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Hello everyone, it's time for BlockTalk.

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I've got a couple sponsors to mention first.

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First off, we have CoinAgy, a professional tool for cryptocurrency traders.

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We appreciate their help.

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Now without further ado, hello.

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We've got everyone here in the basement.

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We've got a special guest calling in, Paul.

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Hi, how's it going?

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Hello, how's it going?

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Oh, fantastic. Thanks so much for joining us.

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Thanks for having me.

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So I guess if you could explain as simply as possible,

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what is Bitcoin Hivemine and prediction markets?

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Okay, well, so what prediction markets are,

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I think it's easier to describe them.

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They're known by an equivalent phrase which is called event derivatives.

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So you can have a derivative that pays you a dollar

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if the stock price of Microsoft is above some value,

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like $43 or something per share.

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And you can just have a derivative of that share that just pays you a dollar

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if something happens to trigger that payment,

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and otherwise it just doesn't pay you anything.

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And so those are normal derivatives that have always existed,

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but these prediction markets are event derivatives.

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So they'll pay you a dollar if something happens in the real world.

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So usually they're most popular with things like elections and sports,

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but there are also other things like Academy Award winners or something.

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But the cool thing is that these things are a lot of fun to trade,

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and they have a lot of sort of financial value to people,

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but they also inform third parties on the likelihood,

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like what's actually driving events' likelihood.

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So if something has a high price,

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this thing is going to pay a dollar if Hillary Clinton is elected.

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And if it's trading for like 95, 99 cents or something,

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you know that it's basically inevitable,

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or that a lot, a lot of people think it's basically inevitable

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that she will be elected.

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And whereas if it were this thing that's worth a dollar

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if Hillary Clinton is elected,

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if people are buying and selling this thing for like 10 cents,

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you know that it's basically got something like a 10% probability of happening.

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So there's this really cool stuff about like informing

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what factors are actually likely to be connected to other factors

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in a very – something that's very kind of subjective,

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but can be measured in a very objective scientific way.

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So it's very neat.

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The term that I've described a lot is the wisdom of the crowd.

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Yeah, sure.

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So I guess when there's monetary incentive,

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people are more likely to predict the right answer across a large group of people?

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Yes, the problem, the wisdom of the crowd, the crowd is very wise.

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I mean basically it's kind of a – it's a bit of a tautology

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because of course if the crowd isn't wise, then kind of like what is, right?

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So but the trick is you have to be able to aggregate the opinions of the crowd

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in the best way.

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So you don't want to spend a lot of money aggregating these opinions

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and you don't want to have two opinions that, you know,

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we have that right now in Bitcoin.

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You want there to be like – you want it to successfully aggregate

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and you want everything to be incentive compatible

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and you don't want to have – there's all these frictions in aggregating information.

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So like I always bring up that when you have a conversation,

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everyone has got to basically talk to every other person

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to kind of like figure out where they're coming from or who they are.

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And this is a big, big like N squared kind of problem.

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So that it's easy for people to be friends when there's like a small group

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and everyone knows everyone else's name.

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But then as things get bigger, you get these other problems.

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But then things get too big, you get other problems go away,

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but new problems appear.

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And so the crowd is very wise,

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but you need a way to aggregate the opinion of the crowd.

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And that's what prediction markets do very well at large scale.

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They're very, very well at large scale, which is what makes them really unique.

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They're the only thing that I am aware of that can actually aggregate

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the opinion of a large group of people in an efficient –

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anything resembling an efficient way.

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Can I ask an early question about prediction markets?

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Sure.

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What was it about Bitcoin or cryptocurrency that enables this system?

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Obviously prediction markets have been around for a while.

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What is it we gain from the new sort of crypto that makes it unique?

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Well, the history of prediction markets is very bleak

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because for years and years some of the smartest people around

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have made like written pledges and written kind of like endorsements

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that these things should be more encouraged, they should be more allowed,

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they shouldn't be harassed or closed down.

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But despite sort of the best of the best kind of tireless advocacy for this
institution,

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it really has not gotten – it really hasn't gone anywhere.

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So there was something, the Iowa electronic markets,

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but that was sort of scaled back where you can only have a few choices

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and you're limited to like $500.

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And the Intrade, the most successful kind of prediction market,

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I guess marketplace for predictions, that was closed down.

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It was constantly harassed and then it was ultimately forced to close.

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So the story for me, I mean I was interested in prediction markets

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long before Bitcoin existed.

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But I just drew a lot of parallels between things like eGold

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and Liberty Reserve, Liberty Dollar, even DigiCash, PayPal,

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where they're sort of like you're on this track and you either kind of get neutered

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or you just get destroyed and you can't really scale up.

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And every time someone scaled up to get big,

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to the point where they're actually changing the conversation,

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improving the conversation, they got kind of eliminated.

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So I think that – I just see a really similar story

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and I was really inspired by the way that the blockchain had kind of fixed this
problem

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and I thought that this was basically almost the same problem.

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But there's another layer to it, which is that Bitcoin currently is kind of missing
–

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if you want to have markets in Bitcoin, you have these –

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you have to kind of – it's easy to set up bets with another person, a second person.

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And you can even do this multi-sig bet where you have a third party be the –

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sort of the arbiter or something if something goes wrong.

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But the main benefits are really lost.

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It's kind of – it's really similar to Bitcoin itself

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where you had all this stuff that you could do with signatures,

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but if you had – you needed a third party to prevent double spends.

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And with this, it's really a very similar thing

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where you could have all these synthetic derivatives and assets and all this betting

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and you could do all this really cool stuff.

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But the main benefits would be lost if you had this trusted third party

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who had to be the oracle.

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And then that guy could just take the other side of every trade

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and he would control two out of the three votes

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and then he could just steal everyone's money.

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So I just thought it was – I just thought it was tremendously similar

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and I was just blown away by this sort of shadow of a problem

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kind of I thought repeated itself in Bitcoin,

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prevents Bitcoin from doing things like having synthetic –

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I'm not a big fan of like the BitUSD, but stuff like –

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if you wanted to have like BitUSD or BitOil or something

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or like BitCorporations and other things like that,

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or any kind of bet really about anything, not just in finance,

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but just about you could want to bet on anything.

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Like a long time ago, there was a Bitcoin Savings and Trust Ponzi scheme

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and someone on the forum bet that it wasn't a Ponzi scheme,

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which effectively like there was like this arbitrage opportunity

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if you could bet with him and bet in the Ponzi scheme

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and like extract all this money.

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But the problem with that was that the guy who was betting

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that it wasn't a Ponzi scheme was sort of like didn't have enough money

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or wasn't serious about meeting this obligation.

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So there's all these kind of examples where all the stuff is there for the bet,

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even two or three multi-sig or something like that with this arbiter concept,

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but the arbiter can still steal everyone's money.

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I just thought it was like it's just the same problem kind of circled around.

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So you mentioned the oracles briefly there,

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and that's kind of I guess the metric for analyzing the bet,

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like figuring out which way the if statement goes.

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So could you give a little more detail of how oracles work in your system

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and just in general I guess?

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So yeah, so that's the major problem, right?

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And that's like I'm saying all the main benefits are lost

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if you need to have this trusted third-party oracle.

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So what I do is it's kind of a complicated thing,

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but there's a white paper on this,

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and what happens is that I create a very strong incentive for people to vote.

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People have to vote on the outcome, of course,

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but I create a very strong incentive for them to vote near other people.

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And so there's kind of a lot to explain at once,

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but for starters, there's like a vote corporation that earns money.

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It's got this forced digital scarcity, and it earns money as people bet.

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And this money, as a function of sort of the usefulness of the network,

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this money kind of flows into them.

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And so if you want to earn this money,

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you can buy in to this digitally scarce token corporation.

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And so you've bought in, and if you're in, you can vote,

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and if you don't want to be in anymore, you can sell,

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and you can get out that way.

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So you kind of avoid an exit scam kind of thing there.

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But it's kind of hard to explain because there's a lot of things going on at once,

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but the econ theory behind it is that you want to establish this concept of
reputation

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and then have people's incentives aligned so that whenever they do anything you
don't like,

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they pay for it.

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So the first way is to abstract this concept of reputation by creating this
corporation

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with sort of shares.

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And then to go into another layer of it,

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these people vote not on each individual thing as each event happens.

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They don't vote one at a time.

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They vote for many things all at once.

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And then I do a big statistical trick called singular value decomposition

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to see whose voting is the most deviant.

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And then I punish this person the most,

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and then I punish everyone else kind of proportional to how close they are to that
guy.

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So you can be punished for being ñ if you vote against the majority on something

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where everyone else was voting with the majority,

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you're punished more than if you vote against the majority on something

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where people were confused.

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And there's like a number of graphs and stuff that try to explain.

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So, again, it's kind of not worth even really explaining the details

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because just the kind of the crux of it, the impetus,

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is that you want ñ I wanted something that mirrored real life.

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So in real life, how do you know what's true?

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If one person says X and another person says Y,

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well, then what you start to do is you start to look at the other things that X and
Y say.

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So if Y is like a gibbering madman who says all kinds of random stuff,

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then you start to get the idea that there's something wrong with Y.

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It's Y. It's not this particular report doesn't mean anything.

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So, boy, as if X is constantly right about everything

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or at least normal about everything,

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you know that there's something about X that's more reliable.

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So after this kind of big matrix of votes is collected and this process is done,

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I redistribute shares in the corporation if anyone disagreed.

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So unless the consensus is totally unanimous, some people will lose.

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They will have bought shares, but they will lose them to other people

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who bought, say, 10 shares, but they'll end up with 12, the winners.

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So, again, that's to avoid the exit scam,

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which is the whole point, to have this economic kind of abstraction of reputation.

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But there are so many other things that are kind of hard to explain.

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I mean, another thing is that when the questions are listed,

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there's an incentive there, which we can talk about if you want,

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but there's an incentive to only create questions that are very, very easy to
answer.

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And there's even a fail-safe if you screw that up.

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So if you create something that's too difficult to answer,

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they can all coordinate on the middle answer, which is in between true and false,

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which is like 0.5.

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And so the questions don't measure anything other than the person's willingness to
lie.

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Everyone should be able to easily just answer the questions.

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And so if they're not, it's not because they didn't know the answer.

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It's because they're up to something dishonest.

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And so that's another layer on top of that.

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And then, finally, I just draw the process out.

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Time is a net advantage to the honest person

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because you can freeze money using the blockchain and lock it in time,

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but over time information will become easier and easier to learn about.

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So today we don't know who will be elected president,

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but it will become clearer to us as time goes on.

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And then in December of 2016 in the United States,

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the United States president, sorry about that U.S. bias,

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but in the United States we'll know in November, in December,

238
00:15:14,000 --> 00:15:17,000
it will be very clear to us who is elected president.

239
00:15:17,000 --> 00:15:21,000
So the betting can take place now when it's very unclear,

240
00:15:21,000 --> 00:15:25,000
but the resolution can take place in the future when it's very, very clear

241
00:15:25,000 --> 00:15:27,000
and it's fresh in everyone's mind.

242
00:15:27,000 --> 00:15:31,000
So that's just more – there's kind of a lot of layers to it.

243
00:15:31,000 --> 00:15:33,000
Ultimately, the process is so slow,

244
00:15:33,000 --> 00:15:39,000
and the process of having multiple people vote on multiple things in a big time
period,

245
00:15:39,000 --> 00:15:43,000
large rare votes instead of frequent small votes,

246
00:15:43,000 --> 00:15:50,000
the large rare vote, it actually collapses up into like one kind of easy-to-measure
thing

247
00:15:50,000 --> 00:15:54,000
because of the way singular value decomposition works, the technique I used.

248
00:15:54,000 --> 00:15:58,000
It's very, very easy to see once every three months or so

249
00:15:58,000 --> 00:16:02,000
which people are kind of like the honest people because you get –

250
00:16:02,000 --> 00:16:05,000
which people are honest and which people are like totally on a different planet

251
00:16:05,000 --> 00:16:09,000
because if you want to lie, you really want to lie about a lot of things,

252
00:16:09,000 --> 00:16:12,000
and so their report will look very, very different.

253
00:16:12,000 --> 00:16:15,000
So even if you only know about one or two of the things that are voted on,

254
00:16:15,000 --> 00:16:17,000
they should like all be backwards or something.

255
00:16:17,000 --> 00:16:22,000
So it should be very, very easy to spot on a large infrequent scale.

256
00:16:22,000 --> 00:16:28,000
Then the miners even have options like veto things and just force them to happen
again.

257
00:16:28,000 --> 00:16:30,000
So it's just very, very slow.

258
00:16:30,000 --> 00:16:36,000
So I just ultimately try to slow the process down to a degree where the attacker

259
00:16:36,000 --> 00:16:42,000
just wouldn't even want to bother trying to go through with this elaborate –

260
00:16:42,000 --> 00:16:46,000
So anyone who I guess really wants to figure out the exact fundamentals

261
00:16:46,000 --> 00:16:50,000
or how the whole network functions, they can read the white paper.

262
00:16:50,000 --> 00:16:54,000
The white paper is very long, and I released it when I came up with –

263
00:16:54,000 --> 00:16:57,000
when I published the white paper a long time ago.

264
00:16:57,000 --> 00:17:04,000
I also released it with code that had tests to kind of help describe sort of what
was going on.

265
00:17:04,000 --> 00:17:10,000
So there's all kinds of stuff like that, and I'm happy to answer any specific
questions,

266
00:17:10,000 --> 00:17:13,000
but they are kind of like specific.

267
00:17:13,000 --> 00:17:17,000
They're not – I've tried this a lot of times, and every time I've tried to explain –

268
00:17:17,000 --> 00:17:27,000
it sounds – it makes it kind of sound bad, but people came up to me like I think at
–

269
00:17:27,000 --> 00:17:30,000
like a couple months ago, but people in Bitcoin came up to me,

270
00:17:30,000 --> 00:17:32,000
and they said we didn't know how to explain.

271
00:17:32,000 --> 00:17:35,000
It's okay. You shouldn't feel bad that you really can't explain this

272
00:17:35,000 --> 00:17:38,000
because no one really knew how to explain Bitcoin for the longest time.

273
00:17:38,000 --> 00:17:41,000
So I guess – I don't know if people are just trying to make me feel better or
whatever,

274
00:17:41,000 --> 00:17:44,000
but it's kind of complicated to explain.

275
00:17:44,000 --> 00:17:49,000
All the pieces there are just me trying to make this look –

276
00:17:49,000 --> 00:17:56,000
this resemble how it is that you learn about whether or not Hillary Clinton was
elected

277
00:17:56,000 --> 00:18:00,000
in the most – like assuming that other people are trying to lie to you,

278
00:18:00,000 --> 00:18:06,000
and so it is kind of very rounded off, but it does kind of sound weird

279
00:18:06,000 --> 00:18:08,000
when you try to explain it for the first time.

280
00:18:08,000 --> 00:18:13,000
Yeah, your white paper – like the table of contents is almost longer than Satoshi's
white paper.

281
00:18:13,000 --> 00:18:15,000
Yeah, that's bad for me.

282
00:18:15,000 --> 00:18:20,000
But part of the problem is that Satoshi is a lot better at programming than I am,

283
00:18:20,000 --> 00:18:25,000
so I kind of had no choice but to stuff the thing full of explanations

284
00:18:25,000 --> 00:18:27,000
and hope that it would make sense.

285
00:18:27,000 --> 00:18:31,000
Like he could just do the right thing, which was like release the software,

286
00:18:31,000 --> 00:18:37,000
but I was like I'm not good enough with – nowhere near good enough with C++

287
00:18:37,000 --> 00:18:41,000
to sort of do that by myself.

288
00:18:41,000 --> 00:18:44,000
Well, you explained the game theory pretty well with it,

289
00:18:44,000 --> 00:18:48,000
and we can see like the Truthcoin white paper has been circulated a lot.

290
00:18:48,000 --> 00:18:52,000
We've got some other questions here. Dave, do you have a question?

291
00:18:52,000 --> 00:18:57,000
Yeah, thank you. Paul, first of all, thank you.

292
00:18:57,000 --> 00:18:59,000
My pleasure.

293
00:18:59,000 --> 00:19:01,000
I'm looking forward to reading your white paper.

294
00:19:01,000 --> 00:19:08,000
I haven't yet, so excuse the question if it's covered by this.

295
00:19:08,000 --> 00:19:16,000
I love that our community is making things like this possible.

296
00:19:16,000 --> 00:19:21,000
Prediction markets are really a fantastic thing, and I agree with you 100%.

297
00:19:21,000 --> 00:19:25,000
I haven't been in the real world enough.

298
00:19:25,000 --> 00:19:35,000
It's true what you were saying about prediction markets being a tautology

299
00:19:36,000 --> 00:19:38,000
in a sense.

300
00:19:38,000 --> 00:19:40,000
In some cases, they're a self-fulfilling prophecy.

301
00:19:40,000 --> 00:19:43,000
I mean if the same people that are betting on an election

302
00:19:43,000 --> 00:19:48,000
are also the ones that are voting on it, then it becomes true.

303
00:19:48,000 --> 00:19:52,000
But also just Adam Smith's invisible hand,

304
00:19:52,000 --> 00:19:57,000
economic incentive to put your money where your mouth is

305
00:19:57,000 --> 00:20:01,000
tends to make the truth rise to the top there.

306
00:20:01,000 --> 00:20:07,000
I think it's great if we can put this in a blockchain-based

307
00:20:07,000 --> 00:20:11,000
or some kind of provably fair system.

308
00:20:11,000 --> 00:20:17,000
But I always try and challenge people that are building these kinds of things

309
00:20:17,000 --> 00:20:27,000
to not forget that the real world has evolved quite efficiently as well.

310
00:20:28,000 --> 00:20:33,000
In the real world, as far as trusted information,

311
00:20:33,000 --> 00:20:42,000
reputation is the thing that tends to create things that are honest over time.

312
00:20:42,000 --> 00:20:46,000
Bloomberg wouldn't sell any terminals if they got the stock prices wrong,

313
00:20:46,000 --> 00:20:50,000
and ESPN would be soon out of business if they were reporting incorrectly

314
00:20:50,000 --> 00:20:53,000
on the Super Bowl and so on.

315
00:20:54,000 --> 00:21:01,000
Given that these organizations have advanced access to the data

316
00:21:01,000 --> 00:21:08,000
and have incentives to report it correctly,

317
00:21:08,000 --> 00:21:12,000
first of all, we trust them, but second of all,

318
00:21:12,000 --> 00:21:19,000
with a system such as what I imagine that you have written out in your white paper,

319
00:21:19,000 --> 00:21:23,000
would there not be economic incentive for these types of organizations

320
00:21:23,000 --> 00:21:33,000
to buy the votes and profit from the information dissemination

321
00:21:33,000 --> 00:21:35,000
and acting as an oracle?

