Ready Layer One: Who Competes With Ethereum?

This week’s Unchained is my panel at Ready Layer One! We talk everything layer one with four key players and projects — Illia Polosukhin of NEARprotocol, Zaki Manian of Cosmos, Rob Habermeier of Polkadot, and Arthur Breitman of Tezos — to find out how these projects plan to compete with Ethereum and attract developers and users. We discuss: 

• What platforms they are building and at which stage in development they are 
• How they differentiate themselves from Ethereum, and what problems they believe need to be solved 
• How they plan to attract devs in an industry of network effects 
• Whether or not Bitcoin and Ethereum are direct competitors
• Whether, in the long run, crypto will be more winner-take-all or there will be multiple, interoperable chains  
• How they plan to bring new users people into the space
• How they think the transition to ETH2.0 will shake up the existing blockchain space

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Episode links: 

Illia Polosukhin: https://twitter.com/ilblackdragon

Near protocol: https://near.org

Zaki Manian: https://twitter.com/zmanian

Cosmos: https://cosmos.network

Rob Habermeier: https://twitter.com/rphmeier

Polkadot: https://polkadot.network

Arthur Breitman: https://twitter.com/ArthurB

Tezos: https://tezos.com

Near protocol on mainnet: https://near.org/blog/near-mainnet-genesis/

Electric Capital report on the number of developers in Ethereum: https://unchainedpodcast.com/electric-capital-on-the-coins-punching-below-their-weight/

Transcript:

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Laura Shin: 

Welcome, everyone. So our panel where we’ve got a number of founders of Layer One protocols, which I believe a year ago maybe we were calling them Ethereum killers but I don’t know if that’s the term nowadays. Anyway, why don’t we just each…have each of you just go around and say what it is that you’re working on and where you’re sheltering in place from?

Zaki Manian:

Hi, I’m Zaki Manian. I’m sheltering in place in Palo Alto, working on Cosmos. I’m just working on watching IBC right now.

Robert Habermeier:

Hi, my name is Rob, and I work on Polkadot which is a heterogeneous sharding platform. I’m hunkered down in the DMV in the DC area.

Illia Polosukhin:

Hey, everyone, I’m Illia, Cofounder of NEAR, working on pretty much…we just released MainNet and like stage one and then kind of going to decentralize it over these months and beyond, actually in Shanghai in China.

Arthur Breitman:

Hi, my name is Arthur Breitman. I’m a co-founder of Tezos.The chain has been live for a bit over…almost two years now, and I’m sheltering in place in Singapore.

Laura Shin: 

Great. Well, thank you all for joining. So I actually wanted then all of us to also just give everybody kind of an overview of what it is, like why we brought you all together. So, why don’t you each now just say what it is that your protocol does and kind of where in this stage of development you’re at?

Zaki Manian:

Cool. I can go first. So Cosmos is a software stack for building your own blockchain, and so the Cosmos Hub and a number of other blockchains like the Binance DEX Chain, IRISnet, KAVA, Terra, have all been live on the software stack for about a year. 

But sort of the…two pieces of this sort of vision of Cosmos, one piece was this idea of, you know, build your own blockchain. You know, everyone can have their own sort of customized community-driven layer one, and then the second piece was interoperating those blockchains.

So in the year since we launched, since a bunch of these networks started to launch we’ve been working on this interoperability framework called IBC, and right now we’re in the midst of Game of Zones, which is the sort of incentivized Testnet sort of inspired by Game of Stakes which was sort of the original incentivized Testnet that we’re sort of putting IBC through its paces expecting to launch IBC on Cosmos Hub later this summer.

Laura Shin:

Robert?

Robert Habermeier:

Yeah, so I feel that there’s design space of blockchain scalability. So what Polkadot does is it occupies a space, a point in this design space that’s in-between something thing homogenous sharding, where you have a bunch of different shards that all execute the same kind of smart contracts and things, and in-between something like Cosmos where you have a bunch of different blockchains that all talk to each other. Each of those blockchains has to be fully sovereign.

So, there are tradeoffs to both sides of that design space so we try to occupy a middle ground where those shards are heterogeneous. We have a bunch of different shards. We split up the work between a bunch of different blockchains that draw security from the same source, but those blockchains are specialized to specific tasks. They don’t have to bring their own balances, they don’t have to bring their own validator sets, things like that. So as any engineer knows, the closer you can specialize to a specific task the better your solution is going to be. More general solutions are less efficient. And so, that’s our notion of parachains. 

So we also embody this notion of build your own blockchain, bring your own blockchain. We built a toolkit called Substrate which is for building your own blockchains, writing what we call the runtime, the logic of your blockchain and WebAssembly in Rust code, and everything else is sort of taken care of. We eat our own dog food in the sense that we’ve written Polkadot using Substrate as well.

So we’ve launched the Kusama Network which is…it’s essentially Polkadot but it isn’t Polkadot, so it’s an incentivized real value-bearing network for sort of putting through our theses through the hoops, and we’re working on deploying the initial implementations of parachains over the next few months.

Laura Shin:

Illia, I know you also have some news.

Illia Polosukhin:

Yeah, so as Rob mentioned there’s kind of a spectrum, so we’re on the other side of spectrum from Cosmos where we see the world as kind of developers might want specialized solutions but in very rare cases, and instead they kind of want speed and ability to go to market if they’re actually building a business faster.

