a new order was nigh. They pumped but did not dump.
Among a certain subset, it was both fashionable and integral to ignore the fluctuations in price. The idea was to build and shore up a new systemâfor everything from payments and banking to health care and identityâthat was either a replacement for the old one, or at least an alternative to it, one that was borderless, independent of state control and of exploitation by Big Tech. âItâs definitely nice to try to eke out some completely parallel kind of world thatâs totally separate from the existing one,â Buterin said. âIt does interact with the rest of society, and the goal is definitely to help improve the mainstream world, but weâre on a different track.â Such an undertaking would, at best, take many years and likely span several economic and investment cycles. While the old armature rots, a new one rises alongside it, much as the new Tappan Zee Bridge, over the Hudson, gradually took shape next to the rusty old one it would one day replace. To Buterin, however, the benefits were already clear. âThe cryptocurrency space has succeeded at making certain aspects of the international economy more open, when politics is moving in the exact opposite direction,â he said. âI do think thatâs a meaningful contribution to the world.â
Buterin is a striking figure, tall and very lean, with long, fidgety fingers, sharp elfin features, and vivid blue eyes, which, on the rare occasions when he allows them to meet yours, convey a depth and warmth that you donât expect, in light of the flat, robotic cadence and tone of his speech. People often joke about him being an alien, but they usually apologize for doing so, because thereâs a gentleness about him, an air of tolerance and moderation, that works as a built-in rebuke to such unkind remarks. As we spoke, on the first afternoon of the Montreal conference (the crypto life is a never-ending enchainment of conferences, and is pretty much wall-to-wall dudes), he aligned some items in front of him: pens, Post-its, phone. He forgoes most social niceties and overt expressions of emotion but, when he finds questions or assertions agreeable, is generous with notes of encouragement: âYep, yep, yepâ; âRight, totallyâ; âYes, yes, exactly.â Arguable remarks elicit a mechanical âHmm.â He seems to anticipate your question before you even know quite what it is, but he forces himself to allow you to finish. He has a dry sense of humor.
He said, âI definitely donât have the kind of single-minded C.E.O. personality that a lot of Silicon Valley V.C.s lionizeâthat thing of being ambitious and wanting to win at all costs, like, basically, Mark Zuckerberg.â He was dressed that day, as on the day before and the day after, in a gray turtleneck, black track pants, and laceless Adidas sneakers over turquoise socks. He often wears T-shirts with unicorns and rainbows. He likes to cite Lambosâas in Lamborghini, the cryptobro trophy ride of choiceâas shorthand for the excessive trappings of wealth, which do not interest him. Heâs about as indifferently rich as a man can be. Although he sold a quarter of his bitcoin and ether well before the prices began to soar last year, he is said to be worth somewhere in the vicinity of a hundred million dollars. (He recently gave away a couple of million dollars to a life-extension research project.) He has no assistants or entourage. He owns little and travels light. âRecently, I reduced my bag size from sixty litres to forty,â he said. âForty is very tolerable. You can go on fifteen-kilometre walks with it.â The Adidas, he said, were his only pair of shoes. âActually, I have another pair thatâs in one of the many places I call home.â These are friendsâ apartments, where he sometimes sleeps for a few nights at a stretchâin Toronto, San Francisco, Singapore, Shanghai, Taipei. He especially likes East Asia. He speaks fluent Mandarin.
