Book - Securing Digital Rights for Communities | Chapter 7 - Sustainable Economy & Decentralized Coin Distribution

1
00:00:00,000 --> 00:00:07,000
Chapter 7

2
00:00:07,000 --> 00:00:13,760
Chapter 7 Decentralized Coin Distribution

3
00:00:13,760 --> 00:00:21,260
So in this section we're going to talk about how to decentralize the coin, how to distribute it

4
00:00:21,260 --> 00:00:26,220
and why it's important to distribute it in a certain way such that it's decentralized.

5
00:00:26,220 --> 00:00:34,140
The problem that a lot of the current projects in blockchain do or have is that they don't have very good distribution mechanisms.

6
00:00:36,300 --> 00:00:42,100
One of the keys for example is that most distribution mechanisms are either done by DeFi

7
00:00:42,100 --> 00:00:48,020
which often results in a centralized system pulling a rug pull which is where people lose their money

8
00:00:48,020 --> 00:00:53,420
or an inflation scheme where people's funds are inflated away.

9
00:00:55,120 --> 00:00:56,200
People in blockchain are decentralized.

10
00:00:56,200 --> 00:00:56,220
People in blockchain are decentralized.

11
00:00:56,220 --> 00:01:00,280
Most of the chains can mine the currencies but mining is getting very expensive now.

12
00:01:00,400 --> 00:01:03,140
It's becoming out of the reach of most average people.

13
00:01:03,800 --> 00:01:06,260
And the other way that you can earn the tokens is by trading for it

14
00:01:06,260 --> 00:01:10,760
but trading is very, very difficult and 90% of people lose money when they're doing it.

15
00:01:11,320 --> 00:01:16,540
And the last way of course is that you can work for a large whale or stakeholder in those tokens.

16
00:01:17,440 --> 00:01:23,940
The problem with that is that the large whales or stakeholders are unlikely to distribute currency for charity

17
00:01:24,440 --> 00:01:26,200
so they're always going to be earning more.

18
00:01:26,200 --> 00:01:30,260
They're going to be earning more value off your work anyway so as you do work for them

19
00:01:30,260 --> 00:01:38,160
maybe they pay you $50 an hour to do some work but they'll be earning $60 to $70 an hour off the work that you do

20
00:01:38,160 --> 00:01:44,720
because the ecosystems that they're building with your labor is worth more than the sum of the individual parts.

21
00:01:46,160 --> 00:01:50,260
And so it's very difficult to get social mobility if you don't decentralize the coin correctly.

22
00:01:50,780 --> 00:01:55,660
And one of the things that the ecosystem that we work on which is Hive but generally,

23
00:01:56,200 --> 00:02:02,040
DPoS or Incentivized Stakeholder Distribution as we refer it to, refer to it as,

24
00:02:03,420 --> 00:02:08,240
it has this additional distribution mechanism where as you guessed from the name,

25
00:02:08,240 --> 00:02:14,840
Incentivized Stakeholder Distribution, you can get some rewards from the ecosystem

26
00:02:14,840 --> 00:02:18,220
for doing something valuable for the community and the community can then judge you

27
00:02:18,220 --> 00:02:20,640
and decide if it was valuable or not and then they vote for you

28
00:02:20,640 --> 00:02:25,260
and some of the inflation gets distributed to the users who are doing things for the community.

29
00:02:26,200 --> 00:02:32,200
At the same time, the users are incentivized to vote for that stuff so they actually get rewards for voting

30
00:02:32,200 --> 00:02:37,200
and so the stakeholders are incentivized to distribute the token

31
00:02:37,200 --> 00:02:42,200
and this is a key difference between the chains that we're working on such as Hive

32
00:02:42,200 --> 00:02:45,200
and most of the rest of the industry currently

33
00:02:45,200 --> 00:02:49,200
in that there is this additional distribution mechanism

34
00:02:49,200 --> 00:02:53,200
and that can be used as a Trojan horse to distribute the token.

35
00:02:53,200 --> 00:02:55,200
So I'll stop here for a second and just pass it over to David.

36
00:02:56,200 --> 00:03:01,200
We want to talk about distribution types, incentivized stakeholder distribution,

37
00:03:01,200 --> 00:03:05,200
social distributions as a Trojan horse, distribution to multiple parties,

38
00:03:05,200 --> 00:03:08,200
ongoing distribution, the importance of earning your tokens

39
00:03:08,200 --> 00:03:12,200
and this is the key word is earning your tokens, not buying your tokens.

40
00:03:12,200 --> 00:03:16,200
Keeping inflation in check, what you want to see, what you don't want to see,

41
00:03:16,200 --> 00:03:21,200
application of semi-centralized models, no compromise of free speech and censorship resistance

42
00:03:21,200 --> 00:03:25,200
and founder stake size or major stakeholder dominance.

43
00:03:25,200 --> 00:03:26,200
I'm going to stop there.

44
00:03:26,200 --> 00:03:28,200
I'm not expecting Dan to remember all of that.

45
00:03:28,200 --> 00:03:30,200
I don't know if you want to take the phone

46
00:03:30,200 --> 00:03:34,200
and just go through it when you're done with one section.

47
00:03:34,200 --> 00:03:36,200
But I'm just going to pass it over.

48
00:03:41,200 --> 00:03:45,200
So to create a network effect.

49
00:03:51,200 --> 00:03:53,200
So you did distribution types.

50
00:03:53,200 --> 00:03:57,200
So incentivize stakeholder distribution.

51
00:03:57,200 --> 00:04:04,200
Talk about distribution types first, if you can think of any.

52
00:04:04,200 --> 00:04:09,200
Well, I mean, the distribution types that currently exist are from mining

53
00:04:09,200 --> 00:04:14,200
or being a validator, sort of the same thing.

54
00:04:14,200 --> 00:04:21,200
You can get it from a layer one DAO, which is basically you propose work,

55
00:04:21,200 --> 00:04:25,200
people vote on that and you can get funded that way.

56
00:04:25,200 --> 00:04:29,200
And then there's also obviously trading.

57
00:04:29,200 --> 00:04:33,200
People can sell their tokens.

58
00:04:33,200 --> 00:04:37,200
But it's very difficult to actually think of distribution models

59
00:04:37,200 --> 00:04:41,200
and distribution mechanisms that work beyond those.

60
00:04:41,200 --> 00:04:47,200
We have things where you can earn to provide infrastructure.

61
00:04:47,200 --> 00:04:50,200
It's basically summed up as a value for value model,

62
00:04:50,200 --> 00:04:54,200
where you provide some sort of value and you can earn value in return.

63
00:04:54,200 --> 00:04:56,200
And that's really the fourth.

64
00:04:56,200 --> 00:05:03,200
And it's a new way of doing it because you have to solve the problem of,

65
00:05:03,200 --> 00:05:09,200
I have something valuable, yet it should be distributed.

66
00:05:09,200 --> 00:05:12,200
But if something's valuable, most people are going to keep it.

67
00:05:12,200 --> 00:05:17,200
So you have to figure a way where they're actually incentivized

68
00:05:17,200 --> 00:05:19,200
to distribute and grow the network effect

69
00:05:19,200 --> 00:05:20,200
instead of the distribution.

70
00:05:20,200 --> 00:05:22,200
Instead of keeping it for themselves.

71
00:05:22,200 --> 00:05:27,200
And that's a very hard problem that's really sort of age old.

72
00:05:27,200 --> 00:05:34,200
And you do it by making sure all incentives are aligned.

73
00:05:34,200 --> 00:05:36,200
And when you have people who are actually incentivized

74
00:05:36,200 --> 00:05:42,200
to grow the network, you have a way to, it's sort of like a faucet.

75
00:05:42,200 --> 00:05:45,200
Because they're incentivized, yes,

76
00:05:45,200 --> 00:05:49,200
but there also needs to be value on the other end.

77
00:05:49,200 --> 00:05:52,200
And it's sort of up for grabs.

78
00:05:52,200 --> 00:05:56,200
Whoever wants to provide the most value can earn the most.

79
00:05:56,200 --> 00:05:59,200
So anyone can get in.

80
00:05:59,200 --> 00:06:03,200
You don't have to worry about where you're from

81
00:06:03,200 --> 00:06:08,200
or any discrimination or anything of that sort.

82
00:06:08,200 --> 00:06:11,200
You can earn if you provide value.

83
00:06:11,200 --> 00:06:14,200
And you don't even have to provide an ID.

