ZK Podcast: Kicking off 2021 with Anna, Tarun, James & Josh

Transcript

[Music] welcome to xero knowledge i'm your host anna rose in this podcast we will be exploring the latest in zero knowledge research and the decentralized web as well as new paradigms that promise to change the way we interact and transact online [Music] so welcome back as some of you may have noticed there was no episode last week this is the first episode of 2021 and actually that week off was the first break i took since this podcast started three years ago

and it was pretty good to be honest now you may have also noticed that the intro is a little bit different and for anyone who missed the end of year podcast that we released two weeks ago there's been a pretty big change here at the zero knowledge podcast so frederick my long-standing co-host and the other voice you are very used to hearing on the show will sadly no longer be joining me on the show every week in the end of your episode frederick actually shared why he felt he wanted to leave the show and so if you want to hear more about that in his own words you should listen to that episode i'll add the link in the show notes or you can just look at the episode that came before this one

it's been a great run and i'm super proud of the work we did and it's sad to see him go but like all change this also offers up an opportunity to rethink the podcast and maybe take it in a new direction so during my time off i was able to spend time reading and learning about new ideas and get inspired and i i feel i've come back more inspired for sure that i felt at the end of 2020 so i think this coming year should actually be an exceptional one and it's clear that the work we are doing in the field of zero knowledge and decentralized tech is more relevant and valuable than ever enjoy this first episode of the year my

guests are tarun shitra james prestwich and josh cincinnati we chat about where we're at in the field of zero knowledge applications blockchain privacy and defy and we also try to imagine where this could be going in the near future so hope you enjoy it if you haven't yet please do subscribe maybe tell a friend who you think might get something out of this yeah so here's my conversation with tyrone james and josh so today i will be doing a catch up with some friends you may be familiar with if you are a regular listener to this show tarou james and josh are here to kick off the new year and set 2021 on its

course so you have all been on but let's do a quick round of intros so that people know who who's talking and what you're all about sure it's nice to be back on the podcast my name is james prestwich i'm currently a protocol engineer at cello we work on the cello blockchain which is a proof-of-stake chain with a evm so i'm i'm josh cincinnati i was previously the executive director of the zcash foundation and prior to that i was the developer advocate at block cipher a bitcoin and ethereum api company and now i am what i like to call gainfully unemployed uh

and i'm just doing a bit of advising and some fun stuff on the side and i've just had my ear to the ground with all things cryptocurrency for quite a while also the co-host of the acclaimed trodcast josh's dumb voice is what it is perhaps the only one of its kind i don't know that there are other quadcasts yes but yeah yeah this is you know this is new for me because i'm used to the two-minute format constraint but i'll do my best hopefully there'll be some bangers okay now tyrone you have already guest hosted quite often so people should be pretty familiar with you but maybe you want to just say a little hello yeah hey i'm tyrone i am a founder of a company called gauntlet we kind of assess economic attacks and

economic security in uh proof of stake protocols and also in d5 protocols um and i also do a little investing on the side with robot ventures nice so it's funny i think tyrone james frederick and i did do one of these kind of more catch-up-y episodes do you remember this was like stanford fbc stanford blockchain conference right before it all went down man but do you do you guys remember how amazing it was that everyone for who was there from asia was just like wtf americans what are you doing and like everyone at the comfort is like huh

[Laughter] man i was just thinking about that though that was sort of the last time we had i did an episode like this which was more just kind of casual and catching up with folks and i think what were we talking about back then it was the flash loans or something yes oh my gosh remember flashlights i do well i feel like they're still kind of happy they don't happen yeah they're huge yeah they're like a regular part of the ecosystem now they've just become normal they sometimes are using attacks we we've seen flashlights really catch on they're pretty much standard attack vectors now um uh but we haven't seen flash minting yet uh there's a proposal to put it in west

version 10 but we'll see if that happens what would that mean what's flash minting uh it means that you can not just borrow tokens that exist but create tokens that don't exist as long as you burn them again before the end of the transaction but of a certain type of like an existing table uh as long as the token contract supports it so the idea of putting flash minting in west is that you could have an infinite amount uh for all intents and purposes of wealth for one transaction is that a good uh also also maker maker actually tried to add this and um it really for mkr and it did it did not succeed i missed that wait it

did not succeed in being implemented because of the governance it did not succeed in passing government okay okay it's not that it failed on the ground no no the code is out there code is out there it's in the repo yeah someone should if only they could have minted an infinite number of governance tokens [Laughter] for that one transaction of voting well that actually also happened by the way and mkr has uh just a maybe a slight aside has a continuous voting mechanism so like imagine if you put up a proposal that says hey um make anna like queen of berlin who says i'm not all ready

and basically and basically people people vote on that and uh you know any time the the the percentage of the vote flips from like below 50 to above 50 then the answer let's say it's like 52 no initially and then it flips to like 45 no then all of a sudden you will be anointed queen but if people remove their votes to that proposal and it falls back down you lose your queen test so it's like it's kind of continuous voting in order so that like a flash wouldn't work like you'd have to keep it up somehow although yeah although there was a bug that like actually someone found a way to do some a flash thing that's sustained at the very last minute okay yeah basically they like front run someone and did a flashlight oh at the

very last minute to get the vote in because then you are you're like even though it's been going over it's not like an average of that time it's just like whatever it ends up on oh wow yeah so they they changed that to happen but anyway sorry maybe that's a little bit of a start oh this is actually exactly the kind of stuff i want to talk about today um there is a little bit of a schedule that you know i put together of kind of a a few topics that we can talk about but um this is kind of the purpose of this episode it's it's a bit of a checking in where we're at maybe talking about some of the things we expect to see i don't want to do a big prediction for the year but maybe like this quarter and uh and get some yeah some general

