How Decentralized Technology Will Impact Our Society at ETHWaterloo

gonna get started so first of all welcome to Waterloo welcome to Shopify plus and welcome to eath Waterloo my name is Nabil I'm one of the organizers of eath Waterloo and it's my distinct pleasure to welcome you here today for an unbelievably special talk that we're thrilled to put together for you guys I'd like to just take a moment to thank a number of parties and do some housekeeping with respects to where the washrooms are the washrooms are in the back on the second floor if you go up these stairs the women's washrooms on the left and men's washrooms on the right and there's an additional washroom past the yoga room over here on the left today we are here in the Seagrams whisky distillery which is now known as Shopify plus it has been home to many different tech companies over the course of time here in Waterloo and today its home to the fastest growing enterprise commerce solution in the world it Shopify's enterprise offering I've had the distinct pleasure of helping found the team here locally and there are 300 strong and growing to about a thousand tech workers here in uptown Waterloo we are deeply indebted to Shopify for providing this facility not just for the talks here today and the panel but also for all the workshops that are happening throughout eath Waterloo so that we could have as many hackers as possible next door at the Center for international governance innovation the Center for international governance innovation has been an unbelievable partner in this endeavor the idea started way back when Liam and a couple of other enthusiasts in the blockchain space were passionate about creating a leadership position for Canada in this technology so back in June or so Liam said hey why don't we do this thing where we we do this hackathon will be the biggest in the world and it's the most important technology he thought that is being built today and so if it wasn't for the Center for international governance innovation this would be possible so we were deeply indebted to them for helping partner with us on this we also would like to thank Galan's as one of the lead sponsors and there's a number of partners of Galilee's here in the room including the the lead lawyer who's running their blockchain practice which I believe has 85 lawyers and Counting and so Galan's is taking also a leadership position in that respect from a Canadian perspective but today we have four incredibly special speakers and I just like to start by mentioning that when it comes to blockchain technology and decentralized applications in the decentralized future we literally have the world's leading foremost scientist sitting right here in the front row his name is vitalik guitar and he dropped out of the University of Waterloo after first year in order to start and found etherium or that with a number of other special individuals he's the visionary behind the technology and the leading scientist and he's literally ahead of the technology talking about where the future is going and before vitalik addresses the crowd I think it's also worth mentioning that Vitalik hasn't won a number of awards I think this audience should probably know who he is but he's recently also won the world technology award in the networking category edging out Mark Zuckerberg so that's pretty cool and the other recipients during that time were you know seminaries as along with like Elon Musk and whatnot then we before vitalik we have joseph Lubin another canadian who's really on the forefront on the implementation side of this technology he has 370 employees most of which are based in Brooklyn and or not not 24 countries worldwide forgive me it's a little bit intimidating introducing these speakers but nevertheless we're thrilled to have Joseph back in his hometown and of Toronto and so we're thrilled to have him here at youth Waterloo you'll be hearing a lot more about what his company consensus is up to is the founder and CEO of consensus and so we also have dr. Julie Maupin who's a senior fellow and researcher at the Center for international governance innovation she's a lawyer and an economist and self-proclaimed blockchain geek and so we're thrilled to have her as well on the panel and she will also be delivering a keynote as well also we have William mafia William a var is actually an entrepreneur and an investor he's also the author of the business blockchain and he's co-founded a number of companies of which I won't get into including a blockchain index so we'll be pleased to hear from him today and he will be the one moderating the panel later today this building was built by a Canadian architect named Barton Meyers legendary architect this building has won an award a Governor General award and Barton Meyers also opened up a practice in Los Angeles so effectively this is a beautiful piece of Canadian architecture but really we're here today to talk about the leading digital architects and and that's what this panel here is about today the talk is entitled how decentralized technology will impact our society and there's no one better than the panel that we have here today to talk about that so with that I'd also just like to take a couple of seconds to recognize some of the other special individuals that we have here in the room and if you don't mind just standing up and doing a quick wave when I mentioned your name that would be appreciated so I guess I'll start on the far right over there so we have the mayor of the city of Kitchener Barry for Benedict we have a federal Member of Parliament the Honourable Roshini right beside him [Applause] the one-time longtime executive director of the Center for national governance ambition is a gentleman named dr. English who is the official biographer of Pierre Elliot Trudeau as well as Lester Pearson was the chair of the Museum of civilization in Ottawa and so many other things but dr. John English is here with us today as well I joined and then of course we have the mayor of Waterloo who is himself a computer scientist longtime blackberry executive and a personal friend Dave Jaworski [Applause] I also like to take a second to say that we have another very special dignitary here she's not only the Member of Parliament for Waterloo but she's also the Federal Minister of small business and tourism and she has a third job and she is the leader of the government in the House of Commons otherwise known as Government House Leader the first ever female in the role and that's a minister checker and the back part is checker I British thank you for coming and really there's there's so many other people to thank and we really really appreciate you being here I don't want to take up much more of your time we're going to be hearing first from Joseph Lubin and I couldn't be more stoked please come on up Joseph Thank You noble first would like to express enormous gratitude to Nabil Nabil Liam mark and the many volunteers that made this epic event possible in this epic setting and and kudos for the genius of running parallel next to this highly energized hackathon a parallel slack athan for us to just sit here and eat sandwiches and lounge around talking about important things so you're gonna hear the word decentralization decentralizing quite a bit here today and it's in some people think of it as a movement I think of it as a phenomenon something that happens to civilizations when after millennia of top-down command and control millennia of hierarchy there are civil civilizations get to the point where they've wrapped the planet in layers and layers of instantaneous communication networks and come up with a technology that allows people all over the world to make very rapid or instantaneous decisions so top-down command and control is an appropriate organizing principle when communication is slow and expensive and decision-making is equally difficult slow and expensive but once you have the right infrastructure in place we have the opportunity to do much better so Satoshi Nakamoto person or group invented at least two things probably three things in November 2008 November January 2009 the first was Bitcoin basically an application an experiment in monetary theory a payment system the second and most important was the foundation upon which that application was built the blockchain the blockchain is breakthrough in computer science it's a new kind of database system upon which we can build applications that we can all trust we can all trust them because based on the consensus mechanisms we can be certain that no minority set of actors can improperly manipulate the system the data because they can inspect it a theorem took that one step further and applied that to the programs as well so Vitalik was living a somewhat centralised life he first in Russia then in Toronto then in Waterloo and I believe he after being turned on to Bitcoin by his father he explored it a little bit later and came to the conclusion that I thinking in consultation with Dmitry that he should decentralize his life and so he travelled the world and encountered a bunch of different attempts to use this foundational technology blockchain to enable people to build better applications and so he worked on a handful of projects and finally came to the conclusion that a lot of these projects were building things in an unscalable way and so he took to step back and wrote the white paper describing the etherion platform so took took a little while to get the system built but it's quite profound that following the organizing principle of decentralization and we did a token launch that effectively had the receipts on the Bitcoin blockchain and tools were created so that those receipts could be put together into a Genesis block and people downloaded those tools so following the organizing principle of decentralization many people around the world constructed their own Genesis blocks fired up the etherium clients that they downloaded and watched in amazement as this platform which embodied a new organizing principle for Humanity reached out with handshakes peer-to-peer and organized itself into existence so I'm going to talk through many different things or aspects of decentralization that all contribute to the power of what we are able to do now the first and obvious one is open-source so if you can get an army of developers around the world you can do some pretty great things much greater things than a company with a closed source of code base anyone can submit issues pull requests can fork the project code forks are an important element of the system we we agreed early on that Forks will keep us honest on the etherium project and and they enable others to explore different paths forward even platform Forks as we've seen I think are really valuable we've seen that in Bitcoin we've seen it in aetherium and it teaches us things it enables us to explore different things so we didn't really understand what the word immutability meant until we were instructed yeah finally this is just the first inning we need so many different projects to explore the solution space developers developers developers globally decentralized developers our truffle suite has around 110,000 downloads in Fura sort of back-end infrastructure allel iment sees about a billion service requests per day on average we had a Gartner analyst in the office about three weeks ago he estimated that I think he was ignoring Bitcoin he estimated that the IBM fabric codebase was the second largest developer core in the world in that aetherium had 30 times more developers so that is really the only thing that matters in my opinion when you're building an ecosystem crypto economic incentives we sold ether and in exchange for bitcoins in 9000 plus different transactions and that enabled many different people to become stakeholders in this ecosystem so incentivized business and software developers to want to create more value in incentivized transaction processors to build the infrastructure the ERC 20 tokens standard does the same thing it because these tokens roughly have the same form it makes it easier for them to interoperate with other important elements of the ecosystem and it makes it easy for projects to again incentivize business and software developers and early stakeholders to add value to the ecosystem so it's a tremendous number of positive feedback loops that will grow this ecosystem it's going to result in the thawing of frozen capital it already has around the world where so many people who really can't make an investment in a start-up in the legacy infrastructure are able to buy utility or protocol tokens for projects that they care about and and for two people in a in a dorm room somewhere close to here who are innovators who would never get a an email back from VC it enables them to permissionless lis themselves so I'd like to think of a blockchain as a next-generation database system it's a database system that we can all trust we can all trust it because we can all inspect the data and the applications I've been liking the term veridical of or pertaining to the truth to describe trust minimized computing that the theorem enables this creates a context in which we can build much more reliable system so a rogue system administrator a corrupt CFO or a hacker I can get into systems and change one of the notes but they're not going to be able to affect the whole system unless they change the majority of the nodes and that's that's relevant for the public blockchain and it's also relevant for private permission to implementations of the same technology so somewhat early on we started calling it the world computer and The Economist helped us out a little bit and called blockchain the trust machine and that'll be a theme in in what we see here today you go a little faster so one thing to say about public versus private blockchain is that the public blockchain with all these positive feedback loops is a tremendous driver of the technology there are a bunch of competing private blockchain technologies that are being used by corporations and explored by governments and my feeling is that the people who are helping those entities build their systems are doing them a bit of a disservice theorem is arguably the most powerful decentralized application platform available and you can build your systems on a stack that enables private permission blockchain systems you can also easily port those or build other aspects of your infrastructure using the exact same technology in the public permissionless context and so if you're a corporation or a government and you decide to stand up a system you select your stack you'd built some expertise in-house and you build a whole bunch of infrastructural elements on that stack the minute you have the need for a public blockchain use case and you're going to you are gonna have to reproduce a lot of that technology I believe in so I like to argue that people should be building their private permission systems on aetherium so do private enterprise enterprise block chains even make sense I would argue that an enterprise can be viewed as a set of cooperating and competing actors entities departments they're all feeding from the same budget and so it really is a complex society a complex society often has the need to for different groups to watch each other and blockchain presents a tremendous infrastructure for different groups within a company to share sources of truth and to collaborate in a trustful non redundant infrastructure IT business processes so we build we in our company consensus and many other companies around the world are starting to build business processes for corporations and for governments on block chains these things basically have access points we use you port identity as access and so we can go into a company and enable them to build their business processes on a blockchain they can give access to those business processes to their employees the same access to their vendors and service providers same access to customers and this is a much more secure IT infrastructure because every transaction against your infrastructure is strongly cryptographically authenticated and potentially granularly authorized for specific aspects of that business process and so we're gonna see companies build lots of business processes on blockchain we're gonna see them reach out to collaborate with other companies and in those kinds of situations that other company may not want to use another company's infrastructure in that sort of situation it's very easy to spin up partner blockchain using the exact same technology you've got all the access controls in place and in that way you can from the ground up cross routes you can build consortium so consortium formation is hard usually falls apart but when you're building a consortium one use case at a time starting with two counterparties you can you can grow these things organically and make sure they work along the way so agile consortium development so if you take this this notion of vertical computing building systems that everybody using them can trust if you add the secure IT infrastructure element where instead of having IT infrastructure that consists of a bunch of soft assets that are ring-fenced by peripherally secured by firewalls you and you realize that all that is realized on a massively decentralized peer-to-peer network a system with low barriers to entry you have an engine for a universal disintermediation so intermediation is a good thing it's valuable when it reduces friction when it adds information to situations when it reduces costs but intermediaries tend to impose themselves into transactions and work to increase the spread between what they extract and what they add to the transaction and so I would argue that this technology will enable us to squeeze intermediaries in many situations completely at a transaction flows or to reduce the size of value that they extract and that this context is a perfect price discovery mechanism for the value of intermediation blockchain gonna be big internet of information that was big we moved to web 2.0 mobile social that was I don't know ten hundred X bigger we are moving towards the Internet of transactions Internet of trusted transactions that I think is what the first phase of blockchain will represent I think that's going to be even bigger and when we get to the Internet of machines the internet of trusted transactions between people corporations and machines I think that's gonna be enormous the sharing economy so these companies are the intermediary that extracts a whole lot of value from their advertiser customers and we are the products we can implement something like Facebook with a set of actors people and companies that are all in different roles in this insided market that all work together to emerge the set of services and none of those roles on that system will be overly controlling or overly monetizing identity and we're going to talk a little bit more about that later is a foundational aspect of web 3.

