Ethereum

We close out Season 8 with the most ambitious organization we've ever covered on Acquired: Ethereum, and it's celebrity wunderkind founder Vitalik Buterin. If you thought Mark Zuckerberg IPO-ing Facebook at $100B by age 27 was something, just wait until you hear the story of this high school junior creating $500B (!!) of market cap by the same age — and oh yeah, maybe seeding the future dethroning of Facebook, Google, Amazon and all of big tech in the process. Regardless whether you're a crypto neophyte, a die-hard bull, or a skeptical bear, this is a story you need to hear, and Ethereum is an innovation you need to understand. Buckle in for a wild ride... and some special surprises from a few Acquired friends. :) Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links: The Ethereum Whitepaper: https://ethereum.org/en/whitepaper/Yung Spielburg https://open.spotify.com/artist/273so0X2Yuo93vfeX2nLDI and Mike Taylor https://open.spotify.com/artist/30ejUciK31BCg0IVCbt1dW on Spotify Carve Outs: Arthur C. Clarke: https://www.amazon.com/Arthur-C-Clarke/e/B000APF21M? (especially Rendezvous with Rama and The City & The Stars)Disney-Marvel's Loki: https://www.disneyplus.com/series/loki/6pARMvILBGzFThe Diamond Age by Neal Stephenson: https://www.amazon.com/Diamond-Age-Illustrated-Primer-Spectra/dp/0553380966Nier Automata: https://en.wikipedia.org/wiki/Nier:_AutomataMagic the Gathering IRL: https://magic.wizards.com/en/events/event-types/friday-night-magic

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

• 0:00Ben Gilbert?

  Should we do the new theme music even though it's not season nine yet?

• 0:04David Rosenthal?

  I think we should.

• 0:05Ben Gilbert?

  Yeah.

• 0:05David Rosenthal?

  Let's do it.

• 0:06Ben Gilbert?

  All right, let's do it.

• 0:06David Rosenthal?

  It's a special episode.

• 0:07Ben Gilbert?

  Let's do it.

• 0:25Ben Gilbert?

  Welcome to season eight, episode eight of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

• 0:41David Rosenthal?

  And I'm David Rosenthal and I am an angel investor based in San Francisco. But today, I am here with you in Seattle, in the flesh.

• 0:50Ben Gilbert?

  In the flesh. And we are your hosts. Well, first, we want to give a huge shout out to Young Spielberg and Mike Taylor for crafting this new intro music that we use to open this episode. We have been wanting for years to do something distinctive for the show and it was a real treat to work with both of them on this. And we have links to both of their fine work on Spotify and just love both of these artists.

• 1:16David Rosenthal?

  They killed it. I am so pumped.

• 1:19Ben Gilbert?

  Me too. Well, we started this season with our first blockchain episode covering Bitcoin. It seems only appropriate to bookend it with the season finale on Ethereum. So David and I are here together in person to tell this story. And as you all know from our Bitcoin episode, Bitcoin is some combination of currency, a store of value, a medium of exchange, which all frankly are up for debate if it's doing a good job at any or all of those things. And as many of you who have bought or sold cryptocurrencies over the last six years know, there has been a big second game in town with Ether, E T H, the token used as a currency

• 2:03Ben Gilbert?

  in the Ethereum network. But this time, it's not just about currency. Ethereum is something completely different. You can think of it more as a gigantic distributed computer that exists all around the globe in a completely decentralized way.

• 2:19David Rosenthal?

  It's the world computer.

• 2:21Ben Gilbert?

  It is. It is one single virtual machine that runs across millions of CPUs all at the same time, albeit one very slow virtual machine. There is a strong argument to be made that this enormous tamper-proof censorship-proof computer is maybe the most important invention of the last decade, laying the groundwork for technology companies to come for the next several decades. And while there are kittens and rainbows everywhere you look in Ethereum land, there were some absolutely wild stories that transpired to bring us to where we are today. This thing has had a pretty wild last year, as most of you will

• 3:03Ben Gilbert?

  know, having a market cap 12 months ago at around 20 billion, earlier this year at 450 billion, sort of in the same 12-month stretch. It's been a heck of a year for Ethereum.

• 3:14David Rosenthal?

  This has been a heck of a year for a lot of things.

• 3:17Ben Gilbert?

  No kidding. Well, are you an acquired Slack member? If not, you should. And aside from all the normal reasons that we usually point out, I'm sure this episode will have quite a vibrant digital assets channel discussion. It's a great way for beginners and the sort of crypto-aware alike to have great conversations. And as always, you can join that at acquired.fm/slac. Another thank you to listener Austin Fedra for curating that channel and for helping with several discussions as we prepared for this episode. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that

• 3:59Ben Gilbert?

  you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 4:08David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 4:29Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 4:51David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 5:09Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. All right, David, take us in and listeners, as always, this show is not investment advice. David and I may have investments in the companies, assets, protocol tokens.

• 5:49David Rosenthal?

  Utility tokens, Ben, utility tokens. I checked with the SEC.

• 5:54Ben Gilbert?

  That we discuss and the show is for informational and entertainment purposes only.

• 5:58David Rosenthal?

  These are commodities, not securities.

• 6:00Ben Gilbert?

  Commodities.

• 6:01David Rosenthal?

  That's right. Before we get into it, two things. One, this is obviously the season eight finale. Like what a season. This is crazy. So we started with Bitcoin. We did the New York Times Company. We did three freaking episodes on Berkshire Hathaway and we're ending with Ethereum. We have May 23rd. Like this is wild. I just like, it's so cool. We get to do all this crazy stuff.

• 6:21Ben Gilbert?

  Yeah, it's remarkable. We can find bull cases in all of those things when they've got daggers pointed at each other. Particularly crypto and Berkshire.

• 6:31David Rosenthal?

  Well, there are at least daggers in one direction from Warren and Charlie to crypto. I don't know about the other direction.

• 6:37Ben Gilbert?

  Oh, I think the Bitcoin maximalists are, are very excited to see the time of Berkshire Hathaway be in the past.

• 6:43David Rosenthal?

  In the past. Yeah, that, that may be true. So freaking cool. Thank you guys all for just being with us on this journey. So awesome. Number two, before we dive in, huge thank you on this episode to Camilla Russo and her book, The Infinite Machine, which came out recently and served as basically the main narrative source for history and facts here. Camilla is an excellent journalist, was part of the technology team at Bloomberg. Brad Stone has quite the crew that he's assembled over there. And now Camilla runs The Defiant, which I think is sort of a play, it's the the Defi.

• 7:21Ben Gilbert?

  Ayo.

• 7:22David Rosenthal?

  And Ayo. But wonderful book. Highly recommend. Everybody go check it out. And thank you to Camilla for writing this amazing history. Okay. So, speaking of history, if you remember all the way back to the beginning of the season with our Bitcoin episode, you'll remember that the Bitcoin White Paper was published, of course, in 2008. But it wasn't until May of 2010, when the famous pizza day pizza transactions happened, where two pizzas were purchased for, what was it? It was like 10,000 Bitcoin, something like that?

• 7:58Ben Gilbert?

  That sounds right.

• 7:59David Rosenthal?

  Yeah, man, those were some spendy pizzas. It obviously took a little while for this whole idea of sort of crypto to gain steam and and enter the, not even the mainstream, but just sort of broader awareness. And then the killer app for Bitcoin, which of course was the first killer app, which was the Silk Road, didn't launch until February 2011. So it was right at that time, the very next month, in fact, in March of 2011, that a new user shows up in the Bitcoin Talk forums online.

• 8:34Ben Gilbert?

  How many of these acquired episodes start with someone showing up in the forums?

• 8:38David Rosenthal?

  Someone shows up in the forum. I feel like probably like half the China tech episodes are like so and so is hanging out on IRC with all the other future giants.

• 8:49Ben Gilbert?

  Yep.

• 8:50David Rosenthal?

  Amazing. So the Bitcoin Talk forums were kind of the central hub of this sort of like early Bitcoin community. They were actually created, I didn't realize this, by Satoshi himself. He created.

• 9:02Ben Gilbert?

  Oh, no way.

• 9:03David Rosenthal?

  Yeah, in 2009. And this is where the pizza transaction happened. This is where the famous Hoddle post was in the Bitcoin Talk forums that generated that meme. Super cool. So this new user who joins the forums. Is very unlike Satoshi in pretty much every dimension and the most obvious dimension that he's unlike Satoshi.

• 9:27Ben Gilbert?

  He has a name.

• 9:28David Rosenthal?

  He uses his real name. There is no username, the name, like everybody else is like, oh, man, in the episode, who is the smokes too much? There was the user smokes too much that had posted to the forum. But this, this new user is just simply Vitalik Buterin.

• 9:46Ben Gilbert?

  Right there. Laying it all on the line and, and saying forever, you will know me by my name. I'll be a public person. I'll be a figure that will identify with all of my comments and, you know, whether for good and for bad, for being vulnerable, but also for galvanizing a movement, this real name tied to my real identity is how I will do that.

• 10:08David Rosenthal?

  Real name, no gimmicks. Vitalik Buterin. So who is this character? And why, when everybody else, literally almost everybody else in Bitcoin land and crypto land at the time is using a pseudonym, why is he willing to use his real name? Well, he's willing to use his real name because he's just a high school kid. He's got nothing to hide. He's got nothing to lose. He's 17 years old. He joins because he is looking for a way to earn some Bitcoin. A pretty awesome like side gig as a high schooler.

• 10:38Ben Gilbert?

  And where is he at this point?

• 10:39David Rosenthal?

  He is in Toronto at this point. So, okay, Vitalik 17, he was born in Russia, in post Soviet Russia, to two undergrad computer science students at Kolomna, which is right outside of Moscow. It's kind of hard to imagine, like, just think about like being born, he was born in January 1994. I've never been to Russia, but I hear January is pretty.

• 11:05Ben Gilbert?

  I have been to Russia in February and I can tell you it is freeze your face off cold.

• 11:10David Rosenthal?

  A whole new level. Probably makes Canada look like, Toronto look like balmy and tropical.

• 11:16Ben Gilbert?

  Southern Canada is, may as well be the beach.

• 11:18David Rosenthal?

  Yeah. So it's 1994. He's born to these two, like very young, very unprepared parents. Not long after he was born, they would get divorced. Russia at the time is in like total shambles. The Soviet Union had collapsed a couple of years before. There's hyperinflation, like double digits per month inflation. People are losing everything. There's a depression. People are starving like this is, I didn't realize this, how bad this was. Life expectancy in the, in Russia declined by over 10 years from the collapse of the Soviet Union to the time that Vitalik was born.

• 11:54Ben Gilbert?

  Which is five years.

• 11:55David Rosenthal?

  Yeah, yeah, that's crazy. Like average life expectancy for people was down into the like 50 years. That is insane. So on the one hand, you've got like all this, like huge amount of turmoil he's born into and like grit that he's going to have to develop out of this. His parents are getting divorced. I mean, that's so hard for anybody, let alone with all this other stuff. But he also has all these huge opportunities. So he kind of wins the genetic lottery. Like both of his parents are not only hyper intelligent, which of course Vitalik is as well, anybody who probably everybody listening to this has at least heard his name, if not heard him speak, he is quite literally a genius.

• 12:36Ben Gilbert?

  I bet that's overstated. I bet, I actually think the majority of listeners do not know Vitalik's name.

• 12:41David Rosenthal?

  Oh, interesting. Well, we'll have to.

• 12:43Ben Gilbert?

  Just to level set for anyone out there who's like, what, what are you talking about, David? Like he's a public figure to us because the last six months, especially we've been diving into the world of crypto and blockchain.

• 12:55David Rosenthal?

  That's a good point.

• 12:55Ben Gilbert?

  We've done months of research to prepare for this, but like last year this time, did I know Vitalik's name? I don't think so.

• 13:02David Rosenthal?

  Hmm. That's funny. I sort of like think of him as this public intellectual. Maybe that's just because he's buddies with Tyler Cowen and goes on the conversations.

• 13:10Ben Gilbert?

  Yeah, he's been on, yeah, he's been on some fairly mainstream podcasts at this point.

• 13:13David Rosenthal?

  Yeah. Anyway, so not only is parents hyper intelligent and of course Vitalik is, his parents are computer scientists in. The mid 90s, this is a great time to be a computer scientist. So even though they get divorced, it's very amicable. So they agree, his parents to basically live their lives like together, but separately. And like number one priority is giving Vitalik every opportunity they can. So the first and maybe most important of these things is when Vitalik is five, they decide to leave Russia and immigrate to Canada. And they settle in Toronto. Vitalik gets put into the gifted program in Toronto's public schools, which is kind of funny.

• 13:58David Rosenthal?

  So like he didn't speak English at all until he arrived in Canada. It takes him a few years to really like get comfortable speaking English. But he's clearly a genius at math and computers and taking after his parents. He's also really good at writing though, and writing English. So this is crazy. When he's seven years old, I don't know if this is a school project or just something Vitalik did for fun. He writes a 30-page document in English in Microsoft Word called "The Encyclopedia of Bunnies." And he structures it, he's really interested in bunnies. And he structures it like a scientific paper.

• 14:39David Rosenthal?

  He's got like graphs and charts and he lists all the chemical elements that like make up a bunny.

• 14:44Ben Gilbert?

  Is it like typeset and LaTeX? Like I could just imagine this being like a overly academic thing for a child to write.

• 14:51David Rosenthal?

  Totally. His dad, Dmitry, would joke later that it was Vitalik's first white paper. Ayo.

• 14:59Ben Gilbert?

  Having read quite a bit of Vitalik's writing preparing for this across blogs from 2013 and before, through the white paper, through a lot of the stuff he's written today. He is a talented, succinct, incredible communicator.

• 15:15David Rosenthal?

  Totally, especially given how young he still is.

• 15:18Ben Gilbert?

  Yep.

• 15:18David Rosenthal?

  I think he's 27 at this point as we're recording this. So for high school, he's clearly so talented. They, his parents decide to take him out of public schools and enroll him in this school called the Abelard School in Toronto. I didn't even know schools like this existed. There are only about 10 students per grade at this school. And it's a very intensive curriculum, but also like lets kids explore their own passions.

• 15:45David Rosenthal?

  So this is where we pick up the story. Vitalik is a junior in high school. Both of his parents are still in tech. His dad is a entrepreneur, runs a software company. And his dad tells him, this is 2011, tells him about this thing called Bitcoin that he's heard about, he's looking into, is part of the company. It's pretty cool. And supposedly at first Vitalik, you know, like all teenagers was like, yeah, yeah, yeah. Cool dad, like whatever, like no big deal. Like, I don't know, like crazy virtual currency. But then he like, obviously he spends a lot of time on the internet and he starts hearing about it himself. And he's like, oh, actually, maybe this is kind of cool. Maybe I should focus on it. So he decides he wants to participate in this whole movement, but he doesn't want to just go buy Bitcoin.

• 16:29David Rosenthal?

  Like, that would be really boring. Plus, he's a high school kid.

• 16:32Ben Gilbert?

  Doesn't feel like participating in the movement if you're just sort of buying.

• 16:35David Rosenthal?

  Yeah, he really wants to like be part of this. He wants to earn Bitcoin. So you would think at this point, listeners, you're probably going like, this is where Vitalik turns all of Abelard's like computer labs into a giant distributed Bitcoin mining machine and like.

• 16:50Ben Gilbert?

  Oh, I actually didn't know that.

• 16:52David Rosenthal?

  No, he didn't. That's what you would like, I'm thinking at this point that this is what he would be doing. But no, this is when he logs onto the forum. And the reason he does is the way he wants to earn Bitcoin is he wants to write about Bitcoin. As he's going deeper in the communities, like, people are not doing a great job of communicating and evangelizing what this is. I think I can do, I'm good at technical writing. I think I can do a good job. So specifically, he creates his account to respond to a post, a request for writers from the publisher of a organization called Bitcoin Weekly,

• 17:34David Rosenthal?

  which is a news site that no longer exists, but you can go read all this in the forum. The initial post reads, "I am willing to pay five Bitcoin for anybody who would write an article and authorized me to publish it under the public domain. Pitch an idea to me and I will think about it. If I like your idea, you will get four days deadline to write your article and three days deadline to finish your final draft. I am one of the most reliable employer on the market."

• 18:01David Rosenthal?

  You can imagine the like-

• 18:01Ben Gilbert?

  Clearly.

• 18:02David Rosenthal?

  The mustache twirling on the other end here.

• 18:06David Rosenthal?

  So young Vitalik responds and he's like, hey, I can write, like, why don't I write about economics and the dynamics of why using, you know, credit cards doesn't make sense for microtransactions? And I can, this is all sorts of stuff I can write about. So the publisher responds, he's like, yep, yeah, yeah, sure. Send in your, uh, send in your submission and I'll see if I like it. So, uh, Vitalik does, he writes the article, he gets paid for it in five Bitcoin, which at the time was worth $4. Today is worth what, five Bitcoin?

• 18:34Ben Gilbert?

  I hope he kept those.

• 18:36David Rosenthal?

  Yeah, I hope he kept those, indeed.

• 18:37Ben Gilbert?

  150K today.

• 18:39David Rosenthal?

  Uh, yeah, 150K plus. His posts though, he keeps writing, his posts start to become really popular. And so he strikes a deal with the publisher, cause he's kind of the only one writing for this thing that people are reading, where-

• 18:54Ben Gilbert?

  Because it sounds like a scam, the way that it was posted about.

• 18:58David Rosenthal?

  Well, get this. So they decide that what they're gonna do, Vitalik's gonna write for free for Bitcoin Weekly, they're gonna post the first paragraph of all of his articles on the site. And then they're gonna hold the rest of the article essentially for ransom, where there's like a fee, it has to be crowdfunded by, by people for a certain amount of Bitcoin for each article, that people have to pay into a wallet address to unlock everybody seeing the rest of the article.

• 19:28Ben Gilbert?

  Interesting. So it's not just like a paywall, it's like the only way anybody gets to read this is if enough people-

• 19:34David Rosenthal?

  It's like a Kickstarter.

• 19:35Ben Gilbert?

  Huh.

• 19:37Ben Gilbert?

  Fascinating.

• 19:37David Rosenthal?

  It's like a Kickstarter for Bitcoin articles. Amazing. So with this, they start making like, pretty decent amount of Bitcoin. Good for young Vitalik. This goes on for a few months, but unlike the original post, Kiba, the publisher, is not exactly one of the most reliable employer on the market. And, uh, Bitcoin Weekly goes under by the end of the summer that year, in 2011. So people that really like Vitalik's writing, and that August, a dude in Romania named Mihai Alasi and his girlfriend Roxana, who were fans of Vitalik's writing, they think, hey- What if we started like an actual magazine to give Vitalik's writing, you know,

• 20:22David Rosenthal?

  a new home and he can be the head writer. So they reach out to him. Unclear if they knew that he was a high school kid in Canada or not, but you know, hey, it's crypto.

• 20:29Ben Gilbert?

  Magic of the internet. It's like you kind of also don't have to disclose that.

• 20:33David Rosenthal?

  Exactly. Exactly. So they reach out to him with the idea to start Bitcoin Magazine, which they do. They team up with a few other folks in the forums and they get to work. The initial idea is that they're going to start slow. They're only going to publish online and then they'll work up to a real physical magazine. One of the other people who becomes involved though, a guy under the pseudonym Matthew N. Wright, he has a different idea. So Mihai, he goes to incorporate this company. They decide to incorporate in the UK. So he flies from Romania to London. He's incorporating and then he's like in the middle of traveling. He's on his way back. Matthew, quote unquote, messages the group online and he says, let's dream big. And then he hits publish on a press release

• 21:17David Rosenthal?

  that he's written and I don't think he's told anybody about. The press release is entitled, first issue of Bitcoin Magazine goes to print. And it says, a 64-page glossy magazine is on its way to the printers with a 5,000 copy initial run and subscribers are going to get their copies within two weeks.

• 21:34Ben Gilbert?

  Which of course, no one has done any of that stuff, right?

• 21:37David Rosenthal?

  Literally nothing has been done. This is like the, um, the whole time I was thinking when I read this, you know, the, the World of Warcraft Leroy Jenkins meme?

• 21:45Ben Gilbert?

  Yes.

• 21:46David Rosenthal?

  That's exactly what this is. The Leroy Jenkins, the magazine.

• 21:51Ben Gilbert?

  So it's not clear that this guy is someone you want to work with long-term.

• 21:54David Rosenthal?

  No, I think he ends up staying for like another month or so. And then they're like, all right, you gotta get out of here.

• 21:59Ben Gilbert?

  But at this point, like, you know, Vitalik's using his real name. He's starting to get out there in the community. A promise has been made. So they're kind of like, hey, I guess we, we should make good on this so that we're viewed as reputable people.

• 22:11David Rosenthal?

  Right. And like necessity is the mother of invention. So Mihai, Roxana and Vitalik, they're like, all right, we gotta do this. Amazingly, they make it happen. I don't think they hit the two week deadline, but. They publish a real, physical Bitcoin magazine. It gets picked up eventually in Barnes and Noble, like it becomes like a real publication. It's pretty cool. So with that, you know, Vitalik, he's the head writer. He starts becoming even more of like a Bitcoin and crypto celebrity.

• 22:43Ben Gilbert?

  Which at this point are kind of the same thing.

• 22:46David Rosenthal?

  Right, they are exactly the same thing.

• 22:47Ben Gilbert?

  20, what, 12 ish timeframe. There is no other crypto.

• 22:53David Rosenthal?

  I don't think so.

• 22:54Ben Gilbert?

  Not of note, anyway.

• 22:55David Rosenthal?