After Montreal, he was headed to Berlin and then Switzerland. His home, really, is the Internet. At one point, I referred to an Ethereum outpost in San Francisco, which Iâd read about, as a âbase of operations,â and he rejected the term: âHome. Base of operations. The more you invent your own life style, the more you realize that the categories that have been invented are ultimately, at best, imperfect devices for understanding the world, and, at worst, fake.â
Iâd been trying for months to talk to Buterin. In January, I reached out to his father, Dmitry, who reported back that Vitalik was not interested in an interview. âHe is trying to focus his time on research,â Dmitry said. âHeâs not too excited that the community assigns so much importance to him. He wants the community to be more resilient.â Dmitry Buterin, forty-six, is from Grozny, in Chechnya. He studied computer science in Moscow and then started a financial-software business, before emigrating to Canada, when Vitalik was six. Dmitry settled in Toronto, with Vitalik; Vitalikâs mother, a financial analyst, chose Edmonton. Vitalik, when he was three, got an old PC and began fiddling around with Excel. By ten or eleven, he was developing video games. âVitalik was a very smart boy,â his father said. âIt was not easy. His mind was always racing. It was hard for him to communicate. He hardly spoke until he was nine or ten. I was concerned, but at some point I realized it is what it is. I just gave him my love.â
He also gave Vitalik his first glimpse of Bitcoin. It was 2011, somewhat early, but Dmitry was an avowed anarcho-capitalist, a cynical child of Soviet and post-Soviet Russia. For many others like him, especially in those early days, the first encounter with Bitcoin was like a religious epiphanyâpowerful, life-altering, a glimpse of an entirely different and perhaps more agreeable way of ordering human affairs. âBitcoin looks like moneyâs dream of itself,â the technology journalist Brian Patrick Eha wrote, in âHow Money Got Free.â
âBefore Bitcoin came along, I was happily playing World of Warcraft,â Vitalik told me. He had already been nursing some inchoate ideas about the risks and intrinsic unfairness of centralized systems and authority. He once told a journalist, âI saw everything to do with either government regulation or corporate control as just being plain evil. And I assumed that people in those institutions were kind of like Mr. Burns, sitting behind their desks saying, âExcellent. How can I screw a thousand people over this time?â â Bitcoin scratched this itch. But in many ways what drew him in was the elegance of the system, invented, it seemed, by a rogue outsider out of thin air. It suited a world view, a dream of a fluid, borderless, decentralized financial system beyond the reach of governments and banks, inclined as they inevitably are toward corruption and self-dealing, or at least toward distortions of incentive. Buterin said, âIf you look at the people that were involved in the early stages of the Bitcoin space, their earlier pedigrees, if they had any pedigrees at all, were in open sourceâLinux, Mozilla, and cypherpunk mailing lists.â These were subversives and libertarians, ranging in political affinity from far left to weird right, as often as not without institutional or academic stature or access. âI found it immensely empowering that just a few thousand people like myself could re-create this fundamental social institution from nothing.â
In the eighties, cryptographers and computer scientists began trying to devise a foolproof form of digital money, and a way to execute transactions and contracts without the involvement (or rent-seeking) of third parties. It was the man, woman, or group of humans known as Satoshi Nakamoto who, with Bitcoin in 2008, solved the cruxâthe so-called double-spend problem. If you have ten dollars, you shouldnât be able to pay ten dollars for one thing, then spend the same ten for another. This requires some mechanism for keeping track of what you have, whom you gave it to, and how much they now have. And that was the blockchain.
Definitions of blockchain are as various as the metaphorsâbingo, Google Docs, a giant room of transparent safesâthat people use to try to illustrate them. Broadly speaking, a blockchain is an evolving record of all transactions that is maintained, simultaneously and in common, by every computer in the network of that blockchain, be it Ethereum, Bitcoin, or Monero. Think, as some have suggested, of a dusty leather-bound ledger in a Dickensian counting house, a record of every transaction relevant to that practice. Except that every accountant in London, and in Calcutta, has the same ledger, and when one adds a line to his own the addition appears in all of them. Once a transaction is affirmed, it willâtheoretically, anywayâbe in the ledger forever, unalterable and unerasable.
Historically, records have been stored in one placeâa temple, a courthouse, a serverâand kept by whoever presided. If you distrust central authority, or are queasy about Google, this wonât do at all. With blockchains, the records, under a kind of cryptographic seal, are distributed to all and belong to no one. You canât revise them, because everyone is watching, and because the software will reject it if you try. There is no Undo button. Each block is essentially a bundle of transactions, with a tracking notation, represented in a bit of cryptographic code known as a âhash,â of all the transactions in the past. Each new block in the chain contains all the information (or, really, via the hash, a secure reference to all the information) contained in the previous one, all the way back to the first one, the so-called genesis block.
