Token Engineering Panel with Trent McConaghy, Benjamin Bollen, ADimitri De Jonghe, and Ryan Selkis

all right up next we have a really awesome treat so we have a panel on token engineering moderated by Ryan sulcus the founder of Masari with so yeah so token engineering is this brand new emerging field like many of the things that we all do if it sounds new that's totally cool I'm just getting up to speed as well but literally the folks you're gonna meet right now are the people who are like giving birth to this field so yeah take it away Ryan you guys are gonna be so so unhappy that you left this session all right you guys good confident comfy yes yes all right you're still alive out there it's four o'clock end of a long day jet lag ether is dead right you haven't check have you have you guys like started building your solutions like porting it into the Bitcoin blockchain yet or we built on that five years ago okay so I think that's that's the og right there okay cool so so you know appreciate everybody if they could either join us for what's gonna be a really awesome discussion or take the conversation outside just two people on the back in here i'm ryan sulcus and founder of Masari I'm super excited to be moderating this panel not just because we've got three really really smart gentlemen next to me that I think are really at the cutting edge of this kind of emerging field but because we tend to put really glossy fancy names on things in crypto but I like to think about token engineering much more simply like we're designing provably fair games from scratch and and incentive systems from scratch that that ultimately should replace companies and and and organizations that are you know traditionally centralized and it's really hard to design games and and have games that are actually like fair and and and fun to play and can actually reward actual value creation and make sure that the the winners of the game are the best incentivized and most honest acting actors so that's how I like to think about token engineering but but this is such an early term just like everything else like let's do let's just start with the basics of like taxonomy like how do you guys define what this emerging field is and and and what you're doing in a day to day basis when you're like engineering these token incentive schemes everyone's look at me hi I'm Trent by the way co-founder of ocean and bikini B and so I'm trained as an electrical engineer and an engineer you know there's all these engineering disciplines right Electrical Engineering mechanical software and engineering is a few things at once it's a collection of I like to say theory practice tools and responsibilities right so theory derived from physics etc Newton's laws Kirchhoff's voltage law all these things practice as in the heuristics that you have the procedures the methodologies you have to to do to build these things the tools to do them so after an otherwise and then the responsibility that whatever the artifact it is that you build you take the responsibility for building it and engineering is really about developing artifacts or and maintaining those over time whether these artifacts are circuits or mechanical devices or tokenize networks public utility networks so it's really all those things together this collection of things and you know it's not just about ethics it's not just about one thing the other it's this collection of ideas and the dream is that it emerges as its own honest-to-god engineering discipline side by side with mechanical engineering software engineering etc we saw the you know probably the last major engineering field that emerged was software engineering in the late 90s and now we have this new and emerging and it's kind of amazing right and electro engineering it's driving this 300 billion dollar semiconductor industry and at the heart of it there is a subset that six feeling no industry for circuit design we are already at a tuner 50 billion dollar industry or maybe with a drop of ether it's 200 billion who knows but overall you know the an industry that is already the size of the whole chip industry that's been around for like 50 50 plus year or 70 years right yeah at the same time we have hardly any of the tools we are like 1974 the tools not even 1972 19 1980 we are literally 50 years behind so there's this huge gap between the value of the ecosystem and the dynamics being designed and the the ways that we can actually address and design these problems so we're all flying by the seat of her pants and in some ways it should if you're not scared you should be always it got dark I so i'm been a year ago we co-founded open simple token and it was in a similar vein so we were working on it theorem it got a lot of popularity but eyestrain said it started to take the shape of tokens we have this programmable blockchain but really what it's being used for is defining tokens and and we have this new tool now we have this tool to define new provable fair games provably fair games but it's very early days and if we want to build a world that we want to see in the future we need to do it together and so that's really where open simple token open se came from is bridging the gap between where a theorem is today and enabling thousands of more developers to to experiment with with building token incentive models for their own application and that's what we've been doing the past year so in many ways I live we look at ourselves as sort of two providers to give this and I think Trent will relate to this evolutionary platform where if we can build thousands and thousands of these rules we can see which ones works which ones don't we also have to simulate them before we put them into practice because like an engineering discipline we need to do safety testing we're playing with people's money potentially with dire consequences so we need to mature this field as rapidly as we can and that's also what we're trying