WuBlockchain x Vitalik, Part 2: Addressing Concerns About EF's Token Sales, Personal Influence, Memecoin Development, and the Pumpfun Controversy

Dec 04, 2024

This podcast is the second part of the conversation between WuBlockchain founder Colin Wu and Ethereum co-founder Vitalik Buterin. Key topics include: how Memecoins can develop to achieve more meaningful purposes, addressing the misuse of cryptocurrency and blockchain by malicious actors through the Pumpfun controversy, and responding to community concerns about Ethereum Foundation’s token sales and the potential exploitation of Vitalik’s personal influence.

It should be noted that Vitalik conducted the interview in non-native Chinese, so some expressions might not be entirely accurate. We ask for readers’ understanding. The transcript was generated using GPT, so there may be some errors. Please listen to the full podcast for details.

YouTube:

Spotify: https://creators.spotify.com/pod/show/7qfkmlvhrl8/episodes/EP-45--Vitalik--Memecoin--Pumpfun-e2rp5ll

How Can Memecoins Be Meaningful? Why Progress Is Limited？

Colin:

Let’s shift to a lighter topic. Memecoins have been trending recently. You previously suggested that Memecoins might integrate with public welfare or charitable causes. However, it seems there haven’t been many successful cases, with most projects still focused on speculation or profit. Do you have any suggestions or thoughts on this?

Vitalik:

Memecoins are popular partly because people are searching for blockchain’s next big application. In 2017, ICOs brought many new token projects, and in 2020 and 2021, NFTs became the hot trend. Now, in 2024, it seems no new major application has emerged. Broadly speaking, blockchain applications fall into two categories: idealistic ones that aim to do good but struggle to be profitable, and highly profitable ones with little real-world meaning.

I’ve always hoped for applications that combine both qualities. This is a crucial topic, as I lean toward idealism but also understand the longstanding challenge of decentralized applications.

I remember a decentralized Facebook-like project during my high school years. It secured $200,000 in funding but ultimately failed. The lesson was clear: if you can’t be profitable, you can’t hire top technical talent or compete with centralized projects. Blockchain is fascinating because it gives decentralized developers opportunities to earn money.

While centralized projects may succeed in being profitable and technically robust, most blockchain applications, especially non-financial ones, have yet to find this balance.

For example, projects like DDocs (a decentralized Google Docs) and Farcaster haven’t generated substantial revenue. Meanwhile, Memecoins seem to be the top earners. So I’ve been thinking: if people are primarily engaging for gambling or entertainment, can we make this process more meaningful? While such activities aren’t inherently bad, they can be dangerous for some, though harmless fun for many. But if the only large-scale applications in blockchain are speculative Memecoins, as a core developer and researcher, I would question my purpose here — why not work in AI or biotechnology instead?

This led me to explore whether Memecoins could be tied to more meaningful causes. In March, I wrote an article proposing three ideas for making Memecoins more impactful:

1. Charitable Donations: Could Memecoins donate to charities? Even if most users lose money, could low-income participants earn some profit? I recall how Axie Infinity became popular in countries like Vietnam and the Philippines in 2021. Many people there enjoyed earning income through Play-to-Earn games, and it genuinely improved their lives.

2. Targeting Low-Income Countries: Could Memecoins deliberately enable people in low-income nations to earn money? Would this be valuable to them?

3. Creating Better Games: Gambling isn’t a meaningful goal. Could we at least make more engaging and enjoyable games?

I proposed these three approaches. However, progress has been limited so far. At best, some Memecoins have donated money to me, which I’ve redirected to causes like biological sciences or other meaningful endeavors. If they trust me to act in alignment with transparent values, I see this as fair.

Why haven’t most teams pursued more meaningful efforts? I believe it’s because there are two distinct groups: one excels at creating Memecoins, while the other focuses on idealism and charity.

