#168 – Silvio Micali: Cryptocurrency, Blockchain, Algorand, Bitcoin, and Ethereum

Silvio Micali is a computer scientist at MIT, Turing award winner, and founder of Algorand. Please support this podcast by checking out our sponsors: – Athletic Greens: https://athleticgreens.com/lex and use code LEX to get 1 month of fish oil – The Information: https://theinformation.com/lex to get 75% off first month – Four Sigmatic: https://foursigmatic.com/lex and use code LexPod to get up to 60% off – BetterHelp: https://betterhelp.com/lex to get 10% off EPISODE LINKS: Silvio’s Twitter: https://twitter.com/silviomicali Algorand’s Twitter: https://twitter.com/Algorand Algorand’s Website: https://www.algorand.com/ PODCAST INFO: Podcast website: https://lexfridman.com/podcast Apple Podcasts: https://apple.co/2lwqZIr Spotify: https://spoti.fi/2nEwCF8 RSS: https://lexfridman.com/feed/podcast/ YouTube Full Episodes: https://youtube.com/lexfridman YouTube Clips: https://youtube.com/lexclips SUPPORT & CONNECT: – Check out the sponsors above, it’s the best way to support this podcast – Support on Patreon: https://www.patreon.com/lexfridman – Twitter: https://twitter.com/lexfridman – Instagram: https://www.instagram.com/lexfridman – LinkedIn: https://www.linkedin.com/in/lexfridman – Facebook: https://www.facebook.com/LexFridmanPage – Medium: https://medium.com/@lexfridman OUTLINE: Here’s the timestamps for the episode. On some podcast players you should be able to click the timestamp to jump to that time. (00:00) – Introduction (08:55) – Blockchain (11:52) – Cryptocurrency (14:42) – Money (18:56) – Scarcity (20:37) – Scalability, Security, and Decentralization (24:03) – Algorand (40:36) – Bitcoin (43:39) – Ethereum (45:10) – NFTs (48:34) – Decentralization of power (52:42) – Intelligent adaptation (55:25) – Leaders (58:31) – Freedom (1:01:31) – Privacy (1:04:15) – Bitcoin maximalism (1:08:01) – Satoshi Nakamoto (1:12:39) – One-way function (1:16:52) – Pseudorandomness (1:21:34) – Free will (1:23:39) – Will quantum computers break cryptography? (1:28:44) – Interactive proofs (1:35:38) – Mechanism design (1:43:04) – Favorite meal (1:46:18) – Book recommendations (1:53:15) – Advice for young people (1:55:48) – Fear of death (1:58:29) – Meaning of life

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

• 0:00Lex Fridman?

  The following is a conversation with Silvio McCauley, a computer scientist at MIT, winner of the Turing Award, and one of the leading minds in the fields of cryptography, information security, game theory, and most recently cryptocurrency and the theoretical foundations of a fully decentralized, secure, and scalable blockchain and algorithm, a company of cryptographers, engineers, and mathematicians that he founded in 2017. Quick mention of our sponsors: Athletic Greens Nutrition Drink, the information in-depth tech journalism website, Four Sigmatic Mushroom Coffee, and BetterHelp Online Therapy.

• 0:42Lex Fridman?

  Click the sponsor links to get a discount and to support this podcast. As a side note, let me say that I will be having many conversations this year on the topic of cryptocurrency. I'm reading and thinking a lot on this topic. I just recently finished reading The Bitcoin Standard, a book I highly recommend. As always with this podcast, I'm approaching it with an open mind, with compassion, with as little ego as possible, and yes, with love. I hope you go along with me on this journey, and don't judge me too harshly on any likely missteps. As usual, I will play devil's advocate. I will, on purpose, sometimes ask simple, even dumb, questions, all to try and explore

• 1:27Lex Fridman?

  the space of ideas here with as much grace as I can muster. I have no financial interests here. I only have a simple curiosity and a love for knowledge, especially about a set of technologies that may very well transform the fabric of human civilization. If you enjoy this thing, subscribe on YouTube, review it on Apple Podcasts, follow on Spotify, support her on Patreon, or connect with me on Twitter at Lex Fridman. As usual, I'll do a few minutes of ads now. There's timestamps, so you can skip, but if you skip, please do still check out the sponsors. Click the links, buy the stuff, whatever you have to do. It really is the best way to support this podcast. This show is sponsored by Athletic Greens,

• 2:11Lex Fridman?

  the all-in-one daily drink to support better health and peak performance. It replaced the multivitamin for me and went far beyond that with 75 vitamins and minerals. It's the first thing I drink every day. It's funny, I had a conversation with Jonathan from MIT, a friend of mine, who I just discovered was an ultra marathon runner. And he talked about one of the mistakes he made is he really didn't ramp up slowly enough. So he had to pay for the cost there. And I made this comment that, you know, life involves taking risks like that, you know, when you're not actually fully prepared, but taking on the task anyway. And sometimes it's worth it.

• 2:53Lex Fridman?

  But given that, it does seem nutritionally and physically in terms of like muscle, it's worthwhile to have like a base, like a balanced base of health, based on which you can do some like epic crazy stuff. So I think it's good to see life as always trying to maintain a healthy base that enables you to, in a somewhat healthy way, take on crazy activities. And, you know, Athletic Greens is on the nutrition side is that's how I see them, is they give me the basic nutritions I need, even if I mess up with the diet, even if I mess up with whatever sleep and whatever crazy stuff I do. Anyway, they also have fish oil and they're giving you one month's supply free

• 3:36Lex Fridman?

  when you sign up at athleticgreens.com/lex. That's athleticgreens.com/lex for the drink and the fish oil. Trust me, it's awesome. They're one of my favorite sponsors. Some of these reads, by the way, might go long, but you have timestamps you can skip. You don't have to listen to this, but I'm trying to do my best. I'm trying to do some interesting stuff that's actually worthwhile listening to. So hopefully it's fun and I'm trying to improvise more and more and just have fun with this thing. Life is short. I'm gonna have fun with everything, even sponsor reads. This show is sponsored by The Information. It's a website and a media company, I guess you can call it. They do in-depth, data-driven investigative journalism in the world of technology.

• 4:19Lex Fridman?

  I first came across their work a few years ago and remember being surprised that it was kind of expensive to sign up to, but I kept reading the stories and it pulled me in. The care, the depth of the reporting made me realize, oh, okay, this is what money can buy. So I think there was some stuff that I didn't always agree with, but I always felt like it was the kind of journalism that was missing from the clickbait world of tech reporting. So I signed up, even though I couldn't really afford it at the time, and it's been truly worth it. In fact, The Information is one of the places that made me think that there's hope for journalism. In some sense, it feels like the engagement mechanisms that are driven by social media

• 5:04Lex Fridman?

  is driving our journalistic integrity into the ground. And so the financial model that The Information operates under, it feels like it's a savior. There's also perhaps a side comment, or perhaps it's actually one of the main qualities of The Information, is because of the quality of the reporting and the writing, the kind of people that read it. So like the, some of the most successful CEOs I'm aware of read it. So it brings a lot of influential people together. So then indirectly, The Information becomes one of the places you go to, to understand what the sort of influential minds in the world of tech are thinking about. Anyway, you can get 75% off your first month if you sign up at theinformation.com/lex.

• 5:49Lex Fridman?

  That's theinformation.com/lex. Besides anything else, I see it just as a good way of supporting in-depth journalism. I hope you do as well. This show is also sponsored by Four Sigmatic, the maker of delicious mushroom coffee and plant-based protein. I know what you're asking, does the coffee taste like mushrooms? No, in fact, it does not. There's a bunch of healthy benefits they keep telling me about. You can research it yourself on the website, but all I know is it tastes good, it makes me feel good, and I'm a huge fan of coffee. Also, even though I'm mentioning mushrooms, unfortunately, or fortunately, there is no psychedelic properties to this coffee. That said, I will be having a lot of conversations with psychedelics researchers

• 6:32Lex Fridman?

  on this podcast. I think it's in terms of the next couple of decades, one of the most exciting areas of research in the space of neuroscience, neurobiology, in the space of psychology, cognitive science, and even just philosophy. So, and even just medicine for overcoming addiction and all those kinds of things. But back to the coffee. Get up to 40% off and free shipping on mushroom coffee bundles. If you go to foursigmatic.com/lex. That's foursigmatic.com/lex. This episode is also sponsored by BetterHelp. They want me to spell help. I refuse to spell help. It starts with an H, ends with a P, and the rest, please try to figure out. They

• 7:14Lex Fridman?

  help you figure out what you need and match you with a licensed professional therapist in under 48 hours. I'm now triggered by the number 48 because it happens to be related to the challenge that I recently completed, the four by four by 48 challenge from David Goggins. Speaking of which, that man is not a licensed professional therapist, but he in fact is one of the kind of philosophical mentors, philosophical guides for me in exploring my own mind, the limits of my own mind, the madness of my mind, the temper ups and downs and the anger and how to use it successfully and how to avoid it and all those kinds of things. He truly is one of the most fascinating

• 7:56Lex Fridman?

  people I know. And dare I say, almost like a kindred spirit to me in terms of madness. So I very much look forward to doing a podcast with him. We postponed the one that we're supposed to do for the four by four by 48 because I hurt my foot and couldn't really push myself to the limit as I wanted to. So we decided to wait until everything is healed and I can really do some crazy stuff together with him and combine a podcast on top of that. Anyway, BetterHelp is easy, private, affordable, available worldwide. Check them out at betterhelp.com/lex. That's betterhelp.com/lex. And now here's my conversation with Silvio McCauley.

• 8:55Lex Fridman?

  Let's start with the big and the basic question. What is a blockchain? And why is it interesting? Why is it fascinating? Why is it powerful?

• 9:04Speaker 01

  All right. So a blockchain, think of it, is a, is really a common database distributed. Think about it as a ledger in which everybody can write an entry in a page. You can write, I can write, and everybody can read. And you have a guarantee that everybody has the same copy of the ledger that is in front of you. So whatever you see on page seven, anyone else sees on page seven. So what is extraordinary about this is this common knowledge thing that I think is a really a first for humanity. I mean, if you look at communication, like right now, you can communicate very quickly

• 9:49Speaker 01

  images, thoughts, photos. But do you have a certainty that whatever you have received has been received by everybody else? Not really. And so this is a common knowledge and the certainty that everybody can write. Nobody has been prevented from writing whatever they want. Nobody can erase. Nobody can tear a page of a ledger. Nobody can swap page. Nobody can change anything. And that is a immutable common record is extremely powerful.

• 10:20Lex Fridman?

  And there's something fundamental that is decentralized about it. So at least in spirit, some degree, against maybe a resistance to centralization.

• 10:30Speaker 01

  Absolutely. If it is not decentralized, how can it be common knowledge? If only one person or a few people have a ledger, the only, you don't have a ledger. You have to ask, you know, what is on page seven? And how do you know that whatever they tell you is on page seven? They tell the same thing to everybody else. And so that is this common knowledge is extremely powerful. Just to just to give you an example, assume that you do an auction, okay? You have worked very hard, you build a building and now you want to auction off. Makes sense because you want to auction worldwide, better yet, you want to organize the building and sell it in parcels.

• 11:16Speaker 01

  Now, everybody sees the bids and you know that everybody sees the bids. You and I see the same bid and so does everybody else. So you know that the fair price has reached and you know who owns what and who has paid how much. And if you do it instead of a wise, you know, in a centralized system, I put a bid, say, oh, congratulations, Alex, you won and your price is $12,570. How do you know? So if instead of this common knowledge is a very powerful tool for humanity.