0 the decentralized worldwide web these incited markets on open platforms your identity is currently sprayed all across the internet and other places and stored on corporate servers and monetized by corporations as the web 3.0 takes hold we're going to see identity exists on essentially on your set of browser encrypted or controlled from your side of the browser encrypted selectively disclosable in situations that you designate so if you want to monetize aspects of your identity or if you want to monetize your attention you can do so and you'll get paid for that similar related idea currently the fundamental atomic unit of IT architectures is a siloed information system it's siloed the nature of the database technology on which it's built because of the trustful nature and the more secure nature of blockchain systems we can start to view the fundamental unit of IT architectures as collaborative we are going to be building systems that serve business sectors that serve industries cross industry systems value chains and supply chains and so we are going to move towards a world that is much more fluid frictionless and supports deep cooperation and and interoperability amongst competitors and entities that that would like to cooperate there are different groups around the world that are forming to facilitate this we were instrumental in forming the enterprise that theorem Alliance it's a group of in excess of 200 members some of the biggest companies in the world some struct some startups some governments and this group it was intended to enable us to build an enterprise friendly version of etherium or specify such a thing but really excitingly we're seeing lots of different working groups pop up that essentially exist at the application layer rather than the protocol there so we're seeing working groups for banking and insurance and advertising technology and law and this is one of the places this is currently the biggest blockchain Alliance or grouping in the world and it's one of the places where we can start building that shared infrastructure so another place the accounting watching coalition that has some excellent company is trying to to map out what tokens are really and how to account for them so implications for identity and reputation implications for people identity on the planet is broken in the developed world as I indicated we spray aspects of our identity all around and and are not in control of it and equifax in the develop in in the developing world it's worse in the developing world there are billion two billion people who don't have state issued ID or financial relationships that they can count on so for the first time in history we have a database substrate blockchain that is appropriately configured for something like a global identity system and you wouldn't want to build a centralized global identity system because that would represent too great a prize for patient well-resourced entities to to try to capture so we built you port self sovereign identity system and enables anybody in the world soon organizations and devices but we're starting with people to establish their own block chain based identity use that identity to login to but now to interact with not login to interact with decentralized applications and soon just normal applications that also speak to the etherion blockchain it enables connectivity to the legacy identity provider infrastructure via something called attestations so where verifiable claims so once you establish your block chain based identity a government agency DMV or agency that certifies citizenship can launch an attestation on your block chain based identity indicating that this person who's standing in front of me is the same person is and it on the blockchain basically and that person is a citizen of Canada for instance or can drive legally until January 2020 you can have your bank's Lodge similar attestations this person's account is in good standing as in access of n dollars these attestations are really powerful you can release or use focused information without spraying all of the underlying information around so if you want to establish that it's legal for you to walk into a bar you don't need to show somebody a document with your address on it and so attestations are going to be a wonderful way of keeping us keeping our lives more appropriately private we are launching a pilot an identity pilot with Zook in Switzerland so zhuge is using all right are you port system to give their citizens digital identity and enable them to access government services electricity implications for decentralizing the energy infrastructure we have a couple of major projects and done some other projects in the past the electricity industry is decentralizing physically cheap photovoltaics and storage or the recognition that centralized generation long-distance transmission is inefficient it's brittle it's vulnerable has led to the decentralization of that industry up until very recently there was no way for Alice on one side of the street to get paid for sharing some electrons with Bob on the other side of the street so we are currently running a pilot with one of the largest energy companies in the world where executives in that company are have devices in their homes that are doing exactly that we have another project called grid plus where we are we sold a token that enables people to take advantage of electricity deregulation and access wholesale energy prices so the electricity industry is tiered deregulated in Texas and so this mechanism gets rid of an intermediary there's a the cost is around 10 11 cents for electricity and half that cost goes to an intermediary that only provides billing services and so we are squeezing that out speak with regulators around the world and they're pretty much all very excited about this technology we built a system a triple entry accounting system called balanced 3 and it is starting to become available to token launches and soon other kinds of business businesses it's going to enable real-time compliance real-time or other technologies will enable real-time compliance but it enables real-time accounting and monitoring regulators around the world are going to have dashboards where they can keep up with real time flows real-time financial flows in companies in sectors in countries and instead of operating dujour and post facto they're going to have the ability to to watch these flows they're going to have tools that will enable them to do things like graph theoretic analysis so who's talking - who's who's got a lot of rich transactional flow between whom what's this thing over here that only has a small set of transactions to it what is this little island should this little island be looked at more carefully this is the nature of regulation and compliance is gonna change quite dramatically regulators are going to have to become tech savvy they're gonna have to have people on staff that instead of writing rules interpreting rules and enforcing rules they're going to have to write specifications perhaps or write test Suites and if you're a banker if you're a securities firm and you implement software that complies with the test suite assuming the Suites written properly or well then you won't be able to be out of compliance intentionally and you won't be able to fat-finger trades taking that a step further what happens in a world what happens to regulation and compliance which was designed to protect consumers from third parties custody in their assets what happens in the world when you can custody your own assets it's going to take as while to build effective systems with excellent user experience but I think that in that sort of world a lot of regulation falls away so we built a system Aaron right professor of law Cardozo law school also a member of consensus has built a system called open law there's some outstanding demos on YouTube so I'd encourage you to take a look at that we are now able to build hybrid blockchain based documents legally enforceable agreements that are part pros and part programmatic element the these clauses whether they're prose or whether their programs are memorialized on the blockchain and clauses can be constructed from variables that can type in numbers and names some of these clauses just set out normal legal terms some of these clauses are programs that you can escrow money into some of these clauses can take money and pay it out on a regular basis or in response to certain conditions that are met we are building an adjacent music industry infrastructure called Ojo which enables artists to upload their content and attach usage policies to that content and confer licenses in exchange for instant payment we're using open law for some of those licensing or usage policies that confer licenses these documents can be forked in their entirety clauses can be forked we're moving towards creating a decentralized open platform to enable lawyers or people like lawyers to create legally enforceable agreements that they can put out on a marketplace and enable people to to pay for and license for usage so that kind of innovation is going to change the legal industry fairly significantly it's going to free up lawyers to do higher value things but it's going to just remove a tremendous amount of the cost from from those kinds of activities in neighborhoods all to more fluidly do business so I think this is good I'm near at the end Martius 2.0 aetherium Island the leaders of that Island got excited about aetherium they got excited about blockchain they did their homework they realized that aetherium was the most capable blockchain system and provided the most flexibility for them and they invited us to i D ate with them about what a blockchain and aetherium island would look like and so we spent some time there and then we spend some time beyond when we went back home thinking about all the different things that we can do and the crux is that we built our societies from technology the technology it's not something we're gonna throw away but the foundation of it is inefficient the foundation of foundational elements of our society identity reputation agreements trust different kinds of certificates title it's all realized in analog or frictional technology it's realized using pieces of paper and rubber stamps and ink and subjective jurisprudence and enforce and incarceration all of those technologies are inefficient all those technologies introduced delays all those technologies forced clearing and settlement of all the transactions using those technologies to extend over minutes hours days weeks and months in some cases and so if you can move all these foundational elements of society into native digital form put them on a blockchain put them in registries and then if you build layers and layers of functionality on top of those foundational elements of your society you can move many of those transactions into a nearly frictionless context you can shrink clearing and settlement of many of those kinds of transactions into the instant of the transaction or if you want some delays for for various reasons you can build in those delays consciously but it's still a very fluid friction list in structure for your society and so technology development like interest compounds so if you can shrink the time that you have to wait to do the next value creating thing you're going to have a society that grows much more rapidly the context of blockchain as we all know is global and so there's no reason in the world why Silicon Valley needs to be the the technology hub for the planet the hub that draws all the money so quite a few years ago maybe 20 years ago Thomas Friedman recognized that the internet was rendering a flatter world and we've seen that that that happened and it's still happening blockchain interestingly in terms of capital formation in terms of allocation of capital in terms of how projects can organize themselves and run themselves and reach out across the globe because blockchain is global I believe that blockchain is is making countries flat you don't need to be in Toronto or Vancouver you don't need to be in New York or Silicon Valley and so I think that's going to be a really exciting decentralizing force so just as we've done in Zook and as we're doing in other places i would love to come back here at some point in the next few years and and hear that eath waterloo doesn't just designate a a conference in hackathon but also designates the way aspects of societies of the kitchener-waterloo society operates thank you [Applause] Thank You Joseph and actually Joseph brought up a very good point I neglected to mention one important thing on the front end that events like this with 500 people next door don't don't happen accidentally there's been a gargantuan effort of volunteers 10 person organizing team 50 more volunteers that have really come together to help us look this 8th Waterloo together for the community so if you can join me in a giant round of applause for all the volunteers like ian sonia guillén karthik he flew from san francisco to be with us here today and so many others that I can't mention and and we were deeply indebted to consensus of course for being the presenting sponsor of this talk I'm a lot of you weren't with us yesterday during the opening ceremonies at CG but Joseph also delivered a keynote as well and I'll point out one thing that really blew my mind is in Joseph's mind this particular City and and specifically the institution of the University of Waterloo has had such an impact on the world that he's mentioned that you know it's systemically more important in his mind and basically most banks and governments so when he said that that really blew my mind and it's a food for thought so with that our next speaker really doesn't need any introduction but for the purposes of this crowd I thought I would mention one more thing at eath Waterloo it's about building the future of decentralized applications I mean the number one rule is no price talk but I just for context for some of the folks in the crowd who have no idea what a theorem is perhaps Forbes recently named Vitalik top 40 under 40 he's 23 and so Vitalik you know in creating and inventing aetherium earlier this year it's actually reached nearly 30 billion dollars in market cap the actual cryptocurrency related to aetherium which is called ether but of course what what we're doing next door is all about any number of decentralized applications not just money so so in to put that in perspective that's like the private valuations of Airbnb or or like an uber and whatnot so it gives me a great pleasure and it's a real distinct honor to be introducing Vitalik to you guys so if you can join me in a standing ovation for Vitalik cool okay um so what I have wanted to do today is start off with a kind of gener'l and I'm like not technical in the sense of math but still technical in the sense of you have to think introduction to what block chains are and what are some of the ideas behind watch hands and why block chains are fundamentally so interesting so I'll start off with the usual question what is a block chain that you've probably heard answered a bunch of times you may have heard some silly answers about block chains having anything to do with proof of work or blocks being chained together or hashes or things like that and these are very nice answers to have if he wants to know how a certain specific block chains technically work but there are much more helpful answers if he wants to think about what block chains can do for you so the one I usually do is this I just say a block chain is a decentralized computer network with a memory so definition has two parts the part on the left as represented by those six computers in will resolution connected to each other by lines is a computer network and the right as represented by a brain means memory so these two things together are kind of fundamental elements of what makes the block chain be a blockchain we've had decentralized networks for a while so BitTorrent for file sharing I'm sure lots of people have downloaded a file over its or network here originally Skype was a fairly decentralized period of your system I mean these days Microsoft added some notion of super nodes it's not clear if that's a no even technically an improvement or not but they're there now so it's less decentralized than it was before it's war internet anonymous a ssin there's a bunch of smaller examples for various kinds of peer-to-peer messaging there's things like I to P and so on and so forth and you have Bitcoin for currency named coin as a form of decentralized DNS if the area as a general purpose state machine so there's many different kinds of decentralized systems and you know they've existed for quite a while when the Alltech intends to serve a fairly wide variety of purposes the second category so the decentralized networks below the line is not like the first category the things above the line and you might want to ask well why what is the fundamental category difference between things below the line and things above the line the answer is memory so basically you know what is the kind of archetypal use cases memory right now if you think about a