Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Max Kaye & Stephan Tual: Ethereum and Decentralized Applications

Episode Date: April 21, 2014

We had two excellent guests on. Stephan Tual is the Chief Communications Officer for the Ethereum project, founder of the London Ethereum meetup and has played a crucial role in building out the Ethereum community. Max Kaye is a Australia-based developer focused on decentralized applications and the developer of Cryptonet, a library to build arbitrary blockchain-based structures. Episode links: Ethereum Ethereum Whitepaper London Ethereum Meetup Eudemonia Cryptonet on github This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/016

Hi there, welcome to Epcenter Bitcoin episode 16. Today is April 20th, 2014. My name is Sebastian Kuchel. I'm a user experience designer and developer based in LidFranz. And I'm Brian Fabian-Cray. I'm a Bitcoin entrepreneur based in Berlin, and I'm also the founder of the Spilling Group. And we have two very exciting guests here today, and perhaps you guys can introduce yourself. Stefan, you want to go ahead? Sure. Hi, I'm Stefan Tio. I'm the director of communications for Ethereum. I've joined the company in January. My role involved mostly community outreach, identifying talent in the community, putting developers in touch with entrepreneurs and investors, communications, basically. And we have Max Kaye on the show down from Australia, so pretty international today. Max, do you want to introduce yourself? Hi. I'm, well, I'm. Well, I'm. I like to think of myself as a researcher.

I'm currently working on some blockchain-based stuff and distributed exchange. Cool. Well, it's very exciting to have you guys on here. We have on the show today, we don't have as many news topic as we often do, which is great, because it gives us lots of time to talk about the projects you guys are involved in and kind of go really deep on the things you've been doing. And especially Ethereum as well, because it's a project that I think both Max and Stefan are, well, Stefan's very interested in and Max is at least following and also very interested in and working on kind of things related to that.

So guys, maybe we should just try to keep the show at under three hours? Yeah. Okay. So, you know, try to try to be as brief as possible when you're discussing these things because I know you can go on for hours and hours. Sure thing. So just one brief announcement. There is, you know, as many of you know, the Bitcoin Foundation's conference is coming up in Amsterdam.

Actually, let's me briefly ask you. Stefan, are you going to be there? I myself won't be, but I'm sure we'll have representation on site. We have Jeffrey Wilkes, or lead go developer, is Dutch and lives in Amsterdam. So it'll be great for him to attend. Yeah. Yeah, so that's indeed. So I'm going to be there, and there's blockchain.info started this thing, which they call

the first annual blockchain awards. And it's basically awards given to different things, so the most impactful charity, most creative video, et cetera. And there's a category called Most Informative Podcast. Now, of course, we are slightly biased here, but we think we try our best to be very informative. So if you can nominate us for this award, that would be awesome. and it's given out in Amsterdam. So if you want to support us by nominating us,

then you can go to blog.blocchain.com, just kind of scroll down, and you're going to see first annual blockchain awards there. And then if you click on that, there's a submission form, so you can put your name in, your email address, and then on the category, you can select most informative podcasts, and then who are you nominating? You can just put the episode of Bitcoin.

and that would be awesome. Right. So to get started, perhaps we should get our kind of news out of the way so we can talk about interesting projects. There's been some news on China. Sebastian, do you want to like kind of talk about what's going on there? Do we have to cover these topics? No, China has been a topic on pretty much every single episode just like Mount Gog. so we do have to talk about it.

I think Bobby Lee is going to get upset, otherwise if you don't talk about China. Yeah, I mean, there has been some news coming out of China. It's nothing really new. I mean, some new exchanges have been forced to stop taking, well, performing withdrawals because their banks have stopped working with them. We still don't have a clear indication

whether China is banning Bitcoin or not, which I don't think we will get. But more and more exchanges are ceasing operation. But the price has gone back up a little bit, you know, since then. So I don't think it's room for much concern there. I think there was this deadline, rumored deadline that came up of April 15th.

I don't know where it was from, because this wasn't any official statement. just as we usually don't have any official statements from there. And people thought, now they're actually going to ban Bitcoin because they've only said it or indicated it in some way a dozen time and nothing has ever happened. And then April 15th passed and once again nothing happened. But then I think on the 17th, some exchanges said,

or some banks shut down some exchange accounts. But who knows? I mean, I guess we will see. at one point we'll oversee some actual, you know, some actual clear decision where they either either say they can operate in a way or they'll be banned. I guess this is what really we're writing for. And it's the same thing that we're waiting for here in France and many other countries is like clear directives, right?

So people want to know how they can operate, if they can operate, how they can operate. And then from there, then we'll make decisions as to whether or not we want to abide by that or contest it or what have you. And so this is where all the uncertainty is coming from, not because of China's central bank is being particularly harsh on exchanges, but just because there's no clear directive into what actually is feasible and how companies should operate. Well, I think what's quite interesting on this point is that it seems that these news from China have a lot of effect on the Bitcoin price. and that maybe made some sense in November when they were doing a really huge part of the Bitcoin trade. But now I was checking a few days ago, it's down to something like 9% of the trade volume is in the Yuan Bitcoin market. So it does, I don't really understand why this is such a, seems to have such an effect on the price and the sentiment.

And personally, I don't think it's particularly important. But yeah, we'll see. Do you guys have any thoughts on this? Yeah, I think it'll be very interesting to see if when you have clear directive, like you said earlier, like for example, in the UK, we have the HMRC saying Bitcoin is potentially a currency. And in the US, they're saying, well, maybe it's treated as property and it will be taxed with property tax law. How that's going to influence startups and where they're going to want to be located? because last year I remember in March, people in the U.S. were saying, well, we'll be much better off in Europe, where we don't have those issues with potential regulation.

And now I think we're going to see the opposite happen, where people will say, well, actually, property tax is a lot more advantageous than being, you know, taxed on your income. So it'll be interesting to see where startups are going to start forming. But I think it's in terms of taxes. I think it's quite similar in Europe, isn't it? At least in Germany, basically it's the same situation as in Europe. the US, it's like a problem, you know, you have to pay capital gainsacks and that kind of thing. And UK as well, I thought, no? I think we had, we had someone on the show, Sean Jones recently, where we talked about

this in death. Absolutely right. It's the HMRC recommendations have been that it was indeed to be treated as a currency in the UK. Okay. What's regulation? I'm interested, Max, what's the regulatory position in Australia? Yeah, so there's been a lot of speculation that Bitcoin's going to be taxed under our GST laws, which is like just sales tax, which means that if you were, say, a business that wanted to accept Bitcoin, then as per normal, you know, when you sell your good, it's, there's 10% GST.

But then when you go to sell your Bitcoin, you're also then charged 10% GST. So there's been a little bit of sort of uncertainty about that. However, the tax office hasn't come out with a ruling yet, and they have just sent. out a whole lot of letters to the majority of Bitcoin businesses that I'm in touch with, asking them to come and they're going to have a meeting in a few weeks to sort of start to decide what to do. So it's uncertain and we're going to, I think we get a ruling at the end of June. Oh, great. So, but they are in touch, which is really nice. Yeah, and there's quite a few Bitcoin ATMs down there, quite a few Bitcoin startups, no? So there's, I think the most popular startup that people have heard of is Coin Jar, which is basically the same as Coinbase in the US. There's a few other startups around, and we're just

starting to get some ATMs. I think our first ATM was like November last year, and that was a Lamassou, but they've been very slowly trickling in. There is a business that's just opened up an ATM in Pitt Street Mall, which is like in the middle of the CBD of Sydney, which is great. So they're starting to come. It's very interesting. I think it'll be very interesting to see, you know, in what countries we will have these hubs of Bitcoin, innovation and startups coming out of, because there's so much activity in different places. And I do think we will see, you know, we'll see some places taking the lead. I guess, you know, Silicon Valley is obviously one.

And it seems like in Canada there's quite a lot of activity in some places in Europe. I think London there's a lot going on. Berlin, there's a decent amount going on. But yeah. Yeah, I'm quite fearful for the state of startups in Australia. I mean, just tech startups in Australia is a bad place. If you've got a tech startup, then you don't do it in Australia to start with. So unless we have favorable tax laws, then I can't see any reason for people to stay here.

I mean, I personally want to leave as soon as possible. Wow. It's, you don't realize how annoying it is being on the other side of the world to everything else. That's very interesting. What are your plans? Where are you planning to go? Um, so if one of these projects pans out, then, uh, I'm going to, so when, when the conference is on, I'm going to check out Amsterdam, um, as sort of a potential place, but otherwise, uh, somewhere in Europe.

Have you ever heard of Ben? Um, I've got a, uh, I've got a friend down in Berlin actually. Um, he, he touts it quite highly, so that's definitely an option. Yeah, no, you should, uh, you should come by here and, yeah, check it out. Actually, I was just contacted by, you know, Stefan. I mean, I mean, you should, um, You know him obviously by Gavin Wood. That's right. He loves Berlin and he's moving here in a few weeks. That's right.

