Hey everyone. I'm Lee here along with my co-host Nathan and this is means of creation a show all about the future of work and the online passion economy. The show is made by every writers Collective focused on business writing. And this is another episode of our new web three explainer Series. Today. We're going to tackle a pretty ambitious subject, which is explaining how etherium works. And what it is. I think it's safe to say that after Bitcoin and Satoshi etherium and vitalik butyrin are probably the best contenders to be.
Household names that most people associate with crypto, but I think the number of people in the world who actually fundamentally understand what etherium is or how it works. Is probably quite small. So to help us unpack those subjects. We've brought in a guest today, who not only has a grasp on how a theorem works, but she was actually part of the team at coinbase that helps launch ethereum. So, we're really excited to welcome. Prithi casts already on the show today. She is an entrepreneur writer engineer and educator. She started her crypto career as a software engineer at coin.
Base before deciding to start her own crypto company called true story where she and her team built their own blockchain on Cosmos today. She runs a popular course that introduces students to the etherium ecosystem and helps them build their first web three product in just 21 days. In my opinion. She's also written the best primer on ethereum on her blog called. How does the theorem work? Anyway, it was one of the first blog post that I read that really helped me to understand aetherium. And so I think she's perfect for helping us unpack.
Explain at the am today. So let's dive in, welcome free. These thank you. Thank you so much for being here
today. Awesome. I'm super
excited amazing. Okay. So let's just dive straight in would love to hear your explainer on what is etherium and how does it work?
Okay, so, I mean, obviously that's a very, very broad topic. So I think we should kind of break that down and the start at a very high level. Like, what is the theory? Mm? I mean, it's a blockchain. Just like Bitcoin is a blockchain. Solana is a blockchain. I'm
I landed the Block in so at a very high level, it's a blockchain. But what makes if they're um unique as a blockchain or made it unique in the beginning at least because the only black kid that existed before if they're young was Bitcoin and what it Syrian really did was they created a blockchain which is basically just a database, you can think of it as like a database that keeps track of transactions, that happen publicly. So, let's say, I want to send you five dollars or five ethereum that all of that.
Transaction data is stored on the blockchain in this public database. And so there's no centralized Authority that's keeping track of this database. Instead the authenticity of the database meaning, like making sure that the transactions are valid is just done in a completely decentralized way and we'll get into how that works. I guess later in the podcast. But really what etherium did was it created a blockchain where not only can you send money like, you know Bitcoin you can send money and so Bitcoin really innovated there.
Now, with aetherium, you can also do all other types of transactions besides just payments. You can create applications where a transaction might be that, you're posting a message on to an application or a transaction might be that, you are adding two numbers. You're subtracting two numbers in order to do something larger. So, basically, it created this block chain that could be that's general purpose. And can be used for much more than just simple payment transfers and that's really
The innovation of of ethereum and how it does that is sort of super interesting in my opinion and we'll get into that. Hopefully
soon, got it. Okay. So so this is really interesting. So now basically aetherium was this more general purpose blockchain where it was not just a ledger for sending and receiving payments. Like Bitcoin was where you send and receive Bitcoin and everyone has a Bitcoin balance, but instead aetherium. Is this basically like Computing platform.
Where developers are writing applications that would it be accurate to say that they are stored on the etherium network? And so, they're essentially like verifiable and publicly accessible and viewable, and no one can tamper what those
applications? That's right. Exactly. It's it is a general-purpose Computing platform. Exactly. Like you said and so really, what if they're aimed it is, whatever you can do in a regular computer technically you should be able to do on ethereum.
So, they built this programming language called solidity, which really compiles down to evm by code. But Celerity is a programming language where you can write programs. Just like, you can write a Python program or a JavaScript program to maybe code a front-end or back-end. Similarly. Now, you can write any type of program that you can do on a regular computer, but you're running that program on ethereum instead. And so yeah, so if they're in gives you this programming language called celebrity, which
is what you use to write smart contracts and for contracts are nothing but some some piece of code that defines some logic that you want running on the blockchain and then you deploy this for a contract on ethereum. And then if they're em run sets my contract. So in that way, you can basically do anything that you can do on a regular computer on ethereum. Yeah. It's so cool because like it kind of blew my mind when I wrap my head around it that it's like it's almost like open source in the sense that, you know, anyone can freely take the code that someone publishes.
Open source and run it. But it's sort of extends that idea almost to like the state of the program itself because the database of the etherium network of like what are all the things that people have in their wallets, like in the whole history of that is like a shared open State. And so it's funny because people call it, it's decentralized because no one controls it, but it's kind of, in a weird way more centralized because everyone can work on like one shared history, which is really rather than, like, everyone having their own databases with their own history that nobody can trust each other necessarily that there's this like the correct history.
