The Social and Economic Impact of Crypto

Kicking off 2021, we’re going to widen out the lens and explore the big picture social and economic impact of crypto. Rapidly accelerating adoption of blockchains and crypto currency are merely early indicators for and enablers of a much larger global social and economic transformation. Crypto infrastructure offers a radically new infrastructure on which to construct social and economic institutions, creating a new fabric for how individuals collectively work to create and share value. New ‘corporate forms’ made possible by crypto offer the potential for human economic freedom that transcends the legacy nation state system and forges a new path for how people will organize themselves and society.

Joining Money Movement host Jeremy Allaire for the 2021 opening episode, The Crypto Transformation, are two innovative leaders and thinkers from the crypto world who are envisioning what the world could become as we keep building. Jeremy will be joined by Balaji Srinivasan, the storied technology entrepreneur, innovator, disruptor and futurist, and Ian Lee, crypto investor, builder, writer and thinker.  Join us for what will hopefully bring us up to the 100,000 foot view on what’s emerging to be a millennial scale change in how the world is organized.

Join us to learn more about the social and economic impact of crypto in 2021.

Jeremy Allaire: Hello, I'm Jeremy Allaire. This is The Money Movement, a show where we explore the issues and ideas driving this brave new world of digital currency and blockchains. Since our last episode in mid-December, there's just been just a breathtaking amount of activity in the crypto space. There's been obviously just this incredible growth in what's happening with digital currency. It's been obviously really inspiring. I think just on the whole, all of us can see increasingly that crypto is just lurching further and further into the mainstream.

I think this is obviously on a broader basis driving more interest, that interest is surging. It's not just on the investing side, it's really people trying to understand what this change really represents. We have obviously these store value assets, and we have an incredible amount of interest around that, but there's more fundamental things that are happening. I think it's really easy to get focused on things like the price or the investment thesis in these underlying assets.

While I think that's really important, I think the much more interesting thing to focus on, and I think a lot of why so many of us got involved in crypto over the past decade, is the real transformation that this can bring to the world. I think kicking off 2021, I wanted to widen out the lens a bit and explore more of the big picture, social, political, economic impacts of crypto. I know for me when I got involved in this back in 2012 and early 2013, that there were a lot of light bulbs that went off about what this infrastructure represented, and what it could represent in terms of changing the way economic activity and human organization happened.

I think when I zoom out like that, this rapidly accelerating adoption of blockchains and cryptocurrencies are really just early indicators for, and obviously enablers for what I think is ultimately a much, much larger and global social and economic transformation. Crypto infrastructure itself offers a radically new infrastructure on which to construct social and economic institutions.

In many ways, it creates a new kind of fabric for how individuals collectively work, how they work to create things, how they work to share value, and ultimately is giving birth to, we're already seeing it giving birth to new kinds of corporate forms that are only really made possible by crypto, and that offer the potential for human economic freedom that even conceptually and literally transcends the legacy nation state system, and forges this new path for how people and society can organize themselves.

This week, I'm really excited to explore all this, and really excited to be joined by two innovative leaders and thinkers from the crypto world who are envisioning what this world could become as we keep building. Balaji Srinivasan, the story tech entrepreneur, innovator, sculptor, futurist, and Ian Lee who'll be joining us in a little bit, who's a, I think, a fantastic thinker, builder, investor is going to be joining in a bit for this conversation. First, I want to kick things off with you, Balaji. Welcome.

Balaji Srinivasan: Hey, great to be here.

Jeremy: Yes, it's awesome to have you on. I know just before the show we were talking about last time we chatted and stuff. I wanted to actually just start and thank you actually, and just offer my gratitude, because I don't know how many people are aware, but you obviously played a really, really pivotal role in in what became USDC. For folks that don't know the history, Coinbase and Circle obviously collaborated together to launch USDC over two years ago, almost really started two-and-a-half years ago. Balaji was really, I think, just an incredible person to collaborate with in making that happen. I think it wouldn't have happened without you. I think we're all really proud of that. Again, I just want to first just offer my gratitude and thanks, because you've been a really big part of that.

Balaji: I appreciate that. You guys, that was absolutely a team effort. I was really proud to work with you folks. You've built a great initial smart contract. I think that was quite a sprint. We did that in about 30 days as I recall. Not much sleep on my side, and probably not much on yours, but that was a great launch. I really think that we built probably the best stablecoin out there, I think in the fullness of time. I also respect what the dye people have done. That's a different approach.

Jeremy: Totally.

Balaji: I think that we put a dent in the world. I was really proud to work with you on that.

Jeremy: Very cool. Thank you again. I think it ties into some of these other themes, which is there's these building blocks, and what are these building blocks? Obviously representations of fiat money is like a building block. It's interesting and useful in a lot of different ways. Like I said, in the intro, I want to zoom out a bit. I think maybe just to start, I'd love to have you chat a little bit about when you think about public chains, whether second generation, third generation, where we are, very big picture, what do you think that this technology represents? What do you think this technology enables on a very large global social, economic, macro level?