There are other words that are sometimes included in the definition of blockchain, but they are slippery, and grounds for endless parsing, asterisking, and debate. One is âdecentralized.â (Some blockchains are more decentralized than others.) Another is âimmutableââthe idea that, in theory, the past record canât be altered. (This is different from having your crypto stolen or hacked, when itâs stored in an online âwallet.â That happens all the time!) Then thereâs âprivacy.â The aspiration is for a digital coin to have the untraceability of cash. Because bitcoin was, at the outset, the dark Webâs go-to tender for the purchase of drugs, sex, weaponry, and such, many assumed that it was private. But it isnât. Every transaction is there in the ledger for all to see. It is, fundamentally, anonymous (or pseudonymous, anyway), but there are many ways for that anonymity to be compromised.
The odds are high that someone, somewhere, has attempted to make an explanation like this one to you. The chain-splainer is a notorious date spoiler and cocktail-party pariah. Here he comesâyouâre trapped. You should have known better than to ask about mining.
Mining is a reward systemâcompensation for helping to maintain and build a blockchain. The work of establishing and recording whatâs legit takes machinery, memory, power, and time. Cryptocurrency blockchains require that a bunch of computers run software to affirm (or reject) transactionsâitâs a kind of automated convocation. During this ritual, the computers in the network are competing, via brute guesswork, to be the first to get the answer to a really difficult math problem. The more computational power you have, the more guesses you can make, and the more likely you are to get the answer. The winner creates a new block and gets a reward, in, say, bitcoinânew bitcoin, which has not previously been in circulation. (Satoshi ordained that there be a finite number of bitcoin ever createdâtwenty-one millionâso that no one could inflate away the value of existing bitcoin, as, say, the Federal Reserve does with dollars. Other cryptocurrencies, including ether, donât necessarily have finite supplies.)
This system is known as Proof of Work. The problem-solving exercise is proof that the computers are doing the work. This approach has serious and, some would say, fatal, flaws. First, it requires a tremendous amount of electricity. This year, it is said, the Bitcoin network will use as much energy as the nation of Austria, and produce as much carbon dioxide as a million transatlantic flights. Mining rigsâcomputers designed specifically to do this workâare thirsty machines. Mining farms tend to sprout up where juice is cheap (typically, in proximity to hydropower projects with excess capacity to unload) and where temperatures are low (so you donât have to burn even more electricity to keep the rigs cool). There are open-air warehouses in remote corners of sub-Arctic Canada, Russia, and China, with machines whirring away on the tundra, creating magic money, while the permafrost melts. Second, a small number of mining conglomerates, or poolsâmany of them Chineseâhave wielded outsized influence over the network and the decisions that get made. Last month, one of the biggest of these, Bitmain, confirmed plans to go public.
The alternative, which Zamfir and Buterin were working on in Montreal, is called Proof of Stake. In this scenario, the holders of the currency in question become the validators, who typically take a small cut of every approved transaction. Theoretically, the more crypto you have, the more influence you have, so PoW partisans consider PoS to be plutocratic as wellâa new gloss on the old problem of too much in the hands of too few.
In 2013, Buterin travelled to San Jose for a Bitcoin meet-up, and felt that heâd encountered like-minded people for the first time in his lifeâa movement worth devoting himself to. âThe people that I had been searching for the whole time were actually all there,â Buterin told me. Zooko Wilcox, a cryptographer, recalled Buterin telling him, âThis is the first technology Iâve ever loved that loves me back.â Buterin had been writing blog posts about it for five bitcoins per post. Together, he and Mihai Alisie, a Romanian blockchain entrepreneur whoâd read his posts, founded Bitcoin Magazine. Buterin had a knack for explaining thingsâat least to an audience already primed to understand. But, as he travelled around the world to Bitcoin meet-ups, he began to think that the technology was limited, that attempts to jury-rig non-money uses for this digital-money platform was the computational equivalent of a Swiss Army knife. You basically had to devise hacks. He envisaged a one-blade-fits-all version, a blockchain platform that was broader and more adaptable to a wider array of uses and applications. The concept behind Bitcoinâa network of machines all over the worldâseemed to be a building block upon which to construct a global computer capable of all kinds of activities.
