Sergey Nazarov: Chainlink, Smart Contracts, and Oracle Networks

Lex Fridman (01:22.920)

and maybe some vodka with old and new friends.

Sergey Nazarov (01:26.760)

This is the Lex Friedman podcast,

Lex Fridman (01:28.960)

and here is my conversation with Sergey Nazarov.

Lex Fridman (01:33.600)

Is that Jozsik there?

Lex Fridman (01:35.360)

So I gave away everything I own a few times in my life,

Lex Fridman (01:38.360)

and he accidentally survived,

Lex Fridman (01:41.000)

and I don't like stuffed animals.

Lex Fridman (01:42.660)

What I really liked about, I got him in a thrift store.

Lex Fridman (01:44.800)

What I liked about him is,

Sergey Nazarov (01:45.960)

because I'd never seen a stuffed animal

Lex Fridman (01:48.040)

that looks pissed off at life.

Sergey Nazarov (01:50.560)

Like they're usually smiling in the dumbest of ways,

Lex Fridman (01:53.400)

and this guy was just pissed.

Sergey Nazarov (01:56.080)

Yeah, I gotta tell you, that's actually pretty funny.

Lex Fridman (01:58.960)

I like this guy.

Sergey Nazarov (01:59.920)

If you had to live only in the digital world

Lex Fridman (02:02.680)

or the physical world, which would you choose?

Lex Fridman (02:06.120)

So I think this is actually a question

Lex Fridman (02:08.560)

more about what the fidelity of the digital world would be

Sergey Nazarov (02:11.720)

versus the physical world.

Lex Fridman (02:13.360)

I think this type of question,

Sergey Nazarov (02:15.200)

this whole simulation thing actually comes from papers

Lex Fridman (02:18.200)

about 20, 30 years ago in the philosophical world

Sergey Nazarov (02:21.280)

where people tried to make this thought experiment

Lex Fridman (02:23.720)

of would you be comfortable

Sergey Nazarov (02:25.500)

if everything that was happening to you

Lex Fridman (02:27.340)

happened in a simulation?

Lex Fridman (02:28.980)

What they were trying to do

Lex Fridman (02:29.920)

is they were intuitively trying to understand

Sergey Nazarov (02:32.640)

is there some kind of intuitive personal connection

Lex Fridman (02:36.980)

we have to something being the real world, right?

Lex Fridman (02:40.360)

And then the Matrix movie actually came out of these papers,

Lex Fridman (02:43.080)

and then these ideas made their way

Sergey Nazarov (02:45.760)

into the public consciousness.

Lex Fridman (02:47.940)

I personally think that if I had the choice

Sergey Nazarov (02:50.480)

to be in the digital world at the same fidelity

Lex Fridman (02:53.120)

as the real world with immortality,

Sergey Nazarov (02:56.080)

I would absolutely go with the digital.

Lex Fridman (02:57.560)

Wait, wait, wait, wait, wait.

Lex Fridman (02:58.640)

How'd you add the immortality part?

Lex Fridman (03:00.440)

That's a, you don't get immortality.

Sergey Nazarov (03:02.680)

If you think about how we would go

Lex Fridman (03:03.920)

into the digital world, right?

Sergey Nazarov (03:04.920)

Our brain patterns would be mapped

Lex Fridman (03:07.440)

onto some kind of probably virtual machine, right?

Lex Fridman (03:10.880)

And that would mean immortality, right?

Lex Fridman (03:13.040)

Because the virtual machine has no limit

Sergey Nazarov (03:15.220)

to how long it can exist.

Lex Fridman (03:16.060)

So don't you think there'll be like a versioning system?

Sergey Nazarov (03:18.480)

Like there'll be, this is a soft fork

Lex Fridman (03:22.040)

versus hard fork question.

Sergey Nazarov (03:23.740)

Whether Sergei version 2.0 would be different

Lex Fridman (03:27.160)

from Sergei version 1.0, there'll be an upgrade.

Lex Fridman (03:30.600)

So that's a mortality.

Lex Fridman (03:32.040)

Sergei 1.0 would die in the digital world.

Lex Fridman (03:34.040)

And you get like a software update, and then that's it.

Lex Fridman (03:38.940)

Well, yeah, when people go into the Star Trek transporter,

Lex Fridman (03:41.340)

are they killed or are they transported?

Lex Fridman (03:43.640)

I don't really know.

Sergey Nazarov (03:45.060)

I haven't written any papers on this.

Lex Fridman (03:46.520)

I haven't really thought about it too much.

Sergey Nazarov (03:48.040)

There's no white paper on the transporter.

Lex Fridman (03:50.040)

Not at this point, so.

Lex Fridman (03:51.240)

Well, what does fidelity mean exactly to you?

Lex Fridman (03:53.720)

Is it like strictly, so the fidelity of the physics world,

Sergey Nazarov (03:58.040)

the physical world is maybe now questions of physics,

Lex Fridman (04:01.780)

quantum mechanics, what is at the bottom of it all?

Lex Fridman (04:05.320)

Or do you mean the fidelity of the actual experience?

Lex Fridman (04:07.640)

Like the original state? It's just perception.

Sergey Nazarov (04:09.400)

It's just perception.

Lex Fridman (04:11.400)

But that's limited by human cognitive capabilities.

Lex Fridman (04:14.280)

It is, but I don't really have anything else, right?

Lex Fridman (04:16.160)

I think all of these papers

Sergey Nazarov (04:17.280)

that brought up these questions of assimilation,

Lex Fridman (04:19.100)

they were like in epistemology and metaphysics.

Lex Fridman (04:21.600)

And what they were trying to do, I think,

Lex Fridman (04:23.840)

was they were trying to put people

Sergey Nazarov (04:25.080)

through a thought experiment

Lex Fridman (04:26.440)

where they would come out on the other end

Lex Fridman (04:28.840)

and say the reality of life is really worth something.

Lex Fridman (04:33.120)

And I don't, you know, ignorance isn't bliss,

Lex Fridman (04:36.140)

which is that consistent statement in the matrix, right?

Lex Fridman (04:38.600)

Ignorance is bliss is that that's what one of the guys says

Sergey Nazarov (04:40.880)

when he's like, you know, doing something wrong

Lex Fridman (04:42.520)

and trying to get back into the matrix.

Lex Fridman (04:44.280)

And the question is, is ignorance bliss?

Lex Fridman (04:47.720)

And it's like a different version of that.

Sergey Nazarov (04:49.840)

I think from a perceptual point of view,

Lex Fridman (04:52.480)

if my perceptions aren't in any way different,

Lex Fridman (04:55.660)

so fidelity is very good, it doesn't matter.

Lex Fridman (04:59.580)

I don't know, right?

Lex Fridman (05:00.960)

So if I don't know something, it doesn't really exist.

Lex Fridman (05:04.880)

And if it doesn't exist in my perception

Sergey Nazarov (05:07.800)

or my consciousness, then it doesn't exist,

Lex Fridman (05:09.840)

period, for me, at least.

Lex Fridman (05:11.680)

And then whether it exists in some, you know,

Lex Fridman (05:13.560)

more metaphysical version of things,

Sergey Nazarov (05:16.380)

I personally never really got into the metaphysics stuff

Lex Fridman (05:18.800)

because I could never really,

Lex Fridman (05:21.960)

I couldn't understand what the point of it was, right?

Lex Fridman (05:24.920)

It's one of these things where I couldn't really get

Lex Fridman (05:27.840)

what the practical application of it was.

Lex Fridman (05:32.320)

And this is from those realm of questions, right?

Sergey Nazarov (05:34.580)

Like if there was something about the world,

Lex Fridman (05:37.040)

but you didn't have a capacity to perceive it,

Lex Fridman (05:39.820)

would it matter to you?

Lex Fridman (05:41.760)

To me, it wouldn't matter.

Sergey Nazarov (05:43.140)

Right, to me, by the way, the simulation thing

Lex Fridman (05:45.440)

is a really interesting engineering question,

Sergey Nazarov (05:47.760)

which is how difficult is it to engineer a virtual reality,

Lex Fridman (05:53.140)

a digital world that is sufficiently of high fidelity

Lex Fridman (05:57.600)

where you would want to live in it?

Lex Fridman (05:59.080)

I think that's a really testable

Lex Fridman (06:01.400)

and a fascinating engineering question.

Lex Fridman (06:03.240)

So my intuition says like,

Sergey Nazarov (06:04.440)

it's not as difficult as we think.

Lex Fridman (06:06.540)

It's not nearly as difficult as having to create

Sergey Nazarov (06:10.080)

a quantum mechanical simulation that's large enough

Lex Fridman (06:12.400)

to capture the full human experience.

Sergey Nazarov (06:14.120)

Like it might be just as simple

Lex Fridman (06:15.880)

as just a really nice quake game,

Sergey Nazarov (06:19.760)

like with a nice engine,

Lex Fridman (06:20.960)

with just creating all the basic visual elements

Sergey Nazarov (06:24.480)

that trick our cognitive, our visual cortex

Lex Fridman (06:28.040)

into believing that we're actually

Sergey Nazarov (06:29.540)

in the physical environment.

Lex Fridman (06:31.720)

And I think that if that's true,

Sergey Nazarov (06:34.280)

then that's quite a high fidelity digital world

Lex Fridman (06:38.440)

is actually achievable within a century.

Lex Fridman (06:42.640)

And that changes things.

Lex Fridman (06:44.860)

Yeah, yeah, maybe in our lifetime.

Sergey Nazarov (06:47.000)

I'm really hoping for that.

Lex Fridman (06:47.840)

I'm hoping somebody can copy my brainwaves

Sergey Nazarov (06:49.840)

onto a virtual machine and allow that consciousness

Lex Fridman (06:54.380)

to continue to exist.

Sergey Nazarov (06:55.760)

Whether that's death or not, I don't know.

Lex Fridman (06:59.040)

But I think it's actually gonna require some serious leaps.

Lex Fridman (07:03.360)

Like even the VR headsets, right?

Lex Fridman (07:05.580)

They don't work if they go below 90 frame rates, right?

Sergey Nazarov (07:09.440)

People start getting freaked out.

Lex Fridman (07:11.200)

So you have to go from one gaming screen

Sergey Nazarov (07:13.820)

of 60 frames per second

Lex Fridman (07:16.960)

to two screens of 90 frames per second.

Lex Fridman (07:19.360)

And so people's hardware today can't even handle that.

Lex Fridman (07:22.280)

And that's for these two little screens by your eyeballs.

Lex Fridman (07:26.720)

What it's gonna take to completely trick my consciousness

Lex Fridman (07:30.200)

into not knowing the difference

Sergey Nazarov (07:31.560)

in terms of like all the sensory inputs.

Lex Fridman (07:36.040)

I'm keeping my fingers crossed.

Sergey Nazarov (07:37.880)

Whoever does that and is close to doing that,

Lex Fridman (07:41.280)

they should contact me.

Sergey Nazarov (07:42.680)

I want to have my brainwaves turned into a virtual machine.

Lex Fridman (07:46.920)

Would you in that context, if Morpheus came to you,

Lex Fridman (07:50.240)

would you take the blue pill or the red pill?

Lex Fridman (07:53.500)

Meaning, would you be happy just living in that world

Lex Fridman (07:58.280)

and not knowing that you're living inside that virtual world

Lex Fridman (08:02.240)

that's running a computer?

Lex Fridman (08:03.800)

Or would you want to know the truth of it?

Lex Fridman (08:06.640)

Well, actually I think that's a very different question,

Lex Fridman (08:08.600)

right?

Lex Fridman (08:09.440)

There's a actually moral ethical question there

Sergey Nazarov (08:12.520)

about whether you should allow a bunch of people

Lex Fridman (08:15.120)

to get manipulated and killed and slaved,

Sergey Nazarov (08:17.960)

because in the matrix they're all enslaved

Lex Fridman (08:20.200)

as like a AAA battery

Lex Fridman (08:23.280)

to turn a human being into the battery, right?

Lex Fridman (08:25.580)

So I think the moral and ethical question of that,

Sergey Nazarov (08:31.540)

fascinating enough, isn't actually different

Lex Fridman (08:33.100)

than the moral and ethical questions we face today

Sergey Nazarov (08:35.380)

in modern daily life.

Lex Fridman (08:36.940)

But I probably have given the choice

Sergey Nazarov (08:39.560)

of just completely going along or going against it.

Lex Fridman (08:43.460)

I would probably go against it

Sergey Nazarov (08:45.360)

if I had to make this kind of binary choice.

Lex Fridman (08:48.020)

Because going along with it,

Sergey Nazarov (08:50.000)

I think at that scale of scary stuff happening to people

Lex Fridman (08:56.840)

is probably something really, really, really difficult.

Lex Fridman (09:00.000)

But for your individual life,

Lex Fridman (09:01.200)

it's way more fun to go along with it.

Lex Fridman (09:03.240)

So you're saying you value the opposing a system

Lex Fridman (09:09.200)

that includes the suffering of others

Sergey Nazarov (09:11.760)

versus just for yourself enjoying the ride.

Lex Fridman (09:15.840)

I mean, if there is such a binary choice,

Lex Fridman (09:19.400)

why choose to oppose the system?

Lex Fridman (09:21.900)

I think it's the nature of kind of the ethical dilemma

Sergey Nazarov (09:24.440)

that you face in that situation.

Lex Fridman (09:26.040)

There's kind of some,

Lex Fridman (09:27.560)

this is obviously not something that's happening now, right?

Lex Fridman (09:29.880)

We don't know this, right?

Sergey Nazarov (09:31.320)

No, we don't know this.

Lex Fridman (09:33.080)

At the end of the day,

Sergey Nazarov (09:34.920)

at that scale of something like that happening,

Lex Fridman (09:38.080)

yeah, that scale of people being manipulated and harmed,

Sergey Nazarov (09:43.560)

then I think pretty much almost all people

Lex Fridman (09:45.760)

have an obligation to go against it.

Sergey Nazarov (09:49.600)

Probably that's what that looks like in my opinion.

Lex Fridman (09:53.620)

So you've talked about the concept of definitive truth.

Lex Fridman (09:57.660)

What is it?

Lex Fridman (09:58.500)

And in general, what is the nature of truth

Lex Fridman (10:00.320)

in human civilization?

Lex Fridman (10:01.820)

And just talking about the digital age,

Sergey Nazarov (10:05.880)

the nature of truth in the digital age.

Lex Fridman (10:09.360)

So the interesting thing about definitive truth

Sergey Nazarov (10:11.600)

is that it actually exists on this,

Lex Fridman (10:14.800)

at least in my mind on this spectrum

Sergey Nazarov (10:16.840)

between objective truth and just somebody made something up

Lex Fridman (10:21.320)

and nobody else agrees.

Lex Fridman (10:22.840)

So what I think definitive truth is,

Lex Fridman (10:25.000)

is it's somewhere in the middle on that spectrum

Lex Fridman (10:27.120)

where if you and me define what truth is, right?

Lex Fridman (10:31.880)

Like if you and me have an agreement of some kind

Lex Fridman (10:34.280)

and we say, as long as the weather is sunny

Lex Fridman (10:38.620)

or the weather isn't, there is no rain on that day,

Sergey Nazarov (10:41.640)

then there'll be an insurance policy that results

Lex Fridman (10:44.480)

and you and me both agree that as long as three sensors,

Sergey Nazarov (10:47.920)

three weather monitoring stations all say that,

Lex Fridman (10:51.520)

then the definitive truth for us and for that agreement

Sergey Nazarov (10:54.780)

is the result of those systems coming to consensus

Lex Fridman (10:59.520)

about what happened out in the real world.

Sergey Nazarov (11:01.960)

I think the objective truth definition

Lex Fridman (11:06.080)

from kind of the philosophical world

Sergey Nazarov (11:08.160)

is really, really stringent and very, very hard to attain.

Lex Fridman (11:12.160)

And that's not what this is.

Lex Fridman (11:14.000)

And that's actually not what commerce

Lex Fridman (11:16.280)

or the ability for people to interact about contracts needs.

Lex Fridman (11:20.180)

What I think the world of commerce needs is an upgrade

Lex Fridman (11:23.980)

from someone can unilaterally decide what the truth is

Sergey Nazarov (11:28.680)

to there can be a pre agreed set of conditions

Lex Fridman (11:34.240)

where we define what the truth is under those conditions.

Lex Fridman (11:37.920)

And then you and me basically say,

Lex Fridman (11:40.620)

if these 20 nodes or of these 30 data sources

Sergey Nazarov (11:43.640)

come to consensus within this method of consensus

Lex Fridman (11:46.440)

with this threshold of agreement,

Sergey Nazarov (11:48.280)

then definitive truth has been achieved for you and me

Lex Fridman (11:51.240)

in our relationship for this specific agreement

Lex Fridman (11:54.360)

and the specificity and our shared agreement

Lex Fridman (11:58.200)

to that kind of truth or that definitive truth

Sergey Nazarov (12:01.480)

being acceptable to both of us is probably

Lex Fridman (12:05.000)

what's kind of necessary and sufficient

Sergey Nazarov (12:08.200)

for everything to move forward in a better way.

Lex Fridman (12:10.600)

In any case, much better than,

Sergey Nazarov (12:12.640)

I'm a bank or an insurance company,

Lex Fridman (12:14.440)

I'm gonna unilaterally decide what happens.

Sergey Nazarov (12:16.800)

It's definitely an upgrade from that.

Lex Fridman (12:18.720)

Do you think it's possible to define formally in this way,

Lex Fridman (12:21.880)

a definitive truth for many things in this world?

Lex Fridman (12:24.360)

Like you talked about weather,

Sergey Nazarov (12:26.240)

basically defining that if three sensors of weather agree,

Lex Fridman (12:30.380)

then that we're going to agree that that is a definitive,

Sergey Nazarov (12:33.320)

useful truth for us to operate under.

Lex Fridman (12:36.640)

So how many things in this world

Lex Fridman (12:39.360)

can be formalized in this way, do you think?

Lex Fridman (12:41.800)

A huge amount.

Lex Fridman (12:43.240)

So there's actually two things going on here.

Lex Fridman (12:48.480)

One thing is the amount of data that already exists

Lex Fridman (12:51.840)

and the pieces of data coming off of markets,

Lex Fridman (12:55.400)

IOT, shipment of goods, any number of other things.

Sergey Nazarov (12:59.200)

Like even your YouTube channel has a certain amount

Lex Fridman (13:01.600)

of likes or a certain amount of clicks

Sergey Nazarov (13:03.840)

or a certain amount of views

Lex Fridman (13:05.200)

and even that's quantifiable.

Lex Fridman (13:06.560)

So even to a certain degree, what we do here today,

Lex Fridman (13:08.980)

you and me right now can be quantified

Sergey Nazarov (13:11.680)

as far as the amount of views, the amount of clicks,

Lex Fridman (13:13.800)

the amount of any number of other things.

Sergey Nazarov (13:14.640)

Yeah, you, the viewer, have power of data in your hands

Lex Fridman (13:18.320)

by clicking like or dislike right now

Sergey Nazarov (13:20.660)

or the subscribe button or the unsubscribe button,

Lex Fridman (13:23.320)

which I encourage you to do.

Sergey Nazarov (13:24.940)

Anyway, okay, so there's data flowing

Lex Fridman (13:27.280)

into all interactions in this world, there's data.

Lex Fridman (13:30.280)

There's more and more data, right?

Lex Fridman (13:31.640)

More and more data.

Sergey Nazarov (13:32.480)

More and more data.

Lex Fridman (13:33.300)

That data is more and more accessible to everybody

Lex Fridman (13:36.420)

and that accessibility and the fact that there's more of it

Lex Fridman (13:39.120)

means we can form more definitive truth proofs.

Sergey Nazarov (13:42.840)

We can form more and more proofs

Lex Fridman (13:44.400)

and as we form those proofs, well, we can provide them

Sergey Nazarov (13:47.520)

to these blockchains and smart contract systems

Lex Fridman (13:49.880)

that consume them and then they're tamper proof, right?

Lex Fridman (13:52.600)

So they can't be manipulated.

Lex Fridman (13:54.280)

And so now we've combined a system that can prove things

Sergey Nazarov (13:57.160)

with a system that guarantees a certain outcomes

Lex Fridman (14:00.120)

and we have a better system of contracts,

Sergey Nazarov (14:02.440)

which is actually an unbelievably powerful tool

Lex Fridman (14:06.680)

that has never existed before.

Sergey Nazarov (14:08.560)

Can we talk about the world of commerce and finance,

Lex Fridman (14:11.480)

decentralized finance?

Lex Fridman (14:13.200)

What is it, what's its promise

Lex Fridman (14:16.480)

from both the philosophical and technical perspective?

Sergey Nazarov (14:20.200)

If we just zoom in on that particular space

Lex Fridman (14:22.100)

of the digital world.

Sergey Nazarov (14:24.080)

Sure, so the decentralized finance is the instantiation

Lex Fridman (14:28.160)

of a specific type of smart contract, right?

Sergey Nazarov (14:31.360)

Or what I call hybrid smart contracts,

Lex Fridman (14:33.680)

which are these contracts that combine the on chain code

Sergey Nazarov (14:36.500)

together with the off chain proofs that something happened.

Lex Fridman (14:40.200)

They're called a hybrid

Lex Fridman (14:41.040)

because they basically use both of these systems, right?

Lex Fridman (14:43.880)

The blockchain and the proofs about what happened.

Lex Fridman (14:47.040)

And what DeFi is, is one specific type

Lex Fridman (14:51.080)

of hybrid smart contract that is taking

Sergey Nazarov (14:53.680)

on the contractual agreements you traditionally find

Lex Fridman (14:57.880)

in the global financial system, right?

Lex Fridman (15:01.340)

And that's basically the world of lending,

Lex Fridman (15:04.400)

the world of yield generation

Sergey Nazarov (15:05.920)

for people giving me or giving whoever their money

Lex Fridman (15:08.800)

and somebody giving back them yield back to them,

Sergey Nazarov (15:11.680)

which is what bonds do and what treasuries do

Lex Fridman (15:13.960)

and what a lot of the global financial markets do,

Sergey Nazarov (15:16.120)

as well as the ability to gain exposure and protection

Lex Fridman (15:20.360)

from different types of events and risks.

Lex Fridman (15:23.000)

That's a lot of what derivatives do, right?

Lex Fridman (15:24.760)

Derivatives allow us to say, hey, something's gonna happen.

Lex Fridman (15:27.520)

And I'm either gonna protect myself

Lex Fridman (15:29.520)

by getting paid if it happens,

Sergey Nazarov (15:31.040)

or I'm going to benefit from it happening

Lex Fridman (15:33.280)

by basically saying it's gonna happen,

Sergey Nazarov (15:34.960)

putting money down on that,

Lex Fridman (15:36.120)

and that prediction will get me a return.

Sergey Nazarov (15:38.840)

Now, that's a very large part

Lex Fridman (15:41.640)

of the global financial system,

Sergey Nazarov (15:43.120)

excluding all the stuff for global trade

Lex Fridman (15:45.100)

and letters of credit and all the stuff

Sergey Nazarov (15:46.480)

that facilitates international trade.

Lex Fridman (15:48.320)

So excluding that at least for now.

Lex Fridman (15:50.920)

So if we look at what decentralized finance does,

Lex Fridman (15:53.560)

it takes all of those agreements

Sergey Nazarov (15:55.280)

about generating yield, lending,

Lex Fridman (15:57.420)

and all of these types of things you find in global finance

Lex Fridman (15:59.860)

and the world of derivatives

Lex Fridman (16:01.180)

and a few other types of financial products.

Lex Fridman (16:04.080)

And it basically puts them into a different format, right?

Lex Fridman (16:07.960)

So the format you have for centralized financial agreements

Sergey Nazarov (16:11.700)

is that you go to a bank,

Lex Fridman (16:13.360)

even if you're a hedge fund,

Sergey Nazarov (16:14.280)

even if you're like the richest people,

Lex Fridman (16:15.920)

you go to a bank, they make a product for you,

Lex Fridman (16:18.600)

and you hope that they honor

Lex Fridman (16:20.180)

the product that they made for you.

Sergey Nazarov (16:21.760)

Or you do a deal with another hedge fund

Lex Fridman (16:23.420)

or whoever, some counterparty,

Lex Fridman (16:25.580)

and you hope that that deal is honored.

Lex Fridman (16:28.440)

Yep.

Lex Fridman (16:29.280)

And then a number of very freaky things start to take place.

Lex Fridman (16:32.840)

One of them is people don't have clarity

Lex Fridman (16:36.700)

about what the agreement is, right?

Lex Fridman (16:38.880)

So a lot of people don't know exactly

Lex Fridman (16:41.160)

what the agreement is between those parties

Lex Fridman (16:44.980)

because they can't actually see it.

Sergey Nazarov (16:46.860)

Sometimes agreements are kept very private

Lex Fridman (16:48.860)

or parts of them are kept private.

Lex Fridman (16:50.440)

And that keeps other counterparties,

Lex Fridman (16:53.040)

other people in the system

Sergey Nazarov (16:53.880)

from understanding what's going on.

Lex Fridman (16:55.540)

This is actually partly what happened

Sergey Nazarov (16:56.960)

with the mortgage crisis.

Lex Fridman (16:58.200)

The mortgage crisis in 2008 was basically,

Sergey Nazarov (17:00.560)

there were a lot of agreements, there were a lot of assets,

Lex Fridman (17:02.720)

but because the centralized financial system

Sergey Nazarov (17:05.160)

worked in such an opaque way,

Lex Fridman (17:07.000)

it was so unbelievably difficult

Lex Fridman (17:08.600)

to understand what was going on, right?

Lex Fridman (17:11.080)

And so that lack of understanding

Sergey Nazarov (17:12.680)

for the global financial system

Lex Fridman (17:13.840)

basically led to a big boom,

Lex Fridman (17:15.400)

and then correspondingly, very, very big bust,

Lex Fridman (17:18.860)

which amazingly enough had a huge impact on everybody,

Sergey Nazarov (17:21.280)

even though they didn't participate

Lex Fridman (17:22.480)

in the boom part of the equation.

