Exploring Polkadot's Potential with Gavin Wood & Raoul Pal

0:00Hey, visionaries. Today's episode is brought to you by Polkadot, a leading layer zero blockchain with over 2 ,000 developers. It's a network protocol that allows arbitrary data, not just tokens, to be transferred across blockchains. Listen to what Polkadot creator Gavin Wood tells Rao about Polkadot's coming jam chain, short for join accumulate machine. So what we're doing is we're turning what used to be the Polkadot relay chain built for a very specific purpose, right, to secure and relay messages between separate blockchain ecosystems. And we're turning that into something much more akin to this like world computer, this like kind of ubiquitous, multi-core, single-turn virtual machine.

0:45Learn more and join the community now by going to realvision.com slash polkadot. Hi everyone, I'm Raoul Pal and welcome to my show, The Journeyman, where I travel on a journey to the nexus of crypto, macro, and the exponential age of technology. now a lot of my recent videos have been on crypto but we've also just had rick reader macro and you'll have a whole selection as we go as i try and shuffle you all along these convergent narratives because if it wasn't for the macro the crypto world would never have happened satoshi would never have written in white paper if it wasn't for blockchain technology which forms part of the exponential age thesis it would be incomplete but that thesis the ai thesis and what is happening and robotics and how robots and AI together replace humans in the workforce comes into the macro picture and how that changes and why I think we get to this idea of an economic singularity.

1:45Well, we don't really understand how economies work anymore because they're usually anchored by that magic formula of population growth plus productivity growth plus debt growth. Well, the debt growth bit stopped. The population growth has been shrinking across the world. Now, when you add AI and robots, it can scale infinitely over time. So what does that mean for GDP? What does it mean for businesses? A lot of this I will discuss more and more on this channel. But blockchain and crypto is really at the core of how I see the opportunity set. As I've said, it's the biggest macro bet of all time.

2:20And I am a multi-chain person. I believe in a world where many people are building incredible technologies on top of the internet and on top of Satoshi's original white paper and blockchain technology. And it's going to solve different use cases. You see, there is a lot of nuance and change between the different protocols. And those allow different use cases for different industries. And that's what really excites me. When I first saw crypto or Bitcoin back in 2012, I started thinking we can build a financial system on top of this. but my vision has become much bigger than that now when we started to realize that every contract once smart contracts came out with ethereum we realized that we could do a lot more with this in fact this was the whole value layer of the internet it's like this immutable layer of this massive distributed database that can be used for so many things and that's really really powerful stuff.

3:24Now, obviously, I try and take you on that journey here on the journeyman and make sure, please, that you subscribe to the channel. Turn on your notifications so you don't miss out on this journey. It's a really important journey. I'm doing it for me and I'm doing it for you. So make sure you subscribe. Additionally, obviously, there's a lot more of this conversation that goes on in Real Vision. So once you've subscribed to this channel, I just urge you to go across to realvision.com, the link's below. Realvision.com, you'll have a whole world, the platform that gives you the knowledge, the tools, and the network to help you succeed in this journey, to allow you not to fuck this up.

4:04So realvision.com, really important place to go because there's a lot of crypto content, macro content, technology content, and there's an incredibly vibrant community in over 100 countries around the world with regional group chats, meetups, all sorts going on. Incredible new trade idea templates are coming. So everyone's sharing ideas with each other. A lot there, plus AI, obviously, as well. Anyway, so realvision.com, do that. Subscribe to the channel. And let's get on with this week's interview. This is a special one because this is with a real OG of this space, Gavin Woods. Gavin needs very little introduction.

