Transcription of Episode 80 – Beyond Bitcoin Uncut!

Participants:

Adam B. Levine (ABL) – Host

Charles Hoskinson (CH) – Ethereum.org

David Johnston (DJ) – Mastercoin Foundation

Daniel Larimer (DI) – Invictus Innovations

Jason King (JK) – Sean's Outpost

Today is February 1st 2014. Welcome to episode 80 of Let’s Talk Bitcoin, a twice weekly show about the ideas, people and projects building the digital economy and the future of money. Visit us at letstalkbitcoin.com for our daily guest blog, all our past episodes and of course – tipping addresses!

My name is Adam B. Levine and today we’re visiting the future, of well, everything. We’ve talked before on LTB about Metacoins and for the last several months I have immersed myself in them. There is really no question in my mind, these tools to create decentralized consensus between people about anything represents the next great leap forward and whatever the release of Bitcoin started.

The afternoon before Miami’s recent North American Bitcoin conference, I organised a private panel discussion. Charles Hoskinson representing the Ethereum project, David Johnston of the Mastercoin Foundation and Daniel Larimer of Invictus Innovations representing the Bitshares project. Jason King, founder of Sean’s Outpost, led the conversation as moderator over the course of about an hour and a half. Starting from the basics of each project, moving through the potential, the fundraising, the ecosystem and eventually the future they each hope to create. I think Jason King said it best, “We’re on the cusp of something here, you’re going to look back at these conversations of this weekend, 5-10 years from now and you’re going to be like, wow we were right there. Right before everything went crazy”.

Thanks to Gustavo Matamoros of subtropics.org for providing the space and the audio feed for the panel and Steve Malagodi of Spectacular Sound for the recording. I’m not going to lie, this is advanced stuff, so hold onto your butts because here we go!

Jason King: Welcome to a very special edition of Let’s Talk Bitcoin, my name is Jason King and we’re here in Miami just before the North American Bitcoin conference. What we’ve got in stored this evening is, hopefully, a very spirited discussion on what I'm going to call DAx (Distributed Autonomous whatever – it could be distributed autonomous applications, distributed autonomous corporations, distributed autonomous fill-in-the-blank). We happened to be joined by three people who are doing the most exciting things in this space, I’m very privileged to meet you and interview you guys and that we get to talk to you. We're just going to go down the line – just name your name and company your company if you will, and we'll start...

Daniel Larimer: My names Daniel Larimer, I’m CEO of Invictus Innovations.

David Johnston: David Johnston, I serve of the executive director for the BitAngels and I sit on the board of the Mastercoin Foundations.

Charles Hoskinson: I’m Charles Hoskinson, I’m the director of the Bitcoin education project and a core developer on the Ethereum project.

JK: Alright, these are our wonderful guest speakers tonight. What I’m going to do is go down the line and give each of you three minutes to describe to me what your project is – what you think the core value proposition is. Once everybody has had a chance to introduce themselves we’re then going to [have more in-depth discussions] about DACs as a whole, ok?

DL: The project I’m working on is called BitShares. BitShares is a very broad concept, instead of looking at a Blockchain as a currency, we look at it as shares in a decentralized autonomous company and that changes everything about how you design and build these decentralized systems. Like all companies you need to focus on doing two things – maximizing revenue and minimizing expenses – and to that extend everything we’re doing is eliminating mining from the equation to minimize expenses. The transaction fees are the revenue of our system so we want to maximize the incentive for there to be transactions and the value provided by executing transactions in our decentralized businesses.

Our flag ship business is what we’re calling BitSharesX, it’s a bank and exchange. It allows you to earn 5% or more on anything, whether it’s gold, silver, Bitcoin, mastercoin or ether. That is in a nut-shell what we’re doing and we’re very excited in the potential for using the BitShare concept in every industry from smart property, banking, insurance, gambling, voting. You name it, there are all kinds of applications that can be developed using that model.

DJ: The Master protocol is basically a protocol built on top of Bitcoin, I think JR used a really good analogy in original paper about thinking of Bitcoin as TCP/IP and thinking of Master Protocol as HTTP. Meaning that Bitcoin gives us a lot of things automatically, it gives us a time stamping service, it gives us a universal token system. It gives us this back-end that solves a lot of these basic crypto-graphic problems and like Dan was mentioning, if you’ve got an application where you don’t necessarily need mining power, such as smart property or you want to issue digital tokens to keep track of an asset then you don’t need your own Blockchain, but you need these back-end services.

The goal with the Master Protocol is to create these features to allow people to easily do this on top of Bitcoin. The first couple of features that are really important to emphasise are; firstly, the distributed exchange that lets you trade Mastercoin for Bitcoin, for any user generated token that people have created on top. The thing I would emphasise is that this is a big debate in the community, what is the right approach? Should we build this on top of Bitcoin? Should we build something else as a Blockchain?

The approach of the Master Protocol is to build on top of Bitcoin and this is really possible now thanks to a recent update of the Bitcoin core client, described by Gavin in his update#5, it talks about provably prunable outputs. Without getting into the tech, [the update] makes it easier for you to encode this meta-data on top of the Bitcoin ledger, that’s the approach of the Master Protocol.

CH: To understand what we’re doing with the Ethereum project it’s really useful to think about the history of Bitcoin and where we started. When we started there were three things you could do and Satoshi Nakamoto decided to test two of them at the same time because he thought there was a wonderful marriage there. The first thing he thought about was a decentralized database, the idea of

putting something into a ledger that is immutable, you can’t take out, it completely transparent and something that everybody has a copy of. Second he created a transaction system that allows people to move value between parties without any third-party interaction, that’s a really big piece of stuff to bite off because at the time it had no economic value, there was a lot of code that had to be written and the concepts were completely untested.

There was a third thing that Satoshi could have done, which was having a robust scripting system. The general notion of instead of just sending transactions you can send anything you want such as contracts or smart property. That’s a wonderful thing to propose but there is some security implications because it requires Turing completeness in the language, there is also implications of things like Blockchain bloating etc. So Satoshi took a step back and said, “I’m going to focus on the core experiment, I don’t want to spoil it and at some point we’ll revisit this topic after we’ve built a sizeable ecosystem that has economic value.

It’s been 5years there has been a tremendous amount of innovation, the market cap at $10 Billion. There is a lot of companies across the world and there are wonderful entrepreneurs in this space who are doing great things. So now people [want to] go back to that, let’s go ahead and find a way to put Turing completeness back into the system. There are a few ways that you can do that, one way is to lay it on top of Bitcoin, which would require you to change Bitcoin and it’s a time consuming process and really respect the amount of effort that Mastercoin has put in, JR and these other guys have done some absolutely amazing work. Another option is to take the BitShares approach, create your own Blockchain, your own paradigm. But what we see in the ecosystem is a lot of isolation, a lot of fragmentation and a lot of cost for innovation, whenever you want to do something it costs half a million dollars, you have to get a team together and it takes months if not years to develop as there is a lot of testing.

Those are usually the symptoms of a disease, and the disease is that you don’t have a proper foundation to go ahead and do this. The general concept, the notion of Ethereum is to throw away all the features, we don’t want to release anything with features, but rather let’s have a beautiful foundation that has a Turing complete scripting language, has the idea of the contract a fundamental computational unit. Then give that to people like you would give a programming language to somebody and let’s use Ethereum to enable people like Mastercoin, colourcoin etc to build anything that they want.

The second part of that project is kind of a social contract – to have a very strong user experience. You can’t just go ahead and build some protocol that has elegant and beautiful code, Gavin has been writing amazing code back there. You have to actually have a foundation that everyday people can use and everyday people can develop for – just like the Android experience. The second part of the project is to build a base foundation so that when we’ve launched for mining it’s like a large catalog that has one-click installation for everything. One-click installation for BitMessage, one-click installation for Open Transactions who is a partner of ours, one-click installation for Ripple, basically anything you want even a wallet is one-click installation.

If you want to build apps for this catalog, to have the same application development experience that people have with iOS or with Android. These two things together, this beautiful foundation that is featureless and Turing complete which removes the isolation, fragmentation and reduces the cost of innovation as well as a really nice user experience. I think it’s going to give us a proper direction for a base foundation for the Crypto-Currency space.

JK: [Okay, thank you guys very much for describing your projects. In all three of your descriptions] I think we kind of went high level on what you guys are speaking of. Why don’t we pretend in this

audience that you need to explain what the value proposition is of DA’s in general to people who have no idea what you’re talking about. Andreas Antonopoulos has this great thing, you guys mentioned the TCP/IP/HTTP thing, I think that’s a great analogy but he said that with Bitcoin technology currency is the first app. It’s everything that’s coming after that, that is going to be the game changers for everything and you guys are working in that space. Let’s talk generally about DA’s as a whole and I would like to hear your thoughts about what the next killer apps are that are coming out for this and why you think there is value to them in the system.

