Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Dieter Fishbein & Joe Petrowski: Polkadot – Claiming Digital Sovereignty on Blockchain

Episode Date: July 7, 2020

Polkadot is a unique protocol connecting multiple purpose-built blockchains into one scalable network. It's using blockchain technology to make way for new markets and future decentralized economies and has many stand out features. It's a sharded multichain network enabling many transactions on several chains in parallel. It offers interoperability and cross-chain communication. Communities on Polkadot govern their own network, and hold a stake in the future of Polkadot’s network governance as a whole. It also enables forkless upgrades, allowing blockchains to evolve and adapt easily. Over 100 projects have been or are currently being built for the Polkadot ecosystem, in a wide range of services and systems.After being in the development stage for 3 years, Polkadot was launched earlier this year. It's the first project by Web3 Foundation, and Parity are behind the development. Dieter Fishbein, Head of Ecosystem Development at Web3 Foundation, and Joe Petrowski, Research Analyst at Parity Technologies, share an in depth overview on the economics and incentives behind the protocol.Polkadot is designed to take back our digital sovereignty from powerful third-parties who currently control the web. It promises to take blockchain technology to the next level, and we believe it will do just that.Topics covered in this episode:Dieter and Joe’s backgrounds and how they got into the crypto spaceThe Polkadot visionThe key components of the Polkadot protocolKusama - Polkadot's cousinScalability, Security, and InteroperabilityThe stages of the Polkadot launch and what is coming nextBuilding with SubstrateThe parachains being developedLeasing parachain slotsRunning validators on PolkadotEpisode links:Polkadot WebsiteKusama WebsiteThe Polkadot launchPolkadot TwitterDieter Fishbein TwitterJoe Petrowski TwitterThis episode is hosted by Brian Fabian Crain & Sunny Aggarwal. Show notes and listening options: epicenter.tv/347

Hi, and welcome to Epcenter. My name is Brian Crane. My name is Meher Roy. Today we did, I think, our third episode on PolkaDot. You know, we've done some over the years. But of course, like, as with many blockchain projects, it takes a long time for those to come about. And now finally, PolkaDot is live.

So we had Dieter Fishbein-on from the Web 3 Foundation and Joe Petrovsky from Parody to dive into various things about PolkaD especially about the economics. and the parochane leasing and some of these interesting, interesting features that Pocod has. Now, you should do not here. So disclaimer that with course one, we are currently running Pocodot validator.

So just be aware of that. And of course, if you do have dots, when a stake, then you can do so with us. So if you wanna learn more about that, just go to course one. So that's C-H-O-R-U-S-S-. dot one. And then there's going to be information there. And the other thing actually where we have been working kind of on a polka dot related thing with KORS1, which is that we've been working

on this bridge between a substrate chain and a cosmos SDK chain. So we talked a little bit about both substrate and cosmos SDK in the project. Those are kind of the leading frameworks at this point for building your own blockchain. And we've actually had a grant from the Web 3 foundation to build that bridge. And so we've kind of just are in the process of finishing that first part. And okay, with that, let's go to the interview. So we're with Joe Petrovsky and Dieter Fishbine to talk about PolkaDOT today. We've done a few episodes about PolkaDot already.

I think there was one with Gavin. There was one with Peter Saban. But now, of course, PolkaDot, which has been in the making for a long time, is actually live or, you know, sort of in the first stages of liveliness, which has become kind of the norm for blockchain projects, right, where a launch has become this drawn-out multi-stage thing. But it is life, right? And kind of with a proper proof of stake network now. So I'm excited we can revisit PolkaDOT again. And thanks so much for joining us today. Yeah, thanks for having us. Yeah, thanks so much. And you guys can each give a little bit introduction about yourselves,

like kind of your journey in the larger crypto space and then like how you've ended up working on polka that. So, I mean, I guess like I've been interested in the crypto space since like 2011 or 12 and then got more into it around like 2015, 2016. I was a professional cyclist and just kind of like looking for my next thing to do after I retired, just a funny word to say when you're like 29 and had been under crypto for a few years already, just out of interest. And then I started, my background was in like time series analysis and stuff. So I got into like, trading algorithms and all this sort of thing and worked on that for a couple of years and then ultimately decided to join parity and start working on Pocod and I've been here like about a year

and a half now. I actually discovered crypto around the same time as Joe. So I was graduate students studying cryptography and it was about 2013 and I remember like seeing the Bitcoin white paper at the time and I actually think this journey sounds probably the same as so many other people, but I saw the Bitcoin white paper and read it and was like, okay, that's super interesting, put it to one side, continued on with what I was doing, finished my graduate degree and ended up working in finance for about four years, doing stuff completely unrelated, but still following the space. In about 2017, when the space was starting to get pretty, pretty large, I decided that at that point I actually wanted to work in it, so I ended up

joining a small blockchain-focused venture capital fund in Toronto and Hong Kong, and really just learning all about layer one protocols and about the ecosystem in a much more deep way than I had been, which was really great. It was super fun. And about a year and a bit ago, decided that I actually wanted to work in the space doing something a bit more meaningful than just investing. So joined Pocod. And yeah, I've been here ever since. Let's just start from a big picture. Probably most people have, you know, some familiarity with polka dots. But can you guys give a little bit of a background?

Like, what is the polka dot vision? From a very high level, PolkaDot fits in with like the rest of the Web3 vision of like creating fundamentally new ways for people to organize themselves outside of like what we would call traditional organizations or societies and a way to organize without trust. And so I think more concretely how Pocodot expresses or contributes to that vision is that it is a suite of protocols that allows like specialized blockchains to communicate and interact and it provides the context for this interaction. So for developers like what this means is like they have a platform that gives them like secure interoperability and allows them to write a blockchain that specializes.

And it kind of lies somewhere on the spectrum between like a smart contract. and building your own blockchain from scratch. So a lot of people find that, like, smart contracts are either too bloaty in their execution due to, like, gas fees or, like, unpredictability or other smart contracts on a shared platform, or they just, they're not able to upgrade or express the complex logic that a developer wants to be able to express. And building a whole blockchain from scratch is, like, a huge undertaking that can take a year or several years to do, and a lot of it's kind of, like, repeated work of, like, the networking and RPC and database. type of work. Pocodot really is trying to create like a new class of developer where you can

target this like intermediate zone of having a specialized blockchain with a lot of customization, but also without the full work of building out like the underlying infrastructure for that blockchain. So yeah, to kind of wrap it all up, like it gives you this platform to deploy this specialized blockchain without worrying about like the security or like the underlying mechanics of it. That's exactly right. I think what Joe just described is really the vision of Pocodot for developers. For users, Pocodot can actually give us new forms of organization. So, I mean, fundamentally, PocaDot exists to give us the ability to coordinate in much more sophisticated ways than we've ever been able to. And ultimately, this will help us solve much more complex problems than we ever thought possible.

