F*****ing Nick Szabo, Smart Transactions and Securities

Transcript

turn on and I'll get started and I'll try to work through the presentation as fast as I can basically it is on okay um I don't see the light but I believe you thank you so much thanks for coming um this talk is sort of um a research update like a high level research update some of the research I've been doing in the last like year or two or more but especially sort of the research topics that I think are like particularly hot in my mind right now it's sort of meant to be like a high level overview where I can I give you drop you some high-level bombs don't go into really the technical details but just give you an idea of like sort of the way things are looking from like a high level research perspective to me right now and um should be interesting I

mean I promise it'll be interesting so here we go this looks like it's offensive but it's just misleading because here is like really the slider you know I've been for a very long time talking about how bad Nick Zabo is and you know I'm not exactly backing down but I have like more to say on the topic about you know sort of like how do we move on and then there's a conversation about smart transactions which is um what's that we have Smart contracts what are smart transactions aren't transactions done and securities which is everyone everyone's favorite topic and then but actually the talk goes in

the other order do I have to wait for the end for the next album stuff so let's bear let's go through the security stuff the boring stuff first but I swear it's actually really exciting so this is just the out so I'm going to give you the whole the whole outline of the of the talk um but actually I'm going to skip the outline just because um we don't have much time so so um so basically what's happened in Security in the world of Securities is that like the SEC has been unintentionally really regulating the English language internationally for uh the purposes of the word Securities because everyone's really afraid to cause something a security unless they be SEC regulated um and you know and and their their own posture is like oh all Securities are SEC regulated and therefore something if

something's not necessary related for them it's like it's a security that is regulated but it's Exempted and that's how it's regulated as exempt and so there's this world where all Securities are in their purview and therefore everyone else is sort of forced to live in this world where if you say security that means something that's regulated by the SEC and this like changes and restricts the way people use the language it's it's like like screwing with the way we use English around this particular word and it really has um as I like hope this will show you uh really really negative effects on like the way people understand or able to reason about and navigate this space so basically people are afraid to use it in a way that the SEC doesn't like or isn't exactly the way the SEC uses it I just use it you know

within the purview of their regulatory thing for the purposes of their regulation and so for them all Securities are SEC regulated and so this kind of leads to this weird world of the SEC regulating the English language internationally and but you know we're gonna kind of break the mold a little bit and go outside of just this world of Financial Security is of debts and bonds and equities and and options and Futures and all these different financial instruments which to one party the seller is a liability and to the buyer it's an asset um so these are like the traditional sort of asset Security in like a sec sort of world it's all about money it's all about sort of

um Securities and financial contracts and the financial contract is like a type of legal contract so the natural way to generalize is this okay what if you have Securities in any legal contract in any contract where you can have a position that you can sort of create a little token for where the person of that token has that position um you know we could like for example um um you use that kind of mechanism among many many other mechanisms to create Securities and contract law also if you think about like a signed piece of paper with contract terms that's also kind of a security and contract law um because basically it secures your position in contract loan and so you know like people used to security is

securing Financial positions and financial contracts but why not in contract law in general and what about corporate law well we have in ethereum and sort of very famously doubts and Dows are literally Securities and corporate law like you like post this smart contract onto this like medium and now like you have a corporate person born and like you know sort of like recognized in the purpose for the purposes of like commercial disputes and you know more and more disputes also a corporate uh in like an incorporation documents also conforms this kind of security so but all these are sort of Securities in the law and you know and that's sort of like the natural place today where we talk about Securities because basically um because of this history of Securities being like a legal sort of instrument

but actually um if you think about sort of a basic organizational principles of security they work in many many different contexts and I want to give you some examples of computational distribution system Securities that are very very useful um and which like you just don't think of or you wouldn't think of because like sort of Securities are not for this world of like Computer Science and Industry systems so you know normally you ask okay you know like will this program halt not is there someone on the market willing to sell any security that this program will help when you're willing to ask that question it's like it sort of flips a little bit changes a bit the nature of the question is not so much can a program tell me whether this program will do this let's go well can any

