Charles Hoskinson: Cardano | Lex Fridman Podcast #192

00:00:00.000 | The following is a conversation with Charles Hoskinson,

00:00:03.200 | founder of Cardano, co-founder of Ethereum,

00:00:06.760 | and a mathematician who's one of the most well-read

00:00:09.800 | and knowledgeable people on the technical side

00:00:12.200 | of cryptocurrency that I've ever spoken to.

00:00:15.600 | Quick mention of our sponsors,

00:00:17.640 | Galileo Games, Allform, Indeed, ExpressVPN, and Asleep.

00:00:22.640 | Check them out in the description to support this podcast.

00:00:26.840 | As a side note, let me say that Charles

00:00:29.040 | is not just a mathematician or cryptocurrency innovator,

00:00:32.360 | but also a Colorado-based farmer of bison and mushrooms,

00:00:37.360 | a gamer, a fisherman, and a world traveler.

00:00:41.800 | When I asked him if he has a nice professional picture

00:00:44.760 | of himself, he sent me a picture of him in Mongolia

00:00:48.240 | with a hawk on his shoulder,

00:00:50.400 | meeting the Mongolian president.

00:00:52.620 | That to me pretty much says it all,

00:00:54.440 | speaking to the humor and the intelligence

00:00:57.280 | of a man who's bold, innovative,

00:00:59.520 | and does not shy away from a bit of fun

00:01:02.000 | and a bit of controversy,

00:01:04.000 | which makes him a fascinating human being

00:01:06.400 | to explore ideas with.

00:01:08.280 | I do wanna say, in terms of ideas,

00:01:10.640 | that at least to me, cryptocurrency is much bigger

00:01:13.580 | than just a way for a few Americans to make a quick buck

00:01:16.940 | through meme-driven speculation.

00:01:19.180 | It is technology that enables freedom from oppression,

00:01:22.460 | from suffering in the world, because money is power.

00:01:26.680 | Mongolia, for example, was a reminder of that for me.

00:01:30.040 | Next day, after talking with Charles,

00:01:31.840 | I spoke with Wyeonmi Park, who is a North Korean defector,

00:01:35.560 | and who spent time in Mongolia, as many defectors do,

00:01:39.240 | in her and their escape from North Korea.

00:01:42.200 | Her story, the story of North Korea,

00:01:44.920 | the story of atrocities throughout the 20th century

00:01:47.840 | committed by Hitler, Stalin, and others,

00:01:50.920 | is a reminder that the world is full of darkness,

00:01:54.480 | but it is also full of beauty and love,

00:01:57.640 | and it is a world worth fighting for

00:01:59.960 | in every way we know how.

00:02:01.940 | This is the Lux Friedman Podcast,

00:02:04.840 | and here is my conversation with Charles Hoskinson.

00:02:08.280 | Let's start with a fun question.

00:02:11.040 | If we're living in a simulation,

00:02:13.520 | what programming language do you think it's written in?

00:02:16.260 | And maybe from a software engineering perspective,

00:02:19.200 | what do you think are some of the design principles

00:02:21.000 | that it operates under?

00:02:22.360 | - You know, there are a lot of really lovely papers,

00:02:24.040 | like one came out of MSR, the Autodidactic Universe.

00:02:27.600 | Did you have a chance to see that?

00:02:29.160 | Oh, you gotta read it.

00:02:30.000 | It's like April of '21.

00:02:31.720 | It's just brand new.

00:02:32.620 | But basically, the idea is that the universe

00:02:34.440 | is like some sort of giant self-learning system

00:02:36.840 | that can self-evolve, almost like NOMIC.

00:02:39.480 | And then you have Wolfram running around saying,

00:02:41.160 | "Hey, we can come up with these very simple rules,

00:02:43.360 | "and we can reconstruct all of reality

00:02:45.120 | "at some arbitrary point."

00:02:47.680 | So I have absolutely no idea what's right.

00:02:50.320 | I look at it kind of like a formal system,

00:02:52.600 | and I say, "Well, if you're stuck within the system,

00:02:54.840 | "it's hard to actually understand

00:02:56.260 | "that you're inside the system."

00:02:57.640 | You know, it's kind of like an object language

00:02:59.920 | to a meta-language.

00:03:01.320 | You know, there's this thing that is outside of it,

00:03:03.800 | but because you're constrained and limited by the simulation

00:03:06.740 | you can't really understand the nature of the thing

00:03:09.160 | that's outside of it.

00:03:10.800 | It's almost like Minecraft.

00:03:12.040 | You can build these redstone computers within Minecraft

00:03:14.920 | and simulate and emulate things within it,

00:03:16.620 | but you really can't go outside of that environment.

00:03:19.440 | - The people outside of it can formally prove

00:03:21.120 | that it's correct or whatever,

00:03:22.780 | but the creatures inside of the system

00:03:24.720 | can't hope to perfectly understand it

00:03:27.320 | and prove something about it.

00:03:28.840 | - Well, also, the question is, it's a computation question.

00:03:31.880 | You know, does P equal NP?

00:03:33.280 | 'Cause you'd have to be able to emulate all of these.

00:03:35.280 | - Yeah, how long will it take?

00:03:36.280 | - Yeah, exactly.

00:03:37.120 | And so I have no clue what type of language

00:03:39.840 | it would have to look like,

00:03:41.160 | but it would probably not be anything

00:03:44.060 | we're used to at the moment.

00:03:45.360 | It'd have to be something else.

00:03:46.560 | It would have to have some more fundamental resolution

00:03:48.680 | of the relationship of these formal systems

00:03:50.800 | and how they get extended.

00:03:52.240 | So that's like a 22nd century question

00:03:54.480 | instead of a 21st century.

00:03:55.720 | - Do you find the Stephen Wolfram idea compelling?

00:03:58.840 | It's a very different way of programming,

00:04:01.480 | which is you set some rules,

00:04:03.160 | you set some initial conditions,

00:04:04.500 | and let it run and see what happens.

00:04:06.120 | - Yeah, and it's not a new concept.

00:04:07.600 | I mean, like the Santa Fe Institute's

00:04:09.200 | been doing that for a long time,

00:04:10.600 | and you can use it for economic modeling,

00:04:12.780 | and you can show that in certain cases,

00:04:14.640 | there's this concept of simple rules

00:04:16.320 | evolving into a complex system

00:04:18.160 | is somewhat more predictive

00:04:20.240 | than trying to build a complex top-down model for things.

00:04:23.480 | And I guess there's some analogies to these things in AI,

00:04:25.880 | where you start with some simple things,

00:04:27.520 | and then somehow it just figures stuff out

00:04:29.520 | in its environment over time,

00:04:30.920 | and much better than if you actually tried to model it

00:04:32.760 | with Prolog or something like that.

00:04:35.720 | So that is exciting because you get to just do a few things,

00:04:40.720 | let the thing run, and then see what happens.

00:04:43.080 | And that's a lot of fun.

00:04:43.960 | In fact, it got so exciting, Wolfram came to us,

00:04:46.440 | and he said, "Hey, let's do an NFT marketplace."

00:04:48.440 | And I said, "What do you wanna do?"

00:04:49.280 | And he said, "I got all these universes to sell."

00:04:51.360 | (Lex laughing)

00:04:52.200 | I said, "Okay, well, that's gonna be fun."

00:04:54.640 | So we're gonna set up an auction system

00:04:56.120 | or something like that with him,

00:04:57.280 | and I think maybe end of this month or next month,

00:05:00.000 | we'll figure out how to do NFTs on Cardano

00:05:02.800 | with Wolfram universes.

00:05:04.520 | So as soon as we can sell one, I'll give you one,

00:05:06.840 | and then we can all just claim

00:05:08.320 | that we're living in some sort of Wolfram simulation.

00:05:10.680 | - I don't know how much money I have,

00:05:12.120 | but I'm gonna give everything I have to get Rule 30,

00:05:15.360 | which is one of his universes that he's created,

00:05:18.200 | one of the first ones where he discovered

00:05:21.520 | some interesting complexities.

00:05:24.240 | - I think Rule 30's Turing Complete, or is that 45?

00:05:26.920 | I can't remember which one.

00:05:28.560 | - You know your stuff.

00:05:29.680 | Actually, I'm not sure if they proved anything

00:05:31.160 | about Rule 30 in terms of whether it's Turing Complete

00:05:33.280 | or not, but there's fun competitions on it,

00:05:35.920 | which is trying to predict something about Rule 30,

00:05:38.080 | about the way it evolves,

00:05:39.280 | and so far, nobody's been able to do it.

00:05:41.440 | Just like looking at the middle column,

00:05:43.320 | try to predict as the system evolves,

00:05:45.500 | say anything conclusive about the future

00:05:49.480 | of the system as it evolves.

00:05:50.920 | It's fascinating.

00:05:51.880 | It's both beautiful that simple rules

00:05:54.560 | can create that kind of complexity,

00:05:56.600 | and it's also sad that we can't make perfect sense of it,

00:06:01.600 | like perfectly predict the future.

00:06:05.880 | Even though it's all simple and deterministic,

00:06:08.240 | we can't say something conclusive

00:06:09.760 | about when the thing will end.

00:06:12.240 | When will this little cellular automata

00:06:14.360 | evolve in a certain way,

00:06:15.680 | and then nuclear weapons will be invented,

00:06:17.320 | and they blow each other up,

00:06:18.240 | and then it'll just be this empty 1D cellular automata.

00:06:21.440 | - Well, doesn't that make it fun, though?

00:06:23.120 | (Lex laughs)

00:06:24.160 | - Yeah, it's fun, but when you're trying to create,

00:06:27.160 | and we'll talk about something that operates the economy

00:06:32.160 | and the way humans transact and cooperate

00:06:36.000 | and fall in love and work together,

00:06:39.360 | then you'd like to be a little bit more formal

00:06:41.160 | and try to say something conclusive.

00:06:42.760 | If this entire universe is just cellular automata,

00:06:45.880 | then being conclusive is kind of hopeless,

00:06:49.440 | generally speaking, and the hope is, I guess,

00:06:51.920 | that there'll be pockets within the cellular automata

00:06:56.920 | where you could be predictive,

00:06:58.720 | where you can formally show that something is true,

00:07:01.920 | and then you can rely on that.

00:07:03.560 | You'll be resilient and all those kinds of things,

00:07:05.360 | even though the rest of the thing

00:07:07.680 | is a giant mess that's unpredictable.

00:07:09.440 | - Didn't they call that Laplace's demon?

00:07:11.120 | - Yes. - Yeah.

00:07:11.960 | - Well, I wonder what the demon's up to these days.

00:07:14.480 | Okay, thank you for entertaining me with that.

00:07:17.400 | But sticking on philosophy, you've also mentioned,

00:07:21.160 | among others, that Bertrand Russell and Saul Kripke

00:07:24.680 | are two of your favorite philosophers.

00:07:26.860 | Maybe you can comment on what ideas of theirs

00:07:30.040 | you find insightful, and also, what to you is the difference

00:07:33.760 | because you're both an engineer and a thinker,

00:07:37.280 | so what to you is the difference

00:07:38.480 | between philosophy and computer science?

00:07:40.640 | - Yeah, so yeah, there's both a deeply human element

00:07:43.960 | to both Russell and Saul, and then there's this,

00:07:46.400 | of course, amazing work that they did

00:07:48.200 | in the late 19th and 20th century.

00:07:50.920 | And you can't really talk about Russell or Saul

00:07:54.360 | without also mentioning Wittgenstein and Tarski,

00:07:57.840 | because when you actually look at these guys

00:08:00.800 | and you put them together, what they were attempting to do

00:08:02.840 | was increase the level of precision we had

00:08:05.080 | in analyzing both formal languages

00:08:06.840 | and also language in general.

00:08:08.960 | And so Wittgenstein makes no sense at all to me.

00:08:11.520 | So there's amazing people out there

00:08:13.620 | that somehow can parse that, but--

00:08:15.440 | - He doesn't make sense to himself either.

00:08:17.240 | - I think you're right about that.

00:08:18.240 | However, Kripke has Kripkenstein, you know?

00:08:20.240 | He has his whole building on that, right?

00:08:24.520 | And he built a whole hierarchy.

00:08:25.800 | And at least there, I have modal logic,

00:08:27.600 | and I have the little boxes, and I have the diamonds,

00:08:30.420 | and I can do a computation, and I can kind of reason

00:08:32.700 | about things that people are saying.

00:08:35.540 | But really, it was all just about precision

00:08:38.240 | and the nature of truth, precision,

00:08:40.160 | and the nature of necessity and possibility.

00:08:42.000 | And the magic of these statements is that

00:08:44.520 | you can then start getting a better understanding

00:08:47.480 | of basically how far formal language can take you.

00:08:52.120 | And so that's the work of it.

00:08:53.760 | You know, David Hilbert also did the same thing.

00:08:55.720 | And Russell, he got his career started

00:08:57.760 | working with Alfred North Whitehead.

00:08:59.120 | He was a logician, and there was this whole desire

00:09:01.480 | in late 19th century mathematics to formalize mathematics

00:09:04.660 | in a completely new and better way.

00:09:07.760 | And they started with geometry,

00:09:08.960 | and Hilbert's geometry was like a complete system,

00:09:11.560 | although recently we've discovered

00:09:13.240 | there's a few holes in that.

00:09:14.520 | But for the most part, it's complete,

00:09:16.180 | and the axioms are independent, and they're consistent.

00:09:20.440 | And they said, "Oh, well, now we can do this

00:09:21.960 | "for all of mathematics."

00:09:23.080 | And Russell and Whitehead wrote this huge set of books,

00:09:26.640 | like two big books, "Principia Mathematica,"

00:09:28.920 | 1,000 pages, and the conclusion's one plus one equals two.

00:09:32.200 | So they linked set theory and arithmetic and logic

00:09:34.840 | all in these beautiful ways.

00:09:36.400 | Then, little by little, as we entered the 20th century,

00:09:40.280 | logicians started chipping away at this idea

00:09:42.560 | that you could actually construct

00:09:43.640 | a complete system of mathematics,

00:09:45.940 | first with Gödel, and then later with the work of Turing

00:09:48.200 | and Church and others.

00:09:49.440 | They said, "Oh, you're not complete, you're not decidable."

00:09:52.040 | And so suddenly, Russell was left in this really bad

00:09:54.940 | position where his early life's work

00:09:57.220 | was basically forgotten.

00:09:59.200 | So he had to kind of reinvent himself.

00:10:00.800 | And so he went into ethics,

00:10:02.060 | and he went into different fields of philosophy,

00:10:03.600 | and he became this titan in analytic philosophy.

00:10:05.600 | And he was also a great pacifist,

00:10:08.000 | and he was just a phenomenal writer.

00:10:10.400 | If you read "Why I'm Not a Christian"

00:10:12.880 | or any of his other attacks on metaphysics,

00:10:15.920 | he said, "Look, I can only deal with the world I'm in

00:10:18.360 | "in the senses that I have, and if I can deduce it,

00:10:21.020 | "I believe it.

00:10:21.860 | "If it's outside of that,

00:10:23.180 | "I really can't make meaningful statements about it."

00:10:25.880 | And he said it in a lovely English prose

00:10:28.240 | that you would expect of a man of his stature.

00:10:30.200 | Now, Sol Cryptri, it was like the complete opposite.

00:10:33.220 | This guy's really down-to-earth dude,

00:10:35.520 | not aristocratic at all.

00:10:36.880 | And he was one of those guys

00:10:38.640 | that just could have done anything,

00:10:40.240 | 'cause he's so brilliant.

00:10:42.040 | I guess he's still alive.

00:10:43.120 | - I think he's 80-something.

00:10:44.240 | - Yeah, exactly.

00:10:45.560 | Yeah, he's getting up there, man.

00:10:47.080 | But I mean, literally, when he was in high school,

00:10:49.000 | he wrote these papers in "Logic,"

00:10:50.680 | and Harvard contacted him and said,

00:10:52.100 | "Hey, could you teach graduate courses at Harvard?"

00:10:55.080 | And he said, "No, I really would like

00:10:56.280 | "to finish high school first

00:10:57.360 | "before I go and teach grad school at Harvard."

00:10:59.840 | And so this is just one of those guys

00:11:01.380 | that you can see through his work

00:11:03.360 | that he can think deeply about anything.

00:11:05.120 | He's like the Galois of philosophy.

00:11:07.160 | And he chose to try to clean up a lot of the messes

00:11:10.880 | that Tarski and others couldn't resolve.

00:11:12.680 | He said, "Let's really get serious

00:11:14.140 | "about the nature of truth.

00:11:15.180 | "Let's really try to resolve paradoxes.

00:11:17.520 | "Let's really try to build things in such a way

00:11:19.780 | "that the work that we leave behind

00:11:21.780 | "can actually be built upon,

00:11:23.400 | "and it's not thrown away every 50 years or 100 years."

00:11:26.640 | And it was the same for Tarski.

00:11:27.840 | He comes in, he says, "We mathematicians

00:11:29.340 | "love this concept of truth,

00:11:31.180 | "but yet we've never really created

00:11:32.460 | "a nice rigorous definition that doesn't have paradoxes

00:11:35.360 | "embedded inside of it."

00:11:36.520 | So he had to invent meta languages and object languages,

00:11:39.120 | all these notions and so forth.

00:11:40.800 | So I really like those four, if you think about them.

00:11:43.400 | And there's a lot of great lessons.

00:11:45.980 | And where it's relevant today is,

00:11:47.960 | you have human beings and you have computers,

00:11:50.400 | and they're trying to understand each other.

00:11:51.960 | And computers live in the formal world,

00:11:53.640 | and human beings live in the natural language world.

00:11:55.960 | And those bridges between those two

00:11:58.240 | are still not completely clear.

00:12:00.880 | And so a lot of the work that these guys were doing

00:12:03.100 | in the 20th century and 19th century

00:12:04.260 | had nothing at all to do with that,

00:12:06.120 | but gives you hope that perhaps a bridge can exist

00:12:08.980 | between those two worlds.

00:12:09.980 | And maybe there are some nice tools

00:12:11.940 | for that bridge to be built upon,

00:12:13.540 | and maybe that in some way will allow computers

00:12:16.040 | to better understand us.

00:12:17.020 | I mean, they've even created languages,

00:12:19.100 | natural spoken languages that are completely ambiguity-free,

00:12:21.740 | like Lojban and things like that.

00:12:23.740 | - What? - Yeah, right?

00:12:25.100 | - Wait, what? - L-O-J-B-A-N, Lojban.

00:12:27.500 | It's based on a language called Loglan,

00:12:29.220 | and it's a spoken language that's equivalent

00:12:31.660 | to first-order predicate calculus.

00:12:33.340 | - Oh, interesting, so no ambiguities,

00:12:35.180 | it's logically consistent.

00:12:36.640 | - Yeah, Lojban.

00:12:38.300 | - But can you still have fun in it?

00:12:40.100 | - You can get very-- - Can you write poetry?

00:12:41.620 | - Yeah, there's people who actually write poetry

00:12:43.820 | in Lojban. - I'm gonna switch to that

00:12:45.460 | and start tweeting in it. - Yeah, there you go.

00:12:48.140 | So there's a lot there,

00:12:49.900 | and they're just fun to study and think about.

00:12:52.120 | And unfortunately, if you go down that rabbit hole,

00:12:55.060 | you'll spend way, way too much time,

00:12:56.820 | and there's diminishing returns.

00:12:58.020 | Now, the second question you asked

00:12:59.220 | was one on theoretical computer science

00:13:01.580 | to, I guess, engineering. - Philosophy, no, no, no.

00:13:04.740 | So first step, you said humans and computers.

00:13:07.860 | So theoretical computer science is theory of the computer,

00:13:11.500 | and philosophy is the theory of the human.

00:13:14.420 | And then we can dissect different stuff about the computer,

00:13:17.520 | but in terms of these two worlds

00:13:19.380 | of the theory of the human, which is philosophy,

00:13:21.260 | and the theory of the computer, which is computer science,

00:13:23.780 | what do you think is the difference?

00:13:25.540 | Like, as we try to bridge that gap, as you mentioned,

00:13:28.360 | what is going to be the biggest challenge?

00:13:33.020 | Like, can we formalize love?

00:13:35.780 | Can we formalize music, art, poetry, all that kind of stuff?

00:13:39.260 | Or is that human nonsense that we need to get rid of?

00:13:42.000 | - No, I don't think it's human nonsense at all.

00:13:43.740 | I mean, there's even attempts

00:13:44.940 | to create algorithmically generated music.

00:13:47.340 | And the question is,

00:13:49.380 | is love just strictly a chemical phenomena,

00:13:51.660 | or is there something metaphysical about it,

00:13:54.660 | or transcendent of some sort of formal system?

00:13:59.020 | I mean, computer science is just saying,

00:14:00.620 | hey, we have this notion of computing.

00:14:03.840 | We have this brain that we've constructed,

00:14:06.020 | this formal system that we've built,

00:14:08.220 | and given that we have it, what can we do with it?

00:14:11.340 | And so some people worry about the roots

00:14:13.460 | of the tree of knowledge,

00:14:14.940 | the great Yggdrasil of computer science.

00:14:17.060 | They worry about the roots and say,

00:14:18.180 | how far can we grow them,

00:14:20.060 | and let's keep adding these new models of computation.

00:14:22.820 | And other people worry about the trunk of the tree,

00:14:25.540 | and some people worry about the leaves of the tree.

00:14:27.980 | And the more advanced the field gets,

00:14:30.540 | the closer and closer it gets

00:14:32.400 | to the people who constructed it, us.

00:14:35.300 | We have better image processing.

00:14:37.580 | We have better ways of handling speech to text,

00:14:39.980 | and we have better ways of computers

00:14:41.460 | kind of understanding the intent

00:14:43.300 | of what a human being is saying.

00:14:45.140 | And then the question is,

00:14:46.460 | well, how will a computer understand love,

00:14:48.740 | or poetry, or music?

00:14:50.100 | Well, it'll understand it the same way we understand it.

00:14:52.780 | You have to get a computer to grow up to a point

00:14:54.820 | where it can learn the way we learn,

00:14:56.340 | or as close to it as possible.

00:14:58.340 | Then you just expose it to the things

00:15:00.320 | that we were exposed with,

00:15:01.420 | and then at some point,

00:15:02.260 | the computer will start creating things.

00:15:04.660 | So the question is, well, how do you quantify creativity?

00:15:07.060 | And I have no clue about that.

00:15:09.300 | - You make it into an NFT and see how much it sells for.

00:15:11.980 | (Luke laughs)

00:15:13.340 | That's one way.

00:15:14.380 | - Yeah.

00:15:15.220 | - But basically, yeah, there's so much of it is subjective.

00:15:18.340 | And that's a fascinating whole area

00:15:20.340 | of that I'm fascinated with is human-robot interaction

00:15:23.580 | is how do we create compelling experiences

00:15:27.340 | that are subjectively compelling,

00:15:28.540 | whether it's art, or just two humans talking,

00:15:31.100 | or two humans interacting in some kind of way

00:15:33.420 | to maximize the richness of the subjective experience.

00:15:36.820 | And I think that could be an optimization problem

00:15:38.980 | that could be solved.

00:15:39.820 | We're solving it all the time.

00:15:41.340 | Human civilization is constantly trying to,

00:15:43.660 | we're constantly trying to impress each other.

00:15:46.900 | When we're younger, trying to get laid.

00:15:48.540 | (Luke laughs)

00:15:49.940 | Whatever, fall in love, impress your boss at work

00:15:53.100 | by all the awesome stuff you do.

00:15:54.220 | I mean, we're trying to optimize that problem

00:15:56.340 | that's purely, for the most part, is subjective.

00:15:59.420 | - Right, did you ever watch "Blade Runner 2049"?

00:16:01.580 | - Yes.

00:16:02.420 | - Yeah, did you remember the whole relationship

00:16:03.700 | between Joy and Kay?

00:16:05.180 | Did she really love him, the hologram or not?

00:16:08.740 | Was it fake love or real love?

00:16:10.820 | - Fake it 'til you make it, is my view on love.

00:16:13.660 | No comment from Charles.

00:16:14.740 | So let's go to the difference

00:16:17.580 | between theoretical computer science

00:16:20.860 | and software engineering.

00:16:22.540 | Or I don't know if you draw a distinction,

00:16:24.820 | but if we look into this computer world now,

00:16:27.200 | is there a difference between theory,

00:16:29.720 | things you can say formally,

00:16:31.420 | and the pragmatic implementation of that theory

00:16:34.780 | into actual systems that people use?

00:16:36.940 | - Yeah.

00:16:37.780 | - Which I guess we'll call software engineering.

00:16:40.180 | - So the engineer, they're obsessed with the domain of,

00:16:43.300 | well, what do you want to accomplish

00:16:44.540 | and who are you accomplishing it for?

00:16:46.280 | So they live in the world of people,

00:16:48.500 | if they're good engineers.

00:16:49.820 | And they say, okay, what's the experience?

00:16:52.700 | How are we going to use this?

00:16:54.260 | Why are we going to use this?

00:16:55.700 | What's the commercial application?

00:16:57.260 | What's the non-commercial application?

00:16:59.180 | And you collect all these business requirements.

00:17:01.300 | And once you've done all of that,

00:17:03.360 | the better job you do, the more self-evident it is

00:17:06.480 | of how do we apply the toys and tools

00:17:08.980 | of computer science and other such things

00:17:11.440 | to actually resolve that.

00:17:13.220 | And the point of theoretical computer science

00:17:15.820 | from the software engineering domain

00:17:17.560 | is it can tell you kind of where your guardrails are.

00:17:20.100 | It won't make perfect programs,

00:17:22.300 | and there's no such thing as that,

00:17:24.220 | but rather it can give you a good notion and sense

00:17:26.960 | that your program has some desirable properties.

00:17:30.720 | Like maybe you can prove that it can terminate

00:17:33.320 | if you're dealing with total programs.

00:17:34.960 | Or maybe you can prove you'll never have a buffer overflow,

00:17:37.860 | or it won't divide by zero somewhere,

00:17:40.260 | or something like that.

00:17:41.340 | Some event won't occur that'll cause

00:17:43.660 | a catastrophic failure in your system.

00:17:45.620 | But there's always this combinatorial explosion

00:17:47.700 | between what you can test and think about

00:17:50.700 | and what you can actually code.

00:17:52.820 | So the stuff on the left-hand side

00:17:54.580 | lives in a different cardinality, a different universe.

00:17:57.700 | There's something significantly larger there.

00:17:59.880 | And the tools on the right-hand side,

00:18:01.820 | we have property-based testing and these SAT solvers.

00:18:04.620 | We have all this great stuff here in formal methods land

00:18:07.740 | and computer science theory land,

00:18:09.580 | but there's only a small subset of things

00:18:11.720 | that they actually give you good answers about.

00:18:14.580 | So the balance of the two things is basically saying,

00:18:17.220 | well, what do you care about

00:18:18.900 | and what are you okay throwing away?

00:18:20.920 | That's the art of engineering

00:18:22.660 | and building these types of things.

00:18:24.780 | So in cryptocurrencies,

00:18:26.340 | we deal with these complex distributed systems

00:18:28.840 | that have cryptography and game theory and Byzantine actors.

00:18:33.000 | So the balance there is saying,

00:18:34.980 | okay, what can't fail in that system?

00:18:37.840 | And that's the kind of stuff that you want to apply

00:18:40.260 | as heavy a tool set as you can,

00:18:42.340 | because when that stuff fails,

00:18:44.100 | you either have a loss of billions of dollars,

00:18:46.260 | privacy, or potentially even life,

00:18:48.580 | depending on how these systems get adopted.

00:18:50.860 | But then other things, what can't fail?

00:18:52.920 | Is it okay if the block doesn't get made every now and then?

00:18:56.340 | Is it okay if your latency goes up

00:18:58.260 | or your network suddenly becomes asynchronous

00:19:01.300 | and you disconnect from it

00:19:02.900 | and you have to restart the computer or something like that?

00:19:05.420 | That's probably okay.

00:19:06.580 | It's an inconvenience and burden to the user.

00:19:09.020 | And if you actually try to chase that tail,

00:19:10.860 | you'll end up spending 10 years chasing phantoms and ghosts.

00:19:13.660 | And meanwhile, the whole world moves on.

00:19:16.220 | So it's really figuring out those balance of the two.

00:19:18.280 | And what's really beautiful is that the formal methods tools

00:19:21.660 | have gotten so much better

00:19:23.140 | over the last 20 years in particular,

00:19:25.180 | mostly because of incredibly high investments

00:19:27.700 | from Microsoft and Google and big universities,

00:19:31.100 | 'cause these guys are building these gargantuan systems.

00:19:34.940 | If you look at the Googleplex

00:19:36.200 | or what Amazon has or others,

00:19:37.940 | and they have so much value, so many users,

00:19:40.740 | so many things going on,

00:19:41.820 | and no person can keep that in their head.

00:19:44.460 | And so you're talking about systems

00:19:46.420 | may have 10 million lines of code,

00:19:48.420 | 15 million lines of code,

00:19:49.740 | millions of nodes connecting,

00:19:51.840 | faulty processes happening all the time,

00:19:53.600 | hackers breaking in on a regular basis.

00:19:56.040 | So when you're trying to model all of that,

00:19:58.020 | you're trying to ask yourself,

00:19:59.220 | what formal guarantees and properties can I get

00:20:01.720 | to simplify this system as much as possible?

00:20:04.400 | So instead of the applications of formal methods

00:20:06.380 | slowing you down, in many cases,

00:20:08.060 | it actually massively reduces your debugging time

00:20:11.180 | and your ability to find where errors occur.

00:20:13.180 | In some cases, you can't find where errors occur

00:20:15.460 | inside these massive concurrent systems.

00:20:17.380 | And you say, well, where are cryptocurrencies going?

00:20:19.320 | We're talking about just the same thing,

00:20:21.460 | but we're talking about a much more hostile

00:20:23.540 | operating environment, where instead of it running

00:20:25.860 | in a pristine data center in California somewhere,

00:20:28.780 | it's running on your cell phone,

00:20:30.300 | it's running on your mom's phone,

00:20:31.500 | it's running on your dad's phone,

00:20:32.500 | it's running on some computer in Mongolia

00:20:35.340 | that may have good internet on Tuesday,

00:20:37.620 | but not any other day.

00:20:39.180 | So when you live in that kind of environment,

00:20:40.780 | you really do need to think carefully

00:20:42.740 | about a whole new class of protocols.

00:20:44.860 | And then you need to think carefully

00:20:46.100 | about a whole new class of tools and techniques

00:20:48.180 | to test the reliability of those systems.

00:20:50.540 | And you need to separate the world and say,

00:20:52.940 | what is high assurance and cannot fail?

00:20:55.140 | 'Cause if it fails, people lose money.

00:20:57.420 | And what is low assurance and it's okay if that falls apart?

00:21:01.260 | The other thing I'll mention is there are

00:21:02.540 | perverse financial incentives in our industry.

00:21:05.340 | Because the reality is when something blows up,

00:21:07.780 | the people who built those things that blow up

00:21:09.580 | usually get paid up front.

00:21:11.300 | So what they're focusing on is time to market,

00:21:13.800 | speed to market, and getting tokens out

00:21:16.180 | and getting them liquid.

00:21:17.900 | I mean, then people come in, they buy it,

00:21:20.100 | but if there's a nascent bug in some DeFi protocol,

00:21:22.660 | it'll probably be discovered six months later

00:21:24.540 | or something like that.

00:21:25.620 | It blows up, who suffers?

00:21:27.300 | The users.

00:21:28.140 | - They already got, the people that created that

00:21:29.700 | already got paid.

00:21:30.540 | - Exactly, that's why you pay the guy

00:21:31.980 | who makes the break software for your train last.

00:21:34.900 | And you make sure he rides the train every day.

00:21:37.260 | (laughing)

00:21:38.860 | - So that's, you're basically describing the complexity

00:21:41.820 | of a distributed system that's fundamentally

00:21:44.540 | game theoretic and like, if we think about turtles

00:21:47.660 | all the way down, it's humans all the way down.

00:21:49.300 | So I mean, at the very bottom is still human nature.

00:21:52.860 | Is there something you can say

00:21:54.620 | formally about human nature to try,

00:21:59.220 | you said you can't, there's certain parts of the system

00:22:01.100 | that can't fail.

00:22:02.400 | You know, some people talk about nuclear war

00:22:04.500 | in that same kind of way.

00:22:05.800 | That there's this game theoretic construction

00:22:08.180 | of mutually assured destruction.

00:22:09.980 | Oh, that rhymes.

00:22:11.140 | See, I'm a poet.

00:22:12.180 | That system can't fail 'cause you're gonna blow everyone up.

00:22:15.920 | But you can't formally say for sure it's not going to fail.

00:22:19.980 | - Right.

00:22:20.800 | - So like, you're basically trying to chase,

00:22:24.220 | like statistically reduce the probability

00:22:26.180 | that these particular critical aspects will fail.

00:22:29.460 | And then you test, I guess, by deploying in the real world

00:22:32.380 | at small scale to see where things go wrong.

00:22:35.060 | - Yeah, it's a great question.

00:22:36.340 | And you know, the problem with game theory

00:22:38.180 | and mechanism design is that you can develop this concept

00:22:41.140 | of a rational actor.

00:22:42.140 | And I don't think in my life I've ever met a rational actor.

00:22:44.660 | You know, there's a rational actor on Tuesday,

00:22:46.420 | but any other day of the week, who the hell knows.

00:22:49.060 | And there's even, I think there was a book, Freakonomics,

00:22:50.940 | and there's a few of these things

00:22:51.880 | where it just shows again and again

00:22:53.420 | where people behave in ways

00:22:55.560 | that are against their best interest.

00:22:57.420 | So then you have these protocol designers,

00:22:59.060 | and they say, well, we need an honest majority

00:23:00.740 | for this thing to work.

00:23:02.420 | And they say, oh, okay, well,

00:23:03.680 | we'll create this incentive model,

00:23:05.180 | and rational actors will behave with that incentive model.

00:23:08.580 | And they say, well, the individual won't do that,

00:23:10.380 | but the firm, the government, the entity will.

00:23:13.960 | The problem with that is we have a lot of counter examples

00:23:16.220 | where the system was actually behaving in weird ways.

00:23:20.260 | Like we almost completely eradicated the human population

00:23:22.880 | twice in the 20th century,

00:23:24.720 | once during the Cuban Missile Crisis,

00:23:26.400 | and again in the 1980s, there was a Russian colonel,

00:23:29.220 | and they installed a new satellite system,

00:23:31.220 | and it said, hey, the Americans

00:23:32.980 | are launching missiles at us.

00:23:34.160 | You need to turn the key and launch all the missiles

00:23:36.300 | in the silo, and he said, oh, that's not right.

00:23:37.960 | That doesn't seem right.

00:23:39.440 | And he was reprimanded for not launching the missiles.

00:23:42.560 | So in both cases, a single person stood

00:23:45.840 | against the systems of superpowers

00:23:48.320 | between us and nuclear annihilation.

00:23:50.960 | So in general, we're really bad

00:23:53.360 | at building these types of things.

00:23:55.360 | So what you look for instead is say,

00:23:57.080 | can the system be self-correcting?

00:23:59.120 | It's not about avoiding a problem.

00:24:01.420 | It's more about can the problem be resolved?

00:24:04.380 | And that's how nature engineers things.

00:24:06.340 | It gives you an immune system.

00:24:07.700 | It gives you the ability to heal.

00:24:09.300 | If a rainforest has a fire or some catastrophic event,

00:24:13.140 | the ecosystem will find a way to patch things up.

00:24:16.520 | So it's a better question of how do you align

00:24:18.220 | the incentives over the long term of a system

00:24:20.460 | where all the actors within the system,

00:24:22.540 | when an event occurs that disrupts it,

00:24:24.860 | have an incentive to push it back

00:24:26.420 | into a healthy, productive, useful state?

00:24:29.520 | Which is going back kind of to that complexity theory stuff

00:24:32.580 | that we began with and a little bit about,

00:24:35.260 | how do you handle modern economics?

00:24:37.560 | Like for example, we knew this coming into the COVID crisis

00:24:41.160 | that there would be catastrophic economic disruption

00:24:43.960 | throughout the entire world.

00:24:45.060 | In the developed world, it was print lots of money

00:24:48.120 | and hope to God it works.

00:24:49.520 | In the developing world, it's try not to starve to death.

00:24:52.060 | Over 100 million people were pushed into acute starvation.

00:24:55.400 | So acute hunger, it's a terrible situation.

00:24:58.200 | But every economist knew we were going into that.

00:25:00.520 | So the question is how do you restart the system?

00:25:02.240 | How do you realign the system and so forth

00:25:04.240 | and make sure that it doesn't collapse at some point?

00:25:08.180 | So it's an imperfect, inexact science.

00:25:10.840 | And that's actually one of the things

00:25:12.280 | that makes our industry so much fun

00:25:14.040 | is that these are kind of like micro experiments

00:25:16.840 | for the macro.

00:25:18.960 | In years past, you never got a chance

00:25:21.760 | to experiment with monetary policy.

00:25:24.000 | I mean, it's like every 20 years, 30 years,

00:25:25.720 | you'd have some conference usually

00:25:27.080 | in a cool island like Jamaica and be like,

00:25:29.200 | okay, let's go talk about monetary policy

00:25:31.160 | and like amend the Bretton Woods Agreement.

00:25:33.080 | And these would be nation states, invitation only.

00:25:35.560 | And now you have over 8,000 cryptocurrencies

00:25:37.600 | floating around all with their own monetary policy

00:25:39.720 | and their rules and it's very Darwinian.

00:25:42.120 | A lot are dying, some are succeeding.

00:25:44.400 | Anomalies happen like Dogecoin and you say,

00:25:46.720 | God, is this temporary?

00:25:47.920 | Is this permanent?

00:25:48.760 | Why doesn't this horrible thing die?

00:25:50.960 | And then other things you think

00:25:52.360 | would be absolutely successful

00:25:54.240 | and just take off and be in the top 10

00:25:56.360 | don't really get as much traction.

00:25:57.840 | Like Algrand is a great example of that.

00:26:00.000 | I mean, Silvio, he's an incredibly bright guy.

00:26:03.080 | Every time I go to MIT, we have dinner

00:26:04.920 | and his work is legendary

00:26:07.840 | and it's just beautiful and elegant

00:26:09.440 | and he literally has all the people.

00:26:11.560 | He went and hired Tal Robin and she got at IBM Research

00:26:15.320 | and Craig Gentry, the guy did homomorphic encryption

00:26:17.520 | under Dan Boneh's there.

00:26:18.600 | There's all these amazing people on that team

00:26:20.960 | and they have money in the VCs.

00:26:22.840 | So you'd say, okay, that's a contender.

00:26:25.400 | But if you look at market adoption,

00:26:27.680 | Ethereum Classic sometimes is above it

00:26:30.120 | and other things are above it.

00:26:30.960 | - And then there's this weird Darwinian evolution

00:26:34.120 | produced Dogecoin organism

00:26:36.320 | that's just like stomping all around.

00:26:38.760 | Evolution doesn't make sense.

00:26:40.000 | - Exactly, but maybe it's we're the problem, not evolution

00:26:43.520 | 'cause the market's the market

00:26:44.680 | and you can scream and cry and pout

00:26:48.800 | and stamp your foot and say, this makes no sense.

00:26:50.900 | But that's the way the world works.

00:26:52.800 | There's plenty of mountain climbers

00:26:54.540 | that didn't want gravity to apply to them

00:26:56.360 | and it's the same situation here.

00:26:58.840 | There's plenty of people in these marketplaces

00:27:00.520 | that had the best of intentions, the best team,

00:27:02.360 | the best technology and for whatever reason,

00:27:04.460 | they didn't get that adoption.

00:27:06.760 | So the question isn't the local,

00:27:08.420 | it should be the long-term

00:27:10.400 | and will the system over time converge to a state

00:27:13.800 | that actually is useful and meaningful to society

00:27:16.680 | and actually solve problems for it?

00:27:18.480 | And that's what we try to figure out

00:27:20.460 | is how do we perturb these things in a way

00:27:22.820 | to kind of push them in that direction?

00:27:24.820 | - So before we go into this fascinating

00:27:27.820 | Darwinian evolution of cryptocurrencies,

00:27:31.260 | let me ask you sort of a basic programming question.

00:27:34.380 | There's a fascinating aspect to your work with Cardano

00:27:37.140 | that you use Haskell to build the infrastructure,

00:27:41.140 | but even stepping back more, looking at this landscape,

00:27:44.860 | another place where Darwinian evolution operates,

00:27:48.680 | looking at this landscape of programming languages,

00:27:51.640 | you as an engineer, you as a philosopher,

00:27:54.680 | both, what programming languages

00:27:57.040 | do you think are interesting?

00:27:58.760 | And more practically, what programming languages,

00:28:01.180 | if you were to advise students today, should they learn?

00:28:05.040 | - Yeah, so there's the pedagogy of learning how to program

00:28:08.680 | and to express the theory of computer science.

00:28:11.120 | Like you have to learn how to write algorithms,

00:28:12.960 | you have to learn what data structures are,

00:28:14.800 | you have to be able to do analysis of these things.

00:28:16.940 | And that probably, I think the debate is over Python

00:28:21.140 | is probably the best language or JavaScript

00:28:24.140 | to get started with 'cause they're very useful,

00:28:26.140 | the libraries are amazing,

00:28:27.460 | there's just tons of online materials.

00:28:29.820 | Even MIT is now teaching their introduction

00:28:32.220 | to computer science in Python.

00:28:34.500 | And they used to do Lisp, I mean,

00:28:36.260 | these guys were hardcore.

00:28:37.340 | - I still love Lisp.

00:28:38.180 | - Oh man, it's great.

00:28:39.660 | These are your father's parentheses,

00:28:41.020 | they're elegant weapons from a time long ago.

00:28:44.780 | But you know, that's a great starting point.

00:28:46.700 | And it's not about falling in love with a language,

00:28:49.260 | it's just falling in love with computing.

00:28:50.980 | It's about falling in love with having a dialogue

00:28:53.580 | with a computer and thinking about,

00:28:55.260 | well, how would I solve that?

00:28:56.480 | How would I interact with that?

00:28:57.860 | What does this need to look like?

00:28:59.720 | Functional programming is what we've chosen

00:29:02.500 | to use for Cardano, mostly because we're living

00:29:05.660 | in the academic world, we've written 105 papers.

00:29:08.040 | And the problem is you have to translate that work

00:29:10.380 | into code, and the gap between an imperative language

00:29:14.020 | like a C++ or C and these academic rigorous papers

00:29:18.280 | is extremely large.

00:29:20.220 | And so there's gonna be a lot of semantical ambiguity

00:29:22.560 | between those two.

00:29:23.540 | And what I mean by that is that you might end up

00:29:26.100 | implementing a wrong thing.

00:29:28.820 | You might think that what you've built is the paper,

00:29:31.480 | but the computer's not going to tell you that

00:29:33.720 | 'cause the paper's written in prose

00:29:35.220 | and maybe typed up in LaTeX or something.

00:29:37.540 | But there's no proof chain, evidence chain

00:29:40.180 | that you can show that there's no ambiguity.

00:29:42.340 | When you look at a functional language,

00:29:43.660 | you're a little closer to math.

00:29:45.540 | And so as a consequence, the translation of the papers

00:29:49.040 | that we spent so damn long writing and writing proofs about

00:29:52.140 | and so forth to code is much smaller.

00:29:55.420 | Now, the downside is these functional languages

00:29:57.260 | tend to be a bit more academic,

00:29:58.660 | and they tend to have not necessarily

00:30:00.620 | the best Windows support and the libraries aren't so good.

00:30:03.180 | And also they tend to be a little slower

00:30:04.900 | when compared as a whole on average

00:30:07.380 | to languages like C, for example.

00:30:09.980 | So it's really a question of, okay,

00:30:11.780 | what are you designing for for version one?

00:30:14.060 | Are you designing for performance?

00:30:16.140 | And are you designing for developer accessibility?

00:30:18.980 | Are you designing for correctness?

00:30:21.100 | And are you designing for a high-fidelity representation

00:30:26.100 | of the protocol?

00:30:27.820 | Okay, so Haskell was chosen as kind of the version one

00:30:32.100 | because we knew that the kinds of people

00:30:34.140 | who think about that are also the kinds of people

00:30:36.340 | that would have an easy time reading a paper like Ouroboros

00:30:39.580 | and working their way through all of this.

00:30:41.420 | And they would do a pretty good job

00:30:43.180 | running a formal specification

00:30:45.020 | and then translating that into running code.

00:30:47.620 | Then once you have that, you have a blueprint

00:30:49.820 | that you can actually reason about, maintain.

00:30:52.340 | And if you really wanted to,

00:30:53.500 | you could then turn that into a Rust code base

00:30:55.820 | or into a Java code base.

00:30:57.620 | Going the other way around would be

00:30:59.580 | kind of pointless and counterproductive.

00:31:01.900 | The other side of it is that Haskell code

00:31:06.480 | or functional code tends to be

00:31:08.060 | significantly more concise.

00:31:09.580 | And I actually have a real life example of that.

00:31:11.980 | So if you take a look at Mantis,

00:31:14.060 | we implemented a full Ethereum node in Scala.

00:31:17.900 | It's only about 14 or 15,000 lines of code.

00:31:21.100 | You compare that with like C++ Bitcoin,

00:31:23.380 | I think that's 120, 150,000 lines of code.

00:31:26.580 | So it's almost 10 times smaller.

00:31:28.660 | And so less code, less to read.

00:31:31.100 | And you tend to read code significantly more

00:31:33.180 | than you would read, write code.

00:31:36.540 | So it's always an advantage for maintenance,

00:31:39.300 | understandability, documentation, and other sort of things

00:31:42.820 | when you have more concise code bases.

00:31:44.980 | And also it's a lot easier for you to apply

00:31:49.180 | stronger tools to a functional code base,

00:31:52.100 | like static analysis or property-based testing

00:31:54.620 | or these types of things than an imperative code base.

00:31:57.320 | But you know, the thing is, it's almost like a religion.

00:31:59.500 | It's like, or language.

00:32:00.860 | It's like saying, what's French versus Russian

00:32:03.100 | versus English.

00:32:03.940 | Everybody has their adherence.

00:32:05.060 | They say, oh, they have the best poetry here.

00:32:07.380 | - Russian, yeah, wins.

00:32:08.620 | - There you go, always, Russian.

00:32:10.260 | Everybody has their favorite tools

00:32:11.940 | and their favorite languages,

00:32:14.020 | but it just comes down to what problems

00:32:15.740 | are you trying to solve

00:32:16.780 | and what problem domain do you live in?

00:32:18.220 | If you're inventing new protocols based on science,

00:32:21.300 | you're gonna take the time to write a paper,

00:32:23.140 | go through the peer review process,

00:32:25.340 | as you've done personally,

00:32:26.420 | and you know how hard it can be to get into a conference

00:32:28.580 | and go through that and get your ass kicked.

00:32:30.840 | Then you also have to apply the exact same level of care

00:32:34.820 | to the engineering side in terms of the implementation

00:32:36.900 | of that, or else you will make a mistake,

00:32:39.020 | and that mistake will probably be an exploit in the system

00:32:41.660 | that destroys the security properties of the system.

00:32:44.600 | So we really had no choice,

00:32:46.020 | but to go to some notion of functional.

00:32:48.260 | The question was, what's the Goldilocks language?

00:32:50.580 | Do you use a hybrid language like Scala and F# or Clojure,

00:32:54.500 | where you still have some connection

00:32:56.400 | to understandable things like .NET or the JVM?

00:33:00.060 | Or do you go to an overly academic language

00:33:03.100 | like Idris or Agda or Isabel?

00:33:06.180 | And there you can really dial up the correctness

00:33:09.140 | and write all kinds of crazy proofs.

00:33:10.820 | But by the way, it's like the seven people

00:33:12.740 | who write your code, they go on vacation a lot,

00:33:15.060 | you'll never get anything done.

00:33:16.660 | So Haskell kind of felt like a nice middle ground

00:33:19.340 | between those two,

00:33:20.180 | where if we needed to pull into the left, we could.

00:33:22.980 | If you wanted to pull into the right, you could as well.

00:33:25.300 | That said, it's really amazing to see

00:33:27.020 | what the hybrid languages have done.

00:33:28.500 | If I was a new student in computer science

00:33:30.540 | and I said, learn any language to grow your career from,

00:33:34.860 | Scala 3 is probably the language to go with.

00:33:37.140 | - Interesting.

00:33:37.980 | - Yeah, it's great, 'cause it's like,

00:33:39.220 | you want it to be like Java, it's Java.

00:33:40.980 | And it looks kind of like a Java program.

00:33:42.660 | You want it to be like Python and scripted

00:33:44.780 | and you reuse a REPL, you can do that.

00:33:46.940 | You wanna go hardcore dot, dependent object types

00:33:51.500 | and do like weird proofs and stuff in the functional,

00:33:54.060 | you do all that.

00:33:55.100 | You have access to all of these things.

00:33:56.880 | And Martin Odersky is a brilliant guy.

00:33:58.700 | He's done some phenomenal work, basically,

00:34:01.260 | 'cause he was one of the guys who created the JVM

00:34:03.380 | and he's worked on compilers for over 20 years.

00:34:06.380 | He did a lot of really hardcore work

00:34:08.620 | in trying to build a concise, nice, modern language

00:34:12.060 | that does a little bit of everything.

00:34:13.860 | And it's got great applications in data science and in AI.

00:34:17.540 | It's also heavily used in modern companies,

00:34:20.220 | like Netflix uses Scala

00:34:21.600 | for all of their microservice architecture.

00:34:23.460 | - Interesting.

00:34:24.300 | - Yeah, so that's a great language.

00:34:25.740 | And it's easy to pick up

00:34:27.060 | and it's easy to hire people into it.

00:34:28.700 | You just find these Eastern European guys

00:34:30.420 | who were Java programmers for 10 years, 15 years,

00:34:32.540 | and they got tired of making $20 an hour,

00:34:34.900 | so they picked up Scala so they can make $35 an hour.

00:34:38.220 | And they're really good at it.

00:34:39.900 | And that's a great gateway drug

00:34:41.380 | 'cause you have like QuickCheck and Haskell,

00:34:43.380 | you have ScalaCheck and Scala.

00:34:45.260 | You can also do model checking.

00:34:47.260 | You can also go and use a TLA spec

00:34:49.620 | and make it work with Scala and so forth.

00:34:52.020 | So it gets you a little bit of everything.

00:34:54.680 | And you can then move around that entire design space

00:34:58.880 | in a beautiful way.

00:34:59.900 | - So the recommendation is maybe if you wanna go vanilla,

00:35:05.680 | you go Python and JavaScript.

00:35:07.400 | - When you're getting started.

00:35:08.240 | - It's the getting started.

00:35:09.080 | - 'Cause that'll get you everything.

00:35:09.960 | You can do web scrapers and anything.

00:35:11.880 | It's just fun. - Like all of us

00:35:12.800 | experiment with drugs in undergrad.

00:35:14.600 | This was where Scala 3 comes in.

00:35:16.520 | It's a gateway drug to then potentially

00:35:18.320 | more hardcore functional languages like Haskell.

00:35:21.380 | Do you think C and C++ still have as a role?

00:35:24.240 | - No, I think Rust is completely replaced

00:35:26.200 | the need for them.

00:35:27.020 | Go and Rust, those are the two twins of Doom.

00:35:30.120 | I mean, Google created Go just to get rid of C.

00:35:33.360 | They hated C that much.

00:35:34.720 | And then Rust is just a phenomenal language as well.

00:35:37.400 | - Hate can be a great motivator.

00:35:39.240 | Let me ask a question from Reddit on this topic.

00:35:41.960 | We're going depth first today.

00:35:43.480 | As a developer, why should I be incentivized

00:35:47.720 | to create Cardano-based applications?

00:35:50.080 | What is on the Cardano developer roadmap?

00:35:52.520 | Any other language, I guess this is the key question

00:35:54.760 | I wanna ask, any other language support other than Haskell?

00:35:58.640 | The example this person gives us,

00:36:00.360 | TypeScript, Go, Java, Python, et cetera.

00:36:04.320 | Also, have you considered a yearly conference

00:36:06.600 | focused around developers?

00:36:08.740 | - Yeah, we call it PlutusFest.

00:36:10.200 | And we did the first one in 2018, 2019, I can't remember.

00:36:14.800 | And we were gonna do one last year, but then COVID hit.

00:36:17.400 | So we'll bring it back and we'll probably do it annually

00:36:19.500 | at the University of Wyoming for their hackathon there.

00:36:22.160 | In fact, it just so happens that coincides

00:36:24.040 | with the Goguen Summit.

00:36:25.000 | So we're doing that, I think the third week of September.

00:36:28.120 | But yeah, it's great to do an annual conference.

00:36:29.880 | You can bring a lot of cool people together

00:36:31.480 | and you can do hackathons and awards and so forth.

00:36:34.760 | But to the question in particular,

00:36:36.480 | Plutus is like any other language.

00:36:38.560 | Plutus Core, you can compile things into it.

00:36:41.040 | So it's entirely possible to write a Scala

00:36:43.600 | to Plutus Core compiler or TypeScript compiler

00:36:46.160 | or something like that.

00:36:47.360 | But I'm a big believer of separation of concerns.

00:36:51.320 | And we don't live in a single chain model anymore.

00:36:54.680 | So you have a situation where you probably wanna have

00:36:59.000 | different execution environments in different chains.

00:37:01.640 | So you have different virtual machines there.

00:37:03.240 | And that's why we work so closely

00:37:04.560 | with the University of Illinois, Urbana-Champaign,

00:37:06.480 | Gregori Roshu's team at Runtime Verification.

00:37:09.400 | What they did is they said,

00:37:10.360 | let's start with something very familiar, LLVM,

00:37:12.800 | which has been around for a really long time

00:37:14.400 | and they happened to have created it there with Apple.

00:37:17.360 | And let's take that and translate that

00:37:19.440 | into the blockchain space.

00:37:21.080 | Okay, then once you have it,

00:37:23.000 | then it's very easy to modify compilers

00:37:26.040 | of standard languages like the Cs and C++s

00:37:28.720 | and other such things that do compile to LLVM already

00:37:31.760 | and have them run there.

00:37:33.040 | So that's a different execution model

00:37:34.640 | than what we tried to build for Plutus,

00:37:36.200 | which focuses on correctness.

00:37:38.280 | Okay, so then all you have to really do is say,

00:37:40.800 | can both of these models coexist within the same ecosystem?

00:37:44.280 | 'Cause then you kind of, and I did a video,

00:37:46.120 | it was called like the island, the ocean, the pond.

00:37:48.040 | And the basic idea was say,

00:37:49.880 | you have an island where everything's perfect.

00:37:51.720 | Calypso lives there, life is great.

00:37:54.920 | People feed you grapes every day,

00:37:56.400 | but maybe you can't do everything on the island.

00:37:58.840 | The ocean's big, it has everything,

00:38:01.480 | but the ocean's got sea monsters and sharks

00:38:04.080 | and Boaty McBoatface and all kinds of crazy stuff, right?

00:38:08.280 | So that's what Yella is about.

00:38:10.000 | It's basically this, let's bring LLVM into our world

00:38:12.760 | and at some point in the next three to five year

00:38:14.640 | time horizon, we can bring modern programming languages in,

00:38:18.320 | but they're gonna come in with all their flaws

00:38:20.400 | and their warts and their problems.

00:38:22.240 | And then the pond was the idea

00:38:25.320 | of the Ethereum virtual machine.

00:38:26.600 | There's some network effect around it

00:38:28.160 | and there's some great tooling

00:38:29.280 | that's materialized and evolved.

