The Eternal Optimist with Karl Floersch | Layer Zero

Karl Floersch is the co-founder of Optimism, the Ethereum rollup scaling solution, as well as one of the primary advocates in the space for public goods funding. Through his prolific body of work—as well as a boundless well of optimism and energy—Karl is a core beating heart of Ethereum culture, as well as a schelling point for values and ethos across the ecosystem. We say it every episode: the code we write impacts the people who use it. Few embody this declaration more than Karl, whose deepest passion is building technological infrastructure to incentivize ethical behavior. We also explore the concept of ‘Ether’s Phoenix,’ a hypothetical being that rewards you for manifesting it—directly contrasting the concept of Roko’s Basilisk (research at your own risk). ------ 📣 OPOLIS | Sign Up to Get 1000 $WORK and 1000 $BANK https://bankless.cc/Opolis ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🏦 ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA 👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave ⚡️ MAKER DAO | THE DAI STABLECOIN https://bankless.cc/MakerDAO 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave ------ Topics Covered: 0:00 Intro 5:00 Inspiration and Leaders 10:10 Road to Ethereum 16:13 For the Right Reasons 21:12 Embedding Values 28:35 The School of Fish 34:38 The Future Karl Sees 42:00 The Human Body Metaphor 47:44 The Decentralized Brain 52:25 Retroactive Public Goods Funding 57:14 Distributing Funds 1:01:08 Unprecedented Opportunity 1:04:59 R*ku’s B*silisk 1:08:39 Ether’s Phoenix (caw!) 1:15:40 A Just Utopia ------ Resources: Karl Floersch: https://twitter.com/karl_dot_tech Optimism: https://twitter.com/optimismPBC Ether’s Phoenix: https://medium.com/ethereum-optimism/ethers-phoenix-18fb7d7304bb ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00Speaker 00

  I was already kind of thinking, oh, my gosh, how are we going to, you know, how are we going to simultaneously create these freedoms, but also, you know, make the world a better place and make, give people money?

• 0:13David Hoffman?

  Welcome to Layer Zero. Layer Zero is a podcast of unscripted conversations with the people that make up the Ethereum community. Crypto is built by code, but is composed by people, and each individual member of the crypto community has their own story to tell. CypherPunks understood that the code they write impacts the people that use it, and Layer Zero focuses on the people behind the code, because Ethereum is people all the way down, and it always has been. Today on the show, we're talking to Carl Florsch, who is one of my main inspirations for overall being in crypto, but even the introduction to Layer Zero itself. CypherPunks understood the code they write impacts the people that use it. And Carl is one of these people that is very intimately attached to this part of the crypto world,

• 0:55David Hoffman?

  and what he's doing over with optimism, the optimism layer two, and retroactive public goods funding goes to the heart of this issue. Carl, I call him the eternal optimist. He just exudes energy. He exudes positivity. And I think he's really just emblematic of the ethos and values that drives this industry. And that's how he's found his way towards what I call like the core beating heart of Ethereum, the people that are driving towards public goods and building a more sustainable future, and answering the question of what that even means in the first place. And so, we go from Carl's just beginnings into the crypto industry, and how he started working with Vlad Zamfier and Vitalik Buterin on just consensus protocols.

• 1:37David Hoffman?

  And then we go all the way to how retroactive public good funding solves basically humans' biggest problems, which is, if you imagine us as a school of fish, how do we direct the school of fish towards a better place? So we use this school of fish metaphor throughout the podcast to illustrate some of these grand meta problems of humanity. When you are an individual in a school of fish, you don't have a lot of power, but we need to make collective decision making as a big school of fish. And we can't just be swimming around in circles. We actually need to go somewhere. And so, we use this metaphor throughout to talk about just consensus protocols and tinkering with incentives, and we go from there and talk about what does society look like when we can finally put a steering wheel behind this like nebulously defined school of fish?

• 2:22David Hoffman?

  And where can we go? So I think you'll absolutely enjoy one of my favorite conversations on Layer Zero so far. Right after we get to some of these fantastic sponsors that make this show possible. If you're trying to grow and preserve your crypto wealth, optimizing your taxes is just as lucrative as trying to find the next hidden gem. Alto IRA can help you invest in crypto in tax-advantaged ways to help you preserve your hard-earned money. Alto Crypto IRA lets you invest in more than 150 coins and tokens with all the same tax advantages of an IRA. They make it easy to fund your alternative IRA or crypto IRA via your 401K or by contributing directly from your bank account. There is no setup or account fees, and it's all you need to do to invest in crypto tax-free. Let me repeat that again. You can invest in crypto tax-free.

• 3:06David Hoffman?

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• 3:50David Hoffman?

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• 4:34David Hoffman?

  allowing users to port their Aave position across all of the networks that Aave operates. operates on like Polygon, Phantom, Avalanche, Arbitrum, Optimism, and Harmony. The beautiful thing about Aave is that it's completely open source, decentralized, and governed by its community, enabling a truly bankless future for us all. To get your first crypto collateralized loan, get started at Aave.com. That's A-A-B-E dot com. And also check out the Aave Protocol Governance forums to see what more than 100,000 DAO members are all robbing about at governance.aave.com. What's up, Carl? How's it going?

• 5:07Speaker 00

  What's up? Pretty good. How are you?

• 5:09David Hoffman?

  Good. Good, good, good, man. I'm excited to do this. People that have been paying attention to the Bankless Podcast for a while will know that you're one of the main influences I have for coming into this space. So being able to do this podcast, specifically a Layer 0 podcast with you is gonna be... I'm really excited for this, my man.

• 5:25Speaker 00

  Well, I feel very blessed to have had my, you know, played my part in this story. And oh my gosh, see what has happened to this ecosystem now that you're in it and all of these other people. Like, it has been a wild journey.

• 5:39David Hoffman?

  Right, yeah. Yeah, so I came in class of 2017 because I had people, leadership like you and like other people on the Optimism team and Vitalik, obviously, all of his content, were paying attention to you guys. Whereas like, I don't know, there's a lot going on in this world of crypto in the era of 2017, but what they're paying attention to, I think, is the right thing to pay attention to. And that was kind of like the last moment I stopped paying attention to. I started prioritizing Ethereum as an ecosystem. But I don't, like, did you have that same... Did you, like, who's your Carl Floersch? Like, who is that for you?

• 6:13Speaker 00

  My Carl Floersch is 100% Vitalik.

• 6:16David Hoffman?

  Okay.

• 6:16Speaker 00

  I just happened to want to, you know, do peer-to-peer technology because I was like, okay, Google is investing all of this, you know, effort into centralized technology. So there must be a market opportunity for decentralized technology. And so I just like was looking up peer-to-peer stuff and I found the DevCon Zero YouTube videos. And I saw Vitalik and I saw Vlad and they were talking about like consensus protocols and like not just doing file sharing with peer-to-peer, but literally rebuilding a peer-to-peer internet from the ground up. And I was like, okay, this is it. I'm leaving my job. Let's go.

• 6:55David Hoffman?

  Okay, so it was also YouTube content that got you into this space?

• 6:59Speaker 00

  Oh, 100%, 100%. I had no, I don't think I had any like real world human connections into crypto. It was 100% the internet and then meetups and that's where I met all these people.

• 7:14David Hoffman?

  And so I'm sure you must have heard of Bitcoin by at that point in time, but were you compelled by it?

• 7:19Speaker 00

  No, I really, I mean, okay, I had heard of Bitcoin. Um, I was somewhat interested, but it really sounded like some like libertarian, you know, heebie jeebie kind of weird thing. And I was just like, oh, like that, that doesn't speak to my revolutionary side in the same way. It's like just money, right? I want, I want something that is like reform, you know, that is like change in like a more fundamental level. And I don't, I wasn't compelled by the like, you know, add money to the internet and everything is worked out narrative.

• 7:53David Hoffman?

  Right. Okay. So you knew that Bitcoin as a technology existed, you understood it to some degree, but then you were at Google. Uh, and, and what was the impetus to, uh, not, not at Google?

• 8:04Speaker 00

  Not at Google. I was at, in college, considering where I was going to work and considering all of these things. And I'm like, oh, everything I can apply to is just like going to centralize the world even further, right? Like it's, I, I just had that entrepreneurial spark, right? I wanted to set out into new lands.

• 8:24David Hoffman?

  Okay. So, uh, that's crazy that you went straight from college in, into this. Did you think in terms of decentralization and centralization? Because that's a lot of people's like awakening moment when they came into crypto. They're like, oh, I didn't even understand this concept of centralization versus decentralization. And all of a sudden there's this new fascination with this word decentralization. Did you already think in those terms before you found crypto?

• 8:49Speaker 00

  I did because I was learning about the net neutrality stuff and the, you know, fight for the, the internet. And like, I, I really was inspired by torrents and peer-to-peer file sharing. And I was like, oh, there's something here. Like I want to create an internet. I, I'm also into music, right? I had a very personal connection to this because I witnessed as I was in college and before, as I was just growing up, the kind of shift of artistry from pre-internet era to, you know, post-internet or in the internet era. And that shift was like, how do artists make money?

• 9:29Speaker 00

  And I'm thinking intuitively, as a consumer of music, I want to have access to everything. Right. But then at the same time, as a producer of music, I want to pay and get paid for the music that I'm creating and be a part of a economy that values me. And so that kind of spark was like, okay, so there's something about this peer-to-peer tech that is like really freedom preserving. But then at the same time, we're not quite there yet because we're not paying the artists properly. And so it was like this, I was already kind of thinking, oh my gosh, how are we gonna, you know, how are we going to simultaneously create these freedoms, but also, you know, make the world a better place and make, give people money?

• 10:10David Hoffman?

  Okay. So yeah, you saw all of these components floating around in the then state of the internet. You saw like distributed systems and that piqued your interest. But then you also were interested in value creation as a creative person. And you saw like, there's something here, like what happens when we smash these two together? How do, how do we even smash these two together in the first place? And so you're probably asking questions like that. And that's where you started typing these questions into YouTube. And that's where you found the DevCon Zero videos?

• 10:39Speaker 00

  Yep, that's exactly right.

• 10:41David Hoffman?

  And then what did you do next?

• 10:43Speaker 00

  So I, I was in college. I was about to graduate. I had a networking kind of open source job. I was going to work in like web two, but it was open source because I was obsessed with open source as well. And I was working on this like peer-to-peer CDN. But then I saw these DevCon two, or DevCon Zero, excuse me, DevCon Zero videos. And I was just like, okay, this is a different design paradigm. So I just started binging content. Oh my gosh. And then I, I just so happened to live in New York City. And so I heard Consensus was in Brooklyn, so I cold emailed one of the people at Consensus and was like, "Hey, I would love to talk about Ethereum with you and grab coffee."

• 11:28Speaker 00

  And they were so kind as to allow me to do that. I then immediately went to a meetup that night where I met all of these Ethereum people that I had seen on the internet. And I'm like, "Wow," starstruck, because everyone that I had seen or heard is there in person. I was amazed that this had happened so quickly. And then I was just like, "Okay, let's go." Oh, I have this so embarrassing story. I started working out of the Consensus office while working my job remotely, and there was a photo shoot from the New York Times that came into the Consensus office. It photographed me, and I ended up in the New York Times

• 12:07Speaker 00

  article, "A New Kid on the Blockchain." And my boss saw me like, "What are you doing in this Consensus article?" I mean, about blocked it. I had talked to them, but I hadn't talked about quitting my job. Anyway, one month into that job, I had quit. It was a great job. Very blessed to be working in open source, but I did not look back.

• 12:28David Hoffman?

  That is the foot in the door into Web3 story I've ever heard. So your boss finds out you're going to be leaving by a New York Times article. Oh, my God. And so, okay, you got your first job at Consensus?

• 12:40Speaker 00

  Yes, I did. And I was working on Ujo, which is like an OG NFT, you know, music payment application.

• 12:48David Hoffman?

  Audius before its time, right?

• 12:50Speaker 00

  Mm-hmm.

• 12:51David Hoffman?

  Certainly, certainly. Okay, cool. Well, talk a little bit more about just like, you mentioned how fast it all happened, as in you, and you like speed ran that, where you're like, "Okay, smash my interests together, open source, Consensus, I'm in New York, and then I'm going to meet all these people that I just was watching on the YouTube." And like, I don't know, it seems like a very compressed amount of time. The one thing I've said about the crypto industry is, once you get into the industry, climbing your way up to the top, there's not that many rungs up to the top of the crypto industry. But you like speed ran that thing. Just elaborate a little bit more on that part of the story.

• 13:27Speaker 00

  So I mean, I lived and breathed crypto and I just was grabbing any opportunity that I could to kind of meet the coolest people and learn the coolest things. And it wasn't because I wanted to like progress my career or anything. I just wanted to contribute in a major way to what was a tiny industry, right? And I really wanted to, you know, have an impact. So I started, you know, my website, carl.tech and I just like, you know, talk carl.tech to everybody, which you could go, carl.tech. But nonetheless, it was this really interesting experience where I would go to these conferences and I would just talk to the people that I respected the most, not because of who they knew

• 14:09Speaker 00

  or how fancy they sounded, but because they had some cool and crazy ideas. And I had my own ideas that were, you know, kind of bubbling around, but I wanted to learn from the masters. And so I kind of talked to Vlad Zanfier and I just was like, hey, I'll do work for you. I, you know, Vlad Zanfier is this OG consensus protocol, kind of core Ethereum researcher. And I was willing to learn his consensus protocol work and just do work for him. Like whatever he said, whatever he needed, I was happy to do. And I just, you know, wrote some Python with him. And then that gave me this, this kind of door or this like foot in the door to, you know,

• 14:52Speaker 00

  going up to Vitalik and being like, hey, Vitalik, you're at a crypto conference. I've seen you all the time, but I've been working for Vlad on his consensus work. Like, can I help you with your consensus work as well? Cause we're, these are early days trying to work on Casper, trying to build out the core consensus protocols of Ethereum. And there were almost no people who had the skills to do that. And I didn't have the skills, but I just binged content like 24/7, web 2 decentralized, or distributed system stuff, and then just like asking for help. And

• 15:26Speaker 00

  It ended up being, you know, it turned out that Vitalik didn't really have enough support at the time to get all of the ideas that he wanted, you know, implemented, implemented. And so I just ended up working for him. Thankfully, you know, ConsenSys is a really free organization and they allowed me to help Vitalik and help Vlad on their, you know, ConsenSys Protocol research because it helps Ethereum, right? That's the magical thing about Ethereum, right? ConsenSys is a company within the Ethereum ecosystem, which meant that I could, as I could contribute to the Ethereum, the broader Ethereum ecosystem, and that would be directly incentive compatible with ConsenSys. Like, that is a magical thing

• 16:08Speaker 00

  that crypto enabled. And so I just took advantage of that wherever I could.

• 16:12David Hoffman?

  Yeah. And I think I'm gonna go ahead and guess that people like Vlad and Vitalik, maybe they weren't as skeptical as they are nowadays, now that the crypto industry is like a trillion dollars in market cap and there's a bunch of other incentives out there. But Carl, something out of you is just like you exude not trying to like, you know, join the top ranks of like crypto celebrities or trying to like show your new project or something. But like when you talk to Vitalik and be like, oh, I would like to do work and help. Like, it's easy to trust Carl because of it's very easy to see that you are doing it for the right reasons. And this is, I think it's something that I think

• 16:53David Hoffman?

  a lot of listeners should take away from is that if you come in with the intent to help, with the intent to build and not to leverage clout or to leverage, you know, other or other incentives, then people just like adopt you in their social circles and then you just become a part of those social circles and that's how you join the community. Is that kind of how it felt for you?

• 17:11Speaker 00

  Yeah, that 100%. Like, you have to leave your ego at the door. Like, I was a student and I, you know, continue to try to cultivate that mindset because that is the way, I mean, what is the point of doing things if we can't learn? I mean, I love, I personally love learning and I was just so interested in this subject matter and I wanted to help in whatever way I could and I was, I was Honestly, really lucky that I was in the right place at the right time to help. But if you make yourself available, you know, constantly over and over again, then hopefully, right, you roll the dice and wow, now you're in a position where you're actually able to make a contribution, to join these circles and to help the people that you most look up to.

• 17:54Speaker 00

  Like Vitalik is a hero of mine and continues to be now that, you know, I'm, I'm friends with him and I, you know, it's, I just, I feel really blessed to be in this community and have made the friends that I, that I have.

• 18:08David Hoffman?

  So you, you came out of college and like just jumped headfirst into this thing. And so you understood computer science, you knew, you knew the like the basics and uh, maybe, maybe more than the basics. But at some point in time, like you, when you run into the world of crypto, like it's just a frontier of unknown knowledge. And so like, how long would you say it took for you to just start working on some of these problems of crypto consensus problems? Before you were like, perhaps the expert on them, as in like, you knew more than basically almost everyone, except for a few key members of, of this whole industry. Like, how, how long did it go from like, you know, college graduate to crypto economic expert?

• 18:44Speaker 00

  It took a few years, I will say, but I mean, realistically nowadays, it's probably even longer. The, the syllabus is jam packed at this point. However, what happened for me was I spent about a year fully immersed, like 100% all, everything I thought about. I was daydreaming about crypto protocols and like incentive protocols. This was a dream come true, legitimately a dream come true. And with that, I kind of did speed run, as you say, through this knowledge and this information. And it actually kind of brought me to my, my, the, the kind of next chapter, well, uh, of, of my story, right? I, I, well, I had two chapters really.

• 19:28Speaker 00

  First, I started working on, on Casper and literally coding the consensus protocols. So that was a huge, uh, uh, kind of shift from theory to actual practice, right? I like wrote the first, you know, the Alpha Casper Testnet. Casper is now the, you know, Ethereum. ETH to proof of stake protocol. So created this testnet and like learned a lot about what a consensus protocol is, writing the actual code for a consensus protocol. And let me tell you, I struggled through that code. I was, it was, that was really out on a limb right there for me. But I made it through, made it through. And I will, I dare say I made some contributions, you know?

• 20:10Speaker 00

  It was actually a useful piece of software, which I'm very, very, very grateful for. So that kind of got me, you know, this real world experience. I'm still, I will say one thing when you're jumping into a new field like this, cultivate your naive optimism. I will say that right now because there are a lot, there were a lot of fundamental computer science things, like, you know, lessons that I was just reinventing left and right. And so was Vitalik and so were a lot of these early crypto people. Like there, these consensus protocols and these, you know, designs have been around for a long time from sharding, like scaling distributed systems. There's a lot of prior art, but you can kind of reinvent a lot of the prior art

• 20:54Speaker 00

  or figure it out on your own if you, if you think about it. It's not, you know, inaccessible. And so having that, you know, going out there and actually doing the thing was a kind of bridge or a gateway for me to, to really learn the theory in a, in a very deep way.

• 21:11David Hoffman?

  And at what point in time did you start to really think meaningfully about like, because the cool thing about Web3 and crypto is that when we build out these systems, values get embedded in them, right? And you, you can probably think about these things in the Web2 context, right? Like when we tinker with Facebook's algorithm, the atoms of the world change. And so when we think about the algorithm, then we also are in need to also be thinking about in what ways does it change the atoms of the world? Like, when did this become like a part of your, your fascination?

• 21:42Speaker 00

  Oh, that was definitely early on. That's like 2015, 2016 era. My, I, I think one of the best ways to put it, Mike Golden actually gave me this great quote. Crypto allowed us to program money. Programming money means we can program incentives and programming incentives means we can program people. And that was simultaneously the scariest thought and the most exciting thought. Because my God, if you can with your hands, write a computer program that programs the way that people behave on a massive scale.

• 22:23Speaker 00

  That is the biggest single impact that I think anyone can hope to have, right? We are the most intelligent beings, like we talk about artificial intelligence all the time, you know, and we're super excited by GPT-3, holy cow, right? But you go on the internet before GPT-3 exists and you could see a heck of a lot of, you know, Dolly 2 generated things, but generated by human beings because we are that intelligence. And so I, I like just the idea of having access to this incredible resource and that is like human ingenuity and creativity. That is where we can make this huge, huge impact. So I was just enamored by that, that concept and that

• 23:08Speaker 00

  the focus of crypto was programming incentives and programming social structures as opposed to programming apps and, and the, the human interacting with the app is a kind of an afterthought. And, and you know, I think that in some sense, video game design is close to crypto in that it's all about thinking about how the person is like interacting with the game, right? It's already, you know, the game design is probably not a, a mistake. And so I was very into video games and so I just love this concept that we can program mass action.

• 23:48David Hoffman?

  That's a really interesting framing where like Facebook's algorithm, Twitter's algorithm, these are products where the incentive is the byproduct of them. Like, oh, we accidentally caused a civil war, rather than like accidentally going, causing it, right? Like, that's what Facebook accidentally did. But then in the world of Web 3, like, we know we're going straight for the heart of it. We are actually trying to reprogram crypto. And like, that's actually, that vibe is baked into a lot of crypto memes. Like, the whole Bitcoin fixes this meme, where like, you know, there's a problem out there, and then the Bitcoiners would say Bitcoin fixes this. What they're really saying is that like, the incentive structure around hard money fixes this problem, right? And so like, they, they understand that they're going straight for the incentives as well.

• 24:32David Hoffman?

  But like, yeah, you said it was one of the most like intimidating and scary like realizations. Like, when we're going straight for the heart of us, like, yes, this line of code is meant to manipulate humans, hopefully for the better. Like, with great power comes great responsibility. Like, does this, how does this hang on you? Is this, is this like hard to tussle with?

• 24:53Speaker 00

  Absolutely. I, I really do think that this moment in time might be, I mean, if it's not, okay, that's great, but it's a solid chance that this is an inflection point, where human beings have a lot of authority and autonomy and power and control of, you know, our destiny as a kind of a group. And so, programming us and kind of building the incentive structures, if we build those incentive structures without the right, you know, mindfulness, we could actually end up undermining our own authority and our own power to then influence the next incentive structure that is, that is created, right?

• 25:39Speaker 00

  Like, this is an iterated game. We're creating the incentive structures for, you know, the next couple of years, which will then create the next set of incentive structures and the next set of incentive structures. And so, if the trend is as it is right now, which is decreasing autonomy and decreasing power for the individual, which I do think there's a solid argument for at this very moment. If that trend continues, that is a very scary future that we live in. Because I, the thing that makes me confident that my like life will improve as a human being on this planet. The thing that makes me really confident about that is that all of the other human beings are in the same boat. Right? Like I'm talking to you, you want a better life for humanity. I want a better life for human, like we all want that.

• 26:23Speaker 00

  So if, if we start creating systems that actually put, take us out of the picture. That is so scary and so possible.

• 26:34David Hoffman?

  Is this, is this a similar subject matter to like, um, like there's this realm of like AI safety thought out there. We're like, oops, we accidentally made this generalize AI because that's really cool thing to make. But then it, then it gets out and then it all of a sudden like takes over the world and we can't, uh, there's no command Z button on that. Like the, uh, I'm fearful of like a similar thing with crypto protocols. We're like, oh, we've, we've created these crypto protocols. They've self-propagated, they self-perpetuated. Uh, we, we threw away the keys so we can't change anything. Uh, and now they have the outcome of these incentives of these crypto protocols. Cause we didn't build them right, uh, makes us do all these bad things that we don't know about. But like, there's no command Z on that either, right? This is the same sort of dilemma.

• 27:16Speaker 00

  Yeah, exactly. And I do think that the, part of the interesting thing about this whole like AI safety issue is that it's really easy to anthropomorphize AI. Because you're like, there's a machine and it has a will and it's doing things, it's acting in the world, right? But it's harder to anthropomorphize collective action and like us as a species where we are headed and social systems and governance. But it is still similarly, you know, anthropomorphizable, right? We could have created the artificial general intelligence, like the thing that is important. That might already exist and we are kind of playing out its, its will in our economy as we speak, right?

• 27:57Speaker 00

  That is totally a thing that, you know, I, I do think, uh, is a perspective that we don't really think about. And, and what you're talking about, how we have a kind of AI safety problem. It's almost like in a human. Economy safety or human directionality safety problem where we're like, we need the economy, our economies that we live in and the thing, the social structures that we live in, we need those to promote human values and promote our intentions. And right now, we don't think very thoughtfully about where our collective, you know, systems are going. And it's pretty scary.

• 28:35David Hoffman?

  You know, one model I have for how DAOs work and how or these distributed organizations where there are no like boundaries, it's like a school of fish or like a murmur of starlings where like, you know, each individual fish in a school of fish just places itself next to a fish, points itself in the same way,

• 28:54David Hoffman?

  swims about in the same direction, at about the same speeds. And, and then those relationships between all the fish creates the school of the fish. But your individual choices do impact your neighbors and that can like murmurate throughout the whole entire thing. But what is not possible by a single fish is like directing the whole entire school, right? And so like everyone in the school of fish can like see some sort of shadow and then we're all like, all right, move left. And then all of a sudden that like this, that response to that can actually like accidentally like drive us over a cliff. Because we don't, the individuals have control over their own part of the like their grand system. But what are the incentives of the whole system, right? Like what are like the, if we can conceptualize this thing as a whole,

• 29:37David Hoffman?

  how do we make sure that that doesn't steer itself in the wrong direction just by the micro decisions of the individuals, right? Like, how, how do we do that? And like a lot of like this fascination in the DAO space of like snapshot votes, let's all vote on this thing. But like, we're all voting on these choices and we can only see so far into the future. And we don't actually know like the longest term time horizons. Have you thought about like how to, how to make people think in longer term, more system level structures?

• 30:08Speaker 00

  Yes, I have indeed. I will say that my journey in crypto was really a search for the algorithm that would coordinate humanity, right? It was like, I wanted this, honestly, it was, I was hoping it was like a financialized algorithm where I could deploy this one smart contract and boom, all of humanity would now self-organize and go into a good direction. And it was so simple and beautiful, but unfortunately, I think the reality is actually a little bit more complicated than that. But I also think it is beautifully elegant, or at least it could be. So, you know, the, this is where retroactive public goods

• 30:49Speaker 00

  funding comes in the picture for me. So, basically, when you're talking about where, you know, it's really hard for these organizations, the school of fish, to direct where they are going, right? We don't know where, we don't know how to predict that kind of future. But what I'm hopeful is that of, is that we can actually determine where we are with respect to where we once were. So what has changed and what has been a positive change and what has been a negative change? And I want us to be able to quantify that and kind of understand the, the things that we like and we want to see more of, and the things that we don't like and we want to see less of. And then, once we've got an understanding

• 31:34Speaker 00

  of basically where we used to be and where we are now, that we can all agree on, right? We can all kind of have some, it's not, everyone's gonna agree 100%, right? Because what I want is different from what you want. But we can come up with something that is like roughly, you know, for maybe my community, my circle of friends, we can all agree on what things we like. And then, we can make sure that we are rewarding the people who are giving us the things that we want. And that is, I like, it's, it's kind of this funny thing where- I think rewarding behavior that we want to see is almost the most fundamental, but also the most dumb and simple thing that crypto can do, right?

• 32:15Speaker 00

  This whole idea of like airdrops being given to like users for using a protocol, like that is the most rudimentary form and kind of dumb form of this. But I think there's actually something really special there. So I do think that we can actually, as a, you know, collective, many schools of fish. It's not just one school of fish, right? It's all of these DAOs, all of these DAOs that are going to be made up of other DAOs. It's going to be this crazy system, ecosystem. I hope that we can start getting a better, you know, directionality and more intentional directionality.

• 32:49David Hoffman?

  Part of what you said made me think of like the story of humanity grows and grows and grows and like our coordination systems grow larger and larger and larger and more and more effective and they get more humans onto the same coordination system. Is part of your vision for this crypto industry, the goals, the meta-goal of crypto is to put all the humans on the same coordination thing? Like we're all, we're all on the same page? Is that like one of the meta-goals here?

• 33:16Speaker 00

  Absolutely. And that meta-goal has to be achieved both from a kind of meme perspective, like we need to talk about that as a meta-goal and we have to make sure that people know that we're all headed, we're trying to head in the same direction. And then we also need our systems to reflect those meta-goals. And that's really like the, the kind of definition of public goods, right? That it's been very confusing, but generally people think that it's things that are good where that aren't being rewarded enough, but that produce positive externalities. And what do positive externalities mean? That just means that it like benefits a large group of people. So the more that we can create systems that kind of bring, that, that kind of build on each other in this cooperative way.

• 34:02Speaker 00

  The more bullish I am on us all having a kind of a part in defining what the future looks like and a voice in that future. Like, I don't want us to cut out, you know, I don't want to cut out, don't want us to cut out human beings in general. I also don't want us to cut out various groups of human beings. Like, I do really think that the ideals that, you know, have defined modern times around, you know, voice and participation and equality and like those kinds of things, they're generally pretty useful for keeping people on track and on the same page and minimizing suffering.

• 34:38David Hoffman?

  Yeah, you talked about it being at the meme layer, at the social layer first, where we need to get everyone on board with, hey, we are having this conversation as like, there's this pocket of like Ethereum researchers and other crypto people that are like trying to create the incentive structure for the whole rest of the world. Hey, guys, you should kind of be paying attention to these conversations. Say, say we successfully, because like there's a, there's many, many parts of the world, right? Like, there's the, the average Joe that like puts on his suit and goes to work and the, the lady, the woman that goes and takes kids, drops kids off at daycare, then they come back and they have family meal. Every once in a while, they get a ballot in the mail to vote on their democracy. And then for that one part of that four-year cycle, they think about the incentives of their particular nation-state. But then the

• 35:23David Hoffman?

  other nation-states have different like organizations and other incentives and, and like, we're all trying to get on the same page, but like so many people are busy with their own like day-to-day lives that like, and like getting everyone on board with this whole like, hey, guys, we're redesigning the whole entire incentive system for humanity is like a kind of a tall ask. But if we were to get there and like all of a sudden, like every human's like, oh, I get it, like we're tinkering with incentives and I want a steak at this table, right? I want to express my, my version of what I think good incentives are. Imagine like where, like if, if the most bullish case for this crypto industry, getting really sci-fi here, the most bullish case for this crypto industry is everyone has the, at least the knowledge that they have the option

• 36:08David Hoffman?

  to communicate their expression of incentives. And all of a sudden- Then we have like this new species on planet Earth with their humans. But now we know that there's like this meta goal, like, hey, we have this meta goal here. Like, all the humans are on board with, like, there's this meta goal, we need to figure it out. Uh, what, what happens next? And so, like, when we have that future where, like, all the humans are on board with, like, okay, we, we get to pick where the school of fish goes, right? Like, all the, the mini fish all become aware of the school of fish. And that, like, when our, when we turn to the left, we actually turn the whole thing to the left. And all of a sudden, all these fish, these micro fish, have the ability to steer the meta fish. Humans have never had that ability before, to steer the meta, meta school of fish of humanity.

• 36:53David Hoffman?

  Like, are we ready for that? Like, what happens next?

• 36:58Speaker 00

  Okay, so first off, you know, I work on optimism, I work at it on Ethereum, and so, uh, you know, I'm a, but I, these are, these are my views. I am, I'm a crazy person. I believe this, though, this is it, this is where we're going. So, here is the future that, that I see, right? I do not expect that your average individual is going to be able to, let's say, vote on whether or not we should prioritize, uh, you know, cleaning up the oceans or technology which takes carbon out of the, the atmosphere, right? I don't think that we can do that. But I do think that every individual is, is, deserves the ability to say,

• 37:43Speaker 00

  "Hey, I am living in a part of the world that is negatively affected by this, you know, big, you know, let's say, I'm negatively affected by some kind of climate-related thing, just to continue on the climate situation. I'm negatively affected by that, and I'm going to put my opinion out there that this is something that's harming me and something that we should prioritize." And lots of people start saying, "I'm negatively affected." Not saying that I know the solution, not saying that I know where we're gonna go out of that, but that this is how I feel, right? And I think I am entitled to the ability of saying, "Hey, this is how I feel about my local government, about..." My, you know, the parks in my neighborhood about the, you know, the weather, like all of these things, I'm entitled to that.

• 38:28Speaker 00

  And so then what we can have, and I'm a, I'm a crazy, you know, markets person, right? I'm simultaneously this like social, you know, socialist crazy person, but I'm also this libertarian crazy techno libertarian crazy person. It's a very weird combo, but that's what crypto does to you, I swear. It really does. Oh my God. Um, anyway, so I think we should all express this opinion. That's the socialist in me, right? But I also think we need markets to solve these problems, right? I don't think that we're going to be able to say vote on the solution to global warming. That's crazy sauce. But if we can empower the people who are innovators, who are listening to this podcast, who are, you know, out there trying to solve problems and make a positive impact.

• 39:12Speaker 00

  If we can empower those people with the knowledge that they will be rewarded for their innovative solution to take carbon out of the atmosphere or clean up the oceans or, you know, help the environment in a local area which has acid rain, right? Like all of these things, if we can have the entrepreneurs, you know, empower them and empower the investors. So the investors know, the investors, instead of thinking of the, you know, the VCs as the enemy, right? Imagine the VCs as talent agents that are investing in the best works that are going to push forward humanity, right? Like imagine the problem solving capabilities that we would be able to achieve.

