The Pomp Podcast - #654 Building the Open Web w/ Illia Polosukhin

Episode Date: September 5, 2021

Illia Polosukhin is the co-founder of NEAR, a new application platform designed to bring blockchain to wide variety of mainstream applications.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Ilya Poloshukin is the co-founder of Near, a new application platform designed to bring blockchain to a wide variety of mainstream applications. We spent a lot of time in this episode talking about the open web and what needs to happen for us to get there. I really hope that you enjoy this podcast episode if you like these types of conversations i also highly suggest that you check out our new youtube live stream show every monday through friday 11 a.m eastern to 1 p.m eastern we have it called the best business show and we talk about all kinds

of current events it's me and my brothers it's a ton of fun and we promise you'll learn something just go on youtube search anthony pompliano make sure you subscribe to the channel and you'll get a notification every single time we go live at 11 a.m. on weekdays. All right, let's get in this episode with Ilya. I hope that you guys enjoy this conversation. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational

purposes only. All right, guys. Bang, bang. I've got Ilya here with me. Thank you so much for doing this. Thank you for inviting me. Absolutely. Let's jump right into your background. How did you get into all this stuff? Yeah. So my personal background is in machine learning. And so I was actually doing an AI startup as my co-founder. And the interesting thing is we were employing people around the world and had faced an interesting problem. which is how do we pay people who live in China, Ukraine, Russia and other places and started looking at blockchain really as like a solution to global payments problem. So, you know, Bitcoin, Ethereum looked at them,

but most of them, even those like beginning, mid-18 were too expensive for like small transactions that we wanted to send people around. And so being, you know, technical guys, we started looking really into kind of how everything else is evolving and got kind of really excited about the space, but also interested in solving a specific set of problems, which kind of got us into this. And these are the problems of, you know, scalability.

Like, how do we make payments really cheap? How do we make transactions really cheap? How do we make kind of smart contracts really cheap? But also, how do we make them really usable for people? And so as you started to think about that, Where did the idea for NEAR come from? How did you think about it being different than anything else that was out there? And then how did you get started?

Yes. So, I mean, it was kind of an interesting first. We just read a bunch about kind of what are the protocols, what are the folks doing in this space? So like we were thinking of this like crowdsourcing platform that we can build using blockchain and kind of iterating through all of the protocols that were out there,

kind of really digging in how they work and really breaking them that was kind of our our thing back then and so obviously you know EOS, IOTA were really hot back then so we kind of looked at them realized all the flaws that they had in kind of design and kind of were exploring what other things have been built in and in progress which a lot of the things by now launched but back then were just ideas and so um not finding really something that actually would provide answers to like how do we scale beyond you know something that's like maybe few millions people can use but to something where we can actually use this right and i mean i'm coming from google like my co-founder is coming from like he worked at microsoft he worked at uh

charter database company and we're just like hey you know it needs to scale horizontally it cannot be like just one big computer processing everything replicated right it needs to actually be scalable and so that's really was kind of the you know the moment where like hey you know we We know how these things should be built, at least in a centralized world. We are learning really quickly how decentralized technologies work, and we don't see anyone else doing the solution to this problem of what is the scalability looks beyond next year, but actually scalability that horizontally scales to how many people want to join. And ideally, everyone in the world will join this.

And when you think about these technical decisions that you made, what are some of the trade-offs that you had to make in order to kind of architect this way? Sure. I think the critical trade-off that we started with was around going away from some of those things that like people in, for example, Ethereum and Bitcoin right now, right? Use proof of work. And I know kind of Ethereum wants to transition, but like proof of work is fully permissionless from perspective of validating nodes and who can kind of participate in block production. And this adds a latency requirement to the whole network.

And so talking with developers and being developers ourselves, if you want to build something that truly like interacts with the end user, you want to reduce latency as much as possible, right? And we know this, you know, from like obviously social networks and all those companies who've built like Google and optimizing their search, you know, to give results in like 0.3 seconds. So by choosing proof of stake first and by actually almost like sub-selecting committees at the block production level, we're able to achieve pretty much the fastest kind of consensus worldwide that's possible, right? we are pretty much producing block every second and we have consensus like full finality every two seconds if everything functions normally and so this is pretty much the fastest you can have like a full consensus like it's faster than you know cost of the polka dot faster than some other chains who have like economic finality obviously and so this allows developers to kind of build application that looks snappy that are you know just work and you know when you pay with your

