Vitalik Buterin
Ethereum creator Vitalik Buterin John Phillips/Getty

Ethereum creator Vitalik Buterin caused quite a stir when he entered the hip Tel Aviv bar this Thursday. The open room overflowed with more than a hundred cryptocurrency fans and curious friends. Most were Israeli men from the local tech industry, from bald polo-shirt-wearing programmers to hacktivists with dreadlocks. There was even a rogue teenager, allowed in with his dad because the underage bitcoin trader idolizes Buterin. Photographers flocked whenever Buterin left the stage to grab water.

“You know who he is?” A traveling startup consultant from California whispered beside the bar, where the air conditioning almost masked the summer night’s sweltering Mediterranean humidity. “That’s the guy who invented OmiseGo coins.” Her mistake was understandable. As a supportive advisor of the Asian blockchain startup OmiseGo, Buterin wore the company’s blue and white logo t-shirt. At least in the tech industry, Buterin’s celebrity status has officially surpassed that of the blockchain network he invented. Many came to hear him speak without knowing what cryptocurrency actually is.

However, once Buterin invited the rowdy audience to ask him questions, it quickly became clear there were also many veteran Ethereum users at this Tel Aviv bitcoin meetup. In between teasing pleas for the crowd to settle down, Buterin explained his take on some of cryptocurrencies hottest topics: Initial coin offerings and the political future of cryptocurrency.

“Are they [tokens] going to replace fiat? I believe no,” Buterin said. There are plenty of reasons a government would want to keep traditional money, like dollars as euros, even if the nation also adopts cryptocurrency. Buterin pointed out the dangers of dramatic price oscillation, the type we’ve seen with bitcoin as it continues to grow. If this happened to a national currency, like the Israeli shekel, Buterin argued even temporary drops could spark local market crashes or a recession.

Newsweek is hosting an AI and Data Science in Capital Markets conference on December 6-7 in New York. NewsweekMediaGroup

Regardless, he said he still believes several countries will soon try making their own digital currencies. Buterin himself met with Russian president Vladimir Putin and Central Bank of Thailand this summer to discuss such possibilities. Traditional banks from India to Switzerland are already working with cryptocurrency.

Cryptocurrency won’t just disrupt centralized systems with government surveillance; It will also become a part of them. “I personally think we are going to see some of both,” Buterin responded to one woman’s question about capitalism versus the blockchain community’s cypherpunk philosophy. “It [crypto] will deeply modify the ways we interact with each other.”

Many cryptocurrency users want blockchain technology to free people from the current financial power structures, including economic government control. Not all are anarchists, some merely prefer the idea of democratizing money. Anyone can mine ether tokens, then spend them without a bank account or institutional approval. Average people can even make their own currencies, with the right technical skills. Now that lawmakers and banks are joining the cryptocurrency boom, some veterans fear institutional blockchain networks will suffocate decentralized volunteer projects. So Buterin offered idealists a spoonful of hope.

“I don’t think the [cryptocurrency] industry could be destroyed,” he said. “But I do think there could be serious setbacks.” Setbacks such as over-regulation, or the cryptocurrency “bubble” bursting, could derail technological process. A lot of people could lose money, or find it much harder to access their cryptocurrency if governments actively resisted this trend.

“As a community, the best thing we can do is to avoid creating scenarios that make them [regulators] want to crack down on those kinds of activities,” Buterin added. This is already happening with ICOs, the tokenized fundraising model that exploded this summer, raising over a $1.2 billion for blockchain projects worldwide.

Many ICOs are online scams wrapped in startup lingo. So China banned them outright. Meanwhile, regulators from Europe to North America recently started issuing warnings and rulings to curb certain types of ICO activity. “In reality, the things that they [startups] are holding have no need for a token whatsoever,” Buterin said. “I think, eventually, people will stop buying those tokens.”

Back in 2014, Ethereum was one of the first cryptocurrency projects to run this type of crowdfunding campaign. Although such lucrative sales became divisive as of late, Buterin still participates in a few ICOs and ponders the possibilities. “Yesterday I invested a 100 useless ether tokens in a joke ICO,” he laughed. He wishes more ICOs followed a community-driven model, closer to Ethereum’s nonprofit precedent, instead of acting like companies. “Even if the network is decentralized, you’re still trusting one team with $100 million,” Buterin said. He proposed future ICOs could fundraise for ideas. Then teams would compete on a monthly or yearly basis for the privilege of executing those ideas with the crowdsourced cryptocurrency funds.

Even as Buterin spoke, several Israeli entrepreneurs in the audience chatted about plans for their own upcoming ICOs. They still want to make money while the boom is in full swing. Buterin cautioned such startups not to fear regulation. “Regulation is going to make more clarity,” the young tech star said. Once legal structures and technical capacity catch up with blockchain’s often misunderstood hype, Buterin said there could someday even be IPOs on blockchain platforms.