EB129 – The Far Future In Front Of Us

Transcript

hi welcome to yet another edition of epicenter Bitcoin the show which talks about the technologies project and people driving decentralization and the global cryptocurrency revolution my name is Savannah quechua and my name is Brian Fallon crane so yes that's right it's the three of us back together again we've done I don't know how many episodes we've done together we definitely did one sort of state of blockchain which I think might have been at the end of last year I think so i think it's right before no it's right before new years i think yeah yeah so we're doing that again we wanted to do a quarterly a little bit less now and this is going to be somewhat different than last time in that we'll talk also about

our expectations about future some ideas about where this is all leading that go beyond just looking the next six months but faking a few years ahead and then what I'm also really looking forward to is that may her whose wisdom and on top of everything going on especially all the crowd sales and stuff and he's gonna he's gonna speak a bit about slow kid so we didn't discuss that and and their crowd tail or or not their karate oh so yeah but i'm sure many people are curious about that and i look forward to that as well so with that out of the way I wanted to kind of introduce the first

topic we have here which is an idea that has been on my mind for a while because it's easy when you sort of work on on in this industry and you know we're complexions and stuff you know you tend to think what's possible in six months as possible in year but if you think a bit further out but if you think of what's what's what are the effects going to be 10 10 years it's quite interesting and and one of the ways that one of the things that I think will happen and one of the ways I haven't is that this concept of open source business so let me explain that of course we all are familiar with open

source software right so for example open source you know web development platforms they used to be very expensive to start a website used to be expensive to start online shop and today that's very cheap you can sort of get it out of walk set it up and go so some some starting some businesses has become super cheap where in the past you know you had to buy servers and cause some software and database etc etc which could have cost millions of dollars just to start up but if you look at organizations today this sort of technology component B it databases or websites and stuff like that it's just

one small part of their costs a lot of it are as other things such as HR processes compliance accounting auditing and all the kind of internal logic processes that run an organization and those haven't really been affected in the same way by something I open source but if now what's going to happen that is that we will implement some of these processes using smart contracts so that really the core process is decision processes and logic of an organization could be done using smart contracts and then let's say that gets open source so an example could be an insurance company so you have to all the core logic of an insurance company how our claim is

managed what happens when this happens in if these conditions like you implement all of that uses more contracts you open source that and all of a sudden the cost of creating for example a new insurance company has shrunk maybe by ninety-five percent right so maybe in the past it would cost you let's say 100 million dollars and take five years to create a new you know sort of regular full-scale insurance company and maybe then you have all that largely come in and you still need to do something so I need iron a lawyer incorporate maybe deploy this do some marketing and stuff but maybe instead of taking five years and 35

months maybe instead of a hundred million dollars it will cost you 1 million dollar and maybe for other types of businesses you could have similar kind of cost savings so maybe that's a really interesting idea that even even for some of the costs like hiring a lawyer similarly a lot of that is gonna is going to shrinking costs as well and so what are some of the effects of that so you know for example you can think of that this couldn't be a massive increase in competition you can also another way to think about it is in terms of the pace of innovation because let's say now I the insurance company I Ron I didn't design it myself right there all the

core logic process is basically it's an open source project that I just pulled and to implement it and now if people contribute the open source process new innovations new ways of working I can implement those in my own company at an extremely rapid pace right the consent should be sort of you know pull the changes and implement them which of course would mean that you have maybe a hundred different companies that use the same quote that in that innovate at an extremely rapid pace all over the world whereas you will have those companies both the old way they wouldn't be able to do that at all they would have to sort of finance all their innovations

internally as opposed to kind of benefiting from the innovation that's happening with the public the public open source code I think these are these are interesting ideas and I think they really could mean some extremely radical change yeah and so this is this is one of the things but I'm curious what are you what are your thoughts on this I mean we can go and look at the insurance exam insurance idea you mentioned is an example like let's let's say let's say one let's take one of the simplest examples of insurances which is like insurance against delays in flight so we want to let city 30

