Faces of crypto: Vitalik Buterin, Ethereum co-founder

ResearchJan 13, 2023
Faces of crypto: Vitalik Buterin, Ethereum co-founder

Vitalik Buterin is one of the most influential figures in the global crypto community. The visionary co-creator of Ethereum, dubbed The Prince of crypto by Time Magazine, has been in the industry for over a decade. Buterin is not only the mastermind behind the global supercomputer — learn more about his achievements and extraordinary rise to fame in our article.

Vitalik Buterin is the face of the second biggest coin by market cap — ether (ETH), the lifeblood of the Ethereum network. Today, its utilities go far beyond digital payments — its smart contracts supports various functions, including the development of decentralized applications (Dapps). Ethereum is the primary platform for decentralized finance (DeFi), which has grown exponentially in recent years. According to Buterin himself, if Bitcoin is a pocket calculator designed for digital payments, Ethereum is a smartphone.

Vitalik Buterin's childhood

Vitalik is a programmer and writer with a Russian-Canadian background. He was born on January 31, 1994, soon after the collapse of the Soviet Union, in Kolomna, a town in the Moscow region. His family moved to Canada when he was six, as his parents were seeking better employment opportunities.

From an early age, Vitalik stood out from his peers, showing peculiar natural predispositions. As a third grader in a Canadian primary school, he was included in a program for the gifted. His biggest talents lay in math and programming — he could add three-digit numbers in his head twice as fast as his average agemate. Unsurprisingly, Vitalik was also fascinated with economics.

When it came to social interactions, Buterin kept to himself, avoiding social gatherings and extracurricular activities. He has recalled being treated as a whiz kid, even a math genius.

Later, the Abelard School, a private high school in Toronto, transformed his perception of education. It was during those years that Vitalik developed his trademark thirst for learning. Knowledge became his top priority and life goal.

Vitalik Buterin. Source: about.me
Vitalik Buterin. Source: about.me

In his spare time, Buterin, in his own words, "happily played" World of Warcraft (WoW). His enthusiasm for the role-playing game lasted for three years until the 3.1.0 patch came out in 2010. The developers nerfed his character, removing the damage component from the Siphon Life spell. As Vitalik once admitted, he, 15 at the time, cried himself to sleep. That day he realized the dystopian potential of systems with unilateral power — the "horrors centralized services can bring."

Student years

Buterin learned about Bitcoin from his father, Dimitry Buterin. When he got interested in cryptocurrencies around 2011, this field was known as "the Bitcoin space."

Initially, Bitcoin did not impress him — Vitalik did not immediately take to the coin due to the absence of physical backing. Yet as time passed, the more he learned about the crypto space, the keener he became. As he could not afford to purchase mining equipment or buy BTC, Vitalik explored crypto forums in search of other opportunities. Eventually, he managed to get his hands on bitcoins — his blog brought him roughly 5 BTC per article.

Thus, the written word helped Buterin officially join this innovative and experimental digital economy. He looked into its multiple facets — economic, technological, and political — and shared his research with readers. Eventually, Vitalik's work attracted Mihai Alisie, a Bitcoin enthusiast from Romania, and the pair co-founded Bitcoin Magazine, "the oldest and most established source of news, information and expert commentary on Bitcoin, its underlying blockchain technology and the industry […] built around it."

Vitalik quit university and fully devoted himself to crypto, researching, writing, and traveling the world to explore different projects. This experience led him to a conclusion that defined his own vision — the existing initiatives were too narrowly focused. They served specific cases instead of pursuing versatility.

Vitalik suggested replacing the functionality of the early protocols with a Turing-complete (computationally universal) programming language. This type of language makes computers capable of solving any problem, provided they have sufficient memory and an appropriate algorithm. The proposed switch would generalize protocol utilities, making them usable on a truly massive scale.

As other developers rejected Vitalik's proposal, he decided to take matters into his own hands. What started as an experiment resulted in the creation of Ethereum, the world computer.

Definition of Ethereum. Source: Ethereum.org
Definition of Ethereum. Source: Ethereum.org

The birth of Ethereum Foundation and network

According to the 2013 Ethereum white paper, Vitalik viewed Ethereum primarily as a different cryptocurrency. Soon, his team became committed to a broader idea — creating decentralized file storage, bringing concepts like name registry to life with just a few lines of code.

In January 2014, the Ethereum project was officially announced. Along with Vitalik and Mihai Alise, the original team included Anthony Di Iorio (later the founder of Decentral), Charles Hoskinson (who then co-founded Cardano), Joe Lubin (who went on to found ConsenSys), and Gavin Wood (who later created Polkadot).

Following Buterin's presentation at a Miami Bitcoin conference, the team started preparing an ICO (initial coin offering) of the Ether token to raise funds for further development. Meanwhile, Vitalik received the Thiel Fellowship grant of $100,000 that he could use for existing and future projects. Beating Mark Zuckerberg, he also won the World Technology Network award, along with Elon Musk.

