EB96 – John Clippinger: Developing A Social Ecosystem Of Trusted, Self-Healing Digital Institutions

Transcript

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[Music] today hi welcome to epicenter Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian kuo and my name is Brian pan crane we're here today with John clippinger he has a has had a long history in technology in law and in thinking about these issues so he is currently is the co-founder of ID cubed they wrote a book they publish a book that was called Bitcoin Burning Man and Beyond and when we saw the title someone recommended it to me was like obviously we need to have him on and he's also a research scientist at MIT media lab and previously he was at the

Harvard he was uh the founder of the Harvard Law lab and he was also at the Berkman Center C there which is I think quite well known for pioneering some of the thinking about internet law so John thanks so much for joining us today well thank you for having me I'm looking forward to the conversation yeah absolutely so you've you've been thinking about some of these issues that have come up with Bitcoin now for a long time many of you of course will not be familiar with your work but can you give a little bit of an introduction about what has brought you here to start thinking about you know blockchain and and how that fits in well for many years

I've been very active involved in so the intersection of technology and policy and society and going back to my college years when I was helped set up the first sort of protest against the en uh the war in Vietnam I was actively involved in the civil rights movement and the worked for the Black Panther program so and I and I've also been interested in the whole area of develop in in developing countries is a uh research associate Harvard many years ago and the and the program for information resources policy looking developing countries and I've always tried to track and see how technology shapes people and people shaped technology and how the interaction between the two and in that interest

I've also did my sort of graduate work and been fascinated by the notion of cybernetics and self-organizing systems and this goes back into the way back in the 80s and70s actually even um well how do you design systems that are self-organizing that are go directed that correct themselves uh that can learn and there was a lot of activity then uh a lot of it came out of MIT in those years um and but the computational power wasn't there really to build systems uh that could do that my PhD thesis was uh basically designing a model of language language discourse generation cogn that was highly distributed um and

saying how can you control complex linguistic and cognitive process in a high decentralized way so the whole what's happened in Bitcoin more recently uh in the arrival of the currency again this is something I've been in interested with people like Bernard latier who does work who was a designer of the Euro uh written extensively on currency design and how currencies reflect policies uh is that currencies are not neutral with the spe policies and if you look at how you can affect policy not just uh Economic Policy but social policy the nature of the currency becomes very important hence when Bitcoin came on on the on the horizon was arrived uh it was very fascinating

to me and actually when we first formed ID cubed we had a uh meeting a dinner uh at the State House in Massachusetts where the revolution began and we had a big dinner celebrating the revolution in the Financial Services industry primarily where we handed out gold coins that said in in TR in data we trust and we tried to get Bitcoin people to come to our event but that would it was really early and I think was Bitcoin was selling at $12 then um but it was it was the idea that you could have a highly decentralized open source incentives mechanism that actually could launch a change and challenge a lot of current institutional structures which I always I currently believe now are failing uh

they're they're artifacts of another era um and they're really if you look at the the institutions that we have designed their artifacts in the enlightenment uh when America had 3 million people not 330 million people when we didn't have the technology it's just it doesn't scale other wonderful principles there but we really have to think fundamentally about institutional design governance itself um so the idea that you can have The Ledger and that you can sign for things without having a third party and you can run scripts and run contracts on top of that that execute C and prove certain premises are really important um when I was at the burkman center started

the law lab there um developed a self-executing contract that uh we took a a uh a Wilson C term sheet and made it into a program and then we provide genetic genetic algorithms to generate new uh variants of that and and Prov that you could actually have uh contracts that are computation approval well that that was in the 1980 201 11 12 I guess no even earlier than that I think in 2009 so we were anticipating what happened with ethereum and smart contracts and not to say we're the first but um I think we're on the edge of a very profound Revolution and

how to think about currencies and institutions so the idea of of decentralization distribution was was was part of it before and then I guess yeah with Bitcoin all and it just sort of all came together right because all I'm curious how you achieved that uh how do you achiev the those smart well I guess precursors to Smart contracts without blockchain technology how did you achieve the decentralization aspect of it well we didn't we didn't we didn't focus on the decentralization aspect of it I mean our Focus was how do you look at a a contract as as a program and how do you make it algorithmic and so what we did is I mean uh we created a list program in which we represented sort of the translated the

terms of the contract into list programs and so you could change you could change the language of the contract say the the terms of of participating preferred to to the to Common and someone could see the effect on their on their cap table they could say oh my God you know I didn't realize that when you change this that my my shareholdings go from 30% to 3% and then we tied it into Actuarial tables and and that was another thing that we were able to um show that the likelihood given cofman did a lot of studies on this was that uh there were very low likelihood that people would be able to uh get an exit the way they thought they would so it it was an attempt to prove a concept and then um

be able to uh write a program that was provably complete and using genetic algorithms which is a nice a nice feature to that that was really cool we could generate uh a lot of variant set Fitness conditions on the outcomes that we wanted and see how we could approximate a solution that took in the different the different intentions so you mentioned in the beginning that your your focus was sort of has been on the intersection between technology and and policy and when I was reading your white paper one thing that struck out to me is that you seem to think of Technology as something very political and you often hear the phrase that technology is

neutral and especially in the Bitcoin space many people say like Bitcoin is neutral so how how how do you think about these issues well I I think that you know technology I mean and there's some people that have written some I mean Kevin Kelly's written some great pieces on it uh Brian Arthur uh who's an economist has written a thing sort of that as technology as almost an evolutionary force uh we co-evolve with technology so I don't think we can disentangle ourselves with technology technology reflects human intention and human understanding it also reflects the the relative power equations of different people uh with access to resources I think when you look at the