Jeremy: It's a new system of property rights. I think everything is becoming digital that to say 2020, I mentioned this in a previous talk, but 2020 is the year that things switched over to the internet is being primary. I think a non-obvious concept is that all wealth becomes digital. That's obviously true for a lot of wealth software seen in the world, but it's not obvious that it's all wealth until you start thinking, it's not just PDFs, but the instructions to go and print out a machine part, or to deliver something, or for a robot to manufacture something, or for a drone to deliver something. More and more of the world will be automated.

As that happens, asymptotically, all wealth is digital because the instructions to instruct those robots are digital. Then how do you protect that kind of digital property? It's all crypto. Essentially crypto is the basis for the next system of property rights. That goes extremely deep. Go to Locke and his theory of government. Government's legitimacy comes as a guarantor of property rights, but it's a different character online. It's cryptography and it's cryptocurrencies. This is like a really foundational philosophical thing that has deep implications for many disciplines beyond just computer science or economics.

Jeremy: Absolutely. I think this bigger theme of when we think about what units of organization even are, and how individuals collectively interact in those, and what the mediation of that is, and how people can form those, and so on. We're going to talk a lot more about that. Just at a very high level, when you look at where things are today, and as I like to say, we're entering the third generation of blockchain tech right now. I think whatever a kind of Moore's law equivalent you want to apply to the evolution of blockchain tech, whatever the next 10 years, taking your concept of basically all property becomes digital, and a little bit of what you've elaborated, where do you think that takes us in 10 years?

Obviously, I like to remind people, 10 years is very fast. Actually, it's a really fast period of time. Even these big arcs of change that happened with the internet, they happen a lot of times over these 10-year periods. It happens pretty fast. Obviously Bitcoin's over 10 years old now, but where do you see this leading us? What impact do you see that having in terms of the social and political institutions that we know of today?

Balaji: One thing, I think, is that Bitcoin and more generally crypto becomes the option for lots of countries that don't want to be caught in the US versus China cold war. It becomes the option of the rest of the world because the dollar is increasingly being weaponized and used to impose sanctions and deplatform people, and not just, "terrorists". It's in a constant expanding set of people. It just is mission creep. Then conversely, China's digital Yuan, it's probably going to be quite functional. They're smart, and they execute, and they're really serious. You may not want to have your entire economy based on digital Yuan also.

That's got its own risks. A demilitarized zone is attractive to everybody who can't be number one. That's a very powerful thing. Kind of human psychology. If I can't be number one, then no one should be. Well, crypto is for you. That's very interesting. I was just joking to a friend of mine the other day that we're going to be giving a new definition to rootless cosmopolitan. If you know that old term is an epithet against the, what we call a digital nomad today, somebody who didn't have roots, and would move from place to place, and so on. Rootless means something different in the context of a blockchain because a blockchain is a database that doesn't have a root user.

Jeremy: I was listening to some of your comments on this on another talk.

Balaji: The reason I came in from this angle is there's different ways of cutting the space, obviously. Let's say your audience, you're talking to somebody who's a AWS or, Azure person who understands databases, who understands Postgres, a backend engineer. Their common opening gambit is, "Blockchain is just a slow database," and say, "Okay, let's make a table of features. Yes, performance is less, but guess what number we've massively increased? We have made it massively multi-client. We've massively increased the number of simultaneous root users."

I can prove that because what is your Postgres password? Did you post that in the internet? Port 5432, and so on, most people don't. You cannot read every table and row in the main Twitter database, let alone all their data warehouses, and so on. Those are not public datasets. Then immediately response is, "We don't just trust anybody on the internet to read our data." I'm like, "Aha. You don't trust everybody. Therefore, you don't trust is actually an implicit design consideration." Then you start to get to the idea of, "Wow, they solved this problem with having essentially a database that anybody can read every single byte.

Anybody with the digital asset can write to. Anybody with enough compute can write blocks too." If you're mining, if it's a proof of work chain. Of course, there's variations. That just is a completely different world. One thing that's obvious to me is crypto is not just open source, it's open state and open execution. What that means is you don't just have the source code visible, you have the backend, the database visible, and you can also replay the entire history of the blockchain, including every opcode.

This addresses obviously, many of the problems with social media, because the market power that Twitter or Facebook uses to deplatform competitors, which they did to Meerkat and to countless companies have been hit by basically, and deprioritized out of the Facebook feed, or the Twitter feed, or just people, individuals who've built up followers or what have you and just can't reach all of them on Facebook without paying ads. All of those kinds of things go away if that backend was actually open. The fundamental thing about an open state backend is that anybody can write different clients to it.

This is what Twitter used to be, remember? It used to be an API on a backend. The issue was that folks started implementing new front ends that replicated all of the features of Twitter. Then what happened was they were no longer the monopoly provider of advertising, and they couldn't figure out how to monetize the API sufficiently. They throttled access and they nerfed it until it was just something their ban came through the main client.