4:44will get his story. And his story is an incredible one. But also, you know, Gavin's a great thinker, he's a great technologist, and he sees the opportunity set to evolve this space even further. He's been at the forefront of evolution in this space over the years, with Ethereum, then Polkadot, and now where he's going on this journey too. So anyway, enjoy this interview with Gavin from Polkadot. Join me, Raoul Powell, as I go on a journey of discovery through the macro, crypto and exponential age landscapes. In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

5:29Gavin, fantastic to see you on Real Vision. Thanks. Nice to meet you, Raoul. Look, there's a lot I want to talk to you about, Now, but for those people who don't know you, and you've probably done this a thousand times, but your story of your journey to where you are today is a hell of a story. So if you don't mind going back in time and giving us the story. Right. Where do you want me to begin? Where are we talking from? I think before Ethereum. How the hell you got into this in the first place? Because that's always, I find it really interesting. what is the there's always some little hook that gets people in and then before you know it they go so far down the rabbit hole so let's start with that well i uh you know i was always pretty interested in economics and game theory uh i mean i studied computer science at university but my first sort of bitcoin uh sort of glimpse into the world uh i guess was in uh 2013 when i was reading an article about Amir Tarki, this Bitcoin.

6:31He was a coder for one of the Bitcoin projects and a sort of self-confessed sort of cypherpunk and a crypto anarchist. And he seemed like a bit of a, you know, a very bright light, let's say. And I figured it would be quite fun to sort of meet up with him and get his take on the world. And I was sort of interested in contributing a bit to the Bitcoin project. I wrote an email just called What kind of year was this? This is like, what's the February, March, 2013? Right. And I, yeah, I just wrote him an email, and he replied, and I met up with him in London at a squat. First time I've been to a squat.

7:14And he introduced me to a couple of other, well, several other Bitcoin people. He initially introduced me to Mihai Alicia and his girlfriend, Roxanna, who, you know, he'd sort of opened this door and they were there on the mattress of a bed. And she was just sort of plonked on the floor in an office room. I mean, this squat was like an office building. And I was a bit, like, surprised to be introduced to someone, you know, in bed. We said hello and we were gone. But Mihai would later become our co-founder of me with Ethereum. So it was a bit of an odd first meeting. but then he introduced me to a couple of other people a couple of sort of bitcoin men about town in London who were into sort of bitcoin cash points that was a sort of bitcoin ATN sort of thing back then and through them I kept in touch and ended up meeting Vitalik through them and that led at the end of 2013 to me reading the Ethereum the initial Ethereum proposal in Vitalik's white paper and starting to code it.

8:26Hey, everyone. We're going to take a quick pause and hear a word from our partners. We'll be right back. Hi, you. Hey, listen, if you're enjoying this, come and see me on the YouTube channel, Raoul Pal, The Journeyman. Sign up there. Get everything I ever do. See you there. Your favourite neighbourhood spot grows with Square. Indeed, my favourite neighbourhood spot has quickly become Todd Snyder in Williamsburg. Todd Snyder is one of my favorite menswear shops and has supplied me with all the clothes I have needed this quite hot summer. Every business has different goals, but Square is the business platform that supports them all.

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9:41What interested you in Ethereum when you first saw the white paper and you started speaking to Vitalik? What was the kind of breakthrough when we thought, actually, this is maybe even more interesting to you at that point than Bitcoin was for you? Because you could have stayed in that ecosystem, but you changed. Well, I could. And I mean, at the end of the day, I think, you know, when you're building stuff, you look for where you're going to be most valuable. And there was already a Bitcoin team and a Bitcoin client and a Bitcoin community. It was already embodied. And Ethereum didn't look, and isn't indeed, a sort of just a copy of Bitcoin.

10:23It was trying to really legitimately push the envelope further. And it didn't have anyone who was building it. And I knew that I could just as well build something that had not yet been built as I could sort of, you know, chip away on building maybe a little, adding a little bit more to something that was already built. And so I just, at the time, I just, I mean, I'd probably still be in this position. I felt that my expertise and value that I could add was much greater helping to build something new. Were you surprised at how successful it was? Or did you always think this was the next big breakthrough?

11:05I mean, because there was a lot of other blockchains coming around at the time. It was the first wave of new blockchains. Did it take you by surprise? I don't think I would have committed to it quite so strongly if I had been truly surprised. You never really know. I've learned that. There's an awful lot of factors beyond whether something is a bit better or even significantly better. Whether it adds particular features and so forth. But I had an inkling. And the thing that really gave me that inkling was visiting a few of the, meeting some of the other co-founders in Miami in January 2014. And also seeing the Bitcoin community up close and personal for the first time.

