back to indexSergey Nazarov: Chainlink, Smart Contracts, and Oracle Networks | Lex Fridman Podcast #181
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The following is a conversation with Sergei Nazarov,
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CEO of Chainlink, which is a decentralized Oracle network
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that provides data to smart contracts.
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He and his team have done seminal research
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and engineering in the space of smart contracts.
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Check out the Chainlink 2.0 white paper
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that I found to be a great overview
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of their technology and vision.
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It's 136 pages, but very accessible.
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Quick mention of our sponsors.
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Wine Access, Athletic Greens, Magic Spoon, Indeed,
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Check them out in the description
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to support this podcast.
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As a side note, let me say that
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externally connected smart contracts
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that combine the ocean of data out there
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with the security of the blockchain are fascinating to me,
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both technically and philosophically.
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Data is knowledge, and knowledge is power.
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I think the more reliable data sources we integrate
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into our decision making,
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especially when those decisions are executed by programs,
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the more efficient and productive our decisions become.
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There are interactions between humans
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that should not be formalized digitally,
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like love, for example, but for all the others,
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there's no reason for smart contracts
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not to automate away the menial parts of life,
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making more room for good conversation over brisket
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and maybe some vodka with old and new friends.
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This is the Lex Friedman podcast,
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and here is my conversation with Sergey Nazarov.
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Is that Jozsik there?
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So I gave away everything I own a few times in my life,
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and he accidentally survived,
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and I don't like stuffed animals.
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What I really liked about, I got him in a thrift store.
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What I liked about him is,
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because I'd never seen a stuffed animal
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that looks pissed off at life.
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Like they're usually smiling in the dumbest of ways,
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and this guy was just pissed.
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Yeah, I gotta tell you, that's actually pretty funny.
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If you had to live only in the digital world
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or the physical world, which would you choose?
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So I think this is actually a question
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more about what the fidelity of the digital world would be
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versus the physical world.
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I think this type of question,
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this whole simulation thing actually comes from papers
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about 20, 30 years ago in the philosophical world
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where people tried to make this thought experiment
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of would you be comfortable
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if everything that was happening to you
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happened in a simulation?
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What they were trying to do
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is they were intuitively trying to understand
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is there some kind of intuitive personal connection
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we have to something being the real world, right?
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And then the Matrix movie actually came out of these papers,
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and then these ideas made their way
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into the public consciousness.
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I personally think that if I had the choice
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to be in the digital world at the same fidelity
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as the real world with immortality,
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I would absolutely go with the digital.
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Wait, wait, wait, wait, wait.
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How'd you add the immortality part?
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That's a, you don't get immortality.
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If you think about how we would go
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into the digital world, right?
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Our brain patterns would be mapped
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onto some kind of probably virtual machine, right?
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And that would mean immortality, right?
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Because the virtual machine has no limit
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to how long it can exist.
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So don't you think there'll be like a versioning system?
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Like there'll be, this is a soft fork
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versus hard fork question.
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Whether Sergei version 2.0 would be different
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from Sergei version 1.0, there'll be an upgrade.
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So that's a mortality.
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Sergei 1.0 would die in the digital world.
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And you get like a software update, and then that's it.
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Well, yeah, when people go into the Star Trek transporter,
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are they killed or are they transported?
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I don't really know.
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I haven't written any papers on this.
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I haven't really thought about it too much.
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There's no white paper on the transporter.
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Not at this point, so.
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Well, what does fidelity mean exactly to you?
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Is it like strictly, so the fidelity of the physics world,
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the physical world is maybe now questions of physics,
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quantum mechanics, what is at the bottom of it all?
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Or do you mean the fidelity of the actual experience?
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Like the original state? It's just perception.
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It's just perception.
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But that's limited by human cognitive capabilities.
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It is, but I don't really have anything else, right?
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I think all of these papers
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that brought up these questions of assimilation,
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they were like in epistemology and metaphysics.
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And what they were trying to do, I think,
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was they were trying to put people
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through a thought experiment
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where they would come out on the other end
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and say the reality of life is really worth something.
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And I don't, you know, ignorance isn't bliss,
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which is that consistent statement in the matrix, right?
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Ignorance is bliss is that that's what one of the guys says
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when he's like, you know, doing something wrong
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and trying to get back into the matrix.
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And the question is, is ignorance bliss?
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And it's like a different version of that.
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I think from a perceptual point of view,
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if my perceptions aren't in any way different,
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so fidelity is very good, it doesn't matter.
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I don't know, right?
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So if I don't know something, it doesn't really exist.
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And if it doesn't exist in my perception
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or my consciousness, then it doesn't exist,
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period, for me, at least.
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And then whether it exists in some, you know,
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more metaphysical version of things,
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I personally never really got into the metaphysics stuff
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because I could never really,
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I couldn't understand what the point of it was, right?
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It's one of these things where I couldn't really get
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what the practical application of it was.
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And this is from those realm of questions, right?
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Like if there was something about the world,
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but you didn't have a capacity to perceive it,
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would it matter to you?
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To me, it wouldn't matter.
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Right, to me, by the way, the simulation thing
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is a really interesting engineering question,
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which is how difficult is it to engineer a virtual reality,
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a digital world that is sufficiently of high fidelity
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where you would want to live in it?
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I think that's a really testable
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and a fascinating engineering question.
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So my intuition says like,
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it's not as difficult as we think.
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It's not nearly as difficult as having to create
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a quantum mechanical simulation that's large enough
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to capture the full human experience.
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Like it might be just as simple
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as just a really nice quake game,
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like with a nice engine,
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with just creating all the basic visual elements
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that trick our cognitive, our visual cortex
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into believing that we're actually
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in the physical environment.
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And I think that if that's true,
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then that's quite a high fidelity digital world
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is actually achievable within a century.
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And that changes things.
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Yeah, yeah, maybe in our lifetime.
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I'm really hoping for that.
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I'm hoping somebody can copy my brainwaves
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onto a virtual machine and allow that consciousness
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to continue to exist.
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Whether that's death or not, I don't know.
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But I think it's actually gonna require some serious leaps.
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Like even the VR headsets, right?
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They don't work if they go below 90 frame rates, right?
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People start getting freaked out.
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So you have to go from one gaming screen
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of 60 frames per second
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to two screens of 90 frames per second.
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And so people's hardware today can't even handle that.
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And that's for these two little screens by your eyeballs.
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What it's gonna take to completely trick my consciousness
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into not knowing the difference
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in terms of like all the sensory inputs.
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I'm keeping my fingers crossed.
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Whoever does that and is close to doing that,
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they should contact me.
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I want to have my brainwaves turned into a virtual machine.
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Would you in that context, if Morpheus came to you,
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would you take the blue pill or the red pill?
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Meaning, would you be happy just living in that world
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and not knowing that you're living inside that virtual world
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that's running a computer?
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Or would you want to know the truth of it?
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Well, actually I think that's a very different question,
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There's a actually moral ethical question there
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about whether you should allow a bunch of people
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to get manipulated and killed and slaved,
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because in the matrix they're all enslaved
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as like a AAA battery
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to turn a human being into the battery, right?
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So I think the moral and ethical question of that,
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fascinating enough, isn't actually different
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than the moral and ethical questions we face today
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in modern daily life.
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But I probably have given the choice
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of just completely going along or going against it.
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I would probably go against it
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if I had to make this kind of binary choice.
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Because going along with it,
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I think at that scale of scary stuff happening to people
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is probably something really, really, really difficult.
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But for your individual life,
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it's way more fun to go along with it.
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So you're saying you value the opposing a system
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that includes the suffering of others
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versus just for yourself enjoying the ride.
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I mean, if there is such a binary choice,
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why choose to oppose the system?
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I think it's the nature of kind of the ethical dilemma
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that you face in that situation.
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There's kind of some,
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this is obviously not something that's happening now, right?
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We don't know this, right?
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No, we don't know this.
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At the end of the day,
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at that scale of something like that happening,
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yeah, that scale of people being manipulated and harmed,
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then I think pretty much almost all people
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have an obligation to go against it.
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Probably that's what that looks like in my opinion.
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So you've talked about the concept of definitive truth.
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And in general, what is the nature of truth
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in human civilization?
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And just talking about the digital age,
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the nature of truth in the digital age.
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So the interesting thing about definitive truth
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is that it actually exists on this,
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at least in my mind on this spectrum
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between objective truth and just somebody made something up
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and nobody else agrees.
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So what I think definitive truth is,
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is it's somewhere in the middle on that spectrum
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where if you and me define what truth is, right?
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Like if you and me have an agreement of some kind
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and we say, as long as the weather is sunny
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or the weather isn't, there is no rain on that day,
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then there'll be an insurance policy that results
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and you and me both agree that as long as three sensors,
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three weather monitoring stations all say that,
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then the definitive truth for us and for that agreement
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is the result of those systems coming to consensus
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about what happened out in the real world.
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I think the objective truth definition
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from kind of the philosophical world
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is really, really stringent and very, very hard to attain.
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And that's not what this is.
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And that's actually not what commerce
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or the ability for people to interact about contracts needs.
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What I think the world of commerce needs is an upgrade
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from someone can unilaterally decide what the truth is
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to there can be a pre agreed set of conditions
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where we define what the truth is under those conditions.
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And then you and me basically say,
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if these 20 nodes or of these 30 data sources
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come to consensus within this method of consensus
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with this threshold of agreement,
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then definitive truth has been achieved for you and me
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in our relationship for this specific agreement
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and the specificity and our shared agreement
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to that kind of truth or that definitive truth
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being acceptable to both of us is probably
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what's kind of necessary and sufficient
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for everything to move forward in a better way.
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In any case, much better than,
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I'm a bank or an insurance company,
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I'm gonna unilaterally decide what happens.
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It's definitely an upgrade from that.
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Do you think it's possible to define formally in this way,
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a definitive truth for many things in this world?
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Like you talked about weather,
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basically defining that if three sensors of weather agree,
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then that we're going to agree that that is a definitive,
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useful truth for us to operate under.
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So how many things in this world
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can be formalized in this way, do you think?
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So there's actually two things going on here.
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One thing is the amount of data that already exists
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and the pieces of data coming off of markets,
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IOT, shipment of goods, any number of other things.
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Like even your YouTube channel has a certain amount
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of likes or a certain amount of clicks
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or a certain amount of views
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and even that's quantifiable.
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So even to a certain degree, what we do here today,
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you and me right now can be quantified
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as far as the amount of views, the amount of clicks,
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the amount of any number of other things.
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Yeah, you, the viewer, have power of data in your hands
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by clicking like or dislike right now
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or the subscribe button or the unsubscribe button,
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which I encourage you to do.
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Anyway, okay, so there's data flowing
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into all interactions in this world, there's data.
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There's more and more data, right?
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More and more data.
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More and more data.
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That data is more and more accessible to everybody
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and that accessibility and the fact that there's more of it
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means we can form more definitive truth proofs.
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We can form more and more proofs
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and as we form those proofs, well, we can provide them
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to these blockchains and smart contract systems
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that consume them and then they're tamper proof, right?
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So they can't be manipulated.
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And so now we've combined a system that can prove things
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with a system that guarantees a certain outcomes
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and we have a better system of contracts,
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which is actually an unbelievably powerful tool
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that has never existed before.
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Can we talk about the world of commerce and finance,
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decentralized finance?
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What is it, what's its promise
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from both the philosophical and technical perspective?
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If we just zoom in on that particular space
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of the digital world.
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Sure, so the decentralized finance is the instantiation
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of a specific type of smart contract, right?
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Or what I call hybrid smart contracts,
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which are these contracts that combine the on chain code
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together with the off chain proofs that something happened.
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They're called a hybrid
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because they basically use both of these systems, right?
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The blockchain and the proofs about what happened.
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And what DeFi is, is one specific type
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of hybrid smart contract that is taking
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on the contractual agreements you traditionally find
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in the global financial system, right?
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And that's basically the world of lending,
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the world of yield generation
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for people giving me or giving whoever their money
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and somebody giving back them yield back to them,
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which is what bonds do and what treasuries do
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and what a lot of the global financial markets do,
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as well as the ability to gain exposure and protection
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from different types of events and risks.
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That's a lot of what derivatives do, right?
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Derivatives allow us to say, hey, something's gonna happen.
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And I'm either gonna protect myself
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by getting paid if it happens,
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or I'm going to benefit from it happening
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by basically saying it's gonna happen,
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putting money down on that,
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and that prediction will get me a return.
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Now, that's a very large part
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of the global financial system,
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excluding all the stuff for global trade
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and letters of credit and all the stuff
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that facilitates international trade.
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So excluding that at least for now.
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So if we look at what decentralized finance does,
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it takes all of those agreements
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about generating yield, lending,
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and all of these types of things you find in global finance
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and the world of derivatives
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and a few other types of financial products.
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And it basically puts them into a different format, right?
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So the format you have for centralized financial agreements
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is that you go to a bank,
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even if you're a hedge fund,
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even if you're like the richest people,
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you go to a bank, they make a product for you,
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and you hope that they honor
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the product that they made for you.
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Or you do a deal with another hedge fund
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or whoever, some counterparty,
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and you hope that that deal is honored.
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And then a number of very freaky things start to take place.
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One of them is people don't have clarity
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about what the agreement is, right?
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So a lot of people don't know exactly
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what the agreement is between those parties
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because they can't actually see it.
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Sometimes agreements are kept very private
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or parts of them are kept private.
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And that keeps other counterparties,
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other people in the system
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from understanding what's going on.
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This is actually partly what happened
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with the mortgage crisis.
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The mortgage crisis in 2008 was basically,
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there were a lot of agreements, there were a lot of assets,
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but because the centralized financial system
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worked in such an opaque way,
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it was so unbelievably difficult
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to understand what was going on, right?
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And so that lack of understanding
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for the global financial system
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basically led to a big boom,
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and then correspondingly, very, very big bust,
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which amazingly enough had a huge impact on everybody,
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even though they didn't participate
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in the boom part of the equation.
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In any case, what decentralized finance does
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is it takes these financial contracts
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that power the global financial system,
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it puts them in this new blockchain based format
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that basically at this point
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provides three very powerful things.
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The first thing that it provides is complete transparency
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over what's going on with your financial product.
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So this means when you use a financial product
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in the DeFi format, you, and you as a technical person
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actually can drill down very, very, very deeply,
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and you can understand where the collateral is,
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you can understand how much collateral there is,
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you can understand what format it's in,
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you can understand how it's changing,
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you can understand this on a second to second
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or block to block basis, right?
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So you have complete transparency
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into what's going on in the financial protocol
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that you have your assets in,
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which is because blockchains and the infrastructure,
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all of these things are built on, force that transparency.
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Whereas the centralized financial system
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is very, very good at hiding it.