DL: I’ll start, generally speaking it’s a better idea to look at what’s been done in society and an ecosystem first and say what can we do to improve what is made instead of what’s the next revolutionary feature. It’s hard to know ahead of time to know what’s important, I know not very many people would have predicted Twitter. What’s been done is we have organisations like WikiLeaks, Wikipedia, ICANN that serve a public utility style format, but they’re constrained by jurisdiction. Where this technology is going, all of our approaches in some way can enable an idea of taking these organisations and removing them from whatever jurisdiction they live in and uplifting them into the cloud, into the internet and taking the rules that constrain them and put the rules into algorithms instead of people.

JK: Ok, focus that down for me. Give me an example of one use-case for that, which would have a wonderful effect on the world.

DL: WikiLeaks is a great example, if you could uplift and put it into the cloud then you functionally can’t shut it down. All the services, utility, the financials, they’re all transparent, they live in a Blockchain and there is no central point of failure. Other things, is that you probably don’t want to have geographic bias like ICANN. It’s based in America and America has tremendous influence over the management and operations of ICANN. You could uplift ICANN, put it into the cloud and define the rules, parameters, and the voting system in a free and fair way that can’t be coerced retro-actively.

Those are tangible examples for non-profit style organisations but there is also great examples, we were just talking about the guy from Cuba who runs the Bitcoin Miami meet up. His parents were from Cuba and he lived there for a while, Cuba has this terrible situation where most commerce is controlled by the government, just like China. There is a lot of grey area businesses because if you actually want to do business you have to be an insider. You have two options right now if you’re an entrepreneur in a developing nation, the first option is to be cosy with a politician and get the bribes done. Or the other option is to go off the books, which is no good for anybody, so when you have the idea of a decentralized autonomous organisation, you now have a third option. Once all of the tools and user experience is correct you could quickly create an organisation that outsources the trust of the operation of the business and makes that business transparent, but it removes it out of the jurisdiction of the country that’s not favourable.

I think this is going to be a god-send for a lot of developing nations.

DJ: Sure, I would definitely echo that. I think you’re right about what Bitcoin accomplished, what Bitcoin accomplished was it created this open-source program that couldn’t be globally censored. Meaning that you had enough copies out there in the ecosystem that people can adapt it to their particular jurisdiction, for example people building an exchange in the US could take a different approach than people building an exchange in China etc.

The core protocol wouldn’t be shut-down because it’s been distributed. For me, the next thing that I want is a distributed exchange, which is the very first feature that I see as the next killer app because this is already a problem with the eco-system. Bitfunder has closed, BTCT has closed, all these

different central approaches to “I want to buy some tokens in this particular application” have closed down because how do you do regulation globally. It’s really tough because everywhere has different rules, that’s a problem as long as you have a central server.

Now imagine that you don’t have central server and it’s all P2P, a person-to-person exchange of these tokens. That’s partly why the Master protocol started focusing on that first, is because it’s been a huge problem for the community. I think that’s why a lot of people are exciting about that particular killer app.

DL: I’d like to talk about that particular killer app because that’s our primary killer app in BitSharesX, I mentioned earlier you could earn 5% or more on anything. I would like to step back and look at what viewing a Blockchain and the shares allocated in the Blockchain, as a company, allows you to do. We can actually create Dollars the same way that your bank currently creates Dollars, it lends them into existence on collateral. You can do that on a Blockchain, where the Blockchain controls the collateral, so whenever you borrow money from a bank you expect to pay interest and whenever you lend money to a bank (have a deposit in a bank), you expect to receive interest. Using a Blockchain we can completely cut out the middle-man which allows you to receive a 5% return on your dollars, if you can lend dollars into existence you can lend gold, silver, oil, anything, Bitcoin or Mastercoin can be lent into existence on a Blockchain using the exact same business model.

Unlike a bank, which normally lends on your house, this is lending on stock in the bank. It would be like going to the Bank of America, saying I would like to borrow $100,000. I have $200,000 worth of your stock. You would get a loan.

JK: Okay, I’m already a little bit confused on it. Let’s go into the next part here, why don’t you describe to me exactly how BitShares is going to implement that in a way so we can all grasp the concept.

DL: With BitShares you would use it just like you would a Bitcoin wallet or online banking, it’s the exact same user experience. You say you want to send dollars to someone, you send dollars to someone, if you want to send ounces of gold to someone, you can send the value of an ounce of gold to someone. These are not debts that cannot be defaulted on because they’re backed by the Blockchain which can do margin calls just like a bank would. The user experience of this is like Bitcoin except we’re combining it with another product we have – Keyhotee – which eliminates the need to use Bitcoin addresses, it’s an identity management application for the Blockchain technology and has a global consensus on who owns what name.

From a banking perspective it works just like a bank, we can use the same business model to implement other types of businesses. If you have a company, a very traditional company that’s doing a lottery, it sells lottery tickets, puts the money the pot, draws a number every now and then and you have a winner. Very traditional business model, it makes millions or billions every single year, you can implement that on a Blockchain. The characteristic of everything that we’re doing is that we view the Blockchain as shares, we pay dividends to the shareholders so we try to maximize the value proposition to the shareholders of the Blockchain and we try to minimize the expenses.

JK: Ok, this is the part I’m getting confused with; In a bank I can go in and put cash into my bank, I have handed over physical control of my cash and they can now make representations of that dollar and lend them out however they want to. In your example of gold or oil, say I have 1000 barrels of oil, I want to implement them in BitShares. How does that transaction take place?

DL: First of all, the system works even if you don’t have a thousand barrels of oil. It’s like if you want to bet whether or not gold is going to go up and down relative to Bitcoin. So you both put

100Bitcoins into a pot and when the price moves one direction or the other, you eventually make or lose money proportional to the price movement. You get the purchasing power of a barrel of oil or an ounce of gold without actually depositing an ounce of gold, but what it allows you to do is a system like LocalBitcoins.

The problem with LocalBitcoins is that you’re trying to simultaneously match a bid, an ask and a location. We match all of the bids and asks on the Blockchain automatically, so you have a bit asset with BitUSD. Now all you have to do is match location, you no longer have the huge spread that you have in the centralized exchanges, so you could meet someone on craigslist and swap $100 for 100BitUSD and the price will fluctuate around 1 dollar. It’s a way of hedging, all of this can be put on Blockchain complete with other features that day traders like – building auctions and the full trading environment can be done on a Blockchain.

Other applications you can implement on a Blockchain would be auctions, you can put an end to domain name squatting by auctioning off the domains. What’s different about our approach is that we view all of the names as belonging to the shareholders and we want to maximize the value that they get for selling their names. We don’t want people to buy a name and to then squat on it, we want to auction it off just in time. That’s another way you can implement something on a Blockchain where everyone doesn’t want to own a name, they want to own all the names. So the names can be allocated the most efficient application.

The core thing that I want everyone to take away from this is that you have to view Blockchains and decentralized applications from a business/economic perspective. If you take the billion dollars a year that Bitcoin is currently spending to mine and secure the network and you were to apply that to development of decentralized applications, think of all the good things that could happen. Bitcoin as a business model is going only so long as a new capital is funnelling into Bitcoin, it’s being diluted at 12% a year right now, paid to new miners. In the future 100% of all revenue, the transaction fees are being paid for security but if you can turn the Bitcoin model into something that is profitable, where 100% of the revenue goes to the shareholders as dividends you eliminate the need to dilute the shareholders, you increase the value proposition. It’s a self-sustaining system.

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(End intermission)

JK: Let me jump in here, I think it’s a good jumping off point for something that I would like to talk about because you’re talking about profit, revenue, development expenses. You guys are all working

on the next-generation of Blockchain technologies, the successor to Bitcoin in terms of functionality here.

DL: I’d also say the augmenter.

JK: The augmenter, ok, that works for me. You guys are all doing fundraising of some sort, I think we can all agree that Satoshi Nakamoto didn’t have to do this because none of us knew that Blockchain technology was going to work. So he had the luxury of being laughed at for a while and being able to mine on his own, then it developed naturally. We all can agree that Blockchains work now, we at least have this one killer app – Bitcoin on it. It’s my understanding that you guys all believe that you can’t pull value from the projects that your release just by releasing them openly, that you need to have some model up front to fundraise for the development of your project and you guys all have different ways of fundraising. Let’s talk about fundraising right now, we’ll start with Charles, we’ll talk about how you guys plan on funding your model.

CH: We looked at this for quite some time, there are certainly a lot of economic models that can be embraced. There is the lets start mining and try to acquire some of it and sell it when the market is high funding model, which in practice doesn’t work terribly well. There is then the 100% pre-mine model where you sell out, there is something to be said about that model for boot-strapping an ecosystem, but not for long-term durability.

