Peter McCormack: Hey there Bryant, hey there Scott. How you both doing?
Bryant Eisenbach: Doing all right, how are you?
Peter McCormack: I’m doing pretty well. Are you good, Scott?
Scott Lewis: Yeah, I’m pretty good. Thanks for having me on. I appreciate it.
Peter McCormack: No problem. Thank you both for coming on. Obviously, I had my episode with Tuur that came out recently, which was like a bearish case for Ethereum on his tweet storm, which obviously kicked up a bit of a storm. A big response from the Ethereum community. I thought it would only be fair and also for my own interest to get a couple of people on to talk about it. What I’d noticed in Tuur’s feed, he’d retweeted both of you because you both offered responses to it. Thank you for both coming on. I’m going to start with an interesting question. A lot of my Bitcoin interviews, I will ask the guest a specific question because I’m always interested in the response, which is what is Bitcoin? I’m going to flip it and do it for this. Bryant, what is Ethereum?
Bryant Eisenbach: I think in some ways it’s whatever you want it to be. It’s really a platform for you to allow to build protocols and interactions between different parties of people and a platform to build digital assets on top of.
Peter McCormack: And you, Scott?
Scott Lewis: Yeah. I see Ethereum as a substrate for exchanging value. It’s open-ended. You can program money or assets to do what you want. It’s more flexible. It offers a lot more possibilities.
Peter McCormack: Okay. Before we get into the weeds of maybe some of the things to discuss and give you a chance to respond to them, I’ve got a few things I want to work through first. It would be great to find out the background for both of you first and what you’re working on now.
Bryant Eisenbach: Yeah, sure. I’ll start. My name’s Bryant, Fubuloubu on Twitter, which somebody has told me before incorrectly means fat warlord or something in Chinese. I don’t think that’s correct. I thought it was funny. Currently, I’ve been a freelance developer working on numerous applications. I’ve gotten involved working on Ethereum mainly through some of the hacks that happened in 2017. I looked at those as a validation that my experience, I had worked as a flight control software engineer for a helicopter company in the United States for almost six years.
I saw what was happening as really a lack of process in the security of these applications. I got involved from that perspective of I can add my perspective to the community. That’s been a good part of what happened this past year with my involvement. The security community is a big part of what I do. Locally I started a developer community that primarily does education, and I’m currently working on a larger project now called GunClear that’s trying to help firearm owners protect their digital providence in the digital age, which I think is really cool.
Scott Lewis: I’m Scott Lewis. I’m on Twitter at scott_lew_is. I was a trader for a little over 10 years. I’m in traditional finance. I started my career at Susquehanna, which is also pretty active in crypto today. Started by trading digital assets. About a year and a half ago I co-founded an ICO due diligence resource that was kind of like Wikipedia for token sales, and mainly with the goal of making a place where the community can come together and collate information specifically about ICO scams and other very shady projects that maybe aren’t out and out scams. Then the new project we’re working on primarily now is Settle. It’s at settle.finance, and it’s an operating system for decentralised finance, primarily on Ethereum. That’s where DFI happening.
Peter McCormack: Okay, cool. Then I’m going to ask you a couple questions about Ethereum in a second and just tell you about my experience and what I know, which is very limited. It would also be good to understand both your broad view on the entire cryptocurrency market, what do you like, what don’t you like, what are you interested in, and what do you think it’s completely disinteresting. We’ll start with you this time, Scott.
Scott Lewis: I like a lot of stuff in the market. I used to really like Bitcoin. Kind of got turned off by some of the more adversarial aspects of the community. I always liked Ethereum as soon as I found out about it. I think a lot of the digital assets in the market are very uninteresting. I don’t like a lot of the UXC 20 tokens and other ICOs. They have no purpose and not really building anything useful. I also don’t like a lot of the coins that are little brother coins that are sort of copies of a different coin, just not as good. Litecoin seems like a reasonable community. Authentic people like it. I just don’t see why you would want Litecoin or Bitcoin ever.
Bryant Eisenbach: I think there’s a lot to like about the whole crypto community in and of itself. It’s kind of this explosion of idealism and talent and just people trying things that really hasn’t been seen for quite so many years. I think that’s what drew me to it. I mean, I’ve gone through a bit of a journey with Bitcoin in the wider ecosystem myself. I remember trying it out, it must have been 2012 or something, around that timeframe. I’ve remembered the price distinctly at around $40. I was just like, I’m not sure I understand this. It’s cool and all but I’ll deal with it another day. A friend had introduced me into it. I would always check in with him every once in a while.
It was a fun thing like oh, hey, how’s your Bitcoin doing? That was basically it. In 2017 for most of the year, I lived in Portland, Oregon. There’s a pretty vibrant Ethereum community out there. I had decided to just take it easy, quit my job, and just relax and learn some different things. Right around the time that happened, that same friend introduced me to Ethereum, which have been going through a hype boom at that point.
I think that’s the point where it really clicked for me. It made sense. Oh, I can build on top of this. I can bring some of the ideas I have. I always thought of myself as a person as a lot of ideas, most of which are probably terrible. The opportunity to bring things to life that has some way of impacting the world and making the world a better place is what attracted me to Ethereum. Because I think a lot of people in the ecosystem have a very similar mindset. They are interested philosophically, technically, just culturally, socially and what’s going on here, and working really hard to make that a reality. That stuck with me and it told me that this is where I want to spend the next two years of my life exploring and seeing if we can make it a reality.
Peter McCormack: I’ll give you my background and perspective so you can understand where I come from. Even though my podcast is called What Bitcoin Did, that was more of a play on words from the background on why it started. At the time I was pretty open-minded to all of the space. I managed to buy Ethereum January 17, I think it was about $9. It was on Coinbase when I was researching Bitcoin. I bought everything. I’ve bought lots of VRC20 tokens. I bought Monero, Litecoin, Dash, loads of different things. My journey of doing the podcast, I’ve tried to educate myself as much as possible. I’m a very big fan, a supporter of Bitcoin.
I’m quite interested in Monero, and I would say with Ethereum I’ve become questioning. I feel like there’s a lot of stuff, a lot of unnecessary things have been built. Broadly it seems like a big waste but I’m sure within there are some very interesting things without wanting to find out about you guys. At the moment I’m like, it seems like a very big, complicated, and unnecessary system to, and I’m not sure what it’s designed to actually build that you can’t build in other ways.