These are large problems requiring the pooling of resources around multiple stakeholders. And I think we'll see kind of the launching of groups that wield similar power to nation states and own properties can enter into business agreements, derive income from sources. And, you know, I think this is more of the end-user vision than the actual developer vision. Let's dive into what Polka-Dar actually looks like. So what are the key components and technologies that make on polka-ons? So we can kind of break it down, like, technically there's this relay chain and then parachines that connect to it. And so the relay chain, it really provides finality guarantees for the parochains and the context for them to interact with

through a protocol that we call cross-chain message passing or XMP. And then kind of like underneath the relay chain, we have a consensus mechanism. It's like a hybrid consensus called Babe and Grandpa, and it's secured by a proof of stake algorithm called nominated proof of stake, where people can select like this is a set of validators that I deem acceptable or that I want to nominate to be a validator. So then like if we go out into the parachane space, you have like parachines and pair of threads,

which we could go into a little bit more. But the way that these interact with the relay chain is really interesting. So Pocod is a sharded platform, So you can think of these pair of threads or parachains as individual shards in the network. And where it gets really interesting is that from the outside in, it looks heterogeneously sharded. So each of these parachines is its own individual blockchain. It's going to have its own API. It could be like an application.

It could be like a decentralized exchange or a stable coin or a smart contracting parochane. And these all look different. So if you're from the outside of Pocodot, it kind of depends like which pair of chain you go to, it's going to provide completely different functionality. But where this gets interesting is that the way that the relay chain interacts with them is through WebAssembly. And WebAssembly is like relay the glue that holds this whole thing together. And through our libraries, like what we've provided is that all of these parachines compiled down to WebAssembly, which gives them an execution interface for validators on the relay chain.

So these parochains kind of all compiled down to like parachain validation function to guarantee a proper state transition. So from the perspective of the relay chain, this is actually like a homogeneously sharded system. All of these parachines look the same. It just, they all expose an API that has a validation function that says like validate my parochain. And that's it. This interaction, it provides like a lot of flexibility. And then if we kind of go like beyond the technical stuff, we can talk about like the ecosystem also like Kusama and our TestNet West End and how those play into Pocod. and, like, I don't know, Dieter can probably talk more about Kusama if you want to talk about

how that fits into Pocodot as a component. Kusama was launched about a year ago, and originally when it was launched, this was kind of early version of Pocodot. And I think we launched in about August of 2019. The idea here was that it allowed us to go through this process of launching the network before we got to Pocod and allowed us to, actually see how these things were deployed in the wild, but the use case has actually really, really developed since then. And when you actually look at what Pocodot is compared to Kusama,

Kusama is this less robust, less secure version of Pocod. And this ultimately means that we can see development take place in Kusama in a couple of ways. You have this Canary Network use case where we've used it to actually test out kind of new pieces of technology, before deploying them to Pocodot. And we actually see this canary network use case evolve into like a canary network use case for others. And so we're seeing a lot of parochains that intend to deploy on Pocod actually want to deploy parochains on Kusama as well.

And this is so that they can test upgrades that they're planning on doing and test things they're planning on doing in an environment with real economic consequences before eventually deploying to Pocodot. I think a good thing to add to that. I was just like talking about like upgrades and probably what I should have mentioned when I was talking about like the architecture and components is this concept of like being able to upgrade your chain. And this is also part of how we architected Pocodot where a client doesn't like express the Pocodot logic itself. It's actually kind of split into two parts. It's a host environment for this WebAssembly executable.

it's the same like compilation target for the pair of chains as for the relay chain. So it's actually hosting its own logic. And so this allows the relay chain to upgrade because we can just place a new web assembly executable on chain. And without anybody upgrading their clients, the system can upgrade itself. And so Pocodot, like it hosts itself, which I think is a first in blockchains, like being able to have forkless upgrades and upgrade the chain without having people update their clients. And this provides like the same functionality for parachines because they're just exposed. using this like parochane validation function for the relay chain validators. And, well, they can change that.

So if they want to upgrade their parochrain, they can come up with a new one. And that's also hosted in the parochane storage. And I can say, hey, I want to upgrade my parochane. Here's a new one. And so it's somewhat of a risky thing, too, like, because we've seen mistakes on Kusama of, like, upgrading the relay chain and some problems there. So that's obviously like something you want to try out on a test net or on Kusama or something before moving to Pocasama.

Dakota because these are new things that we're trying to do and trying to express. And so having these testing grounds that are more than a testing ground, like Kusama is not a test net, but a lower barrier to entry, lower risk than working on Pocod is really important. You can think of it as the minor leagues, basically, where early stage teams can fine-tune their product and business model before potentially moving that to Pocod if they're able to build their community of users and actually construct a business model. that makes sense and is getting traction. I mean, one thing to note, too, is

PocaDot's always going to be 100% focused on reliability and security. However, there are going to be teams out there that don't need bank-like security and robustness that are willing to trade, you know, this higher throughput for lower security and robustness that they can get on Kusama. So, I mean, some use case verticals that could fit in here are like gaming, social networking, content distribution, things where there aren't really kind of high amounts of necessary value transfer.

And so they could actually deploy to Kusama, and this could be a platform for their production deployment, and then things that kind of need this higher security, or maybe for enterprise use cases or things like that, could eventually choose to deploy to Pocod as well. Maybe like one way to think of this spectrum is, if you think of AWS, I can go to AWS, and I can give an image for a machine that I want AWS to boot up.

And AWS will boot me a machine corresponding to the image I give it. So the image is essentially like this binary. And AWS will boot the machine and it will run it for me. And of course, when I give it the image, that image can include my application in it. And in some senses, PolkaDot and Kusama are similar. I can come to Polka dot and Kusama and I can give it. give them a validation function that comprise down to WebAssembly, and I can somehow give it to the network,

and the network will boot up and run blockchain for me. Yeah, that's actually an excellent analogy, except that instead of trusting AWS to secure a data center, you have this open permissionless system of relay chain validators. The difference between Kusama and PolkaDot is that in some sense, when I ask PolkaDot to run my validation function when I run my blockchain and I ask Qusama run my blockchain

I am more sure that the particular blockchain I launched in PolkaDot can't be attacked as easily as Kusama so maybe there's a failure rate associated with these blockchains and Qasama failure rate is let's say like once in 10 years Polka dot failure rate is once in 100 years so that's the quality difference for me but in order to have the blockchain with a lower failure rate. In some sense, I will also need to, I or my users in the end, will also need to pay more

through some mechanism which we will discuss. Exactly. And I think one way to think about this is really, like, from the perspective of how a deployment process should look. And I think teams will originally start kind of deploying their blockchain to West End, which is Kusama's test net. And there they can kind of flesh out their tech and make sure everything works. And then after that successful, deploy to Kusama, and then, I mean, I explained that process before, like maybe at some point after that, once they build their community of users, fine-tune their business model, then deploy to Pocoddot, if it makes sense. On some level, right, we can trace Pocodot back to the challenges of Ethereum and the challenges

of Ethereum and scaling. And of course, that has led to, you know, so much different stuff, right? Whether that's now ETH2.0, whether that's maybe... something like a Cosmos vision where, oh, there will be many blockchains and then operate, whether that's visions like the polka dot one where you have this one tightly interwoven system of many blockchains that then can be separate, you know, then you have like things like near Solana, like so many other things. When you guys kind of look at this landscape and how this has evolved, what do you see as the most important dimensions in which to differentiate these different approaches?

