Speaker 1: By now, most of you have probably heard of bitcoin.
Speaker 1: Bitcoin has risen more than in the last two months. Certainly,
Speaker 1: bitcoin is the granddaddy. Right now, Bitcoin hits a new
Speaker 1: high briefly touching. Bitcoin is a new kind of currency
Speaker 1: that you can use to pay for things, and it's
Speaker 1: exploded in popularity over the last few years. Bitcoin success
Speaker 1: has spawned tons of other digital currencies that share Bitcoin's
Speaker 1: underlying technology. The Ripple is far ahead off everybody else
Speaker 1: in the space. That has been replaced by Monnero as
Speaker 1: the currency of choice. Charlie Lee is the creator of
Speaker 1: a light coin, which is an alternative, a challenger to Bitcoin.
Speaker 1: Right now, several of these currencies are facing a curious problem.
Speaker 1: They become too popular for their own good. They weren't
Speaker 1: originally designed to support so many users, and their networks
Speaker 1: are struggling to keep up with all the new people
Speaker 1: flooding in. Nowhere is this problem more acute than in
Speaker 1: the clogged networks of what's quickly become the world's number
Speaker 1: two cryptocurrency. The currency is called Ether, and the network
Speaker 1: that powers it is called ethereum. Either's boom is meant
Speaker 1: that its network has been bogged down by long delays,
Speaker 1: which means that many of its users already desperate for
Speaker 1: an overhaul. Leading the charge as a young guy I
Speaker 1: recently met at an Ethereum conference in Cancoon. His name
Speaker 1: Vlad Zampier. Hey everyone, how's it going? Do you have
Speaker 1: a The thing is, if Atherorum were run by a corporation,
Speaker 1: there'd be a CEO who could sign off on the change,
Speaker 1: And if a theory were run by a central bank,
Speaker 1: it would be just a handful of central bankers who
Speaker 1: deliberate and vote yes or no. But Ethereum is run
Speaker 1: by neither of those things. Just like many of its
Speaker 1: other cryptocurrency siblings, including the Bitcoin, Ethereum was created with
Speaker 1: this libertarian, anti corporate ideal of being leaderless. It's Vlad's
Speaker 1: job to navigate the chaos and that unstructured can unity
Speaker 1: to implement the change that he and so many others
Speaker 1: have been dreaming of for years. Hi, I'm Brad Stone
Speaker 1: and I'm Matthew Lising, and this week on Decrypted, we're
Speaker 1: taking you inside Lad's planned upgrade Etheroryum, and is hoped
Speaker 1: to pave the way for this new era of technology
Speaker 1: to go mainstream. Glad has big dreams for Ethereum. He
Speaker 1: sees it as so much more than infrastructure for another currency.
Speaker 1: But to make all of that possible, he's got to
Speaker 1: get everyone to agree to his overhaul. So can Glad
Speaker 1: pull it off? Or will it prove too difficult to
Speaker 1: rally this huge community with competing interests that's spread out
Speaker 1: across the world. By the end of the episode, you
Speaker 1: might even understand what blockchains all about. Stay with us, So, Mad,
Speaker 1: I'm a little jealous. You've got to go to Cancoon
Speaker 1: for the story I did, although I was stuck inside
Speaker 1: this conference hall with about two thousand Ethereum developers the
Speaker 1: whole time, and there was some bo involved. Okay, all right,
Speaker 1: I take it back. I'm not jealous. So this conference
Speaker 1: was where you met our protagonists of Lad. Tell me
Speaker 1: what he was like. So he's twenty seven years old.
Speaker 1: He has shoulder length hair that he plays with a lot.
Speaker 1: He tends to put it in his mouth as he's talking.
Speaker 1: He's a huge fan of the Twisted cartoon Rick and Morty.
Speaker 1: He likes to snowboard in his off time. You know.
Speaker 1: He reminded me of Fred Armison of SNL and Portlandia fame.
Speaker 1: But there's another interesting thing. You know, he's got this
Speaker 1: very international background. I was born in Prussia for Romania.
