hi I'm Charles hoskinson and this is foundations of a programmable Society so the purpose of this lecture is to discuss what are the pillars required to enable a fundamentally different type of society and when I say Society I mean it in the most abstract and general sense all the way up to governance so the Bitcoin revolution has given us uh really some pillars uh first incentivized distributed databases so really think of these as blockchain chains and it turns out there's more than one architecture that's propagating uh trustless smart Behavior so you may have heard of things like ethereum and smart contracts and finally tokenized infrastructure as a service these three pillars uh are rapidly evolving and they're becoming properly incentivized to a point where they can stand as a foundation for a lot of really amazing emergent properties which we're going to discuss in this lecture so let's start with incentivized distributed databases well the first one was Bitcoin uh and this came out around 2009 as many people are aware and the database structure is a blockchain so the basic notion is you have an mutable block that once things are in it and it's been committed to the database nothing can change so it's really kind of like fact-based storage uh and there's special rules about who gets to add to that database now initially the only use case was to uh store uh transaction ledger so who owns what in the network but over time they've modified the Bitcoin database to include the op return code which now allows people to store arbitrary amounts of data although very small amounts making it the perfect place to put in hashes or um other types of uh Integrity checks and things like that but people said can we apply the same basic principles of decentralization and incentivization to uh a file storage system but make it look much more like Dropbox or um or other services like that and that's where the M safe and storage a project come from their goal is to achieve decentralization or Federation and uh do this in a way that allows people to store their data securely without any Central actor being able to lock them out or share that with other parties uh there's some other ideas as well perhaps having application specific storage so namecoin or ideas like torrent coin come to mind where they say hey instead of having a centralized DNS system or website that hosts all my torrent files let's go ahead and put them on a blockchain and let's create incen Up structures specifically for those use cases so it behaves like Bitcoin but it's specific for uh certain class of uses and finally we have ipfs it stands for the interplanetary file system which is uh perhaps the most evolved of all of these storage systems and involves merging cademia uh secure file system mitt torrent and other types of Technology together to create uh basically a secure hash addressed persistent web um the takeaway from this is that all of these types of systems are incentivized rapidly evolving and learning from each other and the end goal is to give us places to put our data uh that is secure sensorship resistant and uh very very resistant to outside actors attempting to tamper with them they require overwhelming resources okay the second pillar is trustless smart Behavior so think about relation ships between actors and that can be as simple as you and me that could be a relationship between you and a business uh you and a government in any event let's take actors in a decentralized system and let's formalize those relationships with a programming language like the E programming Lang or solidity uh and then let's encode certain behaviors okay well what can we really do with that well here are some examples we could Implement an escro service so let's say you and me we're uh trading a product and so you want to give me some money I want to give you a product well if the product is in the physical world uh it's really hard for a blockchain or you know some digital system to know if that's been delivered or not so we need an escrow agent so it would be really nice to be able to programmably uh Define how that escrow agent can make decisions uh or you know the ownership of digital property this is a case where we don't need one spending conditions and triggers uh so that would be a case of you having a wallet and being able to put locks and controls and policies on how the money of that wallet could be spent so for example let's say you have a Bitcoin wallet and you say if I spend the first 10% of my money I only need a single signature but anything greater than that requires more than one signature and if I'm going to liquidate the entire account maybe three uh that's an arbitrary example uh other things like proof of solvency so many people in the space are very familiar with Mount gaau or other exchanges that have uh been in become insolvent well it would be really nice if you could match the inputs and outputs of exchanges and make sure that coins haven't flown out so that you know that the money you've put into an exchange is always going to be redeemable there's a onetoone matching and perhaps for gambling you can imagine fairness like for example if you go to an poker website how do you know the other players can't see your cards or that your cards are being fairly generated it would be really nice to in a trustless way to validate that uh your cards are being randomly generated and that when you see the other players cards it's the first time uh trading rules are another example where you have an exchange and you want to make sure the way you use the exchange is identical to everyone else and no one party has an advantage and there's been some ideas about how to integrate this Behavior so some people believe it should be coupled with the blockchain so the database itself and other people believe that it should be disintermediated and so ethereum is an example of coupling whereas counterparty and codius are examples of the decoupling um and uh there's a lot of advantages and disadvantages in terms of scal SC ability but this is a foundational pillar it's basically a programmable blockchain where we have uh the ability to Define relationships and we're limited only by our creativity and the underlying cost of execution of the