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The Prophets of Cryptocurrency Survey the Boom and Bust
The Prophets of Cryptocurrency Survey the Boom and Bust
Not long ago, I was in Montreal for a cryptocurrency conference. My hotel, on the top floor of a big building downtown, had a roof garden with a koi pond. One morning, as I had coffee and a bagel in this garden, I watched a pair of ducks feeding on a mound of pellets that someone had left for them at the pondâs edge. Every few seconds, they dipped their beaks to drink, and, in the process, spilled undigested pellets into the water. A few koi idled there, poking at the surface for the scraps. The longer I watched, the more I wondered if the ducks were deliberately feeding the fish. Was such a thing possible? I asked the breakfast attendant, a ruddy Quebecer. He smiled and said, âNo, but it is what I tell the children.â
My mind had been marinating overnightâand for more than a year, reallyâin the abstrusities of cryptocurrencies and the blockchain technology on which they are built. Bitcoin and, subsequently, a proliferation of other cryptocurrencies had become an object of global fascination, amid prophecies of societal upheaval and reform, but mainly on the promise of instant wealth. A peer-to-peer money system that cut out banks and governments had made it possible, and fashionable, to get rich by sticking it to the Man.
Some of this stuff I understood; much of it I still did not. If youâre not, say, a computer scientist or a mathematician, the deeper you get into the esoterica of distributed ledgers, consensus algorithms, hash functions, zero-knowledge proofs, byzantine-fault-tolerance theory, and so onâthe farther you travel from the familiar terrain of âthe legacy world,â where, one blockchain futurist told me, pityingly, I liveâthe better the chance you have of bumping up against the limits of your intelligence. You grasp, instead, for metaphors.
Blockchain talk makes a whiteboard of the brain. Youâre always erasing, starting over, as analogies present themselves. So, Montreal bagel in hand, I considered the ducks and the carp. Let the pellets be a cryptocurrencyâkoicoin, say. Would the ducks then be currency miners? Every altcoinâthe catchall for cryptocurrencies other than bitcoin, the majority of which are eventually classified as shitcoinâhas its own community of enthusiasts and kvetchers, so perhaps the koi were this oneâs. The koicommunity. The breakfast attendant who had put out the pellets: heâd be our koicoin Satoshiâas in Satoshi Nakamoto, the pseudonymous and still unidentified creator of Bitcoin. Yes, the koicoin protocol was strong, and the incentives appeared to be well aligned, but the project didnât really pass muster in terms of immutability, decentralization, and privacy. Koicoin was shitcoin.
A few hours later, I was at lunch in a conference room in another hotel, with a table of crypto wizards, a few of them among the most respected devs in the space. (Devs are developers, and even legacy worlders must surrender after a while and ditch the scare quotes around âthe space,â when referring to the cryptosphere.) Four of these devs were researchers associated with Ethereum, the open-source blockchain platform. Ethereum is not itself a cryptocurrency; to operate on Ethereum, you have to use the cryptocurrency ether, which, like bitcoin, you can buy or sell. (Among cryptocurrencies, etherâs market capitalization is second only to bitcoinâs.) The devs were specimens of an itinerant coder Ă©lite, engaged, wherever they turn up and to the exclusion of pretty much everything else, in the ongoing construction of an alternate global financial and computational infrastructure: a new way of handling money or identity, a system they describe as a better, decentralized version of the World Wide Webâa Web 3.0âmore in keeping with the Internetâs early utopian promise than with the invidious, monopolistic hellscape it has become. They want to seize back the tubes, and the dataâour livesâfrom Facebook, Google, and the new oligarchs of Silicon Valley.
One of them, Vlad Zamfir, a twenty-eight-year-old Romanian-born mathematician who grew up in Ottawa and dropped out of the University of Guelph, was scribbling equations on an electronic tablet called a reMarkable pad. He narrated as he scrawled. The others at the table leaned in toward him, in a way that recalled Rembrandtâs âThe Anatomy Lesson of Dr. Nicolaes Tulp.â To the two or three people at the table who were clearly incapable of following along, he said, earnestly, âSorry to alienate you with my math.â Zamfir is the lead developer of one strand of Casper, an ongoing software upgrade designed to make Ethereum scale better and work more securelyâan undertaking thought to be vital to its viability and survival. âItâs shitty technology,â Zamfir, whose Twitter bio reads âabsurdist, troll,â told a journalist two years ago.