thoughts about what's up and also given that it's the zero knowledge podcast given that there's this changed format one of my goals is also to start talking about potential topics or ideas that are exciting things that we could even cover in future episodes in depth so first is a quick rundown of where we are at we are currently recording on what is it january 9th what do we what is going on right now it's pretty boring not much in nowhere nothing nothing interesting oh well i mean i guess other than the botched coup in america and crypto assets exceeding a trillion dollars but

yeah that's yeah it is it is sort of nuts though i mean it like it seems like there's uh we seem to be at the beginning of at least from a you know pure interest and speculation perspective um it seems like we're in the beginning of another 2017 style run which may be good or bad depending on your perspective you just said beginning of really when bitcoin in 2016 2017 eclipsed its previous all-time high it went on to just about 10x after that so you know if it follows a similar pattern

there's still a 10x in the future that seems pretty pretty crazy to me i don't think that's actually likely to happen yeah i would agree and i guess by beginning of bull run i don't know that it's going to match that same like that same cycle i mean i don't know anything about price to be honest yeah i'm just feeling just purely based off of the kind of um sentiment and interest that you see from people in and outside of our little niche industry and in that regard it does feel like we're still somewhat early in this stage and i don't know if that means and i very i agree with james i think it's very unlikely that bitcoin's gonna

breach that insane amount of money this time around my big interest and focus i think for the next quarter is going to be really about what the and and this is again obviously like a u.s bias from my perspective but seeing that um new proposed rule by fincen and the incoming administration and how they might approach uh you know cryptocurrency regulation differently uh is going to be something to watch very closely for the next couple of months totally yeah yeah that's something so far that i haven't covered much on the podcast but i actually i'm curious about that a little bit myself i want to understand a bit more where things are at because i think the

last time i really did any in-depth look at that was in 2018 or something it was quite a while ago we've just been sort of you know rolling along kind of under the radar and now all the stuff like that yeah me too i think there is this feeling who i was talking to someone i was talking to you to room the other day and it was like the bear market was kind of nice it was like this little little crew and we'd see each other at conferences and there was nobody that we didn't have the the random like acquaintance pinging us about what do you think about should i should i buy some bitcoin now or should i like that's a tricky question whenever i get it i'm just like i'm always like no it's too high you know how to stop those right what

don't have any friends outside of crypto oh that's my approach i mean the the best part is is the relative ones which are like hey can i like can i like can we can we talk in the uh you tell me how i should invest my crypto asset portfolio i'm like no or i tell them or i tell them random coins that are guaranteed to go down no i'm like these are definitely going to go down so you should you should definitely yeah but uh most of those are gonna go up first yes but you know don't don't tell people about reality tell people about the dream other than so i think

i think to define this moment is a little bit like we're in a moment it feel you know there's a change this month than it was three months ago even with the d5 kind of excitement this is definitely like in a different space i think another interesting thing that's happening right now though is there's a lot of projects that i've mentioned this a few times on the podcast but a lot of the projects that raised in 2017 came out in the last quarter in like q4 and now going into q1 of 2021 you have like because some of them launched but they didn't fully launch like polka dot launched but it didn't launch para chains and cosmos launched actually it launched a little bit before but you

know ibc hasn't launched fully yet so this is where i'm very curious like are there any things that you know are going to actually happen this quarter that are something for us to pay attention to um in blockchain and crypto and zero knowledge something that i i think will be interesting to look at um and and you know full disclosure i i advise these folks a little bit but i think that it's very likely that the mina main net is gonna launch and that i think it'll be a very interesting test of uh well it's gonna be an interesting test for a number of reasons but the biggest one i think is is really like the approach of using you know their approach to recursive uh recursive zero-knowledge proofs uh to

enable you know a more scalable blockchain of sorts and i think they're you know that kind of is going to echo throughout a lot of different projects whether you're talking about like rollups as l2 or the stuff that's happening with halo on on the zcash side like you're gonna you're gonna see more people approaching it it's it's cool to see but there's also like these i don't think it's it's the case that a lot of like the l2 approaches are premature optimization right like it's clear that that's sort of desperately needed on various places but there is a question of like whether you know these these uh sort of base layer scalability things for base layers that don't have as much usage or brand new whether that is a premature optimization to start

what about you tyrone what are you what's on your horizon for the quarter the interesting thing that i've been thinking about at least and and this goes to josh's point regarding like privacy you know kind of we we saw all this growth in spite of the fact that we have piss-poor privacy right now which is like what is the imagenet moment for crypto so if we look back like 10 years ago the thing that caused kind of the boom in like ai stuff and facial recognition and eventually the surveillance capitalism stuff in general was imagenet which is like 2010 actually when people realize that like you could throw more hardware at neural nets and like actually classify

people's cat versus their dog poop and so uh you know like basically like imagenet set off this huge kind of boom and that boom came from the fact that people actually like saw how this could be useful in practice and like it set off this thing about like making good developer tools making like good ux like hiding things from like you oh it's shitty for privacy but good ux is like alexa you know anyone can use alexa and they have to think about it but it's actually doing all this stuff behind the scenes so i kind of feel like the image that moment has got to be some combination of privacy plus you know i'll i'll call it defy in

the sense of like it needs to have more operations than just transfer like it needs to have some notion of trading and he says some notion of borrowing hopefully this boom will like actually push us across the finish line on that and we'll have that moment do you think are there any projects that you've noticed like kind of happening right now that are doing that or is this something that you foresee for like the year like a goal almost i think i've noticed a lot of zero knowledge researchers start looking into actual defy applications that are private which i think like is to me that's like the holy grail barry has been on a bunch of forums like writing about like how do i make a zero like some like approximation to a zero knowledge versus

a version of uniform there are a lot of reasons you can't directly but i i've just like noticed there's the zk folks who like sort of we had the last wave funded a lot of the zk innovation and we're kind of getting to like some of that in production and you know james can of course talk about some of the that stuff actually but i i have noticed like a bunch of people starting to to look more into define i i think like that is the moment we kind of have this like switch that really makes it useful so i don't have a particular project like it's some combination of like a leo aztec maybe starkware i don't know starkwear is doing things it's like really hard to say do you think barry's