We took a step back and asked, how fundraising has been done over the last 50 – 60 years in general. If you look at Silicon Valley, Venture Capital, generally speaking you have some founders that initially have a large amount of control of the company, the ecosystem. They then give a slice of that to the people that initially invest and overtime the investors and the founders divest. What we did was say, we want equitability in our money, we want a large distribution of our money and we don’t have a situation where one person owns 10 or 15% of the currency base which has implications across the board.

So we first went ahead and embraced a persistent linear inflation model, where we create a fixed amount of coin per block indefinitely so over time your inflation rate decreases but you have a linear increase in supply so all of the sins of the fundraiser disappears over a 5 – 10year period. For the most part 95% of the coins in distribution were mined, produced and the opportunity to acquire coins in year 10 or year 15 is the same as the opportunity to acquire coins in year 1 or 2. We embraced that, we’re also going to go ahead and do an IPO style fundraising starting February 1st, and it’s inspired by Mastercoin, which I think is quite good with a couple of modifications. We’re going to run a two month fundraiser and we have a hard-cap of 30,000 Bitcoins, so if we raise that much money we’ll stop.

(Laughs + inaudible)

CH: Guys to be fair it wasn’t too long ago that we were buying pizzas for 10,000 Bitcoins.

DJ: In Bitcoin time, that was a life-time ago though.

CH: Well basically we have two options, window A is 60-days with a cap of 30,000 and we’ll have a full prospectus ready to go February 1st with all terms and conditions and how the investments are going to work. They should be available for liquidity, meaning you can actually trade them and sell them when the Genesis block launches which should be Q3 or Q4 depending how long it takes to vet our security model amongst other considerations.

The important thing to take away from this is that the insiders, the founders of the organisation will have 6 – 7% of the currency base at year 5. Secondly we have endowed an organisation that will turn into a decentralized autonomous organisation with enough reserves so that when the Bitcoin supply runs down it can pay for long-term development of the ecosystem.

JK: What’s the time frame, when do you plan on Ethereum actually becoming its own DAC?

CH: That’s a great question, unfortunately the infrastructure and technology to build a proper decentralized autonomous company is not quite where it needs to be yet. Especially not if you want to stick $25million into it, you’d want a little bit of certainty behind it so you have to do things the traditional way, at least for now. What we’re going to do is start an organisation in a jurisdiction or it might be somewhere else – we’re still in talks with lawyers about where the best place to do this is. Then we’re going to be working with Kyle and a couple of other partners and over and 12 – 24months period we’re going to convert that organisation systematically, step by step, into a decentralized autonomous entity/organisation. We will produce a documentary and a manual, give it to the community and say pick Wikipedia, pick all these other guys and show them the merits of what we’ve been able to do here.

In the meantime we’re very concerned about transparency, we have Anthony Diorio with us who has kind of set the gold standard for the Bitcoin alliance of Canada. We’re going to submit quarterly audits by independent accounting and we’ll also have in-house council and house accounting with the organisation. We feel it’s the best balance that we can provide today and it’s something that’s productive because we can partner with everybody who is interested in DACs about this process to build that.

JK: Let me stop you here, we got off topic a little bit but I want to talk about the fundraising model of the two other guys then I want to come back and talk about jurisdiction, ok?

CH: Sure

JK: Let’s go with Mastercoin, you guys have already done some fundraising right?

DJ: It’s already out there on the market.

JK: Yeah, why don’t you go through how that is and how I can acquire Mastercoin today if I wanted to be involved with it.

DJ: Sure, the question is, if you don’t need mining then how can you fairly distribute tokens. The way that JR set it up was to create this almost kickstarter-like 30-day period where anybody could send BTC to a particular address, the genesis address or the exodus address as they called it.

(Laughs someone says exodus address name is funny)

During that period anybody that sent BTC from August 1st – 31st 2013 to that address was publicly advertised [and the all the Bitcoin community comes]... If you believe in these features, if you want these new projects to succeed, send Bitcoin to this particular address, that generated 100 Mastercoins for every 1 Bitcoin. At the time the price of Bitcoin was about $100 so it was $1 per token of Mastercoin. It create two pools, anybody that contributes they’re going to get a set amount of tokens and then we’re going to create an additional pool on top for developers called developer MSC and it’s given out on a regular predictable basis based on an algorithm to developers every month that contribute to the open-source implementation.

Those are the two pools, people that provided value and money to develop this stuff and then a long term pool of tokens for everybody that contributes over the years in the future to the further

development. That’s how we have both those sets of tokens out there. Similarly to what Charles was describing is that our goal is to have this done in a completely decentralized way, we don’t want a foundation that has any control whatsoever over this process.

What we said is that we certainly don’t want it centralized around JR, so let’s create a non-profit foundation. The foundation will hold the funds and distribute them to developers, what we’re implementing is a proof-of-stake system that lets everybody that holds Mastercoins vote on the new version of the protocol. The second part is a distributed bounty system, so anybody could put up “We have to code this next” and the community can decide based on consensus who should get the developer coins, what should be paid out, who should get roll-based bounties.

All of things that the foundation is doing right now basically dissolve as it goes forward, it’s the same as Bitcoin that the foundation has no more control over the protocol than say the Bitcoin foundation.

JK: So a 51% attack on Mastercoin was just buying a shit-load of Bitcoin right?

CH: You would have to buy 51% of them because it’s on a proof-of-stake system. It would be really expensive if you tried to buy all of them and you would drive up the price.

JK: Well I’d be happy about that for a while, that would be cool.

(CH+JK share laughter)

JK: Let’s move onto BitShares.

DL: We actually have a hybrid model, we started with one model and we pivoted to a Mastercoin style model with some changes. The initial model that we had is what we were calling BitSharesPTS, it’s a new Bitcoin clone without any pre-mine that anyone can go and start mining. That took off when we launched November 5th, it’s been widely successful, and we reached 20 million + market-cap. We briefly hit 31mil for ProtoShare when Bitcoin was at $1200. It used to be ProtoShare, we now call it BitSharesPTS.

That was good, it allowed our community to go from nothing to about 10,000 people. Half in China, half at our forums on Bitsharestalk and probably many more that we don’t know about that are involved because they learned about ProtoShares. What ProtoShares allow you to do is they allow you a stake of at least 10% in every future decentralized system that we produce, we’re trying to encourage others to do the same thing to get the community support.

That didn’t really help us all that much, what we realised from that was that from mining – people spending $100,000 a day for Amazon cloud service or their electric company to mine these ProtoShares, all that money is being burnt up. It’s ridiculous to destroy your seed money in the allocation of your shares. That gave us the idea of what if we could capture all of the money that is being spent in mining and repurpose that money to the development of decentralized businesses that actually give value to the ProtoShare holders. That’s where we came up with AngelShares or BitSharesATS.

Each and every day you mine with your money, instead of for your money, there is a fixed allocation of 5,000 for Bitcoin and 5,000 for ProtoShares/BitSharesPTS holders. The more money that is contributed to the Angel address/the exodus address on a given day sets the price, so there is an actual market operating each and every day that’s establishing the price and it’s got the same social contract as ProtoShares – at least 10% of everything that we do in the future. With the initial BitSharesX, our bank and exchange, you’re going to get 50% going to ProtoShare holders and 50% going to the AngelShare holders.

It has been widely successful, depending on the price of Bitcoin, we’ve probably raised $2million in the month of January alone through the combination of ProtoShares and AngelShares.

JK: Cool, ok so what I wanted to come back to was jurisdiction, so I first I’d like everybody to give a short answer of where you’re based.

CH: We really don’t have a geographic location, I’m in Colorado.

JK: What I’m saying is your company is going to be formed somewhere, Canada right?

CH: Yeah, the holding company that’s managing the money, the fiduciary entity will most likely be in Canada, we’ve looked a couple of other alternatives such as Switzerland for example. We really want to go to a place where the rule of Law is strong and the regulation is coherent.

JK: Ok, so Mastercoin?

DJ: Same kind of deal, there are a lot of Mastercoin foundations around the world. There is one in China, the United States, one in Israel, but the one that holds the original exodus funds is a non-profit incorporated out of Delaware.

JK: Ok.

DL: Invictus is a Virginia company and we’re looking to find the best jurisdiction just like Ethereum.

JK: Ok so why I asked that was and just like you jumped into, we’re based everywhere. We talk about all of these wonderful things, distributed autonomous corporations/organisations that you have to create too. Just like with Bitcoin, facilitating off the evil, so called. There is the ability in these things to create some horrible shit, we jokingly talked on the way over here of a distributed autonomous assassinations. Like quad copters with zip guns or small amounts of explosives, put in an address, pay some coins and then buy and blow up.

DL: I think the US government is on board now (laughs)

JK: (laughs) Yeah, exactly. That’s real things, I believe that if there are to be exploits then let’s talk about the exploit now because it’s going to happen eventually. One of the things that’s going to happen is that when someone utilizes one of your platforms for something terrible like this, because it will happen, is that someone is going to want someone to hang for it. We had a long talk last night about this, Satoshi didn’t have to deal with this, he just disappeared. We can’t go “OH let’s go get Satoshi, damned Bitcoins” because he’s gone, you can’t do that. But I can grab Charles and shake him real hard and do stuff that the US governments do.