84
00:06:14,200 --> 00:06:18,200
So these are the ways that I think that last point

85
00:06:18,200 --> 00:06:22,200
is the most efficient way and one of the strongest points

86
00:06:22,200 --> 00:06:26,200
when it comes to actually growing a network effect.

87
00:06:26,200 --> 00:06:30,200
The most obvious is the validators, the miners.

88
00:06:30,200 --> 00:06:32,200
That's the most important.

89
00:06:32,200 --> 00:06:35,200
Because without that, nothing works.

90
00:06:35,200 --> 00:06:40,200
But at the same time, to decentralize that process,

91
00:06:40,200 --> 00:06:42,200
you need a great network effect.

92
00:06:42,200 --> 00:06:47,200
So you have to have a way to not just pay the miners.

93
00:06:47,200 --> 00:06:50,200
You need to think outside the box.

94
00:06:50,200 --> 00:06:54,200
All distribution mechanisms are on the table.

95
00:06:54,200 --> 00:06:59,200
So when it comes to my favorite, incentivized stakeholder distribution,

96
00:06:59,200 --> 00:07:04,200
value for value model, you see all kinds of things pop up

97
00:07:04,200 --> 00:07:09,200
because now you also have social reputation.

98
00:07:09,200 --> 00:07:15,200
And when you align those two, people will now grow the network effect

99
00:07:15,200 --> 00:07:17,200
but in a valuable way.

100
00:07:17,200 --> 00:07:22,200
Because with trading, people are just looking to sell and dump.

101
00:07:22,200 --> 00:07:25,200
But when it comes to actual value for value model,

102
00:07:25,200 --> 00:07:27,200
people have proven that they want to provide value.

103
00:07:27,200 --> 00:07:29,200
They've improved the network.

104
00:07:29,200 --> 00:07:31,200
Therefore, now they have stake in the network.

105
00:07:31,200 --> 00:07:36,200
So if we're talking the most powerful when it comes to growing this,

106
00:07:36,200 --> 00:07:38,200
it is the value for value model,

107
00:07:38,200 --> 00:07:41,200
the incentivized stakeholder distribution model.

108
00:07:41,200 --> 00:07:45,200
Even validators, when they earn, they usually sell some

109
00:07:45,200 --> 00:07:47,200
to keep the cost going.

110
00:07:47,200 --> 00:07:51,200
Especially when it comes to proof of work.

111
00:07:51,200 --> 00:07:56,200
So it's very important that you are distributing far and wide.

112
00:07:56,200 --> 00:08:03,200
And it's a Red Queen game in terms of keeping up with the validators.

113
00:08:03,200 --> 00:08:06,200
You don't want a group earning more than the others.

114
00:08:06,200 --> 00:08:10,200
You want to give everyone a fair opportunity to earn

115
00:08:10,200 --> 00:08:13,200
by doing something valuable for the network.

116
00:08:13,200 --> 00:08:16,200
That should be the end goal if we're talking game theory here.

117
00:08:16,200 --> 00:08:18,200
How do we grow the network,

118
00:08:18,200 --> 00:08:22,200
but also find a way for people to buy value outside of technology

119
00:08:22,200 --> 00:08:25,200
or being a validator?

120
00:08:25,200 --> 00:08:30,200
There's a lot more that goes into making a chain censorship resistance

121
00:08:30,200 --> 00:08:32,200
than just coding.

122
00:08:32,200 --> 00:08:34,200
It takes a lot more than that.

123
00:08:34,200 --> 00:08:36,200
So finding ways to incentivize that,

124
00:08:36,200 --> 00:08:39,200
you have to put it in the person's hands.

125
00:08:39,200 --> 00:08:41,200
I like to think each person is a DAO

126
00:08:41,200 --> 00:08:45,200
because they decide a tiny bit of where the inflation goes

127
00:08:45,200 --> 00:08:47,200
based on where they see the value

128
00:08:47,200 --> 00:08:49,200
and people see the world differently.

129
00:08:49,200 --> 00:08:53,200
So it's a very diverse, strong way to do it.

130
00:08:57,200 --> 00:09:00,200
The only thing that I'd add to that is that,

131
00:09:00,200 --> 00:09:05,200
just to say the incentivized stakeholder distribution model

132
00:09:05,200 --> 00:09:09,200
originally started off on Steam as something called proof of brain

133
00:09:09,200 --> 00:09:13,200
where it was 75% of the rewards went to the content creator,

134
00:09:13,200 --> 00:09:15,200
I.e. the person who supposedly took it.

135
00:09:15,200 --> 00:09:18,200
It's creating value for the ecosystem

136
00:09:18,200 --> 00:09:20,200
and documenting it via blogs.

137
00:09:20,200 --> 00:09:25,200
And then 25% of the reward went to the curator of that,

138
00:09:25,200 --> 00:09:27,200
to the person who found the content and voted it

139
00:09:27,200 --> 00:09:30,200
and the people that did that,

140
00:09:30,200 --> 00:09:34,200
with the idea being that the content is more valuable than the curation.

141
00:09:34,200 --> 00:09:36,200
The problem is that historically,

142
00:09:36,200 --> 00:09:39,200
and this is one of the hoops that I've had to jump through

143
00:09:39,200 --> 00:09:43,200
to get to where it is without really being able to pre-plan this,

144
00:09:43,200 --> 00:09:45,200
is that what that resulted in,

145
00:09:45,200 --> 00:09:48,200
with the 75% for the content creator

146
00:09:48,200 --> 00:09:52,200
and 25% for the content curator,

147
00:09:52,200 --> 00:09:57,200
resulted in bid bots where people would sell their votes, basically.

148
00:09:57,200 --> 00:10:02,200
And this is just effectively a value extraction from the chain

149
00:10:02,200 --> 00:10:08,200
where the people who bid the most for the votes got voted.

150
00:10:08,200 --> 00:10:12,200
So effectively what happened was the stakeholders with the big accounts,

151
00:10:12,200 --> 00:10:14,200
or some of them,

152
00:10:14,200 --> 00:10:19,200
were able to direct people to pay them

153
00:10:19,200 --> 00:10:21,200
and then they would vote.

154
00:10:21,200 --> 00:10:25,200
And then they would be able to earn more from their upvote

155
00:10:25,200 --> 00:10:28,200
because their vote didn't really get that much

156
00:10:28,200 --> 00:10:31,200
if they're just doing pure curation at 25%.

157
00:10:31,200 --> 00:10:35,200
So the chain eventually changed to 50-50 rewards

158
00:10:35,200 --> 00:10:38,200
where it's 50% goes to the content creators

159
00:10:38,200 --> 00:10:41,200
and 50% goes to the content curators.

160
00:10:41,200 --> 00:10:42,200
And so,

161
00:10:42,200 --> 00:10:44,200
and that eliminated bid bots.

162
00:10:44,200 --> 00:10:46,200
And that was a very controversial period

163
00:10:46,200 --> 00:10:51,200
and it was a very counter-intuitive change that was happening

164
00:10:51,200 --> 00:10:53,200
because the intuitive thing is to think

165
00:10:53,200 --> 00:10:56,200
that the content's worth more than the vote.

166
00:10:56,200 --> 00:10:58,200
But when you do that, you get bid bots,

167
00:10:58,200 --> 00:11:00,200
which are an extraction from the system.

168
00:11:00,200 --> 00:11:02,200
And the counter-intuitive thing is to think

169
00:11:02,200 --> 00:11:06,200
that the vote is worth the same as the content.

170
00:11:06,200 --> 00:11:11,200
And that is effectively saying that the stakeholder,

171
00:11:11,200 --> 00:11:13,200
the incentivization of the stakeholder,

172
00:11:13,200 --> 00:11:17,200
is as important as the incentivization of the content creator.

173
00:11:17,200 --> 00:11:21,200
And that creates a balanced system and eliminates bid bots

174
00:11:21,200 --> 00:11:24,200
because it just takes away the edge that a bid bot would have

175
00:11:24,200 --> 00:11:27,200
if everyone's getting equal rewards

176
00:11:27,200 --> 00:11:29,200
in terms of percentage rewards.

177
00:11:29,200 --> 00:11:32,200
Of course, everyone isn't getting equal rewards across the whole system

178
00:11:32,200 --> 00:11:34,200
because if you get voted more,

179
00:11:34,200 --> 00:11:37,200
then you receive more of the inflation.