first we want to start a company that ensures people against delays in flights if the flight gets delayed by more than four hours for whatever reason they get a certain amount of money is for each flight they they want to buy insurance for the pay as a premium so walk us through brian off about how we would manage all our business processes using blockchain like how how we would do you know how we would sell our insurance how we would do claims management like when people want are claiming us to pay something how we would do that and then tell us how we would do marketing so we have a good vision of the way you see these companies being formed I kind of

think of it like this right so now if you talk about something that claims management if an insurance company is created today where they'll have to think about what does claims management look like right so there they'll maybe hire some old insurance executive at they'll have to set up this process and it's essentially you know some inputs something happens and then there's some output but so inputs could be data such as flight data or customer data and then some process happens that determines you know for example is there a claim to be paid out or not and then you know the output could be a payment made so you

would have to me would have to think through now how does that work right we would have to set design those things from scratch and then I think if you if you had a sort of smart contract based insurance company and and I think the important thing here is not even that the whole thing lifts on a blockchain it crudely vulnerable I mean but the whole thing is that the core processes are implemented using a blockage and using smart contracts now you can sensually pull that and then of course you can have automated data fees such as flight things and stuff and some some of the stuff would be the same as the same same as a day for example marketing what wouldn't really change so I guess my point in a way blockchains

is not even the most important party I think the most important part here is the ability to express a huge range of a company's processes in code so you could potentially have a similar thing without block chains and spark contracts right you could have somebody creating some software that runs let's say flight insurance company and it's open source dad and then you know may hear you could go and you could do this in another country in another continent and you could have similar provide benefit from similar advantages and cost savings but I think what's different and what's to

take over small contracts is that people actually try to do this now I people are actually trying to take core business processes and implement in block in code which is something I think they didn't try to do before so I think to some extent it's also this is kind of mindset shift that's at the power here so what you're saying is the the advent of blockchain technology I mean people who could have done this before people could have written the code to run an insurance company or the code to run a bank or any type of business and have that business logic open source and bees of public and public good and then ascent which is but open source

technology is in a sense but but now since we have smart contracts it's shifted the mindset then people are now looking at how they can automate a lot of these things using block chains yeah exactly and and and there is there is a reason why this is happening now and it's that before people probably would have been very hesitant to say okay let's take the core processes and implement them by a code because there's a well what if there's something wrong what if you know there's an error and then this is not just something that doesn't work on a website but you know core functions could go wrong and of course your block chains if

you can run this in a shared way well maybe you can pull in the auditing company so that they run a node and they see and they can certify that then it can be shared across stakeholders and also you can have that assurance so that you say okay I were comfortable now taking these core processes and actually automating them running by a code and of course the other thing is also if if for some of these processes involve various stakeholders again in the past they might have been difficult to convince people then to automate them it could be like well who runs it now if just different parties in loft and riffs more contracts you can kind of do that yeah I

think that as it is so there's an incentive now because there's an incentive because you can you can run this code in a decentralized way where everybody is is it's coming to a consensus on the code that's being written so that we eliminate any type of errors or mistakes that may happen and I think it's also just the incentive that you know you your competitors are doing it and you're your boss is telling you to look into it so there's that incentive as well so like stating that a bit differently um today when you have an organization that might be sayin insurance company making insurance on flight flight delays there are there are

business processes meaning there are a certain set of steps that the business takes two to evaluate any particular claim and these processes might be happening in let's say for lack of a better word in an analog wave which means the claim comes in into the ASAP system somewhere and then there are a set of people who review it would then send emails to other people to review it and then in on Annie me on an email thread like when such a certain amount of people review it then it's get sense to the accounting department the accounting department and disburses the money something like that right there is a set of process that you go through and then followed by a

conclusion now what you could do in a smart contract is is basically say that the claim comes in maybe maybe on I PFS as a transparent document and then all of these people who are supposed to evaluate that claim need to approve and sign it with a digital signature send it to the smart contract and once a certain number of signatures are accumulated smart contract automatically disburses it disburses the money to the person who was making that claim so you made this whole chain of processes that today my nuh in a thread of emails run rather on a blockchain and anyone can follow this this these these these less internal threads as to what really