  Certainly nothing of note. And as we'll get into, most of the other projects that are happening, I think Satoshi's already disappeared at this point. But most of the other crypto projects that were happening, I think were happening on top of the Bitcoin network at this point. So it's fall 2012. Vitalik has now graduated from high school and he starts as a freshman at the University of Waterloo, studying computer science, super prestigious.

• 23:21Ben Gilbert?

  Great CS school, yeah.

• 23:22David Rosenthal?

  So Vitalik at Waterloo, he's still writing all the time for Bitcoin magazine. He's taking like a whole bunch of courses, you know, this is no walk in the park to actually be a CS student at Waterloo.

• 23:35Ben Gilbert?

  Yep.

• 23:35David Rosenthal?

  He also starts working as an assistant to this legendary professor named Ian Goldberg. Do you know Ian Goldberg?

• 23:43Ben Gilbert?

  I don't.

• 23:44David Rosenthal?

  So he was one of the OG Cypher Funks back in the day. He hacked Netscape's SSL implementation as like a researcher. Ended up, he was chairman of the Tor Foundation, helped get that off the ground.

• 24:00Ben Gilbert?

  And for folks who don't know, Cypher Funk is the email listserv of sort of renegade cryptographer, computer scientists that actually that wasn't Bitcoin sort of hatched and proposed on the Cypher Funk email list.

• 24:13David Rosenthal?

  Yeah, well, certainly in that community. So it's all intertwined and Ian is buddies with Neil Stephenson. So I think like a lot of Ian's work kind of influenced a lot of Neil Stephenson's sci-fi. Pretty cool. So yeah, Vitalik is, uh, he's busy.

• 24:29Ben Gilbert?

  Right. So he has sort of the like side hustle thing that is earning him a name in this community with Bitcoin magazine, but then he also has the like approved societal path of being at university where he is also connected to that community through his professor.

• 24:45David Rosenthal?

  Yep. So by the time the spring rolls around of Vitalik's first year at Waterloo, he's ready to do an internship and start going. He's like, he wants like, I want to go get some actual programming, real world experience at a company, but I'm really interested in all this crypto stuff. And right around this point is when Ripple was getting started. So we said, actually, we should have take, take back what we said earlier, that there were no other crypto projects. There was Ripple. And at the time, you know, Ripple still exists and has had lots of controversy since, but it was a super hot idea to bring blockchain and crypto transactions into the existing banking systems. They raised a ton of money. So the founder of Ripple, we talked about this on the Bitcoin episode,

• 25:29David Rosenthal?

  was Jed McCalib. Remember, he was the dude who also created Mt. Gox.

• 25:35Ben Gilbert?

  That's right. He created Mt. Gox and then he sold it. And so like

• 25:39David Rosenthal?

  He sold it to the Japanese dudes.

• 25:41Ben Gilbert?

  Has, he's not responsible for the collapse, but

• 25:43David Rosenthal?

  That's right. That's right. Yeah. And Jed now runs Stellar, which is, you know, one of the many sort of

• 25:50Ben Gilbert?

  That's a fairly credible current

• 25:52David Rosenthal?

  Very credible project. Yep. Yep.

• 25:54Ben Gilbert?

  Whereas just to make sure we're super clear on Ripple, there's like a SEC lawsuit against them that's being worked through, right?

• 26:00David Rosenthal?

  It's being worked through. Yeah. I think it got de-listed from Coinbase and certainly it's accomplished a lot. I mean, at some point, I think the market cap of Ripple was in the tens of billions.

• 26:11Ben Gilbert?

  Wow.

• 26:11David Rosenthal?

  Yeah, that's like a crazy story for another day, but for here. So Jed, at this point Jed's already like, he's like also a big player in the crypto community. Vitalik gets in touch with him and Jed's like, oh yeah, we gotta hire this kid. And they would have, and history would have taken a very different turn, except they can't get him a US visa. So remember Ripple is like being a legitimate cryptocurrency company. The idea is they're going to bring it to the US financial banking system. So obviously they're a USC corporation.

• 26:45Ben Gilbert?

  Right.

• 26:45David Rosenthal?

  You gotta have a US visa, work visa to work for them. They can't get Vitalik a visa. So like, all right, you know, sorry, let's like stay in touch. We'll be friends, but you can't like actually come work here for the summer. So instead Vitalik says like, well, you know, Mihai and I like, and Roxana work, we're close. This Bitcoin magazine thing's going well. I'm just going to take the summer off. I'm going to go over to Europe, go hang out in Romania and spend the summer with them. We'll write for the magazine and Mihai and Roxana were working on a project to basically build a legitimate Silk Road.

• 27:15Ben Gilbert?

  Yeah.

• 27:15David Rosenthal?

  It's like Silk Road exists at this point.

• 27:18Ben Gilbert?

  What does a legitimate Silk Road even mean?

• 27:19David Rosenthal?

  I know. I was wondering this.

• 27:21Ben Gilbert?

  We're going to accept crypto payments. It's going to exist as an online marketplace, but we're not going to mail drugs through the USPS.

• 27:30David Rosenthal?

  Basically it's eBay. It's like, oh yeah, we should just do a decentralized eBay. Maybe. I don't know if that's a good idea or not, but like clearly the killer use case was drugs.

• 27:40Ben Gilbert?

  Yep.

• 27:41David Rosenthal?

  So needless to say, that project didn't get very far, at least at that point in time. They end up having this kind of wild summer. They move around Europe. Mihai and Roxana are also pretty young. I think they had graduated from college like a couple, maybe a year or two before. They move around Europe. They spend most of their time hanging out in an anarchist commune in Catalonia. And for Vitalik, who's like, he's always been this super, super serious kid. And like, this is like mind expanding for him. So he's having a great time. And by the end of the summer, he emails Waterloo and he's like, hey, I think crypto and Bitcoin is, is a really big thing. I want to take a year off and just focus on working on these crypto projects and being in the community. I'll be back in a year.

• 28:24Ben Gilbert?

  Much like actually the sentiment of a lot of super ambitious, young, technical people right now who are doing that on everything that Vitalik would go on to create. He was sort of the first to say, ah. Maybe it's time for me to take some time off to focus on crypto.

• 28:40David Rosenthal?

  Yep. And also, like, it just hits me over the head how much, you know, the parallels between Vitalik and Mark Zuckerberg, you know, again, 10 years earlier, that we're going to keep getting into as we go along here. But same deal. I don't think, I think when Mark took that summer to move out to Palo Alto and work on Facebook, I think he was intending to go back to Harvard. Maybe he did the same, like, I'm going to take a year off and see back.

• 29:02Ben Gilbert?

  And yeah.

• 29:03David Rosenthal?

  Obviously, neither of these guys end up going back to college. So this starts this kind of incredible journey that like directly leads to Ethereum. So what Vitalik decides he's gonna do, there are all these Bitcoin meetups and conferences that are happening all over the world. He decides he has enough money that he's making from doing his writing, especially as Bitcoin, the currency, starts to appreciate. He decides he's just gonna travel around and go to all of them and meet the community and hear about all these projects that are happening and write about them.

• 29:34Ben Gilbert?

  What year is this?

• 29:35David Rosenthal?

  This is summer 2013.

• 29:37Ben Gilbert?

  Okay.

• 29:38David Rosenthal?

  So we're very close to the start of Ethereum here. He goes to one conference in Amsterdam where he meets a guy named Amir Chetrit, who was working on a project in Israel called Colored Coins. This is where it's all gonna start to come together. So Colored Coins was building on top of the Bitcoin network, and they wanted to bring in real world assets like real estate or fiat currencies, real world, you know, financial assets, securitize them and bring them onto the Bitcoin blockchain. Like, okay, you know, that was an idea a lot of people were thinking about. So he invites, Amir invites Vitalik to come to Tel Aviv and meet up with him, see the team.

• 30:22David Rosenthal?

  And there are a few other projects that are happening in Tel Aviv at the time that they're sort of collectively calling this group Bitcoin 2.0. Like, it's a self-proclaimed group of people in Israel that are gonna create Bitcoin 2.0.

• 30:35Ben Gilbert?

  And it's essentially like a layer on top of Bitcoin, right? They're not proposing any changes to Bitcoin itself.

• 30:40David Rosenthal?

  That's the thinking. They're gonna start building, Vitalik would later use the analogy and other people would use the analogy of like, they're gonna turn Bitcoin into a Swiss Army knife. Like Bitcoin is the chassis of the knife and they're gonna build, you know, the small knife and the screwdriver and the toothpick and all the different tools around it.

• 30:58Ben Gilbert?

  And what Colored Coins was doing was sort of like, hey, I'm going to put the fact that I own this property on the blockchain so that this property or any physical thing in the real world can be sort of identified by a marker on the blockchain.

• 31:12David Rosenthal?

  I think that's right. It's like a representation. I think that was the plan. So Vitalik goes over, meets up with a bunch of teams. One of the other teams in this sort of Bitcoin 2.0 movement is a team called Mastercoin. And what they're thinking about, their sort of Swiss Army knife tool that they're going to build on top of Bitcoin, is the ability for anybody to create their own other currencies on top of Bitcoin, the Bitcoin network, and then fundraise for those currencies. Hmm. This sounds like something people might want to do in the not-too-distant future.

• 31:48Ben Gilbert?

  For sure. And this is where it's worth disambiguating a couple of things, just as a vocabulary lesson. In the world of Ethereum, Ethereum, and I know I'm flashing forward here, Ethereum is the network, and Ether, abbreviated ETH, is the token, the currency that exists on that network. But in the world of Bitcoin, the blockchain is called Bitcoin, and the coin or token is called Bitcoin. And so there's like, you can buy and sell Bitcoins, and there's a blockchain that exists that is also called the Bitcoin blockchain. And so their proposal here is basically like, we want to find a way to create other currencies to exist on the Bitcoin blockchain that is not Bitcoin.

• 32:28David Rosenthal?

  That is not Bitcoin. Exactly. Yeah, it's confused. Bitcoin is basically, Bitcoin is two things. We talked about this a little bit in the episode. Bitcoin is Bitcoin on Bitcoin. Bitcoin being the currency and the Bitcoin network being the blockchain.

• 32:41Ben Gilbert?

  Yep.

• 32:42David Rosenthal?

  So, yeah, the way that Mastercoin was going to make this happen, of allowing these other currencies to exist on the Bitcoin network, was through this

• 32:54David Rosenthal?

  Concept, this computer science concept called smart contracts, which people might have heard of and people talk about Ethereum being the smart contract language. So smart contracts were actually, the concept was invented by Nick Sabo way back in the day, who was the dude who proposed BitGold, if you remember from the Bitcoin

• 33:12Ben Gilbert?

  episode. Which was also on the Cypher Funk email list.

• 33:14David Rosenthal?

  He was also sort of a Cypher Funk. He was actually a lawyer too, I believe. He wasn't technical. So he never implemented BitGold. It was just a proposal, but it's one of the couple proposals that were sort of closest to what Bitcoin.

• 33:28Ben Gilbert?

  Definitely inspired Bitcoin.

• 33:29David Rosenthal?

  Definitely inspired Bitcoin.

• 33:30Ben Gilbert?

  Whoever Satoshi is definitely worked from that sort of foundation.

• 33:34David Rosenthal?

  Those were the shoulders that Satoshi stood upon. So Sabo, he defined smart contracts as quote unquote, "a set of promises," remember, he's coming from a legal background, "a set of promises specified in digital form, including protocols within which the parties perform on these promises." So what does that mean? Basically, smart contracts, and this is what I realized in doing the research, it's just code. It's code that can be arbitrary, but it executes if and only if certain conditions are met. That was kind of the innovation. And then when you marry that with a blockchain and something like Bitcoin where like, there

• 34:16David Rosenthal?

  is a ground truth, like nobody can argue over whether conditions are met or not, then you seed the environment for these smart contracts to actually be really useful.

• 34:26Ben Gilbert?

  Right, yeah. What you're saying is if everything is actually on the blockchain, the assets, you know, the cryptocurrency and the conditional logic is also on the blockchain, then you can have things that will sort of provably do what you think they are going to do. Whereas, you know, in the real world, you've got a contract that's written by a lawyer and then it takes people actually carrying out the work that that contract says, you know, they're effectively dumb contracts. They then require a human compiler to go through and then make sure that the logic that is in that contract can be sort of parsed and then interface with things in the real world.

• 35:03David Rosenthal?

  And you can get into all sorts of arguments about like, well, are these conditions met or were these not, conditions not met? And that's why we have our legal system and judges and lawyers.

• 35:11Ben Gilbert?

  Yep. You know, there's one spec that's written that is executable, that has direct manipulation over the assets to move it. It's pretty genius.

• 35:19David Rosenthal?

  Yeah, totally. So the Bitcoin network and Satoshi, it's not like he didn't know about smart contracts. It uses it. There are smart contracts in the Bitcoin network, but they're limited. There's only a very specific, very small set of functions that you can call functions in the programming sense that you can call as part of Bitcoin's smart contracts. And so what Mastercoin and Colored Coins and all these other folks were doing in the Bitcoin 2.0 movement, they were writing essentially more functions that you can call in smart contracts. So Vitalik, like he's hanging out with these guys. He's like, well, this is, this is great. I love these ideas. I'm good at writing. Maybe I can help you guys write

• 36:01David Rosenthal?

  up white papers for your projects and sort of help evangelize and crystallize what you're doing. That's great. They're like, sure. Go to town, work on white papers for us. As he starts the process of writing, though, for each of these projects, he realizes like, hey, you know, these things are all separate projects and this is all kind of cool and building on top of Bitcoin, but you're all just kind of scratching the surface of a bigger idea. Like, this is sort of whack-a-mole of like adding set functionality to Bitcoin. But if you know anything about programming, like the beauty of programming is this idea of Turing completeness, that like a programming language that is Turing complete, you can do anything. You can create a developer, doesn't need any permission, doesn't need

• 36:46David Rosenthal?

  any set functionality.

• 36:47Ben Gilbert?

  Yep.

• 36:48David Rosenthal?

  She or he can write their own functions and do anything ad infinitum.

• 36:53Ben Gilbert?

  It's the way that any piece of software technology works, that you have these varying levels of abstraction. And at the highest, you know, user-facing layer, you have this sort of application where that is designed for a specific purpose, often for a very specific type of user, performing a certain business logic. Take Slack, you know, that's a very abstract thing that is a field that you type in, you know, that's got a chat window. It's an application. And what people are sort of doing in this Bitcoin land, and this is a little bit of a stretched analogy here, but they're basically building highly specific applications on top of Bitcoin and trying to sort of extend it.

• 37:32David Rosenthal?

  It's kind of like the Bitcoin network as a calculator, not a computer.

• 37:36Ben Gilbert?

  Right. And what Vitalik's basically saying is, but what if the instruction set, the sets of functions or instructions that we could sort of call were very general purpose, very sort of abstract, where there's even further levels of abstraction that applications that could be built on top of that. And it's a dangerously difficult undertaking because it's exploitable in all sorts of ways. It requires incredible amounts of security. It requires you to really think through every way that someone could use your very primitive set of low level instructions to craft whatever they want. But if you can do it, then it's a hell of a foundation.

• 38:16David Rosenthal?

  This is a huge idea, huge idea. I mean, basically saying like Bitcoin is a calculator. Let's build a computer. And if we're going to build a computer, it's got to be a wholly different thing. So he goes first to the Mastercoin team and tells them about this. He's like, hey, I'm working on your white paper. What if you guys did this instead? And the Mastercoin team, you know, sort of half to their credit, they're like, wow, that is a big idea. That's really cool. And then half to their incredible detriment, they're like, we're going to stay focused on what we're doing.

• 38:52David Rosenthal?

  That was probably a mistake.

• 38:55Ben Gilbert?

  Let me just crystallize this even further, just because I keep thinking on that. It is a stretched analogy, but it's like someone handed you a Macintosh without macOS for it. And what you said was, well, I'm going to start building Slack, or I'm going to start building, I'm just looking at my doc here, Chrome or Photoshop. And then it's like somebody proposes to you, whoa, whoa, whoa, whoa, instead of just building Photoshop, build macOS. And like, imagine the potential that we will unlock with that.

• 39:23David Rosenthal?

  And you're like, no, but I really want Photoshop.

• 39:25Ben Gilbert?

  And we only have so many resources and yeah.

• 39:28David Rosenthal?

  There's this amazing email that's in the infinite machine that Kavella cites from the founder of Mastercoin to Vitalik. He says, but I'd rather see Mastercoin doing its core functions before we start experimenting with scripting. Scripting being what you would need, like universal scripting language as part of this to turn it into a real computer.

• 39:47Ben Gilbert?

  Yep.

• 39:48David Rosenthal?

  So Vitalik, you know, at first he's a little disappointed and then he's like, wait a minute. I'm Vitalik Buterin. I've got a following. People in crypto land know me. I'm good at writing white papers. I'm also pretty technical. I think this is the future. I'm just going to go do this. So he leaves Tel Aviv and heads to probably the one place in the world, certainly then, and probably still today, where the best place where if you've got the big world changing idea, you want people to take you seriously, even if you're not, you know, super well known, he goes to San Francisco. So and of course, remember he knew the Ripple team and Ripple's based in San Francisco.

• 40:29David Rosenthal?

  He shows up, he couch serves, he crashes on the couch in the apartment of Ripple's CTO, Stefan Thomas in Soma. And he spends two weeks in San Francisco and he just like, he alternates between during the days, he goes like on long walks around San Francisco, up and down the hills. And then he comes back and he just writes the white paper. Like he doesn't talk to Stefan. Stefan wants things like, hey, I want your thoughts on, you know, Ripple and like, maybe he should write about Ripple, you know, and evangelize us. And he's like, no, no, I'm focused. And so he writes the white paper in two weeks. What would become the Ethereum white paper. At first he titles it, "The Ultimate Smart Contract and Decentralized Application Platform." And then he kind of realizes, you know, again, Vitalik, he's, you know, he knows how to write, he knows how to convince people.

• 41:14David Rosenthal?

  He's like, I need a cool name for this project. So he starts scrolling through Wikipedia, looking for science fiction terms that he can sort of use as inspiration, sci-fi terms. And he comes across the word. I don't know if it's pronounced ether or ether. I always thought it was ether. A E T H E R ether. Let's just call it ether. This concept, I remember this from like way back in middle school. It originated with the ancient Greeks who thought that ether was the fifth element. Out there, you know, there's like, what is it? Wind, fire, water, earth, I think were the four elements.

• 41:49Ben Gilbert?

  Yeah, makes sense.

• 41:50David Rosenthal?

  So the ancient Greeks postulated that those were like the human elements. But there was this fifth element called ether that the gods, the medieval Greek gods breathed. And this idea kind of never got stamped out in human history. So like in medieval times, just when the scientific revolution was kind of getting going. People postulated that ether was a invisible substance that permeated the universe that light traveled through. Yeah, it was like the force. It was exactly, it's like the force. And specifically, light was conducted through ether. The gods breathed it, whatever. Anyway, been disproved. Not, not the case. But Vitalik thinks this is perfect. He's like, oh, man.

• 42:32David Rosenthal?

  The substance that the gods breathe, that it permeates the entire universe, that light gets, you know, conducted through. Great. I'm going to borrow this term. So actually ether does exist and I'm going to use it to title my project. So he comes up with the Ethereum network, of which the currency, native currency on top of it is ether. Boom. It's born.

• 42:57Ben Gilbert?

  Pretty good name. And if you read this white paper, it's pretty A, long and B, technically complex.

• 43:05David Rosenthal?

  Yes, this is not like the Bitcoin white paper.

• 43:07Ben Gilbert?

  No, the Bitcoin white paper, while it does have some reasonably complex mathematical formulas, it basically succinctly lays out in prose how each of these clever mechanisms exist and how they'll sort of all work together. The Ethereum white paper is like. Here's the instruction set architecture for a new type of assembly language and the type of machine that it will run on and the registers are going to look like this. I mean, it's like, it's like going back to my operating systems class in college.

• 43:35David Rosenthal?

  Yeah, we'll link to it. You should go look at it, read it, but like, don't, you know, you should go read the Satoshi White Paper. Anybody can read that and understand that. This, it's for a technical audience.

• 43:44Ben Gilbert?

  The funny thing is then there's even a further technical specification on top of that called the Yellow Paper, which is like, like when I was at Microsoft, we had the PMs wrote the spec and then once the specs was signed off, then the devs wrote the like, the design document, I think was actually how like the software would be architecture. So it's sort of like the spec and then the developer design doc of Ethereum.

• 44:04David Rosenthal?

  So funny. That would come a little later. More drama before then. So basically like, you know, we've talked about, you know, Ethereum being the computer versus Bitcoin, you know, the calculator or that, or like a computer without an operating system. There are two kind of like big consequences of this. So one, you've got a Turing complete, generally programmable computer with a native currency in it. You now have code with money. So, you know, with Bitcoin, you have money and not really code. With normal non crypto world, you've got code.

• 44:41Ben Gilbert?

  Lots of code, but completely separate from money.

• 44:43David Rosenthal?

  Completely separate from money. Here, so the way Vitalik architects Ethereum, there are two types of accounts in the Ethereum network. Accounts that can hold and spend and do things with Ether and can execute code. There are user accounts, you know, which humans would hold.

• 45:01Ben Gilbert?

  Like my wallet.

• 45:01David Rosenthal?

  Like a wallet. Yeah, they're user accounts. But then there also are contracts and smart contract accounts. They are exactly the same as user accounts. So.

• 45:11Ben Gilbert?

  Yeah, this is kind of like the cleverness of abstraction thing that we were talking about earlier. It's like, how low level and customizable can I make stuff? And it's, you just see it show up in the fact that both user accounts and contracts are sort of a subclass of account.

• 45:28David Rosenthal?

