Balaji Srinivasan: Crypto Networks, Sovereignty & Decentralization with Akshay BD

Everybody, this is Garrett Harper, the co host of Lightspeed Blockworks newest podcast. We just launched this podcast last week and we've already had an amazing episode with Balaji and his good friend Akshay. We talk about macro, the incoming volatility, crypto sovereignty, and a whole lot more. I think you're really going to like the episode. That's why we're dropping it here. If you do, click the links in the show notes and subscribe to Lightspeed. And now let's get to the show. Everyone. Welcome to another episode of Lightspeed. Today we have a special one with Balaji and Akshay. BD guys, welcome to the show.

Good to be here.

Thank you very much.

I wanted to start today with something a little special. I know you guys are friends. I thought maybe give a background on each other. Akshay, if you want to start, that'd be great.

Meet Balaji Srinivasan, former CTO of Coinbase, former GP of Andreessen Horowitz, investor in some of the most prolific crypto breakout startups, as well as tech2startups. He also no mix company and sold that, but invested in things like EPNs, Forecaster, Gitcoin instead app Lambda School, basically anything you think of that's had a hockey stick, he probably has had a role in playing, has a role to play in that. Whether it's naming Superhuman or helping name Superhuman in the early days, or running a company like 21Co and eventually selling that to Coinbase. So welcome Balaji. It's incredible to have you on the podcast. And more than anything, I think he's one of the most principled thinkers and operators that I know. And he has the most predictable style of working with any other person, which makes it a pleasure to work with him because he's incredibly principal. I learned a lot about how to do business from him every day.

Great. Well, good to be here. Thanks, Akshay. So you know, Akshay's background, he is the one person in India who didn't major in engineering, but he's a very talented person and made his way up through Uber India. And you know that that got built into a very large business unit for Uber, made his way out to the US from that, which was actually relatively unusual, getting transferred from Uber India to the main HQ and did a lot of stuff at Uber during its hockey stick growth phase. And then more recently has become very senior at the Solana foundation and has done a bunch of other things, you know, besides that. But those are two things that are kind of Legible to the, to the outside world. And it's a great guy.

Thank you for the intros. That was fun. There's so much we can talk about today. We definitely want to talk about crypto ecosystem as a whole. Network stakes, communities. But to start off, I want to go with. When you dedicate your time and your money to crypto, what are you taking a bet on? Are you taking a bet on that we're going to be able to build 10 times better products? You betting on de dollarization and financial collapse or is it something else? And Balaji you want to start?

Yeah, well it's, it's a, it's a bet on several things at the same time because it's so any, any individual protocol. For example digital gold, you know, what bitcoin represents is a bet on essentially a return to hard money. And you're seeing, that's become a U.S. presidential issue. You're seeing central banks buying gold. You're seeing a lot of shakiness around the dollar. That's definitely, you know, that's a whole topic we can get to. Then there's you know, something like Ethereum which is like parallel Wall street, right? Decentralized finance is just in many ways better than traditional finance. Just, just for example, in terms of uptime, you go from you know, us nine to five hours during the weekday for trading. So like you know, eight hours a day for five days, so 40 hours to 24, seven uptime, which is 168 hours a week. So that is already like a massive increase. You're going from sub 90% uptime to 99 point whatever percent uptime. That completely transforms what you can do when it's 24 7. And that's just one aspect of, there's the international aspect, the fact you can do capital formation across borders, there's the transparency, all of that kind of stuff, right? And then you have, you know, something like Solana which, which I think of as like another gear on the bicycle where you can just blast lots of events on chain like the new compressed NFTs thing, just blast a million rather than a one NFT for a million dollars. A million NFTs for a few dollars, just blast them on chain. And that's convenient in a lot of ways. There's ways of doing that on Ethereum too with the L2s, but there's Solana. Then there's Zcash was a bet on privacy and all the zero knowledge stuff that's come out of that. Zcash itself may not have captured all the value it's created in terms of the ubiquity of, I think, where zero knowledge is going to get. And so it's sort of like saying, what is the Internet a bet on? Well, Google and Facebook. And so they're all different kinds of things. You know, Google is your short libraries, basically. Right. You know, long Google, your short libraries, Facebook, Facebook, your long online interaction and, you know, Twitter, your short traditional news media, in a sense. And so it's multiple bets. It's not just one.

Yeah, for me, it's just much more about the stuff I understand, which is, how do you. Which is mostly what I've experienced, which is like, how do you turn labor into capital without a barrier to doing that? Right. If there is a group of people that can come together to do some work and own a piece of the fruits of their labor without having to go through some elaborate process that includes skipping through regulatory hoops and lawyers and accountants and things like this, that I think allows us to live in a world where there is much more equitable distribution of capital. And I know I sound like some of the folks who in the early days talked about the labor movement, but I really think that that's, That's a much more. That's a fair way of distributing capital while you still stick to a roughly capitalist economy.

You know, the thing is, I think of crypto as. Certainly there's a technological element to it, there's also the ideological element to it. And I, I posted this a while back, but I think that one thing I've been surprised by is relatively few people can understand and speak multiple narratives in crypto that say to understand and speak the bitcoin maximalist narrative is one whole school of thought, and then to discuss the Web3 narrative is another. And then maybe the privacy narrative. There's certainly overlap among these, but I eventually I realized that they're as different as at least dialects, if not languages. Because, for example, bitcoin maxim brings in all of this history and culture of fiat currency and so on and so forth. And if you're just a hacker or a programmer and you just want to, I don't know, maybe move money around the world, you don't. You don't think you care about that. Maybe you don't care about that, or you don't think you care, you will eventually care, but you don't think you care. And so, so, you know, I actually look at it as first and foremost, actually ideological. And the technology is actually downstream of the ideology that say you are Essentially saying, okay, this is the system we'd like to build. Satoshi started with the system that he wanted to build. Then he coded something that reflected that, as opposed to, this is just a way to make things better, faster, cheaper. That's important, but it's actually downstream of the ideological assumptions.

I really want to talk about the part of maybe earning crypto versus being bought a little later on the show. But while we're here, Balaji, you're obviously very technical. You were former CTO at Coinbase, and I've heard a lot of your takes on, you know, Bitcoin, Ethereum, crypto in general. What are your thoughts? Like, what is your mental model when you think about crypto infrastructure? And there are L2s and modular L2 ideologies. There's the monolithic Solana and L1 ideology, and then there's kind of the Cosmos app chain ideology, where you have full vertical ownership over the stack. How do you think about those things and which do you have a preference for one over the other?