We think of NEAR as developer platform really targeting kind of people building applications and not needing to think how infrastructure in these works, right, kind of same motive that like AWS been able to build a huge business around.

At the same time like to actually be able to serves this developers, you do need a scalable platform, you do need to solve a lot of current technical challenges, so that’s what kind of infrastructures that we’re building with NEAR protocol is a shard protocol in transmit assembly, it kind of provides all this tooling around it.

Then you have, like yesterday as we mentioned on his opening talks, we just kind of opened up our MainNet. It is our proof of authority right now, but the goal…like the point is that it allows people to start building applications and actually getting initial users. And then throughout like May and June we’re going to be decentralizing, bringing in more validators on board, and over time kind of releasing it to the community.

Laura Shin:

Arthur?

Arthur Breitman:

I think if you think of these networks and platforms merely as technology you’re missing the forest for the trees. What these things are primarily is they are communities, they are I would say the closest thing to them are polities. They are essentially political organization, and the backbone one of that usually is a blockchain, it’s a good way to do it, just one way.

And what we’re trying to do with Tezos is ensure that this…you know, you can preserve that community, you can preserve that network while being somewhat agnostic to the technology, and the way you can do that is by having technology which can evolve.

So, if you’re looking purely as…you know, obviously software and development are very important so you cannot go anywhere if you don’t have good engineering, if you don’t have good software. I would say that it’s not the end goal. These things are not operating systems. They are fundamentally political entities, and what Tezos does is essentially trying to really tackle on that ID directly by introducing means of control by the community of the platform and how it evolves.

And so, Tezos has been…you know, it has been in a Testnet for many years now. It was in a MainNet for almost two years, and it’s already been through three protocol upgrades. There are proposals for a fourth one oncoming, and so you can’t define it as a piece of technology itself because the technology can change.

And so, you know anything we can discuss in terms of like sharding, in terms of like interoperability, all of these kind of things are technologies but they’re not communities, and I think that’s a focus specifically at Tezos.

Laura Shin:

Yeah, well, let’s talk a little bit more about that because I kind of made that joke at the beginning about the Ethereum killers which is sort of like this just catchall phrase that was used for a lot of protocols that are sort of working in the same area that all of you are, but I’m sure, you know, even just like listening to each of you describe what you’re working on, obviously there’s a lot more nuance, and yet at the same time we are in this reality where kind of like the most used blockchain in this space is Ethereum.

So, I was curious to know how you differentiate yourself from Ethereum, what problems you believe still need to be solved in this space, and what you guys are working on. And anybody can start. I know we’ve been going in this little clockwise circle, but it can go in any direction.

Zaki Manian:

I’m happy to start. You know, one thing I was reading about NEAR which I thought was completely on point, and I don’t know how relevant it is today, but there was a statement saying like, look, we’ve been working on sharding and like having this like super high scalability and we realize, hey, there’s no point in building…like it’s like building this giant building in a desert, you know?

And so, I would say by and large it might seem, if you’re like really looking very, very closely at this it’s like, oh, you know everyone’s using Ethereum, but I would say no one is using Ethereum like on a global scale. You have some applications. Most of them are going to be around lending, and there’s not that as much…and so, you might be tempted to think like, oh, well, you know, this thing has not been adopted but I take the view, and it’s not a very…it’s very popular in the Bitcoin circle, but I think that if you have too much of a platform and technology mindset you might miss that, but I take the view that merely holding a token is using it. 

If you’re thinking in terms of censorship resistance, seizure resistance store of values which are fundamentally what these things are, and you can try to think of them as guess as much as you want, this is not the reality that we are today, not in theory or not in any network.

Illia Polosukhin:

Yeah, I think like one thing I would do what I mentioned, like I don’t think Ethereum is even close to like most used blockchain and like I would want to have some data, but I think it goes Git and then a bunch of protocols that kind of follow very similar like…

Laura Shin:

Wait. Inside what was that first one?

Illia Polosukhin:

Like use Git, used by millions of developers. So, Git is actually using…it maintains a data structure which is pretty much blockchain. It has like cache and…

Zaki Manian:

No, it doesn’t have this. It doesn’t have economical overhead…

Illia Polosukhin:

Yeah. And so in general, like…and then if we go cryptocurrencies, right, we have Bitcoin…

Laura Shin:

Right. Right. I just mean in the smart…like in the space where you guys are playing, that’s what I meant, like obviously Bitcoin is…yeah. But anyway, so keep going.

Illia Polosukhin:

Well, I think it’s important to remember how far we are from like actually useful stuff. That’s I think like…like I think Electric Capital actually has a very good report where it’s like actually tracked down all the like developers building the space, and it’s like laughable numbers, right? It’s like 10 thousand actual active developers in the like whole like smart contract space, right?

Laura Shin:

I just wanted to say I did an interview with Maria who wrote that report for Electric Capital. But anyway, keep going.

Illia Polosukhin:

Yeah, I was just saying like 10 thousand developers was like, you know, first few weeks of Google releasing the framework, right? That’s kind of the difference of magnitudes. So I think definitely understanding how can we bring more developers and like people, and actually users because definitely agree that like if we have developers…like developers to come here we need people to use the stuff, right? They need to have value, and need to see value, why is everybody using this.