post in a way was seen as a challenge to some of the zk folks because it was it was pretty much saying you can't do it right like it's defined privacy don't mesh in a way at least in this particular example and i know i know of at least two projects that are trying to do something in that direction using zero knowledge proofs and privacy yeah i think it just says you can't do something as simple yeah it doesn't say you can't do it at all it just says that like something that is really gas efficient which is the real reason uniswap is good is like it's just like simple compared to like a real exchange yeah uh is is hard but i i don't think there's like a impossibility theorem but to me i think that's like that's the

thing i think there's an image that moment for and so i don't have any particular projects you know i can tell you all the d5 projects because i think they're doing a ton of new stuff but though they're not going to be the thing i think that actually crosses the chasm i think like you actually do need private versions of these for it to be like useful um to to kind of turns point there's no impossibility theorem for all of this stuff but we can make it for like a a bunch of specific applications like if you're trying to trade you can't keep the current market price private because no one will trade if they don't know what the market price is there have to be like some kind of bounds on that there has to be some way

you can query and know what trade you're going to be making before dispatching your trade so there's a lot of these like additional constraints on any defy application with privacy there's a bunch of things you can't do and a bunch of things that get much harder uh but there there's no reason to believe that it's all impossible was i was just wondering because like i think there is this motivation uh there's clearly like a motivated interest i think from people like us that see a need for that kind of privacy uh embedded in defy applications because i don't know that it's if it's just a bunch of like very nerdy people who want it i mean the main example i i have here from my own experience is just how just how hard it was to get people to

use these super efficient z cash you know privacy features there wasn't as much priority in the zcash ecosystem to push people to shielded adoption as i think that there you know should have been and and i i mean there there are other things at play there but i can kind of i could imagine something similar happening when you have like uniswap that's super gas efficient and then you might have some other uh cool decks that manages to yeah private one but it's like oh it's gonna cost 10x gas to do it am i gonna really does it matter to me you know and i i don't i don't know um i i can see like very large you know very unchained hedge fund types wanting

that that privacy but i don't know that it's going to trickle down to average users if it winds up costing more but anyway that all of which you say i'm just sort of curious like do you think that there will be a push from protocol developers to figure out ways to encourage that to be the default is there going to be like a ux narrative push to try and get people behind it or something else or maybe something from the actual like from the business side that like actually forces it uh i think it's a really interesting question because one of the outcomes we've seen from like all of this defy summer and yield farming craze is that the blockchain itself does not really trickle down to the average user

with even a moderate amount of usage like we're seeing the gas prices are too high for normal people to take advantage of all of this yield farming and the returns and this fact is what kind of drove the development of yfi and harvest and all of these kind of vault things that batch hundreds or thousands of users into single fee payments but you can't do that effectively with privacy there's no like good design for a what private wi-fi vault yet and is there a demand for it it's kind of the question if uh if people can make money using it one of the huge drivers for privacy and

traditional markets is making money unsurprisingly yeah yeah i i agree i think that when when you're saying kind of like from the business side i think these protocols need to somehow have a much more concrete incentive to people producing privacy and spending resources on generating proofs or generating like contributing like hardware to doing that and i think right now if you look at most designs and privacy preserving networks there's not really something that truly actually like rewards the uh people who actually have to spend extra resources and so in some sense if you if you actually were able to somehow

implicitly or explicitly tax the whales to pay for privacy for the naves and then somehow like promise the whales future inflation or something like some like i look i'm not saying there's i have an answer but there has to be some way of like forcing kind of like hey look you whales you can like collect inflation but you can only collect it if you somehow are to use james's favorite phrase uh if you're somehow providing privacy for the rubes when have you said that james uh i've been using the word rubes a lot lately what is a room i don't know this word

this is a this is an old like uh it used to mean redneck down where i come from in the south okay uh but these days it means like the target of a scam some naive person that you're gonna go take money from uh and you know just like in 2017 i think a huge amount of the market this this uh cycle is driven by taking money from robes a word a word that i want to bring back and i actually have been using it all week is calling someone a yahoo i don't know if you know it used to mean something other than a search engine yeah actually i don't know what it what was the meeting so it means no easy

rude or well yeah something per like it's a it's an obnoxious person i see it's a group of yahoos i feel like old men used that term like in the 80s or something but then they turned it into a search engine and we lost it too to the world um another thing that is and i'm curious you someone one of you might know a bit more about what's going on with that but like last year like libra was like on the radar of everyone like it's gonna happen oh no oh libra now okay so libra's no longer is no longer our best friend what's up with the project is it happening this year

does anyone know uh probably not probably not seems unlikely yeah i i i would say the attrition personnel wise seems to be high that would be the main thing i would point out all right yeah there was also a project that we it was actually one of the first projects that i ever i think that i we ever did a deep technical dive on and that was dfinity three years ago what's going on with dfinity they launched this week it really oh they uh they put scare quotes around the word mainnet in their own blog title in the zk context the zero knowledge roll up rollouts like have been happening is do we know is there anything coming up

uh zcash just pre-announced the announcement of their uh new proving system okay this is the one based on halo i believe so yeah yeah there is in terms of the roll-up world though i know like hermes should be i mean i know that there's a trusted setup going on i think for them as well right now that i want to potentially participate in and that would be another l2 ck roll up coming online uh soonish i'm just trying to think are there any other projects like on the l2 zk side that we think that that are like coming i'm kind of thinking of some of the previous guests and stuff there's a uh there's going to be a major upgrade to zk sync at some point but i'm