322
00:21:35,000 --> 00:21:36,000
Front-running.

323
00:21:36,000 --> 00:21:42,000
Yeah, front-running, so to speak, or otherwise,

324
00:21:42,000 --> 00:21:51,000
just kind of establishing and continuing their dominance in those areas.

325
00:21:51,000 --> 00:21:59,000
And why would there be any economic incentive for someone not so connected

326
00:21:59,000 --> 00:22:03,000
to buying vote coins?

327
00:22:03,000 --> 00:22:08,000
Okay, so I think I'm not sure, so I might need some help answering your question

328
00:22:08,000 --> 00:22:10,000
because you touched on a lot of different issues, of course.

329
00:22:10,000 --> 00:22:16,000
So I think you mean that some people have – first you said that some people had –

330
00:22:16,000 --> 00:22:20,000
the first part of your question part was that some people have access

331
00:22:20,000 --> 00:22:24,000
to more information, and then you said why would they buy the vote.

332
00:22:24,000 --> 00:22:29,000
The voting is just reporting on the event after it's happening, so it's not trading.

333
00:22:29,000 --> 00:22:36,000
Right, why would anyone who did not have an informational advantage

334
00:22:37,000 --> 00:22:42,000
choose to buy a vote coin, or I guess flip the other way,

335
00:22:42,000 --> 00:22:46,000
is wouldn't all the vote coins already have been purchased by someone

336
00:22:46,000 --> 00:22:52,000
who is ahead of that second person in the information stream?

337
00:22:52,000 --> 00:22:59,000
Okay, so again, I think you mean traders again because the voters,

338
00:22:59,000 --> 00:23:01,000
there's no inside information.

339
00:23:01,000 --> 00:23:05,000
The voting happens way long after the event is over.

340
00:23:05,000 --> 00:23:13,000
So you'd be betting on what's the stock price of whatever American Airlines group

341
00:23:13,000 --> 00:23:17,000
on October 5th, but you wouldn't vote on that until like December 1st or something.

342
00:23:17,000 --> 00:23:21,000
So it would just be some number from October 5th to December 1st.

343
00:23:21,000 --> 00:23:24,000
That wouldn't change, and that's by design.

344
00:23:24,000 --> 00:23:28,000
By the time that people vote, they all have common knowledge,

345
00:23:28,000 --> 00:23:33,000
and there's plenty of time for people could have Googled that number at any time

346
00:23:33,000 --> 00:23:36,000
in any of the intermediate kind of time.

347
00:23:36,000 --> 00:23:42,000
So no one would want – there shouldn't be, although there could of course possibly
be,

348
00:23:42,000 --> 00:23:47,000
but there really shouldn't be any significant difference in information by the time

349
00:23:47,000 --> 00:23:49,000
for anyone who owns any vote coins.

350
00:23:49,000 --> 00:23:51,000
They should all have the same information hopefully.

351
00:23:51,000 --> 00:23:54,000
Okay, if everyone has the same information,

352
00:23:54,000 --> 00:23:58,000
why is there any economic incentive for anyone to acquire a vote coin?

353
00:23:58,000 --> 00:24:01,000
So you don't want – yeah, okay, I think I understand what your question is now.

354
00:24:01,000 --> 00:24:05,000
The vote coin – the people who own the vote coins are the employees.

355
00:24:05,000 --> 00:24:13,000
So you can trade – the New York Stock Exchange is run by a company that is itself
listed

356
00:24:13,000 --> 00:24:15,000
on the U.S. Stock Exchange.

357
00:24:15,000 --> 00:24:19,000
I don't remember. I think it's like IE or something, but whatever it is,

358
00:24:19,000 --> 00:24:21,000
the vote coins are the employees.

359
00:24:21,000 --> 00:24:28,000
So if you have inside information or – that was part of the joke for Intrade,
Intrade.com.

360
00:24:28,000 --> 00:24:33,000
Part of the joke was that that was insider trading because that was kind of like a
funny –

361
00:24:33,000 --> 00:24:36,000
so the people with information should be trading,

362
00:24:36,000 --> 00:24:38,000
and they should be buying and selling shares of markets,

363
00:24:38,000 --> 00:24:43,000
but they should not necessarily be buying and selling vote coins at all.

364
00:24:43,000 --> 00:24:46,000
In fact, I would imagine that this would be a little bit like mining

365
00:24:46,000 --> 00:24:52,000
where it would be something like drudge work that people would just do to get paid,

366
00:24:52,000 --> 00:24:55,000
which they wouldn't really care very much about.

367
00:24:55,813 --> 00:24:59,813
The outcomes themselves at all. Does that make sense?

368
00:24:59,813 --> 00:25:18,813
Well, yeah, but you don't have to do data entry if you own the data. So if you're
the entity that is the first publisher or the publisher of record of a particular
entity – or sorry, of a particular bit of information, then you could automate the
voting of this.

369
00:25:19,813 --> 00:25:32,813
So again, I ask, if you were running a racetrack, why wouldn't you be the one that's
reporting on which horses are winning?

370
00:25:33,813 --> 00:25:47,813
Okay, I understand. So ultimately this will be something like, what was the stock
price of whatever as reported by Google Finance or something. So you're asking, why
doesn't Google just do it? And they might do it.

371
00:25:47,813 --> 00:25:59,813
The answer would be, why haven't they done it already? And they may do it. And
actually, on the website I have an FAQ, like a weaknesses section, like a threats
weaknesses section.

372
00:25:59,813 --> 00:26:15,813
And I think the second one that I list, which is that this project might inspire
widespread use of legal prediction markets, which is a failure case that I accept.
I'm totally fine with that.

373
00:26:15,813 --> 00:26:30,813
I would be thrilled if Google would start offering this. And as you say, you
wouldn't need anything other than multi-sig payment channel, right? Because someone
could just open the channel with Google to bet on whatever this is.

374
00:26:30,813 --> 00:26:45,813
And then Google could just sign it or commit to signing it later as a third party.
And then you wouldn't need anything. You would literally need nothing at all except
for that. You would only need Bitcoin and one lightning network spoke or something.

375
00:26:45,813 --> 00:27:10,813
So the entire thing could be replaced by whoever's doing the data. But that would be
centralized. And I think most people are doing decentralized stuff kind of for no
reason. But I don't think that this project falls into that category because there's
a long history of trying to make these things work when they haven't been allowed to
work.

376
00:27:11,813 --> 00:27:26,813
And you'd think – this is one thing that I thought when I first got into Bitcoin. I
thought, okay, now someone will do this. As we've seen, there are many websites,
Farallay. There used to be bets of Bitcoin. There's bidbet.com.

377
00:27:26,813 --> 00:27:37,813
So I thought, okay, someone will just do Intrade and they'll just do it with Bitcoin
as this rail to get in and out. You just deposit and maybe they'll just convert it
to dollars for you or just keep it in Bitcoin or something.

378
00:27:38,813 --> 00:27:59,813
But the exit scam is too – what I thought I think is too insurmountable a problem
for it to scale. Because once it scales, once it gets big and you have like a tiny
mini Wall Street at some company where there's some value there that is in the
millions or billions.

379
00:27:59,813 --> 00:28:09,813
There's enough value on one website for one person to live comfortably for like 100
years. Once you've reached that, you're in this threat zone.

380
00:28:09,813 --> 00:28:29,813
And so I think the exit scam – but even more than that though is that it seems that
many people don't trust. They're not willing to – they have a lot of – they have a
great desire to participate in this process where they want to move their Bitcoins
around and change them into assets and wagers and other things.

381
00:28:29,813 --> 00:28:41,813
But they just don't – they don't want to go to some website and just send their
Bitcoins away and get a SQL row in return or something, an HTML number.

382
00:28:41,813 --> 00:28:48,813
They don't want to send their Bitcoin away. So that's kind of why I don't – but
you're completely right.

383
00:28:48,813 --> 00:29:02,813
If someone would – the entire project is really the oracle. So if someone would be
the oracle, that would obviate the need for the project. And I'm totally okay with
that and I would prefer that to happen.

384
00:29:03,813 --> 00:29:14,813
But I think we can all say a similar thing about – because this is stored value.
It's not – this isn't really even like Silk Road or something where if it gets shut
down, you can just start another one up or something.

385
00:29:14,813 --> 00:29:18,813
You only lost the value of whatever transaction you were planning on making.

386
00:29:19,813 --> 00:29:28,813
With these, the value is stored. So you could store up a lot of money and you could
be trading and earning money in there and they can all just be wiped out and you're
back to zero or something.

387
00:29:28,813 --> 00:29:46,813
So it is very sort of high stakes and you could say that – you could make a similar
argument basically that why don't we just go have Bank of America run Bank of
America coin and it could be exactly like Bitcoin, except it could just be signed by
them instead of by miners.

388
00:29:47,813 --> 00:29:56,813
That certainly wouldn't be my argument, but I appreciate that we want to strive for
decentralization.

389
00:29:57,813 --> 00:30:16,813
What I'm concerned is that this quickly, for economic reasons, devolves into
essentially a centralized solution because if everybody's getting information from
the same place,

390
00:30:16,813 --> 00:30:34,813
if there's economic incentive to regurgitate the information from that same place,
then that economic incentive could also be inured by the original publisher of that
information.

391
00:30:34,813 --> 00:30:43,813
This segues into my question. They just have a head start in the automation of the
Oracle process. So what are your thoughts on automating some of that Oracle?

392
00:30:43,813 --> 00:30:53,813
Are you going to be providing sort of machine readable bets where you're kind of
encouraging people to run automatic Oracle?

393
00:30:53,813 --> 00:30:57,813
It's one of the first questions that I thought about when I was designing this.

394
00:30:57,813 --> 00:31:08,813
And I think the conclusion that I reached was it doesn't actually harm the
decentralization if you – and I call this kind of re-centralization.

395
00:31:08,813 --> 00:31:20,813
So if you have the decentralized layer to recover to, it doesn't matter. You really
only gain, I think, convenience and efficiency by re-centralizing kind of on top of
it.

396
00:31:20,813 --> 00:31:33,813
So everyone might go to Google to get this thing, and that would kind of make it
seem like Google was providing the sole source of the data or something.

397
00:31:33,813 --> 00:31:43,813
But if some censorship force told Google that they couldn't – you can't provide this
data anymore, then people would be able to recover from that.

398
00:31:44,813 --> 00:31:52,813
It wouldn't destroy the thing. They would just say, okay, we can't get it from
Google, but we'll just get it from anywhere else.

399
00:31:52,813 --> 00:31:57,813
We'll get it from Yahoo, or we'll go to like New York Stock Exchange.com or
something.

400
00:31:57,813 --> 00:32:06,813
And so I think it makes a really big difference. Let me see how I want to explain
this.

401
00:32:07,813 --> 00:32:20,813
I'm totally fine with the entire thing being computerized except for the fact that
it populates a big list and one human being – not one, one per user or something,

402
00:32:20,813 --> 00:32:25,813
but it's just kind of manually checking it through to make sure that they're all
right.

403
00:32:25,813 --> 00:32:32,813
And the way that I achieve that is that I give, as you may have noticed, I give
people an incentive to throw other people off.

404
00:32:32,813 --> 00:32:40,813
As long as you don't throw more than half the people off, you want a few of them to
actually be off because you benefit if they screw it up.

405
00:32:40,813 --> 00:32:46,813
So you actually have a strong incentive to like double check the results.

406
00:32:46,813 --> 00:32:55,813
And that's all I really want because the way I see it, the decentralization is just
a means to an end, which is surviving the censor.

407
00:32:55,813 --> 00:33:07,813
And so I say if you've got something that scrapes Twitter and scrapes Google and
scrapes whatever and just like helps you fill in the ballot,

408
00:33:07,813 --> 00:33:16,813
I say I think that's great, and I think that could be encouraged to a very great – a
very strong extent

409
00:33:17,813 --> 00:33:29,813
because if something goes wrong and people say – people can claim, well, the
software is accidentally saying that it's three when it should say 30 or something,

410
00:33:29,813 --> 00:33:33,813
but we're going to leave it as three because we think other people are going to do
that.

411
00:33:33,813 --> 00:33:36,813
We think other people are going to do three.

412
00:33:36,813 --> 00:33:41,813
There's actually an incentive to say that but then secretly go behind the scenes and
change yours to 30.

413
00:33:41,813 --> 00:33:47,813
So no one will ever really know if everyone else is actually leaving it as three or
they're changing it to 30.

414
00:33:47,813 --> 00:33:53,813
And so I don't see it as a very strong – it's not as dooming.

415
00:33:53,813 --> 00:33:57,813
I know what you're sort of saying is that this is kind of – isn't it centralized?

416
00:33:57,813 --> 00:34:01,813
But I think it's – that's something that I thought about a lot and you –

417
00:34:01,813 --> 00:34:08,813
Well, it sounds like the centralized systems are flawed in their scalability where
once they get big enough, economically they fail,

418
00:34:08,813 --> 00:34:11,813
whereas this system can scale economically much better.

419
00:34:11,813 --> 00:34:17,813
That's the idea is that you've really – you really shift the blame around a lot

420
00:34:17,813 --> 00:34:25,813
and you try to get the – you try to get the miners to sort of – the same way the
Bitcoin works where it's sort of like –

421
00:34:25,813 --> 00:34:31,813
it's a very slow kind of expensive gradual accumulation of this proof of work.

422
00:34:31,813 --> 00:34:37,813
And so it's a lot easier to kind of see what's going on and you don't need to – it's
not like –

423
00:34:37,813 --> 00:34:41,813
it's not like the servers are raided and everything is shut down or something.

424
00:34:41,813 --> 00:34:45,813
It's just like very organic and kind of liquid.

425
00:34:45,813 --> 00:34:49,813
And so you need to go back 10 blocks or something.

426
00:34:49,813 --> 00:34:51,813
You can kind of do that and if you –

427
00:34:51,813 --> 00:34:53,813
The whole network won't fail.

428
00:34:53,813 --> 00:34:56,813
It's just departmentalized so only one part might go down.

429
00:34:56,813 --> 00:34:59,813
We have a question from Taylor actually.

430
00:35:00,813 --> 00:35:02,813
Can you explain the payout mechanism?

431
00:35:02,813 --> 00:35:06,813
Like how does the system guarantee its solvency?

432
00:35:06,813 --> 00:35:08,813
Do you mean for –

433
00:35:08,813 --> 00:35:10,813
Like paying off the bet.

434
00:35:10,813 --> 00:35:12,813
Where is the money?

435
00:35:12,813 --> 00:35:18,813
So there's this thing called a market scoring rule which happens to be very
convenient.

436
00:35:18,813 --> 00:35:23,813
Although since the invention of the Lightning Network, I'm going to add a little bit
onto this,

437
00:35:23,813 --> 00:35:25,813
but it's basically the same thing.

438
00:35:26,813 --> 00:35:31,813
There's this thing called a market scoring rule where all you have to do is edit.

439
00:35:31,813 --> 00:35:34,813
The market exists in some state.

440
00:35:34,813 --> 00:35:41,813
So if it's a simple binary market, yes or no, Hillary Clinton will be elected.

441
00:35:41,813 --> 00:35:45,813
There will be two states, one for yes and one for no.

442
00:35:45,813 --> 00:35:48,813
And the market starts with some account.

443
00:35:48,813 --> 00:35:52,813
So you have zero yes shares, zero no shares, some account that has money.

444
00:35:52,813 --> 00:35:59,813
And if you want to edit the state, like let's say you wanted to buy two yes shares,

445
00:35:59,813 --> 00:36:04,813
you can just say, okay, what should the market account be at zero, zero,

446
00:36:04,813 --> 00:36:08,813
which is what it is today, and what should it be at zero, two?

447
00:36:08,813 --> 00:36:12,813
And the formula will just give you what the market account should be,

448
00:36:12,813 --> 00:36:16,813
and then you just pay the difference, and you just update the market state.

449
00:36:16,813 --> 00:36:20,813
So it's just this totally atomic process that's actually very convenient

450
00:36:20,813 --> 00:36:26,813
because it's very, very similar to what each Bitcoin transaction looks like.

451
00:36:26,813 --> 00:36:31,813
They're just like one atomic thing.

452
00:36:31,813 --> 00:36:38,813
And so this lets everyone just – if you want to sell the shares,

453
00:36:38,813 --> 00:36:43,813
all you have to do is edit whatever it says, 40 shares to like 300 shares,

454
00:36:43,813 --> 00:36:45,813
and there's this much money in the market.

455
00:36:45,813 --> 00:36:51,813
You just say, okay, instead of 300, I want it to go down to 298,

456
00:36:51,813 --> 00:36:55,813
and then you pay your two shares, and then you get the cash back.

457
00:36:55,813 --> 00:36:59,813
So this concept of a market scoring rule is actually immensely convenient.

458
00:36:59,813 --> 00:37:03,813
But the other cool thing it does is passively it issues the shares.

459
00:37:03,813 --> 00:37:09,813
So what I'm planning on doing is setting it up so that ultimately this can evolve

460
00:37:09,813 --> 00:37:14,813
into something where big players just buy up a lot of all the states

461
00:37:14,813 --> 00:37:19,813
so they'd pay like $10,000 to just get $10,000 of state one

462
00:37:19,813 --> 00:37:21,813
and $10,000 of state two.

463
00:37:21,813 --> 00:37:27,813
That's $10,000 or whatever, $10,000 Bitcoin or what have you.

464
00:37:27,813 --> 00:37:29,813
It doesn't really matter, of course.

465
00:37:29,813 --> 00:37:31,813
But then they'd just have $10,000 of each,

466
00:37:31,813 --> 00:37:34,813
and then they would be able to open payment channels with people

467
00:37:34,813 --> 00:37:36,813
because they'd have $10,000.

468
00:37:36,813 --> 00:37:40,813
That's how you get from zero issued to $10,000 issued without things like spam

469
00:37:40,813 --> 00:37:42,813
and kind of confusing.

470
00:37:43,813 --> 00:37:45,813
Zero to $10,000 or something.

471
00:37:45,813 --> 00:37:48,813
Yeah, and then someone could just open a channel with them,

472
00:37:48,813 --> 00:37:53,813
and they say, okay, I preemptively bought like 20 of each or something,

473
00:37:53,813 --> 00:37:55,813
but then just keep editing that back and forth.

474
00:37:55,813 --> 00:37:57,813
So that's kind of –

475
00:37:57,813 --> 00:37:59,813
Just the house.

