Vitalik Buterin Sees Opportunities As Sweden, Norway Move Away From Cashless Ambitions

Sweden and Norway are reconsidering their cash society initiatives after discovering that their centralised payment systems are vulnerable to infrastructure failure.

Vitalik Buterin, co-founder of Ethereum, suggested that decentralized systems like Ethereum could be potential resilient alternatives to traditional payment networks, though he acknowledged that significant technical challenges remain.

While some crypto experts believe decentralized finance protocols are already robust enough, others point to critical limitations, including the need for electricity and internet connectivity.

Vitalik Buterin, co-founder of Ethereum, noted that ETH could be a viable alternative to Sweden and Norway's efforts to make their societies cashless. These countries recently revised their policies after discovering that centralized payment systems fail when physical infrastructure fails.

However, the movement in the crypto world has provoked a different reaction: the idea that decentralized systems could perhaps take over this role.

“The Nordics are withdrawing from the cashless society initiative because their centralized implementation of the concept is too fragile,” Buterin wrote on social media, responding to a post that said both countries now require citizens to keep cash in reserve.

While Sweden has reduced cash transactions to just 1% and the Vipps app dominates commerce in Norway, the Russian invasion of Ukraine has exposed critical vulnerabilities, with infrastructure attacks capable of crippling entire payment networks.

Buterin confirmed this need: “Cash appears to be necessary as a backup.”

Looking at his own situation, Buterin offered a nuanced observation about the state of affairs in Sweden and Norway, noting, “Ethereum needs to be resilient and private enough to credibly fulfill this role.”

Cash vs. Code

In response to questions from a media organization about Buterin's statements, Sam MacPherson, Chief Executive Officer of decentralized finance protocol development company Phoenix Labs, disagreed with the evaluation of Ethereum's co-founder.

“Ethereum is already able to be resilient to hostile actors,” MacPherson said, referring to DeFi protocols that manage billions without major disruptions.

Such decentralized systems are “designed from the ground up to be as secure as possible,” he added.

However, offline functionality remains one of the biggest challenges if Ethereum is to take on the role of a more resilient alternative to cash. Without electricity or internet, Ethereum would not function on its own.

Zero-knowledge proofs, which could theoretically enable offline payments, are still experimental following Buterin's comments.

“We know in principle how to do it, but the limitation is that any solution relies on reliable hardware,” Buterin said.

Another opportunity can be opened up with stablecoins, which are pegged to fiat currencies such as the US dollar.

“Stablecoins are an exact solution to this scenario,” said Anthony Anzalone, founder of walletless blockchain platform XION. Stablecoins have “exploded in usage and adoption” because they “don’t rely on one centralized party,” he added.

During crisis situations like those currently facing Sweden and Norway, Ethereum could demonstrate its resilience by not being strictly dependent on users having access “to electricity, secure operating systems, and unhackable Web3 wallets,” Bickle noted, noting shortcomings in how Ethereum can practically continue to function in such instances.

“We still have a long way to go before Ethereum is resilient enough to replace cash transactions,” Bickle added.

Frequently Asked Questions

What are the reasons why Sweden and Norway are reconsidering their cash initiatives?
Countries have discovered that their centralized payment systems are vulnerable to infrastructure failure, as evidenced by the recent implications of Russia's invasion of Ukraine.

How does Vitalik Buterin argue that Ethereum can function in place of cash?
Buterin suggests that Ethereum could serve as a resilient alternative, provided it has enough privacy and robustness to function as a financial backup system.

What are the challenges for Ethereum as an alternative to cash?
Key challenges include dependence on electricity and internet connections, as well as the need to enable offline payments without compromising security.