Something like that. That's right. And then the concept that you're referring to is typically called composability in the ethereum world, to kind of break down what you said. Basically, what you're saying is in addition to writing taking the actual code. You actually also store the data of every application on the ethereum blockchain. So the ethereum blockchain stores, smart contract code and it stores. The data that's associated with all the accounts on the ethereum blockchain. So you can literally take anyone's ethereum account, paste it into either scan.
Or any kind of public blockchain API scanner and get like user. Balances, what types of transactions they've made? All of that data is completely public and available for you and a stir on the blockchain. And so, because that's possible, because all the state is public, and all this more contracts are public anyone can build on top of it. They can copy the code, they can build on top of it. They can do whatever they want with it. So, it's completely permissionless in that way. And that, you know, previously in like the
Aunt web to world. If Microsoft deploy, some piece of code developers can't really build on it unless they open source it, but even if they open source it, they have to Fork it. And then they have to probably have like you said, the data is not there. It's just a code. Whereas like with the theory of all the data is there so you can build on top of it which just creates a really, really cool. Use cases.
Yep. People often talk about etherium and the ebm, the etherium
Machine, can you unpack what that is? And what does it mean when other block chains? Are also evm compatible? Yeah, what does all of that mean?
Yeah, so, evm stands for ethereum virtual machine. And basically, this is the, so when you write to your code and solidity and then you create a smart contract, right? And when someone interacts with that smart contract, something has to run that code. Something has to process that logic that that you're running. And so, the evm.
Is what actually processes the logic that existence work contracts or any kind of transaction. So, every transaction is basically processed by the ebm. And the evm has a set of rules for how different things are done and it has its own language, which is the solidity language. But it's compiled down to a machine language that the evm can understand. So when you write to literally code that code gets compiled to bytecode and the evm understands by code. And so whenever
Man interact with this. My contract and execute certain logic that logic is converted to bytecode. And then the evm executes that by code to be able to process that logic. There's been a lot of criticism about the evm because it was designed very fast. It's very, it's a very crude machine. It's not like an optimized evm, and it's really hard and because, you know, with the blockchain once you deploy it's really hard to meet upgrades. It's not something that people have been able to improve unlike the Java VM.
I'm, for example. So the theorem evm is very simplistic. It has certain operators that I could do, but it could be a lot better. But what happened was the industry kind of standardize on the evm. Because if they're in, was really the first block chain that allowed for general-purpose computing and it became really, really popular, really really fast. And so everyone started writing evm programs, basically smart contracts, and solidity. And as a result because some people are writing evm
Programs. Some people who are building new block chains, for example, like Avalanche. They realize that it's really hard to compete with the evm because it's so many developers already know solidity. There's best practices that exist. For solidity. There's Auditors to understand. How to audit solidity code to rebuild that entire ecosystem is really, really, really hard. So some blockchains realize that and they're like, okay, the evm seems like to be the elephant in the room. So we should be evm compatible and
Really what that means is that you can write a Perl, smart contract and solidity, and compile, and it could compile down to the evm by code. And that Block Chain will understand the evm bytecode and be able to execute it. So basically it's a way to for something like Avalanche to piggyback off of the adoption and the ecosystem that has been built around evm rather than building it from scratch. For example, it's Alana you have to build it from scratch because they're not a be incompatible.
It's kind of like with web browsers. We're like HTML, CSS JavaScript. These are all standards. If you want to build a new web browser. You can totally do that. And you just have to be able to take in as an input, the standard HTML CSS and JavaScript that developers have been writing for, you know, decades and render it properly in a way that the sort of developer would expect similar to other browsers and then you can compete on something else. Like maybe my browser's really privacy focused or my browser is native-like, aetherium while integration or whatever. So there's like Different Twist, you can take on it. And so I'm sure.
These other blockchains maybe they're faster or cheaper or whatever, you know then at or more for foot years so they can kind of embrace and extend as the strategy goes, the actually I'm curious do they do that? Or it's like you can run your theorem code here, but like also, if you're in code, I'm sure that's not a phrase. Anyone actually you just this. But do they do that? Where it's like you can run your theorem code here, but you can also kind of enhance it with extra stuff that you can't do on ethereum. Like, is that a strategy? We definitely do. And then also for example, some that Avalanche you could write solidity code and poured it over or you
Just write in whatever language they provide for those more contracts so you can kind of mix and match. Maybe you want to pour some of your application over and then build on top of it. So, yeah, they do allow kind of enhancements that way faster, the bare minimum they allow at least you to Port over your evm application. And that's a very smart move in my opinion because then it's so much easier for a developer to just be like, okay. I'm going to exist on this chain and this chain and this chain because I don't have to rewrite the logic,
but just to be clear that
that that breaks composability with other applications on ethereum, right? If someone were to take their application and ported over to Avalanche, even though it's easy. I'm compatible. It doesn't compose with all the rest of the world of etherium L1
applications. That's right. Yeah. Until we have better cross, blockchain communication, which we're not even close to having like we don't have the ability to communicate more complex transactions across different blockchains. Yeah. We lose composer.