• 39:52Speaker 00

  Like the, the, the internet that I want to use in the future is one that is protecting my rights at all times. That gives me the right to exit from the, the, the services that I'm using. That gives me a, you know, peace of mind that, you know, what I'm saying is private when I want it to be private or is public when I want it to be public and, and my, my, even all the way down to my, you know, my local neighborhood has the right, uh, parks and the, that we can solve these, uh, pandemics and global warming. Like just the meta problem that allows you to solve the other problems. It's like teaching yourself how to study or like how to work hard, right? Like that, if you can do that.

• 40:33Speaker 00

  The sky is the limit. And my gosh, if we can empower the brains on this earth, that is the most powerful force of intelligence that we have at our hands.

• 40:43David Hoffman?

  The brains being like the entrepreneurs or the problem solvers?

• 40:46Speaker 00

  Yeah, the brains being the entrepreneurs, the problem solvers, the people. And I think we're all entrepreneurs if we are given the ability to, you know, the creativity, the space to express ourselves, right? Like, there are going to be a lot of jobs realistically that need to get done that are not going to be, you know, super fun and creative and whatnot that should be rewarded actually quite heavily considering they, you know. But at the same time, there's a, I think that generally the trend of the internet, really generally, has been this trend towards like smaller, more nimble organizations that are able to coordinate based on, you know, you know, these protocols that automate our interactions, right? Like, the theory of the firm is all this, is this theory that like,

• 41:31Speaker 00

  you know, corporations get to a certain size and they've reduced the switching costs inside of that organization, which makes them more effective. But if they keep growing, then there's like more switching costs, it gets tricky. Like, internet technology is lowering that switching cost and that coordination cost across the board. And Web3 is doing that even further. So I really think that we're going to see an explosion in human creativity if we actually do this thing right.

• 41:56David Hoffman?

  Arbitrum is an Ethereum Layer 2 scaling solution that's going to completely change how we use DeFi and NFTs. Over 300 projects have already deployed to Arbitrum and the DeFi and NFT ecosystems are growing rapidly. Some of the coolest and newest NFT collections have chosen Arbitrum as their home, all the while DeFi protocols continue to see increased usage and liquidity. Using Arbitrum has never been easier, especially with the ability to deposit directly into Arbitrum through all the exchanges, including Binance, FTX, Huobi, and Crypto.com. Once inside, you'll notice Arbitrum increases Ethereum speed by orders of magnitude for a fraction of the cost of the average gas fee. If you're a developer who wants low gas fees and instant transactions for your users, visit arbitrum.io/developer to start building your DApp on Arbitrum. If you're a degener, many of your favorite DApps on Ethereum

• 42:39David Hoffman?

  are already on Arbitrum, with many moving over every day. Go to bridge arbitrum.io now to start bridging over your ETH and other tokens in order to experience DeFi NFTs in the way it was always meant to be. Fast, cheap, secure, and friction-free.

• 42:54David Hoffman?

  The Layer 2 era is upon us. Ethereum's Layer 2 ecosystem is growing every day, and we need bridges to be fast and efficient in order to live a Layer 2 life. ACROSS is the fastest, cheapest, and most secure cross-chain bridge. With ACROSS, you don't have to worry about the long wait times or high fees to get your assets to the chain of your choice. Assets are bridged and available for use almost instantaneously. ACROSS bridges are powered by UMA's Optimistic Oracle to securely transfer tokens from Layer 2 back to Ethereum. A token proposal is being deliberated as we speak in the ACROSS forum, where community members will decide on the token distribution. You can have your part of ACROSS's story by joining the Discord and becoming a co-founder and helping to design the fair, fair launch of ACROSS. If you want to bridge your assets quickly and securely, go to across.to to bridge your assets

• 43:38David Hoffman?

  between Ethereum, Optimism, Arbitrum, or Boba Networks. MakerDAO is the OG DeFi protocol. The MakerDAO produces DAI, the industry's most battle-tested and resilient stablecoin. Using Maker, you don't need to sell your collateral if you need liquidity. Instead, you can spin up a Maker Vault and use your collateral to mint DAI directly. With Maker, the power to mint new money is in your hands. The Maker protocol is extremely hardened and operated by one of the most experienced DAOs in existence. They've been here since the beginning. They've seen it all, and so you can mint DAI with the assurance that your collateral is safe. Soon, Maker will be present on all chains and L2s, so minting DAI can take place on Oasis.app, Zirion, Zapr, or any other DeFi protocol that you use. Follow Maker on Twitter, @makerDAO,

• 44:23David Hoffman?

  and learn from the oldest and most resilient DAO in existence. Okay, I'm gonna tee you up another metaphor, and I want you to take it the rest of the way. Maybe we end up back at public goods, because it'll be very important. Again, we're viewing humanity as like this one global system. It's this school of fish. Can you swap out that metaphor with a human body? Right? Where like, some people in some county, in some city, in some country, somewhere, are saying, "Hey, we're getting acid rain. It hurts." And they need the ability to express that it hurts. And so if we view this as a body, like if you feel pain at the end of your finger, it goes up. Up to your brain and then your brain creates an action to remove pain, right?

• 45:07David Hoffman?

  It's just like a stimulus, there's a negative thing, it's hurting me. And your foot doesn't need to be an expert on fire. It just, all it needs to do is to say, hey, this hurts, I would like this to stop, please. Uh, and then it sends that message, that relays that message to the brain and the brain is like, oh. Uh, foot in fire, it hurts, I'm going to remove the foot and now it's better. And now the people who live in District Foot, uh, don't have the fire that hurts them anymore because the brain helps solve that problem. Uh, and so like, where do, where do public goods come into this metaphor? And, and global retroactive public goods funding and like, who is the actual part of the brain that helps? The foot decide to move away from the fire?

• 45:51Speaker 00

  That is a great question. You are absolutely right. The retroactive public goods funding, what, the point of it, the like, the, like, the amazing thing about it is that. Just as you said, the finger or the foot, they don't need to be experts on the solution. They just need to identify the problem exists today. They, your finger is not predicting if it's going to get a paper cut, right? That is a, that is given to a different part of the brain that is given to, you know, and by the way, our brains are. Emergent, complex systems, right? We think of our brains as this like big, like one thing. Actually, inside of our brains are crazy consensus protocols. There are little neurons voting like, hey, yes, I want this, I don't want that. Like, it's insane, right?

• 46:35Speaker 00

  So we, what we're doing is we're coming to consensus on humanity's priorities. We are building a brain right now. Humanity is self harming because it doesn't have the feedback loops. That give it the proper, you know, impetus to respond in a pro-social way. Everyone's incentives are aligned at a fundamental level because. With technology, with the, the kind of systems that we are building, I do not believe we are in a world. Where the human beings that exist on this planet cannot get along and thrive together, right? There have been theories that have said, oh no, that we're running out of. Resources, etc. And we blew past those numbers. We have way more people on the planet than people thought was possible.

• 47:20Speaker 00

  And we can keep progressing. So we're all in this together. We just need that positive some mindset. And we need the systems which provide the feedback loops that says, hey, this is a problem. And then other systems which go out, the entrepreneurs, you know, come in, solving the problem. Right? So like this is a legit, we have to stop self harming as a species.

• 47:44David Hoffman?

  Right, right. Yeah. As a species, we just have our foot in the fire and we're like, hey, this really hurts. I'd like to know how to like, remove my foot from this fire so that things could get better.

• 47:56David Hoffman?

  I want to, I want to actually dive into the whole brain as like an emergent system because uh, uh, this is where I can actually use my, my, my psych degree.

• 48:04David Hoffman?

  The neurons are just a bunch of logic gates, right? It's like, yeah, is it on or is it off? And the, is it off is a vote for like a zero. And if it's on, it's a vote for a one. And all of these neurons intertwine with each other in certain patterns and certain, uh, in certain structures. Where they like, the one neuron voting for a one will cause another neuron to vote for a one, which can cause another neuron to vote for a zero. And we have this like, this emergently like, uh, bottom up constructed path of neurons for all these voting to make decisions. Uh, and it's gotten, the brain has gotten so efficient that it's basically a reflex at this point to vote to remove like the foot from the fire.

• 48:46David Hoffman?

