41 - Crypto Civilization | Balaji Srinivasan

welcome to bankless where we explore the frontier of internet money and internet finance this is how to get started how to get better and how to front run the opportunity this is ryan sean adams i'm here with david hoffman and we're here to help you become more thankless david we just had balaji srinivasan on what a fantastic episode i was going to ask you what we covered but i almost feel like asking like what didn't we cover we talk a lot on the bankless podcast

about bitcoin and ethereum being neo nations right different new types of organizational structures and i i thought that i think that's a really compelling thesis and it's something that we've been sharing readily on the bankless program bellagi takes this a big step forward and ryan you you called balaji the guy that thinks a decade ahead of everyone else and so bellagio's taking that that metaphor that like you know these things are kind of digital nations and he's he's pondering the idea of what happens if we make a real nation what happens if we make a real country a

country that starts in the cloud and then actually manifests itself somewhere in the world with a sourcing of capital to purchase property and then actually construct a real country that's not a joke balaji is actually having this thought about how to make a real country and so since we talk about this on the bankless podcast all the time it was just a perfect fit to get him on the show to talk about how do we go from a metaphorical country in the clouds to a real country on land so that's that's what we covered in this a very ambitious podcast i expect this podcast to sound

unrealistic to you maybe maybe even a little bit crazy but that's what happens when you have a conversation with with basically like somebody who feels like a time traveler david it's like i mean if you heard bellagi when he first got into crypto and bitcoin right like um at the at the very inception of things bitcoin is a completely bonkers crazy idea right or even uh defy and ethereum completely crazy bonkers ideas the fact

that a uniswap can deliver 4 billion in trading volume and it's a tiny protocol written by you know one individual on a 100k grant that is unrealistic and crazy so there's sort of a a pattern to these kinds of ideas in crypto and a lot of times blodgey has has proven to be right so if this episode sounds crazy to you that is to be expected but it might be crazy and right

right that's exactly right like imagine you can go even further back and say like okay it's 2010. you just read the bitcoin white paper and for some reason you're compelled by it and so you go to your friend and be like oh my god there's gonna be this new money on the internet imagine how crazy you would sound in 2010 well now it's 2020 and kind of all bets are off on things and so i'm kind of hoping that the world can appreciate the the effort to maybe create a brand the idea of creating a brand new nation from scratch uh maybe that's not maybe maybe because it's a

new era maybe it's not so such a hair brained idea it's cool too because we start with present times we we talk about the legacy of covid and this distrust in institutions that has fomented and then we get into those broader topics of the crypto civilization or as blagi calls it the network state so this is definitely an episode that you do not want to miss all right we're going to get right into the episode with bellagi but first we're going to talk about some of these fantastic sponsors that make this show possible

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excited to have our next guest this is bellagios foreign no one blends the academic plus the startup world plus the venture world quite like bellagi this is going to be exciting conversation with him he's got multiple engineering degrees multiple exits he was early into bitcoin he sold a company to coinbase as well i think belashi lives a decade or two in the future his superpower at least it seems to me is to be able to see things before the rest of us and we're going to

ask just what he sees on the horizon today bellagi welcome the bankless nation thanks so much for being here great to be here all right man so two things just hit all-time highs bitcoin market cap and coveted infections in the u.s how do you feel about that well uh so you know covet i haven't i've been been talking about it too much recently simply because it's just become so so so dumb in the west in many ways

um you know basically well i'll i'll say a few things about covet first is an interesting thing to do is to google covet worldwide deaths and what you'll see is an interesting graph where which i don't think actually has been circulated that much it shows this total exponential rise going into may of covid and then it actually does kind of flatten out at roughly 6 000 to 8 000 deaths per day

for like the last six months and with a lot of oscillation that appears to be due in part to you know testing mainly on saturdays and sundays or rather not testing on saturdays and sundays and you know the thing is that from like the early perspective of covid it wasn't obvious that this was the way people would flatten the curve uh namely that the exponential would flatten out at 6 000 deaths per day as opposed to 60 000 deaths per day right that's that's not like an obvious place

that it lands up you know um and it's actually kind of remarkably flat given that this is like an average or a summation over the whole world it's it's like a bunch of different curves that are happening at the same time you know some some countries are going up when our countries are going down it's sort of yoyoing back and forth um that's kind of one aspect number two is you know look i'm you know as uh hopeful for the vaccines you know as anybody the pfizer and moderna you know vaccines that have been announced but these are

you know sample size of like 100 people um we'll we will see what happens when you scale that to a billion there's just always stuff whether it's manufacturing issues or or you know compliance issues or what have you compliance i don't think in the sense of fda getting you know they know enough to not try to block this for dumb reasons probably but um but compliance in the alternative sense of people actually taking it due to you know anti-vaxx or anti-pharma sentiment and you know people might think oh the