Laura Shin:

So, Illia, can I just ask you a little bit more about your approach with NEAR because so obviously you announced your new funding yesterday, congratulations, and that’s the news I was referring to. It was 21 million. And you also want your proof of authority, MainNet, and you know just I think you would agree with me, like proof of authority seems really appropriate for enterprise blockchain where, you know, kind of the validators are known, there’s a very limited number of them. And so, I just wondered, like it this your way of kind of targeting a different audience from the audience that like a more public blockchain like Ethereum is targeting?

Illia Polosukhin:

Yeah, I mean the plan is to like start onboarding more and more validators pretty much like within the months. So we actually have 40 validators running right now on one of our testnets across the world which you know, actually is more decentralized than some other public blockchains right now. 

But yeah, so the idea of POA is really just to give the developers a platform to start deploying while we’re still testing everything, and kind of in the right pipeline like still validating that, you know, decentralization, everything works, like the networking issues, all the things, and like Zaki can tell how really hard his problems are and how long it takes to like debug all this.

At the same time already start providing a platform for developers to actually build applications. And like, we have few developers kind of who already have an application and actually serving users right now from Testnet and really wanted to give them platforms that actually like will maintain state going forward.

Laura Shin:

All right. Well, so to continue, what I was asking about before, just about whether or not you guys are thinking about…how you’re thinking about Ethereum kind of as you’re working on your protocols and figuring out which audiences you’re targeting or which problems you want to solve or things like that, and I guess like in a way Robert and Zaki, you guys, you’re really working in a slightly different way where you’re just trying to kind of bring a bunch of different types of, you know, whether it’s different blockchains or I guess for Robert with shards. How are you thinking about what you’re doing knowing that like if Ethereum at the moment at least in this particular space is leading?

Robert Habermeier:

Well, as the others have said, like they’re leading a developer community which is small relative to the amount of momentum that we want the space to gather in the future. And I would like to clarify that the concept of heterogeneous sharding is very, very fundamentally different from homogenous sharding because you’re bringing in a capability of optimization and specialization that you cannot have with homogenous sharding.

But I mean without a representative of Ethereum here I don’t feel too comfortable speaking a lot about Ethereum, so like maybe I’ll speak a little bit more generally like how we look at developer ecosystem and developer growth. I mean this is one of the reasons that we’ve historically and we continue to lead the charge into technology such as Rust, like bringing Rust into the blockchain space and bringing WebAssembly into the blockchain space.

That these…especially with WebAssembly when you have the ability for developers to target WebAssembly you’re talking about a system of technologies where we don’t have to reinvent the wheel, and you’ve got the strength of the millions of strong developer community, huge Open Source bodies behind it, all the browser vendors behind it for things like formal verification, good developer tools, and for people to write blockchain software languages that they’re familiar with, and I think this is key, right, that you don’t have to learn an entirely new language and rather you can maintain your comfort when moving into a new blockchain space as a software developer who hasn’t previously been exposed to those things.

Zaki Manian:

So, I guess the way I mostly think about the blockchain space and what we’re trying to do with Cosmos is I guess the question…so, where Ethereum has been successful is it has been an incredibly successful sandbox for building sort of early financial primitives and onboarding assets and having some sort of baseline of economic activity on those assets.

The question is really is the like sort of the theory of maximal strategy is, is the way I think about it is it’s a point of view that’s basically like, well, we could take these successful experiments, organically grow this ecosystem, sort of glue on scalability solutions as they’re needed, and essentially sort of organically evolve into sort of global…sort of a global financial sort of ecosystem.

I guess the sort of Cosmos point of view is that we’re sort of missing some primitives there, and the primitive that we’re missing is basically this, you know, sovereign interoperability primitive, and sort of not having that primitive means that like you can…that these sort of nascent experiments will never be able to grow into sort of large-scale platforms.

And you know we’ve had some early signs that there’s like general enthusiasm for this. There isn’t…we don’t really sell the Cosmos platform really that hard, but we’ve seen sort of a number of other entities sort of either adopt the platform wholesale or basically adopt the philosophy and concepts of the platform in what they’ve built, and that sort of seems like the indication that we’re sort of moving in the right direction by introducing this new primitive into the blockchain space, which is to a certain extent a very…that’s sort of like our governing philosophy.

Laura Shin:

I recognize as you guys have all been saying it’s super early and the number of the developers that are working in the marketing spaces is still very small globally, and yet at the same time I think we could say about Ethereum that at least they do have sort of a network effect, and some of you did allude to this.

Right now obviously DeFi on Ethereum I would say has a certain network effect. At the moment there’s about 400 million dollars’ worth of ETH locked in DeFi on Ethereum. So, just like in terms of attracting developers, you know, if this theory that has been talked about for quite a while in the blockchain space is true that, you know, cryptocurrencies and blockchain networks really are about building network effects, then how do you plan to attract developers to your ecosystems

Illia Polosukhin:

There’s actually an interesting point that like probably blockchains in comparison to something like Libra is actually allowed to link to other blockchains, right, and that’s what Zaki Manian working with IBC, but there’s like various ways to connect which means the network effects actually…like and bringing people into this ecosystem kind of benefits everyone obviously with like…

We need tooling and we need like kind of better connectivity, and that’s for example we’re working on a bridge which is somewhat similar design to IBC that links to Ethereum and like allows you to build applications that just use kind of existing liquidity, existing lego pieces from Ethereum on other platforms, and I know like Polkadot is doing the same.

