Bankless - 116 - Why Bankless Is Wrong | Ethan Buchman - Cosmos

Episode Date: May 2, 2022

✨ DEBRIEF ✨ | Ryan & David's Unfiltered Thoughts on the Episode https://shows.banklesshq.com/p/116-ethan-debrief  ----- Ethan Buchman is a fantastic human being, an Internet Biophysicist, Monetary Localist, and Co-Founder at Cosmos. In addition, he is President of the Interchain Foundation. Today, he comes on Bankless to tell us why we’re wrong. This episode’s dialectic explores the fate of the blockchain ecosystem—will we have a multi-chain sprawl of different protocols, or will we see a few chains with a power law distribution? We dive into the value of monetary premium, set against the opposing side of monetary clearing and velocity. And what does this all mean for security? The ultimate answer we seek is how to avoid turning the world into a dystopia. On either side of the tyranny spectrum lies anarchy and autocracy, so perhaps the answer rests somewhere in the middle. ------ 🚀 SUBSCRIBE TO NEWSLETTER:          https://newsletter.banklesshq.com/   🎙️ SUBSCRIBE TO PODCAST:                 https://availableon.com/bankless  ------ BANKLESS SPONSOR TOOLS:  ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum  ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across  🏦 ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA  👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave  ⚡️ MAKER DAO | THE DAI STABLECOIN  https://bankless.cc/MakerDAO   🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave  ------ Topics Covered: 0:00 An Internet Biophysicist 6:10 Why Is Bankless Wrong?  9:35 Network Topology 15:55 Co-op Full vs Bankless 23:06 Monetary Premium vs Clearing 33:25 Empires vs City-States 44:48 Discussing the EVM 51:59 The Role of Bitcoin 56:39 DeFi vs ReFi 1:00:49 Systems and Cycles 1:09:00 The Network Effect of Money 1:14:48 Mutual Exclusivity 1:19:34 Layer 2 vs Cosmos 1:26:38 Cooperative Democracies 1:32:31 Plutocracy 1:42:15 Chaos and Order 1:47:55 Closing & Disclaimers ------ Resources: Map of Zones https://mapofzones.com/  Debt: The First 5000 Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years  Cosmos EVM https://evmos.org/  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. All right, guys, special podcast episode for you today. You've been listening to bankless for a while, probably, and that's good. But are you in a silo of information? Where is the bankless thesis actually wrong?

Is the question we posed today? We brought on someone who shares many of the same values that we do at Bankless, but has an alternate view of how to get there. A few things that we talk about today is Ethan Buckman tells us why we're wrong. Number one, are we going to live in a many chain future or a few power law winning chain future? Number two, can a chain win without actually being money? Bankless doesn't think so.

Ethan seems to. Number three, Ethereum shared security. We're going to have that model of the world or an app chain model. That's what Cosmos is driving towards and what are the tradeoffs of both. And fourthly, I think this is the big question of the episode. What is the best way to build this crypto world without turning it into a dystopia, either an anarchy dystopia or an empire dystopia? That was the setting for the conversation.

David, what were some of your thoughts as listeners going to this episode? Yeah. Ethan does the same thing that we do, where we look towards history and extrapolate models and lessons from history into the future for crypto network. So it's interesting when we're both watching the same story. We're both looking at the same data, but we interpret this data differently as it relates to the future of crypto networks. So, you know, Ethan sees a world of city-states and says like, oh, the future of crypto will be a bunch of app chains, city-state like app chains. And Ryan, you and I, we see a world of nation states and empires that have come to dominate the globe.

And we think that that that means that the future of crypto will be dominated by a few chains that can create just a network of networks, because that's what an empire is. a network of networks. Empire is kind of like the wrong word. It's got a negative connotation. We talk about that in the show. But basically, listeners in their head should be thinking about just what is the long-term equilibrium of the topology of networks. Is this going to be a concentric circle model where network effects begets network effects, capital begins capital, liquidity begets liquidity, and all of these find a center gravitational pull to a center point? Or will there be pockets of value all over this topology, some big, some small, but no one real center point.

That is kind of the meta question being asked here. And so Ethan, like I said, just does a fantastic job of also looking the history, looking towards previous governance structures, previous pockets of value in the world, and tries to extrapolate these things out into the future. Really good episode. Really good episode, Ryan. Yeah, I think the reason this is relevant for everyone is because you got to kind of place your bets, right?

Place your bets as a builder. Place your bets as an investor. Place your bets as someone on the bankless journey as to which of these visions is more true and probably the truth is it's going to be somewhat in the middle. There's elements of truth to both of these ideas, but I do think one will win out over the other in time. And hey, guys, we're going to talk about all of this a bit more in the debriefs and things we didn't get an opportunity to say. David and I digest our thoughts on the episode and come to a conclusion of whether we changed our minds or not. So stay in tune for that. If you're a bankless premium member,

of course, you get that episode as well. And if you're not, you should upgrade so that you do. some hot content waiting for you on the other side of that. We're going to get right to the conversation with Ethan. But first, we want to tell you about these awesome tools for going bankless. Maker Dow is the OG Defi protocol. The Maker Dow produces dye, the industry's most battle-tested and resilient stable coin. Using Maker, you don't need to sell your collateral if you need liquidity. Instead, you can spin up a Maker vault and use your collateral to mint dye directly.

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crypto tax free. Diversify like the pros and trade without tax headaches. Open in Alto crypto IRA to invest in crypto tax free. to alto IRA.com slash bankless. That's A-L-T-O-I-R-A dot com slash bankless and start investing in crypto today. Hey, Bankless Nation. We are super excited to host this conversation with Ethan Buckman. He is a fantastic human being. He's also an internet biophysicist, which is kind of cool, a monetary localist that's from his Twitter profile and the co-founder of the Cosmos ecosystem, as well as the president of the Interchain Foundation. Ethan, thanks for joining us. We're going to talk about city states versus empire state and I think this is going to be fun it's great to have you on

man thanks so much for having me yeah it's good to be here so I want to set the context for listeners here I think the goal of this conversation is not necessarily to like have you change our minds or for us to change your mind right that would be overambitious we're not going to accomplish anything like that in the podcast I think the goal is really understanding so we want to thoroughly understand your perspective how you see this whole blockchain thing shaking out because I know many of our core values, the reasons that we're in crypto are the same. But you have a different vision for the future than probably bankless does. And let me just go. I hope this goes without saying we, bankless, have a tremendous amount of respect for everything that you guys have built in the

Cosmo ecosystem. We think it's net accretive. It's added a lot of value to crypto. And we're aligned on so many of the values that we both share. But with that said, let's dive right into the question at hand. So this is kind of the title. of this episode, but I think it's probably something that you believe. Maybe it's a bit tongue-in-cheek. But let's answer this question for us, if you could. Why is bankless wrong about just about everything, Ethan? All right. Well, thanks for that. I mean, let me say, I think we do probably have a lot in common. Obviously, we're coming from from similar places. And, you know, I think starting from the title of the show, bankless, like, you know, we obviously agree there's a lot fundamentally wrong with the banking

system. And that's why so many of us are here. And I think you guys do a great job of, like, exploring the space. And there's a lot of good technical and philosophical content on the show. So I'm happy to be here and to be able to add to that. I think, you know, what it really comes down to, you know, and claiming you guys are basically wrong about everything, that's just, you know, Twitter diplomacy. So here we have some podcast diplomacy, which allows us to be a little bit more nuanced. Yeah, we're trying to hype the views here, Ethan. That's real. You know, I think it's really a matter of emphasis. And, you know, I've seen, you know, on the show and in some writings, a lot of focus on things like, okay, going bankless, things like monetary premium, things like, you know,

this empire model and defy, right? And what I prefer is to emphasize something a little bit different for each of those things, right? So rather than bankless, I would rather think about being co-op full. Rather than monetary premium, I would rather think about monetary clearing. Rather than empires, I prefer to think about city-states. And rather than decentralized finance, I prefer to think about regenerative and or collaborative finance, right? So it's a little bit of a shift in emphasis. It's not so much that you're wrong about everything per se.

It's just that maybe you're incomplete or, you know, maybe we're not going far enough. we can unpack all those things and talk about what they mean. And, Ethan, just to set the stage and put an image into our listeners' heads, I think a great way to frame this conversation is to how we differ on what the whole network topology of crypto networks looks like. I think the bankless thesis is that there's general some sort of center, there's some sort of like epicenter, there's some sort of gravitational center to the industry. And that's kind of summarized in the concept that liquidity begets liquidity, capital biggest capital network effect. begets network effects. And at some point, there's this concentric circles that all come to a

convergence point. And that is a little bit illustration of like the empire model where one center blockchain with a many, many layer two's kind of feels like all roads lead to Rome, right? All layer twos lead back to the layer one. And that's kind of our model for the topology of network effects, is concentric circles with a focal point. And so do you like this like topology illustration? And if you had to illustrate what the topology of networks looks like, like at matured to you, how would it look in your brain? Yeah, I think it's definitely multi-scaler. And I think there are hierarchies, necessary hierarchies within it. I don't know that there's one thing at the root. I think there will probably be a few at least. And I'm happy for, you know,

Ethereum to be up there. I certainly think there, you know, I'm long Bitcoin and Ether, Adam, of course. But, you know, so I think there's room for a few things at the root and that they do serve different purposes. And, you know, there certainly could be more. But what's most important to me is, you know, when we use this analogy of empires, like there are critical issues in the world with sort of how we've structured society and using a model of domination and oppression as like the way we want to structure how we're building next to address these critical issues doesn't seem like the best approach. And maybe there are aspects to it that are, you know, you talk about capital begets capital, liquidity begets liquidity. There's certainly truth to this, but

I question whether it's right or whether it's always good or what generates that. And the challenge for me with the kind of empire model is one of representation of stakeholders and of information in the structure of the empire, in the state machine of the empire, we could say, right? And the sort of broader you go and the bigger you go, the less able you are to represent the actual needs and interests and values of human beings on the ground and of nature in some sense. And so, you know, the cosmos thesis has really been that, you know, this technology we've built is really important. It's really important to have these big, bad public blockchains that are, you know, dedicated to the pursuit of like a small set of ideals like, you know, Bitcoin and Ether, let's say,

or Ethereum. But it's also extremely important to move this thing forward that we develop software and technology that makes it easy for every community to have their own computer, essentially, right? So I think about this as like the community computer revolution. And what I hear, you know, about empires and blockchains that are supposed to be empires, it's like talking about mainframes, right? It sounds like some IBM exact in the 40s that's like nobody needs a personal computer. We just need like, you know, one or a couple mainframes. and they can run an IBM's basement and okay we can compete with Dell or whoever's mainframe. And that's it. And all the world's, you know, compute needs can be kind of based on that or derived from that.