I think it would be good to get into that. If I can understand because I think I know other people have similar questions. What would be a good thing to hear from you, Bryant tell me about the good stuff that’s happened with Ethereum and the good projects and what’s being delivered that you think has value and is the kind of thing that would be existing in 3, 5, 10 years.
Bryant Eisenbach: Yeah. I think the D5 community that Scott is talking about is definitely something that’s been up and coming in this past year and to me is almost a no-brainer to what the platform can be used for. Personally, I’m more interested in social applications of the technology, how we can use it to interact with each other in a more effective and trustful way. As a platform, it doesn’t really make a determination of what’s good and bad. There’s a lot of crap that exists out there. I think it’s almost a testament to why it’s useful that there’s so much crap that exists on top of it. Because it’s so easy, you can deploy a token in 15 minutes. You can interact with different types of decentralising changes. You can build tokens on top of tokens on top of tokens.
Yeah, it seems like a lot of crap but you’re starting to explore the economics of the situation and how people use economics to interact with each other. The Touring, especially over the past year, has been exponentially increasing and making it easier to compose these sorts of projects together and to use them to build bigger and bigger things that hopefully end up in this self-sustaining cycle that are making things better at the end of the day. That’s what I’m hoping.
Peter McCormack: Okay. Similar question to you, Scott. What is the good stuff on Ethereum and what are the projects that you think are the biggest success stories and that will probably be existing in a few years from now?
Scott Lewis: First, I’d just say a few years from now seems like, I don’t know what the world will look like in a few years. What we have now versus what we saw a few years ago, but I can say that in our blog on Settle, we just had a blog post about do you buy open finance. We mentioned three projects that seem like have achieved some product market fit already on Ethereum. The biggest example seems like MakerDao. You have $72 million worth of dots floating around. A not insignificant portion of Ether has been locked into the contract. It seems like people want this and want to use it.
Will they succeed over the next few years? I have no idea. They definitely have some big challenges. It also seems like a pretty good team that can confront challenges. We also mentioned 0x it seems like they’ve found some product market fit. They’ve recently had one of their big uses of Protocol DDEX break off and start Hydro Protocol.
Then it also sees some product market fit from Compound Finance, which is sort of like a collateralised overnight, actually every block you can withdraw your loan or put more money in. Sort of like a very, very short-term collateralised lending facility. Real people are using these things. I think if you compare that to maybe the traction the Lightning Network’s getting, it looks pretty good. I mean, Lightning Network has a lot of very devoted followers. I think last time I checked it was a little under 1.8 million Bitcoin at the market in there.
Peter McCormack: Yeah. Then also if you were trying to be balanced about Ethereum, Scott, what are the things that made you think aren’t so great? What are some of the fair criticisms of Ethereum?
Scott Lewis: I think Ethereum needs to figure out governance at some point. Ethereum was getting big. I think in the early days if you have, I don’t remember his first name but Dunbar number is sort of like a group for how big can a group get before you start losing person to person trust? It’s like maybe 150. It’s one of the levels for how much trust you get. Ethereum is growing and it is getting so big. The people that have important roles in it is getting larger and larger. I think it’s easy to figure it out because the questions are getting important while the group is getting better.
Bryant Eisenbach: Yeah, I could follow up on that. I think governance is also one aspect that over the past year has been growing exponentially in the Ethereum space as people have realised it’s important to think about and it’s important to discuss and it’s important to ensure that what it is and what it is not is important. This past year, the Fellowship of Ethereum Magicians has been formed. I’ve been part of that. The security community, we formed as a ring or a subgroup of that overall group. It started as a place to talk about Ethereum improvement proposals. I feel it’s turned more into a philosophical community and governance community for Ethereum. Because at the end of the day, the updates to the protocol is the governance of the protocol.
Scott Lewis: I was a trader in New York when Occupy Wall Street first started happening. Not a fan at all. If you look at how much interest and excitement you had in Occupy Wall Street, they also adopted, not that Ethereum is adopting it but they adopted a very, very loose governing system. And occupy Wall Street social movement basically died. I don’t think they really accomplished anything of importance. Maybe Elizabeth Warren’s popularity is the last remnant of that in the United States. I’d be really sad if the Ethereum community did the same thing. Because unlike Occupy Wall Street, I do believe again what the Ethereum community is trying to accomplish.
Peter McCormack: How does governance currently work, Bryant? What is the process? How would you explain that to someone like me who’s not deep in the weeds with Ethereum?
Bryant Eisenbach: In a lot of ways it’s much a meritocracy. If you have something really valuable to add, and you are able to add your voice to the discussion and other people think it’s a good viewpoint to promote, then it will enter into the conversation and eventually enter into the protocol and how it’s been formalised.
The problem with saying what is Ethereum’s governance is that it’s not written down anywhere. It is kind of a fluid thing. That’s actually kind of by design. Because as soon as you start writing down too much of what a governance protocol is, people could start finding the loopholes and exploiting them to their own means. It’s important that the governance of something as large and messy as something like Ethereum has been both fluid and clear to the right parties. The clear part is what we’ve been working I think on over the past year.
We’ve written out, you write an EIP. It says, oh, let’s change the block reward or something like that. Then it’s on a GitHub issue in the Ethereum repository, or the Ethereum organisation. You can go there and add your voice as a GitHub user. You can put it on there. Certain people share those EIPs to other groups like Reddit and just all sorts of different groups. There are so many different ways people talk about what’s going on. There are editors who are only in charge of making sure that that process is loosely followed. They try to gauge the sentiment of the community, even though that’s a hard thing to do because if you’re talking on whether or whatever, there’s a lot of noise. There’s a low barrier of entry to that process.
You try to collect the largest amount of sentiment you can without getting tied up with the noise that’s out there. Signalling and finding the signal through the noise is one of the biggest I think issues that governance needs to be resolving. That’s one of the groups that has formed under the Fellowship of Ethereum Magicians that I think is doing something that really needs to happen.
Peter McCormack: One thing that appears to me is one of the things that really doesn’t help Ethereum is that there is the ability to buy Ether, and it has a price. The price can fluctuate wildly. That kind of impacts the impression and opinion people have on Ethereum. It’s probably a distraction from the work people are doing in building, almost like, and I’m not a techie but I can imagine the days where something like Linux was first being built. People just got on with things and built things. They didn’t have to worry about any kind of valuation or token or any kind of market sentiment that went with that. Would you say that’s a fair observation?