happened and why a particular claim was accepted or rejected right now now I I think like for me for me the questions are a mostly twofold it's one question is do companies really want that level of transparency right like is there is there going to be some sort of loss of competitive advantage because or because of this transparency second thing is one of the advantages of building a company or an insurance business transparently on the blockchain is that other people can come in to your company and contribute something and be paid for it so it's more inclusive in a way to

people who might be in different jurisdictions and who might want to extend your business in say a different country so I think like that's the advantage of openness and the disadvantage is then everything is so transparent so completely advantage is lost so do you think Brian that they're going to be particular businesses that that flourish in this model and some others that don't but you don't necessarily have to make it all public right so there could be a blocking that's just run in turn with the company and maybe let's say there is some auditing companies that also participate in running that so in this example right you probably wouldn't want to have found a public park chain because let's say now claim

to being processed I can see whose signature is processing my claim you know maybe there's all kinds of I could contact if I figure out their identity maybe you know there's a lot of issues with that so I don't think this kind of thing will generally be one on a regular block shady it might for some instances right so you I think you will have kind of insurance type things on here iam and plugins like that but what I mean more is that and I think this is remains to be seen whether that's actually going to happen but you could imagine that the insurance company is going to be as before essentially doing this in a way

that's not transparent not visible but it's still being done using small contract and it's I think it's a very open question whether this actually makes sense or not whether the benefits there outweigh the you know all the costs of implementing that and operating that i'm not sure but maybe right and if it did then i think that could change a lot of things also because it gives sort of like a general framework of handling these processes like what you've described was a good example right so you have that claim which is some sort of like object on a blockchain and then

there's sort of its state which is like where is it in that process of claims management right like and you're right and some people would look at it maybe certify something sign it with the digital signature is like sort of a state change on on that block chain right this is the general paradigm of how this is done and having even that kind of standardization of processes might be very interesting because then it could become much easier to say okay there is a way this is done generally so I can just take that instead of building it from scratch yeah I mean much like in web technologies you have standardization of practices and processes in the way you transact data you could potentially have

the same subtype standardization and say the insurance market like I think that's a really good observation but what do you guys think about how the oldest all these things we've been talking about since a while ago might have an impact on you know on consumer experience so all everything that we're describing so far is mainly you know back in infrastructure implementing an insurance company as a smart contract or as an open source of package that you just install and run and how do you think this might influence the way that US consumers subscribe to insurance staying in insurance example of course subscribe pay for it get insurance benefits paid back I mean I guess in the end but for a

lot of this stuff to really go to its logical conclusion you kind of require that people have private keys that they sign things with my maybe you don't absolutely need it right you can still have a web interface where people like enter their stuff and like maybe there's maybe the smart contracts let's just use sort of beyond that but you to really get the full benefits you would require people to have private keys right so another thing that I think you need for a lot of these things is named with people using some sort of a cryptocurrency yeah you're right yeah I mean again I think it's like you can do

it without and you may be able to get significant number of the benefits but to get to sort of full automation and yeah having cryptocurrency yeah I agree right so those things would be and I presume that will also mean people having hardware devices with this so maybe that's going to become a ubiquitous feeling that everybody having their little wallets that they manage a lot of their applications with so in the case of insurance where if you had some sort of a insurance company built from scratch using no sorry not go from Strasbourg built using an open-source software

package you could do that for really cheap as you mentioned and even potentially you could have a whole lot of automation in there where if you have an Oracle or several Oracle's that maybe prediction markets feeding in your you know the data that the infant that the insurance company makes this decisions on that get to potentially change the way that you know claims are managed I think you know think about for example you're a victim of a burglary well you file a claim with the police and if the police reports are served as some sort of an Oracle to the insurance company it's no longer the person who has been

subject to burglary that makes the claim the insurance company knows about it before you even have time to make a claim right so you make your police report and it's sort of a push process from the police report straight to the insurance company and the insurance company will pay you your you know reimburse you for whatever you've been stolen right yeah yeah exactly you have a lot of automation of course for kinds of data feeds and I think that would be very interesting as well and then that I think flight insurance is a good example right if I think that data is mostly publicly available so yeah that that could be automated there I might want to present a different way of stating the