  Yep.

• 45:28Ben Gilbert?

  And the cleverness of, yep, this account exists over here and you can upload your contract to it. And of course you have to pay and we'll talk about that of getting your contract to go live in this location. But then at any point after that, people can send inputs to it. The contract will execute and then the outputs happen. Yeah.

• 45:45David Rosenthal?

  Yeah. So you've got literally the code contracts that are the same as the user accounts, meaning they have their own money. The code has its own money. This has never happened before. This is huge. So that's just one of the two big ideas. The other big consequence of this is that if this network actually gets instantiated, it's going to be a world distributed computer like there has never been before. So like, you know, people call Ethereum the world computer. This is what they mean. Of course, there's AWS, there's Azure, you know, there's all sorts of like cloud computing out there, but like Amazon owns AWS and like,

• 46:23Ben Gilbert?

  Right.

• 46:23David Rosenthal?

  you can go find like all the locations that all their data centers are and like, you know, whatnot. It's like a thing, you know, it's unlikely it's ever going to go down, but Amazon runs it.

• 46:33Ben Gilbert?

  Right. Let's take the smart contract and just remove the money component for a moment here. It's sort of like thinking about, you know, serverless architecture or even server architecture. You write some code, you deploy it to an endpoint somewhere, you expose an API that has an input, an output, but like that code lives on one server. There's probably some replication, but like it's on a server in a data center. When you deploy an Ethereum, your contract to a location on the blockchain, that is replicated on all million or whatever, hundreds of thousands of nodes on the Ethereum network that sort of have a copy of that.

• 47:10David Rosenthal?

  Just like every node on the Bitcoin network has a copy of the ledger with all the transaction history. Same deal here. Every node on the network has a copy of all the code.

• 47:19Ben Gilbert?

  Right. And as you're visualizing this, where your brain should go is wow, that's powerful. And then simultaneously it should go, geez, that distributed nature, I could really imagine that being like, you know, it's, it's hard to take it down. Like you can unplug a server from the wall, but like, once that code's kind of deployed, that smart contract is pretty hard to undo.

• 47:38David Rosenthal?

  We are going to get into that.

• 47:39Ben Gilbert?

  And lastly, your mind should go to a place where you're like, well, that's pretty inefficient.

• 47:44Ben Gilbert?

  Wait, so it has to go to ev- uh, what? That's gonna cost a lot of energy and time and geez, maybe that there'd be a lot of like network congestion. So already, as you're starting to understand the architecture of this, you're like, okay, really, really good for some stuff and at great cost.

• 48:02David Rosenthal?

  Yeah, I had this later in the notes, but to pull it forward, just for context, you know, people talk about even today, you know, in 2021, mid 2021, the relative power of the computer that is Ethereum, you know, the world computer is roughly equivalent to a Raspberry Pi on a home broadband connection. And that is running everything.

• 48:25Ben Gilbert?

  But it is stable AF, David.

• 48:27David Rosenthal?

  Yeah, that's right. Maybe, maybe we'll get into that. Okay, so this is all pretty freaking cool, especially for like an 18-year-old. So November 27th, 2013, Vitalik, I think he's still in San Francisco at this point, he's done his draft of the first draft of the Ethereum white paper. He emails it out to a very small group of people that he knows from the crypto community to ask for their feedback. So Camilla writes in the Infinite Machine here, I'm gonna quote, that Vitalik was, quote unquote, "Sure, his work was gonna get torn apart. With an idea this big, there has to be a very good reason why nobody has tried to do it. But that never happened. Vitalik's email got forwarded and then forwarded

• 49:10David Rosenthal?

  again, so that instead what he got was a flood of responses from people who were excited about the project and wanted to work with him. Vitalik's vision was much too big to be constrained. He was thinking about creating a base layer for everything, a computer that could simultaneously live in all the nodes of an enormous global network, which would be able to process anything you threw at it without downtime or interference. So developers could build whatever they dreamed of and nobody would be able to stop them or their applications like an infinite machine."

• 49:44David Rosenthal?

  Pretty freaking cool.

• 49:45Ben Gilbert?

  Very cool.

• 49:46David Rosenthal?

  So cool.

• 49:47Ben Gilbert?

  Definitely sci fi.

• 49:48David Rosenthal?

  Definitely. I mean, ether. We were all wrong. The Greeks were right. It exists. Okay, so pretty quickly after this, a core group of five people starts to form to pull this ambitious thing together and try to make this project happen. So there's Vitalik, of course. There's Mihai, his buddy, his Bitcoin magazine partner in crime. There's Amir Chetra, the guy that he met in Amsterdam, the colored coins guy who initially brought him to Israel. Amir's like, oh, I get it. This is cool. I'll go do this with you.

• 50:22Ben Gilbert?

  Even though at colored coins, we're not going to do this as a part of that project. I get where.

• 50:26David Rosenthal?

  I get where this is going. This should be its own thing. And Amir's gonna, there's gonna be some drama here because Amir doesn't leave colored coins. He's still working on colored coins. And then two more people. So the first is a guy named Anthony Diorio, who is also from Toronto and was a Bitcoin enthusiast, but unlike everybody else here, actually had some wealth in, you know, real world money, not just.

• 50:49Ben Gilbert?

  He worked at Goldman Sachs, right?

• 50:51David Rosenthal?

  Uh, no, that was Joe. Uh, he's gonna come a little later. I forget how Anthony had made some money, but he had some money. So he gets brought on to kind of like, he's like, hey, I'll bankroll this while we're getting started up. And he's like, we should also get my buddy Charles involved in this. Charles Hoskinson, for all Ethereum and crypto fans who have been following this space here, probably, you're probably smiling to yourselves right now because you know what's about to happen. So Charles had done work on the idea of decentralized cryptocurrency exchanges, which of course would become a very big thing on Ethereum a few years later.

• 51:31Ben Gilbert?

  And these are DEXs, if people have heard of that. So Coinbase being like a centralized, I mean, it runs in AWS. There's.

• 51:37David Rosenthal?

  Yeah, it's like the New York Stock Exchange.

• 51:39Ben Gilbert?

  Right. It's a SaaS application that happens to connect to a bunch of blockchains underneath it. Whereas a decentralized exchange or a DEX is like, it uses decentralized technology to create the exchange to trade.

• 51:51David Rosenthal?

  It runs in the nodes of the network. We'll get much more into this when we get into DeFi at the end of the episode. The other thing that Charles had worked on was helping pioneer this idea of a concept, which was just sort of like, you know, out there at the time, of a concept called a DAO, a decentralized autonomous organization.

• 52:11David Rosenthal?

  Also going to come back up in a minute here. So Anthony's like, hey, Charles, like, you know, he's a, he really knows the stuff. He's good, you know, and he's got some experience running projects. He would be really good to bring on here and he knows what he's doing. And the group quickly decides that Charles should be the CEO of this fledgling Ethereum something company foundation project. We will see. Charles, of course, would later go on to found Cardano. Quickly after that, so they've got Vitalik, who wrote the white paper and is, you know, technical, but like, he's still a kid. He's a second year computer science student, essentially.

• 52:49Ben Gilbert?

  Right.

• 52:50David Rosenthal?

  You've got Amir, who's not technical. You've got Miha, who's not technical. You've got Anthony, who's not technical. And you've got Charles, who's like borderline technical, but not a developer. So they realize like, hey, we need some devs. So they bring on two developers, the first of whom is a amazing developer named Gavin Wood, who also for people in crypto land, you know Gavin.

• 53:13Ben Gilbert?

  Legendary name, yeah, truly a gifted programmer.

• 53:16David Rosenthal?

  Incredibly gifted. Gavin had intersected with Miha and Roxana before. And when he hears about Ethereum and the white paper, which is now making the rounds in the community, he emails Vitalik and he says, yes, how far along are you encoding it? Can I help? Vitalik responds like, not far. Yes, you start tomorrow. So Gavin drops what he's doing and he gets to work right away on a C++ implementation of a client to run Ethereum nodes on the network. Gavin makes the first commit to Ethereum's GitHub on Christmas Eve, 2013. So he's dedicated. Right around the same time, a Dutch developer named Jeff Wilke also joins the project.

• 54:00David Rosenthal?

  Wilke was at Mastercoin, so he was in Amsterdam, but he was working for Mastercoin and joins this as sort of a side project. He continues working on Mastercoin as well. And Jeff gets to work on an implementation of an Ethereum client in Go, in the Go programming language. So Gavin's working on a C++ version. Jeff is working on a Go version.

• 54:21Ben Gilbert?

  Which if I remember right from the book, was sort of accidental at first. It was like, hey, we both know different programming languages. We both kind of want to do this. We're both just going to get started. It wasn't like this intentional, hey, we should have redundancy to make sure that if we misimplement something in one of the languages, it doesn't become the way Ethereum works.

• 54:39David Rosenthal?

  Which actually ended up being one of the few good decisions in the early days of Ethereum. And I think was probably really a boon to have both of these versions out there. So the next month, in January 2014, the original five, plus Gavin and a few other folks, not Jeff, Jeff decides to stay in Amsterdam, they convene at an Airbnb in Miami ahead of the Miami Bitcoin Conference. I thought the Miami Bitcoin Conference this year was like the first one. No, no.

• 55:09Ben Gilbert?

  I totally thought that too, because there's so many Miami jokes that are happening that like, we should totally acknowledge that Miami 2014 was when Ethereum first happened, when it was presented, when this group got together.

• 55:21David Rosenthal?

  Miami's got OG Tech Grid.

• 55:23Ben Gilbert?

  Absolutely. Do you know if the Bitcoin Conference happens every year in Miami?

• 55:27David Rosenthal?

  That's actually a good question. I don't know. I should know. But nonetheless, it happened there in 2014. So Vitalik, they decide that this is where they're going to announce and launch Ethereum. Vitalik is slated to give a talk at the conference. But this is all happening so fast. He's just giving a talk as like Vitalik Buterin, writer for Bitcoin Magazine. He's not even on the main stage in the conference planning. Like, it's hilarious. So they all show up at the house. Also, Joseph Lubin, Joe, who you were referring to earlier, shows up at the house. He'd been introduced to Vitalik through Anthony. Also, Joe was at Goldman, and then in the hedge fund world, also a Princeton alum, GoTigers.

• 56:11David Rosenthal?

  And they decide to bring him on board. He's got some money as well. So he also, so helps finance things. So Joe and Anthony are just out of their own personal finances or financing these early days.

• 56:22Ben Gilbert?

  And it's not like there's Ether to buy at this point. They're literally just spending money to cover the costs.

• 56:27David Rosenthal?

  So they decided at the house that the original five will be co-founders of Ethereum. So not Gavin, not Jeff, not Joe. And they'll get, the co-founders will get the largest personal stakes of Ether in sort of the pre-allocation before the network goes live. And that's sort of like decided in the early first day when the, at the house. Gavin's there meanwhile, he's like, he had been coding, like, he's coding furiously at the house, trying to get a test net up to demonstrate during Vitalik's presentation. And has these coatings, kind of like, he's looking around, he's like, dude, I'm the only one who actually knows how to build this thing here.

• 57:04Ben Gilbert?

  What are all these other people doing?

• 57:06David Rosenthal?

  What would you say you do here?

• 57:12David Rosenthal?

  So he starts getting a little salty and he's like, guys, I should be a co-founder and I should be CTO. Cause what are you going to do without me? So he and Anthony actually have a pretty big argument supposedly at the house. But everything's happening so fast, nothing gets settled there. They're like, all right, well, let's just like get to Vitalik's presentation and launch this thing and we'll see what happens after that. Finally, presentation happens at 9:30 AM in the morning on Sunday. I think that was maybe the last day of the conference or something, January 26th. Still not on the main stage, but word had gotten out that this was going to be a big deal. So Vitalik takes the stage, the room is packed, like everybody in the crypto community is there.

• 57:52David Rosenthal?

  And he announces Ethereum, I think he announces that the test net is live. And people go nuts. It's like a rock concert, like there's a standing ovation, there's cheering, like people are really jazzed about this idea, as they should be.

• 58:11Ben Gilbert?

  I mean, it's so ambitious. Like the reason it hadn't been done is largely because it's just phenomenally risky and a ton of work. And then will require an enormous groundswell of community support in order to make it happen. Like Bitcoin already had this huge lead, all these network effects. It's kind of like me saying like, I want to start a new operating system. And then I'm going to build a new app store on top of that operating system. Like it's, it's just nutty.

• 58:36David Rosenthal?

  Yep. I don't know. I mean, we could rally the acquired community to make it happen. Bencoin.

• 58:41Ben Gilbert?

  Acquired magazine subscribers.

• 58:44David Rosenthal?

  Acquired makes sense.

• 58:45Ben Gilbert?

  Unite.

• 58:45David Rosenthal?

  That would actually be pretty dope. We should have a 64-page glossy magazine that's shipping in two weeks.

• 58:52Ben Gilbert?

  One, uh, one for each company that we've covered.

• 58:55David Rosenthal?

  We are one of the most reliable employer on the internet.

• 58:57Ben Gilbert?

  Okay. All right. Back to the story.

• 58:59David Rosenthal?

  All right, back to the story. So, literally as Vitalik is walking off the stage, everybody and their mom is like, "Hey, can I give you money? Like, I want to fund this thing. I want a piece of this." So before the announcement, the team had been planning to do a $5 million crowd sale of Ether to bootstrap the network and raise initial funds to pay back Anthony and Joe and get going and fund development.

• 59:22Ben Gilbert?

  Yep.

• 59:23David Rosenthal?

  They decide, though, in the wake of this, they're like, "It's like the Roblox IPO." It's like, "We gotta postpone this. Like, the demand is too high."

• 59:32David Rosenthal?

  So they said, like, "Hey, let's postpone. Let's leave Miami. Let's regroup in Switzerland." Because at the time, Switzerland had the most sort of, you know, Swiss neutrality, best friendliest laws for crypto companies in the world, and let's decide how to proceed. Actually, before they get there, in the aftermath of the conference, Gavin kind of continues to be a squeaky wheel, and they decide, you know, "Okay, great. We're gonna expand the group of co-founders from five to eight. We're gonna include Gavin. We're gonna include Jeff from Amsterdam, who's running the Go implementation, and we're gonna include Joe as well, because he's now financing this."

• 1:00:08Ben Gilbert?

  Big founding team.

• 1:00:09David Rosenthal?

  That is eight people, of which like two and a half are technical on the founding team for an incredibly technical project. The next big question, though, that they, once they get to Switzerland, they gotta start figuring out is like, "Well, how do we structure this thing? Is this a company? Is this a foundation? Like, is this Linux? Is this, what is this?" As Camilla puts it in The Infinite Machine, the question was, would they be Google, a for-profit company with, you know, revenues and cash flow and profit?

• 1:00:41Ben Gilbert?

  Yep.

• 1:00:41David Rosenthal?

  Or would they be like the Mozilla Foundation, which, you know, still would have revenue and resources, but is a nonprofit that would allocate resources to developers to, both internally and externally, to further the project?

• 1:00:54Ben Gilbert?

  Yep.

• 1:00:56David Rosenthal?

  So here's where things kind of go off the rails. Basically, Charles Anthony, remember, Charles is the CEO titularly at the time. Charles Anthony and Amir, the colored coins guy, they all want the for-profit, the Google route.

• 1:01:09Ben Gilbert?

  Yep.

• 1:01:10David Rosenthal?

  They're seeing dollar signs.

• 1:01:11Ben Gilbert?

  Which is so funny that they're seeing dollar signs because it would be a corporation. Like in retrospect, there were a lot of dollar signs because it wasn't a corporation.

• 1:01:19David Rosenthal?

  Arguably, a lot more dollar signs. I mean, we'll never know what would have happened otherwise. But meanwhile, Vitalik and Mihai, they want the Mozilla route.

• 1:01:28Ben Gilbert?

  Yep.

• 1:01:28David Rosenthal?

  And then the developers, Gavin and Jeff, I think mostly they don't really care. They're just like WTF guys, like, we don't have anything right now. We gotta just build this damn thing like, and you're arguing about corporate structure? Like, what the hell? If you press them, they probably want the Mozilla route. But mostly, I think they just don't really care. This becomes a huge schism. Charles wants to go to Silicon Valley and go do a tour and go raise money from venture capitalists and get the cash in the door, which they certainly could have done. And then everybody else is like, you're gonna go raise money from VCs? Like, this is still crypto land. The whole point is to rage against the machine. You're gonna go raise money from the traditional financial system? Meanwhile, fortunately for the way things would go,

• 1:02:11David Rosenthal?

  crowd sales of initial tokens for various projects were becoming more and more of a thing on top of Mastercoin, which existed at this point. And there starts to be a really viable argument that, hey, like you were saying, Ben, you can get plenty of money in by making this a nonprofit foundation.

• 1:02:27Ben Gilbert?

  Yep.

• 1:02:28David Rosenthal?

  The question, though, is, is it legal?

• 1:02:31Ben Gilbert?

  Because like, let's rewind. Has a foundation ever been behind something where you are selling tiny chunks that can potentially be used in the future to have some utility? But today, don't have any-

• 1:02:46David Rosenthal?

  Speculative in nature.

• 1:02:47Ben Gilbert?

  Yeah, it's totally speculative. And also, because you're a foundation, you don't have shares. So it's not like you're selling pieces of your company because it doesn't exist. So it's this weird sort of like-

• 1:02:58David Rosenthal?

  It really is a gray area.

• 1:02:59Ben Gilbert?

  Right.

• 1:02:59David Rosenthal?

  But it really looks on the surface a lot like a securities offering, which of course would be like a major no-no.

• 1:03:06Ben Gilbert?

  Right.

• 1:03:07David Rosenthal?

  The SEC would have something to say about that.

• 1:03:09Ben Gilbert?

  And not, not a no-no in the sense of like, you can't do it. A no-no in the sense of like, you have to register with the SEC to do that. You need like effectively an IPO. You need to do a list on unapproved exchange. Like, there are ways to sell securities to the public. But

• 1:03:24David Rosenthal?

  But not the way the Ethereum guys are thinking about it.

• 1:03:26Ben Gilbert?

  Yes.

• 1:03:28David Rosenthal?

  Not to mention, you know, there's the US, which is obviously the biggest financial market in the world. But this is a world project and a world computer, and most of these people are not Americans. So there's that.

• 1:03:39Ben Gilbert?

  Yep.

• 1:03:40David Rosenthal?

  So they retain a whole army of securities lawyers all around the world to figure this out. They even managed to get, this is amazing, a former SEC commissioner, guy named Joseph Grunfrost, who was SEC commissioner in the Reagan administration. He's now teaching at Stanford. They get him to advise them on like what to do here. And the question all comes down to like Ether, the currency, what is it? Is it a security or is it a commodity? Well, that's a good question.

• 1:04:10Ben Gilbert?

  And the reason you're saying commodity is because like it's a good that people can trade that has a utility, rather than it being a share that people trade that is speculative, that the price will go up or down in the future because it's tied to the performance of an entrepreneurial venture that's managed by some management team.

• 1:04:30David Rosenthal?

  Yep. So if it's a security, no dice on this offering.

• 1:04:34Ben Gilbert?

  Yep.

• 1:04:35David Rosenthal?

  If it's a commodity, all good, like anybody can start selling something.

• 1:04:39Ben Gilbert?

  And the thing that like really gives them that credible argument around it being a commodity is the fact that it has utility in the Ethereum network.

• 1:04:47David Rosenthal?

  Exactly. So we mentioned gas fees, like the way the system works is Ether is the currency on top of the Ethereum network. But Ether exists to pay fees to the nodes on the network to get them to process transactions.

• 1:05:07Ben Gilbert?

  It's effectively a bounty. And when we're saying gas fees, you can think of gas and Ether effectively interchangeably. It's effectively a bounty where you say, all right, I need someone to do something with this smart contract that I've written. I need it propagated.

• 1:05:22David Rosenthal?

  You need an incentive to do that.

• 1:05:24Ben Gilbert?

  Yeah, here's what I'm willing to pay for you guys to send this all around the world.

• 1:05:28David Rosenthal?

  Yep. So Vitalik wasn't even thinking about the securities law implications of this when he wrote the white paper. But, you know, he calls it gas. He's like, this is the analogy. It's like, you gotta buy the gas to put the gas in the car to get the car to go.

• 1:05:40Ben Gilbert?

  Yep.

• 1:05:41David Rosenthal?

  So they go to, I want to say good friend, like the Berkshire episodes and Solomon Brothers, no, Grunfest, the former SEC commissioner. And they say like, well, hey, um, so here's how this works. It's gas fees. Real world gas isn't a security. Obviously, that's a commodity. I can just set up a gas station and sell gas. I don't need to register that as a security with the SEC.

• 1:06:05Ben Gilbert?

  Unless I always sunny style, then go and hoard all the gas in my basement and the back of a van and then try and resell it later at a higher price. But yes, continue.

• 1:06:13David Rosenthal?

  So they probably don't bring that up with Grunfest.

• 1:06:17Ben Gilbert?

  Yes.

• 1:06:18David Rosenthal?

  So like, isn't ether the same thing? Shouldn't it be a commodity? And Grunfest kind of thinks about it and he's like, yeah, I guess you're right. It's amazing. So they take this to their US securities law firm, Pryor Cashman, and they get Pryor Cashman to write an opinion letter saying that like, based on Grunfest saying this, we are of the opinion that ether is not a security. It's a commodity. Bunch of other law firms also write opinion letters. And boom, the doors are wide open, not just for Ethereum to now do an initial crowd sale of their utility token, but for anybody to do an initial crowd sale.

• 1:06:55Ben Gilbert?

  Oh, boy. A lot of people rubbing their hands together here.