vaccine was rushed or i believe in vaccines in general but not this vaccine whatever so will you actually get compliance will enough people take it will it have issues at scale that are not seen in you know the relatively smaller trials i don't know i mean the the optimistic take is that it will be um it'll be fine and covert will be a memory by this time next year the pessimistic take which i think is you know where i'd probably put more probability away not a hundred percent but is that kobe's going to be with us for several years maybe maybe the better

part of the decade nobody nobody you know was expected 10 years of iraq right and nobody expects 10 years of covet um and and yet i think that's something that is a possibility especially in those place in the world that can't afford a vaccine or you know won't have great compliance with the vaccine or will resist it for other reasons whatever right um so you know it's interesting because covet i shouldn't say has been stamped out in asia but it's just been taken more seriously in asia and they just

seem to have a functioning public health system that has gotten the thing under control but not so in the west so it's it's not the lesson that anybody wants here everybody wants to point fingers at this or that political faction in the west but it feels like there's some systemic you know systematic thing that the west is doing incorrectly that asia is doing right um and that's just sort of hard to copy it's like oh do a social network or a search engine and there's a thousand details that facebook and google get right and so copying the way that asia does it may just not be easily

possible um and he said you know what is a legacy that coveted will leave behind you know this is not original to me this is one of my one of my friends who made this comment but i think it's very much true um you know cope 2020 is the year the internet began um by which by which i mean um there's this concept i have of the primary and the mirror for example in the mid-90s um you know the new york times put its first website up and it had you know it's just like a curiosity the new york

times on the web you know we put we put some articles up here just to look at this new technology the world wide web right and it was just a few articles you know and and the primary was still the physical paper and the mirror was you know the the website and then over time sort of like wiley coyote you ever seen wiley coyote from lincoln's of course yeah yeah you know how wildly code sort of shifts his weight gradually from one leg to the other like like this right right so gradually shifting weight uh you know

imperceptibly you know and by degrees over time the new york times.com website became the primary and the paper became the mirror it basically became a printout an imperfect rendition of what was on the web which was the complete version um and there were certain things of course like links to tweets or data science or interactive graphs and so on that were really digital first products um where you know the the paper

was um was not just just not gonna reflect that right at best it could include a url to go and look at it online right and uh even still i you you can still think of the ny times as well as the other you know newspaper side says transitional things because you know like they still buy um they still buy paper right they still have like a like a lumber operation and an ink operation you know um you know there's you can you can sort of invert the normal

dictum which is never listen to somebody who's still buying by the barrel you know or never argue with someone who still does right um so so lasting impact that covett has though as i think all these legacy institutions will start to get examined and you'll ask how do you do the digital first version okay so just as an example i i talked about the ny times the primary in the mirror um everything is turning to having the digital version being primary and the physical version being the mirror or secondary or the printout or

the expensive version for example um you know people used to talk about the digital divide right now the three billion people have phones um and you know probably everybody in the world is going to have a smartphone eventually um it's on on pace to get there very poor people have have you know smartphones that were only the province of the extremely wealthy you know like like a relative you know within our lifetime right um so so everybody has a phone and digital stuff is cheap and so that actually means is we're flipping it

around so that the actual divide is the physical divide that is to say you can make an assembly of a thousand people online very inexpensively but the physical version is is is is no longer cheap the physical version is the premium okay so it's flipped and so that means is every event is digital first every document is digital first that already happened prior to covet but you know increasingly so every court hearing every uh everything for

education everything for health care the hygiene argument has has sort of shifted at every meeting is digital first um so everything has been shifted to be digital first and um it's the physical that's a premium even for really important meetings quote-unquote get-togethers gatherings like weddings right um you know people are doing skype weddings you know and and right now that seems like you know kind of a a sucky sort of thing but i think that once you start thinking

okay what could i do with a virtual reality wedding well actually it could be extremely fancy you know it could it could be extremely fancy and it could be better it could be better in some ways certainly you know like video games whatever you can have very interesting visuals you know you have perfect control over every pixel every guest can attend they can stay the whole time you know it's it's something where um you know look i'm i'm not arguing that people won't still want physical weddings but the digital wedding will be one tenth or one one hundredth as expensive

and pretty good and the physical wedding will be like extremely deluxe it'll be like the difference between saying oh my god they had a they had a wedding in in you know that that that destination wearing that really fancy location wow that must have been expensive it'll be like that the physical version will be expensive um hence the physical divide that's what you mean by the the the start of the internet being 2020 it's basically like and that's very weird for for us to think about because most people think oh yeah the internet that's sort of old technology i mean that's been around for most of my life but

