The Wolf Of All Streets - Layer 1 Wars: How Near Protocol Is Different | Illia Polosukhin, Co-Founder Of Near

Episode Date: August 4, 2022

Illia Polosukhin stops by to talk about NEAR Protocol - a climate-neutral, high-speed, low-fee, Layer 1 blockchain. Illia shares what makes NEAR one of the most exciting projects in crypto - a great user experience, support for Javascript, and much more. He discusses what problems NEAR solves, how they got started, what’s coming next, and how NEAR can scale to 1 Billion users and beyond. JOIN THE FREE WOLF DEN NEWSLETTER 📩 https://www.getrevue.co/profile/TheWolfDen THANK YOU TO OUR SPONSORS ►►This episode is brought to you by Athletic Greens https://athleticgreens.com/melker This stuff is incredible, and I start every day with it. It’s just one scoop in a cup of water each morning, and you get 75 high-quality vitamins, whole-food sourced ingredients, probiotics, and adaptogens to help you start your day right. Right now, Athletic Greens will give you a FREE 1 year supply of immune-supporting Vitamin D AND 5 FREE travel packs with your first purchase. All you have to do is visit https://athleticgreens.com/melker ►► Have you ever had your exchange go completely offline during days of high volatility? Of course you have. We've all been through it. Those days are no longer with Bullish. Bullish is a new breed of digital asset exchange that empowers users to trade with deep and predictable liquidity across highly variable market conditions. They also have incredible automated market-making and industry-leading security. I can't get enough of this platform and it's fully regulated. Sign up here: https://thewolfofallstreets.info/bullish/youtube Bullish is licensed by the Gibraltar Financial Services Commission. Virtual assets and related products are high risk. Consult your investment advisor and trade responsibly. Bullish is available in select locations only and not to U.S persons. Visit bullish.com/legal for important information and risk warnings. EPISODE LINKS Illia’s Twitter: https://twitter.com/ilblackdragon NEAR Protocol Website: https://near.org/ NEARCON 2022: https://nearcon.org/ Production & Marketing Team: https://penname.co/ FOLLOW SCOTT MELKER • Twitter: https://twitter.com/scottmelker • Facebook: https://www.facebook.com/wolfofallstreets • Web: https://www.thewolfofallstreets.io • Spotify: https://spoti.fi/30N5FDe • Apple Podcasts: https://apple.co/3FASB2c SHOW NOTES 00:23 What Makes NEAR Protocol Different 05:05 Security on NEAR 09:26 What Is Decentralization? 11:37 How to Scale to 1 Billion Users 14:20 Why Illia Started Building NEAR 21:40 How to Prevent Bad Actors 25:10 Sharding on NEAR 27:17 Problems Blockchain Can’t Fix 28:32 How to Get Started on NEAR

This podcast is brought to you by Athletic Greens and Bullish. Please stay tuned for more information on both of these amazing companies later in the episode. In a world of nearly endless layer ones, it's difficult to differentiate yourself. But Ilya Polosukhin of Nier has very, very compelling answers as to why they are so, so different. So there are seemingly an endless string now of layer ones being developed.

How do you differentiate yourself from the other ones? So we started kind of at the bottom, right, as developers wanting to build on blockchain. And from our perspective, even right now, the people don't focus on things that, you know, as a developer you want, right? As a developer, you want a simple to build platform. Something that you can come in with whatever programming language you can build on and start building. You want something that users can really easy to use. They should not need to figure out how to buy crypto on an exchange, install Chrome extension, all the stuff before they intuit. They should be really easy to onboard.

It should be secure, and it should be scalable, right? Like somebody else becoming successful app should not make your app super expensive and impossible to use. And so reality is there's still kind of not much focus on these properties. And that's what in Near we focus on, right? We use WebAssembly, which is kind of a framework that

is used by all the browsers. There's a huge community of developers beyond Web3 that are building tooling and compilers for. We just launched JavaScript support. So actually, any JavaScript, there's 20 million developers who know JavaScript, can actually write smart contracts for Nier. Oh, wow. Our onboarding is designed Web2 style.

You know, login with Nier is similar to login with Google or Facebook. Kind of that flow. Underneath there's crypto. All this, you don't see any of this. You don't see private keys. Like, if you don't want to, you don't see seed phrases. You have email recovery. And then, you know, focusing on security, making sure it's bulletproof, it's stable.

Like we did a lot of research across a lot of protocols. We have our own whiteboard series on YouTube where we actually talk with a lot of them. And so really focusing on worst case scenario, focusing on kind of protecting against that. And then scalability, right? At the end, you know, one machine cannot process everything that people will throw at it, right? And so you need to start kind of parallel processing, but you want it to still be simple. And, you know, there's a lot of scalability solutions which I say, well, there's this chain, there's that chain, app chain, roll up, whatever you call it. At the end, it's separate environments that as a user now I need to know about.

And what we focus on, how do we create a singular environment that you, as a user, don't need to know what's underneath? There's shards. There's cross-shard messaging, all the stuff. You don't need to know about it. You just use it up. More shards are added as more capacity needed. Kind of similar how Web 2.0 works. You don't think about how many data centers Google have.

You don't think about that some data centers work or not. You don't need to think about any of this. So this is kind of philosophical focus is different from our perspective and that results in very different decisions on the protocol. How close do you think we are to actually living in a world where a random person

who's not crypto native has no technological understanding can actually engage? So we have people who have no technological understanding, can actually engage? So we have people who have no technological understanding. Like, I mean, some of the stories I've seen, somebody interviewed some of the users, like people from factories, people in the services industry in the Philippines, you know, using apps on Near, onboarding, you know, earning money from, like there's a job marketplace pretty much that they can engage with already

right now. We have Sweatcoin, which has 100 million users, non-crypto. They already onboarded 10 million users on NEAR. So we are there. They don't need to understand private keys. They don't need to understand even crypto. We have also Roro Plus that launched that you don't need to have even Ether or near to send transactions, no transaction fees, just sign up with an email and get going, right?

So we're pushing it pretty much to a limit on what is a real experience should look like for the user that you don't need to think about blockchain. You just use the apps, you just, you know, get the experience. And then over time, you learn about the properties. You learn about all the things you can do. I mean, UX and UI have continued to be the biggest problem, in my opinion, for mainstream adoption.

Exactly. That's the problem that needs to be solved. Obviously, you're working on it. I just think it's too scary for most people. Or confusing. So, I mean, we're addressing a lot of confusion part. Scary part is still there. And this is actually kind of looking forward for this year.

A lot of my focus is how do we build a better security model that is... So right now, there's kind of two worlds, right? You're trusting a bank or whatever exchange to hold all your assets or you're trusting yourself. But now if you lose the seed phrase, if you lose the ledger, if you, you know, whatever happens, you lost everything. Or somebody, you know, somebody attacks a computer and manages to recover it. And so this is two worlds. This, you know, like this is black and white. We should be somewhere in the middle. We should be giving users options to self-custody,

not allow somebody else to withdraw their funds and do whatever they want with them, but still be able to recover. And so part of the benefits, for example, for Near, our account model is not single key, single account. We actually have have like your account is you know named account like minus ilia.near and underneath there's a lot of keys with different permissions and so i can have a bank's key you know my friend's keys whatever i want to set up

as a recovery method that only can recover a new key with a delay with you know with some cool down period right and so pretty much if I lose it, I can go and figure out how to recover it. I can also have a model where there's active threat prevention model that detects if there's outliers in my transactions. All of the things can be added to protect the user. Similarly, one of the other things we're working on

is surfacing information about contracts. Contracts can be malicious. Like we can actually detect that. And so we can surface that in the wallet directly. Like, hey, this contract seems suspicious. You sure you want to transact with it? And so pretty much building the system that protects the user. That's really...

