17 - A Bankless Nation (Part 1)

Episode: #17 June 15, 2020 An alien visits earth. He sees our cities, our governments, our moral codes. He's curious, "What's are you trying to do here?" he asks the humans. The humans respond: "We're trying to get coordinated". Coordination is how humanity rose above the animals. Built the pyramids. Put a man on the moon. We've coordinated as hunter-gather societies in tribes. As agrarian societies in kingdoms. As industrial societies in nation states. And now...as information societies in digital nations like Ethereum and Bitcoin. This. Changes. Everything. Covered: Uh...why are we here? What's the point? A nation is more than a nation state! The thing that makes humans special Getting past Dunbar's number The rise & limits of nation states The next evolution of the nation How you become a citizen of Ethereum Join us next Monday for a fresh episode! ----- Tools from our sponsors to go bankless: Multis http://www.multis.co/ - bank your business without a bank (1 mon. trial https://multis.co/!) Ramp https://ramp.network/ - the fiat onramp for DeFi (mention Bankless!) Monolith https://monolith.xyz/ - holy grail of bankless Visa cards Aave https://aave.com/ - money lego for lending & borrowing ----- Resources discussed: (Article) A Bankless Nation (part 1) https://bankless.substack.com/p/a-bankless-nation-part-i (Podcast) Episode 12 talks about Settlement Assurances http://podcast.banklesshq.com/11-settlement-assurances-and-the-protocol-sink ----- Episode Actions: Read David's "A Bankless Nation https://bankless.substack.com/p/a-bankless-nation-part-i" piece from last week Subscribe to Bankless newsletter https://bankless.substack.com/subscribe so you don't miss part 2! ----- Subscribe to podcast on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 | Spotify https://open.spotify.com/show/41TNnXSv5ExcQSzEGLlGhy | YouTube https://www.youtube.com/c/bankless | RSS Feed http://podcast.banklesshq.com/ Leave a review on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit official Bankless website http://banklesshq.com/ for resources Follow Bankless on Twitter https://twitter.com/BanklessHQ | YouTube https://www.youtube.com/c/bankless Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState

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

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we are here to help you become more bankless. David, how are things, my friend?

• 0:31David Hoffman?

  Things are fantastic. I'm extremely excited about this episode. This has been a subject that I have been tossing around in my head for a long, long time, and I'm excited to break this down and pull this apart with you.

• 0:43Ryan Sean Adams?

  Well, what is the topic? Tell us.

• 0:45David Hoffman?

  The topic is, what are we all doing here? So every person in crypto is kind of doing their own individual thing, right? The whole cool thing about these systems is that there's so many different groups of stakeholders, groups of communities, right? We have the builders, we have the community members, you have the investors, the developers, and each one is doing their, has their own specific role in Bitcoin, in Ethereum, in these greater crypto systems, right? And so the different roles all depend on each other. There's this feedback loop between each individual one, and it kind of just reminds me of that ancient parable of the blind man feeling the elephant, right?

• 1:25David Hoffman?

  So, you know, one, one man is feeling the leg and says like, "Oh, an elephant is like a tree." And another blind man is feeling the trunk and says, "Oh, an elephant is like a snake." And none of them really get it right, but they all get it right individually, right? Because they're just, they can feel and sense what they feel and sense, and they get, they get that right, but they don't get to put things into context with the rest of the elephant. And so that's, that's kind of what I see going on in the crypto land, right? We call this the cryptocurrency industry or the blockchain industry. And really, if we consider like Ethereum and Bitcoin as blockchains, we're selling them just so incredibly short of what they actually are. Like, the blockchain aspect of these systems is the most

• 2:10David Hoffman?

  Boring part like blockchain is just like a specific type of database. An immutable database that just is a append only. And that's not interesting like you can just have a blockchain running on your computer. And I have your data, your computer be a blockchain database, but that's just not interesting at all. Likewise, like, I mean, money is definitely interesting. And the cryptocurrency aspect of these systems is is decently interesting. But it's just one part of these whole entire systems. And the crypto part just refers to cryptography and it has nothing really to do with the money. From the outside of the industry and the inside of the of this industry, we haven't really figured out.

• 2:52David Hoffman?

  What actually emerges when you stitch every single independent piece of these blockchain crypto systems together? And so I wrote this article called a bankless nation where I kind of illustrate what I think of these systems are. And I think of them as digital nations. And what a nation really is, is a bunch of independent. Components that all kind of work together in harmony in this seamless fashion to produce. This result and the result is a place where people can live and coordinate and operate with each other. And I see Bitcoin and Ethereum as a new version and a new iteration, a new paradigm. Of what a nation is, it's, it is this central system.

• 3:37David Hoffman?

  That allows people to coordinate, cooperate and communicate with each other. Across a shared set of like standards, a shared protocol that we are all agreeing to abide by.

• 3:48Ryan Sean Adams?

  Yeah, I think it's a powerful analogy and your piece this week on bankless, it'll be last week by the time folks listen to it. Was fantastic. It was just part one. So we're actually going to be doing a part two of this podcast. And you'll be releasing part two of an article that further explores the topic of the bankless nation. And I like how you framed that. When I was reading the piece, David, one of the coolest things. I took away was like this question of, you know, an alien comes down to earth. And sees everything that that humanity has produced, its societies, its its cities. Its technology, its its money, its its morality and ask the question. What are you guys doing here?

• 4:33Ryan Sean Adams?

  Like, what's, what's this all about?

• 4:35David Hoffman?

  Right, what's the point?

• 4:36Ryan Sean Adams?

  Yeah, what's the point? And the humans go, we're trying to coordinate, right? Like, that's kind of the answer. That, that is why Yuval Harari talks about this in his book Sapiens. That is why man has sort of ascended from its primal roots and distance itself, far distance itself from the animal kingdom is because of our ability to coordinate in societies, in nations. And when we talk about nations, I think people might get tripped up by that because the, the, the standard definition of a nation, we think of a nation as a nation state, right? Just like the US or China or Russia. But what, we're taking a broader view when we use the term nation as sort of a tribe

• 5:21Ryan Sean Adams?

  of people organizing around a, a protocol, right? And we're going to define that and talk about that a little bit. And this is, this is kind of the, the why we're here. It's, it's, it's bigger than crypto. It's bigger than blockchain. It's almost the story of human progress throughout history and our ability to coordinate and organize as a society. So it's a, it's a really deep concept, too. And that's why it's going to be so, so exciting to talk about.