180
00:11:37,200 --> 00:11:39,200
And the vote has to be done based on

181
00:11:39,200 --> 00:11:41,200
a stake-weighted vote,

182
00:11:41,200 --> 00:11:45,200
so people with more stakes in the ecosystem,

183
00:11:45,200 --> 00:11:47,200
the people who have staked in for the longest

184
00:11:47,200 --> 00:11:50,200
and with the biggest accounts staked,

185
00:11:50,200 --> 00:11:53,200
they have more influence over the inflation

186
00:11:53,200 --> 00:11:56,200
and where it goes than the people with the smaller accounts.

187
00:11:56,200 --> 00:11:58,200
So it's not one account, one vote,

188
00:11:58,200 --> 00:12:00,200
it's one token, one vote,

189
00:12:00,200 --> 00:12:03,200
or coin voting in this case.

190
00:12:03,200 --> 00:12:06,200
But the key is that they have to have

191
00:12:06,200 --> 00:12:08,200
an equal incentive for the voter

192
00:12:08,200 --> 00:12:11,200
as for the content creator or the value.

193
00:12:11,200 --> 00:12:20,200
Just to touch on social distribution as a Trojan horse,

194
00:12:20,200 --> 00:12:23,200
so these ecosystems have traditionally all started

195
00:12:23,200 --> 00:12:25,200
as social media ecosystems

196
00:12:25,200 --> 00:12:28,200
because with the idea being that people can curate content,

197
00:12:28,200 --> 00:12:31,200
people can make content,

198
00:12:31,200 --> 00:12:35,200
traditionally it was done as just pure blogging.

199
00:12:35,200 --> 00:12:38,200
And as time's gone on, it's slowly but surely moving,

200
00:12:38,200 --> 00:12:40,200
which I think is important,

201
00:12:40,200 --> 00:12:42,200
to documenting value creation

202
00:12:42,200 --> 00:12:44,200
for the ecosystem, for the community,

203
00:12:44,200 --> 00:12:46,200
rather than just here's my lunch

204
00:12:46,200 --> 00:12:48,200
or here's what I did today in my blog.

205
00:12:48,200 --> 00:12:50,200
It should move more towards

206
00:12:50,200 --> 00:12:52,200
here's what I did for the community today,

207
00:12:52,200 --> 00:12:54,200
here's the value I created for the community today,

208
00:12:54,200 --> 00:12:56,200
please upvote me and support me in what I'm doing

209
00:12:56,200 --> 00:12:58,200
to help it grow.

210
00:12:58,200 --> 00:13:00,200
That's where we want to take it

211
00:13:00,200 --> 00:13:02,200
and it's slowly but surely moving that way.

212
00:13:02,200 --> 00:13:05,200
Now all of this kind of social interaction,

213
00:13:05,200 --> 00:13:07,200
you can get rewarded for your comments,

214
00:13:07,200 --> 00:13:09,200
you can get rewarded for your blogs,

215
00:13:09,200 --> 00:13:12,200
you can get rewarded for running infrastructure

216
00:13:12,200 --> 00:13:15,200
in the ecosystem or for being a witness,

217
00:13:15,200 --> 00:13:18,200
which is one of the top 20 validators.

218
00:13:18,200 --> 00:13:20,200
So there's various different ways

219
00:13:20,200 --> 00:13:22,200
you can be rewarded in the ecosystem.

220
00:13:22,200 --> 00:13:25,200
The idea is particularly with the content,

221
00:13:25,200 --> 00:13:28,200
it was a Trojan horse because everyone can create content

222
00:13:28,200 --> 00:13:30,200
or more or less everyone can

223
00:13:30,200 --> 00:13:34,200
and everyone can almost certainly curate.

224
00:13:34,200 --> 00:13:38,200
So this is a way for people to earn passively or actively

225
00:13:38,200 --> 00:13:43,200
whilst doing relatively simple activities.

226
00:13:43,200 --> 00:13:47,200
And so it creates this distribution of the token

227
00:13:47,200 --> 00:13:52,200
where the community doesn't really realize what it's doing.

228
00:13:52,200 --> 00:13:54,200
The community is just creating content to get rewards,

229
00:13:54,200 --> 00:13:56,200
but what's happening behind the scenes

230
00:13:56,200 --> 00:13:58,200
is that the token is getting distributed

231
00:13:58,200 --> 00:14:00,200
and it's getting distributed far and wide

232
00:14:00,200 --> 00:14:02,200
because so many different people can create

233
00:14:02,200 --> 00:14:03,200
so many different types of content

234
00:14:03,200 --> 00:14:05,200
and create so many different types of value for the community

235
00:14:05,200 --> 00:14:07,200
and they can curate.

236
00:14:07,200 --> 00:14:09,200
So with this type of ecosystem,

237
00:14:09,200 --> 00:14:12,200
with an incentivized stakeholder distribution model

238
00:14:12,200 --> 00:14:14,200
and a parametered coin voting model,

239
00:14:14,200 --> 00:14:16,200
otherwise known as DPoS,

240
00:14:16,200 --> 00:14:18,200
Delegated Proof of Stake,

241
00:14:18,200 --> 00:14:21,200
it's important that you distribute the token far and wide

242
00:14:21,200 --> 00:14:24,200
in multiple different nations and countries

243
00:14:24,200 --> 00:14:27,200
because if one country decides to shut the token down,

244
00:14:27,200 --> 00:14:29,200
they may well achieve that in one country.

245
00:14:29,200 --> 00:14:32,200
But if the token is distributed across the whole world,

246
00:14:32,200 --> 00:14:34,200
it's really difficult to shut it down

247
00:14:34,200 --> 00:14:36,200
in all jurisdictions at the same time.

248
00:14:36,200 --> 00:14:39,200
And this is important because it means

249
00:14:39,200 --> 00:14:41,200
that every time you vote,

250
00:14:41,200 --> 00:14:43,200
you are distributing the token

251
00:14:43,200 --> 00:14:46,200
and it's a Trojan horse to actually secure the chain

252
00:14:46,200 --> 00:14:48,200
and reward the users at the same time.

253
00:14:48,200 --> 00:14:50,200
And those rewards also correlate

254
00:14:50,200 --> 00:14:52,200
to governance votes in the ecosystem

255
00:14:52,200 --> 00:14:54,200
or voting rights in the ecosystem.

256
00:14:54,200 --> 00:14:56,200
So the more value you create for the community,

257
00:14:56,200 --> 00:14:58,200
the more governance rights you get,

258
00:14:58,200 --> 00:15:00,200
the more you're distributing the token,

259
00:15:00,200 --> 00:15:03,200
the more secure the chain becomes.

260
00:15:03,200 --> 00:15:05,200
I don't know if you've got any other thoughts

261
00:15:05,200 --> 00:15:08,200
on social distribution as a Trojan horse, then?

262
00:15:11,200 --> 00:15:14,200
Or do you want to talk about distributing to multiple parties?

263
00:15:16,200 --> 00:15:18,200
Yeah, distributing to multiple parties.

264
00:15:21,200 --> 00:15:24,200
Yeah, well, I've touched on that a bit.

265
00:15:24,200 --> 00:15:26,200
You can't have one.

266
00:15:26,200 --> 00:15:29,200
The whole point is we have to come to an agreement

267
00:15:29,200 --> 00:15:33,200
on how something is done.

268
00:15:33,200 --> 00:15:35,200
And you can't just think of,

269
00:15:35,200 --> 00:15:37,200
you know, current distribution.

270
00:15:37,200 --> 00:15:39,200
You have to think of future distribution.

271
00:15:39,200 --> 00:15:41,200
And if you have no future distribution,

272
00:15:41,200 --> 00:15:45,200
then that means whoever's here is ordained, sort of.

273
00:15:45,200 --> 00:15:47,200
No one else can earn.

274
00:15:47,200 --> 00:15:49,200
It has to be bought

275
00:15:49,200 --> 00:15:52,200
or earned in various ways from other stakeholders,

276
00:15:52,200 --> 00:15:55,200
but not just from the protocol itself.

277
00:15:55,200 --> 00:15:58,200
If you have one distribution mechanism

278
00:15:58,200 --> 00:16:01,200
where it's only going to validators, for example,

279
00:16:01,200 --> 00:16:03,200
well, now everyone else has to buy

280
00:16:03,200 --> 00:16:05,200
to keep up with the validators.

281
00:16:05,200 --> 00:16:08,200
So it creates centralization over time

282
00:16:08,200 --> 00:16:10,200
because one group of parties is earning

283
00:16:10,200 --> 00:16:12,200
where everyone else has to buy.