kind of near uh at the cashier right it just settles right away and so that was one of the biggest uh kind of trade-offs that obviously like doesn't fully align with some of the kind of you know everybody should be able to participate participating node now we have because of the scalability because of the sharding as network grows as we have more shards we actually have more participants in the network naturally because we need more machines to process work in parallel and so it's it's a scalability kind of that adds more nodes not the desire for decentralization so that's that's kind of one of the trade-offs and then the other major trade-off is on the developer side where the kind of in ethereum and many other protocols all the applications are so-called

synchronous which means when you are making a transaction if something goes wrong the whole transaction gets reverted this is why flash bots are possible flash loans are possible and many other things and we went away from this because you are not like just theoretically it's impossible to scale to multiple machines and maintain your synchronicity uh in kind of normal way and so we are actually running applications in parallel asynchronous the same way as you know in internet services are running in parallel and so this creates different trade-offs for developers when they're building applications when you think about the idea of an individual running a node do you worry at all about like centralization or do you think that um the trade-off is kind of

valuable right like how do you think about when it is valuable and when it is i think right now with proof of stake sadly the state is that most people like there's only a kind of smaller subset of people who are able to run nodes because you actually have a pretty high requirements on online on kind of latency on few other things um and so i think over time this will improve and kind of with with kind of more stability of internet more more stability on power etc but But like right now, there's very few people who are running like, you know, node in their kind of home for proof of stake, which is different from proof of work where your node goes offline. Nobody cares, right? It kind of doesn't affect the network.

And so I think right now, the kind of just because of this requirement, we're kind of in the state where there's, you know, a subset of nodes, like a subset of providers who are running nodes and everybody else delegates. So everybody else participates through the economic activity, but not through running physical hardware. And I think this economical activity is still very valuable. And it actually allows to distribute stake to actually figure out which nodes are more resilient because people are doing some due diligence on where they put the money. So I would say it sounds as if it's shifting more on kind of money allocation side versus hardware running side. At the same time, I think like over time we'll just see expansion of this and growth of this as well and so it will become more popular. So I think like right now we're just in kind of this like transition state where it is, you know, maybe a little bit centralized but you know it's still hundreds and hundreds of actual providers. and then there's, you know, tens of thousands to hundreds of thousands of people

who are economically kind of sub-selecting these things. And then over time, I think it will shift as things become robust. And are there certain type of applications or projects that you think are better suited for this protocol versus others? Like, are there certain things that you guys are targeting? For sure, yeah. So kind of the vision that we formed kind of after starting on this journey is so-called kind of open that and this is idea that um really spanning from the the goals that

i think the whole space has of giving control of you know money which what bitcoin started with of data and of governance of the applications that people using right and so kind of that's our mission i mean i i would just say that a lot of people in the space in general shares this mission but kind of how this realizes is through a whole set of applications and protocols that allow pretty much to move most of the existing interactions that people have on internet to this new way of doing it right where there's no central party that kind of owns your data there is no central parties that owns your money and as a user you have ownership and you have ability to kind of impact where the applications are evolving so to give you a concrete example

we have right now facebook facebook owns all of the data that users provide right like and literally in terms of service they just own it they can do whatever they want with it and that's not really beneficial for the user even if they don't care about this and like even worse is when somebody else wants to build some social kind of plugin or whatever Now they need to ask Facebook for the user's data once they use this plugin, right? And half of the time, Facebook doesn't want to give it because it's kind of their proprietary data now

and they want to use it themselves. And so we have this world where Facebook right now pretty much can monitor what are the new cool applications and pretty much implement them faster because they have all this data already and pretty much like almost straffle all the competition. There's a lot of like this privacy competition, transition all of these things kind of they they all work around this current state and so open

web is this idea that well actually let's transition the data let's transition the ownership to the user uh so we have let's say an open social protocol where all your kind of social data is and now you go to one application go to another it's maybe uh you know your work social network or your friend's social network or whatever a bar local bar app and they have access to this data And they can pretty much show you whatever the slice and functionality they want on top of it. And so that completely opens up data side. It gives ownership to the user. It creates a lot of kind of competition among the applications, how they want to surface it.