Today, though, the next Twitter would basically tokenize it. There's different ways of doing. It could be internal currency of it, you could tokenize the messaging. There's many different ways to do it. It's obvious that there will be a tokenized version or versions. When that happens, it's going to happen as blockchain scale. I think eth too is promising. Some of the new L1 chains may be promising. I think actually those chains, rather than chasing digital gold or DeFi, they'd be well-suited to chasing these kinds of application areas and just specializing. Go ahead.

Jeremy: Totally. I wanted to come back to something you said earlier. It is on that currency store value piece. I think, obviously, people who've looked at the history of money realize fiat is the exception not the rule. It's a really relatively recent phenomenon. For the most part, the world wanted to operate on non-sovereign forms of money for almost ever. The idea that the much of the world would want to be able to transact store value over the internet in a non-sovereign store value is quite, in some ways, it's obvious that that's what people will increasingly want to do. Not just to get outside of the US and China, kind of implicit economic warfare, but just as a general matter.

Balaji: Yes, as peer-to-peer thing. Absolutely. I think, by the way, that thing essentially about crypto, it's the second choice for many Americans and many Chinese. Millions and millions, tens of millions of people in both countries like crypto. That's a good backup plan where Americans using crypto, at least it's not China. Chinese using crypto, at least it's not America. I always look for something like that. It's like rank choice voting or what have you. It's a lot of people's first choice, and a lot of people second choice. That means it's a global first choice. It's a very important thing to look for.

Jeremy: Obviously, we're going to see a lot of experimentation in synthetic algorithmic types of stable coins. We're going to see, I think, synthetic, fiat digital currencies, all kinds of fun stuff. That'll be interesting to watch. I guess, one of the things that I'm interested in exploring as well is the ultimately the broader social, and economic, and political implications of this technology. We have an infrastructure, which by design doesn't have a concept of a border. The internet itself is like routing tables and IP. That doesn't care what a country is.

Fundamentally, now we're dealing with these fundamental forms of record keeping, fundamental forms of trustworthy compute, the layer there. Again, it doesn't care what a border is but it has these underlying materials that you can work with. The thing that I've really been drawn to is this idea that we're going to see new microeconomic units of organization that are created, that exists entirely as transnational corporate forms that effectively they entirely exist in a tokenized form. They entirely exist on-chain. Individuals can connect into those, participate in those. I'm interested in your thoughts just at a very high level, about where you see that, where you see these new corporate forms birthing out of public chains as well.

Balaji: Great question. I think we're going to see on-chain and corporations can be very important. Aragon project is like a V1 of this. Their CEO is a smart guy. I think we're going to see more. I'll give a few concepts on that. Last year I wrote that, this was before the pandemic, actually, not last year, I should say 2019 now. 2019, I wrote that San Francisco and setting up in San Francisco and incorporating Delaware is now starting to be clearly wrong, but we haven't yet gotten to remote first, and on-chain and corporations clearly right, but that's obviously the future.

Now, not even 12 months later, remote first happened. I think the next step for a truly global business is on-chain incorporation. We're already part of the way there, and serves a lot these DeFi things are there. They're basically doing on-chain incorporation. The wallet is on chain. Uniswap or something is receiving fees on-chain. This model I've talked about-- Go ahead, sorry.

Jeremy: I was just saying, governance voting, et cetera.

Balaji: Governance voting, that's right. This model I've talked about, called SaaS for GaaS, which is what it sounds like, it is a new SaaS model where you have an on-chain address, and you receive fees as somebody uses your smart contract. Why do they use your smart contract rather than fork it? It may be linked to some offline code. It may simply be that they trust that that's the main one and it's not going to have some weird security bug, and so on and so forth.

Jeremy: It might be composed into a bunch of other things that are valuable for you too.

Balaji: That's right. SaaS for GaaS is cool because it's very self-explanatory, and it's a new business model where it's open source and open state, but it's so monetizable. Every invocation, you pay the invoker. I think that on-chain incorporation, the way to make it happen is there's 100-plus countries in the United Nations, and we want to do is first write a series of blog posts that show every step in setting up a company. For example, V1 is you set up a company, it's acquired for a million dollars and you show the liquidation waterfall.

Then V2 is you set up a company on-chain, and you have a series A investment, and you show what that looks like. Then it's acquired and you do a liquidation waterfall. Then you start getting more and more complicated. You have pari passu, and you have all the crazy--

Jeremy: Class of suckers.

Balaji: Exactly. The thing is, every single venture capital term arose because of some historical train crash. Then people got together and they said, "Actually, let's avoid that by actually spelling out, drag along. Then we can figure out what happens in that situation." The entire cap table is basically an equation for who gets what money when. Then, of course, you've got the debt stack, and so on and so forth. That's basically just a set of equations. Another way of thinking about it is the corporate charter has almost an ACL table.

Which is, for example, you need a series A, a B, and a C majority in order to issue series D shares, that kind of stuff. You can actually, and I have at times, gone and taken corporate charters. Just as a VC, you go through a lot of this stuff. Just for me to understand it, I would enumerate it like this, and I'd just get a lawyer to be like, "Did I read the legal lease correctly?" I got my PhD. in corporatology or whatever doing this. I think that a very useful thing, see those terms are actually very useful terms. One of the problems of the ICO boom of 2017 is, it would just raise money online without vesting schedules or all the mechanics [crosstalk]--

Jeremy: A substance of why you have corporate forms. It's not just like, "We can do whatever the fuck we want."

Balaji: That's exactly right. Especially when it's online, and you have a lower trust environment than you do with VC, it's actually quite important to take some of those VC concepts and put them online. I think a series of maybe 100 exercises, and then you build up to something like the Facebook IPO or something very complicated like that, which has debt and has proxies, and it has the whole shebang. You show all of that happening on-chain. Now you've got basically exercises that show the whole lifecycle of a company.

Jeremy: The Treasury is digital currencies. The Treasury is-- It can be the stablecoins, it can be essentially like a corporate form, is essentially a treasury and a governance around the treasury. The treasury can have its own native token, which is, call that equity, and the treasury can have, obviously, obligations. It can spend and receive, and so on.

Balaji: That's right. By doing this, what you do is you build the on-chain analogs of everything. Then what you do is you start taking that to law reviews. You take that to folks at Yale Law, you take that to lawyers in different countries, and you say, "Look, here's what I did. I showed a bunch of scripts that essentially replicate Delaware stuff, but put it on-chain. How can we write some law review articles on this proposing that this be accepted as a--"

Jeremy: You need support to say, "Yes, this is valid, and this is a form that has substance." You've seen that in some places, even Delaware has started to do some of that as well.

Balaji: That's right. Delaware and Wyoming are fairly farsighted on this. In this fashion, you would then-- You get the code, that you can do pretty relatively quickly, I might put up a bounty or something, Bitcoin prize to this. Do it relatively quickly. Then you send it to farsighted people who have been writing blockchain regulation. You take a look at this. This is a translation map. It's like a scanner. A scanner will take something from paper form and put it digitally. This is like a set of instructions with-- Exactly.

Jeremy: I want to get Ian in here because I know he's got-

Balaji: Please, of course, yes.

Jeremy: -a lot of say around this topic as well. I'm excited to invite Ian to join us as well in the conversation. Ian Lee, who's with IDEO VC and working in the crypto space, and building in this space as well. Welcome, Ian.

Ian Lee: Thanks for having me. Also, I just want to point out that when you get Jeremy and Balaji on the same line, bitcoin breaks 40,000 for the first time.

Jeremy: That's good.

Balaji: Really? Oh, wow.

Jeremy: We thought that could actually happen. [laughs]

Ian: We could do this more often. At least once every four years.

Jeremy: All right. That's a good idea. We'll make sure we come back around it 160, how's that? [chuckles] That's awesome. Very cool. Ian, maybe just for everyone's benefit, just take a moment and share a little bit about yourself, and then I want to pick up on this idea of these new corporate forms.

Ian: Sure. Quick background is I got into crypto in 2014. I headed Bitcoin and crypto at Citi Group for three years, which was the fastest way to get fired at a bank during that time. I've been studying open software for quite some time. After reading Satoshi's white paper in 2014, I immediately realized that what it was was not a digital coin, it was actually an open fintech stack. When you have an open fintech stack, what that could do to the financial system is profound. I got kicked out of boardrooms for several months.

Got re-invited actually back in when Goldman invested in Circle in early 2015. That obviously created a lot of waves, and effectively run our strategies across the bank for those period of time. When I was there, I met a team at IDEO, which is a 40-year-old design and innovation company that was setting up a crypto team in 2015. That was called the IDEO CoLab. It stands for collaborative lab. We've been working with hundreds of crypto startups and enterprises over the last five years. Then two and a half years ago, we spun out a venture capital fund, focused on crypto, and have been investing in building crypto companies ever since. It's been a lot of fun.

Jeremy: That's awesome. I know some of the topics that we're talking about are obviously near and dear for you. I'm obviously excited to hear at some point about what you're actually working on building. Maybe just to ladder off of what we were just talking about, you actually had a recent tweetstorm. You were developing this thesis around these internet cooperatives. I think the ideas that we're just talking about, which is taking what we think of as a corporation, and of how you organize that, bring that on-chain, Aragon, obviously, creating this community-based treasury and governance, and other things, where do you see this now?

Ian: I'd love to get your guys' take on this as well. Almost two years ago, I was really fascinated by where was crypto and decentralization going to make a really big impact in people's lives. That was where I started six years ago. One of the things that was really interesting to me is IDEO had been studying, for actually numerous years, the future of work, not even related to crypto. When you look at a couple things, work itself is decentralizing. It has been over decades. With the rise of the gig economy and things like that, you have more and more freelancers, 35% of the US as freelancers today. 50% will be that in a few years.