It's very reminiscent of... There's a lot of problems with Web 2. But that's happening. Are you sure you don't want to click? Are you sure that you want to click on this website it's a bit you know like if you if you still click there's a certain point at which the onus and the

responsibility is on the user but in crypto sometimes it seems we lack those warnings. Exactly. You click the link and it's over. It seems like right now we're in a place where I don't know if it's because of the scale of adoption or how much more usage there is, but where a lot of things are breaking. Exactly.

So we went from like, this is like, you know, nerds and hipsters who are using this. I mean, for better or worse. Fair. To like, holy shit, you know, there is like everybody starting to try to use it at least. And obviously, they don't understand why they're clicking. And so it's easier to scam them. It's easier to, you know, people running phishing ads on Google, and people click on that.

The first three ads, if you used to serve Uniswap, would be phishing. Exactly. And so that's why what I'm saying is, like, to get to a mass adoption, the next thing is security. It's protecting the user actively, making sure they're not able to do these things, and then creating a more kind of secure environment. Like, still permissionless, but secure. But you're also protecting them from themselves. Exactly, yeah. So it's sort of a different, you're not necessarily protecting them from the attacker, you're protecting them from making the mistakes that are so common.

It's both. It's both, yeah. I mean it's like pretty much it's the same, you know, the browsers have security model that does not allow malicious JavaScript to, for example, take over your computer, right? It's like by doing that, you know, that stops the whole surface of attacks. Yeah. And so this is the same thing. We need, like in a way wallets and you know some of the other tooling is the same thing. We need, like, in a way, wallets and, you know, some of the other tooling is the browser of Web3, and we need to build in protection into it. I love what you said about it being sort of bipolar or black and white. And I think a lot of things in crypto are viewed that way by the communities. And everything really is in the gray on the scale.

And that, I think, also is true for centralization to decentralization. Right? You have this sort of, I guess, the maxi ethos or whatever. Everything has to be fully decentralized, your own keys, all of these. Then you have the Binances and fully centralized exchanges of the world.

And maybe the best things will fall in between. Nobody wants to hear that, seemingly. Well, there's a thing also, like decentralization is not very defined, right? What is decentralization, right? This is like running more machines, this is development decentralized, this is like which, like there's a lot of aspects of it, and there's also a lot

of repercussions of each aspect, like what does that actually mean? And indeed for each one of them, it's not a like, that's why it's like, if we actually build a framework for decentralization, we'll see that it's all black and white, right's like well most of the stuff right now is centralized development maybe decentralized nodes um but you know centralized like this and that right like there's a number of things and then they are have an all-in spectrum i guess it can all be a path as

well and that's really what it is as you just travel this path towards decentralization and it's so we always called it a progressive security, progressive decentralization for the users, for example, because you want to start centralized. First of all, as a user who's just starting, you don't have any assets. You don't really care. You actually can't start fully custodial. I've got my 50 bucks. The question is how easy it is to move out, how easy it is to become secure. And it's actually super complicated in case of a custodian or Binance.

Let's say you bought a bunch of stuff. Now you need to move it out. It's expensive. This is why, again, what we've been trying to do is like, well, okay, you have a custodial key, for example. But now you can flip it and add your non-custodial key if you want and remove custodial key in one transaction. And all of your account is still the same, right? You don't need to move accounts. You don't need to tell everyone

that you moved out of this custody service. Like, it's still your account. And so for me, Web3 in general is not about decentralization per se. It's about low switching costs. How do we deliver low switching costs across everything? Because this is what Facebooks and Googles, et cetera, are. They are a high switching cost data mode platforms. This is cetera, are. They are a high switching cost data mode platforms.

This is what banks are. They're a high switching cost platform that, you know, leverages their resources. And so decentralization is a tool to achieve low switching costs, right? Having multiple wallets, having multiple nodes, having multiple RPC, having multiple of everything means that we can switch everything. But the value we're delivering to users that they're not locked in, and that means every other participants are constantly on their toes

to compete for the user. Because as soon as they do something stupid or start being rent-seeking, people will switch. Right. Is there a certain point at scale where you start to be concerned that things would break down? It's very easy, I think, at this point. We did talk about it's originally nerds and hipsters.

We're sort of on our way to the mainstream. But that's very different than half a billion or a billion or two billion people starting to interact in some meaningful way with crypto. So, I mean, this is our posted goal is one billion. And we're 1% there. They, for me, like, I mean, there's still a ton of stuff to build. Honestly, like, yeah, we're not ready yet. But, you know, definitely the goal is to be ready and kind of build in all of this,

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deciding that this is what you wanted to do and now being a complete digital nomad who's all over the planet every day? So, I mean, it started, so we were doing actually an AI startup and we, one of the products, one kind of tools we built was a crowdsourcing platform that had people around the world. We had people in China, Cuba, Russia, Ukraine, and it actually really hard to send money from US to all of those places, right? And so we actually started looking at blockchain as, can we, you know, it sounded like a global payment system, can we use it? And the answer was not.

And I mean, beyond that, like coming from open source, coming from kind of this open spirit, we wanted to build an open platform that people can contribute value, can, you know, leverage it to generate kind of data, different data sets at different problems. And the reality was it's really hard to build, it's really hard to use, it doesn't scale, it's too expensive for microtransactions that this were. And so we kind of started looking over every single protocol and trying to analyze it. That's why we did like whiteboard series and kind of almost investigating what are the protocols doing.

And yeah, I mean, it resulted in like, well, there's nothing that addresses this core problems in the way at least we believe. And kind of in this more philosophical. A lot of people said like, hey, we have a new consensus. Let's ship a new consensus. And it's like, cool, but consensus is not really the core of a problem.

Consensus may be part of the solution, but it's not the problem. And so that's why I'm like, well, let's start with the problem and let's start designing. In many ways, we actually shipped first a platform for developers. Literally no consensus, no sharding, nothing. Just had this environment where you can write contracts

and ship things. We actually, I don't know, nothing. Just had this environment where you can write contracts and ship things. We actually, I don't know, like three or four months in, we had an internal hackathon where we had applications on Near, what was that back then, already launched that people can use. That was the whole thing. There was no consensus, nothing underneath. It was just like writing a single machine, like a box.

But that was a developer environment that we wanted. And so from there, we started designing how it should run underneath. And we had a couple false starts. We implemented four different consensus. We implemented two different sharding. I, at some point, deleted 20,000 lines of code because we're like, oh shit, this doesn't work,

which was not fun at the moment. But this is kind of, you know, because we had this environment where we already had contracts. Like we actually, our testnet runs from April 2019 nonstop. Like we launched in October 2020. Like we had testnet nonstop upgrades, you know, through everything. Different consensuses, different sharding nonstop for this period of time. Because we had developers already trying to build stuff on testnet. And so, yeah, I mean, I think coming to now,

I mean, the ecosystem is global. We have already five different regional hubs, like full-on fund, product labs, marketing in different places. We have eco funds. We have folks funds. We have folks doing meetups, etc. There's conferences. There's so much going on. The ecosystem

is so global. Pretty much I think we're not on every continent just yet. We need to get Antarctica covered. Everything else is there's something going on in the ecosystem. And so it's kind of really hard to be in one place

because there's so much interesting stuff, so many people. And kind of going around and meeting with everyone and seeing how I can help as well has became my job. Is this all you do, or do you actually have time to have a hobby or do anything for fun i mean i think like traveling is fun at least for a bit but uh yeah i mean mostly this this is really exciting and there's a lot of exciting projects i think kind of because we started from

