41 - Crypto-Civilization | Balaji Srinivasan

BLACK FRIDAY DEAL: GET LEDGERS for 40% OFF! 🔥🔥🔥 https://bankless.cc/ledger 🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️LEDGER - 40% OFF LEDGERS THIS WK ONLY! 🔥🔥🔥 https://bankless.cc/ledger 🚀 ZERION - INVEST IN DEFI FROM ONE PLACE (download it now!) https://bankless.cc/zerion 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🤖YEARN - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn ------ A Crypto Civilization | Balaji Srinivasan No one blends the academic, startup, & venture world quite like Balaji Srinivasan. With multiple engineering degrees, multiple exits, being early into Bitcoin, selling a company to Coinbase, being CTO to Coinbase, Balaji lives on the cusp of the frontier of human innovation. Rumor is that he’s trying to create a digital country, we’re gonna talk about it. - Legacy of COVID creating distrust In Institutions Balaji thinks that the world is ready for new institutions and that the movement of time is to generate new solutions rather than repair old ones. - ‘Crypto-civilization’, or what Balaji calls: The Network State The leveraging of the most useful modern technology and coordination tools, to produce structurally independent organizations - Digital Nations vs the Nation-State How might this independence generate friction with the status quo? And of course, how does a new 'crypto civilzation' actually manifest. Balaji is a real Big Brain thinker, so strap yourself in! ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more Bankless. David, we just had Balaji Srinivasan on. What a fantastic episode. I was gonna ask you what we covered, but I almost feel like asking you, like, what didn't we cover?

• 0:42David Hoffman?

  We talk a lot on the Bankless podcast about Bitcoin and Ethereum being neo-nations, right? Different new types of organizational structures. And I thought that, I think that's a really compelling thesis, and it's something that we've been sharing readily on the Bankless program. Balaji takes this a big step forward. And Ryan, you called Balaji the guy that thinks a decade ahead of everyone else. And so Balaji is taking that metaphor, that like, you know, these things are kind of digital nations. And he's pondering the idea of what happens if we make a real nation? What happens if we make a real country? A country that starts in the cloud and then actually manifests itself somewhere in the world with a sourcing of capital to purchase property and then actually construct a real country?

• 1:24David Hoffman?

  That's not a joke. Balaji is actually having this thought about how to make a real country. And so, since we talk about this on the Bankless podcast all the time, it was just a perfect fit to get him on the show to talk about how do we go from a metaphorical country in the clouds to a real country on land? So that's what we covered in this very ambitious podcast.

• 1:44Ryan Sean Adams?

  I expect this podcast to sound unrealistic to you. Maybe, maybe even a little bit crazy. But that's what happens when you have a conversation with basically like somebody who feels like a time traveler, David. It's like, I mean, if you heard Balaji when he first got into crypto and Bitcoin, right? Like, At the very inception of things, Bitcoin is a completely bonkers crazy idea, right? Or even DeFi and Ethereum, completely crazy bonkers ideas. The fact that a Uniswap can deliver 4 billion in trading volume,

• 2:25Ryan Sean Adams?

  and it's a tiny protocol written by, you know, one individual on a 100K grant. That is unrealistic and crazy. So there's sort of a pattern to these kinds of ideas in crypto. And a lot of times, Balaji has proven to be right. So if this episode sounds crazy to you, that is to be expected. But it might be crazy and right.

• 2:51David Hoffman?

  Right, that's exactly right. And like, imagine, you can go even further back and say like, okay, it's 2010. You just read the Bitcoin white paper and for some reason you're compelled by it. And so you go to your friend and be like, oh my God, there's going to be this new money on the internet. Imagine how crazy you would sound in 2010. Well, now it's 2020 and kind of all bets are off on things. And so I'm kind of hoping that the world can appreciate the effort to maybe create a brand, the idea of creating a brand new nation from scratch. Maybe that's not, maybe because it's a new era. Maybe it's not so such a harebrained idea.

• 3:24Ryan Sean Adams?

  It's cool too, because we start with present times. We talk about the legacy of COVID and this distrust in institutions that has fomented. And then we get into those broader topics of the crypto civilization, or as Balaji calls it, the network state. So this is definitely an episode that you do not want to miss.

• 3:43David Hoffman?

  All right, we're going to get right into the episode with Balaji. But first, we're going to talk about some of these fantastic sponsors that make this show possible.

• 3:52David Hoffman?

  When you own crypto, what really matters is the security and ownership over your assets. Being a part of the bankless nation means having complete sovereignty over your crypto. The easiest way to do that is with a Ledger hardware wallet. A hardware wallet is a little device that manages your private keys for you so you don't have to worry about proper private key management. Your Ledger hardware wallet keeps your private keys private, but still lets you have easy access to your crypto. The combination of my Ledger hardware wallet and MetaMask lets me store my crypto assets in the most safe way possible, but still lets me easily access Uniswap or all the other DeFi apps that I use on a daily basis. If you already have a Ledger wallet, you can use the Ledger Live app to participate in some of the money verbs that we discuss

• 4:37David Hoffman?

  in the Bankless program. The Ledger Live app is your headquarters for managing your personal crypto finance. It's a great tool to manage the assets you hold on your ledger, as well as receive a portfolio summary of all the assets that you have stored. Using the Ledger Live app, you can buy Bitcoin, Ether, and stablecoins and have it sent directly to your Ledger hardware wallet, skipping over the trusted exchanges and getting your assets into your control. You can even use the Ledger Live app to swap crypto assets natively inside of the app, so you never need to send your crypto assets away from your ledger to make a trade. Buying a ledger is like buying a fire extinguisher. The best time to get one was yesterday, especially if you're doing something silly, like holding your crypto in a hot wallet that's always connected to the internet.

• 5:22David Hoffman?

  If you haven't gained full control over your crypto yet, go to the link in the show notes and get your ledger today. If you are looking for the front page of DeFi, look no further than zerion.io. Zerion is your home base for managing your DeFi portfolios. Zerion offers a central place for you to engage with all of the DeFi protocols and assets that you engage with on a daily basis, but all in one central spot. I've loaded up a wallet, and Zerion is giving me the portfolio performance of all the assets in this wallet over time, as well as a breakdown of all the assets that I own, as well as all of my transaction history that I've ever done in an easy-to-view fashion. Zerion also lets you invest right into DeFi's best-yielding financial opportunities

• 6:07David Hoffman?

  right from their homepage. Zerion also makes it super easy to access interest in DeFi using applications like Compound and Aave in the background. And you can also exchange your assets using the Zerion app, using an exchange aggregator in the background to make sure that you always get the best rates. You can even use the Zerion mobile wallet to add your MetaMask or Argent or another Ethereum address right into your mobile wallet, so you can see your portfolio and engage in DeFi on the go. Here, I just loaded up my Argent wallet, and now I'm going to load up my MetaMask as well. And Zerion will do the same thing. Add all of my assets and wallets together all in one space and give me a portfolio summary of what's going on.

• 6:47David Hoffman?

  Adding wallets is trivially easy. If you already have a MetaMask, you can get it right into the Xerion app and it can sync with your desktop app as well. And the best part is you can also buy Ether right into the app itself. Use the Invest tab to look at all the things that you have invested in as well as other opportunities. And coming soon to the Xerion app is the ability to buy and sell your assets straight from your mobile device. So download the app. It works on iOS and Android. Go to xerion.io, plug in your wallets and get a historical report of your portfolio over time, as well as a comprehensive breakdown of all the assets that you own and how much yield they're generating for you.

• 7:29Ryan Sean Adams?

  All right, Bankless Nation, we are super excited to have our next guest. This is Balaji Srinivasan. No one blends the academic plus the startup world plus the venture world quite like Balaji. This is going to be exciting conversation with him. He's got multiple engineering degrees, multiple exits. He was early into Bitcoin. He sold a company to Coinbase as well. I think Balaji lives a decade or two in the future. His superpower, at least it seems to me, is to be able to see things before the rest of us. And we're going to ask just what he sees on the horizon today. Balaji, welcome to Bankless Nation. Thanks so much for being here.

• 8:09Speaker 02

  Great to be here.

• 8:10Ryan Sean Adams?

  All right, man. So two things just hit all time highs. Bitcoin market cap and COVID infections in the US. How do you feel about that?

• 8:19Speaker 02

  Well, uh, so, you know, COVID, I haven't, I haven't been talking about it too much recently, simply because it's just become so, so, so dumb in the West in many ways.

• 8:33Speaker 02

  You know, basically, well, I'll say a few things about COVID. First is, an interesting thing to do is to Google COVID worldwide deaths. And what you'll see is an interesting graph where, which I don't think actually has been circulated that much. It shows this total exponential rise going into May of COVID. And then it actually does kind of flatten out at roughly 6,000 to 8,000 deaths per day for like the last six months. And with a lot of oscillation that appears to be due in part to, you know, testing mainly on Saturdays and Sundays, or rather not testing on Saturdays and Sundays.

• 9:18Speaker 02

  And, you know, the thing is that from like the early perspective of COVID, it wasn't obvious that this was the way people would flatten the curve, namely that the exponential would flatten out at 6,000 deaths per day as opposed to 60,000 deaths per day, right? That's, that's not like an obvious place that it lands up, you know? And it's actually kind of remarkably flat, given that this is like an average or a summation over the whole world. It's, it's like a bunch of different curves that are happening at the same time. You know, some, some countries are going up and other countries are going down. It's sort of yo-yoing back and forth. Um, that's kind of one aspect. Number two is, you know, look, I'm, you know, as hopeful for the vaccines, you know, as

• 10:03Speaker 02

  anybody, the Pfizer and Moderna, you know, vaccines that have been announced. But these are, you know, sample sizes of like 100 people. Um, we'll, we will see what happens when you scale that to a billion. There's just always stuff, whether it's manufacturing issues or, or, you know, compliance issues or what have you. Compliance, I don't think in the sense of FDA getting, you know, they know enough to not try to block this for dumb reasons, probably. But, um, but compliance in the alternative sense of people actually taking it due to, you know, anti-vax or anti-pharma sentiment. And, you know, people might think, oh, the vaccine was rushed, or I believe in vaccines in general, but not this vaccine, whatever. So.

• 10:43Speaker 02

  Will you actually get compliance? Will enough people take it? Will it have issues at scale that are not seen in, in, you know, the relatively smaller trials? I don't know. I mean, the, the optimistic take is that it, it will be, um, it'll be fine and COVID will be a memory by this time next year. The pessimistic take, which I think is, you know, where I'd probably put more probability weight, not a hundred percent, but i- is that COVID is going to be with us for several years, maybe, maybe the better part of the decade. Nobody, nobody, you know, was expected 10 years of Iraq, right? And nobody expects 10 years of COVID. Um, and, and yet I think that's something that is a possibility, especially in those places in the world that

• 11:23Speaker 02

  can't afford a vaccine or, you know, won't have great compliance with the vaccine or will resist it for other reasons, whatever, right? Um, so, you know, i- it's interesting because COVID, I, I shouldn't say is being stamped out in Asia, but it's just been taken more seriously in Asia and they just seem to have a functioning public health system that has gotten the thing under control, but not so in the West. So it's, it's not the lesson that anybody wants to hear. Everybody wants to point fingers at this or that political faction in the West. But it feels like there's some systemic, you know, systematic thing that the West is doing incorrectly that Asia is doing right. Um, and that's just sort of hard to copy. It's like, oh, do a social network or a search engine and

• 12:06Speaker 02

  there's a thousand details that Facebook and Google will get right. And so copying the way that Asia does it may just not be easily possible. Um, and he said, you know, what is a legacy that COVID will leave behind? You know, this is not original to me. This is one of my, one of my friends who made this comment, but I think it's very much true. Um, you know, Co- 2020 is the year the internet began. Um, by which, by which I mean, um, there's this concept I have of the primary and the mirror. For example, in the mid nineties, um, You know, the New York Times put its first website up and it had, you know, it was just like a curiosity. The New York Times on the web, you know, we put, we put some articles up here just to look at this new technology, the world wide web, right?

• 12:51Speaker 02

  And it was just a few articles, you know, and, and the primary was still the physical paper. And the mirror was, you know, the, the website. And then over time, sort of like Wile E. Coyote, you ever seen Wile E. Coyote from iTunes?

• 13:04Ryan Sean Adams?

  Of course, yeah.

• 13:05Speaker 02

  Yeah. You know how Wile E. Coyote sort of shifts his weight gradually from one leg to the other, like, like this, right?

• 13:11Ryan Sean Adams?

  Right.

• 13:11Speaker 02

  So gradually shifting weight, uh, you know, imperceptibly, you know, and by degrees over time. The NewYorkTimes.com website became the primary and the paper became the mirror. It basically became a printout, an imperfect rendition of what was on the web, which was the complete version. And there were certain things, of course, like links to tweets or data science or interactive graphs and so on, that were really digital first products. Where, you know, the, the paper was, um, was not just, just not going to reflect that, right? At best it could include a URL to go and look at it online, right?

• 13:53Speaker 02

  And even still, I, you, you can still think of the NY Times as well as the other, you know, newspaper sites as transitional things. Because, you know, like they still buy, um, they still buy paper, right? They still have like a, like a lumber operation and an ink operation, you know?

• 14:12Speaker 02

  You know, there's, you can, you can sort of invert the normal dictum, which is never listen to somebody who's still buys ink by the barrel. You know, or never argue with somebody who still does, right? So, so lasting impact that COVID has though, as I think all these legacy institutions will start to get examined. And you'll ask, how do you do the digital first version? Okay. So just as an example, I, I talked about the NY Times, the primary and the mirror. Everything is turning to having the digital version being primary. And the physical version being the mirror or secondary or the printout or the expensive version. For example, um, you know, people used to talk about the digital divide, right?

