The Tezos whitepaper, published in 2014, anticipated several areas that would become major issues for blockchain networks. Especially around governance and smart contract security, Tezos proposed original solutions. The project later went on to raise $232m in the biggest token sale at the time. Recently, the Tezos network launched as the first of a wave of innovative next-generation blockchain networks.
We were joined by Tezos co-founders Arthur and Kathleen Breitman to discuss the history of the project, how the network functions today and how it could develop going forward.
Topics we discussed in this episode
- What inspired the original Tezos vision from 2014
- The critical importance of formal verification and governance
- Why Arthur thinks the blockchain scalability problem is overrated
- The case against decentralized applications
- Why the ability to evolve and adopt new features is critical for Tezos success
- Tezos’ Proof-of-Stake and emerging baking ecosystem
- The Tezos Foundation drama and Johann Gevers
- The relationship between their company DLS and the Tezos Foundation
Brian Fabian Crain: Hello and welcome to Epicenter, the show which talks about the technologies, projects, and startups driving decentralization in the global blockchain revolution. My name is Brian Fabian Crain.
Meher Roy: And I’m Meher Roy. Today, we are pleased to welcome back on this show, Arthur Breitman, who is one of co-founder of Tezos. Joining Arthur Breitman is Kathleen Breitman, who’s on Epicenter for the first time. Kathleen is also a co-founder of Tezos. So Arthur and Kathleen, welcome on the show.
Kathleen Breitman: Thank you for having us.
Arthur Breitman: Thank you.
Meher: So before we start the show, we’d like to disclaim that both Brian and I participated in the Tezos fundraiser and we continue to hold our TZs, so we are not exactly neutral interviewers for this episode. Now, with that, Brian, do you want to say something on that?
Brian: Yeah, of course, Tezos, we’ve been aware for a long time and all listeners have been aware for a long time. Actually, one of our most popular episodes was with Arthur back then. I think we’ve had maybe 40,000-50,000 thousand downloads on that one. And that was a long time ago, in 2016 or, at least, long time ago in Bitcoin age or blockchain age. And that was a round the year before the fundraiser and already, at the time, the Tezos white paper actually was quite old. So Tezos white paper was originally published, I think, in 2014 under the name Ellen Goodman and some who’ve been around in the blockchain space for a long time, this may ring a bell, Ellen Goodman. Of course, there was this journalist, Leah McGrath Goodman, who had basically outed this poor guy in California.
Arthur: So that was Tezos’ first encounter with a really bad investigative journalism.
Brian: Yeah. No, that was definitely a remarkable episode, so that was named after that and, I think, at the time, you were still working in banking and then afterwards, spend some time with Google and was developing Tezos on the side, so it’s been a really long time until the fundraiser happened and now, of course, at this point, Tezos being a live project and quite a vibrant project.
Arthur: It’s been a long pregnancy, yes.
Brian: So one of the things I thought would be interesting to talk about a little bit to start this off is can you give a bit of context, like, how did you decide back then to work on Tezos and what were the main triggers for the core ideas of the white paper back then?
Arthur: Well, what I found really interesting was the idea that this blockchain system, they are presented in commons and Bitcoin had a way of thing for decentralized way of thing for commons, which was the security of the network, but that had very minimal governance. And on one hand, it’s good to have minimal governance because you have a smaller surface area to attack, but on the other hand, there was also a lot of innovation coming in this field. I’m thinking, in particular, smart contracts in Etherium or zero-knowledge, proof of knowledge transactions and zero-cash and the Zcash. So all of these things were happening and I didn’t see a very clear path for how they would make their way into Bitcoin without explicit governance and I became fascinated with the idea of what happened during fork-based governance and what happen if you had more formal governance.
Meher: To me, it always seems so visionary that the Tezos white paper was published before the Bitcoin blocksize drama happened, so few anticipated that a problem like that was going to develop and already had written a solution, at least, a solution that could work in practice. But then as time passed on, Tezos also acquired its second flavor which was around smart contract safety, right? So how did that come about?
Arthur: Yeah. And you can see the safety aspect is present in the original papers. One of thing I got really interested in was formal verification as a technology. So it’s been around for a long time. It’s the idea of treating a program as a mathematical expression and making mathematical proofs about your program. It’s typically required a lot of expertise and a lot of time and effort. And so it’s been used in cases where the bugs are extremely costly, for example, aeronautics, where if you have one bug, your rockets can go crashing down instead of going up. That’s something that actually happened. And so smart contracts are, or even in general, the code-base that underpin this digital assets are really prime example of small code basis that could be verified not necessarily easily.
And for which there is it makes financial sense to actually verify those code basis and at the same time, the tools and technology for doing formal verification has gotten easier and easier. So there are better libraries for the theorem provers like Coq. You also have automated provers using S.M.T. servers. So all of these field has been making strides and in the same time, we have perfect candidates for it. So it seemed like a very good fit.
Brian: So, of course, that’s . . . that has been absolutely correct, in both of those points, right. Governance has become a massive topic, I think, today. Lots of new blockchain projects come and governance is always one aspect that they’re aware that’s a problem, there has to be some solution around that. Formal verification as well or smart contract security and blockchain security has become massive. Of course, after the Tezos white paper, we have things like the DAO hack and Parity multisig box and other things like that that have really made that very apparent. But one of the other things that I thought was interesting is that today, if you ask people, “What are the biggest issues in blockchain?” They’ll probably would say, “Number one would be scalability,” I think.
And then interoperabilities another one, probably, interoperabilities, scalability and governance, I would say, would probably be the number, the three. Although, I’m sure some people would have different answers. And on scalability and interoperability, that hasn’t been a topic for Tezos. It wasn’t in the white paper. Do you think this is something that was sort of it should’ve been more of a focus of Tezos?
Arthur: That’s a good question. Two things that were mentioned, one was interoperability and the other one was throughput. In terms of throughput, I think there definitely needs to be a higher throughput than the four transactions or 10 transactions per second that you see on most blockchains. However, always been on my mind that the best solution for throughput were pretty much second layer solutions, so things like the Lightning Network not even necessarily trust these things. So different people see different things in this market and for me, I don’t necessarily think too much as cryptocurrencies as a way to dis-intermediate but more as a way of making the system of intermediation permission-less.
And so in this respect, I’ve certainly been less interested in throughput, although, in terms of throughput, just moving from proof-of-work to proof-of-stake-system can increase your throughput quickly, although, you can get the same thing in proof-of-work using Bitcoin engine type of model. And so there’s a lot of ways to get more on chain scalability, not to get a thousand X or ten thousand X, but reasonable gains that really makes a level to solutions practical. I also think that the reason everyone is so focused on throughput right now is because of a narrative about Ethereum dapp. So in the first phase, you had people who figured out like, “Hey, if I create an application and somehow I manage to tie it with a token even though that that necessarily makes sense, then maybe I’ll make money this way,” and then people will use a token.
And so they tried build these applications and none of them really pan out that well, perhaps, because it’s early but I think, perhaps, because a lot of the times, the token or the application themselves didn’t make a whole lot of sense. Their applications which were perfectly fine has been centralized and people were decentralizing them for the sake of using tokens. And so when it became apparent that really wasn’t going to work, people pointed out at crypto key ideas and said like, “Oh, well, the problem, of course, everyone will be working on all these great dapps.” The only problem is we just don’t have the throughput to do it, right? We’d have decentralized Facebook, decentralized all of it, we just need to have the throughputness in the blockchain and then, finally, we’ll be able to do that.
And so I think that’s definitely, one of the marketing angle of U.S. I don’t think that’s true. I think that the problem is product market fit and the fact that decentralization is only useful in specific cases. And so I generally don’t think that throughput is going make dapps popular. I definitely think it’s going to make, for the next years, high throughput blockchains popular because I think it’s a beauty contest and people will use the throughput as a market of beauty as supposed to something that’s really important for their platform. So you’ll have a lot of discussions of throughput, but I think at the end of the day, it’s not as important. The other one is interoperability, so interoperability is used that you have many different blockchains, a very heterogeneous system and that makes sense if there’s some tradeoffs.
So if one which will design a blockchain . . . let’s say you want to design a blockchain for smart contracts and now, you want to design a blockchain for payments, and somehow designing it for payments or for store of value makes it very different than the design you would use for smart contracts that now, you need to have two blockchains because you have all the different used cases which require a different architecture. In that case, interoperability would be very important because you would like these blockchains stuck to each other, but I don’t believe that there’s such tradeoffs. I think there’s very, very few tradeoffs in the design of blockchains. One of it is, I think, the decentralization in throughput.
And more generally speaking, how decentralized you want to be and safe in a very like general sense. You want to make sure that anyone can participate and everyone kind of agrees, so you proceed very slowly and carefully versus something more centralized where you can go faster. So that’s a real tradeoff and I think we’ll see blockchains in that spectrum, but I don’t think the other ones really are. And so since they’re not tradeoffs, I think one system will end up absorbing a lot of the rest, so I don’t think interoperability is as important as it’s made out to be.
Meher: So I’m really interested in two very interesting ideas you put forward in what you said. The first was you made a statement like you weren’t that interested in disintermediation itself, but in making intermediation permission list, did I state that correctly?
Arthur: Yeah, that’s right, yeah.
Meher: So let’s go into that concept a little bit more. What does it mean in-depth? Could you restate the concept or sketch out a vision for what it means for intermediation to be…
Arthur: Yeah. And I should state that I have many ideas about this space and some of them I hold very, very strongly. This is one of the more speculative one. I’m not as sure about that one would about other things. So there’s a general concept in economics that what you should worry about is not a monopoly, but really, not the fact of monopoly but with the freedom of entry, right? If you have monopoly but any company could come in and compete, it doesn’t matter if they actually compete, what matters is that they can come in. And so the problem with financial intermediation is, perhaps, that they’re social intermediaries. If you have very, very high barrier to entry in financial intermediation, then you’re going to have lower quality of service, higher prices, perhaps, less trust, whereas if anyone can participate, you have more completion and so, possibly, you have better service.
So that’s one point of view. But there is something to be said about the fact that blockchains and cryptocurrencies for the first time, they’re going to go long distance payment without intermediation. That’s never happened in the history of humanity. So I would not be too quick to just take that and say, “Oh, that doesn’t matter.” That’s certainly something that’s important. But I also think that being able to have a lot of different centralized parties bloom and participate in network of operation is very helpful. In fact, if you look at Lighting Network, some people of the Lightning Network say, “Oh, it’s centralized.” Look, it has to have all these apps and spooks and so on and so forth.”
Yeah, but you have freedom of entry. I don’t have to use your Lightning if I don’t want to. I can make a direct block in transaction. I can fall back on some other node. You have the freedom of choice and at the end of the day, that’s what really matters. And so as a result, I’m less concerned about the on-chain transaction throughput by itself, I see basically what happens on-chain as a full back for a flurry of activity that happens off-chain.
Meher: The second interesting concept is you express some of kind of skepticism about the value proposition of decentralized applications in terms of the product market fit and on the other side, so decentralized application’s worth that deal and I tend to think of them as applications that do not have a single individual service provider or central server that’s serving that application. It’s like a network of nodes that’s serving that application.
Meher: And so you express skepticism on the product market fit of decentralized applications, but you yourself built a smart contract chain. What’s the value proposition of smart contracts if not decentralized applications?
Arthur: So I think as people are starting to make a difference between ,and it’s not the fundamental difference but there’s a spectrum, by the way, when people call it dapp, and why people call those smart contracts. So I heard of it is dapp recently is… I don’t know the name and I don’t want to point any finger, it’s a dapp that lets you take some video and then they will un-code the video for you and it’s a decentralized network of people who can un-code your video and so on and so forth and that fine.
Brian: Yeah, that’s Live Peer
Arthur: I’m not sold on the idea that you need to this decentralized network as supposed to facing a centralized website that gives that service. And maybe I don’t understand it, okay? I just don’t see directly. On the other hand of the spectrum, you have something like a multisig contracts. That’s a smart contract that no one would take a look at a multisig and call it a dapp, okay? So this is a smart contract because you want to make things like multisig contracts, because if you have a smart contract language implementing something like the Raiden Network. It’s a lot more trivial than implementing something as the Lightning Network. It is common on Twitter recently that I thought it was really spot on, it’s something that’s a paper in Bitcoin like a block post in Ethereum just because of the simplicity of having a smart contract language. So it’s making it easier for people to write contracts like insurance contracts or . . .
Kathleen: Well, I think to put it simply, Arthur thinks that square contracts are a bad name for smart contracts and one thing he’d prefer is automated escrow. So it gives you an idea of the amount of expressivity that he’d like to see in these sorts of pieces of code, so . . .
Arthur: Yeah, yeah, that’s right. The idea of automated escrow is that, look, you have some tokens which are like stuck in the smart contract and you want to release a certain sum to certain parties, depending on certain conditions. I don’t say this stuff just run a full-fledged application. So, yeah, automated escrow is the idea of just go to the blockchain for adjudication. You are running an option contract, you had a dispute, you go to the chain and then you verify what happened. So that’s supposed to be the used case I see for it. That being said, again, if I don’t need to have a very strong conviction in something, I won’t. And so, obviously, I want Tezos to be a platform that accommodates all kind of applications including the dapps, if dapps want to use Tezos.
Like I said, there’s not a whole lot of tradeoffs. So maybe throughput is a tradeoff and that’s one I would personally favor less than decentralization but at the end of the day, the protocol is the hands of the community and so if they decide to push it in the direction that’s more to a throughput than dapps, that’s what will happen. That’s my personal preference.
Brian: Yeah, just a fascinating answer. Now, would it be fair to say that one way to think about Tezos is it’s like Bitcoin but there’s governance, there are some smart contracts and there’s proof-of-stake instead proof-of-work?
Arthur: Yeah. Yeah, you could say that.
Brian: And because one of the interesting question, of course, if you look at Ethereum and if you looked at the Ethereum, basically, pitched that Ethereum made back. when did it, the fundraiser and after it, it was okay. Ethereum is just world computer and you can run any kind of application on Ethereum and then it’s trustless. And in Ethereum, the token is gassed to pay for computation on this thing, right? So, also, from a token perspective, seen as a very different thing from Bitcoin which maybe this money . . . so do you think when you look at tezis, do you see those more in the kind of money camp than in the gas camp or how do you look at that?
Arthur: Yeah, it’s interesting. When Ethereum came up with that pitch, I thought they were being Straussian. I thought they were saying, “Of course, it’s a cryptocurrency but if we say that we’re competing head-on with Bitcoin before I’m going to take it seriously. So we’re going to find the differentiators says that Bitcoin is gold and says that we’re gassed and that people will see value and then we can establish ourselves as cryptocurrency.” That’s what I saw was going because in mind, it was clear a cryptocurrency. But, no, I think they meant it. I know these things, they meant it. For me, I mean, these things are primarily useful as money and so I see it as a cryptocurrency.
But that being said, I don’t think you have to be in the application camp or the money camp or it’s worse, people tend to be like, “Okay, well, you have privacy coins and then you have money coins and then you have application,” hang on, like I said, not a whole lot of tradeoffs. There’s no reason why you can’t have privacy, you can’t be a money and you can also be used to power gas and smart contracts. I mean, at the end of the day, it’s not like physical gas. It’s not like you have gas and then you have to break down the molecules. You’re just paying. You’re paying miners or bakers to include your transactions and if you’re going to pay pings, then you’re essentially using money.
So it’s money that’s used for a certain type of application and the best money is a money that you can use for the most type of used cases. And so be it gas, be it payments, being everything that you can think of.
Brian: Recently, the guys from Multicoin, they’ve had some interesting thesis around that. And one of things they argued is that the things that will succeed as a store of value and I think that very much ties into what you’re saying, are the things that will have the most usage and basically the kind of smart contract or application platform that succeeds at the biggest scales like whatever, token, belongs to that platform is also going to become the most valuable store of value. Does that kind of tie into . . .
Arthur: Yeah, yeah. No, I would agree with that thesis, although, I think just by virtue of being the first Bitcoin is a very massive lead. And it’s not clear if that’s being able to be used for smart contracts is enough of a benefits to change your selling points into people’s mind that Bitcoin is it. And so that’s a very really an uphill battle for any cryptocurrency out there.
Meher: Including for Tezos?
Arthur: Yeah, including for Tezos, of course.
Arthur: More so for Tezos than Ethereum because Tezos is new to the game.
Kathleen: Yeah. Yup.
Meher: Very interesting. So in a sense, Ethereum tried to create, at least, publicly, this different market of a world computer and this asset as gas in that world computer. Whereas your perspective is all the cryptocurrencies are ultimately stores of value, they all compete with each other including Tezos.
Arthur: Pretty much and I think that most of the dapp cryptocurrencies, even though, they are being used as store of value. The ability have done in a money-like characteristics. There’s cars, people are using them as money and a store of values more than anything. But there’s convergence in money and I think you end up having the most liquid one or the most useful one, be the one that dominates.
Kathleen: Yeah. And then a part of the reason that there’s a conversation around this, that talks about it as like after one thing is because you don’t want to say like, “Yeah, I’m competing with Bitcoin and I’m competing Ethereum,” because there’s a lot of entrenched players and entrenched interest and you don’t want to go head to head with it. You want to say like, “No, no, no, I’m not competing with Ethereum because you see, I will be the application for dog walking on the blockchain.” And so you can’t say that I’m competing with so and so. So I think, for being intellectually honest, we’re all kind of operating in the same space, it’s just very few people want to admit because it invites a lot of vitriol towards you the second you start to say this.
Brian: Yeah. But there are people who knows that these things are competing, Crypto Twitter is pretty bad, but if you look at it . . . and the reason you see so much animosity, I think, is because deep down, people know that these things are competing with each other.
Kathleen: Yeah. Well, yeah. That and a lot of time on their hands, but, yeah.
Arthur: But just because you’re competing, it doesn’t mean that it has to be like a ferocious, like an ugly battle. I think right now, Kathleen, I don’t want to steal your quote.
Kathleen: Oh, well, it’s not my quote. It’s Paul Graham. No, but I always think people overstate the amount of animosity between different project leads. I think Arthur and I have a pretty good working relationship with a lot of people who work in the space, who might be considered our competitors, because as I like to say but I quote from Paul Graham, “A startup doesn’t usually compete against other startups, it usually competes against people not giving a shit about it.” So really . . .
Arthur: That’s even more true about blockchain protocols.
Kathleen: Even more true about blockchain protocols because really, if you look at the amount of people who actually uses in their day to day, it’s actually quite meager compared to the amount of hypes and headlines that have been circulated around us. So, really, a rise in tide lifts all boats relevancy for one blockchain helps out all the others. It’s not crazy to process that, helping out one project become relevant, helps the others, and so, yeah.
Arthur: I remember when I was a kid I watched some T.V, there was T.V. show series for Highlander and it was always weird to me when he had a friend who was also a highlander. And I was like, “But aren’t you going to have to like kill each other down the line at some point? Why are they friends?”
Kathleen: For anyone who’s born after 1990, what Arthur means to say is like, “Well, Highlander, there can only be one.”
Arthur: No, like it’s part . . .
Kathleen: Like he makes friends along the way.
Arthur: It’s part of the underlying.
Kathleen: Yeah, exactly. So like, we’ll pull out knives when all of these things have become the way that you pay for coffee in Dubai and, I don’t know, Frankfurt, respectively, but . . .
Arthur: But what if the real casualties are the friend you met along the way?
Kathleen: Yeah, I don’t think so. Anyway, the point is like we have so far to go in terms of realizing the promises of this technology that it’s really not worth trying to take out other people or blind others at this juncture.
Meher: So that’s a very interesting perspective. And like I’m tempted to contrast it to a lot of different projects in this space, the clearest contrast to me comes out with Dfinity, so a project that’s trying to build like Facebook on the blockchain or Gmail on the blockchain, whereas in Tezos, at least, not Tezos, but you yourself as founders of it, ideologically, believe in a very different direction for the cryptocurrency space, so . . .
Arthur: Yeah. Look, at the end of the day, if Dfinity comes out and everyone’s starts filling all these applications on Dfinity and it becomes clear and everyone starts using them and it’s great and everyone loves them, at this point, I’m like, “Okay, I guess we need to have throughput.” The main thing to know about Tezos is that it’s evolvable system which is really designed to favor innovation and evolvability. I think there’s a lot of ideas in the Dfinity consensus which are really interesting. The idea of doing sortation, but like a better agreement with sortation using [artificial] [00:29:12] signature for getting your randomness.
All of that are really good ideas, but I do expect that at some point, there could well be open source, they will release their papers. Like the part right now that strikes me as a little difficult as a whole, this with key generation, but look, I think the ideas in the consensus are really good and if they’re good, there’s no reason for Tezos not to adopt them if users demand for it.
Meher: So let’s switch to a different topic now. The topic is, of course, the Tezos foundation drama. We need to cover it even for custom’s sake, I guess. So Tezos broke out in the media and in the crypto narrative because of the Tezos foundation drama. It attracted a lot of attention. So could you just walk us through what really happened in this episode and give me some few learnings from it.
Kathleen: What can you take away?
Arthur: Well, basically, your anger versus called self-delaying and so if I get rid of the scandal with the help of Reuters in order to create ambiguity. And also, if he had a lot of contacts and the crypto values that he leveraged to predict themselves. And so what should’ve been a fairly straightforward removal of a board member who committed improprieties was made into a scandal by Reuters who was trying to sell copy.
Kathleen: But thankfully, ours has far more subscribers and much more page views, Wired, actually took the effort to find out both sides of the so called scandal. And it quickly became obvious that Arthur and I were quite wronged by this man and his accomplice, Guido Schmitz Krummacher, and, yeah, I mean, also, it ends well. Thankfully, Tezos was in such a good place that the network was able to ship relatively on time and no harm no foul. I mean, if this was really to live up to the expectation that they set for everyone who they gave tours to crypto value to, perhaps, they’ll prosecute Johann Gevers for disloyal management much like they did the folks with Fiffo. I think this is the same in ballpark of mal-thesis. But, yeah, we don’t spend much time thinking what a South African masseuse thinks, so why should you?
Meher: One of the interesting parts of, at least, the occurrence of events as I saw it is . . . so you had three board members, so Johann Gevers, Guido Schmitz Krummacher and then there was Diego Pons. So Diego, as I understand it, was always very supportive of the two of you.
Kathleen: Well yeah, Diego supported the technology because he understands it. That’s a first. So Diego is also not a fucking crook, so that helps. So, yeah, Diego had a bit of an up on the two of them but, nonetheless, he still had a backbone, yeah.
Arthur: Yeah. No, I think to mention like remarkable resilience and, yeah, I mean, the thing is the board had a two out of three failure I think because of the concentration in the crypto valley.
Meher: So they both had a two out of three failure and I actually thought Diego’s hand was just too weak because it was almost that Johann and Guido had you cornered in some sense. That is the impression I got, but then things suddenly turned around and the situation solved. How and why did Johann give up control?
Kathleen: Well, there’s a few things going on here, first of all, Johann is a terrible tactician.
Arthur: Yeah, but look, without just spending too much time on it, I think, essentially, what happened is that he gives this very weird talk in January at the crypto conference, his large quotes of himself, and the community which had been mislead by Reuters into thinking this was a dispute and they were like, “Okay. No, this guy is nuts.” And he was obviously nuts and Reuters knew that. They did this on purpose. And so once that tilted, the community released report behind initially that also came from the community called the T2 Foundation and when it became clear that the T2 Foundation was actually going to be the one releasing the protocol, I think it forced the hand of the first foundation who had to declare to understand it. Their position was becoming unattainable.
Kathleen: I mean, basically, let’s face it. All of Tezos, barely construed, those who want to see the protocol of the wild are very freaking lucky that their arch nemesis were Anna Herrera, Steve Zaclo, Brandon Huzerari, Johann Gevers and Guido Schmitz Krummacher. That was like . . .
Arthur: They were not exactly the A-team.
Kathleen: Yeah, they’re not exactly the A-team. We were dealing with a pretty weak hand on the other side. So even though they had a billion dollars and all of the narrative that they wanted to do to . . .
Arthur: And the international press publication really did publish anything they would say.
Kathleen: Literally anything they would say. They still managed to fail because guess what, software prevails and the narrative around Tezos is not that of enriching a South African masseuse, but rather . . .
Arthur: Launching a decentralized network.
Kathleen: Launching a decentralized network with the power of 3,000 miles. So, I mean, really, I don’t want to spend my laurels because this is a pretty easy thing to trounce. But the sort of soft narrative around Tezos was really not in favor of them ever having any plot whatsoever. I mean, even the mere suggestion that Tezos would never launch which was what Reuters tried to write twice, once in September because they didn’t understand what a put option was and the second time in this whole governance crisis came through. The whole suggestion was that Tezos will never launch even though there are 40,000 lines of code they’ve been running a Testnet for over . . . almost a year.
Arthur: 60, but . . .
Kathleen: Still, yeah.
Arthur: There is no . . .
Kathleen: Like the technical literacy is that . . . it’s . . .
Brian: There’s no one technical would’ve looked at this and say this will not shape.
Kathleen: Yeah, exactly. Yeah, it’s just . . . it’s annoying in the short term but it’s hilarious in the long term.
Arthur: At the end of the day, I don’t know if it was malice on their part and just wanting to knock an I.C.O. down or one of those things or if it was just like pure incompetence, but the end result was basically the same and I think they made a complete fool out of themselves.
Kathleen: I mean, the horror stories around Anna alone are warranting its own examination, but . . .
Arthur: That’s for another time.
Kathleen: Yeah. That’s another time, but in any case, it’s not worth dwelling on folks who could never compile the code around Tezos to talk about how they made kind of a kerfuffle around this.
Brian: So, of course, it’s always tricky to abstract from this particular story, but still, do you have some kind of lessons that you take away either for you that apply to, I don’t know, business or working in general or maybe that’s specific to people starting blockchain projects, what are your main takeaways here?
Arthur: I mean, there’s often the tendency to over generalize life lesson than sometimes they’re just never accidents, but I think the most useful generalization I can give would be just not to do business in the crypto valley. I think they value their image a lot more than they value integrity and I don’t think it’s a good place to do business. They try to be very, very attractive of the things, but at the end of the day, they haven’t really attracted enough technical talents, not a critical mass. And, yeah, they haven’t been reliable when Tezos suffered, they were nowhere to found or to help.
Kathleen: Well, I mean, what’s more when the whole Gever’s fiasco kind of came into play, we were told by many people who were more than happy to say nice things about Johann prior to us going to this contract with the Tezos Foundation. “Oh, yeah, Johann’s a great guy,” but pretty much in October, everyone was like, “Yeah, no one likes that dude.” And we’re like, “When were you going to tell us?” And it kind of spans a gambit from regulatory officials to people who work for Monotoss who actually contributed to the Tezos fundraiser.
Arthur: What we witness overall was a lot of cowardice.
Kathleen: Yeah, a lot of cowardice. Yeah, so, I mean, I just would never do business there.
Kathleen: Anymore, yeah. Like that’s the only takeaway actually, yeah. Sometimes, it’s just that simple.
Brian: Okay, that’s great. And so ideas of moving some of the Tezos foundation out of there as well, may I know, for example, Ethereum, they have shifted some activities to Singapore, although, I guess, the foundation’s still there, so I’m not totally sure to what extent, or is that something Tezos Foundation is there and has to stay there?
Arthur: I know that there are foundation around the world which are active like Tezos Korea, Tezos Japan, Tezos in the U.S. So there are a few other foundations. I don’t know what the Tezos Foundation intends to do.
Meher: So recently, Tezos launched its main net, right? And tell us how that experience has been and how the Mainnet has shaped up.
Arthur: I think the experience was rather what has been mostly usually a smooth in a sense that it worked. I think the longer the network was unavailable was maybe for one hour, I think, twice where no blocks were produced. And, yeah, no, it’s been about . . . what was really great was to see how quickly bakers took off. So one of the things that worried me at first was before the launching, it was not a big ecosystem of bakers that had been developed, but as soon as it happened, there were twenty and there fifty and then a hundred bakers on the system. Right now, there’s 400 addresses which are ready to bake. There’s about a hundred that are actively baking.
And so that really took off very quickly. And so on the technical side, things were smooth and on the baking side, we had a lot of the standardization very, very early on with a lot of people getting into the network. So I think that’s been fantastic. And I think that the launch, the way that Tezos Foundation communicated around the launch was a little low key, I think, in contrast with some launches which are . . . yes.
Kathleen: I’d like to say Beyonce-inspired, but . . .
Arthur: Oh, yeah, yeah.
Kathleen: We just dropped the mic. Not now, anyway . . .
Arthur: Yeah, but you know what? This environment does not really counter-signaling. You see a lot of people who are like, “Whoa, why didn’t you do like a party with a pop star for your launch?” It’s a technological project.
Kathleen: Yeah. Well, I think people like the comfort of looking like other things.
Kathleen: Yeah. So it’s not about, “Oh, we actually we want to see Snoop Dogg play,” it’s about, “We want the assurance that you’re just like the other projects that invited Snoop Dogg to play.”
Kathleen: So, I mean, there’s a whole psychology to be written about this, very weird milieu in technology.
Arthur: Meltem Demoirs had a talk about the shit going waterfall and in it, she had thick heart stone cards. I mean, there’s a game where you play . . .
Kathleen: Yeah, it was pretty funny.
Arthur: . . . like you play partnership, and it’s like, yeah, you play launch party and then it’s something you play. And, obviously, it gives more value because we all argue that it does and . . .
Kathleen: Yeah, but it costs a lot of mana.
Arthur: That cost a lot of . . .
Kathleen: Yeah, it’s . . .
Arthur: . . . of mana. And what I think is these are transients. At the end of the day, having something that’s robust and secured, that’s useful is what ended up prevailing.
Brian: Yeah, I would love to dive into a little bit how Tezos proof-of-stake works, because I remember reading about this before it launched and kind of the description and I felt it was quite interesting and unusual and so, yeah, maybe you can speak about that.
But I was somewhat skeptical, but I totally agree with you. It’s been interesting to watch the baking ecosystem evolve and I think it seems to work out pretty well so far. So can you talk around how, maybe, the role of bakers, delegator’s roles, endorsements and how can this baker community together works on validating transactions and producing blocks?
Arthur: Yeah. And so one of the thing that you need to separate in the algorithm is, first, what is your kind of consensus for? Who’s really taking part of the consensus and which proportion and then how do you reach consensus? So the first part, who’s your consensus for, so it’s based on proof-of-stake idea and one of the design goal of Tezos is that even if you have a very, very small stake, you can still have a very, very small influence on the blocks, the idea being like if you have 0.1% of the network, you should be able to create 0.1% of the blocks. That’s one property that I like about Tezos, that you don’t have in systems for example like DPoS.
So I wanted to preserve that property but you also need to have some form of delegation because a lot of people aren’t necessarily going to be online or not going to run machines. So there’s the idea of this optional delegation model where you can make yourself, create a block yourself or you can give that right to another key which can be controlled by a different machine, by someone else, by in consortium. So you have a wide variety of option. And then so once you do that, you have this idea of saying, “Okay,” so now, you have these different keys which you can create blocks and they will have different balances. You add a coin tracking mechanism to it. It’s a technique known forth as Satoshi.
The benefits of it is that if you had a fork, not a hard fork, more like another branch, someone cannot shuffle the coin around and make it look like they own a lot of those things and they do. You will see that only a small fraction of the coins are parts being the consensus because you can’t just move your coin between two different addresses. The system is going to track them. So it’s tracked to be efficient, it’s tracked at an aggregate, which is a role level, which is about 10,000 tokens. But at the end of the day, what it boils down to is you have these different delegates or people who are participating directly and they have a stake, which is rounded down to the nearest multiple of 10,000. So since there’s about 800 million coins in total, that means that you have up to 80,000 rolls.