I think that it's certainly conceptually easier to put everything in one place. It's a little bit like when you're coding an app, do you do a monolith or do you do microservices? In general, you want to do a monolith because once you've got other services, things get complicated. You don't want to factor things out until you have to. That's like with Web2 development. But I do think that all three of the things, all three of those architectures both blasting all events on chain, like Solana, or having dedicated app chains, or having ethereum and then L2s, all them are the right approach for different things. For example, if you have a huge scaled Ethereum application, you may not want to port it or may not be able to fully port it, just given the huge ecosystem that's being built over there. But you can get some excess capacity, some relief for transaction cost, potentially by taking the cognitive hit of moving some transactions over to an L2 and, you know, doing that bridge. And you have to manage that. But that may be doable if you can't extricate yourself if you're dependent upon a lot of other contracts, or if you just can't move for cultural reasons, you know, social reasons. The app chain model also, frankly, has a lot to say for it as well, because, you know, it's. It's actually something where you could imagine an app being built which just has a postgres database and that's just mirrored publicly and, you know, people can see the events or some subs of it at the crucial event log, and then that eventually becomes its own chain, or it is something which is just a full app chain from the beginning. And the downside of that is, of course, you're a Galapagos island, you know, you're totally separate from the rest of the ecosystem. And so on. The upside is that you can optimize that for those kinds of events. And arguably, that's what bnb, you can argue BNB is more general than that. But BNB started on Ethereum and then it became its own chain, right? Kind of a dedicated chain to back what Binance is doing. And then you can also have an app chain that's tokenless, sort of like what Coinbase is doing with Base. And why is that interesting? Well, because that's an app chain. That's really an API chain, meaning it is a better way of doing a centralized API. Normally you just hit the Coinbase API and you're just hitting code. But now with Base, Coinbase is opening not just its code, but its state. It's mirroring more of its state publicly. That is just a new way of thinking about API design. You're just taking some of the internal Coinbase data, and rather than hitting a Rest API 50 times to rebuild, you know, what Coinbase knows about the state of this object that you care about, you just inspect the public base, you know, chain. Right? And that's better for a variety of reasons, as we'll see, because you can, you know, if everybody is going and hitting a REST API and they're pulling and mirroring a data set locally, it's incredibly inefficient. You're sucking the thing through a straw. Whereas if the state is actually public, like it is with Base, that's way more efficient. Everybody can just view that, synchronize that, and so on and so forth. Then there's actually like a fifth or a sixth, which would be the thing that neither Bitcoin nor Ethereum people like, and other people don't like it as well, but it's probably better for both. And what that is is taking, for example, some contract on Ethereum, and, you know, because you want a backup every 10 minutes, you hash the chain state or the chain tip to the Bitcoin blockchain, maybe using ordinals or maybe something else. And why would you want to do that? Well, that's, you know, you could call that a sub chain, you know, where you're basically, for the cost of one transaction every 10 minutes, 144 transactions a day times 365. So like, you know, a few tens of thousand transactions a year at a dollar transaction, a few tens of thousands of dollars, it could be more if it goes up, you're getting the security of Bitcoin. And in the event that anybody disputes and says, oh, I thought this transaction didn't happen, you can rewind to that chain tip, you can point to the bitcoin blockchain, you can say that this happened at this time. And so the point is all of those different infrastructures and architectures I think will be useful in different contexts and we'll basically see what happens.

Yeah, that makes sense to me. With the app chain, with Cosmos, it's all about sovereignty and it's almost a trade off between sovereignty and network effects. It seems at the time like you're talking about if you build on something like base, you almost have a built in network effect and then you can lean on Ethereum and you have that liquidity. Actually, I know when you came into crypto, did you go straight to Solana or like, what drew you in? What was it about Solana or did you start somewhere else?

Well, I have to credit biology with this because he got me into crypto because he was working on this thing called 1729 at the time and he was sort of exploring what the early stages of what we now know to be the network state is and wanted some. He was like, hey, do you have some time to come help with this? I don't know what this is going to be. And if you want to spend a few hours a week, you should come do that. So I did that for a few months. That was like my fast track mba, I guess, into understanding what crypto is like. And then I eventually got, you know, started making on chain transactions. I used Solana. I remember it was the solid wallet and I was mind blown by sort of like the user experience at the time. And I was like, okay, this is really interesting because I remember I texted Raj, which he tweeted at some point saying, you know, it felt like taking my first Uber ride or like using like the iPhone for the first time. So I was just drawn to it. And I was, I figured, okay, well is there anything I could do to make my skills valuable here and then? So that's eventually how I got involved in the Salon ecosystem help with international expansion, which at the time they were looking to do, and you know, sort of help launch various communities around the world that we. It's sort of called the Super Team program. As folks who in the salon ecosystem may know about it, but we're in many countries with fully local bilingual teams building out communities of people who contribute to the Solana Network.

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So it seems like you got essentially Network State pilled by biology and then it kind of took off from there. So this is actually one of my favorite books. I did read it twice. I am curious, biology, what is the origin there? Like, how did you first come up with the Network State idea? Was it something that developed gradually or you just had like a moment, you know, your Archimedes moment.

Well, you can go and you can see a talk from 202015 with the title Network State in Estonia. So I've been thinking about these concepts for a long time. In 2013 I had a speech at Y Combinator and this article that I wrote and Wired that I think have held up fairly well. Controversial at the time, but I think it was, it has proven, I think, reasonably, reasonably good. You know, before I actually even had my Twitter account, that was actually, I only set my Twitter, I think December 2013, I was a very late, as early as I was to crypto. I was late to social media for A variety of reasons. Because in the 2000s, and you guys might be too young to remember this, but in the 2000s, you know, Facebook started out in colleges and Twitter started out as just, you know, basically narcissists in San Francisco talking about what they ate for breakfast, right? Tweeting their breakfast. And it just seemed completely uninteresting to me and a total waste of time to. To do that, to like, you know, it's like the animals that pet each other's fur and just do that all day, right?

That.

That's what like social media was in the 2000s, right? And then actually what made me get into it was I remember I saw there was a genomics conference where a friendly acquaintance of mine had live tweeted it, and I could attend the conference remotely and drink in all of the information, including all the really technical details about BAM files and FastQ and what are all the stuff that's technical in that area that no journalist would ever have been able to write up, but a specialist in the area would have. And I was able to do that. And I didn't have to do a plane flight or anything. Like they could just drink and just like crack the marrow. Just get the. Get the information right out of that conference, right? And I was like, okay, now I get Twitter. And. But you. Twitter had to scale to such an extent before it was useful for something as seemingly narrow as that. Right? Now, of course, you can do that with any interesting thing that you're interested in in the world. If you want to find out, I don't know what's going on in Kurdistan or whatever, there's probably some people tweeting about that, and it's not everything, but it's a whole specialist group. There's probably 15 people who have a lot of coverage on whatever topic you care about. Anyway, thing is that. Where did NetworkSave come in? So the short answer is that I realized in the 2000s and the early 2010s that all the innovation that I had wanted to do in biomedicine was blocked by the fda. And, you know, genomics wasn't simply a technical problem. It wasn't simply a logistical problem. It was a regulatory problem, which meant it was a political problem, which meant it was a sovereignty problem. Okay? So, you know, you come back to how, you know, what technologies are actually going to be allowed to be legal. Why don't we have life extension, right? Why don't we have limb regeneration and stuff like that? What things are prioritized by the state, what kinds of Things are thought of as morally good or bad to pursue. Right. Why don't we think of death as bad? Why don't we actively pathologize it? Why are we, you know, for example, you give a lot more coverage to many unimportant things than you do to cancer or heart disease or things like that. Covid is actually the exception that proves a rule in the sense that there were public health dashboards and people could look at those. And I think that actually did make people more health conscious in some ways. I think a lot of the quantified cell fitness tracker stuff has kind of taken off after that. But really, you know, people talk about a stock market as a measure. You know, people say, oh, this country is doing well, its GDP is up. Okay, what's its life expectancy? Is that up? What are its death rates? What are, what's the muscle mass of those people like? What's their body fat like? Why aren't we looking at those things? We have all of these economic indicators and frankly, even those economic indicators are very macro. Because the stock market, okay, it's fine, but it's only for the shareholders. What about the median net worth of that country? Is everybody going into massive debt? Oh, well, that might actually be feeling. You might be looking at the wrong metrics. Right. So things like that, the biomedical thing is what got me started on it. But eventually I realized that we just need very deep seated political reform. And in a sense, that's what startups and tech are. They're a vehicle for reform. Blockbuster is failing, so you do Netflix. Microsoft is failing, so you do Google. The Post Office is failing, so you do email. SpaceX is failing, or NASA is failing, so you do SpaceX and so on and so forth. Right. General Motors is failing, so you do Tesla. And essentially you can think of tech as a vehicle for reform of a particular kind, which is it's not about going and taking over an existing institution and trying to do a turnaround or what Elon is doing at Twitter is very exceptional actually in that respect. Right? It is. I'm not saying it can't be done. You know, like Steve Jobs did it at Apple and Satya did it at Microsoft. It can be done, but that's not our base case. Those are actually relatively, you know, very difficult and important cases, but relatively unusual relative to most startups, which are, you start from a clean slate, you have empowered management and you have venture returns. If you have all three of those, you have a shot at building something amazing. When you go and try and Reform San Francisco or the fda, for example. You don't have those things. You don't have a clean slate because you have all this legacy code. You don't have empowered management because power has been fractured. It's like. You ever play Legend of Zelda?