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It's very good at hiding it
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and packaging things in a glossy wrapper,
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creating a boom, then a bust.
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The centralized finance is built on infrastructure
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that forces transparency such that everyone can understand
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what the financial product does from day one.
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And in fact, escaping that property is practically impossible
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or if someone tries to escape it,
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it becomes immediately obvious
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and people don't use their financial product.
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So that's number one.
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Number two is control.
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So if you look at what happened with Robinhood,
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everybody thought the system worked a certain way, right?
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Everybody thought I have a brokerage account,
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I can trade things under a certain set of market conditions.
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And then the market conditions changed
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within the band of what people thought they could do.
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And everybody was fascinated to find out that,
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oh my God, I thought my band of market conditions
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in which I can control my assets is X,
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but it is actually Y,
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is actually much, much smaller band.
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And the reason it is a much, much smaller
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group of market conditions
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is that the system doesn't work
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the way people think it works.
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The system was wrapped up in a nice glossy wrapper
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and given to them to get them to participate in the system
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because the system requires and needs their participation.
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But if you actually look at how the system works underneath,
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you will see that it does not work
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the way people think that it works.
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And this is actually another reason that DeFi is so powerful
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because DeFi actually, and these blockchain contracts,
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give people the version of the world
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they think they already have,
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which is why they don't beg for it, right?
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So everybody thinks they're in a certain version
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of the world that works in this reliable way,
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transparent way, they're not.
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They don't realize it.
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And so they're confused when you tell them,
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I'm gonna make the world work this way
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because they think they're already in that world.
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But then things like Robinhood make it immediately,
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painfully clear that that's not how the world works
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so that the second real property of DeFi is control,
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which means that you control your assets,
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not a bank, not a broker, not a third party, you.
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You control your Bitcoins,
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you control your tokens in the finance protocol.
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If you don't like how something's going in that protocol,
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you can remove it, you can send it to another protocol,
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or you can use a feature of the protocol
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to do something it's supposed to do.
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Nobody can just say, oops, that feature,
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that isn't so good for my friends over here.
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That feature is actually,
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we're just gonna pause that feature in the critical moment
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when you need it to execute your strategy,
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which is why you took all the risks to begin with.
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And then the final reason, the final thing to know about DeFi
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is that DeFi is inherently global,
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and actually right now provides better yield globally.
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So if you go to a bank right now with the US dollar,
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you get 1% or less.
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If you go to DeFi with the US dollar, you get 7% or 8%.
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So if we think about that in a world
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where there's a lot of inflation coming down the road,
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and we think about, well, a lot more systems
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might be failing soon,
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and they might be highlighting these types of problems
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that were there for, or as a result of the type of control
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that you see in Robinhood,
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and people are more and more concerned
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about both transparency and control,
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and they're looking for yield to combat inflation.
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I think that's what DeFi is about in a practical sense.
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It is this clarity about your risk.
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It is control over your assets.
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And amazingly, at the same time
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as having those two unbelievably useful properties,
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it is actually superior yield,
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which just leads me to the very obvious conclusion
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that the only reason DeFi is more used
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is because more people don't know about it.
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And by virtue of this long kind of explanation
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here and elsewhere, more people will know about it.
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And it's just such an obviously superior solution
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that I haven't heard a single explanation as to why.
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No, no, don't earn 8% and take less risk
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and have more transparency with your assets.
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Earn 7% less, take more risk,
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and give people the ability to change the rules on you
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at their discretion, go do that.
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Who's gonna do that?
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And in general, on the first two of transparency and control,
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first of all, I do think, maybe you can correct me,
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but from my perspective, they're deeply tied together
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in the sense that transparency gives control.
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Transparency creates accountability,
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and there's this kind of game being played,
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game theoretic game, where if I know,
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if you know I'm gonna discover your deviation,
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you're not gonna deviate.
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Yes, this could be a whole nother conversation,
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but just as a small aside,
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on the social network side of things,
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which I've been thinking deeply about in the past year or so,
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of how to do it right there, how to fix our social media.
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And I tend to believe that human beings,
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if they're given clear transparency
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about which data is being stored, how it's being used,
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where it's being moved about,
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just all a clear, simple transparency
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of how their data is being used,
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and them having the control at the very minimal level
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of being able to participate or to walk away,
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and walk away means delete everything
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you've ever known about me.
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That will create a much, much better world.
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That currently there's a complete lack of transparency
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on social media, how the data is being used
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for your own protection.
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I mean, there's a lot of parallels
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to the central bank situation,
link |
and there's not a control element
link |
of being able to walk away.
link |
Like being able to delete all your data,
link |
delete your account on Facebook is very difficult.
link |
It doesn't take a single click,
link |
which I think is what it should take.
link |
There should be a big red button that says,
link |
delete everything you've ever known about me,
link |
or like forget me.
link |
So I think that coupled together can create
link |
a very different kind of world and create
link |
an incentivization that will lead to like progress
link |
and innovation and just like a much better social network
link |
and a really good business for the future social networks.
link |
But so I tend to see like control as naturally
link |
being a sort of an outgrowth from the transparency.
link |
It should all start at the transparency,
link |
which is why the smart contract formulation is fascinating.
link |
Because like you're formalizing in a simple, clear way,
link |
any agreements that you're participating in.
link |
And as a side comment also, what's really inspiring to me
link |
is that I think there's a greater,
link |
I don't know if this is always the case,
link |
but it seems like from having talked to people
link |
on the psychological element,
link |
there's a hunger amongst people for transparency
link |
Like transparency, another word for that is authenticity.
link |
If you look at the kind of stuff that people hunger for now,
link |
they want to know the reality of who you are
link |
So that means you can create businesses,
link |
you can create tools that are built on authenticity,
link |
And then the same, I'm inspired by the intelligence
link |
of people, if you give them control,
link |
if you give them power, that they would make good choices.
link |
That's really exciting.
link |
Of course, not everybody, but that means that
link |
decentralized power can create effective systems.
link |
So couple that, there's a hunger for transparency
link |
so we can move to a world where everyone's being
link |
just like real, conveying their genuine human nature.
link |
And people are sufficiently intelligent
link |
that if they're given power
link |
in a distributed mass scale sense,
link |
that we're going to build a better world through that,
link |
as opposed to centralized supervised control
link |
or only a small percent of the population
link |
know what the hell they're doing.
link |
Everybody else is clueless sheep.
link |
So those two coupled together is really to me inspiring.
link |
Just to really quickly comment on this stuff
link |
that you just said, which I think is super,
link |
super, super fascinating.
link |
I think that's all exactly right.
link |
I think everything that you said is right.
link |
And I think it's actually going to be the same
link |
for social media and banking and every other type
link |
of contract, is that all of those systems
link |
that house people's value for them
link |
and take control of either their social media value
link |
or their financial value or whatever for them,
link |
all of that is going to be made available to people
link |
in like this autonomous piece of code
link |
that does the same thing
link |
that the centralized entity used to do.
link |
So they get all the features,
link |
but the autonomous piece of code gives them the ability
link |
to have control while getting all the features, right?
link |
So banks give you features,
link |
social media sites give you features,
link |
whatever other system that you use online
link |
gives you features, and then it takes your data
link |
and it takes control of your assets from you
link |
in return for those features, right?
link |
I think the whole big difference here,
link |
partly in line with the definition of smart contracts
link |
and its evolution is that there's this,
link |
now there's this autonomous piece of code
link |
that's giving you all those features
link |
without requiring the ownership and lock in and control
link |
and unilateral kind of ownership of your data
link |
or your value or whatever it is that you're giving it, right?
link |
And I think what this will lead to fundamentally
link |
is just more of a free market dynamic
link |
among how people make,
link |
I think with the social media folks,
link |
you should just make some kind of law or something
link |
where you can just export all your data from them,
link |
everyone should be able to get their data exported
link |
by another application,
link |
and then the network effect of all these social media sites
link |
will kind of crumble
link |
because people will just combine your Twitter data
link |
with your Facebook data, with everything else
link |
into an application that you control,
link |
and there'll just be thousands of different interfaces
link |
competing for how to consume all the social media data
link |
because it isn't locked in
link |
in one centralized actor's control.
link |
And so this is just the recurring pattern
link |
of what I think all of this will do
link |
is it'll give people, it gives people a better deal, right?
link |
It gives them features without ownership of data,
link |
without ownership of value,
link |
and that's really the difference.
link |
So I think this is a good place
link |
to talk about smart contracts then.
link |
Can you tell me the history of smart contracts
link |
and the basic sort of definitions of what is it?
link |
Sure, so I think smart contracts as a definition
link |
has actually gone through some kind of changes
link |
or small evolution.
link |
Initially, I think it was actually a conception
link |
of a digital agreement that was tamper proof
link |
and could know things about the world, right?
link |
So it could get proof
link |
and it could define that something happened
link |
and it could conclude an outcome
link |
and release payment or do something else.
link |
That's actually the definition of smart contracts
link |
that I began working in this industry with
link |
seven or eight years ago
link |
when I started making smart contracts.
link |
That is the conception that I had of a smart contract.
link |
Then what happened was that was really hard to do, right?
link |
Building that type of tamper proof digital agreement
link |
that could also know things about the real world
link |
and release payments back to people about those events
link |
that were codified in this tamper proof format
link |
was actually a very tall order.
link |
Turns out it's consistent of three parts.
link |
It's consisting of the contract,
link |
the proof about what happened
link |
and the release of value.
link |
The way things have evolved so far
link |
is that the definition has now come to mean on chain code.
link |
So it's come to mean the codification
link |
of contractual agreement on a blockchain, right?
link |
So there's some code somewhere on some blockchain
link |
that defines what the agreement is.
link |
Now that eliminates the part of the definition
link |
that's related to knowing things about the world
link |
and it partly eliminates the definition about payments
link |
and stuff like that.
link |
But basically it's on chain code, right?
link |
We in our recent work on a second white paper
link |
have actually put out a different definition
link |
that we call hybrid smart contracts
link |
that actually tries to go back to the initial definition
link |
that I started with seven or eight years ago,
link |
which basically says that there's some proof somewhere
link |
that's proven to the contract
link |
and the contract can know that
link |
and the contract can gain proof.
link |
Then it can use that proof to settle the agreement
link |
that's codified on a blockchain.
link |
So you both need a mechanism to provide proof.
link |
You need a mechanism to codify the contract
link |
in a tamper proof way on something like a blockchain.
link |
And then as with all contracts,
link |
there's a presumption that there's
link |
some kind of release of value.
link |
So I think a smart contract in our industry right now
link |
means on chain code,
link |
which limits it to whatever can be done on chain only.
link |
And then in our internal definition for us
link |
and for us at Chainlink and for me,
link |
it's hybrid smart contracts,
link |
which is actually the original definition.
link |
It's the idea that a contract can both know what happened
link |
and automatically resolve to the proper outcome
link |
based on what happened.
link |
So you're referring to the Chainlink 2.0 white paper,
link |
which is a paper that I recommend people look.
link |
It's a very easy read and very well structured
link |
and very thorough.
link |
So I really enjoyed it.
link |
Very recently released, I guess.
link |
Can you dig in deeper?
link |
What is a hybrid smart contract?
link |
You mentioned sort of this idea of data
link |
or knowing about the world and on chain and off chain.
link |
So what are the different roles in this?
link |
So hybrid, by the way, refers to the fact
link |
that it's on chain and off chain contracts.
link |
So maybe digging deeper of what the heck is it
link |
and what does it mean to know stuff about the world?
link |
Like how do you actually achieve that?
link |
So the on chain part is where the agreement itself is.
link |
That's the smart contract itself.
link |
And that's where you codify certain conditions,
link |
such as the conditions under which an interest payment
link |
is made or the conditions under which the contract pays out
link |
the full amount that it holds to someone based
link |
on a derivative outcome or something like that.
link |
Now, what the on chain code is very good at
link |
is creating transparency about what the core conditions
link |
of the contract are.
link |
It's very good at taking in money from other private keys
link |
that send it tokens and send it value to hold.
link |
And then it's also very good at returning money
link |
or returning value back to other addresses
link |
or other private keys.
link |
It can also be involved in governance.
link |
It can be involved in a few other private key signature
link |
But primarily the on chain part of a hybrid smart contract,
link |
from what I've seen so far, defines the agreement,
link |
takes in value and returns value based upon the conditions
link |
codified in the agreement on a blockchain.
link |
The second and equally important off chain part
link |
is where the term oracle and an oracle comes in
link |
or an oracle mechanism or a decentralized oracle network
link |
as we describe it in the paper.
link |
And this is another decentralized computational system
link |
that has a different goal, right?
link |
So blockchains have the goal of packaging transactions
link |
into blocks and connecting them
link |
in a cryptographically unique way to create security
link |
and assurance about that chain of transactions.
link |
Oracles and decentralized oracle networks
link |
achieve consensus and they achieve decentralization
link |
about the topic of what happened, right?
link |
So blockchains structure transactions.
link |
Some of those transactions might be the state changes
link |
in different pieces of on chain code.
link |
And then those on chain pieces of code require input.
link |
I think the thing that people get kind of a little bit
link |
thrown by is despite being called smart contracts,
link |
the on chain code on a blockchain
link |
cannot actually speak to any other system.
link |
So blockchains are valuable and useful
link |
as far as they're tamper proof and secure.
link |
And to be tamper proof and secure,
link |
they're made this kind of walled garden
link |
that is able to know and interact
link |
only with the highly reliable information
link |
that's within that system,
link |
which is basically tokens and private key signatures.
link |
All the other world's information is not available
link |
in a blockchain inherently.
link |
And a smart contract or a piece of on chain code
link |
can't just say, hey, I'm gonna go get some data
link |
from over here because the API they would get it from
link |
creates a whole bunch of security concerns
link |
for the blockchain itself
link |
and a whole bunch of consensus issues
link |
about how to agree on what that API said
link |
or what the truth of the world is, right?
link |
Because it's not even agreeing on what one API said,
link |
it's more so creating a reliable
link |
form of decentralized computation
link |
that can give you a definitive proof of what happened
link |
and not just what one API said.
link |
So for example, some of our most widely used networks
link |
have well over 30 nodes and well over 10 data sources
link |
that are all providing information
link |
about the same type of data.
link |
And then there's consensus on that one piece of data,
link |
which is then written in and essentially given back
link |
into the on chain code to tell it what happened
link |
because you can't really make an agreement
link |
unless you know what happened, right?
link |
If you and me were to make an agreement
link |
and set some contractual conditions,
link |
but our agreement could never know what happened,
link |
it would be completely useless.
link |
However, if you and me made an agreement
link |
and there was another system called an Oracle mechanism
link |
or decentralized Oracle network
link |
that proved what happened definitively
link |
and you and me pre agreed
link |
that whatever this mechanism says is what happened,
link |
then we can achieve an entirely new level of automation.