smart contract then we have tokenized infrastructure as a service now this one's a slightly New Concept but it's also an old concept so decentralized computation and bandwidth they've been around actually for quite a bit if you think about bit torrent really what you're doing is saying I'm going to share this file with other people people and in turn they're going to share other parts of it with me uh it's a kind of a cedar to leer ratio if you think about folding at home that was a very popular and still is a very popular program that uh shares uh that computation for the purpose of protein folding so people can leave their PlayStation 3 on or their laptop on or their PC on uh and overnight it'll go ahead and fold proteins so that Stanford and others can use that to search for cures for cancer or other diseases and then there's distrib grid platforms like Berkeley uh b Inc so there's uh there's plenty of ideas that have been floating around with cryptocurrencies what we've been able to do however is we've been able to actually tokenize these services and make them profitable uh via microtransactions if you think about protein folding you probably aren't going to make a lot of money for that because there's a lot of capacity in the network but over time maybe you can make a little bit of money because you have a lot of little microtransactions one was using credit cards or other payment mediums unfortunately there's just not enough uh the the system is too inefficient I should say to transact but with cryptocurrencies we actually can aggregate lots of little microtransactions together in fact uh we even have begun exploring the idea of creating a decentralized Internet of Things via the adep project that's IBM and Samsung together so as a brief aside if you think about the internet of things what that really means is that you have lots of devices toasters toilets refrigerators light bulbs door handles and these devices if they're uh digital usually have some form of Asic in them that was designed by an engineer there's a single use case but what's happening in business is that things like cell phone processors are becoming so incredibly cheap instead of actually just designing a special chip for a particular device what people are doing is just putting a a CPU in the device that also happens to have a bunch of other features that may not necessarily be needed but it's cheaper just to include them than try to Omit them for example Wi-Fi module Bluetooth module a GPS module and so forth effectively what that means is the devices around your house are becoming a heck of a lot smarter and they can begin to talk to each other however there's significant privacy concerns and scalability concerns and uh uh issues about how these devices are going to talk to each other and and how that network is going to function properly especially considering that infrastructure tends to be a lot longer lived than things like cell phones so IBM and Samsung are exploring how to enable The Internet of Things using blockchainbased technology and trustless smart Behavior so that's really exciting and then finally we can think about mesh Nets so if you think about isps they're very big they have lots of infrastructure but what if we can take these exact same devices that are going into light bulbs and door handles and use them as relays and allow people to construct local area mesh Nets that eventually connect to the backbone and because we can tokenize things guess what you actually create a micro ISP and there's actually been some actors who are thinking about how to do this either from developing the software for the mnet that's kind of the cjdns project to others like Open Garden who are exploring metering uh via cryptocurrencies so these are effectively the three pillars that uh a programmable Society requires so what do they enable why do we care about these pillars well first they enable new forms of interactions uh they enable a single Global Marketplace and finally I think the most exciting thing they enable is algorithmic governance so let's go through these in order so in terms of new forms of interactions let's really think about what the network looks like once you have these pillars in place you have a wonderful place for identity and reputation revocation okay and that's something that we really haven't had before second if you think about projects like open Mustard Seed what you can do with identity and Associated metadata is create a paradigm where the users is actually in complete control with how their data is shared and actually has the ability to revoke trust so for example if you go to Facebook and you put pictures onto Facebook or if you go to Google uh plus and you put pictures onto Google Plus you've now transferred them to a third party and trust is an absolute you trust that third party not to share those with other people you trust that third party not to make copies and if you ever delete your account you trust that third party to delete the copies of that picture uh more personally let's say that you go ahead and have a relationship and you send pictures to your significant other and then the relationship ends maybe you want to be able to revoke access to those pictures so this is an example of something we really can't currently do with the internet but with these three pillars and projects like OMS uh it may become possible to actually revoke access to data that we've shared and also use a reputation system to enforce better Behavior amongst actors in the system so a couple of other things that are really exciting are the notion of a password free internet if you think about having accounts with blockchainbased technology most of the spending rights if not all for altcoins and Bitcoin require public private key Pairs and so what Bitcoin uh e theum and other platforms have effectively done is they've created a nice distribution mechanism for cryptographic credentials now we can attach identities to those credentials and that probably will happen but the minute that that's done we now actually have a means of authenticating people that do not require usernames and passwords so moving forward our interactions will actually probably be more signature-based so as an example when you want to log