• 11:52Lex Fridman?

  So we'll return to it from a bunch of different perspectives, including like a technical perspective, but you often talk about blockchain and some of these concepts of decentralization, scalability, security, all those kinds of things. But one of the most maybe impactful, exciting things that leverage the blockchain, this kind of ledger idea of common knowledge is cryptocurrency. So in the financial space. So is there, can you say in the same kind of basic way, what is cryptocurrency in the context of this common knowledge and in the context of the blockchain?

• 12:33Speaker 01

  Great. Cryptocurrency is a currency that is on such a ledger. So imagine that on the ledger, right, initially, you know that somehow, say, you and I are the only owner, each one, let's give it our ourselves a billion each of whatever this unit. Then I start writing on the ledger. I give a hundred of these units to my sister. You give my, I give this much to my aunt. And then, and then now, because it's written on the ledger and everybody can see. My sister can give fifty seven of these units that she received from me to somebody else. And so, and, and, and that is money.

• 13:14Speaker 01

  And that is money because you can see that somebody who tenders your payment has really the money there. Right? You don't have any more of a doubt when you want to sell an item. If I write your check, is the check covered? If, uh, I write, or do I have the money at the moment of the transaction? You really see because the ledger is always updated. What you see is what I see and what the merchant sees. You know that the money, so is, is the most powerful money system there is. Because it is totally transparent and so you know that you have been paid. And, and you know that the money is there. You have not to second guess anything else.

• 13:55Lex Fridman?

  So the, the common knowledge applied there is you're basically mimicking the same kind of thing you would get in the physical space, which is if you give a hundred bucks or a hundred of that thing, whatever, of that cryptocurrency to your sister, the actual transfer is as real as you giving like a, a, a basket of apples to your sister. Because the, uh, so in the case in the physical space, the, the common knowledge is in the physics.

• 14:27Speaker 01

  Right.

• 14:27Lex Fridman?

  Of the atoms.

• 14:29Speaker 01

  Yes.

• 14:29Lex Fridman?

  And then it's digital space. The common knowledge is in this ledger. And so that transfer holds, um, the same kind of power. But now it's operating in the digital space.

• 14:41Speaker 01

  Go ahead.

• 14:43Lex Fridman?

  Again, I apologize for a set of ridiculous questions, but, uh, you mentioned cryptocurrencies and money. What, what is money? Uh, why do we have money? Do you think about this kind of from this high philosophical level at times of this, uh, tool? This idea that we humans have all kind of came up with and seem to be using effectively to do stuff?

• 15:11Speaker 01

  Money is a social construct, okay? In my opinion. And this has been somehow, people always felt that somehow money is a way to allow us to transact, even though we want to different things. So I have two sheep. And then you have one cow. And I wanted a cow, but you are looking for blankets instead, you know? So to have money is really simplifies this. But at the end of, and that's why a bit was invented. And you started with gold, you started with cornage, when you started with check. But at the end of the day, money is essentially a social construct because you know that what you receive,

• 15:56Speaker 01

  you can actually spend with somebody else. And so there is a kind of a social pact and social belief that you have. At the end of the day, even a barter is of requires a this beliefs that other people are going to accept the quote unquote currency you offer them. Because if I'm a mason and you ask me to build a wall in your field, and I did, and you, in exchange, you give me a thousand sheep? What am I going to do? Eat them all? No, I have to feed them. And if I don't feed them, they die and I my value is zero.

• 16:35Speaker 01

  So in receiving this livestock, I must believe that somebody else will accept them in return for something else. So money is this a social belief, social shared belief system that makes people transact.

• 16:52Lex Fridman?

  That's fascinating. I didn't even, I didn't even think about that, that you're actually, you have a deep like network of beliefs about how society operates. So the value is assigned even to sheep based on that everyone will continue operating how they were previously operating. Somebody will feed the sheep. I didn't even, I didn't even think about that. That's fascinating. So that directly transfers to, to the space of money and into the space of digital money, cryptocurrency. Okay, does it bother you?

• 17:27Lex Fridman?

  Sort of intellectually, when this money that is a social construct is not directly tied to physical goods, like gold, for example?

• 17:37Speaker 01

  Not at all, because after all, gold has some industrial value, nobody denies it. It's a metal, it doesn't oxidate, it has some good things about it. But does this industrial value really represent the value which now is traded? No. So gold is another way to express our belief. I give you an ounce of gold, you treat it like, oh, somebody else will want this for doing something else. So it is really this notion of this. Money is a mental construct, is really, and is a shared, is a social construct, I really believe. And so some people feel that it's physical, so therefore gold exists.

• 18:20Speaker 01

  But then, as you know now, we, countries, most sophisticated country right now, they print their own money and you believe that they are not going to exaggerate it with inflation. Not everybody believes, but I'm saying, there is at least, they are not going to exaggerate it blatantly. And therefore you receive it because you know that somebody else will accept it, will have faith in the currency and so on and so forth. But whether it's gold, whether it's livestock, whatever it is, money is really a shared belief.

• 18:56Lex Fridman?

  So there is something, you know, and I've been reading more and more about different cryptocurrencies.

• 19:03Lex Fridman?

  There is a kind of belief that the scarcity of a particular resource like Bitcoin has a limited amount

• 19:14Lex Fridman?

  and it's tied to physical, you know, to proof of work. So it's tied to physical reality in terms of how much you can mine effectively and so on. That that's an important feature of money. Do you think that's an important feature to be a part of whatever the money is?

• 19:32Speaker 01

  That is certainly a very useful part. So at some point in time, you know, assume that money is something that all of a sudden we say daisies are money, are the currency. Then, you know, I offer you 10 daisies in payment of whatever goods and services you want to provide. But at the end of the day, if you know that you can cultivate it and generate them at will, then perhaps you should not accept my payment. Here is a bouquet of daisies. So you need some kind of a scarcity, the inability to create it suddenly out of nothing is unimportant.

• 20:13Speaker 01

  And it's not an intrinsic necessity, but it's much easier to accept once you know that there is a fixed number of units of whatever currency there is. And therefore, you can mentally understand I'm getting this much, this piece of the pie, and therefore I consider myself paid. I understand what I'm receiving.

• 20:37Lex Fridman?

  You described the goals of a blockchain. You have a nice presentation on this as scalability, security, and decentralization. And you challenged the blockchain trilemma that claims you can only have two of the three. So let's talk about each. What is scalability in the context of blockchain and cryptocurrency? What does scalability mean?

• 21:00Speaker 01

  So remember, we said that a blockchain is a ledger, and each page receives, gets some transaction, and everybody can write in these pages of a ledger. Nobody can be stopped for writing, and everybody can read them. Okay. Scalability means how fast can you write? Just imagine that you can write an entry in this special shared ledger once every hour. Well, you know, what are you going to do if you have one transaction per hour? The world doesn't go around. So you need to have scalability means here that you can somehow write a lot of transaction, and then you can read them, and everybody can validate them. And that is the speed.

• 21:45Speaker 01

  And the number of transactions per second and the fact that they are shared. So you want to have this, the speed, not only in writing, but in sharing and and inspection for validity. This is scalability. The world is big. The world wants to interact with, the people want to interact with each other. And you better be prepared to have a ledger in which you can write lots and lots and lots of transactions in this special way, very, very, very quickly.

• 22:15Lex Fridman?

  So maybe from a more mathematical perspective, or can we say something about how much scalability is needed for a world that is big?

• 22:24Speaker 01

  Well, it really depends how many transactions you want. But remember, I think right now you have to go into at least a thousands of transactions per second. Even if you look at credit cards, right? We are going to go from an average of sixteen hundred to peaks of twenty thousand, forty thousand, something like this. But remember, it's not only a question of the transaction per se, but the value is that the transaction is actually being shared and visible to everybody. And the certainty that that is the case.

• 23:05Speaker 01

  I can print on my own printer way more transactions, but nobody has the time to see or to inspect. That doesn't count, right? So you want scalability at this common knowledge level. That is the challenge.

• 23:20Lex Fridman?

  I also meant from a perspective of like a complexity analysis. So does it, you know, when you get more and more people involved, does it need to scale in some kind of way that, like, do you like to see certain kind of properties in order to say something is scalable?

• 23:39Speaker 01

  Oh, absolutely. I took a little bit implicitly that the people transacting are actually very different. So if there is two people who can do thousands of transactions per second with each other, that is not so interesting. What we really need is to say there are billions of people at any point in time, you know, thousands and thousands of them want to transact with each other, and you want to support that.

• 24:02Lex Fridman?

  So Algorand, it solves, so that's the company, the team of cryptographers and mathematicians, engineers, so on, that challenged the blockchain trilemma. So let's break it down in terms of achieving scalability. How do we achieve scalability in the space of blockchain, in the space of cryptocurrency?

• 24:25Speaker 01

  Okay, so scalability, security, remember, and decentralization, right? So that's what you want.

• 24:31Lex Fridman?

  What's the best way to approach? Can we break it down? Let's start with scalability and think about how do we achieve it?

• 24:37Speaker 01

  Well, to achieve it at one at a time is perhaps easy. Even in security, if nobody transacts, nobody loses money. So that is secure, but it's not scalable.

• 24:50Lex Fridman?

  Good point.

• 24:50Speaker 01

  So let me tell you, I'm a cryptographer, so I try to fight the bad guys. And what you want is that a vessel ledger that we discussed before cannot be tampered with. So you must think of it that is a special ink that nobody can erase.

• 25:07Lex Fridman?

  Okay.

• 25:08Speaker 01

  Then it has to be, everybody should be able to read and not to alter the pages or the content of the pages. That's okay. But you know what? That is actually easy cryptographically. Easy cryptographically means you can use tools invented 50 years ago, which in cryptographic time is prehistory, okay? We are cavemen working around and solve the problem in cryptography land. But you know, but there is really a fundamental problem, which is really almost a social, seems a political problem, is to say, who the hell chooses or publishes the next page on the ledger?

• 25:52Speaker 01

  I mean, that is really the challenge. This ledger, you can always add a page because more and more transactions to be written on there. And somebody has to assemble this transaction, put them on a page and add the next page. Who is the somebody who chooses the page and adds it on?

• 26:09Lex Fridman?

  Who can be trusted to do it?

• 26:11Speaker 01

  Exactly. Assume it is me for the time being, not that I won't volunteer for the job. But then I would have more power than any absolute monarch in history. Because I would have tremendous power to say, these are the transactions that the entire world should see. And whatever I don't write, this transaction will never see the light of day. I mean, no one had any such a power in history. So it's very important to do that. And that is the quintessential problem in a blockchain. And people have thought about it to say, it's not me, it's not you. But for instance, in proof of work, what people say is, okay, it's not me, it's not you. You know what it is?

• 26:54Speaker 01

  We make a very difficult, we invent a cryptographic puzzle, very hard to solve. The first one to solve it has the right to add one page to the ledger on behalf of everybody else. That's now seems okay, because you know, sometimes I solve a puzzle before you do. Sometimes you solve before I do or before somebody else, somebody else solves it. It's okay.

• 27:19Lex Fridman?

  And presumably, the effort you put in is somehow correlated with how much trust you should be given to add to the ledger.

• 27:29Speaker 01

  Yeah, so somehow you want to make sure that you need to work, because you want to prevent, you want to make sure that you get one solution every 10 minutes, say, like in the particular example of Bitcoin. So that is very rare that two pages are added at the same time. Because if I solve a puzzle at the same time you do, it could happen that if it happens once or twice, we can survive it. But if it happens, you know, every other page, you know, is a double page, then which of the two is the real page? It becomes a problem. So that's why in Bitcoin, it is important to have substantial amount of work. So that not many, how many people try on earth to solve a puzzle.