And obviously that's ridiculous. That's not what happened. It's certainly what a lot of people thought back in the day, you know, that we'd never need more than, I don't know, a few hundred kilobytes of RAM or that no one would have devices in their pocket or at home. And instead, these forces of sovereignty and interoperability took hold over the structure of the internet and the evolution of computing in that now we have, you know, billions of devices. is everyone has their own computer. They're sovereign over it. They can, I mean, maybe not as as sovereign as we'd like in a variety of important ways, but, you know, they can install whatever software they want. Generally speaking, they can swap out pieces of hardware. They can decide who to connect to and so on, what programs they run. And yet they're still all interoperable with each other. And, you know, that was the kind of personal computer revolution connected up over the internet. And what I think Cosmos is about is really bringing the community computer revolution to light so that

every community can develop its own computer that represents their values, their needs, and their interests and is still interoperable with all the others. And, you know, the sort of empire model of security, it may have a role to play in that, but I'm not sure the empire analogy is the best one for it. I sort of prefer ecological analogies. And I look at the cycles that we depend on, right? The sunlight, the water cycle, nitrogen cycle, things like that, right? And so I would sort of look at maybe some of these root blockchains like Bitcoin and Ethereum maybe as more akin to, you know, sunlight and the water cycle or something like that in the scheme of life and, you know, ecological blockchain systems that we're trying to develop rather than, you know, empires that are going to go dominate the whole

world and secure everyone with their armies and, you know, force you to pay rent. And certainly the empire metaphor breaks down at some point. There's a huge difference between the actual physical empires of history and using that model to understand crypto networks. All these crypto networks are inherently opt in. Of course. Which has a huge check on the network themselves. Of course.

But from what I think I've gathered from you is like rather than just like the concentric circles model where there's something at the focal point, they're just like pockets, just pockets of value all around this landscape and some are big, some are small, some are very big, some are tiny. Yeah. And then there's like this connective tissue, this like fabric that interweaves all of these things. Is that like the right illustration to put in listeners heads? That's right. Yeah, it's a more emergent topology. And, you know, the best place to see this actually emerging is on Mapazones.com where you can actually see the different cosmos blockchains and see their connections with each other. And no one conspired to construct that topology. It's fully emergent and each chain chooses who it

wants to connect to. And right now there's like, I don't know, 45 chains on there. And, you know, someday there will be hundreds, if not thousands or, you know, millions or if Celeste has its way, billions. So, yeah, I think that's really important. Yeah, that's really cool. And we'll include a link to that website in the show notes so people can get a flavor. But you're essentially talking about Cosmos has always talked about this world of many chains, many interoperable, almost like, you know, in kind of the Ethereum world, you call these a whole bunch of side chains or app chains or city states is maybe the analog. We'll talk about some of that and some of the maybe the pushback from bankless, but first we want to understand it fully. So you mentioned four things as well that you believe

rather than kind of the main bankless thesis. And the first thing you said is rather than think about bankless, you think about co-optful. What does that mean? Co-op like cooperatives, right? So I think the history of banking and the problem with banks are in a deep way actually tied up with problems with corporate structure and corporate governance and shareholder primacy and all these kinds of things. And I think the structure of capitalism owes a lot to its, you know, the challenges with it. It's not just about the banks, it's also about our corporations and our corporate structures. And, you know, just getting rid of the banks, but keeping all the sort of corporate structuring might not solve our problems as deeply. And I think, you know, banks in a certain way, they're there

to play an important role. Obviously, they've gone, you know, completely off the cliff and are not actually serving people the way a healthy system might. But, you know, a big part of that is the nature of corporations and the sort of shareholder primacy. And so what I'm especially interested in addressing some of these issues are cooperatives. And in particular worker cooperatives, right, where they very directly, within the state machine of the organization, of the corporation, represent directly the interest, the ownership rights, the governance rights of the workers, right? And if we just go bankless and we don't actually fix corporate structures and roll out cooperatives, then I think we won't actually achieve our aims and we'll have all kinds of, you know, various perversions.

And so, for instance, our company, I think you might have missed this in the intro. I'm also the CEO of informal systems, which is structured as a workers cooperative, right? So every member of the company, every employee is a one person, one vote owner, you know, member. And we're sort of starting to explore this with DAOs and stuff in the crypto ecosystem, but there's still very much token voting going on there. And I expect we'll talk about token voting a little bit later in sort of critiques of, you know, Cosmos pre-staker, which is, you know, totally valid. But I think there's an emphasis, distinction there on not just going bank list, but also going co-op full. And there are banks that are structured as co-ops. They're consumer co-ops. They're called credit unions, right? And so,

So, you know, we can do a lot to go, you know, to push back against the big banks by supporting our local credit unions, right? And I think they have an important role to play, and we should be looking at how our technology, you know, can actually help them. And people love their credit unions. I mean, they're there to serve their members, right? They're not there to screw you. They're not there to siphon out profits to some foreign shareholders.

But they are really there for membership. And that's the kind of way we should be thinking about things, not just in this like, oh, self-sovereign, opt out, screw the banks, you know, have a Swiss bank account in your pocket kind of thing, but more like, okay, how do we reconstitute something in a, you know, more positive looking, you know, so rather than bankless, co-opful. That's cool. That's cool. So we're seeing a distinction, a distinction and emphasis, because bankless would certainly agree with the vision of more co-ops. But our emphasis, you're right, Ethan, is on not needing governance system, not needing banks at all.

Whereas maybe your emphasis is, let's turn the existing banking services into co-ops where individuals in a community might own it. Our emphasis is a bit more like, be your own bank. Like if we have something like uniswap, then we don't actually need an intermediary at all, whether it's a co-op. Like governance lists is better than having some element of governance. I do agree with you, though. Like credit unions are better than banks. So our first business account, we actually got kicked out of Bank of America, okay? Because we had a crypto transaction from Coinbase to like our Bank of America.

So they booted us. They sent us a dear John letter. And so where are we banking now? Because, you know, show secret. Bankless cannot actually be fully bankless right now. we have real world bills to pay. So we get our services from a credit union. That's great. They've not, they almost kicked us out last week, but they didn't. So we are still banked to the credit union. Credit unions serve our needs. So we are believers in the co-op vision, but that's expressed

a bit more on the Dow level. Ideally, under that level is our governance list protocols that don't even have a co-op member vote model because humans are fickle and prone to plutocracy. And so if you can remove all of the governance styles from the system, that's a little bit better. How would you react to that? Do you see that distinction? Yeah, I mean, I see it. Obviously, there is value in governance minimization at certain layers, but not at every layer. And I think, you know, humans are inherently political animals, and it's important to give voice to that, right? And it's not just about exit. It's also about voice and, you know, obviously about loyalty. And we need our systems to actually be able to that kind of function and coordination ability, you know, governance is the coordination

protocol. And yes, there are ways it gets corrupted. And that's why it's important that it remains local and accessible. But to say that, you know, it has no role, I think is missing something very important. And a lot of my philosophy, I mean, I don't like to get put into boxes so I won't like sign out for anyone else's label. I invent my own labels. What I really like is sustainability existentialism, which is sort of derived from my background in biophysics and studying the theory of organisms and, you know, theoretical ecology and like, you know, what makes a sustainable system, right? That's what I'm here for. Like, how do we structure society to actually be sustainable, right? And my understanding of what that takes is effective multi-scale representation of the environment, of the things that drive you

within the system, right? And so if you don't make way for some form of politics and governance, you are going to insufficiently represent the stakeholders, represent the system, and that will lead to some kind of issue down the road, some kind of unsustainability. But, you know, I think it's a multi-scaler issue. And so at different scales, you need different protocols, right? And at some scales, generally at larger scales, you do want some level of governance minimization. I mean, no one has control over the sun, right? That's probably a good thing. If, like, we could block out the sun, that would probably be bad, you know? So, okay, it's good that the sun is like, I don't know. I heard Elon Musk is putting a bit on the sun. I've heard that. I wouldn't put it past him,

but yeah. Whereas, you know, at other scales, it is important to be able to intervene and, you know, as humans sort of decide what we want, right? And I think that's important. Yeah. I think elements of this conversation are going to reoccur throughout this podcast is at what layer in the stack should a governance exist and at what layer in the stack is complete sovereignty exist and how do those things intermingle? I think that's going to be a core theme of this podcast. And so moving into one of the next things that you said, Ethan, earlier in the show, is the difference between monetary premium and monetary clearing. And so I think that means, correct me if I'm wrong, but the difference between a single asset accruing a bunch of

monetary premium just because it's really useful and a market, a marketplace that is really, really good at clearing itself. Is that the right distinction? And how would you add to these two elements? Yeah, sort of. And I think it builds on the function of banks and stuff and what is the nature of money. And you guys have put a lot of emphasis on this monetary premium idea, this store of value idea, which is, you know, another way of saying liquidity or sort of monetary demand. And I have become a lot more interested in its inverse, which is velocity, right? So, you know, what makes good money? Is it stuff that sits tight and just like a cruise value under your mattress? Or is it stuff that's always on the move and help people get what they want and get what they need, right? And there is a sense

in which when the velocity mechanisms, the clearing mechanisms, the ability to actually exchange and clear and, you know, engage and trade and so on, when that stuff breaks down, the importance of the store of value and the monetary premium just kind of skyrockets, right? It's like a hedge against the failure of the exchange network, right? And so from that perspective, okay, this monetary premium thing is very important. But that's not the be all and all of money. And it's certainly not the case that good money is money which just accrues value indefinitely and no one can use it or no one wants to use it because it's too expensive and you know it'll be worth more tomorrow like that's not what makes good money you know that's a piece of it and it's especially important piece when your whole banking system

has broken down and when it's gone you know completely corrupt and no one except for you know the biggest corporations in the world can access credit then yes okay then maybe the store value thing is super important and so i agree that it's important but i think we have to go much further beyond it and not just focus on you know i think we agree that money is the killer app here right but we have to have and more, I think, nuanced and detailed conversation about what makes good money and what kind of money we're trying to design. And if the only input to that is like deflation and, you know, ultrasoundness, which is something I kind of hate, then I think we're going to mess the whole thing up. And, you know, I think to some extent, you know, I blame the sort of Austrian tradition for having been, I think their like development was arrested early on and they became reactionary because of the war and, you know, the totalitarian fascist regimes and whatever.

That's a whole separate conversation. but I think we need to go a lot deeper into the nature and history of money to understand, you know, how we build systems that enable clearing in local communities that enable people to actually engage more in trade and, you know, build actually more sustainable production chains. And it's not just about, you know, holding money and having its value go up and having it be the most demanded thing and having this like infinite liquidity. It's actually about making sure the money moves. And if the money's not moving, it's probably not good money. It's sitting still. It's making certain people rich and other people not. And I'm not sure that that's exactly what makes good money.

And so what we've been starting to focus on, especially at informal, is studying this problem of credit clearing and of focusing on, you know, how can we start to engineer systems that enable businesses that trade with each other or even people to actually clear their debts, clear their trade credits without introducing external liquidity or by introducing the minimal amount of external liquidity, right? And so, you know, the simplest way to think about this is, you know, David, if I owe you money and you owe Ryan and Ryan owes me, we can clear all those debts without any liquidity, right? just by surfacing the fact that we have this close loop of obligations, right? Now, that's good money. I mean, that money didn't even materialize, and yet we were able to have a whole, you know, cycle of exchange, and it's not sitting under anyone's mattress. It's not accruing, you know, value or premium or anything like that. It's just the actual network of obligations. And I think that's actually the root of money is this sort of like mutualism in a sense and, you know, altruism and gift economies and all this sort of stuff. But trying to bring that back into the modern world,

I think it's really important because we've lost it. And so much of our economics has been structured to be kind of linear, right? and somebody comes in and goes out and usually ends in some rich person's pocket and then it stays there. And, you know, you look at measures of monetary velocity and they're collapsing and money doesn't move to the economy and people can't get access to it, right? And so focusing on this monetary premium aspect kind of devalues, this actually super important thing, which is that we make sure that that money circulates, that people can clear their obligations, that they can enter into trade obligations without feeling like they have to go into debt to a bank and pay high interest

rates just to be able to participate in the economy, right? And so, you know, by looking at that kind of approach to clearing, you can actually clear significant fractions of debt, in an economy without any liquidity, without changing the structure of the obligation graph, like, you know, without introducing a clearinghouse, just by surfacing the information about who owes what and looking for cycles, right? And anytime you find a cycle, you can clear those cycles, right? And that is an incredibly powerful tool for, especially for small and medium-sized businesses, whose primary constraint really is liquidity, right? It's like, how do I, you know, maybe your solvent, maybe your receivables exceed your payables. But if you're not receiving in time and

your payables do, you know, you're out of business, right? And so by actually looking at the network of obligations and enabling this kind of clearing, we can build much better monies that serve much greater, you know, fractions of the population than just, you know, some dumb thing that, you know, has a significant sink and is, you know, deflationary and is accruing value and making people that hold it early rich, you know, yeah. I actually think this is really, really interesting. And Ethan, I think from what I've gathered, hints you and I have read the same book, debt the first 5,000 years.

