Transcript
Speaker: Hold on, I'm just going to record because this is all golden.
Speaker: So I have David from Saito.
Speaker: Saito, he doesn't know what it is either, so don't feel bad if you don't know how to say it right.
Speaker: And he loves crushed ice.
Speaker: David, introduce yourself.
Speaker: Yeah, I'm a co-founder of the Saito or the Saito Project.
Speaker: Both pronunciations are actually correct.
Speaker: Yeah, we're a layer one blockchain that solves scaling from a perspective that I think most people don't think about.
Speaker: So yeah, thanks for having me on the show to talk crypto.
Speaker: Yeah, I got kind of red boxed by a big nano supporter who I follow on Twitter.
Speaker: And he just kept on like, Saito this, Saito that.
Speaker: So I was like, what the hell is this thing?
Speaker: Let me dive into it a little bit.
Speaker: So Mia Coppola to everybody, I have a little bit of Saito.
Speaker: maybe like 2% of my portfolio just to test it out.
Speaker: You guys know I do that.
Speaker: You guys all know I own some Hex.
Speaker: I own some Saito.
Speaker: I own pretty much something of if the person's been on the show, I own some of it just to like experiment around with a little bit.
Speaker: Yeah.
Speaker: So he got me interested in it.
Speaker: And you and I had a back and forth on Twitter because I questioned the economics of it, even though I love the idea of trying a different way of paying people.
Speaker: And so I'm just down to like... I don't remember you questioning Sato economics.
Speaker: I remember you kind of trying to defend proof of works economics, which is different.
Speaker: Oh, different person then, because I absolutely hate proof of work.
Speaker: Oh.
Speaker: Absolutely hate it.
Speaker: I'm a nano.
Speaker: I mean, I'm a nano shill.
Speaker: So I don't believe, you know, in anything proof of work.
Speaker: I don't mind the DAGs.
Speaker: I think actually, you know, I think the DAGs are a reasonable way to scale volunteer networks.
Speaker: You know, maybe just at the start, the first point is like, what's the difference between Sato and a DAG?
Speaker: Yeah.
Speaker: Well, when we're not a DAG, we've got universal broadcast of data.
Speaker: It's a huge difference.
Speaker: A lot of people, when they're thinking about blockchain, they don't think about that feature, right?
Speaker: They're like a blockchain is sending tokens around.
Speaker: And, you know, we go way back and it's like a blockchain is a PKI network that pays for itself that you can use to send signed messages around.
Speaker: that stuff kind of has to be built on top of a DAG and there's not really a solid economic basis for doing it.
Speaker: With Sado, it's from the ground up.
Speaker: The network will pay for data distribution and it will get your data to everyone.
Speaker: So a different use- Okay.
Speaker: So explain how.
Speaker: I told David, so to my listeners who have been here before, you know I try to make sure people le-5 it just because there's so much information out there.
Speaker: And a lot of these people are using shorthand a lot.
Speaker: And so I'm going to be interrupting David a lot.
Speaker: So if you're a David fan, if you're here to listen to David and you're like, who's that fucking asshole who keeps interrupting him?
Speaker: That's the reason why.
Speaker: So I try to get it as lame as possible.
Speaker: You keep me on topic.
Speaker: Yeah, yeah, yeah.
Speaker: Dude, and the other thing is there is no topic on this show.
Speaker: It's two people rambling.
Speaker: Dags don't have universal broadcast.
Speaker: Okay, so explain universal broadcast really fast so we're all on the same page.
Speaker: Well, you know, there are a lot of use cases where you want your data, your publishing data, because it's a broadcasting platform.
Speaker: You're not making a token transfer.
Speaker: A token transfer is you dealing with one other person.
Speaker: This is I'm broadcasting information into the network and I want everyone to be able to get it.
Speaker: I could be sending cryptographic SIGs, you know, like let's say I want to do a Diffie-Hellman key exchange.
Speaker: You know what that is?
Speaker: You just said so much stuff I don't know.
Speaker: Okay, we'll roll it back.
Speaker: When you go to your bank,
Speaker: Yeah.
Speaker: Right.
Speaker: Not physically in person.
Speaker: Who does that these days?
Speaker: When you go to your bank in the browser, you basically, and you know, the bar turns yellow at the top or green depending on the browser.
Speaker: And it's like, you're safe now.
Speaker: What you've done is you've done this cryptographic exchange of information with the bank server.
Speaker: And
Speaker: The result of that is that you and the bank server have a secret number that even though you've exchanged information on a public network, nobody else can figure it out.
Speaker: There are attacks on this.
Speaker: There's man in the middle attacks.
Speaker: Like, are you really talking to your bank or are you talking to someone who's pretending to be your bank?
Speaker: You can do this on a blockchain and that attack goes away because what you can do is you can take data.
Speaker: You put it in the transaction and I send it to your address.
Speaker: And because you can be anywhere in the world and there's universal broadcast, you get the data that's sent to your address.
Speaker: So universal broadcast, you can't do it on a DAG.
Speaker: You can't, you know, attaching transactions, attaching data to transactions in a lot of the kind of compact, oh, we're going to scale with this approach, you know, mimble, wimble.
Speaker: you can't really attach data to transactions because it needs kind of a second layer just to do that with a proper blockchain like CYTO.
Speaker: You can put the data.
Speaker: So, so if somebody wanted to do, if somebody wanted to have the green browser or the, you know, the, the, the green, you're safe, connect your, like you're safe connected, how would they do that?
Speaker: Like on something like Ethereum?
Speaker: Well, I mean, it's why you need a scalable blockchain.
Speaker: No, no, but how would they actually do it?
Speaker: Like they'd have to like send, we'd have to send each other tokens back and forth with this information to prove that it was us.
Speaker: I mean, you'd probably, you'd have to design it maybe with a smart contract and people send messages into functions in the smart contract and other people monitor them.
Speaker: You know, it's so much easier in Sato.
Speaker: You just put the, you put the information in the transaction.
Speaker: It's like sending an email to someone.
Speaker: If you go to sato.io forward slash arcade, you'll see there's a chat box on the left and you can click on the plus to add a friend and you can put in a public key, the address of your friend.
Speaker: And when you click add them, what the network will do is the network will send them a message saying, hey, we want to create this secret key.
Speaker: And it will take
Speaker: I don't know, 30 seconds, maybe a minute, and then they'll pop up in your friends list.
Speaker: And what that means is it means your wallet now has a secret key that's been negotiated from them.
Speaker: So like, why does this matter?
Speaker: Well, you know, we're not in this token transfer space.
Speaker: We're in a digital architecture space where now I know when all of my friends are online.
Speaker: I, you know, maybe if they change an IP address, they might ping me, but
Speaker: And you can fall back to the blockchain if you can't find them and you can announce where you are.
Speaker: But we can now bootstrap all of these massive group applications securely and in an encrypted fashion without Facebook, without Apple or Amazon, because I know who my friends are.
Speaker: We've got secret keys that can identify each other.
Speaker: We can communicate mostly off chain.
Speaker: With big data flows, I can send you my posts and my friend requests, whatever.
Speaker: But when we need to, we can fall back on chain.
Speaker: So it's, you know, for us, blockchain is, it's a lot bigger than just sending tokens around.
Speaker: I mean, why do we have tokens?
Speaker: Well, the reason you need tokens is because the network needs to pay for itself.
Speaker: So kind of having a digital form of money is a side effect of having a network that nobody can shut down because it pays for itself.
Speaker: You know, like you need to have the money to have the network.
Speaker: So, yeah, you know, you can say we approach things differently, but we think we approach things really foundationally as opposed to looking at blockchain and saying, aha, what a blockchain is, is it's a token.
Speaker: Because that's not what a blockchain is.
Speaker: I mean, it's not what Satoshi invented.
Speaker: There are tons of tokens and digital caches before Bitcoin came around.
Speaker: Yeah.
Speaker: So I guess this is what I'm having trouble wrapping my head around.
Speaker: And maybe it's because I've been in crypto too long and it's melted my brain.
Speaker: I've been led to believe that I have to send a token to create, that's how information is being sent back and forth, essentially.
Speaker: But then I realized, oh, yeah, I can just sign a smart contract and I don't have to actually pay for that.
Speaker: So how does that work?
Speaker: So in my mind, I always thought that that was kind of like not a safe thing.
Speaker: If I'm signing something and I'm not actually paying for it, then it's not actually happening on the blockchain, I guess.
Speaker: So then... We're not.
Speaker: Acedo has tokens.
Speaker: Yeah.
Speaker: I mean, why do you need the token is I think the question.
Speaker: And the answer is let's go right back to what Satoshi invented.
Speaker: Like maybe that's a useful starting point.
Speaker: It's like, what are we trying to do?
Speaker: And a lot of people say, oh, you know, what Satoshi invented was a consensus mechanism.
Speaker: You'll hear this, especially in proof of stake.
Speaker: A lot of the DAGs are like, oh, you know, we're a new kind of consensus mechanism.
Speaker: And it's like, well, no, actually, that's not what Satoshi invented.
Speaker: there were consensus mechanisms for at least, for almost three decades before Bitcoin.
Speaker: Some people will say it's like, oh, you know, he solved the Byzantine General's problem.
