#212 Adam Perlow & Asher Manning: Zen Protocol - A Decentralized Financial System

Transcript

this episode of epicenter is brought to you by shape-shift Oh the easiest fastest and most secure way to swap your digital assets don't run the risk of leaving your funds on centralized exchange visits shapeshifter IO to get started hello and welcome to episode of the show which talks about the technologies projects and start-ups driving east centralization and the global blockchain revolution my name is frank coughlan crane I'm here all by myself today we spin a long time that I've done an episode by myself I think happened like once or twice before but I'm here today with Adam Pirlo and Ashe off the Zen protocol and it's super interesting crazy and lots lots of new

ideas to project to build a decentralized financial system so Adam and ash thanks so much for joining me today I'm Brian thanks for taking the time to meet us Thanks yeah so I spent quite a bit of time today you know kind of looking at what you guys are building and it's it's very interesting I think there are a lot of a lot of sort of key things that we have a lot of key components of blockchains how they work today you guys are doing kind of differently and it works out very interestingly so there's gonna be a lot of stuff to cover here and I'm sure we won't get to everything but I look forward to that but maybe before we get

into Zen Adam the sheriff was like how do you first get involved in Bitcoin and what has been kind of like your journey in this industry so firstly I found out about Bitcoin in um 2011 um at the time the friend just showed me it about this website and you know as he said oh you know there's Silk Road and I essentially saw oh well that's really cool that you have bitcoins there um they didn't go much on the site after that point but I was very fascinated with the fact that there's a technology that could survive in such an environment and you know I researched it I saw the economic aspects of it and I dived into it um then essentially I first started with trying

to you know help build communities I was one of the fountain like first people in the Israeli Bitcoin community then we simply maybe when I came to about another five people in Israel that knew about Bitcoin after that I was developing internally a wallet for essentially me and Nathan were building a wallet and another individual called Ellie that essentially was some sort of combination between changed a bit ocker essentially it was a one click one click social media tipping in essentially entering let's say contracts over Facebook YouTube and whatever Twitter then essentially after that we decided to move on to Zen and I can talk more

about that later I worried about us so I first thought about the coin also in 2011 and had been very interesting technology becomes new exciting then I didn't really touch Bitcoin for a long time not until I'm that's Adam actually I was in Israel and a cyber security company and a mutual friend introduced me to Adam and Nathan and they told me about this idea they'd have some protocol we discussed this we decided to go and do it cool interesting well Adam I'm curious to serve on a high level can you tell me how do you look at blockchain like what what do you think

is interesting about blockchain sure so um I think that what's interesting is it then it's for the first time we really people have a way to assert and transfer ownership of things without needing to rely on you know some trusted third party I think that's really the heart of it I think Bitcoin was like a goal and the blockchain was a mechanism to achieve that goal and I think although this may sound very simplistic I think that it's most obvious that you know the box music excel at the goal that it was initially designed for okay and and now so you mentioned in 2016 you guys started working on you start working on send

protocol what's kind of the origin story of that and in division that you guys came up with then so personally I was kind of it's very funny by sirs servant sir panda pity I was somehow found myself you know behind them whether it was color like somehow had a personal connection with colored coins or a master coin you know even aetherium and I saw how all these projects came in and went or some of them are still ongoing and essentially you know colored coins was motivated by this idea let's move some asset around but we don't want it just to be bitcoins right let's have

more assets and then you had master coin that said you know the bitcoin 2.0 the first the first go-round of this like new blockchain projects and master point said let's have more complex condition so essentially you know we want to have let's say let's say there's 20 or 30 different types of transactions you can do on a master point in Vitalik was working on that at the time and he said well I'm not had I want to have more programmability I don't want to be had this restriction of just you know let's say 20 or 30 functions that I can do um and I think that if you're anyone in that direction underneath if anything something very generalized and programmable but essentially what I think that still the focus is is you want really two things that Bitcoin

doesn't provide mm-hmm I'm not talking about like adjectives like more transactions per second so they I mean to like core things which essentially you know support for multiple assets in ownership under complex conditions and we felt that none of these platforms are doing it correctly um and in or if you want to essentially facilitate a financial system not just you know digital money but actually have a bank in your pocket you need to build something that you know this is custom designed to do that and that was essentially the motivation that we saw you know me saw in 2016 after the down hack happened we had this feeling that there was something like that could be done better for a while looking at a theorem

but then I should the Douma happen you were it was like confirmed is that okay for sure we can do something better or not it's not better with a theorem like I said each project has its own its own things that it's good at but for this specific use case of let's say owning your assets and transferring them under conditions we thought that we could do something better um in in that's how vasant reason came about okay this is good I like this definition alright so you say okay decentralize financial system you need basically it will be con has about the money transfer but then you need to be able to do multiple assets and you need to have like complex conditions and of course if you talk about complex conditions you start talking about loans or derivatives and