If that book, Drugs Your Memory, I'll come back to that in a second. But the spectrum that I'm getting here is that there's a lot of monies out there in the world. And what money is isn't actually one thing, but we just have a bunch of things that have money properties and they exhibit different properties on the money spectrum. And I think what you just illustrated is that you're looking for a money system that has extremely high velocity. And in contrast with like the ultrasound money that we described ether to be, which would be very much almost trying to get to as low velocity as possible, right? Yeah. exclusively a store of value and much less emphasis on a medium of exchange. But I think what you're saying is that if you go so far on the medium of exchange side of things, we might actually be able to

lose the denominator. So if I owe you money, U.O. Ryan money, and Ryan owes me money, but these are all obligations of a certain type. And so like maybe those types are different currencies. Like maybe Ryan owes me die, I owe you Bitcoin and U.O. Ryan Cosmos. Maybe we could get even more esoteric and be like, Ryan owes me a favor, and I owe you an item, and some other, like, weird thing. But, like, the vision of what you're trying to articulate is that the network of obligations, where money was formed out of a network of obligations for people, and then we just use this denominator to settle the trade. I think what you're illustrating is that if there's this network of obligations, cosmos to the technology can actually settle these obligations independently

and agnosticly from the other commitments from other parts of the network. And so the velocity is actually so fast that the currency doesn't actually manifest. Did I hear that correct? I think that's a major goal is that to have velocity so high, basically infinite, that the currency doesn't actually even have to manifest. I mean, it's in, you know, simultaneously everywhere at once. That is sound money. I mean, you want sound money. You can't even see it. I mean, it's traveled at the speed of science, right? I mean, a dumb pet rock under your bed. That's not sound money. The problem with that, Ethan, is that if that's true and then the velocity has gone so fast that we've eliminated the need for money, then what do people buy? People like buying things with number go up. If there's no number go up,

then how do you inject attention onto that thing? That's a really interesting and profound question for our species, because I think monetary premium has a religious origin, and maybe private property does it as well. And a lot of what we are reeling from, you know, in the last a couple decades or something or a hundred years is the collapse of the kind of religious substrate of our lives. And we're sort of refining it in the memetics of, you know, internet culture, which is, you know, giving us new kinds of mythologies and new kinds of salvation stories, like, oh, if I hold the token, you know, its value will go up and then I will be saved or whatever, right? And I think we need to get real with ourselves about that.

And I'm, you know, not necessarily just trying to play a game of make number go up because I think there's more to life than, you know, watching numbers on the screen. I'm interested in sustainability. And it's true that, you know, telling that story, it's a little bit, maybe it's a little bit less catchy. Maybe we need to work on our memes a little more and a little harder and, you know, take seriously the religious nature of all this and what it takes to attract people. But I think we do need to question the games we're playing and what we're in it for. And if we're just in it for a number go up, then like, you know, that's what the banks were

in it for. So like, what makes us better than bankers, you know? There's a lot of comments here, which is interesting. I've come to accept that humans are, you know, religious creatures in general and talk about biology. Like, we're probably hardwired towards this. So it's going to be hard to collectively make a change here. And also, like, somewhat when we get into the kind of the more of the pushback section, we can talk a little bit about like the world that you are envisioning sounds amazing. Like I would sign up for that world. That would be fantastic.

Like please, yes. Let's do monetary clearing instead of monetary premium. But some of the times I've been wrong in crypto, have been times where I was a bit too idealistic. And I was like searching for this kind of like this perfection, hoping that humans wouldn't be greedy about things and not accepting the world as it is. And so maybe we'll get into that conversation as we go through in some of our questions about your thesis, Ethan. But let's get to the next one first, which is this idea of empires versus

city states. Okay. So, and you know, David has said, look, the word empires is kind of troublesome because it sounds like the imperial Roman empire who will, yeah, it's like Darth Vader and like, you know, crucify you, behead you if you disagree and don't get in the path of the Roman war machine, that sort of thing. But when we're talking about empire, it's like an opt-in empire. It's sort of like every individual, every chain has the ability to kind of opt in and exit at any point in time. So I want to clarify that. The empire uses its resources to fight for the love of its users. Yes. So empire of love, maybe. But let's still use that loose analogy here. That's what they all say, guys. All right. All right. Is that what Vader said?

I mean, that's what the American imperialists have always said. You know, we're protecting freedom by bombing you. Let's still use this. Let's still use this analogy, though. You know, maybe the empire thinks it's an empire of love, but you use the city-state analogy and tell us about the distinction from the bankless thesis. Yeah, I mean, again, for me, it's a question of sovereignty. It's a question of representing stakeholders in the state machine, right? And I think the empire model is important at a certain layer, maybe high up the stack, to have a sort of low-resolution representation of the world. But to actually cater to the needs of humans and our ecosystems, we need much higher resolution machines, state machines, that better represent stakeholder

their interests, right? And the city-state is kind of a form of doing that. That's a much more local, smaller-scale, you know, polity that represents the people that are part of the city rather than trying to be an oppressive, dominating empire that's sort of conquering and expanding and trying to cover the whole globe, right? And usually what happens with those empires is at some point they get too big for themselves and they break down because they, you know, stew political unrest, because they are found to insufficiently represent the interests of their citizenry, right? And so people rebel and what do they do? Well, instead of, you know, they form nation states. They say, to hell with your empires. We want a state that represents our culture, our language, our interests.

We still want to, you know, cooperate with everyone, but we don't want to do it on these sort of imperial terms, right? And so you get this progression from empires to the nation states. And I think we're seeing the same kind of problem, the same kind of challenge face the nation. And it's an information theoretic problem, right? It's a problem of bandwidth. I mean, how much bandwidth does the state machine of the nation have to represent the interests of its citizens, right? And it's not much. I mean, the nation states are these massive entities. They're so big that by the time they sort of accumulate and process information, like, it's stale, right? We all know this kind of, you know, motivation for decentralized information and, you know, markets or whatever.

And this isn't like a market fundamentalist kind of view that I'm espousing here. It's more information theoretic and sort of localist kind of perspective that, you know, arguably now, now that we have most people living in cities, right? And so this is from a geopolitical standpoint, The cities don't actually have any constitutional representation in most of their nation states. They're like, you know, they're effectively corporations like owned by their province or something. I don't know the specifics, but it's something like that, right? And that is a big problem for the people that live within cities that basically don't have sufficient representation in the structures of government, right? And so I actually see a big part of the, for the next stage of political evolution to be greater sovereignty and representation for cities, right?

And I think something similar is kind of happening in the blockchain space where these big, bad public blockchains that are trying to be empires, they're too big and their citizenry is too diverse for them to adequately represent their interests depending on what they're trying to do. And we've seen this play out already in the sense that some of these chains have forked themselves. I mean, Bitcoin forked because its citizenry was too diverse to be served by a single platform. And some people wanted, you know, cash or whatever. And others wanted this, you know, more secure censorship resistant layer, right? And Ethereum forked because of the Dow.

Maybe it'll fork again, you know, with the merge. I don't know. but in any case, I don't think having a singular world computer is sufficient to represent everyone's interest, right? And I mean, there are lots of people that probably just don't want to use the EVM. I mean, you know, why should we be stuck with this one sort of virtual machine that was, you know, conjured up kind of out of nowhere? And now we're stuck with it because it's like trying to be an empire. And again, I'm bullish Eiff. I'm long on the Ethereum project.

I think it's an incredible project. But I think some of the philosophy around, you know, the world computer and it being an empire and sort of the dominant thing, I think it's inhibiting a lot of important innovation. and representation for people that we actually need to achieve the sort of larger crypto blockchain vision of decentralized, you know, more sovereign communities. One thing I'd say about the empire model is, you know, like you could call some protocol standard that's governanceless like TCPIP to be an communication empire for the internet. And really it's sort of like a governanceless standard that everyone opts into and everyone just agrees, but there are clearly network effects at play.

But maybe my question is more like... You don't have to pay for that. There's a big difference. true. In the real world, like, we see kind of like, if you've read anything by Ray Dalio and, you know, charts through history, right? And often on bank lists, we like to compare chains to kind of like nation states and that sort of thing because there's useful analogs. But it's fun. Everything you were saying about empires is true because we see the rise and fall of empires like throughout history. And they reach a peak and then they do something with their monetary system or they don't represent

their citizenry effectively and there's a revolt, there's a revolution and then some other empire takes charge. We've not really seen a world, at least in the modern world in the last thousand years or so, of many different city states and peak decentralization. We've always seen this like network effect reigning empire, let's say in history. And I'm wondering, like the bankless thesis is just like, hey, this is a society organizational construct and what are we doing? We're actually paying for securities with these chains in the same way empires have to pay for military and defense and, you know, implement like tax codes and all of these things. And that's what chains are actually doing. And so we haven't seen a world full of many decentralized city states in the real world.