11:58Like going to this mad Texas, what was it? I can't remember now. The Florida Bitcoin event. It was in Miami and it was a big event. It was one of these conferences that has quite a lot of parties attached. It was built to me as a hackathon. Metallic was like, join us for a hackathon in Miami. We'll get this all coded. I was flying out to Miami expecting this to be coding with that team and other coders for a week. Then it just turned out to be a party house. I was only on their codings. I mean, it was fine. It was fun. But it gave me an inkling of the excitement. And I could see that the other projects...

12:48I mean, at the time, I don't know if you remember where you were back then, but MasterCoin was sort of the hot thing. It was like, it's Bitcoin, but you can do financial instruments on it too. and then there was sort of counterparty which was like the master coin fork and it was clear to me that there was a little bit of proof of stake right there was NXT which was this proof of stake version of Bitcoin and it was clear to me that Ethereum had quite a lot more to offer than these other blockchains that were just starting to launch and so I that coupled with the excitement and I could see that some of the other co-founders were forces, forces of nature.

13:39And I figured this has really a big, their chance of becoming really very big. So what made you decide to start your own chain and Polkadot? I remember hearing about, and I've been in this place since, I don't know, 2012, 13, and it was somebody presented, I think, well before you'd launched. They were presenting at one of my roundtables about Polkadot. I'm like, what the fuck is interoperability? I didn't understand any of it. I said, this sounds great. They're like, no, this is really important. I'm like, I have no idea what you're talking about. But talk me through the story of starting Polkadot.

14:16What was the idea in your head? And we'll talk about that journey and where you've been right, where you've been wrong, and where you're going. yeah i mean um in in some sense polka dot was an effort to um contribute further into the space technically um now polka dot came to me as i was imagining what an ethereum 2 might look like what what a successor to ethereum might look like um and it always been in my head that it probably was going to be this sort of multi-chain thing where there are many different chains but up until up until i had the idea let's say for both the poker up became a sort of solidified idea i was assuming that each of those chains were going to just do the same thing it'll be like evm chains it'll be like ethereum one chains um and then you would just have a sort of what what ethereum guys call the beacon chain what poker people call the relay chain you'd have a sort of uh a sort of top chain that each of these things were wired into and that made sure they were each doing the right thing.

15:26then it sort of came to me, well maybe they don't all need to do the same thing. Maybe it's simpler even if they are not all doing the same thing, they just do different things. The different chains, domain specific chains, app chains, one of the terms in common use now um and uh but they they are shared have the shared security so they can uh they can interact interoperate um easily so interoperability in this sense and it's used in a couple of different senses so there is some confusion there but in this sense what i meant by interoperate was really just interact interact securely so basically secured under the same umbrella under the same guarantees and yet still able to have causal direct causal interactions now yeah there are definitely some lessons have been learned along the way there the other day it was a it was a an experiment we didn't know what a multi how how useful it would be to have this level of interoperability compared to ethereum's asynchronous composable interoperability where you've got contracts that can actually sort of call into each other and get a response immediately um but uh you know i mean i think uh if we're looking for a starting point of polka dot that's where it was like a bunch of different chains under the same security but domain specific doing their own thing.

17:00And that was actually quite early in people understanding that it was going to be a multi-chain world. Yeah, that idea has been fought back on a lot. So you had to have thought through that and said, listen, there's a probability there's not just an EVM world, not just a Bitcoin world, but it can be a number of different worlds. I mean, for me, it wasn't really an ideological standpoint. it was really a necessary element of scaling at the time it was all about scaling it was like oh ethereum is great but it doesn't scale um and so it's like well how do you scale something and the answer is well you parallelize you know you can scale synchronously that's what solado is trying to do right it's like basically just use faster and faster validators that are better and better connected but there's a there's a you hit a ceiling eventually you're either you know if If you want to stay web 3, you're going to hit a ceiling because barriers to entry basically become so large, it becomes difficult to get in with the clique.