I have. Back in the day.

Yep, back in the day. Okay, what's the whole point of the game? To reunite the Triforce. Right? Triforce piece of being smashed and scattered all over the world. That is basically what all divided government is. The entire thing. You have to do the entire Legend of Zelda quest before you can make a decision. You have to reunify the Triforce and get to a 51% consensus or whatever before you can make any decision. So you have to play the whole game through before you can do the most basic thing. So once you realize, think of it that way, every single vote that has to happen is reunifying the Triforce, which is, which is this whole complicated thing. Right. And so you don't have empowered management. And the third thing, you definitely don't have venture returns. If you're reforming San Francisco, reforming fda, it might require a lot of capital to hire new people to turn it around to do all this stuff. But you can't have private investment come in and do that. But you could do, you could do a startup city. I think it's going to be easier to do a startup city than to reform San Francisco. Just as easier to do bitcoin than to reform the Fed. And with bitcoin, you did have, quote, empowered management in the form of satoshi. You had a clean slate in the sense of no legacy code. You didn't have fedwire and ach. None of that stuff had to be grandfathered into bitcoin. And of course you had venture returns. Once you see that combination of clean slate, empowered management, venture returns, that is where our sweet spot is. Then the metagame is how do you create those clean slates? Because, you know, you had to actually like defeat the Soviet Union and Deng Xiaoping had to win in a coup against Mao in 1978 for capitalism to be legalized in Russia and China. Like basically before then, entrepreneurs were that entrepreneurship was punishable by death. Did you know that? No. Yeah, in China. Oh, you see, that's what communism is. Communism is. Entrepreneurship is punishable by death. Yeah. Okay, there's just to give some color on this. You know, there's a good article on this. This is one I cite sometimes just to give you some color. The secret document to transform China. You can read that we'll pull all.

These up and include them in the show notes as well.

Sure. But basically, like, just to let me poke on that for a second, from let's say, 1917 to 1989, the exits were blocked, right. In 1970, 1981, in Russia, if you were a founder, you're an entrepreneur. If you're a small businessman, they called them kulaks. In the early 20th century. You know what they did to the kulaks?

Nope. Sound like Tim Ferris fell the nose.

Yeah, yeah, they killed. Sorry, sorry. Well, yeah, they killed the kulaks. Right. Lenin gave something called a hanging order, right. That killed the kulaks. I mean, that's actually. That was just the thing which shows evidence for. For what he did.

Yeah.

But basically what communism was was guys with guns coming to your house, killing the husband, raping the wife, taking the kids off to the gulag, stealing the farm for the state, multiply that by a million people. That's what that was. This insanely bloody message. Then when they called it by euphemisms like land reform or collectivization, Right. It basically meant they had a list of all the people who had positive net worth and they went and stole everything for the government. Right. And then the government itself was totally corrupt. Right. So, you know, it was basically just one gang of. Of mercenaries that, let's say, let's call them religious zealots, a better way of thinking about it, because they did actually believe in their crazy ideology. They believe in an ideology that said, let's kill that rich guy and take his money and not call it theft. Right. That was essentially what communism was. And so the thing is that the minority report was squelched in Russia. Like, you couldn't go and start a company, you couldn't reform things, all exits were closed. You couldn't even leave the country. Right. You know, in countries that they took over, like the Berlin, you know, like, like East Germany, they built the Berlin Wall. So you couldn't exit, you couldn't. You can't get out of North Korea today unless you're, you know, you smuggle away on a boat, you can't get out of Cuba. They'll shoot you in the back for trying to leave. Right. That's literally why the wet foot, dry foot policy was established. Basically, if you made it to the U.S. then you could stay in the U.S. if you didn't make it to the U.S. well, you get to drown the ocean or get thrown into a Cuban gulag, Right. So, you know, all of these communist states were like, this where they blocked the exits. They blocked the ability to, certainly to create new corporations. They blocked any form of dissidents whatsoever, any form of constructive criticism. Because that's what starting a company is. It is a constructive criticism. It says, I think you're wrong. I'm going to prove I'm right. I'm going to do so by starting a new business that shows that I'm right. I'm going to take away your customers from them. Right. So point is that it was an enormous ideological and political battle to just be able to click on Stripe Atlas and set up a new company. Okay? Just that, I mean, and now 20 years later, we, 30 years later, we take that totally for granted. You see an entrepreneur like Vitalik, or you see, call it not, let's say, a founder like Vitalik, a founder like cz, you know, who's of Russian or Chinese ancestry, and literally 40 years ago, that same person might have been executed in China or Russia. Maybe 40 years ago in China, maybe 60 years, 70 years ago in Russia because Stalinism had moderated by, you know, the, the 60s and 70s. It might not have been executed, might have just been like, canceled, you know, but, you know, they call it in the Soviet Union, in China, purge, purge, purge. Right. That's the cult there. Okay, all right, so what's the point? Point is, it was this huge battle to be able to start new companies. Massive political, ideological battle. It's something we totally take for granted today. But, quote, freedom isn't free. All right, and so now what is the battle we're in today? Okay, today we're in the battle not to start new companies, but what. To start new currencies. We're in this huge battle with the SEC and with the CFTC and with all these governments around the world, right? And with the, you know, the US Regulatory system. They're basically, in a sense, trying to kill their air, kill their success, or kill their competition. Because the U.S. financial system actually is teetering. If hundreds or even thousands of banks are insolvent, if there are trillions of dollars in unrealized losses, as Stanford reports, if the safest asset in the world, meaning US Treasuries, is the riskiest asset in the world, if we're on the verge of something that's bigger than 2008, not just a real estate crisis, which it is, not just a financial crisis, which it is, but a bond crisis, a central banking crisis, a currency crisis, well, then Defi is the successor to TradFi in much the same way that when the world went to lockdown, people went remote. But even more fundamentally than that, because this one might not come back from lockdown, right? This one might be, you know, going down for the count, right, Rather than, you know, just going down for a period of time. So the thing is we're actually in this enormous fight which we're probably going to win. And the reason we're going to win is because there's more theory I can talk about. But history is running in reverse. The centralized state was rising into the 1950s and it's been losing power since then. Anyway, the point is it was a huge political ideological battle to be able to start new companies. We're in the middle of the one to start new currencies. And then what comes next, I believe, and what's kind of already ongoing is starting new cities and then new countries. One way of just, you know, expressing that, by the way, is for example, in 1945, 1950 geometry countries were in the UN. Here I'll show you a graph. This is not what people expect to see. The number of countries has increased over the last 70 years from about 45, 50 something in 1950 to almost 200 today. 193 UN member countries. And that's because the British Empire and the French Empire and then later the Soviet Empire broke down. Okay, if, if I'm right about what is coming, if we actually, and whether it comes in months or years or a decade, I don't know, it's really hard to say. But if this series of cascading insolvencies of the Western financial system is as serious as I think it might be, and I'm not the only one who thinks this, by the way. Dalio thinks we have 18 months or something like that. Drucker Miller is like, you know, it's 200 trillion in outstanding debts that can't be paid. Larry Fink thinks now bitcoin is digital goal and it's a hedge against the dollar. People have said, they've gone from saying de dollarization isn't going to happen to we need to fight for it. And there's a whole hearing on congressional, the correctional hearing on the doc, all this kind of stuff. The overtime is moving pretty quickly on this. And you know, people were in denial about the mortgage crisis as well in 06 and 07 and even early 2008 until it was finally acknowledged September 2008. Point is, if something like that is coming, and I think, I think it might be then the ability to form new political units in the aftermath of that It'll be like the metabolism of the Soviet empire. You know, it just broke down into a lot of different things.

