#197 Dan Larimer: EOS - The Decentralized Operating System

Transcript

[Music] this episode of epicenter has occupied the ledger nano hands the hardware wallet which sets the new standard security and usability get it today at leisure while calm and use the offer code epicenter to get 10% accrued hi welcome to episode of the show which talks about the technologies project start observing decentralization and the global blockchain revolution my name is Judith handkerchief and my name is Baron prevent rain we heard today is Dan Larimer anybody who's been around the

block since paper for a long time probably has heard of Dan and no sedan or had certainly heard of projects that he has been involved in so he is the guy behind pictures pictures is one of the first projects that was trying to do something more sophisticated with blockchain and simple grunty use cases I think probably start around 2013 but we can get into that in a minute and then a team right so it also was a key part of co-founder and key person kind scheme and of course teammate many will know which I think they're probably today one of the most widely used kind of non-financial use cases for blockchain

and now he oasiz last thing years is another well decentralized operating system they call it but we can get into a bit you'll see the crowd tail in just recently and they raised a enormous amount of money having about 200 million and describes it actually keeps going on for almost another year so there will most likely raise the biggest crowd ever at least you know until the next one comes which probably not going to take very long but certainly an enormous crowd he also is also the CEO of block one which is the company have behind us so yeah thanks so much for coming on there then thank you for having me it's good to be here

so yeah you've had a long journey in this space but maybe need to started beginning how did you originally learn about octane Bitcoin how did you become involved in the space well a long time ago I started looking to question everything my life to find the truth in everything and that started me down the rabbit hole of free markets and Austrian economics and Ron Paul and all that I realized through that journey that I wanted to create systems that would actually give us freedom that were entirely nonviolent so I've made it my mission in life to find free market solutions for securing life liberty and

property and one of the very first things that you need to do if you want to secure your life liberty and property we need to have a money that's not controlled by the people who can print it and be base it and and use it to enslave us so I started trying to find alternatives to gold and silver because they were just not very easy to transport and that's when I discovered Bitcoin way back in 2009 when it's possible to mine entire blocks on a average PC so I've been in the space for a really long time in 2013 shortly after Mount GOx had their US bank accounts seized by the US government I realized

that all the exchanges were a vulnerability in the crypto space and that there was a very real possibility that the government's could shut down the exchanges and then that cuts off the flow of money in and out of cryptocurrency so that's why I set out to create bitshares a decentralized exchange with the primary feature being pegged assets that could be tracked the value of gold silver dollars yen and then can be used to trade against the cryptocurrency so those who need price stability would have it in the process of building and decentralized exchange I realised blockchain technology just wasn't up to the task Bitcoin ten-minute blocks is way too

long for trades the potential for blockchain reorganizations the usability around the count names and permissions even the fee structure in performance so all those things had to be addressed so over the course of two years 2013-14 and I guess 15 I created enlarged bitshares one and bitshares two and this year's was the first one first blockchain to achieve tens of thousands of transactions per second on a live blockchain just know it's distributed around the world so what I've been doing for the past several years is really

pushing the envelope of performance toward real-world use cases but yours is also one of the first block chains to have named accounts and built-in governance for self funding of new proposals funded by the blockchain people actually directly hired by the blockchain to do work that allows us to repurpose all the money that's been wasted on mining and toward actually doing work that then adds value back to the underlying token so that's what I did with with bitshares but bitshares still had the trouble of mass adoption most people is really hard sell to

convinced them to take their money and put it on this risky blockchain platform it still suffered from the problem of transaction fees you have a decentralized exchange the charges you've every time you create or cancel an order even if it's not filled and that was a roadblock to adoption so after I was working on bitshares for a while we started right out of money to fund development and we were in the blockchain recession so I had to come up with a plan to onboard users to get viral marketing and discovery and that's when I came up with the idea of a

social media platform on a blockchain a platform that would reward users for producing content and then the content would drive organic search results to Google and on board users users wouldn't have to any money into the system there's the first block chain that realized that there you can contribute work and labor in addition to money they're all forms of capital that add value to the underlying token so steam was an exercise and massively decentralized budget allocation we wanted the ability to have the masses allocate the block rewards that the billions of dollars that currently go to Bitcoin in theory

and miners to allocate those among content producers and in a very decentralized way we wanted thousands and thousands of people every single day to get rewards and that meant decentralizing the budgeting because under bitshares all worker proposals had to be voted on and get everyone to agree on it was a process that is very difficult very political and people just couldn't process that so we had to move the decision-making authority down to a much lower level so that individuals with an upvote can allocate some of the public money and so that's been very successful steam it has become I believe

one of the top 2000 websites globally in less than a year and it's helped people all around the world get into blockchain and it's actually taught me a lot about blockchain architecture so after building steam you know and bitshares one of the things I I realized do they have a lot of things in common and a lot of other applications could benefit from having the same account systems account recovery and certainly the performance that we've that we've seen with these with these two block chains diamond bit shares are both industry-leading performance they've got by transaction

volume more than 50 percent market share in the cryptocurrency space so they're the heavyweights and actual blockchain usage with respect to steam we had to make it so every transaction was free because people don't want to pay to upvote it I want to pay to post or comment so that was the the other major innovation with steam so so now I'm moving on to ES and ei OSes is bringing it all together to provide a programmable environment where anyone can build applications like steam or bitshares so that's a very impressive resume I think anyone listening to this can definitely appreciate the amount of work that you've been doing at these

last few years since first dragon starting into Bitcoin in 2009 and then starting your work on the shares in 2013 but with regards to this sort of this progression right like working on bitshares and steam it and other projects that using necessarily mentioned but like graphene what what are the common threads here that that we can see like what what is the progression right what what takes you from bitshares to steam to some other project to another project like eels the biggest lesson I learned is just because I learn and I'm ready to move on the community of people out there likes things the way they are so just like