to do with openness t hi Dmitry we Trent doing I'm doing more research and product at ocean I guess half of the room wants to build Skynet the other half of the room wants to build something like the collaborative crypto Commons and we want to build it fast and now so we need to have the tools to do so and as Trent explains we were kind of back lagging there and personally I think where I come from a dynamical Systems Theory background and there you try to comprehend very big systems and and manipulate and so you have like down design bottom-up verification of that design and I see so many gaps in each of them we still don't have for example just clear functional analysis drilling down into component level verifying those component those libraries and modeling and back up having simulators and then do functional verification on top so we missing a lot of these things in the stack and we're in a social economical system which has a lot of externalities a lot of behavioral ISM so a lot of unknowns so the things we do now is like longshots put it there directly into the hands of deaths and clumsy users and then put a lot of money behind it and it yeah I mean so the first half of your answer you kind of talked about the theoretical and the second half kind of a consistent theme with what you know Ben and Trent had started with it strikes me that the first thing you have to think about when you're engineering these systems is the externality that's completely outside of anyone's control and that's the price right because while you might want to put these in a sandbox test them find a user that's actually gonna use the token as designed everybody's speculating with these things so so from right from the get-go people are playing a different game right even if you have the best intentions when you're engineering these systems so part of it is safety but how much of what you're doing or what other engineers should be thinking of is really just putting intentional breaks and like circuit breakers on these systems so that you can actually give them a chance to thrive in the wild yeah I mean I guess one of the first things to do is like look at all the primitives that are available and testing them out at the lowest level so the micro games or the simple things and stake slash zero-sum creation TCR all these type of things so if we already kind of know how these behave I guess that gives you more of a controlled environment not a circuit breaker yet but at least a circle circuit analyzer I think you're entirely right to say that this is speculative still this entire multibillion-dollar game we're playing experiment we're hosting and I think the most important driver to to control that [Music] that externality of the volatility of the price is to onboard users but then you have a chicken-and-egg problem because you can't put them on an experimental system and so the we do need to have those those circuit breakers as you said or or control systems because otherwise who goes first right and and and in the most important game that we are building ourselves is the scaling solution as well there we deliberately design it that a validator pool will warm up for a year but then the circuit breaks go off and it's on its own but you at least have that one year where you can assert that it's playing a steady game and and try to break that chicken-and-egg cycle but then it's custom to every game you're you're designing so at least for us for now I haven't seen a general wave well and and you bring up the other point right because these are experimental systems so if you did want to get them in the hands of users one of the other major issues particularly since these aren't just licenses but they're tied to tokens that have economic value is just the difficulty in iteration right so you get one piece of the token design and they took an engineering wrong one one piece of the incentive scheme or wrong and you have a hard fork situation you have to you know have this cabal of Engineers to meet to talk about how you you know change the money supply right and and then you know everybody it's very easy to critique that because it looks a lot like the old guard of the old world how do you guys think about balancing and communicating with with your broader teams and then communities like how to go from centralized experimental to fully decentralized and lay and and and what are maybe it's bespoke to each project but are there certain kind of critical phases that that each of these token projects should go through when you're going from guy with an idea team with an idea and execution to global decentralized network I think right now actually you know people give answers here and there for that but where maybe at five percent of the possible answers you know very very little of this what has been explored to any level and at the end of the day basically you are developing identical system right so where you have say like if there's three dimensions to the state X Y Zed then you have this thing that's moving around in this state space right following this trajectory and that's the state of the blockchain right and it's not just three dimensions it's you know thousands of dimensions that it's following through and then the question is how can you set it up such that as it's going through the trajectory just as it doesn't fall off and completely break right and that is the question like just seeing observing the trajectory once that would be like simulation of the of the the blockchain design right or even putting it out there in a sort of a test nominal lane but if you actually want to design for it to be robust then then you actually have to account for worst-case behavior or perhaps you know probabilistic behavior one of many possible paths according to various possible behaviors that humans have right and so there are you know back to the sort of circuit land there are there are circuit simulators