Yeah, Balaji on that. You had this. I think this is on Tim Ferriss two years ago. You compared Doberts and window and market depth and how those two things shift and how they correlate. Could you give that? Because I think it's a really cool analogy for the audience.

Sure, sure. So it's actually. It's actually a very powerful analogy. So market depth. Let me start with that, because most of viewers will be familiar with that. Right? Market depth. It's like the V in an order book, basically. It's like, you know, children will ask, where do babies come from? Well, adults will ask, where do prices come from? Where do prices come from? They come from order books. That is say, normally you think of. So I give an example of orange juice. Okay. You say, what's the price of orange juice? Well, the store is selling it for, I don't know, a dollar a gallon. Okay, I'm just make up a round number. It's probably cheap, but fine, it's a dollar a gallon of orange juice. And most people are price takers. They don't even think about the price being set because it's. They're buying it from the store. If, however, you went to the store and you emptied out the grocery store and you bought 100 gallons of orange juice for a dollar and you took it all off, well, then you go to the next grocery store and it's A$10. They're all quoting you at $1.10 for that orange juice. You go to the next one and it's $1.50. And eventually all the grocery stores get wind that this crazy guy is coming and buying all the orange juice. So they start jacking up the price in advance of you coming. That gives you a sense of how prices are actually dynamic and how the price responds to your massively increased demand. And that's basically what's happening on Coinbase and Binance and so on. Every day is people are saying, I want, you know, 100 units of orange juice at a dollar. Except they're saying, I want 100 units of this coin at a dollar. And they'll buy it out, and then the remaining supply will be at a higher and higher price. So that V of all of the guys who are selling and all the guys who are buying is called order book. Right. And it's typically a V. It can be, you know, have weird shapes and so on, but it's typically A V. The reason it's a V is because most buyers want to buy for a really low price and most sellers want to sell for a really high price. So as you get away from mid market, you have more buyers. Like a lot of buyers would like to buy Bitcoin at $5,000, and a lot of sellers like to sell Bitcoin at 100,000. So as you go far away from the center of the market, you have more buyers and more sellers. And at mid market, eventually these people are agreeing on where the current market price is. And if you have people who just have enough money and have enough energy, they can just move the market one way or push the market another way with a huge amount of buying or selling pressure. And that's how market depth works. That's how the order book works. Now, you can compare that actually to the so called Overton window. And the Overton window is a different concept from political science. And it basically says that you have policies that are considered insane, radical, controversial, possible, and then there's the current policy, and then you can go to the other side as well, right? Because you go right or left or whatever dimension you want. And the concept of the Overton window is, for example, starting a business. In 1977, China was insanely radical, way outside the overturement window. By 2017, China was totally routine. You could do it all the time, right. By 1987, China, 10 years later, you could do it all the time. Okay? So sometimes you can have the overtone window shift very rapidly and political positions and what is acceptable, what the policy is, changes very rapidly. And the analogy between that versus the order book is with enough political pressure, with a strong enough block of, let's call it, votes, right? With enough votes and enough concentrated votes, you can have like buy or sell pressure to shift that midpoint of policy in one direction or another, just like you can on a price. Right? And it's actually a good analogy because, you know, price also has independent motion due to the crowd and just people who are outside. But it can also be moved by pressure groups, especially if it's like a thinly traded order book, right? If there isn't a lot of volume, a pressure group can move. And Price actually quite a lot. And so a policy that not too many people care about can probably be moved by an activist group much more easily than one which has a lot of attention on a lot of buy and sell demand on both sides. Right? And once you kind of think about it this way, well, you realize that, you know, often, sometimes you want to shift things on the market axis, and you want to need to move prices or you need buys and sells, but sometimes you need to move things on the political axis to essentially move votes and policies in a different sense. And that's why you think of tech and politics as being fully integrated, where to achieve your objective, you might need to use a right hand, you might need to left hand, you might need to use both together, as we're seeing in crypto itself.

Yeah, that's very well put. And one thing I'm super curious about is so obviously crypto is maybe this new movement that sort of combines politics and tech. You know, Akshay, I know you tweeted the other day, like, cryptos is much, much a political movement as much as it is a technological movement. 1. One problem I've seen so far, especially within DAOs and, and you know, when you're looking to form these communities that want to make change in the world, is alignment and incentive mechanisms. Currently there's a lot of noise out there because people maybe get, you know, blinded by coin price and they get aligned or incentivized by the wrong things. So I guess I'm curious, this is a question for both of you. Like, what are. How do you think about aligning communities to achieve a common goal? Like, how do you structure people such that they are actually driving towards a single mission and not getting blinded by the price of Coin X?

We should sort of be specific about what a community is. You know, when. When we started Super Team, we were very clear that we're not going to have some treasury that everybody's going to vote on. And, like, you can get 10 people in a room and have them agree on what color the pen should be for the office that they're about to, like, inhabit. And so there's just no way you're going to get people to make decisions of that have large stakes. In fact, I used to work at Uber and we used to have this thing where it's like, make the decision with the least number of people required to make the decision in the room and then communicate it effectively outwards. Right. So I've always just been a fan of, like, sort of like, effective decision making. I think a community has roughly three properties. One is they're ideologically aligned. Two, they're financially incentivized. Three, they're operationally capable. Right. And those are. I guess that's like a trilemma that I like, sort of internally refer to. And I know we don't think the trilemma is real. So you know, this might not be as well and I might just be BSing, but you know the. I think if you, you have to manage the financial incentives with the operational capability. Right. And I think id in an ideal world, or at least one. My answer to this is you have ideological alignment and sort of like alignment toward a mission and everyone's crowdsourcing labor and capital to achieve that mission. But that is done in two pizza teams. So you can have a community which is sort of a base layer of people who are aligned towards achieving a mission. And they spin off in roll ups. Like maybe they're private entities, they're private companies, maybe they're LLCs, maybe they're subdaos. Whatever they are, they spin off into roll ups with their own cap tables or coin tables to achieve a submission that maps to the major mission. And as each one of those subdaos or private companies or LLCs achieve those missions, that incentivizes other people to also crowdsource labor and capital to be as effective. Right? That's basically what Super Team is, where there is no token or treasury for anybody to fight or speculate on. But once they get in after, anybody can get into Super Team, but not everybody can, right? Because it's gated by proof of work. Once you contribute enough to the, to building the network, you sort of get let in and then you can work your way up to learn, earn and build, as we like to say. Right. And so to me that's what a community is. It's a group of people who are aligned around sort of like a specific mission that they want to achieve. And everyone's trying to crowdsource, label or capital into different entities that may spin out of this and they want to achieve that. I think the most rudimentary version of that was last cycle daos where everyone's trying to vote on everything. I think that's sort of like disastrous. Most people don't end up voting and very few people end up controlling the outcome of the common funds. Or worse, you have everybody voting on a situation, which means it's basically a financial mob at that point. And we saw this with what is like sushi swap, I guess, where they were unwilling to vote on approving payments to engineers who didn't own any sushi, which was insane. So either of those are like bad outcomes. And so I think the decision making should be bounded to the smallest possible group. And you use NFTs and sort of this cultural identity to bind the larger group. And this is sort of Where I think some of the things that Balaji says are network state sort of coincides with how you can have a relatively, with a broad purpose, but you can have infinite number of, or you can have many units or private companies or LLCs or whatever, the correct structures for that group to achieve its purpose. Right. Because then the community also works well, by the way, when you have, when you're limited by the Dunbar's number, which is the number of people you can know in your lifetime by name and face. So since we started, Super Team membership has been capped at 150. So we call the Purge party where we very sort of like eliminate the members who join and then maybe they got jobs and did other things with their lives and they became inactive. We've been doing this for two years, right? And that's held us in Good stead. Those 150 people are like I like to say members over numbers. Right. We don't need to go and get like 100,000 followers. What we need to do is make those 150 people very successful. And once they do that, they achieve escape velocity. Spokespeople for the community. You don't need like a marketing arm.