DJ: Let me address this one with a couple of things. First, as a foundation, what we’ve said is that we’re never going to get involved in any of the operations. We’re not going to run an exchange, we’re not going to be a market maker or any of that. We only and purely support the open source development. Step two, I believe everybody on this panel is a member of the new CODA organisations, which is anybody hasn’t heard of it it’s the Consortium of Decentralized Applications and it’s a legal entity that we’ve created just to focus on the regulatory issues that you’re bringing up and the legal issues.

They’re creating papers on what’s the legal view of this, they’re talking to the regulatory agencies so we’ve put some of our funds aside for that issue to get way ahead of it before 6-months from now what you described happens.

JK: Right and for 6-months I think that probably makes sense and I think that’s a good Band-Aid. But ultimately I think the reason that all of your platforms exist is because we all realise that we need

something that can’t be stopped, that is jurisdiction less, something that doesn’t exist in one jurisdiction and something no one can actually have control over.

DL: Well luckily our money doesn’t sit in a jurisdiction, it’s in Bitcoin.

(Intermission - advertisements)

This is Chris Joseph, taking a minute to tell you about NXT. Written from the ground up NXT is a 100% proof-of-stake second generation crypto-currency. It’s loaded with advanced features but the one I want to tell you about today is NXTs alternative to mining which is called transparent forging, we think NXT could achieve instant transactions at a rate of more than 1000per second – as much as Visa. NXTs proof-of-stake model eliminates the threat of hash-power centralization and the network is supported for a minimal energy cost. Best of all, NXT is only 8-weeks old but is already supported by an incredible community, so please come and join us – head on over to NXTcrypto.org or myNXT.org.

Stay tuned for more news on NXT on the next Let’s Talk Bitcoin broadcast.

(End intermission)

JK: Ethereum already has a plan to eventually “level up” like Pokemon to a DAC, as its core company. I think that’s cool, have you guys thought about that, have you always thought it’d always be something like that?

DJ: Just like I described, we’re taking a similar approach where the foundation will have 0 power whatsoever over the protocol, the sooner we can get to that stage the better. Like Charles said, not all of the tools to completely get there exist today but I think they will within the next 12-months or so, but like you said it’s got to be something that lives in the cloud and doesn’t have a central point of failure.

JK: Did you want to weigh in on that?

DL: Yeah, like Mastercoin we’re trying to focus on only being the software producers. We’re producing the platforms to allow other people to launch their own systems with our goal being to lower the barrier of entry to that anyone can launch a new DAC. If you have a high barrier of entry, for example requiring millions of dollars’ worth of ASICs to mine or hardware, you can’t release another SHA-256 based coin without existing powers in the mining world controlling it. It doesn’t matter what your proof-of-work is, that’s going to be the case.

We want to lower the barrier of entry to allow anyone to launch a decentralized application. Then the free market is the ultimate form of decentralization and if we provide the tools then the market will do the rest.

CH: I love providing the tools, in fact we can do Namecoin in five lines of code in our platform, that’s something we like to mention. It’s really important to have the tools, the proper developer experience and it’s really important to interface with your ecosystem, have the nice interplay and ask them what they want, what don’t they like. I think we have a nice balance here and I love that Dave is doing some interesting things with Mastercoin because we’re probably going to talk to them on a pretty regular basis to help us to centralize our organisation because it’s important that the knowledge gets out there, that’s our primary focus.

JK: You brought up something interesting here, I think it’s the main differentiator between Ethereum, Mastercoin and BitShares here is that Ethereum has implemented a Turing complete script system into it and then you two guys have basically taken a feature set, there is a feature set to choose from

but there is not particularly a language to make it completely open for everyone. Am I misinterpreting this?

DJ: There is and there isn’t. The Master protocol has taken a specific standard for encoding the data into the Blockchain, you could say that’s our approach to allow people to easily encode this particular type of information into the Blockchain. Another project like OT or Coloredcoins is taking a different technological approach to encoding that information. What we have is four different approaches, at least that I’m aware of that people are testing out.

The first being building on top of Bitcoin without having a token, such as Colorcoins. Secondly you build on top of Bitcoin and you have a token, such as Mastercoin. Thirdly you do your own Blockchain such as Ethereum or BitShares or then if you have no relation to a Blockchain that’s sort of OT, being an open-source project it’s going to end up being pulled into all of our efforts because it adds a lot of volume of code when it comes to great contract work. Chris has done an incredible job with OT and really added a lot of value to the community.

Those are the four things that are getting tested, open-source no Blockchain, open-source no token, open-source on top of Bitcoin and open-source on top of your own Blockchain.

JK: Alright, since we have the people here to talk about it why don’t we talk about that specific value proposition. I’ll give each of you a couple of minutes to tell me what that value proposition is – a way to get to this next level of Blockchain technology, or lack of Blockchain technology that is going to be the driving force behind adoption for your specific entity.

CH: It starts with asking the question – what is your Blockchain supposed to do for you? What is the purpose of your Blockchain? Is the Blockchain where you features are supposed to live, is the Blockchain where your decentralized entities live or is the Blockchain supposed to be something that is there when you need it but interfaces usually with a decentralized application that runs on the client-side? We’ve been talking a lot with Johan and Chris Odom about integrating Open Transactions into our ecosystem because they’ve done some absolutely phenomenal work, they have really worked hard.

They have this problem with voting pools and you have to audit the voting pools, that’s a trust feature and the argument they give is that if you have enough players in the pool it eventually keeps people honest. If you look Wall Street and other entities that’s not necessarily completely true so you say wait a minute here, auditing can be done by the Ethereum Blockchain. That’s very easy to implement, it’s just a few lines of code. You can take all of your decentralized trading, the price discovery, you can take all of the bloat that you would normally incur with running an decentralized exchange and outsource it to open transactions but have the same level of trust as you would have if you ran everything on a Blockchain.

That’s the key, to find the value points and saying whether it’s going to live on or off chain and where is the application going to be. The philosophy we take with Ethereum is we have no features, we’re like Minecraft, it’s just a big open world that you can build on top of. If you want to build a Computer in Minecraft with redstone you can do that.

JK: Do you have creepers at Ethereum?

CH: Yeah we have creepers at this space man, its great! But anyway that’s the approach we take, we say hey, it’s this big open ecosystem. It’s a Lego in a sense that you use to build on top of and the key is incentivizing people like Mastercoin and Colorcoin to see the value proposition of eventually developing on top of our platform, it’s showing the BitShares guys that they can do a DAC a minute. If

you want to use proof-of-stake, you can use proof-of-stake. You can run all of that logic and connect it in a very creative way so that the bloat either lives on a small Blockchain that is only handled amongst the people who are relevant or if you want to pay the expense it’s handled on the Ethereum Blockchain so there is a lot of options that everybody has.

If we give good tools and we’re very diligent with this process, eventually those options will become very satisfying to people and our goal is to reduce the fragmentation, reduce the isolation in the system. We want people working together, it makes no sense to me that every time we want to do BitMessage we have to re-write BitMessage. Why not just have BitMessage as an app and have an API to talk to BitMessage, why re-implement open transactions. Just have open transactions as an app and talk to it through an API. It makes a lot of sense to do that because then everybody can focus on the user experience, the core mission and the fiduciary duties they have to the people who they have taken money from.

JK: You want to jump in?

DJ: No I think he described it well, especially for the Master protocol, the core value proposition right now is that we have this enormous resource in Bitcoin. It’s by far the world’s most powerful distributed network so when you talk about level of security, it’s hard to beat something that has been as well tested as Bitcoin. At least the value proposition that the Master protocol offers is, Ok you can build here on a platform where you know and you trust the implementation that’s already been built with Bitcoin. You know and trust it’s going to have the largest network affect.

That’s the immediate approach, you have these tools, let build on top of them and it’s not as experimental as some other approaches. Though the experimental approaches maybe more powerful in the long run, that’s what we’re experimenting with. We know what Bitcoin can do today so I see the Master protocol as a bet that the Blockchain will continue to dominate as a platform and these other projects that are experiments can build different platforms with different attributes.

I think someone brought up the great analogy that the question is, is Bitcoin TCP/IP or is it SMTP? Is it a protocol that was built just for email or is it general enough that we can use it as TCP/IP and that remains unanswered. So it will depend on what the core developers do, if the core developers decide that Bitcoin is only going to be Bitcoin, then it may end up as SMTP. If they decide that they [will allow metadata embedded] which seems the direction they’re going in with update 0.9, they are now support embedded metadata in a way that doesn’t bloat the Blockchain and anybody can prune out those records if they don’t want to store the extra data. It seems as though they’re slowly moving in that direction where Bitcoin can not only be a payment network and a store of value but also a general ledger. That’s what we’re going to find out.

