. 2 min read

“Cryptoeconomics Is Just Economics,” Says Vitalik

Disclosure: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. By using this website, you agree to our terms and conditions. We may utilise affiliate links within our content, and receive commission.

“It’s not like we’re inventing some completely different parallel society with a different parallel economy and different rules, but it is economics specialized to a particular set of circumstances,” said Vitalik Buterin, a co-founder of the Ethereum platform, in a podcast called Conversations with Tyler. He points out that cryptoeconomics have constraints not usually found in society, such as the inability to make laws that cannot be specified as a piece of computer code.

Vitalik Buterin. Source: A screenshot of a YouTube video by ETHWORLD.

As for what blockchain can do that traditional economics cannot, in his opinion, “a blockchain is one of the few tools that allows you to credibly commit to not turning into a monopolistic jerk.” How will it end up affecting society? He urges people, especially businesses considering blockchain integration, to think about it.

”What is a blockchain’s unique competitive advantage? What are things that you can do with blockchains that you can do only with more difficulty without them? Trying to go from there and zero in and try to figure out exactly what industries and what kind of applications in those industries should be going after.”

On why the space won’t just hyperinflate and collapse as it’s getting easier to create tokens: “Issuing a cryptocurrency by itself is costless, but issuing a cryptocurrency that people care about is not costless. The equilibrium is that there exists this club of cryptocurrencies that people recognize as having value.”

In other words, getting people to care about your cryptocurrency is not easy, let alone free; it is “just difficult enough that it prevents people from doing it willy-nilly to the point where all the cryptocurrency hyperinflates.”

Also, when asked “What’s the best theory out there for valuing a given crypto asset?”, Buterin replied:

“I guess my practical answer is I don’t really know, and if you’re looking to design a cryptocurrency that’s sustainable, then I definitely think it’s important to have a story for why it would maintain its value under a variety of different economic models.”

Speaking about his further plans for Ethereum and what is waiting for the team, for a “full breakthrough” of what he has initially imagined, he considers scalability and user experience the biggest obstacles. “How easy is it to set up a wallet that does not allow all of your money to get stolen overnight or lost overnight if your key gets lost or stolen? Those are challenges that I do think we need a lot more innovation in, and I think we will see innovation over the next few years.”

Among other topics, he also brushes upon his interactions with the community. He is known to be vocal about his beliefs and interacts with the community quite often: “I try to make myself maximally accessible in a bunch of ways, try to bring different people in different communities together, perform a kind of social coordination function,” he told Tyler.

Listen to the full interview here: