Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Neha Narula: MIT’s Digital Currency Initiative – A Research-Driven Approach to Blockchain

Episode Date: July 4, 2018

When the Bitcoin Foundation fell apart and funding for Bitcoin core development was needed, the MIT founded the Digital Currency Initiative to step in. In the years since, the DCI has evolved into a vibrant center of cutting edge research on some of the most difficult challenges around blockchain technology. DCI Director Neha Narula joined us to discuss the DCI’s position between academia and industry, their policy on conflicts of interest, and their most fascinating research topics. Topics covered in this episode: How her interest in distributed systems and scaling lead led her to the blockchain space The mission and history of the MIT’s Digital Currency Initiative How cryptocurrency might evolve over time as an academic field The DCI’s project on digital fiat currency How zkLedger could enable privacy-preserving auditing for distributed ledgers Why sharding is unlikely to succeed in the short- and medium term Why Neha is most optimistic about layer 2 approaches to scaling like lightning network The story of discovering and writing about IOTA’s vulnerability How DCI handles conflicts of interest and strives for neutrality Episode links: MIT Digital Currency Initiative Neha Narula Personal Website What’s New at MIT’s Digital Currency Initiative The Importance of Layer 2 Cryptographic vulnerabilities in IOTA zkLedger | the future of audit zkLedger Whitepaper Neha Narula: The future of money | TED Talk This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/242

This is Epicenter. Episode 242 with guest Neha Narula. This episode of Epicenter is brought to you by DAPCON. DAPCON is a two-day developer conference, organized by diagnosis taking place in July 19th and 20th in Berlin. The conference focuses on decentralized applications, tooling, and scaling solutions on Ethereum. Go to dabcon.io to get you a ticket today. Hi, welcome to Epicenter, the show which talks about the technologies, projects, and startups starting decentralization, and the global blockchain revolution. My name is Sebastian Quiju.

And my name is Brian Fabian Crane. We're here today with Neha Narula. She's the director of the Digital Currency Institute at the MIT, at the Massachusetts Institute of Technology. So we did actually have an episode before a few years ago with Gavin Andreessen when we talked a little bit about this because he was back then with the DCI. But the DCI is doing some really interesting work

around research and, policy around cryptocurrencies and blockchain. So I'm super excited to have Neha on today. Yeah. Thank you, Brian and Sebastian for having me. I'm really excited to talk to you. It seems like since back then, the DCI has evolved a lot. It's doing a lot of different things. And we can speak about that in a little bit. But we'd be curious to hear from you first. Like, how did you become involved and interested in blockchain? Yeah, totally. So I really feel like I got into the field kind of late, but I think a lot of people feel that way, probably. And we all have to remember that it's still such early days.

So I had some really good friends who were very into Bitcoin as early as 2011, and I completely ignored them because I was in the middle of doing my PhD. And as I think is kind of notorious, a lot of academics weren't really that interested in Bitcoin at the time. So I was doing my PhD at MIT in distributed systems and databases. and it wasn't until I graduated in 2015 that I really started getting interested in this area. And when I finished my PhD, I did something a little bit unusual. I didn't have a plan for what I was going to do after my PhD. So I didn't have a job, I didn't have a postdoc, I didn't have a research position or anything.

I was just kind of floating. And the reason for that is because I really feel like I kind of needed a bit of a reset. So I didn't want to go and build a database or something like that and, you know, work for a big company. And I was really sort of feeling this disconnect between what I was working on and the problems that I found intellectually challenging and interesting and helping the world, like making a real impact on the world. And so I decided to just take some time off and kind of think about things. And it was at this time, the summer of 2015, Bitcoin was going to. through the scaling debate. And during my PhD, I'd been really interested in how to effectively scale systems.

And so I was like, hey, you know, maybe I could look at this problem a little bit. Maybe just see what's going on. Like, why is it so hard to scale Bitcoin, right? This was right before the first scaling Bitcoin conference happened in Montreal. So I started learning about it. And once I actually figured out how the system worked, I was totally hooked. and I was like, wow, this is amazing. This is the largest consensus algorithm in the world.

As someone who had been intellectually interested in consensus algorithms, that's an amazing thing. And so from then on, it was just down the rabbit hole. That's a fascinating story then. So let's perhaps transition to the DCI, the Digital Currency Initiative, at the Massachusetts Institute of Technology. So can you tell us what is the mission of the DCI? Yeah, so the mission of the DCI is based on, it's pretty lofty, but the idea for us is we want to help create the Internet of value.

We want to make this, we want to help bring in, usher in this set of open protocols that's going to make it as easy for people to move value around the Internet as it is for them to move information. So that's sort of high-level everything that drives us. What kind of derives out of that is we focus on open source technology, open systems, open access. We are pretty fundamentally technology focused. A lot of what we're doing right now is about how to solve some really big challenges related to making that vision a reality. And those challenges around things like scalability and privacy and figuring out sort of like how we need to operate in this regulatory environment. What kinds of things do we need to do as an academic group as part of a university to help this ecosystem as a whole. move forward. So you guys are at the MIT, right, which is, of course, a well-known university. And it's a somewhat independent institute. Can you explain, like, what's the relationship between, you know, the DCI and MIT

and maybe more generally the DCI and academia? Yeah, sure. So we're a little bit weird. It's not a traditional research group. So I had the DCI, but I'm not a professor. We do some research, but we don't just do research. So we're an initiative at a part of MIT called the MIT Media Lab. So the Media Lab is this, the MIT has a bunch of different labs.

There's the Media Lab, there's the computer science and artificial intelligence laboratory, there's a ton of other labs around engineering, ocean science, all sorts of different things. The Media Lab is under the School of Architecture, which is a little bit interesting. It was founded about a little over 30 years ago. And it's kind of this crazy, wacky mix of people. It's all sorts of different disciplines and topics. There are people who are working on synthetic neurobiology. There are people who write operas.

There are people who do art exhibits, people who build artificial intelligence systems. It really runs the gamut. So in some sense, this is the perfect home for a group that's going to focus on cryptocurrencies and blockchain technology. So we're a group of a few core research scientists. So we're all in the Media Lab at MIT, and we work on a variety of different projects, but we also work with companies a little bit. The Media Lab is actually funded by 85 large companies who are part of a consortium. And so those companies go above and beyond to help fund the DCI as well. We also work with a lot of different professors and students at MIT.

So there are a couple of economists. There's some computer science professors we work closely with. And we have students, of course. So lots of undergraduate students at MIT like to work with us. We also occasionally sort of talk to PhD students and help advise with their projects. And we've had a couple of master students so far at the DCI. So that's been really fun. The students are great.

