🎙84 - Defining the Metaverse

welcome to bank list 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 i'm ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david this is the part of the show where i usually introduce our guests but our guests are going to be ourselves on this show so how are you doing today man oh good i am in colorado uh so a weird show in a weird place but it's gonna be a really fun topic today you know uh you say it's a weird show

but we used to do a lot of these types of shows in the early days of bankless um so for context guys we're going to dig deep on a theme that theme is the metaverse david wrote this fantastic article i think it's the best article i've ever read on the metaverse it's called the metaverse emerges and we're going to discuss that in depth but we see this in the old days a whole lot david where would just be like before we had guests before anyone wanted to come on the bankless podcast and say hello it was just you and i digging through a topic together something we'd given a lot of thought to

and i know you've given a lot of thought to the metaverse so this is almost like a throwback to our roots in the episodes we used to do where we would deep dive on a given thesis like the protocol sync thesis came out of this um digital nation ethereum as a digital nation ethan's money came out of this even the bankless meme came out of some of these early conversations so i feel like this is a throwback to our old days yeah absolutely like we say uh behind behind the the scenes of bankless that bankless is a thesis driven media company and

when we stumble upon a thesis that i think we think is valid and deserves to be like shared and propagated uh it's time to make a show about that so uh it's been a while since we've come up with a new a new thesis around just listed i listed a bunch of them off um but every now and then uh i think we have some good ideas and so we are going to explore this thesis and see how it can predict how the metaverse emerges hence the title of the episode or the yeah the episode actually i think this is like so um this is also another lens through which you

can see crypto right the the lens of of seeing uh it through like a metaverse essentially um i tweeted this out recently it's like just super simple right so one if you believe everything is going digital right most people believe that you know two people like to own things right they like to own their own property everything going digital people like to own their own property well number three they're definitely going to want to own their own digital property right so like two plus two is four

that's the entire thesis of crypto right right humanity is going digital people like to own things people are going to want to own digital things that's crypto in a nutshell and if you believe that's true then like crypto's got to have a bright future and i think that the metaverse sort of fits into that because what we're doing in crypto is so like i guess the metaverse is hard to define maybe we'll get into some definition of it but what we're doing in crypto is we're layering kind of this object permanence on top of it this digital property right system raoul paul when we had him on the

episode last time david he defined the the metaverse as digital fluidity and i really like that concept too but what are we going to be diving into today what's the the high level here yeah exactly extrapolating on what you said once we have digital objects and objects that exist only on the internet then it's up to the internet and the things that we do on it to build a world around those objects because we're not going to build a physical world around those objects we already have a physical world with physical objects now that now

we have digital objects but what we are missing is a digital world but i think this whole digital world of which people have started to call the metaverse begins with a base of digital objects uh and so the the fundamental thesis about this whole idea is that the metaverse emerges out of a shared registry a shared state of truth a single source of truth of all known objects in the digital universe which or the metaverse so that's that's like kind of the skeleton for the whole entire thesis and

then um the the other concept is that like the metaverse is rendered at the periphery but the objects are stored locally right it's stored centrally and we've seen historical anecdotes for this historical references uh and that's also kind of why i think this thesis has a decent uh amount of like foundation to stand on is that we can look back into history and see a similar pattern emerge with regards to and this is where we were talking about with the emergence of like the whole bankless nation digital leviathans crypto bitcoin ethereum these

are digital nations in the clouds but they are just extensions out of like these same social scaffoldings that we've seen come before them hence the nation state and what does the nation state do really really well it provides like numbers and serial numbers and like business tax ids it like it also likes to serialize and account for things that are inside of its domain inside of its borders and once the nation-state knows what's inside of it and it serializes all valuable objects inside of it then it

actually starts to build a civilization around that and that is kind of how the nation state has in you know there's many different ways to describe how the nation state emerged but that is one in my mind uh how nation states were born is like they discovered that they have valuable things inside of them and they started to account for those things uh and build a world around that all right so if that sounds interesting guys that's exactly what we're going to be talking about today how the metaverse emerges how crypto is playing a key pivotal role in the emergence of the metaverse david

i feel like uh since the beginning when we started bankless it's really been a quest of us trying to figure out what crypto is trying to figure out what bitcoin is trying to figure out what ether the asset is and what ethereum is and we've used many different analogies and many different mental models and this is yet another but i think it's going to aid the listener in sort of understanding this space and also understanding a where to spend their time because that's a valuable resource but we b where to invest their money as well right so like

um i recall kind of early definitions of of ether even 2017 some people weren't saying it's money but um they're saying well maybe it's money in a limited use case for icos like ethan's ico money then defy came about and it was eth is d5 money then nfts made a big splash and it's nft money and we talked about eath's supply scarcity in the future with eip 1559 ethan's ultrasound money and now maybe ethan's turning into

metaverse money that is kind of a tantalizing conclusion that i hope we get to at the end but david let's um let's zoom back out to the 20 000 foot view here and talk about some of these bankless concepts that we've talked about before you kind of hinted at them um a little bit but i think for people who aren't familiar with some of our previous episodes some of the stuff maybe bears some recap but you talked about crypto economic systems as a nation state and we put out a bankless podcast called the bankless nation all

about this um can you talk about that mental model for things why do we refer to things like the bankless nation why do we talk about ethereum being sort of the successor uh to the nation state what's uh what's the concept there right so um bitcoin ethereum crypto economic systems they take a lot of responsibilities that nation states have and they take them and say hey we can do this better not all of them uh you know if your house is on fire or if you are have a robber in

your house you are calling your nation state services right ethereum's not going to save you but many many other things uh largely uh to do with property rights management is something that we can actually outsource to ethereum to a a digital ledger that exists on the internet and especially for our digital goods uh and so certain roles and responsibilities we can actually take away from the physical nation state and add it to the digital nation state which is you know a ledger in the cloud which is a theory and the best thing about you know these

digital protocols bitcoin ethereum crypto is that they don't have borders right they are on the internet uh and so we have seen this trend over time of society going in from to larger and larger and larger social scaffolding structures nick sabo calls this social scalability started with hunter-gatherers move towards like feudalism we'd start then move towards religion then towards nation states and now we have these crypto economic states um and so we see humans adopting more and more scalable social structures that have less and

less restrictions less and less censorship resistance more and more credible neutrality and operate at larger and larger scales and so the whole concept of the bankless nation is that well nation states used to make the money but now the crypto economic protocols can make the money nation states used to account and uh uh have a property rights system and now we can give that role and responsibility to the digital nation states um you know uh physical nation states have a court of law and uh metaverse nation states have smart

contracts right and so some some of the almost most significant parts of what a nation state does uh in my mind ethereum does better and the more and more that we can allow ethereum to do that uh the better the the larger of a global civilization we can become that's just it too it's like i i think a big realization for me was after i read the book sapiens i know we've talked about that a number of times on bank list by uh yuval harari and he talked about the the major distinction between sort of

you know animals and humanity is humans have the ability to share stories and coordinate right that's what all of our technology allows us to do is to scale coordination that's human beings superpower we're smarter than animals but like not by a lot right it's really when human beings kind of combine and form groups and create these shared narratives the legal system as a shared narrative an llc a corporation these are shared narratives um money fiat all shared

narratives that allows us to scale essentially are our civilization and our coordination endeavors and that's what blockchain that's what crypto is allowing us to do too it's a new social scalability technology that we've unlocked um maybe we could spend some more time contrasting this with the nation state so there's a book i know you've told me about that i haven't read yet but um i want to read it but maybe maybe uh if i don't get to there's a lot of books on my list give us the tl dr of this book so it's

called seeing like the state and what's what's this book about what's what's it saying what were the takeaways for you after reading this thing yeah the book is about trying to illustrate a perspective of what it is like to see like a state as in take the perspective of a nation state if the and this also alludes to uh one of the articles i wrote called um the digital leviathans or straight up leviathan by thomas hobbs thomas hobbs illustrates the nation state as a composed body a single body like a like a gargantuan titan like walking the

earth like that is a the concept of the leviathan and the leviathan it's made up of all the people of a nation-state and that gives power and control to like the executive branch which is like the head of the leviathan and so what is the the book seeing like a state is like okay what if you were actually the eyes of this leviathan like what if you were were the brain uh and he talks by the way before you go on before you go on david what's so interesting i think people don't think um a lot about this but the nation state is totally a human invention right right so like when did

thomas hobbes live is this like 1700s yeah i think he wrote this in 1781 i hope that's right and this was kind of like the um at the the conclusion of sort of feudalism and aristocratic type powers and the beginning of the nation-state era right 1700s then 16 1651 i was a little bit uh yeah really early okay 1651 right so like he was an early uh i guess philosopher yeah philosopher on the nation state but

before that like nation states didn't really exist at least not in their their present form right uh and so he was using this metaphor the leviathan metaphor to talk about what the citizens the body kind of giving uh giving up some of their individual sovereignty in exchange for some basic services from the nation state like military industry for coordination property rights these basic services that the nation state could give it but there's a sacrifice involved too right we have to as individuals we have to

give up some of our self-sovereignty to this levias to this leviathan so uh it can like kind of conquer our enemies and help solve some some major problems for us right right yeah and it also has its own aligned incentives with itself which isn't necessarily aligned with the people that compose the nation state there's a friction there like you have to give up some of your rights and the the leviathan has its own desires right and so that has what i called in the article nation-state desires and the nation state desires are to extract as

much value out of the land that it holds as possible and so this is where it's like some of the things that we all abide by on our daily lives have come from and as a res and nation states if they want to extract the value out of their domain their dominion they need to understand what's actually in it so they can actually figure out how to extract it uh and that's where some of the like these registries uh and accounting systems that nation states have come up with uh have been bestowed upon us as individuals uh

if you live in the united states you have a social security number uh you have a telephone number you the the government knows where your physical address is if you have a business you have a business tax id number so you know to where like where your taxes are are going to come from uh and these numbers are like the more modern versions of these these things but they started even earlier according to the book where like uh nation state like land assessors would go out and evaluate the land of land owners and say like hey this land is really fertile and it can

grow this much crops um six by six rows of uh aspen trees for lumber uh and that this land will net this amount of yield on a yearly basis therefore we can tax this land this much uh and it's kind of uh uh if you extrapolate that out you see like you know nation states form maybe on like a little settlement on some land somewhere and it grows and grows and grows and it grows into nature and it homogenizes nature it orders nature nature is chaos and nation states are order and nation states need

everything ordered perfectly so they can account for everything and that's why we want to give all the trees all the livestock all the animals a serial number and enter it into its centralized industry right exactly it's ledger if you will and the more effectively you can do that the more it can tax the land and the more contacts the land the more can fund the military the more can fund the military the more powerful the nation state is and if it's the most powerful nation state then you get to order the whole world right like this is an empire like a quest to be like a an empire right like maximum growth

that's what you mean by seeing through the eyes of the leviathan that's that's what the leviathan sees if you're watching the body of the nation state what's the kind of grow colonize things it wants to you know register things so that it can tax those things right so that it can continue to grow right yeah and that's where i put in my article this uh clip out of the uh the the matrix uh movie where neo is like pulling the stem out of the back of his head as he's birthed out of the matrix and then he looks around and he sees fields and fields and fields of humans

as they are just being like sucked dry of their energy from like these robotic overlords like that is like th that art that piece of art is illustrating the same point all of these humans have serial numbers i'm sure right yeah like column number like 13 like row 34 like unit seven like oh there's wait doesn't doesn't neo and it's been a while since i've seen the matrix but i got a like review because the new matrix movie is coming out i definitely want to see that but like doesn't neo have some sort of bar code on his arm as well like in his

real body i think he does i think i think that's right yep mm-hmm right okay so i don't think that was on purpose by the uh by the actual uh director of the matrix but like it's a one way like artists know what's up okay so that's what the book is saying if you're seeing like a state you're trying to serialize everything enter it into your registry tax everything so you can grow is that sort of the theme of the book what were the takeaways of that book is it like is this a good thing is this a bad thing or is it just a thing that nation states do it's just a thing that