And it gives ownership to the user because now they can select which applications to use. And these applications should create mechanics around the economy, right, of how to attract users, how to give them this ownership and how to excite them kind of and and drive more uh more usage so like this is kind of the vision we have this is like and we have set of concrete steps like how to get there blockchain is step one there are number of steps you know that include like better identity and that end up in this set of like new applications it's pretty much powering the world Right. And and ideally, like, you know, have billions of users actually using them. So that that's kind of the division that we're aiming for.

And so like what Nier is built for is kind of this is like, you know, how do we get to billions of users using applications that are rooted at the end in this kind of root of trust blockchain is. And so when you think about that open web vision, is that something that needs innovation at the protocol layer? Is it something that needs kind of reimagination of what the applications are? Like, what do you think is the biggest hurdle going from where we are in this weird transition period between a web two, web three to that kind of full featured future vision? So I think like with blockchain, we're kind of already there, right? And so that's probably like already over the hurdle. the next step is creating this like common protocol like i call for example for social like we need a social kind of network protocol where the data of the users is kind of organized

in specific way that everybody knows how to access right so let's say we have that social protocol it can on its own have an economic incentive for people to join and to create more connections and to bring their friends and kind of create more activity there and so that will in turn kind of bring people who want to build products who want to use the data right uh obviously there probably would be like first like first application that kind of uh partners together with the developers of protocol but this is kind of the idea is like by building more open protocols which have on its own motivation for users to use it uh we then have more um more of these apps that are exciting to plug in into this existing usage right and and have on its own some business models as well

and so i think like innovation that needed now is on this like common protocol side like designing them in a way that's like extendable and and is you know future-proof in some ways or like at least upgradable and bringing people and bringing motivation right bringing this like ownership economy, pretty much like what right now in DeFi, you have all this liquidity mining, we need like, you know, social graph mining, and whatever, like tweet mining, etc. Like ideas where how do we align incentives of the kind of network growth with kind of the ownership of this platform. And then the third step will be like building this kind of combinatorial application to plug in multiple of those different protocols into new experiences.

And when you think about kind of how this plays out, it seems like this multi-chain world moves forward. Talk a little bit about the various protocols, how much of them will be super specific to a use case versus kind of much more general purpose, right? It almost feels like that's a debate that hasn't been settled yet. Yeah, I think there's been a lot of debate, and I think we'll see how it will play out. I think definitely what we see right now is that Ethereum kind of captured this financial side of things, right? And it became like a financial center that everybody's connected to. So Nier has, for example, a decentralized trustless bridge that connects to Ethereum and kind of we have sounds of financial activity of Nier happening on Ethereum. And then, you know, sounds of liquidity from Ethereum comes to Nier to some applications. And so that I think is, you know, they already solidified this. And also by doing this, they actually kind of drove off all of the other activity that was interested in participating, just because like, you know, on one side is pricing out activity, on the other side, it's also a lot about tooling and other things that kind of are there.

I think we see a lot kind of in Polkadot and Cosmos worlds where people build specialized chains for specific use case, right? And so there, we definitely, it's super interesting to see how this will evolve. From my perspective, and I've mentioned that before to folks, is, like, building a chain, like, specialized application-specific chain is like building a data center. It's like, you know, you find a place, you build a data center, you put power in, you put cooling, you know, you put servers, and then you launch the application, right? And so it justifies, if you know already, that you will have a lot of demand for this application and that you know exactly what you're doing. Right. So if Facebook does it, it makes sense. If a startup does it, it doesn't. The startup should just launch it on AWS today. And then when it grows enough, can I consider doing it? And so smart contract chains are more like AWS right now. Right. And that's kind of how we position here is like, you know, come launch super easy, super cheap, grow with us and then figure out if there's options to transition it into app specific chain if you have enough usage to justify it. And so we actually have one of the ecosystem projects, Octopus Network, that are allowing to launch app chains connected to Near, for example, in those cases. So when you think about Near today, is there a world where it will follow kind of the layer one, layer two architecture that Bitcoin and Ethereum have?