Bryant Eisenbach: I think that’s a pretty fair observation of the entire space. That is definitely one thing that even BitTorrent didn’t have to deal with when they build, I think BitTorrent is probably one of the more interesting examples that exist. You didn’t have to deal with a token. You didn’t have to deal with valuations. It was kind of a community project.
I think that’s the spirit a lot of developers in Ethereum try to bring to their work, so like discussions about price are not laid in laws as being wrong or something, but it’s not interesting. As developers, we’d like to talk about interesting technology we’re building and stuff like that. I think in a way, that’s a way to filter out this noise about the market pressures. Every protocol, Bitcoin included, faces the market pressures. Dealing with that is something that’s never happened before. That’s a really, yeah. That in and of itself is something that needs to be dealt with.
Peter McCormack: Yeah. I guess I see a slight difference with Bitcoin in that whether you call Bitcoin gold or money, it’s essentially only is money. That’s pretty much all it really is. Whereas I guess with Ethereum, people are trying to build a whole bunch of different kind of application assets with it. Many of them aren’t directly money, but maybe are a kind of sub-representation of money. I guess people see it slightly different.
I guess this is why, all right, maybe in some ways defends what Tuur was trying to get at with his tweetstorm. Because I think what he was trying to do was he was thinking a lot about investors and the risk of investors investing in this. You all have a counterpoint to this. I’d love to hear your reaction. I think this is where he was referring to it may be as a science experiment in that maybe it would be better if this was in some MIT lab being developed, built, and understood before people were trading the Ethereum token. Do you see that point?
Bryant Eisenbach: Not really. I think one of the biggest and coolest things about Ethereum is that it is an open source project and it has just been allowed to exist. There are plenty of examples of protocols being developed by closed source entities that are inherently capturing the entire system. That’s a threat in and of itself. Bitcoin has gone through this immaculate conception. There is no other coin that could ever have that happen again. It’s just not possible. That’s a hard thing to drive against. That’s a hard thing to respond to because there is no good response. We can’t have a second immaculate conception. It’ll just never happen.
Peter McCormack: Right. Okay, that’s a fair point. Okay, so I think we should work through some of Tuur’s points because I think it would be good to respond. I think it’ll be a good way to end is then just talk a little bit more about Ethereum and the future of Ethereum. Because I don’t think we should notice the entire interview on his tweetstorm. What I’ve done is I’ve picked out some of the key points that, and I’ve also read both of your responses. The first thing he talked about was culture.
I think what my understanding of his point here was that, and actually, there’s a better way to sum it up. When you responded, Bryant, there was a sub comment from a chap by the name of Bob McCulrith. He’s put, the culture is the gold stated by Vitalik to move fast and break things. Bitcoin is decidedly more conservative, don’t break anything ever. Do you think that’s a fair observation?
Bryant Eisenbach: I guess first the culture comment was really what drove me to even write that in the first place because that just strikes me as a completely ridiculous argument. For one, I think the culture he’s trying to drive with his comment is that we are all scammers and we are all unscrupulous people. That, of course, makes people angry when you tell them that the thing that they’re working so hard on and spending so much of their time on is just something throwaway and something just meant for pure monetary gain, and especially with the Ethereum community.
I think such a large part of it is not about that. It’s just a really, you get a really strong response from that. That’s kind of the first thing. Some context to that is you can’t really experience the culture of an ecosystem without being inside of it. I can make a guess to what the culture of Bitcoin is but I’ve never been inside the community. From the outside looking in, like Scott was saying, it’s a bit adversarial in nature by looking at it. I think that’s just a function of what it’s trying to do and the impact it’s trying to have. Right there in the white paper, we want to be the next world financial system. You want to down all the bankers and they’re all corrupt and all this stuff. It’s very adversarial.
I respect it. I think one of the coolest things that have come out of all this is that we finally have tools for dealing with the corruptions and the injustices in the world. I think the Ethereum community is focused on a different aspect of that, namely big tech companies and the surveillance economy. I think a lot of the community is really interested in that perspective. The banking system and the financial system are a huge problem.
Peter McCormack: It’s an interesting point where you’ve said there about we have tools for dealing with corruption and say fraud and things. Do you think there’s also an argument that new tools have been created to allow for corruption and fraud, and that equally could be labelled at Bitcoin to a certain extent as well?
Bryant Eisenbach: Absolutely. I think one of the key aspects of a technology that enables freedom on the level that Bitcoin, Ethereum, any real crypto project does is that it can be used for rampant crime. One of the first major uses of course of Bitcoin as everyone knows is the drugs that you could buy on Silk Road and all that stuff. A lot of people that I met that got interested in it early on got interested in it through that. Then they realised, oh, it’s so much more powerful than that. So much more interesting than that.
I think with Ethereum you have this ICOs like oh, I can launch a token in 15 minutes and scam a bunch of people out of their money. But I think it points to a deeper underlying thing that’s way more fascinating that we can build projects that don’t have a home. They don’t have a home country. They’re not a company. We can deal with problems by collectively coming together and working on them instead of like a top-down infrastructure. I think that’s really interesting.
Peter McCormack: Scott, what did you feel about the comments about culture? Because I’ve got to say, it does seem from my side that whilst people have experienced say hacks and loss of funds with both Bitcoin and Ethereum, there appears within say Ethereum to be more instances of money and value being lost where maybe there’s a problem with the code or a problem with say a smart contract. Then I have obviously read that move fast, break things. It does feel a dangerous statement to have when you have a protocol which does hold a lot of value and a lot of money for people.
Scott Lewis: I think the reasons why you’re seeing more instances in the news, it’s not really just the news but social media and everything is because the way people use, one of the big reasons the way people use Bitcoin and Ether are very different. You buy Bitcoin and mainly until later to stuff gets traction. You buy Bitcoin to sell it to someone later and then take that and store your value, take your money out in however many years. It’s hold, hold, hold. If you buy Bitcoin and leave it on Coinbase or you buy Bitcoin and put it on a hardware wallet and bury that hardware wallet under your house, you’re not actually interacting with it.
A lot of people bought Ether because they wanted to Ether. They were going on their computer once a week or once a month and doing something with it. Just because you’re actually using the magic internet money, you have more places to touch someone when they’re transferring you. Yeah, I think there’s an education process that needs to happen for who people trust, like Slack chat room. Slack used to be a hotbed for scamming people out of their crypto and projects and people reacted. Very few teams use Slack today. I think it’s almost a problem of actual real use adoption.