into a web server instead of using a username and password you just simply assert who you are and the system will look up your public key send you a challenge encrypted with your public key and you send the challenge decrypted back and the only person in the world who can do that is the person who controls the private key credential so it's a challenge response type of protocol which is significantly more secure and it means you never have to remember a single password second if you think about social networks currently social networks are curated by Central actors if we can actually put most of the underlying data on uh distributed storage systems and we have a nice web of reputation a nice identity space that actually you can create Invitation Only dark so social networks where all of the data is actually encrypted and the only people who have access are trust circles and again you'll actually have the ability to revoke certain people's access to the data that you've shared with them VI things like OMS all the communication can then be endend encrypted as well because every single party is identifiable uniquely has a reputation and uh also has cryptographic credentials so you can get rid of men in the middle of tax and you don't require certificates or things like that and so this could actually mean the end of domain name systems as we know it and public key infrastructure as we know it which is tremendously exciting and I would recommend anybody listening to this lecture to actually read John clippinger self- Sovereign identity management essay uh it's actually in the book from Bitcoin uh to burning man I believe it's chapter 2 and it talks a little bit about where uh controlling one's identity can lead and the types of interactions we can have it's a very exciting field so this is really the first major component that these three pillars enable an even more exciting component is the notion of a single Global Marketplace and so if we really have a secure IM mutable place to store product and service offerings alongside a decentralized currency well isn't there any reason why we can't Implement a great Marketplace that just like a blockchain can't be censored or disrupted so the products or services that you offer whether they're legal or not can't be removed they can't be taken down even if they're inconvenient to certain actors so there's projects like open bizaar for example that are leading the way and trying to figure out how to create a decentralized censorship resistant Marketplace and are also exploring how to build reputation systems so that there's an economic cost the fraud in the system in many cases that will be greater than the uh the value gained from committing fraud which is always the key in creating a secure Marketplace if you think about um eBay's seller ratings now if we use smart contracts and private law another really cool thing happens and let's have a brief aside about private law it's nothing new it's been around for quite some time during the Middle Ages there was a system called Lex mercatoria which Merchants used uh if you were a merchant you traveled between country to Country it didn't make a lot of sense to try to understand the legal system of every single place you went uh for disputes Merchants would rather have a single legal system whether they were in Florence OR in Amsterdam or in Paris that they could leverage and under and use uh so that they'd have a consistent uh amount of certainty in their trade well the modern day analogy for this is maritime law and there's systems like unidroit which are trying to go ahead and create a international Global framework of private legal uh uh relationships and if we can do this and combine it with smart contracts then actually what we can do is create an automated Global legal system uh that's basically object-oriented it's very efficient and it actually applies the same way no matter where we're at in the world all right so another thing that's really exciting is the prediction markets uh systems like augur for example where you know it's one thing to go ahead and try to sell a product it's another thing to try to determine what the price of a product should be or what the likeliness of an event should be or let's say you have a one-of-the-kind product like a rare painting like the monolisa and you're trying to determine what is the value of that particular monol Lisa or maybe you're trying to incentivize certain types of behavior or maybe you're trying to get information that's external to your network like uh who won a sports game something Bitcoin can't really know but you're trying to get that into the system but you're trying to do it in a way that's uh as trustless as possible or at least the level of trust is known and quantifiable so projects like augur and uh other prediction Market systems are attempting to integrate this in a way that uh is as decentralized as possible and then finally we have kind of the gray or dark area of marketplaces and uh we have a project called Dark leaks which actually allows people to sell information like State Secrets like classified information or source code like Windows source code for example or perhaps you found an exploit in a software system and you want to share that or maybe you have personal information like nude celebrity photos turns out that people have found a way to allow you to sell this online anonymously in a completely decentralized format so really it's actually kind of amazing we can create this huge Global Marketplace that's totally censorship resistant you can sell literally any product or service uh you have controls and mechanisms to ensure that this is done safely and it's not an absolute it's actually more of a spectrum where you can live on the dark leak side and um and if you're okay with doing business in those black markets and gray markets uh that's fine uh or you can go all the way up to an actual formal highly contracted uh publicly auditable uh transaction you know perhaps you're buying a computer and it's just like it was on eBay but instead of having eBay control as open bizaar does and you can even price one of aind things or events or predict who's going to win an election and actually have values connected to that so this is the second