Zamfir was showing the others some rough equations heâd worked out to address one of the thousands of riddles that need to be solved. This particular effort was an attempt (jargon alert) to optimize the incentive structure for proof-of-stake validationâthat is, how best to get enough people and machines to participate in a computing operation essential to the functioning of the entire system. âWeâre trying to do game theory here,â Zamfir said. The others pointed out what they thought might be flaws. âIt doesnât seem reasonable,â Zamfir said. âBut the math works out.â This summarized much of what Iâd encountered in crypto.
To his right sat Vitalik Buterin, Ethereumâs founder and semi-reluctant philosopher king. Buterin, who is twenty-four, occasionally glanced at Zamfirâs formulas but mostly looked into the middle distance with a melancholic empty stare, sometimes typing out messages and tweets on his phone with one finger. He was a quick study, and also he pretty much already knew what Zamfir had come up with, and to his thinking the work wasnât quite there. âWhen the models are getting overcomplicated, itâs probably good to have more time to try to simplify them,â he told me later, with what I took to be generous understatement.
Buterin had been working, simultaneously, on another version of Casper. So he and Zamfir were both collaborating and competing with each other. There seemed to be no ego or bitternessâin their appraisal of each otherâs work, in person, or on social media, where so much of the conversation takes place, in full view. Their assessments were Spockian, and cutting only to the Kirks among us.
They had first met before a conference in Toronto in 2014. Zamfir was amazed by Buterin, whom he called a âwalking computer,â and he joined Ethereum as a researcher soon after. Now good friends who meet up mostly at conferences and workshops, they had greeted each other the day before in the hotel lobby with a fervent embrace, like summer campers back for another year, before quick-walking to a quiet corner to start in on the incentive-structure-for-proof-of-stake-validation talk. Whenever and wherever Buterin and Zamfir convene, people gather aroundâeavesdropping, hoping for scraps of insight. The two are used to this and pay little heed. There were no secrets, only problems and solutions, and the satisfaction that comes from proceeding from one toward the other.
The first time I heard the word âEthereumâ was in April, 2017. A hedge-fund manager, at a benefit in Manhattan, was telling me that heâd made more money buying and selling ether and other cryptocurrencies in the past year than heâd ever made at his old hedge fund. This was a significant claim, since the fund had made him a billionaire. He was using words Iâd never heard before. He mentioned bitcoin, too, which Iâd certainly heard a lot about but, like most people my age, didnât really understand. Iâd idly hoped I might be just old enough to make it to my deathbed without having to get up to speed.
As the year wore on, that dream faded. The surge in the price of bitcoin, and of other cryptocurrencies, which proliferated amid a craze for initial coin offerings (I.C.O.s), prompted a commensurate explosion in the number of stories and conversations about this new kind of money and, sometimes more to the point, about the blockchain technology behind itâthis either revolutionary or needlessly laborious way of keeping track of transactions and data. It seemed as if language had been randomized. I started hearing those wordsâthe ones Iâd never heard beforeâan awful lot: âtrustless,â âsharding,â âflippening.â Explaining blockchain became a genre unto itself.
The dizzying run-up in crypto prices in 2017 was followed, this year, by a long, lurching retreat that, as the summer gave way to fall, began to seem perilous. As with notorious stock-market and real-estate bubbles, innocents had been taken in and cleaned out. But both boom and bust reflected an ongoing argument over what cryptocurrencies and their technological underpinnings might be worthâwhich is to say, whether they are, as some like to ask, real. Is crypto the future or a fad? Golden ticket or Ponzi scheme? Amazon 2.0 or tulip mania? And what is it good for, anyway? It sure is neat, but for now it lacks its killer app, a use that might lead to mass adoption, as e-mail did for the Internet. âWe need the hundred-dollar laptop, the iPod,â a blockchain apostle told me.
Now and then, legacy titans voiced their scorn. Jamie Dimon, the chief executive of J. P. Morgan, labelled crypto âa fraudâ; Warren Buffett used the phrase ârat poison squared.â Legions of skeptics and technophobes, out of envy, ignorance, or wisdom, savored such pronouncements, while the true believers and the vertiginously invested mostly brushed it aside. They had faith that a new order was nigh. They pumped but did not dump.