Peter McCormack: I’m not sure that’s really what I was getting at. Yeah, I agree people will have bought Eth to sue, I understand that. I would have said the majority of people bought Eth as a trade to make money. I think that’s why the price is so volatile. Yes, there are certainly people who are buying it to use it. The price is driven by buying and selling, right, not the system usage. I would have thought the majority would have been buying as a speculative asset.
Scott Lewis: I mean, lots of people bought Either because they thought it was going to go up. Don’t want to definitely agree with you on that. If you did by either and you just left it on Coinbase or you put it on your hardware wallet, you probably weren’t getting scammed by that. It’s only if you’re actually using it and transferring it to you have the opportunity to transfer to someone that’s lying about who they are and why you’re sending it to them.
Peter McCormack: I’m not so much talking here about the scammers, because that can happen with Bitcoin, right? It only happened the other day. I’m talking about more something say like the parity wallet where there seems to be more of that because the Ethereum community, development community seems to move faster. It seems to be a bigger, riskier system. I think that’s the point that Tuur was getting at rather than being scammed because that can happen with any cryptocurrency.
Bryant Eisenbach: The Parity Multisig hack was one of the main instances that got me interested in joining because move fast and break things is the mindset of the traditional application world, that Silicon Valley’s culture. We didn’t create that ourselves. That’s adapted from the system that we’re intending to fight against. Whereas the culture I come from, it takes us three years to build the first part of a project. I think the reality is somewhere in between the two. We definitely need to take things more seriously. Over the past year, we have started taking things seriously.
One of the most interesting things technically is that the use of formal verification proofs has never really been something practical or useful to do until smart contracts arrived. In fact, Maker DAO Is a great example of that. They’ve formally verified all their contracts that exist on chain. That’s the reason why I can trust it to hold as much money as it does. That’s the security answer to the question. The answer to the speculator investment question I would say is nobody told them to do that.
Peter McCormack: No, of course not. Of course, nobody told them to do that. We still have to be aware that people are investing, right? Whilst nobody told them to do it, I’m guessing the Ethereum development community provides some kind of support to exchanges to allow the trade of the asset. If you’re able to buy an asset, I think there has to be some kind of responsibility towards the security of the code base.
Bryant Eisenbach: Yeah, yeah. I mean, one of the things I formed this past year was a security community, and it’s about 250 people from the community that are purely focused as either security researchers or core developers or protocol engineers as I would call them that are focused on all the different layers of sec. Ethereum I will 100% agree is 10 to 100X more complicated than what Bitcoin is. That’s been pointed to as a negative, but there are certain situations where more complexity is actually justified.
I think Ethereum, while it grows and changes like any decentralised project that tends to add complexity as things go on, the core idea of what if we took a blockchain and the verification of transactions and made transactions arbitrary against a virtual machine that is able to execute arbitrary computations? I think that grabbed a lot of people technically and at the justified layer of complexity to start from.
Peter McCormack: One of the things that stands out to me is the pure sheer size of how big Ethereum can be in terms of how much can be put on chain. There is a certain amount of, and Tuur referred to this, a certain amount of bloat within the system. I’ve been reading some about Eth two and about some of the ways it’s going to be dealing with that. How big a challenge is it and how big a problem is it the size of the blockchain?
Bryant Eisenbach: I think this is a common misconception. I think a lot of people point to the 2 terabyte number like oh, man, that’s crazy. That’s really only an archive node which contains every single possible computational step that’s ever occurred. The real size, one of the parity engineers has a blog that just says it. It’s 138 gigabytes. It’s growing. The problem is that we actually have some mechanisms for some small amount of extra scaling now. If we release those on the wild, it’s going to get more use. Then the state problem is going to start blooming. We have a bunch of proposals and ideas, state rent, that hopefully will start to deal with this.
I think there’s a lot of really interesting, I think Coda is working on a recursive blockchain where you only really have to keep track of the most recent block. There’s a lot of different things being tried that will hopefully help attack this problem. This problem not only affects Ethereum, it affects Bitcoin. How are you going to use Bitcoin in 50 years when you’re passing around terabytes of blocks or you’re passing around, you’re downloading the chain and it takes terabytes of data to download? We all have to figure out how to deal with this. It’s one of the core problems with blockchains as in architecture in general.
Peter McCormack: Would I be right in thinking that it’s a more pressing problem for Ethereum because of the rate at which it’s growing and the amount of stuff that’s been built upon it? I accept it’s a problem for Bitcoin too, and I’ve read about proposals to reduce it. I think there’s one from Gregory Maxwell actually. Is it more of a pressing issue for Ethereum?
Bryant Eisenbach: I think we’ll bump into that sooner than later. I think with some of the core protocol engineers have raised is more out of a position of caution. If we doubled the gas limit, which is the limit to the amount of transactions that can be put in a block, if we doubled that limit, then we would start quadratically growing the size of the stake. We want to avoid that, but we want to do scaling, but it’s like a chicken and egg problem. Yeah, I agree with you. I think people make it a bigger problem than it is currently, but I also believe in the long-term, if not dealt with it will become a huge problem.
Peter McCormack: How does the problem manifest itself? What is the impact of having such a bloated blockchain? Does it end up meeting a theory becomes more centralised or does it mean it runs slower? What are the problems that this causes?
Bryant Eisenbach: I think that at a low level, just more disk space. The big problem is that it keeps things like mobile phones and laptops and stuff out of the picture, which is definitely a design goal for, especially Ethereum 2.0, I’d like to be able to run this on a laptop and even able to run a light client on a mobile phone. We can do the kinds of things we want to do it that’s not possible. The computing devices and keeping them reasonable and consumer-friendly, computing devices is a core point.
I think with any other protocol, that’s also probably a core precept of the design is you want to be able to actually run it on normal machines. That’s a big part of the whole big block thing too. If you start pushing around very large blocks, you’re going to start needing very centralised computers to deal with it. The decentralisation design space is so multifaceted and so hard to reason about. It can be a problem to figure out what the right solutions are, but I think we’re all coming to agreements.
Peter McCormack: One of the things Tuur touched on quite a bit was proof of stake. There seems to be a very black-and-white Ethereum V Bitcoin view here which is the best consensus mechanism, whether it’s proof of stake or proof of work. Obviously, Ethereum is moving to proof of stake. Firstly, because of the kind of people who might listen to my show, can you explain the differences between proof of stake and proof of work and why the Ethereum community is so keen on moving to proof of stake?