My question, you, Ethan, is what do you think is different in the world of blockchains and like the digital world? Yeah, so there's a few things there. So first, I'm not sure actually if that's true. And I'm, you know, trying to study a little bit more sort of medieval history to understand, you know, how things went basically before the rise of the Dutch empires or Spanish even. But it certainly does see, you know, you see these amazing maps of like the Holy Roman Empire. And it sounds like, okay, there's an empire there, right? But if you actually look at, like,

the political constitution of the thing, it's incredibly decentralized and diverse. And not to say that, you know, feudalism is like a good model for what we should be working towards. I mean, we're, just trying to understand the history. But I think there is probably a lot, especially in medieval ages, if not older, about political structures that are going to be informative today. And one way I think about this, you know, is still kind of new to me. And I'm reading a lot. And a lot is sort of, changing my understanding of the world, especially the more I read about history, and the more, you know, some things I took for granted

or sort of overturned about money and politics and all these kinds of things. So maybe we'll find out I'm wrong about everything, and, you know, at least I will know. But so in my understanding of this thing, this was like something that operated above the politics, you know, that was sort of on the ground. And on the ground, you know, there was a lot of kind of decentralization

between different, you know, minor kingdoms or whatever. And there was this like unifying ethos that bound everyone. And that was the church, essentially, right? And with the Peace to West, this is sort of my own. my rough understanding of kind of the history. With a piece of Westphalia and 1648, the church's power kind of collapsed and was replaced

by this like balance of power ruled over by a hegeman, right, which was initially the Dutch and then the British and then, you know, America, right? And the hegeman, that sort of imperial ruler was the thing that kind of bound the whole world system together, right? And there was nothing above it. And it was the thing that was above. And what I think is happening is that the internet is the new church and that, you know, there is something now that is above.

the ruling nation states. And that can kind of cross between them. And that's the internet. And it does have this kind of religious quality because it connects us to each other in this kind of instantaneous way that is reminiscent of how we used to be connected through our sort of more oral cultures, you know, before, for vision and reading and literature kind of took over our lives and made us all, you know, very private people and whatever. But, and so I think part of what we're seeing is potentially that kind of throwback to that kind of, you know, political substrate where there is something that rules above all the nations, which is essentially the internet and protocols that can be built at the internet layer. And there's a new opportunity for politics to kind of emerge under that

and new balance powers to emerge and so on. And so that's part of why, you know, I don't think we're locked into this deterministic. Well, there can only be, you know, a single world hegemon and, you know, they're the imperial army and they protect all the trade routes and all that. I mean, obviously we need coordinations for, you know, safety and security. But, you know, that's part of what makes me optimistic about kind of the future and about these sorts of changes. And so I think there have been city states and certainly, you know, the capitalism in some sense got its origin with the Italian city states, which were, you know, not ruled over the state. And so, you know, over by a single empire. They were all sort of fighting with each other. And maybe that's not a great

model either because, you know, they were fighting quite a bit. But maybe we also need to appreciate the extent to which, you know, some amount of fighting is just sort of inherent. And yeah, so that's a little bit why I think that there's more in future and that by looking to the past, we can actually learn a little bit about what the future's going to be like. And there have been changes in technology that suggest our modes of relating to each other might start to become more like they were in the past than like they have been, you know, the last few hundred years. it might be more like a thousand years ago or, you know, 700 years ago or whenever it was. But I'm still learning and putting my thoughts together on this.

There's a lot here. But I think, you know, a lot of like political economics really just focuses on the last few hundred years and kind of dismisses a lot that came before that. And I think we have a lot to learn from especially medieval times, if not lots of other times as well. And I certainly think this is an example of, because we also just love looking back into history to help project us into the future. So we're all looking at the same data, right? We're all coming to consensus about what was true back then, but we're just projecting

it out, I think, a little bit differently as it goes into the frontier, right, into the unknown next 10 to 20 years of crypto networks. And Ethan, you talked about how, you know, at the center of the Roman Empire was the empire, but as you went further away from Rome, it started to get into more independent city states. And this same model, I think, definitely exists in what we kind of think of Ethereum, where you have this L1 blockchain that is supposedly completely credibly neutral, something that the center of a physical empire was, could not be, because it's always up to human corruption at the end of the day. And so if we can code in anti-corruption, anti-governance at the L-1 and have it be very, very un-opinionated, each layer two represents its own

city-state. Each layer two represents its own community with its own governance, gets to determine with a lot more fidelity what the values of that community each represents on the layer two. And the beautiful thing is, it's free to spin up a layer two. And it's also free to be secured by the Ethereum Layer 1. And so the only two things that the Ethereum Layer 1, does force upon its layer two's is opinionated about how these things work, is that you need to settle to the Ethereum with a transaction that you pay for in ETH, and you need to adhere to the rules of the EVM. And those are the only two rules.

And the rest of the governance spectrum, like what EIPs we want to implement, how fast our blockchain go, where the fees of this blockchain go, is completely determined by the periphery, by the city states. It's just that these city states are anchored down to the central security force. And so like the whole totalitarian or top-down control command and conquer type of empire is completely nulled because of cryptography, right? We've removed governance from the base layer to push governance to the layer twos and allowing these communities to govern themselves.

And I think that's what I'm hearing from you as to what you value. And we value these same things. We just think that, again, the topology of where these things actually exist are just different. What would you say to that? Yeah, I mean, I agree with a lot of that. And I think the L2 model is great for scaling Ethereum. But, you know, what if you don't want to pay an ETH and be beholden to, you know, ridiculous ultrasound monetary policy that serves the interest of the creditor class?

And what if you don't want to use the EVP, which has all sorts of problems and all kinds of limitations and severely restricts your ability to represent how you want to, you know, structure computations? I mean, that's a deal breaker for me and for many others, right? And so that's not a knock against Ethereum. I mean, Ethereum's great. There is a lot of amazing things. and a lot of people will want to settle against it and use the EVM and, you know, inherit all the benefits that come from that. But a lot of people won't. And it's important that they don't be,

you know, hit over the head and told they're stupid if they don't use the EVM or ETH because that's the only thing that has monetary premium and, you know, oh, whatever, we can, you know, forgive the sins of the EVM because the monetary premium that's accruing to ETH is sort of sufficient. And so, you know, don't worry about that. Don't look too closely that, you know, it's fine. It's not fine. There's a lot of needs for greater sovereignty. And some people want more control. think it's really important that we have that and Ethereum's important again you know I think um that it will play a major role in our future it may break itself with these you know positive feedback loops on its so-called monetary premium I think that could eventually be a problem for it

like it has been historically you know over the years rulers have had to interfere intervene in the monetary system when they have been quote unquote too sound because everyone ends up in debt and then they can't afford to pay things because the money is too expensive in the future and so they're just trapped and so you know all your L2s may end up in some form of you you know, debt servitude to Ethereum or something, which which probably wouldn't be good. But that's the sovereignty thing, right? So I think there are elements of sovereignty to L2s, but it's not the sort of full-fledged sovereignty that I think is important.

And what we've really focused on in Cosmos is modular pieces. I mean, I think we were pretty much the inventors of this kind of modular thesis. And it's been taken a lot further and improved upon significantly. But what we have built over the years are modular pieces that work at a certain layer of the stack that people can take and do what they want with and sort of maximize the opportunities for people to use these tools to express themselves, to build their own. community computers, right? And that was the ethos behind tendermint. It was like, let's build robust Byzantine fault tolerance. That's simple, easy to understand. And on top of which, people can

build arbitrary applications, right? And now we build the Cosmos SDK and we say, okay, people want to build public group of state cryptocurrencies. Well, let's make it easy for them to do that with all these modules and stuff and in the Cosmos SDK, right? And then, okay, now we have all these sovereign blockchains. There's, you know, tons of them out there. They need to be able to interoperate with each other. So we focus on IBC. And IBC, the inter-blockchain communication protocol is very much like TCP. It's a general purpose protocol for communicating, for sending messages between machines. In this case, you know, those machines are generally blockchains, but they actually don't have to be. You can actually, you know, in the internet of blockchains, nobody knows you're a fridge,

right? You can just have a private key and participate in IBC. It's actually pretty cool. And that thing has taken off. And now you look at Map of Zones and you see all these chains connecting with each other. It's like looking at the ARPANET in the early days. You know, you have New York connecting to California and the birth of a new internet. And that's kind of what's happening in cosmos. And you don't, you don't get that kind of self-emergent experimentation and innovation and expressions, new expressions of sovereignty and sort of curiosity, if you're locked in to using ETH and using the EVM. And as much as, you know, using those things, give you all kinds of benefits, just like being under any imperial army gives you all kinds

of benefits, you know, you're paying rent. You're paying taxes. And not everyone wants to do that. There's going to be rebellions and people want their sovereignty. They want to worship a different lord and structure their lives differently. And that's totally good and should be, you know, nurtured and promoted, and that's what Cosmos is here for. Yeah, I actually agree with a lot of those takes, Ethan. I do think that the EVM does enshrine some things. Ethereum certainly does enshrine some things. It's a little bit different than TCPIP in that way, which is maybe governance list

in the way that Ethereum is governance list, but doesn't actually surine, enshrine enshrine an economic policy the way that Ethereum does. And I do think if you're a layer two, you do sign up for the economic policy of Ethereum, and you do receive the benefits of the Ethereum network, let's call it. I do wonder, and we'll get to some of this when we get to the, like, you know, kind of the pushbacks or my main objectives, whether a internet of side chains of app chains can actually stand up against the economic pressures and, like, the benefits of aligning yourself with an empire. And we'll talk about some of those things.

One thing I just want to say before I get to your last point on D5 versus refi, though, everything you've said about like monetary premium against being sort of, you know, Austrian. I'm just thinking, Ethan, you must piss off a lot of Bitcoin maximalists, too. Like, how would you, like, identify with the Bitcoin or community, which is very much about monetary premium, very much does not believe they want. That's the only thing that they're about. Hyper-bitcoinization, right? How do they react? Well, yeah. I don't, I spend a lot of time defending Bitcoin. And I play an interesting game where I'm sort of playing all sides in some sense, right? So to people that are deep in crypto, I'm telling them that, you know, MMT is important and, you know, forget about your store-a-value stuff.

and to the MMT crowd and, you know, people outside crypto. I'm saying, hey, Bitcoin is maybe the most important invention ever. Like, get your head out of your ass and pay attention to this freaking thing, right? And so, you know, depends who I'm talking to. I sort of have to adjust my arguments. I think Bitcoin is incredibly important. I write articles about it all the time. I think Bitcoin's proof of work is a very, very significant, meaningful thing.

You know, I was listening to the episode you did with Justin, Drake, and Lin Alden. I thought that was really good. Captured, you know, just the constant back and forth. about both sides, I thought was amazing. But at the end of the day, I think there is something proof of work provides and are sort of grounding in the real world. You know, my intuition's about it. You know, Lynn was making a ton of great arguments.

But at the end of the day, a lot of them are just grounded in the fact that Bitcoin is grounded in something, you know, thermodynamically real in a way that, you know, proof of stake is not. And it's funny for me to say that. I mean, I'm, you know, I might have, I think I said this in chat, I might have like the highest ratio of like pro proof of stake to anti proof of work. like in the world, like as far as people that are, you know, have helped make proof stake happen, but are also like very pro Bitcoin and its use of proof of work.

I seem kind of kind of in a world of my own. So which is interesting because maybe it means I'm wrong, but hopefully it means everyone else is wrong. So with the Bitcoiners, yeah. But what about Ethan if like Bitcoin took over as store of value? Like do you go that far? Because you seem to indicate that, hey, the best money has the highest velocity. That is not at all what Bitcoiners want for the world. They want everything to hyper.

Yeah, I mean, that's ridiculous. I mean, I think, you know, if Bitcoin became the unit of account, we would be in big trouble for all the reasons I've been talking about. But that's not to say Bitcoin can't. I mean, this is the thing. Like, you know, gold isn't money. A unit of account of gold is money, right? Gold on its own is just a commodity. It's just a metal that, you know, has some people have interest in.