Bitcoin fork into Bitcoin cash and theorem into aetherium classic if you want to do major changes or architecture changes to the rules like like steam took some risks with massive budgeting and inflation that the bitshares community was based on deflationary model and didn't like it the few times I tried to change the chairs to add the limited inflation to fund ongoing development so there's this once you have a community and critical mass these things have a life of their own people have an interest in the way things are and there's a resistance to change so the time to move on to a new blockchain

is when you've learned enough that you can't move the community along with you and people want the things to work the way they they are and so you create something new and you allow a new community to form and then the market will reach consensus and anyone who wants to can sell the old token and buy the new token and it balances out everyone gets what they want so that's the free market at work in resolving the super high level consensus over very difficult questions because it's speculative who knows if the new ideas are better than the old most people aren't living and breathing blockchain 24/7 I haven't experienced it from the developers side as well as from the user

side so it's it's a learning experience and sometimes you have to pull the steve jobs and eliminate the floppy drive and the serial ports and the CD drive right sometimes you have to do that and a lot of people don't want to let go of the old legacy stuff yeah that's it that's the fascinating answer and I can I can see that being you know as fun as they're kind of having these visions about change and right and then justice community and dent and they like the way it is and that then that's kind of fiction but so so looking back now what's going on with peaches today is that project still lies that well do people actually use that decentralized

exchange and audio assets on there that gets real usage and traction it shares is gaining tremendous traction without my involvement except for emergency situations to to fix things but yeah it's running on its own yeah since I left bitshares it's only really gone up in price so and same thing for steam since I left steam it's only gone up in price so maybe it's a good thing when I yeah Satoshi left Bitcoin it went up in price so yeah that's a sign of a mature decentralized ecosystem that's no longer dependent on its on its founder and and when it comes to creating tokens selling

tokens exchanging tokens it creating tokens that are legally compliant with know your customer and restrictions on which assets they can trade against bitshares is still unrivaled in the space and and now with the increased liquidity that you have on bitshares token and higher valuations technologically I think bitshares is a better platform for doing these icos than aetherium it's just people don't know about it and it's not as well integrated into the exchanges out there but from a technology perspective bitshares is handling through puts two or three times higher

than what aetherium maxes out at every single day so it's it's really making a lot of progress a today at transaction volumes going through that which are about triple that of adhering yes and every single day and the primary use case that means you mean oh right there's especially icos a lot but people use it for a bunch of key centrist applications in early stations up so what are people doing on Vichare set holy bloater know in icy OS on bitshares there's people that are doing actual securities and slide things on this years people are doing remittances and

things like that so it's this years is proving one use case steam proved another use case and both of those use cases could benefit from the addition of a customizability programmability and that's why I'm creating is so I'd like to come back to this to this idea that you were able to build these projects and then take a step back and the projects continue to have a life of their own when looking at right now we're in a period where there are many many blockchain projects emerging every single week new icos coming out every

single week would you say that this is a property that is desirable for when when looking for projects that could potentially be successful and if so are there other properties that you think people should look at when evaluating whether or not a project has long term viability well there's certainly a lot that you have to know in order to evaluate whether these things have long-term viability I see very few token distributions that I think have sound fundamentals behind them and that the biggest challenge in the space is everyone including the experts has a lot to learn there's so

many different disciplines involved everything from economics to game theory to software engineering and there's so many different philosophies in play to all these things so I I certainly believe that there is a lot of i SEOs are in token distributions are people that have maybe good intentions but they just don't have the experience of years of building these things and so they're they're repeating a lot of the same mistakes or they're throwing tokens into things that don't need tokens or they're making things decentralize that don't benefit from decentralization and that's

that's the biggest challenge in the space is there's a lot of theoretical cryptographic anarchists without software engineering principles and that's that's the challenge and most people look at the marketing of all these projects and they all sound the same they all sound like they're doing the same thing so the details between what makes a good project and a bad project are very very hard to tell for me from the surface great I definitely want to get back to this topic and and you a little bit about your Paulson what's you know what's a good idea how this one properly do this in your experience but just one one more

question on on this topic of you know moving on to different projects and that kind of evolution here so do you think it's because people I think people have to question it where you know it's not now you're doing yours you know are you going to go to the next thing next year or two years so I guess the question here is your one how do you think about that but maybe also a valid answer is that that you should be at a point where that does matter or how do you think about this question I've I've made long-term commitments to block one a large part of moving on in the past was you know big shares running out of money that's unlikely to be an issue with es e OS is something I'm