you're saying that um previously it was not part of the fabric of our lives in the way it's about to be over the next over the coming decades correct that's right so you know you can call it the internet flipping it's like the the internet was uh just learning to be what it could mature into up to the point we are getting to to now and that that's cut the legacy of covet covet is pulling that into the now it's pulling the future into now at an accelerated rate that's right and i think you know social

distancing caused more social networking so balaji ryan started off this uh asking about like well the coveted infections in btc is that both are at an all-time high and the the reason why we wanted to start this podcast off is to talk about the juxtaposition because there's not not just only that is is extremely juxtaposed but it seems to be the fabric of society is moving into the extremes right we are we are the the distrust in institutions and the the banding together of different ideologies

is is really a very has created a very polarizing world and and we wanted to get you on the podcast to talk about like how you are seeing this distress in institutions be filled like there's a void that is left by these institutions how is society coming to terms with this void that is being left what is what is scarce today is trust but what's abundant is computation and so the rapprochement that we're going to have is we're going to substitute computation for trust everywhere that we can so what does that

mean well so you know an obvious version of that is um like bitcoin right in the sense that or ethereum blockchains in general um where you have somebody who is you know democrat or republican they're sunni or shiite they are you know chinese or japanese they're turkish or greek um they're you know protestant or catholic they're on one or the other side of some historical divide right but they despite all the things they don't

agree on they do agree on the state of the bitcoin blockchain on the state of the ethereum blockchain and not just they agree on the state of it they they agree on the state of it not just like in a oh yeah you know that it's true that the sky is blue today okay they agree on the state of something that is extremely materially and financially important which is the kind of thing that people tend to have political arguments over you know the scarcity is what causes conflict so we have an example of something where computation has sort of forced uh you know that's

where global consensus is now feasible uh in this environment where everybody is kind of you know advocating for their own thing and they've got these politically constructed truths into the gap is coming crypto and over time that's actually where facts are all all facts are on chain if it's not on chain it's not true um that's very deep point i can i can drill into there's a lot i can say about that i i wanted to dig into that for a second but just uh to to ask clarify what one point that you made so you said computation is

getting cheap i think people understand that of course that are listening right like moore's law these sorts of things we've observed this over our lifetimes but you also said uh trust is becoming more scarce why like what what has fundamentally happened in the past like 30 years let's call it to shake our trust in the institutions that we as a society formerly trusted i'm probably a little bit older than you you know i was i was a teenager in the 90s and i remember you know before like the

internet became very mainstream you know probably some of your listeners are in their 20s and may not have that much of a memory of that but essentially you know in that time even in the 90s it you really didn't hear from that many people you heard from your parents you heard from your teachers you heard from you know the people who were on tv or you know you picked up the newspaper but the number of different people that you heard from was was fairly limited and it was actually a big deal to

you know be on tv it was a big deal to have a broadcast license that was like a a regulated thing um and so the um the thing about it was there just weren't that many voices online um or not voice online there weren't any voices contending for your attention because there were relatively few of them they had come into some sort of consensus on their own now you know really you can push it all the way back 1950 i think was peak centralization and as you move forward and backward in time

things get more quote unquote decentralized or polarized okay so so in many ways it's sort of a mirror moment you know we're more similar to the 1800s than we are to the 1950s in many ways but you know so for example you have like the advent of cable news the advent of cnn and you know like the repeal of the fairness doctrine all those kinds of things allowed for more opinions to be on you know on the air and then things of course started to accelerate but the internet and especially i'd say blogs in the early 2000s suddenly you started to hear from way more voices

way way way more voice than you know microblog and social media and you know initially with facebook and twitter those sort of started in you know like facebook started at harvard you know twitter started in sf and they started among social networks that pretty much agreed with each other you know facebook for example was basically taking colleges and then high schools and putting them online and so there were implicit moires because you could only friend somebody who is at your same institution and and so on and so forth i think a critical moment was you know

september 26 2006 when facebook networked the networks okay and um that was a moment where growth really took off it was a huge experiment it was very not obvious that it was going to work um that people would friend each other outside of these institutions because people were sort of cautious about doing that oh you know with a little stranger impact me online that was like there's a natural caution or sort of suspicion of strangers in the 90s and and the early 2000s it was weird to do online dating there's going to be

weirdos online etcetera right and then then there's a period of about ten you know five to ten years of like the open internet yay and everyone's just online and they're like hey this social media thing is great let's everybody connect with each other about so like from 2006 to roughly 2015 and then of course what happened is by the early 2010s a lot of people you know actually this happened even pretty quickly with twitter um you know in the middle east voices had been even more constrained than they were in the us so you know the impact of