Speaker 1: In Romania, yeah, okay, cool? Did you grow up there? Okay?
Speaker 1: And then then where'd you go? Canada? I grew up
Speaker 1: in Ottawa wasting. I noticed the wealth is something you list.
Speaker 1: Are you do you living? Growth? I went to the
Speaker 1: university and golfer I live and growth for a number
Speaker 1: of years. Lad's parents now live in Switzerland, but Lad
Speaker 1: himself more or less doesn't really have a home. He's
Speaker 1: been so busy traveling from conference to conference that he's
Speaker 1: on the road full time. Lad has been interested in
Speaker 1: computers since he was a young boy. That's always been
Speaker 1: my thing. My grandfather was about professor. He taught me
Speaker 1: about Sin Sosa. Yeah. He says he got into programming
Speaker 1: when he was eleven or twelve. I guess the first
Speaker 1: time I got into programming, I was playing around in
Speaker 1: the World Cup three map editor, making the custom games.
Speaker 1: And then we had this great environment where you could
Speaker 1: news drop down lists to program um events and all
Speaker 1: sorts of like actually incredibly complex um things. And soon
Speaker 1: enough that led to a passion for cryptocurrencies. At first,
Speaker 1: he was focused on bitcoin. I actually got into bitcoin,
Speaker 1: um in my I think, which was um the year after,
Speaker 1: like in my first year of grade school. Um and uh,
Speaker 1: but I I kind of dropped out, not with the
Speaker 1: intention of going into cryptocurrency, but in like the following
Speaker 1: months that ended up being when I ended up doing.
Speaker 1: Now enter Batalic buterin a Russian Canadian boy genius programmer
Speaker 1: the years when lad got into bitcoin, And that's when
Speaker 1: Batalic created a new kind of cryptocurrency called ether, powered
Speaker 1: by a network he called ethereum. Metallic was only nineteen
Speaker 1: at the time. And Matt, did you meet Metallic at
Speaker 1: this conference too? I did. I asked him how he
Speaker 1: came up with the name ethereum. I came up with
Speaker 1: it myself. Um, but we I and I remember myself
Speaker 1: reading as a list of elements from science fiction. Uh.
Speaker 1: And I remember liking ethereum because has this connection to
Speaker 1: this nineti century scientific theory of ether, this medium where
Speaker 1: a gift waterways travel through water, sound ways traveled through
Speaker 1: the air, like the hypothesis will be light We've traveled
Speaker 1: through ether. I just love this name. It's it's geeky,
Speaker 1: it has a hat tip towards a history the sci
Speaker 1: fi connotations. It's kind of just perfect for a cryptocurrency. Yeah,
Speaker 1: and if you met this guy, he's almost like a
Speaker 1: walking computer. He's just incredibly, incredibly smart. So in the
Speaker 1: talk met Vlad at a bitcoin meet up in Toronto.
Speaker 1: The two soon started talking about the seeds of what
Speaker 1: will become the project. The Lad would head up May
Speaker 1: It's play fourteen Italian thinking about it for a few
Speaker 1: months before that, he told me there's like, you know, future,
Speaker 1: and we kind of spent a bunch of time and
Speaker 1: May actually like it's like hashing things out. But at
Speaker 1: the point I was still skeptical, didn't really think it
Speaker 1: would work. But like in September, I became like, you know,
Speaker 1: convinced that it would work. Now in the niche, nerdy
Speaker 1: world of Ethereum, Vlad is nothing short of a celebrity.
Speaker 1: I followed him around at the DevCon conference and people
Speaker 1: were hurling questions at him left and right as he
Speaker 1: walked down the hall. But the signature is, I mean,
Speaker 1: may not be enough. I mean it sounds like fun. Yeah,
Speaker 1: it's pretty hectic. But you know, even before he was
Speaker 1: scheduled to make his big speech about his project, people
Speaker 1: are jostling to talk to him. So this is the
Speaker 1: project that's going to unclogged the ethereum network. That's the hope.