same thing so what we are saying is like this technology it it it makes it enables like business processes to be done on say open block chains and open source software or in a cryptographic fashion and it allows many different organizations to coordinate to get to a particular result right now now we can actually I think I think there's a different way to state state the case as well so so let's let's let's take an example so one of the one of the most interesting examples which I think many people are familiar with is the is the mortgage market and specifically these financial

instruments called cdo's that were implicated in the 2008 crisis so what happens in the financial market for example is let's say I want to go and buy and buy a house and I want I want money to buy that house so i get i go to a mortgage mortgage company I I get some money from the mortgage company as a loan I go and buy the house and then I give I give some claim to the mortgage company in in case I default so let's say I go a quarter million dollars and I word on the condition that I will be shipping them $50,000 for the next 40 years 50 thousand dollars each so for

monthly I might be shipping them I don't know three thousand dollars so i go to the mortgage company and making an arrangement like okay I get a million and every month I'm going to ship you like three thousand dollars in the future and in case I stopped shipping you these three thousand dollars then you can basically claimed my house and it becomes your house and then you can sell it and retrieve the initial money you sent to me so basically why my house itself is guarantee against me not sending this money now you could imagine for instance that this interaction could be replaced by the combination of a smart contract and a legal contract so so what the smart contract does is it

gives the it gives me as the user and interface way to send these three thousand dollars every month so let's say there is like a contract contract a where I am supposed to send like three thousand dollars every month and then this in this particular smart car target ref refers to a normal english language contract and in that english language contract we have conditions for what happens if I fail to send these three thousand dollars over so they might be able to foreclose on my home it out of recover the money etc now the interesting part starts to happen well when they are like thousands of these like more gig smart contracts on the same block chain so to anyway the way

this system works is of some big investment bank like Goldman Sachs might come might go to these a lot of different mortgage companies and end up buying their positions so the mortgage company has a claim on receiving these thousand dollars three thousand dollars from me every month so Goldman Sachs comes to them and says okay sell this claim since sell this flow of cash to me so that i receive it in the future instead of you and take say let's let's say take this 1.2 million dollars in exchange for it so the mortgage company gets 1.2 million from the investment bank and then and then my money the three thousand dollars a month goes to the investment bank in the future now

then what the investment bank will do is and say okay this is going to collect like a thousand of these different ones similar once and then it's going to create a new security for it so it's gonna create let's say like what this is technically called a CDO and then this CDO basically has money coming in from different mod gauges made in the real estate market so maybe let's say a thousand of them and then it's going to sell shares inside this CDO to a lot of different investors all over the world so maybe somebody in Norway ends up owning one of these shares so one of these CD or shares what did entitle the person to get is a claim over cash flows

occurring in different mode gauges across different parts of the United States at a particular time so it's like a fractional claim across a lot of different market mortgages and that is what makes them safe right because they're like a thousand different homeowners who need to pay and if some of them end up paying you will find you you get your money back as an investor now as in a smart contract system what could happen is like you could automate the whole thing where your mod gauge with your mortgage companies represented in a smart contract which has let's say its own token right and then these tokens can be bought by other companies and then your your mod cage can be

repackaged as CPUs are these other higher level instruments and then sold to other people across the economy and all of this buying and selling of these mortgages is happening through you know decentralized exchanges or other smart contracts that are running on etherium so this whole market starting from all the people who are borrowing money to all of the people who are ultimately lending lending money basically gets connected to a big giant system of smart contracts and a lot of different organizations are participating to make this system run so the the boundary between organization kind of blurs a bit

but the whole system works in the aggregate right so the way the way the way the analogy I I take for explaining this this kind of process automation is a the annular the analyst you of the pump clamping system if you imagine the plumbing system what does what is the plumbing system of a city do essentially um what it does is as any city has like a set of different water sources so in in the city of Basel well if it might be the line there might be some wells around here somewhere far they might be any there's a lot of different water sources those are the points the sources

and then there are points of drainage which means like I am a consumer so so some of the water must come to me so I and they're like say millions of these what does the plumbing system do the plumbing system is an infrastructure that gives a way for this water to flow physically from the point of source to the point of drain now if you look at the mortgage market what is happening is there are points of sources which are people paying their monthly partly monthly dues like me paying thousand three thousand dollars so that's like I'm a source in this system and who's the drain the drain is some investor who basically gave the principle and ultimately wants a