Early, so that application that existed on that exists. On ethereum can still be composable with other apps on ethereum, but the app on Avalanche doesn't have that ability. That's right. Hmm, makes sense. One thing I wanted to ask about was I think, you know, when most people think of etherium, probably the first thing that comes to mind is like, and ftes and dowse and till. Now in the conversation. We've talked a lot about the technical capabilities of ethereum as compared to, like Bitcoin potentially, but how do those give rise to NF, teas and dowse, you know, like what's the connection?
Ian between Theory and being a programmable, you know, Turing complete virtual machine and the ability to because it seems like a 10 ft is kind of the same thing as a Bitcoin, in some ways because it's just like a token. Basically. It doesn't feel like a program that I'm running. It. Just feels like a token that is one-of-a-kind as opposed to one of many. Yeah. It's a good question. I mean, and of teas are super simple concept, like you said, it's just just like an ear sees. 20 token is just a nearly 20, fungible token, your see 721. It's just a different type of token.
And the key difference, is that like? Okay. So if they're IAM, the Block Chain has the ether as the underlying token, right? And you use ether, for example, to pay gas fees or if you wanted to store, by Theory and itself, you can buy it but because if their muscle allows us to build smart contracts, things like ERC 20. And ERC 721 tokens are actually just smart contracts.
Is that Define what type of token it is? So it's not like native to the ethereum blockchain. These tokens are not native to that. They're in blockchain. They're just smart contracts that Define a set of standards for what. This type of token is. The reason we can't really do this on bitcoin, at least not before things like stacks and stuff existed on the core Block Chain is because just deploying any kind of smart contract on bitcoin is, is really, really painful. And it really doesn't allow for complex logic. So with etherium, we can kind of innovate a lot faster and
Create new types of tokens that were just never possible before. So the reason they exist on ethereum is mostly because we can write to my contracts and we can Define the logic of that specific type of token, using a smart contract. And so yeah, your see 721 tokens are honestly, there's very simple like any Junior Dev can take the standard that exists and deploy a contract. And there you go. They have an ear Z71 token.
Okay. So for a lot of folks who are new to crypto, I think upon hearing all of this, this might sound like very intellectually interesting, but the question that
My table is like, why, why why invent, like a new kind of computer? Why? Build applications in this way using smart contracts versus just in the traditional software development way on your own server, and database, people often times, say that etherium applications are like normal applications, but slower and more expensive, and they cost money to use and deploy. And so could you sort of paint the picture of like, what are the benefits to developing applications in this way? And
Are your responses to folks who are skeptical?
Yeah, I think a few different. You can kind of look at this from a few different angles. One is like we talked about the composability that it creates. So everything on the Darren blockchain is open, its publicly verifiable other people can build on it. And so it allows people application to be composable and an example of where that really shined, where that property really shined is D Phi. So everyone saw how quickly kind of
Crew in 2020 and 2021. And the main reason is because of how composable a lot of these applications are and will continue to be. Especially now defy 2.0. A lot of developers are thinking about composability. So, what this allows is much faster innovation in my opinion, when you open source, everything and everything allows for permissionless Innovation. The in the rate of innovation is just so much faster like the, the the amount of stuff that have been invented and defy.
The last couple years is remarkable compared to how quickly the same thing happened in traditional Finance. Like it probably would have taken one or two decades to the same thing. So speed of innovation, this one.
To is, I think people sometimes underestimate the importance of not needing permission to have access to Applications. Whether its Financial social or something else in a country like the us, maybe it's less appreciated. But some other countries do really appreciate that permissionless ability to access any kind of application and I think you're also starting to see that in the US where you're trying to see platform sensor.
Users kick them off for no reason and I think that's a very slippery slope and biology talks about this a lot where he says and web to like that. Kind of censorship is a slippery slope, but in web 3, it leads to a crypto Cliff as he calls it. Meaning that when you when you tried it, when you kick off a very valuable users off of platform because they said something wrong, or thought something wrong, people who disagree with that will have a very strong voice because they have skin.
The game in that protocol, the actually can can cause the the network value to go really low. If they decide that this platform is not something they want to be attached with and they move their activity elsewhere. So in crypto, because every Network participant has skin in the game, it creates more, what's the right, more accountability for platforms to not just sensor people left and right.