Speaker 1: He's named the project Casper because it's related to an
Speaker 1: earlier type of consensus system known as Ghost or ghost
Speaker 1: protocols with a friendly ghost correct by Construction Filtre. This
Speaker 1: is the introduction for lad rallying the crowd. There must
Speaker 1: have been about two thousand people in the conference hall
Speaker 1: and they were getting excited. But then he ran into
Speaker 1: a power Point Snaphew, as we all do, even math
Speaker 1: wonder kids struggle with power Point. You would have thought
Speaker 1: they were chanting for a rock star. Really sorry, guys,
Speaker 1: but you know I swear to God's gonna happen and
Speaker 1: you'll be impress. So did it happen? Yeah, he eventually
Speaker 1: got it to work. And were you impressed with those ideas? Yeah?
Speaker 1: It was mostly a ton of crazy math that I
Speaker 1: didn't understand, but from what I could tell, it went
Speaker 1: very well. Part of Glad's job is to figure out
Speaker 1: the super complicated math behind his project, but another part
Speaker 1: is evangelizing the project itself, trying to get everyone to
Speaker 1: come aboard, and that's a steep challenge. Just as the
Speaker 1: more technical problems he's trying to solve. Vlad is kind
Speaker 1: of like a politician. Yeah, he'd probably cringe at that,
Speaker 1: but it's true because then just his name veragely difficult
Speaker 1: and extraordinarily difficult systems from a distributed systems problem. What
Speaker 1: does that mean. That's a very technical way of saying that,
Speaker 1: just like our own messy democracy, it's really hard to
Speaker 1: get a large group to all get behind Casper. I mean,
Speaker 1: these are people spread all around the world, most of
Speaker 1: whom don't know each other, So how would they actually
Speaker 1: implement lads change? Well, once lads done figuring out the math,
Speaker 1: then there are going to be these other developers who
Speaker 1: come in and turn lads math into code, and that
Speaker 1: code goes into an updated version of the software that
Speaker 1: people use to navigate the Ethereum universe. So then people
Speaker 1: either decide to adopt that update or not. It's kind
Speaker 1: of like when Apple pushes a new iOS update on
Speaker 1: you and you decide whether to download it. So was
Speaker 1: this like a vote. It's not a formal vote now,
Speaker 1: but you could think of it like the people who
Speaker 1: adopt the new software or voting yes, and the people
Speaker 1: who keep using the old software or voting no. And
Speaker 1: as long as enough computers adopt the update with lads changes,
Speaker 1: Ethereum will have effectively moved on to the new system.
Speaker 1: And what happens if that fails, If not enough people
Speaker 1: adopt the new system, well, it would basically give birth
Speaker 1: to a new version of Ethereum. So there would be
Speaker 1: the Ethereum based off of the old software and the
Speaker 1: Ethereum based off the new software. That kind of split
Speaker 1: has happened to Bitcoin and to Ethereum before it gets
Speaker 1: really messy, though, and Vlad wants to avoid that at
Speaker 1: all costs. Yeah, okay, so I think I understand enough
Speaker 1: to know that that is a bad outcome. And a
Speaker 1: lot is writing on Glad to convince everyone to take
Speaker 1: of changes. Yeah, yeah, for sure, and he knows that
Speaker 1: he knows the pressure he's under. But here's the thing.
Speaker 1: Even after three years, Casper is not ready. There's been delays,
Speaker 1: and the people who regularly use Ethereum are starting to
Speaker 1: get impatient. So what exactly Laddin Vitallic are trying to
Speaker 1: do in the world's first explanation of blockchain that won't
Speaker 1: put you to sleep? We promise that is coming up.
Speaker 1: So Matt, what exactly is Casper trying to do? Okay,
Speaker 1: to understand it, we need to explain how the underlying
Speaker 1: technology works. This is the technology that we've been referring
Speaker 1: to as blockchain. Oh God, okay, I'm gonna prepare myself here. Okay,
Speaker 1: are you ready go for it? So imagine you want
Speaker 1: to send me a hundred bucks to thank me for
Speaker 1: being such a great guest host on DECRYPTI okay, I
Speaker 1: can see where this is going now. Traditionally, what would
Speaker 1: happen is your bank would check your balance right to
Speaker 1: make sure you actually have that one hundred bucks to
Speaker 1: give me, right, But then if you were to give
Speaker 1: me a hundred dollars worth of bitcoin or ether, it
Speaker 1: works differently. So it's not a bank that checks anything
Speaker 1: or verifies that you have a hundred dollars to give.