Sergey Nazarov (17:25.360)

In any case, what decentralized finance does

Lex Fridman (17:28.680)

is it takes these financial contracts

Sergey Nazarov (17:31.520)

that power the global financial system,

Lex Fridman (17:33.320)

it puts them in this new blockchain based format

Sergey Nazarov (17:36.240)

that basically at this point

Lex Fridman (17:37.400)

provides three very powerful things.

Sergey Nazarov (17:39.880)

The first thing that it provides is complete transparency

Lex Fridman (17:42.380)

over what's going on with your financial product.

Lex Fridman (17:45.340)

So this means when you use a financial product

Lex Fridman (17:47.120)

in the DeFi format, you, and you as a technical person

Sergey Nazarov (17:50.240)

actually can drill down very, very, very deeply,

Lex Fridman (17:53.240)

and you can understand where the collateral is,

Sergey Nazarov (17:56.000)

you can understand how much collateral there is,

Lex Fridman (17:57.740)

you can understand what format it's in,

Sergey Nazarov (17:59.280)

you can understand how it's changing,

Lex Fridman (18:00.680)

you can understand this on a second to second

Lex Fridman (18:03.480)

or block to block basis, right?

Lex Fridman (18:05.340)

So you have complete transparency

Sergey Nazarov (18:07.840)

into what's going on in the financial protocol

Lex Fridman (18:11.160)

that you have your assets in,

Sergey Nazarov (18:12.840)

which is because blockchains and the infrastructure,

Lex Fridman (18:15.680)

all of these things are built on, force that transparency.

Sergey Nazarov (18:19.760)

Whereas the centralized financial system

Lex Fridman (18:21.300)

is very, very good at hiding it.

Sergey Nazarov (18:23.480)

It's very good at hiding it

Lex Fridman (18:24.920)

and packaging things in a glossy wrapper,

Sergey Nazarov (18:27.840)

creating a boom, then a bust.

Lex Fridman (18:30.360)

The centralized finance is built on infrastructure

Sergey Nazarov (18:32.600)

that forces transparency such that everyone can understand

Lex Fridman (18:35.880)

what the financial product does from day one.

Lex Fridman (18:38.120)

And in fact, escaping that property is practically impossible

Lex Fridman (18:41.760)

or if someone tries to escape it,

Sergey Nazarov (18:43.400)

it becomes immediately obvious

Lex Fridman (18:44.760)

and people don't use their financial product.

Lex Fridman (18:46.720)

So that's number one.

Lex Fridman (18:48.640)

Number two is control.

Lex Fridman (18:50.700)

So if you look at what happened with Robinhood,

Lex Fridman (18:53.160)

everybody thought the system worked a certain way, right?

Sergey Nazarov (18:55.560)

Everybody thought I have a brokerage account,

Lex Fridman (18:57.760)

I can trade things under a certain set of market conditions.

Lex Fridman (19:02.320)

And then the market conditions changed

Lex Fridman (19:05.480)

within the band of what people thought they could do.

Lex Fridman (19:08.280)

And everybody was fascinated to find out that,

Lex Fridman (19:10.320)

oh my God, I thought my band of market conditions

Sergey Nazarov (19:13.440)

in which I can control my assets is X,

Lex Fridman (19:15.960)

but it is actually Y,

Sergey Nazarov (19:17.520)

is actually much, much smaller band.

Lex Fridman (19:20.480)

And the reason it is a much, much smaller

Sergey Nazarov (19:22.840)

group of market conditions

Lex Fridman (19:24.460)

is that the system doesn't work

Sergey Nazarov (19:26.800)

the way people think it works.

Lex Fridman (19:28.200)

The system was wrapped up in a nice glossy wrapper

Lex Fridman (19:30.320)

and given to them to get them to participate in the system

Lex Fridman (19:32.860)

because the system requires and needs their participation.

Lex Fridman (19:35.840)

But if you actually look at how the system works underneath,

Lex Fridman (19:39.520)

you will see that it does not work

Sergey Nazarov (19:41.100)

the way people think that it works.

Lex Fridman (19:43.240)

And this is actually another reason that DeFi is so powerful

Sergey Nazarov (19:45.560)

because DeFi actually, and these blockchain contracts,

Lex Fridman (19:49.320)

give people the version of the world

Sergey Nazarov (19:52.080)

they think they already have,

Lex Fridman (19:54.100)

which is why they don't beg for it, right?

Lex Fridman (19:56.520)

So everybody thinks they're in a certain version

Lex Fridman (19:58.360)

of the world that works in this reliable way,

Lex Fridman (1:00:01.440)

And then after you write it, you need services.

Lex Fridman (1:00:04.480)

And that's where oracles come in,

Sergey Nazarov (1:00:05.580)

they provide all the services.

Lex Fridman (1:00:07.200)

So just like you would be writing code in web 2.0 land,

Sergey Nazarov (1:00:10.360)

running it on a server somewhere

Lex Fridman (1:00:11.560)

and using an API, here you'd be writing code,

Sergey Nazarov (1:00:14.880)

putting it on a decentralized infrastructure

Lex Fridman (1:00:16.640)

like a blockchain or a smart contract platform like Ethereum.

Lex Fridman (1:00:20.120)

And then you would be using various services

Lex Fridman (1:00:22.640)

in the form of oracles.

Lex Fridman (1:00:23.640)

So they'll just be called oracles

Lex Fridman (1:00:24.940)

or decentralized services instead of APIs.

Lex Fridman (1:00:27.400)

And you're basically composing the same type of architecture

Lex Fridman (1:00:31.120)

except it's hyper reliable.

Sergey Nazarov (1:00:33.120)

At the moment, it's a little bit less efficient

Lex Fridman (1:00:34.760)

because there's an early stage to our industry.

Lex Fridman (1:00:39.160)

But it provides this extreme level of reliability

Lex Fridman (1:00:43.200)

and transparency, which for certain use cases

Sergey Nazarov (1:00:46.240)

is an absolute critical component

Lex Fridman (1:00:48.720)

and is completely reinventing how they work.

Lex Fridman (1:00:50.840)

So I think people should look at what are the use cases

Lex Fridman (1:00:53.920)

where that trust dynamic can be so heavily improved.

Lex Fridman (1:00:56.520)

And that's probably the ones

Lex Fridman (1:00:57.720)

where this is maybe initially useful.

Lex Fridman (1:00:59.560)

But I mean, just to emphasize,

Lex Fridman (1:01:01.680)

I don't think people realize when you say code

Sergey Nazarov (1:01:04.360)

that we're talking about non obfuscated actual program.

Lex Fridman (1:01:09.240)

Like you can read it, you can understand it.

Lex Fridman (1:01:11.960)

And there's something about,

Lex Fridman (1:01:15.140)

maybe this is my computer science perspective

Sergey Nazarov (1:01:17.320)

of like software engineering perspective,

Lex Fridman (1:01:19.640)

but there's something about the formalism

Sergey Nazarov (1:01:21.320)

of programming languages, which enforces simplicity

Lex Fridman (1:01:26.400)

and clarity and transparency.

Lex Fridman (1:01:28.040)

And because it's seen to everybody,

Lex Fridman (1:01:31.960)

I mean, simplicity is enforced.

Sergey Nazarov (1:01:34.080)

There's something about natural language,

Lex Fridman (1:01:36.600)

like language as written in the constitution, for example,

Sergey Nazarov (1:01:40.780)

where there's so many interpretations.

Lex Fridman (1:01:44.360)

With the nice thing about programs,

Sergey Nazarov (1:01:47.580)

there's not going to be a huge number of books written

Lex Fridman (1:01:51.120)

about what was meant by this particular line

Sergey Nazarov (1:01:54.160)

because it's pretty clear.

Lex Fridman (1:01:56.400)

Like programming languages have a clarity to them

Sergey Nazarov (1:01:58.880)

that natural language does not,

Lex Fridman (1:02:01.460)

and they don't have ambiguity, which I think it's important

Sergey Nazarov (1:02:06.120)

to pause on because it's really powerful.

Lex Fridman (1:02:08.260)

It's really difficult to think about.

Sergey Nazarov (1:02:09.920)

I think we live in a world where all the philosophers

Lex Fridman (1:02:12.320)

and legal minds don't know how to program.

Lex Fridman (1:02:15.360)

So I think, not all, most don't.

Lex Fridman (1:02:18.560)

And so we don't often see the philosophical impact

Sergey Nazarov (1:02:22.800)

of this kind of idea that the agreements

Lex Fridman (1:02:25.200)

between humans can be written in a programming language.

Sergey Nazarov (1:02:30.040)

That's a really transformative idea.

Lex Fridman (1:02:32.760)

That, I mean, yeah, it's an idea that's not just technical.

Sergey Nazarov (1:02:38.000)

It's not just financial.

Lex Fridman (1:02:39.560)

It's philosophical.

Sergey Nazarov (1:02:41.000)

It's rethinking human nature from a digital perspective.

Lex Fridman (1:02:46.400)

Like what is human civilization?

Sergey Nazarov (1:02:48.100)

It's interaction between humans.

Lex Fridman (1:02:51.040)

And rethinking that interaction as a digital interaction

Sergey Nazarov (1:02:55.840)

that is managed by programming languages,

Lex Fridman (1:02:58.100)

by programs, by code.

Sergey Nazarov (1:03:00.840)

I mean, that's fascinating.

Lex Fridman (1:03:03.320)

That we'll look back at this time potentially

Sergey Nazarov (1:03:06.840)

as one where us little descendants of apes

Lex Fridman (1:03:10.120)

did not realize how important this moment in history is.

Sergey Nazarov (1:03:16.040)

Like human beings might be totally different

Lex Fridman (1:03:19.640)

a century from now because we codified

Sergey Nazarov (1:03:23.640)

the interaction between humans.

Lex Fridman (1:03:25.840)

That might have more of an impact than anything else

Sergey Nazarov (1:03:28.760)

we do today.

Lex Fridman (1:03:30.360)

You think about the impact of the internet,

Sergey Nazarov (1:03:31.760)

one of the cool things is digitization of data.

Lex Fridman (1:03:35.020)

But we have not yet integrated the tools,

Sergey Nazarov (1:03:38.100)

the mechanisms fully that use that data

Lex Fridman (1:03:42.320)

and interact with humans yet.

Lex Fridman (1:03:43.840)

And that's what smart contracts do.

Lex Fridman (1:03:45.840)

I wonder if you think about the role

Sergey Nazarov (1:03:47.600)

of artificial intelligence in all of this.

Lex Fridman (1:03:50.200)

Because your smart contracts are kind of agreements,

Sergey Nazarov (1:03:56.380)

maybe you disagree with this,

Lex Fridman (1:03:57.600)

but at least the way I'm thinking about it

Sergey Nazarov (1:03:59.880)

is agreements between humans or groups of humans.

Lex Fridman (1:04:03.920)

But it seems like because everything's operating

Sergey Nazarov (1:04:07.220)

in the digital space that you can integrate

Lex Fridman (1:04:10.600)

non humans into this.

Sergey Nazarov (1:04:12.960)

Or AI systems that help out humans,

Lex Fridman (1:04:16.180)

managed by humans.

Sergey Nazarov (1:04:17.600)

Like what do you think about a world

Lex Fridman (1:04:20.960)

of hybrid smart contracts,

Sergey Nazarov (1:04:25.480)

codifying agreements between hybrid

Lex Fridman (1:04:30.840)

intelligent being networks of humans and AI systems?

Sergey Nazarov (1:04:35.620)

Yeah, I think that makes perfect sense.

Lex Fridman (1:04:39.080)

In terms of AI, I'm not an expert, right?

Lex Fridman (1:04:42.300)

So it might be a bit simplistic or naive,

Lex Fridman (1:04:45.320)

my ideas in this field.

Lex Fridman (1:04:48.400)

I think everyone saw the Terminator movie, right?

Lex Fridman (1:04:51.760)

Everybody kind of saw the Terminator movie in the 90s.

Lex Fridman (1:04:55.000)

And it was like, this is really scary.

Lex Fridman (1:04:57.520)

I personally think AI is amazing and makes perfect sense.

Sergey Nazarov (1:05:02.160)

I think it will evolve to a place where people have...

Lex Fridman (1:05:06.400)

Just to understand,

Lex Fridman (1:05:07.240)

I work in the world of trust issues, right?

Lex Fridman (1:05:09.460)

I work in the world of how can technology solve trust

Lex Fridman (1:05:12.980)

and collaboration issues using encryption,

Lex Fridman (1:05:16.080)

using cryptographically guaranteed systems,

Lex Fridman (1:05:18.280)

using decentralized infrastructure, right?

Lex Fridman (1:05:20.040)

So that's the world that I've been inhabiting

Sergey Nazarov (1:05:22.240)

for many, many years now,

Lex Fridman (1:05:24.800)

building smart contracts for seven or eight,

Sergey Nazarov (1:05:26.480)

doing stuff before that.

Lex Fridman (1:05:27.520)

It's kind of what I'm focused on.

Lex Fridman (1:05:29.360)

So I view AI through that same lens.

Lex Fridman (1:05:32.920)

And my brain naturally asks,

Sergey Nazarov (1:05:34.280)

well, what is the trust issue

Lex Fridman (1:05:35.900)

that people might have with AI?

Lex Fridman (1:05:37.920)

And my natural kind of response is,

Lex Fridman (1:05:40.600)

well, let's say AI continues to be built and improve.

Sergey Nazarov (1:05:44.840)

At some point, I have no clue where we are on this now.

Lex Fridman (1:05:48.000)

I've seen different ideas that were very far from this.

Sergey Nazarov (1:05:51.040)

I've seen other ideas were very close to this.

Lex Fridman (1:05:52.840)

At a certain point, we'd arrive at a place with AI

Sergey Nazarov (1:05:55.480)

where we would be a little bit worried

Lex Fridman (1:05:57.840)

about just how much it could do, right?

Sergey Nazarov (1:05:59.600)

We might be worried that AI could do things

Lex Fridman (1:06:02.180)

we don't want it to do,

Lex Fridman (1:06:04.240)

but we still want to give AI

Lex Fridman (1:06:06.320)

a level of control over our lives, right?

Lex Fridman (1:06:08.600)

So in my world, that's a trust issue.

Lex Fridman (1:06:11.680)

And the way that that trust issue

Sergey Nazarov (1:06:13.160)

would be solved with blockchains

Lex Fridman (1:06:15.000)

is actually very straightforward.

Lex Fridman (1:06:16.840)

And I think in its simplicity, quite powerful.

Lex Fridman (1:06:19.780)

You could have an AI that has an ability to do

Lex Fridman (1:06:23.420)

and control key parts of your and our lives, right?

Lex Fridman (1:06:28.680)

But then you could limit it with private keys

Lex Fridman (1:06:32.040)

and blockchains and create certain guardrails

Lex Fridman (1:06:35.800)

and firm kind of walls and limits

Sergey Nazarov (1:06:41.720)

to what the AI could never go past,

Lex Fridman (1:06:44.260)

assuming that encryption, right?

Lex Fridman (1:06:46.960)

That encryption continues to work, right?

Lex Fridman (1:06:49.000)

And assuming that if it's not that AI's specialization

Sergey Nazarov (1:06:53.060)

to break encryption, that it wouldn't be able to do that,

Lex Fridman (1:06:55.920)

right?

Lex Fridman (1:06:56.760)

So if you have an AI that controls

Lex Fridman (1:06:59.200)

something very important, whatever it is,

Sergey Nazarov (1:07:01.480)

shipping or something in defense

Lex Fridman (1:07:03.560)

or something in the financial system, whatever it is,

Lex Fridman (1:07:07.400)

but you're sitting there and you're kind of worried,

Lex Fridman (1:07:09.060)

hey, this thing is unbelievable.

Sergey Nazarov (1:07:11.560)

It's coming up with things

Lex Fridman (1:07:13.080)

we wouldn't have thought of in a hundred years,

Lex Fridman (1:07:14.980)

but maybe it's a little too unbelievable.

Lex Fridman (1:07:17.920)

How do you limit it?

Sergey Nazarov (1:07:19.680)

Well, if you bake in private keys

Lex Fridman (1:07:22.720)

and you bake in these kind of blockchain based limitations,

Sergey Nazarov (1:07:27.020)

you can create the conditions

Lex Fridman (1:07:28.960)

beyond which an AI could never act.

Lex Fridman (1:07:31.640)

And those could once again be codified

Lex Fridman (1:07:33.500)

in the very specific unambiguous terms

Sergey Nazarov (1:07:36.680)

in which you described,

Lex Fridman (1:07:38.040)

which once again, in my trust issue focused world,

Sergey Nazarov (1:07:41.660)

would solve the trust issue for users

Lex Fridman (1:07:45.020)

and make them comfortable with using the AI

Sergey Nazarov (1:07:47.880)

or ceding control to the AI,

Lex Fridman (1:07:50.760)

which I think in more advanced versions of AI

Lex Fridman (1:07:53.840)

will continue to be a concern, right?

Lex Fridman (1:07:55.840)

This is fascinating.

Lex Fridman (1:07:57.100)

So smart contracts actually provide a mechanism

Lex Fridman (1:07:59.280)

for human supervision of AI systems.

Sergey Nazarov (1:08:01.600)

With encryption, very encryption heavy.

Lex Fridman (1:08:04.560)

So it's not about like, is it smarter than us?

Lex Fridman (1:08:07.320)

It's about will the encryption hold up?

Lex Fridman (1:08:09.840)

Yep.

Lex Fridman (1:08:10.780)

So that's based on the assumption that encryption holds up.

Lex Fridman (1:08:15.040)

I think that's a safe assumption.

Sergey Nazarov (1:08:16.360)

We can get into that whole discussion,

Lex Fridman (1:08:18.120)

but from quantum computing,

Lex Fridman (1:08:19.960)

but cracking encryption is very difficult.

Lex Fridman (1:08:22.000)

That's a whole nother discussion.

Sergey Nazarov (1:08:23.680)

I think we're safe on the safe ground

Lex Fridman (1:08:25.520)

for quite a long time, assuming encryption holds.

Sergey Nazarov (1:08:29.860)

I, there's a space that is at the cutting edge

Lex Fridman (1:08:38.020)

of general intelligence research in the AI community,

Sergey Nazarov (1:08:41.400)

which is the space of program synthesis

Lex Fridman (1:08:44.680)

or AI generating programs.

Lex Fridman (1:08:47.360)

So that's different than what you're referring to

Lex Fridman (1:08:50.300)

is AI being able to generate smart contracts.

Lex Fridman (1:08:54.800)

And that to me is kind of fascinating

Lex Fridman (1:09:00.400)

to think of, especially two AI systems

Sergey Nazarov (1:09:03.560)

between each other, generating contracts,

Lex Fridman (1:09:07.080)

sort of almost creating a world

Sergey Nazarov (1:09:10.760)

where most of the contracts are between nonhuman beings.

Lex Fridman (1:09:15.460)

I think an AI system, as I think about it,

Lex Fridman (1:09:17.800)

and once again, this is not my field.

Lex Fridman (1:09:19.340)

This is something I might watch a YouTube video on

Sergey Nazarov (1:09:21.320)

or just see something interesting about at some point.

Lex Fridman (1:09:25.120)

I think if I were to just reason through it even now,

Sergey Nazarov (1:09:29.320)

I think the highly deterministic

Lex Fridman (1:09:30.960)

and guaranteed nature of smart contracts

Sergey Nazarov (1:09:34.400)

would probably be preferable to an AI

Lex Fridman (1:09:37.920)

because I'm guessing an AI would have a lot of problems

Sergey Nazarov (1:09:41.800)

with dealing with the human element

Lex Fridman (1:09:43.720)

of how contracts work today, right?

Lex Fridman (1:09:45.600)

So an AI, for example, couldn't pick up the phone

Lex Fridman (1:09:48.560)

and call Dave at a bank to do a derivative

Lex Fridman (1:09:53.360)

and kind of discuss with Dave and have a call with him

Lex Fridman (1:09:55.800)

and kind of have a conversation and get him comfortable

Lex Fridman (1:09:58.840)

and tell him it's gonna be fine

Lex Fridman (1:10:00.320)

and kind of smooth out all the weird social cues

Sergey Nazarov (1:10:03.600)

that have to do with making certain derivatives.

Lex Fridman (1:10:06.180)

I'm assuming that that's a pretty complicated

Sergey Nazarov (1:10:09.920)

neural map AI kind of problem.

Lex Fridman (1:10:15.360)

Yeah, so if I think about it,

Sergey Nazarov (1:10:17.240)

the deterministic guaranteed nature of smart contracts

Lex Fridman (1:10:21.120)

probably would, and if, assuming they're accessible to AIs,

Sergey Nazarov (1:10:25.120)

could actually, interestingly enough, be the format

Lex Fridman (1:10:28.540)

that they prefer to codify their relationship

Sergey Nazarov (1:10:32.340)

with non AI systems and very possibly other AI systems,

Lex Fridman (1:10:37.400)

right, because it is very,

Lex Fridman (1:10:41.760)

I mean, it's pretty guaranteed, right?

Lex Fridman (1:10:44.060)

All the other types of contracts

Sergey Nazarov (1:10:46.040)

that an AI could go out there and seek to do

Lex Fridman (1:10:50.440)

would require some language processing around the law.

Lex Fridman (1:10:56.160)

And I think, I don't know if this is a term,

Lex Fridman (1:10:59.520)

but probably not a smart AI or a good AI

Sergey Nazarov (1:11:01.640)

or whatever the term is for a high quality AI,

Lex Fridman (1:11:04.640)

would probably realize some of the limitations

Lex Fridman (1:11:08.060)

and the risks.

Lex Fridman (1:11:09.220)

Yeah, yeah, AI definitely dislikes ambiguity

Lex Fridman (1:11:12.000)

and would prefer the determinism,

Lex Fridman (1:11:14.560)

the deterministic nature of smart contracts.

Sergey Nazarov (1:11:17.520)

I do wonder about this particular problem

Lex Fridman (1:11:19.680)

and maybe you could speak to it of how smart contracts

Sergey Nazarov (1:11:23.500)

can take over certain industries in a sense

Lex Fridman (1:11:27.960)

or how certain industries can convert their sets

Sergey Nazarov (1:11:31.380)

of agreements into smart contracts,

Lex Fridman (1:11:34.160)

which is, you mentioned sort of talking to Dave

Sergey Nazarov (1:11:36.360)

from the bank, many of our laws, many of our agreements

Lex Fridman (1:11:41.040)

are currently through natural language, through words.

Lex Fridman (1:11:46.880)

And so there is a process of mapping that has to occur

Lex Fridman (1:11:50.320)

in order to convert the legal agreements,

Sergey Nazarov (1:11:53.800)

legal contracts of today to smart contracts

Lex Fridman (1:11:58.280)

that by the way, AI may be able to help with.

Lex Fridman (1:12:01.040)

But by way of question, how do you think we convert

Lex Fridman (1:12:06.100)

the legal contracts on which many industries

Sergey Nazarov (1:12:09.680)

currently function today or not even legal contracts,

Lex Fridman (1:12:13.520)

but ambiguous kind of agreements,

Sergey Nazarov (1:12:15.960)

maybe they're loose sometimes into more formal

Lex Fridman (1:12:19.440)

deterministic agreements that are represented

Lex Fridman (1:12:22.840)

by smart contracts?

Lex Fridman (1:12:25.020)

So I think there's two, maybe two sides to this.

Sergey Nazarov (1:12:30.280)

I think the first one is actually not a huge problem

Lex Fridman (1:12:32.940)

where you have things like the is the master agreement

Sergey Nazarov (1:12:35.280)

for derivatives or you have these agreements

Lex Fridman (1:12:37.580)

that basically already reference a system somewhere,

Sergey Nazarov (1:12:41.080)

like for example, many legal agreements

Lex Fridman (1:12:43.220)

already accept eSignature.

Lex Fridman (1:12:45.020)

And so they're saying, hey, I'm gonna use

Lex Fridman (1:12:46.520)

this computing system over here around signatures

Lex Fridman (1:12:49.320)

and I'm gonna consider, and there's laws around that

Lex Fridman (1:12:51.300)

and there's clauses that say eSignature is good enough

Sergey Nazarov (1:12:53.640)

for this agreement.

Lex Fridman (1:12:55.080)

I actually don't think this is a big problem

Sergey Nazarov (1:12:57.220)

for the vast majority of legal agreements

Lex Fridman (1:12:59.740)

that use systems already.

Lex Fridman (1:13:02.000)

So what you'll do is you'll swap out one repository

Lex Fridman (1:13:05.440)

or one set of system of contract settlement.

Lex Fridman (1:13:09.120)

And you'll just say, hey, this blockchain system over here

Lex Fridman (1:13:11.480)

is my new system of contract settlement.

Sergey Nazarov (1:13:13.520)

Whatever it says is the state of the agreement

Lex Fridman (1:13:16.800)

instead of the centralized system over there.

Lex Fridman (1:13:20.440)

And so there's actually a huge amount of agreements

Lex Fridman (1:13:22.260)

that are already able to do that

Lex Fridman (1:13:24.840)

and I think we'll do that.

Lex Fridman (1:13:26.680)

I think there's another side to your question,

Sergey Nazarov (1:13:28.840)

which is the amount of agreements that are very ambiguous

Lex Fridman (1:13:33.840)

that can be turned into smart contracts.

Lex Fridman (1:13:36.120)

And I think the limitation there is twofold.

Lex Fridman (1:13:39.280)

First of all, like you said earlier,

Sergey Nazarov (1:13:41.740)

the highly reliable smart contract

Lex Fridman (1:13:44.120)

and the lack of opaqueness and the clarity

Sergey Nazarov (1:13:46.560)

of smart contracts is very high and very powerful

Lex Fridman (1:13:52.120)

and very clear and it's, in my opinion,

Sergey Nazarov (1:13:54.800)

gonna be much, much easier to take a smart contract

Lex Fridman (1:13:58.360)

and turn it into a set of natural language explanations

Lex Fridman (1:14:01.680)

and just say, hey, this is what this does, right?