Despite hitting a few bumps along the way, the crowdfunding endeavor was a success. The initial ETH sales brought the team over 31,000 BTC, worth around $18 million at the time. Subsequently, they established a non-profit in Switzerland tasked with overseeing open-source software development for the network. Called the Ethereum Foundation, it is still an important ecosystem component supporting Ethereum's growth.

Ethereum in numbers as of January 12, 2023. Source: ethereum.org
Ethereum in numbers as of January 12, 2023. Source: ethereum.org

Design-wise, Ethereum is based on five pillars, and it is constantly evolving to improve its underlying architecture. Here are the core principles the team adheres to.

  • Simplicity — feasibility and simplicity must go hand in hand.
  • Universality — smart contracts based on a proprietary Turing complete language replace "features."
  • Modularity — the end goal is benefiting the entire crypto ecosystem, so Ethereum must be developed to the fullest possible extent.
  • Agility — developers should keep an open mind and explore new opportunities for the protocol when they arise.
  • Non-discrimination and non-censorship — no specific type of user activity may be restricted or banned.

Challenges faced by Ethereum network

When Ethereum emerged in 2015, it was mainly seen as an alternative to the Bitcoin blockchain. The network grew and improved with time, allowing users to explore and leverage many utilities of blockchain technology beyond payments. However, this evolution was not a smooth ride.

The DAO hack

One of the many use cases for the Ethereum network is the creation of DAOs (decentralized autonomous organizations). The pioneering DAO, revolutionary at the time, was launched in 2016 as an investor-directed equivalent of a venture capital firm. This high-profile project raised $150 million worth of ETH from 11,000+ members, but it was hacked after less than three months in operation.

The alleged attacker stole $60 million of ETH by exploiting an imperfection in the codebase. Aside from requiring a technical response, this incident tested the Ethereum leadership's resilience and the technology's moral underpinnings.

Initially, Buterin proposed a soft fork to blacklist the hacker and prevent the transfer of stolen funds. However, soon afterward, the cybercriminal wrote an open letter to the community, claiming the wallets had been drained legally according to the smart contract rules and threatening anyone who would seize those coins with legal consequences. Then, through an intermediary, they informed the members of the DAO Slack channel that they would bribe miners to thwart any soft fork.

Eventually, after much debate and discovering a bug in the update code, the team implemented a hard fork that let investors withdraw their funds. It rolled the network's history back to a pre-attack condition, reallocating The DAO's ETH to another smart contract.

This decision contradicted blockchain's fundamental principles — immutability and censorship resistance. Protests within the community led to the splitting of the blockchain into Ethereum (with ETH) and the original Ethereum Classic (with ETC).

Ether vs. Ethereum Classic. Source: wallstreetmojo
Ether vs. Ethereum Classic. Source: wallstreetmojo

Looking back, experts believe that Vitalik and the Ethereum community made the right decision, as it ensured the network's survival. Since then, Ethereum has become a pillar of blockchain technology and decentralized finance. Not only does ETH outshine ETC in terms of market cap ($168.3 billion against $2.8 billion as of January 12), but it is also supported by the Enterprise Ethereum Alliance, a global community of innovators and businesses that includes giants like Citigroup and JPMorgan.

In 2022, the Ethereum blockchain abandoned mining in favor of Proof of Stake, a more sustainable and efficient consensus model. This switch is expected to increase the security and scalability of the network. At press time, Ethereum Classic remains a proof-of-work blockchain.

The Merge

Processing delays and soaring gas fees at peak times prompted developers to seek a lighter, more agile solution to secure the network. Vitalik realized that his brainchild had become a victim of its own success — the demand caused network congestion, with transactions queuing up and costs becoming prohibitively high for the average user.

These problems were exacerbated by Ethereum's status as a utility platform, unlike Bitcoin. It resembles the Apple app ecosystem — developers can build Dapps, DAOs, and other projects within it.

The PoS model lets Ethereum investors stake their assets in dedicated pools, earn rewards, and grow their holdings. The staked capital, managed by a smart contract, acts as collateral subject to liquidation if the validator misbehaves. In comparison, miners must expend substantial energy and computing power to solve complex puzzles and validate blocks.

Differences between Proof of Work and Proof of Stake. Source: Ledger.com
Differences between Proof of Work and Proof of Stake. Source: Ledger.com

The transition to PoS, included in the Merge upgrade (called this way because the original mainnet merged with a separate PoS blockchain — the Beacon Chain), was designed to provide multiple improvements:

  • Lower energy consumption
  • Lower barriers to entry (no need for mining equipment)
  • Lower centralization risk (more nodes are involved)
  • Incentivizing participation
  • Making 51% attacks costlier due to economic penalties for misbehavior

Speaking at the Ethereum Mainnet Merge Viewing Party live stream during the countdown to the Merge, Buterin said he was "absolutely excited about being exited from the proof-of-work era" and that the transition had been on the agenda for years. "[It] has obviously been a dream for the Ethereum ecosystem since pretty much the beginning. We started the proof-of-stake research with that blog post on Slosher back in January 2014."