nation states do my biggest takeaway was that like nation states and nature cannot live harmoniously right like nation states need to impose order upon nature and nature is inherently chaotic right and this is why indigenous cultures of the world have have witnessed oppression from whatever nation state like they encounter nation states don't like indigenous people because they're nomadic they don't like use the local fiat currency the value they produce is like undefined and nebulous uh and so like especially inside the united states the united the

united states of america have confined its native americas into smaller and smaller and smaller plots of land because like we can't figure out how to account for them uh and so uh we just like give them their reservations uh and then we just order everything around them uh and this has caused a lot of strife in the world the desires of the nation's day are fundamentally misaligned with the desires of the human um and the one of the core theses of the metaverse emerges is that ethereum as a digital rights management system a

nation state in the clouds fundamentally improves upon that misalignment between protocol and individual and allows the individual to live more harmoniously with nature because it doesn't impose nation state desires because it's a protocol we have algorithmically removed the misaligned incentives out of a nation state by putting everything into code and saying hey you can't be evil anymore well let's get into that in a second because i think you've uh maybe unlocked uh an interesting um

like uh interesting quest there but like i want to ask the question do you think that is is is there some level of this this is sort of a faustian bargain that humanity has made right like we are seeking greater order to improve our technology to to grow further therefore we have to create order out of nature and there are some detrimental effects in in like doing that i mean we could have stayed as a species back in sort of agrarian societies or even

prior to that like hunter-gatherer societies would we be any happier i don't know that's a very difficult question to answer it's an existential question but like that definitely has not been the trajectory we have moved in the trajectory of more society more civilization more order out of nature and on the back of that have developed some you know prettiest astounding things some wonderful technology also invented some terrible technologies but um quality of life wise right um you

know ask yourself would you rather live today having this conversation talking about the metaverse with all of the benefits of technology or in a hunter-gatherer society i mean for me like i would not last uh i would not last a week in an ancient society i think but yeah what are your thoughts there is this just not a trade-off that that we've had to make as a speech as a species in order to achieve these advances in these unlocks yeah absolutely united united states people humans have been making trade-offs

as technology is a trade-off right like we moved from hunter-gatherers to like the agricultural world uh and we moved from being like upright athletic like you know hunters to bending over back-breaking like farmers and now we all have back problems like our backs aren't meant to like bend over and pick stuff up uh and that's and and also like grain is is as a fundamental like part of the human diet not actually the best thing that's aligned with us yet it gave us the calories that we needed to make civilization to do things like learn how

to like have hospitals and like like you know mend broken bones and cure cancer and like make vaccines so there's always trade-offs but also technology new technologies can impose better trade-offs than old technologies uh and so while we do are capable of making trade-offs that like do kind of suck we over time can iterate on improved technologies that allow us to make better and better trade-offs hey guys that was all about seeing like a state and now we are going to get into the seeing like a protocol side of this

conversation which is of course the beginnings of what a metaverse is before we get there we have to take a moment to talk about some of these fantastic sponsors that make the show possible living a bankless life requires taking control of your own private keys not your keys not your crypto that's why so many in the bankless nation already have their ledger hardware wallets which makes proper private key management a breeze but the ledger ecosystem is more than just a secure hardware wallet ledger is the combination of the ledger hardware wallet and the ledger live app

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through the eyes of the leviathan and what that looks like and you're starting to get into it but um what does a what does it look like to be organized by a protocol how does the protocol see things isn't the protocol sort of trying to do the same thing at some level we've talked previously david about um the analogy of ethereum being sort of like a black hole and it's just sucking all of this capital into it um ethereum itself wants to organize the world as well it wants to serialize everything right the whole idea in the

early days when we talked about ethereum is everything will be tokenized this is nice yeah tokenize the world this is ethereum as sort of a different digital leviathan if you will uh but it is pulling all of this economic activity into its ranks it is trying to serialize everything give everything a like an ether address a contract id a serial number on ethereum uh it wants to take your bank account and serialize that as well uh what's different between the nation state and a protocol like ethereum right it go back it goes back to what i

said is that like uh it's all these digital items and now because they're digital now we can start to talk about having sort of nation state in the clouds but also it's a lack of desire for growth right where the nation state the physical nation say is a top-down empire the the ethereum nation state or the ethereum neo-nation whatever you want to call these things um is actually an opt-in nation as in we grow it rather than it's growing itself right so we

