hey everybody charles hoskinson here i wanted to make a quick video to talk a little bit about treasury systems it's our favorite topic at least in the atc world right now okay so why should we care and what value do they provide all right so in the beginning there is something simple so when you think about bitcoin it's a simple idea it's actually not a super complicated system the hard part was thinking it up and inventing it and building it but then after it was released a lot of the core concepts like how the ledger rules work uh things like the scripting language so how transactions work uh things like the network stack and consensus they're not super involved all things considered and as a consequence this system from a maintenance viewpoint doesn't necessarily require an enormous amount of people in fact if you had a dedicated team of three to five devs you would be able to maintain maintain bitcoin in its current state and make sure that it's interoperable compatible with modern computers and it just does its thing okay and that's because satoshi designed the system in a fairly simplistic way and that's a good thing simplicity is the ultimate elegance and it's also a good installation uh for security see when you go to complexity complexity is the enemy of security and correctness people can look at the bitcoin code and the bitcoin design and it's pretty easy to analyze and understand and there's some elegance there as i've mentioned but at the end of the day it's sufficiently simple that most engineers after a bit of study can keep the whole thing in their head when you start looking at things like the evm you look at things like sharding you start looking at the things like scale so you move from a replicated to a distributed system okay bitcoin it is somewhat distributed but it has problems because the way that for example the blockchain is stored is replicated if you run a full node you have an exact copy as does everybody else okay so that doesn't scale so well because basically you'll have alpha times n copies of the uh full node uh in terms of data so let's say you have a 30 gigabyte blockchain i don't remember how big the bitcoin blockchain is right now the the total amount of storage that you're using is times n full nodes not good that's not how a distributed system works replicated systems don't really scale because they're only as weak as their weakest link okay so it's replicated not distributed so when you want to go from like complex transactions you want to shard the ledger and uh be able to have a big state space and you want to go from replicated to distributed and you want more sophisticated network protocols you end up having lots and lots and lots of complexity and that complexity is the enemy of security and it's the enemy of corruptness so correctness is does it perform the way you thought it was is it uh is it behaving the way that it was intended and security is can i do the things that i'm supposed to be able to do but unauthorized people can't okay well here's an example of where this can all go wrong horribly horribly wrong so here's the zero cash white paper and it was a phenomenal paper for its time written by an all-star team aliban sassen matthew green uh aaron tromer these are like really really really solid people uh ian myers alessandra chiesa uh and you know madars uh viscera wonderful academics very smart big paper lots and lots of pages i think the final version is like 54 pages with references okay and this was the opening paper for the zcash ecosystem now zcash has a treasury and very rightfully so why because the people who constructed zcash realize that stuff like this is going to happen zcash team reveals it fixed a catastrophic coin counterfeiting bug this is one of the worst bugs in the history of the cryptocurrency space why because you could counterfeit zcash tokens and you could do that without being detected so not only can you impact the monetary policy of the system you could do so in a way that other actors would not know that you succeeded the problem is that zcash is a super complicated system if you look at the sapling upgrade for example this was a huge body of work and a lot of highly professional extremely skilled domain expert engineers had to wake up every day and figure out how to do that and the thing about zcash is this is a bitcoin-like system okay so they started very wisely with a simplistic set of rules they use the proof of work system like bitcoin does a relatively same network stack with some improvements similar ledger rules similar way of doing transactions and then they added on top to that model the whole zcash infrastructure despite that and despite the fact that the team is composed of some of the best academics and engineers in our industry they still had a major issue okay and what does that major issue mean it means that if there wasn't a dedicated well-funded good team to proactively resolve this and there where it's subtle uh this subtle bug in a a efficient way it's a very high probability that it would have been unpatched for an attacker to use and because of the nature of this bug an attacker could have used it silently and people wouldn't have even known that z cash's monetary policy had effectively been destroyed and so then we ask ourselves the roadmap for ethereum classic etc so etc has to decide what it wants to be as an ecosystem this is why i'm bringing up the treasury conversation it has to decide does it want to err towards simplicity or does it want to go compete with f2 and go for complexity metallic recently uh was interviewed by cointelegraph and said boy this f2 thing is a lot harder than we thought and they're trying to push their way towards it cardano for example we've spent over a hundred million dollars in five years chasing the same type of complexity and we've had to do a lot to manage that and i think we're better suited for it and it's really starting to show with the shelley release but despite people's opinions f2 is is also chasing that and we have a treasury system it has roughly 140 million dollars available for the community and alternative teams and us to use to get to the next level and we'll have that discussion 2021 we're starting to roll out that treasury system in cardano okay f2 has a huge economic moat a lot of well-funded ico companies that can contribute consensus can contribute and the foundation which has hundreds of millions of dollars of value sitting around and it can definitely compete to deal with all of that complexity now the core argument for a treasury is that you need some pool of