decentralized messaging system and you know we can think of the the atmosphere in this room through which the sound waves that I'm speaking to you through you know as being a kind of decentralized messaging system except it's wonderful we has a range of maybe 30 meters and maybe a bit more if I scream but I don't like screaming so what properties do decentralized messaging systems need to have well I can send a message and I can send a message broadcast it and a bunch of people receive the message now let's suppose I take a message and I send a message to one person hi Joseph and then I copy that exact message and paste it and send it to someone else hi Joseph now I know none of you are named Joseph but unfortunately that's no copy and paste works so you know basically you know even though sometimes it might not make sense to send the same message to do it to two different people but it's still an operation that's theoretically possible and if this happens then you know nothing technically breaks nothing bad happens another property is once you send a message after you've sent the message and after a person receives the message the system itself can forget the message ever was ever assessed now the center and the receiver might both wants to remember locally that the message was sent and that the message was received but there's no reason for the network as a whole to remember and there's no reason for anyone other than the two people between which to message to receive to remember that the or even ever know that the message existed unfortunately money does not work this way so let's say we had a system where I had one of 100 digital dollars and I can speak these 100 dollars to Joseph and then I can copy these 100 dollars and I can seek the same $100 to William now what what do we have here well we have a system that can turn 100 digital dollars into 200 digital dollars now this might seem you know great yay we can multiply money this will be a great revenue stream for the Waterloo government but if money if money actually worked this way it would hyper-inflated a stone in Zimbabwe so basically what money is the sort of thing where and you do not want it to be possible to just copy money and send it to through different people and this makes money a fundamentally different kind of information from other kinds of information that people said now and the other thing is that you know basically in order for a system of money to exist it has to have some kind of memory right so if right now I have a hundred digital dollars and I create two transactions and I broadcast both of these transactions now you know either of those two transactions are totally valid in isolation right so a transaction of me sending 100 dollars to person a is totally valid by itself a transaction sending 100 dollars from me to person B is totally valid by itself but the two together are not valid and so after I send the first transaction the system needs to somehow remember that I used to have these 100 dollars but now I do not have these 100 dollars and so the set even though the first transaction was valid the second transaction is not so the system has to keep track of how much money people have at some particular point in time and this process of keeping track is not a process that's just between kind of repair individual pairs of people but it's a process that's real to the entire community that uses that particular currency so hence decentralized computer networks with memory now what are you skaters of memory now what the kind of very simple one that you can think of that covers a lot of use cases yes who did it first example one so who received a coin first if I have a coin a digital coin and I copy this coin and I send this coin to do different people then those two transactions are both valid individually they're not valid together and so you want one of these two transactions to succeed in not the second well which transaction succeeds well logically it has to be the first because if it was the second then you would start off sending money to one person and then later on you would switch this basically the point would switch ownership from the first receiver to the second which is not really a good property for money to have so whoever received the coin first actually has the coin whoever receives the coin second does not get the point registering a domain so about three years ago in late November 2013 I registered the domain a Furion org you know not real not realizing just how many people would end up accessing that domain over the years to come now what's suppose passed forward it is now October 14 5 20 17 and suppose that you are a scammer and suppose that you decide well if here am thought org seems to be a popular domain that a lot of people visit and so I am also going to register at the area morgue and I am going to basically create my own website and on my website I'm going to say look 30 million more ether for sale here put your credit card info over here and I'm going to try get people's credit card info and make a few million dollars so let's say that no akyuu as a scammer try to do this and you register if you're a morgue make it points to your own website and put up this website well an individual person who is trying to access to theory a morgue the website would see a in a system without memory so in a system that worked the way messaging protocols work you would see the two attempts to register etherium org one of which actually happened three years ago the other of which actually happens today and you would actually have no idea you know which one of these actually came first and which one of these you should actually view as being correct now if you have a system that does have a notion of memory as you know our existing centralized dns does because it has servers and these servers have hard drives and RAM and so forth then this is totally not a problem because it remembers the registration already happened and so the second time you attempt to do the registration the registration fails so um other example it's just entering into a financial contracts there might be cases where you need to remember when a financial contract was agreed to which clauses were triggered you know when it was resolved accepting versus what's drawing an offer if I make an offer to trade asset a for asset B then later on I changed my mind and you accept the offer but at the scene around the same time you accept the offer then those are two operations that are not compatible with each other one of them needs to get into the blockchain first and the system has to decide between one of these two and everyone has to agree on which one of these two operations actually did come first revoking versus using an authentication key and this is just another interesting use case so let's suppose that I use some kind of cryptographic key to interact with some kind of services and what suppose my T gets stolen so it's a my computer gets hacked well let's say I then I make an operation that work work sticky so I send a signature with the key that basically says this key has been compromised it is no longer valid please do not trust it and I broadcast it well you let's say you as the person who hacked my key you try to use the key in your and basically impersonate me well here once again you have a kind of who did it first scenario basically you know the service that's being accessed it's trying to figure out well has this key actually been revoked yet or has it not yet been revoked and really what you want is you want a system that tells you if the key has been revoked and you want a system that also tells you if the key has not yet been revoked so you want a system that provides a group of existence and you want a system that provides proof of any existence of a certain type of message and now prove any existence is really the interesting kind of unique assurance that watch chains can often give you so these are some simple use cases for memory but as we know in reality of no there's thousands of thousands more a lot of which are much more complex than any of these scenarios so let's take a look at the security of systems like Bitcoin and systems like etherium this is called a blockchain now even though these are circles and not rectangles either you know they're still blocks it's all mathematical representation anyway in reality blocks don't look like squares or circles at all you know you have these blocks and they form a chain of course in reality they're not literally links together each one just contains the hash of the previous one but now you can think of it as being ashamed and in a kind of well-functioning well running blockchain generally you have this chain each more points to the previous one and you've watched just keep on getting added to added to the end of the chain it just keeps on growing out of here we orderly paste and everybody is happy this is the kind of optimal scenario this is the scenario we want to encourage this is a scenario we wants to maximize here is a scenario we wants to minimize this could happen for two reasons one of them is because of a deliberate attack the other is just because you know different computers see different views of the network at the same time and they might just decide to do different things at the same time without seeing each other's actions so over here suppose that it just so happens that you know you have a block here and there were two different miners that we're trying to create a block on top of the same block one of them created a block before this message was fully broadcasted to the network a second miner also created a block now you have a short range gene split so now well okay so now you have two versions of a blockchain let's say this transaction or this block contains a transaction that sends five dollars or five big points for myself to alice in this transaction innocencio 5 bitcoins for myself subong well how do we decide which one of these is correct well basically we wait some time and eventually someone creates another block well let's say we got very unlucky and someone created a block on top of here and someone created a block on top of here at the same time well then we just wait again and let's say the next time we get we get lucky and someone creates a block on top of here now this chain is the longer one and this chain is the one that everyone accepts and this is the chain that everyone builds on so you have this kind of nice convergence property now what are the things that are actually ensuring this convergence property so what are the things that are actually ensuring just all of evil chains security properties in general well if you think of the applications above the bottom line earlier in the presence of the dotted line earlier in the presentation the only thing that they really rely on is cryptography so you use cryptography first of all to hide the content of the messages so also with only one particular recipients can't hear the message so that get Nadia's encryption algorithms and another one is if you use a if you want people to know that and securely know that it was actually you who said the message then you use digital signatures so cryptography by itself gives you basically the security guarantees they can want in a block chain though you cannot do that now cryptography can give you some guarantees it can give you the guarantee is that all this all the transactions actually were signed by the sender it can give you guarantees of integrity so in a particular chain like you can't just go in and change the contents of the block in the middle because then the hash doesn't match but there is one type of guarantee that cryptography cannot give you which is irreversibility so suppose that you have a purely cryptographic system and blocks were produced just this one this one this one and in the bottom chain over here four and five you have no cryptographic proof that this is going to continue being the longest chain or a chain that everyone reckon it's totally possible that the next flocks that everyone produces people just decide to keep building off of this block and just build these four blocks over here so cryptography by itself does not does not have any opinion between one of these scenarios and the other and so in order to achieve the property of your reversibility we need some other other things as well so there's two other components one of them is economics so economics ads guarantees about the blockchains future by basically incentivizing them so over here if you create a block that ends up being part of the longest chain you get a reward so either it's 12 and 1/2 bitcoins or five ether in the case of etherium if you create a block which is which is not on the main chain then you have to pay some electricity and hardware costs to create the block but you get no reward and so this is the worst and if you don't participate at all then your reward and then your reward is zero so accurate in the system have an economic incentive to behave in ways that are kind of pro-social so this is the idea behind you know basically introducing economics into the security model of watch of a decentralized systems you can use economic incentives to reward participants in the systemic or further the system's objectives and penalize participants to harm systems objectives now this is actually a philosophically a very interesting thing because if you think about where do these incentives come from well the incentives that protects the integrity of the system actually are are cryptographic tokens that are themselves defined in the system itself so incentives defined inside a system are themselves responsible for the system's ongoing perpetuation in this in my opinion that's kind of weird feedback group is actually you know one of the kind of three major things that's it so she invented that's actually so interesting and powerful now aside from this we also have this idea of decentralization which means that you have a large number of computers in the network that are creating BOTS and so knows Ingle actor has the ability to and have shoved the entire blockchain to one side or the other and this adds fault-tolerance and it adds security through II cannot basically by requiring cheating system to solve very hard coordination problems so cryptography economics decentralization all together come into this combined to the sort of package of my security models that I call crypto economics so crypto economics has a bunch of applications beyond watching consensus itself you can talk about scaleable verified computation you can talk about making block chains more scalable you can even talk about things like on blockchain provably fair lotteries you can talk about decentralized on watching Oracle's no there's a bunch of applications of this sort of thing so one interesting idea in blockchain land is the same cost Mart contract now the idea of a smart contract is in the narrow sense it is a program that controls digital access in the broad sense it's an application on a blockchain that accepts transactions and executes those transactions according to certain rules so nick szabo came up with the term smart contracts in 1994 and the analogy that he used was basically talking about in vending machines a vending machine is a device that implements the rules of an agreement and enforces them through physical hardware so if you think about what are the rules of the agreement well the rules are simple you put two dollars in water comes out you do not put two dollars in water does not come out these rules are enforced by a vending machine purely through in in in modern days that's the automatic code but previously it was basically purely physical hardware so this basically allows you to have some guarantee of security in a way that is very cheap right so now security in vending machines is only a limited kind of security because if you really wanted to you could knock the thing down you could smash it with a sledgehammer and you get the water out and you can break the invariants you do not put $2 in you sledgehammer it water still comes out now fortunately in the digital world we have cryptography and the properties of cryptography are much more kind of imbalanced on the side of the defender cryptography is a magical world where even individuals are capable of giving themselves enough security to defend even against certain kinds of nation-state actors even the government cannot crack messages that you encrypt using RSA or elliptic curve cryptography so when you have in this digital world basically like you know it is a world where forts are very powerful and weapons are actually quite weak and so you could imagine smart contracts running on the blockchain as have you know being basically a digital analog of us of this right you would have a computer program that runs on a blockchain and the computer program just enforces certain rules and the rules would basically say so let's say you know in this case instead of selling bottles of water we are selling digital domain names that are all solar that are also on the watch hand in the rules basically say you have a function called by and if into this function called by you would send one ether then you would transfer owners automatically transfer ownership of a domain name to the set to the center of the transaction and you know you would say you you could pass the money along to the buyer if the one ether does not come in then the domain does not come out so just the same as a vending machine except there is no opportunity to put in a swatch camera unless of course you just break the entire blockchain completely so now this is kind of the the basic idea of what smart contracts can give you and you can imagine them being used in many different escrow insurance financial agreements just creative digital assets and lots of different applications for various different purposes so what is a theorem theorem is a general-purpose blockchain and so basically how a theorem works for you as a developer as you know fairly simple conceptually step one you write code so you write