So you mentioned that 85 companies are funding the media lab, or is there also like direct funders of the DCI? And are there, for example, cryptocurrency and blockchain companies that are funding DCI? Or how are their kind of resources where are they coming from? Yeah, great question. So our initial funding came from this fundraising round that was done in like 2015 to 2016. So I think it helps to explain a little bit of the origin of the DCI first. So the DCI really, it was started by Joey Edo, who's the director of the Media Lab. And actually Jeremy Rubin, who's an undergraduate from MIT. He sort of, I like to think that Jeremy like brought Bitcoin to MIT. He founded the MIT Bitcoin Club and he did this big thing in 2014 called the

the Bitcoin drop, where every undergraduate got $100 worth of Bitcoin. And they designed this huge experiment about it, ended up writing a great paper about innovation and how it spreads through communities. So Jeremy was one of the people who really made that happen. And he sort of helped Joey, I think, get to the point where he realized how important this technology was. And at the time, the Bitcoin Foundation was kind of imploding. It was going through a lot of chaos and a lot of trouble.

But there were these three developers who were employed by the Bitcoin Foundation. It was Gavin Andreessen, Vladimir van der Leyen, and Corey Fields. And these developers were working on Bitcoin for a nonprofit, the foundation. They wanted to keep working on Bitcoin. But if this foundation went under, they wouldn't have a job anymore. So Joey stepped in and said, okay, look, why don't we just support them? Why don't we, you know, try to get a university-backed fund together to support core protocol development? So that's what happened, and we raised a fund.

We raised a fund that, I think, was from, like, 20 different Bitcoin-related companies and individuals in the space, and we have a blog post about it. No more that – it was, like, on the order of a million dollars, and no more than 100,000 was. from any one company. So it was like pretty well distributed. Since then, our funding has come from the companies that fund the Media Lab, like I said. And those are pretty large companies. And also individuals who have wanted to give us money and who have wanted to support

our mission. You mentioned something before that was interesting before we started the podcast that, you know, cryptocurrencies are kind of this new field. So how does that kind of fit in? Do you think that this is a sort of test bed, then that it becomes like an academic discipline? Or do you think because it is a new field, it actually makes sense that it is more in a sort of, you know, almost tangential attachment to academia? How do you see that evolving? That's a great question.

So one thing I think that really distinguishes the work that we do at MIT from other places is that the DCI is about multiple different departments. and multiple different schools of thought coming together. It's not just the computer science department. And I think that's actually really important because cryptocurrencies and blockchain technology are so much more than just computer science. Like, yes, it's distributed systems. It's cryptography.

It's networking. But it's also regulation and game theory and market design, finance, law. Like there's so many different areas that all need to come together. and we need to figure out. And like something that's been really difficult for me is all these different areas speak very different languages.

So it's hard for people, for experts in them to even talk to each other effectively. So it's been really interesting to watch this happen. And part of the reason that I'm at the DCI is because we have people who are world-class economists, like world-class former regulators and world-class computer scientists all working together. Now, about what this is going to be, you know, I mean, I think we all recognize that something

very special is happening here. Like I said, it's more than computer science. I think that this could go in a lot of different directions. One thing I've been thinking about a lot lately is the history of computer science. So 70 years ago, computer science didn't really exist. Like, it wasn't its own discipline. It was, like, mathematics and engineering. And then I think it was at Purdue in the 60s that the first PhDs in computer science were awarded.

And now, like, computer science is the top undergraduate major at MIT and Stanford. And if you think about it, 70 years is not a lot of time to go from like zero to 60, right? Like that, you know, now it's the most popular undergraduate major. It's like a huge discipline. It's affecting everything in our lives, and it didn't even exist 70 years ago. So I could see something like that happening in the space as well. Or maybe it's something that sort of, you know, is a layer that goes across many different disciplines. So it's not a new department per se, but in computer science and economics and law,

there are sort of like subspecialties where you can kind of like, you know, learn this field. And we see new disciplines like emerging all the time. Bioinformatics is relatively new. People are starting to create a field, a discipline of stuff. around AI and ethics. So I think it's really exciting and I think it's part of our job to help shepherd this in to help create this because you really need in order to create a new discipline you need really rigorous well thought out foundations like you need really

good models and I think at MIT we're in a unique place to be able to create this so many disciplines were born at MIT like the internet was partially born at MIT so I think we're in a really good place we have have a history of sort of shepherding these new fields forward. And so that's something that we really want to do. So currently, what is the status at MIT when you look at the, you know, the normal university life of, you know, courses being taught in different departments? How is blockchain infiltrating that? And where is it taught in which ways? Yeah. So I think we at the DCI taught the first blockchain technology class,

MIT in 2015 in the fall of 2015. And it was really popular and a lot of really great things came out of that. And then we taught that class through the Media Lab. And it was kind of more application focused. We had a lot of guest speakers, a lot of people come in and talk about different things. But 2015 was really, it was a very different time. You know, it was like the Ethereum network had just launched. And so, you know, things were still developing. We taught a class in 2016, a graduate computer science class. I co-taught it with Sylvia McCauley. And that was really great.

So that was kind of a different intersection of students. It was sort of computer science graduate students who were learning about the space for the first time. And we're really like learning the fundamentals. And then this past spring, Tad Stridja and I taught sort of a more like design and engineering focused class around cryptocurrencies and blockchain technology. And that class was really about like what are the fundamentals. you know, like signatures and hashing and proof of work and transaction formats and forks and, you know, really about like how do you put these pieces together and why are they designed the way that they are. And that was also really fun. But they've been like three really different classes because I think we're still figuring out what the right way is to teach this topic.

One thing that has been true of all our classes is that on the first day they are completely oversubscribed. They are so popular. We've also had a couple classes through Sloan, the business school, also incredibly popular. There's just like this hunger from students to learn more about the space, which is really exciting. So the DCI has several different areas of research that focuses on. And if you go to the website, some of the ones that are featured there are variable. And there's some really good explanations on each of those research topics. But before we go into detail on some of those topics, tell us, you know, when looking at research topics in the blockchain space, it seems like there's just an ocean of research topics.

There's just so many things that one can look at, you know, from the technical side, the economics, the sort of social change. I mean, like, it just runs the gamut. When looking at different topics to research, what are some of the things that goes into decision making about which ones? you choose and which ones you focus on. That's a really great question, and that's really hard. And part of the challenge is that this space moves so fast that you think you have a handle on things. You think you're like, okay, this is how things are laid out, this is what we're going to do.

And then something new happens and you're just like, mind is blown. So I think what we've landed on is really trying to think about, okay, we're not like a team of 30 software engineers who are going to turn. out a product, right? We're not in it to make money either. We're an academic group, but we want to do what is necessary to move the space forward, and we want to do the things that other people are not necessarily going to do. And so there's a few different ways that we choose what to work on. First of all, we're a group of research scientists. We kind of get to pick what we want to work on, which is really exciting. So, you know, it's not like, it's not

as top down as you might think. I believe that people do the best work when they're really motivated and passionate about the work that they're doing. So people should be able to decide from themselves what to work on. But aside from that, I think that our values drive a lot of our work. So we have a big focus on technology. And like I said earlier, I think that there are a few really big pieces in the space that need to be figured out

before we can get it to a billion people. A major, major, major part of that is scalability. How do we build functionality in a way that is going to scale beyond, you know, a few million people, but into the billions. Another really challenging area is around privacy. So, you know, it's just not really feasible to have a financial system in which every transaction is out there in the public. But at the same time, you know, we can't just hide everything.

