Bankless - 17 - A Bankless Nation (Part 1)

Episode Date: June 15, 2020

Episode: #17 June 15, 2020 An alien visits earth. He sees our cities, our governments, our moral codes. He's curious, "What's are you trying to do here?" he asks the humans.  The humans respond: "We're trying to get coordinated". Coordination is how humanity rose above the animals. Built the pyramids. Put a man on the moon. We've coordinated as hunter-gather societies in tribes. As agrarian societies in kingdoms. As industrial societies in nation states. And now...as information societies in digital nations like Ethereum and Bitcoin. This. Changes. Everything.  Covered: Uh...why are we here? What's the point? A nation is more than a nation state! The thing that makes humans special Getting past Dunbar's number The rise & limits of nation states The next evolution of the nation How you become a citizen of Ethereum Join us next Monday for a fresh episode! ----- Tools from our sponsors to go bankless: Multis - bank your business without a bank (1 mon. trial!) Ramp - the fiat onramp for DeFi (mention Bankless!) Monolith - holy grail of bankless Visa cards Aave - money lego for lending & borrowing ----- Resources discussed: (Article) A Bankless Nation (part 1) (Podcast) Episode 12 talks about Settlement Assurances ----- Episode Actions: Read David's "A Bankless Nation" piece from last week  Subscribe to Bankless newsletter so you don't miss part 2! ----- Subscribe to podcast on iTunes | Spotify | YouTube | RSS Feed Leave a review on iTunes Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program Visit official Bankless website for resources Follow Bankless on Twitter | YouTube Follow Ryan on Twitter Follow David on Twitter

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 are here to help you become more bankless. David, how are things, my friend? Things are fantastic. I'm extremely excited about this episode. This has been a subject that I have been tossing around in my head for a long, long time.

and I'm excited to break this down and pull this apart with you. Well, what is the topic? Tell us. The topic is, what are we all doing here? So every person in crypto is kind of doing their own individual thing, right? The whole cool thing about these systems is that there's so many different groups of stakeholders, groups of communities, right? We have the builders, we have the community members, you have the investors, the developers. And each one has their own specific role in Bitcoin, and it's a business. Ethereum in these greater crypto systems, right? And so the different roles all depend on each other.

They're this feedback loop between each individual one. And it kind of just reminds me of that ancient parable of the blind men feeling the elephant, right? So, you know, one, one man is feeling the leg and says, like, oh, an elephant is like a tree. And another blind man is feeling the trunk. And it says, oh, an elephant is like a snake. And none of them really get it right. But they all get it right individually, right? Because they're just, they can feel and sense what they feel in sense, and they get that right. But they don't get to put things into context with the rest of the elephant. And so that's, that's kind of what I see going on in the crypto land, right? We call this the cryptocurrency industry or the blockchain industry. And really, if we consider like Ethereum and

Bitcoin as blockchains, we're selling them just so incredibly short of what they actually are. Like the blockchain aspect of these systems is the most boring part. Like a blockchain is just like a specific type of database, an immutable database that just is a penned only. And that's not interesting. Like you can just have a blockchain running on your computer and have your computer be a blockchain database. But that's just not interesting at all. Likewise, like, I mean, money is definitely interesting. And the cryptocurrency aspect of these systems is, is, is,

decently interesting, but it's just one part of these whole entire systems. And the crypto part just refers to cryptography and it has nothing really to do with the money. From the outside of the industry and the inside of this industry, we haven't really figured out what actually emerges when you stitch every single independent piece of these blockchain crypto systems together. And so I wrote this article called a bankless nation where I kind of illustrate what I think these systems are, and I think of them as digital nations. And what a nation really is is a bunch of independent components that all kind of work together in harmony in this seamless fashion to produce this result. And the result is a place where people can live and coordinate and operate

with each other. And I see Bitcoin and Ethereum as a new version and a new iteration, a new paradigm of what a nation is. It is this central system that allows people to coordinate, cooperate, and communicate with each other across a shared set of like standards, a shared protocol that we are all agreeing to abide by. Yeah, I think it's a powerful analogy. And your piece this week on Bankless, it'll be last week by the time folks listened to it was fantastic. It was just part one. So we're actually going to be doing a part two of this podcast, and you'll be releasing part two of an article that further explores the topic of the bankless

nation. And I like how you framed that. When I was reading the piece, David, one of the coolest things I took away was like this question of, you know, an alien comes down to earth and sees everything that that humanity has produced. It's societies. It's cities. It's technology.

It's money. It's morality. And ask the question, what do you? guys doing here? Like, what's, what's this all about? Right. What's the point? Yeah, what's the point? And the humans go, we're trying to coordinate. Right. Like, that's kind of the answer. That is why Yvall, Harari talks about this in his book, Sapiens. That is why man is sort of ascended from its primal roots and distance itself, far distance itself from the animal kingdom is because of our ability to coordinate in societies, in nations. And when we talk about

nations, I think people might get tripped up by that because the standard definition of a nation, we think of a nation as a nation state, right, just like the U.S. or China or Russia. But we're taking a broader view when we use the term nation as sort of a tribe of people organizing around a protocol, right? And we're going to define that and talk about that a little bit. And this is kind of the the why we're here. It's, it's bigger than crypto. It's bigger than blockchain. It's almost the story of human progress throughout history and our ability to coordinate and organize as a society. So it's a, it's a really deep concept too. And that's why it's going to be so so exciting to talk about. I've been mentioning to my crypto friends, my Ethereum friends, my bankless friends, like,

I wake up in the morning, just extremely optimistic about the world around me, which kind of goes at odds with the world around us, you know, as we see it, right? There's, there's protests across the nation, across, across the USA nation, across also the whole entire world. There's conflict between Russia, China, US. There's this pandemic. But I've been waking up in the morning just extremely optimistic about the future. And it's really because of the nation I see ahead of us. And, you know, everyone needs a purpose in life. And I think with this article, I've, it was really more for me, It was really me trying to figure out what I'm doing with my life. And what I'm trying to do with my life is show people that there is this new nation ahead of us.

