Leon and I wanted to be a part of Bitcoin history and decided to attend the first Texas Bitcoin Conference held in south Austin.
Austin is the capital city of Texas for any readers who are not familiar with the state of Texas.
One of our goals at the conference was to meet and interview Vitalik Buterin, one of the co-founders of Ethereum (ETH), to get a better understanding of this new alternative currency, protocol and scripting language before we invest money into it.
I’ve seen a lot of videos about Ethereum online but they are too technical for the non-technical people like myself.
As an investor, I just want to know if it’s worth my time and money to invest in Ethereum or not.
Here is video interview (1 of 6) with Vitalik conducted by myself, Leon Fu, and James D’Angelo from the World Bitcoin Network:
My friends and I approached Vitalik at the first Texas Bitcoin Conference to ask him some questions to help us determine whether or not we should invest into Ethereum when they launch.
We wanted to ask him more “investing” related questions versus “technical” questions about Ethereum.
I hope these series of videos about Ethereum will help you make a better and informed decision whether or not to invest in Ethereum.
Here is the interview we did with Vitalik:
Tai Zen: What’s up guys? This is Tai Zen again with prisonorfreedom.com.
It’s a blog where we talk about the tools, the techniques and the strategies and the technologies that are available to help people find freedom in their life.
With us here today is James D’Angelo from the World Bitcoin Network, and we also have here Vitalik with the Ethereum project.
These are some of the guys that are in the forefront of helping people find freedom, when it comes to the currency world.
How old are you Vitalik?
Vitalik Buterin: I just turned twenty a month ago.
Tai Zen: Twenty?
Vitalik Buterin: Yeah.
Tai Zen: Good job. Hey, is it Vie-talik or is it Vitalik or…?
Vitalik Buterin: It’s Vitalik.
Tai Zen: it’s Vie-talik; and last name is Buterin?
Vitalik Buterin: Buterin, yeah.
What Is Ethereum?
Tai Zen: We want to talk to you about the Ethereum project that you’re involved in and founded.
I’m going to ask you some of the non-technical questions and James D’Angelo here, our in-house MIT graduate here, he’s the one that’s going to be asking you all the technical stuff, okay?
To get started, one of the common questions that we get is that, “What is Ethereum and what makes it different from Bitcoin?”
Vitalik Buterin: For about the past year now, there’s been a lot of interest in this concept which we’re going through currency 2.0. so you have this idea of a Bitcoin blockchain, but can you use it for more than just money?
For example, there’s this concept of colored coins where you basically have people put their own currencies on top of Bitcoin.
There’s Mastercoin which is a decentralized exchange.
People are thinking of making protocols for things like financial derivatives, peer-to-peer gambling, pretty much everything.
So what Ethereum is, is that we’re taking a somewhat different approach to that and what we’re saying is, instead of having a blockchain what has lots of features, we’re going to have a blockchain without any features.
We don’t even support multiple outputs.
Instead, we’re going to have just a programming language, and then whatever features you want you just write it in the programming language.
Is Ethereum A Programming
Language Or A Public Ledger?
Tai Zen: Is Ethereum a programming language or is it a public ledger or a combination of both?
Vitalik Buterin: Ethereum is a blockchain and inside of the blockchain protocol, there is an integrated programming language.
James D’Angelo: So even a basic transaction is something that someone else will program or you guys will program that?
Vitalik Buterin: A basic transaction that does exist as a fundamental type, but anything more complicated – whether its multi-sig, whether its multiple outputs, whether it’s an atomic trade, whether it’s making your own currency – everything else that you can possibly build on top is a contract.
What’s An Atomic Trade?
James D’Angelo: What’s an atomic trade?
Vitalik Buterin: Atomic trade, that’s a concept that’s really relevant in the idea of colored coins. The idea there is that if I have one green coin and you have five blue coins, and you want to trade them, you can do the trading in a way that’s trust-free.
You have one transaction that sends the green coin from me to you and sends the five blue coins from you to me.
What Are Colored Coins?
Tai Zen: So for the non-technical people out there, when you say one green coin for five blue coins, what does that mean? What do those coins represent?
Vitalik Buterin: Colored coins could represent anything so you could have coins representing company shares; you could have coins representing some asset like US dollars; you could have single coins that represent some digital collectible.
Tai Zen: For example, Twitter just went public recently, how would that be used as a colored coin?
Vitalik Buterin: If some company wants to launch an IPO on the blockchain, then they would basically create this new colored coin and they would start off with themselves owning all the units, then they would just start selling the units off.
Then whenever they want to pay dividends, they would just automatically pay the Bitcoins to whoever owns the colored coins in that particular time.
Tai Zen: And so the algorithm would just run through the blockchain and whoever has that coin at that time receives the dividends?