not sure if it's scheduled yet okay you mean the addition of their token um i'm sure that's gonna happen but uh um they're they're looking to add some uh like scripting or smart contract functionality yeah i i i am actually pretty excited though that's in case i think about the token no no the code i mean the token i don't really understand why like at the end of the day this goes back to the thing i was saying earlier i i it was like if you could somehow make the whale subsidize privacy then like that's like the ideal privacy token but i have yet to see anything that looks like that um uh what do you think of the uh tornado

cash token uh i i guess mixers are a little bit like that in the sense that like the whales are contributing at least if they're contributing the most liquidity it's mixers make a little more sense for this than zk stuff right now although there is this weird thing with um like for instance like nim has a token for for their mixer but there's something weird about it because if the distribution of the token gets really concentrated you can identify who the main mixers are oh my gosh true name is the uh mixnet one right yeah which is like really there's like some trade up like someone actually does have to quantify this trade-off of like

if it's too concentrated you actually can never really have too much privacy and this gets to what josh was talking about like there's some trade-offs service but i do really think that somehow you got to get the whales to subsidize privacy for the rubes but like but that idea that like by participating a lot in the network and then being rewarded after the fact with these governance tokens kind of the model that was popularized by uniswap that potentially that would actually undermine a private system because then the somehow the identity of the most active users would be revealed by the balances in the in the wallets unless those two were done in private setting i guess yeah i mean i think the ux is also annoying because you would

basically be forcing the users to constantly be splitting their assets if you're going to try to like make it look like it's not concentrated but then they're paying fees for that yeah a question to all of you and this is another kind of topic for this is a little bit thinking more about this podcast and actually any listeners who have additional ideas please do get in touch about this but it's it's ideas that you personally want to explore this year things that are exciting to you well uh you know i mentioned this earlier i'm really interested in all of the kind of user and fee batching and pooling that's going on recently uh so a lot of these like d5 projects are pooling users and splitting up the pool to get the highest

return for everybody i think that that kind of model can have a bunch of applications so maybe trying to at the lowest interest rate on borrowing for a large pool of users or you know kind of other things in that area this way that we're saying okay the layer one is not scaling it doesn't serve all users needs so we're providing a way to batch users and fill all of their needs together and that's more efficient for everyone yeah and i guess examples like would you put zk roll ups in that category or would you think more on the like defy urine kinda uh you know i've been

thinking more about the defy yearn harvest kind of thing but uh you know rollups also fit that bill is you're letting users opt in to this other system with different trust assumptions in order to get group benefits rollups also do this nice thing where they allow people who aren't part of that system to avoid paying for it what about you tyrone what's in your mind what are the ideas that you want to explore well i guess i i i i as they would say alpha leaked to my my top thing i wrote in my little notes which was how do you finance privacy alpha leaked it earlier in the show

yeah it's not not a big wide alpha there is there uh yeah exactly um i think like kind of a a related question uh to to what james is thinking about it's something that i started thinking about like around sbc with some people i met at stanford and then of course the world blew up and then like somehow i it got lost in march and like i don't know if it's coming back but was it's kind of like pre-urine there there was this idea of like okay if layer twos that are optimistic or like not zk force validators to place collateral and then they're

validating many people's transactions they're effectively doing the same uh batching thing right like everyone who's using the layer 2 all their transactions are getting approved by the layer one in a batch like on every little like infrequent right to the main chain whether it's during a challenge or whether or not right there's some way you can view that like validator maintainer actually batching all the layer two users and and so the question was like what does the transaction fee market look like when you if you say like x percent of transactions are layer two and you vary x from zero to a hundred like at some point when it's all layer twos it's like the competition is quite different versus like it all being

individual users um and so that that was like kind of something i was thinking a lot about because the zero knowledge proof generation market is quite different and i couldn't exactly put my like we couldn't put our finger on exactly why but there's some like quantitative difference between batching many layer twos competing for box face versus like zkp roll-ups but but it is an l2 like wouldn't it also need to be batched in what you described like it's it's just one of what is batched no it is but the security model is weird like theoretically it really doesn't even need a token it like could just be someone relaying a single zkp

or like a sequence of state updates versus like optimistic style stuff you actually have to lock up collateral almost in the same way that when you deposit to urine you've given them your collateral okay okay so like there's like less of this like finance game and more of like a like timing game and so like somehow quantifying that spectrum and that includes these urine type of things there's kind of this like you know simplex triangle of like these three things and i don't know exactly how you describe them but there's probably some way to describe all three of them and each of them are limits of like that so anyway i was thinking i was thinking a little about that march but then kind of got wrecked and so maybe now i'll think

about it again in a sense like in that in that framing it would make a lot of the l2 collateral lockups competing with the staking lockups for l1 in in those systems which would is that sort of what you're alluding to turn that there would be this like new unknown currently unknown equilibria between those economic actors or is it something else yeah yeah it's exactly that it's that plus if you add in something like a urine yeah and it's like i have the same capital that's theoretically fungible over all three how do i allocate to it um there's a bunch of like really non-obvious engineering details around this too that are going to come into play

so like for an example a zk roll up that can't pay for layer 1 gas just stops making new blocks an optimistic roll-up that can't pay for layer one gas uh probably gets everything stolen after a while and uh you know a kind of urine or vault-like thing that can't pay for uh gas the funds are tied up and uh getting a sub-optimal rate i mean also actually if they're levered there's potentially losses oh yeah right if they're leveraged there's huge losses potentially right this is a topic is there any project or anyone that you think is actually working on

this right now like have well i mean i did say it was something i was thinking i'm wondering there's no project right you don't know of anyone who's actually doing anything like this do you i think we got we have to see a couple more of these things come online i i think d5 the d5 data actually is the best data set for trying to predict this okay because you know we had yearn and it grew and then there was like a million copy pasta clones and the layer two wars are probably going to look kind of similar it's just that because there's so much engineering effort we don't think of like we don't think of like off chain labs as a copy pasta version of optimism but two validators to miners economically they're they're they're just you know wow auction bidders who are all

