Balaji Srinivasan and Raj Gokal: The Network State (Breakpoint 2024)

0:00Hey, everyone. As you know, Solana is one of the ecosystems I'm the most interested in. I've been incredibly bullish. I love to see the vibrancy of what is happening in the space. Unfortunately, I couldn't make Breakpoint this year, but the stories have been amazing. I heard the talks are incredible, and we're really proud of Real Vision to give you talks from Solana Breakpoint 2024 in Singapore. I really hope you enjoy them.

0:38Welcome. All right. Oh, we're really far apart. I know. Yeah, it's like Romeo and Juliet. All right. Go. Thank you so much for coming, and thanks, everybody, for coming to Singapore if you flew in. Baljana, I know you don't do in-person appearances very often, so this is really meaningful. One of the themes of Breakpoint this year, there are many themes, but one is just be as efficient as possible. We want to be like a firehose of information, so I'm going to skip your bio, your PhD, masters, council, EARN, A16Z, that you're on the network state now. And I know you have a lot to say about the network school, which you're building here nearby in the Singapore area.

1:22We'll get to that. What I'd love to start with is what has your experience been maybe putting a network state lens on Solana, the network and the ecosystem? What's your experience been with Solana. Great. So, yeah, the main thing right now is, so I think Solana is awesome. I wouldn't be on stage if I didn't think it was awesome. It's actually useful, which is the highest compliment I can give. USDC on Solana actually works. Tiplink works for sending, you know, NFTs and so on. So I think of Solana as important infrastructure for network states and startup societies, because it just means that a lot of stuff we were talking about theoretically for 10 years, and it was kind of possible with high fees or kind of possible, but you had to really hack a smart contract, basically just works.

2:10And once that goes into infrastructure, you can build on top of it. So I look at Solana as being an important piece, not the only piece, certainly. I think of Bitcoin and other things as crucial components as well. But I think of Solana as a crucial piece of infrastructure for the network state. Well, your definition of decentralization, the way you brought sort of a harder quantified approach to how to measure censorship resistance has been an important part of the Solana roadmap. So, well, first of all, thank you for saying all these nice things, but also I want to stress that we focused on decentralizing Solana and making sure we deliver that kind of user experience while actually having a censorship-resistant network, and a lot of that came from your thinking.

2:51Thank you. Do you have a similar way of sort of quantifying success as a network state? Like if you look at Solana, the ecosystem, the founders, as a network state, how do we define success? Great question. So on quantifying decentralization, that was a paper from several years ago. And I'll just describe that for those who don't know how that works. So lots of people argue about decentralization as almost a theological concept, like something is either not decentralized or it's centralized or it's decentralized. But between that zero and one, you have many intermediate states, levels of decentralization.

3:23And I had this paper from seven years ago that I think has held up reasonably well on looking at all the choke points in a system and saying how many actors do you need to choke to choke off a system. For example, if you capture three miners or 70 validators, does that compromise the system? And the Nakamoto coefficient is like the minimum number of entities you need to capture to choke point the system, and that's a measure of decentralization. So Solana's built, I think, in part on that. Obviously, you have a lot of other technological breakthroughs, but to your second question, which is what are the key metrics for a network state?

3:56So, you know, everybody here is familiar with CoinMarketCap, and MarketCap and a few other metrics like that have become things that people refresh every day. They're flawed, they're imperfect, but they still are, you know, let's say roughly correlated with the important success of an asset. People talk about top five, top ten coins or whatever, fine. So, in the same way, I think we have started cloud currencies that compete with fiat or land currencies. We are going to start cloud countries that compete with fiat countries, and what are the metrics? it's population real estate and annual income which are comparable to the population of a fiat state the real estate footprint of a fiat state and the annual income so the population annual income you can think of it let's take all salon holders for example you can count their population and you can count their annual income the part that we haven't really focused on yet is how the cloud takes land that's the next step for us as a community how does a cloud take land and we actually have done this in implicit ways for example Facebook's data centers or Google's offices or salon is validators all around the world are actually taking up significant physical footprint if you had some NFT that proved how much real estate there was for example you have a surveyor go there and that surveyor sort of it's like a notary or an auditor or a proctor of some kind and they say okay this is 50 ,000 square feet data center or whatever it is, right?