• 1:06:57David Rosenthal?

  Oh, talk about those dollar signs, you know? Man, if, if only the people that wanted to go the C corp route had known about this, they would have changed their tune. So once this is settled, they all get back together in Switzerland. This is now June 2014 to make the final call on the direction to go. And everybody thinks going into this meeting, that this is just going to be like a rubber stamp, like, great, we're gonna approve, we're going in the Mozilla direction, we're gonna do the crowdfunding, all good here, not a big deal. Camilla titles this chapter, "The Red Wedding" in The Ethereum Machine. Basically, this becomes about way more than how they're going to structure the company.

• 1:07:38David Rosenthal?

  The devs are starting to really resent Charles as CEO and the decisions he's making and how he wants to run things. And they don't think he's doing anything. They also don't think that Amir, Amir's still running colored coins as well. So like, What the hell is this Amir guy doing? Like, why is he part of this? He's not even doing anything.

• 1:07:53Ben Gilbert?

  Yep.

• 1:07:54David Rosenthal?

  So there ends up being like a mutiny in his meeting and everybody screaming at each other. They all turned to Vitalik. Vitalik hadn't been in Switzerland. He was still traveling around the world evangelizing, you know, talking about Ethereum and the white paper and everything. And he had just been awarded the Thiel Fellowship to officially, he then emails Waterloo and he's like, hey, guys, I'm not coming back. And he drops out to work on this. So he shows up and he's got like a full on, full on mutiny on his hands. So they all look at him and they're like, you make the call. You decide who's in and who's out.

• 1:08:28Ben Gilbert?

  Which can I just say incredibly foreshadows the future of Ethereum where despite this being, and they're not saying the eight of them are this decentralized governance, but despite the fact that there's eight people with eight voices, ultimately, when push comes to shove, everyone looks at Vitalik and says, all right, what do we do?

• 1:08:49David Rosenthal?

  Yep. Rightly or wrongly, there's no, you know, it's not a company. He's not the CEO, but yeah, everybody looks at Vitalik. So supposedly he goes out on the terrace of this house in Switzerland in Zug where they are. And apparently he just sits there for like a super long time. He's got a yoga ball that he's like hugging to his chest. He's like rocking back and forth like a baby. I'm just imagining the wait on this guy. So he's 20 years old. So meanwhile, back in the house, everybody's like staring at each other. The tension is crazy. Finally, he comes back in. It's like smoke is coming from the Vatican. He declares Ethereum will be a foundation, full stop and for all time. Charles and Amir, you're out. You're done. You're gone.

• 1:09:30David Rosenthal?

  And the project going forward is it's me, it's Gavin, it's Jeff, it's Joe, and it's me, hi. And you two are out. This is pretty heavy, heavy stuff. I just like, as I was reading about this, it was reminding me of some of the Zuckerberg Yahoo vomiting in the bathroom moment.

• 1:09:49Ben Gilbert?

  Oh, it absolutely is that sort of like high tension, high drama, like pins and needles moment.

• 1:09:54David Rosenthal?

  Because this is literally like. The entire future of the project is on him here. Like this is like Facebook could have sold to Yahoo for a billion dollars. This is the same moment.

• 1:10:03Ben Gilbert?

  The code's not done. There have not been any tokens sold yet. Six, seven years later, the market cap of all the tokens out there would be half a trillion dollars.

• 1:10:15David Rosenthal?

  Yeah.

• 1:10:16Ben Gilbert?

  Like, this is a high tension moment because, well, of course, they don't know that. Everyone believes that if this thing succeeds as the world computer.

• 1:10:25David Rosenthal?

  That's gonna be pretty valuable.

• 1:10:26Ben Gilbert?

  Yeah.

• 1:10:26David Rosenthal?

  Yeah, there's a lot at stake. So they incorporate the Ethereum Foundation as a Swiss nonprofit. They move forward with the crowd sale.

• 1:10:37Ben Gilbert?

  Can you incorporate? Does that word mean corporation?

• 1:10:39David Rosenthal?

  I don't know. I don't know if that's the right. They start.

• 1:10:41Ben Gilbert?

  Yeah.

• 1:10:41David Rosenthal?

  They instantiate.

• 1:10:42Ben Gilbert?

  Yeah.

• 1:10:43David Rosenthal?

  The, uh, to use a developer phrase. The crowd sale starts on July 22nd, 2014 at midnight Swiss time. It runs for two weeks. They sell $2.2 million worth of ether in the first 12 hours. By the end of it, they sell a total of 60 million ether for 18.3 million USD, which was way more than any other crypto crowd sale in history to that point.

• 1:11:11Ben Gilbert?

  Yep.

• 1:11:12David Rosenthal?

  I mean, even just thinking back 2014, like this is essentially a seed round for a company. An 18 million, to use the VC world analog. It's crazy. Like, nobody raised that much money.

• 1:11:23Ben Gilbert?

  Totally.

• 1:11:23David Rosenthal?

  This was huge. So the next question is, okay, now we got to actually launch the thing. Gavin's like, I've been telling you guys all along, like, we gotta launch the thing. The plan is that they're gonna launch in January 2015. And then throughout the year of 2015, they're gonna roll out the network in five phases. By the end of 2015, they will have rolled out the final fifth phase, which is gonna be called Serenity, is the code name.

• 1:11:49Ben Gilbert?

  All five phases in that first year?

• 1:11:51David Rosenthal?

  All five phases in the first year was the plan. And Serenity was gonna transition the underlying network and blockchain from a proof of work blockchain to a proof of stake blockchain.

• 1:12:02Ben Gilbert?

  Yep.

• 1:12:03David Rosenthal?

  Which is gonna be a lot more scalable. It's all, all mapped out.

• 1:12:10David Rosenthal?

  Non crypto people who are listening and wondering why we're laughing.

• 1:12:13Ben Gilbert?

  Like, why is David cackling like a madman in the corner over there?

• 1:12:16David Rosenthal?

  So yeah, we're now in June 2021. There is no serenity. There is no proof of stake. It's coming soon.

• 1:12:25Ben Gilbert?

  July, there's, there's a huge milestone theoretically this month. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 1:12:43David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 1:12:57Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 1:13:07David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 1:13:25Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 1:13:41David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 1:13:58Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 1:14:07David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 1:14:18Ben Gilbert?

  Listeners, before we dive back into the story and say, in exactly all the ways in which this did not go to plan, it's worth dwelling on this proof of work, proof of stake thing for a moment, because we haven't really talked about proof of stake. We talked at the end of the Bitcoin episode about how proof of stake theoretically was going to require a lot less energy, but would retain a lot of the same characteristics of that sort of security, verifiability, tamper-proof.

• 1:14:47David Rosenthal?

  Immutable.

• 1:14:48Ben Gilbert?

  Immutable. Let's save that for a moment. I do want to talk about proof of work, because there was a key detail in the Bitcoin episode that we missed in the history of proof of work, which of course is that the cryptographic way of consuming energy to do a very hard math problem and end up with a mechanism that verifies the integrity of the chain of all the transactions.

• 1:15:12David Rosenthal?

  Transactions, yeah.

• 1:15:12Ben Gilbert?

  Yeah, that came before. So, of course, it was mentioned by Satoshi, who proposed it in the Bitcoin white paper, proof of work, and its prior use in hash cash. But it was actually invented way back in 1993 by Cynthia Dwork and Moni Nowar. And I did want to call this out, because it is way too easy to make it seem like crypto was pioneered by a bunch of dudes. And so it's notable that-

• 1:15:36David Rosenthal?

  There are so many dudes. Oh, my God.

• 1:15:38Ben Gilbert?

  It's hard to tell the story.

• 1:15:39David Rosenthal?

  There's so many dudes.

• 1:15:40Ben Gilbert?

  Dude, dude, dude, dude. It's all based on research done by Cynthia, a female computer science professor from Harvard in the early 90s.

• 1:15:48David Rosenthal?

  No way. Oh, that's so awesome.

• 1:15:50Ben Gilbert?

  It's funny how this concept that was originally intended to make it cost prohibitive to be an email spammer, ended up becoming the underpinning of crypto blockchain. This whole world pioneered by her research.

• 1:16:02David Rosenthal?

  That's right, because hash cash was an anti-email spam thing. Yep. Super cool. I did not know that.

• 1:16:08Ben Gilbert?

  Yep. Proof of work, 93, Cynthia Dwork.

• 1:16:11David Rosenthal?

  Wow. Dang. Vitalik wasn't even born then.

• 1:16:15Ben Gilbert?

  It's wild.

• 1:16:16David Rosenthal?

  Wild. Okay, so on July, in the middle of July, July 30th, actually, 2015, middle of 2015, the team finally releases the first of the planned five phases of Ethereum. The frontier release goes live and Ethereum is open to the public. Amazing. Two weeks after it goes live, the first new other token crowdsale happens on top of Ethereum. Augur, which is a decentralized prediction and betting market, raises $5.3 million USD in a token offering of the Augur tokens that is built on top of Ethereum.

• 1:16:57David Rosenthal?

  They build on the quote-unquote ERC20 standard that makes it really easy to issue currencies on Ethereum, just like Mastercoin on Bitcoin. Now, with ERC20, you can do it super easy.

• 1:17:07Ben Gilbert?

  ERC being the Ethereum request for comment, kind of putting out there, hey, hey, world, hey, open source friends, here is a proposal that I'm making and I'm requesting comments on it. Eventually, people comment, the proposal gets revised, and then at some point it receives a number, and now it's a thing out there in the world that is the sort of standard upon which you can operate.

• 1:17:29David Rosenthal?

  Because remember, Ethereum at this point, they are now operating and still do, like the Linux Foundation, like the Mozilla Foundation, you know, there are people out there in the world. They say like, hey, we should add this. And then the foundation is like, okay, cool. We'll add that. So the ICO boom is born. Just two weeks after the public launch, the first ICO on Ethereum happens.

• 1:17:55Ben Gilbert?

  That's wild. That was something from the research that I did not realize that was so fast. Like, hey, there's this new thing Ethereum. It's not even like, cool, there's a world computer. Imagine all the uses for that. It's like, gold rush to launch my coin on this new thing.

• 1:18:08David Rosenthal?

  Now, I do, I think Augur is like a real project.

• 1:18:11Ben Gilbert?

  Sure. I'm not saying all ICOs were scams, but there were some.

• 1:18:19David Rosenthal?

  I don't always drink beer, but when I do.

• 1:18:21Ben Gilbert?

  Tulips in the garden.

• 1:18:23David Rosenthal?

  Oh, my goodness. Yeah. So the next year in 2016, while Augur does happen very quickly and was a legitimate project, at least to the best of our knowledge, it does take a little while for people to realize how much gold is in these hills. The next year in 2016, there are 64 ICOs on Ethereum that collectively raise over $100 million. So this is like, I mean, that's like a lot of money. People are like, dang, ICO boom 2016. Well, 2017, there are 966 ICOs that collectively raise over $10 billion. Floyd Mayweather, DJ Khaled, Paris Hilton.

• 1:19:07Ben Gilbert?

  Everyone's getting a little sweetener for promoting it on their social media.

• 1:19:10David Rosenthal?

  Oh my goodness. We talked about all this on the Bitcoin episode. Amazing. But what we didn't realize was this is the, just like Silk Road was for Bitcoin, ICOs were the killer use case to bootstrap up the Ethereum network.

• 1:19:25Ben Gilbert?

  And just like the Silk Road, it sort of didn't matter how illegitimate the initial use case was. What it did do was bootstrap a network that could be then used for all sorts of purposes. Now that you have this sort of decentralized.

• 1:19:38David Rosenthal?

  It literally played out exactly the same way. So thankfully, by the end of 2018, the ICO bubble had deflated. Still though, even in just like the first, I don't know when it really popped during 2018, but so let's say the first six, nine months, I'm making that up, but I'm estimating of 2018, there were 2,300 ICOs that raised $11 billion. Oh my God. At the start of 2018, Ethereum had risen up to a, for a long time, all time high of just over $1,350 per token, giving it a market cap of over $100 billion. And then when the ICO bubble deflated at the end of the year in December, Ether had crashed

• 1:20:21David Rosenthal?

  to $84 a token or a market cap of just under 10. So 90% of the value in the Ethereum network or of the Ether token. Vanished over the course of 2018.

• 1:20:35Ben Gilbert?

  It is fascinating that this bubble had a very specific reason for it. That like there was utility in Ethereum to be used by anyone launching an ICO. Like a lot of the times, there's these bubbles in crypto where you can't quite point to exactly the reason why the token was getting so much more valuable, other than like a snowball of excitement building around it. But this one, it was very clear what the boom was about and what the bust was about.

• 1:21:01David Rosenthal?

  It was about the money.

• 1:21:02Ben Gilbert?

  Yeah.

• 1:21:03David Rosenthal?

  It's all about getting the money. All right. So speaking of money, there's one before we dig, I can't wait to move on from ICOs. We got one more we gotta talk about. That is probably the wildest part of this whole episode. So one of the, what was it 64? I think I said in 2016 ICOs, something like that, you know, sort of in the early part of the tip of the spear in the wave was a little project that a group of folks had put together that they called Slocet, S L O C K dot I T.

• 1:21:41David Rosenthal?

  And the idea behind Slocet was it was going to be a decentralized Airbnb and other sort of sharing economy platform where you could send transactions into the blockchain and use those to unlock hardware locks, like on doors and on bikes and on cars and stuff that they would be connected to the blockchain and the specialized hardware and then you would pay the rental fee as part of the, you know, transaction on the blockchain and it would all happen on smart contracts on the Ethereum network. I mean, okay, it sounds like freaking crazy and really dumb now, but at the time people were excited. So they decided to do an ICO for this.

• 1:22:26David Rosenthal?

  But the SLAket founders, they were like real believers. Like they're like, yeah, this is the future. And like, a lot of people were excited about this.

• 1:22:30Ben Gilbert?

  Thank God for the diaspora of human enthusiasm and creativity, because when some new piece of technology comes out like this, nobody knows what the future is. Nobody knows what the killer use cases are. And so thank God, there are legions of people that take their own harebrained ideas and try and execute them. Because absent that, we would never have the discovery mechanism to discover what the actual great applications are.

• 1:22:56David Rosenthal?

  Yeah, totally. You could argue whether it was good or bad that the SLAket team did this. Remember though, like I said, they're true believers. So they get a bunch of money in the eyes, or they had to get a bunch of money. No, no, it hadn't happened yet. They were lined up. They thought they were going to get a bunch of money. They said, hey, we're going to go a step further. Remember, I introduced a little while back with Charles Hoskinson, the idea of a decentralized autonomous organization.

• 1:23:22Ben Gilbert?

  Which, by the way, that is actually in the original Ethereum white paper.

• 1:23:26David Rosenthal?

  Yeah, as an idea of something you can do on Ethereum.

• 1:23:29Ben Gilbert?

  Yep. And for folks wondering, like, okay, this, these words decentralized autonomous organization, to the extent that a company, a corporation is made up by a set of documents, you know, you've got your articles of incorporation, you've got employment agreements, like, a corporation is defined by a big pile of dumb contracts.

• 1:23:46David Rosenthal?

  Yep.

• 1:23:47Ben Gilbert?

  A DAO, or decentralized autonomous organization.

• 1:23:50David Rosenthal?

  And a corporation is defined by, you know, a board of directors and a CEO and a management team that are making the decisions.

• 1:23:55Ben Gilbert?

  Totally. And those people are given powers by the contracts, by the documents. The DAO is simply that, but with smart contracts, like.

• 1:24:04David Rosenthal?

  It's all in code.

• 1:24:05Ben Gilbert?

  Yeah. Why couldn't you have an organization that runs in a provable, sort of code legislated way?

• 1:24:12David Rosenthal?

  Yeah. So the idea is, in a DAO, the allocation of resources, be it capital, or time, or effort, or dev resources, or whatever, get allocated.

• 1:24:23David Rosenthal?

  In a decentralized way by people who hold the tokens of the Dow and everybody can vote and their protection mechanisms for minority token holders versus the majority. And anybody can take their money out at any point in time if they disagree with the direction the Dow is going, but it's a, it's a decentralized organization. Okay, pretty cool. So the Slotit guys, they're like, we're going to be a Dow. So if you don't like what we're doing, you know, you can vote, you can have a say in the governance of Slotit. And if you don't like what we're doing, you can take your money out. Then they decide to go even one step further. They say, you know, actually, like, we think this Slotit thing is cool, but there might be other things people think are cool, maybe cooler than Slotit. We'll allocate our money to anything and we'll just let the Dow decide where the money's going to go.

• 1:25:08Ben Gilbert?

  It's like a reverse Berkshire Hathaway. Everyone has a say in capital allocation.

• 1:25:12David Rosenthal?

  That's exactly what it is. It is the opposite of Berkshire Hathaway. To say the crypto community goes nuts for that, this is like catnip for the crypto community. People are jazzed. So by the time the ICO closes in May 2016, remember this was originally for a decentralized hardware Airbnb competitor, they raise $150 million into, they renamed the whole thing The Dow. They're just The Dow. That is what they are. So great, so, so great. 150 million bucks, that is more than most first time VC funds. It like the world, that's like a lot of money. That is like, I think the biggest crowdfunding of all time.

• 1:25:56Ben Gilbert?

  I think the only seed funding that is larger than that for a single entity is probably like Quibi.

• 1:26:01David Rosenthal?

  Oh, boy. Oh, boy, the parallels. That is more Fred Wilson and Union Square are going to come into the story here in just a minute. 150 million bucks into the Dow is more than USV's entire first fund. And they're one of the most active venture capital investors in crypto at the time. This is a lot of freaking money.

• 1:26:23David Rosenthal?

  It turns out, though, that there is a security flaw in Ethereum and in specifically in the part of smart contract code where DAOs like this one, like the DAO, operate.

• 1:26:36Ben Gilbert?

  Yeah. And to put a finer point on that, there are a few programming languages, but there's one very popular programming language developed specifically for writing smart contracts called Solidity. And Solidity, it's kind of like JavaScript. If you know how to write JavaScript, you can pretty quickly learn how to write Solidity. So the DAO is basically a big pile of Solidity smart contracts that all interact with each other. But to your point, in order to run Solidity, there is code underneath in Ethereum's core software that needs to make sure that when those Solidity smart contracts are running, they're doing what the programmers intended for them to be doing.

• 1:27:12David Rosenthal?

  And that code all exists on all the nodes in the Ethereum network. There's some downsides to distributed systems here. So right after the DAO finishes their ICO and gets this, all this money in the bank, so to speak, one of Solidity's core developers realizes that there's this bug in Solidity. And the consequence of this bug is that you could drain money, an attacker could come in and drain money out of a DAO. Uh-oh.

• 1:27:43Ben Gilbert?

  Yep.

• 1:27:43David Rosenthal?

  So in probably one of the biggest unforced errors of all time, they, in the foundation, they're like, okay, great, we're going to update this. We're going to update our clients. We're going to post about it. We're going to let everybody know what's going on. We're going to post like, okay, so they do that, right? But it's a distributed system. So like, not everybody, not all the nodes in the network, update the client software that they're running on to patch the hole. And anytime on the internet, you're going to have bad actors, especially in crypto land. Well, a bunch of hackers are like, oh, shoot, here's a whole blog post about how to exploit DAOs and how to drain the funds. And here's this DAO that has 150 million bucks in it. I'm going to go start hacking on this thing.

• 1:28:25Ben Gilbert?

  So the initial exploit was actually, wouldn't have been discovered, we don't think, except for the fact that the Ethereum Foundation published about it?

• 1:28:34David Rosenthal?

  Yeah. I mean, it could have been independently discovered by other folks, too. But yes, one of the core developers on Solidity found the bug.

• 1:28:42David Rosenthal?

  And then fix the bug. And then they published about the bug.

• 1:28:46Ben Gilbert?

  And everyone-

• 1:28:46David Rosenthal?

  But it wasn't all fixed yet.

• 1:28:47Ben Gilbert?

  They breathe this deep sigh of relief.

• 1:28:50David Rosenthal?

  Yeah.

• 1:28:51Ben Gilbert?

  Huh.

• 1:28:51David Rosenthal?

  Until the balance in the Dow's account starts slowly going down. So this is a crazy thing. It's like, you know, this, it's like the main plot point of The Last Jedi. You know, where it's like the slow motion cruiser chase throughout the whole movie where it's like they're just saying one, it's like happening in slow mo. It's all this, this is exactly what happens. So the way this exploit worked, you could steal money, but you could only steal it very slowly. And you could do it in a way that like was unstoppable.

• 1:29:20Ben Gilbert?

  You did, yeah, you sort of dripped it out.

• 1:29:22David Rosenthal?

  So for two weeks, everybody is freaking the F out. Like Vitalik is losing his mind. Everybody is losing their mind. The Dow was so big, that 150 million bucks was 14% of all Ether in existence.

• 1:29:37Ben Gilbert?

  Wow.

• 1:29:38David Rosenthal?

  Was in the Dow. And it's getting robbed. So Vitalik calls on all exchanges like Coinbase, you know, Binance, everybody to stop trading ETH. Stop trading.

• 1:29:49Ben Gilbert?

  Oh my god.

• 1:29:50David Rosenthal?

  Literally pause everything. This is amazing. A group of white hat hackers band together and they'll, they call themselves the Robin Hood group. They're like, we're gonna hack the Dow as well. We're gonna attack the Dow, but we're gonna do it.

• 1:30:04Ben Gilbert?

  We're gonna drain the funds into an account that then we're gonna take that account and we're gonna give it back to all the people.

• 1:30:10David Rosenthal?

  So great. So great.

• 1:30:12Ben Gilbert?

  And we're gonna try and-

• 1:30:13David Rosenthal?