and like where do you sort of situate PolkaDOT in this landscape? A lot of the early motivations for these kind of next generation protocols came out of scalability. Several years ago, people knew that like Ethereum wasn't going to be scalable for building production applications

if it was going to gain mass adoption. And so we started talking about like different scalability approaches and we saw a few. So like you look at like what NIR is doing and they're saying like, well, we're going to still do smart contracts, but we're going to do sharding on a single state. And Ethereum 2 said, well, we're also going to still do smart contracts,

but we're going to use Ewasom, and we're going to have these sharded chains that are all the same. They all just kind of have like an EWASM host environment. And then we saw Cosmos say, like, well, we want to do like interoperability, so we're going to have like specialized blockchains and we're going to let them communicate with each other.

I think there's another dimension in here, which is security. And so I wouldn't really say like one of these is more important than another one. I would say, like, we try to look at all three security, interoperability, and scalability as like three dimensions of the same, like fundamentally the same problem. So interoperability kind of naturally gives you scalability because if you can send messages between different systems, then all of a sudden these systems can specialize and you just get like horizontal scalability, right? That's kind of

obvious. But what do those messages mean? And without security, you're kind of relying well, if I receive a message, how do I know that the chain hasn't been forked or attacked since it sent that message? And so all of a sudden, you're kind of stuck with, well, how do I interpret these messages that I'm receiving? Like, I have this scalability and interoperability. Like, that's great. But like, what do I do with these? Right. The angle we're trying to take is like providing the context in the form of security to give these messages meaning so that if you receive a message, you have some guarantees about the providence of that message. like who sent it, how it was generated. If the message says, like, hey, I burned 100 tokens, so therefore, like, you can mint 100 tokens on your chain. I want to actually know that, like, you burned 100 tokens on your chain, right?

And that you didn't just send me this message. And likewise, like, for the sender, you know, I want to know how this message is going to be interpreted. Is this person going to just mint 200 and then come back to me later and say, like, yeah, I actually have 200. I'm like, well, no, you don't. I would say, like, the other dimension that we go to is just, just, you know, just like pushing scalability or pushing this work to the edges of the system, right? Like a lot of shardons systems have some sort of like central gatekeeper that's kind of like the relayer between all these different chains that are in the system.

And with Pocodot, like one of our core principles is that like we really want the relay chains to like as little as possible. The relay change to really provide the context for these messages and for the interoperability, but it shouldn't actually send them itself. So we let the chains actually just talk to each other, like chain to chain, doesn't even need to be through validators. Like if they just share a normal full node, they can actually exchange messages. But those messages are still guaranteed by the security of the relay chain. To kind of like go back to your original question, like, I don't know if I would particularly like pick out a single dimension of this.

That's the most important. I think you need like more of a holistic solution about how you actually scale. Web 3 and make these different systems interact? So the way I think of it is, like you mentioned, there's an interplay between scalability and messaging. And the idea that a system like cosmos and system like Polkarol ultimately is playing with is you can have many blockchains and they can message with each other. The difference is that in a cosmos-like system, if you imagine a blockchain and it has a

post box, and other blockchains can sort of. deposit messages, letters into this postbox. And then this blockchain will process each of these letters in its own logic. In Cosmos, when the letters, let's say stack up in the postbox, there's a stack of 10 letters from 10 different blockchains, each of these letters has different risk. So for example, the first letter, it might be that, hey, there's a once in 10 year risk that this letter is actually a forgery of some kind, meaning that it's a, not really valid, but it looks like a valid letter. The second letter is that also runs that risk, but maybe it's a once in 100 years risk. There's a third letter that runs a once in

two years risk, and fourth letter that runs a once in 50 years risk. And so each of these letters essentially has a heterogeneous risk. And this blockchain in some way will need to deal with the heterogeneity of these risks. And the risk comes from, oh, you receive a letter from or blockchain, you're trusting that blockchain, right? So if that blockchain ends up being corrupted, then that letter could end up being, I don't know, invalid or due to some hack or... What's happening with PolkaRod is when a blockchain runs on PolkaDot

and it has a post box, it's also receiving letters. Now, these letters are of two kinds. Like, one kind is it's receiving letters from inside the PolkaRot ecosystem. And there might be other messages it's receiving from outside the PolkaRot. ecosystem. But let's forget the once it receives from outside the Polkaoad ecosystem and just zoom into the once it receives from inside the Polkaoids ecosystem. So these are other blockchains. Yeah, I think outside the Pocahda ecosystem, you could kind of consider like a chain's

API, right? Like how does it let the users, untrusted people interact with it? So when the messages come from outside, it will have the same problem cosmos chains have, which is it will need to deal with the fact that all these letters have intrinsically different risks. But if you look at like the sheaf of letters coming from inside the Polkarot ecosystem, what Polkarat has essentially done is even though these letters are from different blockchains, all of them have exactly the same risk. And it's trying to make that risk be below. It's trying to make that risk be once in 50 years or once in 100 years. It's not just that they have equal risk. It's that they share common execution and state logic

with yourself. And so if you're compare this to like smart contracts interacting on Ethereum, like smart contracts on Ethereum can interoperate with each other. And the reason they can do that is because they're sharing common execution logic. The fact that they're on the same chain and that they're sharded, that's what allows them to interact in a synchronous way instead of asynchronous. But what allows them to interoperate in a trustless way is that they share common state and execution logic. So contract A knows that if it receives a message from contract B, there's no possible condition where contract B gets like 51% attacked and gets rolled back to a state before it sent that

message and contract A doesn't. They either both get rolled back and attacked or they both don't. So you know that like if you receive a message and there is some attack, you would also go back to a point before you receive the message and would get to re-progress through and maybe that message gets sent again or maybe it doesn't. Pocodot provides that similar guarantee where if some other parachain in the system send you a message, there's no way that parachain can be reverted to a state before it sent that message without you also being reverted to a state before you receive that message. And so that's one of the things that I mean by context that the relay chain provides is that you can't attack a single parochane without attacking the entire system.