Besides that I think like the other argument that I really like for why crypto? Why web three kind of falls in the line of what Chris Dixon talks about which is the value of being able to own and Port your data. So like we said, all of the data that exists on the during blockchain is open and technically you own your data because the only person who has access to your ethereum account, private key is you. And so the only person so you
And we have access to all your data. There's no other person in the world that has your private key. We see and web to that when we use Twitter and when you use Facebook, like we don't have access to that data, like, it's completely owned by Facebook and they monetize it. And they do all kinds of things to that. Don't align with the users, the end users at the end of the day, whereas, with etherium, because you own the data, you have a lot more power and control over what you can do with that data. What the platform can do with that data, you can move.
Two different platforms, for example, rather than rather than one single Twitter existing. Maybe there's a way that three different Twitter's exist for different things and they use the same underlying data that's stored on the blockchain. Like that was never possible before because before all the data was siloed and all these companies now, we have all the data on this publicly, verifiable verifiable database is called the blockchain, and then all the applications can exist using that same data that you own. So I think that's very powerful. I don't think
We've seen that play out though, like, most of the applications today, and crypto are very much about, like, how much money can you make, like, how fast can you flip this token or this token? I mean, there are very genuine people in the space building really, really cool things, but on the surface, at least with a lot of entities and defy, that's what it seems like. And I think I think that will slowly over time become less of a thing and it will will start to see more and more utility to the average user
agreed. Yeah. I think there's like
a really powerful like ideological and Mission underpinning to aetherium and at least like a lot of what drew me to the space from many years of investing and web to was the idea of user ownership of their data. And I think a lot of people in the world, kind of, just take the status quo for granted, like, this is the way that the world has always worked, but I think when you reflect on it and introspect and as I did for,
Like many years really? Like I think it becomes apparent that a lot of the issues that we have on the modern internet, with these platforms is rooted, in the fact that users don't actually own anything. They don't own their social graphs. They don't own their content. They're not able to monetize it freely. However, they see fit. They're really beholden to the policies. And the experience that that one platform has decided.
Added upon because they have a database that is closed off. And that engender is like very strong Network effects for their particular company. So anyways, the implications are very profound as to like, what happens when that isn't the case, and all of this data as on one public shared open database, but I think like, as you said, we're, we're still in the very early Innings of exploring. What kinds of new experiences can be built.
And that is the case.
Yes, and I know that like some people argue that you know, it's too early has been used for too long. But I think crypto is like when you know, even when I got in deeper into space 2016, 2017 time frame when people would ask me, like what do you think is, how long do you think this whole thing will take to play out? Like, I thought it was like two to five decades. Hmm. So even though it might seem like, it's been a long time. It really has an especially because it's not like we're
We're fixing one small part of some technical stack like we're rewriting like how the financial industry Works, how the internet operates. Like that's not going to happen overnight. I think it's going to happen over like a decade or two decades more before we actually see us becoming truly crypto dative. Yeah, it seems like the way that a lot of its unfolding is similar to how most Technologies unfold which is there's like waves an adjacent possible.
Ability and whatever is currently the next possible step is determined by the technology. We have the ideas that are in people's heads in the motivations that people have and the behaviors that users are currently doing. And I'm curious like, it seems like sort of the the steps for cryptos expansion so far like unfolding. Maybe we're like, okay first there's like the idea of a blockchain and and money, right? And then there's the idea of a programmable blockchain which gives rise to the idea of, you know, non fungible.
Tokens and seems like, the next thing that's kind of come around is organizations douse, right? Which I think now might be a little bit of a misnomer. It's more like a non chain organization doesn't necessarily have to be super decentralised. You can have leadership programs into your smart contract. Whatever you want. Anyway, what do y'all think are the next sort of like adjacent possible things that are interesting to you? That feel like it might be more ready for bigger levels of adoption. Yeah. It's a good question and like it's almost like
you know the 27, Ico boom like
Yeah, 99% of the ico's, were crazy ideas and way up there, but when you actually look at them, I think a lot of them were just bad timing but many of them were actually good ideas. So I think like all of the interest like all of the crazy things that I co starred about like walking for healthcare blockchain for the oil industry. Blockchain for this blushing for that. I actually think that some of them a lot of them will happen but those are like
She's that are super and Trend super slow, super hard to change, and you need to get many, many stakeholders in the system to agree, to do something like that. And the stakes are really high. Like, people don't want to risk their health by using an experimental technology. Like that's just not something they're willing to do. So right now, we're you kind of using magic internet money and defy to experiment, but I do think once a technology, which is maturity will go to more serious Industries. I do think social networks are probably on the
Inge of happening on the blockchain. Like you saw the first gen happen with things like twitch and twitch. Not twitch. It was like a etherium clone on. Sorry. I put a cone on ethereum. You saw all of that happen in like twenty Seventeen to twenty time, 2020 timeframe, but none of it was like, I don't know. It just didn't none of it worked. You also saw the one that was huge with. It was like funded by the base coin Founders. I forget the name of it, but I think now.