choose to make ethereum larger by taking our capital and putting it into ethereum we choose to make ethereum larger by figuring out how to tokenize maybe real-world assets or just like create new on-chain assets right so because ethereum is inherently an opt-in system like you are not born with your ethereum address you are not born with like your favorite nfts but when you are born in the nation state you are given your social security number you are all already right no choice what your citizenship was what your social security number is you have

no choice uh about kind of the geographic limitations of your physical presence that's just assigned to you at birth right and so like while ethereum is on the same trajectory in the sense that it wants to like envelop the world it's because we choose it to do that we only will allow it to envelop us of what we want to be enveloped by because that is our choice because we are the people that are actually shaping ethereum rather than like the physical nation say actually shaping us and so it's it's it's where the cart and the horse are in related to

each other and uh in my mind uh when we uh have these protocols working for us rather than dictating to us how we work um we are more aligned with the world around us what's nice you know that portrait of the leviathan um uh i think it was in your article but it actually has like a weapon in its hand is it like a saber or something a sword yeah i can't remember a sword okay so it's got a sword in its hand um that really symbolizes a primary weapon that the nation state uses which is violence the character right right like this he's

the stick uh eric voorhees has been on you know talks about all the times like um you know the ability to throw people in cages the ability to kill an individual the ability to take violence on an individual that is a right that we've only given to the state it's illegal for a citizen to do any of these things to imprison another citizen for example but the state has this ability has this um license over violence the nice thing about something like ethereum these digital nation states is no violence they don't even have the power to instantiate violence

the worst they can do is like slash you for like uh breaking a protocol uh rule right and those which you opted into by the way you opted into and they're fairly enforced it's completely 100 transparent you know exactly what you're getting into and it's um the collection of of capital so it's not actual physical violence so the protocol leviathan the digital nation leviathan has kind of a different he has no sword in his hand um he has what he has maybe his code and

algorithms he has tokens he has incentives right right and so yeah exactly take out your sword it's all carrots no sticks exactly take out take out the stick replace it with a carrot uh when i made the i made this image for the bankless dao and i photoshopped out the sword and i replaced it with a bankless token and daos are there only like mini leviathans and they have the the one power that daos have is the ability to mint their own token and that's the one thing that they get to do and they get to use that token as incentives right and so like it's incentives only and that's why like

there's in my mind going to be a lot less oppression under a metaverse world that uses opt-in incentives versus nation states which you know control and coerce you okay so we've gotten to the state where we've i think established what a digital nation is and how a protocol sees things in a different way still wants to coordinate still wants to serialize it doesn't use violence to do that only uses incentives only uses carrots no sticks um so far we haven't really talked about the concept of of the metaverse right

and um the metaverse is something that's very hard to define right a lot of people might define it as kind of like the entire you know human digital experience like the internet is part of the metaverse but in your article you talk about objects object permanence being a key attribute that's that's required to manifest the um the metaverse maybe a ledger of object permanence can you talk about what what you mean by that and how crypto fits into that

so we created digital scarcity with crypto that's what that's what bitcoin created um and it that's not actually enough to create the metaverse because btc and eth and and fungible currencies are the fungibility doesn't allow for unique objects to form because these because they're fungible like if you have two two dollars well or two single dollar bills we actually have two dollars right that's the one thing that you have um and so like the fungible nature of currencies can't allow for digital

objects and when we talk about the metaverse we're talking about a version of a universe that behaves like our physical world and so we need non-fungible assets and there's no like no surprise that like this whole metaverse phenomenon is coming out on the heels of like the two nft manias that we've seen over the last year or so nfts or non whatever non-functional tokens can represent digital objects that can actually interact with each other and that's really really important in the same way that like i have these

two objects here i've got a coffee mug and my phone and in the physical world they collide right if they were fungible the atoms and these objects would just like mesh they would just come and form like a blob they would just come together but since they're separate each one is like you know unique each item i have is non-fungible now that we have non-fungible objects in quote-unquote the metaverse on the ethereum ledger we can have objects that collide and so like i have a handful of erc 721 items in my wallet they're in the same