options etc etc right yeah sure many people would say but you can do Downey theorem right you can have multiple assets you can write more contracts to mirror basically any kind of derivative so what makes it here iam ill-suited for this so I don't want to attack a theorem in any way because I think that the the design decision there is to enable platform which which is programmable and that allows people to try to innovate in in order to be able to do that you have to you have to kind of say you know we're not going to specialize it we're not going to do any one thing good in order to leave it you know room air in the room for the other kind of like the

use cases let's say um now if you look at how with your in came about by the way excuse me for my cold umm but yeah so if you look at how a theorem came about um it was like first it was gonna be you know it's more complex scripts on prime coin and then it moved into its own thing and currently the architecture is such where you have like these these accounts and you have these externally owned accounts and internally owned accounts and that's how the whole thing works but what people essentially really want to do is they don't want to have these gaps they don't want to have a DAP that's acting like a token or adopt that's acting like a contract and just like this sort of program ability in there but I think they really want is it

again they want to own assets under some conditions um and they want to reason about these assets in that way and that's where with us you know we don't have any er c20 we actually have tokens it's a distinct object even in Vikrant actually it's like it's just presumed because there's only one coin right that let the the input and output is always bitcoins but with us we actually you know each token has like an identifier and we have tokens as first-class citizens as we call them and then we have contracts and contracts you can think of very similar to like a pate a script hash in Bitcoin except with us the you know the page script - rather than being like a one-time yeast transaction that beta script - is essentially held in the act of contract set so if you want to spend

something locked at page of script - you have to be able to validate it against a contract and the contract is the logic that will say okay you're allowed to release asunder if you know these conditions are fulfilled okay so let's let's take a step back from here to provide some context for this so I think we you know you kind of described I think quite well right this this general idea of Zen Ness is decentralized financial system and and you know define kind of what those additional pieces are that are needed so multiple tokens that the complex conditions that anything else is that that's in your view that's kind of - they're a full thing literally

let's save the I'd say the the components of it but there's a lot of prerequisites I say in there as well so no one's going to be using this if there's unnecessary exposure to risk so you don't want to replace your banker with a contract that could essentially you know lose your money by mistake and you don't want to replace your banker with let's say being exposed to assets which are very volatile - cryptocurrency maybe I'm just a normal individual you know I just want to do my banking without a bank essentially but I don't I'm not even interested in you know Bitcoin or ether any sort of crypto token so this necessary exposure to to let's say a native token is something that that I think is gonna hold is gonna hold you know the current crypto system is back

some one prerequisite is you know essentially security predictability of the outcome um and then another one I'd say is actually being useful doing that actually makes a difference in people's lives um that's essentially the whole motivation for us building an Oracle mechanism because you know it's nice to have some more contracts and everything but what are they worth if they can't you you know operate on let's say um interesting events um in the final one I'd say is scalability and the I hate to say that because it's kind of like become like a a meme already blockchain scalability but but you do we have seen with a Bitcoin where where it's at the point where if if you don't take that in mind when designing the

system initially then then it may make something bad may happen that may promote lis change the course of you know the outcome of that protocol okay very good so so we have we had this this additional kind of design requirements the security thing and of course you mentioned the Dow incident before and and and I think we see that continuously any theorem the challenges of that then to usefulness and and of course I think everybody or almost most people listening will will understand the significance of Oracle's in that context that you can basically have outside information so that some of these contracts or instruments can actually respond to events in the world and then

scalability of course that's also a perennial topic great okay that I think that gives a good context now it seems you guys we're very inspired by Bitcoin and you built this in this kind of you tx0 approach now actually maybe I think a lot of people will not be familiar with you TX o versus Hiram's model can you explain just very briefly I kind of like what is this you take so exposure what is ATMs model and like why did you guys choose the Bitcoin way well actually since them I think this is a great question too they also have ash um come on in comment about that right so um I suppose I did the UT EXO approach

is much more simple actually than a breakout space system you're envisioning token something that can be spent and split into more tokens and they are just representative of some kind of value you can split them you can consume them to make you wants the same amount every transaction puts the same amount that it was input that's pretty much it really there's nothing more than that you don't need to keep track of any kind of account balance you don't need to exchange anything through any kind of small contract you're just locking something to a public key saying okay

this isn't mine anymore on merits of analysis the accounts based system of ethereum is far more complex probably the reason if they're amended up with an account system is because they decided they wanted to be able to do general-purpose computation so they designed a theory and not to be a network that can send around assets but to actually function as a computer so once you're functioning as a computer and you have the ability to saw state you might as well represent assets as just part of this state as entries in some database so the consequence system in if there is probably not nearly as simple as a Bitcoin style system it's just not once you already have all of

the complexity of maintaining some kind of decentralized computer you might as well give the extra mile into accounts as well okay maybe I can just sort of like paraphrase that and let me see if I get this right because you guys say as a sort of primitive unit in the system right is assets right so different types of assets and then the other thing like the computation is kind of like the associative particular asset in managers like ownership of that asset right so kind of the asset stays as this like fundamental unit and like it is in Bitcoin why would the Bitcoin is the fundamental unit so it's kind of natural to just extend that a bit whereas in the hiriam right because you general