Speaker: And it's like, no, no, no.
Speaker: Leslie Lamport solved that in 1982.
Speaker: So a lot of the people that say this, you know, they actually don't, they don't really understand the history of what they're talking about.
Speaker: We've been able to build distributed consensus systems since the mid 1980s.
Speaker: We have had systems that have been run by companies that are PKI systems since the early 1990s.
Speaker: Like think of, you know, you know, the app store with Apple, right?
Speaker: That's a PKI system.
Speaker: That's when you develop an app, you sign it with your private key and then this is, I'm the developer and I've signed it and you send it to Apple and they confirm who you are and they sign it with their key and then your computer will recognize who signed it and it's on the app store.
Speaker: That's a PKI application.
Speaker: You know, Apple could add tokens anytime they wanted to.
Speaker: The problem is more fundamental with that.
Speaker: The problem is if you read the Satoshi white paper,
Speaker: The problem is he says, look, you know, we've got an issue because our banking system is run by these financial institutions that cannot stop themselves from mediating transactions.
Speaker: And the reason for that, and the reason that Bitcoin was revolutionary is that before Bitcoin, all of the solutions that provided distributed consensus had closure.
Speaker: And what that means is that means there was like a small, you had to have a limited, a set number of actors.
Speaker: Like Leslie Lamport's solution, when anyone says validators and proof of state, that's kind of the thing they're talking about, right?
Speaker: Like we know that seven out of 10 approved, so okay, now it's final.
Speaker: And the problem is you've got a problem of who picks the seven out of 10.
Speaker: And you can pick seven out of 10 and say, hey, we're decentralized, whatever.
Speaker: But that selection mechanism,
Speaker: is not trustless.
Speaker: And Bitcoin came along and proof of work is actually open.
Speaker: It's a consensus mechanism that anyone can join and anyone can leave.
Speaker: And what's wonderful about it is that it's not just technical, it's economic.
Speaker: Because if you leave, it's more profitable for someone else to come in.
Speaker: And that's what the token's doing.
Speaker: the token, Satoshi kind of made this brilliant leap because before people were trying to create these digital forms of money.
Speaker: And well, how do we do it?
Speaker: Well, we have a company run the database.
Speaker: And it's like, well, if the company runs the database, it's not money because you can't trust it.
Speaker: And Satoshi said, well, wait a minute.
Speaker: If the network itself is a kind of money that
Speaker: The network can use its own kind of money to pay for itself.
Speaker: And it's this revolutionary leap forward where we go from we can't have a trustless system and we can't have money to
Speaker: as long as we simultaneously have both, all of a sudden we're levitating in the air.
Speaker: And this is what, this is, you know, a lot of people in crypto, you know, DAGs and proof of stake and all of this stuff, they think trustlessness is about a cryptographic signature.
Speaker: Like I can guarantee you sign this.
Speaker: Like, no, it's not.
Speaker: Trustlessness is,
Speaker: that nobody can stop anyone from entering the network.
Speaker: And we know it's not going to go away because if you leave, someone else will come in and support it.
Speaker: And that's the original Bitcoin vision.
Speaker: You know, it's like, I know this form of money is not going to go away because we don't need Google to pay for it.
Speaker: So Google can't control it.
Speaker: And, you know, if the people that are providing it disappear, someone else has a financial incentive to come in.
Speaker: And that's why it's trustless.
Speaker: It's a non-excludable, self-supporting public data infrastructure.
Speaker: And that's why it can be money because if your money is not trustless, it's not money, but that's not all it is.
Speaker: And so a lot of these technical systems that just say, oh, well, we've invented a more efficient way of having a token transfer.
Speaker: The problem is that they sacrifice the fundamental properties that made Bitcoin special.
Speaker: And in doing so, you know, a lot of people celebrate them.
Speaker: They're like, oh, this is more scalable.
Speaker: Oh, this is more efficient.
Speaker: Well, the question is, are they going to stick around?
Speaker: And, you know, taking a look at DAGs like Nano, for instance, I think Nano is a great example of it's a great example of a volunteer provided network.
Speaker: If you take a volunteer provided network, though, and you put a ton of data on it,
Speaker: The volunteers go away.
Speaker: And so, you know, we're moving in the opposite direction from networks like Nano because we're saying, well, the solution isn't to limit the data so that volunteers will do it.
Speaker: The solution is to pay people for the stuff that they need to do in order to scale.
Speaker: And the challenge is how do we do that securely?
Speaker: And that's kind of the fundamental, fundamental issue that Sato addresses.
Speaker: But how it does it is counterintuitive.
Speaker: Maybe we can check in with you and see how you're doing.
Speaker: My brain just fell out of my head.
Speaker: Sorry.
Speaker: No, that makes a lot of sense.
Speaker: I guess my response to that is, or my question to that is,
Speaker: What aspects of the network am I paying for then?
Speaker: Because I've created my Sado name, Michael at Sado, that I can use in the chat box.
Speaker: So, and I didn't pay anything for that.
Speaker: And so I'm assuming that's like, that's like the chat feature.
Speaker: And then you eventually want to have like the Facebook and the Twitter and all that kind of stuff.
Speaker: So like, when would I actually be paying for stuff?
Speaker: One, we're an open network and the network you're using process is fee-free transactions.
Speaker: Why don't we get to Sato in a bit?
Speaker: And like, I'd ask you that question about Bitcoin.
Speaker: What are you paying for when you pay for the transaction fee?
Speaker: I'm assuming I pay for the miner because they're the ones who get the rewards.
Speaker: Right.
Speaker: The ones who are mining, who are creating the blocks and, and, and, uh, you're, you're not paying for, uh, you're not paying for data storage because miners can prune data.
Speaker: You're not paying for miners to put nodes into the peer to peer network.
Speaker: So you're not paying the computers that are collecting the transactions from you.
Speaker: You know, you need software, you're not paying the developers.
Speaker: That software, like if you, you know, there's the Bitcoin.com wallet, which I quite like.
Speaker: They've got servers that monitor the blockchain and, you know, this is your new balance.
Speaker: Congratulations, you got a payment.
Speaker: You're not paying for that.
Speaker: So really with Bitcoin, you're not really paying for much of anything except mining.
Speaker: And this is one of the scaling problems.
Speaker: And it's a fetishization in the technical space because what's happened as far as we can tell is people have decided because Bitcoin worked before it scaled.
Speaker: And people have decided that this is because it's decentralized.
Speaker: And
Speaker: They're saying, okay, well, if we build decentralized systems, they're going to behave like Bitcoin.
Speaker: And what they don't understand is Bitcoin isn't behaving like Bitcoin because it's decentralized.
Speaker: Bitcoin is decentralized because it's provided by volunteers.
Speaker: And it's the willingness of the volunteers to do everything except mining that is what makes the network open and secure and non-excludable.
Speaker: You know, it's, you know, the example I like to give with how people kind of fetishize decentralization is Halloween, right?
Speaker: It's kind of like we're scaling a blockchain means we want to scale Halloween.
Speaker: And people go, well, you know, the houses are separated in space.
Speaker: That's why we're getting the candy.
Speaker: So why don't we break up the Hershey factory into 32 pieces?
Speaker: It's a fundamental misanalysis of why people are providing the services that they provide.
Speaker: And this is why, like, you know, you can go back to Nano as a volunteer network.
Speaker: If you can keep it small, that's great because volunteers can do that.
Speaker: One of the questions, one of the real questions people need to ask with these networks, though, is are they volunteer because people really are going to keep running it?
Speaker: Or are they really people who are monetizing their ability to kind of
Speaker: shill and promote and market a token because that's not sustainable.
Speaker: Well, so I'll, I'll, I'll defend nano in this point.
Speaker: The, the logic is, um, as bigger players come into their space, come into the space there, it'll, they'll be incentivized, um, to secure the network and run their own node.
Speaker: Like, so if I was, if I was, you know, like, uh,
Speaker: McDonald's and I wanted to accept Nano, it would behoove me to have a node running in the background.
Speaker: I mean, maybe.
Speaker: I wouldn't say I was attacking.
Speaker: And you don't really need more than 10,000 nodes worldwide.
Speaker: One, I wasn't attacking Nano.
Speaker: Oh, no, I know.
Speaker: I was pointing out that once you stretch past volunteer provision,
Speaker: you have an economic problem that decentralization doesn't fix.
Speaker: I mean, there's a lot of arguments about what the private sector will do that's not compatible with what the private sector actually does.
Speaker: You know, in blockchain, people basically will tell you the private sector will do what they need it to do.
Speaker: And that's not often how free markets work.
Speaker: I mean, I can give you a really simple example of this.
Speaker: And again, this is not nano.
Speaker: This is just, you've got to be really careful with what people say McDonald's will do.
Speaker: like why is McDonald's running infrastructure for Nano instead of some MC currency or something like that?
Speaker: Why aren't they forking things?
Speaker: You know, why are they, you know, are they running open infrastructure so anyone can use it or are they only running infrastructure for MC customers?
Speaker: If they're running open infrastructure, I mean, are we now asking McDonald's customers to pay more for a hamburger because McDonald's is running the financial payment system?
Speaker: Like,
Speaker: It's not an issue if you have a network that is really low cost because then it's volunteer provision.