Vitalik Buterin: Yup.
Tai Zen: Okay.
James D’Angelo: I mean what’s really nice about it is even when you buy stock, you’re actually trusting in that piece of paper holding your stock.
It’s like a bare bond you register with an investment bank. This is proof.
You know all the time exactly…
Are you sure how many shares are available? You’re not.
Are you sure that this guy bought x amount of shares and he’s distributing it that way?
The blockchain proves that so your comfort with that stock…It’s pretty exciting.
Can You Create A Turing Complete
Scripting Language On Top Of Bitcoin?
Tai Zen: Now, with this Ethereum, did you do all these colored coins or anything? Why can’t someone do that with Bitcoin now?
The common question is that all those things that you’re talking about… why can’t someone write that script or language on top of Bitcoin right now?
Vitalik Buterin: Right, so in terms of writing things on top using Bitcoin itself, one of the big problems with that is that in order for a lot of these things to become possible, you need to actually have a lot of features integrated way into the bottom of Bitcoin protocol essentially.
First of all, let’s take an example of something like a financial derivative where I send in ten Bitcoins, you send in ten Bitcoins, and then after a month, it automatically sends me the same US dollar value of Bitcoins back.
That’s a common use case because it basically takes away volatility.
So the problem with doing that on top of Bitcoin is that the contract would need to have the power to actually move that certain quantity of Bitcoins back to me. Because the contract itself would actually have to have that power, the language for the contract would have to be baked right into the Bitcoin protocol.
Bitcoin does have a scripting system but it’s very weak.
It’s only really used right now for just point a to b sending and for multi-sig and there’s a bit of other stuff we can potentially do for it but its limited.
Why Didn’t Satoshi Create Bitcoin
With A Scripting Language Already?
Tai Zen: Why was this not built? Didn’t Satoshi know that it would be beneficial to have this scripting language that you’re talking about?
Vitalik Buterin: Well the thing is you have to understand that Satoshi was testing out a completely new idea that nobody had ever tried before and there’s already these two separate concepts that are particularly revolutionary that it’s trying which is the peer-to-peer blockchain and also this idea of a currency that’s backed by pretty much nothing and doesn’t even have an organization supporting it.
Those are two ideas that are pretty much already incredibly revolutionary and risky to really write. He was just being conservative and didn’t want to introduce a third great idea at the same time.
Tai Zen: Okay, so that took up most of his time and didn’t want…okay.
James D’Angelo: A lot of people here have Turing complete and really that means you can do any computation.
You don’t need a special device or a special programming language once you have Turing complete, so any computation can be done.
But really, most of the stuff that I’ve heard is much simpler than the Turing complete so most of the ideas you’re coming out with could really be solved by just adding an if-then loop or if-then into Bitcoin.
Vitalik Buterin: Yes, Turing completeness is overrated.
It’s a buzzword that people like, but really there are several substantial ways in which Ethereum actually improves on Bitcoin, I would say – rather, its scripting language.
So first of all the Turing complete scripting language which we talked about.
Second, is the fact that contracts can actually have “state”.
So in Bitcoin, a transaction can be spent or it can be unspent. That’s all. You can’t have a contract that has multiple stages and if this happens, you move to this stage, if this happens you move to that stage.
If you want to have some kind of a decentralized company on top of Ethereum, you could do that. But on top of Bitcoin, there’s no way to actually store what all of the owners of that company are and actually update that list, inside of a script.
Tai Zen: So basically, what you’re saying is Ethereum allows you to have conditional orders or conditional parameters?
Vitalik Buterin: Well Bitcoin does conditional, but the key word here is stage. So some contracts have memory. In Bitcoin, it’s just… something exists then you spend it and then it doesn’t exist.
In Ethereum, you could have a contract exist and then something happens that activates and it switches into some new state. So you could have something not get initialized, then initialized, then finalized.
Tai Zen: So it can lay there dormant until its activated?
Vitalik Buterin: Yeah.
What Are Smart Contracts?
Tai Zen: Would this be a good example? Let’s say that a dad wants to leave an inheritance to a child, and he programs that into Ethereum, and then at a certain time, a certain age, in the future, when these conditions are met, then the kid can receive the funds or receive the money? Is that what we’re talking about?
Vitalik Buterin: Yeah.
James D’Angelo: But you can do that already with Bitcoin. That’s simple.
Vitalik Buterin: That’s something you can do.
James D’Angelo: What would be interesting would be something like you put money somewhere and then if dad dies, and if mom dies, the kid gets to release the funds and clearly taking outside inputs is very hard.
Vitalik Buterin: Or here’s another interesting one, which just segways into the next area where Ethereum improves which is you could have the contract that gives the kid the power to withdraw a maximum of twenty thousand dollars per year until he turns twenty-five and then he can withdraw whatever he wants.