competing with each other and so like it's this harvest versus urine versus like rory versus like i mean there's like 500 of these things they're not even named after food anymore so it's hard to just call them food coin i know it's terrible go back to food yeah food was easier i could just say they ran out of food emojis didn't you that's fa i i keep i mean and and i don't understand that that realm nearly is not even in the same magnitude the way that that tyrone you and you and james do but i um but it does like the way that you start to describe it my head just immediately starts wandering into oh god this is an overly

complex system where no one has full visibility into what's going on and there is going to be some catastrophic tail event at some point and i just that's just what winds up it's like big you know red alarm bells without any real like i can't back that up you know beyond just gut feeling but that's what it feels like right uh are we going to see the rise of systemically important food coins [Laughter] um i i will say another thing you're seeing a lot of is insurance funds um in defense protocols and i think layer twos okay this is a crazy prediction because all the layer two are very like they're all fighting with each other

like psyops-wise for mindshare but i think they're gonna actually have to pull together an insurance fund like all like for the reasons james is mentioning they're basically like they're gonna realize it's cheaper for them to socialize an insurance fund over multiple layer twos for potentially losing block space versus like trying to always compete against each other wow yeah how many insurance funds are there i i'm only aware of like one i think but are there quite a few now uh i so like each d5 protocol that has leverage right now basically has one so like ave and synthetics have it explicitly like internally they have their own or the do they outsource that like i

said is it within their protocol they have it's in the program when you say when you say insurance fund you mean like a pool of funds for in insurance yeah okay not like an insurance like an external insurance the the same way that uh there's the safu fund or whatever or like the bit mex insurance yeah yeah exactly got it yeah like an on-chain visible insurance fund so so to josh's point there is a little more transparency to these insurance events versus like financial crisis where i i think like one kind of benefit of the current technology is in the financial crisis all these homes were under water in like 2005 or six but like it takes forever for like the

mortgage payment person to like not collect like maybe they didn't collect for six months and then they have to go tell the person above them and there's this whole bureaucracy that made it not clear whereas in d5 if everything collapses it's like oh it collapses in like five transactions right it's like so at least awesome the market the market gets the information faster rather than like having these kind of like actors who are kind of taking forever to figure out whether they want to tell the world everything's blowing up or not you know the the root of that problem is all of this hidden information in the bureaucracy is you have the mortgage which has been sold to someone else and some you know a third party is collecting the payments and it takes time for information to like become

public through that process whereas if it's happening on chain it is immediately public exactly when you miss your payment uh all we need is people watching for that information they have access to it whereas previously they didn't on purpose it was like purposefully obfuscated it was obfuscated so that they could create these incredibly profitable instruments yeah i wanted to share one of the new ideas that i want to explore which was this is this is something i actually will hopefully find a way to explore on this podcast but it's um the zk game episode i found which is really fun to do and that project i find super fun and it's this is like moving a little bit maybe even away from blockchain

necessarily but it's this idea of zero knowledge procedural generation and the fog of war and that the connection between those things and and where zero knowledge proofs could potentially actually lead to a decentralized gaming experience without like no need for a central server and yet a kind of a trusted truth and maybe you do need a blockchain in there but i'm not sure like i think the most exciting part here is that idea that the xero knowledge could provide the privacy to the fog of war but having like truth be underneath it and shared truth among different participants um so that's that's a just a topic that i am curious about and want to explore i don't know if you have any

ideas for people who i should invite on i mean i think zk the folks that did ck game are awesome but i would love to see more people doing zero knowledge proof or to to be playing with xeronaut proofs in games so i might i was thinking even of like inviting some game expert and seeing if i could convince them to use it or like getting some zk expert and a game person together so that they can like start to brainstorm that that was one of my to-do's this year and things that i'm thinking about another one that i'm thinking about exploring further is the flashbots and mev stuff oh i was uh going to bring this up perfect one of the one of the things i'm kind of excited about is

accelerationism like that you know the goal of flashbots is to kind of accelerate this mev system so that we don't build up a huge defy infrastructure assuming miners are your friends so that we start designing much earlier for the adversarial world that we will eventually end up with you know this kind of ties back to what we were talking about earlier about this equilibrium developing between on-chain vaults zk roll-ups optimistic roll-ups and other end-state chain users is we should probably be trying as much as possible to accelerate these things get there faster so that it is less of a uh shock when it happens when you find out about it

yeah because it had been happening for a while right but like it was just more recently where it was discovered how bad it was well um i think the the thing that brought it to most people's attention was the uh phil dan's paper from oh i want to say it's like yeah it's actually 2017. yeah we're old james that's okay we're just just get just get used to getting used to it yep we're ancient um so it's uh it's really great to kind of see a concrete accelerationist project for that um and the work like georgios has been

doing on mev geth is really interesting i think the only thing i was i would add to that is there's a there's a fallacy that i think other chains may run into which is that they may try to over optimize for this before they have usage and i actually think you should there's a you should be accelerationist like assume it's going to happen but you shouldn't do it cart before the horse style before you have any transactions because you're just going to make the ux terrible for your end users is like is is the flashbots i actually i haven't talked with them so i don't know what the exact project is but is that like a research project or is that like designing

new l1s to not have this is it it's a revenue sharing model with miners and transaction submitters but so it would need to be implemented into a oh no it is like it doesn't exist it does exist it is implemented it is is it an l1 uh no no um this is a modified version of geth so it's an ethereum full node software for miners okay okay what it does is it accepts transactions without transaction fees checks if the transaction will pay the miner and then executes them if it does there's a lot you know like more complexity there and a lot of interesting things you can do with it but essentially

you know what it's doing is it's checking transactions for mev and optimizing based on mev and it's a normal ethereum node that runs on the network today and at least one pool is running and so okay so if a mining pool uses this node software then it is actually already implemented yeah but it's not a hard fork and it's not through it's it didn't have to do any of the ethereum governance stuff yeah it's not a hard fork it's not a change to ethereum uh it is a change to the software to recognize this extractable value and extract it interesting and then do a revenue share between the submitter and the miner this has already existed in bitcoin land forever