computation you can do anything and contracts calling each other there's no assets aren't a fundamental union right so you get rid of ass that's any kind of builded later in and of course you end up with a completely different architecture yeah I think that's very accurate I'd also say that um one of the things that you could get around um maybe quantum is trying to do it right now but essentially using a gaseous and not knowing what the transaction fee is ahead of time kind of would require an account approach I find it very hard to how would you how will you do you TX owes if you don't know what the transaction fee you're offering is ahead

of time so I think that's kind of like a designer coming on the theorems in ok ok so this is now again to kind of rephrases so of course in a theorem right we have two system like okay people send in complication I mean the network doesn't necessarily know how long it's gonna take right so they have to send along with it basically money or and then that gets paid to miners depending on how much computational steps it takes and of course in Bitcoin it's just paid based on the size of the transaction and then I guess material right the size of the transaction doesn't really tell you anything about the computational complexity and so with

you guys I guess you have a similar thing right where the size of a transaction isn't a good indicator of how much work it is going to be to execute that transaction exact right right so with us actually that's our I'd say main scientific contribution that Ash's done which changes that oh yeah yeah so um in a theorem you because you want to be able to do any kind of computation the designs they design 2/3 to be able to support this by having this gas system where you tell the very impartial machine to do all these constructions and each time there it

looks at the instruction it looks up the gas price for that instruction it looks up how much gas you paid for if you have enough cash to cover that instruction then it subtracts and subtracts the gas from the gas you've paid for and then executed the instruction and it proceeds in this loop now this model of giving the virtual machine a little instructions his part of the theorems architecture of being a kid I wanted to make it operate at the lowest level possible to give it the greatest possible generality we solve with incidents like the Dow and the parotid multi-sig both attacks having a very low level system doesn't

necessarily make your system very secure and if you want to be doing any kind of decentralized finance you need to be able to inspire a large a high degree of trust within smart contracts so we looked at what we could be doing to give greater security guarantees in spa contracts we're interested in language based security so instead of going with the absolute lowest level language because it's the simplest being site and actually we're gonna go with something extremely high level and it turns out when you have extremely high level languages you can actually use them to express things like their own resource costs which is very unusual probably very few people outside of academia

would ever have seen this done but we've kind of brought us into the real world somewhat so we're having small contracts that must express their own resource cost which can then be quickly verified so because we know the resource cost of any contract which can be parametrized by inputs or whatever you want it doesn't have to be fixed but there has to be some expression that you can give for it since you know how long a contract is going to take to run before you run it you don't have to do all that so keeping track of gas essentially essentially let

me just add the way I see it is that you know yeah I know order to enable like loops version is theorem the only way to do it is by implementing this putting everything under this like virtual machine umbrella and having this counter in there mmm and I think that were probably the only system that both allows you to do recursion on arbitrary inputs while at the same time not requiring this sort of counter or virtual machine to do that and that's all this F star of formal verification stuff ashes have been talking about okay that sounds cool all right so I get that you hear Matt's kind of complex physics is you send your contract in there or your transaction in there it's gonna result in some

computation you have to send money along with it so it has enough for that competition you don't know exactly how much or maybe or the network at least doesn't know when that transaction comes how much it's gonna be and and of course if he can if I can prove okay this is gonna be this many steps I can send exactly that amount pay for exactly the transaction so I don't have we don't have gas anymore that sounds good it's not such a huge deal like why is it so great to get rid of gas so it's not that I mean beyond I think as previously pointed out let's suppose you know for AK 4 times as much stuff just didn't like kind of monitor the gas it's beyond

that it's like I think it's the the gas is pushing the requirement for this virtual machine rather than the other way around um once you once you can get rid of gas then you can you can start treat you can treat a contract as its own independent object you don't need to like look at a contract as part of the crater thing because think of it if you have no way of determining the price of executing the contract then the only way that you can be able to deal with it as a miner is by using this virtual machine but with us since you don't need the gas and you don't need the virtual machine you can evaluate each of these contracts on its own um not to confuse the viewers but that's like essentially what our analogy for let's say maybe a virtual machine although very different is our

like active contract set so their set of contracts that can currently operate but you can view each of these contracts as its own independent computer um now in the benefit of this is essentially new things not only do we have language based security which is the whole form of verification and that kind of stuff it's also I don't even know how to call it architecture based security so let's take the recent bug that you had where someone essentially deleted you know committed suicide on the ether account and that ether account was used to validate a multiset contract now because of this paradigm where you have a virtual machine and one thing calls the other to get things rather than like these independent components in

depending not even coming like each independent contract you didn't have built in let's say good mechanism by which you could like reactivate that contract revive that contract and a lot of money was lost so this idea of having this isolation in this idea of this isolation and independent evaluation enables you to to essentially enables a lot more scalability because it's not a single threaded process anymore it's like a multi-threaded process it's like running a GPU rather than a CPU you can think of it that way you can each of our contract and run in parallel and they can learn in compiled version because they can run compiled that's also a lot faster so we don't interpret things with with us essentially once you've

