Vitalik Buterin Calls for End of Anonymous Society in Crypto

Anonymity Ethereum Vitalik Buterin

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Hassan Shittu

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Hassan Shittu

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Hassan, a Cryptonews.com journalist with 6+ years of experience in Web3 journalism, brings deep knowledge across Crypto, Web3 Gaming, NFTs, and Play-to-Earn sectors. His work has appeared in...

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August 22, 2024

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Vitalik Buterin, co-founder of Ethereum, recently ignited a spirited debate within the cryptocurrency community by challenging the long-standing notion of an “anonymous society” in the crypto space.

Buterin called for a more sophisticated and multidimensional notion of identity, proposing that decentralized systems risk reverting to centralized control without such a framework due to unresolved collusion issues.

From Anonymity to Multidimensional Identity

In the early days of crypto, anonymity was celebrated as a means to protect individual privacy, ensure financial sovereignty, and guard against the surveillance state.

The cypherpunk ethos, which underpinned much of the early development of blockchain technology, envisioned a world where individuals could interact in financial markets and other digital arenas without revealing their identities, thereby preserving their freedom and autonomy.

However, Buterin’s recent remarks suggest that this vision may be too simplistic to address the complexities of modern decentralized systems.

He argues that an “anonymous society” or a “financialized pseudonymous society” is inherently flawed because it fails to account for the challenges posed by collusion and governance attacks.

In such systems, where identities are hidden or pseudonymous, trust and accountability become difficult to establish, leading to vulnerabilities that bad actors can exploit.

Buterin claimed that a more multidimensional notion of identity makes decentralized governance structures likely to succeed, with the most stable ones inevitably becoming centralized.

This perspective is particularly relevant to DAOs, which are designed to operate without central authority and rely on decentralized decision-making processes.

However, as these organizations have grown, they have encountered significant challenges related to governance, particularly around decision-making and the influence of wealthy or powerful participants.

Buterin suggests that these challenges are, in part, due to the limitations of anonymity within these systems.

Without a more nuanced approach to identity, DAOs risk being dominated by financialized governance attacks, in which those with the most resources can disproportionately influence outcomes.

Buterin’s call for a shift from anonymity to a more multidimensional identity structure is about solving these immediate governance issues and shaping the crypto space’s future trajectory.

He argues that while anonymity serves as a critical check and balance, it cannot sustain the entirety of a governance cycle.

Just as a society cannot thrive solely on the “energy of rebellion,” a decentralized system cannot function effectively without identifiable and accountable participation.

In this context, Buterin proposes the concept of “soulbound” features — identity characteristics that are more anchored and less easily manipulated — as a potential solution.

Removing Anonymous Society in Crypto: “A Genuinely Terrible Idea”

Vinay Gupta, a technologist who deeply understands blockchain technology’s philosophical and practical implications, argues that Buterin’s approach is misguided, even calling it “a genuinely terrible idea.”

He claimed that It solves the wrong problems in the wrong way.

In Gupta’s view, the real challenge is adapting our political and governance philosophies to address these new risks rather than focusing on the nuances of identity in a decentralized system.

Gupta’s critique of Buterin’s “Plurality” concept also extends to the technology underpinning the crypto space.

He asserts that crypto’s core value lies in its ability to provide self-sovereignty through faceted identity, allowing individuals to control their identities independently of any state or tribal affiliation.

He argues that this is one of the fundamental achievements of blockchain technology, enabling individuals to interact in digital spaces without being defined or constrained by their identities.

However, Gupta warns that introducing rich, intersectional identities into this space could lead to a society characterized by entitlements and exclusions, which is antithetical to the original cypherpunk vision.

In particular, Gupta opposes the idea of building a society in which identity plays a central role in governance and social interactions.

He argues that such a society would inevitably lead to greater surveillance and control as identity becomes a tool for inclusion or exclusion within various systems.

He believes that this would undermine the very principles of liberty and self-sovereignty that crypto was designed to protect.

Instead, Gupta advocates for a return to the cypherpunk ideal of a largely anonymous society, where individuals can participate in digital spaces without revealing their identities or being subjected to identity-based entitlements.

Gupta’s critique also touches on the practical challenges of integrating identity into decentralized systems.

He warns that introducing identity into these systems could lead to more excellent centralization, as managing identities would likely require some oversight or control.

This could, in turn, lead to the very governance issues that Buterin is trying to avoid, as those in control of identity systems could exert disproportionate influence over decentralized networks.