like transaction acceleration has sort of like i mean i don't mean to disabuse the kind of idealist notion that oh like miners non-consensus part things they have of course they follow whatever bitcoin core does absolutely not right like like the mempool in transaction ordering is kind of the the thing in general that like is never in consensus because too expensive to ever be in consensus i i just don't until we have some crazy zk world real i can zk snapshot my mempool ordering as i get transactions or something there's really no way that you're ever gonna put that in and there's a really intuitive way to say that which is the mempool is what you're going to come to consensus on

if you want to come to consensus on the mempool you need a mempool mempool to do that and all right i want to continue on with some of the topics that i wanted to cover in this and this is a there was basically three three terms i threw out to you kind of in some notes in preparation for this it was the highest potential so that's like highest potential outcome this year in your knowledge blockchain whatever in that category highest potential stretch dream something that could happen but it would be unlikely but might be interesting or awesome and then what black swan possibility do you think people might want to look out for

so let's start with highest potential this is a this could be kind of anything josh do you have do you have a highest potential idea what i think would be interesting to see as something that would be the most like the highest value that we could all bring this year or see this year is if actually like that some of those chains that are built with like uh you know multi the multi-block chain block chains that allow a great deal of interoperability actually uh have some privacy focused chains on them um and that it kind of that the inclusion of that might accelerate more uh private versions of of d5 maybe not in the way that we were talking

about earlier but you know a lot of that is like it's incumbent on the you know those those chains launching and being successful and getting enough usage and uh to be to be meaningful um but yeah i don't i i i would love to see that i don't know if it's gonna happen um but yeah a high like craziest low probability event that could happen is just you know we follow the same cycle as the rainbow chart predicts and all assets rise in tandem and we wind up with a 10 trillion dollar market cap for this funny money that we all have should that be is that your stretch dream yeah why not sure i wanna i just wanna see what all of uh like people there are a lot of uh you know

just to be blunt there are a lot of terrible people in our industry but there are a lot of like really wonderful people who i think would do amazing things with life changing wealth and i would love to see what they do cool um so that would be that would be great nice and then black swan is like wait actually hold your black swan listen i want to do everyone's highest potential stretch stream and then i'm sorry i'm just doing them all serially my my back no worries no i want to i'm just changing course as we're going through it to roon what's your highest highest potential likely thing to happen and a stretch dream um the highest likelihood is uh the gentrification of ethereum um due to layers all the normies move in

no no no as in like on the product some product the protocols start clustering to different layer twos and you in this fragmented ecosystem it's like you have the d5 layer two neighborhood which is like the you know upper crust neighborhood you have the like crypto kitties nft neighborhood which is kind of like trying to be cool but it's kind of like is it like la you know it's like williamsburg it's like it's like it's like it like once was cool but it kind of just is filled with sick of fans who don't realize they're uh and then you have the like you know the remainder which is i don't know just different different different neighborhoods interesting i feel like the layer twos are basically turning

a single chain into a city okay what's your stretch dream this would be like crazy that could happen that would be kind of awesome uh private decks that you think of that as a stretch dream and not a possibility i think a lot of the people are doing it are very smart but i also think they're you kind of need to you need to have a little bit of the delusion that you've already solved the problem before you realize all the pitfalls okay james throwing the ball to you you know kind of in the same vein as tyrone thing i'm excited about and think is likely to happen is a bit of uh this disaggregation of d5 and all of the ethereum layer 1 stuff

we had compound announced their app chain we're having these layer 2's come online that won't be directly interoperable and composable the way layer one is we're going to have to kind of completely change the way we think about dapps and defy and the way they all fit together to account for this and i think it's going to be really fun and interesting the stretch goal that i i think won't happen in the time frame is a cheap simple standard for connecting these layers uh i think that we're going to have a bunch of bespoke bridges that don't work together with no standards around them

for the foreseeable future and we're going to have all of these bridges to ethereum which is an extremely inefficient bad environment for running a bridge and a huge amount of effort and resources is going to be spent bridging to ethereum uh unfortunately i'm excited for this to be called project tacoma narrows yep yep yeah i think my i'm predicting disaggregation and what i would like to see is uh efficient connections between all of these different neighborhoods in the city uh but i don't think it's likely that we build a good subway system anytime soon all right let's now talk about black swans

i think the whole the definition of black swan is like you're not supposed to be able to predict it or something right it's firstly it's the most unlikely bad things something we all pretend is impossible so what do you what do you have in mind as a black swan a nation-state attack on a chain cause like yeah because i feel like everyone's kind of getting complacent now they're like oh yeah oh yeah paypal is buying in a ton of bitcoin and gbtc is buying a ton of bitcoin and like i don't know at some point i feel like on on the march to to to 10 trillion i guess is is is eventually you know surpassing the gdps of germany and france so you know it does starts to seem a little bit like

hmm i think there might be uh some some some likelihood for that the other two things i think that are black sounds well the end of the moore's law for zero knowledge proof stuff whether if you think of it in terms of pure algorithmic or whether it's like in terms of the coding like the actual implementations um kind of like if that peter's out and we kind of are stuck with what we have and the last thing is uh the the the ultra rug pull which is like somehow d5 collapses due to like insurance cascades oracle failure and you know as much as i love how uh how how chain link has somehow

vacuumed researchers like in a way that i've i'm kind of still no one could predict how many people no one predicted that like two years ago um if chain link somehow fails there's a lot of there's a lot of blood in the streets a lot of blood in that layer to whatever do you know i don't know what's what's the equivalent of street blood in the blocks blood in the chains blood in the men pool i don't know blood and the men party is being splattered i mean the men the men mempool is like you know fight club james black swan events um so truon brought up nation state attacks uh you know