We're going to see some interesting social applications on the blockchain being built. And I really think that is a next wave that will happen. Like we saw NFP Styles. I think social networks will probably be either the next thing or the next. Next thing like things like lens for the called who which is created by the founder of Ave is super interesting. They basically created a bunch of Primitives for what all of a social graph consists of and now developers can use those Primitives to build interesting, social applications. That's in a good area to look out.
For so text. Yeah, it's about time. I
agree. I think like a lot will. A lot will become possible once the cost of transactions to clients. And also when the cost of block space and storing things on chain decreases. Because right now, there's still relatively few activities that people are doing on chain besides. Yep. Buying and of T's, like swapping tokens for each other. Like the richness of all of that interaction in the media that were uploaded.
To the internet, still primarily happens on web to platforms. It's not on chain, which means that developers who are looking for new ways to facilitate Discovery or facilitate interactions between users, have not much to work off of in terms of underlying connections and content. So I think, like, when we get to the point where the cost of block space declines and more of our activity can be stored on chain, then there will be like a proliferation of
Of new social experiences to make sense of all of that information.
Yeah, that's exactly right. And like, you know, in 2017 scalability was the big thing on people's heads because it's like, if we can't scale this thing, then there's no way it's going to be useful and to the masses, but I think we've kind of gotten over that hump and its people finally have confidence that blockchains can scale. I mean, there's different trade-offs that people make to achieve that scalability. Some people make a trade-off and security others and decent job.
Station. And I think people are starting to realize that skill ability is like a very application specific problem and maybe some applications need much more security. Other applications can deal with less and so we are try getting to that tail. End of like, okay scalability. I think we've got we've got this week. I think we can see all the blockchain. So now all of the things like social stuff I think will will become a lot, more easier for engineers to experiment, right. I mean, when we were building true story like I do,
To love to build on ethereum, like, don't like, I love the theory of, I think it gave me an amazing platform, but realistically, like, it was just simple. Like, how you gonna build a social have been 2018 on ethereum. The just doesn't make any sense. So itõs Cosmos because we can have much smaller transactions, but that also limited are our connection to the
broader ecosystem because we were
our own app chain and we had to like get adoption on that chain. Whereas like if you build on a cerium, you can kind of piggyback.
Off of the entire network effects of the theory on which is huge. And now I think that they're a to stuff coming out and it during eventually launching sharding. You'll see developers? Start building more day-to-day applications on ethereum. I'm curious what sort of the steps that need to happen? Are the timeline that most people expect for transaction costs to come down? Because yeah, I mean, if you have a social network where it costs, you know, 40 bucks of USD worth of gas.
You know, that for every poster every Trend or every like or whatever like every transaction, I mean, that's pretty, that's pretty tough. You're not going to have people posting very minute, very much stuff. So it needs to get down to, like, negligible basically transaction fees, like pretty close to zero for favorite happiness scale.
I think it would be helpful to start with like, what, what is happening right now on a theory. I'm like, we're at thirty, two million, many masks accounts, monthly. Yeah, monthly active metal mask accounts, and we're already hitting like the
Tons of ethereum, in terms of transaction times, the gas costs for like minting an FTE are in the hundreds of dollars. Like why is that happening creepy? Maybe you can sort of explain like what's happening right now and then the path out of out of where we are.
Yeah. So, I mean the reason it Durham is so insanely expensive today. It's just because of the demand and you know, like you said flux space, right? There's only so much because everyone is storing storing.
Data on the ethereum blockchain and transacting on this single Block Chain. There's a limit to how much data and processing we can do on that block chain. It's not like we have a thousand computers running these thousand applications. We have one computer running a thousand applications. So as a result if they're young charges a fee for every transaction and every piece of data that you store on the blockchain and so if there's a lot of demand for the blockchain then let those fees go up because that's the only way they can kind of throttle the demand.
And so that's why when and if he blew up and defy blew up and all of these things, blow up the transaction fees, just skyrocketed because everyone wants to transact. We're already seeing a way out of that. The first iteration of us, seeing a way out of that was polygon. Pakistan has been around for a couple years now, but it really got popular last year and polygon is basically a side chain for ethereum. A side chain is just basically an alternative blockchain that exist that can communicate.
Kate with the ethereum blockchain. So with polygons, you can basically take your aetherium, lock it up into a smart contract and by the polygon token, and then transact on polygon, which has much cheaper and faster transactions. And then when you're done, you can burn your polygon tokens and then redeem your ether. So, polygon is a side chain that exists on aetherium and it gave people a platform to actually run much faster, cheaper transaction. So you saw a ton of applicants almost like every major application on ethereum.