It doesn't work for society. Like, you have to be able to measure things about the financial system as a whole. You have to be able to understand what's going on. And so how do we like address this tension between this need for privacy with this need for like some sort of transparency? That's something else that we really spend a lot of time on. And then a third thing I think is that, you know, this field could really go in a couple different directions.

So one sort of thing I like to bring up a lot is BitTorrent. So BitTorrent at one point in time was like a huge majority of the traffic on the Internet. peer-to-peer file sharing. And now I think it's around 3%. So, you know, BitTorrent really showed people that they could get music and movies over the internet. And at the time, that wasn't something that people just took for granted. And like none of the incumbent media companies were offering that. But because of BitTorrent, because BitTorrent existed, the companies realized that this was something that people really wanted. And they realized that they needed to step up and create it or they were going to go out of business. And so now

we have things like Netflix and HBO Go and Amazon Prime. I don't think we would have those things if it weren't for BitTorrent. So one way this technology might go, I'm not saying it's the way I want it to go, but one way this technology might go is it's like it catalyzes the incumbents to change and get better. And I mean, I think no matter what happens, it's going to catalyze the incumbents to change and get better, but that doesn't mean that the incumbents will still be around. but that's sort of one way that this could go. And if it goes that way, I think part of that is motivating central banks

and motivating sort of the people who control the currency in the world to move closer to cryptocurrency in the way that our Fiat currencies exist. So another big project that we're working on is around digital Fiat currency. So what would it look like? How would we want that to look? we were to take sort of the best parts of cryptocurrency and move them over to design a digital dollar, a digital euro, or a digital pound, you know, what would that even, what should that be? And I think we're in a good place to work on that because at MIT, we can work with central banks.

Like, we can actually talk to them directly and we can guide them. And so we're working with a group of six central banks to kind of answer some of the really thorny questions that exist around, that like sort of the issues that exist around this question of like how would you design a digital fiat currency okay well let's maybe stay on this topic for for a little while and we can address other other research initiatives at the DCI later in the episode so let's talk about this notion of a digital fiat currency this is a topic that we've discussed on the show quite a few times and so what is the work that the DCI is doing, and you mentioned also that you're working with central banks, or at least discussing with central banks, can you tell us about how this topic is being received,

how digital currencies in this sort of form that they take in terms of like cryptocurrency and blockchain, like how is that topic being received at central banks? Yeah, so I was just in Geneva a couple, a month or so ago, at this event called the Geneva Conference, which was a lot of European Central Bank. bankers. And it's really interesting. They're very skeptical that cryptocurrencies like Bitcoin could replace fiat currency. I think rightly so. They raise a lot of the challenges around scalability and privacy and energy consumption and people losing private keys, et cetera, like all the usual questions. But at the same time, they're a bunch of nerds and they're

fascinated by this technology too. I think they're really interested and they're really excited about it actually. Yeah, it was really interesting for me. This was the first time I'd spent a lot of time around economists and especially central bankers. Central bankers are quite conservative. Like, they're very focused on maintaining financial stability. That's very, very important to them. They see that as their job. And so I think when you realize they're coming at it from that lens, you understand why they're like not jumping up and down for joy about about cryptocurrencies. It's it's pretty disruptive, but at the same time, they're interested. I don't think that, like, we're working with a pretty large central bank.

So we're working with the Federal Reserve, the ECB, Monetary Authority of Singapore, the Bank of Japan, Bank of Canada. And this is all on our website, so you can go look and see. And, you know, I don't think that any one of these institutions is going to be the first to really issue digital fiat currency. but I think that probably a smaller central bank will really, really soon. Like it's going to happen. We're going to start experimenting with it.

There's still so many, like if you realize that the focus of these institutions is on financial stability, though, like it's really hard to figure out how to do that in a way that's safe. That's not going to totally destroy your economy or cause a run on the banks or, you know, just have like these really unintended side effects. And I think a major challenge standing in the way is, around user experience and UI and sort of like what's the interface with the average citizen when you're talking about digital fiat currency.

Like right now, people can't even handle usernames and passwords. Like people are getting fished and hacked constantly. Like public-private key pairs is like a whole other paradigm that people don't really understand. So we're still like really far away from being able to just give everybody a digital wallet and have them hold their money on their phone or in a hardware wallet. You know, it's not, we're not ready for that yet. There's still a lot of stuff to figure out on the way. Yeah, I agree.

Like, as an example, we just had Eric Lachshavec of Ledger on last week. And although they're doing fantastic work on the user experience side and also on the security side, we're still a lot years away from being able to give, you know, just your average person a hardware wall and say, hey, like, these are your keys and, you know, you're going to have to manage your own currency. You know, but one could imagine some sort of an intermediary solution where a central bank could be some sort of custodian or at least partly custodian of the keys.

And also perhaps some intermediary companies like payment service providers also providing security there, but where ultimately the sovereignty of your keys lies in your ability to sign like a multi-statement of transaction or something like that. Yeah, I think we're getting closer. Like, you know, we're starting to experiment and try to figure these things out. Again, you have to remember central banks are coming from this position of, like, extreme conservatism, right?

Like, they just want to make sure the economy doesn't explode. The person leading this effort here at the DCI is a former central banker, actually. His name is Rob Ali, and he was the former manager of digital currencies at the Bank of England. So he really understands kind of both sides, and he has some really interesting ideas. is about a new type of structure because central banks probably aren't going to like they are not in the business of servicing customers directly that's just not what they do that's not what they're good at they would mostly rather that the private sector kind of handle that side of things and that's kind of why we have the banking industry that we have today banks are the ones who interface with the customers

but can we create a different structure around that and what does that structure look like that that's sort of the question. Is there any thought given to, and I know this is probably quite unlikely, but is there any thought given to sort of the scenario where central banks begin to, in some places, be disrupted by initiatives like cryptocurrency initiatives and decentralized currency initiatives? I mean, I think that's why central banks are paying attention, because this is something happening in the private sector that's a new form of money. It really is a new form of money. And it is possible that a lot of people really start using it, right? So I think that there is a

potential for that. But I think that's a good thing. I think that puts pressure on the central bankers and sort of that ecosystem to kind of step up and start thinking about what could this look like. You know, I think I do want to mention one thing, which is I think, I don't know if we've been having the most productive conversation across the two worlds, the cryptocurrency world and the central banking world. I think, you know, there's a lot of talk about how, like, fiat currency is dead, and, like, cryptocurrencies are going to replace it, and central bankers are just, like, what are you talking about? You can do seven transactions per second. This is, like, this is not going to fly. Why are you telling me this? And, you know, I kind of, I get both sides. Like, on one