But it's coined gold. It's gold stamped by the sovereign, you know, with a unit of account that is money. And it's important that there's gold in that coin, no doubt about it. But if you just try to use the gold itself and you fixate on the weight of gold purely, the pure weight being the 100% backed whatever money, you have a lot of problems. And historically, if we look at the nature of the coinage system, it wasn't really like that until, I don't know, the 17th century or late 17th century or something. And actually kind of ironically, it happened at the same time the Bank of England was created

that we sort of went on this like, you know, idea of a gold standard, right, where it was like a fixed amount of gold and it was like super hard, super hard currency or whatever. So, but I think, I think system using Bitcoin as a substrate, maybe with their own units of account will be, will be really important and interesting. And I think this is a, this is the topic that I think is the big open research question for us in the 21st century is like, how do we conceive of units of account and where do they come from and what do they represent, right? And, you know, I am just beginning to start actually.

having any idea how to even think about or talk about this. So I think it's a really important, a really important problem. And we sort of have to go back in history and understand where they came from. But I think Bitcoin is super important technology. I think if we hyper Bitcoin eyes and everyone uses Bitcoin as a unit of account, that would be a complete disaster. And so, you know, there's a subtlety there. But I think Bitcoin as a substrate and a sort of backing to monetary systems will be important. But we also need a huge diversity of monies as well. And Bitcoin will have a role in that. So, you know, I think about Bitcoin, I sort of like to say, Bitcoin is like the sun. You know, it's like the shining of the sun is this sort of constant, constant cycle that

you can lean on, that you can rely on. But, you know, if you get too close on it, you depend on too much, you get burnt, right? But it's a major input to two other systems that sort of capture the energy from the sun and recycle it internally, you know, before dissipating. And so I think Bitcoin is something like that. Okay, Ethan, let's talk about just your last point when you went through those four, which is, you know, bankless tends to emphasize defy. And you're talking about refi. I will say we do talk a lot about regenerative finance, you know, public goods, not sort of thing. But maybe you have a different definition. What is the distinction between defy and refi? Refi. I also like co-fi, which is what a collaborative finance, which is what we're calling our project at informal to work on credit clearing and stuff like that.

You know, I think the problem is really in the finance part of things. And, you know, this obsession with like financial value and trading and speculation and all this stuff at the expense of the real world and what we're actually trying to do. do is like, you know, build a sustainable society, which we don't have. And it's not clear that, you know, this obsession with defy and, and, and, and, and, and, and, you know, products and systems is really helping us there. And so, you know, if we're, if we're talking about, you know, what's the best system for, for building defy on top of, okay, great, you know, maybe, you may be, you, maybe your monetary premium and, and Ethereum structure and all that is, is, is the answer. But if we're talking about, you know, what are the best systems for actually building a sustainable, you know,

human society, you might get different answers, right? And so, and again, I actually don't fully know, and I struggle a lot with, even with refi, with, you know, are we just like financializing, you know, carbon credits and all these things? But I think there's probably some good there, but there's also risk that we're just like applying market forces in all kinds of places where they don't belong. And, you know, so I'm certainly not a market fundamentalist. And by just like making everything accessible to finance and this focus on, like, oh, everything, you know, we should have, like, you know, super liquid markets and liquidity begets liquidity and everything should have, you know, be, have low slippage and be easy to trade. Like, I'm not actually sure. All those

things are good. And in the same way, and I think this relates to this, you know, inside I have that actually the network effect is not monotonic. Like, you know, everyone thinks, like, oh, the network effect is this like infinitely growing thing. You keep adding people. The value keeps going up. Well, the value can actually not be measured in a single unit, right? And this is the problem of the units of account. And, you know, once the networks get too big, actually, they start to cause problems, right? And so, you know, Facebook is like a great example. Initially everyone's like, great.

Like, yeah, getting on Facebook, like network effect, you know. And then it takes over the whole world and it destroys democracy. It's like, okay, how's that for network effect, right? And so I worry that the same kinds of things are at play in the monetary systems where, you know, you get like too big to fail and just by like financializing everything, we neglect the actual structure and values that we need to put in place. And even, you know, even with refi, there are potentially those issues with Kofi. I'm sure we're going to have it as well.

But that's why we're really trying to focus on real world patterns of trade and activity. And, you know, payments are, you know, money. What is money? It's about payments, right? Money is where the payments are. And if you're just locking up your, your, your, your, as collateral, like, I'm not sure that's money. Maybe it's a store of value.

But if you're not making payments, you know, what are you doing? And, you know, payments are the inverse of the supply chain, right? And if we care about sustainability, we need local sustainable supply chains. And so by really focusing in on the sort of payments graph, on finding ways to incentivize more local supply chains, more local payments, you know, being able to make payments without having to inject liquidity, right? The best money is the friends you make along the way kind of thing. That's sort of co-fi, you know, co-fi collaborative finance to me. And I think, you know, regenerative finance is a way to sort of get us towards that by thinking about, okay, how can we create incentives, you know, take better.

care of the land and steward or ecology and all that's really important, but there's always this risk that we sort of get carried away with finance, that the sort of capitalist interest can take over that, you know, Wall Street will you super everything, that will price everything in U.S. dollars. Like, these are all big, big problems and concerns for me. The Brave browser is the user first browser for the Web3 internet with over 50 million monthly active users. Control your digital footprint with built-in privacy and ad blocking. Inside the Brave browser, you'll find the Brave wallet, the first secure crypto wallet built natively inside of a Web3 crypto browser.

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If you're a Dgen, many of your favorite dafts on Ethereum are already on Arbitrum, with many moving over every day. Go to bridge.arbitrum.com.com now to start bridging over your ETH and other tokens in order to experience defy and empties in the way it was always meant to be. Fast, cheap, secure, and friction-free. Okay, so Ethan, those were the four themes that you discussed at the beginning of the show about the main differences that you have with the Ethan thought and the versus the bankless thought. Rather than bankless co-optful instead of a monetary premium markets that can clear in extremely liquid fashion, instead of empires, there's many, many city-states, and instead of defy, there's refi. And before we completely transition into where me and Ryan will argue with some of these things, we'll push back on some of these things. I just want to start with this much more broad question where we have network.

effects in the world. We have capital begets capital. We have liquidity that begets liquidity. Network effects begets network effects. And I think a lot of the themes that I've heard you say is that, or my first pushback would be that there's a lot between the is-aught gap of what you are saying. There is a lot of things that you think should exist. Yet they don't exist. And I think that there's a gap there that I think is going to be difficult to transcend. And we've talked about, well, the old models for empires, the physical empires of the world, they come and go. right well look at the network effects of facebook it's gotten so big that it's bad for the world like oh the new empire is america and it's completely misaligned with its users and so we're seeing all these

same patterns and i think the difference between our ideology about the world our thesis about the future world of crypto networks and yours is that you're saying look at all these similar structures that have come and gone because they haven't worked we should use crypto networks to go in a different direction and i think ryan and i are saying look at all these models that have come and throughout the world, providing some utility, a lot of utility at some points in time, and then eventually they came down and broke and crumbled. But look at the crypto networks, they're going to exhibit similar patterns into the future and they're going to be better. In the same way that just like the American democracy was way more just peaceful and

advanced and technologically innovative than like the Roman democracy or the Roman Empire. Like these things do progress. And so sure, like there's nothing about the future of crypto networks that's going to fix everything. But they still will exist. the same patterns that we've seen before for better or for worse, but they will be better than the ones that came previously. And so I think you point towards history and you say, look at all these examples of the times it didn't work. And I think we point to history and we say, look at all of these examples of these patterns

that have come and gone, but been significant improvements from their predecessors. And now we are going to see these same patterns exhibit themselves in the future. and they are also going to be better than the predecessors, better than what we have today. And maybe in like a generation, 80 years, 100, 200 years, hopefully as long as possible, that they do crumble because they do are finally misaligned with society. But for now, they are fantastic models that are strong extrapolations from what we've seen previously. And maybe in the future they crumble in the same way that we're seeing Facebook crumble or the Roman Empire crumble. But not today, but not now. What would you say to that?

Yeah, I mean, there's, that's certainly one way to approach this thing. I'm interested in long-term sustainability, and that doesn't necessarily mean that, you know, any singular system is going to last forever. I think part of what we need to understand is that no single system can last forever and that there are cycles. But the sort of imperialist empire model, I think, tries to pretend that there aren't, that they are going to be the one, you know, empire to rule them all, and that they are, won't end. And so when the end does inevitably come, it's chaos, it's destruction, you know.

And so I think what I'm what I'm proposing is a way of internalizing within the model of the empire that the empire will end. And that the end of the empire isn't, doesn't need to be chaos, doesn't need to be destruction. And the only way that I think or I know that could be possible is if there are a plurality of, of, you know, polities that can sort of pick up the slack and that you can start to move between. So if one goes down, it's sort of okay. It's not, it's not the end of the world, right? And so, you know, I think we are, we are lined somewhat there. But, you know, and then going back to the is-a-a-a-a-a-a-t thing, I mean, I agree, you know, I don't want to sit here on a moral as a moral list and just be like, oh, you're all bad because, you know, you want to get rich and you want to make money. I mean, you know, that's fine. That's the way it is. But we have made changes in our culture through, you know, discourse, through writing, through the spread of ideas that have, like, dramatically changed human behavior and the way we approach things. and this like the nature of accumulation. And civilization is in some sense just like a, you know,

a means of accumulation. And all we're doing is like accumulating more and more. And there are inflection points where like the accumulation just ramps up. And I, you know, it's one thing to say, okay, well, we ought not to accumulate so much, right? And at some level, okay, that's what I'm saying. But at another level, it's like, well, we can actually intervene in material ways in these like accumulistic tendencies and potentially reverse them or change the way we approach them, right? Change the way we think about growth. And, you know, we could get into like a

whole discussion about, you know, growth and degrowth and I'm not a degrowther per se. I'm a sustainable growth, right? I prefer patterns of growth that are circular in nature, right? And that grow in a sustainable way. And I do think there are, there are ways of sort of moving us towards that. But it does require, you know, talking about these ideas, not, you know, not sort of adhering to some kind of like historical determinism that's like, well, this is the way it is and is the way empires are. And so, you know, how could you, how could you change that? I mean, Things change all the time, all the time throughout history because passionate people, you know, push things through. And a lot of times, it's for the worst. And maybe my interventions are going to be

for the worst. And, you know, some kind of chaotic anarchy will ensue if people listen to me. I mean, I hope not. But, you know, I think that's how I think about it. That, you know, on the one hand, we do have to be playing the current game. But on the other hand, we have to be shaping a new game. And that's a really hard thing to do, right? That's something I struggle with all the time, you know, because, yeah, in order to stay alive to play your new game, you have to keep playing the old game, right? And that's a really interesting challenge that's worth thinking about and talking about more. Well, you do sort of wonder if Ethan's view of the world leads to some sort of, like, the dystopian element would be warring feudal city states that can't get along. And the

bankless version of things is like this super evil empire that's just like everyone hates, but they're forced to comply with. Everyone behave. You must behave. And so there are dark versions of everything. And so like what we would say, Ethan, is we super respect the fight on the social layer to actually try to create the ought world. And I think that is very much what bankless also wants. So we're in full alignment there. And I have to ask the questions we get into kind of like the money portion and our main pushback on one of your thesis points is back to what David was saying, how do you fight the network effect of this thing? The network effect of money. For example, if Bitcoin had a lot of people, you know, talk about, hey, the best monetary system is

actually inflationary, right? Because, you know, you're distributing some. It's not all going to existing holders, that sort of thing. But if Bitcoin had like, say, what Cosmos has, which is, I don't know, 7, 8 percent inflation, something like this. Correct me if I'm wrong, right? Some inflation per year, then it would lose to a monetary system that had no inflation or minimal inflation. Why? By virtue of the fact that people want to store their money and the thing that is most deflationary, right? And it has most certainty of that deflation in the future. And so you're up against these network effects with the ought vision of things. And so one of the bankless thesis has been as a result of how we're perceiving how the world

is, is a blockchain has to be money in order to win. And what we mean is a blockchain has to you in order to accrue the most secure chain status. It has to have the highest degree of monetary premium. And you see this very much with what Bitcoin is trying to achieve. It is achieved its security through proof of work by having moneyness. People want to store Bitcoin as valuable and increases the overall security of the Bitcoin network. And that is where all chains ultimately derive their securities from the value of its

asset. And when you have a chain that has this magic monetary premium energy, you probably heard this in our ultrasound money podcast. You're essentially, you get security budget for free. And so our view of the world is all of these chains ultimately. If you're fighting to be a settlement layer, if you're playing the empire game, which we say all chains kind of are playing the empire game because if your city state against an empire, you're probably going to lose, then that means all chains are playing the monetary premium game. What would you say to that? Do you think that that is off basis? And if so, how does a app chain ecosystem fight against a chain that is playing the monetary premium game very well? There's a lot to unpack there.