back when i started working on this everyone was afraid of fincen this was back in like 2013-2014 we've gone through phases where everyone's afraid of the sec and everyone's afraid of the cftc and now we're kind of back to fincen and the sec i think that you know a black swan could be a new administration with a aggressive regulation policy i don't think that's very likely but it would kind of knock the wind out of the sails for most of d5 what what we saw like last cycle was this innovation in token sales we we saw a bunch of different models of

token sales of like direct on-chain smart contract sales moving into these long-term auctions moving into safts and other off-chain instruments we we saw like a lot of experimentation around how do we sell these tokens directly to customers what we're seeing this cycle is a lot of innovation around airdrops is how do we distribute these tokens without doing a sale i i think uh one of the other black swans i have in mind is that we kind of settle on this like standard for distribution that is retrospective and it causes a lot of uh problematic and unhealthy behavior

that attracts attention or attracts regulators interesting yeah there's one new mechanism that i just recently learned about for that i mean i think it goes into this category but it's like these work locks are like the lock drops there's uh on the kusama network there's like i think this changes names sometimes but it's like the crowd loan because you have to secure parachain slots with a certain amount of ksm and participants could help you uh the progression from you know these uh work locks and lock drops and stake drops and uh through like the snx rewards

contracts and the wi-fi rewards has really been like this fascinating amount of experimentation with how can we unfairly distribute tokens and call it a fair distribution um you know and we've seen some amazing innovation on that out of the merkle drops and the retrospective distributions and i think we're gonna keep seeing innovation until some sort of black swan happens oy all right josh what's your black swan well i was uh i was actually going to approach it from the regulatory side as well um but the the specific just to get to drill down and maybe suggest

another horrifying scenario involving privacy is that let's say something maybe not the current fincen rules but other rules like it pass and all the sudden every single centralized exchange is required to basically document the second or even third order and acquire those people's identity um the the big maybe black swan there that i think could have tremendous negative impact is not so much that they're doing that data collection but that the data collection itself because let's get real uh if it's done by banks and exchanges what are the track records of banks and exchanges it's

securing this kind of data it's not great and um i i like can foresee if if there's ever any kind of hack that doesn't actually result in uh people losing monetary value but instead results in like a complete data release yeah complete data release of of all of these and effectively fills in the gaps and makes it possible for anyone to be you know chain analysis for a minute i i don't know i i i kind of worry like if that if that happens and then all of that becomes very very public i think that people will

there will be this illusion that people had about the privacy of these systems that just get shattered even though we all know that it works it works that way now um to take the uh to take the maybe uh leninist view on this maybe you need that to actually have the revolution yes yeah yeah that is that is totally fair actually i mean that's the other that is the silver lining of that black swan is like okay well all this is out why were we not building these systems with this in mind to begin with yeah but yeah and that yeah i think that's like that's my the craziest oh and the other one of course being like on the nation state side uh what if there's what if there is some sweet quantum computer somewhere that someone's running and

just decides to like spend all the early bitcoin what would that do i just i i want to ki i kind of want to see that happen even you know a non-native nation state just satoshi showing up again with all this bitcoin would be a pretty interesting black swan hasn't happened yet though yeah when i thought of black swans it's interesting mine mine was much more focused on like the narrative crashing and crumbling and burning which would that's perfectly predictable you know that's one hundred percent it's gonna happen anyway but it's the idea that like some you know like in a polarized place some side gravitates so heavily to this technology

that it becomes a virtuous thing to really try to stamp it out across the world that like governments across the world agree that this is a not only is it you know dangerous to the infrastructure but it's run by dangerous people and i know there's hints of that obviously but so far it's it's been you know it's it's a it's a wide range of people who are part of it there's a lot of different actors kinds of you know politically it's very broad but my my concern or this is like a black swan is that it becomes too much associated with one of the the sides or quadrants or what have you um i hope it continues to be something

that people are open to and not that it becomes sort of a close like the world closes their mind to it actually i want to add one positive uh more positive black swan because i feel like we're all focusing on like the nation state one but i think there's a lot of people who are are in the neck this year in particular but between this year and next year who have been extremely oppressed by technological progress people in like xinjiang uh especially i would say kovid kind of actually made it work significantly worse as far as we can tell in terms of like the like internment camps like can't use money freely um

and i i actually feel like those people will drive usage for real life usage um that's like a black swan that like the response to kind of the ai technocracy repression of like certain people actually leads to like real payment usage that would be awesome to see i think we've reached the i mean we've we've actually covered a lot of ground and we have some fantastic ideas to explore further in the coming episodes and um i do want to ask each of you just kind of a quick like if you wanna i don't know if you have something to share but what's what's next for you like you personally what what are you

excited about what are you going to do this quarter do you have any projects or anything you want to you can also chill i shilled in the last step in the last uh podcast episode so i feel like now we now we can do that now that frederick's gone anything goes oh no yeah the shackles are off i'm gonna be a crypto trading podcast just wait youtube all right what what is new what's next for you which one of you wants to start josh he's the mystery man all right what's next for you josh i get i guess it's just it's uh you know i i i am i am taking it a little easier than

i have in the past and so i'm i'm advising a few folks um uh here there but my actually my main output is i and i think i i speak for a lot of people where i'm sort of disappointed with the quality of troll uh and and the lack of high brow satire in our industry um and so i i don't know i i really love doing that as many of you who might follow the the twad cast on my twitter account now for anyone who who saw you present uh at zcon1 oh yeah with the black turtleneck full apple

full apple gear yeah channeled steve jobs right there on stage it was amazing great oh yeah and i just and i super shad on on libra it felt great so funny sort of an easy target but yeah it was uh that was fun that was fun and i love doing that sort of stuff that's very good thank you yeah it was a great time but i i'm gonna be doing more of that in a long form context and i'm i'm really you know my personal stretch goal uh once i get that that site out um uh is going to be like trying to become a little bit more like a matt levine of the cryptocurrency industry uh so that's my that's my that's my little project um but yeah do you have text like what

