Ethereum's Eternal Optimist with Karl Floersch | Layer Zero

I was already kind of thinking, oh my gosh, how are we gonna, you know, how are we going to simultaneously create these freedoms, but also, you know, make the world a better place and make give people money.

Welcome to Layer Zero. Layer Zero is a podcast of unscripted conversations with the people that make up the Ethereum community. Crypto is built by code, but is composed by people, and each individual member of the crypto community has their own story to tell. Cypherpunks understood that the code they write impacts the people that use it, and Layer Zero focuses on the people behind the code, because Ethereum is people all the way down, and it always has been. Today on the show, we're talking to Carl Floch, who is one of my main inspirations for uh overall being in crypto, but even the introduction to layer zero itself. Cypunks understood the code they write impacts the people that use it. Uh, and and Carl is one of these people that is very intimately attached to this part of the crypto world and what he's doing over uh with optimism, the optimism layer two, and retroactive public goods funding goes to the heart of this issue. Um, Carl, I call him the eternal optimist. He just exudes energy, he exudes positivity, and I think he's really just emblematic of the ethos and values that drives this industry. Uh, and that's how he's found his way towards what I call like the core beating heart of Ethereum, the people that are driving towards public goods and building a more sustainable future, and answering the question of what that even means in the first place. Uh, and so we go from uh Carl's just beginnings in the into the crypto industry and how he started working with Vlad Zamphir and Vitalik Buterin on on just consensus protocols. And then we go all the way to how uh retroactive public good funding solves basically humans' biggest problems, which is if you imagine us as a school of fish, how do we direct the school of fish towards a better place? Uh so we use this school of fish metaphor throughout the podcast to illustrate some of these grand meta problems of humanity. Um, when you are an individual in a school of fish, you don't have a lot of power, but we need to make collective decision making as a big school of fish. Uh, and we can't just be swimming around in circles, we actually need to go somewhere. Uh, and so we use this metaphor throughout to talk about just consensus protocols and tinkering with incentives, uh, and we go from there and talk about what does society look like when we can finally put a steering wheel behind this like nebulously defined school of fish and where can we go? So I think you will absolutely enjoy one of my favorite conversations on layer zero so far, right after we get to some of these fantastic sponsors that make this show possible.

What's up Carl? How's it going?

What's up? Pretty good.

Good. How are you? How are you?

Good, good, good, good, man. I'm excited to do this. Uh, people that have been paying attention to to the Bankless podcast for a while will know that you're one of the main influences I have for coming into this space. So being able to do this podcast, specifically a layer zero podcast with you, is is is gonna be I'm really excited for this, my man.

Well, I feel very blessed to have had my, you know, played my part in that this story. And oh my gosh, see what has happened to this ecosystem now that you're in it and all of these other people. Like it has been a wild journey. Right. Oh yeah.

Yeah, so I mean I came in during class of 2017 because I had people leadership like you and like uh other people on the optimism team and Vitalik, obviously, all of his content, were paying attention to you guys, where it's like I don't know there's a lot going on in this world of crypto in the era of 2017, but what what they're paying attention to, I think is the right thing to pay attention to. And that was kind of like the last moment I stopped paying attention to I started prioritizing theorem as an ecosystem. But I don't like, did you have that same? Did you like who's your Carl Floch? Like, who who is that for you?

My Carl flourishes 100% Vitalik.

Okay.

I just happened to want to, you know, do peer-to-peer technology because I was like, okay, Google is investing all of this uh uh you know in

effort into centralized technology. So there must be a market opportunity for decentralized technology. And so I just like was looking up peer-to-peer stuff and I found the DevCon Zero YouTube videos. And I saw Vitalik and I saw Vlad, and they were talking about like consensus protocols and like not just doing file sharing with peer to peer, but literally rebuilding a peer to peer internet from the ground up. And I was like, okay, this is it. I'm leaving my job. Let's go.

Okay, so it was also YouTube content that that got you into this space?

Oh hundred percent. A hundred percent. I had no I don't think I had any like real world human connections into crypto. It was fe one hundred percent the internet and then meetups and that's where I met all these people.

And so I'm sure you must have heard of Bitcoin by at that point in time, but were you compelled by it?

No, I really I mean, okay, I uh had heard of Bitcoin.

Uh huh.