5:23And then that's put on chain and you sum up all of those proof of space NFTs that would give you a real estate footprint of a decentralized structure, right? And of course, it's not just space because you can say, all right, maybe this is the built up building and this is the land parcel around it. But there's a whole set of things in real estate that you can do in this. You start arguing like you do on market cap. The point is you start actually now seeing the physical footprint of the Google offices and the Facebook data centers and the Solana data centers. So you see this with Solana too, right?

5:56There are things like IslandDAO and MountainDAO. There are hacker houses. There are conferences like this. There's over 6 ,000 people here gathered in Singapore for Breakpoint. What I see is a sort of like founder collective of product builders. That's the biggest like in-person experience that we've been able to create. And now it's sort of out of control. It's not driven by any centralized entity. The thing that binds everyone together is that they're building on Solana. Do you think it's those spaces that ultimately seek out diplomatic recognition? Should we be thinking about active addresses?

6:29And then you mentioned solo holders. Which is the metric? Yeah, so the way I think about it is just like a startup company needs a technical innovation, I think a startup community needs what I call a moral or social innovation. You need some feature of your community that you think is better than the establishment. And it usually needs to be one thing. Like, you know, for example, for technology, it's better, it's faster, it's cheaper. Here, take, for example, cul-de-sac. It's saying, okay, they're in Arizona. They're saying we want a car-free society. It's all walkable, right? Prospera, which is in Honduras, and Vitalia, they want a biotech-free zone, right?

7:07So I think what would be, I think you'd have to exercise sort of new muscles, which are not the technology muscles, but the community, society, morality, history, controversy muscles, right? Where you say, society thinks this, I think something different, I'm going to build it on Solana, right? But Solana up to this point has, it's basically solved all the problems of blockchains better, and which is an amazing accomplishment, don't get me wrong, it's really good, right? But it didn't wade into non-blockchain, non-technical controversy. And that's necessarily what like a new society will be because you're saying, I think we should live like this, and most people are living like that and that'll immediately start an argument in in a good way because it polarizes and now these folks say okay i do think cars are bad so i'm moving over here i i do think the fda is bad i'm moving over here so i think that's actually the underlying prerequisite the technology and the capital and the population is now there we just need the moral innovators yeah so so features of the way you live the way you operate daily that are they're controversial that are different yes i'll give some examples right so brian johnson and i we've just we're just setting up the network school right and one of the things i talked about in the never say book is keto kosher right so as south asians you know we were just talking you know we have um we don't metabolize glucose as well with glucose dysregulation and uh you know before my first startup i was as jacked as an indian can be given our physiological limits and you've you know we've we've been you know poking each other on this and you've gotten in great shape recently and um What was our little thing?

8:43Well, it was earlier this summer. We were in Dubai in a car. Yes. Yeah, and I think all I remember is you saying, look, I'm going to get jacked. Yes, I am. Back to jacked, right? I love this. I think it's going to be great. Like Bezos, you know, great operational mind. Yeah, yeah, yeah. You have a great mind for networks, like matching with the body. Here's a constraint. Here's a constraint. Here's how it relates. is I, as a founder, you have to put the team first, right? What happened? Oh, so... Is someone yelling? Oh, gosh. I just ignored him. So as a founder, you have to put the team first.

9:20And what happens is that basically that means that you lose sleep, you overeat. It's always easy to prioritize the work, the meeting. Exactly. That's right. Because why do they care if you lose 10 minutes, you know, 20 minutes of sleep or whatever? and that adds up and that accumulates or whatever, right? But what we're doing with Never School is we actually use Solana a lot for the proof of workouts, right? And so you'll have actually a tracker. You can see the GitHub streak and let's see where we are in a year. Amazing. Yeah, there's a little bit of rhyming here. At Mountain Dow, you know, everybody is getting up super early, first chair, you know, hitting the slopes, putting in really hard work.

9:56Tully and the engineers that he worked with at Qualcomm used to surf every morning. They did Ironmans. I think this is actually relevant to the cultural kind of... contribution that Solana has. Yeah, I think like basically Zuck, Bezos, several you know, Brian Johnson and so on, that's an emerging part of tech culture is self-improvement, you know, and we just need to productize that, so take it from something that a tech billionaire can do into something that becomes a product. Sort of like how, have you seen Wall Street, the movie Wall Street 2? No? I haven't seen it, no. There's a site gag where Michael Douglas comes out of prison and he gets his cell phone back and it's a giant brick.

