Professor Silvio Micali - Democratising Finance for the Masses: How Algorand Solves the Blockchain Trilemma

Full transcript: Professor Silvio Micali on London Real

2:40 This is London Real. I am Brian Rose. My guest today is Professor Silvio Micali, the computer scientist, philosopher, thought leader and founder of the cryptocurrency platform Algorand. For nearly 40 years, you have been a professor in the computer science department at MIT conducting research on cryptography, secure protocols, distributed ledgers and co-inventing zero knowledge proofs. In 2017, you founded Algorand, a first-of-its-kind platform that solves the blockchain trilemma by offering true decentralization, scalability and security.

3:10 Now Algorand posts an average of 500,000 transactions per day with more than 500 companies developing applications on the platform. Your goal is to democratize finance for the masses while ensuring technology is used as a service for the people. Professor Silvio, welcome to London Real. Brian, thank you and good evening to you and great to be with you and your audience. Thank you so much.

3:36 Very excited to have you here today. I’m very much looking forward to going deep on all of these issues. But I got to be honest, you’re giving me flashbacks to my days at MIT. I think you got there in 1983. I got there in 1989.

3:48 I came from San Diego, California. You came from originally Sicily. So I think we both probably had culture shocks in Boston. I got my degree in mechanical engineering. That’s course two for anybody that doesn’t know how we do things at MIT, a lot of numbers.

4:04 And a few of my flashbacks, you know, there’s this intangible spirit of, I don’t know, hard work, determination and excellence at MIT. It almost feels like it comes from the building walls. And people always ask me, what was Boston like? And I don’t remember because I was in the Hayden Library 24 hours a day studying until my eyes would bleed. That’s what MIT is like.

4:24 I actually took some courses at the Sloan School of Finance as well. And then I went straight to Wall Street. But all the smart kids in my fraternity were computer science majors. They really were. And I think I took one course in your department, computer science.

4:38 I think it was 6071. It was kind of an introduction to computer science, and it was really intense. You know, I think there’s that classic cartoon silio of a student drinking from a fire hose at MIT, which kind of sums up the experience. I was wondering, what do you tell your friends when they say, what’s MIT like? How do you kind of describe it to people?

4:58 What’s it like being there? Well, let me tell you, first of all, Brian, when I, the first time I came to MIT, I was a graduate student in Berkeley. And so I went to Sicily, to Rome, to Berkeley. Okay, good weather. Ice could be found in the refrigerator until that point in my life.

5:20 And then I had to cross the Harvard Bridge to go to MIT. And you know, that, as you know, is brutal, because it’s all exposed to the wind, as Lizzie was throwing out. I have my trench coat, you know, coming from back, which was plenty over there. And I felt I could not cross on the other side. I was not going to be alive crossing the Harvard Bridge.

5:41 And so I put to myself in the first door I could find. And I did not, at the time, I was in the middle of the infinite corridor. And to me, it was a surprise, a warmth, energy, people all over the place, discussing all kinds of things. As soon as I recouped my senses, I said, what a marvelous place. And so I really decided to go there.

6:05 That was, how do I get there for a longer time? So finally, I succeeded. And as you know, it’s an international place. You find people from all over the place, not only from all over the world, not only at the faculty level, but actually at the student level. So it’s really a marvelous factor of ideas.

6:29 And even the motto of MIT, mens et manus, right, is the brain and the hand. So about caring and transforming into technology, making, bringing to fruition the most theoretical science. And that is really what MIT is about. And I think its openness is really something that anybody touches, anybody who has been at MIT. And I’m sure you agree with that.

7:00 Yeah, I forgot that motto, hands and head. And it really is, it’s a place where you put things into practice, isn’t it? It’s not just theory. It’s like, what are you doing with these things? And the Infinite Corridor is the famous entrance on Massachusetts Avenue, where you go into Lobby 7 and you look down this seemingly infinite corridor.

7:19 And again, we’re kind of a weird culture at MIT. We’re a little dorky, and we have names and weird codes for everything. But I would walk into that lobby every day and look at the top. It’s a beautiful lobby, and I felt kind of honored to be there. I felt a real sense of history.

7:35 And coming from San Diego, there wasn’t much history. So it was just a special, it’s a special place. I agree. Yeah, yeah. I want to jump in to cryptography, because most people don’t understand that cryptography has been around for quite some time.

7:53 And lately, people know cryptography because it’s the first part of the word of, say, a cryptocurrency. But cryptography has actually been around for a little while, and you’ve been doing some of its most important work. And strangely enough, Silvio, I’m actually watching a course at the Sloan School of Management that Gary Gensler taught in 2018 on the blockchain space. It’s really good. It’s about 24 hours long.

8:16 I’m about 20 hours in. And Gary reminds the students, I think, in lecture 10, he said, you know what, there’s been a lot of work on cryptography and zero-knowledge proofs being done at MIT way before the blockchain by some of the best people in the world. And I just realized today, he was talking about you, Silvio. And so maybe you can walk us through it. I’m sure he was talking about you.

8:37 And so maybe you could talk us through some of the early work you did in cryptography and maybe walk us through why it’s such an important part of the blockchain. I’m guessing that some of the early work you did was even in the Cold War times when we really had to keep things secret. And wondering if you can give us a perspective on that. I know you won the Turing Award in 2012 as well for some of your work done with zero-knowledge proofs. Maybe talk us through cryptography for basics or cryptography for dummies.

9:03 What do we need to know about it? All right, so let me tell you. First of all, the word of cryptography is a Greek word which means secret writing. The original application is that I want to send a message to you, and making sure that only you, the legitimate recipient, understand it. And no adversary in between that can capture the message, capture the Pony Express, whatever the message was transmitted could understand us.

9:29 And that is being an art more than a science for thousands of years. So examples of cryptography go all the way back. So then something happened, which essentially when I was a graduate student in Berkeley, there was all of a sudden started becoming a science. And then we’re becoming also mathematics, not just a hacks here and there. So we were trying to define what does it mean that a message is truly secret?

9:58 How can I make sure that not only the message does not get understood, but even partial information about the message? People should not understand the message is a praise or is a dislike. And so how do you capture all the infinite possible ways in which partial information can leak? And so finally, we found a way to express that. And that was really for the first time.

10:24 But something more interesting happened. The techniques that Shafi, my co-winner of the Turing Award and I created for having this probabilistic encryption, this, if you want a perfect encryption scheme, should have were way more general than just a secret writing. And why is that? And so cryptography right now means a lot of things. It has morphed into being essentially a science of a secure interaction in the presence of an adversary.

10:58 So who is this adversary? Well, in the original application, is somebody intercepts a message and wants to figure out what it is. Well, it could also be somebody in the example of a digital signature want to pretend that you are sending the message and so and wants to forge your digital signature. That’s the adversary. What else can it be?

11:23 In a put system is somebody who wants to convince you of a falsehood. That’s another anniversary. In a pseudo-random number generation, is somebody who wants to predict what beats your computer pseudo-random program is going to generate next. And so on and on and on. So essentially, these techniques to cage in and to limit an adversary are becoming extremely powerful and have a common root and the same techniques apply to them all.

11:57 And why is that? Because you don’t need to be a cryptographer to understand that adversaries are all over the place. In fact, actually, let me tell you that if you take any sufficiently complex system and you run it for a sufficient long time, it will behave as if it’s dominated by an adversary. This is a general law of complexity. So it’s going to happen.

12:25 And how do you make sure to curb the power of an adversary? The less an adversary knows, the less power it has. So therefore, privacy, even though it’s something which we care about human beings, but becomes a general tool to guarantee correctness of a very complex system. Because by making certain things private, you actually prevent the adversary to create damage. And even if there is no adversary, it’s just a serendipity and complexity that somehow emerges as if it were an adversarial behavior.

13:02 You, privacy is a big help. Privacy is the key to correctness, in addition to guaranteeing a private communication and everything else. So that’s essentially what the cryptography is. And that’s why it’s so powerful all over the place. I never thought of it that way.

13:22 I always thought cryptography is because you’re trying to keep it a secret from someone else, trying to find someone from hacking into you and having an agenda to destroy something. But you’re saying over a long enough timeline, it’s just a solution to natural random adversity. And so the more you have it, the more that actually you can just obtain your goal. Like you said, which is correctness. Photon, yep.

13:48 OK. Now, better than I did. Your early work on cryptography, I’m guessing, was aimed at slightly different goals than, say, a cryptocurrency. How does that change things? Was your early work thinking about certain systems?