He's got big plans for Berlin and potentially build up quite a bit of the C++ development team for Ethereum over there. That would be very excited because I've been in contact with some people with the kind of brainstorming about putting on basically a Bitcoin center here, you know, a bit like what the guys in Toronto did. So. You mean that? You mean Bitcoin Decentral, do you mean? Yeah, something like that.

I call it the Consenture because I guess it is maybe Decentral Center. Yeah, so NBC or whatever you call it, but basically a big space for co-working, for events, for startups, incubators, things like that. Yeah, I think Bitcoin DeCentral was really, really cool to visit. I went there last week for the Bitcoin Expo. Anthony kindly let us stay there. what was really cool is they had this big Bitcoin sign outside, you know, like a neon sign. And people in the street, it's a pretty active street. People would stop and take picture.

And sometimes people would just walk in and ask question. That was really cool. Yeah. Let's all move to Berlin. What is it? Like in France, Sebastian? So France is, well, things are moving along. slowly, I guess.

But that's, you know, as you know, that is the French way, I guess, when you're trying to disrupt when you're trying to disrupt existing incumbents. But, you know, there is a lot of stuff that's been going on for the last few months. I mean, I've seen quite a bit of activity in the last few months, especially coming from Paris. The French Bitcoin Association was founded a few months ago. So there are a few startups in Paris. There's a very active Paris meetup. I, of course, started the Lid Meetup, and that's been going on quite nicely.

We just did our third meetup with 50 people came. So the startup community is starting to just kind of starting to take off. The media is still a little weird about it, although the perceptions. are changing for a lot of reasons, I think, and that's kind of the role of the French Bitcoin Association also is to be a kind of spokesperson for Bitcoin. Recently, we just had a really interesting announcement, Monopri, which is a French grocery chain, announced that they were going to start accepting Bitcoin, at least on their website within the year. So that was really kind of interesting and help to

kind of for the layperson see this as a kind of interesting and what's the word I'm looking for? Yeah, it's kind of a legitimate use for Bitcoin from a real

French company, right? So a lot of the media has been focusing on the negative aspects of Bitcoin. The French central bank issued like warning statements everything. And this is kind of the first time where like a serious French company and quite a large one for the for that matter said that they were going to start accepting Bitcoin. So I think in the public perception that kind of, you know, people kind of go like, oh, huh. So Monopri is going

to set Bitcoin. Okay, maybe this is something that we should be looking at. Or maybe they're going to think like, oh, maybe Monopry is going to start selling drugs online. Yeah. So, yeah, there's been some activity, but even French people will tell you, like, people that are in Bitcoin here in France will tell you that things are kind of, well, we are a bit behind countries like Germany, for instance. And in fact, like during some hearings with, I forget which government entity, there was a Senate hearing, right? And one of the speakers there said, well, you know, France is kind of behind on this. And Germany is taking these positions. And we don't want to be behind Germany.

And that kind of really hit home with French politicians. Yeah, that seems to be like the way to get action going in France, no. Yeah. Germany is already ahead on this. And then like, oh, whoa, oh. Well, let's dive into Ethereum, no, I think. Okay, yeah, sure. Well, I can give you a quick overview.

It's a nice segue from Monoprey. I think one of the way I describe Bitcoin is that what makes Bitcoin interesting is not that my grandmother, which just happened to be in France, can buy her eggs at Monopree with Bitcoin. That's not what gives it its power to me, at least. I don't see it that way. I think it's more about how Bitcoin allow you to have control over your funds at all times, and you're responsible for those funds.

A bit like cash, if you drop your cash, it's gone. Same with Bitcoin, but you don't have to trust the bank to hold your Bitcoins or to hold your funds or to execute those transactions. It's all secured by this idea of decentralized consensus at scale. Decentralized consensus at scale can be applied to other things, and that's where Ethereum comes in. It's about applying this mechanism where people are in control of their funds

and personal information at all times can still transact internationally and contract internationally with anyone they wish to, but it's applicable to anything that can be mathematically represented. So it can be voting, domain names, financial derivatives

from options, futures, contracts for differences, and so on, intellectual property, agreements of the most kind, and that kind of stuff. That's Ethereum in a nutshell. It took that concept of decentralized consensus at scale, and it's building a brand new programming framework

and distribution mechanism for what we call DAPS or distributed applications. Go ahead, Brian. Yeah, there are a lot of projects that aim to do the same thing. I mean, I can think of something like six, perhaps. So do you want to talk a bit about what makes Ethereum special or different versus...

Absolutely. So, you know, if you look at things like Colored Coin, the idea of Colored Coin, and you have this special client that listens to the blockchain, and based on certain type of transactions, the way they're formed, it would assign shares to a share value to Bitcoin, for example. So now your Satoshi was worth one share. It was worth one Satoshi plus the value of whatever the share was.

But that requires a specific client, and it's pretty limited. And then you have guys like MasterCoin, for example, we took that concept further and they said, well, what about if we say, well, in the transaction, the first number will be, say, the denominator of an asset, like a share or maybe even a physical asset, like what would maybe match a car, for example, or physical property. And then the next number would be one. And one means buy or sell or whatever. And then the next item means from and then the next item means two.

And now you have yourself a very nice decentralized market on top of the Bitcoin blockchain, which is pretty neat. But that's a feature. That's a feature in the sense that if I create a language, a syntax, to trade this type of stuff, I'm limited to create applications that will use this language, and I won't be able to break out of the box, so to speak. Ethereum is taking that concept further by saying, well, I actually build whatever you want. Here's a programming language. And that programming language, it's assembly code that's read by a virtual machine, executed on all the nodes at all times.

and in order to write the programs, you can use higher-level languages that you may be familiar with. So that could be things like Python, for example. We call it Serpent, because it's Python. We have things like LLL, which is list-based language, and a new one called Muton, which is based on the Go language. So if you're a programmer, a web developer,

an application developer, a Java guy, a C++ guy, you can go and you start to be able to program not only that money, but also programming. relationships on the blockchain and benefit from this blockchain immutable database that can be corrupted or colluded against. I had a question about this. We often talk about Ethereum and so it's potential for creating decentralized applications.

So how does one get started? I mean, when I go on the Ethereum website, I don't really kind of get a get started button where I can learn how to code. these applications. Like, how does it work really from a programmer's point of view? How does he get started in building these applications? Right. So today is very early days.

I mean, one thing to remember about Ethereum is Vitalik was playing with a concept, you know, last year towards the second part of last year. He released the white paper to his closest friends in November. In December, the team started to form. I joined in January. It's early days. What we've done is, Instead of doing an Ether cell, which people used to refer to as the IPO back in January,

we thought, well, actually, let's put some code in the developer's hand before Bitcoin is starting to be exchanged, right? What we started to do is release software on a regular basis. It's proof of concept software. We have a C++ client, a Go client, and a Python client, and those three programming language for smart contract running on all three. At the moment, I would say the core audience for Ethereum would be developers that are comfortable to work with. that documentation. Once we're further down the development process, and that's probably going to be around July, August, we'll issue tutorials, we'll have code academy sites, we'll have video tutorials, and it'll be a lot more friendly, and also the gurys will be a lot more friendly. At the

moment, it's the kind of stuff that you'll enjoy as a hardcore developer wanting to play with the edgy stuff. How you get involved when the product is released? Well, there's two ways, really. You can be a user and be using your application. It's going to look like the Android App Store. You double-click an app. It gets downloaded on a decentralized network as well. So the GUI itself is decentralized, interacts with the underlying Ethereum blockchain, which is decentralized. And now you have those corruption-proof applications that you can play with, and it will be a beautiful GUI written either in HTML or QT, if you're familiar with that. It's another sort of visual language. If you're a developer, you can simply write smart

contract in the language of your choice on the platform of your choice. And as I said, we'll have plenty of documentation and hopefully hackathons and training sessions and things like that. So what's the timeline for this kind of Ethereum App Store? And, you know, at the kind of level where someone who is not a developer can actually start using some of the stuff. Well, I mean, basically, that will be, in order for a user to use this stuff, it needs to be actual, practical applications that have value and that value will be derived from the launch of the main net. The main net currently we're operating on the test net. The main net would be launched probably towards the end of the year.

We say Q4 of this year. I would say personally expect December would be a fair, a fair month to expect if they're to be launched. Very exciting. Now, it's often difficult to, you know, to kind of, explain, you know, it's difficult enough to explain Bitcoin to people. But then you come with Ethereum and it's, it's even more difficult to explain this. Maybe can you speak about, let's say, the first two, like, really basic applications that Ethereum can do and that you need something like Ethereum to do.