So, in general I think like there is a network effect and there’s people who are kind of professionally like building solidity contracts now and are excited about the space, but I don’t think like at this point there is like we see that Ethereum way of like specifically building on this specific technology, right, is winning.

And I agree with Arthur here. It’s more about like there’s a community of people who are building these financial primitives and excited about the new way of building kind of Fintech companies, and they will be looking for kind of what is the best piece of technologies that they can pull together to build a better experience for users, right.

And I mean even…so what happened on like March 12, right, the kind of spike in gas price, spike in usage pretty much rendered a lot of obligations on useable or like the thousand developers end up paying huge amounts in fees, right, because Ethereum just couldn’t like scale to this kind of very extreme capacity each year.

So like there’s definitely a need for kind of different solutions, and I think like even this existing cohort of people who are already here will be like extending, and I think like jobs will probably…they’ll just because they’ll bring more people who are excited about Fintech and see the kind of these approaches and those technologies actually will allow them to get faster to the market.

Laura Shin:

And Arthur, actually does that apply to you that you can kind of interoperate with Ethereum in some ways to take advantage of the developer activity they have there? I see how it applies to some of the other blockchains, but I wasn’t sure about Tezos.

Arthur Breitman:

I mean, you know, Tezos doesn’t have any way of…you know, Tezos is what it is, so it’s either attracted to developers or it’s not, and the only means that they have is to…I would say to make it attractive to people is going on podcasts and explaining why it is a great option. So you know that’s pretty much all I can do for it, but I do think it’s very attractive.

I think the spirits and the idea of it is that you can have a chain which is in some sense autonomous. It has internally mechanisms that can make it current over and over and over, and the idea of knowing that you can build a platform and know that it’s going to keep current in such a scope, media space, by something else which is going to be faster or more scalable it’s always, always, you know, the idea of having the means, technologically-speaking, to always be at the forefront or close to the forefront is I think pretty compelling.

But in general, I think that if you want to develop the best thing is to have good developer tools. That’s what…you know, on top of a good platform you want to have, easy to use, good developer tools and that’s an important thing.

But also, if you’re not an incumbent and much of the network effect of Ethereum, I don’t think it comes from the fact that they have existing…that it’s not so much that there’s like what is built. I think it mostly comes from the fact that they’re an incumbent, and you know we’re in a space where…which is mostly winner take all and so incumbents have a huge advantage.

So Bitcoin is a huge advantage over Ethereum because they are our direct competitors, and Ethereum has a huge advantage over Tezos’ platform just because it was there earlier and has been there for longer, and it has nothing to do with I think the network affecting the developers that have built. It’s more of a mindshare type of network effect that I’m referring to.

And I think the way that you can deal with that is by being very focused and by having a really good understanding of what it is that your technology do, what it is that you’re building, and that lets you avoid a lot of deadends if you understand precisely…you know if you really understand your product, and I think very few people in this space understand what it is that they’re building, but they know how to build it, they just don’t understand what they’re building.

Laura Shin:

Yeah, I mean I think…I’m just translating that as you’re sort of saying that basically everybody should have a vision and kind of keep that in mind while they’re building, but I was curious to know, like with Tezos what are people voting on. You know I kind of took a look and it looks like it’s all stuff kind of really focused on the protocol, and it doesn’t seem like there’s anything controversial happening, but I didn’t know like aside from that like what else are people doing with Tezos?

Arthur Breitman:

So there was actually something controversial in a benevolent upgrade and even in Athens there were some discussions over the upgrade, so I think that’s very important. And you also have to say that because there is mechanism it’s…you know, you should think of the building mechanism on a chain, not as the decision procedure but as a ratification procedure.

In some sense you have some governance that essentially happens off-chain, but then you present it and you ratify, and basically I think it avoids a lot of this scenarios which we might have otherwise what people might push for, you know, controversial ideas to hard forks because they know that they’re not going to get the votes, and so you don’t necessarily observe it but I think it has an effect, an important effect on the network.

You know I think they’re using it as cryptocurrency, and fundamentally I think that if you’re building a platform and you’re not saying…and you’re saying you’re building a platform for application and that you’re not building a cryptocurrency I think you’re not understanding what you’re building. If you don’t think that Ethereum is direct competitor of Bitcoin, obviously I think you don’t understand this area. If you don’t think it is…yeah, but…

Laura Shin:

Yeah. No.

Arthur Breitman:

Right. Well, but whether it’s me or…

Laura Shin:

I don’t.

Arthur Breitman:

…at-home pricing they’re all direct competitors and the fact that you can build application is great. If you can have applications, you know, because cryptocurrencies are…you know they’re good for a few things. They’re interesting as they store…you know, if the authorities come and take everyone’s money and then chase everyone from a shelter then you can keep your cryptocurrency and that’s great. Case number one.

Case number two, you want to make a lot of cross boarder payment to machines all over the internet, it’s completely invisible to use on the thousands of internet works that exist out there, you want cryptocurrency. Great. If you want to pay fees using a smart contractor, that’s great which is a cryptocurrency, still having smart contract, being a smart contract platform lets you use the cryptocurrency in a useful way, but you’re still building a cryptocurrency fundamentally. But,  if you are not seeing it as cryptocurrency you don’t understand your product.

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Laura Shin:

Yeah. Well, I’m also curious, Zaki Manian, Robert, and Illia, do you agree that Bitcoin and Ethereum are direct competitors because I don’t see it that way at all?