a piece of code which is a program look something like this in my look something like this and it's a program that's in a written in a human-readable programming language thank you break the code compiler compiles the code into a much more compact byte code you send each transaction to upload the code to the blockchain then when a transaction gets to the transaction gets confirms so when the trans actually gets put into a block the system generates what's called an address for what's called before this smart contract that you are creating and this address looks something like this and anyone can send transactions going to this address to interact with your application now in real life if you're an actual user of a decentralized application you don't needs to personally fiddle with transactions on addresses they're going to be fairly friendly interfaces wallets and so forth that do most of the work for you but this is basically how it works when you under the hood now what is actually running a thing well a decentralized network made up of twenty five five thousand computers distributed all around the world so you can see it North America and you know Canada is fairly well represented you might see what this particular circle is actually looks like three circles so you go to see you got Seattle and Vancouver this one you got Seattle and Vancouver in there this entire thing stretches up into the top side of the Great Lakes so Yee Canada the NZ o we have Europe Asia so it really is a globally distributed system globally distributed network globally distributed community how it works for you the user well every operation on etherium is a transaction which is recorded on a public blockchain and you can check the transaction on aetherium clients or there are websites online where you can you know like either scan where you can just get the details about any particular transaction so no this is generally the kinds of properties of public watch scenes give you anyone can download the machine anyone can download any part of the and verify any particular part of the chain that they wants to verify and you know anyone can develop applications build applications upload them and use applications that other people are building and you know there's a bunch of different tools so but it's fairly open for people to start working with it in developing with it and know lots of people actually have started building very interesting things with this kind of technology right so you know you have you know people building if you just various simple financial applications whether it's just payments mean the whole concept of smart contracts is one that can be used in a very wide variety of contexts financial contracts insurance escrow trading one kind of asset for another just a registering digital assets coming up with better ways to secure digital assets lots and lots of use cases now there are you know use cases in just making the internet more secure in various ways so earlier on I mentioned key revocation and there is a bunch of smaller use cases like that just a number of smart contracts give you applied form for this generally giving mechanisms that automatically give payouts when certain different things happen so it making it makes it very easy to incentivize various different kinds of behaviors you can use watching students each track of information you need to do with identity to do with reputations to deal with look when products were produced and where they were created you know where they've you know where the supply chain has gone through so the number of applications is you know a fairly large and fairly broad and you know hopefully people what that sacrified will come up with a few new interesting ones that we haven't seen before [Applause] thank you for telling so just a couple of points of order there's gonna be two more talks and then we're gonna have a roundtable with all of the speakers up here and you guys will have the chance to ask any of the speakers questions about anything you'd like so just and we also have sandwiches if anybody's interested in black market hummus so so our next speaker so dr. Julie Maupin is a senior fellow at C G's international law research program she's also a senior research fellow at the Max Planck Institute for comparative public law and international law in Heidelberg Germany she did her PhD in Switzerland at C G Julie is contributing to the international law research programs research theme on international economic law her research will explore the international law dimensions of the use of blockchain and on the underlying technology of course Bitcoin she's particularly interested in international financial transactions and she will also assess the potential of regulatory frameworks in addition to her scholarly work julie regularly advises international organizations governments and businesses and other NGOs on matters of economic law and policy with a special emphasis on Africa so without any further ado I'd like to introduce to you dr. Julie [Applause] thank you very much for the invitation it's a pleasure to be here today great presentation so my name is Julie I got interested I got into the the blockchain space in 2012 when I started passively following Bitcoin while teaching international investment and international trade and international commercial arbitration things like that in Duke Law School in the US and then when I moved to max-planck in Germany I had a opportunity to kind of reinvent my research agenda and I was really fascinated by all of the governance implications in blockchain obviously which extended quickly beyond just a Bitcoin and I thought you know this would be a great time to start looking into this so my background is I'm an economist and a lawyer so but that actually turns out to be a really useful combination of things when you're in the blockchain space because when you want to think about governance implications you have to look at the question from the inside from the question of the economic incentives the design of the system which metallic was just talking about and then you also have to ask how do those incentives in impact what we see coming from governments and regulations and their concerns on the outside of the system so that's what I'm going to try and give you a little bit of insight in to today and so first why do we still need governance in a decentralized distributed world where the vision is to really empower you and me and everybody around the world to be able to interact autonomously freely in accordance with the principles that they hold dear without being being confined by the dictates of societies which they may not agree so I'll give you a couple examples of why we need governance first um because things like frictionless direct global markets are great this is the screenshot from open Bazaar open Bazaar lets you buy and sell things in a decentralized marketplace and without having to go through a central operator like eBay but murder-for-hire in dark markets is not so great and that's also something that you can do if you operate in a world with completely decentralized marketplace structures where people can contract for whatever they want without any sort of outside strictures and we actually saw this in the Silk Road case with the the dark marketplace and Silk Road that was built and run by Ross Ulbricht because the FBI agents that were they were trying to trap him essentially basically entrapped him into commissioning their murders using using the dark web and that didn't play out well for him and he's now serving two life sentences in the United States and so but those kinds of things happen and we see them happening on the dark web there are bad people who want to do bad things and it's not all roses and cherries and out there so we have to think about that most of us don't want to live in a world where somebody could be out there contracting for a murder right now so other example microscale sustainable investment opportunities are great here's a screenshot from a startup that started a couple of years ago called the Sun exchange they enabled people who have Bitcoin to invest in sustainable energy production in sub-saharan Africa so if you had Bitcoin you would get a prospectus and you could put a little bit of money in and the Bitcoin would be used to purchase German solar technology that would be installed on the roofs of some house or hospital or school in a really sunny place so that they could generate electricity themselves and then it was set up so that you would get returns on a pre-specified rate I think was around 10% or something and they would be automatically paid out to you in Bitcoin and that's a really cool idea we want to be able to open up financial markets and let people invest in things that they care about all over the world without having to go through all of the hurdles of well I'm only allowed to vest in things that are accredited in my country or that I can find out about through financial advisors who are certified in my country or whatever the case may be but on the other hand Ponzi schemes are not so great and we've also seen a lot of those in the cryptocurrency space this is a famous one sort of because it happened just earlier this year there was a lot of press about this this one coin operation was going around and marketing have heavily heavily in places like India I got a lot of emails from people in Africa oh is this a legitimate thing should I invest in this the answer is no no you shouldn't but it turned out I mean this wasn't even actually a blockchain there was no blockchain behind one coin but they were claiming that it was a blockchain a cryptocurrency and that it was going to be the one coin that would rule them all and sort of you know take over the world overpass surpassed Bitcoin and aetherium and everybody else and it didn't happen they are all I think most of them maybe all of them are also now in pretrial detention and bank accounts all over the world are being seized to try and recover the funds that they scammed people out of it was basically a pyramid scheme so a third example why we still need governance of some kind or regulation integrating the unbanked into the global economy is great and this was actually one of the things that I immediately recognized about Bitcoin when I first started following it in 2012 was hey you know there are these two billion unbanked people in the world and this could potentially be a way of reaching them and hooking them up into the global economy and there are many many companies that are startup startups have tried doing this or using different kinds of distributed ledger technologies to reach the unbanked but peso was one of the early ones in the space about on the screen there and the idea of being hey you can send money from a developed Western northern whatever country to sub-saharan Africa and you can do it much more cheaply than you can through using the global financial system so we can get rid of these large remittances fees that people have to pay and then the money can do a lot more good for the intended recipients but um one thing that's not so great about the idea of putting a bunch of unbanked people even if you could do it despite regulatory barriers which is problematic at the moment on such distributed systems is that having an insufficient tax base to build schools and hospitals in all of these places is not so great so what you see here on the screen is a screenshot of a study from the South African Revenue Service in South Africa's pretty well developed economy within Africa much much richer than many of its neighbors but it's incredibly stratified so that you have people who are really part of the first world and you have people who are completely in the third world and they're living side by side so if you see that the relevant number for this purposes of this example is you see down on the bottom there you see the seven million four hundred eleven thousand that is the number of taxpayers in South Africa does anybody know what the official population of South Africa is it's about 55 million 56 million so seven million people have to pay for everything that the government has to do for the for all of the rest and that's because everybody else exists in the informal economy so if we integrate these people who are in the informal economy into the global financial system in a way that doesn't take account of tax revenues then we're not going to be able to build schools and hospitals and roads or even broadband infrastructure for them so we have to figure that out that's missing in in internally in most blockchain systems today and so what I want to propose today is that we think about governance a little bit in a concentric circles kind of a model so here are a few examples of things that you can think about in concentric circles you can think about this self as a set of concentric circles in the center we have our core self whatever that means it's a combination of conscious and unconscious and physical things that make up who we are we may not be fully aware of all of them influences nature and nurture all of that then we have the private self that we have the things that we know about about ourselves that we don't necessarily share with everyone and then we have our public self this is how we present ourselves to the external world you can also think about politics in a concentric circles kind of a model this is something I found just a random image from Google Images search where someone was conceiving of politics in terms of great thinkers in the center and then you've got disciples and then disseminators at Leicester disseminators the citizens way out here participating citizens way out here in the light blue and then you finally you've got the politically inert in the very outer circle those are people who don't engage at all in a meaningful way with politics and you can also think about the Anthropocene as a set of concentric circles and this is one model where you know the economy is one part of it society is bigger than the economy environment is even bigger than society and we're all living in this sort of set of inter woven relationships you can think about IT environments in concentric circles as well this is often modeled as stacks but you can also model it as a set of circles where you've got in the center there sorry on the outside you've got the network then you've got hardware then you've got operating systems and apps and then other stuff interfaces and things on the inside but what would this look like for the blockchain roll so um so my proposal is that actually we would we would want to set the concentric circles or we should think about the concentric circles in exactly the flipped model from this IT environments way so instead of having the the network on the outside we have kind of the protocol at the center the underlying protocol and so there's not really a good visual representation for this that I'm not terribly artsy so these are a couple of ideas and the one on the left you can see we've got these concentric circles with these different things and you notice that the way I like this image because the way that it's drawn it sort of looks like on the one hand it's just a set of concentric circles but on the other hand it's kind of like an Escher drawing on the other hand it looks like they're inter spiraling with one another in some way or if you look at the one on the right they're sort of overlapping with one another they're a bunch of different maybe block chains with different sets of things built on top of them that are smashed together or touching each other in different ways and I think that that's the world that we see today and the world that we see developing and then the question is what does that look like what kind of governance structure does that give us so basically we have three key types of governance that we have to think about in the blockchain space one is internal governance what does the set of incentives and the security decisions and the various different design features that we've built into the system what does that what results does that render in terms of human behavior in interacting with the system that's the inbuilt governance of the system and those are very much I can't stress this enough design decisions so either you choose to set it up that way or your system ends up operating a particular way because you didn't think about it what your design decision would be and so one of the classic examples of this would be you know Bitcoin the original idea for Bitcoin was for it to be completely decentralized and be this really awesome peer-to-peer thing but it turns out because of the way that the mining process works in Bitcoin we see this massive trend towards centralization of mining with 80% of mining in the hands of four mining pools which are located in China and that's a massive amount of power to have because the miners get to determine what happens which which protocol changes are gonna be accepted they play a major major role in Forks oh that kind of stuff and those are governance questions should we should we change the size of the block should we make it faster should we change the fees those are governance questions and it turns out that actually a centralized set of actors are getting to make those decisions because of the in belts incentives in the system externally then when you have things like that happening so then you that raises a bunch of external questions so in that specific example what should we as the rest of the world make of the fact that we've got this system for transferring value all over the world 80% of which is being done in China by these four sets of centralized pooled actors well that raises a lot of questions in a lot of minds because China's not the most free speech sort of uncensor ship internet a place that we know in the world a lot of implications about what would happen if the Chinese government decides that it's going to crack down on some of these things but also even if that weren't the case just the fact that there is a set of people who get to make decisions on the basis of on some opaque basis that most people don't understand which will then affect how everyone else around the rest the world gets to use it it's not a terribly democratic idea and it's not a terribly decentralized idea so then we have governance at the interst is ease so if you look at the concentric circles at each interface the private the private and the public say you've got this governance at the inners disease so I'm also a lawyer as I mentioned and in the law we have we have sort of public law in continental Europe they they split it into private and public law just call it law state law so law that is made by states which in a good system we elect our representatives and they make the laws for us and we all abide by them and if we don't like them we just replace them with new representatives and they change the laws so we've got the law that we as a society have agreed to abide by and then within that there's this big big big wiggle room which we call private ordering in law and that is the sphere where you can contract freely to do whatever you want within certain bounds so you can sell your bicycle you can sell your house you can decide who you want to marry you can make decisions about your children all kinds of things but when you run up against the boundaries of the private ordering concentric circle with the public ordering one that's when you start to get interactions so for example you can have a child but you can't sell it as is life you can build a marketplace to buy and sell things but you can't use that to finance terrorism those kinds of things so so there are borders which we draw around what the permitted area of human active free human activity independent of state interference is and that's the interface between private ordering and public ordering and the way that we set up our blockchain incentive systems also determines how governments then have to react from the outside so um a couple of examples of this I don't have slides for this so I'm just gonna run through these kind of verbally so a couple of examples for this and one really notorious example that was super fun to watch last year was the Dow the Dow was this decentralized set of well basically a decentralized autonomous organization some smart contracts that enabled people to contribute ether and then in return get Dow tokens which would allow them to vote as if they were sort of mini venture capitalists on new projects to fund to be built on top of the etherium blockchain well this is a really cool idea because a venture capital is not very accessible it's not something that most people can participate in and it's heavily regulated in a lot of countries many places you have to be an accredited investor in order to be invest in certain Abel to invest in certain types of investments which means basically you have to be really wealthy already so that means that the people who were able to invest in the most exciting things that could potentially make huge returns are people who were already wealthy and the people who would stand to benefit the most from it they're prohibited from investing in it so this was a cool idea let's democratize sort of angel investing or venture venture capital investing by building this and it turned out that there was a bug in the code and a hacker found it they raised a hundred and fifty million ish dollars and then lost about 50 million to the hacker this was a really great set of lessons learned for the entire theorem community but actually the thing that I want to point out about this is not just what's important about this is not that there was a bug in the code that's gonna happen many times and yes people should audit their code better and I think a lot of lessons were learned there and have been internalized but what's also important about the Dow is that it's probably it was a blessing in disguise that I blew up because the internal governance structure of the Dow was really not well thought through and if you looked at the proposals that were coming into the Dow for the things that should get funded by this group of people who had all put in they were terrible ideas for the most part and the voting mechanism with which people would vote which which projects should be funded was also not very good and it was based on a really naive assumption that the wisdom of the crowd will pick the winners um now why do I call that a naive assumption well because it turns out that there's a lot of research about the wisdom of the crowd and the circumstances in which the wisdom of the crowd is actually wiser than people with professional judgment like venture capitalists and it turns out that the wisdom of the crowd does not work at all in homogeneous communities because if you don't have enough of diverse perspectives in the room you're not going to get all the critical voices that you need to make a wise collective decision and if there ever was a case for a homogeneous community it's the cryptocurrency community right I mean even just sitting at the opening ceremonies yesterday I was looking around and just thinking how many women are in this room how many women are participating this hackathon we can look around the room today and do the same thing so there are really serious problems with diversity and wisdom of the crowd doesn't function so you have to think about that not only in the case of the towel but also prediction markets and other experiments that are running on various block chains so another example that I wanted to give for you so recently this year I was asked to do a really interesting project which was to develop a legal roadmap for the government of Georgia's attempt to put its property registry on a blockchain so georgia entered into a cooperation with a blockchain firm called it fury which is mainly a Bitcoin mining firm that has operations in Georgia and they decided hey you know we want to we have a lot of problems in the past we had a lot of problems with corruption in the land registration process where people would sell their land and in this sort of post communist transition environment where a lot of stuff was being propped privatized in a willy nilly fashion there was a lot of corruption so they wanted to say hey we're gonna clean up the corruption and they created this National National Association of public registries and the NA pr's job is to register among other things property transactions and to do it in a transparent and publicly accountable way so they created a centralized database to do this where everyone can view all the records and they also wanted to make it so that they were keeping themselves accountable by forcing themselves not to be able to change the records after the fact so the parties come to the registry they sell the land from from Alice to Bob and then they go away with the title in hand and the money changes hands but then later on somebody goes back in and changes the registry and now it doesn't belong to Alice or Bob but to Charlie because of some corrupt action which doesn't get discovered until years later when the the property gets sold for development to some multinational business so this happens a lot in a lot of countries and they wanted to make that impossible say well we're gonna hash all the records that we put into the NA PR database on to the Bitcoin blockchain so you're gonna put all the information that you need about the property and the owners and all of that you make a hash of it you put another blockchain and then anyone who wants to can go and look up that hash and verify that it matches what's in the NA PRS registry so that you know that it hasn't been tampered with that was phase 1 phase 2 which I asking for first legal advice on phase two was so how can we now make it possible to allow the parties to actually do the smart contract to use a smart contract for the sale of the property so that instead of having to write out a contract I can just write a smart contract we do all over the whatever blockchain and it will automatically then enter the government registry and change the record so it turns out when you start opening up this onion you unpeel many many many layers of legal complexity so for example what do you do about what do you do about legally how do you determine legal incompetence so you have two people who are interacting over blockchain they don't come in person to have their identity verified maybe we can use a solution like you port or one of the other many solutions that are out there for a blockchain identity self sovereign identity does solve a lot of those problems for us and it's very exciting and but even if you can do that you need to you need to make sure that it's not just who am i dealing with but also has this person been discriminated or jand you have to make those in different types of things talk to each other you can do this if you get them all to use self sovereign identity types of structures but you have to make sure that everybody does it once you can't just have the property register do it by itself it won't work and then what about people with disabilities who actually you just can't interface with this part contract they need to be able to designate someone else who can do it for them and then you need to be able to check that the designation was valid another level of complexity then there is this interesting question about well who should write the smart contracts and if you write a smart contract are you then an intermediary of some kind because if you look at the civil code or the laws of a lot of countries you'll see that we actually place legal duties on intermediaries people who help with sales in between people for consumer protection reasons so if you screw up the contract and you write it in a bad way you could actually be legally liable for it and if the government and Joseph you mentioned this in your talk if the government itself writes the contract in some way the government itself could be legally liable so you have to you have to look at that and you have to think about the fact that maybe we can have maybe we can have an army of lawyers out there who are super creative technical you know geek geek lawyers who are going to be able to create template clauses and template contracts on a marketplace like what Aaron Wright is doing with open law but they might be liable then if they screw up and it might not actually be this this sort of decentralized marketplace of lawyers it might be AI bots because there are other other startups that are that are focusing on that right now so that you just when you want to write a smart contract you get a little chat that pops up and it walks you through the process and asks you a few questions and it creates a contract for you on the basis of machine learning so then you don't have a human to hold liable you have a bot it's a whole valuable and so there are a lot of different really complex questions because of the way that we set up the internal system and then if we think about for a third and final example there are a lot of governments that are talking about issuing fiat currencies essentially government backed currencies on a blockchain and this raises a lot of interesting questions as well about competitions between truly stateless as a permissionless public blockchains like aetherium and state centralized models and this touch is also on what what Joseph was saying about public and private chains and consortium chains a lot of those themes come up again in this context but basically what we have is we have three different possibilities out there or major possibilities the first one is you put what we currently have today which is a fractional reserve banking system on a blockchain and the government issues the money whittling in accordance with whatever monetary policy it uses and then it goes in this multiplier way through the banking system and multiplies credit and this would be really an interesting experiment because we don't really know a lot economists about monitor policy today and how well it works because it's pretty opaque we know what we know what the government does at the beginning of the process but we don't really know what happens to the money as it gets multiplied through the shadow banking system except it once in a while we get a little window of illumination when some kind of financial crisis hits like the subprime loan crisis or the Greek debt crisis then we see whoops this was piling up money in this one part of the economy that we weren't aware of somehow if you had all of that on a blockchain you could actually see all of that data in real time and assuming you could find a way to meaningfully mine it and analyze it you could probably make a lot better decisions about monetary policy but there are probably a lot of people in the existing financial system who really don't want that information to be known because it would eliminate not only where the money is going but who is profiting most from monetary policy and it might not be Main Street but Wall Street so um that is a politically hot question and something that's definitely worth thinking about and experimenting with so the second option that we have out there now thanks to blockchain is that you're gonna have a pre announced monetary policy and this can be done either in a state launched or a non-state launched blockchain and Bitcoin does this obviously they said this is the number of bitcoins that are ever gonna be in existence then everybody knows what they're gonna get this is how many were we created this is how often they'll be created it's an announced monetary policy and there's some room it for playing at the margins but basically that's it the 21 million bitcoins and then it's done it's a deflationary monetary policy it's rigid though and you can't change it if you later discover that actually that's hindering innovation of what you can do using using that currency so then you have the third which is an unannounced monetary policy which is essentially what we have in aetherium so we have a monetary policy which we don't really know exactly according to what's scheduled and in what kind of decisions will be made about the monetary policy of the the underlying tokens and that's problematic because it makes it difficult to plan for people who want to know what is going to be the value of the currency in the future or what I'm gonna be able to do fit how often will it enter circulation and at what levels etc is that is that monetary policy going to have any relationship to the real growth of the economy is there comes some kind of inflation targeting or something like that we don't know so um and you know it's also troubling from the outside users perspective because it puts the users of that monetary system at the mercy of whoever gets to make those monetary policy decisions just like in the case of central banks so except obviously they're not central banks they're developers and maybe miners maybe stagers who are making those kinds of decisions in the future but the question is which of these three models then is the better one from a governance perspective for society is it better to have this opaque fractional reserve state centered banking system we would rather have this known stable this is what you get Bitcoin kind of system or do we want something that's more flexible but unpredictable because it's unannounced and and my answer is we don't know but we should try to find out so it would be great to see and I'm thrilled that we're seeing these experiments happening side by side and I think it's gonna be really fantastic in the next few years to see who the winners and losers are and one thing we know for sure is that we're gonna have a whole lot more data to look at and that's gonna be helpful so um those are three quick examples there are a lot a lot more questions one could ask about this interface between internal design and and what that means in terms of external governance but we will save some chances to have questions in the panel as well thank you wonderful Thank You Julie and next up for a short ten-minute talk before the panel we have William ooga our William is an author of the business blockchain he's a producer of token summit and he's also a venture investor and advisor in fact when I first met William I was a director at Communitech here in town and he was coming to town to check out some velocity companies and we actually have Communitech CEO here with us today Ian equipmen my old boss two careers ago but in any case he's also the founder of start-up management he's a mentor an entrepreneur a speaker and definitely a thought leader when it comes to blockchain without further ado I'd like to introduce volume to you who will take it over thanks very much Nabil so let me start by asking you a very simple question now that you've been listening to a theorem for a while what do you think is the most important feature about etherium okay well this is a trick question really because the most important feature about a theorem is not a feature the most important feature about a theorem is the title of my talk it's the etherium ecosystem and to give you an appreciation of this ecosystem I wanted to take you back in history a little bit because I could probably qualify as the unofficial a theorem historian having having seen the birth from the very early days and watch them and help them very closely so this whole thing started when the italic and four years ago wrote the white paper then he announced it in Miami in January 14 then they did the sale a few lines of code generated the tokens they sold 48 million earth the currency that we know about today then they had the first developers meeting in Berlin there were barely 30 people in there that's really what's started aetherium two years ago again to put things in perspective I've been tracking the space for more than four years and as my role as an analyst I analyze what's going on two years ago 80% of the activity in the ecosystem was Bitcoin two years ago when we were in London with Joseph and Vitalik at the DEFCON one I had just developed the this landscape of