I also have a deep dive I want to start with. And I may be a little bit nervous about it because the deep dive about crypto. I know just enough about crypto to make it clear. I don't know about crypto and it annoys the crypto heads. So I'm probably going to embarrass myself with the deep dive today as well as anger a lot of people, but you know, Jesse's not here to talk me out of it.

So why not? So with that in mind, let us do a deep dive. Which I am calling with trepidation. The crypto question. No one is asking. So let me again set the foundation here. My goal in this deep dive is to build up to a question about crypto technology that is almost certainly very naive.

And will be laughed at by those who are serious about this tech. And I will be dismissed as a as a dweeb. However, I'm just curious why I don't hear this talked about. So I'm going to ask it anyways and those in the audience can educate me, but let's put it out there.

Alright, so I'm going to build up to my question about crypto that no one is asking. Let's do a little bit of a basic tech overview for those in the audience who have the good fortune of knowing nothing about crypto. There's many different ways to come at it. Here's the way I like to think about this technology.

Imagine I am offering you the following tool. A ledger book or log book where you can submit an entry and that entry will be written into the ledger or log book and it's numbered. Here's entry number one. Here's entry number two. Here's entry number three. You don't know exactly where it's going to go into it, but it'll get written in there.

We'll get around to it. We'll write it into the log book. Two, assume that you sign your entry so people know it's not forged. Once it goes into the log book, we know this really came from Cal. And three, it is publicly inspectable. So anyone can walk up to that log book at any time or that ledger and look through all of the entries.

And I guess I'll say a fourth thing. You can't change it. We write in ink. So it would be clear if someone tried to cross something out or something. We would say that's shenanigans. You can't change it once it's in there. That turns out to be a really useful thing because now if we have a distributed ledger to use the crypto terminology that everyone can inspect, you can't forge the entries, and you can't change the entries.

We could use that distributed ledger as the foundation for lots of different stuff we might want to do. We could, for example, keep track of money. If I wanted to give you $5, I could write something in the ledger that says, I am giving this person $5. And then later, if they wanted to give someone else $2, they would say, I'm giving this person $2.

We could just check through the ledger, looking from the beginning forward, who gave money to who, and say, do you actually have that money to give? Now you do. So we all now keep track of you having less money. So that would be useful. You could run a currency.

You could have contracts on there. You can make agreements on there that everyone could then see. And so everyone agreed. We write in a contract that says, I am going to give a boat to Cal by noon on Sunday. And if I don't, he gets to keep my house or something.

And him and I sign it. That person signs it. Everyone can see it. So everyone agrees. If I don't get a boat, like, hey, you guys agreed to this. We all see it. He owns your house. So there's a lot of useful stuff. It turns out it's kind of boring, but it turns out a distributed ledger is useful.

So what we have with the standard crypto technologies is a distributed way of implementing one of these ledgers. So lots of different people work together to actually establish and implement one of these ledgers. And the way they actually do it in most crypto setups is, I mean, it's not super interesting, but essentially people have a proposal for what they want the next entry in the ledger to be.

And they're going to tell people, hey, this is what I think, you know, entry seven should be. And they're going to broadcast it over the internet and try to get other people to agree to it. And the problem if we just did that is that people would be constantly broadcasting out.

This is what I think it should be. This is what I should think it would be. We would never reach any sort of consensus there. So what most cryptocurrency or crypto technologies do is say before you can propose what the next entry should be in the ledger, you have to solve a puzzle.

So there's a puzzle. It's semi cryptographic. It's kind of hard to solve, but easily verified. So if you solve it, everyone can verify you have the answer real easy. This is very hard to solve it. So you have to solve a hard puzzle and attach the answer to your proposal that this is what the next entry in the ledger should be.

So that's how these ledgers work. And these puzzles are hard enough that it's unlikely that a bunch of people will solve it at the same time. So if you're the first one to solve it, you have open water. You're proposing this is what I think entry seven should be.

There's no one else with a solved puzzle. So that eventually people accept that's what it is. And people move on to the next entry. And by the time someone else solves the puzzle for entry seven, we may already be three or four entries further down the chain. And the rule is, hey, if you already have enough entries down the chain, you're not going to go back and change it.

And there's some details there, but that's it. And what are the puzzles? The puzzles aren't that interesting. It's just one-way hash functions. So it's functions that you give an entry to, an input to, and they spit out a random seeming output. And the puzzles are literally just trying to find an input that's going to get an output that has enough zeros in a row.