Zaki Manian:

Well, what I think a lot about is, so like we have platform technologies and each of us have like different platform technologies, but it is somewhat…like the search for comparative advantage for a token is also sort of somewhat like…it’s like a different like technology, like social and technological progression to the like platform evolution, like they’re coupled because the token exists within the platform technology, but you have the search for comparative advantage.

And comparative advantage is not zero sum, but like there is a relatively narrow space in which to search for that comparative advantage right now, and that does sort of render all of our tokens that like into something of like a competitive space.

Robert Habermeier:

Well, it’s competitive, but it’s not zero sum, at least at the moment because there’s a lot of room for growth, so like I think that’s a very important distinction to make is that like what one protocol gains is not necessarily the loss of another protocol, and once you’ve saturated the market, yes, I think that this would be the case. But at this point we’re looking for differentiators that will just expose us to broader and broader markets and bring more people into the space.

Illia Polosukhin:

I think good framework is like tokens and especially like monetary policy is in some way a central bank of this like country of, you know, people and users and developers and everyone who’s using this system right, and like in some way obviously every country wants to take over the world, but at the same time we actually have countries coexisting to some extent.

And centrals banks have very different properties around like what is their economics is based on, right? Like you know if you look at Russia for example, a lot of its economies is based on oil versus…you know, I’m not going to talk about US, but like in general, right, the way the economics of essential banks operates can be very different, and while like at the same time it is money and you know it is what people use for like day-to-day operations.

So, I think like it’s important to remember that like, yes, in like underlying way kind of when we have like saturated the market it will become like somewhat more of a competition, but at the same time like the economics can be based on very different kind of components and like utilities that it provides.

I do want to mention though like on the governance side just to put one thought, I actually don’t believe there’ll be like contentious hard forks in proof-of-stakes systems at all. Because in proof of stake…like in proof of work the decision of switching to a new protocol is like on miners, but everybody else needs to accept it, right? Like everybody else needs to also change the binary, like because miners can you know shift and like start mining in different chain, but if I’m running my node I can start mining the old chain, right?

So, there can be like natural forks and like mining power. And proof of stake, especially BFT, where we prefer liveness, you kind of need 66 percent to switch or you need those to be like contentious hard forks, right? Like you can upkeep the chain that like no changes chain anymore because like you don’t have a like super majority to produce blocks in the first place, even if like more than 33 percent left.

So, it’s actually like…and the kind of somewhat bad part about this is actually if there is something that just happens and both chains modify their state to produce new like forks, then the choice is actually not at people’s hands but at exchange’s hands because the people who decide which one to value and which one has stake is like, you know, whoever values it and whoever puts a price on it, which right now are exchanges and centralized exchanges for the most part. So, there’s a lot of like mechanics that we need to be aware of here.

Arthur Breitman:

I don’t think that miners decide on forks in proof of work because miners have to expend electricity in order to mine, and so they’re going to follow the markets, and markets are going to fill basically social consensus. So it’s a media circle where everyone is trying to pre-commit really hard to one branch of the fork, but it’s hard to create…you know, it’s hard to make a critical commitment where there’s so much on the line.

It’s kind of a giant game of chicken between, you know, users, maybe exchangers, miners, and you get an outcome which…I mean basically you end up with groups having like massive leverage just because it’s just so entangled and you have this crazy game of chicken, and that’s I think the beauty of having onchain governance is that you bypass this thing.

I also think that even if you have BFT, like technical BFT for doing a consensus, you can still have contentious hard forks because you will have validators who just decide to go on both branch, and they can’t be slashed. It’s easy to modify studies according to one branch to make sure they’re not going to be slashed from one to the other, and so they’ll just assign both.

I think it depends on the mentality of the validators. If you have validators which are convinced that, yes, it’s important to maintain the integrity of the network it’s fine, but if they are in closed thoughts of, oh, we’re just building technology platforms, they’re just applications. In other words, they don’t get it, but yeah, is it going to be…they’re going to be on multiple platforms.

Laura Shin:

Yeah, I would just add to that that if we just look at history with what happened with Ethereum Classic there were some really small number of miners, maybe like one or two or something, that kept the old chain going originally, but Ethereum Classic didn’t really exist until the exchanges started offering it, offering trading on it, so you know it really was a situation where the exchanges actually led, and the exchanges themselves would say it was the users who led because they were demanding trading in it. So you know, just from that one example I don’t know if I would say miners were the ones who decided. 

But one thing I just wanted to ask was I don’t remember who it was that…

Illia Polosukhin:

So, yeah, I just wanted to mention like when I said miners I said miners can, not that they are try…but like in general, if there’s no miners, right, there will not be Ethereum Classic, like somebody actually mined in proof of stake. Like if I decide, you know, to fork off at Tezos right now, like it’s not like I will not be able to like produce blocks, period. Like oil, reproducing block. .

Arthur Breitman:

….between the states, but you could if you had enough…

Illia Polosukhin:

Yeah, and that is a contentious hard fork, like that’s a definition of contentious hard fork in the state. So, like that’s what I’m saying. There is no zero choice. There’s always like whatever kind of…whatever’s super majority wants or nothing. There’s no like kind of splitting into like contentious like options.

Arthur Breitman:

But the problem oftentimes…the problem is not that you have a fork and that there’s no Ethereum Classic or Bitcoin Cash or something like that because these are generally very small. The problem is that the one that becomes canonical becomes canonical for the wrong reasons. 