• 5:48David Hoffman?

  I've been mentioning to my crypto friends, my Ethereum friends, my bankless friends, like, I wake up in the morning just extremely optimistic about the world around me, which kind of goes at odds with the world around us, you know, as we see it, right? There's, there's protests across the nation, across, across the USA nation, across also the whole entire world. There's conflict between Russia, China, US. There's this pandemic. But I've been waking up in the morning just extremely optimistic about the future. And it's really because of the nation I see ahead of us. And, you know, everyone needs a purpose in life. And I think with this article, I've, it was really more for me, right? It was really me trying to figure out what I'm doing with my life.

• 6:33David Hoffman?

  And, and what I'm trying to do with my life is, is show people that there is this new nation ahead of us. And then we can all be citizens. Of it because citizenship is an opt in thing. It's not, you don't ask for permission for a citizenship of Bitcoin or Ethereum. And so I'm trying to just raise the flag and say like, hey, there's this new way we can organize each other. There's this new organizational scheme that we should all operate by and it's better. And so when I wake up in the morning, I'm trying to spread this message as far and wide as possible. There is this new nation, this new frontier ahead of us and it is better and we should all go there.

• 7:11Ryan Sean Adams?

  Yeah, absolutely, David. All right, man. Well, we're gonna dive in. You got me excited to talk about this, but before we do, let's talk about some bankless tools from our fantastic sponsors. First, I want to tell you about Multis. Multis gives you the ability to run your business without a bank. We're all on our journey from a personal perspective to become more bankless, but Multis gives you the ability to take your entire business bankless. It's the first ever bankless bank account for entrepreneurs who want to run their business on crypto and traditional currencies. It features a multi-signature wallet. That means teams get access to it. So you've got access controls.

• 7:52Ryan Sean Adams?

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• 8:31Ryan Sean Adams?

  and we're going to be releasing a video tactic to show you how to get Multis working on the bankless YouTube. So check it out.

• 8:39David Hoffman?

  Part of what we're going to talk about in the part two of this episode and in my article is sub nations of Ethereum and Aave is an incredibly robust sub nation of Ethereum. Aave isn't just one thing, it is a whole suite of services that you can tap into using the Aave protocol. And I am in particular bullish on on protocols that do more than just one thing. So what are the things that you can do on Aave? First, there are A tokens which represent interest bearing versions of the tokens deposited into the Aave borrowing and lending platform. But the Aave borrowing and lending platform is different from the borrowing and lending platforms that you may know on Ethereum.

• 9:20David Hoffman?

  Aave allows for fixed interest loans so that the interest rate doesn't shift under your feet as you are making your personal or business financial decisions. We've all seen the Maker Dow interest rate go from half a percent to 20.5% over the course of a year. Aave allows for interest rates that don't change, which is a really important money Lego for building stable dependable businesses on Ethereum. In addition to that, there's also the flash loans which allow you to borrow assets with the zero collateral so long as you pay those assets back in the same transaction. There are just a ton of use cases that I'm really optimistic about, including being able to pay back your collateral from a Maker Dow vault and then open it up back again

• 10:03David Hoffman?

  with a different collateral using the Aave flash loan system. So there's no surprise that Aave has been marching to the top of the DeFi charts. They have almost $90 million locked in DeFi, threatening to take over Compound at number three with $93 million in DeFi. So check them out at ave.com. That's A-A-V-E dot com.

• 10:25Ryan Sean Adams?

  All right, David, let's dive right in. This is a bankless nation. You know, you talked about why current definitions suck in the intro of cryptocurrency and blockchain. So The current definition, the analogy that you've opted to use is the analogy of a nation. I think we should spend a minute defining what a nation actually is. Like, when we say nation, most people think about America, or they think about China, or some nation-state. But what is a nation at a more fundamental level?

• 11:00David Hoffman?

  Yeah, the current iteration of nations are these geographic areas that have the set of rules that people abide by. But if we want to look back into history, we see different types of organizational schemes that if you restrict the current temporal version of what nations are, you can start to see that different nations have actually come and gone throughout time, and different versions of nations. And so there are plenty of different systems that fit the definition for a nation. But before we go into those, let me try and define a nation in its most general sense. And so in the article, I say, "Nations are systems that humans use as scaffolding for

• 11:44David Hoffman?

  their daily activities. They create the structure for the constituent components of a nation that compose them." And I really like the image of a nation as an organism. An organism is something that is composed of many different independent parts that each work to achieve its own individual goals, but then when you stitch the component parts together, they create the nation, right? And every single nation is centered around some sort of DNA, as a creature is, as an organism is. The DNA, the protocol of the creature, defines what the creature will look like at maturity. It defines where all the organs of a creature position themselves around each other.

• 12:27David Hoffman?

  And then, as the creature grows, it consumes resources, and then it grows and develops into a larger and larger body. And nations do the same thing. Nations are like bodies. They have internal organs, they have protective defenses, they have offensive systems, they consume resources, generate outputs, they produce waste, and they are primarily concerned with their own survival. Nations also live in places of scarcity, and they compete with other nations in order to do what's best for itself. And you know, even nations can often band together like other creatures in order to prove their own individual chances of success. And so what nations really are, are these tools that

• 13:10David Hoffman?

  humans leverage in order to access stability for themselves. They offer organizational structures that people depend on for coordination, trust, and protection. And then because they offer these services towards people, the services of, you know, enabling coordination, enabling trust, and then also protecting the system at large, the nation is able to then achieve its own livelihood, achieve its sustenance by charging taxes upon the people, which the people are largely happy to pay because, you know, the ability to coordinate and be protected is really beneficial. So long as what they are paying is worth those

• 13:50David Hoffman?

  things, people are generally happy to pay them. So really, what a nation is, is an organizational scheme where people are allowed to produce an economy inside of, and then the nation protects that economy using the taxes of the people of the system. And they just grow and develop and mature over time. Now, the important thing to understand is that there is no such thing as a immortal nation. All things in the world develop, grow, develop, and then die. They die of old age, and nations are no exception. So some of the earliest versions of a nation, and there are plenty of ones earlier than this, but like, a big

• 14:33David Hoffman?

  archetype for an early nation is actually religion. And so religion is a creature that grows, develops, matures, and hasn't completely died. They don't completely die. They just whittle over time. But they are replaced by new nations that offer these same basic services, but with less costs upon the people. And this is kind of the age-old conflict that a nation or a state, and I've spoken about this in previous episodes, the age-old tug-of-war between the people of a nation and the nation itself. Where the incentives of the nation are to be maximally extractive of the people.

