Real World Tolerance

Transcript

alrighty uh we are back from our break uh we have our next exciting speaker uh Tim Boo from the ethereum foundation and uh he'll be talking to us about real world tolerance uh World hi so let's go uh floor is yours Tim thank you can everyone hear me hopefully um I'll just get started and if there's an issue just let me know um but yeah thanks for the introduction uh my name is Kim Boo and yeah the title of my talk today is real world tolerance

uh before I get started just a couple disclaimers um first this is my personal opinion so this is not talk that's the ethereum foundation's opinion or all of Al cevs are obviously not uh all of ethereum um also um I'm not a geopolitical expert so uh you know some of the things uh in this talk might be a bit vague or you know not quite right on the details but hopefully the high level idea um is interesting um and then on by saying there's still a lot of uncertainty in all this um so if you have any comments or Corrections please send in my way I would love to chat so let's get into it um so so real world

tolerance um a thing that we talked about a lot in the ethereum space is this idea of Real World Adoption we want to ethereum to be used broadly across the world um and my premise for this stock is that this is obviously something we should do um but it's only necessar and not necessarily sufficient for ethereum to be successful in the long term and the reason for this is that ethereum has a lot of properties that are fundamentally in tension with existing power structures in the world um the asset is this effectively Sovereign money that the protocol issues and ethereum enables permissionless coordination you can start a doubt it doesn't have to be set up as a legal entity or to exist in any specific

jurisdiction and obviously when we talk about censorship resistance um it always assume there is some power there that wants to censor some user um and obviously you know those powerful actors have the reason why they want to do that and so given all of this one question that uh you know we should ask ourselves is um you know why should existing power structures tolerate ethereum to exist as is and usually when we think about this um there's a couple sort of answers that come up the first is that you know maybe they wton will fight back so we designed the ethereum protocol to be resistant to this um sometimes you will talk about designing ethereum to be World War III resistant that's be what they mean by

this I think um there's another sort of um another outcut somewhere um maybe from you know existing nation states perspective ethereum just become somewhat irrelevant where um you know you look at something like the Pirate Bay for example today torrenting still exists it's still a thing that people can do um but by and large you know things like Netflix Spotify or like you know Kindle eBooks have like taken the the the majority of the market so um torren thing is just not this really relevant thing in the world um as it as it you know was originally thought it would be and then another another failure mode is something um that was coined a few years ago called Bitcoin TM it was a great

post by Epson theory about this where um in in the Bitcoin context people talk on about you know institutional adoption and wanting to you know have everyone in the world own Bitcoin but one way this can happen is if it's facilitated through you know the existing Financial system I'm sure you can get everyone to own Bitcoin but they're not actually owning Bitcoin in a self because away or you know sending it to each other peerto peer everyone effectively owns the coins through an ETF or something like that and this effectively effective for capture where you know you might have achieved your originally stated goal but you've done so by like compromising on the core properties of of of the protocol and so all of these are pretty you know Bleak outcomes and one thing

I've been trying to think about is other like more positive versions of this and one idea that I you know that I want to talk about is what would it look like for ethereum to provide some value to the world um such that you know it's the only place or the only protocol in the world that can provide this and and get tolerated that way and so my thesis for this talk is that in short if we want existing nation states and other power structures to tolerate ethereum's properties at scale we need to have something called an absolute competitive advantage of creating some valuable export for the world so a bit of backgrounds here um in terms of just like competitive Dynamics in the

market there's effectively four positions you can be in in the market where um either you're like at a comparative disadvantage with other producers where um you know other people are just better than you at producing something so it makes sense for you to buy from them and you can be in a state where you have competitive parity so you're effectively as good as as another producer for something and you're kind of ambivalent between either buying the good from them or producing it yourself um then comp comparative advantage you know you're better than get people on producing act so people buy it from you and the strongest competitive position you can be is having an absolute Advantage where either you're the only one who can produce something or you're the only one who can do it in like a cost effective way and so you

effectively have you know like a complete advantage over everyone else in the world at this thing and um one one principle related to this is that in practice outside of crypto uh we we see that nation states will often tolerate pretty big ideological or political differences with other trading partners um if their economic exports are valuable enough and this is what I'm talking about when I talk about real world tolerance is you know they don't necessarily have to agree with everything um but they'll tolerate this because they get you know positive value element and one note on this uh before I move on um etherum is obviously not a country you know it's not like a