14:05 And does it change now if it’s cryptocurrency? Or is it all really that same protocol that you’re just trying to protect against adversity? So the mindset is the same. And some general techniques are the same. But then you really have to breathe a problem and understand it all deeply before.

14:25 So usually, every five years, I make a small turn in whatever I’m dealing with. And so I made a few talks over my life. And blockchain and cryptocurrency is the latest one. But certain techniques actually stay the same. So one of these techniques, Brian, is so-called the one-way function.

14:48 Let me tell you what the one-way functions are. And let me tell you why you should expect this technique to be so powerful, OK? So a one-way function is the mathematical equivalent of a one-way phenomenon, such as I take a glass, I bring it to the ground, I shatter it. That is easy. It’s a bit harder to put the glass together, isn’t it?

15:11 That’s example one. Fast forward a little bit more. Easy to fry an egg, I’ve done it multiple times. Harder to get back the original egg. If you want to continue, easy, unfortunately, to kill somebody, resuscitating him, hard.

15:27 So that is the same function that to go from x to f of x is easy, but to go from f of x to back to x, that’s hard. So when you have an object, which is a mathematical object, that essentially joins two opposites, like easy and hard, you get power. And so only to do now, you have all the ingredients to do to harvest this easiness and this hardness and put them in the right place. So for instance, encrypting a message should be easy. Decrypting for an adversary should be hard.

16:06 Producing pseudo-random bits should be easy. Predicting should be hard. Digital sign messages should be easy. Forging them should be hard, and so on and so forth. So it’s no wonder that essentially one general technique comes useful so much time, because in all mythologies, if you look like a Shiva, the god of life and death.

16:31 So these are where the power lies. When you have two opposite things and you reconcile them, you subsume them yourself. So this notion of a one-way function is a mathematically hugely important and powerful tool. And it’s no wonder that actually we successfully apply to so many different domains. Wow, that’s a fantastic explanation.

16:53 And I’m so glad that cryptocurrencies came into such mass adoption so people could probably understand what you’re doing in that department. Because I’m guessing before, people had some other notion of what cryptography was. But like you said, it’s a super powerful tool that can make this world a highly-functionable place if used in the right way. Because it’s hard to unfry an egg. It’s hard to resuscitate someone.

17:16 Like you said, it’s hard to put the glass pack together. Let’s talk about computer science and algorithms really quickly. Because you’re in this incredible department of computer science. Most people know that term. But that term didn’t exist many, many years ago.

17:29 When my dad graduated from Caltech in 1965, he had a degree in electrical engineering. And I think they were just starting to call it computer science. But before that, it was electronics. I remember when I was a young kid, I learned, I think the first coding language I learned was BASIC and then FORTRAN and then PASCAL and then I took some assembly code. And people now talk about smart contracts and something being Turing-complete.

17:53 But maybe it’s worth walking people through what is an algorithm? What is maybe the basic building block of what’s going on behind these contracts? Because maybe it’s something even a computer scientist doesn’t often think about how some of these basics are so powerful and allow us to scale up. How do you explain an algorithm to someone and maybe why a smart contract is so useful in that sense? Well, an algorithm essentially is a very, very precise recipe for doing something.

18:23 And it’s so precise and so specified that even a computer can follow it up. So you don’t need to have generic recipes by the way my mother was a great chef by the way of me. But it was very generic in describing a recipe. But an algorithm is a recipe extremely detailed that machines can actually follow. And what we can do essentially by doing computation is we have some very ancient algorithms which we no longer talk about.

18:54 Like for instance, the algorithm for multiplication, right? That is centuries old, but it was not thousands of years old. Somebody got the bright idea that multiplying by shift and add, if you remember, you shift and you add and you can multiply because try to do 1,063 times 2,074. Well, technically means you have to take 1,063 and add it to itself 2,074 times. Good luck, if not, see you tomorrow if you finish.

19:28 But somehow shift and add, that’s very, very, very simple. So the world of computation has been as momentous in the life of humanity as the invention of fire. If you look at the last century, everybody predicted that was going to be the century of the atom. In reality, it was the century of the computer. And the computer revolutionized our life and computation similarly to cryptography that starts for second writing and becomes everything else.

19:56 The computation became a form, just calculations to actually communication platform, to reaching everybody. And so to ability to communicate with millions of people. And I think the blockchain is a natural evolution because communication sending a message to millions of people is easy. But what does the blockchain do for you? It makes something common knowledge.

20:20 If I received say from Facebook or something else, a message, do I know that everybody else is getting the same message I’m getting now? On a blockchain, that is shared knowledge. Now I know what the common truth is. And it is a first time for humanity. So that I think is an important revolution that the blockchain gives just in, if nothing else forgets my country for a second, just providing this common knowledge that everybody can see, everybody can contribute to it.

20:55 Nobody can alter the content of the block or the order of the blocks. And that is, so what I see, I’m guaranteed that the same thing that you see. That is a powerful tool to civil society. Yeah, and let’s jump into the blockchain. And I guess I’ll start as we jump into deeper on this.

21:16 Your first reaction when you saw Bitcoin, I think you’ve said, and I’ll quote, I had two main reactions. One was its beautiful idea. Two, it was a very inelegant solution. Do you remember the first time you came across it and what were some of the things you saw? Obviously that open blockchain was one of them.

21:33 What were some of your first observations? Well, the first observation is, as you said, that says, wow, this is great. But I also said, why it needs to be architected this way. And so to me, I actually asked, it was so contrived that I had to ask a student, explain to me, no, I’m beholden. We think we teach students, but students teach us.

22:00 That’s why we want to continue to be educators. And I said, just everybody, at least it doubles a little bit of our time into education because it’s very rewarding. So they explained to me, I said, what, could you explain it to me again? So I’m when I started deciding what the hell we’re trying to achieve. And then once I, because nobody tells you, right, you know, Bitcoin is a recipe.

22:21 You do this, you do this, you do this, and you are raising the truck. So what you’re trying to do and why? But once I figured it out, I say, well, we ought to be doing better in bed. And that’s what I roll up on my sleeves and really locked myself in a room for a few months until I got the signs in principle for our entire system, which was, you know, alternative to Bitcoin. So what I was struck is by the complexity and the grandginess, but the beauty of the idea was not lost on me.

23:00 And again, this whole concept, like you said, of an open blockchain, of a dual ledger system that was invented in your country. Well, maybe Italy wasn’t a country yet, but it was still in what is now Italy in the 15th century. You know, that double entry bookkeeping system that’s now a public ledger, that was quite a breakthrough to have that now located on everyone’s computer. We’d never seen technology like that where anyone could instantly verify it and you could see the truth.

23:26 As long as that blockchain was verified, then it would be the truth. And that in itself is just a massive leap forward and it opened up so many possibilities. Is that right? Absolutely correct, Brian. So in some sense, you know, nevermind, you know, just a ledger, but a way to govern ourselves, to have a process of consensus in which everybody’s welcome to participate.

23:50 And even more millions or billions of people can participate if the blockchain is correctly designed. We can make progress rapidly is really a fantastic innovation. Because if you think about the general governance, what do we know? Well, initially there was, you know, kings and emperors and the like. So we follow one person, whatever he or she says, we do them, that’s easy.

24:15 So then we had elected democracy, which is way better, right? So in which, you know, you put in charge of few people for a temporary amount of time, suing for years if we like, what do we do, we continue. But for a while, they cannot, we leave them, we trust all the matters in their hands. And so this allows a different type of governance in which, you know, everybody can participate and if we do it right. And still we don’t get bugged into useless discussions forever and ever and very far to say, give me a dictator, please, because I prefer a dictator than to have chaos.

25:00 And so that is actually only, we didn’t have the right technology, now we do have. And so we have the power to keep on doing whatever parts of our lives that we want, centralized or sort of centralized and other parts so we can actually open up to open participation. We have a much better set of tools and new possible way of interacting with one another. Yeah, I mean, most power structures that have historically gone corrupt, they thrive by controlling information, if you think about it.

25:36 I mean, the church used to do it before the printed Bible, governments have done it. When I was on Wall Street, if I’m honest, we actually, we controlled the information flow to our clients, we withheld information and that gave Wall Street all of its power traditionally. And you could argue that’s true in so many different industries. Now that it’s out there in the public, it’s something we’ve never really seen before, even on Wall Street, the fact that you can see all the transactions on the blockchain.