This parallels the earlier debate between small and big blocks: one group excels at creating applications that attract users but lack human-centric meaning, while the other group develops meaningful solutions that fail to generate revenue. Ideally, these two aspects would merge to create applications that both attract users and benefit humanity. This is an unresolved challenge that we urgently need to address.

PumpFun Livestream Controversy: What to Do When Blockchain Is Misused

Colin:

The following questions are particularly relevant to the Chinese community. These might be the last ones, as our session is getting lengthy, and you might be tired. The first is about the recent attention on the PumpFun livestream. I’m not sure if you’ve noticed it. During the livestream, many raised the question: as a decentralized, censorship-resistant blockchain and network, how should we address its misuse by malicious actors? For example, people using cryptocurrency for money laundering, extortion, or activities like the PumpFun livestream. How do you think we should handle this? How can we balance decentralization with combating malicious behavior?

Vitalik:

This is an important issue, and different solutions apply to different areas. Let’s start by discussing decentralized social media. I think the most critical feature of social media today isn’t just providing a platform to publish content; the key function is sorting. Platforms must decide which content to prioritize for users.

On the blockchain, anyone can publish anything. On Ethereum, for example, you can submit a transaction with text, images, videos, or anything else you want to share. This isn’t inherently problematic. The issue arises when platform algorithms prioritize harmful content over good content, pushing the former to the forefront. Centralized platforms often aim to maximize “engagement” rather than provide high-quality information. This leads to content like PumpFun videos being highly promoted — despite most users disliking or avoiding them — because they generate significant interaction.

Thus, the problem often lies in how algorithms prioritize content. Harmful or low-quality content might dominate while valuable information is ignored.

Centralized platforms can address these issues to some extent, but their solutions have drawbacks. If a platform intervenes based on its own team’s judgment, users who don’t trust that judgment might lose faith in the platform.

We saw this in the U.S. in 2020 when many social media platforms banned Trump and others, leading to a significant loss of trust in these platforms. I believe an ideal solution would involve developing more decentralized and open algorithms aimed at prioritizing content quality over engagement metrics.

One example I often mention is Community Notes on Twitter. If you’ve used Twitter, you might have noticed that when a tweet gains many retweets or replies but contains false information, Twitter adds a Community Note below the post to flag the error and provide links to correct information. Community Notes are powered by a relatively democratized algorithm where participants vote on the accuracy of information. If most people agree that a piece of information is false, it gets flagged.

This approach works well, and many people appreciate the results of Community Notes. I hope we can see more decentralized algorithms like this that help users access accurate, high-quality information.

However, the PumpFun team clearly isn’t interested in this idealistic approach. Their sole focus is attracting users and generating traffic, with no concern for idealism. Solutions to these issues won’t come from teams like them.

Regarding privacy issues — such as with platforms like Tornado Cash — I believe the current state of zero privacy on public blockchains is unsustainable. The lack of privacy is unacceptable for many individuals and companies. When you make a transaction, others can see your entire transaction history, which is why privacy protection is essential.

On this topic, I have two perspectives.

First, governments wielding excessive power and information is extremely dangerous. Coming from Russia, I’m acutely aware of how the Russian government treats opposition figures.

Second, even when governments have access to information, it’s vulnerable to hacking. For instance, last year, journalists uncovered breaches of U.S. intelligence communications and databases. Almost every country’s databases are susceptible to hacks. While governments might believe they can control such information, it often ends up being exploited, threatening public safety.

I support solutions that balance privacy and transparency. Platforms like Tornado Cash can protect privacy while maintaining some transparency. For example, users could prove their deposits are legitimate without revealing their identities. Conversely, if funds are illicit, such as stolen from a DeFi project, users could demonstrate they aren’t the thief.

This approach minimizes large-scale illegal activity while protecting individual privacy.

The cypherpunk ethos — “Privacy for the weak, transparency for the powerful” — resonates here. Ordinary people need privacy to protect themselves, while those in power, like national leaders or corporate executives, should remain transparent due to their significant societal influence.