And then we can all be citizens of it because citizenship is an opt-in thing. It's not you don't ask for permission for a citizenship of Bitcoin or Ethereum. And so I'm trying to just raise the flag and say like, hey, there's this new way we can organize each other. There's this new organizational scheme that we should all operate by. And it's better. And so when I wake up in the morning, I'm trying to spread this message as far and wide as possible. There is this new nation, this new frontier ahead of us. And it is better. And we should all go there. Yeah, absolutely, David. All right, man. Well, we're going to dive in. You've got me excited to talk about this. But before we do, let's talk about some bankless tools from our fantastic

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at www.maltis.co. That's www.m-M-U-L-T-I-S.co. And you can get a one-month free trial when you mention bankless. So make sure that you do that. Also, we're going to be releasing a video a live video, they're having a big release on June 22nd, and we're going to be releasing a video tactic to show you how to get Maltes working on the bankless YouTube. So check it out. Part of what we're going to talk about in the part two of this episode and in my article is Subnations of Ethereum. And AVE is an incredibly robust sub-nation of Ethereum. AVE isn't just one thing. It is a whole suite of services that you can tap into using the AVEA protocol. And I am in particular bullish on protocols that do more than just one thing. So what are the

things that you can do on AVEA? First, there are A tokens which represent interest-bearing versions of the tokens deposited into the AVE borrowing and lending platform. But the AVE borrowing and lending platform is different from the borrowing and lending platforms that you may know on Ethereum. AVEA allows for fixed interest loans so that the interest rate doesn't shift under your fee as you making your personal or business financial decisions. We've all seen the MakerDAO interest rate go from half a percent to a 20.5% over the course of a year. AVE allows for interest rates that don't change, which is a really important money Lego for building stable, dependable businesses on Ethereum. In addition to that, what else can you do? In addition to, in addition to that,

there's also the flash loans, which allow you to borrow assets with the zero collateral. so long as you pay those assets back in the same transaction, there are just a ton of use cases that I'm really optimistic about, including being able to pay back your collateral from a MakerDAO vault and then open it up back again with a different collateral using the AVE flash loan system. So there's no surprise that AVE has been marching to the top of the defy charts. They have almost $90 million locked in defy, threatening to take over compound at number three with $93 million in Defi. So check them out at AVE.com. That's Aavee.com. All right, David, let's dive right in. This is a bankless nation. You know, you talked about why

current definitions suck in the intro of cryptocurrency and blockchain. So the current definition, the analogy that you've opted to use is the analogy of a nation. I think we should spend a minute defining what a nation actually is. Like when we say nation, most people think about America or they think about, you know, China or some nation state. But what is a nation at a more fundamental level? Yeah, the current iteration of nations are these like geographic areas that have the set of rules that people abide by. But if you want to look back into history, we see different types of organizational schemes that if you kind of restrict the current, the current temporal version of what nations are, you can start to see that different nations have actually come and gone

throughout time and different versions of nations. And so there are plenty of different systems that fit the definition for a nation. But before we go into those, let me try and define a nation in its most general sense. And so in the article, I say, nations are systems that humans use as scaffolding for their daily activities. They create the structure for the constituent, of a nation that compose them. And I really like the image of a nation as an organism. An organism is something that is composed of many different independent parts that each work to achieve its own individual goals. But then when you stitch the component parts together, they create the nation, right? And every single nation is centered around like some sort of like

DNA, right, as a creature is, as an organism is. The DNA, the protocol of the creature, defines what the creature will look like at maturity. It defines where all the organs of a creature position themselves around each other. And then as the creature grows, it consumes resources and then it grows and develops into a larger and larger body. And nations do the same thing. Nations are like bodies. They have internal organs.

They have protective defenses. They have offensive systems. They consume resources, generate outputs. They produce waste. and they are primarily concerned with their own survival. Nations also live in places of scarcity, and they compete with other nations in order to do what's best for itself. And even nations can often band together like other creatures

in order to prove their own individual chances of success. And so what nations really are these tools that humans leverage in order to access stability for themselves. They offer organizational structures that people depend on, for coordination, trust, and protection. And then because they offer these services towards people, the services of enabling coordination, enabling trust, and then also protecting the system at large,

the nation is able to then achieve its own livelihood, achieve its sustenance by charging taxes upon the people, which the people are largely happy to pay because the ability to coordinate and be protected is really beneficial. so long as what they are paying is worth those things, people are generally happy to pay them. So really what a nation is is a organizational scheme where people are allowed to produce an economy inside of, and then the nation protects that economy using the taxes of the people of the system,

and they just grow and develop and mature over time. Now, the important thing to understand is that there is no such thing. thing as a immortal nation. All things in the world develop, grow, developed, and then die. They die of old age. And nations are no exception. So some of the earliest versions of a nation, and there are plenty of ones earlier than this. But a big archetype for an early nation is actually religion. And so religion is a creature that grows, develops, matures, and hasn't completely died. They don't completely die. They just whittle over time. But they are replaced by new nations that offer these same basic services, but without, with less costs upon the people.