Move over to polygon, because it just, it just made sense. It was, it was the only practical skill ability solution, that existed last year that actually worked. There are trade-offs to it. It's not like if you're transacting on polygon, you know, it's not a secure. It's a nice decentralized as if they're young. So you're making a trade off there, but applications developers clearly didn't care. And now you're starting to see Roll-Ups become more prominent or starting to become at least available for developers. Many of them are still very much in like a
Alpha Beta stage, there's like optimism Arbitrage from Stark where they're all creating different flavors of Roll-Ups, and you can actually deploy an any application that you would deploy an aetherium on a roll up today and already get much much, much cheaper transactions. It's just that it hasn't been adopted as much as polygon has, but I do think in the next six months, when these roll up Solutions, move out of that beta phase, a lot more developers will start deploying on roll up.
And roll ups are really the scalability solution that for example, vitalik and the etherium core Community is really embracing like they taluk. I think he appreciated polygons, but he viewed. He didn't view it as like the ultimate solution for scaling etherium, it existed in met the need at the time, but he thinks like Roll-Ups are in sharding, which is another idiom scalability solution are going to be the ultimate Solutions. So Roll-Ups are going to be available. I think this year, you'll see a lot more adoption of roll-ups.
Super exciting. And then I think sharding is the next thing that's still a little bit uncertain. Charting has been in the works for ethereum for a couple years now and they're still very much in development phase. I think it's at least another one to two years out before we see any kind of adoption there. But at least in the interim, we do have Roll-Ups. Yeah. I'm curious. Like why doesn't it work like normal things? Like let's say apples. If there are some company that like has an apple orchard and they get crushed wisdom and everybody wants their apples. Then like two things are going to happen. They're going to plant more.
Trees and grow more apples and then other people are going to like shit, people want apples. So let's like get in the Apple business, right? Because the price signal encourages more Supply to come online. It's like
surge pricing with Uber gets more drivers to come online.
Why isn't it as simple as that? Like, why can't if they're him just like be like, wow, we're getting crushed with demand. Let's like buy some more ec2 instances and like throw it on the network or like, I mean, I'm sure this betrays a basic misunderstanding of how it works. But I just want to ask the stupid question because it seems like why is it so complicated to like scale you?
Sure, that's a good question. So the reason it is is because remember in a decentralized network, like ethereum every single node. So notice basically a computer that is participating in this network. Every single node has to store the full copy of the blockchain. There are ways to kind of compress and prune old data that might not be necessary. But for the most part you do have to store most of the data. And so if we make the blockchain too big, then
Then anyone for someone to become a node in the network at least a full node in the network. They would have to get a much larger computer. Like you said, like an ec2 instance, or even a much larger one than that. And sure we can say, let's, let's make that trade-off and make that a requirement for every note. But then that reduces the decentralisation because you're far less people running full nodes because if you just made it so that should to any person with the Mac laptop can run the ethereum blockchain. Then you have much more people who are willing to run.
The blockchain. But if you require them to have Hardware requirements, then there's much less people running the blockchain hands. It's much more centralized because for a few nodes are running, but I mean, how hard is it? Like, can you buy a computer in it? WS, that's big enough to be able to run a node. Yeah, if you can use AWS to run the ethereum blockchain today, it's not on a Mac. It's really hard. I'll show you days to sync the blockchain. I'll be really hard but on AWS you can but how many people have to have knowledge of AWS and how many people are willing to spend that money rather than just being able to run it on a laptop?
Pop. I mean, the goal has always been like can we even get people to run a block in on mobile phones? Like, that was biology's first company. If you remember, he wanted people to be able to run a note on their computer. So we're trying to go in that direction, not increase the hardware requirements. But with that said, there are block chains that are willing to make that trade-off and Salon as an example, Solana. Actually, it to be a valid in Solana. You actually have to have pretty hefty Hardware. So they are a little bit centralized and that's how they get the higher throughput. Gotcha.
Guess is it economical right now to like because obviously AWS cost money in a in a very different way than if you like actually are pretty vertically integrated and own your own hardware and have access to like cheap electricity because you're sitting on like, you know, a damn or whatever like a windmill farm. Is it economical to run at aw Europe? Yeah. If you're in node on AWS, or the reason why people aren't because it mean there's not that many people who know how to do it, but there's like a lot, there's like hundreds of thousands of developers who like know how to do it. And so if it's economical you think more people would
Good, it depends. It depends because like if there is still on proof-of-work it's not on proof of stake. So with proof-of-work, the the more Hardware that you have, the more computing power that you have, the more likely that you are actually able to solve the crossword puzzle. So your is becomes more economic economical for you. It's probably not very economical for an average, Joe to just spin up and become a validating note on aetherium. But, you know, it's not just about becoming a valid, a minor or
Note. It's also about like if we want decentralisation if we truly want everyone to own their data then rather than me trusting 100 other developers to store the blockchain. Like I should be able to show the blocking on my computer and have access to the transaction data and validate it on my computer without having to trust someone else to validate it for me. Does that make sense? So like if I'm at it from a decentralization ethos perspective, the goal has always been let's get as many people running a noticed.