00:38:31.040 | And it's not clear if that's the standard yet

00:38:33.520 | or if like MySpace or BlackBerry

00:38:35.640 | or all these other things, it'll fade away.

00:38:37.640 | Well, if it becomes the standard, okay,

00:38:39.840 | don't fight nature, just support it.

00:38:42.920 | And the same thing that gives you the ability

00:38:44.640 | to bolt on the LLVM will also give you the ability

00:38:48.760 | to bolt on the EVM and they can run with their own models

00:38:51.400 | and they're encapsulated, bulk-headed, separated systems,

00:38:54.880 | but you can move ADA applications information

00:38:58.160 | between those two systems.

00:38:59.840 | And so your main chain will always stay

00:39:01.720 | somewhat conservative and have the minimum viable amount

00:39:04.440 | of expressiveness required on it

00:39:06.280 | to do all kinds of interesting things.

00:39:08.840 | And also for interoperability, be able to talk

00:39:11.200 | to all kinds of interesting things,

00:39:12.880 | but it's not trying to be everything to everyone.

00:39:15.080 | There's never gonna be an ice cream store in the island.

00:39:18.120 | You'll have the grapes and the beautiful women,

00:39:19.800 | but no ice cream.

00:39:21.440 | - Now you're just like distracting me with the ice cream.

00:39:23.680 | So just for, because we'll throw around a bunch of terms

00:39:26.800 | for the record, what is Plutus?

00:39:28.400 | - So Plutus is a programming language.

00:39:29.760 | It's kind of a DSL that we built on top of Haskell.

00:39:33.520 | And basically we wrote it after spending about three years

00:39:38.000 | thinking about all smart contracts.

00:39:40.040 | We were trying to figure out like,

00:39:41.840 | what is the ideal language to express a smart contract?

00:39:44.440 | And then we started thinking, well,

00:39:45.280 | what is a smart contract?

00:39:46.400 | Is it the whole application or is it just like a sub module

00:39:49.680 | within an application?

00:39:50.920 | And usually it's the latter more than the former.

00:39:54.080 | You can build a self-contained program like a script,

00:39:56.800 | but usually what's happening is you'll have it

00:39:58.600 | like a video game, let's say World of Warcraft

00:40:00.600 | or something like that.

00:40:01.680 | You say, hey, maybe I want to actually create gold

00:40:04.600 | in World of Warcraft that's actually a currency.

00:40:07.840 | Okay, so I'm gonna issue a token.

00:40:09.720 | Well, and then maybe I want to create some mechanics

00:40:11.620 | behind how people are gonna trade that amongst each other.

00:40:14.320 | So that would be like a smart contract layer

00:40:16.580 | and issue an asset.

00:40:17.960 | So you have this centralized server running

00:40:20.300 | and proprietary software controlled by a single company,

00:40:23.860 | but then you've opened your application up

00:40:26.460 | to a broader world.

00:40:27.920 | And what you've done now is added a blockchain layer

00:40:29.920 | and the blockchain handles the accounting of that asset

00:40:32.120 | and the spending policy of that stuff.

00:40:34.480 | So that is a much smaller program

00:40:37.460 | than what Blizzard is doing with World of Warcraft.

00:40:40.780 | So the point of Plutus was let's create a language

00:40:43.360 | where you can write these small to mid-sized programs

00:40:46.720 | and have a high degree of confidence

00:40:48.240 | that they behave with correctness.

00:40:50.200 | And also they give you deterministic results

00:40:52.840 | on the consumption of resources.

00:40:54.160 | You can run things locally and you actually understand

00:40:56.900 | what it costs to run.

00:40:57.880 | And that doesn't change when you deploy it on the system.

00:41:01.200 | If you dial up the expressiveness of the system

00:41:03.700 | and like Ethereum does

00:41:05.080 | and these big mutable account systems,

00:41:07.680 | the problem is you have to have global state.

00:41:09.320 | So whatever you test locally

00:41:11.000 | doesn't actually necessarily translate

00:41:13.280 | to what you've deployed.

00:41:15.240 | So we spent a long time asking,

00:41:18.000 | where's the Goldilocks zone?

00:41:19.560 | Bitcoin script was too restrictive

00:41:22.080 | and every single time Satoshi tried to dial it up,

00:41:24.600 | it led to mega problems.

00:41:26.160 | Like there was a beautiful thing

00:41:27.200 | called the value overflow incident in 2010,

00:41:29.800 | which led to the creation of billions of Bitcoin.

00:41:32.440 | They had to quickly clean that up and sweep it under the rug

00:41:34.680 | and pretend like it didn't exist.

00:41:36.360 | But that was mostly because of an issue

00:41:38.680 | with how the scripting language was implemented.

00:41:41.280 | And when you look at Ethereum,

00:41:44.040 | it's like this pure game of stomping down these skirmishers

00:41:48.000 | where every update there's something

00:41:49.280 | they have to change or tune.

00:41:50.640 | And then it's not clear how you shard such a model.

00:41:54.080 | So we said, let's build something

00:41:55.560 | that's in the middle of this.

00:41:56.880 | And that's what Plutus basically is.

00:41:58.560 | And it's really designed to play very nicely

00:42:01.040 | with off-chain infrastructure

00:42:02.400 | as much as on-chain infrastructure.

00:42:04.280 | So you can look at all those different examples,

00:42:05.960 | whether it's Wolfram wants to auction off

00:42:07.880 | their universes or Blizzard wants to issue

00:42:11.000 | an in-game currency or you're Uber

00:42:13.440 | and you want to start putting peer-to-peer dynamics

00:42:15.680 | inside your system, you're going to gracefully connect

00:42:18.760 | to that on-chain code.

00:42:20.680 | And it's very clear how those two things connect together.

00:42:23.080 | Just so happens Haskell is really good for this.

00:42:25.600 | They have template Haskell and it makes it very easy

00:42:27.720 | to embed domain-specific languages.

00:42:30.000 | And it makes it very easy to wire your Haskell code

00:42:32.320 | onto off-chain infrastructure.

00:42:34.160 | So in the future, you'll be able to have your off-chain

00:42:36.960 | run a node or the Java virtual machine

00:42:39.240 | or a .NET application, and there'll just be

00:42:41.520 | this beautiful interface and then it can talk

00:42:43.240 | to all your on-chain code.

00:42:44.240 | And that's written in that DSL

00:42:45.920 | and you have a high degree of assurance that it's right.

00:42:49.280 | - Is there like a Hello World program in Plutus

00:42:52.240 | that reveals the beauty of this balance

00:42:55.040 | that you're referring to?

00:42:56.160 | Sort of simple but not too simple, the Einstein idea.

00:42:59.960 | - Yeah, so we did do our first Hello World program

00:43:03.000 | actually today 'cause we just--

00:43:03.840 | - Yeah, I heard about this.

00:43:05.880 | But there you'd want to have the whole round trip.

00:43:08.600 | So you'd like to have an interaction.

00:43:10.360 | And I think a video game would probably show it the best.

00:43:12.480 | Like if we could reimplement CryptoKitties

00:43:14.360 | or something like that on it,

00:43:15.840 | and you have this off-chain infrastructure

00:43:17.400 | and you have your GUI in your front end,

00:43:18.840 | it's running on your phone or a browser,

00:43:21.120 | and most of that lives off-chain.

00:43:23.240 | But your CryptoKitties, they'd live on the blockchain.

00:43:26.240 | The whole round trip end-to-end with relatively low fees

00:43:29.080 | and low latency and high availability of service,

00:43:33.040 | it never goes down.

00:43:34.240 | That would probably be the best thing to do.

00:43:36.000 | And we'll have something like that by August.

00:43:37.840 | It's pretty easy to build this stuff.

00:43:39.200 | - So what kind of off-chain interactions

00:43:40.800 | are supported with Bluetooth?

00:43:41.960 | What are the limits you want to put on the thing

00:43:44.000 | so it doesn't get chaotic?

00:43:45.120 | - That's the beautiful thing.

00:43:46.040 | When you have a less expressive model on-chain,

00:43:48.240 | it means you can do anything you want off-chain.

00:43:50.760 | - So you started talking about smart contracts,

00:43:52.600 | but let's zoom back out and ask the big question here

00:43:57.600 | is what is a blockchain and what is a cryptocurrency?

00:44:02.200 | - So a blockchain is just a ledger,

00:44:04.200 | and really it has three nice properties.

00:44:05.880 | You're time-stamped, you're immutable, and auditable,

00:44:08.280 | either in a global or a local sense.

00:44:10.240 | And so there's all kinds of things mankind has invented

00:44:13.460 | where it's really important

00:44:15.080 | that when you put some information down, it doesn't change,

00:44:18.840 | and other people can see it,

00:44:21.200 | and that you know when it was put down.

00:44:23.280 | For example, a property ledger.

00:44:24.680 | So when you buy land or you have rights associated with land

00:44:28.000 | like mineral rights or water rights or these things,

00:44:31.040 | you'd like to transitively see how does it go

00:44:33.680 | from Alice to Bob to Charlie to Jim and so forth,

00:44:36.400 | and what was the state of these things

00:44:38.520 | as they were transitioning?

00:44:39.600 | So how much did they pay, when did it occur,

00:44:43.280 | et cetera, et cetera, the metadata that follows that.

00:44:46.120 | Okay, well normally these types of ledgers are so important

00:44:49.560 | that they're managed either by governments

00:44:51.000 | or regulated entities.

00:44:52.420 | And the issues are that while they can be efficient,

00:44:55.820 | they're generally brittle to political manipulation,

00:44:58.960 | and they're brittle to geopolitical events.

00:45:02.080 | For example, when Syria fell apart,

00:45:04.520 | the very first thing ISIS did is they started saying,

00:45:06.520 | "Hey, the ownership of the land,

00:45:08.560 | "it's gonna fundamentally change.

00:45:10.300 | "We've decided that this guy over here now

00:45:12.560 | "owns all these things."

00:45:13.680 | And then when peace comes, how do you unwind all of that,

00:45:16.580 | put it all back together?

00:45:18.440 | So the power of a blockchain is that it gives you

00:45:21.240 | a transnational way of sorting all these details out,

00:45:25.080 | putting it all together in a place that you know

00:45:29.640 | that even if it's inconvenient to a very powerful actor,

00:45:33.320 | that it will still stay preserved.

00:45:35.640 | This is an asymmetry we haven't had as a society.

00:45:38.760 | Usually kings and empires,

00:45:40.840 | they have the ability to decide what's true.

00:45:43.260 | And then suddenly you have this asymmetrical thing

00:45:45.400 | that is above them, kind of like a synthetic laws of physics

00:45:49.000 | and once something goes in there,

00:45:50.840 | you know that that's there, okay?

00:45:53.540 | So that's the first part of it.

00:45:54.780 | The second part of it is that it's auditable,

00:45:59.500 | meaning that instead of saying only the high cleric

00:46:02.680 | or the president or some very special club of people

00:46:07.240 | get to see what's going on,

00:46:08.940 | suddenly now all the people can actually see

00:46:11.780 | who owns what where.

00:46:13.280 | Like imagine a tax system where the ProPublica

00:46:16.040 | just leaked the taxes of all these different billionaires

00:46:19.080 | and said, "Well, how much do they make

00:46:20.000 | "and how much do they pay?"

00:46:21.320 | Well, imagine a tax system where that's just done by default

00:46:24.680 | or other social systems where this type of information

00:46:27.760 | is put in by default.

00:46:29.180 | So it's tremendously useful, this type of structure

00:46:32.800 | and all kinds of things, medical records, supply chains.

00:46:35.740 | Just a good thought experiment is I travel a lot,

00:46:38.440 | I've been to 52 countries in the last five years.

00:46:41.040 | Imagine if I got sick in Zimbabwe.

00:46:43.400 | You know, I get hit by a car or something

00:46:44.940 | and I'm unconscious and a Zimbabwean doctor

00:46:47.300 | calls my doctor in Colorado and says,

00:46:48.920 | "Hey, I need all of Charles's medical records.

00:46:51.600 | "He's unconscious right now,

00:46:53.560 | "but I need it to treat him 'cause he's quite ill."

00:46:56.360 | They'd say, "Who is this person in Zimbabwe?

00:46:58.740 | "I don't know you, I can't give you his records.

00:47:00.720 | "I need his consent."

00:47:01.560 | "Oh no, he's unconscious in the hospital, can't do it."

00:47:04.200 | Well, a broker system that would allow the movement

00:47:06.280 | of medical records would be an example

00:47:07.800 | of what a blockchain could potentially do

00:47:09.440 | in the foreseeable future.

00:47:10.840 | Cryptocurrency is just an application

00:47:12.680 | that runs on top of blockchain 'cause it turns out

00:47:15.280 | that when you issue property,

00:47:16.480 | you also can issue tokens of value.

00:47:18.860 | And then you could have a monetary policy,

00:47:20.440 | it could be inflationary or deflationary,

00:47:22.680 | gonna demorize where it decays over time

00:47:25.080 | or whatever have you.

00:47:27.280 | And the very same mechanics that would ensure

00:47:29.920 | your property records are secure,

00:47:31.480 | your medical record access is secure,

00:47:33.440 | could also be applied for the ownership

00:47:35.160 | of the cryptocurrency.

00:47:36.200 | And again, you can either be completely transparent

00:47:38.800 | and everybody can see what everybody owns

00:47:40.240 | and that's what Bitcoin does,

00:47:41.640 | or you can be as opaque as you seek to be.

00:47:44.240 | That's what Zcash basically attempts to do.

00:47:46.400 | It says, "Hey, let's keep these things

00:47:47.640 | "as private as possible."

00:47:49.080 | But they have relatively the same mechanics

00:47:50.720 | in terms of those properties of auditability

00:47:52.660 | and timestamping and immutability.

00:47:54.680 | You know things won't be reversed,

00:47:56.380 | you know that people aren't gonna manipulate the timestamps

00:47:58.800 | and you can audit at least enough to know

00:48:01.440 | that the ownership is right.

00:48:03.200 | - But the way, if you think about physics and the universe,

00:48:06.480 | the universe has figured out a way to update

00:48:08.480 | the ledger of physics in a way where like a lot of people

00:48:12.360 | can be updating it and it stays consistent.

00:48:16.080 | Is there something you can say about the task

00:48:19.660 | of updating the ledger when a bunch of people

00:48:21.920 | are trying to do it,

00:48:22.760 | or a bunch of entities are trying to do it?

00:48:24.320 | - Well, yeah, that's the whole point

00:48:25.160 | of a consensus algorithm.

00:48:26.240 | So whatever ledger you're running,

00:48:28.240 | there has to be some mechanism to decide who's in charge.

00:48:32.040 | And that's what proof of work does

00:48:33.680 | and proof of stake does and all these other systems.

00:48:35.800 | And you break them down to basically three steps.

00:48:37.840 | And so we'll use Eve for kind of step number one.

00:48:40.560 | Hi Eve, how you doing?

00:48:42.080 | And we're gonna use Wally for step number two.

00:48:44.320 | And I need the monkey, give me the monkey.

00:48:47.140 | What's the monkey's name?

00:48:49.000 | - Daisy.

00:48:49.840 | - Daisy the monkey, okay.

00:48:50.960 | I like Daisy.

00:48:52.360 | Daisy is a very confused monkey.

00:48:54.600 | - Pondering its own mortality.

00:48:56.720 | - Right, and so anyway, the first step is all about

00:49:00.220 | basically deciding who's in charge for that moment.

00:49:03.200 | So blockchain is just a sequence of events

00:49:05.080 | the heart has to beat, the metronome has to click.

00:49:08.120 | So somebody has to be in charge.

00:49:09.880 | And so generally you have this notion of a resource.

00:49:12.000 | So there's some pool of resource out there.

00:49:14.240 | And it can be a token,

00:49:15.400 | and in that case it's a plutocratic system,

00:49:17.240 | and that's what proof of stake does.

00:49:18.760 | Or it can be computation,

00:49:20.440 | but there can be other resources.

00:49:21.720 | But computation's what proof of work does.

00:49:23.320 | And so you make so many hashes,

00:49:25.060 | and then eventually somebody wins.

00:49:27.040 | And that person who wins is now the person

00:49:29.360 | who basically gets to decide the order of transactions,

00:49:32.040 | and put them all together

00:49:33.240 | from their perspective in the system.

00:49:35.480 | Then once that person wins, they'll make the block,

00:49:37.920 | that's step two, and after it's made,

00:49:40.640 | transmit it, and it gets validated and accepted.

00:49:43.120 | So actually it's quite fortuitous

00:49:44.160 | you have the magnifying glass,

00:49:45.520 | 'cause at this stage people are trying to decide

00:49:48.720 | is what I'm looking at correct or not.

00:49:51.120 | Now there are other ways to potentially conceive of this,

00:49:54.400 | but this particular model gives you

00:49:56.840 | a kind of a way of thinking of

00:49:58.320 | all consensus algorithms in one setting.

00:50:02.640 | You can be Algorand, you can be a classic BFT protocol,

00:50:06.120 | you can be Paxos, you can be Raft,

00:50:08.080 | you can be proof of work, you can be proof of stake.

00:50:10.320 | It's always the same idea.

00:50:12.360 | You have to find someone or some group to be in charge.

00:50:15.960 | They'll reach a consensus on order.

00:50:18.520 | They have to then do some work,

00:50:20.280 | change the state of the system, update it,

00:50:23.480 | and then the network has to accept that that's valid.

00:50:26.400 | So even if this process works well,

00:50:28.560 | this side will say, oh, you created a Bitcoin

00:50:30.440 | at a thin error, you're not allowed to do that,

00:50:32.020 | so that's rejected.

00:50:33.600 | So there's checks and balances and guards all the way through.

00:50:36.600 | There's a meta question of fairness in all of this.

00:50:39.720 | So the proof of work people, they're kind of a cult,

00:50:42.080 | and they say that this is the only truth,

00:50:45.000 | and everything out here, any other resource

00:50:47.620 | is not legitimate or valid.

00:50:49.440 | And there's not a lot of evidence to that,

00:50:51.440 | but that's what they believe.

00:50:52.720 | The proof of stake people, the downside and weakness

00:50:54.920 | they have is it's a plutocratic model.

00:50:57.100 | The more ownership of the system you have,

00:50:59.020 | the more control you have over that system.

00:51:01.240 | And it suffers from the same thing

00:51:03.280 | the shareholder models suffer from,

00:51:04.760 | whereas you may maximize short-term gain

00:51:07.640 | over the long-term viability of the system.

00:51:09.880 | So a really cool question is,

00:51:11.320 | can you build systems that are multi-resource?

00:51:14.020 | So instead of just pulling from one resource

00:51:16.680 | to select who wins, this 25% of the time,

00:51:20.040 | and maybe this 25%, you can do that.

00:51:22.200 | In fact, the cryptocurrency space did that a long time ago.

00:51:25.240 | There was a cryptocurrency called Peercoin in 2011,

00:51:28.040 | and it was a hybrid proof of work, proof of stake.

00:51:30.400 | So some of the blocks were made

00:51:31.780 | with the token ownership distribution,

00:51:34.720 | and some of the blocks were made with proof of work.

00:51:36.660 | But you could keep adding.

00:51:38.320 | You could put in like, hey, I want hard disk in my thing.

00:51:41.280 | You can put Permacoin in or something like that

00:51:43.360 | to create an incentive for hard drives.

00:51:45.000 | And then you could say, oh no,

00:51:45.840 | I want to do like a human system, like a proof of merit.

00:51:48.760 | Oh my God, now we're up to four.

00:51:50.120 | And you just keep adding.

00:51:51.320 | And each of these pools will have different adherence

00:51:54.100 | and actors, and then you can actually balance out

00:51:56.520 | the whole thing.

00:51:57.360 | - So as opposed to having one cult, you have many cults.

00:51:59.920 | - Exactly. - And they argue.

00:52:01.080 | - And the cults argue with each other,

00:52:02.400 | and we call that a government.

00:52:03.440 | - By the way, not all cults are bad.

00:52:05.160 | Physics is a cult too.

00:52:06.720 | - And it's sometimes bad.

00:52:08.240 | - It's honest, at least.

00:52:10.880 | Nature is a cult.

00:52:12.040 | Nature is metal.

00:52:14.480 | Check out the Instagram.

00:52:15.600 | So that's really the crux of it.

00:52:17.600 | You have a ledger, and the ledger is just all about saying,

00:52:20.460 | hey, we need to put some stuff in here.

00:52:21.960 | And once it's put in here, you can't turn it back.

00:52:24.520 | And you know when it was put in,

00:52:26.880 | and everybody can see it, or some group can see it.

00:52:29.240 | And then you need to pick somebody to modify that.

00:52:31.640 | So all this chaos will happen,

00:52:33.120 | all these transactions are all around the world,

00:52:35.160 | and our perception of them are different.

00:52:37.280 | There's a beautiful paper from Lamport

00:52:38.880 | that kind of talks about this from the '70s.

00:52:40.760 | It's like one of the most classic papers ever

00:52:43.320 | in computer science, I think.

00:52:44.480 | It's been cited like 50,000 times or something like that.

00:52:47.760 | It's a crazy paper.

00:52:48.840 | But basically, you have to figure out,

00:52:50.400 | okay, well, somebody has to be in charge.

00:52:51.920 | Some group has to be in charge.

00:52:53.560 | You can do it with a meritocratic,

00:52:55.640 | hashocratic computation thing.

00:52:58.000 | You can say, well, if you have coins, 25% of supply,

00:53:00.920 | 25% of the time, on average, you'll be selected

00:53:03.800 | to have the right to do this or give it to somebody else.

00:53:06.200 | Or you can search for other resources,

00:53:07.880 | and they can even be human resources,

00:53:09.160 | like some notion of merit or social benefit.

00:53:12.080 | Maybe you get a token for that,

00:53:13.400 | and you can weight it with these other systems.

00:53:15.760 | And that's where kind of where everything's going.

00:53:18.000 | We're getting to a point where we've really optimized

00:53:21.080 | all the properties here.

00:53:22.120 | We've proven all these nice things about it.

00:53:24.200 | And there's a lot of competition

00:53:25.720 | to basically build the perfect proof-of-stake system,

00:53:28.800 | whether you're Polkadot or Algorand

00:53:30.920 | or any of these other guys.

00:53:32.800 | But now the next step is say,

00:53:34.240 | well, why don't we just have one?

00:53:36.840 | We should have multiple resources.

00:53:39.080 | And the point is each of these

00:53:40.480 | has different trade-off profiles,

00:53:42.240 | and so they balance each other,

00:53:43.680 | and you end up building a much more resilient system,

00:53:45.660 | so it's not winner-take-all with one particular demand.

00:53:49.260 | - Okay, so there's a million questions

00:53:50.960 | that spring up right there.

00:53:52.440 | But first, linger on this topic and say,

00:53:54.440 | what is proof-of-work, what is proof-of-stake?

00:53:56.840 | Just zooming in on each of those.

00:53:59.480 | And what are the differences?

00:54:01.500 | - Okay, so they all have the same three properties

00:54:03.920 | of pick someone in charge, do something, and validate it.

00:54:06.640 | The difference is that the picking mechanism

00:54:08.840 | for proof-of-work is you have to solve a puzzle.

00:54:11.400 | So it's basically like buying lottery tickets,

00:54:13.600 | and you can buy a certain amount every second

00:54:16.480 | with your computing devices,

00:54:18.080 | and some of them are ASIC-resistant,

00:54:19.640 | so you run them on like a laptop or a GPU,

00:54:22.040 | and some of them are you specialized hardware

00:54:24.420 | that you have to either manufacture

00:54:26.320 | or buy from someone who sells it to you.

00:54:28.640 | And that's just how many tickets per second you can get,

00:54:31.080 | and eventually you hit those magic numbers.

00:54:32.920 | And when you do, it means you have the right

00:54:35.380 | to make the block, and generally you bundle the block making

00:54:38.280 | with the proof-of-work system.

00:54:39.940 | Now you can do this looking for a single,

00:54:43.000 | or you can do this to actually shard it

00:54:44.600 | and look for multiple block makers at the same time.

00:54:47.520 | So there are sharded proof-of-work protocols,

00:54:49.160 | like Prism is an example of that,

00:54:50.820 | and actually Ethereum got started this way

00:54:53.760 | with Spectre and Ghost and Phantom,

00:54:56.340 | the Avi Zahar's work and Yonatan Samlipinsky.

00:54:59.660 | But the basic idea is you pick some collection of people,

00:55:02.360 | they make some collection of things,

00:55:03.520 | and there's some way to sort it all out,

00:55:04.900 | serialize it, and prevent double spends.

00:55:06.880 | Great.

00:55:07.720 | The proof-of-stake is the same,

00:55:09.660 | but it's a synthetic resource.

00:55:11.180 | So instead of doing things, they say,

00:55:13.020 | "Well, if you had 25% of the hash power on average

00:55:15.740 | "over a long period of time,

00:55:17.060 | "you'd probably win 25% of the time."

00:55:19.540 | Well, why don't we just introduce some randomness in

00:55:21.740 | from some source, and then 25% of the time on average

00:55:24.900 | over a long period of time, you'll win.

00:55:26.900 | So it's a synthetic resource.

00:55:28.780 | But you still have to do the other two things.

00:55:30.540 | You still have to make the block,

00:55:31.860 | and you still have to validate the block.

00:55:33.860 | The big difference is this step in the proof-of-work world

00:55:36.900 | is horrendously expensive.

00:55:38.760 | You use more energy than the nation of Switzerland.

00:55:41.500 | And the problem with that is that you have less resources

00:55:43.820 | for the other two.

00:55:44.980 | And the other problem with that is that

00:55:46.380 | if this is horrendously expensive,

00:55:48.240 | you have an economy of scale kick in.

00:55:50.460 | So what ends up happening is the system

00:55:52.060 | becomes less decentralized over time

00:55:54.400 | because you have these vertically integrated operations.

00:55:56.820 | I mean, not everybody can go build a mining facility

00:55:58.980 | on a volcano in El Salvador.

00:56:00.820 | Not everybody can go to Mongolia

00:56:02.860 | and set up a five gigawatt power plant

00:56:05.100 | and a huge data thing.

00:56:06.300 | Not everybody has access to the patented ASICs

00:56:08.940 | that people produce.

00:56:10.100 | 'Cause what if I don't sell it to you

00:56:11.300 | and I have the patent on it?

00:56:12.580 | Or what if I control the supply chain for these things?

00:56:15.240 | So you'll end up having centralization

00:56:17.660 | around maybe 10 or five major operations,

00:56:20.660 | as we've seen historically with proof-of-work.

00:56:23.280 | And that means you end up having a ruling class

00:56:27.100 | of a mining oligarchy in the system.

00:56:29.380 | Proof of stake, if you design the parameters correctly,

00:56:32.300 | you actually get more decentralized over time.

00:56:34.980 | 'Cause as the currency goes up in value,

00:56:37.220 | the distribution of the currency

00:56:38.880 | tends to get more egalitarian.

00:56:43.140 | For example, Bill Gates, when he started Microsoft,

00:56:45.620 | he had 64% of the shares.

00:56:47.500 | Now he has less than 5% of the shares.

00:56:49.880 | So there's founder drift over time.

00:56:52.060 | As the value goes up, divestment occurs.

00:56:54.140 | You have more and more and more people coming in.

00:56:56.620 | That means there's more people

00:56:57.500 | who can participate in the consensus.

00:56:59.320 | You can even tune economic parameters.

00:57:01.180 | And this is what we did with Cardano and Ouroboros.

00:57:03.940 | We created this concept of K in the system,

00:57:06.700 | and it's just a parameter.

00:57:07.940 | It's like a forcing factor that tends to accumulate

00:57:11.140 | a certain amount of stake pool.

00:57:12.220 | So you can set it to 200 and then 500 and 1,000 and so forth.

00:57:16.140 | But the basic idea is as the price of ADA goes up,

00:57:19.260 | you make K larger, and then you end up, in practical terms,

00:57:23.100 | having a larger and larger set of actors making blocks

00:57:27.080 | that are unique and distinct.

00:57:28.620 | And the other good thing is this is a virtual resource

00:57:31.420 | instead of a physical resource,

00:57:32.960 | which means it's portable by the click of a button.

00:57:35.820 | So let's say China says mining is bad,

00:57:37.880 | we're gonna shut it all down,

00:57:38.980 | and it looks like they're moving in that direction.

00:57:40.940 | You have all these people in WeChat

00:57:42.180 | just trying to sell miners,

00:57:44.060 | or trying to figure out how the hell do I move miners,

00:57:46.660 | 'cause they have these huge data centers they've constructed.

00:57:48.900 | You can't exactly go and grab a server

00:57:50.740 | and take it with you.

00:57:51.580 | It's huge.

00:57:52.420 | It's a lot of work.

00:57:53.260 | And if the government seizes it,

00:57:54.340 | well, it's their property now.

00:57:56.020 | A virtual resource, you can click a button

00:57:57.900 | and redeploy it to a different jurisdiction.

00:58:00.740 | So to me, for a virtual asset,

00:58:03.480 | it makes a lot more sense to try to tie your security

00:58:06.080 | to something endogenous, something within the system,

00:58:08.960 | because it's just like the asset.

00:58:11.000 | It can move anywhere at a click of a button.

00:58:13.160 | And human beings have a much harder time

00:58:15.120 | attacking something like that.

00:58:16.480 | - Well, so people, maybe you could sort of play

00:58:18.800 | devil's advocate and say,

00:58:19.640 | "What is the strength of proof-of-work system?"

00:58:21.560 | Because some people would argue that proof-of-work has,

00:58:25.380 | because it's outside the system,

00:58:27.040 | it's tied to physical resources,

00:58:29.800 | it's more secure, it's less prone to attack

00:58:34.800 | by large groups of people.

00:58:36.520 | - Yeah, that's a great question.

00:58:37.840 | And the first question we had was,

00:58:39.880 | could proof-of-stake actually work or not?

00:58:41.760 | So the problem was that the engineers kind of led

00:58:44.720 | when the science should have led.

00:58:46.080 | And so there were all these POS protocols

00:58:48.160 | that came out in the early 2010s,

00:58:50.440 | like Peercoin was the first,

00:58:52.160 | and then NXT and others came out.

00:58:54.280 | And there they had suffered from things

00:58:55.520 | like the random number generation wasn't good.

00:58:57.560 | They had grinding attacks and nothing at stake

00:58:59.800 | and all these other things.

00:59:00.760 | And there's a lot of beautiful properties

00:59:02.600 | for proof-of-work from a theoretical sense.

00:59:04.420 | We even wrote a paper called GKL,

00:59:06.780 | named after the authors, Juan Gray,

00:59:09.680 | Nico Leonardis and Agulhos Gassis, our chief scientist.

00:59:13.080 | It's got 1,100 citations now,

00:59:14.800 | and it was published in 2015.

00:59:17.320 | But basically all it did is just modeled a blockchain

00:59:19.440 | and created some security properties for it.

00:59:21.200 | And then it started talking about,

00:59:22.480 | well, what does proof-of-work actually do for you?

00:59:24.600 | And it turns out it does a lot.

00:59:26.240 | It's an asynchronous system.

00:59:28.040 | You can bootstrap from Genesis.

00:59:29.640 | So if Eve joins the network and Wally joins the network

00:59:34.040 | and Daisy joined the network,

00:59:36.880 | then you give them some different chains,

00:59:39.500 | like five or 10 different chains.

00:59:41.280 | They can run a calculation

00:59:42.960 | and they will always pick the longest chain,

00:59:45.140 | the heaviest chain inside the system.

00:59:47.220 | That's a great property of proof-of-work.

00:59:49.480 | Until we published Ouroboros Genesis in 2018,

00:59:52.900 | you actually needed to solve that in proof-of-stake

00:59:54.880 | with a trusted checkpoint.

00:59:56.600 | So some actor had to be observing,

00:59:58.840 | watching the whole thing and creating checkpoints.

01:00:00.960 | And then when new people joined in,

01:00:02.600 | they would only be able to distinguish between a chain

01:00:05.080 | based upon a checkpoint telling them that.

01:00:07.800 | So you have to do a lot of really wonky, crazy math

01:00:10.200 | to show and create this notion of density

01:00:12.920 | to be able to show that that's possible.

01:00:14.800 | But there's a lot of properties of proof-of-work

01:00:16.640 | that were super hard to replicate and emulate

01:00:19.040 | in the proof-of-stake world.

01:00:20.960 | Macaulay kind of revolutionized the whole VRF thing.

01:00:24.600 | There was a group out of Cornell

01:00:26.120 | that talked about better network conditions.

01:00:28.100 | They wrote a paper called Sleepy.

01:00:30.360 | We did Genesis.

01:00:31.960 | We also did the very first proof-of-secure protocol.

01:00:34.760 | But that was six years of work and like 12 papers.

01:00:37.280 | And it's still not done.

01:00:38.160 | There's still a few polishing things

01:00:39.840 | that have to be cleaned up

01:00:41.720 | because this is a physical resource

01:00:44.920 | and there's something there.

01:00:46.400 | But there's a flaw to proof-of-work

01:00:48.160 | that is a little problematic.

01:00:49.500 | It's a winner-take-all type of a system.

01:00:51.180 | So maximalism is kind of philosophically

01:00:54.720 | and computationally built into it.

01:00:56.620 | Let's say you have two proof-of-work systems

01:00:59.940 | and they have roughly the same market cap and hash rate

01:01:03.200 | and they use the same algorithm.

01:01:05.320 | Then the problem is if the miner comes in

01:01:07.960 | and let's say the miner has enough resources

01:01:09.800 | to have 51% for any of these chains,

01:01:13.540 | they actually have a perverse incentive

01:01:15.080 | to come and destroy one chain and short sell the asset.

01:01:19.600 | It's called a goldfinger attack.

01:01:21.220 | And then go mine the other asset

01:01:23.300 | 'cause they're not bound to that asset.

01:01:25.360 | They're not loyal to it.

01:01:26.780 | And they can make just as much profit mining this

01:01:29.660 | as they can make mining the other system.

01:01:31.860 | And the markets allow them to profit

01:01:33.480 | from the destruction of a system.

01:01:35.180 | So that's something that proof-of-stake doesn't suffer from

01:01:37.780 | because the only way you can participate

01:01:39.700 | in a proof-of-stake system

01:01:40.740 | is you have to actually own equity

01:01:42.180 | and you have to have ownership in that system.

01:01:44.180 | So if you go and destroy Daisy's chain,

01:01:48.060 | it would just be a net loss for the most part,

01:01:50.520 | unless you have really messed up markets

01:01:51.880 | or something like that.

01:01:53.140 | So there's always trade-offs in all these things.

01:01:55.060 | And this is why I like this concept of going one to end

01:01:57.180 | and having multiple resources

01:01:58.940 | because why not have proof-of-work

01:02:00.620 | and proof-of-stake together?

01:02:02.180 | If the proof-of-work is useful, not wasted computation,

01:02:05.420 | and why not add other things

01:02:06.600 | like create incentives for network relay?

01:02:08.780 | Right now there's no incentives in the system

01:02:10.440 | for you to run peer-to-peer nodes and to share data.

01:02:12.380 | Right now it's not a problem,

01:02:13.560 | but if you're running like Amazon Web Services

01:02:16.180 | level of bandwidth,

01:02:17.060 | it could cost you like $5,000 a month in bandwidth

01:02:19.740 | just to run a full node or something like that.

01:02:21.380 | No one would do it.

01:02:22.500 | So then your system will centralize along the weakest link,

01:02:26.120 | whether it be the storage layer, the computation layer,

01:02:28.540 | or the network layer of the system.

01:02:31.160 | So if you can incentivize the resources differently,

01:02:33.500 | then you'll be in a beautiful position

01:02:35.020 | where you end up having a resilient system

01:02:37.700 | that pays its own bills.

01:02:39.500 | - So how does Cardano solve the consensus problem?

01:02:43.420 | Do you tend to eventually wanting to solve it

01:02:46.820 | in the hybrid approach of proof of stake and proof of work?

01:02:50.380 | - Yeah, this was a philosophical difference

01:02:52.260 | between Vitalik and myself.

01:02:54.020 | You know, the problem with the people in the Ethereum side

01:02:56.460 | is they're really bright.

01:02:57.500 | And these really bright people,

01:02:58.940 | what they do is they try to do everything all at once

01:03:01.940 | 'cause they're really, really smart

01:03:03.260 | and they keep going until they run up against the wall

01:03:05.460 | and they realize the problem's a lot harder.

01:03:07.940 | If you're more experienced,

01:03:09.340 | and that's why we brought in proper academics

01:03:11.460 | like Agalos and others,

01:03:12.460 | 'cause they've been beaten up through life.

01:03:14.300 | You know, Agalos worked with David Chom

01:03:16.580 | and these other, this really hard work with those guys.

01:03:19.700 | And they'd already been humiliated and yelled at,

01:03:22.260 | had chalk thrown at them and all that stuff.

01:03:24.060 | And so they were humble enough to say,

01:03:25.100 | "I'm not smart enough to solve the big problem,

01:03:27.180 | "so don't even try."

01:03:28.300 | What you do is you decompose it and you say,

01:03:30.060 | "Okay, what's the first problem to solve

01:03:32.300 | "in a chain of problems

01:03:33.660 | "that you can compose your way up to a working system?"

01:03:37.260 | And once you get far enough along,

01:03:39.280 | you have something that's pretty good,

01:03:41.540 | and then you have an obvious path forward

01:03:43.740 | of how do you iterate and improve that system.

01:03:45.940 | That's why we started with GKL 15,

01:03:47.740 | because it was just saying,

01:03:48.580 | "We don't know what a fucking blockchain is.

01:03:51.220 | "What is this thing, right?

01:03:52.340 | "What's the security properties of this stuff?

01:03:53.900 | "Like, what do we really mean?"

01:03:55.700 | Then we did Ouroboros Classic,

01:03:57.300 | the original Ouroboros protocol in 2017.

01:03:59.820 | And that protocol was like a synchronous system,

01:04:02.100 | and it assumed the nodes were always on.

01:04:04.300 | It worked, but it was useless,

01:04:06.020 | because that's not real life.

01:04:08.040 | Then Paros came out, and then suddenly we relaxed things.

01:04:10.580 | - These are all, by the way,

01:04:11.420 | names for consensus algorithms.

01:04:12.580 | - Yeah, papers that we published,

01:04:14.540 | and they were all peer-reviewed.

01:04:15.740 | Like, GKL was Eurocrypt.

01:04:17.220 | That's a very hard conference to get into.

01:04:19.060 | And Ouroboros Classic was Crypto,

01:04:20.620 | and Paros was Eurocrypt, and Genesys was CCS.

01:04:24.560 | So basically, every step of the way

01:04:27.180 | was first an academic validation

01:04:28.940 | that there was some merit to the work that was done.

01:04:31.260 | Second, it solved a particular class of problems,

01:04:34.060 | either showing the feasibility of the entire problem.

01:04:36.820 | 'Cause when I said, "Let's do the model first,

01:04:38.580 | "'cause let's see if we can do an FLP thing.

01:04:40.300 | "Let's see if we can get a possibility theorem."

01:04:42.200 | That's great, 'cause you're done.

01:04:43.700 | It's like those short math papers

01:04:45.580 | where you're like, "I found a counterexample."

01:04:47.260 | It's like, "Oh, okay, this whole thing has fallen apart,

01:04:49.280 | "'cause you have a two-line proof, thank you."

01:04:51.820 | So that's what we were looking for

01:04:52.980 | in the beginning of the agenda was,

01:04:54.660 | let's either prove it's possible in a straw man case,

01:04:57.780 | or show that there exists an impossibility result,

01:05:00.140 | in which case we can just abandon the entire inquiry.

01:05:02.260 | Proof of stake's impossible.

01:05:03.980 | And then, once you've gotten past that threshold,

01:05:06.120 | it goes from theory to practicality.

01:05:08.480 | What actual network conditions are you looking at?

01:05:10.900 | Are you okay with living with an external clock,

01:05:13.380 | or do you wanna build time from within?

01:05:15.300 | How are you generating random numbers, et cetera, et cetera?

01:05:17.980 | And every step of the way, each paper,

01:05:19.940 | you're solving one particular class of problems.

01:05:22.420 | With PRISM, it said,

01:05:23.700 | "Probably shouldn't know ahead of time who Eve is.

01:05:26.660 | "You probably shouldn't know who's making those blocks.

01:05:28.740 | "That should be something after the fact.

01:05:30.840 | "But if you know ahead of time, you can attack them.

01:05:32.700 | "You can DDoS them.

01:05:33.640 | "You cause all kinds of problems."

01:05:35.540 | Okay, so adaptive security.

01:05:37.820 | Also, we move from an MPC, random number generation,

01:05:41.620 | which was great, but very heavy and very slow,

01:05:44.200 | and you can't scale to large amounts of people,

01:05:46.480 | to a VRF-based system, which is super fast,

01:05:48.660 | but a little dirtier,

01:05:49.760 | 'cause Algorand actually did some great work there.

01:05:52.140 | There was some good knowledge there.

01:05:53.460 | - What are the really hard problems that you,

01:05:54.820 | maybe if you just linger on a little bit,

01:05:56.760 | what are some of the really hard problems

01:05:58.540 | you have to solve along this chain of papers,

01:06:00.660 | ideas, the evolution of the consensus algorithm?

01:06:03.100 | - Yeah, not only are they really hard problems,

01:06:04.980 | they actually require different cryptographers,

01:06:06.740 | because you're moving from mathematician-style

01:06:09.800 | cryptographers, like the Neil Koblitz's

01:06:11.780 | and the Adi Shamir's,

01:06:12.620 | and the people that start as proper mathematicians,

01:06:14.900 | and they really love theory, and that's their thing,

01:06:17.660 | and the proofs are dense, and they're thick,

01:06:19.580 | and they're beautiful, to practical applied work,

01:06:23.660 | where you're saying, "Okay, now this is something

01:06:25.720 | "an engineer can look at and say,

01:06:27.320 | "I know how to build that.

01:06:28.540 | "I know how to think about that."

01:06:30.100 | So that transition from GKL to Ouroboros Classic to Proust,

01:06:35.100 | I'd say the biggest leap was Classic to Proust,

01:06:38.860 | because that was going from a system

01:06:40.920 | that would only work in a consortium chain, like Fabric,

01:06:43.620 | to a system that would actually work, and is working.

01:06:45.800 | That's what's implementing Cardano today,

01:06:47.920 | $50 billion cryptocurrency and all these people.

01:06:50.660 | That was a huge leap, but that paper alone wasn't enough.

01:06:54.180 | We also had to layer on the economic model,

01:06:56.920 | because we said, "Well, hang on a second here.

01:06:58.860 | "Not everybody's gonna be online all the time

01:07:01.020 | "to be available to make a block,

01:07:03.360 | "so you need some notion of delegation."

01:07:05.400 | The minute you have a notion of delegation,

01:07:06.880 | you have these stake pools, what the hell does that mean?

01:07:09.300 | And so this is a beautiful interdisciplinary notion

01:07:12.880 | that layers computer science and biology together.

01:07:16.020 | And the minute that complexity starts going up,

01:07:18.040 | you start seeing cell specialization.

01:07:20.400 | So you go from single-cell organisms to organisms

01:07:23.220 | where you have eyeballs and brains and hearts,

01:07:26.020 | and each of these tissues do different things.

01:07:28.100 | Well, analogously, complex distributed systems

01:07:30.780 | start getting specialization.

01:07:32.060 | You move from the single-celled thing, Bitcoin,

01:07:34.780 | where everything's a full node,

01:07:35.780 | they all have the same rights and responsibilities,

01:07:37.500 | a lot of homogeneity in that system,

01:07:39.460 | but you're only as good as your weakest link,

01:07:40.980 | you're only as capable as whatever the basic cell can do,

01:07:45.060 | to a specialized system where you start having

01:07:47.060 | these actors in the system that are actually

01:07:49.220 | a little different than the other actors.

01:07:50.980 | So you introduce this concept of the stake pool,

01:07:53.220 | and suddenly now you have this actor

01:07:54.740 | where you're probably gonna be online 24/7.

01:07:57.640 | You're probably gonna have extra relay infrastructure.

01:08:00.120 | There's a trust relationship where you don't own the ADA,

01:08:03.660 | but you have a right to use it for something,

01:08:05.840 | and a person's made that choice to endow you with that.

01:08:08.520 | The minute that you introduce specialization, though,

01:08:10.960 | the system gets more complicated,

01:08:12.540 | the game theory gets more complicated,

01:08:14.420 | and then you start having to think really deeply

01:08:16.300 | and carefully about, okay, well,

01:08:18.780 | can this now introduce a new attack vector

01:08:20.920 | that we didn't have before?

01:08:22.500 | So that leap from classic to Prowse

01:08:24.960 | and adding in stake pools and figuring out

01:08:26.700 | how to handle the game theory there

01:08:28.040 | was exceedingly hard.

01:08:29.100 | It took two years to do that.

01:08:30.500 | - So stake pools allow for multiple parties

01:08:33.420 | to delegate their staking capabilities to others.

01:08:36.740 | Can you describe a little bit how this works?

01:08:38.340 | It's kind of fascinating.

01:08:39.180 | - It's a super simple concept.

01:08:40.540 | So you register a pool, and then the pool is there,

01:08:42.780 | and basically they advertise,

01:08:46.220 | and they're actually registered on-chain with a certificate,

01:08:48.900 | and then in the wallet software itself,

01:08:50.660 | you can see all of the pools that have registered.

01:08:53.340 | There's over 3,000 of them now inside the system,

01:08:56.060 | and you can click a little tile,

01:08:57.660 | and it shows you all the metadata that's in the certificate

01:09:00.020 | and says, hey, I have my own pool.

01:09:02.220 | It's called RATS, you know, king of the RATS.

01:09:05.220 | So you can see all the stuff that's described there,

01:09:07.380 | and pools have an operating fee

01:09:08.860 | 'cause they're like a business,

01:09:09.900 | and they say, well, if you delegate to me,

01:09:11.840 | I'll charge this much,

01:09:13.140 | so if you get like 100 bucks in rewards,

01:09:15.700 | I'll give you 90 and I'll take 10 or something like that,

01:09:19.460 | and then you make your decision,

01:09:20.460 | and whichever one you select,

01:09:21.580 | you click Delegate, you push the button,

01:09:24.320 | and then you have now given your staking rights

01:09:27.700 | to them until revoked, okay?

01:09:30.100 | So it lives there.

01:09:30.940 | And then the stake pool's weight in the system

01:09:33.700 | is proportional to the amount of stake

01:09:35.540 | that they have delegated to them.

01:09:37.300 | And then we have this other limiting factor, K,

01:09:39.420 | which says that you get diminishing returns

01:09:41.500 | with the more stake you have,

01:09:42.700 | so it's kind of like an S function.

01:09:44.340 | So you kind of go up and up, and then eventually caps,

01:09:46.880 | and then at some point,

01:09:47.720 | you get no rewards beyond a certain threshold.

01:09:49.980 | So there's an incentive to split pools

01:09:51.780 | to different owners after some point.

01:09:53.820 | - Interesting.

01:09:54.660 | - Yeah, and so that's a complex thing,

01:09:57.060 | and you have to actually model the game theory out

01:09:59.140 | to understand where those parameters should be set,

01:10:01.460 | and we didn't know how to do that.

01:10:02.820 | So what we did is we bought talent.

01:10:04.860 | We went to Oxford, and we hired this guy

01:10:06.580 | named Elias Kasupis, who's an algorithmic game theorist.

01:10:08.900 | We said, "Hey, would you like to do

01:10:10.420 | "some game theory work in crypto?"

01:10:12.180 | And he's like, "That sounds fun."

01:10:13.760 | So he spent a year and a half,

01:10:15.220 | we built all these beautiful models,

01:10:16.680 | and we kind of figured out what those curves

01:10:18.300 | needed to look like.

01:10:19.140 | - So figure out like the S curve

01:10:19.980 | that would result in a nice distribution

01:10:21.620 | of responsibility. - Exactly.

01:10:22.900 | - So not everybody delegates to the king of the rats.

01:10:26.220 | - Exactly.

01:10:27.060 | - How does it feel to be royalty, by the way?

01:10:28.500 | (Lex laughing)

01:10:30.540 | - It's not a very impressive kingdom,

01:10:31.880 | but you're nevertheless a king.

01:10:33.280 | - I'll take it, 'cause I think it's the kindest thing

01:10:35.260 | people call me in this space.

01:10:36.780 | - Yeah, people love you.

01:10:39.220 | So, okay, so that, I mean, so is that,

01:10:41.860 | would you say, a solved problem,

01:10:43.900 | the game theory of stake pools?

01:10:45.500 | - No, it's the starting, and then I was getting back

01:10:48.020 | to my original point that you build things in iterations.

01:10:50.500 | Every step, if you've done it right,

01:10:53.060 | is an invitation for 10 more sexy, fascinating,

01:10:55.860 | fun problems, and this is why we have

01:10:57.180 | such a great time building labs.

01:10:58.780 | We started in Edinburgh, now we're at Tokyo Tech,

01:11:01.380 | and University of Wyoming, and Athens,

01:11:03.300 | and we're setting up more labs this year,

01:11:05.300 | and all these academics wanna work with us,

01:11:06.780 | A, 'cause we write a lot of really fascinating papers,

01:11:09.100 | but B, because we're focused on all these really cool,

01:11:12.260 | sexy, interdisciplinary problems.

01:11:14.100 | We're actually running the problems

01:11:15.060 | where we don't even know where to publish the paper,

01:11:17.060 | 'cause you'll have this paper where there's like

01:11:18.420 | these PL guys working with crypto guys,

01:11:20.380 | working with systems guys, working with economists,

01:11:23.100 | and you put it all together

01:11:23.940 | and you have this Frankenstein paper monster,

01:11:26.140 | and we're like, where do we submit this?

01:11:27.980 | Where does this go?

01:11:28.980 | - Nature.

01:11:29.820 | - Yeah, there we go.

01:11:30.740 | Nature or quanta or something, I don't know.

01:11:32.860 | It'll run a nice--

01:11:33.700 | - So the sexy problems multiply exponentially.

01:11:36.500 | - Exactly, and we've now gotten to a point

01:11:38.980 | where we're starting to work on refinements to the system

01:11:42.040 | rather than fundamental things that are like,

01:11:44.940 | if you don't solve it, the system just simply doesn't work.

01:11:47.460 | For example, you can run all of this with NTP

01:11:49.900 | as your clock server, but you actually can create

01:11:51.620 | a notion of time within.

01:11:52.700 | We wrote a paper called "World Wars Chronos" for that.

01:11:55.500 | But that's not necessary for the system.

01:11:58.300 | It's just a nice-to-have thing.

01:11:59.520 | It's a nice property.

01:12:00.420 | Optimization of the random number generation

01:12:02.100 | is another example of that.

01:12:03.040 | You can run it with a heavier thing.

01:12:04.700 | You just have more blockchain bloat

01:12:06.100 | and slower time and transition.

01:12:08.440 | We have this concept in an epic.

01:12:09.920 | So you elect leaders to run the system

01:12:13.820 | every five days with Cardano.

01:12:15.760 | But there's been derivative work.

01:12:17.140 | We didn't even do this.

01:12:18.120 | This work occurred at University of Illinois,

01:12:19.940 | and that derivative work said,

01:12:21.140 | well, you don't actually need to do that.

01:12:22.340 | You can do it on a block-by-block basis.

01:12:24.540 | It's like, ooh, that's pretty cool.

01:12:26.140 | So that's the other point about doing things

01:12:27.580 | in a very rigorous way is that that way

01:12:31.020 | creates a lingua franca for what you're trying to solve

01:12:33.900 | with the totality of the academic community.

01:12:36.420 | So suddenly, people that you've never met,

01:12:38.360 | you know nothing about, have read your papers,

01:12:40.480 | cited your papers, and start writing their own papers,

01:12:43.020 | either to try to attack and destroy things you've done

01:12:45.700 | or to build on top of the things that you've done.

01:12:48.060 | - So people are trying to figure out ways to attack this.

01:12:50.380 | - Exactly. - As rigorous as you are

01:12:52.580 | trying to build up the-- - And I don't have to pay 'em.

01:12:54.140 | - That's the beautiful thing.

01:12:55.260 | - It's fun. - Yeah.

01:12:56.100 | - It's fun to try to destroy, and that's how we grow stronger.

01:12:58.460 | - And it's how you build your career, too.

01:12:59.860 | There's plenty of people that they've gotten tenure

01:13:02.300 | just kicking the hell out of Intel SGX.

01:13:04.820 | You go to CCS every year, there's some guy there,

01:13:06.980 | and he's having a hell of a time making Intel cry.

01:13:09.480 | - Can we pull back, historically speaking,

01:13:13.300 | and in terms of the big picture of cryptocurrency

01:13:15.540 | real quick, and ask the question, what is Cardano?

01:13:19.100 | We started talking about already the consensus algorithm

01:13:21.540 | Cardano takes, but maybe when you look at the history books,

01:13:26.540 | sort of Hitchhiker's Guide to the Galaxy

01:13:28.820 | and Cardano have one sentence.

01:13:31.220 | What's that one sentence going to be?

01:13:33.340 | And in general, what's the vision in the context

01:13:36.220 | of the history of cryptocurrency?

01:13:37.540 | You have this whiteboard overview video

01:13:39.580 | that you talk about the three generations

01:13:42.260 | of cryptocurrency where Cardano's the third.

01:13:44.420 | So that's five different questions,

01:13:47.700 | way of asking the exact same thing.

01:13:49.060 | You can answer however the hell you want.

01:13:50.620 | (laughing)

01:13:52.700 | - You know, I always term Cardano as like a FOSS,

01:13:55.420 | a financial operating system, and nobody likes it,

01:13:57.980 | and everybody picks on me for using that term.

01:14:00.100 | But basically the idea is that the world runs on systems,

01:14:03.180 | especially the financial world.

01:14:04.420 | You have the BIS and SWIFT and all this other stuff.

01:14:08.060 | And these protocols allow you to move value around

01:14:11.700 | and represent things like identity

01:14:13.460 | and allow you to express yourself in some way.

01:14:17.060 | And those protocols, for the most part,

01:14:19.100 | work well for people in rich countries.

01:14:22.100 | And they don't work so well for people

01:14:23.900 | who aren't in rich countries.

01:14:25.580 | And so the point of what we do,

01:14:28.380 | or at least what I do and what my company does,

01:14:30.620 | is we think a lot about how do we build a universal protocol

01:14:34.220 | that does all the stuff the legacy system has,

01:14:36.580 | but just does it better, faster, and cheaper

01:14:38.460 | for everybody in the world.

01:14:39.900 | And everybody has equal access to it.

01:14:42.140 | So it's the people's protocol.

01:14:43.820 | You have a situation where the guy in Senegal

01:14:46.280 | has the same access that I do, or Bill Gates does,

01:14:48.860 | or someone else who's kind of higher

01:14:50.500 | on the spectrum of wealth and power.

01:14:52.900 | And so that is what we seek to achieve.

01:14:56.780 | But then the question is, well, is Cardano the solution?

01:14:59.740 | Is that that thing?

01:15:01.460 | And the answer is no,

01:15:02.700 | because you need a lot more evolution.

01:15:05.520 | You need decades of evolution

01:15:06.980 | to kind of work your way there.

01:15:08.860 | And in many ways, the work is never quite done,

01:15:11.180 | but it's better than what came before.

01:15:13.940 | Why?

01:15:14.780 | Because you have a realization that first,

01:15:17.180 | the control of the system needs to be

01:15:19.100 | more balanced and nuanced.

01:15:20.860 | And it needs to be more democratic.

01:15:23.640 | So there's this sustainability component

01:15:25.660 | of who's in charge and how do you pay for things?