fractional claim oh my reserves so just as you have the plumbing system for a big city you can make the real estate plumbing system on us on a block chain with a set of like thousands of different smart contracts working together with each other and they kind of market keeps adopting and at the plumbing system also keeps keeps changing right would so would do you agree with this kind of vision that is just any system where you have money flowing in from us a big set of people going towards another big set of people and the linkage between these two the ways by which money must flow from one

to another is very complex you can auto bild that whole system using using smart contracts exactly right and I think there's some other interesting things that you can sort of take from there so one coming back to the the mortgage example right so what one of the things was that when all these mortgages started going sour right there was a sort of a disconnect between the securities that package all these mortgages in the mortgages themselves right so I might buy this mortgage-backed security and I wouldn't know exactly first of all which actual mortgages or in there and what is the current state you know are they being

paid or are they in delay and of course if you had those marches being managed on a block chain and that sort of triggers all up to the security you should have in real time see the state of that mortgage and I think that same sort of analogy works for lots of things but it also works for supply chains and having transparency about where your products came from or another example is this is the idea of liquid democracy maybe I miss representing it a little bit but this sort of idea T that I I I can delegate maybe my voting rights

to somebody else within votes right so you could also imagine something like that that democratic rights but currently as in a representative democracy you sort of give it to somebody and the HS vote for you but if I could like delegated according to some rules i set up and maybe maybe the person i delegate to delegate a further on specific issues because they're not the best expert there you could have that same kind of transparency there for example and I've every the same thing holds and so many use cases oh yeah I think the example you made this is great and plumbing is sort of a nice a nice way to think about it yeah it much like

it actually you wrote this in some of the notes here behind that lines between your organization's might blur and I think much like the plumbing system you know the following system interconnects from sources and then comes through for example you know pipes belonging to the city and then may flow into pipes belonging to some some like in a house or business and back into the city pipes but the the contents of those pipes knows you know no owner right it's it's it's so you know those lines may become blurred and we may it may be difficult to know when information is flowing or

when value is being transferred exactly where it is in the system and who it belongs to today's magic word is plumbing PL um be ing head over let's talk bitcoin calm to sign in enter the magic word and claim your part of a listener award if you look at something like chemical engineering right like which is which is basically the science of making fluids flow and like and like flow on on us on a certain set of conditions across point A to point B right Chemical Engineering

is essentially that the couple of plumbing system is exactly that and so in chemical engineering you have like fluids that are flowing and in this case what we are doing is like instead of fluids it's it's money that's flowing and we just have build sort of with the block chain and smart contracts we have a new kind of infrastructure by which we can build the the pumps the walls and all of this that are needed to make financial money flow from people to people and not only that we have a way by which we can make this infrastructure as you correctly say publicly owned like not owned by a by a single company or maybe owned by a lots of different

organizations at the same time and it just it just flows from the points where it's needed to to the points where people are supplying it yeah so listed maybe take this opportunity to talk about the the infrastructure and and what the infrastructure might look like and is it this is something I've been thinking a lot about recently and so you know we we talk about public blockchains in on one end of the spectrum and any other in the spectrum we talk about private a permission blockchain all those sometimes those two terms get in touch their air interchange not necessarily so what I'm getting to is that all all of all these block chains

that we expect that will happen to and that will come to exist in the future will be on this spectrum at some point so you'll have fully public blockchains and fully private block chains and somewhere in the middle you may have a block chain that is owned by a federation of companies you may have block chains that are owned by States you may have block chains that are owned by countenance you may have like a European wyd blockchain that handles transfer funds between different countries or that handles transfer of information about citizens that sort of thing and interoperability I think for this world to come to fruition is essential so you need to be able to have ways through

which this information can information and value can transact from one type of system to another otherwise you still you just end up with the same type of system we have now where everything exists in silos what are your thoughts on how interrupt bility can occur in in a future where we have thousands perhaps millions of different ball chains not all operating on the same protocols you know different block chain protocols are becoming 2222 to the ecosystem you know things are tender man things like open chain multi-chain big chain TV etc we need to have a sort of some rails on which we can exchange value at the top