If you look at Compare Cosmos and Polka, though, right, there is, of course, you know, many pros and cons on each side, right, because they're just different approaches. But a big pro in, if you run a pair of chain, right, is you don't have to worry about, you know, the validators. You don't have to find the validators. And you have just kind of like shared, you know, the shared security. The con is, I think that you have more complexity, right? The system is just very, and then especially these in that outside event that maybe it's never going to happen, but where, you know, there is this corruption and having to roll back all of the the chains in polka dot, that's going to be.

be a challenge. Actually, has that happened in test nets? I mean, we've rolled back Kusama before by a few blocks. But was that just a single chain without having to roll back also relate parachains that are connected with it? Exactly. Like, we haven't done a system of like rolling back a hard fork with multiple pair of chains now. That hasn't been done yet. Hopefully it doesn't have to be done. Well, I think that kind of ties actually into something that would love to dive in here because right now, you know, the relay chain is life, which is still restricted, right? So there's no token transfers yet. There is staking. So can you talk a little bit about what are the stages of this polka dot launch and, you know, what do the next two or three years look like? Or what has

happened for kind of the full polka dot to be in operation? Yeah. So like we launched about the end of May in like a proof of authority phase. And the purpose of this phase is really, to allow people to claim their dot tokens and set up their staking infrastructure. So I know that's like, you kind of mentioned at the beginning of the show. This is like a thing with blockchains now of like having a bigger rollout process.

And if you think about like when Bitcoin and Ethereum launched, there wasn't really like a threat of like launching and having like a really low security and then getting attacked. But if you look at like modern blockchains when there's like a lot of attention on them, there's much higher risk. So you could imagine like a,

a scenario of, say you launch a blockchain that has 100 million tokens in it. And on day one, there's only 100,000 of them have been claimed. Some person could come along and say, claim a million of them. And easily, like, this individual could attack the chain in that moment. So, like, the proof of authority phase is really just to allow, like, enough stake to be claimed and put behind validators that we can, like, securely transition to a permissionless proof of stake, which we did after, I think, about two weeks. So I switched to nominated a proof of stake and then relatively quickly scaled up the validator account to about 200 validators. So that's where we are now is we've been running for two or three weeks now with about 200 validators on Pocod with still quite restricted functionality, like limited to like the staking and proxying accounts and like kind of getting your infrastructure set up.

Our next phase, which will hopefully be in the next two or three weeks, will be rolling. out governance and removing the pseudo authority. You know, like, Pocault has this module. It's called pseudo that it takes the place of governance before governance is like fully in place. So we should very quickly see the removal of that and the implementation of like our full, full governance protocol suite. And then after that, it would be enabling balance transfers and hopefully not too long after that. So I think we'll probably see that around like late August, early September. And then hopefully not too much longer enabling paratro.

chains and then cross-chain message passing by the end of the year, I would hope. So I think that's kind of what the next six months look like when we talk about like getting to the core relay chain functionality and like opening up all these features. And when we talk about like getting to the full Pocodot vision, I would say the next two or three years will still be a lot more infrastructure. So I wouldn't expect like a super exciting application to be out there like in a year or something. I think it's like Pokemon. is like fundamentally like infrastructure for infrastructure.

The first wave of parochains are actually going to be like not so much an application in themselves. So there might be stable coin chain, a decentralized exchange chain, an identity chain. And then I know you guys want to talk about later, but like some more system level parochains, moving some work off of the relay chain and putting that into parochains. And that really provides like infrastructure and composability for other applications. So the next wave of applications that come is an after. for that, well, they have an identity suite. They have a stable coin. They have a decentralized

exchange. They have a smart contracting chain, all of this stuff. And so that's what I'd expect in like the, say, like, four to 10 year frame is these applications can come in. And they have all of these primitives that exist within the Pocod network that they can compose and build higher level logic. And I mean, I would say like when we talk about like the full vision of Pocod, I don't think we can, like anybody can predict it. Like if Pocod is successful, it won't be something that I could tell you today. My imagination is kind of like restricted to like things that I know and like maybe like a little bit more I would hope. You know, I don't want Pocodot to like just recreate stuff that exist today and like redeploy it. Like I want to see new stuff, new things that

don't exist yet. And I think that just takes like people coming from different backgrounds and seeing things like in a new way. It's not necessarily possible to see like from your one angle. So that's what I I'd hope to see, like, in the longer term, is more of these applications coming in that. I'm just like, oh, that doesn't even exist in a non-block chain world, but is being deployed on Pocodot. And I think one really powerful thing, which Joe alluded to, is you're going to see, like, a very different notion of application. Like now when we think of applications, we think of them living on one layer one, and, you know,

that provides some limitations. But with Pocodot, with the really intimate notion of interoperability, and with kind of this environment of all these, you know, application-specific and also more general parochains, you're going to basically see this notion of an application that lives across parochains, and that's going to make things much more scalable and much more powerful in a lot of ways. Yeah, I can't wait to see, like, an application that's not a blockchain itself, but it uses, like, all these blockchain primitives. So, like, instead of PayPal, it uses, like, a stable coin platform.

And, you know, instead of some, like, email login, it uses some, like, Web3 login type of thing. and the application itself isn't a blockchain. It's just using blockchains as it's back end. Yeah, that's, I mean, first of all, the first thing comes in mind. I think that sounds very, you know, in the time frame that is probably realistic. But it's interesting kind of like pointing out

just a long time scale we're talking about. And of course, this is not just Polka dot, right? This is like same with EF2 and like all of these other networks, but we're just seeing this is taking such a long time, you know, to be in the place where actually, you know, blockchains are able to support, you know, end-user applications with, you know, millions of users that, yeah, it's a long road that is ahead of Pocod and the entire blockchain space. I mean, one really nice thing for Pocod is even though we're just getting around to launching

Pocod now, substrate has been around for, I don't know how long, like well over a year, right, right, Joe? A year and a half, two years. And so, I mean, something we haven't really touched on, but I mean, to build one of these parochains, like substrate is this very versatile framework for building kind of either your own independent blockchain or your own independent blockchain

that can natively connect to Pocod as a parochain. So we've actually been very lucky to see a ton of development of teams building on substrate. And, I mean, we actually We actively track the number of teams building on substrate. There's something like 70 teams doing this and it's really, really special to see

this ecosystem already forming. And so we think, I mean, when Pocod is launched, I mean, this gives us this kind of massive bench of teams. Yeah, I mean, we've been, of course, one, right? I mean, running our validators on Pocodot, but also we've been doing that for centrifuge now for quite a few months, which of course is built on

on substrate. I'm kind of curious, like, because you're running validators on centrifuge. Like, I mean, like, I'm mostly in this, like, PocaDot and Kusama ecosystem. Like, how different is it to run a validator on, like, an arbitrary substrate-based blockchain

versus on PocaDot? The validator experience is very similar today. The same tool sets. Yeah. Yeah. Yeah. Yeah. Yeah.

Yeah. Everything's the same. Yeah. I mean, that's awesome. Like, that really helped, like, scalability. And, like, hopefully that eventually transitions over to, like, co-liter nodes. Yeah. I mean, absolutely.

I mean, I think we are seeing that also from, you know, there's now, we are probably running, like, six blockchains to build on Cosmos SDK. And the ease of onboarding these networks is just 20 times easier or something than, like, some totally independent blockchain. And, I mean, the same is going to be true with substrate, right? And also, as you pointed out, right, many, many chains. also deciding to build on substrate. And I think that's going to be a great advantage, right?