So, you know, you can't do it in another way or if you can do it in another way, it's clearly inferior. Well, I mean, I think it's a, um, uh, it's a bit of, uh, it's a bit of it. bit like trying to say, what can you do with Java? Well, you can send a Mars rover on Mars. You can write an enterprise financial application. You can probably build a virus. You can even write a gaming map. So, you know, what you can do with Ethereum is anything you can do with a Turing complete programming language. That said, there's some pretty good use case I've seen done at the hackathon that we had last week in Toronto. The best application, or actually,

I would should say my favorite one, really. My favorite one was these guys they've built Ethereum on top of a Raspberry Pi. The Raspberry Pi is connected to a physical door. And they have a web interface, and it's called Airlock. Airlock is a decentralized Airbnb. It works exactly like Airbnb. You have a reputation system. You can browse the room.

It looks beautiful on a website and so on. But what happens is you carry this, potentially, say, this card that antifies you as a user. And once you've purchased the room in a completely decentralized manner, without paying fee to a centralized operator, the door will open as you swipe your card, for example, automatically. So you have this $10 billion valuation company, Airbnb, that can be disrupted and so-called eliminate the operator from the equation. I think that's exciting. If you imagine that applied to things like Facebook that you trust with your personal information, with your children's picture, and at all times you need to always be confident that there's not a single developer

at Facebook that's malicious, that Facebook is being transparently audited every one. week or every day. Can you trust that? Probably, well, personally, I don't think, just like, you know, Bitcoin is fantastic because you'll need to trust the bank. Same thing for Dropbox, decentralized Dropbox, rent your hard drive space or rent someone else a hard drive space in order to earn money or to simply pay less than Dropbox and not having to trust Dropbox with your special files. I think that's where the real disruption is going to take place. eBay is another example. Why pay all those auction fees where you could just transact peer to So the use cases I'm seeing here is we take these services that are performed by, you know, big internet companies and you essentially try to decentralize them and then make them perhaps cheaper because you can drop their fees.

And you also reduce the amount of trust you have or you get rid of the trust. You need to put in those services that, of course, can be abused. That's right. what Ethereum really is is a zero trust interaction system. It's Gavin Wood or lead C++ developer and CTO

describes it a bit as web 3.0. So you have four components. You have static content publication that's distribution of web pages or whatever QT code over a bit torrent type layer. Dynamic messages, that's Ethereum messaging layer that again you don't

have to trust into but you can stay insured that it's uncorruptible. Trustless transactions. Well, that's very similar to Bitcoin and the integrate GUIs that we're currently building for POC5 to be released next month. In terms of use cases, going back to your question, well, I mean, you know, the obvious one also is financial derivatives. You know, the big problem with the volatility of the, of cryptocurrencies is that we don't have proper decentralized derivative exchanges. And the ones that are out there are going back to regulations are a little bit iffy in terms of, you know, what's possible to do or not. in a true decentralized exchange that would trade derivatives,

I'm hoping we'll see things like contracts for differences backed by Bitcoin. We'll see options and features backed by Bitcoin or backed by Doge for all things. It doesn't really matter. Ethereum is like this glue between applications. We're talking to people at Ripple, where I have people from MasterCoin on a channel. Dave Johnson was actually the chap who oversaw the judging on, on our hackathon last week. So Ethereum is not really a competitor to all this system.

It's more like a partner. We're partnering with BitCloud, with METSAFE, with Open Liburnet. So from wireless mesh networking to decentralized storage layer, Ethereum sort of glues everything together in terms of logic. So one of the things that occurs to me then is, like, I love the idea of Airbnb being on Ethereum, but if you're running a massive derivatives market, then I don't want to have to go through all that to,

just so I can open a door. Sorry, I don't quite follow. The Deriv Market is one application. The Airbnb application is another one. So it's like little icons on your Android-like app store, so to speak, your Ethereum app store. You either use one or use the other. Oh, yeah, but I mean full validation-wise, like there has to be nodes that are fully validating the blockchain, right? Oh, I get you.

So you're talking about blockchain bloat, right? Yeah, yeah, absolutely. Yeah, so absolutely. So that's this, Vitalik Bouture. the inventor of Ethereum has written a very good paper. I'll post the link in the channel later on about the big issues around crypto today. Number one, blockchain bloat. Everyone on the Bitcoin network has to have all transactions from everyone else.

So if you take Visa, for example, on Christmas Day, they do about 10,000 transactions per second. On the Bitcoin network, you're limited by the blockchain, sorry, by the block side. which is currently 1 meg. Now, that can be raised, of course. Technically, Bitcoin could do 10,000 TPS if we wanted it to do, but it would grow the block size to something rather unmanageable per individual nodes. So that leads to potential centralization.

In terms of what we're trying to do with Ethereum, we have multiple layers of size of nodes. So we'll have the equivalent of an SPV node, if you're familiar with that, so a light node. We'll have a full non-mining node. We'll have an archive node. And we're trying to disaggregate sort of the data from the nodes in order to improve its scalability. But it's a challenge.

It's a challenge for everyone and not just for Ethereum. The other thing is transaction speed. So our block resolution time is one minute, which is, you know, you could say, oh, it's better than Bitcoin. Well, not really. One minute is still pretty slow, in my view. How can we improve this further? What can we do to make this on par with a traditional transactional system? And maybe you don't need to.

Maybe in that point, that's when you start looking at off-chain transactioning system, like an open transaction, which is also trustless, and can do HFT. So I'm interested, because Max, you kind of chimed in here, and you also have some interest in involvement in Ethereum, at least on some level. Can you talk a bit about that? Like, what appeals to you find in Ethereum, what's been your involvement, and what do you see doing going forward? Ethereum.

Yeah, sure. So, I mean, Ethereum, I read the white paper. It was either really late December or really early January, and it immediately grabbed me as, you know, it's both ambitious and fantastic that it's happening. My initial sort of thoughts were like, oh, fantastic. I've had this idea for a distributed market in my head for nearly a year now. And when I first heard this, it was like, fantastic.

I can finally, you know, build this really simple. and easily. So my initial sort of involvement was I got straight into the contract side of things and started, you know, writing contracts. So I've written both a market contract and a Bitcoin SPV contract. And this was quite early on. So the language was a bit different. And I wrote some, you know, some things to start testing Ethereum contracts and stuff like that. And admittedly, it's a bit different now, but all the logics there. Anyway, as the language, started to change, I decided, since I'd basically gotten most of the architecture out of the way, that I'm still sort of following this distributed exchange idea, but in a slightly different way.

Ultimately, I mean, I think that Ethereum is fantastic as a place to start testing these ideas. But I sort of became convinced quite quickly that it doesn't, or it may not be able to scale well enough to run some of the bigger applications that we've got, like an exchange. And that's because of how much data they will produce, or because then the Ethereum transaction fees will make it too expensive, or what's the reason why it won't scale? Not so much the data, but when you start thinking about a distributed exchange, you've got to, like, basically the task at hand is prove some payment happened off-chain. And that means that you have to be able to validate a foreign chain, whether that be Bitcoin or

light coin or anything like this. And I started thinking about it. And if you take, say, light coin, for example, light coin's trying to be memory hard. And so if you had to start validating most of the light coin chain, and I mean, you don't need to, we can just say start it here, as in, you know, use the last checkpoint and go from there. We don't need everything before now. But when you think about validating the entirety of the light coin chain, that gets

very, very computations. expensive. And of course, the resource of Ethereum is both Ether, but then that's used to produce computation. And so it's going to be, I think it's going to be really interesting to see how Ethereum deals with some of the challenges about these sort of decentralized applications that add a lot of value, but are very computationally expensive. I think Max makes a very good point. It's very important to remember that when we say Ethereum runs computation in a distributed manner, we're not talking about, you know,

Boeing City at home or folding prolete at home or even prime coin type computation here. What we're talking about is, you know, what was on your calculator, circa 1993? Those are very basic logic gates. If else, do that, you know. It's if you want to run extensive computation, so say a distillery exchange, for example,

or an exchange at all, order book matching system, that's pretty better suited to an off-chain mechanism and use Ethereum as a validation. Contracts aren't proactive, contracts are reactive, they're like machinery, they're your arbitrators, so to speak.

They're just ensuring that nobody cheated. They're not here to do 3D rendering or anything of the sort. That's not what we're about. On the other hand, what you could have is you can have a metacoyne that's built on Ethereum, so say the

Stefan coin, that would be kind of cool. And the Stefan coin would be issued if people had executed a certain amount of CPU cycle on Citi at home. So you can reward users arbitrarily by issuing your own cryptocurrency a bit like a brand coin, a bit like a loyalty point, so to speak. So that opens the door to new issuance mechanism that I don't think we've seen so far in the Alcoin world. Yeah, absolutely.