link |
We can suddenly say, there's this piece of on chain code
link |
that's highly reliable.
link |
We can give it millions, billions,
link |
eventually trillions of dollars in value.
link |
And it is controlled by this other system over here
link |
that's also highly reliable
link |
under this configurable set of definitive truth
link |
and decentralization conditions,
link |
which we all agree are sufficiently stringent
link |
to control that much value.
link |
And therefore the combination
link |
of this tamper proof on chain representation of a contract
link |
and this mutually agreed upon definition
link |
of a trigger or a proof system combined
link |
is a hybrid smart contract,
link |
which as you can see probably already
link |
does a lot more than just a contract on chain, right?
link |
Can you talk about this consensus mechanism,
link |
which by the way is just fascinating.
link |
So there's the on chain consensus mechanism
link |
of proof of work and proof of stake.
link |
And then there is this Oracle network consensus mechanism
link |
So how do you, can you compare the two?
link |
Like how do you achieve that kind of consensus?
link |
How do you achieve security
link |
in integrating data about the world
link |
in a way that's definitively true
link |
in a way that is usefully true,
link |
such that we can rely on it in making major agreements
link |
that as you said, involve billions of trillions of dollars.
link |
Right, so this is the challenging,
link |
this is the challenging question, right?
link |
This is the challenging problem that Oracle networks,
link |
Oracles, we at Chainlink that we work on
link |
in order to create this definitive truth
link |
to trigger and create hyper automation
link |
in this more advanced form,
link |
more advanced form of hybrid smart contracts.
link |
The reality I think of this problem
link |
is that it is very specific to each use case.
link |
And it, and this is actually how we've architected our system
link |
is in a very flexible way.
link |
So for example, you need an ability for an Oracle network
link |
to grow in the amount of nodes that it has
link |
relative to the value it secures, right?
link |
So if you have an Oracle network
link |
that secures a hundred thousand dollars
link |
in like a beta of a financial product,
link |
maybe it can be fine with only seven nodes
link |
and only two or three data sources, right?
link |
Because the risk to that Oracle network
link |
is relatively low based on the value it secures.
link |
So the first question is actually
link |
how do you scale security relative to value
link |
secured by that Oracle network?
link |
Because it wouldn't be very efficient
link |
to have a thousand nodes securing $100,000 worth of value.
link |
So one of the first questions is how do we properly scale
link |
and how do we compose ensembles of nodes
link |
in a decentralized way where we can know that,
link |
okay, we're going from seven nodes in a network
link |
to 15, to 31, to 57, to 105, to a thousand, right?
link |
So that's one dimension of the problem.
link |
So you have to be scaling the number of nodes
link |
relative to the value that's derived
link |
from the truth integrated into those nodes.
link |
Well, that's not the only problem, right?
link |
The other side of this is that you're trying to create
link |
a deterministic result, a deterministic output
link |
from a set of non deterministic disparate systems,
link |
data sources, or places that prove things.
link |
Can you also, just as an aside, what is an Oracle node?
link |
What is the role of an Oracle node?
link |
Sure, so an Oracle node essentially exists in both places,
link |
it exists in both worlds.
link |
It exists as an on chain contract
link |
that represents either an Oracle network or an Oracle node.
link |
So there's an on chain interface in the form of a contract
link |
that says, I exist to give you this list of inputs.
link |
You can request weather data from me,
link |
you can request price data from me,
link |
you can ask me to send a payment somewhere.
link |
So it's like an API, so it's a pointer to a API
link |
that provides truth about this world.
link |
It's an interface, so just like an API
link |
is an interface for Web 2.0 engineers,
link |
Oracle networks and the contracts that represent them
link |
or individual nodes are the interface
link |
of Web 3.0's use of services.
link |
And services includes all services,
link |
data, payment systems, messaging systems,
link |
whatever Web 2.0 or any kind of computing service
link |
that you can conceptualize,
link |
needs an interface on chain in the form of a contract
link |
that says, here are the services I can provide for you,
link |
here are the transactions you need to send me
link |
to get back this data or that computation or this result.
link |
And then what you actually see
link |
is that decentralized Oracle networks,
link |
because they're uniquely capable of generating
link |
their own computations in a decentralized way
link |
around the data that they have access to,
link |
you actually see decentralized Oracle networks
link |
generating a lot of these services.
link |
So for example, we have a randomness service,
link |
a verifiable randomness function service
link |
that basically provides randomness on chain
link |
and that randomness is then used in lotteries
link |
and various other contracts that need randomness.
link |
But that randomness, it's not a piece of data
link |
that comes from somewhere else.
link |
We don't go to another data source and get it.
link |
We generate it within an Oracle node
link |
that then provides it over into Oracle node
link |
or Oracle nodes that provide it
link |
into the contracts themselves.
link |
So why do you say Oracle nodes are non deterministic?
link |
Well, they are as far as they come to consensus,
link |
but there's this kind of different problem here, right?
link |
The blockchains are very focused
link |
on generating blocks of transactions
link |
within a smaller universe of transaction types,
link |
a certain block size and a certain set of conditions.
link |
And then they have a economic system that says,
link |
I will perpetually generate blocks of this size
link |
with these transaction types in this kind of limited set
link |
of transaction types, whether those are UTXO transactions
link |
or scripted solidity or whatever it is.
link |
Oracles and Oracle networks,
link |
we don't have a blockchain, for example.
link |
There is no chain link blockchain.
link |
Our goal is not to generate a certain set
link |
of very clearly predetermined transaction types
link |
into a set of transactions that are put into blocks
link |
and it will infinitely be done that way.
link |
Our goal is actually to create what we call a Meta layer,
link |
a decentralized Meta layer between the non deterministic,
link |
highly unreliable world
link |
and the highly hyper reliable world of blockchains
link |
so that the unreliable world can be passed
link |
through this decentralized Meta layer.
link |
And it can coexist with a reliable on chain world.
link |
Exactly, it can coexist and in some cases,
link |
the Meta layer might generate it.
link |
So the problem in giving you this straight answer
link |
is that there's just such a wide array of services.
link |
If you were to say,
link |
well, Sergey, how do we generate randomness
link |
from a data source?
link |
Well, we don't use a data source to generate the randomness.
link |
That's the type of service that can be generated
link |
in an Oracle network itself.
link |
And so there'll be certain computations
link |
that Oracle networks themselves generate themselves
link |
to augment and improve blockchains.
link |
And it is actually the goal of Oracles
link |
to consistently do that.
link |
So if you were to think about the stack
link |
in a very generic high level,
link |
you would see blockchains or databases.
link |
They're basically the data structures
link |
that retain a lot of information
link |
in this transparent, highly reliable form.
link |
Smart contract code is the application logic.
link |
It is the logic under which all of this
link |
kind of activity occurs,
link |
storing data in the data structure in the blockchain
link |
as a database in a certain conceptualization of it.
link |
And then Oracles and Oracle networks
link |
are all the services that are used by the application code.
link |
So, you know, by analogy, let's take Uber.
link |
Uber initially, some core code goes and gets the GPS API
link |
from Google Maps about the user's location,
link |
sends a message to the user through Twilio,
link |
pays the driver through Stripe.
link |
If those services weren't available
link |
to the people who made Uber,
link |
they wouldn't have made Uber, right?
link |
Because they would have written their core code
link |
and then they would have had to make a geolocation company,
link |
a telecom messaging company,
link |
and the global payments company.
link |
And they wouldn't have done that because it's too hard.
link |
And that's the weird scenario
link |
that a lot of people in our industry are in.
link |
And that's the problem that Oracles and Oracle networks fix
link |
is they provide these decentralized services
link |
to take this developer ecosystem,
link |
the blockchain and smart contract developer ecosystem
link |
from, hey, I can have a database
link |
and write some application logic
link |
about tokenization and voting and private key signing,
link |
all of which is super useful and is a critical foundation.
link |
But now, if you just layer on all the world's services,
link |
whether that's market data, weather data, randomness,
link |
suddenly people can build DeFi, fraud proof gaming,
link |
fraud proof global trade, fraud proof ad networks.
link |
And that's why this world of decentralized services
link |
and decentralized Oracle networks
link |
is particularly, in my opinion, important to our industry.
link |
And you talk about the currents of a decentralized world,
link |
decentralized world, DeFi,
link |
but decentralized services world is primarily just tokens.
link |
And it's basically just financial transactions.
link |
And the kind of thing, the reason why it's super exciting,
link |
the kind of thing you do with Chainlink and Oracle networks
link |
is that you can basically open up
link |
the whole world of services
link |
to this kind of decentralized smart contract world.
link |
I mean, you're talking about just orders of magnitude
link |
greater impact financially
link |
and just socially and philosophically.
link |
Are there interesting near term
link |
and long term applications that excite you?
link |
Yeah, there's a lot that excites me.
link |
And that is how I think about it,
link |
that it's not just about
link |
we made a decentralized Oracle network.
link |
It's about we made a decentralized service
link |
or collection of services
link |
that's going from hundreds to thousands.
link |
And then people are able to build
link |
the hybrid smart contracts,
link |
which I think will redefine what our industry is about.
link |
Because for example, for the people
link |
that only learned about blockchains
link |
through the lens of NFTs,
link |
they understand blockchains through NFTs,
link |
not through speculative tokens or Bitcoins, right?
link |
And I think that will continue.
link |
I think the use cases that excite me,
link |
they vary between the developed market,
link |
the developed world's economies and emerging markets.
link |
I think in the developed world,
link |
what you will see is that transparency,
link |
creating a new level of information
link |
for how markets work and the risk that is in markets
link |
and kind of the dynamics that put
link |
the global financial system
link |
at systemic financial risk like 2008.
link |
And my hope is that all of this infrastructure
link |
will soften the boom and bust cycles
link |
by making information immediately available
link |
to all market participants,
link |
which is by the way, what all market participants want,
link |
except for the very, very, very small minority
link |
that are able to game the system and their benefit
link |
and benefit from booms but avoid busts
link |
because of their asymmetric access to information,
link |
which really everybody should have
link |
and which this technically solves.
link |
I think in the process of doing that
link |
and which is happening, I think right about now,
link |
you see a polishing of the technology
link |
such that it can be made available to emerging markets.
link |
And on a personal level,
link |
I feel that the emerging markets will benefit much more
link |
from this technology,
link |
just like the emerging markets benefit much more
link |
from the internet or from those $50 Android phones
link |
that people can have,
link |
because it's such a massive shift
link |
in how people's lives work, right?
link |
I have always had access to books and a library,
link |
which has been fantastic and very important.
link |
But there are places in the world
link |
where people don't have libraries,
link |
but now they have the internet and a $50 Android phone
link |
and they can watch the same Stanford lecture that I watch.
link |
I mean, that's kind of mind blowing realistically, right?
link |
They just went from zero to one in a very,
link |
very dramatic way.
link |
I think all of these smart contracts,
link |
and in my case, I think the one
link |
that I seem to keep coming back to is crop insurance,
link |
where partly because it doesn't have
link |
a tokenization component,
link |
partly because it's actually much more important
link |
than it might seem.
link |
What is crop insurance?
link |
Right, so this is the nature of why it's sometimes hard
link |
to see the full value of what our industry does,
link |
because it solves all these kinds of backend problems
link |
that we don't have, right?
link |
So crop insurance is if I own a farm and it doesn't rain,
link |
I get an insurance payout,
link |
so I don't need to close down my farm,
link |
because if it didn't rain, I don't have crops, right?
link |
So people in the developed world can get crop insurance
link |
and there's all kinds of systems
link |
that basically pay them out,
link |
and then they can argue with the insurance company
link |
if they don't get paid out properly and whatever.
link |
And this allows people to smooth out risk.
link |
In fact, a lot of the global options markets
link |
were about this, right?
link |
They were initially about people selling their produce
link |
or their crops ahead of time,
link |
so that if there was a risk of drought,
link |
they weren't impacted by it, right?
link |
And that's where a lot of options trading
link |
and all this kind of stuff came from,
link |
even though it's now turned into this kind of global casino.
link |
But in the emerging market,
link |
there are literally people that,
link |
if they don't have rain for two seasons,
link |
they need to close down their farm
link |
and become a migrant worker of some kind.
link |
And now they have a $50 Android phone
link |
where they can read Wikipedia,
link |
but they're still decades away from an insurance company
link |
coming to their geography and offering them insurance
link |
because their local legal system simply doesn't allow
link |
that type of thing to exist.
link |
No insurance company is gonna go and create insurance entity
link |
and offer them insurance because the levels of fraud
link |
and the ability to resolve that fraud through courts
link |
would just not exist.
link |
So now these people have to wait for decades
link |
to have this very basic form of financial protection
link |
or something like a bank account even.
link |
And with this technology, they don't, right?
link |
So with this technology, if I have a $50 Android phone
link |
and the smart contract has data from satellites
link |
or weather stations about the weather conditions
link |
in the geography that my farm is in,
link |
I can put value into the smart contract
link |
and the smart contract will automatically pay me out back,
link |
pay me back out at my Android phone.
link |
I just leapfrogged past my corrupt government
link |
not being able to provide a legal infrastructure
link |
to create insurance.
link |
I just leapfrogged past dealing with insurance companies
link |
that'll probably price gouge me and often not pay out.
link |
And I leapfrogged into the world of hyper reliable
link |
kind of guaranteed smart contract outcomes
link |
that are as good or in many cases better
link |
than what farmers in all parts of other parts
link |
of the world have.
link |
And this type of dynamic for the emerging markets
link |
of creating a way for people to control and manage risk
link |
in their economic life, I think extends way past insurance.
link |
It extends to them having bank accounts
link |
to combat local inflation.
link |
It extends to them being able to sell their goods
link |
on the free market of global trade without middlemen.
link |
It extends to all these things
link |
that we don't really care about, right?
link |
Because we're not farmers,
link |
but are unbelievably impactful for people
link |
that don't have a bank account
link |
and their inflation rate in their country is double digits
link |
or their farm completely depends on rain
link |
or their livelihood completely depends
link |
on their ability to sell goods.
link |
And they can't sell those goods because there's a middleman
link |
who essentially controls all the trust relationships.
link |
But now we have the internet and smart contracts
link |
and that might not have to be the case
link |
in the next five or 10 years.
link |
Yeah, so that definitely has a quality of life impact
link |
on the particular farmer's life,
link |
but I suspect it has a huge like down the line ripple effect
link |
on the whole supply chain.
link |
So if you think about farmers,
link |
but any other people that produce things
link |
that are part of a large like logistics network,
link |
like supply chain network,
link |
that means when you increase reliability,
link |
you sort of increase transparency and control,
link |
but like where any one node in that supply chain network
link |
can formalize the way it operates
link |
in its agreements with others,
link |
then you could just have a very like at scale
link |
transformative effect on how people that down the line
link |
use the services that you provide,
link |
the products that you create operate.