Because you're going to have tooling around that framework and people are going to be familiar with it. And that's going to... So I think actually, when it comes to this sort of blockchain frameworks, I mean, at least the way it looks like to me at the moment, you know, I think we're going to have like substrate in Cosmos SDK, both having a big market share. But I think it's going to be difficult, actually,

for somebody else to come in without doing something like, dramatically better. Yeah, and even from my vantage point, while it's like a very technical point, the substrates design that like pieces of substrate compiled down to this wasom and then they can be upgraded independent of each other is such a massive strength of substrate. It's a strength that's really hard to appreciate until the point. you run a blockchain and you need to upgrade something. Yeah, I mean, it's like, we saw this kind of recently in Kusama.

It gives us a lot of flexibility to push like optimizations in the underlying client too. Like we did an upgrade, I think, to like version like 2012 on Kusama. And the client actually like for validators was throwing some error about like having difficulty finding the signing key for the session. But those validators were just able to downgrade their client to like the previous version. but without affecting the actual blockchain's upgrade. So, like, we just had all the validers running, like, the client version of, like, one earlier than latest, but the actual runtime of the blockchain was on the latest version, and that didn't affect anything.

So it's, like, pretty cool that it gives us this flexibility to, like, fix bugs, both on the runtime side and the client side. So talking a little bit about, you know, kind of what's in development I'm in at the moment. So there are system parachains that you guys mentioned, right, that will, let's say, stable coin or identity that will then be available to other parachains. So what are some system parachains that are like, you know, currently being developed? And, yeah, maybe we start there. I wouldn't call those system level parachains. I guess, like, the vocabulary is not completely flushed out here.

You know, I mean, those are still, like, infrastructure, but maybe coming from, like, some other party. and like somebody who's actually like bidding for those parochains slot because like they want to launch their identity solution versus somebody else's. I view system level parachines as offloading work from the relay chain. So, you know, like the relay chain's primary responsibility is validating the state transitions of parochains, but it also has all these other things.

Like it has dot tokens. And so it has to deal with like balance transfers and staking and governance and all of this stuff. and that could all be offloaded into parachines. So you could have like a balance as parochane, a governance parochain, a staking parochain, and all of the transactions that are related to that type of activity take place on those parochains, which just leaves room for more parochains in the system to exist because you're pulling all of that stuff out of the relay chain. Really the only stuff that should go into the relay chain is the like the updates to the parochane heads.

So we kind of take like, I don't think it's like fully decided, but like, like a hash of the header of the latest parochane block or the state route or something, and that gets updated in the relay chain block. And then some like other critical stuff. So like if somebody observes some like misbehavior from a validator, like slashable behavior that you want to report, you don't really want that like going on on a parochane. You want that to go like right to the middle so that everybody knows about it right away. But the relay change should really just be doing this like super like low level core stuff.

And so like I view system level parochains as like, anything that just takes functionality away from the relay chain and puts it more on the edges of the system? The way I think about this breakdown is you have parachains. You have the collection of parachines. And then you have a category of kind of governance allocated parachines. So, I mean, these are parachains that are some sort of public good where, I mean, these slots weren't bid on by kind of individual projects that want to build their business. And then you have system level parochains. I mean, these will definitely. almost surely be assigned by governance, but then you probably actually have this kind of other category of governance-assigned parochains

that aren't actually taking functionality off the relay chain but are still some sort of public good that shouldn't be launched as a business necessarily, or at least, I mean, this is very subjective, but at least at this time we don't think that should be true. Yeah, I would see, like, system-level parochains or, like, anything that's awarded by governance so it's like kind of like a good for the whole PocaDot ecosystem,

probably is like a tokenless parochane. The fact that that's even possible kind of just like speaks to the security model of PolkaD as a whole that like you don't really need to depend on having your own token for like block rewards or like having value at stake for your validators in order to be secure because you're like kind of like outsourcing your security to the relay chain. And so you can really have these parochains that don't have any token or like economic model with them at all. They just provide some sort of service. And that's primarily what I would see as being allocated by governance. A good example would be bridges, probably. I mean, they kind of have

their own token, but I think, I mean, our view is that they shouldn't, and these should be launched on kind of governance allocated parochain slots. And any transaction fees should be paid in kind of some other tokens, basically, and probably go to like some pool of capital that serves. to keep these pieces of infrastructure updated and maintained. Yeah, I mean, if you think about like a Pocodot Ethereum bridge or something, if you introduce like a third token for the bridge, the bridge is kind of just like acting as a middleman. And like, yeah, I'm going to like take my cut, my own token or whatever.

So yeah, I think it would be ideal that we can just say like, hey, this is a useful service to the whole Pocod network to have a bridge to Ethereum. It doesn't need its own token. So we're just going to like provide this functionality. And it's not only as benign as this token just being like a middleman, it actually brings in real security concerns depending on how you actually use the token. So, I mean, in some designs, if certain kind of participants in the bridge have to actually use these tokens as collateral to stake, then you're now introducing this concern that what if kind of there's a market dump of that token and it has no value. And then these kind of stakes participants no longer are subject to, say, slashing. And then there's potentially, like, security concerns that that introduces.

Whereas if you kind of keep the types of collateral to kind of more liquid, more, you know, assets that have other use cases and other purposes, then I think you mitigate that risk. Yeah, that makes sense. Actually, that brings sort of one of the really cool aspects of Polka, the things that I find are just sort of like is elegant and interesting, which is this idea that, okay, you want to create a parochane and then you basically can lease a parochane slot, which will mean with the exception of the things you mentioned now, right, if there's some sort of like, you know, public good pair chain. But of course, the other thing can be that, you know,

I have some idea for a decentralized application. You know, I could go and build it as a smart contract on Ethereum or somewhere else. I could create my completely own blockchain that, you know, I have to get my own validator set, et cetera. Or there is this, you know, hybrid approach where I can kind of get my own parochain.

So it's kind of your own blockchain and you can decide a lot of things about what that looks like. But at the same time, you know, you're leveraging all of the polka dot thing. And you basically putting up this leasing, you know, starts to lease that slot.

And of course, it also means I can still have my own token on that chain. But, you know, today with most proof mistake token, if you create or most with mistake networks, you're launching a network and then that token is used, you know, to pay validators, to put up collateral, et cetera. Whereas in the polka dot example, you know, that's decoupled, right? You have dots that are used to hear the collateral, but afterwards, you can kind of do whatever you want with the token. So I think that's really interesting. It's a novel thing, right, that we don't have today.

So I'm curious, what do you think are some of the business model or interesting use cases that are going to kind of arise from this new paradigm? Yeah. So, I mean, you bring up a good point. Again, the spectrum of things that you can build on Pocod, basically, I mean, there's two dimensions to this, I think. The things that you can build on Pocod can look anywhere like applications built on Ethereum to platforms like Ethereum, basically.