like for example bitcoin you know we all agree today that bitcoin is one block chain on which we all agree that has value and that's why bitcoin has because remain the biggest block chain and that's why bitcoin is the point of entry for buying any other type of cryptocurrency how do you see interoperability up operating in the future given that sense so i think i personally think like there are many companies that are already solving these companies and projects that are already solving this interoperability problem and and and it's a big problem right like they did it'd be the way to see it is you essentially warn financial plumbing but like parts of this system

might exist on different block chains and they might you might need for value to flow between these blockchains seamlessly right so how would we do that in the future now then already like two interesting projects in this direction so one is BTC delayed what does VDC really do bdc DNA is a small kantai a set of smart contracts only cereal which have the ability to verify bitcoin transactions so the kind of thing that is possible is with bdc relay you can build a some logic life when Sebastian transfers to Brian on the Bitcoin blockchain 10 BTC then a

particular smart contract will transfer Sebastian I don't know 100 ether automatically so when Sebastian transfer Stan Bitcoin to Brian he can publish this proof on the Atheneum blockchain VDC delay will verify this proof and if correct they automatically trigger this smart contact of transform let's say 100 ether the Sebastian so there's already already a step on the interoperability between blockchains the other the other big project on the interoperability space is inter ledger which which we have an episode coming up with IntelliJ folks but in a sense it is a way by which value can flow between change like

Sebastian is on the Bitcoin block chain and brian is on on on the ether blockchain and Sebastian wants to pave line and there are different block chains but intelligent makes a series of infrastructural hops by which this value can flow from Bitcoin Twitter seamlessly then you have some centralized version so these are all like decentralized versions both of both intelligent and and BTW silly then you have centralized interoperability like shape-shift but I I have the centralized in inter inter polarity meaning like if you want to do the same thing instead of IntelliJ you can do it with shape-shift but then I i personally suspect that there are going

to be more complicated forms of interaction where there are smart contracts on one chain interacting with contracts on another chain and these are going to be kind of hard in the beginning vitalic himself has a lot of a big paper on making this kind of interoperability work and and somehow I feel like zero knowledge proofs have a role to play here in the future so once you have good sister so 20 oops interoperability between change is going to become really easy because there might be a particular computation on one chain with the zero knowledge proofs you can prove to another change that that computation was done correctly and then the other chain can just trust this proof and do something else in

return so that kind of systems are also coming so yeah I do believe the future is like a thousands thousands of chains but the interview the big problem is only solved for certain limited set of interactions today yeah mayor absolutely i think if you have put it so so beautifully and elegantly and and and actually I would love to read that paper from Vitaly perhaps we can also link to it in the show notes so I I don't have much to add here but let's talk a little bit about sloppy because they've been if you think ahead of you know where is the space going what is the human system can look like what are all these applications going to look like on there

I mean we haven't actually seen very much so far but it's so mostly experiments planning or people developing some code that nobody uses but now we've slock it there you know getting serious so it can you give us a little bit of background what's been going on there and what that will mean for the future of here amend of the apps yeah so in the big picture like when vitalic came out with his white paper he he he essentially popularized again the idea of decentralized autonomous organization this idea kind of was floating around in the cyber cyber space for quite a while even before I tedium

came in but vitalic basically pitched helium as kind of the substrate on which you could build organizations like that and now that ethelia ms kind of operating what we are what we seem to be heading into is is a phase where there are different models of how dao should build and what they should do so slow kid is one of the first projects to come or come with come up with like serious vision of what a deist how would you should be built how how should it operate itself what should it do and what kinds of returns should it produce for the for the people that I invested in BDA now i must say that there are a couple of

different visions that are that are coming together and slock it is not the only one but since its think it's the most further along let's just describe what what division really is so what the the ways debase locket is approaching the building of a dao is it is it says that da was a best thought of a set of people who come together and been like a decentralized capital allocation form on a decentralized VC if you want to go pull up here so there they essentially say that the do ecosystem will consist of many different players so the first

