Fireside Chat with Vitalik: Coordination Challenges in the Ethereum Ecosystem
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Fireside Chat with Vitalik: Coordination Challenges in the Ethereum Ecosystem
In this fireside chat with Vitalik, we'll explore coordination by examining the multi-layer coordination challenges and potential solutions within the Ethereum ecosystem.
Navigating Web3 tides with focused insightsCompiled by: LXDAO
In this fireside chat with Vitalik, we explore coordination by examining multi-layered coordination challenges and potential solutions within the Ethereum ecosystem. Our goal is to inspire reflection on how to manage coordination in decentralized ecosystems and offer insights into overcoming these challenges for smoother, more efficient operations. Below is the full transcript 👇
Bruce: Hello everyone, I'm Bruce, a core contributor at LXDAO and ETHPanda. Today, we'll be exploring the theme of "Coordination," focusing on the multifaceted coordination conflicts and possible solutions within the Ethereum ecosystem. We hope this conversation will spark thoughts on managing coordination in decentralized systems and provide practical insights to help overcome such challenges, making the entire ecosystem more fluid and effective.
We're honored to have Vitalik, a key participant and observer in the Ethereum ecosystem. To begin, Vitalik, could you please give us a brief introduction?
Vitalik: Hi everyone, I'm Vitalik Buterin, co-founder of Bitcoin Magazine. I've been involved with Ethereum for the past 10 years. I started primarily in research but have since engaged with many different aspects of the ecosystem.
Bruce: Today we're discussing coordination. From your perspective, how do you define coordination within Ethereum? Are there any notable examples of successful coordination in the ecosystem?
Vitalik: Coordination can mean many different things. In abstract terms, it essentially means multiple people acting together toward a shared goal, rather than ignoring each other's needs or working against one another. This can take various forms—for instance, individuals contributing to public goods, like projects that benefit the entire ecosystem.
It might also mean people collaborating around a common standard—like shifting from speaking one language to another because the new one is better in some way. That’s essentially what happens during every Ethereum protocol upgrade. It could even refer to highly decentralized efforts where people independently do different things, yet still contribute to a collective outcome. Wikipedia editing is a good example: no one directs others or forces uniform behavior, yet many contributors build something valuable for everyone. I believe all these types of coordination occur within Ethereum, and the ecosystem heavily depends on them.
Bruce: Regarding the Ethereum ecosystem, the 'infinite garden' philosophy encourages diversity. However, this diversity may lead to competition over resources and reputation. What conflicts and coordination challenges have you observed between communities in terms of competition and cooperation? And what solutions might foster better collaboration and development across communities?
Vitalik: One challenge we’ve faced—and one I think we’ve handled quite well—is different Ethereum clients coordinating to upgrade the network and update their code simultaneously. Many parts of the ecosystem participate in this, which is actually an impressive achievement. Ethereum is unique in that the largest client, Geth, controls only about 52% of the network—a level of decentralization rarely seen elsewhere. Most ecosystems are dominated by a single player, whether in web browsers, Bitcoin clients, or even implementations of social protocols aiming to be decentralized.
The ongoing challenge is that we still need to agree annually on the next upgrade. Ethereum has various internal structures designed to support this—annual in-person meetings (we held one in Kenya, and a smaller one just yesterday), AllCoreDevs calls, online discussions, incentives, etc. Initially, the Ethereum Foundation provided crucial funding to client teams. Even today, it still offers some support, though most of their income now comes from the clients themselves. That’s one example.
Another example is funding public goods across the broader Ethereum ecosystem. Historically, the Ethereum Foundation led this effort, but now we see Gitcoin Grants, Protocol Guild, and other foundations emerging. We released a transparency report about two days ago. One interesting statistic: in 2022 and 2023, the Foundation accounted for only 49% of public funding distributed—just under half—with 51% coming from other organizations. There are still unresolved challenges, however. A major one is standardization and collaboration among Layer 2s and wallets. This area is only now beginning to be discussed seriously. Conversations around supporting public goods continue to evolve, with more actors experimenting thanks to early leadership from Gitcoin, Optimism, and Protocol Guild.
Bruce: You mentioned coordination issues between clients. As the Ethereum ecosystem grows, the EIP and ERC standardization processes involve more stakeholders, making them more complex and slower. What major conflicts have you observed in the standard-setting process? How can we balance openness and efficiency to reach consensus more effectively and advance standards?
Vitalik: I see three distinct types of conflict, and it's important to distinguish between them. The first is when different groups push competing standards because doing so benefits them personally—this isn’t unique to Ethereum; it happens everywhere. The second type occurs when people advocate different standards due to "not invented here" syndrome, or simply for the pride and social status of creating something widely adopted. The third isn't really a conflict at all—it's minor disagreements where people just need to sit down, set aside differences, and converge on a mutually acceptable solution.
For the first case, I think in decentralized worlds we can establish baseline norms about which kinds of standards are likely to be accepted. For example, if someone proposes an account abstraction standard that requires routing transactions through their own server, it won't gain traction. People only adopt standards that appear genuinely neutral.
Another experiment we've tried: At Devcon and ETHcc, many attendees expressed frustration over too many competing side events. So we tested discouraging side events during Devcon itself. Instead, side activities are encouraged before or after the main event, while during Devcon, we promote Community Hubs integrated into the official program. If your hub fosters substantive cross-community collaboration—not just self-promotion—the Foundation is more likely to support it.
So instead of separate events for Optimism, Arbitrum, or Starknet, we encourage Multi-Layer 2 events as part of Devcon. This promotes cooperation at the social layer, reducing the tendency for individuals to push proposals solely as personal initiatives. We're applying this approach more broadly to standard-setting, trying to institutionalize cooperative norms. I believe this also helps address the second issue—the human desire for recognition—and the equally human resistance to perceived dominance or imposition by others.