01:15:28.380 | Well, the system can print its own money,

01:15:30.020 | so it always has the ability to have a budget.

01:15:31.900 | Okay, so there's a treasury idea.

01:15:34.180 | And then there's a voting thing.

01:15:35.780 | Well, the same things that allow you to move money around

01:15:38.020 | allow you to represent votes.

01:15:39.340 | So you can do e-voting with the type of system, okay?

01:15:42.220 | And if you played Nomic in the 1980s,

01:15:44.860 | or Peter Superfan, or any of these things,

01:15:46.620 | you can build a self-evolving system.

01:15:48.300 | You can actually create a game where the rules

01:15:50.080 | can be voted on and changed in the game itself.

01:15:52.940 | Great.

01:15:53.820 | Okay, so that exists there.

01:15:55.260 | And then you say, okay, well,

01:15:57.460 | but this thing still has to touch the legacy world.

01:15:59.780 | There has to be cash in and cash out

01:16:01.740 | and these types of things.

01:16:02.880 | So there's just this interoperability thing.

01:16:04.580 | You need a Wi-Fi or a Bluetooth moment for the industry

01:16:07.140 | 'cause nothing understands each other right now.

01:16:08.860 | All these chains are blind, deaf, and dumb to each other.

01:16:11.740 | And then there's this thing

01:16:12.580 | that it has to work at a huge scale,

01:16:14.380 | like billions of people.

01:16:15.720 | And we've done that, but we've done that

01:16:17.300 | with large, multinational, trillion-dollar companies

01:16:19.800 | with centralized infrastructure.

01:16:21.220 | We've never really done that with one master protocol

01:16:24.300 | that somehow does it for everyone.

01:16:25.500 | The closest approximation is probably BitTorrent.

01:16:28.040 | And there, it's a cool protocol,

01:16:31.500 | but it doesn't have all the oomph necessary

01:16:34.060 | to do something like this.

01:16:36.480 | So Cardano is just our first approximation.

01:16:38.820 | And like any good system, we wanted it to be self-evolving.

01:16:42.620 | So once you get the philosophy out of where's the target

01:16:44.920 | of what do you want to do, then you build a community.

01:16:47.860 | Now it's over a million people strong,

01:16:49.700 | and that community keeps growing,

01:16:51.300 | and they keep pushing the system

01:16:52.820 | in that particular direction.

01:16:54.300 | And what's nice about it is if you build

01:16:55.900 | the right philosophy within the system,

01:16:57.700 | it doesn't need founders.

01:16:58.880 | This is the great lesson of Satoshi.

01:17:00.500 | It doesn't need founders to be able to get there.

01:17:02.820 | So if you look at the academic side,

01:17:07.820 | that's very decentralized.

01:17:09.700 | We have more than 30 different contributors

01:17:11.660 | for the 105 papers, and that set keeps growing

01:17:14.260 | within the next five years.

01:17:15.260 | It'll probably be two, three, 400 different scientists

01:17:18.060 | from all across the world, some from Russia,

01:17:20.620 | and some from India, some from China,

01:17:22.420 | and some from Japan, and America,

01:17:24.540 | and Africa, and South America.

01:17:25.860 | And the faces change, the languages change,

01:17:28.780 | the cultures change, but the process stays the same.

01:17:32.480 | And that is a permanent organ

01:17:34.340 | within what we have constructed as a system.

01:17:36.900 | It's the same situation entering marketplaces.

01:17:38.940 | Like we entered Ethiopia.

01:17:40.460 | What are we doing there?

01:17:41.300 | We have five million people in Ethiopia.

01:17:43.020 | We're getting them digital identity,

01:17:44.820 | and we're dragging that digital identity into the system,

01:17:47.140 | 'cause that's the most fundamental thing

01:17:48.420 | of a financial operating system.

01:17:50.080 | You need to know who people are

01:17:51.660 | in order to be able to do business with them,

01:17:53.280 | give them credit, be able to give them economic agency,

01:17:56.140 | and so the thing.

01:17:56.980 | But once they're there,

01:17:58.180 | they're gonna grow up with that system.

01:18:00.260 | They're gonna deploy applications on that system.

01:18:02.240 | They're gonna build on that system.

01:18:03.420 | Or use it every day for getting a loan,

01:18:05.220 | or payments, and so forth.

01:18:06.700 | And if they have pain points,

01:18:07.980 | what they're gonna do is evolve that system

01:18:10.500 | to be able to mitigate and manage

01:18:12.100 | those particular pain points

01:18:13.600 | to a point where the system is competitive for it.

01:18:16.340 | So my job is to be,

01:18:18.900 | we have this tagline in our company,

01:18:20.340 | cascading disruption.

01:18:21.900 | My job is to be the first domino.

01:18:23.740 | Just kind of knock it over and watch the cascade,

01:18:26.580 | and it kind of blows, and blows, and blows,

01:18:28.420 | until eventually it gets to where we need to go.

01:18:31.260 | And what I was trying to think about with Cardano

01:18:33.540 | was how do you build the minimum viable set

01:18:36.580 | of tools and social processes

01:18:40.180 | that once we push the domino,

01:18:42.060 | the system will just evolve to a point

01:18:43.860 | where eventually it can grow to fill that need,

01:18:46.200 | not out of charity, but out of self-interest.

01:18:49.340 | People want things better, faster, cheaper.

01:18:51.860 | People want to have economic agency,

01:18:54.740 | especially when they lack it.

01:18:56.280 | Nobody wants to grow up in a world

01:18:57.820 | where they're unbanked,

01:18:59.220 | and they have no access to marketplaces.

01:19:01.100 | They're gonna seek it.

01:19:02.260 | Look at M-Pesa.

01:19:03.220 | It's the great example of that.

01:19:04.820 | Like cell phone minutes,

01:19:06.220 | they're using it as a currency.

01:19:07.840 | So that's where we're at.

01:19:09.740 | And I say a few more years,

01:19:10.900 | I think we'll have that right minimum viable

01:19:13.060 | set of dynamics inside the system.

01:19:15.140 | And then it's inevitable, in my view,

01:19:16.940 | that it'll kind of grow and consume

01:19:18.580 | and become this concept.

01:19:20.220 | And what's really cool is there's competition

01:19:21.660 | in the systems and concepts.

01:19:22.780 | So China's trying to do the same thing.

01:19:24.800 | They're saying, how do we de-dollarize the world

01:19:26.820 | and create a digital yuan?

01:19:28.320 | So they have a very top-down notion

01:19:30.220 | of how to apply this technology and bring it in.

01:19:32.260 | And they even have an identity system

01:19:33.480 | they're building in parallel called social credit.

01:19:35.780 | We have an identity system, a teleprism,

01:19:37.500 | that we're putting in.

01:19:38.320 | Ours is bottom-up and you own your own identity,

01:19:40.300 | social credit.

01:19:41.140 | You have no idea, you just have a number

01:19:42.500 | and some computer's giving it to you,

01:19:43.980 | but they're both trying to do the exact same thing.

01:19:46.140 | And it's gonna be this clash of cultures at some point

01:19:49.020 | between the open FOSs and the top-down authoritarian FOSs

01:19:53.140 | and probably some Hegelian dialectic action.

01:19:56.020 | We'll create some sort of somewhat close,

01:19:59.100 | somewhat authoritarian, libertarian utopia.

01:20:02.740 | - Yeah, and most likely it would be AIs battling

01:20:05.580 | in the space of FOSs.

01:20:06.660 | So I really like this idea of financial operating system,

01:20:09.000 | but the letter F, so financial,

01:20:13.520 | is this just a basic mechanism

01:20:18.040 | with which you can have social interaction,

01:20:20.440 | therefore, or all kinds of interactions,

01:20:22.320 | therefore have an identity?

01:20:23.760 | Like is F essential to this?

01:20:26.200 | - Yeah, because that's how people care.

01:20:28.240 | You need resources to survive.

01:20:30.320 | And finances is kind of like this field

01:20:32.480 | of managing your resources in an intelligent way.

01:20:36.160 | And you could call it SOFI too, social finance.

01:20:38.520 | You know, the nomenclature hasn't exactly been settled

01:20:42.420 | for our industry, and that's fun.

01:20:44.420 | But basically the concept is that you have something

01:20:48.800 | and you wanna be able to store it, transform it,

01:20:51.280 | trade it, and use it to survive.

01:20:54.020 | And the question is what rails do you do that on?

01:20:56.740 | Do you do those on centralized, controlled rails

01:20:59.380 | where there are these third parties

01:21:01.280 | that are basically able to live off those things,

01:21:04.460 | become very fat and nepotistic?

01:21:06.040 | Or do you wanna do it on rails where there's no middleman?

01:21:08.640 | You have a direct relationship

01:21:10.000 | with whoever you're doing business,

01:21:11.320 | and if you invite more people to the transaction,

01:21:13.200 | they're middlemen of value, not necessity.

01:21:15.600 | And that's really the, I would like to say

01:21:17.560 | the resendetra of our space, that the reason we exist

01:21:20.560 | is to try to figure out a way to kill the middleman

01:21:22.920 | and try to figure out a way that we can

01:21:25.040 | better quantify value and transform it,

01:21:27.080 | move it, manipulate it.

01:21:28.480 | And in many ways, we've actually discovered

01:21:30.280 | some amazing things in the last 10 years as an industry.

01:21:32.780 | Like we've kind of created the financial stem cell.

01:21:35.440 | This idea of a token can now just as well

01:21:37.800 | be a national currency as a CBDC

01:21:39.880 | as it can represent a CryptoKitty.

01:21:42.560 | The same architecture can do stuff at the nation scale,

01:21:46.100 | can do stuff for a 12-year-old kid in Texas.

01:21:48.400 | It's pretty amazing to see that.

01:21:50.040 | - But sort of in that whiteboard presentation,

01:21:54.960 | you gave these three phases, and you're kind of implying

01:21:58.920 | that there'll be N phases to this whole evolution,

01:22:02.820 | and Cardano is just like the cutting edge.

01:22:05.400 | But if you look back to Bitcoin,

01:22:08.780 | how would you compare Cardano versus Bitcoin?

01:22:12.340 | Sort of where we are, how we started, and how it's going.

01:22:16.180 | - Okay, so what I did in that video,

01:22:19.060 | and I've done in a lot of media interviews,

01:22:21.340 | 'cause I think it really helps people understand

01:22:23.540 | where we're at in the clock,

01:22:24.860 | is face things in terms of generations.

01:22:27.740 | And so I said, well, the first generation is Bitcoin.

01:22:30.040 | Really, the problem Bitcoin was trying to solve

01:22:31.800 | is saying every time we want to represent or move value,

01:22:34.860 | we need some sort of trusted third party to facilitate that.

01:22:38.980 | So can we build some sort of system

01:22:40.460 | where we can create some notion of value

01:22:42.340 | that can be teleported around the world,

01:22:44.880 | and it doesn't require a trusted third party?

01:22:47.260 | That's it.

01:22:48.100 | And it's done in a beautiful way

01:22:49.720 | because it didn't try to be anything else.

01:22:52.500 | It just was, you only have Bitcoin,

01:22:54.500 | you can only do one type of thing, you can only push it.

01:22:56.760 | You can do some things on the encumbrances

01:22:58.740 | of like multi-sig and other things,

01:23:00.660 | but that's a one-trick pony as a system.

01:23:04.220 | And it wasn't really clear

01:23:05.300 | if that was gonna work or not for a long time.

01:23:07.260 | It took several years to build up enough network effect

01:23:09.800 | and for Bitcoins to actually become valuable.

01:23:12.140 | And I'd say the inflection point was 2013.

01:23:15.160 | And at that point, it became a billion dollar market cap.

01:23:17.740 | There were like Silicon Valley startups,

01:23:19.980 | real exchanges performing.

01:23:21.940 | And it got to a point where there was legitimacy

01:23:23.660 | behind the concept, and people started getting,

01:23:25.500 | this is a really incredible idea

01:23:27.540 | 'cause I can evade capital controls with it.

01:23:29.900 | I can move $10 billion of something

01:23:32.800 | from one country to another country in five minutes.

01:23:35.060 | It's like I could never do that before.

01:23:36.820 | And some said, this is incredible.

01:23:38.940 | Okay, the problem is the minute

01:23:40.920 | that people validate the idea,

01:23:42.940 | they immediately want something they don't have.

01:23:46.260 | So the minute Elon can land a rocket,

01:23:48.860 | there's the next big thing, right?

01:23:50.500 | You've landed the Falcon 9, now you're on the Starship.

01:23:53.600 | Similarly, you say, okay, I want programmability

01:23:56.380 | with this thing.

01:23:57.220 | It's kind of like when JavaScript came to the web browser.

01:23:59.820 | You went from these static, perhaps pretty,

01:24:02.220 | but ultimately static non-interactive pages

01:24:05.460 | to YouTube and Google and Facebook

01:24:08.100 | and these amazing, rich, incredible experiences

01:24:10.860 | because now you can actually interact with the user.

01:24:13.260 | You can program things.

01:24:14.420 | Stuff runs on their side, stuff runs on your side.

01:24:16.800 | It's a beautiful two-way relationship.

01:24:19.180 | So that's what Ethereum effectively did.

01:24:21.300 | They bolted a programming language onto a blockchain

01:24:24.120 | and they went from a certain use case

01:24:27.640 | to whatever your imagination can have,

01:24:30.040 | you know, like sunshine and rainbows and unicorns

01:24:32.520 | and these types of things.

01:24:33.480 | - So what you're saying is Bitcoin is HTML

01:24:35.800 | and Ethereum is JavaScript?

01:24:37.400 | - Basically, yeah, it was like when JavaScript came

01:24:39.360 | and with like JavaScript,

01:24:41.000 | it has all kinds of problems and issues.

01:24:43.160 | - I wonder who's Flash in this analogy, this metaphor.

01:24:46.040 | But let's not go there.

01:24:46.880 | - Well, actually, there were plenty

01:24:48.080 | of active Xs and Flashes.

01:24:49.440 | NXT was an example of a fail to start

01:24:52.100 | and BitShares was another example.

01:24:54.100 | There were a lot of people who tried to add some notion

01:24:56.060 | of programmability and/or a different view

01:24:58.540 | of how these things should be done

01:25:00.160 | and they were not as competitive.

01:25:02.020 | Ethereum kind of came out as that JavaScript moment.

01:25:04.300 | Okay, the minute you have that,

01:25:05.360 | then suddenly you have ICOs and DeFi and STOs and NFTs

01:25:09.620 | and all these word salads of things.

01:25:11.940 | And then people start using it and they get frustrated.

01:25:13.900 | Why?

01:25:14.740 | Because it's too slow, it's too expensive,

01:25:16.580 | it doesn't talk to the things they want it to talk to

01:25:18.700 | and also, it gets too big to manage itself.

01:25:21.820 | When you're small, you have founders and foundations

01:25:25.060 | and you have trusted actors and core developers

01:25:27.340 | and you can feed them with pizzas.

01:25:29.200 | You know them, you can meet them,

01:25:30.660 | you can shake their hands at conferences.

01:25:32.500 | When you're a multi-billion person system,

01:25:36.540 | you're too large to be able to do that.

01:25:39.860 | For example, we had the Shelly Summit last year,

01:25:42.860 | we invited Vince Cerf to come to the summit.

01:25:44.860 | Vince's a brilliant guy and he created the internet

01:25:47.540 | with Bob and the rest of the gang.

01:25:49.940 | Back in those days, it was such a simple, small system

01:25:53.460 | that one of their students, they said,

01:25:55.940 | "Hey, you need to test it."

01:25:56.780 | He created a video game just to kind of test the thing.

01:25:58.380 | You could call the guy on the other side and say,

01:26:00.060 | "Are you seeing this?

01:26:00.900 | "Are you getting the signal?"

01:26:01.860 | They used to have an actual address book

01:26:03.540 | for email addresses.

01:26:05.020 | Yeah, so you'd open up the book--

01:26:06.260 | - Amazing. - Look it up.

01:26:07.660 | And now look at the internet, it's like,

01:26:08.940 | who's in charge of that?

01:26:10.020 | It's this gargantuan network

01:26:12.900 | and there's no group of people you can bring in

01:26:15.340 | and thus the internet evolves very slowly.

01:26:18.540 | You see, and so that's the problem

01:26:20.020 | is that you have this situation

01:26:21.360 | where you wanna do lots of utility.

01:26:23.340 | You wanna do a lot of things.

01:26:24.180 | You wanna be a financial operating system

01:26:26.100 | and be everything to everyone,

01:26:28.800 | but then your rate of evolution slows down

01:26:30.660 | as your rate of adoption speeds up.

01:26:32.580 | So that's one of the other design goals

01:26:35.040 | of the third generation.

01:26:35.880 | It's not good enough just to do things better, faster,

01:26:37.680 | cheaper and have consistent cost

01:26:39.840 | with your population growing

01:26:41.500 | or talk to everything, your Wi-Fi moment.

01:26:43.900 | You also need a system that can govern itself

01:26:46.460 | at a scale of millions to billions of people

01:26:48.260 | who have divergent interests.

01:26:49.740 | Some cases, ice pick an eye, divergent interests.

01:26:52.400 | They really hate each other and they don't get along.

01:26:55.420 | And so that's what we termed

01:26:56.820 | a third generation cryptocurrency

01:26:58.340 | and there's a lot of people attempting

01:27:00.300 | to compete in that space.

01:27:01.940 | There's Tezos and Algorand and ICP and Polkadot

01:27:05.060 | and so forth and each and every one of them

01:27:07.100 | kind of brings a different blend of things that they value.

01:27:09.660 | So it's not completely equal between scalability,

01:27:12.540 | interoperability and sustainability.

01:27:14.620 | Some people were very focused on high throughput,

01:27:17.300 | lots of transactions perspective.

01:27:19.180 | Other people very focused on governance

01:27:21.740 | like Tezos is like the governance chain

01:27:24.860 | and they were one of the first to do a self-amending ledger

01:27:27.260 | and other people are like Aeon or Polkadot.

01:27:30.140 | They're really thinking carefully

01:27:31.340 | about how do we build a nice interoperable ecosystem.

01:27:34.060 | With Cardano, we tried to actually tackle

01:27:35.540 | all three at the same time,

01:27:36.800 | which was one of the reasons

01:27:37.640 | why we were a little slower out of the gate.

01:27:39.940 | We had to write a lot more protocols

01:27:41.340 | but we think we've kind of come up

01:27:42.960 | with a beautiful interlocking design for all of them.

01:27:45.900 | And again, the point is not to get it perfect

01:27:48.140 | but rather get those just right set of evolutionary factors

01:27:52.020 | that when you click the domino,

01:27:54.620 | it just self evolves into what you need it to get to.

01:27:57.520 | - Allow me to stretch the metaphor further.

01:28:01.820 | If Bitcoin is HTML, there's HTML5.

01:28:04.940 | If Ethereum is JavaScript,

01:28:06.420 | JavaScript with V8 has become quite fast,

01:28:08.860 | quite, you know, it runs much of the internet.

01:28:11.220 | So the argument could be that eventually

01:28:15.100 | everything will be JavaScript

01:28:17.100 | or maybe you could say eventually everything will be HTML

01:28:20.620 | and it's just be a bunch of different tools

01:28:22.180 | that generate that HTML.

01:28:23.800 | So is it possible that just like we were so,

01:28:28.260 | we eventually return to generation one, Bitcoin,

01:28:31.980 | or we return to generation two, Ethereum,

01:28:35.160 | as we, you know, at the end of this journey?

01:28:39.340 | - Yeah, the problem is your tail is wagging the dog there.

01:28:42.260 | And it's not, you have a situation

01:28:44.380 | where you're so focused on the technology

01:28:46.620 | that you're failing to understand

01:28:48.660 | that there's still Daisy here.

01:28:50.500 | You still have the user and where's the app store?

01:28:53.100 | Where's the one-click install?

01:28:54.780 | Where's the use and utility?

01:28:56.140 | You know, all these layer two protocols

01:28:58.020 | and these DeFi applications,

01:28:59.260 | in five years they're completely protocol

01:29:01.260 | and blockchain agnostic.

01:29:03.180 | Because at the end of the day,

01:29:04.020 | they care about liquidity, operating cost,

01:29:05.980 | and user experience.

01:29:07.380 | It's so preposterous and absurd for somebody to say,

01:29:10.340 | oh, well, I'm going to go build my application,

01:29:12.980 | get on the, you know, the Apple store,

01:29:14.820 | and I am going to use Amazon as my web host.

01:29:17.460 | And no matter what happens, I will always use Amazon,

01:29:20.420 | even if the operating cost is crazy.

01:29:22.220 | - I see. - You see?

01:29:23.300 | And so we're just in a unique period of history

01:29:25.940 | where there's a network effect

01:29:27.160 | around some initial infrastructure.

01:29:29.100 | And people tend to be building around that.

01:29:30.860 | But every single one of the top DeFi providers are,

01:29:35.500 | if they're getting successful into a certain network effect,

01:29:38.020 | they're having the multi-chain conversation.

01:29:40.380 | So I don't really believe in a winner-takes-all,

01:29:42.540 | maximalist view of, well, there's going to be some protocol

01:29:45.100 | that becomes the god protocol.

01:29:46.340 | First, because they evolve too quickly.

01:29:48.420 | Second, the incentives aren't aligned for that.

01:29:50.900 | TCP/IP didn't have a token connected to it.

01:29:53.260 | There was no financial incentive

01:29:54.980 | where if TCP/IP got adopted over something else,

01:29:57.300 | they'd make some big company crazy amounts of money.

01:30:00.180 | It was a useful piece of infrastructure.

01:30:02.660 | So I think that the third generation

01:30:05.060 | is going to be as defined by the social components

01:30:07.620 | and the usability components

01:30:09.100 | as it is by the technological capabilities of the system.

01:30:12.380 | Really what these technological capabilities gave you

01:30:14.660 | was the ability to demonstrate a proof of concept

01:30:18.040 | and say these things are possible.

01:30:19.220 | Kind of like Xerox PARC.

01:30:20.740 | You know, when Steve and Bill came in, they said,

01:30:22.860 | "Wow, you have networked computers,

01:30:25.140 | "object-oriented programming, and a GUI."

01:30:28.460 | And this is like, what, was it '70s?

01:30:30.340 | It's like, wow, it's like incredible.

01:30:31.940 | But none of that was an actual product.

01:30:33.480 | That wasn't a Macintosh.

01:30:34.560 | But it was enough to get the idea,

01:30:37.180 | and then it was a race to how do we productize

01:30:39.340 | something like that.

01:30:40.260 | And in that case, it actually took several decades

01:30:43.060 | to roll out that vision that those guys had.

01:30:45.220 | And I think that's what Bitcoin and Ethereum did.

01:30:47.700 | But what's unique about this is normally you throw away

01:30:50.400 | the prior experiments.

01:30:51.740 | With these things, these are self-evolving systems.

01:30:54.060 | So it's entirely possible to, you know, Joe Rogan quote,

01:30:57.500 | to evolve Bitcoin to a point where it could become

01:31:01.060 | a third generation system if desired,

01:31:02.940 | as some amalgamation of layer one and layer two protocols.

01:31:05.720 | And it's the same for Ethereum.

01:31:06.920 | In fact, Vitalik is throwing away Ethereum

01:31:09.080 | and replacing it with Ethereum 2,

01:31:10.960 | 'cause he recognizes he needs to upgrade

01:31:12.760 | and evolve the system.

01:31:13.800 | And that's what makes it fun,

01:31:15.040 | because the techniques and methodologies

01:31:17.840 | that they've chosen to evolve and upgrade this system

01:31:20.560 | are distinctly different from the ones that we've chosen.

01:31:24.280 | And we have no idea which one's actually going to win,

01:31:26.780 | but we learn from each other,

01:31:28.240 | and we co-evolve from each other.

01:31:29.940 | So you're running all these experiments in real time,

01:31:32.520 | in a giant marketplace, and maybe they'll consolidate,

01:31:35.720 | maybe they'll stay divergent.

01:31:36.880 | I mean, look at big tech.

01:31:38.100 | You have Google, Apple, Microsoft, Facebook.

01:31:40.280 | They all coexist, and they're trillion dollar companies.

01:31:42.880 | Some cases, with TCP, it consolidates to one standard,

01:31:46.120 | and that's what we end up using.

01:31:47.680 | - So what's your intuition with Cardano

01:31:51.120 | having the proof of stake,

01:31:52.960 | and then eventually smart contracts,

01:31:55.520 | versus the Bitcoin with layer two technologies,

01:31:59.000 | this kind of evolving creature?

01:32:02.120 | Again, you said you can't really predict the future,

01:32:04.120 | but what's your intuition,

01:32:05.460 | why one might be more successful than the other?

01:32:10.460 | - So the problem with Bitcoin is it is so slow.

01:32:14.960 | It's like the mainframe programming of the past.

01:32:17.960 | And the only reason it's still around

01:32:19.680 | is because there was so much invested in keeping it around

01:32:22.240 | that we just kind of have to leave it there,

01:32:24.160 | and one day Cobol will die.

01:32:29.720 | There's nothing about it from a collection of USPs

01:32:32.520 | that's particularly desirable.

01:32:34.120 | You have extremely long settlement time.

01:32:36.000 | You have extremely low programmability.

01:32:38.160 | It is not aware of any other system.

01:32:39.680 | There's no native way of issuing an asset in that system.

01:32:42.320 | You can't even do a pull transaction.

01:32:44.160 | You can't do anything that's interesting or unique there.

01:32:47.080 | And yeah, all due respect, it's, you know, mafia.

01:32:50.480 | All due respect, Tony.

01:32:51.520 | (Lex laughing)

01:32:53.160 | You got some problems.

01:32:54.000 | You need to lose some weight. - You come to me

01:32:54.840 | on the day of my daughter's wedding.

01:32:56.600 | - I know, I know.

01:32:57.440 | So, you know, all due respect to the Bitcoin people.

01:32:59.400 | It's like an amazing, incredible first-generation thing,

01:33:03.200 | and it really, we're all here because of Bitcoin.

01:33:06.480 | But the problem is you have to upgrade the damn thing.

01:33:08.560 | You know, just because you were a high school football star

01:33:11.560 | doesn't mean that 30 years later

01:33:13.880 | you're still a high school football star in the same shape.

01:33:16.280 | You got the beer belly, you're old,

01:33:17.680 | you're not doing this thing again.

01:33:18.880 | That's what Bitcoin has to do.

01:33:20.460 | There's fundamental improvements

01:33:21.960 | that I think Bitcoin can make at the protocol level

01:33:25.560 | that would actually make it

01:33:26.640 | an incredibly competitive system.

01:33:28.240 | Like if they wanted to keep Nakamoto consensus,

01:33:30.520 | proof of work, there's ways to enhance proof of work.

01:33:33.280 | I mean, Minkins-Seer did this with Bitcoin-NG.

01:33:36.040 | Promotiv-Eswanis did this with Prism.

01:33:38.620 | Make it 10,000 times faster,

01:33:40.320 | and you don't compromise the fundamental security assumptions

01:33:43.000 | that the system has.

01:33:44.160 | You can add programmability to it.

01:33:46.040 | Blockstream created a language called Simplicity.

01:33:48.640 | So there's actual ways to extend,

01:33:50.480 | and we did this with Cardano with the extended UTXO model.

01:33:53.340 | There's ways to extend what Bitcoin has.

01:33:55.640 | Keep the philosophy, the accounting,

01:33:57.440 | the way of thinking about transactions,

01:33:59.640 | but then suddenly you can now do DeFi and other things.

01:34:02.440 | But what they've done is said,

01:34:03.520 | we will not evolve the base layer at all,

01:34:06.200 | and we're just gonna build all this layer two stuff,

01:34:08.760 | which is usually highly fragile and centralized,

01:34:11.640 | and requires enormous effort

01:34:13.080 | at the base level to do anything.

01:34:14.840 | It's not a coincidence.

01:34:15.800 | Vitalik started as a ColorCoins guy

01:34:17.840 | and a MasterCoin guy, hanging out in those circles.

01:34:20.240 | He was trying to innovate and do things in Bitcoin,

01:34:22.800 | and it was so hard and difficult

01:34:24.880 | that he started diverging and going and doing things

01:34:27.200 | in a different system entirely.

01:34:29.080 | I knew the MasterCoin guys, JR, all these people.

01:34:32.760 | They were maximalists.

01:34:33.680 | They really wanted to build something cool

01:34:35.440 | and exciting for Bitcoin,

01:34:36.800 | and anything they did, the developers would attack them.

01:34:39.240 | It's all, you're misusing op return.

01:34:41.320 | You're doing this, that.

01:34:42.160 | It was a holy war any time you wanted to evolve.

01:34:44.680 | So I think it's its own worst enemy.

01:34:46.680 | It has the network effect.

01:34:47.920 | It has the brand name.

01:34:48.960 | It has the regulatory approval,

01:34:50.920 | but there's no way to change the system,

01:34:53.640 | even correcting obvious downsides in that system.

01:34:56.640 | Now, what's really cool is Ethereum

01:34:58.360 | doesn't suffer from that problem.

01:35:00.280 | It's getting to a point where it has

01:35:02.440 | a similar network effect to Bitcoin,

01:35:04.200 | but the community there is completely different in culture.

01:35:07.980 | They love evolving.

01:35:09.040 | They love upgrading, sometimes a little too much.

01:35:11.520 | And so that means that if you look

01:35:14.240 | at the trajectory of things,

01:35:15.480 | if I had to bet just those two systems,

01:35:17.280 | Bitcoin or Ethereum, I would say nine times out of 10,

01:35:20.280 | Ethereum is going to win the fight against Bitcoin

01:35:23.320 | if it was the only competitor.

01:35:25.160 | But obviously we're here and a lot of other people are here,

01:35:27.560 | so there's different things going on.

01:35:29.600 | So it's a much more complex game.

01:35:31.480 | But I think that's always a key,

01:35:33.320 | zooming out a little bit.

01:35:35.120 | Set the technology aside

01:35:36.600 | and the word salad of cryptography aside

01:35:38.520 | 'cause it's too much.

01:35:39.720 | What you have to always do is say,

01:35:41.040 | what incentive does the system have to evolve?

01:35:44.000 | And when you look at things like Android and the App Store

01:35:46.600 | and these analogous platforms,

01:35:48.880 | you say, ah, the evolution is user-driven

01:35:51.120 | and there's a financial incentive

01:35:52.340 | for the user to participate.

01:35:53.760 | So if I had to look at the trajectory of this thing,

01:35:56.160 | come back 10 years later,

01:35:57.640 | it's probably gonna have millions of applications

01:35:59.860 | and lots of stuff going on

01:36:01.680 | because that's the way the system was constructed.

01:36:04.200 | Okay, it makes sense.

01:36:05.520 | When you look at Bitcoin, you say,

01:36:06.640 | what is the incentive to evolve the system?

01:36:09.240 | There's none.

01:36:10.500 | What is the incentive for the system

01:36:12.320 | to get more competitors?

01:36:13.720 | None, in fact, it's the opposite.

01:36:14.760 | They've turned it into a religion.

01:36:16.500 | I was in Miami at this Bitcoin conference there.

01:36:19.480 | I had a toilet paper roll thrown at me

01:36:21.520 | that had shitcoin written on it.

01:36:23.060 | You have Max Keiser out on the stage

01:36:25.480 | doing his best Rick James impression.

01:36:28.280 | - Was he the guy that did the F Elon?

01:36:31.560 | - Yes, yes, yes.

01:36:33.040 | - That's wonderful.

01:36:33.880 | - You're watching this stuff and you say,

01:36:35.480 | okay, first, why would anybody wanna join that?

01:36:37.840 | And then second, where is the conversation

01:36:40.560 | about how do we achieve something?

01:36:42.560 | I started with Cardano, the end in mind.

01:36:44.480 | I said, we really wanna sit down

01:36:47.040 | and build this financial operating system

01:36:49.000 | and the definition of success is

01:36:51.000 | the poorest person in the world

01:36:52.340 | has access to the same system

01:36:53.900 | as the richest person in the world

01:36:55.500 | and they both get treated fairly.

01:36:57.700 | We've never had that happen before.

01:36:59.180 | Okay, that's something.

01:37:00.060 | You can agree with it, disagree with it,

01:37:01.340 | say it's boiling the ocean, it's impossible.

01:37:03.220 | At least I have something.

01:37:04.460 | I can't for the life of me understand

01:37:06.340 | what the hell is the point of Bitcoin.

01:37:08.100 | When I joined the Bitcoin space way back in the day,

01:37:11.140 | it was, hey, we hate the dollar

01:37:13.020 | and hey, we like gold a lot.

01:37:14.880 | Let's create digital gold.

01:37:15.940 | Let's build a payment system.

01:37:17.740 | And then it just kind of went all these different directions

01:37:20.020 | and nobody can actually tell you what Bitcoin is for.

01:37:22.680 | It's a store of value, okay.

01:37:24.520 | There's some proof of work thing

01:37:27.200 | where maybe you're like incentivizing

01:37:29.680 | alternative energy to be produced.

01:37:30.920 | I don't know.

01:37:31.760 | It's like nobody really knows the philosophy.

01:37:33.680 | There's no direction and they say, but don't worry.

01:37:36.920 | Just buy and hold and everything will sort its way out.

01:37:40.280 | - I believe it's HODL.

01:37:41.320 | - Yeah, HODL.

01:37:42.560 | - What about the idea of digital gold?

01:37:44.400 | So trying to replace that particular physical material

01:37:46.880 | that is gold and transfer into the digital space.

01:37:49.240 | - It's something, okay, let's do that then.

01:37:51.680 | And just say that's all it does.

01:37:52.800 | Then why are we doing lightning?

01:37:54.100 | Why are we doing any of these other things?

01:37:55.280 | 'Cause you don't really need with a commodity,

01:37:57.760 | a digital commodity, high throughput.

01:38:00.120 | You can have slow settlement.

01:38:01.320 | You can have high transaction fees,

01:38:02.760 | all these types of things.

01:38:03.600 | And that's fine.

01:38:05.040 | Okay, that's something, pick it.

01:38:07.280 | - Well, the idea is to try to come up with technology

01:38:09.920 | like the lightning network

01:38:11.320 | that could have something like gold,

01:38:13.600 | but then still build an economy around it.

01:38:16.040 | Something with a high throughput transactions.

01:38:18.040 | - And have we ever built a successful banking credit system

01:38:21.120 | off of gold?

01:38:22.360 | Never, it never works because there's too much volatility

01:38:25.520 | in the underlying asset.

01:38:26.720 | Would you take a gold denominated loan for something?

01:38:29.000 | If somebody says, all right, I'll give you five bars of gold

01:38:30.840 | to go buy this car and pay me back

01:38:33.680 | five and a half bars of gold.

01:38:35.040 | Nobody would know in five years where they come out

01:38:37.360 | in that kind of arrangement.

01:38:38.200 | - The idea is that the gold is used

01:38:39.600 | for the settlement of transactions.

01:38:41.240 | And then you're operating,

01:38:42.720 | the actual economy is operating outside of gold.

01:38:45.960 | And then you kind of connect back to gold.

01:38:48.200 | - So you have to go back to the gold reserve.

01:38:49.840 | And we tried that for a long time.

01:38:51.880 | It didn't really work in a modern global economy.

01:38:53.760 | We had the Brentwoods Agreement and all these other things.

01:38:55.880 | And so I understand what you're saying.

01:38:58.080 | Maybe there's some merit to that.

01:38:59.920 | But if that was really in earnest where they want to go,

01:39:02.160 | then the conversation should be about,

01:39:03.880 | well, how do we make it easy for layer two protocols

01:39:06.400 | to interact with Bitcoin?

01:39:08.120 | So why is simplicity not built into it?

01:39:10.280 | Why is it taking so long to do snore sigs?

01:39:12.200 | Why is it taking so long to do all of these obvious upgrades

01:39:14.960 | which are cryptographically low danger?

01:39:17.240 | Also NIPA Pals, non-interactive proofs of proof of work.

01:39:20.280 | There's no cost to doing that.

01:39:21.880 | It's just a property of proof of work

01:39:23.680 | where certain puzzles are more special than other puzzles.

01:39:26.920 | And by noticing that, you can create these beautiful proofs

01:39:29.720 | that allow you to have side chains and like clients.

01:39:32.000 | It's not compromising security of the system.

01:39:34.120 | It's just something you get for free with proof of work.

01:39:36.520 | Those came out in 2016.

01:39:38.120 | There's derivative work fly client floating around.

01:39:40.280 | Where the hell is it?

01:39:41.760 | This is the frustration that I have is like,

01:39:43.760 | if you really are serious about this whole lightning

01:39:45.880 | and gold economy thing, I love choice.

01:39:48.720 | I'm a libertarian by nature.

01:39:50.060 | I love competition.

01:39:51.320 | And I read all those books.

01:39:53.040 | I read Ludwig von Mises' work and Murray Rothbard's work.

01:39:56.120 | I love what Hayek had to say about private currencies.

01:39:58.640 | Let's go try it.

01:39:59.700 | That's great.

01:40:00.540 | But then you have to have some focus

01:40:02.440 | and commitment as an ecosystem.

01:40:04.120 | And the excuse they use is, well, no, we don't

01:40:07.080 | because we're decentralized.

01:40:08.320 | And because we're decentralized, we don't need that.

01:40:11.360 | As if there's some sort of guiding swarm intelligence

01:40:14.040 | that will naturally push the system

01:40:16.200 | in that particular direction.

01:40:17.960 | But then you ask, well, how do people measure

01:40:20.160 | the success of Bitcoin?

01:40:21.640 | Is it the fact that they've actually achieved

01:40:23.700 | lots of transactions and lots of actual economic activity

01:40:27.720 | and lots of businesses accepting Bitcoin?

01:40:29.160 | - The number go up.

01:40:30.400 | - It's the price.

01:40:32.000 | That's what they do.

01:40:33.200 | And that's the only thing they pay attention.

01:40:34.800 | That's why this is the most attended

01:40:36.320 | Bitcoin conference in history.

01:40:37.960 | Not because somehow Bitcoin got so much more adoption.

01:40:40.560 | It's because this is the highest price point

01:40:42.880 | Bitcoin has ever been this year.

01:40:44.760 | You know, over 30,000.

01:40:46.000 | - So first of all, let me state that Charles,

01:40:47.800 | for the most part is purely objective.

01:40:51.400 | The bias that comes in for the record, I want to say,

01:40:55.360 | that I have heard, 'cause you mentioned the mafia,

01:40:58.040 | that you prefer good fellows over the godfather.

01:41:00.840 | So a man who prefers good fellows over godfather,

01:41:04.400 | you take it for that opinion for what it is.

01:41:09.560 | - I actually had to think about that one for quite a bit.

01:41:11.880 | I think--

01:41:12.720 | - Oh, come on, Joe Pesci was so good at that.

01:41:14.120 | - He's incredible.

01:41:15.120 | I also love Casino and those big glasses on De Niro.

01:41:18.280 | I love it with Sharon Stone.

01:41:20.480 | But we could talk about that for hours.

01:41:22.000 | But let me ask you about the Bitcoin conference,

01:41:24.000 | 'cause it is kind of, I would say,

01:41:27.560 | an important moment in human history.

01:41:29.400 | It was quite exciting in terms of size

01:41:31.520 | and kind of turmoil and all those kinds of things.

01:41:35.200 | And you were there in, what is it, hot and humid Miami?

01:41:39.200 | I believe is the way you introduced it.

01:41:41.480 | So what do you make of the community of Bitcoin

01:41:44.920 | or that particular event in human history?

01:41:49.120 | - What makes me sad is I remember the old Bitcoin community

01:41:51.680 | and I've seen what it's become.

01:41:53.200 | And the old community was really fun,

01:41:54.920 | like the San Jose conference in 2013

01:41:57.120 | or subsequent conferences.

01:41:59.320 | You know, there was just a lot of people,

01:42:01.000 | they had no money.

01:42:02.200 | They just really loved this idea of decentralized money.

01:42:06.000 | They loved this idea of decentralization in particular.

01:42:09.160 | And you could strike up a conversation with everyone.

01:42:11.720 | There was no ego at all.

01:42:13.400 | But what was really fun is you could really get

01:42:16.800 | intimate friendships and relationship

01:42:18.800 | and great conversations with people there.

01:42:21.760 | It's kind of like the early days of AI,

01:42:23.120 | you know, they all met in Dartmouth

01:42:24.200 | and all these other places, very intimate.

01:42:25.800 | There was no egos.

01:42:26.640 | Everybody was just trying to do some really cool stuff.

01:42:28.680 | Now, just like those early days,

01:42:30.720 | there was an overestimate of how robust

01:42:33.480 | the solutions would be.

01:42:34.440 | So we believed, oh yeah, in 10 years,

01:42:36.680 | we're gonna rule the whole world, right?

01:42:38.600 | Didn't exactly happen.

01:42:39.640 | On the other hand, Bitcoin grew from nothing

01:42:42.440 | in just 11 years to, I'm in Mongolia riding camels

01:42:46.560 | and the camel herder has Bitcoin in the Kobe desert.

01:42:50.120 | So that's telling you that's a pretty pervasive technology

01:42:52.560 | if you have that level of adoption that quickly.

01:42:54.760 | When I went to Miami, it was unrecognizable.

01:42:57.360 | You know, everything was so commercial.

01:42:59.000 | Half of the vendors at the conference were like watches

01:43:04.000 | that would cost half a million dollars

01:43:06.240 | and they were covered in diamonds.

01:43:07.880 | So when you see that kind of materialism

01:43:09.560 | leak its way in, it's first is repulsive.

01:43:12.080 | The other thing was there was no,

01:43:14.320 | like I remember one of the first conferences,

01:43:16.240 | Mo Levin's conference in January of 2014,

01:43:19.040 | the North American Bitcoin Conference,

01:43:20.360 | ironically in Miami, there was a Bitcoin help center booth.

01:43:24.920 | Dima ran it and a few of the other Bitcoin OGs ran it.

01:43:27.680 | The core developers actually came over,

01:43:29.280 | like Jeff and others, who were there and sat at the booth.

01:43:32.000 | Anybody come up, ask a question,

01:43:34.000 | anything you wanna ask about Bitcoin.

01:43:35.560 | It was like, that was the culture,

01:43:36.880 | just help people, welcome in.

01:43:38.680 | There was no help booth there.

01:43:40.840 | There was no notion of that.

01:43:42.040 | There were six hour lines and superstars

01:43:44.680 | and things like that.

01:43:45.520 | And again, again, it was always the same thing.

01:43:47.560 | Look how much money all these people have made.

01:43:50.760 | And the whole point of Bitcoin

01:43:52.040 | was to redefine the notion of money,

01:43:54.000 | redefine the notion of value, you know,

01:43:56.040 | these types of things.

01:43:57.240 | So it just, I'm no longer part of that.

01:43:59.680 | And it made me sad because I really enjoyed

01:44:02.120 | being part of the, how I got started

01:44:03.560 | was the Bitcoin Education Project.

01:44:04.880 | I did a class on Udemy.

01:44:06.020 | I gave it away for free.

01:44:07.080 | I had 80,000 students and they would email me.

01:44:09.920 | I got 5,000 emails before I stopped answering them.

01:44:12.960 | And everyone come in and ask me some question

01:44:15.720 | about something, sometimes arcane, sometimes trivial.

01:44:18.720 | And I'd take the time to sit down

01:44:20.240 | and answer the question or forward the email

01:44:22.120 | to somebody I knew who could answer

01:44:23.360 | that particular type of question.

01:44:24.920 | And there were some amazing people in the early days,

01:44:27.100 | like Mike Hearn and Gavin and others.

01:44:29.120 | And they were just super committed.

01:44:31.520 | And in Mike's case, he knew Satoshi.

01:44:33.560 | He actually emailed him back and forth

01:44:35.320 | 'cause he was around 2009, 2010.

01:44:37.620 | He did the Bitcoin Java client.

01:44:39.720 | And Satoshi was all excited.

01:44:40.760 | He said, "Oh, wow, Bitcoin can come to a cell phone.

01:44:43.120 | "This is really cool and exciting."

01:44:45.540 | And then what happened?

01:44:46.380 | Mike left Bitcoin in 2013

01:44:48.740 | over the whole big block debate that happened.

01:44:51.380 | They just treated him like dirt,

01:44:53.100 | like he was subhuman or something.

01:44:54.920 | So I don't know, the culture's changed a lot.

01:44:57.480 | And if they like it, it's good for them.

01:44:59.900 | They can enjoy their religion.

01:45:01.720 | But it's not for me.

01:45:02.840 | And where I like being is,

01:45:04.840 | like I had a guy who used to work for me,

01:45:06.560 | Alex Chirpinoy,

01:45:08.280 | and he created this beautiful project called Ergo.

01:45:10.360 | To me, that is the spiritual successor to Bitcoin.

01:45:13.520 | Ergo is really special 'cause it has the same culture,

01:45:15.940 | it has the same mentality.

01:45:17.400 | And the technology is kind of like a natural evolution

01:45:20.380 | of what you would do if you knew about Bitcoin

01:45:22.800 | and you wanted to build the next big thing.

01:45:24.760 | So it's still a proof-of-work system.

01:45:26.380 | It's still a UTXO system.

01:45:28.080 | But he added UTXO with some smart contracts.

01:45:30.440 | It's this Sigma protocol idea.

01:45:32.520 | On the proof-of-work side,

01:45:33.800 | Satoshi had this one CPU, one vote idea.

01:45:36.280 | So Alex tried to create non-also-sorcible puzzles

01:45:38.560 | to make it impossible to have mining pools.

01:45:40.880 | And there's all these other beautiful little things.

01:45:42.360 | And he's this brilliant Russian programmer,

01:45:45.280 | and he surrounded himself

01:45:46.240 | with all these other brilliant people.

01:45:47.680 | He has zero ego.

01:45:48.840 | He has negative ego.

01:45:50.320 | When you put him with a person with ego,

01:45:51.720 | your ego goes down.

01:45:53.880 | And everything about Alex is always like,

01:45:56.200 | how do I solve this, how do I do that?

01:45:57.960 | And he gets legitimately excited when he meets somebody

01:46:00.840 | that he can collaborate with or learn from.

01:46:04.040 | That's where Bitcoin was in the beginning.

01:46:06.600 | Everybody set their egos aside,

01:46:08.520 | whether it was Hal Finney or whatever,

01:46:10.240 | and they would just say, how can I help, what can I do?

01:46:12.560 | And it was all about coming up with some cool new thing

01:46:14.960 | or solving some cool new problem.

01:46:17.280 | I don't see any of that in Bitcoin today.

01:46:19.120 | - So quite a few people are excited about Ergo

01:46:20.960 | and excited about the fact that you

01:46:22.560 | kind of appreciate Alex and Ergo.

01:46:25.080 | Do you see Cardano potentially utilizing

01:46:28.120 | the proof-of-work mechanism from Ergo

01:46:30.200 | as part of this pool for the consensus mechanism?

01:46:35.200 | - I mean, anything's possible.

01:46:36.440 | And there's a lot of evolution Ergo has to go through.

01:46:39.200 | And Ergo was, it was kind of like,

01:46:41.320 | when the Xbox 360 first came out,

01:46:43.640 | while they were prototyping it,

01:46:45.000 | Microsoft needed a development environment.

01:46:46.880 | They ironically purchased a lot of Apple computers

01:46:49.760 | to do that, 'cause Apple was moving away

01:46:51.400 | from the PowerPC to Intel,

01:46:52.720 | and Microsoft was moving towards the PowerPC,

01:46:54.880 | just this weird intersection of history.

01:46:56.640 | So at that time, the largest order of Mac computers made

01:46:59.400 | was done by Microsoft,

01:47:01.120 | and they were using it for Xbox stuff.

01:47:02.640 | So Ergo, we viewed the same way.

01:47:04.240 | So we said, well, we have this extended UTXO model.

01:47:06.800 | The only thing that's sufficiently close to it

01:47:09.480 | where we can beta test contracts is actually with Ergo.

01:47:12.920 | And Alex just was a little faster

01:47:15.200 | in getting certain things out,

01:47:16.360 | 'cause we were doing things in a slightly more rigorous way

01:47:18.800 | and slightly more expressive way.

01:47:20.520 | So we actually tested a stable coin

01:47:22.040 | and Oracle and other things on Ergo.

01:47:24.040 | And it has just incredible community.

01:47:26.760 | When we said, hey, we're coming here to work and build,

01:47:29.080 | oh yeah, we'd love to work with you guys.

01:47:30.760 | This is so cool.

01:47:32.280 | The other thing is Alex used to work for us,

01:47:33.960 | and he had this lovely project called ScoreX,

01:47:36.280 | and it was all about a pedagogical framework

01:47:39.080 | for building blockchains.

01:47:40.520 | And if you want to do prototyping or academic research,

01:47:42.720 | it was great.

01:47:43.560 | It was super modular,

01:47:44.500 | and it separated the consensus network

01:47:46.240 | and transaction layer from each other in just the right way

01:47:49.680 | so that you can make it modular and mix and match things.

01:47:52.120 | So you can put secure academia in,

01:47:53.480 | or maybe a different network layer

01:47:54.840 | and a different consensus protocol,

01:47:56.760 | like proof of work to another proof of work and so forth.

01:47:59.360 | So we loved having that kind of IP sitting around

01:48:02.520 | 'cause it gave us the ability to kind of play around

01:48:04.760 | with ideas in a matter of weeks instead of months or years.

01:48:07.600 | And then he just took that concept and he gave it away.

01:48:10.520 | The Wave protocol was built on it.

01:48:12.720 | That was Sasha Ivanov, he did that.

01:48:15.120 | And I think there's two or three other cryptocurrencies

01:48:17.360 | that were launched from ScoreX.

01:48:18.440 | And then Alex took that and built Ergo from it.

01:48:22.040 | So there was a nice intersection

01:48:23.640 | where there was overlapping technology with Ergo,

01:48:26.400 | with our technology.

01:48:27.600 | And the other thing was that the community

01:48:28.960 | was so open and friendly, it was just a no-brainer.

01:48:31.360 | Just go in and start building some things there.

01:48:33.800 | Now, in terms of evolving ideas,

01:48:35.640 | the whole Sigma protocol idea is very different,

01:48:37.960 | and it's very interesting.

01:48:39.080 | And there's a guy at a Boston University,

01:48:42.080 | his name will come to me in a segment,

01:48:43.680 | who came up with this stuff.

01:48:46.060 | And I think there's some merit there,

01:48:48.080 | especially as we start moving closer to this idea

01:48:51.200 | of blockchains being used to validate proofs

01:48:53.480 | instead of running computation.

01:48:54.680 | - What's the Sigma protocol, by the way?

01:48:56.200 | - So it's just a way of expressing scripts.

01:48:58.840 | And basically, you get these concise representations

01:49:03.200 | of proofs, and then you can say,

01:49:05.040 | okay, the script is correct,

01:49:06.120 | but you don't have to run the whole program.

01:49:07.800 | So there's a lot, I'm not doing the topic justice,

01:49:10.200 | there's a lot more to it, but that's the basic concept.

01:49:12.880 | And in a Redeemer validator model,

01:49:14.920 | you need stuff like that,

01:49:16.000 | because as your model gets more complex

01:49:19.000 | and a lot more things happen,

01:49:20.940 | you don't want to have a situation where I have to run,

01:49:24.200 | replay a huge amount of the UTXO graph

01:49:27.280 | to be able to get to a point

01:49:28.520 | where I have the state of the system.

01:49:30.000 | You need some mathematical artifact

01:49:32.120 | that gives you the state of the system quickly.

01:49:34.320 | And then you're saying, okay, I now know how to,

01:49:35.960 | what computation thread I need to run

01:49:37.800 | to be able to get enough

01:49:39.040 | to be able to redeem this transaction.

01:49:41.400 | So he just found a more compressed representation of it.

01:49:43.640 | And the math doesn't matter.

01:49:45.480 | What matters is there's a whole beautiful field

01:49:49.060 | that thinks about this type of stuff.

01:49:51.180 | And it was never once linked before into our industry.

01:49:55.160 | The brilliance of Alex was to actually realize

01:49:57.160 | you could do that and pull those things together.

01:49:59.640 | And it may actually have some merit,

01:50:01.360 | but by no means is the only guy that does this stuff.

01:50:03.840 | There's actually other approaches in verified computing

01:50:07.760 | that have explored that.

01:50:08.920 | Like my favorite came out of Microsoft research

01:50:10.880 | is a project called Pinocchio.

01:50:12.280 | And there was a followup called Geppetto.

01:50:14.000 | And the basic idea was that it's fortuitous

01:50:17.440 | that you have these computer science problems

01:50:19.800 | like hashing where you can do all this computation.

01:50:24.800 | And once you've done all of it,

01:50:27.360 | you found this magic number that you can verify

01:50:29.560 | that the computation was done correctly.

01:50:31.640 | So the proof of work works this way.

01:50:33.240 | Hard to do the proof of work,

01:50:34.520 | easy to check the proof of work.

01:50:36.240 | Cryptography also works this way.

01:50:38.640 | You have some trap door

01:50:39.680 | where you can verify something's correct,

01:50:41.200 | but to get that thing done,

01:50:43.480 | if you're doing it brute force,

01:50:44.800 | it takes an enormous amount of computation.

01:50:46.720 | Well, not all problems are like this,

01:50:48.340 | like protein folding.

01:50:49.520 | To verify the protein is folded correctly,

01:50:51.360 | you have to fold the protein.

01:50:52.360 | You have to redo the work.

01:50:53.880 | But what if for arbitrary computation,

01:50:56.640 | you could take a problem

01:50:58.220 | and then you could generate a proof

01:50:59.740 | that you've done that computation correctly

01:51:01.960 | and the proof validates in logarithmic time

01:51:04.160 | or constant time.

01:51:05.200 | Wow, that's incredible, right?

01:51:06.960 | Well, Microsoft actually wrote a paper on how to do that.

01:51:09.260 | It's called Pinocchio.

01:51:10.360 | So that's another example of these types of things,

01:51:12.240 | these roll-ups of things

01:51:13.460 | where instead of doing the computation on chain

01:51:16.000 | or trying to create some sort of replicated machine

01:51:17.960 | that does all this stuff,

01:51:19.640 | you instead just say,

01:51:20.480 | okay, only thing I'm going to use the blockchain for

01:51:22.440 | is to check your proof,

01:51:24.160 | but I'm going to turn it

01:51:25.000 | into a distributed computing problem

01:51:26.120 | and any person in the world can do the problem

01:51:28.820 | on any server, untrusted server even,

01:51:31.360 | because you don't have to trust the output.

01:51:33.400 | You trust the proof and the proof is deterministic.

01:51:36.380 | It tells you these things.

01:51:37.640 | So whether you're using zero knowledge

01:51:39.680 | or Sigma protocols or some other mechanism,

01:51:41.960 | it's moving you in that particular direction

01:51:44.240 | to turn it from a replicated to distributed problem

01:51:47.200 | and go from I'm doing the work

01:51:48.480 | to I'm checking that the work was done correctly.

01:51:50.160 | - That's fascinating.

01:51:51.000 | And all of a sudden we're back to the P equals NP thing

01:51:54.760 | where for many very interesting problems,

01:51:57.260 | the checking is efficient,

01:51:59.760 | is much more efficient than the solving.

01:52:01.680 | - Right, and also do you want complete determinism

01:52:04.000 | or is it probabilistic?

01:52:05.800 | 'Cause if you relax that requirement a little bit,

01:52:07.720 | then suddenly actually you have a broader class of things

01:52:10.440 | you can construct this stuff for.

01:52:12.280 | - You mentioned UTXO.

01:52:14.160 | There's a paper titled the Extended UTXO Model.