link |
So like, it's almost hard to imagine
link |
the possible ways it might transform the world.
link |
I wonder how much friction there is in the system,
link |
I guess, currently that smart contracts might remove.
link |
That's almost unknown.
link |
You can sort of hypothesize and stuff, but I wonder.
link |
I've seen enough bureaucracy in my life
link |
to know that smart contracts in many cases
link |
would remove bureaucracy.
link |
And I wonder how the world will be
link |
once you remove much of the bureaucracy.
link |
Coming from the Soviet Union,
link |
where I just have seen the life sucked out
link |
of the innovative spirit of human nature by bureaucracy.
link |
I wonder, the kind of amazing world that could be created
link |
once bureaucracy is removed.
link |
Yeah, I think it's fascinating how the world can evolve.
link |
I think this extends a lot further than people think
link |
into many, many different parts of the global economy.
link |
It might start with NFTs for art,
link |
or it might start with DeFi, right?
link |
Or it might start with fraud proof ad networks next.
link |
We don't know what it's gonna go to next,
link |
but I think the implication of people being
link |
in a system of contracts that holds them accountable
link |
and guarantees contractual outcomes,
link |
regardless of a local legal system,
link |
is something that I think extends to the supply chain.
link |
You can prove that goods were sourced in an ethical way,
link |
and you can prove that in a way that can't be gamed.
link |
That'll change buying power and supplier power
link |
and how people produce goods that we all consume.
link |
And then on the political level,
link |
I personally think that in a number of decades,
link |
we could literally be in a place
link |
where politicians can commit
link |
to a certain set of smart contract kind of budget,
link |
definitional kind of results.
link |
For example, we discovered oil.
link |
I promise as a politician, I'm gonna take the oil
link |
and I'm gonna redistribute it to all of you.
link |
Well, that's wonderful.
link |
That's a great idea.
link |
Sounds very nice when you're running for office.
link |
Why don't we codify that in a smart contract?
link |
And why don't we put those conditions
link |
very solidly on a blockchain?
link |
And then once you've been elected,
link |
we'll just turn that one on
link |
and it'll distribute the money just like you said,
link |
and everything will be fine.
link |
I personally think that this new level of systems
link |
that allows trustworthy collaboration between everybody,
link |
between supply chain partners, ad network users,
link |
the financial system, insurance companies, and farmers,
link |
all of these are just interactions
link |
that require a trusted entity,
link |
or in this case, a trusted piece of code
link |
to orchestrate the interaction
link |
in the way that everyone agrees.
link |
Yeah, one of the things that makes the United States
link |
fascinating is the founding documents.
link |
And it's fascinating to think of us moving into the new
link |
in the 21st century to a digital version of that.
link |
So the constitution, a smart constitution,
link |
no offense to the paper constitution,
link |
and that would have transformative effects
link |
on politicians and governments,
link |
holding people accountable.
link |
Oh man, that's so exciting to think that
link |
we might enforce accountability
link |
through the smart contract process.
link |
Exactly, why can't that happen?
link |
Anything that we could codify into a smart contract,
link |
and anything that we all agree
link |
is the way the world should work.
link |
And then anything that we can get proof about, right?
link |
Anything that a system somewhere could tell us happened,
link |
those are the pieces of the puzzle, right?
link |
We need a trusted piece of code,
link |
we need to have agreement
link |
that that's how the world should work,
link |
and we need a system that'll tell that trusted piece
link |
of code what happened.
link |
As long as we have those three things,
link |
we can theoretically codify any set of agreements
link |
about anything where those three properties take hold.
link |
I wonder if you could apply that
link |
to like military conflict and so on.
link |
Recently, Biden announced that we're going to pull off
link |
from Afghanistan after 20 years in the war.
link |
I wonder, there's a lot of debacles around war in Afghanistan
link |
and invasion of Iraq, all those kinds of things.
link |
I wonder if that was instead formulated as a smart contract.
link |
Like that might have actually huge impact
link |
on the way we do conflict.
link |
So you think of the smart contract
link |
as a kind of win win situation where you're doing
link |
like financial transactions or something like that.
link |
But you could see that also about military conflict
link |
or like whenever two nations are at tension with each other,
link |
different scales of conflict,
link |
that you can have conflict codified.
link |
And that would potentially resolve conflict much faster
link |
because there's honesty, transparency and control
link |
within that conflict, because there's conflict in this world.
link |
And I, again, very, very inspiring to think
link |
about the kind of effects it might have
link |
on the negative kinds of contracts,
link |
on the tense, painful kinds of contracts.
link |
I haven't thought about that as much.
link |
It's actually kind of scary,
link |
the stuff you're thinking through now
link |
with like the war contracts or something.
link |
That's not in the white paper.
link |
We don't have anything about war contracts or anything.
link |
Again, this is the Russian, we're both Russian,
link |
but I'm a little more Russian in the suffering side.
link |
Maybe I read way too much Dostoevsky
link |
and military kind of ideas.
link |
But anyway, holding politicians accountable in all forms,
link |
I think is really powerful.
link |
Is there something you could say as a small aside
link |
on how smart contracts actually work if we look at the code?
link |
Is there some nice way to say technically
link |
what is a smart contract?
link |
What does it mean to codify these agreements,
link |
the actual process for people
link |
who might not at all be familiar?
link |
I think you just write it into code
link |
that operates in this kind of decentralized infrastructure.
link |
You usually write code
link |
that runs in a central server somewhere.
link |
Now you write code that runs across a lot
link |
of different machines in this decentralized way.
link |
And then after you write it, you need services.
link |
And that's where oracles come in,
link |
they provide all the services.
link |
So just like you would be writing code in web 2.0 land,
link |
running it on a server somewhere
link |
and using an API, here you'd be writing code,
link |
putting it on a decentralized infrastructure
link |
like a blockchain or a smart contract platform like Ethereum.
link |
And then you would be using various services
link |
in the form of oracles.
link |
So they'll just be called oracles
link |
or decentralized services instead of APIs.
link |
And you're basically composing the same type of architecture
link |
except it's hyper reliable.
link |
At the moment, it's a little bit less efficient
link |
because there's an early stage to our industry.
link |
But it provides this extreme level of reliability
link |
and transparency, which for certain use cases
link |
is an absolute critical component
link |
and is completely reinventing how they work.
link |
So I think people should look at what are the use cases
link |
where that trust dynamic can be so heavily improved.
link |
And that's probably the ones
link |
where this is maybe initially useful.
link |
But I mean, just to emphasize,
link |
I don't think people realize when you say code
link |
that we're talking about non obfuscated actual program.
link |
Like you can read it, you can understand it.
link |
And there's something about,
link |
maybe this is my computer science perspective
link |
of like software engineering perspective,
link |
but there's something about the formalism
link |
of programming languages, which enforces simplicity
link |
and clarity and transparency.
link |
And because it's seen to everybody,
link |
I mean, simplicity is enforced.
link |
There's something about natural language,
link |
like language as written in the constitution, for example,
link |
where there's so many interpretations.
link |
With the nice thing about programs,
link |
there's not going to be a huge number of books written
link |
about what was meant by this particular line
link |
because it's pretty clear.
link |
Like programming languages have a clarity to them
link |
that natural language does not,
link |
and they don't have ambiguity, which I think it's important
link |
to pause on because it's really powerful.
link |
It's really difficult to think about.
link |
I think we live in a world where all the philosophers
link |
and legal minds don't know how to program.
link |
So I think, not all, most don't.
link |
And so we don't often see the philosophical impact
link |
of this kind of idea that the agreements
link |
between humans can be written in a programming language.
link |
That's a really transformative idea.
link |
That, I mean, yeah, it's an idea that's not just technical.
link |
It's not just financial.
link |
It's philosophical.
link |
It's rethinking human nature from a digital perspective.
link |
Like what is human civilization?
link |
It's interaction between humans.
link |
And rethinking that interaction as a digital interaction
link |
that is managed by programming languages,
link |
by programs, by code.
link |
I mean, that's fascinating.
link |
That we'll look back at this time potentially
link |
as one where us little descendants of apes
link |
did not realize how important this moment in history is.
link |
Like human beings might be totally different
link |
a century from now because we codified
link |
the interaction between humans.
link |
That might have more of an impact than anything else
link |
You think about the impact of the internet,
link |
one of the cool things is digitization of data.
link |
But we have not yet integrated the tools,
link |
the mechanisms fully that use that data
link |
and interact with humans yet.
link |
And that's what smart contracts do.
link |
I wonder if you think about the role
link |
of artificial intelligence in all of this.
link |
Because your smart contracts are kind of agreements,
link |
maybe you disagree with this,
link |
but at least the way I'm thinking about it
link |
is agreements between humans or groups of humans.
link |
But it seems like because everything's operating
link |
in the digital space that you can integrate
link |
non humans into this.
link |
Or AI systems that help out humans,
link |
managed by humans.
link |
Like what do you think about a world
link |
of hybrid smart contracts,
link |
codifying agreements between hybrid
link |
intelligent being networks of humans and AI systems?
link |
Yeah, I think that makes perfect sense.
link |
In terms of AI, I'm not an expert, right?
link |
So it might be a bit simplistic or naive,
link |
my ideas in this field.
link |
I think everyone saw the Terminator movie, right?
link |
Everybody kind of saw the Terminator movie in the 90s.
link |
And it was like, this is really scary.
link |
I personally think AI is amazing and makes perfect sense.
link |
I think it will evolve to a place where people have...
link |
Just to understand,
link |
I work in the world of trust issues, right?
link |
I work in the world of how can technology solve trust
link |
and collaboration issues using encryption,
link |
using cryptographically guaranteed systems,
link |
using decentralized infrastructure, right?
link |
So that's the world that I've been inhabiting
link |
for many, many years now,
link |
building smart contracts for seven or eight,
link |
doing stuff before that.
link |
It's kind of what I'm focused on.
link |
So I view AI through that same lens.
link |
And my brain naturally asks,
link |
well, what is the trust issue
link |
that people might have with AI?
link |
And my natural kind of response is,
link |
well, let's say AI continues to be built and improve.
link |
At some point, I have no clue where we are on this now.
link |
I've seen different ideas that were very far from this.
link |
I've seen other ideas were very close to this.
link |
At a certain point, we'd arrive at a place with AI
link |
where we would be a little bit worried
link |
about just how much it could do, right?
link |
We might be worried that AI could do things
link |
we don't want it to do,
link |
but we still want to give AI
link |
a level of control over our lives, right?
link |
So in my world, that's a trust issue.
link |
And the way that that trust issue
link |
would be solved with blockchains
link |
is actually very straightforward.
link |
And I think in its simplicity, quite powerful.
link |
You could have an AI that has an ability to do
link |
and control key parts of your and our lives, right?
link |
But then you could limit it with private keys
link |
and blockchains and create certain guardrails
link |
and firm kind of walls and limits
link |
to what the AI could never go past,
link |
assuming that encryption, right?
link |
That encryption continues to work, right?
link |
And assuming that if it's not that AI's specialization
link |
to break encryption, that it wouldn't be able to do that,
link |
So if you have an AI that controls
link |
something very important, whatever it is,
link |
shipping or something in defense
link |
or something in the financial system, whatever it is,
link |
but you're sitting there and you're kind of worried,
link |
hey, this thing is unbelievable.
link |
It's coming up with things
link |
we wouldn't have thought of in a hundred years,
link |
but maybe it's a little too unbelievable.
link |
How do you limit it?
link |
Well, if you bake in private keys
link |
and you bake in these kind of blockchain based limitations,
link |
you can create the conditions
link |
beyond which an AI could never act.
link |
And those could once again be codified
link |
in the very specific unambiguous terms
link |
in which you described,
link |
which once again, in my trust issue focused world,
link |
would solve the trust issue for users
link |
and make them comfortable with using the AI
link |
or ceding control to the AI,
link |
which I think in more advanced versions of AI
link |
will continue to be a concern, right?
link |
This is fascinating.
link |
So smart contracts actually provide a mechanism
link |
for human supervision of AI systems.
link |
With encryption, very encryption heavy.
link |
So it's not about like, is it smarter than us?
link |
It's about will the encryption hold up?
link |
So that's based on the assumption that encryption holds up.
link |
I think that's a safe assumption.
link |
We can get into that whole discussion,
link |
but from quantum computing,
link |
but cracking encryption is very difficult.
link |
That's a whole nother discussion.
link |
I think we're safe on the safe ground
link |
for quite a long time, assuming encryption holds.
link |
I, there's a space that is at the cutting edge
link |
of general intelligence research in the AI community,
link |
which is the space of program synthesis
link |
or AI generating programs.
link |
So that's different than what you're referring to
link |
is AI being able to generate smart contracts.
link |
And that to me is kind of fascinating
link |
to think of, especially two AI systems
link |
between each other, generating contracts,
link |
sort of almost creating a world
link |
where most of the contracts are between nonhuman beings.
link |
I think an AI system, as I think about it,
link |
and once again, this is not my field.
link |
This is something I might watch a YouTube video on
link |
or just see something interesting about at some point.
link |
I think if I were to just reason through it even now,
link |
I think the highly deterministic
link |
and guaranteed nature of smart contracts
link |
would probably be preferable to an AI
link |
because I'm guessing an AI would have a lot of problems
link |
with dealing with the human element
link |
of how contracts work today, right?
link |
So an AI, for example, couldn't pick up the phone
link |
and call Dave at a bank to do a derivative
link |
and kind of discuss with Dave and have a call with him
link |
and kind of have a conversation and get him comfortable
link |
and tell him it's gonna be fine
link |
and kind of smooth out all the weird social cues
link |
that have to do with making certain derivatives.
link |
I'm assuming that that's a pretty complicated
link |
neural map AI kind of problem.
link |
Yeah, so if I think about it,
link |
the deterministic guaranteed nature of smart contracts
link |
probably would, and if, assuming they're accessible to AIs,
link |
could actually, interestingly enough, be the format
link |
that they prefer to codify their relationship
link |
with non AI systems and very possibly other AI systems,
link |
right, because it is very,
link |
I mean, it's pretty guaranteed, right?
link |
All the other types of contracts
link |
that an AI could go out there and seek to do
link |
would require some language processing around the law.
link |
And I think, I don't know if this is a term,
link |
but probably not a smart AI or a good AI
link |
or whatever the term is for a high quality AI,
link |
would probably realize some of the limitations
link |
Yeah, yeah, AI definitely dislikes ambiguity
link |
and would prefer the determinism,
link |
the deterministic nature of smart contracts.