activated contract miners take its code they extract the s star into essentially native like machine code and they come they compile it to that and then whenever you're doing an operation that depends on one of these contracts it just you know runs super quick at the machine code level essentially okay I think I sort of get it given that you don't know the cost you must have guessed and given that you have gas you can't essentially compile the code in the contracts natively you're your full state interpret it if you don't know the gas plus you're forced to go along one instruction at a time keeping track of the gas cost every instruction every instruction you're looking up it's gas

price we're saying if there's a has enough gas you're subtracting it and going on to the next instruction why can you compile it and have guests because you have to be doing this interpretation one by one of these instructions you don't necessarily view these instructions you want to be able to stop when you run out against I mean I guess I could imagine that they have to run the contract before then maybe you could pilot and somebody sends it to you and you already know I mean much gas is going to use if it's given the exact same input in the exact same stake yeah every time with the exact same and put on the exact same state so

you have no way of knowing yeah okay no I mean that sounds sounds great and of course the whole formal verification thing right is also something that has been much talked about I think mainly in the context of security right but that's also very interesting I think these kind of other simplifications that come along with it I want to note that this isn't theoretical also um I encourage your viewers to go right now that Alpha Protocol calm um it's not a concept it's like we actually have something working so um yeah let's let's see let's see four right let's see if it breaks yeah so what I found interesting reading

through you guys been here is this this you th zero approach and and of course what actually it reminded me off a lot was Korda by r3 right which is also very very Bitcoin inspired and it also has this kind of like modular thing where things are kind of their own entities and get like executed and they can have their own like kind of verifiers or little consensus processes as opposed to having like one big global system do you also see a lot of parallels to Corda personally um I gotta say although we just talked about right before the show the last I remember looking at kora was a few years it's been a while until I

really took an in-depth look at it mmm and essentially you know my career went right and I think he yeah maybe a lot of input on the design so maybe that's why they went with Bitcoin um I'd say I'd say it's probably a lot a lot very similar because they're they they're a blockchain built for finance and we're a blockchain bill for finance the difference is just a you know one of them is selling it to banks and or you know for giving people more freedom so yeah they may very well be have so a lot of similarity there it's a yeah yeah of course that is the big difference right is that this is meant to be public no this is a public network and quarters permission network I think but yeah I mean the the I mean now I'm not I don't

understand coder that well you know we did guess a podcast about it with Mike and Richard once upon a time and it kind of read about it and stuff but but it sounds very similar I think a lot of things are similar and I haven't seen that elsewhere I don't think I've ever seen another project that kind of went a similar direction YouTube so do you mean yeah this yeah this kind of you TXO smart contract mix I think it's a lot you know simpler for a developer to reason maybe about accounts initially right maybe and you want to abstract that stuff away maybe you want to have the tools like an SDK where the developer is sinking in terms of a Walt rather than in terms of which you know

you take so you to spend right now that I'm very empathetic to I guess the thing is like imagining that for a second that you were as a node or as a user you were like partition from the Bitcoin network so um like a UT so isn't itself like a cryptographic thing of it's like a graphic object of importance and you know it's yours you don't know if it's been spent or not but you still have something whereas with a counting system it's like you kind of need to everything or you have nothing so it's like it's very if it's my new difference but yet it can be important um so yeah I think I think that in general it enables a lot of things at a technical level but at a

usability level you know people should be thinking about et exo's maybe this episode is brought to you by shape-shift the world's leading trustless digital assets change quickly swap between dozens of leading cryptocurrencies cluding bitcoin ethers e cash gnosis manera golem walker and so many more when you go to shape-shift dot io you see if i select your currency pair give me receiving address sent the coins and boom shape-shift is not your traditional cryptocurrency changed you don't need to create an account you don't need to give them your personal information and they don't hold your coins so you are never at risk from a hacker or other malicious actor

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contracts I just sit around there mmm and actually maybe if there anymore this kind of thinking like let's have them commit suicide right we have two two types of contracts if you have an active contracts an inactive contracts now in inactive contract can only receive funds and the identifier of the inactive contract is the hash of its code so it doesn't have that contract doesn't have state directly um it just has code that stays fixed you take it a hash of that code and that's your contract identifier and you can always say tokens to a contract however releasing tokens from that contract saying sending funds from a contract or using a contract to issue new tokens that's the require stuff that requires activation because um

say for example I lock of funds in a contract well then we need the miner and then I say okay I want to unlock the funds how does the miner know whether should listen to me or not the only way the miner knows is by storing that contract cope and essentially the act of contract set is the area mmm it's the group of contracts which right now people are paying the miners to store so essentially if the contract is active you can spend funds locked it and miners have to store active contracts and they get rid of the contract once it runs out of the activation G okay so sorry I think on a high level about that kind of makes sense right so I'm putting in this contract right of course is it creates a

burden on the miners and on the network right so I pay for the time that it lives there right not like me theorem where I put in this contract I pay once it's there forever so that that I understand but then let's say there's a bunch of assets in there and and this runs out right out of money and you said okay but somebody can reactivate it but then how can you reactivate it if the miner kind of like throws away it doesn't have it anymore like how does that work sure so let's say um it maybe we use this example again but let's say we're talking about uh I'm writing a call option so a call option essentially says