Market participant tell me that this program will do it's not every program but like this program in particular um and so like you know this sort of speculative prospective promise may be perfectly hedged or not you may know that the program is going to help you may not but you can still sell this kind of instrument you could still transfer it and it could help an operating system figure out how to schedule tasks you know it could help systems organized because of the predictions and promises that are entailed in securities so today we can't imagine economics without Securities soon we won't be able to imagine any kind of you know crypto or computer science without them um you know people say code is law I

mean as far as I can tell a code is Securities because it like secures a relationship between you and like a service writer almost always or you and some provider some some kind and so you know uh code is much more Securities than law already we have all sorts of security sitting on our systems and computers we just don't talk about them like that we don't recognize them as such but they're they're sort of everywhere and every every speculative execution you have sort of like a a promise that is sort of like you know it's all it could basically be I mean and it often is like created you create like a token for it based on like some programs like expectation about what will happen somewhere and so basically like the the organizational indispensability of Securities and economics actually like

will have an analogy and has an analogy directly like in computer science and industry systems we're basically like computers need to organize to figure out how to execute tasks they can't just imagine themselves in a computational world where they're thinking one computational step ahead like what probability is it to the next step they have to prospectively think far ahead and understand the way that you know uh sort of like we understand economics today like the critical role of speculation um now that's like sort of going to be the case also in computer science and history systems because it's just that much more efficient we can't imagine economics doesn't because it sucks without them and because of this reason basically Securities are proliferating they're

proliferating all over the place and they're not recognized legally but they're becoming more and more of an important part of economic life and just because they're not recognized doesn't mean they're not recognized I just mean that you know like some formal regulatory Authority won't formally recognize them I mean people still have disputes people still are in Commerce um and as these things proliferate and become more and more ordinary part of doing Commerce basically every neoliberal subject's right to transact is on a collision course with SEC regulation and this is like a very very serious sort of legal problem great um next section smart transactions um but yeah let me just let me just like

summarize again okay Securities are actually not just Securities and financial contracts that are regulated by the SEC but there's a whole world of different kinds of Securities out there some of which are regulated by the SEC and not and you know by letting this you see monopolize the use of this word we're losing out on tremendous organizational capacity efficiency gains etc etc and basically the issue with this is basically because people sort of do it anyways just in a way that's not recognized by like they don't they don't know they're creating Securities but they are and they don't know they're having security disputes but they are uh and they don't know they're you doing it in like every day Commerce but as it becomes sort of more more and more normal as like everything

becomes like digitalized and smart um people basically like almost won't have a right to transact without touching security is because it's almost like you can't compete like you can't participate really in the economy like what is your right to gainful employment if you can't use Securities in like the 21st 22nd 23rd century I mean it doesn't seem legit almost at all um and basically just because the indispensable nature of security as an organization um very broadly speaking like way outside of financial products all right so next Topic start transactions um smart transactions are sort of um you know smarter electives is sort of like a you think of it as like a

marketing name for this general idea that I'm about to describe um it's basically um it's what what sort of came out of is this actually is a response to the Mev um sort of challenge to the Constitution of the blockchain um you know everyone is surprised about what transactions can do and contracts can do sort of all the time but like with MEP sort of this has pushed us and surprises even more we don't really know as much sort of like what a transaction is supposed to do as before we like the semantics of a transaction and therefore you know what it means to transact with the blockchain

sort of is challenged by the introduction of this of the Searcher intermediary role that facilities execution of transactions um and so basically you know you have like in the classic mbv world you have like the transactions that are made first and then the Searcher the search is second and then the Searcher sort of just orders the transactions and the transactions like don't interact with the Searcher anyway or the Searcher anyway or with each other really except for like in the way that they do in the evm in like the uh according to like evm traces um and that's sort of like the the birthplace of math but because that sort of challenges transactions transactions basically have to respond and they basically become smart they basically become search aware the way