And this is kind of the age-old conflict that a nation or a state, and I've spoken about this in previous episodes, the age-old tug-of-war between the people of a nation and the nation itself, where the incentives of the nation are to be maximally extractive of the people. It's designed to look after itself, and the more taxes it can charge upon people, the better. This is why Martin Luther nailed the 99 theses to the church, to the door of the Catholic Church, because it was saying, you guys are charging too much. You guys are not following the protocol. You guys are doing things for your own benefit, and your indulgences are costing too much from the people, and you're not worth the cost of the extortion that you're making. And so I kind of see this going on with our current nation states where the populist uprising, both on the right and the left in the United States, are both generally reactions to the costs of the USA nation versus the benefits that the USA nation is providing. And that's why I'm so optimistic about Bitcoin and Ethereum, which are these nations that are designed to be minimally extractive by design.

Dude, there's so much to unpack there. There's so much in that, right? So a few things that you said, a nation is like an organism, right? So it has a lifespan. It also competes with other organisms, with other nations. And you also said that when we talk about nations, we're not just talking about nation states. We're also talking about religions as well as being kind of a proto-nation as well or a different type of nation. And I know we'll talk about the differences between maybe a religion, nation of a religion, or a,

nation state and these digital nations that we're creating. But like, I guess in terms of purpose here, let's get back to that for a second. So you said the purpose of a nation is to provide security and like eventually to like foster an economy. So you create like this trust layer. And we've talked in many episodes, including the previous episode with Nick Carter, about the settlement layer of crypto versus nation states and how that's something, that's like a property rights layer that is generally enforced by nation state, but can also be enforced by crypto currencies and, you know, chains like Ethereum and Bitcoin. But like is the purpose here, once you have those ingredients, once you have the trust and the security and the law, the settlement layer,

is the purpose really to grow an economy? Is that what we're trying to do here? Is to coordinate like growth and progress of an economy? I think so. And I think we can see evidence from this. And the fact that animals always tend to group up over time. There are very few animals that are just complete lone rangers. And that's because that being around other animals that you can trust and coordinate with is always beneficial to the individual.

And so like seven individuals being a pack allows for that pack to survive. at a stronger rate than if the individuals were alone. And so over time, evolution has forced in the desire to trust and communicate and cooperate and coordinate around each other so that a group of creatures, a group of organisms, are better able to find resources and survive. And so we have the desire to trust and coordinate with each other, baked into our DNA, baked into the protocol of creatures. and nations are no different. So the DNA of a nation, the protocol of a nation is always designed to

coordinate people, to allow for people to coordinate commerce around each other. And so the whole idea about an economy is an economy is a tool. It is a tool that people can tap into in order to achieve their own personal goals. And the important thing is, like, one person can have one set of goals, that means nothing to anyone else. But the shared economy that we all tap into allows us to achieve our own individual goals, whatever they may be, without having to dictate what those goals should be upon others. So this economy is this central tool that we all use in order to live our own lives. And what a nation is is this scaffolding for an economy. The protocol of a nation is an ideological belief that this particular protocol that we have designed that we are creating is a good way to

foster an economy, is a good way to allow for commerce to happen. And the way that a protocol of a nation becomes good is that it does the heavy lifting of coordination of trust. And it does that for the individuals. So they don't have to do that themselves. Okay. So let's go back and talk about something because I think we're making the argument here, and you certainly made it in your post, that basically coordination is why humans have made all of the progress that we've made as a species, as a civilization, right?

But like why? Why is that required? Why is coordination required? It feels like maybe there are some limitations in our biological wetware, like almost in our DNA, that make it so that we have a hard time coordinating. Can you talk a little bit about that? Like, why do we need nations to coordinate? And why has it taken us so long in human history to get to the point of having religions and having nation states? So humans have an inherent limitation on how far they can scale

their own individual trust. And there's something called Dunbar's number, which is a number that is unique to every single mammal, every single organism, but the human Dunbar number is 150. And what that means is that humans have a really hard time scaling trust beyond 150 individual people. And so hunter gatherers, nomadic hunter gatherers, they tend to never be in tribes larger than 150 because a tribe larger than 150 tends to break down. Is that, is that because like your brain just can't? Your brain can't handle it. So you can't have enough close, you can have enough trust. Right. With, there's too many permutations of individual connections, individual relationships, for you as an individual to be able to hold all of those connections, remember all of those

faces, remember who to trust and who not to trust all at once. It's too hard. There's too much information there. Yeah, like a basic way of saying this is like, you know, I trust my family because I know them, right? Like I grew up with them, you know, and I know which, which of the family members are trustworthy or not, which I would loan to or not. I trust my close friends, right? But like beyond that circle, you know, a somebody who's friends with me on Facebook, yeah, kind of trust them, not really. But like outside of that, I don't know them well enough in order to to trust them, right? It's not, it doesn't scale outside of some kind of like number radius. And I guess Dunbar's number is saying that's 100, that number is about 150 for most people. Absolutely. And I think