thing that programmable Society should have and is enabled by the three pillars that I mention finally I think the most emergent and the the farthest out but I think the most exciting overall is the whole idea of algorithmic governance so the same mechanics that actually permit de centralized Commerce and sensorship resistance can actually enable corruption proof elections transparent accounting and even autonomous companies so many people may have heard the term triple entry accounting or you may have heard the idea of a Cena compliant election stands for confidentiality integrity non-repudiation and authentication in all cases uh this is basically saying listen we can take blockchains and this programmable smart behavior and so we now have a situation where the rules are defined in absolute and trustless and that all of the results of things the data that we receive can't be taken down and we know it hasn't been tampered with uh and take these things together alongside the fact that we now can have a very meshlike architecture for the way we relay information to each other so major isps can't censor things you can't have a situation like occurred in Egypt where the entire internet was shut off you actually now have a much more resilient backbone and you can combine that with ideas that have come out of the liquid democracy the liquid feedback world you can take that ideas that have come out of Estonia with the Estonia project and all of a sudden now you actually have totally transparent uh voting and you have rapid opinion polling you have the ability to very uh quickly decide who gets to be leader what decision is proper uh as long as the the mechanics behind that election are well understood and the other thing is that conducts of leaders can actually be constrained algorithmically including the Locking of assets and smart property so if the government or the company's assets are digital and they have a constitution if somebody who's leading the company decides to go spend the money on something they're not allowed to spend the constituents can actually lock that so to use an example imagine if the US government's assets were digital and they decided to go invade Iraq one of the things that could be done if it was algorithmically constrained is that the American population could vote and lock the US government's money so it wouldn't actually be able to pay for the adventure to Iraq and they actually have to convince the voters that this was in some way legal so this is an example of where you can go once your assets become uh algorithmically constrained and uh your behavior of your leaders are actually constrained by algorithms in fact companies themselves can be um constructs of code and modularized there's this wonderful term called a da um Stanley larer calls it a DAC and they basically stand for a decentralized autonomous organization or a decentralized autonomous company and uh the basic notion is that you have stakeholders uh who create a constitution and they have some form of decision rights and then they elect certain actors because we don't have quite strong AI yet to be these actors to preside over some pool of assets and make decisions about um how that system should run uh and in some cases the actors can be totally automated so Stan and others argue that Bitcoin is an example of this in other cases they can be semi-automated and uh strong controls can be placed over their behavior and that relies on the fact if the organization requires human judgment or not and uh one thing that's really cool about this that I personally like is the whole idea of an open- source project having its own currency and treasury so the bitshares project in particular has uh begun to explore this where Developers in the bitshares ecosystem are now actually starting to be paid by the blockchain itself uh via an inflation mechanic uh delicates can actually be elected uh from stakeholders and the inflation can actually pay the developers so instead of working for company like blockstream or the Bitcoin Foundation or bitpay and altruistically contributing to an open source project on your spare time or working for some highly organized open source project like the Linux Foundation which is paid for by a Federation of compan companies you now can actually directly work for the technology stack that you happen to be implementing and there there's no reason why this couldn't actually be done with other systems for example zeromq or Linux all these things could actually be tokenized the market could produce a value for it and then the developers themselves can actually be paid to work for the open- source project so there's no conflict of interest um and if the project becomes very large and very valuable the system would actually have enough money to do more than just pay for its own development it could actually pay for a marketing and evangelism Venture Capital you can even imagine a blockchain owning things for example shares and other companies or assets and other blockchains the sky is really the limit and this is the why algorithmic governance is kind of the most emergent because as everything else in the space evolves all of these properties tend to go into play okay so really the overriding theme is we have pillars and those pillars have enabled three things that I think are really exciting about uh where Bitcoin is going and the ecosystem as a whole is going but I think the most important thing to take away from this is that everything here is completely open source all the foundations of a new Society are basically being laid and now a cell phone can be a government an ISP an exchange a bank a lawyer well cell phone runs software so really you The Listener are actually in complete control over where the space goes you can choose the classes of problems you want to solve the problems of society that you think are a big issue and simply go out you should ask how should the world change and guess what it's your turn you get to build it all right well thank you very much for listening I know this was quite brief and uh I hope this got everybody listening thinking about where we can go with this technology and I'd uh love to get some questions from you have a wonderful day and thanks for listening