side, well, this is not forever. We are, like, cryptocurrencies are moving forward. We're going to address the scalability issues. We're going to address a lot of these issues. But at the same time, via currency has a place. Like, there's a reason that countries have their own currency. There's a reason nation states exist and, you know, they need to be able to control their own economy. So you can't just say, like, one or the other. We're going to live in a world where both exist. And the question is, how are they going to both exist? And also, like, are they going to move closer together? I think those are really interesting questions. Yeah. So for people who are interested in this, we did an episode, this was

several years ago, maybe three years ago, I don't know, with David Andolfofer, I don't know if you know him, but he's at the Fed. And he wrote this, he's a researcher there and he wrote this article or these articles on this idea of a Fed coin. And it was interesting because we did this episode and actually talking with him, we realized just how disruptive the idea of a Fed coin is too. because at least it seemed like it's actually incompatible with like fractional reserve banking. You know, if it's a bearer asset, even whether it's issued by a central government or not, then you can't really have fractional reserve banking. So that was very interesting.

So it's hard for me actually to reconcile how you could have fractional reserve banking and even a fiat digital currency at the same time. Is that also, I guess, one of those thorny questions or? Yeah, I would say so. I think that's the question that I've heard the most talking to central bankers is what about, you know, if digital fiat currency coexist with the current system of fractional reserve banking, then what does that mean in times of crisis? Is there a flight? Is it, you know, are you going to exacerbate the potential of a run on the banks? I think that's a big question

that a lot of people would like to think about and understand and have answers to. I don't know the answer. I don't know how both systems can coexist effectively, but what I do know is that with the advent of more and more stable coins, like this is, you know, I think something's going to have to happen. Like, people are pumping stable coins out into the market at a pretty fast clip because there's a real desire for stable coins. And by stable coins, I mean, like, coins that are kind of pegged, try to be pegged to the dollar.

You know, whether or not those are good designs is another question. but I think that part of the reason that stable coins even exist is because of the lack of a digital fiat currency with cryptocurrency like properties. So in some ways, the private sector is stepping up already and just saying, hey, we're going to figure out how to do this, whether it's with reserves or an algorithm. And so I think that central bankers and governments are going to have to deal with this. Cool. Yeah, absolutely. I think that would be a fascinating area of a key. in the next years. This episode of Episunner is brought to you by DabCon Berlin. Dapcon is a non-profit, two-day developer conference

that brings together the Ethereum community to learn, build, and think big around the topic of decentralized applications, tooling and scaling solutions for Ethereum. The conference organized bygnosis is taking place on July 19th, 20th in Berlin. So put that in your calendar now, July 19th and 20th in Berlin.

There will be panel discussions, talks, workshops, Find topics like governance mechanisms, usability, or the next generation of decentralized exchanges. So this is a conference organized by developers and for developers, and that's good news for you because it means there will be all useful content and none of the fluff that you see at other conferences. And they have a fantastic roster of speakers. I counted, and there's actually 11 former episode of guests among the speakers and one host. And those include people like hypernet Eric founder, Lloyd Liu.

the founder of Gollum, Julian Zabwisdowski, the co-founder of Status, Jared Hope, or of the Web 3 Foundation, Peter Saban, and they even have Ethereum co-founder and Consensus CEO Joe Lubin. So don't miss out, get your ticket, you'll be joining a fantastic crowd and be part of people who really can take this technology to the next level. So go to dabcon.io, so that's d-A-P-P-C-O-I-O. get your ticket now and Berlin's calling and we hope to see you there in Berlin in July. So you mentioned scalability before, so we'd love to come to that topic.

And one interesting thing that struck me kind of looking at your background is that your PhD thesis, the title was like parallel execution for conflicting transactions. Now this sounds like a perfect description of like, you know, the problem of sharding, right, where you have like you want to parallelly execute these transactions and, well, they may conflict, maybe they're double spends or so I'm curious like how how do you think that research like carries over to the blockchain space yeah that's a really good question I mean this is why I got in the space at the beginning was because of the scalability issue and I think it's really fascinating um so I worked on sharding in distributed databases during my PhD and I worked at Google before my PhD and so I kind of looked you know there was a lot

of sharding and partitioning of databases at Google as well. It's not a trivial undertaking. Like even when you're dealing with a system where it's under one company's control, so they can set everything. They can set the partition key. They can set the number of nodes. They can like redo everything whenever they feel like it. You know, they control the traffic. Even when it's entirely under one company's control is really difficult. And it's very workload dependent. and sometimes the performance ends up being worse than if you just had one really fast machine. I think that was what was sort of most interesting

and at the same time frustrating to me was that if your workload could fit on one machine, it was almost always better to just run out on one machine than to partition and to shard and try to get better performance that way. Now that said, we're dealing with a whole different ecosystem here. And I wrote this post about layer two scalability and in the post, I was pretty pessimistic about sharding

for the reasons that I just said. But that doesn't mean, I think that it will be helpful. Like, I think it's just going to be hard. It's going to be a lot harder than people think. It's not like, oh, we're going to roll out sharding next year. I don't think that that's going to happen. Or I think if that does happen, it's going to turn out to be broken or not performant in really subtle ways.

It's going to take a long time to figure out. So it's not that I think it's impossible. I just think it's going to be a little. a lot harder than people are making it out to be. And I don't think it's like the magic, like the silver bullet for scalability. I think that in order to reach a billion people, we really have to think about what needs to be on-chain and what needs to be off-chain. But the really exciting thing to me is that we can do things off-chain with similar security guarantees to what we can do on-chain. Like, that's amazing. That's like magic to me, right?

Like you don't have to run everything on-chain. That's really cool. and that means that we can shift a lot of the work that was being done on-chain to off-chain. And that's through layer two protocols like the Lightning Network or Raiden or even things like Trubit. So we had a conference here in Boston called the Layer 2 Summit that we put on with Fidelity where we invited like all the people that we could think of and I know we missed a bunch which is really unfortunate and I wish that we hadn't but we're still learning about the space. We invited all the people who were working on layer two type projects to come and explain what they're doing.

And then we had a hackathon where people could build using their APIs, which was really fun. And it was really great because it was like, okay, where's your code? Show us your layer two solution. Show us how to use it. And we're going to have people, students and all the other people who are participating in the hackathon actually build stuff. And that was really eye-opening for me to see where all of the different projects were in terms of maturity. I'm still really excited about layer two. I think there's quite a bit to do.

The incentives are what worry me the most right now. Like how do you incentivize people to work on layer two to build, to create projects, to create companies without issuing a token? Because I don't think you need a token. I don't think that's the point of layer two. So that's a pretty big open question for me right now, is how do we sort of have? And I also just felt like there wasn't enough attention on this space.