Speaker: It's kind of like what Ethereum has done.
Speaker: If you know in FURI, you can think about Ethereum's solution to the scaling problem is that Joe Lubin is now the volunteer.
Speaker: It's true.
Speaker: I mean, he can do it because if Infura collapses, the price of ETH tanks.
Speaker: Yeah.
Speaker: So it's super easy for him, given the massive amount of money that he's made, to keep paying for it.
Speaker: Like, why not?
Speaker: Yeah, exactly.
Speaker: And it also behooves him to keep the price of Ethereum propped up.
Speaker: Right.
Speaker: And I mean, these people aren't economists.
Speaker: They're like, oh, well, we'll figure it out.
Speaker: We'll figure out a business model.
Speaker: And one of the problems, like we talked about it, is that there literally is no business model that doesn't add closure.
Speaker: And people don't like this answer.
Speaker: And so people say, oh, no, no, no, but X will pay, but insurer will pay.
Speaker: Oh, customers will pay.
Speaker: And it's like, look, you can come up with a thousand possible solutions, but all of them, either you've got a company that is closing access to critical parts of the network and critical data flows,
Speaker: or you are requiring somebody to act irrationally and you're turning someone back into a volunteer.
Speaker: And this is what SEDO does.
Speaker: We're diagnosing the problem on the incentive level.
Speaker: The technical issues are they exist because the economic incentives are broken.
Speaker: But it's very hard, I think, for people to get down there in part because people believe this stuff that's not true.
Speaker: Well, and that's been my biggest problem with the cryptocurrency space is it's filled with irrationality.
Speaker: So I got into college as an engineer just because I really, really enjoyed math and science.
Speaker: I hated it and switched over to the arts.
Speaker: But that part of my brain never left.
Speaker: It's like I got into one of the top engineering schools in the world because I can see that kind of stuff.
Speaker: I just didn't like the community.
Speaker: I wanted a different community.
Speaker: But I've never been able to turn that aspect of my brain off.
Speaker: So I think one of the reasons why I'm not a millionaire right now is because nothing about trading cryptocurrency is rational.
Speaker: I keep looking for the rational plays, the rational investments, and they're the ones who are tanking left and right just because people are- Sato's doing well.
Speaker: No, no.
Speaker: Sato's doing well.
Speaker: But I mean like relatively, I'm talking about over the last five years.
Speaker: I get it.
Speaker: I didn't invest in Doge.
Speaker: Literally, my friend a year ago says, what do you think about Doge?
Speaker: When it was like less than a penny, I was like, dude, it's never going to go over two cents.
Speaker: You've got to realize it's insane and just give somebody a little bit of cash to put into Elon Musk coin or whatever the graph is.
Speaker: Exactly.
Speaker: Yeah, look, I mean, everybody knows the market's irrational.
Speaker: And everybody knows that crypto is, in many cases, a speculative Ponzi game.
Speaker: Like, we're not.
Speaker: Everybody else is but me.
Speaker: Well, no, it's trust me.
Speaker: We can talk about it.
Speaker: We can talk about the tokenomics.
Speaker: You know, it's much more important, I think, for people to understand the fundamentals.
Speaker: But, you know, if we're talking about if we're talking about crypto, one thing is you can look and you can say, hey, crypto is broken, but it's also easy to see why it's doing well.
Speaker: Yeah.
Speaker: Yeah.
Speaker: I mean, you know, U.S. inflation stats, they're crazy.
Speaker: Well, not even that.
Speaker: It's just casinos.
Speaker: People like casinos.
Speaker: They love the flashing lights.
Speaker: They love, and every single exchange preys on that by having all these flashing lights everywhere and people get overloaded.
Speaker: And I mean, I remember reading an article saying that
Speaker: Playing a World of Warcraft is actually physically addictive because the way they do the light simulation or the flashing lights in your eyes a certain way, it peaks all these things in the brain to make it addictive, just like casinos use.
Speaker: And so it's like, it doesn't surprise me why cryptocurrency does so well.
Speaker: But I think for people like you and me,
Speaker: we actually see problems that cryptocurrency could fix.
Speaker: And that's the reason why I'm still here.
Speaker: Long-term things work or they don't.
Speaker: And you've got to be clear about what you're building.
Speaker: One of our biggest challenges actually is there's so much noise in the space that it's hard to get signal.
Speaker: We're doing much better about this because the more people learn about Sado, the more people are like, oh my God, actually, I need to learn how this works.
Speaker: So we're kind of going down the Bitcoin road where
Speaker: you're misunderstood, but the signal builds and that's great.
Speaker: And it's why we're delighted to talk about things.
Speaker: So in a way it's like, well, whatever the crypto market is, it can be.
Speaker: It's not what we're building.
Speaker: It's not what we're focusing on.
Speaker: In the long term, there are economic problems with designs that don't work.
Speaker: And it's the reason you need to fix the problem.
Speaker: Like with Nano, will it be a volunteer supported network?
Speaker: Maybe.
Speaker: Maybe not.
Speaker: We don't know.
Speaker: What I can say is I can tell you, you're not going to be using BTC and you're not going to be using ETH to do a Diffie-Hellman key exchange.
Speaker: And there are major economic vulnerabilities and problems with those networks.
Speaker: And almost everything is leaning on a block reward
Speaker: that it's leveraging to kind of get its economic system moving.
Speaker: And it's kind of like you're saying you've got a perpetual motion machine and it's plugged into the wall and the power is slowly fading out.
Speaker: That's a great analogy.
Speaker: All these DeFi shit points, right?
Speaker: Where people are staking for the financial incentive and the financial incentive will work out and, you know, the developers don't care because they make the money now and, you know, it doesn't matter.
Speaker: If we're focused seriously on doing and getting this trustless network, we need to fix these problems.
Speaker: David, you guys stop talking while I laugh because I can't get that image out of my head because I'm still... No, it's what it is though.
Speaker: That's what Bitcoin is.
Speaker: That's what the block reward is.
Speaker: Think about it.
Speaker: It's true.
Speaker: I mean, that's why I'm laughing so hard.
Speaker: I haven't thought of it that way, but it's absolutely.
Speaker: It's worse than people think.
Speaker: People come to us and they're like, oh, you guys are still in testnet.
Speaker: It's like, well, it depends on how you define testnet.
Speaker: With some features where in mainnet, you can write and deploy applications.
Speaker: Is Bitcoin in testnet because it hasn't figured out its monetary policy yet?
Speaker: Or scaling?
Speaker: Yeah, no, no.
Speaker: I mean, there are reasons they can't scale.
Speaker: I mean, we can talk about it.
Speaker: But thinking about the security, what's the block reward doing?
Speaker: It's pushing up the slope of the supply curve and it's making hashing very, very difficult.
Speaker: But it also means you're buying way more of it than you need.
Speaker: You can't keep that up.
Speaker: People are like, oh, the fees will catch up.
Speaker: It's like, no, your problem isn't replacing.
Speaker: Your problem is keeping that supply curve
Speaker: almost vertical.
Speaker: I mean, it's Sisyphean.
Speaker: You can only push a boulder so far up a hill before you, you know.
Speaker: Well, think of the CPU market, right?
Speaker: The every year, it's not every year, I think it's every decade.
Speaker: It's like the marginal cost of improvements keeps going higher.
Speaker: Yeah.
Speaker: And so the CPUs you buy are, you know,
Speaker: They're better, but they're not as much better as they used to be.
Speaker: And the cost of that marginal improvement is getting higher and higher.
Speaker: Well, with hash power, it's exactly the same.
Speaker: You don't need to keep fees constant.
Speaker: We're not trying to replace the block reward.
Speaker: If you're a proof of work blockchain, you need strong linear growth in fees because otherwise your supply curve is going to go flat and anyone can buy or rent as much of it as they want.
Speaker: And that's the end game for Bitcoin because you've got a 51% attack, which means anybody will be able to rent 51% of the network or collude and 50% of the miners kick off the others and they collect 100% of the block reward.
Speaker: You've literally incentivized attacks on your network.
Speaker: It's a huge problem.
Speaker: Or just shut down 12% of the hash rate in Kazakhstan.
Speaker: Yeah.
Speaker: Or you like, or the, you know, you get the, the bigger miners, they just start doing little tiny things to cheat and bully the smaller ones, you know, like hoarding attacks.
Speaker: Like, well, you know, I'm not going to share the transactions that I've collected, but if you don't share the ones you've collected, you know, me and my buddies here, we're not going to let you make a block on the chain.
Speaker: And all of a sudden, you know, like look at the relative profitability of those notes on the network.
Speaker: It's a red queen.
Speaker: And of course they're going to do that just because that's what rich people do to condense more power.
Speaker: You know, we think so because we think that, you know, we think that all forms of work are fungible with money in the long term, which means $10 of hash, you're going to be able to buy it for $10 or $10 and five cents because it's going to become a commodity and it's going to become a commodity because there's a strong market for that.
Speaker: And it's the same with proof of stake, like proof of stake.
Speaker: I remember I met with some guy in California who worked for a really big VC fund.
Speaker: And this guy, man, he was like, oh, proof of stake is great because no one's ever going to be able to buy 50% of the stake in the network.
Speaker: I looked at him and was like, you don't need to buy it.