01:52:18.120 | It writes in the introduction,

01:52:20.400 | "Bitcoin and Ethereum,

01:52:21.920 | hosting the two currently most valuable

01:52:23.680 | and popular cryptocurrencies,

01:52:25.280 | use two rather different ledger models,

01:52:28.040 | known as the UTXO model

01:52:30.440 | and the account model, respectively.

01:52:33.160 | At the same time, these two public blockchains

01:52:35.720 | differ strongly in the expressiveness

01:52:37.600 | of the smart contracts that they support.

01:52:41.120 | This is no coincidence.

01:52:42.360 | Ethereum chose the account model

01:52:44.440 | explicitly to facilitate more expressive smart contracts.

01:52:47.640 | On the other hand, Bitcoin chose UTXO

01:52:49.920 | also for good reasons,

01:52:51.100 | including that its semantic model stays simple

01:52:54.340 | in a complex concurrent

01:52:55.480 | and distributed computing environment.

01:52:57.240 | This raises the question of whether it is possible

01:52:59.800 | to have expressive smart contracts

01:53:01.480 | while keeping the semantic simplicity of the UTXO model."

01:53:06.220 | Okay.

01:53:07.060 | - So what's the fuck that mean?

01:53:08.600 | - Exactly.

01:53:09.440 | (laughing)

01:53:10.260 | What is UTXO?

01:53:11.560 | What is the account model?

01:53:13.160 | And what is the idea of the extended UTXO model?

01:53:17.680 | - So I guess the easiest way of visualizing it

01:53:19.520 | is that UTXO is kind of like cash register accounting.

01:53:22.720 | So, you know, let's assume you don't have credit cards,

01:53:24.960 | you just have cash.

01:53:25.960 | And so when you go and buy some milk and potatoes

01:53:28.560 | or whatever, you go to the cashier,

01:53:30.360 | you pull out your $20 bill,

01:53:32.360 | you give it to them,

01:53:33.240 | and let's say that comes up to 17.50,

01:53:35.200 | they have to make change.

01:53:36.520 | So you don't tear your $20 bill

01:53:39.120 | and cut a piece of it off and say,

01:53:40.840 | "Here's part of my 20."

01:53:42.280 | You give them the entire $20 bill,

01:53:44.800 | and then they give you something back.

01:53:46.680 | And the things that they give you back

01:53:48.020 | are also atomic units.

01:53:49.320 | They don't cut those things up.

01:53:51.000 | So that's kind of what UTXO is all about in a nutshell,

01:53:53.940 | is that there's inputs and outputs.

01:53:55.400 | Your input's that 20,

01:53:56.480 | and your outputs will be the 17.50 that goes to them,

01:53:59.960 | and then the remaining change that goes back to you.

01:54:02.760 | Okay?

01:54:03.760 | The problem with this particular model

01:54:05.520 | is that the way it was implemented with Bitcoin,

01:54:08.160 | there was no notion of how do we run complex predicates,

01:54:12.880 | complex contracts on this thing,

01:54:15.520 | where instead of just saying,

01:54:16.640 | "Okay, I'm just gonna push value to you,

01:54:19.080 | "I wanna put lots of terms and conditions

01:54:21.160 | "into the movement of that value."

01:54:22.840 | Like, "You only get this if I mow your lawn on Tuesday,"

01:54:26.000 | or, "You only get this if some event happens,

01:54:29.500 | "like the Broncos win the Super Bowl,"

01:54:31.080 | or something like that.

01:54:32.500 | Okay?

01:54:33.340 | So you need some notion of programmability with it.

01:54:35.400 | So a lot of people are trying to figure out

01:54:37.440 | in the early days of Bitcoin,

01:54:38.920 | how could we improve the expressiveness of the system?

01:54:41.840 | And one of the ways of doing it

01:54:43.560 | is you can go to a different accounting model,

01:54:46.760 | bank-style accounting.

01:54:48.280 | So in a bank ledger,

01:54:50.040 | every time you do a withdrawal, a deposit,

01:54:52.560 | it's a mutable system.

01:54:54.300 | With the cash register accounting,

01:54:55.880 | you don't tear up the bills,

01:54:57.120 | but the bank, you can deduct or add

01:54:58.680 | to the ledger all the time.

01:55:00.240 | So Ethereum kinda works in that bank accounting system,

01:55:02.760 | where you send messages, you send transactions,

01:55:05.760 | and you're going up or down,

01:55:07.180 | and so you can trigger programs the same way.

01:55:10.240 | So what we did is we said,

01:55:11.480 | "Okay, if you take the UTXO model,

01:55:14.020 | "and you add some data to it,

01:55:15.540 | "and instead of saying it's just a digital signature,

01:55:17.840 | "but it's in a script,

01:55:19.360 | "you can basically create something

01:55:22.200 | "that's still the same as cash register,

01:55:24.520 | "but now you have programmability,

01:55:25.940 | "and the big difference is local versus global."

01:55:28.920 | So in the case of UTXO, your scripts are your concerns.

01:55:32.640 | So whatever's going on in that cash register

01:55:34.800 | has no bearing or impact on the other cash registers.

01:55:37.900 | But when you look at bank accounting,

01:55:39.560 | you have to know the state of the entire banking world

01:55:42.020 | to be able to make that work.

01:55:43.180 | Why?

01:55:44.020 | Because if that transaction's inbound,

01:55:45.460 | that wire transfer's inbound,

01:55:46.700 | you have to know those funds are actually there,

01:55:48.220 | that thing is actually happening.

01:55:50.060 | So when you have a global state for a program,

01:55:52.340 | it's like you could do a lot more with it,

01:55:54.220 | but it's a lot more dangerous,

01:55:55.380 | and so you have to build all these mechanisms

01:55:57.100 | to try to protect yourself from it.

01:55:58.780 | So what we did is we said,

01:56:00.000 | "Okay, add data, add a programmability,"

01:56:02.100 | and you're kinda in this nice Goldilocks zone

01:56:03.900 | between what Ethereum did with an account-style model

01:56:06.500 | and a global state system,

01:56:08.380 | and you're not as restrictive as Bitcoin,

01:56:10.540 | but you're still in a Turing-complete world,

01:56:12.140 | you can still run all kinds of things.

01:56:14.060 | And then any standard mathematician,

01:56:16.380 | they'll say, "Okay, well, is it isomorphic?

01:56:19.900 | Is there a mapping between this?

01:56:21.080 | What type of function?

01:56:22.220 | Could I actually take something expressed in one structure

01:56:25.660 | and transmit it to the other structure

01:56:27.480 | and properties are preserved?"

01:56:28.820 | So we wrote a paper, it was called "Chimeric Ledgers,"

01:56:30.780 | where we actually showed that UTXO,

01:56:32.660 | extended UTXO, and accounts are somewhat similar,

01:56:36.380 | in that you can map things that happen in one system

01:56:39.420 | to the other system,

01:56:40.380 | the properties are preserved between the two.

01:56:42.500 | So in practice, what's nice about extended UTXO

01:56:45.700 | is that you can put infrastructure on top of it

01:56:48.700 | to make the development experience

01:56:50.380 | relatively similar to the development experience

01:56:52.520 | of what you would do with Ethereum,

01:56:54.980 | but you don't have to worry about this global state.

01:56:58.260 | So when you talk about sharding,

01:56:59.900 | it's a lot easier to do that.

01:57:01.320 | It's a lot more conceivable to that.

01:57:02.720 | And also you get determinism in the system.

01:57:05.240 | So when I have a Plutus smart contract,

01:57:07.020 | whatever I run locally

01:57:08.300 | is exactly what I expect to run in the system.

01:57:11.280 | When you have a concept of this mutable global state

01:57:13.660 | in the system, whatever you run locally

01:57:15.220 | is not necessarily what you're gonna get

01:57:16.740 | when you actually push it into the system.

01:57:18.780 | So you may misprice things and the contract will fail.

01:57:21.700 | It doesn't ever happen in the Plutus world.

01:57:23.940 | So you get a lot of advantages with this particular model.

01:57:26.300 | The downside is that it's a little bit less expressive

01:57:29.800 | on the boundaries and a little bit harder

01:57:31.960 | to write certain types of software with it.

01:57:34.860 | But again, how you resolve that is you kind of build

01:57:38.580 | higher level languages and other such things

01:57:40.700 | that compensate for these types of things

01:57:42.600 | and design patterns that compensate

01:57:44.180 | for these types of things.

01:57:45.380 | The other advantage that we have

01:57:46.780 | that's really fun and exciting is that

01:57:48.740 | Bitcoin lives in this model

01:57:50.320 | and there are other UTXO based systems.

01:57:52.740 | And so they're all talking about smart contracts as well

01:57:55.380 | and they would like to continue working in the UTXO model.

01:57:58.620 | So if you're a Bitcoin contract developer or other things,

01:58:01.360 | there's actually already a group of people

01:58:02.800 | that understand this very well

01:58:04.120 | and that's still a fairly large part of the mindshare

01:58:07.000 | of the entire space.

01:58:08.380 | So there are no silver bullets

01:58:09.800 | and anytime you pick a particular model,

01:58:11.600 | there's an upside and a downside

01:58:13.080 | and there's different ways of doing things

01:58:14.360 | from cash register accounting or bank accounting.

01:58:16.240 | You can even do different accounting models.

01:58:18.280 | But we felt this was kind of the best first step to go into

01:58:22.400 | 'cause we started with something very familiar

01:58:24.680 | that had a long history behind it

01:58:27.320 | and it maps very beautifully

01:58:29.180 | to functional programming principles.

01:58:30.900 | This concept of immutability and these things

01:58:33.120 | and much more strict management of state

01:58:36.160 | and no notion of having this global concept

01:58:39.600 | that you have to kind of manage as you break up the system.

01:58:42.680 | Now in practice, what does this mean to the developer

01:58:46.860 | and when they actually start real writing an application?

01:58:50.340 | Not too much.

01:58:51.720 | There's gonna be a little bit of retooling

01:58:53.240 | and some new patterns you have to learn,

01:58:54.740 | but in practice you can still do the same things.

01:58:56.540 | You can implement a Uniswap style thing.

01:58:59.380 | In fact, we even wrote that code

01:59:00.680 | with the Plutus Pioneers program

01:59:01.920 | so you can go to YouTube and watch a lecture

01:59:03.880 | and see how that's done.

01:59:05.320 | You can do a stable coin, you can do an Oracle,

01:59:07.960 | you can do interactive contracts.

01:59:10.060 | It's just it has to be done a little differently

01:59:12.140 | than the way that you would do it in an account style model.

01:59:14.340 | Just like you could run an application in Java,

01:59:16.660 | you can run an application in Haskell.

01:59:18.680 | They both can do the same thing,

01:59:20.040 | but the code is gonna look different

01:59:21.380 | and the canonical way of looking at things is different.

01:59:25.200 | - So in terms of Oracle, Oracle networks,

01:59:27.600 | what are your thoughts about Chainlink

01:59:29.080 | and external off-chain data sources?

01:59:32.200 | And everything we've been talking about now

01:59:34.600 | with the extended UTXO model.

01:59:37.960 | - Yeah, I mean, trying to do smart contracts

01:59:41.240 | without Oracle is like trying to have sex

01:59:42.640 | with your pants on.

01:59:43.640 | I mean, it's not really fun.

01:59:45.640 | It's not exactly the best of things.

01:59:47.640 | - That's the way I've been doing it all these years.

01:59:49.120 | I didn't know.

01:59:49.960 | - For any other person, Lex,

01:59:51.340 | I wouldn't believe you, but for you.

01:59:54.480 | - That's why I'm single.

01:59:55.680 | This makes so much sense now.

01:59:57.120 | - Okay, so anyway, you need the outside world

02:00:01.440 | to be ejected into your system, right?

02:00:03.520 | I'm trying to keep a straight face.

02:00:06.320 | It's great.

02:00:07.160 | You need the outside world to make your system useful.

02:00:09.520 | It's like all the kinds of things

02:00:11.080 | that you care to do with a smart contract

02:00:13.040 | usually involve human beings and information streams

02:00:16.280 | aggregating and doing something.

02:00:17.440 | So the Oracle is a super important component

02:00:20.240 | in practice for any smart contract

02:00:22.360 | involving any notion of value.

02:00:24.120 | You need to know when things have happened,

02:00:25.500 | how they happened, who won, who lost, et cetera, et cetera.

02:00:28.920 | So first, where do you get the data from?

02:00:31.300 | So what's the aggregator?

02:00:32.880 | This is why we love our relationship with Wolfram

02:00:34.880 | 'cause if you know, one of the things you'll know

02:00:36.320 | about Wolfram as you get to know the guy

02:00:37.920 | is he's a data pack rat.

02:00:39.340 | Every email, every communication, every interaction,

02:00:41.640 | he's archived somewhere.

02:00:43.200 | Like last time I talked, he's like,

02:00:44.440 | oh yeah, I have emails from you from 2012.

02:00:46.440 | It's like, you still have those?

02:00:47.960 | Like, yeah, every keystroke is written down

02:00:50.240 | and stored somewhere.

02:00:51.360 | So if you use Wolfram Alpha,

02:00:52.760 | it's a simulacrum of the way his mind thinks.

02:00:55.180 | And so you can query the system and be like,

02:00:57.480 | oh, how many shipwrecks have happened in Florida

02:01:00.000 | between 1950 and 2000 that have resulted

02:01:02.600 | in more than a billion dollars of cargo loss

02:01:04.720 | and at least one fatality?

02:01:06.640 | And it'll return an answer.

02:01:08.200 | I mean, he has this incredible source of data

02:01:10.400 | that's computable.

02:01:11.320 | - For people who don't know, Wolfram Alpha

02:01:13.440 | is more than just the thing that assists you

02:01:15.400 | with your math homework in high school.

02:01:18.200 | It's actually this giant network of data

02:01:20.400 | of like weather data, of location data,

02:01:23.440 | just statistics, all kinds of,

02:01:25.160 | is doing the aggregation in a way

02:01:26.840 | that you can query across data sets.

02:01:30.680 | And it's exactly this kind of idea.

02:01:33.320 | It basically represents the very kind of thing

02:01:36.720 | you would hope to be able to query off-chain

02:01:40.000 | as part of the smart contracts.

02:01:41.560 | - Right, but the only downside is it's centralized.

02:01:44.600 | You know, and that's always the Achilles heel

02:01:46.560 | of Wolfram is he tends to like proprietary things

02:01:49.140 | and he tends to like centralizing things

02:01:50.640 | and mostly 'cause he likes running the things

02:01:52.440 | and then, you know, everybody can have an opinion on that.

02:01:56.280 | The thing though is that after you've done aggregation,

02:01:59.680 | there's a question of injection.

02:02:00.960 | How do you get that data into the system?

02:02:04.160 | And you can do that in a very naive way

02:02:05.980 | where you can say, oh, I'm just gonna attach

02:02:07.160 | a public key to it and it'll sign for that data feed,

02:02:09.560 | that injection, and then somehow I'll just trust it as it is

02:02:13.360 | or you could try to make it more complicated.

02:02:16.560 | You could weight data feeds from different sources

02:02:18.860 | and have some notion of truthiness or of veracity metric

02:02:21.960 | or something like that.

02:02:23.320 | So Chainlink is just one of many different philosophies

02:02:27.200 | that was born out of the academy.

02:02:29.040 | I believe Ari Jewell was connected to it

02:02:30.920 | and there's some good people on that side.

02:02:33.000 | And it has a philosophy about how do you aggregate,

02:02:36.360 | a philosophy about how do you inject

02:02:38.520 | and how do you create incentives

02:02:39.920 | so that that process over time gets more federated

02:02:43.440 | or more decentralized instead of centralizing

02:02:46.000 | around one particular setup.

02:02:47.900 | Now, closely related corollary to this

02:02:50.140 | is computation off-chain.

02:02:52.920 | So as I mentioned, smart contracts

02:02:54.840 | are intimately connected to an oracle.

02:02:56.680 | The question is how much pre-processing

02:02:58.360 | and state management are you gonna do

02:02:59.720 | outside of the system versus what do you do

02:03:02.400 | inside of the system?

02:03:03.880 | So it's a very interesting balance between these two.

02:03:07.440 | And they were thinking about this stuff for a long time.

02:03:09.640 | There's a great paper called Town Crier,

02:03:11.600 | came out way back in the day at Cornell,

02:03:13.400 | and that was all about using SGX to scrape things

02:03:16.680 | and you can rely on trusted hardware to give you good data.

02:03:20.800 | But you could also use those SGX cores

02:03:22.640 | to do contract processing

02:03:24.160 | 'cause if it runs in trusted hardware,

02:03:25.760 | then it's very unlikely to be tampered with or manipulated.

02:03:28.980 | And because of that, you don't have to federate it

02:03:31.540 | or decentralize it, you can run it on a single device

02:03:33.880 | as if it was running on a cryptocurrency.

02:03:36.000 | So there seems to be a desire in that community

02:03:38.720 | to capture more and more of the smart contract stack

02:03:42.320 | and pull more and more of that stack

02:03:43.800 | into that layer two infrastructure

02:03:45.180 | from running on layer one.

02:03:47.120 | Why?

02:03:47.960 | 'Cause you have cost reduction

02:03:49.160 | and potentially because your trust model collapses

02:03:51.360 | to whatever Chainlink is offering,

02:03:54.020 | you're not gaining anything

02:03:55.400 | by doing the computation on Ethereum

02:03:57.560 | or another platform.

02:04:00.600 | 'Cause you ever watch The Simpsons?

02:04:02.780 | There was this beautiful episode

02:04:04.160 | where Mr. Burns wants to turn the power off in Springfield.

02:04:06.880 | It is the perfect analogy for information security.

02:04:09.960 | So he and Smithers,

02:04:11.120 | they go through this elaborate series of doors

02:04:13.520 | and secret passages and guard dogs and robots and shit

02:04:17.040 | to get to the center of the power plant

02:04:18.660 | to turn off the power.

02:04:20.000 | And when they arrive at the center of the plant,

02:04:21.940 | there's like this stray dog that's inside the room.

02:04:25.360 | And there's this wicker door,

02:04:26.680 | that screen door that leads to the outside.

02:04:29.160 | And you're like, well, why the hell did you go

02:04:30.600 | through this elaborate series of doors and things

02:04:32.180 | if there's like a backdoor into your system?

02:04:34.220 | Well, that's basically a real life analogy

02:04:36.720 | of the relationship between the Oracle

02:04:39.480 | and the smart contract.

02:04:40.660 | You're only as good in your infrastructure model

02:04:42.460 | as your weakest link.

02:04:43.320 | And it doesn't matter if all of your computation

02:04:45.640 | is decentralized if you're at the mercy of your data feed.

02:04:48.920 | 'Cause I can just manipulate that

02:04:50.160 | and break the entire security model of the system.

02:04:52.320 | You know, okay, you'll perfectly execute the wrong answer.

02:04:55.440 | So they say, well, if you're trusting us anyway,

02:04:57.280 | why don't you pull more of what you're doing on chain

02:04:59.940 | into our stack,

02:05:00.780 | which creates more transaction fees for them

02:05:02.480 | and more value for them.

02:05:04.120 | But there are many different ways you can do Oracles.

02:05:06.220 | And earlier I was talking about the biology

02:05:08.520 | of these things, cell differentiation.

02:05:10.920 | The minute that you admit heterogeneity in your system

02:05:14.480 | and you start having cells like stake pools or things

02:05:17.420 | that are on and 24/7,

02:05:19.900 | then you can start asking the what if question.

02:05:22.540 | Why don't you guys just also provide data feeds?

02:05:25.980 | Why don't you guys also provide state channels

02:05:28.140 | or payment channels or generate random numbers

02:05:29.820 | from here or whatever?

02:05:31.020 | And you're now a service provider.

02:05:32.300 | You're making the blockchain full time,

02:05:33.980 | but part time you're doing this.

02:05:35.300 | And if you're making bagels,

02:05:36.260 | you could probably make donuts, that type of a concept.

02:05:38.940 | So I think that type of competition is going to be

02:05:41.980 | very difficult for a lot of these layer two protocols

02:05:46.980 | that aren't tightly coupled with the protocol.

02:05:49.600 | Because the ones that are tightly coupled with the protocol,

02:05:52.820 | they have a built in trust advantage.

02:05:54.520 | They've already built a commercial reputation.

02:05:56.320 | There's already an increasingly more decentralized set.

02:05:58.880 | The other thing is you don't need a token.

02:06:00.960 | You can just use ADA.

02:06:02.440 | You don't need an Oracle coin

02:06:04.160 | for these types of things to work.

02:06:05.440 | And by the way, that's just for the injection component

02:06:08.560 | and the veracity attestation.

02:06:10.580 | So is it true or not?

02:06:12.100 | That's not about the aggregation.

02:06:13.780 | That's still a tremendously time intensive,

02:06:15.900 | expensive proposition.

02:06:17.100 | There's only a few people in the world

02:06:18.700 | that have what Steve has with Wolfram.

02:06:21.460 | And those guys, by just cutting off those supply

02:06:24.920 | to replicate what they have is something

02:06:26.660 | that would cost hundreds of millions or billions of dollars.

02:06:29.020 | And so it's an interesting question of

02:06:30.700 | how do you incentivize

02:06:31.700 | decentralized aggregation of information?

02:06:33.580 | And that's kind of what Town Crier

02:06:35.220 | and other protocols were trying to achieve.

02:06:37.300 | - So maybe you can say how Town Crier works

02:06:39.680 | because it's like, what's your vision?

02:06:41.800 | You're now partnering with Wolfram, Wolfram Alpha

02:06:44.720 | and sort of exploring this partnership of data

02:06:49.520 | and the blockchain.

02:06:51.720 | What's your vision for a possible

02:06:53.500 | distributed version of Wolfram Alpha?

02:06:56.160 | - Well, the first step is just say,

02:06:58.320 | can we use this as a feed?

02:06:59.880 | And they can be what Bloomberg is to the financial markets.

02:07:02.720 | So you have a terminal and you have something

02:07:04.420 | and there's always a value of at least offering choice.

02:07:06.940 | And so it's not like we're anti Chainlink

02:07:08.640 | or picking winners and losers.

02:07:10.000 | It's an open protocol, it's an open system.

02:07:11.720 | So if we're successful, Chainlink will migrate

02:07:14.320 | or will at least support us because they like money.

02:07:17.200 | They like users, they like liquidity.

02:07:19.080 | It's a disservice to their community

02:07:20.560 | not to support a potential customer set.

02:07:23.120 | But you're going to have a spectrum from the desire to do

02:07:26.360 | a completely decentralized aggregation, curation, injection

02:07:31.320 | and veracity attestation to a completely centralized

02:07:34.880 | vertically integrated set.

02:07:36.380 | You need to be able to have that whole spectrum

02:07:38.200 | and offer that to the smart contract developer

02:07:40.400 | to decide what makes sense.

02:07:42.920 | By the way, a lot of cases,

02:07:44.400 | they're going to be their own Oracle.

02:07:45.840 | So for example, the World of Warcraft example that I gave,

02:07:49.520 | well, it's a completely centralized thing.

02:07:51.240 | It's a video game run by a single company.

02:07:54.120 | There's no sense in saying that we're somehow

02:07:55.600 | going to decentralize that.

02:07:56.980 | What they're just trying to do is extend their currency

02:07:59.240 | or NFTs or whatever into new marketplaces.

02:08:02.740 | So the minting of that is controlled by a single entity

02:08:07.360 | and the world state of that,

02:08:08.840 | you just have to trust Blizzard

02:08:10.280 | to inject that into the system.

02:08:12.020 | You could try to imagine some sort of like,

02:08:14.340 | you know, Sentinel group of people within the game

02:08:16.940 | who keep Blizzard honest, but it's completely unnecessary

02:08:19.840 | because they can change the rules of the system arbitrarily.

02:08:22.400 | So in that case, you're optimizing around efficiency

02:08:26.400 | and cost reduction.

02:08:27.600 | So you'd want a single feed that gets injected

02:08:30.860 | into the system from them.

02:08:32.200 | If you look at a stable coin that's algorithmic

02:08:34.700 | and it's basing its value on the aggregation

02:08:37.200 | of many different exchanges,

02:08:38.920 | that's the polar opposite example.

02:08:41.280 | Because there you're saying, okay,

02:08:42.400 | what's the price of my asset relative to some basket?

02:08:45.480 | But how do I know that the price feeds

02:08:47.900 | I'm looking at are accurate?

02:08:49.400 | You'd have to look at Binance and Bittrex

02:08:51.160 | and all these other things,

02:08:52.000 | or maybe there's conventional Forex exchanges

02:08:53.580 | or something like that.

02:08:54.680 | Okay, well, how do you weight that?

02:08:57.160 | And how do you clip outliers and, you know,

02:08:58.920 | these types of things?

02:08:59.760 | That's a completely different conversation.

02:09:01.320 | And there's a lot more mechanics you have to put in

02:09:04.320 | for that bundling and attestation

02:09:06.520 | of the veracity of the data feed.

02:09:08.160 | And what happens if you get it wrong?

02:09:09.800 | Your stable coin gets mispriced and everything goes to hell.

02:09:13.740 | And, you know, the markets will eventually correct it

02:09:15.840 | for arbitrage seeking behavior,

02:09:17.560 | but anything that was built on that will fail

02:09:19.600 | in the short term.

02:09:21.240 | So Oracle's really just a game of, you know,

02:09:23.400 | you have to build a standardized interfaces

02:09:25.040 | and make it as easy as possible for people to do that.

02:09:27.680 | And then let people choose how they want to inject data

02:09:31.000 | and what level of assurance do they need behind that?

02:09:34.080 | And the question is, how much do you leave to the user

02:09:36.240 | versus how much does the protocol take care of for you?

02:09:38.680 | And it's a difficult design question.

02:09:40.880 | For our part, you know,

02:09:41.720 | we love working with Steve and Wolfram

02:09:43.920 | and they're a great company

02:09:45.060 | and they really have some bright people there.

02:09:47.080 | And we know on the data set, they're second to none.

02:09:49.840 | Because not only do they have it, it's computable.

02:09:51.480 | You can do all kinds of things and manipulate

02:09:53.280 | with a very rich query language.

02:09:55.280 | So that's a great thing.

02:09:56.480 | And we want to make sure that that's accessible

02:09:58.360 | to developers and Cardano.

02:10:00.560 | But remember, they're like Bloomberg.

02:10:01.800 | It's a centralized speed in that respect.

02:10:04.280 | So if you want to build a Chainlink S competitor,

02:10:06.600 | you know, there's other protocols you could do for that.

02:10:09.480 | Now you asked about Town Crier,

02:10:10.680 | and that was an attempt to kind of,

02:10:13.040 | you know, like sweep the oceans with the net, you know,

02:10:16.240 | get the data through a decentralized way.

02:10:19.120 | And that was just saying,

02:10:20.840 | hey, let's use trusted hardware to go read law,

02:10:23.080 | all kinds of websites and other things.

02:10:24.480 | And because it's trusted hardware,

02:10:26.040 | the scraping is non-biased.

02:10:28.480 | You know, if you find something inconvenient

02:10:30.040 | to whatever the person who's scraping is,

02:10:32.520 | the trusted hardware will still do it,

02:10:34.160 | and it can't be changed.

02:10:35.240 | You'd have to manipulate SGX to do that.

02:10:37.880 | So that's great, but you still run into the problem

02:10:40.320 | of how do you wire that together?

02:10:42.000 | The underlying websites still don't have any notion

02:10:44.920 | of veracity or reputation behind them.

02:10:47.320 | And then you also have the issue of storage.

02:10:49.440 | Where the hell do you put all of it?

02:10:51.240 | If you have exabytes of data, what's the incentive for that?

02:10:54.720 | - That's the dream of the semantic web,

02:10:56.560 | that I still think is a fascinating idea,

02:10:58.800 | how to basically convert the internet

02:11:00.400 | into a knowledge base that you can query,

02:11:05.400 | you can integrate the same way you did with WolframAlpha,

02:11:08.880 | but much bigger.

02:11:11.280 | But that means basically revolutionizing

02:11:14.880 | the way we put the internet together,

02:11:17.400 | which I think these ideas of off-chain data

02:11:22.400 | will motivate people,

02:11:25.120 | 'cause there's a lot of money to be made.

02:11:27.680 | Finally, there's money to be made with a semantic web.

02:11:30.880 | So that'll be an interesting kind of future.

02:11:32.800 | I do wanna ask you about video games really quick,

02:11:35.040 | as a small tangent,

02:11:35.960 | 'cause you've said this really interesting idea

02:11:37.960 | of Blizzard being centralized control.

02:11:40.300 | Is it possible to have items in the game

02:11:44.560 | that are not controlled by Blizzard?

02:11:48.760 | - Sure.

02:11:49.600 | - Being controlled in a decentralized fashion

02:11:51.960 | that you can, like what is it,

02:11:53.240 | the grandfather sword in Diablo?

02:11:56.120 | - Hmm, what was it really?

02:11:58.080 | Somebody was criticizing me.

02:11:59.200 | I was saying all these kinds of nice things

02:12:01.120 | about Diablo III, and they said Diablo II Resurrected

02:12:04.160 | is coming out, they need to check it out.

02:12:05.700 | There's a lot of camps and wars on the internet.

02:12:07.720 | - Well, come on, we both know that Diablo II

02:12:09.360 | is far better than Diablo III.

02:12:10.440 | - That's what they're saying.

02:12:11.520 | This is the war that they're having.

02:12:12.960 | Okay, so we'll play it.

02:12:14.840 | It's coming out soon.

02:12:15.800 | I'll play it, fine.

02:12:17.040 | But nevertheless, those items are owned by Blizzard.

02:12:20.160 | Is it possible to create video games

02:12:23.280 | where items are owned by the people outside of Blizzard?

02:12:28.040 | And do you think in like a half century from now,

02:12:32.640 | we will all live in those games

02:12:34.240 | and we'll forget the physical space even exists?

02:12:36.000 | - Well, yeah, that's definitely possible.

02:12:37.400 | And look at CryptoKitties.

02:12:38.480 | That's a great example of that.

02:12:39.720 | - Can you explain what CryptoKitties is?

02:12:41.160 | - Well, it's basically just a video game

02:12:42.680 | that kind of lives on a blockchain

02:12:44.180 | and the creatures within the game can breed with each other

02:12:47.740 | and create new CryptoKitties and you can own them.

02:12:50.200 | Just like some sort of dystopian Tamagotchi

02:12:52.960 | with lots of money behind it.

02:12:54.360 | (laughing)

02:12:56.000 | But anyway, the thing is those assets

02:12:58.220 | actually have a blockchain-based representation.

02:13:00.880 | And so whether the infrastructure that hoists up that game

02:13:04.260 | off-chain goes on or off,

02:13:05.800 | because that ledger exists outside of the game,

02:13:09.760 | any person can come in and replicate it, restore it,

02:13:12.720 | and turn it back on.

02:13:14.280 | Sans intellectual property.

02:13:16.760 | So yeah, it's completely possible

02:13:18.680 | to break your architecture up

02:13:20.720 | where you have a notion of the player part

02:13:24.120 | and then you have a notion of the experience part

02:13:27.160 | and you can interchange experiences.

02:13:29.920 | Almost like you do cascading style sheets or something

02:13:32.240 | for you to have different presentations

02:13:33.760 | and the ownership of the underlying layer is the players.

02:13:36.720 | So yeah, that's definitely doable.

02:13:38.040 | And frankly, that's what's going to happen

02:13:39.640 | in the gaming world.

02:13:40.520 | Because there's so much value in that.

02:13:42.020 | I mean, everybody wants to play.

02:13:43.560 | And right now the model is you make a game,

02:13:46.200 | you sell licenses,

02:13:47.640 | and you have a huge surge of people

02:13:50.440 | at the beginning of the game buying the video game.

02:13:52.320 | And then you have this long tail,

02:13:54.080 | but you've gotten almost 95% of your value

02:13:56.400 | in the first six months.

02:13:57.320 | You have a huge churn rate.

02:13:58.840 | The odds are the vast majority of people

02:14:00.160 | won't be playing the game within 12 months.

02:14:02.440 | But if you can create an interactive game

02:14:04.160 | where there's an actual economy inside the game,

02:14:06.160 | then you have EVE Online or Second Life

02:14:08.480 | or any of these things

02:14:09.300 | where you have people playing for 10 years

02:14:10.720 | and there's people buying virtual real estate

02:14:12.600 | and all these other things.

02:14:13.720 | You as the game developer

02:14:14.720 | actually don't have to create a lot of content.

02:14:17.640 | So your long tail gets a lot fatter

02:14:20.360 | and it generates a lot more revenue

02:14:21.920 | and your cost of operating system

02:14:23.720 | is fairly fixed or diminishing.

02:14:25.900 | So the economics align for doing exactly

02:14:28.080 | what you're talking about.

02:14:29.680 | I think it'll get done.

02:14:30.800 | - Well, I just saw recently sort of this calculation

02:14:34.280 | that people played WoW and Fortnite for 140 billion hours.

02:14:39.280 | - Yeah.

02:14:41.860 | - And that's without the economic incentives there.

02:14:44.860 | So do you think it's possible

02:14:46.140 | that most of our economy in the future

02:14:48.740 | will be people playing video games essentially?

02:14:52.440 | Okay, so one vision of the future,

02:14:56.500 | especially with AI and automation,

02:14:58.180 | that people would get wealthier and wealthier.

02:15:01.540 | There's this kind of rising GDP for the entire world.

02:15:04.580 | And then people are losing their jobs,

02:15:06.780 | but they're still well off enough

02:15:08.760 | to be able to have a high quality of life.

02:15:11.380 | So we're all looking for meaning

02:15:12.820 | and the meaning we'll find is by playing video games

02:15:14.980 | and now there's this extra levels.

02:15:17.180 | Like you can be a Bill Gates within a video game world,

02:15:19.720 | in the digital world as opposed to the physical world.

02:15:22.620 | Is that, do you think that's the future?

02:15:24.820 | - You just wanna have the Westworld.

02:15:26.100 | If you can't tell the difference,

02:15:27.300 | doesn't matter, line uttered to you.

02:15:29.420 | Did you ever interview Yuval Harari?

02:15:32.500 | Was he-- - Not yet, eventually.

02:15:34.220 | - Well, yeah, I guess, you know,

02:15:35.780 | Homo Deus, that's kind of like the roadmap there, right?

02:15:38.500 | This hedonistic dystopia where everybody just lives wired

02:15:42.820 | into some simulation.

02:15:44.980 | And there's some movies about that,

02:15:46.420 | Ready Player One and the other one was Surrogate

02:15:49.660 | and so forth.

02:15:50.500 | So yeah, Hollywood has certainly visualized

02:15:52.960 | what this could be.

02:15:54.140 | But you know, I'm not so pessimistic in that respect.

02:15:58.340 | I do believe that the video game world

02:16:00.140 | is evolving at an amazing pace.

02:16:01.620 | If you look at where Unreal is at,

02:16:03.740 | it's just incredible, the latest Unreal Engine.

02:16:06.220 | And within one or two more ticks of that clock,

02:16:09.100 | the iterations, so five to 10 years,

02:16:11.380 | the photorealism will be so good

02:16:13.420 | that it'll be hard to distinguish

02:16:15.900 | between real life and video games.

02:16:18.900 | And you know, the hardware is almost there.

02:16:20.980 | So the question is then,

02:16:22.940 | when you have photorealistic experiences

02:16:25.260 | where you've successfully traversed the uncanny valley

02:16:27.980 | to a point where it's good enough,

02:16:29.820 | then will virtual reality be more desirable

02:16:33.960 | than actual reality?

02:16:35.900 | And for the vast majority of people,

02:16:37.180 | the answer is probably yes,

02:16:38.540 | because actual reality is tough, it's hard.

02:16:42.100 | But then your knowledge that you live in a virtual world

02:16:46.740 | actually becomes a problem for you.

02:16:48.980 | So there's gonna be this kind of sad, dark industry

02:16:52.180 | where people try to create amnesia,

02:16:54.140 | where they're not aware that they're inside

02:16:55.640 | the virtual world.

02:16:56.940 | And so that's an interesting--

02:16:57.980 | - Why is it sad?

02:16:58.820 | I mean, it's almost like--

02:17:00.380 | - Because you know, it's not real.

02:17:02.600 | But if you could forget that it's not real,

02:17:05.060 | then you believe what you're experiencing is real.

02:17:07.780 | - Yeah, but yeah, so what?

02:17:09.460 | You forget all the ugly parts of life,

02:17:12.820 | which is the physical, the meat space,

02:17:14.980 | and then you get to enjoy video games.

02:17:16.700 | - But it's always lurking in the back of your mind

02:17:18.180 | that you're in the Matrix.

02:17:19.020 | You have to not be in the Matrix.

02:17:20.660 | That's just why the bald dude in the Matrix was like,

02:17:23.060 | I wanna be rich and have a beautiful wife

02:17:25.220 | and eat a steak every day.

02:17:27.020 | You know, he didn't wanna know he was in the Matrix.

02:17:29.060 | - So you would take the red pill, not the blue pill?

02:17:31.100 | - Well, no, hang on.

02:17:32.780 | (shrieks)

02:17:33.980 | It depends on how good the virtual world is, Lek.

02:17:36.300 | - Well, that's what I'm trying to tell you.

02:17:38.340 | I mean, isn't that what most of the beautiful experiences

02:17:40.980 | about human life are, is forgetting for a moment,

02:17:45.980 | for time, like the mess of it?

02:17:48.620 | - Yeah.

02:17:49.460 | - I mean, that's what love is.

02:17:50.280 | You forget, like all of a sudden everything is beautiful.

02:17:53.440 | But like the reality is you're gonna lose that person,

02:17:55.460 | and most likely love will fade.

02:17:57.140 | And no matter what, even if it doesn't,

02:17:59.380 | you're both gonna be dead soon.

02:18:01.220 | - Jesus Christ.

02:18:02.460 | (laughs)

02:18:04.460 | - So I'm taking the blue pill on that one.

02:18:06.020 | - You went full Ernest Becker on me, man.

02:18:08.020 | (laughs)

02:18:09.460 | - Okay.

02:18:10.740 | - But you know, I get what you're saying, though.

02:18:12.500 | And actually, but then it begs the question,

02:18:14.900 | how do we, and goes back to the very first question

02:18:17.020 | you asked in this interview, which is like,

02:18:18.500 | how do we know we're not in a simulation?

02:18:20.020 | Or, you know, is Bostrom's concepts

02:18:22.860 | or these ideas like real?

02:18:24.740 | Well, it's entirely possible that we are

02:18:26.580 | and that we desire to be because the real world

02:18:30.020 | is horrifically dystopian or bad,

02:18:32.260 | or maybe we actually don't exist,

02:18:34.180 | we're completely virtual, and does it matter?

02:18:36.660 | And I'd argue that it probably doesn't

02:18:38.300 | at some certain point.

02:18:40.140 | If you're at the end of your life

02:18:41.460 | in your 90s dying of cancer,

02:18:43.620 | the fact that you can live out being young, healthy,

02:18:45.860 | and 25 is probably a desirable thing,

02:18:48.140 | and no one would ever complain about that.

02:18:50.120 | Where it becomes problematic is if the vast majority

02:18:53.220 | of society enters this virtual simulacra of reality,

02:18:57.660 | and as a consequence, nothing works

02:18:59.700 | because there's no one to do anything.

02:19:01.300 | Society falls apart in that respect.

02:19:03.660 | There's no desire to do anything in the real world.

02:19:05.860 | Innovation stops, the desire to actually do real work stops,

02:19:09.180 | 'cause you're always inside this virtual economy.

02:19:12.380 | So I don't know, it's an interesting question,

02:19:14.740 | but drawing it back more to where we're at today,

02:19:18.660 | the evolution factors are there.

02:19:20.500 | VR is evolving at a very rapid rate,

02:19:22.940 | the game engines are just incredible today,

02:19:25.820 | and they're really doing amazing things,

02:19:27.900 | and there seems to be an overwhelming desire

02:19:30.660 | for people to escape the harshness of where they live,

02:19:33.440 | just by evidence by how many billions of hours

02:19:36.020 | have been spent playing video games.

02:19:37.340 | People still play Skyrim.

02:19:38.980 | - Yeah, yeah. - Yeah, it's a good game.

02:19:41.100 | - It's probably my favorite game

02:19:42.900 | of the whole Elder Scrolls series,

02:19:44.620 | but it's fascinating because smart contracts

02:19:47.820 | is actually the mechanism by which we take

02:19:49.640 | a lot of the meatspace stuff and move it to the digital world

02:19:52.700 | so that all the stuff we've been talking about

02:19:55.700 | is really probably the mechanisms which take us there,

02:19:59.660 | which I find that world not dystopian,

02:20:03.060 | I find that world quite utopian,

02:20:04.300 | 'cause there's so many opportunities

02:20:05.460 | to create beautiful experiences.

02:20:07.200 | But since we're talking about the future,

02:20:11.300 | let me ask you the timeline question,

02:20:13.140 | or even just like definitional, what is Alonzo?

02:20:16.700 | You mentioned some fun hello world experiments going on.

02:20:20.900 | - Right.

02:20:22.220 | - And how and when will Cardano get smart contracts?

02:20:26.340 | - Yeah, so Alonzo Church is a famous, famous mathematician,

02:20:29.420 | computer science guy, and he was a contemporary of Turing,

02:20:32.220 | and there was like these three different views of computing,

02:20:34.940 | recursive functions from Godel

02:20:36.500 | and Turing machines from Turing,

02:20:37.860 | and Church had lambda calculus, and they're all equivalent,

02:20:40.660 | and they all give you the ability to build a computer.

02:20:42.840 | So we like functional programming, so we decided--

02:20:46.020 | - That's your favorite Church.

02:20:47.820 | - So we had to name something after Church,

02:20:49.420 | and it's just weird that we never did,

02:20:52.060 | so we said, okay, Alonzo is a good release name.

02:20:54.620 | Basically, it was bringing smart contracts to Cardano.

02:20:56.620 | Took us a long time to get here,

02:20:58.180 | and we'll be there in the next 90 days.

02:21:00.180 | Like everything we do, there's a process,

02:21:03.980 | and so there's all the colors of the rainbow.

02:21:05.700 | We start with Alonzo blue, and then white, and purple,

02:21:09.460 | and each step, you do some more things,

02:21:11.260 | you bring more users in,

02:21:12.620 | and then eventually you get to a threshold

02:21:14.420 | where you say, okay, everything works the way intended,

02:21:17.020 | and you push a button,

02:21:18.220 | and we initiate what's called a hard-for-combinator event,

02:21:20.180 | and boom, the system has smart contracts.

02:21:22.700 | You just wake up, and it's there.

02:21:24.260 | It's like it's in your house.

02:21:25.820 | - So it's gonna be a hard fork.

02:21:26.660 | - It's like when I got my blue check mark on Twitter.

02:21:28.140 | I woke up, and I had it.

02:21:29.460 | It was just like Christmas came.

02:21:30.300 | - And you were never the same.

02:21:32.300 | You can't go back.

02:21:33.200 | It's like hard fork.

02:21:34.780 | It's a hard fork of Charles.

02:21:36.060 | - Yeah, exactly.

02:21:36.900 | - You've got blue.

02:21:37.740 | Well, actually, I think you can take it away, but--

02:21:39.780 | - Can they take my check mark away, Flex?

02:21:41.700 | (laughing)

02:21:44.020 | - But that'd be like a hard fork backwards, I guess.

02:21:47.380 | Okay, so great.

02:21:50.020 | But currently, there's a testing procedure going on

02:21:55.020 | to see what does that look like,

02:21:58.500 | and what will give you confidence

02:22:00.060 | that things are working well.

02:22:00.940 | - Yeah, so first, you start with the Meri-era,

02:22:02.920 | which is where we're right now multi-asset.

02:22:04.860 | So you can do metadata and issue tokens on Cardano,

02:22:08.060 | but you'd have limited programmability on-chain.

02:22:11.140 | Alonzo adds the programmability in,

02:22:13.260 | but we already have most of the foundations

02:22:15.180 | of the extended UTXO model,

02:22:16.500 | and the smart contract model is just,

02:22:17.900 | those things aren't ready.

02:22:19.300 | So the first step is say, fork it,

02:22:21.460 | so all those rules are now there, okay?

02:22:23.740 | That's what we did with Alonzo Blue.

02:22:25.420 | We forked a testnet-based layer,

02:22:27.820 | and it successfully survived going from Meri to Alonzo,

02:22:31.760 | which means that you can move transactions

02:22:33.380 | from one side to the other, both systems work.

02:22:35.780 | And then the next step is say, okay, well,

02:22:37.780 | are the stake pool operators,

02:22:39.020 | people who run the infrastructure,

02:22:40.180 | able to run this testnet just like they run Cardano?

02:22:42.820 | And that's what we're doing right now with Blue.

02:22:44.180 | We're bringing all these SPOs in,

02:22:45.940 | and then are we able to submit

02:22:47.420 | and run smart contracts on the system?

02:22:49.460 | And they actually return a round trip.

02:22:51.260 | You send something, you get something back.

02:22:53.000 | Yay, okay.

02:22:54.760 | So that's where we're at.

02:22:55.600 | And then what you do is each step,

02:22:57.720 | so the next is white,

02:22:58.900 | you go from like 50 people to several hundred,

02:23:01.540 | and then purple's an open testnet,

02:23:03.860 | where we want every single person

02:23:05.660 | in the entire ecosystem to use it.

02:23:07.060 | It's also a devnet, so that means that people

02:23:09.660 | who are writing with Clues Playground

02:23:11.500 | and local interpreters, their smart contracts

02:23:14.180 | can actually start testing them now

02:23:15.980 | on the public infrastructure.

02:23:17.420 | So it's kind of like releasing dev kits to the Xbox

02:23:20.540 | or something like that.

02:23:21.380 | You send them out to game developers

02:23:22.780 | before you release the Xbox,

02:23:23.940 | so they can test their video games

02:23:25.300 | in anticipation of the release of the system.

02:23:27.940 | So you run that for at least a month.

02:23:29.340 | And as long as it doesn't blow up in your face,

02:23:31.700 | and oh God, what have we done?

02:23:33.020 | Hindenburg, oh, the humanity.

02:23:35.240 | You release it, and you ship it.

02:23:37.460 | The problem is it's no longer in our control.

02:23:39.620 | There's over a hundred exchanges that have listed Cardano.

02:23:42.260 | There's lots of wallet infrastructure.

02:23:43.760 | There are thousands of different constituencies.

02:23:45.940 | So it's less of a technological problem now,

02:23:48.980 | and it's more of a coordination problem.

02:23:50.980 | So you have to evolve in a very methodical way,

02:23:54.620 | and each step of the way you bring new actors in,

02:23:56.780 | they get ready for it.

02:23:57.980 | They upgrade their infrastructure to it,

02:23:59.760 | and then like shells, eventually,

02:24:01.860 | you get to the outer shell,

02:24:03.340 | which is the hard fork for the general public.

02:24:05.260 | And if we've done it right, like that blue check mark,

02:24:08.260 | they wake up, and it's exactly the same.

02:24:10.660 | They just get a little update thing, update your client.

02:24:14.540 | And then they start demanding Wagyu beef.

02:24:16.020 | - Is there stuff you're worried about

02:24:17.460 | in terms of like when something's this tricky,

02:24:21.000 | goes up several orders of magnitude in terms of scale?

02:24:25.620 | Are there problems that you foresee?

02:24:27.420 | Is there, like we said, there's game theoretic aspects,

02:24:30.900 | all those kinds of things.

02:24:32.340 | Like what worries you the most?

02:24:33.820 | - I mean, I sleep like a baby.

02:24:35.420 | I wake up every two hours crying.

02:24:37.100 | (laughing)

02:24:39.360 | - Damn, that's a good line.

02:24:41.660 | You're full of good lines.

02:24:44.420 | - I mean, there's a lot that--

02:24:45.260 | - You just made me realize that expression makes no sense.

02:24:47.780 | I sleep like a baby, but go ahead.

02:24:50.020 | - Yeah, exactly right.

02:24:51.700 | Messing your whole world up right now, Alex.

02:24:53.940 | No, I mean, there's so much that keeps me up at night.

02:24:56.780 | You know, it's like you're in a cold sweat every day

02:24:58.960 | when you have an ecosystem like this,

02:25:00.540 | 'cause the other thing is you're judged as much

02:25:03.480 | by the applications people build on the platform as you are

02:25:06.420 | by the platform you've constructed.

02:25:08.260 | So, you know, one of the most unfair things

02:25:10.500 | that happened in our industry

02:25:11.860 | was blaming Vitalik for the DAO hack.

02:25:14.540 | He didn't write the code, he wasn't responsible for it.

02:25:16.500 | A completely independent, different team.

02:25:18.620 | And because it blew up,

02:25:19.580 | a lot of people just developed this idea,

02:25:21.260 | Ethereum is not secure, the EVM is fundamentally broken.

02:25:24.220 | And it's true there are some issues there,

02:25:25.900 | but come on, that's like saying,

02:25:28.140 | oh, well, Photoshop didn't work, fuck Bill Gates.

02:25:31.460 | - Yeah.

02:25:32.300 | - And that's the issue is you get,

02:25:34.800 | as a platform developer,

02:25:36.640 | coupled with the wins and losses

02:25:40.020 | of your application developer.

02:25:41.220 | So if they go do amazing things, it's like,

02:25:43.740 | oh yeah, Windows is great, we love it.

02:25:45.780 | And if they go do terrible things, they're like,

02:25:47.300 | oh man, I guess he's trying to kill all of us.

02:25:50.300 | So what we're kept up at night about

02:25:53.260 | is not just what we've constructed,

02:25:55.100 | but also how do we curate an ecosystem

02:25:58.020 | and foster the development of an ecosystem

02:25:59.700 | where you have assurance baked into the application

02:26:02.020 | and that's somehow expressible to the user.

02:26:04.360 | So when you download your smart contract

02:26:06.520 | or you click your one-click install

02:26:07.980 | to use your Uniswap clone or whatever the hell it is

02:26:10.700 | that's deployed on Cardano,

02:26:12.420 | you have a little green check mark

02:26:13.660 | or something that indicates to you

02:26:15.020 | that somebody audited the code

02:26:16.500 | or it followed a specification.

02:26:18.260 | The lack of that is problematic

02:26:19.940 | because then first there's impersonations,

02:26:22.520 | the whole MyEtherWallet thing,

02:26:23.900 | or like your videos or my videos are the same.

02:26:26.180 | Every comment there's a bot that says,

02:26:28.220 | hey, give me some money or something like that.

02:26:30.780 | That kind of stuff happens.

02:26:31.880 | But then just protocol level flaws,

02:26:34.060 | like what happened with the DAO hack.

02:26:35.740 | That's what really keeps me up at night

02:26:37.140 | is how do you resolve that problem?

02:26:38.900 | 'Cause I don't hire these people,

02:26:40.500 | I don't tell them what to do,

02:26:41.740 | I didn't tell them how to build things on the platform.

02:26:44.300 | They may have tons of experience and knowledge,

02:26:46.140 | they could be Simon Payton Jones

02:26:47.700 | or they could have absolutely no knowledge whatsoever

02:26:50.460 | and they read one tutorial

02:26:51.540 | and they've written three lines of code their entire life

02:26:53.860 | and they've deployed something horribly broken copy paste

02:26:56.660 | and suddenly it all goes to hell.

02:26:58.100 | I'm judged by both.

02:27:00.140 | That's what really keeps me up at night.

02:27:01.620 | And we're as a company trying to figure out

02:27:03.620 | and as the ecosystem trying to figure out standards,

02:27:06.300 | like at University of Wyoming,

02:27:07.480 | we're setting up the Smart Contract Engineering Institute

02:27:10.480 | we're negotiating with them right now.

02:27:12.140 | And the goal there is just to create some standards

02:27:14.940 | for how to certify smart contracts

02:27:17.500 | so that you can get that green check mark

02:27:19.220 | and know that it actually has some assurance level behind it.

02:27:22.540 | But God, that's a huge coordination problem

02:27:24.940 | and it's a huge information presentation problem

02:27:27.100 | and incentives problem and so forth.

02:27:29.060 | And unfortunately people who value being first to market

02:27:31.940 | will kind of piss in the pool for everybody else.

02:27:35.140 | - In terms of maybe you can comment

02:27:37.480 | on the topic of decentralized exchanges.

02:27:40.680 | What kind of decentralized exchanges Dex is?

02:27:43.920 | What are they first of all?

02:27:45.020 | And what kind would you like to see built around Cardano?

02:27:48.800 | - Yeah, so people want to create exchanges

02:27:51.080 | that don't have custodial risk.

02:27:53.000 | The point of exchange is to build you a marketplace

02:27:55.760 | where bids and ask can find each other.

02:27:57.880 | Market people can meet and trade.

02:28:00.420 | You can find a price and you can get liquidity.

02:28:02.460 | So you got gold, you wanna turn your gold into dollars.

02:28:05.840 | Okay, well somebody has to create a marketplace for that.

02:28:08.160 | - So like Coinbase is an example of a marketplace

02:28:10.520 | but it's centralized.

02:28:11.360 | - But the problem is you have custodial risk.

02:28:13.120 | So when you put your gold and your dollars,

02:28:15.200 | your digital representations of these things

02:28:17.320 | into the exchange, what if Wally,

02:28:20.700 | Eve broke up with him and now he's really sad

02:28:24.340 | and he's gone to the dark side

02:28:25.960 | and he's become Wally the hacker.

02:28:27.700 | Okay, so he can go and sneak his way in

02:28:29.500 | and hack into Coinbase and steal all your gold

02:28:32.120 | and your tokens.

02:28:32.960 | So instead of you actually being able to swap these things,

02:28:34.780 | you've lost all your money.

02:28:36.360 | And there's other problems too.

02:28:37.400 | Like let's say, you know,

02:28:38.680 | Daisy has now come in and become a regulator

02:28:42.460 | and said, "Oh, I don't like these exchanges anymore.

02:28:44.320 | "I'm just gonna shut them all down."

02:28:46.120 | Yeah, and then you have no access to it.

02:28:47.680 | So you have sovereign risk, you have the risk of threat,

02:28:50.080 | you have regulatory risk, you have the issue of banks

02:28:53.040 | maybe cutting you out.

02:28:54.400 | So it's been in our industry for more than 10 years.

02:28:57.280 | Mount Gox was the most famous example of that.

02:28:59.560 | They collapsed, I believe, in 2013

02:29:01.980 | and hundreds of millions of dollars was lost

02:29:05.060 | over the course of a while.

02:29:06.620 | So the point of ADEX is saying,

02:29:07.980 | can we do what a marketplace does,

02:29:10.960 | but not have Coinbase,

02:29:13.300 | not have a central actor run this thing?

02:29:16.020 | And there's a lot of problems with that

02:29:17.580 | because exchanges are generally creatures of latency.

02:29:22.020 | You know, high frequency trading, for example,

02:29:24.300 | these things that nanosecond,

02:29:25.620 | they co-locate their infrastructure

02:29:27.620 | with the exchange software

02:29:28.900 | just so they can front run orders over other people.

02:29:31.460 | I mean, it's crazy the amount of technology

02:29:33.560 | that they put in.

02:29:34.540 | So the traditional Wall Street version of an exchange

02:29:37.480 | is very centralized, very fast, very optimized,

02:29:40.400 | and kind of behaves by a very closed set of rules.

02:29:44.320 | When you look at ADEX,

02:29:45.440 | you have to accept that you're going to have

02:29:47.320 | to have slightly different rules

02:29:48.960 | because you're operating in a global systems latency

02:29:52.540 | and you're operating in a system

02:29:53.680 | that has different behaviors.

02:29:55.280 | However, that said, there's a lot of great protocols

02:29:57.320 | that have been built for it.