You combine that with this other trend, which is that technology is starting to centralize power and centralize wealth among a very few number of people. You've got these interesting platforms that are right in the middle of that, like Uber, where you have some people who have become, in some cases, decabillionaires, or whatnot. Many of these people on these platforms that are contributing resources or services to these platforms are often below the poverty line. We live in Silicon Valley, and there's people sleeping in their cars, driving Ubers. This is not specific to Uber, this is happening everywhere.

50% of jobs are expected to be automated in the next decade. You look at those two seemingly unrelated things, work decentralizing, technology centralizing, and you wonder, isn't there a better way? One of the things that I've been looking at for the last year and a half, and researching is this topic that I call crypto cooperatives, internet-based cooperatives enabled by crypto.

Which is, can you decentralize organizations and the ownership of these organizations to the people that actually provide value to these platforms? I think we actually have a lot of precedent for this to actually be very excited about the potential, even though there's a lot of work to be done. The concept of cooperatives is not a new thing. They were actually invented in 1498. 500 years ago.

Jeremy: It is in a corporate form, right? It's just at the end of the day, how do people get together and organize their work and, dig the fruit out of their work situations?

Ian: REI, Ace Hardware, Vanguard, AAA Insurance. Visa was once a cooperative. The Green Bay Packers was a cooperative starting in 1923. 15% of the world belonged to cooperatives. Cooperatives today, which are mostly in agriculture and retail, employ 10% of the global workforce. Now here's the question though, why haven't cooperatives effectively been able to-- Why hasn't that model shown up in technology? Because ownership of technology has not been very easy. Going back to what Balaji said, you can actually now encode the ownership of a enterprise or organization into these crypto tokens and distribute that across the workforce. That's what I think the big opportunity is here.

Jeremy: Right. If anything, it's the mechanism that is needed so that you actually have a trustworthy infrastructure to know what ownership is, and how people are contractually entitled to different things, to make decisions, but to have the actual participation in that be dramatically more distributed.

Ian: Yes. Here's the big idea, is that-- The provocation is could crypto cooperatives start to solve massive challenges that we have around the world right now, and that are creating really big problems, second-order problems, around wealth inequality? 99% of the world now owns the same amount as the top 1%, or maybe I should have said that the opposite way. The other thing is that when you look into the research of cooperatives, cooperative models have shown to be more resilient and actually outperform, in some cases, traditional corporations.

In 2008, when the financial crisis happened, credit unions, for example, had a 5x lower failure rate than corporate banks. Many cooperatives, I think there was a study that the five-year survival rate of a cooperative is 20x to 30x higher than a traditional business. These systems, the combination of the infrastructure, like Aragon and things, combined with the design and implementation, actually, within a particular work context, like freelancers or our creators of influencers on-

Jeremy: Market--

Ian: -TikTok, and stuff like that, yes, like Instagram, this is all connected. The combination of these things can start to more equitably distribute wealth and value, and, number two, make these systems much more resilient long-term.

Jeremy: That's super-helpful. I'd be interested in both you, and your perspective. I think what we saw with the internet in the past, whatever, 20 years, is things became possible that people didn't know were going to be possible. For example, fundamental new communications utilities emerged out of just simple pieces of software. Mobile devices, billions of people connect to those. That was unimaginable some period of time ago. Is this a similar thing? Are we getting the building blocks in place where I-- Whatever, people call the uber moment, where someone just synthesized enough interesting features together that were right in front of everyone.

Like a GPS and 3G, and a reasonable UX, and has such a profound change and people can participate in it? Is it something like that, where some group of people are going to envision--? Maybe, Balaji, maybe it's a social media platform that is owned and operated as a platform cooperative that is built on decentralization. Is there something that happened, where there's just massive scale and success, and it just works, and it's independent of nation states? It just is out on-chain, and you've got mass participation and value creation, and so on. How does this burst into being in the same way that certain things like social media or other dimensions in the internet burst into existence?

Balaji: I have a lot of thoughts to say. Actually I have the book that I've been writing. If you want to follow me, I'll tee it out at some point. The tentative title of the book is called The Network State. The idea is that we have mechanisms to start new communities and new companies, and now even new currencies, but not yet new cities and new countries. I think new cities, there's actually already the legal processes for doing this, where you can go and take unincorporated land, for example, and incorporate it. With Starlink and with social networks, you could imagine actually building a community in the cloud, then crowdfund territory, and build a city.

You do the whole city in VR before you build a single brick. You argue over everything in the cloud. You build an actual community before you move there. This actually is similar to the 1800s, when people would move out and build communes and so on in the West of the US. I think to get to something like a new country, is you're going to need new techniques. Most importantly, you're going to need international recognition. That might seem crazy, but think about how far Bitcoin has come in the last 10 years.