• 15:16David Hoffman?

  It's designed to look after itself and the more taxes it can charge upon people, the better. This is why Martin Luther nailed the 99 theses to the church, to the, to the door of the Catholic Church. Because it was saying, you guys are charging too much. You guys are not following the protocol. You guys are doing things for your own benefit and your indulgences are costing too much from the people. And you're not worth the cost that, that of, of the extortion that you're making. And so I kind of see this going on with our current nation states where the, the, the populist uprising, both of the, on the right and the left in the United States are both generally reactions to the costs of the USA nation versus the benefits that, that the USA nation is providing.

• 16:01David Hoffman?

  And that's why I'm so optimistic about Bitcoin and Ethereum, which are these nations that are designed to be minimally extractive by design.

• 16:09Ryan Sean Adams?

  Dude, there's so much to unpack there. There's, there's so much in that, right? So a few things that you said, a nation is like an organism, right? So it has a, has a lifespan. It also competes with other organisms, with other nations. And you also said that when we talk about nations, we're not just talking about nation states. We're also talking about religions as well as, as being kind of a, a proto-nation as well, or a different type of nation. Uh, and I know we'll talk about, you know, the differences between maybe a, a religion, nation of a religion, or a nation state and these digital nations that, that we're creating. But like, I guess in terms of purpose here, um, let's get back to that for a second.

• 16:52Ryan Sean Adams?

  So you said the purpose is, is of a nation is, is to provide security. And, um, like eventually to like foster an economy. So you create like this trust layer. And we've talked in, in many episodes, including the previous episode with Nick Carter, about the, the settlement layer of crypto versus, versus nation states. And how that's something, that's like a property rights layer that is generally enforced by nation state, but can also be enforced. Forced by cryptocurrencies and you know chains like Ethereum and Bitcoin. But it like is the purpose here, once you have those ingredients, once you have the trust and the security and the law, the settlement layer, is the purpose really to grow an economy?

• 17:35Ryan Sean Adams?

  Is that what we're trying to do here is to coordinate like growth and progress of an economy?

• 17:40David Hoffman?

  I think so, and I think we can see evidence from this in the fact that animals always tend to group up as over time. There are very few animals that are just complete lone rangers. And that's because that being around other animals that you can trust and coordinate with is always beneficial to the individual. And so like seven individuals being a pack allows for that pack to survive at a stronger rate than if the individuals were alone. And so over time, evolution has forced in the desire to trust and communicate and cooperate and coordinate around each other so that a group of creatures, a group of organisms

• 18:24David Hoffman?

  are better able to find resources and survive. And so we have the desire to trust and coordinate with each other baked into our DNA, baked into the into the protocol of creatures. And and nations are no different. So the DNA of a nation, the protocol of a nation is always designed to coordinate people, to allow for people to coordinate commerce around each other. And so the the whole idea about an economy is the an economy is a tool. It is a tool that people can tap into in order to achieve their own personal goals. And the important thing is like one person can have one set of goals. That means nothing to anyone else.

• 19:08David Hoffman?

  But the shared economy that we all tap into allows us to achieve our own individual goals, whatever they may be, without having to dictate what those goals should be upon others. So this economy is this central tool that we all use in order to live our own lives. And what a nation is, is this. Scaffolding for an economy. The protocol of a nation is a, an ideological belief that this, this particular protocol that we have designed, that we are creating is a good way to foster an economy, is a good way to allow for commerce to happen. And the way that a protocol of a nation becomes good is that it does the heavy lifting of coordination,

• 19:53David Hoffman?

  of, of, of trust, and it does that for the individuals, so they don't have to do that themselves.

• 19:59Ryan Sean Adams?

  Okay, so like, let, let's go back and talk about something because I, I think we're making the argument here, and you certainly made it in, in your post, that, you know, basically coordination is, is, is why humans have made all of the progress that we've made as a species, as a, as like a, you know, a civilization, right? But like, but like, why? Why is that required? Why is coordination required? It feels like maybe there are some limitations in our biological wetware, like, like, like almost in our DNA that make it so that we have a hard time coordinating.

• 20:44Ryan Sean Adams?

  Can you talk a little bit about that? Like, why do we need nations to coordinate? And why has it taken us so long in human history to, to get to the point of having like religions and having, having nation states?

• 20:57David Hoffman?

  So humans have an inherent limitation on how far they can scale their own individual trust. And there's something called Dunbar's number, which is a number that is unique to every single mammal, every single organism. But the human Dunbar number is 150. And what that means is that humans have a really hard time scaling trust beyond 150 individual people. And so hunter gatherers, nomadic hunter gatherers, they tend to never be in tribes larger than 150, because it, a, a tribe larger than 150 tends to break down.

• 21:34Ryan Sean Adams?

  Is that, is that because like your brain just can't?

• 21:37David Hoffman?

  Your brain can't handle it.

• 21:38Ryan Sean Adams?

  So you, you can't have enough close, you can't have enough trust?

• 21:43David Hoffman?

  Right.

• 21:43Ryan Sean Adams?

  With.

• 21:44David Hoffman?

  There's too many permutations of individual connections, individual relationships, for you as an individual to be able to hold all of those connections, remember all of those faces, remember who to trust and who not to trust all at once. It's too hard. There's too much information there.

• 22:01Ryan Sean Adams?

  Yeah, like a basic, a basic way of saying this is like, um, you know, I trust my family because I know them, right? Like I grew up with them, you know, and I know which, which, which of the family members are trustworthy or not, which I would loan to or not. I trust my close friends, right? But like beyond that circle, you know, a, somebody who's friends with me on Facebook, yeah, I kind of trust them, not really. But like outside of that, I don't know them well enough in order to, to trust them, right? It's not, it doesn't scale outside of some kind of like number radius. And I guess Dunbar's number is saying that's a hundred, that number is about 150 for most people.

• 22:39David Hoffman?