you're gonna pay me money today for the event that lets say in a month from now if um the price goes above what we call a strike price so if the price of the asset the stock goes above a strike price then I owe you the difference between the strike and the appreciation of that asset um people essentially use call options when they're bullish in the short term and they think NASA is going to go up in the short term and they want to essentially you know capture their games in they they don't want to be exposed to any downside it's also a hedging tool so essentially let's say I'm going to write you a call option on Apple we're gonna look at it again in 30 days so I'm gonna create that contract I'm gonna step a is gonna be writing the contract code creating the contract you

know identifier which is done automatically and then that's step one right you read that contract and you make sure that it's a legitimate contract it's not trying to steal any funds from you you know that you know if the price of Apple goes above let's say $200 mm-hmm in within the next 30 days then you're going to be able to essentially take the funds back so after I wrote the contract I'm gonna then um activate it now once I activate it I essentially what I'm gonna do is I'm gonna attach an activation fee let's just call it what we call the contract sacrifice and let's say I'm going to provide a contract sacrifice for two blocks and by the way um I should note that well we we have a

different source of heat so we have computation fees which are is like for the cost of time and we have the the active contracts at fees which are just like storage fees so let's say I'm going to pay whatever what it cost to activate for two blocks and within that two blocks you know we're gonna activate the contract and then I'm sorry and then I'm going to send it collateral to it and then that contract will issue me um like the a little issued me the the writers token so I'm gonna hold it open now of the person who just wrote a call option and you're gonna come in you're gonna pay the premium right well let's say it's five bucks um you're gonna pay that premium and then you're gonna that contract will issue you a token saying you know if Apple goes up then and you

have this token then you can get the spread out and now after that operation has been done after we each have the tokens that entitle us to our rights that contract it goes inactive now both of us have a vested interest to keep this contract in our local computer and our local memory right in the event you know whoever like wins they need to get their money out now let's say for all intents and purposes for the next twenty nine days um nothing interesting has happened the price of Apple hasn't risen above 200 that contract assists are enacted but in the meantime meaning you can trade these tokens right so we can trade these tokens irregardless of the contract any regardless of the collateral that that contract holds so

we're just moving these tokens around you know I'm free will and no one cares about what's going on in the contract it's only at the end like at the end of the position in our example where all the sudden Apple jumps above 200 and then you say okay I'm gonna activate this contract and remove my collateral and then essentially what you can do is you're gonna retake the code you're gonna you know put it back in the hacker set it'll activate for a couple blocks so take out your money and that's gonna be it yeah this is amazing uh yeah I understood that but maybe we just maybe just walk through it again because I think this is like a really key thing here it's okay so we have to the call option first right which I guess the

exact substance doesn't matter so much but it's basically like a contract that you know means that I pay something for a right and then if the share price is at a certain point I can make money and if it isn't there then it's just worthless to me so so you you create this option right so this option trading option means you basically create a bunch of small contract code you deploy it on a network and you pay for it to live there for some time right this is a storage fee now in this case so even though this option would only become its due date expiry it's yeah it's fire date it's like a month later you're actually

only paying for storage for like I don't know an hour or something at that right because that that is the window of time that then I can come in and say I'm gonna take the other side of this I'm gonna also you know put in some collateral so we both have some collateral in there you get it token I also get token light so we both have a token that basically represents the opposite side of this trade then this contract goes like dormant so the - throw it away but we keep it locally right we keep that contract code now that we can trade the token I presume if

he trade token right you'd also like let's say we sold it to a third party you'd have to send him along with it the contract code but you know let's say we can trade this token Apple shares change in price so the tokens change in value and then after a month you know let's say I was right the Apple chair went to a a fault of my options now worth a whole bunch of money so I can I can basically say I'm gonna pay or I'm gonna send back this coat on the chain I'm gonna pay this activation fee again and I pay - to execute it and to basically get my money

there so the contract only really is there exactly when it needs to be there and it's paid for exactly then but at the same time you can still trade that value the entire time yeah yeah what's going on and and I guess let me I guess the implication of that - I remember reading that somewhere but I didn't fully understand it but I think now I know I understand it I guess this also means that now let's say you like my option is worth you know I'd get from you a hundred dollars at this point so I can go on the chain right pay for that activation if you pay for the computation fee and then I get

my money but of course I pay those fees whereas could you also do it that basically you pay me out-of-band and now I don't like maybe now it's not possible for me to claim anything anymore yeah it doesn't work as well so that you don't actually have to execute it on chain yeah that's that's a great intuition so that's exactly that's exactly you know something that I find to be very attractive essentially saying you know we're gonna we're gonna view these contracts as like an enforcement mechanism more than the actual payment and maybe I have these like outstanding debts and I'm entering all these sort of deals and the reason that you know maybe