• 14:53Speaker 02

  Now the three billion people have phones, um, and, you know, probably everybody in the world is going to have a smartphone eventually. It's on, on pace to get there. Very poor people have have, you know, smartphones that were only the province of the extremely wealthy, you know, like, like a relative, you know, within our, within our lifetime, right? So, so everybody has a phone and digital stuff is cheap. And so that actually means is we're flipping it around so that the actual divide is the physical divide. That is to say, you can make an assembly of a thousand people online very inexpensively. But the physical version is, is, is, is no longer cheap. The physical version is the premium. Okay, so it's flipped.

• 15:35Speaker 02

  And so that means is every event is digital first. Every document is digital first. That already happened prior to COVID, but you know, in increasingly so. Every court hearing, every, uh, everything for education, everything for healthcare. The hygiene argument has, has sort of shifted. Every meeting is digital first. So everything has been shifted to be digital first. And, um, it's the physical that's supreme. Even for really important meetings, quote unquote, or get togethers gatherings, like weddings, right? Um, you know, people are doing Skype weddings, you know? And, and right now that seems like, you know, kind of a, a, a sucky sort of thing.

• 16:16Speaker 02

  But I think that once you start thinking, okay, what could I do with a virtual reality wedding? Well, actually it could be extremely fancy. You know, it could, it could be extremely fancy and it could be extremely cheap. It could be better in some ways. Certainly, you know, like video games, wherever you can have very interesting visuals, you know? You have perfect control of every pixel. Every guest can attend, they can stay the whole time. You know, it's, uh, it, it's something where, um, you know, look, I'm, I'm not arguing that people won't still want physical weddings. But the digital wedding will be one tenth or one one hundredth as expensive and pretty good. And the physical wedding will be like extremely deluxe. It'll be like the difference between saying, oh my God, they had a, they had a wedding in, in, you know, that, that, that destination wedding, that really fancy location.

• 17:01Speaker 02

  Wow, that must have been expensive. It'll be like that. The physical version will be expensive. Um, hence the physical divide.

• 17:07Ryan Sean Adams?

  That's what you mean by the, the, the start of the internet being 2020. It's basically like. And that's very weird for for us to think about because most people think, oh yeah, the Internet, that's that's sort of old technology. I mean, that's been around for most of my life. But you're saying that previously, it was not part of the fabric of our lives in the way it's about to be over the next, over the coming decades.

• 17:31Speaker 02

  Correct. That's right. So you know, you can call it the Internet flipping.

• 17:35David Hoffman?

  So the the Internet was just learning to be what it could mature into up to the point we are getting to to now. And that that's kind of the legacy of COVID. COVID is pulling that into the now, is pulling the future into now at an accelerated rate.

• 17:50Speaker 02

  That's right. And I think, you know, social distancing caused more social networking.

• 17:54David Hoffman?

  So Balaji, Ryan started off this asking about like, well, the COVID infections in BTC is at a both are at an all time high. And the the reason why we wanted to start this podcast off is to talk about the juxtaposition, because there's not not just only that is extremely juxtaposed, but it seems to be the fabric of society is moving into the extremes, right? We are, we are the distrust in institutions and the banding together of different ideologies is is really a very has created a very polarizing world. And we wanted to get you on the podcast to talk about like, how you are seeing this distrust in institutions be filled. Like, there's a void that is left by these institutions. How is society coming to terms with this void

• 18:39David Hoffman?

  that is being left?

• 18:40Speaker 02

  What is what is scarce today is trust. But what's abundant is computation. And so the rapprochement that we're going to have is we're going to substitute computation for trust everywhere that we can.

• 18:53David Hoffman?

  So what does that mean?

• 18:54Speaker 02

  Well, so, you know, an obvious version of that is like Bitcoin, right? In the sense that or Ethereum, blockchains in general, where you have somebody who is, you know, Democrat or Republican, they're Sunni or Shiite, they are, you know, Chinese or Japanese, they're Turkish or Greek, they're, you know, Protestant or Catholic, they're on one or the other side of some historical divide, right? But they

• 19:22Speaker 02

  Despite all the things they don't agree on, they do agree on the state of the Bitcoin blockchain, on the state of the Ethereum blockchain. And not just that they agree on the state of it, they, they agree on the state of it, not just like in a, oh yeah, you know, that it's true that the sky is blue today. Okay. They agree on the state of something that is extremely materially and financially important, which is the kind of thing that people tend to have political arguments over. You know, they scarcity is what causes conflict. So we have an example of something where computation has sort of forced, you know, that's where global consensus is now feasible. In this environment where everybody is kind of, you know, advocating for their own thing, and they've got these politically constructed truths. Into the gap is coming crypto.

• 20:07Speaker 02

  And over time, that's actually where facts are all, all facts are on chain. If it's not on chain, it's not true. That's a very deep point. I can, I can drill into that. There's a lot I can say about that.

• 20:20Ryan Sean Adams?

  I want to dig into that for, for a second, but just to, to ask, clarify one, one point that you made. So you said computation is getting cheap. I think people understand that, of course, that are listening, right? Like Moore's law, this sorts of things. We've observed this over our lifetimes. But you also said, trust is becoming more scarce. Why? Like what, what, what has fundamentally happened in the past, like 30 years, let's call it, to shake our trust in the institutions that we as a society formerly trusted?

• 20:50Speaker 02

  I'm probably a little bit older than you. You know, I was, I was a teenager in the nineties. And I remember, you know, before like the internet became very mainstream. You know, probably some of your listeners are in their twenties and may not have that much of a memory of that. But essentially, you know, in that time, even in the nineties, you really didn't hear from that many people. You heard from your parents, you heard from your teachers, you heard from, you know, the people who were on TV or, you know, you picked up the newspaper. But the number of different people that you heard from was, was fairly limited. And it was actually a big deal to, you know, be on TV. It was a big deal to have a, a broadcast license. Like a regulated thing.

• 21:35Speaker 02

  And so the thing about it was there just weren't that many voices online. Or not voices online, there weren't any voices contending for your attention. Because there were relatively few of them, they had come into some sort of consensus on their own. Now, you know, really, you can push it all the way back. Nineteen fifty, I think, was peak centralization. And as you move forward and backward in time, things get more quote unquote decentralized or polarized. Okay, so, so in many ways, it's sort of a mirror moment. You know, we're more similar to the eighteen hundreds than we are to the nineteen fifties in many ways. But, you know, so for example, you have like the advent of cable news and the advent of CNN.

• 22:15Speaker 02

  And, you know, like the repeal of the fairness doctrine, all those kinds of things allowed for more opinions to be on, you know, on the air. And then things, of course, started to accelerate with the internet. And especially, I'd say, blogs in the early two thousands. Suddenly you started to hear from way more voices, way, way, way more voices than, you know, microblogging and social media. And, you know, initially with Facebook and Twitter, those sort of started in, you know, like Facebook started at Harvard. You know, Twitter started in SF. And they started among social networks that pretty much agreed with each other. You know, Facebook, for example, is basically taking colleges and then high schools and putting them online. And so there were implicit mores because you could only friend somebody who is at your same institution and so on and so forth.

• 22:59Speaker 02

  I think a critical moment was, you know, September twenty sixth, two thousand and six, when Facebook networked the networks. Okay, and that was a moment where growth really took off. It was a huge experiment. It was very not obvious that it was going to work, that people would friend each other outside of these institutions. Because people were sort of cautious about doing that. Oh, you know, with a little stranger, impact me online. That was like, there's a natural caution or sort of suspicion of strangers in the nineties and the early two thousands. It was weird to do online dating. There's going to be weirdos online, etc., right? And then, then there's a period of about ten, you know, five to ten years of like the open internet. Yay, and everyone's just.

• 23:42Speaker 02

  Online and they're like, hey, this social media thing is great. Let's everybody connect with each other. So like from two thousand and six to roughly twenty fifteen. And then, of course, what happened is by the early twenty teens, a lot of people, you know, actually, this happened even pretty quickly with Twitter. You know, in the Middle East, voices had been even more constrained than they were in the US. So, you know, the impact of Facebook and Twitter was like boom gasoline, you know, on on a flame, like all these people could speak where they never could speak before. And once you have multiple voices, that's actually what causes distrust. And the reason is, if there's only one voice and it's broadcast, then no one can argue with the voice, right? But if there's N voices and they're all arguing with each other.

• 24:24Speaker 02

  You know, like people start to be, you know, they look left, they look right, they look up, they look down, they're trying to figure out who to make sense of. Maybe they make sense of nobody. Maybe they side with one person. More voices, more people with a microphone, more distrust. So I think that was the fundamental thing that caused it. The other thing that caused it was, once you network the networks. All of these mores and assumptions, I mean, you know, before some, you know, steelworker in in Pennsylvania, rural Pennsylvania and some, you know, like, I don't know, a graphic designer in LA could blissfully ignore each other's thoughts for their entire lives. They would never know what each other thought about various things.

• 25:08Speaker 02

  You know, the the the the press would never think of it as, you know, in the eighties or nineties would never think of it as an important thing to go and, you know, maybe once in a while they might do a lifestyle story, but they're not going to like take a a live feed of this guy's thoughts and pipe it into the other guy's thoughts. It just wouldn't happen. There's there's scarce, you know, time on television. You had a thirty minute, you know, news segment or whatever, right? But now those people can find out what each other thinks and they can't stand it. They can't stand each other. And the implicit sort of boundaries that had been set up before were just totally collapsed. And it's as if, you know, you took these three billion people and you just teleported them into a battlefield, you know, which is the internet and you took.

• 25:52Speaker 02

  Down all borders and all boundaries. No one has a home. They're just boom, just transplants to the plains of, you know, Megiddo. Where, you know, Armageddon is arising, right? And that's kind of what happened in the 2010s.

• 26:04Ryan Sean Adams?

  This is so, I, I find this so counterintuitive because basically what you're, what you're saying is this uh, open communication protocol that, that we call the internet that we think is so great, actually destroyed societal consensus. But like, I think the, the, the way you're talking about it makes sense, Balaji, but like, is, is that a good thing? Because it wasn't, it wasn't that these people um, didn't have the opinions that they had necessarily. It's just that they couldn't express them. Is this move to decentralization from the 1950s forward a good thing or a bad thing? Or is it just neutral? Is it just a thing that happens and we're just on a, you know, in the, in the trend?

• 26:41Speaker 02

  Well, so I actually, so I, I do think much of it is good. I think, you know, my, my macro is the internet increases variance.

• 26:52Speaker 02

  Okay, that, so that's, that's a macro concept that you can apply to many, many different sectors. For example, you go from 30 minute sitcoms to 30 second, you know, TikTok videos and uh, 30 episode Netflix binges. Okay. You, you go from a nine to five job for the rest of your life to a fail son who stays in mom's basement or a 20 something year old tech billionaire. You go from, you know, the, the nightly news where everybody kind of has this normie mainstream opinion to extremely well researched things where people are reading Google books and, and, and PDFs from, from, you know, like, like

• 27:35Speaker 02

  scientific outlets where you can educate yourself to this incredible level or to the dumbest of online conspiracy theories, you know? And, and so in every area, what you see is the internet increases variance, even in areas that you wouldn't normally think of. For example, if you look at the data on Uber and Lyft rides, okay, relative to taxi rides, they have both much longer and much shorter rides than taxis do. Okay. Because it was more convenient to call in your Uber or Lyft, sometimes people will take it for a block where they would normally call a taxi. Um, but also because um,

• 28:11Speaker 02

  You you can calculate how much the cost is going to be. You know, and people are sometimes used as a car replacement. They also tend to take longer rides. So it's taken that distribution and just pulled it apart and increased variance. Right? You see this with with book sales, you know, the, you know, with with Amazon, you know, the long tail of books, the number of different kinds of books that people are reading, the number of different channels. So why is why does that happen? You know, first, there's the kind of empirical observation, the Internet increases variance. Why is that happening? Well, the answer is whenever you disintermediate, you remove the mediator, right? And nodes can correct, connect directly to each other.

• 28:52Speaker 02

  And that mediator is like an averaging, you know, force, right? It rejects some things. It it forces things into like a middle of the road kind of thing, you know, like like the person who used to decide who got on TV would would de facto enforce a sort of normative consensus, you know? The the person who would, you know, decide was on the front page of the newspaper. All of those quote gatekeepers basically were mediating things. And what they were doing was they were capping the upside, you know, because you'd read some like dumb, I don't know, Maureen Dowd column, whatever, and she's still she's still, I think, you know, writing columns, but you'd read some dumb column or whatever in the 90s.

• 29:38Speaker 02

  But it wouldn't be like a completely lunatic, you know, conspiracy theory on their hand. It also wouldn't be extremely insightful, you know? It'd just be mediocre. And and so what what's happened is we've gotten more downside and more upside. So everything I just described with everybody sort of meeting, you know, to to for this Armageddon battle online, I think is absolutely real. But of course, at the same time, we have open source and we have Google and we have, you know, like incredible amounts of of learning and content and commerce and so on. That's happened thanks to the internet, right? And, you know, like, just like yourself and myself, or most of the people we've met on Twitter, you met all of these really interesting, smart,

• 30:24Speaker 02

  intelligent, valuable people that enrich your life online, you know? So there's a huge win to it. There's also a huge loss. And what I think happens is, you know, I have this concept that all progress actually happens, you know, on the z-axis. What I mean by that is, you know, for example, you start a company because you're tired of some existing bureaucracy, right? You leave Google, you leave, well, you know, you leave IBM, okay? You leave Microsoft, then you leave Google, then you leave Facebook. And each time what's happening is you leave the bureaucracy, you start something, often it fails. If it doesn't fail, you start getting more employees and, you know, you start

• 31:06Speaker 02

  building up, you know, processes. And eventually what happens, there's a flip from burn rate to bus number. Do you know those two things, burn rate and bus number? Like burn rate is...