all of the companies in the blockchain space in the financial services industry 300 companies and we were so happy to see just a few aetherium logos at the time and were saying 'we yeah it did you miss penetrating the ecosystem what a difference two years can make now the etherium system is strong and big its developers startups meetups hackathons enterprises funds governments banks crypto capital everybody is using cerium to be specific 50,000 developers today and this is a conservative figure to give you a relative measure of that number today next door there are close to 400 developers here that means for every for every one developer there are 125 others somewhere in the world that know or are playing or working with and touching the etherium technology that is significant 63% of central banks are working with a theory and technology today according to a recent survey and that's seventy five percent of those that are doing anything with blockchain 44 percent of public institutions are working on aetherium technology today and that's 90 percent of all the ones that are doing anything with blockchain technology more than 300 enterprises are very seriously developing aetherium projects solutions and various applications as Joseph mentioned the etherium Enterprise Alliance and its own has more than 200 companies in it and as to who's who from the big companies to the small startups more than 730 dabs decentralized applications are tracked on website that consensus has founded state of the apps' the dabs you can go and search on any tag any thing that you are thinking about there's probably in etherium application being developed today more than 1,500 startups and every week there's probably 10 or 20 new ones that are emerging I get emails every day of new companies that are working on aetherium technology more than one and a half billion dollars of capital raised in the last 12 to 18 months only that's 80% of the whole total of capital capital that has gone into blockchain related startups VC is the new VC virtual currency is the new venture capital and the theorem is really leading it we cannot talk about a theorem without comparing it to Bitcoin because it's all part of the same big ecosystem and just to put things in perspective four years ago Bitcoin was four years old and the total value market cap of Bitcoin was 1 billion dollars today he theorem is 4 years old and it's market cap is 30 billion dollars that gives you a relative sense as to how much quicker the etherium technology is propagating into our world into our society into our government into our business into our lives you can extrapolate today Bitcoin is about a hundred billion dollars so a hundred times more than it was four years ago and if aetherium continues on the same trajectory it might be worth three trillion trillion dollars in the near future so aetherium is really the cool thing here right so if it really was a car I make this analogy what kind of car do you think the theory would be if it was the coolest car around today Tesla right that's like this our theories itself this is how a theorem sees Bitcoin this is a bit combs is etherium because they keep criticizing it but they're not right so let's be serious here when technology develops usually there are three types of buckets in terms of the activity and first we have to build the infrastructure then a bunch of middleware software gets built on top of the infrastructure and then smart developers use the middleware to develop applications that require the infrastructure so you can think of the Bitcoin Belov the ether and blockchain as really that base layer infrastructure and where are we today this is my own estimation I think we're about 70% into the infrastructure about 50% into the middleware it means that we need to see more and more middleware it's just very important because that makes things much easier for developers and we're only 20% into the applications segment I've lost a bit of sound okay I was - no problem the ecosystem today is very rich you just name any particular segment and there are dozens and dozens of projects and solutions in each one of them from the core technologies which the etherion foundation is focused on to all kinds of development tools languages you name a language software language there is an ethereal you can build a theory of applications on it you name a client there is a version of it that a theorem supports you name an industry and there are at least a dozen aetherium applications currently being worked on professional services fund management accelerators all other protocols that are going on top of etherion the ecosystem is big and it is very rich where are we in terms of the evolution if you think about three or four years ago when vitalik started and he it was all about selling the vision and he wasn't alone and a whole bunch of people followed him to sell the vision and then at the top end is when the vision gets realized we are probably today in the installation phase of this evolution and this is only the beginning because the big part is going to happen when the deployment phase starts next year a lot of the applications today are in the early stages aetherium is the new Java and I make this analogy because it's very important to remember that Java was really what started the web Java was this neutral language that if you wrote an application once on Java then you can run it many times on the web you don't have to worry about what kind of server it ran on and today there are about 10 million Java developers but we don't have enough aetherium developers so you have on one hand 50,000 and the other hand you have 10 million it tells you where we have to go so maybe theorem is not a Tesla maybe theorem is a very modern train that is pulling ahead the ecosystem behind it let's look forward to a day where there are thousands and thousands of applications with millions and millions of users on etherium and this is where we're going and maybe it might happen faster than we think things can happen because the last two years were phenomenal within forecast it was going to happen so quickly but let's be realistic as well a theorem is not perfect today but there are no block chains that are perfect today don't let anyone tell you there is a perfect block chain it doesn't exist yet so yes a theorem is not perfect yet but many of its parts are excellent thank you so now we're going to jump into the panel discussion if I could ask Vitalik and Joseph and Julie to join me and I was told to take the rooster seat I don't know if there is a meaning behind that questions for the panel we're gonna do a few minutes of questions and then we're going to take some questions from the audience fairly quickly so maybe it's off with a question directed at Vitalik and Joseph as a starting point it was what are the things that the blockchain is not good at because I think well one of the traps is that people want to put everything on the blockchain and you I think both of you have a lot of experience now and you're seeing things that should not be on the blockchain and that in a way that helps people to to get to the real more important things that you can people hear me by the way wallah so and I would so first of all the main three weaknesses of a blockchain are number 1 scalability and this is felt by application developers and users in the form of transaction costs number 2 privacy so like all data on a bar chain by its by itself is public and number 3 latency so you have to wait for in a theory Em's case like 14 seconds for confirmation as opposed to an age centralized service where you can wait half a second so if you have anything in an application where either you wants to get instant feedback or you once you have you the use case is not one that's valuable enough to pay transaction fees well there's just too much data involves to pay the transaction fees to put all of it on the chain or it's data that needs to be public then chances are you do not wants to be putting the data on a blockchain and chances are either it's an application that at least at this point doesn't make sense to put on a blockchain or it's the sort of application that makes sense to you where you wants to use a block chain but you wants to use a blockchain any more kind of complex and nuanced way than just shoving the entire application on it but as the etherium roadmap begins to be realized with respect to scalability we're gonna see a bunch of different mechanisms that enable transactional throughput to grow dramatically if essentially to infinite transactions per second currently if you had compute to the etherium blockchain you increase overhead just a little bit and you reduce transaction for a second throughput but if you can add compute to the blockchain in the form of functional units called shards then you can keep adding more and more compute and get perhaps a quasi linear increase in transactional throughput all of that is going to move us into a world where transactions get very very inexpensive I believe storage technologies will enable decentralized storage to get very very inexpensive so I think we'll still see specialized decentralized storage having a role as bulky data storage but I think we'll see more and more data on the blockchain itself with respect to privacy and confidentiality there are technologies being built into a theorem currently that will help with privacy and there are overlay systems that enable sets subsets of actors on the system to engage in confidential transactions that are part of the overall consensus of the system but aren't readable by actors that shouldn't be able to read them great Julie I was gonna get you because you mentioned the open Bazaar in your remarks as one of the examples I'm not sure if it was a good or bad you know I'm an investor in open Bazaar I'm on the board so can you clarify what was the example about and what could be done better no actually I mean the open bizarre thing was just an example of that the site the title was you know direct peer-to-peer markets are great but being able to do things like murder hire and murder for hire and direct markets are not right I don't think we see that so it's not really particularly directed at that remark or at that particular startup but the the bigger idea is simply that we have to have ways of distinguishing which uses of blockchain technology are being built designed in ways and used in ways which further broadly shared society goals and which ones aren't or in which instances they're not so building systems in a way that that makes it possible to do anything at any time without any kind of detection with no consequences is probably not at the end of the day what we want because there are some things for which we want to hold one another accountable as a society and that's why we have political consensus and political consensus might be determined in completely radically new ways using blockchain technologies there's no reason necessarily that it always has to remain the domain of the nation-state but there has to be nevertheless some kind of consensus about what kind of a world we want to live in and those decisions need to be built into the systems that we're designing are there any good examples where governance is being done right on the blockchain governance being being done right being governance is well integrated into blockchain that you can think of yeah there are lots of examples of that right now the sticking point is that people who are trying to build governance in right into their projects are nevertheless running up against outside regulatory barriers because they're doing it in ways that are new or unusual for external regulators so you know a great example is the case of remittances and the companies that are trying to work on on providing free or very low cost for immittance --is to people in the developing world who really can't afford to have even 7% of the transaction or 3% of the transaction eaten up along the way so that's something that's really difficult to do because at the end when it gets to the to the receivers side you have to somehow be able to know that the people who are receiving the money aren't they're not anti-money laundering watchlist they're not on any counterterrorism financing watchlist etc because in principle one could do many many many of these tiny little transactions and make it look like remittances and actually be funding global jihad so you have to have ways of doing that now the question is do we have to do it in the way that we've always done it before and regulators like the things that they know and all the things that they don't and but the purpose of the of the regulation AML kyc regulation is to prohibit these kinds of activities it's not doing it perfectly in the global financial system that we have today so I think that that building new systems of governance directly into weather platforms or DAPs on top of platforms you have to then interface with governments and regulators and say look we are fulfilling your policy goal by doing this and we're just doing it in a way that looks different than what you're used to but we can fill in your policy goal at least as well as your existing regulatory system for example if you could show that you have written a service that is not being used at more than greater than 3% for money laundering you know that so that it doesn't exceed what we see in the in the traditional system than fine we should allow it great Joseph back to you you're at the forefront they're implementing you do the hard work I mean the foundation and other developers they throw the technology over the wall you put it together it's not perfect and you make it work what are some really interesting projects that you're seeing that we can expect to see a lot of users coming into it in the next six months let's say can you comment decentralized self sovereign identity is incredibly important it'll be the foundation of the decentralized worldwide web and there are many vectors that we are applying to push that out into the world a couple of fun projects that I think will gain traction pretty soon one is the yugioh system Ojo music is the first instance of it we are enabling artists to register their content using open law to attach usage policies to enable consumers or other artists to get public performance licenses or derivative works licenses or synchronization licenses in contrast to the way the music industry works value will be sent in and exchanged for licenses instantly the artist itself who's registered his or her content will have the ability to designate collaborators so that that payment gets immediately split and all of the content creators will be paid instantly we're building on top of this content management infrastructure we're building a business and social network so we're already selling albums on the system and we're enabling artists to register their content or to register themselves as bands etc very very soon one fun project that is moving into token launch pretty soon is called virtue poker so I think this has a chance it's a provably fare poker it's a poker system that will enable people who are using the system to only have their funds at risk when they're actually playing the game so in contrast to the current online poker industry where you have to go through quite a lot of gyrations to get funds onto the system and because it's such a pain in the butt you leave your money there and government shut those systems down and and service providers walk away with those funds in different circumstances in this situation and we've drastically reduced the risks so this gonna be legal is this kind of the loophole for me in many places it will be legal again absolutely and we won't offer it in other places and the interesting about thing about that is that the professional online professional poker players three of the top 10 all-time were money winning players are helping us build the system will promote the system and are extremely excited to get all of their friends into the system because they hate the way the online poker industry works so you know there's a chance that that will get some real traction great back to the italic I want to talk about Ethier and the society because what struck me about a theorem when I first heard it from you is that and I said in the book I said I saw a human element to it it's not just technology it's a human element and then you think a lot about technology can you tell us what's your philosophy now about the etherium the famous impact on society where is it going this kind of question is often a very difficult one to answer especially for general-purpose technologies because it's similar to asking like what impact does C++ have the programming language have on society you know the problem is that the thing is just so generic that you know it gets literally probably the same programming language that gets a cue by people building the darker markets as again and also gets us by the police trying to catch them so it's in blockchains aren't quite as far because and like unlike programming languages they do also have very specific property is like decentralization like you know like openness this idea of reducing in this intermediating trust and those are very particular directions and then they do in enable certain specific kinds of things that are that you know previous generations of technology didn't able although you could argue that they were in that you know they were enabled in somewhat different forms so the you know the fact is the internet did democratize the the ability to publish things that in order to become visible to much larger audience as you know what social media did is the democratize the ability to easily talk to people on the other side of the world and I do see blog chains as democratizing and the ability to an instant was to remain as terms make make agreements and though at the same time you know the kinds of agreements that people can make the kinds of assets that people can create and store the kinds of smart contracts that people can build are many and varied