Like people were always talking about sharding, and they were always talking about proof of state. and as a solution to scalability. And I don't think that they are by themselves a solution to scalability at all. So I really just wanted to help shed more light on the space and to get more people thinking about it and working on it. And this kind of goes back to actually sort of a core thesis

of the DCI, which is that the best way for this space to develop is in layers. So if you look at the internet, for example, the internet is composed of these layers of open protocols. You've got Ethernet, a base layer. for how to connect machines together. You've got TCPIP for routing messages around a network, HTTP the web on top of that.

And each of these protocols developed independently. I think that's really important to note. They developed independently, but the people between, like, with the different layers, were always talking to each other. And at the same time that these layers were kind of evolving, you also had these, like, walled gardens and these, like, full-stack things, like Minitel,

or, you know, AOL is another example of this. And the full stacks lost out to the layers. Now, the internet was a whole different time period. It didn't have a ton of VC funding when these layers were developing. It was very, very different. So it's unclear if the same thing's going to happen right now. But I do think that we need to take more of this layered approach. So could you maybe just come back and talking about sharding,

explain your skepticism in a bit more detail and why you feel, broadly that these layered systems are a better approach for scaling. Yeah. So there's a couple of things when you're issuing queries in a distributed system that can kind of end up tricking you up. So let's think about, let's like break down the cost of issuing a query. And in this case, when I say query, I mean like submitting a transaction and have it processed, right?

So if you only have to talk to one machine to submit a query, then that's great. You have the overhead of communicating with that machine. You have the time it takes that machine to sort of process what it's doing, and you have the time it takes to return to you, right? And in a system like Bitcoin, every machine is processing every query, but they're kind of all doing so independently. Like they don't depend on each other, but they all have to process every query,

and they all kind of need to catch up and get to the same spot. Now, in a sharded system, if a query can be, handled by one shard, that's great. That's awesome. Then if each shard can sort of independently handle queries and you get this nice parallel speed up because the shards are handling queries in parallel. But there are some queries that cannot be handled by one shard because they sort of touch data that lives on multiple shards. This means your workload is not perfectly partitionable. And most, a lot of workloads are not perfectly partitionable, especially when you think about workloads that are kind of more like

graphs, right? Like social networks. We're like, I'm friends with you, but you're friends with Brian and you guys are on different shards, right? So it's like we can never find a partitioning which makes all of our queries sort of work together because we have friends everywhere and it's just all too complicated and connected. So like when you apply this idea to things like money, money is like pretty, is not a perfectly partitionable workload. It's very, very, interdependent. Like there's a lot of relationships between the money. And so what ends up happening is that you have to sort of like stop both of the shards in order to process a query that touches both shards. And that means that you're slowing things down. You're slowing things down a lot.

And that overhead with which you're slowing things down can be so high that it's actually sort of like worse than if you just did everything together sort of like one at a time. It's not always intuitive. And like I'm trying to map like a distributed system onto a cryptocurrency, which is a little bit hard to do. But it's that it's that basic idea that there's going to be cross-shard coordination and that cross-shard coordination is really expensive. Cool. That's very interesting. I mean, I presumably probably some listeners have heard that Ethereum has done some big replanning about their roadmap and now they wanted to Casper, like the full Casper as well as sharding and at the same time and BLS signatures. So threshold relay

signatures. What are your thoughts on that? And in particular, the sharding as they want to do it in Ethereum. So I've only looked a little bit at Ethereum sharding design. I haven't sort of, I, you know, I looked at a small amount. Like, first of all, let me say I'm really excited about all of the research the Ethereum Foundation is doing. I think it's great that they are pushing forward so fast in all these ideas that they are putting effort into experimenting and into building into trying all these different things. And I think it's really cool because we can learn from it. You know, I wouldn't believe a promise that this is going to work necessarily in the next year or two. Like I don't think we can rely on that. I think it's great

to try all of these different things. But from what I've seen, like building a really robust distributed system is a challenging task. It takes multiple years. And that's a system that doesn't even have the sort of malicious, everybody's trying to attack each other and steal each other, sort of facet to it. So I just don't see how this could really happen and work and be robust in the time period of like a year, for example.

Can you build something? Yeah, totally. You can absolutely build something, and you can try it out. You can see how it works. And it might even work in production for a while. But I think eventually you're going to have, there are going to be bugs.

There are going to be problems. Like even distributed systems protocols that have existed for years and were like peer reviewed, end up having subtle flaws that people find like many years later, it's really, really hard to get these things right. And it doesn't, you know, I think that's a big challenge in the space around security, and that's something that we've been thinking about a lot and are trying to figure out how to handle. Just because your system hasn't broken yet doesn't mean

that it's secure. And just because no one's bothered attacking your system yet doesn't mean it's secure. And so what you have to realize is that there's a lot of code out there right now. There's a lot of cryptocurrencies out there right now. And there's very, there aren't that many people who have the expertise to actually effectively evaluate these systems. And also, evaluating these systems is really time-consuming and really hard. And so, you know, it's not necessarily in someone's interest to do it for you. So what we're seeing is that there's a lot of code out there, there's a lot of systems out there that are very, very broken and nobody knows it. It's really fascinating to me that there are a lot of sort of these 51% attacks happening right now.

Like, we always kind of knew, like, hey, if you don't have enough hash power, then it's possible that someone could just kind of invest a bit of money and 51% attack you and double spend. But nobody bothered doing it until recently. And now we're seeing it happen. It's like, oh, yeah, this is a problem. Hmm, we should figure out how to fix this. And it's like, we always knew it was going to be a problem. It just no one had bothered doing it.

And there's just going to be more and more and more of this as things become more valuable. Cool. No, that's super interesting. Now, I wanted to zoom in on the layer two stuff a little bit more. So you kind of hinted at that in your hackathon, it seems like you had the impression that, oh, this is, you know, there's so much work to do and it's still going to take a fairly long time. So what makes you so much more optimistic? And what is your kind of assessment of the current state of, you know, let's say something like Lightning Network?

The reason I'm optimistic about Lightning Network is because people are actually building applications on it. So one of the people we had, you should have him on your show, by the way, is Alex. Bosworth, who's building a bunch of stuff on top of the Lightning Network. And his talk was super interesting because he just had a lot of insights that were based on actual experience, like running a website, taking lightning payments. And so that was really cool. And, you know, he had done it. He'd done it.

And that's what it's about. It's like, are you running an application that is using this stuff? are you servicing real users and do you have real traffic? And it's not like huge amounts of traffic, but there were enough projects like Satoshi's Place and yalls and all sorts of things that are actually using the software that are like putting it through its paces, that are finding bugs that are realizing, you know,

hey, it's kind of annoying to have to have my keys online in order to like, you know, sign these transactions. Like what can we do about this? Like people are actually building and actually finding out what's going on. So that's, that was what made me hopeful. There are a lot of layer two projects, like Lightning's been around for a long time, you know, and it's taken a few years for it to get to this point. There are some projects that are newer that are, that are still, I think, building and still trying to get to that point. But it's all about real users. I think it's all

about people really using your system. We're very keen to see. And of course, we did Lightning. Yeah, I mean, we did a podcast about Lightning episode with Tudge and Joseph, proven when the white paper came out. And I remember we did the podcast with Greg Maxwell and Adam back, like in 2000. Maybe it was 2015 or something like that. And they had the opinion back then. You know, they said it was going to take like four or five months and lightning will be live. So, although, of course, we also had, I think, like, Vitalik on, you know, two and a half years.