DL: What we’re building is a software library which is in a Turing complete language that allows you to build any type of DAC very quickly. One of the things we’re focusing on is the economic efficiency of the system, recognizing that you cannot maintain a decentralized system processing all of the transactions from exchanges from every single business model on a single chain using a single currency.

But if you provide the tools, APIs and software you can build an entirely new Blockchain very quickly and if you don’t have to depend upon mining for security because you have proof-of-stake combined with ripple style consensus then you don’t have all the expense or the need to centralize into a single Blockchain. You can achieve much faster transactions, much lighter weight transactions, which is a critical reason why – if I was going to build a decentralized bank and exchange and I had to pick a platform, would I build it on a library that would eliminate all of the other overhead, the fees I would have to pay to process transactions through the Bitcoin network, pay their miners or the fees I would

have to pay to pay the Ethereum miners. Or create a whole new Blockchain that doesn’t have those fees and therefore I can offer greater value proposition to both the user and the shareholders in the decentralized bank and exchange, so the key is to maximize competition.

Instead of trying to build one Blockchain to rule them all, whether it’s Bitcoin or some other Blockchain. We want to have many Blockchains, each of which is very light weight so that someone who only cares about playing a Blockchain based game or gambling or voting doesn’t have to process all of the Bids and asks of the New York Stock Exchange. That’s the key to decentralization, many Blockchain because Blockchains are not scalable beyond a certain point when you only have one chain, you have to go parallel and to do that we’re developing a software tool kit and trying to teach people the process.

JK: Wait, I know we got started late, how are we on time?

?: We have enough time

JK: Cool, I just wanted to make sure because we’ve got stuff I want to talk about, I just want to make sure you all get your turn.

CH: Just to clarify in question, your software library you say is Turing complete?

DL: What I’m saying is that with C++, Java or whatever language you want to use, if you can rapidly put together a new Blockchain I can encode the Namecoin transactions in a few lines of code by modifying an existing library and then release a new chain. There’s a lot of value for the core Ethereum concept which is effectively a metered computational engine for doing general purpose transactions and I believe there is a demand for that.

What I’d like to do is work with people like the Ethereum team to create a version of your Blockchain that takes your core technology and combines it with your profit model, of minimizing expenses, eliminating the mining and allow ripple-style speeds. Then you can get all of the benefits you currently have today along with the benefits that we bring to the table which is sustainable economic – (Cut off by JK)

JK: I’d like to applaud all three of you guys because all three of you guys are for lack of a better word, competing companies. But I have heard all three of you in one way or another say; “We would really like to work with these guys, we think this will be good with that etc”. I would just like to say that’s the way to go because the truth of the matter is that none of us have any idea how this is going to work out, we have really good hypothesises of how this is going to turn out, I think that’s great and I think working together would be great.

I like that you guys organically said that and we didn’t have to beat you over the head to hear that.

DJ: That’s the beautiful thing about this all being open-source, part of what Ethereum are doing are going to get dragged into the Master protocol, parts of what BitShares are doing are going to get dragged into Ethereum and parts of what OT are doing is going to get dragged into all three. It’s not solid lines of I’m on this team and I don’t like the other team, if you’re intellectually honest, we all know that these are experiments and that some of them will succeed and some of them will fail but we’ll learn something valuable. Each time we run these different experiments and that will add to the ecosystem as a whole and I think the thing that bonds us together is that we have the same core philosophy – at least with a lot of the people I have talked to.

The goal here is to build these decentralized systems and to disrupt the old systems that have become corrupt, very hierarchical – whether we’re talking about banking or financing. That’s our

core goal, we’re going to try a lot of ways to get there, some will work and some won’t but we can learn from every one of those experiments. I really like that about this community.

JK: There is a good bridge here for something that I think is a hot-topic around your three companies, it’s going to piss some people off here but – so it is open-source, anyone can grab it and fork it at any point in time. I’m making the argument, to a degree that that is why pre-mining for any of you guys is a dangerous concept to a degree because you guys are taking a great amount of risk, putting a great amount of effort into it. You guys are, for lack of a better word, however you guys want to phrase it, in your fundraising model there was some amount of pre-mine of what you guys were actually going to have value in on your system. You’ve got an auction for it right?

CH: There was no portion that was set aside for founders that wasn’t a part of the auction. Everybody equally participated. I do think that’s an important connection.

JK: That’s great, I’m going to ask you guys to come in and you can talk about the specifics of it. For Ethereum you guys have been very open about how you guys are going to do the distribution of this initial portion, I worry with everyone, that you guys are relatively small companies (Although you’re rather large players in this space) and then another company comes in, grabs all of your hard work, cutting out all of your fundraising portion of it and taking the value proposition, moving it, putting a lot of scale behind it and creating a wonderful ecosystem that we all want and you guys are no longer really a part of it. What are the reasons that make you think that’s not going to happen to you, how you’re going to mitigate it or how it’s irrelevant?

CH: Okay well we can take a look at it from a couple of different angles because it’s a very good and poignant question. First we look at incentives, we probably don’t like the US government very much – [JK cuts off - inaudible]

JK: I love the US government, for the NSA listening right now I was an army person I served my country –

CH: We as in the Bitcoin community, there is a little bit of resistance there, they don’t like things like PRISM. Yet the US government is actually a fairly robust shareholder of Bitcoin, they have over 200,000 of them because of the Dread Pirate Roberts seizure. So there is a very strong incentive for the Bitcoin Blockchain to have a fork and for that position to be divested, either simply removed or for that position to be reallocated by a facet or some mechanism because who wants the US government to hold these coins and have control over the ecosystem.

You can pick any possible actor, a fork isn’t just pushing a button and releasing code. It’s an ecosystem, you have people that live there and people have financial incentives. In our case, miners have an incentive to mine, there is chain A and chain B, whichever one they can actually sell on an exchange and make money with. In the case of the investors who bought into the IPO, they’re going to stick with the people who deliver value.

What you’re proposing where they fork it and cut out the pre-mine is basically firing the founders, so what I’m saying is let the market decide. If the founders haven’t done a good job, there is probably going to be a fork. (People try to interrupt but CH gets control of conversation) But let’s look at the ecosystem as a whole, let’s say a hard-fork does happen, the only person in the world that screwed is the founders, think about that. Because let’s say Ethereum A and Ethereum B happens and for some reason Ethereum B is more popular and cuts out the founders pre-mine, we still have Ethereum, it still exists it’s there.

Does that matter to anyone who is using the ecosystem? It really doesn’t matter to anybody who is using the ecosystem, the only guy that gets shafted is me, and I’d probably be a little pissed off about it –

JK: I want to back up to what you just said when you were talking about the Dread Pirate Roberts coins and how we could technically cut those coins out and force them out. In that example that you give you’re talking about actually messing about with the fungibility of Bitcoin because if we have coins we have control of and the core team at some point in time can decide that we can no longer have control of those and they reallocate the coins. I think the effect of that’s our money, it would probably destabilize the entire network by doing that, but what you guys are building with DACs is that the core value – money – is not as important as all of the application stuff that you were talking about. Whereas with Bitcoin and how it stands right now, the money is what it’s about, so there is a difference there. I just wanted to point that out so when you’re talking about let’s cut that portion out of it, you can’t because Bitcoin operates differently right now because it’s currently about the money. Get those dollar bills ya’ll, stack bits. Go for it DJ.

DJ: I just wanted to say I’ve spent a lot of time thinking about this question. This is the question I had to ask myself as the lead for BitAngels, I led the due diligence for the Master protocol when it came to our process. I ask to ask myself really hard, is this going to have any value? Or is somebody going copy this, fork it and create another version that will have all the value. It took me a while to wrap my head around that question because you can say, is Bitcoin just this oddity? Is it the only use-case where creating a fork isn’t as valuable because all of the value is in the infrastructure and not in the code. Or can we apply this model generally and what I eventually became convinced of is that we can apply this model generally.

The value is not in the code, the value is in the people who build on top of the code – it’s in the infrastructure and that was a big revelation to me because it opens up this model for all kinds of things that aren’t cash, currency, a payment network. I’m not saying that this model will work for everything, I think there will be small enough niches where if you copy it and there isn’t much infrastructure on top then maybe it doesn’t make sense. But for anything that is widely used enough that there is infrastructure being built on top, people will say, well should I go with the one with the nice infrastructure, the library, the tools and all these business that are integrated in it or should I go with this new network that has none of that.

I think rational actors would pick the one with the infrastructure, but what that tells me is the first mover advantage is enormous in this area because if you’re the first one to do a fair distribution in a transparent way and build a new technology then people are going to opt-in to your system over somebody else that comes later. That’s what I encourage people to do, people think this revolution is going to take 3, 4 or 5 years… This revolution will take 12 – 18 months, everything that you can imagine decentralized – the first version of that is going to be built within the next 18months. I’m following 26-protocols under development right now using this new model. This is going to move really fast, I don’t think people appreciate how fast this is going to move.