Um, I was somewhat interested, but it really sounded like some like libertarian, you know, heebie juoby kind of weird thing. And I was just like, oh,

like that that doesn't speak to my revolutionary side in the same way. It's like just money, right? I want I want something that is like reform, you know, that is like change in like a more fundamental level. And I don't I wasn't compelled by the like,

Okay.

you know, add money to the internet and everything is worked out narrative.

Right. Okay. So you knew that Bitcoin as a technology existed, you understood it to some degree, but then uh you were uh at Google. Uh and and what was the impetus to uh not not at Google?

Not at Google. I was at in college considering where I was going to work and considering all of these things. And I'm like, oh, everything I can apply to is just like going to centralize the world even further. Right. Like it's

I I just had that entrepreneurial spark, right? I wanted to set out into new lands.

Okay, so uh that's crazy that you went straight from college in into this. Uh did you think in terms of decentralization and centralization? Because that's a lot of people's like awakening moment when they came into crypto. They're like, oh, I didn't even understand this concept of centralization versus decentralization. And all of a sudden there's this new fascination with this word decentralization. Did you already think in those terms before you found crypto?

I did because I was learning about the net neutrality stuff and the you know fight for the the internet. And like I I really was inspired by torrents and peer-to-peer file sharing. And I was like, oh, there's something here. Like I want to create an internet. I I'm also into music, right? So I had a very personal connection to this because I witnessed as I was in college and before as I was just growing up the kind of shift of artistry from pre-internet era to you know post-internet or in the internet era. And that shift was like, how do artists make money? And I'm thinking intuitively, as a consumer of music, I want to have access to everything. Right. But then at the same time, as a producer of music, I want to pay and get paid for the music that I'm creating and be a part of an economy that values me. Um, and so that kind of spark was like, okay, so there's something about this peer-to-peer tech that is like really freedom preserving. But then at the same time, we're not quite there yet because we're not paying the artists properly. And so it was like this I was already kind of thinking, oh my gosh, how are we gonna, you know, how are we going to simultaneously create these freedoms, but also, you know, make the world a better place and make give people money.

Okay, so yeah, you saw all these components floating around in the in the then state of the internet. You saw like distributed systems uh and that piqued your interest, but then you were also were interested in value creation as a creative person, and you saw like there's something here, like what happens when we smash these two together? How do how do we even smash these two together in the first place? Uh and so you're probably asking questions like that, and that's where you started typing these questions into YouTube, and that's where you found the DevCon Zero videos.

Yep, that's exactly right.

And then what did you do next?

So I um I was in college. I was about to graduate. I had a networking kind of open source job. I was gonna work in like web two, but it was open source because I was obsessed with open source as well. Um and I was working on this like peer-to-peer CDN, but then I saw these DevCon 2 or DEF CON Zero, excuse me, DevCon Zero videos, and I was just like, okay, this is a different design paradigm. So I just started binging content. Oh my gosh. And then I I just so happened to live in New York City, and so

I heard Consensus was in Brooklyn. So I cold emailed one of the people at Consensus and was like, hey, I would love to talk about Ethereum with you and grab coffee. And they were so kind as to allow me to do that. I then immediately went to a meetup that night where I met all of these Ethereum people that I had seen on the internet and I'm like, wow, starstruck. Because everyone on the, you know, everyone that I had seen or heard is there in person. I was like amazed that this had happened so quickly. And then I was just like, okay, let's go. Oh, I have this so embarrassing story. I started working out of the consensus office while working my job remotely. And there was a photo shoot from the New York Times that came into the consensus office. It photographed me, and I ended up in the New York Times article, a new kid on the blockchain. And my boss saw me like, what are you doing in this consensus article? Like, I mean, about blockchain. I had talked to them, but I hadn't talked about quitting my job. Anyway, one month into that job, I had I had quit. It was a great job. Uh, very blessed to be working in open source, but I did not look back.

That is the uh the foot in the door into web three story I've ever heard. So your boss finds out you're gonna be leaving by a New York Times article. Oh my god. Well and so okay, you got your first job at consensus?

Yes, I did. And I was working on Ujo, which is like an OG, NFT, you know, music payment application.

Audio before it's time, right?

Mm-hmm.

Certainly, certainly. Okay, cool. Well how

Talk a little bit more about just like you you mentioned how fast it all happened, as in like you and that you like speed ran that where you're like, okay, uh smash my interests together, open source uh consensus. I'm in New York, and then I'm gonna meet all these people that I just was watching on the YouTube and like, I don't know, it seems like a very compressed amount of time. One thing I've said about the crypto industry is once you get into the industry, climbing your way up to the top, there's not that many rungs up to the top of the crypto industry, but you like speed ran that thing. Just like to elaborate a little bit more on that part of the story.

So, I mean, I lived and breathed crypto and I just was grabbing any opportunity that I could to kind of meet the coolest people and learn the coolest things. And it wasn't because I wanted to like progress my career or anything. I just wanted to contribute in a major way to what was a tiny industry, right? And I really wanted to, you know, have an impact. So I started, you know, my website, Carl.tech, and I just like, you know, talk Carl.tech to everybody, which you can go, Carl.tech. Um, but nonetheless, it was this really interesting experience where I would go to these conferences and I would just talk to the people that I respected the most, not because of who they knew or how fancy they sounded, but because they had some cool and crazy ideas. And I had my own ideas that were, you know, uh kind of bubbling around, but I wanted to learn from the masters. And so I kind of talked to Vlad Zamphir and I just was like, hey, I'll do work for you. I, you know, Vlad Zamphir is this OG consensus protocol kind of core Ethereum researcher. And I was willing to learn his consensus protocol work and just do work for him. Like whatever he said, whatever he needed, I was happy to do. And I just, you know, wrote some Python with him. And then that.

Gave me this kind of door or this like foot in the door to you know going up to Vitalik and being like, hey, Vitalik, uh, you're at a crypto conference. I've seen you all the time, but I've been working for Vlad on his consensus work. Like, can I help you with your consensus work as well? Because we're these are early days trying to work on Casper, trying to build out the core consensus protocols of Ethereum. And there were almost no people who had the skills to do that. And I didn't have the skills, but I just binged content like 24 7 web 2 decentralized uh or uh distributed system stuff, and then just like asking for help. And

It ended up being, you know, it turned out that Vitalik didn't really have enough support at the time to get all of the ideas that he wanted, you know, implemented, implemented. And so I just ended up working for him. Thankfully, you know, Consensus is a really free organization. And they allowed me to help Vitalik and help Vlad on their uh, you know, consensus protocol research because it helps Ethereum, right? That's an magical thing about Ethereum, right? Consensus is a company within the Ethereum ecosystem, which meant that I could, as I could contribute to the Ethereum, the broader Ethereum ecosystem, and that would be directly incentive compatible with consensus. Like that is a magical thing that crypto enabled. And so I just took advantage of that wherever I could.

Yeah, uh and I I think per I'm gonna go ahead and guess that people like Vlad and and Vitalik, maybe they weren't as skeptical as they are nowadays now that the crypto industry is like a trillion dollars in market cap and there's a bunch of other incentives out there. But uh Carl, something out of you is just like you exude not trying to like, you know.

uh join the top ranks of like crypto celebrities or trying to like fill your new project or something. But like when you talk to Vitalik and be like, oh, I would like to do work and help, like it's easy to trust Carl because of it's very easy to uh see that you are doing it for the right reasons. Uh and and this is I think it's something that I think a lot of listeners should take away from is that if you come in with the intent to help, with the intent to build and not to leverage clout or to leverage you know other or other incentives, then people just like adopt you in their social circles and then you just become a part of those social circles and that's how you join the community. Is that kind of how it felt for you?

Yeah, that a hundred percent. Like you have to leave your ego at the door. Like I was a student and I, you know, continue to try to cultivate that mindset because that is the way. I mean, what is the point of doing things if we can't learn? I mean, I love I personally love learning, and I was just so interested in this subject matter, and I wanted to help in whatever way I could. And I was, I was honestly really lucky that I was in the right place at the right time to help. But if you make yourself available, you know, constantly over and over again, then hopefully right, you roll the dice. And wow, now you're in a position where you're actually able to make a contribution to join these circles and to help the people that you most look up to. Like Vitalik is a hero of mine and continues to be now that you know I'm I'm friends with him and I, you know, it's I just I feel really blessed to be in this community and have made the friends that I that I have.