Or do you think that it will be kind of continue to be scalable at the layer one? so i would say it's more like there's a lot of scalability at layer one and there's a like this kind of when your application is like completely doesn't fit then you go kind of app chain bout right so like when you know exactly what you're doing and you have already usage you can go up chain route and kind of connect to to near and like least security and and have a bridge and everything there is some ideas like for privacy and for some other kind of more specialized cases you may want to have a layer two uh so like zero knowledge proofs for example that kind of compress some like private transaction private exchanges and stuff like this this is where it actually

makes sense to have layer twos but i would say right now even with the stadium you can kind of see that the boundary between layer two and like side chains and other chains is actually being kind of almost removed because people don't care as much about the differences in security like nuances of like yes this security is like ethereum security but you need to wait seven days and this security is like you know some as a set of validators and people just want to use stuff and like and and solve their problems and maybe make money and that's kind of the main drivers And so I think this boundary of the chains and layer 2s, et cetera, will be removed by better products around users. And so I think with Near, that's one of the things we're trying to figure out is how do we offer more clear user experience across the board, right?

When you think about Bitcoin and Near, there's a number of protocols for side chains or second layers, et cetera, that are adding this interoperability. Do you see Bitcoin and Near ending up getting connected in some way or having interoperability? Yeah, for sure. I think we may have a project already working on bringing Bitcoin to Near pretty much. And then you can do it through Ethereum right now, right in the rainbow bridge. So for sure, like I think Bitcoin is kind of this reserve currency of blockchain now, and it makes sense to use it across various ecosystems as like a financial instrument and a kind of source of liquidity and source of like lending, collateral, etc. And so definitely connecting to Near and starting to use it across the ecosystem is important. Got it. And so what are you most excited about as you continue to kind of build this out?

Like what are the things that get you the most excited when you wake up in the morning? So like our kind of short term and just like open the web, like long term vision, right? Our short term focus and kind of what I'm excited about is this idea of like creator economy triangle. and this is the idea that there's a set of d5 primitives a set of kind of creator nft uh applications and then a set of community tools and um kind of instruments as working together creates this pretty much uh new opportunity for people around the world for creative who have patents around various things to pretty much participate in this new new global economy right and so like it's not really d5 it's it's just some like tools that you know allow to issue

tokens list them create create initial offerings etc the nft is really about kind of creating this connectivity between the creator and the fan base and the people around in the community and then the community side which which i'm especially excited is the whole like dow structures and ability to organize people ability to make decisions ability to kind of create valves as well uh for this for these communities and so we've been working like we and projects in ecosystem been working on this creator triangle to really fill in with projects in each one and really interconnect them and start bootstrapping kind of bringing creators bringing folks who uh with communities who are excited to launch and you know like a community can

pretty much create like with discord you know creating gating with a token they issue the token then they maybe create some nfts they use nfts to like maybe create a lending borrow something you know distribute to users and like create this kind of economy that they didn't didn't have before right like imagine facebook groups like with bank accounts with ability to kind of create wealth with ability to vote on things his ability to invest like that's kind of like that's already here right we're already seeing this happening and we have like over 150 of these DAOs active and near and like it's exciting to see kind of this playing out and and I think like this on its own will kind of showcase new ways of how people can organize beyond companies or beyond

kind of non-profits to something new completely new and completely global so that's the part I'm super excited about. What's the biggest challenge right now for you? I think the challenge one is the bigger challenges is definitely kind of breaking out into the uh normal people like kind of non-crypto people right like i think on in crypto in crypto world like like people are willing to do kind of complicated things and and like kind of excited sometimes to do it uh we've been building for like normal people for you know our experience is very similar to like log in this kind of google look in the facebook it's like log in this year you know you set up you use you can use obviously kind of secure ways like ledger seed phrases but you can ask to use like email

sms and kind of have a progressive way of of increasing security of your account and the lingo that people use on its own is detracting people right so like when we say dao like we all know what dao is but then when when i talk this like even some technical friends who are not in blockchain they have no idea what that is right so we've been looking what what is the way it replace that like for example digital cooperative is something that the cooperative people know is digital okay you know it has a bank account it can invest but still a corporation of people right so like how do we even change the way we talk about these things such that it's more interesting to people and they're willing to kind of invest a little bit of time to learn

what they can do like what are the new things they can do what about in terms of the folks that you guys are trying to bring on etc there's certain roles that you're looking to fill any sort of you know qualifications past experiences for sure yeah i mean we're hiring across the board right like this huge ecosystem that needs people for almost every single job um the everything from you know managing projects like one of the projects that i am working on for example is creating a governance for the near ecosystem itself right i think that's a critical piece kind of for long-term success because uh like we believe in innovation we believe in iteration and kind of making progress and the bigger the ecosystem the harder it is to coordinate

kind of all the parties who have kind of different interests and different views and things and so really bringing them together and creating alignment is important and so really looking actually for help here was like project managers and people who are interested in house and people who are excited to kind of organize this like governance at this kind of decentralized global level we're definitely looking for more you know developers like always rust solidity um the you know most of our ecosystem is built in rust but we are like with some of the things launching that supports EVM. There's also things that bridge together

the ecosystems with Ethereum. So kind of a lot of jobs open there. Got it. And then when you think about the other things that are being built in this space, is there anything that you're trying to get built on the platform or anything that you'd like to invite people to specifically focus on?