  Absolutely. And I think Nicholas Taleb said this right, where as a model for how he treats others is somewhat related to this, where he goes, there should be communism among family, socialism among friends, capitalism among, among your neighborhood, among your state, and then libertarianism among the world. And that's really just an illustration of as you include more and more people in your daily commerce and your, in your economy, you need to trust them less and less and less because you don't know who they are. But so these nation, these systems are a tool for us to scale up Dunbar's number in a way that we can include them in our Loki, we can include them in our circles.

• 23:24Ryan Sean Adams?

  So if we were to set up, like, what's the fundamental problem? Like hu- humans are better when we coordinate, right? Like, we can clearly see that. We organize, we create better technology, we're better when we coordinate. But the fundamental biological limitation we have around that coordination is Dunbar's number, which allows us to, which, which means that we can only trust up to about 150 people in that kind of sharing, you know, communist relationship, if you will. But apart from that, we need technology. And when I say technology, like, we're talking about the nation as a technology, right? Like, it's a social technology. We need that, that technology in order to scale it beyond a radius of about 150 relationships. Is that right?

• 24:09David Hoffman?

  That's totally right. And like, imagine, imagine what the world would be like if, you know, there are seven billion people on the world and, and there are, were 150 different, like tribes. It would, it would not be the world that we would have today. We would not have cities. We would not have skyscrapers. We would not have like innovation or technology or, or improvement or advancement at all. We would just have 150 different tribes that couldn't trust other tribes. And the nation is a solution for this. The nation allows us to coordinate among larger groups of people. This is why, uh, New York City is like, what? 10 million people and it operates pretty well on a day-to-day basis.

• 24:48Ryan Sean Adams?

  Yeah, it's funny. It's totally. And it's funny. It's funny how, um, in crypto, even in crypto circles, right? So, so people talk about the scalability problem of crypto, right? And they talk about it in terms of, uh, transactions per second, right? Like this kind of limited, very narrow, technical definition of scalability, right? But, but really what, what we're all talking about, and this is a fundamental, like scalability dilemma with humanity, is how do we scale trust? That's what crypto and blockchains, public blockchains like Ethereum and Bitcoin are actually trying to solve for, right? They're trying to scale trust. And if you can solve that, well, then you've got something really incredible, like a new substrate that can be built on top of.

• 25:34David Hoffman?

  Absolutely. And I don't think, bringing this back into something concrete today, like, I don't think anyone really thinks that it's possible that there's going to be like one single nation of earth, right? It's, and especially in the last 10 years where we have seen a rise in populism, have seen a rise in isolationism, uh, you know, Brexit, where the UK, uh, exited from the EU, uh, the, we, we are just seeing a breakdown in the nation's ability, this nation-state's ability to coordinate trust across the whole world. And so what that really indicates to me is that if we really want to get the whole world coordinated, which is what the whole point of this whole human experiment

• 26:17David Hoffman?

  is, we're going to need a new system, a new scaffolding to coordinate and trust each other around. And it looks like the technology of the nation-state is not going to be the thing that does that.

• 26:28Ryan Sean Adams?

  Well, okay, so what's the problem? So, so I, I know a lot of like globalists, for instance, right? Maybe partially in the progressive crowd who love that vision, though, of like one world, one nation, right? But like, what's the problem with that? Why doesn't it, why doesn't it scale? Why is that a bad idea?

• 26:44David Hoffman?

  I, I mean, I do believe in one world, one nation. I don't believe in one world, one nation state. And there's just so many problems with that. And one of the biggest ones is currency. We're all using a different money to trade and, and trust each other with. And money is one of these, another tool that everyone uses. And it's better when everyone uses the same currency. But the nation state puts up its protective walls, it puts up its taxes, it puts up its military to protect the currency. And it, it inherently puts the people of the world at odds with each other by forcing them to use different money, different currency. And so each individual nation state is using a different way of value expression, a different

• 27:29David Hoffman?

  way to communicate value by imparting different currencies upon each of its population.

• 27:34Ryan Sean Adams?

  But I could solve that. So let's say the, the one world, one nation, like, no problem, David, we've got one currency now. Like, it's called, you know, US, US droney bucks, whatever. That's our currency.

• 27:48David Hoffman?

  But why hasn't that happened?

• 27:49Ryan Sean Adams?

  Like, did I just solve it? Here, here's, here's another thought on that. This is like, uh, this week, um, well, so over the past three months, the, the US federal government has printed an unprecedented amount of money, trillions of dollars, 2.2 trillion, getting ready to print another 500 billion. Okay, right? So someone argue, we need it, stimulus, all of these reasons, modern monetary theory, all of these things, right? 500 billion of which went to the PPP program, supposedly to small businesses. We know from some information that some of those funds went to large corporations who shouldn't have been eligible.

• 28:27Ryan Sean Adams?

  Uh, this week, Steve Mnuchin, Secretary of the Treasury, says that the information about who received the $500 billion in PPP loans is proprietary and confidential.

• 28:42Ryan Sean Adams?

  That the US public, basically, our money, if you live in America, it's your money as a US citizen. You don't get to see who actually received your money as part of a government stimulus. Your elected representatives should be accountable for, right? Like, to me, that sums up the problem of, like, the moral hazard of one world, one government. That's the US. Imagine if that happened with, like, a centralized, one government overlord, right? Corruption leaked in. Now these people are in power. You can't get them out of power. They're not accountable to the people. And what do the people do?

• 29:24Ryan Sean Adams?

  Like, you've put all your eggs in this basket, and the basket turns out to be full of rotten eggs, right? That seems to be one of the main problems here, specifically when the state has control of the money printer. Because they can do all sorts of things to reward themselves. And what you could end up with, and it's kind of my fear for the US, honestly, is some kind of a kleptocracy, where those in power are stealing from, like, your elected officials are stealing from the public.

• 30:00David Hoffman?