Bitcoin and the Bitcoin protocol um that inherent in that is a certain assumption about um uh public and private goods and this is what this is one of my concerns about this community understanding that these these problems have been been thought about for quite some time um and so it's the difference between a public and a private good difference between a one-time game a multiplayer game you start to look at Game Theory and you start to think well what what forms of how what forms of cooperation were possible in order to get a St outcome uh and for a preferred distribution of goods or services and the Bitcoin

reflects a particular private Goods model it's so like a one-time game and it's very sort of in your Chicago School uh it is a reflects that mentality of uh in personal exchange onetime game it's a one-time player and it's an incentive that is sort of a zero sum game so you know each time uh you're doing the mining you you you don't you don't you don't know the identity of the person that you assume that everyone's out for themselves uh so there's a high trustless you don't trust anyone therefore you're going to you need to create a mechanism uh in that verifies the the consensus the proof of work that that verifies the uh uh the transaction um but there are other incentive

mechanisms um and and I should also say that the Bitcoin itself is sort of like bit it's sort of it's a uh it's what they call it's officially a demand back current a demand backed asset that's how the US Commodities Exchange LA uh defines it it's a very fascinating definition because it's not grounded any real asset but it's still sort of a gold bug kind of thing uh and I think that was the intention uh and you're going to limit it it's deflationary it's it's so it and it can be highly speculative in that way so it it reflects a particular view of a class of currencies there are other kinds of currencies that are different and and this is true throughout history you have

you have like two different currency models typically one's gold the other's silver and one is to create liquidity and create interaction uh but Bitcoin in sense is built on the sense that you don't trust a central Authority and that you have to limit the the issues of the coin and so it is sort of rival either some what I have it or someone else uh but it's it's it's not the more you create it the more deflation or less value it has uh um but there's thinking about digital information based currencies that are what I call Cooperative currencies and this is based upon a lot of people's work but I would reference Brian Arthur who is an economist and works at the CFA Institute and talks about the theory of increasing

returns and that's a different model it says information when you're in a digital world you know that the more the information is disseminated the more people possess it the more value it has whereas in physicalized asset say is gold it's rivalers so you you're creating shortages you're creating you're speculating in shortages and you make money off the difference between the supply and demand the shortage where the information based currency you actually want wide acceptance uh and and the broader that information floats the greater value for everybody yeah so I saw that as well n thought it was quite striking how you talked about that but don't you think that for money or a

currency to be valuable it has to be scarce no I think it has to have inherent value I also think and and actually made the point the white paper and and Bernard the the me he's a currency designer they will say you need both um and the analogy I make um I think is is uh in the paper is to the the the I don't know people are familiar with there's a program called Deadwood was sort of like the settling of the of the weest best and when you didn't have rules and you didn't have and it was sort of the survival of the fittest you really you you want you want to have a currency that is like Bitcoin it's like gold you can trust it and it's

here itself you don't re you don't depend upon a a a party to accept it it's a one-time game it's a zero sum game I either have it or you have it but is what happens is you start to get repeat games and then you start to get ideas of boundaries and the sheriffs and you have different ways of of of creating Cooperative Behavior then you want another currency that is is cooperative and and increases by through value of use and this is where you you're know and this is there's a lot of Stu in Game Theory on this is is that when you have a repeat game you you uh and you know the person you're develop working with and you have a reputation metric you can create higher outcomes for everybody doing that and I also

cited the work by uh Martin Novak um there are a lot of work that's being done in evolutionary bi ology that says this is also true biological system so you have higher outcomes uh The evolutionary stable Solutions when you have some kind of collaboration to known reputational identity you have to have the reputational and then you do with a s a a sheer um uh sort of um one-time game rivalis outcome yeah what would such a currency actually look like though well I mean it's something where you're there are a number of people are are developing these things and actually Prim Vera is is we me we talked about earlier has some ideas of this but

there's uh we're looking at something like an artisan coin or Artisan currency um where and I've been I referenced Bitcoin and burning man that when I was in burning man talking to Larry Harvey and they were talk he was talking about well he would like to have a gift kind of currency that would be in other words people acknowledge what other people do and they get they acre some kind of credits for that and those credits are are can be uh they can be exercised in the context of of a of a uh a different kind of social contract um so if you go to burning men and You' have all these people working together basically for a public good and you have you have uh you

you have mechanical engineers you have Carpenters you have all these people coming together to build stuff and if what we'd like to Larry was saying a lot of people like to acknowledge that so it's like a a gift exchange currency that that people were able to acknowledge what other people do and you can actually develop so Social Capital that way well that's a and and in order to do that you're you're looking at something it's a repeat game it's not rivalers and and when you look at an artisan economy you want to buy something not be you don't want to create you don't want to create shortages you want to go back and you want to have a repeat experience with someone who you value for what they created it's not a standardized product

it's it's not a uh what what your valuing is what is unique about it and you want to be able to then bring other people to appreciate that uniqueness and it's not a you're not rivalers you want to work with them to be successful and it's their success is your success so it ties into empathy and shared theories of mine that's another area a lot of work has been done in evolutionary biology that that's a a a critical aspect when people have shared theories of mind then they their coordination cost and their social value create is vastly increased but do you think that's compatible with the I guess current state of the world of the economy and how in large part we're moving away from Artisan economies