and ultimately in allocating it idiots based you know basically up to humanity to decide what it adds up building on top of these platforms and can I jump in yes yes so I see a theorem is one of a suite of decentralizing technologies it's perhaps the linchpin or the glue these technologies include decentralized storage trustful computing or trust minimized computing or etherium high throughput computing organized in a decentralized way similar things for bandwidth all these mechanisms need to come together to build the next generation the the decentralized worldwide web that's going to enable us as a global society to move from top-down command and control as an organizing principle to richly rapidly communicating consensus forming set of overlapping global villages that are all focused on specific topics that are able to define their goals fund their goals execute their goals all in a decentralized fashion so the smart contracts the window to this is it going to be available to consumers I'm always looking for ways to put this technology in the hands of consumers and it could be smart contracts are gonna be the hands of lawyers we haven't seen that yet from a purely theoretical standpoint creating your own smart contract is only five minutes and 75 cents away but from a much more practical standpoint you know right now it still does take quite a bit of expertise to actually create one of the one of these contracts particularly in a way that is secure and I think we are going to see a wide variety of tools for wide varieties of professions and wide varieties of skill levels start to be developed especially over the next couple of years both as the fundamental technology needed to actually build smart contracts increases and as the applications built on top of them get more and more infrastructure closer closer to actual medium adoption yes we've done a bunch of supply chain management work around the world the the public instance of that is work we did with bhp billiton we've taken those different projects we've abstracted them generalized them into a product called violent violent is business process flow or supply chain management system you can define define assets actors States transitions very elegant user interface and it writes the smart contracts for you and it puts the user interface together for you and can show you a demo at some point soon and at this level already analysts in organizations can wire up there their supply chains we're moving that beyond we're gonna create domain-specific languages so that analysts in specific industries can more easily construct these things domain-specific and eventually move them into a sort of puzzle pieces sort of interface so that you can just graphically wire up supply chains so I think you know as the user interfaces get more sophisticated you won't need to write smart contracts looking forward to that Julia wanted that something about my contracts and what you'll you point there but the prospects in the future yeah I mean I think if the tools continue to improve to become more user friendly which they're not anywhere near where they need to be yet then will become more and more possible for more people to start interfacing them with them I mean if if I look at the way that my that my ten-year-old is learning you know coding starting with scratch you know which is some of the program software that was developed by MIT and it's kind of a plug-and-play drag-and-drop sort of a modular way of learning how to do things and then you can become more sophisticated from there or you can just decide you know actually I really don't like coding and I want to just have something where I can just click on boxes because you know not everyone in the world is going to become a smart contract programmer we have to be realistic about that so the the user design needs to become a lot better and I think that in relation to that we also have to start thinking about consumer protection in a different way because right now we have this model where we have legal agreements and online they in interface they they they show themselves as these I agree buttons that we click which have hundreds of pages of TechSmith nobody reads and this was demonstrated last night at the hackathon when there is an embedded piece of an embedded line and the I agree to the hackathon terms and conditions in which says if you read this line you will win a free prize at the hackathon and only you send us an email and only 11 people out of the 450 participants actually read it which i think is really high I'm having breasts that they actually did but we need to start thinking about different ways of verifying that people know what there doing when they conclude a smart contract and we can actually use technology to do that as well we can ask a set of interactive questions we can use BOTS to help walk people through the process we can use sort of mini quizzes that walk them through the process to make sure that they understand what they're agreeing to the essential terms before they click yes and upend their digital signature from their sovereign wallet as health sovereign wallet to it but we do need to have some kind of mechanisms in place otherwise we're gonna end up with all kinds of things that will be scams you know massive scams sort of the digital block chain based equivalent of grandma's mutual fund being robbed out from under her create something look really the value of blockchain is so profound and exciting that many people are talking about it but I think it's really important to note that most of the people in this room will never use blockchain the software developers in this room will use blockchain but you're all just gonna keep using the world wide web and we're gonna build applications for you that enable you to do things better than you've done them before and able to you to do things that you were never able to do before so I I get sad when people start to worry about everybody needing to to get savvy with this this software development infrastructure it's not going to be the case we're going to take questions from the audience before doing that so start thinking about your questions one more question to vitalik what super is there anything that surprised you that you can think of in the past six months to a year as you know regarding the development of the whole of the holy theorem ecosystem or anything to do with it definitely there's just the sheer speed and scale but which it happened is by itself something that I think was very significant and very surprising especially over the last 12 months so much faster 5 X 10 X 2 X also the large amount of enterprise adoption in the blockchain space is definitely something that happened that has been surprising over probably the last kind of half decade in general I would say also just the facts that in general we've migrated from blog chains being only interesting for payments to abroad chains almost being more interesting for everything but payments I that's also something that I probably would not have predicted back in the 20 in 2012 or 20 or at least early 2013 I mean it clearly did start seeing it in late 2013 when I started getting into general-purpose walk she has an idea I say those are probably some of their major ones I mean as far as just the speed of tech of technological development I think it's in some ways both slower and faster than all the scalability side did you expect to go faster well my I think that in both for etherium technology specifically both on the proof of stake side and the scalability side the solutions are coming both substantially later than we expected but are also substantially better than we expected so that's in in some ways a bad news for the I think a great example of that is the privacy developments as well because that that was something that took me by surprise because it was very clear early on to everyone who started looking at this that this is gonna be a huge issue how to take care of privacy and then Z cash coming along and showing how to do this with CK snarks and others getting into the space Manero with ring signatures and whatnot that was something that I think developed a lot more ideas or made it possible to deploy a lot more things faster than I expected great I'm tempted to ask you one more question are you worried about both anyone can answer I worried about that there was a lot a bit too much token dominance right now in the ecosystem tokens a lot about tokens and is that worrisome or you think cuz I cannot walk I was remind people it's not just about talking there's a lot going on besides just that it's an established fact that 90% of startups fail and it should also be an established fact that 90% of these ERC 20 is on coin market cap are gonna go to zero so it's you know this basically yeah and here's like tokens 1.

0 and you know there are some good ideas there are a lot of very bad ideas and you know there's a lot of very very bad ideas in quite a few scams as well and I expect you know I mean I expect that kind of tokens 2.0 and the kinds of things that people will start building in 2018 and 2019 will in generally be a substantially higher quality especially once we start seeing you know what the consequences of the first wave of tokens are kind of in the medium to longer term and once it becomes clearer that you know like actually sensible economic valuation models are needed for these tokens to make sense you know what he has a good role for them you know what he has a role that doesn't really make sense like do we really need fifty six thousand one hundred and twenty five different forms of medium of exchange you know maybe not but you know like we mean it we may need fifty six thousand one hundred and twenty five types of something else it's I but personally I am happy that there is a lot of experimentation going on I mean one thing that I think is somewhat unfortunate is that I see that there's like a lot of the attention is concentrated on a very small number of projects and I feel just because of the social dynamics of the space are making it easy for a lot of attention to be concentrated on the small number of projects so for example you know what we know people talk a lot about like three or four projects with like 200 million solve our IC o---- is an or and so forth but there is also you know in this very kind of long tail of a much smaller projects and often do very interesting things that we often just never end up hearing about and I think part of this actually is because comes from the fact that these tokens don't have sensible valuation models and look basically if you try to economically model the idea of tokens being valuable as a medium of exchange you start to realize that it's a very multi equilibrium game basically because like tokens get value of PA maintain their value if people want to hold them and if they start looking like they're not going to maintain their value then they become more expensive to hold and so on they can't maintain their value of anymore and so now I feel like this kind of multi equilibrium elements of the economics of the situation actually does encourage this have high level of of concentration we are not there are a few ideas that end up basically a kind of becoming the getting a large amount of attention you know basically a purely because there are a small number of people that are kind of at the center of the social circle and you know like this you know leads to all sorts of various consequences and just another one of which is just people T people taking random selfies of myself and Percy and trying to put that on the website as an endorsement and you know basically I mean it's like hey I took a look here is a picture and I expect that note there is like in general when you have a new industry and you have this kind of early stage 1.0 period wot's people try different things and lots of people try lots of things that just make no sense whatsoever and after some time you know actually and the market does mature and people find kind of the right place for these kinds of things and I personally do think that it's coming but you know there is also there is going to be a process involved in getting there I keep reminding people that if I'm only raised eighteen million dollars for of which maybe got disseminated because of fluctuations of exchange and look how much I think I mean important economic challenge and a lot of these systems is also just kind of incentive mismatch in the sense that incentives for the developers are front-loaded whereas the real like the benefit of the sub projects up to all of their users into society is back loaded in the sense that you actually need to do a whole bunch of work to get that to get that I wouldn't get that done and coming up with incentive models that kind of look basically the thing is right that when visuals aren't well equipped to really understand into the technicals of something and understand if it makes sense or not you have to rely on secondary proxies and the usual secondary practice that people rely on are like one very big one is social proof and another one that you can use is inside of alignment and incentive alignment basically means you know the guys doing the thing too well if and only if and only if I do well and I think those establishing mechanisms that probably just properly have more incentive alignments in between different parts people are just fits in a system is something that is generally had a very important and helpful establishing incentive alignment of social proof is also something that's very helpful and valuable so look there's a difference between a social proof in the sense of a guy like and just giving us thumbs up versus social proof in the sense of someone who is really willing to put a large portion of his time into a given project and distinguishing between those two as important so putting all this into perspective we've had tokens for millennia we've had tokens in the form of beads and pieces of metal and pieces of paper representing money or securities or beyoncé tickets so with the advent of every new instantiation of token technology we have the builders the makers and we have the crackers or the hackers or the breakers right and there there's a tug-of-war there it's hard to understand all the edge cases of a new technology it's much easier to find cracks in that new technology if if you think you can achieve some value by providing that sort of unasked-for Consulting security consulting service basically so in the legacy world we have financial instruments we have things like bucket shops we have a lot we've constructed business models there's no reason to believe that this new technology should be devoid of that often information some a symmetry czar taken advantage of and people are hurt by those things the difference here is that things are moving so fast things are developing at an exponential pace the A's symmetries the informational asymmetries in this space are even larger but interestingly and the barriers to entry are a lot smaller so you can just put up a webpage or you can get on somebody slack and say okay the pre sale is startings and send some tokens to this address so really easy access low barriers to entry to doing barriers to entry are also available to people who want to do good things and so I think this ecosystem will rapidly self-organized we're part of a lot of those efforts and we will see and we've already seen in many cases real solid analysis organized information and ways of protecting the consumer from from situations that they need to be predicted from great actually the one of the things I think that's gonna be helpful in this overemphasis on tokens is is the law because recently the the US Securities and Exchange Commission issued sort of a legal post-mortem on the Dow and one of the consequences of that is that exchanges are going through and looking at those hundreds of tokens that they have listed and saying which ones of these actually fall afoul of the guidance and tokens are starting to be dropped for legal reasons because the SEC made it clear that not only the tokens issuers but also the exchanges can be liable if they're listing and selling things that actually should be considered to be securities so that will help partially in getting rid of some of the things where tokens have very speculative kind of investment speculative investment focused behind them but the question is and so what do we do then with the with the projects there are actually really good ideas that are new ways of financing things because not everything that you do in the technology world needs to have a token and there's other ways of reasoning money and usually if there's if there's not a functionality to the token there's not a reason why your protocol should have a token in it then you shouldn't be raising money with a token so that we should just do away with but there are projects that are using tokens and functionally interesting ways to do kinds of financial rate arrangements that are not possible in the existing financial structure and the question is where are those projects gonna go because they're gonna get dropped from the exchanges currently and all the new states I can tell you as a lawyer the exchanges are now actually requiring listing agreements they're requiring all the new tokens to provide memos with legal opinions that were not a security you are not a regulated commodity we're not this better the other so the exchanges are kind of a fear of God now and that's going to close down some of the innovation and the question is going to be which country which jurisdiction who is going to come up with a structure to somehow sensibly make it possible for these other experiments to happen and not just d-list everything our response is because some unruly at the street level in this ecosystem the like it won't be possible they just shut things down just because there's so much activity by their startups it's so difficult to predict the life of a startup that has to take place the innovation has to take place and has to go forward so nobody can