media are you thinking so the media it's gonna be it's just gonna be like a real bare-bones i'm not even gonna use javascript honestly uh it's just gonna be like text text uh and and an audio file of my voice reading the text that's pretty much it that's it that's all yes and it's you know rss feed so you can plug it into your sub stack if you want you're doing rss readers now i know i know the future is in the past we just have to go back return everybody can we get the josh cincinnati vr experience that's the future that's v2 i'm going i'm going to go from

text and audio files into full vr it's going to be immersive vr text full immersive yeah absolutely it's just going to be like microsoft word art but you need a valve index to see it properly all right throw to you tyrone what's next for you uh well you know working on building a product also uh really just you know i think i have a bunch of papers to write but i i feel like i do miss conferences um i know unfortunately unfortunately it has been less inspired lately do you wanna do you wanna i don't know if you've ever said anything about the product on the podcast

do you wanna say something about it yeah i mean so we're building kind of like a prediction engine risk engine for uh d5 protocols that we're calling automated governance so what it does is we we read a bunch of on-chain data and market data run simulations you know every few minutes and then kind of make some prediction and if if some like something is going wrong and your protocol will submit a proposal uh automatically that's like hey here's the statistical reasons like this thing is out of whack and here's the before and after uh this is why we chose this parameter um and then people can vote on it and it would be like would it would it provide the resolution to that

issue as well like the exact change needed yeah i mean it would generate the code okay right like it would generate like the solidity code needed to to do that and then it would basically submit it a lot of the changes aren't even actually deploying a new contract a lot of them will be like change the interest rate slope yeah to 0.8 and look at the results for y it's kind of like people aren't really monitoring the stuff but you know if there's going to actually be this 10 trillion dollar thing then stretch stream someone needs to actually like pay attention to being the fed black book or whatever so cool very cool all right james what's next for you uh

you know a lot of my time for the last few months has been spent uh prepping for the upcoming cello hard fork so that's gonna be out in march and then i'll have a lot more free time and a little less stress i think what what i'm looking to work on for the next six months or more is trying to build that you know cross-chain connection layer that i want to see in the world we we have some like interesting designs for this and a new approach and i think like we can make something compelling and try to get people to use it so i'm going to be spending a lot of time working on that at cello cool very cool james the ethical robert moses of the blockchain i want i want to take that like 1950s

1960s new york city analogy to the fullest yeah you need to make a subway map of blockchains james you don't need to have that iconic subway map like feel you know i think the one one of the nice things here is that i think i can maybe obsolete that pattern of these point-to-point connections and not need the subway map i think that we have finally a good model for single producer multi-consumer channels so we we could maybe like eliminate the need for that multi-hop subway transfer routing map anna what's what's next for you in 2021 so i guess 2021 i actually spent some time

over the last two weeks taking that week off thinking about what the show can be like what kind of ideas to pursue what what formats to look at going forward i will be returning to a weekly i think it's a really good routine for me i will be inviting all three of you to be guest hosts on various episodes on various topics there's also going to be a zk podcast blog where it's hopefully i will actually write some of these but we're also going to get really smart guest writers to start writing deeper deep dives on some of the topics that are covered in the show or have been covered we might also look back some older episodes where you know we did this really great

podcast but then never produced anything else with it and it actually could use some extra reference material and all that so we're going to be playing around with that i have alex pruden who's helping me on the blog and he's going to be you know working with coordinating new authors and all of that i love alex yeah and zk the zk summit currently i'm thinking of actually doing it one time per year and a bit later in the year and hopefully when we can actually do it in person but i also think there's something worthwhile in having us get together around these topics for sort of like more like in a meet-up setting um and so actually i'm planning on doing a monthly zk

sessions event quote-unquote an online event kind of like a meet-up kind of like a mini summit and i want to do that i want to kind of try to link that a little bit closer together with some of the podcast topics it's going to be a work in progress like the blog and so this will be sort of coming out regularly the first few might be a little awkward because we don't know what they are yet but um yeah that's the plan and then that would lead up to a new zk summit the zk summit has been awesome and i did two online ones last time but i like it you know it the online it doesn't quite get that feeling of the in person and it's sort of heartbreaking in a way because everyone's there

and you want to chat with everyone in the way you would have normally done in a live event but you can't and so that's why i'm going to push that back a little bit i also think that online events like we i did two days of six hours which was like a lot and i think a three hour once a month might be a little bit easier we can all get together and stuff like that so look out for those i'm actually going to be releasing a blog post with like the whole spectrum of things that we're going to do around the podcast but i'm pretty excited about it i feel like this year like i want to be a little bit more thoughtful in the programming and work a little bit more on having series like you know episodes that really grow off the other ones like our previous ones

so that's the current plan i am so excited that you all came on this first episode of the year with me really looking forward to uh yeah like co-hosting and yeah likewise digging into new topics with you no i'm just i'm i'm tremendously excited this year uh just for it being not just a new year and it not being 2020 but also for zero knowledge in particular um and zero knowledge uh the podcast as well as the research uh uh space but uh i'm i'm i'm excited to to help where i can too so thank you thank you for hosting and having all of us on anna cool would be remiss without giving you at

least one dumb math fact which is uh 2021 is is a is a it's a if it has a nice quadratic structure as it's prime factorized as 43 times 47. very nice 45 plus 2 times 45 minus 2 so if you've ever had to go to interviews where they ask you to multiply numbers that one is it's a nice though we'll never forget that 2021 beautiful well uh i'm i'm really excited to be you know part of the show more often this year uh and i also have a math fact which is that uh seven is not divisible by three wish it was [Laughter] all right so thank you all again for

joining for this first episode of the year and to our listeners thanks for listening [Music] you