Lex Fridman (1:14:05.600)

So I think that many contracts are,

Lex Fridman (1:14:08.280)

and even now in decentralized finance and DeFi

Lex Fridman (1:14:11.000)

and in decentralized insurance,

Sergey Nazarov (1:14:12.000)

they're basically being rebuilt in this format

Lex Fridman (1:14:14.820)

and that rebuilding will make them clearer, like you said,

Lex Fridman (1:14:18.200)

and then restating those in natural language

Lex Fridman (1:14:20.240)

and explaining to people, well, you know,

Sergey Nazarov (1:14:21.680)

whether it is this, I think it'll actually be a lot simpler

Lex Fridman (1:14:24.340)

to explain to people what the contract is about.

Sergey Nazarov (1:14:26.040)

It's fascinating.

Lex Fridman (1:14:27.160)

Mapping smart contracts into natural language,

Sergey Nazarov (1:14:29.180)

I didn't even think about that.

Lex Fridman (1:14:30.240)

So that's, you're saying that's doable

Lex Fridman (1:14:33.400)

and natural and easy to do.

Lex Fridman (1:14:35.960)

Because there's so much clear, right?

Sergey Nazarov (1:14:37.680)

There's that forced clarity that you talked about.

Lex Fridman (1:14:40.040)

I think the second aspect of this problem

Sergey Nazarov (1:14:42.840)

is the nuance around what contracts can be made unambiguous

Lex Fridman (1:14:47.680)

and I think that comes down to,

Sergey Nazarov (1:14:49.280)

often comes down to proving what happened,

Lex Fridman (1:14:51.960)

which is where Oracle networks

Lex Fridman (1:14:53.240)

and decentralized Oracle networks and Chainlink would come in

Lex Fridman (1:14:56.100)

and our experience there is quite extensive

Sergey Nazarov (1:14:58.740)

over the many years that we've worked on many different

Lex Fridman (1:15:00.720)

contract types.

Sergey Nazarov (1:15:02.320)

I think what it fundamentally comes down to

Lex Fridman (1:15:05.560)

is whether there is data.

Lex Fridman (1:15:07.640)

So we're not gonna be able to make a hybrid smart contract

Lex Fridman (1:15:11.520)

about whether somebody painted your house

Sergey Nazarov (1:15:13.240)

the right color blue.

Lex Fridman (1:15:15.040)

We're just not gonna be doing that

Sergey Nazarov (1:15:16.360)

because there's no data feed that tells us

Lex Fridman (1:15:18.480)

that your house was painted blue

Sergey Nazarov (1:15:19.760)

or that it was the right color of blue.

Lex Fridman (1:15:22.200)

You know, unless somebody sets up a drone

Sergey Nazarov (1:15:24.160)

with a color analysis tool and they generate that data.

Lex Fridman (1:15:28.220)

Which by the way, it could be possible, right?

Sergey Nazarov (1:15:29.960)

They could, there could be, if there's enough demand

Lex Fridman (1:15:32.240)

then the service would be created

Sergey Nazarov (1:15:33.800)

that has drones flying around

Lex Fridman (1:15:35.500)

that's telling you about the colors of, you know,

Sergey Nazarov (1:15:38.040)

all this kind of stuff.

Lex Fridman (1:15:38.920)

So if there's actual demand that that would be created

Lex Fridman (1:15:41.560)

and because there'll be value to connect that data feed

Lex Fridman (1:15:44.660)

to the smart contracts and so on.

Sergey Nazarov (1:15:46.360)

I think you have it unbelievably right

Lex Fridman (1:15:48.640)

because there are already insurance companies

Sergey Nazarov (1:15:51.060)

that use drones to monitor construction sites from overhead

Lex Fridman (1:15:54.400)

and see how many people are wearing hard hats.

Lex Fridman (1:15:57.120)

And if the percentage of people wearing hard hats

Lex Fridman (1:15:59.120)

isn't sufficiently high, then, you know,

Sergey Nazarov (1:16:01.180)

the policy is voided.

Lex Fridman (1:16:02.720)

And so in that case, there is a data source

Lex Fridman (1:16:05.240)

and that data source can be put

Lex Fridman (1:16:06.680)

into a hybrid smart contract.

Lex Fridman (1:16:08.360)

So the limitation of hybrid smart contracts is,

Lex Fridman (1:16:11.040)

is there a data source or a set of data sources

Sergey Nazarov (1:16:13.820)

to create definitive truth,

Lex Fridman (1:16:15.640)

to settle the contract and eliminate ambiguity.

Lex Fridman (1:16:18.960)

And then as you said, I think as people realize

Lex Fridman (1:16:22.520)

that smart contracts are a format

Sergey Nazarov (1:16:24.800)

in which they can form agreement about things

Lex Fridman (1:16:27.240)

like that insurance product around, you know,

Lex Fridman (1:16:29.320)

how many people are wearing hard hats.

Lex Fridman (1:16:31.200)

If I'm the construction site owner, well, you know,

Sergey Nazarov (1:16:33.760)

I would really like a guarantee

Lex Fridman (1:16:35.640)

that your insurance policy is gonna pay me out

Sergey Nazarov (1:16:38.880)

if everyone is wearing hard hats.

Lex Fridman (1:16:40.780)

And in that case, there is demand for the data

Lex Fridman (1:16:44.560)

and people will generate the data.

Lex Fridman (1:16:46.520)

And I actually think the insurance industry

Sergey Nazarov (1:16:48.480)

is interestingly a precursor of this

Lex Fridman (1:16:50.080)

because they're so data driven.

Sergey Nazarov (1:16:51.640)

You already see insurance companies paying IoT companies

Lex Fridman (1:16:56.040)

to put data into their customer's infrastructure

Sergey Nazarov (1:16:59.080)

at the cost of the insurance company

Lex Fridman (1:17:01.320)

to generate the data that the insurance company uses

Sergey Nazarov (1:17:03.840)

to make a policy for the customer.

Lex Fridman (1:17:05.780)

So you basically already have people

Sergey Nazarov (1:17:08.240)

who really want to price data into their agreements

Lex Fridman (1:17:12.200)

when they're of sufficiently high value paying

Sergey Nazarov (1:17:15.200)

for their own customers to get data sensors

Lex Fridman (1:17:18.820)

into their infrastructure.

Lex Fridman (1:17:20.600)

And I think as smart contracts become more

Lex Fridman (1:17:23.400)

of a requested format or data driven contracts

Sergey Nazarov (1:17:26.800)

become more of a format,

Lex Fridman (1:17:28.240)

there will be a growing demand

Sergey Nazarov (1:17:31.160)

about proving what happened through data.

Lex Fridman (1:17:33.680)

So it'll be motivating totally new data feeds being created.

Sergey Nazarov (1:17:36.820)

By the way, the insurance industry broadly,

Lex Fridman (1:17:40.240)

the revolutions there, it would be huge.

Sergey Nazarov (1:17:42.800)

I've worked quite a bit with autonomous vehicles,

Lex Fridman (1:17:44.720)

semi autonomous and just vehicles in general.

Sergey Nazarov (1:17:47.700)

The insurance industry there, by the way,

Lex Fridman (1:17:49.680)

makes a huge amount of money,

Lex Fridman (1:17:51.520)

but is using very crappy data feeds,

Lex Fridman (1:17:56.160)

revolutionizing how like not by crappy,

Sergey Nazarov (1:18:00.160)

I mean very crude.

Lex Fridman (1:18:01.520)

Like literally the insurance is based on things like age,

Sergey Nazarov (1:18:06.300)

gender, like basic demographic information

Lex Fridman (1:18:09.080)

as opposed to really high resolution information

Sergey Nazarov (1:18:13.320)

about you as an individual,

Lex Fridman (1:18:15.280)

which you may or may not want to provide.

Lex Fridman (1:18:18.160)

So you can choose from an individual perspective

Lex Fridman (1:18:20.320)

to provide a data feed.

Lex Fridman (1:18:21.400)

And there like the power of insurance

Lex Fridman (1:18:30.500)

to enable the individual,

Sergey Nazarov (1:18:33.480)

to empower the individual could be huge

Lex Fridman (1:18:36.720)

because ultimately smart contracts motivate the use of data,

Sergey Nazarov (1:18:40.460)

the creation of new data feeds,

Lex Fridman (1:18:42.160)

but leveraging the whatever service it provides in truth,

Sergey Nazarov (1:18:48.760)

as opposed to some kind of very loose notion of who you are.

Lex Fridman (1:18:52.680)

So that I'm not, again,

Sergey Nazarov (1:18:55.240)

not sure how that would change things,

Lex Fridman (1:18:57.200)

but in terms of the fundamental experience of life,

Sergey Nazarov (1:19:02.360)

because I think we all rely on insurance,

Lex Fridman (1:19:04.040)

not just in business, but in life

Lex Fridman (1:19:06.160)

and grounding that insurance

Lex Fridman (1:19:09.300)

in more and more accurate representation of reality

Sergey Nazarov (1:19:13.320)

might just have transformative effects on society.

Lex Fridman (1:19:15.940)

Well, just to mention one quick thing that you said,

Sergey Nazarov (1:19:18.840)

where I noticed another trust issue,

Lex Fridman (1:19:20.560)

you said the user might not want to share their data.

Lex Fridman (1:19:23.720)

So what you could actually do,

Lex Fridman (1:19:25.140)

and what we've already worked on is,

Sergey Nazarov (1:19:26.980)

you can have a smart contract that holds the data

Lex Fridman (1:19:30.240)

and evaluates the data of the user

Sergey Nazarov (1:19:32.900)

without sharing it with the insurance companies.

Lex Fridman (1:19:35.480)

And the insurance company knows that the smart contract

Sergey Nazarov (1:19:38.080)

will evaluate it according to the policy.

Lex Fridman (1:19:40.520)

They don't need the data.

Lex Fridman (1:19:41.880)

And the user can provide the data

Lex Fridman (1:19:45.280)

knowing it'll never touch the insurance company

Sergey Nazarov (1:19:47.200)

because it's only provided to the smart contract.

Lex Fridman (1:19:49.860)

And suddenly you've solved another trust issue

Sergey Nazarov (1:19:52.480)

because the autonomous piece of code

Lex Fridman (1:19:54.520)

can evaluate information separately from the interests

Sergey Nazarov (1:19:58.280)

of both of the counterparties.

Lex Fridman (1:20:00.320)

And so this is the recurring theme.

Sergey Nazarov (1:20:02.040)

I think you're seeing this recurring theme

Lex Fridman (1:20:03.580)

where there's a trust issue,

Sergey Nazarov (1:20:05.280)

people can't use the system, they can't collaborate,

Lex Fridman (1:20:07.840)

they can't share information

Sergey Nazarov (1:20:09.280)

that would make a better agreement for both of them,

Lex Fridman (1:20:11.240)

they can't solve a risk in their daily life,

Sergey Nazarov (1:20:14.640)

they can't participate in a market,

Lex Fridman (1:20:16.260)

they can't have a bank account

Sergey Nazarov (1:20:17.560)

because nobody will give it to them

Lex Fridman (1:20:18.600)

because they can't give it to them in that legal system.

Lex Fridman (1:20:22.000)

And once you have an autonomous piece of code

Lex Fridman (1:20:25.360)

that can also know what's going on,

Sergey Nazarov (1:20:27.920)

thanks to Oracle networks and that combination of the code

Lex Fridman (1:20:30.580)

and the Oracle network for the hybrid smart contract,

Sergey Nazarov (1:20:34.240)

the same pattern just recurs.

Lex Fridman (1:20:36.720)

It's really the same pattern.

Lex Fridman (1:20:38.160)

And this is why I keep saying trust issues.

Lex Fridman (1:20:40.720)

It's because I basically,

Sergey Nazarov (1:20:43.080)

almost every contractual trust issue that I see

Lex Fridman (1:20:45.780)

where there is a piece of data to prove

Lex Fridman (1:20:47.620)

and settle the trust issue

Lex Fridman (1:20:49.740)

in a way that works for both parties,

Sergey Nazarov (1:20:53.320)

there is no reason not to use an autonomous,

Lex Fridman (1:20:55.840)

highly reliable contract and piece of code.

Lex Fridman (1:20:59.600)

And I have to tell you,

Lex Fridman (1:21:01.240)

I've seen this in a lot of different industries.

Sergey Nazarov (1:21:04.080)

I've seen it insurance, ad networks,

Lex Fridman (1:21:07.120)

global finance, global trade,

Sergey Nazarov (1:21:09.200)

those are all multi trillion dollar industries.

Lex Fridman (1:21:11.760)

And then there are other smaller industries.

Sergey Nazarov (1:21:14.040)

Like even one of the first smart contracts

Lex Fridman (1:21:16.240)

we worked on many years ago

Sergey Nazarov (1:21:17.760)

was for search engine optimization firms

Lex Fridman (1:21:20.640)

where they would tell you,

Sergey Nazarov (1:21:21.640)

hey, I'm gonna raise your search engine ranking,

Lex Fridman (1:21:24.160)

give me the money.

Lex Fridman (1:21:25.520)

And people wouldn't wanna give them the money

Lex Fridman (1:21:26.920)

because they never knew if they were gonna do it.

Lex Fridman (1:21:29.760)

And then the search engine firm

Lex Fridman (1:21:30.840)

doesn't wanna do any work

Sergey Nazarov (1:21:31.740)

thinking they'll never get any money.

Lex Fridman (1:21:33.600)

So we just initially even came up with a system

Sergey Nazarov (1:21:36.200)

where you could put Bitcoin into a smart contract

Lex Fridman (1:21:38.960)

and it would be released based on whether the search rank

Sergey Nazarov (1:21:42.480)

of a website got to a certain level on Google

Lex Fridman (1:21:45.000)

for a certain keyword, right?

Lex Fridman (1:21:47.080)

And so the trust problem was solved.

Lex Fridman (1:21:49.140)

But it's just the same story, right?

Sergey Nazarov (1:21:50.740)

It's kind of like trust issues around AI,

Lex Fridman (1:21:52.560)

trust issues around financial products,

Sergey Nazarov (1:21:54.200)

trust issues around insurance,

Lex Fridman (1:21:55.480)

trust issues around social media, whatever it is.

Sergey Nazarov (1:21:58.960)

I think that's what people looking at this industry

Lex Fridman (1:22:04.500)

really need to understand.

Lex Fridman (1:22:06.140)

And once they do understand,

Lex Fridman (1:22:07.200)

they realize what this is all about.

Sergey Nazarov (1:22:09.440)

This is about redefining how everyone collaborates

Lex Fridman (1:22:14.240)

with everyone about everything

Sergey Nazarov (1:22:17.360)

where we can prove something through data.

Lex Fridman (1:22:20.000)

You've mentioned confidentiality and privacy

Sergey Nazarov (1:22:23.520)

that the parties don't need to necessarily know private data

Lex Fridman (1:22:27.520)

in this interaction.

Sergey Nazarov (1:22:28.360)

You talk about confidentiality in the white paper

Lex Fridman (1:22:32.360)

for Chainlink 2.0.

Lex Fridman (1:22:33.940)

Can you talk more about how to achieve confidentiality

Lex Fridman (1:22:38.080)

in this process?

Sergey Nazarov (1:22:39.860)

Sure, sure, absolutely.

Lex Fridman (1:22:43.220)

So I think you once again need to think of the contract

Lex Fridman (1:22:45.560)

as existing in two parts, right?

Lex Fridman (1:22:47.020)

You have the on chain code

Lex Fridman (1:22:48.340)

and then you have this off chain system

Lex Fridman (1:22:49.880)

called the centralized Oracle network.

Lex Fridman (1:22:52.740)

So the question is really what portion of the contract

Lex Fridman (1:22:56.720)

should live in what part of these two systems, right?

Lex Fridman (1:23:00.680)

So if you wanna create transparency,

Lex Fridman (1:23:03.720)

you should put more information on chain

Sergey Nazarov (1:23:06.960)

because that's what blockchains are very good at.

Lex Fridman (1:23:09.240)

They're public, transparent,

Lex Fridman (1:23:12.240)

but they don't necessarily have privacy.

Lex Fridman (1:23:15.000)

Well, you can see how those two things

Sergey Nazarov (1:23:16.700)

are a little bit kind of completely diametrically opposed.

Lex Fridman (1:23:21.440)

So I do think and I do see blockchains working

Sergey Nazarov (1:23:25.360)

on on chain encrypted smart contracts.

Lex Fridman (1:23:28.800)

That's very inefficient.

Sergey Nazarov (1:23:29.980)

It has a lot of nuances around it.

Lex Fridman (1:23:32.640)

That I think will appear at some point.

Sergey Nazarov (1:23:35.060)

I think until it appears,

Lex Fridman (1:23:37.320)

you have an option of taking a part of the computation

Lex Fridman (1:23:41.580)

and putting it into the centralized Oracle network.

Lex Fridman (1:23:44.800)

We actually did an entire paper about this

Sergey Nazarov (1:23:47.160)

that we presented at Stanford in February of last year,

Lex Fridman (1:23:52.200)

something called Mixicles,

Sergey Nazarov (1:23:53.420)

which basically talks about how you can take

Lex Fridman (1:23:55.640)

an Oracle network and you can put a portion

Sergey Nazarov (1:23:58.380)

of the computation into the Oracle network,

Lex Fridman (1:24:01.080)

assuming that you're comfortable with that limited set

Sergey Nazarov (1:24:04.160)

of nodes knowing what the computation is.

Lex Fridman (1:24:07.060)

And you could actually provide additional confidentiality

Sergey Nazarov (1:24:09.760)

through special hardware

Lex Fridman (1:24:11.060)

called trusted execution environments

Sergey Nazarov (1:24:12.920)

that all those nodes are forced to run.

Lex Fridman (1:24:15.320)

So they won't even know what they're operating.

Lex Fridman (1:24:17.900)

And so at the end of the day,

Lex Fridman (1:24:19.600)

if you look at a hybrid smart contract

Sergey Nazarov (1:24:22.160)

as gaining functionality from its on chain code

Lex Fridman (1:24:24.680)

and gaining other functionality

Sergey Nazarov (1:24:26.160)

from its off chain decentralized Oracle network component,

Lex Fridman (1:24:30.520)

you can place the part of the computation

Sergey Nazarov (1:24:32.840)

that you would like to be private

Lex Fridman (1:24:34.600)

in the decentralized Oracle network,

Sergey Nazarov (1:24:37.280)

because you can control the set of nodes.

Lex Fridman (1:24:40.800)

You can control the committee of nodes

Lex Fridman (1:24:42.820)

and you can require that they run certain hardware

Lex Fridman (1:24:46.120)

to keep the information private, right?

Lex Fridman (1:24:48.000)

So you could basically make a derivative that,

Lex Fridman (1:24:50.760)

or a binary option is the example used

Sergey Nazarov (1:24:52.560)

in the Mixicles paper where the payout happened on chain,

Lex Fridman (1:24:57.200)

but it was actually impossible to tell

Lex Fridman (1:24:59.680)

what the outcome of the contract was.

Lex Fridman (1:25:02.400)

So the outcome of the contract was computed

Sergey Nazarov (1:25:04.820)

in the centralized Oracle network.

Lex Fridman (1:25:06.560)

And then there was a switch that triggered

Sergey Nazarov (1:25:08.680)

who received the payment,

Lex Fridman (1:25:10.440)

but from the point of view of analyzing

Sergey Nazarov (1:25:13.760)

the on chain transactions and seeing who received

Lex Fridman (1:25:18.760)

the payment or what the outcome of the contract was,

Sergey Nazarov (1:25:21.480)

you couldn't derive that,

Lex Fridman (1:25:24.000)

you couldn't backward engineer what that was,

Lex Fridman (1:25:26.400)

but the users of that hybrid smart contract

Lex Fridman (1:25:30.160)

still had on chain code that guaranteed them

Sergey Nazarov (1:25:33.560)

that as long as the decentralized Oracle network

Lex Fridman (1:25:36.080)

found a certain outcome, right?

Sergey Nazarov (1:25:37.920)

Determined a certain outcome

Lex Fridman (1:25:39.540)

that the relevant user would get paid

Lex Fridman (1:25:42.080)

and there was still a place to put value, right?

Lex Fridman (1:25:45.680)

So there is this kind of fundamental tension

Sergey Nazarov (1:25:49.360)

between confidentiality, privacy,

Lex Fridman (1:25:52.400)

which is very important for many contracts,

Sergey Nazarov (1:25:54.240)

which is critical to many contracts

Lex Fridman (1:25:56.160)

and the public and transparent nature of blockchains,

Sergey Nazarov (1:25:59.560)

which I think eventually will be solved

Lex Fridman (1:26:01.920)

through encrypted on chain smart contracts.

Sergey Nazarov (1:26:04.720)

That'll take some time,

Lex Fridman (1:26:05.920)

I think that'll take years in my opinion.

Lex Fridman (1:26:08.240)

And before we arrive there,

Lex Fridman (1:26:11.000)

I think people will put the private portion

Sergey Nazarov (1:26:13.120)

into the centralized Oracle network.

Lex Fridman (1:26:15.080)

Once again, going back to what

Sergey Nazarov (1:26:16.760)

the decentralized Oracle networks do,

Lex Fridman (1:26:19.080)

they seek to provide these services, right?

Lex Fridman (1:26:21.660)

So the ability to do a privacy preserving computation

Lex Fridman (1:26:25.360)

is perhaps a service without which

Sergey Nazarov (1:26:28.160)

a certain type of contract might never come into existence

Lex Fridman (1:26:31.480)

in the form of an on chain hybrid smart contract.

Lex Fridman (1:26:34.560)

And so this is once again,

Lex Fridman (1:26:35.920)

what we see the centralized Oracle networks

Lex Fridman (1:26:38.240)

and decentralized services doing

Lex Fridman (1:26:40.040)

is providing people these tools and building blocks

Sergey Nazarov (1:26:43.060)

to compose, like I'm great at making

Lex Fridman (1:26:46.760)

these derivatives contracts,

Lex Fridman (1:26:48.000)

but I can't make them unless I can retain

Lex Fridman (1:26:50.360)

the privacy of them.

Lex Fridman (1:26:52.200)

And our goal is to provide the infrastructure

Lex Fridman (1:26:56.120)

that gives you as a developer

Lex Fridman (1:26:57.680)

and as a creator of smart contracts, that capability.

Lex Fridman (1:27:00.940)

And what we've seen is that as we provide that capability,

Sergey Nazarov (1:27:03.680)

people create more,

Lex Fridman (1:27:04.920)

which is also really the story of the internet, right?

Sergey Nazarov (1:27:07.240)

The story of the internet is it was really tough

Lex Fridman (1:27:09.520)

to do eCommerce while everything was an HTTP

Lex Fridman (1:27:13.200)

and credit cards were transmitted publicly.

Lex Fridman (1:27:15.760)

And so eCommerce was kind of tough

Sergey Nazarov (1:27:17.240)

because how am I gonna send my credit card

Lex Fridman (1:27:18.880)

over public on encrypted channels, right?

Lex Fridman (1:27:21.400)

But the second HTTPS appears,

Lex Fridman (1:27:23.280)

eCommerce becomes a lot easier

Sergey Nazarov (1:27:24.920)

because I can put in my credit card number

Lex Fridman (1:27:26.920)

and it can be sent over an encrypted channel

Lex Fridman (1:27:29.120)

and it's not at risk.

Lex Fridman (1:27:30.500)

And so I can participate in eCommerce

Sergey Nazarov (1:27:32.000)

as long as I have a credit card.

Lex Fridman (1:27:33.680)

I think those types, and I'm sure that was unexpected,

Sergey Nazarov (1:27:36.880)

right, I'm sure at the time that was an unexpected outcome

Lex Fridman (1:27:40.120)

from that technology.

Lex Fridman (1:27:42.000)

And so I think this is why we sometimes have this focus

Lex Fridman (1:27:45.440)

on privacy because in our work with contracts

Lex Fridman (1:27:48.560)

and their transition into this hybrid smart contract form,

Lex Fridman (1:27:51.760)

we see a substantial amount of need for privacy

Sergey Nazarov (1:27:55.780)

as an inherent property of these contracts.

Lex Fridman (1:27:59.860)

And it'll take a while before that's possible

Sergey Nazarov (1:28:01.880)

to create the kind of technology innovation required

Lex Fridman (1:28:04.480)

to do that on chain.

Sergey Nazarov (1:28:05.600)

I know there's a few ideas that are being floating about,

Lex Fridman (1:28:07.880)

but so the currently distributed Oracle networks

Sergey Nazarov (1:28:10.820)

provide that feature, which is essential to many contracts.

Lex Fridman (1:28:14.280)

What brings to mind in this whole space,

Sergey Nazarov (1:28:16.880)

again, it might be outside of your expertise,

Lex Fridman (1:28:20.240)

but within the world which I'm passionate about,

Sergey Nazarov (1:28:23.520)

which is machine learning,

Lex Fridman (1:28:25.120)

and it seems like very naturally

Sergey Nazarov (1:28:27.860)

because current machine learning systems

Lex Fridman (1:28:31.280)

are very data hungry

Lex Fridman (1:28:33.320)

and much of the value mined by companies

Lex Fridman (1:28:37.900)

in the digital space are from data.

Sergey Nazarov (1:28:40.400)

They often want their data to maintain privacy.

Lex Fridman (1:28:44.880)

So you think about an autonomous vehicle space,

Sergey Nazarov (1:28:47.500)

Tesla is collecting a huge amount of data,

Lex Fridman (1:28:49.520)

Waymo is collecting a huge amount of data.

Sergey Nazarov (1:28:53.160)

It seems like it would be very beneficial

Lex Fridman (1:28:54.760)

to form contracts where one could use the data

Sergey Nazarov (1:28:57.200)

from the other in some kind of privacy preserving way,

Lex Fridman (1:29:00.720)

but also where all the uses of data are codified

Lex Fridman (1:29:05.880)

and you can exchange value cleanly,

Lex Fridman (1:29:08.560)

basically contracts over data,

Sergey Nazarov (1:29:10.720)

over machine learning systems use of different data.