Once you have it in place people are going to opt for that first category as long as it’s been done transparently, it’s been done fairly where people could participate. But people are going to experiment with different versions, a pool for developers, a pool for the kickstarter, a pool for user-behaviour if you still do need mining. I think best practises will emerge based on what people opt into. If you just said I’m not going to participate in that model, people just aren’t going to adopt that model. The Master protocol has been really successful so a lot of people are adopting the Kickstarter model and mixing it with a similar dev pool, people will create variations of that but I think that best practices are slowly emerging.

CH: I agree completely it’s all about the community that you build and I like the fact that the community has the ability to fire the founders. That’s a pretty cool fact, think about it, that’s what a fork does if you remove the pre-mine.

DL: The thing we’re adding to the mix is that we recognize that the network effects are incredibly important. Which is part of the reason we launched BitSharesPTS in November so we can capture the network effect, build the community and start getting some infrastructure around the BitSharesX exchange idea. One of the things we’re doing now is now that we’re building an open-source library and tool kit, we’ll actually have a software-licence that if you’re going to use our tool-kit to build something, you have to honour the founders. Even though it’s open-source you can do that. It doesn’t stop someone from creating an entirely new language and entirely implementing it but that’s of course, first mover advantage. If you’re going to build something new from scratch, you’re going to have to go through all of the leg work that we’ve gone through that will set you back dramatically.

Someone else can come along, allocate 20% to the creators of the open-source library that you’re using and take the other 80% and distribute it however they need – if they need to raise funds for development, any of those things.

JK: Okay, so you guys have this next-gen technology here and I’m probably going to use a really poor example here but; let’s say an application for example we had Friendster then Friendster sucked so they built Myspace. Everyone had Myspace and was like “Myspace is going to be it”, then Facebook was just there and Facebook became ubiquitous and everybody had Facebook. So there was this iterative process of having the core functionality. The core functionality of Friendster wasn’t particularly different than Facebook but no one is on Friendster anymore and now Facebook is starting to lose market share to newer websites.

Do you guys feel that you’re just one iteration in the growth of this technology and that you guys will see additional currencies or additional Blockchain technologies built on top of you guys or built to supersede you guys, or is this it, is this going to enable to building of the whole future?

CH: I think it would be hubristic to claim that Netscape 1.0 was the final web browser. I don’t want to be Facebook, I don’t want to be Dropbox, those are applications. I want to be the web browser, I want to be the foundation layer and I want to get everybody behind the idea that we need a foundation layer. Let’s talk about how to make that foundation layer work, let’s talk about how to make that foundation layer scalable and easy to develop on top of.

It’s a process, it takes a lot of effort. There are some philosophies on how to do that but ulimtealy I think best value proposition that oculd be offered to the cryptocurrency space right now is unity. We need to start working together, we need to start acknowledging that the problem with BitPay are similar to the problem with CoinBase, are similar to the problems that we have, that BitShares has, that Dave has. It makes sense to me to rally behind some core principles, our principles are really simple, and simplicity is one of them. Modularity, universality, non-discrimination, agility – these are principles that I think everybody in this space can like.

I also think that we recognize that Bitcoin is quite valuable but it still has a very small ecosystem compared to global population. The real growth hasn’t happened yet, we’re not at the billion person stage yet. So how do you get between 2 million people and 2 billion people? That’s the user experience and you’re never going to get a wonderful user experience if you have 26-procotols, 26 standards and 150 coins floating around. Whether your approach is to have licensed library or your approach is to build the Android of the cryptocurrency space like we’re trying, one of these will eventually win. Something will solidify, then the user experience will very rapidly get better and eventually you’re going to have all of the creativity coming in.

Just think about how many really bright people are in this space who are not phenomenal coders, who aren’t really hard-core programmers who write assembly code everyday – but they’re great designers. The magic of the web was to give these beautiful tools to people to build amazing website/webpages without having to be a hard-core developer, we gave them that. That’s kind of the goal here, let’s give these amazing tools – whether it be a library, a platform, a really robust protocol or maybe a composition of all three, so that you can walk in there in a very small period of time, 3weeks 6weeks whatever your dream is, you can get it done. That’s what I’m trying to get done in this ecosystem and my hope is that Bitcoin starts competing with us because in the process of competing with us it’s actually going to make the Bitcoin protocol significantly more robust – that way everybody wins, the whole ecosystem is going to win. Value goes up, it’s a rising tide effect.

(Musical interlude)

DJ: I would agree with Charles on a lot of points and I think the goal here is to build these new systems in a way that conserve the most people. I think he made a really good insight into user levels, this is sort of how technology works today, my own view is that what we’re going to see is more and more protocols built on top of each other. So you buy a computer, the computer is hardware it’s a platform itself, you have an operating system that works on top of the computer hardware.

The operating system has a number of different technology stacks, let’s say you’re in the Apple technology stack or you can use the Google technology stack – that’s sort of a third layer. On top of that Google offer a huge plethora of applications from its app store and most people are here at the fourth level. They’re not in the hardware, they’re not in the OS, they’re not even in the tech stack but they’re using those end user applications.

That’s what I’ve described for those that have read my decentralized applications white-paper is that I have seen these different layers emerging for the Bitcoin ecosystem. We can think of Bitcoin as that bottom layer, we can build things on top of that, that makes things easier to build. Then most people will be at the third or fourth level where the users end up going and that’s where it really gets exciting. We’re really early days concerning Bitcoin as that first layer and here we’re really talk about the second layer on top of that technology. I think in 2015-2016 we’re going to get to that third and fourth layer and that’s really where you hit mass market.

JK: I’m actually going to jump into another question and I’m going to get you to go ahead and answer it Daniel. What I’d like to talk about is, let’s say that this 18month period has gone by and we have this mass adoption somewhere of the DACs. Give us a look into the future, let’s look at five years down the road, what is it going to look like? What are we going to see here in the world? Because someone is going to win, this technology is out of the box - what are we going to see, what is going to be different for a normal person and how is this going to affect them?

DL: I don’t think someone is going to win, I think everybody is going to win. You asked earlier whether or not we were worried about somebody replacing us and my primary vision is to teach how to make all of these things happen. I believe that there are so many creative ideas, it’s like going back to the beginning of the Internet and imagining Google and Facebook and all of the things that happened. You can’t predict 5-years out because things are moving so quickly, my personal mission in all of this is to secure the life, liberty and property of everyone through decentralized solutions and we’re all going to win no matter what.

JK: I’m not going to hold any of you guys to this, but what I want here is I want some pie in the sky, big ideas of how this is going to make it all better. Take it out as far as you need to – 50 years in advanced – tell me what life could possibly be like if everything went well.

DL: Where I am going, is a world where all interaction with our fellow man is entirely voluntary. Where you no longer need to rely on government to settle disputes, in fact decentralized technologies will make governments entirely irrelevant and ineffective in being able to do anything because we now have the ability to communicate with everyone on the world, the ability to reach a global consensus about who owns what, how to settle disputes and how to do co-ordinated decentralized justice without having to rely on taxation or force.

CH: HEAR, HEAR!

DJ: I can hear the cheers from New Hampshire from here.

DL: That is my mission, I have various decentralized applications, dozens of them on a roadmap on how to get there from where we are today. It’s going to be an amazing new world, my primary goal is to teach people how to apply these principles because I know that I don’t have enough creativity to see everything that’s going to happen. But I do believe that eventually, the free-market, will find a way to provide that particular good service, the security and protection of all our property from everyone including organised crime… like governments.

(Applauds)

JK: You guys can’t tell this over the radio but we have a big crowd here, we have packed this studio out, people are interested in this and that’s fantastic.

DJ: So let me imagine with your world, where the idea if you have one job is antiquated, in fact even the idea that you would go to one place or work on one project for years at a time is entirely antiquated to the way we think in this future world. Because if I can immediately earn tokens for whatever value I’m contributing. If I’m contributing to a decentralized Dropbox by the 3tera-bytes sitting on my desktop or if I’m contributing to a new application by writing some of the code. I’m immediately getting compensated with those tokens which unlike stock in a company are immediately liquid, I can sell them on any exchange in the world and it can immediately turn into any other asset or any other fungible currency.

So imagine a world where you don’t need to have a job in the traditional sense, or earn equity in the traditional sense but you can participate in all of these decentralized communities and all of these decentralized applications, whether it be the decentralized Dropbox, the decentralized Amazon, the decentralized whatever you’re doing you can be universally compensated for that in a way that you’re talking about where arbitration and courts become a thing of the past.

That’s, I firmly believe where we’re headed. The first people that are going to get there are the programmers and the people that have these abilities that can immediately be put into use. As this gets to higher and higher levels you have more and more everyday things built on top of all these layers that everybody can participate in, whether they know a line of code or whether they’re just doing their everyday thing – that’s where I think we’re going.