Zero-Knowledge Proofs (ZK) play a vital role here. ZK technology enables us to balance privacy and transparency. Unlike earlier privacy projects that were either fully private or fully public, ZK allows selective proof and disclosure. This flexibility lets us tailor the privacy-transparency balance as needed.

Currently, some second-generation privacy projects are addressing issues like DeFi hacks. I’m optimistic about their potential.

Why Does the Ethereum Foundation Sell ETH On-Chain? Could It Trigger Panic?

Colin:

On Twitter, you recently addressed questions about why the Ethereum Foundation sells ETH on-chain instead of using OTC channels. Some worry this approach might cause market panic. My understanding is that transparency is the main reason, correct?

Vitalik:

Yes, the Foundation faces challenges in balancing expectations. Some want total transparency, with every action publicly disclosed. Others prefer we don’t openly sell ETH. Yet another group expects the Foundation to maintain a robust budget, even suggesting higher salaries for core developers to avoid relying on token sales. These expectations often conflict, creating a triangular dilemma.

Additionally, misconceptions arise. Yesterday, for instance, a lookonchain account claimed the Foundation sold over 5,000 ETH from one of its addresses. In reality, that address isn’t controlled by us and hasn’t been for a long time. It was funds paid to a developer years ago, later transferred elsewhere.

Regarding the 35,000 ETH we sold in August, that transaction actually used OTC channels via platforms like Kraken. The sale was conducted gradually to minimize market impact, not all at once.

Our goal is to ensure transparency while demonstrating careful, controlled trading methods.

One of our challenges is the lack of a centralized repository for this information. Before DevCon, we released a transparency report detailing our financial activities, including fund allocation and key wallet movements. For example, our Berlin office wallet covers developer salaries and operational costs.

Although the information is public, it isn’t well-organized in one place, which is an area we aim to improve.

Finding the right balance between transparency and meeting community expectations is challenging. For example, maintaining a budget to pay developers fairly while avoiding excessive token sales is almost impossible. As the Foundation evolves, we’re continually adjusting to meet these competing demands.

How to Prevent Misuse of Personal Influence by Projects and Individuals？

Colin:

One final question: in the Chinese community, people often call you “V God,” which is quite a unique nickname. While you might not particularly like being addressed that way, some people believe that those who approach or even flatter you might gain certain advantages. How do you view this phenomenon? Or, do you think people close to you might receive benefits from this relationship? (Though, based on my experience, I don’t agree with this community accusation.)

Vitalik:

Lately, I’ve started saying “no” more often. For example, most of the time, I now decline photo requests. Five years ago, I announced that I would no longer serve as an advisor to any token projects. This year, I’ve also made it clear that I won’t invest in tokens. If I want to support a specific field, I do so through organizations rather than personally.

For instance, if I’m interested in supporting a certain area, I rely on others to help me evaluate which projects within that field are worth supporting, or we decide on criteria for offering support.

I think this reflects a natural progression from a small ecosystem to a larger one. When the Ethereum community was small, with very few teams, directly supporting each team was crucial. If a team was doing valuable work, they deserved direct backing.

Additionally, I need to stay connected to the real world. I can’t become an “ivory tower” academic who is detached from what’s happening in practice. However, as the community grows larger, this creates a different challenge. With more projects, many people want to discuss things with me, and some hope I’ll invest in their projects. In a small community, my role was to be inclusive, but in a larger one, my role has shifted to saying “no.” Over the past year or two, I’ve begun declining more direct support for individual projects.

Sometimes, if a project is excellent, I might provide a bit of support, but it won’t involve a long-term relationship. Instead, I consider how to expand the ecosystem in a more neutral way.

However, this requires finding a balance. I need to remain engaged with the world; otherwise, I risk becoming increasingly distant from our ecosystem. Striking this balance requires adjustments, and I recognize the need to make those adjustments.

Wu Blockchain

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