If you have a community of 1 million or 10 million people that considers themselves to be a digital nation, and has a footprint worldwide, and is serious enough about it for long enough, and does all the diplomacy necessary, I do think that you will get a new country recognized in the UN, just like you've got new currencies that are being recognized on Bloomberg and so on in our exchanges. I think that's a mechanism by how that happens. Ian, to your point earlier, by the way, on influencers, I'm an investor in tryroll.com, which is doing social money. That's just one, but I do believe that it is going to be influence--

This is maybe obvious, but the next social media platforms will be rating influencers from the existing ones, and giving them a better experience. locals.com-- There's actually another company called Circle, which you may know, it's a creator's platform, circle.so, I believe. There's also newsletters like Substack and Ghost. People are starting to pull their communities off of these platforms. The free model was actually wonderful, 15 years ago, because, "Wow, you can freely communicate with everybody," but now, free is table steaks, and we want the better than a free model. We're actually getting remunerated for all this work. I think that's an obvious thing.

It's not just also remunerated. Some people think that the major social networks have too much moderation. Others think there's too little or too much censorship, or too little, whatever. Actually, what really people are saying is, "I don't feel that my community is properly flipping the dials. I think this place is too big, and I'm not in control enough." A smaller community that's run by a de facto-- or not de facto but an actual influencer, has a very clear set of rules associated with it.

I think you're going to see way more of those. The big social networks will still exist, but will be war zones that people transit through en route to these more monetizable communities. Am I kidding? I'm not even kidding, really, where they're digital war zones, basically.

Jeremy: Then there's these, what I think of, as the horizontal platforms universe that can move into these entirely digital forms. Then I come back to your basic corporation. It's a corporation, people invest in it, people will work for it, they make something. Maybe they're making software or maybe they make a physical thing. They sell it because it can be sent around the world, or what have you. Globalization is created this way, where people can create products to sell them anywhere, all this kind of stuff.

How do we envision, beyond a digital-- or far short of a digital nation state I should say, a-- Just making it possible? I think this gets back to what, Balaji, you were talking about earlier, just that people figure out that they can form something, and form capital in it, and have governance, and have that be done entirely on-chain, and create things, and that individuals can contract to that all of the sharing economy. You can contract to that and know you're getting that appropriate remuneration in stablecoins or tokens, or what have you.

Balaji: One thing is, an interesting view on what a company is, is it's a contract execution engine. If you've ever sold a company, there's a diligence process, where you have to assemble a folder with every contract the company has ever signed. If you haven't done that periodically during the life of the company; there's some contracts somebody signed, and it's floating around in email and so on. It's actually an antiquated process. It's amazing to think that people could ever do this in the paper age, where you have to make copies. There's literally just a file holder with every contract the company's ever signed. It's actually insane to think that we were able to operate before the internet at all.

Jeremy: They still keep copies of all that in paper in Japan.

Balaji: Yes, exactly. It's crazy to think that there would be an archive with all the important pieces of paper on the company, and those would be the only copies of it. It's also crazy, I think in 10 or 20 years, people will think, "Woah, they just had a warren of PDFs, like on DocuSign? That's crazy."

Jeremy: Right. The natural next thing is that this is-- obviously all of these ought to be contracts in code that you can--

Balaji: Exactly. That's right. It should be--

Jeremy: They ought to be-- you run a piece of code on it, it's like people scan opensource libraries, and say is this toxic code, because it's got GPL on it, or whatever.

Balaji: That's right. Just for example, Sign and Wire. That's the same thing on the blockchain. You're basically presenting your digital signature and initiating the payment. If you do it from your official corporate account, like circle.eth for example, if you use ENS, then it's like an official stamp, "I publicly committed to something," the blockchain has witnessed it.

There's just so much cool stuff that comes out. Of course you can eventually zero-knowledge encrypted or what have you, but that's the right way to go. Then you get what's interesting is it becomes easier to sell companies because one way of thinking about it when you sell a car to somebody, what do you do? You just hand over the keys, and it's taken for grants that they can offer.

Jeremy: [crossalk] RMV and titles.

Balaji: Sure. You're right. That's true all right, but basically a car is a machine that you can just sell to somebody and they pay whatever thousand dollars for it. They could just turn the key and it works. The original operator usually doesn't have to be there. A company isn't like that, yet a company is not a machine that you can just sell.

Jeremy: What we saw with SushiSwap was pretty interesting. It's like here's this thing and who's got the keys, and who's got the [unintelligible 00:40:51] keys, and now we're actually appointing other people the [unintelligible 00:40:54] keys. Now this machine has just been passed over to another set of operators. I think the closest thing we have in recent times to something that's happening.

Balaji: That's all right. I think that you're going to see more of these things where with smart contracts, a crucial aspect-- You can automate setting up and tearing down software. You can automate APIs, integration testing. What was hard to automate was the flow of money. You couldn't deploy easily on that. Now you can. A program can actually hold money. What you can do is actually build a digital machine. For example, a good example would be something like zamzar.com. That's just file conversion. That's just doing MP3 to M4A. It's got 50 file conversion things. That's something where with smart contracts, you could turn that into a digital machine that's literally just a cash generating machine.

Jeremy: The definitive vision a little bit is like they're-- I don't know what they call them but basically it's much more fullsome. You could actually have a media conversion on-chain and--

Balaji: That's right.

Jeremy: Especially we have that scene, just the canister, as they call them.