CH: I have no idea. (Laughter) I want to build tools that give the world the ability to tell what’s going to happen. I don’t have an economic philosophy here, we’ve tried to pick a balance in basically everything that we’ve done and everything that we’ve designed. We have no features, the goal here isn’t to remove governments, the goal isn’t to change the world, the goal is to give the people who want to change the world the ability to do that. No matter where they live, in a completely transparent way.

The goal is also to get the people who want to change the world to collaborate with each other, to talk to each other and to have these experiments run in a very transparent way, that’s my goal, that’s

what I want. I can’t predict the future, no one can and no one has ever been able to do that. IBM would be a pretty rich company right now, I guess they’re rich but they’d own Microsoft and Intel if they could predict that. There is so many examples of these people, look at Xerox for heaven’s sakes.

Instead all I want to say is come to me, I want to make that experience so magical and so insanely great that everybody just wants to come to me and build the new world on top of this platform, that’s my goal.

JK: Ok, two things here. One I would like to say you all have interesting propositions but as I have said before I think that Dogecoin is going to institute a Turing complete scripting language in there. That is totally, much Turing, many complete and I think that’s going to make all of you guys irrelevant.

But something you all have said and it’s cool because it makes things a lot simpler here. You’ve all used the term “Me, I” and stuff like that but you all have awesome teams. You guys all have people that you’re working with, can we just take a minute to talk about the people that you guys work with that are helping to build these projects.

I run into this all the time, I am Jason King from Sean’s Outpost so people think Sean’s Outpost is Jason King and that’s not true. Sean’s Outpost is a ton of people, Jason King is not in Pensacola right now and guess what – people are still getting fed right now. So let’s talk about your teams if that’s cool, just take a minute and talk about that.

CH: We have a really wonderful team, on the fiduciary members-side there is myself, Anthony Diorio who is the executive director of the Bitcoin Alliance of Canada, he created SatoshiCircle, he created KryptoKit which by the way is one of the most amazing applications you need to download it, it’s incredible. We obviously have Vitalik who I guess has developed the reputation of some sort of android from the future sent back in time to save us from the dystopian government. He’s an amazing guy, it’s true, Vitalik802134 they’re going to make a graphic novel.

Then we have Mihai, he works for Bitcoin magazine, he does Egora, he is a really phenomenal person. The ecosystem that we’ve surrounded ourselves with is that we have a really healthy balance of people. We have some quantitative analysts such as Dr [Emmanuel Acosta?] who worked for Goldman Sachs, he is running a hedge fund in Asia. We also have Joe Lubin who is also helping us out on the financial side, they’re actually studying how to implement clearing houses and do everything you would want to do on Wall Street on Ethereum to see if the scripting language is robust.

We have some great marketing people like Jon Mohan who is really helping us to build a community, we thought that it was really important from day one to bring people in to interface with communities. There are so many people on the list, I think we have a total of 15 – 20 core developers. There is Dr Gavin Wood who is a game developer, he has built game engines, I think he got his PhD Computer Science and specializing in basically taking algorithms to visualize music and he has done some absolutely amazing things. He wrote our entire C++ client in the period of 6 or 7 days whilst drinking some Robert Mondavi, he’s the kind of guy you want to get to know.

We even have a few philosophers and we even invited Tatiana, she did the Bitcoin song. She was at the beach house that we rented and we had some fun. It’s been really an amazing experience to be on this team, in fact I think it’s the best team I’ve ever been on in my entire life with any project that I’ve ever worked on. Just because there is so much passion and diversity, there is so much clarity of thought and there is so much vision, which is so rare. There is so much vision in this team and my hope is that we can continue to attract that as we move forward and work with people who have vision like the people here.

DJ: That’s awesome, yeah I’ll give a quick shout-out to Peter Todd, our chief scientist at the foundation. A lot of people know Peter Todd from his work as a Bitcoin core developer, I really respect a lot of things that he has done and he has been going after this question of Bitcoin scalability and how to properly embed metadata, I’m really glad to get him involved in the foundation. Our executive director for the foundation is Ron Gross, a lot of people know him as Ripper234 from the Bitcointalk forums. Based in Israel, a really great guy, very passionate and very experienced in the space.

I want to talk about J.R Willet of course who wrote the original paper, it’s been exciting to see, he has recently become full-time on the project and has been able to leave the day job which is the vision of every founder ever. I also want to talk about Sam Yilmaz, he sits on our board and he is one of the co-founders of BitAngels. Michael Terpin leads all of our media stuff, he is also another co-founder of BitAngels. He was the guy that back in the 1.0 days of the Internet founded Marketwire, the first internet company to do PR stuff.

I also want to talk about a few of the other board members, a lot of people know Brock Pierce who is sort of the grandfather of virtual currency, he’s been doing this since the late 90’s/early 2000’s. Jonathon Yantis and Antony-Vo are all very passionate.

It’s been great as we’ve brought on more and more core-developers, Craig Sellars recently came on as the CTO of the foundation full-time. The team has been exploding and we’ve now go north of 10 – 15 full-time developers. Marin, a lot of people know because he has created the most popular Mastercoin wallet and there are three or four other great core developers. I’m going to forget a few names but it’s really been exciting to work with a team that had varied and interesting talents.

DL: I’m working with a great team that’s growing very rapidly, we’ve got so many people I can’t even name them all working all over the world on many different things. Bo Shen is a Chinese partner of ours, he is head of all of the China aspects. We have a huge community in China and he’s doing it all on his own. It’s wonderful to be able to work with people that are autonomous and just make things happen, they’re great partners.

Recently Brian Page joined us, we met him in Vegas and he has been completely revamping our marketing in a way that you guys are going to appreciate in the coming days and the year ahead. Arlen has come on-board and he’s going to help us manage all of our bounties and organise all of our technical teams. Of course Dan [Nodestein??], he is a CEO for another company that has a whole team in Poland that he is heading to help develop and manage Keyhotee and BitShares etc.

We have got an incredible team, it’s growing and I’m very excited.

DJ: I can’t forget Tariiq Lewis who is in the audience, our smart property lead - otherwise I would be remiss.

DL: Actually I forgot to mention Wendell from Hive who is also in the audience and he has been working very closely with us, I’m sorry Wendell for not mentioning you, I feel really bad.

JK: I’d like to take advantage of the fact that we have a bunch of great in the audience right now too, so if you guys are cool, I’m going to open it up to some questions and we’re going to take some questions, is that cool? Has anybody got anything?

Stan Larimer: I was very impressed with each one of you who were basically talking about how well you co-operate together and I am just wondering maybe whether you can talk about, is there some way this wonderful triumvirate in here can put together some type of a joint project that can show how you can work together?

JK: Ok, I want to restate this because I don’t know how well that’s getting picked up on the mic and my own piece of mind. So basically the gentleman said he was very impressed with all three of you, if there some way we can get a super-group together and you guys can all riff and you guys can work on a project together.

CH: A few months ago I did have a plan to establish the cryptocurrency research group with Virginia Tech but we could never quite get that accomplished. I think there are a set of common problems in this ecosystem, no matter who you are, Bitcoin, BitShares or Ethereum such as Blockchain bloat, coin fungibility, the idea of the user experience of mobile clients – how you want to handle mobile clients in that trust model – that we all suffer from.

80% of the world is on mobile and Bitcoin doesn’t do mobile very well so I think that’s a really natural place of collaboration for everybody in this space. To invest some money into resolving these kinds of problems, we’re probably going to take the lead on that and we’re going to make it very easy for people to join quickly and a way that we can distribute these costs. Not just for us, I think these are problems that BitPay and CoinBase and other large companies that are starting to get a lot of revenue can participate in. That’s number 1.

Number 2 is that I think we are already participating CODA, I got the memo on that so we’re already working together on legal projects and regulation. We’re going to try to help sculpt the legal definition of a decentralized autonomous organisation because as much as we want to move everything to the cloud. The government still do have a say on how they respect smart property and the generic taxes in the system.

We’re also going to work really closely with people to try to build things on top of Ethereum, one that adds value to both parties. I think there is a really strong value proposition for both ColoredCoins and Mastercoin in a certain respect that would benefit both their investors and also their core mission, so we’ll be in talks at some point with Dave and other people on the project about if we can do that. I think there is definitely room for DACs, right now there is no point-click/one-click way of doing DACs and a library is a good start. But I’d really like to improve the user experience as much as possible so I think we might collaborate on the libraries and might collaborate on the approach if anything just to ensure interoperability between what you’re doing and what we’re doing.

So absolutely Stan, I think that’s a very good question and I think over the next six months I think you’ll be very happy with the amount of collaboration we have.

DJ: Stan the man that coined the term DAC in the first place.

CH: Absolutely he is the man who coined the term decentralized autonomous corporation.