I'm very, very curious to see what sort of like new types of money people come up with. I mean, I know we've like in the previous to the cryptocurrency world, we had these sort of complementary currencies, whether they be like frequent flyer miles or, you know, the Bristol pound or stuff like that. But now that we can really like, with zero effort, someone can create a user issued currency that runs with the security of the Ethereum blockchain. So sort of on that line, it's sort of similar to the master coin argument, as in running with the security of Bitcoin. But now they can do whatever they want to it.

And they get SPV, of course, as well. Absolutely. That's why you meant is playing to do with low T points. I've heard of others. And going back to Andrea Santinopoulos paper yesterday, about 15 million outcoins, I completely agree with Andrew. I think we are going to see 15 million al coins, if not more. You know, you are your own currency. Currency is no longer a means of payment, but it's a means of representing your value.

And you kind of like vote with your wallet on issues that you care about. So this is something I've been thinking about also until since recently. And it's just kind of interesting to have you guys on so we can discuss this. So I'm interested in kind of like the sci-fi aspect of, of, of, these cryptocurrencies and especially these decentralized autonomous applications and corporations, these things that we've been thinking about, but haven't really kind of been able to illustrate. We keep talking about DOAs and decentralized companies. Stefan, you talked about this a while ago and gave the example of a decentralized Airbnb.

be. And you also, you did a talk at Google recently where you put forth a theory where autonomous vehicles would also be running themselves. Can you go into a bit more detail as to what kind of new models will emerge from this and things that we can't really kind of imagine today, but that will most definitely be commonplace in five, ten years from now or even less. Yeah, absolutely. So create it where it is due. The person who thought about these things first, I believe, is Mike Hearn. Mike gave a talk at the Turing Festival, I think it was mid-last year, where he described, because as you know, he works for Google, he described that self-driving cars are a reality. They're not science fiction. In fact, there's studies that have been made that show that self-driving cars are most likely to be commonplace in 2050 that clean and energy. So the self-driving cars currently in Palo Alto will become commonplace. And you can imagine

a model by which maybe Sarah, say, wants to go out tonight. She opens her hello type application or Android phone. She calls the car. The car parks outside. She jumps in. The car starts driving her towards the nearest pub or club or whatever. As the car drives, the car talks Bitcoin, or Android phone talks Bitcoin. The car asks Sarah, would you like to go on a faster lane because the car actually pays the highway in order to use this faster lane, in order to reduce traffic congestion and so on. So Sarah has the choice. She can say yes, she can say no, and then she arrives at her destination. The interesting aspect here is that the car is a mobile asset by definition. Therefore, the car can relocate itself to a more

affluent town. It can relocate itself to a place where there's maybe more demand for its services where there's less competition. And so the question is, the question is, is who owns the car? Is it Google? Is it the Hello type app? Is it the car manufacturer? Well, the answer is neither. The answer is the car owns itself. The car owns itself because he was crowdfunded a bit like a co-op by a group of like-minded individuals who wanted to see this car happen. So they went and they put money together, a bit like a Kickstarter, so to speak. But instead of receiving a free t-shirt for their efforts, what they got is they actually have shares in this means of production, the car. And so obviously, this is a little bit science fiction-ish, because what if the car breaks down?

Who's going to repair the car? What if it's on the side of the road, et cetera, et cetera? Yeah, but you have other services that come in plug in, and you have these decentralized autonomous tow truck companies that will come and pick up the car and bring it to the nearest mechanic to have it fixed. Absolutely. This is, I mean, I was recently reading, I was recently reading Ray Kurzweil's The Singularity until my tablet broke down, so I'm getting my tablet fixed.

I can keep reading it. But this is the kind of stuff that he talks about. Only he omitted to say that these systems would be based on this type of technology, maybe because when he wrote it, it hasn't been imagined yet. But I really see the parallels between the singularity that he talks about where computers run themselves and kind of own themselves and these technologies that were now starting to see emerge. Yeah, I think an interesting thing about this is if you bring the model away from hardware, because that's a little bit far-fetched for now, it won't be in 10 years time, but for now, if you bring the model back to software, that's where it gets really interesting, because you could have a DAO, a decentralized autonomous application that's been built by a group of developer in exchange of receiving dividends in its profit that would then allow for this previously mentioned decentralized drawbox type.

type of application where people would pay for storing their data encrypted and broken down into chunks, of course, onto some other person hard drive. And so technically this application does not need humans to tell it what to do. It just does what it does as long as it's financially efficient and financially successful. And if it's not, it dies and then another one comes up and replaces it. That's an interesting concept. But it has, you know, the singularity is interesting and the science fiction stuff. I love it.

You know, it's not omnibus technology, though. It can also be used for good. One example I quite like is this website that you have in the U.S. today, whereby people run errands for $5, $5 a pop, not $5 an hour. Now, I don't know how many here are from the U.S., but I'm pretty sure you don't live well on $5 an hour in the United States of America today. These people are not doing it by choice. doing it because they don't they need food on the table right so what could be

imagined is a system by which the sites are created by like-minded individuals and I own by the people who actually run the errands we can then define the price unlike a central operator that by the way takes a 30% cut today while this guy still don't get benefits but that's another story and and so it actually is very liberating it's a means of promoting entrepreneurship at all levels in any companies unfettered by regulations and by, you know, this type of sort of greed that we're seeing on the internet today. The dream of the internet was everybody would become a content producer, everybody would compete with movies from Hollywood, and the reality is today, well, you know, we're very

far away from it. What we got was the NSA and Prism. I quite like this idea of a trustless, decentralized Web 3.0 where people own the sites that they use. Yeah, absolutely. Like the eye-opener for me in your talk was when you talked about the hosting service that goes and finds the cheapest hosting available. And that was really the eye-opener for me that now enables me to really kind of understand

how these systems will work in the future. Yeah, that's Torj, by the way. It's invented by a chap called Gregory Maxwell. I was also a lead Bitcoin developer and contributor. I think at the time he expected it to be operating in a centralized way, but you can imagine a decentralized store J, that would be even cooler because then nothing can stop it. Yeah, absolutely.

That's not a pun on J-Store, is it? The journal compendium. I have no idea. I think it's pronounced storage, actually. It's probably pronounced storage, yeah. It's a French thing. Yeah, it's maybe I want to give a big book tip here. So if you're, there's a science fiction author named William Hurtling.

He has some books called, one is called Avogadro Corp. And I think it kind of plays to the maybe the more dark vision of where this could lead. Because in a book, a company that sounds a lot like Google. You know, they have this email system that optimizes email and then it takes on a life on its own. And we, you know, when we, when we read about these things, it's hard to imagine how would this happen, you know. But then when you hear about something like Ethereum, I think what's very powerful is that all of a sudden you can have these autonomous systems that can take on economic functions. They can do economic transactions. Now, of course, I think that those dark scenarios are perhaps unlikely and I think, or at least,

unlikely for the near future because artificial intelligence just isn't there. You know, it's not like these systems are going to take on a will of their own interests of their own. But if they did, then using systems like that, contract language and cryptocurrencies would be the way that they could actually start having all, you know, start controlling actual resources in the world, hiring people, all those things. So it's, yeah, it is mind-blowing where this can kind of lead. I like this idea that a computer program, and you absolutely right,

strong AI, as far as I'm aware, does not exist to date. We have weak AI systems and that's okay. But I like this idea that a contract could potentially issue a bounty to human beings, a bit like Amazon Mechanical Turk, stating, you know, look at this picture. Is this picture beautiful or is this picture ugly? And so you'd get a thousand human getting rewarded for pressing the ugly or beautiful button, a bit like a split-abee testing. And of course, you could get rid of the ad liars using some type of machine learning,

statistical analysis, and determine with a pretty fair degree of accuracy if the picture is ugly or beautiful by a machine. That's a sort of futuristic topic. I'm quite interested in myself. Yeah. What's interesting in the book is like where this thing goes, because I think there's a second book, which I don't quite remember what it's called, but you can find if you look for William Hurtling. And there

you start having different of these systems that compete, and the most valuable resource they start to have are data centers. So, you know, those systems, they would hire humans to improve the data centers. They would hire humans to improve, like,

defensive robots, et cetera. So it's, yeah, it's very fascinating. I think the, I think the catch is that a contract on the blockchain is not aware of its underlying environment, so it's not aware that it actually even exists. A bit like termites build this beautiful cathedral, whether it's in Europe, the United States or Asia or Africa,

they all build the same beautiful cathedral. But I'm pretty sure if you were to interview any termite, they wouldn't be able to tell you what a cathedral is. Yeah, we should get a termite out on the show for next week. Let's do that. No, I mean, I think your point is very important. And there's no real sense and it doesn't make sense to get scared of these things or think too much about them because what would be needed for all those things to take on really that kind of dimension would be a huge step forward in artificial intelligence. And if that's not going to happen or until that happens, what we'll see instead is things like you're talking about, like the self-driving cars, you know, that have like economic transaction layers, decentralized Dropbox.

or financial derivatives, all those things, which are fascinating and absolutely revolutionary on their own. Now, what I think is fascinating about this, too, is I mean, you mentioned artificial intelligence, Brian, but in effect, it's just mathematics, right? These things are just running off mathematics and making decisions based on parameters that were put in place by humans. But I think the important point here is. Yeah, it's a good point.

