a16z Podcast - a16z Podcast: Cryptonetworks and Cities -- Analogies

Episode Date: August 1, 2018

with Denis Nazarov (@iiterature), Jesse Walden (@jessewldn), Ali Yahya (@ali01), and Devon Zuegel (@devonzuegel) Cryptonetworks are often compared to firms, people, or even coral reefs -- but, observes a16z crypto partner Ali Yahya, they might be much more similar to cities. Where does that analogy fit, and where does it break down? And what can we learn from how cities both emerge from the bottom up and are motivated by a top down vision/design  and apply to open source networks such as those in crypto? In this episode of the a16z Podcast -- guest hosted by freelance software engineer (and blockchain app developer) and writer (and urban watcher) Devon Zuegel -- a16z crypto partners Denis Nazarov, Jesse Walden, and Yahya share their thoughts on "rough consensus"; shared myths and beliefs; modularity vs. monolithic design; and the rivers and riverbeds that people build cities and code around. At the end of the day, it's all about mass coordination at scale... but what are the incentives for building the infrastructure and ecosystem, for running experiments but also determining governance as well? Please note that the a16z crypto fund is a separate legal entity managed by CNK Capital Management, L.L.C. (“CNK”), a registered investor advisor with the Securities and Exchange Commission. a16z crypto is legally independent and operationally separate from the Andreessen Horowitz family of fund and AH Capital Management, L.L.C. (“AHCM”).  In any case, the content provided here is for informational purposes only, and does NOT constitute an offer or solicitation to purchase any investment solution or a recommendation to buy or sell a security; nor it is to be taken as legal, business, investment, or tax advice. In fact, none of the information in this or other content on a16zcrypto.com should be relied on in any manner as advice. You should consult your own advisers as to legal, business, tax and other related matters concerning any investment. Furthermore, the content is not directed to any investor or potential investor, and may not be used or relied upon in evaluating the merits of any investment and must not be taken as a basis for any investment decision. No investment in any fund advised by CNK or AHCM may be made prior to receipt of definitive offering documentation and due diligence materials. Finally, views expressed are those of the individual a16z crypto personnel quoted therein and are not the views of CNK, AHCM, or their respective affiliates.  Please see https://a16zcrypto.com/disclosures/ and https://a16zcrypto.com/disclaimers/ for further information.

Hi everyone. Welcome to the A6 and Z podcast. I'm Sonal. Today's episode is on analogies between crypto networks and cities covering everything from where the analogy works and where it breaks down to how communities emerge bottom up, but also at top-down vision and design. And what happens when we have mass coordination at unprecedented scale? The discussion is moderated by guest host Devin Zougal in conversation with Dennis Nazarov, Jesse Walden, and Ali Yaya, all of the A6 and Z crypto team. Speaking of, please note that A6 and Z Crypto is an independent fund managed by CNK Capital Management, a registered investment advisor with the SEC, it's separate from the Andreessen Horowitz family of funds. The content here is for information only and should not be taken as legal business tax or investment advice. It does not constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security.

In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment. CNK is not seeking investors, an investment in any fund advised by CNK may not be made without first getting final offering docs and diligence materials anyway. For more details, please also see A6NZ Crypto.com slash disclosures and A6NZ crypto.com slash disclaimers. Finally, you can find this episode as a video as well with links and more on A6NZ's YouTube channel. Hi, I'm Devin. I am a software engineer and writer based out of San Francisco. Today I'm going to talk with Dennis, Jesse, and Ali, who work at A16C Crypto. We're going to talk about crypto networks and their evolution and open source, and it's going to be a fun conversation.

So for starters, Ali recently had a great tweet about how crypto networks are similar to cities and not so much like individuals and firms. Can you unpack that for me a bit? Yeah, of course. The tweet was basically drawing an analogy between crypto networks and cities. And the inspiration for it was that oftentimes people tend to compare crypto networks to things like firms or to things like individual organisms like individual humans or to things even like coral reef, which was a surprising comparison that I think people have drawn. And my sense is that crypto networks are actually much, much more like cities, which could be considered a specific kind of organism than they are like individual organisms or firms. or coral reefs. And the rationale behind this is that both cities and crypto networks are, in the case of a

crypto network that is decentralized, like many of the crypto networks that we know and love are, there are communities of loosely affiliated individuals. And so there are communities that come together and there's consensus about the location in which they will live and work in the case of cities. and there's consensus about the protocol that they will run in the case of crypto networks. They also tend to emerge in a bottom-up way. They're organized in a bottom-up way. And I think this is a trait that's common to a lot of the crypto networks that are most successful.