Scott Lewis: In proof of work you essentially have a computer trying to solve a mass riddle until it finds one, finds an acceptable solution. Send the block to the chain, and everyone realises that some anonymous person or pool put in resources to put this block forward. That solves nothing, I’m not a technical expert but there’s something at stake for that block producer if they double-spend coins or they produce an invalid, they included invalid transactions within that block. Proof of stake takes a different way to assure that there’s something at stake for the person that’s validating or for the entity that’s validating the transactions. That stake is tokens on the protocol rather than energy or resources expended to solve the math riddle or do the work.
Bryant Eisenbach: I think proof of work, proof of stake I think get highly technical the more you dive into it. You’re just going to have to do your own research to really understand the differences. One of the really cool things about proof of work is it really solves not just one, two, or three problems, but four problems at the same time with the same algorithm. One of I guess the negatives of proof of stake design is that it can only really solve I think two or three of them. It can’t solve all four. There is a way to layer the approach where it can indeed solve all four.
One of the biggest things that proof of work gets you is the ability to filter out the noise. You post your Reddit article, a bunch of people respond to it. There’s a bunch of low-quality comments. How do you know you’re getting out what is the most useful? The proof of work mechanism says that you put some effort in to get yours at the head of the heap. Therefore because you put effort into it, it’s worth listening to.
Proof of stake is taking that idea, that effort gets represented in proof of work as the amount of computational power you have, and vis-a-vis the amount of money, you spent purchasing that computational power. It makes it explicit. It turns it into an actual equation you can design for and reason about. I think that’s one of the huge pluses about proof of stake is that you can say with this much security, here are the returns. Here’s what’s at stake if certain people don’t agree. This is what it is. We can reason about it in that way, whereas proof of work ends up a little bit more noisy and probabilistic in its behaviour.
Peter McCormack: I’ve tried mining. Whilst I’ve lost money, it’s been a very useful exercise. I brought some DragonMints and some S9s. One of the very interesting things about it is every month trying to get as cheap power as I can, but balancing up the cost of running them versus what I mine. I’ve had some loss-making months. I’ve also staked Zcoin. I bought, I can’t remember what the number was but I bought say a thousand Zcoin and I have a Z node and I get a payout every month.
The distinct difference for me in that experience is I have a one-off cost with Zcoin, and then I’m a player. I’m in the game, I don’t have to do anything else, and I just get my returns each month. With my proof of work with my mining, I’m constantly having to work at this to make sure I can afford to do this. There’s a very distinct difference in that experience for me. Can you see the experience I’m going through? I’m kind of like …
Bryant Eisenbach: Yeah, I actually like that you’re trying to make it more physical and more real. Maybe a critique of proof of stake is that it feels less real. The losses are no less real. If you’re off-line for a certain period of time, your balances start dropping until you’re kicked out, which is I think at 95%.
Peter McCormack: There are not too many ongoing costs with proof of stake, right?
Bryant Eisenbach: There is the cost of running the validation. You still have to have more specialised computing devices on the network communicating at all times. You just don’t need to have an ASIC. You don’t need to have a GPU. You don’t need to have that. I think one of the really interesting things about Ethereum classic hack that just happened was that the computing power for that was purchased. It was mercenary GPUs that were partly to use in that attack. That’s something that really isn’t possible in proof of stake as your coins are locked. They cannot be moved. You can maybe create some sort of derivative contract and offer it and go through the complexity of that. Why would I give you the keys to my kingdom in that regard? It seems a little antithetical.
Peter McCormack: If you were honest, what are the things about the migration to proof of stake that does concern you? Now, I would definitely be out of my depth here, so I tried to read about some of the design problems with proof of stake, some of the issues with censorship vulnerability, etc. If you’re openly honest, what concerns you about proof of stake?
Bryant Eisenbach: Like I was saying, proof of stake doesn’t solve all four problems at the same time. I’m pretty sure the biggest problem that it’s not really able to solve is becoming a source of randomness to ensure the proper mixing through of the validating parties. Just like with mining, whoever is the block producer is randomly chosen. Proof of stake is actually a committee of validators that are randomly chosen. However, the source of randomness is a problem. That’s not something easily solved by proof of stake because any source of randomness can be biased towards choosing more and more of a particular set of validators that let’s say you own.
The community response to this has been Randel, and with Ethereum 2.0 we respond this Randel idea which I think is similar is to Dfinity and the protocol they’re working on. Obviously different in practice. Then you get all sorts of complexity with that. I think that’s the one area that I’m still watching to see how it turns out and if it makes sense. There’s been this VDF rig posed, which is a much less power-hungry device, but it’s still a custom device, kind of like an ASIC that you would have to run in order to help ensure the randomness is unbiasable.
Peter McCormack: What’s involved in the migration from proof of work to proof of stake, and how risky a migration is that?
Bryant Eisenbach: That’s a huge risk. That’s probably the second thing I’m most worried about, what the migration will be. I think there’s a lot of cool research going on. It’s going to happen. Then we are going to have this thing. That’s like, cool, there are two, three, four years of these protocols operating out of the wild on the 1X chain or the 1.0 chain, whatever you want to call it. How do we move them over?
I think as the developer community, the people that build on top of Ethereum need to have a bigger conversation about migrations and upgrades for each of these protocols and how to make them easy and effective so we can change over to this new chain architecture easily. It’s like each sub-community that’s running like Maker DAO has a sub-community and all these different protocols that the sub-communities, how do they process that upgrade and move to a different chain?
Peter McCormack: Will Eth one and Eth two be running side-by-side at one point?
Bryant Eisenbach: Yes.
Peter McCormack: Will the Eth token be valid on both chains, or will there be separate tokens?
Bryant Eisenbach: There’s this one-way mechanism that’s been proposed to move your 1.0 Eth to 2.0 in order to become a validator. That’ll be like the initial migration process of just the Eth that exists.
Peter McCormack: The total supply across both chains will never change?
Bryant Eisenbach: Yeah, I’m pretty sure. I mean, the rewards that are offered are created on the chain in the same way that the block reward is produced. I think in that way actually the proof of work Ethereum will have a higher issuance than the proof of stake Ethereum at that point.