So now, you have these 80,000 rolls, how do you do consensus, right? You could say, “Well, I’m going to do byzantine agreement on 80,000,” but that’s too much. So it’s a chain-based algorithm which was in epoch. One epoch is 4,096 slots and in each slots, you have a random priority, so it’s your turn to create a block and then the next turn, it’s some else’s turn to create a block and so on and so forth. So, no, it’s not like having finality, it’s more like you try to be . . . chain-based algorithm are kind of optimistic B.F.T. in the sense of like instead of trying to get everyone’s agreements, you try to get people to agree and you just count how many people agree.
And if a lot of people agrees, then it’s probably going to converge, so we have a mechanism of endorsements where after each block, you have 32 random stakeholders who can come in and sign and add their signature to the block. So the main benefits of doing that is that if the network is really active and is really live and you get a lot of endorsements, which means there’s a large fraction of the stake that’s involved in validating the chain and so you need only a few confirmations in order for you to be confident that there’s not going to be any aversions. And if the network is not working as well, you’ll get few endorsements and then you’ll wait a little longer to get your confirmations.
So that’s basically the algorithms. I think the closest other algorithm that I can think of in this space would be Ouroboros, which turned out to be very, very similar to the algorithm for Tezos with the difference that it doesn’t have the endorsement aspect, but it does have the benefit of being simple enough that you can do a full mathematical treatment of it, which is nice because you can actually proof properties about it. Whereas in Tezos . . . and that’s really one of the thing you were alluding when you’re shaking your head a little bit, you have more heuristic arguments of safety.
Brian: Yeah, because one of the things with many like let’s say if you look at the example of Tendermint or I think Dfinity is the similar way, right? And that you have like let’s say in Tendermint, right? You need two-thirds of the stake to sign off on each block and so you have this finality and you also have this guarantee that, “Okay, as long as less than one-third is malicious, the chain progresses and every block . . . there can’t be four instances of like that.” So here, you don’t have to add but, of course, at the same time, you have to this probabilistic characteristic that you may be sort of implicitly have that because you would have to get extremely, extremely unlucky to have a bunch of malicious entities being chosen as block proposals in a row or how do you look at that kind of resilience to a group of malicious bakers?
Arthur: So the way you analyze sort of being able to do a full mathematical treatment is mostly simulation. And that’s why I refer to, I mean, the heuristic argument, so you simulate the system where you have, for example, 10% of the stake that’s not doing anything, 50% of the stake that’s participating and then you have 40% that’s malicious, and then when what you try to do with a malicious participant is you try to say, “Okay, let’s say that I want to revert a transaction in a specific block, so I can start earlier and I can edit later.” How often I’m I going to get a series of block creation rights and endorsements that will let me create a chain with more weight than the other chain.
So how often is it that I can catch up to a chain which has a hundred endorsements. And if you do when they call a sampling on that, long enough, you get some indication of how fast these things decay. And having endorsement makes these things scale a lot faster than if you don’t have endorsements.
Brian: Okay. So . . . but you basically have this characteristic that a little bit similar to Bitcoin maybe that, right, you have this longest chain and it starts becoming very unlikely that somebody can create a longer chain . . .
Arthur: For me, it’s not longest chain, it’s total number of endorsements. That’s the way.
Brian: Yeah. Okay, okay. So it’s like chain but with this, yeah, added endorsement, I mean, the endorsement is purely a subjective thing that let’s say I as an exchange will take into account if you deposit some TZs on the exchange and I might say, “Okay, what are the endorsement currently in the chain and how many transactions do I need or confirmations do I need until I say I credit your account . . .”
Arthur: You don’t count confirmation than blocks. Either you count confirmations than endorsements. And right now, I think the recommendation is wait 30 blocks because there’s still better numbers, which are pending, which are based on confirmation. In practice, I think, yeah, given that every blocks has 32 confirmations, I think, in practice, after a couple of blocks, you’re probably fine, but I think it’s important to wait for these numbers.
Meher: So both Brian and I have spent significant part of this year working to build a validator for the Cosmos Network and in the Cosmos Network, that’s also proof-of-stake, but Cosmos has the property that when a block is produced with the set of transactions in it and a set of 366% of the validator set, signs off on that block and if I’m a user and my transaction is in a block like that, then I see that single block, I can be like, “Okay, my transaction’s confirmed and it cannot reversed.” Like this block finality at the point, the block is produced actually.
Meher: Does Tezos have something like that or do I.S.O. user need to wait a few blocks, many blocks before considering my transaction final?
Arthur: No, yeah, you have to wait a few blocks. So basically the idea of a finality in something like Cosmos is that you’re going to get until everyone . . . not everyone, it’s too . . . but a sufficiently large fraction of everyone, agrees on everything and they’re not going to agree until they agree. So, potentially, sometimes, it can take longer for them to agree but once they agree, that is going to move. Whereas here, you’ll get some of a tentative agreement, they’re like, “Well, it looks they’re starting to agree,” and then you wait a few blocks. But the thing is like what’s the difference between finality and something like a 10 to the minus 9 probability of reversion if you wait for certain amounts of blocks.
So for me, I don’t see the finality as supposed to waiting for a few blocks to be that big of a deal. What does seem more important to me, and to the benefit of Cosmos, is that Tendermint is a . . . so Bitcoin or Tezos, they’re both synchronized protocol whereas you can do partial synchrony. With something like Tendermint, which means essentially that in Tendermint, you can afford to go as fast as you want and then you won’t get to go that fast because maybe you’ll have network delays or attackers that delay, so maybe you’ll take longer to reach your consensus but there’s no harm in trying to try to get it very, very fast. Whereas in Bitcoin, for example, you have to set 10 minutes between block because you don’t really how much an attacker can delay blocks and so you have to kind of send this high conservative value.
It would be nice to say like, “I don’t know what the deal is, but somebody is trying to go as fast as possible.” And then if there are delays, I’ll go slower, but if there are no delays, I’ll go fast. So to me, not being fully synchronized, I think, is one of the main benefits of these approaches. And for that, you need something like a byzantine agreement. I mean, I’ve thinking of different chain-based algorithm and so one possibility is if you noticed that you’re missing some slots, so, for example, the first block that’s supposed to be produced is not produced and so now, you have the second priority. So if you notice that, you could increase the times.
You could say, “Ha, you know what? I’m missing some blocks. Maybe they’re being delayed by an adversary so I’m going to wait longer.” So you could do that and it’s funny because if you do that, then you become safer against attacks but at the same time, you start slowing down more when there are attacks. And so you can think of it as a continuum between safety and mildness, you can get more sluggish and more sluggish but still have lightness and have more safety. So there’s really a continuum between the two. Now, with that being said, I think when Bitcoin came . . . the two reasons for doing something like a chain-based algorithm is I think when Bitcoin came around, there was this idea that people would just like open their laptop or their computer and participate and go online and go offline.
You don’t really know who’s going to be online and offline, whereas quickly this thing has become professionalized, all the mining pools are professional. Most of the bakers on Tezos are professional or semi-professional. And so since these people are going to be available anyways, the risk of not being able to find two-third is actually lower and what was anticipate when Bitcoin was designed.
Kathleen: Well, the main argument for Bitcoin was like, “Anyone can participate in the mining process and get them involved,” and quickly it’s becoming not the case.
Arthur: Yeah. So I’m generally wondering how much are you losing when you’re doing finality in every block. And then the other problem is say, “Well, okay, but what if I have 80,000 rolls. I don’t want to just like select the top 100 because I don’t want the person who has 0.1% to do 0.1% of the blocks. But on the other hand, I can’t do byzantine agreement at this scale because there’s just like way too many.” And then you get into stuff like Dfinity where you just randomly select a large enough that you then do byzantine agreement between them.
Kathleen: It seems to be a matter of taste.
Arthur: Yeah. Yeah. At the end of the day, I think everyone’s going to be over building for the demand right now in terms of consensus and throughput. So there’s a lot of really cool science and engineering that’s being done all around. I think it’ll come down to what applications actually are needed.
Kathleen: Well, I think that is a mean differentiator for Tezos, that was like this idea of inclusivity for anyone who wants to participate in the algorithm. But I think we’re going to be a little off topic if we go down that rabbit hole.
Arthur: Yeah. No, absolutely, Tezos is not married to consensus algorithm.