Nicholas Teleb said this right, where as a model for how he treats others is somewhat related to this, where he goes, there should be communism among family, socialism among friends, capitalism among friends, capitalism among your neighborhood, among your state, and then libertarianism among the world. And that's really just an illustration of as you include more and more people in your daily commerce, in your economy, you need to trust them less and less and less because you don't know who they are. But so these nation, these systems are a tool for us to scale up Dunbar's number in a way that we can include them in our Loki. We can include them. We can include them in our circles. So if we were to set up, like, what's the fundamental problem? Like,

humans are better when we coordinate, right? Like, we can clearly see that. We organize, we create better technology. We're better when we coordinate. But the fundamental biological limitation we have around that coordination is Dunbar's number, which allows us to, which means that we can only trust up to about 150 people in that kind of sharing, you know, communist relationship, if you will. But apart from that, we need technology. And when I say technology, like, we're talking about the nation as a technology, right? Like, it's a social technology. We need that technology in order to scale it beyond a radius of about 150 relationships. Is that right? That's totally right. And like, imagine what the world would be like if, you know, there are 7 billion people on the

world and there were 150 different, like, tribes. It would, it would not be the world that we would have today. We would not have cities. We would not have skyscrapers. We would not have innovation or technology or improvement or advancement at all. We would just have 150 different tribes that couldn't trust other tribes. And the nation is a solution for this. The nation allows us to coordinate among larger groups of people. This is why New York City is like what, 10 million people and it operates pretty well on a day-to-day basis. Yeah, it's funny. It's totally. And it's funny. It's funny how in crypto, even in crypto circles, right? So people talk about the scalability problem of crypto, right? And they talk about it in terms of transactions per second, right? Like this

kind of limited, very narrow technical definition of scalability, right? But really what we're all talking about, and this is a fundamental like scalability dilemma with humanity is how do we scale trust? That's what crypto and blockchains, public blockchains like Ethereum Bitcoin are actually trying to solve for, right? They're trying to scale trust. And if you can solve that, well, then you've got something really incredible, like a new substrate that can be built on top of. Absolutely. And I don't think bringing this back into something concrete today, like, I don't think anyone really thinks that it's possible that there's going to be like one single nation of earth, right? It's, and especially in the last 10 years where we have seen.

a rise in populism, or seeing a rise in isolationism, you know, the Brexit where the UK exited from the EU. We are just seeing a breakdown in the nation's ability, this nation state's ability to coordinate trust across the whole world. And so what that really indicates to me is that if we really want to get the whole world coordinated, which is what the whole point of this whole human experiment is, we're going to need a new system, a new scaffolding. to coordinate and trust each other around. And it looks like the technology of the nation-state is not going to be the thing that does that.

Well, okay, so what's the prop? So I know a lot of globalists, for instance, right, maybe partially in the progressive crowd, who love that vision, though, of like one world, one nation, right? But like, what's the problem with that? Why doesn't scale? Why is that a bad idea? I mean, I do believe in one-world, one-nation. I don't believe in one-world-one-nation state.

And there's just so many problems with that. And one of the biggest ones is currency. We're all using a different money to trade and trust each other with. And money is another tool that everyone uses, and it's better when everyone uses the same currency. But the nation state puts up its protective walls. It puts up its taxes. It puts up its military to protect the currency. And it inherently puts the people of the world.

at odds with each other by forcing them to use different money, different currency. And so each individual nation state is using a different way of value expression, a different way to communicate value by imparting different currencies upon each of its population. But I could solve that. So let's say the one world, one nation, like, no problem, David, we've got one currency now. Like, it's called, you know, U.S. Jiboney Bucks, whatever. That's our currency.

But why hasn't that happened? Like, did I just solve it? Here's another thought on that. This is like this week, well, so over the past three months, the U.S. federal government has printed an unprecedented amount of money, trillions of dollars, $2.2 trillion, getting ready to print another $500 billion. Okay, right? So someone argued we need it, stimulus, all of these reasons, modern monetary through,

all of these things, right? 500 billion of which went to the PPP program. supposedly to small businesses. We know from some information that some of those funds went to large corporations who shouldn't have been eligible. This week, Steve Minnuchin, Secretary of the Treasury, says that the information about who received the $500 billion in PPP loans is proprietary and confidential, that the U.S. public basically our money, if you live in America, it's your money, as a U.S. citizen, you don't get to see who actually received your money as part of a government stimulus your elected representatives should be accountable for, right? Like, to me, that sums up the

problem of, like, the moral hazard of one world, one government. That's the U.S. Imagine if that happened with like a centralized one government overlord, right? Corruptionally, in. Now these people are in power. You can't get them out of power. They're not accountable to the people. And what do the people do? Like you've put all your eggs in this basket and the basket turns out to be full of rotten eggs, right? That seems to be one of the main problems here, specifically when the state has control of the money printer because they can do all sorts of things to reward themselves. and what you could end up with, and it's kind of my fear for the U.S., honestly, is some kind of a kleptocracy where those in power are stealing from,

like your elected officials are stealing from the public. Yeah, that's a fantastic point. And I think what you're alluding to is just the limitations that the incentive structure of the nation state has in contrast with its people. The nation state inherently has a stance against its own people. because its people are the one group of people that can remove the nation state from power. And so if the current people that are in power inside the nation state remove the ability for the people to remove them from power, then they have perpetual control.