to similar dynamics and there are also tools to verify in a worst-case sense or in a probabilistic sense and it's pretty straightforward in circuit land because it's a closed system it's straightforward right the problem is in blockchain land we have pesky humans so how do you account for that one of them is you can actually try to model all the possible ways that the actors can interact with the system and I come for that in a worst-case way but that act very quickly becomes too pessimistic if you could try to account in a probabilistic way I mean that's gonna be less pessimistic but there's if you have the wrong probabilities then things can fall off the rails so overall to try to understand the range of possible things right now we do have to resort to sort of human simulation sitting around over beers trying to break each other's designs or playing card games and different teams are developing card games for the token designs and so on and then also leveraging the economics themselves right so you know I think an example of a failure is one day before main that launch of your billion dollar Network you have a ten thousand dollar bounty I won't name names right that's a fail so better than that is you know maybe you have growing a higher higher boundaries before you go to Maine at lunch or maybe you just launched me net right away and it's on some sort of market maker that as people realize that it's growing in value then it's just there so there's a bunch of things or circuit breakers and so on to sort of have these warm starts rather than going from zero to production right and all of these are basically helping to adjust the system over time such that it ends up robust but this is make no mistake this is a question of robust design of a dynamical system yes maybe we won't get negative right and in terms of who's clearly failing because I think in my eyes that's kind of the default no offense but but yeah I I find that these conversations especially because you guys know I'm not an engineer so I just do my best to keep up but but what I what I typically find is these conversations give very abstract very quickly because we are so early I'd be curious to hear outside of you distinguished gentlemen like what what are some projects that have nailed some part of the token engineering stack aside from Bitcoin right I think that one's kind of tried and true but aside from all right maybe all right maybe that maybe that's that's okay I thought that just everybody in this room agreed that Satoshi was a genius and that was a pretty darn good incentive design scheme and it's all right we can challenge like around the periphery but I guess my point is something that's newer right when the when the stakes have been higher when the environment is this awash in capital right who's done a good job of navigating the difference between the speculative furor right and the actual system architecture in the last year or so right going from zero to one I don't know I'm thinking no more I kind of have an interesting feedback loop maybe there's a few waters like a chain but but let's roll into the specifics like what what what made that like a this simply arises a successful iterative process I wasn't in the design process of it that I think Trent was more involved in like reviewing the papers and stuff but what I gather is that it's a simple protocol that easy to grasp have too much externalities it has the price setting inside of the system it has a bit of a prediction aspect to it which can be modeled by stochastic sand and other stuff so yeah I think every project that has a very simple clear incentive would be on top of my personal lists of curated incentives do you think that projects need to start with a narrow use case because there's a lot of platforms that are getting built now right everybody's building a marketplace a platform you know I think they should a serial-killer initially for token engineering it starts off with defining clear objective function like where do you see your network evolving towards what what's that dot on the horizon if you create a self-sustaining or at differential Network where does it evolve towards and then you're gonna try to make a control loop in order to basically gradually converge towards that objective function and that's just the most difficult thing to do is like figure out a concise precise objective function which also makes you think about what's the actual utility that you are putting in your network then the same question yeah yeah so it's hard to name a specific project but I do feel that that there's two points towards sort of a guideline that and that I would want to make first of all I like that you mentioned that that Bitcoin or a theorem themselves are also games right so there is not a clear distinction between a token engineering as an application and the platform that you're building because both of them are games and so I think a very first lesson that I myself learned and I respect another or learn from other projects specifically actually tenorman to give credit to where credit is due is try to build with the group velocity try to build modular components that serve one function and that can be helpful for other projects so that you're not trying to build the whole world in one piece and then that comes down to your normal development cycle as well because on the one hand we've all over the past 20 years adopted agile development but then you cannot add a smart contract layer you have to launch it and so so there's sort of as a development philosophy I think if you think about modular pieces that serve one function then you start out as agile as possible and for all and you try to identify the most important foundational components first and you try to shrink them and shrink them and swing them until they're one singular purpose and and you've battle tested them and so it theorem for example has been established ERC 