theorize and say well this doesn't look right so we're gonna close it it has to take its life and so I'm kind of worried when the regulators can kind of predict the life of a start-up because nobody can as you indicated a pretty good structure in place it's called the law securities law and we were delighted to read the report on the Dow it confirmed all the legal work that we've been doing it also I think importantly indicated that the SEC would look at the details of every situation just like they do in the legacy world and so the United States I consider quite favorable to either tokenized securities or securities that with appropriate legal work or tokens that with appropriate legal work would not be deemed securities by the SEC but could in fact be utility tokens or protocols that's the key part so many things I think there are lots of jurisdictions that will be very friendly to appropriately structured projects one the kind of counterpoint I will give to a lot of this is that there is a big difference between not being a security and not being a scam and often enough projects that optimize for not being a security or actually in some ways like I actually I actually think the median utility token is skinnier than the median security token basically because they rely on these like the facts that they have to claim that they are utility token basically me and so they have to contort their economic model and this often ends up making them valueless so you know this is I think one of the reasons why the suggestion that you know there needs to be some place that tries to approach the whole problem in the way that's balanced and sensible thing is very valuable yeah so so the SEC does go after situations where they deem that somebody is sold to an American an unregistered security that doesn't qualify for any exemptions but they also go after just fraudulent projects that aren't consumers so after we come back from the audience I'm gonna ask you the same question so we can think about it I want to ask you your wish for the next six months so think about that while we come back okay so let's take questions do I just pick anybody nabil and just okay please do they have any speakers or I mean any of the mic so I repeat the question okay can I repeat the question for the just you're recording the question is summarizing it is what is the recourse for when things go wrong compared to like the visa network there is a record you go to them what's gonna happen in the blockchain space when there are smart contracts that are barely legal short answer we're in the first minute of this revolution and the situation that you're describing is basically like somebody who has access to a banks database system who's transferring things around improperly basically so we are we and many others in the space are building better versions of identity versions of identity and control of value tokens that will enable people to lose their phone lose their laptop etc and recover tokens that are their private keys basically that enable them to control their identity and their value tokens so very early days still with respect to different kinds of financial infrastructures we're going to be building layers and layers on top of the raw blockchain and so there will be many protection mechanisms built over the next few years there's hope but I think importantly one of the revolutions of this technology is that if you want to if you want to put the work into it if you're savvy enough you can get into that bank and and move your money around by yourself okay let's go there and yes of what was the first question yeah so just for everyone who doesn't know webassembly is an effort that was started by martin beck see and there are some other developers working on it too that basically tries to take web assembly which is an existing project that tries to make a standardized VM for browser virtual machine for browsers and adapt sets so that it has the right properties for that work for aetherium style block chains and this is definitely an interesting effort and there's definitely there are quite a few people that support the if they reimburse all mission eventually either just becoming webassembly or using love assembly as an interpreter for it and even if this does not happen web assemblies already being used in etherium in other contexts so i believe that for example true--but which is a in a verifier for large-scale kind of cloud computing type computation on etherium and you know you use as as i believe it uses wobble assembly as a base so it is definitely something that can enable both increased efficiency and increased ability to use existing programming languages Thanks yes okay so question is are there any efforts going on at the global level in the area of security for banking maybe Joseph or do it specifically security for banking for token launches so there is a tokens working group that has been established or is being established at the enterprise aetherium Alliance we didn't start it the one of the biggest banks in the organization started it there's a group called the accounting for watching accounting watching coalition I believe we did start that it consists of some of the big four and other accounting firms they are looking at what tokens are how to report on tokens etc so again it's it's an infrastructure for collaboration and so these these institutions are springing up because lots of different actors want to build shared infrastructure it's pretty exciting I think in terms of the global legal regulatory level certainly the Financial Action Task Force as far as paying a lot of tension to what's going on in the blockchain space and they have various different working groups going on their focus is not so much on regulating securities because securities have historically been regulated on a country-by-country basis with of course a lot of cooperation amongst countries when when things cross borders or have cross-border implications but securities law tends to be anchored around the idea of it affecting the internal market so the jurisdiction of the securities regulator comes from the fact that whatever the activity is is in fact is affecting the internal market obviously in a blockchain world something that's happening anywhere in the world can be affecting your internal market so that means that everyone has jurisdiction over everything which is problematic especially for the entrepreneurs who don't know whose standards they should be designing to but there are efforts to bring to have these conversations there is a working group within the Commonwealth happening there there are efforts within the g20 to take up conversations about this there are efforts dialogues happening at the IMF in the World Bank and then there are many sort of industry lobby groups and players like the digital Chamber of Commerce the etherium Enterprise lions koala the coalition of automated legal associations lots of other efforts going on to try and have these dialogues but the fact is we don't really have we don't really have a super structure for global governance we have this nation state system where we make treaties with each other and once in a while we managed to establish something that has some kind of a jurisdiction at a global scale but that's really the exception and not the rule you know the World Trade Organization for example has its own dispute settlement system we've got the International Court of Justice we've got a few things out there but most international law is soft law so it's sort of a set of gentlemen's agreements and that means that the countries have to come together and work in groups and cooperate and that's what we're seeing in the blockchain space and I think what's novel and what's exciting about blockchain is that it's much more of a fundamental public-private partnership model from the very GetGo because the governments don't understand it from the from the beginning and they have to be informed about it by the startups and so the only way to come up with sensible ways of approaching these problems is to really come into conversation with the people who are building the technologies and I think that's very fundamentally helpful why bit what oh I can probably answer that anybody from kick here no I was an adviser to them please go ahead and you're you you've been working with the Canadian railers the short answer is that the I mean they said that I'm not saying anything that's not public the OSCE they felt that the OEC did not give them a clear enough guidance in terms of including the Canadians and they made that decision to do not risk anything and but then the greater topic here is that the US see this is another topic should be giving a clearer guidance not just to kick butt to the market they owe it to us to give us better guidance that is more clearly defined so that the companies know where they stand and right now I've written an open letter to the US see last week and as specified a number of things they could be doing basically so unfortunately that's that's the situation in BC they are a little bit more open-minded right now I'm seeing more openness from the BCSC and from the Quebec regulators as well but there is hope we're gonna we're not gonna stop we're gonna keep talking to them and helping them understand what they should be doing I think generally speaking this is very much a chicken-and-egg problem right now for the entrepreneurs though because sometimes it actually is better to ask forgiveness than permission and some other than that yes and they have to undertake if there's lack of guidance where there's unclear guidance either they go they seek out a jurisdiction where they feel more comfortable which is happening a lot with people going to Switzerland or Singapore or whatever but or they just go for it and they figure we'll just see what happens and usually if they put people and they have a good idea and they try in good faith then on the back end they're they're regulators will work with them to work out some sort of reasonable arrangement but you can't count on that it is a risk yeah just timewise should we stop at four there's ten minutes to go three more questions okay few more question just jump jump in quickly we speak to regulators and securities regulators around the world we seek out appropriate jurisdictions for our different projects we have noticed so you indicate that they should get their act together but it's complicated and we have noticed in the attitudes a reluctance to come down too hard we've noticed that there is interest in letting this unfold to some degree stomping on things that are obviously in violation but I think that with respect to asking permission versus asking for forgiveness I think we might be able to justifiably air on the the going for it side of things because while regulators around the world have their own careers and they they identify situations that will advance those careers you probably don't want to be the person who kills blockchain who kills this tremendous growth engine for your jurisdiction so I think that they're going to in many cases take a wait-and-see approach to a lot of these things unless there's something egregious going on okay let's take three more questions and try to maybe give short answers as well yes there there's and in blue all I see is a blue and yeah I can't hear I'm sorry so in theory I map locations already use JavaScript for the user interface side for the smart contract side you specifically want programming languages that optimize for security which means two things so first of all like Java the thing with JavaScript right is that it's a language that airs on the side of just keep them keeping on going at all costs like if you say dog minus one in JavaScript it doesn't return here it just says doc - 1 equals nan and yeah this is like well but so you know I think like as far as programming languages go right like I think that you know like there does needs that there do need to be programming languages that are specifically well designed for the smart contract environment and I think in the web environment in many cases having a language we our dog minus one equals a man and you just keep on trying your best and like do whatever just keep going and see what happens may well actually be a totally okay thing to do because very often the cost of failure is low but any smart contract the goal is very specifically to number one minimize risks and so if you want a language that basically forces the user to even over specify what the contract does so that the programming language can check if this if the specification is self-consistent and if it isn't return an error before even the contract even gets compiled and the second thing is that you wants to create contracts that are easy to audit so you wants to create you wants to number one make a default code easy to read and you want it to be maximally hard to write code which is misleading and this is a different set of properties from properties a traditional programming languages have and so this is a specific niche that will needs to be Optima optimized for over time but it is definitely like the kind of each of the Robie that you know things will continue to be developed for and will continue to be improved over the next few years yeah I think it's useful to think of etherium as the back end of applications it is akin to the database in traditional applications and so there are different ways of of interacting with the the java virtual machine or writing code for that machine and there are lots of different ways of building user interfaces that that speak to the etherium network but by the way my java analogy was metaphorical one more question then I'm gonna close my eyes in there the back of the back at the back yes the role of Amazon in the business first of all definitely as far as this is probably also a follow-up to my answer on surprises is that I have been surprised by just how little interest relatively speaking we've seen from like the Google Twitter Facebook Amazon reddit side of the tech ecosystem to blockchain technology in general so like if you had asked me five years ago and which sectors would be most at least interested I would have said companies like that most interested in governments among the least interested and it turns out governments among the most interested and is they are among the least interested as for why and I would expect that like one of my hypotheses is basically just that what block chains are easiest to get traction in areas where the existing technology sucks and finance is an area where existing technology sucks and government is you know sorry but it's also an area where existing technology sucks like it's 2016 and you still have to do a huge huge number of things on paper come on and it's 2017 weeks so you know this is the sort of thing what basically you're you're competing against stuff which is much older and even whereas with on the in the tech ecosystem you're already competing against the stepping the like snappy new thing and so like it is in some way it's kind of harder to get it to get a leg up in that sense another thing is that block chains are the kind of technology which is fundamentally about you know things like increasing safety and reducing the need for trust and those are just things that are naturally just take more time to get a - I get adopted and it's the sort of thing that any like practically speaking once again the tech sector has focused on less because at the least the immediate consequences are lower and it's like the fact is okay Equifax Equifax got hacked and there has been a few a number of large media splats but it's not the same you know I get still life goes on right like it's it's still very bad but it's also easier spend less time thinking about breakfast yeah that's right no I mean like other sectors are no there are places we are at first of all the existing technology is what's integrated and also where the specific trade-offs at watchings give you are kind of you know a more natural thing that can get more that can't get integrated more easily I mean I do expect that over time this is going to change especially as the cost of using a blockchain starts to decrease and to the point where it actually becomes viable for applications going beyond finance but this is going to take some time I think it's gonna change really rapidly when self sovereign identity starts to gain real traction in the marketplace and the more governments adopt this the more companies adopt this the more startups start using this as a fitness model because Google Amazon Facebook Apple they all make money on our data their fundamental business model is our data and once it's possible for us to control our data and decide who is able to monetize it you great that's too close 10-second answer starting with Julie what's your wish in the next six months for the blockchain ecosystem and a theorem in particular so my wish for the next six months is really simple I work with lots of governments and interrupt the governmental agencies all the time and my wish is that everybody who goes around and sells an idea to a government or an inter governmental agency where corporates or whoever it is is up front about both the amazing possibilities and also about the current weaknesses and the scalability problems the privacy concerns the things that you need to work about you know worry about on the regulatory side and it just be upfront about that realistic realistic okay I can do that now you're summarizing things are going so astonishingly well that I don't see a lot of impediments I just see a lot of parallel tracks for forward progress our biggest difficulty is spinning up enough people to handle the onslaught of incoming and the limited amount of time each day so if there's a time dilation device out there that we can get early access to that would be my wish as there are more developers ability privacy and if that continues going smoothly then I'll be very happy scalability privacy great thank you very much bigger applause for the panelists okay [Applause]