And then, you know, I think you can kind of split business models in roughly two ways. You know, one, you can still have these token models. And I think, I think actually when, you know, we did a survey of several dozen kind of core teams that are planning to build parochains, and we asked them a ton of questions. And one question was, do you plan to have a native token? And I think almost all teams said yes, basically, which was quite interesting. interesting. And I think, you know, generally, like the use of a native token is one of the uses will be to reward collators, basically. And collators on paratrochains are, they basically take parochane transactions, package them into blocks that are then, you know, reviewed by validators

on the relay chain, essentially. So there's a much different security model for collators than validators. You just need one honest collater to make sure that actually the blocks produced by parat chains go to the relay chain successfully, so they can compromise availability, but they can't compromise safety, essentially. All this to say that incentivization of collators matters quite a bit less than incentivization of validators, and there's much less that can go wrong. So when you actually think about having an inflationary model that rewards collators, this doesn't need to be of the same magnitude of having an inflationary model that rewards validators. So you can get away with a lot less inflation.

I mean, it took me a lot to get back to this point, but basically, I think you will see token models for platforms that are very similar to kind of token models and proof of stake platforms, but have way less inflation, you know, making it kind of cheaper for participants in the long run. I think that's definitely one thing. Yeah, I mean, it's great you bring that up because you can of course look at this problem or at this situation that you have to put up dots to lease a pair of chain slot. And, you know, in some level, there's also something problematic about it, right? Because you have, let's say, a new team coming up and, you know, maybe they raise, maybe they're just a startup, right? And they don't have any capital.

Or let's say they raise capital from some VC. investors, I think they will be very, very hesitant or wary of the team then going to like purchase dots to lock them up for a long time. But I think the natural thing to happen here is that, you know, you'll have on the one hand people with thoughts. And then on the other hand, you'll have people who like have a business idea for a pair chain. And then I think so from my perspective, like the obvious thing to do would be to create some sort of like a marketplace. where I can say, oh, I'm creating my own parochain. It's going to have its own native token.

I need somebody to put up the collateral for that parochain, but I'm going to pay some inflation on that token to basically compensate people for putting up the collateral. I think that's sort of the natural thing in my eyes to happen there. And it could be very cool to have to sort of, you know, crowdfunding, parochane leasing marketplace. Yeah, and I mean, this is something that we've arrived at as well. And in fact, there's a substrate palette called the crowdfunding module,

and this is actually deployed on the relay chain. And it basically allows for exactly what you're saying here, that the crowdfunding of parochain slots. So how this would work in practice is a project that is seeking to raise enough dots to acquire a parochain slot would essentially use this module to accept contributions from dot holders into an account on the relay chain. And, you know, if the account obtains enough dots to win on the next parochain auction, then the dots, you know, would be used kind of as the bond for the duration of that auction,

and then they'd be returned to dot holders, the dot holders who contributed them. And then, you know, of course, if the auction fails, you know, these dots would be immediately returned to contributors. And because this account is on the relay chain and it's not like contributors are sending these directly to the parochains, in a way, this is very secure. Like dot holders, you know, as long as they trust in the security of Pocodot know they will receive these back. And there's no risk, say, of like, ICO risk where you can kind of send your ether or Bitcoin to a project and, you know, they fizzle out and you lose everything. in a sense it's a secure debt investment into a parochain. And so, you know, this brings into the question which you were saying, Brian,

like how are these dot holders being compensated for that? So, you know, this is left open and this is not, you know, built-in rewards is not something that the crowd funding module handles, but we fully expect projects to, you know, incentivize contributors here by setting up, you know, some sort of offer. And I think the most obvious offer, and I think this is what we're going to see early on and potentially for a long time,

is as you said, you get like some sort of share of that parochains native tokens. And the way you set the share is you probably have to make it more attractive than staking. In a sense, staking asks as the risk-free rate here. It's actually much more complicated in that because there's different risks associated

with sending your dots to the crowdfunding module, actually probably lower risks than staking, so it's a bit different. So you could see dot holders or contributors rewarded in a pair of chains native token, but you could also see other stuff, right? Like, you don't have to have a native token to use the crowdfunding module.

So you could see projects that either don't have a native token or really, really believe in what they're doing and want to retain as many tokens as possible, I guess in the short term probably. use, say, stable coins as rewards or use dots as rewards. And this actually gives a much different risk profile to what, basically, to the contributor's contribution. You could also see choice here.

You could give people different options. And yeah, I think this will be super, super interesting. So we'll definitely see that. And actually, one interesting thing to add, when we asked projects if they plan to use the crowdfunding module to raise dots, I think all but maybe one or two of the projects we served were yes. So I think this will definitely be probably one of the most predominant sources to actually raise this bond. There's a very interesting differentiation of where inflationary tokens go in, for example, Cosmos SDK chains, which are independent and in a para chain. So in a

in a traditional cosmos SDK chain, let's say they start with 100 million tokens. And generally these chains need to have high inflation. So they might be 7% or 10% inflation. So let's say 10 million tokens a year are printed. And it might be the case that 9 million of these tokens already go to the existing token holders. And a million of these tokens go to the validators to run the infrastructure. So in some sense, in these networks, the validators, are the beneficiaries of new token supply.

Now, in the PolkaDot environment, the validators are less clearly the beneficiaries of new token supply. Because when you create your own token and launch a parachain, you don't need to give extra supply to the validators. It's the paracain that figures out how to remunerate the validators. So you don't need to give the new supply to the validators, but you may... Yeah, well, the validators don't even know anything about like the internals of your parochane

or either of it has a token or not. Exactly, exactly. But you might, may slash probably need to give some of your new token supply to the people who put up dots so that you could lease your parochines slot. So in a sovereign cosmos SDK or sovereign substrate model, the validators are the beneficiaries of new token supply. In the polka dot model, the dot holdings. the dot holders are the beneficiaries of the newly minted token supply,

which is very interesting because it's almost like the capital allocation role is shifting here. So many times in sovereign chains, it's like when you, and as a validator, you go and validate these chains, you are doing some form of capital allocation because like you want to go and validate those chains in which the token value will go up or you want to validate those chains were successful. But outwind in Polka, or that kind of role of picking who will be successful is

shifted onto the dot holders. Yeah, so I think like the word sovereign carries some like decision-making connotation to it. And I would say in the sense that parachains are actually sovereign blockchains. They have their own implementations

of governance and the way that they handle the logic of their chain. When it comes to validators, I mean, people might be getting confused unless we like break down the whole validators versus co-lators thing here. But when it comes to validators, they really have no choice about like which parochane they validate. And it actually changes every block. So like using like a random VRF, which that can go in another direction. But like using our VRF, we randomly assign validators to parac chains every block. And so that's actually every single block, this just gets reshuffled.