20 tokens on it theorem have been sensibly established with some lapses here and there and then you push that project forward because also what what Trend said were only scratching the surface right to gravitational particles are are calculable a third one produces a chaotic system as you have more of these small components interacting you have a space you cannot imagine so you need to build it gradually and the point and I were to argue the points where you don't have a good control over it keep agile development keep them somewhat centralized produce a spectrum of gradually decentralizing some of the functionality and make it a multi-year project because it will take time yeah I think like several other points you touched on a really great example is the aerospace industry right it's very very bottom up because there's very high it's very expensive to deploy something and there's very big pain if it fails right you don't want a jumbo jet falling out of the sky so when you're designing new jumbo jet you're generally trying to reuse existing well-known building blocks and compose them in these higher waves that are generally well known right and you make tweaks here and there and here and there so if you look at the blockchain projects right you know it's sort of pre aetherium days or made safe there was all these clones of Bitcoin right and they were just tiny deltas right litecoin took Bitcoin and changed a couple things and most of the projects were like that and Bitcoin was and no one design that was working right it actually took a bunch of new leaps and ideas from for other projects even before but it was the first time that it really worked in this new way but once it was demonstrated to be working then small tweaks here and there you kind of have a good feel because you're not making any major leaps right and even in the theorem design at the heart of it it's also a proof of work and they did a lot of amazing things with you know gas and all this but they tried to keep it on there as minimal Delta changes in terms of the token dynamics and then helped a lot and you know as we have these new building blocks also it's hard to combine more than one component and if and have success right so we don't have that many nice examples to point to yet but I really love you know like the people that are deploying TCR is where they make sense I love the restraint that they've had in having just a TCR like add chain and spank chain and so on I think that's really great actually so some of you and they're here in the room good job guys really and and so beyond that too you know there's other designs that have worked that are kind of amazing right like film or 3d there was kind of an experimental cool thing there just like Wow right but to us like in the world of thinking about token dynamics it's amazing so these building blocks that are emerging they they're showing to be working here and there and now we can start thinking about how to combine them and you know because we don't simulators yet or anything it's like designing airplanes in 1912 right as opposed to an even 2012 but in 2012 we still don't have great airplane simulators right so that's why we keep going bottom-up with that so you mentioned you mentioned Bitcoin Bank chain so basically it's still like drugs porn and Ponzi's with filmer 3d like those those are still a killer apps like to shave yeah it's it's not too far off the mark and and don't forget ads internet ads and Internet ads right like but the driver is Facebook we should all just retire like we've won right see you know you mentioned the and this kind of goes to Ben's point too but you bring up the aerospace industry you don't normally want your 747 to fork mid-flight bad for business and and that's yeah how do you how do you even start to think about designing for that externality because it's it it happens all the time and I have a feeling that it's going to get much much more pervasive even for really successful pride Jax and strong communities with things like cosmos and other interoperability solutions rates it how do you maintain the security of any single application or you know think about the connective tissue that these different blockchain projects and and how value might have been flow and and ultimately even screw with the security of your underlying system like how do you get customers comfortable with that Enterprise discusses comfortable with that dynamic I think we can partly orthogonalize security from basically up token dynamics with thanks to the likes of things like polka dot and cosmos and so on right so where you can actually have recourse or even plasma right where you have recourse so then it's basically you have to just handle good token I'm Alex and then what it helps because you can just orthogonalize these two problems and then really really focus on trying to have good token right max I'll stop there I leave it the rest of you guys I guess if you want to build a bridge a mechanical rich and then you're looking at the eigen frequencies and that gives you a measure for stability of a system you want to have them damped you don't want to have them like being oscillating or it going exponential so extracting like performance measures from these systems like the noting how stable they are towards externality fluctuations that would be one way forward or predicting like which system is getting vulnerable towards more fluctuations in the market so having this do you like staking and burning mechanisms that have been introduced to do that do you think that adequately covers some of the security challenges if that improves the feedback loop and dampens the the or basically vampy adds more resistance towards fluctuating externalities like really thinking about systems how they would evolve then yes if it helps in robustness definitely but I think you can do extract performance features from an existing system to see how stable and