Lex Fridman (1:29:15.840)

I don't know, do you talk to machine learning folks

Sergey Nazarov (1:29:19.200)

that use ideas of smart contracts

Lex Fridman (1:29:21.480)

or is that for outside of your interest?

Sergey Nazarov (1:29:23.320)

Because it seems like exceptionally applicable set of,

Lex Fridman (1:29:27.460)

when we talk about different services

Sergey Nazarov (1:29:29.120)

that might be created and revolutionized by smart,

Lex Fridman (1:29:33.360)

especially hybrid smart contracts,

Sergey Nazarov (1:29:36.200)

I think machine learning systems comes to mind to me

Lex Fridman (1:29:40.120)

in all industries.

Sergey Nazarov (1:29:42.200)

I don't know if you've gotten a chance

Lex Fridman (1:29:43.520)

to interact with those folks, with those services.

Sergey Nazarov (1:29:46.680)

I think what you're talking about is more data marketplaces

Lex Fridman (1:29:49.160)

in the data marketplace side of things.

Sergey Nazarov (1:29:52.860)

Well, this is actually once again, very applicable

Lex Fridman (1:29:55.360)

because there's a trust issue.

Sergey Nazarov (1:29:56.760)

At the end of the day,

Lex Fridman (1:29:58.400)

let's say I'm trying to sell you some data.

Sergey Nazarov (1:30:00.560)

You don't know the quality of the data.

Lex Fridman (1:30:03.000)

So you don't know what you wanna pay for it.

Lex Fridman (1:30:04.720)

And I can't give you the data for you

Lex Fridman (1:30:06.540)

to determine the quality

Lex Fridman (1:30:07.520)

because I've given you the data, right?

Lex Fridman (1:30:09.880)

Guess what?

Sergey Nazarov (1:30:10.720)

We need an autonomous impartial agent.

Lex Fridman (1:30:13.680)

We need an impartial computational kind of agent

Lex Fridman (1:30:17.160)

and on chain smart contract with an Oracle network

Lex Fridman (1:30:20.920)

to assess my data to write,

Sergey Nazarov (1:30:23.320)

to basically take random cross section samples of the data,

Lex Fridman (1:30:28.320)

assess it for quality, assess it for signal

Sergey Nazarov (1:30:31.920)

from the algorithm you have,

Lex Fridman (1:30:33.560)

which you don't wanna share with me

Sergey Nazarov (1:30:35.200)

because you don't wanna know the algorithm

Lex Fridman (1:30:36.400)

you're working on, right?

Sergey Nazarov (1:30:37.760)

You don't want me to know what you want the data for.

Lex Fridman (1:30:40.880)

So now the autonomous agent takes your algorithm,

Sergey Nazarov (1:30:44.120)

keeping it private from me and takes my data,

Lex Fridman (1:30:46.020)

keeping it private from you,

Sergey Nazarov (1:30:47.720)

assesses it on a random cross section sampling

Lex Fridman (1:30:50.680)

for quality of data, returns the scoring back to you,

Sergey Nazarov (1:30:54.700)

allows you to determine a price.

Lex Fridman (1:30:57.480)

And now both you and me know that we've arrived

Sergey Nazarov (1:31:00.400)

at a fair price for the quality of my data

Lex Fridman (1:31:03.680)

for what you wanna do with it.

Lex Fridman (1:31:06.840)

And that's once again,

Lex Fridman (1:31:09.400)

from what I've seen in the data marketplaces,

Sergey Nazarov (1:31:12.180)

which are full of people who want that data

Lex Fridman (1:31:14.680)

for these learning models, often for financial markets,

Sergey Nazarov (1:31:17.400)

often for other reasons,

Lex Fridman (1:31:20.240)

this is their fundamental problem,

Sergey Nazarov (1:31:22.240)

which amazingly enough,

Lex Fridman (1:31:24.440)

there's a trust issue that is getting solved.

Lex Fridman (1:31:28.080)

And I think you can see even on the face of it,

Lex Fridman (1:31:31.160)

once that trust issue is solved,

Lex Fridman (1:31:33.640)

those markets can work a lot better, right?

Lex Fridman (1:31:36.680)

I don't need to know your algorithm.

Sergey Nazarov (1:31:38.000)

You don't need to know my data.

Lex Fridman (1:31:39.560)

We both know that the autonomous agent

Sergey Nazarov (1:31:41.920)

is not under either of our control

Lex Fridman (1:31:43.680)

and gave us a fair assessment and a fair price.

Lex Fridman (1:31:46.360)

And that's it.

Lex Fridman (1:31:47.960)

And we're all very comfortable with that.

Sergey Nazarov (1:31:50.960)

I could even make conditions

Lex Fridman (1:31:52.560)

that your algorithm isn't analyzing the data

Sergey Nazarov (1:31:55.360)

for something I don't want you to analyze it for,

Lex Fridman (1:31:57.160)

or you could make conditions

Sergey Nazarov (1:31:59.000)

that the data has to have any number of properties.

Lex Fridman (1:32:02.440)

And once again, you haven't leaked any signal to me

Lex Fridman (1:32:05.160)

and I haven't leaked any data to you,

Lex Fridman (1:32:07.480)

which is once again,

Sergey Nazarov (1:32:09.120)

just another type of trust issue that all of this solve.

Lex Fridman (1:32:12.280)

So it's the same pattern.

Sergey Nazarov (1:32:14.200)

If you work in this industry long enough,

Lex Fridman (1:32:15.840)

or if you really look at these use cases long enough,

Sergey Nazarov (1:32:18.440)

you'll simply come to the question,

Lex Fridman (1:32:20.080)

and this is the useful question,

Lex Fridman (1:32:22.280)

what is the trust issue this is solving?

Lex Fridman (1:32:24.800)

And then if you can get an answer to that question

Sergey Nazarov (1:32:27.160)

on a case by case basis,

Lex Fridman (1:32:28.960)

that's when you'll understand why blockchains are relevant.

Lex Fridman (1:32:32.640)

And then once you do that with enough use cases,

Lex Fridman (1:32:35.240)

it becomes a little bit mind blank.

Sergey Nazarov (1:32:38.640)

You've mentioned trust quite a bit.

Lex Fridman (1:32:40.600)

You also mentioned trust minimization

Sergey Nazarov (1:32:45.880)

in the Chainlink White Paper.

Lex Fridman (1:32:48.920)

Can we dig into trust a little bit more?

Lex Fridman (1:32:51.600)

What is the nature of trust

Lex Fridman (1:32:53.800)

that you think about in these smart contracts?

Lex Fridman (1:32:56.120)

What is trust minimization?

Lex Fridman (1:32:58.160)

How do we accomplish, achieve trust minimization?

Sergey Nazarov (1:33:02.160)

Sure, sure.

Lex Fridman (1:33:03.000)

I think it's important maybe to have a conception

Lex Fridman (1:33:05.640)

of what the alternative is, right?

Lex Fridman (1:33:07.440)

What is highly reliable trust minimized off chain

Lex Fridman (1:33:11.640)

and on chain computation and alternative to?

Lex Fridman (1:33:14.080)

So this is just kind of how I see the world

Sergey Nazarov (1:33:17.000)

in these two camps.

Lex Fridman (1:33:18.960)

One camp is the traditional,

Lex Fridman (1:33:20.760)

what I call brand based or paper guarantee camp.

Lex Fridman (1:33:25.240)

And this is the world as pretty much most

Sergey Nazarov (1:33:27.520)

or all people know today.

Lex Fridman (1:33:29.120)

This is the world where there's a bank logo

Sergey Nazarov (1:33:31.400)

or an insurance company logo, or some kind of logo.

Lex Fridman (1:33:34.160)

There's a very big building with marble arches

Lex Fridman (1:33:36.460)

and columns, it's the biggest building in the town.

Lex Fridman (1:33:39.440)

It's bigger than the church.

Lex Fridman (1:33:40.980)

And everybody feels very good.

Lex Fridman (1:33:42.360)

Everybody's got such a nice logo.

Sergey Nazarov (1:33:43.720)

It's such a big building.

Lex Fridman (1:33:45.240)

Why don't I give them my money?

Lex Fridman (1:33:47.640)

Why don't I interact with them on the basis

Lex Fridman (1:33:49.760)

of any kind of agreement?

Lex Fridman (1:33:51.820)

And that's good.

Lex Fridman (1:33:52.900)

And that is definitely better than that not being there.

Lex Fridman (1:33:56.120)

And that is definitely a huge improvement

Lex Fridman (1:33:57.980)

for how people conduct commerce.

Sergey Nazarov (1:34:00.280)

Letters of credit from branded entities

Lex Fridman (1:34:04.140)

are very important for global trade to take place

Sergey Nazarov (1:34:06.760)

in the early stages of global trade.

Lex Fridman (1:34:09.360)

So that's good, but it is fundamentally

Sergey Nazarov (1:34:13.480)

just a paper agreement with a legal framework behind it.

Lex Fridman (1:34:16.800)

And if the paper agreement you have would say Robinhood

Sergey Nazarov (1:34:20.680)

or somebody else suddenly has to change,

Lex Fridman (1:34:24.000)

well, it changes and you can't really do anything about it.

Sergey Nazarov (1:34:26.520)

You won't be able to change anything

Lex Fridman (1:34:28.320)

about what happened there.

Sergey Nazarov (1:34:29.740)

There's some long terms of service.

Lex Fridman (1:34:31.240)

There's some other agreements around all this stuff.

Sergey Nazarov (1:34:34.560)

At the end of the day,

Lex Fridman (1:34:36.560)

that's the brand based and paper guarantee world

Sergey Nazarov (1:34:40.440)

where it's all very vague and opaque

Lex Fridman (1:34:42.240)

and you're kind of hoping for the best

Sergey Nazarov (1:34:44.080)

because there's a nice logo.

Lex Fridman (1:34:45.680)

It's been around a hundred years.

Sergey Nazarov (1:34:47.240)

There's a lot of marble.

Lex Fridman (1:34:48.320)

Put a lot of marble.

Sergey Nazarov (1:34:49.320)

Big building, lots of marbles.

Lex Fridman (1:34:50.800)

This is why banks have such nice buildings, right?

Sergey Nazarov (1:34:53.760)

It's not because they want to spend money on buildings.

Lex Fridman (1:34:56.040)

It's to create confidence in them as an entity

Lex Fridman (1:35:00.000)

in order for people to transact through them, right?

Lex Fridman (1:35:03.200)

This is why all these kind of go to cities

Sergey Nazarov (1:35:06.440)

that had gold rushes, go to cities

Lex Fridman (1:35:08.760)

that needed banking as a service in certain time periods,

Sergey Nazarov (1:35:12.560)

they're the most beautiful buildings

Lex Fridman (1:35:14.040)

at least in the United States.

Lex Fridman (1:35:15.960)

So this is the brand based paper guarantee model

Lex Fridman (1:35:19.040)

for which up until now,

Lex Fridman (1:35:20.480)

there has never been an alternative, right?

Lex Fridman (1:35:22.040)

So up until now, if you had a bad experience with a bank

Sergey Nazarov (1:35:25.080)

or insurance company or some logo somewhere,

Lex Fridman (1:35:28.360)

you would only have one option.

Sergey Nazarov (1:35:30.360)

Your option would be to go across the road

Lex Fridman (1:35:32.360)

and down the block to another building

Sergey Nazarov (1:35:35.400)

with another color of marble

Lex Fridman (1:35:37.680)

and another set of agreements

Lex Fridman (1:35:39.320)

that are fundamentally still paper brand agreements, right?

Lex Fridman (1:35:43.120)

Now for the first time, you have mathematical agreements.

Sergey Nazarov (1:35:47.560)

You have mathematically guaranteed encryption secured,

Lex Fridman (1:35:52.480)

decentralized infrastructure powered agreements, right?

Sergey Nazarov (1:35:56.520)

This is really the shift.

Lex Fridman (1:35:59.480)

This is really the comparison and the alternative

Sergey Nazarov (1:36:03.400)

through which people should view all of this in my opinion,

Lex Fridman (1:36:05.560)

because there's once again, this conception

Sergey Nazarov (1:36:07.960)

that everything is fine, everything works very well.

Lex Fridman (1:36:11.080)

Well, it does, it works fine and very well

Sergey Nazarov (1:36:13.480)

as long as nothing goes wrong.

Lex Fridman (1:36:15.120)

And then in the cases when things go wrong,

Sergey Nazarov (1:36:17.520)

which they pretty much invariably at some point do,

Lex Fridman (1:36:20.360)

then you find out that, well, you know,

Sergey Nazarov (1:36:22.040)

turns out they don't have to pay me

Lex Fridman (1:36:23.840)

or turns out I can't trade

Sergey Nazarov (1:36:25.240)

or turns out the ATMs can be locked up

Lex Fridman (1:36:27.920)

and only give me 66 euros per day,

Sergey Nazarov (1:36:30.120)

whether I'm a business or an individual,

Lex Fridman (1:36:31.760)

like what happened in Greece a few years ago, right?

Lex Fridman (1:36:35.080)

And the reality is that once that becomes a strong enough

Lex Fridman (1:36:41.960)

kind of realization for people,

Sergey Nazarov (1:36:43.840)

I think they will all just migrate

Lex Fridman (1:36:45.280)

to mathematically guaranteed contracts

Lex Fridman (1:36:47.480)

because why wouldn't you?

Lex Fridman (1:36:49.520)

So in the world of mathematically guaranteed contracts,

Sergey Nazarov (1:36:53.240)

kind of how do we, and cryptographically secured

Lex Fridman (1:36:56.240)

and decentralized infrastructure powered,

Lex Fridman (1:36:57.960)

how do we evolve into that world?

Lex Fridman (1:37:01.400)

Well, at the end of the day, it comes down to consensus,

Sergey Nazarov (1:37:05.080)

right, it comes down to a collection of independent nodes,

Lex Fridman (1:37:09.560)

a collection of provably independent computing systems

Sergey Nazarov (1:37:13.280)

arriving at the same conclusion impartially.

Lex Fridman (1:37:17.120)

That conclusion might be the transaction

Sergey Nazarov (1:37:20.440)

is valid between address A and address B,

Lex Fridman (1:37:25.280)

address A has one Bitcoin,

Sergey Nazarov (1:37:26.720)

wants to send it to address B,

Lex Fridman (1:37:27.920)

now address B has one Bitcoin, right?

Lex Fridman (1:37:29.960)

So that's one degree of validation.

Lex Fridman (1:37:32.000)

It has certain cryptographic primitives

Sergey Nazarov (1:37:33.880)

that are used, certain levels of cryptography,

Lex Fridman (1:37:36.240)

encryption, and other methods

Sergey Nazarov (1:37:37.760)

that basically provide clarity and those guarantees.

Lex Fridman (1:37:42.480)

But fundamentally, it's this level of consensus

Sergey Nazarov (1:37:44.640)

that multiple independent computing systems

Lex Fridman (1:37:48.120)

came to the same conclusion, verified that conclusion

Lex Fridman (1:37:51.280)

and created a sense of finality,

Lex Fridman (1:37:53.480)

created a final state that is globally considered

Sergey Nazarov (1:37:56.920)

to be the state of a transaction.

Lex Fridman (1:38:00.920)

And that is how it's achieved, right?

Lex Fridman (1:38:03.840)

So it's achieved by users looking

Lex Fridman (1:38:06.720)

at these mathematical contract systems and saying,

Sergey Nazarov (1:38:11.320)

you know, if I have money in a bank,

Lex Fridman (1:38:13.720)

there's one single person who controls that money,

Sergey Nazarov (1:38:16.400)

that's the bank,

Lex Fridman (1:38:17.400)

they could choose to give me my money

Sergey Nazarov (1:38:18.680)

or choose not to give me my money.

Lex Fridman (1:38:20.880)

And that's great,

Lex Fridman (1:38:22.040)

but maybe there's a percentage of what I own

Lex Fridman (1:38:24.040)

that I wanna put into another system

Sergey Nazarov (1:38:26.240)

where there's thousands of independent computing systems

Lex Fridman (1:38:29.160)

that are promising me, you know,

Sergey Nazarov (1:38:31.160)

with the help of cryptographic primitives,

Lex Fridman (1:38:33.200)

that I will be able to always have access to this,

Sergey Nazarov (1:38:36.600)

whatever this is, whatever this token is,

Lex Fridman (1:38:41.080)

I will at least, or at the very least,

Sergey Nazarov (1:38:43.520)

I will always have unfettered,

Lex Fridman (1:38:45.920)

complete control and access to it.

Sergey Nazarov (1:38:48.240)

So, you know, that's one example.

Lex Fridman (1:38:50.400)

Another example is, hey,

Sergey Nazarov (1:38:51.440)

we have a hybrid smart contract

Lex Fridman (1:38:52.960)

for something like crop insurance.

Sergey Nazarov (1:38:55.160)

I, as the user, evaluate where this smart contract runs.

Lex Fridman (1:38:59.200)

Oh, wow, the smart contract runs on Ethereum.

Sergey Nazarov (1:39:01.520)

Great, thousands of nodes,

Lex Fridman (1:39:03.560)

lots of computational security,

Sergey Nazarov (1:39:06.760)

hash power, so on and so on.

Lex Fridman (1:39:08.560)

Then I look at, oh, well, what triggers the contract?

Sergey Nazarov (1:39:10.920)

Oh, there's this Oracle network.

Lex Fridman (1:39:12.440)

Okay, it's composed of 25 nodes or 15 nodes,

Sergey Nazarov (1:39:15.520)

gets data from five different weather stations.

Lex Fridman (1:39:18.080)

You know, I'm comfortable with that.

Sergey Nazarov (1:39:19.920)

I have a certain level of comfort

Lex Fridman (1:39:21.480)

with that hybrid smart contract

Lex Fridman (1:39:23.200)

and its ability to provide me consensus

Lex Fridman (1:39:26.760)

about the transaction

Sergey Nazarov (1:39:28.360)

once the contract knows what's happened,

Lex Fridman (1:39:30.600)

and I'm comfortable with the consensus around the event

Lex Fridman (1:39:34.520)

that controls the contract, right?

Lex Fridman (1:39:36.240)

Because once again,

Sergey Nazarov (1:39:37.560)

that event is what determines

Lex Fridman (1:39:39.880)

what happens with the contract.

Lex Fridman (1:39:41.480)

And if the contract is super well written,

Lex Fridman (1:39:43.960)

it doesn't matter if the event isn't reliable, right?

Lex Fridman (1:39:47.080)

So now I've made this determination.

Lex Fridman (1:39:48.600)

I've gotten all this clear, transparent information

Sergey Nazarov (1:39:51.240)

about this system that combines the contract code

Lex Fridman (1:39:55.640)

with a decentralized Oracle network.

Lex Fridman (1:39:57.600)

And I've made my decision to participate

Lex Fridman (1:39:59.600)

in this decentralized insurance,

Sergey Nazarov (1:40:02.000)

kind of crop insurance policy.

Lex Fridman (1:40:03.840)

I've sent the Bitcoin or the stable coin

Sergey Nazarov (1:40:06.560)

or whatever I have on my Android phone.

Lex Fridman (1:40:09.200)

And then time goes by and let's say it doesn't rain,

Sergey Nazarov (1:40:12.400)

lo and behold, the smart contract returns

Lex Fridman (1:40:15.520)

the relevant amount from the policy back to me.

Sergey Nazarov (1:40:19.040)

I continue my life as a farmer.

Lex Fridman (1:40:22.160)

And by the way, the fact that that happened

Sergey Nazarov (1:40:25.080)

contributes reputation and contributes proof

Lex Fridman (1:40:28.400)

back to both the contract

Sergey Nazarov (1:40:30.400)

as something that can prove to other people

Lex Fridman (1:40:32.600)

that it has settled and the Oracle network

Sergey Nazarov (1:40:35.800)

as something that can prove

Lex Fridman (1:40:36.920)

that it has properly assessed reality

Sergey Nazarov (1:40:39.560)

or properly triggered a contract.

Lex Fridman (1:40:41.760)

And this is where there's one of many network effects

Sergey Nazarov (1:40:44.400)

where the more that smart contracts

Lex Fridman (1:40:47.720)

and Oracle networks are used,

Sergey Nazarov (1:40:49.360)

they themselves generate this immutable on chain data

Lex Fridman (1:40:54.360)

that proves their value and reliability.

Lex Fridman (1:40:57.920)

And improving more and more of that

Lex Fridman (1:41:00.640)

in more and more kind of use cases

Lex Fridman (1:41:03.800)

and more and more variants of the same contract,

Lex Fridman (1:41:06.840)

they arrive at a greater body of proof

Sergey Nazarov (1:41:09.840)

that they like, I am the decentralized crop,

Lex Fridman (1:41:12.960)

the decentralized insurance contract for crop insurance

Sergey Nazarov (1:41:16.720)

used by a million users.

Lex Fridman (1:41:19.880)

And my failure rate is non existent or really low.

Lex Fridman (1:41:24.560)

And here's my Oracle network.

Lex Fridman (1:41:25.720)

And by the way, it's also settled a million of these.

Lex Fridman (1:41:28.840)

And so it's not the logo, right?

Lex Fridman (1:41:31.480)

It's not, hey, what a nice logo you have

Sergey Nazarov (1:41:35.560)

on top of a building above a train terminal or something.

Lex Fridman (1:41:40.120)

It's much more, hey, there's a million people,

Sergey Nazarov (1:41:44.040)

there's a million separate contracts

Lex Fridman (1:41:45.480)

that got settled correctly.

Sergey Nazarov (1:41:46.680)

I have all the proof that I could ever need about that.

Lex Fridman (1:41:50.360)

And it's not something that's very easy to gain, right?

Sergey Nazarov (1:41:53.440)

Because real value was at stake, real value was moved around.

Lex Fridman (1:41:57.080)

And so I think once again,

Sergey Nazarov (1:41:59.160)

the transparency aspect comes in where you're able to prove

Lex Fridman (1:42:02.560)

that the cryptographically enforced contracts are better.

Sergey Nazarov (1:42:09.440)

That said, you can still integrate the traditional banks

Lex Fridman (1:42:12.040)

as long as you create a data feed

Sergey Nazarov (1:42:13.520)

on the amount of marble that's included.

Lex Fridman (1:42:16.960)

So if that's valuable to you in terms of reputation,

Sergey Nazarov (1:42:19.280)

you could still integrate the marble, the amount of marble

Lex Fridman (1:42:22.360)

that and the size of the logo.

Sergey Nazarov (1:42:26.000)

We could still keep the banks around.

Lex Fridman (1:42:28.600)

I think we will.

Sergey Nazarov (1:42:29.440)

I think what'll happen with the banks

Lex Fridman (1:42:30.800)

and all the insurance companies, by the way,

Sergey Nazarov (1:42:32.480)

is not that they'll all just die or something.

Lex Fridman (1:42:34.840)

I think it'll be just like the internet.

Sergey Nazarov (1:42:36.400)

There'll be some of them that adopt this

Lex Fridman (1:42:38.640)

and some of them that don't,

Lex Fridman (1:42:40.120)

and some of them that do it faster,

Lex Fridman (1:42:41.320)

some of them that do it slower.

Lex Fridman (1:42:42.840)

And that's an economic decision that they'll make.

Lex Fridman (1:42:45.400)

I think their whole question is,

Lex Fridman (1:42:46.960)

is this a foregone conclusion?

Lex Fridman (1:42:48.920)

I mean, I think my answer is yes,

Sergey Nazarov (1:42:51.120)

this is definitely gonna be happening.

Lex Fridman (1:42:52.960)

I think they still have a question of,

Lex Fridman (1:42:55.080)

is this gonna change my industry?

Lex Fridman (1:42:58.560)

But I'm seeing a definite shift in people's understanding.

Lex Fridman (1:43:03.480)

And I think that shift is gonna accelerate rapidly

Lex Fridman (1:43:06.080)

as one or two of them of their competitors

Sergey Nazarov (1:43:08.560)

throw their hat in the smart contract ring

Lex Fridman (1:43:11.800)

and say, well, I have smart contracts.

Sergey Nazarov (1:43:14.560)

I guarantee my outcomes to you.

Lex Fridman (1:43:17.320)

What do they do for you?

Sergey Nazarov (1:43:19.560)

It's risky, just use mine.

Lex Fridman (1:43:22.040)

And the second some of them start losing business

Sergey Nazarov (1:43:24.280)

because of that, they're gonna move very quickly

Lex Fridman (1:43:27.720)

because that's what all of their compensation structures

Lex Fridman (1:43:30.080)

and all their goal planning structures are based around.

Lex Fridman (1:43:32.960)

They're based around what is losing us business

Sergey Nazarov (1:43:35.240)

or getting us business.

Lex Fridman (1:43:36.800)

Yeah, it's fascinating organizationally though,

Sergey Nazarov (1:43:38.960)

to think about banks, they're very old school

Lex Fridman (1:43:41.920)

and their ability to move quickly is questionable to me.

Sergey Nazarov (1:43:46.280)

I just look at basic online banking,

Lex Fridman (1:43:50.120)

like how good banks are creating

Sergey Nazarov (1:43:53.240)

a frictionless online experience.

Lex Fridman (1:43:55.840)

And I think they're not very good.

Lex Fridman (1:43:58.640)

And so that speaks to the kind of people

Lex Fridman (1:44:01.160)

who are in leadership positions at banks,

Sergey Nazarov (1:44:03.880)

the kind of people they hire,

Lex Fridman (1:44:05.680)

the kind of culture there is.

Lex Fridman (1:44:07.520)

So I do wonder if banks will from inside

Lex Fridman (1:44:12.280)

revolutionize themselves to include smart contracts

Sergey Nazarov (1:44:15.440)

or whether totally new competitors will have to emerge

Lex Fridman (1:44:18.800)

that basically create new kinds of banks.