284
00:16:12,200 --> 00:16:17,200
Now, the idea is to get as many distribution mechanisms

285
00:16:17,200 --> 00:16:21,200
as you possibly can and in different forms.

286
00:16:21,200 --> 00:16:23,200
So you have validators,

287
00:16:23,200 --> 00:16:26,200
and then you want ways to earn everything.

288
00:16:26,200 --> 00:16:28,200
Any way you can think of,

289
00:16:28,200 --> 00:16:30,200
the more the better.

290
00:16:32,200 --> 00:16:34,200
Yeah, just value for value models.

291
00:16:35,200 --> 00:16:38,200
There's really a value for value model that's a tree,

292
00:16:38,200 --> 00:16:40,200
and there's a bunch of branches

293
00:16:40,200 --> 00:16:42,200
that can grow various different ways,

294
00:16:42,200 --> 00:16:44,200
like infrastructure providing or marketing.

295
00:16:44,200 --> 00:16:46,200
You name it.

296
00:16:46,200 --> 00:16:48,200
And then there's the validator route

297
00:16:48,200 --> 00:16:51,200
where if you're a validator, you can earn.

298
00:16:51,200 --> 00:16:54,200
That one's what most people are familiar with.

299
00:16:54,200 --> 00:16:56,200
And then you have DAO.

300
00:16:56,200 --> 00:16:58,200
It has to be on a base layer,

301
00:16:58,200 --> 00:17:01,200
but where you can actually earn from the protocol

302
00:17:01,200 --> 00:17:04,200
based off votes, based off governance votes.

303
00:17:05,200 --> 00:17:07,200
So community projects,

304
00:17:07,200 --> 00:17:09,200
this is where some of your core developers,

305
00:17:09,200 --> 00:17:12,200
your community projects, your nonprofits,

306
00:17:12,200 --> 00:17:14,200
all these things come from.

307
00:17:14,200 --> 00:17:16,200
The community is basically,

308
00:17:16,200 --> 00:17:18,200
it's like a giant,

309
00:17:18,200 --> 00:17:20,200
you have incentive by state cultural distribution,

310
00:17:20,200 --> 00:17:23,200
and this one's like a giant focus one

311
00:17:23,200 --> 00:17:24,200
that the community gets.

312
00:17:24,200 --> 00:17:26,200
It's like one vote for the community.

313
00:17:26,200 --> 00:17:28,200
So if we see a project we like

314
00:17:28,200 --> 00:17:30,200
that requires more funding

315
00:17:30,200 --> 00:17:33,200
than we're able to give as an individual,

316
00:17:33,200 --> 00:17:34,200
we all say,

317
00:17:34,200 --> 00:17:37,200
well, we're able to lend a little bit each,

318
00:17:37,200 --> 00:17:39,200
basically via dilution.

319
00:17:39,200 --> 00:17:41,200
Sort of like a spirit bomb,

320
00:17:41,200 --> 00:17:43,200
if you're familiar with Dragon Ball Z.

321
00:17:43,200 --> 00:17:45,200
Everyone puts up a little bit,

322
00:17:45,200 --> 00:17:48,200
and then you focus that onto whatever you want to vote on.

323
00:17:48,200 --> 00:17:50,200
And that's a powerful way

324
00:17:50,200 --> 00:17:53,200
because now you're thinking outside of just validators,

325
00:17:53,200 --> 00:17:55,200
and then you have your value for value model,

326
00:17:55,200 --> 00:17:59,200
which unlocks all kinds of various different ways.

327
00:17:59,200 --> 00:18:03,200
So yeah, the idea is to always have

328
00:18:03,200 --> 00:18:05,200
multiple distribution mechanisms.

329
00:18:05,200 --> 00:18:07,200
Ultimately at the end of the day,

330
00:18:07,200 --> 00:18:10,200
you have something like proof of work,

331
00:18:10,200 --> 00:18:12,200
and then you have coin voting.

332
00:18:12,200 --> 00:18:14,200
Coin voting is all this time.

333
00:18:14,200 --> 00:18:16,200
So it's good to perfect it

334
00:18:16,200 --> 00:18:19,200
and at least have it as a legitimate route

335
00:18:19,200 --> 00:18:22,200
because we need as many governance models

336
00:18:22,200 --> 00:18:24,200
proven and tested as possible.

337
00:18:24,200 --> 00:18:26,200
So the only way coin distribution

338
00:18:26,200 --> 00:18:28,200
or coin voting actually works

339
00:18:28,200 --> 00:18:30,200
is if the coin distribution is decentralized.

340
00:18:30,200 --> 00:18:32,200
And just because it's decentralized now

341
00:18:32,200 --> 00:18:35,200
doesn't mean in the future it won't become centralized.

342
00:18:35,200 --> 00:18:37,200
That is why you always have to be thinking

343
00:18:37,200 --> 00:18:39,200
of future distribution.

344
00:18:47,200 --> 00:18:49,200
Yeah, don't worry.

345
00:18:49,200 --> 00:18:51,200
There's not a war going on outside.

346
00:18:51,200 --> 00:18:53,200
It's just any Friday in Mexico,

347
00:18:53,200 --> 00:18:55,200
it's fireworks.

348
00:18:55,200 --> 00:18:57,200
All right.

349
00:18:57,200 --> 00:19:02,200
No, I think we can get through this chapter.

350
00:19:02,200 --> 00:19:03,200
Hold on.

351
00:19:03,200 --> 00:19:05,200
Distribution to multiple parties.

352
00:19:05,200 --> 00:19:07,200
Ongoing distribution.

353
00:19:07,200 --> 00:19:09,200
The importance of earning your tokens.

354
00:19:09,200 --> 00:19:14,200
So the key thing here is that many projects in crypto

355
00:19:14,200 --> 00:19:16,200
have ordained themselves tokens.

356
00:19:16,200 --> 00:19:20,200
Some have given themselves 80% pre-mines

357
00:19:20,200 --> 00:19:22,200
before the token got released.

358
00:19:22,200 --> 00:19:25,200
And they say, oh, we have to use it to fund our own projects

359
00:19:25,200 --> 00:19:26,200
or we have to lock it up

360
00:19:26,200 --> 00:19:28,200
to distribute it later.

361
00:19:28,200 --> 00:19:34,200
But ultimately, the founders and the CEOs of these ecosystems

362
00:19:34,200 --> 00:19:37,200
have control over these pre-mined supplies.

363
00:19:37,200 --> 00:19:40,200
And it centralizes control of the ecosystem.

364
00:19:40,200 --> 00:19:44,200
It also results in the communities openly being used

365
00:19:44,200 --> 00:19:49,200
as exit liquidity by the founders of these ecosystems.

366
00:19:49,200 --> 00:19:54,200
So it's an immoral model under the guise of self-funding.

367
00:19:54,200 --> 00:19:56,200
How do we fund ourselves?

368
00:19:56,200 --> 00:19:59,200
If we can't have a portion of the tokens to ourselves

369
00:19:59,200 --> 00:20:01,200
to keep the project going?

370
00:20:01,200 --> 00:20:03,200
Well, Bitcoin never did that.

371
00:20:03,200 --> 00:20:06,200
The idea is you build the technology open source and free

372
00:20:06,200 --> 00:20:09,200
and then you release it to the community

373
00:20:09,200 --> 00:20:11,200
without giving yourself any tokens.

374
00:20:11,200 --> 00:20:14,200
And then you have to go in the ecosystem with everyone else

375
00:20:14,200 --> 00:20:18,200
and earn the tokens fair and square like everyone else did.

376
00:20:18,200 --> 00:20:21,200
That's very difficult to do because people need to eat.

377
00:20:21,200 --> 00:20:23,200
People need to self-sustain

378
00:20:23,200 --> 00:20:25,200
when they're building these projects.

379
00:20:25,200 --> 00:20:27,200
So it's very, very difficult.

380
00:20:27,200 --> 00:20:28,200
But there's multiple ways.

381
00:20:28,200 --> 00:20:29,200
We'll go into a bit later in the book

382
00:20:29,200 --> 00:20:34,200
on how to fund these projects in a decentralized way

383
00:20:34,200 --> 00:20:36,200
rather than giving yourself any of the token

384
00:20:36,200 --> 00:20:39,200
when you start if you're a founder.

385
00:20:39,200 --> 00:20:42,200
And that also gives the government the moral right

386
00:20:42,200 --> 00:20:45,200
to regulate you because you're using your community members

387
00:20:45,200 --> 00:20:48,200
unsuspectingly as exit liquidity.