• 31:15David Hoffman?

  I don't know bus number.

• 31:15Speaker 02

  Okay, so burn rate is like how much, how much money you're burning. Bus number is how many people can get hit by a bus, whether your company's still alive, right?

• 31:24Speaker 02

  And, you know, it's colloquial, whatever, right? But, you know, point being that early in a startup, every single person must be indispensable, okay? Because you're just trying to control costs, they all have to be total killers, unique, you know, amazing, amazing people. At a certain point, you know, once you've gotten the scalable business model where you're repeating it and you've gotten to 10 or 100 million revenue and you need to get to a billion, at a certain point, now having seen this many times, you know, as a venture capitalist and angel investor and having done it myself a few times, what happens is...

• 31:57Speaker 02

  You start having to go from burn rate to bus number, where everybody goes from being completely irreplaceable to you're not doing your job as CEO if they're not all replaceable. Because if one person can, you know, get sick or quit or something like that, it'd crash the site and you would not be doing your duty by your now millions of customers. So that is when bureaucracy starts. And in the best sense, what bureaucracy is, is sort of scaling the founder's instincts. You know, the founder kind of writes down what they would do. And now you can kind of act as if you were Jeff Bezos or whatever, you know,

• 32:39Speaker 02

  doing customer service himself, you know, and that sort of scales themselves. And then eventually it becomes Jeff Bezos' designate scaling themselves. You know, that manager says how the manager would do it and on and on, right?

• 32:53Speaker 02

  So in a sense, a properly functioning bureaucracy is like a set of algorithms that humans, rather than machines, execute. Okay. And it's meant to achieve a result and it's meant to sort of scale what that human would otherwise do themselves, but they can't anymore. And it's meant to sort of put a level of intermediation between, you know, this one unique person, rather than having a unique person. Anybody or any, any one of a class of people can now come into the role and they can do this legal role or they can do the system and role and amazon.com won't crash if one person quits. Okay. Now, what happens is as you do this, this necessary thing, it's like the transition from a single cellular to a multi-cellular organism.

• 33:36Speaker 02

  As you do this necessary thing, as you introduce this bureaucracy, you introduce stultification, you introduce deadening in a sense of individual initiative. How could you not? Because you're making everybody indispensable, or rather, you're making people dispensable. You have to do this. And as you make people dispensable, their alienation from their job increases because they realize, oh, someone else could do this. I'm not that unique. They don't really need me. I can go and do something else. This isn't that important and so on. And you can stay the same. Off to some extent as the thing keeps like growing, right? But but that that's sort of like a necessary thing that happens. And then what happens is you quit because of the bureaucracy.

• 34:15Speaker 02

  Okay, now that seems at first to just be a loop where we just came back to where we started where you quit from the bureaucracy and you rebuild the bureaucracy. Right? I I call this the libertarian founder rebuilds the state. Because you find that, you know, if you're a small libertarian or whatever, you know, you find that you actually need to. There's reasons that various progressive or conservative or whatever things are out there. The larger the organization, you start to realize you need to actually have some of these things. People want a bureaucracy. You know, the first or the 10th employee is simply not the same psychological mindset as a 10,000 in terms of their risk reward. Okay.

• 34:51Ryan Sean Adams?

  This this logic, this is why the pendulum swings back and forth like throughout time, throughout history from centrally. Centralization to decentralization. But I think what you're saying is right. Like, I think what you're saying is. If we talk about decentralization, is it good or bad? Well, like what you're saying is there's going to be winners and losers. Because the 1950s were very good for someone who is average, right? Whereas this more decentralized world is not really built for people for for kind of the average. It's not built for the bureaucracy centralization, even kind of the corporate example you gave. It optimizes for the average. But in this decentralized world, we can sort of optimize almost for the exceptional. And the exceptional people and the exceptional individuals, exceptional projects really stand out.

• 35:34Ryan Sean Adams?

  Like someone someone like in the crypto space, like Vitalik, you know, teenager, sort of created a white paper, right? Except exceptional individual and his true talents were able to be fully expressed in this decentralized permissionless world. Only possible by the internet. Is that kind of what you're saying?

• 35:52Speaker 02

  Yeah, I mean, though I would say one thing that's very important is I think the right metaphor is not a pendulum. Because that sort of makes it seem like there isn't any progress. I think the metaphor I think about is a corkscrew. Okay, so if you look down on right, as you look down on the corkscrew. It looks like the dial is just turning around and around. You go, you know, 12 all the way to six, back to 12 and so on. Which is similar to the pendulum metaphor. It seems like you're just coming back to where you are, right? But. If you think about, you know, IBM to Microsoft to Google to Facebook to, you know, Bitcoin and Ethereum, you're making progress there, you know, like there, there is a stack

• 36:35Speaker 02

  of technologies you're building up where you can do more things with with more, you know, and and as you go and you, you know, centralized, decentralized, you know, you've seen this within computing as well, right? You go from mainframes to personal computers to cloud to mobile to, you know, like, you know, now decentralizing with the, I mean, mobile is in a sensible centralized and decentralized, right? Because, you know, all the services are up in the cloud and the local thing is on your phone. And now, you know, back to crypto where, you know, you bring your private keys locally. Progress is happening. So that's what I'd say there. On your other point, yes, absolutely. Vitalik's a great example of this. I would, I would also note

• 37:17Speaker 02

  that there are folks who were sort of propped up by that existing system who are now falling as a consequence, you know, and, you know, that's like the, you know, in the 1950s, what did you do? You went and you sat on an assembly line and you pushed the same button every day for 30 years. Okay. In 2020, what do you do? You're pushing a different key every second on your keyboard. Right? And so like the, you know, just, just the level of innovation and difference and creativity and novelty you need to put out each day is just very different. Now, something else to think about is the 20th century was exceptional in terms of how average-making

• 38:02Speaker 02

  and homogeneous it was. That's say, if you go farther backwards in time, okay, you know, it like the idea of there being one telephone company and two superpowers and three television stations was actually a massive destruction of diversity of different ideologies, of different cultures, different ways of thinking, leading into kind of the homogeneity of 1950 and these two just Gaiga empires going at it. Okay. If you go farther backwards in time,

• 38:35Speaker 02

  You know, you go to the eighteen hundreds, um, you know, like there's Frederick Jackson Turner's concept of the frontier thesis, the US frontier closed in eighteen ninety. And if you go further backwards, you have, you know, the time of the robber barons or everybody was able to start, you know, companies, robber barons, by the way, you know, today you'd call them entrepreneurs or founders because they, you know, they built oil, they built railroads, they built mines, they built all the stuff that that helped build a country. Um, and, uh, you know, at least if you're in the US. And you also had private banking where people could issue currencies, uh, you know, very similar to crypto. You had, um, you know, sort of, uh, these communes, which are sort of like the intentional houses.

• 39:17Speaker 02

  So people would just go out west and take a bunch of people and you'd start a commune, like the Oneida commune and, and whatnot. That wasn't actually out west was kind of upstate New York. Conceptually west, yeah. And, yeah, it conceptually was basically out to the middle of nowhere, pretty much. And, um, and so the, uh, the, the thinking is that, um, our future is really like our past. You go further backwards in time and a bunch of like pseudonymous people started a new government, that was the seventy seventies, right? Um, and, and one of the reasons for that is communications technology at that time imposed necessary decentralization. Okay. You had lags of when a message could get from point A to point B.

• 40:03Speaker 02

  You know, the telegraph brought people closer together, but, you know, before the telegraph, okay, you had the lag of, you know, physical mail getting somewhere. You didn't, you don't have, you know, if you go further backwards, you didn't have photos getting somewhere and so on. So the ability to coordinate people was just fundamentally limited. Um, you had to build the whole thing as a decentralized system and your ability to enact a, uh, you know, a very centralized thing was, was less. As you came into the twentieth century, you got mass media and you got mass production. And so the ideologies that preponderated, you know, like, um, nationalism and communism and, and, and, you know, like kind of the fusion that that was the US, right?

• 40:46Speaker 02

  Uh, democracy, you know, slash capitalism. These were all ideologies that sort of justified control of gigantic numbers of people.

• 40:58Speaker 02

  Okay, and and you know, justified control in the sense that those people heard those ideologies. You're like, okay, that's legitimate for you to control me to at least some extent. It's sort of like a self-reversational loop, right? But um, but now I think what you've got, thanks to technology shifting, thanks to the fact that, you know, Instagram with 12 people can defeat Kodak with 12,000. Thanks to the fact that WhatsApp with 55 people can change text messaging for for billions of people. You you have new ideologies that are becoming feasible and older ideologies that are really showing their age because they were built under a time when just assumptions were different.

• 41:39Speaker 02

  And you know, this is the technological determinist thesis, by the way, which is every ideology you can think of has always been around. What's changed is the technology to make them feasible or inflexible.

• 41:48David Hoffman?

  But Lajee, I want I want to take a step back and kind of make sure our listeners are following through the cycles of conversations that we've gone through. Because there's a through line here to everything and I want to make make sure that the the listener understands how how we got here. We we started this conversation talking about how there was a in the 50s, you you talked about how that was peak centralization. There was like one canonical newscaster, there was one canonical or a few canonical sources of truth. And we didn't really have this distrust in institutions that we have today. And then you kind of cited how the internet is offers variance to the world. And and you cited that it was a good thing. It's the internet is a democratizing platform. If you have a voice, you can get a voice on the internet, you can create your own blog.

• 42:32David Hoffman?

  Now you don't need to have to listen to the one canonical source of truth. There are new sources of truth that are perhaps different and alternative and also right. And then also perhaps not right, there's there's fake news and there's real news. But for whatever for better or for worse, the internet creates every version of everything. And some of some versions will be bad and some versions will be good. Either way, we have more people able to have voice. It's a democratizing technology. And as a result of that. We've lost the signal, right? To some degree, some people have lost the signal, right? There's the absence of one trusted source of information means that it's harder to find truth, right? It's harder to to take trust in these legacy institutions because in some

• 43:15David Hoffman?

  instances, the legacy institutions are being proven wrong and also they're also being proven right. But there there is the be as a result of these democratizing technologies, we are losing our faith in previous institutions. And you've gone through a number of iterations of like, how the world has responded to this, like regardless of our our lack of trust in institutions, there still seems to be some progress. And we can take an evolution in Silicon Valley tech companies to illustrate some progress forward into the point where you cited, like now we have these things called Bitcoin and Ethereum, and that is also on that same spectrum of progress, right? Like there's cycles of history, revolutions of history. These are all the same patterns. And so what me and Ryan want want to get

• 43:59David Hoffman?

  to is, okay, so we have this, we're in this period of of there's a lot of noise, and the people are looking for signal, especially now. And when we see ahead of us, perhaps we only see more noise. In the in the next revolution of history, in the next turning of the corkscrew, where do we get that signal? Like, how do we, as a decentralized group of people, find consensus, find truth? Where does that come from in the future?

• 44:29Speaker 02

  Great question. So, you know, one of my sort of one liners, which I think you also found interesting is, you know, crypto anarchy is is interesting, but I prefer crypto civilization, you know?

• 44:41David Hoffman?

  I love that.

• 44:42Speaker 02

  You know, right? Okay.

• 44:43David Hoffman?

  Very clever.

• 44:44Speaker 02

  So here's what I mean by that. If you were sort of to rank order states of being, right? You know, the worst of all states is sort of tyranny combined with anarchy. That's like, you know, Venezuela, or to a lesser extent, you know, significantly lesser extent, but still not zero, like San Francisco. For example, in San Francisco, You know, you you park on the side of the street and you're one minute over and you'll get like a hundred dollar plus parking ticket. But you can like defecate in the middle of the street and nothing will happen to you. And so that's that's the tyranny on the law abiding, like the the poor Uber driver or whatever, who is just getting crushed by these fines, you know.

• 45:27Speaker 02

  Um, and it's actually a really big deal for them because it's like, you know, you can like take away their, it's very unfortunate, it can take away their entire day's earnings, one of those tickets. Um, but they see the guy who's not working at all, you know, just, you know, basically have, you know, doing drugs or attacking someone in the middle of the street, nothing happens to them. So that's like, that's like the worst of all worlds. Then you have actually just pure anarchy where there's like no government. Um, and that sucks as well, but at least you're not, you know, prevented from doing things by the state, you know, you can self organize. This is a little bit like Russia in the nineties in some ways, there were gangs, uh, what have you, but the oppressive state wasn't there to the same extent.