well I I mean I think we're actually moving back to that I I I think I think you're seeing a failure of of of the I mean the classic failures in Wall Street I mean is is is a case in point I I I actually think we're going to move away from that I and I and I uh I as and I'm not saying that you're not going to have things like a a Bitcoin or a gold base or limited I think you're going to have the combination of the two because you're always going to have cases where people cheat and fail one another so you have to you have to have something that is sort of trustless but the the the benefits of having an identity and having a reputation and being able to to distribute and create

resources around that I think far outweigh the the artificial creation of shortages which really don't exist they choke points that benefit some parties so that's where your power laws come in and that's and that's and that's why you have this huge disparity of wealth and that Genie index kind of things accentuating because you people think oh that's a natural consequence you got preferential attachment therefore you get power laws we we can't do anything about that I don't agree with that at all Today's Show is brought to you by your friends at shape shift of course shape shift is the fast and easy way to trade altcoins and they now Support over 45 of the most popular altcoins including counterparty Ripple gems and so many others that I've never even heard of and they now support you guess

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The Wander and it's called spells of Genesis so if you're gamer if if you're interested in that check it out because of course it's a very interesting way to make this sort of fake scarce asset actually scarce by by using the blockchain so uh head over to shapes shift. and give it a try we would like to thank shapeshift for their support of epicenter Bitcoin I guess what what becomes very Central in what you're talking about Endo is is the question of identity know because if you have Anonymous party that can just join well you can exactly like this abuse right can happen exactly right so all societies when when they when they really succeed I mean people internalize and this is one of the

points I tried to make rather than have a state impose it a set of norms and basically you want people to internalize and generalize certain codes of conduct that it's in their interest to be adhere to and hold so when you have really strong reputational identity signals that you can be relied upon then you eliminate enormous amounts of inefficiency in the society you don't and and you actually create much more abundance so the identity component is very very important in my mind and I think that the same time is the fact that people uh this is where this notion of self- sovereign identity becomes very important is that I could he enrolls controls so if the government issues the identity credential or the bank does it

then basically they're the control point and so we're talking about a new kind of uh third a new kind of third party organization it's not private sector it's not public public sector it's more like an open source sector and there's a set of protocols I can go through that I can I can establish my identity send establish certain certificates that other people rely upon they'll take that risk and I can build upon that and I can control I have control over my own data that I can create legitimate credentials Express who I am that other people can rely upon and that flattens the authority structure that we currently have that's very static and is like tens of thousand years old we're still running Society on a patriarchal lineage system that was you know that goes back

into our our deep past I mean so so so if I can oversimplify that that model then rather than having say the government issue identity cards and that becomes your sole means of of proving your identity you have multiple sources which can together come together and form a a a right a consensus around who you are but however I mean idty on the Internet is something that is quite malleable uh well you can make it non-m valuable I mean I mean you can have multiple identities everyone's going to have and you right that's the point I wanted to make so then does that does fact that we can have multiple

identities not cause a problem for social order yeah yeah I it does you that's why you have to Anchor it in a root identity in other words you can't let someone gain the system I mean and this is you know this is one the problems with they had going way back to to PayPal and things like that that you you can you can you know you can gain the system and then you can get people to trust in a particular person identity and then you can change and and and screw them so you need and you need to Anchor it in some you I need to Anchor my identities in a root identity what I mean by a root identity is something is tied to me to my biological physical self now I don't need to have that identity be uh fully disclosed I can

have it be authenticated and anonymous and I can uh so I can have an A Persona out there that has certain verified attributes but doesn't reveal who I am uh on a on a pii basis I can I can reserve that how would you tie the your physical identity to these other identities what you have to do and actually this is some the work we're doing on you need you need to get a a a collection of unique identifiers it's almost uh saying that I as an individual have certain unique patterns that distinguish me from anyone else so those can be biometric and behavior metric patterns and in combination they create

something that I don't know if you're familiar with like an igen Vector that uniquely identifies me um and I can you you know and I I I can encrypt that and I can verify that and I can I can prevent and use that as a core credential how do you prevent that the input data isn't for fored well I mean there there there a there you're always everyone it's an arms race in how these things happen we all know um but what what you can do is mitigate the uh vulnerability of having multiple dimensions of these things so and they can be updated in real time the other thing with with that that we're learning and and I this may reference an

earlier conversation is the idea of cybernetic versus models software models uh is that you're constant we're constantly getting data updated all the time so we can compute our our metrics we can compute our distributions on the Fly and and and we can have one-time tokens we can have we and we highly decentralized uh and distributed system it's very difficult actually uh when the with these new kind of architectures to uh basically uh spoof them uh it's not say it can't be done but it the cost goes up dramatically particularly given what we have now which is totally archaic so where do you

see so let's let's project like 10 years in the future what do you see the state of identity being then are we still looking at a system where we have a high I think I don't think it's going to be higher I think I think this this revolution is imminent um I really and I think Bitcoin is is a huge I mean is a huge uh Vector for that change um and I think that I mean I was just talking to the the the CIO of the uh the new CIO of the federal government Tony Scott and U and he's he he he basically buys into the whole idea of a decentralized blockchainbased services for identity and for government uh security and they