Then they have perpetual say over how things work. And this has been a core reason as to why nations, both of religion and of nation states and all the other nations in history have failed is because the more successful a nation becomes, the larger a target it becomes for capture. And the United States protocol, I would say, has been the best example of this. Being able to influence control over the rules and regulations of the United States is one of the most valuable assets you have as an individual, especially as an individual with a company or corporation inside the United States.

If you can make the protocol of the United States bend to your will, then you are inherently advantaged. That's the biggest weakness of the United States Protocol and nation states is that those that are powerful and wealthy have the tools available to them to make the USA Protocol change to what benefits them. And the people don't have this power because the nation state protocol responds to capital, not to votes.

And, you know, we are a democracy, but the frustration that the people of the United States and everywhere else are experiencing is because their vote doesn't really mean as much as somebody who has billions and billions of dollars. And if we scaled this up into a world nation, a nation planet Earth, that incentive to capture the nation of planet Earth would just be even greater. You would just be able to control the whole planet. Yeah, it seems like a real scalability limiter. When we talk about scaling trust, we can scale it only so far with the nation state,

even with the protocols of the Constitution and the amendments in the Constitution and everything that's provided there. But at some point, corruption, it seems, seeps in, particularly when you have all of these powers bundled together, right? You have, you know, defense and you have fiscal. And now you have money. The power to print money is quite a glorious power that can be a corrupting force. So we've got some scalability limiters there.

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And they will help you with that. and on ramp the first 100K USD free. Check out the show notes for more info. The best thing about the Ethereum Nation is that it has many different ways of growing its roots out into the real world. And one of those ways is by the Monolith Defi card. If you want to get some of the world's economic activity onto Ethereum and help grow the Ethereum nation, you should get the Monolith Defi card so that you can go to your local store, go buy your local groceries. and with the monolith defy card using dye on Ethereum.

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You can still spend your money at your local stores and still live a bankless life. So go to monolith.xyZ today to go get your bankless visa card. All right, David, let's talk about some of the nation state protocols that are in existence. Are there some commonalities? Are there like some protocols that work better than others? For example, it seems like all of the nations of the world have converged to the protocol of capitalism. Even formerly communist nation states have sort of converge just because capitalism has tended to work. It's sort of a survival of the fittest type function.

Are there other attributes of a nation state's protocol that tend to work as well? I think it's pretty clear as you consider the strengths and weaknesses of past nations and current nations, is that any nation that promotes individual self-sovereignty, individual freedoms, individual autonomy tend to work out better than ones that don't. And I think it's pretty fair to claim that the reason why religions do not dominate people's lives as they do today is because religion is inherently restrictive on what a person can do. A religion is very prescriptive as to how you should live your life. And when it comes to building up a global economy, restriction is a limiting factor upon economy.

And so as we saw the transition from a religion-based world to a nation-state-based world, we saw one protocol, one organism give up control to another because that second organism allowed for more freedom, more autonomy, and more commerce than previous. So the people of nation states were more free than the people of religion. And I think we can draw that same comparison when we compare the protocol of the USA to the protocol of the USSR. You know, the USSR, communist Russia, was a very centralized, very dogmatic, very authoritarian protocol that had a lot of control and influence over its constituents as to what they should do. how they should behave, how they should act. And it was very restrictive.

People inside the USSR were not really all that free in comparison to the USA. Now, there's this really elegant concept called chaotic organization or emergent order. And it talks about the evolution of life on earth, language, crystal structures, the internet, a free market economy. They all have systems that are organized and evolved through spontaneous order. So they grow and develop on their own, but their emergent product is this organizational structure that it creates based on a very similar, based on a very basal rules down at the bottom. And when a totalitarian dogmatic nation comes in and dictates how these systems should be shaped, that's not as scalable. It's not as strong.

And an economy, really it does best when people, And this is why capitalism works so well when people are left to their own devices to decide how they best fit into the world. And so, Ryan, I think you and I have definitely found our personal niche. We both like to produce media, right? Like, I have two podcasts. I write a lot. You write a lot. You have a podcast.

And we're just doing the things that we think are best that provide value to the world around us. And if I were to go and be a chef. I'm not a very good cook. And it doesn't really resonate with me. And so I've just decided to, instead of being a chef, I'm a podcaster. I'm an article writer. And that's just my freedom, my personal choice. And the fact that the USA nation runs on autonomy and capitalism allows for people like me

to naturally find my best work, allows me to do my best work. And that's how an economy grows, economy that is, free and maximizes free individual liberty and individual autonomy allows for this economy to naturally find its best fit. And so any top-down control like religion, like the church, like the USSR, is a limiting factor on the individual's ability to be free and choose their own path for creating value for the world. That's a really interesting argument. Have you read the book Homo Deus by Eval Harari? So it's a second book. after Sapiens, part of the thesis is that with a lot of the centralizing technologies that are

coming about, artificial intelligence, for instance, it may actually give an advantage to not the communist state, right, because the capital is the capital is critical that you were talking about and all of its advantages kind of won out, right? But as, you know, the principle of survival of the fittest is as the environment changes, then one organism might not be as successful in the new environment as some other organism, right? It's why reptiles were, you know, wiped out and mammals kind of, you know, thrived 65 million years ago up until this point. And I've also seen that the, you know, coronavirus and these sorts of things, it does seem to be

the case that some countries that have a more totalitarian grip on their country are able to stamp out a coronavirus, for instance. giving them some kind of an advantage where you could argue, you know, some Western countries without that grip on their population with those civil liberties intact have been less able to respond to it. I guess one of the questions is, I don't know if you have thoughts on this, David, but it's like the free protocols, the classical liberal protocols of individual sovereignty and freedom, you know, it's not necessarily a given that those will be the most successful, you know, adaptive traits for a nation state over the next 100 years. It's kind of scary to me because I totally embrace

those protocols. But like, what's your take on it? Do you think that could be the case? Yeah, I think what you're doing, though, is you are comparing nation states to nation states. And you're saying, like, well, the fact that the China nation state has such a strong grip upon its people allows it to do better in the face of coronavirus than the USA. and using that totalitarian control to make sure everyone goes inside and stays inside, and the USA doesn't have that power. But that's just a very, first off, that's a very specific situation, right? Coronavirus is very specific.