building so that I can build future applications on it it's designed to be extensible programmable and high performance building communities is a lot of work starting over with new block change is not something I do lightly yeah I do it only when there are intractable intractable problems with the with the underlying foundation and gos is built with so much experience from the past several projects we've got such a great team working on it yeah my next project will be built on EOS not instead of es because because I'm

trying to create so I want to eat my own dog food I'm creating these products for myself and as long as gos can evolve with its Constitution in its voting and the es platform has this mission to be a a platform that enables developers to build the apps they want to build in to do so in a general-purpose way whereas steam had a very narrow focus on social media and in its budgeting allocation strategy ES has a very very broad focus and it incorporates the philosophies that are compatible with long term sustainable growth so I don't I don't foresee any need to move on from us

because E is can adapt to enable me to do whatever I need to do on top of it so let's let the movement move on to EOS then so some have compared us to I guess a decentralized operating system that would allow developers to much like you would on like the Android SDK or the cocoa SDK on Mac build applications allowing you to easily access the features of that operating system and in a similar way I guess EOS is building sort of an operating system for blockchains where

developers can build applications and easily access some of the features the core features of up the underlying system which would be I guess the computer which has you know probably we would probably compare aetherium more to that layer of the stack so can you expand on this analogy and perhaps explain how the two compare so if we were to compare for instance if I want to build something like steam it and I have a choice between using EOS and I have a trick to using etherium as a developer what would that look like for me well for starters it's not possible to build steam it on aetherium the it's

just too slow there's too long a delays users would have to buy tokens and maybe they'd have to constantly buy tokens in order to continually use the platform so all those things make steam it steam it's something that cannot be implemented etherium likewise you can't even implement bitshares on aetherium I know you have things like ether Delta and other aetherium exchanges but all those exchanges do not have the same behavior mechanics of a centralized exchange in from a user experience perspective and that's because you're limited by a fees performance blockchain reorganizations so that the primary reason we're creating a OS is because

the design and architecture of aetherium fundamentally does not support the applications I've wanted to build so my primary test case for iOS is can I build something like Steam and like bitshares on ES with while gos being general-purpose so to explain like the difference between them and why we make the operating system analogy versus the computer analogy and maybe maybe this general purpose notion maybe expand on this general-purpose machine well a Raspberry Pi or a microcontroller is a turing-complete computer that doesn't have well microcontrollers better example it

doesn't have an operating system on it technically you can program it to do anything but it's got limited resources and you've got to deal with all the hardware yourself in this case we're talking about the hardware being the cryptography the file systems you know writing to individual sectors and so on and so forth you don't get databases you don't get accounts you don't get all these things you would expect from an operating system and in particular most microcontrollers you know don't have multiple cores they don't have all talking from threads so you don't have scheduling and governance and all these other things that you would expect so AOS is an operating system because it's doing more resource management for you

it's dealing with the complexities of managing the disk space and giving you a high level database with sorted indices on it it's managing the account system giving you permissions in groups and things like that it's managing the scheduling across multiple threads giving you the scalability that you need to add the platform so just just to stay on the subject for one second it's a kathiria if you compare sort of aetherium for the Raspberry Pi and EOS to the operating system what would prevent someone from building something similar to EOS which which has all this all these other functionalities the scalability the the increase throughput

on top of aetherium why is that logical stack doesn't work for starters the theory would have to change their fee model they'd have to change their consensus algorithm even Kaspar hybrid uses proof of work for the short term consensus in Casper for the long term consensus so there is so many things that a theory we need to do and then of course you'd have to increase your throughput do I use the analogy of a road you've got the speed of the road and the number of lanes on the road and etherium has got a single lane road that's very slow speed and with lots of

potholes and POS is a multiple laying superhighway with high speed limits now if you can go parallel to increase performance but going parallel to soon is overhead associated with parallelism and there's some things that you can't do parallel like exchange order books so you need to have high sequential throughput as well as parallel throughput so anything on the etherium roadmap even their most recent plasma does not address or enable developers to build apps like steam it or bish airs on etherium so when it comes to general-purpose

right so you also brought at that point is is your general purpose in the same way that your miss general purpose and that is extreme complete scripting language yes we use webassembly which is an industry standard with support from Microsoft to Google and Apple and and others and webassembly is designed to provide a trusted environment to running high performance applications in your browser we're now running it on the blockchain it's it's sandbox and we added the limitation of how long it can run so that people can't create infinite loops so if they're your technical II not turing-complete because you can't do

infinite loose you eventually run out of gas but the same concept applies is that you can program anything on ES and the difference being that when you want to communicate between contracts you can do so asynchronously or synchronously and contracts can run in parallel and you don't have to run every contract on your local node if you don't want to you can just run the subset of contracts that are relevant to your business for example steam it was operating on a OS it would not have to run the bitshares exchange contracts because those contracts aren't relevant to the social media consensus and that really

facilitates likewise the exchanges wouldn't have to run everything they'd only have to run the currency contracts that they're supporting and that gives a lot of benefits so maybe this is a good point to speak a little bit about the chemo but because if you speak about okay infinite loops so how and there's no gas right no fees how do you handle that these block producers use a wall clock time which makes it subjective if a block producer decides to include your transaction that means they ran it and it finished and they are basically saying it finish fast enough or to be included so the block producers decide if it takes too long as well as all the