And he was like six months and like Casper and proof of steak. So it seems like. estimating timelines in this industry is a challenge. Well, there's one other thing we wanted to speak about before when it comes to research agendas, which is this ZK ledger thing. Can you tell us a little bit about what ZK ledger is and what problem it's trying to solve? Yeah, totally. So I mentioned that I think one of the fundamental challenges facing the space is sort of this tension

between privacy and having an effective working system. So when I first sort of got into the space, I was hearing about projects like Zcash and Snarks and LibSnark. And one of the research scientists at the DCI is Madariz Fierza, who's one of the authors of Zero Cash, the paper, and Lib Snark. So knows a lot about Zero Knowledge Proofs. And it was really interesting talking to him and learning more about the assumptions baked into Snarks, what zero knowledge proofs could do effectively, what they can't do effectively. I think Zcash is super cool. I just went to ZCon Zero.

They have amazing technology. They have really high-quality cryptographers working on this stuff. But the problem that seemed a little bit open to me was, okay, you've got things like Bitcoin in which the transactions are totally public, and then you have things like Zcash in which the shielded transactions of which there aren't that many right now, but, you know, assuming they were used, shoulder transactions are totally private. And they really don't give a regulator or an outside observer or anyone, any insight into the system. And it seems like insight into the financial system is actually really important.

And so we wanted to see, we wanted to think about, could we find a point in the design space that provided privacy, but at the same time also gave the ability for a third party to sort of do provably correct analytics over the system to measure things about the system. And so that's why we designed ZK Ledger. It's a research project. So we had a paper in NSDI in April, and we presented it there. And it's more of a design on top of a distributed ledger than an actual distributed ledger. So we kind of like abstract out the ledger part. But the idea behind the design is you have a set of participants. They're all working together to, they're all creating transactions, transferring assets back and forth. And these transactions that, you know, a participant might make a transaction

transferring, let's say, like, a hundred euros to someone else. And the transaction's totally private. You can't see who's involved in the transaction, but it's still publicly verifiable. So everyone in the system can look at the transaction and verify that all of the proofs match up, even though they can't tell how much the transaction is for or who's involved. Like they can tell that no assets were created out of nowhere. They can tell that whoever's transferring the assets had the right to do so and that sort of everything balances out. And then in addition to that, a third party could kind of audit the participants of the ledger

and run analytics over the ledger. So they can say like how much of this asset do you have on your balance sheet? Or what was the average price that this asset traded? at over the last month. Or, you know, what is the overall sort of distribution of this asset in this network? So they can run these provably correct queries. And so we design the sort of like auditing system on top of the zero knowledge proofs in the ledger to be able to do this.

And I think part of the reason that I'm interested in the space at all is because we recently hired Gary Gensler at MIT, and he's the former chairman of the CFTC, and he's working with us pretty closely at the Digital Currency Initiative. I think we really need to have a lot of conversations with regulators. I don't think regulators know that zero knowledge proofs exist, and that they could be like a really effective tool for preserving privacy and at the same time trying to achieve their public policy goals. Like public policy goals are actually pretty reasonable. It's like we want these markets to be to have integrity, right? We want to make sure that participants are like doing the right thing. We want to protect consumers. Like these are reasonable

goals, public policy goals. And I don't think anyone would disagree with them. It's just, you know, it's, it's how that regulation is enacted that can kind of be problematic. And so we really wanted to show that there's this technology out there that can help you in your quest to achieve these public policy goals called zero knowledge proofs. And here's how they work. Cool. That's super fascinating. I'm just maybe one question on like how this actually works. So you said, okay, let's say a regulator could make these queries and learn. And so you gave the example, okay, for example, like how much of this asset you have in your balance sheet. So that doesn't seem like how is that preserving privacy or like what, I mean, what kind of is it,

does that like, you know, it's predefined what type of queries can be made up front and then it is in those areas that maybe some privacy is given up? Can you expand? Yeah, the idea is that you can kind of get these aggregate answers about the system without revealing individual transactions. So you never have to open up the individual transactions. So like, you know, I could say how many assets I have on my balance sheet without the regulator knowing that I got them from you or from Sebastian

or like, you know, who they went through or what happened or who I've been, who my trading partners were, basically. So the idea is that you can answer aggregate queries. And the answering is voluntary. It's interactive. So it's not like the auditor can just, like, look at the ledger and figure out all sorts of stuff on its own. It has to be this interactive process.

And so there's always the chance that I just might not answer the auditor, in which case they couldn't learn anything. But the idea here is you're kind of existing in the system where you want to show you're complying with regulations. Also, it's kind of up to the participants in the auditor to sort of define the acceptable set of queries. So our system sort of only supports certain types of queries, linear functions over the transactions. You know, we can't do arbitrary things. But obviously you shouldn't, like, answer the question, how much of this asset you have on your balance sheet, like, every five seconds?

Because if you do that, that's going to reveal, that's going to end up revealing the content of the transactions. but that can be something that's kind of determined between the auditor and the participants. So where do the interest for this project come from? Like where do you think that there are some practical applications where this could be applied, you know, like maybe today or in a few years? Yeah, that's a great question. So we were kind of noticing that a lot of companies were coming to us, and they were really interested in using blockchain technology for various sorts of things,

you know, supply chains, all sorts of weird asset transfer sort of use cases, but they were not doing it because they didn't want all of the transactions to be public. And then you have systems like Cora where the design for how to keep transactions private is use trusted notaries or don't put them on the ledger. So that means that they're not publicly verifiable. So you're kind of like losing the whole benefit of blockchain technology in the first place. So we kind of saw this tension where people wanted to think about using these ledgers, but the privacy thing was just like a no-go. They were like, no, we cannot show what we're doing to our competitors.

Like if you think about, for example, some people think that it's a reasonable use case to use a blockchain for supply chains, but the members of that supply chain consortium are probably competitors and don't want to show all their data. So that's kind of where this thinking came from. In terms of use cases, we're still sort of figuring it out. It's a research project at the moment. We have a paper coming out soon about how to potentially apply this to the asset-backed securities market. So that's something that we looked into a little bit.