link |
I do wonder about this particular problem
link |
and maybe you could speak to it of how smart contracts
link |
can take over certain industries in a sense
link |
or how certain industries can convert their sets
link |
of agreements into smart contracts,
link |
which is, you mentioned sort of talking to Dave
link |
from the bank, many of our laws, many of our agreements
link |
are currently through natural language, through words.
link |
And so there is a process of mapping that has to occur
link |
in order to convert the legal agreements,
link |
legal contracts of today to smart contracts
link |
that by the way, AI may be able to help with.
link |
But by way of question, how do you think we convert
link |
the legal contracts on which many industries
link |
currently function today or not even legal contracts,
link |
but ambiguous kind of agreements,
link |
maybe they're loose sometimes into more formal
link |
deterministic agreements that are represented
link |
by smart contracts?
link |
So I think there's two, maybe two sides to this.
link |
I think the first one is actually not a huge problem
link |
where you have things like the is the master agreement
link |
for derivatives or you have these agreements
link |
that basically already reference a system somewhere,
link |
like for example, many legal agreements
link |
already accept eSignature.
link |
And so they're saying, hey, I'm gonna use
link |
this computing system over here around signatures
link |
and I'm gonna consider, and there's laws around that
link |
and there's clauses that say eSignature is good enough
link |
for this agreement.
link |
I actually don't think this is a big problem
link |
for the vast majority of legal agreements
link |
that use systems already.
link |
So what you'll do is you'll swap out one repository
link |
or one set of system of contract settlement.
link |
And you'll just say, hey, this blockchain system over here
link |
is my new system of contract settlement.
link |
Whatever it says is the state of the agreement
link |
instead of the centralized system over there.
link |
And so there's actually a huge amount of agreements
link |
that are already able to do that
link |
and I think we'll do that.
link |
I think there's another side to your question,
link |
which is the amount of agreements that are very ambiguous
link |
that can be turned into smart contracts.
link |
And I think the limitation there is twofold.
link |
First of all, like you said earlier,
link |
the highly reliable smart contract
link |
and the lack of opaqueness and the clarity
link |
of smart contracts is very high and very powerful
link |
and very clear and it's, in my opinion,
link |
gonna be much, much easier to take a smart contract
link |
and turn it into a set of natural language explanations
link |
and just say, hey, this is what this does, right?
link |
So I think that many contracts are,
link |
and even now in decentralized finance and DeFi
link |
and in decentralized insurance,
link |
they're basically being rebuilt in this format
link |
and that rebuilding will make them clearer, like you said,
link |
and then restating those in natural language
link |
and explaining to people, well, you know,
link |
whether it is this, I think it'll actually be a lot simpler
link |
to explain to people what the contract is about.
link |
Mapping smart contracts into natural language,
link |
I didn't even think about that.
link |
So that's, you're saying that's doable
link |
and natural and easy to do.
link |
Because there's so much clear, right?
link |
There's that forced clarity that you talked about.
link |
I think the second aspect of this problem
link |
is the nuance around what contracts can be made unambiguous
link |
and I think that comes down to,
link |
often comes down to proving what happened,
link |
which is where Oracle networks
link |
and decentralized Oracle networks and Chainlink would come in
link |
and our experience there is quite extensive
link |
over the many years that we've worked on many different
link |
I think what it fundamentally comes down to
link |
is whether there is data.
link |
So we're not gonna be able to make a hybrid smart contract
link |
about whether somebody painted your house
link |
the right color blue.
link |
We're just not gonna be doing that
link |
because there's no data feed that tells us
link |
that your house was painted blue
link |
or that it was the right color of blue.
link |
You know, unless somebody sets up a drone
link |
with a color analysis tool and they generate that data.
link |
Which by the way, it could be possible, right?
link |
They could, there could be, if there's enough demand
link |
then the service would be created
link |
that has drones flying around
link |
that's telling you about the colors of, you know,
link |
all this kind of stuff.
link |
So if there's actual demand that that would be created
link |
and because there'll be value to connect that data feed
link |
to the smart contracts and so on.
link |
I think you have it unbelievably right
link |
because there are already insurance companies
link |
that use drones to monitor construction sites from overhead
link |
and see how many people are wearing hard hats.
link |
And if the percentage of people wearing hard hats
link |
isn't sufficiently high, then, you know,
link |
the policy is voided.
link |
And so in that case, there is a data source
link |
and that data source can be put
link |
into a hybrid smart contract.
link |
So the limitation of hybrid smart contracts is,
link |
is there a data source or a set of data sources
link |
to create definitive truth,
link |
to settle the contract and eliminate ambiguity.
link |
And then as you said, I think as people realize
link |
that smart contracts are a format
link |
in which they can form agreement about things
link |
like that insurance product around, you know,
link |
how many people are wearing hard hats.
link |
If I'm the construction site owner, well, you know,
link |
I would really like a guarantee
link |
that your insurance policy is gonna pay me out
link |
if everyone is wearing hard hats.
link |
And in that case, there is demand for the data
link |
and people will generate the data.
link |
And I actually think the insurance industry
link |
is interestingly a precursor of this
link |
because they're so data driven.
link |
You already see insurance companies paying IoT companies
link |
to put data into their customer's infrastructure
link |
at the cost of the insurance company
link |
to generate the data that the insurance company uses
link |
to make a policy for the customer.
link |
So you basically already have people
link |
who really want to price data into their agreements
link |
when they're of sufficiently high value paying
link |
for their own customers to get data sensors
link |
into their infrastructure.
link |
And I think as smart contracts become more
link |
of a requested format or data driven contracts
link |
become more of a format,
link |
there will be a growing demand
link |
about proving what happened through data.
link |
So it'll be motivating totally new data feeds being created.
link |
By the way, the insurance industry broadly,
link |
the revolutions there, it would be huge.
link |
I've worked quite a bit with autonomous vehicles,
link |
semi autonomous and just vehicles in general.
link |
The insurance industry there, by the way,
link |
makes a huge amount of money,
link |
but is using very crappy data feeds,
link |
revolutionizing how like not by crappy,
link |
I mean very crude.
link |
Like literally the insurance is based on things like age,
link |
gender, like basic demographic information
link |
as opposed to really high resolution information
link |
about you as an individual,
link |
which you may or may not want to provide.
link |
So you can choose from an individual perspective
link |
to provide a data feed.
link |
And there like the power of insurance
link |
to enable the individual,
link |
to empower the individual could be huge
link |
because ultimately smart contracts motivate the use of data,
link |
the creation of new data feeds,
link |
but leveraging the whatever service it provides in truth,
link |
as opposed to some kind of very loose notion of who you are.
link |
So that I'm not, again,
link |
not sure how that would change things,
link |
but in terms of the fundamental experience of life,
link |
because I think we all rely on insurance,
link |
not just in business, but in life
link |
and grounding that insurance
link |
in more and more accurate representation of reality
link |
might just have transformative effects on society.
link |
Well, just to mention one quick thing that you said,
link |
where I noticed another trust issue,
link |
you said the user might not want to share their data.
link |
So what you could actually do,
link |
and what we've already worked on is,
link |
you can have a smart contract that holds the data
link |
and evaluates the data of the user
link |
without sharing it with the insurance companies.
link |
And the insurance company knows that the smart contract
link |
will evaluate it according to the policy.
link |
They don't need the data.
link |
And the user can provide the data
link |
knowing it'll never touch the insurance company
link |
because it's only provided to the smart contract.
link |
And suddenly you've solved another trust issue
link |
because the autonomous piece of code
link |
can evaluate information separately from the interests
link |
of both of the counterparties.
link |
And so this is the recurring theme.
link |
I think you're seeing this recurring theme
link |
where there's a trust issue,
link |
people can't use the system, they can't collaborate,
link |
they can't share information
link |
that would make a better agreement for both of them,
link |
they can't solve a risk in their daily life,
link |
they can't participate in a market,
link |
they can't have a bank account
link |
because nobody will give it to them
link |
because they can't give it to them in that legal system.
link |
And once you have an autonomous piece of code
link |
that can also know what's going on,
link |
thanks to Oracle networks and that combination of the code
link |
and the Oracle network for the hybrid smart contract,
link |
the same pattern just recurs.
link |
It's really the same pattern.
link |
And this is why I keep saying trust issues.
link |
It's because I basically,
link |
almost every contractual trust issue that I see
link |
where there is a piece of data to prove
link |
and settle the trust issue
link |
in a way that works for both parties,
link |
there is no reason not to use an autonomous,
link |
highly reliable contract and piece of code.
link |
And I have to tell you,
link |
I've seen this in a lot of different industries.
link |
I've seen it insurance, ad networks,
link |
global finance, global trade,
link |
those are all multi trillion dollar industries.
link |
And then there are other smaller industries.
link |
Like even one of the first smart contracts
link |
we worked on many years ago
link |
was for search engine optimization firms
link |
where they would tell you,
link |
hey, I'm gonna raise your search engine ranking,
link |
give me the money.
link |
And people wouldn't wanna give them the money
link |
because they never knew if they were gonna do it.
link |
And then the search engine firm
link |
doesn't wanna do any work
link |
thinking they'll never get any money.
link |
So we just initially even came up with a system
link |
where you could put Bitcoin into a smart contract
link |
and it would be released based on whether the search rank
link |
of a website got to a certain level on Google
link |
for a certain keyword, right?
link |
And so the trust problem was solved.
link |
But it's just the same story, right?
link |
It's kind of like trust issues around AI,
link |
trust issues around financial products,
link |
trust issues around insurance,
link |
trust issues around social media, whatever it is.
link |
I think that's what people looking at this industry
link |
really need to understand.
link |
And once they do understand,
link |
they realize what this is all about.
link |
This is about redefining how everyone collaborates
link |
with everyone about everything
link |
where we can prove something through data.
link |
You've mentioned confidentiality and privacy
link |
that the parties don't need to necessarily know private data
link |
in this interaction.
link |
You talk about confidentiality in the white paper
link |
for Chainlink 2.0.
link |
Can you talk more about how to achieve confidentiality
link |
Sure, sure, absolutely.
link |
So I think you once again need to think of the contract
link |
as existing in two parts, right?
link |
You have the on chain code
link |
and then you have this off chain system
link |
called the centralized Oracle network.
link |
So the question is really what portion of the contract
link |
should live in what part of these two systems, right?
link |
So if you wanna create transparency,
link |
you should put more information on chain
link |
because that's what blockchains are very good at.
link |
They're public, transparent,
link |
but they don't necessarily have privacy.
link |
Well, you can see how those two things
link |
are a little bit kind of completely diametrically opposed.
link |
So I do think and I do see blockchains working
link |
on on chain encrypted smart contracts.
link |
That's very inefficient.
link |
It has a lot of nuances around it.
link |
That I think will appear at some point.
link |
I think until it appears,
link |
you have an option of taking a part of the computation
link |
and putting it into the centralized Oracle network.
link |
We actually did an entire paper about this
link |
that we presented at Stanford in February of last year,
link |
something called Mixicles,
link |
which basically talks about how you can take
link |
an Oracle network and you can put a portion
link |
of the computation into the Oracle network,
link |
assuming that you're comfortable with that limited set
link |
of nodes knowing what the computation is.
link |
And you could actually provide additional confidentiality
link |
through special hardware
link |
called trusted execution environments
link |
that all those nodes are forced to run.
link |
So they won't even know what they're operating.
link |
And so at the end of the day,
link |
if you look at a hybrid smart contract
link |
as gaining functionality from its on chain code
link |
and gaining other functionality
link |
from its off chain decentralized Oracle network component,
link |
you can place the part of the computation
link |
that you would like to be private
link |
in the decentralized Oracle network,
link |
because you can control the set of nodes.
link |
You can control the committee of nodes
link |
and you can require that they run certain hardware
link |
to keep the information private, right?
link |
So you could basically make a derivative that,
link |
or a binary option is the example used
link |
in the Mixicles paper where the payout happened on chain,
link |
but it was actually impossible to tell
link |
what the outcome of the contract was.
link |
So the outcome of the contract was computed
link |
in the centralized Oracle network.
link |
And then there was a switch that triggered
link |
who received the payment,
link |
but from the point of view of analyzing
link |
the on chain transactions and seeing who received
link |
the payment or what the outcome of the contract was,
link |
you couldn't derive that,
link |
you couldn't backward engineer what that was,
link |
but the users of that hybrid smart contract
link |
still had on chain code that guaranteed them
link |
that as long as the decentralized Oracle network
link |
found a certain outcome, right?
link |
Determined a certain outcome
link |
that the relevant user would get paid
link |
and there was still a place to put value, right?
link |
So there is this kind of fundamental tension
link |
between confidentiality, privacy,
link |
which is very important for many contracts,
link |
which is critical to many contracts
link |
and the public and transparent nature of blockchains,
link |
which I think eventually will be solved
link |
through encrypted on chain smart contracts.
link |
That'll take some time,
link |
I think that'll take years in my opinion.
link |
And before we arrive there,
link |
I think people will put the private portion
link |
into the centralized Oracle network.
link |
Once again, going back to what
link |
the decentralized Oracle networks do,
link |
they seek to provide these services, right?
link |
So the ability to do a privacy preserving computation
link |
is perhaps a service without which
link |
a certain type of contract might never come into existence
link |
in the form of an on chain hybrid smart contract.
link |
And so this is once again,
link |
what we see the centralized Oracle networks
link |
and decentralized services doing
link |
is providing people these tools and building blocks
link |
to compose, like I'm great at making
link |
these derivatives contracts,
link |
but I can't make them unless I can retain
link |
the privacy of them.
link |
And our goal is to provide the infrastructure
link |
that gives you as a developer
link |
and as a creator of smart contracts, that capability.
link |
And what we've seen is that as we provide that capability,
link |
people create more,
link |
which is also really the story of the internet, right?
link |
The story of the internet is it was really tough
link |
to do eCommerce while everything was an HTTP
link |
and credit cards were transmitted publicly.
link |
And so eCommerce was kind of tough
link |
because how am I gonna send my credit card
link |
over public on encrypted channels, right?
link |
But the second HTTPS appears,
link |
eCommerce becomes a lot easier
link |
because I can put in my credit card number
link |
and it can be sent over an encrypted channel
link |
and it's not at risk.
link |
And so I can participate in eCommerce
link |
as long as I have a credit card.
link |
I think those types, and I'm sure that was unexpected,
link |
right, I'm sure at the time that was an unexpected outcome
link |
from that technology.
link |
And so I think this is why we sometimes have this focus
link |
on privacy because in our work with contracts
link |
and their transition into this hybrid smart contract form,
link |
we see a substantial amount of need for privacy
link |
as an inherent property of these contracts.
link |
And it'll take a while before that's possible
link |
to create the kind of technology innovation required
link |
to do that on chain.
link |
I know there's a few ideas that are being floating about,
link |
but so the currently distributed Oracle networks
link |
provide that feature, which is essential to many contracts.