Transition to PoS. Source: Ethereum.org
Transition to PoS. Source: Ethereum.org

Initially, the team planned to precede the Merge with a substantial scalability boost via sharding. This process would partition the Ethereum database horizontally to distribute the load, thereby reducing congestion and speeding up transactions. However, according to the official website, sharding has been postponed until "sometime in 2023".

Ethereum's prospects in China

The Merge could open new opportunities for Ethereum in China, despite the company's tough stance on crypto. The government outlawed mining in 2021, citing a lack of "safe production conditions," a significant "waste of resources," and carbon footprint. The ban was part of a crackdown on all crypto-related operations.

As Ethereum's PoS has replaced mining, Chinese crypto enthusiasts might be able to rejoin the blockchain economy. The upgrade makes it harder for regulators to trace network participants — previously, they could link abnormally high electricity consumption to node operators.

Vitalik, who learned Chinese in a few months using a mobile app, acts as a general partner and advisor at Fenbushi Venture Capital. An oldest and most prominent venture capital firm in Asia, it is focused exclusively on blockchain projects. In addition, the Enterprise Ethereum Alliance opened a regional office in China in 2019.

Chinese institutions and businesses are exploring Ethereum and adapting its various features to their needs. For example, Royal Chinese Mint is experimenting with smart contracts and the ERC-20 token standard, native to Ethereum, to digitize the Chinese yuan.

In 2016, 11 regional exchanges for commodities, equities, and financial assets formed the ChinaLedger Alliance with Vitalik Buterin as an overseas consultant. This non-profit aimed to create an "open-source blockchain protocol that developers can further build upon in the future" in compliance with China's law. However, there have been no updates about its activities since 2017.

Vitalik Buterin's skepticism about the Metaverse

In the summer of 2022, Buterin revealed his concerns about Meta, which he believed would eventually "misfire." In response to a tweet from Dean Eigenmann, Dialectic co-founder, he noted that although "the metaverse is going to happen," none of the existing projects, including the one promoted by Mark Zuckerberg, were "going anywhere."

Vitalik Buterin's tweet. Source: Twitter
Vitalik Buterin's tweet. Source: Twitter

Buterin wrote, "We don't really know the definition of 'the metaverse' yet, it's far too early to know what people actually want. So anything Facebook creates now will misfire." His criticism came despite the rise of projects like Decentraland and The Sandbox and the launch of AR and VR applications like the Meta Horizons Workroom.

Buterin in Russia

While Ethereum remains a politically neutral network, its co-founder has made unequivocal comments on the Russia-Ukraine conflict. In a Russian-language tweet on February 24, 2022, he called it "a crime against the Ukrainian and Russian people." He also revealed that he was "very upset by Putin's decision to abandon the possibility of a peaceful solution to the dispute with Ukraine and go to war instead."

Vitalik emigrated to Canada the same year Russian president Vladimir Putin took office (2000). In 2017, he visited the country to promote the development of blockchain technology and even met with Putin himself. Speaking in front of over 5,000 people in the Moscow Skolkovo Innovation Center, Vitalik included Russia in the top three countries for blockchain research and testing, alongside England and Singapore.

Following his meeting with the president, he mentioned that Putin had expressed support for blockchain development in Russia. That same year, Sberbank, the biggest bank in the country, became part of the Enterprise Ethereum Alliance, previously joined by QIWI, a local electronic payment service provider. In November 2022, Sberbank announced plans to integrate its proprietary blockchain platform with the Ethereum-based DeFi ecosystem.

During his 2017 visit, Vitalik Buterin also signed an agreement with Yota, a Russian mobile communications and connectivity devices company, on creating Ethereum Russia. This new entity aims to provide education, events, and architecture review for VTB, another state-owned bank.

Philanthropy efforts and vision for a better future

The Ethereum co-founder is a prominent crypto philanthropist. In May 2021, soon after becoming the youngest known crypto billionaire, he was praised for a 50 trillion SHIB ($1.2 billion) donation to a COVID-19 relief fund in India. To make the transfer, he offloaded the dog-themed meme tokens received as a gift from their creators.

Vitalik has also made other million-dollar donations. These included 13,292 ETH for Givewell, a non-profit charity evaluation service, 1,000 ETH and 430 billion ELON tokens for the longevity-focused Methuselah Foundation, and 1,050 ETH to the Machine Intelligence Research Institute committed to ensuring that AI has a favorable impact on society.

He is also concerned about the shameless display of wealth in crypto. Commenting on the success of the Bored Ape Yacht Club, a collection of cartoon primate NFTs that has become a status symbol for celebrities, he noted, "The peril is you have these $3 million monkeys and it becomes a different kind of gambling…"

Vitalik Buterin wants Ethereum to contribute to the welfare of the global population. He hopes it will support different kinds of sociopolitical improvements in the future, serving as a counterweight to authoritarian regimes and the power of Silicon Valley over our digital lives. Fair voting, urban planning, and universal basic income are only some of the applications, and Buterin is playing an increasingly public role in shaping this future.

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