Speaker 1: It's these other people in the community that perform the verification.
Speaker 1: These are the people we call miners, okay, like gold miners,
Speaker 1: yeah kind of. I presume they're not wearing hard hats
Speaker 1: and carrying picks, So how how do they verify what
Speaker 1: they need to verify? The first thing to understand is
Speaker 1: how important the history of the ledger is here every
Speaker 1: transaction and a blockchain is recorded in time stand so
Speaker 1: when the network checks for your one bucks, there it is.
Speaker 1: Miners are using these really powerful computers that do tons
Speaker 1: and tons of trial and error calculations, and the first
Speaker 1: one to get it right gets rewarded with bitcoin or
Speaker 1: ether or whatever other cryptocurrency you're working at. So think
Speaker 1: about it right now. That's a free seventeen tho dollars
Speaker 1: for one bitcoin right now. So there's a lot of
Speaker 1: money here at stake. And this is how all cryptocurrencies work. Yeah,
Speaker 1: basically except for a few very minor ones. But you know,
Speaker 1: it's also a process that's led to a lot of
Speaker 1: problems like what, well, it's become expensive to be a miner.
Speaker 1: You're competing against everyone else to be the first to crack,
Speaker 1: you know the problem. That means you have to invest
Speaker 1: in really powerful computers to run these calculations. You need
Speaker 1: to pay for a lot of electricity to run those computers.
Speaker 1: That all means that it's mostly big companies and big
Speaker 1: groups of miners that have all banded together who are
Speaker 1: dominating the mining of these cryptocurrencies. And there's been a
Speaker 1: lot of talk recently about all the electricity that these
Speaker 1: miners are wasting to perform these calculations. Yeah, I don't
Speaker 1: know if they would say it's wasting, but it's a
Speaker 1: lot of usage. So like a recent report estimated that
Speaker 1: the electricity used to mind the world's bitcoin is equal
Speaker 1: to the electricity used by Ecuador in an entire year.
Speaker 1: And Ecuador is a country with sixteen million people. That
Speaker 1: is absolutely crazy, particularly now when you know C two
Speaker 1: emissions and global warming have become such a big problem. Yep,
Speaker 1: there's another problem too. You know, when you're relying on
Speaker 1: this time consuming trial and error process to verify transactions,
Speaker 1: it also means you have a pretty slow network. Okay,
Speaker 1: how slow are we talking about? At the conference, I
Speaker 1: spoke to someone named Andrew Keys. He works for an
Speaker 1: ethereum startup in Brooklyn called Consensus, and he compared it
Speaker 1: to credit card transactions. American Express, Visa, master Card all
Speaker 1: average around thirty thousand transactions per second. But if you
Speaker 1: compare that with etherium, the public ethereum main net average
Speaker 1: it about seven. So if Ethereum can process seven transactions
Speaker 1: per second and there's demand for a hundred, what happens, Well,
Speaker 1: you get a backlog Uh, there's transactions that are just
Speaker 1: waiting to get verified, which leads to long delays. That's
Speaker 1: exactly what's happening now. Recently, it's gotten really bad to
Speaker 1: some transactions have taken as long as twenty minutes and
Speaker 1: glad you know he's out there saying, Hey, my proposal
Speaker 1: is going to fix this, good old Lad. Okay, so
Speaker 1: what would lads changes actually do. Here's the gist. In
Speaker 1: the current system, miners are the ones who verify transactions,
Speaker 1: but Lad and Metallic wanted to move that responsibility to
Speaker 1: these people that they're calling stakeholders stakeholders. Okay, the metaphors
Speaker 1: aren't quite consistent, but tell us who are the stakeholders? Okay,
Speaker 1: A stakeholder is anyone who owns ether. That's the currency
Speaker 1: remember for ethereum. Here's the catch. You have to lock
Speaker 1: it up and like an escrow account or for a