The solution to both lies in encouraging collaboration from the very beginning of any process. As for the third issue—lack of communication—we simply need more forums and organizations facilitating these dialogues.
Bruce: Thank you. Next, let’s talk about Layer 2s. Since Layer 2 solutions play a critical role in Ethereum's scalability, what are your thoughts on the coordination challenges between Layer 2s and Ethereum? What challenges or strategies exist in aligning the development and governance of Layer 2s with the broader ecosystem?
Vitalik: Layer 2s initially emerged in a very independent manner. Many teams built their own tech stacks, aiming simply to create functional, fast-scaling solutions for Ethereum. Now, the ecosystem has matured—Layer 2s exist, they work, and they’re achieving their goals. So the migration to Layer 2s is underway. But how do we ensure they feel and operate as a unified ecosystem, rather than 40 separate blockchains? Take a concrete example: if you hold tokens on Optimism but use apps on Arbitrum, bridging assets between them becomes extremely cumbersome. There are many such non-standardized pain points.
That’s why we’ve started discussing how to standardize cross-Layer 2 interactions. This involves collaboration between Layer 2 teams and wallet developers—an area seeing significant progress.
Bruce: Thanks. Due to time constraints, Vitalik, do you have any final thoughts on coordination you'd like to share?
Vitalik: On the topic of coordination, I think there are two key dimensions: the social, involving interpersonal communication, and the economic. Interestingly, people like me often overemphasize the economic side. But in this discussion, we’ve focused more on the social aspect—which is actually great.
Still, economics matter. You can’t force people to act against their incentives. As we’ve seen, relying too much on moral pressure eventually leads to frustration, backlash, and sometimes even radical opposition. Where our ecosystem has succeeded is in funding small-scale projects. If there’s an important public good needing $100K or $300K to build a demo, there are many sources willing to fund it—Ethereum Foundation, individual donors, DAOs, Layer 2 projects, ETH whales. If they see value, many will step up with $300K.
But the challenge arises when a project scales—from a $300K demo to a mainstream initiative requiring $30M serving the entire Ethereum user base. At that point, incentives shift dramatically—from near-socialist to fully capitalist. At the $30M level, beyond market incentives, there’s little motivation to act socially responsibly. Everyone assumes you’re already well-funded. Yet we want to support projects that otherwise wouldn’t get funded.
Once a team becomes a company with users and investors, the next challenge is maintaining pro-social behaviors—following standards, avoiding vendor lock-in, staying open-source—even as pure market incentives take over and intrinsic motivation fades. So a fundamental challenge is: how do we improve incentive structures at the $30M scale? This remains unsolved. I welcome experimentation in this space.
Audience Q&A
Q: I originally wanted to ask about standards, but something you said really inspired me. You mentioned the sudden jump from small grants to $30 million. While these operate under different mechanisms, isn’t the abruptness of this transition itself a problem? Can’t we have a more gradual path? What experiments could we run? For instance, small businesses in Web3—we don’t see nearly enough of them. It feels like everyone either aims for hypergrowth or is just hanging out, saunas and fun stuff. How can we better support small businesses? I’m curious how you think about this or what promising experiments you’ve seen.
Vitalik: I think there are different kinds of support. One is more proactive—if a promising project exists, helping it gain user traction, integrating it into coordinated environments so it can interact with real-world usage and improve. For example, at Devcon, we’ve implemented many tools—ZK identity solutions like Zupass, and various on-chain or open-source projects. Part of the goal is to help projects overcome network effects barriers—nobody knows about them, nobody uses them. This is non-monetary support.
On the funding side, once projects reach higher stages, the core issue is finding a balance. You need a funding model that isn’t purely charitable. Even at $3M, relying solely on donations quickly runs out. You need a model that expects returns but isn’t driven solely by profit. The key question is: who are the participants willing to engage in such hybrid models?
I believe many are open to it—many people, including ETH whales, hold ETH because they believe in the vision and are willing to make small sacrifices. But they’re not eager to donate everything overnight.
On the other hand, what actual institutions or models can encourage projects to stay open-source, standards-compliant, decentralized, and ideally, if highly successful, give back to future projects?
I know of various ecosystem initiatives trying to pool funding from large ecosystem players. The basic idea is that if such pooled capital exists, and participants trust others are also committing, they’d be more willing to invest. But this is still very early stage.
Q: Another issue is the lack of incentives for people to join existing projects rather than start their own. If you contribute to someone else’s project, there’s no economic return. Right now, what we really need is better UX and onboarding. But people—especially VCs—only fund infrastructure if we want to build something big. What can we do to improve this situation?
Vitalik: That’s a great question. An interesting observation is that both private and public goods funding have failed in this regard. Look at programs like Optimism’s retroactive funding or Gitcoin—they’ve largely become popularity contests. To win large grants, you need high visibility, a marketing team, almost like running a political campaign. Many people aren’t interested in that model—they don’t want to be full-time self-promoting politicians. Moreover, this model reinforces existing social hierarchies, clearly favoring creators over maintainers.
I think in public goods funding, consciously designing mechanisms to identify and support maintainers could make a big difference. In retroactive public goods funding, some communities are already doing this—trying to map downstream dependencies of widely used major projects, identifying not just direct contributors but those who build upon them. This allows support across the entire dependency graph.
In Optimism, there are even explicit efforts to discover and fund such overlooked projects. For example, the academics who invented Keccak—a hash function used by everyone—were scholars unfamiliar with Twitter self-promotion. A few years ago, they received a $200K retroactive grant. So I believe consciously building a public contribution graph—showing who contributed to what—and making it visible is itself a crucial infrastructure. Once we have that, it becomes much easier to support any mechanism aiming to improve the system.
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