On that. I was going to say, do you think you can scale above the Dunbar number? And is that something that crypto allows you to do maybe with tokens? Is that where tokens come in? Is that it can coordinate a group that's bigger than 150. And I think part of that is to really have a group that has a cohesive mission. You almost need to go through trials and tribulations. And I'm not saying price is the way to do that, but I think that's really helped the Ethereum community and probably Solana as well because they've gotten punched in the face multiple times over the last year. You saw that price go up to 200 and then back to I don't know what it was $8. And that almost binds the community even more. So I don't know if the token. Do you think a token is necessary to scale beyond that 150 or are you better off? Balaji, even what you talk about with the network states how do you get above that 150 number? Because I know you've talked about like, I think it was like a million people in a network state would be a very successful model to you. So what do you think binds that group together?

There's at least three different ways of aligning people. Inheritance, incentives, ideology, meaning genetics, economics, politics. Right. And those are respectively you know, inheritance is like Hamilton's rule. You know, it's basically like inclusive fitness. If you, it's like an ant colony, for example. They coordinate because they have essentially shared genetics. Economics is, you know, you can think of in terms of game theory or positive sum outcomes. That's like, you know, prisoner's element studies coordination in that context. And then politics, there's different ways of thinking about that, but like spatial theory of voting is one way of quantifying that. Each of those are terms, if you just go and Google those, you know, Hamilton's rule, positive sum in game theory and, and spatial theory of voting, you'll see there's some, there's some math and quantification, pretty robust quantification on that. And why is that important? Because you can take a group and you can actually quantify whether they are genetically, economically or politically aligned. Ideally you want all three. Now tech thinks a lot about economics and in fact alignment typically is thought of as purely economic alignment. But if you look at what gets people to fight in wars, like you know, for example, Ukrainian nationalism, that is in part genetics. They're all genetically Ukrainian or they're related to each other. Right? So, so that's definitely a factor. Major factor indeed. Through history, it predates economics certainly because you know, we have, we've only had economies for whatever thousand years. We've had genetics going way longer than that. And certainly animals have that and there's politics and ideology more generally. And that's important as well because that's like an ever burning fire. Okay. For example, I funded various startup societies like, like cul de sac.com, it's car free society or kif.com it's van life. And people aren't there for the token. You know, they're, they're there for the moral, social, ethical, political belief that creates a new community which says, you know what? In their view, cars are the biggest problem in society. If they're going to spend years of their life building something new, they're going to build a car free society. Why? Because what do cars do cars mean? That we have these streets that divide each other. We have people sort of put into solitary confinement in these houses or these apartments. And that's not how people are meant to live. They're supposed to live in communities. And now you could have swimming pools and grass and greenery and so on. And they're not like totally, they're not, you know, dumb. There are cars. But on the outskirts of the city, however, people get better exercise. They meet a Community and so on and so forth, right? So you could take that car free ideology, you propagate all the way out and you get actually a society that is there for something other than money. Now the money also has to be there because the car free society is built for remote work, right? So the money comes in through the cloud and it's coming in through Starlink. And technology is certainly important. Of course they've got to eat, right? Scarcity, it does matter. But it's kind of like thinking about something not just from the X axis of economics, as crucial as that is, as neglected as that often is, but also from the Y axis and the Z axis at the same time to start having sort of different engines. And if one of those engines conks out and the price is down, well, the ideology is still there, we're still in it for the cause, right? And if that is getting, you know, oh, there's some political, well, you know what the money is there, we kind of stick with it because I need the job and so on, right. So you have sort of backups, you know, rather than, it's like multiple engines on a plane rather than any one engine being determinative of the whole thing. And what's interesting is when, you know, like you mentioned, there's actually a good way of putting it that when the price collapses 80, 90%, a lot of the front runners and short term people do leave. And there's like, it's kind of like crypto has had these ongoing waves of natural selection. And I think my friend Nick Carter made this mark. He's like, if you can just hang on and make it through and stick through the whole thing, right. And not rage, quit. When it seems like it's time to quit, you do great, right? In the, in the long run, that may not always be so, but I think it is. I think basically we're on a secular uptrend. As the legacy state metabolizes and breaks into a thousand pieces, all the wealth and power that it stole re decentralizes. That's the thing that people, you know, you really have to have a model of what the 1800s was like. It was a time of Rockefeller and Carnegie and all of these founders who could build these amazing things. And you, the centralized government was rising like, you know, like. But it wasn't as overbearing as it became in the 20th century, the century totalitarianism and whatnot, right. And so now that that's running in reverse, you have more opportunity to make your name more opportunity to build something on Your own, it's more chaos as well. I'm not saying it's all. There's reasons that people wanted centralization once, you know, it's like the. There's a proverb, the empire, long divided, must unite, long united, must divide. Such has always been the way of things. But the point is that the way you align people is not just economics. The others also matter. So, you know, let me put it like that. Last thing I'll say is tech has. Tech has really become a community. It's becoming an ethnic group, just like many political parties are essentially becoming ethnic groups. Like, you know, I put up some stats a while back showing that 96% of Democrats are not married to Republicans. Okay, so that's where ideology becomes biology in one generation. The political becomes a genetic. And of course the economic as well, because the laws influence what trade happens within your borders. For example, like, California passed some laws against trading with Republican states or something like that a while back.

Right.

Like, they. It was like a small thing, but it was like, but it'll become larger over time where it was like restricting the travel of members to red states that had certain laws. Right. So eventually, when you have enough political differences, I mean, what's the political difference between north and South Korea is also a big economic difference is also now a big genetic difference because bigger and bigger genetic difference because they've, you know, they've basically not intermarried for now two or three generations, right? It's only two or three. But if it's 20 or 30, that starts to become quite a divergence. All right, let me pause there.

So since I'm on the bird app quite a bit, I have some PTSD from tribalism between these communities. One thing I want to touch on is like, so when you said you can imagine maybe a startup or a network state where there's people who just don't believe in cars and they think cars are like a waste of space, et cetera. Now, I could imagine there's actually the complete opposite of that in that same universe where there's people who only believe in cars and they live out of their cars and whatnot. And maybe a parallel to this is more like Bitcoin people wanting Ethereum to get regulated and for Gensler to kind of regulate all these other shit coins. So it seems like there's this inherent tribalism aspects. When you kind of organize communities in such a way, how do you, you know, how do you combat that? What do you. What do you do against the face of such tribalism that We've seen so much in crypto.