physical place with borders and has to deal with food and shelter for its citizens um but I think it's still valuable to think of it as like a strong economic force in the world um at least for the purpose of the do and so if we look in the real world at some examples of like comparative and absolute advantages uh you can sort of start from like you know some weaker ones and and building your way up to to the strongest ones um one of the you know biggest ones is just oil production so um Saudi Arabia and Russia specifically have about 20% of worldwide oil production which is roughly on par with the US and you know I think you can see how um this gives them pretty strong geopolitical leverage across a bunch of

topics where you know they have very different Valu than a lot of their trading partners but then these Partners will engage with in trade with them because of this and you know one that's a bit stronger is the case of cobalt in Congo so Congo has about 70% of the world's production of cobalt which is used to power a bunch of different electronics that thatly everyone relies on um and again this gives them like strong uh strong geopolitical leverage um you know things like human rights and whatnot or are things where they get sort of a a more lenient treatment um than others because they have this like pretty valuable resource I think today uh probably the most Sant example of like an absolute advantage in the world is tsmc the

chiwan chip manufacturer where you know it produces over 90% of the world's most advanced chips um and something like 70% of worldwide chips uh last time I checked and this is just you know effectively like this huge huge Advantage where you know most modern computers effectively can't run without ships that are produced by tsnc um and and it gives sort of the entire um the entire country this huge geopolitical weight that otherwise might not have and so when we think about ethereum one thing I think we should consider is like when we're when we're thinking about what we should what we what should we be building what are the things that like we should be spending your time and

efforts on um it's worth thinking whether these are things that can help us build towards a strong competitive advantage and like very short version of this is like what would what would it look like to build something like ethereum's tsmc one example um you know that uh people have used in the past is the idea of banking the unbanked where ethereum um effectively allows anybody to create an eum address and through this they can interact uh with all of the network um and you know all of Defi and whatnot and they don't need to sort of have a customer relationship with a traditional financial institution so this means that a lot of people who you know might not be able to get that um are are users that are like easier for ethereum to

reach and you know one comparative advantage you you have there uh you know from the perspective of just aligning with existing power structures is things like exporting us dollarss you know in other places in the world because we have something like usdc on ethereum or usdt and you can see how this is a bit of a like precarious position to be in where you know while this might be something that allows like these power structures to tolerate ethereum more than they otherwise would um if it shifted overnight if there was an easier way to reach those people or if it turns out they didn't have this as a strategic goal um this wouldn't be a super strong Advantage for theum um so it's it's like a useful thing to as like a tactical stepping stone but it might not be like

the core thing you want to build at your competitive Advantage r one other thing um that ethereum is unique for that I think is a bit stronger and you know might be a good candidate for an absolute Advantage is this idea of ethereum being an economic test net for the world and what I mean there is that ethereum is big enough in terms of like the economic value that it secures and and um and generates that we can actually run pretty big experiments on it you know we can run things at tens hundreds of millions of dollars in scale if not billions um and we do this in a way where we can be more risk-taking than existing institutions who like manage similar amounts of capital because etherum is pretty disconnected from the rest of the world again etherum

is not like a real country it doesn't have to deal with like you know citizens food and shelter and so it can afford to be more risk-taking and what this means is that we can effectively look at all the potential new ideas around mechanism designs or econom or what not and actually test them and iterate on them and prove which ones work and under which conditions they work and this is something we can export back and you know go back to the world and say Hey you know we tried you know quadratic funding and retroactive public goods funding and you know if you set it up this way and this way and this way in those context you can actually allocate you know hundreds of millions of dollars or billions of dollars in this way um and this is something that I don't think there are really other places in the

world that you know you can do this um so it's a bit closer to an absolute advantage and maybe the one caveat is that um it sort of implies we have to keep coming up with these things over and over where you know like if we if we just do one of these and Export it then um it doesn't give doesn't give us much lasting power so to recap everything so far um theorum has these core properties that are intention with existing power structures getting adopted at scale doesn't mean we get to be tolerated at scale and won't get push back um and you know there's a bunch of ways you can be defensive about this but one way to be more proactive and to improve our long-term odds is to think about exports or things we can bring to the

world where ethereum has like a very strong comparative advantage and ideally an absolute Advantage where it's the only thing in the world that's able to produce uh this this new so what if we can't do this um so uh you know maybe we just don't have enough weight or enough uh you resources uh alone to be like this this this uh this like effectively economic actor that's tolerated by existing Network States um you know the way that people resolve this again in the real world is through coalitions right like you find allies that can help sort of build a a sort of Coalition with you and the question is you know what should ethereum's