this like hey we want to build stuff on blockchain uh i'm really excited about this stuff on blockchain right and so that's why I'm kind of going around and meeting people who are building really different use cases and seeing how I can help has became very like yeah it's exciting part of the job it's a totally new world because they're not your employees yeah these are just people who have chosen to or passionate about your ecosystem and have chosen to build on it and you want to go meet them exactly it's really cool it's i mean gone are the days of like a centralized office and you sit there and you guys have your meetings and you're the boss and you tell everybody to go get coffee it's just incredible you can build something this big now in this world was that

because of covid um so we were actually going, like, we were going distributed. And I would say, the eventuality of of the decentralization of organization was there as well. Like, from the start, we were designing that, like, hey, we're gonna launch the first version of protocol. I mean, there's obviously going to be tons of work afterwards, but we're going to in some way decentralize. And so what happened, actually, a lot of initial team spun out to build projects on DoubleNear. We have folks who spun out to build DeFi. We have folks who spun out to do kind of some NFT stuff. We have folks who are doing some other infrastructure on top, like private shard.

And so that was kind of part of the spirit. A lot of people we brought in originally were entrepreneurs like they you know had companies before or you know wanted to do a company before and we're just like join us let's build together this infrastructure that then everybody on top can build and you can go and fund your own uh enterprise on double this infrastructure and that's kind of what happened and so so because of this, yeah, like I'm not a boss of anyone, but there's a lot of folks who I worked with before who now are building their own things

that I'm excited to work with. So obviously there's a lot more new folks coming in as well. And so you have this really kind of, I mean, it's somewhat planned, right? Obviously it always happens at the wrong time, I would say. But like it's somewhat planned, right? Obviously, it always happens at the wrong time, I would say. But it was somewhat planned that we're going to really just centralize our own team and become lots of pieces in a whole kind of ecosystem puzzle.

I call it an open Google model. So I worked at Google. And at Google, actually internally, you have a lot of teams working together in different ways. The infrastructure in Google inside is open. You can see everybody else's else source code you can build on top of any other service you just need to be inside and the idea here is like well what if we open this model what if we actually have a you know common services common platform everybody can build everybody's stuff but it's open anybody can, and you have economic incentives

around. And not just the platform incentive, but actually each company and team can have its own token to align, and people can work together through that. So actually creating a more direct incentivization structure. How do you disincentivize bad actors from coming in and building something? Well, I mean, I don't think you can completely disincentivize, right? This will happen. I think the general, generally part of it is culture, right?

Like just we've set up a lot more kind of, hey, this is a builder. You know, it's not a hype culture. It's not a, you know, people kind of running crazy and making a ton of money type of culture. That in itself, you know, there's other places where that culture exists, where people who want to make a quick buck go and result. And then on the other side is, I mean,

all the security and other things that we're going to be working in. Like, it's just, you know, as you kind of go beyond when everybody knows everyone to, you know as as you kind of go beyond when everybody knows everyone to you know there'll be a lot more projects that kind of coming out of nowhere we need kind of a more we need to use the blockchain for the coordination right like we build this coordination engine which is blockchain so we can use it to actually coordinate and disincentivize this right we? We can have people reporting suspicious things.

We can have, you know, whitelists and blacklists on chain that everybody else can use in their software, in their wallets. We can have all the things governed by community that are governed by token holders. And so through that, you can actually build in some of the systems as well. Are market conditions, as far as price, relevant at all to building? Or does the same excitement remain regardless of the price of the token or because obviously there's people yeah tokens a certain

price it's very exciting all of a sudden 80 of your net worth or what you believe you had is gone does that dampen the excitement or you think that people are really just continuing to build because they know that so near started we started in august 2018 so we were started when things were going depths of the bear market yeah well actually it was like it was going down the slide of down yeah like everything was going down and continue going down and so like i think for a lot of the kind of the ecosystem it's kind of like oh yeah bear market great now we can focus and can build for long term versus you know trying to like optimize for short term obviously you know there's like economically there's some things where like uh uh kind of things crashing means they cannot go as fast and as as like scale up

as fast as they want to um then you should be accounted but i think like being able to focus on on a more longer term, sustainable business model, sustainable token economics, I think is a big benefit here. Again, the amount of advice I got from the ecosystem before is like, oh, just zero out prices for the transactions, do this and that, just to go faster. And so I think that kind of stops.

