Introduction:
Jehan Chu, founder of the Ethereum Hong Kong meetup, welcomed the audience and introduced Vitalik Buterin, the founder of Ethereum. Vitalik Buterin highlighted that Ethereum is still in beta and that great successes and failures are likely.

Ethereum as a Blockchain Technology:
Ethereum is a blockchain technology based on Bitcoin, aiming to improve the internet by enhancing security, identity, and online interaction. It’s a foundation level technology that has seen applications in various domains, including Internet of Things, financial settlements, digital identity management, supply chain management, and accounting.

Key Features of Ethereum:
Ethereum is a decentralized network with nodes distributed worldwide, enabling transaction processing. The Ethereum wallet is a primary interface for accessing Ethereum, allowing users to transfer funds and deploy contracts. Smart contracts are computer programs that control digital assets, providing flexibility and innovation in creating complex rules and applications.

Growing Institutional Adoption:
Ethereum is witnessing rapid institutional adoption with organizations like Deloitte, UK government, UBS, Microsoft, and others exploring blockchain solutions.

The DAO:
The DAO (Decentralized Autonomous Organization) is a long-running smart contract that operates autonomously, controlling assets and adding or removing participants. It is self-executing and self-enforcing, making it a disruptive concept in organizational structures.

Aspirational Goals:
Ethereum aims to be a decentralized operating system for a new kind of internet. It strives to be a universal framework that underlies various applications and services. Ethereum seeks to be a platform where users can create and operate decentralized applications without relying on central authorities.

Current Status:
Ethereum currently processes around 15 transactions per second. Scalability remains a significant challenge, with the platform falling short of handling the transaction volumes required by mainstream applications. Privacy and latency are additional areas where Ethereum faces limitations. User interface and smart contract security are also crucial aspects that require improvement.

Technological Approach:
Ethereum employs a methodical approach to address its limitations. The platform’s features are compared to the ideal system’s properties, identifying specific areas that need improvement. Scalability is a primary focus, with solutions like state tree pruning and fast syncing being developed to optimize performance. Privacy, latency, user interface, and smart contract security are also addressed through ongoing research and development efforts. Light clients are being developed to enable efficient interaction with the blockchain on devices with limited resources.

Sharding:
Vitalik Buterin introduces the concept of sharding as a long-term solution for blockchain scalability. Sharding involves splitting transactions into groups and processing them in parallel. This approach allows for increased transaction throughput and faster processing times.

Database Parallelization:
Buterin highlights the parallels between sharding and database parallelization techniques that have been used for decades. The challenge in blockchain sharding lies in combining these concepts with the economic incentives and fault-tolerant constraints unique to blockchain systems.

Data Privacy on Blockchains:
Buterin emphasizes that all data on the blockchain is public, meaning it can be accessed by anyone within a certain range. While this level of transparency may be suitable for some applications, others may require varying degrees of privacy.

Cryptography and Data Privacy:
Buterin introduces cryptography as a branch of mathematics that addresses the challenge of keeping data private while making it publicly visible. Cryptography allows for the creation of systems where data is accessible to everyone but remains incomprehensible without the appropriate keys or knowledge.

Privacy:
Even with data transmitted securely over the internet, it is not necessarily private. Blockchains not only store data, they also compute on it. Storing encrypted data and computing on it requires complex cryptography. Privacy is viewed as a layer two issue, where specific applications can implement it, while others can ignore it.

Latency:
14-second block times are adequate for many applications, but not for IoT, retail payments, and other sensitive use cases. Solutions include making blockchains faster or using cryptographic channels.

Security:
User account management is a layer two problem. Better systems are needed to allow users to manage access to funds while minimizing the risk of loss or theft. Smart contract code verification involves challenges such as ensuring that contracts are correct and protecting against vulnerabilities. Many security challenges stem from human error or vulnerabilities in software rather than flaws in the underlying technology.

Example Vulnerabilities:
Private Functions: Using private functions to hide sensitive data or random number generator seeds does not protect against vulnerabilities on public blockchains. Uninitialized Variables: Failing to initialize variables can lead to unexpected results, such as repeatedly paying the same person in a payout system.

Mitigation Strategies:
Better Development Tools: Tools that can automatically catch errors, such as uninitialized variables, can help prevent vulnerabilities. Improved Programming Languages: Languages that make it easier to write secure contracts and minimize the number of lines of code can reduce vulnerabilities. Standard Components: Creating standard, vetted components like random number generators can reduce the need for individual developers to create their own vulnerable implementations. Formal Verification: Using computer programs to verify that contracts meet specific requirements can help catch bugs and vulnerabilities.