  You cannot make this stuff up.

• 1:30:13Ben Gilbert?

  Figure out how to drain it faster.

• 1:30:16David Rosenthal?

  Yes.

• 1:30:16Ben Gilbert?

  Than the black hat attacker. And the craziest thing, because we've talked about this a couple of times, but like the way that you can get stuff to happen on the Ethereum network is by spending ETH, by offering a reward to do it. It's like the more they can bankroll their white hat efforts, the faster it will happen. And so they're out like asking-

• 1:30:36David Rosenthal?

  Raising money.

• 1:30:37Ben Gilbert?

  Yeah, they're asking anybody who they know who is a big ETH holder, a lot of the true, like early true believers, like, hey, send your ETH to our address so then we can drain the Dow faster. And when they start doing this, they aren't even publishing about it yet. So they're kind of freaking out that like, wait a minute, we're actually just black hat hackers right now until we tell the world what we're doing and why. And everyone realizes that like, we're doing this for the good of everyone. It's this crazy like, um, you know, that Spider-Man gif with all the pointing.

• 1:31:08David Rosenthal?

  This is like such a giant cluster. So unfortunately, nothing works. So like the white hat, the Robin Hood group, they're draining the Dow, but the black hats are also draining the Dow. Everybody's freaking out. The foundation in metallic decides, all right, we're going to do a what's called a soft fork of Ethereum, where we're going to get all the nodes that are running Ethereum, all the, all the miners to update their software and basically stop. We know the addresses of the black hats. We're going to get them to stop processing transaction requests from the black hats. We can do that by just like update the software. It's fine. And then everything will continue on. Cool. Like it's not great, but it's not good.

• 1:31:47Ben Gilbert?

  Well, I mean, it really makes you wonder how decentralized is this really?

• 1:31:52David Rosenthal?

  Well, wait till we just wait. Let's see whether this.

• 1:31:54Ben Gilbert?

  It's like, wait a minute. You're telling me that you're willing to modify the core code to just be like, yeah, everyone except that address.

• 1:32:00David Rosenthal?

  We don't like those guys. Yeah, exactly. Well, so they're about to do this. And then a group of researchers at Cornell, led by Professor Eman Gunstrider, figures out that if they were to do this, the way they were going to do it, I don't know the technical details, they would actually open up the network to like big distributed denial of service attacks. So you could do this, but like there's a like, this is not going to be good. So they decide, all right, we're going to call off the soft fork. So that leaves only two options. One, do nothing and the attackers steal 14% of all the ETH out there.

• 1:32:36Ben Gilbert?

  And they've already stolen one third of it. Like the black hat guys have 50 of the 150 already stolen.

• 1:32:41David Rosenthal?

  Yep, exactly. Or option two is do what's called a hard fork and actually modify the underlying protocol itself to cut out the history, like go back and modify the history of the blockchain. And that necessitates ending the current Ethereum blockchain.

• 1:33:01David Rosenthal?

  And wholesale starting over with a new one.

• 1:33:03Ben Gilbert?

  Basically, you're rewinding the tape before the attack started. You're changing the code then. So you're sort of like undoing all the transactions. Everyone's like having the money move sort of like from destination accounts back to source accounts. So like, all that gets undone. And then the code, you know, the bug gets patched and then we fork. And now we're just playing everything forward again from there. The future can unfold with this bug fixed and none of those transactions happened.

• 1:33:31David Rosenthal?

  Yep. So it actually, you know, to a lot of folks listening, I think going with the hard fork and option number two might seem like the obvious right path here. But this has huge philosophical consequences, as you were alluding to, Ben. You know, this is essentially a bailout that we're talking about here. It's like, it's just like 2008. We screwed up, the consequences of our actions ended up, it's a bad places. Rather than taking responsibility and moving on, we're going to have some Deus ex machina. A government, like a higher authority is going to come in and reset things here.

• 1:34:06Ben Gilbert?

  Right. And what they sort of proved is like, geez, these Ethereum Foundation people have a lot of power over this ecosystem. Like if they come out and Vitalik comes out and says, okay, everyone, we want you to hard fork. Then as long as 51% of people hard fork, and really it's 51% of the sort of mining capacity. So it's not that many players that need to, you just get a few of the big guys together. They hard fork, that is the new source of truth.

• 1:34:32David Rosenthal?

  Yeah.

• 1:34:33Ben Gilbert?

  And sure, technically, the way that you look at the architecture is that it's decentralized. But like, if we were willing to wind back the clock and rewrite history, then we kind of could always do that. And in the future, we always sort of will be able to do that again. And so really, you're betting the farm not on, you know, what you thought you were, which is like, contract is code and this is immutable and unchangeable. But really in like, well, if a few people decide that the quote unquote, right thing to do is to undo history, make the change and then let's go forward from there. Then like they could-

• 1:35:10David Rosenthal?

  Any different than Jerome Powell deciding to, you know, parachute money in?

• 1:35:15Ben Gilbert?

  Yep.

• 1:35:16David Rosenthal?

  So- Vitalik is like, again, this is a huge decision. He's really stressed. Finally, Eman, the computer science professor at Cornell, sits down with him and he says, he says to Vitalik, "I'm going to ask you a question." This is a quote, "And I want you to answer truthfully. I'm not going to judge you. Just be completely honest. Are you serious about building the world computer? Or are you trying to appeal to illegal money flows, drug dealers, illegal gamblers and whatnot?" And Vitalik responds, "No, that is not what this is about. We want to build the next generation of applications. Like, I really believe in the world computer." And Eman says, "Okay, well, immutability, not doing the hard fork is paramount if you want to appeal to this illegal money crowd.

• 1:36:00David Rosenthal?

  If you don't, and you're serious about the world computer, then it's completely reasonable to do a fork." And so that kind of convinces Vitalik. So they do it. They do the hard fork. All the miners switch over. Literally, people are popping champagne at the foundation and at Cornell. It's all happening. And then a couple hours later, all of a sudden, the old blockchain comes back to life.

• 1:36:27Ben Gilbert?

  This is another dramatic moment where like, you're imagining them sort of watching the old chain on some monitor somewhere and you're like, "Wait a minute, they're adding new blocks to the old chain. How is this even possible?"

• 1:36:38David Rosenthal?

  It's like the end of Return of the Jedi with like, the fireworks are going off and like, everybody's having that like, you know, the first order though is like, they're brewing.

• 1:36:46Ben Gilbert?

  So what's going on there?

• 1:36:48David Rosenthal?

  Well, so it's unclear to me at least. I don't know if it's known, if anybody else knows or broadly, whether it was either on a mistake that some of the miners just like, didn't get the message and update their

• 1:36:59Ben Gilbert?

  Kept mining the old chain.

• 1:37:00David Rosenthal?

  Kept mining the old chain, or if it was on purpose, kind of a protest.

• 1:37:03Ben Gilbert?

  Right, true believers.

• 1:37:04David Rosenthal?

  Or the attackers themselves, who were like, "Hell, man, I want my money." So that old chain keeps going. It is still going to this day. It is called Ethereum Classic. You can buy Ethereum Classic tokens on Coinbase. It has a $4 billion market cap.

• 1:37:23Ben Gilbert?

  It's the 22nd largest cryptocurrency by market cap.

• 1:37:26David Rosenthal?

  Amazing, amazing. Ethereum, of course, you know, the main thing, quote unquote, main chain, you know, has a $200 billion market cap, as we were saying. So it's obviously, you know, more successful, but like,

• 1:37:40David Rosenthal?

  Yeah, this is crazy.

• 1:37:41Ben Gilbert?

  Yeah, and Ethereum classic is in some ways Dogecoin like where like, people are trading it even though they know there is a fundamental flaw and it's future development does not have any effort behind it to fix bugs and develop new features. And it's not gonna evolve the way that Ethereum is going to evolve for the future.

• 1:38:01David Rosenthal?

  So they survive the Dow and this becomes known in history like this is one of the defining moments of Ethereum. And ironically, you know, look, there's Ethereum classic, right? There's the fork and everybody who really is into immutability and whether you want that for philosophical reasons or to do illegal stuff or like, you know, whatever you want that for, that exists. But for the main Ethereum blockchain, ironically, this kind of helps it. Cause they're like, look, we're legitimate, we're going to do the right thing. We are a system and a protocol that is in development. We are evolving, there will be bugs, there will be hacks. When that happens, this is not Bitcoin.

• 1:38:45David Rosenthal?

  When that happens, we're going to do the right thing and we're going to fix it. And you can understand why that's actually pretty appealing to a lot of folks.

• 1:38:52Ben Gilbert?

  It demonstrates a pretty extreme amount of pragmatism. It's very interesting how this crypto community started as exclusively true believers. And then as it got more into the mainstream and as there's more money behind it and as it needs broader societal adoption, this sort of trappings of traditional society start to seep in a little bit. And there is this sort of realization that geez, maybe safety nets are kind of good. And maybe having someone at the helm who has good judgment. Also, maybe that's kind of good.

• 1:39:25David Rosenthal?

  Yep.

• 1:39:25Ben Gilbert?

  And the future of Ethereum, as much as Vitalik wants to sort of work his way out of it, for better or for worse, there is a little bit of a benevolent dictatorship going on there between Vitalik, the foundation and the largest mining pools where ultimately we are putting our faith and trust in something.

• 1:39:43David Rosenthal?

  Yep. And certainly hard to know what would have happened otherwise, but had there not been a Vitalik, I don't think the hard fork would have happened. Only he, just like all the co-founders put the gun in his hand to set up, you know, how the company was going to be, how the organization was going to be. Without somebody like that at the helm, like there's a good chance this would have just evolved into chaos.

• 1:40:09Ben Gilbert?

  Right. With Vitalik, so goes the community.

• 1:40:11David Rosenthal?

  Yep. So that doesn't necessarily mean, though, that Ethereum is out of the woods, shall we say, or that all is sunshine and rainbows and kitties and unicorns.

• 1:40:23Ben Gilbert?

  David, we did say at the beginning of the episode, this is the world computer, and it's also the world's slowest computer.

• 1:40:28David Rosenthal?

  It is maybe the world's slowest computer.

• 1:40:31Ben Gilbert?

  And we should talk about also, like, your comment about the Raspberry Pi. There's not any sort of more Raspberry Pis getting daisy chained to that thing as this is growing. So we're seeing, you know, the ICOs, we're seeing all these people spinning up Coinbase accounts during COVID. We're seeing, I'm sure you're about to tell us about the boon of DeFi.

• 1:40:49David Rosenthal?

  And DeFi summer, baby.

• 1:40:51Ben Gilbert?

  It's still all happening on this little Raspberry Pi.

• 1:40:54David Rosenthal?

  It's still all happening on a Raspberry Pi. Yep. So scalability, as more and more stuff is happening on Ethereum, the Raspberry Pi is like having a harder time keeping up. And there has been this explosion of stuff. So for a sense of scale, right now, the Ethereum network processes somewhere on the order of, call it like 15 to 45 transactions per second. So that's like the entire Ethereum world computer, 15 to 45 transactions per second happen on it.

• 1:41:28Ben Gilbert?

  And those transactions could be anything. If you really want to abstract this, think about that as like an actual transaction, like a wire transfer, or, you know, something about in software, like a tweet could be a transaction, like any sort of movement of bits from one place to another.

• 1:41:42David Rosenthal?

  Any read write on the system.

• 1:41:44Ben Gilbert?

  Yep.

• 1:41:45David Rosenthal?

  For comparison purposes, the Visa network can at peak load process about 50,000, five zero thousand transactions per second.

• 1:41:56Ben Gilbert?

  Woo, centralization, baby. You can really scale with that.

• 1:41:59David Rosenthal?

  A lot more. Now, in theory, once the final Serenity release of Ethereum, which, together with a few other things, is being called Ethereum 2.0, once that is live, in theory, the Ethereum network will be able to process up to 100,000 transactions a second. So like, Dang, that's like a, it's like a pretty serious, it's like a Tesla Roadster style upgrade.

• 1:42:25Ben Gilbert?

  And you're probably scratching your head going, wait, wait, how's that possible? So let's, maybe let's put a pin in that a now, but it's coming, dot, dot, dot. And it's been coming for six years, but it's coming.

• 1:42:35David Rosenthal?

  It's, it's coming, but right now, you know, it's, it's not here. So as network congestion gets worse and worse, the way gas fees, the amount that you have to pay to get the nodes to validate your transaction, the price of that you have to pay, the gas fees keep going up.

• 1:42:53Ben Gilbert?

  It's supply, demand. It's effectively, your CPU still has the same clock speed, but now there's a kajillion people that want to do stuff on that CPU.

• 1:43:00David Rosenthal?

  Yeah, so it goes from like a de minimis amount in gas fees that you have to pay, you know, in 2015, 2016, to I think in 2017, it hits like, maybe like $13 per fee, equivalent of 13 USD per transaction you have to pay. Then that dies down a little bit, and then at the peak.

• 1:43:18Ben Gilbert?

  It's like 70 bucks.

• 1:43:20David Rosenthal?

  Yeah, at the, at the peak, you know, in the last few months here, as DeFi has just totally taken off and DeFi involves lots of transactions.

• 1:43:26Ben Gilbert?

  Decentralized finance, there, there is no application that requires more transaction throughput than high frequency trading, lending, all that stuff.

• 1:43:35David Rosenthal?

  It spikes up over $70 just to execute one transaction. So obviously this is a problem and, you know, Vitalik and the Ethereum Foundation knows it's a problem, but progress is not happening super fast. So there's this famous Fred Wilson quote, Fred Wilson from USV, one of the most prominent, you know, early VCs investing in crypto, board member of Coinbase, plenty of other, you know, of Dapper Labs, maker of CryptoKitties, which we'll get into in a sec. So he's doing a fireside chat that's on YouTube at MultiCoin Capital's 2018 Summit, and he just goes off on Vitalik and Ethereum, like literally goes off.

• 1:44:17David Rosenthal?

  He argues that they're incompetent, that they can't ship, that they're blowing the lead for the whole ecosystem. He says, somebody needs to go over to Switzerland and fire those F'ers who don't know what they're doing.

• 1:44:31David Rosenthal?

  Boom, he lays down the gauntlet.

• 1:44:33Ben Gilbert?

  And his rationale for that is like, hey, at this point, it is a growth stage startup. There are playbooks here to run.

• 1:44:40David Rosenthal?

  Yeah.

• 1:44:40Ben Gilbert?

  You know, he was on the board of Twitter. I remember reading, hatching Twitter.

• 1:44:43David Rosenthal?

  Oh, boy.

• 1:44:44Ben Gilbert?

  And feeling like, actually, this Ethereum story is, it feels similar to how Twitter came to be. This band of renegades, sort of pseudo anarchists. What was the Twitter?

• 1:44:53David Rosenthal?

  What's, you know, we've been making the comparison between Vitalik and Zuck in this episode. Really, there's also a comparison between Jack.

• 1:45:00Ben Gilbert?

  Yeah, absolutely.

• 1:45:01David Rosenthal?

  Totally.

• 1:45:01Ben Gilbert?

  And so much tumult happened at Twitter, but Fred witnessed, here is how you take something that is unbelievable product market fit and is scaling like crazy and figure out how to put great management in place.

• 1:45:12David Rosenthal?

  Get our boy Dick Costolo in there.

• 1:45:16David Rosenthal?

  Oh, man. So Vitalik then responds, he goes on Larsen's Unchained podcast and is like, yeah, I mean, like, you're a VC, like, you want them, but like, no.

• 1:45:28David Rosenthal?

  And it's debatable who's right here, but in the meantime, so developers need their, they're building stuff that's really cool. It's executing very slowly. Performance is such an issue on the network. Other blockchains start popping up to compete. They're like, well, hey, there's a problem.

• 1:45:44Ben Gilbert?

  Yep.

• 1:45:44David Rosenthal?

  There's, it's a free market. Like, we'll start an Ethereum competitor. So we've referenced Cardano from Charles Hoskinson.

• 1:45:52Ben Gilbert?

  Unbelievable that that guy was one of the co-founders of Ethereum and then went on to start.

• 1:45:57David Rosenthal?

  And went on to start Cardano. Polkadot comes out from Gavin. Gavin Wood had left the foundation and started working on.

• 1:46:04Ben Gilbert?

  This is the genius programmer who did the initial implementation of.

• 1:46:07David Rosenthal?

  A Rust client, a Rust Ethereum client as part of Parity, I think is his company, and was a great contributor from Parity into the Ethereum ecosystem for a long time. But then they start Polkadot, which is a competing chain, a little different, but competing chain. There's EOS, which raises $4.2 billion in an ICO before that bubble burst. They end up getting sued by the SEC. There's Binance's Smart Chain. There's lots and lots of folks out there. By and large, though, A, a lot of these projects still here in 2021 haven't even shipped. So like, you think Ethereum shifts slowly, like, look at some of these other ones. None of them get like real traction, though, except maybe Solana, which we'll get into Solana in a little bit. But meanwhile, these transactions are exploding on the Ethereum network.

• 1:46:51David Rosenthal?

  We talked about, you know, what they are, DeFi and NFTs. Let's get into it. So NFTs, I thought NFT, the NFT boom kind of came after DeFi.

• 1:47:02David Rosenthal?

  No, I had forgotten about this. NFTs became a thing first.

• 1:47:05Ben Gilbert?

  Huh.

• 1:47:06David Rosenthal?

  So.

• 1:47:06Ben Gilbert?

  Well, of CryptoKitties.

• 1:47:08David Rosenthal?

  Exactly.

• 1:47:09Ben Gilbert?

  Yeah.

• 1:47:09David Rosenthal?

  So at the end of 2017, the Ethereum Foundation hosted their first official Ethereum Foundation Hackathon in Toronto. And a Canadian startup incubator, startup incubator called Axiom Zen from Vancouver. They're like, oh, we're looking at blockchain stuff. We're going to send our team over to Toronto. We're going to participate in Hackathon.

• 1:47:28Ben Gilbert?

  Totally.

• 1:47:28David Rosenthal?

  At the Hackathon, they come up with this idea. They're like, look, there are these ERC 20 tokens, which are used for ICOs and creating your own currencies on top of Ethereum. Those are commodity tokens. Every, every token is just like every other token.

• 1:47:41Ben Gilbert?

  So they're fungible.

• 1:47:42David Rosenthal?

  They're fungible. Yeah.

• 1:47:43Ben Gilbert?

  It's like American dollars. Like, sure, they have serial numbers, but like, if I have 20 bucks and then I exchange that for a different 20 bucks, I still have 20 bucks.

• 1:47:49David Rosenthal?

  Still 20 bucks. What if we create and implement a new token standard where every token is different? Every token is unique and that's actually the appeal. We can make them collectible. We'll do things and like, this is the internet. Like, let's make them cats. The internet loves cats.

• 1:48:05Ben Gilbert?

  And this is Ethereum. I mean, that, that community is like a cats and rainbows community.

• 1:48:09David Rosenthal?

  Oh, I got to say, it's like catnip is da, da, da.

• 1:48:12Ben Gilbert?

  Heyo.

• 1:48:12David Rosenthal?

  Heyo. CryptoKitties. So literally, I didn't figure, I didn't know this. CryptoKitties invented the NFT.

• 1:48:19Ben Gilbert?

  Yeah, I don't think I knew the phrase NFT. Like, I actually came very close and really regret not buying CryptoKitties in 2017. I remember going through the website, being like, this is wild. I can't believe they're doing this. But yeah, I don't think NFTs entered.

• 1:48:32David Rosenthal?

  People didn't think about it as an NFT and it was just a CryptoKittie.

• 1:48:34Ben Gilbert?

  Right. It's, and people thought, hey, we could do this for other things. In fact, there was a, a friend and another venture capitalist that was pitching me on this idea of baseball cards, but on the blockchain, like CryptoKitties for sports. And so people were thinking about like, hey, we could take this idea and do it for other stuff. But there wasn't like a category name that was in the public consciousness.

• 1:48:56David Rosenthal?

  And of course, you know, many listeners will know. CryptoKitties, Axiom Zen, changed its name to Dapper Labs.

• 1:49:03Ben Gilbert?

  Amazing.

• 1:49:04David Rosenthal?

  And they are the company behind MBA Top Shot now.

• 1:49:08Ben Gilbert?

  Amazing.

• 1:49:08David Rosenthal?

  So freaking cool. So CryptoKitties accounted for, at its peak, 15% of all the transactions on the worldwide Ethereum network. Crazy. So yeah, that's NFTs. And then of course, that goes on to, you know, people and the alien, everything going on now that people probably know about. The other big set of applications, though, that are happening on Ethereum in the sort of post ICO summer, after the ICO winter, is DeFi. So decentralized finance, for people who aren't up on it yet, we're not going to go super deep. We don't have time here, but like, it is super freaking cool. And basically, the idea is like, the idea behind Bitcoin was, you know, we're going to create a decentralized currency, a non fiat currency. We're going to go outside the traditional financial system to create money.

• 1:49:53Ben Gilbert?

  Yep.

• 1:49:54David Rosenthal?

  DeFi is like, well, what if we take that a step further and we just go outside the traditional financial system for every financial product?

• 1:50:00Ben Gilbert?

  Right. It's like, it's something like 15%, 10%, I can't remember exactly what it is, but a meaningful percent of the US GDP is the finance and financial services industry. So clearly, like, there's a lot of stuff that needs to happen.

• 1:50:14David Rosenthal?

  Yep.

• 1:50:14Ben Gilbert?

  Lot of instruments, a lot of different professionals to manage those things.

• 1:50:17David Rosenthal?

  All sorts of stuff.

• 1:50:19Ben Gilbert?