Speaker 1: short period of time. It's sort of like in a
Speaker 1: security deposit box. And as they're working on verifying other
Speaker 1: people's transactions, they get rewarded if they verify legitimate trades. Uh,
Speaker 1: if they verify bad ones, or if they try to
Speaker 1: mess with the system, they can lose those security deposits. Okay,
Speaker 1: so I get it. It's against their interest to try
Speaker 1: to do anything bad exactly. And in this new system
Speaker 1: to verify transactions, um, you don't need an army of
Speaker 1: computers to be running those energy consuming, time consuming trial
Speaker 1: and error calculations. The verifications here would happen much faster,
Speaker 1: so the network would be able to take on a
Speaker 1: lot more volume. It would also be more energy efficient
Speaker 1: and less expensive. Proponents hope that would have the benefits
Speaker 1: of allowing more people, ordinary people to earn more Ether
Speaker 1: and also keep the cryptocurrency from getting concentrated in the
Speaker 1: hands of just a few rich people and those mining
Speaker 1: groups that we've been talking about. Yeah, but Matt, it
Speaker 1: does sound like this is a system that benefits people
Speaker 1: who already own a ton of Ether, these so called stakeholders.
Speaker 1: Wouldn't they just go on to earn more. Yeah, that's
Speaker 1: definitely an argument against it. But they also feel that
Speaker 1: think about the barrier to entry of mining. You have
Speaker 1: to have all the equipment, you have to know what
Speaker 1: you're doing here, you just have to own the currency,
Speaker 1: which is a lot easier to get into it. So
Speaker 1: they hope that it kind of democratizes it So remember
Speaker 1: how I told you earlier that people are getting anty
Speaker 1: for this upgrade. They're getting so anty now that Vitalic
Speaker 1: is pushing another version of Casper, another version, so there's
Speaker 1: Casper two point. Oh yeah, they're not necessarily competing proposals though,
Speaker 1: Laden Vitalic on good terms, and Thetalic plan is more
Speaker 1: like a stop gap aragement for Ethereum developers as they
Speaker 1: wait for lads more permanent fix to be ready. Why
Speaker 1: it definitely has his own ideas that he wants to
Speaker 1: fully flesh out, whereas I'm more concerned about let's get
Speaker 1: something out there and now because they know people are
Speaker 1: demanding some kind of crocustique to be out there. When
Speaker 1: the talent created Ethereum, in from the very beginning, he
Speaker 1: intended it to be so much more than Bitcoin, so
Speaker 1: much more than a network that powers just another currency.
Speaker 1: Like what all right, you remember crypto Kitties from a
Speaker 1: few weeks ago. That's exactly what happened to the Ethereum
Speaker 1: network this week, an application called crypto Kities clogged the
Speaker 1: entire network. Crypto Kitties is a great example of an
Speaker 1: application that's built on the Ethereum network, and it's a game, right, Yeah. Essentially,
Speaker 1: so you purchased these virtual cats and they have their
Speaker 1: own unique digital DNA. You can breed them, and you
Speaker 1: can collect more war cats and sell those cats to
Speaker 1: other people. It's kind of like Beanie babies, remember, but
Speaker 1: if beanie babies could have their own babies. But it's
Speaker 1: not just that the payments in this game happen in Ether.
Speaker 1: The blockchain technology is keeping a record of the exact
Speaker 1: kind of cats everyone owns. So when it comes time
Speaker 1: to sell your aqua marine kitty, it verifies that you
Speaker 1: actually have an Aqua marine kitty. And I know you
Speaker 1: have one, brat I have two of them, so you know.
Speaker 1: Basically this is all being based on Ethereum, and it
Speaker 1: keeps track of how much Ether is going in and out,
Speaker 1: and cats are why lad has been working so hard
Speaker 1: on this. Let me give you a less weird example.
Speaker 1: So the other week I bought a record on the
Speaker 1: Ethereum blockchain. I had to pay for it with Ether.