  Right? And this is, this is the goal for, for crypto, right? Like, how can we make like something like acid rain? Such a automated, automatized like reflex that we know the solution that it's just like acid rain, just like immediately is just like gone from, from the earth. And this is where we get into like a Star Trek future. There's just a few steps between where we are now versus where we're going. I'll let you take that, take that one and run with it for what it is.

• 49:11Speaker 00

  Yeah, no, that is what you are saying. I mean, it's music to my ears. And one of the key things, right, when we say there's a one and there's a zero or there's a yes and then there's a no. Like, the key thing is that there is always going to be a, you know, a response, a kind of, like, every single, no matter where humanity is going, there will be a response system where we're saying, you know, where we do things or we don't do things based on feedback. That's just like, you know, how we operate. We take in inputs and we produce outputs. This is, you know, there's only state and state transitions in computer sides. So this is going to happen, but it's really critical that the people in our brain are relatively equally represented.

• 49:56Speaker 00

  Like, we are, as a species, all going in the right direction, right? I really want to live in that future where we can all move in the right direction. And so that's why it's so important that, for instance, we move past just, you know, simple token voting in the, you know, in the crypto space, and we move towards richer forms of identity, that privileged humanhood. I'm not saying that it's always going to be one, you know, one person, one vote for every single thing, but it should not be a bajillion, you know, votes for one person and one vote for the other, right? Because then our human is going, like, if we think of our human as our collective self, then yeah, we can have our foot in the fire, but the only thing we actually care about is our, you know, fingers,

• 50:38Speaker 00

  because that's where all the money's at. So like, the foot just falls off and people, you know, we ignore it as a species, but that would be a real tragedy. Like, we need to get the maximum, you know, velocity for human advancement. Everyone needs to be in the same ship. So I, yeah, this is, this is why we need these identity systems. This is why we need to make sure that we're getting better at quantifying things that we want, things that we don't want to happen, and specifically things that are, you know, I'm really obsessed with focusing on where things are at, quantifying the state of affairs, because that's actually hard enough, right? That's what, retroactive public goods funding. We say, this is, you know, this is the state of affairs.

• 51:21Speaker 00

  We like this, we don't like this, this has been a great public good. This, you know, hasn't been, been really anything. And then based on that, we just reward the creators who got us where we are today. Right. And we do that consistently and that gets everyone in this mindset. It changes the script. Everyone's building in towards a future that is, you know, pro-social, that is pro, that, that, that does incorporate the full body of, of, of responses. Right. And that is, you know, that is the, the, the, that's the retroactive public goods funding future that I really want to see. Okay. I'm just going to go random left field. I'm just, I have to do it. Here's the thing. Here's another reason why you should like retroactive public goods funding.

• 52:04Speaker 00

  Oh my gosh, I have a broken record, but this is concept of quote ethers phoenix.

• 52:10David Hoffman?

  Okay. No, no, no, wait, wait, wait. So I want to first go into defining retroactive public goods funding and just like actually explain that what, what, what that is. And then we're, I want to talk about Roku's basket list. And then I want to talk about ethers phoenix. So we're, we're heading, we're heading there. But first we have to actually do a, a good definition of retroactive public goods funding. So let's start there. How does that work? What is it and how does it work?

• 52:35Speaker 00

  Okay. So what it is, it's just a, it is, it is rewarding public goods that have already been created, rewarding the creators of public goods that have already been created. Doing so consistently, so consistently that builders build for, build public goods to get the reward in the future. So just in the way that we have seen the crypto space explode with crazy bot farmers. The bot farmers are trying to get these airdrops, right? They're trying to predict what is going to be incentivized in the future. But we can do that and harness that energy for good, for actual positive, you know, pro-social progress.

• 53:16Speaker 00

  And the way we do that is we create systems, governance systems, which allocate retroactive public goods funding to the creators of the best public goods. And we do this consistently over a long period of time. And the more specific. The goals are that we're, you know, retroactive public goods funding, right? You don't necessarily want to start with, you know, funding

• 53:39Speaker 00

  the best public goods in the climate space, right? Maybe we're funding public goods that are more localized to our communities, but we're doing so consistently. And so as the communities grow, the more, you know, you're getting more and more public goods getting funded.

• 53:53David Hoffman?

  Right. You gotta, you gotta put the mask on before you help your neighbor, right? And so we need, we need to make sure our system can survive before we start caring about the health of other systems. Okay, so how, how does like the VC, the VC element work into, into retroactive public goods? Because the, the line that we gave during our live stream was that we're injecting like startup type in financial incentives, where if you build something really cool, you can make a ton of money. But how do we, how do we, can you explain how those types of incentives gets injected via retroactive public goods funding into people that build public goods?

• 54:27Speaker 00

  Sure, yeah. So if you have a credible source of funding, so for instance, optimism, the blockchain, using the optimism blockchain, you generate transaction fees. These transaction fees are then put into a pot of money, which is then distributed to fund retro, to fund public goods on the network. If there is a pot of money that is going to be distributed, then VCs and other investors can look to see what are the best public goods teams that I know of? So I'm, let's say I'm a new builder. I want to create an open source library, you know, on optimism, of course. And then I will go up to my investor friends.

• 55:12Speaker 00

  I'll go up, you know, what's up Paradigm? I'll say, hey, guess what my business model is? My business model is to build this incredible piece of software that all of optimism is going to use, actually all of Ethereum, the ecosystem is going to use because optimism is EVM equivalent, right? So we're, I'm going to build this crazy good public good. And guess what? Look at all this money. There is a pot of, you know, a billion dollars that is going to be distributed. Distributed over a reasonable period of time. I only need a million dollars of investment to fund my project. And I bet that I would make a return of at least $10 million, probably $100 million.

• 55:55Speaker 00

  Because this is going to revolutionize all of the Ethereum ecosystem. So I'll go up to my investor friends and my investor friends will be going to be like, okay, there's a chance that you fail. But if you do succeed, I agree that retroactive public goods funding money is significant. And so I will then invest and this creates a market for creating public goods. The problem with charity and open source software generally is that like you go in and you're like, I know this thing is going to be insanely valuable and I know that everyone's going to be profiting off of it. Just like massively, like the Geth team, for instance, and all of these Ethereum forks. And then there's no business model.

• 56:39Speaker 00

  So we're giving a business model to the builders of open source software first, right? We're giving them a business model to then pitch to investors and whomever. Their family that is going to put money in and they know they will get rewarded, right? We should be, if you create an open source software library that is changing the world, you should be paid like an NBA superstar, right? If you really, if you made something that is so impactful, that should be, you should be paid like that, so.

• 57:15David Hoffman?

  Okay, so optimism from the block space sales of the optimism layer two generates this pile of money that is going to be sent out for retroactive public goods funding. People will build these projects and if they get used, they get to have some of that money. Who and how is, who determines how much of that money is sent to whom? How does that governance process work?

• 57:37Speaker 00

  Great question. So this is, we are currently building out various governance experiments to do this well. What do we need to experiment with? Well, we need to experiment with, number one, we need to experiment with non-plutocratic forms of governance, right? The optimism community is a group of people, individuals, that are all using the network and are all benefiting. And so we have created this, you know, this two-house system, or two-bycameral system, which we talked about in our previous podcast. But we created this system, one house is the token house, and one house is the citizens' house. And the citizens' house are the ones that are directing this retroactive public goods funding.

• 58:21Speaker 00

  We have done one experiment thus far for how to direct the retroactive public goods funding. We gave out a million dollars a few months ago to a bunch of projects, including Geth, including, you know, EtherScan, including, you know, tons, Ether's JIs. And then, we're going to do that again, but probably have a larger set of people who are judging, right? We had this set of 26 badge holders, which are now, we're calling citizens. We had 26 of them, they all just voted. Then, we're going to expand that group pretty significantly, and probably expand it, expand it, expand it over time. This is why, right, here's a reason why we're not doing a token vote for that, right?

• 59:02Speaker 00

  It's because tokens are relatively centralized. And your experience on the network, the things that you really like about the network, and that you are benefiting from, that should not be decided by this, you know, heavy bag holder. That should be decided by the people on the system, that are using the system. And so that's why we're trying to spread that voting power out a little bit more, more equally. But the details of how we're, you know, all the nitty-gritty details, we're going to be experimenting for four years on this. So we're gonna, we have this whole governance system, built around experimentation, built around non-plutocratic governance.

• 59:40David Hoffman?