  If we've got a new type of money and we've got a new set of rails that that money can move around in programmatic ways, we need all those instruments in this ecosystem, too.

• 1:50:30David Rosenthal?

  And remember, what is Ethereum? You know, one big idea is the world of computer. The other big idea is it's code with money. Oh, shoot. Well, you got code with money. Now you don't need the code with institutions. The code's got the money.

• 1:50:41Ben Gilbert?

  Mind blown, David.

• 1:50:42David Rosenthal?

  Mind blown. So DeFi, the first major DeFi project was actually MakerDAO. Yes, DAOs are back. MakerDAO launched the DAI stablecoin, uh, which was a totally decentralized stablecoin. You didn't need to have a counterparty like with Tether, on the other hand, saying like, don't worry, I hold USD in some bank account somewhere. Like, don't need that anymore. Then, at the end of 2018, Uniswap launches and Uniswap was like.

• 1:51:06Ben Gilbert?

  Liquidity pools, baby.

• 1:51:07David Rosenthal?

  Liquidity pools.

• 1:51:09Ben Gilbert?

  Now, suddenly, you don't necessarily need a specific counterparty to trade with. There is a, exactly what it sounds like, a pool of basically pairs of tokens from one to another, if you want to swap assets without somebody on the other side of the trade.

• 1:51:23David Rosenthal?

  And there's a very, very. Acute and real use case for this, which is like, hey, I want to buy a coin. Before Uniswap, I would go to Coinbase, I would go to FTX, I would go to some centralized exchange and I would do it, I would sell some Bitcoin and I buy some Ether, whatever, or I would like put money in and then I would pay a whole bunch of fees to that exchange. Well, with Uniswap, what do you just do this decentralized, peer-to-peer, no centralized exchange, no fees. Great. People love it. In June of 2020, another project, a decentralized lending platform called Compound, they go even further. They say to participants on

• 1:52:04David Rosenthal?

  their system, which are lenders and borrowers, if you participate in the system, we're going to give you a new Compound token. We're going to give you a utility token for Compound by participating in the system. This kicks off a craze. This becomes known as yield farming and this kicks off DeFi summer and like, it is all up into the right from there. Before this Compound event, at the start of 2020, there was about 1 billion USD worth of collateral that was in DeFi. By the end of the summer last year, it was $12 billion. In May of 2021, last month, it hit $100 billion USD equivalent.

• 1:52:43Ben Gilbert?

  Which is half the market cap of ETH.

• 1:52:46David Rosenthal?

  Of ETH, yeah. So you can imagine the pressure that this is putting on the Raspberry Pi that is the Ethereum computer.

• 1:52:52Ben Gilbert?

  Right. Quite a constrained world computer at this point.

• 1:52:56David Rosenthal?

  Totally.

• 1:52:57Ben Gilbert?

  And for all these DeFi projects, each one has an associated token. I mean, that's kind of the crazy thing is they all work the way that Ethereum does, where there's a utility token that allows you to do stuff on that platform. And of course, that platform is a sub-platform that sits on top of Ethereum in the same way that you could have, like, going way back to our earlier example, Ethereum's the operating system, but like, somebody made a browser and then you could have web apps inside the browser. And so there's there's sort of these, it's an application with our platform within a platform within a platform type thing.

• 1:53:29David Rosenthal?

  Oh my God.

• 1:53:30Ben Gilbert?

  But it is crazy that-

• 1:53:32David Rosenthal?

  And the computer scientist in you is getting excited.

• 1:53:35Ben Gilbert?

  Absolutely.

• 1:53:37Ben Gilbert?

  Each one of these projects that has a purpose also has an associated utility token that you can trade that can do something inside of that project. It's just like the speed at which the complexity of this thing is just growing. It's really hard to stay up on what is the, the current frontier.

• 1:53:57David Rosenthal?

  And it's so exciting too. I mean, like, these are like real things that are happening. You know, Bitcoin's a whole separate thing and like, I think Bitcoin is a store of value. Like, that makes sense. I think it's a good idea, but like, that's what it is. Like, all this stuff is how there's so much innovation happening and like, new value being created in Ethereum. It's awesome. So that brings us to today, at the start of 2020, the price of ETH was 140 bucks a token. Last month, in May of 2021, that had skyrocketed up to over $4,000 a token. And Ben, as you referenced at the top of the show, about a $450 billion market cap for ETH that has since come down by a factor of about two.

• 1:54:40David Rosenthal?

  It's a ETH is right around $2,000 a token right now and right around $220 billion market cap. Not bad for a Raspberry Pi. In December of 2020, the Ethereum Foundation did finally launch phase zero of the Ethereum 2.0 upgrade, which started the beacon chain to start the process of moving to proof of stake, but sharding, which we haven't really gotten into, but that's going to be the real scaling.

• 1:55:07Ben Gilbert?

  Listeners, we'll get into Ethereum 2 and sharding here in analysis because that's the, that is the conversation that we want to have around what does the future of Ethereum look like and how should we think about this thing going forward? But let's pause on that for the moment.

• 1:55:20David Rosenthal?

  Pause on that. Yep. So, yeah, here we are. It's kind of amazing.

• 1:55:25Ben Gilbert?

  All right, listeners, now is a great time to talk about a new partner of ours here on Acquired, Lagora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:55:38David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Ligora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:55:55Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:56:10David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Ligora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:56:34Ben Gilbert?

  And they recently launched Ligora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:56:53David Rosenthal?

  And Ligora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Ligora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:57:23Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at ligora.com/acquired and just tell them that Ben and David sent you.

• 1:57:48David Rosenthal?

  So as we get into analysis, man, I was so freaking pumped for this episode and just doing all the research, all the crazy stories, all the history. The one thing I didn't have time to do was I meant to go back and reread all the great pieces that Packy has done.

• 1:58:04Ben Gilbert?

  Oh, my God.

• 1:58:04David Rosenthal?

  On the whole Ethereum ecosystem, on Web 3, on all the applications on DeFi, especially his great piece he just did on Ethereum.

• 1:58:13Ben Gilbert?

  Zero knowledge proofs.

• 1:58:14David Rosenthal?

  It would really help with our analysis if I had done that.

• 1:58:17Ben Gilbert?

  Yeah, well, you are in luck. And I just heard the doo doo of joining our Zoom call here. Is that Packy McCormick I see on Zoom?

• 1:58:26Speaker 02

  Hello, acquired. What's up, Ben and David? How are you?

• 1:58:30David Rosenthal?

  What is up?

• 1:58:31Ben Gilbert?

  Great to have you, man.

• 1:58:32Speaker 02

  I am so honored to be here for the last episode of the season.

• 1:58:36Ben Gilbert?

  I was wondering why Zoom was open on my computer this whole time. I'm like, David's here in person. This doesn't even make any sense. I hope he joins at some point.

• 1:58:43Speaker 02

  Well, I'm here now. This is gonna be so fun. A topic that is near and dear to my heart and a podcast that is near and dear to my heart. So.

• 1:58:49David Rosenthal?

  This is, we're like the Super Bowl halftime show of podcasts. Like, you know, you thought it was just Ben and David, but like, boom, there's Beyonce.

• 1:59:00Ben Gilbert?

  Well, Packy, the first sort of analysis section we want to do here is the, the bull case and the bear case for Ethereum. And because you're Mr. Unicorns and rainbows and bubbles and sunshine and, and the optimist, I would love for you to lay out like, what is the bull case for Ethereum from here? Like, why, why is it gonna beat all the challengers? And we haven't even really talked about some of the challengers yet. You know, how is ETH 2 gonna go? Well, what the heck is ETH 2? So I don't know where you want to start, but I think you painting the bull case would be just perfect.

• 1:59:35Speaker 02

  Fantastic. So when I wrote my piece called Own the Internet on Ethereum, I think ETH is around 2,400. So I'm about $400 more bullish now than I was then. But I think the bull case ends up being pretty simple and something, and I think this is maybe a meta theme for kind of all of crypto, for it to work, it kind of has to have analogies to traditional business. And I think the bull case here is. More demand and less supply. You know, you can boil it down to that. So I know you've talked about some of the use cases. We've talked about DeFi. We've talked about NFTs, maybe touched a little bit on DAOs.

• 2:00:11Speaker 02

  There's all this stuff being built. I'm talking to so many people who are building things on top of Ethereum right now, who are not in the least bit perturbed by the price. I think that, you know, high value art sales will continue to happen, but there's going to be this long tail of NFT kind of content that is created on the internet where there's just ownable files. I think there's an explosion happening in the DAO space right now. People truly just wrote a great piece today, kind of laying out the whole landscape. So crazy that DAOs are back after like DAOs are back. Literally the worst thing. They almost broke Ethereum and they are, and they're very, very back. I mean, there's so many interesting projects being built. There's a company called

• 2:00:52Speaker 02

  Syndicate Protocol right now that is essentially rebuilding, investing infrastructure on the blockchain. And like, there's all of these projects being built by people, some of whom are crypto native, some of whom are coming from kind of traditional web two, traditional internet that are building on top of the blockchain. The fun thing about ETH is that, you know, I kind of view it like, you know, Ethereum is AWS. If you had to use Amazon stock to use AWS, so you had to buy Amazon stock to use AWS. And then when you used AWS, they actually did a share buyback and ate up some of those shares.

• 2:01:29Ben Gilbert?

  And when you say supply demand, you're talking about ETH, the token or Ethereum, the network or both?

• 2:01:34Speaker 02

  Both. The way that it works is to do nearly anything that you'd want to do on top of the Ethereum blockchain. You essentially need to start with ETH, which you pay transaction fees in the form of gas fees. So you need to buy the thing, create demand, and you need to spend that thing on top of the blockchain. And you might buy other tokens that you use in certain projects, but you're buying them with ETH and you're still paying gas fees. For the most part, right now, what happens is with kind of ETH one or Ethereum, we are in a proof of work world, just like Bitcoin, where people are solving math problems on their computers and they're getting rewarded in ETH to do that. And then they're having to sell a lot of that ETH to go pay for

• 2:02:20Speaker 02

  the computers themselves, the electricity to pay their taxes that they're making off of this. And so all these ETH are being minted and then just kind of like kicked out of the system. So there's this big kind of sell pressure on. What's happening with EIP 1559, which was a proposal that is approved and is about to be implemented? What's happening with EIP 1559 is that gas fees are splitting into a base fee and a tip, where the tip is, you know, there's a bunch of transactions at any given block and you can pay more to be further in the block. So that's one thing. The other piece of it, which is a huge change, is that the base fee is being burned. So instead of going to the miners and being sold to be cashed, to be whatever, that's just being wiped out.

• 2:03:01Ben Gilbert?

  So it's effectively deflationary or potentially deflationary because you're basically saying the amount of ETH that exists in the world, of course, mining will continue. So the people will sort of continue creating more ETH, but now there's a way for it to be destroyed also in the base fee basically getting burned.

• 2:03:18Speaker 02

  Exactly. So the more things that are happening, there's more demand for the currency itself. And then as more of those things happen, more of the currency is burned off. So it's potentially deflationary. So there's this meme that goes around in the Ethereum community that if Bitcoin is sound money because it has a cap supply, then Ethereum or ETH is ultrasound money because it has a decreasing supply. And so if you've seen the bat and the speaker on Twitter, that is the ultrasound money meme. And so that's, that's the one part of it. The other thing that's happening is the switch to ETH 2, which will change it from being a proof of work consensus mechanism to a proof of stake consensus mechanism.

• 2:04:03David Rosenthal?

  Actually, one thing, but before we get into proof of stake versus proof of work, I hadn't thought about, I knew what you were just saying about the deflationary aspects, but am I right that this will also remove a huge amount of selling pressure, as you were saying? Not only is it going to be deflationary, but you have now all of a sudden all of these essentially sell orders that were coming in from miners that are now gonna not. Come in, right?

• 2:04:27Speaker 02

  Exactly right. And so the inverse of less sell pressure is essentially more

• 2:04:32David Rosenthal?

  More buy pressure.

• 2:04:32Speaker 02

  It's more buy pressure, right? And so it's essentially like all of the stuff that was being sold to pay for computers on electricity and all this stuff off-chain is now essentially being bought, assuming everything goes well.

• 2:04:44David Rosenthal?

  Always a big assumption with Ethereum.

• 2:04:46Speaker 02

  Always a big assumption. And that, that is a whole nother thing. I think EIP 1559, less of a huge assumption. ETH 2 is the very big assumption. And we're probably like six months out from ETH 2.

• 2:04:57David Rosenthal?

  All right, straw poll amongst the three of us. First to happen, ETH 2 or full self-driving Teslas?

• 2:05:06Speaker 02

  Yeah, ETH 2, but not by much.

• 2:05:10David Rosenthal?

  I'll, I'll go with ETH 2, too.

• 2:05:11Speaker 02

  I'm also going to go with ETH 2, but I think it's, it's interesting, right? And that like all these things that seem like technological challenges are also kind of human challenges. Just like Tesla, everyone's like, oh, you know, the tech is there, but it's the regulation. I think same here, there's a bunch of people who are ETH miners who are bummed that, you know, they bought these rigs and they have their whole thing set up and they're no longer going to be running these proof of work things and making ETH for doing so. And so that, that I think is the opposing camp to ETH 2 is the miners who've been making all this money off of proof of work. But if it does switch to proof of stake, which it seems like it will, the big thing that happens there is that instead of spending a lot of electricity to solve really hard math problems and, and, you know, maybe hurting the environment, maybe not, depending on if you use renewables, all of that.

• 2:05:57Speaker 02

  What happens is you put up whatever amount of ETH, I think to do it directly on-chain, you need to hold 32 ETH and put them up or stake them. And you essentially vote, yes, this is a good transaction. We can allow this. No, this is a bad transaction. We won't allow this. And you earn ETH and that's where you get your yield from staking your ETH. If you're voting in the right way, but if you contradict yourself or if it's proven that you've voted in a way that's bad for Ethereum, then you lose your stake. And so you're staking the stuff to vote. But what it also means is that the yield for staking means that all of the sudden, instead of just being kicked out of the system, the value that is being created on top of Ethereum actually starts accruing to ETH holders. And so that's like the really big thing where it's always been this disconnect in my mind,

• 2:06:42Speaker 02

  where the question that I would always ask people is like, great, so people use Ethereum. What happens? Like, how does value occur to ETH? And proof of stake is how value accrues to ETH because you need ETH to stake to secure the network. And then for doing that, as a holder, the value accrues back to you.

• 2:06:58David Rosenthal?

  Yeah, it essentially makes it a cash flowing asset.

• 2:07:00Speaker 02

  It makes it a cash flowing asset.

• 2:07:01Ben Gilbert?

  Okay, so let me like to identify what proof of stake is, let me throw out the question that everybody has to have in their mind at this point. So proof of work, you get rewarded with a token in order for spending money on energy to do some hard math problems. Proof of stake makes it seem like, okay, well, now just the people who have the existing ETH are the people who get to vote whether something's legitimate or not. So it almost feels like we're shifting the power from labor, from the computers doing the work to mine, to the power going to capital. Whoever currently has the most ETH and is

• 2:07:44Ben Gilbert?

  willing to risk it to say, yep, I'm staking my ETH on the line here to say that this is the most, you know, legitimate transaction and you can take it away from me if it's proven later that it's not a legitimate transaction. Is that the right way to think about it?

• 2:07:58Speaker 02

  I think Bitcoin fans, maximalist, whatever you want to call them, Bitcoin people would say that a proof of work is a much more democratized, open, fair way to do it because anyone with a computer in the world is able to become a miner. On Ethereum, you need to own a certain amount. And so it's 32 ETH. That's a meaningful amount of money. That's $64,000 at today's prices. You can also stake smaller amounts if you do it through Coinbase and a bunch of other projects where you're able to stake ETH in smaller amounts and then they'll pool them and stake for you. So it's not like you have to be the richest person in the world. The fear in all of this is if somebody gets 51% of the ETH in circulation, then they can just take over the network.

• 2:08:42Speaker 02

  They win, the whole thing is done, they take everything.

• 2:08:45David Rosenthal?

  But there's always a 51% issue with any of these decentralized networks.

• 2:08:49Speaker 02

  There's a 51% issue with any one of these, for sure.

• 2:08:52Ben Gilbert?

  We should say, this actually was, I was gonna bring this up later, but it's worth calling out now. If you look at the pie chart of current miners of Ethereum, Ethermine, F2 Pool 2 and Nano Pool combined own like something close to 60%. So it's only those three mining pools that could hard fork if they wanted to. But of course, it's not in their incentive to do it because then people wouldn't trust the system, their holdings, like they, they want ETH to continue to get more valuable.

• 2:09:21Speaker 02

  Which is the other really kind of interesting, I think, piece of a bull case for Ethereum. And yeah, I guess for Ethereum more than, more than Bitcoin is that it's in the interest of anybody building on top of Ethereum for ETH to be more valuable. Because the more valuable that ETH is, the more secure the network is. So there's all these different ways, I think, where the value can accrue.

• 2:09:45Ben Gilbert?

  Yeah. So in some ways, like the bull case there would be that it's so geographically distributed that like you, you can't turn Ethereum off. You could crash the value, but there's no way it's going to go down completely. So it's like, it's censorship resistant, but it's not collusion resistant. Like if those three parties colluded to do something, they could. But there would still be a lot of other people out there running ETH nodes. And it's in everybody's interest, running Ethereum nodes. And it's in everybody's interest to make that network as robust as possible, such that if any single set of actors does something bad, then there still exists a large network.

• 2:10:22Speaker 02

  And to buy up enough or for those pools to continue to own enough, or for any outside party to come in and buy up enough to influence anything and to do a 51% attack.

• 2:10:32David Rosenthal?

  Yeah, because in proof of stake, it's not about the miners anymore. It's about how much ETH itself you hold, right?

• 2:10:39Speaker 02

  Exactly. And so if ETH is all of a sudden $10,000 and the market cap goes up to a trillion dollars, then it costs $510 billion to run that attack. If it goes up to 20, it costs a trillion dollars to run that attack. So the more valuable it is, the more secure the network becomes, which I think probably is why Ethereum, you know, I think just the, the Lindiness of Ethereum and the fact that it's been around.

• 2:11:03Ben Gilbert?

  Explain Lindy.

• 2:11:03Speaker 02

  Okay. So Lindy is this concept that the longer something has been around, the longer it's likely to be around. So if something's only been around for a day, then the chances are probably in another day, it's going to be gone. Like this could be a buzzy social app. This could be whatever else. If it's Play-Doh and people have been referencing Play-Doh for millennia, then chances are people are going to be referencing Play-Doh for millennia in the future. And there's a bunch of reasons that that happens. Uh, one is, you know, quality, I think rises to the top over time. There become these network effects where people start teaching philosophy courses and using Play-Doh and all of that. And I think with a blockchain, it's network effects and Lindy a little bit on steroids where there's also this financial piece kind of tied into the Lindy and it's attracting money and

• 2:11:48David Rosenthal?

  It's like you own Play-Doh coin in addition to teaching Play-Doh.

• 2:11:51Speaker 02

  Exactly right. Exactly right.

• 2:11:54Ben Gilbert?

  And so, okay, we talked about EIP 1559, which you've now said enough times that I actually know the number, which is about changing the way that gas fees work and changing the way that mining works and potentially will make ETH deflationary. So now we talked about switching to proof of stake. Packy, do you have a good handle on what the proposal is for these side chains that are proof of stake to interact with like the one main core Ethereum blockchain?

• 2:12:24Speaker 02

  So now we're getting into sharding. And so right now there is a single chain. It's one of the reasons that there's all of this congestion is because everything that you're trying to do is fitting a block, each single transaction into the main chain and that's. It and so of course, there's going to be congestion, particularly when DeFi was exploding and NFTs were exploding, gas fees were high because people were bidding to get in. And so it was, it was just insanely expensive to use Ethereum and the network was congested. With sharding, what happens is that these transactions kind of get batched off the main chain in any number of like maybe 64 shards and then come back down to the main

• 2:13:08Speaker 02

  chain as one transaction. So instead of 64 separate things happening, it happens one time and comes back down to the main chain as one transaction, which decreases congestion.

• 2:13:20Ben Gilbert?

  Yeah, let's introduce the scalability trilemma. So this was an interesting concept that was proposed by Vitalik, where he basically said, look, there are three sides of the triangle. You've got decentralization, which we hold dear. There's security, which we also hold dear. And then there's scalability, or you could think of that as like bandwidth. And David and I talked about, you know, you can get 15 plus transactions a second, but it's certainly not 5,000 transactions a second. Like it's not going to scale to a lot of transactions. And so the proposal for these side chains is interesting because you're basically saying, we're going to punt a little bit on either security or decentralization in order to get that scalability.

• 2:14:01Ben Gilbert?

  So for like little ticky tack transactions that you don't want to pay huge fees for, but also if they don't matter as much, if like there's a lie in it somewhere, or there's an attack on it and it's like not that big a deal, it's kind of fine for that not to happen on the main Ethereum blockchain. It's almost like not all laws are the 10 commandments. Like things can be treated with different weights. And so for those things, maybe it's okay to have these side chains that sure, we're going to punt a little bit on the decentralization or sure, we're going to punt a little bit on security, but it's going to enable a lot of these ticky tack transactions to happen in a way that actually makes the whole system kind of work better.

• 2:14:42Ben Gilbert?

  So that said, there exist things like Solana that are Ethereum like in the fact that they are global scale computers, but they make different trade offs in that trilemma and definitely get a lot more scalability, but perhaps don't have the same level of hardcore security and decentralization as Ethereum.

