0:00 I'm going to talk about three different things, they're all related, and I'm really just going 0:03 to mention the first two and then get into this third one. 0:06 So the first and most important thing is sort of some like emergency discourse kind of repair 0:12 type concept. 0:13 So an objective function is something that you want to achieve. 0:17 So if you don't agree on that first, the conversation is a waste of time after that. 0:23 So I think there are a lot of people here, you know, this is a very diverse community. 0:28 Some people are interested in cheap transactions. 0:31 Other people want to like single-handedly overthrow most of the world's governments. 0:36 Some people want to like timestamp documents. 0:38 So if you can't agree on what the objective is, everything you could say after that might 0:44 be true and you could still get a different conclusion and everything would be a disaster. 0:50 So I just wanted to mention this in two slides, this is the second one. 0:54 So related to the block size, if you, if someone hasn't stated what they think the 1:00 block size does for Bitcoin, then you can't even tell if what they said is related to 1:05 improving Bitcoin according to them, let alone whether you even care if what they said was 1:11 right because you even agree with the purpose that they expressed. 1:16 So secondly, if you're going to state conditions under which the block size should increase, 1:22 you should also be able to say state conditions under which it should decrease. 1:28 They're actually the same question because either it's related fundamentally to some 1:31 principle or it's just kind of like what you think today and tomorrow it could be something 1:35 else or if you went to a different person, they could think something else. 1:38 So that's, I just really wanted to mention that because I think a lot of misery, and 1:41 I hope it's not too patronizing because, you know, professional philosophers struggle with 1:46 this kind of reduction to first principles a lot and I think a lot of misery has basically 1:52 been the result of this and nothing else. 1:55 So I also wanted to briefly mention something that I wrote a blog post about very recently. 2:01 So not agreeing on the objective function is almost as bad as not agreeing on the constraint. 2:07 So decentralization is something that I think we would all agree is sort of this constraint 2:11 and we need to keep it at some acceptable level. 2:15 So I don't really actually want to go into this because there's not a lot of time, but 2:19 basically my conclusion is that if you, you need to run a full node in order to know whether 2:24 or not you've been paid or you're asking someone else if you've been paid and so you have to 2:29 trust them. 2:30 So this process of using money becomes more decentralized when it's easier and cheaper 2:35 to run a full node and I think, so this is like the scalability comment I wanted to make 2:41 is that I think that since it's an engineering requirement that Bitcoin be kind of above 2:47 the law. 2:48 So it's not like you don't have to want to break the law or anything, but if you acknowledge 2:52 the law as an authority, it is no longer peer-to-peer. 2:55 So everything that's peer-to-peer, BitTorrent, Bitcoin, whatever, it all is above the law 3:03 just by design. 3:04 So it's not like, it doesn't have to mean anything politically, but my point is that 3:09 I think the real constraint is actually not upstream bandwidth, but I think it's actually 3:14 Tor bandwidth so that things remain private and I think it would be very cool if someone 3:18 could figure out how to do metering of the bandwidth using Bitcoin itself and with that 3:24 being the case, you would have actual price for this bandwidth and that would be the last 3:28 abstract thing and you could add them all up and then you'd have an actual number for 3:33 measuring decentralization. 3:35 But since this is part of the communication block and I really have something important 3:39 to say about this concept of peer-to-peer governance. 3:42 So I think we can all agree that governance is more important, or at least it affects 3:47 the software, the causality kind of like goes up through this pyramid. 3:51 The governance is the only thing that can change the protocol's rules and so it's actually 3:56 even more important than the operation of the protocol or the software that uses the 4:00 protocol. 4:01 It's sort of, it's more important. 4:05 It's really, really difficult to figure out how to do this and how to communicate this 4:08 information given that everyone is going to be an equal peer and I really think that 4:13 no one has ever done this before because even something else that's peer-to-peer like BitTorrent, 4:18 it doesn't really matter if you fork BitTorrent and you create a new BitTorrent client. 4:24 It doesn't affect the people who are already using their old BitTorrent client at all. 4:29 So it's like they're all soft forks when it comes to BitTorrent or basically anything 4:33 else but with money it's a big deal because what other people do affects you and so we're 4:39 kind of like all in this together whether we like it or not. 4:42 So you need some kind of governance thing, yet with this peer-to-peer thing it's going 4:46 to be very difficult. 4:50 So I'm suggesting that we can use markets to inform this governance process. 4:54 So it's not like a government, like you don't have to do this, but it's like what should 4:58 the government do, governance. 5:00 So markets can help us inform this governance process a lot, I think. 5:05 So first of all, they're totally peer-to-peer and like permissionless and decentralized 5:10 just in their nature because all the information happens locally, but what I really wanted 5:15 to explain is that markets transform subjective values into objective information. 5:21 So that's a very helpful thing. 5:23 When you, in capital markets like the stock market, you make a trade, you have contributed 5:28 knowledge to the market. 