26:01 I mean, you know, when we were doing derivatives trades on Wall Street, we would go out of our way not to talk about what we were doing. And so this is quite a leap forward, isn’t it? Absolutely, conspiracy is a big leap forward, yeah. So we have Bitcoin and the next major evolution was Ethereum with this smart contract. So now you can put an algorithm, which Sylvia, you’ve kind of shown us why it’s so important.

26:27 It also takes human error out of the process and human judgment out of the process when you can run an algorithm. But now you put that on top of the blockchain and you start to see all sorts of interesting things happening. What started maybe decentralized finance and all these potential issues, NFTs, et cetera. But then Vitalik Buterin, one of the founders of Ethereum, came up with this concept called the Trilima, which is that you can never have these three cherished things at the same time, which is decentralization, scalability, and security.

26:58 Because at some point, you’re gonna push the envelope of I guess bandwidth at the end of the day or a variety of things. I think you challenged that in kind of what you’re doing with Algorand. Perhaps you could describe to people the concept of that Trilima and then whether you think it’s true or not. Well, okay. First of all, give me a punch of light.

27:19 The Trilima is false, but we had to prove it false. So, but now let me explain a little bit of things. So first of all, as a scientist, and if I see something proclaimed impossible, my antennas are up. Because I believe in two things. One, there are in life, impossible things.

27:42 By the way, that is a benefit because it gives depth and meaningfulness to our lives. If everything is possible, we lose interest, right? If the second thing is that much fewer than the things we think are impossible are actually impossible. So as soon as it’s impossible, I really want to see if it’s true or not. So that’s why it took me a while to figure out.

28:04 I was saying, you know, a few months, but finally I figured it out. Let me explain to you what the Trilima means. So if you are not a cryptographer, to have a database or transactions organized in block, and if somebody tells you, it’s impossible to manipulate it, to change it, or to change the order of the block. You say, wow, that’s, or to be the other stuff. No, turns out this you solve it with a cryptographic tool which was an existence when I was a graduate student.

28:32 This is prehistory, okay, in cryptographic terms. I’m sorry to say. But instead the difficulty is, who is going to choose the next block or transactions to append to the chain? Because that person has an insane amount of power. Not even Louis XIV or the quintessential absolute monarch had such power.

28:57 Because you are going to declare, these are the transactions the entire world has to see, and these are the transactions we should not see the light of day. This granularity of power is unprecedented. So how do we solve this? You say, but you know, choosing who has the right to append seems a political problem. Well, but we have to solve it algorithmically, as you say, right?

29:15 So we want to have that part out of Daniel Domari. How do we do it? Well, in proof of work, the idea of Mr. or Mrs. Nakamoto was actually a good one, it was not perfect, but it was the first idea, so hat off to the first idea.

29:33 You say, well, Brian, you don’t have this power. See, you don’t have this power either. Rather, we create a computational game. We are going to put forward a cryptographic read-all, very, very hard to solve. And the first one who solves it presents the solution and has the right to append the next block or transaction to the blockchain.

29:54 So the idea was that one day I solve it, another day you solve it, and another day she solves it. You know, we keep turns and it’s decentralized in that way. In reality, because people love power, and because if you solve a real append the block, you get remunerated. Well, guess what happened? Became an arm race.

30:14 People don’t use the laptops anymore for minting these blocks. I’m going to buy a bunch of very expensive supercomputers. I’m going to power with an insane amount of electricity, then to refrigerate these thousands and thousands of computers because it generates an insane amount of heat. So, and therefore consuming even more electricity. And so when the cost of solving the read-all becomes so high, fewer and fewer people participate.

30:44 So in principle, it could have been decentralized, but fewer and fewer people means it becomes very centralized. And the Bitcoin blockchain sometimes is actually controlled by two or three mining pools. So that’s all. So that’s not enough. The next typical thing that people did was, you know, a delegated proof of stake to say, ladies and gentlemen, look at these 10 individuals.

31:09 Don’t they look honest? Yes, they do. And let me tell you, I bet they will remain honest in the foreseeable future. So why don’t we charge them with the task of appending the next block on the chain on behalf of all of us? Wait a minute.

31:24 Bitcoin eventually became centralized due to the cost of participating to consensus. This system is centralized from the get-go and it will remain forever centralized, right? So the idea that a state, you know, we put in an algorithm was a bit different. So the idea is that, you know, there is a bunch of tokens, like 10 billion tokens that participate to consensus. That’s a lot of granularity.

31:52 And then what you do in two steps, step one, you have a magical, where the magic is replaced by mathematics, by the way, way to select in an uncontroversial way, one thousand of these tokens. These tokens must belong to somebody. These people are an ad hoc committee in charge of agreeing on the next block to append to the chain. And next block, different thousand strong committee, different transaction for the block, and so on and so forth. So this is the way algorithm operates.

32:25 So therefore, everybody can have a chance as long as you have one of these, you possess one token to participate to this system. And of course, at this high level of description, the first very legitimate question is, wait a minute, Silvio, but you know, who flips the coins to determine at random which 1000 tokens ought to be selected for such privilege? Well, it’s not going to be me and nobody else actually chooses these people. But rather, we do something unorthodox.

33:01 We ask that each participant, individual, for each of these token, run a cartographically fair lottery. Think of it like a slot machine whose lever you can pull down only once. And once you pull down the lever, two cases occur. Either you win or you lose. If you lose, you can say whatever you want about the next block, you are going to be ignored.

33:27 But if you win, you obtain a winning ticket, a mathematical proof that you are part of this committee, your opinion counts, and you propagate on the network, your winning ticket and your opinion about the block. That’s the way it works. All right, so even if I’m a national state, can I cheat this cryptographic lottery and increase my chances of winning a little bit more, not even a small amount? No matter how many computers I have, that is the magic of cryptography.

34:01 You cannot fake that, okay? Is this distributed? Yeah, because you have a million participants, so this is the granularity. Is this scalable? How long does it take to pull down the lever?

34:17 Turns out it takes one microsecond. No matter how many tokens you possess, one or a billion even doesn’t matter. In one microsecond, you can do. So that is pretty fast, right? So in some sense, you want to say, what if a million people participate?

34:36 Well, a million times one over a million is one second of computation. That’s not much. What if 100 million people participate? Well, you are wasting 100 seconds of computation, okay? Really, there’s nothing.

34:52 So that’s why in Algo and everybody can participate. And on the other side, why is this secure? So decentralization, yes, check. Scalability, check. How about security?

35:05 Well, let’s assume now that I’m very, very powerful, an evil guy, and I’m so powerful that I can corrupt anybody I want on the planet Earth. Who may want to corrupt? Well, the committee. That is a problem, right? I don’t know who belongs to the committee.

35:23 Could be you, could be this lady in Shanghai. I have no idea because who are the participants, the winner of a secret lottery inside your own computer. And if you win, you propagate the winning ticket. But otherwise, I don’t know who won. So I don’t know whom to corrupt.

35:39 But wait a minute. After I see the winners coming out to say, here is my winning ticket, here is my peanut butter block. And these things propagate on the network. I get to the message, you say, oh, I know who the committee is. Let me corrupt it right away.

35:54 But at that point, it’s a bit too late, isn’t it? Because whatever I wanted to say is already virally propagated on the network. And if on a third anniversary, it can suck it back into the bottle, no more than the US government or any government can put back in the bottle a message virally propagated by, say, weak leaks. So the system is secure because beforehand, I don’t know whom I should corrupt. And exposed is too late to corrupt.

36:23 So that is a little bit of a thing. But you see, you need cryptography and you need some, a little bit of strange architecture in which you actually empower the people to self-select themselves, which sounds weird. But thanks to a cryptographically fair lottery, I don’t mind if you select yourself because you’re not going to be cheating the odds. Selecting yourself more than you should. It’s a fascinating dilemma because you almost have to democratize or put the power back into the people, but also ensure that it has all those processes to make sure they make the right decisions.

36:59 It sounds like something that was only cooked up in the brain of somebody that’s been studying this for 20 or 30 years, because it’s not something you just come up with out of the blue, I’m guessing. Do you call that proof of stake, kind of a randomized proof of stake? What do you call it? Okay, our brand proof of stake is a portfolio of techniques. Delegated proof of stake is one, bonded proof of stake is another one.

37:25 This particular way that Algorand uses is we call it pure proof of stake because essentially means that everybody can really participate. So essentially, if you want to corrupt a blockchain like Algorand, you essentially have to corrupt the majority of the tokens in Algorand and say, hey, vote against your own financial interest and destroy the very blockchain of which you own the majority of. And I mean, that is, when you have concentrated power, you have to always to worry, but can everybody’s, how conceivable it is?