476
00:37:59,813 --> 00:38:04,813
So those people would be like – so someone would create this synthetic thing

477
00:38:04,813 --> 00:38:08,813
like Bitgold or whatever, and then these other places would be like different
exchanges.

478
00:38:08,813 --> 00:38:12,813
There's like the BATS exchange, and there's like IEX,

479
00:38:12,813 --> 00:38:15,813
and there's all these different exchanges.

480
00:38:15,813 --> 00:38:18,813
So Wall Street is not just one exchange.

481
00:38:18,813 --> 00:38:21,813
It's many exchanges, and they all have different rules,

482
00:38:21,813 --> 00:38:23,813
and some of them hate each other and stuff.

483
00:38:23,813 --> 00:38:26,813
So these would just be like kind of – that's kind of the new vision.

484
00:38:26,813 --> 00:38:30,813
But to answer the question, which I didn't really get around to answering,

485
00:38:30,813 --> 00:38:34,813
it's just this scoring rule, it just prevents – what it does is it has a bounded
loss,

486
00:38:34,813 --> 00:38:38,813
and I force the guy who creates the market to pay all that up front.

487
00:38:38,813 --> 00:38:41,813
So he gets money if the market is popular.

488
00:38:41,813 --> 00:38:45,813
He gets a tiny, tiny cut, but he's got to pay up front to create it.

489
00:38:45,813 --> 00:38:49,813
So it's an anti-spam, and it solves the bounded law.

490
00:38:49,813 --> 00:38:52,813
And you know, a lot of times it doesn't even hit the bounded loss,

491
00:38:52,813 --> 00:38:55,813
so the person will get a refund.

492
00:38:55,813 --> 00:38:59,813
But it's just a formula, and it can't lose money.

493
00:38:59,813 --> 00:39:03,813
It's this formula based on like diffusion of – it's from like physics.

494
00:39:03,813 --> 00:39:07,813
So it's not that – you know, it's not like –

495
00:39:07,813 --> 00:39:11,813
so each state is updated with this rule.

496
00:39:11,813 --> 00:39:17,813
And so there is no like – there's no real storage of money literally,

497
00:39:17,813 --> 00:39:23,813
but in an abstract sense you have bitcoins in this sidechain system,

498
00:39:23,813 --> 00:39:26,813
and then you update, update, update,

499
00:39:26,813 --> 00:39:30,813
and you just end up with more or less cash based on the updates.

500
00:39:31,813 --> 00:39:33,813
And I don't know if this – I didn't make this clear.

501
00:39:33,813 --> 00:39:35,813
I have a huge Excel spreadsheet.

502
00:39:35,813 --> 00:39:40,813
I don't know if anyone even in the bitcoin world enjoys Microsoft Excel at all

503
00:39:40,813 --> 00:39:43,813
to the extent that I did when I was working in consulting.

504
00:39:43,813 --> 00:39:51,813
But the partial derivative of this account function

505
00:39:51,813 --> 00:39:54,813
that relates the total outstanding shares to the amount of money,

506
00:39:54,813 --> 00:39:57,813
that is just – that determines the prices.

507
00:39:57,813 --> 00:40:00,813
So as you buy more of one than the other,

508
00:40:00,813 --> 00:40:04,813
you are knocking the price around at the very same time.

509
00:40:04,813 --> 00:40:07,813
So if you bought like a million of –

510
00:40:07,813 --> 00:40:11,813
let's say there's like 13 of state one outstanding,

511
00:40:11,813 --> 00:40:14,813
and there's like 20 of state two outstanding.

512
00:40:14,813 --> 00:40:18,813
State two would like probably cost – it would cost more than 50 cents on the dollar.

513
00:40:18,813 --> 00:40:22,813
It would cost like probably 54% or something or whatever.

514
00:40:23,813 --> 00:40:29,813
But if you then bought like 10 million shares of state two,

515
00:40:29,813 --> 00:40:33,813
it would cost you about $10 million or 10 million units

516
00:40:33,813 --> 00:40:37,813
because you get the first few slightly for cheap.

517
00:40:37,813 --> 00:40:41,813
You get the first few at like 60 cents or 70 cents, 80 cents,

518
00:40:41,813 --> 00:40:45,813
the first two or three based on the trades –

519
00:40:45,813 --> 00:40:48,813
the money that had already been put in by people who had made trades.

520
00:40:48,813 --> 00:40:53,813
But then as you had knocked the price in this – within this one trade,

521
00:40:53,813 --> 00:40:56,813
you would knock this price to the value of one.

522
00:40:56,813 --> 00:40:59,813
And so you're just buying shares from yourself.

523
00:40:59,813 --> 00:41:01,813
So you just sink like a million dollars.

524
00:41:01,813 --> 00:41:04,813
It's going to cost you like a million dollars to buy a million shares.

525
00:41:04,813 --> 00:41:08,813
And you didn't really do anything with a lot of –

526
00:41:08,813 --> 00:41:11,813
with about 9,900,000 of those.

527
00:41:11,813 --> 00:41:14,813
You just – the price was at one, and you just –

528
00:41:14,813 --> 00:41:17,813
what you really did is you pointlessly put a huge amount of money at risk

529
00:41:17,813 --> 00:41:21,813
because on the off chance that it doesn't happen and state one wins,

530
00:41:21,813 --> 00:41:24,813
you lost all of your money for really no reason.

531
00:41:24,813 --> 00:41:27,813
And that would be a very – and then people would be buying in,

532
00:41:27,813 --> 00:41:29,813
and they would be buying in at around zero.

533
00:41:29,813 --> 00:41:32,813
So that would be a very interesting situation to land yourself in.

534
00:41:32,813 --> 00:41:37,813
But the formula is documented, and I didn't come up with it.

535
00:41:37,813 --> 00:41:43,813
Other people, actual guy who has a – a brilliant guy who has a PhD in physics

536
00:41:43,813 --> 00:41:49,813
and in economics came up with it like 15 years ago and lots of peer review,

537
00:41:49,813 --> 00:41:51,813
and it's not that complicated.

538
00:41:51,813 --> 00:41:53,813
It's very clear that it has a bounded loss,

539
00:41:53,813 --> 00:41:57,813
and you can check in Excel by just typing in values all day,

540
00:41:57,813 --> 00:41:59,813
and you'll never get it below.

541
00:41:59,813 --> 00:42:01,813
So the bounded loss is very small.

542
00:42:01,813 --> 00:42:03,813
And you can change the value as much as you want.

543
00:42:03,813 --> 00:42:06,813
You can make the bounded loss like 10 cents.

544
00:42:06,813 --> 00:42:10,813
It's directly related to the amount of liquidity you want in the market.

545
00:42:10,813 --> 00:42:13,813
So I would imagine that most people would set it very low

546
00:42:13,813 --> 00:42:16,813
and then just force other people to deal with it.

547
00:42:16,813 --> 00:42:20,813
But if there's a need to make the market more liquid,

548
00:42:20,813 --> 00:42:22,813
you can actually just pay for that.

549
00:42:22,813 --> 00:42:27,813
So that was a big – that was a lot of luck involved with how conveniently that
worked out.

550
00:42:27,813 --> 00:42:30,813
So that is a lot more convenient.

551
00:42:30,813 --> 00:42:33,813
It depends on how much liquidity you want to offer in your own bet.

552
00:42:33,813 --> 00:42:34,813
It does.

553
00:42:34,813 --> 00:42:36,813
If you want to run a bet for, say, your own thing,

554
00:42:36,813 --> 00:42:38,813
then, yeah, you have to offer up some liquidity to it.

555
00:42:38,813 --> 00:42:39,813
Absolutely.

556
00:42:39,813 --> 00:42:40,813
You're absolutely right.

557
00:42:40,813 --> 00:42:42,813
That's something that a lot of people often overlook

558
00:42:42,813 --> 00:42:46,813
is that these markets are a little different from –

559
00:42:46,813 --> 00:42:51,813
they're a little different from normal markets where there's a use case for the
actual thing,

560
00:42:51,813 --> 00:42:57,813
like something like oil where you need it to heat your house or move your car or
something.

561
00:42:57,813 --> 00:43:00,813
You can just kind of sit back and wait for the market to just form.

562
00:43:00,813 --> 00:43:01,813
And the market will just form,

563
00:43:01,813 --> 00:43:06,813
and then everyone will be able to use the price to make their capital investments,

564
00:43:06,813 --> 00:43:10,813
and everyone will be very happy because we'll have a price system and everything
will be great.

565
00:43:10,813 --> 00:43:13,813
And so that's great.

566
00:43:13,813 --> 00:43:17,813
But it's something like where there is no real use for the thing.

567
00:43:17,813 --> 00:43:24,813
I mean oftentimes Intrade had success with the political futures

568
00:43:24,813 --> 00:43:26,813
because they were very entertaining,

569
00:43:26,813 --> 00:43:31,813
and I suspect because a lot of people wanted to kind of cheer on someone they liked

570
00:43:31,813 --> 00:43:34,813
or maybe even hedge against someone they didn't like.

571
00:43:34,813 --> 00:43:38,813
I've always thought – I had like a crazy uncle who I thought was doing that where he
would just –

572
00:43:38,813 --> 00:43:43,813
he hated whatever candidate, and so at least he could make a lot of money if the
candidate won.

573
00:43:43,813 --> 00:43:45,813
I thought that was kind of what he was doing for a while.

574
00:43:45,813 --> 00:43:48,813
He was kind of a nut.

575
00:43:48,813 --> 00:43:51,813
But basically there's like a lot of entertainment kind of value.

576
00:43:51,813 --> 00:43:58,813
But if you don't have this value somewhere, there won't be really a big need to
trade.

577
00:43:58,813 --> 00:44:01,813
It depends on all kinds of factors, right,

578
00:44:01,813 --> 00:44:03,813
and how people's preference for like risk and stuff,

579
00:44:03,813 --> 00:44:07,813
and how many people have the information that you want.

580
00:44:07,813 --> 00:44:09,813
But yeah, you're right.

581
00:44:09,813 --> 00:44:12,813
A lot of times these will need someone to front.

582
00:44:12,813 --> 00:44:21,813
Sometimes in one extreme, a very common extreme, some organization will want to buy.

583
00:44:21,813 --> 00:44:24,813
This is what I really wanted to do with Bitcoin's block size.

584
00:44:24,813 --> 00:44:30,813
I wanted to have just people put up a lot of money so that someone could just buy
the information they wanted,

585
00:44:30,813 --> 00:44:34,813
which is like the answer to some question, like should we fire the CEO,

586
00:44:34,813 --> 00:44:40,813
or should we change the block size, or should we elect a different president or
something.

587
00:44:40,813 --> 00:44:47,813
So I wanted someone to just put up this money so that there would be this big lure
to like really start everything going.

588
00:44:47,813 --> 00:44:50,813
So if you want to buy information, you can do that here.

589
00:44:50,813 --> 00:44:56,813
And if you don't pay enough, you run the risk of the market not being successful,
which is unfortunate.

590
00:44:56,813 --> 00:45:03,813
So just as a follow-up, that sounds like it guarantees the solvency of the bet, but
how do you guarantee the pair?

591
00:45:03,813 --> 00:45:07,813
So I just – I jam the final prices.

592
00:45:07,813 --> 00:45:12,813
So the – sorry, there's this thing on my computer that's making a lot of noise.

593
00:45:12,813 --> 00:45:18,813
But the solvency is guaranteed.

594
00:45:19,813 --> 00:45:21,813
The loss is bounded.

595
00:45:21,813 --> 00:45:27,813
If you hit an extreme, you've lost the most you can lose.

596
00:45:27,813 --> 00:45:33,813
So obviously, if you don't hit an extreme, you hit somewhere in the middle, and
you're sort of happier.

597
00:45:33,813 --> 00:45:43,813
So after the oracle, the voting procedure is done, those people have determined what
has actually happened.

598
00:45:43,813 --> 00:45:48,813
From there, you get the final – you get like whether or not Hillary Clinton actually
did win.

599
00:45:48,813 --> 00:45:51,813
And there I just jam the prices.

600
00:45:51,813 --> 00:45:59,813
I just say, okay, once we've reached a certain – once the market has reached a
certain time, a certain block number or whatever, it's matured.

601
00:45:59,813 --> 00:46:04,813
And you can now – instead of selling, you just withdraw.

602
00:46:04,813 --> 00:46:09,813
And you withdraw – the prices no longer vary as people bet.

603
00:46:09,813 --> 00:46:16,813
They're just jammed at the correct value, and then everyone can just withdraw.

604
00:46:16,813 --> 00:46:18,813
Does that make sense?

605
00:46:18,813 --> 00:46:21,813
Like it's just – the loss is bounded.

606
00:46:21,813 --> 00:46:25,813
So no matter what happens, you can't lose more than – you can't lose any money.

607
00:46:25,813 --> 00:46:32,813
And you – whether or not – if Hillary Clinton is elected, all the yes shares will be
redeemable for one.

608
00:46:32,813 --> 00:46:35,813
And if not, all the no shares will be redeemable for one.

609
00:46:35,813 --> 00:46:46,813
And so you ultimately – instead of having prices that are a function of this rule,
they're just a function of – they're instead a function of that voting process.

610
00:46:46,813 --> 00:46:48,813
That happens on a different track.

611
00:46:48,813 --> 00:46:50,813
So all the market stuff is – yeah.

612
00:46:50,813 --> 00:46:56,813
They're redeemable for one of the coins that are part of your separate blockchain?

613
00:46:56,813 --> 00:46:58,813
Yes.

614
00:46:58,813 --> 00:47:03,813
Yeah, so this is a sidechain, and there's a lot to say about that.

615
00:47:03,813 --> 00:47:09,813
But yeah, it's just a bunch of different rules for manipulating Bitcoin.

616
00:47:09,813 --> 00:47:22,813
So you would end up with – and then you would – so once you had these Bitcoin, you
could theoretically withdraw them to the Bitcoin main chain, not a sidechain.

617
00:47:22,813 --> 00:47:27,813
You could have it back in the Bitcoin world if you wanted to do that in theory.

618
00:47:27,813 --> 00:47:33,813
And I don't know if you are aware, but I did something else called Drivechain, which
is about that.

619
00:47:33,813 --> 00:47:40,813
And there's a lot to be said about sidechains and other stuff about that.

620
00:47:40,813 --> 00:47:41,813
It's very interesting stuff.

621
00:47:41,813 --> 00:47:54,813
But yeah, but this is – the idea is just that this is – everything that Bitcoin is,
but it just adds more message types and obviously more – a more complicated
database.

622
00:47:55,813 --> 00:47:57,813
But yeah, that's basically it.

623
00:47:57,813 --> 00:48:04,813
Some people might argue that I guess the project that you originally helped out
with, Augur on the Ethereum network.

624
00:48:04,813 --> 00:48:08,813
Ethereum is far better suited for a prediction market.

625
00:48:08,813 --> 00:48:15,813
I guess could you give us your experience of working with the Augur guys, kind of
how that whole thing played out?

626
00:48:15,813 --> 00:48:20,813
So I published this idea a while ago, and a lot of people were interested in it.

627
00:48:21,813 --> 00:48:30,813
And Augur, what eventually became known as Augur, they were some of those people who
were interested.

628
00:48:30,813 --> 00:48:38,813
And they were kind of – long story short, they were about – at one point, there were
about four different teams.

629
00:48:38,813 --> 00:48:44,813
And I didn't think the Augur team was sort of the best team.

630
00:48:44,813 --> 00:48:46,813
I thought that a different team was better.

631
00:48:47,813 --> 00:48:53,813
And I was just working at Yale as a researcher, and I was not really working on
this.

632
00:48:53,813 --> 00:48:56,813
It was just kind of like a spare time thing.

633
00:48:56,813 --> 00:49:03,813
And so Augur then did a lot of very aggressive kind of things.

634
00:49:03,813 --> 00:49:07,813
Like they partnered with Vitalik, and they switched to Ethereum.

635
00:49:07,813 --> 00:49:12,813
And then they did like a big – they planned to do like a big crowdfund.

636
00:49:12,813 --> 00:49:17,813
And then they changed their name to Augur, and they like made – they hired like a
marketing guy.

637
00:49:17,813 --> 00:49:21,813
And they did like a lot of posters and stuff.

638
00:49:21,813 --> 00:49:25,813
So yeah, they did a lot of stuff.

639
00:49:25,813 --> 00:49:28,813
I'm familiar with Jeremy from – they're a former marketing guy.

640
00:49:28,813 --> 00:49:31,813
He was an interesting guest on the show for sure.

641
00:49:31,813 --> 00:49:35,813
Yeah, they're very interesting.

642
00:49:35,813 --> 00:49:40,813
Yeah, the real problem is not – so yeah, they're really nice.

643
00:49:40,813 --> 00:49:43,813
And they're smart guys.

644
00:49:43,813 --> 00:49:53,813
But there are kind of a lot of problems with – one of the big problems with Augur is
that the people working there didn't totally –

645
00:49:53,813 --> 00:49:55,813
I mean it's really complicated, right?

646
00:49:55,813 --> 00:49:57,813
Like imagine how long it took for people to understand.

647
00:49:58,229 --> 00:50:03,229
I hate to force the parallelism, which is really unfair. But it took people a really
long time to kind of understand Bitcoin.

648
00:50:04,229 --> 00:50:12,229
And there were all kinds of people many months into the creation of Bitcoin who were
saying like – who are today's experts.

649
00:50:13,229 --> 00:50:20,229
But at the time, they didn't really know kind of what was going on. And the Augur
team was just kind of learning it a little too slowly.

650
00:50:21,229 --> 00:50:26,229
And they really wanted to make lots of changes. You know how this is very common in
Bitcoin as well?

651
00:50:27,229 --> 00:50:31,229
Again, where people hear about it for the first time and then they say, okay, that
would be great.

652
00:50:32,229 --> 00:50:36,229
But let's just change the deflationary thing or let's just – why do we have it?

653
00:50:37,229 --> 00:50:41,229
Like we should add know your customer to this or something.

654
00:50:42,229 --> 00:50:44,229
So they hear about it and they kind of want to make this – people get inspired.

655
00:50:44,229 --> 00:50:51,229
They really want to make – add their own thing to it even if their own thing is like
something that you thought of like two years ago and this is not a good idea.

656
00:50:52,229 --> 00:51:01,229
So they were kind of like – but they kind of did all this stuff very quickly at the
beginning of 2015 or whatever, 2014.

657
00:51:02,229 --> 00:51:07,229
I don't even – I lose track of the years now. But they started to do this stuff very
quickly.

658
00:51:08,229 --> 00:51:18,229
And I had – the other thing, the weird thing was that the person who was the most
productive volunteer, he didn't want me to reveal he or she.