Lex Fridman (1:44:22.320)

Whether, what is the company square?

Lex Fridman (1:44:26.200)

I think it comes up out of nowhere really with Cash App

Lex Fridman (1:44:30.360)

and they have Bitcoin on Cash App,

Lex Fridman (1:44:31.840)

whether they will start incorporating smart contracts

Lex Fridman (1:44:34.440)

and they will revolutionize the whole banking industry

Lex Fridman (1:44:40.120)

or whether Bank of America will revolutionize themselves

Sergey Nazarov (1:44:44.640)

from within.

Lex Fridman (1:44:46.000)

I'm skeptical on Bank of America, but you never know.

Sergey Nazarov (1:44:50.040)

In general, I'm fascinated by how big organizations,

Lex Fridman (1:44:53.640)

whether it's Google or Microsoft or Bank of America,

Sergey Nazarov (1:44:56.760)

pivot hard in a world that's quickly changing.

Lex Fridman (1:45:00.720)

I think that takes bold leadership and a lot of firing

Lex Fridman (1:45:05.480)

and a lot of pain and a lot of meetings

Lex Fridman (1:45:08.120)

where the one asshole brings up the

Sergey Nazarov (1:45:10.680)

from first principles idea that, you know what,

Lex Fridman (1:45:13.440)

the ways we've been doing stuff in the past require,

Sergey Nazarov (1:45:16.840)

we need to throw that out and do stuff totally differently.

Lex Fridman (1:45:20.440)

I know a lot of those assholes

Sergey Nazarov (1:45:22.440)

in a lot of these different industries.

Lex Fridman (1:45:25.320)

First of all, I think they're getting listened to more

Lex Fridman (1:45:27.040)

and second of all, I think all of these places,

Lex Fridman (1:45:30.480)

as I look at it more and more,

Sergey Nazarov (1:45:32.400)

I think they have a fundamental line of business

Lex Fridman (1:45:35.440)

that they try to protect

Lex Fridman (1:45:37.080)

and then everybody's compensation

Lex Fridman (1:45:39.000)

and everybody's metrics and goals

Sergey Nazarov (1:45:40.400)

is focused around that line of business.

Lex Fridman (1:45:43.080)

So the second that things begin to impact that,

Sergey Nazarov (1:45:48.640)

then everybody will be in a senior meeting

Lex Fridman (1:45:52.520)

and that asshole will be quite listened to

Sergey Nazarov (1:45:55.200)

because he will have the only thoughtful explanation

Lex Fridman (1:45:57.960)

as to why this is happening.

Lex Fridman (1:45:59.920)

How things will evolve from there, I actually don't know

Lex Fridman (1:46:02.960)

because that hasn't been the case yet.

Lex Fridman (1:46:05.760)

But my thinking is that there will be people

Lex Fridman (1:46:08.720)

who don't wanna cannibalize certain parts of their business

Sergey Nazarov (1:46:12.040)

or don't wanna change certain parts of their business

Lex Fridman (1:46:15.000)

and then there will be people who say,

Sergey Nazarov (1:46:16.480)

look, I think this is how the world's gonna work.

Lex Fridman (1:46:18.960)

We're gonna make a very, very heavy

Sergey Nazarov (1:46:23.040)

kind of set of commitments to put resources towards this.

Lex Fridman (1:46:27.320)

I already see that with a few banks

Sergey Nazarov (1:46:29.880)

working on various blockchain based systems,

Lex Fridman (1:46:33.160)

but granted, they've been working on those for years.

Lex Fridman (1:46:34.880)

So I think all of this comes down

Lex Fridman (1:46:37.440)

to these kind of quarterly earnings calls

Sergey Nazarov (1:46:39.880)

where somebody asks them, hey, I saw that bank over there

Lex Fridman (1:46:44.040)

once the blockchain bond

Sergey Nazarov (1:46:45.440)

or a smart contract derivative platform.

Lex Fridman (1:46:47.880)

And I also saw that they made $10 billion in revenues

Sergey Nazarov (1:46:51.600)

or $10 billion in volume or whatever it is from that.

Lex Fridman (1:46:55.040)

What's your plan on the earnings call?

Lex Fridman (1:46:58.080)

And I promise you by the next earnings call,

Lex Fridman (1:47:00.560)

there's a plan.

Lex Fridman (1:47:02.040)

And then the question on the next one is,

Lex Fridman (1:47:03.440)

well, when's the plan gonna happen?

Lex Fridman (1:47:04.720)

And then by the next earnings call,

Lex Fridman (1:47:06.000)

it's a plan is happening.

Lex Fridman (1:47:08.440)

And that's what these people are sensitive to.

Lex Fridman (1:47:11.560)

That's what these organizations are structured around.

Lex Fridman (1:47:13.760)

It's not completely economically like disconnected, right?

Lex Fridman (1:47:17.200)

They have this core business, they wanna protect it.

Sergey Nazarov (1:47:20.440)

I understand that idea,

Lex Fridman (1:47:23.000)

but I think that the problem with that

Lex Fridman (1:47:26.040)

is sometimes it requires this myopic focus, right?

Lex Fridman (1:47:31.840)

And that's what all the innovation stuff is about.

Sergey Nazarov (1:47:34.520)

Every time somebody at a corporate entity

Lex Fridman (1:47:36.600)

is about innovation, they're trying to sidestep this.

Lex Fridman (1:47:40.280)

But once again, the incentives to maintain

Lex Fridman (1:47:42.320)

whatever the core businesses is so strong

Sergey Nazarov (1:47:45.240)

that the innovation people, even though they are there,

Lex Fridman (1:47:52.040)

I think they get a phone call and go like,

Lex Fridman (1:47:53.840)

what are we doing for this?

Lex Fridman (1:47:55.560)

And the ones that actually did good work

Lex Fridman (1:47:58.560)

and got ready to do something for this

Lex Fridman (1:48:00.600)

have done their employer and their organization

Sergey Nazarov (1:48:03.960)

a very positive service.

Lex Fridman (1:48:05.800)

Whereas the ones that aren't ready,

Sergey Nazarov (1:48:07.800)

I mean, they'll make up something

Lex Fridman (1:48:09.920)

and maybe they're really smart and they'll get it together.

Sergey Nazarov (1:48:11.920)

I don't know.

Lex Fridman (1:48:12.880)

Can we talk about tokens a little bit?

Sergey Nazarov (1:48:15.200)

Generally speaking, there's been a meteoric rise

Lex Fridman (1:48:19.600)

of a bunch of different tokens.

Sergey Nazarov (1:48:20.920)

We could just talk about Bitcoin and Ethereum as examples.

Lex Fridman (1:48:24.240)

Bitcoin I think crossed $60,000 in value.

Lex Fridman (1:48:27.960)

What are your thoughts in general on this rise?

Lex Fridman (1:48:31.080)

What's the future of Bitcoin?

Lex Fridman (1:48:32.480)

What's the future of Ethereum?

Lex Fridman (1:48:34.040)

There's the total value locked metric

Sergey Nazarov (1:48:38.880)

that I think generalizes the different kind of value

Lex Fridman (1:48:42.000)

of these tokens.

Lex Fridman (1:48:46.800)

What does the future value and impact

Lex Fridman (1:48:51.000)

of cryptocurrency look like

Lex Fridman (1:48:52.360)

if we look through the lens of these tokens?

Lex Fridman (1:48:56.040)

I think valuing all these tokens

Lex Fridman (1:48:58.400)

and determining that isn't something

Lex Fridman (1:48:59.920)

I'm particularly great at.

Sergey Nazarov (1:49:01.280)

I haven't spent a lot of time on that.

Lex Fridman (1:49:02.960)

I've spent the vast majority of my time

Sergey Nazarov (1:49:05.240)

on building these systems and architecting them

Lex Fridman (1:49:07.800)

and getting them to fruition and getting them to a place

Sergey Nazarov (1:49:09.960)

where they operate properly on both the technical

Lex Fridman (1:49:12.400)

and the crypto economic and in every other sense.

Sergey Nazarov (1:49:15.560)

I think with Bitcoin,

Lex Fridman (1:49:17.160)

there is a certain conception

Sergey Nazarov (1:49:21.640)

of non governmental fiat money

Lex Fridman (1:49:24.440)

that Bitcoin is really the first creator of, right?

Lex Fridman (1:49:28.840)

So there's this very powerful idea called fiat money.

Lex Fridman (1:49:31.960)

It's basically more or less a kind of 40 year experiment.

Sergey Nazarov (1:49:36.920)

I think on August 15th of this year

Lex Fridman (1:49:38.480)

is maybe I think given the 40th anniversary,

Sergey Nazarov (1:49:41.320)

government can say, hey, I have a currency

Lex Fridman (1:49:42.960)

and it's worth something and here it is.

Sergey Nazarov (1:49:46.160)

In terms of the way that governments have stopped that

Lex Fridman (1:49:50.800)

in the past is if anyone tries to make

Sergey Nazarov (1:49:52.480)

another fiat currency in their country,

Lex Fridman (1:49:54.440)

they immediately shut it down, right?

Sergey Nazarov (1:49:56.440)

They immediately say, hey, this is really bad.

Lex Fridman (1:49:58.920)

You've done something really bad.

Sergey Nazarov (1:50:00.440)

It's time for you to stop.

Lex Fridman (1:50:01.640)

Don't do it anymore.

Lex Fridman (1:50:03.000)

And it stops, right?

Lex Fridman (1:50:04.200)

That's been the history of non governmental fiat currency.

Sergey Nazarov (1:50:07.800)

Bitcoin is really due to its decentralized nature,

Lex Fridman (1:50:12.160)

the first and possibly in some cases,

Sergey Nazarov (1:50:15.240)

in many people's minds,

Lex Fridman (1:50:16.120)

it's still the only true non governmental fiat currency.

Lex Fridman (1:50:20.760)

Now, how powerful is non governmental fiat currency?

Lex Fridman (1:50:24.400)

I have no idea, right?

Sergey Nazarov (1:50:26.360)

This is why so it's really as powerful as the ideas

Lex Fridman (1:50:31.360)

that people ascribe to it are, right?

Lex Fridman (1:50:33.440)

So let's say people start saying,

Lex Fridman (1:50:36.720)

like right now people are saying,

Sergey Nazarov (1:50:37.960)

hey, it's internet money.

Lex Fridman (1:50:39.240)

It's the money of the internet.

Sergey Nazarov (1:50:41.600)

Okay, great.

Lex Fridman (1:50:42.600)

What's that worth?

Sergey Nazarov (1:50:43.440)

I don't know.

Lex Fridman (1:50:44.280)

It's probably worth a lot.

Sergey Nazarov (1:50:45.120)

I have no idea what it's worth,

Lex Fridman (1:50:45.960)

but as an idea, as a concept to underpin the fiat money,

Sergey Nazarov (1:50:51.120)

the let there be aspect of fiat and of Bitcoin,

Lex Fridman (1:50:56.800)

you basically look at it and you say,

Sergey Nazarov (1:50:58.400)

yeah, internet money.

Lex Fridman (1:51:00.040)

Okay, that could be worth whatever,

Lex Fridman (1:51:02.400)

60,000, 600,000, great question, right?

Lex Fridman (1:51:07.000)

There are other versions of the world, right?

Sergey Nazarov (1:51:08.600)

Where people say,

Lex Fridman (1:51:12.080)

there are countries that don't have a good fiat currency

Lex Fridman (1:51:14.520)

and I see a lot of people using Bitcoin.

Lex Fridman (1:51:16.920)

So Bitcoin isn't internet money,

Sergey Nazarov (1:51:19.400)

it's countries without a good currency money.

Lex Fridman (1:51:24.120)

So all the countries without a good currency

Sergey Nazarov (1:51:25.800)

now use Bitcoin and let there be,

Lex Fridman (1:51:29.200)

Bitcoin as this, right?

Sergey Nazarov (1:51:31.880)

As this conception of Bitcoin.

Lex Fridman (1:51:33.160)

What's the value of that?

Sergey Nazarov (1:51:34.640)

I don't know.

Lex Fridman (1:51:35.480)

That's a great question.

Sergey Nazarov (1:51:36.320)

Probably huge amount of value.

Lex Fridman (1:51:39.040)

Then there's a further conception of Bitcoin

Sergey Nazarov (1:51:42.680)

as some digital gold.

Lex Fridman (1:51:45.000)

There's a scarcity dynamic.

Sergey Nazarov (1:51:46.600)

There's all these other kinds of dynamics.

Lex Fridman (1:51:49.480)

What is a portable version of digital gold

Lex Fridman (1:51:52.600)

with some kind of built in scarcity worth?

Lex Fridman (1:51:57.600)

You know, kind of artificially created scarcity.

Lex Fridman (1:52:01.040)

What's that worth?

Lex Fridman (1:52:02.960)

I don't know.

Sergey Nazarov (1:52:04.200)

That's a great question.

Lex Fridman (1:52:05.760)

I haven't done the analysis on that is the point,

Sergey Nazarov (1:52:07.920)

might be worth a lot.

Lex Fridman (1:52:09.400)

What is it all worth if all three of these things,

Sergey Nazarov (1:52:13.280)

you know, flow into the same fiat,

Lex Fridman (1:52:16.200)

kind of let there be Bitcoin

Lex Fridman (1:52:18.000)

as these three things conception of Bitcoin?

Lex Fridman (1:52:21.840)

I don't know what that's worth.

Sergey Nazarov (1:52:22.680)

I also don't know what that's worth,

Lex Fridman (1:52:23.520)

but could be worth a huge amount.

Lex Fridman (1:52:25.840)

So I think it's not,

Lex Fridman (1:52:28.080)

I don't think it's,

Sergey Nazarov (1:52:28.920)

I personally don't think it's super important

Lex Fridman (1:52:30.200)

what I think it's worth

Sergey Nazarov (1:52:31.360)

or what many other people think it's worth.

Lex Fridman (1:52:33.520)

I don't think that's really that important.

Sergey Nazarov (1:52:35.560)

I think what's probably important

Lex Fridman (1:52:37.240)

is understanding what the societal conception of Bitcoin is

Lex Fridman (1:52:44.760)

and how does that societal conception evolve over time.

Lex Fridman (1:52:49.640)

And that interestingly enough,

Sergey Nazarov (1:52:51.200)

doesn't just depend on, you know,

Lex Fridman (1:52:54.280)

you or me or the people who made Bitcoin or anything else.

Sergey Nazarov (1:52:58.120)

It actually depends on current events.

Lex Fridman (1:53:00.720)

So for example, if people suddenly say,

Sergey Nazarov (1:53:02.720)

I'm more and more worried about fiat currency.

Lex Fridman (1:53:05.960)

I'm more and more worried that governmental fiat,

Sergey Nazarov (1:53:09.400)

even if it's the most reliable version of that

Lex Fridman (1:53:12.520)

is not as good as I thought it was.

Sergey Nazarov (1:53:14.560)

Maybe I should go on the PayPal app

Lex Fridman (1:53:17.800)

and maybe I should get some Bitcoin just in case.

Sergey Nazarov (1:53:20.440)

What's the world where Bitcoin is a certain percentage

Lex Fridman (1:53:25.800)

of everyone's ownership as a hedge

Lex Fridman (1:53:28.080)

against governmental fiat money not being so good?

Lex Fridman (1:53:32.800)

Haven't done the analysis, but another example, right?

Sergey Nazarov (1:53:35.200)

Here's this conception, that's the conception.

Lex Fridman (1:53:38.320)

So when I look at Bitcoin,

Lex Fridman (1:53:40.040)

what I see is a lot of these fascinating conceptions

Lex Fridman (1:53:43.680)

of what the fiat, let there be value of Bitcoin is.

Sergey Nazarov (1:53:47.680)

By the way, all of them could be true.

Lex Fridman (1:53:50.760)

Maybe some of them are true.

Sergey Nazarov (1:53:51.880)

Maybe some of them aren't true.

Lex Fridman (1:53:53.400)

And the fascinating thing is that

Lex Fridman (1:53:54.920)

I've seen this conception change, right?

Lex Fridman (1:53:56.920)

So when I started in the Bitcoin space,

Sergey Nazarov (1:53:59.040)

the conception was micropayments.

Lex Fridman (1:54:01.960)

The cost of Bitcoin is low, we'll have micropayments.

Sergey Nazarov (1:54:05.400)

Micropayments are wonderful for machine to machine

Lex Fridman (1:54:09.080)

transactions, micropayments are wonderful.

Lex Fridman (1:54:10.800)

The emerging market, and that's fine, right?

Lex Fridman (1:54:13.400)

And that was one conception of Bitcoin

Lex Fridman (1:54:15.760)

as let there be Bitcoin as micropayments platform, right?

Lex Fridman (1:54:19.600)

But then the value rose and things changed.

Sergey Nazarov (1:54:21.880)

There wasn't enough expansion in certain ways.

Lex Fridman (1:54:24.000)

And now the conception has evolved

Sergey Nazarov (1:54:26.600)

into this other conception.

Lex Fridman (1:54:28.520)

But at the end of the day,

Sergey Nazarov (1:54:30.760)

I think governments have a very clear set of steps

Lex Fridman (1:54:34.640)

for directing the public's conception of their fiat, right?

Sergey Nazarov (1:54:40.320)

They say our fiat is worth this for these reasons.

Lex Fridman (1:54:44.240)

Bitcoin doesn't have that.

Sergey Nazarov (1:54:45.640)

Bitcoin doesn't have an official Bitcoin spokesperson

Lex Fridman (1:54:49.240)

that goes out and says,

Sergey Nazarov (1:54:50.760)

the non governmental money called Bitcoin,

Lex Fridman (1:54:53.200)

the non governmental fiat money called Bitcoin

Sergey Nazarov (1:54:55.360)

has value on the basis of this, this, this and this.

Lex Fridman (1:54:57.960)

Here's our fiscal budget, here's our future plans.

Sergey Nazarov (1:55:00.720)

Our money will continue to be safe and secure and reliable.

Lex Fridman (1:55:04.080)

And so what that hole creates

Lex Fridman (1:55:07.360)

is a hole that we all fill, right?

Lex Fridman (1:55:09.120)

We all basically come to some vague kind of

Sergey Nazarov (1:55:12.360)

group understanding that Bitcoin is worth this

Lex Fridman (1:55:16.680)

because it is tied to,

Sergey Nazarov (1:55:23.000)

let's say all non governmental fiat money comes

Lex Fridman (1:55:27.480)

into question, everybody doubts it,

Sergey Nazarov (1:55:30.360)

possibly due to inflation.

Lex Fridman (1:55:32.240)

And everybody says, you know, this is nice,

Lex Fridman (1:55:35.480)

but I'd like to keep 10, 20% of my wealth

Lex Fridman (1:55:39.440)

in non governmental fiat, just in case,

Lex Fridman (1:55:44.360)

you know, what are those numbers?

Lex Fridman (1:55:47.320)

I mean, if that happens, you know,

Sergey Nazarov (1:55:49.280)

I'm guessing you can add a few zeros.

Lex Fridman (1:55:52.600)

I like how you say I haven't done the analysis

Sergey Nazarov (1:55:55.040)

as if I'm sure a lot of people have done

Lex Fridman (1:55:56.920)

quote unquote analysis, but it's not,

Sergey Nazarov (1:55:59.360)

it's still speculation.

Lex Fridman (1:56:00.520)

Nobody can predict the future,

Sergey Nazarov (1:56:02.080)

especially when so much of it has to do

Lex Fridman (1:56:04.800)

with a large number of people holding an idea

Sergey Nazarov (1:56:08.600)

in their mind as to the importance

Lex Fridman (1:56:10.720)

of a particular technology like Bitcoin.

Sergey Nazarov (1:56:13.360)

There's a lot of excitement by its possibilities,

Lex Fridman (1:56:15.400)

but the number of zeros you add is an open question

Lex Fridman (1:56:19.480)

and nobody can do a perfect analysis

Lex Fridman (1:56:22.040)

except whoever created this simulation.

Sergey Nazarov (1:56:27.160)

Let me ask you this question.

Lex Fridman (1:56:30.360)

Who is Satoshi Nakamoto?

Sergey Nazarov (1:56:33.160)

There's quite a few people who suggest that person is you.

Lex Fridman (1:56:39.560)

So is it you?

Sergey Nazarov (1:56:42.680)

No.

Lex Fridman (1:56:45.200)

Who do you think it could be?

Sergey Nazarov (1:56:47.760)

I don't know who it is.

Lex Fridman (1:56:48.640)

I think if I had to guess, it's probably a group of people,

Sergey Nazarov (1:56:52.080)

some of which might not even be around anymore.

Lex Fridman (1:56:55.240)

You know, obviously I'm very grateful to,

Sergey Nazarov (1:56:57.400)

if this is a singular or a group of people

Lex Fridman (1:56:59.200)

for kicking off this entire industry

Lex Fridman (1:57:00.680)

and making this amazing change in the world

Lex Fridman (1:57:02.800)

that I have the privilege and luxury

Sergey Nazarov (1:57:05.480)

of being part of in some small way in the work that I do.

Lex Fridman (1:57:09.920)

I think also this kind of focus on who is Satoshi

Sergey Nazarov (1:57:13.440)

or who isn't Satoshi,

Lex Fridman (1:57:14.920)

shouldn't in my opinion matter so much

Sergey Nazarov (1:57:17.640)

because regardless of who it is,

Lex Fridman (1:57:20.040)

that in my opinion should have no substantial

Sergey Nazarov (1:57:24.080)

significant effect or bearing on the functioning

Lex Fridman (1:57:27.760)

or the value or the use

Lex Fridman (1:57:29.560)

or the security of the Bitcoin system, right?

Lex Fridman (1:57:33.480)

So I think whoever it is,

Sergey Nazarov (1:57:35.840)

they're probably better off not making that public.

Lex Fridman (1:57:38.880)

And I think beyond that,

Sergey Nazarov (1:57:41.560)

whoever it turned out to be shouldn't matter

Lex Fridman (1:57:43.760)

because it has nothing to do

Sergey Nazarov (1:57:46.360)

with how the system is made useful

Lex Fridman (1:57:48.640)

or secure or anything else.

Lex Fridman (1:57:50.760)

And so I think that's the point of view that I have.

Lex Fridman (1:57:54.480)

Now, if you were Satoshi Nakamoto, would you tell me?

Sergey Nazarov (1:57:58.160)

Because you said they shouldn't,

Lex Fridman (1:58:02.160)

whoever Satoshi is, you should keep that private.

Lex Fridman (1:58:05.440)

So would you tell it to me or no?

Lex Fridman (1:58:08.320)

We're in some kind of weird like thought experiment here.

Sergey Nazarov (1:58:12.040)

If I was this guy, let me think about this,

Lex Fridman (1:58:16.960)

which I'm not, by the way, I am not this person.

Lex Fridman (1:58:19.200)

But if you were, would you say it?

Lex Fridman (1:58:21.560)

I think probably not.

Sergey Nazarov (1:58:29.360)

I don't see the,

Lex Fridman (1:58:30.200)

I think that they would cause a lot of distraction

Lex Fridman (1:58:33.000)

and a lot of weird stuff.

Lex Fridman (1:58:34.920)

And so realistically, I don't think it would help anybody

Sergey Nazarov (1:58:38.880)

or even the person who discloses it,

Lex Fridman (1:58:40.800)

but just to be clear, I am not.

Lex Fridman (1:58:42.480)

And whoever it is, I think they haven't said anything

Lex Fridman (1:58:45.000)

because they don't want the attention

Lex Fridman (1:58:46.520)

and they don't want the distraction

Lex Fridman (1:58:47.920)

and they don't want all the problems from this.

Lex Fridman (1:58:49.800)

And that makes sense to me, conceptually.

Lex Fridman (1:58:53.040)

It's fascinating to think if they're still out there

Lex Fridman (1:58:55.160)

and part of the Bitcoin, the cryptocurrency community,

Lex Fridman (1:59:00.600)

and it is inspiring to think that if they're out there,

Sergey Nazarov (1:59:04.920)

that they're not revealing their identity

Lex Fridman (1:59:09.080)

because it would be a distraction.

Sergey Nazarov (1:59:11.360)

That's kind of inspiring that people are like that.

Lex Fridman (1:59:13.040)

Just like George Washington,

Sergey Nazarov (1:59:15.400)

a relinquishing power is inspiring

Lex Fridman (1:59:17.960)

because it's ultimately about the progress of the community

Lex Fridman (1:59:20.560)

and not some kind of ego driven attention scheme.

Lex Fridman (1:59:25.000)

Again, very inspiring.

Sergey Nazarov (1:59:26.360)

The humans at their best are inspiring.

Lex Fridman (1:59:29.720)

What do you think about the certainty

Sergey Nazarov (1:59:31.680)

that people in the Bitcoin Maximus community

Lex Fridman (1:59:34.720)

have about this particular piece of technology, Bitcoin?

Sergey Nazarov (1:59:38.640)

Is there something interesting that you think

Lex Fridman (1:59:41.520)

that you might wanna say about this community

Lex Fridman (1:59:44.360)

or is it just is what it is?

Lex Fridman (1:59:48.720)

I think at the end of the day,

Sergey Nazarov (1:59:49.760)

results speak for themselves

Lex Fridman (1:59:51.720)

and Bitcoin has had an amazing impact on our industry

Lex Fridman (1:59:55.880)

and has had an amazing impact on the world.

Lex Fridman (1:59:59.000)

And I think the result is still

Sergey Nazarov (20:00.460)

transparent way, they're not.

Lex Fridman (20:02.800)

They don't realize it.

Lex Fridman (20:04.000)

And so they're confused when you tell them,

Lex Fridman (20:05.580)

I'm gonna make the world work this way

Sergey Nazarov (20:07.140)

because they think they're already in that world.

Lex Fridman (20:09.180)

But then things like Robinhood make it immediately,

Sergey Nazarov (20:12.020)

painfully clear that that's not how the world works

Lex Fridman (20:14.020)

so that the second real property of DeFi is control,

Sergey Nazarov (20:17.120)

which means that you control your assets,

Lex Fridman (20:20.240)

not a bank, not a broker, not a third party, you.