I'm doing 100 deals a day but although we have like a contract with collateral for let's say 10 of those deals and I can be proven you know that I you know someone entered a position I paid them when it needed to pay and I can prove that you know I've made these transactions mm-hmm yeah that I personally made these transactions and paid like you said out-of-band so you bought the you bought the option right and then you know you won and you he said this request he said this token to me and then after you sent me the token back I'm gonna you know send you money um know what you could do essentially as you could come to the contract and say hey you know I can show that I said added the token but he didn't send me the money right no I need

to get my money plus a penalty for example yeah ya know this is a very interesting yeah I think very just unusual I I really like how it's it's different from from blocking other blockchain architecture stuff kind of scene yeah so I guess with this Multi multi token approach there's no assets just get basically you know treat it the same way it makes sense so there is of course this native token Zen and now that doesn't get treated exactly the same way right because that is what you

used to pay for is it this storage fee is just paid in Zen what's that right you know in general right the way I view it is that why I have another token the token essentially it does two things obviously first is its it acts as a you know an economic subsidy both for the development today and you know miners in the future mmm so so an or other people in the future essentially so it acts as an economic subsidy and the second thing is it acts as a focal point so coming in and saying okay we're all gonna accept you know this one thing and agreed that you know this should be used for certain operation so some operations could be for example voting saying you know we

want to you want to vote on on what happens and the other operation for example could be when you have a sensitive you know sensitive scenario like the contract sacrifice so when I'm inserting a contract in the active contract side any minor can decide to activate that contract but that contract is going to be sitting there you know my active maybe for another hundred blocks in he's not the one in burying of that externality he's not the one bearing that cost of storage so um when I make the contract sacrifice that contract sacrifice is essentially split up among all the miners and we need to make sure that they're paid the contracts I said and valuable token because in for example compare this with a transaction fee well in a transaction fee if a miner wants to

waste his time by you know mining worthless transaction well then that's you know whatever his prerogative right he's he's found that proof of work and he can waste he can take transactions music which are essentially useless but when he's creating this actually bloat on the system we need to ensure that that um the thing that's being made a payment in his will have some value so that's the only difference is that in the other tens but there's no there's no real difference sorry right because if a miner executes the computation then it's just them and others don't have don't have to actually execute it so right if we wouldn't everyone has to do validation

but essentially yeah people people go and they do validation but they're not like your it's easier to let's say place a limit on validation just like in Bitcoin you have you know size pallet of a limit like one megabyte but there's also like some sync hash you know limits on certain operations and the same thing gonna happen here we're gonna say okay you know there's there's limitations on the amount of computation a miner can do but the amount of time you can activate a contract for mhm you know that that's justifiably limitless I mean I guess maybe I would phrase it like that is that if you have a minor right so then they have an incentive to optimize what

they actually execute right because they keep those fees right so they want to choose something valuable they don't want to choose something useless but if it's if it's the activation right or the where maybe it's for many many periods gonna be used and socialized I guess then it doesn't it creates this kind of tragedy of the Commons problem maybe yeah the comments and also the ability to just easily attack the system because let's say we're counting you know just points and one as you know the value of a thousand acts and the other point has a value of 1 X um if we're just counting it on a on a

purely like absolute mechanism without taking into account like you know the rates that these things are going for then it would be very easy for someone to pay in the cheap points and in the expensive ones right ok yeah well let's let's move to the next thing let's speak a little bit about Bitcoin integration because you guys have some interesting and weird kind of connection to the Bitcoin system can you explain how that works sure so the idea here is you know the center was always wanting to come in as like sort of a sidechain mm not it not exactly side to him but essentially as

providing help to Bitcoin some manners so saying we're you know we're essentially we're not trying to compete with Bitcoin were providing complimentary complement free services to it um you know having other tokens and that kind of stuff is actually something useful and sometimes um in the way that you know we're doing Bitcoin integration is essentially the Zen miners they're running a they're miles and blocks but they're running a Bitcoin note I mean while the ring is Bitcoin note what they're being forced to do is they're forced to take mmm the state of the Bitcoin network essentially in committed in this end block so when his empire finds a Zen block not only is he ordering all the transactions in the

block he's also taking this data he's like reporting to what he thinks happened in the Bitcoin network and other Meijer will reject his block if they think that you know he lied about what happened in Bitcoin this property essentially allows you to it allows other people to essentially use the coin transactions as an argument for smart contracts so I can for example in our call option like an example I can write a smart contract that says um you can pay me the premium to my Bitcoin address for example yeah so the big write integration it essentially enables you know the interaction for example you could also even imagine

they like you at Satoshi dice so you can imagine that people you know since it's a very quick transaction you send they send back um that's associated place would have like a small basket of collateral sitting there making sure that you know everyone can trust them while all these transactions are going on so let's just do this thing okay so we have this call option on sin and and now we want to have you know we have this financial intermittent Zen but now we want to have a Bitcoin payment on the Bitcoin chain that let's say you know for payment that I or something like that in and and okay I get that basically the headers of the