Well, because then the data is right there and they can validate everything themselves. How many people actually want to do that? I'm sure. Right. I think like, worst, the worst world is one where it's pretty centralized and it's super expensive and not very many. Transactions are happening better than that is like okay. It's not quite as decentralized as we would like, but at least transactions are cheap because there's like, you know, hundreds of people with these large AWS
instances or their own server Farms, or whatever.
And at least we can, like, get the throughput without the. So I decentralisation were like. And then the band.
Because it's cheap and it's super decentralized. And yes, it seems like to me it's sort of like if there's a profit opportunity and being a validator than it seems like people should have done it and but I'm since they haven't because the prices are so high then I guess there's not an opportunity is like my outside view conclusion, but like I don't know but it's very interesting to me because it seems like everything is being held back by transaction fees right now. Yeah, it's a really good point. Some people like it 30. Mm is taking the more like we want to be more decentralized route and they have a very decent.
Realization ethos and there's a lot of more practical minded people who are like, I'm fine. Thanks, certain parts of the stack being more centralized. And if I can get faster transactions and still get some of the guarantees that I would get on a regular blockchain. So it's, it comes down to philosophy at some point.
Yeah, I think so, there was recently a piece that was going around the twittersphere, which it was probably like the best written piece of criticism, on web 32 days.
that I've at least come across and that was blog post by Moxie marlinspike called my first impressions of web 3, I think Moxie is a founder of signal the application that messaging application and he basically details a lot of his Impressions and critiques of web three saying that even if the underlying blockchain is decentralized, there's still layers of the stack that are re centralizing for instance like in order to access data on the theory and blockchain most developers of
These are actually using like, one of a very small number of providers in order to connect to that, underlying blockchain data, or they're just plugging into an API. That's offered by Open Sea. In order to access like data about NF T's and surface that show users. And so, yeah, I would love to hear your thoughts on that piece because I think part of the sentiment and the worry on the part of a lot of people is that web to started with a lot of this.
Ethos as well. People thought that the internet, you know, at the dawn of the 2000s would result in a flourishing of opportunities and everyone could operate their own website and monetize freely. But instead we ended up having an ecosystem. A small number of Walled Garden platforms that have occurred, most of the value. And so what are the countervailing forces that is to prevent ethereum from becoming that as well.
Yeah, so Mark, they made really good points in the article, and I'll point to the two examples, Utah.
You said which is one example, he pointed to his a lot of developers instead of running their own nodes that we were just talking about. They will rely on services like in fura or Alchemy or any node provider to run the node for them. So there's a centralization chick choke point where you have centralized companies that are running nodes that you use as a developer and then the other big criticism he had was for example Open Sea like even though all the nfc's existing on it.
This on that, during blockchain open, most people use Open Sea to transact. And open sea has like, a lot of control and there are centralized Etc. The key thing. I think that's missing from that argument. Like, they're good arguments, are good. Observations, is that on web three? All of the data is still stored on the blockchain and then you have centralized players that exist that are serving users through the data that exists on the blockchain with web to the centralized players exist. And
They have their own proprietary database. And so, you don't even have say Open, Sea exists today, but if anyone wants to create a decentralized alternative of Open Sea, which is already starting to happen. Looks rare and a couple other teams are working on these centralized regions of Open Sea. They have that option to do that because they can just plug into their database and pull the same data that it opens. He has access to, you can't do that on the web to like you can't access Facebook's data to create an alternative to Facebook. Yeah, so that's like that's huge and I think you missed that.
Once like, you just kind of looking at what the user sees on open sea, but you're not looking at like how the data is actually structured. Totally like Twitter. I think is a great example where there is a hole developer ecosystem, in the early days of like Twitter, clients and Bots and all sorts of different stuff and people were talking about it. Like it's a new sort of protocol, you know, and then Twitter it just didn't fit their business strategy anymore. I don't really begrudge them for doing it because it's not like Twitter has been like the amazing performing stock of the decade or whatever. Like they had some tough choices to make.