Arthur: They’re dating and, yeah, and then Tezos has a wandering eye.
Kathleen: Yes. Yes, it does.
Meher: So, of course, Tezos can change the consensus algorithm, but is that something that you will actively pursue and if so, are there particularly attractive targets that you want to evaluate?
Arthur: Like I said, there’s two parts of the consensus algorithm. The first is how you select your core, the role and delegation model, in Tezos the Alpos model. I think it’s pretty good and that thing is rather solid. What you could improve, though, is the lag between you delegating tokens and then having creation rights. A lot of these lags are created for security and for randomness generation. So if you can improve these things, you can reduce this lag. Yeah. No, I definitely interested in improving the Tezos consensus algorithm. I’m reading literature when it comes out. Thinking more about it, I think the first order of business is improving what already exists in Tezos.
I think the randomness generation is an easy way to improve it using also a trick to use in integral projects is to do P.D.S.S. in order to generate randomness. So we have that in a branch but it’s not in the main branch. So adding that will probably be a good addition. I think the block time could be reduced a lot for the first slot, so maybe you can get your first slot within 10 seconds, but in the second slot, it takes a minute. So that way, you get to have a block every 10 seconds when everything goes well and if there’s some delays, it’s still very forgiving before someone else can start stealing slots. So once you get better simulation, better formalization of the consensus algorithm, would be able to tweak it and get a bit of performance out of it and then start evaluating what’s out there and what’s the best bet for Tezos.
Kathleen: But, yeah, there’s a lot of products with a lot of big claims coming up and provisional putting, it’s really hard to execute, but we keep a close eye on them.
Arthur: Yeah. But I’ll say I really like Tendermint as an algorithm. One compliment I made before is that they’re making consensus boring in a sense of like it’s really classical. It’s a really classical method, but at the end of the day, you get so much better properties. And there’s a lot of really weird and cool science being done in chain-based algorithm, but at the end of the day, what are you really buying when you’re doing a chain-based algorithm? So I think that’s really cool. Doing sortition in Tendermint like Dfinity’s doing is really cool. I don’t think you necessarily need to do it with threshold cryptography. You could be using something like P.D.S.S. to slowly generate randomness and do that. So I think that would be a fairly easy path to take. I think that’s a fairly straightforward thing to do and . . .
Kathleen: Well, yeah. So that’s like one axis which is like the consensus part of it, but on the other part is like adding privacy preserving transactions for the network and the sort of implications of that on . . .
Arthur: Right. Oh, yeah, I mean, in terms of once you start having privacy preserving transactions and when some of the stake becomes private, it gets a little trickier to let people have their stake private and participate in the consensus algorithm, because you want people to leave their stake as a sign of commitment so that you have a bigger and unlimited sets. So these people should be making rights but it complicates the matter quite a bit, so that’s an interesting aspect as well.
Brian: So you both just mentioned privacy preserving transactions in Tezos but I didn’t fully understand what exactly that means and what context that would be used to. So do you mind expanding on what ideas you have in that direction?
Arthur: Yeah. So at the end of the day, what cryptocurrencies are trying to do is e-cash, right? So most of the money today’s electronic, but it’s in a banking system and so it means that if you want to use electronic payments, you have to go through intermediaries. You have surveillance, you have censorship. You have all of these things. Whereas in cash, you have a lot of privacy, you have a lot of freedom. So can we get cash electronically, right? That’s been the dream. And one aspect of cash is really not dictated by Bitcoinn or Tezos or Ethereum for that matter is the privacy aspect. It’’s kind of the opposite of privacy, you’re broadcasting your payments to the entire world and based on your payments, you could be targeted, you could be discriminated against.
And also, I think just not having privacy hurdles, personal expression, there’s things that we want to express in the private sphere that we don’t necessarily want to express in the ledgers that’s going to be recorded for everyone to see for all of eternity, right? So in that respect, privacy is super important and there different ways that people have tried to tackled it early on, coin drawing with Bitcoin and then efforts around rig signatures and crypto note financial transactions. The most promising you can gain is basically with your knowledge, proof-of-knowledge like Zcash is doing. And so, for me, that’s the most interesting technology to deploy on Tezos, to have private transactions.
Brian: So, yeah, so you mentioned privacy preserving transaction and, of course, I think many of us will be in agreement that that’s a very important thing. And I think that brings us to another topic which is one of the main topics around Tezos, which is governance, so how actually would something like that be implemented, the governance? How would the community reach agreement? So governance was, of course, one of the main selling point, one of the main areas of focus for Tezos. So what’s implemented right now in terms of governance and are there any activities already in Tezos in terms of people making proposals or people building systems to vote or what’s the kind of state there right now?
Arthur: Yeah. No, so in terms of what’s implemented, the voting procedures described in the white paper is implemented, so it’s a vote in several phase wherein one phase, many people will make different proposals then you have an approval voting phases like just one of these proposals, then this proposal is submitted to a vote, then you have this into a testing phase and then after the testing phase, there’s another vote to prove it. So that’s the process. There hasn’t been any proposal made. There’s active development in the Gate library for Tezos and so, probably, I think what’s going to happen is at some point, one of the master branch will start getting frozen into a proposal branch and that branch will be proposed within the community and then, yeah, the idea that bakers who presents different amount of stakes get to vote on that proposal.
Meher: So basically as I understand it, there’s two phases, so one is the phase of approval voting which is, “Should we consider this proposal seriously or not?” Followed by actual voting and then in actual voting, I’m assuming there’s some form of corum and percentage of affirmative votes needed and one that’s prior to the voting process, the new client hold base will already be uploaded somehow to the network and then if there’s enough votes, you switch automatically. Is that . . .
Arthur: Yeah, so the automatic switch, that already happened on the network. The first thing the network does is switch protocol, so the genesis block in Tezos is actually a block that signs and activates the protocol which then starts. So the protocol change, that happened on a chain. It hasn’t happened yet as triggered by a vote, so that’s the next step.
Meher: Cool. So when do you expect we’ll see one of these changes, for governance followed by client switch?
Arthur: Hmm, I don’t know. Right now, I speak to different teams working on Tezos and I think right now, most of these teams are really using time meters launch to really get up to speed on a code base, really understand in details, clean up as much as possible what needs to be cleaned, add documentation. So I think we’re really in that phase now. I don’t think it’s exactly clear when there would be the first proposal, but I mean, I will be surprised if it would be more than six months, I would be surprised.
Kathleen: Well, there haven’t been any proposals to date is another . . .
Arthur: No, there hasn’t been proposals to date, but there’s an intention to take whatever it is, the master branch over GitLab make a proposal out of that.
Meher: So, of course, there’s been quite a bit of skepticism about the idea of there being a vote in a decentralized system followed by an automatic client switch and one of the issues that has been pointed out by Philip Dianne who is, I think is from Cornell, is that cryptocurrency-based voting systems weren’t able to vote buying on a grand scale, right? So if you have a normal democratic process, let’s say the U.S. election, people can bribe voters to vote in a particular way, but then there’s no way for them to verify that somebody they bribed actually voted the way they wanted them to because the voting is probably in the form of some electronic voting machine or paper that doesn’t leave a certificate of how the vote happened.
But with cryptocurrency, there’s, of course, you can build technology that allows people to prove that they voted a particular way and therefore you can have smart contracts where I as large-scale governance attacker can create a bounty where I pay XYZ TZs to people that vote a certain way and, basically, attract briber, anonymous group of people to work the way I want by paying them money. Do you think this is going to be a practical issue in the Tezos governance mechanism and how will you deal with it?
Arthur: I think this issue is really interesting and is strongest when you are trying to do one-person one-vote, right? If you’re trying to do one-person one-vote, then, obviously, there can be a lot of bribery happening and also on top of that, you have the problem of identifying people. In Tezos, the type of vote that you had is more one token one-vote and so as a result, people already have an incentive to vote in a reasonable way just based on their stakes. And so you could try to bribe people but if the decision they make is bad, is going to end up hurting them, then you would need to spend a lot of money for this bribery.
