On Governance (The Nick Szabo Video)

hi everyone this is charles hoskinson broadcasting pre-recorded from warmth sunny colorado today's video has a very special audience it is made for the legendary nick zubo it's been in our space since before our space existed we knew of nick from his work on smart contracts i have an article right here smart contracts building blocks for digital markets copyright 1996. gives you a sense of how how long he's been doing these things he's the og of ogs recently there was some twitter confusion about the nature of cardano's governance system and how it relates and are we centralized are we not centralized and there's a lot to the story and if it was a normal twitter person i'd just be but it's nick and i know nick i've talked to him many times throughout the years and i think that it'd be good to discuss some of the things we're thinking about i don't care if nick agrees or disagrees but he has earned the right to have a dialogue and for us to make videos explain who we are what we're thinking about what problems we're trying to solve above the social media phrase actually get into details so this one's going to be a long one hold on to your butts it's going to be a fun one though i'm going to enjoy it and hopefully nick you enjoy it too let me know what you think we write a lot of papers we do a lot of cool stuff you did a lot of cool stuff still do a lot of cool stuff web code dry code okay so let's talk a little bit about the transaction when we think about blockchains blockchains are these vehicles that live out in the cloud and they're either permissioned or permissionless and they're either public or private i but on the permission list public side which is what bitcoin is really there are three things that you tend to deal with you tend to deal with identity you tend to deal with value and you tend to deal with governance implicit or explicit so value is where we started in bitcoin land we created this notion of a bitcoin and you can just teleport it anywhere in the world as a push transaction and the identities were addresses inside the systems and so people would send something from one address to another in a very simple system one to one one to many many to one or many to many okay it supported all four of those transaction patterns but you only move one type of value and there's only one type of identity and there's no explicit governance system okay now when you build an application that deals with these types of things that application has this concept of trust now the social contract of bitcoin is bitcoin is the honey badger it does not care it does not change to accommodate the whims and wills of an individual so the better job you do at being resilient in the face of an adversary for your application space the higher the trust goes so you have this notion of an adversary and then you have this notion of resilience oops okay so the more resilience stronger the adversary trust goes up now the fundamental unit of operation of change the unit of change in these types of systems is the transaction and the transaction really deals with five things four direct one meta so first transactions deal with the movement of value so core to our space when we're in the blockchain industry whether you're public private permission permissionless you really think a lot about value representation in our industry we have things like commodities and that's what bitcoin has been termed as a digital commodity you have securities so for example security tokens you'll see stos these types of things you have non-fungible tokens you have utility tokens you have many different representations of value you can represent intellectual property you can do complex things you can do an nft that also has a security component so you can have a pokemon card and have fractional ownership of that pokemon card so you issue a pokemon token and then for your pikachu you have 100 shares and each of them represents fractional ownership of it so you can layer these things together but in general there's the representation of value and then the ways you can move that value okay so bitcoin is a push only system alice sends to bob you also have poll payments for example like credit card subscriptions where bob polls funds from alice you subscribe to a magazine or you subscribe to an app or something like that the call map and every month it takes something out then you also have contingent okay so contingent movement of value is where you say something like if then you have some predicates and then if they are true then you execute so you have your predicates do stuff and these can be complex interactive puzzles for example let's say you want to donate some money to a foundation you say okay i'll only donate if you sign this particular donation deed so this is an interactive two-party transaction where you send a deed over they must sign it if they sign it then the transaction will settle okay so contingent supplement so you have push you have pull you have contingent and then you have different representations of value so that's the first property of a transaction the unit of change in the blockchain system the second is identity and identity is all about who is involved so as i said before you can do one to one one to many many to one or many to many these are four types that bitcoin supports but identity is basically it could be something a did a decentralized identifier it can be an address it can be hard-coded entities you see this a lot in permission blockchains where they have a quorum of pre-selected actors and only those people can run the system and then they can be public all the way to private and that's a spectrum bitcoin is a pseudonymous system so it's not quite private it's not quite public you are representing an identity with a code and that code is the address but there are ways to link it if it's completely unlinkable using modern techniques that it's truly a private system but as your name it's public system if it's directly linked you've actually docked yourself okay then you also have metadata okay so the metadata is the story of the transaction the way i like describing this is you can have the very same identity the same type of transaction the same value but different metadata have radically different interpretations of the nature and the legality of that transaction so for example imagine bob and i'll give you two scenarios for bob so scenario one is bob withdraws three hundred dollars of a stable coin which is translated to cash by the atm in front of an italian restaurant at noon you'd say oh he's getting some cash to pay his to take his friends out for lunch now let's say bob withdraws three hundred dollars at two a.