I think Ethereum, Bitcoin, to a considerable degree, emerged out of communities working together, as opposed to necessarily a top-down monolithic design that's imposed, upon an organization or a group of people who are working together by a single person or a small group of people. And similarly, the birth and the death of cities and the birth and the death of crypto networks have interesting similarities. Because there's bottoms up organization, it tends to be the case that the birth of a city occurs when there's critical mass, when people come together and decide to live in a particular place and some infrastructure starts to be built around that place.

And in the case of crypto networks is similar. You need a critical mass to provide enough security and enough infrastructure for the crypto network itself. And similarly with the death of a city, it's kind of telling that when a government is overthrown, it doesn't necessarily mean that the city dies. The city continues to exist. And maybe there's a new government thereafter,

which is an emergent property of the fact that the city is organized in a bottom-up way. In the case of a company, for example, if the company, if the CEO is fired, it's much more likely that the company will fail. I mean, oftentimes you can replace the CEO, but there's much more of a central point of failure in its top-down hierarchy as opposed to bottom-up.

And so cities like crypto networks may have this property in common. They tend to live for a very long time because of their bottom-up nature that makes them sort of more robust and more resilient. They have fewer central single points of failure. And then finally, if we think about the design of a city, like the role of a city planner or a city designer, somewhat analogous to the role of a crypto network protocol designer

in that that person has to keep in mind the preferences and the roles of a lot of other different people who are not under the control of the individual actually doing the designing. And so it's a, I think like there is an analogy there to be drawn to, insofar as the architecture, that there is some amount of top-down design in the case of cities, but it's more of a scaffold. And then that scaffold allows for the emergence of something greater in a bottoms-up way. And I think it's similar in the case of crypto networks. I love that analogy. I think it's really interesting to draw the parallel to the urban planner because there's so much that is out of their control,

but there are also initial conditions that you can get right. What are some things that Ethereum or Bitcoin got right early on or things that maybe resulted in consequences that the designers didn't notice at first? Maybe just a way of sort of reframing the analogy to cities is to throw in an element of time. So when we talk about sort of cities being a scaffold and sort of an emergence structure for independent parties to agree about the location of their work

and go about their business, it's important to talk about where the scaffold originally emerged from. What is the tipping point that creates this, I guess, sort of maximum interestingness for people to sort of move in this direction, to converge on a city? And I think, you know, if we talk about a project like Ethereum, for example, you know, early on, there was this amazing white paper, and it described this profound vision about what the platform could enable. And at the time, you know, the code hadn't been written. There was no network. There was no city yet. But there was this grand vision about, you know, basically the city that we could build and what it would look like.

it described self-driving cars driving cars driving on roads where they pay the road by the meter that they drive and then going to the petrol station and paying to fill themselves up and paying a mechanic to fix them and all this happening happening through automated smart contracts. And this vision was very compelling, I would say, you know, it sort of galvanized a lot of people to move in this direction to arrive at some sort of rough consensus about the direction. about the direction that this technology was heading and become, you know, converge in such a way that they decided to help build it out.

And so it was very important to have this sort of, I think, top-down vision in the very early days about what the network could become and then sort of allow the community to finish it. And Chris Dixon in his post on why decentralization matters has a really interesting framing of this that the sort of, one of the amazing properties of open source is that someone can put an idea out there

and then galvanize developers to finish the idea. And that's, in fact, one of the features of open source that, you know, and it gets this idea that Dennis talked about recently about why worse is better, about why getting an idea sort of half-baked, but compelling enough to galvanize people is actually a really good strategy in the space. Yeah, I think this is a really interesting,

one place in which analogies can be useful is that you can also see where they sort of break down a little bit with cities they usually start because they happen to be like at a river basin or like they have a really good port and so people just naturally start coming there and then over time this community builds up and they realize oh we're a thing now or in San Francisco's case the gold rush happened

people came there for the gold and then it turned out that like oh I guess we have all we have to put in sewage systems We have to put in roads. And so I think to contrast that with crypto networks, with crypto, it's starting in the ether. There's like, there's nothing there. And so having that core vision early on is really critical to get people to come there. Yeah, it's like creating that river out of almost nothing. It's like the idea of proof of work based consensus.