And I think, ultimately, it’s better to try and prevent bribery so this kind of economic incentives by ensuring skin in the game than by trying to offer scale votes. That doesn’t mean you can do both. I mean, there’s definitely a very more literature in cryptographic voting and what Tezos is doing is very, very simple and it’s all just a public broadcast. At the end of the day, if you don’t have something like an isolation booth, it’s really hard to prevent that person from just giving user key. And the thing is like we’re talking about really remote scenarios. We’re like, “Oh, you bribed me but I don’t completely trust you, so give me an SGX attestation that you’re going to give my money back.”
I mean, people just trust weird exchanges to not steal their money. So clearly, what would stop them from being bribed is not the lack of SGX attestation it’s an interesting economic exercise but like I would contend that people are much more bribable than even what is assumed. So really the only defense is to, A, try to align economic incentives so that bribing is the issue and mind you, you can still try to play games and say, “Hey, everyone who votes for this proposal gets newly created money. Everyone who votes against it, loses it.” And then everyone is like, “Oh, no, prisoner’s dilema I have to vote for it.” But there’s a lot of delays in these things.
There’s long testing periods and there’s enough time for people to coordinate and just say, “Well, that was a stupid vote. Well, that was manipulative,” and hard fork out of bad decisions like this. So I’m not really concerned about the practical Tezos attacks. I’m more concerned about attacks that don’t look obviously evil like a master trolling villain which look like they would be first benefit of the network but which actually end up harming the network or devaluing the network.
Kathleen: The underrated Ocaml contest.
Arthur: Well, that’s more about introducing bugs. It’s more of like . . . oh, anyways . . .
Meher: You vote for my bad proposal, I vote for your bad proposal. Like you vote for my bad project, I vote for your bad project and we have an equilibrium that way.
Arthur: Yeah, but you need to get 80% of people to vote for your bad proposals. That’s a wide array of people. The voting in Tezos is not so much about, “Oh, my God, let’s all agree to this change,” it’s like, “I want to post this change. Oh, no, how am I going to do that? I got to get so many people to agree. It’s going to be hard.” The point of governance in Tezos is that if something is really obviously good, it should go through. If it’s not, it’s going to be hard for it to change. And in some sense, it can make changes of a protocol harder. So imagine you have a protocol where you say, “There’s never going to be any change whatsoever.” We can’t change it. If you change it, that’s a scam, okay?
So you try to have a cultural taboo against it. But then people are going to say, “Oh, but we really need to change it because we have this and that and we really need to change it. What are we going to do? What are going to be hard fork?” Okay, well, if you’re hard forking, what else is on the table? And then now, you can do everything or if you have a protocol and you say, “Well, we really need to change it,” and the answer is like, “Well, of course, you can change it. All you need to do is, first, convince a prediction market it is a value of protocol and then you need to get a collection of 80% to vote for your protocol twice after a long period of testing and all this stuff.”
Then now you can’t really engineer for a hard fork anymore because there’s a viable cast for inclusion even though this cast is hard, so having some flexibility in protocol changes can actually make you more resilient to protocol changes. That’s a paradox of having formal governance. The other thing is there’s interesting projections that you use at the protocol level. So protocol in Tezos introspect into that change. So you just don’t accept anything that people send you. First of all, everything is sent boxed, so a protocol that you accept is just a pure function, it’s not going to give you access to a file system or anything like that.
The second thing is it’s a set of files, so you can choose which file you’re allowed to change and which file you’re not allowed to change. So in the Ocaml model system, it’s pretty straightforward to create a module that handles all of the token creation and token movement and token destruction, so it’s really straightforward in Tezos to have a rule that says, “Hey, you know what, you can change your protocol with a vote, but you cannot create more than 10% of token a year.” You can’t do that. If you want to do that, you need 95% of the vote, for example. So you can introduce these rules. You can go even further and say, “We’ll have a proof checker in the protocol and then unless you have a formal proof that you verify such and such properties, then we won’t accept your change.”
So there’s a lot of things that you can do to improve the governance beyond simple voting. The point of voting in Tezos is not to give everyone a voice. It’s to make good decisions.
Kathleen: Yeah. I think the biggest misconception that we come across is that Arthur and I are somehow pro-democracy and we came up with Tezos because we’re pro-democracy and pro-everyone having like a voice and a way to express themselves. Really, governance is a procedure that’s a means to an end and the end is a better way to incorporate new innovations into the blockchain. And so it can take a lot of different manifestations beyond just one-token one-vote.
Arthur: Yeah. The idea of democracy is not . . . so I think in general, political system, the idea of democracy is not to give power to the people, it’s to destroy power, because you have a lot of people who have a lot of power and instead of coordinating and making a revolution, they’re going to invest all of this power into someone who doesn’t really have any power. And so that’s a really neat way of not having power and not doing things in a government. I mean, that’s my take on it more than anything. But you know what? There are people who participate in Tezos because they love the participating aspect and maybe I’m completely wrong about it and maybe Tezos is great for reasons other than the one I believe it’s good for and that’s completely fine, there’s a lot of smart people who are very welcome to disagree about these things.
Kathleen: And that’s the beauty of having a community of thousands and thousands of people who have their own unique voice in things. So this would be very un-fun if it was just the voice or opinions of a few select folks who are coming at the table.
Arthur: I mean, your opinion is overused, but it’s strong opinion weakly held.
Brian: Cool. Well, let’s speak briefly a bit about . . . well, and first of all, on the governance side, I’m super excited to see this in real action when some proposals come and we’ll actually see some upgrades and all of that. And I think it’s going to be one of the most interesting years of experimentation in governance in the next few years and let’s see which way it goes. But I would love to speak a bit at this point about Tezos community, so there has a community emerged since the fundraiser and since the network launched. So can you speak a bit about what are some of the main players in this community, and also, what is the role of your company at D.L.S. going forward and the relationship between the company and the foundation?
Kathleen: So I’ll let Arthur take the hard question first which is what’s the relationship between D.L.S. and the foundation because I think that’s something that’s very poorly understood but deserves clarification.
Arthur: Yeah, so, originally, Tezos was developed by this company called Dynamic Ledger Solutions. It was a pretty boring name. I think it was purposely boring. And then it was developed with a team of programmers OCamlPro and so the Tezos Foundation signed a contract with D.L.S. back in June, I think, of 2017 and after that, they basically took on the responsibility to develop the project and to further the system. And so when Gevers reneg’d the obligation to do that, D.L.S. tried to keep involved, to keep the project going, but so now that the Foundation has a functional board, we’ve taken backseats and Tezos itself is being developed by many companies, Nomadic, Obsidian, Cryptonomic so . . . and there’s one that just started in Japan.
So there’s really an array of developers around working on Tezos. And I think for myself, what I try to do is meet with developers and try to sit down with them and say like, “Hey, here’s what I think about the consensus algorithm,” these type of things.
Kathleen: Yeah. We spend a lot of time evangelizing but we have no formal role within the foundation and D.L.S. for over a year, had any contractual relationships with any development job. So it’s a very interesting yolk at wares reputationally, but it doesn’t have a formal role within development current day, but as mentioned before this, tens of thousands of people in the Tezos community . . .
Arthur: Yeah, but we do have a contract back in January. Yeah, but it’s been a while.
Kathleen: Oh, we . . . no, no, June. June, you said.
Arthur: No, in January, Kathleen, but not with . . .
Kathleen: With a very . . . yeah, okay.
Arthur: It felt like more than a year.
Kathleen: Yeah, sorry. It’s . . . time dilation is an issue here, but I digress, yeah, back in July of 2017 at least, 30,000 wallets were opened for the Tezos fundraiser. This represents tens of thousands of people across the world. There’s many more people in the Tezos community arguably than who participated in the fundraiser, but for the sake of argument, that’s a good metric or a good number to put our hat on. Since the fundraiser has occurred and since the board has been governed by the same people, there’s been a lot of interesting more formal and informal ways that the community has come around. One of them has been in terms of non-profit foundations across the world, notably, Tezos Japan and Tezos Korea, which have taken the mantle of evangelizing and creating meet-ups and whatnot.
Arthur: And baking classes.
Kathleen: And baking classes and really getting into the roots of the technology. So we see a lot of strong presence in Asia and strong presence in the U.S. and in Europe for interest in Tezos and Latin America as well. Tezos results are pretty big baking cohort.