But if we come back to that example before of the self-driving car and then, you know, Stefan, you say, what happens if it breaks down? Now, if you programmed that before and said, like, you have something that measures, it broke down and then this happens and you have that logic in the contract, fine, right? You can adapt to that. But you will never be able to anticipate all the scenarios. So unless you have a system that is intelligent, there's never going to go very far. I see what you're saying.

Yeah. But I'd be interested in seeing if within those, within that set of rules, uh, that is defined by humans, if, if patterns can evolve or if behavior can evolve, like, I'm interested in this kind of, um, thought, this idea of, uh, new patterns and, and new behaviors evolving out of just, you know, like mathematics, um, and, and, and true and false algorithms. And if that's at least possible.

I think there's no reason that that sort of thing shouldn't be possible. I mean, going back to the self-driving car read, I had this, or there's this vision that I have of this future where you've got these virus-like pieces of software that inhabit these cars.

And essentially, the car drives itself, all it needs is a routing engine. So these viruses are just complicated routing engines. Now, when it, if the car or if this virus is able to earn enough profit in order to buy a second car, then it replicates itself, but like replication with DNA, it has a few errors in it, a few little mutations. If we can get software to that sort of point,

then I think it'll, or hopefully, it'll just take care of the rest. You mean where a self-driving car buys a new self-driving car? Yeah, but then evolves itself on top. Or smart property, smart property. that actually owns itself, a house that ends up buying more houses. I think my brain just... I think my brain just left. So, but let's kind of talk a bit about, you know,

then more near term again. So what do you think, you think, Stefan Ormax, that financial derivatives or financial applications are going to be the first kind of, like, you know, really ground-changing thing? Or do you think it's going to be something like the decentralized Dropbox, that kind of thing? Or where do you think this will have the most impact in the near future? I think Water finds its own level.

I think where the paint points are is where, you know, we're going to see the most innovation. So what hurts people today is probably where we're going to see websites being created, decentralized apps being created. I like this, you know, I purchased an Oculus Rift, pre-ordered on Kickstarter.com, that was about a year ago, something like that. So I got the old model, right? Two weeks ago, Facebook purchases Oculus Rift for $2 billion. Where does that leave me? Well, I'm just sitting there with an outdated piece of hardware that they're currently replacing with a brand new piece of hardware.

And that's it. So if I had actually held shares and received sort of my fair share in the purchase of Oculus Rift as being an early adopter and supporter of the project, I think I would have made 148x return. And so we'd have everyone who invested in this initial dev kit. I think this is where we're going to see immediate change. I think people will create these websites, these decentralized apps, and will say, hey, do you believe in my project? Go and get some shares in my project. and get dividends. If I succeed, you succeed.

If I fail, you fail. So then we're talking about the sort of fundraising thing, right? So basically, give companies a tool to allow people to participate in an investment company, participate in their economic success. Absolutely. You know, how many times you're at work, you go down the street, you go down the street, you go get your hot dog, and you notice that this guy behind the hot dog stand was maybe independent is a great business guy.

so much hope for him and you think, man, I wish I could actually invest in this guy because I know nothing about food and I know nothing about hot dog, but I can tell this guy is on the ball, right? So next time you buy a hot dog, you could actually open your Android app and then get a share in his business and help him expand and become a franchise, for example. I agree quite a lot with Stefan on that point. These sort of applications are going to be a product of the free market. And if you think about something like Kickstarter, Kickstarter take 7% I think it is of anything that's raised. And so we might start seeing, oh, there's a decentralized Kickstarter that's come up, which is great.

But then, you know, it's even though it's 0%, then there's people just run off with the money and stuff. So then there's then another application for, you know, ensuring the Kickstarter, and that might only take 2%. So it'll basically be down to, yeah, where are the pressure points? Where are people losing the most money? Yeah, I can certainly, from personal experience, I've done quite a few Kickstarter, Indiegogo projects and failure to deliver has been a huge problem. I mean, I think most of them did not live up to the promise.

And I think that can be an issue. You know, if we talk about, I find, you know, economically what you're talking about, Stefan, this is absolutely revolutionary, so interesting groundbreaking. The idea that, you know, anyone can kind of sell shares of the company or sell these tokens that then can be used to buy things in the company, so the value of those corresponds to the value of the company, you know, totally revolutionary. But if you look at, you know, for example, Bitcoin IPO or these kind of Bitcoin stock markets, those things, I think this is actually an area where lack of regulation can be very, very problematic and very dangerous.

And, you know, it's definitely a place where a lot of people with very questionable intentions go. And so I think it's also very dangerous where we are heading with this. You know, like Max said, we could imagine a scenario by which people could pay a little bit more and subscribe to a consumer protection service that would function as an insurance or as a broker between yourself, the client and the actual derivative in case the derivatives, sort of data feeds are compromised. And that's what actually is happening in the world today. If you look at people who are trading whether they're ready to date, they get a data feed from NASA,

and they have no real guarantee that it's actually NASA or that the chap that's actually behind the computer entering all this data doesn't have a gun pointed to its head. So what they do is they create this buffer by enabling brokerage of services, which are themselves insured against fraud. and transactions are instant, right? It's not like, oh, it's been raining today, ergo, boom, all the contracts trigger. Well, that will be silly because that will be so immediate. There'll be no recourse. You want to be able to build this mechanism for recourse

that are potentially even optional. So people can choose to take that extra risk because they may have traded with this operator prior and they trust its reputation. Or maybe they don't because they never traded with this guy. And I'm like, oh, I better get insured myself maybe 3% of my total transaction fee isn't that bad on this particular deal, for example.

Yeah, I agree with you. I think that is where that's could go. I guess my fear here is that first people will build the decentralized Kickstarter. There will be all kinds of fraud, and then, you know, people will try to build those things later, but there will definitely be a time where, you know, you have the one without the ladder or one works, but not the other. And there will be, I think the fraud problem is going to be huge. there's I think there's there's an interest or the other side of this is yes the the fraud problem is may be or may be huge but if we're talking about a Kickstarter style operation that's also like a combination with essentially an IPO in a company though though at a very very early stage we're essentially talking about the average consumer going out and putting money into venture capital so so we shouldn't be expecting every single thing to work out like like failure is still a

an option. Yeah, sure, but the idea is right, you buy shares of a company. You know, if that happens today, this is, you know, it is made sure that those shares actually exist. You know, there's a contract and notarized all of that. But, you know, if I just sell shares, you know, if we sell shares of epitone and there's no, there's absolutely no, you know, to some guys in Argentina, who knows, and there's no accountability here, and there's no one who checks, for example, what do you do with the profits? You actually pay them out? Or did you sell five times as many shares as he said you would? It's tricky. I think it's going to be very interesting how some people solve that. But I'm slightly skeptical to just the kind of, we're just going to sell

those shares or sell those tokens. I think that's a good point. If you look at what's happened with M.T. Gox or M.T. Gox. It's fascinating to me to see that you have this beautiful thing, Bitcoin. It's most interesting properties that it's yours, yours only, yours to keep, used to cherish and keep safe. And yet, people trusted a centralized entity for a decentralized currency. Yeah, they run out with a, they run away with the money. What a surprise, you know. To some extent, that's why, you know, we also try to not necessarily discourage, because it'll always be possible, but to create a centralized website that talks to the underlying Ethereum blockchain and promises the moon, we are providing alternatives to this model. We're providing a decentralized

GUI that will be signed, cryptographically signed, backed by a reputation system that people can then study. The code will be entirely open state, so everybody can go and read through it. There's a mechanism to protect ourselves from this type of fraud, just like there's mechanisms to protect Bitcoin from Gavin Anderson assigning himself 10 billion Bitcoins by modifying the source code, right? We all know that's not possible because of the way Bitcoin works. Same thing here. I just want to kind of maybe this is a good opportunity to talk about this new proposal of side chains. And I'd like to get you guys' thoughts on how it compares to Ethereum and what Ethereum is trying to do.

We spoke about side chains briefly last week. And I've been just kind of doing a bit of research about how these work. So can you perhaps explain what is its site chain and how it compares to what Ethereum is trying to build? Yeah, side chains are something that came up in November last year, I believe. There were any discussions about it. The idea is you can do a one-way peg by doing proof of burn on the Bitcoin blockchain and assigning value to some parallel chain. then somebody came up with a concept of doing a two-way peg.