the fragile or self-sustaining list I'm so on on for more 3d because it's an absolutely story but relating to the question and why you think that writing a Ponzi scheme shouldn't be that hard of a token engineering problem but even that was hacked I mean and it was hacked in a genius way by manipulating the underlying interim chain so it it it goes to show that we we definitely need to build hierarchical systems as a strand set so that you can have recourse on them but we should also have modest expectations you you you can't build I mean the the Airbus 380 today you need to have a spectrum where you start out with with recourse systems on the most trusted system let's say a theorem proof of work and then do a very simple use case within a bigger context because you'll get it wrong I think there's one other thing to like you know depending who you ask Forks are a good thing our Forks are a bad thing right and I think in this context here Forks are a wonderful thing because you can actually explore many design variants very very quickly and then the fork that does well add something new et cetera can really survive and it's you know it's sort of a new variant of a design pattern that's clearly working right the other thing about you know difference between jumbo jets and software of course is that software's malleable right you can change it that said blockchain software support contract software all this is actually not quite as malleable as the software of the last 50 years right so we have a bit of a delta there we can hard fork towards you know new changes and stuff so things won't fall out of the sky but it's not quite as malleable as it was and one other thing in terms of the forks right sometimes they're for better so just you know next to the poor next to the ads and stuff we have dogecoin right so you know free prize inside so some of these are showing new value in new ways that we didn't expect and actually so so we've been very cautious on like let's try to not rush too far ahead and and and be reasonable about our time expectations at the same time it took a couple of years for Bitcoin to to become trusted then a theorem came relatively fast after Bitcoin but now you have this foundational layer and you can start experimenting in parallel and we are doing it in the masses and so so a large part I think is can we provide the good research the simulators the tools to have as many as pupil as possible in a sensible constructive way collaborate and an experiment in parallel so here I see a bit of a problem massive parallel deployment of all these games and then you basically sharding your user base so you don't have enough data points or so if you really put enough money behind behind the game that I think it might be worth people playing or just make it weird enough there's a lot of people and so you know obviously eath Berlin the the centerpiece of this event is the hackathon so you know by definition we're gonna have a lot of teams that are just going from zero to one with very simple applications over a short period of time you guys read a lot of white papers help a lot of teams just think about hacks when you're thinking about very rudimentary systems designs what are some of the things that you caution teams to avoid or kind of recommend is like either must-have tooling or design choices or I don't know someone someone you know some college graduate is here putting together a team this week like what's if you give him like a 30-second pep talk on how to win this hackathon like what's what's gonna prevent him from imploding and like or her from imploding and falling on her face tell him to go back to school nothing to look here now I guess like yeah just start with very simplicity is key and all of these things and and and just see if you can if you if you're willing to eat your own dog food like we always try to play the game ourselves if we don't like the game then we probably nobody else would like the game as well so if they come have a beer night playing the game with themselves or it's too complicated for them to explain and better move on to something else I would say try to keep it simple reiterating the same point but also try to find that one function that currently is missing try to because you want to capture that collaborative nature of the space that's uniquely to blockchain space we can collaborate and both benefit so you have a lot less competition and far more emphasis on collaboration and so use it use it to your advantage build modular components and build in collaboration with as many as people get feedback talk to them it's often overwhelming but but it's working yeah kind of related right toka dynamics is only one of the places of possible innovation in the DAP or the blockchain you're trying to build right so if you can actually it's quite often attempting to try to innovate across the board everywhere everywhere but that's actually a bad idea you know if you're an entrepreneur you should actually be as a uninhibited as possible across the board except for those one or two places where you really chose in your battle same thing here right reuse reuse reuse reuse reuse and then pick that one thing were you doing something novel and then pour all the gasoline in those flames right and everything else we use kind of perfect marriage of the first two answers use what you can keep it simple on the innovation right are we doing the time about five minutes left I want to make sure we don't go over because I knew we were going a little over into this five minutes saying was ten minutes ago so I did I didn't see I took my glasses off so I see somebody saying it's not happening anymore we're are we done we're done all right lightning round no question from audience one yeah if there's one magical question from the audience maybe we can do that but otherwise we're gonna get back on schedule covered everything great job guys Congrats [Applause]