38:04 I mean, nothing is in principle impossible, but to say, Brian, Silvio, let’s get together. Now it’s enough of us. Yeah, now we can bring down the Algorand blockchain, but who doesn’t belong? To us, we have a majority of you. Do you want to really break it down?

38:18 Maybe not, okay. Thank you. Let’s do something else in our day. So that is a little bit of an idea behind it, your proof of stake. But all these other proof of stake, in my opinion, don’t capture this ability to welcome everybody in the, under the advent of the sacred consensus protocol, which is the process by which we grow the blockchain.

38:44 In Algorand, everybody is capable of participating if he or she wants. Right. It’s a conversation everyone’s having now because obviously we’re watching the market grow. We see Bitcoin that’s stuck in a proof of work protocol that again was incredible innovation at the time and it created security, but a lot of extra work that’s heating up the planet and probably not necessary. We saw Ethereum go to the smart contract, which was a great innovation, but it’s talking about moving to proof of stake.

39:16 But by all the guests I’ve had in my studio here, even the ones that are intertwined with Ethereum, they said this is a matter of years, maybe in the next decade. So that’s not even a reality, that proof of stake. But when it does become a reality, you’re saying there’s still no way to keep it decentralized without some more protocols, which is what you’re talking about. You need, you know, let me, Brian, what I really think is that blockchains are a very sophisticated goal and can be achieved by very sophisticated technologies.

39:49 There are no hacks to achieve blockchain. I mean, so otherwise you get into centralization or you get into insecurity or you get into lack of scalability. By the way, lack of scalability is also cost because the cost is an impediment for most people. You cannot have a financial inclusion unless you make things available to the masses in huge amounts of participants, but also very, very, very small cost. And, you know, if the typical smart contracts, you know, is very expensive, very slow, and so you cannot do many of them and very fragile, you know, I mean, a great idea, but not as great implementation.

40:37 Yeah, and you’re one of the few people that actually speak about cost. You know, I now run something called the DeFi Academy and I’m taking so far about 500 students through kind of a four-week bootcamp where I kind of stick a fire hose in their mouth and turn it on and I get them to try these protocols out. And the biggest complaint I get right now, Silvio, is the gas fees. And they’re saying, Brian, you’re asking me to do a $50 trade so I can understand what a liquidity pool is.

41:01 Or I do a $50 trade so I can do my first yield swap. And yet I’m trying to, I’m being asked to pay $100 a gas fees. And everyone says, well, that’s gonna be resolved when ETH 2.0 comes on, et cetera. But like you said, if you don’t address the cost issue, then there’s no point in the network and it’s not real decentralized finance and you’re not giving the human right to people in the world that we think banking is a human right, I think. And so you can have the greatest theory in the world, the greatest security in the world, the greatest scalability in the world, but if it’s not cost-effective, then it also misses the point.

41:35 Absolutely correct. So let me tell you that somehow decentralized finance to me means democratization of finance and that means to put in the ends of the common people in the streets the most sophisticated financial tools that are right now are the privilege of an elite. That’s what it means. But to do this, cost has to come down. So let me give you an example.

42:04 As you said, first of all, when you do cost through gas, you have an additional problem. Not only that costly, but you cannot even budget for the cost because of the cost of gas fluctuates so much that you don’t know as a, even a financial institution, how much should I put aside to run my smart contracts? You don’t know. It really depends on the cost of gas. I mean, that is too much uncertainty, if you ask me.

42:28 So let me give you an example, right? So the first programmable money is a big world. It can mean very sophisticated things. Let me talk about one thing. Payments, payments.

42:41 Payments is a solved problem. I mean, if you’re lucky to be in the United States or you’re in a fraction of a second, I can transfer money internationally, not so much. But, you know, within Europe, say, I can. But, you know, where does it go? Payment is a unilateral transaction.

43:01 I pay you. What is an example of a unilateral transaction? A donation to charity. I pay the charity. What else?

43:12 If I’m an immigrant and I want to send money to my family or origin, I send money to them. Nothing is expected in return. Most of the time, most of the payments are a door to death type of transaction. They are a round trip, not a single, a one-way trip. So I pay because I want something in return.

43:34 And then the option is, how do I get something in return? Oh, well, that’s a different problem. Really? No, it’s part of the, it’s the other half of the middle. So we, the other half of the coin.

43:45 So somehow, what I, credit cards come in, mediators, I take the risk, but whatever comes back, it doesn’t come back. So the first smart contract, in my opinion, is an atomic swap, indivisible swap, a payment for something else. For instance, I’m buying a bond from you. Let me take this bond, offer your own balance sheet. Here is the money, done.

44:12 Now, in algebra, if I only could do, to send you the money directly, then how do I know that you’re going to get the bond? If you send me the bond first, how do you know that you get the money? So what do we want to do is that we want to do an indivisible transaction, which both happens or nothing happens. What is the cost in algebra? Time-wise, in 4.4 seconds, we are done with finality.

44:39 And the cost is two cents, two tenths of a cent. Now we’re talking about, because if you say an atomic swap, I want to buy something and guarantee what I want, even say it costs the 50 cents, for us, it’s very cavalier to say, it costs a hundred, as you said, dollars, but even if it costs the 50 cents, it’s very cavalier. I don’t care about 50 cents. Maybe we don’t, because we are privileged, but if somebody’s salary is $50 a month, 50 cents a transaction is to say, how many transactions can I do this month?

45:11 It’s not so easy. Two tenths of a cent sounds right to me, because all of a sudden you start to know, really enabling financial inclusion and anything shorter than that, you cannot do. So in Algorand, our philosophy is, we want to have programmable money and the program can be as general as you want it to be. Do incomplete, as you said before, technically speaking. But we don’t believe it.

45:37 How do we get a general problem? Additionally, you take elementary operation, like add one to this counter, or multiply by two this number, you’d make a bunch of elementary operation, you can do anything you want. At Algorand, we thought, how about we choose 80% of what the people want to do in smart contracts, optimize the hell out of them, and then we prove that every other smart contract, we use this very elementary component, super optimized, but already 80% of the time, you don’t need to go any fiber.

46:13 But if you want to take another extra percent for some very strange operation, you can, but putting together these optimized primitives. In Algorand, atomic swap, money, an asset for an asset is a bread and butter of trade. We do it as a primitive. Not even two way to the blockchain. No program to be written, nobody to be hired, no single iron new core, 4.4 second, two tenths of a cent and you’re done.

46:48 Yeah, I think the big elephant in the room that no one’s talked about until now in 2021 is speed and cost. And again, I get students that join my DeFi Academy and then they go do a trade and they said, Brian, I’ve been hearing all about how great the blockchain is. It’s not fast and it’s expensive. What’s the point? And I always tell them, guess what, the layer one solutions are coming.

47:08 And right now we are seeing, it looks like the market wake up to these layer one solutions. Algorand, as we speak, I think is number 21 in the top market caps, $15 billion market calculation. We see other layer ones making the massive headway, whether it’s Cardano or Solana or Avax, all giving maybe tangible evidence that there is something that can actually work fast and efficiently in the future. Will 2022 be the layer one wars? Do you believe, do you think it will, people will be really finally vying for who either is gonna win that or contribute to that?

47:42 And how do you look at the rest of the competition? First of all, I welcome competition. I think competition makes me, makes Algorand thrive, okay? If we have no competition, we all get lazy and like, complacent, okay? So I love the competition.

48:00 So let the best one win. By the way, I also believe that at the end of the day, different blockchains may have, may actually survive in the long-term and by having a niche in which everybody is better than somebody else in some particular aspect, right? So Bitcoin, for instance, even though it consumes so much energy and things, it turns out to be a great store of value. So I’m welcome, we need the store of value. However, for an economy to put the value and store it under the mattress is not going to let us transact.

48:35 So we better Algorand to have a transactional blockchain and that is to be both store of value and very fast transactions. So I believe that competition is good, but I believe that right now we do have the technology for solving these problems. All of a sudden, the market has to understand it. The market is understanding more and more people are developing on the right blockchains and we are blessed Algorand to have a few people. By the way, our best, some of the developers come from competitors because at first they wasted some time a year or two and some money developing on some other competitor and then decided, you know what?