02:29:58.160 | You know, Uniswap has kind of evolved a lot over the years.

02:30:01.200 | And we've seen a huge competition

02:30:03.940 | and a lot of evolution to basically build out protocols

02:30:07.420 | that kind of excuse some of these security problems,

02:30:09.060 | enjoy high liquidity,

02:30:10.580 | and then also have this beautiful concept of openness.

02:30:15.060 | One of the gatekeepers to crypto

02:30:16.500 | when you're a cryptocurrency developer are the exchanges.

02:30:19.220 | I remember when we first created Cardano,

02:30:21.060 | you know, the Bitfinex guys

02:30:23.180 | reached out to the Cardano Foundation.

02:30:24.580 | They said, "Oh, we'd be happy to list ADA."

02:30:26.860 | I said, "Okay."

02:30:27.940 | And they said, "Yeah, we want $5 million to do it."

02:30:30.980 | You know, so there was kind of some Italian

02:30:33.720 | for go fuck yourself in those email conversations.

02:30:36.640 | Fuck, fulo is what I said.

02:30:38.260 | But anyway, that kind of back and forth

02:30:41.820 | happens all the time.

02:30:42.900 | And because these guys are gatekeepers,

02:30:44.620 | they have this nepotistic control,

02:30:46.420 | information asymmetries, and so forth.

02:30:48.480 | So having a DEX, you don't have that problem.

02:30:50.720 | You have open listing.

02:30:52.160 | And you basically just put the asset into it.

02:30:54.400 | And if anybody wants to trade it, they will.

02:30:56.920 | And if it seems like it's a good idea,

02:30:58.600 | a natural market will form, market making will occur,

02:31:00.740 | and you get liquidity with it.

02:31:02.000 | So there's no barrier to entry for that type of system.

02:31:05.160 | The biggest existential problem for DEXs right now

02:31:08.720 | is the concept of regulation.

02:31:10.880 | So basically, right now, when you use Binance,

02:31:13.820 | or Coinbase, or these other guys,

02:31:15.400 | you have to go through KYC and AML,

02:31:17.000 | know your customer, and anti-money laundering.

02:31:18.960 | So basically, who are you, and is your money real or not,

02:31:22.200 | or are you a drug dealer or something?

02:31:24.240 | So normally you do that by saying,

02:31:26.120 | "Okay, I'm gonna give them a copy of my passport,

02:31:29.040 | "and maybe they're gonna request some tax records,"

02:31:31.180 | or whatever the best practices are

02:31:32.680 | for the particular jurisdiction.

02:31:34.540 | And then that exchange is liable if that's fucked up.

02:31:37.840 | So if the government comes in and says,

02:31:39.840 | "Hey guys, we pull your compliance records,"

02:31:43.280 | and they find discrepancies,

02:31:44.600 | they'll actually put the exchange out of business

02:31:46.360 | or fine them very heavily.

02:31:48.340 | JPMorgan Chase got $19 billion in fines

02:31:52.240 | over the last 20 years for various compliance issues,

02:31:55.000 | amongst other things.

02:31:56.260 | So it's expensive, a very difficult thing.

02:31:59.200 | And at DEX, it's an open system.

02:32:01.240 | You just have value coming in, not identity.

02:32:03.620 | And so all these things are trading

02:32:04.960 | amongst pseudonymous accounts,

02:32:06.440 | and so there's no notion of compliance right now for that.

02:32:09.240 | So a lot of regulators are coming in and saying,

02:32:11.280 | "Oh, well, this is just a cesspool for terrorism

02:32:13.880 | "and drug dealing and bad stuff."

02:32:15.280 | And they're a word salad of bullshit.

02:32:18.200 | But it is what it is, you have to deal with these guys.

02:32:20.300 | And so there's been a lot of discussions of,

02:32:22.440 | "Can we take DEXs and keep the openness

02:32:25.440 | "and keep the liquidity

02:32:27.000 | "and no counterpart or custodial risk?

02:32:29.700 | "And can we add some notion of compliance to that

02:32:32.680 | "in a decentralized way

02:32:33.840 | "that doesn't require a single actor to be a gatekeeper?"

02:32:37.180 | So I think actually by combining DIDS,

02:32:39.060 | decentralized identifiers, that's the way to do it,

02:32:41.100 | but it's actually the next generation of the technology

02:32:43.380 | is the regulated DEX.

02:32:44.620 | And who regulates that, how does that work, and so forth.

02:32:47.580 | But I think ultimately,

02:32:48.420 | those are gonna be the only marketplaces

02:32:50.020 | that end up surviving in this current environment

02:32:54.100 | if your desire is to exit to a dollar.

02:32:56.480 | If you don't really care about the fiat side,

02:32:59.080 | like a traditional legacy currency,

02:33:00.960 | you can always do things in a shadowy, unregulated way.

02:33:05.280 | But I mean, it's a personal preference

02:33:07.680 | and a business preference.

02:33:08.920 | - Can we kind of return to proof of work and proof of stake?

02:33:13.560 | There's just so many topics I wanna talk to you about,

02:33:15.760 | so I'll jump around a little bit.

02:33:17.700 | But at the Bitcoin conference, Jack Dorsey spoke,

02:33:21.440 | I think, I believe he said, "Bitcoin changes everything."

02:33:25.020 | I think you made a video for Jack,

02:33:27.340 | trying to explain different ideas to him,

02:33:30.140 | I guess describing the difference between proof of work

02:33:32.700 | and proof of stake, as we've talked about.

02:33:35.100 | What do you hope Jack Dorsey comes to understand

02:33:37.140 | about the difference between proof of work and proof of stake?

02:33:40.660 | - Well, I hope he understands it's just a resource.

02:33:42.860 | That's the entire point of the video I was trying to make,

02:33:45.020 | is like, dude, you're like in this cult

02:33:47.380 | where you think the only way to be secure is proof of work,

02:33:49.820 | or somehow proof of stake is less secure than proof of work.

02:33:52.900 | I don't even know how you put those inequalities there,

02:33:55.420 | 'cause you're talking about apples and oranges.

02:33:57.660 | You're making different trade-offs,

02:33:59.500 | and there's different assumptions

02:34:00.500 | about the nature of the people involved,

02:34:02.700 | but the mechanics are the same.

02:34:04.620 | And so it's really more of a question of,

02:34:06.700 | what type of system do you prefer?

02:34:08.500 | Do you want mercenaries guarding Rome,

02:34:10.440 | or do you want Roman citizens guarding Rome?

02:34:13.100 | Okay, and as the Romans learn,

02:34:14.280 | it's better to have citizens usually doing that.

02:34:16.860 | Okay, and that's the only point I was trying to make

02:34:19.300 | to Dorsey, and I don't think he watched it

02:34:22.460 | or particularly cared,

02:34:24.380 | but it was more of a video for everyone,

02:34:26.620 | and to start that dialogue of realizing

02:34:29.340 | that the real game is not,

02:34:31.220 | is proof of stake better than proof of work?

02:34:33.340 | It's how do we go from one to N, and what should N be?

02:34:36.380 | You just mentioned that semantical addressable web,

02:34:38.660 | going back to IPFS and these other concepts.

02:34:41.740 | Well, how do you pay for the enormous burden

02:34:44.620 | of storing that much data?

02:34:46.180 | You can create a consensus protocol for it.

02:34:48.140 | There actually is one.

02:34:48.980 | It's called Permacoin.

02:34:50.060 | Came out in 2014, '15.

02:34:51.820 | Andrew Miller wrote it, and a few other authors.

02:34:54.460 | I think our John Katz may have been an author as well,

02:34:57.900 | but basically it was just a throwaway

02:35:00.100 | proof of work style algorithm

02:35:02.020 | that only works if you have large amounts of data.

02:35:05.620 | Okay, so it's like your miners are like a hard drive,

02:35:08.620 | effectively.

02:35:09.700 | - Proof of storage, I think you call it.

02:35:11.180 | - Yeah, this type of stuff,

02:35:12.780 | and there's been since then many iterations,

02:35:14.700 | evolutions of that type of protocol.

02:35:17.020 | Okay, so what if you throw that into your resource bag?

02:35:20.220 | Now you have a capacity in your system

02:35:22.580 | for storing huge amounts of information

02:35:24.860 | that's incentivized by the way the system works,

02:35:27.100 | and you can balance that with a proof of stake system,

02:35:29.260 | and you can balance that with,

02:35:31.220 | let's say you have proof of useful computation.

02:35:33.860 | We may have a paper on that, who knows?

02:35:35.980 | Coming soon.

02:35:37.340 | And what if you have a proof of useful computation

02:35:39.300 | where maybe you can do walk stat or something, who knows?

02:35:41.660 | With something like that, okay,

02:35:43.180 | well now you have three resources inside your system,

02:35:45.780 | and those three things keep your system secure,

02:35:47.740 | they keep each other balanced,

02:35:48.740 | and they just so happen to create

02:35:50.300 | the world's largest supercomputer that's programmable,

02:35:53.060 | and it just so happens to create

02:35:54.260 | the world's largest database that's programmable,

02:35:56.680 | in addition to having a shareholder-style model

02:35:59.620 | for ownership inside of it

02:36:00.740 | to kind of balance these things out

02:36:02.100 | so people care about the appreciation of value

02:36:04.300 | inside the system.

02:36:05.500 | So that was my point to Jack,

02:36:06.660 | is you're a business guy, why are you betting all your eggs?

02:36:09.780 | And one crazy model that's a cult,

02:36:12.380 | step away and realize that that does something.

02:36:14.940 | It's a tool, but saws aren't the only tool in the toolbox.

02:36:18.420 | There's hammers and screwdrivers and other things.

02:36:20.660 | Go to end resources, and let's have a real conversation

02:36:23.500 | about what would a world computer or a world infrastructure

02:36:26.980 | that's useful for your business domain,

02:36:28.900 | in this case Twitter, require?

02:36:31.580 | And what type of resources would you need

02:36:33.220 | for such a thing?

02:36:34.060 | - Well in this case, Square, more importantly.

02:36:36.420 | Currently, if you look at Square and Cash App,

02:36:38.260 | they support Bitcoin.

02:36:41.100 | He is kind of all in on the proof of work idea.

02:36:44.260 | Not all in, but currently kind of,

02:36:46.380 | that's the one supported idea.

02:36:48.580 | - I guess there's no just a tip in proof of work.

02:36:51.180 | (laughing)

02:36:53.060 | - I love you so much, Charles.

02:36:54.460 | (laughing)

02:36:55.940 | Thank you, appreciate this.

02:36:57.500 | But I'm not gonna run with that, even though I'm tempted to,

02:37:02.220 | but looking forward, do you hope Cardano

02:37:05.980 | becomes part of Cash App?

02:37:07.860 | - I mean, he's a business guy, or at least I'd hope he is,

02:37:10.540 | and it's not about what I want or what he wants,

02:37:13.020 | it's about what markets want.

02:37:14.620 | When you run a publicly traded company,

02:37:16.660 | you have a fiduciary obligation to your shareholders

02:37:18.660 | to maximize the utility, the sustainability

02:37:21.820 | and value of your company.

02:37:23.460 | And so if he's running a company that makes money

02:37:27.320 | off of these things, it makes absolutely no sense

02:37:29.700 | to be a maximalist.

02:37:30.980 | You want transaction volume,

02:37:32.220 | that's how you make your damn money.

02:37:33.380 | It was, Coinbase was the same way.

02:37:34.700 | They were very maximalist in the beginning.

02:37:36.940 | Very quickly, they started realizing,

02:37:38.420 | hey, we're losing a lot of money.

02:37:39.940 | If we want to IPO, we kind of need to be a bit more diverse.

02:37:43.340 | Eric Voorhees was also a maximalist way back today.

02:37:46.100 | And now look at Eric, he's got Shapeshift

02:37:47.780 | and all these other pieces of infrastructure.

02:37:49.940 | He's a lot more friendly with us ultis.

02:37:52.420 | So, you know, Jack will make that decision.

02:37:55.140 | His people will make that decision, I think,

02:37:56.940 | based on market dynamics, transaction volume

02:37:59.300 | and value to the user.

02:38:01.540 | And if the concern is actually legitimately security,

02:38:04.660 | then the only question I'd ask their team is,

02:38:06.700 | can you please provide me a definition of one?

02:38:09.440 | Doing POW is more secure than proof of stake as a tweet

02:38:14.440 | is not really a proof, okay?

02:38:16.340 | You need to actually come out and sit down and say,

02:38:18.140 | what is your security model?

02:38:19.460 | What do you care about?

02:38:20.540 | What do you value?

02:38:21.380 | What's the problems you're concerned about at proof of stake?

02:38:23.940 | And they never really get there.

02:38:25.420 | And that's why I call this maximally like a religion,

02:38:28.420 | because it's just like saying,

02:38:30.140 | you know, the angels descended from the heavens.

02:38:32.300 | And it's like, well, how do you know?

02:38:33.460 | Because the Bible said so, or this doctrine said so.

02:38:36.180 | It's like, well, that's your evidence?

02:38:37.540 | Somebody wrote something down?

02:38:39.220 | Can you please give me a little bit more?

02:38:41.140 | They say, no, you're challenging the word of God.

02:38:43.580 | In this case, you're challenging the word of Satoshi.

02:38:45.980 | And all I ask for is just what is the burden of proof?

02:38:48.340 | We wrote the papers, we have security models,

02:38:50.680 | we went through the peer review process.

02:38:52.060 | God, that was not easy.

02:38:53.760 | We wrote formal specifications.

02:38:55.420 | In some cases, we formalize those specifications

02:38:57.580 | with Isabel, for God's sakes, which is not easy to do.

02:39:00.900 | And then we implemented it, and it's running in production

02:39:03.180 | with a million users at a $50 billion market cap.

02:39:06.140 | I mean, at what point do you start saying,

02:39:08.900 | well, maybe there's something there?

02:39:11.020 | And they say, no, there's nothing there,

02:39:12.660 | and it's not secure, it can't be secure.

02:39:14.260 | And you say, okay, then why do you believe what you believe?

02:39:17.220 | And they never come back to me with an answer, ever.

02:39:19.900 | - Well, I believe God didn't go through

02:39:21.340 | a peer review process when he wrote the 10 Commandments,

02:39:23.580 | so sometimes it works out, sometimes not.

02:39:28.020 | Let me ask on that same thread.

02:39:30.020 | Tesla, SpaceX, Elon Musk currently invest in Bitcoin,

02:39:34.900 | but are openly looking to explore

02:39:37.020 | other cryptocurrency investments.

02:39:39.540 | What case would you make for Cardano?

02:39:41.900 | - Well, if they truly care about alternative energy

02:39:43.860 | and sustainability, carbon reduction or carbon neutrality,

02:39:47.740 | you can't be in a system where there is no built-in mechanism

02:39:52.740 | to constrain the energy consumption.

02:39:55.380 | With proof of stake, energy consumption is a negative.

02:39:58.820 | You wanna minimize it.

02:39:59.940 | If you can get the same amount of stuff done

02:40:01.700 | on a Raspberry Pi as you can a big server,

02:40:03.740 | you're gonna do it on the Pi,

02:40:05.220 | 'cause ultimately that server cost and that energy cost

02:40:07.900 | is coming out of your budget.

02:40:09.300 | With proof of work, any innovation you come up with

02:40:11.980 | to optimize power, you just build more ASICs.

02:40:16.300 | 'Cause, you know, oh, it's 30% more power efficient.

02:40:18.780 | Great, buy 30% more.

02:40:20.940 | You keep adding to the work set,

02:40:23.900 | 'cause you want more hash power.

02:40:25.340 | More hash power, more share of the Pi.

02:40:27.820 | So you have no energy savings component.

02:40:30.140 | And I know these people are saying,

02:40:30.980 | well, there's a lot of wasted energy in the grid,

02:40:33.500 | and this is kind of incentivizing using that wasted energy,

02:40:37.300 | and it's a better way of storing it than batteries,

02:40:39.460 | 'cause you're now storing it as a Bitcoin

02:40:41.140 | instead of storing it as energy.

02:40:42.620 | Okay, maybe there's some truth to that.

02:40:44.660 | But anyway, it's just--

02:40:47.740 | - The energy is a critical point for you.

02:40:50.140 | Like the-- - Yeah, and that's exactly right.

02:40:52.540 | The energy is a critical point for me with Tesla,

02:40:55.740 | 'cause they assert to be an alternative energy company.

02:40:58.940 | And unless they can make the case

02:41:00.660 | that somehow the proliferation of Bitcoin

02:41:02.300 | is legitimately going to proliferate batteries,

02:41:04.460 | solar, and wind, or other things,

02:41:06.940 | then it's probably good for them to just focus

02:41:09.300 | on the most efficient,

02:41:11.020 | energy efficient cryptocurrency possible.

02:41:13.140 | Otherwise, you're exacerbating global warming.

02:41:15.300 | You're exacerbating the ecological consequences of it.

02:41:18.180 | The other thing is Bitcoin is the least programmable

02:41:20.380 | of all the cryptocurrencies.

02:41:21.700 | And if you wanna do interesting, sexy, unique things,

02:41:24.300 | let's say Tesla, for example,

02:41:26.540 | they wanna start doing V to I and V to V

02:41:28.500 | for autonomous vehicles,

02:41:30.900 | and have the vehicles start talking to each other

02:41:32.500 | and connect it to 5G.

02:41:33.900 | Well, imagine if you wanna build a telco coin,

02:41:35.780 | or some sort of 5G coin,

02:41:37.660 | and you wanna build an IoT layer and network.

02:41:40.340 | There's just no real way to do that on Bitcoin

02:41:42.820 | with the way it's designed.

02:41:44.140 | So you'd need fundamentally different infrastructure

02:41:46.460 | to create such a token and regulate such a system,

02:41:49.460 | and have these things autonomously negotiate

02:41:51.980 | and do business with each other.

02:41:52.940 | You need DEXs and stable coins,

02:41:54.860 | and all kinds of mechanics

02:41:56.340 | to make something like that possible.

02:41:58.340 | Well, that's really beneficial to Tesla

02:42:00.180 | if they could figure that out.

02:42:01.580 | 'Cause they could create

02:42:02.420 | an information-sharing incentive scheme

02:42:04.300 | where if the cars talk to each other,

02:42:05.640 | including other branded cars, like GM cars and Fords,

02:42:08.860 | they can now actually get data from those cars

02:42:10.900 | through a marketplace and exchange

02:42:12.500 | for the benefit of autonomous driving,

02:42:14.380 | or for the benefit of understanding road conditions,

02:42:16.340 | or safety enhancement, and so forth.

02:42:18.180 | So it's just depending.

02:42:19.220 | Are you just here to speculate?

02:42:20.580 | Are you here to actually use it

02:42:22.220 | as another medium of exchange?

02:42:23.620 | Or do you actually wanna build infrastructure on this thing?

02:42:26.380 | The more closely you get to utility,

02:42:29.020 | the further down the road you get there,

02:42:31.300 | then the more programmability you need.

02:42:33.700 | And so it makes a lot more sense to be an Ethereum fan

02:42:36.260 | or a Cardano fan than to be a Bitcoin fan.

02:42:38.900 | - So to be both proof of stake

02:42:40.780 | and have the smart contracts capabilities.

02:42:42.720 | - Yes.

02:42:43.980 | And that's why we went over to Ethereum,

02:42:45.340 | 'cause they're proof of work.

02:42:46.780 | - You mentioned God.

02:42:49.020 | God spelled backwards as dog.

02:42:51.040 | How's that for a transition?

02:42:53.960 | (laughing)

02:42:55.740 | And Elon Musk and Tesla are at least a little bit curious

02:43:00.740 | about a coin called Dogecoin.

02:43:04.460 | You made a video directed to Elon

02:43:06.380 | on how to improve Dogecoin.

02:43:08.420 | What are your ideas for making Dogecoin

02:43:11.980 | even better than it already is?

02:43:14.040 | - Well, you know, Dogecoin is just based,

02:43:16.500 | it's like that Nine Inch Nails song,

02:43:18.540 | a copy of a copy of a copy.

02:43:20.140 | Yeah, it's just a copy of a copy.

02:43:21.540 | It's a Bitcoin gave Litecoin, Litecoin gave Dogecoin.

02:43:25.060 | And it was kind of a parody cryptocurrency.

02:43:26.820 | And I think Jackson was trying to do it

02:43:28.540 | to like prove a point about altcoins.

02:43:30.420 | And then true to form, it's like nobody got the doctrine

02:43:33.540 | and completely perverted the entire religion.

02:43:35.500 | It's almost like the emperor of man in Warhammer 40K.

02:43:37.900 | It was like this atheist, don't worship me.

02:43:39.660 | And now there's like this whole religion

02:43:41.220 | built around the emperor.

02:43:42.740 | So Dogecoin has become a thing

02:43:44.940 | and it's become such a large thing

02:43:46.680 | that it is a reasonable target for somebody to fix it up

02:43:49.820 | and repair it, make it an interesting cryptocurrency.

02:43:52.540 | The point of the video was to show

02:43:54.420 | what a modern third generation cryptocurrency

02:43:56.500 | really would require.

02:43:57.820 | It's a major overhaul.

02:43:58.980 | And there are already people doing this.

02:44:00.820 | You know, there's the Solanas and the Harmony Ones

02:44:03.340 | and the Cardanos, Nioses and all these other guys.

02:44:05.540 | And they have billions of dollars and huge dev teams

02:44:08.300 | and all these innovative protocols.

02:44:09.980 | If you're really serious about this thing sticking around,

02:44:12.740 | being useful and doing stuff,

02:44:15.260 | then the point of the video was to show

02:44:16.780 | the types of things you'd have to think about

02:44:18.780 | and the types of papers that are all open source,

02:44:21.340 | patent free and don't have any notion

02:44:23.660 | of intellectual property behind them

02:44:25.100 | that his engineers could grab and go and do.

02:44:28.100 | And he did mention on Twitter that he was looking

02:44:30.500 | for feedback on how to improve Doge.

02:44:32.620 | And so I said, all right, well,

02:44:33.740 | I'll just put all these things together.

02:44:35.460 | It was a little tongue in cheek

02:44:36.620 | 'cause I figured he'd ignore it,

02:44:38.620 | but it was also showing how hard it is

02:44:41.180 | to innovate in this entire space.

02:44:42.820 | You know, you don't just go and say,

02:44:44.340 | I'm gonna go build a battery powered car or rocket

02:44:47.220 | or enter a new industry.

02:44:48.460 | It's really hard to do that.

02:44:49.940 | You spend years and lots of effort.

02:44:52.180 | You have to do series of small learning steps.

02:44:54.500 | You have to pick up destroyed rockets

02:44:56.380 | on the side of the beach and things like that

02:44:58.180 | before you get to the rocket landing itself.

02:45:00.820 | Well, analogously, it's really hard

02:45:02.580 | to build a cryptocurrency.

02:45:03.880 | Satoshi probably spent years thinking carefully

02:45:08.400 | and that work was a derivative of 30 years of work

02:45:11.380 | in the digital assets space starting in the 1980s,

02:45:13.860 | working its way through.

02:45:15.340 | So, and then Bitcoin only did very limited things

02:45:18.460 | relative to what Ethereum can do

02:45:20.060 | or Cardano can do and so forth.

02:45:22.080 | So, the minute that you extend that complexity,

02:45:24.400 | you're talking about years of R&D,

02:45:26.100 | years of engineering effort that needs to be done.

02:45:28.620 | So, what's the point of Doge?

02:45:30.100 | Is it just a meme?

02:45:32.140 | Is it actually contending to be useful

02:45:34.460 | or is it competing as a store of value against Bitcoin?

02:45:37.820 | Now, if it's competing as a store of value against Bitcoin,

02:45:39.780 | why the hell does it have the monetary policy it does?

02:45:42.700 | Also, there's predatory distribution of the underlying asset

02:45:45.660 | and over 90 some percent is consolidated

02:45:47.980 | in less than 1% of the holders.

02:45:49.460 | - For Dogecoin. - For Dogecoin

02:45:50.700 | at a very, very low price point.

02:45:52.800 | So, they can sell at almost any price point

02:45:55.000 | and make a profit.

02:45:56.320 | So, it hits 50 cents, they're billionaires

02:45:59.120 | and it's not like 20,000 people,

02:46:02.560 | it's probably less than 100 wallets

02:46:04.320 | that have that distribution.

02:46:05.740 | So, there's this existential ticking time bomb

02:46:07.800 | that's in Doge that once the guys who are vested

02:46:10.440 | start selling, they can just keep selling

02:46:12.560 | and keep selling and ride it all the way down

02:46:14.280 | and make windfall profits regardless

02:46:15.840 | of what price they sell at.

02:46:16.680 | And who are they selling against?

02:46:18.040 | The retail investors.

02:46:20.640 | People make $500 spare money a month or something like that.

02:46:25.040 | And it bothers me because I see it in my community.

02:46:27.540 | So, I live in Longmont, Colorado and I was at a restaurant

02:46:31.160 | and I was talking to the waitress

02:46:32.680 | and she asked me what business I was in.

02:46:34.240 | I said, "I'm in the cryptocurrency space."

02:46:35.740 | And she's like, "What is that?"

02:46:36.760 | And I started explaining all of it.

02:46:37.840 | And she goes, "Oh, yeah, I own some Dogecoin."

02:46:41.280 | I said, "You own anything else?"

02:46:42.480 | "No, no, I just bought some Doge."

02:46:43.720 | "Why did you buy Doge?"

02:46:44.620 | "Oh, I saw Elon tweeting about it

02:46:46.880 | "and I thought it was a good deal."

02:46:48.880 | So, when you see stuff like that

02:46:50.520 | where people have no clue what they're doing,

02:46:52.480 | they don't really understand the supply dynamics,

02:46:55.000 | the ownership dynamics and these types of things.

02:46:57.320 | And then when the clock stops,

02:47:00.200 | they're the ones who get hurt.

02:47:01.980 | And then the regulator comes in,

02:47:03.220 | the Elizabeth Warrens of the world,

02:47:04.640 | and they say, "See, this is an evidence

02:47:06.480 | "these guys can't regulate themselves, control themselves.

02:47:09.100 | "We need to control everything.

02:47:10.760 | "Either let's ban it or let's just announce

02:47:12.940 | "that the only three are legitimate

02:47:14.440 | "and every one of them has to be connected

02:47:16.660 | "to identity and rah, rah, rah."

02:47:18.720 | And I'm just very concerned that that's a bad thing to do.

02:47:22.160 | And that's why I've been so vocal about this topic.

02:47:24.840 | And my hope is that a compromise can be made

02:47:27.680 | where real developers come in

02:47:29.240 | and they start working on Doge

02:47:30.520 | and they find a way to create

02:47:31.480 | some sort of use and utility for it

02:47:33.400 | so at least it has a value floor and it won't collapse.

02:47:37.240 | - Is it possible for Cardano and Doge

02:47:39.120 | going to work together somehow?

02:47:40.720 | - Yeah, it'd be a lot of fun.

02:47:42.720 | I'm not adverse to the idea of cleaning up the code base,

02:47:45.680 | but legitimately whoever comes in,

02:47:47.960 | it'd be two years or three years of work.

02:47:50.520 | 'Cause you have to do real stuff

02:47:51.840 | and that code is like Litecoin circa 2012, 2013.

02:47:56.760 | - Well, the interesting thing about Elon,

02:47:58.560 | and I've got to interact with him quite a bit,

02:48:00.400 | that combination of humor and extreme ambition,

02:48:04.620 | like in the face of impossible odds,

02:48:06.560 | is something he does really well.

02:48:08.400 | And so I think that's the spirit of Dogecoin,

02:48:12.200 | is fun and almost like bold, ambitious,

02:48:17.960 | innovation and so I think you can't

02:48:20.640 | discount the power of that.

02:48:22.240 | - But where's the innovation?

02:48:23.320 | What's the agenda?

02:48:24.280 | - This is step one.

02:48:25.200 | - What's going to Mars for Dogecoin?

02:48:27.560 | - Well, I mean, he came in the same way to rockets,

02:48:31.280 | he came in the same way to electric cars.

02:48:34.600 | It seemed impossible at first,

02:48:37.480 | but you step in and you solve the problems,

02:48:39.680 | first principles one at a time.

02:48:41.640 | - But I'll challenge you a little bit on this

02:48:43.800 | because I think he had some trends

02:48:45.440 | that he was very smart to recognize.

02:48:47.200 | In the case of battery-powered cars,

02:48:48.440 | he said, "Hang on, everybody has tablets and cell phones

02:48:50.520 | "and these other things and there's an incentive

02:48:53.100 | "to make batteries better, faster, cheaper

02:48:55.080 | "and charge faster."

02:48:56.200 | And that's connected to mobile computing.

02:48:57.920 | So regardless if you want battery-powered cars or not,

02:49:01.240 | every year you have billions of dollars of R&D

02:49:03.760 | being pushed to force this capacity to evolve

02:49:07.440 | and he's just getting on the train

02:49:08.800 | and piggybacking on that.

02:49:10.320 | So that was a brilliant business acumen to recognize that.

02:49:12.920 | In the case of SpaceX, it was just an obvious question.

02:49:15.520 | If every time you get on a plane,

02:49:16.600 | you have to throw the plane away, no one would fly.

02:49:19.400 | So reusability is like a fundamental thing

02:49:22.440 | that if you solve that, you've now opened space up

02:49:25.280 | to a complete new class of commercialization.

02:49:27.920 | I don't see the problem in Dogecoin

02:49:29.960 | 'cause if he was looking for it,

02:49:31.200 | then why not look at a real platform

02:49:33.120 | actually trying to solve a real problem?

02:49:35.320 | There's so many of them.

02:49:37.280 | He can throw a rock, he can hit 15 of these guys

02:49:39.700 | and they'd all die to work with Elon Musk.

02:49:42.160 | - Yeah, it's very interesting.

02:49:43.200 | I mean, so first, I could continue pushing back

02:49:45.920 | on your intuition about electric cars and batteries

02:49:49.160 | and so on.

02:49:49.980 | I don't think it's more obvious in retrospect

02:49:52.000 | than it is at the time, I would say.

02:49:55.160 | Because I would agree with you on the batteries front,

02:49:57.520 | I wouldn't necessarily agree with you with the electric car

02:50:00.040 | because first of all, nobody's started

02:50:01.880 | a successful car company for decades.

02:50:04.240 | - Well, but it was the loyalty.

02:50:05.600 | The EV4 guys or whatever it was with GM,

02:50:08.480 | they didn't wanna give 'em back

02:50:09.860 | when they hit the lease program.

02:50:11.620 | - So there's some basic intuition

02:50:13.520 | that there is some hunger here,

02:50:14.920 | but it's not obvious that you can do it successfully.

02:50:17.160 | And with relaunching rockets for cheap,

02:50:19.760 | that sounds good on paper, but to do it well,

02:50:22.800 | NASA is spending way more money for this.

02:50:25.320 | And the Russians were assholes not selling any rocket.

02:50:29.520 | Like you say, you have to do it all yourself from scratch.

02:50:31.480 | How do you build the team?

02:50:33.120 | How do you launch rockets when if you fail a few times,

02:50:38.040 | you're gonna go bankrupt?

02:50:39.440 | I mean, just business-wise, I would rather build an app,

02:50:42.340 | like Angry Birds. - Oh, yeah, yeah.

02:50:44.140 | He's got-- - Launch rockets.

02:50:45.300 | - You gotta give him credit, he's got boulders for balls.

02:50:47.460 | (laughing)

02:50:49.420 | That's a good picture. - Yeah, thank you for that.

02:50:52.220 | But I don't, maybe that's what, I mean,

02:50:54.680 | I think there's not enough first principle thinking

02:50:59.540 | on the cryptocurrency side.

02:51:00.780 | I think I agree with you on that.

02:51:02.540 | But there's some aspect to which the seriousness

02:51:06.400 | of the cryptocurrency world is paralyzing.

02:51:09.700 | So in some way, the innovation that you spoke to

02:51:14.420 | requires taking risks, requires not taking everything

02:51:18.220 | so seriously, like being afraid to take those bold risks

02:51:21.260 | in the space of ideas, not in the space of financials.

02:51:24.140 | So in that way, I think that's one pro for Bitcoin

02:51:29.140 | is there's room, it's hungry for innovation.

02:51:33.780 | But I think Cardano in that same way

02:51:35.260 | is hungry for innovation, just like as you said,

02:51:37.780 | with some more rigor and formalism behind it.

02:51:41.740 | And even Ethereum has a hunger for innovation.

02:51:45.060 | That's where Bitcoin is a little bit more,

02:51:47.900 | I would say conservative in terms of how much innovating

02:51:50.140 | they're willing to do, in terms of the incentives

02:51:53.100 | they built into the systems for the evolution

02:51:55.660 | of the cryptocurrency.

02:51:57.220 | But yeah, I mean, it's difficult to psychoanalyze

02:52:00.800 | why Dogecoin is the thing that excites Elon so much.

02:52:04.820 | But at the same time, there's some power to the fun.

02:52:09.220 | It sounds ridiculous to say, but the fun,

02:52:12.540 | this idea that the most entertaining outcome

02:52:17.540 | is the most likely, there could be something built

02:52:22.940 | into the physics of the universe that makes that true.

02:52:25.800 | 'Cause the viral nature of fun has power.

02:52:34.380 | - Well, it's a neuroscience thing.

02:52:35.980 | We like dopamine, we like these chemicals in our brain.

02:52:40.660 | And when we have fun, we want more of it.

02:52:43.340 | So you tend to gravitate towards work activities

02:52:46.040 | and play activities that are enjoyable to you.

02:52:48.660 | And it is nice sometimes to kind of come in

02:52:52.380 | and troll an entire industry.

02:52:54.060 | I can imagine he's probably having the time of his life.

02:52:56.980 | It's the same as like taking Tesla private at 420.

02:53:00.780 | That kind of stuff.

02:53:01.820 | And it's one thing when you do it with friends.

02:53:04.660 | It's another thing when you do it with the whole industry

02:53:06.340 | and it hurts people financially.

02:53:09.060 | And also I understand he hates short sellers

02:53:11.520 | and there's some things there.

02:53:12.940 | And I can't speak for him

02:53:14.300 | because I only know the guy from a distance.

02:53:16.340 | It's just, I live in this space

02:53:18.260 | and I have to deal with the consequences

02:53:19.780 | and clean up the messes.

02:53:20.620 | - You feel the pain.

02:53:21.860 | - Yeah, and this results in a regulatory event.

02:53:24.380 | It's like, I'm the guy who has to put on a suit

02:53:26.220 | and go to Washington and go and sit in a Senate inquiry

02:53:28.820 | and all this stuff.

02:53:29.660 | I'm the guy that just like laugh with his friends

02:53:32.380 | about how he crashed the crypto market

02:53:33.980 | and how easy it was to do it.

02:53:36.100 | And that's my only umbrage about this.

02:53:39.300 | On the other hand, if it brings a lot of cool,

02:53:41.220 | new, interesting things and people into the space,

02:53:43.720 | that's a net positive.

02:53:44.700 | And so it's not universally bad or universally good.

02:53:47.580 | And I'd like to give people the benefit of the doubt.

02:53:50.380 | And so I'm really hopeful to see

02:53:52.620 | what comes about this recent surge of interest

02:53:55.260 | and if Elon actually puts his money where his mouth is

02:53:57.660 | and takes some of his enormous engineering talent

02:54:00.780 | and capital and starts contributing

02:54:03.380 | and building something in the cryptocurrency space.

02:54:05.940 | Be really cool to see that happen.

02:54:07.640 | - There's a bunch of different technical aspects

02:54:11.220 | I want to ask you about on the Cardano side.

02:54:13.380 | So first, maybe on the scaling side, what is Hydra?

02:54:17.100 | How does Hydra compare to other different ideas

02:54:20.440 | for scalability like roll-ups?

02:54:22.660 | Main trade-offs with respect to security, UX.

02:54:27.140 | Um, and anything else you want to talk about?

02:54:30.460 | - You have to have a little bit more energy, Lex, come on.

02:54:33.380 | - You know what I need?

02:54:34.740 | I need that Coke machine that you mentioned.

02:54:36.580 | The thing that converts water to cocaine.

02:54:38.580 | - Water to cocaine from Director Bullock?

02:54:40.540 | We'll leave this in, right?

02:54:43.180 | - Yeah.

02:54:44.260 | - Isomorphic state channels.

02:54:45.660 | That's a great topic, right?

02:54:47.660 | There's a word salad of cryptographic terms.

02:54:51.060 | Whether Lightning Hydra roll-ups, any of these things.

02:54:53.500 | Really what you're trying to do is say, okay,

02:54:56.100 | if I do it on layer one, it's slow and expensive.

02:54:58.900 | What I'm going to do is batch something, somehow, some way,

02:55:02.100 | and then do it in a different system

02:55:04.220 | where it's fast and cheap.

02:55:07.220 | And what I'm doing with that is I'm losing

02:55:09.480 | some of the security guarantees of the base layer

02:55:12.620 | and admitting a slight higher degree of centralization.

02:55:17.060 | But then I get super fast settlement,

02:55:20.260 | I get super low-cost transactions,

02:55:22.540 | and potentially I may even be able

02:55:24.620 | to get distributed computing.

02:55:26.620 | Meaning that instead of having the smart contracts

02:55:29.260 | run in a replicated system,

02:55:30.420 | they can run on a single node, like a stake pool,

02:55:32.880 | and their stuff is different from the other guy's stuff.

02:55:35.960 | So you go from a system of capacity of whatever it is

02:55:40.600 | to a system of N for the totality of all the stake pools.

02:55:44.160 | So basically Hydra is just the next generation of that

02:55:48.240 | when you have the ability to tinker

02:55:49.880 | with the accounting model and the layer two solution

02:55:52.980 | is co-designed with the layer one solution.

02:55:55.660 | So it's like what Lightning would have been

02:55:57.780 | had Lightning been co-developed when Bitcoin came out.

02:56:00.820 | There would have been special provisions made in Bitcoin

02:56:03.460 | specifically to accommodate Lightning,

02:56:05.500 | and it would have made it very easy for you then

02:56:07.220 | to move inside the system, outside of the system,

02:56:09.460 | and have security properties preserved,

02:56:12.100 | like availability, for example, or fraud resistance.

02:56:15.380 | They always, you can't steal the money,

02:56:16.980 | or these types of things.

02:56:18.260 | Where things get really complex,

02:56:19.760 | and this is why Hydra's novel over Lightning,

02:56:22.420 | is when you want to move beyond payments

02:56:24.060 | to state management.

02:56:25.620 | Okay, so payments are just,

02:56:26.900 | I want to move between Alice to Bob as quickly as possible,

02:56:29.460 | as low cost as possible.

02:56:31.060 | So for example, I have a micro tipping application,

02:56:34.260 | like change tip on Twitter, or like a video,

02:56:37.160 | I'm watching YouTube video,

02:56:38.180 | like maybe this video in the future,

02:56:39.720 | and people really like it, and they click tip,

02:56:41.340 | and you get five cents or something like that.

02:56:43.460 | Okay, so that's an example of a perfect payment application,

02:56:46.580 | and that's great, but what happens

02:56:48.640 | when you actually have a rich smart contract,

02:56:50.500 | like a DEX, or you want to do a video game,

02:56:53.420 | or something like that, you want to run that off chain,

02:56:55.620 | but then there's some reconciliation on chain that happens.

02:56:59.060 | So a state channel basically lets you do that,

02:57:01.820 | but it's a lot more complicated,

02:57:04.020 | and there's a lot more to think about.

02:57:05.700 | So Hydra basically just has in its design,

02:57:09.040 | a collection of ideas of how to do that,

02:57:11.300 | and the current paper is for a single head.

02:57:15.180 | The next thing you do is composition.

02:57:17.340 | So you go multiple heads,

02:57:18.900 | and there's a routing protocol between them,

02:57:20.900 | and then eventually create these tail protocols

02:57:22.620 | for when things get asynchronous.

02:57:24.260 | So instead of always being aligned,

02:57:25.820 | and always being available,

02:57:26.860 | what happens if they die for a bit,

02:57:28.780 | and then they come back?

02:57:29.980 | And you can create all kinds of guarantees

02:57:31.900 | that your funds won't be lost, or locked forever,

02:57:34.520 | or things like that.

02:57:35.360 | There's a failure recovery mode for this type of stuff.

02:57:37.740 | And basically the idea is,

02:57:39.580 | leverage what Lightning has already achieved with Bitcoin,

02:57:42.260 | but then take advantage of the fact

02:57:44.720 | that you have a more expressive accounting model,

02:57:46.940 | and a more expressive programming model,

02:57:48.740 | so you can just physically do more,

02:57:50.180 | and you can put more crypto inside that thing.

02:57:52.260 | Now contrast it with rollups,

02:57:53.660 | really that is just saying,

02:57:55.260 | you're gonna take some thing,

02:57:56.660 | batch a bunch of transactions together,

02:57:58.400 | and you're gonna generate a proof,

02:58:00.040 | and then what you can do is,

02:58:01.480 | whenever you see some part of that history,

02:58:03.400 | you can check it against that proof that's rolled up.

02:58:05.860 | And there's closely related concept of recursive snarks,

02:58:08.680 | that you'll see a lot.

02:58:09.520 | There's things like the Mina protocol, or other things.

02:58:11.660 | And basically the idea is that whenever you see something,

02:58:14.580 | you can always generate two proofs,

02:58:16.860 | an existential proof that the coins exist,

02:58:19.380 | and a non-existence of a double spend.

02:58:21.820 | So you can always check those two properties.

02:58:23.540 | And the proof is verifiable in logarithmic time, ideally.

02:58:26.980 | So you can have giant amounts of data,

02:58:29.300 | but it's very small, the actual proof is concise.

02:58:32.300 | Okay, so they're just different boats for different floats.

02:58:35.660 | The advantage of a layer two network,

02:58:38.580 | where there's actual channels,

02:58:39.900 | and there's interaction, and there's service providers,

02:58:42.520 | is the channels can eventually scale

02:58:44.380 | in the collection of things that they can do,

02:58:46.620 | and eventually they can become interoperability networks

02:58:49.660 | between cryptocurrencies.

02:58:51.360 | So at some point, we could modify the Bolt spec,

02:58:53.940 | and make it somewhat interoperable with Hydra.

02:58:56.340 | And then what you could happen is,

02:58:57.360 | you could use it as a bridge,

02:58:58.540 | to actually do cross-chain traffic,

02:59:00.100 | and send transactions between the systems.

02:59:02.460 | You don't really think about that too much,

02:59:03.900 | when you're talking about roll-ups.

02:59:04.940 | That's more of optimizing what you have within the system.

02:59:07.500 | - Within the chain.

02:59:08.340 | So can you elaborate how it's possible

02:59:10.660 | to do cross-chain traffic?

02:59:12.860 | - Well, you already have the intermediary,

02:59:14.140 | you have the channel operator,

02:59:15.540 | and you already have Lightning protocol, right?

02:59:18.740 | And you just build a DEX that runs within that system,

02:59:21.700 | and they can swap assets, or you can do wrapped assets.

02:59:24.300 | So you lock it.

02:59:25.140 | - So it would be like low cost?

02:59:26.220 | I guess you could just switch low.

02:59:28.060 | - Yeah, the same thing lets you batch things on one,

02:59:30.060 | will let you batch the other.

02:59:31.020 | So if Lightning works on Bitcoin,

02:59:32.420 | and Hydra works on Cardano,

02:59:34.080 | you can eventually bridge these two together,

02:59:35.840 | and create a way of moving back and forth.

02:59:37.740 | And the same things that make transactions

02:59:39.380 | in and out of that network cheap,

02:59:40.580 | will make creating wrapped assets cheap.

02:59:43.220 | At least on the Bitcoin to Cardano side,

02:59:45.580 | you can't create assets on Bitcoin.

02:59:47.460 | Another flaw of Bitcoin that they've never fixed.

02:59:49.900 | - What's your thought about Layer 2 technologies in general?

02:59:52.580 | Is there stuff you're excited about?

02:59:53.940 | We talked quite a bit about Lightning Network,

02:59:55.820 | Hydra, these ideas.

02:59:57.940 | Do you think there'll be somebody that wins out,

02:59:59.860 | or is this gonna be this kind of dynamic thing

03:00:01.780 | that we just keep building different ideas,

03:00:03.820 | and they all interact with each other?

03:00:05.540 | - It goes back to biology, that cell differentiation concept.

03:00:08.460 | You have to build specialized tissue to do these things.

03:00:11.500 | Point of Layer 2 is to extend the network.

03:00:13.540 | It's adding a foot, it's adding an arm,

03:00:15.320 | it's adding a brain, it's adding a heart, it's adding eyes.

03:00:18.220 | Giving you additional senses, you have ears now.

03:00:20.380 | So when you add these Layer 2 protocols,

03:00:21.940 | like a Tala Prism is a perfect example of that.

03:00:24.000 | We don't have identity at the base layer of Cardano.

03:00:27.260 | It's a real bad deal to do that.

03:00:29.500 | 'Cause China will come in, or US will come in,

03:00:31.740 | and tell you how to do that.

03:00:32.860 | What you do is you build a Layer 2 protocol

03:00:34.380 | that's blockchain agnostic,

03:00:35.700 | and then the user can decide

03:00:37.420 | when and where they need an identity,

03:00:38.860 | and then bring that identity into the system.

03:00:41.220 | And if you designed it right, when they bring it in,

03:00:43.340 | it's very easy, very fluid,

03:00:45.380 | and suddenly the experience enhances.

03:00:47.820 | Everything just gets better.

03:00:49.300 | Oh wow, okay, now I can use all these regulated things.

03:00:51.780 | They go from gray to green in the App Store.

03:00:53.860 | That's so cool.

03:00:55.020 | Or oh wow, now I can send to human readable addresses.

03:00:58.420 | 'Cause if I have an identity and you have an identity,

03:01:00.220 | we can alias them with some namespace,

03:01:02.420 | and now I send to Lex,

03:01:03.620 | instead of some horrible back 32 address structure.

03:01:08.100 | Okay, so that's really what you need to do with Layer 2,

03:01:10.940 | is say, okay, each Layer 2 protocol

03:01:13.140 | is meant to do something.

03:01:14.180 | Either it gives me payments,

03:01:15.540 | or lower cost of our contracts,

03:01:17.300 | or interoperability, or identity.

03:01:19.780 | And then it's a marketplace.

03:01:21.540 | So you should have blockchain agnosticism

03:01:23.660 | with your Layer 2 solutions.

03:01:25.020 | And so you can mix and match,

03:01:27.020 | and choose whichever collection of services you need.

03:01:29.260 | And that's actually how IT works these days,

03:01:31.540 | with microservices and these other things,

03:01:33.660 | and cloud software.

03:01:35.460 | Every firm is an aggregation of dozens of providers,

03:01:38.540 | and basically that composition of them

03:01:40.660 | is your software stack.

03:01:41.860 | - Jumping around, back to proof of work.

03:01:45.860 | What are non-interactive proofs of proof of work?

03:01:49.180 | N-I-P-O-P-O-W-S.

03:01:51.700 | - Nip-pah-pows.

03:01:52.900 | - Nip-pah-pows.

03:01:53.740 | - Nip-pah-pows, it's fun to say, right?

03:01:54.860 | - Nip-pah-pows.

03:01:55.700 | - It's just one of those things that you notice

03:01:57.180 | that certain proofs of work,

03:01:58.980 | when you solve them,

03:02:00.180 | come up less frequently than other ones.

03:02:02.100 | And just by that nature,

03:02:04.180 | you can sample them,

03:02:05.460 | and then construct proofs from them.

03:02:07.060 | So you can, with that just set,

03:02:09.940 | have a more concise representation

03:02:12.020 | of an amount of work for a range of the chain.

03:02:14.100 | So that works--

03:02:14.940 | - Can you say that again?

03:02:15.780 | - Yeah, I was gonna say,

03:02:16.620 | that works salad.

03:02:17.620 | Basically, the idea is, okay,

03:02:19.180 | so let's say that this block,

03:02:20.980 | and I'm just simplifying the concept a lot.

03:02:22.740 | This block, you get a regular green type of proof of work,

03:02:27.180 | and then this block, you get a green,

03:02:28.740 | and you keep going,

03:02:29.620 | and then suddenly you get a red one.

03:02:31.540 | So it's still a valid proof of work,

03:02:33.000 | but it's more rare than the other ones.

03:02:35.820 | So if you notice that particular pattern,

03:02:37.620 | what you can do is you can just start

03:02:39.260 | not caring so much about the green ones,

03:02:41.380 | and you can just bookend your chain with red.

03:02:44.460 | Okay, and then you can just repeat that,

03:02:46.460 | and repeat that, repeat that,

03:02:47.300 | and you can create this really compressed representation

03:02:50.820 | of these things.

03:02:51.740 | So what does it mean?

03:02:52.580 | It means that suddenly, when you have that,

03:02:55.000 | now you have a way of representing

03:02:56.460 | a long range of history with a very small proof.

03:03:00.380 | So you can use it for light wallets,

03:03:01.940 | and you also can use it for sidechains,

03:03:05.340 | if both sidechains use proof of work.

03:03:07.780 | So when you see a transaction come in,

03:03:09.380 | you don't have a copy of the sidechain,

03:03:11.180 | but you have a copy of the proof of work,

03:03:12.740 | and it has the same algorithmic weight

03:03:14.980 | as the normal longest chain,

03:03:17.500 | because you don't have all the greens,

03:03:19.000 | but the reds only occur with a certain sampling frequency.

03:03:21.940 | So this is the brainchild of Dionysus Zindros and Agalos,

03:03:25.300 | and it's just an amazing paper,

03:03:27.060 | and what's so cool about it

03:03:28.660 | is it doesn't require any structural changes

03:03:30.860 | to proof of work.

03:03:31.700 | It's just something you notice

03:03:32.700 | as an off-gas of proof of work.

03:03:34.420 | It's like you're watching an engine operate,

03:03:36.500 | and you notice like every 500 times

03:03:38.540 | a piston will do a certain weird thing,

03:03:41.020 | and so you take advantage of that.

03:03:42.420 | You say, well, if I count 10 of them,

03:03:44.220 | now I have 5,000 pistons, strikes,

03:03:47.220 | as I observe that pattern.

03:03:48.660 | And so it's the same concept there,

03:03:50.420 | and it's just a property of the engine.

03:03:52.580 | So you don't really need to hard fork it in.

03:03:54.080 | It's just there,

03:03:54.920 | and because you can build proofs that way,

03:03:57.060 | now you can use those proofs to do like clients,

03:03:59.700 | and you can use those proofs to do other things,

03:04:01.140 | 'cause you just use that

03:04:01.980 | as something that comes with the history.

03:04:03.460 | You don't have to have the whole blockchain.

03:04:04.900 | - Now, is this a weird property

03:04:06.100 | of multiple proof of work chains?

03:04:08.560 | - It has to be key to the particular consensus algorithm,

03:04:12.060 | but usually there's some portability in this type of thing.

03:04:15.340 | Like we're right now exploring,

03:04:16.460 | can you do NEPA piles with Prism

03:04:18.020 | or any of these sharded proof of work protocols,

03:04:20.180 | but it looks like you can.

03:04:21.420 | The closely related is log space mining.

03:04:23.580 | So you can use this concept,

03:04:25.340 | and instead of having the entire blockchain

03:04:26.900 | to be able to mine,

03:04:27.880 | you can use a compressed representation of it.

03:04:29.980 | We wrote a paper called Log Space Mining

03:04:31.740 | that basically explains how to do that.

03:04:33.720 | So your miner only has this very small micro ledger

03:04:38.180 | as opposed to the entire ledger.

03:04:40.460 | - How does it connect back to the entire ledger?

03:04:43.060 | How does the--

03:04:43.900 | - Because you have those red blocks,

03:04:45.620 | you have those special things,

03:04:46.740 | and so you know that the state you're working on

03:04:48.780 | is actually legitimate, right?

03:04:50.820 | - Oh, so the map goes both ways?

03:04:52.900 | - Yeah, it's pretty cool.

03:04:55.500 | - Wow, that's really interesting.

03:04:56.420 | - Yeah, and Dines is a genius.

03:04:58.580 | He's a really, really smart kid,

03:05:00.020 | and he got his PhD under us.

03:05:01.740 | He went to University of Athens,

03:05:03.280 | and he was a Agalos's graduate student,

03:05:05.300 | and now he's doing a postdoc at Stanford under David Shih,

03:05:08.380 | and this is literally the only thing he does.

03:05:10.340 | He does interoperability, sidechain stuff,

03:05:13.100 | Nipah Pals and so forth,

03:05:14.580 | and he's written a lot of great papers on it,

03:05:16.580 | and that was a testimony to hard work

03:05:18.740 | for getting the paper published

03:05:20.060 | because the paper came out in 2016,

03:05:21.820 | but I think it took three or four years

03:05:23.600 | for it to go through peer review.

03:05:25.500 | He kept trying to push it one conference after rejection,

03:05:28.300 | after another rejection,

03:05:29.380 | but he got it through.

03:05:30.860 | Real proud of that kid,

03:05:32.180 | and then he's just doing all this beautiful

03:05:33.540 | derivative work now, like log space mining and so forth.

03:05:37.000 | - So, Reddit.

03:05:39.200 | Any sentence that starts with Reddit,

03:05:42.220 | you know it's gonna be fun.

03:05:43.600 | The top question on the Cardano subreddit,

03:05:47.560 | which is quite a wonderful place, by the way,

03:05:50.480 | was can you get Charles to play devil's advocate

03:05:55.200 | against Cardano?

03:05:56.960 | If it's going to fail, what would failure look like,

03:06:00.040 | and what are the most likely reasons it would fail?

03:06:02.640 | - Okay, well there's the failure,

03:06:06.560 | for example, I said one of the project goals

03:06:09.040 | was to achieve self-evolution.

03:06:11.160 | So, if it doesn't achieve that,

03:06:12.560 | where it can evolve itself iteration by iteration,

03:06:16.040 | then obviously the product didn't do what was intended.

03:06:19.160 | If it continuously required the supervision of custodians

03:06:23.000 | in order for it to succeed, the system just won't work.

03:06:26.700 | The good news is we have a lot of data showing the opposite.

03:06:29.320 | You know, we used to run a federated model,

03:06:31.680 | and now we're completely decentralized

03:06:33.200 | for block production,

03:06:34.420 | but that didn't just happen overnight.

03:06:36.360 | I mean, there was a whole process

03:06:38.400 | with the incentivized test net,

03:06:39.960 | and the stake pool pioneers program,

03:06:41.800 | and the launch of Shelly,

03:06:42.920 | and the decrementing of the decentralization parameter,

03:06:45.720 | and every step of the way, people showed up

03:06:47.160 | and had to do things,

03:06:48.320 | and we went from several to thousands of people

03:06:51.560 | who were regularly maintaining the infrastructure.

03:06:54.040 | But there's no guarantee that that would be sustainable,

03:06:57.060 | and there's no guarantee that the next step,

03:06:59.860 | the smart contract step, will achieve what we want,

03:07:02.100 | and the next step, the governance step,

03:07:03.460 | will achieve what we want.

03:07:04.740 | I mean, it's an experiment in all these types of things.

03:07:06.820 | All cryptocurrencies, all companies,

03:07:09.260 | are, in a sense, experiments

03:07:10.740 | when they are evolving the business model.

03:07:12.900 | And as our case, our business is systems and society.

03:07:17.560 | We're offering to the world a vision

03:07:19.620 | of how to run humanity in a different way,

03:07:22.220 | and the only way the system can do that

03:07:24.220 | is by millions of people joining the system,

03:07:26.580 | self-evolving the system,

03:07:27.900 | and growing it in that particular direction.

