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.

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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-

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Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.

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