pool nodes right when you broadcast the transaction to the network every full node attempts to execute it if it takes too long it rejects it at the peripheral so the block producers don't even receive transactions they've already been pre-filtered if they take too long to execute but once they're in a block we know they they completed and in the blockchain moves forward and if any particular block producer is misbehaving say they they generate a block that has a transaction that takes a full second to execute they'll get voted out and they lose their their reputation and their income stream from being a block producer so I'm kind of curious about this because

you know if it's about performance but then you have to run the transaction first to see how much you know how much time it uses for this not need to loop etc doesn't that create a bottleneck when it comes to throughput well there's there's two aspects to performance there's the speed of your virtual machine and with webassembly yeah in just-in-time compilation we can run 50,000 transfers per second which is over ten times faster than what you can do with the fastest aetherium client for doing transfers so trying to compare apples apples here how long does it take to do a chance for operation executed in

a smart contract ten times faster or sequential throughput the other aspect of performance is how many things can you do in parallel and that's where yose shines these transactions can be processed and filtered on many different nodes in the network and then they can be run on many different cores on your computer so just because that increases your performance this episode of epicenter is brought to you by ledger makers of the best hardware key security solutions on the planet but the lecture is more than just a hardware wallet it's your path to eternal bliss and happiness and peacefulness do I look like I'm losing

sleep I am but it's not because I'm worried about my cryptocurrency my big horn on my ether nuts because I use a ledger ledger devices for multiple crypto currencies like Bitcoin e 2zii cash and more and you can even secure your ERC if your tokens with them or you can ask the security support from ledger to some of the wallets you already love and use like electrum copay my ether wallet and others all your keys and segregated accounts are derived from one unique seed seeds are generated on the device and are never exposed to the host computer so when you make a transaction your ledger will present you with the details and kindly ask you for your

confirmation before signing how is that so the best choice right now for anyone looking to invest in security is the ledger nan OS it's a keychain size device that fits in your pocket it has a screen and buttons and connects to your computer or Android phone using USB look if you're holding crypto and you're storing your keys on your computer on your phone or worse in exchange you know that's a disaster waiting to happen don't be the person that loses their keys because they were careless with them so don't wait any longer secure your Bitcoin secure easy cash secure ether go to ledger wall calm and get your ledger nanomask today we'd like to thank ledger for their support of epicenter and so as their if I if I have one sought use an application on yours

but let's say you know you have specific application running in subsets of networks how can you verify that what was run is actually accurate and there was no you know I'm not giving being in wrong information sure the EOS protocol all the block producers and all the full nodes can run everything and verify everything everyone else can use a web of trust of people who are running the different of the network and collectively verify that those are valid additionally every transaction is included in a Merkel tree so you can prove that a particular

transaction was included in the blockchain with only following the block headers so kind of like a check if you've got a cash check with the stamp from the bank on it you know the check cleared and you know that you had payment you might not know the balance which would be the state but you do know that the check went through which means that you did receive payment from someone and that proof can then be used for other things there is a concept in in blockchain you know this is a bit whole debate about state versus messaging cos reaches consensus over the messages all messages in the blockchain are deemed valid and you can prove that

a message was executed the state however can only be measured when the transaction is executing now you can't actually prove anything about the current state of an etherium contract until you're executing a transaction against that state you can prove what it was yesterday but you can't prove what it is today and so proofs over state simultaneously make things much more rigid much harder to optimize and don't actually give you a lot of the benefits that you would expect even aetherium needs to do messages that get passed in their

sharding proposals passing messages to other contracts which then give receipts which then you verify the receipt is the way that they have to do sharding and so gos gives white clients the ability to verify transactions without having to run everything and if you need to query the state for whatever reason you want to know your balance you can query multiple nodes multiple independent sources compare them and es has another F effect to it everyone who's participating on the network with every transaction they sign they're also signing the hash of the Constitution and

the Constitution is a legally binding agreement between the users which allows users to go for arbitration and hold users accountable for certain rules and expectations on behavior so if you're using a service provider to query state and they return to you a signed statement that this is what the state was at the time you queried it and it's then later proven that they lied about it you can hold them accountable before arbitration for any financial damages you incurred as a result of that and so that's a very practical trade-off between performance and security and usability

one of the biggest differentiators between iOS and aetherium is that we're aiming commercial-scale big applications the the Facebook's the exchanges the social media sites prediction markets all these things that are happening on a massive scale of millions of users anything operating on that scale is not going to be running on your home computer over your home internet connection it's just it's just not a viable approach as well as the fact that many many of these applications are completely legal where there's no threat of government shutdown of the entire network now there will be safe places around the world where you

can run these applications in data centers with high bandwidth connections and that gives us decentralization scalability and usability both and those are all factors that are incredibly relevant for taking blockchain mainstream let's let's seek it everything about the piece right because I think that's also nature sinking right so let's say anythi room right I want to send some transactions basically means I have to buy some meter and pay for the gas now with different India so if I understand it correctly and I think this is the same thing in theme is that you can buy some eels but then you don't use the yield directly to pay for transactions but

that basically did yes you have a kind of stake and then you get a certain number of transactions that you can allow to do for free so there's there's two aspects to this yes the very basic model is the copy scheme in which case users have a small balance just a couple dollars and that's enough to allow them to transact as much as any reasonable user would expect to transact thousands of times per day in that you don't even have to own it you can have it delegated to you so if you have one wealthy user say hey I'm going to allocate my