Peter McCormack: Scott, as somebody who’s building on Ethereum, are you fully conscious that there is Ethereum one and Ethereum two, and that at some point you’re going to have to possibly rearchitecture and rebuild everything you’ve done to work on Eth two? Obviously, I’m out of my depth here. Do you understand the question?
Scott Lewis: Yeah, for sure. Definitely, some of the stuff that we’ve dealt will have to be rebuilt. A lot of the most important things for interacting with the blockchain happen within the user’s experience in the regular web app. Although things might not change that much, some facets of it will. I think at the same time what I’m hoping happens, and I think it’s the plan is that the performance is going to be much, much better. The kinks in the user experience that are created by having to make a transaction, sign into a transaction pool or a mempool, wait for a miner to mine it, they’re not going to completely go away but I think it’ll just be much better. There will be costs, but if it happens it’ll be because when the switch is made if it all gets figured out, which I think it will, the benefits will be much greater.
Bryant Eisenbach: Projects will move over if they see a clear cost-benefit analysis to the new chain.
Peter McCormack: Is it almost like, I’ll go back to when I had a web agency. We had some clients we would build their web applications using .net and some with PHP. Is almost a case of like, if we move one client from .net to PHP, the users of the website would have no idea but it would be an upgrade or a transition in the backend? Is it like that?
Bryant Eisenbach: Absolutely I think.
Scott Lewis: Yeah, although the users might not notice that some random stuff they had to do before, they don’t have to do now. The fact that a transaction is specced to be final, to have finality better and more predictably, I think going and checking how many confirmations you have on a block explorer, that’s pretty annoying for users.
Bryant Eisenbach: Yeah. That’s a great point. Like with the Ethereum classic produced I think many exchanges, we’re using 200 blocks or something to call it final. They really should have been using like 1,000. Really the confirmation depth, this gets into the probabilistic nature of proof of work really depends on the amount of hash power that’s actually mining the chain. Bitcoin it’s like two blocks at the right depth, and Ethereum them I think it’s like 120, I don’t know. There’s some numbered depth where it matters.
Scott Lewis: Have you ever just gotten unlucky and had to wait an hour for a new block on Bitcoin? That’s not fun if you have a business and your users are having to do that. I’d like it if it’s just like snap your fingers and it’s there.
Bryant Eisenbach: There’s a lot of UX problems that we’re going to be figuring out from now until then. I think the user experience for like the front facing user experience will be there. The user won’t experience much of a difference in that. I really believe that Ethereum is a big part of the backend of, it’s like Web3 decentralised web idea. The core users of Ethereum will end up being just engineers who are learning how to interact and learning how to give that to the users in a way they don’t notice. The best user experience is that what you don’t notice.
Peter McCormack: Okay. Let’s shoot a few years down the line. Eth two is out, plenty of people are using it. Will there come a time that Eth one is retired? And how is that decided, and does it just come down to whether anyone is mining? Would it come down to that? How does that process work?
Bryant Eisenbach: I would say yeah. Like you’re saying, the lack of miners would declare it dead in the same way that a lot of the Bitcoin copy coins that just kind of die. Not out of the fact that it doesn’t exist and you can’t still run it, it’s just that nobody cares. People stop caring about it at some point because it no longer has value. The new thing has so much more value that everyone’s it. They’re reporting over a whole network effect, which is kind of crazy. That’s the idea.
Scott Lewis: Right. Did someone recently propose that Eth one chain would actually be on a shard?
Bryant Eisenbach: Yeah.
Scott Lewis: I don’t think it’s completely settled exactly how.
Bryant Eisenbach: Yeah, it’s not completely settled exactly how it’ll work out. That’s one suggestion that the current chain becomes a shard chain or like a subchain of the 2.0 chain. It’s kind of like instead of a discrete transfer over, it’s more of a growing of what’s possible with the current chain. That approach is definitely a lot harder to accomplish.
Scott Lewis: I think one of the most important differences about Bitcoin process and Ethereum process is that if you think it’s likely that the Ethereum 2.0 will happen, you’re putting your confidence that this problem-solving community will be able to solve the problems. New solutions, people are very open to new ways of doing things. It’s more of a dialogue I would say than a …
Bryant Eisenbach: Yeah. Because it’s such a collaborative community, the tools needed to port over to the new chain or integrate it into the new chain or whatever happens. Because it’s so collaborative, we’ll work on them together so no one of us is doing all the work. We’re able to all take advantage of it and move over, which I think is a very valuable thing in a community.
Peter McCormack: Do you think if you read the medium post by James Prestwich that came out yesterday about Eth 2.0 …
Bryant Eisenbach: I was reading through that. I didn’t get a chance to get all the way through it.
Peter McCormack: I had a read of it. As I’ve told you, I’m not technical. I try my best to understand these things. The level of complexity and the problems that need to be solved, they’re huge. It reminded me of, it might sound a very weird comparison but I was at a South By Southwest a couple years ago. I went as a guy with a web business. Some of the most interesting discussions I went to were nothing to do with my industry.
I ended up with one with NASA where they were talking about the complexities of putting a man Mars. They were talking about, they are having to solve things that had never been solved before. They might not be able to solve. I couldn’t help when reading this document thinking about that, thinking some of these problems seem huge. Is there a chance that some of these problems just cannot be solved? How do you feel about the level of complexity involved here?
Bryant Eisenbach: From a security perspective, definitely complexity, more complexity grows almost quadratically the amount of risk you’re exposed to. The idea is to find the right level of complexity where you’re getting what you want out of it without adding too much to it. Also composing these different pieces of complexity together so that one doesn’t affect the other. That is I guess one thing that does worry me, what’s upcoming.
I think a really great thing that I also personally like about Ethereum is that there’s not one client that’s the canonical client and everyone uses it. Because if there’s one thing I’ve learned from my experience in helicopter design is that you need redundancy. We have Parity, we have Geff. The 2.0 I think has eight different teams. Any problem that gets discovered in the protocol or the specifications or the data structures or anything like that will be exposed because there’s a lot of different people working in different languages that are attacking it from different angles. That to me is the only real way to build a truly secure piece of infrastructure like this.
Scott Lewis: Peter, I think you’re completely right in that it’s possible some of the problems that people plan to solve won’t be solvable. It seems very possible, implausible to solve them all. I think one of the advantages with like an open community that looks favourably on new ideas that didn’t come from them is that you might actually get a brand-new idea that’s way better and creates an even better way to make a 2.0 work. Because you’re always looking for new ideas and people know that they bring something that’s new, they’ll be given a reasonable hearing and celebrated if it actually does work better.