Well, so I, I think first is to realize that it doesn't make rational sense, but it does from a meta rational standpoint. So like, you know, I talked about this before on the Ferris podcast, but like if you are an orthodox libertarian, why would you want the, you know, basically illegitimate sec? I mean you, you have to comply with it when it has a gun to your head. But it's just obviously this captured corrupt agency that has been, you know, like in cahoots with Sam Bankman Fried of FTX and meeting with him and totally fine with him, but attacking all the good actors in the space. You know, you have, you have the head of the. Gensler is talking about when he was at mit, how Bitcoin, Ethereum, Litecoin and bitcoin cash are not securities. And then he turns around and says they are right, it's completely corrupt thing. Why would you want that to have more power? Well, oh, because your enemy's enemy is your friend. Okay, why is Ethereum your enemy? Well, because they think it's a zero sum competition. For every dollar that goes into crypto, it could go into either Bitcoin or Ethereum or something else. That's one aspect. The other aspect is many of them and people have said it's like my friend Peter McCormack has admitted and I don't think he'll think this is a diss or anything, that a lot of it is like a dry drunk where somebody who has a problem with alcohol might rage against alcohol a lot because they just don't want it near them since they can't hold their liquor. And so some fraction of people have lost a lot of money on making bets on other digital assets and they didn't lose on bitcoins. They're like, nobody should ever bet on anything other than bitcoin and so on. So that's another aspect. I think the most fundamental is that we're tapping into really fundamental human drives where you talk about, you know, atheism, monotheism, polytheism, except you extend that from God to the state and the network. Let me, should I talk about that for a second? Explain what I mean by that. So basically God, state, network. I talk about that in the network state book, but it's essentially about what do you think is the most powerful force in the world? Is it almighty God? Is it the US military and the centralized state, or is it encryption and the decentralized network? The reason that's so important is, you know, like a kid will Say on a playground, you know, my dad can beat up your dad. And that like silly kind of kid remark actually has a lot of, a lot of weight behind. Because the question is, whose God can beat up who's God, right? Basically what happened in the 20th century is in the 1800s a lot of people actually believed in the traditional God. By the late 1800s, Nietzsche wrote quote, God is dead. And what he meant was that enough intellectuals no longer believed that you couldn't have, you couldn't assume that the church and belief in the church would help maintain order. So instead you had the boys in blue. The state stepped in, right? The centralized state in both its nasty varieties like the communists and the Nazis and its reasonable variety, the state stepped in in the place of God. And Nietzsche predicted that this would happen. He said there's going to be wars beyond imagining as this, as something comes to replace God. And you know, Carl Schmidt wrote a book called Political Theology. People talked about how communism is the God that failed. And people have talked about American democracy as a civic religion. So all three of the major, you know, God replacement ideologies of the 20th century, which are democratic capitalism, communism, fascism, all three of them had books that likened them to religions as replacement religions, right? The state replaced God, God was replaced by gov. Haha, okay. And so that's like the, the 20th century. And the state also crushed the network. The network is like peer to peer interactions and so on. What's interesting is I found this remark from this guy named Jacob Burkhart, okay? And he actually called out the state, the church, and then what he called culture as the three forces. And I saw this only after I'd written about God's state and network. And he identified those same forces like 170 years ago. He didn't have the concept of the Internet, but you know what he called culture? He said culture is like the set of all peer to peer interactions. And by the way, the reason I'm talking about this is to understand crypto tribalism, it's like comparative religion, having some understand. It's sort of like you can use Solana, but to like actually understand Solana, to actually understand Ethereum, to actually understand Bitcoin, it helps have some knowledge of cryptography and distributed systems and game theory and networking. You can go deep in these areas, right? So the surface observation is just the wallet, but the underlying technology is there. And the surface observation is the tribalism, but there's an underlying comparative religion aspect. So here's this quote from Jacob Burkhart, right? He says our theme is the state, religion and culture and their mutual bearings. We are fully aware of the arbitrariness of this division into three powers. The division, however, is a mere device to enable us to cover the ground. Right. The three powers are supremely heterogeneous to each other and cannot be coordinated. The state and religion, the expressions of political and metaphysical need, may claim authority, at least over their particular peoples for our special purpose. However, culture is the sum of all that is spontaneously arisen for the advancement material life, all social intercourse, technologies, arts, literature. It's a realm of the variable free, not necessarily universal of all that cannot lay claim to compulsive authority. Holy cow. Look like that is as close as you could get in 1850 talking about consensual peer to peer cooperative interactions over the Internet between people all over the world. Right? What I call the network he was calling culture. It's amazing, right? And he also identified the other two things, the state and religion. So, right. God, state, network, state, religion, culture. Right, okay, so that's like it's always cool when you can see somebody who's kind of come up with a similar view on the world from a totally, totally, you know, it's the 1850s Swiss guy way before obviously the Internet. It point is that once you think of like this God State Network trilogy, lots of things become apparent for you can now start classifying ideologies on this space. It's almost like the, the periodic table, you know, the elements. You break things into elements and you're like, oh, carbon dioxide. It's got one of this and two of these, right? Carbon and monoxide, one of this and one of these. So let me do that.

Right?

So first with God you have the atheist, the monotheist and the polytheist. Atheist doesn't believe in God. The monotheist, like a Christian or Muslim believes in one God. The polytheist, like a Hindu, believes in multiple gods. Right? Okay, now with the state, the a statist is like an anarchist or an anarcho capitalist. They don't believe in the state. The monostatist is like a Chinese communist or like America first or rules based order person. There could be both left and right varieties of it, but they believe in one empire to dominate the world. Okay. And then the third is the polystatist. The polycyst is like the digital nomad. They're often grouped with the anarchist, but they're not. They do believe in the existence of a state. They just want to be able to choose between Dubai and Switzerland and you know, Monaco or whatever, right? They're not actually out there to tear it down. They're like, you know, where can I get the best value for money? The best, you know, civilization for my dollar's worth. The subscriber citizen, okay? And even though they're often equated, they're very, very different. They're not about tearing it down. Like, just like a Hindu is not an atheist. They're even if they're both considered infidels by a very insistent monotheist. Right? And then the third would be the network. And you can have somebody who is a no coiner, an A coiner who is against all coins, right? That's like the central bankers, the CBDCRs, that is, you know, Chinese Communist Party and Elizabeth Warren's anti crypto army. And, and then those, you know, like Trump a few years goes like, oh, the dollar must be the reserve currency. There's left and right versions of this as well. Right? So that's the no coiner. A coiner. Then you have the mono coiner. That's the maximalist. Then you have the polycoiner, which is like the venture capitalist or the tech person, you know, switches between coins. Right? And now you can start classifying ideologies. For example, the, the American establishment person is typically an atheist monostatist, a coiner, right? They don't believe in God, they don't believe in a coin. They do believe in one state. Okay? The Bitcoin maximalist is an atheist, sometimes a monotheist, sometimes a Christian or what have you. Right? But you know, they're, let's say that's not as important. It's like secondary atheist or monotheist, usually an A statist because they're often very anarchistic in their leaning and they're an insistent monocoque. Okay? So they're like 0, 0, 1 and the American establishment is 01, 0. Okay? Whereas somebody like me, I am like from a polytheist background, at least polystatist and polycoinist. So I'm N and n, okay? Rather than 01010. So you see, I come from a completely different philosophical tradition of choice on all three axes, right? And once you start laying it that way, you're like, oh, that's not simply just tribalism. It's not like, oh, can't we all just get along? That's like a fundamental difference in fundamental values, right? Should there be choice on this axis? Should this axis not even exist? Or should there be no choice in, you know, like this. And of course I can give an ethical justification of mine. And in general, usually the polytheist is okay with other guys worshiping their own God, but not vice versa, you know, and the poly coiner is fine, why don't you guys go into your own coin? Why don't you let me do this? And that's been something where it's like mongoose and snake across history. Because there's a logic to the monocoiner. It's not a, it's not a logic in the sense of human to human logic, but there's an evolutionary logic which is if you can have, you know, all of these pagan groups that are worshiping all these different religions, you can unify them under one God, then you build a fighting force and you unify them. Right? And in, in a sense, bitcoin is God's way of making libertarians cooperate, right? All of these heavily armed libertarians in the US who would otherwise be involved in countless different economic schemes or whatever, have now been slapped into becoming just devout bitcoin maximalists under one coin, right? And you can make parallels through history of other examples of this, but they've been snap together into this fighting force, right? Where they all know that it's taboo. You know, even the term shitcoiner, like that has the sense of certainly heretic, but it also has a sense of like obviously impurity, right? Because. Right. And then also actually weakness. Like you couldn't control yourself, you gambler, right? You, you, you, you couldn't hold the one true coin. You went and you decided to go and day trade, which at a minimum is shameful. It shows you don't have self control, right? And so, so there's actually a lot of like the old school, old testament religious purity that has been kind of re architected through this. Right? And that's why I'm like, while I am not a maximalist, I speak maximalist, remember, I think about dialects. Yep, right. Like I speak maximalist in the same way that somebody might speak Vietnamese and Chinese and Japanese, you speak multiple languages, you can speak in such a way that I understand their premises. I totally understand where they're coming from. I disagree with some of those premises, but I think actually a lot of polycoiners don't understand where maximalism comes from at a deep level. Polycoiners typically come from a higher trust environment in their, in their headspace. You know, they are less likely to believe that the western system is on its last legs, you know, and as such they don't need the same level of security guarantees in their code or they don't think they do. And so they're more likely to cooperate and more likely to do crowdfunding of public goods. And that's good. I'm glad that that community exists. Right. And you, you know, I'm glad that all the communities exist actually. Right. Because as squabbling as they are, they're kind of going to be the mammals that inherit the earth after the meteor hits. Dinosaurs, in my view. All right, let me pause here.