And it's not the, it's not about the nation state first nation state. It's about what the people choose to organize themselves by. And we saw China welding people inside of their apartment homes. We saw China chasing down people that were outside with drones, telling them to go back inside. And so while they were able to do better with coronavirus in that specific scenario, what cost did that bring upon its people? How much trust does that do the people of China have in the totalitarian Chinese state? And I would say that while the success that China has had in controlling coronavirus came at the future success of its nation state because the trust of China is broken down.

And I just don't think that the authoritarian totalitarian control that China has over its people is long for this world because there's a lot of people in China. And more and more and more every single day are upset and not aligned with the. these with the state. And so, you know, they claimed a small victory in the battle of coronavirus, but at what cost in the future. Yeah, it's an interesting argument. That's kind of the argument that there's a lot of cracks under the exterior. Everything looks like polished and nice and shiny in the state of China and growing, but there's a lot of cracks under the exterior and social unrest that hasn't yet risen up due to this erosion of trust. I think that's definitely. an argument that could be made and something we'll have to, you know, pay attention to.

But so far we've talked about like these, these almost these different ways to scale trust. And there are other ways, but three of them that we've kind of talked about. And you've nailed down are like religion as one, scaling trust through, you know, things like the Bible and sacred texts and those sorts of things. Shared narratives, for sure, shared memes. Some of the advantages there, it seems like, are, like, propagation. right? And there's certainly the ability to fork. We've seen many different religions and also sub-denominations that sort of have different shared narratives. So that has some advantages. And we've

talked a lot about the nation state as well and the advantages and disadvantages. But I think what we're the heart of your article and the meat of your article is this this kind of this third technology, this new social coordination technology that was just birth 10 years ago. And it's just revving up now, which is the digital nation. Can we talk about that from it? So, like, what is the digital nation? Why is it different? The digital nation is what gets me so optimistic every single day about our future. And it's basically because we are simultaneously seeing the limits of the nation state and what it can do today. Even the United States, where we have baked into our documentation, baked into the DNA of our protocol that all men are created equal.

We're seeing a majority of the nation raising a hand and saying, that's bullshit. That's not what's going on. This is a whole Black Lives Matter movement that has erupted across the nation and across the world, saying like, you know, like it says it in the documentation, but is it really true? I don't think so. And that's because that the Declaration of Independence, where it says all men are created equal, It just says that. It's just a suggestion. It's not a hard-coded rule. There's nothing really stopping anyone from not following that. It's it's the ought side of the is-ought gap. It is not what is. It's what ought to be. And that's why digital nations are so powerful. It's because of cryptography where everything that is stated in the protocol must be or else it is not included. You must follow the rules or else you do not it to have your transaction included in the blockchain. And so there is no subjectivity involved.

What ought to be part of the protocol is what is part of the protocol with Bitcoin and with Ethereum. And so this really allows us to scale because we all get to look at the protocol and have the strongest assurances that what the protocol says it will do is actually what it will do. Now, like a digital nation like Bitcoin or Ethereum can't, you know, they can't operate a police force that protects private property. They can't run infrastructure that builds bridges and things of this nature. But what they can do are similarly really powerful things. And I think as these two nations, the model for these two nations that we have today, Bitcoin and Ethereum, Bitcoin offers the complete separation of nation state and money.

and Ethereum offers the complete separation of nation state and economy. And so it really reduces the subjectivity of these extremely important things. Throughout history, all of these protocols, what they're trying to do is they're trying to foster economy. And so let's just, the nation state can have the responsibility of infrastructure, of health care, of police force. But we're going to give the responsibility of money and economy to the digital. nation where it's totally unsubjective.

So objective only protocols that are responsible for managing the most important things in this world, which is our money and our commerce. Money, economy, and also like a property rights system without the corruption moral hazard of a nation state. I mean, that's basically what we're saying these digital nations do. I tweeted this recently. It's like crypto is Steve Minnuchin resistant. a Steve minutinution resistant form of money, right?

