64 - Legitimacy | Vitalik Buterin

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May 10, 2021

Vitalik Buterin, co-founder of Ethereum, dives into his blog post on legitimacy's role in the cryptocurrency landscape. He discusses how legitimacy shapes trust in systems like Bitcoin and Ethereum and affects resource allocation. The conversation also highlights societal norms, the impact of legitimacy on NFTs, and governance challenges in blockchain communities. Vitalik examines the balance between innovation and social acceptance, emphasizing the power of community perceptions in defining the future of decentralized technologies.

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INSIGHT

Legitimacy as Social Consensus

Legitimacy is driven by shared expectations and the cost of disrupting consensus.
It's why people drive on the right side of the road, even without police enforcement.

ANECDOTE

DAO Hard Fork

The 2016 Ethereum DAO hard fork exemplifies a battle for legitimacy.
The "real" Ethereum became the chain with greater market cap, DeFi economy, and community support.

INSIGHT

Fairness in Funding

Funding network security has greater legitimacy than funding development due to fairness.
Security is clearly defined, and participation is open to anyone on equal terms.

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Vitalik is back on Bankless to discuss his recent blog post: The Most Important Scarce Resource is Legitimacy.

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------ 📣 UPSHOT | Become an NFT Appraiser! https://bankless.cc/upshot ----- Bankless Podcast #64 - Legitimacy Guest: Vitalik Buterin

Ethereum co-founder Vitalik returns to Bankless – "the greatest Ethereum podcast" – for a deep dive into one of his recent blog posts, titled "The Most Important Scarce Resource is Legitimacy." The catalyzing example for Vitalik's discussion of legitimacy comes from Bitcoin and Ethereum, who both have the power to mobilize a tremendous amount of capital but are restricted in how this capital is used. Vitalik posits that legitimacy is the deep and powerful social force behind this.

Legitimacy is a social phenomenon that describes things that are broadly and generally accepted in a coordination system. Without ascribing moral values, legitimacy can be seen as social reality - the status quo. Legitimate things include the de facto norms and collective expectations of groups, whether you like it or not.

According to Vitalik, there are a number of ways to achieve legitimacy: brute force, continuity (inertia), fairness, process, performance, and participation – these are not mutually exclusive. Cryptocurrencies and blockchain ecosystems 'earn' legitimacy by community acceptance and adoption, but the continued legitimacy of these things is dependent on maintaining that which made it legitimate in the first place: promises and proofs of decentralization & security.

Vitalik turns this discussion towards funding public goods. Ethereum can't summon capital for public goods without sacrificing the decentralization and soundness that give it legitimacy. However, these expectations are not carried as strongly in the app layer. This gives the ecosystem flexibility to coordinate and provide for the health of the network beyond base layer security & decentralization. Legitimacy determines our best practices for interacting with the world – understanding and wielding the power of this concept is necessary to maximize the benefits we bring to it.

------ Resources:

The Most Important Scarce Resource is Legitimacy: https://vitalik.ca/general/2021/03/23/legitimacy.html

Vitalik on Twitter: https://twitter.com/VitalikButerin?s=20

Vitalik's Blog: https://vitalik.ca/

Vitalik's Bankless Appearances: https://youtube.com/playlist?list=PLmkdAgtxf3agqnA5IieA7OkKBjlhx9mn-

------ This Week on Bankless:

🧢 WEEKLY RECAP | Bankless DAO is Born (4/24) https://newsletter.banklesshq.com/p/ethereum-bonds-weekly-recap 🗞️ WEEKLY ROLLUP | Uniswap V3, Bankless DAO (5/7) https://shows.banklesshq.com/p/-rollup-uniswap-v3-btc-in-bank-accounts 🧠 THOUGHT THURSDAY | Crypto Pawn Shops (5/6) https://newsletter.banklesshq.com/p/the-evolution-from-crypto-pawn-shops ✏️ WRITER WEDNESDAY | The Never Sell Plan (5/5) https://newsletter.banklesshq.com/p/the-never-sell-plan 🏴‍☠️ STATE OF THE NATION | Chainlink 2.0 God (5/4) https://shows.banklesshq.com/p/-sotn-45-chainlink-20-with-chainlink 🛠 IT’S TIME FOR BANKLESS DAO(5/4) https://newsletter.banklesshq.com/p/its-time-for-bankless-dao

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