link |
What brings to mind in this whole space,
link |
again, it might be outside of your expertise,
link |
but within the world which I'm passionate about,
link |
which is machine learning,
link |
and it seems like very naturally
link |
because current machine learning systems
link |
are very data hungry
link |
and much of the value mined by companies
link |
in the digital space are from data.
link |
They often want their data to maintain privacy.
link |
So you think about an autonomous vehicle space,
link |
Tesla is collecting a huge amount of data,
link |
Waymo is collecting a huge amount of data.
link |
It seems like it would be very beneficial
link |
to form contracts where one could use the data
link |
from the other in some kind of privacy preserving way,
link |
but also where all the uses of data are codified
link |
and you can exchange value cleanly,
link |
basically contracts over data,
link |
over machine learning systems use of different data.
link |
I don't know, do you talk to machine learning folks
link |
that use ideas of smart contracts
link |
or is that for outside of your interest?
link |
Because it seems like exceptionally applicable set of,
link |
when we talk about different services
link |
that might be created and revolutionized by smart,
link |
especially hybrid smart contracts,
link |
I think machine learning systems comes to mind to me
link |
in all industries.
link |
I don't know if you've gotten a chance
link |
to interact with those folks, with those services.
link |
I think what you're talking about is more data marketplaces
link |
in the data marketplace side of things.
link |
Well, this is actually once again, very applicable
link |
because there's a trust issue.
link |
At the end of the day,
link |
let's say I'm trying to sell you some data.
link |
You don't know the quality of the data.
link |
So you don't know what you wanna pay for it.
link |
And I can't give you the data for you
link |
to determine the quality
link |
because I've given you the data, right?
link |
We need an autonomous impartial agent.
link |
We need an impartial computational kind of agent
link |
and on chain smart contract with an Oracle network
link |
to assess my data to write,
link |
to basically take random cross section samples of the data,
link |
assess it for quality, assess it for signal
link |
from the algorithm you have,
link |
which you don't wanna share with me
link |
because you don't wanna know the algorithm
link |
you're working on, right?
link |
You don't want me to know what you want the data for.
link |
So now the autonomous agent takes your algorithm,
link |
keeping it private from me and takes my data,
link |
keeping it private from you,
link |
assesses it on a random cross section sampling
link |
for quality of data, returns the scoring back to you,
link |
allows you to determine a price.
link |
And now both you and me know that we've arrived
link |
at a fair price for the quality of my data
link |
for what you wanna do with it.
link |
And that's once again,
link |
from what I've seen in the data marketplaces,
link |
which are full of people who want that data
link |
for these learning models, often for financial markets,
link |
often for other reasons,
link |
this is their fundamental problem,
link |
which amazingly enough,
link |
there's a trust issue that is getting solved.
link |
And I think you can see even on the face of it,
link |
once that trust issue is solved,
link |
those markets can work a lot better, right?
link |
I don't need to know your algorithm.
link |
You don't need to know my data.
link |
We both know that the autonomous agent
link |
is not under either of our control
link |
and gave us a fair assessment and a fair price.
link |
And we're all very comfortable with that.
link |
I could even make conditions
link |
that your algorithm isn't analyzing the data
link |
for something I don't want you to analyze it for,
link |
or you could make conditions
link |
that the data has to have any number of properties.
link |
And once again, you haven't leaked any signal to me
link |
and I haven't leaked any data to you,
link |
which is once again,
link |
just another type of trust issue that all of this solve.
link |
So it's the same pattern.
link |
If you work in this industry long enough,
link |
or if you really look at these use cases long enough,
link |
you'll simply come to the question,
link |
and this is the useful question,
link |
what is the trust issue this is solving?
link |
And then if you can get an answer to that question
link |
on a case by case basis,
link |
that's when you'll understand why blockchains are relevant.
link |
And then once you do that with enough use cases,
link |
it becomes a little bit mind blank.
link |
You've mentioned trust quite a bit.
link |
You also mentioned trust minimization
link |
in the Chainlink White Paper.
link |
Can we dig into trust a little bit more?
link |
What is the nature of trust
link |
that you think about in these smart contracts?
link |
What is trust minimization?
link |
How do we accomplish, achieve trust minimization?
link |
I think it's important maybe to have a conception
link |
of what the alternative is, right?
link |
What is highly reliable trust minimized off chain
link |
and on chain computation and alternative to?
link |
So this is just kind of how I see the world
link |
in these two camps.
link |
One camp is the traditional,
link |
what I call brand based or paper guarantee camp.
link |
And this is the world as pretty much most
link |
or all people know today.
link |
This is the world where there's a bank logo
link |
or an insurance company logo, or some kind of logo.
link |
There's a very big building with marble arches
link |
and columns, it's the biggest building in the town.
link |
It's bigger than the church.
link |
And everybody feels very good.
link |
Everybody's got such a nice logo.
link |
It's such a big building.
link |
Why don't I give them my money?
link |
Why don't I interact with them on the basis
link |
of any kind of agreement?
link |
And that is definitely better than that not being there.
link |
And that is definitely a huge improvement
link |
for how people conduct commerce.
link |
Letters of credit from branded entities
link |
are very important for global trade to take place
link |
in the early stages of global trade.
link |
So that's good, but it is fundamentally
link |
just a paper agreement with a legal framework behind it.
link |
And if the paper agreement you have would say Robinhood
link |
or somebody else suddenly has to change,
link |
well, it changes and you can't really do anything about it.
link |
You won't be able to change anything
link |
about what happened there.
link |
There's some long terms of service.
link |
There's some other agreements around all this stuff.
link |
At the end of the day,
link |
that's the brand based and paper guarantee world
link |
where it's all very vague and opaque
link |
and you're kind of hoping for the best
link |
because there's a nice logo.
link |
It's been around a hundred years.
link |
There's a lot of marble.
link |
Put a lot of marble.
link |
Big building, lots of marbles.
link |
This is why banks have such nice buildings, right?
link |
It's not because they want to spend money on buildings.
link |
It's to create confidence in them as an entity
link |
in order for people to transact through them, right?
link |
This is why all these kind of go to cities
link |
that had gold rushes, go to cities
link |
that needed banking as a service in certain time periods,
link |
they're the most beautiful buildings
link |
at least in the United States.
link |
So this is the brand based paper guarantee model
link |
for which up until now,
link |
there has never been an alternative, right?
link |
So up until now, if you had a bad experience with a bank
link |
or insurance company or some logo somewhere,
link |
you would only have one option.
link |
Your option would be to go across the road
link |
and down the block to another building
link |
with another color of marble
link |
and another set of agreements
link |
that are fundamentally still paper brand agreements, right?
link |
Now for the first time, you have mathematical agreements.
link |
You have mathematically guaranteed encryption secured,
link |
decentralized infrastructure powered agreements, right?
link |
This is really the shift.
link |
This is really the comparison and the alternative
link |
through which people should view all of this in my opinion,
link |
because there's once again, this conception
link |
that everything is fine, everything works very well.
link |
Well, it does, it works fine and very well
link |
as long as nothing goes wrong.
link |
And then in the cases when things go wrong,
link |
which they pretty much invariably at some point do,
link |
then you find out that, well, you know,
link |
turns out they don't have to pay me
link |
or turns out I can't trade
link |
or turns out the ATMs can be locked up
link |
and only give me 66 euros per day,
link |
whether I'm a business or an individual,
link |
like what happened in Greece a few years ago, right?
link |
And the reality is that once that becomes a strong enough
link |
kind of realization for people,
link |
I think they will all just migrate
link |
to mathematically guaranteed contracts
link |
because why wouldn't you?
link |
So in the world of mathematically guaranteed contracts,
link |
kind of how do we, and cryptographically secured
link |
and decentralized infrastructure powered,
link |
how do we evolve into that world?
link |
Well, at the end of the day, it comes down to consensus,
link |
right, it comes down to a collection of independent nodes,
link |
a collection of provably independent computing systems
link |
arriving at the same conclusion impartially.
link |
That conclusion might be the transaction
link |
is valid between address A and address B,
link |
address A has one Bitcoin,
link |
wants to send it to address B,
link |
now address B has one Bitcoin, right?
link |
So that's one degree of validation.
link |
It has certain cryptographic primitives
link |
that are used, certain levels of cryptography,
link |
encryption, and other methods
link |
that basically provide clarity and those guarantees.
link |
But fundamentally, it's this level of consensus
link |
that multiple independent computing systems
link |
came to the same conclusion, verified that conclusion
link |
and created a sense of finality,
link |
created a final state that is globally considered
link |
to be the state of a transaction.
link |
And that is how it's achieved, right?
link |
So it's achieved by users looking
link |
at these mathematical contract systems and saying,
link |
you know, if I have money in a bank,
link |
there's one single person who controls that money,
link |
they could choose to give me my money
link |
or choose not to give me my money.
link |
but maybe there's a percentage of what I own
link |
that I wanna put into another system
link |
where there's thousands of independent computing systems
link |
that are promising me, you know,
link |
with the help of cryptographic primitives,
link |
that I will be able to always have access to this,
link |
whatever this is, whatever this token is,
link |
I will at least, or at the very least,
link |
I will always have unfettered,
link |
complete control and access to it.
link |
So, you know, that's one example.
link |
Another example is, hey,
link |
we have a hybrid smart contract
link |
for something like crop insurance.
link |
I, as the user, evaluate where this smart contract runs.
link |
Oh, wow, the smart contract runs on Ethereum.
link |
Great, thousands of nodes,
link |
lots of computational security,
link |
hash power, so on and so on.
link |
Then I look at, oh, well, what triggers the contract?
link |
Oh, there's this Oracle network.
link |
Okay, it's composed of 25 nodes or 15 nodes,
link |
gets data from five different weather stations.
link |
You know, I'm comfortable with that.
link |
I have a certain level of comfort
link |
with that hybrid smart contract
link |
and its ability to provide me consensus
link |
about the transaction
link |
once the contract knows what's happened,
link |
and I'm comfortable with the consensus around the event
link |
that controls the contract, right?
link |
Because once again,
link |
that event is what determines
link |
what happens with the contract.
link |
And if the contract is super well written,
link |
it doesn't matter if the event isn't reliable, right?
link |
So now I've made this determination.
link |
I've gotten all this clear, transparent information
link |
about this system that combines the contract code
link |
with a decentralized Oracle network.
link |
And I've made my decision to participate
link |
in this decentralized insurance,
link |
kind of crop insurance policy.
link |
I've sent the Bitcoin or the stable coin
link |
or whatever I have on my Android phone.
link |
And then time goes by and let's say it doesn't rain,
link |
lo and behold, the smart contract returns
link |
the relevant amount from the policy back to me.
link |
I continue my life as a farmer.
link |
And by the way, the fact that that happened
link |
contributes reputation and contributes proof
link |
back to both the contract
link |
as something that can prove to other people
link |
that it has settled and the Oracle network
link |
as something that can prove
link |
that it has properly assessed reality
link |
or properly triggered a contract.
link |
And this is where there's one of many network effects
link |
where the more that smart contracts
link |
and Oracle networks are used,
link |
they themselves generate this immutable on chain data
link |
that proves their value and reliability.
link |
And improving more and more of that
link |
in more and more kind of use cases
link |
and more and more variants of the same contract,
link |
they arrive at a greater body of proof
link |
that they like, I am the decentralized crop,
link |
the decentralized insurance contract for crop insurance
link |
used by a million users.
link |
And my failure rate is non existent or really low.
link |
And here's my Oracle network.
link |
And by the way, it's also settled a million of these.
link |
And so it's not the logo, right?
link |
It's not, hey, what a nice logo you have
link |
on top of a building above a train terminal or something.
link |
It's much more, hey, there's a million people,
link |
there's a million separate contracts
link |
that got settled correctly.
link |
I have all the proof that I could ever need about that.
link |
And it's not something that's very easy to gain, right?
link |
Because real value was at stake, real value was moved around.
link |
And so I think once again,
link |
the transparency aspect comes in where you're able to prove
link |
that the cryptographically enforced contracts are better.
link |
That said, you can still integrate the traditional banks
link |
as long as you create a data feed
link |
on the amount of marble that's included.
link |
So if that's valuable to you in terms of reputation,
link |
you could still integrate the marble, the amount of marble
link |
that and the size of the logo.
link |
We could still keep the banks around.
link |
I think what'll happen with the banks
link |
and all the insurance companies, by the way,
link |
is not that they'll all just die or something.
link |
I think it'll be just like the internet.
link |
There'll be some of them that adopt this
link |
and some of them that don't,
link |
and some of them that do it faster,
link |
some of them that do it slower.
link |
And that's an economic decision that they'll make.
link |
I think their whole question is,
link |
is this a foregone conclusion?
link |
I mean, I think my answer is yes,
link |
this is definitely gonna be happening.
link |
I think they still have a question of,
link |
is this gonna change my industry?
link |
But I'm seeing a definite shift in people's understanding.
link |
And I think that shift is gonna accelerate rapidly
link |
as one or two of them of their competitors
link |
throw their hat in the smart contract ring
link |
and say, well, I have smart contracts.
link |
I guarantee my outcomes to you.
link |
What do they do for you?
link |
It's risky, just use mine.
link |
And the second some of them start losing business
link |
because of that, they're gonna move very quickly
link |
because that's what all of their compensation structures
link |
and all their goal planning structures are based around.
link |
They're based around what is losing us business
link |
or getting us business.
link |
Yeah, it's fascinating organizationally though,
link |
to think about banks, they're very old school
link |
and their ability to move quickly is questionable to me.
link |
I just look at basic online banking,
link |
like how good banks are creating
link |
a frictionless online experience.
link |
And I think they're not very good.
link |
And so that speaks to the kind of people
link |
who are in leadership positions at banks,
link |
the kind of people they hire,
link |
the kind of culture there is.
link |
So I do wonder if banks will from inside
link |
revolutionize themselves to include smart contracts
link |
or whether totally new competitors will have to emerge
link |
that basically create new kinds of banks.
link |
Whether, what is the company square?
link |
I think it comes up out of nowhere really with Cash App
link |
and they have Bitcoin on Cash App,
link |
whether they will start incorporating smart contracts
link |
and they will revolutionize the whole banking industry
link |
or whether Bank of America will revolutionize themselves
link |
I'm skeptical on Bank of America, but you never know.
link |
In general, I'm fascinated by how big organizations,
link |
whether it's Google or Microsoft or Bank of America,
link |
pivot hard in a world that's quickly changing.
link |
I think that takes bold leadership and a lot of firing
link |
and a lot of pain and a lot of meetings
link |
where the one asshole brings up the
link |
from first principles idea that, you know what,
link |
the ways we've been doing stuff in the past require,
link |
we need to throw that out and do stuff totally differently.