49:22 We believe this is important. Let me start from scratch in Algorand. So if somebody else wants to migrate to us, we are very happy, but they want to start directly on Algorand that is a great about the confidence and we are happy too. Are you glad to see a lot of those layer one solutions coming in to at least challenge the narrative because before this, I mean, most of the transactions were still proof of work based on Bitcoin and Ethereum and now we have the Solana with proof of history.

49:49 We have Avax with a type of proof of stake, but it’s a different algorithm and we don’t know what Cardano is gonna do. I mean, these are good things to bring into the marketplace to show people that there is real scalability and decentralization. This is all encouraging from your point of view? I think competition is always good. And I think, you know, by the way, one thing we are very proud of Algorand is not that you look at the one technology entrenched, that’s what Algorand is forever.

50:21 You know, we are very proud of our solving the dilemma. We are very proud of the central business scalability that is going to say that we are very proud of our smart contract. But you know what I’m most proud? What do we got it right? That we build in Algorand the ability to have the consensual upgrading of the protocol.

50:41 Because I do not know anything human or anything in nature even that is fixed and remains relevant or alive for a long time. So you need to operate or die, you know, that’s the end. So if we become a little bit, you know, unable to improve, you know, we’ll become the next dinosaurs, right? So we need to improve. And so what I, in fact, actually in Algorand we already launched several changes that somehow make Algorand relevant not only to solve the needs of our community today, but to solve the needs of our community in the future.

51:19 And that I think is important. But the key is to budget for this from the very beginning so that we have a consensual agreement on improving the protocol. If we don’t have that, I mean, life is about, you know, intelligent adaptation and nothing fixed is going to go very far. And maybe you could speak a little bit on this whole web 3.0 concept. Because, you know, if you walk down the Infinite Corridor you see all the incredible innovators and engineers from MIT and a lot of them went on to create companies or companies were created on the back of it.

51:52 But they were all based on a traditional equity structure, shareholders, founders. It wasn’t this open source movement where people take your code and then vote on your code and improve your code. This is something very, very blockchain based, although maybe Linux and some of the things in the past of computer science is there. I had Stanley Kuleshev of Aave here in the studio. And he said, Brian, at the end of the day, my job isn’t to tell the community where Aave is going.

52:15 It’s just to produce the best code. So people use it and people develop on it. And it’s a new kind of thinking to where you kind of, you know, let it go and let the community now build on it and tell you where they wanna go. How do you find that kind of new mentality when it comes to maybe capitalism in America or in the world? Is it different or is it very computer science?

52:39 Well, that is very different. We didn’t have that iconology to enjoy this possibility. It’s going to unleash hands-on creativity. And yes, it’s a very computer science, but I think outside of computer science, we are going to see the same thing. The world isn’t used to be as simple as it used to be.

53:02 Remember, they would be, I’m a factory, I produce, you are consumers, I give you a product, I think. And to say, I am a water, I’m an electrical company, I produce energy. You are my devoted customer, you buy my energy. Really? Now we are all in a soup, right?

53:23 So if I put some solar panels on top of my roof, yes, I’m a consumer of energy, but I am also a producer of energy. And so how the hell are we going to keep this thing together? I used to be very nice, one producer and people below. And now everything is in a soup. So I think the blockchain really enables this new reality in which we are not passive, customers, users, whatever you want to name it, or somebody that is centrally designed.

53:52 We are actually part of the producers and consumers at the same time. And that is really a revolution, which first of all is the revolution of the only computer science which allows this to happen in a structured way, in a sound way, but it’s actually like in my example the energy production is already in the world, right? I mean, it’s out there. There is no coming back and all these other traditional models, they don’t have legs and sorry, if they don’t adapt, they will go the way of the dinosaurs.

54:26 Question about regulation. I mentioned, I was watching this course with Gary Gensler in 2018 at Sloan. And it’s interesting because he’s not yet the SEC chairman and he’s talking about these things, whether they’re securities, whether they’re not. He’s talking about stablecoins, et cetera. And it’s very interesting to see.

54:42 He’s also a really smart guy who really understands this technology. Absolutely. Really well. And every hour I watch him, I really like him more. He’s got a lot of experience on Wall Street and he understands Washington too.

54:54 And like, I know he’s got a difficult job. And I’m wondering what you think we need in the form of regulation. I think you’ve come out and said that we just need clearer points on regulation. And you’ve talked about, I think kind of four things that you want the regulators to talk about and consider, which is like scalability, the cost again, environmental sustainability, which is something you’re big on at Algorand and consensus. What do you think we need from regulators to move forward?

55:21 So first of all, good regulation and clarity in rules make a better market. I think that’s the true reason. You don’t need me to say that, right? So that’s a fact. So we must acknowledge that the regulators have not to crack here, right?

55:42 It’s not easy. Why? Because the traditional tools of the regulators say I shut something down, which it doesn’t harm the public. Well, let it be clear, there are good blockchain project, there are bad blockchain project. Who’s only goal is to skin the public to scare their scams, right?

56:04 And sometimes, my only plan is I got the money and run, or I get the money, I try to develop the technology. Then I say, sorry guys, the technology was a bit hard for me to develop. I didn’t produce what I promised to produce. Of course, we have to, but what is the difficulty here? That when you have even a semi decentralized blockchain is going to be, there are no offices to shut down, to seal.

56:33 There are no postal addresses, there are no something. The fact, we are powerless. So in a situation like this, what should regulators do? Regulators should do whatever they want to do. But here, at least as some suggestion from you, in my opinion, because if a bad blockchain, once it gets established, you cannot dislodge it, the best bet is to give regulation that enable good blockchain project, to pick hold a sizable position in the market, keeping out because nature abores a vacuum.

57:09 If this space, people want programmable money period. We say, buddy, we can give in our own unilateral payments. They don’t want unilateral payments. So they are going to give themselves to whomever, if we don’t let responsible blockchain project to establish themselves. So what I would say, my hope is to have a climate in which, we can differentiate good blockchain from bad blockchain, and we enable the good blockchain actually to take over, preventing the bad blockchain to get in, because if they get to 0.1% of the market, it’s unfortunate, but at least we can deal with.

57:49 But if they get that 20, 30, 40% of the market, we are kind of, it’s a nightmare, not only regulatory, but for all of us, right? So I believe that what is important here, two steps to have a good regulation. Education, and we saw essentially, Gary’s, I spend a lot of time at MIT, I start a courses, but in general, speaking more generally, education and experimentation. Because education, we must figure out how to distinguish these blockchains at a very technical level, what they can do and cannot do, and one thing.

58:28 And second of all, what we want to do is, we cannot only rely on rules and regulation of the past two decades, because this field evolves, as you said, Brian, a lightning speed. Two decades old, the regulation is already old, let alone regulation of the last century. So we need essentially new regulation that capture this soup, this air and the consumer and a producer together. All of this stuff is not so easy to dissect. We need the visa to do that.

59:02 And then experimentation, to figure out really what happens in real life, in a sandbox. Open the sandboxes, give the people to experiment, we’re allowed to distinguish, we see very clear what blockchain can and cannot do, because both things are a technology of also limitations. And from that, we can enact a good regulation that allows the whole market to benefit. Yeah, I think it’s a very tricky place. I think the SEC almost has a blunt instrument.

59:36 And again, they’re also governed by politicians that have to worry about votes. And again, they’re using rules that were made a century ago to deal with great depression type crises, and they’re trying to apply them. Is it a currency? Is it an asset? Is it a security?

59:53 Maybe it needs some new thinking. Plus, I think their department budget is being cut at the same time. So it’s a very challenging job that Gary’s got. And you’ve got companies to do- It’s the man for the job. Yeah.

1:00:07 That I mean, I’m to say is I have a huge appreciation for the man. He was a colleague at MIT when he stepped down from a registration and all. By the way, some of his blunt instruments could actually see it useful because some of these scams are so basic that we don’t need the precise instruments. Even instruments of a century ago would do quite well. But that’s not the only thing we need.

1:00:33 We need more precise instruments as well. And by the way, and yes, the politician, but I remember that at this point, this blockchain, this need of programmable money, this need of financial inclusion, this needs of I don’t want to pay an intermediary in order to be able to transact with you. This comes from the people. So the politicians understand that and they will understand more and more and this demand is going to grow. And why?

1:01:05 Because mediators, post-remediators, they don’t care about helping the you and me and the people on the streets. They don’t have any financial incentives to do it, right? Because how much is the transaction? How much money can I get out from this transaction as a mediator? So then these poor people are left to their own devices and they cannot transact, but that’s not the way the world should evolve.