Balaji: That's right. The other thing you get out of that is you get on-chain accounting. Now you can basically look at five years of "audited financials" so long as they use the, let's say somebody else's auditing package or what have you. You've got a consistent format, and it's cryptographically signed, and it's very hard to falsify. You know exactly what their growth rate is. Coin market cap is so interesting because crypto is such this odd space where you can see public numbers on the traction of almost everything.

That's not the case for drones. That's not the case for other industries that don't have all their numbers on chain. We take that for granted in our space, but it's actually quite atypical. I think that that aspect, I thought it was crazy actually many years ago when, there's a company called buffer that did this. It's a good company but it was being super transparent. I was like, that's weird that you're doing that as a small company, because a lot of small company, as you know, startups are hard.

Jeremy: [crosstalk] like VCs are like yes, it's good to be private. All your dirty laundry's not out there.

Balaji: That's right. What they have done, which is interesting is they turned it into essentially a content marketing gimmick for themselves and an accountability mechanism. The upside of just taking the hit, so to speak, on transparency was they took the hit once and then they were inure to it. Like, "Yes, we failed this quarter, or we succeeded this quarter." Now what I don't like about it is if they really succeeded, then it reduces their leverage.

For example, this is not the biggest thing, I'm not saying that every company needs to do this, but Google for a very, very long time did not disclose what percentage it was taking out of AdSense to its publishers. It's just like, "You put this widget there, you're getting free money. We're not going to tell you if we're taking 50% or 70% or 30%, or whatever it is." Eventually they disclosed it under a lot of pressure. You can't keep any numbers like that proprietary in such an environment. Maybe that's good overall, but it is a constraint. It's something new. Anyway, Ian, I want you to get a word.

Jeremy: Yes, Ian, I would love to hear you talk about this too, just the immediacy of how do we create these today.

Ian: Just piggybacking off of what Balaji's saying. I think when media starts to get encoded on chain, all those things happen. What we've learned from crypto recently around DeFi, for example, is that it enables higher order composability. When you were asking about, is this going to be a moment where, like the internet, there are things that get created like Instagram, TikTok, which we not necessarily could have predicted 10 years ago, I think that's going to be the case. I think that that's going to be enabled by a range of things, including composability.

DeFi, right, you have exchange protocols Uniswap and SushiSwap, and other things. You've got interest earning protocols Yearn Finance and whatnot. You've got lending protocols Aave and Compound, and they're all composable. That composability enables things on top of it, whether they're centralized products or more decentralized protocols. You take that same thing and you port that over something like media, for example, which I think is really, really interesting because it has enormous opportunities and potential related to social networks, social media, art.

There's a lot of things going on right there right now in NFTs. The idea of composable media that creates composable media experiences, whether it's new kinds of social networks, new social media experiences, is there a composable YouTube or a YouTube experience that based on composable media? Then what happens when that composable media, you can take some of that and then put that into Aave and get a loan on it? We're going to start to see some really, really weird stuff. When [crosstalk]

Balaji: What do you mean by composable media, Ian? Did you define that? Sorry.

Ian: Let me give you an example. Let's say there's an artist. I actually was an artist by training in undergrad, and then I realized that I wouldn't be able to make it. I probably wouldn't be alive right now.

Balaji: [unintelligible 00:46:22] idea that's pretty good. Go ahead.

Ian: In this world, it's really interesting. If you're a really, really talented artist, let's say you tokenize your art and you start to sell that via an NFT on OpenSea or Wearable, or something like that. Let's say you go a step further, that media which is an art piece is an NFT that is composable. Let's say you can also encode into that certain on-chain revenues that go into a Dow, for example, and that Dow ends up being owned by your followers. Now, that NFT also financial value. Let's say someone buys an NFT from you, or let's say you have some of these art pieces still in your collection.

Maybe you can lend that out into Aave or something, and get via Aave or Maker, or something $100,000 loan to then INDI or USDC, or something, to then build credit to then reinvest in yourself and the growth of your business. This kind of stuff is not possible really in web too, but because of the fact that media gets put on chain, that these financial kind of things can be encoded within that, and because of the composability of media combined with this rich ecosystem of DeFi that is also permissionless, these new possibilities emerge.

I think, for example, these potential hybrids between social media networks or social influencer networks and fintech now start, or even gaming in fintech start to become possible. Another good example in gaming. If you're a 15-year-old kid, let's say you're in the Philippines. Some of this is happening right now around Axie Infinity or this thing called Yield Guild.

You're a 15 year old kid in the Philippines. You don't have a bank account. You love playing blockchain-based games. You earn some NFTs through playing those games. You put those NFTs into a wallet. That wallet and those assets end up being worth $10,000. Then you start to ask yourself the question, what is the difference between an NFT game wallet and a bank account? That insight starts to lead to really interesting possibilities that we haven't seen before.

Jeremy: A lot of what you're describing does feel like even those things are imminent in the next year.

Ian: Yes. In some cases they're already happening, which is really exciting, because the truth is that these problems and these needs for people, they've existed for decades. That's what I like to see is when there's a latent or existing human need combined with the new capability of crypto that we can now offer.