You also have the shot that you’re not just limited by what you think you might be able to solve in the future. Because humans are really innovative. If you don’t censor their ideas and if you do let free thought and positive dialogue happen, really cool stuff can come out of it. I think that’s sort of like one of the things I like most about it Ethereum.
Bryant Eisenbach: I think that also holds most for the wider cryptocurrency community. These are all open source projects. I think a lot of the ethos of what we’re trying to do is, in essence, make the world a better place in so many different ways. We should almost be celebrating each other in what we’re doing. We can learn from Lighting. Ethereum can learn from Coda-like I was talking about. All these things are sharing components. The only way that we really succeed in that goal is by working together and helping each other.
I guess that’s the one thing that resonates me with Ethereum’s community is that it’s not adversarial. It’s very collaborative. I hope that more communities adopt that to understand, there isn’t going to be one coin that wins. It’s probably not going to look like anything like what we’re looking at right now. Five, 10 years from now it could be, I don’t know. It could be called something totally different. Who knows.
Scott Lewis: I think about it as like the meta-decentralisation project. Even though there are rivalries between different almost quote unquote ideologies within a Bitcoin versus Bitcoin cash or whatever, at the end of the day everyone’s trying to solve really hard problems in different ways to make human society better for everyone. If Bitcoin accomplishes everything that I see Ethereum is possibly accomplished and Ethereum fails, I’ll probably have less money, but I’ll be pretty happy.
Bryant Eisenbach: I agree with that 100%.
Peter McCormack: Another thing that stands out to me, and I’m not here just to pick on Ethereum but I’m trying to answer or understand the things that I don’t get. There’s been a lot of criticism labelled across the crypto space on the amount of adoption there has been with taps and protocols, etc. There seems to be a vast imbalance between the amount of work that needs to go to Eth two, the multiyear project, the number of developers and work to build something that has not really seen a real wide adoption. Do you understand where I’m coming from?
Bryant Eisenbach: Yeah. I think a lot of people like to point to daily active user metrics because that’s how Web2 points to it. The really important thing to recognise is that it follows the power law distribution. The amount of, for example, I was reading something that the amount of people posting on Reddit is something like 1% the actual users. By that metric, daily active users only count towards transactions, actions taken in these different protocols that are built on Ethereum or any other thing. The holders of Bitcoin are users because they’re using it to store their value. They’re just not active users, but they are active users. They are actively using it what it’s meant to be used for.
That’s why I think the decentralised finance ideas are really interesting because it takes advantage of that. I think finance in and of itself, there’s a lot of inefficiencies in the process that can be improved. They’re at the end of the day one of the few people that are willing to pay for those improvements that they can until the scalability is there that we can support more wider scale application. Not to say that finance is the only thing that can be built on it right now.
I think it’s about finding other use cases like with what I’m working with on my project. We figured out the number of transactions that could be potentially done, and even if 100% of them happen over the course of the year it’s still only like two or three a second that we’re supporting on our sublayer chain or whatever it is. Which means that there’s only one transaction a week or something that we’re pushing to Ethereum. If that one transaction a week is accommodating for millions of users, that’s pretty cool. We’ve compressed all this activity into one little string of bytes.
Peter McCormack: I guess what I worry about is that how many of these projects are actually creating things that enough people are going to be using to create enough value to create sustainable companies and products and applications. I’m seeing a very big disconnect with that. It’s also a worry, it’s still a worry I have sometimes with Bitcoin as well. I don’t think Bitcoin has solved this problem at all.
I almost look down coin market cap, and the further I go, the bigger problem I see it is. I see it as a problem Bitcoin with adoption. I see a bigger problem with Ethereum, and then I’ll get down to things like I don’t know, like Litecoin or Cardona, anything on Neo. I think it just becomes a bigger problem the further down you go. I think we’ve all got these big hopes and dreams. Potentially the use case just may not be therefore enough people.
Scott Lewis: I might look at what the actual plan for making Ethereum usable was when it’s launched. I think the goals of the Ethereum foundation and the people in the Ethereum community was to get product market fit with developers, with the idea that Ethereum foundation was not going to build the Ethereum wallet, and they weren’t going to own Ethereumloans.com. They wanted to attract developers. I talked about this. When you think about developers as the daily active users of Ethereum, they were going to attract and they wanted to be judged on. The premier conference in Ethereum is Devcon. It’s not trying to get people hyped up about spending either to buy goods.
I think what we’re in the middle of right now is they did get really good products market fit with developers. Now the challenge is to scale the chain so that it can support a lot of users and to find apps. What apps are these developers going to build on Ethereum that can actually attract a lot of users? I sort of see the growth in Maker DAO as the best example, there are others, but the best example of within the Ethereum community of something that has real users that people just do it to create a loan for themselves, like a collateralised loan without any other paperwork that you might have to do if you went to refi your home or get a loan on your car, go do a title loan on your car which is a thing in the US. I’m not sure.
Bryant Eisenbach: I think at the end of the day, and Scott hit on a great point. The users of any of these networks are not going to be people. They’re going to be developers. They’re going to build these things into other applications that people use. Maybe cryptocurrency is the idea of digital value bubbles at the service. Maybe it doesn’t. Maybe it looks like a dollar that’s really a die on the backend. Who’s to say what that will look like? I feel like the one thing that is sure though is that these things are too complicated for people to use directly.
Scott Lewis: Yeah. I think if we’re still talking about developer product markets in 30 years …
Bryant Eisenbach: That’s a question.
Peter McCormack: One of my experiences as somebody who’s built things, projects and applications in the past is that whatever idea I’ve had, I would never have been able to do it without competent developers. Knowing some very competent developers, they wouldn’t have been able to deliver their ideas without a very good designer working with them and without more of a business person. I always felt like you needed those three elements.
Obviously, you find the random freak who’s great at everything. Generally speaking, I always felt like I needed a good developer, a good designer, and a good business person. The three together can make something work. I think that probably gets to the root of one of my worries with Ethereum is so developer-focused that there are not the practical business people who understand the kind of applications that people need and will actually use and are working to design things that let’s say the normie will use.