659
00:51:19,229 --> 00:51:22,229
I have no idea. They didn't want me to reveal their – I assume it was a he.

660
00:51:23,229 --> 00:51:27,229
Didn't want me to reveal their identity or that they were working on the project.

661
00:51:28,229 --> 00:51:32,229
So they kind of did a lot of – they did like all of the groundwork, C++ groundwork.

662
00:51:33,229 --> 00:51:36,229
They were kind of doing it secretly for a while.

663
00:51:37,229 --> 00:51:44,229
And Roger Vier contacted me. He heard about the project in late 2014 and we met.

664
00:51:45,229 --> 00:51:55,229
And he was really interested in it and he started paying this developer, but it was
sort of like put me in like a weird position where I didn't really understand.

665
00:51:56,229 --> 00:52:04,229
The other thing, I didn't really care because – but things kind of got a little out
of hand with Augur and they – I don't know.

666
00:52:05,229 --> 00:52:12,229
Ethereum is really new and a lot of people I know are convinced it won't work for a
variety of completely different reasons.

667
00:52:13,229 --> 00:52:20,229
So I find it very unlikely that Ethereum will still be with us in two years.

668
00:52:20,229 --> 00:52:22,229
But I don't know. Maybe it lasted this long.

669
00:52:23,229 --> 00:52:25,229
But a lot of things lasted a while, right?

670
00:52:26,229 --> 00:52:29,229
MasterCoin. There's like a head MasterCoin.

671
00:52:30,229 --> 00:52:32,229
I mean Litecoin. Who would have thought that Litecoin would still be here?

672
00:52:33,229 --> 00:52:34,229
Litecoin and MasterCoin.

673
00:52:35,229 --> 00:52:36,229
What? I didn't catch?

674
00:52:37,229 --> 00:52:38,229
A lot of self-deprived Litecoins around, yeah.

675
00:52:39,229 --> 00:52:43,229
Yeah. So we still have Litecoin. We still have Ripple.

676
00:52:44,229 --> 00:52:46,229
They said they were closing it down I thought, but it's still there, right?

677
00:52:47,229 --> 00:52:48,229
It's still on CoinMarketCap.

678
00:52:48,229 --> 00:52:51,229
So, I mean, it's like weird stuff. BitShares lasted a very long time.

679
00:52:52,229 --> 00:52:55,229
I don't – you know, it's sort of still there.

680
00:52:56,229 --> 00:53:01,229
So it's like – these are kind of weird projects, but none have been as big as
Ethereum.

681
00:53:02,229 --> 00:53:09,229
But I just – it seems so – things really kind of – I don't know.

682
00:53:10,229 --> 00:53:15,229
It's hard to know what to say about that, but I don't think it's – you know, lots of
people just openly laugh at Ethereum

683
00:53:15,229 --> 00:53:20,229
and they stopped trying to correct the mistakes like three years ago,

684
00:53:21,229 --> 00:53:26,229
and now it's just kind of – we have the talk of Microsoft hosting Ethereum,

685
00:53:27,229 --> 00:53:29,229
which is like a total contradiction.

686
00:53:30,229 --> 00:53:31,229
They host Ethereum after a while.

687
00:53:32,229 --> 00:53:34,229
Like their blockchains are only like 10 gigabytes and it's only been like four
months.

688
00:53:35,229 --> 00:53:37,229
Very, very fast, right? There's that paper.

689
00:53:38,229 --> 00:53:39,229
See, this is the thing. You don't really know.

690
00:53:40,229 --> 00:53:44,229
There's a huge chicken and egg problem where you don't know if you're any good

691
00:53:45,229 --> 00:53:47,229
until you really start to get the actual momentum, right?

692
00:53:48,229 --> 00:53:52,229
Because – so you don't know if you're any good.

693
00:53:53,229 --> 00:53:55,229
So once you get big enough, then someone will say,

694
00:53:56,229 --> 00:53:58,229
okay, I'm going to write a little academic paper about Ethereum,

695
00:53:59,229 --> 00:54:00,229
because now Ethereum's big, right?

696
00:54:01,229 --> 00:54:06,229
So then someone wrote that ring of guages or something paper where they're like,

697
00:54:07,229 --> 00:54:12,229
by the way, you can just do these little computations that like multiply these
matrices or something

698
00:54:12,229 --> 00:54:16,229
and it will just be a huge amount of work for Ethereum to do,

699
00:54:17,229 --> 00:54:18,229
but it now costs you very much.

700
00:54:19,229 --> 00:54:20,229
And it was like, how is that?

701
00:54:21,229 --> 00:54:24,229
But more fundamental to me is that the whole operating premise –

702
00:54:25,229 --> 00:54:27,229
so this is the thing. You talk to a lot of Bitcoin experts,

703
00:54:28,229 --> 00:54:33,229
and it seems like many of them have completely different objections to Ethereum.

704
00:54:34,229 --> 00:54:39,229
So some people will talk about the organization and how there's lots to talk about
there,

705
00:54:39,229 --> 00:54:46,229
and other people will talk about the size of the blockchain, the blockchain growth.

706
00:54:47,229 --> 00:54:49,229
But I mean, for me, it's just like, what is the point?

707
00:54:50,229 --> 00:54:58,229
Before Bitcoin, someone would try to prevent you from sending money in this fashion.

708
00:54:59,229 --> 00:55:07,229
So you needed the money to be sent in a reliable, kind of redundant way like this,

709
00:55:07,229 --> 00:55:09,229
where you could recover.

710
00:55:10,229 --> 00:55:15,229
But with Ethereum, I'm like, who is stopping you from doing computations on your own
computer?

711
00:55:16,229 --> 00:55:21,229
No one. So the only thing that – what it must be offering is the opportunity

712
00:55:22,229 --> 00:55:24,229
to use those computations to move money around.

713
00:55:25,229 --> 00:55:30,229
But again, you can kind of already do that to a large extent with this –

714
00:55:31,229 --> 00:55:32,229
you're going down this oracle road again.

715
00:55:32,229 --> 00:55:37,229
So either you're going to do the entire oracle thing, or you're going to just use
multisig.

716
00:55:38,229 --> 00:55:42,229
But there's a bigger problem, which is that Ethereum can't actually work very well
with oracles,

717
00:55:43,229 --> 00:55:47,229
because you need to – if someone has an incentive today to be dishonest,

718
00:55:48,229 --> 00:55:54,229
which they directly do, just by being one of two counterparties to any bet,

719
00:55:55,229 --> 00:55:58,229
they have – you know, if you're on the losing side of the bet,

720
00:55:59,229 --> 00:56:01,229
or you don't even care if you're on any side of the bet,

721
00:56:02,229 --> 00:56:06,229
you've got to be able to control the outcome of the bet that's directly worth money
to you.

722
00:56:07,229 --> 00:56:11,229
So the only way you can extract this long-term surplus

723
00:56:12,229 --> 00:56:16,229
is to have some kind of reputational – some kind of abstract reputation.

724
00:56:17,229 --> 00:56:22,229
So either you literally have reputation, as in the case of someone like, you know,

725
00:56:23,229 --> 00:56:26,229
Dread Pirate Roberts, Silk Road, you have some kind of abstraction,

726
00:56:27,229 --> 00:56:29,229
or you have some kind of feedback or something like that.

727
00:56:30,229 --> 00:56:31,229
Or you have kind of like what I did.

728
00:56:32,229 --> 00:56:35,229
You can make like a really, really, really abstract reputation

729
00:56:36,229 --> 00:56:37,229
that exists like in the form of this corporation.

730
00:56:38,229 --> 00:56:41,229
But whatever it is, you need to have some way for people to compete on reliability

731
00:56:42,229 --> 00:56:46,229
in order for the oracle path to succeed.

732
00:56:47,229 --> 00:56:49,229
But Ethereum is too general.

733
00:56:50,229 --> 00:56:54,229
You can copy someone else's – you can free ride off of someone else's reputation

734
00:56:55,229 --> 00:56:57,229
by just making a little thing that just watches what they do.

735
00:56:57,229 --> 00:57:00,229
So as a consequence, no one can compete on reputation,

736
00:57:01,229 --> 00:57:02,229
and it's going to be basically impossible.

737
00:57:03,229 --> 00:57:06,229
I mean, the security margin in this –

738
00:57:07,229 --> 00:57:10,229
just like the miners determine the security margin in Bitcoin,

739
00:57:11,229 --> 00:57:13,229
with this, it's the market capitalization of those vote coins

740
00:57:14,229 --> 00:57:17,229
that determines how much vote coin do you have to buy a lot

741
00:57:18,229 --> 00:57:21,229
to shake all the outcomes.

742
00:57:22,229 --> 00:57:24,229
And assuming that nothing else works, you know, none of the miner stuff,

743
00:57:24,229 --> 00:57:27,229
which could catch that downstream.

744
00:57:28,229 --> 00:57:29,229
But basically, the security margin –

745
00:57:30,229 --> 00:57:34,229
so I'm imagining these vote coins would be worth a good chunk of change eventually,

746
00:57:35,229 --> 00:57:37,229
especially eventually once they've grown.

747
00:57:38,229 --> 00:57:42,229
But how can they be worth if their value is that they earn money?

748
00:57:43,229 --> 00:57:47,229
The vote coins are kind of a share in an abstract corporation, right?

749
00:57:48,229 --> 00:57:52,229
So they're earning – they're paying out shares of revenue.

750
00:57:52,229 --> 00:57:57,229
So how can they – how can it be worth, like, I say $1 million

751
00:57:58,229 --> 00:58:00,229
if someone else can just copy that, you know?

752
00:58:01,229 --> 00:58:03,229
They just write a little piece of code that just copies that.

753
00:58:04,229 --> 00:58:06,229
That should have – that should be able to capture –

754
00:58:07,229 --> 00:58:08,229
it should be able to undercut this thing,

755
00:58:09,229 --> 00:58:11,229
and it should – it can guarantee that it's going to perform just as well.

756
00:58:12,229 --> 00:58:16,229
And so, long story short, I mean, this should be worth –

757
00:58:17,229 --> 00:58:18,229
this tiny piece of code should be worth $1 million,

758
00:58:19,229 --> 00:58:20,229
and anyone can write this tiny piece of code.

759
00:58:20,229 --> 00:58:25,229
So it – because it will be getting these dividend streams

760
00:58:26,229 --> 00:58:31,229
just the same as the main vote coin kind of set would.

761
00:58:32,229 --> 00:58:35,229
So it's kind of – it gets a little technical, but I don't think –

762
00:58:36,229 --> 00:58:39,229
but I don't – so I don't think Ethereum has a use case other than –

763
00:58:40,229 --> 00:58:42,229
it can't go down the oracle path.

764
00:58:43,229 --> 00:58:46,229
So I don't know, you know, what the use case is.

765
00:58:47,229 --> 00:58:50,229
I've asked people for years to tell me what they would use Ethereum for,

766
00:58:51,229 --> 00:58:52,229
and for a while I got back nothing,

767
00:58:53,229 --> 00:58:55,229
and then people would tell me they use it for Augur,

768
00:58:56,229 --> 00:58:58,229
which is my own project, securitously.

769
00:58:59,229 --> 00:59:01,229
So – but people, you know, have really never given –

770
00:59:02,229 --> 00:59:07,229
the use cases that are featured on the Ethereum website are, like, not –

771
00:59:08,229 --> 00:59:09,229
you know, they're not serious.

772
00:59:10,229 --> 00:59:12,229
These things about little locks and stuff that you are not –

773
00:59:12,229 --> 00:59:17,229
I mean, it's not – these are not, like, you know,

774
00:59:18,229 --> 00:59:19,229
this would be much better done.

775
00:59:20,229 --> 00:59:25,229
Almost everything that Ethereum does would be much better done not on Ethereum.

776
00:59:26,229 --> 00:59:30,229
Just, like, there's no reason to decentralize almost everything that is there.

777
00:59:31,229 --> 00:59:34,229
And in another sense, none of it is decentralized,

778
00:59:35,229 --> 00:59:37,229
because if law enforcement disagrees,

779
00:59:38,229 --> 00:59:40,229
they can just, you know, bring bolt cutters

780
00:59:41,229 --> 00:59:43,229
and just cut the lock or something,

781
00:59:44,229 --> 00:59:46,229
and it's, like, there's no – you know, it's very –

782
00:59:47,229 --> 00:59:48,229
I just don't get it, personally.

783
00:59:49,229 --> 00:59:51,229
But you talk to a lot of different people,

784
00:59:52,229 --> 00:59:53,229
they'll give you a lot of weird problems,

785
00:59:54,229 --> 00:59:56,229
and there's a lot of burnout in the, you know,

786
00:59:57,229 --> 00:59:58,229
the Bitcoin wizards or whatever you want to call them,

787
00:59:59,229 --> 01:00:00,229
the people who know a lot about –

788
01:00:01,229 --> 01:00:03,229
they're just, like, tired of explaining this stuff.

789
01:00:04,229 --> 01:00:05,229
They've been explaining it since 2009 or something,

790
01:00:05,229 --> 01:00:07,229
so they just don't even bother talking to anyone anymore.

791
01:00:08,229 --> 01:00:11,229
And so now you kind of – it's kind of just like –

792
01:00:12,229 --> 01:00:14,229
so I don't – you know, there's a lot to say about Ethereum.

793
01:00:15,229 --> 01:00:16,229
We could talk about it all night if you want.

794
01:00:17,229 --> 01:00:20,229
One thing that Ethereum can't do is buy beer from our vending machines.

795
01:00:21,229 --> 01:00:22,229
I don't know who here wants a beer, guys.

796
01:00:23,229 --> 01:00:25,229
I still got some money from our guests last time.

797
01:00:26,229 --> 01:00:27,229
Maybe I'll get a round.

798
01:00:28,229 --> 01:00:29,229
All right. I'll send it off here.

799
01:00:30,229 --> 01:00:33,229
And yeah, you should check out our machine here, Paul.

800
01:00:34,229 --> 01:00:36,229
You have to turn me around.

801
01:00:37,229 --> 01:00:39,229
You can have the light go off at least to show that it's working.

802
01:00:42,229 --> 01:00:45,229
So we have an old vintage testing machine here.

803
01:00:46,229 --> 01:00:47,229
Oh, cool.

804
01:00:48,229 --> 01:00:53,229
And we've packed it with a Raspberry Pi to basically accept –

805
01:00:54,229 --> 01:00:55,229
why is it not doing anything now –

806
01:00:56,229 --> 01:00:57,229
to accept Bitcoin payments,

807
01:00:58,229 --> 01:01:01,229
and yeah, it's been working splendidly for us.

808
01:01:01,229 --> 01:01:05,229
I've got to thank the guys in the room here for setting it up.

809
01:01:06,229 --> 01:01:07,229
Pi is still on.

810
01:01:09,229 --> 01:01:10,229
No, Pi is still on.

811
01:01:11,229 --> 01:01:12,229
It should go.

812
01:01:13,229 --> 01:01:14,229
Yeah.

813
01:01:15,229 --> 01:01:16,229
We'll see how fast blockchain is.

814
01:01:17,229 --> 01:01:19,229
And Paul, while he's doing that, I've got a quick question for you.

815
01:01:21,229 --> 01:01:26,229
You mentioned Augur and whether or not you believe in Ethereum and Augur and so on.

816
01:01:27,229 --> 01:01:31,229
You have to agree that if there's any value to the world in prediction markets,

817
01:01:32,229 --> 01:01:33,229
and I certainly believe there is,

818
01:01:34,229 --> 01:01:38,229
that there will be multiple prediction markets out there.

819
01:01:40,229 --> 01:01:45,229
Has there been any talk about standardizing any kind of formats

820
01:01:46,229 --> 01:01:50,229
for interacting with them as far as oracles are concerned?

821
01:01:52,229 --> 01:01:54,229
It would seem that there might be some advantage

822
01:01:54,229 --> 01:02:04,229
to being able to upload information to both Augur and Hivemind

823
01:02:05,229 --> 01:02:10,229
and also to whatever other sites are out there

824
01:02:11,229 --> 01:02:12,229
so that when an election is won,

825
01:02:13,229 --> 01:02:20,229
you can put your reputation on the line on all the different prediction markets.

826
01:02:21,229 --> 01:02:29,229
And I imagine that it might be possible to make bets

827
01:02:30,229 --> 01:02:32,229
between the different prediction markets

828
01:02:33,229 --> 01:02:39,229
in order to kind of tighten and solidify that common information thing

829
01:02:40,229 --> 01:02:43,229
so that if you wanted to make a bet on Hivemind

830
01:02:44,229 --> 01:02:47,229
that a particular bet on Augur

831
01:02:48,229 --> 01:02:52,229
or a particular oracle reporting to Augur was accurate.

832
01:02:53,229 --> 01:02:55,229
By interlinking these various things,

833
01:02:56,229 --> 01:02:57,229
you could get arbitrage happening

834
01:02:58,229 --> 01:03:03,229
that would tend to very quickly reveal

835
01:03:04,229 --> 01:03:07,229
when there's a systematic problem with one of the underlying networks.

836
01:03:08,229 --> 01:03:10,229
Yeah, I don't know about that.

837
01:03:11,229 --> 01:03:12,229
I mean, it's an interesting idea.

838
01:03:13,229 --> 01:03:16,229
So first of all, as I tried to explain earlier,

839
01:03:17,229 --> 01:03:20,229
the security margin is the market capitalization of the vote coins.

840
01:03:21,229 --> 01:03:23,229
So if you copy that 10 times,

841
01:03:24,229 --> 01:03:27,229
all you've done is decreased security by a factor of 10,

842
01:03:28,229 --> 01:03:32,229
but you haven't like – you don't make up for it

843
01:03:33,229 --> 01:03:34,229
by the fact that there's 10 different systems.

844
01:03:35,229 --> 01:03:39,229
It's just 10 systems that are all one-tenth as secure.

845
01:03:40,229 --> 01:03:42,229
So I'm not sure.

846
01:03:43,229 --> 01:03:44,229
It's hard to say.

847
01:03:45,229 --> 01:03:46,229
I think there definitely will be a lot of –

848
01:03:47,229 --> 01:03:50,229
there will be more than one service like this,

849
01:03:51,229 --> 01:03:52,229
but I'm hoping that it plays out a slightly different way.

850
01:03:53,229 --> 01:03:55,229
And so I'm hoping that – I'm not hoping,

851
01:03:56,229 --> 01:03:59,229
but I kind of expect that Hivemind would be used

852
01:04:00,229 --> 01:04:05,229
for things that are very sensor-attracting

853
01:04:05,229 --> 01:04:07,229
or something kind of like these things that I think are –

854
01:04:08,229 --> 01:04:10,229
I think will be kind of really important.