Jeremy: One last question for both you guys, and obviously we could just go on on some of this is, I think as we get into some of these on-chain entities, whether they're collaborative, economic, independent of a nation state, exists on chain, rubber meets the road. People live places where there's militaries and borders, and guns, and taxes. These things exist and meld with that just by virtue of how property is classified, how securities are classified, how all that happens. What is that intersection with, let's just call it national or local jurisprudence and these forms? Is it a matter of we just need some case law to start getting established from some of this? Where do we go on that? I'll start with you, Balaji.

Balaji: One huge difference here is that when you disrupt Microsoft, Microsoft can't shoot you. That is a big difference. I actually think that there's a whole envelope of possible outcomes. One thing that has been interesting is that there is a large group of people within Western countries and within the US that are activists and advocates for this technology. We saw that with FinCEN.

In fact, I would go so far as to say that I think with BTC versus MMT, the battle will really be joined because there are people who are very big advocates for MMT, but there aren't that many people who are advocates against cryptocurrencies. What I mean by that is, there isn't grassroots opposition to cryptocurrencies, just grassroots support. That importantly comes not just from companies, but it comes from many individuals. It comes from overseas. It comes from pretty much every country in the world at this point.

Jeremy: All over the world.

Balaji: It comes from activists, it comes from nonprofits like EFF. It comes from academics like MIT, and it comes from financiers now, legacy financial institutions like Fidelity. We're really starting to build a fairly big coalition.

Jeremy: [unintelligible 00:51:44] a lot of the fabric of society and the economy.

Balaji: That's right. I think we're going to win 55/45 or 60/40, or something like that. I don't think it's going to be easy. I'm not saying it's going to be without reversals. It just makes too much sense to digitize the stuff. It's fundamentally a technological advance. Ultimately, there's lots of different models, and I can give some historical ones. One of them is the encryption wars of the '90s.

That was quite a big tug of war. There were a lot of things thrown around. Ultimately, you did get SSL. What happened was the US government complete u-turn. They went from saying, "Encryption's ammunition, you can't use it," to, "Have you seen https.cio.gov?" Now, the US government requires every US government website to use strong encryption, because they want to protect.

Jeremy: The same thing could happen with crypto and zero-knowledge proofs, and all this. It's just going to be like, "Duh, this is so much better. We should all be using this."

Balaji: We've actually already seen a flip of that, where even a few years ago, you probably experienced this yourself, but when the big four audit a crypto company, they use the blockchain as a gold standard--

Jeremy: [crosstalk] nodes, and they operate the nodes, and they're like, "Holy shit."

Balaji: Yes, exactly. Think about that, in 2013, people were saying Bitcoin is a scam, but listen, five years later, they're saying it is the gold standard of truth for accounting. It's triple-entry bookkeeping where we can check your internal numbers against an external standard of truth and reconcile that way. That is amazing, and it's just underreported in terms of how important that is. I think that the ineluctable logic of it, this is something which is technically superior.

I do believe that, at least in some countries, it will win the day. I also think it's possible, like New York State has actually driven a lot of companies to launch in New York last just simply because the BitLicense is actually fairly onerous. It's possible there's places, jurisdictions that take a more aggressive view. I think net, the world's a big place, and a lot of places are going to see that wealth is created by cryptocurrencies, you're going to want that to come there. Ian, your thoughts.

Ian: I will just make a short comment, which is, I think piggybacking off of what you were saying earlier about how the world is now living on the internet as a result of COVID and stuff, we are going to start to see new behavioral patterns that we haven't seen before, namely this rise in pseudonymity. I think, Balaji, you wrote something or tweeted something about the pseudonymous economy.

I think we're going to start to see more of that, where people actually have multiple identities, like a named identity and a pseudonymous one. You can be both Clark Kent and Superman, or Bruce Wayne and Batman at the same time, in the digital world. I think we're going to see stuff like that where in certain cases to address maybe some of those issues where you might live in a state or in a country that isn't as supportive of cryptocurrencies. Maybe that starts to go to your pseudonymous identity as opposed to your real world one.

Jeremy: Awesome, man. This is a great conversation, guys. We've gone over my typical time because I think this is just so much fun to talk about on this. I want to thank both you guys for joining today. We'll look forward to doing this again. There was a correction that also happened during our--

Ian: I think it might have been right after I joined.

Jeremy: I already knew that.

Ian: Maybe that's the thing.

Balaji: It dropped $3,000 as well.

Ian: It was rising when you guys were on. When I showed up, it crashed.

Balaji: It's fine. The long-term trend is up, so that's fine.

Ian: Awesome.

Jeremy: Thanks, guys.

Balaji: Thank you, everybody.

Ian: See you later. Thanks.

Jeremy: All right. Until next time, stay well, stay safe, and stay informed.

[music]

Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Balaji S. Srinivasan
Angel Investor & Entrepreneur
Ian Lee
Co-Founder at Syndicate Protocol

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