• 46:11Speaker 02

  Um, and so the state was at least absent, it wasn't like actively promoting, you know, disorder and tyranny. Then you go up one level and you have crypto anarchy and crypto anarchy is anarchy in in the physical world in some ways, but you've got a digital order, you know, it's like the apocalypse, but with internet, okay. Um, and, uh, you know, in some ways, that's what COVID is, right? The apocalypse, but with internet, at least it was in the early, early, early months. Um, and, um, and that's actually what Bitcoin's like disaster model is, crypto's disaster model is. Uh, so crypto anarchy is you now take anarchy and you put a layer on top of it, which is

• 46:51Speaker 02

  you have contracts, you have, you have a realm in the cloud where there is order and there is logic and there are rules and those rules are enforced by encryption and so on and so forth. Um, even if, you know, the the land around you is, if not Mad Max, um, you know, like the US this summer, you know, and in the last few months has certainly not been normal, you know, there's, there's many shades of gray, of course, between like totally copacetic and Mad Max, but it hasn't been normal, you know, and, um, And yet, like, the internet still works, cell phones still work, there's still incredible

• 47:32Speaker 02

  degree of order in the cloud. And now you go up on a level, and now you talk about crypto civilization, where you say, "Look, yes, cryptoanarchy is better than anarchy, which is in turn better than anarchy tyranny, but I prefer crypto civilization." Crypto civilization is, I can bring a group of people together to get to Mars, okay? I can bring a group of people together to build an integrated circuit or a hardware device, because it's actually still pretty hard to build those things, you know, like semiconductors, like the actual physical manufacturing still requires the coordination of fairly large numbers of people. Eventually, the robotics, maybe that goes away, but that's,

• 48:12Speaker 02

  we're not yet there. And so, how do we actually, you know, build a crypto civilization? Well, there's a lot of pieces to this, I've thought about lots of pieces. I have a book coming out called "The Network State," you can, you know, if you want to get updates on it, just subscribe at bologis.com, sign up, it's all free. But let me just touch on a few pieces of this. So, the first thing you need is, you need some source of absolute truth. I give, like, one, I shouldn't say one cheer, that's not exactly right, I give partial credit to the postmodernists, who, you know, have essentially the logic of, everything

• 48:57Speaker 02

  is a power relationship, deconstruct everything, it's all situationally or contingently, you know, true, if you have power, you can change what is true. You can divide truths into a spectrum of political truths on one side, and technical truths on the other side. So, like, a political truth is, you know, who is the CEO, or where is the border, or what is this money worth, okay? And those are things where if you can write enough software to people's brains, you can change who is the leader of some organization, or where the border is, or what the money's worth, because if enough of those people agree on it, that thing changes, okay? On the other side of the spectrum are technical truths, which are truths about, you know,

• 49:42Speaker 02

  genetics, or physics, or mathematics, like, you know, what is the genome of this virus? And, you know, how, how many microns in diameter is it? And how quickly does it replicate?

• 49:56Ryan Sean Adams?

  Okay. It's like social consensus versus like scientific truth.

• 49:59Speaker 02

  Yes, that's right. And, and the thing about a technical truth, the fundamental difference is a technical truth exists independent of human brains, whereas a political truth can be changed by affecting human brains. Covid nineteen was a huge shock to America because so much of the US has been set up to simply assume that everything was about a political truth. Okay? It's all about lawyers and PR firms and politics and media and Hollywood. And, you know, it's all just like convincing other people to do things versus, you know, even finance, even Wall Street, like, is, it's the best of the East Coast institutions

• 50:41Speaker 02

  or legacy institutions in some ways because it's at least zero sum, you know? Right? And, and so it's all just convincing people to convince people, and that's all fine until there's something that comes in that cannot be convinced because, you know, the coronavirus, you know, I mentioned this, it's highly non-compliant with regulations. It is willing to commit murder, you know? And, you know, it cannot be regulated, it's fully decentralized, blah, blah, blah.

• 51:08Ryan Sean Adams?

  Crosses borders without the passport, right?

• 51:10Speaker 02

  Exactly, that's right. So, so you can't bomb it, you can't regulate it, you, it doesn't get demoralized by negative press coverage, it has no bank account to freeze or seize, it is just this pure force of nature, you know? And it's, it's something where you realize that

• 51:28Speaker 02

  much of the US, much of the West is, it's, it's what I call founding versus inheriting. Okay? Much of the West has, is basically just operating on inherited institutions. You know, it's inherited names, it's inherited fortunes, but it's inherited institutions. And the same way that someone who's like the 10th generation scion of a factory, they can collect a, you know, a check from their trust fund, maybe they can tell the factory owner, hey, make t-shirts with this color rather than that color. But they certainly wouldn't be able to like repurpose the factory to go from, you know, like, like. Task A to Task B, let alone build a new factory from scratch. And that's kind of the problem that COVID presented to Western institutions is it had to do something new.

• 52:13Speaker 02

  They had to do something new, which they were incapable of doing. As opposed to folks like, let's say Bezos or Zuckerberg, who have founded something from scratch, like gigantic multimillion person, you know, logistics operations or multi-billion person networks, you know, communication networks. Those are very difficult things to do. Those are from scratch. Where you may think of them, they, they are the kinds of people who can organize large scale things from nothing. And so the point being that these inherited institutions not set up to deal with technical truths. Founders do have to deal with technical truths. And so one of the things to think about is how do you get people to agree on technical truths?

• 52:53Speaker 02

  Now, a big aspect of crypto is it took things that were previously wholly, meaning totally political truths, and started putting them into the realm of technical truths, you know? So like, who holds what money? Well, now we've actually put some cryptography around that.

• 53:09David Hoffman?

  And is that not just the inevitable march of humanity? Is that not the thing that we do? We, we put things into technical truths and then we build off of that?

• 53:20Speaker 02

  I don't know if that's the inevitable march of humanity. I think that, um, you know, there's significant regressions, right? So if you, have you, have you studied the Renaissance in detail? How much you know about it?

• 53:32David Hoffman?

  Not since AP Euro history, no.

• 53:34Speaker 02

  Okay, yeah, so like, I mean, this is, this is a little bit of an exaggeration, or you might quibble with this, but you know, imagine if, um, you know, like a server went down, like Google went down or something like that, and, um, just all server copies were deleted and someone had to sort of restore what they knew of Google from like one person's Git checkout.

• 54:01Speaker 02

  Okay, that's kind of like, you know, after, you know, the Roman Empire fell, you know, people copied these manuscripts and it was like a big deal to find like, oh, another piece of source code from this ancient culture that was like way ahead of us. And it was like copying of those like old piece of sources like, whoa, they were so much smarter. Man, I was able to recover this. We were never able to do this one from scratch, right? And so like you sort of piece together like a thousand years later, the tattered remnants of what had been a great civilization and then your people were able to rebuild. But it really was like, you know, a thousand year setback, you know, which is, which is a big deal. Now, there's folks who will argue, oh, you know, the Dark Ages wasn't really dark. There was progress in the medieval era, etc.

• 54:45Speaker 02

  But, you know, there's a reason that the Renaissance was a Renaissance is that they were like, wow, those, those old people were actually smart and had more advanced in us in some ways. Yeah. Um, so I wouldn't say it's a guarantee of civilizational progress. I do think there are ideologies that can crash a civilization and take it down.

• 55:06David Hoffman?

  Hey guys, there is so much left in this interview. Coming up next, Balaji gets into the differences between what he calls a crypto civilization versus what some people call crypto anarchy. We also ask him the question, is there room in the world for internet powered coordination groups that have the ability to grow to the size and the influence of a nation state? How a national consciousness might develop among this group of people? How this new nation might generate GDP and revenue for itself? And also why virtual reality is important in the establishment of this new nation? We're going to get into all of those topics. It's such an exciting interview. But first, we're going to take a moment to talk about some of these fantastic sponsors that make this show possible.

• 55:50Ryan Sean Adams?

  Bankless Nation. Do you want to go fully bankless, but in the real world? Monolith is the DeFi account that you need. It wraps your ETH address in a bankless Visa card and it does so much more. It closes the loop from fiat to DeFi. So you can onboard fiat to DAI on Monolith with zero fees. Then you can convert that. Die to ADI, which is an interest-bearing savings account. Again, zero fees. And then you can spend that interest in the real world on a Visa card. So you can finally buy your cup of coffee with interest earned in DeFi. Guys, this is magic. This is the closest thing to the Holy Grail crypto card. And Monolith gives you all of it. You need to download the app at monolith.xyz to get your bankless Visa card.

• 56:35Ryan Sean Adams?

  It's optimized for European listeners. They'll be coming to the US soon. And when you get that Visa card, the Monolith card, tweet about it when you do. I love seeing people unpackaging their beautiful bankless Visa cards. It makes me realize that the revolution is here. Search Monolith in the App Store.

• 56:54David Hoffman?

  Yearn is DeFi's first self-building project on Ethereum, focused on producing products for those who are interested in earning yield in DeFi. Yearn's various products are all built to suit each individual investor's preferred level of risk from various vault strategies that leverage DeFi tokens to the safer Earn system, which relies on stable coins. Vaults are aggressive yield-farming robots, each with a unique strategy that is designed to maximize the yield of the deposited asset. Yearn employs some of the most informed developers in DeFi to keep the vault strategies updated with the various yield-farming opportunities on Ethereum. For customers who are more risk averse, the Yearn's Earn product may be for you. Earn is a yield-aware dynamic money market

• 57:38David Hoffman?

  that automatically seeks the best interest rates across the various DeFi protocols and regularly migrates your deposited stable coins between the DeFi protocols that are returning the best yield at the present moment. Yearn is a system that is just a little over four months old, so things are still very much an experiment. However, this hasn't stopped people from depositing over $700 million worth of assets into the Yearn system in order to find yield on Ethereum. Perhaps the people that deposited all this money were tired of constantly making daily transactions to follow the best DeFi interest rates. And maybe the gas fees that they were paying ended up eating too much into their profits. With Yearn, it doesn't remove the risk of these various protocols that it leverages,

• 58:19David Hoffman?

  but it does remove the overhead of constantly trying to make sure you're finding the best yield and also so that you don't have to pay for gas to switch up your assets. Check out the products that Yearn has to offer at yearn.finance. That's Y-E-A-R-N dot finance, which they also have a nice statistics page to see what other people are doing.

• 58:40Ryan Sean Adams?

  So back to this idea of a crypto civilization, Balaji, right? So some in the crypto space, I think, are content with this idea of Bitcoin citadels and crypto anarchy, right? But you're advocating for something more, something that I think David and I in Bagless have talked about often. We've talked about the purpose of crypto is to solve human coordination problems.

• 59:02Speaker 02

  Right.

• 59:03Ryan Sean Adams?

  Particularly the difficult to solve coordination problems. So like, what kind of things, like, what is a crypto civilization? What sorts of things can we build on top of these trust machines? Like, is there room for completely self-sovereign internet-powered organizations that could even become as complex and as interesting and as coordinated, maybe as powerful, as a nation-state?

• 59:27Speaker 02

  One thing I just want to talk about with like citadels and so on. I mean, one issue is, we've seen so many post-apocalyptic movies that people have this sort of romanticized idea of what that is, but all the actors in those movies have perfect hair and makeup and, you know, they go off-set, they've still got a flush toilet and, you know, whatever. Like, and, and, and the thing is that, you know, in real life, you have supply chains, you know? And lots and lots of things that you just completely take for granted, you know, supply chains are very important. And supply chains, in their own way, are a social dependency, until you have, like, robotic autarky, which I do think can come, okay? I'm not, I'm not against that, but you have to actually realize that is itself a serious,

• 1:00:09Speaker 02

  huge, 20-year-plus technological project to have, like, robotic autarkic farms and mines, you know, where robots would mine and farm everything for you. That's becoming possible. Go and look at like vicarious.com, look at Rio Tinto, look at some of the stuff that Boston Dynamics has done, of course, and you'll see how, how, how much robotics has advanced in terms of grasping and packing and, you know, remote mining and stuff. But it's a big deal, right? So, supply chains exist, citadels are still unrealistic for that, from that standpoint, because you have social dependencies.

• 1:00:42Speaker 02

  So crypto civilization would basically mean using crypto to sort of rebuild civilization. And when I say rebuild, by the way, there's a saying, you know, that that's very famous, you know, from the early age of the internet or the commercial internet, which is there's only two ways to make money online that I know of unbundling and bundling. Okay. And so what sort of happened with social networks is we unbundled the nation state. But I think what's going to happen is we're going to rebundle the nation state into a concept that I'm calling the network state.

• 1:01:16Speaker 02

  And the network state starts, you know, a concise definition is a network state is a virtual or VR social network with an integrated cryptocurrency, a sense of national consciousness, and a plan to crowdfund territory. Okay. And so there's a bunch of things there, you know, I'll pack, unpack them. But essentially it is, it starts with the observation that if you, if you think about the emergence of BTC and ETH, right, 10 years ago Bitcoin didn't even exist. Or, okay, it existed in 2009, I should say 12 years ago Bitcoin didn't exist. But basically by about 2013, it was listed on Bloomberg and CNBC.

• 1:02:00Speaker 02

  You know, there's a price ticker for this pure internet phenomenon. And it was, it was the first of its kind, like purely from the internet, holy cow, you know, as opposed to something that had been uploaded from the offline world, right? This was a digital native object, like the thing we were talking about at the beginning, the primary in the mirror. This was primarily digital. It had no offline analog, right? And so being listed, there was this huge win. And now, of course, we don't think of that as that remarkable, but it, but it was a big deal. And in the same way, something I've thought a lot about is if you look at the list of, you know, countries in the United Nations, there's 233 countries in the United Nations. Just off the top of your head, do you know how many of them have a population less than 1 million?

• 1:02:43Ryan Sean Adams?

  I would definitely say most of them.

• 1:02:45Speaker 02

  Yeah, the majority.

• 1:02:46Ryan Sean Adams?

  But I'm not sure how many.

• 1:02:48Speaker 02

  It's about thirty percent have a population less than one million and about sixty percent have a population less than ten million. So, so the reason that's counterintuitive is most people live in big countries. Okay, so most people live in China, India, you know, the US, right? Even Russia, Germany, France, UK. So you think, okay, yeah, most countries are kind of like that. Actually, no, most countries are small countries. And what that suggests is, okay, well, look, if, if a million people in one place, that's a nation state. It's got borders. We call it Estonia, right? It's got a seat on the UN Security Council. It's got a flag. It's got, you know, like, it's got recognition from these other governments. Could you take a million people online?

• 1:03:33Speaker 02

  And if they develop a sense of national consciousness, which, to be clear, could take years or decades, you know, or even longer, okay? You know, I'm not saying it's like an overnight thing. But if they, if they do that, well, you know, there's a concept of national self-determination. Could they not crowdfund territory? Right? In the, in the same sense that the, you know, Estonians can afford Estonia, right? Like, in the sense of, like, probably, I haven't looked at the actual deeds and, and land records. But, you know, it, it is likely that those million Estonians own most of Estonia, right? A million people could crowdfund territory. And they could start by doing it with enclaves.