855
01:04:11,229 --> 01:04:14,229
This sort of like president versus GDP,

856
01:04:15,229 --> 01:04:19,229
CEO versus stock price kind of really kind of a lot –

857
01:04:20,229 --> 01:04:22,229
that potentially embarrass a lot of people, markets.

858
01:04:23,229 --> 01:04:25,229
And I think that a lot of other stuff will be done.

859
01:04:26,229 --> 01:04:29,229
Like I think sort of like short-term sports betting will be done.

860
01:04:30,229 --> 01:04:32,229
There will be like prediction market version of that

861
01:04:33,229 --> 01:04:34,229
and prediction market version of like other more entertaining things

862
01:04:35,229 --> 01:04:37,229
I think will eventually be kind of on a website

863
01:04:38,229 --> 01:04:41,229
or on like a smaller system of some kind

864
01:04:42,229 --> 01:04:44,229
where it's just – it's not as serious.

865
01:04:45,229 --> 01:04:46,229
But I think for this, like if you want –

866
01:04:47,229 --> 01:04:49,229
like I'm imagining this could contain

867
01:04:50,229 --> 01:04:52,229
like some kind of synthetic Dow Jones Industrial Average

868
01:04:53,229 --> 01:04:56,229
in the U.S., like U.S. Stock Market Index.

869
01:04:57,229 --> 01:04:59,229
And I think that that – I'm not sure.

870
01:05:00,229 --> 01:05:01,229
I mean something that serious is going to –

871
01:05:02,229 --> 01:05:05,229
I think it's going to want to converge to one thing

872
01:05:06,229 --> 01:05:08,229
that is the thing.

873
01:05:09,229 --> 01:05:11,229
I think not necessarily network effect of money as with Bitcoin,

874
01:05:12,229 --> 01:05:15,229
but there are still other smaller network effects

875
01:05:16,229 --> 01:05:24,229
with like respect to developers and what you might call

876
01:05:25,229 --> 01:05:27,229
like human capital knowledge and stuff like that.

877
01:05:28,229 --> 01:05:30,229
Like much easier to just learn one.

878
01:05:31,229 --> 01:05:36,229
So I think there might be – it's hard to say completely,

879
01:05:37,229 --> 01:05:44,229
but I don't think it's – I don't think that you'd want to spread.

880
01:05:45,229 --> 01:05:47,229
See the thing is what you can already do on Hivemind

881
01:05:48,229 --> 01:05:50,229
is you can already create lots of different markets

882
01:05:51,229 --> 01:05:52,229
in different ways.

883
01:05:53,229 --> 01:05:54,229
And you can – you create these different decisions

884
01:05:55,229 --> 01:05:56,229
and then from there the decisions are the bottlenecks.

885
01:05:57,229 --> 01:05:58,229
You can create markets that are very liquid from there,

886
01:05:58,229 --> 01:06:01,229
markets that use a lot of decisions.

887
01:06:02,229 --> 01:06:04,229
You can do lots of different things kind of within one already.

888
01:06:05,229 --> 01:06:09,229
So you would get a lot of differentiation

889
01:06:10,229 --> 01:06:11,229
even within one system.

890
01:06:12,229 --> 01:06:14,229
So I'm not sure given the risk that the system would collapse,

891
01:06:15,229 --> 01:06:20,229
which I think is high even for one or two

892
01:06:21,229 --> 01:06:23,229
because it's very experimental.

893
01:06:24,229 --> 01:06:26,229
But I don't necessarily think it would play out totally like that.

894
01:06:26,229 --> 01:06:27,229
I think it would be slightly different.

895
01:06:28,229 --> 01:06:30,229
I think there would be more of this kind of log distribution

896
01:06:31,229 --> 01:06:32,229
where there would be like one big one

897
01:06:33,229 --> 01:06:34,229
and then maybe sort of like a sub one.

898
01:06:35,229 --> 01:06:38,229
And then like a lot of that are just basically centralized websites

899
01:06:39,229 --> 01:06:42,229
that are just sort of for fun or shorter term type of thing.

900
01:06:43,229 --> 01:06:46,229
What's your opinion on the I guess upcoming election

901
01:06:47,229 --> 01:06:51,229
that's going on in Bitcoin in regards to the expanding,

902
01:06:52,229 --> 01:06:53,229
doing a segregated witness

903
01:06:54,229 --> 01:06:55,229
or just going straight to bigger blocks

904
01:06:56,229 --> 01:06:57,229
like hard fork versus soft fork?

905
01:06:58,229 --> 01:06:59,229
Well, I waited a very long time.

906
01:07:00,229 --> 01:07:01,229
But I did sign.

907
01:07:02,229 --> 01:07:04,229
I just signed like four days ago,

908
01:07:05,229 --> 01:07:07,229
Greg Maxwell's scaling roadmap.

909
01:07:08,229 --> 01:07:09,229
So I guess I endorsed.

910
01:07:10,229 --> 01:07:11,229
I waited a really long time.

911
01:07:12,229 --> 01:07:14,229
I read it very carefully because it's become quite the issue, right?

912
01:07:15,229 --> 01:07:16,229
It's the talk of the town.

913
01:07:17,229 --> 01:07:20,229
But I guess so I couldn't really find anything I really disagreed

914
01:07:21,229 --> 01:07:22,229
with seriously in his thing.

915
01:07:23,229 --> 01:07:24,229
So I signed it.

916
01:07:24,229 --> 01:07:28,229
But I think it's very clear that the debate is not really about

917
01:07:29,229 --> 01:07:33,229
anything other than control over Bitcoin.

918
01:07:34,229 --> 01:07:36,229
I don't think it's really about anything

919
01:07:37,229 --> 01:07:41,229
because I don't know if you read my blog or something.

920
01:07:42,229 --> 01:07:45,229
I've already proposed like three different ways of solving this

921
01:07:46,229 --> 01:07:47,229
like in a kind of a Pareto improvement

922
01:07:48,229 --> 01:07:50,229
like such that everyone can kind of get what they want

923
01:07:51,229 --> 01:07:52,229
or no one is worse off,

924
01:07:52,229 --> 01:07:54,229
but other people can still do very well.

925
01:07:55,229 --> 01:07:57,229
So I've published a lot of things

926
01:07:58,229 --> 01:08:02,229
and tried to advocate privately and publicly

927
01:08:03,229 --> 01:08:05,229
for these like win-win solutions,

928
01:08:06,229 --> 01:08:07,229
but they never really catch on.

929
01:08:08,229 --> 01:08:11,229
And I think that's because no one really wants to make everyone happy.

930
01:08:12,229 --> 01:08:13,229
I think I'm the only maybe the only one who wants

931
01:08:14,229 --> 01:08:16,229
like the only one in the conversation who wants that sometimes.

932
01:08:17,229 --> 01:08:18,229
And other people I think they just want to win

933
01:08:18,229 --> 01:08:22,229
and they want to kind of assert dominance

934
01:08:23,229 --> 01:08:25,229
or protect their turf or do some other thing

935
01:08:26,229 --> 01:08:27,229
that is not related to.

936
01:08:28,229 --> 01:08:30,229
Because I mean I've done this like so many times for months

937
01:08:31,229 --> 01:08:34,229
since like May of 2015.

938
01:08:35,229 --> 01:08:37,229
And since it like became an issue

939
01:08:38,229 --> 01:08:44,229
and no one seems to be interested in doing those things.

940
01:08:45,229 --> 01:08:49,229
And the sidechains I think are the weirdest example of that

941
01:08:50,229 --> 01:08:53,229
because you could have these things as a sidechain

942
01:08:54,229 --> 01:08:55,229
and everyone could get what they want,

943
01:08:56,229 --> 01:08:58,229
but no one wants to do that at all.

944
01:09:00,229 --> 01:09:07,229
It's really hard to say that it's I no longer believe

945
01:09:08,229 --> 01:09:10,229
that the debate is really about anything other than.

946
01:09:11,229 --> 01:09:13,229
And it's ultimately of a very low consequence, right?

947
01:09:14,229 --> 01:09:16,229
Because even if you know other than the principle

948
01:09:17,229 --> 01:09:18,229
which is of tremendous consequence.

949
01:09:19,229 --> 01:09:21,229
So some people say on principle Bitcoin can never hard fork

950
01:09:22,229 --> 01:09:23,229
or it can never do anything.

951
01:09:24,229 --> 01:09:30,229
You know the rules are set and they're not being changed.

952
01:09:31,229 --> 01:09:33,229
So some people say that and so obviously in that light

953
01:09:34,229 --> 01:09:35,229
it makes a huge deal.

954
01:09:36,229 --> 01:09:38,229
But I think ultimately I mean think about it

955
01:09:39,229 --> 01:09:42,229
like the miners can just set the soft limit back down to one megabyte.

956
01:09:42,229 --> 01:09:43,229
They can soft fork back down.

957
01:09:44,229 --> 01:09:47,229
So I mean and then if there's a hard fork all the users,

958
01:09:48,229 --> 01:09:52,229
all the investors, they'll have two copies of each coin.

959
01:09:53,229 --> 01:09:56,229
So ultimately it's not, it's really not.

960
01:09:57,229 --> 01:09:59,229
It's really I think it's blown up

961
01:10:00,229 --> 01:10:02,229
and I wrote about this very recently.

962
01:10:03,229 --> 01:10:06,229
It's you know it's blown up and it's made a lot of people angry

963
01:10:07,229 --> 01:10:10,229
and there's people have become very political

964
01:10:10,229 --> 01:10:13,229
and there's been no recovery from that.

965
01:10:14,229 --> 01:10:16,229
There usually isn't in Homo sapiens

966
01:10:17,229 --> 01:10:19,229
and there hasn't been here.

967
01:10:20,229 --> 01:10:22,229
So that's kind of, it's very hard for me to believe

968
01:10:23,229 --> 01:10:25,229
the debate is actually about anything anymore than just.

969
01:10:26,229 --> 01:10:31,229
Well it's true Paul and that I think leads to a good question.

970
01:10:32,229 --> 01:10:35,229
As you intimated it's not about the specific issue

971
01:10:36,229 --> 01:10:39,229
so much about you know people wanting to win

972
01:10:40,229 --> 01:10:42,229
but maybe even more importantly

973
01:10:43,229 --> 01:10:46,229
it's a fundamental question about the governance

974
01:10:47,229 --> 01:10:49,229
of these distributed systems

975
01:10:50,229 --> 01:10:54,229
and how to manage the governance in a decentralized way.

976
01:10:55,229 --> 01:10:56,229
So I'm going to ask you,

977
01:10:57,229 --> 01:11:01,229
what is your vision for Hivemind's ultimate governance?

978
01:11:02,229 --> 01:11:06,229
If it takes off and becomes the de facto prediction market,

979
01:11:07,229 --> 01:11:08,229
decentralized prediction market,

980
01:11:08,229 --> 01:11:13,229
who decides which versions of the code,

981
01:11:14,229 --> 01:11:18,229
you know 2.0 and 3.0 run down the road?

982
01:11:19,229 --> 01:11:23,229
Are you looking at building anything into the actual system

983
01:11:24,229 --> 01:11:27,229
to have people vote in a decentralized manner

984
01:11:28,229 --> 01:11:33,229
for the type of code that makes these future decisions?

985
01:11:34,229 --> 01:11:36,229
Yeah well it's interesting,

986
01:11:37,229 --> 01:11:39,229
I actually, there is an idea for that.

987
01:11:40,229 --> 01:11:44,229
So the first thing I published was a blog post

988
01:11:45,229 --> 01:11:47,229
that I called the win-win block size solution

989
01:11:48,229 --> 01:11:50,229
which was about using prediction markets,

990
01:11:51,229 --> 01:11:52,229
a very clever one in fact,

991
01:11:53,229 --> 01:11:55,229
where anyone who wanted a hard fork,

992
01:11:56,229 --> 01:11:58,229
they could buy these coins that would give them,

993
01:11:59,229 --> 01:12:01,229
you know it would give them today's exchange rate,

994
01:12:01,229 --> 01:12:02,229
and you could basically get a refund

995
01:12:03,229 --> 01:12:05,229
if it didn't hard fork, if Bitcoin didn't hard fork,

996
01:12:06,229 --> 01:12:08,229
you get today's, excuse me, today's price.

997
01:12:09,229 --> 01:12:13,229
You do the same thing if you didn't want the hard fork,

998
01:12:14,229 --> 01:12:15,229
you get a refund if it did hard fork,

999
01:12:16,229 --> 01:12:21,229
but you could keep your Bitcoins if it did not

1000
01:12:22,229 --> 01:12:23,229
or whatever it was you wanted.

1001
01:12:24,229 --> 01:12:26,229
And there was like a lot of clever math there

1002
01:12:27,229 --> 01:12:29,229
and it was a really neat idea.

1003
01:12:29,229 --> 01:12:30,229
The weird thing is,

1004
01:12:31,229 --> 01:12:33,229
that would have used prediction markets to,

1005
01:12:34,229 --> 01:12:36,229
so as a side effect I didn't even bring up,

1006
01:12:37,229 --> 01:12:39,229
as a side effect you'd end up with two prices

1007
01:12:40,229 --> 01:12:41,229
and I would imagine that one of those two prices

1008
01:12:42,229 --> 01:12:46,229
would be slightly higher than the current exchange rate.

1009
01:12:47,229 --> 01:12:48,229
See what I'm saying is you'd have,

1010
01:12:49,229 --> 01:12:50,229
you'd have basically what I call fork futures.

1011
01:12:51,229 --> 01:12:54,229
You could buy one type or the other type of Bitcoin,

1012
01:12:55,229 --> 01:12:56,229
but you wouldn't need the, you wouldn't,

1013
01:12:57,229 --> 01:12:58,229
you'd be able to recover completely

1014
01:12:59,229 --> 01:13:00,229
if you bought the right type.

1015
01:13:01,229 --> 01:13:02,229
So if you bet on hard fork

1016
01:13:03,229 --> 01:13:04,229
and the hard fork didn't happen,

1017
01:13:05,229 --> 01:13:06,229
you'd win money and you'd win enough

1018
01:13:07,229 --> 01:13:09,229
such that you could cash out as the,

1019
01:13:10,229 --> 01:13:11,229
at the today's exchange rate,

1020
01:13:12,229 --> 01:13:13,229
no matter what happened with the exchange rate in the meantime.

1021
01:13:14,229 --> 01:13:18,229
So you have these, basically these futures on the forks

1022
01:13:19,229 --> 01:13:21,229
and that was like, that was like a really cool thing

1023
01:13:22,229 --> 01:13:23,229
because everyone could just buy

1024
01:13:24,229 --> 01:13:25,229
and sell exactly what they wanted

1025
01:13:26,229 --> 01:13:27,229
and you'd, as a side effect of this,

1026
01:13:27,229 --> 01:13:28,229
you'd get two prices.

1027
01:13:29,229 --> 01:13:31,229
You get the price of, you know, Bitcoin original

1028
01:13:32,229 --> 01:13:33,229
and the price of Bitcoin hard forked.

1029
01:13:34,229 --> 01:13:36,229
And my, my total, my 100% expectation

1030
01:13:37,229 --> 01:13:38,229
would be that one of those would be

1031
01:13:39,229 --> 01:13:40,229
slightly higher than today's exchange rate

1032
01:13:41,229 --> 01:13:43,229
and the other one would be like near zero or something

1033
01:13:44,229 --> 01:13:45,229
because I would imagine that

1034
01:13:46,229 --> 01:13:48,229
there would be some expectation

1035
01:13:49,229 --> 01:13:50,229
on which of the two would survive

1036
01:13:51,229 --> 01:13:53,229
if the fork actually happened.

1037
01:13:54,229 --> 01:13:57,229
And so, long story short, you could,

1038
01:13:58,229 --> 01:13:59,229
you could like,

1039
01:14:00,229 --> 01:14:01,229
within this prediction market environment,

1040
01:14:02,229 --> 01:14:03,229
everyone could kind of get exactly what they wanted

1041
01:14:04,229 --> 01:14:05,229
or they could trade until they were,

1042
01:14:06,229 --> 01:14:07,229
had reached that point and,

1043
01:14:08,229 --> 01:14:09,229
and that would enable prediction markets

1044
01:14:10,229 --> 01:14:11,229
to help Bitcoin decide what to do.

1045
01:14:12,229 --> 01:14:14,229
But it would not, I don't think you could totally use,

1046
01:14:15,229 --> 01:14:16,229
you know, it would be like operating

1047
01:14:17,229 --> 01:14:18,229
on your own brain or something.

1048
01:14:19,229 --> 01:14:20,229
I don't think you would be able to,

1049
01:14:21,229 --> 01:14:22,229
I thought about it, but I don't think Hivemind

1050
01:14:23,229 --> 01:14:24,229
would be able to predict markets on itself

1051
01:14:25,229 --> 01:14:26,229
because it would have no way of knowing the outcome

1052
01:14:27,229 --> 01:14:28,229
after the hard fork because the hard fork would,

1053
01:14:29,229 --> 01:14:30,229
you know, potentially, you know,

1054
01:14:31,229 --> 01:14:32,229
it was like kind of,

1055
01:14:33,229 --> 01:14:34,229
you reach like an unmeasurable zone.

1056
01:14:35,229 --> 01:14:37,229
But I thought about having like a tiny, tiny,

1057
01:14:38,229 --> 01:14:39,229
this is the original proposal

1058
01:14:40,229 --> 01:14:41,229
was just to pick multi-sig people, just pick,

1059
01:14:42,229 --> 01:14:43,229
you just elect seven people

1060
01:14:44,229 --> 01:14:45,229
and their job is only,

1061
01:14:46,229 --> 01:14:49,229
only to report on the exchange rate

1062
01:14:50,229 --> 01:14:51,229
and whether or not you forked.

1063
01:14:51,229 --> 01:14:52,127
Thank you very much.

1064
01:14:52,127 --> 01:15:01,827
The exchange rate and whether or not you forked, or, and, or whether or not you did
other things, but you just, they just have to report like two numbers, basically, a
one or a zero, and then the exchange rate in dollars or whatever.

1065
01:15:03,327 --> 01:15:10,827
And if you did that, then you would have, you could have these markets, and I think
markets are much better than I, you mentioned voting. I'm not a huge fan of voting,

1066
01:15:10,927 --> 01:15:28,527
even with money, even when it's weighed by money because there's nothing at stake
for a bad vote. So you, it's a plutocracy I've described in the past as, so having
money bet is the, having money vote is a plutocracy, right, rule of the wealthy.