Challenges of Formal Verification:
Complexity of Values Problem: Defining and verifying complex requirements, such as fairness or the absence of front running, can be challenging. AI Alignment Problem: Even if a contract meets its stated requirements, it may not align with the user’s actual goals.

Caveat to Mathematical Verification:
Mathematical verification has limitations in predicting all potential negative outcomes. Complexity arises in AI theory and crypto landscapes.

Ethereum’s Development Phases:
Frontier: Developer alpha phase. Homestead: Beta phase, closer to application usability. Metropolis: Upcoming major step, focusing on browser improvements, Lite Clients, and Swarm. Serenity: Creation of a more efficient consensus algorithm called proof-of-stake. 2.0: Focuses on scalability. 3.0: Aims to further enhance scalability.

Ethereum Research Collaboration:
Open channel called Gitter Ethereum Research for participation in proof-of-stake and scalability research.

Reasons for the Current Surge in Interest in Blockchain and Bitcoin:
Recent surge in adoption lag due to technology advancement. Potential increase in attention if scalability is achieved, or decrease if it proves impossible.

Potential Solutions to Scalability Challenges:
Partial solutions include channels and other techniques minimizing blockchain usage. Trade-off between simplicity and scalability.

Private Blockchains:
Concept of limiting node participation to a selected group. Potential use of private blockchains for high-value applications.

Powerwall Distribution of Blockchains:
Future scenario with a few large blockchains and specialized blockchains with intercommunication protocols.

Five-Year Vision for Ethereum and Society:
Aiming for a smooth and polished user experience once scalability is achieved. Envisioning a society with blockchain technology seamlessly integrated.

Ethereum’s Current State:
Ethereum has 220 applications, but most have less than 220 users. These applications are created independently by entrepreneurs, coders, and startups.

The Next Phase:
Many of these applications will fail due to lack of user interest, competition, or developer boredom. Successful applications will have to find their own path to critical mass.

Combined Blockchain Network Effect:
Different applications of a blockchain complement each other, creating a network effect. Digital assets and non-financial use cases like identity contribute to this network effect.

Self-Sovereign Identity:
Traditional identity systems are centralized and controlled by a few institutions. Self-sovereign identity has two layers: accounts and attestations. Accounts are controlled entirely by the user and have no restrictions. Attestations can be various forms of verification, such as social media reputation, government-issued IDs, or bank account information. Attestations don’t necessarily need to be stored on the blockchain.

Blockchain-Based Identity Verification:
Vitalik Buterin introduces a blockchain-based identity verification system where individuals can cryptographically sign messages with their accounts to share information with specific entities. The system aims to minimize information sharing, preserving privacy. Individuals can share attestations about their citizenship, phone number, address, and receive attestations from trusted individuals. This information allows entities like banks to verify individuals’ identities without requiring excessive personal data.

Blockchain as a Foundation for Diverse Use Cases:
Vitalik Buterin emphasizes that blockchain technology can serve as a base layer for various applications beyond cryptocurrencies. He cites examples like rating systems, where users can prove they have purchased a product before leaving a review, enhancing the authenticity of ratings.

Digital Truth and Its Implications:
Jehan Chu highlights the potential of blockchain to establish persistent information truth that is provable, reliable, and transparent. Vitalik Buterin sees blockchain as democratizing trust by enabling individuals and startups to create secure systems without relying solely on established trust anchors. He believes that blockchain can lead to the development of systems where fraud is impossible by delegating only the necessary power.

Decentralized Cryptocurrency Exchanges:
Vitalik Buterin mentions the frequent hacking incidents involving cryptocurrency exchanges. He proposes creating completely decentralized cryptocurrency exchanges, eliminating the need for a central authority and reducing the risk of hacks.

Smart Contracts for Delegating Authority:
Smart contracts can be used to delegate authority to an authority for specific purposes, preventing misuse of authority. Complex conditions can be encoded in smart contracts, ensuring authority is granted only for the intended purpose.

Blockchain as a Trust Model:
Blockchain transactions serve as receipts, timestamping, and auditing, promoting trust. Cheating is easily detectable on the blockchain, encouraging honesty.

Government Acceptance and Support:
Governments are increasingly accepting and supporting blockchain technology. The UK government awarded 248,000 pounds to Tremonex for developing a pound or euro back to token on the blockchain. Government agencies see the potential of blockchain to reduce corruption, fraud, and increase trust.

Blockchain’s Applicability to Government Activities:
Government activities often involve similar tasks as other areas, making blockchain technology applicable. Blockchain can reduce corruption, fraud, and increase trust within and between governments and regulated entities. Smart contracts offer new paradigms for enforcing rules and minimizing delegation of authority.