1:01:33 And I believe that when the people realize that these instruments can be had and they are the cost effectiveness and they transparent in the thing, then the politician who interprets it correctly in a democratic system, the will of the people, they will actually step up to the plate. I’m optimistic about this. We are going to see progress in this area. It’s tricky, but it’s not impossible and we are going to see progress. Well, we’re all watching unstable coins in the next six months.

1:02:04 So we’re really looking for good progress here. It’s a pivotal point, I think, for America to be clear and definitely regulate that. It would be a crime, Silvio, if I didn’t ask you about zero-knowledge proofs because you’re probably one of the best people to ask about zero-knowledge proofs. I haven’t yet heard anyone explain them properly on any video on YouTube. And so maybe we should try now.

1:02:28 Obviously, you would co-invent in the phenomenon. I think you’ve also been clear in saying, right now, they’re not an essential part of what we do, but everyone believes going forward they could become this incredibly efficient and incredible piece of technology to verify things. How do you go about explaining what a zero-knowledge proof is and how would you explain it to my mom who might be watching right now at 76 years old who’s just starting to understand crypto?

1:02:58 How do we go there, Silvio? All right, so, well, I would break it in two steps, right? So first of all, I want to say, how would you, let me focus on the word proof. And then let’s add the zero-knowledge on top of it, okay? So proof is that’s very scholarly thing, full of dust, very long, tedious, long explanation that people have a hard time to follow.

1:03:25 And sometimes, actually, the proof, if you really want to have a classical proofs, is very, very, very, very long. Could be arbitrarily long. So nobody has the time to read it. Nobody has the time to verify it. Even if there is a mistake, you’re not going to notice.

1:03:41 So the first idea is to change the notion of a proof and make it a bit more interactive. So what do you want to do? Assume that I have to say a certain statement is true. Okay, I create a game and a game is very special. If the statement is true, I have a strategy that is going to win this game no matter what you do, Brian, okay?

1:04:03 If I’m the cougar here. If the statement is false, you have a strategy that guarantees you that you win half of the time, no matter what I do. So I say, Brian, this statement is true, believe me. You say, Silvio, come on, I know better than believing you. I should be skeptical, right?

1:04:21 I’m a verifier. So it’s okay, let’s play the game. The game is very, very simple and it’s going to take less than a second. We play once, I win. We play twice, I win.

1:04:32 Three times, I win. Four times, five times, a hundred times, I win, I win, I win, I win. Remember, if the statement was false, you had the chance of at least a half of winning. So now you have to start thinking, this simple game, Silvio wins all the time. Two things are happening.

1:04:47 Either the statement is false and Silvio is lucky, lucky, lucky, lucky, lucky because every time it does, a fair coin gets hit, hit, hit, hit, hit, hit. Or the statement is true. And so that we are going to change this verbose interaction or the explanation or written into a very quick interaction or a very elementary game and we just monitors how many times one of the two players wins. If one guy wins all the time, the most logical explanation is that the statement is true.

1:05:23 That is what it is, right? It’s becoming a game. So it is, and by the way, the fact that you say, it’s not written, right? Because I cannot convince somebody else, I played with Silvio and Silvio, despite whatever I did, they won all the time, very far to be true. Well, I want to play my Silvio myself, otherwise I don’t know, you’re telling me this experience.

1:05:42 I want to try firsthand, right? So that is the idea. Once you take this notion of proof that by the way, we narrated at least in the west from ancient Greece, right? So it is 2,500 years old at least. I’m sure that in some other part of the world I’ve had the same idea, but at least for my tradition, I don’t know.

1:06:07 So this has been an ethical change to have proofs like not a syntactic object, but as an interaction between the two players and as a game, that is a novelty. Now, once we disturb the military notion of proof, what else do we know about truth? But if you want to inspect the truth, you cannot separate verification of the truth from knowledge. The two of them are linked on the hip, right? Well, wrong intuition.

1:06:41 For thousands of years, verification was only possible if you have knowledge. What zero knowledge of proof enabled you is to disentangle knowledge from verification. You can verify that something is true even though you have no idea why. And that is what that zero knowledge of proof is. And by the way, is why do we care?

1:07:04 Why don’t you want to give them the model? Because think about it, if you’re going back to the regulator example, right? So to say, I want to inspect that you are not overextended in one asset class. So show me your investment portfolio. Well, that’s my secret sauce.

1:07:21 I don’t want to show if I can, right? So, but if I can give you a zero knowledge of proof, I’m not overexposed in any sector. Would you care about what my portfolio is? So you have your pick and eat it too. You can preserve privacy and your secret sauce and you enable, in this case, a regulator to figure out that all the proper rules have been followed.

1:07:47 So it is amazing what this tool can do. It started as a mathematical concept and I’m very proud to have been part of this big change. But now it’s becoming actually a tool and it’s not anymore a theory, it’s not anymore a theorem. It’s actually a tool to change our lives and to allow all kinds of more interaction. Because when you interact with somebody, you also expose yourself.

1:08:19 But if you can interact safely without exposing what you don’t want to expose, guess what, you will interact more, right? Because the only thing that stops me from interacting with anybody and to say, hey, you know, I have an envelope of privacy, I want to figure out to myself how much I want to reveal to whom? My friends and my family and trusted friends and all my, et cetera, et cetera. Here in zero knowledge of proof, you can interact with an unknown person and you know that you have nothing to fear about losing your privacy.

1:08:48 And that is a powerful thing which in my opinion, my hope is, we’ll allow us to interact more and to interact safely. And back to your opening thesis, that if in a long enough timeline, you experience adversity, that zero knowledge proof really protects you in a way to where you can do so much more, right? Yes, yes, yes, absolutely. You must have had moments when you’re working on zero knowledge where you thought, I’m guessing, Silvio, wow, like if I can help push this forward, this is something that humanity hasn’t even conceived of since its inception and it could push us forward to this whole new reality.

1:09:30 I mean, you must’ve felt like you were working on something so powerful. Did you have those moments? Absolutely, and let me tell you, these are good moments, these are actually lucky moments. I think, you know, never be ashamed or like Brian because without luck, nothing of importance has ever been done, okay? People say, oh, I deserve, yeah, maybe you deserve.

1:09:54 Luck is important, fortune is important, and fortune favors the prepared. But sometimes the good news is that like in my case, if favored, not only the unprepared, but actually the naive and the ignorant. But the good news is that even a young person, totally naive, I took on with my quarters co-inventors, you know, huge tasks of it, you know, by mere sheer luck, we managed to get the right key to open the door. But this can happen. So I really want to encourage all of you to say, never despair, but it’s too hard.

1:10:37 And sometimes the less you know, the more myopic you are, the more bold you are. And you are going to, maybe some door only to do is to give it a good push and the door will open. So, and I think that’s something we should remember. Nothing is impossible until we have tried. Yeah, I think you have a great quote.

1:10:59 You said, stubbornness is believing in yourself when nobody else does. And like you said, sometimes being biopic is how the impossible is solved in that sense. Do you think zero knowledge proofs are gonna be the future of the blockchain? Maybe not next year, but in years to come? Oh, yes, we are going to be not only of the blockchain, but also beyond the blockchain too.

1:11:23 So I mean, blockchain have a vital crucial impact in our lives, I think. And for civil society will be a major contribution and we are going to organize ourselves better and more transparently and so on, absolutely. But even outside of this, I think we are going to do. And just to give you a simple thing, let’s assume that you have a dating scheme, right? So you want to give a rank to say between the two people to say, yeah, you know, I want to have, let’s get out for a dinner.

1:11:56 You know, from between one and 10, I’ll give you a vote of 10. And how much, you know, how much, what is your vote you give it to me? Go what? If I’m going to think that the coming back is two, three, I’m never going to reveal myself, right? So this has nothing to do with the blockchain.

1:12:15 When you can actually compare ranking and enable people to like each other, to find if and only if they both like nine or above each other without revealing anything at all, in case this is not true, you see that helps in people opening up to each other. And I think zero large proofs will help us get organized in life and not dare more. It’s such an important concept. And like you said, the possibilities are endless, but as humans, we’re always used to those being linked intrinsically, you know, throughout our lifetime.

1:12:55 And so separating them is, it’s hard to do. But once you do, you can see there are just so many possibilities. So I encourage everybody just to really think hard about this because understanding zero knowledge will get you way ahead of the curve. And you’ll start probably looking at everything around you very differently. And what if someone could verify all sorts of things about you or your company without knowing any information, which potentially in a long enough timeline might hurt you.