link |
I know a lot of those assholes
link |
in a lot of these different industries.
link |
First of all, I think they're getting listened to more
link |
and second of all, I think all of these places,
link |
as I look at it more and more,
link |
I think they have a fundamental line of business
link |
that they try to protect
link |
and then everybody's compensation
link |
and everybody's metrics and goals
link |
is focused around that line of business.
link |
So the second that things begin to impact that,
link |
then everybody will be in a senior meeting
link |
and that asshole will be quite listened to
link |
because he will have the only thoughtful explanation
link |
as to why this is happening.
link |
How things will evolve from there, I actually don't know
link |
because that hasn't been the case yet.
link |
But my thinking is that there will be people
link |
who don't wanna cannibalize certain parts of their business
link |
or don't wanna change certain parts of their business
link |
and then there will be people who say,
link |
look, I think this is how the world's gonna work.
link |
We're gonna make a very, very heavy
link |
kind of set of commitments to put resources towards this.
link |
I already see that with a few banks
link |
working on various blockchain based systems,
link |
but granted, they've been working on those for years.
link |
So I think all of this comes down
link |
to these kind of quarterly earnings calls
link |
where somebody asks them, hey, I saw that bank over there
link |
once the blockchain bond
link |
or a smart contract derivative platform.
link |
And I also saw that they made $10 billion in revenues
link |
or $10 billion in volume or whatever it is from that.
link |
What's your plan on the earnings call?
link |
And I promise you by the next earnings call,
link |
And then the question on the next one is,
link |
well, when's the plan gonna happen?
link |
And then by the next earnings call,
link |
it's a plan is happening.
link |
And that's what these people are sensitive to.
link |
That's what these organizations are structured around.
link |
It's not completely economically like disconnected, right?
link |
They have this core business, they wanna protect it.
link |
I understand that idea,
link |
but I think that the problem with that
link |
is sometimes it requires this myopic focus, right?
link |
And that's what all the innovation stuff is about.
link |
Every time somebody at a corporate entity
link |
is about innovation, they're trying to sidestep this.
link |
But once again, the incentives to maintain
link |
whatever the core businesses is so strong
link |
that the innovation people, even though they are there,
link |
I think they get a phone call and go like,
link |
what are we doing for this?
link |
And the ones that actually did good work
link |
and got ready to do something for this
link |
have done their employer and their organization
link |
a very positive service.
link |
Whereas the ones that aren't ready,
link |
I mean, they'll make up something
link |
and maybe they're really smart and they'll get it together.
link |
Can we talk about tokens a little bit?
link |
Generally speaking, there's been a meteoric rise
link |
of a bunch of different tokens.
link |
We could just talk about Bitcoin and Ethereum as examples.
link |
Bitcoin I think crossed $60,000 in value.
link |
What are your thoughts in general on this rise?
link |
What's the future of Bitcoin?
link |
What's the future of Ethereum?
link |
There's the total value locked metric
link |
that I think generalizes the different kind of value
link |
What does the future value and impact
link |
of cryptocurrency look like
link |
if we look through the lens of these tokens?
link |
I think valuing all these tokens
link |
and determining that isn't something
link |
I'm particularly great at.
link |
I haven't spent a lot of time on that.
link |
I've spent the vast majority of my time
link |
on building these systems and architecting them
link |
and getting them to fruition and getting them to a place
link |
where they operate properly on both the technical
link |
and the crypto economic and in every other sense.
link |
I think with Bitcoin,
link |
there is a certain conception
link |
of non governmental fiat money
link |
that Bitcoin is really the first creator of, right?
link |
So there's this very powerful idea called fiat money.
link |
It's basically more or less a kind of 40 year experiment.
link |
I think on August 15th of this year
link |
is maybe I think given the 40th anniversary,
link |
government can say, hey, I have a currency
link |
and it's worth something and here it is.
link |
In terms of the way that governments have stopped that
link |
in the past is if anyone tries to make
link |
another fiat currency in their country,
link |
they immediately shut it down, right?
link |
They immediately say, hey, this is really bad.
link |
You've done something really bad.
link |
It's time for you to stop.
link |
Don't do it anymore.
link |
And it stops, right?
link |
That's been the history of non governmental fiat currency.
link |
Bitcoin is really due to its decentralized nature,
link |
the first and possibly in some cases,
link |
in many people's minds,
link |
it's still the only true non governmental fiat currency.
link |
Now, how powerful is non governmental fiat currency?
link |
I have no idea, right?
link |
This is why so it's really as powerful as the ideas
link |
that people ascribe to it are, right?
link |
So let's say people start saying,
link |
like right now people are saying,
link |
hey, it's internet money.
link |
It's the money of the internet.
link |
What's that worth?
link |
It's probably worth a lot.
link |
I have no idea what it's worth,
link |
but as an idea, as a concept to underpin the fiat money,
link |
the let there be aspect of fiat and of Bitcoin,
link |
you basically look at it and you say,
link |
yeah, internet money.
link |
Okay, that could be worth whatever,
link |
60,000, 600,000, great question, right?
link |
There are other versions of the world, right?
link |
there are countries that don't have a good fiat currency
link |
and I see a lot of people using Bitcoin.
link |
So Bitcoin isn't internet money,
link |
it's countries without a good currency money.
link |
So all the countries without a good currency
link |
now use Bitcoin and let there be,
link |
Bitcoin as this, right?
link |
As this conception of Bitcoin.
link |
What's the value of that?
link |
That's a great question.
link |
Probably huge amount of value.
link |
Then there's a further conception of Bitcoin
link |
as some digital gold.
link |
There's a scarcity dynamic.
link |
There's all these other kinds of dynamics.
link |
What is a portable version of digital gold
link |
with some kind of built in scarcity worth?
link |
You know, kind of artificially created scarcity.
link |
What's that worth?
link |
That's a great question.
link |
I haven't done the analysis on that is the point,
link |
might be worth a lot.
link |
What is it all worth if all three of these things,
link |
you know, flow into the same fiat,
link |
kind of let there be Bitcoin
link |
as these three things conception of Bitcoin?
link |
I don't know what that's worth.
link |
I also don't know what that's worth,
link |
but could be worth a huge amount.
link |
So I think it's not,
link |
I don't think it's,
link |
I personally don't think it's super important
link |
what I think it's worth
link |
or what many other people think it's worth.
link |
I don't think that's really that important.
link |
I think what's probably important
link |
is understanding what the societal conception of Bitcoin is
link |
and how does that societal conception evolve over time.
link |
And that interestingly enough,
link |
doesn't just depend on, you know,
link |
you or me or the people who made Bitcoin or anything else.
link |
It actually depends on current events.
link |
So for example, if people suddenly say,
link |
I'm more and more worried about fiat currency.
link |
I'm more and more worried that governmental fiat,
link |
even if it's the most reliable version of that
link |
is not as good as I thought it was.
link |
Maybe I should go on the PayPal app
link |
and maybe I should get some Bitcoin just in case.
link |
What's the world where Bitcoin is a certain percentage
link |
of everyone's ownership as a hedge
link |
against governmental fiat money not being so good?
link |
Haven't done the analysis, but another example, right?
link |
Here's this conception, that's the conception.
link |
So when I look at Bitcoin,
link |
what I see is a lot of these fascinating conceptions
link |
of what the fiat, let there be value of Bitcoin is.
link |
By the way, all of them could be true.
link |
Maybe some of them are true.
link |
Maybe some of them aren't true.
link |
And the fascinating thing is that
link |
I've seen this conception change, right?
link |
So when I started in the Bitcoin space,
link |
the conception was micropayments.
link |
The cost of Bitcoin is low, we'll have micropayments.
link |
Micropayments are wonderful for machine to machine
link |
transactions, micropayments are wonderful.
link |
The emerging market, and that's fine, right?
link |
And that was one conception of Bitcoin
link |
as let there be Bitcoin as micropayments platform, right?
link |
But then the value rose and things changed.
link |
There wasn't enough expansion in certain ways.
link |
And now the conception has evolved
link |
into this other conception.
link |
But at the end of the day,
link |
I think governments have a very clear set of steps
link |
for directing the public's conception of their fiat, right?
link |
They say our fiat is worth this for these reasons.
link |
Bitcoin doesn't have that.
link |
Bitcoin doesn't have an official Bitcoin spokesperson
link |
that goes out and says,
link |
the non governmental money called Bitcoin,
link |
the non governmental fiat money called Bitcoin
link |
has value on the basis of this, this, this and this.
link |
Here's our fiscal budget, here's our future plans.
link |
Our money will continue to be safe and secure and reliable.
link |
And so what that hole creates
link |
is a hole that we all fill, right?
link |
We all basically come to some vague kind of
link |
group understanding that Bitcoin is worth this
link |
because it is tied to,
link |
let's say all non governmental fiat money comes
link |
into question, everybody doubts it,
link |
possibly due to inflation.
link |
And everybody says, you know, this is nice,
link |
but I'd like to keep 10, 20% of my wealth
link |
in non governmental fiat, just in case,
link |
you know, what are those numbers?
link |
I mean, if that happens, you know,
link |
I'm guessing you can add a few zeros.
link |
I like how you say I haven't done the analysis
link |
as if I'm sure a lot of people have done
link |
quote unquote analysis, but it's not,
link |
it's still speculation.
link |
Nobody can predict the future,
link |
especially when so much of it has to do
link |
with a large number of people holding an idea
link |
in their mind as to the importance
link |
of a particular technology like Bitcoin.
link |
There's a lot of excitement by its possibilities,
link |
but the number of zeros you add is an open question
link |
and nobody can do a perfect analysis
link |
except whoever created this simulation.
link |
Let me ask you this question.
link |
Who is Satoshi Nakamoto?
link |
There's quite a few people who suggest that person is you.
link |
Who do you think it could be?
link |
I don't know who it is.
link |
I think if I had to guess, it's probably a group of people,
link |
some of which might not even be around anymore.
link |
You know, obviously I'm very grateful to,
link |
if this is a singular or a group of people
link |
for kicking off this entire industry
link |
and making this amazing change in the world
link |
that I have the privilege and luxury
link |
of being part of in some small way in the work that I do.
link |
I think also this kind of focus on who is Satoshi
link |
or who isn't Satoshi,
link |
shouldn't in my opinion matter so much
link |
because regardless of who it is,
link |
that in my opinion should have no substantial
link |
significant effect or bearing on the functioning
link |
or the value or the use
link |
or the security of the Bitcoin system, right?
link |
So I think whoever it is,
link |
they're probably better off not making that public.
link |
And I think beyond that,
link |
whoever it turned out to be shouldn't matter
link |
because it has nothing to do
link |
with how the system is made useful
link |
or secure or anything else.
link |
And so I think that's the point of view that I have.
link |
Now, if you were Satoshi Nakamoto, would you tell me?
link |
Because you said they shouldn't,
link |
whoever Satoshi is, you should keep that private.
link |
So would you tell it to me or no?
link |
We're in some kind of weird like thought experiment here.
link |
If I was this guy, let me think about this,
link |
which I'm not, by the way, I am not this person.
link |
But if you were, would you say it?
link |
I think probably not.
link |
I think that they would cause a lot of distraction
link |
and a lot of weird stuff.
link |
And so realistically, I don't think it would help anybody
link |
or even the person who discloses it,
link |
but just to be clear, I am not.
link |
And whoever it is, I think they haven't said anything
link |
because they don't want the attention
link |
and they don't want the distraction
link |
and they don't want all the problems from this.
link |
And that makes sense to me, conceptually.
link |
It's fascinating to think if they're still out there
link |
and part of the Bitcoin, the cryptocurrency community,
link |
and it is inspiring to think that if they're out there,
link |
that they're not revealing their identity
link |
because it would be a distraction.
link |
That's kind of inspiring that people are like that.
link |
Just like George Washington,
link |
a relinquishing power is inspiring
link |
because it's ultimately about the progress of the community
link |
and not some kind of ego driven attention scheme.
link |
Again, very inspiring.
link |
The humans at their best are inspiring.
link |
What do you think about the certainty
link |
that people in the Bitcoin Maximus community
link |
have about this particular piece of technology, Bitcoin?
link |
Is there something interesting that you think
link |
that you might wanna say about this community
link |
or is it just is what it is?
link |
I think at the end of the day,
link |
results speak for themselves
link |
and Bitcoin has had an amazing impact on our industry
link |
and has had an amazing impact on the world.
link |
And I think the result is still
link |
that Bitcoin is very widely adopted
link |
and driving the adoption of our industry in many ways.
link |
So I think it's very difficult for people to say
link |
that Bitcoin maximalists don't have something
link |
that they can latch onto and say,
link |
hey, there's something very real here.
link |
I think there's been decisions made
link |
by the Bitcoin community
link |
and the people who made the Bitcoin protocol
link |
to focus it on Bitcoin
link |
and to focus it on the kind of storing
link |
of the ledger of Bitcoin
link |
and the information about Bitcoin
link |
and the transaction of Bitcoin
link |
and to focus on securing that.
link |
And I understand why that decision was made
link |
to a certain degree, right?
link |
It was about focus.
link |
It was about getting something worthwhile right
link |
without adding additional features and additional risk.
link |
And that decision is a decision that was made
link |
and has kind of the benefits of focus
link |
and the benefits of a certain amount of security
link |
and a certain amount of guarantees around Bitcoin
link |
and what that is and the value of that.
link |
And then it has certain limitations
link |
as a consequence of doing less
link |
or having the system hold data
link |
that isn't related to Bitcoin
link |
or not having the system hold contractual outcomes
link |
or smart contract code.
link |
So I think it's just kind of a decision, right?
link |
And I understand why they're excited
link |
and I'm very excited.
link |
I started in this industry going to Bitcoin meetups
link |
and I met a lot of fantastic people,
link |
libertarian people that wanted
link |
to see the world work differently
link |
and shared a lot of my beliefs
link |
and a lot of my points of view.
link |
And so anyone who's been in the industry
link |
as long as I have has had to come
link |
from the Bitcoin ecosystem
link |
by virtue of kind of starting out that early.
link |
So I have an unbelievable amount of respect
link |
and admiration and gratitude for Bitcoin
link |
and that it exists and everything that it's done
link |
and that it birthed this industry.
link |
There's absolutely no doubt about that.
link |
At the same time, whatever design decisions people make
link |
are the design decisions they make, right?
link |
And so if you've made a design decision
link |
that this ledger and this thing will be about Bitcoin,
link |
it won't be about colored coins,
link |
it won't be about op return at 80 bytes,
link |
it won't be about these other kind of nuances
link |
that you don't want this to be about, then that's fine.
link |
That's fine and that's a logical decision
link |
and it's called focus.
link |
And focus has a lot of value
link |
and a lot of great technology products
link |
have focused on something and done that.