So that’s actually an important point which is that the Bitcoin scripting system isn’t really aware of value so in Bitcoin, an output can either be unspent or it can be spent completely.
Whereas in Ethereum, contracts can say, “under these conditions we’ll send out a hundred units, under these conditions we’ll send out ten units.”
So that’s very useful for a lot of financial applications because you could actually say something like, “send one thousand ether plus thirty times this particular price sticker.” So any kind of financial contract that generally requires you to send some variable amount of money, you can do.
Also, something like withdraw limits; so if you say, “we want to have an account like a savings wallet where I’m the owner and you’re a trustee” and so we can set this up so that for less than a hundred dollars a day, you only need my signatures and the contract would actually keep track of it; and we keep track to make sure that I’m spending less than a hundred dollars a day. If I want to withdraw more, then I would need him to co-sign the transaction.
Tai Zen: So it’s like a multi-sig scenario…
Vitalik Buterin: Yeah, like a multi-sig, but enhanced because it’s actually aware of different transaction values and you can set different policies depending on how much you’re actually sending.
Can You Build Applications Like Ebay,
Twitter, Dropbox, Etc On Ethereum?
Leon Fu: I have a question. You also mentioned applications such as Dropbox, right? You said that because there’s state, you could also store data on the blockchain itself. Could you write entire applications? Could you write twitter in Ethereum? Could I write eBay on Ethereum?
Vitalik Buterin: Possibly. I’ll talk about how application set-up works. The Ethereum client is actually a two-level system.
The first level is the technical side that actually interacts with the blockchain and verifies transaction and verifies contracts and verifies blocks; and potentially, mines if you wanted to. Then the second level is like a stripped down chromium web browser, which talks to the first level, but it just opens up a white box.
We just put them over here and you just write an app. The simplest app is a wallet. You could have an app to do a Dropbox. You could have an app to do twitter.
In the long term, what we’d also want to do is we also want to integrate an API not just for Ethereum but also for peer-to-peer protocols in general.
So the idea there would be, we would have API calls forward and look for peers on a certain channel or sends data to the specific peer or what you do when you receive data. So you could potentially do even a completely non-financial and non-Ethereum protocol on top of it.
We would be a really easy platform to write something like bit torrent and something like a decentralized Twitter; and the idea is if you want to write an app, your app would be able to take advantage of that.
It would be able to take advantage of Ethereum, so it would be able to use both of the regular, not money-related and non-incentivized peer-to-peer protocol and the Ethereum blockchain both for money and for timestamping and if you want absolutely anyone in the world to copy certain data, you could. So you would have this really advanced suite here.
Will Ethereum’s Blockchain
Get Bloated Due To All The Apps?
Tai Zen: Does that enlarge the size of the blockchain? Does that make it bigger? How big will the blockchain be?
Vitalik Buterin: So that’s the thing, is we want people to do a lot of things off chain. If you want to have a decentralized twitter, you’re not necessarily going to publish your transaction for every message; that would be a pretty expensive way to do it. Twitter doesn’t charge you a five cent fee, right?
With the way that would be set up is probably some kind of system that’s on the second level, a peer-to-peer network; more like a regular bit torrent style peer to peer network.
Then for example, if you want to send some big message and you want to use Ethereum to automatically pay people to store the message or pay people to propagate the message, then that’s something you definitely could do.
James D’Angelo: But then your block size is dependent on price, right? So if Ethereum’s price is low, I have no trouble bloating the blockchain with everything.
Vitalik Buterin: Well, so the question of what the transaction fees are going to be, that’s something were very much thinking of.
We’re pretty much certainly going to have some kind of mandatory transaction fee, then that’s going to adjust in some fashion. Ideally, we want the transaction fee to reflect the cost that you’re imposing on the network.
James D’Angelo: And you’ve come up with some ideas to work around that? It sounds like a scary aspect to me right now.
Vitalik Buterin: Right, it is. Transaction fees are a very hard problem and Bitcoin’s solution really isn’t a solution at all. I have a blog post where I was talking about some of these issues, they pretend that it’s some market-based system.
James D’Angelo: It’s not, at all.
Vitalik Buterin: Exactly. It’s not, at all.
James D’Angelo: Your writing is great, by the way. I’m a big fan of that.
What’s The Difference Between
Ethereum And Other Alt Coins?
Tai Zen: When you look at Ethereum versus the other alt coins that’s on the market – let’s take for example, NXT.
Now, full disclosure, I help on the marketing with NXT.
So what makes Ethereum different?
From a non-technical perspective – I’m not a technical person – the things that you talk about, they talk about the exact same thing in NXT.