1:13:21 It’s super powerful and exciting to see it happen. And again, thank you for all the hard work. Silvio, personal question for you. I mean, here you are, 67 years old, you’re running a company with a market cap of $16 billion. You’re on the cutting edge of cryptocurrency.

1:13:37 Did you ever expect that, you know, a kid from Sicily would be doing all of this? And what is it like to live a day in your life and have that in your computer science department at MIT? You know, how do you keep the energy? How do you do something like this? Is it fun?

1:13:52 Is it difficult? Give a question there. Let me tell you, first thing, I believe that I’m not revealing much by saying, is it fun? Yes. Because if you don’t have fun, you don’t go very far.

1:14:05 Because the road is always hard in front of you. And if you have fun, you keep on going. If you don’t have fun, you give up. So this, let’s put it to rest. I’m having a lot of fun.

1:14:17 So my life, you know, I’m very hard on myself. I always think that I’m not doing enough. And so, yeah, it’s good, that’s the trick. Man, that is the trick. I’m glad we share that.

1:14:32 Another thing that we share is really this MIT culture that both you, Brian, and I have. In particular, the one of an educator, I think it is important to proceed to be in touch with young people. Because as much we help them, we like to think that they help us. And in particular, we learn from them as much as they learn from us, tell you the truth. And that’s what I think it is.

1:15:02 67, I want to make it 80. So as long as you have fun, and you are in touch with young people, and then you can actually have a lot of energy. And so it’s a big responsibility. And I think what invest soup that the modern world has become, educators are actually learners and vice versa, and it’s a big soup. And I think we are getting at the point in the history of our civilization, which we can actually function in a co-equal manner, driving by consensus, making progress.

1:15:40 I think it’s a new stage of humanity, and it’s a fun stage, not only for you and me, we both admit it to have been fun, but also for everybody else. So let’s share the fun. Yeah, it’s so important what you said. I mean, I have two young boys, they’re four and five years old, and they definitely teach me more about life sometimes than I teach them, for sure. This community is super exciting.

1:16:03 There’s a lot of energy, there’s a lot of love, there’s a lot of possibilities. And it looks to me as if the blockchain, tell me what you think here, Silvio. It feels like it makes us as humans be the best versions of ourselves. When we’re totally transparent and everyone can see our actions, it’s almost like we were on the old hunter-gatherer tribes where you can see if everyone’s contributing and then you get weeded out if you’re not doing everything you say you’re gonna do, being the best version of yourself.

1:16:28 And I feel like somehow that transparency is gonna take humanity over a bunch of challenges we’ve had over the last 100 years and maybe bring out the best in us. Are you that optimistic about blockchain? Absolutely. If I, you know, at this point, I was spending a few years in this field and I’m feeling very strongly and there is a lot of the blockchain can do. And transparency, as you said, there is the number one ingredient for trust.

1:16:56 And when there is trust, there is progress, right? Because progress is a collective thing, you know. Is an old saying, if you want to go fast, travel alone. If you want to go far, travel in good company. Okay, so and trust is whatever allows us to do that.

1:17:16 But, you know, even small things, you know, the blockchain, what it can do, you know, in a democratic state for most of us who are lucky enough to live in one. So why shouldn’t, you know, treasuries be auctioned off on a public blockchain? I mean, right? So I’m a citizen, I trust my government, I want to participate directly in a Dutch auction for to buy a governmental bond. Why shouldn’t I be able to?

1:17:46 Why should I have the step in which a few people first participate and then they sell at a higher price to the rest of us? I mean, there is no reason. The transparency, however is, there was a technological barrier. There may be many reasons, but certainly one reason is the technology. If you are in the same room and you start a signaling in an auction, everybody sees it, gets common knowledge of what’s happening.

1:18:11 So everybody realizes what is the price and what has been reached and who won what. But on a blockchain, if it is scalable, if it is a national based and everybody can see the bids and everybody sees what’s happening and everybody’s satisfied with the results, we can actually do things which are actually much more open to everybody. Let me give you another example to go back to your original and questions about financial inclusion. Assume that I’m a builder. I build an office building.

1:18:46 I want to sell it. How do I sell it? Well, I could sell it to a commercial building, to a few local billionaires who specialize in commercial buildings and they are so few and so well loving each other that maybe they make the price for me. But if I am going to take my building and partition it in a million pieces, then I can allow somebody to bid at $100 to buy one of these more piece. But what’s preventing that?

1:19:20 Well, the lack of transparency. If I give you a piece of paper, this piece of paper says that is paper number 17 of a million pieces of paper. How do you know? So if you put in things in a blockchain in which you know this tokenization is really exactly what the number ever maximum that is going to be. And you know how many you are putting into circulation you’re selling now.

1:19:46 All of these things. And you have the ability at a very low transaction cost to participate in all this. I think that is really what the blockchain is about. And so am I optimistic about blockchain? Absolutely.

1:20:03 Yeah, imagine a government auction, maybe a zero knowledge auction on the blockchain going forward. That could be pretty exciting. Tell me your thoughts on NFTs. I know you’re working with the, I think the Italian Society for Authors and Publishers. What do you make of the NFT phenomenon?

1:20:17 I know Algorand has a NFT platform that you’re pushing forward. What do you make of this and what do you think it can become? First of all, as they, it’s already huge and it’s going to become bigger. So I think of it as Algorand, I think we have a unique, so it’s easy to have an NFT that sells for $69 million, what an example was, right? Because to say, if you want to issue this NFT and it costs a hundred dollars to issue it, but you fetch, you know, $69 million on the other side, that’s easy to do.

1:20:54 But if you want to do mass production of NFTs, well, a hundred dollars each is a high cost. So the CI, which is Italian Society for Authors and Editors as put on the Algorand blockchain in a single day, in fact, in a single half a day, 4.5 million NFTs with a total cost of $4,000. If I had to pay $100, would have been half a billion. And so what do these 4.5 million NFT represents? The digital rights to musical pieces, say songs, et cetera, or 100,000 Italian artists.

1:21:37 So you need the scale to do this. It cannot just say wait in a month, I will be done issuing all the stuff, or it’s going to cost me half a billion dollars, you know, no way. So this NFTs is already a phenomenon, it already exists, and it’s going to find more and more application. But by the way, one of the advantages that Algorand has all above all other competitors here is that our blockchain does not fork as you and your audience know that once in a while a blockchain is a unique string of blocks, but once in a while it splits in two branches.

1:22:19 And all you know is that eventually one of these two branches will die and you remain with, again, a single blockchain. But then you have a nail biter, which one of the two branches will survive. And what is an NFT? It’s a unique digital representation of a good, like a Mona Lisa. Okay, I’m assuming you wanted to become an NFT.

1:22:40 Well, there can be one Mona Lisa, so it’s very hard even semantically to start reasoning about NFTs in a blockchain that forks. So this match so far has not come up yet, but it will come up. So to have a blockchain that does not fork is really hand and glove for NFT because anything is unique, you give meaningfulness and depth to this being unique. And it’s very hard to be unique when a point, there are two branches in one. In one branch, I own this NFT, in another branch you own NFT, the world becomes becoming complicated.

1:23:14 So, and I think that is a great phenomenon. And I think we are going to see more of it, but I don’t think that all blockchains are equal when it comes to treating an NFT’s cost effectively and semantically corrected remaining unique pieces of property. Now, I appreciate that explanation. I don’t think people have considered that forking piece with NFTs because it hasn’t happened recently on a major blockchain. So it’s a good point.

1:23:40 Some people say forking is necessary because it allows this decentralization and allows the community to choose to go one way or the other. You don’t agree with that. You think that there should be a protocol without a fork. Can you explain? Yes, because, so how does forking may occur, right?

1:23:57 In a traditional blockchain, people think because is in the first blockchain has to be that way now. So I have a blockchain over here, right? That is, I want to add another block. Okay, when do I add another block? If I believe that this block is correct and all the ones before it are correct.

1:24:16 So you Brian just added this block and congratulations Brian. I agree with your block and I’m proving it by attaching my new block up to you. Now you have one vote or confidence. My next block that points to you. Guess what, if another somebody else attaches later, Brian, congratulations on your two vote, Silvio and this other person, right?

1:24:38 Well, is one vote enough now? Is two vote enough now? Maybe you should wait a thousand things, but we have to wait when you say, well, is this block correct or it takes a long time. Consensus in traditional blockchains is diluted. So if all of a sudden somebody disagrees with me or he hasn’t seen my block yet, he can start appending to yours, but below and he could appended for a while there is two chains coexisting.