that people like write solidity the solidity that you know programs or programmable transactions changes because of the search the way that ethereum transactions execute like has to adapt and is adapting as transactions secure themselves against the search and eventually use it and master it in the sense of becoming sort of not victims of and exploited by the search but are more like being provided Services by the search and are tapping into it as like a wealth of uh sort of computational and informational power that Searchers have as an economy so basically instead of a transaction semantics being like ethereum Trace

semantics it's it's actually very very much more complicated uh a smart transaction interacts with like the search by paying for Mev deliberately by conditioning when it pays deliberately in the context of not just itself in the search but the other transactions of that bundle and also there's like a um you know the possibility of introducing minor transactions or sorry the Searcher transactions into these bundles right which we've known for a while but that basically amounts to doing IO with the transactions at search time at me time and so actually like not only is it about ordering them and interacting with them but also you know in a way that they pay you for and they

want to have done to them you know instead of this sort of extractive like involuntary extraction of value that we kind of see today so basically like as transactions become smarter you know like transactions just will refuse the participation in liquidations you know they'll just refuse to you know be part of certain kinds of activities that can be more and more recognized as transactions become smarter and smarter and you know instead of a world where sort of everyone tries to create a bundle so they don't get background maybe everyone will pay a little service fee for background protection and like maybe that is going to be a little more expensive for everyone but at least you know in the but but the benefit is like oh you don't get involved in this

liquidation sort of thing which actually in the end is like much more expensive than like the protection actually because protection services are relatively simple um but let's not go into detail too much the point is basically transactions today don't interact with the Mev search They Don't Really and when they do it's amazing it's like hail this Innovative event but this is going to happen much more we're going to see transactions become much more aware of the search much more aware of who they're being searched with and much more able to sort of um conduct the Search and say look I want the search I want this kind of result and then to be included in a bundle basically should mean that your transaction was like solved optimized executed correctly like executed well as if like you know

um as if the Mev search wants your transaction to go well so like you know smart transactions I think it was like they're programmable yes like all ethereum transactions but they're also sort of situationally aware and in that context of I mean research that means two things one of them is being aware of the future as like the Searcher is going the search is going to be on the current state of the where your transaction is executed but also means being aware of other transactions and service providers and the search in general like um in this sort of um very Broad and open-ended way because basically we have like arbitrary I O with arbitrary with arbitrary sort of um flexibility with it within the search um because basically like us transaction

can introduce arbitrary data to the blockchain that like people can Call Etc so you know there's a tremendous so basically there's a tremendous explosion of the semantics instead of just being ordering of dumb transactions it's like ordering and parametrization of smart transactions were basically like the they behave differently uh on these different on these different searches maybe contingent even on which of like on search data that isn't available in the evm and all sorts of things they like in the future you can imagine they become aware of which today they can't or have limited awareness of and so the the amazing thing about smart transactions though really is or there's a lot of amazing things but one of the amazing things is the way that sort of um the the world computer as like the

concept sort of you know isn't sort of just executing your transactions but also optimizing them and and and and potentially cranking a lot putting a lot of computational power not towards something like proof of work but towards actually like the faithful execution of your transactions and so um you know uh the the demand for these fees sorry if they're meant for the search actually I think will be sort of created by smart transactions also more you know more than just today by Searchers who are trying to extract value um because basically um they're gonna they're going to basically be paying for these better outcomes for their transactions uh and this is going to create new market participants and unexpected configurations as people figure out what best ways to serve

different transactions and basically sort of this like culmination of this like sort of realization that like yeah proof of work is obviously about proof stake but but uh miners can still do med mining and that actually can be very useful because like you know like imagine if like the world computer is sort of mining power wasn't just there to secure it in this like relatively slow execution but actually could be devoted to optimizing execution of all the transactions like searching the space of all the possible ways they could be ordered to find ones that like Everyone likes that really just does a great job across the board sort of like a compositional search is amazing magic and it takes a lot of either amazing lucky math or computational power and we have this