Speaker: You rent it because people are renting.
Speaker: That's an economic decision.
Speaker: And if they're willing to accept 2% interest,
Speaker: they're sure as hell going to be willing to accept 2.1% interest.
Speaker: And you've got 4% interest on the table if 50% can conspire.
Speaker: So what's preventing it right now is that we have people who are economically irrational in the way they treat tokens because they're not willing to sell them because it's a speculative activity.
Speaker: Well, and also people say, well, you know, why would I do that when I'm mining Bitcoin?
Speaker: I want to protect the network.
Speaker: It's like because people are irrational when it comes to money.
Speaker: Like with global warming, it's a perfect example is people don't care about the long-term effects of global warming if they're getting short-term profit.
Speaker: They're putting short-term profit ahead of the well-being of their families and the planet itself.
Speaker: I'd go more fundamental.
Speaker: I'd say people say that and the people that say that do not know how free markets work.
Speaker: They are reasoning from an outcome that they desire.
Speaker: The outcome they desire is the network doesn't collapse.
Speaker: And they're saying, well, because that's the desired outcome, it must be in my interest to do that.
Speaker: That's not how a free market works.
Speaker: Like it's literally not how economics works.
Speaker: This is how a lot of people who have libertarian leanings in the crypto space think.
Speaker: Another example of the same form of reasoning is, well, miners will pay for the network or they're not going to get paid.
Speaker: And you say, well, who's going to do this?
Speaker: Who's going to do this?
Speaker: And they'll say, well, someone's going to do it because if someone doesn't do it, they're not going to get paid.
Speaker: So the people making money are going to do it.
Speaker: Yeah.
Speaker: That's the equivalent of saying Walmart will pay for national defense because if it doesn't, no one's shopping at Walmart because the country doesn't exist.
Speaker: The fundamental, and it's so fundamental, the fundamental economic problem is people don't realize economic rational actors
Speaker: They don't care about the collective outcome.
Speaker: They don't care about- This is what drives me crazy is people don't realize this.
Speaker: Right.
Speaker: They care about their own self-interest.
Speaker: And so you've got a problem.
Speaker: And the problem is when what it is in my private interest to do is at odds with what we need people to do.
Speaker: And in a working, functional, free market, it's the same, right?
Speaker: Because the market is paying the most for the thing that's the most scarce.
Speaker: And we're all free to change what we value.
Speaker: And so a real free market, those things are not out of alignment.
Speaker: But in the crypto space, in literally every single network that has fees and pays for the network that is not Sato, that's fundamentally broken.
Speaker: And that's actually, it's one of the two very fundamental things that Sato fixes.
Speaker: And that's why it's very difficult, I think, for a lot of people, because when they first run into Sato, they're like, but what problem are you describing?
Speaker: And the problem we're describing, they can't believe that it exists because they're like, but wait a minute, if that like, if that was true, then the network's broken.
Speaker: And we're like, yeah, the network's broken.
Speaker: And as soon as this battery that's pumping and buying stuff runs out, you're toast.
Speaker: But he did a really intelligent, well, I don't want to say intelligent, but he did a smart thing in the sense of he put the battery running out in 130 years.
Speaker: So everybody live right now is going to be dead by then.
Speaker: I don't think so.
Speaker: You don't think people alive right now are going to be dead in 130 years?
Speaker: Oh, I don't think that.
Speaker: I think Bitcoin's got four to five.
Speaker: Oh, no, I just mean that that's when the block rewards end.
Speaker: So people can hypothetically in their heads say, I don't have to worry about it because it's not going to run out of.
Speaker: The thing is, like it's economics.
Speaker: You can't force people to, you can't force, you can't force the value of Bitcoin up.
Speaker: Oh, no, no, no.
Speaker: I'm not saying, I'm not, I'm not, I'm not saying whether it's going to work or not.
Speaker: I'm saying the block rewards end in 135 years.
Speaker: So theoretically- Do they or do they end at the next helving?
Speaker: The point is when the block reward, there are a bunch of different attacks.
Speaker: If we're treating hash as something that's fungible with money, the point is the point at which you can rent 51% of network hash power for less than 100% of network revenue.
Speaker: That's not going to take 130 years.
Speaker: No, I just mean it's written in the code that there's not going to be any black awards after 135 years.
Speaker: I mean, it's like our weave.
Speaker: Let's create a digital model of how we think the economy is going to work and we can shill this.
Speaker: It's literally not how economics works.
Speaker: It's not how a free market works.
Speaker: But that's how Bitcoiners have convinced themselves.
Speaker: Well, they're technocratic central planners.
Speaker: That's the beautiful thing about it.
Speaker: I mean, literally, they're making the exact same mistake that the Marxists made in like, actually, literally a century ago.
Speaker: where the Marxists are looking at machines and they're saying, look at these efficient things.
Speaker: Deployment of capital is efficient.
Speaker: And they think that the state controlling it and the state determining how it's allocated and is working is as efficient as the free market.
Speaker: And it's not.
Speaker: And the reason it's not is because of prices.
Speaker: And it's exactly the same in Bitcoin.
Speaker: It's exactly the same in proof of work and proof of stake.
Speaker: You have a consensus mechanism that is acting as a state planner.
Speaker: And that consensus mechanism is saying all of the money for staking, none of the money for collecting the money that we're going to give the stakers.
Speaker: Like what could possibly go wrong with this?
Speaker: What possibly is going to be underprovided?
Speaker: But it's this price fixing that is actually responsible for the incentive misalignment.
Speaker: Because why am I like, it's like,
Speaker: It's like I get paid for spending money.
Speaker: Nobody gets paid for making money.
Speaker: What exactly do we think is going to happen in this market?
Speaker: Well, we have to have naive views of how free markets will, like someone's got to do the work because otherwise the network breaks.
Speaker: You know, this is where the naive libertarian stuff comes from.
Speaker: And, you know, it's ironic that they're Marxist because I think one of the problems is they don't realize they're price fixing because they're only paying for one thing.
Speaker: And they don't realize like these people have never read Hayek.
Speaker: Hayek doesn't say the free market is great because we're able to incentivize stuff.
Speaker: Like Soviet technocrats, like Goss Plan, they were able to incentivize stuff and they were able to make people pay fees.
Speaker: What they were doing is they were fixing the relative value that their system paid for different commodities.
Speaker: And they introduced radical inefficiencies as people game the system.
Speaker: And it's the same in blockchain.
Speaker: Like a miner, what's in their interest to do?
Speaker: Hash.
Speaker: And you say, well, they're going to pay for this or else the network doesn't work.
Speaker: And it's like, well, why would they do that?
Speaker: If they do that, like if they start paying for, if they start running these like McDonald endpoints say, well, their competitors are not going to do that because they can use the public good that is now being funded by their competitor.
Speaker: And who's going to win that?
Speaker: Like whose hamburgers are cheaper?
Speaker: Well, the one that's not actually needing to fund the entire banking infrastructure.
Speaker: So
Speaker: You know, that's not a dig at nano.
Speaker: That's it's a dig at proof of work because proof of work has this super expensive work component that is supposed to be centrally provided.
Speaker: And that's the most profitable thing to do.
Speaker: So it's hard for people to see this, though, because as soon as you see the problem, you go, wait a minute, what have people told me about why this isn't a problem?
Speaker: Yeah.
Speaker: And, you know, everyone wants to get rich quick with crypto.
Speaker: And so people are willing to believe the most like ridiculous nonsense in economics if it lets them hold on to the hope that actually someone has thought this through.
Speaker: Yeah.
Speaker: Okay.
Speaker: So we're 40 minutes in and I still don't know the consensus model of Sado.
Speaker: So how about you explain that now?
Speaker: How do we fix this problem?
Speaker: Well, we can't pay for an extractive form of work like mining and staking.
Speaker: What we have to do is we have to pay for a contributive form of work.
Speaker: We need the property where you're actually, you're not getting paid for anything except contributing value.
Speaker: And to a blockchain, it's like, well, what's value?
Speaker: And it's one of the reasons people would say to us like, well, you know, people haven't even thought about this.
Speaker: They're like, what do you mean what's valuable?
Speaker: You know, proof of work people, they're like, mining is valuable.
Speaker: It gives us security.
Speaker: And stakers are like, staking is valuable because I'm doing it and I want a return on interest, you know?
Speaker: And it's like, yeah, I'm glad you think that stuff's valuable.
Speaker: It is.
Speaker: But again, it's not priced appropriately.
Speaker: The way you price things appropriately is what Sato does.
Speaker: We pay for fee collection.
Speaker: So what happens is basically the nodes in the network that service users with data, they get their transactions in exchange.
Speaker: And when they take those transactions and they send them deeper into the network,
Speaker: In the process of doing it, there are these cryptographic operations where people are signing the transactions and we know who collected the transaction and we know who they sent it to when that transaction goes into the block.
Speaker: And the result of this game is that the people get paid a fraction of the fees they collect over the long term.
Speaker: And we use this to kind of create a security system with a cost of attack.
Speaker: But the end property is that if you're an honest node, you're getting transactions from users, you're passing them into the network, and you are getting paid a fraction of that.
Speaker: If you're an attacker, you have to cheat the system by spending your own money.
Speaker: and maybe to kind of pull it together.