have something called security by Design they're looking at uh and that's a very decentralized system so that brings us to the to the topic of of governance then um you know there there's been the rise of decentralized Technologies the recent years especially due to the rise in you know Bitcoin um and in in those circles many have suggested that governance could be decentralized becoming more and more obvious uh with the recent release of ethereum and people have speculated that uh governments governance and institutions could be decentralized um what are the first I mean I'm we always we always hear these these these ideas but with no real concrete um right what what what what are what are the

things that could be decentralized so where you think the first areas of decentralized governments are going to come from what are the first things that governments are going to start to decentralize essentially well I think there the the the one of the things that you can do in a decentralized manner so much more effectively and not only in terms of coordination cost and expense and everything else um yeah is um and this is where the blockchain is so so amazing I mean and you you look at remittances and payments and being able to verify transactions and identities and do that through smart contracts and hold um and be able to hold hold money or hold identities or hold some asset in

escroll and release it when when provided the appropriate credentials that is so pervasive uh and I think when you're looking at the and I've worked with a number of Banks and how to they they totally have to rethink what they're doing um and what happens is you have a regulatory structure right now uh and a banking structure it's a hub and spoke model and they and there's this impossible ponderance of cost that that for financial regulation that makes the regulations by the time they're written they're out upd they're a huge cost um they only served in many cases to to help the incumbents but yet it it creates this burden the fact that you can decentralize um the payments and remittances systems uh in a distributed

way and have oversight that is uh basically um there you can use uh smart contracts you can use multi-party computation methods there variety of ways in which you can do it that's going to unlock so much value and have so much savings it's just it it it can't be resisted I mean I look at this as very analogous to what happening to Banks is what happened into the newspaper industry say 15 years ago um and they you know they oh no will not affect us we'll become portals will adapt no they come they could not adapt it's a very different model so it really affects them and and so that's you know that's that's a thing that I think you're going to see um and I think another area that that is interesting is is the whole idea

of location based data an internet of things and I mean how are we going to scale Internet of Things without having some kind of decentralized autonomous contracts into that you know I think that's that's an inevitability um and I have dealt with a number of say companies car companies they're capturing all this location data and things like that and the question they're they're in breach of of of the EU uh data director but if you have uh API calls and enforce the uh the regulations through API calls then then you don't have to have a high you know governance it can be done very well and and I think that um these are the areas

which you can see some of the Innovations coming um there's all sorts of companies that are working on on various aspects of this so you you mentioned the newspaper industry and so that that they they did have the the Monopoly of of information but they didn't have an imposed Monopoly uh that Monopoly could and has been dethroned the the difference with governments is that the Monopoly is imposed by power um what apart from the cost savings potentially which I think are pretty obvious um don't you think government governments would have and institutions would have resistance uh to decentralizing uh their institutions since they would essentially be losing control like I don't I don't know if

they're ready for that Paradigm Shift well I think what what you're seeing is is a failure of traditional governance institutions so they're genuinely looking they're losing legitimacy I mean this is what this election is all about call it um and and so I I think and what you're seeing in certain cities is and is is I think and this is what's interesting uh there's a lot of movement in the cities and there's I think uh the maker movements in cities the the idea to get citizen participation I we talked about uh I've talked about in several areas what I call governance free zones but but it's like Enterprise free zone allow people to actually start to take over and run some of the local services and and gencies uh there are housing

authorities and there are whole lots of of traditional government functions that that are performed so poorly I mean Tim O'Reilly talks about this as government is a platform and and and that you should allow people you know allow sort of API access to different services but actually in the delivery of the services too and you can start to you create competing uh institutions that that uh that can compete with a a traditional government uh way of dispersing uh benefits actually in the UK they're looking at this developing a gov coin for dispensing of of of benefits and so you're creating a new kind of currency around benefits that can only be used within a certain context and that

creates a different kind of micro economy and people will start experiment with that and I think that's going to be much more effective more responsive more savings more engaging participatory and what'll happen is the governments will say okay we're going to move move up we'll become more meta we'll let we'll let we'll let these decentralized networks provide more of the function and we'll set certain ground rules um and actually there was um something called instinct which national strategy Ted identities in cyers space that came out of the bomb Administration they were saying yeah maybe around identity and personal data the government T doesn't try to figure out at all the details they just set up the the the the meta

rules and provide Safe Harbor provisions allow people to experiment in it and and and and try to to establish those meterials I think that's what's going to happen um do do you think that this change so you mentioned like the governments doing some of this change do do you think that's more the way it's going to happen or do you think that people will just sort of create these quasi governmental organizations uh using blockchains that then will take on some of the functions but without actually the permission or endorsement from corporate governmental bodies well here's what you're seeing already you're seeing this already um if you look at Uber and you look at Airbnb you know and you know Uber is

what a$ 45 billion they're Breaking All the Rules and and but they're and they're they achieved such scale and they actually proba a benefit that people want uh and there's a whole set of services that that are going against the traditional government models and regulations they're forcing the government to change and and uh I think you're going to see that pervasive so the government's going to have to adapt to these changes and it's going to have to reframe its role not to say it's going to roll over not to say there's not going to be a lot of resistance but I I I I think in the US for example I think there's a huge disaffection with the the the role of the Federal Government it's