1067
01:15:28,527 --> 01:15:43,227
And it puts the same wealthy people in charge no matter what the decision is about,
whereas this prediction market thing, it allows people to really lever up and bet if
they happen to know a lot, and it allows them to stay out of it if they don't know a
lot.

1068
01:15:43,227 --> 01:15:55,927
You could have a really rich guy who just doesn't know anything about manufacturing
two-by-fours, and so he doesn't buy a, he doesn't invest in a two-by-four factory or
something because he doesn't know anything about that.

1069
01:15:55,927 --> 01:16:07,927
But you can have a sort of a poorer person borrow money or go to a bank or something
and say, I know everything about this. So markets I think are much better.

1070
01:16:08,627 --> 01:16:35,627
That makes sense. But when you're talking about an underlying system, the whole
proof-of-stake concept essentially is a plutocracy, but that's arguably a good thing
because the people who have the most money at stake in a particular system have the
most incentive to have that system have integrity.

1071
01:16:35,627 --> 01:17:05,327
So if you're talking about using voting for governance, I think that's a little bit
different than using for governance of how a system runs. I think that's a little
bit different than using voting for Oracle purposes because there's obviously a
market incentive for somebody to cheat in the case of an Oracle situation.

1072
01:17:06,027 --> 01:17:21,027
Reputational issues aside, if there's a wager that they can bet, if the cost of
dissenting is smaller than the gain from that cheating, then there's an economic
incentive to do that.

1073
01:17:21,727 --> 01:17:41,727
But if you're talking about the fundamental trustworthiness of an underlying system,
take Bitcoin as a simple example, there's clearly a disincentive for the people who
have the largest stake in that system to undermine the trustworthiness of the
system.

1074
01:17:42,427 --> 01:17:59,427
You're completely right. This is very similar to that. The only difference is that –
so if you're going to allow people to – so like I'm saying, allowing people to –
capitalism is similar to a plutocracy because the rich people have more votes that
they could deploy.

1075
01:18:00,127 --> 01:18:14,127
But what you allow is you allow – when you have this capitalist kind of prediction
markets thing, you allow people to abstain and they can – in plutocracy, you should
really never abstain because you risk nothing by voting.

1076
01:18:14,127 --> 01:18:20,127
So you could be bribed or you could just have a huge ego and then you would want to
vote.

1077
01:18:20,827 --> 01:18:26,827
But this is really everything that you want, I think, plus the option to abstain.

1078
01:18:26,827 --> 01:18:35,827
And I think something you mentioned earlier about the wisdom of the crowds, and you
brought it up and I wanted to bring it up because I had thought about it for a
while.

1079
01:18:35,827 --> 01:18:43,827
And I think the real reason that prediction markets work is not so much that the
truth – you mentioned that the truth rises to the top.

1080
01:18:44,527 --> 01:18:49,527
You said that when people have their own money at stake, and that's certainly true.

1081
01:18:49,527 --> 01:18:52,527
But what I think really happens is that there's a lot of noise.

1082
01:18:52,527 --> 01:18:57,527
And when you ask people to put their own money up, it just filters a lot of the
noise.

1083
01:18:57,527 --> 01:19:06,527
I think the real thing is that the market ends up at the right place and then it
reaches this point where everyone is just too afraid to put their money up.

1084
01:19:07,227 --> 01:19:11,227
And so I think that's the very, very subtle difference.

1085
01:19:11,227 --> 01:19:16,227
But I think it's more about getting people to shut up more than it really is about
getting –

1086
01:19:16,227 --> 01:19:25,227
sort of like it just says the conversation has ended because no one is willing to
disturb this kind of equilibrium that we're in, which I think is very interesting.

1087
01:19:27,227 --> 01:19:30,227
And then the person shuts up. Yeah, it makes a big deal.

1088
01:19:30,927 --> 01:19:34,927
Yeah, I write a lot about this in – I have like a whole sequence of papers.

1089
01:19:34,927 --> 01:19:40,927
And the first one I kind of try to describe why prediction markets are important and
why I'm doing this.

1090
01:19:40,927 --> 01:19:43,927
And I write a little bit about – I don't know if you've read it. You might enjoy it.

1091
01:19:43,927 --> 01:19:48,927
I write a little bit about how – why a bet is so much better than talking,

1092
01:19:48,927 --> 01:19:53,927
and why prediction markets are so much better than a bet because they kind of scale
and there's no inherent –

1093
01:19:53,927 --> 01:19:56,927
the bet is very confrontational and personal.

1094
01:19:57,627 --> 01:20:04,627
There's this example where Mitt Romney offered this guy a $10,000 – Newt Gingrich –
Rick Perry a $10,000 bet.

1095
01:20:04,627 --> 01:20:12,627
And it ended up like backfiring horribly because he was like perceived as an
out-of-touch rich guy last election cycle.

1096
01:20:12,627 --> 01:20:20,627
And so all this very interesting stuff happens with the bet even though the bet is
immeasurably better than the conversation I think.

1097
01:20:20,627 --> 01:20:25,627
But the bet can be very – but yeah, you're right. It's about the bets that are
refused.

1098
01:20:26,327 --> 01:20:30,327
That's the major thing that the prediction market will show that the bet does not.

1099
01:20:30,327 --> 01:20:34,327
The bet – you never get to observe the bets that are refused as some guy.

1100
01:20:34,327 --> 01:20:39,327
But as some guy, you can look at the – you can look at in trade or election betting
odds or something.

1101
01:20:39,327 --> 01:20:44,327
You can say, okay, I know what bets have been accepted out of everyone on the
planet,

1102
01:20:44,327 --> 01:20:49,327
and therefore I also know what bets are not being accepted.

1103
01:20:49,327 --> 01:20:52,327
And that is a big – that's a big difference I think.

1104
01:20:52,327 --> 01:20:55,327
So that's a really interesting point.

1105
01:20:56,027 --> 01:21:04,027
Prediction markets are not immune to the same kind of sociological phenomenon that
you touched on and other ones.

1106
01:21:04,027 --> 01:21:18,027
The most obvious one it would seem would be people manipulating prediction markets
in order to affect the real world result.

1107
01:21:18,727 --> 01:21:26,727
Like if it's just a question of who wins the Super Bowl, well, then that comes down
to the players on the field.

1108
01:21:26,727 --> 01:21:32,727
But if it's a question about who wins the election, if everyone starts looking at
prediction markets

1109
01:21:32,727 --> 01:21:40,727
in order to see who the frontrunners are, and if the frontrunners tend to gain more
momentum

1110
01:21:40,727 --> 01:21:44,727
because other people start wanting to vote for the winner,

1111
01:21:45,427 --> 01:21:53,427
then there's an economic incentive for people to manipulate those prediction markets
in order to say,

1112
01:21:53,427 --> 01:21:57,427
hey, look, see, the wisdom of the crowd says I'm the next president.

1113
01:21:57,427 --> 01:22:07,427
You're 100% right that there's this – it's a very strong and very obvious
psychological bias.

1114
01:22:07,427 --> 01:22:11,427
You don't want to back a loser because if you back a loser,

1115
01:22:12,127 --> 01:22:15,127
and there was evolutionary times, you could literally be killed or something.

1116
01:22:15,127 --> 01:22:22,127
There's this fear of backing someone who's not a winner that is overpowering.

1117
01:22:22,127 --> 01:22:26,127
But the effect that you described is not specific to prediction markets, of course.

1118
01:22:26,127 --> 01:22:31,127
So it's obviously – in the United States, Fox News is a pro at this.

1119
01:22:31,127 --> 01:22:34,127
They put the guy they want and they say, clearly he won the debate.

1120
01:22:34,127 --> 01:22:39,127
Clearly we're hearing great things about him, blah, blah, blah.

1121
01:22:39,827 --> 01:22:42,827
So it's not at all specific to prediction markets.

1122
01:22:42,827 --> 01:22:45,827
Prediction markets do better as far as the –

1123
01:22:45,827 --> 01:22:48,827
but yeah, you're entirely correct that people feel a strong urge,

1124
01:22:48,827 --> 01:22:53,827
particularly when voting, to vote for someone that they already – they assumed was
going to win,

1125
01:22:53,827 --> 01:22:58,827
which is bizarre because you think that their incentive would be to just stay home
and let the person win.

1126
01:22:58,827 --> 01:23:02,827
But they really want to – you want to join the winning guy

1127
01:23:03,527 --> 01:23:08,527
because we evolved our brains long before secret ballots were invented.

1128
01:23:08,527 --> 01:23:13,527
So we have no concept of this kind of safety behind the secret ballot.

1129
01:23:13,527 --> 01:23:16,527
Assuming the ballot is actually secret, which is like –

1130
01:23:16,527 --> 01:23:21,527
it's unclear how long that will remain the case, if it's ever been the case or
anything like that.

1131
01:23:21,527 --> 01:23:27,527
But you're right about – there's a strong – but there's a more interesting –

1132
01:23:27,527 --> 01:23:32,527
so yeah, these prediction markets are usually relabeled as decision markets

1133
01:23:33,227 --> 01:23:35,227
that are used specifically to inform a decision.

1134
01:23:35,227 --> 01:23:40,227
As I argue in the case of the block size markets,

1135
01:23:40,227 --> 01:23:45,227
I say we should pick the one that has the higher market price or that has the one
that's not zero

1136
01:23:45,227 --> 01:23:51,227
because that's the one that the money says is the best, that the opinion has been
aggregated.

1137
01:23:51,227 --> 01:24:00,227
The consensus, to use the loaded word, is to go with this fork or something

1138
01:24:00,927 --> 01:24:08,927
And so there, there's an interesting question of will people have an incentive

1139
01:24:08,927 --> 01:24:12,927
to bet money to screw with the decision?

1140
01:24:12,927 --> 01:24:17,927
And to what extent is that sort of type of thing likely?

1141
01:24:17,927 --> 01:24:21,927
And the usual answer that's given is that while some people have an incentive

1142
01:24:21,927 --> 01:24:26,927
to manipulate the outcome, everyone prefers having more money to having less money.

1143
01:24:27,627 --> 01:24:31,627
And another trap door, but yeah, to flesh out that first point,

1144
01:24:31,627 --> 01:24:35,627
is that normally the market is going to settle on –

1145
01:24:35,627 --> 01:24:38,627
so you mentioned that the elections case, right?

1146
01:24:38,627 --> 01:24:41,627
And how the cause can become the effect.

1147
01:24:41,627 --> 01:24:45,627
But sometimes two things are just caused at the same time, right?

1148
01:24:45,627 --> 01:24:48,627
So sometimes one candidate really is better

1149
01:24:48,627 --> 01:24:52,627
and it had nothing to do with the markets or the media.

1150
01:24:52,627 --> 01:24:54,627
And then one person, they were just more likely to win.

1151
01:24:55,327 --> 01:24:59,327
And given that we live in a world that has media and has people with brains,

1152
01:24:59,327 --> 01:25:05,327
you know, why does the person with more name recognition do so much better always,
right?

1153
01:25:05,327 --> 01:25:08,327
So it's basically the same thing.

1154
01:25:08,327 --> 01:25:12,327
There's this fear of backing the wrong person.

1155
01:25:12,327 --> 01:25:16,327
And so sometimes prediction markets are just accurately saying

1156
01:25:16,327 --> 01:25:20,327
that this is going to be magnified to the extent that this person will win.

1157
01:25:20,327 --> 01:25:24,327
And there's no causality at all and it's entirely in effect.

1158
01:25:25,027 --> 01:25:27,027
So markets will always be in effect.

1159
01:25:27,027 --> 01:25:29,027
Sometimes they'll be a cause, but they'll always be in effect

1160
01:25:29,027 --> 01:25:33,027
because they'll always be measuring – as long as this knowledge exists

1161
01:25:33,027 --> 01:25:39,027
and the potential to make money exists, they'll always be there to catch that thing.

1162
01:25:39,027 --> 01:25:41,027
So no matter what – yeah.

1163
01:25:41,027 --> 01:25:43,027
It's like string theory.

1164
01:25:43,027 --> 01:25:47,027
Like the act of observation will always change the result.

1165
01:25:47,027 --> 01:25:49,027
That's – yeah.

1166
01:25:49,027 --> 01:25:53,027
Well, I mean, it's one of the ideas of string theory.

1167
01:25:53,727 --> 01:25:55,727
I'm paraphrasing it a bit.

1168
01:25:55,727 --> 01:25:57,727
You have a question as well.

1169
01:25:57,727 --> 01:25:59,727
Yeah, just back on the implementation side,

1170
01:25:59,727 --> 01:26:02,727
where are you storing like the state of the market?

1171
01:26:02,727 --> 01:26:09,727
Is this a native app, so P2P that does a discovery via DHT?

1172
01:26:09,727 --> 01:26:11,727
Yeah, this is a sidechain.

1173
01:26:11,727 --> 01:26:18,727
So it's everything Bitcoin is just with different messages, more messages to be
specific.

1174
01:26:19,427 --> 01:26:24,427
If so, is there a lot of sort of overlap with OpenBazaar and Obi-Wan,

1175
01:26:24,427 --> 01:26:26,427
like the content and the messaging code?

1176
01:26:26,427 --> 01:26:28,427
Yeah, that's a good question.

1177
01:26:28,427 --> 01:26:30,427
I don't think so, but I don't really know enough

1178
01:26:30,427 --> 01:26:34,427
about how OpenBazaar is doing what they're doing.

1179
01:26:34,427 --> 01:26:37,427
But I don't know to what extent they –

1180
01:26:37,427 --> 01:26:42,427
so this – the goal for me was to change as little as –

1181
01:26:42,427 --> 01:26:44,427
this is basic software modularity, right?

1182
01:26:45,127 --> 01:26:49,127
I didn't want to change anything about what's now known as lib consensus,

1183
01:26:49,127 --> 01:26:51,127
and I didn't want to change anything about Bitcoin

1184
01:26:51,127 --> 01:26:53,127
or any of the proof of work stuff.

1185
01:26:53,127 --> 01:26:55,127
I just wanted this to be –

1186
01:26:55,127 --> 01:26:59,127
it's basically Namecoin's merged mind thing,

1187
01:26:59,127 --> 01:27:01,127
is what this will eventually be.

1188
01:27:01,127 --> 01:27:04,127
Of course, it's not merged mind, so we can test it.

1189
01:27:04,127 --> 01:27:07,127
But basically, it's not going to –

1190
01:27:07,127 --> 01:27:10,127
it's going to change as little as humanly possible.

1191
01:27:10,127 --> 01:27:13,127
So that's a basic modularity concept.

1192
01:27:13,327 --> 01:27:18,827
I don't know enough about if OpenBazaar is going to do –

1193
01:27:18,827 --> 01:27:20,827
I'm really – I have a lot of interesting –

1194
01:27:20,827 --> 01:27:22,827
OpenBazaar, there's a lot of interesting questions

1195
01:27:22,827 --> 01:27:26,827
about, like, storage for them that –

1196
01:27:26,827 --> 01:27:28,827
I mean, I don't know – are they –

1197
01:27:28,827 --> 01:27:30,827
I don't really know enough about –

1198
01:27:30,827 --> 01:27:32,827
sorry, I don't really know enough about how they plan on doing it.

1199
01:27:32,827 --> 01:27:34,827
If they – but all I can say is that

1200
01:27:34,827 --> 01:27:36,827
I plan on making it very, very, very similar to Bitcoin,

1201
01:27:36,827 --> 01:27:39,827
where there are headers and there are blocks,

1202
01:27:39,827 --> 01:27:41,827
and that's – the blocks have messages.

1203
01:27:42,527 --> 01:27:44,527
The messages get passed around,

1204
01:27:44,527 --> 01:27:48,527
and then it's just about getting the messages around,

1205
01:27:48,527 --> 01:27:51,527
and then the software will just build a database

1206
01:27:51,527 --> 01:27:53,527
in LevelDB or whatever

1207
01:27:53,527 --> 01:27:55,527
that will actually be used for everything.

1208
01:27:55,527 --> 01:27:57,527
It just won't –

1209
01:27:57,527 --> 01:27:59,527
you just need the blockchain to get that

1210
01:27:59,527 --> 01:28:01,527
score of the heaviest chain.

1211
01:28:01,527 --> 01:28:03,527
And that's – I don't even want to touch that,

1212
01:28:03,527 --> 01:28:05,527
because it's a lot –

1213
01:28:05,527 --> 01:28:09,527
it's above my pay grade, so to speak.

1214
01:28:10,227 --> 01:28:12,227
It's a lot of work goes into that,

1215
01:28:12,227 --> 01:28:14,227
and I don't even want to think about it.

1216
01:28:14,227 --> 01:28:16,227
If you want to make an offer,

1217
01:28:16,227 --> 01:28:18,227
you have to kind of have a server up that's available.

1218
01:28:18,227 --> 01:28:20,227
Yeah, no, there won't be anything like that.

1219
01:28:20,227 --> 01:28:22,227
No, yeah.

1220
01:28:22,227 --> 01:28:24,227
So that's why I wanted to bring up the scoring rule

1221
01:28:24,227 --> 01:28:26,227
that that gentleman behind you asked about,

1222
01:28:26,227 --> 01:28:28,227
which is that it's just an atomic state update.

1223
01:28:28,227 --> 01:28:32,227
So as long as you can reach the network at all,

1224
01:28:32,227 --> 01:28:34,227
you just broadcast your message

1225
01:28:34,227 --> 01:28:36,227
and the trade goes through.

1226
01:28:36,227 --> 01:28:38,227
And then I wanted to bring up that part about Lightning,

1227
01:28:38,927 --> 01:28:40,927
because, of course,

1228
01:28:40,927 --> 01:28:42,927
again, I copied what Satoshi Nakamoto did,

1229
01:28:42,927 --> 01:28:44,927
but it's not –

1230
01:28:44,927 --> 01:28:46,927
it doesn't play very well

1231
01:28:46,927 --> 01:28:48,927
to have to do that,

1232
01:28:48,927 --> 01:28:50,927
to have everyone store everything.

1233
01:28:50,927 --> 01:28:52,927
So try to do the same thing.

1234
01:28:52,927 --> 01:28:54,927
I just tweaked –

1235
01:28:54,927 --> 01:28:56,927
Lightning is very different from this,

1236
01:28:56,927 --> 01:28:58,927
but there are a lot of disadvantages,

1237
01:28:58,927 --> 01:29:00,927
but one or two critical advantages

1238
01:29:00,927 --> 01:29:02,927
to mine with this issuance.

1239
01:29:02,927 --> 01:29:04,927
And so I kind of got my

1240
01:29:04,927 --> 01:29:06,927
little Lightning-inspired thing

1241
01:29:07,627 --> 01:29:09,627
that I'll write about,

1242
01:29:09,627 --> 01:29:11,627
and hopefully it's a lot of work,

1243
01:29:11,627 --> 01:29:13,627
this kind of stuff.