10:32right and that's because cell phones in the 80s were for the riches of the rich and now they're for the poorest of the poor right and so lots of stuff starts like that as a toy for the rich and the reason is because it's an mvp it barely works and you pay a premium for it and it's and then you get the scale and so i think that's going to happen with self-improvement and i think actually the crypto community is uh they're selected for actually being into this you know why? Why? Because crypto is parallel finance. And it says the existing system exists, but it's fundamentally flawed. We're going to take fundamental assumptions of them and invert it.

11:07And so even those surface aspects look the same. Like you still have, you have bar charts on Wall Street and you have bar charts in our space and so on, and you have limit orders. And some of the concepts port. Other concepts are just fundamentally morally inverted, like self-custody is good. Well, self-custody is impossible at DTCC, right? Or decentralization is good. And that's impossible in the old system, right? Inflation is bad, and inflation is built into the old system. So we've built a parallel financial system, and the people who are there also have the capital and the moxie to do other things, and that's why other kinds of parallel systems will be built by the people who built the parallel financial system.

11:42We built the parallel financial system, we can build the parallel health system. That's right, exactly, that's right. And in fact, the parallel financial system is upstream of all of that, because, well, first you can fund it all, right? And that's important. And second is the legacy system will de-platform and choke point anything that's like too good relative to it, right? Like it's just almost like a meta organism. Think about, you know, think about, let's say, Microsoft Windows, right? Anything that was built on Microsoft Windows that was too good, they used the platform against you. That's why you needed your own sovereignty.

12:14And in fact, in the 2000s and the early 2010s, de-platforming had a very different, the conversation around de-platforming had a different character to what it does today. It wasn't about political de-platforming. It was about economic de-platforming. For example, there's Farmville, right? Zynga was basically going viral on Facebook and was de-platformed from Facebook. Steve Jobs famously said, I would have never let Farmville get that big. Yeah, exactly. Which meant he had the control. That's right. That's right. And essentially, if you are moderately successful, the platform's happy to have you.

12:49If you're getting so big, that you're compatible to scale the platform, the platform has lots of different levers. For example, Twitter, there was this video app that I forget that was going viral on Twitter. And Twitter just basically cut them out of the feed and they got Vine instead and they prioritized Vine in the feed. So you can understand it from an economic standpoint, you can understand it from a political standpoint. And those things fuse where often people use the economic justification for what they want to do politically or vice versa. but attacks by platforms are going to become more and more and more important and that's why crypto becomes more important because it gives you defense against attacks by platforms.

13:28So that's how I see where the world is going. Keep going. You're going to... Well, maybe we can switch gears a little bit. I think one of the use cases that we see exploding on Solana is D-Pin, decentralized physical infrastructure networks like Helium and HiveMapper that have rebuilt 5G wireless networks and mapping networks. HiveMapper has remapped 25 % of the world's roads in a year. When I look at what you talk about with the network state, I haven't seen a connection yet between these cloud-first, land-second kind of movements, and then the obvious clear today examples that we have of cloud-first and hardware-second.

14:10How do those connect? Well, so first is that mapping between cloud and land. The network state is about real estate, just as much as cryptocurrency is about fiat currency. And what I mean by that is, in theory, cryptocurrency exists completely independent of the fiat world. In practice, the practical details of the crypto fiat exchange, that's a$100 billion industry that I was heavily involved in, and you're obviously very aware of, and it's going to become a trillion-dollar industry. that bridge is literally like going over the Atlantic or going over the Pacific. Going up and down into the cloud is something that you will just constantly, constantly do.

14:51Going from the land to the cloud and back, it's almost like a transatlantic voyage, right? It's a new, new world. And so cryptocurrency was about fiat currency. And when you built that exchange, then you could onboard into the pure crypto world and you can do crypto, crypto trading and you don't have to worry about it, right? And you're in the new world and it's fine. But if you need to go back and forth and lots of people need to onboard before they become full of crypto, this bridge was important. In the same way, the network state is about real estate. And so, like, I've had to deal with more plumbing, electrical work, carpentry, painting, all the physical stuff we're building.

15:25I'll put a video out online soon with all the time lapse stuff. It's actually pretty awesome. Network school sign going up, right? But all the deep end stuff, you know, I need to make a list of all the tools. And as they become robust, then we start using them to prove our physical blueprint to the world. And then also build everything IoT first. Why is that? Because, you know, IoT, there's actually this Twitter feed called, like, Internet of Shit or something like that, which is all about how IoT makes things worse. And, like, oh, my God, it's a complicated lock. And why don't you just unlock it with a key?