• 28:14Speaker 01

  You have one solution out of how many people are trying every 10 minutes. So that you have, you distanciate these pages and you have the time to propagate through the network a solution and the page attached to it. And therefore, there is one page at a time that is added. And they say, well, why don't we do it? We have a solution. Well, first of all, a page every 10 minutes is not fast enough. It's a question of scalability. And second of all, to ensure that no matter how many people try, you get one page every 10 minutes, one solution to the riddle every 10 minutes. This means that the riddle becomes very, very hard.

• 28:59Speaker 01

  And to have a chance to solve it in, within 10 minutes, you must have such an expensive apparatus in terms of specialized computers, not one, not two, but thousands and thousands of them. And they produce tons of heat, okay? They dissipate heat like maniac. And then you have to refrigerate them too. And so then now you have air conditioning galore to add to the thing. It becomes so expensive that fewer and fewer and fewer people can actually compete in order to add to the page. And the problem becomes so, so, so crucial that in, in, in Bitcoin, depending on which day of the week you look at it,

• 29:44Speaker 01

  you are going to have two or three mining pools are really the ones capable of controlling the chain.

• 29:52Lex Fridman?

  So you're saying that's, that's almost like, at least a centralization?

• 29:58Speaker 01

  Right. It started being decentralized. And but the expenses became higher and higher and higher. When the cost becomes higher and higher, fewer and fewer people can afford them. And then, you know, it becomes, you know, de facto centralized, right?

• 30:13Lex Fridman?

  Yeah.

• 30:14Speaker 01

  And, and a different type of approach is instead, for instance, a delegated proof of stake, which is also very easy to explain. Essentially boils down to, to say, well, look at these 21 people, say, okay? And don't they look honest? Yes, they do. In fact, I believe if they're going to remain honest for the foreseeable future, so why don't we do ourselves a favor? Let's entrust them to add the page on behalf of all of us to the ledger. Okay? Okay, but now we are going to say, is this centralized or decentralized? Well, twenty-one is better than one, what I'm saying is very little.

• 30:57Speaker 01

  So if you look at when people rebelled to centralized power, I don't know, the French revolutions, okay, there was a monarch and the nobles.

• 31:05Lex Fridman?

  Yes.

• 31:06Speaker 01

  Were there twenty-one nobles? No, there were thousands of them, but there were millions and millions of disempowered citizens. So one is centralized, twenty-one is also centralized, right?

• 31:18Lex Fridman?

  So that's delegated proof of stake.

• 31:20Speaker 01

  Delegated.

• 31:21Lex Fridman?

  Kind of like representative democracy, I guess.

• 31:23Speaker 01

  Yes, which is good.

• 31:26Lex Fridman?

  It's working great, right?

• 31:27Speaker 01

  It's working great. Well, it's better than the single monarch, right? And, but.

• 31:35Lex Fridman?

  There's, there's problems.

• 31:36Speaker 01

  There are problems.

• 31:37Lex Fridman?

  Yeah.

• 31:38Speaker 01

  And, and so we were looking for a different, when thinking about algorithm, for a, for a different approach. And so we have an approach in that, you know, is really, really decentralized because essentially

• 31:57Speaker 01

  it works as follows. You have a bunch of tokens, right? These are the tokens that have equal power. And you have, say, ten billions of tokens distributed to the entire world. And the owners, each token, has a chance to add the ledger, equal probability like everybody else. In fact, actually, if you want, here is how it works. So think about, you know, by some magic demographic process, which is not magic, it's mathematics, but think of it as magic. Assume that you select a thousand tokens.

• 32:36Speaker 01

  And so sometimes at random, okay? And you have a guarantee that they're randomly selected. And then, the owners of these one thousand tokens somehow agree on the next page, they all sign it.

• 32:50Speaker 01

  And that is the next page, okay? So it is clear that nobody has the power, but you know,

• 32:58Speaker 01

  once in a while, one of your tokens is selected and you are in charge of this committee to select the next page. But this goes around very quickly. So and if you look at this, the question really is that is not really centralized. And because for agreeing on the same page, it is important that the 1,000 tokens that you randomly selected are in honest hands, the majority of them. So which if the majority of the tokens are in honest hands, that is essentially true. Because if the majority of the tokens are in honest hands, if you select,

• 33:39Speaker 01

  say 90% of the people are, 90% of the tokens are in honest hands. So can you randomly select a thousand? And in this thousand, you find the 501 tokens in bad hands. Very, very improbable.

• 33:54Lex Fridman?

  So basically, when a large fraction of people are honest, then you can use randomness as a powerful tool to get decentralization.

• 34:04Speaker 01

  Correct.

• 34:05Lex Fridman?

  So what does honesty mean? And now we're into the social side of things, which is, how do we know that like the fraction, a large fraction of people or participating parties are honest?

• 34:22Speaker 01

  That is an excellent question. So by the way, first of all, we should realize that the same thing is for every other system. When you look at proof of work, you rely that the majority of the mining power is in honest hands.

• 34:37Lex Fridman?

  Yes.

• 34:37Speaker 01

  When you look at delegated proof of stake, you rely that the majority of these 21 people are honest. What is the difference? The difference is that in these other systems, you should say the whole economy is secure. If the majority of this small piece of economy.

• 34:58Speaker 01

  Are honest. And that is a big question. But instead, what in Algorand, in our approach, we say, the whole economy is secure if the majority of the economy is honest. In other words, who can subvert Algorand? It's not a majority of a small group, but it's a majority of the token holders had to conspire with each other in order to sink the very economy for which they own the majority of.

• 35:24Lex Fridman?

  Yes.

• 35:24Speaker 01

  That I think it is a bit harder to.

• 35:26Lex Fridman?

  Like a self-destructive majority, essentially. And you're also making me realize that basically, every system that we have in the world today assumes that the majority of participants is honest.

• 35:41Speaker 01

  Yes, the only difference is the majority of whom. And in some cases, the majority of a club. And in our case, it's the majority of the whole system.

• 35:50Lex Fridman?

  The whole, the whole system. Okay, so that's, that's, so through that kind of

• 35:56Lex Fridman?

  uh, random uh, sampling, you can achieve decentralization. You can achieve, so the scalability, I understand. And then the security that you're referring to, basically, the security comes from the fact that the sample selected would likely include honest people. So it's very difficult to, so by the way, the, the security, as you, as you mentioned, that you're referring to is basically security against dishonesty. Right, or manipulation or whatever.

• 36:30Speaker 01

  Yes, yes. So essentially, when what you're going to, to do is to the following, and say, you say, well, Silvio, I understood what you're saying, but somebody has to randomly select the tokens, then I believe you. So then who does this random selection?

• 36:43Lex Fridman?

  That's a good point.

• 36:43Speaker 01

  And in, in Algorand, we do something a little bit unorthodox. Essentially, is the token choose themselves at random. And you say, if you think about it, that seems to be a terrible idea. Because if you want to say, choose yourself at random, and whoever chooses himself is a Fasam people committee, you choose the page for, for the, for the rest of us. And because if I'm a bad person, I'm going to select myself over and over again, because I want to be part of the committee every single time. But not so fast. So what do we do in Algorand? What does it mean that I select myself? That each one of us, in the privacy of our own computer, actually a laptop,

• 37:26Speaker 01

  what you do is that you execute your own individual lottery. And think about that you pull a lever of a slot machine. You can only pull the lever once, not until you win, not enough times until you win. And when you pull the lever, case one, either you win, in such a case you have a winning ticket, or you lose, you don't get any winning ticket. So if you don't have a winning ticket, you can say anything you want about the next page in the ledger, nobody pays attention. But if you have a winning ticket, people say, oh, wow, this is one of the 1,000 winning tickets. We better pay attention to what he or she says. And that's how it works.

• 38:11Speaker 01

  And the lottery is a cryptographic lottery, which means that even if I am an entire nation, extremely powerful, with incredible computing powers, I don't have the ability to improve even minimally my probability of winning my token within the lottery. And that's how it happens. So everybody pulls the lever. The 1,000 random winners say, oh, here is my winning ticket, and here is my opinion up or down about the block. These are the ones that count. And if you think about it, while this is distributed, because there is, in the case of Algorand, there is 10 billion tokens,

• 38:52Speaker 01

  and you selected a thousand of them, more distributed than this, you cannot get. And then why is this, you know, scalable? Because what do you have to do? Okay, you have to do the lottery. How long the lottery takes? It takes actually one microsecond. Whether you have one token, or two tokens, or a billion tokens, is always one microsecond of computation, which is very fast. We don't hit the planet with a microsecond of computation. And finally, why is this secure? Because even if I were a very evil and very, very powerful individual, I'm so powerful that I can corrupt anybody I want instantaneously in the world.

• 39:36Speaker 01

  Whom would I want to corrupt? The people in the committee, so that I can choose the page of the ledger. But I do have a problem. I do not know whom I should corrupt. Should I corrupt this lady in Shanghai, this other guy in Paris? Because I don't know, I should, the winners are random, so I don't know whom I should corrupt. But once the winner come forward and say, here is my winning ticket. And you propagate your winning ticket across the network. Together with your opinion about the block, now I know who they are. For sure, I can corrupt all thousand of them given to my incredible powers. But so what? Whatever they said, they already said, and their winning tickets and their opinions are

• 40:21Speaker 01

  virally propagated across the network. And I do not have the power, no more than the US government or any government has the power, to put back in the bottle, a message virally propagated by WikiLeaks.

• 40:36Lex Fridman?

  So, everything you just described is kinda, is fascinating, a set of ideas. And, you know, online, I've been reading quite a bit, and people are really excited about those set of ideas. Nevertheless, it is not the dominating technology today. So Bitcoin, in terms of cryptocurrency, is the most popular cryptocurrency, and then Ethereum and so on. So it's useful to kind of comment, we already talked about proof of work a little bit, but what in your sense does Bitcoin get right? And where is it lacking?

• 41:13Speaker 01

  Okay, so the first thing that Bitcoin got right is to understand that there was the need of a cryptocurrency. And that, in my opinion, Trump, so, they deserve all the success, because they said the time is ripe for this idea.

• 41:28Lex Fridman?

  Yes.

• 41:28Speaker 01

  Because very often, it's not enough to be right, you have to be right at the right time.

• 41:32Lex Fridman?

  Yes.

• 41:32Speaker 01

  And somebody got it right there. So, how to offer to Bitcoin for that? And, um, and so what do they got to write? Is the, that is make, that is hard.

• 41:45Speaker 01

  To subvert and change the ledger, to cancel a transaction. It's not impossible, but it is very hard. What they did not get right is somehow that is a great store of value, currency wise. But money is not only a question that you store it and you put under the mattress. Money wants to be transacted and the transaction in Bitcoins are very little. So if you want to store value, everybody needs a store of value, might as well use a Bitcoin. I mean, it's the brand, but if you don't look at that for a moment, at least it's a great store of value. And everybody needs a store of value, but most of the time we want to transact.

• 42:28Speaker 01

  We want to interact, we don't put the money under the mattress, right? So we wanted to, and that they didn't get it right. That is too slow to transact, too few transactions.

• 42:39Lex Fridman?

  There's a scalability.

• 42:40Speaker 01

  The scalability issue.

• 42:42Lex Fridman?