And so, you know, the problem with the forks is that it’s not that, oh, you’re going to have two branch, because one branch is almost always clearly going to be the canonical branch. The problem is the function that decides which branch is canonical.

Laura Shin:

Okay. Oh, Zaki Manian, did you want to add on this? I mean this is interesting.

Zaki Manian:

Well, all I wanted to say is I think that like a big part of the design of…I think, you know…so, Polkadot, Cosmos, and Tezos, at very least, are people who are like…have been designed by people who were like around for the blockchain wars of 2015 and 2016, 2017, and so they are informed by the political process of that.

And you know, Cosmos you know a year into its life is just kind of starting to experience a world where we actually have like real politics onchain, and there are real protocol governance questions and these things are…so we’re like very early in the maturity process with that stuff, and so like our experience with this sort of like political systems are like…our experience with the limitations of the technology platform and how that affected the politics informed these like design decisions, but they didn’t…we are still yet to know how they play out.

It isn’t until you really stress the system and still there is like tension and contention and like disagreement that we really know any of this stuff, and how our design decisions have played out. But like that’s like…that is where kind of the rubber meets the road on these protocols is like is how they’re going to process all of these political changes, and like how a polity and how like natural community forms, so we’re still like very early days in these things, but I think that would just generally be like I think something that people kind of miss in the, like this technology is better than that technology.

We’re trying to operate at this like intersection of like developer onboarding community and politics on top of the technology platform, and it’s only the combination of all of those things that eventually becomes like a significant player, not any individual aspect being better or worse.

Laura Shin:

Yeah, that’s actually…I feel like maybe what Arthur was saying in the beginning, but I find it interesting because I do agree with you that it does seem like those tensions from those years have really informed the different design choices that you guys have made but what’s interesting, and I didn’t realize this actually literally until we were here talking, meaning like before when we were figuring out who would be on the panel, I didn’t think of this, but it does feel like, and Arthur, correct me if I’m wrong, it does feel like…and actually I think even in this conversation you’ve already had like a slightly different vision was, were you the one who said that this is like a winner-take-all space and then the others were like, no, it’s not? Was that you who said that or who said that?

Arthur Breitman:

No, I did say that, but I agree with Robert that just because it’s winner take all doesn’t mean that now it’s negative sum now. I don’t think it’s negative sum now because in the world of program, you know, most times programs is most firms don’t competing against each other, they’re competing against anyone giving a shit, and clearly blockchains today, you know, they’re not part of…but they compete for something, and right now they compete against anyone giving a shit and not really against each other.

What I find very sad is that I think that the economic insight behind maximalism is correct, and some people use it correct maximalist insight as an excuse to not only be dicks on the internet, but like how trite to call for state violence, and I find that absolutely despicable.

But the economic insight is correct. I think it’s way down the line, and I just think it’s better to maintain a collaborative environment and see who makes it out alive rather than try to tear each other to pieces like that early in the game. We would tear each other to pieces in ten years, okay, not now.

Laura Shin:

Well, but so, I’m curious to know like Robert, Zaki, and Illia, so, because you guys had this like slightly different vision that you guys were talking about, so do you agree with Arthur that someday down the line it will become winner take all, or do you just fundamentally foresee a totally different future where, you know, it’s kind of like more of this interoperable world that you guys are trying to build?

Robert Habermeier:

I think that’s in many ways just the nature of the things, that things follow power law distributions and that when you start to run out of resources competition is inherent and you can see that in many different ways and places in the world and I don’t think that this is going to be any exception. But the road that we have out before us is one that has a long way to go before I think we reach that point of exhausted resources and further competition.

At the end of the day though, blockchain protocols need to provide value for the token in order to provide security, like these things are built off of incentive loops where new issuance, you know, has to be based off of demand that drives security. So, if there’s no demand or if there’s more demand for another platform then down the line if there’s a limited amount of possible demand then you can’t secure all of the platforms, or some of them may grow largely more powerful than others.

But as Arthur says, I think that this is really why, you know, I’d like to strike the point that things are not settled right now, like the best directions to go in are unclear and that it’s really a time for experimentation. It’s for projects to do something different from each other, and it’s one of the reasons that we also are using on-chain governance in our protocol because we think that, one, sometimes the…I mean the alternative seems to be, as we’ve seen from history oftentimes just no governance, that nothing happens and you get caught in kind of obfuscated power structures and your systems don’t adapt as they should.

And so, a formalized system of government allows the system to adapt, bring in new technology, but also allows people to just fundamentally put their money where their mouth is, and if they want to back a position with a certain amount of conviction they can spend money and they can spend time in order to back that position and well, whichever the community decides is the way that it’s going to go.

Zaki Manian:

So my general thought here is that I expect there to be fundamental tradeoffs in like sort of what tokens can be good at. I think there are going to be like sort of politics and governance will imply that like not everything is for everyone. And so, you know, if you are…if a token is sort of pursuing this like monitor, like base layer monetary vision it’s likely to be like a sort of politics-less protocol and sort of optimize for that.

You know, I think all of us are sort of, definitely building systems that are more sort of specific and will tend to end up with like unique characteristics. And so, I’m more skeptical than in the blockchain space that you’ll follow the sort of standard technology industry, power law distribution because of sort of scalability constraints about communities and sort of standard practices and around like how your blockchain actually works. So, more skeptical of anything truly achieving like sort of like a winner-take-all space.