Speaker: Give me an explanation, two minutes is kind of rough.
Speaker: No, dude, you can spend an hour.
Speaker: I mean, we can go into detail on anything that's confusing.
Speaker: I'm trying to figure out how to wrap this up.
Speaker: Welcome to my life.
Speaker: Writing a script, writing a 100-page script and then trying to explain it in 400 characters.
Speaker: I sent a query letter today and he's like, explain it in 400 characters.
Speaker: I'm like, bro, there's 180,000 characters.
Speaker: It's like, come on.
Speaker: No, but like that, like, don't worry about like you can take as much time as you want.
Speaker: Like don't feel you need to rush.
Speaker: Let me try this again if you don't mind.
Speaker: When would I pay for something?
Speaker: Okay, you're a user.
Speaker: Yeah.
Speaker: You're making a transaction on the network.
Speaker: So you pick a node and you send them your transaction.
Speaker: And you add a little signature that says, hey, I sent it to Michael.
Speaker: Now,
Speaker: You take that transaction, you put it in your mempool.
Speaker: And to you, what you need to do is you need to be collecting what we call routing work, which is derived from the transaction fee.
Speaker: Because you're the first hop, that transaction gives you a lot of routing work.
Speaker: But you can't make a block.
Speaker: You don't know who else I sent my transaction to.
Speaker: So what you got to do is you got to send that transaction to someone else who maybe can make a block.
Speaker: And you want to do it quickly because if somebody else who has my transaction makes a block and it doesn't have you in the routing path, you don't make anything at all.
Speaker: So you're going to pass that transaction to a guy deeper in the network who's serving you and you sign it to him.
Speaker: He puts it in his mempool and he's like, oh my gosh, I can make a block.
Speaker: So he produces a block.
Speaker: Now, the way this works with Sato is then all of the fees in that block are burned and destroyed.
Speaker: So right away, we've got a system where if you are an honest node, you're making blocks with transactions and fees that users have spent.
Speaker: If you are an attacker, you have to burn your own money to do it.
Speaker: This cost of attack is going to persist and it grows the more expensive and the bigger the network is.
Speaker: So we've got this basic system.
Speaker: You can think of it as secure because we're burning money, but we've got a problem.
Speaker: And the problem is we don't want a system that's burning money.
Speaker: We want a system that can pay for stuff.
Speaker: And there's this fundamental problem that is unsolved in proof of work and proof of stake, which is the bringing money back problem.
Speaker: And this is why these networks, they don't pay for routing.
Speaker: It's why the networks don't pay for random stuff because this random stuff in those networks does not have a security property.
Speaker: And this is where Vitalik's scalability trilemma, which does not exist in Saito, it's where this comes from.
Speaker: Because the idea is you've got a small pool of money.
Speaker: You can either spend it for expensive computers, which is scale, or you can buy a bunch more cheaper computers, decentralization, but you can't spend the money simultaneously, right?
Speaker: You've only got 20 bucks.
Speaker: You can't have a ton of decentralized powerful computers.
Speaker: Vitalik says, well, we also need to pay for security because security is the return on investment provided staking.
Speaker: In proof of work, it's the return on investment provided hashing.
Speaker: Vitalik says, well, we're screwed because we can't spend the same dollar on two things at the same time.
Speaker: And so they go into trade off land, right?
Speaker: Like the developers are Marxist technocratic central planners are gonna be deciding how to optimize these variables as if they have half a clue what configuration of the network is gonna optimize fee inflows.
Speaker: Because optimizing fee inflows is by definition optimizing the value of the network.
Speaker: Security is too low, it's gonna go down.
Speaker: Not enough scale, it's gonna go down, not enough decentralization.
Speaker: They have no idea how to do it.
Speaker: They put their finger in the air.
Speaker: But we got this problem.
Speaker: we're not paying for anyone in the network at this point.
Speaker: And that's the problem that Sato solves.
Speaker: And it solves it through a cryptographically biased lottery that takes advantage of the fact that we've got these records of who collected the money.
Speaker: And what we do is we say, look, if you're making a block and you were on that routing path, you've got a chance of getting some of that cash back.
Speaker: But if you're an attacker,
Speaker: Something really interesting.
Speaker: So you'll get the cash back.
Speaker: So basically we play a lottery and as you're the first routing node, you've got a better chance of getting paid.
Speaker: But if you get paid, you're not gonna get paid all of it.
Speaker: You're gonna get paid a fraction of it over time.
Speaker: We take advantage of the fact that attackers are needing to spend their own money to make work.
Speaker: And the way the lottery works, they're gonna be forced to lose money.
Speaker: The amount of money we can force them to lose scales with the size of the blockchain and the amount of fees that it's processing, but we can force them to always lose money.
Speaker: There are these entire classes of economic attacks that vanish, like the Bitcoin attack where you can rent hash, produce 51% of the blocks and get all of the money.
Speaker: That goes away.
Speaker: The same attacks and proof of stake, 51% of you team up.
Speaker: What are you doing?
Speaker: You're breaking the fundamental property of openness and like one CPU, one vote, where everyone's work is worth the same.
Speaker: You're breaking that because of the 51% attack.
Speaker: In Sato, you can't.
Speaker: And you can reorder the chain.
Speaker: You can produce blocks.
Speaker: But it's quantifiably expensive always.
Speaker: And so if you want security, you need to wait four confirmations, six confirmations, but you know how much it will cost someone to attack you.
Speaker: Does that make more sense?
Speaker: Okay.
Speaker: So don't take this the wrong way.
Speaker: And maybe it's just a way of trying to think about it or explain a different way.
Speaker: But the way you were saying it reminded me of
Speaker: pyramid schemes with selling long distance carrier rates.
Speaker: Remember that when we were younger?
Speaker: Did you ever have that in college?
Speaker: I'm not in the least offended.
Speaker: Tell me why you're saying that and what you did.
Speaker: Because it was the thing of like, hey, you work for me, so I'm going to pass this to you and I'm going to get a cut and then you're going to get a cut and then he's going to, and it's just like, it kind of felt that way a little bit.
Speaker: You can't afford to have everyone in the routing network always get a payment because you can't afford, that means every transaction that people process, everybody gets a payment.
Speaker: It's like, no, there's too much data.
Speaker: You're playing a mining game.
Speaker: where this time you get a payment, this time he gets a payment.
Speaker: But on average, the amount of money that you'll get is proportional to this thing of routing work.
Speaker: What's happening is we're using the cryptographic objective proof of who has routed transactions to pull money away from block producers.
Speaker: So it's not a long distance Ponzi scheme.
Speaker: What we're doing is we're saying everyone can agree on who should be paid
Speaker: And the block producer can't get the money because this is the attack vector you've got that is really, really hard to solve in proof of work and proof of stake designs.
Speaker: And there are, I don't like any of the solutions to it in those categories, to be honest.
Speaker: But the idea is if you are the block producer and you're deciding that you're gonna give like 20 bucks in a subsidy to someone on the network, why isn't the block producer just cheating and like generating blocks until they can randomly choose the right one?
Speaker: you know, if you say we're going to pay for bandwidth, I mean, how do you know who's done bandwidth?
Speaker: Why isn't the block producer just saying, hey, man, I fake they fake all of the bandwidth in their basement.
Speaker: And they say, look, I spent all of this money on bandwidth.
Speaker: You can't objectively prove it so it doesn't have the properties of mining and staking.
Speaker: You need a property that in a distributed network that's open, everybody can agree on the value of the work that someone's done.
Speaker: Because otherwise, you've just invented proof of work because whatever fake system you create that's supposed to measure value is going to be gamed by people setting up three computers in their basement.
Speaker: Now, in Sato, you can't game it because the form of work is linked to the fee.
Speaker: So the only way you can create fake work in Sado is by spending money.
Speaker: And this is how we get a cost of attack for the attackers.
Speaker: We say if you're not on the routing SIG or you're deeper in the network, these transactions are less useful for producing blocks.
Speaker: And if you do produce a block, they're not going to pay you as much either.
Speaker: So the attackers, it's a security property that's not in any other blockchain.
Speaker: It is more expensive for nodes that are deeper in the routing network to produce blocks and get paid.
Speaker: And attackers, by definition, are deeper in the routing network.
Speaker: Because if they're making a block that's collecting money that is profit to them, they have to get that money from someone else.
Speaker: We're on a deeper level than anyone in the proof of work and proof of stake.
Speaker: And it's focusing on solving these economic problems.
Speaker: It's like, how do you prevent, we call them fee recycling attacks.
Speaker: How do you prevent the attacker from making a block, getting the money back from that block, using their profits to make another block?
Speaker: They're going to spin the thing in circles.
Speaker: Yeah.
Speaker: Like as soon as you fix that and proof of work and proof of sake had this problem.
Speaker: As soon as you've ghost blocks, right?
Speaker: Essentially.
Speaker: That's what a, that's what a hash rental attack is.
Speaker: And you know, you said before you said, well, you know, no one's going to do that.
Speaker: Maybe is a, you know, people say this, I'm not saying you say that, but people say like, Oh yeah, no, no.
Speaker: Cause they're going to hurt the network.
Speaker: It's like,
Speaker: How do you even know that they're not doing it today?