Speaker 1: It was about ten bucks, and I spent and I
Speaker 1: went directly to the artists who wrote the music, so
Speaker 1: there was no record company in the middle, no music
Speaker 1: busher taking a cut. My ten bucks was split up
Speaker 1: exactly as the band wanted it to be. So maybe
Speaker 1: five bucks went to the singer, three bucks to the guitarists,
Speaker 1: that kind of thing. So it's cutting out the middleman exactly,
Speaker 1: and it's making it possible to do all of this
Speaker 1: in an automated way. So imagine how it would have
Speaker 1: implications for all these other kinds of services that connect
Speaker 1: people who need each other, like how Uber makes it
Speaker 1: possible for a rider to get a car and a driver,
Speaker 1: or how Airbnb makes it possible for a traveler to
Speaker 1: find a room at someone's apartment. If it's all automated,
Speaker 1: if it's all code, all of these services would be
Speaker 1: a lot cheaper for consumers. There's a picture that I
Speaker 1: love to show people about Apple's evolution because because I'm
Speaker 1: I'm always trying to basically parallel this way. Three point
Speaker 1: oh two Web two point oh. This is Andrew Keys,
Speaker 1: the Ethereum startup guy who I met at the conference.
Speaker 1: He pulled up a chart on his phone that showed
Speaker 1: the growth in the number of iOS apps, and it
Speaker 1: starts out in two thousand seven where there were zero,
Speaker 1: and then in two thousand and eight there were hundred.
Speaker 1: Then there were a thousand up to two eighteen, where
Speaker 1: they were a billion. So Andrew thinks there will be
Speaker 1: a lot more Crypto Kitties in the future. Yeah, but
Speaker 1: only if the Ethereum network gets the upgrade it needs,
Speaker 1: the kind of upgrade that lads working on. When people
Speaker 1: rushed into the Crypto Kitties game, those Crypto Kitty users
Speaker 1: made up of all Ethereum transactions. And that's all for
Speaker 1: a relatively simple game about collectible cats. Yeah, so imagine
Speaker 1: how much worse it would be to run a huge,
Speaker 1: complicated business like Uber or eBay on Ethereum. Okay, so
Speaker 1: the Ethereum developers have some big dreams for where this
Speaker 1: technology could go, but they can't do any of it
Speaker 1: unless they can increase the number of transactions happening at
Speaker 1: a time, and that means it's all up to Casper.
Speaker 1: So what's the timeline for its rollout? I asked Metalic
Speaker 1: about this uh and his temporary kind of stop gap measure,
Speaker 1: and he said he was aiming for the end of
Speaker 1: the year. This was in early November and there aren't
Speaker 1: many days left in the year. And I haven't heard
Speaker 1: anything yet about it being rolled out. And what about
Speaker 1: Vlad and his big overhaul, so he said was very likely,
Speaker 1: though he doesn't have a hard deadline at this point.
Speaker 1: I see, but once Casper has been rolled out, can
Speaker 1: we expect Ethereum to start really going mainstream. That's certainly
Speaker 1: the hope, although Vlad was cautious when I asked him
Speaker 1: that same question about how long it would take to
Speaker 1: bring Ethereum to the masses. He said, you know, even
Speaker 1: beyond Casper, Ethereum developers still have a lot more work
Speaker 1: to do. And that's it for this week's episode of Decrypted.
Speaker 1: Thanks for listening. Hey, do you use Ethereum and have
Speaker 1: a story to share, Send us an email at Decrypted
Speaker 1: at Bloomberg dot net, or you can reach out to
Speaker 1: us on Twitter. I'm at Matt Licening and I'm at
Speaker 1: brad Stone. If you haven't already, please subscribe to our
Speaker 1: show wherever you get your podcasts, and while you're there,
Speaker 1: I hope you'll take a minute to leave us a
Speaker 1: rating and a review. It does so much to get
Speaker 1: us in front of more listeners. This episode was produced
Speaker 1: by Pierre Gadkari, Liz Smith, and Magnus Henrikson. Fancesca Levi
Speaker 1: is the head of Bloomberg Podcasts. We'll see you next week.