just it is it's not that these things shouldn't be done I mean this is the tension be the between the progressives and the Tea Party and the Grassroots and the bitcoiners and the S the libertarian view um I mean I I think in the extreme libertarian do is like there there's and that's s of The Chicago School there's like no oversight you know do not tread on me you know I don't want you can't tell me what to do uh and there's no sense of communitarian responsibility I think that's extreme uh I do think they're going to come you're going to reframe the problem it's not going to be a big government solution that just doesn't work that doesn't scale but you have to have governance and you have and you're going to governance becomes a

kind of Technology just imagine if you're able to have governance as a technology and that starts to innovate the way you have a Mo's law that just changes everything and I think they problems fundamental problems that that have been around forever like who guards the guards uh in this whole idea of that can be solved I really believe they can be solved through zero knowledge proof and new kind of technologies that that will make that maybe not solve all the cases but 8020 and make a huge difference uh so we're at we're at a threshold of being able to solve some very intractable problems about how people run govern themselves and I I find that very

exciting one of the things you mentioned that I thought was was a was a great Point regarding that is that if you have a if you have a regular government body or or some sort of institution right over time they start having employees and their rules and of course those people start having their own interests and all of a sudden you know when it was just supposed to provide a service now it has it its own right interest and I think you know in Europe for example with the EU and uh ECB and and all those one one sees that extremely strongly and I think in the US is also a great example where yes uh the government has enormous power and and I think it's interesting

to think that oh maybe with decentralized autonomous organizations and things like that right where there's sort of transparent rules and it really isn't something in the middle that start taking on its own interests maybe we could get rid of some of that corruption absolutely I think that's a huge hugely important uh uh I think what happens with bureaucracies is they and and government is they become their own interest group and then as their own interest group they they are they allocate resources and budgets in terms of perpetuating themselves rather than their constituencies and I think we need to open that up and decentralize that and actually make I mean it returns back to a notion that well maybe those

functions can be distributed out broadly in the community so the way you do it in an open source movement there people that have certain this is where credentials and reputation becomes really important so if I had a really strong set of credentials that were EST and and I could then solve a quote government problem uh and and collections of people could do that so it doesn't have to be this hard divide between what's public and private sector that's why I think that's a false dichotomy here um and and not just public and private sector but what you what you call in your white paper citizen sourcing and it's what you're mentioning now right so yeah I really think citizen sourcing is is is a real option here and and you can and it's

just not you know a do good Feelgood I mean you can have a high level professionalism in the citizens comp competency and course and that is the way I mean look with the Athenian democracy when it worked it was a very short period of time but actually republics when they worked that's the way they worked and uh and and and then the best part of the when the us and this early phases that that's the way it worked and even the early Ro Roman Republic was that way you had you had people take an active role in government and it wasn't a and they weren't there to to L their net I mean the what I see this of another generation when I when I was I did work in Washington and help set up an agency there and uh you went there with the intent of giving back it

was a public service thing it wasn't a way of of of bootstrapping your career now it's just like Washington is owned by K Street I mean it's it's that's just a fact and the Supreme Court is say fine you know go ahead so this is United ruling so it it it it sort of really undermined the a core democratic principle you're listening to this show in parts thanks to all the support we get from our great sponsors we have some some fantastic companies we work with and we're very proud of what they do and of of their products and the companies we happy to stand behind every week we reach a large audience of thousands and thousands of people deeply involved in

the Bitcoin cryptocurrency space people running companies people having a lot of influence and people who are just enus enthusiastic about technology about progress and about the future so if you're involved in a project or startup and think that reaching our audience could help you email show epicenter bitcoin.com and let's talk now with the idea of of Citizen sourcing this has come to mind so I mean I agree that you know given for instance uh let's say you have a neighborhood and you know there are issues or problems in that neighborhood who better to to solve those problems than the people actually living in it than you know perhaps a local government or federal government or what have you coming in and trying to to solve those but where does that citizen sourcing stop because it seems

like they're seems to me that you could have a risk there if you start getting into uh you know citizens ensuring security citizens policing that sort sort of thing where you could get into some sort of touchy situations there oh really good question I I I think uh I I do think that um you know you you have to you you you have to think of an architecture governance and accountability and transparency so you really need the architect institutions to perform different functions and and you need to hold them accountable um so when I'm when I'm thinking of assist s it's not like crowdsourcing just throwing everything out no I think there's there's there's a set of

different kinds of institutional designs and roles for that that you need to establish and and it's an optimed system I mean so and people have different preferences as to how much and how little they want to be governed and this and that uh and there there you know there natural differences in personality and disposition but I I think there are ways it's an empirical issue is is how to design certain kinds of efficacious institutions and and so if corruption is an issue well then how do you if you're using certain forms of encryption and and ver authentication and you can do chain of custody on data and you have uh you have ledgers that you can audit

uh and you can rotate in and out people in positions of power in a in in a in non- gameable way and I think you can then you can create more effective kinds of institutions of oversight that themselves learn rather than try to arrest development and try to protect a special set of interests and uh and this can be an area of genuine Innovation uh experimentation um and and and then I think there are certain empirical solutions that that one can test have we seen this before in in history there examples of this sort of Citizen governance uh um we're we're moving into an era you

know whether you believe in the singularity literally we are having a convergence of Technologies and how we think about Technologies is how we build our futures and uh that's never happened before I mean we can you know we can we can hack the human brain we can hack our genome we can hack everything uh and and that's only increasingly true so that's when I in the paper I made a big emphasis is is that to understand the magnitude of those changes and put them in a historical context the kind of things that we're doing not see it in such isolation uh of a particular expertise but we are we are things are up for grabs but yeah I think that's also one