  Yeah, that's a fantastic point. And I think what you're alluding to is just the limitations that the incentive structure of the nation-state has in contrast with its people. The nation-state inherently has a stance against its own people, because its people are the one group of people that can remove the nation-state from power. And so if the current people that are in power inside the nation-state remove the ability for the people to remove them from power, then they have perpetual control, then they have perpetual say over how things work. And this has been a core reason as to why nations, both of religion and of nation-states

• 30:43David Hoffman?

  and all the other nations in history have failed, is because... The more successful a nation becomes, the larger a target it becomes for capture. Because, and the United States Protocol, I would say, has been the best example of this. Being able to influence, control over the rules and regulations of the United States is one of the most valuable assets you have as an individual, especially as an individual with a company or corporation inside the United States. If you can make the Protocol of the United States bend to your will, then you are inherently advantaged. That's the biggest weakness of the United States Protocol and nation states is that

• 31:25David Hoffman?

  those that are powerful and wealthy have the tools available to them to make the USA Protocol change to what benefits them. And that, and the people don't have this power because the nation state protocol responds to capital, not to votes. And, you know, we are a democracy, but the frustration that the people of the United States and everywhere else are experiencing is because their vote doesn't really mean as much as somebody who has billions and billions of dollars. And if we scaled this up into a world nation, a nation Planet Earth, that incentive to capture the nation of Planet Earth would just be even greater. You would just be able to control the whole planet.

• 32:09Ryan Sean Adams?

  Yeah, it seems like a real scalability limiter, right? When we talk about scaling, scaling trust, you know, we can, we can scale it only so far with the nation state, even with the Protocols of the Constitution and the amendments in the Constitution and everything that's, that's provided there. But at some point, corruption, it seems, seeps in, particularly when you have all of these powers bundled together, right? You have, you know, defense and you have fiscal and now you have money. The power to print money is, is quite a glorious power that can be a corrupting force. So we've got some scalability limiters there. All right, before we continue, Dave and I want to tell you about our fantastic sponsors.

• 32:53Ryan Sean Adams?

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• 33:17Ryan Sean Adams?

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• 34:01Ryan Sean Adams?

  You just gotta mention bankless and they will help you with that and on-ramp the first 100k USD free. Check out the show notes for more info.

• 34:10David Hoffman?

  The best thing about the Ethereum Nation is that it has many different ways of growing its roots out into the real world. And one of those ways is by the Monolith DeFi Card. If you want to get some of the world's economic activity onto Ethereum and help grow the Ethereum Nation, you should get the Monolith DeFi Card so that you can go to your local store, go buy your local groceries and with the Monolith DeFi Card, using DAI on Ethereum. So it's a normal Visa card. It's accepted wherever Visa is accepted, which is like the whole world. And when you swipe your Monolith DeFi Card, it makes a transaction on the Ethereum blockchain using your Monolith Smart Contract Wallet and spends a little bit of DAI

• 34:54David Hoffman?

  to pay for whatever you just bought at the grocery store. So it's directly connecting your financial life with the Ethereum Nation. And this helps grow the Ethereum Nation. This allows you to live your life without compromise. You can still spend your money at your local stores and still live a bankless life. So go to monolith.xyz today to go get your bankless Visa card.

• 35:18Ryan Sean Adams?

  All right, David, let's talk about some of the nation-state protocols that are in existence. Are there some commonalities? Are there like some protocols that work better than others? For example, it seems like all of the nations of the world have converged to the protocol of capitalism. Even formerly communist nation-states have sort of converged just because capitalism has tended to work. It's sort of a survival of the fittest type function. Are there other attributes of a nation-state's protocol that tend to work as well?

• 35:52David Hoffman?

  I think it's pretty clear as you consider the strengths and weaknesses of past nations and current nations. Is that any nation that promotes individual self-sovereignty, individual freedoms, individual autonomy tend to work out better than ones that don't. And I think it's pretty fair to claim that the reason why religions do not dominate people's lives as they do today is because religion is inherently restrictive on what a person can do. A religion is very prescriptive as to how you should live your life. And when it comes to building up a global economy, restriction is a limiting factor upon economy.

• 36:37David Hoffman?

  And so as we saw the transition from a religion-based world to a nation-state-based world, we saw a one protocol, one organism, give up control to another because that second organism allowed for more freedom, more autonomy, and more commerce than previous. So the people of nation-states were more free than the people of religion. And I think we can draw that same comparison when we compare the protocol of the USA to the protocol of the USSR. You know, the USSR, Communist Russia, was a very centralized, very dogmatic, very authoritarian

• 37:18David Hoffman?

  protocol that had a lot of control and influence over its constituents as to what they should do, how they should behave, how they should act. And it was very... It was very restrictive and people inside the USSR were not really all that free in comparison to the USA. Now, there's this really elegant concept called chaotic organization or emergent order. And it talks about the evolution of life on Earth, language, crystal structures, the internet, a free market economy. They all have systems that are organized and evolve through spontaneous order. So they grow and develop on their own, but their emergent product is this organizational structure

• 38:01David Hoffman?

  that it creates based on a very similar, based on very basal rules down at the bottom. And when a totalitarian dogmatic nation comes in and dictates how these systems should be shaped, that's not as scalable, it's not as strong. And an economy really does best when people, and this is why capitalism works so well, when people are left to their own devices to decide how they best fit into the world. And so, Ryan, I think you and I have definitely found our personal niche. We both like to produce media, right? Like, I have two podcasts, I write a lot, you write a lot, you have a podcast.

• 38:44David Hoffman?

  And we're just doing the things that we think are best, that provide value to the world around us. Like, and if I were to go and be a chef, like, I'm not a very good cook. And it doesn't really resonate with me. And so, I've just decided to, instead of being a chef, I'm a podcaster, I'm an article writer. And that's just my freedom, my personal choice. And the fact that the USA nation runs on autonomy and capitalism allows for people like me to naturally find my best work, allows me to do my best work. And that's how an economy grows. An economy that is free and maximizes free individual liberty and individual autonomy

• 39:29David Hoffman?

  allows for this economy to naturally find its best fit. And so, any top-down control, like religion, Like the church, like the USSR, is a limiting factor on the individual's ability to be free and choose their own path for creating value for the world.

• 39:48Ryan Sean Adams?

  That's a really interesting argument. Have you read the book Homo Deus by Yuval Harari? So it's his second book after Sapiens. Part of the thesis is that with a lot of the centralizing technologies that are coming about, artificial intelligence, for instance, it may actually give an advantage to not the communist state, right? Because the capitalism, the capitalist protocol that you were talking about and all of its advantages kind of won out, right? But as, you know, the principle of survival of the fittest is as the environment changes, then one organism might not be as successful in the new environment as some other organism, right? It's why reptiles were wiped out and mammals kind of thrived 65 million years ago up until this point.