Bitcoin chain are kind of written into into the Zen chain so I guess that means you can so would it work like this you send me some bitcoins because the pecan headers are in the Zen chain you can basically kind of provide like an SPV proof on the Zen changer proof that you actually paid that Bitcoin and then the send protocol understands that is that how it works exactly yeah thank you okay okay amazing pretty day but let's let's briefly speak about Oracle's at least you know what's the role of Oracle's so essentially essentially the Oracles you know or or like not built into the

protocol but they're still a very necessary component to have I mean you know we we've provided the first ones I mean but essentially that the way that we're doing it is every single s and many the assumptions made in previous Oracle mechanisms we're saying maybe someone wants to ask any question um but essentially it's like a pull mechanism in another Oracle so essentially um you know the the smart contract theorem or contract would ask the Oracle for some data and in the Oracle would go and provide that data with us it's it's more of a push mechanism so kind of what happens here's the Oracle is ain't taking the state of all the data sets and it believes that someone may be interested in so of them stock prices you know weather info whatever flight

cancelations all this kind of stuff and he's sorting that into a miracle tree and he's committing to this miracle tree every block now what that enables is then right it's very cheap to make the commitment and um and he can also charge for payment so when he's writing when he's doing this Merkel tree he's like salting these leaves so he's creating this sort of secret that you need to have in order to be able to prove what the price was and so then what the Oracle does is you know he just he goes about his daily business he doesn't he there's not only complexity really here he's just you know great gathering data from NEP eyes and doing this a continuous process very method all methodological and in the event that is needed in the event that let's say i

default on a contract how do you prove what the price of Apple was right so what you're gonna do is you're gonna go you're gonna pay that Oracle you're gonna say listen um please provide me with the path in the secret that essentially will enable me to prove to the smart contract what the price of Apple is at the time so meaning you are gonna agree when you write the contract who did single Oracle or a set of Oracle's will be um in the event one of them is down or one of them is malicious or whatever but we're gonna agree on let's say a set of five Oracle's right and and essentially um you know most of the time we're gonna settle without the Oracle but in the event that we need to settle it's not even the contract talking if the Oracle you'll just go

you'll ping the whirlpool you'll say hey man I need I need to have this this proof he'll provide you the proof and then you can use our proof in the contract and that's how the contract works the Oracles working one of the things I found interesting about this I think you mention that somewhere in the paper or something is the regulatory aspect of that right because an Oracle of course can be like let's say an Oracle writes to a contract only hiriam and that contract is saying some financial instrument well that can be kind of tricky right because all of a sudden it's like okay base is a regulated activity etc who is here basically it's almost like the Oracle is just a cryptographic data feed it's kind of

like writing that into the chain that didn't has to be queried and just prices answer and that can then be used to execute whatever contract on Zen without the Oracle actually being involved there exactly exactly so for example let's say see maybe one thing that may be totally legitimate in a country may be you know a normal normal stock right or normal CFD let's say but then that same country may have a ban on you know highly leveraged binary options um but the Oracle as far as the Oracles bench I mean he doesn't know he was just reporting the price of Apple okay well let's let's speak now about another another complex orbital the consensus

algorithm so you guys have this also again like unusual thing that I haven't seen anywhere else which is basically that you have these hashing algorithms like in Bitcoin and but except that there are several different ones and then one uses the tokens to basically vote on the difficulty for the different algorithms so basically saying okay I mean like so you have some almost like a consensus process to manage the proof-of-work algorithm like why it seems it's he's a very like strange why

would you do that yeah why would he do that so the motivation actually this was first polish on to the Bitcoin mailing list I think it was like in March before the whole forth thing happened and essentially we recognized that there's this issue of contention here you know let's say maybe users aren't satisfied that that you know miners are are knocking in certain ways and not only in the ways that have been recently you know on social media all over maybe you know it's not okay to SPV mine or two maybe even pools aren't okay with users it doesn't matter what the case is but is actually users have no credible threat against these miners so they can say we don't like it we don't like it we don't like it but II there's not a very high chance that users are going to let

say hard forth and change a proof award because you know obviously those quantum illusions would be hurting themselves very much in the process of doing this so this creates this kind of like Cold War dynamic where no one can make the first move I'm also on the kind of a separate side note but it makes it into this is the fact that you know when Bitcoin sorry right the idea was that hash power would be the votes one CPU one vote and then I guess everyone kind of agrees that maybe hash power wasn't isn't like dispersed in a way that it's the optimal way to make decisions in Bitcoin so we're not saying ok well just let hash barbicide but there is no like good governance mechanism if hash powers in deciding

what is people who yelled a lot us on social media that's not necessarily a good idea and because it was it and substantiate it the first point even when they hold on coin votes which I think they did I don't want to get into the whole argument I think they don't you know Bitcoin Commons website they have a coin voting right um people didn't accept that because I said well you know that's not the way the system was designed that wasn't designed for current coin voting so this this whole mechanism is both weighted as such a say number one like coin voting is going to be like the essentially the way to make decisions going forward and number two we're gonna also use coin voting as a way to enforce and incentivize actions on behalf of the people who are servicing the network so why have you

we've you kind of like miners as people who need to service a network um and you know they need to be paid for it and if they don't listen essentially they can lose that it is it's not like a it's it's not a god-given privilege to be a miner in Zen right that can be taken away from you if you don't behave correctly or at least taken away from everyone who owns your sort of hardware um and and so this provides this sort of incentive to behave correctly because you know that it's a credible threat that the users may may kind of you know provide you with less of them with less than mining reward with less of the blocks and they'll do that by increasing the difficulty for you relative to all the other miners out there the other different hashing algorithms ok I mean I