capital and either you get it from an ico or other people's icos or the blockchain makes it for you like what we're doing with cardano if you don't have that then how are you going to be able to chase this and also who is going to propose this and how do we guarantee that that team can get there so if you're a dap developer and you're sitting here you have more than 500 choices now 500 choices and you're sitting and saying okay which platform should i use should i use cardano should i use f2 should i use etc and you say all right well first off can i get funding no there's nothing really available for you especially when concerned with these other systems okay where is this platform going and who's actually going to get it there there's no current road map to deal with emerging complexity and it's not clear which team is actually going to deliver this right now they're maintaining clients and doing kind of shallow hard forks that are following innovations coming from the ethereum ecosystem which really aren't going to be portable when f2 moves to proof of stake the technology is going to be radically different okay so there's not a clear roadmap it's not clear who's responsible and so this complexity doesn't seem obtainable within the etc ecosystem so there can be a regression to simplicity for example but then again who's going to lead you there and what is the roadmap to get there it turns out that there's a lot of competitiveness that you could attract by being bitcoin's test net there's a huge amount of value there why because we can take a look at papers for example bitml and this is something that was built for the bitcoin space but it could be very useful for a smart contract system you have things like merkley's abstract syntax trees you could switch the signature system to bls signatures ahead of bitcoin and that means you get all kinds of cool new objects that you can work with cryptographic objects you can work with you have things like coded merkle trees and they're really cool things like utreexo for example uh ergoscript is a real cool idea of the ergo community and this could be implemented you have things like uh fountain codes a secure fountain architecture there's a team out of berkeley if you read their paper they get 1000x storage savings and encode 191 gigabyte bitcoin blockchain 291 195 megabytes on average it's pretty cool when you think about that so there's actually a great marketplace to be a simpler system overall and get rid of this evm bull hui and not have to shard and still be able to do some things in the distributed space still be able to have high assurance applications and still offer a unique choice that is distinctly different from f2 or cardano or eos or tazos or any of these other guys and you know what that's a roadmap we could follow but in this debate between simplicity and complexity there needs to be independent teams to help sort it out and this is really the first core argument of a treasury the first core value proposition of it you need independent well-funded teams because through the ecip process those teams are going to have an opinion a philosophical opinion do we want to increase the complexity of the system or do we want to reduce the complexity of the system and what are the trade-offs here and ultimately what are we offering those developers who will create use and utility for the system it's just that simple and if you have independent well-funded teams you need at least two or three okay to hold each other in check there's a marketplace of ideas and what that means is you'll have lots and lots and lots and lots of proposals some on this side some on this side and then inevitably what can happen is they'll merge and then you'll form something on that spectrum of simplicity to complexity you'll pick a side you'll pick a location and then that portfolio of ecips is the roadmap then it's very easy when you have a treasury system for marketers to go ahead and ask which stakeholders are interested in this trade-off because the reality is that everybody who has an application they come somewhere on the spectrum and they have some business and technical requirements as well as a set of values when you look at these things this complexity to simplicity these are different value sets so a developer has a business model and they want to make money but then they also have uh want to make money within their belief of how things ought to be done so what a marketer can do is analyze the set of stakeholders who live in that value set and then they can write a campaign specifically for them and go and execute that campaign and they can be funded for that out of the treasury system and there's a going to be competitive pressures that exist there and you know what those people here you're offering them funds from the treasury system to go and adopt the platform so they have the funds that they need to come into the ecosystem and try out our system so what does it mean increases use in utility see it's a positive feedback loop it feeds into itself people know there's a future why because the who has been answered there are three independent teams that are well resourced and capable of sustainably executing a roadmap and when events come up like for example these types of events these catastrophic bugs there's going to be somebody around to fix it and there's going to be money around for independent security audits and all kinds of things so it makes a developer feel like the platform that they're building on is solid because these independent teams have a voice and they're not beholden and controlled by a rich benefactor they are truly independent and because they have a voice and they're independent the ecip process is working properly and there's checks and balances and real decentralization there and the community has assurances that they're not getting railroaded or pushed into an uncomfortable thing and then you can have a big philosophical conversation of complexity versus simplicity and where should you fall should this be a road map where you're a few years ahead of bitcoin and basically taking a path that bitcoin could take leapfrogging that and then developers say well i'd love to build on bitcoin but i can't build the things i want to build so i'll build on etc it's a nice prototype network and then whenever bitcoin's ready i can be a multi-chain application and work on both systems that's one thing that simplicity can get you and transient wise probably get hundreds of great developers using utility over the next few years just satisfying that role you want to go for complexity