Coalition be like what is the thing if we were to do this that we want to build a coalition around and a few ideas um I think are worth considering from uh a bunch of different posts over the past few years to help think about this are first Alex idea around di so he had this post around death connect last year in Stan talking about um the eak movement and what you know he saw as like a potential response for that and the idea of theak was you know the Ean Community should focus on Building Technology that's like optimized for Defenders rather than attackers that helps push the ideal of democracy forward and that you know pushes decentralization rather than relying on

like centralized third parties to uh to secure things another really good article to help us think about this is an article uh by Josh Stark around what ethereum's core uh value proposition is uh the piece is called atoms institutions and blockchains and what he clearings there is that um the thing ethereum gives us in the world is this property called hardness which is the ability to make claims or commitments about the future that uh are credible and make you know an uncertain future more predictable and his thesis is that you know there's other things like this in the world there's specific materials which he calls atoms that do this you know if you think of something like gold we can know

that there's this much gold in the world and so we can you know make all these assumptions around it um and you know use it for things like storing value and and other use cases as well um but that's kind of hard because we have to rely kind of on Nature's Randomness so we have this other thing at institutions where you know if we want to make credible commitments Beyond a single individual can set institutions and then we can uh effectively rely on them you know to make the future predictable on a longer on a longer time scale and you know with less of a with less of a like uh variable risk than you would by relying on a specific individual um but institutions are are quite heavyweight they don't uh always work well and what not um and blockchains are effectively a

new way that we can create hardness in the world where you know we have this digital thing where we can just say here's a smart contract and it does X Y and Z and you know you know that under these economic conditions and these security assumptions it will do this thing in the future as you expected to and that's effectively this idea of hardest and then the last piece I want to highlight is a recent piece by theic again uh around political alliances um and specifically commenting on all of this support of like crypto tokens recently where he argues that the thing we should actually be looking for in these alliances isn't as much support the crypto tokens but support of these other values that are very Central to ethereum and to like the crypto space as

a whole so things around freedom things around privacy and whatnot um and that's like a stronger basis on which to build at these alliances rather than just saying you know support ethereum and so putting all this together we have these three uh these three ideas uh D you know democracy decentralization faor Tech hardness disability to create future certainty and then these crypto values that we've mentioned the very beginning so you know Freedom permissionless neutrality censorship resistance um that I think this gives us a good basis to think about what do we want to build coalitions around and I was talking about this uh in the past couple months uh with someone I work with v and he came up with this this

phrase so hardening the commons um as basically the unifying principle around which you could build these coalitions saying that one good way to think of ethereum's impact in the world um isn't necessarily as this like token or isn't necessarily as this like Tech platform but you know can we have this infrastructure that exists uh on on chain um to help Co Commons make these hard commitments where you know they can't rely on existing institutions for whatever reason and I think this is a really good candidate to think about what's the framing want to have if we are to build these coalitions with um other sort of uh economic and political actors in the world and so H to wrap all this up I'll

just summarize everything we went through but as I said earlier ethereum has these Core Power structures that are intentions with existing uh existing power structures sorry e support properties that are intentioned with these Pro Power structures things like censorship resistence things like having a sovereign uh money and whatnot and so if etherum gets adopted that scale it doesn't mean that it will be tolerated um you know there's a lot of worlds in which we have like a much more adversarial relationship with these Powers um and that's ideally something we should avoid and I think one way we can avoid this is by effectively um coming up with things that are uniquely valuable to the world where only ethereum is able to produce those States um and if we're not able to do this then we should think about okay what are you

know other coalitions that we want to build and people and and institutions want to aligns yourselves with and to do this thinking of you know ethereum as a tool to harden the commons it's probably a more productive framing than thinking of etherum as just another crypto project and so the question I'll wrap up with is uh sort of an exercise to the reader what is ethereum's absolute advantage in hardening the comments and yeah that's all I had thank you very much [Applause] all right thank you very much Tim um that was a great presentation

um yes uh we uh Tim is here if anyone has maybe are you Tim okay if there's a question or two okay I can a question or two yeah yeah all right uh does we have time for maybe one or two questions is anyone has um any questions all right it looks like everyone's still needing a little bit for warmup still today so but that that was awesome thanks so much Tim um pleasure having you of course thank you very much for having me thank you