  Is it possible to build stuff on top of Bitcoin? That's sort of fixes the scalability. I mean, this is the thing, you look at, there's a bunch of technologies that kind of hit the right need at the right time and they have flaws. But we kind of build infrastructures on top of them over time to fix it. As opposed to getting it right from the beginning. Or is it difficult to do?

• 43:11Speaker 01

  Well, that is difficult to do. So you're talking to somebody that when I decided to throw my hat in the arena and I decided, first of all, as I said before, I much admire my predecessors. I mean, they got it right, a lot of things and I, and I really admire for that. But you know, I had a choice to make. Either I patch something that has holes all over the place or I start from scratch. I decided to start from scratch because sometimes it's a better way.

• 43:39Lex Fridman?

  So what about Ethereum, which looks at proof of stake and a lot of different innovative ideas that kind of improve or seek to improve on some of the flaws of Bitcoin?

• 43:51Speaker 01

  Ethereum had another great idea. So they figured out that was that money and payments are important as they are. They are only the first level, the first stepping stone. The next level are smart contracts. And they were at the vision to say the people will need smart contract. Which allow me and you to somehow to to transact securely without being shop around by a trusted third party, by a mediator. By the way, because mediators are hard to find. And in fact, maybe even impossible to find if you live in Thailand and I live in New Zealand. Maybe we don't have a common person that we know and trust.

• 44:34Speaker 01

  And even if we find them, guess what? They want to be paid. So much so, right, that six percent of the world GDP is goes into financial friction, which is essentially third party. So the headed right of the world needed that. But again, the scalability is not there. And the system is of smart contracts in Ethereum is slow and expensive. And and I believe is not enough to satisfy the appetite and the need we have for smart contracts.

• 45:10Lex Fridman?

  Well, what do you make of, just as a small sort of aside in human history, perhaps it's a big one, is the NFT, the non-fungible tokens? Do you find those interesting technically? Or is it more interesting on the social side of things?

• 45:24Speaker 01

  Well, both. I think, you know, I think it's NFTs are actually great, right? So you have a this, you're an artist to create a song or it could be a piece of art. He has many unique representation, right, of a unique piece where there is an artifact of something dreamed up by you and a and as unique representation, but now you can trade. And allow, and the important part is that now you have this, not only the NFTs themselves, but the ability to trade them quickly, fast, securely, knowing that who owns which rights.

• 46:09Speaker 01

  And that gives a totally new opportunity for content creators to be remunerated for what they do.

• 46:17Lex Fridman?

  So but ultimately, you still have to have that scalability, security.

• 46:22Lex Fridman?

  And decentralization to to make it's, you know, to to make it work for my bigger and bigger applications.

• 46:30Speaker 01

  Correct, yeah.

• 46:31Lex Fridman?

  Yeah, I still wonder what kind of applications are yet to be like enabled by it because so much the interesting thing about NFTs, you know, if you look outside of art is just like money, you can start playing with different social constructs is you can start playing with the ideas, you can start playing with with even like investing, somebody was talking about almost creating an economy out of like creative people or influencers, like if you start a YouTube channel or something like that, you can invest in that person

• 47:14Lex Fridman?

  and you can start trading their creations and then almost like create a market out of people's ideas, out of people's creations, out of the people themselves that generate those creations. And there's a lot of interesting possibilities of what you can do with that. I mean, it seems ridiculous, but you're basically creating a hierarchy of value, maybe artificial in the digital world and they're trading that. But in so doing are inspiring people to create. So maybe as a sort of our economy gets better and better and better, where actual work in the physical space becomes less and less in terms of its importance,

• 47:58Lex Fridman?

  maybe we'll completely be operating in the digital space where where these kinds of economies have more and more power. And then you have to have this kind of blockchains to the scalability, security and decentralization. And decentralization is of course, the tricky one because people in power start to get nervous.

• 48:21Speaker 01

  Absolutely. Once in power, you're always nervous that you'll be supplanted by somebody else, but this is your job. Congratulations, you got the job, the top job, and now everybody wants it.

• 48:33Lex Fridman?

  Well, what is your sense about our our time and the future hope about the decentralization of power? Do you think that's something that we can actually achieve? Given that power corrupts and absolute power corrupts absolutely and it's so wonderful to be absolutely powerful.

• 48:56Speaker 01

  Well, good question. So first of all, I believe, by the way, there is a complex questions, Lex, like all the rest of your questions.

• 49:10Lex Fridman?

  I'm so very sorry.

• 49:13Speaker 01

  It's okay, I am enjoying it. So, but, so there are two things. First of all, power has been centralized for a variety of reasons. When you want to get it, it's easier for somebody, even a single person to grab power. But there is also some kind of a technology, lack thereof, that justified having power. Because in a way, in a society in which even communication, never mind blockchain, which is common knowledge, but even simple unilateral communication is hard, it is much easier to say, "You do as I say." Because the alternative is... But as, so there is a little bit of a technological barrier.

• 49:56Speaker 01

  But I think that, and now to get to this common knowledge, that is a totally different story. Now we have finally the technology for doing this. So, that is one part. But I really believe that, you know, not by having a distributed system, not only you don't have a, you have actually much more stable and durable system. Because not only for corruption, but even for things that go astray. And you give it a long enough time, by strange version of Murphy's Law, whatever goes wrong, goes wrong. And so, and if the power is diffused, you actually are much more stable. If you look at any...

• 50:37Speaker 01

  Any living, complex living being is distributed. I mean, I don't have somebody is, okay, tell Sylvia now it's time to eat.

• 50:47Lex Fridman?

  You have millions of cells in your body, you have billions of bacteria.

• 50:50Speaker 01

  Exactly, help me in the guts, I think, you know, we are in a soup that somehow keeps us alive. It is, and so strange enough, however, when we design systems, we design them centralized. We ourselves are distributed beings. And when we plan to say, okay, I want to create an architecture, how about I make a pyramid? I put this on the top and the power flows down. And so again, it's a little bit perhaps of a technology problem, but now the technology is there. So that is a big challenge to rethink how we want to organize power in very large system.

• 51:32Speaker 01

  And distributed system, in my opinion, are much more resilient. Let's put it this way, there was mine, my Italian compadres, right, you know, Machiavelli, who looked at the time, there was the big, there was a bunch of the small state, Democratic Republic of Florence, of Venice and the other thing. And there was the Ottoman Empire, but at the time was an empire, had a southern, was very centralized. And he made a political observation that goes roughly to say, whenever you have such a centralized thing, it's very hard to overtake that former government is centralized. But if you get it, it's so easy to keep the population.

• 52:15Speaker 01

  When instead, these other, these other things are much more resilient. When the power is distributed, it's much more, it's going to be lasting for a much longer time.

• 52:27Lex Fridman?

  And ultimately, maybe the human spirit wants that kind of resilience, wants that kind of distribution. It's just that we didn't have technology throughout history. Machiavelli didn't have the computer, the internet and.

• 52:38Speaker 01

  That is certainly part of the reason, yes.

• 52:42Lex Fridman?

  You've written an interesting blog post, if we take a step out of the realm of bits and into the realm of governance. You wrote a blog post about making algorithm governance decentralized. Now, can you explain what that means, the philosophy behind that? You know, how you decentralize basically all aspects of this kind of system?

• 53:06Speaker 01

  Well, the philosophy and the how, let's start with the philosophy. So I really believe that nothing fixed last very long. And so I really believe that life is about intelligent adaptation. Things change and we have to be nimble and adjust to change. And when I see a lot of crypto project, actually very proud to say it's fixed in stone.

• 53:42Speaker 01

  Right, you know, code is law, law is code, I verify the code will never change. You go, wow, when I'm saying this is a recipe to me of disaster, not immediately, but soon. Just imagine you take an ocean liner and you want to go, I don't know, from Lisbon to New York. And you set a course iceberg, no iceberg, Tempest, no Tempest, you know, it doesn't matter. But it's not the way, you need a till, you need to correct, you need to adjust. And so, by the way, with the sign algorithm, with the idea that the code was evolving as the needs.

• 54:24Speaker 01

  And of course, however, is a system in which and every time there is an adjustment, you must have essentially a vote that right now is orchestrated that ninety percent of the stake, they say, okay, we are ready, we agree on the next version and we pick up this version. So we are able to evolve without losing too many components left and right. But I think without evolving, any system essentially become asphytic and is going to shrivel and die sooner or later. And so that is needed. And what you want to do on the blockchain, you have a perfect platform in which you can log your wishes, your votes, your things,

• 55:07Speaker 01

  so that you have a guarantee that whatever vote you express is actually seen by everybody else. So everybody sees really the outcome, call it of a referendum, of a change. And that is, in my opinion, a system that wants to live long as to adapt.

• 55:25Lex Fridman?

  There is an interesting question about leaders. I've talked to Vitalik Buterin, I'll probably talk to him again soon. He's one of the leaders, maybe one of the faces of the Ethereum project. And it's interesting, you have Satoshi Nakamoto, who's the face of Bitcoin, I guess. But he's faceless, he, she, they.

• 55:49Lex Fridman?

  It does seem like in our, whatever it is, maybe it's 20th century, maybe it's Machiavellian thinking. But we seek leaders, leaders have value. Linus Torvald, the leader of Linux, the open source development a lot. I mean, there's no, it's not, it's not that the leadership is sort of dogmatic. But it's inspiring and it's also powerful in that through leaders, we propagate the vision. Like the vision of the project is more stable. Maybe not the details, but the vision. And so do you think there's value to, because there's a tension between decentralization and leadership?

• 56:34Lex Fridman?

  Like visionary.

• 56:35Speaker 01

  Yes.

• 56:36Lex Fridman?

  What do you make of that tension?

• 56:38Speaker 01

  Okay, so I really believe, if it's another good question, I think of it, you know, I really believe in the power of emotions. I think the emotion are the creative impulse of everybody else. And therefore, it's very easy for a leader to be a physical person, a real being, and that interprets our emotions. By the way, this emotion has to resonate. And what is good is that the more intimate our emotions are, the more universal they are. Paradoxically, the more personal, the more everybody else somehow magically agrees and feels a bit of the same.

• 57:17Speaker 01

  And so, and it's very important to have a leader in the initial phase that generates out of nothing something. That is important leadership. But then the true test of leadership is to disappear after you've led the community. So in my opinion, the quintessential leader in my uh, uh, uh, uh, according to my vision is George Washington. He served for one term, he served for another term. And then Allah's son, he retired and became a private citizen. And two hundred and change years later, we still are with some defects, but we have done a lot of things right. And we have been able to evolve. That to me is success in leadership.

• 58:01Speaker 01

  While instead you contrast our experiment with a lot of experiment. I've done so much so well that I want another four years. And why shouldn't I be only a four and I have another eight? And why should be another eight? Give me sixteen, I will fix all your problem. And now then is the type in my opinion of failed leadership. Leadership ought to be really lead, ignite and disappear. And if you don't disappear, the system is going to die with you. And it's not a good idea for everybody else.

• 58:32Lex Fridman?

  Is there, so we've been talking a little bit about cryptocurrency, but is there spaces where this kind of blockchain ideas that you're describing, which I find fascinating? Do you think they can revolutionize some other aspects of our world? That's not just money?