1:25:07 In the case of Algo and essentially, remember we take a sample of a thousand random people and all of them to agree. So if I see a block that does say the digital signatures of 750 and making it up of these 1000 people, there is only one block. That’s why we never fork. There cannot be two of them and by the way, 750 agree that this block of yours was actually good because a thousand random people all check your block, agree is correct and 750 of them say this is the new block and thank you Brian for producing this block.

1:25:45 This block, your block, as soon as appears on the Algo blockchain is guaranteed never to leave the blockchain. Therefore you can rely on these transactions immediately rather than waiting to wait one, two, three, four, five, six block and say, well, maybe I can trust this block to remain there forever. In Algo once you see a block is immediate finality. Look, in finance, there is already enough risk. The last thing you want to do is introduce another risk of the risk of forking and then to be end up in a losing part of the chain where the branches that somehow disappear together with a block it contains and the transaction of contains in those blocks.

1:26:23 That’s a fantastic description and now I understand why your consensus mechanism is different than everyone else’s. And so that’s a perfect way to explain it. And I appreciate that. What’s your single biggest challenge now for Algorand for the next 12 months? What are the kinds of things that you think about that keep you awake at night when you’re being hard on yourself?

1:26:43 Is it hiring? Is it scaling? Is it partnership? What’s on your mind? So I think of it, I’ll tell you one thing.

1:26:50 Algorand, we are going to secure the chain against a quantum attacks. Quantum computers are not there yet, but they will be. But by the way, the chain, we ought to be forever, right? So in some sense, we want to protect the chain now against the quantum computers that are going to come up in the future. And that’s for sure is going to happen.

1:27:14 Later on, we are going to secure the chain and that’s for sure is going to happen. Layer two smart contracts, in addition to layer one is something else that is going to happen. We are going to have the decentralized bridges to other blockchains, because we believe that other blockchains will have a purpose and would be nice to interact with them chain to chain. I’m going to tell you what in chain A is going to happen. Trust me, when I tell you that an asset has been transferred to chain B, nothing of this.

1:27:45 We want to have the decentralized token bridge chain to chain, all of this is going to happen. But most of all, in my opinion, is that there is going to be the ability of Algorand to change in a consensual manner. And it really is the community that has to govern itself and somehow decide what the chain should develop, should be, and that’s, I think, what is going to be the way really to have the inclusions and in which everybody wants to participate too. Governing of these blockchains should be able to do so and this governing is self-governing, collective governing is going to produce the chain that is always ready to help us wherever they needed to be.

1:28:34 I think that it’s very hard to see what is in the future, but as long as you have the ability to evolve in a consensual manner, you’re going to be fine, doing fine. We are so missing those cross-blockchain bridges right now. It’s so challenging right now to go from one blockchain to the other. It’s so difficult. Yeah, amazing.

1:28:58 In the solution, I’m really bizarre. So, I hear some people to say, you know, what do you want to do? You don’t want to be a bridge between two blockchains. Go, really? So, I don’t want to ask that question.

1:29:11 And who are you? Because a blockchain that functions is out to secure trillions of dollars in assets, right? And so, the notion that I am a mediator between two blockchains says, you know… And what do I do? I post a bond.

1:29:28 I post a million dollar bond. So what? This is peanuts, right? I mean, I’m moving trillions of dollars on the left, trillions of dollars on the right, and I have my 10 million at a risk. I don’t even have the ability to pay if I make a mistake, even an honest mistake.

1:29:46 It means nothing. So when you want to transact from one chain to another, two things are true. A, if you want to transfer an asset from blockchain A to blockchain B, you trust blockchain A. If it is that your asset lives in blockchain A, you trust also blockchain B because so much so that you want to transfer your asset to blockchain B. And you know what?

1:30:09 Our philosophy at Algorand is is that you should not trust anybody else. Thank you very much. Otherwise, we throw the mediators out of the door in the blockchain, but then transacting blockchain to blockchain, we put them back. It makes no sense. By the way, speaking of mediators, I want to make sure that I welcome mediators who add value to the transaction.

1:30:34 But if the only purpose of a mediator is to enable the very transaction, then what is welcome is to keep an efficient technology that replaces that mediator. Fantastic point. I appreciate that. And I look forward to those cross chains actually working. It’s going to empower, I think, the whole ecosystem.

1:30:57 Final thought, Silvio, what is the future? What happens 10 years from now in 2031? What does this space look like? How big is it? What do you think Algorand is doing?

1:31:07 Have you thought about that? I’m sure you have. Yes, so, but I’ll tell you one thing. The best thing that I find that I’ve been, the best part of the future is that we do not know clearly, because the future we can predict is actually called the present or it’s going to be tomorrow. Okay, and even that is…

1:31:32 But I think the best thing is the future that surprises us. So if you ask even me personally, nevermind Algorand, Silvio, what are you going to do? Well, I hope that I don’t know. I hope that something else is going to capture my passion, my imagination, and that is true for each and every one of us, right? And Algorand I think is going to be as a great technology behind it and is going to get a governance scheme which is unique and cooperative.

1:32:03 And all I care is that as the ability to adapt, to a world that keeps on changing. And so in my opinion, to our children, to everything we spin off, so we really must keep them with keep up with change. In the case of our children, education and everything else that can enable them to be successful in the world, they’re going to inherit the brand of world that is different than one of the UNI experience, right? So the only thing is to say, be prepared. In the case of a blockchain is really a question to be, everybody’s welcome.

1:32:39 I think this is a good element to stay. And even a consensual evolving technology is also another good things to say. And for the rest, good luck to everybody and each one of us and our competitors included because it’s going to be a very long journey and very profitable journey for everybody. Yeah, any final thoughts Silvio, anything we didn’t cover or any final messages you want to leave to anybody out there who’s watched us? I’ll tell you one thing is to say is, I want to go back to something you just say, believe in yourself.

1:33:20 If you’re an entrepreneur, I’m saying the blockchain is here to help you to make your dream succeed. And, but don’t take up something which in which is not fun for you, right? And don’t take up something which is not a passion for you. Cause if you want to go far, the first thing you have to pack is your passion because it’s going to be the best fuel for the other end. So be passionate, there, win.

1:33:55 Perfect advice. And one, I think a lot of people wouldn’t expect to hear from a computer science professor. So I appreciate that spirit Silvio. I like you. I’m very hard on myself.

1:34:06 I spend a lot of my time asking myself why I didn’t do better. And it’s taken me 50 years to try to come to terms with that where I give myself a little slack and then kind of push myself a little bit further. But it also means I can create some great work too. And you’ve made some amazing work. Obviously the market’s also voting for Algorand and giving you a lot of credibility and backing your protocols with all of their investments.

1:34:30 And there’s constantly new players jumping involved every single day. And you guys have built some really unique technology. I’ve had the pleasure of having a few people like you that are bringing really novel consensus protocols to the game. And it’s just something I don’t think a lot of people have really thought about in the last year, but they’re starting to think about it right now. And we can see that from the market cap.

1:34:52 It definitely is the future. And it’s exciting to me to know that someone like you has spent 30, 40 years thinking about these concepts and now you can apply them to the blockchain. And yeah, I couldn’t think of someone better to be in the driver’s seat than you. So thank you, Silvio. Thank you, Brian.

1:35:09 Really appreciate you. Appreciate your energy. I guess if people wanna learn more about you, go to the Algorand website. I’m sure you’re hiring as well. So that’s the place to find out more about you guys.

1:35:17 Is that probably right? Absolutely right. All right, fantastic. Silvio, really appreciate that. Thank you for teaching at MIT.

1:35:25 Send my love to that institution. I’m gonna come back and visit soon. And for everybody out there, we appreciate you listening. Again, incredible stuff here. Incredible innovation happening at Algorand.

1:35:35 This future of zero knowledge is really important. Try to educate yourself on what zero knowledge proofs are because it’s a fascinating part of the future. And again, ultimately, we all want ownership of our information. We all want that privacy and it’ll make this world an incredible place. So thank you so much, Silvio.

1:35:50 We appreciate you. All the best to Algorand and hopefully we’ll see you again on the show. Next time, maybe in London. All right, Brian, you have it. Thanks a lot has been a real pleasure for me.

1:36:00 Thanks a lot. All right, fantastic. Thank you so much. We’ll see you next time on London Real. Bye everybody.