Like Nakamoto consensus could be that river basin around which people converge and communities emerge. And then the development of Ethereum is kind of like a, it's another city that's being established that's inspired by the first city that was Bitcoin. And of course, I think it's a very good point to clarify that analogies only go so far. And they're like a good tool to explore the maze of ideas. But ultimately, when we actually have to make decisions or rigorously think about something, we should think about those things from first principles. And so in the case of, like when we talk about what makes sense for crypto networks, now that we've been. to some extent inspired by the analogy to cities, we can now think, okay, well, in the case of the development of open source, what actually is what makes the most sense? And we can talk about

things like modularity versus monolithic design. Can you dive into that a little bit, the dichotomy between modularity and more top-down design? Yeah, I think exclusively in the world of software, we could talk about the dichotomy that exists between something like the Unix philosophy, which is very much about modularity, is very much about bottoms up, and say the Apple philosophy, which is much more about vertical integration and top-down monolithic design.

So you have the UNIX philosophy telling you you should build software in a way that is very well-scoped, it's narrowly focused, has very clean interfaces, and is optimized for modularity. It can be built around, it can be composed with other pieces or other tools

that other people may build. And in the case of Apple, it's a very different world. It's much more about I, Steve Jobs, know what's right for people, and I will design a phone end to end. And then I will build it and ship it, and it'll work. And it's interesting to see that in different contexts, both strategies have worked. And then there's a question, like how does this apply to things like crypto networks? And I think we're already seeing examples of both strategies. Like Ethereum, I think, as sort of Jesse was saying, is more an example.

of the bottoms-up modular approach where there's a kernel of an idea, there's that riverbed along which people get together. But then there's also a community that's building all sorts of tools around it. And a lot of those tools are projects in and of themselves. And so there's a certain amount of modularity therein. And there are also other projects that have a much more top-down vision for the way that things should go and spend a hell of a lot of time building in-house before releasing something to the community. And you can say that they are much more opinionated about the way the system will ultimately look.

And both of these seem to have significant merits. Yeah, for sure. I mean, both Unix and Apple have been massively successful in their own ways. What are some of the trade-offs that you make on one side or the other? On the top-down approach, I think we give too much weight to the beauty of top-down.

You know, we only see it when it works. There's the genius. There's the genius iPod product. There's a genius iPhone product. But, you know, how many hundreds of products that the Apple team iterate, you know, whatever the Johnny Ives office, the white box that you have high clearance to get into, what were the crazy ideas that didn't go to market? And how efficient can a top-down organization be in terms of, you know, catalyzing, you know, tons of experiments to try different ideas? And I think what's amazing about this distributed approach that, you know, Ethereum laid down the vision for, I think what was amazing, about the vision, that it was an unattainable vision.

You know, the self-driving cars, like, clearly we weren't going to be building that on Ethereum in the next few years, but this high mark created this, you know, wide space of, you know, shorter-term kind of improvements that we had to make. And although Ethereum is just one example, there's many projects that are, you know, maybe competing with Ethereum. And I think a great analogy there is that we can think of them as, you know, it's a different city trying to have its own kind of structure and governance, but ultimately, you know, you can say we're contributing to one country that ultimately there's these are still parallel experiments

where you know bitcoin maybe the mother project and where everyone is taking their own vision you know they think that you know maybe I don't want to live in this city I want to start my own city but ultimately it's still co-evolution you know parallel experiments yeah so maybe one thing that's interesting to talk about is sort of when we when we talk about sort of the evolution of cities and the evolution of crypto networks to talk about sort of what level of granularity This is to Dennis' point about the city level versus the country level. Ethereum recently announced a big

sort of pivot. They had long planned to upgrade to a proof-of-state consensus Casper FFG was the name of the specific consensus mechanism. In fact, when the protocol initially launched, there was actually a time bomb hard-coded into the protocol that if they didn't make this change,

the system would explode. I forget exactly what the constraints were. They removed it, and just about 45 days or so before Casper FFG was set to be deployed, the Ethereum Foundation decided that they were going to pull that recommendation to the network in favor of sort of a joint update between Casper FFG and Sharding, which is another project that independent team was working on.