And so validators don't really have any choice about what paratro chain they're validating. Just jumping in here, like if you shuffle it every single block, I mean, don't you have as validated like sync the blockchain or like how is that? So this is like where it gets really cool about like WebAssembly and like some of these like really early decisions,

say like two years ago about the way that like the host environment is architected and isolated and how we use WebAssembly. and like why a light client was built into substrate from the beginning. So you can think of the relay chain as a light client to all of the parochains, and you can think of every parochain as a light client to the relay chain. And so when a validator shows up at a parochane to validate, it already has the previous state route of that parochane. And what the co-liter from the parochane actually hands over to the validator,

we call it a proof of validity. So it has the block. So you have like a list of a list of state transitions and like the header information about like what his parent block is and what the new state route is. And then it comes with this like pruned state tree. So you think like a Merkel tree where all of the leaves are just hashes. Only the values that actually got updated would be in what the handover or the rest

would just be like the hashes. And so it's still like quite a large chunk of information that goes over. But they basically have like the previous state route. And they have like the different, like basically like the diff of the Merkel tree of the state of that. And then they have the list, the block, which is the list of state transitions. And so they can actually, and then they have the actual runtime, like the wasam executable of that parochain. And so they can like, they can validate this list of state transitions against the difference in the state. And they can show that they validly get to the new state route.

and that's like their process. So you have this kind of like cluster of validators and they're all going to kind of like gossip this around. Like they're a little like micro cluster. So there's like 10 validers on a parochane. And they're going to attest that this thing is valid before what actually goes into the relay chain is just like the header information

or like a hash of the header of this parochane. And that's what actually goes in. And there's like a whole bunch of like other availability and validity checks that go on before this gets finalized. and that stuff's pretty interesting too. But yeah, just to like to briefly answer your question, that's how they're able to do it without any kind of sync issues. Yeah, that's actually super cool.

One of the concerns I have as a putting on a hat as somebody looking to lease a parachain, one of the concerns I have is that this model appears to be one in which pricing is potentially volatile. meaning if I think of an AWS experience, I want to be able to go to AWS and have a machine for like as much time as I want with a fixed cost that maybe goes up with the rate of inflation. That's the arrangement I want.

But in the in the Polka dot model, I have to get some people to put in dots that might be volatile themselves. And because they are putting in something that is volatile, I will have to give them something that is volatile as well. And there has to be a financial contract, balances volatility. It feels like it's not the ideal customer experience for somebody wanting to launch a parochie. So, I mean, with that,

I don't think you necessarily have to reward people giving dots with another volatile asset. I mean, I think some people will want that because they'll be risk-seeking and want to take that. but I think there'll be probably an element of contributors out there that will appreciate a stable return to their volatile asset, which they will get back. So, you know, I don't think that's everyone.

But, I mean, to your point on this is an ideal user experience, I mean, I think at the end of the day, this will really actually help select the good projects versus the bad projects. And, you know, by basically having this process where you allow the community, and dot holders to actually drill into what each of these projects are doing, I mean, I think value propositions will be challenged enough

that we'll actually see some really interesting models here and really see good projects actually get the funding required to participate in this. I think also the parochain lease is for two years, which in crypto space is kind of an eternity for a project to get going. But there's also, it's not like you lose this. lease and then you're all of a sudden, like, kicked out or whatever. There's a lot of other options. So, like, you can convert to a pair of thread and have, like, more of a pay-as-you-go model. And you're not going to get, like, the same execution throughput, but you still get the same

security guarantees, the same API, the same experience. It just might be, like, a little bit slower. And so, I mean, that's kind of like an on-ramp and an off-ramp to being a parochain, right? Is that, like, maybe you don't have the ability to raise. use all of the dots that you would need for a parachain slot. But you can get started as a pair of thread and kind of like prove your application and develop interest in it to get like the next one. There will be some stability even though like early on like some of these auctions could have wide variations.

But the actual like swapping doesn't only take place like during an auction. Parathreads and parachains can actually just kind of like agree to swap. So like if somebody decides, hey, I don't want my parochane slot anymore. but I still have another year on my lease, if you find a pair of thread that's willing to take over your lease, you can just swap places. And so I think with that kind of like slot liquidity, if you will, that allows this like intermediate swapping,

I would be surprised to see in the long term, like, too high of a variation there because like people will always know like, if this slot auction goes for some obscene amount, you know, I could like kind of offer to take somebody else's like off their hand in the midterm for something cheaper. We also have this idea that there's going to be kind of one substrate-based chain

to a pair-chain slot, which is true. It's technically the thing that has to happen. But I think what you'll actually see potentially is, like, one chain that wins a parochain slot, maybe they don't actually need all that throughput. And, you know, maybe they could, you know, depending on what they're building, this will vary quite a lot. But, you know, if they're kind of building the stable coin platform, maybe it makes sense to have, you know, a substrate-based chain that's building a defy application actually

deploy on their chain as well. And, you know, maybe they can actually say, okay, a defy application, do you want a portion of, you know, do you want a portion of my runtime? And I mean, with substrates, sophisticated governance, I think there's actually probably quite good ways to manage the sharing of these parochane slots like that. Cool. Those isn't very, very cool. features. I'm amazed that it's just possible to kind of like swap out the pair. But you guys brought up pair of threads. Maybe it's worth spending like a few minutes talking about what pair of threads are. Yeah. I mean like it kind they were kind of borne out of this concern about like well what happens if I lose my pair of chains slot, you know, like what am I just out or something?

And so I mean you can think of like an application on a computer that, you know, you can kind of like pull in some application, execute it on a thread, put this back in memory, and then come back to it later, rather than keeping it, like, in the cache and executing all the time. They're actually quite similar to parachains. I mean, they have the exact same API. They have the exact same security. They have the interchain message passing or cross-chain message passing. There's going to be more latency because, like, the messages aren't going to be delivered

on, like, every single relay chain block. So the big difference is really, like, how you allocate. these slots. So like, we predict that for every 10 validators on the relay chain, we can have one parachian slot. And so, you know, if you have a thousand validators, you have 100 slots, but this is kind of like fundamentally limited. It can only execute so many parachains in one relay chain block. And so parachains, you know, they put up this bond for like one or two years. And by bonding these tokens, they basically have the right to execute a block of their own every time. that there's a relay chain block. So they have very high throughput. They're just always able to

split a block. Parathreads, they actually don't have like a bond, or it might be like a very small bonds to become a pair of thread. But then they have like more of a pay as you go model. So you might have 30 of these hundred pair of chain slots might be allocated to pair of threads. And you might have a thousand pair of threads out there that are all bidding for these 30 slots. And so they're just going to like bid, hey, I'm willing to give five dots to a validator if they'll take my block and execute it. And somebody else will say, well, I'll give seven, whatever. And this is on a block basis, not on a transaction basis. Right. This is on a block by block basis. And so it'll take like the top 30 bids and say like, okay, well, these are like in the next block, I'm going to take these 30

pair of threads and execute those. But who pays, like who makes, I mean, let's say there's this pair thread, which sort of like a little bit like the blockchain, right, and various users sending various transactions, can they sort of like pay a little fee with each transaction and those get aggregated up and if it's enough they get the block or does that payment happen in some other way? Right. I mean, it depends on the pair of thread. I mean, like the payment would be like in dot tokens.