388
00:20:48,200 --> 00:20:50,200
So the importance in these ecosystems

389
00:20:50,200 --> 00:20:52,200
is that you can earn the token.

390
00:20:52,200 --> 00:20:54,200
You can flat out earn the token separately

391
00:20:54,200 --> 00:20:56,200
by doing good things for the community,

392
00:20:56,200 --> 00:20:58,200
receiving votes from the community,

393
00:20:58,200 --> 00:21:02,200
and the community will, by voting for you,

394
00:21:02,200 --> 00:21:04,200
distribute the inflation to you.

395
00:21:04,200 --> 00:21:07,200
So now you're earning the token instead of buying the token

396
00:21:07,200 --> 00:21:10,200
or distributing the token to yourself if you're a founder.

397
00:21:10,200 --> 00:21:13,200
And what it does is it means if the founders are really good

398
00:21:13,200 --> 00:21:15,200
and the community likes the founders,

399
00:21:15,200 --> 00:21:17,200
then they'll keep voting for the founders

400
00:21:17,200 --> 00:21:18,200
when they publish content.

401
00:21:18,200 --> 00:21:21,200
And so the founders will earn their stake in the ecosystem

402
00:21:21,200 --> 00:21:23,200
instead of mining it

403
00:21:23,200 --> 00:21:26,200
or although if it's a fair, legitimate mining model,

404
00:21:26,200 --> 00:21:29,200
that's also fine

405
00:21:29,200 --> 00:21:31,200
where it's on an equal playing field.

406
00:21:31,200 --> 00:21:33,200
But if you get the tokens early,

407
00:21:33,200 --> 00:21:38,200
like 20%, 40%, 60% of the tokens in your pocket early,

408
00:21:38,200 --> 00:21:39,200
ordained by yourself,

409
00:21:39,200 --> 00:21:42,200
then ultimately that's the definition of a security.

410
00:21:42,200 --> 00:21:44,200
And it's an unregistered security often,

411
00:21:44,200 --> 00:21:47,200
and so now the government's got the right to regulate you.

412
00:21:47,200 --> 00:21:48,200
And then on top of that,

413
00:21:48,200 --> 00:21:50,200
most of these projects are registered

414
00:21:50,200 --> 00:21:52,200
in pro-regulation jurisdictions.

415
00:21:52,200 --> 00:21:55,200
As companies or the CEOs of these companies,

416
00:21:55,200 --> 00:21:56,200
everyone knows their phone numbers,

417
00:21:56,200 --> 00:21:59,200
everyone knows where to go.

418
00:21:59,200 --> 00:22:02,200
So this is a huge problem.

419
00:22:02,200 --> 00:22:05,200
So the importance here is whenever you look

420
00:22:05,200 --> 00:22:06,200
at a decentralized ecosystem,

421
00:22:06,200 --> 00:22:08,200
one of the questions you should be asking yourself is,

422
00:22:08,200 --> 00:22:11,200
can you earn the token?

423
00:22:11,200 --> 00:22:14,200
If you can earn the token by doing things for the community,

424
00:22:14,200 --> 00:22:17,200
then it's got a chance of being actually decentralized

425
00:22:17,200 --> 00:22:20,200
and it's got a chance of at least moving away

426
00:22:20,200 --> 00:22:21,200
from the founders

427
00:22:21,200 --> 00:22:25,200
and the CEO or the company that started the token.

428
00:22:25,200 --> 00:22:28,200
Hopefully there's no company or CEO at all

429
00:22:28,200 --> 00:22:30,200
in the ecosystems that you're using.

430
00:22:30,200 --> 00:22:33,200
And then there's always a way to earn the token fair and square

431
00:22:33,200 --> 00:22:35,200
like everyone else can.

432
00:22:35,200 --> 00:22:36,200
And that's the key.

433
00:22:36,200 --> 00:22:39,200
And if the founders have to earn their token as well,

434
00:22:39,200 --> 00:22:41,200
it's a pretty big deal.

435
00:22:41,200 --> 00:22:43,200
It really makes it a fair distribution.

436
00:22:43,200 --> 00:22:48,200
It's one of the key elements that we've identified.

437
00:22:48,200 --> 00:22:50,200
Keeping inflation in check is another thing.

438
00:22:50,200 --> 00:22:59,200
So you have to have an agreed consensus inflation model.

439
00:22:59,200 --> 00:23:02,200
In the token systems that we're talking about,

440
00:23:02,200 --> 00:23:04,200
the inflation is continuous.

441
00:23:04,200 --> 00:23:07,200
It doesn't cap off like Bitcoin does.

442
00:23:07,200 --> 00:23:13,200
The reason for that is because you have to have an incentive layer

443
00:23:13,200 --> 00:23:16,200
to reward the infrastructure operators,

444
00:23:16,200 --> 00:23:19,200
but also so that people can earn the token and stake it

445
00:23:19,200 --> 00:23:22,200
so they can get access to the rewards competition,

446
00:23:22,200 --> 00:23:26,200
sorry, to the resource competition on the base layer.

447
00:23:26,200 --> 00:23:28,200
So if people can't earn the token,

448
00:23:28,200 --> 00:23:33,200
they can't stake tokens to get access to resources.

449
00:23:33,200 --> 00:23:37,200
Yes, you need to see a continuing inflation in these tokens,

450
00:23:37,200 --> 00:23:41,200
but it should be very, very, very low, as low as possible.

451
00:23:41,200 --> 00:23:43,200
It can start off on some projects,

452
00:23:43,200 --> 00:23:47,200
it can start off high in the kind of 15% range per annum

453
00:23:47,200 --> 00:23:49,200
and then drop slowly every year.

454
00:23:49,200 --> 00:23:53,200
Down to a level such as 0.5% a year.

455
00:23:53,200 --> 00:23:56,200
And that should be enough just to keep the system greased

456
00:23:56,200 --> 00:23:58,200
and incentivized.

457
00:23:58,200 --> 00:24:00,200
Now, everyone in blockchain will say,

458
00:24:00,200 --> 00:24:03,200
oh, this is bad because we need to cap the token like Bitcoin

459
00:24:03,200 --> 00:24:05,200
so we stop inflation.

460
00:24:05,200 --> 00:24:08,200
But the argument is as long as a community is producing

461
00:24:08,200 --> 00:24:11,200
more economic value than the inflation is worth,

462
00:24:11,200 --> 00:24:15,200
it should maintain a sustainable token price.

463
00:24:15,200 --> 00:24:18,200
And as long as the community is not going to act in its,

464
00:24:18,200 --> 00:24:21,200
as long as the community acts in its own best interests,

465
00:24:21,200 --> 00:24:23,200
then it makes sense that it will not vote

466
00:24:23,200 --> 00:24:26,200
for inflationary policies like governments do.

467
00:24:26,200 --> 00:24:29,200
And so we believe that you can have some inflation to these tokens,

468
00:24:29,200 --> 00:24:31,200
but minimal and under control

469
00:24:31,200 --> 00:24:34,200
and agreed in consensus by the community.

470
00:24:39,200 --> 00:24:42,200
So what you want to see, any thoughts on that, Dan?

471
00:24:42,200 --> 00:24:48,200
Yeah, all right.

472
00:24:48,200 --> 00:24:51,200
We'll cut it here and we'll come back on the distribution section

473
00:24:51,200 --> 00:24:55,200
in another recording.

474
00:24:55,200 --> 00:24:57,200
All right.

475
00:25:03,200 --> 00:25:07,200
This is chapter 7.2.

476
00:25:07,200 --> 00:25:10,200
We're going to talk about what you want to see

477
00:25:10,200 --> 00:25:12,200
and what you don't want to see.

478
00:25:12,200 --> 00:25:15,200
As these distributions unfold.

479
00:25:15,200 --> 00:25:17,200
Any thoughts on this, Dan?

480
00:25:21,200 --> 00:25:25,200
You don't want to see any kind of ICO or sale or pre-mine

481
00:25:25,200 --> 00:25:29,200
or unfair advantage of the coin.

482
00:25:29,200 --> 00:25:33,200
What you want to see is an open opportunity,

483
00:25:33,200 --> 00:25:38,200
no barriers, meaning it can't cost a lot of money or resources.

484
00:25:38,200 --> 00:25:41,200
People must be able to provide value.

485
00:25:41,200 --> 00:25:44,200
In exchange for the coin.

486
00:25:44,200 --> 00:25:48,200
It has to be seen as not that valuable at the beginning,

487
00:25:48,200 --> 00:25:50,200
which is hard to do nowadays.