tremendous computational resource today it's like the the proof of work mining rigs in the ecosystem and um and and and and they can transition to Mev mining uh if the Mev search ecosystem is organized in such a way where Searchers can use this commodified Searcher as part of their ecosystem and um and you know if it's done pre-merge then then the miners maybe won't have to sell as many graphics cards which maybe means we have a more powerful World computer which maybe because we get better transactions especially instead of this world where like you know proof of work is like politically uh undesirable should be banned because it's bad for the environment Suddenly It's like optimizing the economy and is like good for GDP growth and like needs to be

mandated because of the recession and sort of like the politics changes around mining when it goes from proof of work mining to MEP mining in particular in this like sort of host smart transactions world where Mev is actually good for the transactions that are being searched um we're basically like the all these resources going to optimize transactions would actually be sort of not um not wasted but creating like economic surplus for like lots of different Market participants so basically you know we didn't have like a prospect for minors in like the proof of State Transit should be asked for State obsoleted proof of work but now that like the Mev constitutional sort of uh situation is happening actually we have this opportunity where basically we

can give miners a path forward uh basically to change nothing about their hardware setup but to change sort of the nature of the mining from this uh um proof work mining to Mev mining all right um so I'm going to the last last part of this La the last part I just want to know can someone tell me how many minutes I have been great um so so what did Nick Samba do uh well he kind of invented blockchain immutability and smart contracts and Associated them with the blockchain like before like anyone was even around and sort of like you know like and he he doesn't really deny it and and you know blockchain

immutability comes also with the stuff like governance minimization and a lot of associated memes um including you know if it's not permissionless it might as well be a database and all sorts of all sorts of beeps this is like this meme Plex that sort of is like an outgrowth of an example's work uh in blockchain governance not blockchain in like crypto political governance that he did like before crypto is crypto that we recognize today back when it was like nothing to do with crypto assets and like all to do with sort of like cryptography and distributed systems and I mean so I mean at that time they did have like like centralized uh e-money and stuff like that but um but you know that was a big problem right because it

would get shut down and and sort of nixabo in his like amazing Brilliance and like uh limited wisdom um associated immutability with with a blockchain and it did this amazing legal trick of setting up like a technically a private International legal order that's very very deviant and which basically refuses to change the software no matter what claims are brought by who because it's not me it's immutable um and and so he really created um a big part of our history ethereum in like the cryptocurrency space in general and he created like the conceptual frame in which we exist in which we identified or still identified for so long

um so he really like defines us in a sort of big way um and and the reason why it's sort of like really critical is because we have blockchain governance issues and we can't solve them we can't do anything about them because he's banned us from it he said no you're not allowed to touch it and it really does screw up blockchain governance in a big way because it makes it so that like you know earlier decisions have become ingrained they fossilize into the into the protocol which then basically like it doesn't matter like how criminal the will of the founder it doesn't matter what disputes there are doesn't matter the consequences sort of Next Level says like no no you know like I know better like politics only goes one way like just know to politics no to morality no to law Etc and and sort of like

you know he's wrong and we can take it down very much and many many we break down a million orders oops oh no what happened here oh I need to reload the I need to refresh because I was um I don't know how to do this is okay a new date coming on oh almost there oh yeah great so so yeah

um you know but um and basically like the the sort of like You know despite like how severe what he's done is actually because like a fully autonomous software like Unstoppable code like you know RoboCop like like combined with chain link and like 4chaners I mean it's not going to be a good story and it's like already not um and I think there's a there's sort of like a difficulty that we have um in recognizing okay like you know that he did this thing that we identified with and that is horrible and then even if you do it's actually really challenging also to like forgive him for this thing because like he's created this horrible thing then I was like a part of you it's like how do you you know how do you