• 58:49Speaker 01

  A lot of things are going to be revolutionized is uh, is uh, independent of finance. By the way, I really believe that um, finance is uh, an incredible form of freedom. I mean, if I'm free to do anything I want, but I don't have the means to do anything, that's a bad idea. So I really think financial freedom is very, very important. But you know, but you just can say that, you know, against, you know, censorship, you write something on the chain and now nobody can take it out, can't take it out. That is a very important way to express, you know,

• 59:26Speaker 01

  our view. And um, and then the transparency that uh, that, that you give, because everybody can see what's happening on the blockchain. So transparency is not money. But I believe that transparency actually is a very Very important ingredient also of finance. Let's put it this way, as much as I'm enthusiastic about blockchain and decentralized finance. And we have actually, our expression, we're creating this a future five. Because as much as we want to do, we must agree that the first guarantee of financial growth and prosperity are really the legal system, the courts.

• 1:00:10Speaker 01

  Because we may not think about them and say, oh, the courts are a kind of a bunch of boring lawyers. But without them, I'm saying there is no certainty, there is no notion of equality. There is no notion that you can resolve your disputes. Think that's what thrives commerce and things. And so what I really believe that the blockchain actually makes a lot of this trust essentially automatic by make it impossible to cheat in very way. You don't even need to go to court if nobody can change the ledger. Right? So essentially is a way of, you cannot solve an illegal system reduces to a blockchain. But what I'm saying, a big chunk of it can actually be guaranteed.

• 1:00:55Speaker 01

  And there is no reason why technology should be antagonistic to legal scholarship. It could be actually existing and one should start to doing the interest things that the technology alone cannot do. And then you go from there. But I think that is essentially is blockchain can affect all kinds of our of our behavior.

• 1:01:20Lex Fridman?

  Yes, in some sense, the transparency, the required transparency ensures honesty, prevents corruption. So there's a lot of system that could use that and the legal system is one of them. There is a little bit of attention that I wonder if you can speak to where this kind of transparency, there's a tension with privacy. Is it possible to achieve privacy if wanted on blockchain? Do you have ideas about different technologies that can do that? People have been playing with different ideas.

• 1:01:54Speaker 01

  So absolutely, the answer is yes. And by the way, I'm a cryptographer. So I really believe in privacy and I believe in, and I have devoted a big chunk of my life to guarantee privacy, even when it seems almost impossible to have it. And it is possible to have it also in the blockchain too. And however, I believe in timing as well. And I believe that the people have the right to understand their system they live in.

• 1:02:34Speaker 01

  And right now, people can understand the blockchain to be something that is not, cannot be altered and is transparent. And that is good enough. And right now, any way to add, and there is a pseudo-privacy for the fact that, who knows if this key belongs, public key belongs to me or to you, right? And I can, when I want to change my money from one public key, I split it to other public keys, going to figure out which one is Silvio, all of them are Silvio, only one of Silvio, who knows? So you get some vanilla privacy, not the one I could talk. And I think it's good enough because, and it's important for now, that we absorb this stage.

• 1:03:16Speaker 01

  Because of next stage, we must understand the privacy tool rather than taking on faith. When the public starts saying, I believe in the scientist and whatever they say, I swear by them and therefore if they tell me it's private, it's private. And nobody understands it very well. We need a much more educated about the tools we are using. And so I look forward to deploying more and more privacy on the blockchain. But we are not, I will not rush to it until the people understand and are behind whatever we have right now.

• 1:03:53Lex Fridman?

  So you build privacy on top of the power of the blockchain. You have to first understand the power of the blockchain.

• 1:03:58Speaker 01

  Yes.

• 1:03:59Lex Fridman?

  So Algorand is like one of the most exciting, technically at least, from my perspective, technologies, ideas in this whole space. What's the future of Algorand look like? Is it possible for it to dominate the world?

• 1:04:14Speaker 01

  Let's put it this way. I certainly working very hard with a great team to give the best blockchain that one can demand and enjoy. And they said, I really believe that there is going to be, it's not a winner takes them all, so it's going to be a few blockchains. And each one is going to have its own brand and it's going to be great at something. And sometimes it's scalability, sometimes it's your views, sometimes it's a thing. And it's important to have a dialogue between these things. And I'm sure, and I'm working very hard to make sure that Algorand is one of them.

• 1:04:57Speaker 01

  But I don't believe that, you know, is even desirable to have, you know, a winner takes all because we need to express different things, but the important thing is going to have enough interoperability with various systems so that you can transfer your assets where you have the best tool to service them, whatever your needs are at the time.

• 1:05:22Lex Fridman?

  So there's a idea, I don't know, they call themselves Bitcoin maximalists, which is essentially the bet that, the philosophy that Bitcoin will eat the world. So you're talking about it's good to have variety. Their claim is it's good to have the best technology dominate the, the medium of exchange, the, the medium of store value, the money, the, you know, the, the digital currency space. What's your sense of the positives and the negatives of that?

• 1:05:59Speaker 01

  So I feel people are smart and it's going to be very hard for anybody and

• 1:06:06Lex Fridman?

  To win.

• 1:06:06Speaker 01

  Bitcoin, man, to win because people want more and more things. Uh, um, there is an Italian saying that goes as translates well, I think. Uh, it goes of the appetite grows while eating. Okay. I think you understand what he, what he means.

• 1:06:22Lex Fridman?

  Yes.

• 1:06:22Speaker 01

  So I say, I'm not hungry. Oh, okay, food. Oh, let me try this and that. So we want more and more and more. And when you find something like Bitcoin, which I already had very good things to say, but it does something very well, but is a static.

• 1:06:37Lex Fridman?

  Mm hmm.

• 1:06:38Speaker 01

  I mean, store of value, yes, I think is a great, right? The rest, you know, it would be a sad world if the world in which we are so anchoring down, so on the defensive, that we want to store value and hide it on the mattress. I long for a world in which is open, people want to transact, interact with each way. And therefore, when you want to store value, one, perhaps one chain, where you want to have to transact, maybe is another. I'm not saying that, you know, uh, one chain cannot be store of value or other thing, but I really believe, I, I believe in the ingenuity of people and in the innovation that is intrinsic to the human nature.

• 1:07:21Speaker 01

  We want always different things. So how can it be something invented, whatever it is decades ago, is going to fulfill the needs of our future generations? Um, I'm not going to fulfill my needs, let alone one of my kids or their kids. I is there, we are going to have a different world and, uh, uh, things will evolve.

• 1:07:43Lex Fridman?

  So you believe, yeah, so you believe that life, intelligent life is ultimately about ad- adaptability and evolving. So static is, um, static loses in the end.

• 1:07:55Speaker 01

  Yes.

• 1:07:57Lex Fridman?

  Let me ask the, well, first the ridiculous question. Do you have any clue who's, who Satoshi Nakamoto is? Is that even an interesting question?

• 1:08:09Speaker 01

  Well, your questions are very interesting. So, and I think, so I would say, first of all, it's not me. And I can prove it. Because, you know, if I was Satoshi Nakamoto, I would have not found an algorithm. Takes totally different principle to approach to the system. But the other thing, who is Satoshi Nakamoto? You know what the right answer is? It's not him, or she, her, or them. Satoshi Nakamoto is Bitcoin. Because, to me, it's such a coherent proof of work, that at the end, the creator and the creation identify themselves. So, he says, okay, I understand Michelangelo. Okay, he did the Sistine Chapel, fine.

• 1:08:53Speaker 01

  He did the St. Peter's Dome, fine. He did the Moses of the Pietà statue, fine. But besides this, who was Michelangelo? This is the wrong question. It's his own work, that is Michelangelo. So I think that, when you look at the Bitcoin, is a piece of work that, as it affects, yes, like anything human. But it was captivated the imaginations of millions of people, as subverted the status quo. And I'm saying, you know, whoever this person or people are, he's living in this piece of work. To me, it is Bitcoin. That's my...

• 1:09:35Lex Fridman?

  The idea of the work is bigger. We forget that sometimes. It's something about our biology wants, likes to see a face and attach a face to the idea. When really, the idea is the thing we love. The idea is the thing that impact, the idea is the thing that ultimately, you know, Steve Jobs or somebody like that, we associate with the Mac, with the iPhone, with just everything he did at Apple. Apple, actually, the company, is Steve Jobs. Steve Jobs, the man, is, uh, is, uh, pales in comparison to the creations of the man.

• 1:10:07Speaker 01

  And the sense of aesthetics that has brought to the daily lives. And very often, uh, aesthetic wins in the long, in the long, in the long end. And these are very elegant design product. And when you say, oh, elegance, a very few people care about it, apparently...

• 1:10:26Speaker 01

  Millions and millions and millions and millions of people do because we are attracted by beauty and these are beautifully designed products and, and, and, you know, and they've in addition to ever the technological aspect of the other thing. And I think, yes, that is.

• 1:10:44Lex Fridman?

  Yeah, as the Stevsky said, beauty will save the world. So I'm with you on that one.

• 1:10:49Speaker 01

  Right.

• 1:10:51Lex Fridman?

  It currently seems like cryptocurrency, all these different technologies are gathering a lot of excitement, not just in our discourse, but in their like scale of financial impact. A lot of companies are starting to invest in Bitcoin. Do you think that the main method of store value and exchange of value, basically money will soon or at some point in the century will become cryptocurrency?

• 1:11:26Speaker 01

  Yes. So mind you, as I said, that the notion of cryptocurrency, like any other fundamental human notion has to evolve. But yes, so I think that he has a lot of momentum behind it. And it's not only static as a this programmable money as a, I think.

• 1:11:48Lex Fridman?

  Smart contracts.

• 1:11:48Speaker 01

  Smart contracts. It allows a peer to peer interaction among people who don't even know each other, right? And they don't even, therefore cannot even trust each other just because they never saw each other. So I think it's so powerful that is going to do. That said, again, a particular cryptocurrency should develop and cryptocurrency, they will all develop. But the answer is yes, we are going towards a much more, unless we have a society, a sudden crisis for different reasons, which nobody hopes.

• 1:12:26Lex Fridman?

  There's always an asteroid. There's always.

• 1:12:28Speaker 01

  Something.

• 1:12:30Lex Fridman?

  A nuclear war and all the existential crisis that we kind of think about, including artificial intelligence. Okay. It's funny. You mentioned that.

• 1:12:42Lex Fridman?

  Michelangelo and Steve Jobs, you know, set of ideas represents the person's work. So we talked about algorithm, which is a super interesting set of technologies. But, you know, he did also win the Turing Award. You have a bunch of, you have a bunch of ideas that are, you know, seminal ideas. So can we talk about cryptography for a little bit? What is the most beautiful idea in cryptography or computer science or mathematics in general? Asking somebody who has explored the depths of all.

• 1:13:20Speaker 01

  Well, there are a few contenders.

• 1:13:26Speaker 01

  And

• 1:13:27Lex Fridman?

  Either your work or other work.

• 1:13:31Speaker 01

  Let's leave my work aside.

• 1:13:33Lex Fridman?

  Yes.

• 1:13:33Speaker 01

  And, and so, but one powerful idea, and is both an old idea in some sense and a very, very modern one, and it might be known as this idea of a one-way function. So a function that easy to evaluate. So given X, you can compute F of X easily.

• 1:13:58Speaker 01

  But given F of X is very hard to go back to X. Okay. Think alike.

• 1:14:05Speaker 01

  Breaking a glass, easy. Reconstruct the glass harder. Frying an egg, easy. Fried egg to go back to the original egg, harder. If you want to be extreme, killings a living being, unfortunately, easy. The other way around, very hard. And so the fact that a notion of a function, which you have a recipe that is in front of your eyes to transform an X into F of X. And then from F of X, even though you see the recipe to transform it, you cannot go back to X, that in my opinion is one of the most elegant and momentous.