facebook twitter was like boom gasoline you know on on a flame like all these people could speak where they never could speak before and once you have multiple voices that's actually what causes distrust and the reason is if there's only one voice in its broadcast then no one can argue with the voice right but if there's end voices and they're all arguing with each other um you know like people start to be you know they look left they look right they look up they look down they're trying to figure out who to make sense of maybe they make sense of nobody maybe they side with one person

more voices more people with the microphone more distrust so i think that was a fundamental thing that caused it the other thing that caused it was once you network the networks all of these rays and assumptions i mean you know before some you know steel worker in in pennsylvania rural pennsylvania and some you know like i don't know a graphic designer in la could blissfully ignore each other's thoughts for their entire lives they would never

know what each other thought about various things um you know the the the press would never think of it as you know in the 80s or 90s would never think of it as an important thing to go and you know maybe once a while they might do a lifestyle story but they're not going to like take a live feed of this guy's thoughts and pipe it into the other guy's thoughts it just wouldn't happen there's there's scarce you know time on television you had a 30 minute you know news segment or whatever right um but now those people can find out what each other thinks and

they can't stand it they can't stand each other um and the implicit sort of boundaries that have been set up before were just totally collapsed and uh it's as if you know you took these three billion people and you just teleported them into a battlefield you know which is the internet you took down all borders and all boundaries no one has a home they're just boom just transplanted to the plains of you know megiddo where you know armageddon is arising right and that's kind of what happened in the 2010s this is so i i find this so

counter-intuitive because basically what you're what you're saying is this uh open communication protocol that we call the internet that we think is so great actually destroyed societal consensus but like i think the the way you're talking about it makes sense blaji but like is is that a good thing because it wasn't it wasn't that these people um didn't have the opinions that they had necessarily it's just that they couldn't express them is this moved to decentralization from the 1950s forward a good thing or a bad thing or is it just

neutral is it just a thing that happens and we're just on a you know in the in the trend well so i actually so i i do think much of it is good i think you know my macro is the internet increases variance okay that so that's that's a macro concept that you can apply to many many different sectors for example you go from 30-minute sitcoms to 30-second you know tick-tock videos and uh 30 episode netflix binges okay

you you go from a nine-to-five job for the rest of your life to a failed son who stays in mom's basement or a 20-something year old tech billionaire you go from you know the the nightly news where everybody kind of has this normy mainstream opinion to extremely well researched things where people are reading google books and and and pdfs from from you know like like scientific outlets where you can educate yourself to this incredible level or to

the dumbest of online conspiracy theories you know and and so in every area what you see is the internet increases variance even in areas that you wouldn't normally think of for example if you look at the data on uber and lyft rides okay relative to taxi rides they have both much longer and much shorter rides than taxis do okay because it was more convenient to call in your borough lift sometimes people will take it for a block where they wouldn't normally call a taxi but also

because you you can calculate how much the cost is going to be um you know and people are sometimes used as a car replacement they also tend to take longer rides so it's taken that distribution and just pulled it apart and increased variance right you see this with with book sales you know the um you know with with amazon you know the long tail of books the number of different kinds of books that people are reading the number of different channels so why is why does that happen you know first there's the kind of empirical

observation the internet increases variance why is that happening well the answer is whenever you disintermediate you remove the mediator right and nodes can correct connect directly to each other and that mediator is like an averaging um you know force right it rejects some things it it forces things into like a middle of the road kind of thing you know like like the person who used to decide who got on tv would would de facto enforce a sort of normative

consensus you know the the person who would um you know decide was on the front page of the newspaper uh all of those quote gatekeepers basically were mediating things and what they were doing was they were capping the upside you know because you'd read some like dumb i don't know maureen dowd column or whatever because she's still she's still i think you know writing columns but you'd read some dumb column or whatever in the 90s but it wouldn't be like a completely lunatic you know conspiracy theory on their hand

it also wouldn't be extremely insightful you know it'd just be mediocre and uh and so what what's happened is we've gotten more downside and more upside so everything i just described with everybody sort of meeting you know to to for this armageddon battle online i think is absolutely real but of course at the same time we have open source and we have google and we have you know like incredible amounts of of learning and content and commerce and so on that's

happened thanks to the internet right and you know like just like yourself and myself or most of the people we've met on twitter you met all of these really interesting smart intelligent valuable people that that enrich your life online you know so there's a huge win to it there's also a huge loss and what i think happens is um you know i have this concept that all progress actually happens you know on the z-axis what i mean by that is you know for example you start a company

because you're you're tired of some existing bureaucracy right you leave google you leave well you know you leave ibm okay uh you leave microsoft then you leave google then you leave facebook and each time what's happening is you you leave the bureaucracy you start something often it fails if it doesn't fail you start getting more um employees and uh you know you start building up you know processes and eventually what happens there's a flip from burn rate to bus number do you know those two things burn rate and buster number like burn rate