5:30 So you think the current price is X and you change it to Y and you think that the X was 5:37 wrong and you think that Y is right. 5:40 But more importantly than this knowledge that you contribute, you know that anyone could 5:45 have changed the price to anything, but they did not. 5:48 It's you who's changing it from X to Y. 5:51 So you think that you're actually the number one expert in the entire world because anyone 5:54 could have done this thing and picked up expected value and made some money in expectation, 5:59 but they did not and you are doing it instead. 6:01 So it's like you're really saying that you're the expert. 6:04 So this is sort of like a maximization of the signal-to-noise ratio in a way and market 6:10 prices are constantly and unanimously acceptable. 6:13 So at all times, to all people, the price is an acceptable measure of future reality 6:20 because if this is ever not the case, someone can trade and introduce something that, introduce 6:27 an edit to the forecast that nets them money. 6:32 But most important of all, the real purpose of all this is that prices are what game theorists 6:36 call common knowledge. 6:38 So if I know the price of something is K and you know that it's K, I mean we can just look 6:44 at whatever price we're talking about and we'll both know that it's K and everyone will 6:48 know that everyone knows that it's K and everyone will know that everyone knows that 6:52 it's K ad infinitum, et cetera. 6:54 So common knowledge enables something called free coordination. 6:59 So since everyone is on the same page, it's very easy for a group of people to just switch 7:04 from one thing to another thing even without any kind of leader being involved. 7:10 So that's a really important thing. 7:12 So I kind of think of it as actually it's not sort of like you have these proofs in 7:16 cryptography that you know like a certain number or something. 7:20 But I see prices as kind of like an expertise proof. 7:22 You can just look at them and everyone knows that this was an accumulation of a serious 7:27 quantity of expertise. 7:30 And so that can be very helpful to us. 7:32 And it's not commonly known that markets can be about anything. 7:37 They don't need to be about capital. 7:38 They can be about these events which are today commonly called prediction markets. 7:44 So you have these like partitions of mutually exclusive states. 7:48 And so on the left here, one of these things is paying a dollar. 7:51 Only one of them because Hillary Clinton is either going to be elected or not elected. 7:56 And on the right, it's basically the same question. 7:58 It's electoral college votes in the United States. 8:00 There's 538 electoral college votes for president. 8:03 And you can just instead of being, you know, it's like zero, one, you can just split this 8:07 thing so you can get a continuous measure instead of a discrete one. 8:14 So this has some costs even though it's only like an information thing. 8:18 So a cost that it does not have is you're not like sacrificing any of your autonomy 8:23 or anything. 8:24 You can still decide to ignore this later. 8:28 But it does have some costs. 8:29 And so the cost of it, you need an oracle, you need this market infrastructure, you need 8:32 traders. 8:34 And so as was mentioned, I have my own project Truthcoin aims to eliminate the oracle completely 8:40 and make it peer-to-peer. 8:42 But it's highly experimental and requires peg sidechains which don't currently exist. 8:48 So you could make a very, very, very simplified version instead which is sort of what I'm 8:52 proposing with this federated idea. 8:56 And you could have these multi-sig functionaries. 8:58 So this is kind of like a tradeoff, right? 9:00 So I'm saying you're picking like something like seven people to just type in five or 9:04 six numbers later. 9:05 You need to type in, you know, what the objective function ended up being. 9:09 But they don't need to use any expertise or anything like that. 9:11 They just type in something that we all know and you're just trusting them to do it honestly. 9:15 So this is a tradeoff like anything else. 9:17 So like for example, the SHA-3 competition that we just heard about, you had to have 9:21 experts kind of administer. 9:23 That was like endorsed by like the federal government and there was like a hierarchy 9:27 of expertise and the experts were sort of in charge. 9:31 But with this, you know, you don't have experts. 9:34 You have these representatives who you're only picking them based on how likely they 9:39 are to do this job. 9:41 So you're not saying they're smart or that you like them or anything. 9:44 You just think that they're likely to type in these numbers honestly, possibly because 9:47 they own Bitcoin businesses that would lose future business or something like that. 9:52 So the problem with the experts thing is that it's a circular definition and this is a very 9:56 diverse community and it's like who is going to resolve a dispute if you think someone 9:59 is an expert and someone is not. 10:00 But it's much easier, it's much more objective to pick the representatives. 10:04 The other thing is that there's this tradeoff between meta-deception and deception. 10:07 So the expert, you might pick these seven people or these three in this case and they 10:11 might deceive you, but you would know that you had been deceived because they had these 10:16 numbers and they just typed in numbers that were different. 