• 2:15:04Speaker 02

  The only thing that I would add to that is That there is this concept of the execution layer and the settlement layer. And right now with Ethereum, those two things are all bundled into one. So it's like having all of the trades happen in real time on the New York Stock Exchange. And then all of the settlement and the bank accounts and the money trading hands at the end of the day also happen in that same spot. Sharding on Ethereum or things like Solana could be where a lot of the execution happens. But because Ethereum is the most secure and more decentralized potentially than the other ones, a lot of the settlement will still happen on Ethereum, even if a lot of the activity happens in a bunch of different places. Hmm.

• 2:15:47David Rosenthal?

  Yeah. The analogy I've been thinking about with this, with Solana, they're the most interesting competing other chain with Ethereum. And I kind of think about it like, yeah, like lots of organizations use AWS and they use Snowflake. And like, that makes sense, you know? Like, it's not like you're only going to use one or the other.

• 2:16:05Ben Gilbert?

  Just to put a fine point, because you brought up the execution layer and settlement layer, it's worth making the analogy to the current financial system where, you know, we've got a very low bandwidth connection between banks that doesn't need a lot of transactions. You've got Fedwire, that needs to be bulletproof, but how many per day really need to execute? Like, not that many. But like credit card transactions, like, yeah, we need like tens of thousands per second around the world. Because like, a lot of people are doing that. And there's going to be some issues, there's going to be some fraud, there's going to need to be some reversals. We need to build all sorts of other mechanisms. But like, do all of those need to happen on Fedwire? No, no, they don't.

• 2:16:44Ben Gilbert?

  So to put the bow on the bull case, is it fair to say this is the next internet? Web three is the next breakthrough paradigm shift for technology, the way that the internet was. It will power trillions of dollars of new economic activity, the same way the internet did. And importantly, this is part of the bull case, Ethereum will be the base layer upon which it all happens.

• 2:17:09Speaker 02

  That is a good summary of the bull case, yes.

• 2:17:13David Rosenthal?

  Ben's been reading Packy's pieces.

• 2:17:16Ben Gilbert?

  Okay, so then let's go to bear. I mean, the very first one here that I think we've all been alluding to is like, either ETH2's switch over doesn't happen and they blow their lead in the corresponding network effect because it's technically difficult and also difficult to get the community on board, or that it goes poorly and in trying to make the system work faster, they actually kill the golden goose of this existing bulletproof-ish but slow system. Like that, to me, feels like the big bear in the room. Does that seem right?

• 2:17:49Speaker 02

  That seems right. And I think, you know, again, if you talk to Solana or some other single chain, single shard protocols, I think what they might say is that because you're switching over to sharding, this beautiful thing that we haven't really discussed, but is one of the reasons that people like building on top of Ethereum and like building in Web3 in general, which is composability, or people call it money Legos or media Legos, where you can have all these things that snap together and work together instantly.

• 2:18:20Ben Gilbert?

  These are like smart contracts that exist at different addresses on chain that you can sort of daisy chain together.

• 2:18:26Speaker 02

  Exactly. So it's like a bunch of open source projects that fit together really nicely that anybody can just kind of take off the shelf. And so there's a bunch of those daisy chains that happen that if they're not on the same chain and they're sharding, then there's speed lost in that kind of moving down from the shards to the main chain. They kind of just break composability for certain use cases. And it's like, maybe there's enough things that somebody else can come in and say like, look, we can do all of the things that Ethereum can do and we're single shard and we're faster and X, Y, and Z. And so maybe there's enough there to kind of provide the activation energy needed to move over to another chain.

• 2:19:05Ben Gilbert?

  Right. It's sort of like, to bring it to the Web2 world, like I built this great application, it calls these three other APIs and, you know, I send data into this API, it sends data out, which then calls this other API. It's beautiful. Actually, though, between these two, there's actually a phone call that needs to get made.

• 2:19:23Speaker 02

  Right. And it's happening much faster and all of that. But I think that's a really good analogy. Yeah.

• 2:19:27Ben Gilbert?

  Yeah. I mean, they do have this huge lead, but they threaded a needle the first time by creating Ethereum at all. Like, the concept of a Turing-complete globally-distributed computer upon which other, not only applications, but platforms for applications could be built. Like, that's a rabbit out of a hat. That's threading the needle. And they kind of need to do it again in order to make this shift to a scalable future.

• 2:19:53David Rosenthal?

  In doing the research for me, it seems like there's also like, people like Fred Wilson, like, are just kind of fed up with how slow it's moving, right? Like, we've known that scalability is a problem for a long time. We still don't know when it's gonna get fixed. And I guess is like, there are risks that despite all these benefits to Ethereum, like, it's just like, you're gonna reach a certain point in the equilibrium where gas fees are too high, it's just too much of a pain for developers, where they're like, alright, fine. I'm out. I don't know. What do you think, Becky?

• 2:20:30Speaker 02

  I think that's certainly a possibility, depending on how slow it moves. There are already some things, like Audius Project, which is a distributed kind of music player, which is building on both. And it also settles on Ethereum.

• 2:20:46Ben Gilbert?

  Both Solana and Ethereum.

• 2:20:48Speaker 02

  Both Solana and Ethereum. And then like, for really fast things, like likes or uploads on certain things, that are just these really quick transactions, that's all happening on Solana. And then it's coming down and settling on Ethereum and all of that. But there is this idea that different pieces are being picked off. But there's also this thing where if there are enough good blockchains like Solana that can interoperate with Ethereum, but that certainly lower gas fees and lower congestion, and if there are enough sidechains that gas fees just get so low, that even if a bunch of people use this thing, maybe the take is just so low that not enough value is accruing to the holders of the tokens.

• 2:21:28David Rosenthal?

  Of Ethereum.

• 2:21:30Ben Gilbert?

  That's the bare case for ETH, is that this thing becomes so rarely used that those tokens don't become super valuable.

• 2:21:39Speaker 02

  Potentially, right? The transaction, you know, even if everybody in the world... Used the credit cards, but interchange dropped to 0.0001%, Visa, Mastercard become a lot less valuable. And so maybe there's something at play there. There may be a very good response to that critique, but that's one that's just kind of in the back of my head a little bit is what happens if everything gets so decongested and gas fees drop so much that there's actually not that much money to be made, even if this is something that a lot of people are ultimately settling back on.

• 2:22:14Ben Gilbert?

  And it's interesting, your, your comment there on the credit card companies, it would both, because ETH's value is derived from the supply, demand match, it's actually a worse quote unquote business on two axes. It'd be that smaller percentage spiff, and there would be way fewer transactions happening. So it's sort of like a exponential problem for them if a lot of the demand for transactions on the Ethereum blockchain shifted to other blockchains.

• 2:22:48Speaker 02

  I think that's right.

• 2:22:49Ben Gilbert?

  At least for ETH holders.

• 2:22:51Speaker 02

  I think that's right. Yes. Everything is a double edged sword, right? I mean, its strength is also its potential downfall.

• 2:22:59Ben Gilbert?

  Well, I think that covers it for sort of high level bull and bear. And I think in playbook here, we may discover some more, but do you want to shift to power?

• 2:23:08David Rosenthal?

  Yeah, let's do it. This is interesting. I guess we did seven powers for Bitcoin. It's a whole new world in like protocol level power.

• 2:23:19Ben Gilbert?

  This thing's, it's almost like, first, I kind of want to wrap my head around what's the power of HTTP? And you, you raise the right point that like Bitcoin is kind of simple. It is complex and clever in the combination of genius insights to create the system that worked beautifully together. But Ethereum, it's actually quite difficult to wrap your whole head around it the way you can wrap your whole head around Bitcoin because it exists in all these different layers. So maybe as we're doing power, we should define it a little bit tighter and say the Ethereum network rather than trying to say the asset of the tokens.

• 2:24:02David Rosenthal?

  I like that. I like that.

• 2:24:04Ben Gilbert?

  Okay, so for folks who are new to the show, the options here coming from Hamilton Helmer seven powers are counter positioning, scale economies, switching costs, network economies, process power, branding and cornered resource. And normally, the way this is kind of defined is what enables a business to achieve persistent deferential returns above their nearest competitor, sort of how to be more profitable than their closest competitor. Of course, this is a foundation and of course, this is a big open source community. So it's interesting, how would we define the persistent differential returns of the Ethereum network? So that we even have some criteria to figure out the power?

• 2:24:45David Rosenthal?

  I think that's easy. I think that's the value of Ether.

• 2:24:48Ben Gilbert?

  Does it all keep coming back to that? Actually, it's the market cap of Ether.

• 2:24:51David Rosenthal?

  Yeah.

• 2:24:52Ben Gilbert?

  It's the total combined value of all the Ether in the world.

• 2:24:56David Rosenthal?

  So yeah, what, I mean, gosh, I'm tempted to say like Ethereum has every single one of these powers.

• 2:25:04Ben Gilbert?

  Wow, David's got laser eyes over there in the corner.

• 2:25:06David Rosenthal?

  I know.

• 2:25:08Speaker 02

  To me, I think network effects are for any blockchain, the number one thing that any of them have. And this one actually works in a couple of ways. One, there's kind of the concept that we talked about that everything gets more secure, the more people who are using it and the higher price the Ether is. And then I think even on top of that, all the things that are being built on top of Ethereum, I think really benefit from it, where the holders of a token of a certain project are more likely to stick around. So I think that's the potential power of businesses built on top of Ethereum, is that they're

• 2:25:48Speaker 02

  incentivizing users to get more of their friends to use the thing that they're using because their token accrues, gets more valuable as they do it. And so those things have their own really strong network effects, I think, that then I think benefit back down to Ethereum.

• 2:26:05David Rosenthal?

  Yeah, it's multi-layered.

• 2:26:06Speaker 02

  It's multi-layered.

• 2:26:07Ben Gilbert?

  You're right. It's interesting. I'm trying. I keep trying to come up with a good like non crypto analogy because I think like the Mac OS one that I threw out earlier where like Ethereum is kind of the operating system upon which you can build platforms and applications that that felt right. But there is also this element where it's also like being a shareholder in Apple as well as Mac OS.

• 2:26:28David Rosenthal?

  Well, this is where I think there's counter positioning too, right? Like if you view AWS and the like as competitors to the Ethereum network, like there's no way that Amazon, even in a post Jeff Bezos world is going to be like, yeah, cool. When you use AWS, you get paid in Amazon stock like.

• 2:26:49Ben Gilbert?

  Right, right. Yeah. It's like, no, we want to capture that upside.

• 2:26:52David Rosenthal?

  Yeah.

• 2:26:53Ben Gilbert?

  Like that's our leverage. Oh, there's massive switching costs. I mean, if you're going to go write something for Solana, you don't write in solidity. So like any of these applications that have already begun development or are already developed for Ethereum, there are some other systems that are compatible with the, they call them EVM compatible with the Ethereum virtual machine, basically the globally distributed computer that is Ethereum. You can, with minor tweaks, port those over to non Ethereum blockchains. But like for ones that are dramatically different and better in a lot of ways, like Solana, it's going to be hard to get the developer community to really shift at this point.

• 2:27:34Ben Gilbert?

  It's not that Ethereum has a 30 year lead, but they have like a four, five year lead with the developer community that is non trivial.

• 2:27:41David Rosenthal?

  I think there's another element of switching costs too, which is for participants in the crypto economy, Ether is the coin trading pair du jour and Bitcoin too, but probably Ether more than Bitcoin for other coins and other obviously like you want to buy an NFT, you're buying that with Ethereum. You're not buying that with Solana tokens or you want to buy Solana tokens. Like you're probably buying that with Ethereum or you want to trade on Uniswap. Like I think Ether is the number one trading pair on Uniswap.

• 2:28:12Ben Gilbert?

  And then there's another level, which is that if you're occurring tokens for participating in something that's built on top of Ethereum, those are ERC 20 tokens. And so maybe there's some mechanism where you sell, you convert to something else and then you get a new token if the project switched to another, another chain, but.

• 2:28:29Speaker 02

  It seems incredibly complicated, if not possible, to pull that off. And so I think just the fact that all these tokens are ERC 20 tokens is a switching cost as well.

• 2:28:38Ben Gilbert?

  Yeah, the thing that springs to mind is on the Bitcoin episode, we were talking about how entrenched the US dollar is versus Bitcoin because the government both settles its debts and collects taxes in USD. And there are so many things that plug into the Ethereum network at this point that it's sort of the same effect, where if you're participating in a lot of these different projects, you're going to end up with ETH one way or another. And then it's work for you and it's transaction cost for you to move that to a different blockchain.

• 2:29:06David Rosenthal?

  All right, what's next? Let's keep going here.

• 2:29:09Ben Gilbert?

  So there's some that it doesn't have, like what's the cornered resource? I don't think it really has that.

• 2:29:15David Rosenthal?

  Vitalik, maybe? People aren't exactly cornered resources. But maybe I don't think there's any other single person who is as much the face of crypto as Vitalik.

• 2:29:28Speaker 02

  And it's a liquid asset, so this is not exactly right, but there's something about ETH holders, or at least serious ETH holders, or people who have held for a long time, that are effectively cornered resources, like people who just aren't going to sell and who are incentivized for ETH to become more valuable. The hodlers, the ETH hodlers, maybe not as boisterous or passionate, maybe as the Bitcoin.

• 2:29:52David Rosenthal?

  I can buy that, I can buy that.

• 2:29:53Speaker 02

  I think there's something there where, I mean, at some point you have to pay a bunch of taxes if you sell your ETH. Maybe that's the cornered resource. There's a bunch of people who don't want to pay a lot of taxes.

• 2:30:03David Rosenthal?

  Latent capital gains. What about, I think there's probably scale economies.

• 2:30:06Ben Gilbert?

  Definitely scale economies.

• 2:30:08David Rosenthal?

  The currently the mining network and then in a proof of stake world, the just number of ETH holders out there who are staking.

• 2:30:16Speaker 02

  That's true. There's also, I mean, you could argue that there's been negative scale economies as well, where, you know, Gassv's got.

• 2:30:25Speaker 02

  prohibitively high because too many people were using the network. I mean, maybe it's negative network effects as well, but too many people using the network degrades the experience and all of that. So maybe those are things that if you assume EIP 1559 and need to go through smoothly, become powers, but in the short term may not be.

• 2:30:44Ben Gilbert?

  That's a great point.

• 2:30:45Speaker 02

  Dis-economy.

• 2:30:46Ben Gilbert?

  Yeah, we've been to sunshine and rainbows over here on that point. Yeah. Ethereum as a network got less utility in several ways as it got bigger.

• 2:30:54Speaker 02

  Yeah, for sure.

• 2:30:55Ben Gilbert?

  And like, that is the opposite of what happens in a WhatsApp or a Facebook or any of these like true network effect businesses. Or just to stay on scale economies, it's also the opposite of what's true in like a Netflix, where you have that pure play scale economies where the bigger it got, the more cost effective it got for them to do things like licensed content.

• 2:31:16Speaker 02

  Yeah, here the bigger it got, the harder it got.

• 2:31:18Ben Gilbert?

  That doesn't show up here at all.

• 2:31:21Speaker 02

  Okay, maybe, maybe not then. The bigger it gets, the more secure it gets and the more people are willing to build on top of it. But then there's also certainly the dis-economies of scale up to this point.

• 2:31:31Ben Gilbert?

  Yeah. So continuing down the things that it's probably not, I don't think there's really process power. There are a lot of people who contribute to this thing. You know, it's a big open source project, but I don't think that gives it power. I think in large part that has held it back.

• 2:31:50Speaker 02

  Yeah. I mean, Fred Wilson would say it's held it back.

• 2:31:54Ben Gilbert?

  Yeah. And so much of the value actually happened when there wasn't a lot of process to it at all. When it was the sort of founders and sort of early folks contributing to it that kind of created the initial system.

• 2:32:10Speaker 02

  Yep.

• 2:32:11Ben Gilbert?

  All right. We haven't talked about branding yet. It's the last one. How do you guys feel about that? Yes, it has branding power. The way this would classically be defined is that...

• 2:32:20Speaker 02

  Tiffany's, I'm going to pay more for this diamond because it's from Tiffany's.

• 2:32:23Ben Gilbert?

  And I don't think this has that.

• 2:32:25Speaker 02

  Ah, I would say maybe that's its other than network effects, maybe it's its biggest power. All right, like, all right, let's go. So Vitalik wrote a post that I, that I referenced in the piece too, on legitimacy and how like, one of the main reasons that different things in crypto have... Value is because they have legitimacy. And so you can get legitimacy in a whole bunch of ways, but because Ethereum's been around a long time and performed well in the past and all of these things, it keeps accruing legitimacy. And so you could build and people have built forks of Ethereum. There's Ethereum Classic out there right now.

• 2:33:02David Rosenthal?

  Ethereum Classic, as we covered, yeah.

• 2:33:03Speaker 02

  Which is the same thing, but it doesn't have the brand power associated with. And so that it all kind of ties in together where there are network effects because people moved over. And so it makes sense because other people are moving over. And so there's a bunch of things jumbled into one. But I think the existence of an Ethereum Classic or an existence of a bunch of other chains that technically are the exact same as something like Ethereum, but their coins are nowhere near as valuable. I think to me, that's kind of brand power. That ties into the Lindy thing we were talking about before.

• 2:33:34Ben Gilbert?

  Yeah, that's a really good point because it's funny how the psychology of would I go put $5,000, again, not investment advice, into Ethereum feels like, maybe, like it's probably not going to go to zero. But when I put $5,000 into a brand new coin that someone told me is doing something technically interesting, but I've never heard of, I might be like, hmm, how about 500?

• 2:33:58David Rosenthal?

  Yeah.

• 2:33:58Ben Gilbert?

  There's, there's definitely some kind of like test the waters thing. And it's funny that it's actually more around how much would I be willing to invest, not how much would I be willing to pay. But there is a brand power that accrues to it from a trust perspective to even though it is a very, very volatile asset, give me some amount of trust that it's here to stay.

• 2:34:20David Rosenthal?

  I buy it. I mean, Pekka, you're spot on with the ETH Classic argument.

• 2:34:25Ben Gilbert?

  We appreciate you joining our Liquid Super Team to bring us this great insight.

• 2:34:29Speaker 02

  It has been an honor to be on your Liquid Super Team.

• 2:34:34Ben Gilbert?

  There is something that's sort of been ruminating, and I know we already did Baron Bowl, but like, there's gotta be a bear case on all of crypto. That's like the bear king here that we're not talking about. I mean, there's a variety of things that are pseudo-black swany, like quantum computing, or like, you know, someone figures out how to crack RSA effectively, or there's, let's put those black swan type things aside. I mean, where is there a perma burst on the entire crypto bubble?

• 2:35:03Speaker 02

  I think there are still a lot of things that are happening on Web3, or happening on Ethereum, because it's early and cool, and they have no impact on the real world. And so one kind of big bear bubble burst case is just that it doesn't find applications where it's that much more useful, and useful enough to be worth kind of the extra complexity. That's not my belief, but I think that's maybe one of them, is it just doesn't find the application still. I think that's been derisked over the past few years. Another

• 2:35:41Speaker 02

  one is everything is still so tied to the price of Bitcoin. And Bitcoin is, you know, it's blessing and a curse. I don't think there's anything fake about it, just because it is kind of built on human belief and the fact that other people will accept Bitcoin. But if people decide, for whatever reason, you know, it has tanked a bunch recently. If people decide for whatever reason, or governments start to crack down, and it's just not worth the headache, then if Bitcoin goes down, at least temporarily, everything is going to absolutely crash.

• 2:36:14David Rosenthal?

  It's been wild to watch just these last couple of months, like, as Bitcoin has swung around, Ether has swung around, Solana tokens have swung around, and it's like nobody realizes these things are completely not connected. But they are, which is your point.

• 2:36:28Speaker 02

  That one's, that one's a big one to me. Just even the fact that they trade together, I think is a big one to me, let alone what happens if Bitcoin, if Bitcoin drops. Like, the fact that they're not being priced independently yet is either a phenomenal opportunity, or something to be worried about.

• 2:36:43David Rosenthal?

  Is there, how do, how do we feel about the state actor government risk? Not necessarily, I mean, in terms of like, oh, a government, a state actor is going to do a 51% and like destroy these things, but more like, like what we're starting to see with China of like, hey, no, we're going to make it illegal to do this. We're going to try and prevent our citizens from participating in either Bitcoin or, or in the whole decentralized ecosystem and Ethereum.

• 2:37:12Speaker 02

  I think Uber is a good analogy, actually, where it's this race between what governments decide to do and how much people really want to use this thing. And so if it can get to a point where there's a ton of utility and it enables cross-border payments and people who are in hyperinflationary markets need cryptocurrency as a stable thing to keep their money in, if those use cases accelerate past the point of what kind of governments can control and there's a ground swell, then that's awesome. And the Uber case is, is that they would go into town, they'd break all the rules, but customers loved Uber so much that they could fight the local governments and win because they had all the constituents on their side.

• 2:37:55Speaker 02

  And so I think that's probably the race that plays out is can crypto find enough use cases and provide enough real value to enough people that if the governments tried to correct out, it would cause an uproar.

• 2:38:06Ben Gilbert?

  Right, because right now that cross-border payments thing is real, you know, in countries that are having monetary crises, but in terms of like actual real use cases, most of them, while there are very cool things like Audius out there, most of them are for true believers. And so to your point of like, if a government bans it, there has to be enough of the citizenry who is in it for the utility of what's already built, rather than in it for the belief in the future to sort of continue its sort of development and momentum.

• 2:38:38Speaker 02

  Right, like you couldn't ban the internet at this point. There was probably a time in the early 90s, late 80s where the government could have said, yeah, no internet and people would have been like, eh, that would have been cool.

• 2:38:48David Rosenthal?

  I'll use my web TV instead.