Laura Shin:

And Illia, you got cut off earlier. What were you going to say?

Illia Polosukhin:

Yeah, it actually was Rob. I do think like it will follow power law and like following my example with countries and central banks, like you know we do have few super powers that kind of controlling the world in many ways, and then there’s, you know, few other like sub kind of followers in a way.

I do also, like on the other side of this, like this space is evolving so fast and like even the last two years, like we learned a lot kind of new things. There’s new cryptography coming out. There’s all kind of things happening all the time, so it’s both not the time nor it’s unclear that like what we think right now is the right way…will be right way in a few years, right, like it may be you know we all switch to zero-knowledge proofs and we don’t need a chain, right? We all just exchange zero-knowledge proofs offline or like peer-to-peer, right?

There’s like so many like possible other kind of alternatives, and I think like us exploring the space and like figuring out what works right now and how we like get it to people is important, but also like looking forward to new technologies is definitely something, and like it may reshape completely how we think like this will be evolving, right?

I mean same as like before Bitcoin nobody could imagine this kind of thing, but there’s a possibility that there will be some new like kind of evolution that will completely change how we look at this, so we should be like open-minded about that.

At the same time, like I’m agreeing, like we should be evolving and yeah. Like our plan is kind of continue both working, as well as like continue evolving the protocol and like both feeding in closer to like what developers need, what users need, and like bring in new technology. 

So, like I do think governance is very important. I don’t think that token holder, like direct token holder voting is the best way to do it, and I don’t think we have a good way right now to kind of organize it. At the same time, like I do think in proof of stake right now validators are kind of at power, one way or another, like they…people who are running code and they are defining what blocks are produced, so like pretty much building from there and kind of evolving that into like operational governance is crucial.

And I think…I mean like I’m here in many ways following Zaki with Cosmos and like what’s been done already just because like they kind of gave power to validators and like kind of delegated a series of voting, and then pretty much like given they are pretty much producing blocks and signing and running hardware is like a reasonable way to start from, but I do think we need to bring more people who are actually like, would be introducing other sides of this like non-protocol developers, kind of community leaders, and like in other like financial institutions as well to kind of manage houses going forward.

Laura Shin:

Well, that’s actually…yeah, that’s kind of where I wanted to go next or depending on the time this is probably where we’ll leave off, but basically like, you know, if we’re saying like it’s so early in the space that we just need to get more people in, how are you doing that? 

Like you know, you guys did talk a little bit about the technological things that you think will…your technical features that will interest different developers and stuff, but like also there are the community aspects and everything. So like just in a holistic sense, like what are all the different things that you’re thinking of doing to bring more people in and to get people to use your networks and to just get into cryptocurrency? Hopefully this is not one of those questions where nobody has a plan.

Arthur Breitman:

So, I’ll answer that by replying on what Zaki Manian was saying in a sense. He was saying if you want to be something akin to money it shouldn’t be political and I agree with that, but I also think that the protocols themselves shouldn’t be political. The best way not to be political is to basically have very strong social norms against never changing anything, but then you give up on innovation.

And so, I think right now if you look at this cryptocurrencies they’re not quite money, they’re printed money and as such they are political projects. That doesn’t mean they have to be internally political, but you have to understand them as political projects and I think embracing that is a way of growing communities because it’s accepting the nature of the beast.

Laura Shin:

But like how do you bring that message to people out…like how do you get people outside of crypto to take an interest in that? Like what you just said just seems very kind of internal, like not something where…like what would be your message to somebody who’s not in the crypto space? You’d be like, hey, come check this out.

Zaki Manian:

So my point of view on this is I think the next sort of interesting big steps for Cosmos is, you know, the ATOM community is a very crypto-native community, but I think that we have participants in the Cosmos ecosystem, whether you have like the Agoric folks who are very native to like the mainstream Java community, they’ve been part of the sort of Java Script standards working to distribute, like mainstream distributing competing world for, you know, 30, 40 years. Is there a community that’s going to be founded that’s sort of more based in that world? You have people like ReGen who are sort of based in sort of like the environmentalism, sort of ecological transformation movement. 

So in many ways I think the way that you get mainstream people to care about blockchains and the way Cosmos helps onboard those people is the ability to sort of go and like land sort of social coordination mechanisms that are native to those communities and sort of…and then bring them and connect them to some of the more crypto-native communities inside of the Cosmos.

Illia Polosukhin:

Yeah, I think it’s actually…there’s a trend that’s happening in that real world which is communities wanting to have more control and moving away or like trying to kind of build that control outside of those big distribution platforms like Facebook, Reddit, etcetera, right, and like Kyber is a good example, right? They moved away from medium so they have more control over their platform with their users, over the monetisation, etcetera, and this technology like as part of it provides kind of a substrate for thousands like how to build a community, how to boost traffic, how to align incentives and create new economies around this, so I think that’s like an interesting perspective.

That’s one which Vitalik mentioned yesterday was around just like kind of controller’s liability, right? We have this huge platforms that now pretty much are becoming…like they need to like exercise control over and censorship over their own product and kind of sometimes censor the governments, and like for them like something that actually decentralizes control and like in a way removes the need or brings it back to the communities to the kind of more local governance provides a new way of doing that right.