10:18 So you would know that they deceived you, whereas today I think we're just kind of confused 10:23 in general and it's sort of like we don't know what we're confused about or who is actually 10:28 more confident or more of an expert about a certain thing than someone else. 10:33 And so it's just a tradeoff like anything else, but this is the bad news. 10:37 So I don't really have a lot of time to go into this, but I think people, the other two 10:41 things, so the market infrastructure is actually very, very, very easy. 10:44 You don't need to do this thing with having everyone submit bids and asks into like a 10:48 big order book and like waiting for them to overlap or something like that. 10:51 You can actually have something called a market scoring rule, which just has a single state 10:56 and then a single person just atomically updates the state and it's only them. 10:59 So it's just like passing a single Bitcoin around, only faster. 11:05 But the way this works is that there's this formula that you have these mutually exclusive 11:09 states and you have the formula that relates the total number of outstanding shares to 11:14 an account, the money that the market owns, and people propose updates to the share state. 11:21 If you want to buy shares, you propose an update that has more shares. 11:25 If you want to sell, you propose an update that has lower shares. 11:28 You do this on your own computer. 11:29 You use this tiny formula. 11:31 You can actually change the formula around a lot, but you use some formula to relate 11:35 these things. 11:36 And if you pay the difference, then it's valid. 11:38 If you don't, it's not valid. 11:39 So you can buy. 11:40 It issues the shares. 11:41 You can do buying. 11:42 You can do selling. 11:45 On the right, I have this first difference. 11:47 So time is on this vertical axis and on the right, I have this first difference. 11:51 So this red guy at time equals nine bought 18 shares for 12.86 something, and then this 11:57 green guy at time equals 12 sold 21 shares of that right, more right state for 2.7. 12:08 But my point is just that this does everything you would want and it's literally one formula 12:12 and it just doesn't get any simpler than this. 12:14 So that would not be a lot of work and I already have code that does that anyway. 12:19 So the other thing is getting the users involved and you might think that you would just create 12:22 two different markets and have an objective function for one, an objective function for 12:25 another and you would then just look at them and see which price is higher because this 12:30 is a representation of the future reality if you do a certain thing like that. 12:34 But you can actually go way crazier than that by combining them and now you've got four 12:38 mutually exclusive states. 12:40 You get a lot of stuff for free. 12:42 You get things like decision insurance so you can just set up something that pays you 12:46 a ton of Bitcoin if something that you don't like happens. 12:49 So if you're interested in, you want to see the block size increase, you could bet that 12:54 it would not increase and then after you're disappointed at least you get a lot of money. 12:58 So it's sort of like hedging yourself, something like that. 13:01 You can do that, you get that for free as just a result of this, you know, summing these 13:05 things. 13:06 You also get, depends on, you can bet on the objective function itself vertically. 13:11 But the cool thing is that for every n dimensions you have here, you get n minus 1 relationships 13:17 and that lets things get really fancy because I don't really want to go into it because 13:20 it takes a lot of time but you can basically invest a total of one Bitcoin and get a total 13:25 of one Bitcoin back if things didn't go your way. 13:28 So if you really wanted the block size to increase, you could do this thing where if 13:32 it didn't increase, you'd get a Bitcoin back. 13:34 But if it did increase, you would get something equal, the entire portfolio that you invested, 13:40 the one Bitcoin would be worth the Bitcoin return between now and the time that you made 13:45 the investment. 13:46 And you can go even crazier than that by multiplying again by the exchange rate and you can put 13:50 that entire process in cash. 13:52 So believe it or not, you can actually start with $500 US and end up with at least $500 14:00 or more, even if the Bitcoin price collapses, as long as it doesn't go to zero, it's actually 14:04 the log price, so that's why that doesn't make sense. 14:07 You can start with $500 cash and you can get it all back if someone screws up the decision 14:14 according to you and if the decision goes the way you thought it should, you'd get something 14:22 that covaries with the objective function. 14:24 So you basically always have, tons of people have an incentive to participate in this market 14:29 and you can even charge these people a little bit of money for this insurance service and 14:34 this money can pool up as liquidity, something called liquidity sensitive market scoring 14:38 rule and then there's like a big pot of money for ideally like researchers to kind of like 14:42 start fighting over and then as they fight over it more, the market becomes even more 14:46 liquid and that's how it might work, it might work better. 14:49 So I'm just going to really quickly go over the benefits, the Oracle is a slightly annoying 14:55 cost, but the main benefit is that you can use the price as an objective function and 14:59 the price kind of catches everything, right? 15:01 It's like everything you would want, if Bitcoin is useful or whether or not it's different 15:04 from something else that we already have and so the price is kind of like this big funnel 15:09 that catches everything. 15:10 But even if you wanted to have lots and lots of different objective functions, another 15:14 benefit is that you can just keep redoing this, it's very simple, you just need the 15:17 Oracle to type in these things later. 15:18 Paul? 15:19 Yes? 15:20 I think we're hitting overtime. 15:21 Oh yeah. 15:22 For this 15 minute presentation. 15:23 That's fine, yes. 15:24 Thanks for cutting me off. 15:25 It was awesome though. 15:26 Loved it. 15:27 Okay, thanks a lot. 15:28 And people remember to, this point is really important about agreeing on an objective function. 15:33 Paul? 15:34 It's time to go.