of my expectations and hopes is that when when you start having blockchains maybe integrated in all kinds of areas and all kinds of systems and initially of course often it will be because there's a commercial benefit to it right it's it's cheaper make something possible that wasn't possible before but then that over time actually uh the effect and and that might even be a secondary effect often is that actually reduces corruption it reduces some of these flaws incentives that we have today oh yeah I mean I don't I I don't I don't look at as a secondary int I look at as as a design point I mean that that that's what interested me yeah I think it's a design point of

blockchains but when people will adopt it in a commercial setting you know they might not do it for that reason that might be a side effect but I I do think that the the the the the need to have things that that are I mean trust is important in commercial settings transparency and predictability and how do you manage risk I mean those actually all create value and so and I think the ability to uh create systems to perform that way I mean if you have a highly trusted highly Learning System that rapidly evolves and and and and and changes and and is able to to maintain high levels of of sort of value creation

versus one that oh maybe not governed but hacked and not and porous it's it's going to outcompete that um I just I I just think we're we're at a point of different kinds of competing institutional economic designs today's magic word is mustard m u s t a r d go to let's talk bitcoin.com to sign in enter the magic word and claim your part of the listener reward [Music] so this ties into a lot of your work uh regarding cybernetics and AI um I I've often had this sort of idea that you

know U smart contracts although they are very primitive um individually together when when you have multiple smart contracts it starts to resemble a living that multiple smart contracts are interacting with each other and and and doing all Ty of things they it starts to look like a living organism tot age is that how you see it oh I definitely see that I mean I think we're I mean and by a living organism and that's where cybernetics is so interesting um and and people lot of people are not familiar with cybernetics but the whole idea is Go I mean it was a theological system it's the system had a goals that had feedbacks and tried to maintain certain equilibria it could be dynamic equilibri there could be

multiple systems working together um but it it it's like well how do how do you approximate living things uh through cybernetic mechanisms or and and you and I've always been interested in the work that's done by the Santa Fe Institute in which they've really started working on this 25 years ago and I think what you find is the notion of cybernetics is sort of mutated the notion of of of complex adaptive systems and and where John Holland's work um and that's gotten very sophisticated and and and applied to lots of different fields uh I think there's a rich body of knowledge on looking at things this way uh and a lot of it does come out of the Santa Fe Institute uh and looking at Social systems this way uh there got work of

Sam BS herb Gus um there there's just really fascinating uh and very rigorous ways of understanding social organization and how people adapt and change and don't change and what are the factors that affect them so we're getting a very sophisticated understanding of of sort of adaptation and I and evolution uh and how different kinds of organisms adapt and I'd recommend the work of Martin Novak who runs the uh evolutionary Dynamics Center at Harvard and his group uh it's a whole it's very rigorous work and it can be applied to to uh designing social institutions I mean we're all part of the same evolutionary

process looking at it from that angle uh of you know the study of self-organizing organism what do you think of the design of Bitcoin or the way it it functions well I think there was you know I mean it really brilliant I mean you you just uh I I I think that I mean when you when you consider all the things that were pulled together and there was it was a it seemed to be a single person's effort and to get the incentive mechanisms right I mean and and and then be able to launch something like that I I think it was it was just extraordinary uh um and uh it's sort of epical I mean uh not and I think it I'm not sure how

else you you could have done it so I may disagree with certain things I say but that's part of the evolutionary Paradigm of it and you know there is a lot of debate about you know private blockchains public blockchains what to you know what kind of currency design what kind of incentive mechanisms you're or consensus mechanisms you're going to use I I mean there there it's broaden that discussion and whether proof of work is really what's required particularly an ecological way and if you have identities and you can able have white list then do you really need such an honorous uh consensus mechanism that kind of thing um but the fact that something like that took off I mean and it's but it's the same it's the same basic phenomena that you have you know

uh in in in any kind of peer-to-peer distributed system um and um so I uh I you know I L Ian it was just it was great it changed it it created possibilities where there were none say four or five years ago I don't know if you've seen here us what your thoughts on this I don't know if you've seen this really fascinating talk by Mike Hearn that he gave a couple years ago at Google um exploring the idea of autonomous vehicles and how you could have autonomous vehicles that were basically a public good and um responding to markets and and and you know going where there's demand and then perhaps like shutting off for a while uh when there's no demand or moving to

another city and and the idea that those Vehicles could essentially run themselves and uh then the question is you know who who owns the vehicle uh exactly if you have a market of these and it could be Vehicles it could be drones it could be you know whatever is does that does that constitute an artificial intelligence or to you or is that just is that just devices responding to programs that were made by I mean I mean uh yeah I mean and I'm very I just gave a keynote on the Internet of Things a group Massachusetts was focusing on that and I think that the Internet of Things uh what what is you're you're having more autonomous

things people think oh you got to have people in the loop all the time you can't scale it and have people on the suit therefore you have to allocate certain agency to the device that's inevitable and then the question is to what extent is that that device acting on your behalf and if it is not then how do you revoke that that set of Privileges and and when you start to think about the internet of things I mean these things are pretty smart things these are arm chips I mean that's of the basic you know the 64-bit arm chips you're having things that that and then they can tie into a cloud so if you look at uh Computing so I just was looking at some of these new drones and they you know you can have autonomous drones and now from an AI point of view