player is the dao itself which is essentially a set of people who invested some ether and got a token in return so let's say i might invest 100 ether and i got a ten thousand sloppy tokens right in the current route see so there are many people around the world who would do this and let's say they are like 100 billion shares owned by 10,000 different people so they constitute the Dow and while creating this Dow all of the ether they invested becomes kind of the capital of the doubt so the now might have say 30 million dollars of capital now that's the first play let's play I want it out then there is another player

which is the service provider or contractor they keep changing between these names so the contractor is let's say a company that that has that is an i NC again behind are gay and what the contractor does is it it comes to the Dow and it says I want to build a particular product and I need say five million dollars for developing this product so here's my proposal for building this product and what I'll do with it give me five million dollars worth of ether so in this case what a locket itself is doing its saying that it's going to build the what is for it calls the Athenian computer which is essentially a system which

merges IOT and the blockchain is going to go to the Dow and say okay give me these many million dollars was of ether and I will take this money and i will build this particular computer now now with our members now shareholders essentially need to decide whether they want to invest five million dollars of that Dow to the contractor which is slotted game behind this case so they have to make this capital allocation decision is like a VC like decision like whether they want to fund this speculative project or not and the idea is once if they if they agree to fund this speculative project then the contractor goes and and builds the

product it ships the product and whenever this product is installed somewhere in the real world this product makes some kind of revenue for the DAO so slock its main thesis now what is lockets main thesis thesis is that a set of people were collectively unknown to each other and who came together during a moment of three of creation of a Dow will be collectively great at making these capital allocation decisions and they just might be better than conventional VC firms of ancient forms that seems to be the hypothesis that they are testing so that's one of the models ok interesting aha I have being a

little bit skeptical here do you really think that is their motivation because if you think of it as ABC right so now they erased which is crazy actually the race 9 million dollars as we recall this when you went to the show notes before like an hour ago that race 2 milli there is 2 million dollars just in this time so if you think of it as a VC right so we see you soon invest in all kinds of things also we seize tend to be fairly diversified but certainly wouldn't put in like you know sixty percent of the / folio or whatever into slock it so it doesn't seem too any sense for them to say okay we're going to try to raise crowd funding by trying to create this VC like structure

and then hoping they invest money here and probably this thing is not going to have that kind of Independence oh I probably is just going to give the money it's lock it isn't that right if you look at the code itself and i have i've actually started the whole socket socket gold and there's a paper from for interested people there's paper from krista inch describing the whole code and and it's actually a pretty simple set of smart contracts that do this if you look at the code itself the future shareholders of this dove which they call the dow can actually reject socks lockets proposal and and not decide to give money for the development of the

Athenian computer it is it is certainly possible if you just look at the code itself now in reality I do think that they will end up giving the money to lock it gambia Simpson simply for the reason that is such an early model that they won't have too many competitive proposals I guess like I mean like startup guys around the world are not thinking that they will make a product and pitch it to this Dow instead of a normal VC today so there's not much I don't think there'll be a lot of proposals that come to them at least when the system begins and slock it Gambia's a helium computer might be one of the first ones to come so they'll end up approving it but in theory they could

they could reject it because the dow is supposed to be a separate entity from socket game by yourself and even in the token sale arm none of the founders of slow kid game behalf get any stake in the Dow itself so that directly seems to seems to be the plan now my the fundamental question I think about is is this statement that a big chunk of people collectively unknown to each other can make great capital allocation allocation decisions is this very true I mean if you if I look at the great capital allocators of the world you know I always imagine a person now you see

Warren Buffet that's a great capital a locator he knows where to invest and we're not or somebody like George so that's that's a great guy now you might think like Andy Grove intense you that's a great capital alligator now what they're saying is the wisdom of the crowd can be better than the then a single person capital allocate a potom hole and if if this hypothesis is true there is a big conclusion I just wonder if it's true or not yeah and any other thing is if you say wisdom of the crowds right so it's still going to be a very fairly small set of people who will participate in this and you have to imagine that many of them even if you

think about it rationally let's say now I'm gonna put in two hundred dollars worth of money in this doll thing or even a thousand it's not gonna be worth my time to like look at all these proposals and like contribute to it so it's only going to be make sense for a small portion and I think one of the problems here is even if we accept that you know somehow aggregating intelligence can lead to superior outcomes is that there's sort of a lack of responsibility here but you can always say okay somebody else is doing it and in the end that might just mean that everybody is going to kind of go with the default choice whatever that is well let me put it like this i think this kind of two different questions one