bandwidth to you if I'm not using it and that people can use it for free and then when cos were we're making it so that well the developer the you know Facebook pays for their servers you don't pay their server provider micro payments every time you request the page from Facebook or every time you like something on Facebook when you're using steam it you don't pay Amazon for the hosting every single time you do something the app developers need to monetize their applications through some other mechanism other than micro payments on how they happen to implement it it's the fee structure on a themes

entirely unpredictable it can go up and down you eventually you run out no matter how much aetherium you start out with you consume it and then it's gone but uh neos you can transact forever at a slow rate based on how much you have and as an app developer it's cuz it's the difference between renting and owning the infrastructure behind the app so we all have to worry about the network spamming the rate-limiting algorithm means that even if you have an IC o---- that's got a you know one window during which you can get your transaction in it won't be possible to

flood the network to such an extent that individual users won't be able to get their transaction in now to me it seems like let's say as a certain time I have to use it a lot I need a lot of transactions right so my demand is high but later below and so this seems to be kind of a problem here is it possible but less or let's say I have some euros I take it but I'm actually not using your transaction could I sure sell those is that possible it kind of works like your internet service provider they give you a certain minimum guaranteed bandwidth but of course you can surge to higher capacities if other people aren't using it so your if you own 1% you

allocated 1% of the bandwidth only when the networks 100% saturated if the networks not saturated you can use up to 50% of the available network capacity for whatever the threshold releases certainly a multiple of what you're using and since everyone is doing this you're going to surge at a different point in time than other people it means they'll sort of balance out and so under normal operating conditions everyone will actually be have access to more capacity than they need to it's just the congestion control the anti-spam that really thought was you back if the networks being flooded but

for most people it's like having an unlimited data plan that's actually technically it's limited but you never feel it cos as you mentioned uses the delegated proof of stake protocol could you just give us a little refresher about how that works and how it compares to say other proof of stake protocols proposed with it eerie my Kasper all right well for starters there's several different aspects of a consensus algorithm you need to decide who's going to produce a block when they're going to produce it and how are you going to determine that it's irreversible and these are all separate problems proof-of-work solves it by saying we're going to have a lottery everyone's going

to compete to do as much work as possible and first person to find the solution that determines both when the block is produced and who gets to produce it and then you have the rule of well after you get so many confirmations it's deemed irreversible under yose everyone who has a stake in the system gets to vote for as many people as they would like there's there's actually a limit to just prevent abuse but for all practical purposes you can vote for 30 plus different people to produce blocks and these block producers work just like the mining pools in aetherium and Bitcoin now I like to think of Bitcoin in

aetherium is delegated proof of work the people who are producing a block are different than the people doing the voting the mining and so once you know who the block producers are it's just a question of when do they get to produce it well on delegated proof of stake the consensus algorithm allows all the mining tools to take turns every three seconds someone else is scheduled and no one else can produce in that slot and no one can produce at a time other than their slot which means we don't have contention we don't have orphan blocks and we have very predictable one block every three seconds and in theory the

mining pools could do the same thing except for the consensus algorithms of those networks don't allow it and how does this compare to Casper well Casper doesn't actually solve the problem when does a block get produced and who produces it instead it leaves that as an abstract problem for and in the case of a theorem it's relying on proof of work to solve those two things what Casper does is it creates checkpoints after 100 blocks which is a really long time by that time it's long considered irreversible by the proof-of-work standard so Casper is not actually adding any securities not adding any performance at least any

secured the near-term it doesn't protect against short-term chain reorganizations that would cause double spends from 51% mining attacks or any of those things it's just longer-term long-range attacks is the only thing that Casper is protecting against in the long term so every blockchain relies on voting to determine what's going on it's just a question of who's doing the voting in the case of Bitcoin when there is the unexpected Forks you had the mining pools vote to pick one of the chains to win and then it happened even with sig Witt you had a bunch of the industry leaders get together and they all sort

of agreed what's going to happen and then now we've got sig Witt in any system that has a different group of people voting from the people who are the beneficiaries has the incentives out of alignment and it basically puts power it's sort of like the the Federal Reserve voting to determine whether or not to debase the dollar the people hold the dollars have no say in it or the block producers miner is voting not to get rid of proof of work because they have financial incentive to keep proof work and to keep the block size small to raise transaction fees all these things are a misalignment of incentives so delegated proof of stake works kind of

like a company where the stake holders pick a Board of Directors and they take turns producing blocks my sort of sense is from you know trying to understand a little bit how this works is when you have delegated from sake buy this is literally going to be Kings because some kind of humans right that you basically say okay you're going to validate or you're going to delegate and produce those locks on my behalf and then if they don't perform well right you would basically withdraw your voting power from them right and they would have set revenue right so I think one in this you know in contrast to I think both to caspere attempts or you know 10m in size to where the idea is more you have a

secure deposits and and that there's a sort of crypto economic aspect of security and if they don't perform well that they essentially get penalized and that then those for example proofs can come from anybody or two actors here producing a block doesn't mean that the blocks accepted it still has to be valid so you have an infinite number of validators producing is just sort of a proposal of a block hey here's a block I think it's valid and as everyone else agree that it's valid so block producers don't have the power to create invalid blocks they don't have a power to change the consensus of the community now if you think about it in reality all these