which which blew the top of my head off of was you know the problem with with AI in my generation was it was very rule-based and very brittle and and so you did and you didn't have a lot of data coming in so you didn't have the ability to do Dynamic modeling and verification and and and do real-time computation so there was everything was tried to capture in a brittle set of rules now that's not the case and so you can have and and you can have drones flying in the wild and they can know what a window is not and they they're also things that they've never seen before that they can can make reasonable judgments about so and then you can tie into the cloud so the the Drone is is as smart as the cloud uh and these things

can work in formation uh and of course when you weaponize them you you you you you're creating quite a foe um and I we have not thought that through and and and one of the areas we've really not thought through and this is where you people say oh personal data privacy who gives a damn these are classic these are who you are these these are new is data is a new asset class they're per and and it's got to be signed and verified I mean this the military is running into this issue and that they don't know whether they have control over a drone or a satellite because they can't they they can't sign for the the for the the data that goes in it they can't verify the Providence of it um and that that's happening in

Spades throughout the net um if you look at your home should be your Castle it should be the the heart of privacy what you've got a Samsung TV in there that's watching everything you're doing and and doing Rec facial recognition voice recognition and feeding it back and selling it it's a surveillance device the same thing with nest and now there's no there's there's no design point that gives you control of that data and what you want them to see you can't you can't intervene and control that and that's just going to escalate this is this is not a good situation it's time for a word from our sponsors volt.com the go to Bitcoin exchange now we all know there's been no shortage of Bitcoin exchange scams and

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mustard seed right what is open Mustard Seed open Mustard Seed was an open source project that uh we started about four years ago um and it was an it was an an effort to and actually there's there's a video on it pretty describes it it's a set of Notions to give people control over their personal data and being able to have the aggregation point of personal data and create trust networks whereby people could have a principled way of sharing and releasing that data and and the key element here is is that in the classic internet notion the control should be at the edge of the node and then the the the edge of the node now is now an individual in data and

computation and at that point that you any other you as an individual should have control over that I Als in as an evolve we had a develop we call wind hover principle around personal control of data and sovereignty of individual identity in other words you should have not only control of your data but you should have a control of your identities and by that I mean that in the classic notion he enrolls controls which means that the government or the uh Banks or some of authority enrolls you and they basically control your identity and tell you who you are and this is not something you control in our model you have an open Source you

have a protocol whereby you control it and you assert it and other people V to to accept that and on the basis of that then you can decide in a peer-to-peer way how you want to share your data now we worked on post mustard open mustard SE we worked on a a peer-to-peer terms of service agreement where everyone in the network is in parody with everyone else and that other party that other entity could be a company but I have the right to extend and revoke my data at any point and so I can use access tokens I can do ways onetime tokens for the release of the data I can verify who's gotten it and have that signed for uh but the aggregation point is the individual and that gives you a 360

degree view of and therefore if I can verify that it becomes much more valuable to all parties control that sounds that sounds of course fantastic and we've talked often about you know topics and ideas like that on the show but at the same time it seems like where the world is going is not that direction right you have larger and larger institutions Gathering more and more data and of course very often their commercial interest is very much tied with the ownership of that data so so do you think this really has a chance yeah yeah I mean well I yeah no i' I've been pushing this rock up a hill for 10 15 years and I can so I've seen I've seen a whole change in Attitude over the last

five or six years um and what I'm also on the world economic form we came out with a a a notion of personal data as a new asset class that people should have control over it that was adopted there there's also there the uh the consumer data Bill of Rights in the US government adopts that position so does the EU adopt that position this and now even someone like gmsa which is the um trade Association for mobile uh phone operators believe that people should have control of their data the fact is they want they want to be the people that host it monetize it um but there's a recognition that that in a classic internet notion that that if if you can push it to the edge you can create more

value in that um because you're able to have a natural aggregation point and what you're finding is companies like T you know all these these data breaches that happen is create a liability for companies and holding the day they really don't want to have the pi the personal identifying data they would like to have access to Rich verifiable data they can build a relationship with a customer so if you give them API access in a in a protected way and a better way and they off load the liability they're very very happy with that so I believe that that there are strong incentives for major companies and I've talked to them I mean I've talked to a lot of them Banks agree with a number of banks agree with me on this

one uh I can't say which ones but huge Banks um and they they welcome this also Major Brands welcome this uh so I think this actually is where it's going to go yes you have the Googles and you have the Facebooks that monetize your data and this is where the big battle begins because you can see where Google and we're they're collecting all the data about us um and I have no control over that they're going to they're going to try to be an identity provider and they're going to try to monetize it through advertising I think advertising is a dead model too and there are a lot of people in advertising acknowledge that um because once you know a lot about people and the the matches that actually if I get enough data I can give

people what they want that's a different model in advertising where you you're sort of scattershot and you're and you're making money on just being able to to spam people uh and you get all these false hits now that I think that's going to change dramatically so I think you're going to have a different business model uh and so when you get a different business model and different value proposition and different economics then you're going to have a shift so what in this model um maybe I understand really how it works but how how do you prevent someone who has access to your data who to whom you've given access to your data from copying it and keeping it for for himself well I mean there there there technology where you can give them a they can they're

various there there about three different ways you can do that um and and I think that there's one model I mean this is uh stuff we do MIT will say you have you ask questions and you don't get the data you're just ask questions of the data so you really don't possess the data there ways in which you can actually uh you can have a temporary hold on the day and then then bring it back and there are other ways in which you can actually then do it through uh and you can actually do it through in a contract so you're saying the part of your agreement a terms of service agreement is any party can retracted agreement and data and we assigned for that in a in a um uh on the blockchain so you can have that verified now if a party breaches