One thing that jumps out is actually, I don't think it's true that the city states struggle against the empires, at least the Italian city states. States had as much revenue and wealth flowing through them as some of the largest empires at the time and went on to actually be critical to some of those empires growing. And I don't think everyone is, you know, and going back to my understanding about money and this sort of monetary premium and store value, that is important when the clearing system breaks down, right? So when money doesn't move well, then everyone wants to hoard it, right? And then it's important that you actually stock up on liquidity on something that, you know, everyone will accept because the clearing network is broken,

the trade network is broken. You can't actually, you know, you can't actually get what you need through what you produce, right? And that's what money is supposed to be for. It's supposed to be enabling, you know, some level of specialization to still allow everyone to get, to get what they need, I think. And so if we, if we focus on, you know, this monetary premium thing and this store value thing, that's important in a world where the clearing system is completely broken down. And the banks are broken and no one can get access to the stuff. But if we only focus on, on that. I think we miss the actual important thing, which is like making payments at the end of the day. And if your system is hostile to making payments because the cost is massive because you're

using a deflationary currency and, you know, the price is always going up and so on. Well, you know, at some point, every positive feedback loop, you know, runs into a wall. And so, you know, I think we actually need to take that aspect of money, the payments aspect and the clearing aspect a little bit more, a little bit more seriously. And I think there's a role in an important, you know, element that this sort of store value monetary premium thing plays. But I don't think, I don't think it's the be all end all. And I don't think it's the only thing that all these blockchains are competing to provide. The blockchains are competing to, I mean, they're community computers. They're competing to represent the interests of their communities, right? And,

and, you know, that's not necessarily a zero-sum game because there are so many different communities, so many different interests and people who want different things. And it's not necessarily all of them wanting to be the global reserve currency. I don't know that global reserve currency is a good idea or that it's a stable thing or or or or or or should last. So, um, you know, from that perspective, um, no, I, you know, I don't, uh, I don't, uh, I don't agree that that's the game we're all playing. And, you know, I do think it's important that some, some chains play that game, but not all of them. And I don't think it's true that, you know, I think there was a line in David's Empire post. Like, if you're not playing for the number one spot, you're not playing. Uh, you know,

that's not true. A lot of teams are playing and and and and and their play is very important. And they're not playing for the number one spot. And, and still, that's okay. Because it's not just about monetary premium. It's about much more than that. Yeah. And I really think that these aren't mutually exclusive visions. And I think the future of this world is actually how do we include these, how do we integrate these two visions? Because I think they're very, very integratable. Something you said, Ethan, was that the Italian city states had more money flowing through them than the empire itself. And that actually helped the empire. grow just because of the power of the city state. Well, when you say that, to me, that means

that these things are actually integrated. And if the value of the city state helps the value of the empire, in my mind, there is a relationship between the empire and the city state where the city state is a part of the empire. No. And we'll go into that. I'll illustrate that. And what I'm thinking is you have this topology of many, many networks. And we have this vision of a many, many roll-up ecosystem on Ethereum that settles down to the empire, right? And each one is given its sovereignty. And this market clearing effort can be the bridges around all the layer twos, especially ZK roll-ups because of how atomic transactions can be across one, two, five, ten roll-ups all at once. And so we have this mesh network of a clearinghouse, but it's fundamentally secured by the

incentive that Ryan was talking about earlier with the monetary effects, the monetary aggregation, liquidity against liquidity at the base layer. And I think these things just completely integrate with each other. What we're really going at is we're playing a thumb war as like who's on the bottom? Like who pinned the other one? And this one is the inverse, right? Because I think the whole city states, I think your vision is the layer above the security layer. And I think what you're saying is like, no, no, no, no.

My vision is at below. And that's the new paradigm. That's the new sustainable fields. Would you agree with all that? No, I think they're in parallel. No, I think they're in parallel. Parallel. Yeah, because, you know, depending on who I'm arguing with,

we'll determine, you know, what I'm going to emphasize, right? And, you know, if, like, I'll argue with Cosmos people that Bitcoin and Ethereum are important, then they have, you know, an important role to play in our future. And I'll argue with Ethereum and Bitcoin people that, you know, that's not the be-all-end-all, and we also need this cosmos thing. So I think it's actually there's a parallelism here. And that's the kind of idea behind sovereignty that you do need this, you know, plurality. of systems that sort of have their own, have their own rules and govern themselves and that they're

all interoperable with each other. And it's that emergent mesh. It's that connective tissue, I think was the term you used before, which I really love, actually, connective tissue. I think that's the most important thing. And, you know, just to make a, you know, connection to human health, like everyone ignores the connection, connective tissue, right? Everyone thinks about the organs and the heart and the lungs and the, you know, the bones and whatever. But the thing that actually holds the human being together is the connective tissue and the health impacts of, you know, unhealthy connective tissue and fascia and, you know, knots and all these things, like, that's where chronic stress is held. That's where, you know, longevity is. It's in healthy connective tissue, right? And so

rather than focusing on, you know, the one empire and how the empire secures itself or, you know, the heart and what keeps the heart beating, it's actually how do all the pieces connect. And it's that connective tissue that is, I think, so important to healthy societies as well. And that's why, you know, part of why Cosmos has focused so much on IBC and building this general purpose standard for an internet of blockchain so that all these chains can communicate with each other on sort of common standard grounds. And I don't think we've even begun to see the potential of that. There's all kinds of new functionality and sort of application layer protocols coming over IBC that are just going to completely change the landscape of the sort of internet of blockchains

and produce new forms of political alignment and new approaches to security and new ways to mesh the security of different chains together. And so, you know, this model of like, oh, there's this one empire, you know, security thing at the center and it'll provide security to everything else. I think it's a, I think it's very limited. And there's a, you know, we don't need to constrain ourselves to that. There's a lot more that we can do. One thing I'll just say, just so it's clear to everyone is like the bankless thesis is also super glad and happy that all of these different visions of the world exist. Right. And I think that there's a strong Bitcoin maximalist position that all other non-Bitcoin chains are.

evil, that is definitely not the bankless thesis. Our thesis is more like, let the best chain win. And we hope that the best chain is not a particular chain, but like decentralization, maximum decentralization, and competition is very good. It also keeps empire models like Ethereum on their toes and allows people to defect when the empire doesn't serve them very well. So I'll just say that. But let's get into some specifics here. I want to talk about maybe layer two economics versus kind of a cosmos app chain economics for a minute. So one of the thesis in bankless as to why layer two's will actually dominate is because they get security, not for free, but at massively reduced cost. So in the cosmos ecosystem, or if you're booting up your own

chain, an app chain or a side chain, you have to essentially fund all of your security budget through validators. So you have to pay for these validators in the primary way every chain, Ethereum right now included, pays for its validators is by issuing more of its currency. So block rewards. So for Adams to pay for the security budget of all of its validators in the Cosmos network, it has to issue some atom tokens on an annual basis. Transaction fees are not nearly enough to pay for validator costs. And so what we see in layer two's, not yet, what we see in layer twos is that you get kind of that security for free. The only thing you have to pay for is Ethereum block space because you can settle your transactions on Ethereum.

And so we're seeing layer 2s starting to issue tokens like Optimism, for example. And the nice thing about the Optimism token is optimism doesn't actually have to fund its security through subsidies. It doesn't actually have to issue more OP tokens in order to fund its security. In fact, it can pay its Ethereum security budget and purchase the blockchain space from Ethereum as a fraction of its transaction fees, essentially. So how does a side chain compete against a layer two that gets its security at massively reduced cost when a side chain or an app chain has to boot up its validator set and boot up its economics from the base layer?

What are your thoughts on this? I mean, so that the whole point is sovereignty, right? And not inheriting security from someone else if you don't want to, right? And being able to provide it for yourself. and, you know, security isn't necessarily just denominated in dollars. And I think when we do that, we discount other aspects of the system, which are that, you know, in a cosmos chain, you know, part of the ideal is that the entities running the chain, they care specifically about that application.

They are there, you know, to serve that community and to be part of that community. And there's more to it than just, you know, the sort of crypto economic security that's on the line. And so there's definitely a cost, obviously, putting up your own security. And that's been a common critique against Cosmos since the beginning is like, oh, no one's going to be able to put their own validator sets together, too expensive. And of course, you know, that doesn't seem to be the case. There's a proliferation of these app chains. And it seems like the app chain thesis was actually, you know, very much correct to a significant

extent. But the app chain thesis alone is insufficient. And part of what Cosmos is, is, is, is insufficient. looking at now is sort of filling in the spectrum of sovereignty, right, from a fully independent application-specific blockchain secured by its own token and validator set to, you know, a smart contract on an existing blockchain or an L2 or, you know, what we're building right now, this shared security solution for the Cosmos Hub will allow other chains to launch using the security of the staked atoms on the Cosmos Hub to run their own chains, you know, similar to sort

of L2 designs. But we do that over IBC, right? And so, we can use, you know, so we've sort of built from the bottom up and said, okay, let's do sovereignty first, prioritize sovereignty. Every community can run their own computer and can secure it in the way that's appropriate for that, whether it's issuing a token, whether it's using reputation, whether it's using their legal system, whatever they want, right? And then let's build a general purpose interoperability protocol so that different chains can communicate in arbitrary ways. And then we can start to think about, okay, now let's fill in the spectrum of sovereignty using that interoperability protocol and using those pieces we have so that we can, we can

can offer people, you know, the ability to have L2s and to inherit their security from a parent chain and things like that. So it's more a, you know, a difference in the sort of approach we take into sort of more bottom up than the kind of top down, well, let's build the most secure global, you know, base chain first. And then everyone can inherit security from there. You know, we're sort of going kind of the other way. Well, let's make it easy for everyone to build their own chain, not the most secure in the world. But, you know, at least in the terms you might denominate, if you're looking just purely in USDA, like attack costs or something, there are lots of other factors to attacking. a chain. But let's do that first and then sort of build our way up to, you know, more, more global security and being able to inherit that security for more application-specific use cases.

You said that chains will be able to choose whether or not they want to have their own security, right? Like if you don't have to fall under the empire model, you can just make your own security, right? Yeah. And I will say that the only way that Ethereum grows as an empire model is that it actually incents chains to adopt it for whatever purposes, for whatever incentive. to become a part of the empire, right? So become a part of the network. So every network is completely sovereign, but it's Ethereum's job to convince every sovereign network.

Like, hey, you will actually have advantages if you use us for security. And the kind of the image I have is like, you know, Water Dropless congregate, and then they get bigger, and then like a new one comes and then it gets bigger, and another one comes, and then the center gets bigger. And this was what really Vitalik was working towards when he made Ethereum in the first place, right?

He was working on like this master coin thing And every single chain that was like a Swiss Army knife. And he was like, okay, well, this chain has like a screwdriver, a knife and like a can opener. But this chain over here has like these components. What if I just make like a generalizable chain where like all these other things can just be built on, right? And so it seems to be a very similar thing where there's all these different use cases. Back then he was thinking about apps, but now we're thinking about chains. And so every single chain has complete sovereignty over what to do with itself.