And so like however they wanted to acquire dot tokens, like whether they have an account or, I mean, like, they will have an account on the relay chain, but like, however they wanted to acquire them and decide how to allocate them or like charge their transaction fees in their native token and whatever logic they have for converting that to dot tokens to make the bid. And it could be inflationary. So they could say, you know, like my block reward is going to be like one native token if it's been, say, 10 blocks since the last time we got a block in the relay chain. But if it's been 100 blocks since we've gotten a block in the relay chain, our block reward will be, say, 50 tokens or something that will give. that co-liter more incentive to say like, hey, I really want to get this block into the relay chain, so I'll bid more dots. I think a lot of applications actually make sense as a pair of thread and not as a pair of chain. So like, if we think of like higher throughput applications, of course, it makes more sense to be a pair of chain. And they might start out as a pair of thread to gain some traction and then like raise the capital that they need to become a pair of chain. But applications that are,

say, like, read heavy versus write heavy, those would make perfect. sense as a pair of thread. So if you think of like a Bitcoin Oracle that just says like, hey, this is the latest like block header that I have from Bitcoin or whatever. That's only like every 10 minutes. You don't need this to have a block every six seconds for that. Or say you're like a domain name service. You could update your registry every hour and still let people read from it. You don't need to submit a block every six seconds. So you could just kind of like collect this change to your DNS and then submit like a batch of this every hour or two hours or whatever you want. there's no need for this super fast throughput.

So I think for some applications, it actually makes more sense to just stay a pair of thread. So in some sense, it is like this on ramp to convert to a pair of chain or back to a pair of thread. But in some sense, in another sense, it's just like a different economic model

that is like fundamentally, like more opposite to certain applications than others. So in some sense, the unifying principle appears to be that, in Polka, lot you're really auctioning off para chain block production rights, right? So there's auctions at two timescales. One is a per block time scale and then there's a one is a two years worth of block production timescale. And Polkort is a system that just believes in auctioning off these

assets and people can bid on those assets at these two different timescales and then and then they can create financial engineering on top of it to auction of those resources to other users. Yes, like the primary resource is state transition validation. Right. Do you have any examples of teams that are building like this financial engineering on top of parachines, on top of parathreads?

Like they're taking these production slots somehow. They're acquiring these production slots somehow. and then they're selling them on further or something like that and that is itself decentralized application. I don't know about selling them. I think the most interesting one that we've seen is Akala.

I'm really like, I'm excited in general, like I said it earlier, but like things that don't exist before. I don't, I'm very, I don't know the right word, like skeptical or maybe just like negative

about defy in general where I see just like kind of these like same financial primitives that a lot of like the early blockchain movement was kind of like opposed to like this is the problem and now we're like well let's just recreate these exact same instruments on a blockchain and like I think it's kind of silly and I think it's like it's more interesting to see like something new that's never been done before and so like what a call is doing is um they're calling it a decentralized sovereign wealth fund where they have some like dot tokens outside of their per chain saw that they're staking and these are actually owned by the

chain. So they have a para chain with its own like native token and treasury, but this parochain has an account on the relay chain, and they can also interact with other parachains in the ecosystem. And so it actually owns some dot tokens that it will stake and use the staking rewards to start contributing to its parochane slot and steadily return whatever crowdfunded dot tokens they got to their users who crowdfunded them. And then in that sense, they just become like a self-sustaining parochain. And they can take stake in like other parochains or like when we have a bridge to Ethereum and Bitcoin.

Like they could take, they could take a stake in those. And I think that's like, it's interesting because we're not talking about like an organization that's decided to take a stake in like some blockchain token or an individual or something. We're talking about one blockchain owning a. stake in another blockchain. It's something that, like, we can't really express in, like, the Ethereum or Bitcoin world. Like, we can talk about, like, interoperability that, like, we have Bitcoin on Ethereum or something. But you can't really have, like, Ethereum take a stake in Bitcoin. Like, that's a new thing. Like, that doesn't exist. And I think that's, like,

one of the really cool things that's being known on Pokoda. I don't know. Do you have more Dieter? Yeah. I mean, just one thing about that is basically, like, a portion of transaction fees from what Akala's like from Akala's stable coin protocol which is essentially a maker like protocol so a portion of stability fees and others basically go into this decentralized

sovereign wealth fund and initially the goal is to just acquire dots until they get to some like critical massive dots where kind of they think and obviously this is somewhat subjective because of the auction process they think this will be enough dots

through staking returns that they'll be able to afford this parrachian slot in perpetuity. And then they'll be kind of making more strategic investments in other protocols, probably mostly on Pocod, at least to begin with, where they think it could make sense for some reason. I mean, when you think of parallels here, one is obviously like a nation's sovereign wealth fund, where nations who have excess wealth, instead of like putting that directly into the economy, will put that in some fund.

designed to grow returns and use that in the future. And then the second parallel would be how corporates deal with strategic investing. I mean, sometimes corporates will invest in other corporates, you know, if it's for some sort of vertically integrated reason, if they expect to use the services of those corporates down the line, you know, these are kind of strategic investments. And so this is a really, really good example of where you actually actually. actually see blockchains and Pocod and what we're building actually kind of cross the barriers from just like decentralized applications to some mix of a corporation and nation state that's

able to actually have its own agency, which I think is something that we've never seen before. So some computation can be sovereign and that it has no human owners. and the thing that it needs to keep running are these para-chain block production slots, right, in some sense. The acquisition of these parachain blocks production slots is again subject to some kind of payment that this sovereign computation can bid for. And so it's almost like you can have sort of a sovereign agent that can pay for, its own hosting that can own pieces of other sovereign agents and as long as its logic is such that

it keeps getting on more and more assets so that it continues to host itself it can it can go on indefinitely that's really the future that you know people in the in the cryptocurrency space have imagined for a long long time it's like computation that is self-owned can pay for the resources to have it executed, but once it's executed, it earns more resources and then can pay more to have it executed, and it just keeps on going forever. But it says in PolkaDot, it's given like a more elegant economic substrate to do its operation. Yeah, and I fully agree. A lot of the frictions in Pocodot that come up around like parochane, particularly around parochane bonds and the auction process,

here really come down to, and they can all be corrected by, do people believe this project will add value? And has this, is this project, do they have a likelihood of succeeding? And does kind of, do dot holders recognize that? And so, I mean, from that, you basically get the, like, hopefully, like the best projects out there that continue to win these slots. And by extension, continue to be able to succeed on the platform. Yeah, cool. Well, guys, thanks so much for coming on. It was a pleasure to kind of talk about Pocod

again. It's exciting to see this project, you know, live and now unfolding. And I think especially all of these interesting economic experiments and experiments around like coordination. And that's, I think that's the part that I'm especially excited about when it comes to Pocod. And I think in the next few years as this actually goes live, I think there'll be incredibly interesting experiments happening on polka dot. Yeah, thank you back. I'm super excited for us to see how it plays out. Yeah, thanks so much for having us.

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