and so what's interesting about this is it's sort of if Ethereum is a microcosm of a city you have these independent parties that live in that ecosystem working independently of one another on projects that they think are the most important so you have one team working on Casper, one team working on charting and independently they arrive at some convergence that in fact the independent paths that they're on

They share some common features that allow the two teams to agree that, hey, there's a better path forward if we work together on this. You were talking about how the Ethereum community has been able to converge on really a huge change, changing the entire approach for Casper, some fundamental architecture for the whole system. And yet, it's this big decentralized system. No one person to get to make these choices. It requires a lot of consensus to make any of these shifts. Can you talk a little bit about the what about the community enables them to do that, despite not having the central point of control? Yeah, yeah, that's a great question.

So I think there's this idea of rough consensus, and this was actually a term coined by the Internet Engineering IETF. I can't remember what the T-stance were. Task force. Task force, that's right, yeah. Internet Engineering Task Force. They first came up with this term rough consensus. And the idea of rough consensus has these four sort of properties.

One is that the consensus can't be constrained by the limited resources of like one organization or sort of one sort of top-down vision. It has to emerge from sort of like a soup of people. Individuals, potentially, or individual organizations that are working in their own direction of whatever they think is sort of most interesting. And the process of arriving at this consensus can appear very messy and sort of unfocused because these parties are moving in their own direction.

But what's serendipitous about it is when these parties independently converge on the same idea, this rough consensus sort of is the result. And in order for this to happen, of course, there needs to be sort of a philosophy, an operational philosophy of strong views weekly held. So people are opinionated, they're working in their direction, direction, and they're able to convince others that that is the right direction, ideally

through working code. By the way, when we keep talking about this idea of rough consensus and sort of the direction of maximum interestiness, these ideas actually came from a post written by Venetash Rao in a series called Breaking Smart. And so Ethereum has been able to do this a few times, maybe the most well-known example is the DAO hard fork, or the... the community decided that the right direction to proceed after that, after all these funds were locked up, was to, to fork the state. You know, the Dow fork was the sort of cataclysmic

event very early on in the network's history, where lots of, a very large percentage of the total Ethereum supply got hacked and stolen by an attacker. And so the community, the wide Ethereum community had to make a choice. Were they going to allow this attacker to keep the funds, or were they going to try to return them for the general health of the ecosystem? And so this was a very contentious decision because lots of folks felt like, well, you know, the one rule of smart contracts is that they're immutable and the code is the law. And another group felt that it was more important to, you know, to the health of an early network to restore the funds to their rightful owners and ensure that the,

attacker did not sort of ruin the community at the outset. And so, you know, a proposal was made on how to actually make this change to return the funds. And, you know, the foundation and its sort of leadership got behind it, and the miners of the network decided to adopt it, and a minority group decided not to, and the community forked into two directions. And so I think that's a very, it's a good example of the foundation and other sort of prominent. people in the community, having strong views, but being willing to adapt them in the face of new information and sort of being able to sense a rough consensus about what was best for the community. It's interesting here because the Ethereum Foundation has figured out a way of

striking a balance between these two ends of like top-down monolithic design and imposed control versus completely bottoms up anarchy. And I mean, the Tao is an example. It's like there was some amount of top-down control, but there's also a pushback and there's also a dialogue. There's also an involvement from the community. And so I think, I mean, that's crucial, really, because if we think about a crypto network that goes too far on one end or the other, I think you'd end up with, say, for example, if you go too far on the, on the, like, bottoms up direction, and you just do, everything's modular, everyone just moves in the direction of maximum interestingness. And to some extent, that's the greatest value, the greatest good.