Among a certain subset, it was both fashionable and integral to ignore the fluctuations in price. The idea was to build and shore up a new systemâfor everything from payments and banking to health care and identityâthat was either a replacement for the old one, or at least an alternative to it, one that was borderless, independent of state control and of exploitation by Big Tech. âItâs definitely nice to try to eke out some completely parallel kind of world thatâs totally separate from the existing one,â Buterin said. âIt does interact with the rest of society, and the goal is definitely to help improve the mainstream world, but weâre on a different track.â Such an undertaking would, at best, take many years and likely span several economic and investment cycles. While the old armature rots, a new one rises alongside it, much as the new Tappan Zee Bridge, over the Hudson, gradually took shape next to the rusty old one it would one day replace. To Buterin, however, the benefits were already clear. âThe cryptocurrency space has succeeded at making certain aspects of the international economy more open, when politics is moving in the exact opposite direction,â he said. âI do think thatâs a meaningful contribution to the world.â
Buterin is a striking figure, tall and very lean, with long, fidgety fingers, sharp elfin features, and vivid blue eyes, which, on the rare occasions when he allows them to meet yours, convey a depth and warmth that you donât expect, in light of the flat, robotic cadence and tone of his speech. People often joke about him being an alien, but they usually apologize for doing so, because thereâs a gentleness about him, an air of tolerance and moderation, that works as a built-in rebuke to such unkind remarks. As we spoke, on the first afternoon of the Montreal conference (the crypto life is a never-ending enchainment of conferences, and is pretty much wall-to-wall dudes), he aligned some items in front of him: pens, Post-its, phone. He forgoes most social niceties and overt expressions of emotion but, when he finds questions or assertions agreeable, is generous with notes of encouragement: âYep, yep, yepâ; âRight, totallyâ; âYes, yes, exactly.â Arguable remarks elicit a mechanical âHmm.â He seems to anticipate your question before you even know quite what it is, but he forces himself to allow you to finish. He has a dry sense of humor.
He said, âI definitely donât have the kind of single-minded C.E.O. personality that a lot of Silicon Valley V.C.s lionizeâthat thing of being ambitious and wanting to win at all costs, like, basically, Mark Zuckerberg.â He was dressed that day, as on the day before and the day after, in a gray turtleneck, black track pants, and laceless Adidas sneakers over turquoise socks. He often wears T-shirts with unicorns and rainbows. He likes to cite Lambosâas in Lamborghini, the cryptobro trophy ride of choiceâas shorthand for the excessive trappings of wealth, which do not interest him. Heâs about as indifferently rich as a man can be. Although he sold a quarter of his bitcoin and ether well before the prices began to soar last year, he is said to be worth somewhere in the vicinity of a hundred million dollars. (He recently gave away a couple of million dollars to a life-extension research project.) He has no assistants or entourage. He owns little and travels light. âRecently, I reduced my bag size from sixty litres to forty,â he said. âForty is very tolerable. You can go on fifteen-kilometre walks with it.â The Adidas, he said, were his only pair of shoes. âActually, I have another pair thatâs in one of the many places I call home.â These are friendsâ apartments, where he sometimes sleeps for a few nights at a stretchâin Toronto, San Francisco, Singapore, Shanghai, Taipei. He especially likes East Asia. He speaks fluent Mandarin.