But like I think at the end what we do need to do is like stop talking about like how can everybody use blockchain…like I do agree that like it’s about money and politics in underlying way, but at the same time like most people don’t really care. Most people…like when they use an application, right, they don’t think this is like a Sql application, right, or a you know, like they just use application, like they don’t care.

So it’s the same, like they don’t think the dollar is gold-backed or not gold-backed, they just want to use a dollar and buy something with it, and we need to get to that point where like people actually just use it for the function and kind of start operating on that level.

And like I’m originally from Ukraine. Our economy sucks, like every crisis that hits US hits like Ukraine twice, three times more, and like I’m actually very scared of what’s going to happen given what’s happening with US right now, and like there’s a huge opportunity for like this technology and especially money as like a way for people to, you know, shelter their savings and you know actually like hold up in the like economic turmoil.

The problem is that kind of stuff is like completely unusable, like no people can actually like get it on their phones or devices. There is no like markets created in the local countries, right? So we’re going to need to like really up the game on usability and really up the game on actually like liquidity.

If you think of like USDT which is like in a way the only right now usable stable coin I love Maker, but like the amount of DAI that exist in the world is like so small that like it’s not like really operational. Like if we think of USDT out like removing all the issues of like, you know, how it’s managed, etcetera, again it’s just like it doesn’t have liquidity in the places where it needs to be, right, like where people actually have demand for dollars and there’s no dollars and there’s no like way to acquire them. So, I think like we kind of need to like start investing more in these types of things on top of like just making this stuff really usable for people.

Laura Shin:

So one other thing I wanted to ask about was, you know, right now while we’re speaking we’re kind of at the beginning of what will eventually be a multiphase and quite long transition to Ethereum 2.0, and so even though we were just talking about kind of getting people outside the crypto space, and I’m sure you do want to also get developers who are already developing in crypto interested in your projects, and so does that create some kind of opportunity for you? Like how do you think the transition to Ethereum 2.0 will sort of shake up the existing kind of blockchain space?

Arthur Breitman:

Ask me again in 2016.

Laura Shin:

2016?

Arthur Breitman:

Ask me. I remember in 2016 I was, you know, I was talking to Tezos and how we had proof of stake, and I remember people saying like, well, who cares if Tezos has proof of stake, everyone is going to have proof of stake next quarter. So I think it will be great. 

I think there’s a lot of super interesting designs here in 2.0, but I feel like Ethereum gets all the credit of Ethereum 2.0 with none of the deployment. So, let’s give credit to the blockchains which are out there which are actually sharding, which are actually using proof of stake, which are actually doing these things as opposed to talking about them.

Laura Shin:

Well, and just out of curiosity, like would you say that most people that are interested in Tezos just are developers that didn’t have previous experience in crypto, like didn’t come from another blockchain, they just came straight to Tezos?

Arthur Breitman:

No, I think most people who took an interest in Tezos had an interest in cryptocurrencies to begin with, although I think more people had an interest in Bitcoin and Ethereum I think in terms of the balance in a community. I would say that’s the difference.

Laura Shin:

Oh, interesting. And what about the rest of you guys, like how are you thinking about how that’s going to affect the development of your protocols or interest in them?

Rob Habermeier :

So one I guess thing that I think a lot about with Ethereum 2.0 is Ethereum has sort of embarked on this strategy that is very much like, okay, we are going to sort of ground-up design a second system. It is an interesting strategy because there’s an alternative system strategy which is we’re just going to try to colonize our networks into other people’s technology stacks, and that would…well, it sort of I guess an interesting alternative strategy and it sort of remains open to Ethereum the option of pivoting.

Like Ethereum could pivot and decide, you know, there’s like a lot of things that we like about the newer technology stack, it’s close enough to the Ethereum 2.0 vision. Why don’t we just colonize it and then try to bring our network effects over into that technology stack?

We are all building Open Source technologies. There is nothing that stops any one of our technologies from sort of colonizing the ideas, ethos, code of each other, and I was kind of surprised that this happens less than anything.

So, I think the most…the way to think about…the way that I think about Ethereum 2.0 is Ethereum 2.0 will be the attempt of the Ethereum community to move their network effects into a new system, to take that network effect with them into some new technology. I think the assumption that like Ethereum 2.0…that like how that happens is sort of like a fixed vision may not end up actually being the case, and so it’ll be interesting to see what occurs.

Laura Shin:

Okay, we probably have time for one more person who might want to jump in on that?

Illia Polosukhin:

Yeah, it’s a lot of like excitement in the space and Ethereum 2 like has this kind of ring to it. So, I think like from our perspective, like we focus on developers and bringing it to end users, like bringing their product to end users. So in many ways like, you know, cooperate or like have conversations with the Zero Foundation on like technology and underlying things, we share a lot of like ideas like with Zaki and some Polkadot folks.

And like I think like on technology side I think it’s kind of in a way like shared mind space of us all figuring out what works, what doesn’t, and how to make it, and I think like on network effects I think it will be more utility and in some forms maybe the like governance and politics, but I think the kind of like utility and functionality and getting this to the users will be the like driving factor first.

And I think like all of us are focused on a different aspect of this and how this is brought to developers, and like we’re all kind of proving that this is the best way or this is like at least a sizable chunk of the market, and we’ll see how it’ll play out.

Laura Shin:

Exactly. We’ll know what works when it’s all over. All right, well, thank you all so much for joining us, and thank you also to the audience, and I hope you all have a great day, and stay safe and healthy, everybody.