• 40:33Ryan Sean Adams?

  Like, and I've also seen that the coronavirus and these sorts of things, it does seem to be the case that some countries that have a more totalitarian grip on their country are able to stamp out a coronavirus, for instance, giving them some kind of an advantage where you could argue, you know, some Western countries without that grip on their population with those civil liberties intact have been less able to respond to it. I guess one of the questions is, I don't know if you have thoughts on this, David, but is like, the free protocols, the classical liberal protocols of individual sovereignty and freedom, you know, it's not necessarily a given that those will be the most successful

• 41:19Ryan Sean Adams?

  adaptive traits for a nation-state over the next 100 years. It's kind of scary to me because I totally embrace those protocols, but like, what's your take on it? Do you think that could be the case?

• 41:32David Hoffman?

  Yeah, I think what you're doing, though, is you are comparing nation-states to nation-states. And you're saying like, well, the the fact that the China nation state has such a strong grip upon its people allows it to to do better in the face of coronavirus than the USA. And it's using that totalitarian control to to make sure everyone goes inside and stays inside, and the USA doesn't have that power. But it's it's that's just a very, first off, that's a very specific situation, right? Coronavirus is very specific. And it's not the it's not about the nation state first nation state. It's about what the people choose to organize themselves by.

• 42:17David Hoffman?

  And and we saw China welding people inside of their of their apartment homes. They saw we saw China, you know, chasing down people that were outside with drones, telling them to go back inside. And so while they were able to do better with coronavirus in that specific scenario, what cost what cost did that bring upon its people? How much trust does that do those the people of China have in the totalitarian China Chinese state? And I would say that, you know, while the success that China has had in controlling coronavirus came at the future success of its nation state because the trust of China is broken down.

• 42:58David Hoffman?

  And and I just don't think that the the authoritarian totalitarian control that China has over its people is long for this world because that's all there's a lot of people in China and more and more and more every single day are upset and and not aligned with these with the state. And so, you know, they they claimed a small victory in the battle of coronavirus, but at what cost in the future?

• 43:26Ryan Sean Adams?

  Yeah, it's an interesting argument. That's kind of the argument that there's, there's a lot of cracks under the exterior. Everything looks like polished and nice and shiny in the state of China and growth in growing, but there's a lot of cracks under the exterior and social unrest that hasn't yet risen up due to this erosion of trust. I think that's, that's definitely an argument that could be made and something we'll have to, you know, pay attention to. But so, so far we've talked about like these, these almost these different ways to scale trust. And there are other ways, but, but three of them that, that we've kind of talked about and you've nailed down are like religion as one, scaling trust through, you know, things like the Bible and sacred texts and those sorts of things, shared narratives

• 44:11Ryan Sean Adams?

  for sure, shared memes. Some of the advantages there, it seems like are like propagation, right? And there's certainly the ability to fork. We've seen many different religions and also sub denominations that sort of have different shared narratives. So that has some advantages. And we've talked a lot about the, the nation state as well and the advantages and disadvantages. But like, I think what we're, the heart of your article and the meat of your article is this, this kind of this third technology, this new social coordination technology that was just birthed 10 years ago and is just revving up now, which is the digital nation. Can we talk about that for a minute? So like, what is the digital nation? Why is it different?

• 44:54David Hoffman?

  The digital nation is what gets me so optimistic every single day about our future. And it's been basically because we are simultaneously seeing the limits of the nation state and what it can do today. Even the United States, where we have baked into our documentation, baked into the DNA of our protocol, that all men are created equal. We're seeing a majority of the nation raising a hand and saying, that's bullshit. That's not what's going on. This is a whole Black Lives Matter movement that has erupted across the nation and across the world saying like, you know, like you, it says, it says it in the documentation, but is it really true? I don't think so. And that's because that the Declaration of Independence, where it says, all men are created equal.

• 45:41David Hoffman?

  It just says that. It's just a suggestion. It's not a hardcoded rule. There's nothing really stopping anyone from not following that. It's the ought side of the is ought gap. It is not what is, it's what ought to be. And that's why digital nations are so powerful is because of cryptography, where everything that is stated in the protocol must be, or else it is not included. You must follow the rules, or else you do not get to have your transaction included in the blockchain. And so there is no subjectivity involved. What ought to be part of the protocol is what is part of the protocol with Bitcoin and with Ethereum. And so this really allows

• 46:24David Hoffman?

  us to scale because we all get to look at the protocol and have the strongest assurances that what the protocol says it will do is actually what it will do. Now, like a digital nation like Bitcoin or Ethereum can't, you know, they can't operate a police force that protects private property. They can't run infrastructure that builds bridges and things of this nature. But what they can do are similarly really powerful things. And I think as these two nations, the model for these two nations that we have today, Bitcoin and Ethereum, Bitcoin offers the complete separation of nation-state and money, and Ethereum offers the complete

• 47:08David Hoffman?

  separation of nation-state and economy. And so it really reduces the subjectivity of these extremely important things. Throughout history, all of these protocols, what they're trying to do is they're trying to foster economy. And so let's just, the nation-state can have the responsibility of infrastructure, of healthcare, of police force, but we're going to give the responsibility of money and economy to the digital nation, where it's totally unsubjective. So, objective-only protocols that are responsible for managing the most important things in this world, which is our money and our commerce.

• 47:47Ryan Sean Adams?

  Money, economy, and also like a property rights system without the the corruption moral hazard of a nation state. I mean, that's basically what we're saying these digital nations do. I tweeted this recently. It's like, it's like crypto is Steve Mnuchin resistant, a Steve Mnuchin resistant form of money, right? An oligarch, a plutocrat, a kleptocrat can't take it from you, can't take your property from you. That is a better substrate of trust, a more scalable substrate of trust than the current nation state is. So it's a it's a new technology that we've basically just unleashed. And I think what you're saying is is pretty important, too. I want to dig into this a little bit. So what we've seen in the past is not necessarily that

• 48:30Ryan Sean Adams?

  like one type of nation replaces another type of nation completely, because there are some, there are certain things that one type of nation can do that another can't do and can't ever do. So what they tend to do is sort of layer, right? So like, example of of religion, that didn't get replaced by the nation state. It was sort of supplemented by the nation state. There were conflicts at various times, of course. But, you know, now we live in a world where both coexist peacefully. And I think the protocol of the US was was was a key in in in some of that, which was a clear separation between religion and state. Now with these digital

• 49:10Ryan Sean Adams?

  nation states, we have the opportunity to clearly separate money from state. But digital nations like Bitcoin and Ethereum are not going to replace everything that religion gives us, or everything that the the the nation state gives us. We're not going to get a Ethereum police force. Like, I I hope we never do, right? We're not going to get Ethereum to, you know, plan our cities and construct roads and provide, you know, public, public healthcare, or, you know, education or anything like that. It's going to be layered in to the other nations, and do what it does best, and essentially, you know, take some of those components from

• 49:55Ryan Sean Adams?

  the the previous nations and build on top of them and allows to do more cool things.