Adaptation to a New Paradigm:
Governments are accustomed to central control and regulation. Adapting to blockchain’s decentralized nature requires a shift in workflow and mindset. Jurisdictions like the UK, Estonia, and Singapore have shown receptiveness to blockchain.

Challenges in Certain Jurisdictions:
Some jurisdictions, such as the US, pose challenges for blockchain adoption due to regulations like the BitLicense. Regulatory barriers can lead to restrictions or complete unavailability of blockchain applications in certain regions. Inertia, culture shock, and lack of understanding can contribute to these challenges.

Blockchain Applications:
Blockchain applications beyond currency exist, and they are generally free from regulations, creating opportunities for safe exploration in most countries.

The DAO:
The DAO is a revolutionary concept designed to improve efficiency and justice through smart contracts. It aims to eliminate the need for trusting third parties and promote sustainable practices.

Challenges Faced by Blockchain Technology:
The DAO is the first of its kind on the Ethereum blockchain and received unexpected funding, which may have led to insufficient security reviews. Blockchain technology’s focus on trust and low risk creates a paradox, as innovative technologies tend to be less safe and prone to disruptions. Institutional adoption of blockchain technology takes time due to the need to de-risk and fully realize its advantages.

Vitalik Buterin’s Optimistic Outlook on DAOs:
Vitalik Buterin expressed optimism about the potential of decentralized autonomous organizations (DAOs), emphasizing the promise they hold for various applications.

DAO as an Experimental Tool:
Buterin acknowledged that DAOs are still in an experimental phase and highlighted the need for ongoing exploration and learning.

Accountability in DAOs:
The question of accountability in DAOs was raised, particularly concerning potential legal and ethical implications.

The Role of Social Contracts in DAOs:
Buterin emphasized the significance of social contracts in shaping the behavior and expectations within DAOs.

The Influence of Presentation on DAO Functioning:
He illustrated how different presentations of a DAO’s rules and expectations can lead to diverse outcomes, even with identical smart contracts.

Developer Responsibility in DAO Creation:
Buterin discussed the varying levels of responsibility that developers might assume when launching DAOs, ranging from noncommittal to explicit ownership.

The Challenge of Unethical Actors in DAOs:
He recognized the potential for dishonest actors to exploit the benefits of DAOs while avoiding accountability.

DAO Sociology as an Emerging Field:
The study of DAO sociology was highlighted as a relatively unexplored area with opportunities for research and understanding.

Ethereum’s Leadership in Blockchain Development:
Buterin acknowledged Ethereum’s leading role in blockchain architecture and constraints.

Open-Source vs. Competitive Landscape in Blockchain:
The question of whether the blockchain landscape is characterized by open-source collaboration or competition was raised.

The Future of Blockchain:
The blockchain ecosystem may see the emergence of several major blockchain ecosystems, each representing different visions and use cases. A blockchain ecosystem and a blockchain might not be the same thing. Some projects may provide software tools for users to launch specialized chains for various use cases.

Hyperledger and Corda:
Hyperledger and Corda are staking out their own ecosystems and actively avoiding competition. Corda is a platform focused on two-party consensus, similar to a lightning network without a blockchain. Corda’s approach is valid for its target use cases, such as specific interactions between financial institutions.

Proof of Stake Consensus Algorithm:
Proof of stake is a consensus algorithm that aims to achieve blockchain consensus without mining. It involves depositing Ether into a proof of stake contract, which acts as a “virtual miner” and gives users the rights to randomly create blocks proportionally to their deposited Ether.

Benefits of Proof of Stake:
Greater energy efficiency compared to mining. Potentially reduced centralization concerns.

Progress on Proof of Stake Implementation:
Currently in the stage of developing protocols with solid reasoning behind design decisions. Next steps include test net and live implementation.

Voting Mechanism for Moving to Proof of Stake:
Hard fork is the mechanism for activation. Specific rules for activation are yet to be determined.

Moratorium Proposal and Quorum Issues:
Moratorium is active until it stops being active by deliberate action. Vitalik opposes the idea of requiring a fixed quorum. Proposes a dynamic quorum targeting a particular number of proposals per week.

Changes to DAO Code:
Next version of the DAO code will include fixes for security issues and potentially changes to the voting mechanism.

Gratitude and Appreciation:
Appreciation for the efforts of Jihan and the Meetup group. Gratitude to everyone who attended the event. Reflection on the significance of the gathering, especially for those who haven’t seen Vitalik before. Photo opportunity for attendees.