Yeah, for sure. So I actually gave a talk like a week ago and we're actually going to have a hackathon on starting tomorrow, well, starting Friday, 27th. But the general idea is like, there's a set of this like common protocols, right? So I mentioned like social, but there's like similar things can be built for reputation,

for certification, for music, for video, et cetera, that are pretty much will spur out like lots of innovation at application level, if available. Similar how like Uniswap has became like, almost like this huge enabler for DeFi ecosystem, right? Like one small application, literally as far as, you know, 600 lines of code as a protocol level became this like huge movement of DeFi, right?

And then it took some time to build it up, but like generally this is kind of the enabling power of this protocols that you can build. And so I invite everyone to kind of participate in Hackathon, build them, reach out to me, super excited. And these protocols can pretty much be powering like this next billion people before we'll be using this open web. So there's like huge impact to be made here. Is there anything that you think that you believe that everyone else would disagree with you on? Like, do you have any thoughts that kind of are completely outside of what I'd consider the mainstream?

I think the thing that probably everybody agrees, but nobody actually does anything is the fact that like we cannot use MetaMask and like, you know, 0x addresses as a way to onboard people into crypto. That's just not, like, this should not be a thing. If you go to like, go to your parents and ask them to figure this out, right, they will not be able to. And so you want the kind of normal ways to onboard people, which maybe like provide some kind of progressive security for this and require kind of over time to kind of expand, like pretty much educate people over time instead of requiring them to figure out what private keys are and what these addresses are before even they got into the application. right and so like this is my strong belief and we've you know we've built things to kind of address this problem but i i it's really surprising to me when people actually need here who are from crypto and are like where's metamask like how where why is my address is just like you know their name dot near and i'm like that's how like they just don't feel secure actually because they

Their experience is so easy, right? And so that is, I think people need to change their mind in the blockchain ecosystem that like blockchain needs to be hard because that's kind of been like this before. And we should start actually focusing on making it really easy for people to use. Got it.

Before I end, I always ask everyone the same three questions. The first one is what's the most important book that they've ever read? I think the recent one that I think is super important is Extreme Leadership. It's been an interesting and very exciting,

especially in audiobook format. And so, yeah, if you haven't checked it out, that's been a really cool kind of way of thinking more about like how to take responsibility and how to kind of manage teams as well. Sleep schedule. If you had to kind of describe how that's changed over the last few months or a year,

how is your sleep schedule been well i've been in china for the past year and a half and so that uh was very suboptimal sleep schedule because having meetings with pacific and with europe requires to stay very late but now that i'm in europe it's a little bit better so uh going to sleep at like 12 1 and waking up at 8 9 tend to get seven or eight hours of sleep that's not too bad that's better than most people so you're uh you're doing all right um what about aliens are you a believer or non-believer so i don't believe that aliens visited us already because i feel like if if they if and and and like i totally accept that there can be other life forms existing in the universe like that's you know just probably probability theory but uh if they visited us we

probably would have already connected with them in some way unless they're like in completely different dimension or whatever and then then it's not really as as useful uh conceptually anyway what one question do you have for me to finish up uh i think i'm curious do you like what's your prediction on when are we going to have a billion users on chain a billion users on chain definitely in the next five years potentially in the next three i would say but definitely in the next five uh i would say uh it's kind of almost a no-brainer at this point yeah you agree we'll be pushing for that well that that's that's our goal so three to five is our goal oh three to five perfect we're right uh right on uh online there i think it'll happen all right where can

we send people to find out more uh about the project or uh to find you on the internet uh Nier.org is our website. You can find lots of information. We just launched another set of educational materials as well. And I'm on Twitter, ILBlackDragon, or follow Nier Protocol, and you'll see my tweets as well. Awesome, man. Well, thank you so much for taking the time to do this. And we'll definitely do it again in the future.

Thanks a lot.