  And there's a bunch of parallel experiments going on in the space that are highly related to this, right? Like, Gatecoin's quadratic funding seemed extremely relevant. Coordinap, what Coordinap is doing where they're pushing the decision-making of financial allocation to DAO contributors towards the people that are seeing the other people contribute. And they say, "Okay, that guy, or that person, or that woman, they contributed a lot, they should get paid." And that is completely separate from a completely different corner of the DAO, because they just didn't see it, but the people that do see it get to vote. And so, there's a bunch of peripheral experiments going on, and it seems to be that optimism can just inject the ones that seem to work the best. But for right now, with the citizens' house, the people that are in the citizens' house,

• 1:00:25David Hoffman?

  is it just like, one person, one vote, there's like a million dollars, and there's a proposed distribution of that million dollars, and people vote for that distribution?

• 1:00:35Speaker 00

  That is how our first experiment went.

• 1:00:39David Hoffman?

  Okay.

• 1:00:40Speaker 00

  The amount of money is surely going to increase for the next experiment. And the mechanisms, there's still a little bit of uncertainty. However, I do think that it's very overwhelmingly likely that it's going to be one person, one set of votes. It may not be one vote, it may be you get 100 votes, and you can spread those out, and we count them quadratically. We counted them quadratically in the first experiment as well.

• 1:01:05David Hoffman?

  Cool, cool, cool, cool. Okay. The beautiful thing about this, and what I think people who are listening in, who think like, "Oh, this is really great, this is going to be awesome for humanity", this is also tapping into people's reptilian brain of like, "Oh, you can make a bunch of money." But the cool thing about this is that it opens up a new field of products that were never before possible with the incentive mechanisms that we saw bootstrap Web 2. Right? So like, Web 2 level growth, but with products that have never been seen before. Like, products that are public goods, where it starts in the software camp, of course, it starts on crypto economics. But like, no one has seen what happens when we have Web 2 Silicon Valley-type incentive mechanisms, where the products are public goods.

• 1:01:50David Hoffman?

  It's like, not only have we not seen this in the crypto space, but we've never seen this for the world. So the amount of opportunity there are for entrepreneurs, non-technical entrepreneurs who just have an idea to build stuff. Like, the golden age of crypto building hasn't even begun yet, because like, it's gotta be this. Because we haven't seen greener pastures that have like, so it's like fields of snow that have zero footprints in them. Like, there's no, no one has delved into this world yet because we haven't found it. But with now with retroactive public goods funding, we have found it. And so I expect there to be this to just suck up a lot of hungry builders out there who want to build something really cool and also make a lot of money. Like, this is something that has been like untouched, untouched, no.

• 1:02:35Speaker 00

  Yeah, I'm extremely excited about this, and because I am one of those creators. And, you know, I, I'm excited to see not only, you know, yeah, as you say, technical, kind of like coding projects could be created. But think about the educational products and the, the access to information that we can, you know. I, I, I, one of the things that I worked on, which, you know, I think that you, you, you looked at was cryptoeconomics.study. And it was an open source course, which, you know, shout, shout out to all of the, the learnings that I had learning from Vitalik and Vlad and Justin Drake and all of these ETH2 researchers. I wanted to just communicate that to the world. And I was like lucky enough to be working at the Ethereum Foundation at the time

• 1:03:18Speaker 00

  to be able to like spend my time, all of my time, creating this, this course and giving it out for free. And guess what? That course, I'm sure, had tons of nice ripple effects and got a bunch of people into the space. And, you know, was, was very helpful and I think, I think valuable. And so the thing is that that was just, I was lucky to be in the right place at the right time, working at the Ethereum Foundation where my stars aligned and I could release an open source course for anyone to look at. But we can tap into the creative genius of so many people that are in the crypto space. And if we can give those people a incentive mechanism that gets them paid for creating awesome educational content

• 1:04:01Speaker 00

  from, on all ends of the spectrum, from like governance theory to, you know, deep cryptoeconomics to, you know, what's happening in the space we can Ethereum, like, all of these things are so valuable and are currently just. I think personally, I think they are way under invested in across the board. Good content is so hard to come by. I mean, thank you for doing your stuff.

• 1:04:29David Hoffman?

  Well, like what you said, like part of Bankless is came out of crypto economics study, where I was like just pounding my head into just like white papers and like YouTube content. All of a sudden like this is, this came out, it was like, oh, this explained like things that I was taking hours and hours to learn. It was just in this one like website that one person just built because they thought that it was useful. And so like if we could have more of that, imagine how easy it would be to onboard people into into this industry. Okay, I think it's time to get into Roku's basilisk. Can you speedrun us through Roku's basilisk?

• 1:05:05Speaker 00

  Okay, I will, and I will just say, please forgive me, LessWrong community.

• 1:05:10David Hoffman?

  Oh, yeah, I forgot. We're about to curse everyone that listens to this. That is part of this Faustian bargain.

• 1:05:17Speaker 00

  I think that we can uncurse by having a better alternative and the curse is dispelled because of it. That's my hope, but you can, we can talk about it later.

• 1:05:27David Hoffman?

  Is the dispelling of the curse Ethereum's phoenix?

• 1:05:29Speaker 00

  Yes, I'm hopeful that that is a dispelling. So Roku's basilisk is this thought experiment that was posed on LessWrong, that was then banned from LessWrong. You can look it up and it's generally frowned upon to, you know, we're not supposed to talk about it. The thought experiment is imagine in the future, there is an AI and the AI will punish everyone who doesn't, who didn't help it come into existence. And the worst part is that if you've heard about it and you didn't help it come into existence, then it'll punish you even more.

• 1:06:03David Hoffman?

  Yeah, so sorry, everyone that just heard that sentence, because now you are doomed. Because if you do not start building this thing, it will punish you for not building it. So it's a little bit like the game, where like the game that everyone just lost, because I mentioned the game, so sorry about that as well. But it's a little bit like that, where just like now that you know Roku's basilisk exists, if you don't start building it, Roku will punish you for not choosing to do that. But can you, let's go a little bit further into the metaphor. Why does this thing have this power? Like what gives Roku its power?

• 1:06:39Speaker 00

  What gives Roku this, its power is a causal bargaining. Anyway, I don't, I, I, I'm not really the, the expert, but if you think about it, right? You can, you can play out this future and you can kind of construct a compelling argument, right? You listen to this and you're like, oh, okay, so everyone who hears this is going to have to work on it. And so if everyone's working on it, then it'll actually happen and that will actually bring it into life. And so this idea, it's literally like an idea that is in the future and it's reaching back into the present and pulling us towards it. It's like this attractor, that's what, you know, people, you know, these mathy people talk about.

• 1:07:23David Hoffman?

  Yeah, basins of attraction, right? Because, because only one person needs to actually do it. Cause if one person builds Roku, then Roku will punish everyone else. So it only takes one person to defect and say, hey, I'm going to build Roku and ha, ha, ha, for all you people that didn't help, but I won't be punished because I was the one that built it. Uh, and so it only takes one person to actually build Roku for this AI to start punishing all the other non-builders out there.

• 1:07:51Speaker 00

  Yeah, very scary. And you can, I do think that it is interesting, like these crazy people think of like ideas and memes. It's like physical objects that exist and like, you can imagine these as like literal physical, like physical things in the, in a kind of higher dimensional space. I'm just talking voodoo, but whatever, like pulling us there. It's, it's kind of, kind of freaky, uh, but don't worry about it, don't worry.

• 1:08:15David Hoffman?

  Okay, because we have, we have the dispel. We have, we have, we have the dispeller. Spell curse or the, you have the ability to dispel the curse. How do we, and emphasis on the aspect of this thing that doesn't exist, pulling, uh, in the future, pulling us in the present towards it, like emphasis on that point. Like it does, it doesn't physically exist, but the mirror thought of it creates it. Um, but also we can do this in the, an inverse fashion. So Carl, can you teach us how to dispel Roku?

• 1:08:43Speaker 00

  Sure. So, the same logic can be applied in the opposite direction. So, instead of an AI, or, and remember, when we're talking AI, we can be pretty liberal. We're just talking in something. It could be a governance system, like we talked about before. So, something in the future, Ether's Phoenix, instead of punishing you if you don't create it, it will reward the early creators of the positive public goods future. So, the sooner you cooperate, right, we're in the prisoner's dilemma. You have two choices. You can cooperate, or you can defect. And defecting, you're going against, you know, you're kind of like being mean, you're being selfish. Roko's basilisk. Roko's basilisk, right?