An oligarch, a plutocrat, a kleptocrat can't take it from you, can't take your property from you. That is a better substrate of trust, a more scalable substrate of trust than the current nation state is. So it's a new technology that we've basically just unleashed. And I think what you're saying is pretty important, too. I want to dig into this a little bit. So what we've seen in the past is not necessarily that like one type of nation replaces another

type of nation completely because there are certain things that one type of nation can do that another can't do and can't ever do. So what they tend to do is sort of layer, right? So like, example of religion, that didn't get replaced by the nation state. It was sort of supplemented by the nation state. There were conflicts at various times, of course. But, you know, now we live in a world where both coexist peacefully. And I think the protocol of the U.S. was a key. in some of that, which was a clear separation between religion and state. Now with these digital nation states, we have the opportunity to clearly separate money from state. But digital nations, like Bitcoin and Ethereum, are not going to replace everything that religion gives us or

everything that the nation state gives us. We're not going to get an Ethereum police force. I hope we never do, right? We're not going to get. Ethereum to plan our cities and construct roads and provide public health care or education or anything like that. It's going to be layered into the other nations and do what it does best and essentially take some of those components from the previous nations and build on top of them and allows to do more cool things. In the First Amendment of the United States nation state. It has the concept of separation of church and state. And it does not have the elimination of the church. It just has the rules that are suggested that perhaps the church does not belong in the protocol

level of the United States of America. And in the very first block of the Bitcoin blockchain, we have a very similar concept stated clearly in the Genesis block or of Chancellor on the brink of second bailout for banks, which is talking about the subjective nature of nation state control over money. And it's basically saying in the first block, just like how the separation of church and state was in the first amendment, in the first block of Bitcoin, we have the separation of state and money. And so while these things do not erase each other, they do not overwrite each other, they are additive and supplemental. They also subtract the role of one nation state into the role and responsibilities of another.

Okay, so can we do like a compare and contrast? Because we've talked about some similarities and some differences, but like, what would it compare and contrast look like? We talked so much on bankless about crypto being a new form of money and the state has a new form of money. Religion doesn't. So that'd be one. What are some of the others?

Yeah, and this is where the expansive definition of what a nation is really becomes handy. This is where if you, like, open up your imagination, you've, can really see the similarities between a digital nation and a physical nation. So yeah, like you said, each nation of both types have its own currency, right? So the United States has the dollar, Bitcoin has the Bitcoin, Ethereum has the ether. All digital nations have their own native currency, which are critical for the operation and maintenance of these systems, of both physical nations and digital nations. If you took away the native currency of both types, things would just not

work so well. And with digital nations, they would immediately crumble. Then you have the defensive systems of both types. The miners of Bitcoin or the stakers of Ethereum are the military for a digital nation. And they are paid for out of the funds generated from the taxes on the economic activity inside of the digital nation. Now, what's really cool about the military for digital nations is that they are strictly defense only. There is no offensive mechanism for these things to exert their control upon the world, right? And so the United States, which has the money printer, possibly the world's most valuable asset, has this immense budget for the military because they have the money printer. They have the world's relic, right? They have the world's

most valuable asset. And so they need the world's most valuable military to protect the world's most valuable asset. So we have like thousands and thousands of nuclear bombs and fighters and tanks and warships and all of these resources, all of these materials come at the cost of the economy because that cost comes from somewhere and it really comes out of the people. It's extractive. And this is what I was saying earlier where nation states are designed to be maximally extractive from the people. Because the money printer exists, it needs to fund its own protection as much as possible. And it does that by charging taxes. And then it also does that by printing the money, which is just another hidden tax. Then there's also the police force,

right? So there's the external offense. And then there's also the internal defense, right? The immune system. And I would say the police system is the immune system of both nations. But in the digital nation, the police force is really cryptography. It's this system that we define, we clearly define as what can and cannot be included in the digital nation. And in digital nation, it's completely binary. Either, yes, it fits, or no, it does not. And it's defined by cryptography, which means that there very little costs actually needs to go to funding a police force. In fact, absolutely zero costs needs to go for the internal maintenance, the internal order of a nation. Cryptography, we've relegated that responsibility to cryptography. So it's really

cryptography that manages the internal state of the digital nation. There's also borders. The blockchain database defines the borders of a digital nation. Either data and information is in the blockchain and it's on chain or it's not and it's off chain. And so that's the borders of the digital nation. There's also native businesses that offer products and services in exchange for the native currency. We would call these defy apps. If you go to defy pulse, you can see all the native businesses of Ethereum. There's also Patriots. Ryan, I would say you and I are definitely the patriots of our respective digital nations. Nations of both types have their respective loyalists, right?

And so I would say a patriot is somebody that serves in government in order to serve a larger purpose than themselves, right, to serve something bigger than themselves. And the maximalists of both Bitcoin and Ethereum are definitely those same types of people that believe in a vision larger than themselves. And they evangelize and entice others to join their cause and are likely also going to write.

the ship down to the very end no matter what. And the the presence of these patriots of these digital nation evangelists, the fact that they exist at all are really what upholds the strength of these systems. Bitcoin depends on the buyers of last resort and Ethereum operates in the same way. And so the more buyers of last resort there are, the more maximalists there are, the stronger the foundational base of these systems are. And then they also have in-group identities. right like what what does it mean to be a bitcoiner what does it mean to be an ethereum we have very clear and obvious like statements as like what it means to be an american right uh and that's just baked into the protocol of america and that same thing exists for bitcoin like bitcoiners and ethereum

have a very clear and differentiated set of values and depending on like who you are your political leanings your your beliefs about the world you might be become a Bitcoin or an Ethereum based off of that even before you find out what these things really are. And so these comparisons between digital nations and physical nations are almost endless. And like many things throughout history, they are not the same, but they rhyme really, really well. And that's why I've been considering these things as digital nations, digital commonwealths of sorts. Yeah, I totally think it's the best analog. And I've thought so for some time, too.

even one that we've often talked about, is the settlement layer. In the nation state, the settlement layer is law. In the digital nation, Ethereum and Bitcoin, the settlement layer is code, which is a profound differentiation. And this whole entire thesis is surrounding the scalability of digital nations versus physical nations. And there are really important characteristics about the Bitcoin and Ethereum nations that you will never be able to find in physical nations.