1244
01:29:13,627 --> 01:29:15,627
But I have a lot of advantages.

1245
01:29:15,627 --> 01:29:17,627
I wouldn't need to route.

1246
01:29:17,627 --> 01:29:19,627
These people would connect to –

1247
01:29:19,627 --> 01:29:21,627
directly connect to –

1248
01:29:21,627 --> 01:29:23,627
mine would be much more hub-and-spoke,

1249
01:29:23,627 --> 01:29:25,627
so they just connect to the hub.

1250
01:29:25,627 --> 01:29:27,627
And then if the hub goes down,

1251
01:29:27,627 --> 01:29:29,627
they just can't trade

1252
01:29:29,627 --> 01:29:31,627
for whatever it is,

1253
01:29:31,627 --> 01:29:33,627
a month or whatever it is they did,

1254
01:29:33,627 --> 01:29:35,627
whatever the custodial period was.

1255
01:29:36,327 --> 01:29:38,327
I guess it won't be.

1256
01:29:38,327 --> 01:29:40,327
Yeah, please.

1257
01:29:40,327 --> 01:29:42,327
Do spreads converge as markets

1258
01:29:42,327 --> 01:29:44,327
get more liquid?

1259
01:29:44,327 --> 01:29:46,327
Is it expensive to change a mine

1260
01:29:46,327 --> 01:29:48,327
in niche kind of bets?

1261
01:29:48,327 --> 01:29:50,327
Oh, well, that depends.

1262
01:29:50,327 --> 01:29:52,327
So it kind of depends.

1263
01:29:52,327 --> 01:29:54,327
If you set the market-scoring rule

1264
01:29:54,327 --> 01:29:56,327
up the way –

1265
01:29:56,327 --> 01:29:58,327
the default way,

1266
01:29:58,327 --> 01:30:00,327
the prices sum to one perfectly.

1267
01:30:00,327 --> 01:30:02,327
So they sum to one unit.

1268
01:30:02,327 --> 01:30:04,327
It would be one bitcoin,

1269
01:30:05,027 --> 01:30:07,027
but it wouldn't really matter

1270
01:30:07,027 --> 01:30:09,027
because you could rescale.

1271
01:30:09,027 --> 01:30:11,027
Everything is just passively rescaled.

1272
01:30:11,027 --> 01:30:13,027
In finance, only the return matters.

1273
01:30:15,027 --> 01:30:17,027
So that doesn't matter at all.

1274
01:30:17,027 --> 01:30:19,027
But the prices would sum to one

1275
01:30:19,027 --> 01:30:21,027
so there would be no spread at all.

1276
01:30:21,027 --> 01:30:23,027
But I know what you mean

1277
01:30:23,027 --> 01:30:25,027
because there still is thematically

1278
01:30:25,027 --> 01:30:27,027
a spread because

1279
01:30:27,027 --> 01:30:29,027
every single trade

1280
01:30:29,027 --> 01:30:31,027
is changing the price

1281
01:30:31,027 --> 01:30:33,027
in this system.

1282
01:30:33,727 --> 01:30:35,727
You are trading against yourself

1283
01:30:35,727 --> 01:30:37,727
some for X percent

1284
01:30:37,727 --> 01:30:39,727
where X is the liquidity

1285
01:30:39,727 --> 01:30:41,727
of the market currently.

1286
01:30:41,727 --> 01:30:43,727
So X is a function

1287
01:30:43,727 --> 01:30:45,727
of the liquidity of the market.

1288
01:30:45,727 --> 01:30:47,727
So if the market is very liquid,

1289
01:30:47,727 --> 01:30:49,727
you won't move the price at all.

1290
01:30:49,727 --> 01:30:51,727
You'll be able to buy

1291
01:30:51,727 --> 01:30:53,727
all the shares you wanted

1292
01:30:53,727 --> 01:30:55,727
at 40 cents and there will still

1293
01:30:55,727 --> 01:30:57,727
be 40 cents and you'll get

1294
01:30:57,727 --> 01:30:59,727
whatever you paid divided by 0.4 shares.

1295
01:30:59,727 --> 01:31:01,727
But if it's not liquid,

1296
01:31:02,427 --> 01:31:04,427
you'll be drifting against the price

1297
01:31:04,427 --> 01:31:06,427
which is unfortunate.

1298
01:31:06,427 --> 01:31:08,427
So I guess

1299
01:31:08,427 --> 01:31:10,427
the answer to your question is

1300
01:31:10,427 --> 01:31:12,427
still yes.

1301
01:31:12,427 --> 01:31:14,427
It's always the spread

1302
01:31:14,427 --> 01:31:16,427
or what the trader

1303
01:31:16,427 --> 01:31:18,427
experiences as the spread

1304
01:31:18,427 --> 01:31:20,427
is always going to be a function of

1305
01:31:20,427 --> 01:31:22,427
liquidity.

1306
01:31:22,427 --> 01:31:24,427
That's what's interesting about these markets

1307
01:31:24,427 --> 01:31:26,427
is that markets

1308
01:31:26,427 --> 01:31:28,427
gain. They do better with scale.

1309
01:31:28,427 --> 01:31:30,427
They're really remarkable.

1310
01:31:31,127 --> 01:31:33,127
Everything else degrades with scale

1311
01:31:33,127 --> 01:31:35,127
but markets, they love scale.

1312
01:31:35,127 --> 01:31:37,127
They want more people.

1313
01:31:37,127 --> 01:31:39,127
They want everyone to be in one spot.

1314
01:31:39,127 --> 01:31:41,127
So they're very, very interesting

1315
01:31:41,127 --> 01:31:43,127
and they're very cool.

1316
01:31:45,127 --> 01:31:47,127
It's a sad thing to see

1317
01:31:47,127 --> 01:31:49,127
when I go on.

1318
01:31:49,127 --> 01:31:51,127
A lot of people contacted me

1319
01:31:51,127 --> 01:31:53,127
when they were starting their

1320
01:31:53,127 --> 01:31:55,127
prediction market website.

1321
01:31:57,127 --> 01:31:59,127
A lot of people,

1322
01:31:59,827 --> 01:32:01,827
and

1323
01:32:01,827 --> 01:32:03,827
there's a lot of trouble getting

1324
01:32:03,827 --> 01:32:05,827
the critical mass of users

1325
01:32:05,827 --> 01:32:07,827
because

1326
01:32:07,827 --> 01:32:09,827
no one wants to be the first guy to trade.

1327
01:32:09,827 --> 01:32:11,827
So the scoring rule and

1328
01:32:11,827 --> 01:32:13,827
forcing the market

1329
01:32:13,827 --> 01:32:15,827
guy, the creator, to put up

1330
01:32:15,827 --> 01:32:17,827
the bounded loss

1331
01:32:17,827 --> 01:32:19,827
cash, even if it's a very small

1332
01:32:19,827 --> 01:32:21,827
amount, mitigates this

1333
01:32:21,827 --> 01:32:23,827
to a great extent

1334
01:32:23,827 --> 01:32:25,827
but I don't know

1335
01:32:25,827 --> 01:32:27,827
if that extent will be enough.

1336
01:32:28,527 --> 01:32:30,527
The critical mass is very important

1337
01:32:30,527 --> 01:32:32,527
so that's a sad thing.

1338
01:32:32,527 --> 01:32:34,527
It's really sad to see a market that

1339
01:32:34,527 --> 01:32:36,527
no one is trading in because you know that

1340
01:32:36,527 --> 01:32:38,527
no one will want to jump in and be the first guy

1341
01:32:38,527 --> 01:32:40,527
so it will just kind of, even if a lot of people

1342
01:32:40,527 --> 01:32:42,527
are actually interested,

1343
01:32:42,527 --> 01:32:44,527
if the engine stalls,

1344
01:32:44,527 --> 01:32:46,527
it's stalled out and that's

1345
01:32:46,527 --> 01:32:48,527
too bad.

1346
01:32:48,527 --> 01:32:50,527
I think I have one final question for you.

1347
01:32:50,527 --> 01:32:52,527
I asked Augur the same thing

1348
01:32:52,527 --> 01:32:54,527
where prediction markets are

1349
01:32:54,527 --> 01:32:56,527
technically illegal, I guess,

1350
01:32:57,227 --> 01:32:59,227
in the United States but

1351
01:32:59,227 --> 01:33:01,227
their answer for what they were doing

1352
01:33:01,227 --> 01:33:03,227
was they were being mindful of the law

1353
01:33:03,227 --> 01:33:05,227
and working with legislators

1354
01:33:05,227 --> 01:33:07,227
to, I guess, build

1355
01:33:07,227 --> 01:33:09,227
a tool that could be used

1356
01:33:09,227 --> 01:33:11,227
in a legal way but still

1357
01:33:11,227 --> 01:33:13,227
have a legal potential but they weren't

1358
01:33:13,227 --> 01:33:15,227
at fault, I guess, for any

1359
01:33:15,227 --> 01:33:17,227
misuse of their platform.

1360
01:33:19,227 --> 01:33:21,227
It still, I guess, goes against

1361
01:33:21,227 --> 01:33:23,227
the idea of prediction markets

1362
01:33:23,227 --> 01:33:25,227
are illegal in the US so could you, I guess,

1363
01:33:25,927 --> 01:33:27,927
tell us more about what your stance is

1364
01:33:27,927 --> 01:33:29,927
on the legality of it?

1365
01:33:29,927 --> 01:33:31,927
Yeah, well, if they were illegal

1366
01:33:31,927 --> 01:33:33,927
there would be no need to decentralize, right?

1367
01:33:33,927 --> 01:33:35,927
I could just start

1368
01:33:35,927 --> 01:33:37,927
the website.

1369
01:33:37,927 --> 01:33:39,927
But I'm just a guy who

1370
01:33:39,927 --> 01:33:41,927
publishes papers

1371
01:33:41,927 --> 01:33:43,927
and some software code

1372
01:33:43,927 --> 01:33:45,927
and Roger Ver hired me away

1373
01:33:45,927 --> 01:33:47,927
from Yale and in our contract

1374
01:33:47,927 --> 01:33:49,927
it says that he has to pay for my legal fees

1375
01:33:49,927 --> 01:33:51,927
if I get sued so

1376
01:33:51,927 --> 01:33:53,927
I don't take any...

1377
01:33:55,927 --> 01:33:57,927
In the United States

1378
01:33:57,927 --> 01:33:59,927
your liability really begins

1379
01:33:59,927 --> 01:34:01,927
when you take money from people

1380
01:34:01,927 --> 01:34:03,927
which is something that I haven't done

1381
01:34:03,927 --> 01:34:05,927
on purpose so

1382
01:34:05,927 --> 01:34:07,927
but Augur did do that

1383
01:34:07,927 --> 01:34:09,927
and I advised them not to do that

1384
01:34:09,927 --> 01:34:11,927
but they did it anyway because

1385
01:34:11,927 --> 01:34:13,927
Vitalik and all these other people

1386
01:34:15,927 --> 01:34:17,927
Vitalik and all these other people

1387
01:34:17,927 --> 01:34:19,927
are like pro-crowd sale

1388
01:34:19,927 --> 01:34:21,927
and I don't know about that

1389
01:34:21,927 --> 01:34:23,927
so I'm very anti-crowd sale

1390
01:34:24,627 --> 01:34:26,627
I think the crowd sale does a lot of bad things

1391
01:34:26,627 --> 01:34:28,627
at once and it's wrapped in this

1392
01:34:28,627 --> 01:34:30,627
kind of free market

1393
01:34:30,627 --> 01:34:32,627
let people do whatever they want with their money

1394
01:34:32,627 --> 01:34:34,627
thing but it doesn't quite

1395
01:34:34,627 --> 01:34:36,627
when it comes to open source software I think it actually

1396
01:34:36,627 --> 01:34:38,627
does a lot of

1397
01:34:38,627 --> 01:34:40,627
it's the

1398
01:34:40,627 --> 01:34:42,627
wrapping of the free market

1399
01:34:42,627 --> 01:34:44,627
stuff is kind of

1400
01:34:44,627 --> 01:34:46,627
it hides a sinister

1401
01:34:46,627 --> 01:34:48,627
core

1402
01:34:48,627 --> 01:34:50,627
It's not illegal

1403
01:34:50,627 --> 01:34:52,627
because you're essentially just creating a means for people

1404
01:34:53,327 --> 01:34:55,327
So first of all

1405
01:34:55,327 --> 01:34:57,327
the platform doesn't even have any prediction

1406
01:34:57,327 --> 01:34:59,327
markets on them at all and you can just

1407
01:34:59,327 --> 01:35:01,327
create

1408
01:35:01,327 --> 01:35:03,327
even if we were calling these

1409
01:35:03,327 --> 01:35:05,327
even if we were trying to label these

1410
01:35:05,327 --> 01:35:07,327
things as markets

1411
01:35:07,327 --> 01:35:09,327
because again it's just a set of rules

1412
01:35:09,327 --> 01:35:11,327
it's just a protocol

1413
01:35:11,327 --> 01:35:13,327
but even within the protocol assuming

1414
01:35:13,327 --> 01:35:15,327
the protocol were a thing

1415
01:35:15,327 --> 01:35:17,327
a user can create the decision and then

1416
01:35:17,327 --> 01:35:19,327
from there a different person

1417
01:35:19,327 --> 01:35:21,327
can create a market using

1418
01:35:22,027 --> 01:35:24,027
and then from there different people can trade

1419
01:35:24,027 --> 01:35:26,027
but

1420
01:35:26,027 --> 01:35:28,027
right so I

1421
01:35:28,027 --> 01:35:30,027
wouldn't even if I created the system which

1422
01:35:30,027 --> 01:35:32,027
I'm really not doing I'm just

1423
01:35:32,027 --> 01:35:34,027
writing about it a lot and it's slowly

1424
01:35:34,027 --> 01:35:36,027
being built by volunteers

1425
01:35:36,027 --> 01:35:38,027
which are like sort of managed by me

1426
01:35:38,027 --> 01:35:40,027
but not really right and nothing stops

1427
01:35:40,027 --> 01:35:42,027
you know

1428
01:35:42,027 --> 01:35:44,027
but it is like

1429
01:35:44,027 --> 01:35:46,027
a lot of other people are kind of helping to do

1430
01:35:46,027 --> 01:35:48,027
the actual development work

1431
01:35:48,027 --> 01:35:50,027
but the other thing is

1432
01:35:50,727 --> 01:35:52,727
the core of the question is that

1433
01:35:52,727 --> 01:35:54,727
there is no

1434
01:35:54,727 --> 01:35:56,727
I mean this is just a totally different

1435
01:35:56,727 --> 01:35:58,727
thing but to really answer

1436
01:35:58,727 --> 01:36:00,727
the real question is that I do

1437
01:36:00,727 --> 01:36:02,727
understand that

1438
01:36:04,727 --> 01:36:06,727
prediction markets are not

1439
01:36:06,727 --> 01:36:08,727
you know it's really not clear that they

1440
01:36:08,727 --> 01:36:10,727
are actually totally illegal

1441
01:36:10,727 --> 01:36:12,727
in the United States but obviously yeah

1442
01:36:12,727 --> 01:36:14,727
there would be a lot of places you'd have to register

1443
01:36:14,727 --> 01:36:16,727
with and things like that but

1444
01:36:16,727 --> 01:36:18,727
it's not clear that this thing

1445
01:36:19,427 --> 01:36:21,427
meets the definition of a prediction market

1446
01:36:21,427 --> 01:36:23,427
A, it's not clear that it meets the definition

1447
01:36:23,427 --> 01:36:25,427
of anything or any market

1448
01:36:25,427 --> 01:36:27,427
even though that's how I

1449
01:36:27,427 --> 01:36:29,427
try to describe it but

1450
01:36:29,427 --> 01:36:31,427
B, there's

1451
01:36:31,427 --> 01:36:33,427
people have wanted

1452
01:36:33,427 --> 01:36:35,427
to make the case for a very long time

1453
01:36:35,427 --> 01:36:37,427
I mean

1454
01:36:37,427 --> 01:36:39,427
ultimately

1455
01:36:39,427 --> 01:36:41,427
ultimately

1456
01:36:41,427 --> 01:36:43,427
there is

1457
01:36:43,427 --> 01:36:45,427
I guess it's hard to explain but

1458
01:36:45,427 --> 01:36:47,427
there is like

1459
01:36:48,127 --> 01:36:50,127
a lot of people

1460
01:36:50,127 --> 01:36:52,127
I think want this to happen

1461
01:36:52,127 --> 01:36:54,127
but they just

1462
01:36:54,127 --> 01:36:56,127
kind of feel like they have to

1463
01:36:56,127 --> 01:36:58,127
say they don't want it to happen so

1464
01:36:58,127 --> 01:37:00,127
it would be very cool to have

1465
01:37:00,127 --> 01:37:02,127
it just sort of happen slowly and experimentally

1466
01:37:02,127 --> 01:37:04,127
and not

1467
01:37:04,127 --> 01:37:06,127
I would want it to happen

1468
01:37:06,127 --> 01:37:08,127
kind of very

1469
01:37:10,127 --> 01:37:12,127
I don't know very

1470
01:37:12,127 --> 01:37:14,127
what's the word

1471
01:37:14,127 --> 01:37:16,127
gradually I guess

1472
01:37:16,827 --> 01:37:18,827
organically right and so

1473
01:37:18,827 --> 01:37:20,827
it's just this is an idea

1474
01:37:20,827 --> 01:37:22,827
and if

1475
01:37:22,827 --> 01:37:24,827
it inspires

1476
01:37:24,827 --> 01:37:26,827
things to happen then that's what it did

1477
01:37:26,827 --> 01:37:28,827
but I really only see it as an idea

1478
01:37:28,827 --> 01:37:30,827
at this point still

1479
01:37:30,827 --> 01:37:32,827
and you know it's

1480
01:37:32,827 --> 01:37:34,827
a lot of stuff is written down

1481
01:37:34,827 --> 01:37:36,827
on paper and that's free speech

1482
01:37:36,827 --> 01:37:38,827
and then a lot of stuff is software

1483
01:37:38,827 --> 01:37:40,827
but I don't know what the

1484
01:37:40,827 --> 01:37:42,827
most of the software isn't written by me

1485
01:37:42,827 --> 01:37:44,827
and I don't know what

1486
01:37:45,527 --> 01:37:47,527
it's MIT open source

1487
01:37:47,527 --> 01:37:49,527
well I guess there's still a concern though

1488
01:37:49,527 --> 01:37:51,527
like what happened with Silk Road

1489
01:37:51,527 --> 01:37:53,527
and Ross Ulbrich

1490
01:37:53,527 --> 01:37:55,527
like he didn't list anything on the site

1491
01:37:55,527 --> 01:37:57,527
but he was the one who created it

1492
01:37:57,527 --> 01:37:59,527
and made an example out of it

1493
01:37:59,527 --> 01:38:01,527
yeah well I think that would be very interesting