And we're hoping when we put that out, people will sort of see that and sort of come to us with more use cases. And so when speaking to these companies that we're interested in using blockchain for these sort of like supply chain use cases or, traceability use cases. What were some of the other sort of negative connotations that they may have had about blockchains that these tools actually provide, that tools like ZK. Ledger provides? I think like the top two things are probably privacy and scalability. But I want to be frank here. I think like the vast majority of the time, blockchains don't make sense for these use cases. So, you know, I think that they rightly have a lot of issues with using blockchain technology because they don't need blockchain technology. They just need to run a database. And I kind of

want to distinguish between blockchain technology and distributed databases. Like distributed databases are a thing that have existed. They are, you know, and I think a lot of the times when you're talking about permission blockchain use cases, you're really talking about a distributed database. So, you know, I think that's part of the challenge. It's not just like, oh, I can't use the blockchain because of the privacy. It's like, yeah, you probably shouldn't be using a blockchain anyway. There's one topic that we want to bring up here, and that is a post that you wrote in September of last year, so not quite a year ago, about some of the vulnerabilities, cryptographic vulnerabilities in IOTA that you discovered. Can you tell us why you decide to look

into Iota? Yeah. So this started like early last year. It was totally a side project. So I want to make it clear we don't do this full time. This was kind of a side thing. And what happened was one of the people in the DCI was coming to us and was talking about this awesome new project called Iota and how it solved all of the problems with blockchains. My colleague Tadj, got really grumpy about this and was like, there's no way that it does all of this. And I was like, Tadj, you say this about everything. That might be true, but you have to start proving it. And so Tadge was like, fine. And so Tadj and went and looked at the code for Iota.

And one of the things he noticed almost immediately was that they were using their own hash function and that it looked like pretty weird. And he didn't think that there was any, way that this hash function could be secure. So Tadge noticed it. And then he happened to be having lunch with Ethan Heilman. Ethan is a PhD student at BU who was starting a company at the time. And Ethan has done a lot of work on security and hash functions and things like that. So Ethan saw this and got really intrigued and was curious if he could break the hash function using differential

Cryptanalysis. So Ethan, I think like the story is that he actually missed going to someone's going away party because he stayed at home to like work on breaking this hash function. He was so interested in it. So Ethan kind of figured out a technique for getting the time down to find collisions pretty low. And then we, the three of us started working together on getting that down even further. And later on, we started talking to Madar's, who's a really good cryptographer, to see if he could find sort of a parallel technique for trying to break it, but he ended up not doing that. And so then the three of us were kind of working on it,

and we were like, OK, I wonder if you could actually use this to produce. In Iota, they're called bundles, not transactions, but to actually produce bundles that collide. And so we worked on that for a bit, and we were able to produce bundles that, we were able to produce two bundles, that spent money, like different amounts of money to different addresses, but hashed to the same thing and thus had the same signature.

So that means you could use a signature for one bundle on another bundle. So that's what we did. That's what we were trying to show that we did. And we actually did this in parallel with doing a vulnerability disclosure to the IOTO folks. So Ethan emailed them and told them about what he found. and they were skeptical that it seemed like they were skeptical that we could actually use the hash function collision to produce bundles that were this way. They pointed out a lot of checks in the code.

Like, look, the timestamp has to look like this and the value has to look like that. And, like, you know, it has to. And yeah, those are constraints, But those constraints weren't enough to make it unreasonable to produce the colliding bundles. The things you have to realize with hash functions and collisions and things like that is, yes, all hash functions have collisions. But it's supposed to take you a ridiculously long time to find them. And if you can find them faster than a ridiculously long time, that's really bad.

That's really, really, really bad. and usually if someone can find a way to get that time down even a little bit, it means that with more work, you're going to be able to get that time down a lot more. Like it's just a matter of time. So we were able to get the time down to a point where we can produce colliding bundles on my machine like in less than a minute. So that's bad. Do you have any idea why they would choose to design their own hashing function

and not just use the ones that everybody uses and they've been tried and tested for decades? No. They've said a lot of different things about this. I don't know. I'm not sure why. I don't think it's a good idea. So what was the reaction like? The reaction was surprising.

And I think that part of the problem, again, was that we were speaking very different languages. So there's a community that sort of does vulnerability disclosures and understands the process for that, right? Like, you contact the team, you give them time to fit. and then once you fix it, you're allowed to share the story about what you did. Like, that's interesting to people. People want to hear the story and how it worked and what it was like. And it's also, like, good for the team to share that. So we were kind of operating under that paradigm, and I think that the IOTA community

hadn't had a lot of experience with that paradigm. And so, you know, they were confused about why we published the vulnerability disclosure after it had been fixed. Well, it's like, we're not going to publish it before it's been fixed because then people could use it to attack the system. And we don't want that to happen. So obviously, you publish it after it's been fixed. No, we're not saying we found something new. We're explaining what we did find that was new when we found it.

So, you know, the reaction was surprising. And I think it probably had a lot to do with a difference in sort of backgrounds of where we were coming from. But, you know, honestly, yeah, that it was. it was a, it was a very strange experience. As I just wanted to spend like a minute on, on the actual vulnerability, right? So let me, maybe please correct me if I'm, I get this correctly, right? So let's say in Bitcoin, right, I have, you have an address and there's a particular amount of, or, you know, a particular amount of bitcoins are kind of, you know, tied to a particular address.

So then if you can produce, uh, basically a transaction hash, or if anything, but that private key, right? If I can generate some other, use some other key and create a transaction hash that, like, matches that, you get the same hash, then I could basically, you know, create a transaction, move that money to myself, submit it, you know, and steal the money without actually having the private key. Is that sort of what the situation was and how one could have used it,

or was it in a different way? Yeah. Well, I think it was really different than Bitcoin. It's like a really different design. So it's hard to kind of map it onto Bitcoin directly. maybe like at a high level. So signatures in Iota are on the hash of the bundle. So you sign the hash of the bundle,

and that signature is what shows that, you know, you know the private key that can spend these funds. So if two bundles hashed to the same thing, then a signature on one will, apply to a signature on the other. It doesn't mean that you've cracked someone's private key, and it doesn't mean that you can generate brand new signatures on anything. It definitely does not mean that. It just means that if you have a signature for a bundle, so if you see, like, out there in the wild, a bundle that is signed, and you can produce a different bundle that hashes to the same

thing, you can just copy that signature over, and it'll be a valid signature. assuming, you know, that the bundle is valid as well. So that's kind of the attack. Does that make sense? Yeah, okay. So let's say you send a transaction and, you know, you kind of relayed in the network. I'm the first one. I'm the attacker.

I'm the first one to get that transaction. You know, maybe I don't relay it because you just connected to me. And then I use this attack to produce my own bundle, sealing the money and then sending it out with your signature into the network, that sort of thing. And I guess if you could get the time down to a second or less, then you could maybe be successful with that. Yeah, we didn't go all the way in trying to produce the attack. And just to be clear, you know, we never sent any messages on the IOTA network.