Because of that is aught gap. between what a physical nation wants to be and what it actually is. And with Bitcoin and Ethereum, there are a number of characteristics about individual people that does not matter. And this is something that we have seen still be relevant over and over and over again in the meat space world, in the physical nation world. And things like gender, your race, your religion, your age, the language you speak, how able you are,

your citizenship of a particular nation, your personal connections, your personal clout, all of these things really materially impact your ability to live your life in a physical nation. You know one of my favorites, David, is the digital nation doesn't care where you were born. So there's massive disparity, right? If you were born in an emerging country versus born in a first world country, there's a massive disparity in terms of your opportunity and life experience just because of your

passport, just because of your citizenship and the infrastructure that surrounds that citizenship. But the digital nation doesn't care. It doesn't care where you're born. You can be a citizen of it and live anywhere in the world. All you need is an internet connection. And that is a fantastic equalizer, I think. Absolutely. Absolutely. And that's really what I'm here for. That's going back to the alien that comes to planet Earth and asks us, what are we doing here? And we respond, we're trying to get coordinated. Well, it's really easy to get coordinated if we're all using the same nation, if we're all in the same nation. The only way that I see a nation of planet Earth is through Ethereum, is through Bitcoin. So let's talk about that for a minute. So to become a

citizen of a nation state, you have to be born in a particular place. That's the qualification or your parents have to be born in a particular geographic boundary, right? Like a plot on earth with these imaginary lines that humans drew, right? So what does it take to become a citizen of a digital nation like Ethereum? One of the greatest things about the answer to this question is like the answer is almost nothing. Even people that are babies that are being born today, we could in a very loose way consider them citizens of Ethereum, citizens of Bitcoin. And that's because the barriers to entry are so low. Basically, you only need an internet connection and then a wallet. And those are the minimum viable entry into the system. You just need to be able to spin up a wallet.

Now, some people are more citizens than others in the sense that some people put more of their value upon these systems. And some people don't have any value in these systems. But that doesn't mean that that citizenship is restricted, right? It's just some people choose to identify or leverage these digital nations more than others. So you become a citizen just by using it, right? Just send a transaction on Ethereum. You've agreed to the Ethereum constitution, basically, and your citizen. Own some eth. You purchase some eth, the currency of the nation, and you're a citizen of types. It's basically powerful because it's opt-in. And as you said, it's not a binary. I have to be 100% a citizen and move all of my everything there and only do

transactions in a bankless money system. You could do it gradually. So it's open and opt in in that way. And you also have the ability to exit. Do you know, like so if you wanted to exit your American citizenship, not saying you would, not saying you want to, of course. But if you did, it's a difficult process actually. On purpose. Yeah, on purpose. I don't know if you know this, but you'd you are actually taxed on all your wealth at that point. So there's a tax in place. And you're also put on a list of basically people have revoked their citizenship that Congress publishes publicly.

That's a little bit of a shaming process. With digital nations, you come and go as you please, you opt in, you opt out, you enter, you exit. It really doesn't matter. The protocol doesn't care. And you get to have dual citizenship. You get to be a citizen of your physical nation state, and you also get to be a citizen of your digital state, your digital nation.

And one doesn't conflict with the other. These can happen in tandem. These can happen in parallel. David, we've covered so much. We definitely have to do a part two on this and dig into the topic further. I want to discuss in part two things like, is Facebook a digital nation? I know you are writing a part two article as well. So that'll be some meat for us to dig into.

But how would you summarize this for bankless listeners what we covered today in part one? Part one is drawing a line through the historical examples of nations and seeing where that line continues as it passes through the present and goes into the future. I hope we have done that well enough for you today. But if you still want to learn more, go and read the article, a bankless nation in the bankless publication. And then also if you, it's a pretty dense article. It's a pretty long one. And so I've also read it for you on the bankless YouTube. So you can check it out there. And part two, I had to split it into two parts because I wanted

to focus on the past, you know, nation states and religion and then Dunbar's number. And then part two is all about the future, right? It's all about where do these digital nations go when they develop and mature just as all nations have. How do they change as they mature? And there's so much left to talk about. I want there's, we're definitely going to talk about subnations where I view maker Dow compound uniswap. These are all subnations of Ethereum in the same way that the United States is a protocol of protocols and the Fed, the federal government is the main chain of the United States and the 50 states are different shards of the United States protocol. Ethereum is the main chain. And, maker-DAO compound dy-d-x all of these constituent protocols these individual states of ethereum and the contracts

the contract addresses of each individual protocol is its own its own independent sovereignty inside of ethereum and so that is definitely worth getting into and i'm really excited to to get into that one with you ryan on part two of a bankless nation can't wait so here the action items here's what you need to do david covered some of them read a the bankless nation it's i was published last Wednesday, we'll include a note in the action list. Also, subscribe to the podcast if you haven't, because part two is coming very soon. Are you a citizen of Ethereum? Well, you are if you've purchased Ether or ever transacted on the Ethereum chain. We hope we've given you a new way of looking at Digital Nation states. Guys, risks and disclaimers, ETH is risky. Being a citizen of a

digital nation has some risk because crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us. This has been episode number 17, the Bankless Nation.