So that is when you create a transaction, the transaction in the second blockchain as a mechanism to burn itself back to the initial blockchain. So what you end up is a means of having a two-way peg between these two different currencies. And that's a very important word, currency. Side chains are properties of a currency, not protocol. So if someone was to release,

because I think that's the underlying question here, which I've read a lot about on the forums. What if somebody releases a fork of Ethereum where we have a representation of our ether currency replaced by a Bitcoin side chain? That fork will not have the same feature that our Ethereum will. That fork will not benefit, for example,

from the data feeds that already exist in Ethereum contracts. In fact, for that matter, it won't even benefit from any contract or whatever decentralized markets, liquidity we may have on our chain. on the other, yeah, sorry. Let me chime in there. So, what would stop anyone

from forking the data feed as well? Or, I mean, you know, if they're in the Ethereum blockchain, you could get them out of there, or, I mean, if you talk about, the contacts won't be there, I certainly agree, right,

you have a kind of a network effect. Question is, how large is it going to be? Well, that's true. That's true about, you know, forget side chains. It's true today. It's true about, like, you know, we have this nice little fork button at the top right of all our GitHub repo. Ethereum is open source wall to wall. Even our business plan is going to be open source. Our salary model will be open source. Let's stop someone from cloning Ethereum today. Not nothing is the answer. Nothing stops.

In fact, somebody's already done it. It's called Aetherium. There's a thread on Bitcoin Talk, I believe. Amusingly enough, VitaEquen in there and help them out with their own side project, which is quite a little bit where we sort of position ourselves on that topic. We actually welcome that kind of stuff because we think everybody can benefit from it. Network effect is the answer. And also, you can't clone the Ethereum people, which is useful. What we will see, though, we'll definitely know that we'll have side chains for Bitcoin, light coin, dochecoin, implemented as contract within our Ethereum.

within potentially three months of launch. We think it's an interesting concept, and we like interoperability, so it makes all sense. Oh, can you talk about that? What would that look like, you know, Bitcoin side chain on the Ethereum network? Well, I mean, I'll skip the technical detail because some of it goes above my head as well. Vitalik was talking to me about yesterday.

But the idea is, you know, you can already build SPV clients on Ethereum that listens to transactions on the Bitcoin. or the chain. So that's how you can actually foresee things like Bitcoin back there it is on Ethereum. So if you listen to what's going on in the blockchain, and if you say, I'll send you three Ether if you send one Bitcoin to this other Bitcoin address,

you just need to listen to the Bitcoin blockchain to say, hey, you know, something's been transferred. Action, yes, boom, and the ether is being unlocked from that smart contract box, so to speak. You could extend this reasoning to sidchain. So you could actually have a two-way pegging via proof of burn, implemented as part of a smart contract. So you could, for example, then be on the Ethereum network

and, you know, there's an Ethereum contract. You need to pay, for example, a thousand Dogecoin to pay for this contract to be executed, and then you could do that by the peg. So you could have, for example, the monetary unit used there, you could use a Bitcoin or Doge. or something like that, no.

I don't know if you can, I haven't talked to Vittalik about doing a three-way like you're describing. So dochecoin to Bitcoin via Ethereum. I mean, that sounds like a cool concept. I'm not sure how that would work. No, I just made one or the other, right?

But so you could. Oh, one or the other. Yeah, you just basically burn the currency on one and then implement that as a, as a transaction on whatever side chains you created that represents the currency parallel to Bitcoin. Yeah.

There's other ways to do that, though. Just maybe a tiny detail. Well, if you didn't side chain's thing, I think you don't burn the currency, but you suspend it. Well, you burn the sidechains currency if you go back, but on the Bitcoin chain, you would be basically putting into a script that then you can get it out again if you burn it. But this, I find it interesting, this idea that you can mirror the value of another asset or commodity as part of a contract. CFDs come to mind. You can also do what Vitellic has referred to as shelling coins, which is like a guessing game that rewards the people who are the closest to the real answer,

validated by a multiplicity of data feeds. There's various ways to do this. At the moment, I don't think we've seen any practical implementation of this on Ethereum because it's so early days. But it's definitely the kind of stuff we're looking into, and actually I should say the community is looking into. I want to talk about maybe two more things related it is.

So one is, I actually didn't think about that before, but the thing of moving Bitcoins into Ethereum is, I think that's very interesting because it can, that's really something that makes it increases the utility. You know, I think it makes it possible to do a lot of things more neatly. So then you're an Ethereum contract

and you can pay with Bitcoin, your Ethereum contract. Well, you could do things like, you know, you could do proof. of burn on Bitcoin so you could have an SPV client that listens to money being burnt on Bitcoin and then issue a meta coin

that would represent Bitcoin on top of Ethereum but that has limitation of course because it's a one way move but there's ways to do it yeah what I want to yeah it's a great point what I want to talk about

two just very briefly is I guess the interesting idea about side chains thing is about is that you extend the utility of the Bitcoin money supply because I think a lot of their thinking is actually about a monetary perspective

that you say you use Bitcoin or the kind of Bitcoin currency, the value in Bitcoin to do all those other functions and that's not so much is it better a side chain or Ethereum I guess it's equivalent

in there, it's more of a value judgment or a preference whether you say you'd rather issue new currency as ether or you'd rather use the existing one. Of course, there's also economically that has a lot of implications because if you used the Bitcoin one, then you couldn't do the fundraise. You couldn't erase that money that way. It would, you know, it would, for the Ethereum team, it would be negative. It would be positive for the current Bitcoin holders, especially the ones who have a substantial amount of Bitcoin. So there's this, you know, trade-off.

Like counterparty did or something. Yeah, like counterparty, exactly. I mean, who is counterparty really good for? It's good for Bitcoin holders, right? So in a sense, so it just briefly... Well, yeah, it's good for them because it's burning the Bitcoin. So whoever's left has more value in their Bitcoin. Exactly, yeah.

So essentially, all the value remains in the Bitcoin network. And to the extent that people put money into counterparty, it actually increases the value of the remaining Bitcoins. Oh, yeah, we looked into Proof-Bird. I mean, as you know, we had various conversations taking place on our economic channels very early on as to, you know, what is the ether cell model is going to look like. So obviously, this idea of proof of burn, which is, you know, let's all drop our guns and pick a pitchfork in six months time. that's one way of doing it. There's only one little problem with that is how do we feed herself during that gap.

Also, the thing to keep in mind is that, and we haven't announced it yet, so obviously this is all a bit new, but we have big plans in terms of what we want to do with the Ethereum Vision. There's an Ethereum 2.0, 3.0, 4.0, 5.0 that we're already thinking about using softworking mechanisms, as well as some of the so-called pre-mine of Ethereum,

that money will go into three things. The first one is a not-for-profit organization that will do research in those very complex, difficult projects that we talked about, such as blockchain bloat, speed of transaction, useful proof of work, what about proof of stake, that kind of stuff. And that research will be made available free of charge to the community, and it will be led by Vittelik and also Neil Koblitz, the co-inventor of the Elept.

curve encryption that's used in Bitcoin today that are going to do work on this type of stuff. The second thing is a for-profit entity. And that's a question that comes back time and time and time again. How is it the Ethereum team going to make their money? Well, the for-profit is very simple. It's going to be an accelerator, just like any accelerator out there, investing in startup that uses Ethereum or deploy application on top of the Ethereum infrastructure to try to build that ecosystem.

GUI applications is a good example. I have never seen any GUI built by a company. that actually kicked ass, so to speak. Private companies do very well at that. And then the third part of that, a tiny fraction, less than 5%, will go towards rewarding the investors, the founders, the people who were the early adopters, into the project and pay back their salaries, so to speak.

That's pretty much the plan. Yeah, no, I mean, I think you're pointing out something really important, which is that there are two functions to what you guys are doing, or what the fundraiser does, is one is distribution and the two is fundraising. Now, if you replace it with something like side chains, you have a different distribution mechanism and one can argue whether that's better or not,

but what you definitely lose is the fundraising thing. And obviously that can be enormously powerful to build something big. And I think from all the enthusiasm about Ethereum and how many people are involved, also the quality of people involved, I strongly suspect it's going to be a very, very successful fundraise, and you'll actually end up raising a lot of money that will help to develop this at a really high speed.

Yeah, and that's the point. And again, complete transparency is what you can expect. Even the business model will be open source. One thing that's actually quite interesting, and I hope will become the model for all sort of VC2.0 type initiatives in the future, is that even our salaries will be public as well as how we got to that figure. So they're going to be formulaic in nature and they'll say things like, okay, so you live in England, you have this level of seniority, you have experience,

you're doing this function, computer says you're worth X. And that's going to be public to everyone. And how, like, so you talked about people getting involved, how can people get involved in this project? Because it seems like you guys could, Could use some more community involvement to help build this even further? Absolutely. So I think the biggest one for me is meetups.