And for example, for NEAR, we have designed our token economics during bear market with what is a sustainable token economic model of layer 1 will look like and how it should become sustainable through that. I mean, I'm not saying it was perfectly designed. Obviously not. We learned a lot through past years kind of how token economics in general work. But those kind of things is during bull market,

everybody forgets about it. And it's just like, let's try to go faster. And then kind of we come back to like, oh, actually, let's build for future. Let's build for sustainability. Yeah, that makes perfect sense. And you talked about having to once delete 20 000 lines of code yeah what happened there well so we actually built a different sharding mechanism originally uh actually closer to what east2 was planning to do

before and we realized like we actually built it we started running it and we realized there's a lot of problems with with uh with that design around like asynchronicity and kind of finality and stuff and so that's where we're like okay we need to redesign all this and this is why like our current design is very different it's it's actually just one chain that in the shards blocks instead of having lots of different chains just creates very simple model for everyone to understand as well as simple model to implement like the thing is like it's really easy on the whiteboard on white paper to write some stuff and then when you start implementing it realize it's like super complicated and you cannot get it to work um i mean you can but it's gonna take you years and yeah like train will leave by that

time so yeah that was like So yeah, that was it. We implemented it, we started testing it, and realized it's way too complex, and it's way too asynchronous for anyone to be able to then later debug and kind of understand it. Because we also need to build, and now that we actually have multiple companies contributing to the code, you need to build it such that more people are able to work with it.

I think Bitcoin actually had a really... In one sense, Bitcoin has this... It's actually a very simple protocol and any reasonable developer can understand it. You can actually build your own Bitcoin model. I mean, obviously right now the implementation is way more complex because they're handling developer can understand it and like you can actually build your own like Bitcoin model. I mean, obviously right now it's the implementation is way more complex because they're handling a lot of edge cases, but the kind of basics of it is very simple. As we're going into this like more scalable platforms, they're all very complex now.

And so it's important to keep them as simple as possible so you can attract more developers to contribute, to understand, to build on top. So it feels like we're trying to do everything all at once in this space, which I think is a good problem to have. Are there glaring things that you think that are being built that blockchain is just not needed or does not fix? Well, I think, so for me, it's not about blockchain. I mean, blockchain is a fundamental piece of Web3, but Web3 in general is like a, like I do think everything should move into Web3.

That doesn't mean that everything should run on blockchain, obviously. Right, so there is storage that, you know, can use the blockchain for coordination, but, you know, you're going to run completely different hardware. You know, AI machine learning, you're not going to do it on blockchain. You're not going to run machine learning models on blockchain. But you can use the coordination and payment and stuff like this, but you're still going to have customized

hardware, super optimized to do the inference. But I think the benefit of coordination, the benefit of openness is there. And I think that part is it requires a pretty fundamental shift on how, like, let's say I'm a company and I want to go into Web3. You need to kind of shift your business model. You need to shift your mindset to do that.

Like, that's why I'm, like, I'm curious to see how Meta will pull it off, but I'm not optimistic at all, right? It's my, like, common joke is, like, if I have to live in the Zuckerverse or some decentralized Web3 metaverse that we create, I'll take my chances over here for sure. And if anyone wants to become a developer, become a part of the ecosystem, how do they do that? I mean, near.org, there's really good docs.

We now have JavaScript, which is amazing. I mean, you can build in Rust. You can build in Solidity with Aurora. So yeah, go to near.org, follow the developers. There's grants. There's joining community as well. So start your journey now. Awesome.

We'll see you in the next city. All right. Peace. Thank you so much for listening to this episode. If you haven't already left a rating or a review on Apple Podcasts or Spotify, please do that now. Spotify just added ratings, so please go ahead and click that five star. I'll see you guys next time.