Sergey Nazarov (20:23.880)

You control your Bitcoins,

Lex Fridman (20:25.000)

you control your tokens in the finance protocol.

Sergey Nazarov (20:27.320)

If you don't like how something's going in that protocol,

Lex Fridman (20:30.240)

you can remove it, you can send it to another protocol,

Sergey Nazarov (20:32.820)

or you can use a feature of the protocol

Lex Fridman (20:34.480)

to do something it's supposed to do.

Lex Fridman (20:36.020)

And guess what?

Lex Fridman (20:36.860)

Nobody can just say, oops, that feature,

Sergey Nazarov (20:38.900)

that isn't so good for my friends over here.

Lex Fridman (20:41.280)

That feature is actually,

Sergey Nazarov (20:42.520)

we're just gonna pause that feature in the critical moment

Lex Fridman (20:45.520)

when you need it to execute your strategy,

Sergey Nazarov (20:49.480)

which is why you took all the risks to begin with.

Lex Fridman (20:52.120)

And then the final reason, the final thing to know about DeFi

Sergey Nazarov (20:56.520)

is that DeFi is inherently global,

Lex Fridman (20:59.200)

and actually right now provides better yield globally.

Lex Fridman (21:02.960)

So if you go to a bank right now with the US dollar,

Lex Fridman (21:05.680)

you get 1% or less.

Sergey Nazarov (21:07.840)

If you go to DeFi with the US dollar, you get 7% or 8%.

Lex Fridman (21:12.760)

So if we think about that in a world

Sergey Nazarov (21:16.620)

where there's a lot of inflation coming down the road,

Lex Fridman (21:19.120)

and we think about, well, a lot more systems

Sergey Nazarov (21:24.120)

might be failing soon,

Lex Fridman (21:25.440)

and they might be highlighting these types of problems

Sergey Nazarov (21:28.280)

that were there for, or as a result of the type of control

Lex Fridman (21:32.240)

that you see in Robinhood,

Lex Fridman (21:34.640)

and people are more and more concerned

Lex Fridman (21:37.240)

about both transparency and control,

Lex Fridman (21:39.960)

and they're looking for yield to combat inflation.

Lex Fridman (21:43.040)

I think that's what DeFi is about in a practical sense.

Sergey Nazarov (21:46.780)

It is this clarity about your risk.

Lex Fridman (21:48.880)

It is control over your assets.

Lex Fridman (21:51.360)

And amazingly, at the same time

Lex Fridman (21:53.620)

as having those two unbelievably useful properties,

Sergey Nazarov (21:56.800)

it is actually superior yield,

Lex Fridman (21:59.240)

which just leads me to the very obvious conclusion

Sergey Nazarov (22:03.060)

that the only reason DeFi is more used

Lex Fridman (22:05.920)

is because more people don't know about it.

Lex Fridman (22:08.260)

And by virtue of this long kind of explanation

Lex Fridman (22:12.040)

here and elsewhere, more people will know about it.

Lex Fridman (22:14.920)

And it's just such an obviously superior solution

Lex Fridman (22:17.720)

that I haven't heard a single explanation as to why.

Sergey Nazarov (22:20.960)

No, no, don't earn 8% and take less risk

Lex Fridman (22:24.160)

and have more transparency with your assets.

Sergey Nazarov (22:27.560)

Earn 7% less, take more risk,

Lex Fridman (22:29.800)

and give people the ability to change the rules on you

Sergey Nazarov (22:32.640)

at their discretion, go do that.

Lex Fridman (22:36.200)

Who's gonna do that?

Lex Fridman (22:37.240)

And in general, on the first two of transparency and control,

Lex Fridman (22:40.440)

first of all, I do think, maybe you can correct me,

Lex Fridman (22:43.080)

but from my perspective, they're deeply tied together

Lex Fridman (22:47.800)

in the sense that transparency gives control.

Sergey Nazarov (22:50.800)

Transparency creates accountability,

Lex Fridman (22:52.880)

and there's this kind of game being played,

Sergey Nazarov (22:55.440)

game theoretic game, where if I know,

Lex Fridman (22:58.320)

if you know I'm gonna discover your deviation,

Sergey Nazarov (23:00.640)

you're not gonna deviate.

Lex Fridman (23:02.280)

Yes, this could be a whole nother conversation,

Lex Fridman (23:04.800)

but just as a small aside,

Lex Fridman (23:06.600)

on the social network side of things,

Sergey Nazarov (23:08.600)

which I've been thinking deeply about in the past year or so,

Lex Fridman (23:13.480)

of how to do it right there, how to fix our social media.

Lex Fridman (23:18.360)

And I tend to believe that human beings,

Lex Fridman (23:22.820)

if they're given clear transparency

Sergey Nazarov (23:25.240)

about which data is being stored, how it's being used,

Lex Fridman (23:28.160)

where it's being moved about,

Sergey Nazarov (23:29.780)

just all a clear, simple transparency

Lex Fridman (23:32.840)

of how their data is being used,

Lex Fridman (23:36.420)

and them having the control at the very minimal level

Lex Fridman (23:40.720)

of being able to participate or to walk away,

Lex Fridman (23:43.840)

and walk away means delete everything

Lex Fridman (23:45.920)

you've ever known about me.

Sergey Nazarov (23:48.640)

That will create a much, much better world.

Lex Fridman (23:51.960)

That currently there's a complete lack of transparency

Sergey Nazarov (23:54.480)

on social media, how the data is being used

Lex Fridman (23:56.740)

for your own protection.

Sergey Nazarov (23:57.580)

I mean, there's a lot of parallels

Lex Fridman (23:58.520)

to the central bank situation,

Lex Fridman (24:00.480)

and there's not a control element

Lex Fridman (24:02.640)

of being able to walk away.

Sergey Nazarov (24:04.080)

Like being able to delete all your data,

Lex Fridman (24:06.360)

delete your account on Facebook is very difficult.

Sergey Nazarov (24:09.420)

It doesn't take a single click,

Lex Fridman (24:11.600)

which I think is what it should take.

Sergey Nazarov (24:12.920)

There should be a big red button that says,

Lex Fridman (24:15.020)

delete everything you've ever known about me,

Sergey Nazarov (24:17.400)

or like forget me.

Lex Fridman (24:19.240)

So I think that coupled together can create

Sergey Nazarov (24:21.700)

a very different kind of world and create

Lex Fridman (24:24.880)

an incentivization that will lead to like progress

Lex Fridman (24:29.920)

and innovation and just like a much better social network

Lex Fridman (24:32.680)

and a really good business for the future social networks.

Lex Fridman (24:37.800)

But so I tend to see like control as naturally

Lex Fridman (24:43.440)

being a sort of an outgrowth from the transparency.

Sergey Nazarov (24:47.680)

It should all start at the transparency,

Lex Fridman (24:49.520)

which is why the smart contract formulation is fascinating.

Sergey Nazarov (24:54.000)

Because like you're formalizing in a simple, clear way,

Lex Fridman (24:59.160)

any agreements that you're participating in.

Lex Fridman (25:01.480)

And as a side comment also, what's really inspiring to me

Lex Fridman (25:05.640)

is that I think there's a greater,

Sergey Nazarov (25:07.760)

I don't know if this is always the case,

Lex Fridman (25:09.720)

but it seems like from having talked to people

Sergey Nazarov (25:12.480)

on the psychological element,

Lex Fridman (25:14.600)

there's a hunger amongst people for transparency

Lex Fridman (25:21.160)

and for control.

Lex Fridman (25:23.240)

Like transparency, another word for that is authenticity.

Sergey Nazarov (25:26.200)

If you look at the kind of stuff that people hunger for now,

Lex Fridman (25:29.520)

they want to know the reality of who you are

Sergey Nazarov (25:32.920)

as an individual.

Lex Fridman (25:33.760)

So that means you can create businesses,

Sergey Nazarov (25:35.840)

you can create tools that are built on authenticity,

Lex Fridman (25:39.960)

a transparency.

Lex Fridman (25:41.320)

And then the same, I'm inspired by the intelligence

Lex Fridman (25:45.880)

of people, if you give them control,

Sergey Nazarov (25:48.080)

if you give them power, that they would make good choices.

Lex Fridman (25:52.760)

That's really exciting.

Sergey Nazarov (25:54.040)

Of course, not everybody, but that means that

Lex Fridman (25:56.480)

decentralized power can create effective systems.

Lex Fridman (26:01.680)

So couple that, there's a hunger for transparency

Lex Fridman (26:03.840)

so we can move to a world where everyone's being

Sergey Nazarov (26:06.400)

just like real, conveying their genuine human nature.

Lex Fridman (26:10.920)

And people are sufficiently intelligent

Sergey Nazarov (26:14.160)

that if they're given power

Lex Fridman (26:16.120)

in a distributed mass scale sense,

Sergey Nazarov (26:18.800)

that we're going to build a better world through that,

Lex Fridman (26:21.440)

as opposed to centralized supervised control

Sergey Nazarov (26:24.160)

or only a small percent of the population

Lex Fridman (26:26.600)

know what the hell they're doing.

Sergey Nazarov (26:27.600)

Everybody else is clueless sheep.

Lex Fridman (26:30.880)

So those two coupled together is really to me inspiring.

Sergey Nazarov (26:35.440)

Just to really quickly comment on this stuff

Lex Fridman (26:36.880)

that you just said, which I think is super,

Sergey Nazarov (26:38.480)

super, super fascinating.

Lex Fridman (26:40.440)

I think that's all exactly right.

Sergey Nazarov (26:42.760)

I think everything that you said is right.

Lex Fridman (26:44.720)

And I think it's actually going to be the same

Sergey Nazarov (26:46.080)

for social media and banking and every other type

Lex Fridman (26:47.960)

of contract, is that all of those systems

Sergey Nazarov (26:51.160)

that house people's value for them

Lex Fridman (26:53.400)

and take control of either their social media value

Sergey Nazarov (26:56.760)

or their financial value or whatever for them,

Lex Fridman (27:00.120)

all of that is going to be made available to people

Sergey Nazarov (27:02.480)

in like this autonomous piece of code

Lex Fridman (27:05.200)

that does the same thing

Sergey Nazarov (27:06.480)

that the centralized entity used to do.

Lex Fridman (27:08.800)

So they get all the features,

Lex Fridman (27:10.760)

but the autonomous piece of code gives them the ability

Lex Fridman (27:14.360)

to have control while getting all the features, right?

Lex Fridman (27:17.720)

So banks give you features,

Lex Fridman (27:19.840)

social media sites give you features,

Sergey Nazarov (27:22.520)

whatever other system that you use online

Lex Fridman (27:24.480)

gives you features, and then it takes your data

Lex Fridman (27:27.120)

and it takes control of your assets from you

Lex Fridman (27:29.720)

in return for those features, right?

Sergey Nazarov (27:32.240)

I think the whole big difference here,

Lex Fridman (27:34.520)

partly in line with the definition of smart contracts

Lex Fridman (27:37.040)

and its evolution is that there's this,

Lex Fridman (27:39.200)

now there's this autonomous piece of code

Sergey Nazarov (27:41.960)

that's giving you all those features

Lex Fridman (27:44.440)

without requiring the ownership and lock in and control

Lex Fridman (27:49.440)

and unilateral kind of ownership of your data

Lex Fridman (27:54.080)

or your value or whatever it is that you're giving it, right?

Lex Fridman (27:58.800)

And I think what this will lead to fundamentally

Lex Fridman (28:02.040)

is just more of a free market dynamic

Sergey Nazarov (28:04.760)

among how people make,

Lex Fridman (28:07.120)

I think with the social media folks,

Sergey Nazarov (28:08.840)

you should just make some kind of law or something

Lex Fridman (28:11.720)

where you can just export all your data from them,

Sergey Nazarov (28:14.240)

everyone should be able to get their data exported

Lex Fridman (28:16.960)

by another application,

Lex Fridman (28:18.680)

and then the network effect of all these social media sites

Lex Fridman (28:21.520)

will kind of crumble

Sergey Nazarov (28:22.360)

because people will just combine your Twitter data

Lex Fridman (28:24.840)

with your Facebook data, with everything else

Sergey Nazarov (28:27.000)

into an application that you control,

Lex Fridman (28:29.040)

and there'll just be thousands of different interfaces

Sergey Nazarov (28:31.800)

competing for how to consume all the social media data

Lex Fridman (28:34.680)

because it isn't locked in

Sergey Nazarov (28:35.960)

in one centralized actor's control.

Lex Fridman (28:38.400)

And so this is just the recurring pattern

Sergey Nazarov (28:40.880)

of what I think all of this will do

Lex Fridman (28:42.600)

is it'll give people, it gives people a better deal, right?

Sergey Nazarov (28:46.000)

It gives them features without ownership of data,

Lex Fridman (28:49.000)

without ownership of value,

Lex Fridman (28:50.840)

and that's really the difference.

Lex Fridman (28:53.640)

So I think this is a good place

Sergey Nazarov (28:54.920)

to talk about smart contracts then.

Lex Fridman (28:56.560)

Can you tell me the history of smart contracts

Lex Fridman (28:58.920)

and the basic sort of definitions of what is it?

Lex Fridman (29:02.680)

Sure, so I think smart contracts as a definition

Sergey Nazarov (29:05.880)

has actually gone through some kind of changes

Lex Fridman (29:08.240)

or small evolution.

Sergey Nazarov (29:10.000)

Initially, I think it was actually a conception

Lex Fridman (29:12.240)

of a digital agreement that was tamper proof

Lex Fridman (29:14.920)

and could know things about the world, right?

Lex Fridman (29:17.120)

So it could get proof

Lex Fridman (29:18.320)

and it could define that something happened

Lex Fridman (29:20.280)

and it could conclude an outcome

Lex Fridman (29:22.520)

and release payment or do something else.

Lex Fridman (29:24.160)

That's actually the definition of smart contracts

Sergey Nazarov (29:26.360)

that I began working in this industry with

Lex Fridman (29:28.440)

seven or eight years ago

Sergey Nazarov (29:29.560)

when I started making smart contracts.

Lex Fridman (29:31.520)

That is the conception that I had of a smart contract.

Lex Fridman (29:34.920)

Then what happened was that was really hard to do, right?

Lex Fridman (29:38.920)

Building that type of tamper proof digital agreement

Sergey Nazarov (29:41.240)

that could also know things about the real world

Lex Fridman (29:43.680)

and release payments back to people about those events

Sergey Nazarov (29:47.240)

that were codified in this tamper proof format

Lex Fridman (29:49.560)

was actually a very tall order.

Sergey Nazarov (29:51.440)

Turns out it's consistent of three parts.

Lex Fridman (29:53.080)

It's consisting of the contract,

Sergey Nazarov (29:54.600)

the proof about what happened

Lex Fridman (29:55.760)

and the release of value.

Sergey Nazarov (29:58.440)

The way things have evolved so far

Lex Fridman (2:00:01.120)

that Bitcoin is very widely adopted

Lex Fridman (2:00:03.440)

and driving the adoption of our industry in many ways.

Lex Fridman (2:00:07.240)

So I think it's very difficult for people to say

Sergey Nazarov (2:00:08.920)

that Bitcoin maximalists don't have something

Lex Fridman (2:00:12.800)

that they can latch onto and say,

Sergey Nazarov (2:00:14.040)

hey, there's something very real here.

Lex Fridman (2:00:16.280)

I think there's been decisions made

Sergey Nazarov (2:00:18.400)

by the Bitcoin community

Lex Fridman (2:00:19.920)

and the people who made the Bitcoin protocol

Sergey Nazarov (2:00:21.800)

to focus it on Bitcoin

Lex Fridman (2:00:24.360)

and to focus it on the kind of storing

Sergey Nazarov (2:00:28.120)

of the ledger of Bitcoin

Lex Fridman (2:00:29.680)

and the information about Bitcoin

Lex Fridman (2:00:31.200)

and the transaction of Bitcoin

Lex Fridman (2:00:32.440)

and to focus on securing that.

Lex Fridman (2:00:34.800)

And I understand why that decision was made

Lex Fridman (2:00:37.480)

to a certain degree, right?

Sergey Nazarov (2:00:38.480)

It was about focus.

Lex Fridman (2:00:39.880)

It was about getting something worthwhile right

Sergey Nazarov (2:00:43.000)

without adding additional features and additional risk.

Lex Fridman (2:00:46.680)

And that decision is a decision that was made

Lex Fridman (2:00:49.880)

and has kind of the benefits of focus

Lex Fridman (2:00:53.680)

and the benefits of a certain amount of security

Lex Fridman (2:00:57.360)

and a certain amount of guarantees around Bitcoin

Lex Fridman (2:01:01.040)

and what that is and the value of that.

Lex Fridman (2:01:04.280)

And then it has certain limitations

Lex Fridman (2:01:07.680)

as a consequence of doing less

Sergey Nazarov (2:01:10.760)

or having the system hold data

Lex Fridman (2:01:12.360)

that isn't related to Bitcoin

Sergey Nazarov (2:01:13.600)

or not having the system hold contractual outcomes

Lex Fridman (2:01:17.800)

or smart contract code.

Lex Fridman (2:01:19.840)

So I think it's just kind of a decision, right?

Lex Fridman (2:01:21.960)

And I understand why they're excited

Lex Fridman (2:01:24.600)

and I'm very excited.

Lex Fridman (2:01:25.480)

I started in this industry going to Bitcoin meetups

Lex Fridman (2:01:28.240)

and I met a lot of fantastic people,

Lex Fridman (2:01:30.200)

libertarian people that wanted

Sergey Nazarov (2:01:32.800)

to see the world work differently

Lex Fridman (2:01:34.400)

and shared a lot of my beliefs

Lex Fridman (2:01:35.720)

and a lot of my points of view.

Lex Fridman (2:01:37.560)

And so anyone who's been in the industry

Sergey Nazarov (2:01:40.000)

as long as I have has had to come

Lex Fridman (2:01:44.120)

from the Bitcoin ecosystem

Sergey Nazarov (2:01:45.280)

by virtue of kind of starting out that early.

Lex Fridman (2:01:48.200)

So I have an unbelievable amount of respect

Lex Fridman (2:01:50.640)

and admiration and gratitude for Bitcoin

Lex Fridman (2:01:55.000)

and that it exists and everything that it's done

Lex Fridman (2:01:56.560)

and that it birthed this industry.

Lex Fridman (2:01:58.080)

There's absolutely no doubt about that.

Sergey Nazarov (2:02:01.040)

At the same time, whatever design decisions people make

Lex Fridman (2:02:04.440)

are the design decisions they make, right?

Lex Fridman (2:02:07.000)

And so if you've made a design decision

Lex Fridman (2:02:08.960)

that this ledger and this thing will be about Bitcoin,

Sergey Nazarov (2:02:11.880)

it won't be about colored coins,

Lex Fridman (2:02:13.880)

it won't be about op return at 80 bytes,

Sergey Nazarov (2:02:16.480)

it won't be about these other kind of nuances

Lex Fridman (2:02:20.480)

that you don't want this to be about, then that's fine.

Sergey Nazarov (2:02:23.680)

That's fine and that's a logical decision

Lex Fridman (2:02:26.720)

and it's called focus.

Lex Fridman (2:02:28.120)

And focus has a lot of value

Lex Fridman (2:02:30.120)

and a lot of great technology products

Sergey Nazarov (2:02:32.680)

have focused on something and done that.

Lex Fridman (2:02:36.520)

And then there's a lot of smart people around Bitcoin

Sergey Nazarov (2:02:39.040)

building kind of additional systems

Lex Fridman (2:02:41.800)

that anchor their security within Bitcoin.

Lex Fridman (2:02:44.200)

And I think that's an interesting approach

Lex Fridman (2:02:45.920)

that could bear fruit.

Sergey Nazarov (2:02:48.360)

I think it'll eventually require an interaction

Lex Fridman (2:02:51.080)

with a Bitcoin protocol in more advanced ways.

Lex Fridman (2:02:54.280)

And then there will be another question of,

Lex Fridman (2:02:56.160)

what is the design decision for Bitcoin?

Lex Fridman (2:02:58.960)

Is it that Bitcoin will be just about the Bitcoin ledger?

Lex Fridman (2:03:02.520)

Or does Bitcoin want to evolve

Sergey Nazarov (2:03:05.200)

into an anchor for all these other systems

Lex Fridman (2:03:10.560)

and maybe create additional data store,

Sergey Nazarov (2:03:13.200)

kind of more data on chain,

Lex Fridman (2:03:15.440)

on the Bitcoin blockchain related to that?

Lex Fridman (2:03:18.240)

So I'm excited to see how that evolves,

Lex Fridman (2:03:20.520)

but until then kind of results speak for themselves

Lex Fridman (2:03:23.520)

and the results that Bitcoin has achieved

Lex Fridman (2:03:25.760)

for our industry and for itself

Sergey Nazarov (2:03:27.120)

as kind of the dominant cryptocurrency

Lex Fridman (2:03:30.200)

and the conception of our industry

Sergey Nazarov (2:03:31.880)

that people interact with first

Lex Fridman (2:03:33.720)

is obviously very important and something

Sergey Nazarov (2:03:36.280)

that I think really everybody in our industry

Lex Fridman (2:03:39.080)

is grateful for, right?

Lex Fridman (2:03:40.080)

Because without Bitcoin, where would our industry be?

Lex Fridman (2:03:43.880)

And that's obviously something that we can't forget.

Lex Fridman (2:03:46.840)

What are your thoughts about Ethereum

Lex Fridman (2:03:49.400)

in the chain link distributed Oracle network world?

Lex Fridman (2:03:55.280)

Is it competition?

Lex Fridman (2:03:57.240)

Is it collaboration?

Lex Fridman (2:03:59.320)

Is it complimentary technology?

Lex Fridman (2:04:02.120)

What do you think about Ethereum?

Lex Fridman (2:04:03.400)

How much do you think about Ethereum?

Lex Fridman (2:04:05.200)

What role does it have?

Sergey Nazarov (2:04:07.040)

Yeah, I think about a lot.

Lex Fridman (2:04:08.400)

I think we're completely complimentary.

Lex Fridman (2:04:11.040)

So there's no competitive dynamics in my opinion.

Lex Fridman (2:04:13.840)

We are completely collaborative and complimentary

Sergey Nazarov (2:04:16.320)

with Ethereum and all other blockchains

Lex Fridman (2:04:18.720)

and all other layer twos that operate a contract, right?

Lex Fridman (2:04:22.960)

So we do not seek to operate a smart contract.

Lex Fridman (2:04:26.120)

We seek to augment and enable smart contracts

Sergey Nazarov (2:04:29.800)

to go further in what they're able to do.

Lex Fridman (2:04:32.840)

In fact, Oracle networks have some value,

Lex Fridman (2:04:35.960)

but they don't have nearly as much value in what they do

Lex Fridman (2:04:38.360)

if there isn't a mission critical system

Lex Fridman (2:04:40.480)

like a smart contract that needs their data, right?

Lex Fridman (2:04:43.320)

So we've made our own explicit design decisions

Sergey Nazarov (2:04:46.000)

in our own and created our own focus

Lex Fridman (2:04:48.560)

around guaranteeing that smart contracts can go further.

Lex Fridman (2:04:53.760)

We've already done that, right?

Lex Fridman (2:04:54.840)

Decentralized finance, the rate at which we put data

Sergey Nazarov (2:04:57.760)

is to a degree the rate at which certain

Lex Fridman (2:04:59.280)

decentralized financial markets grow.

Lex Fridman (2:05:01.360)

And as we put more data, we see more

Lex Fridman (2:05:03.160)

financial products go live, gaming, we provide VRF.

Lex Fridman (2:05:05.920)

So we have this kind of focus and it's a very useful

Lex Fridman (2:05:08.880)

and valuable kind of, valuable for our industry focus.

Sergey Nazarov (2:05:13.680)

At the end of the day, I think that smart contract platforms

Lex Fridman (2:05:18.440)

like Ethereum made a different set of design decisions

Sergey Nazarov (2:05:22.400)

from Bitcoin and others.

Lex Fridman (2:05:23.440)

And they focused on creating the smart contract capability

Lex Fridman (2:05:27.520)

and they kind of wanted that functionality to exist.

Lex Fridman (2:05:32.680)

And I think since then, there's been a number of people

Sergey Nazarov (2:05:34.360)

that try to improve on that or try to make variants of that.

Lex Fridman (2:05:37.920)

From our point of view, we want to support smart contracts

Sergey Nazarov (2:05:41.840)

in all of their variations and in all of their use cases.

Lex Fridman (2:05:46.360)

So one of the things that I personally like about Chainlink

Sergey Nazarov (2:05:49.200)

is their ability or Chainlink's ability

Lex Fridman (2:05:52.400)

and the Chainlink network's ability to be useful

Sergey Nazarov (2:05:54.320)

to many different chains and across many different use cases.

Lex Fridman (2:05:58.400)

I'm personally a fan of Ethereum.

Sergey Nazarov (2:06:00.400)

Ethereum has done a huge amount for our industry as well.

Lex Fridman (2:06:03.200)

Ethereum took us from a world where it literally took months

Sergey Nazarov (2:06:06.400)

to make a new smart contract by being forced

Lex Fridman (2:06:08.720)

to code it into a protocol.

Sergey Nazarov (2:06:10.960)

You had to go to the protocol developers

Lex Fridman (2:06:12.560)

and you had to say, hey, I need a DEX

Sergey Nazarov (2:06:15.360)

or I need some kind of smart contract.

Lex Fridman (2:06:17.360)

Put it in the protocol itself.

Sergey Nazarov (2:06:19.320)

Put it in the actual blockchain mining

Lex Fridman (2:06:21.880)

and kind of block generation, transaction generation protocol.

Sergey Nazarov (2:06:25.360)

That would take months or sometimes even over a year.