After Montreal, he was headed to Berlin and then Switzerland. His home, really, is the Internet. At one point, I referred to an Ethereum outpost in San Francisco, which Iâd read about, as a âbase of operations,â and he rejected the term: âHome. Base of operations. The more you invent your own life style, the more you realize that the categories that have been invented are ultimately, at best, imperfect devices for understanding the world, and, at worst, fake.â
Iâd been trying for months to talk to Buterin. In January, I reached out to his father, Dmitry, who reported back that Vitalik was not interested in an interview. âHe is trying to focus his time on research,â Dmitry said. âHeâs not too excited that the community assigns so much importance to him. He wants the community to be more resilient.â Dmitry Buterin, forty-six, is from Grozny, in Chechnya. He studied computer science in Moscow and then started a financial-software business, before emigrating to Canada, when Vitalik was six. Dmitry settled in Toronto, with Vitalik; Vitalikâs mother, a financial analyst, chose Edmonton. Vitalik, when he was three, got an old PC and began fiddling around with Excel. By ten or eleven, he was developing video games. âVitalik was a very smart boy,â his father said. âIt was not easy. His mind was always racing. It was hard for him to communicate. He hardly spoke until he was nine or ten. I was concerned, but at some point I realized it is what it is. I just gave him my love.â
He also gave Vitalik his first glimpse of Bitcoin. It was 2011, somewhat early, but Dmitry was an avowed anarcho-capitalist, a cynical child of Soviet and post-Soviet Russia. For many others like him, especially in those early days, the first encounter with Bitcoin was like a religious epiphanyâpowerful, life-altering, a glimpse of an entirely different and perhaps more agreeable way of ordering human affairs. âBitcoin looks like moneyâs dream of itself,â the technology journalist Brian Patrick Eha wrote, in âHow Money Got Free.â
âBefore Bitcoin came along, I was happily playing World of Warcraft,â Vitalik told me. He had already been nursing some inchoate ideas about the risks and intrinsic unfairness of centralized systems and authority. He once told a journalist, âI saw everything to do with either government regulation or corporate control as just being plain evil. And I assumed that people in those institutions were kind of like Mr. Burns, sitting behind their desks saying, âExcellent. How can I screw a thousand people over this time?â â Bitcoin scratched this itch. But in many ways what drew him in was the elegance of the system, invented, it seemed, by a rogue outsider out of thin air. It suited a world view, a dream of a fluid, borderless, decentralized financial system beyond the reach of governments and banks, inclined as they inevitably are toward corruption and self-dealing, or at least toward distortions of incentive. Buterin said, âIf you look at the people that were involved in the early stages of the Bitcoin space, their earlier pedigrees, if they had any pedigrees at all, were in open sourceâLinux, Mozilla, and cypherpunk mailing lists.â These were subversives and libertarians, ranging in political affinity from far left to weird right, as often as not without institutional or academic stature or access. âI found it immensely empowering that just a few thousand people like myself could re-create this fundamental social institution from nothing.â
In the eighties, cryptographers and computer scientists began trying to devise a foolproof form of digital money, and a way to execute transactions and contracts without the involvement (or rent-seeking) of third parties. It was the man, woman, or group of humans known as Satoshi Nakamoto who, with Bitcoin in 2008, solved the cruxâthe so-called double-spend problem. If you have ten dollars, you shouldnât be able to pay ten dollars for one thing, then spend the same ten for another. This requires some mechanism for keeping track of what you have, whom you gave it to, and how much they now have. And that was the blockchain.
Definitions of blockchain are as various as the metaphorsâbingo, Google Docs, a giant room of transparent safesâthat people use to try to illustrate them. Broadly speaking, a blockchain is an evolving record of all transactions that is maintained, simultaneously and in common, by every computer in the network of that blockchain, be it Ethereum, Bitcoin, or Monero. Think, as some have suggested, of a dusty leather-bound ledger in a Dickensian counting house, a record of every transaction relevant to that practice. Except that every accountant in London, and in Calcutta, has the same ledger, and when one adds a line to his own the addition appears in all of them. Once a transaction is affirmed, it willâtheoretically, anywayâbe in the ledger forever, unalterable and unerasable.
Historically, records have been stored in one placeâa temple, a courthouse, a serverâand kept by whoever presided. If you distrust central authority, or are queasy about Google, this wonât do at all. With blockchains, the records, under a kind of cryptographic seal, are distributed to all and belong to no one. You canât revise them, because everyone is watching, and because the software will reject it if you try. There is no Undo button. Each block is essentially a bundle of transactions, with a tracking notation, represented in a bit of cryptographic code known as a âhash,â of all the transactions in the past. Each new block in the chain contains all the information (or, really, via the hash, a secure reference to all the information) contained in the previous one, all the way back to the first one, the so-called genesis block.