I absolutely love our meetups. We have now, I'm checking the... We have... Can you still hear me? Yeah, okay. We have 51 meetup groups in the world, 2,800 people involved. Now, obviously, that's not necessarily full time. and in terms of how can people get involved,

go on GitHub and contribute code. That'll be great. We'd love to see nothing more than reference implementation of Ethereum and all sorts of language. I know some guys doing stuff with closure. I know some guys doing stuff with Node.js. You know, they're going to need help.

Obviously, we have the Python Go and C++ reference client that need to be improved constantly. In terms of if you're not a programmer, start a meetup group, write blog articles, write tutorials. I mean, we have a lot of, you know, it's a long road ahead. We're not by any way, shape, or form saying this is going to be easy. It's not just, you know, having a sequential memory hard or CPU-friendly proof of work algorithm is a challenge in itself. So, yeah, a lot of work ahead.

Excellent. Max, do you want to weigh in something else on Ethereum or otherwise, I think perhaps we can, we can also talk about your other project. Yes, I mean, my other project called Cryptonet is very similar to Ethereum. A lot of the design has been directly inspired by it. I think it's like the white paper has been, like since December at least, has been a fantastic resource. It's, the system that Ethereum is built on is very, very well designed. What I was saying before about distributed exchange, one of the sort of things that I,

that I thought sort of should exist that doesn't currently is the idea of a library that just lets you create blockchain-based structures. So Ethereum is like one of these structures, and it's designed to allow you to create any DAP that you want. Bitcoin is obviously the first structure. But outside of those and a few others, we haven't really seen anything built on sort of novel blockchains yet. So for about the last two months or so, I've been working on this with a friend of mine. The idea is that you'll, so it's written in Python at the moment, and the idea is you say, oh, from Cryptonet, import crypto net, and from Cryptonet.com, standard, import, like, blocks, headers, transactions, et cetera. And then you just change the bits of this network that you want

to change. So say, if you want to, if you want to DAP, then you can write, you know, a DAP. And all it does is alter a state in a very particular way. Distributed autonomous something, I assume? A distributed application. So that's what I think that's, so it's sort of, we've got like, you know, a DAC, like a decentralized autonomous corporation. And I sort of think of those as like collections of DAPs. Like a DAP does something very specific.

So it'll like keep track of the Bitcoin blockchain or it will allow you to, you know, to bet on the outcome of some data. data feed or something like that. And so when you collect all these together, you end up with a network. Anyway, so I've, the idea of this library is to be able to create these sort of networks in isolation. One of the disadvantages of Ethereum is that you need ether in order to power your contracts. Whereas if you have a network of people who consent to a particular application running, then

you don't need any fee. it's everyone will just do it because they want the end result. And so this is meant to, I guess, Cryptonet is meant to cater to a slightly different audience, but it's something where you could create, you know, a distributed voting system or perhaps a standalone blockchain that where each block, instead of having a proof of work, is signed by a central authority or stuff like this.

I really want to see, like the blockchain is, for me, an awesome data structure. But outside of money, we haven't seen many sort of applications of it yet. So that's where I'd really like to start seeing innovation. So let me try to rephrase that. And then maybe you can tell me if I'm wrong or right. Sure. So what you're trying to do is you're trying to build a library.

So if I want to go and I say, I want to do something a bit like Ethereum for a certain project, but I don't want to use Ethereum. Then I can kind of use your library and sort of metaphorically drag and drop my thing together. And then I have that. And it's totally independent of a currency, a mining network, etc. And then I deploy that sort of on my own with perhaps the other people that are interested in this. Is that about right? Yeah, yeah.

I mean, that's pretty much right. By default, there will be mining so that, you know, and run things like a currency without getting into trouble. But, yeah, I mean, that's... So how is the mining going to work? Who's going to... Are they going to get transaction fees? Who's... In what currency will they be paid?

So that's completely up to the person who invents the library, right? I mean, so an altcoin is a very simple distributed application at its bare framework. And all it needs to do is just reassign balances. So you write a little contract that says, when you get this, then take the sender of that contract and, you know, remove their balance and then add it to the recipient. Things like that. So the idea is that you simply describe what the blockchain should do and then the rest is taken care of. The network is taken care of, the serialization, the blockchain, all that is taken care of.

And it's just that layer on top, whether that be that you want to make a currency or you want to make Ethereum or a voting network or that sort of thing at where this is sort of aimed. And so what are the types of DAPs that are included in this library? Like what are some of the most basic applications that come, that would come included in this library? So when, hopefully we're going to have sort of a proper proof of concept done in a month or so. With that, we're going to have a proof of concept of a distributed market. So that'll be, that'll sort of. of be there, but that's an example. In terms of the library itself, the only real DAP that

will be, that I think it needs to be shipped is some sort of monetary framework underneath. And to deal with, you know, when you get a transaction, where do the messages go and things like that? But the idea is that the DAPs are able to be written by whoever's using the library. And so this library will, so the idea is that people build. the individual DAPS and that they're included in the library so it's an open source community effort? Yeah, the DAPs can be included

in the library, and it is, and it's most certainly open source, it's most certainly community based. One of the, so for example, one of the use cases that I've gotten my head that's way down the line, but possible, is say the Ethereum blockchain, you've got this really cool idea for a distributed application, but Ethereum's become too expensive.

So you write your various contracts in Ethereum, and then you select, you know, say, three or four of them to work together, and then there's like a compile to network button. And then that just spits out an alternate chain that only does those like three or four things that you specified. But it runs completely on its own and completely outside of Ethereum, and only people that want to partake in it, partake in it. Okay, I see. Is there anybody where people can check this out?

Do you have a website up or a GitHub? Yeah, so it's on GitHub. It's in a very, very early stage. I'm sort of getting the blockchain stuff is essentially done. Because of the structure of the library, all the transaction execution is actually built into the data

structure of the blocks themselves, not the blockchain. And then so you'll be able to sort of choose the level that you want to sort of cut it off at. So if you want to, you know, do things from the block up, like, you know, from the right at the ground up, then you can. So I'm putting the, I'm writing the structures on top of blocks to start to deal with transactions and daps and stuff like that now. The organization that my friend and I are forming to sort of launch this under is called EUDOMO-Research, spelled EUDE. E-M-O-N-I-A. Is that Monia?

Yep. And our website is eudamonia.io. So there you can click on research, and that's got a link to our GitHub, and that's where all the code is. Yeah, that's fascinating. I still have some slight difficulties, understanding it exactly, but I'm sure once you're further along, and maybe we see some implementations and applications, we'll all make, you know, it will become more clear as well.

I think that's fascinating with any of these things. You know, I don't know how often I've heard people talking about distributed voting system, et cetera. And we still, you know, I don't know if anybody actually ever used, you know, if anybody uses this kind of thing or it's just something that all these people are working on. But you're kind of a practical application is like, now I'm going to use this to run the meetup group or something. You know, I think that's where it's going to be really interesting when you're going to actually going to be able to use those in the real world. context. Yeah, but to see, I mean, I agree. I think that we need to see a real kind of good use case for this.

We're a practical use case. But the fate of these things actually working is people using cryptocurrency. So in order to run a decentralized autonomous corporation, your clients need to be using a Bitcoin or a cryptocurrency. I don't know about that. No? You don't think so? I mean, if you talk about, I mean, maybe Stefan, you can weigh in on that. But I think if you have an Ethereum app store, people down in the Ethereum Map, like, why do they use Bitcoin?

Yeah, there's various ways to get into the system, so to speak, to get the bull rolling. Ripple is one way. Of course. If you're going to be running a DAC, your customers need to be paying you in Bitcoin or some other cryptocurrency. Well, imagine a DAC that has. SPV clients built in for not just Bitcoin, but also Ethereum and Dogecoin. And so you can actually pay it in any of those. Yeah, I agree, but they're not going to be accepting euros, is what I mean.