18:04It gets difficult to run a validator that's so powerful. And so if you can't scale up, you scale out, right? Classic Silicon Valley mantra there. And it's really just you need to scale across many different nodes. And the way that you do that is you paralyze your workload. So you split it up into little bits and you say, you guys do that bit, you guys do that bit, and so forth. And that's really what Polkadot was based on. And my assertion, which I've come to realize can be improved upon, let's say, is that when you're parceling up that workload, you don't need to have a persistent parceling mechanism.

18:48You don't need to split it up into chains that each have their own state and each sort of just do their own thing over a long, long, long term, right? You can do it on a much, much shorter term, much more agile basis. But the basic idea of parsing of the workload and scaling it out across the network, this I think is inescapable. how has your hypothesis changed and what has that kind of led you to do? Because you've kind of been building out a new world of Polkadot as well. What was the changing hypothesis or what you saw was going on around you that made you think, you know what, I can break some new boundaries again?

19:31The main change was this idea of what I'll call persistent fragmentation of state.

19:43so having us having a single security umbrella this like i'm absolutely convinced is the sensible way for i don't think it makes any sense at all to have a fragmented security model so the cosmos model i mean okay cosmos guys are now kind of saying oh well actually we have this we have a we're trying to do this shared security thing as well but it's not really done properly that the original cosmos model at least and the current cosmos model um is is is one of fragmented security now i don't believe that's sensible so i do believe in the ethereum and model of having a single security umbrella um and then parallelizing within that so the change in attitude is really of how the parallelization takes uh takes by what the structure of the parallelization is.

20:34And the main difference between how I see what Polkadot 1 is and what Jam, which I recently introduced in the great paper is, is that in Polkadot 1, the model is one of persistent fragmentation, which is basically you say, we're going to have this blockchain and this blockchain and this blockchain and this blockchain, and they have their state and they sort of are running in isolation, and they are secured all together, but they run in isolation. They operate on the different collator sets, different state transition rules and so forth. But they can send messages to each other. So we have XCM messages, which are a pretty coarse-grained way of interacting.

21:13Much more coarse-grained than, for example, what you'd be used to if you're using Ethereum to interact with smart contracts. And my realization is, well, that limits you quite a lot in terms of what compositions you can make. and it limits you in what sort of models of block space usage you can utilize.

21:44And the outcome is, well, let's not have persistent fragmentation then. Let's not bake this into the model, or let's not at least, let's not assume this about what's being used. and instead let's have a more agile ephemeral fragmentation so basically the fragmentation of state there is sort of a big state and instead of fragmenting it on on a blockchain boundaries which are persistent in large basically indefinitely instead what we do is we split it up arbitrarily every say six seconds and we figure out arbitrarily is comes with its own set of well how do you do that? And we've sort of been thinking about, well, how we might do that.

22:29There are a few ideas. But what we do is we don't bake that fragmentation in at the protocol level. What we do is we allow it to be repartitioned as the use case needs. And we do so on a block-by-block basis. So what we're doing is we're turning what used to be the PokéLock Relay Chain built for a very specific purpose, right? to secure and relay messages between separate blockchain ecosystems. And we're turning that into something much more akin to this world computer, this kind of ubiquitous, multi-core, single-turned-virtual machine, this sort of world computer that can host programs. But the idea is to make them be able to host programs that can, A, process a lot of data, and B, get through a lot of computation.

23:25So for those people who have no idea what you're talking about, talk me through a use case, something that's in your head. Because obviously, when you think about solving a problem or thinking about a future state, you've got a mental model in your head of, okay, how can this be used? What difference is it going to make to people? How does it open up new use cases for blockchain technology? How are you thinking this through? Okay, I mean, a very simple one would be something that the Poconot ecosystem has been floating around tonight. There's an idea of Poconot ecosystem for some time now. It was originally called Spree, and then I later sort of named the general approach Accords.

24:09Now, you can think of an Accord as basically being a smart contract that governs how two separate blockchains can interact with each other. And the idea is that through the Accord, although the different shards of the Accord, like one shard might sit with one blockchain and another shard might sit with another blockchain, the Accord knows that it's a copy of itself. So it's sort of like, it's almost like an international law that the blockchains commit into and they can't get out of it, right? There's no, they can't say, oh, well, actually I'm not going to enforce the law in this circumstance.