03:07:30.580 | Another failure scenario would be

03:07:32.380 | the system evolves in the wrong direction.

03:07:34.900 | So it's self-evolving,

03:07:36.140 | but it goes into a more centralized dystopian way,

03:07:39.620 | and that's problematic as well.

03:07:41.380 | - What would that look like?

03:07:42.220 | What would dystopia,

03:07:44.060 | self-evolution toward dystopia look like?

03:07:46.300 | - A small group of actors have total control

03:07:48.580 | over who gets to use the system

03:07:50.100 | and how they get to use the system,

03:07:51.540 | and your use of the system is monitored

03:07:53.700 | and shared with that small group of actors.

03:07:56.180 | So social credit in China is a great example of that.

03:07:58.980 | A small group of people have access to that,

03:08:00.860 | and then your experience in Chinese society

03:08:03.540 | is determined by it.

03:08:04.640 | So that's an example of a failure mode.

03:08:07.740 | And then another could be just network effect.

03:08:10.700 | We start experiencing a churn rate,

03:08:13.220 | and inputs don't match the outputs

03:08:16.860 | in that you lose more than you gain,

03:08:19.540 | and then over time, the system dies off.

03:08:21.780 | However, that's really hard in practice.

03:08:23.540 | Once you reach a certain network effect,

03:08:25.420 | even if you become stagnant and stale,

03:08:27.980 | you tend not to lose your users.

03:08:29.540 | And our evangelism is unbelievable

03:08:32.340 | in the Cardano community.

03:08:33.380 | I think we're number one for tattoos.

03:08:35.900 | And if you think about that,

03:08:37.260 | it's a strange metric to have,

03:08:38.860 | but there are brands that associate that way.

03:08:41.100 | Apple and Harley-Davidson and so forth,

03:08:43.140 | people tend to actually tattoo the logo.

03:08:45.340 | Those people don't leave.

03:08:47.060 | They don't actually walk away from the ecosystem.

03:08:49.460 | They're fanboys to the core.

03:08:51.300 | So there's a lot of people that are here for life.

03:08:55.240 | They don't care if it's dollar ADA, two cent ADA.

03:08:58.020 | They believe in the mission, vision, and value

03:08:59.860 | of what we wish to achieve,

03:09:01.180 | and they've become evangelists in that respect.

03:09:03.300 | So the question is, does that community sustain itself?

03:09:06.800 | And also, does that community not make the same sins

03:09:09.100 | and mistake of Bitcoin,

03:09:10.580 | where they become toxic and maximalistic,

03:09:12.940 | and they start becoming highly religious

03:09:14.660 | about whatever beliefs they have?

03:09:16.220 | My hope is our community will be open and Socratic

03:09:20.180 | and love the scientific method

03:09:21.900 | and be willing to entertain ideas

03:09:24.180 | without adopting them and discard ideas

03:09:26.580 | that are proven to be wrong.

03:09:28.060 | If we become dogmatic and embrace an orthodoxy

03:09:31.380 | that is counterproductive to innovation,

03:09:33.700 | then it'll stall out the ecosystem.

03:09:36.120 | And you'll notice I never said price in any of this.

03:09:38.540 | I never said, hey, failure is if the price goes way down,

03:09:42.580 | and success is if the price goes way up.

03:09:44.900 | That's unfortunately the metric that most people use,

03:09:46.940 | but I couldn't care less about it.

03:09:48.620 | Because the reality is, if you construct a system

03:09:51.340 | that encompasses the entire globe

03:09:53.540 | and has billions of users,

03:09:55.100 | it's probably gonna be a pretty valuable system.

03:09:57.100 | That's a secondary thing.

03:09:59.420 | It's an after effect of having success

03:10:02.100 | in adoption, use, and utility.

03:10:03.680 | Unfortunately, most people on Reddit

03:10:06.980 | and Twitter and other channels,

03:10:08.860 | they tend to just judge your entire success based on that.

03:10:11.540 | I had very few people, when Shelley launched,

03:10:13.900 | even though it took us four years to get there,

03:10:15.580 | a lot of work, say congratulations on Shelley.

03:10:18.460 | But I had a lot of people, when ADA reached the dollar,

03:10:20.660 | say, we're so proud of you, amazing work.

03:10:22.860 | Congratulations, and so forth.

03:10:24.380 | And that's probably the most disheartening thing

03:10:26.300 | about the whole being around and doing this stuff,

03:10:30.420 | where all the things you do only matter

03:10:32.660 | as long as it's making someone else rich.

03:10:34.620 | And in a way, I feel almost like a failure.

03:10:37.320 | That mindset means that we haven't yet

03:10:42.460 | inculcated the community in a proper way,

03:10:44.880 | saying, hey guys, this is about more than money.

03:10:48.260 | It's about more than the value of ADA.

03:10:49.860 | What we're attempting to do here

03:10:51.180 | is re-engineer the way society works.

03:10:52.980 | I'd like your voting to be different.

03:10:54.620 | I'd like your property to be different.

03:10:55.860 | I'd like you on your cell phone to have a universal wallet.

03:10:58.860 | And when you go to Starbucks or wherever,

03:11:00.540 | you can buy your coffee with silver or gold

03:11:03.460 | or airline miles or something like that,

03:11:05.420 | and they get paid whenever the hell they wanna get paid.

03:11:07.220 | And I want those rails to be done with a system

03:11:09.060 | that puts you in charge, not someone else.

03:11:11.260 | And they say, yeah, that's all fine and great,

03:11:12.720 | as long as ADA's $5, we're all happy.

03:11:15.760 | You see, so that's a problem.

03:11:18.040 | There are, of course, other things that could fail.

03:11:19.700 | Like we could lose project cohesion,

03:11:22.060 | lots of people could quit and die.

03:11:23.780 | But again, there's so much momentum,

03:11:25.380 | there's so many things here,

03:11:26.380 | the ideas are already out there,

03:11:27.940 | and there's no intellectual property.

03:11:29.980 | When you publish 100 papers,

03:11:31.180 | you write a million lines of code,

03:11:32.580 | that's something, and it's permanent.

03:11:34.420 | And it's in the commons now,

03:11:35.900 | so it's just as much yours as it is mine.

03:11:38.380 | So there's no notion that somehow,

03:11:41.180 | if the core development company disappeared,

03:11:43.280 | then that concept is lost forever,

03:11:46.860 | like the library of Alexandria burning to the ground.

03:11:50.180 | It's there, and someone else will take it,

03:11:53.020 | fork it, and get it done.

03:11:55.380 | - I mean, first of all, that's fascinating.

03:11:56.740 | The self-evolution, you don't know which trajectories

03:11:59.020 | that's gonna take.

03:11:59.860 | But also, there could be singular events,

03:12:03.620 | like bugs in the system create an opportunity

03:12:07.860 | to hack the system.

03:12:09.380 | Is that something that you see as a potential failure case?

03:12:12.860 | - Yeah, it's always a possibility.

03:12:14.540 | Bugs can exist.

03:12:15.540 | There can be flaws in the protocol design.

03:12:17.940 | Zcash was a great example of that,

03:12:19.500 | where there was a subtle flaw,

03:12:21.020 | and it damaged the fidelity of the cryptocurrency

03:12:23.300 | in ways no other cryptocurrency's ever experienced.

03:12:26.100 | Normally, when you have a bug,

03:12:27.980 | the bug, you can see it, like the Bitcoin overflow,

03:12:30.300 | the value overflow incident.

03:12:31.380 | Yes, Bitcoin can be created,

03:12:32.580 | but we can verify they weren't.

03:12:34.500 | So the monetary policy is preserved.

03:12:36.420 | When you have a bug with a private system, like Zcash,

03:12:39.260 | and it exists on the shielded side,

03:12:41.460 | there's no guarantee, unless you can audit

03:12:43.580 | the total supply inside that shielded side.

03:12:45.780 | My understanding is you can't,

03:12:47.340 | that somebody didn't exploit the bug

03:12:49.140 | and create trillions of these coins out of thin air,

03:12:51.180 | just hiding them on that system and dripping them out.

03:12:53.820 | And so the monetary policy's forever damaged

03:12:55.980 | as a consequence of a bug like that.

03:12:57.540 | It's probably the worst type of bug you can have

03:12:59.420 | for these types of products.

03:13:01.100 | So, no matter how good of a job you do,

03:13:03.980 | they have great scientists,

03:13:05.180 | there are great people there, great engineers there.

03:13:07.440 | You can always have something like that seep its way in,

03:13:09.800 | leak its way in, and that lurks in the distance.

03:13:12.780 | But if that's a problem shared

03:13:15.500 | with every one of your neighbors,

03:13:17.220 | it's like everybody working at a nuclear power plant.

03:13:20.460 | Well, yeah, you can all die of radiation poisoning.

03:13:22.460 | Well, we all kind of knew that, didn't we?

03:13:24.620 | You know, so it's like I don't really think

03:13:27.820 | too much about it.

03:13:28.660 | I think the context of the question was more,

03:13:30.620 | what is Cardano-specific over Ethereum or Bitcoin

03:13:33.460 | or any of these other things?

03:13:34.540 | And yeah, okay, an existential lurking bug could happen.

03:13:37.580 | It's lower probability for us than the other systems

03:13:40.160 | because we use formal methods

03:13:41.980 | and we use peer review inside the protocol design.

03:13:45.880 | So, there's been more eyeballs and tools and techniques

03:13:48.180 | used to check things.

03:13:49.220 | And we actually have discovered a lot of weird wonky bugs

03:13:52.380 | before production and resolved those bugs.

03:13:54.920 | So, it shows you the system works.

03:13:56.660 | It's a lot of fun.

03:13:57.780 | - What about close kind of competitors?

03:14:00.580 | I don't know if you would put it that way,

03:14:01.860 | but if you look in the space of ideas,

03:14:04.000 | competitor cryptocurrencies like Polkadot,

03:14:08.420 | what are some interesting differences

03:14:09.860 | between Cardano and Polkadot,

03:14:12.140 | technically, philosophically, historically?

03:14:14.380 | Is that something you think about

03:14:15.620 | when you think about the future of Cardano?

03:14:17.580 | - Yeah, I mean, we do.

03:14:19.300 | We actually have a whole group of people

03:14:20.740 | that do business intelligence and comparative analysis.

03:14:23.340 | And we're getting to a point where we wanna start

03:14:25.540 | eventually forking their code

03:14:27.220 | and running private versions of it

03:14:28.580 | and just playing around with things.

03:14:29.700 | - Well, that's fascinating.

03:14:30.540 | - Getting better at it.

03:14:31.380 | Consensus actually does this.

03:14:33.300 | They actually did it with EOS.

03:14:34.300 | And they wrote this lovely report like trashing EOS saying,

03:14:36.860 | hey, by the way, all those claims these guys made

03:14:38.700 | are just not true.

03:14:39.920 | But it's nice to do that.

03:14:42.940 | It's nice to use your competitors' technology

03:14:45.020 | or competing protocol technology

03:14:47.020 | 'cause you learn a lot along the process.

03:14:48.580 | It's not all bad.

03:14:50.260 | There's always something there

03:14:51.740 | because they have different trade-offs and customers

03:14:53.840 | that potentially are more interesting.

03:14:55.420 | Like right now we're grokking,

03:14:56.780 | how do we wanna do the sidechain model of Cardano?

03:14:59.480 | Polkadot's actually a tremendously useful piece

03:15:02.020 | of infrastructure for that conversation

03:15:03.840 | because they copied part of our infrastructure.

03:15:07.100 | Gavin's a trained computer scientist.

03:15:08.740 | He got his PhD from York and he read our papers obviously

03:15:12.900 | and he realized that Ouroboros was a really good

03:15:15.460 | starting place for building a proof-of-stake system.

03:15:18.460 | So Polkadot's consensus is very similar to ours.

03:15:21.260 | And so if you're saying, hey,

03:15:22.340 | how do you do a good sidechain model

03:15:24.400 | with an Ouroboros-style proof-of-stake?

03:15:26.940 | Well, we already have this parachain thing, right?

03:15:29.060 | And so now by just looking at that,

03:15:31.320 | I can kind of get an idea of how, one way of doing it.

03:15:34.560 | And so that's just beautiful that we live in a space

03:15:37.000 | where that's there, it's open source.

03:15:38.460 | And if it's really good, you just say, okay,

03:15:40.220 | well, we'll just take that and adopt that.

03:15:41.900 | There's no shame.

03:15:42.820 | The other side of it is that Polkadot

03:15:46.900 | really has focused a lot on commercial adoption,

03:15:49.860 | Silicon Valley adoption, getting real use and utility.

03:15:53.500 | I say in a much more sustainable way

03:15:55.740 | than Ethereum is focused on.

03:15:57.500 | Ethereum was kind of a spray and pray thing.

03:15:59.700 | Polkadot was more of like, hey, let's go ahead

03:16:02.020 | and actually curate our ecosystem more carefully.

03:16:04.660 | And we're gonna build it in a way

03:16:06.540 | where there's predictable or as predictable a cost

03:16:09.500 | as possible with the rollout of the infrastructure.

03:16:13.020 | And that's so important for a business.

03:16:16.640 | It's not necessarily important for an experiment

03:16:18.720 | or a startup where they're just trying

03:16:20.860 | to get population as quickly as possible.

03:16:22.980 | We'll figure out later.

03:16:24.500 | But if you're actually sitting here saying,

03:16:25.780 | I need to know what my expenses are three years,

03:16:28.460 | five years, 10 years into the future,

03:16:30.260 | you need predictability there.

03:16:31.980 | I think they have a better shot of it than anything

03:16:33.940 | in F2 or with currently Ethereum.

03:16:37.700 | Now the big contrast between the two systems,

03:16:40.500 | those we actually have native multi-asset,

03:16:43.380 | we have a different accounting model.

03:16:44.720 | I think our base ledger is far more expressive.

03:16:47.340 | Our rate of evolution with proof of stake

03:16:49.000 | is much faster than theirs

03:16:50.220 | 'cause they're based on derivative work

03:16:51.620 | and we already have Oroboros Omega and other things there.

03:16:54.620 | I think we have a better, ultimately,

03:16:56.660 | a better sidechain model will come

03:16:58.580 | because we have something called Mithril for that.

03:17:00.700 | But we learned a lot from their work.

03:17:02.940 | The other thing is that we thought about governance

03:17:04.860 | a lot more carefully, in my view.

03:17:06.660 | And we have Catalyst and Voltaire.

03:17:08.340 | And really the key there is saying,

03:17:10.380 | how do we make sure that every single person

03:17:12.140 | who holds data can participate in the network?

03:17:14.820 | That wasn't a high design priority of Polkadot.

03:17:17.460 | It was more fast commercial adoption,

03:17:19.780 | the acquisition of customers.

03:17:21.060 | We'll come to governance later.

03:17:22.780 | And those were just different business philosophies.

03:17:25.900 | But it's nice to have a competitor like that.

03:17:28.420 | And oftentimes I've said that Polkadot's like Ethereum 1.5.

03:17:31.580 | It's what F2 probably should have been.

03:17:33.700 | There was what Vitalik wanted to do,

03:17:35.180 | which was incredibly aggressive and brilliant.

03:17:38.700 | But it's a lot.

03:17:39.900 | And there's so much execution risk in that plan.

03:17:42.660 | And I think they've had like six years

03:17:44.280 | of playing around with it.

03:17:45.700 | Had they gone down the Polkadot road,

03:17:47.940 | they probably would have been a market with it in 2018.

03:17:50.500 | And because they already had the network effect,

03:17:52.980 | they would have had years of building on that,

03:17:55.140 | iterating that.

03:17:55.980 | And they already had a path to it too.

03:17:57.420 | All they had to do was just give Elaine Shi

03:17:59.300 | and her cohorts at Cornell, $5, $10 million grants.

03:18:02.940 | No white would have been the dominant protocol,

03:18:05.420 | not Ouroboros in the proof of stake space.

03:18:08.300 | So it's really fascinating historically

03:18:09.700 | when you look at these things and the rivalries

03:18:11.260 | and what they did and what they didn't do.

03:18:12.780 | And Gavin had a chance to have C++ Ethereum

03:18:17.780 | be used as IBM's enterprise blockchain.

03:18:21.860 | The only reason they didn't do it is it was licensed GPL.

03:18:24.740 | And I think they wanted to relicense Apache.

03:18:27.180 | If you ever talked to Bob Summerwall,

03:18:28.580 | he was there at the time and he had this amazing story

03:18:31.020 | about these terrible fights where,

03:18:34.140 | it's like, guys, just relicense the goddamn code.

03:18:36.380 | Let's figure out a way to make this happen

03:18:37.920 | so that we can get this huge network effect

03:18:40.380 | of being basically IBM's play.

03:18:43.180 | They didn't do it, they created Fabric,

03:18:44.900 | these types of things.

03:18:46.420 | So there's a lot of lore and stories in that respect.

03:18:49.880 | But the space is better because of Polkadot.

03:18:52.620 | And there's a lot of good people there.

03:18:53.980 | Web3 is a good concept.

03:18:55.760 | And we run into their people in Germany and Zurich a lot.

03:18:58.700 | And they've always been cordial and friendly

03:19:00.700 | and really affable.

03:19:02.900 | - Before I talk to you about governance,

03:19:04.380 | which is one of the most fascinating things about Cardano,

03:19:07.820 | there's a lot of stuff to untangle there.

03:19:10.280 | Since you mentioned some humans in this wonderful story,

03:19:15.280 | you did make a video before we talked,

03:19:20.140 | directed to me, thank you so much for that.

03:19:24.820 | - It came from a place of love, Lex.

03:19:26.780 | (laughing)

03:19:29.440 | - But it was basically saying, as we have been,

03:19:32.600 | you would love to talk about the technology,

03:19:34.400 | about the future that you're creating with Cardano

03:19:37.400 | and just the future of the cryptocurrency space.

03:19:40.200 | I think you were kind of worried

03:19:42.880 | that you'd be talking to a journalist

03:19:44.640 | that's looking for clickbait content, that kind of thing.

03:19:47.720 | But I'm fascinated by human beings.

03:19:49.420 | I think you're all, from an outsider perspective,

03:19:51.560 | incredible human beings.

03:19:52.760 | I don't know about personal intentions

03:19:54.320 | and all those kinds of stuff,

03:19:55.280 | but I think you're changing the world together

03:19:57.840 | in different ways.

03:19:59.080 | And I just wanted to sort of give you an opportunity.

03:20:02.500 | If there's, in the name of love and friendship,

03:20:06.440 | is there something from your history

03:20:09.700 | over the past decade or so, outside of technology,

03:20:12.400 | on the human side of things,

03:20:13.980 | that you draw inspiration from, you draw insight from,

03:20:16.920 | that you're just proud that happened?

03:20:18.800 | - I mean, it's like asking Paul McCartney about John Lennon.

03:20:21.960 | Tell us about John Lennon.

03:20:23.200 | It's like-- - How much do you hate Yoko?

03:20:25.480 | (both laughing)

03:20:27.400 | - For almost eight years now,

03:20:28.640 | it's just been this reoccurring pattern.

03:20:31.280 | Every interview, tell us about your time at Ethereum.

03:20:33.800 | Those six months you spent there

03:20:35.300 | that were so pleasant and enjoyable.

03:20:37.380 | Tell us all about it.

03:20:38.560 | And tell us about your relationship with Vitalik.

03:20:40.800 | It's like, I barely talk to the guy.

03:20:42.240 | I see him every now and then.

03:20:43.400 | Like, every two years, we say, "Hey," he says, "Hey."

03:20:45.560 | It's like, okay, maybe 10, 20 years in the future,

03:20:49.160 | Walt Mossberg or Robo-Walt will bring us together

03:20:52.520 | like he did Steve Jobs and Bill Gates,

03:20:55.840 | and we can kind of talk about--

03:20:57.560 | - That was a tense conversation, by the way.

03:20:59.480 | - The 2007 interview? - Yeah, the 2007.

03:21:01.560 | - Great, though, wasn't it?

03:21:03.480 | - Yeah, that was the body language.

03:21:05.600 | That was art.

03:21:06.480 | - Yeah.

03:21:07.760 | - That was fascinating.

03:21:09.560 | That was a fascinating study of human nature.

03:21:11.440 | - Yeah, so maybe that'll be us in like 10 or 20 years.

03:21:14.080 | Who the hell knows?

03:21:14.920 | - The robot versions of all three of you.

03:21:16.360 | - Yeah, my only point, though,

03:21:17.600 | was that it's a closed chapter, and it's funny.

03:21:20.660 | I was there for six months.

03:21:21.760 | I've been building Cardano for years.

03:21:23.800 | We've done all this stuff.

03:21:25.320 | I've been to 52 countries.

03:21:27.160 | I love talking about those experiences,

03:21:29.600 | and there's so many of them.

03:21:30.600 | I've met heads of state.

03:21:31.840 | Mongolia, like eagle hunting,

03:21:34.960 | and getting bucked off horses, and riding the sand dunes.

03:21:39.180 | We've invented all this new cool technology

03:21:43.860 | that the space itself is using,

03:21:45.760 | and we've had a chance to sit on government panels,

03:21:48.640 | pass laws, 24 laws in Wyoming.

03:21:51.360 | I mean, there's like all this amazing stuff that's there,

03:21:54.080 | and it's such a fun conversation.

03:21:55.600 | There's so many superheroes in that conversation,

03:21:57.460 | like Caitlin Long and Taylor Lim Holm,

03:21:59.320 | and there's Alex Chirpinoy, who we already mentioned,

03:22:03.000 | that I met along the travels.

03:22:04.360 | I met Ralph Merkle.

03:22:05.640 | Cool, I met all these amazing people along the way.

03:22:08.080 | I have fond memories of,

03:22:10.000 | by the way, you should interview him, by the way.

03:22:11.440 | Amazing guy, does nanotech now.

03:22:13.280 | You know, I met, I was hanging out with Sylvia McCauley,

03:22:16.480 | and I remember before we launched Yale Grant,

03:22:18.400 | I said, "You should really just do a Bitcoin Cash-style play

03:22:21.200 | "and airdrop Bitcoin.

03:22:22.240 | "What the hell are you doing distributing this?"

03:22:24.320 | He's like, "Trust me, I know what I'm doing."

03:22:26.480 | You know, so it's like so many great conversations,

03:22:29.200 | and so many great people,

03:22:30.160 | and what I've really noticed in this industry,

03:22:32.040 | when you separate the tribalism, the maximum, and the side,

03:22:34.780 | there really is a love of creativity and building,

03:22:38.920 | and there's like no other industry like it.

03:22:41.120 | I've been in many different places in life,

03:22:42.980 | and here, people just love art.

03:22:44.960 | They love beauty.

03:22:45.800 | They love the unknown.

03:22:47.600 | They love pushing things.

03:22:48.640 | They love really, in some cases,

03:22:52.160 | not necessarily the most socially beneficial way,

03:22:55.460 | but they really love the challenge, right?

03:22:57.600 | And that has been fun.

03:23:00.760 | I wouldn't trade it for anything in the world.

03:23:02.640 | The dark side of the industry is that people love labels.

03:23:07.480 | They love saying, "This person's good.

03:23:09.120 | "This person's evil.

03:23:10.340 | "This person's a sociopath.

03:23:11.880 | "This person's not."

03:23:13.040 | And by the way, they've never met that person.

03:23:15.080 | They've never interacted with that person,

03:23:16.840 | and they just say, "Well, I heard from this person,

03:23:19.520 | "or I read this book, or I did that."

03:23:22.000 | I'll say, "Oh, so some book's written by a journalist

03:23:23.880 | "who makes $50,000 a year who's looking for a movie deal.

03:23:27.480 | "Say that somebody said this or did this

03:23:29.760 | "in an unconfirmed way."

03:23:32.040 | So what can you do, sue 'em for slander?

03:23:33.760 | I mean, so you just let it ride, and you let it roll,

03:23:36.480 | and if it was just ending there, that'd be great,

03:23:38.540 | but the problem is it cascades,

03:23:40.240 | and people just repost it, and they relive it again,

03:23:43.060 | and again, and again, and then what do you do about it?

03:23:45.240 | You eventually just say, "I'm not gonna talk about it

03:23:46.840 | "anymore, I'm done with it."

03:23:48.440 | And you move on, and you say, "You know what?

03:23:50.040 | "If it's your problem, it's your problem,

03:23:51.320 | "it's your reality that you wanna live in,

03:23:53.180 | "I'll be defined by the things that I achieve and do,

03:23:55.740 | "and the people that we help, and the things that we build."

03:23:58.680 | And since I started in this industry,

03:24:01.000 | I've gotten to a point where not only do we have

03:24:03.600 | this amazing company with these incredible people

03:24:06.440 | who work at this company, but we also have the ability

03:24:09.000 | to pursue amazing different interests.

03:24:10.960 | Like I met Ben Gortzel, and Ben and I are gonna do

03:24:14.280 | an AGI project together, and of all places, Rwanda.

03:24:17.480 | And he gave me this 85 fucking page paper,

03:24:20.240 | he was wearing that damn hat that he always wears.

03:24:22.600 | I think he showers with the hat on.

03:24:25.600 | He never takes that thing off.

03:24:27.240 | - I think you refused, I interviewed him,

03:24:29.360 | and he refused to tell me the story of the hat.

03:24:32.080 | - He wouldn't tell me either, I interviewed him as well,

03:24:34.200 | in Wyoming, and every time I call him,

03:24:36.760 | he'll have his shirt off, he'll have the fucking hat on.

03:24:39.160 | - And now all I can think about is the hat.

03:24:41.120 | I wonder what the story there is.

03:24:42.640 | - I know, it's like, it's gotta be--

03:24:44.880 | - That might be the AGI.

03:24:46.040 | - Yeah, exactly, but anyway, he gives me this 80 page paper,

03:24:48.880 | and he says, Charles, it's like the culmination

03:24:50.960 | of everything, this is how we're gonna do AGI.

03:24:53.280 | And I said, that's crazy, Ben.

03:24:54.480 | I said, I'll throw some money at it.

03:24:56.480 | So we're gonna hire some developers,

03:24:58.040 | and I have no idea where it's gonna go,

03:24:59.560 | but I mean, I get to hang out with Ben Gortzel.

03:25:02.000 | You know, that's fun, that's the kind of stuff,

03:25:04.320 | and that's the really cool side of the space,

03:25:06.440 | and it's what I enjoy.

03:25:09.160 | In the Vitalik Rival thing, the Ethereum thing,

03:25:12.440 | I try my best not to mention it.

03:25:14.560 | I hate the fact that still when Bloomberg

03:25:16.720 | or anybody else writes a story about me,

03:25:18.280 | they'll say Ethereum co-founder.

03:25:20.280 | Like, can you say something else?

03:25:22.440 | - Well, I think if I've learned anything from the internet,

03:25:24.600 | you can't resist that kind of stuff.

03:25:25.920 | You just have to, it's the Elon, it's the joke,

03:25:28.640 | joke it away.

03:25:30.080 | I've noticed this, this is already starting

03:25:31.800 | to happen with me, is like, people just make up stuff.

03:25:34.240 | They haven't made up anything interesting yet,

03:25:36.440 | but they could, and I've seen that with Bill Gates,

03:25:39.360 | for example, just stuff being made up.

03:25:41.480 | I mean, probably half of it is true.

03:25:43.160 | Sorry, internet, I'm sorry.

03:25:44.760 | But like, you know, I guess what I realized,

03:25:48.320 | this is the dark side of memes,

03:25:49.760 | is you can just make something up, and it'll spread.

03:25:52.720 | - Yeah. - And then that's it.

03:25:53.760 | And that's what happens, but then--

03:25:56.440 | - And the problem is half the world will believe it.

03:25:58.400 | - Yeah, it could be good stuff, it could be bad stuff.

03:26:01.040 | So I guess the hope is it bounces up in the end.

03:26:04.320 | I tend to believe you almost want to play with that,

03:26:06.840 | and not take it seriously, just kind of laugh it off,

03:26:09.240 | and enjoy life, and keep creating,

03:26:10.840 | keep doing awesome stuff.

03:26:12.360 | - Right.

03:26:13.240 | - Operating both in the physical space with other humans,

03:26:16.140 | and in the digital space with humans and AI systems,

03:26:18.600 | and just have fun.

03:26:19.560 | - Yeah. - 'Cause most of us,

03:26:21.680 | in the long arc of history, will be completely forgotten,

03:26:24.080 | none of it will matter.

03:26:26.080 | It'll all be some kind of, just like "Hitchhiker's Guide

03:26:29.760 | "to the Galaxy," will just be one sentence

03:26:31.600 | that summarizes all of our existence.

03:26:34.360 | And the sad thing is most of us will not be part

03:26:37.360 | of that sentence, or all of us.

03:26:38.920 | - Well, thanks for all the fish, Lex.

03:26:41.040 | - Thanks for all the fish.

03:26:42.000 | The dolphins are running this thing,

03:26:43.640 | and they're talking to the UFOs recently,

03:26:46.280 | which is very interesting.

03:26:48.120 | 'Cause the UFOs keep going to the water,

03:26:50.600 | so we humans assume that the UFOs are here to visit,

03:26:53.760 | the aliens are here to visit us, but it's probably the fish.

03:26:56.400 | - No, I just think it's next generation aircraft

03:26:58.600 | that we're using.

03:27:00.120 | - Oh, that we're just not aware of?

03:27:01.520 | But why are they talking to the fish?

03:27:03.080 | - Well, that's the place you'd test hypersonic aircraft,

03:27:05.760 | is over oceans.

03:27:06.680 | - So that's the Russians with their hypersonic

03:27:08.440 | nuclear weapons.

03:27:09.480 | That's what a lot-- - Rods from God, man.

03:27:12.160 | Rods from God.

03:27:13.760 | - So let me try to transition from UFOs to Abraham Lincoln.

03:27:17.780 | Lincoln said that nearly all men can stand adversity,

03:27:22.960 | but if you want to test a man's character, give him power.

03:27:25.960 | Do you think power and money can corrupt most people?

03:27:31.240 | And if so, do you worry of this corrupting force

03:27:34.000 | on your own mind?

03:27:35.540 | You're one of the leading minds

03:27:38.900 | in the cryptocurrency space,

03:27:40.420 | you're the leader of the Cardano Project,

03:27:43.240 | you're the king-- - Of the rats.

03:27:47.240 | - Of the rats.

03:27:48.440 | Does this corrupt your mind,

03:27:51.060 | both the power and the money of it?

03:27:53.260 | - Yeah, I mean, you see this most pervasively

03:27:55.440 | with people who inherit a large amount of money or title,

03:27:59.400 | like dynasties, like the Melons or the Rockefellers

03:28:02.520 | or other people, it's the worst thing you can do

03:28:04.200 | to somebody is just hand them an enormous amount of power

03:28:06.640 | that they're not prepared for.

03:28:08.880 | And the challenge with this space is like everybody's young

03:28:11.920 | and we're all billionaires now

03:28:13.440 | and we have these cult followings

03:28:14.960 | and do all these things, right?

03:28:16.320 | Nobody really says no to you.

03:28:18.040 | Like for example, I have this ranch up in Wyoming

03:28:21.040 | and it has 400 bison on it, so now I'm a bison rancher.

03:28:25.440 | Like if somebody was like monitoring, auditing that,

03:28:30.440 | be like, Charles, do you have any experience

03:28:32.400 | raising, taking care of bison?

03:28:33.880 | I'd be like, no.

03:28:35.240 | So you think it's really a good idea

03:28:36.680 | to have this ranch with 400 bison running around.

03:28:39.040 | What the hell are you gonna do with bison?

03:28:40.280 | I just have to figure out what I'm gonna do

03:28:42.280 | with these bison.

03:28:43.120 | So, and I, you know, we'll make a video game,

03:28:45.240 | we'll do Crypto Bison.

03:28:46.440 | But you're gonna get one.

03:28:49.520 | - I'm not pulling, thank you, I'd love to.

03:28:52.160 | I'm not pulling at that string just yet.

03:28:53.720 | So I'm wondering how you're gonna connect this back to power.

03:28:57.680 | - Right, and so, but my point is that

03:28:59.920 | when you are unrestrained, like literally no one can say no

03:29:03.640 | or you have the ability to distort reality around yourself

03:29:06.880 | and you're not constrained by social customs,

03:29:10.320 | it creates a situation where you start losing perspective.

03:29:15.320 | You're not grounded anymore, I think.

03:29:17.940 | So it's less of a question of will you become evil or not,

03:29:20.800 | it's more of a question of will you lose so much touch

03:29:22.920 | with humanity that you just can't relate

03:29:25.440 | or understand people and then you inadvertently,

03:29:27.520 | by your actions, start harming people,

03:29:30.060 | either through the policies that you pursue

03:29:32.240 | or the things that you start building and so forth.

03:29:35.960 | So I think the best inoculation against that

03:29:38.880 | is to surround yourself with activities

03:29:40.940 | that are utterly divorced from your reputation and status.

03:29:44.140 | The best thing are animals and gardening.

03:29:46.900 | 'Cause you know, a donkey doesn't care

03:29:48.280 | if you're a billionaire or broke,

03:29:49.440 | he'll shit on you exactly the same way.

03:29:51.360 | And so there's a humility behind these types of activities

03:29:55.880 | and these things and there's a honest work component,

03:30:00.580 | like when you grow hay or whatever, you have to plant.

03:30:03.460 | You have to actually water, you have to irrigate,

03:30:05.200 | you have to actually be there.

03:30:06.540 | You can't use some excuse,

03:30:07.720 | well I was meeting the president of El Salvador,

03:30:09.780 | I was doing this, the hay doesn't give a shit.

03:30:12.640 | It's hay, right?

03:30:13.760 | So it grounds and connects you.

03:30:14.880 | The other thing is you have to get used to giving away.

03:30:17.280 | All the best things in my life

03:30:19.040 | have come as a consequence of first giving.

03:30:21.440 | Like I got started in the cryptocurrency space

03:30:23.120 | by giving away a free class,

03:30:24.440 | Bitcoin or How I Learned to Stop Worrying or Love Crypto.

03:30:26.600 | You did a free podcast, right?

03:30:28.280 | In life, if you give and you develop that mindset

03:30:31.420 | of I'm not attached to the things I have

03:30:33.980 | and if push comes to shove, it goes away,

03:30:36.340 | usually you get more back.

03:30:37.820 | Like I gave away all my ether, I never received any.

03:30:39.820 | I have 293,000 ether at the all time high,

03:30:42.220 | over $1.2 billion.

03:30:44.380 | I gave it to my secretary.

03:30:46.100 | I had no idea if it was gonna be worth anything or not

03:30:48.020 | but he kinda got shafted and I was like,

03:30:49.620 | well, they don't like me so they don't like you

03:30:51.900 | by the transitive property of relationships

03:30:54.180 | so you're screwed.

03:30:55.660 | And he's like, well I'm gonna go back

03:30:56.780 | and my wife is probably gonna divorce me

03:30:58.480 | and all this stuff and what do I do?

03:31:00.080 | I said, well, I'll give you my ether.

03:31:01.180 | I don't know if it's gonna be worth anything.

03:31:02.880 | So he's doing pretty good.

03:31:04.760 | But then again, regardless of doing that,

03:31:09.180 | I now have Cardano, I have this great career,

03:31:11.360 | I've done all these amazing things.

03:31:12.760 | So I think that's the single best way of handling power

03:31:16.040 | is you have to do things to keep yourself grounded.

03:31:19.520 | In the case of Washington,

03:31:20.600 | he was deeply connected to Mount Vernon.

03:31:22.680 | During the Revolutionary War, he was like sending letters

03:31:25.200 | talking about the irrigation ditches and the barn

03:31:27.420 | and things like that.

03:31:28.460 | He was always connected to that

03:31:29.900 | and then also develop a mindset

03:31:31.460 | that you're only here temporarily.

03:31:34.220 | Everything you have is finite.

03:31:35.660 | It's going to go away at some point.

03:31:37.660 | No matter how much you want to keep it, you will die

03:31:40.340 | and somebody else will have it.

03:31:42.460 | So you live for the next generation.

03:31:44.780 | You don't live for yourself.

03:31:45.780 | You look to the future and you say,

03:31:47.100 | what am I going to leave behind?

03:31:48.380 | What am I going to transmit?

03:31:49.980 | And then in that kind of mindset,

03:31:51.920 | always forces you to be more gracious,

03:31:54.960 | cooperative and collaborative with people.

03:31:57.160 | All these dictators, they are egomaniacs

03:32:00.680 | and they connected these fantasies

03:32:02.880 | and they live for themselves.

03:32:04.080 | Look at Xi in China.

03:32:05.240 | He's unraveling a power structure

03:32:07.560 | that was what made China China today.

03:32:10.560 | After Mao, they said, we probably shouldn't have

03:32:12.560 | another one of those guys.

03:32:13.840 | And so they said, let's build something

03:32:16.160 | where there's checks and balances

03:32:17.840 | and no one person is going to run the whole show

03:32:21.120 | or else it'll descend and regress and we'll have problems.

03:32:24.200 | And then what he's done, he's thinking only about himself,

03:32:27.240 | not the best interest of China.

03:32:29.160 | So he's systematically unraveling a system

03:32:31.520 | they've been embracing for over 40 years.

03:32:34.400 | And to what end?

03:32:35.840 | After he dies, the next guy who comes in,

03:32:37.760 | even as he's super competent,

03:32:39.400 | the next guy is going to horrifically abuse

03:32:41.520 | that power structure.

03:32:42.600 | And the same thing happened with the Romans.

03:32:45.160 | After Augustus, the great emperor,

03:32:47.500 | then suddenly down the line you have Caligula

03:32:49.880 | and Nero and all these other terrible emperors

03:32:51.840 | that just destroyed everything that the Republic

03:32:54.440 | and the empire sought to achieve.

03:32:56.520 | So you have to think for the future.

03:32:58.840 | You have to think in institutions and systems.

03:33:01.080 | You have to have things that ground yourself

03:33:03.280 | and you have to be fully prepared to lose everything

03:33:05.800 | and give up everything.

03:33:07.080 | After I left Ethereum, I had nothing.

03:33:09.600 | Okay, reputation was damaged, not a lot of money.

03:33:12.920 | Nobody really want to work with me.

03:33:14.120 | No one pick up a phone for two whole years.

03:33:16.560 | It was horrible.

03:33:18.000 | And so I was a bedrock in that experience.

03:33:21.080 | And now look at where I'm at.

03:33:22.640 | I built all the way up to that.

03:33:24.240 | And so that wasn't by accident.

03:33:26.000 | It was I had to surround myself with amazing people.

03:33:29.260 | Why would amazing people want to surround themselves with me?

03:33:31.360 | If I was this narcissistic asshole

03:33:34.480 | who just was like, it's me, me, me,

03:33:36.960 | everything would be a transactional relationship.

03:33:41.360 | It would be, okay, we'll get as much as we can

03:33:43.240 | and then run away as quickly as possible.

03:33:45.320 | Instead it was, I'm going to invest in you.

03:33:47.680 | And maybe I'll win, maybe I won't win,

03:33:49.480 | but I'll be the last guy to leave the boat.

03:33:51.600 | If we're freezing to death, you get my coat

03:33:54.200 | and I'll just deal with the cold, that kind of mindset.

03:33:57.560 | You have to have that.

03:33:58.640 | I got that from my dad.

03:33:59.880 | He got it from his father.

03:34:02.240 | My grandfather and great-grandfather,

03:34:04.160 | my dad said grew up in Montana

03:34:05.600 | and they were like products of the Homestead Act.

03:34:07.920 | Very rough Montana.

03:34:09.920 | A lot of people died and froze to death up there

03:34:11.920 | or eaten by animals or something

03:34:13.280 | or shot by their neighbors.

03:34:14.840 | And nobody investigates anything

03:34:16.840 | 'cause it's Montana.

03:34:18.080 | So the only way you survive is by taking care of each other

03:34:21.720 | and being a good member of that community.

03:34:23.520 | And if somebody gets big,

03:34:24.640 | you have this implicit desire to go and give back

03:34:27.920 | and take care of the community that you came from

03:34:30.160 | and invest in that community.

03:34:31.560 | Like I came from the mathematical community.

03:34:32.960 | I never completed a PhD,

03:34:34.360 | but one of the things that I'm doing

03:34:36.040 | is I'm gonna put $20 million and set up a center

03:34:39.000 | to do automated theorem proving

03:34:40.360 | and we're gonna heavily invest in lean

03:34:42.440 | 'cause I'm super excited about mechanizing math

03:34:44.640 | and making a machine understandable.

03:34:46.400 | Now I know all these guys who do this work.

03:34:48.320 | There's like all these mathematicians and computer scientists

03:34:51.360 | and no one pays attention to them

03:34:52.640 | and they're kind of like the redheaded stepchildren

03:34:54.720 | of mathematics and they live on the boundaries and periphery.

03:34:57.300 | Meanwhile, they're super passionate

03:34:58.880 | and they absolutely love what they do.

03:35:01.240 | And if only they had the right resources,

03:35:05.200 | within 50 or 100 years,

03:35:06.920 | what they're doing can probably become the dominant model

03:35:09.160 | of how to do mathematics.

03:35:10.800 | So I'm now in a position where I have the financial means

03:35:14.140 | to take care of these guys.

03:35:15.800 | So all I have to do is just call them up and say,

03:35:18.040 | "Hey, would you like to work with?"

03:35:19.640 | "Oh, absolutely."

03:35:20.840 | And cut a check and it's done.

03:35:22.840 | - So the interesting tension here,

03:35:25.160 | so we talked about ways to prevent power

03:35:27.960 | from corrupting a human being

03:35:30.240 | that's in a leadership position.

03:35:32.000 | There's an interesting case in the cryptocurrency space

03:35:35.960 | of Bitcoin and Satoshi Nakamoto

03:35:38.560 | that basically doesn't have a leader.

03:35:40.840 | So the benefit of a leader is somebody

03:35:44.480 | that perhaps even when they don't carry power,

03:35:48.480 | maintains a little bit of a flame of a vision.

03:35:51.640 | I suppose Bitcoin has that

03:35:55.200 | with the original work by Satoshi Nakamoto

03:35:57.800 | and the sort of that, even though it's anonymous,

03:36:02.600 | the idea still lives on through the community,

03:36:05.120 | but nevertheless, the leader is anonymous.

03:36:08.420 | Do you think this is an interesting case study

03:36:11.960 | about leadership is for the leader to maintain anonymity?

03:36:16.880 | - Yeah, it was a saying from Sun Tzu paraphrasing it,

03:36:19.320 | "The best leaders are felt but never seen."

03:36:21.920 | - Yeah. - Yeah.

03:36:22.760 | So I think that's exactly right.

03:36:24.200 | The less the leader can be in the room

03:36:26.680 | and the more the principles of the leader are in the room,

03:36:28.840 | the better for the firm,

03:36:29.920 | because what you're doing is creating more leaders that way.

03:36:32.480 | You're inspiring the next generation, the next wave,

03:36:35.040 | the next circle out to act with those principles,

03:36:38.500 | but contribute in their own way and their own flair.

03:36:41.160 | And so you gain collective intelligence

03:36:43.040 | inside the organization

03:36:44.120 | instead of just constraining yourself

03:36:45.760 | to however great the leader can be.

03:36:48.240 | The other side of it is

03:36:49.080 | if the leader's principles are too strong,

03:36:51.420 | so this is the dark side of it,

03:36:52.760 | you end up with what's happened to Disney,

03:36:54.360 | with Walt Disney after he died.

03:36:56.240 | For 20 years, people said, "Well, you don't do that

03:36:58.160 | "'cause Walt Disney wouldn't do it that way."

03:37:00.600 | Or to a lesser extent, Apple.

03:37:02.200 | They say, "Oh, we don't do that

03:37:03.280 | "'cause Steve Jobs wouldn't do it that way."

03:37:05.400 | Well, he's dead, he's gone.

03:37:06.920 | Move on.

03:37:07.760 | - So somebody, I think, asked you

03:37:09.040 | whether you're a clone or a deepfake,

03:37:12.040 | and you said that you admitted,

03:37:14.000 | you slipped up on video saying that you're a deepfake.

03:37:17.320 | So on that--

03:37:18.160 | - I'm actually a poker-playing robot that escaped a lab.

03:37:20.840 | - The truth finally comes out.

03:37:22.280 | But I said on that topic,

03:37:23.680 | who do you think is Satoshi Nakamoto?

03:37:25.640 | Is it possible that you are, in fact, Satoshi Nakamoto?

03:37:29.160 | - No.

03:37:30.000 | If you have a preponderance of the evidence,

03:37:35.760 | I think the most likely candidate would be Adam Back.

03:37:39.080 | It's the Occam's razor candidate,

03:37:41.160 | and mostly because he's the right place, right time,

03:37:43.800 | right age, right skill set.

03:37:46.080 | If you look at the design of Bitcoin,

03:37:48.480 | the types of decisions,

03:37:49.440 | like the use of FORTH, the scripting language,

03:37:52.000 | it was pretty common in English

03:37:53.440 | and European pedagogy in the 1980s and 1990s.

03:37:56.120 | It was like an example language for a stack-based assembly,

03:37:58.920 | and little stuff like that, little quirks like that.

03:38:01.800 | Also, he created HashCash,

03:38:03.080 | which was the predecessor of Proof of Work,

03:38:05.200 | and he's kind of got a chip on his shoulder

03:38:06.640 | that Microsoft never did anything with it,

03:38:08.880 | so he's probably looking for something.

03:38:10.280 | He grew up with all the cypherpunks.

03:38:11.840 | He knew of Hal Finney.

03:38:13.680 | He knew of all these people.

03:38:15.320 | He knew Phil Zimmerman. - You don't think

03:38:16.160 | it's Hal Finney.

03:38:17.200 | - Well, no, because the code was not good enough.

03:38:21.040 | Hal was a Unix, Linux guy.

03:38:23.200 | He was a talented programmer.

03:38:24.960 | He was a talented developer.

03:38:26.520 | The initial code for Bitcoin was developed

03:38:28.680 | to look like on a Windows machine.

03:38:30.400 | Adam worked at Microsoft, go figure.

03:38:33.600 | And also, it was very academic,

03:38:35.200 | and it had to be cleaned up,

03:38:36.320 | and a lot of things had to be patched up and fixed.

03:38:38.960 | If a guy like Hal developed it,

03:38:40.840 | it probably had less of the, you know,

03:38:43.760 | let's use SecP256k1 and these types of things,

03:38:47.420 | and more of like, hey,

03:38:48.720 | let's build this cool engineering thing,

03:38:50.780 | and we'll figure out the protocol design later on.

03:38:53.280 | It just stinks of an older academic,

03:38:56.520 | the initial design of Bitcoin,

03:38:58.000 | and the initial rollout of Bitcoin,

03:38:59.480 | and then brilliant people like Greg Maxwell and others,

03:39:02.020 | they came and cleaned it all up.

03:39:03.840 | And lo and behold, where's Adam?

03:39:05.520 | He's like the CEO of the largest

03:39:07.000 | Bitcoin development company in the space,

03:39:09.080 | who's trying to keep working on and building out Bitcoin.

03:39:11.720 | And where the hell was Adam when Satoshi was around?

03:39:14.840 | I don't think there was any overlap,

03:39:17.080 | where they were both together at the same period of time.

03:39:19.640 | But I mean, if you really care,

03:39:21.000 | you can even do this.

03:39:22.780 | There's a lovely paper written by the US Army.

03:39:25.320 | If you just Google like, Code Stylometry, US Army,

03:39:28.540 | it's a technique where you can use ML,

03:39:31.720 | and a few other things to actually kind of develop

03:39:33.720 | a fingerprint for the way that people write code.

03:39:36.320 | So all you got to do is take the original Bitcoin source code

03:39:39.320 | and then take all the open source repos

03:39:41.600 | from around that time period and before,

03:39:43.640 | and see if there's a match between those two.

03:39:46.600 | Now, if he's really good at creating an alias,

03:39:49.560 | probably not so good at obfuscating the code

03:39:52.220 | that was written.

03:39:53.100 | So the odds are that you'd probably find a match

03:39:55.320 | to a repo that's connected to a real life human identity,

03:39:58.120 | or at least a weaker OPSEC,

03:40:00.320 | because you're younger, you have weaker OPSEC.

03:40:03.000 | - Do you know if people have tried that?

03:40:04.160 | - I don't think anybody's actually done it,

03:40:05.760 | but there's actually a beautiful paper,

03:40:07.320 | it's like 94% accurate, the Code Stylometry.

03:40:09.680 | - The Code Stylometry.

03:40:10.520 | So I've, for various reasons,

03:40:14.320 | I've worked with people that work on stylometry

03:40:16.320 | of natural language.

03:40:17.760 | - Okay.

03:40:18.600 | And I think it matches closest to Nick Szabo,

03:40:22.280 | if you actually do the written stylometry analysis

03:40:26.480 | of Satoshi's writings to stylometry.

03:40:28.400 | - So I meant stylometry as a field,

03:40:30.080 | I didn't actually look for application

03:40:31.800 | for this particular problem.

03:40:33.560 | But so you're saying Nick Szabo is the closest match.

03:40:36.520 | - Yeah, somebody did it years,

03:40:37.840 | I didn't look at if the model was sound or not,

03:40:39.800 | but I just remember reading on a Bitcoin talk,

03:40:41.520 | and Szabo is another one of the common candidates.

03:40:44.240 | Helphenny Szabo and Adam are probably

03:40:46.440 | the top three things that people could list.

03:40:48.760 | - What do you think about this idea of anonymity,

03:40:51.060 | of publishing something anonymously?

03:40:53.040 | Would you ever consider publishing a paper,

03:40:55.080 | you've been part of, I mean, the Cardano ecosystem

03:40:59.680 | has published a lot of incredible papers.

03:41:01.840 | Is there ever a value to publish anonymously?

03:41:04.080 | - Well, every paper that goes through the referee process,

03:41:06.960 | the authors are ripped off.

03:41:08.420 | So you don't actually see the authorship

03:41:10.320 | when you submit to the conference.

03:41:12.320 | So that's just best practice.

03:41:14.360 | But the question is, do you preserve

03:41:15.640 | the anonymity post-conference,

03:41:17.000 | and actually not reveal the author of the paper?

03:41:20.160 | It's a detriment for the deals we make,

03:41:22.920 | because the whole premise of working with our company

03:41:25.640 | as an academic is that you're gonna have amazing co-authors

03:41:28.900 | and your work is gonna appear in great conferences,

03:41:31.100 | great journals, and as a consequence, you get tenure.

03:41:33.840 | If you publish anonymously, it's like doing clearance work

03:41:38.400 | in high-energy physics or something like that.

03:41:40.280 | It's like, after 30 years of this amazing career

03:41:42.840 | working on nuclear weapons and classified reactors,

03:41:45.640 | you finish and then you go to apply for a job

03:41:48.080 | and they're like, "So what have you done

03:41:48.920 | "for the last 30 years?"

03:41:49.960 | "Stuff."

03:41:51.160 | (Luke laughs)

03:41:52.560 | "Where is it on your CV?"

03:41:53.480 | "Well, I can't really talk about it."

03:41:55.180 | "Okay, welcome to community college."

03:41:57.640 | So you get really screwed if you do that.

03:41:59.780 | So there's a misalignment of incentives

03:42:01.620 | in the academic world towards anonymity,

03:42:04.040 | and generally it's only done when you're doing something

03:42:07.540 | very controversial or there's a whistleblowing

03:42:09.740 | type of a component.

03:42:10.940 | It's not typically done for foundational work.

03:42:13.820 | And Satoshi was really one of the first things,

03:42:15.420 | 'cause if there was a, Satoshi doxed himself,

03:42:17.740 | and I don't think it's possible anymore,

03:42:19.600 | but if he or she did that,

03:42:21.620 | that's like a Nobel Prize in economics, likely.

03:42:25.060 | You're on the short list for that.

03:42:27.060 | There's enormous accolades that would come

03:42:28.900 | beyond the monetary incentives

03:42:30.500 | of being able to dox yourself.

03:42:32.700 | But--

03:42:33.540 | - That'd be cool if they give a Nobel Prize in economics

03:42:37.240 | to an anonymous, to Satoshi Nakamoto.

03:42:39.380 | - It's been proposed and it was turned down.

03:42:41.660 | Yeah.

03:42:42.500 | So yeah, I mean, there are a few people in our company

03:42:45.180 | that have done pseudonymous publications.

03:42:47.480 | Like if you look at the Chimerical Edgers paper,

03:42:49.800 | that's a, it's not a real name, it's a crazy name.

03:42:52.540 | It's a pseudonymous publication.

03:42:55.260 | And, you know, but that's usually for throwaway work.

03:42:58.380 | There is one project we inherited from an anonymous person,

03:43:01.100 | which is fascinating.

03:43:02.140 | It's called QADDIS.

03:43:03.740 | And it's basically an extension of the QADD Manifesto

03:43:06.880 | from the '90s.

03:43:08.060 | And the pseudonym is Bill White.

03:43:10.140 | And I think it's some anonymous mathematician,

03:43:12.160 | but I can't figure out which one it is.

03:43:14.120 | But basically it's a marketplace for deduction.

03:43:16.320 | So it's like a, it's like this magic machine

03:43:19.080 | where you can create incentives for people

03:43:20.860 | to write mathematical proofs in a theorem prover

03:43:23.060 | and make some money from it.

03:43:24.400 | So there's some cool work that's there.

03:43:26.780 | And it's sad that Bill stayed anonymous

03:43:29.060 | 'cause I think that could have been easily published

03:43:30.980 | and there was a lot of really cool things

03:43:32.240 | that could have been done with QADDIS.

03:43:34.380 | - So you did say the success of Cardano,

03:43:36.340 | sort of the vision you have is for you

03:43:38.860 | to have less and less power over time.

03:43:41.300 | So this idea of governance,

03:43:43.700 | what's your vision for a decentralized,

03:43:45.980 | secure governance system?

03:43:47.400 | - So the first thing you have to do

03:43:49.420 | is you gotta look at meaningful metrics,

03:43:51.580 | not vanity metrics.

03:43:52.980 | So what does it mean to have legitimacy

03:43:55.840 | in a governance system?

03:43:56.680 | You can build any governance system you want.

03:43:58.280 | You can have a dictator, right?

03:43:59.840 | Like Bob is in charge.

03:44:01.240 | It's like whether you like Bob or not, he's in charge.

03:44:04.360 | That's not very legitimate.

03:44:05.600 | And you can have pure democracy

03:44:06.920 | where every single person votes

03:44:08.440 | and then nothing ever gets done.

03:44:10.280 | County dog catcher is like a six year election

03:44:12.880 | or something like that.

03:44:14.100 | So there's a spectrum there between absolute power to one

03:44:17.320 | and perfectly egalitarian power

03:44:20.200 | to every single potential participant inside the system.

03:44:23.440 | And then the question is, okay,

03:44:24.940 | well, how do you even architecture,

03:44:26.500 | how do you handle choice architecture in that?

03:44:28.200 | So like, are you asking your people about every question?

03:44:31.940 | Or are you asking your people about a subset of questions

03:44:34.540 | related to a particular set of topics,

03:44:36.340 | but then they're not allowed to talk about other topics?

03:44:38.660 | Like for example, are they allowed to change the tax rate,

03:44:40.680 | but they can't change freedom of speech?

03:44:42.480 | That kind of a thing.

03:44:43.740 | So the first thing you have to do

03:44:45.740 | when you build these types of systems

03:44:47.180 | and they get to a certain scale

03:44:48.940 | is you have to build some mechanism

03:44:50.820 | for people who are interested in governance

03:44:52.740 | to self-select and participate.

03:44:54.940 | Just create a collection bucket.

03:44:56.780 | In Bitcoin, we had Bitcoin Talk

03:44:58.420 | and Bitcoin Reddit and these things.