1494
01:38:01,527 --> 01:38:03,527
I mean I think I would do better than he did

1495
01:38:03,527 --> 01:38:05,527
he's in court right

1496
01:38:05,527 --> 01:38:07,527
he's in court and six people did die

1497
01:38:07,527 --> 01:38:09,527
and it was unfortunate

1498
01:38:09,527 --> 01:38:11,527
it would have been a very interesting experiment

1499
01:38:11,527 --> 01:38:13,527
if he only allowed like marijuana sales or something

1500
01:38:14,227 --> 01:38:16,227
because six people did die

1501
01:38:16,227 --> 01:38:18,227
and I think five of them

1502
01:38:20,227 --> 01:38:22,227
were heroin if I remember correctly

1503
01:38:22,227 --> 01:38:24,227
and one of them

1504
01:38:24,227 --> 01:38:26,227
the only one that wasn't heroin

1505
01:38:26,227 --> 01:38:28,227
was like a

1506
01:38:28,227 --> 01:38:30,227
very young teenager

1507
01:38:30,227 --> 01:38:32,227
who was like left alone

1508
01:38:32,227 --> 01:38:34,227
by his parents and he did

1509
01:38:34,227 --> 01:38:36,227
a bunch of kind of like

1510
01:38:36,227 --> 01:38:38,227
hallucinogenic drugs and like jumped off a balcony

1511
01:38:38,227 --> 01:38:40,227
or something and I think that that would be

1512
01:38:40,227 --> 01:38:42,227
you know that's a much easier

1513
01:38:42,927 --> 01:38:44,927
you can blame the parents

1514
01:38:44,927 --> 01:38:46,927
for that or something right

1515
01:38:46,927 --> 01:38:48,927
you can go in as a defense attorney

1516
01:38:48,927 --> 01:38:50,927
you can just say look we had millions of customers

1517
01:38:50,927 --> 01:38:52,927
but where are the parents

1518
01:38:52,927 --> 01:38:54,927
you know and then you can kind of like

1519
01:38:54,927 --> 01:38:56,927
you know I mean like it's of course

1520
01:38:56,927 --> 01:38:58,927
but I think you know

1521
01:38:58,927 --> 01:39:00,927
you have to really imagine it in court

1522
01:39:00,927 --> 01:39:02,927
I mean it's clearly he was running

1523
01:39:02,927 --> 01:39:04,927
I obviously think

1524
01:39:04,927 --> 01:39:06,927
the sentence was

1525
01:39:06,927 --> 01:39:08,927
was

1526
01:39:08,927 --> 01:39:10,927
very extreme and I'm not

1527
01:39:11,627 --> 01:39:13,627
a very anti-drug war

1528
01:39:15,627 --> 01:39:17,627
I have a lot of nuanced views about it

1529
01:39:17,627 --> 01:39:19,627
but certainly all kinds of

1530
01:39:19,627 --> 01:39:21,627
all kinds of

1531
01:39:21,627 --> 01:39:23,627
club drugs and marijuana and stuff should be

1532
01:39:23,627 --> 01:39:25,627
100% legal

1533
01:39:25,627 --> 01:39:27,627
in my view but

1534
01:39:27,627 --> 01:39:29,627
as should most

1535
01:39:29,627 --> 01:39:31,627
almost everything and the enforcement

1536
01:39:31,627 --> 01:39:33,627
is a huge problem

1537
01:39:33,627 --> 01:39:35,627
but I think there's a huge difference

1538
01:39:35,627 --> 01:39:37,627
between that and kind of what I'm doing

1539
01:39:37,627 --> 01:39:39,627
a guy

1540
01:39:40,327 --> 01:39:42,327
who wrote about

1541
01:39:42,327 --> 01:39:44,327
creating a better world through

1542
01:39:44,327 --> 01:39:46,327
information but you know maybe I could be

1543
01:39:46,327 --> 01:39:48,327
totally wrong about this maybe they'll be playing this video

1544
01:39:48,327 --> 01:39:50,327
in court and I'll be thinking oh wow

1545
01:39:50,327 --> 01:39:51,430
it was a big mistake to go onto that

1546
01:39:51,430 --> 01:39:56,750
well Paul if they do this video in court you're gonna hate this next question from
me

1547
01:39:56,750 --> 01:40:06,630
have you have you had any talk about how prediction markets can and will naturally

1548
01:40:06,630 --> 01:40:14,350
usher in assassination politics yeah I know I wrote a giant essay about how they
won't so I'm

1549
01:40:14,430 --> 01:40:19,150
actually I'm thankful to get that question so that's number six in the sequence you
can go

1550
01:40:19,150 --> 01:40:24,150
on to the website Bitcoinhivemind.com and it's on there somewhere and yeah I know
people are

1551
01:40:24,150 --> 01:40:28,630
obsessed with that question and I actually worked through that I'm actually happy to
get the

1552
01:40:28,630 --> 01:40:35,390
question and I hope they play it in the hypothetical courtroom because I did
actually before I I wrote

1553
01:40:35,390 --> 01:40:44,750
the whole thing and I had finished it in November of 2014 I think oh no I think
maybe 2013 I can't

1554
01:40:44,750 --> 01:40:53,230
even remember now but I waited until December 3rd I think December 3rd 2013 I didn't
publish it at

1555
01:40:53,230 --> 01:40:58,310
all and I spent all of November working through the assassination markets thing and
the only reason

1556
01:40:58,310 --> 01:41:02,750
I didn't publish it earlier because I wanted to see kind of what other people that
had to say on

1557
01:41:02,750 --> 01:41:09,950
the subject I thought it would bias people's views but the short answer is that it
the market

1558
01:41:09,950 --> 01:41:17,430
will you know the markets will is okay so it's kind of hard to explain but the
market is always

1559
01:41:17,430 --> 01:41:24,670
going to be pricing the person's health accurately so it will kind of converge the
actuarial tables

1560
01:41:24,910 --> 01:41:33,150
likelihood of of them dying so if you put a million dollars on it won't die which is
would

1561
01:41:33,150 --> 01:41:40,990
appear to give someone an incentive to put you know their own million dollars on no
they will

1562
01:41:40,990 --> 01:41:46,090
die and then shoot them and then you think something a little bit more sinister what
if

1563
01:41:46,090 --> 01:41:53,910
somebody who wants to be a particular politician die makes a wager that they are
going to die on

1564
01:41:53,910 --> 01:42:03,310
a particular day by a gunshot against that on a market with a billion dollars worth
of Bitcoin

1565
01:42:03,310 --> 01:42:13,470
that you know so-and-so will not die on this day by a gunshot then somebody who is
able to actually

1566
01:42:13,470 --> 01:42:23,870
make that gunshot yeah I got on a consensus so there's everything right so um the so
the thing

1567
01:42:23,870 --> 01:42:30,670
is I've thought about it and it is possible to use Bitcoin to like do stuff like
this but I it is a

1568
01:42:30,670 --> 01:42:35,190
little complicated and I haven't written down how and I don't plan on writing that
down because I'm

1569
01:42:35,190 --> 01:42:40,350
not interested in that but these are these prediction markets are not assassination
markets

1570
01:42:40,350 --> 01:42:46,630
so Jim Bell's essay about assassination markets is is has what you suggest where the
person can

1571
01:42:46,630 --> 01:42:55,510
place a secret wager that's very specific and and then the guy the assassin can
claim it and so

1572
01:42:55,510 --> 01:43:03,350
these are different so one difference Jim Bell's assassination markets is more of a
market in the

1573
01:43:03,350 --> 01:43:10,510
sense of a like a supermarket where you would go and buy things at a fixed price but
friction

1574
01:43:10,510 --> 01:43:16,310
market has the price react to different to the bets as their place so if you if you
bet a lot

1575
01:43:16,310 --> 01:43:24,750
of money on the person not dying what someone who thinks that they will die even if
they're

1576
01:43:24,750 --> 01:43:30,270
even if I'm not planning on assassinating this person but they say wow a million
dollars is a

1577
01:43:30,270 --> 01:43:35,830
lot of money someone's gonna take them up on that there's now an incentive for these
totally

1578
01:43:35,830 --> 01:43:41,870
passive innocent third parties to just put a little bit of money on die right
because someone

1579
01:43:41,870 --> 01:43:46,910
would probably take them up on this on this offer right they'll think like oh here's
a million

1580
01:43:46,910 --> 01:43:51,430
dollars you know I think the person will probably die but by doing that you actually
drain the

1581
01:43:51,430 --> 01:43:55,710
battery you realize you're draining the million-dollar bounty so there's this
there's this

1582
01:43:55,710 --> 01:44:03,550
kind of this kind of negative feedback loop that is inescapable and so the question
is does the

1583
01:44:03,550 --> 01:44:11,510
negative feedback loop is it strong enough to withstand you know the context into
which it

1584
01:44:11,510 --> 01:44:21,310
exists but you know this particular setup where it's like public blockchain is very
is very not

1585
01:44:21,910 --> 01:44:26,870
amenable to this this type of thing and in fact there are superior alternatives
which I write

1586
01:44:26,870 --> 01:44:32,950
about in the in the essay so if you think the person the politician is really
incompetent you

1587
01:44:32,950 --> 01:44:38,510
can actually you can set the market up so that you make money if they if they fail
to you know

1588
01:44:38,510 --> 01:44:43,950
decrease unemployment or something and and that's you know a much you can set it up
so you make

1589
01:44:43,950 --> 01:44:51,910
money instead of having to pay a million dollars but I from being used for
assassination politics

1590
01:44:51,910 --> 01:45:02,030
it would seem would be to have a a bet cancellation feature that some committee if
you will could

1591
01:45:02,030 --> 01:45:09,270
decide so I mean let's say that you and seven trusted friends it's in the protocol
and it's

1592
01:45:09,270 --> 01:45:15,830
in the essay that very and I magnify everything and I say you know in the protocol
you can say

1593
01:45:15,830 --> 01:45:22,830
that you can have like I I tried to mention a long time ago when this this
conversation began

1594
01:45:22,830 --> 01:45:28,790
about if the question is the question is supposed to be very easy to answer and so
if it's not easy

1595
01:45:28,790 --> 01:45:35,550
to answer they can they can select this 0.5 value of like we're all agreeing that
this question is

1596
01:45:35,550 --> 01:45:40,230
not answerable or something but there are rules there would be guide publicly
commonly known

1597
01:45:40,230 --> 01:45:45,630
guidelines in advance obviously so that people know it's something you know like two
minutes of

1598
01:45:45,630 --> 01:45:58,590
googling you know and then give up and then you could just say if one of the rules
is no no

1599
01:45:58,590 --> 01:46:04,110
questions about that and then you and then you there's no since everyone knows in
advance it'll

1600
01:46:04,110 --> 01:46:12,110
be voted 0.5 the market will never actually be able to control any money in it but
there are

1601
01:46:12,110 --> 01:46:16,790
other things you know in the there is like different like where it regresses to
private

1602
01:46:16,790 --> 01:46:22,150
individuals hiring other private individuals and so so I encourage you to read the
whole essay and

1603
01:46:22,150 --> 01:46:29,030
and then let me know what you think but I have never thought that I do believe that
someone will

1604
01:46:29,030 --> 01:46:35,870
figure out how to do I mean I've already figured it out how to use I think Bitcoin
to create

1605
01:46:35,870 --> 01:46:41,110
assassination markets but I'm not going to tell anyone about how that how I would do
it because

1606
01:46:41,110 --> 01:46:46,270
I'm not interested in doing that and I don't really agree I think prediction markets
are better

1607
01:46:46,270 --> 01:46:52,750
version actually the more effective change vehicle than assassination markets anyway
because you can

1608
01:46:52,750 --> 01:46:58,110
you can you can describe exactly what it is you don't like and you can profit if the
politician

1609
01:46:58,110 --> 01:47:03,590
screws it up while promoting the guy who's actually and prediction markets are just
better

1610
01:47:03,590 --> 01:47:08,270
because they're they're really nice you know it's hard to understate a lot of people
have no idea

1611
01:47:08,270 --> 01:47:15,590
what they are how they can be used but what really bothers people often is how
helpless and confused

1612
01:47:15,590 --> 01:47:22,350
that they feel and so when people feel like there's a process that actually works or
there's

1613
01:47:22,350 --> 01:47:28,870
some phenomena that actually reliably gives them information I think they would they
would be

1614
01:47:28,870 --> 01:47:33,750
happier about that so I think there's lots to say about that in fact that essay is
something like

1615
01:47:33,750 --> 01:47:42,830
26 pages long on itself and it's like all text so there's no pictures so but yeah
there's a that's

1616
01:47:42,830 --> 01:47:47,230
a I used to get that question all the time and I used to kind of sit back and say I
don't know

1617
01:47:47,230 --> 01:47:54,150
what do you think about that and I don't know if but yeah there's a there's lots to
say about that

1618
01:47:54,150 --> 01:47:59,750
but I don't think it I don't think it's likely at all I would be a little
disappointed but certainly

1619
01:47:59,750 --> 01:48:06,470
that would be a case for censorship resistance though you would need certainly would
not allow

1620
01:48:06,470 --> 01:48:15,470
those things to exist in in any organizational and decentralized business in the
United States

1621
01:48:15,470 --> 01:48:21,870
or elsewhere but yeah that's a neat that's a neat thing to talk about in bars final
questions I

1622
01:48:21,870 --> 01:48:28,870
guess that anyone watching the show I guess has that they can go to
Bitcoinhivemind.com and get

1623
01:48:28,870 --> 01:48:35,750
in contact with you to explore this topic a lot further we're coming kind of here on
two hours

1624
01:48:35,750 --> 01:48:42,350
like people I know you had a question is it really small okay we'd like to end the
show with our our

1625
01:48:42,350 --> 01:48:47,030
pseudo prediction market that we do where we predict the price of Bitcoin and I got
to share

1626
01:48:47,030 --> 01:48:51,230
this one from last week because it's actually pretty phenomenal the price was
crashing while

1627
01:48:51,230 --> 01:48:57,750
we were doing it and we predict a week in advance what the price of Bitcoin will be
and I think

1628
01:48:57,750 --> 01:49:05,630
Jeremy actually got this one he guessed the opening candle price perfectly Yuri I'm
sorry it went up

1629
01:49:05,630 --> 01:49:17,550
a little bit back down but whatever you're doing on the chorus exchange so we'll go
around the room

1630
01:49:17,550 --> 01:49:22,990
here and we'll get everyone's I guess prediction and the show with what they think
the price will

1631
01:49:22,990 --> 01:49:28,150
be so we'll start off with our guest of honor here all what do you think the price
of Bitcoin

1632
01:49:28,150 --> 01:49:32,230
is gonna be next Thursday at this time next Thursday at this time what is it right
now I

1633
01:49:32,230 --> 01:49:43,110
got on my phone and 86 I have 386 75 I don't know if that so okay well I mean the
logical thing

1634
01:49:43,110 --> 01:49:48,350
would be to just say that it will only go up a little bit so I'll just say it'll be
390 in one

1635
01:49:48,350 --> 01:49:53,990
week I mean so I'll be a really boring guess and I'll just say I'll just say that
it's it's they're

1636
01:49:53,990 --> 01:50:00,430
all net present value zero projects and it's by the grouping of lines a lot of
people guess the

1637
01:50:00,430 --> 01:50:06,310
same price would be a week later and yeah sure enough we rebounded with another
crowd at work

1638
01:50:06,310 --> 01:50:30,870
there cam what do you think I'm gonna say I'm so conflicted I think by next week
we'll probably

1639
01:50:30,870 --> 01:50:48,430
be down to 350 I'm gonna be a little bearish probably the ball we'll go for 15 or 15
you're

1640
01:50:48,430 --> 01:50:59,070
planning on buying Peter Peter and Dave David I was hoping to go last I was gonna
take one extreme

1641
01:50:59,070 --> 01:51:07,470
or another he said for 15 I'd go for 16 and and then get everything high or or you
said 350 I'd

1642
01:51:07,470 --> 01:51:14,430
go 349 and get everything low watch too much price I actually have a funny joke
about that

1643
01:51:14,430 --> 01:51:19,870
after you're done with that okay but but but why don't why don't I say why don't I
say for 16 I'll

1644
01:51:49,870 --> 01:51:55,670
know but that you joke about that strategy but I know when I was working at Yale I
was working for

1645
01:51:55,670 --> 01:52:00,950
a very important person who knew lots of other important people who are in the like
Society of

1646
01:52:00,950 --> 01:52:06,990
forecasters or something and they there was a guy who was doing very well and the
guy I was working

1647
01:52:06,990 --> 01:52:11,550
for dr. Nordhaus is like super smart super important guy he's like asking him he
wasn't a

1648
01:52:11,550 --> 01:52:15,830
forecaster himself or something but he asked this guy oh you know what's the secret
and he's just

1649
01:52:15,830 --> 01:52:20,150
like I don't know he's like I just you know I just I try to be on the high edge or
the low edge

1650
01:52:20,150 --> 01:52:25,150
because there'll probably be a shock and then you know and if it's in my direction I
I win or

1651
01:52:25,150 --> 01:52:30,990
something so that's you joke about that but actual like you know this is not like
any serious

1652
01:52:30,990 --> 01:52:36,630
forecasting but there was like a like an informal thing just like this and the guy
who was winning

1653
01:52:36,630 --> 01:52:43,710
was doing exactly what you just joked about so so it's there's a lot of merit to it
obviously and

1654
01:52:44,030 --> 01:52:50,470
and it highlights perfectly forecasting when there's no skin in the game right
there's no

1655
01:52:50,470 --> 01:53:17,590
yeah we're almost yeah we have a nice kind of a testnet that's sort of bubbling up
so when it's

1656
01:53:17,910 --> 01:53:24,910
maybe like in a few days you know like if it'll be so maybe I'll send you out I'll
ping you back

1657
01:53:24,910 --> 01:53:29,230
and then we'll kind of see kind of where it's going and maybe you can tweet it out
and then

1658
01:53:29,230 --> 01:53:35,790
maybe a couple months later yeah more interesting conversation yeah all right
fantastic all right

1659
01:53:35,790 --> 01:53:40,830
cool from us here at a block talk we thank you so much for watching our one viewer
and anyone

1660
01:53:40,830 --> 01:53:45,150
so we'll see you in the next thousand blocks