There are other words that are sometimes included in the definition of blockchain, but they are slippery, and grounds for endless parsing, asterisking, and debate. One is âdecentralized.â (Some blockchains are more decentralized than others.) Another is âimmutableââthe idea that, in theory, the past record canât be altered. (This is different from having your crypto stolen or hacked, when itâs stored in an online âwallet.â That happens all the time!) Then thereâs âprivacy.â The aspiration is for a digital coin to have the untraceability of cash. Because bitcoin was, at the outset, the dark Webâs go-to tender for the purchase of drugs, sex, weaponry, and such, many assumed that it was private. But it isnât. Every transaction is there in the ledger for all to see. It is, fundamentally, anonymous (or pseudonymous, anyway), but there are many ways for that anonymity to be compromised.
The odds are high that someone, somewhere, has attempted to make an explanation like this one to you. The chain-splainer is a notorious date spoiler and cocktail-party pariah. Here he comesâyouâre trapped. You should have known better than to ask about mining.
Mining is a reward systemâcompensation for helping to maintain and build a blockchain. The work of establishing and recording whatâs legit takes machinery, memory, power, and time. Cryptocurrency blockchains require that a bunch of computers run software to affirm (or reject) transactionsâitâs a kind of automated convocation. During this ritual, the computers in the network are competing, via brute guesswork, to be the first to get the answer to a really difficult math problem. The more computational power you have, the more guesses you can make, and the more likely you are to get the answer. The winner creates a new block and gets a reward, in, say, bitcoinânew bitcoin, which has not previously been in circulation. (Satoshi ordained that there be a finite number of bitcoin ever createdâtwenty-one millionâso that no one could inflate away the value of existing bitcoin, as, say, the Federal Reserve does with dollars. Other cryptocurrencies, including ether, donât necessarily have finite supplies.)
This system is known as Proof of Work. The problem-solving exercise is proof that the computers are doing the work. This approach has serious and, some would say, fatal, flaws. First, it requires a tremendous amount of electricity. This year, it is said, the Bitcoin network will use as much energy as the nation of Austria, and produce as much carbon dioxide as a million transatlantic flights. Mining rigsâcomputers designed specifically to do this workâare thirsty machines. Mining farms tend to sprout up where juice is cheap (typically, in proximity to hydropower projects with excess capacity to unload) and where temperatures are low (so you donât have to burn even more electricity to keep the rigs cool). There are open-air warehouses in remote corners of sub-Arctic Canada, Russia, and China, with machines whirring away on the tundra, creating magic money, while the permafrost melts. Second, a small number of mining conglomerates, or poolsâmany of them Chineseâhave wielded outsized influence over the network and the decisions that get made. Last month, one of the biggest of these, Bitmain, confirmed plans to go public.
The alternative, which Zamfir and Buterin were working on in Montreal, is called Proof of Stake. In this scenario, the holders of the currency in question become the validators, who typically take a small cut of every approved transaction. Theoretically, the more crypto you have, the more influence you have, so PoW partisans consider PoS to be plutocratic as wellâa new gloss on the old problem of too much in the hands of too few.
In 2013, Buterin travelled to San Jose for a Bitcoin meet-up, and felt that heâd encountered like-minded people for the first time in his lifeâa movement worth devoting himself to. âThe people that I had been searching for the whole time were actually all there,â Buterin told me. Zooko Wilcox, a cryptographer, recalled Buterin telling him, âThis is the first technology Iâve ever loved that loves me back.â Buterin had been writing blog posts about it for five bitcoins per post. Together, he and Mihai Alisie, a Romanian blockchain entrepreneur whoâd read his posts, founded Bitcoin Magazine. Buterin had a knack for explaining thingsâat least to an audience already primed to understand. But, as he travelled around the world to Bitcoin meet-ups, he began to think that the technology was limited, that attempts to jury-rig non-money uses for this digital-money platform was the computational equivalent of a Swiss Army knife. You basically had to devise hacks. He envisaged a one-blade-fits-all version, a blockchain platform that was broader and more adaptable to a wider array of uses and applications. The concept behind Bitcoinâa network of machines all over the worldâseemed to be a building block upon which to construct a global computer capable of all kinds of activities.
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