But you illustrated Ethereum as like this top-down thing, like we'll just be hyper-secure and then we'll just make all the chains. But I think there's an equal and opposite way to view this where Ethereum is hyper-secure. And all of the crypto networks on Ethereum or not on Ethereum look at that hyper-security and be like, I want some of that. And so Ethereum just has a really good product that the sovereignty that every single chain sees is like, hey, if we go onto Ethereum, we get to retain like 95% of our sovereignty. And so we will just choose to give up 5% of the sovereignty, using the ETH to make an L1 chain and adhere into the EVM. And then it's still this bottom-up organic structure. Yeah. Yeah.

I mean, all you have to do is accept Jesus Christ as your Lord and Savior. And then you can do whatever else you want in your life, right? I mean. Okay. And one thing I'll say on to that, and this will get into like the last section that we have in this little bit is like security, right? Where if every single chain is its own independent security mechanism and there's this many multi-chain ecosystem, Probably going to be proof of stake because that's just what I think the industry has converged upon. In this many, many proof of stake world, like you're baking in just proof of stake risk layered on top of proof of stake risk, layered on top of proof of stake risk, right?

Like every single chain requires two-thirds honest majority. And when you fracture one central pool of security, which is the Ethereum model, into 50, 100, 1,000 different blockchains, each with their own two-thirds, honest majority assumption, you stack these things on top of each other. Rather than converging it into one shared security pool, which is Ethereum, you have many, many, many micro pools. There's this thing called a Gestalt psychology where, like, the whole is greater than the sum of the parts. In my mind, that's Ethereum security. When you align all of these chains together, you get something greater than just a sum of the parts. But when you break everything up, you have all these two-thirds honest majority assumptions. Then we need to do a two-thirds honest proof-of-stake bridge to have all these bridging ecosystems.

And we were just on a technical level, on a security level, like the aggregate security. of the entire industry, of the entire ecosystem, is just not comparable to what happens when you aggregate security. So, yes, we have this very modular world where some chains can fail, some parts of the organism can die, they can be replaced by other things. But over, like, net, net, you will see more dying of chains

because they didn't share their security, because they didn't become cooperative with their security. So instead of, like, an empire model, Pauli Naya, somebody I was talking to when doing some research for this, talked about like, well, no, Empire isn't the right terminology. It's more about cooperative democracies that all share security. That's my pushback on that. Yeah, I mean, I like the idea of cooperative democracies. And I like the idea of shared securities at certain layers. And,

and, you know, I've said repeatedly, I think Bitcoin and Ether and the kind of settlement guarantees they provide are important things to lean on. But they're not the only things that matter. and, you know, the ability for communities to determine what security means to them and to provide it on terms that are appropriate to them, I think is arguably more important than everyone pooling into a sort of singular common security pool, not least because, well, what if there's something wrong with that singular common security pool? What if it, you know, what if Lido takes over because of the, you know, the way the staking system works, right? And so there's a, you know, inherently, if we actually care about decentralization, like, Like, shouldn't we care about decentralization of decentralization itself, right? And so, you know, if there's only one true wholly decentralized solution, is that decentralization? I mean, these are, these are interesting dilemmas that we have to deal with, right? And so, you know, I'm not, I'm not saying it's definitely one or the other. I think we do need both.

We do need this multi-scale reality. We need these sort of emergent topologies. I would say I am very concerned about proof of stake as an economic mechanism. And the sort of centralizing forces, the rich-gate richer forces, the lack of grounding in sort of real-world thermodynamics, all of these things concern me. And I see proof of stake as a stepping stone and that there is a lot more work to do on civil resistance mechanisms, on organizing governance, on introducing randomness into these systems, like grounding them, providing more accountability. integrating with legal systems or constructing, you know, sort of new forms of judicial and legal systems that draw on, you know, a thousand years of tradition in this respect. We don't have to sort of invent everything from scratch, discover everything from scratch.

There's a lot of work to do here. And we're just at the beginning. I mean, this is a stepping zone, right? So I sort of see this trajectory of moving from, you know, global, anonymous, low resolution systems for, you know, for identifying, let's say, individuals like proof of work, you know, or anti-Sibble, like proof of work, and progressively moving towards more and more locally attuned system, right? And that's, you know, so you step towards proof of stake.

And maybe from there it's on to like proof of bandwidth or, you know, the holy grail is like proof of care, proof of plant, right? Like, we should be issuing money to the people that keep society alive, right? Like that is, you know, the whole economic system needs to be flipped. And what's super interesting about what Bitcoin did and what the blockchain are doing is to say, hey, what's important? Security. Okay, we think security is the only important thing.

So we're going to issue our tokens to the people that provide security. and, you know, that's all that matters. Okay, that's great for building, you know, a secure blockchain, but we have a lot more to do as a society than just provide some security. We have to actually keep ourselves alive. And unfortunately, you can't eat, you know, Bitcoin. You can't eat ether. You can't eat, you know, your ASIC or your, you know, validator key or whatever, right?

And so finding ways to actually ground this stuff in more real world, productive work and labor and care and, you know, growing plants and all this stuff is going to be really important. And there's no way to pool security on that. We can't share, you know, a global food system because, you know, we're doing that right now and it's, it's crisis. And we're, you know, we're probably on the verge of famine with, you know, the wars and the supply chain, you know, issues and all this stuff. So if we don't attend to this need for much more local representation and capacity and we try to do everything on this like global shared security settlement layer, then we're going to have the same kind of problems. And that's not to say the global shared security settlement layer isn't important or doesn't have a role, but it's not.

sort of the only thing, right? So I think, like I was saying, they're in parallel. You sort of need both. And we don't know exactly what the right emergent topology is, but that's what we're discovering. So, Ethan, one of our other, I guess, critiques or one of my other critiques on this is about side chains and app chains and how they can become plutocracies. And maybe we'll talk about this because we've echoed some themes of this, right? So, you know, imagine the city state, but unfortunately the city state is controlled by kind of a validating elite plutocracy. And I, I know you're talking about a co-op where it's sort of one worker one vote, but we are so far removed from that in like all chain ecosystems, but in particular like coin vote chain ecosystems

that are controlled by a very small subset of validators. And so calling these things plutocracies is actually not incorrect, at least the stage of governance that we're in today. And so I tweeted this out and it was somewhat of a spicy tweet. And I think this is part of the original prompting for a call. And what is actually against Cosmos? My critique is more about, like, cosmos types of chains being sort of the base layer of our economic system and our money system. And I saw this very much reflected in UST and Terra.

For example, Terra being a base money. My critique was basically, like, a very small set of validators actually control, if you look at Binance Smart Chain or, like, the Terra Network. It's a very small subset of individuals. And these sort of look like the plutocrats or the neo-banks. if you will. I actually used to be a validator in the Cosmoe ecosystem as well. And it's fantastic. Like the ecosystem builds like hell, a bunch of talented engineers. But I was kind of looking for something that was a bit more like, I guess, credibly neutral at the monetary level in scaling a money. And I didn't see that in a network like Cosmos. It was because a lot of when you

distribute via DPS and an ICO sale and that sort of thing, you have a lot of insiders, employees, plutocrats who actually get to control the system. And then when you add on-chain governance to that, that means the same plutocrats with token vote actually get to make the decisions in the system. So you've got on-chain governance, you've got a small validator set, which is capped to like, you know, 100, 120 validators. And then you have, because you're doing proof of stake right from the get-go and you don't have like years of doing proof of work, you have a very difficult to distribute token set that is unsolved right now. And so I'm less concerned about like a network of chains like Cosmos. I would be more concerned if we relied on this structure as kind of an empire, right?

It almost be like putting kind of the United States governance system and constitution in the hands of like Facebook shareholders, right? Something like this or corporate structure where it's basically like one share, one vote sort of systems. And why do we not do that? Because we need stronger governance layers at the public layer where citizens get representation. So the answer to this in my mind is just you try to remove governance altogether and you try to make the chain maximally credibly neutral. That's where we are in the cycle. How would you respond to some of those critiques about plutocracy? Yeah, it's something that concerns me deeply. It seems like to some extent this is this is part of the package with proof of stake and one of the challenges with it. And I don't think Ethereum is going to be immune to this issue either. I think there's a lot of work that needs to be done on proof of stake systems to address this. There are, are, you know, I mean, I would caveat a lot of the things you say, you know, there are, it's not like the validators completely control things. There are delegators and the delegators can override the votes of their validators. And we see massive amounts of delegator participation on,

on cosmos and cosmos chains. And so there's sort of, you know, there's always more, more to the story. There's still the ability for, you know, social consensus and hard forks to deal with things. And, you know, we had this, like in game of stakes, right? I don't know. Were you in game mistakes with, uh, yeah, I was. That was a lot of We discovered that one of the validators was like actually sibling or something and they kicked them out, right? And that hasn't happened on a main net yet, but it's only a matter of time before we decide to kick finance out of the validator said. I mean, you know, that would be pretty interesting to see. And I don't know if you're following what's happening in Juneau.

There's like this crazy, you know, effort to steal the money of someone who basically, you know, unfairly benefited from theirdrop, let's say, right? And that's a bit of a mess, but governance is messy. And I certainly agree that there is a layer at which we want to minimize governance, but there are also areas where we want to support it and enable it and not necessarily maximize it. I don't know if that's, you know, spend all our time politicking, but certainly some level of governance control. But right now we're sort of in this, you know, intermediate period where we're trying to, you know, we're trying to experiment with new cryptocurrency systems. And obviously we can't just use proof of work. So we've had to invent this proof of stake thing so that we can proliferate and not just. you know, use insane amounts of energy.

And there are, there are challenges with the economics and they're being, you know, captured in various ways and all the proof of stake systems. And I don't think Ethereum is excluded from this are going to struggle with these things. And we will need more, you know, better mechanisms and more research. And there's a lot to be done here to improve the situation. But I don't think it's, you know, it's not the end of the world yet. This is like just the beginning of a whole new class of systems. And there are risks of them being captured, absolutely.

and we have to be diligent and do a lot of work to improve them. But again, they're not, you know, they're not just about, you know, it's not like each system is trying to be the global reserve money. They're trying to build communities and represent those communities and serve them and do things for them. And in that respect, having, you know, maybe somewhat more concentrated validator sets are appropriate, right? And, I mean, the other thing I would say about it is, like, Cosmos has taken a very practical

approach to its go-to-market, right? it's sort of at each stage we wanted to have something that works and that could like provide value to people rather than embarking on just this like grand you know five 10 year project to like come up with a whole new proof of stake system and then deploy it all at once sort of more more the more what ethereum's trying to do and not not to knock that approach i mean i think both are actually it's important to really have both and they they you know they compliment each other and they feedback on each other and and i think we both learned you know both cosmos is taken from ethereum and and vice versa um but you know it's not like the current proof of stake of cosmos but

is stuck where it is. I mean, it's an evolving, developing thing, right? So, you know, the Cosmos Hub now has 175 validators. You know, we just voted to, to increase that. And so a lot of smaller validators were able to get in. And, you know, it won't be long before we're able to introduce, you know, aggregator threshold signatures into the validator system to allow that number to increase to thousands, right? And then it's a question of, well, how do we actually then start to force decentralization of the stake? And there are various ways that we can do that. I mean, one, one thing is to try to get, get people off of the centralized exchanges so that the exchanges kind of have so much, so much capital to stake and sort of lose their, lose their spot. And, you know,

one approach to that is, is going to be introduced liquid staking natively into the chain, because one of the thing that tracks people to centralized exchanges are the, you know, the derivatives, the off-chain derivatives they can provide that allow, you know, their stake to be, to be liquid. And so if we, you know, if we could provide that natively on chain, well, then maybe that, that can sort of bring people over and reduce their stakes. So there's, there's all kinds of, but this is just the beginning, right? There's all kinds of things we can be doing and working on to, you know, to better democratize. And, you know, I agree. And, I agree, you know, Ethereum is really unique and interesting because it has this, you know,

have had this history of proof of work, which is, you know, probably remains the most effective, the most fair, let's say, quote unquote, fair distribution system known to man for a global anonymous cryptocurrency. I mean, there's like no doubt about that. And so I'm almost jealous of Ethereum that it's sort of able to have this like proof of work beginning. And, you know, I've always kind of wished we could do something like that and maybe still will. I mean, one of the cool things about, about, um, cause.

those chains is you can build whatever you want at the application layer, right? You can, you can use proof of work to distribute the coin even though the system is proof of stake or, or, you know, using a tendermint or whatever, right? So there's, there's a huge, you know, landscape of possibilities and possible experiments and innovation to happen and even moving beyond proof of stake. So there's a system now that the Confio team who built a Kossum has been working on called proof of engagement, where they're actually trying to, you know, have the anti-sybil mechanism require you to be more engaged in the, they, you know, try to measure that in different ways.