for people to sort of feel free and to contribute in whichever way they want, then you may end up with something that just simply isn't coherent. This maybe would be akin to a city that lacks basic infrastructure, that lacks some sort of planning for how the road system should work or how the plumbing system should work or how the electrical system should work. And so that's clearly, it was likely not to be the best approach, but also you go too far on the other side, then you don't have enough participation from the community,

and then you don't get to build the kind of widespread community that a project like Ethereum ultimately succeeds at building. And what's important about having some amount of modularity and bottoms-up organization is that it maximizes the surface area for experimentation. If you build some component of your system in a way that's modular and in a way that can be built upon, then other people can be creative in the ways that they incorporate that module with whatever it is that they're building, whereas if you have some top-down vision

for how everything should work, then there is very little flexibility and there's very little opportunity for experimentation. So I think it's a fine balance to try to strike, and I think that is the challenge that's facing a lot of these projects. Yeah, looking at past open-source projects, I think is really interesting, again, analogy to crypto as it is today. Can you guys dive into some examples of projects that go more on one side or the other and what the implications were of those? I think one analogy I keep thinking of is just basically innovation in general, you know, startups in general, that there are many, many startups that are formed every year.

You know, most of them, 99% of them will fail, but one of them will succeed or a few of them will succeed in sort of technology and innovation moves forward. And that's sort of the beauty of innovation, you know. But in general, innovation always moves forward. I think to the city's analogies, in New York, if you open a restaurant, it's a very competitive business, it's probably it will fail. But if you love food, there's always going to be great restaurants in New York. And I think with the technology analogy, the value broadly goes to innovation in general, but it's not captured in some base layer. But in competition in open source and in the blockchain community, ultimately, everyone is creating these open, transparent contributions that anyone else can reuse. So I think you can argue there is a capture of all of the innovation in one place

One way is through the technology that is created for anyone else to use, but another could be that if everyone's building on top of the same blockchain platform It makes that blockchain platform stronger. So I think it's a very unique feature of the space that The knowledge sharing isn't siloed. It's open So even though you have the same, you know, capitalist free market competition the fruits of all of that labor are for the public, and they do aggregate in one place. Some examples from the world of open source may be, well, all of which have worked,

maybe on the top-down monolithic side is Linux. It's still an open-source project, but you have a lot of top-down control. Lina Storvoltz is the gatekeeper. Versus something like the JavaScript, like NPM ecosystem, where it's very much bottoms up and there's a very large number of open source projects that are built by a diversity of people,

and those get composed in all sorts of creative ways. And both of them have, to some extent, worked. And what's interesting is in neither of those two worlds, at least historically, like pre-crypto, has much of the value that those open source contribute been captured. And to Dennis's point, like how does some of the value that innovation creates get captured?

So what's interesting with this brave new crypto world is that now we, can have modular components that are built in an open-source way that are granularly incentivized. So people can work on building those modular components, and if there is some crypto-enabled mechanism like a token or something like it that incentivizes that work, then they can capture some of the value that they create. And this has been historically a big problem in open source, like, for example, in the world of, which is generally open source, like, for example, the hard bleed bug in SSL.

is interesting because even though SSL is a critical piece of infrastructure and is used by sort of every single person in the world who connects to the Internet, only a couple of people were really in charge of maintaining the implementation of OpenSSL. And so not enough of the value that those people were contributing was captured, and as a result there isn't enough of a strong incentive for the adequate amount of resources to be devoted to that one particular. module. So something that's exciting here is that that can change. Yeah, I mean, both cities and open source are just a classic example, but both classic

examples of positive externalities that aren't captured. Everyone benefits from having a city that works really well. You can thrive much more. It could see this platform that you can live in, infrastructure to get places, but no individual person wants to fund BART. They don't care that much. Similarly, with open source, these are just fundamental protocols that underlie everything that we do, like the internet wouldn't work without TCP, internet wouldn't work without Ethernet, all of these protocols. And yet most of these come out of like academic research institutions, just people working on them out of the good of their hearts.

So one of the reasons I'm really excited about crypto is it now can like pump some juice into these. And actually you get all of those positive externalities, but then also some of them are more captured by people. Oh yeah, exactly. I think a point about positive externalities in the case of cities, how people, like no one individual wants to fund like a public good. So that's super interesting because we often talk about how what's exciting about this new technology is that it brings together two of the most powerful forces in history. There's what makes science tick, say the free flow of ideas and the universal freedom for criticism and discourse about those ideas on one hand.

