vitalik.eth

3. Optimizing for ETH as SoV is aligned with decentralization and CROPS Whenever I ask what people appreciate the most about Ethereum (as opposed to either other blockchains, or anything outside the blockchain world), the most common answer is: decentralization and CROPS (censorship and capture resistance, open source, privacy and security). Decentralization and CROPS have a lot of value, even to institutions. For individuals, privacy is often viewed as an abstract ideology. For institutions, it's prudent risk management, data protection law compliance, and a number of other things. Likewise for security. And likewise for running your own node (enterprise buzzword: "on-prem deployment"). But what about for the ETH holder? Well, it depends why you're an ETH holder. If you want ETH to optimally chase financial trends and collect fees from them, then you want a Fearless Leader™ who bravely shouts on the socials that Ethereum loves [insert opportunity here] and will pragmatically reconfigure itself to give it explicit protocol support. But if your primary reason to hold ETH is as an SoV, then you will be judging ETH by SoV-ish metrics. And what is the first and most important SoV-ish metric? To survive. That's what a big chunk of this last Devcon was about ("post-quantum and post-AI"). You want a chain that is taking conservative tradeoffs ("hash-only security, all formally proven, >3x more rounds than known to be necessary for security"). You want a chain that is aiming for at least partial ossification, where the great balance of work will move to higher levels of the stack once the core is complete. You want a chain that aims to minimize protocol politics, by having a very high bar before it accepts either precompiles that bloat the protocol or new kinds of in-protocol rewards that could get captured. What other SoV'ish metrics? The ability to easily hold it safely (hence, work on multisigs). The ability to hold it privately (hence, kohaku work). The ability to hold it privately *and* safely (hence, 8288 and private-AA workstreams already starting). The guarantee that if you have coins, you can send them, and block builders can't stop you (FOCIL) Minimized infrastructure dependence (basically the whole decentralization roadmap, including the fact that I am able to currently run a node on this laptop, and it synced in < 6 hours and takes up only 1/8 of my hard drive - better stats than in 2019!) Now, are there "adoption" goals that are highly synergistic with SoV? Very much so. The more assets there are natively issued on L1, including both RWAs and native decentralized assets, the larger a set of things you can "do" with your ETH, the better. Being able to easily (including safely, trustlessly) convert back and forth between ETH and other assets, use ETH as collateral to do things with other assets, etc, all forms part of the utility of holding ETH. There are still some conflicts between serving these use cases and decentralization (eg. we want to be careful about fast slots and impact on centralization), but on the whole much less than what you get if you maximize fees. Conclusion: The best social reason to care about Ethereum is because it makes decentralization and CROPS properties a reality for more people and uses. The best private reason to hold ETH is its SoV properties, which are a direct consequence of that decentralization and CROPS.

2. Optimizing for ETH as fee-burning token would demand compromising decentralization and capture resistance If we decide we actually want to optimize ETH for burning fees to justify a present-day ~$270B market cap, then Ethereum would essentially be functioning as a world-scale major corporation - it would be somewhere around L'Oreal (#55). Now, what do *real* major corporations have to do in order to maintain their positions in the long term? 1. They spend. AI estimates L'Oreal as spending ~0.58% of its market cap per year on R&D. This would bankrupt the EF almost immediately. So this would require in-protocol funding to the tune of ~700k ETH per year, with all the political issues that it entails (so validator revenue would get cut by 2/3). And that's just R&D. Corporations have to spend on all kinds of things beyond just cranking out more units of their pre-existing product. 2. They govern. To survive new waves of technology and culture, you have to make highly opinionated choices to go after new markets, make new kinds of products with new features to appeal to people who think in new ways and use the newest technologies. Ethereum would need to have highly interventionist governance, for the long term. Needless to say, both of these are far from conducive to optimizing capture resistance and decentralization. On top of this there is another concern: optimizing for fee burning means optimizing for high gas prices to some degree. This may price out users, including some users who may need privacy and security the most. The price that maximizes price * usage leads to less usage than the price that allows as much usage as possible subject to safe blockchain resource limits.

# 1. ETH as fee-burning token never was as strong as it seemed Let us re-cap the economic theory behind valuation of a fee-burning token. This is the "net present value" (NPV) theory. Formula: market cap = fees burned / discount rate Imagine you have a token of which $1 billion is burned per year, and this is a long-term stable equilibrium. Now, imagine the discount rate is 4%; that is, people value having $1B today as much as $1.04B in one year. The idea is that $1B / 4% = $25B serves as a natural "floor" for the valuation: if the valuation drops lower than that, then someone could buy an asset expected to pay $1 per year forever for less than $25 (by buying some tokens, and then selling >4% of their supply each year so their share of the total pie remains the same), and so by buying the asset you reliably beat the market. In 2021-23, Ethereum burned millions of ETH per year in this way. But here's the problem: this was never a true floor. The reason is that the bulk of that burn was crypto-internal use cases. If ETH had dropped by 10x, then the profits from those use cases would have also dropped, because all the buyers would have had much less money to pay with. This applies both to things like that infamous $180m-fees-burned-in-one-day digital monkey sale (yes, this happened; if you don't remember look it up!), and to more "normal" things like lending. The floor argument only works if the backing of the revenue stream is external. Today, Ethereum actually has a better claim to this external backing, because of the growing RWA economy, but on the other hand, perhaps precisely because it's a normal stable mature business, it's not going to randomly go crazy and burn $180m on a digital monkey sale.