488
00:25:50,200 --> 00:25:53,200
But there has to be a reason to just distribute it and give it away.

489
00:25:53,200 --> 00:25:56,200
If you think of the 10,000 Bitcoin pizza.

490
00:25:56,200 --> 00:26:00,200
So you don't want a highly desirable coin before it's even launched

491
00:26:00,200 --> 00:26:03,200
because then the VCs will eat it up.

492
00:26:03,200 --> 00:26:08,200
You don't want to see any kind of founder ego

493
00:26:08,200 --> 00:26:10,200
who

494
00:26:10,200 --> 00:26:12,200
gets a cult-like following,

495
00:26:12,200 --> 00:26:15,200
even if he doesn't have that strong of a distribution.

496
00:26:15,200 --> 00:26:20,200
People can tend to just listen to go with just the founder.

497
00:26:20,200 --> 00:26:24,200
So, you know, it's obviously the best way is founderless.

498
00:26:24,200 --> 00:26:27,200
If not, you have a founder who takes a back seat.

499
00:26:27,200 --> 00:26:34,200
It's good to see

500
00:26:34,200 --> 00:26:38,200
ways that people in all kinds of countries,

501
00:26:38,200 --> 00:26:39,200
especially where it's needed,

502
00:26:39,200 --> 00:26:44,200
can get involved

503
00:26:44,200 --> 00:26:47,200
without having to ask for permission.

504
00:26:47,200 --> 00:26:51,200
So permissionless entry.

505
00:26:51,200 --> 00:26:54,200
You definitely don't want the only thing,

506
00:26:54,200 --> 00:26:57,200
only way to get the coin is selling,

507
00:26:57,200 --> 00:27:01,200
even if you didn't have the pre-mine.

508
00:27:09,200 --> 00:27:15,200
The other things that I would not want to see

509
00:27:15,200 --> 00:27:20,200
is a situation where there's a growing upper class

510
00:27:20,200 --> 00:27:22,200
and a growing lower class,

511
00:27:22,200 --> 00:27:24,200
but not a growing middle class.

512
00:27:24,200 --> 00:27:27,200
You really need to have middle classes.

513
00:27:27,200 --> 00:27:29,200
And the way the middle classes happen,

514
00:27:29,200 --> 00:27:30,200
in our view,

515
00:27:30,200 --> 00:27:34,200
is the lower classes have to create value,

516
00:27:34,200 --> 00:27:36,200
like added value activities,

517
00:27:36,200 --> 00:27:38,200
such as providing a service,

518
00:27:38,200 --> 00:27:39,200
a digital service,

519
00:27:39,200 --> 00:27:41,200
or creating events,

520
00:27:41,200 --> 00:27:44,200
or marketing a community,

521
00:27:44,200 --> 00:27:46,200
anything around the community

522
00:27:46,200 --> 00:27:50,200
to kind of feed value back into the community.

523
00:27:50,200 --> 00:27:53,200
And these added value services

524
00:27:53,200 --> 00:27:54,200
can be used to make money

525
00:27:54,200 --> 00:27:57,200
and be used to garner more upvotes from the community

526
00:27:57,200 --> 00:28:00,200
to distribute more inflation to those activities.

527
00:28:00,200 --> 00:28:05,200
And that can then move those users up the social scale

528
00:28:05,200 --> 00:28:07,200
to the middle class.

529
00:28:07,200 --> 00:28:09,200
And then once you've got a burgeoning middle class,

530
00:28:09,200 --> 00:28:11,200
that middle class can be way more eyes and ears

531
00:28:11,200 --> 00:28:13,200
to distribute way more tokens

532
00:28:13,200 --> 00:28:15,200
to different pieces of content.

533
00:28:15,200 --> 00:28:18,200
If you just have whales and plankton,

534
00:28:18,200 --> 00:28:20,200
or upper class and lower class,

535
00:28:20,200 --> 00:28:22,200
then those whales often struggle

536
00:28:22,200 --> 00:28:24,200
to distribute the token to everyone.

537
00:28:24,200 --> 00:28:27,200
So you really need to keep a check and balance

538
00:28:27,200 --> 00:28:29,200
as you go on,

539
00:28:29,200 --> 00:28:32,200
and this is by reading the chain,

540
00:28:32,200 --> 00:28:34,200
you have to watch your middle class

541
00:28:34,200 --> 00:28:36,200
and make sure it's growing.

542
00:28:36,200 --> 00:28:38,200
Make sure there's social mobility

543
00:28:38,200 --> 00:28:40,200
so that plankton become,

544
00:28:40,200 --> 00:28:42,200
dolphins become,

545
00:28:42,200 --> 00:28:45,200
orcas become whales.

546
00:28:45,200 --> 00:28:48,200
Or at least you see some signs of that being possible.

547
00:28:48,200 --> 00:28:50,200
And the other thing you don't want to see

548
00:28:50,200 --> 00:28:55,200
is all the tokens accumulating around just a few whales.

549
00:28:55,200 --> 00:28:56,200
If you see that,

550
00:28:56,200 --> 00:29:00,200
then either your social activity

551
00:29:00,200 --> 00:29:04,200
isn't strong enough or isn't high enough volume,

552
00:29:04,200 --> 00:29:06,200
or your distribution model

553
00:29:06,200 --> 00:29:08,200
isn't good enough,

554
00:29:08,200 --> 00:29:10,200
or you don't have the right token,

555
00:29:10,200 --> 00:29:12,200
and it's not the correct settings.

556
00:29:12,200 --> 00:29:14,200
You've got to tweak it more to get,

557
00:29:14,200 --> 00:29:16,200
well, you've got to get the community to agree,

558
00:29:16,200 --> 00:29:18,200
including those whales,

559
00:29:18,200 --> 00:29:20,200
to tweak it more to distribute the token

560
00:29:20,200 --> 00:29:21,200
to the lower class

561
00:29:21,200 --> 00:29:24,200
and turn them into middle class members.

562
00:29:24,200 --> 00:29:27,200
The theory is that it's in the interest of those whales

563
00:29:27,200 --> 00:29:28,200
to vote for that,

564
00:29:28,200 --> 00:29:31,200
because if they take all the tokens to themselves,

565
00:29:31,200 --> 00:29:32,200
then eventually,

566
00:29:32,200 --> 00:29:34,200
if all the tokens pool in the hands of the whales,

567
00:29:34,200 --> 00:29:36,200
they risk being forked out,

568
00:29:36,200 --> 00:29:37,200
the lower class leaving.

569
00:29:37,200 --> 00:29:39,200
And it's really the beauty of these systems

570
00:29:39,200 --> 00:29:40,200
is that it's the lower class,

571
00:29:40,200 --> 00:29:44,200
it's the community that provide the ultimate value

572
00:29:44,200 --> 00:29:45,200
to these tokens.

573
00:29:45,200 --> 00:29:46,200
So the whales can be rich,

574
00:29:46,200 --> 00:29:48,200
but if they don't respect

575
00:29:48,200 --> 00:29:52,200
and work out clever ways to distribute the token

576
00:29:52,200 --> 00:29:54,200
as much as possible to the lower classes,

577
00:29:54,200 --> 00:29:56,200
then the lower classes can just leave

578
00:29:56,200 --> 00:29:59,200
and go to another place without those whales.

579
00:29:59,200 --> 00:30:02,200
So they have to keep an eye on that.

580
00:30:06,200 --> 00:30:12,200
Yeah, in terms of what do and don't you want to see,

581
00:30:12,200 --> 00:30:15,200
I think that's the majority of it.

582
00:30:15,200 --> 00:30:19,200
Let's move on to another item here.

583
00:30:27,200 --> 00:30:30,200
The application of semi-centralized models.

584
00:30:30,200 --> 00:30:34,200
So there is a justification to do a pre-mining ICO.

585
00:30:34,200 --> 00:30:36,200
If you,

586
00:30:36,200 --> 00:30:39,200
if what you're doing is like reviewing restaurants

587
00:30:39,200 --> 00:30:44,200
or just something that's not going to rock the boat too much,

588
00:30:44,200 --> 00:30:46,200
something that isn't really related to human rights

589
00:30:46,200 --> 00:30:49,200
or digital human rights on the base layer.

590
00:30:49,200 --> 00:30:50,200
So for example,

591
00:30:50,200 --> 00:30:52,200
if you're doing restaurant reviews,

592
00:30:52,200 --> 00:30:54,200
you could have the most amazing restaurant review system

593
00:30:54,200 --> 00:30:55,200
in history.