• 1:14:46Speaker 01

  Notions that there are. And it's a computational notion because of the difficulties in a computational sense. And it's a mathematical notion because we were talking about function. And it's so fruitful because that is actually the foundation of all cryptography. And let me tell you, it's an old notion. Because very often in any mythology that we think of, the most powerful gods or goddesses are the ones of X and the opposite of X. The gods of love and death. And when you take opposites, they don't just erase one another, you create something way more powerful.

• 1:15:29Speaker 01

  And this one-way function is extremely powerful because essentially it becomes something that is easy for the good guys and bad for the, but hard for the bad guys. So for instance, in pseudo-random number generation, the easy part of the function corresponds, you want to generate bits very quickly. And hard is predicting what the next bit is. It says, gee, it doesn't look the same. One is X F of X, going from X F of X to X R, what does it do predicting bits? By a magic of reductions and mathematical apparatus, this simple function morphs itself into pseudo-random generation.

• 1:16:13Speaker 01

  This simple function morphs itself in digital signature scheme in which digitally signing should be easy and forging should be hard. Again, a digital signature is not going from X to F of X, but the magic and the richness of this notion is that it is so powerful that it morphs in all kinds of incredible constructs. And in both, these two opposites coexist, the easy and the hard, and in my opinion, it's a very, very elegant notion.

• 1:16:45Lex Fridman?

  That simple notion ties together cryptography, like you said, pseudo-random number generation. You have work on pseudo-random functions. What are those? What uh what's the difference in those and the generators, pseudorandom number generators?

• 1:17:05Speaker 01

  Okay.

• 1:17:05Lex Fridman?

  How do they work?

• 1:17:07Speaker 01

  Let's uh let's go back to pseudorandom number generation.

• 1:17:10Lex Fridman?

  Yes.

• 1:17:12Speaker 01

  First of all, people think that pseudorandom generation generates random number, not true. Because I don't believe that from nothing you can get, you can, you can get uh something. So, nothing from nothing.

• 1:17:26Speaker 01

  But randomness, you cannot create out of nothing, but what you could do is that you can be expanded. So in other words, if you give me somehow three hundred random bits, truly random bits, then I can give you three hundred thousand, three hundred million, three hundred trillions, three hundred quadrillions, as many as you want, random bits. So that even though I tell you the recipe by which I produce these bits, but I don't tell you the initial three hundred random numbers, I keep them secret. And you see all the bits I produce so far. If I, if you were to bet, given all the bits produced so far, what is the next bit in my sequence? Better than fifty fifty.

• 1:18:09Speaker 01

  Of course fifty fifty, anybody can guess, right? But to be inferring something, you have to be a bit better. Then the effort to, to do this extra bit is so enormous that is de facto random. So that is pseudorandom generator are these expanders of secret randomness, which goes extremely fast. Okay, this said, what is the?

• 1:18:33Lex Fridman?

  Expanders of secret randomness, beautifully put, okay. So every time, every time somebody who, if you're a programmer, is using a function that's not called pseudorandom, it's called random usually, you know, these programming languages and it's generating different, uh, that's essentially expanding the secret randomness.

• 1:18:53Speaker 01

  But they should. In the past, actually, most of library, they used something pre-modern cryptography. Unfortunately, we'll be better served to take a three hundred uh real seed random number.

• 1:19:10Speaker 01

  And and then expand them properly as we know now. Eh, but that has been a very an old idea. In fact, one of the best philosophers have debated eh whether the world was deterministic or probabilistic.

• 1:19:26Lex Fridman?

  Yes.

• 1:19:26Speaker 01

  Very big questions, right?

• 1:19:28Lex Fridman?

  Does God play dice?

• 1:19:29Speaker 01

  Exactly. Einstein says it does, he doesn't. But in fact, now we have a language that even at the Albert time was not around, but it was this complexity theory and modern complexity based cryptography. And now we know that if the universe has three hundred random bits, whether where is random or probabilistic or deterministic, it doesn't matter because you can expand this initial seed of randomness forever in which all the experiments you could do, all the inferences you could do, all the things you could do, they are you are not be able to distinguish them from truly random. So if you are not able to distinguish truly random from this super duper pseudo randomness,

• 1:20:16Speaker 01

  are very different things. So I say so many to become a really philosophical. So for things to be different, but I don't have in my lifetime, in the lifetime of the universe, any method to set them aside. Well, I should be intellectually honest, say, well,

• 1:20:33Speaker 01

  pseudo random in this special function is as good as random.

• 1:20:37Lex Fridman?

  Do you think true randomness is possible? And what does that mean? So I practically speaking, exactly as you said, if you're being honest, the pseudo randomness approaches true randomness pretty quickly. But is it, maybe is this a philosophical question? Is there such a thing as true randomness?

• 1:21:02Speaker 01

  Well, the answer is actually maybe, but if there exists,

• 1:21:08Speaker 01

  most probably is expensive to get. And, and, and in any case, if I give you one of mine, random, you will never tell them apart.

• 1:21:19Lex Fridman?

  Yeah.

• 1:21:20Speaker 01

  By no any other shape, no matter how much you work on it. So in some sense, if it exists or not, it really is a quote philosophical sense in the colloquial way to say it, that we cannot somehow pin it down.

• 1:21:34Lex Fridman?

  Do you ever, again, just to stay unphilosophical for a bit, for a brief moment, do you ever think about free will? And whether that exists? Because ultimately, free will sort of is this experience that we have, like we're making choices. Even though it appears that, you know, the world is deterministic at the core. I mean, that's against the debate, but if it is in fact deterministic at the lowest possible level, at the, at the physics level,

• 1:22:11Lex Fridman?

  how do you make, if it is deterministic, how do you make, how do you make sense of the difference between the experience of us feeling like we're making a choice and the whole thing being deterministic?

• 1:22:21Speaker 01

  So first of all, let me give you a gut reaction.

• 1:22:23Lex Fridman?

  Yeah.

• 1:22:24Speaker 01

  To the question. And the gut reaction is that

• 1:22:29Speaker 01

  it is important that we believe that there exists free will. And second of all, almost by weird logic, if we believe it exists, then it does exist. Okay.

• 1:22:43Lex Fridman?

  Yeah.

• 1:22:44Speaker 01

  So it's very important for our social apparatus, for our sense of ourselves, that it exists. And the moment in which, you know, we so want to, we almost we conjure it up in existence. But again, I really feel that if you look at some point, the space of free will seems to shrink. We realize how more and more, how much of our, say, genetic apparatus dictates who we are, why we prefer certain things than others, right? And why we react to noises of music, we prefer poetry, we may explain even all this. But at the end of the day, whether it exists in a philosophical sense or not, it's like randomness.

• 1:23:29Speaker 01

  If you can, if pseudorandom is as good as random vis a vis lifetime of a universe or experience, then it doesn't really matter.

• 1:23:38Lex Fridman?

  Yeah. So, you know, we're talking about randomness. I wonder if I can weave in quantum mechanics for a brief moment. There's a, you know, a lot of advancements on the quantum computing side. So leveraging quantum mechanics to perform a new kind of computation. And there's concern of that being a threat to a lot of the basic assumptions that underlie cryptography. What do you think? Do you think quantum computing will challenge a lot of cryptography? Will cryptography be able to defend all those kinds of things?

• 1:24:18Speaker 01

  Okay, great. So first of all, for the record, and not because I think it matters, but it's important to say for the record, there are people who continue to contend that quantum mechanics exist, but has nothing to do with computing, is not going to accelerate it. And at least in a very basic kind of hard computation. That is a belief that you cannot take it out. My, I'm a little bit more agnostic about it, but I really believe, going back to whatever I said about the one-way function.

• 1:24:52Lex Fridman?

  Mm-hmm.

• 1:24:53Speaker 01

  So one-way function, what is it? That's a cryptography. So does quantum computing challenge you?

• 1:25:00Lex Fridman?

  The one-way function?

• 1:25:01Speaker 01

  Essentially, you can boil it down to, does quantum computing, one-way or one-way function? What is one-way function? Easy in one direction, hard in the other. Okay, but if quantum computing exists, when you define what it is easy, it's not by a easy by a classical computer and hard by a classical computer, but easy for a quantum computer, that's a barrier. But once easy means... It should be easy for a quantum and hard for also quantum. Then you can see that you are, yes, is a challenge, but you have a hope because you can absorb. If one computing really realizes and becomes available and according to the promises, then you can use them also for the easy part.

• 1:25:45Speaker 01

  And once you use it for the easy part, the choices that you have a one-way function, they multiply. So, okay, so the particular candidates of one-way function may not be one-way anymore, but quantum one-way function may continue to exist. And so I really believe that for life to be meaningful with a one-way function had to exist. Because just imagine that anything that is, becomes easy to do. I mean, what kind of a life is it?

• 1:26:25Speaker 01

  I mean, so you need that, and if something is hard, but it's so hard to generate, you'll never find something which is hard for you. You want that there is abundance, there is easy to produce, hard problem. That's my opinion is why life is interesting. Because hard problem pop up at a really relative speed. So in some sense, I almost think that I do hope they exist. If they don't exist, somehow life is way less interesting than it actually is.

• 1:26:55Lex Fridman?

  Yeah, it does, that's funny. It does seem like the one-way function is fundamental to all of life, which is the emergence of the complexity that we see around us seem to require the one-way function. I don't know if you play with cellular automata, that's just another formulation of.

• 1:27:15Speaker 01

  I know, but it's.

• 1:27:17Lex Fridman?

  Very simple, it's almost a very simple illustration of starting out with simple rules and one way, being able to generate incredible amounts of complexity. But then you ask the question, can I reverse that? And it's just, it's just surprising how difficult it is to reverse that. It's surprising, even in constrained situations, it's very difficult to prove anything. That it almost, I mean, the sad thing about it.

• 1:27:52Lex Fridman?

  Well, I don't know if it's sad, but it seems like we don't even have the mathematical tools to reverse engineer stuff. I don't know if they exist or not, but in the space of cellular automata, where you start with something simple and you create something incredibly complex, can you take something, a small picture of that complex and reverse engineer? That's kind of what we're doing as scientists here. You're seeing the result of the complexity and you're trying to come up with some universal law that generate all of this. What is the, you know, the theory of everything? What are the basic physics laws that generate this whole thing? And there's a hope that you should be able to do that, but it gets, it's difficult.

• 1:28:32Speaker 01

  Yeah, but there is also some poetry of the fact that it's difficult.

• 1:28:35Lex Fridman?

  Right.

• 1:28:35Speaker 01

  Because he gives us some mystery to life, which without which, I mean, it's not so fun. Life will be less fun.

• 1:28:45Lex Fridman?

  Can we talk about interactive proofs a little bit and zero knowledge proofs? What are those?

• 1:28:50Speaker 01

  Okay.

• 1:28:50Lex Fridman?

  How do they work?

• 1:28:51Speaker 01

  So interactive proof actually is, is, is a modern realization and conceptualization of something that we knew was true, that, you know, that is easy to go to lecture. In fact, that's my motivation. We invented schools to go to lecture. We don't say, oh, I have a minister of education. I published this book. You read it.

• 1:29:15Lex Fridman?

  Yeah.