consensus systems are really consensus among people we're just using software to accelerate the rate at which we can reach consensus and delegated proof of stake captures that philosophy and it captures the difference the relaunch difference between a validator and a producer and they're not the same thing and and there's a level of checks and balances there the other thing is the with deepest you have financial incentive to cooperate whereas under these other systems like Casper or mining you have people producing blocks with no transactions in it that doesn't happen on Steam or bitshares because

those people would be clearly running non-standard software may be clearly harming the network and I actually don't have anything to gain by producing empty blocks whereas proof of work and these other algorithms they make more money when they produce less and if you prioritize people based only on the size of their bond now you're once again changing who's controlling the network versus who supposedly is the beneficiary who has an interest in the network because there's a lot of subjective things that cannot be measured by code and it caused the forfeiture of a bond and the people like early on and seemed

many people don't know this we actually had a flat in condition if a block producer produced two blocks at the same time stamp they would get voted out and they could forfeit all their staking balance and all their coins are paid to the staking balance so they couldn't just take their money out and save it so we have that but the reality is that there are any number of non malicious reasons why a producer might inadvertently produce two blocks at the same time for example they're trying to be very reliable they have a backup node that's scheduled to kick on automatically when their first node goes down and that double signed the block when it wasn't intentional purely because of network communication or any number of things

what we found was that flashing conditions disincentivizes good people from participating because it has a very high risk associated with it and they're actually not needed the loss of future income the loss of reputation the fact that the block producers are known vetted individuals means that they can't do double spend attack because everyone will know exactly who to go after for the double spend right that's fraud it's against the Constitution it's against the contractual agreement so you can go before arbitration and resolve the issue so these bonded approaches the slashing conditions they look really good from a

mathematical game theory perspective until you apply actual human realities to the situation in which case they break down under the vast variety of things that can go wrong so you mentioned the Constitution let's take a few minutes to talk about governance and how it's applied in yeah so the way that I see it there are I guess two levels of governments that you you that would be desirable you want to have governance at the protocol level so that you can ensure that the protocol evolves and there could be changes that are made if necessary so for instance you know if changes need to be made to the consensus algorithm of the sort of thing and then there are governance

there's governance that needs to occur also at the application level where application developers and communities around application can also decide when this application needs to evolve or for instance if there's malicious code you know how we revert back and can you talk about these two different levels of governance and how they operate and so the first level governance is I it's kind of like the Constitution the source code that drives the consensus the drives of software that all nodes are running that's the lowest layer and the stakeholders through their elected block producers get to decide when to hard fork the network or upgrade the network one thing about EOS is you don't

actually get a fork where two chains go in different directions instead the entire network agrees that's time to upgrade and the nodes that don't know how to run the upgraded code shut down automatically and the network will actually wait until only the block producers who have indicated that they've got support for the hard fork so you can have a hundred percent support so you never have any miss blocks even when you're upgrading an example of how successful this has been is that steam it has been constantly evolving with major upgrades about every three months or so it's actually gone through eighteen different upgrades without any

Forks being created with very seamless without any problem that's one of the phillip philosophies of EO says things need to be adapt it's not the strongest that survives it's the most adaptable and no project or system survives first contact with the with the free market so long term if you don't adapt you die so es is designed to adapt with built-in governance so that's that the consensus layer then there's the governance of the applications for example if a developer creates a Dao and there's a bug in it and all the funds are stolen the block

producers that are elected have the ability to update just that one contract without actually having to hard fork or force anyone update of course they can only do that after there's review and if they see something wrong they can actually freeze accounts while it's under review because block producers on all platforms have the ability to censor transactions it's just fundamental yeah and in fact they censor any transaction that doesn't pay a fee so there's any number of criteria that can be applied to determining when to censor transaction and one of them can be hey this account just stole one hundred million dollars from an exchange

or this Dao just had a bug that inadvertently allowed someone to do it or this multi-sig contract just got compromised and everyone who is using it lost all their money those situations happen bugs happen and that's one of the things that u.s. recognizes that a lot of other platforms don't it's not possible to create perfect code there's even code that's been operating flawlessly for years can have latent bugs and you know bitshares had one of those several months ago where a piece of code that's been operating flawlessly

a very very subtle thing caused the all the nodes to freeze but of course you fix it in it and it goes on the point is that whether it's block chains or open SSL in the cryptography that we use in all of our computers whether you're Apple Microsoft or Google yeah code is not perfect and you need the ability to recover and that's what cos recognizes and we design around that and so with checks and balances producers can fix broken programs and then the highest level is of course allowing application developers themselves to have the flexibility to create their own

governance layers they can create multi things or have communities vote on updating the code for their particular application that they can either have that government or they could basically say we're going to revoke our ability to update it and the only way to fix this is to get the system-wide governance to update this contract so there's all these different layers at the blockchain for self policing and then the very very highest layer is the relying on the contractual nature of all users are legally bound to other users to arbitration and then it ties it all back into the real world it