594
00:30:55,200 --> 00:30:58,200
It's not really going to rock the boat

595
00:30:58,200 --> 00:31:00,200
of the restaurant industry too much

596
00:31:00,200 --> 00:31:02,200
or the world, the system.

597
00:31:02,200 --> 00:31:04,200
So you could get away with doing an ICO

598
00:31:04,200 --> 00:31:06,200
in that type of system.

599
00:31:06,200 --> 00:31:08,200
When you're talking about preserving free speech

600
00:31:08,200 --> 00:31:12,200
and you're talking about preserving digital human rights

601
00:31:12,200 --> 00:31:14,200
on the chain,

602
00:31:14,200 --> 00:31:17,200
then you really need to have a free, fair,

603
00:31:17,200 --> 00:31:19,200
open distribution

604
00:31:19,200 --> 00:31:23,200
where there was no CEO, no ICO, no company, no pre-mine,

605
00:31:23,200 --> 00:31:25,200
none of that type of stuff

606
00:31:25,200 --> 00:31:27,200
at the start of the project.

607
00:31:34,200 --> 00:31:35,200
Yeah, so ultimately,

608
00:31:35,200 --> 00:31:37,200
you need to decide if you're trying to preserve

609
00:31:37,200 --> 00:31:38,200
digital human rights or not.

610
00:31:38,200 --> 00:31:39,200
And if you are,

611
00:31:39,200 --> 00:31:44,200
then you need to have no compromises on

612
00:31:44,200 --> 00:31:47,200
any type of centralization in the initial distribution.

613
00:31:47,200 --> 00:31:48,200
Whereas if you're just doing something simple

614
00:31:48,200 --> 00:31:50,200
like restaurant reviews

615
00:31:50,200 --> 00:31:53,200
or some other simple activity,

616
00:31:53,200 --> 00:31:55,200
then you can get away with some form of centralization

617
00:31:55,200 --> 00:31:57,200
because no one's going to come and regulate you

618
00:31:57,200 --> 00:32:00,200
because you're not going to rock the boat.

619
00:32:00,200 --> 00:32:03,200
You're not trying to preserve human rights.

620
00:32:03,200 --> 00:32:04,200
People, of course,

621
00:32:04,200 --> 00:32:06,200
don't understand this in the ecosystem these days,

622
00:32:06,200 --> 00:32:12,200
but these are important points to understand.

623
00:32:12,200 --> 00:32:14,200
And again, just to reiterate,

624
00:32:14,200 --> 00:32:15,200
if you are trying to preserve free speech

625
00:32:15,200 --> 00:32:17,200
and censorship resistance,

626
00:32:17,200 --> 00:32:21,200
then you cannot compromise on any of these factors,

627
00:32:21,200 --> 00:32:22,200
either previously in this book

628
00:32:22,200 --> 00:32:26,200
or the preceding chapters.

629
00:32:26,200 --> 00:32:29,200
It's incredibly important that the models that we use,

630
00:32:29,200 --> 00:32:30,200
the ecosystems that we use,

631
00:32:30,200 --> 00:32:33,200
have these factors that we've described in place

632
00:32:33,200 --> 00:32:36,200
because it means you end up with a neutral layer one

633
00:32:36,200 --> 00:32:39,200
and no one can regulate a neutral,

634
00:32:39,200 --> 00:32:44,200
ownerless, unregistered,

635
00:32:44,200 --> 00:32:48,200
non-traceable to any individual layer one

636
00:32:48,200 --> 00:32:51,200
that is operating in the ways that we've described.

637
00:32:51,200 --> 00:32:52,200
If you have that,

638
00:32:52,200 --> 00:32:54,200
then you have digital human rights.

639
00:32:54,200 --> 00:32:57,200
You have censorship resistance on the layer one

640
00:32:57,200 --> 00:32:59,200
and it can't be shut down.

641
00:32:59,200 --> 00:33:00,200
And that is the key here,

642
00:33:00,200 --> 00:33:01,200
that the layer one is a neutral,

643
00:33:01,200 --> 00:33:03,200
ownerless layer one

644
00:33:03,200 --> 00:33:05,200
with no central points of failure,

645
00:33:05,200 --> 00:33:07,200
no central party behind it.

646
00:33:07,200 --> 00:33:08,200
And so as a result,

647
00:33:08,200 --> 00:33:10,200
it does then preserve free speech.

648
00:33:10,200 --> 00:33:17,200
It does then create censorship resistance.

649
00:33:17,200 --> 00:33:18,200
Any other thoughts on that, Dan,

650
00:33:18,200 --> 00:33:24,200
before we touch on stakeholder size and founder size?

651
00:33:24,200 --> 00:33:26,200
Do you want to talk about the size of stakeholders

652
00:33:26,200 --> 00:33:28,200
and the size of...

653
00:33:28,200 --> 00:33:30,200
Well, I mean, you're a large stakeholder on high,

654
00:33:30,200 --> 00:33:32,200
so maybe you can describe why you're a large stakeholder

655
00:33:32,200 --> 00:33:34,200
and why you don't want to get any bigger.

656
00:33:38,200 --> 00:33:42,200
So a very wise stakeholder

657
00:33:42,200 --> 00:33:45,200
who does not want to have responsibility

658
00:33:45,200 --> 00:33:46,200
or become an attack vector

659
00:33:46,200 --> 00:33:50,200
will realize that stake matters in coin voting.

660
00:33:50,200 --> 00:33:54,200
So it's not desirable to accumulate

661
00:33:54,200 --> 00:33:56,200
a centralizing amount

662
00:33:56,200 --> 00:34:00,200
because the community that you are

663
00:34:02,200 --> 00:34:04,200
basically buying the coin from

664
00:34:04,200 --> 00:34:06,200
will start to resent you if you get too large,

665
00:34:06,200 --> 00:34:09,200
if your influence becomes too big.

666
00:34:09,200 --> 00:34:10,200
Even if you're benevolent,

667
00:34:10,200 --> 00:34:13,200
you're going to take on risk and attack vectors

668
00:34:13,200 --> 00:34:15,200
and you'll be risked being forked out

669
00:34:15,200 --> 00:34:18,200
because you might be forced

670
00:34:18,200 --> 00:34:20,200
by an outside entity to do something

671
00:34:20,200 --> 00:34:23,200
that goes against what the community wants.

672
00:34:23,200 --> 00:34:28,200
So ideally, you never get to that point.

673
00:34:28,200 --> 00:34:30,200
You make the coin incredibly distributed

674
00:34:30,200 --> 00:34:34,200
and you make it very hard to accumulate that amount.

675
00:34:34,200 --> 00:34:37,200
That's why you can't start with any pre-mines

676
00:34:37,200 --> 00:34:42,200
or ICO sales of coins to insiders.

677
00:34:42,200 --> 00:34:46,200
But if you do have a very large stake size,

678
00:34:46,200 --> 00:34:48,200
just know that you are now...

679
00:34:48,200 --> 00:34:49,200
The larger the stake size,

680
00:34:49,200 --> 00:34:51,200
the larger target you become,

681
00:34:51,200 --> 00:34:55,200
the more responsibility that lies on your shoulders.

682
00:34:55,200 --> 00:34:58,200
And really, if you look at it from an investment point of view,

683
00:34:58,200 --> 00:35:00,200
it doesn't even make much sense.

684
00:35:00,200 --> 00:35:03,200
Because when you go to cash out,

685
00:35:03,200 --> 00:35:05,200
you're going to suck up all the liquidity.

686
00:35:05,200 --> 00:35:10,200
So why stakeholders would become a part,

687
00:35:10,200 --> 00:35:13,200
not try to own or control?

688
00:35:13,200 --> 00:35:17,200
Usually, you build these things that are resistant to that.

689
00:35:17,200 --> 00:35:20,200
If someone tried to get a hold,

690
00:35:20,200 --> 00:35:25,200
it would become apparent very quickly.

691
00:35:25,200 --> 00:35:27,200
You also have the free market.

692
00:35:27,200 --> 00:35:29,200
The idea is to have a thinner supply,

693
00:35:29,200 --> 00:35:32,200
make that sort of attack hard to do.

694
00:35:32,200 --> 00:35:36,200
And really, it would have to be more seen as a malicious attack

695
00:35:36,200 --> 00:35:38,200
rather than a smart investment.