• 1:29:15Speaker 01

  And this is book for this year, this book for this year. We spend a lot of our treasury in educating our kids and in person, educating, go to class, interact with a teacher on the blackboard and chalk on my time. Now we can have a whiteboard and presumably you're going to have actually this magic pens and a display instead. But the, the, the idea is that interactively you can convey truth much more efficiently. And we knew this psychologically. It's better to hear an explanation than just to belabor some paper, right? Same thing. So interactive proofs is a way to, to do the following, rather than doing in some complicated,

• 1:30:00Speaker 01

  very long papers and possibly infinitely long proofs, exponentially long proofs, you say the following. If this theorem is true, there is a game that is associated to the theorem. And if the theorem is true, this game, I have a winning strategy that I can win half of the time. No matter what you do. Okay, so then you say, well, is the theorem true? You believe me, or why should I believe you? So, okay, let's play. So, and if I prove that I have a strategy that, and I win the first time, and I win the second time, then I lose a third time, but I win more than half of the time, or I win, say, all the time if the theorem is true, and at least at most half of the time if the theorem is false,

• 1:30:46Speaker 01

  you statistically get convinced, you can verify this quickly. And therefore, is a much when the game typically is extremely fast, so you generate a miniature game in which if the theorem is true, I win all the time. If the theorem is false, I can win at most half of the time. And if I win, win, win, win, win, win, win, win, you can deduce either the theorem is true, which most probably is my case of speaker, or I've been very, very unlucky. Because it's like if I had a hundred coin tosses and I got a hundred heads, very improbable. So that is a way. And so this transformation

• 1:31:28Speaker 01

  from the formal statement of a proof into a game that can be quickly played, and you can draw statistics how many times you win, and you is one of a big conquest of modern complexity theory. And in fact, actually, as I highlighted, the notion of a proof has really given us a new insight of what to be true means, and what truth is, and what proofs are.

• 1:31:57Lex Fridman?

  So these are legitimately proofs? So what kind of mysteries can allow us to unlock and prove? You said truth. So what does it allow us? What kind of truth does it allow us to arrive at?

• 1:32:16Speaker 01

  So it enlarges the realm of what is provable, because in some sense, the classical way of proving things was extremely

• 1:32:27Speaker 01

  Inefficient from the verifier point of view.

• 1:32:30Lex Fridman?

  Yes.

• 1:32:31Speaker 01

  Right, so and so therefore, there is so much proof that you can take. And but in this way, you can actually very quickly, minutes, verify something that is the correctness of an assertion. But otherwise, it would have taken a lifetime to belabor and check all the the passages of a very, very, very long proof. And you better check all of them. Because if you don't check one line, an error can be in that line. And so you have to go linearly through all this stuff rather than bypass this. So you enlarge tremendous amount what the proof is. And in addition,

• 1:33:12Speaker 01

  once you have the idea that essentially a proof system is something that

• 1:33:18Speaker 01

  allows me to convince you of a true statement, but does not allow me to convince you of a false statement.

• 1:33:27Speaker 01

  And that at the essence of proof, proof can be beautiful, should be, should be elegant. But at the essence is true or false, if you want to be able to differentiate. It is possible to prove the truth and it should be impossible or statistically extremely hard to prove something false. And if you do this, you can prove way, way more, once you understand this. And on top of it, we got some insight, like in this zero knowledge proofs, that is in

• 1:33:56Speaker 01

  something which you took for granted were the same. Knowledge and verification are actually separate concepts. So you can verify that an assertion is correct without having any idea why this is so. And so people felt to say, if you want to verify something, you have to have the proof. Once you have the proof, you know why it's true, you have the proof itself. And so somehow you can totally differentiate.

• 1:34:26Speaker 01

  Knowledge and verification, validity. So totally, you can decide if something is true and still have no idea.

• 1:34:34Lex Fridman?

  Is a good example, you mind?

• 1:34:36Speaker 01

  Oh, actually, you know, at the beginning, we labor to find the first knowledge, zero knowledge proof. Then we found a second, then we found a third. And then a few years later, actually, we proved a theorem, which essentially says, Avery theorem, no matter what about, can be explained in a zero knowledge way.

• 1:35:00Lex Fridman?

  Wow.

• 1:35:00Speaker 01

  So it's not a class of theorem, but all the theorems. And it's a very powerful thing. So we were really, for thousands of years,

• 1:35:11Speaker 01

  bought this identity between knowledge and verification had to be hand in hand together. And for no reason at all. I mean, we had to develop a way of technology. As you know, I'm very big on technology because it makes us more human and make us understand more things than before. And I think that is a, that is a, that's a good thing.

• 1:35:34Lex Fridman?

  So this interactive proof process, there's power in games.

• 1:35:40Speaker 01

  Yes.

• 1:35:40Lex Fridman?

  And you've recently gotten into, recently, I'm not sure you can correct me, mechanism design.

• 1:35:46Speaker 01

  Yeah.

• 1:35:47Lex Fridman?

  It's just, so it's, I mean, first of all, maybe you can explain what mechanism design is and the fascinating space of playing with games and designing games.

• 1:35:59Speaker 01

  Mechanism design is that you want to, you want a certain behavior to arise, right? If you want to organize, you know, a societal structure or something, you want to have some orderly behavior to arise, right? Because it is important for your goals. But.

• 1:36:19Speaker 01

  But you know that people, they don't care what my goals are. They cares about maximizing their utility. So, putting correctly, making money, the more money, the better, so to speak, right? I'm exaggerating.

• 1:36:32Lex Fridman?

  Self-interest in whatever.

• 1:36:34Speaker 01

  Self-interest.

• 1:36:35Lex Fridman?

  In whatever way they.

• 1:36:35Speaker 01

  So what you want to do is, ideally, what you want to do is to design a game so that while people played so to maximize their self-interest, they achieve the social goal and behavior that I want. That is really the best type of thing. And it is a very

• 1:37:02Speaker 01

  hard science and art to design these games. And it challenges us to

• 1:37:13Speaker 01

  actually come up with a solution concept for a way to analyzing the games that need to be broader. And I think when game theory has developed a bunch of very compelling

• 1:37:27Speaker 01

  way to analyze the game, that if a game has a best property, you can have a pretty good guarantee that it's going to be played in a given way. But as it turns out, and not surprisingly,

• 1:37:40Speaker 01

  these tools have a range of action like anything else. All these so-called the technical solution concept, the way to analyze the game, like dominant strategy, equilibrium, if something comes to mind, to be very meaningful. But as a limited power, in some sense, the games that can be admit such a way to be analyzing.

• 1:38:02Lex Fridman?

  There's a very specific kind of games and the rules are set, the constraints are set, the utilities are all set.

• 1:38:08Speaker 01

  Yes, so if you want to reason, if there is a way, say, that you can analyze. A restricted class of games this way. But most games, you know, don't fall into this restricted class. Then what do I do? Then you need to enlarge away what a rational player can do. So for instance, in my opinion, at least in some of my... I played with this for a few years and I was doing some exotic things. I'm sure in the space that were not exactly mainstream. And then I changed my interest and now I do blockchain. But what I'm saying, for a while I was doing...

• 1:38:51Speaker 01

  So for instance, to me is a way in which I design the game. And you don't have the best move for you. The best move is the move that is best for you, no matter what the other players are doing. Sometimes a game doesn't have that, okay? It's too much to ask. But I can design the game such that, given the option in front of you, say, oh, these are really stupid for me. Take the side. But these, these are not stupid. So if you design the game so that in any combination on non-stupid things that the player could do, I achieve what I want, I'm done. I don't care to find the very unique equilibrium. I don't give a damn.

• 1:39:33Speaker 01

  I want to say, well, as long as you don't do stupid things and nobody else does stupid things, good social things outcome arise, I should be equally happy. And so I really believe that this type of analysis is as possible and has a bigger radius. So it reaches more games, more classes of games. And after that, we had to enlarge it again. And it's going to be, we are going to have fun because human behavior can be conceptualized in many ways. And it's... It's a long game.

• 1:40:12Lex Fridman?

  Do you have, it's a long game. Do you have favorite games that you're looking at now? I mean, I suppose your work with blockchain and algorithm is a kind of game that you're you you basically mechanism design, design the game such that it's scalable, secure and decentralized, right?

• 1:40:29Speaker 01

  Yes, yes. And very often you have to say, and very, and you must also design so that the incentives are are

• 1:40:39Speaker 01

  and tend to the truth of whatever little I learned from my venture in mechanism design is that incentives are very hard to design. Because people are very complex creatures. And so, and so somehow the way we design algorithm is a totally different way, essentially with no incentives, essentially.

• 1:41:02Speaker 01

  And then, and but technically speaking, there is a notion that

• 1:41:08Speaker 01

  is actually believable, right? So that to say, people want to maximize their utility, yes, up to a point. Let me, let me tell you. Assume that if you are honest, you make hundred bucks.

• 1:41:24Speaker 01

  But if you are dishonest, no matter how dishonest you are, you can only make hundred bucks and one cent. What are you going to be? I'm saying, you know what?

• 1:41:34Speaker 01

  Technically speaking, even that one, nobody bothers and say, how much am I going to make by honest hundred? If I'm devious and if I'm a criminal, one hundred bucks and one cent, you know, I might as well be honest, okay? So that essentially is called, you know, epsilon utility equilibrium, but I think it's good. And, and, and, and that's what we design essentially means of it, you know, there is an, having no incentives is actually a good thing because it prevent people from reasoning how else I'm going to game the system. But why can we achieve in algorithm to have no incentives? And in Bitcoin instead, you have to pay the miners because they do tremendous amount of work. Because if you have to

• 1:42:19Speaker 01

  Do a lot of work, then you demand to be paid accordingly. Because you, right, but if I're going to say you had to add the two and two equal to four, how much you want to me pay for this, or if you don't give me this, I don't add the two and two. I would say you can add the two and two in your sleep. You don't need to be paid to add the two and two. So the idea is that if we make the system so efficient, so that generating the next block is so damn simple, it doesn't hit the universe, let alone my computer, let alone the X and microsecond computation, I might as well not being received incentives for doing that. And try to incentivize some other part of the system, but not the main consensus, which is a mechanism for generating and adding block to the chain.

• 1:43:05Lex Fridman?

  Since you're Italian, Sicilian, I also heard rumors that you are a connoisseur of food.

• 1:43:14Lex Fridman?

  What, you know, if I said today's the last day, you get to be alive, I'm Russian, you shouldn't have trusted me. You never know with a Russian whether you're gonna make it out or not. Well, if you had one last meal, you can travel somewhere in the world. Either you make it or somebody else makes it, what's that gonna look like?

• 1:43:35Speaker 01

  All right, if it's one last meal, I must say, you know, in this era of COVID, I've not been able to see my mom. And, and there was, my mom was a fantastic chef, okay? And had this very traditional food. As you know, the very traditional food are great for a reason, because they survived hundreds of years of culinary innovation. So, and there is one very laborious thing, which is, you heard the name, which is this Parmigiana. But to do it is a piece of art, it takes so many hours, but only my mom could do it. If we have one last meal, I want the Parmigiana.

• 1:44:19Lex Fridman?

  What is, uh, what's, what's the laborious process? Is it, is it the ingredients? Is it the, the actual process? Is it the, the atmosphere and the humans involved?

• 1:44:31Speaker 01

  The latter. The ingredient like in any other, in Italian cuisine.

• 1:44:39Speaker 01

  Believes in very few ingredients. If you take, say, quintessential Italian recipe, everybody knows spaghetti pesto, okay? Pesto is olive oil, very good, extra virgin olive oil, um, basil, pine nuts, pepper, a clove of garlic, not too much, otherwise you

• 1:45:05Lex Fridman?

  Overpower everything.

• 1:45:06Speaker 01

  And then you had to do, if there are two schools of thought, Parmesan or pecorino or a mix of the two.

• 1:45:13Lex Fridman?

  Yeah.

• 1:45:13Speaker 01

  I mentioned six ingredients.