Vitalik Buterin: I would say, the difference is that from what I’ve seen of NXT, NXT implements a lot of those features explicitly. They have transactions; they have all these different things. Whereas with Ethereum, we have this programming language and you can just write…
Tai Zen: …write all those features…
Vitalik Buterin: …in the programming language. it seems like there’s no difference between the two paradigms now because I’m sure we all support decentralized exchange, financial derivatives and all the buzzwords; but, if somebody comes up with something new that no one’s ever thought of, then if you have a blockchain design that’s just based on having specific transaction types, it’s not going to fit in. Whereas here, you just write it in the programming language.
When Will Ethereum
Leon Fu: I know software development; I’m a software engineer myself. When is this going to be ready?
Vitalik Buterin: Well 1.0, probably in about six months or so.
James D’Angelo: The testnet is running right now.
Leon Fu: Okay, sure.
Vitalik Buterin: Yeah, the testnet is fine. You could actually write contracts.
Tai Zen: Back to that question, just a follow-up here. You’re saying that one’s a scripting language; the other one has a bunch of features, right?
What is to prevent the developers of NXT to create a scripting language on top of it? Then wouldn’t that be the same as Ethereum then except they’re some months in advance?
James D’Angelo: It’s a little late trying to turn a tank into an airplane just because it has a motor. You have to really rebuild it all back up.
Vitalik Buterin: You can’t really build a scripting language on top because the idea is for it to actually work, the scripting language actually has to have this hook and actually have the power to send transactions. So it has to be at the foundation.
I was actually looking for something at the NXT specs and they have a turing scripting language as one of their wish list features, so good luck to you guys on that. LOL
Tai Zen: I just want the cryptocurrency world to succeed, it does not really matter to me if its Ethereum or if its NXT. So I’m neutral on that aspect. I know that there are some coders that might lean towards one side or lean towards another alt coin.
But for me, personally, as a non-technical person, I just want to see it succeed. So I just threw it out there not as an attack on NXT, not as an attack on Ethereum, but more of a curiosity question, “what’s to prevent this alt coin from developing the same benefits that Ethereum has?”
Vitalik Buterin: Absolutely. We’re even handicapping ourselves just because everything we do is completely open-source. If you’re investing in Ethereum, I would say you’re investing in the team and to the community to a large extent.
Why Did Vitalik Buterin
Tai Zen: Okay. The other thing too is that what prompted you to do this by itself, this script language, this Turing complete script? Why didn’t you use your talents and your knowledge and your experience and pick out one of the alt coins that’s there?
Vitalik Buterin: I actually was working with Mastercoin before Ethereum and I was working on implementing savings wallets and contracts for difference, and at that point, I came up with this idea of, “hey, let’s take this idea and let’s actually generalize it.” And the logical way to generalize things is with a programming language. I actually submitted the proposal, but at that point…
Tai Zen: It fell on deaf ears? Not interested?
Vitalik Buterin: Well J.R. said that, I believe his words were, “that’s something that we didn’t want. That’s not going to be in our timeline for at least a few months.” Basically I said, ” Yeah okay” and [moved on].
Tai Zen: Obviously, you had to leave that project and go build it from scratch yourself.
Vitalik Buterin: Yeah, J.R. actually has a post on the Mastercoin blog a few weeks ago where he talks about that essentially. He’d prefer Mastercoin to be more of a less innovative but more stable sort of thing; something between Bitcoin and Ethereum.
Tai Zen: Well I wish you the best of luck and thanks for spending time with James D’Angelo from the World Bitcoin Network and myself. We wish you great luck.
Vitalik Buterin: Thank you.
James D’Angelo: Thanks Tai for putting it together.
Tai Zen: Alright, guys. Thanks for joining us and what I’ll do is I’ll get Vitalik’s Bitcoin address, leave it at the bottom of this video; and James D’Angelo’s also. If you guys appreciate their work, I invite you guys to support them, send donations their way.
James D’Angelo: Leon’s as well.
Tai Zen: And Leon’s as well.
James D’Angelo: Our cameraman.
Tai Zen: Send them some coffee donations or soda donations. I’m pretty sure you drink a lot of sodas while you’re programming.
Vitalik Buterin: No, actually.
Tai Zen: No? Coffee?
Vitalik Buterin: Green tea.
Tai Zen: Green tea. Okay, there you go. Send some green tea donations to him. So thanks for joining us and I’ll see you guys in the next video.
Click the link below to watch part 2 of our talk with Vitalk where we talk about why you would want to invest in Ethereum:
You can support and donate to our efforts on our donations page.
Be sure to also donate Bitcoins and support the work of James D’Angelo and the World Bitcoin Network at his BTC address: 1javsf8GNsudLaDue3dXkKzjtGM8NagQe