Vitalik Buterin believes crypto still ‘needs time to mature’ before mainstream adoption
Following the ongoing debate surrounding crypto regulation, Ethereum founder Vitalik Buterin joined the discussion in a series of Twitter posts over the weekend. FTX CEO Sam Bankman-Fried has been the subject of much criticism over his views on DeFi regulation. Buterin decided to share his thoughts after stating that it “feels unfair to let other people be attacked by CT but never stick my head out.
Vitalik argued that the crypto industry should not pursue “large institutional capital at full speed” as it needs more time to mature before gaining further attention. The Ethereum founder explained that the industry needs to be “free to act” and a delay in mainstream adoption is healthy for the space.
“Regulation that leaves the crypto space free to trade internally, but makes it harder for crypto projects to reach the mainstream, is much less bad than regulation that intrudes on how crypto works internally.”
However, unlike the SBF, which argued that compromises may be necessary to keep crypto regulation free at a protocol level, Vitalik believes rules that keep crypto fully open but slow the rate of adoption are preferable.
Regulation for front-end DeFi products that require some form of KYC would be pointless to deter hackers, according to Vitalik. Hackers write code to interact directly with smart contracts, so the front end of a project is usually ignored by bad actors.
Basically, especially at this point, regulation that leaves the crypto space free to trade internally but makes it harder for crypto projects to reach the mainstream is much less bad than regulation that intrudes on how crypto works internally.
— vitalik.eth (@VitalikButerin) 30 October 2022
Vitalik also outlined some regulations that could improve DeFi.
“(i) limitations on influence
(ii) require transparency about which audits, FV or other security controls were performed on the contract code
(iii) closed use of knowledge-based tests rather than plutocratic minimum net worth rules”
Vitalik also suggested that regulations be compatible with “zero-knowledge proofs,” so that rules can be enforced without human oversight. He sees ZKPs as a technological innovation that can be used to improve regulatory practices rather than contradict them.
“ZKPs offer many new opportunities to satisfy the policy goals of the rules and preserve privacy at the same time, and we should take advantage of this!”
SBF responded to Vitalik’s thread and articulated that the comments were “quite reasonable.”
generally think these are pretty reasonable!
— SBF (@SBF_FTX) 30 October 2022
The Ethereum founder chose not to comment that OFAC-sanctioned blocks take up over 60% of blocks due to MEV boost relays. The situation is relevant to the regulation issue as it can be argued that Ethereum is currently regulated at the protocol level through OFAC sanctions.
Work is reportedly underway to reduce the impact of relays that only process OFAC-compliant blocks. However, the percentage of OFAC-compliant blocks has risen to 65% from just 12% in September. Some may find it strange that Vitalik, in a series of comments on regulatory matters, completely ignored the ongoing problem with relays. Perhaps he does not want to shed more light on the topic until there is agreement on a solution.