And then there is capitalism and free markets and economic incentives on the other hand. and those things tend to not coexist, at least they haven't, before the emergence of this technology. It has been difficult, like the science aspect is embodied by open source, and historically it's been difficult to monetize open source. And that's kind of like a public good. People benefit from the existence of open source, and yet no one person wants to fund development on open source projects.

It's only volunteers who ultimately drive that effort. And then similarly, the technology aspect, the capitalism aspect tends to only really be sequestered within technology companies that have an incentive to keep their secret sauce confidential in a way from everyone else as a form of defensibility. And so there's no free flow of ideas. And so combining these two in this new world is powerful because we have a model for funding public good, or public goods in a sense.

Yeah, the irony behind open source is it's supposed to be this big decentralized thing where everyone can democratically participate. But because the incentives aren't nicely tied to the contributions people make, all of the funding ends up coming from massive companies, which is wonderful that they're willing to contribute. But the reason they're willing to contribute is because they actually do capture enough of the externalities that it makes it worth their while. So this results in huge centralization, and the projects that do get done, that do get completed, are just the ones that the really large companies want, or that the government or the NSA wants, which leads down a whole other rabbit hole. Yeah, and they have very specific incentives in wanting to do that, like Google funding, the development of TensorFlow, the open source machine learning library, it's very strategic. Something like Ethereum is a great example of there being a very strong incentive to deliver. this new technology. There's a market demand for it, and those that worked on it, you know, did very well with the increase in price of that, the asset that's native to the network. But there's also this sort of persistent tragedy of the commons problem where, you know, now going forward, Ethereum needs improvements.

Like, it's not fully baked. We discussed this earlier where it still needs the community to build it out. And so there's this question of, you know, who will fund that? And the answer has been, you know, this boom of ICOs, like each project starting its, with its own token, and it's, you know, raising tons and tons of money. And not every one of these projects necessarily needs its own token. Some of these projects could be just sort of core infrastructure at the base layer of the protocol, but there's not an incentive or there's at least no mechanism by which the community can formally decide that funding should be directed towards this particular module. And so it brings up this really interesting question of how do we govern these decisions.

And in cities, we have local governments to decide how to allocate taxpayer dollars and what should be the public goods that are built. And I think that question is very much open. And TBD, whether sort of this idea of rough consensus about the right direction is sufficient or more top-down approaches is better in terms of making exponential progress on public goods and better infrastructure. Yeah, the incentive seem much better aligned with crypto networks these days, but there's still some nuances that need to be worked out.

I think the fact that you can get rich pretty fast by just having a token sale result in certain parts of core infrastructure being systemically undervalued. Like, whenever, as I write solidity smart contracts, like, the developer ecosystem is just not there at all. Now, there's a few exceptions. Like, consensus has built a lot of good tooling. But besides consensus, like, basically no one's building tools. There's no incentive to build the tooling, the base infrastructure. All of the energy is, like, sucked out because everyone who has those skills just wants to run a token sale.

One way I've been thinking about it is, you know, the idea of some, semantic version, and you have the major, minor, and patch version, you know, patches, like, very small bug fixes, minor, you know, is a non-breaking change, and major is, like, when you've significantly changed the protocol, and history is shown that, you know, if you think of Ethereum as an evolution of Bitcoin, if Bitcoin is, you know, blockchain 1.0, Ethereum is blockchain 2.0. You know, Vitalik was active in the Bitcoin community, but he realized that to get consensus from the stakeholders to significantly improve Bitcoin will be impossible.

to go from 1.0 to 2.0 required basically raising money and creating a completely new version that was a fork. So we have this tragedy of the commons that maybe it's impossible with introducing these new economic incentives to evolve the protocol where we upgraded the protocol significantly without independently raising money and basically creating a fork. So if you think of a project like DFINITY and EOS as 3.0, the way the incentives have worked, worked for them is that it's better for them to raise their own money, hire the best teams, and realize all the upside from creating this innovation as opposed to being part of the Ethereum community.