Expanding on why I believe "ETH as store of value (SoV)" makes much more sense to focus on than "ETH as fee-burning token". Three primary reasons: 1. ETH as fee-burning token never was as strong as it seemed 2. Optimizing for ETH as fee-burning token would demand Ethereum and ETH function in ways that are very hard to make compatible with decentralization and capture resistance. 3. Meanwhile, optimizing for ETH as SoV is aligned with Ethereum focusing on its unique strengths (decentralization and CROPS) EIP-1559 (including its burn) is fine and good, we should keep them. But we should not feel sad if fee burn is < 10% of breakeven indefinitely; the value of ETH comes from elsewhere. The core idea: the big thing that people appreciate about Ethereum is decentralization and CROPS. The main pragmatic benefit that these things translate into is stability. SoV is the category where that is not an unneeded extra we merely put effort into for ideological reasons, but rather a pragmatic strength from the perspective of people putting in their assets. And in the era of AI disruption, stability will be highly valued.

I know this is a predictable opinion from me but I don't agree with the strong emotional reaction against the anti-data-center movements that I've seen this week. As I see it, algorithmic progress means that whatever you would be able to do with more and bigger data centers in 2 years, you will be able to do with the data centers we have today in 4 years - probably sooner. So nothing remotely apocalyptically bad will happen from even extreme levels of success by anti-data-center people. Meanwhile we need all the time we can get to better harden the world against both already-visible cybersecurity issues and any bio and other risks soon to come. Science applications are bottlenecked by many things other than AI, so slowing AI down by one year will slow those down by much less than one year. Given this, a slowdown in compute hyper-scaling seems quite net good? Notice this is without any controversial "doomer arguments", RSI etc. Even if net-bad, it's certainly not worse than like 10+ other political things.

Just arrived in Mumbai! Looking forward to seeing familiar faces and new faces and all the wonderful Ethereum and open/secure/private/decentralized tech projects that everyone is working on over the next week.

Digital minimalism vitalik.eth.limo/general/202…

For anyone getting into biology, please consider taking airborne disease resistance more seriously. It's a super important area of medicine that is a huge cause of death and sickness but easily gets forgotten. We're likely to get many more airborne plagues in the future due to the combination of not just extremely dense and interconnected society (including city and farm animals), but also accidents from bio research and offensive biotech (both from random people and from secret government programs that can easily get themselves exempted from safety restrictions), all enhanced by powerful AI. Right now, this area is getting way less love than longevity research (which continues to be super important!), but it's an area where there are lots of unclaimed wins that we know exactly how to do (but are not yet doing) with present-day tech: * early detection * passive universal testing * filtration/ventilation/UVC * better vaccines (including making them open source and open science) * cryptography to make all of the above privacy-preserving We can have China-level pandemic resistance with Sweden-level limited intrusion into people's lives, and then go even further. We just have to actually do the work for it.

I am okay with Kimi 3.1 deliberately leaving out top-end offensive cyber capabilities from their training data. Discriminating against use cases is MUCH less bad than discriminating against users. And the world does need all the time it can get to prepare, harden, check old code, (properly) formally verify new code, etc before the full weight of very powerful cyber attacks is upon us. And if this first big wave of AI risk is not handled well, then we may well get a dystopia of highly locked down models, KYC gating on everything, highly intrusive surveillance on everything, a society where you may be a second or third or fourth-class citizen in terms of model access based on your credentials and nationality.

Ultimately, precompiles and EVM are both the wrong place to put most cryptography support into Ethereum. The reason is that precompiles and EVM both operate on data that has to be included into the ethereum chain somehow, which realistically means included in a block as calldata. That space is limited - even with PeerDAS and blocks-in-blobs, there's a practical cap of ~8 MB/s before it starts getting uncomfortable. Remember: it's not a blockchain. It's a cryptographic world computer. Any data/computation that does not need to be in the "main thread" of data/execution should not be put into the main thread. Instead, the correct solution is... EIP-8288 maximalism. If you have any heavy computation that's self-contained, compute it and STARK it client-side (this is quickly getting faster and faster, even on phones), and push the STARK through the EIP-8288 recursive aggregation mechanism. The chain sees the fact that the computation was done and what the result is; it never needs to see the actual data and computation. This way everyone can use whatever cryptography they want, the Ethereum chain can be lean, and we never need to add more precompiles again.

Fun fact of the day: Bitcoin mining cost is split about 50/50 between compute capex and electricity. Meanwhile, AI inference is almost completely dominated by compute capex.

Wrapped zkAPI + Tor + extra cover traffic + local LLM prompt rewriting in an open-AI compatible daemon, and made a "paranoid mode" wrapper for my agent harness (pi): Each conversation gets assigned a separate Tor circuit, your requests are masked with random cover traffic, zkAPI ensures you don't leak your identity through payments, and all prompts are locally rewritten (bring-your-own-local-model; I'm using qwen3.8-flash-next) github.com/vbuterin/zkapi/tr… My agent harness is wrapped with a bwrap sandbox (also experimenting with MicroVM) and wrapped again with torsocks, so everything it does goes through Tor. Here's what me asking it to do a simple research task looks like. It's getting quite usable! Though you definitely still pay quite a bit in increased latency, especially when starting a new conversation. Also, Tor is far from optimal here for privacy; the cover traffic mechanism is okay against passive adversaries but much weaker if the LLM provider is colluding with the guard and actively manipulating timing. This kind of task really requires a more specialized mixnet, probably take the tradeoff of a higher bandwidth multiplier and built-in constant cover traffic. Also also, much cheaper zkAPI deposit and withdraw gas costs are coming to mainnet soon.