Speaker: Yeah, they don't care about the network.
Speaker: They care about making money.
Speaker: I know a bunch of miners and at the end of the day, an extra half a percent to 1% profit is a ton of cash for them.
Speaker: These people are doing a lot of stuff that is not public and you can talk to them about it if you get a beer.
Speaker: But we're not talking about a fraction of a percent.
Speaker: We're talking about like, look, you know,
Speaker: If you've got a cartel or coalition that's got 30% of the network, there are things you can do.
Speaker: Like you can play games with not sharing transactions.
Speaker: You can hoard transactions.
Speaker: It's a huge problem for scaling too because a lot of the scalable approach is like X thin.
Speaker: It's like they assume, they just assume that every node in the network has the transactions in their mempool because that's how Bitcoin works on a volunteer network.
Speaker: But all of a sudden, you've got this for-profit model where people are cheating because they can, you know, well, if I don't give this transaction to everyone, like it's more profit for me.
Speaker: And okay, their blocks are a bit slower, but the math works out that they're way more profitable despite that.
Speaker: We're kind of getting off topic with this, but- It happens.
Speaker: If you can see the fee recycling attack with Bitcoin, you can kind of see that the problem that we're solving, like how do we solve it?
Speaker: Well, we solve it by taking the payment and removing it from the block.
Speaker: Like, why do you do that?
Speaker: Well, you have to do that because you can't have the block producer have control over who gets paid.
Speaker: So Sato says, look, you want to make a block, you're going to lock up the money.
Speaker: And if you don't have money from honest users, you got to lock up your own money.
Speaker: And then when it's locked up, that's when we play the hashing game.
Speaker: Because you don't control the hashing game, you can't game the hashing game.
Speaker: And the way the lottery works actually is, you know how we said that payments are biased towards the honest nodes on the outside of the network?
Speaker: Yeah.
Speaker: What that means is that means there's a statistical probability that the attacker in the best case scenario is going to get paid.
Speaker: And that statistical probability works out to 50%, which means they've had to lock up all this money, including their own money,
Speaker: And they've got a 50% chance of getting it back, which means that they have to, in order to get their money back all the time, in other words, in order to break even, they need to have double the hash power of the honest network.
Speaker: So 50% is no longer good enough.
Speaker: There are vulnerabilities, right?
Speaker: Like, if you have 100% of hash power, well, you can break even.
Speaker: And if fee throughput on a Sado network is very low, people can play cash games very easily.
Speaker: But we're kind of the opposite of Bitcoin because like we've got the economic basis for scale.
Speaker: The challenge for us is very different.
Speaker: The challenge for us is how do we actually get fee volume up?
Speaker: And that's what you're seeing on the arcade.
Speaker: And that's why you're seeing we're rolling out apps that don't really care about fees right now.
Speaker: Because having the token transfers, that doesn't matter.
Speaker: What we need is we need a million to 2 million to 3 million transactions a day to bootstrap this.
Speaker: which means we need data applications.
Speaker: Bootstrapping the network is creating the data application layer in the community that people in BuildOff.
Speaker: And the token stuff comes with that.
Speaker: So how are you doing that right now then?
Speaker: Because I saw on your website you got a lot of VC relationships and people are really anti-VC right now in crypto.
Speaker: So are they kind of funding that aspect to...
Speaker: bootstrap it for you or is it self-funded by your early Bitcoin investments or?
Speaker: I'd say at the very beginning, of course.
Speaker: Richard and I both go back.
Speaker: When we're going to VCs, you got to remember this stuff is really hard.
Speaker: The conversation we're having is on the higher end of how you would talk to people about Sado.
Speaker: And we're not interested in pump and dump economics and Ponzi's and that kind of crap.
Speaker: So, you know, at the beginning, we did a seed round with people so that we could prove out the network and new development and stuff.
Speaker: Earlier this year, we've got other people on board and we've all got contracts with them to be doing various things.
Speaker: And part of that is, you know, they deliver, they get the right to buy a token at a certain price.
Speaker: But it's not a VC pump and dump.
Speaker: I don't think people realize that yet.
Speaker: We're obviously concerned about distribution and we're working hard on it because we've got a network where we don't want people to have a massive stake because if someone has a massive stake, they've got the resources to attack us when we're weak.
Speaker: So I think anyone, we hear this stuff, it's really a response to the way other projects have functioned.
Speaker: Anyone who's curious can go and check out the token distribution.
Speaker: It's beautiful.
Speaker: No, that's good.
Speaker: I mean, I had to ask.
Speaker: So just because... No, no, no.
Speaker: I mean, it's fine.
Speaker: It's very relevant right now with... I can tell you this.
Speaker: Like there are some utterly useless VCs out there.
Speaker: And there are some that are absolute gold.
Speaker: I don't think there's a better development model.
Speaker: Like our big challenge is getting the signal above the noise because, you know, if you remember, I said there's like a thousand different ways to break things.
Speaker: Well, that's a thousand different proof of stake networks.
Speaker: there's one correct way of doing things that fixes these problems, which is you've got to fix value measurement and fix the incentives.
Speaker: And, you know, you know, there are people that are like, oh, you know, I'm upset that like, I don't have the opportunity to buy SEDA earlier on.
Speaker: It's like, actually you do.
Speaker: That's today.
Speaker: And the same people would be whining six months ago.
Speaker: We think we actually kind of nailed the launch because you don't want a price spike.
Speaker: You don't want a price spike early on that you want to have slow and steady growth and you want to incentivize people who understand
Speaker: to be helping other people understand and to be putting their own credibility on the line so that other people take it seriously.
Speaker: So, you know, what's happening right now is that the people who are learning how SEDO works are getting really excited and getting involved.
Speaker: And that's beautiful for us because it means there's more people to answer questions.
Speaker: There's easier analogies and some non-obvious ones to explain to people how things work.
Speaker: And there's excitement because, you know, if we go to someone and say, look, you know, you should really look into this.
Speaker: They'll go, oh, you know, conflict of interest.
Speaker: This guy's, you know, shilling.
Speaker: And it's like, actually, no, I'm not shilling.
Speaker: I'm not telling you to buy.
Speaker: I'm telling you this is the solution to the scalability trilemma.
Speaker: This is the economic problem with proof of work.
Speaker: That's the message that we try to get out there.
Speaker: Yeah.
Speaker: It's just what I've noticed, especially with Nano, is that if people don't see an immediate incentive or an immediate way for them to make money off of running the chain, they just kind of... They're like, why would I do that right now?
Speaker: I can...
Speaker: I can mine Ethereum.
Speaker: I can mine Bitcoin.
Speaker: I can make all this money right now.
Speaker: It's a big problem if the economic model is supposed to be volunteer provision.
Speaker: So that suggests that it's okay.
Speaker: Well, the, you know, the future for these volunteer networks are corporate provision, but you know, that's like, isn't that like Ethereum saying Google will run Ethereum?
Speaker: Like why isn't Google just going to fork Ethereum and run its own stuff?
Speaker: Yeah.
Speaker: Yeah.
Speaker: Why isn't Google going to fork Sato?
Speaker: Well, let me tell you how we're going to help Nana, because this is what's really exciting, I think, about what we're doing.
Speaker: If you think about the form of work, right?
Speaker: Like we need a form of work everyone can objectively agree on.
Speaker: It needs to be visible to everyone.
Speaker: Okay.
Speaker: So mining has that property, right?
Speaker: Like I can intuit that you've spent 20 bucks of hash because you've shown up with this hash.
Speaker: Like it must have cost that much.
Speaker: Yeah.
Speaker: Staking has this property because we have a staking table.
Speaker: Like literally I can see that you've got this money and you were picked.
Speaker: Sado has it too because we can intuit that if I gave you that transaction and that transaction has a high fee,
Speaker: Well, you're competing with other nodes in the network for money.
Speaker: So you must have done something worth the fee.
Speaker: This is hard for people to see.
Speaker: But it's like, well, why did I send my transaction to you instead of John?
Speaker: Why do I use Gmail instead of some other email service?
Speaker: And the answer is, you know, at the beginning, maybe it's just because you're there.
Speaker: Like there's not enough routing nodes.
Speaker: You're a routing node, so I connect.
Speaker: But because you're in a competitive space, anything that the network needs to drive transaction volume and utility and usage is technically becoming our kind of mining.
Speaker: So you like Nano, right?
Speaker: You know, I like Nano too.
Speaker: I love the experimentation, but you know, okay, we've got an infrastructure running problem.
Speaker: So here's what you do.
Speaker: You hook up Nano to a Sado node.
Speaker: And you say, okay, the arcade and the wallet and these applications that use third-party cryptos, they're now able to send and receive Nano because I've set up this Nano node that I've connected through an API to my Sado node.
Speaker: And now my Sado node can run Nano applications.
Speaker: And I go to the market, I say, hey guys, you know, you should send me your transactions because I'm offering you Nano support.
Speaker: And all of these applications that are running in the browser now,
Speaker: the wallet, the chat messages, the decentralized Facebook, now they're supporting nano or whatever, Ethereum or Bitcoin or whatever crypto you want.
Speaker: You are using that to induce fee flow to your node, which means running that nano service is the form of work that is now securing Sado.