identifies the watchings their two-track property rights that just because you have the ability to sign something with a private key whether you've got the key legitimately or you hack someone's computer doesn't necessarily mean it's your property and identity is something that's and property rights are what the systems are supposed to protect and a lot of blockchain has been taken in a very technology approach role to get property rights possession is the law not 9/10 of the law cool well I think it will be reassuring to see how this turns out I mean especially I think with different approaches to consensus and I think

we're sending out some interesting years ahead of us so I would like to now move on to discussing you know you crowd sale and some things around also that you're scoping around that so first of all good to crowd so what were what were this the kind of design requirements you had or you know what did you want it achieve in and I wanted to enjoy several things community engagement widespread distribution fair equal opportunity for many different people to get involved so that was high-level goals and then we structured it to simulate mining so that you know with mining you're spending a

certain amount of money on electricity for a certain probability of producing a block but ever on average the more people that you don't know when you start mining how many other people are going to be mining so you don't actually know what the cost is going to be at the time you get the block but you know approximately what the current difficulty is and approximately what your your cost will be so we created a system that incentivize people to contribute equal amounts over time which gives lots of people who are on you know regular paycheck the ability to put money in over a year rather than having to have all the money saved up ready to go in a

10-minute window and so those are the things so it keeps everyone engaged we wanted to have a longer period of development e EO Co software that we're creating is going to have a test network and is largely functional today so we recognize that development of block chains slows dramatically as soon as you have a live block King you can't change things give so many different parties running on it all the exchanges need to be notified you have to have rigorous testing to make sure that you don't have downtime so the rate of development falls off a cliff once you launch a

block chain so we wanted to have six months of extra development after we have a minimal Viable Product during which we can still rapidly improve and enhance it but during which people can also start building their applications under the philosophy that serious applications take three to six months at least to to build and so when the blockchain finally does launch people will be able to launch their applications at about the same time so that's a high-level view of why we structured it out over a period of a year and how it works so the way the way works is just listener who are where you

guys sold initially I think it was 30 percent of tokens of sunrise it 20 percent of tokens we we had an initial 5 7 day window where anyone could everyone who contributed got an equal percentage of 200 million euros RC 20 tokens on the etherium Network and then every every 23 hours after that there's another two million Waukesha POS that are distributed proportional to the total aetherium received each of those days so depending on how many people contribute on a day determines the price of the day and no one knows what the final price is going to be even those who contribute the very last block of

each period oh yeah so I need that first period right you guys based around two hundred million something at that and how are those options fair since then so like why have you prices been order yeah yeah we've generated approximately 300 million dollars in revenue it's constantly changing this is revenue that's not investment and we already had the money to build the product the purpose of this is to distribute the tokens as wide as far as possible we're essentially taking it from being 100% owned by us distribute it to the rest of the market that's what we're doing with

these stuff so this is an interesting point so you say this is revenue not not investment so and you guys had the money to build a product so this is and I think this is also kind of a point of relationships right because because block one is a for-profit and you know you guys face the US or we're or were an international company was incorporated in the Caymans in the Cayman Islands okay so because because that money is going to you guys so that there's no obligation either to like spend it on developing your correct you know in fact all the development of the actual software is being funded by money we had prior to the token sale and we will not be operating blog producing nodes

ourselves we won't even start the network ourselves there's a difference between creating software for the new york stock exchange and running the new york stock exchange and so we're we're staying clearly on the software development side we're creating free software we're giving it away the eos GRC 20 tokens may have no value unless the community of people decide to use our software to create a blockchain that allocates tokens one to one one of these funds what will these funds be used for if you if if they're considered to be revenue what it was the plan here well we're going to have a lot more details about what we're doing as block

1 but we're going to build applications and infrastructure to build a blockchain business so we're going to continue to advance and and build the yeoseo software but as far as the software that's required for the initial block cane launch that's funded separately from the money that's being generated from the sale I mean that is that is actually kind of a mind-boggling if you sort of wrap your head around it right so in essence you guys may end up generating I don't know 600 million or some some huge amount maybe a billion who knows it's disposed it just keeps going up like this which is essentially [Music]

sure pure profit closed very very high profit margins yeah yeah so as a company we're driven by a desire to find free market solutions for securing life liberty and property we want to build technology that changes the world and like any company Apple takes their profits and they invested in building the next great thing right they took their profits from the Mac and built the iPod profit from the iPod and built the iPhone so you know there's there's lots of things that that we can do to make a positive impact in the world with the with the profits were here I guess where there's a sort of contrast here because because most projects right the way most

projects have raised money so far you know from me theorem to to many others who calls and set cetera you know there's a foundation in Switzerland right the money is basically it's it's almost like a special purpose vehicle or something like that or the money is given into that foundation and then it's basically specified for specific use which is building that Network and and then it can only be spent for that and then euros people kind of funding that development of that but here is very different right because this is not funding the development of us right and they're not shares in block one or any other type of viability like our you know I'm not a lawyer but we've seen how the SEC has

come out about things like the DAO and a lot of these other icos they're really flirting with the security lines there and we wanted to but we want to make sure that the eos token distribution was as compliant with all the laws that it was not a security that there was no expectation for profit there is no expectation that block one would do anything to operate the network or to derive the cause of final value to exist there the only thing we're doing is producing open source software so why did you guys choose to launch an EOC 22 open and I mean is there a different choice of Enright's one has a way to give people give money you know they