we had to spend over 100 million dollars on the cardano side chasing that and there's more to spend there's more to do it's a very expensive very time consuming very difficult thing to do and there's tons of competition there these are the high performance chains that are looking for billions of users uh they're looking for uh you know a huge set of use and utility and applications they want to be everything to everyone and we all have our philosophies of why our chains are gonna win that's a crowded space there's a lot of money in it and there's a titanic war being fought and there's no way in my view that anybody can be successful unless they have a treasury system an economic moat and either they got it from an ico or they get it from a treasury but you need something like that in order to be able to compete in that pool because it's so competitive it's so vicious and there's a lot of ideas floating around and frankly i don't think etc is in a good position to do that we need to go back to first principles as an ecosystem and say let's build strong independent teams let's get those strong independent teams well-funded so that they're able to really think carefully about where the road ahead is and you know what i can do with my independent team is propose a collection of ideas and we'll propose a simplicity idea and we'll propose a complexity idea with a trade-off profile and risk reward and so forth and you know what there'll be checks and balances if there was a treasury system with strong independent teams that are capable of looking at those proposals and saying no we don't like them or no we don't think they're right or maybe this is an easier better way or cheaper or less risky way of doing it and then through that discussion eventually we can get to that compromise and be able to find where etc needs to live one thing that's not an option is for etc to live where it's at today it can't because it's in the worst of both worlds it's too complicated because the technology of ethereum is too complicated it was built as a prototype an experiment that was always meant to be replaced it wasn't like bitcoin which enjoys the luxury of being a rather simplistic system by design and as a consequence it's stable and it can run that way for a long long time and it doesn't need a lot of maintenance to do that this is a situation where people wanted to experiment and they did and they attracted tons of other people to come in and tens of millions of dollars of capital have been deployed to get to a point where that experiment is soon going to end and be replaced e t let me zoom out et h1 is dying and eth2 is coming and eth2 is a reflection of all the lessons that vitalik and his team and the ecosystem as a whole have learned there's a lot of good lessons there they were very expensive lessons on the back of d5 failures on the back of emerging science and distributed systems thousands of conferences and conversations with dap developers and scientists and engineers there's an enormous amount of collective knowledge and intelligence there and etc because it's not going to go to proof-of-stake really can't follow in that wake so it's on unsustainable technology today and there either needs to be a regression to simplicity or there needs to be a divergence to complexity but there's no way to get there without developers to take you there and the current way that developers are funded the current ambition of those developers is not satisfactory in either direction in my view so if the ecosystem wants to survive it's going to need to figure out its way its roadmap its path and the first major step in getting there is getting funding into the hands of the people who can get you there and that calms everybody down and they realize that no matter which direction it goes they'll be able to find a niche that has use and utility and an audience for that use and utility and grow within that niche and actually become something quite unique to the ecosystem in space without ever violating its principles the reason why i bring up things like bitml and bitcoin's path is that all of these things are vetted with the code as law principle and it's one of the reasons why bitcoin was so simple that's an easy principle to have when your system can't do much it's a much harder principle to have when your system does a lot because some of those things that you're doing may end up not being so good for the network or for others and so the temptation to reverse things censor things uh the temptation to undo things is much higher okay so similarly we as an ecosystem the etc ecosystem have to have that philosophical conversation of how do we preserve dakota's law philosophy but also have some more complexity than what bitcoin is offering enough so that people can build things on etc that are distinctly different unique from the things that they would build on bitcoin for example or another ecosystem uh and it's not really an option to go down the f2 road and their divergence from etc's principles is only going to accelerate there's probably going to be a reality as they move to a fully distributed system that pruning occurs that rent is charged for smart contracts that the chain gets edited for certain applications and so forth because of the necessity of having billions of users and hundreds of millions of applications and the bloat that comes from that it's not good enough just to make the system faster so that technology doesn't work in a code is law world it's just philosophically incompatible with that so where do you go what do you do well i want to have that conversation and i don't want to have that conversation with myself i'd like to have that conversation with people who feel like they have the total freedom to disagree and have the funding necessary to build anything that they would want to build and so as a consequence we through independent collaboration can get to a very strong philosophy-based roadmap for 2021 that will create real use and utility and has a real use case and something that an outside marketer could be hired or brought in and clearly know how to sell that clearly know how to grow that and so forth and ultimately what is a treasury about philosophically speaking it puts you the community in charge why because the is ultimately in charge of who gets it how much they get and how many people get it and over time everything evolves the treasury system goes to another form and then to another form and then to another form and every time that happens it gets more inclusive more decentralized uh and also it starts making better and