• 50:00David Hoffman?

  In the First Amendment of the United States nation-state, it has the concept of separation of church and state. And it does not have the elimination of the church. It just has the rules that are suggested that perhaps the church does not belong in the protocol level of the United States of America. And in the very first block of the Bitcoin blockchain, we have a very similar concept stated clearly in the Genesis block or of Chancellor on the brink of second bailout for banks, which is talking about the subjective nature of nation-state control over money. And it's basically saying in the first block, just like how the separation of church and state was in the First Amendment,

• 50:44David Hoffman?

  in the first block of Bitcoin, we have the separation of state and money. And so while these things do not erase each other, they do not overwrite each other. They are additive and supplemental. They also subtract the role of one nation-state into the role and responsibilities of another.

• 51:03Ryan Sean Adams?

  Okay, so can we do like a compare and contrast? Because we've talked about some similarities and some differences. But like, what would a compare and contrast look like? We talked so much on Bankless about crypto being a new form of money, and the state has a new form of money, religion doesn't. So that'd be one. What are some of the others?

• 51:23David Hoffman?

  Yeah, and this is where the expansive definition of what a nation is really becomes handy. This is where if you like open up your imagination, you can really see the similarities between a digital nation and a physical nation. So yeah, like you said, each nation of both types have its own currency, right? So the United States has the dollar, Bitcoin has the Bitcoin, Ethereum has the Ether. All digital nations have their own native currency, which are critical for the operation and maintenance of these systems, of both physical nations and digital nations. If you took away the native currency of both types, things would just not work so well. And with digital nations, they would immediately crumble. Then you have the defensive systems of both types.

• 52:07David Hoffman?

  You know, the miners of Bitcoin or the state. Acres of Ethereum are the military for a digital nation and they are paid for out of the funds generated from the taxes on the economic activity inside of the digital nation. Now, what's really cool about about the the military for digital nations is that they they are strictly defense only. There's no offensive mechanism for these things to exert their control upon the world, right? And so the the United States, which has the money printer, possibly the world's most valuable asset, has this immense budget for the military because they have the money printer, they have the world's relic, right? They have the world's most valuable asset, and so they need the world's most valuable military to protect

• 52:52David Hoffman?

  the world's most valuable asset. So we have like thousands and thousands of nuclear bombs and fighters and tanks and warships and all of these resources, all of these materials, come at the cost of the economy because that cost comes from somewhere and it really comes out of the people. It's extractive. And this is what I was saying earlier, where nation states are designed to be maximally extractive from the people. Because the money printer exists, it needs to fund its own protection as much as possible. And it does that by charging taxes. And then it also does that by printing, printing the money, which is just another hidden tax. Then there's also the police force, right? So there's the external offense. And then there's

• 53:37David Hoffman?

  also the internal defense, right? The immune system. And I would say the the police system is the immune system of of both nations. But in the digital nation, the police force is really cryptography. It's this system that we define, we clearly define as what can and cannot be included in the digital nation. And the in digital nation, it's completely binary. Either yes, it fits, or no, it does not. And it's defined by cryptography, which means that there are very little costs actually needs to go to funding a police force. In fact, absolutely zero cost needs to go for the internal maintenance, the internal order of a nation. Cryptography, we've relegated that that responsibility to cryptography. So it's really cryptography

• 54:21David Hoffman?

  that manages the internal state of the digital nation.

• 54:26David Hoffman?

  There's also borders. The blockchain database defines the borders of a digital nation. Either data and information is in the blockchain and it's on-chain, or it's not and it's off-chain. And so that's, that's the borders of the digital nation. There's also native businesses that offer products and services in exchange for the native currency. We would call these DeFi apps. If you go to DeFi Pulse, you can see all the native businesses of Ethereum. There's also patriots. Ryan, I would say you and I are definitely the patriots of our respective digital nations. Nations of both types have their respective loyalists, right?

• 55:05David Hoffman?

  And so I would say a patriot is somebody that serves in government in order to serve a larger purpose than, than themselves, right? To serve something bigger than themselves. And the maximalists of both Bitcoin and Ethereum are definitely those same types of people that believe in a vision larger than themselves and they evangelize and entice others to join their cause and are likely also going to ride the ship down to the very end, no matter what. And the, the, the presence of these patriots, of these, of these digital nation evangelists, the fact that they exist at all are really what upholds the strength of these systems. Bitcoin depends on the buyers of Last Resort and Ethereum operates in the same way.

• 55:48David Hoffman?

  And so the more buyers of Last Resort there are, the more maximalist there are, the stronger the foundational base of these systems are. And then, and then they also have in-group identities, right? Like what, what does it mean to be a Bitcoiner? What does it mean to be an Ethereum? We have very clear and obvious like statements as like what it means to be an American, right? And that's just baked into the protocol of America. And that same thing exists for Bitcoin, like Bitcoiners and Ethereum's have a very clear and differentiated set of values. And depending on like who you are, your political leanings, your, your beliefs about the world, you might be, become a Bitcoiner or an Ethereum based off of that, even before you find out what these things really are.

• 56:34David Hoffman?

  And so these comparisons between digital nations and physical nations are, are almost endless. And like I, and like many things throughout history, they are not the same, but they rhyme really, really well. And that's why I've been considering these things as digital nations, digital commonwealths of sorts.

• 56:52Ryan Sean Adams?

  Yeah, I totally think it's the best analog. And I've thought so for some time, too. And even one that we've often talked about is settlement layer. In the nation-state, the settlement layer is law. In the digital nation, Ethereum and Bitcoin, the settlement layer is code, which is a profound differentiation.