Uh

So you you came out of college and like just jumped headfirst into this thing and and so you understood computer science, you knew you knew the like the basics and uh maybe maybe more than the basics, but at some point in time, like you when you run into the world of crypto, like it's just a frontier of unknown knowledge. And so, like, how long do you would you say it took for you to just start working on some of these problems of crypto consensus problems before you were like perhaps the expert on them? As in, like, you knew more than basically almost everyone except for a few key members of of this whole industry. Like, how how long did it go from like, you know, college graduate to crypto economic expert?

It took a few years, I will say. But I mean, realistically nowadays, it's probably even longer. The the syllabus is jam-packed at this point. Um, however, what happened for me was I spent about a year fully immersed, like 100%, all everything I thought about. I was daydreaming about crypto protocols and like incentive protocols. This was a dream come true, legitimately a dream come true. And with that, I kind of did speed run, as you say, through this knowledge and this information. Um, and it actually kind of brought me to my my the kind of next chapter, well, uh of of my story, right? I I well, I had two chapters really. First, I started working on on Casper and literally coding the consensus protocols. So that was a huge uh uh kind of shift from theory to actual practice, right? I like wrote the first, you know, the alpha Casper test net. Casper is now the you know Ethereum uh ETH2 uh proof of stake protocol. So created this test net and like learned a lot about what a consensus protocol is writing the actual code for a consensus protocol. And let me tell you, I struggled through that code. I was, it was, that was really out on a limb right there for me. Um but I made it through, made it through, and I I will, I dare say I made some contributions. You know, it was actually a useful piece of software, um, which I'm very, very, very grateful for. So that kind of got me, you know, this real world uh experience. I'm still, I will say one thing when you're jumping into a new field like this, cultivate your naive optimism. I will say that right now, because there are a lot, there were a lot of fundamental computer science things, like you know, lessons that I was just reinventing left and right. And so was Vitalik, and so were a lot of these early crypto people. Like there, these consensus protocols and these, you know, designs have been around for a long time from sharding, like scaling distributed systems. There's a lot of prior art, but you can kind of reinvent a lot of the prior art or figure it out on your own if you if you think about it. It's not you know inaccessible. And so having that, you know.

going out there and actually doing in the thing was a kind of bridge or a gateway for me to to really learn the theory in a in a very deep way.

And at what point in time did you start to really de think meaningfully about like the good because the cool thing about web three and crypto is that when we build out these systems, values get embedded in them, right? And you know, you I you could probably think about these things in the web two context, right? Like w when we tinker with fakes Facebook's algorithm, uh the atoms of the world change. And so when we think about the algorithm, then we also are need to also be thinking about in what ways does it change the atoms of the world. Like I uh w when did this become like a part of your your fascination?

Oh, that was definitely early on. That's like twenty fifteen, twenty sixteen era. Um my

I think one of the best ways to put it, Mike Golden actually gave me this great uh quote. Um, crypto allowed us to program money. Programming money means we can program incentives, and programming incentives means we can program people. And that was simultaneously the scariest thought and the most exciting thought. Because my God, if you can, with your hands write a computer program that programs the way that people behave on a massive scale, that is the biggest single impact that I think anyone can hope to have, right? We are the most intelligent beings. Like we talk about artificial intelligence all the time, you know, and we're super excited by GPT-3, holy cow, right? But you go on the internet before GPT 3 exists, and you can see a heck of a lot of, you know, Dolly 2 generated things, but generated by human beings, because we are that intelligence. And so I I like just the idea of having access to this incredible resource, and that is like human ingenuity and creativity.

That is where we can make this huge, huge impact. So I was just enamored by that concept, and that the focus of crypto was programming incentives and programming social structures, as opposed to programming apps and the human interacting with the app is a kind of an afterthought. And you know, I think that in some sense, video game design is close to crypto in that it's all about thinking about how the person is like interacting with the game, right? It's already, you know, that game design is probably not a uh a mistake. Um, and so I was very into video games. And so I just love this concept that we can program mass action.