03:44:59.920 | And eventually the GitHub repos and these things,

03:45:02.160 | there was a place to go if you were interested.

03:45:04.740 | And you need some sort of change management system

03:45:06.700 | where people who want to evolve the system

03:45:08.740 | can write it down in a very careful way.

03:45:10.460 | So in Bitcoin's case,

03:45:11.420 | it was Bitcoin Improvement Proposal and Ethereum,

03:45:13.860 | it's the Ethereum Improvement Proposal.

03:45:15.540 | And for us, it's the SIP,

03:45:16.620 | the Cardano Improvement Proposal.

03:45:18.340 | But it's just a structured way

03:45:19.380 | of discussing how you wish to change.

03:45:21.320 | Then there's a question of,

03:45:22.780 | do you want to do this implicitly or explicitly?

03:45:25.820 | The case of Bitcoin and Ethereum, it's an implicit system.

03:45:28.820 | So there's no on-chain voting.

03:45:30.740 | There's no like five people said this

03:45:32.740 | and four people said this, so we do this.

03:45:34.860 | In the case of Cardano,

03:45:35.700 | we're actually explicitly inviting this.

03:45:37.500 | This is one of the biggest differentiators

03:45:39.260 | between Cardano, Polkadot, EOS, and these other things

03:45:41.540 | is that we're really serious about governance

03:45:43.760 | to the extent that we're actually doing

03:45:46.140 | foundational research in e-voting.

03:45:47.900 | We're building new voting systems,

03:45:49.420 | we're exploring preference voting and quadratic voting.

03:45:51.940 | And the long and the short is that we want more

03:45:54.140 | and more people to participate in voting for things.

03:45:57.720 | And you have to start somewhere.

03:45:59.620 | So our hypothesis is we can bootstrap the system

03:46:02.620 | with the treasury system.

03:46:05.820 | So in Cardano, some of the inflation

03:46:08.740 | goes to the block producers,

03:46:10.060 | just like any other cryptocurrency,

03:46:11.760 | but some goes into a decentralized treasury.

03:46:14.480 | China has over a billion dollars of ADA in it.

03:46:17.260 | So it's a lot of money.

03:46:18.660 | And that treasury is not under my control

03:46:20.660 | or the foundation's control.

03:46:22.100 | It's actually controlled by the community as a whole

03:46:24.820 | through a program called Catalyst.

03:46:26.380 | And so all these people can come together,

03:46:28.020 | they can submit spending ballots,

03:46:29.420 | and other people who hold ADA can vote to approve that.

03:46:32.420 | What's nice about it is you have a growth engine

03:46:34.580 | to improve two accesses.

03:46:36.740 | One is absolute participation.

03:46:38.660 | So increase the amount of people

03:46:40.660 | who hold ADA participating,

03:46:42.220 | so the absolute number of people participating.

03:46:44.460 | And the other is meaningful participation.

03:46:46.660 | So the depth of participation.

03:46:48.220 | Did you just show up and vote?

03:46:49.860 | Or did you spend hours debating things on IdeaScale,

03:46:53.300 | the innovation management platform,

03:46:54.940 | interacting with the funding proposal,

03:46:56.660 | going back and forth?

03:46:57.860 | And there's dozens of little things like that.

03:47:00.340 | Now my hypothesis is if you run this

03:47:02.000 | with enough iterations,

03:47:02.900 | eventually you get to a certain critical mass,

03:47:05.340 | like over 50% absolute participation

03:47:07.620 | and a high level of meaningful participation,

03:47:09.940 | where you can move beyond funding

03:47:12.100 | and you can start actually having meaningful questions

03:47:14.700 | about protocol design.

03:47:16.340 | And improvement proposals and so forth.

03:47:18.260 | And then what you can do is you can roll out

03:47:20.260 | new voting systems and new social structures,

03:47:22.700 | and you can let them start voting on training wheels

03:47:25.100 | like system parameters.

03:47:26.100 | Like for example, the minimum transaction fee,

03:47:28.180 | or that K parameter for the amount of stake pools,

03:47:30.260 | or these types of things.

03:47:32.080 | Then they build enough competency there,

03:47:34.060 | and they move up a next level,

03:47:35.660 | and they actually start talking about hard forks,

03:47:37.460 | using the update system,

03:47:38.580 | the hard fork combinator system.

03:47:40.300 | See, so that's how you--

03:47:41.140 | - Voting on a hard fork.

03:47:42.740 | - Voting on a hard fork.

03:47:43.940 | You can't do it unless your social dynamics are right,

03:47:46.300 | and your voting system is right.

03:47:47.380 | And by the way, you also need to write a constitution

03:47:49.500 | around the same time.

03:47:50.820 | Because not all hard forks are created equally.

03:47:53.400 | The kinds of things that would add support

03:47:55.140 | for a new cryptographic primitive

03:47:57.420 | are distinctly different from the kinds of things

03:47:59.180 | that would change your monetary policy of the system.

03:48:02.020 | - So the constitution would be written,

03:48:04.660 | and maybe you can comment on

03:48:05.780 | what is the innovation management proposal system.

03:48:09.020 | - So we partnered with a company called Ideascale,

03:48:11.100 | and they run a kind of a side platform.

03:48:13.260 | So people who are interested,

03:48:15.360 | that's kind of our version of a forum.

03:48:16.820 | They sign up, and there's special tools in that platform

03:48:19.220 | for discussions that are productive.

03:48:21.200 | So they don't descend into kind of like trolly,

03:48:22.980 | Reddit-style conversations,

03:48:24.420 | but they're much more focused around

03:48:26.300 | how is your product building out.

03:48:28.260 | And by the way, we're gonna add

03:48:29.100 | more infrastructure over time.

03:48:30.380 | In fact, our chief of staff, Tamara Hasson,

03:48:32.420 | she's working on setting up an incubator and accelerator,

03:48:35.340 | and we have lots of cool partners

03:48:36.900 | we've talked with in that space.

03:48:38.160 | And it's the same concept.

03:48:39.500 | Your idea comes in, what enters the system

03:48:42.620 | should not be what gets approved on the other side.

03:48:44.740 | It should go through some sort of gauntlet,

03:48:46.260 | some sort of crucible where you iterate your way through,

03:48:49.100 | and there's all kinds of optimizations and upgrades

03:48:51.820 | and evolutions and combinations and destructions that occur.

03:48:55.220 | And then by the time you get to the other side,

03:48:56.420 | either the idea just dies on the vine

03:48:58.500 | 'cause it was a bad idea,

03:48:59.700 | or it's a significantly stronger, far more fundable thing,

03:49:03.060 | and potentially even gets attached with accountability.

03:49:05.300 | So you don't just fund the idea,

03:49:06.820 | you actually fund the auditor at the same time

03:49:09.500 | who actually holds the person accountable

03:49:10.900 | 'cause the blockchain is not a real company.

03:49:12.820 | It's an ethereal thing.

03:49:14.700 | You need a counterparty to hold someone accountable

03:49:16.940 | who's real for that type of stuff and that type of funding.

03:49:19.940 | So that's what we're doing this year.

03:49:21.380 | So we have a whole team of people,

03:49:23.100 | partners like Governance Live and IdeaScale,

03:49:25.700 | and papers we've written,

03:49:26.980 | and about 30, 40,000 people regularly participating in this.

03:49:30.540 | So it's a huge social experiment,

03:49:32.460 | and we're learning an enormous amount.

03:49:34.220 | And then our goal is by the end of the year

03:49:35.800 | to have a meaningful percentage

03:49:37.540 | of the entire Cardinal population inside of it, like 40, 50%.

03:49:41.340 | Then once you're at that threshold,

03:49:42.660 | now you have democratic majority of the entire system.

03:49:46.260 | Then you can have a real conversation about,

03:49:48.060 | okay, how do we write a constitution

03:49:50.300 | for this type of a system?

03:49:51.580 | - And sorry to interrupt, but so the constitution,

03:49:54.620 | people still argue about it because natural language,

03:49:57.420 | much like poetry, lends itself to multiple interpretations.

03:50:00.700 | Is it possible to formalize some of these ideas

03:50:03.900 | that reduce the ambiguity?

03:50:07.580 | - Everything's old is new again.

03:50:09.000 | We were talking about Logeban back in the day, right?

03:50:12.140 | So there's definitely formal languages you can use

03:50:15.140 | to express these things.

03:50:15.980 | That's why I'm so interested in things like Idris,

03:50:17.820 | and Koch, and Agda, and theorem proving,

03:50:20.980 | 'cause that's exactly what you're attempting to do

03:50:22.980 | is to express some concept, or desire, or construction

03:50:27.420 | in a language that's machine understandable

03:50:29.060 | and manipulatable.

03:50:30.140 | In particular, how does the system know its own design?

03:50:33.300 | So what is the reference of a cryptocurrency?

03:50:35.460 | Usually it's a canonical code base,

03:50:37.140 | like here's Bitcoin Core, and the C++ code,

03:50:40.700 | that is the canonical code base.

03:50:42.620 | But actually that's not right.

03:50:43.700 | You should have specifications, blueprints,

03:50:46.380 | that are implementation agnostic

03:50:47.860 | as your canonical code base.

03:50:49.180 | And can your system know those specifications,

03:50:51.380 | understand those specifications,

03:50:52.860 | and can your change management system be for that,

03:50:55.500 | and then can you provide a proof that your client

03:50:58.000 | is bisimilar to that specification?

03:51:00.380 | So that's 10 years in the future,

03:51:02.180 | but that's where you would go with that kind of a concept.

03:51:05.260 | - But you're tending towards a formalism.

03:51:08.820 | - Eventually, but that's not necessary

03:51:10.820 | for the system in the short term.

03:51:12.300 | It's good enough just to have,

03:51:14.300 | I know what a winner, and say the Haskell client is that,

03:51:17.740 | and then what you basically do is you vote on a SIP,

03:51:21.260 | and then once it's approved,

03:51:23.280 | then you go and implement that,

03:51:24.500 | and there's some mechanism to trigger the update system

03:51:26.540 | to update the reference client.

03:51:27.380 | - Do you have an example of a SIP,

03:51:29.180 | a Cardano Improvement Proposal?

03:51:31.140 | - Yeah, like the CURT Benefit Pledge, SIP 007.

03:51:34.340 | So the--

03:51:37.220 | - 007.

03:51:38.380 | - Yeah, everybody loves that.

03:51:40.900 | - Yeah.

03:51:41.740 | - I'm gonna change my luggage code now, Lex.

03:51:44.380 | - What is that?

03:51:45.220 | - So, yeah, so basically it just has to do with the pledge.

03:51:50.100 | So a pledge is a certain amount of ADA

03:51:52.340 | that a stake pool operator will set aside

03:51:54.660 | and connect to his pool in order to be listed

03:51:57.980 | in the registry, and actually it's connected

03:52:01.580 | to how much income you make as a pool operator.

03:52:03.980 | So if you set it too high, you have a consolidation,

03:52:07.460 | you have lots of pools.

03:52:08.660 | If you set it too low, what'll happen is larger pools

03:52:11.020 | will tend to fragment and actually run

03:52:13.780 | multiple instances of themselves.

03:52:15.460 | And so there's this delicate parameter

03:52:16.980 | that you have to tweak.

03:52:18.020 | And so we have a formula for it,

03:52:19.940 | our formal specification that's quite involved.

03:52:22.020 | And so one of the community members came and said,

03:52:23.700 | "Well, I think we can massively simplify this design

03:52:27.140 | and actually get a better result

03:52:28.580 | for smaller stake pool operators."

03:52:30.900 | And so it's SIP 007, and there's actually a lot

03:52:33.780 | of conversation and people are thinking about it.

03:52:35.620 | And it was just stunning for me,

03:52:37.540 | 'cause to understand how to write a SIP like this,

03:52:39.620 | you actually have to read like 100 pages

03:52:41.420 | of mathematical prose in the formal specification.

03:52:44.700 | So the guys who wrote it was like, "Fuck yeah,

03:52:47.500 | this is great."

03:52:48.340 | But it's an example of a SIP, but that's one thing,

03:52:51.380 | but it could be as big as, "Hey, I wanna add

03:52:53.580 | like quantum resistance to this system,

03:52:55.580 | and here's how you do that, you know, like quantum VRF,

03:52:57.900 | and I wanna put XMSS and all this other stuff."

03:53:00.700 | So there's a lot you can do, and you can do it

03:53:03.460 | in, you can do it indirectly or implicitly,

03:53:07.460 | where there's some social process outside of the system

03:53:10.140 | where you eventually approve a SIP,

03:53:12.460 | or you can do it explicitly where you directly vote

03:53:14.660 | or some representative democracy,

03:53:16.940 | some group of representatives directly votes,

03:53:19.260 | and then once you've decided, it's there.

03:53:21.220 | The constitution's necessary because you need

03:53:22.900 | to know the decision threshold.

03:53:24.740 | Is it super majority or majority?

03:53:27.020 | And also the voting process.

03:53:29.100 | Like a lot of policy experts believe

03:53:30.820 | that if Brexit was a multi-stage vote,

03:53:32.940 | it would have never passed,

03:53:34.460 | because what people would have done the initial stage

03:53:36.540 | and all the horrors of Brexit

03:53:37.780 | would have been broadcast to society,

03:53:39.740 | and there would have been some reluctance

03:53:41.220 | and buyer's remorse on it,

03:53:42.980 | and then the second round would have failed

03:53:44.620 | or something like that.

03:53:46.020 | But because it was just a single-year event,

03:53:47.900 | you know, it's like they passed it,

03:53:49.700 | now British are all passive-aggressive about it.

03:53:51.860 | With no sign, "Very well, we shall remove from Europe."

03:53:55.740 | And so your voting system has a lot to do

03:53:58.700 | with the outcome you get.

03:53:59.900 | The other thing is, you know, what type of voting?

03:54:01.580 | Is it just an absolute or is it preference voting?

03:54:04.180 | So you pick your favorite SIP,

03:54:06.220 | follow your second favorite SIP or something like that.

03:54:08.900 | So Condorcet or Borda are two examples of systems--

03:54:11.100 | - Are you a fan of those, like the rank-choice vote?

03:54:13.140 | - I love them so much, especially for political diversity,

03:54:16.380 | 'cause this whole concept of throwing your vote away,

03:54:18.820 | if it's Alice or Bob, you're always gonna get a,

03:54:21.140 | and South Park did it best, right?

03:54:23.580 | The giant-- - Turd.

03:54:25.100 | - Yeah, yeah, you know the one.

03:54:26.620 | - Turd versus, I forget what else.

03:54:28.060 | - The douche. - Douche versus Turd.

03:54:29.660 | - Douche versus Turd, South Park.

03:54:31.820 | So if it's ranked order or preference voting,

03:54:34.540 | you never have that situation,

03:54:35.660 | 'cause you always pick your favorite,

03:54:36.860 | and you get a lot more diversity on the ballot.

03:54:38.620 | But then you have Arrow's Paradox

03:54:39.900 | and all these other things that come up.

03:54:41.860 | So there's no perfect system,

03:54:44.060 | and really you have to be comfortable

03:54:46.820 | with governance in a game of inches.

03:54:48.860 | And you start by some guiding principles,

03:54:51.300 | and the guiding principles is more is better,

03:54:53.500 | and productive interactions are better

03:54:55.960 | than destructive interactions.

03:54:57.260 | And you have to be able to quantify those things.

03:54:58.860 | As long as you have an engine

03:55:00.060 | that allows you to grow in those directions,

03:55:02.160 | then you have a lot more people along for the ride

03:55:04.100 | when you actually start talking about

03:55:05.520 | these bigger and bigger things.

03:55:07.220 | The other challenge was that we had

03:55:08.500 | the decentralized development of the protocol

03:55:10.580 | and the brain of the protocol.

03:55:12.900 | We have fully decentralized the brain of the protocol.

03:55:15.380 | The peer review academic process means that

03:55:17.660 | there's now an academic incentive

03:55:19.420 | for graduate students, postdocs, and professors

03:55:22.240 | to spend enormous amounts of time

03:55:23.780 | writing papers in our ecosystem,

03:55:25.780 | 'cause they want tenure.

03:55:27.420 | They wanna, and we showed that you can get it.

03:55:30.140 | There's been a lot of people who've gotten

03:55:32.060 | great academic careers from working with us.

03:55:34.320 | So yeah, keep adding to that pile of 105 papers.

03:55:37.700 | This is great.

03:55:38.900 | And that doesn't need Charles Hoskinson.

03:55:40.500 | It doesn't need IOHK funding or anything like that.

03:55:42.780 | They're on.

03:55:43.620 | We're already seeing unfunded derivative work

03:55:45.100 | from people who are completely disconnected

03:55:46.620 | from us writing papers about stuff in our ecosystem.

03:55:49.580 | So just continue to develop that, but that's looking good.

03:55:53.020 | The centralized development, we're working on that as well.

03:55:55.140 | Our goal is sometime in the next few years

03:55:57.140 | to make sure there's at least three independent clients.

03:56:00.060 | So three completely independent dev teams and code bases,

03:56:03.060 | and also to get a separation of the commercial clients

03:56:06.860 | from the reference code, and turn the reference code

03:56:09.320 | into like a formal specification, a formal blueprint,

03:56:12.140 | and then have that change management

03:56:14.100 | be completely decentralized.

03:56:15.660 | The core developers are actually voted on,

03:56:17.900 | and the SIP process is used to change that,

03:56:21.140 | and then some way of proving that your client

03:56:24.020 | follows the specification as use of the protocol.

03:56:28.180 | - Is there beyond the Cardano ecosystem,

03:56:30.860 | these ideas of distributed governance,

03:56:35.380 | do you see ways it could revolutionize politics?

03:56:40.380 | - Yeah.

03:56:41.340 | - Or governments?

03:56:42.420 | - Oh yeah, like Ethiopia deal, for example.

03:56:45.340 | We have 5 million people that we brought in

03:56:47.220 | with the DID system there.

03:56:49.260 | That's gonna follow them throughout their whole life.

03:56:51.140 | Right now they're high school students,

03:56:52.940 | but when they're in their 20s, 30s,

03:56:54.380 | they're gonna wanna use that for e-voting,

03:56:55.900 | and for payments, and so forth.

03:56:57.620 | - Can you describe the Ethiopia project,

03:56:59.100 | 'cause that's fascinating.

03:57:00.500 | - Yeah, so we spent four years in Ethiopia.

03:57:02.580 | I went there in 2017, and shook a lot of hands,

03:57:05.380 | kissed a lot of babies, and they said,

03:57:06.580 | "Oh yeah, we'll have it all done in six months."

03:57:08.540 | (laughing)

03:57:10.060 | Everything is a lot of fun there,

03:57:11.620 | but it takes a little bit longer than you'd think

03:57:13.800 | to get anything done, and that's okay.

03:57:15.780 | I really love Ethiopia, it's a beautiful country.

03:57:19.060 | So we spent four years, we trained a whole cohort

03:57:21.860 | of developers, and then we started a relationship

03:57:23.780 | with the Ministry of Education,

03:57:25.140 | and they care a lot about proper credentials.

03:57:28.300 | One of the biggest problems they have is,

03:57:30.200 | when someone graduates, it's really hard for them

03:57:32.260 | to prove the quality of the credentials that they have,

03:57:34.620 | and really hard for them to prove

03:57:35.860 | the knowledge that they have.

03:57:37.180 | So if you wanna be an ICT outsourcer,

03:57:39.260 | how does somebody know that this is a real programmer,

03:57:41.940 | or how does somebody really know that this is a real doctor,

03:57:44.220 | or whatever the hell you're outsourcing?

03:57:46.220 | So they said, "Can you come and build

03:57:47.620 | "a digital identity system for credentials?"

03:57:50.660 | So every student in the country, at some point,

03:57:52.940 | will get a DID, a decentralized identifier,

03:57:55.260 | and then you can prove all sorts of things about them,

03:57:58.160 | like GPA, or what particular diploma they hold,

03:58:00.960 | or blah, blah, blah.

03:58:02.300 | And then the beautiful thing is, the way we designed it,

03:58:04.540 | is it's extensible to include payments,

03:58:07.500 | extensible to include proofs about themselves,

03:58:10.260 | like are you over the age of 21, that kind of stuff.

03:58:12.740 | And then eventually it can be used

03:58:14.120 | to link into a cryptocurrency system.

03:58:16.140 | In this case, we built it for Cardano.

03:58:18.140 | So Atala Prism is the framework we're using for it.

03:58:20.820 | Every student will get one, and then those students

03:58:23.100 | will be able to use those credentials

03:58:25.420 | in the Cardano ecosystem, eventually for DeFi,

03:58:28.060 | like lending and so forth.

03:58:29.180 | So it's the largest blockchain deal of its kind,

03:58:31.260 | and it probably will grow to 20 million people

03:58:33.940 | over the next 24 months.

03:58:35.500 | The other beautiful thing about Ethiopia

03:58:37.100 | that people don't know is the prime minister

03:58:38.900 | is a cryptographer.

03:58:40.380 | He's in his 40s, 50s, a young guy,

03:58:43.020 | and he can actually read the papers we write.

03:58:45.300 | And so he's a really bright guy,

03:58:46.860 | and he's written this beautiful agenda

03:58:48.940 | called Digital Ethiopia 2025.

03:58:51.260 | And one of his things in the agenda is digital identity.

03:58:55.700 | He wants every person in the country

03:58:57.220 | to have a digital identity by 2025,

03:58:59.940 | and he wants to implement an e-voting system

03:59:01.860 | at some point for that.

03:59:03.380 | So when you ask about governance,

03:59:04.820 | all these governance tools that we're constructing

03:59:07.160 | for Cardano are completely reusable for a nation state,

03:59:11.380 | a company, and by the way, if you create

03:59:13.040 | a Cardano application, will eventually be reusable for you.

03:59:16.260 | 'Cause if you have a DeFi protocol,

03:59:17.700 | you need a voting system,

03:59:18.660 | why the fuck do you have to reimplement that?

03:59:20.260 | Native multi-asset, anything that works on ADA

03:59:22.940 | works with a native multi-asset.

03:59:24.620 | You can use our voting system for your asset.

03:59:27.020 | So you get a government in a box

03:59:28.620 | that you can parametrize any way you want.

03:59:31.140 | And similarly, when a government does something

03:59:33.100 | with Cardano, not only do they get

03:59:34.940 | all this amazing infrastructure, but wait, there's more.

03:59:38.220 | They actually get this amazing voting system

03:59:40.220 | that they can use for smaller, large-scale decisions

03:59:43.100 | that they wanna do.

03:59:44.180 | On the US side, we're thinking about trying

03:59:46.340 | to roll something like this out in the state of Wyoming.

03:59:49.100 | There's been tons of laws that are passed.

03:59:50.900 | It's a very friendly crypto place.

03:59:52.940 | The very least, it'd be fun to see

03:59:54.780 | if we can do the Republican-Democrat primaries

03:59:57.140 | with preference voting and voter registration this way

04:00:00.380 | and do it completely online with an e-voting system.

04:00:03.860 | So that's something we'll be pursuing in 2022.

04:00:06.580 | - You think there's some openness to that?

04:00:08.060 | - Yeah, yeah.

04:00:09.460 | That's the one good thing about the craziness of Trump.

04:00:11.420 | He made like half of America think the election system

04:00:13.560 | is completely, irreparably broken.

04:00:15.660 | So you walk in, it's like, we're gonna go kill Dominion.

04:00:18.340 | And they're like, yay, that's great, let's go do that.

04:00:20.940 | Whether you believe that or not,

04:00:23.060 | it's created a market opportunity,

04:00:24.500 | created a lack of faith and credibility in the system.

04:00:26.940 | - To improve the system. - Exactly, exactly.

04:00:30.220 | - What do you think about El Salvador

04:00:32.260 | becoming the first country to approve a cryptocurrency,

04:00:35.860 | Bitcoin in this case, as a legal currency?

04:00:39.100 | And where's this trend going?

04:00:40.660 | First of all, this event, if you mentioned

04:00:43.100 | the Bitcoin conference, the Bitcoin folks believe

04:00:46.020 | that this is a monumental event.

04:00:47.500 | Do you think this is a start of something new?

04:00:49.860 | - Well, they're both right, the critics and the pro people.

04:00:53.420 | So the critics are saying this is a nothing burger

04:00:55.540 | and it's just a publicity event for El Salvador.

04:00:58.220 | And then the people say this is the most monumental event.

04:01:00.740 | They may actually be right

04:01:02.000 | because there's reciprocal agreements.

04:01:04.260 | When a country issues a currency,

04:01:06.060 | other countries honor that usually.

04:01:08.220 | And it trades on forex exchanges.

04:01:09.800 | So if like Bitcoin becomes a recognized currency

04:01:12.860 | of a country, then it may be the case

04:01:15.460 | that United States and European Union and others

04:01:17.460 | can't actually stop them from trading on forex exchanges

04:01:20.500 | and being treated as a currency

04:01:22.260 | from a regulatory perspective.

04:01:23.620 | So it's like a really clever backdoor

04:01:26.180 | into the League of Nations.

04:01:28.940 | And actually we had this crazy harebrained idea years ago.

04:01:31.940 | We were down in Mexico at the Satoshi round table

04:01:34.460 | and we're like, hey, let's go buy a country.

04:01:36.640 | Let's go to Tuvalu and get them to do something

04:01:39.160 | with the cryptocurrency.

04:01:40.500 | 'Cause they sell everything in Tuvalu,

04:01:42.080 | like the dot TV extension and their fishing rights

04:01:44.780 | and Taiwan pays them money to recognize them and so forth.

04:01:48.140 | So I'm like, man, maybe we can convince Tuvalu

04:01:50.100 | to do something with crypto.

04:01:51.700 | And that didn't work out so well.

04:01:53.460 | But now El Salvador is actually playing the game.

04:01:56.460 | And that's a real country.

04:01:57.540 | It's got like 5 million people and so forth.

04:02:00.100 | So we know the president's brother

04:02:01.980 | and we've had some conversations there.

04:02:03.780 | So maybe we'll go in the next few months

04:02:05.620 | and see what's going on there and do a state visit

04:02:07.820 | and talk to the president.

04:02:09.180 | But it's an interesting development.

04:02:11.540 | And it's one of those things that it can't quite be ignored

04:02:14.240 | 'cause the nation state's doing it.

04:02:15.920 | On the other hand, you have to manage expectations.

04:02:18.440 | Is the central bank taking a position in Bitcoin?

04:02:21.040 | Are they actually switching over to a cryptocurrency

04:02:24.800 | as their unit of account?

04:02:26.600 | Are they now getting off of BIS

04:02:28.280 | and they're all using the settlement rails of central banks?

04:02:31.640 | Are they actually blockchaining the entire country

04:02:34.100 | and they have some broad, ambitious agenda

04:02:36.760 | to go and do all that?

04:02:37.800 | That remains to be seen.

04:02:38.840 | And so it really is a commitment there.

04:02:40.640 | The other thing is that if you're autocratic,

04:02:43.500 | these systems are not so good for you

04:02:45.240 | 'cause the minute you adopt these types of systems,

04:02:47.180 | you're pushing a lot of power to the edges.

04:02:49.540 | So there's a world of difference between optics

04:02:51.820 | and actual commitment.

04:02:53.380 | And actual commitment is I'm prepared

04:02:55.700 | to accept the consequences that the state is going to lose

04:02:58.940 | a lot of power along the way.

04:03:00.980 | And the problem is it's not clear to me

04:03:02.940 | if some of these politicians who are pro-blockchain,

04:03:05.580 | and I'm not making a statement on El Salvador in particular,

04:03:08.140 | I'm just saying in general,

04:03:09.660 | are fully aware of that reality.

04:03:11.680 | A lot of them seem to think that somehow

04:03:13.400 | they can contain the blockchain genie in the bottle

04:03:16.100 | and blockchain their whole country,

04:03:17.620 | but stay president for life.

04:03:19.780 | That doesn't work.

04:03:20.840 | Once they have that power, they're gone.

04:03:23.660 | - So do you think once they realize

04:03:24.880 | that this is one of the failure cases,

04:03:27.780 | one of the things that people are concerned about

04:03:29.380 | is governments banning cryptocurrency?

04:03:31.260 | - Well, that's China case, right?

04:03:32.520 | They've started realizing this was a legitimate threat

04:03:35.420 | to capital controls and to the autocratic system

04:03:37.900 | that they've constructed there.

04:03:38.940 | And then suddenly China's starting to build

04:03:40.860 | its own People's Bank of China blockchain,

04:03:43.180 | and Bitcoin is now the red-headed stepchild.

04:03:46.060 | They didn't really care too much

04:03:47.060 | 'cause it was great for corruption.

04:03:48.140 | You could evade capital controls

04:03:49.540 | and so all the well-connected people,

04:03:51.620 | they're like, "Oh yeah, Bitcoin's bad,"

04:03:53.060 | but then they'd have Bitcoin of their own

04:03:54.660 | and they could use it to send money around.

04:03:56.820 | But now the government's gotten very serious about it.

04:03:59.300 | They're saying like, "Okay, we want to control

04:04:01.380 | "and dominate this whole thing,

04:04:02.780 | "and it's a threat to our plan for the digital yuan

04:04:05.000 | "to become the world standard to displace the dollar."

04:04:07.220 | - But so the moment you have El Salvador

04:04:09.140 | and just more and more countries,

04:04:10.660 | say there'll be a country in Europe, for example,

04:04:13.340 | that accepts Bitcoin or other cryptocurrencies, Cardano,

04:04:18.340 | the idea is it would put a lot of pressure on you.

04:04:21.060 | So there'll be like this kind of ripple effect

04:04:23.220 | and then the individual governments won't be able to help,

04:04:26.940 | and eventually there'll be a superpower

04:04:29.020 | like, I don't know, Russia or the United States

04:04:32.020 | and/or, I don't know, Canada.

04:04:34.500 | So do you see that sort of an inevitable trend

04:04:38.460 | where cryptocurrency takes over the world

04:04:40.460 | as a store of value and as a method of payments?

04:04:46.020 | - Yeah, probably.

04:04:46.900 | I mean, you can do just so much more

04:04:48.820 | with programmable finance.

04:04:50.100 | Transactions in general have five properties.

04:04:51.900 | You have the asset that runs on the rail.

04:04:54.260 | That's what we always think about.

04:04:55.700 | And you can transact that,

04:04:56.980 | and then you have the identity

04:04:59.540 | and you transact that either like one to one,

04:05:01.980 | one to many, many to one, or many to many.

04:05:04.460 | And then you have metadata.

04:05:05.380 | So that's the story of the transactions,

04:05:07.140 | like where did it take place, these types of things.

04:05:09.580 | And then you have the contractual relationship.

04:05:12.260 | So that's the smart contract component.

04:05:13.620 | And then you embed that within regulation.

04:05:15.260 | So transactions always live within jurisdictions.

04:05:18.260 | This is relevant to the conversation,

04:05:19.700 | will digital currencies take over?

04:05:21.460 | Because those things are right now done separately

04:05:25.780 | in a very fragmented and fractured way,

04:05:27.940 | and they're not completely globalized.

04:05:29.980 | And it's a super expensive to hoist up this entire system

04:05:33.020 | and automate things like compliance.

04:05:35.220 | It's usually a huge part of every bank's balance sheet.

04:05:39.340 | So when you look at the concept of a digital currency,

04:05:42.300 | you're saying all five of those things are programmable.

04:05:44.940 | And so they could be like library driven.

04:05:47.260 | You say, oh, I wanna be in compliance with Eritrea.

04:05:50.140 | Okay, pull up the Eritrean library.

04:05:51.860 | Now you are, it's built into the transaction.

04:05:54.460 | Previously, it's like, go hire some lawyers

04:05:56.740 | and go figure out the entire code

04:05:58.740 | and translate some things and rah, rah, rah.

04:06:01.220 | It's crazy.

04:06:02.780 | So just the orders of magnitude efficiency gains

04:06:07.500 | that you get and the increased liquidity you get

04:06:10.180 | and the fact that you can now represent all assets

04:06:12.980 | with a universal way, that financial stem cell,

04:06:15.700 | there's an inevitability to the victory of our industry.

04:06:18.660 | The challenge is how do we deal with this

04:06:21.260 | with the squabbling of superpowers?

04:06:23.180 | China wants to be the new world standard.

04:06:25.780 | America wants to preserve that.

04:06:27.220 | And the rest of the world is trying to figure out

04:06:29.160 | how do we create something

04:06:30.140 | that's a bit more fair and balanced?

04:06:32.220 | And so crypto comes in and it potentially is

04:06:35.380 | both an ally and a competitor to those desires.

04:06:38.060 | 'Cause if you do too much crypto,

04:06:40.140 | you don't need a nation state anymore.

04:06:42.220 | If you do too little crypto, well,

04:06:44.180 | it's China or America.

04:06:45.820 | So what's that sweet spot?

04:06:47.860 | - Do you hope that in the process of cryptocurrency

04:06:52.340 | pushing power to the edges, to the people,

04:06:55.420 | that we would be able to alleviate

04:06:57.380 | some of the suffering in the world

04:06:58.920 | caused by centralized power and the abuses of power

04:07:01.660 | and corruption, all those kinds of things?

04:07:03.340 | - 100%.

04:07:04.160 | I made a very angry video months ago.

04:07:06.020 | (Lex laughing)

04:07:07.300 | I make angry videos.

04:07:08.820 | I should drink, Lex.

04:07:10.020 | I really should.

04:07:10.860 | (Lex laughing)

04:07:11.680 | - Maybe you should drink more.

04:07:12.520 | - Yeah, I know, right?

04:07:13.360 | It depends on who you ask.

04:07:14.540 | I made a video a little while.

04:07:15.700 | I said, you know, our industry is an industry of frustration.

04:07:17.980 | It exists because we weren't the industry

04:07:21.100 | that charged 85% interest to the poorest people

04:07:23.740 | in the world for loans.

04:07:24.740 | We weren't the industry that charged 15% to move money

04:07:27.820 | for a maid sending money home to mom in Manila.

04:07:31.780 | You know, we weren't the industry

04:07:33.140 | that laundered hundreds of billions of dollars

04:07:35.220 | of drug money and funded arms dealers in Africa

04:07:38.100 | and all these things or permitted oil for food

04:07:40.460 | to exist and so forth.

04:07:42.860 | And the people who did these things aren't in jail.

04:07:44.860 | They're rich.

04:07:45.700 | They're billionaires.

04:07:46.520 | They fly private jets.

04:07:48.220 | So our industry is the antidote to these types of things.

04:07:51.540 | We say, guys, we want a system that's fair.

04:07:54.780 | That's it.

04:07:56.260 | And we want everybody to be treated equally.

04:07:58.960 | That doesn't mean everybody's gonna win.

04:08:00.980 | It doesn't mean that when you lose, you know,

04:08:03.140 | somebody's gonna come on a white horse and bail you out.

04:08:05.860 | You're gonna have winners and losers, but it's fair.

04:08:08.060 | That's all we want.

04:08:09.020 | That's all we've ever wanted.

04:08:10.600 | There's no coincidence that Bitcoin was created

04:08:12.580 | right around the same time as the 2008 financial crisis.

04:08:16.060 | It's not like these were just unrelated events.

04:08:17.880 | They're highly correlated to each other, okay?

04:08:20.180 | I'd say perhaps even causal.

04:08:21.660 | Go figure.

04:08:23.100 | And everything we've done as an industry

04:08:26.020 | from that moment to today and beyond

04:08:28.740 | has been about that endless, relentless desire

04:08:32.740 | to make things a little bit less corrupt,

04:08:35.380 | a little bit less nepotistic, and a bit more open.

04:08:38.900 | And it's gotten so insane

04:08:41.980 | that you have these things in Wyoming called speedy banks,

04:08:44.340 | where you're full reserve banks.

04:08:45.640 | They have 100% of their balance sheet is accounted for.

04:08:49.720 | They don't lend.

04:08:51.060 | And then you have the people in the banking community saying,

04:08:53.560 | well, those are a risk to banking.

04:08:56.220 | We're scared that these speedy banks are gonna default.

04:08:59.660 | It's like, what world are you living in?

04:09:02.220 | You have fractional reserve,

04:09:03.460 | sometimes like 2% assets on the balance sheet,

04:09:06.240 | and then you're worried that the guys

04:09:07.620 | who actually have a dollar for every dollar

04:09:09.540 | they say they have are the ones that are gonna collapse.

04:09:12.500 | It's like the 1984 level doublespeak

04:09:15.060 | when you see the system and negative interest rates

04:09:17.060 | and all these other things.

04:09:17.940 | And so I absolutely believe the direction and course

04:09:20.820 | of this industry is to make things more honest and fair,

04:09:24.180 | and also by its very existence,

04:09:26.460 | it exposes double standards, hypocrisy, and corruption.

04:09:30.460 | Just the fact that it's there,

04:09:32.160 | because it's one thing to say that,

04:09:33.940 | well, it just can't be because of the nature

04:09:35.900 | of global finance.

04:09:36.740 | There's no way to do it otherwise.

04:09:38.380 | It's another thing to see it there as an example,

04:09:41.740 | and say, well, that thing is doing it.

04:09:43.380 | Why can't you guys be this way?

04:09:45.300 | That's why I'm so passionate about Africa,

04:09:46.860 | 'cause they don't like the systems they have,

04:09:48.780 | and everybody's really young,

04:09:50.340 | and they are gonna throw all the systems out

04:09:52.500 | in the next 20 years,

04:09:53.520 | and they're gonna replace them with something else.

04:09:55.460 | If we get this stuff into Africa,

04:09:57.340 | 1.2 billion people will be living

04:09:59.380 | in a considerably better system than the rest of the world.

04:10:02.260 | And then everybody else will look at that and say,

04:10:03.860 | why the hell are those guys so rich?

04:10:05.660 | Why are those guys making the money?

04:10:07.020 | Why are those guys doing so well?

04:10:08.820 | And it's not satisfying to hear,

04:10:10.060 | well, Africa's just better.

04:10:13.320 | No one's gonna say that.

04:10:14.460 | They're gonna say, okay, yeah,

04:10:16.300 | it's nepotism and corruption and lack of transparency

04:10:19.180 | and these types of things.

04:10:20.020 | So I think absolutely it has the potential

04:10:22.120 | to improve the human condition,

04:10:23.720 | but humans have to get out of the way.

04:10:26.200 | Humans have ingrained in themselves selfishness,

04:10:29.020 | and it is a desire to maximize for themselves

04:10:31.980 | and their family, and not think in systems.

04:10:34.500 | And so we have to evolve capitalism at the same time.

04:10:38.180 | And what I mean by that is right now,

04:10:39.540 | you're trying to maximize the amount

04:10:41.200 | of resources you get today.

04:10:42.580 | What we need to do is start thinking about

04:10:44.600 | how do we create future versions of ourselves in 2100

04:10:47.940 | and create a resource for that time period,

04:10:50.220 | and then the name of the game

04:10:51.620 | is to maximize that or balance that

04:10:54.380 | with what you get in the short term.

04:10:55.780 | And then suddenly you're saying to yourself,

04:10:57.420 | well, if I'm doing things that are good for me today,

04:11:00.140 | but compromising then, I make less money.

04:11:02.740 | So capitalism as an engine is okay.

04:11:05.580 | The problem is it's misparameterized.

04:11:07.580 | - Right, almost like inject long-term incentives

04:11:10.060 | into the capitalist system.

04:11:10.900 | - Exactly, and cryptocurrency space

04:11:12.500 | is the only economic system where that's actually possible.

04:11:15.640 | You can create a tokenomics scheme

04:11:17.220 | where doing things that are beneficial for people

04:11:19.180 | you'll never meet 'cause you're long dead

04:11:21.700 | actually makes you money today.

04:11:23.380 | You can't do that in a legacy financial system and so forth.

04:11:26.460 | So I think that that's the real impact capital conversation

04:11:29.400 | that has to be had as you explore these things

04:11:32.060 | is you have to talk to people and say,

04:11:34.020 | look, it's not about communism

04:11:35.540 | or socialism versus capitalism.

04:11:37.540 | It's not about, hey, let's donate and save the world

04:11:40.500 | or try to be charity and make things better.

04:11:43.120 | It's all about how do you use the fact

04:11:44.780 | that we have a better toolkit to create a different system,

04:11:48.140 | a different incentive model,

04:11:49.700 | where the default configuration of the system

04:11:51.700 | is long-term thinking.

04:11:53.140 | And the default consideration of the system

04:11:54.700 | is get rid of all these negative externalities

04:11:56.620 | that marketplaces have and judge the success of society

04:11:59.900 | not by how the greatest of society are doing

04:12:02.420 | but by how the least of society are doing.

04:12:04.660 | You know, HDI, not GDP, this kind of thinking.

04:12:07.180 | And I think crypto can actually be the vanguard

04:12:09.860 | that kind of pushes us there.

04:12:10.700 | And the first countries to adopt that

04:12:12.900 | are gonna be just significantly better places to live.

04:12:16.020 | And the people who envy them

04:12:17.260 | will force the other countries to change.

04:12:19.140 | - That'd be a ripple effect.

04:12:20.020 | So when you wake up in the morning

04:12:21.620 | or as you sleep like a baby,

04:12:23.120 | wake up multiple times in the middle of the night,

04:12:25.620 | do you feel the burden of this kind of future

04:12:31.660 | that's in your hands and not to mess it up?

04:12:34.460 | Like, what is it, Big Lebowski?

04:12:36.380 | Her life is in your hands, dude.

04:12:38.680 | (both laughing)

04:12:41.060 | - Don't worry about them, they're nihilists, Donny.

04:12:42.980 | (both laughing)

04:12:45.420 | - Do you feel the burden of like,

04:12:46.780 | 'cause we're talking about all these 100 plus papers

04:12:49.500 | and the academic beauty of the algorithms

04:12:52.180 | we're talking about, but then there's millions

04:12:53.940 | of human lives at stake here.

04:12:55.420 | - I mean, you always feel the burden,

04:12:57.900 | especially in my own company.

04:12:59.060 | I mean, I have all these people who work for me

04:13:00.660 | and they eat because I pay them, right?

04:13:03.220 | So if I can't pay them, then that's my fault.

04:13:06.300 | So you have to, as a leader,

04:13:09.340 | you always have to be cognizant

04:13:10.600 | that there's all these people who've signed up

04:13:12.060 | for your crazy vision,

04:13:13.540 | and you have to be larger than life.

04:13:15.740 | You always have to be good.

04:13:18.260 | You're not allowed to have a bad day.

04:13:20.460 | You're not allowed to feel like shit.

04:13:21.780 | You always have to show up.

04:13:23.080 | You always have to be pushing forward.

04:13:24.980 | And so that's a huge burden in many respects,

04:13:28.080 | 'cause there's Charles the person,

04:13:29.540 | and then Charles the CEO,

04:13:31.860 | and these are very different things

04:13:33.620 | in terms of expectations, at the very least.

04:13:37.180 | And so it's heavy in that respect.

04:13:39.900 | That said, what gives you solace

04:13:41.460 | is that you're not in it alone.

04:13:43.540 | It's lonely, but you're not alone.

04:13:45.240 | You have so many amazing people around you

04:13:47.700 | that are willing to help

04:13:48.700 | and actually take some of that burden.

04:13:50.060 | And my life has gotten considerably better

04:13:53.220 | when I learned how to delegate and trust,

04:13:55.680 | and even if people screw up and fail,

04:13:57.940 | it's worth the risk,

04:13:59.920 | 'cause ultimately you're amplifying yourself.

04:14:02.360 | The other thing is that it's okay not to get all the way.

04:14:06.140 | You want to, you wanna push there,

04:14:07.820 | but make sure whatever the hell you do,

04:14:10.180 | you leave something for somebody else

04:14:11.980 | to pick up and carry on.

04:14:13.860 | That's why we care so much about the publication process

04:14:16.880 | and open source, 'cause we'll never file a patent

04:14:19.360 | in our entire history,

04:14:20.480 | 'cause whatever we do, it's yours as much as it is mine.

04:14:23.820 | And maybe I can only get you 70% of the way,

04:14:26.280 | and I'll plop over dead from a heart attack

04:14:28.220 | or get killed by an eagle or something like that.

04:14:30.600 | Maybe somebody brings the-- - Eagle?

04:14:32.440 | - Maybe somebody brings the Hasteagle back

04:14:34.240 | and it kills me, you know?

04:14:35.200 | So it could happen.

04:14:36.280 | They're bringing the woolly mammoth back.

04:14:37.600 | Talk to George Church about that.

04:14:39.880 | - It's a good way to go. - Yeah, I know.

04:14:40.720 | - Either the eagle or the mammoth.

04:14:42.680 | I'd rather be crushed by a mammoth,

04:14:44.080 | 'cause eagles actually fly you up and drop you.

04:14:47.180 | - Oh, so you won't die.

04:14:48.020 | It'll be a slow death and they'll probably peck at you.

04:14:49.960 | - Exactly, you'll just be grievously wounded on the ground

04:14:52.720 | and the eagle's slowly devouring you.

04:14:55.080 | Yeah, don't go down that way.

04:14:56.800 | I've lost my train of thought.

04:14:57.880 | (both laughing)

04:15:01.020 | - The point is you feel deeply grateful

04:15:03.320 | there's a bunch of people around you.

04:15:04.160 | - Yeah, there we go. - And then you give--

04:15:06.280 | - Yeah, you delegate, you delegate.

04:15:07.800 | And somebody fights the eagle

04:15:09.600 | and another people takes care of that and this, that,

04:15:11.560 | and the other, you just do the best you can.

04:15:13.240 | You're in the arena, you fight as hard as you can.

04:15:15.240 | You leave nothing for home.

04:15:19.120 | You put it all on the field.

04:15:20.720 | And then when you go home, you have pride

04:15:22.360 | in what you've done and you know

04:15:23.960 | that you've at least made a slight difference.

04:15:26.000 | You know, one person can make a huge difference.

04:15:28.280 | Look at Norman Borlaug.

04:15:30.240 | I mean, just went around the whole world

04:15:31.400 | teaching people how to grow crops.

04:15:32.920 | He saved a billion lives over the course of his life.

04:15:35.560 | Billion people didn't starve to death because of one guy.

04:15:38.720 | It's amazing the asymmetry and the returns

04:15:40.920 | on that type of a thing,

04:15:41.760 | just for the knowledge transfer of all things.

04:15:44.080 | And yet, not a household name.

04:15:46.080 | So that's the other side of it, of the burdens.

04:15:48.880 | You know, people always want something for something.

04:15:51.560 | So they say, oh, if I endure all these burdens,

04:15:53.240 | I should be given something.

04:15:54.720 | I entered into this space fully expecting

04:15:57.120 | that probably the most likely outcome was jail.

04:16:00.320 | That's what my dad told me and other people told me.

04:16:02.480 | And it was because it's like, look at where we came from.

04:16:04.880 | The Liberty Dollar, Eagle, all these things.

04:16:07.040 | Anybody tries to innovate the monetary system,

04:16:09.520 | they either end up like Gaddafi or they end up in prison

04:16:12.040 | or they end up like nepotistic or a banker

04:16:15.080 | or something like that.

04:16:16.480 | And so, you know, the financial regulations

04:16:19.760 | are not built for rapid innovation.

04:16:22.280 | They're not built for Bitcoin.

04:16:24.040 | There's a reason Satoshi was anonymous.

04:16:26.040 | It wasn't 'cause he enjoyed the anonymity.

04:16:28.480 | There was legitimate criminal risk

04:16:30.840 | for this type of activity.

04:16:32.360 | So the fact that I've gotten this far

04:16:34.320 | and I'm doing pretty good, that's a win.

04:16:37.000 | You know, you take that.

04:16:38.000 | Life is good.

04:16:39.960 | - What is a productive day

04:16:41.160 | in the life of Charles Hoskinson look like?

04:16:43.720 | Now we're getting to the details here.

04:16:46.040 | Diet, like fasting or not, maybe.

04:16:49.320 | Coffee, non-coffee, exercise, sleep,

04:16:54.120 | scheduling, like periods of deep work, programming.

04:16:57.600 | Then the social media stuff that you do.

04:16:59.840 | You clearly enjoy being on social media

04:17:01.600 | and also live streaming, educating, inspiring the world

04:17:04.280 | or getting drunk and ranting at the computer.

04:17:07.880 | - Well, first off, you do a wet year and a dry year.

04:17:10.240 | That's what prevents you from becoming an alcoholic.

04:17:12.360 | So unfortunately, the way that schedule worked,

04:17:14.960 | 2020 was my dry year.

04:17:17.000 | Like I didn't drink the entire year.

04:17:18.760 | Not a single sip of alcohol.

04:17:20.160 | It was the worst. - On purpose.

04:17:21.440 | - Yeah, you do a dry year and then you do a wet year.

04:17:23.560 | - Oh, so this is one of your ideas about life

04:17:26.240 | is you alternate.

04:17:27.280 | - Yeah, you have to alternate.

04:17:28.720 | Never do too much of any one thing.

04:17:30.440 | - Well, Churchill never alternated.

04:17:31.680 | He just kept drinking throughout his life.

04:17:32.960 | He did pretty good.

04:17:33.800 | (Luke laughs)

04:17:35.720 | Just to push back against you.

04:17:37.800 | - Yeah, him and Alfred North Whitehead.

04:17:39.400 | Although, didn't Churchill get kicked out

04:17:41.000 | as prime minister at some point?

04:17:42.240 | - So maybe he took one dry year.

04:17:44.120 | - Yeah, he was a sober, happy, in shape Churchill.

04:17:47.120 | He would have led Britain for 30 fucking years.

04:17:49.120 | (Luke laughs)

04:17:51.400 | See, Lex, that's why we can't have nice things.

04:17:55.080 | - Conor S. Thompson, maybe you're onto something.

04:17:57.000 | - Oh, you know, it's really crazy if you go to Aspen

04:17:58.960 | and see the bar he used to go to.

04:18:00.840 | I actually met a waitress who knew him really well

04:18:02.680 | and he'd go in there like two, three times a day.

04:18:05.360 | And she's like, "Yeah, he'd do cocaine

04:18:07.160 | "right here on the table."

04:18:08.260 | And he'd come in with lots of pills

04:18:10.280 | and just put them all out on the table

04:18:12.320 | and be taking them at different hours.

04:18:13.880 | And they were all clearly illegal substances.

04:18:15.760 | But we'd just give him coffee or whatever he wanted.

04:18:18.320 | He's a great guy.

04:18:19.340 | But anyway, that's the day in the life of Charles.

04:18:20.800 | I fast.

04:18:21.620 | I tried to do intermittent fasting, 16/8.

04:18:23.920 | The longest fast I ever did for a long-term fast

04:18:26.200 | was two weeks, which was just crazy.

04:18:28.120 | - Wow.

04:18:28.960 | - Oh my God, I was--

04:18:30.200 | Can you take me through the journey of philosophically

04:18:33.160 | what was going on in your mind?

04:18:34.720 | - Well, so normally when I do an extended fast,

04:18:37.120 | it's about three, four days,

04:18:38.680 | 'cause that's the sweet spot

04:18:39.880 | before you start losing muscle mass

04:18:41.540 | and other things start happening.

04:18:42.840 | And people know so much more about this than I do.

04:18:45.780 | But I just feel pretty good.

04:18:47.060 | And you kind of get addicted to the fast high.

04:18:49.320 | You don't have to eat.

04:18:50.520 | You have no downtime.

04:18:52.240 | You're just going.

04:18:53.400 | Your energy never dips.

04:18:54.640 | And so I used to do three, five days.

04:18:58.180 | Maybe three, four was the sweet spot.

04:19:00.780 | But then after about a week, I was like,

04:19:02.620 | how long can I make this go?

04:19:04.500 | And so I started talking to some people.

04:19:05.740 | They said, well, Angus Barber did 384 days.

04:19:09.840 | Of course, I'm not as fat as Angus.

04:19:11.220 | So I said, oh, I can do two weeks.

04:19:13.060 | So I just kept going and kept going and kept going

04:19:15.420 | and kept going.

04:19:16.260 | And right around the two-week mark,

04:19:19.220 | I fainted for a little bit in a chair.

04:19:21.620 | And I was like, okay, maybe I should start eating again.

04:19:24.900 | But then I was legitimately worried

04:19:26.140 | about refeeding syndrome and this stuff.

04:19:28.020 | Like, okay, how do I take care of that?

04:19:30.020 | So my brother's a doctor and I called him and I said,

04:19:32.180 | hey, Willie, I haven't eaten in two weeks.

04:19:34.340 | How do I start eating again?

04:19:36.460 | And he's like, what?

04:19:37.820 | (laughing)

04:19:40.020 | - Slowly.

04:19:40.860 | - Slowly, yeah.

04:19:41.680 | So in the usual routine, intermittent fasting,

04:19:43.780 | although I haven't been as good about it as I should be

04:19:46.040 | and I used to work out, I don't do as much as that,

04:19:48.740 | the stress and the work-life balance has been horrible

04:19:52.780 | the last 24 months.

04:19:53.940 | And I've gained a lot of weight and all that stuff.

04:19:55.940 | But I'll fix that.

04:19:57.060 | But I do try a lot of things.

04:19:58.180 | Like I use the Calm app and I do meditation.

04:20:00.300 | Recently I started doing photo biomodulation.

04:20:02.740 | You ever heard of that?

04:20:03.660 | - No.

04:20:04.500 | - It's a crazy headset called a V-Light.

04:20:06.020 | You saw that picture of me with like the weird thing

04:20:08.120 | with the red lights on?

04:20:09.420 | Actually, it shoots lights into your brain.

04:20:10.940 | It's really cool stuff.

04:20:12.220 | But it improves blood flow.

04:20:13.260 | And actually, there's some peer-reviewed studies

04:20:15.340 | that show that it does neurogenesis.

04:20:17.260 | So you actually generate new neurons and things like that.

04:20:19.900 | It's really cool stuff.

04:20:21.220 | So I do that and it actually helps a lot.

04:20:24.020 | And every day's a little different.

04:20:26.180 | - Do you get a few hours of alone time to work, to think?

04:20:31.340 | - Yeah, deep work is so important.

04:20:33.640 | There's even a book on that, like Deep Work.

04:20:36.820 | - Yeah, by Cal Newport.

04:20:38.100 | - I think you interviewed him, didn't you?

04:20:39.220 | - Yeah, everyone should listen to his podcast,

04:20:41.540 | Deep Questions, he's awesome.

04:20:43.340 | He's a mathematician, a theoretical computer scientist.

04:20:46.780 | So those guys really need their time alone to really think.

04:20:49.540 | - That's the one thing I deeply miss.

04:20:51.340 | When you're a CEO, you're the master of the five-minute deal.

04:20:54.860 | You come in, you talk to people, you make a decision,

04:20:57.180 | you move on to the next thing, you move on to the next thing.

04:20:59.020 | And I used to be used to really deep focus.

04:21:01.280 | You'd sit down and think about something

04:21:02.700 | for 10 hours, 15 hours, 20 hours.

04:21:05.080 | And that's that.

04:21:05.920 | And I enjoyed it.

04:21:06.740 | It was just so beautiful to get lost into something

04:21:09.820 | and just go and go and go.

04:21:11.820 | And then you become a CEO,

04:21:13.060 | and it's like you never can go and go.

04:21:14.380 | You're lucky if you read a four-page thing

04:21:16.380 | 'cause there's something else that comes up.

04:21:18.140 | You have to travel, you have to do that.

04:21:19.760 | So I've been trying lately to have,

04:21:21.620 | and actually our chief of staff recommended,

04:21:23.740 | it's like Fridays is Do Not Disturb Day.

04:21:26.220 | So it's for deep work.

04:21:27.860 | You don't have meetings, any of these things.