Lex Fridman (2:06:27.640)

That was a horrible experience

Lex Fridman (2:06:29.040)

and obviously very few people wanted to participate in that

Lex Fridman (2:06:31.600)

and so very few people made smart contracts,

Lex Fridman (2:06:33.760)

which I was not a fan of, right?

Lex Fridman (2:06:35.880)

And then Ethereum came along

Lex Fridman (2:06:37.160)

and really did a lot of innovative things

Lex Fridman (2:06:39.680)

and introduced this approach to scriptable smart contracts

Sergey Nazarov (2:06:43.360)

where you could script all of these different conditions.

Lex Fridman (2:06:46.960)

And I found that fascinating before Ethereum.

Sergey Nazarov (2:06:49.720)

I found that fascinating once Ethereum

Lex Fridman (2:06:51.680)

arrived, I found it fascinating after Ethereum launched

Lex Fridman (2:06:54.400)

and I still find it fascinating.

Lex Fridman (2:06:55.680)

And I'm also very grateful to Vitalik

Lex Fridman (2:06:58.640)

and the Ethereum community and all the core developers there

Lex Fridman (2:07:01.320)

for taking our industry a step further.

Lex Fridman (2:07:03.960)

So I think they absolutely deserve a huge amount of credit

Lex Fridman (2:07:06.640)

for taking our industry from it takes months

Sergey Nazarov (2:07:10.080)

to make a really small smart contract

Lex Fridman (2:07:12.160)

to it takes weeks to make a relatively secure,

Sergey Nazarov (2:07:15.920)

relatively advanced piece of on chain code

Lex Fridman (2:07:18.240)

that anybody can script and people can do audits on

Lex Fridman (2:07:21.560)

and that's an unbelievable leap forward for our industry

Lex Fridman (2:07:25.560)

and I'm genuinely grateful to them for that.

Sergey Nazarov (2:07:29.200)

I think the next step in line with our body of work

Lex Fridman (2:07:32.160)

is how does that scriptable on chain code

Sergey Nazarov (2:07:36.400)

become more advanced in its interaction

Lex Fridman (2:07:40.080)

with all of the systems and events in the real world,

Sergey Nazarov (2:07:44.360)

which is in my opinion, the final missing piece

Lex Fridman (2:07:47.080)

of the puzzle, right?

Lex Fridman (2:07:48.320)

So my body of work, the body of work that I'm involved in

Lex Fridman (2:07:51.160)

would not be where it is right now

Sergey Nazarov (2:07:52.520)

without Bitcoin by any measure.

Lex Fridman (2:07:54.560)

It wouldn't even be where it is now without Ethereum

Lex Fridman (2:07:57.080)

and the growth in smart contract development

Lex Fridman (2:07:59.640)

that they've created.

Lex Fridman (2:08:01.320)

And now what I think is gonna happen next

Lex Fridman (2:08:04.760)

is there'll be a lot of different smart contract platforms,

Sergey Nazarov (2:08:07.520)

a lot of different layer twos,

Lex Fridman (2:08:09.240)

some of them will be private for enterprise,

Sergey Nazarov (2:08:10.960)

some of them will be public,

Lex Fridman (2:08:12.440)

there'll be some public winners in certain geographies

Sergey Nazarov (2:08:15.080)

for maybe regulation reasons, maybe other reasons,

Lex Fridman (2:08:18.000)

there'll be other public winners, the larger internet,

Lex Fridman (2:08:21.840)

and there'll be a number of different people

Lex Fridman (2:08:23.480)

building smart contracts in different languages.

Sergey Nazarov (2:08:26.480)

We are excited and I am excited

Lex Fridman (2:08:29.160)

and the Chainlink community is excited

Lex Fridman (2:08:30.840)

and basically there's a lot of,

Lex Fridman (2:08:34.960)

I mean, for lack of a better word, excitement

Sergey Nazarov (2:08:36.960)

in seeing our industry graduate

Lex Fridman (2:08:39.960)

to providing more use cases,

Lex Fridman (2:08:43.840)

more usable hybrid smart contracts, right?

Lex Fridman (2:08:46.720)

Because once again, it's absolutely amazing

Sergey Nazarov (2:08:49.200)

that Bitcoin created non governmental fiat money.

Lex Fridman (2:08:51.680)

It's an unbelievable innovation

Lex Fridman (2:08:53.280)

and invented decentralized infrastructure

Lex Fridman (2:08:55.760)

and birthed our industry.

Sergey Nazarov (2:08:57.440)

It's an unbelievably great achievement,

Lex Fridman (2:09:00.280)

an amazing achievement that we now have

Sergey Nazarov (2:09:01.960)

scriptable smart contracts through something like Ethereum.

Lex Fridman (2:09:04.600)

Once again, monumental achievement in my opinion.

Sergey Nazarov (2:09:08.560)

Once again, we still need to look to the future.

Lex Fridman (2:09:10.720)

We need to look to how do we take

Sergey Nazarov (2:09:13.440)

the decentralized infrastructure concepts

Lex Fridman (2:09:16.040)

that Bitcoin initially put forward,

Sergey Nazarov (2:09:17.840)

that Ethereum then improved upon

Lex Fridman (2:09:19.600)

and created into these scriptable smart contract formats,

Lex Fridman (2:09:23.320)

and how do we expand that into the world

Lex Fridman (2:09:25.960)

of real world outcomes to change

Sergey Nazarov (2:09:28.640)

the global financial industry, the global trade industry,

Lex Fridman (2:09:31.280)

the global data marketplace industry,

Lex Fridman (2:09:34.360)

and many other global industries.

Lex Fridman (2:09:36.160)

You mentioned results speak for themselves

Lex Fridman (2:09:38.240)

and how design decisions have consequences.

Lex Fridman (2:09:43.000)

The Chainlink community have come up

Sergey Nazarov (2:09:44.880)

with a lot of brilliant designs.

Lex Fridman (2:09:48.040)

So how do you think through the design choices

Sergey Nazarov (2:09:51.640)

that you're facing where you can't predict the future,

Lex Fridman (2:09:55.440)

but you're trying to create a better future?

Sergey Nazarov (2:09:58.600)

Is there something low level introspective advice

Lex Fridman (2:10:05.080)

that you can give or describe

Sergey Nazarov (2:10:06.680)

as to how you think through those decisions

Lex Fridman (2:10:09.040)

or high level how you think about those decisions?

Sergey Nazarov (2:10:12.040)

Sure, absolutely.

Lex Fridman (2:10:14.040)

I think that's a great question.

Lex Fridman (2:10:16.160)

And I think that actually gets to the core

Lex Fridman (2:10:18.360)

of what the Chainlink network is supposed to achieve.

Sergey Nazarov (2:10:22.160)

We are supposed to achieve a maximally flexible system.

Lex Fridman (2:10:27.400)

So once again, this is the big difference

Sergey Nazarov (2:10:28.960)

between Chainlink and Oracle networks in general

Lex Fridman (2:10:31.600)

and blockchains in my opinion.

Lex Fridman (2:10:33.560)

Blockchains do not seek to be maximally flexible, right?

Lex Fridman (2:10:36.360)

They say, here's my block size,

Sergey Nazarov (2:10:39.320)

here's the transaction types you can put in those blocks.

Lex Fridman (2:10:43.920)

Here's the contract language I have.

Lex Fridman (2:10:46.160)

Here's kind of my blockchain system, right?

Lex Fridman (2:10:49.840)

Here's the fee structure for those blocks.

Sergey Nazarov (2:10:51.640)

They're gonna keep getting kind of composed,

Lex Fridman (2:10:54.760)

transactions are gonna get put into blocks,

Lex Fridman (2:10:56.440)

blocks will get connected and it'll continue, right?

Lex Fridman (2:10:58.360)

And that's a very focused type of system.

Lex Fridman (2:11:00.400)

And that's great.

Lex Fridman (2:11:01.240)

And that makes sense because it's focused

Sergey Nazarov (2:11:03.040)

on creating security for that category

Lex Fridman (2:11:05.880)

of on chain activity, which is once again,

Sergey Nazarov (2:11:08.320)

a critical, critical part of building

Lex Fridman (2:11:10.280)

a highly transparent system and something

Sergey Nazarov (2:11:12.280)

that Chainlink enables and doesn't compete with

Lex Fridman (2:11:14.920)

and just enables to do more.

Sergey Nazarov (2:11:17.360)

Oracle networks, conversely, have to interact

Lex Fridman (2:11:21.360)

with all the world's data and provide all the services

Lex Fridman (2:11:25.520)

that blockchains don't provide, right?

Lex Fridman (2:11:27.200)

So there's kind of a spectrum.

Sergey Nazarov (2:11:28.520)

On one end of the spectrum, you have blockchains

Lex Fridman (2:11:31.000)

that are highly secure, highly reliable,

Sergey Nazarov (2:11:33.360)

highly tamper proof, highly transparent,

Lex Fridman (2:11:36.600)

but are not very feature rich.

Sergey Nazarov (2:11:38.480)

For example, they cannot talk to an API.

Lex Fridman (2:11:41.000)

Many of them can't generate randomness.

Sergey Nazarov (2:11:42.520)

They cannot do some kind of privacy preserving computation.

Lex Fridman (2:11:46.160)

So they're very secure.

Lex Fridman (2:11:47.440)

And there are these kind of data structures

Lex Fridman (2:11:50.200)

and smart contract platforms to hold on chain code

Sergey Nazarov (2:11:53.880)

that can define conditions, receive value,

Lex Fridman (2:11:57.280)

pay value back out under conditions

Lex Fridman (2:11:59.280)

and create transparency around all that,

Lex Fridman (2:12:01.000)

which makes perfect sense.

Lex Fridman (2:12:03.040)

And then there's oracles and oracle networks.

Lex Fridman (2:12:06.720)

That is all the world's data, right?

Sergey Nazarov (2:12:08.560)

We're talking about taking all the world's data

Lex Fridman (2:12:11.320)

and making it consumable for all the world's use cases

Sergey Nazarov (2:12:14.840)

that have trust issues.

Lex Fridman (2:12:16.520)

So the amount of variability there is absolutely massive,

Lex Fridman (2:12:19.400)

right?

Lex Fridman (2:12:20.240)

It's like the decentralized oracle network

Lex Fridman (2:12:22.560)

and the conditions that that decentralized oracle network

Lex Fridman (2:12:25.040)

needs to meet is gonna vary very widely

Sergey Nazarov (2:12:28.560)

from an insurance contract to a lending contract

Lex Fridman (2:12:32.280)

to an ad network contract to the data sales contract

Sergey Nazarov (2:12:36.680)

that we discussed to any number of other smart contracts.

Lex Fridman (2:12:40.680)

So really the ability of a decentralized oracle network

Sergey Nazarov (2:12:44.600)

to flexibly address all of those requirements

Lex Fridman (2:12:47.800)

is what's necessary.

Lex Fridman (2:12:49.840)

So flexibility is the goal,

Lex Fridman (2:12:51.480)

whereas with on chain like Bitcoin,

Sergey Nazarov (2:12:55.280)

flexibility is the enemy in the sense

Lex Fridman (2:12:58.280)

that you want security, you want the focus there.

Lex Fridman (2:13:03.360)

And in that kind of world,

Lex Fridman (2:13:05.480)

design decisions have huge consequences.

Lex Fridman (2:13:08.040)

And then if you look at the distributed oracle network side,

Lex Fridman (2:13:12.000)

you want to remove the restrictions of design choices.

Sergey Nazarov (2:13:16.200)

You want to provide maximal flexibility then.

Lex Fridman (2:13:19.000)

So it's a completely separate kind of a design framework.

Lex Fridman (2:13:23.720)

It's a slightly different problem, right?

Lex Fridman (2:13:25.160)

Because we're not trying to define transaction types

Sergey Nazarov (2:13:28.200)

fitting into blocks on a certain timeline

Lex Fridman (2:13:30.440)

of those blocks being generated.

Sergey Nazarov (2:13:32.120)

We're trying to say, hey, there's this world of services

Lex Fridman (2:13:35.120)

or this world of data that's not very deterministic,

Lex Fridman (2:13:37.640)

but it's unbelievably useful

Lex Fridman (2:13:39.200)

to these smart contracts over here.

Lex Fridman (2:13:40.800)

And actually they need it to even exist.

Lex Fridman (2:13:42.920)

And we really want them to exist because once they exist,

Sergey Nazarov (2:13:45.440)

it's gonna completely redefine

Lex Fridman (2:13:46.640)

what our whole industry is known for, right?

Lex Fridman (2:13:48.640)

And defined NFTs are not even the tip of the iceberg.

Lex Fridman (2:13:51.520)

They're like the snow coming off the top of the iceberg.

Lex Fridman (2:13:54.320)

And so our goal is to create a framework

Lex Fridman (2:13:57.320)

and an infrastructure and a software

Sergey Nazarov (2:14:00.000)

that allows people to compose

Lex Fridman (2:14:03.240)

decentralized oracle networks, right?

Lex Fridman (2:14:04.960)

So initially you can compose a decentralized oracle network

Lex Fridman (2:14:08.920)

of seven nodes that goes to three data sources

Sergey Nazarov (2:14:11.840)

to trigger your contract worth a million dollars.

Lex Fridman (2:14:14.200)

And that's where you could start.

Lex Fridman (2:14:15.400)

And then let's say your smart contract,

Lex Fridman (2:14:16.840)

your DeFi smart contract goes to a billion dollars.

Lex Fridman (2:14:19.400)

Well, then you need to make some changes, right?

Lex Fridman (2:14:21.440)

You need to go from seven nodes

Sergey Nazarov (2:14:23.000)

to 15 or maybe 31 nodes.

Lex Fridman (2:14:25.680)

And you need to go from three data sources

Sergey Nazarov (2:14:27.680)

to five or seven.

Lex Fridman (2:14:29.040)

And you maybe need to create some kind of

Lex Fridman (2:14:32.960)

what we call circuit breakers and some other checks.

Lex Fridman (2:14:36.000)

And you need to make sure

Sergey Nazarov (2:14:36.920)

that the decentralized oracle network

Lex Fridman (2:14:38.960)

comes to consensus around those checks.

Sergey Nazarov (2:14:40.560)

Because now the centralized oracle network

Lex Fridman (2:14:42.600)

isn't controlling a million dollars,

Sergey Nazarov (2:14:43.760)

it's controlling a billion dollars.

Lex Fridman (2:14:45.240)

And we have decentralized oracle networks

Sergey Nazarov (2:14:47.000)

that control well over a billion dollars,

Lex Fridman (2:14:48.640)

multiple billions of dollars.

Lex Fridman (2:14:50.320)

And we see them growing and getting more advanced

Lex Fridman (2:14:52.240)

data sources and more advanced features.

Lex Fridman (2:14:55.000)

And then if somebody else comes and says,

Lex Fridman (2:14:56.760)

well, I don't really wanna make a DeFi product,

Sergey Nazarov (2:14:59.000)

I wanna make crop insurance.

Lex Fridman (2:15:00.520)

And I have a completely different set of conditions.

Sergey Nazarov (2:15:02.600)

I want this method of consensus

Lex Fridman (2:15:04.360)

and I want data to be aggregated in this way,

Lex Fridman (2:15:06.840)

but not the way that you do

Lex Fridman (2:15:07.840)

for decentralized financial products.

Lex Fridman (2:15:09.920)

I mean, what are we supposed to tell them?

Lex Fridman (2:15:10.960)

We're supposed to tell them, no,

Sergey Nazarov (2:15:12.960)

our decentralized oracle network can't let you do that.

Lex Fridman (2:15:15.600)

And you can go and wait another five years

Sergey Nazarov (2:15:18.680)

until somebody builds it for you.

Lex Fridman (2:15:21.520)

That's not what we wanna do, right?

Lex Fridman (2:15:23.200)

What we wanna do is be able to say,

Lex Fridman (2:15:24.880)

absolutely, here's an example of how somebody else

Sergey Nazarov (2:15:29.040)

made a decentralized oracle network for weather insurance.

Lex Fridman (2:15:34.800)

Here's a template, change that template,

Sergey Nazarov (2:15:37.440)

evolve it to meet your needs.

Lex Fridman (2:15:39.880)

And then someone else comes and says,

Lex Fridman (2:15:41.240)

hey, I have some other use case in gaming, right?

Lex Fridman (2:15:44.760)

I wanna make NFTs related to real world sports events,

Sergey Nazarov (2:15:48.120)

or I wanna do whatever I wanna do

Lex Fridman (2:15:49.400)

with some kind of sports related data.

Sergey Nazarov (2:15:52.480)

Wonderful, here's the framework,

Lex Fridman (2:15:54.600)

here are your risk dynamics,

Sergey Nazarov (2:15:56.640)

here's a collection of node operators,

Lex Fridman (2:15:58.920)

here's a set of preintegrated data sources,

Sergey Nazarov (2:16:02.320)

here's a reputation system to assess

Lex Fridman (2:16:05.320)

the quality of your ensemble of nodes,

Sergey Nazarov (2:16:08.320)

here's a way to scale that up

Lex Fridman (2:16:09.800)

as the value in your contract scales.

Sergey Nazarov (2:16:13.040)

Here's all the tools that you need to build this contract.

Lex Fridman (2:16:17.000)

And what we actually see now as there are multiple types

Sergey Nazarov (2:16:20.600)

of computations and data sources that are provided

Lex Fridman (2:16:23.520)

by different decentralized oracle networks,

Sergey Nazarov (2:16:25.920)

of which there are now hundreds,

Lex Fridman (2:16:27.920)

we now see that a single hybrid smart contract

Sergey Nazarov (2:16:31.680)

might use multiple decentralized oracle networks.

Lex Fridman (2:16:34.480)

So there might be a hybrid smart contract

Sergey Nazarov (2:16:36.520)

that uses a price data, decentralized oracle network,

Lex Fridman (2:16:39.720)

a proof of reserve oracle network,

Sergey Nazarov (2:16:41.720)

a randomness oracle network.

Lex Fridman (2:16:43.920)

And I think we're gonna continue to see

Sergey Nazarov (2:16:45.920)

this dynamic that more and more advanced contracts

Lex Fridman (2:16:49.640)

compose various decentralized oracle networks

Sergey Nazarov (2:16:53.440)

into more advanced use cases.

Lex Fridman (2:16:55.760)

And this is the dynamic that we're focused on enabling.

Lex Fridman (2:17:01.280)

And I think it's actually a very virtuous cycle

Lex Fridman (2:17:03.400)

for everybody because the more of these

Sergey Nazarov (2:17:05.760)

hybrid smart contracts we enable on Ethereum

Lex Fridman (2:17:08.720)

and other blockchains, the more our industry

Sergey Nazarov (2:17:11.800)

provides real world outcomes to the market.

Lex Fridman (2:17:15.520)

To the larger world, which is at the end of the day,

Lex Fridman (2:17:18.280)

what I think everybody in our industry wants.

Lex Fridman (2:17:21.040)

Everybody in our industry wants hybrid smart contracts

Sergey Nazarov (2:17:24.640)

to become the way that global finance works,

Lex Fridman (2:17:28.080)

global trade works, global insurance products work,

Sergey Nazarov (2:17:31.200)

because they will inherently need both a blockchain

Lex Fridman (2:17:34.240)

on which the contract itself lives

Lex Fridman (2:17:36.880)

and an oracle network that powers

Lex Fridman (2:17:39.200)

all of the other interactions, right?

Sergey Nazarov (2:17:41.800)

As a developer, how would you recommend

Lex Fridman (2:17:44.400)

somebody listening to this, but also me,

Sergey Nazarov (2:17:50.200)

to get started with smart contracts

Lex Fridman (2:17:52.880)

and to get started with hybrid smart contracts?

Sergey Nazarov (2:17:57.200)

Well, for hybrid smart contracts,

Lex Fridman (2:17:59.080)

I'm gonna have to do some kind of shameless promotion.

Sergey Nazarov (2:18:01.680)

Please, let me twist your arm.

Lex Fridman (2:18:05.320)

Thank you.

Sergey Nazarov (2:18:06.640)

I think you can go to our YouTube.

Lex Fridman (2:18:08.520)

We have a number of developer tutorials.

Lex Fridman (2:18:11.080)

Chainlink YouTube?

Lex Fridman (2:18:12.160)

Yeah, Chainlink.

Sergey Nazarov (2:18:13.360)

I think if you just search Chainlink on YouTube,

Lex Fridman (2:18:14.880)

you should find it.

Sergey Nazarov (2:18:17.560)

Beyond that, we recently had a hackathon

Lex Fridman (2:18:19.800)

where we had a huge amount of very kind of

Sergey Nazarov (2:18:22.440)

advanced hybrid smart contracts getting built.

Lex Fridman (2:18:25.000)

To elaborate on that, you had a hackathon.

Sergey Nazarov (2:18:28.280)

Is that something that people can follow along

Lex Fridman (2:18:30.560)

like a video or there's web page traces of what happened?

Sergey Nazarov (2:18:35.560)

Or is there a future actual hackathons

Lex Fridman (2:18:37.640)

that people could literally participate in?

Sergey Nazarov (2:18:39.560)

There's plenty of more hackathons coming up.

Lex Fridman (2:18:41.520)

We wanna enable as many developers in web3 and web2

Sergey Nazarov (2:18:44.440)

to build hybrid smart contracts

Lex Fridman (2:18:46.080)

as a way to redefine our industry

Lex Fridman (2:18:47.880)

and kind of make all of these smart contracts come to life.

Lex Fridman (2:18:52.280)

There are definitely gonna be more hackathons.

Lex Fridman (2:18:54.040)

So people should go and preregister or register

Lex Fridman (2:18:56.720)

on a list to get involved in that.

Sergey Nazarov (2:18:58.240)

That's a great resource where we have a lot of speakers

Lex Fridman (2:19:00.240)

and a lot of educational tools.

Sergey Nazarov (2:19:01.440)

They happen over a course of weeks, not days.

Lex Fridman (2:19:04.680)

So there's a long time for people to work on these things

Sergey Nazarov (2:19:07.080)

at the speed that they find comfortable.

Lex Fridman (2:19:09.800)

Two questions.

Sergey Nazarov (2:19:10.640)

One, is there a kind of hello world entry point

Lex Fridman (2:19:14.400)

for hybrid smart contracts?

Lex Fridman (2:19:17.640)

And two, on the hackathon side,

Lex Fridman (2:19:19.640)

what kind of stuff do you see people building at first?

Sergey Nazarov (2:19:22.360)

Just kind of getting their feet wet

Lex Fridman (2:19:25.440)

in terms of the kind of applications that could be enabled.

Sergey Nazarov (2:19:28.880)

I mean, there's unbelievable things

Lex Fridman (2:19:30.480)

that we see people building.

Sergey Nazarov (2:19:32.440)

I think how to get your feet wet,

Lex Fridman (2:19:35.160)

I think the hello world is probably DeFi

Sergey Nazarov (2:19:37.160)

because it's pretty straightforward.

Lex Fridman (2:19:38.520)

And there's a large amount of data sources

Sergey Nazarov (2:19:40.280)

that we already have putting data on chain on test net,

Lex Fridman (2:19:42.800)

which is the test environment in which people would build.

Lex Fridman (2:19:45.360)

So I think DeFi is probably to a certain degree

Lex Fridman (2:19:47.800)

the most exciting for certain people

Lex Fridman (2:19:49.240)

and pretty expansive in terms of the tutorials

Lex Fridman (2:19:54.160)

and the amount of contracts

Sergey Nazarov (2:19:55.360)

to see how people have already built it.

Lex Fridman (2:19:57.760)

I think beyond that,

Sergey Nazarov (2:19:58.600)

we see people building amazing things at these hackathons.

Lex Fridman (2:20:01.040)

In the previous hackathon,

Sergey Nazarov (2:20:02.400)

we saw somebody build a smart contract

Lex Fridman (2:20:04.720)

that allows someone to rent out their Tesla.

Lex Fridman (2:20:09.440)

So it allows the Tesla API to give someone else access

Lex Fridman (2:20:14.680)

and rent out someone's Tesla

Sergey Nazarov (2:20:16.600)

on the basis of a smart contract kind of coordinating payment,

Lex Fridman (2:20:19.880)

which was kind of amazing.

Sergey Nazarov (2:20:22.480)

The more recent hackathon,

Lex Fridman (2:20:23.880)

we saw something called Dbridge,

Sergey Nazarov (2:20:25.600)

which is a cross chain solution that uses Oracle networks

Lex Fridman (2:20:28.400)

to confirm data on different chains.

Lex Fridman (2:20:30.640)

So I think the things that people build

Lex Fridman (2:20:33.880)

will just become expansive and varied

Sergey Nazarov (2:20:36.840)

in ways that I can't even imagine.

Lex Fridman (2:20:40.120)

But I think this recent hackathon saw a huge, huge list

Sergey Nazarov (2:20:44.440)

of different kind of winners in different categories.

Lex Fridman (2:20:48.080)

And there's so many different categories.

Sergey Nazarov (2:20:49.360)

We even have a GovTech category

Lex Fridman (2:20:50.840)

and a whole bunch of things.

Sergey Nazarov (2:20:53.120)

If people wanna see what's possible,

Lex Fridman (2:20:54.640)

they can go look at the winners.

Sergey Nazarov (2:20:55.960)

I think that's probably a good idea.

Lex Fridman (2:20:59.480)

Yeah, that'll be on the side of the hackathon.

Sergey Nazarov (2:21:01.400)

There's a blog related to that,

Lex Fridman (2:21:03.880)

and we're gonna have more of these.

Lex Fridman (2:21:05.400)

And once again, our explicit goal

Lex Fridman (2:21:08.440)

is to take our industry into this world

Sergey Nazarov (2:21:11.560)

of hybrid smart contracts, which just benefits everybody.

Lex Fridman (2:21:14.800)

It makes more on chain activity.

Sergey Nazarov (2:21:16.920)

It helps provide real world value to the average person

Lex Fridman (2:21:21.080)

from all of this infrastructure period.

Lex Fridman (2:21:23.560)

And at the end of the day,

Lex Fridman (2:21:25.040)

I think that it just redefines what our industry is about

Lex Fridman (2:21:28.560)

through use cases, right?