That is. That is very well put. I'm really going to steal some of those terminologies with that mental framework in mind. Akshay, I'll ask you this. Like, how do you think about multi chain? Obviously you've picked Solana so far over the other religions, so to say, or ideologies, I guess. One, why? And two, what do you think the future looks like in this kind of inter ideology battleground?

Yeah, look, I think I picked slalom because it works. Okay. So that's just the simplest answer I have. I think so. If you let me reference some of Balaji's writings here.

Okay.

Here he co authored this thing about Nakamoto coefficient, which sort of articulates what the decentralization of the network should be. Right. So that's sort of on one end. He also wrote an article called why the next Open source, Open state and open execution is what the next version of databases are. Right. It's basically this idea that you can have. It's open source, but anybody can read read from it and anybody can write to it for a fee. And anybody can read from it for free. Anybody can write to it for a fee. Right. So this, to me that. That was the most interesting sort of thing about blockchains, that they enable this composability where you don't have to like you can replace BD with just permissionless composability. I think one of them is overrated and the other is underrated. Sorry, Balaji. Which is that community's emphasis on what decentralization should be. And they obsess over the score and how you quantify decentralization. And we've sort of built an entire industry of products that just don't work because of this ideological overemphasis on decentralization, which probably wasn't even the intention of that paper while compromising what I think is the most underrated interesting part that drew me to blockchains, which is the fact that this is open state and open execution. The fact that you can now coordinate with a group of other people with a bunch of other people in your same group or groups that don't like each other can still coordinate in the same network is what I thought personally was most interesting to me. And if it is true that decentralization means there's going to be an abundance of leadership, not all those leaders are going to get along with each other. That's the outcome of this right there. The reason you have different leadership is because they all have views on the world that or they're all forks. They're all trying to build forks of the future that don't necessarily align with each other. And that's fine. And at a network level, you benefit from this sort of abundance of conflict, I guess, or abundance of leadership that leads to many, many a times abundance of conflicts. So I've just come to accept that it's a part of the thing. But so, so I think the fact that it's composable, the fact that you can go and work with applications that you didn't, with teams you didn't, that built applications on the same chain as you, then you never have to talk to them, to be able to compose with that is amazing. Like UXD for instance, required a order book, required you to be able to have some product that allows you to do go long and short on the same thing. And you could build a stable coin on top of that, right, by taking a delta neutral position. That would not have happened in something in another chain in a meaningful way, I think. So that's one interesting part. The other is sort of what I talked about earlier, which I think Balaji referred to as well, which is. Do you know who Andrew McCollum is? Naomi Gleat. Okay, great. So Andrew McCollum designed the Facebook logo. Naomi Gleat was Facebook's longest serving employee. Why don't we know them? Well, because they were all part, they were subsumed, their identities were sort of subsumed by the larger company and they all got to be part of like the early days of Facebook and enjoy the fruits of the success and labor that they had built. Now I think that everybody can be Naomi Gleat and Andrew McCollum in the world if they find the thing that they can bring to life. I think the only thing that's stopping crypto, you know, like there's this meme that oh, like we need more products to get to product market fit. I just think you can flip a regulatory switch and tomorrow you can distribute profits of collectives to its members and you'll have productive crypto projects just emerge. Out of nowhere, Right? Like, because it's just a way of capital formation. And this idea that you can come together as a group and, and like create, create something and take value from it is why I am personally in it. I just think that it's a way for labor to own capital with the least amount of friction. And it's most interesting right now. I think it's a dress rehearsal for when regulations change. So everyone's getting on the Internet like, oh, let's meme this dog coin to $88 billion at peak value or whatever. And that's how dogecoin gets created. But you could take the same thing and replace the dog coin with something that's like, hey, let's go crowdfund a city or let's go build a, or whatever the thing that it's set up for. Right. Or you could do, you could. That's a general purpose thing that you can replace it. Right now it's constrained by regulations. But I think like regulations have, you know, like somebody should always say all laws have the privilege of retiring. Right? Yeah. And so once that happens, I think that there's going to be a Cambrian explosion of capital formation amongst groups that don't necessarily have to be companies, which today they have to be in the form of companies. So that's why I'm excited. And I think that some of them, or a cohort of them may go on to have ambitions bigger than achieving just their mission and go on to be cities and maybe even countries. And that's like, to me, the most ambitious version of this, which is why I'm super interested in network state movement emerges. And working with biology to the extent I can to, you know, sort of see where I can contribute.

There's a hot take on PMF is being held back by regulation.

I mean, well, you can use all the infrastructure we have today. You don't have to build another product. You can change one law or like, well, this is in the U.S. maybe there are countries, by the way, where these laws are already changing, are not looking to the US for direction on what the SEC does. They're already making it easy to launch security tokens or pass on profits of the collective to the individual members. That's already happening. Right. So I think it's just a matter of we can get to a spot where that, that just becomes the norm and people start to bootstrap new ventures that don't necessarily look like companies, but they may be a collection of just smart contracts.

I'll just address two things we Said actually there, basically. So, you know, when something just works, it's good that it just works. And I completely understand why it attracts people to an ecosystem when it just works. But when something like Singapore or Apple or a blockchain just works, it's because usually there's an underlying ideology and a lot of work that went into it. I mean, obviously. Right. So it isn't something that is easy, is hard to build. Right. Easy to use is hard to build and vice versa, typically. Right. It's easy to build something that's hard to use. Right. The other point you made on decentralization, I agree there's a lot of decentralization theater where people just talk about it without actually measuring it. Which is why I kind of put out that article on quantifying decentralization way back. But another way of talking about it is in terms of who has root.

Right.

Who is CEO, who has sovereignty is very important.

Right.