That's a really interesting uh framing where like Facebook's algorithm, Twitter's algorithm, these are products where the incentive is the byproduct of them. Like, oh, actually, we accidentally cause a civil war rather than like accidentally going and causing it, right? Like that's what Facebook accidentally did. Uh but then when in the world of web three, like we we know, we're going straight for the heart of it. We are actually trying to reprogram crypto. And like that's actually that vibe is is baked into a lot of crypto memes. Like the whole uh Bitcoin fixes this meme where like you know, there's a problem out there, and then the Bitcoiners say Bitcoin fixes this. What they're really saying is that like the incentive structure around hard money fixes this problem, right? And so like they they understand that they're going straight for the incentives as well. But like, yeah, you you said it was one of the most like intimidating and and scary like realizations. Like

W when we're going straight for the heart of those like yes, this line of code is meant to manipulate humans, hopefully for the better, like

how with great power comes great responsibility. Like does this how how does this hang on you? Is this is this like hard to tussle with?

Absolutely. I really do think that this moment in time might be, I mean, if it's not, okay, that's great. But it's a solid chance that this is an inflection point where human beings have a lot of authority and autonomy and power and control of our destiny as a kind of a group. And so programming us and kind of building the incentive structures, if we build those incentive structures without the right, you know, mindfulness, we could actually end up undermining our own authority and our own power to then influence the next incentive structure that is that is created, right? Like this is an iterated game. We're creating the incentive structures for the next couple years, which will then create the next set of incentive structures and the next set of incentive structures. And so if the trend is as it is right now, which is decreasing autonomy and decreasing power for the individual, which I do think there's a solid argument for at this very moment.

If that trend continues, that is a very scary future that we live in. Because I, the thing that makes me confident that my like life will improve as a human being on this planet, the thing that makes me really confident about that is that all of the other human beings are in the same boat, right? Like I'm talking to you. You want a better life for humanity. I want a better life for humanity. Like we all want that. So if we start creating systems that actually put take us out of the picture,

that is so scary and so possible.

Is this is this a similar subject matter to like um like there's this realm of like AI safety thought out there where like oops we accidentally we made this generalized AI because that's a really cool thing to make, uh but then it then it gets out and then it all of a sudden like takes over the world and we can't uh there's no Command Z button on that. Like the uh I'm fearful of like a similar thing with crypto protocols where like, oh, we've we've created these crypto protocols, they've self propagated, they self perpetuated, uh we've we threw away the keys so we can't change anything. Uh and now they have the outcome of these incentives of these crypto protocols because we didn't build them right, uh, makes us do all these bad things that we don't know about. But like there's no command Z on that either, right? This is the same sort of dilemma.

Yeah, exactly. And I do think that the part of the interesting thing about this whole like AI safety issue is that it's really easy to anthropomorphize AI because you're like, there's a machine and it has a will and it's doing things, it's acting in the world, right? But it's harder to anthropomorphize collective action and like us as a species where we are headed and social systems and governance, but it is still similarly uh, you know, anthropomorphizable, right? We could have created the artificial general intelligence, like the thing that is important. That might already exist and we are kind of playing out its will in our economy as we speak, right? That is totally a thing that, you know, I do think uh is a perspective that we don't really think about. And and what you're talking about, how we have a kind of AI safety problem, it's almost like an uh human economy safety or human directionality safety problem, where we're like, we need the economy, our economies that we live in, and the thing, the social structures that we live in, we need those to promote human values and promote our intentions. And right now, we don't think very thoughtfully about where our collective systems are going. And it's pretty scary.

Yeah, what one model I have for how DAOs work and or these distributed organizations where there are no like boundaries, it's like a school of fish or like a murmur murmur of starlings where like yeah, each each individual fish in a school of fish just places itself next to a fish, points itself in the same way, uh uh swims about in the same direction at about the same speeds. And and then those relationships between all the fish create the school of the fish. But your individual choices do impact your neighbors, and that can like murmurate throughout the whole entire thing. But what is not possible by a single fish is like directing the whole entire school, right? And so like everyone in the school of fish can like see some sort of shadow, and then we're all like, all right, move left. Uh and then all of a sudden that like this that response to that can actually like uh uh accidentally like drive us over a cliff because we don't the individuals have control over their own part of the grow, like the grand system, but what are the incentives of the whole system, right? Like what are like the if we can uh conceptualize this thing as a whole, how do we make sure that that doesn't steer itself in the wrong direction just by the micro decisions of the individuals, right? Like how how do we do that? And like a lot of like this fascination in the Dow space of