that then they can be from the network and they can be subject to to certain kind of Remedies um so I think there's a combination of these things uh yes you're can always get some bad actor that's going to hack some kind of weakness in the system but the fact is I I think that you can increase the cost of that uh in such a way that it that you can minimiz you make it an edge condition rather than in a central condition that that's an interesting thought to to have a terms of service on your data because so there's terms of services to use Google to use iTunes and essentially we are subject to their terms uh but uh I I I agree that it would be great if we

could have our own terms of service for a you can use you can use my data like this you can do this with it yeah right we have I've been working on that for many many years but we've actually now implemented is is it's a peer-to-peer terms of service agreement and so you know and and it's enforced through a smart contract and and uh so if if a person's a bad actor you you know who they this is it you know who they are you can they can be a huge reputational hit and then you can and and you could do what the Greeks did you can throw them out of the city you know that was the when you expel someone from the city when they're bad citizen outside the walls that had a huge cost and you can do that through contract law this is the

interesting governance mechanism particularly in a common law uh jurisdictions you can do that no that that sounds that sounds extremely exciting yeah I mean I do think if you start having these like blockchainbased maybe systems where it's like reputation on both sides then maybe things like that become possible so you mentioned before that you were also working on a startup can you share about what the goal is with that and what you want to do yeah I think what we what we recognize is that it's very important to establish uh an open source component to to this new ecosystem and and you know

one of the things that uh I think you asked me earlier is what the success of Bitcoin the fact it was all open source was really huge a huge issue a huge plus um so you're really trying to create a resource that is open to other people they can build value on so what we are about an intrinsic and is actually being able to support uh and and it builds on an open source uh project right now called flux stream that has um it's it's uh was done out of Cari Mel and and U that gives people control over their it say like Quantified Self stuff the point

is be able to give have someone set up their own container of their own data and be able to assert certain credentials about themselves put it on the blockchain that they control and then being able to assert them uh I think you create the whole different kind of dynamics that people will have different badges different ways in which they can assert and authenticate certain attributes of themselves um that will enable all sorts of uh possibilities now one of the areas that I think is that I mentioned is most critical is is this what's happening in this new what I call sort of the gig and gild economy that's coming coming out where you look at the

maker movement you look at Uber you there's a whole you look at instacart you look at all these efforts to say well here's an independent contractor uh how do we create how do you when they're working for a company you're you're creating a certain assets skill assets and your skills and your accomplishment why shouldn't you as an individual be able to benefit from that and why can't you in turn work through your own network to to create learning value increase your craft but also mitigate risk and enter into agreements with the Ubers or the um instacart all these other kind of service or be a maker I

mean what is how the maker movement is is is I think inevitably going to be there and that to me is like an artisan movement but it's not a guild is not in the sense the old sense of a guild a guild I think is you you yes it's a way in which people can come together and you can use Smart contracts to reduce the the enormous friction legal and economic friction and organizational friction and how to provide how to provide services so one of the things we're very interested in and it comes out of the background at at the law lab is how do you create you know self Le there's so many legal contracts that are just very standard agreements that once people agreed them and I have the right

credential I should be able to push a button and get a loan push a button get a new passport push a button and create a credential around credit that that is is be independently verified so we're looking at this in this this this new networked economy and also in developing countries um where there's a huge opportunity and need for that so that that's sort of the intrinsic value proposition um and it's sort of based upon these principles and how to create basically an API network of a value that that will bring a new economy and be allow you to monetize us in a very different ways than having the control of a of a Google or or a Facebook like massive participation for lots of different

people to be sort of distributed the Innovative around how to create credentials how to create value and not how it be captured by a few small big companies cool well uh John thanks so much for for coming on today and joining us it's it's really exciting the things you're working on and well thank you very much it's exciting to be all part of this together so if if people want to learn more about your work so we'll of course link to ID cubed and to the bitco and burning man book is there some other place you want to send people to yeah uh well I'll send them to ID Cube and eventually we we're going to be sending them to to Intrinsic as well so that that and we'll be able to do that and be

when we be more official but uh I the white paper ium will be putting out on the on the Cube website okay fantastic yeah cuz you wrote a nice white paper that unfortunately is in draft stage so we can't put a link up yet but yeah if you let us know then you know we we can let people know I will definitely do that and I'm always welcome for feedback I mean this is a living conversation that people have so I'm always I look forward to that yeah no thanks so uh one last thing before we wrap up so we we started this t-shirt contest basically if bribing people so if you leave us an iTunes review we're going to do a drawing I I think we said once a week but let's do it once a month and we give out four or something like that and then

we send it to you and of course you can say it was the most enlightening hour you ever spent or you can say it was miserable I want I want my I want my money back uh so either is fine um so yeah and and of course if you do that you need to send us an email because we have no way of identifying people on iTunes so you need to send email to show at end.com just let us know uh which one it is so yeah so that's it so thanks so much for thank you very much it was great enjoyed it absolutely so yeah so we put out new episodes of eps and Bitcoin every Monday of course you can get it on iTunes or your favorite podcast app you can also get the video on YouTube at

youtube.com/ Bitcoin and that's it so thanks so much and we look forward to being back next week [Music] no