Not us in this crypto space, like my son, will use when he goes into the world or that like my friends, I sit down with the pub on a Friday night. At the moment, even Bitcoin is hard for them. Getting them into any kind of decentralised application, it seems to be such a big leap. I’m not sure if that’s a leap we will make.
Bryant Eisenbach: I agree. I think the three parties you picked out there are what it takes to build an application. I’ve seen over the past year that the user experience and designer community has started coming into Ethereum, which I think is pretty promising. One point of criticism I will take is that there has been a lack of business people in the space that only up until this past year have started filtering in as they start understanding what the actual use cases are in trying to find that product market fit. That’s something we can do better with. The nice thing is that developers are way rarer than business people. I don’t think we’ll have a problem finding more business people.
Peter McCormack: I guess I really hope we don’t come out at the end of this and the single use case we find is a dollar coin. I hope more comes out of it. We’ve got away from Tuur’s tweetstorm. Before we round up and close out some of my final questions, why were you overall triggered by the tweet storm? Is there anything in there I haven’t covered that you wish I would have asked you about?
Bryant Eisenbach: I think as a developer, the perspective may be that his arguments were coming from were a little bit out of the loop. I feel like they weren’t accurately representing the experience that I have and being in the Ethereum community over a year now. It’s been really an amazing experience getting to know all these super smart people that are really interested in human lives instead of profit. Then to hear him come back and say oh, we’re totally focused on profit and all this kind of stuff, it just really didn’t stick with me the right way. That’s the thing I wanted to rebut against the most.
Scott Lewis: Yeah. I definitely felt like Tuur was talking about a different project than the one I’m involved in. Like Raiden and our chain aren’t really things that I’m involved with or follow or even know about. Then his criticism that a stream of dividends was a Marxist idea and that we promised a utopia, it sounds a lot like if I go and buy one share of Coca-Cola stock and then I get a very, very, very small percentage of all future cans of Coca-Cola sold across the world. It doesn’t sound like Marxism or communism or socialism or utopianism. It just sounds like an asset you buy, like gold is an asset you buy that happens to not pre-dividends or a government bond is an asset you buy that does pay coupon or share a stock. It seems pretty down to earth to me.
Peter McCormack: It’s interesting. I talked to Tuur quite a bit about doing the podcast, and I definitely think there are some misconceptions about why he did it and his thinking. It definitely doesn’t come from a place of wanting to attack Ethereum to protect his Bitcoin holding. I got to know him a fair bit, not very well but I’ve got to know him because we’ve done two interviews now and he’s definitely conscientious guy. I think where it comes from primarily is he deals with investors a lot. You guys have given some great answers in terms of what you’re building and why you’re building it and the kind of applications you want to build.
I guess I approach that point, there’s a disconnect with the token because the token can send investors in and people to buy this token. That could lose the money. I think a lot of it also was coming from that point of view. I do really appreciate you both coming on and discussing this with me. I do have a couple final questions to close out with as well. Firstly, it would be great to hear from both of you. What are the things that excite you most about Ethereum and what’s coming up and what kind of projects you think people should be keeping an eye out on?
None of it requires any use of a blockchain component at all. It relies on these layered approaches, these second layered approaches that make it really usable to an average user. It’s pretty cool that you can be in someplace like sub-Saharan Africa or India or somewhere and you can just use this webpage. You can get around the banking restrictions and ridiculous financial infrastructure that exists in order to do what you want. If it really takes off, I’m sure it’ll be used for less than good intentions at some point. I think the fact that that’s enabled is really interesting and really powerful.
Scott Lewis: I’m most excited about decentralized demands right now. For our second hackathon for Settle, we had a developer build a dex aggregator, dex.he which is a name., and also its URL. It’s cool because since dexes are decentralized and you can compare the price of all the dexes at the same time and then go trade on them. I think that’s a really cool thing that you can’t quite have when you’re dealing with centralized procedures because you need an account, you need two of a minimum deposit, KYC, and all these other things.
As long as you’re dealing with a system that’s not on chain and trustless, you’re going to have those problems. I think it’s kind of a cool application, sort of like an app on top of these other D5 projects that are getting real traction and real usage. Yeah, really love Maker I like Compound Finance and stuff.
Bryant Eisenbach: I would also like to parrot your point about Tuur’s criticism. I think from the investor perspective, what’s the value of the Ethereum ecosystem? I think I’m not necessarily a finance personal or really interested in building projects down that path, but a lot of people are. A lot of people are building those on top of Ethereum. I think that will ultimately give Ethereum value if you want to talk about the value perspective. That’s important because the value ultimately informs the security of the network. The value also allows people to fund these projects and to be collaborative in that way.
As things go down and down and down, that’s less money, less working capital to actually build out things with. It is important that investors see value in the network and think it’s a good investment so that we can take the investment and actually build out our ecosystem with it. That’s one of the things over the past year that I’ve been coming to terms with as a developer.
Peter McCormack: Which do you think is going to happen first, Ethereum’s going to solve its major scaling complications or Elon Musk put a man on Mars?
Bryant Eisenbach: Oh, definitely Ethereum. Elon Musk’s plan is pretty outrageous from an aerospace perspective.
Peter McCormack: I’m just teasing you. I appreciate you both coming on. Obviously, you can tell by the interview I’m not the most technical. I’ve learned some things today. I will definitely keep an eye on it Ethereum. I do have my doubts still. I do worry about this huge engineering effort to build something that I still don’t see much real-world application. I also think there’s a huge risk with investing in Ethereum. I also recognise there is a significant risk in investing Bitcoin as well. It’s not just one or the other. I do appreciate you both coming on. I will keep an eye on Ethereum and the work you both are doing. Yeah, what would be great is to just finish off by telling people how they can stay in touch with you and who you’d like to hear from. You can go first, Scott.
Scott Lewis: You can find me on Twitter at scott_lew_is. I love talking to people there, or you can check out a project I’m working on at settle.finance. I love blocking people. If they’re nasty, GTFO.
Bryant Eisenbach: Yeah, so you can find me on Twitter, fubuloubu. It’s a name I made up in high school. I have no idea what it means anymore so don’t ask. Currently working on GunClear, gunclear.io. You can check that out. Hopefully you find it interesting and share with your friends. We’re really aiming to get that launch in. I think it would be a really good expose of a non-financial use case for Ethereum.
Peter McCormack: Fantastic. Look, thank you both for coming on. Let’s stay in touch, and hopefully, I’ll speak to you again soon.