And, but again, all of this requires being willing to move away from this like fully global, anonymous, objective, you know, fully verifiable if you've been a cave, been in a cave for a month, uh, kind of approach to more local, you know, accountable, somewhat subjective, um, aspects. And, and, and to say that money only exists at the one layer and not the other is, I think, to miss a huge spectrum of aspects of money that are actually critical to money working, right? And part of money is, yes, this like reliable, you know, sort of don't have to trust anyone, you know, gold borrowers kind of mindset. But the other is this very much, you know, credit-based aspect of money.

I mean, people in monetary theory are arguing to the end of time about whether money is a means of exchange or a unit of account, whether it's a commodity or credit, right? Whether it's, you know, comes from the state or comes from metal, things like this, right? And both of them are obviously right. I mean, it's crazy to think it's just one or the other. And so we need to fill in all the. the pieces of that. And, you know, Cosmos is trying to fill in, I think, a lot of that, of that spectrum where other people have focused on one piece, you know, we're focusing on the others. And it's

going to take both to actually, to actually create the money of the future. Ethan, just one thing I want to add, because the whole distribution of stake, I think, is definitely going to be the big problem of crypto networks over the next decades or so. And just like all the other proof of stake networks, Ethereum, as it turns to proof of stake, will also have this problem. But it also has one big, very, very important difference, which I didn't hear you voice, so I want to voice it here, is that there's actually formal governance stripping out of proof of stake. And so state how transactions get updated in proof of stake is verifiable throughout the whole network, right? So there is no on-chain governance. And there's only so much power that a validator has over the

rest of the network when it is time for that thing to, that validator to propose a block. And if it doesn't propose the correct block in the correct way, it gets penalized by the rest of the proof of stake validator network. And so like social capital and governance value has been completely stripped away from Ethereum's proof of stake. And it really only has the returns on capital rather than any sort of other like governance powers that we would find with any on-chain voting. And so yes, like while there is like a centralization of power into the ether asset, powers express is purely financial rather than being able to impart its values upon the rest of the ecosystem. And so,

while like in this whole empire model, this convergence of stake into this one asset, which we think is going to be really, really valuable might seem a little dystopian to a lot of people. The cool thing about cryptography is that we get to strip away the dystopian elements out of it. And so this is the new structure of these empires or new structure of these democracies that I think will come out into the future.

So I just wanted to add that element. I mean, there's two sides to dystopia. There's chaos and order. And, you know, to, it can be dystopian to be able to arbitrarily change the system, and it can be dystopian to not be able to change the system. And so, you know, there's both sides. So I think the thing is we'll see. I mean, we'll see where the power lies when there's a real conflict. And I think, you know, a lot of people are suggesting, hey, actually, you know, who controls the Ethereum network is the

custodial stable coin issuers. And wherever those things are, that's going to determine what the, you know, what the upgrade is, what the fork outcome is and so on. And so, you know, part of the Cosmos thesis has been like, well, rather than let power lie implicitly where it will, and we only find out who has the power in a conflict when they actually have to rise up and, you know, assert themselves, why don't we try to make the power more explicit and surface it, right? And maybe we haven't done it in the best way yet, absolutely. I mean, there's a, you know, making power explicit is like the grand, in some way, the grand challenge of, you know, the history of human civilization. How do we give voice to people and find out what it is and actually act

on it effectively. And so that's a big sort of experimental thing. But again, to just to just say, well, all this kind of governance is, you know, we need to absolutely minimize it. There are, there are areas where that's true and that's important. And there are areas where that's not true and where we need to do the opposite. And so Cosmos is partially, you know, significantly an experiment on how to give more voice to stakeholders within the state machine. And that's important in blockchains. It's important in society. And I think we need a better, really better political theory. I mean, in some sense, We're all, you know, aspiring political theorists to really, you know, understand how do we, how do humans organize themselves?

What's the right way to organize and secure, you know, economies and so on? And I think this is a process of discovery and experimentation. And we all have a tremendous amount to learn. So, yeah, appreciate being able to sort of come on here and talk about all these ideas. It's a lot of fun. I think we covered a lot of ground. Ethan, last question for you before we close this out. Importance of individuals being able to become validators in the network.

You know, so Cosmos has been limited. by that, but the promise of Ethereum, the next gen of Ethereum is actually anyone can be a validator if you have 32 ETH and spin it up. I know that is the promise, and you were alluding to, like, you know, centralization around staking and collateral with Lido and other crypto banks, let's call them. But how important is that in the cosmos ethos? And do you believe that that is an ingredient to decentralization here? Yeah, I do. I think it's important. I think there are always, there are always tradeoffs. And at the moment, we've, you know, for a variety of reasons, we, we selected a point

in the tradeoff space where, you know, beyond a certain point of a chain success, it will be harder for individual validators to join because there's, you know, a limit on the number of validators. And, you know, and we've sort of taken a position that, okay, that's actually maybe sufficient, maybe this long tail of validators doesn't necessarily help that much or doesn't add that much. And what you really want are, you know, highly available, committed validators that are sort of upholding, upholding the system and you sort of have this tighter integration between who's running it

and what the actual application is. But I mean, that's just a current limitation. It's not, it's not like set in stone. It's not something that we're necessarily committed to defending that, you know, the validator sets can never increase. I mean, we see them increase somewhat steadily. All the networks are kind of increasing at their own pace. And there is work in the, in the tendermint code base now to dramatically increase the size of the validator set by, you know, similar mechanisms that Ethereum is using, right? And so we can see that, you know, I would love to see it be more accessible for individual validators to come in. I do think that's important.

And there is work to that effect. So hopefully, you know, in the next, I don't know, a couple years at the latest, it will be much more validators that will be much more accessible and there'll be, you know, a long tail of individuals participating. So, Ethan, this has been super fun. Maybe let's just close with kind of summarizing arguments here. And I'll start. So to allow you to finish with your thoughts here.

I guess my TLDR on the back and forth is like there's so many points of alignment and we're all super excited and happy that there are these other approaches to crypto, right? If we had one monolithic approach, that would be a recipe for disaster and failure. Definitely the bankless thesis does think that there are certain network advantages, monetary influence, these sorts of things that make sort of an empire of love, maybe let's call it, probably result in the dominant or one of the most dominant power law winning. chains, and that's why we're probably more excited about the Ethereum version of things. The other point of distinction, I would say, is we're in the app layer. You know, you mentioned kind of these things would be sort of a similar place in the app layer. I think the maximally decentralized version that we see at bankless is you have something like Ethereum, which maximizes a security and decentralization at the very bottom. And then you have layer two's on

top of that that are much more expressive. These are these co-op type communities of the type you're talking about. They handle execution, composability. They are also permissionless. These are the city-states that essentially are part of the defense network of the credibly neutral settlement layer. And then you have something above that, which is maybe more of the app chains, as kind of a layer three. So in my mind, that is very much compatible with the cosmos's vision of things and our most likely outcome thesis for how this space might evolve. And again, could be totally wrong. And I'm super excited to. see all of the cosmos visions play out. Certainly for people that aren't aware, like,

tendermint is core to so many chains. I mean, tendermint is part of, you know, Maddoch, which I'm sure many Ethereum users use today. It's just fantastic technology. It's also part of Terra, which is certainly taken a chunk out of the defy story and the defy narrative. So we're certainly seeing the cosmos app chain layer, like flex its muscles these days. But that would be how I would summarize the bankless thesis. How would you summarize your pushback on that and what you think, Ethan? Yeah, I mean, I think that there's obviously a lot, a lot good there and probably a lot I would agree with for us. And for me, it's really about, you know, sovereignty and the community computer and that sort of, you know, analogy to, well, Ethereum being this base layer that is

sort of like a mainframe, right? And mainframes kind of, you know, don't govern the world today the way the way people maybe once thought for various reasons, and everyone has their own computer. And in a similar way, we expect that it will be very important to people, to communities, to have their own computers, community computers, application-specific blockchain, we could say, that they can govern and use in the way that's appropriate to them with the technology that's appropriate to them,

the virtual machines or languages that are appropriate to them, the economics that are appropriate to them, and to not necessarily be beholden to the political economy of Ethereum. regardless of the kinds of sovereignty that, you know, L2's on Ethereum can still offer. There's a whole spectrum of greater sovereignty that people will want and demand, and we're seeing that play out. So there's, you know, in my view, an essential role for Ethereum in the future, but I don't think it's as simple as, you know, Ethereum's at the center,

and we just have concentric circles coming out. To me, it's more of like a fractal hierarchy and sort of a web of different blockchains and applications. And then the other key piece, you know, just to summarize on is on this money aspect, I think monetary premium is important, especially in a world where our clearing systems have broken down, but it's not the only thing. And if we're actually going to fix money, which I think many people here are interested in doing, we have to go a lot further than just store value and monetary premium. We have to figure out how to construct units of account, how to make them, you know, represent things that matter to the world that are sustainable and actually enable clearing

and local communities to engage with each other and to build more robust, say, community economies. Well, excellent summary, Ethan. I think bankless listeners, You heard both sides and probably understand both sides of this story a lot better than when they came in. And as always, in a bankless podcast, we don't just talk technical. I mean, this is philosophy. This is, you know, biophysics. This is history. This is just about everything, which makes crypto the best place to be in if you are looking for the future of humanity and to spend your career.

So thanks for joining us, Ethan. This has been a super awesome conversation. We appreciate it. Thanks so much for having me. It was great time. Hope to do it again. Bankless Nation, a couple of action items for you. one, we have a link that Ethan was talking about, the map of zones where you can see what the

cosmos architecture looks like, what the ecosystem looks like across all of the various cosmos chains. Also, Cosmos just released, and I believe it was this week, an EVM-compatible version of a chain called EVMOS. This was formerly called Etherment, I believe. Evmos. Okay. This was formerly called Etherment back in the day. So take a peek at that. We'll include a link in the show notes as well. As always, risks and disclaimers. All this stuff is risky. Side chains, ETH, the whole gamut, defy is risky. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not financial advice. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.