You know, thanks to just like the incentives of, you know, what, they set themselves up to do. And so all that one away, you know, like there's still some remnants of stuff from that era like tweetbot still exist. I think there are sort of like, you know, got to keep their special deal with Twitter or whatever because they achieved a certain status. But most of those things went away. Whereas, if somebody is relying on Open Seas API and Open Sea, decides to try and change it. It would be very easy for someone else to come up and say, well, we'll expose this API in the way that people
Because at the end of the day, the data is not open Seas. They can't really control it. They can only provide a more convenient form of access to it, for some people, to the extent that they're aligned with that. Then, you know, they will have traffic flowing through them, but they don't actually really have power. The power is really in the etherium
network. Well, I guess I would push back against that. I think that people are building Network effects on top of the open data and that Network effects, still a cruise value and will serve as a source of defensibility. Even if the underlying tokens are aetherium tokens. So for
Open Seas example. Like their order book is closed, its proprietary to their platform. So all the bids and asks and offers that are on on different and have to use like that is open, see specific right and like other developers don't have access to that. And so it's still like a web to kind of traditional Network effect. That is still going to be powerful. So long as users are using open sea and perpetuating that network of
act. Get that's a fair point on the order book piece, but I do think
That Open Seas still has skin in the game to be more user-friendly because they still don't want the nft data. And so like, even if you look at, for example, to take rates of Open Sea versus like, I don't know what they thought from. Like Apple logo printed stickers, like 2% Apple says 30%. So, like they have an incentive to serve and be on the user side because they know that the data is
portable. I agree with that. Yeah, it'll definitely be really interesting.
Going to see how this plays out. Like I think about the question of Defense, ability and web three a lot because yeah, as an investor like we have to think about that and I there are still going to be sources of traditional Network effects defensibility, even if like, the underlying blockchain is open.
It's interesting because it seems really misaligned with like the basic, ethos though, like it's kind of like this core tension in any of these businesses. Like, you know, if you're a media company and you, you know, subsist based on Advertising there's always a tension.
Twin the wind to be credible and serve your audience and focus on on what they want. First is like, you know, chilling products, which is not necessarily inherently bad. Like we do advertising now and it's great. And I love it because we have a nice subscription business that makes advertising business. Pretty much like optional, you know, but like it seems like for open. See it's in their incentive to basically push it as far as they can, to have more and more data and valuable stuff be like within their Network right to like enhance their Network effect, but that's like
A sort of misaligned incentives with the with the users participating in their Network. And so, there are able to push it a certain amount, but they can only push it so far. And I think we'll probably see a lot of companies like flirt with a line basically. And the same way that media companies kind of fit with the line of figuring out how to you in bed ads and ways that, you know, basically our feel unobjectionable to people. But like, you know, track you as much as possible. Like, you know, are snuck in is like a native advertisement as much as possible, all that kind of stuff. Yeah.
It's a super interesting thing to think about like the defense ability in web 3, where the net, where do the network effects. The crew stereotypically, like data is, what gave you the network effects, but now you don't have that. So you are you like, maybe it's additional layers of data on top of the core data that your crew Network effects on, or it's, the user experience. Whatever it is. I think it'll be interesting to see how it plays out. And my, my thing is like, there's going to be centralized players in web three, but now
Now, you have a choice and the ability to switch from platforms, much more easily than you
couldn't go up to. Yep. Absolutely. Yeah, I want to end with recommendations from you. So, you know, this has been a whirlwind tour of aetherium for folks who are seeking to develop a deeper fundamental, understanding of aetherium. Do you have recommended books articles resources that you could recommend to our
listeners?
Yes, obviously, you can read the, how does it didn't work? Blog? Post that I wrote. I also actually really love if you just go on it. There. I am dot org, they have a bunch of guides and explainers of various topics related to etherium, but I find really really well written. It's like it's not too technical. It's not, it's actually not that technical but if you want to go into the technical, stay provide additional resources, so definitely check out just a theorem that org itself and if you're a programmer, then you can do more.
Like development-oriented stuff. You can join rdap camp. There's also free educational resources like build space and Quest book that exists for developers. If you're not a developer, I would say like check out Rabbit Hole. I know that they have some really cool like things that you can do to get familiar with if they're IAM. And the best way I found to learn anything in the space is really just to get your hands dirty, like get a metal mask wallet, try to transact on, you know, swab how to use Ave. Try to buy it.
EFT. Try to sell it in ft and and just tried doing stuff. And then it'll just make things click a lot faster for you rather than trying to read and make sense of things. And then you can go back after you play around and read things and those things will start to make more sense to you and you'll want to dig deeper into it.
Yeah, plus 12 all of that. I definitely endorse like playing around with these applications buying an mft like playing around with some of the defy products in order to get a better sense of how it works. Cool. Well, thank you. So,
Much greatly for being on our show today. This has been awesome, really, really helpful. And I think really well explained, where can people find you on the internet if they want to follow you and read more from you.
Awesome. Thank you for having me. You can find me on Twitter or so. My username is I am underscore Preeti and yeah, that's probably the best place to reach out to me if you want to reach out.
Awesome. Thank you so much. This has been great.