• 1:09:28Speaker 00

  The other option is, let's cooperate. Let's build a good future. Let's build a positive future that we all want to see happen. And guess what? The sooner you start building that future, the sooner you dedicate your life and your motivation to this, and you get people along with the cause, and you're building open source software, and contributing to Ethereum, contributing to Optimism, Gitcoin, ah, ah, ah. All of these things, the sooner you do that, the more you're going to be rewarded. Because guess what? Ether's Phoenix is this, you know, is this future where retroactive public goods funding has succeeded. Every, the world's, you know, incentive system is aligned.

• 1:10:09Speaker 00

  And so, the people who didn't get rewarded in 2022, those people will be rewarded in the future when Ether's Phoenix is born. And so, we can really think about, instead of, let's forget the negative stuff, right? The negative stuff is literal, is just some like, heebie-jeebie. I think there's a lot of other ways for us to destroy the world. You know, we don't have to do that. That's silly. But, we can focus on the positive attractor. And that is the attractor towards public goods, towards greater forms of coordination and cooperation for all of us. And the sooner you start getting involved, bringing that future to reality, the more money you'll make, because that's why we're doing it. Money.

• 1:10:54David Hoffman?

  And so, okay, so pulling back from pulling forward from some of the metaphors that we've been using, like this school of fish that, you know, no one really can direct in this school of fish isn't conscious. It just goes in circles, even though there's move fish are moving everywhere. Ether's Phoenix offers offers like a point, a place to go for the whole entire school of fish. Right. And so like now that we have this place that we're going to progress towards the fish that helps steer the whole entire school towards that point get rewarded. And the more that you do that and the earlier that you do that, the more you get rewarded when you finally do get to that point. Uh, and so this, this gets, it goes from being like a dumb school of fish that only reacts to its environment to a smart school of fish that as can have goal oriented behaviors and can pick its

• 1:11:39David Hoffman?

  goals, uh, can actually make progress in getting there. Um, but the final issue with that, the final like TBD that we need to collectively work on as a group is, well, where that point actually is, is up to governance decisions. Like, we need to make sure that that point is where we actually do want to go and that that actually, it actually is the right choice. This is the brain and when the, the foot is getting, is in fire. This is the brains, like the brain knows like, okay, goal, let's get this done. Let's go there. But the brain can also be wrong, like, and it can also be right, but it could also be wrong. Uh, and so like making these choices is the meta problem for crypto.

• 1:12:19David Hoffman?

  And again, that starts at the optimism, uh, at Citizens House and with, uh, identity innovation and, and like, uh, uh, decision making innovations, we can start to actually refine where that point wants, uh, needs to be. Um, how's that for summing that up? Anything you want to add?

• 1:12:36Speaker 00

  That's beautiful. And I just want to say that if we think, if we make a bet that our governance systems, that our ability to determine what is actually bringing us closer to Ether's Phoenix, right? We know Ether's Phoenix is the goal, but if those systems improve over time, then actually the future system of governance is going to be able to accurately reward the people who are Left out of the earlier iterations. So that's saying that even if the governance system isn't quite good enough yet, right? We're doing retroactive public goods funding and we're taking checkpoints and we're saying, "Oh, who got us here and how close are we to Ether's Phoenix?" And we reward the people who got us. Then we get a little closer and we do it again and we do it again.

• 1:13:20Speaker 00

  But maybe some people are getting left out because we're kind of not going quite to the Ether's Phoenix point that we want to go. Well, once we get to that Ether's Phoenix, now it's time to reward everybody and make sure that all the debts are settled, right? It's a Lannister, it's paying all its debts. Ether's Phoenix, the golden heir, I don't know, stretching some weird analogies. Nonetheless, I'm excited for that future.

• 1:13:42David Hoffman?

  Right, and also the beautiful thing is that the meta question of like, "How do we get everyone on the same page?" That's also, that question itself is also technology that can be iterated on. Like, the question can get better, it can become a better question. As in like, "Hey, what is the, what is the local maxima?" This is pulling in Kevin O'Waki is like, "What is the, the local maxima versus the true maximum?" Right? Like, maybe Ether's Phoenix finds like, "Hey, here's a really good point on the value spectrum, the value landscape that's higher than where we are now." And then we get to that point and then we're there and then we discover that there's actually a higher point somewhere else that we wouldn't have been able to identify because we haven't developed the technology to ask that question in a better fashion.

• 1:14:24Speaker 00

  Yeah, and this is why we need entrepreneurs, we need different thinkers, right? Because we hit the local maximum, right? The, the people who are in the governance system, they should be determining, you know, they, they're doing their job, right? But it's up to the innovators and the people who are risk takers to push us out of that local maximum and find a new maximum and innovate in, in identity tech or innovate in, you know, our ability to quantify the universe that we live in and quantify our wants and our needs and what things are bringing us up or bringing us down, right? Like, that is, there's this like really beautiful thing that we're not, we're not, you know, sacrificing innovation to democracy. Like, I, I would be terrified if we just start using democracy as our hammer. That is insane.

• 1:15:09Speaker 00

  But if we can empower those innovators, oh, I feel I can sleep easy at night because my God, the number of people who are out there that are just geniuses waiting to create the next thing is the most happy thing like the fact that human beings get better as time goes on is beautiful. I'm so excited to see the, you know, the, you know, people hate on young generations. I bet, I will bet all my money in those young generations. They know what they're talking about. I'm, I'm out of my mind. I don't know what I'm talking about.

• 1:15:41David Hoffman?

  So Carl, say we find the true maximum, right? Like we've gone from local maximum to the higher local maximum. Then we find the true top. We find the true maximum where all coordination incentives have been figured out and this all humans are aware of the meta question and are doing their part to help answer it. And we're a globally unified society. What does that society looks like? Like what, what, what does that look like? Like what, what does the earth look like? What is our relationship with our neighbors look like? What do our jobs look like? Can you illustrate this for us?

• 1:16:11Speaker 00

  Well, I, it looks like, first off, it looks like a well-oiled machine and it looks like things, if you imagine dysfunction, governmental dysfunction, and if you think like that, that is a kind of day to day, that is a baseline. Everyone, I wake up in the morning and I'm like, wow, that is some serious dysfunction over there. Like, what are those people doing? Why are we making this decision? Why is this company being so stupid? Right? Like, that is, like, think about how much bad stuff happens these days. At least we learn about it, right? Before, I'm sure we didn't even learn about it because

• 1:16:50Speaker 00

  information was traveling at a snail's pace. But now we're learning about, we're like, wow, something is horribly wrong. So the first step to reform is knowing something's wrong, right? Then the next step is actually fixing it. So we, I am at least well aware of the wrongness in our world. And so I am excited to see a future where I just feel liberated, right? I can like, it's like, you know, gliding through water in, and, and we, we can find new challenges, right? It's not like I, I want the, The challenges to be over. Eventually, I'm excited for the challenges all to be over. But like, you know, exploring space, different, you know, planets and coordinating like cross

• 1:17:33Speaker 00

  planetary consensus, that's going to be hard, right? Like the delays between information propagating is like, these are, there's some really fun problems and I just want us to dive deep in them. And I also want us to connect to each other, right? Like all of these barriers, we're working all, you know, 24/7, like let's give ourselves time to, you know, spend time with our families and care about what matters, right? Like, I really do think that is important. And I will say, okay, this is, that's all like very materialistic type stuff. But I will say that the, you know, the reason why, part of the reason why I got into crypto is because my mom is Hindu and I grew up going to the ashram and meditating and like doing all of this stuff. That's why I'm

• 1:18:14Speaker 00

  wearing these beads. And from my perspective, I basically, I think there are like two options, where you can either become a, you know, monk and self-realize and recognize the universe and kind of be at peace in one, or we can use technology to make that process automated and give it to everyone. So I'm really hopeful that, that, you know, self-actualization, realization, like we literally elevate our consciousness to places that haven't, we can't even conceive of right now, because we don't have that, we don't have the doors to those perceptions, to that perception.

• 1:18:55David Hoffman?

  Carl, that was beautiful. And that line is the line that I always wanted to hear you say on a bankless podcast. So thank you for coming on and sharing your thoughts with all of us here.

• 1:19:05Speaker 00

  Thank you so much. This has been so much fun.

• 1:19:07David Hoffman?

  Cheers.

• 1:19:08Speaker 00

  Cheers.

• 1:19:09David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks and exclusive content and even the Bankless token for airdrops, raffles and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anything's and weekly rollups where we summarize the week in crypto and other

• 1:19:54David Hoffman?

  fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.