And the difference, you know, why Linux rather than Windows? Because Linux is decentralized or more so than Windows. And that's why you use it, because you can give a very operational definition. If I use Windows on the server in the early 2000s, then Google can never have been a success because Microsoft could just increase the price of Windows and stolen all their revenue off the back end because it would just increase the enterprise licenses. Oracle did the same thing where just keeps charging more and more for its database. Right. Whereas Postgres, you can't do the same thing. It's decentralized, anybody can use it. Right. So control, sovereignty, root, that's really important. And what they're really saying when people talk about decentralization is who has control over me? And I want that to be a very limited list of people or people who I consent to and so on and so forth. You can take it too far and you can basically be like these guys who are anarchists, you know, and they think they don't want anybody to have control over them. But if you like, the thing is, you know, Steve Jobs wrote about how, you know, he's not growing his food, he's not cleaning his water, he's not building the pipes to his room. And he depends. We're. We're like a social organism, just like an ant colony. You do depend upon other people. Until we have like AI and robotics to such an extent where you don't need that. So in depending on other people, there has to be some social contract, there has to be some sense in which you are quote, submitting to the collective and giving up Something to get something. So total anarchistic decentralization doesn't really make sense as an endpoint. But relative to the degree of centralization that, let's say the US or China or other countries might be trying to implement, I can understand why people want it, of course, the way that they want it. They want it in a verbal, inarticulate way. And the last thing I'll just say on that is often the benefit decentralization is, it's like an insurance policy or a parachute or a lifeboat. And you see it only in the breach, you know? Right. So, for example, Venezuela, you know, if you had used just Venezuelan, the Venezuelan national currency for years, you'd have been fine, you trusted the government, you'd have been fine, and then you wouldn't have been able to exit. Right? So your daily transaction costs would have been low, but your exit costs would have been very high because currency gets inflated away and you have nothing with exit. Conversely, if you didn't trust the Venezuelan government anymore and you just held a bar of gold at your home, your transaction cost is very, very high. You chip off a flake of gold at Starbucks, that doesn't really work. But your exit cost is relatively low because you can take the gold with you and leave. And so the answer is some portfolio strategy of some things within the system and some partial trust and some outside the system. And then you can operate within the system, but your exit cost isn't infinite because you have some outside the system.

Quick question on when you're talking about decentralization there, and I've seen you write about this, do you think crypto is going to push centralized companies to reposition to more open systems? And with that, do you think there's a polarity, almost a smiling curve where it's the most centralized companies and then you have decentralized protocols over here and there's really not maybe a ton of value in the middle, but it's going to be on the polar end. How do you think about that?

I'm not sure if it's a U shape exactly. I don't know what shape it takes, but certainly Facebook, like Zuck, I give a lot of credit because he will try something, he'll fail, he'll dust himself off, he'll try again, and so on. And even after Libra or what have you, he is the new threads is talking about doing, you know, integration with the, with Macedon and so on. Right. It is going to be a potentially more decentralized protocol. We'll see. One thing, however, that Makes it very possible. Is he just open source? Llama2 that's a huge deal. If you guys follow, you know that in AI that's massive. Basically an open source AI model changes the entire landscape and its counter positioning versus Google and, and ChatGPT and others. Right? So, so you know, open sourcing something can be. And that's kind of what this is, the next step in open sourcing. Right. Decentralizing comes after open sourcing. So if we think about how open sourcing was used by companies, it was used strategically. Sometimes they open source this thing, this piece, because it was like your stripe and you open source the Python drivers because there's no point in keeping them closed sometimes like IBM backed Linux as a way to weaken Microsoft early on. Okay, so you commoditize your complement that. Say you try to commoditize operating system, take the value of the operating system by making it open source. Sometimes you take something that was open source and you make it closed. Kind of like what Apple did. They took BSD and they added all of this stuff on top of it. You know, they got osx, OSX runs on top of bsd. Right. So the part of it that's open, they comply with all the license stuff and they still distribute that. But basically the reason that I use Apple and the reason that the Mac laptop plus Linux server has become the canonical kind of thing for the last 20 years is because it's basically Unix on the client and Unix on the server, which is unexceptional today, but was really useful in the 2000s when that was first new. So the point being sometimes you open source pieces, sometimes you open source as a strategy to attack competitor. Sometimes you take something open source and you add closed source functionality on top of it. And sometimes you're just ideologically open source like GitHub, which open sourced almost everything for a long time. And I think you're going to see the same diversity of approaches where just substitute decentralization there. Coinbase doing its base API, which is not an app chain, but an API chain is a good version of this.

If you had one piece of advice for aspiring Network State founders, crypto founders, startup founders, what would it be? Both of you.

Read thenetworkstate.com no, I.

Mean like mine would become the Network State conference.

Yes, that's also good. Yes, that's right, I know. I mean basically that reason is that in company that has 500 pages of stuff in it. So you know, and it's a V1, but I think it's useful aside from that, learn all the AI content creation stuff. Get good at that. Get good at either content creation or, or coding and math or maybe, you know, just operational execution, one of those three things. Get good at something that's useful at a tech company. Company. Because if you don't, then you may not have a useful skill. We'll see. I mean, maybe I'm wrong about that actually. You know, there's a lot of physical tasks that are also actually very helpful now. You know, obviously plumbing and, and things like that. Those are actually rising in price. So we'll see what happens. But, but I think that if you are in tech, interested in tech, getting, getting into the latest tools will, will certainly help you out. I mean AI content creation is going to be underpriced for a long time because it's a whole effort to go and explore these 50 different tools and most people aren't using them well. And the existing establishment, like Hollywood's on strike and so on on this. It's like the thing about speaking multiple dialects. If you can be on top of multiple tech trends at the same time, I know it's a full time job just to stay on top of crypto, but if you can stay on top of that and you can stay on top of AI to some extent there's other stuff that's coming down the pike like transhumanism. And obviously drones have become a bigger and bigger thing quietly. It's good to have like some peripheral vision on all those things and then maybe pick one of them to focus on. So maybe that's very generic, but read thenetworksafe.com that's very specific.

I have something very specific actually. I think in 2012 when social media came around, people were like hiring marketing teams were hiring social media managers hoping to win whatever comes out of this new medium of distribution. But actually the people who won were social media founders, not social media managers attached to big companies. They were the influencers. Companies like Warby, Parker, Away Luggage, all these people who realized, holy shit, this is a new distribution medium and they went all in on it at the exclusion of the other legacy stuff. I think the exact same thing is happening now with communities where people are trying to hire. They're like, oh, community is important, let's hire a community manager. Except the folks who I think will win are community founders who will, who do what looks like the job that is above their pay grade or whatever. And I think of myself as a community founder. You know, like internally we discuss whether it's with cash at super team or with other communities that I work with as community founders. And I think if anybody has a shot at building valuable communities that some of which may go on to become network cities and network states, it'll be founder. It'll be people who want to become founders. So I know some of them may be listening to this podcast and they have like a right brain heavy sort of skill set. And if they do and they want to become founders, they should know that there is venture scale opportunity available here. Because for once in 2000, I think like Paul Graham wrote an essay in 2005 saying hackers and painters and the only artisans left in the world are engineers. And all the Silicon Valley companies for the next 20 years were effectively built around the founding engineers. So maybe this time these communities will be built around founding influencers. And if that is true, then some of them have the opportunity to grow way bigger than companies ever did. Because the most ambitious version of that is a network state. So if you're listening and have run an NFT community or are a community manager who thinks they know how to run a community, but aren't really given that much responsibility, you might have an opportunity here that's way bigger than what you think is possible. So let's say just read the book, come out and hopefully apply for funding. There's a lot of pools of capital to fund you.

Amazing answer. All right, everybody, well, I'll put all the links to the show notes, everything we talked about. Akshay Balaji, thank you so much for coming on today. That was amazing conversation.

Yeah, thank you so much.

Thanks, guys.

Thanks for having us.

Cheers.

It.