15:58And that's robust and so on and so forth. And I'm sympathetic to that in some ways. But if you have a smart lock that's unlocked by a Solana wallet, well, that means your Solana wallet doesn't just secure your coins. It secures your doors and your cars and your office and your this and your that. And that means your crypto wallet is now upstream, not just of, let's say, millions of dollars of digital assets, but millions of dollars of physical assets, or millions of sol, I should say. Anyway, keep going. Well, as you think about building these products and securing the space, Can you talk a little bit about how, you know, let's say an island DAO or a mountain DAO should, you know, go through that work of actually securing land and securing diplomatic recognition?

16:39Like, what are the steps? What's our steps? So we're building the playbook now, right? The network school is a tech community that is also meant to boot up other tech communities, right? So this is, you know, what we're going to do is prototype a lot of this stuff for ourselves. And so we never, I shouldn't say never, we don't broadcast something unless we know it's working for us at 100 or 1 ,000 or 10 ,000 person scale. As I'll talk about, the piece of land that we've got can actually scale up to hundreds of thousands of people. Like we can go from, right now we're at a Dunbar number stage, like a Stanford dorm room, and you get to 1 ,000, it's like the scale of a Stanford undergrad class.

17:17Then you get to 10 ,000, it's like the scale of Stanford itself. 100 ,000 is the scale of Stanford and Palo Alto, and a million is the scale of San Francisco. As we scale up and we're built to scale, we will put everything we possibly can open source and open state did we talk about that open state yeah yeah so like you know open source it was v1 and open state is what blockchains are because you open the back end to not just the front end the database is public not just the code right so by making everything we can open source and open state then uh we publish what we're doing and other communities can learn from that playbook right so to give you some of the things that are working now, for example, one thing that we have, and I'll publish on this, is what I call the ideology vector.

17:58Okay. Do you know like Harry Potter, the sorting hat? Harry Potter? Yeah. Yeah, I know Harry Potter. Okay. So I don't know. I actually, you know, I'm a little bit older than you guys. So Harry Potter came out, it was really popular just after, you know, I was a kid. So there's this concept from it called like the sorting hat, which puts people into different schools or whatever and everybody's got their own you know school that's appropriate to them so one thing we have is something that i call the ideology vector where we actually ask up front about all these polarizing questions right like example like what's your position on um nuclear power or something like that right that's not you know for our audience we're very pro other people are con right so you ask a bunch of questions like that about political figures about countries like what's your position on dubai what's your position or that's not a country in I mean, cities, what's your position on this cryptocurrency and that one?

18:51And within our community, that's very polarizing, right? And you get, let's say, let's say you ask 100 questions and you ask plus 10, minus 10 sentiment. You have 100 dimensional vector. That vector can now be used to cluster people into communities. And that's actually the new borders, but in digital space. And so that's actually how, so you're asking for subroutines. There's like 50 subroutines like this that I think of as emerging best practices for startup societies. Another big one, a very important one that we've kind of figured out the last couple of years now, it's called this sort of proven now at this point, is you have to start your startup starts with a pop up.

19:27You can't go like directly to a full built out metropolis or whatever in your head. Like it's hard enough to get a few hundred or a few thousand people like this was a logistical effort. A little bit. Right. Yeah. Great job, team. Yeah, exactly. Right. Yeah. Yeah. Great job to the team here for everything they did. Right. This is itself like a mini city in its own right, right? And actually, the next step is to, it's funny, you know how people make fun of sometimes the crypto community? Oh, crypto is just a bunch of conferences and people go to those conferences and so on. But that's because you wonder our hidden strengths.

19:57You know why? Why? Because we're used to setting up mini cities around the world like that. We have all these like fairly technically savvy, hungry, mobile, you know, risk tolerant people who will go around to these things and they think of themselves as part of the Solana community rather than, you know, geo-locked. Right. You're like an unlocked phone. You can operate worldwide. Right. So we can set up the physical infrastructure. We've got the financial infrastructure, which is portable across borders. We've got the people who are mobile. We've got all the prerequisites now to just start taking territory and take this from a one day thing into a 365 day thing.