link |
And then there's a lot of smart people around Bitcoin
link |
building kind of additional systems
link |
that anchor their security within Bitcoin.
link |
And I think that's an interesting approach
link |
that could bear fruit.
link |
I think it'll eventually require an interaction
link |
with a Bitcoin protocol in more advanced ways.
link |
And then there will be another question of,
link |
what is the design decision for Bitcoin?
link |
Is it that Bitcoin will be just about the Bitcoin ledger?
link |
Or does Bitcoin want to evolve
link |
into an anchor for all these other systems
link |
and maybe create additional data store,
link |
kind of more data on chain,
link |
on the Bitcoin blockchain related to that?
link |
So I'm excited to see how that evolves,
link |
but until then kind of results speak for themselves
link |
and the results that Bitcoin has achieved
link |
for our industry and for itself
link |
as kind of the dominant cryptocurrency
link |
and the conception of our industry
link |
that people interact with first
link |
is obviously very important and something
link |
that I think really everybody in our industry
link |
is grateful for, right?
link |
Because without Bitcoin, where would our industry be?
link |
And that's obviously something that we can't forget.
link |
What are your thoughts about Ethereum
link |
in the chain link distributed Oracle network world?
link |
Is it competition?
link |
Is it collaboration?
link |
Is it complimentary technology?
link |
What do you think about Ethereum?
link |
How much do you think about Ethereum?
link |
What role does it have?
link |
Yeah, I think about a lot.
link |
I think we're completely complimentary.
link |
So there's no competitive dynamics in my opinion.
link |
We are completely collaborative and complimentary
link |
with Ethereum and all other blockchains
link |
and all other layer twos that operate a contract, right?
link |
So we do not seek to operate a smart contract.
link |
We seek to augment and enable smart contracts
link |
to go further in what they're able to do.
link |
In fact, Oracle networks have some value,
link |
but they don't have nearly as much value in what they do
link |
if there isn't a mission critical system
link |
like a smart contract that needs their data, right?
link |
So we've made our own explicit design decisions
link |
in our own and created our own focus
link |
around guaranteeing that smart contracts can go further.
link |
We've already done that, right?
link |
Decentralized finance, the rate at which we put data
link |
is to a degree the rate at which certain
link |
decentralized financial markets grow.
link |
And as we put more data, we see more
link |
financial products go live, gaming, we provide VRF.
link |
So we have this kind of focus and it's a very useful
link |
and valuable kind of, valuable for our industry focus.
link |
At the end of the day, I think that smart contract platforms
link |
like Ethereum made a different set of design decisions
link |
from Bitcoin and others.
link |
And they focused on creating the smart contract capability
link |
and they kind of wanted that functionality to exist.
link |
And I think since then, there's been a number of people
link |
that try to improve on that or try to make variants of that.
link |
From our point of view, we want to support smart contracts
link |
in all of their variations and in all of their use cases.
link |
So one of the things that I personally like about Chainlink
link |
is their ability or Chainlink's ability
link |
and the Chainlink network's ability to be useful
link |
to many different chains and across many different use cases.
link |
I'm personally a fan of Ethereum.
link |
Ethereum has done a huge amount for our industry as well.
link |
Ethereum took us from a world where it literally took months
link |
to make a new smart contract by being forced
link |
to code it into a protocol.
link |
You had to go to the protocol developers
link |
and you had to say, hey, I need a DEX
link |
or I need some kind of smart contract.
link |
Put it in the protocol itself.
link |
Put it in the actual blockchain mining
link |
and kind of block generation, transaction generation protocol.
link |
That would take months or sometimes even over a year.
link |
That was a horrible experience
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and obviously very few people wanted to participate in that
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and so very few people made smart contracts,
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which I was not a fan of, right?
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And then Ethereum came along
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and really did a lot of innovative things
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and introduced this approach to scriptable smart contracts
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where you could script all of these different conditions.
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And I found that fascinating before Ethereum.
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I found that fascinating once Ethereum
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arrived, I found it fascinating after Ethereum launched
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and I still find it fascinating.
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And I'm also very grateful to Vitalik
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and the Ethereum community and all the core developers there
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for taking our industry a step further.
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So I think they absolutely deserve a huge amount of credit
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for taking our industry from it takes months
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to make a really small smart contract
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to it takes weeks to make a relatively secure,
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relatively advanced piece of on chain code
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that anybody can script and people can do audits on
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and that's an unbelievable leap forward for our industry
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and I'm genuinely grateful to them for that.
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I think the next step in line with our body of work
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is how does that scriptable on chain code
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become more advanced in its interaction
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with all of the systems and events in the real world,
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which is in my opinion, the final missing piece
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of the puzzle, right?
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So my body of work, the body of work that I'm involved in
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would not be where it is right now
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without Bitcoin by any measure.
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It wouldn't even be where it is now without Ethereum
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and the growth in smart contract development
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that they've created.
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And now what I think is gonna happen next
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is there'll be a lot of different smart contract platforms,
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a lot of different layer twos,
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some of them will be private for enterprise,
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some of them will be public,
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there'll be some public winners in certain geographies
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for maybe regulation reasons, maybe other reasons,
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there'll be other public winners, the larger internet,
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and there'll be a number of different people
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building smart contracts in different languages.
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We are excited and I am excited
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and the Chainlink community is excited
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and basically there's a lot of,
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I mean, for lack of a better word, excitement
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in seeing our industry graduate
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to providing more use cases,
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more usable hybrid smart contracts, right?
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Because once again, it's absolutely amazing
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that Bitcoin created non governmental fiat money.
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It's an unbelievable innovation
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and invented decentralized infrastructure
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and birthed our industry.
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It's an unbelievably great achievement,
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an amazing achievement that we now have
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scriptable smart contracts through something like Ethereum.
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Once again, monumental achievement in my opinion.
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Once again, we still need to look to the future.
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We need to look to how do we take
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the decentralized infrastructure concepts
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that Bitcoin initially put forward,
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that Ethereum then improved upon
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and created into these scriptable smart contract formats,
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and how do we expand that into the world
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of real world outcomes to change
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the global financial industry, the global trade industry,
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the global data marketplace industry,
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and many other global industries.
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You mentioned results speak for themselves
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and how design decisions have consequences.
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The Chainlink community have come up
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with a lot of brilliant designs.
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So how do you think through the design choices
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that you're facing where you can't predict the future,
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but you're trying to create a better future?
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Is there something low level introspective advice
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that you can give or describe
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as to how you think through those decisions
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or high level how you think about those decisions?
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I think that's a great question.
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And I think that actually gets to the core
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of what the Chainlink network is supposed to achieve.
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We are supposed to achieve a maximally flexible system.
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So once again, this is the big difference
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between Chainlink and Oracle networks in general
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and blockchains in my opinion.
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Blockchains do not seek to be maximally flexible, right?
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They say, here's my block size,
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here's the transaction types you can put in those blocks.
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Here's the contract language I have.
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Here's kind of my blockchain system, right?
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Here's the fee structure for those blocks.
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They're gonna keep getting kind of composed,
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transactions are gonna get put into blocks,
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blocks will get connected and it'll continue, right?
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And that's a very focused type of system.
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And that makes sense because it's focused
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on creating security for that category
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of on chain activity, which is once again,
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a critical, critical part of building
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a highly transparent system and something
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that Chainlink enables and doesn't compete with
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and just enables to do more.
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Oracle networks, conversely, have to interact
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with all the world's data and provide all the services
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that blockchains don't provide, right?
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So there's kind of a spectrum.
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On one end of the spectrum, you have blockchains
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that are highly secure, highly reliable,
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highly tamper proof, highly transparent,
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but are not very feature rich.
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For example, they cannot talk to an API.
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Many of them can't generate randomness.
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They cannot do some kind of privacy preserving computation.
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So they're very secure.
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And there are these kind of data structures
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and smart contract platforms to hold on chain code
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that can define conditions, receive value,
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pay value back out under conditions
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and create transparency around all that,
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which makes perfect sense.
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And then there's oracles and oracle networks.
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That is all the world's data, right?
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We're talking about taking all the world's data
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and making it consumable for all the world's use cases
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that have trust issues.
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So the amount of variability there is absolutely massive,
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It's like the decentralized oracle network
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and the conditions that that decentralized oracle network
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needs to meet is gonna vary very widely
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from an insurance contract to a lending contract
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to an ad network contract to the data sales contract
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that we discussed to any number of other smart contracts.
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So really the ability of a decentralized oracle network
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to flexibly address all of those requirements
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is what's necessary.
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So flexibility is the goal,
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whereas with on chain like Bitcoin,
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flexibility is the enemy in the sense
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that you want security, you want the focus there.
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And in that kind of world,
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design decisions have huge consequences.
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And then if you look at the distributed oracle network side,
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you want to remove the restrictions of design choices.
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You want to provide maximal flexibility then.
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So it's a completely separate kind of a design framework.
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It's a slightly different problem, right?
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Because we're not trying to define transaction types
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fitting into blocks on a certain timeline
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of those blocks being generated.
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We're trying to say, hey, there's this world of services
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or this world of data that's not very deterministic,
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but it's unbelievably useful
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to these smart contracts over here.
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And actually they need it to even exist.
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And we really want them to exist because once they exist,
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it's gonna completely redefine
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what our whole industry is known for, right?
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And defined NFTs are not even the tip of the iceberg.
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They're like the snow coming off the top of the iceberg.
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And so our goal is to create a framework
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and an infrastructure and a software
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that allows people to compose
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decentralized oracle networks, right?
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So initially you can compose a decentralized oracle network
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of seven nodes that goes to three data sources
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to trigger your contract worth a million dollars.
link |
And that's where you could start.
link |
And then let's say your smart contract,
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your DeFi smart contract goes to a billion dollars.
link |
Well, then you need to make some changes, right?
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You need to go from seven nodes
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to 15 or maybe 31 nodes.
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And you need to go from three data sources
link |
And you maybe need to create some kind of
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what we call circuit breakers and some other checks.
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And you need to make sure
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that the decentralized oracle network
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comes to consensus around those checks.
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Because now the centralized oracle network
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isn't controlling a million dollars,
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it's controlling a billion dollars.
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And we have decentralized oracle networks
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that control well over a billion dollars,
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multiple billions of dollars.
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And we see them growing and getting more advanced
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data sources and more advanced features.
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And then if somebody else comes and says,
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well, I don't really wanna make a DeFi product,
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I wanna make crop insurance.
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And I have a completely different set of conditions.
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I want this method of consensus
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and I want data to be aggregated in this way,
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but not the way that you do
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for decentralized financial products.
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I mean, what are we supposed to tell them?
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We're supposed to tell them, no,
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our decentralized oracle network can't let you do that.
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And you can go and wait another five years
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until somebody builds it for you.
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That's not what we wanna do, right?
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What we wanna do is be able to say,
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absolutely, here's an example of how somebody else
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made a decentralized oracle network for weather insurance.
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Here's a template, change that template,
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evolve it to meet your needs.
link |
And then someone else comes and says,
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hey, I have some other use case in gaming, right?
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I wanna make NFTs related to real world sports events,
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or I wanna do whatever I wanna do
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with some kind of sports related data.
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Wonderful, here's the framework,
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here are your risk dynamics,
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here's a collection of node operators,
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here's a set of preintegrated data sources,
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here's a reputation system to assess
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the quality of your ensemble of nodes,
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here's a way to scale that up
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as the value in your contract scales.
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Here's all the tools that you need to build this contract.
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And what we actually see now as there are multiple types
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of computations and data sources that are provided
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by different decentralized oracle networks,
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of which there are now hundreds,
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we now see that a single hybrid smart contract
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might use multiple decentralized oracle networks.
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So there might be a hybrid smart contract
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that uses a price data, decentralized oracle network,
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a proof of reserve oracle network,
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a randomness oracle network.
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And I think we're gonna continue to see
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this dynamic that more and more advanced contracts
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compose various decentralized oracle networks
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into more advanced use cases.
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And this is the dynamic that we're focused on enabling.
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And I think it's actually a very virtuous cycle
link |
for everybody because the more of these
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hybrid smart contracts we enable on Ethereum
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and other blockchains, the more our industry
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provides real world outcomes to the market.
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To the larger world, which is at the end of the day,
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what I think everybody in our industry wants.
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Everybody in our industry wants hybrid smart contracts
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to become the way that global finance works,
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global trade works, global insurance products work,
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because they will inherently need both a blockchain
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on which the contract itself lives
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and an oracle network that powers
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all of the other interactions, right?
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As a developer, how would you recommend
link |
somebody listening to this, but also me,
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to get started with smart contracts
link |
and to get started with hybrid smart contracts?
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Well, for hybrid smart contracts,
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I'm gonna have to do some kind of shameless promotion.
link |
Please, let me twist your arm.
link |
I think you can go to our YouTube.
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We have a number of developer tutorials.
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Chainlink YouTube?
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I think if you just search Chainlink on YouTube,
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you should find it.
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Beyond that, we recently had a hackathon
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where we had a huge amount of very kind of
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advanced hybrid smart contracts getting built.
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To elaborate on that, you had a hackathon.
link |
Is that something that people can follow along
link |
like a video or there's web page traces of what happened?
link |
Or is there a future actual hackathons
link |
that people could literally participate in?
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There's plenty of more hackathons coming up.
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We wanna enable as many developers in web3 and web2
link |
to build hybrid smart contracts
link |
as a way to redefine our industry
link |
and kind of make all of these smart contracts come to life.
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There are definitely gonna be more hackathons.
link |
So people should go and preregister or register
link |
on a list to get involved in that.
link |
That's a great resource where we have a lot of speakers
link |
and a lot of educational tools.
link |
They happen over a course of weeks, not days.
link |
So there's a long time for people to work on these things
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at the speed that they find comfortable.
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One, is there a kind of hello world entry point
link |
for hybrid smart contracts?
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And two, on the hackathon side,
link |
what kind of stuff do you see people building at first?
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Just kind of getting their feet wet
link |
in terms of the kind of applications that could be enabled.
link |
I mean, there's unbelievable things
link |
that we see people building.
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I think how to get your feet wet,
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I think the hello world is probably DeFi
link |
because it's pretty straightforward.
link |
And there's a large amount of data sources
link |
that we already have putting data on chain on test net,
link |
which is the test environment in which people would build.
link |
So I think DeFi is probably to a certain degree
link |
the most exciting for certain people
link |
and pretty expansive in terms of the tutorials
link |
and the amount of contracts
link |
to see how people have already built it.
link |
I think beyond that,
link |
we see people building amazing things at these hackathons.
link |
In the previous hackathon,
link |
we saw somebody build a smart contract
link |
that allows someone to rent out their Tesla.
link |
So it allows the Tesla API to give someone else access