24:44It's either they're in or they're not, or they're out. and as long as they're in they can interact on this basis with any other blockchain that's also in so you can think of an accord an example accord might be a token accord right and it's just like right well if i want to send tokens to you i buy into the fact that i will only mint a token if i know that you've burnt it and similarly i know that you will mint a token if i burn it and this means that you can have bilateral um direct bilateral uh messages for doing things that he would otherwise have to trust the blockchain for. And is that within the Polkadot ecosystem, or it can be any chain?

25:19It would only be within the Polkadot ecosystem for chains that are secured by Polkadot. But again, what counts as a parachain can now be relaxed quite a lot, because it's basically anything that can feed into this general sort of world computer model. So we can start imagining, or we can start better imagining. It's not that Polkadot can really do a ZK rolled up chain. It's just it wasn't really sort of designed around, designed to be general enough for it. You could shoehorn it in a bit. But really, this really generalizes the computation model of Polkadot. And it allows you to start thinking about, well, what if it's not a parachain or it's not a traditional parachain, the ZK roll-up chain?

26:02Can Polkadot still check all of that chains or transactions, make sure they're correct, and then do something else with them, sequence them properly, or have them be subject to an accord, or have the outgoing messages be relayed out, or whatever it is that you can figure out. And so in a real-world use case, what does that enable in a kind of more web 3 world how is that gonna move things forward in terms of application and usage i mean i look at this at a being on the low level here i don't think too hard about um uh what specific applications like i mean i could tell you well supply chain enables supply but it doesn't it doesn't really matter so much uh the specific things it enables uh all sorts of applications are enabled the the key to the matter is um can an application be enabled at a particular scale you see applications suppose you want to track all the supply chain all the cargo shipments that happen around the world well there's quite a lot of data right you're talking i don't know i guess hundreds of thousands of vessels right probably millions of uh millions or tens of millions of individual shipping containers and you need to be able to get all of that data into basically one big state machine and do enough computation on that data for this application to make sense in the real world we're really talking about a scalability issue and it's not something that current blockchains are really desperately able to achieve so what we need is to be able to up the amount of data the blockchains can process and up the amount of computation so essentially not just the amount of data that goes in and out but also what happens to the data as it's as it's going through the machine we need to increase this by many orders of magnitude to be able to realistically have sensible real world use cases to be able to take web 2 and applications and actually bring them into web3 um and that's really what what this is designed to enable it's a it's a sort of blueprint of a of a machine that could actually process global levels of transactive data and when does jam roll out i mean it's that's never a question you can actually answer but you know in your head how does what is the implementation strategy here and how long does that take always difficult to turn to say for this stuff i mean look i i'm a tesla roadster on order that i ordered when was it 2017 about that yeah october 2017 when he did it um you know i jumped to the chance yeah go on that here's my money take my money two years it's gonna be delivered i've heard nothing right i've heard nothing while we six years late um i figured they'd be delivered before it you know i was i was hoping poppenop would be delivered before uh but i figured probably possibly not you know but man was i wrong um i i you know i hope i get my tesla before jam is delivered who knows uh well yeah i mean realistically i'm going for this the ethereum one timeline more or less i'm hoping we can keep to this um so the yellow paper i mean i I published a yellow paper almost 10 years, just over 10 years ago.

29:44More or less the 10th anniversary was the great paper publication. And it took about six or seven months to get that into something that was recognizably the Ethereum protocol that launched. There were a few extra bits because it was audited and a few bits needed to be changed on the basis of that, but not much. And then eventually Ethereum launched, what, July, I think, 2015? might have been August summer 2015 let's say so I'm thinking let's try and target a Jam launch approximately on the same timeline, I think we are more or less there with the big bits of the Jam protocol, there was one extra bit to add to the grey paper which I'm working on currently and I think that's going to get rolled in over the next week or two and then beyond that I think it's just going to be community review uh research team review prototyping going through the audit process uh but i i think the big questions about jam are already answered so once jam is out the next problem that all blockchains face is scaling usage how are you going to approach that how are you going to because you know it there's a lot of chains out there a lot of people shouting for attention a lot of people paying each other to try and get activity on chain how do you build that that is hard you know that's scaling the business as opposed to the technology yeah i mean my my i'm working on a very uh a very basic assertion here which is that present blockchains don't provide decentralized block space like high quality block space at a level um that makes sense for most real world applications you normally have to pay too much to you like the fact that you have to pay anything at all the fact that you have to go through an exchange and buy e to use any ethereum i mean i know this is something that they're kind of fighting to to get around with the uh with with some of the new stuff that they're building.