• 1:04:16Speaker 02

  So that is to say, they don't all have to be next to each other at the beginning. If you think about Google or Facebook.

• 1:04:23Speaker 02

  Have, have you ever been to a Google office?

• 1:04:25Ryan Sean Adams?

  I have not. I have not.

• 1:04:26Speaker 02

  You've not? Oh, really? Wow. Crypto really is a different culture, you know?

• 1:04:31Speaker 02

  It overlaps with tech, but crypto is to internet tech as internet tech was to desktop tech.

• 1:04:38Ryan Sean Adams?

  Yeah, totally agree.

• 1:04:39Speaker 02

  So, so, you know, there's, it's interesting to hear you say that because, you know, I sort of straddle both worlds, right? And there's, you know, just like there are folks who made the transition from desktop to the internet. But, yeah, okay, so you have not actually visited major tech companies. Have you ever been to any of them?

• 1:04:53Ryan Sean Adams?

  Nope.

• 1:04:53Speaker 02

  No? Wow.

• 1:04:54Ryan Sean Adams?

  I came, I came from a world of physical therapy.

• 1:04:57Speaker 02

  Oh, wow. Okay, that's so interesting and I'm glad to I'm glad to hear it. Okay, so I'll say something which you may not know. Okay, so if you have a Google badge, right, and you visit a Google office anywhere in the world, it's like a little piece of Google. It's a fractal polity. Okay, you walk in and the branding is just so, the couches are just so, there might be some twist for like, you know, Google Spain or whatever, maybe some of the signage is in the local language or something like that, right? But it's recognizably Google everywhere in the world, your login works, your, your, you know, your internet connection works.

• 1:05:34David Hoffman?

  You're allowed to be there.

• 1:05:36Speaker 02

  Yeah, you're allowed to be there. Exactly, right?

• 1:05:38David Hoffman?

  Like a WeWork. I do have that familiarity with WeWork.

• 1:05:41Speaker 02

  Okay, exactly. And in the same sense, you know, like to to give one cheer to defend the honor of the multinational, this is also why the frequent flyer actually likes Starbucks and McDonald's and so on. You know, it's, it's like, okay, I've got a familiar experience. Yeah, maybe it's not going to be that great, but I know they're going to burn the coffee just the way that I know it's going to be burned. You know, it's it's a devil I know, right? And so like my day is not going to get worse, right? So speak, right? So you're just bound downside by going there. And actually, that's often a valuable thing to do, right?

• 1:06:20Ryan Sean Adams?

  Plagi, it's it sounds like what you're talking about, right? So like, like going back to this funding a territory, that sort of thing, national consciousness, VR, I think those are the three things he said are part of a network stake. It sounds like you're proposing like the new ICO, but it's it's not an initial company, it's initial country offering. Like we could actually like fund one of these countries to be. So I have a friend who is American, he found out that through, you know, his ancestry, he has a small portion Luxembourgian, actually, in his family relations. So he went through the process and applied to the country of Luxembourg. And now he and his family actually have a Luxembourg citizenship,

• 1:07:05Ryan Sean Adams?

  which gives them access to. Like Europe and it seems very much to me as I was hearing a story and I think Luxembourg has a population of like 600,000 people that this is a country that almost like punches above its its

• 1:07:19Speaker 02

  Absolutely.

• 1:07:19Ryan Sean Adams?

  It almost like acts like a startup in that it is looking to attract citizens. It's almost like, you know, Dave and I, and I'm sure you have, Balaji, you've read the sovereign individual, right? That the whole thesis that

• 1:07:33Speaker 02

  I think I probably got a lot of people in crypto Twitter onto that, by the way, if you go back and look.

• 1:07:37Ryan Sean Adams?

  Yeah, I'm sure you did like and like, but but the idea is basically

• 1:07:41Speaker 02

  I got it from Teal. I got it from Teal. So, you know, that's legacy. Give credit to Peter.

• 1:07:46Ryan Sean Adams?

  Yeah. And that the idea, thank you, Peter. And the idea is basically that nation states would have to be competitive for population sets essentially. And I see that in Luxembourg. Is that kind of what you're saying that a digital nation would essentially do is attract some population? And like, I'm, I get kind of the VR part. I think the funding a territory part makes sense, right? Because we've seen sort of ICOs and what crowdfunding can do. What is this national consciousness piece? How do you get that?

• 1:08:16Speaker 02

  So one thing I'd say, let me just talk about a couple of things you said. First, just on the ICO bit. The thing about ICOs is, you know, like, I think they, I'm mostly negative on them, but not completely. The thing that's good about them is that you can do capital formation and so on, right? Instantly, all that stuff. The thing that's bad about them is it's a promise of fast money, you know, and, you know, venture capital has many flaws, but one of the things it evolved over time, which you sort of take for granted when you're in the space, is a mechanism to select for people who have ambition more than avarice. Okay. And what that means is you give them $10

• 1:08:59Speaker 02

  million and the first thing they do is they don't go and buy a sports car with it or whatever. They're putting it into the business, right? This is almost like, it's incredible to the extent to which that sort of assumed that any deal that I refer to somebody or who's referred to me, we have already done sort of that pre-vetting Mechanism to such an extent that you forget how important a vetting mechanism that is to some extent. Right. When you just open it up to the whole world, of course, there are crooks. Of course, there are people who just want to get money now. Right. And, and so the one of the big problems that ICOs is too much money like upfront versus like, you know, like building it over time. Of course, some people who can, you know, obviously Ethereum's ICO was great.

• 1:09:42Speaker 02

  There's some ICOs that have been great. I'm not against it as a thing. What I think happens, the rapprochement that happens is you bring a lot of venture terms into ICOs to protect investors. So for example, four year lockups and, you know, agreements on who can sell when, and the equivalence of boards and all the type of stuff. And that's entered into by all participants. So you sort of bring some of those structures, you know, in there. Okay. So that's kind of one thing. The reason I just wanted to push back on that is like, starting a new country. It's not like a, it's not a money making endeavor per se. It is, it is something which is, it's meant to actually get to a level of stability.

• 1:10:26Speaker 02

  It's a civilization making endeavor, you know. How do you build a stable civilization that can get to Mars? That can, can do brain machine interface, that can do limb regeneration, that can do reversal of aging and life extension. That's my interest in it. Okay. So there's not, go ahead.

• 1:10:43David Hoffman?

  So is this, is this goal to make, to perhaps like generate a community of online individuals? And then some, somehow like crowdfund money to purchase real property somewhere, real land. Is this, is this a goal to answer one of the original questions that we started this podcast with is, where are we going to look to for institutions into the future? It's like, well, our, our current institutions, our current governments aren't really doing their jobs. And so we will just make our own country and we'll do it ourselves. Is this the goal of this whole thing?

• 1:11:15Speaker 02

  Yeah. So, so the thinking is, I don't think many institutions that predated the internet will survive the internet.

• 1:11:21David Hoffman?

  Ooh, interesting.

• 1:11:23Speaker 02

  Okay.

• 1:11:24Ryan Sean Adams?

  Including the nation state?

• 1:11:25Speaker 02

  Including the nation state. Now, the thing is that there's two ways to get to a network state. One of them is like a retrofit of an existing nation state, which sort of networkifies it in the same way that, you know, buildings that that were exist in the 1800s got, you know, lighting and electrical power. If you go to east, the east coast, have you been to like, like a Boston or something like that? Or let alone Europe, you see these old, old buildings that have, you know, have been retrofitted for power and for lighting, which weren't before, right? Okay. So one way of doing it and, and, you know, some examples of network states, good versions, you know, coming from below, coming from the state up to the cloud. Uh, good versions would be like Estonia, um, you know, a bad ver-, you know, like Taiwan, Singapore are fairly,

• 1:12:11Speaker 02

  you know, computer savvy and so on. A bad version arguably is like China. And maybe where the US is heading, actually, in some ways where it's like, you know, the technology is used increasingly to oppress and to track and to surveil. Okay. Um, and, you know, China also does good things with technology. It's not purely dystopian. So, you know, I want to give some credit to them. I know it's, it's, it's not that fashionable to do so. It's not like every single person there is like, oh my God, get me out. But a lot of people are, um, a lot of people do want to get out. So it's not, it's not the ideal vision. The alternative is rather than having a retrofit where you take an existing state and you kind of retrofit it for the network, you start with a network and then you get the state. Now, how do you do that? Well, um, you know, that, that's going to be a process of degrees.

• 1:12:54Speaker 02

  But just to give you some proof points, um, if you think about HQ two, right? You think about Tesla and the Geiger factory. So Amazon HQ two negotiated, Amazon negotiated with New York and, and Washington DC and other places say, hey, look, if we bring 25,000 people, um, to your district, what can you give us, right? Can you give us guarantees that we can build there? You know, can you, um, like, you know, tell us that you're not going to impose new regulations or fees on us in the next few years, right? And, you know, cities bid on this, right? And, you know, some of them didn't like it, but they did also bid on it. And you know, Elon did this with Tesla, like his Geiger factory location, he got places a bit on it.

• 1:13:39Speaker 02

  Google did this with Google Fiber. And Boeing did this with its plant and eventually based it in South Carolina. And an interesting question is, can we take that outside the confines of mere companies? If we do that for communities. Okay, can we organize communities to do collective bargaining with governments?

• 1:14:00David Hoffman?

  Fascinating, fascinating.

• 1:14:02Speaker 02

  And so the thinking is crypto allows you to have binding online commitments. So if you have a million people who each put in a thousand dollars, that is a billion dollars in provable hard currency. You could show to, you know, the government of XYZ and you say, hey, look, this district over here is totally unoccupied. What if we pay you a billion dollars or you can see we're good for it? Or we pay you a hundred million, you know, a year for 10 years, right? And we set up this smart contract, which is doing so on the condition that self-driving cars are legal here and we can build whatever we want.

• 1:14:41David Hoffman?

  Balaji, how reasonable do you think that this is?

• 1:14:44Speaker 02

  I think it's extremely, nothing I've described violates the laws of physics.

• 1:14:49Speaker 02

  Right? You're just talking about a large online crowdfunding and not even that large because Amazon HQ2 was only 25,000 people.

• 1:14:57Ryan Sean Adams?

  What are the layers of the stack here? So I'm trying to understand, right? So we've got VR, right? You get that, right? So like, but like the crypto.

• 1:15:04Speaker 02

  Let me explain why the VR component, by the way, is important here.

• 1:15:07Ryan Sean Adams?

  Okay, do that. And I also want to, I also want to hear about kind of the crypto components, right? So from crypto, something like a Bitcoin or Ethereum, obviously we have some kind of a money or we have a stablecoin. And then with DeFi, maybe we get basically kind of financial infrastructure. And then like.

• 1:15:24David Hoffman?

  Decentralized. And he's going to be get involved somewhere.

• 1:15:27Ryan Sean Adams?

  Decentralized identity, I would, that that seems to be part of it. But also like the smart contract layer can almost act as sort of a, a financial, you know, law system or a corporate law system, if you will, like, are those Yes. base components? Or maybe you could describe some of the components we have now. That we didn't previously have that make this even feasible.

• 1:15:46Speaker 02

  So very briefly, VR is important because VR architecture is important. This is something which people outside the field don't really know. But architecture has gotten into VR as much as like traditional finance has gotten into crypto. Like it's it's a fairly big thing in architecture for maybe the obvious reasons. You can walk around the building, you can have clients look at it. It's just way more real when you can see it in 3D, you know. Oh, that's, you know, that beam is in a weird location. Oh, the window sells a weird location. Oh, the light will come in this window. We are, we should move the window. You can get, you can basically virtualize it. Okay. And what that means is what hasn't been done, but which I want to do is make that a social thing.

• 1:16:28Speaker 02

  Where, you know, John Winthrop in the, in the early, you know, kind of pre, pre USA America had this concept of, you know, the city on a hill. Okay. And, and the idea is that the, the city on a hill was,

• 1:16:47Speaker 02

  you know, how, how you'd build this amazing city up on a hill. That'd be a beacon for everybody and so on, right? So the update of that is, I think of the city in the cloud. Okay. We build this thing in this, in the cloud, which is this amazing futuristic city. And we can debug it and argue over it and edit it and fork it and whatever in the cloud. Yeah, because it's, it's bytes, right? So if, if somebody disagrees with it, you could fork it and materialize a different version in a different location. Cause when I say materialized, by the way, um, you know, VR architecture, you can get it to Autodesk quality, right?

• 1:17:30Speaker 02

  You can have the location of every pipe, every wire, every outlet, every, you know, like drop of paint can be fully specified in these VR environments. In fact, that's how things are constructed in, in Autodesk. You just need to, I'm not saying it's trivial, okay? But Autodesk does have stuff where you can upload to the cloud and, and, and see it in VR as well, right? So, so existing architecture firms have software for this kind of thing. And, and there's already energy towards it in that space. It sounds just like one person trying to do it. Point being, you can envision getting to a.