Kathleen: Yup. And that’s really the strength of the network, that’s something that can’t be easily either disbanded or replicated. So we see that as a true thing for Tezos is the number of people who have shown an interest in this technology.
Brian: Just to clarify with this, so you mentioned, I mean, of course, D.L.S. was the company you founded and you said they’re working on Tezos and you mentioned that D.L.S. had the contract and was working for Tezos foundation but not anymore. So does that mean, at the moment, neither of you has a formal work engagement on behalf of Tezos and you’re just working on your own time or what does it look like at this point?
Arthur: Yeah, pretty much. We’re working on our own time.
Kathleen: I like the term funemployment, but, not formally working sounds good, too. Yeah.
Brian: And does the idea that down the line, are you planning on building D.L.S. into an organization or building out a team to work on Tezos or maybe starting, I don’t know, different types of projects or building things on Tezos or what are your long term plans?
Arthur: No, no, so the agreement was that D.L.S. itself would be acquired by the Tezos Foundation. And you mentioned what they’re going to do with it, but that doesn’t happened. We haven’t made money yet, but we have a pretty comfortable lifestyle, so we’re not in any rush.
Kathleen: Yeah. I mean, I think just logically, Arthur and I hold officer positions in D.L.S., I’m the C.E.O., Arthur’s the C.T.O. Moving forward, I think it makes more sense for me to focus on the application layer, for example, and it makes sense for Arthur to focus on the protocol layer as he just outlined. He has many ideas about it. I have less conviction about what types of libraries are to be added and what not. So in general, like our natural interest lead us to separate at this point. And so I look forward to doing my next thing, going to do his role with Tezos whatever he winds up wanting to do. But the logical endpoint for our association with D.L.S. has always been the launch of the network that was robust enough, that the foundation can control it, so holding to that, I guess, milestone. It doesn’t really make much sense for D.L.S. to operate much further.
Meher: So, you mentioned earlier on this show that you have a put option with the foundation which means that once the network is functioning well, maybe, even better than today and it has met certain metrics, then D.L.S., company can be sold to the foundation and then you as the promoters of that company will receive 10% of tezis and the percentage of the fundraiser proceeds and thereafter, so that you can form your own other companies to either focus on protocol, development or application development and this will be completely independent of the Tezos foundation.
Arthur: Yeah, exactly.
Meher: Okay, okay. So Kathleen, do you have a particular application level project in mind that you would want to pursue, that you feel strongly for?
Kathleen: Oh, yeah. Well, I think the problem to having blockchain technology adopted broadly construed is that many people don’t know how to interact with the blockchain. In particular, smart contracts seems to intimidate people and rightfully so. It’s very easy to shoot yourself on the foot. And so one thing I was thinking of is like, “Hey, there’s a bunch of different used cases that everyone use on panels in different conferences.” The one that I find to be the most engaging is online video games because I don’t think it’s a coincidence that one of the most popular applications that’s veered to use Bitcoin was a match with a gathering exchange.
So these people have sort of a natural disposition towards using digital assets first. And so I want to focus my efforts on understanding how people might interact with smart contracts and it makes sense to that end to use video games, the hook for building up better applications and tools. And I found a really cool co-founder. Hopefully, we’ll have some news over the next two weeks about the exact direction life’s shaping in, but I don’t want to jinx myself. So thank you for asking, but I’m sorry, I can’t be a little bit more explicit with my intention, but that’s the idea.
Arthur: Yeah. And I think the main contribution I can do to Tezos is keep thinking in the three directions I’ve mentioned which were kind of consensus algorithms that are going to be most useful for Tezos, how to get security in a good base and in a smart contracts if we’re going to run Tezos. And also, especially, governance, how to improve the governance model, very explicitly, the voting mechanism is bootstrap mechanism for Tezos. And so improving that should be the key, with constructivism and rules around which may end up permissible and not permissible. That’s mostly what I want to be researching and developing and, essentially, proposing to the community.
Brian: We’ve spoken a little bit about this before, but since Tezos, the original of Tezos concept was developed, of course, the blockchain space and, especially, the space for your next generation blockchains is becoming extremely competitive and extremely active. And I think also, a lot of investors in the VC’s they’ basically saw Ethereum and there was such a massive amount of money made with Ethereum and then they were all like, “Oh, no, we didn’t make any of this money. So now, we have to invest in the next thing.” And so I think because that, we’ve seen massive investment in next generation of blockchain project and many of those are working with large teams, so things like Cosmos, Dfinity, Polkadot, Algorand, EOS and many others with also lots of money.
Arthur: One of these is not like the others.
Brian: Right. Now, one of the interesting question then becomes the differentiation, right? Is it going to be winner take all or are there particular areas where a project’s going to do better. So how do you see Tezos differentiated in this aspect and do you think that there are any particular types of application where Tezos will do best then?
Arthur: So, yeah, there’s different ways to differentiate. One way to differentiate is you can be Bitcoin and you’re like, “Well, we’re the first one. We’re the most legitimate one and, obviously, we’re going to win.” And then if you convince enough people of that, then it becomes a self-fulfilling prophecy. So that’s one way to differentiate yourself. If you’re not Bitcoin, it’s trickier and I don’t think you can do it by just having better technology, especially, since most of these technologies are open source and so as long as you have other teams who are competent and who can observe good technology, who can be wise enough to not have not-invented-here syndrome and adopt it inside their own platforms, I don’t think technology becomes an advantage.
So what really becomes important is how good your community of core developers is and how easily you can improve and incrementally develop on your platform. People make a big deal about the entire developer ecosystem in Ethereum. It is certainly a strength but it’s only an application layer ecosystem, there’s not a whole lot of core developers. And so having a really, really strong core developers will really . . . personally invested in your project if you really want make it a big success. That, I think allows you to integrate the technology, and so at the end of day, I think the differentiator becomes community and governance. If you have a lot of community and a good governance model, then that’s something that’s hard to compete with.
Kathleen: Yeah. And, I mean, obviously, to some extent, we think those are strengths that Tezos, so we’re . . .
Arthur: There’s a bias here.
Kathleen: Yeah, there’s a clear bias here, but in general, I just think if we look back at other projects that launched over the past years that had all our technical strengths, you have things like N.X.T. you have things like Stellar so on and so forth, and they sort of came up with a bit of a whimper because they didn’t sort of had this organic, natural community behind them. I think that’s telling in a few fronts, it’s a little bit in governance, but it’s also a bit in the message that they had around them and the myth that they had around them. So Tezos, you can say many things about it, but one thing is for certain, it got this certain grassroots, organic quality to it that allows people to really get involved in the heart of the algorithm by allowing for those inclusive algorithm. So I think that’s something, at least, gives us an advantage over other projects. And the other things like technological advances are things that Tezos was meant to incorporate because it has anticipated these things. So I don’t think . . . I mean . . . yeah.
Arthur: Yeah. It’s also if you’ll succeed by not face planting. So if you’re around enough and you stick and you don’t have major problems and you kept being used just by virtue of doing this for a long time, I think you get a lot of credibility and resilience . . .
Arthur: . . . just by doing this, so . . . and it’s not easy. It’s not easy to have longevity in this space.
Kathleen: It’s tough because a lot of the narratives around other projects really start around with a promise to deliver and very few of them actually focus on what’s there today. So there’s this romanticism around what people say that they’re going to do, that drives a lot of invitation for comparison, but if we look at what’s actually shipped, it’s a bit of a murkier territory.
Arthur: It’s also development priority because you still have efforts to make and at the end of day, if your community spend a lot of time developing solutions for getting the minute transaction per second then it turns out no one needs it, it’s like you wasted a lot of time whereas if your community developed, I don’t know, for example, all solutions for having more privacy in your transaction and it turns out that a lot of people want that, then you end up having more staying powers because of that.
Brian: Cool. Well, thanks so much for coming on. It was really a pleasure to speak again about Tezos and to hear a bit an update about the project and it’s been fascinating to watch how the projects has developed and the ecosystem has started emerging since Mainnet launch during the beta launch. So, yeah, thanks so much for coming on. It’s a pleasure.
Arthur: Thanks, Brian.
Kathleen: Thank you for having us.