DJ: Though it seems, it may be helpful to note for the community, it seems like everybody is moving away from corporation as a frame, and I know you guys were talking about decentralized communities, DA consensus mechanisms and I think that important just to spend a moment on and this is something we’ve all been talking about. It’s part of why I put my white-paper out there and made the argument for decentralized applications and we need to be careful, language is really important and setting precedent is really important. These are entities that have no employees, they have no shares, they make no profit, they’re not incorporated anywhere other than the protocol itself.

So I’m trying to move it to a frame where it’s something more tangible to people and something more accurate, so applications – given it literally is a piece of software I’m downloading onto my computer and using it like a regular application is a good frame to use.

There is not a perfect consensus yet on what the heck we’re going to call these things but I think we’re moving towards the right frame and we’re all thinking about that. Charles highlighted the CODA partnership and that’s really important, I was just speaking to Peter Todd yesterday about the research we can do together on the consensus stuff so I think there is going to be a lot of cross-collaboration between the projects.

CH: I like DAO by the way so I can write the book the DAO of DAO.

DJ: The Tao of Dao

CH: The Tao of Dao, it’s better than the Tao of poo.

(Laughter)

DL: What I would like to see us work together on is to focus on taking these really good ideas and making them self-sustaining. All living organisms need to produce more than they consume or they eventually consume themselves and die, therefore all of these decentralized autonomous companies – I’m calling them companies because that’s a concept rather than a corporation which is a legal entity. They do earn a profit based upon services they provide and the transaction fees they’re charging so I believe what we can bring to the table is taking some of our software tools that do ripple style consensus combined with a new form or proof-of-stake with something like the Ethereums Turing complete pay-as-you-go calculation engine.

Also to build more efficient systems that are actually as profitable as can be so that they can be as viral, self-sustaining and economically efficient as can be. If I can bring anything to the group, to the community, it’s actually to teach the economics of building self-sustaining systems.

JK: Next question, anybody?

Question from Audience member: What do you think about the running joke that a decentralized autonomous corporation, could in 10/15years could merge, grow and become the next SkyNet. What do you think of this whole decentralized run amok, once you give computers the ability to run themselves, won’t they own us?

DL: Let me address that, there has been a lot of confusion about what a decentralized autonomous company can do. All it really is a means of people to co-ordinate a consensus, to reach an agreement about the state of things. There is a difference between what I like to call a vending machine which can be thought of as a centralized robot that goes and has some business and with these decentralized autonomous companies, they are all about consensus and information. They can do nothing on their own except allocate or reallocate balances within their Blockchain. The goal is to engineer economic incentives to motivate people to take the actions necessary to implement the business without having any one person in control

A system that you’re talking about where it becomes an artificial intelligent, taking over the world Skynet type situation is more like a vending machine run amok rather than a decentralized autonomous company.

CH: Yeah you would totally need a Turing complete scripting system and a decentralized currency to do that.

(Laughter)

DJ: I have actually thought about this a lot, maybe this is a controversial idea but my idea of AI is that people will still be at the centre. We are giving the AI a will, we’re imbuing it with goals and desires and the AI development that I have seen before nobody has solved the hard AI problem. So we’re getting better and better and more advanced languages and more computational power and I actually do think that in the next 20/30 years we will actually cross that point where the majority of the world’s thinking is done by machines. Pure number of calculations in brains versus the number of calculations in machines [the machines can out-calculate our brains.]

I actually think that’s a good thing, that’s similar to the tipping point of the industrial revolution. Before the industrial revolution the majority of labour on Earth was done by people or done by livestock and today the majority of thinking on Earth is done by people – even if it’s repetitive, very manual or a very rudimentary sort of thinking, people will still have to do because computers just aren’t that good yet.

I think that when we cross that, it’ll be a huge benefit to humanity but I think we’ll still be at the centre and we’ll be imbuing it with goals and will etc.

DL: I would like to say one more thing on that topic. About people being in the centre, a lot of the technologies we were building with BitShares involves prediction markets. You can think about it as a global human mind where the prices are the co-ordinating factor. Where you can price anything from abstract ideas to patents, you can figure out how to allocate resources. All of human effort will now be co-ordinated by a decentralized consensus mechanism by prices. It takes the intelligence of each and every human, combines them all together to be something more intelligent than any artificial AI could possibly be.

DJ: But truthfully, isn’t that what the robots would tell you to tell us.

DL: I’m actually a robot.

CH: I for one welcome our machine overlords.

(Laughter)

DL: There is a lot of wonderful projects in academia and in private industry that have done some amazing things like DeepQA with David Ferrucci over at Watson we got to watch a wonderful jeopardy episode. Pete Morgan is doing great work at Carnegie Mellon University with NELL, the whole of idea of building a program that can read the internet.

There is a lot of government projects as well as academic ideas, I think that the notion of strong AI requires a different unit of computation. We can build with a Turing complete system a lot of things that emulate human behaviour, that make a lot of amazing decisions. However I don’t think we can actually get cognition without a better unit of computation so I’m not worried about any of these systems implementing that.

I think that’s a noble goal and Daves right. Generally when you build this kind of technology, they tend to make our lives better. If you think about the standard of living today, globally, for the entire world it’s significantly better than it was in the beginning of the 19th century than it was in the beginning of the 20th century. This progress tends to make it easier to live well regardless of where you’re from and how many resources you have available.

My conjecture is that strong AI could actually do the same thing but that’s something for Ray Kurzweil and other guys to kind of figure out. I’m just building android here.

(Laughter)

JK: Alright let’s do one more question, then we’ll wrap it up.

Question from Audience: When all of these technologies together lead us toward a future in which there is no scarcity for human-kind on Earth. What will it mean to live a life on Earth?

CH: So a scarcity free economy like the Venus project, a resource base. I don’t know, economics is like the study of scarcity so I guess we just look at the models and we remove the scarcity factor.

JK: I know something that will still be scarce, our time. Just look at what has happened with agriculture, we have moved from a society where 95% of people were involved in agriculture to 2 – 4% of industrialized countries are now involved in agriculture. We’ve shifted from agriculture to industry and now to services. Most services that you won’t be able to replace are ones that are time-based, people will still need nannies, we still need people to do the physical things that are interacting with other people. It’s more of a knowledge and experience based economy, do you still want to go kayaking yourself instead of out-sourcing it to somebody else.

There are a lot of things like that where our time is still scarce, so if you want some of my time, it becomes more and more the most important resource.

DJ: But once we download our souls into DACs, then time is going to free-up too right!? It’s not going to be so scarce and then we’re going to be truly living in a scarce-free society, right?

CH: That depends if it pays dividends or not.

DL: As long as there is enough profit motive, I’m sure someone will come up with the flux-capacitor and solve the time issue. But I believe that human demand is insatiable, there is always going to be scarcity for what people actually want. There is going to be scarcity to spaceships to go travel the universe and therefore that’s what people are going to be working towards, so I think that’s the case.

JK: Ok that’s great I said I was going to end it there but I want to do one more thing. I want you guys to go through real quickly and say your company again and tell me how I can get involved, tell me what I can do right now to get a stake in your company.

CH: Hi I’m Charles Hoskinson, I’m a core developer on the Ethereum project. We’d like you to go to Ethereum.org

DJ: I’m David Johnston and I’m one of the people on the board of directors for the Mastercoin foundation, you can go to mastercoin.org to go to the community website. We have a separate foundation website which is just mastercoinfoundation.org

For those that want to see all the transparent records, everything is public records with the foundation, whether it’s our books, the developers working on it and all the developer discussion. I really encourage you to engage, we don’t run any exchanges ourselves, you can’t get MSC through either of those websites but there is a link to the Wiki that lists all of the different exchanges that trade Mastercoin for Bitcoin. All those links are at Mastercoin.org

DL: My name is David Larimer with BitShares and Invictus Innovations, you can visit us at Invictus.io – check out our new website, it’s been dramatically improved from what we’ve had in the past. If you want to get involved in the future of decentralized businesses then you should look into our Angel addresses.

JK: Guys this has been a lot of fun, thank you all for coming out here. For everyone that’s here I want you guys to realise that we’re on the cusp of something here. You’re going to look back at these conversations this weekend 5-10years from now and you’re going to be like “Wow that was it, we were right there, right before everything went crazy”.

Thanks for everyone for coming out, this has been a Let’s Talk Bitcoin production.

ABL: Thanks for listening to episode 80 of Let’s Talk Bitcoin. This episode was entitled Beyond Bitcoin, and featured Jason King, Charles Hoskinson, David Johnston and Daniel Larimer. Thanks to Gustavo Matamoros of the SubTropics.org for providing the space at the Audiotheque for the panel and Steve Malagodi of Spectacular Sound for the recording. Music was provided by Jared Rubens, General Fuzz and Calvin Henderson.

Any questions or comments? Email adam@letstalkbitcoin.com. Have a good one!