better decisions the treasury can improve itself it's self-evolving infrastructure this is the miracle of cryptocurrencies they start from some configuration and they have an evolution rate it can be slow it can be fast like etc eth is fast for example bitcoin is slow but no one will deny that in all cases successful cryptocurrencies do evolve through the improvement proposal process and a treasury as a sub-component is no different the treasury gives us in the cardano ecosystem over 140 million dollars today to play with and that's coming online systematically and it's evolving as i mentioned rapidly and you know as we grow as an ecosystem that very easily could turn into a billion dollars it could turn into 10 billion dollars it just gets as it just gets bigger and bigger and bigger as the cryptocurrency grows this is the brilliance of treasury bearing systems and there's no centralized control there it's controlled by the community and similarly etc could eventually have this kind of power and you know we're just looking at the proposals for fund one for our treasury system there's well over 50 i think and that's just the beginning we'll wake up there's 500. we'll wake up there's 5 000. we'll wake up there's 50 000. all curated tons of discussion around them and what's cool about a treasury is this is my final point it allows you to set priorities in a decentralized way normally priorities are set by a ceo a leader a committee a board they sit down and say this is the vision this is the roadmap this is where we're gonna go that doesn't work in a decentralized ecosystem so you can have volunteers just sit around and do some stuff and that's great when you have very simple systems but if you have very complex systems or your systems want to have real use and utility the ecosystem has to have some priorities to move in that direction we see that with linux for example linux is used by billions of people from my cell phone to many of your cell phones to this very computer i have linux dna everywhere and there are thousands of corporations that have a vested interest in the evolution and growth of linux and that linux be well supported not have zero day exploits and be able to keep up with the ever increasing pace of hardware and new capabilities okay well you need some decentralized governance structure to set those priorities set that roadmap incentivize development make sure that the system doesn't get co-opted and controlled by a particular entity like a microsoft or something like that so that they can gain and do influence or gut the product for competitive reasons that's why the linux foundation was created and this is our chance to build a system that has that same utility but it's as decentralized as the underlying currency and then once you have it the community can set priorities how much do we spend on tech how much do we spend on adoption how much do we spend on marketing how much do we spend on infrastructure how much do we spend on partnership development developer incentives these types of things that is a bespoke conversation to the etc community and it would be nice if every single person in ethereum classic actually had a voice as opposed to a bunch of self-appointed leaders having a voice saying this is what we're going to do deal with it by the way we're the only people with the money and we maintain the clients right now so if you disagree with us there is no support for the product outside of volunteers showing up and as we've mentioned too much complexity makes it damn near impossible for volunteers to be effective because even if they have the desire to fix the problems fixing problems takes months in some cases and who is willing to work for free or very low pay for months to do something and telling them well they can profit by buying the token so they get paid the exact same amount of money as the speculator who does no work we have a system for that it's called communism didn't work out so well and that's not how you get systems to work well never ever bet on the altruism of people bet on people to be greedy and build a system that greed results in good outcomes this is the lesson that all free markets have taught the world and wherever you can figure out a way to align these things the systems will evolve in the way you want for example if you want solar to take over the world don't tell people that solar is better for them make solar cheaper than coal and you know what will happen people will buy it because it's the best option on market and the cheapest option on market and that's what's happening and that's why it's slowly taking over the world similarly here we can't bet on altruism let's make sure that people can make a living supporting the ecosystem in doing the right thing and they can make as good or better money doing that than they could make doing other jobs and then that will attract great talent highly specialized talent that can help wrangle complexity where it's decided and make sure that simplicity is preserved where it's needed for the system to be successful so anyway i figured i'd make a philosophical video about treasury systems i hope you guys enjoyed it hope it wasn't too long and too rambly i have a reputation for that uh and i look forward to the debate we have two ecips coming out wednesday the 26th one is for the checkpointing solution uh and then the other is a straw man treasury idea and both of these are meant for discussion with the ecosystem not final adoption and our hope is through iteration and discussion that we can converge to a final idea and in the case of the treasury we'll write a smart contract and deploy it and it's only going to ever be filled with ether through a hard fork so it would require adoption and consent to get there majority adoption of the client the very least and in the case of the ledger checkpointing solution that we have we're going to do a demo this week and attend the meeting on thursday for it and then next week we'll have the ecip out and this ecip is written in a way and the infrastructure is built in a way that we think it's portable so it's not just the mantis client we should be able to figure out a path to implementation for geth and so forth so the other clients in the ecosystem we we should be able to figure out how to get those running with the solution and again it's a discussion ecip so the point here is not to be a final solution but rather an intermediate one that allows us to get to that final decision for the community uh consideration thank you so much for your time i hope this was helpful and we'll talk soon cheers