• 1:18:08Speaker 02

  Buildable blueprint in VR that you can walk through, not just for a single building, but for a community, not just for a community, but for a town, not just for a town, but for a city. Okay. And, um, and then, you know, Songdo, for example, it is possible to build a city. You know, like there are contractors out there, you know, in China. I don't know if you've seen some of these videos, they can snap together a train station in nine hours. You know, they can build a skyscraper in like a few days. Um, you can also, by the way, constrain your VR architecture for the purposes of rapid materialization. You know, for example, maybe you only use shipping containers or you only use these kinds of power outlets or these kinds of windows, you know, it's like your library of things that you can drag and drop into place

• 1:18:52Speaker 02

  is constrained in a certain way by cost or materials or weather or whatever. Right? Okay. So that's a VR component. What's a crypto component? Crypto component gives you a lot of stuff. It gives you, um, you know, the currency, of course. It gives you smart contracts for binding kinds of agreements. You can do crypto credentials. This is something I'm going to write more on, but I think it's a missing component for kind of online work is approvable, provable scarcity of credentials. That, that would actually remove a lot of interviewing time if you could just prove you knew Python and how well you knew Python. And then, you know, jobs just open up to you. You could just then qualify for GitHub tickets that you could do for a hundred bucks. You know, if you knew Python, right?

• 1:19:34Speaker 02

  Crypto is also something which allows people to crowdfund, allows them to make long-term provable commitments. It allows them to do encryption. It allows, uh, you know, people to do hosting, that's sort of sovereign hosting. Blah, blah, blah, all the things that, you know, we know crypto can do. Perhaps most importantly, um, and I don't think people realize how important this is. Something like ENS is a crypto identity that allows you to earn and speak under one name. You can speak under, you know, one pseudonym, earn under another pseudonym, your state name. They use unofficial forums as yet a different one. And, um, you know, this is something you can use to log into websites. It, it's something where everything that you do under your online names, you can have it fact.

• 1:20:18Speaker 02

  And organized and you you basically own all of that digital property. And this lets you exit and move between network states as well because you've you've got the self sovereign identity. So it's like your identity and your wallet and your private keys and so on all kind of coincide.

• 1:20:34Ryan Sean Adams?

  And and you mentioned you mentioned like property, right? So we've often talked about Bitcoin and Ethereum, and especially Ethereum being sort of like a digital property right system that's independent of the nation state. Would you depend on something like an Ethereum, for example, for a property rights for a a network state like this?

• 1:20:55Speaker 02

  Yeah, potentially. I mean, lots of small countries, by the way, they they do what's called dollarization or harmonization. Have you heard that term?

• 1:21:01Ryan Sean Adams?

  Yes.

• 1:21:02Speaker 02

  So dollarization is they peg their currency to the dollar, right? Harmonization is they outsource their regulation to the US rather than doing it themselves, you know? Relatively few countries actually have like their totally own sovereign military and sovereign currency and sovereign regulation and so on and so forth. They actually outsource much more than people think, you know? And so that's in sovereignty truly is a continuum. And you don't have to start, I mean, very few countries did start this way. You don't have to start as like, OK, I'm going to try and be like, you know, invading Iraq or whatever, you know? That's actually probably a stupid idea.

• 1:21:41Speaker 02

  You know, you what you want to do is start with

• 1:21:46Speaker 02

  mutual positive interactions with local governments where you are, hey, you know, we're just going to build a self driving car zone over here in this swamp where we're going to take video of it with drones. Nobody's living there. You know, we'll pay you X dollars per year. We'll, you know, we'll abide, and this is critical. Initially, you're just building new towns or new cities, right? You your initial agreement is probably the first 10 or so that you do of these communities. You are abiding by all local laws. You might ask for one. The first one, you don't even ask for an edit. You just show that you can build a town from the cloud, which is amazing. Okay.

• 1:22:27Speaker 02

  The second or the fifth or the 15th, you ask for an edit, which is, hey, let us do self-driving cars. Hey, let us fly drones here, you know? Hey, let us, let this be a fintech regulatory sandbox. We can just start a crypto company here, sort of like, you know, casinos are allowed on some Native American land. Right? Hey, let us, you know, do STEM cells here, like STEM cells are allowed in Germany. Right? You start asking for regulatory breaks where everybody who comes into this special innovation zone is there for the regulatory break for the, for the innovation and they've all gone in eyes wide open. Right? And then with success in that, you, you push farther. Right?

• 1:23:05Speaker 02

  And, and this is the same model, for example, of special economics zones that the UN and World Bank and others are all very familiar with and have endorsed. Except you're not like, it's not focused on taxes per se. What it's focused on is regulation because a tax is a, is a quantitative thing. It's like, okay, I would have got an X percent. Now I got Y percent. But a regulation is a qualitative thing where it's literally impermissible to do it in the first place. Impermissible to use or drive that self-driving car. Right? And making it permissible to do something that was impermissible is a binary thing. And that just unlocks something totally different.

• 1:23:40Ryan Sean Adams?

  We've been talking about this network state, this sort of crypto nation. But two things in my mind seem to be missing. The first question is, what is the economic engine of this thing? Is there some sort of incentive structure to contributing? And then let's get into the social layer of this thing. But first, the, the economic engine. What powers every, every, you know, nation has an economic engine of some sort. What is this nation's economic engine?

• 1:24:10Speaker 02

  So I think it's going to be digital labor for digital currency. Where the digital labor aspect is, it comes from a digital university. And so the idea is that, you know, cities in the past were.

• 1:24:30Speaker 02

  Begun on the basis of being near rivers or oceans or coal mines, you know, natural resources of some kind. More recently, they've, you know, been, that's become more commoditized thanks to shipping and so on. You don't have to be next to a coal mine to get access to coal. You do pay some surcharge for being far away from it, but you can get it shipped to you. And so, and not just from one location, but from any of the locations where it's being mined, right? And so instead, what matters is the proximity of a university of some kind. So Stanford and Berkeley are one example, but certainly, you know, Oxford and Cambridge and

• 1:25:13Speaker 02

  other universities around the world have sort of catalyzed these sort of local tech ecosystems. And in the cloud, if you could build a digital university that issued what I call a crypto credential, namely a provable certificate that shows that you have a certain skill, you know, and it could go very micro, right? It's like, I can code a binary tree in Rust. Okay. And the code, the source code that you have to do that is put on chain, as is the integration test that evaluates it. And it's maybe cosigned by a proctor who saw you type it in. And maybe it's encrypted so that it's not easy for somebody else to copy, but that you could easily give a view key to somebody so that they could run an integration

• 1:25:58Speaker 02

  test against it to confirm that you've actually coded it this time, right? I mean, there's other features as well, but this was just some of the, some of the things. That gives you something which is like a very fine-grained qualification. You might say, okay, well, why do I care if they can code a binary tree in Rust? Okay. Well, now let's say they've got examples where they can code not just a binary tree, but a skip list in a B-tree and, you know, like they've, they've coded a compiler and an operating system. They've basically gone through the list of major algorithms and data structures, and they've done so well in Rust, and they've got like 70 different examples. Okay, that might be somebody who could contribute to the parity codebase.

• 1:26:37Speaker 02

  Right, if they've done the same thing, they've done it in Go, that might be somebody who's qualified to contribute to the Geth codebase. Right, and so now you did is you just made the impedance matching from somebody's skill to their work much, much, much easier. And it could be something where, okay, you know, someone who has that crypto credential and they submit a pull request to your open source project, you're more likely to look at it. Or you just may, you know, merge it, given that they, you know, you probably want to review it for security and other types of stuff. But you're much, much more likely to look at it. If they interview with you, you're much more likely to give them an interview.

• 1:27:22Ryan Sean Adams?

  So basically, like crypto labors, right? And they get the, the crypto nation provides them credentials in this model of things. And of course, that's a powerful labor force, of course, they're all a credential labor force, which is pretty interesting. Does the crypto nation get its cut? Does a percentage of the earnings go to some tax system as a, as a nation state might do? Or is there some sort of like issuance fee, some sort of inflation that happens in the background? So like, what is the economic engine that actually pays for the, the national infrastructure, if you will?

• 1:27:57Speaker 02

  So the simplest is, and you know, several thoughts on this. First is, if you build an economy, there's like 500 different ways you can take fees off of that economy if you need to do that. Right, but the simplest is you boost people's human capital and then you take a cut. One way of doing that is, you know, the, the Lambda School model where it's an ISA. Right, you know, that is to say you, you train, you, you take a, a worker at Walmart, you train them in programming, you place them in a programming job. And, you know, Lambda School, for some people increases their income like a hundred thousand dollars a year. And then they take a cut of that via the ISA, right? So you literally increase somebody's human capital, you take a cut of it, that's a win, win, win all around, right?

• 1:28:41David Hoffman?

  Okay, so you educate the individuals and then as a result of that education, they go out into the workforce and you've invested in them with an ISA, an income service agreement, I believe?

• 1:28:52Speaker 02

  Yep.

• 1:28:52David Hoffman?

  And then you get your dividends paid to you by the labor of that person that you educated.

• 1:28:58Speaker 02

  Correct, that's right. And so they've made a hundred thousand dollars more a year and they give you back twenty or thirty thousand dollars, something like that, right? That's a Lambda School Business Model. Another business model is, you know, something like OnDeck where people pay to be part of a community and they get mentorship and help out of it, sort of like, you know, like, what's my college? Sort of like a college alumni network if you can't get into a college, you know, or, you know, you can't attend remote or something, right? But it's much cheaper than that. Still, you know, reasonably priced. So that's another version where it's a membership base, like community base, you're part of a

• 1:29:36Ryan Sean Adams?

  And then, and then so the laborer gets credentials, access to these credentials. What other public services do they get from the nation state? So if I'm in the nation of the United States, I get a pretty robust legal system, for instance, you know, generally a nice place to lay, to live, good, good rule of law, you know, there's geographic, I guess, you know, weather sorts of advantages. There's economic advantages if I'm close to a place like York City, that's, you know, financial hub of the world, these sorts of things. Those are the, the network effects that the United States has and the benefits of being a US citizen. How would such a nation state

• 1:30:17Ryan Sean Adams?

  or such a crypto nation attract the, these types of laborers? What would be the perks or the public goods?

• 1:30:25Speaker 02

  Yeah, so good question. So, well, first, I would sort of contest your premise, which is, I think that the value proposition of, you know, if you separate it out into physical America and digital America, okay, and you say, physical America is, you know, being physically present in the United States and digital America is, you know, having access to internet services, not all of which are American, but many of which are. So that's amazon.com and google.com and Wikipedia and whatnot, right? I argue that much of the value proposition of being physically in America has been uploaded to the cloud over the last 20 years.

• 1:31:11Speaker 02

  In the sense that you can live an American-grade life in Thailand or Poland or, you know, like, big swaths of Brazil and, you know, so on and so forth, right? In, in good chunks of the world, especially in Asia, much of Asia, you can live, uh, in, in Eastern Europe, you know, Western Europe, um, much of the Middle East, or at least parts of the Middle East that aren't, uh, you know, in war, but like Dubai, for example, pretty nice place to live, Israel, you know, um, and good chunks of South America as well, you can live an American-ish life, sometimes American plus, um, because it's better, you know, the, the streets are cleaner in Asia, you know?

• 1:31:53Speaker 02

  And, uh, your email is the same, you know, you log in and boom, you're in the same Gmail, no matter where in the world you are, right?

• 1:31:58Ryan Sean Adams?

  Do you mean irrespective of whether you have an American citizenship or not?

• 1:32:01Speaker 02

  Yes.

• 1:32:02Ryan Sean Adams?

  Sort of these quote-unquote like American internet services?

• 1:32:06Speaker 02

  That's right, that's right. I mean, the thing is that, you know, 20 years ago, you know, 30 years ago, there, there wasn't even the concept, like 30 years ago, you had to come to America to get Starbucks and McDonald's and, you know, clean streets and so on and so forth. Over 20, 30 years, the world has dramatically changed and lots more places have become livable. You know, it's like, the, the, the sort of things that you take, the reason I just say Starbucks is, it signifies a certain level of sort of consumer affluence that you can afford, afford to pay $4 for burnt coffee or whatever. I like the, I like the particular way they burn it, by the way, but, you know, it, it, it's just sort of a signal. You've got Starbucks, you've got an Apple Store, you've got high-speed internet connection,

• 1:32:47Speaker 02

  you've got food delivery, you've got, um, grocery delivery, you've got Amazon delivery, you've got printers and, you know, your, your plugs work, your, your power works, water works, a, all that type of stuff, right? The basics. Um, plus, you know, a little bit more than the basics, you know, you, you can get in much, much more of the world now than you could 30 years ago, 20 years ago.

• 1:33:12David Hoffman?

  So Balaji, one question that I have with the formation of this whole nation is why, the incentives are there, but what about this, how does a social fabric cohere? When the American Revolution established America, there was like a very similar shared set of values that people wanted to see instantiated. And I don't think that while there's plenty of incentive to move to this new theoretical nation, which that has intrinsic advantages and intrinsic incentives to be there, it seems to be missing a social purpose, a social coherency. How does a, how does a community arise in this new like nation?

• 1:33:55Speaker 02

  Well, so actually, that's a huge part of what I talk about in the book. Sure, first is absolutely, you know, when you think about France, the first thing you think about is not the French stock market, God bless them, okay? The first thing you think about is not, you know, the valuations of their tech companies or anything. You think about the Louvre, and you know, I know I'm pronouncing that wrong, the Louvre. Yeah, you think about, you know, the Eiffel Tower, and you think about baguettes and, and le fromage, and all this stuff, right? And, and you think about their, their culture, because they really do have an amazing culture. They've got some, they've done some amazing things. And that's what kind of defines them as, as a country. It is their art, it is their food, it is their, you know, architecture, it's all that stuff, right?

• 1:34:40Speaker 02

  And, you know, what's interesting is whenever you have large assemblies of people, there's sort of a default culture forming process. We don't usually think of this, but you know, the hundred something million person social network called Japan created sushi, and you know, the 300 million person social network called Reddit helped create keto, you know? And, you know, keto came out of Reddit, is absolutely a diet of the internet, you know? And, you know, you can argue it's a subculture, it's not the entirety of 300 million, I would agree with you, right? But it's not the cuisine of any country yet, but I think it will be.