04:21:29.700 | And so far I have not committed to that,

04:21:32.040 | but everybody else in the organization

04:21:33.340 | has started to move there.

04:21:34.220 | But my hope is next month

04:21:35.660 | that I can actually get serious about that.

04:21:37.580 | The other time I'm lost in thought is

04:21:39.260 | I do a lot of float tanks.

04:21:40.740 | Have you ever done isolation tanks?

04:21:42.380 | - But I really want to.

04:21:43.820 | - It's one of the most amazing things you can do.

04:21:46.260 | You come out on the other side,

04:21:48.020 | and all your stress worries, they're just gone.

04:21:51.220 | And you have so much productivity and clarity.

04:21:53.860 | If you combine that with daily naps, that's the way to go.

04:21:57.140 | - Yeah, I'm a huge fan of naps.

04:21:58.540 | So what about the social media stuff

04:22:01.520 | and you doing the live streams?

04:22:04.540 | Do you ever dread those?

04:22:06.660 | Are you energized by those?

04:22:08.980 | Because you're exceptionally good

04:22:10.300 | at communicating all the different kinds of ideas

04:22:12.260 | and being very transparent with the community,

04:22:13.980 | all those kinds of things.

04:22:14.820 | - I really enjoy the live streams.

04:22:16.820 | It's fun, it's never been a chore, because it's for them.

04:22:20.540 | It's a chance for people in the community

04:22:22.220 | who've been loyal, and they really love it,

04:22:23.580 | to actually just be there, ask some questions.

04:22:25.580 | And I try to make it as entertaining as possible.

04:22:28.300 | And you have your trolls, and you have your love.

04:22:32.140 | And it's actually nice to have a mixture of the two,

04:22:34.700 | 'cause sometimes you can beat down trolls just for fun.

04:22:37.060 | You know, that kind of stuff.

04:22:37.940 | And it's grown to a cult following.

04:22:40.460 | I think there's like 40, 50,000 people.

04:22:42.500 | And it's almost like Fight Club in a certain respect.

04:22:45.380 | So I was in Vancouver years ago,

04:22:47.420 | and I was at Air Canada checking in,

04:22:49.340 | just about to fly back to Colorado.

04:22:50.940 | And I was getting this weird vibe

04:22:52.580 | from the guy that was checking me in.

04:22:53.980 | And then right after he takes my bag,

04:22:55.980 | he kind of leans over to me, he's like, "I love ADA."

04:22:59.060 | You know, and I was like, "Really?"

04:23:00.300 | He's like, "Yeah, I watch your live streams."

04:23:02.500 | And then I was flying into London.

04:23:04.020 | I was at London Heathrow Airport,

04:23:05.460 | and the passport control guy was there.

04:23:07.300 | And I was just about to take my passport out,

04:23:09.100 | and he says, "Welcome to London, Mr. Hoskinson."

04:23:11.420 | (Luke laughs)

04:23:13.140 | I was like, "Oh God, am I going to jail in London?

04:23:15.060 | "Why does the border patrol guy know who I am?

04:23:17.460 | "This is a bad deal for me."

04:23:19.380 | And it turned out he watched my live streams.

04:23:22.020 | And so there's a lot of that, and that's so much fun.

04:23:25.740 | In fact, here in Austin,

04:23:27.140 | there's a Mexican restaurant just down,

04:23:29.040 | close to this place.

04:23:31.380 | And while eating there,

04:23:32.340 | two different people recognized me,

04:23:33.940 | and I took a picture with one of them.

04:23:35.380 | And again, they watched the live streams.

04:23:37.260 | So that's-- - Well, if it's anything

04:23:38.540 | like Fight Club, you have to wonder

04:23:39.940 | if some of those people or all of them

04:23:41.520 | are just figments of your imagination.

04:23:43.500 | - Right, I would, (laughs)

04:23:46.180 | I don't have an answer for that.

04:23:47.780 | - I could be a figment of your imagination,

04:23:51.180 | which just proves that you're insane.

04:23:52.020 | - Yeah, but honestly,

04:23:52.860 | if I was capable of that level of delusion,

04:23:54.660 | why the hell don't I look like Brad Pitt?

04:23:56.380 | - Good point.

04:23:57.220 | Okay, so on this topic, let me ask you about mushrooms.

04:24:01.100 | You're interested in mushrooms, growing mushrooms.

04:24:05.580 | I believe you are also interested

04:24:08.260 | in the mind-expanding capabilities of psychedelics.

04:24:11.300 | At least you mentioned kind of the interesting place

04:24:14.260 | where your interest in non-psychedelic mushrooms might go.

04:24:17.500 | Can you explain the nature of your interest in mushrooms?

04:24:21.100 | Is it personal, is it business, is it both?

04:24:24.140 | - Well, it's a little bit of everything.

04:24:25.780 | It's just an underexplored area of science and botany

04:24:29.900 | that ought to be explored,

04:24:31.180 | because there's so much cool, interesting stuff there.

04:24:34.580 | Mushrooms do so much.

04:24:37.320 | Like, they have these things called cordyceps,

04:24:39.380 | and they are like a zombie fungus that infects insects,

04:24:43.700 | takes them over, and then it will have them

04:24:46.340 | kind of get to other insects,

04:24:47.740 | and then burst out of their head like an alien,

04:24:50.180 | and spray spores on them, and repeat the process.

04:24:52.260 | I mean, they even made a damn game about this,

04:24:53.900 | The Last of Us, or something like that.

04:24:55.820 | And this is a real thing.

04:24:56.860 | Like, you Google it, and see these dead ants

04:24:59.020 | with these fungal stabs coming out of them.

04:25:01.460 | It's like, holy God, this is crazy.

04:25:03.860 | And in the same topic,

04:25:08.260 | you go all the way to Lion's Mane,

04:25:09.740 | and it could actually help treat Alzheimer's,

04:25:11.780 | and treat depression, and Parkinson's,

04:25:14.500 | and regrow nerves, and so forth.

04:25:16.740 | Other things, they've shown some effectiveness

04:25:19.660 | against COVID.

04:25:20.860 | It's just so crazy, the diversity in the mushroom kingdom,

04:25:24.220 | of the medicinal applications, the pesticide applications.

04:25:29.220 | You can use it a lot to kind of save hay and trees.

04:25:32.340 | There's a lot of things you can do

04:25:33.620 | that combat all kinds of invasive species.

04:25:37.340 | And it's true, there's a lot of cool stuff

04:25:39.620 | with psychedelic mushrooms.

04:25:41.260 | And there's a great book from Michael Pollan,

04:25:43.500 | "How to Change Your Mind,"

04:25:44.900 | where he was really the first journalist

04:25:46.340 | in a long time to go and roll in crystals,

04:25:48.740 | work his way through the Johns Hopkins studies.

04:25:50.980 | But the long and short for me, when I read that book,

04:25:52.980 | like, okay, mind expansion is great,

04:25:54.880 | but look at the effectiveness of psychedelics,

04:25:59.300 | psilocybin mushrooms with SSRIs,

04:26:02.180 | selective serotonin reuptake inhibitors,

04:26:03.980 | for the treatment of depression.

04:26:05.540 | They showed in the Johns Hopkins studies

04:26:07.820 | that they're equal or better in effectiveness in many cases.

04:26:10.540 | - Yeah, it's fascinating.

04:26:12.100 | - For the treatment of depression

04:26:13.700 | than a drug that you have to take forever.

04:26:16.660 | And this is just one or two treatments,

04:26:18.540 | and then you desist from it.

04:26:20.500 | That's a miracle, 'cause there's so many people

04:26:22.620 | suffer from severe depression, and it's a lifetime ailment.

04:26:26.740 | And the fact that we have something in the toolbox

04:26:29.020 | that we've underexplored is a very powerful thing.

04:26:32.380 | The other thing was end of life issues.

04:26:34.500 | A lot of people get cancer.

04:26:35.820 | I've lost people in the family from cancer.

04:26:38.220 | And it's so hard those last two, three months,

04:26:41.100 | 'cause they kind of have this, they're in horrific pain,

04:26:44.660 | they're trying to find meaning,

04:26:45.660 | and why is this happening to me?

04:26:47.500 | And if you can just give them a substance

04:26:49.160 | that on the other side of it,

04:26:50.260 | there's a good chance they can come to peace

04:26:52.020 | with everything and die with a lot more dignity

04:26:54.420 | and happiness, that alone justifies

04:26:57.820 | an enormous amount of study.

04:26:59.420 | And the fact that these things are super cheap

04:27:01.500 | and they grow pretty much anywhere, it's pretty cool.

04:27:03.900 | Now on the commercial side,

04:27:04.860 | you can make a lot of money from mushrooms.

04:27:06.980 | I'm working with a company called Farmbox Foods,

04:27:09.180 | and it's one of the, they do both vertical

04:27:12.140 | hydroponic farming, they also do mushroom,

04:27:15.580 | and they put these amazing labs and shipping containers

04:27:20.060 | that are kind of like controlled environments.

04:27:22.060 | You can grow 400 pounds of gourmet mushrooms

04:27:24.220 | a single week off of that.

04:27:26.100 | And your margins can be up to 30% per year.

04:27:28.460 | If you're just selling them for food consumption,

04:27:31.320 | if you're doing supplements,

04:27:32.240 | they can be even higher than that.

04:27:34.380 | So it just kind of made sense

04:27:35.460 | from a diversification of assets to say,

04:27:37.300 | hey, let's do some stuff in hydroponics

04:27:38.940 | and aquaponics and in mushrooms.

04:27:40.880 | But the more I do, the more I learn that community,

04:27:43.220 | just the cooler that community is.

04:27:45.380 | Like I went to this beautiful mushroom festival

04:27:47.220 | in Cape Springs down in Georgia,

04:27:49.820 | and I met this guy named Bill Yule.

04:27:52.900 | And he just looks like a druid.

04:27:55.020 | You know, it's just like he lives in a tree

04:27:56.620 | and he opens up the tree and goes out and everything.

04:27:58.620 | And I was like, Bill, what do you do?

04:27:59.820 | He said, I go and I try to study beetles and boletes

04:28:03.440 | and a very particular type of beetle.

04:28:05.080 | And they mate in the most crazy way.

04:28:07.600 | It's like this beetle will fuse on top of another beetle

04:28:10.480 | and they'll vibrate.

04:28:11.640 | And if they make the right harmony,

04:28:12.840 | she'll mate with them.

04:28:13.680 | Otherwise, they'll kick her off.

04:28:14.920 | And you can only make the harmony

04:28:16.280 | while you're on a specific type of bolete mushroom.

04:28:18.800 | If it's anywhere else, the harmony.

04:28:20.480 | It's like, who the fuck does this?

04:28:21.960 | (laughing)

04:28:22.800 | It was like 20 years, 30 years,

04:28:24.880 | just thinking about goddamn beetles and bolete mushrooms.

04:28:27.860 | But that's that community.

04:28:29.000 | And they're the happiest people you'll ever meet.

04:28:31.560 | And they're just so much fun to talk to.

04:28:33.240 | And there's just so much lore there that's not discovered.

04:28:36.480 | The other thing is there's a ton of undiscovered mushrooms.

04:28:39.760 | So, you know, you go to my ranch up in Wyoming,

04:28:42.080 | go out that national forest next to it,

04:28:43.680 | you'll probably discover six or seven new species

04:28:46.040 | just doing some gene sequencing and things like that.

04:28:48.960 | So there's like a gold rush for new things to discover,

04:28:52.600 | to treat all kinds of things.

04:28:53.880 | So love mushrooms, love that community.

04:28:55.600 | I think there's a lot of wonderful medicinal properties

04:28:57.800 | and everybody there is just a lot of fun to hang out with.

04:29:00.800 | The other passion is aquaponics and hydroponics.

04:29:03.040 | And I got a lot more serious after COVID.

04:29:06.060 | I go to the supermarket, all the store shelves are barren.

04:29:08.600 | I say, guys, can you imagine if like we had a real big thing

04:29:12.080 | what this would be like?

04:29:13.440 | We need to have domestic food production.

04:29:15.520 | We need to have resilience at the community level.

04:29:18.000 | So let's go build a $40, $50 million aquaponics facility

04:29:21.240 | next to every major city.

04:29:23.420 | So at least you have some local production of food

04:29:26.320 | and people won't starve to death.

04:29:27.880 | Otherwise it's very bad.

04:29:29.640 | And again, the margins are phenomenal.

04:29:31.280 | They're 20%, 30% if you actually do it right

04:29:34.160 | and alternate your crops properly and so forth.

04:29:36.400 | And you create a lot of high paying jobs with it as well.

04:29:38.920 | - And so you kind of draw a lot of value

04:29:41.740 | from staying close to nature and all of these kinds of ways.

04:29:44.240 | They're keeping you humble.

04:29:45.560 | Like you said, what is it?

04:29:46.680 | The goat is still gonna crap on you.

04:29:49.160 | - Oh yeah, the donkeys will shit on you,

04:29:50.720 | whether you're broke or a billionaire.

04:29:53.180 | - That's a good line.

04:29:54.020 | That's the one like, (laughs)

04:29:56.520 | that'll be the line you'll be remembered for.

04:29:59.380 | - Right.

04:30:00.220 | - If the universe has a sense of humor.

04:30:01.380 | - Yes, it's a Neo Yogi Berra.

04:30:03.620 | - So I think mushrooms is a good place to ask

04:30:07.780 | about my friend, Joe Rogan.

04:30:11.180 | So I keep focusing on the Cardano community,

04:30:13.300 | kept saying, keep saying things like,

04:30:15.900 | likes podcast first, then Joe Rogan experience.

04:30:19.620 | I guess I'm the moon and Joe's Mars in this metaphor.

04:30:23.980 | Since I'm a CS person, I can talk a little bit

04:30:26.380 | more fluently about cryptocurrency

04:30:29.140 | 'cause fundamentally cryptocurrency is a computational idea.

04:30:33.060 | But then there's somebody like Joe,

04:30:34.780 | who's more like an everyman.

04:30:36.260 | He does not necessarily know the technical intricacies

04:30:39.340 | of cryptocurrencies.

04:30:40.720 | What kind of, and I don't think he's had

04:30:43.260 | a cryptocurrency person on.

04:30:45.140 | - Didn't he interview Andreas on Tenopolis?

04:30:47.480 | - Oh, he did.

04:30:48.320 | That's right, a long, long time ago.

04:30:49.380 | But that was almost like,

04:30:52.380 | the cryptocurrency space goes through phases.

04:30:54.860 | And I think we're in a new era of some kind.

04:30:57.620 | And how do you talk to Joe about Cardano?

04:31:01.860 | How do you talk to Joe about what the heck?

04:31:04.900 | I remember somebody tried to explain to him

04:31:06.220 | what Dogecoin is.

04:31:07.940 | How do you explain this whole space of what Bitcoin is,

04:31:10.980 | of where Ethereum is, of where Cardano and smart contracts

04:31:13.820 | and some of this proof of work,

04:31:15.220 | what this proof of stake ideas that we've been talking about?

04:31:18.500 | - You don't.

04:31:19.340 | What you do is you start with applications

04:31:20.880 | that they're interested in.

04:31:21.820 | So he's an elk hunter.

04:31:22.940 | And so he's probably interested in elk tags, right?

04:31:25.820 | So you start there.

04:31:26.660 | And you say that whole system can be put on a blockchain

04:31:29.180 | and here's how it's gonna be better for you.

04:31:31.740 | You say that's what you do.

04:31:32.580 | You always connect it to something they know and love.

04:31:35.100 | And then once they get that, they say,

04:31:36.540 | "Oh, that's really cool."

04:31:37.860 | And then they ask, "What else can you do with it?

04:31:39.620 | "What else can you sell me on it?"

04:31:41.180 | And you kind of work your way outwards there.

04:31:43.140 | Problem technologists make is they're so damn in love

04:31:45.500 | with the technology.

04:31:46.440 | They have that tail wagging the dog

04:31:48.180 | where they just want to talk about the technology

04:31:50.420 | and how incredibly cool it is.

04:31:51.980 | And that's fun.

04:31:52.820 | It's like talking about math.

04:31:53.740 | Oh God, let's talk about corbordisms.

04:31:55.820 | That's fun, all right, yeah.

04:31:58.100 | Everybody's eyes glows over.

04:31:59.540 | No, you always have to connect it

04:32:01.380 | to the interest of the particular person

04:32:03.500 | and what they care about, what they love,

04:32:04.820 | what they need.

04:32:05.660 | Royalty payments.

04:32:07.140 | He's a big guy.

04:32:08.060 | He's got the Spotify thing.

04:32:09.420 | He's got all these things going on.

04:32:10.980 | Intellectual property is probably pretty important, Joe,

04:32:13.120 | at some juncture.

04:32:14.380 | So NFTs.

04:32:15.500 | We can talk about this concept of perpetual royalties.

04:32:18.520 | So for example, let's say that you create a piece of art.

04:32:21.460 | You can build into the token itself a perpetual royalty

04:32:25.340 | to something you care about.

04:32:26.680 | Maybe every time it sells, it pays it back to you.

04:32:29.640 | Or maybe every time it sells,

04:32:31.420 | it donates to some clean water charity

04:32:33.300 | or something like that.

04:32:34.620 | The point is that the actual acquisition of the NFT

04:32:37.620 | requires adherence to that smart contract.

04:32:40.180 | So people can't deviate from your desire

04:32:42.220 | even after you die.

04:32:43.820 | So stuff from Andy Warhol or from Picasso,

04:32:46.940 | that can still be generating some donation

04:32:49.480 | every time a Picasso sells to something else.

04:32:52.120 | You can do that with NFTs.

04:32:54.160 | And so he starts thinking, God, what else can I do?

04:32:56.000 | I do shows.

04:32:56.940 | Maybe I can do my tickets with these types of things.

04:32:59.080 | Maybe I can do loyalty points for my fans.

04:33:01.320 | So now you've got him engaged

04:33:02.680 | and he's thinking of all the opportunities for him

04:33:04.840 | and it gives him an incentive to anchor

04:33:07.200 | and connect to those concepts.

04:33:08.880 | And then over time, he starts asking questions.

04:33:11.200 | Well, how do we know it's secure?

04:33:12.960 | Then we can talk about proof of work or proof of stake

04:33:15.400 | or these types of things.

04:33:16.320 | Well, so this is how it stays secure

04:33:18.200 | if you're really interested.

04:33:19.480 | And there's an incentive to have the attention span

04:33:22.840 | necessary to do the homework, eat the broccoli

04:33:25.000 | and get over that hill.

04:33:25.920 | - But it's also an opportunity, at least it was for me,

04:33:27.880 | especially with Bitcoin a while ago,

04:33:30.440 | is to take another look at the monetary system.

04:33:34.000 | Even look at the, you know, I've been looking quite a bit

04:33:36.400 | at the history of the 20th century

04:33:38.120 | and sort of look at that history

04:33:39.960 | through the perspective of the monetary system,

04:33:42.240 | or the gold standard and all those kinds of things.

04:33:44.400 | Just add that little layer of consideration

04:33:47.400 | of how much money, of how money can be used

04:33:51.360 | by people in power to control the populace.

04:33:55.400 | And it's fascinating to look at the history

04:33:59.980 | from that perspective.

04:34:00.960 | And then that allows you to look at the future

04:34:03.360 | of how we can change that in order to empower people.

04:34:06.720 | And then of course, the governance thing

04:34:09.800 | that you're working on is fascinating because,

04:34:12.840 | I mean, I don't know, but it seems like

04:34:14.520 | a deeply broken aspect of our government

04:34:16.880 | is just the voting system.

04:34:18.800 | And discussing how that could be revolutionized

04:34:21.760 | is fascinating because a lot of conversations

04:34:24.000 | end up being on the internet about like number go up,

04:34:29.000 | which is like financial side.

04:34:30.960 | And to me personally, at least,

04:34:32.960 | I think that's the same for Joe, that's just boring.

04:34:36.760 | Like it's the investing, the financial side of it,

04:34:40.140 | I know it has a lot of impact, but it's kind of boring.

04:34:42.680 | - Right.

04:34:43.520 | - 'Cause long-term is not gonna have any impact.

04:34:45.080 | If the ideas are strong, long-term is going to win.

04:34:47.840 | - Right. - If the ideas are weak,

04:34:49.040 | long-term is gonna lose.

04:34:50.400 | The ups and downs of the short-term don't matter.

04:34:52.800 | That's just like casino games that you play.

04:34:57.160 | Speaking of games, video games,

04:35:00.240 | gotta ask you about those.

04:35:01.320 | - Okay.

04:35:02.160 | - You mentioned Diablo, maybe you're a fan of Diablo.

04:35:04.200 | - Well, yeah, Diablo 2 was great.

04:35:06.200 | - Do you like Skyrim?

04:35:07.280 | - Skyrim was great too, like the Elder Scrolls.

04:35:09.400 | I actually bought the game that the Elder Scrolls

04:35:11.280 | was based on, do you know that?

04:35:13.000 | So way back in the day, the Elder Scrolls series

04:35:16.320 | was inspired by a game called Legends of Valor

04:35:18.600 | that I played when I was a little kid,

04:35:20.100 | and it doesn't actually have an ending.

04:35:22.040 | They ran out of money before they finished it,

04:35:23.640 | so they just kind of like put this little thing on

04:35:25.680 | and said, "Okay, but you never finish it."

04:35:27.440 | So I actually bought all the intellectual property

04:35:29.680 | from the game. - Yeah, I saw that.

04:35:30.760 | I didn't know there was a connection

04:35:32.000 | between Legends of Valor and Arena.

04:35:33.960 | - I forget the name of the guy,

04:35:34.960 | was it Todd something at Bethesda?

04:35:37.640 | He played it and he was inspired by it,

04:35:40.240 | and then he created Arena right after playing it.

04:35:42.520 | - That was such a good game, Arena, Daggerfall.

04:35:45.240 | - Yeah. - Yeah.

04:35:47.040 | - I had a copy of Daggerfall when I was a kid,

04:35:48.920 | but it had a bug in, so when you left the dungeon,

04:35:50.960 | it would crash, and this was before,

04:35:53.080 | like you can get an easy patch for it,

04:35:54.840 | so I never actually played Daggerfall.

04:35:56.880 | I entered in through Morrowind.

04:35:58.580 | - Yeah, no, the Daggerfall was the fascinating thing,

04:36:02.880 | which is jumping all over,

04:36:03.960 | but we'll return to Legends of Valor

04:36:05.440 | 'cause I wanna ask you about that,

04:36:06.400 | but Daggerfall was fascinating 'cause I think

04:36:08.800 | of all of the Elder Scroll games,

04:36:11.080 | it was like the largest because it was randomly generated.

04:36:15.240 | - Right. - It would randomly generate

04:36:16.640 | the worlds, the dungeons and so on,

04:36:18.680 | which is fascinating to think about,

04:36:20.320 | like how big can you make the world,

04:36:22.200 | both in actuality and feel.

04:36:27.320 | It's incredible to have a video game,

04:36:29.760 | I don't know how many video games do this well,

04:36:32.180 | where the feeling is you can be lost here forever,

04:36:35.880 | you can live here,

04:36:38.480 | 'cause most video games have a bottom

04:36:40.800 | that feels like you can run out of stuff,

04:36:42.600 | where Daggerfall was like, I can just keep doing this.

04:36:45.800 | At least that's what I felt at the time,

04:36:47.200 | but yeah, what the heck, Legends of Valor,

04:36:50.200 | what's the idea there?

04:36:51.800 | - Well, there's really nothing about it

04:36:54.680 | that's super compelling today.

04:36:56.240 | I mean, there's a nostalgia of youth that's there,

04:36:59.360 | but it doesn't even have a class system, a level system,

04:37:02.120 | the combat system is terrible, there's no journal,

04:37:04.320 | the magic system is terrible and so forth,

04:37:06.220 | and so I just wanted to start somewhere,

04:37:08.120 | and I felt like that would be

04:37:09.160 | an incredibly fun overhaul project.

04:37:11.080 | I kind of got the idea from Beamdog Studios

04:37:13.120 | when they did another one of my favorite games,

04:37:15.160 | remember Baldur's Gate?

04:37:16.920 | Yeah, and they did the--

04:37:17.760 | - I love that, Baldur's Gate 2.

04:37:18.760 | - Oh yeah, the enhanced edition was great.

04:37:20.960 | They should have never just done Throne of Baal,

04:37:22.840 | they should have done an actual proper sequel,

04:37:25.320 | God, down that whole road.

04:37:27.480 | But anyway, I got the idea there,

04:37:29.880 | I said, well, take some old piece of IP,

04:37:32.440 | and then you can kind of retrofit it and clean it up,

04:37:34.920 | and what's nice about Legends of Valor

04:37:36.400 | is it's a blank slate.

04:37:37.400 | You can do your own Elder Scrolls,

04:37:39.240 | you can create your own class system

04:37:40.520 | and level system and so forth.

04:37:42.520 | You could write some beautiful,

04:37:43.800 | exciting, fun narratives for that,

04:37:46.200 | and also it gives me a chance to explore

04:37:48.280 | a lot of things I think should be

04:37:49.600 | dragged into game development,

04:37:50.840 | like algorithmically generated music is one example.

04:37:53.680 | The problem with sound in games, as you mentioned,

04:37:55.880 | you play lots and lots of hours,

04:37:57.920 | but your sound content is much smaller,

04:38:00.000 | so you have tons of repetition in the soundtrack.

04:38:02.580 | So what if you could connect the music

04:38:05.000 | to the state of the game world,

04:38:06.680 | and it automatically, through some process,

04:38:08.680 | will generate music?

04:38:09.520 | And there's actually people who study this.

04:38:11.760 | And so that's one dimension.

04:38:12.920 | The other thing is you have things like GPT-3 and so forth.

04:38:15.120 | There was a great game, Event Zero,

04:38:18.280 | and it came out in 2016,

04:38:20.120 | where you could actually have a dialogue with an AI,

04:38:23.920 | and you're like a marooned astronaut

04:38:25.640 | on a space station that's abandoned,

04:38:28.000 | and you have to somehow work with this AI

04:38:30.560 | through communicating with it

04:38:32.000 | to convince you to take you home.

04:38:34.760 | But the AI is a bit duplicitous,

04:38:37.000 | and I don't want to spoil the plot of the game,

04:38:38.800 | because it's such a cool game,

04:38:39.980 | but it's actually like a paint by never.

04:38:41.800 | It's almost like Zork,

04:38:43.000 | where you don't have pre-selected dialogue.

04:38:46.520 | You actually type in the terminal,

04:38:48.280 | and the AI will reply to you back and forth.

04:38:50.360 | And this was 2016,

04:38:51.600 | and it's like things have gotten an order of magnitude better.

04:38:54.120 | So the evolution of that tech,

04:38:55.660 | I think within the next five years,

04:38:57.280 | brought into video games,

04:38:58.240 | could give you incredibly cool dialogue

04:39:00.920 | inside the game.

04:39:02.880 | So algorithmically generated music,

04:39:04.520 | better dialogue, better gameplay mechanics.

04:39:06.480 | Also, I'd love to explore alternative physics systems,

04:39:10.680 | alternative geometries,

04:39:11.920 | like hyperbolic geometry or these types of things.

04:39:15.560 | And there's actually Hyperbolica is a game that does that.

04:39:19.040 | And you can do down the Euclidean geometry as well,

04:39:21.480 | and bring those elements into a game design.

04:39:23.680 | And that's what we'll do is Legends of Valor.

04:39:25.160 | So it'll be kind of like Skyrim,

04:39:26.600 | but with a lot of really cool new shit.

04:39:28.560 | It's kind of like, I saw Aerosmith years ago,

04:39:30.920 | and he was out there, he's like,

04:39:31.760 | "Do you like the old shit?

04:39:32.760 | Do you like new shit?"

04:39:34.240 | Kind of middle shit.

04:39:35.240 | (laughing)

04:39:36.080 | You know, so.

04:39:36.920 | - So you're going for the middle.

04:39:38.040 | - Yeah, I'm gonna try to do some of the old

04:39:39.880 | and some of the new, and bring it in.

04:39:41.680 | So that'll be a lot of fun.

04:39:43.480 | And what's nice about it is that

04:39:45.960 | there is a lot of new play in the market

04:39:51.800 | because of the Microsoft acquisition of Bethesda.

04:39:54.440 | They've been losing employees like crazy,

04:39:56.480 | and there's a lot of belief that Elder Scrolls VI

04:39:58.400 | will not live up to expectations

04:40:00.240 | because Microsoft will kill it.

04:40:01.320 | - I will tweet, okay, listen to me.

04:40:03.760 | I will go into, I'm all about love on the internet,

04:40:07.920 | but I will go hard at you, Microsoft,

04:40:09.800 | if you screw up Elder Scrolls.

04:40:11.400 | - Well, we might have to do a spiritual successor, right?

04:40:14.120 | And it might have to happen with Legends of Valor.

04:40:16.120 | You never know.

04:40:17.440 | But it's a passion project, so I have no time for it at all.

04:40:20.320 | It's like so low on my list of things to do.

04:40:22.080 | So I'll probably do it in 2022, 2023,

04:40:24.640 | and we'll build a nice crew, and we'll do it in Wyoming,

04:40:27.440 | probably in Wheatland or some really small town,

04:40:29.520 | and we'll import everybody,

04:40:31.280 | and then we'll have to build the whole city up

04:40:32.960 | like Elon is doing here in Texas.

04:40:34.760 | It'll be a fun project.

04:40:36.720 | - Well, I like programmatically generated music.

04:40:38.560 | You mentioned Baldur's Gate.

04:40:40.440 | - By the way, Haskell Frameworks for that.

04:40:41.920 | Utopia is one.

04:40:43.000 | - For generating music?

04:40:44.000 | - Yeah, for doing it.

04:40:45.480 | - I wonder how successful that could be,

04:40:46.720 | 'cause I remember Baldur's Gate was the first game

04:40:49.120 | where I realized music is so important to the game.

04:40:52.200 | It was the thing I remembered about the game.

04:40:54.160 | It was the reason, it was the thing I thought about

04:40:57.520 | when I was away from the game,

04:40:59.480 | is the feeling it created, that music.

04:41:02.760 | I don't even remember the music anymore,

04:41:04.600 | but I remember the music.

04:41:05.840 | (Jerry humming)

04:41:08.160 | - Jeremy Soule, I think, was the composer.

04:41:10.440 | - Yeah. - It was great.

04:41:11.960 | And actually getting like Rahman Jawadi

04:41:13.960 | or Bear McCready in to do that, it would be so cool.

04:41:16.920 | (Jerry laughing)

04:41:18.120 | - Okay, this is awesome.

04:41:19.600 | Ridiculous question.

04:41:20.520 | What's the, maybe let's say,

04:41:22.640 | top three greatest video games of all time?

04:41:25.080 | - Yeah, Baldur's Gate's definitely in the top three.

04:41:28.360 | Arcanum is my favorite game.

04:41:30.280 | And Arcanum was, Troika Games was just this amazing studio

04:41:34.480 | where they took the time to build

04:41:37.920 | probably the most compelling game worlds.

04:41:40.480 | In the case of Arcanum, it takes place

04:41:42.160 | in kind of like a 19th century Victorian England play,

04:41:44.960 | so it's steampunk,

04:41:46.320 | but then there's also magic inside this game world.

04:41:48.640 | And there's this crazy juxtaposition

04:41:50.680 | between magic and technology.

04:41:52.040 | And the more technology you have, magic stops working.

04:41:54.720 | The more magic you have, it disrupts technology.

04:41:57.160 | So all the people on the magic side

04:41:58.600 | hate the technology people and vice versa.

04:42:00.760 | And so you're just this character in this game world

04:42:03.320 | and you're just trying to figure out like where do you fit?

04:42:06.120 | And it has this incredible plot

04:42:08.760 | where you're kind of just a stowaway on a zeppelin

04:42:11.680 | that gets shot down and you get dragged into this conspiracy

04:42:15.580 | and you have to kind of figure out the conspiracy

04:42:17.640 | as you go through the whole game world.

04:42:18.920 | And you meet all these different races

04:42:20.200 | like the elves and the dwarves and so forth.

04:42:21.960 | And they've all been impacted by the proliferation

04:42:24.280 | of technology in different ways.

04:42:25.640 | Like the humans use steam engines to clear cut

04:42:28.480 | all the forest and it caused a lot of problems.

04:42:30.760 | The dwarves leaked that technology to the humans

04:42:33.480 | and so they kind of got exiled for it and so forth.

04:42:36.080 | And you have to decide like where do you fit all this?

04:42:38.120 | And you have a lot of choices as a player.

04:42:40.000 | You can be on the magic side,

04:42:41.320 | the technology side kind of be neutral.

04:42:43.680 | There's like 40 different endings for the game.

04:42:46.140 | It's just incredible.

04:42:47.400 | This is all like 2000.

04:42:48.840 | And you talk about a procedurally generated world,

04:42:51.200 | you have a quick travel, but if you want,

04:42:53.080 | you just walk and the world randomly generates.

04:42:55.040 | But it's not like Daggerfall

04:42:56.120 | where there was interesting things along the way.

04:42:58.040 | So it was really ahead of its time

04:42:59.820 | and it was kind of the last of a generation of games.

04:43:03.360 | It was based on the same framework

04:43:05.400 | that Interplay used for Fallout,

04:43:07.320 | the original Fallout and Fallout 2.

04:43:09.440 | So that was really a cool setup.

04:43:10.880 | - So how were the graphics?

04:43:12.280 | They were not as interesting.

04:43:13.120 | - Oh, it's isometric three, top down.

04:43:15.700 | So yeah, kind of like the Fallout look.

04:43:17.960 | And so it doesn't hold up super well today,

04:43:21.560 | but that was never the point.

04:43:22.920 | It was a more of a story driven game.

04:43:24.960 | But it was one of the very few games

04:43:26.760 | where at the very end of the game,

04:43:27.840 | you could actually talk the villain into killing himself

04:43:31.040 | instead of fighting you.

04:43:33.520 | If you, and you had to really work at it.

04:43:35.560 | You had to become a master of persuasion

04:43:37.380 | and get your charisma score maxed out

04:43:39.320 | and learn all this stuff along the way.

04:43:40.920 | And you have this philosophical debate

04:43:42.520 | over the nature of life and death with him.

04:43:44.120 | - That's amazing.

04:43:44.940 | - Yeah, and then you're just like,

04:43:45.920 | by the way, you're wrong and here's why.

04:43:47.520 | And he's like, oh yeah, you got a point.

04:43:48.760 | I'm just gonna kill myself.

04:43:50.000 | (both laughing)

04:43:51.600 | I was like, wow, this is great.

04:43:52.980 | Planescape Torment is the other one.

04:43:54.900 | I think is probably the greatest.

04:43:56.120 | - What's it called?

04:43:56.960 | Planescape?

04:43:57.780 | - Yeah, it's another one on the Infinity Engine,

04:43:59.400 | which was what was used for Baldur's Gate.

04:44:01.280 | So it looks like Baldur's Gate.

04:44:02.760 | And God, that was such an incredibly well-written game.

04:44:05.960 | You play this character called the Nameless One,

04:44:07.680 | this little blue guy, and you wake up in a morgue.

04:44:10.040 | And it turns out that you're immortal.

04:44:11.880 | And every time you die, you lose all your memories.

04:44:14.180 | And so you've just been apparently living this life

04:44:17.360 | for a very long time.

04:44:18.600 | And you meet all these people

04:44:19.960 | in this crazy city called Sigil who know you,

04:44:22.320 | but you don't know yourself.

04:44:23.640 | And you're trying to figure out your name, your identity,

04:44:25.680 | and why do you have this curse where you live forever,

04:44:28.720 | but you keep forgetting every time you get killed.

04:44:31.120 | And it turns out you weren't such a nice person

04:44:33.600 | throughout this entire game world.

04:44:35.080 | But then again, there's this question of,

04:44:36.560 | well, if you can start over and you lose all your memories,

04:44:40.320 | do you have a chance for redemption or not?

04:44:42.680 | So it's an incredible game, Planescape Torment.

04:44:45.080 | And it's actually another one of those games

04:44:46.520 | where you can never actually have a fight.

04:44:48.920 | You can just kind of talk your way out of everything.

04:44:50.800 | And there's probably like a thousand pages of dialogue

04:44:53.640 | inside the game.

04:44:54.480 | Those guys had a lot of fun and a lot of drugs

04:44:56.400 | making that game.

04:44:57.840 | - Do you think these three games are the kinds

04:45:00.440 | that would still be okay to play today?

04:45:02.360 | Or are they forever lost in time

04:45:03.880 | because we sort of got desensitized to the richness

04:45:08.880 | of computer graphics and all those kinds of things

04:45:11.360 | in modern games?

04:45:12.360 | - I think you can enhance these games

04:45:13.960 | because your storytelling medium is so much more engaging.

04:45:17.440 | You know, I was at the movie theater before COVID

04:45:19.400 | and the person to the left of me

04:45:21.160 | was looking at their cell phone during the movie.

04:45:23.040 | And the person to the right of me

04:45:24.000 | was looking at their cell phone.

04:45:25.080 | They're just not engaged anymore.

04:45:26.320 | Everybody's attention starved.

04:45:28.560 | And the video game is one of the last mediums

04:45:30.600 | where you have undivided attention of people.

04:45:33.160 | They're really into it.

04:45:34.640 | They're all into that thing.

04:45:35.960 | And so I think the fact that you have VR and AR

04:45:39.080 | and enhanced graphics and all these new gameplay mechanics,

04:45:42.480 | it's a value add instead of a value negative.

04:45:44.920 | Because ultimately, what are you doing?

04:45:46.040 | You're telling stories

04:45:47.720 | and you're trying to connect people to something.

04:45:49.760 | Maybe it's the nature of life and death

04:45:52.040 | or are we truly real?

04:45:53.520 | Are we in a simulation or not?

04:45:55.080 | Or something like, it'd be great to do 13th floor

04:45:57.040 | as a game or something like that.

04:45:59.320 | And the question is, well, how good of a story can you tell?

04:46:02.160 | Well, you're constrained by your storytelling tools

04:46:04.120 | and technology.

04:46:05.240 | The fact that games are so much more advanced now

04:46:07.720 | means that you now have many more dimensions

04:46:10.200 | of storytelling available to you.

04:46:12.160 | And actually with AI now coming in

04:46:14.200 | and really good AI coming in the next five or 10 years,

04:46:17.500 | your storytelling is not static anymore.

04:46:20.060 | The person can actually majorly participate

04:46:22.880 | and change the outcome in ways

04:46:24.360 | that were previously unpredictable.

04:46:26.280 | The other thing is they're still educational.

04:46:27.720 | You can teach people concepts that they never knew before.

04:46:30.560 | And it's like, if you wanna teach people

04:46:32.200 | about bizarre geometries or like Minecraft

04:46:35.280 | is a great example.

04:46:36.760 | A lot of people learned how computers work from Redstone.

04:46:40.180 | Think about that.

04:46:41.800 | It's true.

04:46:42.640 | - Yeah. - Yeah.

04:46:43.960 | - Yeah, I mean, yeah, as we said,

04:46:45.880 | we're more and more going to be living

04:46:47.440 | in the video game worlds might as well,

04:46:50.240 | sort of as opposed to just make it fun,

04:46:52.900 | also expand our knowledge, expand our ability to think,

04:46:57.120 | explore different ideas and do education broadly defined

04:47:02.280 | within those video game worlds.

04:47:03.700 | So we do the entirety,

04:47:05.040 | the entirety of life in the video game worlds.

04:47:08.160 | Hopefully it doesn't look like Minecraft, but we'll see.

04:47:11.200 | Do you have advice for young people today,

04:47:13.600 | aside from playing lots of video games,

04:47:15.600 | high schoolers, college students,

04:47:19.040 | thinking about their career, thinking about life?

04:47:22.040 | - Well, we no longer live in a world

04:47:24.680 | where you get one skill set,

04:47:25.800 | you do it for 40 years and retire.

04:47:28.280 | I mean, that ship has sailed a long time ago.

04:47:30.360 | So learn how to learn and learn an appreciation

04:47:33.320 | and love for learning.

04:47:34.600 | So that's the first thing.

04:47:36.080 | Josh Waitzkins wrote this beautiful book,

04:47:37.720 | "The Art of Learning" if you ever read it.

04:47:39.880 | Stuff like that.

04:47:41.520 | So good study skills, slip box notes, these things,

04:47:44.760 | what was it, Zettelkasten or whatever it is.

04:47:48.080 | Yeah, there's a lot of little techniques

04:47:49.480 | that you can pick up along the way.

04:47:50.920 | And basically they teach you how to process

04:47:52.640 | lots of information very quickly, retain it,

04:47:55.240 | and then decide what's useful to you for that moment.

04:47:58.320 | The second thing is do not undervalue EQ,

04:48:00.600 | emotional intelligence.

04:48:01.780 | We've lived for a long time in a society

04:48:03.880 | where IQ was dominant.

04:48:06.000 | It's like how smart you are excuses everything else.

04:48:08.920 | You could be a horrible human being,

04:48:10.640 | but he's a really bright guy, right?

04:48:12.600 | The asshole mathematician or physicist.

04:48:15.320 | We now live in a world where the balance

04:48:17.200 | is far more important.

04:48:18.600 | You have to be smart, but you also have to be a nice guy.

04:48:21.620 | And don't undervalue that.

04:48:22.960 | So learn things like closed circuit communication

04:48:25.040 | and active listening.

04:48:26.440 | These skill sets will always pay enormous dividends

04:48:29.960 | along the way.

04:48:31.400 | Third, remember that you're judged for the things

04:48:33.280 | that you have and what you do with those things.

04:48:35.240 | You know, if you have very little,

04:48:36.720 | you still have to do something.

04:48:37.800 | When you have a lot, you have to do even more.

04:48:39.640 | So learn how to give and do that early on.

04:48:43.200 | Learn how to give back, volunteerism, charity,

04:48:45.960 | mentoring, these types of things.

04:48:48.120 | Those are so incredibly valuable to a person's development.

04:48:51.300 | The people that you mentored in the academic world,

04:48:53.360 | you learn this, you have graduate students.

04:48:55.340 | They one day will be professors.

04:48:58.160 | And it might just so happen they might eclipse you.

04:49:00.680 | Remember, Gauss had a doctoral advisor.

04:49:02.980 | Never forget that.

04:49:05.120 | And so did Feynman.

04:49:08.100 | Make sure that you mentor people, you give back,

04:49:10.440 | and you learn how to learn, and you learn how to teach.

04:49:12.680 | Super important for your development as a person.

04:49:15.120 | Now you'll notice all those things are agnostic

04:49:16.980 | to whatever domain you happen to have chosen.

04:49:19.080 | You could be in medicine or law or technology,

04:49:21.200 | whatever, that's your fancy,

04:49:22.760 | whatever your passion happens to be.

04:49:24.920 | And don't conflate your earning and your career.

04:49:27.800 | If people try to keep putting these things together,

04:49:30.760 | they're increasingly becoming decoupled.

04:49:32.760 | There's a lot of cases where people do their passions

04:49:34.800 | and they do it for free or for sustenance,

04:49:37.780 | but then they have something else they do on the side

04:49:39.560 | to also augment or supplement their income.

04:49:41.800 | Probably best that way.

04:49:43.520 | When you conflate the two,

04:49:44.820 | you tend to get burnt out terribly.

04:49:46.600 | You see this a lot with musicians or other people.

04:49:49.120 | They just, they wanna make music,

04:49:50.480 | but they have to tour or whatever

04:49:51.800 | 'cause they gotta pay bills.

04:49:53.280 | Stuff like that happens.

04:49:54.920 | Other than that, I mean, I'm not a guru.

04:49:57.280 | I'm not in any particular position.

04:49:59.200 | - You showed up in a robe,

04:50:00.320 | which I thought was kinda weird.

04:50:01.760 | And you had a crown and you kept calling yourself king.

04:50:04.280 | - (laughs) King of the rats.

04:50:06.400 | And that wasn't a robe, that was a yukata.

04:50:08.300 | - Okay, thank you for clarifying.

04:50:09.940 | - Wait, audience, he's joking.

04:50:11.580 | (Lex laughs)

04:50:12.580 | Reddit.

04:50:13.420 | (Lex laughs)

04:50:14.980 | - I heard somebody's gonna write blog posts.

04:50:17.540 | Charles Hoskinson walks around with a crown.

04:50:20.060 | Let me ask you a ridiculously big

04:50:23.460 | and the most important question.

04:50:24.860 | What's the meaning of this whole thing of life?

04:50:28.140 | - Well, I got a story for that.

04:50:29.300 | (Lex laughs)

04:50:31.620 | - Does this have something to do with a farm?

04:50:33.860 | - Well, no, no, no.

04:50:34.700 | It's from Japan.

04:50:35.520 | I used to live in Japan.

04:50:36.360 | In Osaka, right next to Namba.

04:50:38.860 | Beautiful area.

04:50:39.700 | It's like, if you're gonna live anywhere in Japan,

04:50:41.340 | live in Osaka.

04:50:42.180 | You live anywhere in Osaka,

04:50:43.220 | live next to the restaurant district.

04:50:44.580 | At four o'clock in the morning, you can get good ramen.

04:50:47.220 | These are the things in life that make you who you are.

04:50:50.620 | So there was a shogun and he was kind of a badass.

04:50:54.340 | He was really good killing people,

04:50:55.900 | really good at running his empire.

04:50:57.300 | And then he got a bit disgruntled in his late 40s.

04:50:59.940 | And he said, "You know, I'm just gonna give it all

04:51:02.220 | "to my son and I'm gonna wander around Japan

04:51:04.760 | "until I find the perfect cherry blossom.

04:51:07.100 | "That's what I'm gonna do."

04:51:08.460 | Everybody thought he went crazy.

04:51:09.740 | He said, "No, no, no, that's what I'm gonna do."

04:51:11.100 | And he took his whole entourage with him.

04:51:12.620 | And so his son is now the shogun.

04:51:14.700 | And then he's just wandering throughout Japan

04:51:16.700 | and having all these incredible, crazy adventures

04:51:18.980 | as he's wandering throughout Japan.

04:51:20.300 | You know, fighting bandits

04:51:21.700 | and loving beautiful women and so forth.

04:51:24.260 | And then 30 years later,

04:51:26.860 | he's passing these two geisha gals

04:51:28.860 | and one of them turns around

04:51:31.060 | and they notice him slumped over next to a cherry tree.

04:51:33.940 | And so she goes over to try to rouse him and he's dead.

04:51:37.740 | And in his hands is a wilted cherry blossom.

04:51:40.440 | So that's a very Japanese story, right?

04:51:43.880 | The point is that it's not the actual blossom

04:51:47.460 | finding the perfection that matters.

04:51:49.340 | It's the things you do on a day-to-day basis.

04:51:52.000 | The places you go, the people you meet,

04:51:53.560 | the experiences you have, and the joy you take

04:51:55.700 | in the things that you do here in the moment now.

04:51:58.460 | You have to get there.

04:51:59.860 | You know, if you look at Jiro Dreams of Sushi,

04:52:02.020 | there's this guy, 70 years of his life,

04:52:03.860 | making the same damn piece of sushi

04:52:05.620 | again and again and again.

04:52:06.820 | He's the happiest guy around.

04:52:08.600 | Albert Camus in his story of Sisyphus.

04:52:11.140 | You know, Sisyphus should be miserable.

04:52:12.780 | It's the Greek curse.

04:52:13.700 | No, he's happy.

04:52:15.060 | He has total clarity of purpose.

04:52:17.120 | And every day he gets to basically roll that stone

04:52:19.820 | just a little bit better than the day before,

04:52:21.660 | a different way than the day before.

04:52:23.660 | And it's not the destination.

04:52:25.620 | It isn't getting the stone up at the top of the hill

04:52:27.860 | that matters.

04:52:28.700 | It's the fact that the act, you find that joy

04:52:31.340 | in that act, that ikigai, that way of life,

04:52:33.400 | that purpose of life.

04:52:35.180 | That I think is the closest thing a human can get

04:52:38.060 | to a meaning.

04:52:38.940 | You're a blip.

04:52:40.940 | You know, you didn't exist.

04:52:43.660 | You're dead.

04:52:44.860 | And if you compare it to the size of the universe

04:52:47.780 | in that time, it's just a little blip.

04:52:49.700 | So all you can do with what you have

04:52:51.840 | is just find meaning in the things that you do

04:52:53.620 | on a daily basis.

04:52:54.580 | And you can't predict the macro.

04:52:56.460 | We have all this wealth and power in America.

04:52:58.380 | What if a world war breaks out?

04:52:59.980 | We could be destitute, like Weimar Germany.

04:53:02.700 | And so you could be a big guy.

04:53:04.740 | You could be now living on the street side.

04:53:07.120 | Would you be miserable?

04:53:08.540 | The point of life is getting to a point

04:53:10.240 | that no matter what comes your way,

04:53:11.740 | what misfortune comes your way,

04:53:13.720 | you're in a position where you can find a modicum

04:53:16.120 | of happiness and love and empathy for others

04:53:19.680 | in that moment.

04:53:21.460 | And then the highest pursuit of life

04:53:23.180 | is the ability to share that mindset with other people

04:53:25.920 | and give it to them somehow.

04:53:27.760 | And that's really hard, you know,

04:53:29.560 | 'cause everybody comes to you, they're always,

04:53:30.920 | "Oh, doom and gloom and cynical,

04:53:33.180 | "but this and that, a reputation this and that."

04:53:35.600 | You have to somehow transcend all of it and say,

04:53:37.280 | "You know, that doesn't matter.

04:53:38.780 | "Look at the cherry blossoms.

04:53:40.160 | "Aren't they beautiful today?

04:53:41.420 | "And let's find a better one tomorrow."

04:53:43.360 | - See, you're also a fan of fishing, I read somewhere.

04:53:48.440 | And one of my favorite books is "Old Man and the Sea,"

04:53:51.160 | where there's an old man sort of battling a big fish

04:53:58.360 | and basically closing out the last chapter of his life

04:54:01.520 | in this battle.

04:54:02.900 | So I think another aspect of life with this boulder,

04:54:06.120 | it feels like the boulder gets bigger and bigger

04:54:08.000 | as we get closer to death.

04:54:11.000 | And you find yourself married to a particular struggle

04:54:15.280 | in life that eventually just kind of overtakes

04:54:20.840 | the entirety of meaning of your existence.

04:54:23.680 | Do you think, I know what it is for me,

04:54:26.280 | do you have something like that?

04:54:28.560 | The broader vision that unites your work with Cardano

04:54:32.480 | and everything you've done in life,

04:54:34.200 | the big fish that you're going to end up

04:54:36.640 | in the dark of night struggling with

04:54:40.120 | at the end, the last chapter of your life,

04:54:42.240 | like the big problem you're taking on?

04:54:44.140 | - Well, in mathematics, it was the Goldbach conjecture.

04:54:48.040 | I'd like to prove that.

04:54:48.880 | (laughing)

04:54:50.680 | That's probably not gonna happen.

04:54:51.520 | - That's a really big fish.

04:54:53.200 | So do you still have a love for mathematics?

04:54:54.920 | - Oh God, yeah, of course I do.

04:54:57.040 | You never lose that, you never lose it.

04:54:58.800 | You lose the ability to do deep work

04:55:00.880 | and you don't have the creativity and the raw inspiration.

04:55:04.080 | This is why I've gotten to automated theorem proving

04:55:06.040 | 'cause what I lack in, 'cause I'm getting older,

04:55:08.600 | I can now have computers understand it

04:55:10.120 | and use AI to just solve this stuff.

04:55:11.820 | It's like the cheat codes for math.

04:55:13.960 | Fuck those guys, we'll still do that.

04:55:16.520 | But yeah, mathematics still has those last passions

04:55:19.080 | and there's all kinds of cool things

04:55:20.800 | that I'd like to see done.

04:55:22.280 | Like quota complexes allow you to unify topology

04:55:24.880 | and number theory in really novel ways

04:55:26.600 | and there are all kinds of cool things, but who cares?

04:55:29.040 | (laughing)

04:55:31.300 | Everybody has those white whales.

04:55:34.400 | Another thing I love to do is bring back the woolly mammoth.

04:55:37.040 | You know, that's George Church's hidden pleasure.

04:55:39.240 | In five to 10 years, it's actually gonna happen.

04:55:41.200 | And I have this beautiful ranch in Wyoming

04:55:42.760 | and I gotta find a way to convince George

04:55:44.440 | to let me raise his clone mammoth fence on my ranch.

04:55:47.600 | - Among the bison.

04:55:48.420 | - Among the bison, they'd probably get along really well.

04:55:50.800 | And then I have to learn all these cool things

04:55:52.440 | about woolly mammoths, like do you shave them

04:55:54.600 | in the summertime and let them get shaggy

04:55:56.320 | during the winter or do you just let that coat go

04:55:58.080 | and then fall, who knows?

04:56:00.320 | It's an undiscovered country.

04:56:02.040 | - I just had the image of Charles Hoskinson alone

04:56:05.000 | on a bison farm trying to raise a woolly mammoth.

04:56:09.600 | - Just start wearing a white suit

04:56:10.800 | and say, "Welcome to Hoskinson's Ranch."

04:56:13.080 | I'll have a cane with amber on it.

04:56:14.640 | - Yeah, with a chalkboard that you keep scrambling on

04:56:17.120 | like the beautiful mind in the movie

04:56:20.000 | and you'll have voices talking to you.

04:56:20.840 | - Oh, the schizophrenia's already come.

04:56:22.480 | You guys are all figments of my imagination anyway.

04:56:25.440 | Now, one of my goals though, I love catfish

04:56:27.960 | and they live a long time.

04:56:28.940 | They get really damn big if you see those guys.

04:56:31.040 | I'd love to catch one now and be in my 60s

04:56:33.560 | and catch the same fish twice and recognize it.

04:56:36.560 | Maybe I'll lift a scar or something.

04:56:38.240 | That'd be really cool, going back to the fish thing.

04:56:41.080 | 'Cause both the fish has gone through a lot,

04:56:42.880 | I've gone through a lot, we can just be like old friends.

04:56:44.840 | - Reminisce.

04:56:45.680 | - Exactly, exactly.

04:56:47.360 | And then I'll die of a heart attack

04:56:50.240 | and my mammoths will eat me.

04:56:51.640 | - That's something to look forward to.

04:56:53.440 | Charles, this was one of the most amazing conversations

04:56:56.320 | I've ever had.

04:56:57.160 | It's truly an honor that you would spend

04:56:59.680 | your valuable time with me.

04:57:01.360 | And I'm glad you exist in the cryptocurrency

04:57:03.560 | and the technology space.

04:57:04.680 | And I can see your love for mathematics

04:57:06.840 | and your love for life just radiate

04:57:08.480 | through everything you do.

04:57:09.320 | So thank you for being you

04:57:11.040 | and thank you for talking to me today.

04:57:12.880 | - This was a lot of fun.

04:57:13.720 | Thank you so much, Lex.

04:57:15.640 | - Thanks for listening to this conversation

04:57:17.080 | with Charles Hoskinson.

04:57:18.320 | And thank you to Gala Games, Allform, Indeed, ExpressVPN,

04:57:23.560 | and Aidsleep.

04:57:25.000 | Check them out in the description to support this podcast.

04:57:28.520 | And now let me leave you with some words

04:57:30.800 | from William Faulkner.

04:57:32.640 | "You cannot swim for new horizons

04:57:35.280 | "until you have the courage to lose sight of the shore."

04:57:39.240 | Thank you for listening and hope to see you next time.

04:57:42.000 | (upbeat music)

04:57:44.580 | (upbeat music)

04:57:47.160 | [BLANK_AUDIO]

Charles Hoskinson: Cardano | Lex Fridman Podcast #192

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