Well, maybe they will. Oh, yeah. I mean, maybe you can have a layer where, you know, you'd have some service. You know, you maybe buy a voucher at the kiosk or something, and then it gives you credit for, you know, in that application. You don't even know what it's doing on the back end. you know, if on the back end someone takes that $10,000, you know, buy some Bitcoin, takes their cut, you know, maybe then buy some Ethereum and deposits those in the account,

then you just see 10 credits. I mean, yeah, yeah, I agree. I know what you're saying here, but the barrier to entry to all of these things and the point at which these things will take off to me is really when you have interoperability between fiat currency and crypto and where people can easily buy crypto and start interacting with these new models until that happens until you can easily buy a Bitcoin voucher or whatever cryptocurrency voucher in a newspaper kiosk or until your bank allows you to easily switch from euros to Bitcoin or whatever other cryptocurrency in your online banking

or until people actually are getting paid with Bitcoin. that mass network effect will not occur. I agree that we need to limit friction. Friction is the death of any app that actually would be based on a network effect. Facebook is Facebook because Facebook is free. The downside of that is when you're not paying for the product, then you are the product. So in that regard, you're absolutely right. But I'm hearing good things about things like Zipzap, for example, in the UK,

is going to open 29,000 newsagents to be able to sell Bitcoin to users using a very simple sort of Bitcoin-type mechanism. They probably don't call it Bitcoin, but it's the ideas there. And yeah, the more we can limit friction, the more depths will be popular. And that's a critical point. Ideally, we want to see a fiat to crypto-decentralize exchange. Well, one of the things we haven't talked about is, and I think that there is going to be a bank at some point who does this. Let's say, you know, HSBC starts an Ethereum contract, and there's a button that allows you to, you know, move euros from your account into sort of their Ethereum contract, and you can transmit them internally then. But now we've been able to bridge the gap between the legal construct that is, you know, our fiat currency and the cryptographic construct that are,

that is Bitcoin and Ethereum, et cetera. Yeah, let's not use HSBC as an example. I think in the context of this podcast, we should not use HSBC as an example of anything. Never mention it again. But I understand what you're saying. And I think that, see, to come back to the Zip-Sap, like I was at the grocery store yesterday,

and right at the register, I've got a Google Play card. And I was actually thinking about this, like, You know, if I want to give, because my mom just bought a tablet and I'm going to give her a Google Play card so she can just, she doesn't have to put her credit card in, which I know she's not going to want to do. So until we get, until we get to this very frictionless purchasing model where we can just buy Bitcoins from a, from a kiosk or, you know, where you can just grab a half a Bitcoin or whatever at your grocery store. it's going to be a challenge to get people to start using these these these these decks now again much like the internet at the dawn of the internet it was used only by geeks and mostly used by geeks and then kind of more technically savvy people but as things evolve you know you have a network effect obviously and more people getting on that boat so I think it'll take time but but the

The point at which that starts to take off is when cryptocurrencies, there's less friction between fiat and crypto. And this is what we've been saying since all along, right? Yeah. The problem is when you move from fiat to crypto. Yeah, no, it's a huge pain point. That's for sure. And it's, yeah, it's definitely slowing down massively the development. But, you know, it's something I think that gradually, gradually I'll buy much more slowly than we'd want to.

Now, what are your thoughts on, I've been hearing a lot of things, people saying, like, the, the cryptocurrency revolution is going to happen very, very quickly. And coming back again to Ray Kurzweil in the singularity and his theory that evolution happens in an exponential way, where we've seen the internet revolution happened in 15, 20 years, let's say the mobile revolution took four or five years or perhaps less. The cryptocurrency revolution, from what I've been hearing from thinkers and people in the community, is that this is going to take off really quickly. Within a year or two, we're going to be reaching some sort of critical mass or mass adoption. What are your guys' thoughts on this? Do you think that this is a linear, there's a linear model or that we are

are in fact in an exponential growth rate. I don't think anyone can predict the future, so I'm not going to hazard a guess. No, I'm not asking you to predict, but what are your thoughts on it? What are your feelings about how the cryptocurrency, like the largest sense, decentralized systems revolution is going to take place? Going back to your initial point, Sebastian, I think we need to see practical applications that solve real world problem that people know they have. not problems that they don't know they have.

When I tried to explain Bitcoin to my dear mother, she didn't get it because she said, well, I have this NFC card. I can just tap to pay. And then I don't have to worry about keeping my money safe, like cash under the mattress, because the bank does that for me. I realize I'm paying a fee. Now, the flip side of that is, of course, she didn't know that currency today was no longer, you know, backed by the gold standard, believe it or not.

Yeah, I was amazed at how little people actually know that. No, no, but, you know, my money's backed by gold. I'm like, what? Yeah, it's unbelievable, isn't it? Yeah. The bank will never take my money, right? I mean, Cyprus, anyone? You know, it's ridiculous. But until people realize they have that problem,

then you need to find other means to reach out to them. I don't think we should push for it either. I think it should come naturally. Let's find some killer apps or killer daps, I should say, and that will get some eyebrows raised. When you've really disrupted one market, the other verticals will quickly follow. suit and say, wait a minute, what's going on here?

Maybe we should pay attention to this, you know? Yeah. Yeah, I just wanted to kind of get some cool sci-fi theories. Yeah, what about Max? What's your view? So, so, Sebastian, you mentioned, you know, the internet revolution, and I think, you know, we need to sort of consider this. We're only halfway through it.

Like, half the world doesn't have access to the internet yet. where we're seeing, we're still, we're at that point in sort of the S curve of greatest adoption. And if we're talking about Bitcoin and cryptocurrencies, then the primary sort of innovation, the piece of technology that it gave us was distributed timestamping. We now have a way to order things without trusting anyone. And the full repercussions of that for society, I think are going to take some decades to sink in. Like, you know, maybe at 2050 we'll see sort of the starting of, settling down. And that's the point where, you know, we're going to have cryptographic networks

to replace governments and that sort of thing. I think it's going to go that far. Yeah, I think so a good call on the half of the world that having the internet. The flip side of that is that some countries, my family, some of my families from the Philippines, when I go there on holiday, I can't stop but notice nobody, no one has a landline, not one person, but they all have smartphones. They skip generations. Just like M. Pesa in Kenya, you know, Now you have an entire country, I think it's 70% of their GDP going through M-Pesa. It wouldn't be far-fetched to imagine that if presented with a valid Bitcoin-based alternative, people would actually adopt it fairly rapidly because they're not encumbered by all this previous experience

with other devices or other technology. They just go for whatever is useful right now. Yeah, so let me also kind of weighing on that question you asked to us. Yeah. So I think, you know, there's a web site called Bitcoin Pulse, where that kind of tracks a lot of metrics, you know, from like how many wallets are they on blockchain. Not info. How many transactions are there? How many physical places, except, and if you look at that, and, you know, I think if you look at any sort of data source, it's totally clear that Bitcoin is growing exponentially. Now, if you compare that to the mobile smartphone revolution that indeed happened so quickly, you know, if you think back to iPhone, my suspicion is that this is going to take longer. And I think one of the primary reason is regulation, you know, because it's still, I think that is,

it's not going to kill Bitcoin, but I think it can slow it down dramatically, and it is already slowing it down dramatically. And then I think when you talk about it, like really far-fetched, potentials of this, of course, you know, who knows what the, you know, even if you talk about the internet, there's so many more things that will be done. In a sense, you can think of Bitcoin as an internet application as well.

So, of course, those will take much longer to, you know, really be realized. Well, that's absolutely right. So, you know, take the example of the Philippines and the remittance market, Bitcoin is the best way to send money abroad today. I can't think of a better way. honestly it's the best. And yet I'm not using it.

Why? Because in the Philippines, they have only one exchange. And the family I have over there is located pretty far away from them. Do not know how to, well, don't have a bank account for that matter. And don't know how to convert Bitcoin to Fiat because there's no local Bitcoin site over there. So regulation is what has stopped those markets or those exchanges from sort of perforating and expending. And it's a worry. I mean, in a sense, I think if you look at people calling for more regulations because they want to be able to be comfortable to start a business without going to jail, the flip side of that is actually slowing the growth of Bitcoin.

Yeah, absolutely. Well, I think we've been talking for quite a while. So maybe can you both tell people where to check out your work or the projects you're involved in? Sure, thanks. So for Ethereum, it's Ethereum.com. We have forums at forum.ethorium.org. And if I had one living note, I would say, keep in mind the poor developers, they're still building Facebook for cats or yet another clone of Twitter. Yeah, so you can, I live at eudamonia.io, as I said before, or you can check out my personal site, which is xK.io, and that's got links to everything that I've mentioned. I was looking for you to Modia. I forgot that you actually had it listed on your website, so I'm going to look for it there.

Yeah. Well, thanks so much, guys, for joining us today. It was lots of fun. I think kind of really far ahead some of it, but I think it's super interesting talk about these topics. That's a pleasure. Thank you. Well, hopefully it was informative.

It's been an absolute pleasure. Yeah, well, thanks so much. And some things, yeah, if you want to check out our website, at Epiccentabicon.com. Still kind of in development, but, you know, hopefully it will be better soon. You can follow us on Twitter at Epitainebtc.

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So, you know, it's kind of the most important news in development. you can do that at epcentobitcoin.com slash newsletter. Okay, so thanks very much for listening and we'll talk to you guys next week. Okay, thanks. See you. Thank you. Bye-bye. Bye.

Ciao.