• 1:35:21Speaker 02

  Okay, and so in the same way, once you start thinking about nations as just large collections of people with a shared culture, you should, one should also realize, well, actually, the US is unbundling, right? Certainly, people have talked about it as, you know, like, blue versus red or whatever, and that's an important aspect. But it's unbundling in lots of other ways. You know, it's got cloud people versus land people, you know, who are working remote versus working with their hands. It's got, you know, like, folks who are secular versus others. Just the commonality that bound the US together is just less there. And so you do have to rebuild that online. And, you know, I think

• 1:36:03Speaker 02

  it's a gradual process. It's not going to happen overnight. But, you know, things like,

• 1:36:10Speaker 02

  you know, articles that you agree with, piece of art that you like, generating culture together, hanging out together, socializing together. I think, you know, video games are underrated because they're remote play as opposed to remote work. You don't normally think of it this way. But, you know, for example, there's a company, which I respect, and they do like a Zoom coffee, right? And look, Zoom coffee is fine, you know, but you're sort of inventing a ritual, you know, to do that you wouldn't normally do, right? You know, it's a little unnatural to come and drink your coffee in front of the monitor, right? You know, what is natural is to get on Call of Duty or Fortnite, you know, with your friends and blow something up, right?

• 1:36:51David Hoffman?

  What's also natural, I think, would also be like finding people via Facebook or Twitter, right? That's a large part of how communities are established.

• 1:37:00Speaker 02

  That's right.

• 1:37:00David Hoffman?

  But in this podcast, we've talked about how Facebook and Twitter kind of represent, and Google kind of represent their own internal nations. Are these nations invited to this new nation? Or is that against the ethos? Is that against the purpose of this whole thing?

• 1:37:15Speaker 02

  So what do you mean? Are Facebook and Twitter nations invited to this new nation, is that what you're asking?

• 1:37:20David Hoffman?

  Yeah, like is the social fabric of the nation established through a Twitter medium? Or is that like antithetical because it's using an alternative Twitter? Or is using web two technology when it could be using a more decentralized medium?

• 1:37:34Speaker 02

  Oh, well, I, I, I mean, the technology is certainly one aspect of it. But I think the fundamental thing is that Twitter and Facebook are utilities, not communities.

• 1:37:44David Hoffman?

  Okay.

• 1:37:44Speaker 02

  Right? So the, the whole point is basically that, um,

• 1:37:52Speaker 02

  you know, Twitter in particular is just the public war zone. Right?

• 1:37:56David Hoffman?

  Right.

• 1:37:56Speaker 02

  People there, look, I mean, you're on crypto Twitter. I don't even need to tell you what that means, right? Like, people, basically, you know, for, for a number of reasons, Twitter has set it up to optimize engagement. Guess what? A, a significant number of humans do things that I would never have thought to do, which is like run up to strangers and just say F you at them. Right? And, you know, I remember like a year or two ago, I, I had a thread which was like, Twitter is not real life yet, but it will be. It was just before Corona, actually, I think, right? And the reason is, I was like-

• 1:38:32David Hoffman?

  I think the question I wanted, was getting at is the, what holds the social graph of the network?

• 1:38:38Speaker 02

  Ah, that's right.

• 1:38:39David Hoffman?

  Of, of, of the, that's what, I think that's what I really meant to ask.

• 1:38:41Speaker 02

  So, so good question. So the answer is different network states are held together by different things. So I think the first network state, you know, the one that like, you know, I, I may build, is, um, held together by the goal of, uh, immutable money, infinite frontier, eternal life. Okay? So that is to say, you know, Bitcoin, digital currency, of course, I respect Ethereum, you know, but, um, like immutable money, infinite frontier, like Mars, and eternal life, meaning reversing aging, right? And that kind of stands for a sense of, uh, you know, of progress, technological progress, um, and really pushing the frontier, the great acceleration as opposed to the great stagnation. And it's, it's sort of something, it's a little bit of a shibboleth. Do you know what the shibboleth is?

• 1:39:25Speaker 02

  It's like, it's a term from religion, which is like, um, a seemingly insignificant, you know, customer tradition that distinguishes like one group from another. Okay?

• 1:39:37Speaker 02

  So if you like, you know, Peter Thiel's Zero to One, if you like my book, if you like my Twitter feed, if you like Mark Anderson's It's Time to Build, if you like Elon's SpaceX, you know, feed, if you, you know, can do physics, if you are willing to fight back online, not necessarily to start a fight, but certainly to fight back if necessary, and so on and so forth. There's a bunch of these sort of cultural checklist items, and I'm not saying every single one of them is is critical, but all of those things together, that's like a particular kind of person, you know? It's like the pro-tech, you know, pro-future kind of person. And I think that's like, that's a network state I'm interested in building, something which is,

• 1:40:19Speaker 02

  it sort of restores what Western civilization used to have, which was the arrow of progress, right? The sense of not manifest destiny, like conquer someone else, but, um, you know, to to to get to space, right, to transcend, the sense of transcendence, you know, to overcome our limitations, to advance mathematics, to uncover the secrets of the universe, you know? That that's the the sense of the explorer, the the pioneer, to reopen the frontier, right? That's the kind of spirit that I'm looking for for the first network state.

• 1:40:56Ryan Sean Adams?

  And the the interesting thing about this, Balaji, is right, so somebody could take all of the open source that is built through the network state that you're envisioning, fork it, and instantiate their own network state with, say, a different set of values, right? Something like those, like, super, like, conservative, or super regressive, or like, they're really passionate about the keto diet, right, whatever. And then it's almost like a kind of a survival of the fittest, sort of, you know, which economy, which network state is going to attract the most sovereign individuals to live there and to grow its economy?

• 1:41:35Speaker 02

  That's right. So so that's right. So basically, um, you know, I think the first network state, we will set up for forking, in much the same way, imagine if Bitcoin was set up to fork at the beginning, right? Completely different world. If had, if that had been like a design decision from the beginning, I don't think Satoshi could have envisioned what happened with it, you know, like he, he or she or they figured out a lot of things, but it's pretty hard to predict the craziness of crypto or last, you know, 10 years, right? But had you set it up to fork, uh, which, which I, which I would intend to do. Yes, you could build a vegan network state. You could build one that was focused on, let's say Latin, right? You know, for example, the Israelis were able to revive Hebrew, which was a dead language, you know?

• 1:42:19Speaker 02

  You could have a Latin network state that wanted to revive Latin and Greek, which is, I mean, Greek is obviously a live language, but you know what I'm saying? That those used to be studied, right? You could have one that focused on like shipping container housing. And, uh, you know, there's, there's various subcultures and communities where their full expression, the reason I mentioned veganism, for example, is there's a whole supply chain associated with that, right? It's everything from food preparation to, um, it's something where if all the people opt in, you know, and they know it's all vegan by default, you don't have to ask people's dietary preferences, et cetera. You, um, you just know they're all vegan, right?

• 1:42:56David Hoffman?

  Vegan, vegan zone.

• 1:42:58Speaker 02

  Yeah, you're in the vegan zone. That's right. And so you, you know, somebody doesn't have to ask, they don't accidentally eat meat by mistake. They don't accidentally eat eggs by mistake. Uh, you know, none of the pots and pans, if you're really religious about it, you know, some people are literally religious vegans. You get it. You get, there, there's a certain benefit from flipping all the switches so you can go a full stack on something and the assumptions are just baked into the firmament, right?

• 1:43:24David Hoffman?

  So is this reorganizing the world from, like, if we take this experiment, this thought experiment out to the nth degree? Is the borders of the world reorganized by shared, by shared sets of values in, in all particular forms?

• 1:43:39Speaker 02

  Yeah. So I, I wrote an essay on this actually in 2013 called Software is Reorganizing the World, where essentially I predicted that because your actual community, it's not about your nation state or your state of mind, right? Actually, to go to something very fundamental, right?

• 1:43:58Speaker 02

  The whole piece of Westfalia, you know, 1648, which established what we think of as a modern nation-state, you know, what preceded that was, you know, the idea that the Catholic Church could have influence anywhere. And instead, what happened was, it was like, okay, this is our turf, that's your turf. We've got a government, it is the sole, you know, holder of the monopoly of violence over this territory, that's your territory. Catholic Church, you're not a sovereign here, right? That, all of those assumptions actually were not things that just came out of nowhere. They were fought over and negotiated for a long time. There's a fundamental presumption behind that, which is that people in the same geography, people who are close to each other in physical space implicitly share

• 1:44:43Speaker 02

  the same culture and therefore can be bound by the same laws. Okay. But now, when people live in anonymous apartment complexes and don't recognize each other, you know, people live in these huge apartment buildings and literally wouldn't recognize somebody who's living 10 feet away from them, you know. But what they do is they recognize somebody who's 3,000 miles away from them via Snapchat or WhatsApp or whatever, right? And so that's a different distance metric. You know, the distance metric in physical space, you can think of it as a so-called great circle distance, which is the distance between two points on the face of, the surface of a sphere, okay? Whereas the geodesic distance is the

• 1:45:24Speaker 02

  number of degrees of separation between two people in a social network. Now, the great circle distance is an approximation because in practice, you know, you're going to be constrained by oceans and by, you know, mountain ranges and deserts and so on and so forth. But roughly speaking, it's like the transit time over land between two people, okay? Whereas the geodesic distance is, you know, it's basically the speed of light, so it's the distance in a social network. And increasingly, that's the one that really matters because that's where you're spending much of your time. That's where your trade is happening. That's your social network. Those are the people you're talking with. And so you're in just a totally different headspace than the person next door, who themselves is a totally different headspace than the person next door to them, right? And that's the

• 1:46:07Speaker 02

  State of affairs we're in right now, but I think that because humans are still fundamentally physical beings, you know, um, that's like a rubber band that's going to snap and it's going to snap in such a way that it pulls people up into the cloud and then down into an area where they can all coalesce together, right? And COVID, because it just pushed remote everything because of COVID, because of Starlink, um, crypto is a big component. Uh, all of this stuff is going to, you know, especially in the, if a vaccine is deployed, right? Um, which would be wonderful, obviously, but if a vaccine is deployed, the world doesn't just go back to what it was. It is a fundamentally remote world now, right? Digital nomadism spikes, right? Because anybody can work

• 1:46:49Speaker 02

  from anywhere. All the stuff we've been talking about for the last decade just goes totally vertical and it becomes more feasible to just go and live with the people of like mind. You know, it's a plane ticket to go over there. Now, of course, it's harder for people with families. It's harder for people, you know, who aren't as mobile. And one of the things you want to do is you want to bring down that cost of exit. But here's the thing, even if only a relative.

• 1:47:13David Hoffman?

  Does some of that cost of exit come as a result? Like, I would imagine the legacy world, if you could embody the legacy world into one like Leviathan, the legacy world doesn't want that to change. Like the nation state isn't interested in this new future world. What are the frictions coming from the legacy world that's going to like kind of slow this progress down? Not everyone is ready for this kind of change.

• 1:47:39Speaker 02

  It's, it's going to be interesting. Um, I think that it's

• 1:47:45Speaker 02

  one important thing is that, um, you know, the world is no longer the United States, you know, or China, right? Uh, that is to say, you know, the US is 300 million people, China is 1.1 billion, 80% of the world is neither American nor Chinese, right? 96% is non-American. Um, so I think a lot of this is probably going to be done outside the US in various ways, number one. Number two is, you know, it's, it's not illegal to leave a country. In fact, it's a UN human right to be able to leave, you know, to like the right of people to emigrate. This, it's funny, all the stuff I talked about in terms of right to exit, you know, years ago.

• 1:48:30Speaker 02

  I think people appreciate that more with lockdown and with planes being shut off and so on and so forth. It's when that's taken away that you're like, oh, wow, the right to exit is actually pretty important, you know? Now, the right to exit is not the right to enter. A country may not decide to let you in, maybe due to Corona, maybe do other things, you know? But I think that we're in for an age of much more global migration than was previously possible. And many more nations are going to become nations of not just immigrants, but also immigrants. What's funny, by the way, is, you know, for Ireland, for India, for China, for other countries, those, you know, Mexico, those countries all encouraged their citizens in different ways, or at least certainly didn't extremely discourage them from leaving.

• 1:49:13Speaker 02

  The countries that have discouraged citizens for leaving tend to be the ones that are really bad. You know, like Cuba, like East Germany, which set up the Berlin Wall and shot people for trying to leave, like Russia. The US actually passed something called the Jackson-Vannik Amendment. Do you guys know what that is?

• 1:49:29David Hoffman?

  No. No.

• 1:49:30Speaker 02

  Jackson-Vannik was passed to allow Soviet Jews to be able to get out of the USSR because they weren't able to practice. They were, you know, particularly oppressed, you know, there, right? And so that's the kind of country which you can't get out of. Do you, by the way, do you know why the Berlin Wall was set up in the first place?

• 1:49:47David Hoffman?

  So people couldn't get out.

• 1:49:49Speaker 02

  Yeah, but the context of it was, after World War II, you know, the Allies, you know, the US, Britain, France, and the USSR split up, whereas the US and Britain and France on one side, really, the US coalition and, you know, the Soviet Union on their side. And Berlin was set up in this odd way, you can look at a map, where West Berlin...

• 1:50:12Speaker 02

  Or rather, the West Germany-controlled part of Berlin was part of East Germany, okay? And it was behind enemy lines, okay? It was in this weird enclave kind of thing, okay? And so because of that, what that meant was that it was a weird loophole that you could walk out of East Germany into West Berlin. Here's, here's actually, I'm gonna paste this into our little document or whatever, so you can just kind of get a visual of it. So, so you, you could walk out of the, the Eastern Bloc into West Germany and GTFO out of this horrible, you know, communist dictatorship, right?