forgive him for that especially when he's compromised our governance situation completely where we basically don't have a political Freedom legal freedom to maneuver to protect ourselves our users Etc et cetera et cetera um you know especially when the consequences are so high maybe hard to understand how we can and why we might uh need to forgive them and but the very duty to move on and we can't create a blockchain governance regime that's just a reactionary sort of uh uh you know anti-zabo thing you know we need to have like a independent foundational constructive approach that just you know sort of moves on Beyond like his Paradigm doesn't like sort of trying to create this reactionary uh you know like like like what is this called the

material dialectic you know like incorporating sabo's thing into some better future no like it was wrong it's part of our history we can admit it we can forgive him move on and just do it in a better way that has nothing to do with it doesn't is not defined with respect to you know his failed uh blockchain governance uh ideology and you know um Matrix Etc et cetera and and it's it's it could be really really tough to forgive someone who's done something in particular when it affects you personally um so you know a lot of things helped me for your next album

um the maybe the number one main thing though was to realize like I could have done worse I could have done worse like I could have been in his place and have done worse not just in that place but in another place like and I can imagine sort of how you can be in this legal world of of of of thinking like logically that like the conclusion because long spot it's just a bandit like use a lot to ban law like let's make a right one law that says no laws allowed and like that's it and like and like when you're coming from like this particular like legal tradition that like you know we have in the west like it's not it's not it's not unsympathetic because like legal systems aren't like inherently disenfranchising they're inherently dehumanizing they're

inherently like undermine people's ability to you know like have like justice and to you know be treated in a humane way and so like you know imagining that the law is made of legal systems and that legal systems aren't subject to the rule of law and that like we just have like law as a system and that all systems are corruptable and going down this like sort of structuralist logic of like the fallibility of law like in the way that like I might do for like every single blockchain governance mechanism and say like no no it just doesn't work you know um um like Nick Zabo basically did and said no but as a result it isn't like oh we just don't use the structural stuff we like have like other means you know the result is no you make a structure that says no structure like

and no rules allowed basically like that's like the one rule another way to think about it is like you know you have like you have a structure and then you put some do not tamper stickers on it and like the sort of like that's what he's done he's like it's better and his you than having like a system that changes the system and you know um as like and it is kind of traumatic to realize that you that like okay you know he did this horrible thing is that like also you would have done okay but it does help with the Forgiveness part to like understand that like actually it's like a it's a it's it's a fallibility that comes potentially from um the like legal Matrix that he's in the lack of possibilities that he has in his own sort of uh legal struggle

um a lot of other things helped me forgive an example also um but then another thing that really really helped me is the the lack of time for Redemption there was no time there's no time to like to go back and to fix all this in a way that is properly fully Redemptive and so since there's no time for Redemption you know it you actually can't you don't you you don't want to wait your whole life you know you don't want to wait too long before you can forgive someone basically when someone is going to take 10 years to redeem themselves like it might not be okay for you to wait 10 years to forgive them and so in these timeline mismatch scenarios I think you can kind of have an exceptional sort of forgiveness because of the need for forgiveness on a faster timeline than

the possibility of redemption um so basically like the impossibility of quick Redemption um plus like my immediate need to like detach of like a Nick Zabo a reactionary posture and instead have like my own independence like completely like emotionally completely um you know basically um um you know it sort of drove me to find these reasons like you know why why why why basically like um you know why I can forgive him and it's not sort of wrong for me to do that despite everything that's done you know because of a number of reasons you know

including the fact that like sort of you know he defines like me and my friends you know because of the way we see the world because of because I could have done worse you know and because like every like that timeline that I need to forgive it's like way shorter than the timeline than he has for Redemption but Redemption is possible for Nick for crypto um and it's a hell of a good thing I mean it's gonna protect us and it's gonna make everything much better uh so you know I think we should really try to recognize the bad move on and do better in like a totally Fresh Start kind of way thanks guys [Applause] uh just don't forget to take your stuff

in the cloak room because we're going to close everything and you don't want to your luggage or jackets to stay with us during the night I'm sorry you don't have questions for Q a time for Q a but we're closing down the venue so I think we should kind of exit thank you all okay