Well, one of the things that I think is super, super exciting is that each of these projects represents an experiment as to how governance can work, as to how incentives can be structured. So I think as a result of the space, because each one of them is, to some degree, self-contained, We'll learn a lot about economics. We'll learn a lot about game theory. We'll learn a lot about monetary policy and political science. It's parallel city experiments that make the country that is the blockchain more robust. Exactly.

So to some extent, like Ethereum hasn't yet succeeded at incentivizing core development or development on the core protocol and has succeeded massively at incentivizing people building on top of it. Developers, that is not users yet. And a different experiment may take the same ideas that Ethereum, has implemented and maybe they may extend them a little bit. Like, for example, one idea would be for the base chain to, to some extent, charge a tax from all of the things that ultimately get built on top of it as a way of funding core development work.

And one way of doing this could be the supply of any token that is issued on top of the Ethereum blockchain may be inflatable by the underlying chain, by the Ethereum. main chain, and then paid either to miners to improve security or distributed to developers who are working on the core protocol. And then there's obviously a whole host of questions as to how do you decide who that money goes to, and that's a governance question that needs to be answered. But there is a very large space of possibilities that we can explore. It will be very exciting to see what kinds of experiments emerge.

Yeah, I wonder if we can look to history at all and maybe in like ancient civilizations or city-states and sort of at what point did governance emerge? Like when did the city get to a sufficient point that it became so chaotic that, you know, leaders needed to be elected, taxes needed to be collected, etc. You know, because I think a lot of what we're talking about here is on the one hand we've talked about sort of this idea

of rough consensus and people sort of organically converging on the right path forward. That's not a formal process. On the other hand, what you just described of collecting taxes in order to fund public goods on the blockchain, that sounds like a much more formal process. And so, again, the element of time may prove to be a very important factor. And I just wonder if there's, like, historically, some examples of, you know, at what critical mass do we need to implement formal governance? There's definitely a lot that we can learn from history here. I think I'm even more excited about what traditional governance can learn from blockchain governance.

For instance, like, I mean, the last few years, we've had a lot of conversations about the electoral college, how, like, our voting systems have some flaws, or arguably. But innovating on this is really rough. Like, changing the election system of the entire U.S. is a big, very risky thing to do. If we can experiment with the ways we elect leaders or vote on different proposals within smaller communities, perhaps those lessons can, like, bubble up to the real world as well. Can you think of any specific historical examples that you think are useful? One important parameter is probably scale. It's like as community scale from just like a family or like a small group of people, like a tribe to a broader community to eventually like something like a nation state,

to eventually a global community, newer and more sophisticated mechanisms for coordination and collaboration need to emerge alongside. And so I think a lot of the governmental structures, have emerged through history are just a response to that need. There's no other way to coordinate that number of people. I think actually, Yuval, Noah Harari and Sapiens does a great job at articulating this point and I strongly recommend that book. Yeah, in the book, he talks a little bit about how people create these shared myths

that allow them to coordinate. What are some shared myths that you guys see the crypto community working towards these days? I think it's a good question about what are the shared myths or the memes that organize crypto networks? And in the case of, it is, I think, the case that different projects tend to be organized around different memes. And it's kind of hard to speculate or really pin down what those memes are. But in the case of Bitcoin, or at least the later form of Bitcoin, the current Bitcoin,

the shared meme seems to be fixed applies, store of value, digital gold. In the case of Ethereum, it's more of a meme around technology. So we're building a technology is not just a financial tool. And what's interesting about forking is that that in and of itself is a mechanism of governance. It's a form by which communities can decide to run a different experiment. In a sense, if we go back to the analogy to cities, it's like some of the people saying, we no longer want to live in this city, we want to go build a different city, and we'll do it our own way. And that's, I think, a very valuable property.

It's good that it's expensive because it's good that it's hard to do that. because it encourages the participants of a network to try to figure out their differences, but it's also very good that that always exists as a possibility because you don't want to be locked in, especially if there really is a very significant philosophical divide into a philosophy or set of ideas or memes that will never be reconcilable.

Yeah, it'll be really exciting to see these myths evolve alongside the networks and see how these stories change over time. Well, thanks, guys. It was really fun chatting today. Thank you. Thank you.