Speaker: And the reason that works is because you're competing in the market
Speaker: by providing value-added services atop the Sado network.
Speaker: And the only reason it works is because we're using the most abstract form of work possible.
Speaker: This is the same form of work that proof of work and proof of stake are supposed to measure.
Speaker: Because we've secured fee collection, we can actually measure it directly.
Speaker: Like there'll be a couple of nano nodes and the people that run the best applications and provide that support will get transaction flow.
Speaker: And so we'll have Sato applications that can send and receive DAG cryptos, which is great.
Speaker: You know, fantastic.
Speaker: Pretty wild.
Speaker: And like the value you attribute to them, which is the reason you're paying on our network, is generating the fee.
Speaker: And that fee is what's making the cost of attack for the attacker.
Speaker: So what happens by paying for routing work is we've got this phenomenal model.
Speaker: Like we've got to build it and we've got to get security up, but we're starting to pay for abstract forms of value that like the free market can decide what's a value.
Speaker: And this goes back to the Soviet technocrats comment, right?
Speaker: Like our consensus algorithm is not saying what the value of your nano note is.
Speaker: Our consensus algorithm is not saying what the value of an end access point is.
Speaker: Our consensus algorithm is saying the free market can figure this out.
Speaker: We're going to just watch what happens with fee flow and how users value the network.
Speaker: So, you know, like there are these wonderful hypothetical examples where you could have a guy in North Korea, say, and he walks transactions across the border in his brain like Johnny Mnemonic.
Speaker: That guy is a routing node and that guy is going to collect first hop on the transaction fee.
Speaker: Well, what's the value that he provides?
Speaker: Well, the fee might be very, very high because it's really, really hard.
Speaker: So what are we incentivizing?
Speaker: Well, if people want scale, we're incentivizing scale.
Speaker: If there's a need for more bandwidth to do all of these data services, Sato is going to pay for it.
Speaker: All of the money that's going into hashing is now going into scalable value added services that are wrapping around the blockchain.
Speaker: And the beautiful thing is as these services wrap around the blockchain, they increase the value of the blockchain.
Speaker: And as they increase the value of the blockchain, they secure it.
Speaker: So we're basically, you know, the...
Speaker: It's a beautiful economic solution.
Speaker: And that's one of the reasons we're taking the approach that we're taking.
Speaker: Our big challenge is coming into a world where people have internalized the idea that decentralized is good.
Speaker: And we've got to tell them, no, you got to pay for stuff.
Speaker: And because you need to pay for stuff, these existing models break in this way, but here's a better way of doing it.
Speaker: come and help us out as a user or as a dev.
Speaker: Help us spread the word, study how Sato works because we can actually build the crypto infrastructure that we need.
Speaker: Do you really think you're going to be able to convince people to pay for this stuff, though, in the long run?
Speaker: That's not the model in the long run.
Speaker: Well, the mid-run is we're getting transaction volume up and we're going to install an ad module into Sado.
Speaker: And if you're using the Sado applications and you're watching adverts, you're going to get a trickle of tokens in.
Speaker: Trickle.
Speaker: Not a huge amount.
Speaker: It's not really play to earn.
Speaker: It's kind of like the Brave model in a sense.
Speaker: Well, Brave is a centralized entity.
Speaker: Yeah, yeah.
Speaker: So if you're using Brave, it's using Google.
Speaker: A module on Sado is anyone can put up a module.
Speaker: If you want to enter the advertising business, you can.
Speaker: I just mean in the sense of you watch ads.
Speaker: I understand.
Speaker: I'm pointing out that there is a fundamental difference, and the difference is openness.
Speaker: And you might want to install, you're a crypto OG, maybe someone's going to pay you 10 times the token flow than someone else because you dox yourself as an ETH buyer.
Speaker: Because they're like, this guy's in crypto, I want to show him crypto ads.
Speaker: That's a decentralized network.
Speaker: That's not brave.
Speaker: It's brave in the sense that we have advertising paying for things, but it's open, not closed.
Speaker: We don't want Google.
Speaker: The fact that people look at Brave and they're like, hey, Brave new world of crypto ecosystem.
Speaker: It's like, no, you've got a new Google wrapped around this thing.
Speaker: Advertising gets tokens into the wallet and then
Speaker: that wallet is making transactions on the network spending fees.
Speaker: So the free-to-play model and the free-to-use the web model persists.
Speaker: The difference is, in the old web, Facebook paid advertisers and it gave you free data.
Speaker: You paid your ISP and they gave you bandwidth to connect to Facebook.
Speaker: In the new model, the advertisers give you tokens directly, you use the network, and that pays for your ISP.
Speaker: I mean, it's everything I kind of envisioned for like what Web 3.0 could potentially be or 4.0 or 5.0 or whatever it is, you know, where it's a self-sustaining model and, you know, you can earn this way.
Speaker: I mean, there's, you know, we've, I don't know how much TV you watch, but there's those
Speaker: you know, futuristic shows where people are just sitting there just inundated with advertisements because they can't afford anything.
Speaker: And so that's the only way they can afford to use the internet anymore is by, you know, they have to watch all these ads first.
Speaker: Yeah, but you don't have to watch anything.
Speaker: It's an open network.
Speaker: You know, if you want some free tokens, you can do it.
Speaker: If you don't want free tokens, well, you kind of, well, buy them.
Speaker: No one, you know, like people, if you look at Sato.io, you look at all the, everything that's on that site is a Sato application.
Speaker: I know, but that's the thing.
Speaker: If someone's broke and they can't use the internet without having to watch ads first, I mean, I guess technically you can't use the internet if you don't have any money anyway because you can't pay your ISP.
Speaker: So...
Speaker: I think people forget that they're paying a drawbridge fee to enter the internet, and that's their ISP.
Speaker: And everything else seems free for the most part, but they're being harvested for their data.
Speaker: Well, and it's another really uncomfortable thing that Web3 people don't think about, which is that how do users pay?
Speaker: Users pay with data monetization.
Speaker: If you've got data that's worth money, users will pay by letting you make money with it.
Speaker: So, you know, go back to Lubin and Infura.
Speaker: What's the end game for those transaction processors?
Speaker: Devs will be all they'll figure out models and they'll charge fees.
Speaker: And it's like, no, the mainstream user is never going to pay a fee to send a transaction into the Ethereum network.
Speaker: They're already paying a fee.
Speaker: The mainstream user is like, I'm paying this fee.
Speaker: Why am I not getting service?
Speaker: Especially when the fees are already so high.
Speaker: Yeah.
Speaker: Well, and the fees would be higher if Joe Lubman wasn't subsidizing and losing money.
Speaker: So what's the business model?
Speaker: The business model is closure.
Speaker: The transaction processors, they're going to take your transaction and they're going to put it in the block themselves.
Speaker: They're going to hoard it or they're going to sell it.
Speaker: And proof of work people really don't like this one because, you know, if you go back to the Satoshi white paper, read section five and see the first thing that he tells you nodes in the network have to do.
Speaker: And the first thing he says is you got to distribute all of the transactions to all of the nodes in the network, because if you don't, the fair play, fair competition properties of Bitcoin implode.
Speaker: And we're not, you know,
Speaker: We're not here with a decentralized open network.
Speaker: We're back at Google.
Speaker: And we're back where Infura with its economies of scale around transaction processing is now, I mean, even today, I think it's like it's over 80% of transactions.
Speaker: They control, last I heard, over 80% of the money that flows into Ethereum.
Speaker: That's insane.
Speaker: That's an 80% attack right there as soon as they stop sharing.
Speaker: This is the future of Web3?
Speaker: It's like, no, it's not.
Speaker: nano is a much better network i mean one of the things about DAGs is because there aren't these fees there's not the fees to consume and incentivize attacks yeah and yet still people try to attack the network which i mean which i think is great it bothers it bothers the devs but there's external incentives you know you can always short the network um yeah
Speaker: And they don't want competition.
Speaker: So like who's the scariest competition around is the one that doesn't charge any fees.
Speaker: Well, and the thing is, again, that's also the business model, right?
Speaker: Like it's people will say, oh, no, no, these companies, they won't.
Speaker: I've heard this so many times from people where they're, oh, no, no, of course.
Speaker: You know, of course they're not going to sell transactions.
Speaker: They're like, well, why won't they?
Speaker: The first is, well, users won't let them.
Speaker: What do you mean users won't let them?
Speaker: Users want them because users want them.
Speaker: They want their transaction fee to be used to pay for their network stuff.
Speaker: Users don't want to pay a double fee.
Speaker: The companies don't want to pay a double fee.
Speaker: And, you know, if there's one company out there monetizing data, the others don't have a choice.
Speaker: Like, are you going to be the guy trying to charge 40, 50 bucks a month for Gmail service while Gmail's offering it for nothing?
Speaker: Like, good luck.
Speaker: And the 50 bucks a month is supposed to be the mainstream because honestly, the security models fall as soon as a non-trivial percentage of the network does this.
Speaker: What percentage of transactions are hoarded before the biggest miners are the most profitable ones?
Speaker: Because as soon as that happens, your network's toast in about three years.
Speaker: Look at BSV.
Speaker: It's collapsed so quickly.
Speaker: Yeah, it's insane.
Speaker: I follow somebody who's been posting just like the week by week collapse of the network.