696
00:35:38,200 --> 00:35:40,200
Because the amount you'd have to buy

697
00:35:40,200 --> 00:35:43,200
and the risk you'd have to take on with such a thin supply,

698
00:35:43,200 --> 00:35:46,200
if you were to do this game theory correct,

699
00:35:46,200 --> 00:35:48,200
wouldn't make sense.

700
00:35:48,200 --> 00:35:51,200
So it would have to be some sort of outside of attack.

701
00:35:51,200 --> 00:35:53,200
And if that was the case,

702
00:35:53,200 --> 00:35:56,200
there's always the last resort where communities can fork out.

703
00:35:56,200 --> 00:35:58,200
Let's get a bit off topic.

704
00:35:59,200 --> 00:36:04,200
Yeah, and then it's also in the interest of the community

705
00:36:04,200 --> 00:36:10,200
to keep a keen awareness of how big the whales are in the ecosystem

706
00:36:10,200 --> 00:36:13,200
and how much percent of the supply that they've got.

707
00:36:13,200 --> 00:36:16,200
And it's, of course, in the interest of the whales

708
00:36:16,200 --> 00:36:18,200
to be somewhat public about that,

709
00:36:18,200 --> 00:36:20,200
but at least demonstrate to the community

710
00:36:20,200 --> 00:36:23,200
that they're not trying to accumulate the whole supply.

711
00:36:23,200 --> 00:36:25,200
And there's like a limit.

712
00:36:25,200 --> 00:36:28,200
Some whales have got 1%, some 2%.

713
00:36:28,200 --> 00:36:32,200
You see some ecosystems where you get a whale with 5%.

714
00:36:32,200 --> 00:36:35,200
But when you start getting past 5%,

715
00:36:35,200 --> 00:36:38,200
you're really starting to get to a centralized decision-making process,

716
00:36:38,200 --> 00:36:40,200
a centralized vote,

717
00:36:40,200 --> 00:36:43,200
a centralized point of failure in the ecosystem,

718
00:36:43,200 --> 00:36:47,200
especially when it's parameter coin voting.

719
00:36:47,200 --> 00:36:52,200
So, yeah, shrewd whales will not accumulate more than

720
00:36:52,200 --> 00:36:57,200
between 1% and 3%, 4%, maybe 5% of the supply.

721
00:36:58,200 --> 00:37:01,200
Shrewd communities will just nudge that whale from time to time

722
00:37:01,200 --> 00:37:06,200
to let them know that they know how much that whale is accumulating.

723
00:37:06,200 --> 00:37:09,200
And, of course, there's a fork-out risk that Dan just mentioned,

724
00:37:09,200 --> 00:37:14,200
but we'll talk about that in later chapters,

725
00:37:14,200 --> 00:37:17,200
where the community can fork the whale out and leave the whale

726
00:37:17,200 --> 00:37:26,200
if they judge that whale as being non-malevolent, malevolent to the community.

727
00:37:26,200 --> 00:37:31,200
The same goes for the founders, the ICO stakes, the pre-mines,

728
00:37:31,200 --> 00:37:34,200
any venture capital or anything that looks like venture capital.

729
00:37:34,200 --> 00:37:37,200
If it starts to accumulate a large amount of token,

730
00:37:37,200 --> 00:37:41,200
then the community needs to move towards figuring out a way

731
00:37:41,200 --> 00:37:46,200
to marginalize the effect of that on the community itself.

732
00:37:46,200 --> 00:37:49,200
So, for example, there's nothing wrong with a big hedge fund

733
00:37:49,200 --> 00:37:51,200
accumulating loads of stablecoin,

734
00:37:51,200 --> 00:37:55,200
but the second they move that, let's say it's $100 million worth,

735
00:37:55,200 --> 00:38:03,200
so it's a significant size vote, let's say it's 10, 15% of the vote.

736
00:38:03,200 --> 00:38:06,200
The second they start moving that to the main token

737
00:38:06,200 --> 00:38:11,200
and powering that token up or locking it up and using it to vote,

738
00:38:11,200 --> 00:38:13,200
that's a massive security risk to the community

739
00:38:13,200 --> 00:38:16,200
because they can bring in their own consensus.

740
00:38:16,200 --> 00:38:22,200
So the community needs to have a time period between the voting and the lockup.

741
00:38:22,200 --> 00:38:24,200
So when you lock up, you have to wait a certain amount of time

742
00:38:24,200 --> 00:38:25,200
before you can vote.

743
00:38:25,200 --> 00:38:29,200
So the community can decide what it wants to do with this new entity

744
00:38:29,200 --> 00:38:34,200
that's decided to power up a load of the governance token.

745
00:38:34,200 --> 00:38:38,200
And we'll talk, again, we'll talk more about that in later chapters as well

746
00:38:38,200 --> 00:38:41,200
and how to defend against it.

747
00:38:41,200 --> 00:38:44,200
But, yeah, I mean, these are things the community needs to be keen on,

748
00:38:44,200 --> 00:38:48,200
keep an eye out for, and make sure they stay in check.

749
00:38:48,200 --> 00:38:50,200
The next section will be reputation.

750
00:38:50,200 --> 00:38:54,200
Any final thoughts on this section, Don, in terms of distribution?

751
00:38:54,200 --> 00:38:58,200
Sure.

752
00:38:58,200 --> 00:39:06,200
So anyone that converts an amount of the Hive Power governance coin

753
00:39:06,200 --> 00:39:09,200
that is centralizing is seen as an attack vector,

754
00:39:09,200 --> 00:39:11,200
or at least should be seen as an attack vector.

755
00:39:11,200 --> 00:39:14,200
So it doesn't matter if you're right or wrong,

756
00:39:14,200 --> 00:39:17,200
whatever your reasons are, they're benevolent or not.

757
00:39:17,200 --> 00:39:23,200
The moment that there is a centralized amount of consensus,

758
00:39:23,200 --> 00:39:28,200
of governance coin in one entity's hands, it's an attack vector.

759
00:39:28,200 --> 00:39:34,200
So you want to mitigate that with delays so you can see it coming

760
00:39:34,200 --> 00:39:41,200
and you can act as a community and, you know, put safeguards, parameters,

761
00:39:41,200 --> 00:39:44,200
because that's the thing about governance is it always evolves.

762
00:39:44,200 --> 00:39:46,200
It's not stagnant.

763
00:39:46,200 --> 00:39:50,200
So a new attack might come and you have to make a parameter on the fly,

764
00:39:50,200 --> 00:39:52,200
which we've seen in practice before.

765
00:39:52,200 --> 00:39:57,200
So it's important to understand that as an investor,

766
00:39:57,200 --> 00:40:03,200
you do not want to come in and buy a centralizing amount of the coin

767
00:40:03,200 --> 00:40:05,200
because that is called a money attack.

768
00:40:05,200 --> 00:40:10,200
So you are directly attacking the chain, thus putting the chain at risk

769
00:40:10,200 --> 00:40:15,200
and yourself, the value, or at least the coins that you have at risk

770
00:40:15,200 --> 00:40:20,200
of being forked, frozen, whatever the community decides with the attack.

771
00:40:20,200 --> 00:40:21,200
.

772
00:40:21,200 --> 00:40:26,200
Yeah, it has to be powered up.

773
00:40:26,200 --> 00:40:28,200
It has to be consensus coin.

774
00:40:28,200 --> 00:40:32,200
So it has to be seen as, oh, I am powering up enough

775
00:40:32,200 --> 00:40:36,200
to overtake all the governance on the chain.

776
00:40:36,200 --> 00:40:40,200
I'll have predominant voting power, 51%.

777
00:40:40,200 --> 00:40:43,200
If that is seen, it should be stopped.

778
00:40:43,200 --> 00:40:45,200
It's an attack.

779
00:40:45,200 --> 00:40:49,200
There's never, ever a good reason that that should be allowed.

780
00:40:49,200 --> 00:40:50,200
.

781
00:40:50,200 --> 00:40:55,200
So it should be known that you don't do that.

782
00:40:55,200 --> 00:41:01,200
And if you do, expect that it's like being a bad validator on proof of stake.

783
00:41:01,200 --> 00:41:03,200
You lose your funds, right?

784
00:41:03,200 --> 00:41:09,200
Well, that's sort of what you're risking if you're coming in trying to monopolize.

785
00:41:09,200 --> 00:41:14,200
Whether you know it or not, that's why education is important on this.

Book - Securing Digital Rights for Communities | Chapter 7 - Sustainable Economy & Decentralized Coin Distribution

Chapter 7. Sustainable Economy & Decentralized Coin Distribution

Transcript ⏬