• 2:38:50Speaker 02

  I'll use my web TV. And there wasn't money tied up into it. And I think we're past that point now, but I think that's the race.

• 2:38:55Ben Gilbert?

  Okay. Thank you for helping me tie off that section in a way that calms my, uh, just felt like we were, we missed something there. Playbook?

• 2:39:03David Rosenthal?

  Yeah, playbook.

• 2:39:05Ben Gilbert?

  So the first one that I thought was really interesting is that, just to contrast this against the Bitcoin episode, Bitcoin's like pretty set in stone, but Ethereum evolves. And they've demonstrated this ability to learn from mistakes, adjust the underlying software and the contracts to change to what the community feels is best. And that's for better or for worse. Like, is Ethereum truly immutable? Does it have strong, uh, what's the phrase? No, I don't think it's truly immutable. And yes, it does have weak subjectivity. Like, there still are-

• 2:39:39David Rosenthal?

  There have been a bunch of hard forks.

• 2:39:40Ben Gilbert?

  Right. There are decisions that are left to human actors who can influence 51% fairly easily. And then it changes the way the world works. We talked about the three mining pools. It's sort of this, uh, in contrast to Bitcoin, it does represent the human element of the way that all of our existing social monetary technology systems are structured where we do have faith in institutions.

• 2:40:08David Rosenthal?

  Not that I think this actually happened, but like, it would be much less crazy than with Ethereum to say like, Bitcoin was probably like given to us by the aliens. I'm not saying that it was, but it could have been. You know, this is like, it was like a, a technology transfer from an advanced society where they were like, here it is, you know, whereas that is not, as we've seen with the history, like with Ethereum has been built in public by humans.

• 2:40:32Ben Gilbert?

  Yep. Yeah. The other thing that makes me think Bitcoin was built by aliens is no human could sit around with $60 billion in a bank account and never touch it.

• 2:40:42David Rosenthal?

  You're talking about Satoshi.

• 2:40:43Ben Gilbert?

  Satoshi Bitcoin stake.

• 2:40:44David Rosenthal?

  Yeah. Totally. I've got one that I think is a really, really big playbook theme that we've only scratched the surface here and we can't fully dig into, but I think we're going to in the future of acquired quite often is, you know, look like Fred Wilson's arguments against Vitalik and against the foundation had a lot of merit. And rewinding back to the original history and the founding, you know, Charles and Anthony and the desire to do a for-profit company for this as the vehicle and to raise venture financing, there was merit for those things.

• 2:41:24David Rosenthal?

  Ethereum and so many other crypto organizations since Ethereum have proven that there is another way to generate and for people and institutions to capture amazing amounts of value outside of a traditional USC corporation with a foundation. I mean, like Solana is a combination of a foundation and a C corporation that is operating things, but most of the value and most of the tokens are held by, I believe by the foundation. This is a whole new way of structuring projects, companies. It's kind of like Peggy's liquid super teams idea, you know? It totally is, and this is going to change a lot. And certainly lots of VC funds, USV, Andreessen Horowitz, you know, et cetera have been like,

• 2:42:08David Rosenthal?

  and then crypto native funds have been like, yeah, cool. We get it. We're going to buy tokens instead of buying shares in C corps. Like, cool. And maybe it's that simple, but like, I think we're just scratching the surface of all the implications of this.

• 2:42:20Ben Gilbert?

  Yep. All right. I got another one that we, we touched on earlier, but it's worth sort of repeating that like, would we literally think of what was the playbook to build Ethereum? What was the playbook to build Bitcoin? It was bootstrapping the network with illegitimate use cases. But then, once that network has been laid, like you do really cool stuff on it and like cool legitimate stuff that is better than what came before, or at least serves a different use case, because now you have this infrastructure. And I was trying to think like, where did this show up? Or did we see this with the internet? In the same way that we've seen it in crypto, where you had the Silk Road and Bitcoin, you had ICOs with Ethereum. Like, people talk about sort of the adult industry being

• 2:43:02Ben Gilbert?

  an early adopter of the internet and pioneering video technologies. And like, that happened to some extent.

• 2:43:06David Rosenthal?

  It also happened with Ethereum. We didn't talk about it really in history, but there's a thing called Spank Chain, Spank Chain, Spank Coin, something like that, that it for sure was one of the first applications on Ethereum.

• 2:43:16Ben Gilbert?

  Yep. But I guess the contrasting point that I want to make is like, it's interesting to me that the internet started in university computer science departments. And maybe I'm missing a huge chunk of internet history, but it doesn't feel like a bunch of nodes were lit up on the internet because people wanted to access it, something illicit. And it's fascinating to me that that has happened twice in crypto, but was not a part of the internet, or really, I don't think a part of the PC revolution, and didn't really seem to be a part of the phone revolution. It's sort of like a new way to

• 2:43:53David Rosenthal?

  Not to the same scale, I don't think.

• 2:43:55Ben Gilbert?

  Gain widespread adoption.

• 2:43:56David Rosenthal?

  Yeah.

• 2:43:57Ben Gilbert?

  Yeah. Yeah. It's a spectrum.

• 2:44:00David Rosenthal?

  So the playbook is start with illicit use case if you want to get adoption.

• 2:44:04Ben Gilbert?

  The crypto playbook is figure out how to get as many nodes on your network as possible, as fast as possible, at whatever cost, so that you can gain what will happen, the benefit of what will happen down the line with it.

• 2:44:16David Rosenthal?

  Makes sense to me.

• 2:44:18Ben Gilbert?

  Packing any playbook themes?

• 2:44:19Speaker 02

  I mean, I think the interesting thing on that playbook theme is that people who are operating, selling drugs, in porn, all had a really hard time operating in the existing system. So I think it's less illicit use cases, and it's more enabling something that wasn't possible for a group of people before. And those people were not able to transact in the existing system to the same extent that they were in something kind of decentralized and a little bit more anonymized. And so I think certainly that piece is true, but I think that's maybe a playbook theme is that, you know, if you're enabling something that wasn't previously possible to a certain group of people, that's where you get your first adoption. It's maybe like marketplace building 101 is find that passionate core

• 2:45:04Speaker 02

  niche and expand outward from there. I think maybe that's the like, the kinder, gentler way of looking at what happened here. Another playbook theme to me is there's something around the idea that There's all of these use cases that are internal to the network right now. And they're still looking to find ways to kind of influence the quote unquote real world a little bit more. But I wonder if there's a playbook theme around how do you build up use cases that are internal to your network to get that initial activation energy before going out and taking over external use cases?

• 2:45:44Ben Gilbert?

  Yeah. Man, it leads me to another thing that I've been thinking about a lot with Ethereum and crypto broadly. That I sent out this tweet the other day that was, it was in this vein of jobs to be done that you're sort of talking about, Paki, which was, what are examples of blockchain based applications that A, created a lot of value besides profits from speculation? B, would have a worse user experience if built on centralized technologies? And C, has a primary function that is not finance or currency? And I got a lot of really good pushback from a number of people, including friend of the show Chad Whitman, that were basically like, why would you put C in there? Like, why does it have to have finance or currency not be a core part of it?

• 2:46:27Ben Gilbert?

  Because what Web 3 is, is bringing finance and currency in an integrated way to networked software. And like, it's like, in the way that Web 2 was about bringing dynamically loaded data into your webpages. It's kind of like asking like, what's a good example of a Web 2.0 app that doesn't use Ajax? You know, it's sort of like, the jobs to be done of all things on Web 3, on the crypto internet, do involve a transfer of value between people. And I think like, I'm sort of coming around to the idea that, I'm not going to see like, the next Spotify that is just straight up better than Spotify, but decentralized and because it's decentralized, it's like,

• 2:47:11Ben Gilbert?

  no, we're going to see a version of Spotify that lets me transact directly with artists because like, transacting directly or something involving decentralized finance is actually the point of Web 3.

• 2:47:23Speaker 02

  Yeah, I think DAOs are fascinating here as well. Where the big innovation and where most of the people are doing their work is not on the technology side, but it's on the incentive design and the tokenomics and all of the things to help coordinate groups of people on the internet in ways that might otherwise either not be possible or be filled with so much friction. And that comes back to the financial aspect and. Whether or not it's financial, the tokenization aspect where at least you have status from owning a bunch of tokens or other things. And so I think that idea of baking incentive design into the core of the product and letting the community design incentives for themselves is mind-bendingly fascinating.

• 2:48:06David Rosenthal?

  Suit guys, I mean, like I've been and I've gotten been interested in in Bitcoin. That's such a good example of this, right? Like, what is Bitcoin? It's Twitter with money, right? But like Twitter with money is super freaking different than Twitter.

• 2:48:19Speaker 02

  Totally. Like, many times I have wanted to invest in someone some way that I thought was criminally under-followed for the quality of their content. And like, yep, that is exactly what it lets me do.

• 2:48:30David Rosenthal?

  Yep. Cool.

• 2:48:31Speaker 02

  All right. I think that about wraps it for playbook for me.

• 2:48:34David Rosenthal?

  Me too. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 2:48:41Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 2:48:52David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 2:49:12Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system. So teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 2:49:25David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:49:36Speaker 02

  Okay, grading.

• 2:49:37David Rosenthal?

  How are we going to do this?

• 2:49:39Ben Gilbert?

  Are we going to decide on air how to do this? I guess so.

• 2:49:43David Rosenthal?

  I thought you had a plan.

• 2:49:45Ben Gilbert?

  So I'll tell you what we're not going to do. And Paki and David can doodle on what we are going to do. So we are deliberately not grading this one on the investment return of ETH. Bitcoin, I think we talked about was a 3 million X in one decade. That is the single greatest return in human history on any asset in one decade. But that is not what Ethereum is about. It is the world computer. Sure, it's a financial asset, but it's not primarily a financial asset. And so of course, it is a cryptocurrency. But I think if we like focus in on grading and sort of tying this episode up based on its investment return, I think we're missing the point.

• 2:50:24David Rosenthal?

  Yep, totally agree.

• 2:50:25Ben Gilbert?

  So David, how are we going to grade this one?

• 2:50:28David Rosenthal?

  Put on me. I think we should grade the Ethereum Foundation on their stewardship of the Ethereum network over the past seven years.

• 2:50:41Ben Gilbert?

  Yeah, and to abstract it even more, you could say like, grade how Ethereum's implementation, how successful has it been, given the sort of germ of the idea initially of the world computer that exists on a blockchain?

• 2:50:57David Rosenthal?

  Yep. I think it is utterly amazing what has happened here. Like no Vitalik, no White Paper, no Foundation, none of this would exist. No DeFi, no NFTs, no CryptoKitties, no NBA Top Shot, no Audius. No, and like, yeah, none of these things are quote unquote mainstream yet, but they're like pretty darn close. And there are billions and billions and billions of dollars of economies that have been created here. So like, that is out of this world.

• 2:51:36David Rosenthal?

  That's on the one hand. Now, on the other hand, it looked like 2014 was a long time ago. They've shipped like a bunch of versions, but like relative to certainly the initial promise of we're going to be at the Serenity release by 2015, we are way far behind here. And I think Vitalik himself has certainly said and admitted that there are many things he would want to go back and change about the beginning of Ethereum and the trajectory that it's been on. So I'm going to land on an A minus. I think it gets A range because of the first part of what I just said of like, this is freaking unreal. Now, the actual

• 2:52:19David Rosenthal?

  execution, like you're not ready for primetime yet, guys. So, um, you know, they're getting there, but that's, I'm gonna go A minus.

• 2:52:26Ben Gilbert?

  And it's funny how it's like, it just parallels so many other open source things. Like famously, the, the meme in the early 2000s was next year is the year of Linux on the desktop. This stuff, you're herding cats. Again, and Vitalik is literally herding cats.

• 2:52:41David Rosenthal?

  Literally herding cats.

• 2:52:42Ben Gilbert?

  So it's sort of to be expected with the path that they chose. The question is, was it executed better or worse than your sort of average open source project, given what a world-changing idea they, they had to start with? I do like your A minus. The only thing, and I'm going to violate the way that I initially opened this by talking about ETH here, the only thing that would possibly push me closer to an A, but I'm not going to go there, and I'm going to land with an A minus, is the fact that they have created $200 billion plus of market cap in six years.

• 2:53:18David Rosenthal?

  Yep.

• 2:53:18Ben Gilbert?

  And you look at like Uber that IPO'd at 80 billion after 10 years and like that everyone refers to as like, geez, if I could just get a little Uber in my portfolio, you know, like just one, all I need is one. Like you hear so many VCs that are like, yeah. So the value creation activity, or at least perceived value creation activity that Vitalik and the team have done in the last six years, seven years, whatever it is, is remarkable and outpaces basically every hypergrowth startup.

• 2:53:47David Rosenthal?

  For sure. Yes.

• 2:53:50David Rosenthal?

  I cannot argue with that.

• 2:53:53Ben Gilbert?

  But A minus to your point of like, if this is the route that you choose in this open source foundation way, and this is the way you choose in which to execute it, there are laws of human physics that govern your ability to continue to affect change.

• 2:54:06David Rosenthal?

  You got to manage it well. And they've managed it. Okay.

• 2:54:11Ben Gilbert?

  Yep. Packy?

• 2:54:13Speaker 02

  You left the A wide open for me. And of course, as the rainbows and unicorns and butterflies guy, the other big kind of crypto theme that we've touched on a little bit, but not that we haven't talked about too much is the idea of trade offs. And I think there's a bunch of trade offs inherent with the way that they decided to do things. They have a human team that is just the starting point that they've dealt themselves. So if you're starting after that, I think, given the fact that they have a human team, given the fact that they don't want to change things too many times and change things too quickly, they forked and they've made some decisions in the past that, that, you know, are very human decisions, but they can't do that too frequently and still be viewed as a secure thing. They're

• 2:54:56Speaker 02

  of course going to be slower. Obviously, it'd be amazing if they were faster, but look at the explosion of things that has happened on Ethereum in the past year, despite all of that. And maybe they made the exact right trade offs even accidentally over the past few years to get to the point.

• 2:55:13David Rosenthal?

  Maybe the world wasn't ready five years ago to get.

• 2:55:15Speaker 02

  Well, certainly, I mean, like, the world wasn't ready. It was accidentally super lucky that, you know, it was at least stable during the time when we were all locked inside and looking for new ways to organize ourselves and all of those things. So there's a ton of luck involved as well. But I think looking from then to now, and then what's potentially going to happen in the future and like the, the seeds of things that are being planted right now, to even just be alive to this point, when there have been other blockchain spin offs and Bitcoin spin offs and other things, and Ethereum is still standing as number two and the most exciting in terms of just like world changing potential. I mean, I don't know how you do a much better job than that, whether it's by skill or luck

• 2:56:00Speaker 02

  or some combination of the two, you have to give it an A.

• 2:56:04David Rosenthal?

  All right, there we go.

• 2:56:06Ben Gilbert?

  I didn't expect anything less.

• 2:56:09David Rosenthal?

  Taki McCormick, not boring, as expected.

• 2:56:12Ben Gilbert?

  Yeah, well, you guys want to do some carve outs before we wind it up here?

• 2:56:17David Rosenthal?

  Yeah, I actually have some great ones for this episode.

• 2:56:23Ben Gilbert?

  Ooh, multi carve out.

• 2:56:24David Rosenthal?

  Yeah, well, it's two in the same category. So criminally, as long time listeners of the show, I've been reading sci fi for not my whole life, but like a number of years now, and I really enjoy it, love it, been through, you know, the Asimov books, everything like so fantastic. I have not until the last couple of weeks read Arthur C. Clarke. And it's fantastic. I love his stuff. Famously, you know, he coined the term, any sufficiently advanced technology is indistinguishable from magic, often quoted in the tech world and plenty of other things, concepts he pioneered. He was writing in the 50s and 60s, kind of like same time ish as Asimov. And his writing is great. I really like it.

• 2:57:07David Rosenthal?

  So first book I read was Rendezvous with Rama. That's a really cool one about a dead seeming alien spacecraft enters our solar system and what happens? That's super cool. And then I'm in the middle of the city and the stars right now, which I'm also really enjoying, set billions of years in the future where all of mankind has been reduced to one single city on Earth. Yeah, the rest of Earth is a desert. Yeah, it's super cool. Highly recommend.

• 2:57:40Ben Gilbert?

  I like it. Adding to my list. I'm going to do a little bit of a popcorn one this time because I think I've been a little heavier in the past. I'm watching Loki right now on Disney plus and it is exceptional. It is so clever. There are so many little details. It opens in a way where I'm like, oh my God, I totally didn't realize there was this hole in Avengers in the MCU where they created an opportunity to go and tell this entire story with Loki. And as soon as I saw the beginning of the first episode, I was like, oh my God. Of course, that was unresolved. And I just think it's Marvel and it's Disney at their absolute

• 2:58:19Ben Gilbert?

  sort of storytelling best. And just so that I don't say full rainbows, I contrast it heavily with the Winter Soldier show that they've come out with, where it seems like Loki was made for people who like are looking for these sort of really clever, fascinating Marvel on top of their game shows.

• 2:58:42David Rosenthal?

  They're made for the nerds.

• 2:58:43Ben Gilbert?

  Yeah. And then they just like cranked out that Winter Soldier thing like it was like Pacific Rim, or just like, it felt really off brand in a way where I was uncompelled. So it's interesting to see how some of these spinoff shows they're doing from the MCU and from.

• 2:58:57David Rosenthal?

  Did you watch Wandavision?

• 2:58:59Ben Gilbert?

  I did. That was, that was great, too. Loki is like Wandavision caliber. So if you're into that, go check out Loki. It's great.

• 2:59:07David Rosenthal?

  Great.

• 2:59:07Speaker 02

  All right. So I'm actually going to go to sci fi as well. It's pretty much over the past year and a half, all I've been reading. And recently, my friend Ben Rollard, a composer, recommended that I read Diamond Age by Neil Stephenson. And he's famous for Snow Crash and coining the term metaverse and all those things.

• 2:59:24Ben Gilbert?

  Yeah.

• 2:59:25Speaker 02

  Diamond Age is really fascinating because it's a non digital future. It's a future where a lot of the innovation has come on the physical side of things. And the world map is split up in all of these interesting ways. And it takes place in what is today China. And they have these matter compilers that make all sorts of interesting things, including islands and airships. And it's just like a totally different view of the future where no one spends any time on computers. And it's all centered on this book that talks to the reader and is actually read out loud by a real human actor. And it's just a very different view of the future than I'm used to reading in

• 3:00:06Speaker 02

  sci fi. And the best part is it reminds me in terms of writing style, a lot of Kurt Vonnegut. And so it's just this really fascinating book to read. I would highly recommend Diamond Age by Neil Stephenson.

• 3:00:19Ben Gilbert?

  Awesome.

• 3:00:19David Rosenthal?

  Love it.

• 3:00:20Ben Gilbert?

  Another one to add to the list.

• 3:00:20David Rosenthal?

  Since this is the season finale, I got two more. Can we, can I throw in two more?

• 3:00:24Ben Gilbert?

  Let's keep going.

• 3:00:25David Rosenthal?

  All right, let's keep going. I've been playing on Xbox Game Pass near Automata, which is a Square Enix game. I never would have played otherwise. It's kind of a weird game to play because you've got to play through it like four times to like, it's a whole, it's like a

• 3:00:40Ben Gilbert?

  It's like watching The Big Lebowski.

• 3:00:41David Rosenthal?

  It's like, yeah, it's like, it's like an auteur type piece. It's kind of cool though. Like, Packy, you reminded me of it. It was like this weird future. It is sci-fi-y in that you play as an Android and you're fighting robots, but like, yes, it's a very different vision of the future that I find interesting. And then my other one, the pandemic has subsided here in the US. We are very lucky on that front. I've been vaccinated. Couple of weeks ago, I did a in-person recording with Jeff at Software Daily. It was so freaking fun, like to be back in person. Like Ben and I are here now. Packy, we got to get you out here next time, uh, live. It's so great. And then at the end of it, we were like, we're hanging out. We're like, it's so great to hang out.

• 3:01:26David Rosenthal?

  You want to play some Magic the Gathering? And so we put a Magic the Gathering night together with a couple of buddies and like, God, it was so much fun to just be like back in person, playing cards, like so fun.

• 3:01:37Ben Gilbert?

  That's awesome. Listeners, if you haven't checked that out yet, it's a great episode with Jeff and David. So go listen. Well, speaking of, Packy, where can people find you on the internet?

• 3:01:47Speaker 02

  You can find me at notboring.co or at Packy M on Twitter.

• 3:01:52Ben Gilbert?

  Great. Well, Packy, thank you so much for joining us. Listeners, we really enjoyed being on the journey the last six months. I mean, whiplash and holding all these competing ideas concurrently and just forming new perspectives and new ways of looking at the world. I hope you've enjoyed it as much as David and I have, and it's truly a privilege to be able to do this and get all the incredible feedback and comments that we do from you all. So, thank you.

• 3:02:22David Rosenthal?

  Thank you so much.

• 3:02:24Ben Gilbert?

  If you want to be a part of what we do here, you should become an LP. We're going to do more Zoom calls in the coming months and more book clubs. And we've got 50-plus great, I think probably closer to 75-plus great LP episodes in the catalog for everything from the basics of VC fundamentals through pricing and packaging, through hiring and building great teams, all sorts of good stuff in there. If you want to become a part of the Acquired community, that is free and no doubt we will be discussing this episode. You can join the Slack at acquired.fm/slash/Slack. And lastly, if you aren't subscribed, you should. And if you like this, please, please, please, share it with a friend, share it on social media. We really appreciate you helping to grow the show.

• 3:03:07Ben Gilbert?

  With that, thank you so much, and we'll see you next season.

• 3:03:10David Rosenthal?

  We'll see you next season.