31:57But realistically, that's not going to change for some time. And a big part of that is simply scalability. It's not cheap enough. Block space needs to be very, very, very, very, very nearly free. It needs to be so incredibly scalable that you can run almost normal computer code on chain. And Jam is built for that. Jam is built so that you can take more or less normal computer code not a smart contract not something in sell a team not something where you've done gas profiling but normal computer code more or less and just run it just upload it for a vaguely reason of like you know for almost nothing and run it and get and get users that way so it's really sort of so it's kind of the same as cloud you know and also we see this over time everything digitized goes to zero in cost in the end because everyone gets better and better at doing it.

32:52And cloud compute was a great example. It used to be expensive and now it's not unless you do it at a huge scale. But then how does value accrue within the ecosystem unless you've got vast amounts of transactions? Because I always look at this space as a great example of Metcalfe's law and that's kind of the number of users and let's say the total value transactive because of the applications on it. Somewhere in this, it's hard. If everything goes to zero, how does it accrue value unless it accrues gigantic scale like AWS did in cloud? How do you think through that? I mean, again, my assertion is that as block space becomes cheaper, approaches are near zero cost, applications are opened up, markets are opened up.

33:50applications that didn't make sense before now make sense simply because the transactive cost is is sufficiently close to zero now i'm not saying uh i would like to get to the point where it's not required to buy anything to go through an exchange in order to use a transaction sorry in order to um to what to make a transaction in order to use a blockchain at the moment more or less there might be one or two minor exceptions but basically to do anything on a blockchain you have to first own cryptocurrency and that massively limits the market it massively limits the use cases um i would like to get to a point where that's no longer true and we're not going to get to that point until we have radically uh greater scalability and jam is the first step towards this radical scalability.

34:43Now, I figure once we get to that point, once Web3 becomes a legitimate alternative to Web2, then the sufficient markets will open up, but the block space, even though it's still near zero in cost, it's still not quite zero, and that scale will ultimately result in the block space that the network is selling being of a value enough to pay the validators that are running the network. One of the things I've been thinking through is when we, I'd love to hear your thoughts now because I don't really know an answer. When we look at all infrastructure layer technology scaling, whether it's 3G, whether it was fiber optic, whether it was whatever, we end up with gigantic excess capacity at some point.

35:37And then there's consolidation. and out of that comes, okay, this is where the space goes. Where do you think we are in that? As you said, we still haven't solved a lot of problems, so there's still a ton of issues. It's not like we've got a perfect blockchain out there that solves every issue, but when do we get to the gigantic excess capacity? I think we might be looking at something similar to energy. And I don't know if we do have an excess capacity of energy. looks to me like uh uh like we're still fighting for edgy as a you know as humankind um uh i i i suspect that um that high quality block space i mean it's easy enough to make low quality block space right isolated insecure block space is not you know just fire up a new private thief chain and you've got it but um but high quality well-connected block space i'm kind of thinking of the ability to have new entrance into the space as opposed to you know we'll have excess capacity of block space per se i agree with you the more the cheaper it gets the faster it gets the more use cases and the whole internet basically runs on it so no problem but how many more innovations or new people can come into the space or does that stop at some point i.e they don't get funding anymore i mean if the block space is cheap enough near zero then it's really it should be less about um entrance in terms of use cases and applications um and only about um who you know if if they are useful like are there users for them is there a market um if there's a market kind of the same thing as like setting up a website and getting AWS to run your servers.