We never actually tried to do this attack. All we did was produce conflicting bundles. But I think the thing is you shouldn't even be able to do that. Like even just being able to do that is really bad. So whether or not it's sort of like feasible to actually steal someone's money with this is sort of a different question in my mind. I think that we just didn't even try to answer that question. I mean, I think that we could produce two different bundles that had the same hash. That doesn't necessarily mean that someone sitting on the network could like take any bundle and produce something.

else that would be accepted by the network but was bad. Like that's not the case at all. Like this, you know, this is something that only works in sort of really special circumstances. And it's unclear how often those circumstances happen. But the fact of the matter is you don't want a cryptocurrency that has this sort of problem to begin with at all, no matter how like unlikely or likely it is.

Like it's just really bad that this is even a thing, right? And I think that might have been something that got a little lost in the, in the communication. Yeah, I mean, I remember following that pretty closely, meeting your post and responses, and it was astonishing just that the anger and the vitriol and people like you guys are somehow, you know, have a big financial interest in IOTA competitors

and you want to see the IOT price go down. And there was all of these absurd theories. Yeah, that was sort of like laughable, actually, because, like, I don't have any vested financial... Like, I have no material interest in cryptocurrencies, and this is something that... And, like, Tadge is the same way. And to accuse us of conflict of interest

was really surprising to me because we really, like, don't have a financial interest in this stuff. Like, yes, we work on open-source software projects. So does everybody. And just because we work on open-source software projects doesn't mean that we have a conflict of interest. That kind of would COI out, like, everyone in the space.

we work really hard to try to stay financially neutral. And it was really, like, I was really sad that that was a story that was being carried around. Like, I never worked on Zcash or anything like that. And I don't understand, I really don't understand where that came from. I think, yeah, I was really surprised about that. So this is an interesting point. So you mentioned you're a financial neutral and touch as well. So I presume that means you guys don't hold cryptocurrencies.

We don't hold material amounts. We hold small amounts because I think it's important if you're in this field to at least have some skin in the game. But yeah, no, we're not like, you know, it's not the case that we're like all about a certain cryptocurrency or something like that. And so do you think that's something that is sort of a general approach or policy or stance of the DCI? and is this is something you, like, require from people on the staff or that they make disclosures, or how do you guys handle that in general? Yeah, that's a great question. So I think there are sort of like circles, concentric circles, for sort of some of the core part of the staff,

people like myself and Rob, who works with central banks, you know, that is true. There are people who are sort of in outer circles of the DCI who we work with for whom that might not be true. For example, Madarza was a co-founder of Zcash. So his research paper ended up getting turned into that. So it's not true for everyone in the DCI, but I think that we try to make that true for a core part of it. So that's definitely the case. And Joey Edo as well sold all of his cryptocurrencies holdings

and his shares in companies that invest in cryptocurrencies when he founded the DCI. So that was kind of baked in at the very beginning. So we talked about funding much earlier in the episode, but so how does this tie into funding in organizations that may want to fund the DCI? What is your approach there? Yeah, that's a great question. So we're starting to sort of figure out our funding philosophy. One thing that is true is that we can take donations in like the popular cryptocurrency,

sort of the ones that are traded on large exchanges, we will convert them to dollars immediately. We don't hold cryptocurrency at all. And, yeah, that's pretty much it. Obviously, MIT has certain rules on doing KYC and AML for taking donations. And at the moment, we're kind of aligning ourselves with MIT's rules for that.

But my question was more along the lines of, you know, projects that would potentially fund research that the DCI is conducting. Is there a philosophy or a policy around that? Is that even something that should be discussed? So one thing is we don't do sponsored research at all. So any project that funds us does so through the form of a gift. So there's no strings attached. There's no sort of tip for tat.

We don't sort of do research for people necessarily. if you want to fund the DCI, it's like a one-time, no-contract sort of a thing, which helps us stay neutral again. Another thing is we try to make sure that we're taking funding from a really wide variety of sources, so no single source has invested a lot of money in what the DCI is doing. When it comes to the actual projects that have given the DCI money, so far, it's mostly been large companies and individuals. like I said, except for the initial Bitcoin dev fund.

And we're sort of still determining the filtering mechanism for taking funding in the future. Great. So as we come to a close here, please tell us about the things that you're looking forward to in terms of the DCI and what do you think it will accomplish in the next five years. Yeah, so we're really excited about expanding the DCI. I think that we have a really important role to play. being a place that is really rigorous and that can help kind of set the foundation for this new field. Like this new field is really exciting.

Everybody has an important role to play. Large companies, startups, sort of new projects. But it's also the case that a lot of people in this field have like a financial stake in the game. They're selling their platform or they're selling their token. and even nonprofit institutions that are formed to govern a certain token are like usually hold a lot of that token. And that's just like not the way DCI operates. We are not about that. And I think that that's a really important role to play.

I think it's really exciting that this new area of study is developing. We don't even really have a shared vocabulary for it yet. Like, you know, I don't know how you define what a blockchain is, but I think there are like 50 different definitions out there. People are constantly saying different things. We just don't have like the terms even set yet. We don't have like the methodology. Like one thing Joey asked me the other day is like, what is a fact? You know, like what does it mean for something to be a fact in this space? Does it mean that like there's a white paper about it or does it mean that there's a blog post or does it mean that it's been like peer reviewed? Like what does that even mean? What does it take for something to be

accepted by the community? Like we're still figuring all of this out. And these are the kinds of questions that we're thinking about here and trying to push this space forward. Another big part of what we do, part of MIT's mission is service. So MIT actually has it like baked into its mission statement that it's about service. It's about serving the public good.

And we take that really seriously within the DCI too. And so a large part about what we think about is like how can we make sure that as we create the space, as we create the framework around it, that we're thinking about helping people and we're thinking about making the world a better place. We're thinking about things like access and inequality and ethics. Like what, you know, what is the set of ethics that we want to have in the space? We look at what's happening in AI right now with a lot of people talking about

bias and sort of like unintended consequences. Like how do we use that and apply it to the cryptocurrency space? So those are like some of the high level things that we're thinking about. We're also like pushing forward really hard with the layer two stuff and with work on privacy. and digital fiat currency. So more to come there. Cool. Well, Neha, thanks so much for joining us today. It was really fascinating to hear about DCI

and all of the progress that has been made on that front. And it's very impressive. I think the activities, and I totally agree that you guys are doing very important work. And hopefully we'll do much more of it. Thanks for having me, guys. This is really fun. And, of course, thanks so much for a listener,

for once again tuning in. So we're going to have in the show notes, you know, links to DC. a few articles that we mentioned and, you know, kind of other things that people can check out if they want to learn more about it. There's really quite a few interesting projects and research on there that, you know, I recommend people have a look at. And of course, we are going to be back next week with another episode. In the meantime, if you want to subscribe to the show, you can do so on iTunes or any kind of podcast application or you can watch the videos on YouTube. com slash episode of Bitcoin.

And if you want to support the show, you can do so by leaving our YouTube. in iTunes for you. That really helps new people find the show. So thanks so much and we look forward to being back next week.