After a difficult year in the crypto space (bear market, Terra/Luna, FTX, 3AC) @RyanSAdams & @TrustlessState from @BanklessHQ want to know from @VitalikButerin how he envisions the upcoming 2023 for #Ethereum.

🧵 I summarized this awesome episode for you guys. Let's dive in

Esperanto, Linux & Crypto

Vitalik wrote a blog post in 2011: Bitcoin, Esperanto, Linux or the Internet. He described a few possibilities for how Bitcoin (or in general the Crypto Space) will move forward. Will it be mass adoption like the Internet or will it remain a niche like Esperanto? Here are a few possibilities:

• Esperanto: Constructed Language with the goal to have one unified language and replace the legacy languages → Mandatory additional language for everyone. If everyone can communicate with each other, it should lead to world peace but it ended up as a niche language. It has good technical properties but not mass adoption

• Linux: It is the middle case. It has kind of succeeded but also not. The desktop version for end users is mostly a failure because it hasn’t seen mass adoption. But on the other hand, it is an important backbone of the technical infrastructure. Lots of servers run Linux, the mobile System Android runs on Linux, etc.

• Internet: Took over everything and saw massive adoption that reached every single corner of society

Vitalik is convinced that Bitcoin passed the stage of Esperanto but the question remains if it will be more of a Linux (Backbone) System or something that sees mass adoption in the near future → Maybe Crypto is somewhere in the middle: In developed countries, maybe more like Linux but in developing countries, it could become ubiquitous. He believes that the builders have it in their hands and it the mass adoption case depends on how hard we try. If good people in the crypto space stay passive, the predators and negative people will take over and shape the industry.

Advice for Crypto Space

Vitalik is focusing on using the word “Crypto” less and the word “Ethereum” not because he is a maximalist. He just does not want to be associated with all kinds of projects just because they are also in the Crypto Space. It is important to differentiate between “us” and “not us” because it is important to have that definition to shape important and specific values.

He wants to distance from some more centralized projects (IOTA, XRP, etc.) but at the same time value ecosystems like COSMOS. He just wants alliance by default because it can shed a bad light on the space because of bad actors

What lessons did we learn in 2022?

Vitalik believes that the crypto space is only truly honorable when it adheres to its core principles. These principles are:

• Decentralization

• Openness

• Self custody

• Transparency with people

Those are all values that FTX did the exact opposite pretty much since the beginning. A lot of applications that grew a lot but then failed also saw those values as secondary. There are a lot of applications that are winning or on the rise because they follow the core values of web3: Uniswap, DAI, ENS, Smart Contract Wallets, Privacy Apps, etc.

Vitaliks Blogpost: What in the Ethereum application ecosystem excites me

Money: the first and still most important app

It is important to enable access to money for the unbanked and to protect us against inflation in developed countries or for economies that are dependent on other nations’ currencies. Stablecoins are also an important use case for Cryptocurrencies. Additionally, it is easier to route money to charity compared to the legacy banking system because it’s global, borderless, and direct money flow.

Defi: keep it simple

The good and resilient Defi apps are very simple. The more complicated they get, the more venerable and unsustainable they are. The best applications did not build a complicated web but stayed on course and build long-lasting apps like Uniswap, Aave, Maker, etc.

The identity ecosystem: ENS, SIWE, PoH, POAPs, SBTs

For a long time, I have been bullish on blockchain identity  but bearish on blockchain identity platforms

• Blockchain Identity: Signing a message/transaction, ENS names, etc. It is a by-product of the application that needs it

• Blockchain Platforms: You can’t make an identity app, it is emerging and composed of many sources of inputs.

Whatever gets the network effects, needs to have that network effect first before implementing the identity layer. Ethereum wallets enabled the possibility to sign transactions and also sign in with wallets which decentralizes the internet more and maybe helps to get reduce the number of bots.

Standards will emerge. POAP is a good example that acquired lots of users that has an implicit identity element. So far it is an island of identity but Vitalik believes that these systems will start to talk to each other. This is something that the ENS protocol already achieved.

DAOs & Governance

Vitalik thinks DAOs can replace a lot but probably not corporations because corporations benefit from the ability to pivot which isn’t a DAO strength. However, DAOs have a massive advantage if someone needs to spin up a financially tied group that has a specific goal or for something that is robust and needs to last for Decades without fear of hostile takeover, etc. If DAOs want to compete with Corporations, they have a disadvantage because it is slower and is an open book for competitors. Vitalik believes that is important to see innovation in governance and de-financialize the governance to avoid 51% attacks.

Math (Finance) → Identity → Governance

Hybrid applications

Applications that are not fully on-chain but use its features of it. They can be centralized but they use technology to make their service better. Example: Making Centralized Exchanges safer with proof-of-solvency reports or polls on Twitter that could use blockchain technology to make the votes more resilient and valuable.

How to accelerate the good things in Crypto

We must acknowledge our power to shape the environment. We must focus on aspects that are not flashy but highly beneficial in the long term. Currently, everyone is chasing money and wealth, but non-financialized apps will bring tremendous rewards in the long run.