I actually I can sort of understand if one comes from the right proof-of-work like paradigm to say ok this is an improvement do I did like it potentially weather potential addresses some of the issues we've seen in Bitcoin but it feels to me I mean you know from sort of coming a little bit from the cosmos tendonman proof of stake inspired thinking it feels to me it's going like like halfway or partially because okay sure coin voting governance makes sense but then why not also use basically the coin wait for validation and why not have like security deposits because there's so

much I mean oh of course variety of benefits right like this speed scalability all of that works better but maybe one of the biggest one right at least with the tenements all thing is is that blocks are final and that seems to be a huge issue here if you have Forks you know it if you're forwards and then you have to roll back these options or complex financial contracts I mean nobody's gonna be able to deal with this you know um I hear your point mmm-hmm I think it's it's kind of funny that we don't see many of yours happening in Bitcoin like not yeah not let's say normal oh it was in an

accident kind of rework that doesn't happen very often not for more than like a block with you right the it's very rare than that like you know reorder after ten blocks mm-hmm so I think it's relatively safe to I don't see this as the biggest problem and I also agree that you know maybe a lot of people asking you know why why like why why miners right and we I can't touch the surgery personally so the way I see it is that there's been a huge divergence of what miners are supposed to be doing it maybe what they're currently doing I don't think that they're just supposed to be saying there may be wasting hash power they should be you know being a node and essentially servicing the network you know taking transactions

propagating them out etcetera etc um the predominance of pools has essentially heard that and that's something that you know we may look at essentially fixing saying that you know we may we're still considering it um I think we have a very good with it but essentially saying you know we're gonna remove the ability to use a pool we're just still gonna get make it competitive so we're gonna provide this sort of smart contract that then enables you to to mine even even if you're not like a huge minor so it's so competitive for the little guy but essentially you know remove the ability to use pools or thus forcing everyone to to run to run a note and I think that when you look at it this way and you're saying okay I

understand you know that a hash power is a good proxy for essentially the computer existing the guy is running a node okay I want to compensate and providing that note and when you look at it from that aspect IV then the coin creation has a subsidy for being a network service provider rather than like rather than I don't know what point holders at the networking level at the hardware level let's say are really doing for the network topography essentially does that mean some sense well yeah but I mean the coin holders think they could basically stake coins and then validate right and and then let's say they get returned but also if they you know if they don't do things

right they get punished it seems to be it seems a I don't think it fully makes sense to me sure no I'm happy to explain so so essentially um think of it I'm not sure with all the different ones no offense intended at all um I think that essentially you know I looked at one of them with delegated proof of stakes so one of the big things that makes it scalable is that people know which which which node is gonna like find the next block which person is going to find the next block but because you know this it means that there's not a very high incentive to to propagate things very quickly and be highly connected to the network with proof-of-work there's a big

incentive because the lower your latency is the more bandwidth you have the faster you validate the quicker you process the higher the probability of finding another block is um and I think that this is very important when you're looking at like what is the function you want miners to be doing beyond you know just securing the network we also want them to be acting as nodes and that's why I think proof-of-work is is part of the reason now we're looking at like they can I'm excited right you that's a different discussion so we have two discussions going on everything about the stake one is like the economic aspect and the other is the technical aspects now on the economic aspect I think that you know it can be done that the more coins you have the higher

probability it is to find another block I mean the question is you know do we want to do that like do people want to do that I think that we should let people decide but but essentially it may create a situation where people say oh this this was a pre mine and no I'm gonna go for with my own version mmm so yeah so I think that there's like that's a different conversation the economics of it like it should be be mining there should be we be chlorine holding but from the technical perspective I I think that you know that that essentially there's there's some benefits to proof of work and we're not sure about the case of proof of stake but I don't know what do you have any thoughts on that yeah okay great well guys thanks about she was super fascinating now of course well no no of

course but you so you guys also have a token sale now we're kind of at the end you won't have much time to speak about it but I'm sure some people will be interested and they want to like learn about it and read about it and economics of it in terms and when it's happening it's at the cetera can you share like what wish people go what are the dates when it's happening and how can people learn more about it sure so um yeah please go to WWE and protocol calm all the information is there yeah that's pretty much it go please try to use or software at Alpha Protocol calm and thank you very much for your time Brian yeah no thanks

so much guys and just be play so wait when is there ready sis tokens sale starting and when is the ending so people know sure it's starting on November 30th and then December 30th and the year okay great so some people know that okay well thanks so much it was really really fascinating of course we'll have links in the show notes to to variety for blog posts light paper and and this is a nice indeed that kind of alpha demo that you guys have it's very impressive so I highly encourage people check it out and yeah thanks so much you guys for coming on Thank You Man and of course thanks so much for listener for once again tuning in so if

you want to support the show you can do so by leaving us the iTunes review and not a lot of people do it but it helps new people find the show so we do appreciate that and yeah we look forward to being back next week