is in the abstract our crowds good at making certain predictions and i think in some cases they certainly are and the other is does that help with something like making investments decisions for a VC light vehicle especially at this context as well right because a big part is also software like how easy is it for me to evaluate these proposals kazma vote there's no real software for this which is gonna make it for terribly user experience I would agree on I'm kind of at least the second found out definitely agree on that if i look at like governance off yesterday

they are very badly adapted to a problem like this so you in a sense have say 10,000 people that need to agree on what should be the name of the Dow 41 and then they must agree on whether they want to ship five million dollars to socket gain better or not and I and I suspect slack is the most common to be used today for this kind of intercom inter Dow collaboration is slack and I suppose slack is completely inadequate for something like this because you need kind of voting systems you start to need prediction markets you need like ways to analyze these investment opportunities

and I just think the governance tools are not there so currently what I have kind of observed from this ecosystem is there's this company which is called Dow link which has kind of taken upon itself to build some of these governance tools and they are going to themselves try to become some contractor or service provider to the Dow in addition to socket gambia so they're able to come up with their own proposal in the future but it's a very interesting experiment that's like look Bitcoin has has trouble just coming like Bitcoin which is like you know least I don't know a hundred different people on a different important stakeholders distributed

across the world Bitcoin has trouble coming to consensus on something as simple as a block size now this is a Dow which might have like like more than thousand a thousand people or maybe 10,000 people and they have to come on consensus on like decisions on how they want to spend all of this money so it's going to be like a great experiment in in governance mechanisms like decentralized governance mechanisms and I and that's what makes this investment really risky like not knowing how these things will be done and knowing that there are no tools for it makes it like a real pioneer experiment so that's that's life but but but you know like

slock it is just like one vision of what the Dow should do sokka's vision is simple the Dow should be like this set of people who make investment decisions that's it that's that's what did ouch it do but then there are other kinds of visions coming along as well for how how should you should one should build the Dow economy and maybe like interested listeners should follow Macchio Pinsky's blog and we link that log in the show and he comes up with a vision of how thou should be so in matches case what he says is that investment decisions should be made by the market not through governance mechanisms so slow kid says you should be government Donis

mechanisms to make investment decisions but much he says is investment decisions are kind of the prerogative of the free market not free market as a whole rather than a governance mechanism of one time so check out kind of his view which is the the economy will end up building with these organizations is there'll be like thousands of dowels and they will be all linked to each other through through financial financial means so there might be lets say let's say a pairing Dow that pulls some money to do some particular thing and then some other person are some other person a different part of the world my thing

okay they he was aight rate on the product of this parent dow so equally ends up creating a new dow and decides to give some of these shares in his new doubt to shareholders of the old dow or some of the profits in his new doubt of the prophets of the Old Dow get some support from the old our members and build this product and commercialize it and then some other guy basically folks this this new douse product and so you end up with this system of dows we're like thousands and they have relationships between each other the market besides the value of the token of each Dow and in combination you get like a superorganism made up of like

thousands of different dow's doing solving thousands of small problems together so that's like another vision that's coming and we don't know what we are walking here so these are all experiments thanks so much for your insights then and I personally look really forward to our sloka depa sewed which should be coming up soon as well and I'm sure that's going to be very interesting to dive a bit deeper in there and and and this is exciting also from the perspective this is probably going to be the biggest crowd sale since helium in this ecosystem maybe even bigger than aquarium and that's that's pretty crazy if one thinks of the kind of speculative nature of this project I guess if human

was a bit like that too in big extremely speculative and kind of out there so it seems people have not lost a risk aversion when it comes to things like that and of course if the Hume success it has been that's that's quite understandable so thanks so much for for discussion hopefully we'll we'll do something at that soon again and thanks so much for listeners for listening so we put out new episodes every Monday you can subscribe to it using your favorite podcast application or watch the videos on youtube com that's youtube.com slash absent and Bitcoin and if you would like to you could also leave us review and then we will send you a t-shirt so you

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