So it's really just mindless boringness, but it takes a long time to do. All right. The final piece of the cryptotechnology puzzle is why would anyone waste time participating in this scheme of I'm going to sit here trying to solve these puzzles and helping to try to make proposals to extend the ledger?

Well, that's where cryptocurrencies come in. So on most of these distributed ledger technologies, if you succeed, you're the one who solves the puzzle and get an entry added to the ledger. The rule of the system is you get a little bit of that system's currency. So the original Bitcoin blockchain, the way new Bitcoins were generated was by people successfully expanding the ledger.

So the ledger could be used for whatever you want. These entries have stuff that have nothing to do with cryptocurrency, but the miners, as they're called, who are doing the work to solve the puzzles to try to grow this in a consistent fashion. In a fashion that everyone can see solving puzzles, which spreads it out, spreads out the proposals and keeps us all on the same page.

They get paid. And they get paid because you just say, okay, this is the miner who solved this puzzle. He gets this many Bitcoins. She gets this many Bitcoin. And then you just look on the ledger and you now have that much Bitcoin. So that's why everyone is working to extend the ledger because they want the currency rewards.

The currency, the currency incentivizes random people out there to actually work on keeping the ledger going. But the ledger itself is being used for all sorts of different uses. I mean, this is a key distinction that I think people with just a casual interaction with crypto don't quite understand.

The currencies are what motivates the distributed work on the ledgers. The ledgers have a lot more usefulness beyond just being able to support generating currency and passing it back and forth to each other. So that's the basics of what's going on with crypto. So I heard an interesting interview.

Dan Olson went on Ezra Klein's show early in April to talk about crypto. And he had an interesting interview. And he was giving an overview of the technology sector itself. And his argument was in the early days of crypto, a lot of the focus was on the currency itself.

So again, currency is generated by expanding this ledger. The ledger can be used for all sorts of things. But you can then use the ledger itself to actually keep track of who has what money. You get a financial system there. And the original, according to Dan Olson, the original push in crypto was the currencies will be a big deal.

Because it's an unregulated currency that can't be controlled by any particular government. We're going to have a new financial system that's not cited in any particular country. It'll be this financial system of the internet. Now, according to Olson, a lot of those promises didn't come true. It didn't happen.

Venezuela did not adopt Bitcoin. It did not destabilize world economies. People actually like fiat currencies that are controlled by governments with bankers who think about these things. So then the focus shifted. And now it's shifted more towards, okay, forget the currencies are useful for incentivizing people to help work on the ledgers.

But it's all the other stuff you can do. And now you hear about NFTs and digital ownership. And it's going to unlock this new web economy. You hear a lot about Web3, which is basically like the web. But we're now, you can keep track of who owns what by putting entries into a distributed crypto distributed ledger.

So now that the emphasis has changed towards other things you might use these distributed ledgers for. According to Olson, a big push right now from the crypto boosters is a distributed social media service where you can post things onto the chain. Everyone can see it. Everyone knows who posts it.

No particular company needs to exist to control the data or mine the data in some sort of secret way. So that's where the energy has shifted. All right, here comes my inconvenient, potentially very naive question. Why do we need this puzzle, proof of work, puzzle solving, distributed nature for this ledger?

Once people discover it is really useful to have a public ledger that everyone can inspect and everyone can see the same thing. And it's not forgeable. And it doesn't change. Once we understand that's really useful for lots of applications. Once we enter this world that Dan Olson's talked about now where it's less about the currency, but more about you can have a social media service on the ledger that no one owns.

You can have contracts. You can have DAOs. You can do public offerings and all this interesting stuff. The getting around having to have a lot of having to go through like a lot of overhead. Why are there not going to be just private companies offering useful, very fast ledgers?

Here's a scenario. Imagine Google comes along, says, here's good news. It's a very simple product for Google to build. We have a ledger and you can send an entry as we enter it into the ledger. Everyone can inspect the ledger. It's signed by Google. So it's not going to be forged.

It's publicly accessible. Every entry has a hash of the ledger up to that point. So you can verify that this entry follows the all of the entries to come up to this point. It would be very fast. Obviously, it's a very simple technology to build. You could have all sorts of useful features that are hard to implement in a truly distributed ledger, such as different priorities or larger amounts of data.

I mean, look, it would work really well. This is I do distributed systems would be a simple system to build. So if we think publicly inspectable ledgers are useful, why are we not going to just eventually have private companies? So here you go. Here's one that uses very fast.

No currency even needs to be involved. You could pay a little bit of money to put entries in there. I think companies would would gladly do that. Or you pay a little bit of money if you want, I don't know, express access. Now, there's two arguments against this that I can imagine, but none of them are like super compelling to me.

