Disclaimer: The views expressed below are solely those of the author.
In yesterday’s episode of “Dinner with Sumiko,” Straits Times Executive Editor Sumiko Tan spoke to Vitalik Buterin, who happens to spend quite a bit of time in Singapore (more in the video).
But the co-founder and face of Ethereum, while weighing his words, questioned the approach to trying to separate blockchain technology from cryptocurrencies, which regulators like the Monetary Authority of Singapore (MAS) consider inherently speculative and dangerous.
Here’s what he said:
Trying to make a distinction between blockchain usage and cryptocurrency is one of those weird things, right? On the one hand, this is the type of thinking that every regulator has.
You want to support technology and make life easier for people, but you know, you find cryptocurrencies weird and intimidating. But on the other side, [blockchain and] cryptocurrencies have this close relationship with each other. You cannot have one without the other.
The reality is that if you don’t have cryptocurrencies then the blockchains you will have are just fake and no one cares about them.
– Vitalik Buterin, co-founder of Ethereum
But is it? The answer is yes and no.
Since the interview was not particularly detailed on the topic, we must assume that Vitalik was referring to the widespread use of blockchain, mainly for economic value exchange. After all, there are blockchain applications that do not rely on cryptocurrencies and offer a new way to track and verify business transactions or medical records.
However, the peculiarity of using blockchain for financial transactions is that the main change that this new technology contributes to is decentralization, i.e. the rejection of traditional institutions, government, regulators, etc.
For the whole system to work, you need to have enough participants willing to either use their computing power (proof of work) or stake their coins (proof of stake) in exchange for a reward.
Without rewards, an independent blockchain would simply not work. In other words, for decentralization to happen, you need a kind of self-financed, self-sustaining community that replaces central authority with a set of rules that keep everyone safe.
However, the question is, do we really want this?
Now, undoubtedly, if you are Vitalik Buterin, then you are not – and however diplomatic you may be in your statements, any attempts at centralized regulation trying to restrict or control cryptocurrencies are unacceptable (both practically and ideologically).
That’s not to say he doesn’t support some sort of regulation, recognizing the inherent risk of bad people doing bad things (he even once cited Singaporean labor laws during the Terra Luna crash as an example of a safety net that could be a model for similar actions). protecting cryptocurrency users if similar crises occur in the future).
The point, however, is that regulators don’t want decentralization — and I guess most people don’t either.
What we really want is more secure, faster and more convenient transactions, that’s all. We don’t care how it is achieved.
Of course, there is a certain libertarian subset in every society that is suspicious of the government and believes that only by abandoning the rule of law can we break our shackles, but I’m willing to bet that this is a tiny minority.
Blockchain-based decentralized cryptocurrencies are not needed for security, speed, or convenience for the masses.
…this is the new centralization
When Vitalik Buterin questions their separation, he is essentially acting in his own interests, which are at odds not only with the interests of national regulators, but, I believe, of society as a whole.
Just as I am writing these words, the infamous FTX hacker is dumping the stolen coins he had previously transferred to Ether, dropping the price of the second largest digital currency by seven percent in just a few hours.
It happens when we feel a pinch of seven percent annual inflation, which is the equivalent of the currency you are being paid in falling by the same amount, raising the price of goods and services (especially imported ones).
This kind of fluctuation is simply unacceptable for any medium used for financial transactions, as it would make our once-in-a-decade crises a monthly or weekly occurrence.
The irony, of course, is that by switching Ethereum to Proof-of-Stake instead of the energy-intensive Pro-of-Work, Vitalik and his colleagues inadvertently (or maybe intentionally?) pushed the entire system towards greater centralization, in which those who can boast the most Ether ownership, receive the most rewards, and their position cannot be challenged unless they are willing to sell their stake — or, in the case of exchanges that lure individual users with their own rewards — dismantle the entire lucrative system. giving them a significant impact.
I think that if Vitalik wants to promote a truly mainstream adoption of cryptocurrencies, he must first convince us that the technology can provide stability and predictability to traditional fiat currencies before he wants to challenge regulators.
And that it will not push us towards an oligarchy of token-holding elites over governments, however imperfect, but still largely elected.
Because the only reason for the crypto frenzy that has swept the world over the past two years has been the belief that digital tokens can make you a millionaire in days or months if you get in and out at the right time — not the appeal of technological innovation, which, say Honestly, few people even understand.
Featured Image Credit: about.me/vitalikbuterin (edited)