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21:32Amazing. Yeah, I mean, it reminds me of the first breakpoint that we had. It was right after COVID lockdowns, which, by the way, Your forecast of what was going to happen during COVID lockdowns actually had an impact on us because we launched the network on March 16th, 2020. Oh, my God. Yeah. I got to give you huge props. Like a lot of people had their roadmaps completely derailed in 2020. Every investor was calling every founder saying, cancel your launch, do your layoffs, hunker down. It's going to be a slog and focus on survival. and I think your forecast of what was going to happen and you know the idea that obviously it would be good for crypto this would be the moment for crypto to actually accelerate not decelerate otherwise it's not useful what's it here for that was a really big moment for us so thank you for that well the thing about that is just to speak with that for a second that was an unfortunate event for the whole world and but what it did is it powered up both the state and the network like the state got powered up with lockdowns with with tracking of people, with all of these emergency authorities, just 9-11 to the nth power, you know, in terms of, you know, surveillance, civil liberties, and so on.

22:44But the network also got powered up. So Freedom also got powered up. Crypto got powered up. Remote work got powered up. Video conferencing. Contracts could get signed online. We flipped in many ways to an internet-first world after 2020. I think future historians will look back on that and realize that was the moment that the internet became primary and the physical world became secondary. And for example, like you write a document first and only if it's really important, you print it out. You go through a shopping cart first online and only if it's really important, you hit a button and you print it out to your door.

23:13You look online for an Uber, you know, or a Grab. And if it's time, then you hit a button and it comes to your door, right? And you have your cryptocurrency. And, you know, that's where much, you know, if you have 1 % of your net worth in cryptocurrency today, you'll have 100 % of your net worth in cryptocurrency by 2040 or thereabouts. Like that's what cryptocurrency becomes, right? So anyway, that flipped the internet first world. You guys were extremely well positioned for that, and you did extremely well, so very good job on that. So as you've been building out the network state infrastructure, you've been using things like Tiplink, you've used Superteam, you've used Phantom, all these primitives.

23:49And then you've been doing the work of establishing the network school and working with plumbers and contractors and all these things. Have any product ideas started to emerge for you? Oh, my God. So many. So actually, I'm going to be putting up some bounties on these.

24:10Basically, the quote, idea guy is not worth that much. But idea plus capital guy is now worth something, right? So the idea plus capital guy is a person who is time limited, but not capital limited. I just don't have time to build all the stuff that I'd love to see built, right? So you mentioned some of these products. Like Phantom Wallet, the wallet just works. and you can just like go like this boom and usdc back and forth and um you know by the way you know you know that i launched usdc right do you know that yeah i do know that you've launched so many things yeah so usdc at coinbase if you go back and look um september 2018 there's a story of that for a second because now i use usdc every day but basically uh in september 2018 um circles uh you know they had a smart contract for just to digress on this for a second because it's an important part of the Solana ecosystem.

25:00They had a smart contract that was audited and it worked, but they didn't have any distribution and so on. And if you go back and look, before the Coinbase USDC launch, USDC's market cap was like$10 million or$0 as of September 1st, 2018, right? And then you can go and look at the YouTube video. I'll post that after this if you want, where we launched USDC. We launched it on Coinbase and we set up... Because the only way it would work is if you had multiple exchanges adopting it and we had to figure out all the decentralization stuff and the redemption stuff. So that turned it from an audited smart contract into the V1 of USDC.

25:35And we put Coinbase's exchange behind it and we did all that stuff. You know what I did on that? We just took two engineers and the hardest part was me just clearing away every single meeting. And when people wanted to try to get a meeting with them, I would stand outside the room and HR was not allowed. Nobody could bug them for any signatures or anything. I really didn't care. The government could throw us in jail. There would be no signatures. Nobody would bother my engineer. right giving them that 30 days of just total protected time we ship the whole thing in like basically a month and now it's at like 35 billion dollars from you know 10 million and usdc on sol with fantoballet it just works tip link you can send it's like mailchimp for nfts and um remind me why do i get a product ideas okay right so what are product ideas um So one thing I'd like to have is the, like an NFT check-in.

26:28Okay, so for example, at the front desk over here, you have like a pretty cool check-in thing where you show your barcode and you're in, right? So connecting NFT check-in to an NFT gated door lock would be, I think, a pretty important thing. And the thing is, you have to figure out the right application for it. Airbnb hosts are good because they are tech savvy and they have an incentive to let lots of people in and out over the internet so they don't have to be there physically to let them in the door, right? So I think we're now at the point that NFT door locks and NFT check-in is one thing, so that's number one.