• 57:12David Hoffman?

  And this whole entire thesis is surrounding the scalability of digital nations versus physical nations. And there are really important characteristics about the Bitcoin and Ethereum nations that you will never be able to find in physical nations. Because of that is-ought gap between what a physical nation wants to be and what it actually is. And with Bitcoin and Ethereum, there are a number of characteristics about individual people that does not matter. And this is something that we have seen still be relevant over and over and over again in the meat space world, in the physical nation world. And things like gender, your race, your religion, your age, the language you speak, how able you are, your citizenship of a particular nation,

• 57:56David Hoffman?

  your personal connections, your personal clout. All of these things really materially impact your ability to live your life in a physical nation.

• 58:07Ryan Sean Adams?

  You know, one of my favorites, David, is the digital nation doesn't care where you were born. So there's massive disparity, right? If you were born in an emerging country versus born in a first-world country, there is a massive disparity in terms of your opportunity and life experience just because of your passport, just because of your citizenship and the infrastructure that surrounds that citizenship. But the digital nation doesn't care. It doesn't care where you were born. You can be a citizen of it and live anywhere in the world. All you need is an internet connection. And that is a fantastic equalizer, I think.

• 58:46David Hoffman?

  Absolutely, absolutely. And that's really what I'm here for. That's going back to the alien that comes to planet Earth and asks us, what are we doing here? And we respond, we're trying to get coordinated. Well, it's really easy to get coordinated if we're all using the same nation, if we're all in the same nation. The only way that I see a nation of planet Earth is through Ethereum, is through Bitcoin.

• 59:10Ryan Sean Adams?

  So let's talk about that for a minute. So like, to become a citizen of a nation state, you have to be born in a particular place. That's the qualification, or your parents have to be born in a particular geographic boundary, right? Like a plot on Earth with these imaginary lines that humans drew, right? So what does it take to become a citizen of a digital nation like Ethereum?

• 59:35David Hoffman?

  One of the greatest things about the answer to this question is like, the answer is almost nothing. Even people that are babies that are being born today, we could, in a very loose way, consider them citizens of Ethereum, citizens of Bitcoin. And that's because the barriers to entry are so low. Basically, you only need an internet connection, and then a wallet. And those are the minimum viable entry into the system. You just need to be able to spin up a wallet. Now, some people are more citizens than others in the sense that some people put more of their value upon these systems, and some people don't have any value in these systems. But that doesn't mean that that citizenship is

• 1:00:18David Hoffman?

  restricted, right? It's just some people choose to identify or leverage these digital nations more than others.

• 1:00:27Ryan Sean Adams?

  So you become a citizen just by using it, right? Just send a transaction on Ethereum, you've agreed to the Ethereum constitution, basically, and you're a citizen. Own some ETH, you purchased some ETH, the currency of the nation, and you're a citizen of types. It's basically powerful because it's it's opt in. And as you said, it's not a binary. I have to be 100% a citizen and move all of my everything there and only do transactions, you know, in a bankless money system. You could do it gradually. So it's open and opt in in that way. And you also have the ability to exit. Do you know, like, so if you wanted to exit your American citizenship, not saying you would, not saying you want to, of course, but if you did, it's a difficult process, actually.

• 1:01:12David Hoffman?

  On purpose.

• 1:01:13Ryan Sean Adams?

  Yeah, on purpose. I don't know if you know this, but you you are actually taxed on all your wealth at that point. So there's tax in place. And you're also put on a list of basically people have revoked their citizenships that that Congress publishes publicly. That's a little bit of a shaming process. With with digital nations, like there's you come and go as you please. You opt in, you opt out, you enter, you exit. It really doesn't matter. The the protocol doesn't care.

• 1:01:47David Hoffman?

  And you get to have dual citizenship. You get to be a citizen of your physical nation state, and you also get to be a citizen of your digital state, your your digital nation. And one doesn't conflict with the other. These can happen in tandem. These can happen in parallel.

• 1:02:04Ryan Sean Adams?

  David, we've covered so much. We definitely have to do a part two on this and dig into the topic further. I want to discuss in part two, things like, is Facebook a digital nation? I know you are writing a part two article as well. So that'll be some some meat for us to to dig into. But how would you summarize this for for Bankless listeners, what we covered today in part one?

• 1:02:25David Hoffman?

  Yeah, part one is drawing a line through the historical examples of nations and seeing where that line continues as it passes through the present and goes into the future. I hope we have done that well enough for you today. But if you haven't, if you still want to learn more, go and read the article, A Bankless Nation, in the Bankless publication. And then also, if you, it's a pretty dense article, it's a pretty long one. And so I've also read it for you on. The Bankless YouTube, so you can check it out there. And part two, I had to split it into two parts because I wanted to focus on the past, you know, nation states and religion and then Dunbar's number. And then the part two is all about the future, right?

• 1:03:07David Hoffman?

  It's all about where do these digital nations go when they develop and mature? Just as all nations have, how do they change as they mature? And there's so much left to talk about. I want, there's, we're definitely going to talk about sub nations where I view MakerDAO, Compound, Uniswap, these are all sub nations of Ethereum. In the same way that the United States is a protocol of protocols and the Fed, the federal government is the main chain of the United States and the 50 states are different shards of the United States protocol. Ethereum is the main chain and MakerDAO, Compound, DYDX, all of these constituent protocols, these individual states of Ethereum. And the contracts, the contract addresses of each individual protocol is its own,

• 1:03:53David Hoffman?

  its own independent sovereignty inside of Ethereum. And so that is definitely worth getting into and I'm really excited to, to get into that one with you, Ryan, on part two of A Bankless Nation.

• 1:04:03Ryan Sean Adams?

  Can't wait. So here are the action items. Here's what you need to do. David covered some of them. Read A The Bankless Nation. It was published last Wednesday. We'll include a note in the action list. Also subscribe to the podcast if you haven't because part two is coming very soon. Are you a citizen of Ethereum? Well, you are if you've purchased Ether or ever transacted on the Ethereum chain. We hope we've given you a new way of looking at digital nation states. Guys, risks and disclaimers. ETH is risky. Being a citizen of a digital nation has some risk because crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us. This has been episode number 17, The Bankless Nation.