So the first argument is the the crypto libertarian argument that know that the thing that's required for all crypto based technologies. The thing that's important is that it's not owned by one company. It's not owned by one country because if it was people, what if they're going to trick us?

You know, we don't know what's happening. What if they we can't trust that they're running it right? We want to be completely transparent. It's just the citizens of the world working together to implement this thing. There's a there's a nice philosophical ring to that that it truly is distributed that it is kind of no one no one company that controls it.

But again, I think when we get away from that central core of sort of hardcore. Cyber libertarian crypto types. I mean, do we do we really think Google is going to trick us and doctor the logbook somehow? I mean, for one thing, why we trust these companies for any number of other things.

But for another thing, public ledgers are very easily verifiable, right? So if Google is like, I'm going to fork this ledger, I'm going to tell this person, this is entry seven. I'm going to tell this person this other thing is entry seven because I am Google and I can do this because this is not implemented in a distributed fashion.

What would happen? Those two people could simply just display to the world. They're conflicting information from the ledger service signed by Google. So Google can't say I didn't do that. And then the whole world would know, oh, they lied. And that would be the end of the service. I mean, so it's not like there is even a lot of subterfuge that Google could do here in this scenario.

So then the other argument, which I think people give to this answer, is, well, we want to be free from government regulation. So if it's being run by a company that is in the United States, then like in theory, United States could pressure them for something or have some impact on something.

And again, I would say for 98% of the uses of these ledgers, if and when they become just a popular backbone on which to run various types of applications that people might think are useful, no one would care about that. I mean, I think if Google is literally saying this is a ledger that we're running, we don't keep track of what's in it much in the same way that you can buy database space from a cloud database, or you can buy computational cycles from a cloud computational center, like we're just offering this to you.

The idea that that's going to be like heavily controlled, it wouldn't be. And for most people to say, I don't care, I want to jump on the ledger for my app that I'm writing that makes it easy to barter or to sell stuff to each other and whatever. I just need a ledger that we can all inspect and trust.

I'll use the Google one. It costs me $100 a month. We have unlimited access for our app to put stuff up there. However, it works out, right? Again, beyond the core, the inner circle, I don't think most people are worried. Like it's very, very important to me that technically no one company owns the ledger because technically speaking, I guess it makes it less regulatable.

Again, that might be true, but for 98% of the purposes, I don't think it matters. So this is my question. Why can't we get most of the benefit of what crypto gives the broader internet world without having to do this whole distributed mining, solving puzzles, the piece of it that uses all the energy, the piece of it that slows down the whole chain, the piece of it that basically puts most of the control of these things into like a small number of countries where most of that mining is happening anyways.

Why not just have a few competing chains, privately run, easily verifiable, simple, bare metal tech so it's not doing anything complicated. Shenanigans will quickly be detected. Yes, it's a company that's in a country, but with 98% of the uses of crypto matters. So anyways, this is my question because my prediction is if the crypto boosters are successful in getting app developers used to using these distributed ledgers, these publicly expected gold distributed ledgers, I think that's going to actually spell their own downfall.

Because if people say this is great, but this is weird having to wait for these people to solve these hash puzzles, we're just going to use Google's private ledger. Because it's good enough, it's faster, and they're not going to trick us and I don't care because this is honestly, you know, an app that we're implementing with kittens and I'm not really worried about weird like government regulation stuff.

So that's my question and I think I'll get some answers and crypto people will be upset. I'll tell you what Dan Olson's interpretation of all this was. His interpretation is just there's a small number of venture capital firms that are despairing that after the web 2.0 revolution, they don't have a place to invest their money where they could get a Facebook type return.

Where are the super unicorns and give them 500x on their original investment? And so they're trying to create a new space, especially AZ-16. They're trying to create a new space according to Dan Olson where they can put a lot of money early and have it blow up and that's why they're really boosting it.

I don't know if that's true, that's what Dan Olson thinks, but this is my bigger point. I've been thinking about this for a while. Either distributed ledgers aren't that useful and this is just a hype thing that comes and goes. Or they are really useful, in which case I'm not going to wait for a mining pool in Scandinavia to solve a hash puzzle.

I'd rather just use a very simple, publicly accessible, incredibly high speed and responsive Google or Apple or Amazon powered ledger. Why not? Again, they're not going to trick us. It'd be easy to see if they were. 98% of the users of this people aren't worried that there'll be some sort of weird governmental pressure that's going to come in and do God knows what.

All right, so that's my inconvenient question about crypto. In the end, does it just lead to a much simpler technology we already know how to do? We shall see. (upbeat music)