Speaker: I mean, collapse is a tough word because I actually, I know some people in BSV.
Speaker: We're not negative on BSV in the way other people are.
Speaker: BSV for us is great because it's an example of proof of work at scale.
Speaker: Like we've been for years, we've been saying transaction processors will monetize and eat transaction fees.
Speaker: And that's exactly what Tal is doing.
Speaker: It's all a bunch of side deals so that the money flows into the pockets outside the network.
Speaker: It's one of the reasons the token price is so stagnant because like there's really not much of an incentive for people who are seriously using the network to buy the tokens and then use those tokens to pay when they get side deals with the miners.
Speaker: Like you don't even need to touch BSV.
Speaker: So, you know, like for people it's, you know, it's a form of closure.
Speaker: There are other issues.
Speaker: Like people say, well, why should I care about closure?
Speaker: Because we say like, if you look at the economics, because we've got these free riding pressures, the only way to solve them is closure, which is adding a trusted third party back or collusion or monopolization.
Speaker: It's like, well, why should I care about it?
Speaker: Well, BSV is another great example because like,
Speaker: regardless of where you are on the CSW stance, like a unilateral decision by a cartel of miners that you can't disempower is a tax.
Speaker: And that's not going to stop.
Speaker: It's not like people are going to seize coins and then, okay, we've eaten to our fill.
Speaker: Give it six months.
Speaker: Give it another year.
Speaker: But that's BTC too.
Speaker: And that's Ethereum too.
Speaker: So isn't FURA going to be an issue once Ethereum switches over to proof of stake?
Speaker: It sure is already an issue.
Speaker: No, I mean, will it continue to be an issue?
Speaker: How can you, how can anybody be intellectually honest and look at Ethereum's network design and say it's going to get better at scale?
Speaker: Like that, that may have, that's not a negative statement.
Speaker: That's like, it's, it's, it's a question because it's a product of an incentive misalignment.
Speaker: And incentive misalignments get worse at scale.
Speaker: No, my question is, is Infura going to be needed once it moves to Proof of Stake?
Speaker: Infura powers MetaMask.
Speaker: Yeah, but like... Well, almost all of them are going through Infura.
Speaker: So what happens to every single application that people are using that uses MetaMask, which is most of them,
Speaker: Yeah, but there's alternatives now.
Speaker: Really?
Speaker: Yeah.
Speaker: So there's... There's VPI nodes, which is you can pay us and we'll send you an endpoint and they're failing.
Speaker: Like what's the model?
Speaker: What's the economic model that provides network access at scale?
Speaker: Because the only one that seems viable right now on any scalable network is either funding from dev funds or closure and monetization of transaction data inflows.
Speaker: Yeah, that's true.
Speaker: And, you know, it's just, it's the way markets work.
Speaker: Like it's again, it's this free market thing where it's like, well, why do people believe something else will happen?
Speaker: It's like, well, if that doesn't happen, the network will break and it won't make money.
Speaker: And, you know, like the economics here aren't new.
Speaker: The economics here, we're going back to the 60s.
Speaker: It's collective action problems.
Speaker: Like these people are the equivalent of saying the prisoner's dilemma is not a thing because, well, if both of them fib, then everybody goes to jail.
Speaker: So obviously that's not going to happen.
Speaker: And it's like, well, okay, we'll see how that works out for you.
Speaker: It does feel overwhelming and scary.
Speaker: And every time I spend more than five minutes thinking about, when I think about crypto rationally, I get a big pit in my stomach and I look at my portfolio and I want to sell every single thing.
Speaker: Yeah, but what are you going to sell it for?
Speaker: I think it's going to be good.
Speaker: We're in a transition period.
Speaker: We're going to be paying for infrastructure for these networks.
Speaker: And the ones that have users that want to use applications will get infrastructure paid for them.
Speaker: Well, what's that do?
Speaker: That gets rid of Infura.
Speaker: You know, like these problems, we can make them go away.
Speaker: Like the problem is not Infura.
Speaker: The problem is the incentive misalignment that forces Infura to add closure to the network.
Speaker: And we can solve these problems.
Speaker: It's just knowledge of how to do this is so, like it's,
Speaker: The US is going heavy into proof of stake.
Speaker: We've got the DAG stuff happening and Bitcoin is kind of just moving along like it is.
Speaker: Yeah, I'm much more positive than you.
Speaker: I mean, the question for anyone who's dabbling in crypto, it's like a dance.
Speaker: It's like,
Speaker: You're like Indiana Jones where you're walking on a floor and the tiles might collapse out from under you.
Speaker: So you're like, how much do you want to have in any crypto?
Speaker: It's that kind of game.
Speaker: A lot of it's just what's being marketed and what's being hyped and it might be set up.
Speaker: Here's my suggestion for you because I got to go because I'm about to collapse.
Speaker: I'm so tired.
Speaker: I would suggest you start coming up with a dozen to two dozen
Speaker: analogies like perpetual motion machine that's plugged into the wall and the energy's running out or Indiana Jones doing the dance of trying to step on the right tiles because these are really clear visuals.
Speaker: In Sato, it's really hard to wrap my head around it.
Speaker: Oh yeah, it's rough.
Speaker: It takes people time.
Speaker: So that would be my one suggestion because I feel like after we've been recording for an hour and 20 minutes and I feel like I understand about 5% of it.
Speaker: It's gonna take time.
Speaker: And I kind of feel proud that I feel that I understand 5% of it right now.
Speaker: It's one of these things where we had a guy, he's like, I just don't understand the white paper at all.
Speaker: This was ages ago.
Speaker: I walked him through it.
Speaker: I'm like, this is what's happening.
Speaker: He goes back, he reads, he's like, the white paper is so clear.
Speaker: A lot of the obstacles, it's the assumptions people make, you know, it's like you point out a problem and they're like, oh no, but that's not, that's not a problem because X. And you know, okay.
Speaker: You like, people want to believe that.
Speaker: Like a lot of the challenge understanding Sado is just learning why the objections aren't actually economically sound.
Speaker: Like, and a lot of it's denial.
Speaker: Like you get people, they'll tell you that this will never happen.
Speaker: And it's literally happening sometimes in the next room, you know?
Speaker: Yeah.
Speaker: Anyway, thank you.
Speaker: Thanks for the time and having me on the show to, to rant and hopefully
Speaker: you know, help people understand Sato better.
Speaker: I, I mean, I joke around that my audience that I need to LE5 stuff for my audience, but I have a, I have a feeling that 99% of my audience is like a hundred IQ points smarter than I am.
Speaker: So I think a lot of them are actually going to get it.
Speaker: Um,
Speaker: or at least get a lot more than I got.
Speaker: That's great.
Speaker: If people have questions, we've got Telegram.
Speaker: Go to saito.io.
Speaker: You can come in.
Speaker: A lot of people, they look at it and they're like, well, wait a minute.
Speaker: No, there's this problem with the mechanism.
Speaker: And come into Telegram.
Speaker: put it, we're going to give you the answer.
Speaker: Um, is that the best way to reach out to you guys telegram versus like Twitter or somewhere else?
Speaker: We got a great community.
Speaker: So, uh, like you can get your answer pretty much right away.
Speaker: Okay.
Speaker: So use the telegram.
Speaker: It's, it's good.
Speaker: It's a fun community too, because like the more people know about Sado, the more fun they have looking out at just the nonsense that's happening.
Speaker: And they're like, well, okay.
Speaker: But yeah, I mean, people shouldn't expect to understand right away.
Speaker: And, you know, like people will have thoughts and objections as they work through it.
Speaker: A lot of the time it's because they think Bitcoin provides something that it doesn't provide.
Speaker: And, you know, we can answer them.
Speaker: But yeah, it's good.
Speaker: It's good.
Speaker: Come on in.
Speaker: You'll get your questions answered.
Speaker: And I think the more people learn about Sado, the more they'll love it.
Speaker: Yeah, I mean, smart people I follow, you know, have been red boxed.
Speaker: I just joke around because like if you're on Twitter, they put their their handle and they put a red box and that means that they like Sado and it's just like, OK, that's great.
Speaker: I think that was green.
Speaker: I don't know.
Speaker: Whoever it was, it was great.
Speaker: I was like, okay, I guess I got, I'm adding the red box too.
Speaker: Yeah.
Speaker: It's funny.
Speaker: It's great.
Speaker: Um, and you know, and they, and you know, so I, I try to gravitate towards really smart people who, who, who, uh, point out issues way before I even think about them.
Speaker: And so, uh, I'm glad I got on my radar.
Speaker: If you want more, bring Richard on the show at some point.
Speaker: He's fantastic.
Speaker: Yeah.
Speaker: He's better than I am at explaining stuff.
Speaker: Uh,
Speaker: I need about like three months to decompress and disperse all this knowledge throughout my brain.
Speaker: And then I'll definitely want one of you two back because I'm going to have a lot more questions.
Speaker: Okay.
Speaker: Yeah.
Speaker: Thanks.
Speaker: Yeah.
Speaker: I'll have everything in the show notes.
Speaker: People can get a hold of you on Telegram.
Speaker: And thank you so much for coming on and taking the time.
Speaker: It was great.
Speaker: No worries.
Speaker: Thank you, Michael.