generate a key pair and you basically create a kind of recommended genesis lock that then again people can use or not use when they launch it at work so why are you creating your t2202a this trader will immediately well because the initial distribution is critical to a any successful you can take this code but without the distribution you have a real problem how are you going to distribute it if you want to launch a blockchain you need an initial condition so this ERC 20 token it's about collaboratively creating a distribution over a long period of time so that the distribution is ready at the same time

as the software if we built the software first then we'd have to figure out how to distribute it and that just pushes back how long it is until things can actually be used in the public network I want to come back to the to some of these concerns because they have been raised in the community and specifically some concerns with with the Terms of Service of the sale so as you mentioned so business is not a investment it's not security nor is it a right to a token and to some people in the community in reading some of the comments online that in addition to the fact that this money is going to a for-profit company and not a foundation

that has a mandate to build the software is problematic because you could potentially run away with the buns not saying that's something that you would like you to want to do but there is some concern there that these funds could potentially be allocated to do things that have nothing to do with bitshares or that those you know the project could just drop Windell off and you guys could all be for personal reasons how do you reassure people in the community that this is in fact these funds will be used for actually like you mentioned of building applications building infrastructure building these platforms I can't make any assertions or assurances that that's what we will do with anything those types of assurances and promises and guarantees are what

create securities so the fact that we aren't promising those things is a key key factor in making sure that es is not considered a security if us were considered a security it could negatively impact everyone who's contributed to the project so okay so the way main people gave money to block one is this because I know also I think actually in some projects have I think Civic was sort of like that right it's educators like the product that you're kind of purchasing is that a similar thing or what so is so you guys don't consider it donation right the product

is the distribution you're reserving some percentage of of a pie that anyone anyone who's participating in the distribution can take the software that's free and open source and launch the blockchain so there are hundreds of millions or maybe billion dollars or financial interest out there in someone honoring one to one and it's basically creating a agreement on everyone in the market who's got money but they spent on heõs tokens to see that something happens with it but that something that happens with it will not be the block one operating it but if you want my mission in life is to find

free market solutions for securing life liberty and property and with the resources the block one has how we really able to pursue that because money is not what motivates me what motivates me is changing the world making things a freer society for my kids ending corruption ending violence those are the things that motivate me the biggest most exciting thing about steam for me is the poor people in Africa who have brought out of poverty people who can even afford the power for their cell phones who are now living a middle-class lifestyle in Africa because of the projects that I've created those are the things that excite me that's what gets me out of bed in the morning after after

you have a certain amount of money it doesn't matter having extra money beyond that so I'm going to continue to do my best to yeah it's a great free market solutions so before we wrap up here let's let's prep talk perhaps talk about the road map and how the project is being developed as you mentioned not with the Pens that are being raised in this crowd sale but with previous ones I presume then that the product is already being developed can you talk about where you're at and what's coming in the real game it's entirely transparent developed on github everyone can see all the issues that are being worked on who's working on them what's currently in

progress so if you're a developer is very easy to audit it and see the progress that's being made where we are right now is you've got a functional block king with the peer-to-peer networking code ability to write smart contracts and you know what we're going to be doing over the next couple of weeks is polishing the developer documentation creating additional tools to make it easier for developers to write these contracts on the platform and then toward the rest of this year by the end of this year we hope to have a completely functional beta which the goal is by September to have a platform

the developers can start building on by December to have a platform that's relatively stable feature complete including features that don't necessarily impact developers but which are nonetheless required and then to have five months of testing stress testing and the ability to enhance the api's and do minor tweaks prior to releasing version 1.0 of us io once the software is out there it's a race for people to figure out how to use the software to get the initial block producers to volunteer and set up and

spontaneously emerge a consensus among them about what the actual blockchain is and then from there the initial version will have a throughput of about twenty-five to fifty thousand transactions per second is what we're targeting because it's going to be a single threaded implementation of EOS but that single threaded implementation can be upgraded multi-threaded without breaking consensus now this is more of a stability first performance second approach we've designed a OS for massive scalability for parallelism by

separating data and making sure that these things can be run in parallel so it's designed for parallelism but implemented with a single thread primarily because there's more capacity than any blockchain needs that we'll be able to support with this single threaded version and long and then in the years that follow or continue to upgrade the EOC IO software with better and better implementations so that's that's the long term roadmap cool then well thanks so much for coming on that was really interesting speaking with you about yo se I'm looking forward to seeing how this project develop what's going to happen what kind of things people so of course we're going to put links in the show notes to white paper

some top CEOs website is there any other place that you want to send people to to check out the project or get involved yeah well I hope you post this on steam it and then do that sure yeah you can you can follow me on steam it as well as the US IO on steam it and sign up for our mailing list to make sure that your have the latest updates the instructions if anything comes up best way to stay informed is sign up at ESRI oh cool well thanks so much Dan it was a pleasure and very interesting speaks yeah thank you for having me yeah thanks so much for listening for once again tuning in to be a part of west of the cornet or chip and this show and

other shows unless you've become calm and of course if you initially supposed to show you can do so by leaving in iTunes reverse helps people find the show so thanks so much you look forward to being back next week