• 1:45:15Lex Fridman?

  Yes.

• 1:45:15Speaker 01

  That is typical Italian. That is, I understand that there are other cuisines, for instance, a French cuisine, which is extremely sophisticated and extremely combinatorial, or some Chinese cuisine, which has a lot of, many more ingredients than this. And yet, the art is to put them together, a lot of things. In Italy, it's really striving for simplicity. You had to find few ingredients, but the right ingredients to create something. So in Parmigiana, the ingredients are eggplants, there are tomatoes, there are basil, but, but how to put them together and the process is a, is an act of love, okay, labor and love.

• 1:45:56Speaker 01

  Is that you're gonna spend the entire day, I'm not exaggerating, but the entire morning for sure, to do it properly.

• 1:46:06Lex Fridman?

  Yeah, the Japanese cuisine too, there's a mastery to the simplicity with the sushi. I don't know if you've seen your journey of sushi, but there's a mastery to that that's propagated through the generations. It's fascinating. You know, people love it when I ask about books. I don't know if books, whether fiction, nonfiction, technical or completely non-technical, had an impact in your life throughout? If there's anything you would recommend, or even just mention as something that gave you an insight or moved you in some way?

• 1:46:37Speaker 01

  So, okay, so I don't know if I recommend, because in some sense, you almost had to be Italian or to be such a scholar, but being Italian, one thing that really impressed me tremendously is the Divine Comedy. It is a medieval poem, a very long poem, divided in three parts, hell, purgatory and paradise, okay? And that is the non-trivial story of

• 1:47:08Speaker 01

  A middleman man gets into a crisis, personal crisis, and then out of this crisis, he purifies, makes a catastrophe, he purifies himself more and more and more until he's become capable of actually meeting God. Okay? And that is actually a complex story. So he had to get some very sophisticated language, maybe Latin at that point, that we were talking about twelve hundreds Italy, right? And Florence. And this guy instead, he chose his own dialect, not spoken outside his own immediate circle, right? Florence and Dante.

• 1:47:52Speaker 01

  And actually, Dante really made Italian, Italian. He was... And so I say, how can you express such sophisticated things and so this? And then, the point is that these words that nobody actually knew, because they were essentially dialect. And plus, a bunch of very intricate rhymes, in which you had to rhyme with things. And turns out that by getting meaning from the things that you rhyme, you essentially guess what the word means. And you invent Italian and you communicate by almost osmosis what you want. It's a miracle of communication. In a dialect, a very poor language, a very unsophisticated, to express a very sophisticated situation.

• 1:48:38Speaker 01

  I love it. People who love it, and Italians and not Italians. But what I got of it is that, you know, very often limitations are our strength. Because if you limit yourself at a very poor language, somehow you get out of it and you achieve even better form of communication if you're using an hyper sophisticated literary language with lots of resonance from the prior books so that you can actually instantaneously quote. He couldn't quote anything, because nothing was written in Italian before him. So... I really felt that limitations are our strength. And I think that rather than complaining about the limitations, we should embrace them.

• 1:49:22Speaker 01

  Because if we embrace our limitation, limited as we are, we find very creative solutions that people with less limitation we have, we would not even think about it.

• 1:49:34Lex Fridman?

  Wow, so limitation is a kind of superpower, if you choose to see it that way. Is there, since you speak both languages, is there something that's lost in translation to you? Is there something you can express in Italian that you can't in English? And vice versa, maybe? Is there something you could say to the musicality of the language? I mean, I've been to Italy a few times and I'm not sure if it's the actual words, but the people are certainly very, there's body language too. There's just the whole being is language. So I don't know if you miss some of that when you're speaking English in this country.

• 1:50:15Speaker 01

  Yes, in fact, actually, I certainly, I miss it. And somehow it was a sacrifice that I made consciously by the time I arrived. I knew that this I was not going to express myself at a better level. And it was actually a sacrifice because given you have also your mother tongue is Russian. So you know that you can be very expressive in your mother tongue and not very expressive in a new tongue, a new language. And then what people think of you in the new language. Because when the precise of expression of things, it generates, you know, it shows

• 1:50:57Speaker 01

  elegance, or it shows, you know, knowledge, or it shows as a census, or it shows as a caste, or education, whatever it is. So all of a sudden, I found myself on the bottom.

• 1:51:10Lex Fridman?

  Yeah.

• 1:51:11Speaker 01

  So I had to fight all my way up back up. And but what I'm saying, I go back to.

• 1:51:15Lex Fridman?

  Yeah, it's fascinating, right?

• 1:51:17Speaker 01

  The limitations are actually our strength. In fact, it's a trick to limit yourself. To exceed, right? And you know, there are examples in history. If you think about, you know, Hernán Cortés, right? Goes to invade Mexico. He has what? A few hundred people with him. And he has a hundred thousand people in arms on the other side. First thing he does? He limits himself. He sinks his own ship. There is no return.

• 1:51:48Speaker 01

  And at that point, he actually managed to come up victorious.

• 1:51:52Lex Fridman?

  That's really profound. I actually, first of all, that's inspiring to me. I feel like I have quite a few limitations, but more practically on the Russian side. I'm going to try to do a couple of really big and really tough interviews in Russian.

• 1:52:08Lex Fridman?

  Once COVID lifts a little bit, I'm traveling to Russia. And I'll keep your advice in mind that the limitations is a kind of superpower. We should use it to our advantage because you do feel less, like you're not able to convey your wisdom in the Russian language. Cause I moved here when I was 13. So you don't, you know, the parts of life you live under a certain language are the parts of life you're able to communicate. You know, I became, I became a thoughtful, deeply thoughtful human in English.

• 1:52:46Lex Fridman?

  But the, the pain from World War II, the, the music of the people, that was instilled in me in Russian. So I can carry both of those and there's limitations in both. I can't say philosophically profound stuff in Russian, but I can't in English express like that melancholy feeling of like the people. And so combining those two, I'll somehow.

• 1:53:10Speaker 01

  Beautifully said. Thanks for sharing. This is great. Yes, I totally understand you. Yes.

• 1:53:15Lex Fridman?

  You've accomplished some incredible things in this space of science, in a space of technology, a space of theory and engineering. Do you have advice for somebody young? An undergraduate student, somebody in high school? Or anyone who just feels young? About life or about career, about making their way in this world?

• 1:53:40Speaker 01

  So I was telling before that I believe in emotion and my thing is to be true to your own emotion. And that I think that if you do that, you're doing well because it's a life well spent. And you are going never tire because you want to solve all these emotional knots that have always intrigued you from the beginning. And I really believe that you know, to to live, live meaningfully, creatively. And yet to live your emotional life. So I really believe that whether you're a scientist or an artist even more, but a scientist, I think of them as artists as well. If you are a human being, so you are really to live fully your emotions.

• 1:54:25Speaker 01

  And to the extent possible, sometimes emotions can be overbearing and my devices try to express them. The more and more confident, sometimes it's hard, but you are going to be much more fulfilled than by suppressing them.

• 1:54:42Lex Fridman?

  What about love, one of the big ones? What role does that play?

• 1:54:45Speaker 01

  It's it's the bigger part of emotions, but it's a scary thing, right? It's a it's a lot of vulnerability that comes with a love. But there is also so much, you know, energy and power and and love in all senses and in the traditional sense, but also in in the sense of a broader sense for for humanity, this feeling this, you know, compassion that, you know, makes us one with, you know, other people and the suffering of other people. I mean, all of this is is a very scary stuff, but it's really the the the the fabric of life.

• 1:55:29Lex Fridman?

  Well, the the sad thing is it really hurts to lose it.

• 1:55:34Speaker 01

  Yes, that's why the vulnerability comes with it.

• 1:55:37Lex Fridman?

  That's the thing about emotion is it's up and down and the down seems to come always with the up. But the up only comes with the down, so.

• 1:55:49Speaker 01

  Yeah.

• 1:55:51Lex Fridman?

  Let me ask you about the the ultimate down, which is unfortunately, we humans are mortal. Or appear to be for the most part. Do you think about your own mortality? Do you, do you fear death?

• 1:56:07Speaker 01

  I hope so, and I do. Because, I mean, without death, there is no life. So at least there is no meaningful life. And death is actually, in some sense, our ultimate motivator to live a beautiful and meaningful life. I myself felt as a young man, that unless I got something that I wanted to do, I don't know why I got the idea of saying something to say. If I'm not able to say, I would suicide. So maybe it was a way to motivate myself. But you don't need to motivate it because, in some sense, fortunately, death is there. So you better get up and do your thing. And because that is the best motivation to live fully.

• 1:56:52Lex Fridman?

  Well, what do you think, what do you hope your legacy is?

• 1:56:59Speaker 01

  You know.

• 1:57:01Lex Fridman?

  You mentioned you have two kids.

• 1:57:04Speaker 01

  Yes. And so I really feel that, you know, there is, on one side is my biological legacy. And that is my two kids, right? And their kids, hopefully. And that is one fine. And the other thing is this common enterprise, which is society. And I really feel that my legacy would be better by providing security and privacy. Actually, for me, are metaphorical to say, I want to give you the ability to interact more

• 1:57:44Speaker 01

  and take more risks and reach out to more, for more people, as difficult and dangerous as it may seem. But my all scientific work is about to guarantee privacy and give you the security of interaction. And not only in a transaction, like it would be a blockchain transaction, but that is really one of the hardcore of my emotional problems. And I think that, you know, these are the problems I want to tackle.

• 1:58:16Lex Fridman?

  Yeah, and ultimately, privacy and security is freedom.

• 1:58:19Speaker 01

  Yes.

• 1:58:20Lex Fridman?

  Freedom is at the core of this. It's dangerous. It's like the emotion thing. But ultimately, that's how we create all the beautiful things around us. Do you think there's meaning to it all? This life, except the urgency that death provides? And us anxious beings create cool stuff along the way. Is there a deeper meaning? And if it is, what is it?

• 1:58:46Speaker 01

  Well, meaning of life. Actually, there are three meanings of life.

• 1:58:50Lex Fridman?

  Great.

• 1:58:50Speaker 01

  That's great. One, to seek. Two, to seek. And three, to seek.

• 1:58:57Lex Fridman?

  To seek what?

• 1:58:58Speaker 01

  You know, I

• 1:58:59Lex Fridman?

  Or is there no answer to that?

• 1:59:01Speaker 01

  There's no answer to that. I really think that the journey is more and more important than the destination, whatever that be. And I think that is a journey and is, in my opinion, at the end of the day, I must admit, meaningful in itself. And we must admit that maybe whatever your destination might be, I'd hang it, you know, we may never get there, but where hell was a great ride?

• 1:59:34Lex Fridman?

  Well, I don't think there's a better way to end it. Silvio, thank you for joining. Thank you for wasting your extremely valuable time with me today, joining on this journey of seeking something together. We found nothing, but it was very fun. I really enjoyed it. Thank you so much for talking to me.

• 1:59:51Speaker 01

  Thank you, Alex. It's been really special for me to be interviewed by you.

• 1:59:56Lex Fridman?

  Thank you for listening to this conversation with Silvio McCauley, and thank you to our sponsors. Athletic Greens Nutrition Drink, the information in-depth tech journalism website, Four Sigmatic Mushroom Coffee, and BetterHelp Online Therapy. Click the sponsor links to get a discount and to support this podcast. And now, let me leave you with some words from Henry David Thoreau. Wealth is the ability to fully experience life. Thank you for listening and hope to see you next time.

• 2:00:48Lex Fridman?

  Thank you.