• 1:50:56Speaker 02

  Now, of course, that was quite a loophole, and East Germany did not like that, especially once all the professionals started doing it, because those were the people that the communist regime was giving the worst deal to. So, they came with a term called Republikflucht, which pathologized anybody who left. And it was something which was basically like, oh, you're a traitor for leaving. Here, I'm just pacing it in over here. You're a traitor for leaving, I can't believe you're doing this. You know, from the moral standpoint, as well as the interests of the whole German nation, leaving the GDR, meaning the German Democratic Republic, is an act of political and moral backwardness and depravity.

• 1:51:37Speaker 02

  Those who let themselves be recruited objectively serve West German reaction and militarism. Is it not despicable when for the sake of a few alluring job offers or other false promises about a guaranteed future, one leaves a country in which the seed for a new and more beautiful life is sprouting, for a place that forevers a new war and destruction? You know, that kind of tone, right? And, basically, Republikflucht was this thing where, you know, the country that sucked, everybody wanted to leave it, and they started to put up barriers to leaving it. And then eventually, a wall where they shot you for trying to leave, and that was there for 40 years.

• 1:52:18Speaker 02

  So, I mean, it's, it's something where, actually, you know, 40 years, not exactly 40, it's 38 years, okay? But- That is something where unfortunately, I think some countries will go down that route. I think other countries are going to be more favorable to migration. Either A, because they're net winners, or B, because they're just more enlightened about it.

• 1:52:42Ryan Sean Adams?

  Okay, so another question I have, so say the right to exit. Like citizens start exiting countries in various ways. But what about the idea that like countries still could use the threat of force to make lesser countries, smaller countries, less powerful countries, sort of their satellite state, right? Almost subjugate them. Do you think that basically in geopolitics, it's sort of the rule of the jungle, Balaji? Or do you think that like there can be a more peaceful coexistence? Like for a crypto nation, would a crypto nation have to have a military, for instance? I mean, as crazy as that sounds.

• 1:53:24Speaker 02

  Well, I think that, you know, we're getting to, so a few things. First is, India managed to get its independence nonviolently, right? So did Singapore. So it is possible to do. So that's kind of one, one major concept. It's an important inspiration. I think also that, you know, you don't have to go to full sovereignty right away. You can, I mean, just getting a special innovation zone where you're building a new city, where you have dispensation from the powers that be. You know, there's 233 countries in the world. Some of them will want entrepreneurs to come near and build, you know, the self-driving car Detroit, right? So I don't think you need a military to do a lot of this stuff, number one. Okay.

• 1:54:07Speaker 02

  Number two, though, you ask, you know, could it be possible that somebody, you know, that governments will get very oppressive and so on? Unfortunately, that is possible. However, I would also say, you know, in.

• 1:54:20Speaker 02

  There's this sort of toy problem in differential equations where you've got two armies and you have the assumption that like the first army is N soldiers and the second is M soldiers and the N soldiers can kill the M soldiers at a rate K1 and the M soldiers can kill the N soldiers at a rate K2. And so what happens is each side is shooting the other and knocking down its soldiers, which knocks down the ability of the other guys to kill this group and and vice versa, right? So, you know, basically blam, blam, blam, blam, and who wins, right? And, you know, if you've got more firepower but fewer people, you might, you know, take them to zero faster than they take you to zero, right? Okay. And so in a sense, you know, you're losing power even as you're fighting better guys.

• 1:55:05Speaker 02

  There's a, there's a modification of that, which is it's not the, or guy is shooting you and therefore reducing your firepower. It is one where using your firepower causes enough public backlash that it reduces your firepower.

• 1:55:22Speaker 02

  Okay, so hard power, the use of hard power, especially if it's filmed, depending on how it's filmed and how it's put out there, potentially reduces the support for further ruthless measures of hard power. It very much depends on the context and so on, but it can be delegitimizing. Okay, so for example, when the USSR went and did, you know, the invasions of, you know, Hungary and of Czechoslovakia,

• 1:55:52Speaker 02

  like in 1956, you know,

• 1:55:56Speaker 02

  when the Soviets rolled tanks in there or when in 1968, when they rolled tanks into, you know, the, the, during the Prague Spring, both of those were things where the Soviets put it down, but they did so with just brute force, right? And

• 1:56:15Speaker 02

  And those, you know, like, they caused people to know that they were not free people, you know, and it did take 20 years. It wasn't something that happened overnight, but they paid a price for that, which was delegitimization among people, at least behind closed doors, you know? And, you know, I think that that price paid for the use of very coercive hard power is faster in the internet age with encrypted, you know, end-to-end messaging and so on and so forth. It's, you know, if you're brazenly, you know, attacking or censoring or, you know, doing something in a way that's non-consensual, you might try to suppress it and it might be

• 1:56:59Speaker 02

  partially suppressed in mainstream channels in China, in, you know, the US and whatever country, but it will, it will ultimately erode support for that regime. At least, this is the, that's a positive take, right? The negative take is you have a regime that's so efficiently totalitarian that it can actually reprogram people's brains enough that they don't even question it. You know, I think that's going to be hard in the age of the internet for lots of reasons, but I can't say it's impossible. So we have to work towards that, or against that, rather, to, towards a better future instead.

• 1:57:35Ryan Sean Adams?

  So Balaji, this has been so incredibly fascinating. I think, I think it's obvious to many who are listening that, like, you know, maybe coming to this podcast thought they were in like the, the end stages of the internet or the technology's over, that this is the very beginning. But to kind of pull this full circle and, and wrap this up, we, we talked about COVID at first and the world becoming more decentralized and even more variant, leading to this distrust in institutions and trust being the scarce commodity. And then we've got crypto as this trust substrate. And then we started talking about how crypto could be used not just for anarchy purposes,

• 1:58:15Ryan Sean Adams?

  but to build actual civilizations, even network states, as you call them. But remind us, put a bow on this for us. Why is this all good for the world? Like, what problem would this sort of thing solve?

• 1:58:31Speaker 02

  It would solve the problem of how to...

• 1:58:37Speaker 02

  Address regulatory harmonization. I know that seems like it's out of nowhere, but I think of that as actually the most important problem in the world. Okay, let's say, what, huh? Okay, I've never heard this term. Okay, let me explain. Harmonization is the process by which small countries outsource their regulation to the United States of America. Okay, so this is in the same way that a small company might outsource its law, outsource its login to Facebook, right? A small country might outsource its regulation to the USA, right? And when it does so, that means that the American bureaucrats at the FDA or the FEA or the SEC or what have you basically have a global hammerlock on regulation.

• 1:59:24Speaker 02

  That's to say they are able to just quash

• 1:59:30Speaker 02

  innovation worldwide because they're the police. You know, they can literally order raids and fines and seizures. They can get banks to pull your account. Usually it doesn't come to that, but you know, lots of threats happen beforehand. Usually when they just point the finger at you in the press, everybody just scurries away because they're so scared of getting hit, right? And the issue there is that, you know, when's the last time you elected a federal regulator in the US? They typically have career tenure. There's there's so-called plum book appointees, which are the folks who are appointed by a new administration. And those are the most senior officials, but the rank and file, including fairly senior people, just one notch below like

• 2:00:10Speaker 02

  the commissioner or the director or whatever, the rank and file, including this relatively senior managers often have career tenure, which means they can't be fired and they're not elected. So they're not subject to either if you, whether you have an electoral or market theory of accountability, they're not subject to either. But they also have a hammerlock on worldwide innovation through this process of harmonization. Now, cracks have started to form in this, for example, like, you know, in different ways, like Brazil has more liberal drone laws in some ways. Singapore has been doing self-driving car zones. Germany's experimented with stem cells and, you know, allowing people to do stem cells. The UK has a fintech regulatory sandbox. And, you know, Russia and China kind of have their own regimes for technology in many ways.

• 2:00:55Speaker 02

  So the the hammerlock is sort of breaking, you know? And of course you've got Uber, you've got Airbnb, you've got crypto.

• 2:01:04Speaker 02

  The US stranglehold over worldwide regulation is breaking. When I say stranglehold, it's like a few unelected, unnamed, unaccountable, unfireable people who have this hammerlock. But it hasn't fully broken, and in particular for fiscal innovation, it hasn't broken yet. And what you really want, because here's the thing, the naive person, I mean, look, I'm sympathetic in some ways to Ron Paul or what have you, but Ron Paul was like, "End the Fed", right? And the reason that's like laughable is, you know, the Fed is at the center of a thousand, a million different things. It's like this extremely important hub node. It's like saying, "End Google or end AWS." Okay, if you just did that without a replacement, the whole system crashes.

• 2:01:47Speaker 02

  However, exit the Fed is much more reasonable, right? Exit the Fed is BTC. Exit the Fed is, build something up over time, which gains backlinks in a gradual opt-in fashion, and gets through a thousand different proof points and a million different tests, and it gradually becomes the next financial system, as opposed to trying to do this overnight, switch over, just end it without a need of replacement. Okay? You can't just end it, you have to replace with something better. So in the same way, I think exit the ABC agency, exit the FDA, exit the SEC, exit, you know, the FAA, etc., comes when the 96% of the world

• 2:02:31Speaker 02

  that is not American realizes that harmonization may be holding them back. I mean, Corona has really taken the bloom off the rose, right? If you thought that the FDA was like this competent regulator, the fact that it held back the tests that could have prevented the pandemic in the US from becoming a pandemic, like, I don't know if you remember this, in February, emergency use authorization was denied to academic labs, preventing them from rolling out coronavirus tests. So that's why the country was flying blind for weeks, not knowing how many people actually had the disease, who was able to grow exponentially out of sight. Okay? And, you know, that's a very concrete, undeniable...

• 2:03:14Speaker 02

  Very large scale consequence example of what, you know, bureaucratic inertia can do, something that had the cost of trillions of dollars and hundreds of thousands of lives, that was in part on FDA, certainly in part on CDC, in part on, you know, the White House, in part on, you know, like the, the state of New York and, and every other state. But it's definitely something where had we had better biomedical technologies, had we had better quantified self, had we had better, you know, and faster genomic testing, there's many innovations I can point to that were held back by FDA over the last decade. For example, you know, your Apple Watch would have had way more sensors in it, had FDA not nerfed it, right? 23andMe would have been at, you know, hundreds of millions of

• 2:03:57Speaker 02

  people, so you might have been able to get pharmacogenomic analyses of, you know, individual drugs and vaccines and immunogenomic analyses of, you know, which, which particular immune things affected your, your disease response. If Uber and Airbnb, if, if you saw the taxi and hotel regulations were holding back hundreds of billions of dollars, and that's just taxi and hotel regulations, what is the FDA, what are the FAA, what are the SEC holding back? What are these ancient alphabet agencies holding back? It's going to be in the trillions of dollars, but even more than that, it's going to be in the millions of lives. The only way we can demonstrate that without crashing the system, you can't just end those agencies, though, because they're at the center of everything. Like, every approval goes through them, every company is hooked into them. You have to create new opt-in regimes

• 2:04:42Speaker 02

  outside where everybody opts into them, they take the risk, they deal with the bugs, because there'll be lots of failures at the beginning, and you have much faster innovation. And over time, enough people gravitate towards that, that it proves itself, or not, in which case, it's, you know, just like a shitcoin or whatever, you know, so to speak, it fails, right? And then, you know, the, the failure is limited to the 100 people who tried it out, rather than, you know, trying to impose that new regime on everybody, right? Makes sense? So this solves for a bunch of things. For those people who are what I'd call technological conservatives, they have an intact regulatory system, they can, if they like the regulations, they can keep them. For those Folks who don't, your body, your choice, right?

• 2:05:26Speaker 02

  You get enough people together and now you can get a jurisdiction where you actually have bodily sovereignty. Because, you know, we can do bungee jumping, right? We can do skydiving, euthanasia is legal. People, many people believe, you know, like marijuana, other kinds of drugs, recreational drugs should be legalized. When you add all that up, it doesn't make sense as to why you should be so restricted in terms of other kinds of medical procedures that could help you. And getting new regimes for doing this, I think that's the most important thing we could solve for biomedicine for other technologies.

• 2:05:59David Hoffman?

  Balaji, it's very clear that you have spent a lot of time thinking about this. We speak often on the Bankless Program about how these cryptoeconomic systems are social scaffolding for organization, right? Bitcoin as a money is a tool for people to coordinate around. Ethereum as a property rights management system is another tool for people to coordinate around. And we often speak about the logical conclusion of where this goes. What happens when we find new institutions to coordinate around? And so tip of the hat for being 10 years ahead, a decade ahead of everyone else

• 2:06:38David Hoffman?

  with how these things can actually manifest themselves as organizational tools in the real world. So, thank you for coming on the Bankless Podcast and sharing your ideas with us. They have been already extremely valuable to me and I look forward to listening back on this episode in the future as some of these ideas begin to manifest themselves in the real world.

• 2:07:00Speaker 02

  Thank you.

• 2:07:01Ryan Sean Adams?

  Guys, action items, you can go to balaji s dot com slash signup. I think he is going to be sharing more about his new book, A Network State, that is coming out, as well as other items of interest if you enjoyed this conversation. We will also include in the show notes, hyperlinks to all of the references that Bilaji made during the show. There are quite a number of them, so we will include that. Check those out. Lastly, five-star reviews on Apple Podcast. Guys, we are moving up the charts with those five-star reviews. Just a reminder, if you love Bankless, give us a five-star review.

• 2:07:41Ryan Sean Adams?

  Tell us what you like, and we will pop up the charts and get Bankless and crypto up into mainstream. Risks and disclaimers, everyone, none of this was financial advice. ETH is risky, so is crypto, as is DeFi. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on your Bankless journey. Thanks a lot.