Lex Fridman (2:21:29.560)

Because if you only learn through our industry

Sergey Nazarov (2:21:33.080)

from the point of view of a single use case,

Lex Fridman (2:21:35.040)

like the NFT use case or some other use case,

Sergey Nazarov (2:21:37.640)

that's what our industry is about.

Lex Fridman (2:21:39.680)

And the more of these use cases

Sergey Nazarov (2:21:41.600)

that people can make available to the average person

Lex Fridman (2:21:44.280)

or to the FinTech world or to the insurance world

Sergey Nazarov (2:21:46.680)

or wherever, the faster our industry will not just be

Lex Fridman (2:21:50.720)

about Bitcoins or tokens,

Sergey Nazarov (2:21:52.600)

it will be about changing global finance,

Lex Fridman (2:21:55.160)

changing global insurance, changing global trade.

Lex Fridman (2:21:58.080)

And that's the change in the world

Lex Fridman (2:22:00.360)

that I and a lot of other people in this industry,

Sergey Nazarov (2:22:02.640)

I think, got into this for.

Lex Fridman (2:22:04.680)

Now it's funny, you've mentioned about,

Sergey Nazarov (2:22:06.920)

you've had a lot of kind words to say about Bitcoin

Lex Fridman (2:22:09.440)

and Ethereum as important technology

Sergey Nazarov (2:22:12.400)

that paved the way for the future.

Lex Fridman (2:22:14.440)

And you somehow did not mention

Sergey Nazarov (2:22:16.920)

one of the most profound pieces of technology,

Lex Fridman (2:22:18.760)

which is Dogecoin.

Lex Fridman (2:22:20.400)

What are your thoughts about this particular

Lex Fridman (2:22:24.800)

revolutionary technology?

Lex Fridman (2:22:26.280)

And what are your thoughts about Dogecoin

Lex Fridman (2:22:28.000)

going to the moon, to Mars,

Lex Fridman (2:22:30.120)

and outside of the solar system?

Lex Fridman (2:22:32.520)

I think Dogecoin is a very interesting kind of,

Sergey Nazarov (2:22:36.600)

probably closer to a social experiment than anything else.

Lex Fridman (2:22:40.040)

Isn't everything a social experiment?

Sergey Nazarov (2:22:42.840)

Yeah, I guess that's fair to a degree.

Lex Fridman (2:22:46.360)

I think it's fascinating how that's evolved.

Sergey Nazarov (2:22:49.160)

I think the people that made it

Lex Fridman (2:22:51.320)

with certain goals in mind

Lex Fridman (2:22:53.080)

and then it's kind of taken on a life of its own.

Lex Fridman (2:22:56.080)

I don't fully understand exactly why it's taken on a life

Sergey Nazarov (2:22:59.000)

of its own at this point.

Lex Fridman (2:23:01.040)

I once again, I don't spend too much time

Sergey Nazarov (2:23:03.040)

thinking about different tokens and how they're evolving.

Lex Fridman (2:23:07.080)

I'm much more focused on the launching and...

Sergey Nazarov (2:23:10.720)

The technology around trust and all those kinds of ideas.

Lex Fridman (2:23:15.040)

But I think one of the fascinating things about Dogecoin

Sergey Nazarov (2:23:18.840)

is how technology that leverages social dynamics,

Lex Fridman (2:23:23.840)

that technology's ability to utilize fun and memes to spread.

Sergey Nazarov (2:23:30.240)

I think it's really interesting.

Lex Fridman (2:23:31.800)

I don't think it should be discounted as a...

Sergey Nazarov (2:23:35.280)

I think I tweeted today something

Lex Fridman (2:23:36.960)

about like the fundamental force field of fun.

Sergey Nazarov (2:23:41.600)

That fun has an effect on the space time.

Lex Fridman (2:23:45.080)

So general relativity describes how mass and energy

Sergey Nazarov (2:23:50.080)

can curve space time. And I was just giving an example

Lex Fridman (2:23:53.920)

that when life is fun, it seems short.

Sergey Nazarov (2:23:56.360)

When life is not fun, it seems very long.

Lex Fridman (2:23:58.560)

So fun has a very similar effect on space time,

Sergey Nazarov (2:24:01.080)

like in curved space time.

Lex Fridman (2:24:02.720)

In that same sense, there is a power to the meme.

Lex Fridman (2:24:07.200)

And I think Dogecoin illustrates that.

Lex Fridman (2:24:09.480)

I think Elon is an example of somebody that uses Dogecoin.

Sergey Nazarov (2:24:12.680)

I don't know his philosophy in particular on this aspect,

Lex Fridman (2:24:16.600)

but he does use Dogecoin.

Lex Fridman (2:24:18.240)

But he does use it effectively to excite the world

Lex Fridman (2:24:23.720)

in a fun way about the possibilities

Sergey Nazarov (2:24:26.400)

of future technologies like cryptocurrency.

Lex Fridman (2:24:29.080)

I think the Bitcoin world is very serious right now.

Sergey Nazarov (2:24:33.200)

We've spoken about Bitcoin maximalists.

Lex Fridman (2:24:36.760)

There is very little space for fun and joking

Sergey Nazarov (2:24:40.800)

in the Bitcoin world, but there's still a little bit of fun

Lex Fridman (2:24:45.800)

and humor left in the Dogecoin world.

Sergey Nazarov (2:24:48.600)

In that sense, I think it's exceptionally powerful

Lex Fridman (2:24:51.640)

to inspire, to excite, to be able to talk about stuff

Sergey Nazarov (2:24:57.320)

without the seriousness of financial impact

Lex Fridman (2:25:05.080)

that now certain cryptocurrencies have like Bitcoin.

Lex Fridman (2:25:08.880)

So I keep an eye on, I've previously mentioned

Lex Fridman (2:25:12.520)

that Dogecoin I think is a fascinating piece of technology

Sergey Nazarov (2:25:16.120)

because I do think cryptocurrency is much bigger

Lex Fridman (2:25:19.120)

than the technology that you focus on.

Sergey Nazarov (2:25:23.880)

There is also a social element that you also spoke to

Lex Fridman (2:25:27.760)

that's I think not quite yet understood

Lex Fridman (2:25:31.120)

and it's fascinating to watch, especially as it covalls

Lex Fridman (2:25:35.440)

with the different tools on the internet,

Sergey Nazarov (2:25:37.360)

the different social networks,

Lex Fridman (2:25:39.640)

social network mechanisms on the internet.

Lex Fridman (2:25:42.160)

So I'm a huge supporter of Dogecoin

Lex Fridman (2:25:46.200)

because I'm a huge supporter of fun.

Sergey Nazarov (2:25:49.880)

I'm fascinated to see how it'll work out.

Lex Fridman (2:25:54.000)

You think it'll go to the moon?

Sergey Nazarov (2:25:55.680)

You think it'll be the first cryptocurrency

Lex Fridman (2:25:57.600)

to land on the moon?

Sergey Nazarov (2:25:59.240)

I couldn't say.

Lex Fridman (2:26:00.080)

I haven't done the analysis as I've said before.

Sergey Nazarov (2:26:04.240)

I haven't done the analysis.

Lex Fridman (2:26:05.640)

Well, yeah, no matter what,

Sergey Nazarov (2:26:09.640)

I do hope we will get humans back on the moon

Lex Fridman (2:26:12.520)

and hopefully get humans on Mars soon.

Sergey Nazarov (2:26:15.320)

Dogecoin, Bitcoin or not.

Lex Fridman (2:26:21.320)

Let me ask you about books and movies.

Lex Fridman (2:26:25.960)

What books and movies in your life long ago

Lex Fridman (2:26:30.400)

when you were a baby Sergei or today had an impact on you?

Sergey Nazarov (2:26:36.720)

Maybe you would recommend to others

Lex Fridman (2:26:39.080)

and maybe what ideas you took away from those books,

Sergey Nazarov (2:26:43.640)

movies, coloring books, children's books, blogs, whatever.

Lex Fridman (2:26:49.280)

Yeah, yeah, sure.

Lex Fridman (2:26:51.440)

So I think one of the things that had a very big impact

Lex Fridman (2:26:54.000)

on me were Plato's dialogues

Lex Fridman (2:26:56.000)

and particularly Protagoras and Gorgias

Lex Fridman (2:26:58.240)

as some of the two initial ones.

Sergey Nazarov (2:27:02.760)

I think what Plato's dialogues do very well

Lex Fridman (2:27:05.600)

is they give people a clear picture of what dialogue looks

Sergey Nazarov (2:27:09.520)

like and what the assessment

Lex Fridman (2:27:11.440)

of information probably should look like, right?

Lex Fridman (2:27:15.240)

And how the dissection and analysis

Lex Fridman (2:27:18.480)

of an idea is very important

Lex Fridman (2:27:20.480)

and how it can actually be taken in either direction.

Lex Fridman (2:27:22.840)

But at the end of the day that the process

Sergey Nazarov (2:27:25.840)

of eliminating kind of this fuzzy thinking

Lex Fridman (2:27:30.000)

and arriving at whether it's an external dialogue

Sergey Nazarov (2:27:33.360)

or an internal dialogue about an accurate picture

Lex Fridman (2:27:36.520)

of reality is actually very important.

Lex Fridman (2:27:38.960)

And so I think I'm very lucky to have read the dialogues

Lex Fridman (2:27:42.480)

when I was in my early teenage years

Lex Fridman (2:27:44.920)

and it had a very large impact on me

Lex Fridman (2:27:46.480)

because it kind of showed me that nobody knows

Lex Fridman (2:27:49.520)

what they're talking about.

Lex Fridman (2:27:51.000)

I would play out dialogues in my mind

Lex Fridman (2:27:55.120)

and I would engage in certain dialogues

Lex Fridman (2:27:56.760)

with different people.

Lex Fridman (2:27:58.920)

And what the Platonic dialogue showed me was kind

Lex Fridman (2:28:02.360)

of how to tell when someone has no clue.

Lex Fridman (2:28:06.000)

And a lot of people are very good

Lex Fridman (2:28:07.360)

at kind of say they have a clue, right?

Sergey Nazarov (2:28:12.680)

Saying like, here's how the world works.

Lex Fridman (2:28:14.280)

Here's what you should do with your life.

Sergey Nazarov (2:28:15.520)

Here's what you should do with your time.

Lex Fridman (2:28:16.760)

Here's what you should do with your money.

Sergey Nazarov (2:28:18.000)

Here's what you should do with your attention.

Lex Fridman (2:28:19.800)

Here's what you should do with all these things.

Lex Fridman (2:28:22.400)

And I think the ability to evaluate information

Lex Fridman (2:28:26.280)

generally is something that is surprisingly under taught.

Sergey Nazarov (2:28:31.000)

I don't actually understand why there isn't a course

Lex Fridman (2:28:33.840)

in like high schools or universities

Sergey Nazarov (2:28:35.880)

that's just like, here is how you evaluate information.

Lex Fridman (2:28:39.320)

Here's how you engage in external dialogue

Lex Fridman (2:28:41.640)

and internal dialogue to arrive

Lex Fridman (2:28:43.640)

at an accurate picture of reality

Sergey Nazarov (2:28:45.480)

rather than the picture of reality

Lex Fridman (2:28:47.200)

that other people want you to have

Lex Fridman (2:28:48.600)

for their benefit most often, right?

Lex Fridman (2:28:50.560)

And at the end of the day,

Sergey Nazarov (2:28:52.760)

I think that put me down a path

Lex Fridman (2:28:54.800)

to really try and understand.

Sergey Nazarov (2:28:57.120)

Beyond that, I think biographies

Lex Fridman (2:29:00.280)

have had a very large impact on me.

Sergey Nazarov (2:29:03.960)

Plutarchs, Greek and Roman lives.

Lex Fridman (2:29:05.800)

After I read Plato,

Sergey Nazarov (2:29:07.080)

I started reading a bunch of stuff, Greek stuff.

Lex Fridman (2:29:09.000)

I was just like, these Greek guys,

Sergey Nazarov (2:29:10.360)

they really know how it is.

Lex Fridman (2:29:12.440)

They did this 2000 years ago and they still got it right.

Sergey Nazarov (2:29:15.360)

There's something here.

Lex Fridman (2:29:16.600)

It's kind of this like a theory of time around them,

Lex Fridman (2:29:19.640)

the value of intellectual ideas, right?

Lex Fridman (2:29:21.080)

If an intellectual idea has survived the test of time,

Sergey Nazarov (2:29:24.800)

it's much more valuable than the intellectual idea

Lex Fridman (2:29:27.160)

that I just came up with 10 minutes ago,

Sergey Nazarov (2:29:28.720)

I haven't told anybody and hasn't gone up against

Lex Fridman (2:29:31.320)

all of the kind of rebuttals.

Sergey Nazarov (2:29:35.880)

So...

Lex Fridman (2:29:36.840)

So what's your favorite,

Lex Fridman (2:29:37.760)

what would you say would be a most impactful biography

Lex Fridman (2:29:41.240)

that you've come across?

Sergey Nazarov (2:29:43.280)

I don't think it was those Greek or Roman biographies

Lex Fridman (2:29:45.640)

because they were very far away.

Sergey Nazarov (2:29:48.560)

I think that probably one of the most impactful ones

Lex Fridman (2:29:53.560)

that I can remember recently is around Vanderbilt.

Lex Fridman (2:29:59.320)

And so Vanderbilt was this guy who basically,

Lex Fridman (2:30:03.640)

without that much of an education,

Sergey Nazarov (2:30:05.160)

he would invent or work with people

Lex Fridman (2:30:08.760)

to make these steamboats.

Lex Fridman (2:30:10.160)

And then he had a lot of acumen

Lex Fridman (2:30:12.080)

around creating certain monopolies,

Sergey Nazarov (2:30:15.480)

regardless of what was right or wasn't right.

Lex Fridman (2:30:20.480)

Right or wasn't right.

Lex Fridman (2:30:22.080)

And then fascinating enough,

Lex Fridman (2:30:23.200)

it all hinged on like a Supreme Court case

Sergey Nazarov (2:30:25.480)

that decided if monopolies were acceptable

Lex Fridman (2:30:29.120)

in the form of state created monopolies or not.

Lex Fridman (2:30:32.880)

And if it was deemed that state created monopolies

Lex Fridman (2:30:36.800)

were acceptable, he would have had a huge problem, this guy.

Lex Fridman (2:30:39.440)

But it was deemed that state created monopolies

Lex Fridman (2:30:41.880)

through these licenses for steamboat routes

Sergey Nazarov (2:30:46.040)

was not acceptable.

Lex Fridman (2:30:47.880)

And that did two interesting things that unseated

Sergey Nazarov (2:30:51.200)

some kind of old time landed gentry in the Americas

Lex Fridman (2:30:55.560)

in like the 1830s and 40s.

Lex Fridman (2:30:57.920)

And it basically made him right

Lex Fridman (2:31:00.840)

and he saw it before other people.

Lex Fridman (2:31:03.160)

So I think Vanderbilt was a very interesting personality,

Lex Fridman (2:31:08.200)

first of all, of all the biographies that I read

Sergey Nazarov (2:31:11.520)

is somebody who really took the situation in hand

Lex Fridman (2:31:16.520)

and kind of took action to achieve an outcome,

Sergey Nazarov (2:31:20.120)

which I think was an amazing result.

Lex Fridman (2:31:23.840)

The fascinating thing, by the way,

Sergey Nazarov (2:31:26.200)

is, or amazing way of looking at things.

Lex Fridman (2:31:28.360)

The fascinating thing, by the way,

Sergey Nazarov (2:31:29.440)

is that the ferries now in New York Harbor

Lex Fridman (2:31:32.200)

are all run as a public good.

Lex Fridman (2:31:36.000)

So the fascinating thing is that the guy,

Lex Fridman (2:31:37.680)

he focused on an industry and he worked on something

Sergey Nazarov (2:31:40.680)

that was so important that it ended up

Lex Fridman (2:31:42.800)

becoming a public good.

Lex Fridman (2:31:44.920)

And I think that that's an interesting conception

Lex Fridman (2:31:48.720)

of how to look at this industry.

Sergey Nazarov (2:31:51.800)

I think there's a lot of economics dynamics

Lex Fridman (2:31:54.400)

around this industry,

Lex Fridman (2:31:55.680)

but I think I might've said this somewhere else before,

Lex Fridman (2:31:58.960)

but really the success of someone in this industry

Sergey Nazarov (2:32:03.240)

is whether they're able to make a Linux or HTTP

Lex Fridman (2:32:06.640)

or an HTTPS like system that lives on for a very long time

Lex Fridman (2:32:11.640)

and is essentially a kind of public good.

Lex Fridman (2:32:14.400)

It's a success of an idea,

Sergey Nazarov (2:32:16.840)

even if that idea is originally sort of a capitalist idea

Lex Fridman (2:32:19.960)

above that's grounded in financial benefit.

Sergey Nazarov (2:32:23.000)

Success of it is if it becomes a public good.

Lex Fridman (2:32:26.000)

It is so universal.

Sergey Nazarov (2:32:27.640)

It is so fundamental to the quality of life

Lex Fridman (2:32:30.880)

that it's a public good.

Sergey Nazarov (2:32:32.120)

It is deemed to be so valuable

Lex Fridman (2:32:34.880)

that it should be a public good.

Sergey Nazarov (2:32:37.480)

Yeah, I think so.

Lex Fridman (2:32:38.320)

I think that's a pretty,

Sergey Nazarov (2:32:39.640)

a pretty good definition of success that you work

Lex Fridman (2:32:42.160)

on a body of work and that body of work

Sergey Nazarov (2:32:44.560)

isn't just some commercial enterprise.

Lex Fridman (2:32:47.200)

It's a body of work that whatever commercial aspects

Sergey Nazarov (2:32:51.480)

or economic incentive aspects it might have,

Lex Fridman (2:32:54.560)

it eventually is so important

Sergey Nazarov (2:32:56.640)

that it becomes critical to how society functions.

Lex Fridman (2:33:00.560)

I'm personally quite lucky and grateful to be,

Sergey Nazarov (2:33:04.800)

in my opinion, working on something like that

Lex Fridman (2:33:07.400)

with an amazing team and an amazing community

Sergey Nazarov (2:33:11.000)

that seems to really very much care

Lex Fridman (2:33:13.280)

about this hybrid smart contract transparent world

Sergey Nazarov (2:33:18.280)

that a lot of people on our industry,

Lex Fridman (2:33:20.600)

realistically, I think this is why a lot of them signed up.

Sergey Nazarov (2:33:23.520)

This is why I came into our industry.

Lex Fridman (2:33:25.360)

It wasn't because Bitcoin,

Sergey Nazarov (2:33:27.920)

it was because Bitcoin was a picture

Lex Fridman (2:33:32.040)

of how the world could work in so many other ways.

Lex Fridman (2:33:34.960)

And that picture of how the world could work

Lex Fridman (2:33:37.480)

in so many other ways attracted me a very long time ago.

Lex Fridman (2:33:42.840)

And I think that all of this stuff

Lex Fridman (2:33:47.360)

will eventually become a public good.

Sergey Nazarov (2:33:49.320)

I think it will become so critical

Lex Fridman (2:33:50.960)

to how societies function internally and internationally

Sergey Nazarov (2:33:54.360)

that just like there are systems,

Lex Fridman (2:33:56.360)

like the Federal Reserve, like global payment systems,

Sergey Nazarov (2:33:59.360)

like all these types of things,

Lex Fridman (2:34:00.720)

I think eventually all of this technology

Sergey Nazarov (2:34:03.240)

will be baked into these societally critical systems.

Lex Fridman (2:34:08.440)

And if I, in our community and the people I work with

Lex Fridman (2:34:11.320)

and the body of work that we're working on

Lex Fridman (2:34:13.680)

can make some kind of contribution to that shift

Sergey Nazarov (2:34:18.200)

towards a fairer, economically fair, transparent society,

Lex Fridman (2:34:23.760)

from my point of view, it's a very worthwhile body of work.

Sergey Nazarov (2:34:27.040)

In terms of the show, you also mentioned the show,

Lex Fridman (2:34:30.640)

one of the shows that I really seem to like more and more

Sergey Nazarov (2:34:33.960)

for some reason is Star Trek, not the old Star Trek.

Lex Fridman (2:34:37.640)

I don't really get the old Star Trek.

Sergey Nazarov (2:34:39.040)

The special effects aren't good enough.

Lex Fridman (2:34:41.000)

Star Trek, like The Next Generation and Voyager

Lex Fridman (2:34:44.640)

and Deep Space Nine and all those.

Lex Fridman (2:34:47.760)

I think whenever I happen to watch a Star Trek show again,

Sergey Nazarov (2:34:52.400)

I have a very simple conception in my mind

Lex Fridman (2:34:54.840)

that I really didn't have whenever I saw it way back when.

Sergey Nazarov (2:34:57.800)

It's that I'm not a fan of Star Trek.

Lex Fridman (2:35:00.080)

It's that this is what the world looks like

Lex Fridman (2:35:03.240)

if technology takes us towards a utopia, right?

Lex Fridman (2:35:06.880)

So I think there's this fascinating thing

Sergey Nazarov (2:35:08.840)

where technology can take us towards a utopia

Lex Fridman (2:35:11.720)

or towards a dystopia.

Lex Fridman (2:35:13.680)

And in my mind, those kind of three Star Trek shows

Lex Fridman (2:35:18.000)

are a picture of what human civilization looks like

Sergey Nazarov (2:35:23.360)

if everybody's technological ambitions

Lex Fridman (2:35:26.120)

successfully take us towards a utopia, right?

Sergey Nazarov (2:35:28.440)

Because in the Star Trek universe,

Lex Fridman (2:35:30.840)

you're not seeking money or you're not seeking safety

Sergey Nazarov (2:35:34.120)

or you're not really seeking anything for yourself.

Lex Fridman (2:35:38.440)

Everybody within Maslow's hierarchy of needs

Sergey Nazarov (2:35:41.960)

has gotten so many things for themselves

Lex Fridman (2:35:43.960)

that their goal is learning and discovering and or helping.

Lex Fridman (2:35:49.600)

And I think there is this conception of human life

Lex Fridman (2:35:53.160)

once the baser needs are satisfied.

Lex Fridman (2:35:56.120)

And at the end of the day,

Lex Fridman (2:35:59.040)

I think that's what technology generally can elevate

Lex Fridman (2:36:02.560)

all of human civilization to, right?

Lex Fridman (2:36:04.360)

It can elevate us to Star Trek world

Sergey Nazarov (2:36:07.280)

where if people want to invent,

Lex Fridman (2:36:10.360)

they can do that all day and nothing else.

Sergey Nazarov (2:36:11.960)

If people wanna explore the stars,

Lex Fridman (2:36:13.840)

they can explore the stars

Lex Fridman (2:36:14.840)

and they don't have to worry about economic scarcity

Lex Fridman (2:36:18.600)

or any number of these other conceptions.

Lex Fridman (2:36:21.040)

So I don't know what the most impactful on me shows have been

Lex Fridman (2:36:24.640)

but for some reason recently Star Trek

Sergey Nazarov (2:36:27.600)

in the newer variant,

Lex Fridman (2:36:29.880)

not the most new Star Trek shows.

Sergey Nazarov (2:36:32.000)

Those shows are a little strange.

Lex Fridman (2:36:33.320)

The kind of middle Star Trek universe

Sergey Nazarov (2:36:35.840)

where everybody is doing something

Lex Fridman (2:36:37.840)

with like a very important purpose

Lex Fridman (2:36:40.400)

and nobody's thinking about like,

Lex Fridman (2:36:42.080)

where's my paycheck or where's my whatever.

Sergey Nazarov (2:36:46.200)

They're all kind of like,

Lex Fridman (2:36:47.040)

we have to discover the formula to this

Sergey Nazarov (2:36:50.560)

to save the planet over there.

Lex Fridman (2:36:52.440)

And literally every episode you're discovering a formula

Lex Fridman (2:36:54.360)

to save a planet, right?

Lex Fridman (2:36:55.240)

Of some kind or a universe or ecosystem or whatever.

Lex Fridman (2:36:58.480)

And you're looking at it, you're like,

Lex Fridman (2:37:00.360)

you know, this is like,

Sergey Nazarov (2:37:02.160)

this is a pretty good place to end up.

Lex Fridman (2:37:03.560)

This is where we might wanna end up.

Lex Fridman (2:37:05.280)

So it gives you hope.

Lex Fridman (2:37:06.400)

I mean, it's funny that we don't often think about the,

Sergey Nazarov (2:37:13.200)

I think it's very useful to think about positive visions

Lex Fridman (2:37:16.880)

of the future when we're trying to design technology.

Sergey Nazarov (2:37:20.960)

There's a lot of sort of in public discourse,

Lex Fridman (2:37:25.080)

a lot of people are thinking about

Sergey Nazarov (2:37:27.040)

kind of how everything goes wrong.

Lex Fridman (2:37:29.400)

It's important to think about that sometimes,

Lex Fridman (2:37:31.520)

but in moderation, I think,

Lex Fridman (2:37:33.040)

because there's not enough in my little corner

Sergey Nazarov (2:37:37.080)

of artificial intelligence world,

Lex Fridman (2:37:39.000)

people are very kind of fear monger centered.

Sergey Nazarov (2:37:42.800)

There's a lot of discussions

Lex Fridman (2:37:44.240)

about how everything goes wrong.

Sergey Nazarov (2:37:46.040)

Important to do, but it's also really important

Lex Fridman (2:37:48.920)

to talk about how things can go right,

Sergey Nazarov (2:37:53.240)

because we ultimately want to guide the design

Lex Fridman (2:37:56.000)

of the systems we create to make things right.

Lex Fridman (2:37:58.880)

And I think with hope and optimism,

Lex Fridman (2:38:02.080)

not naiveness, but optimism,

Sergey Nazarov (2:38:05.840)

you can actually create a better world.

Lex Fridman (2:38:08.240)

Like you have to think about a positive,

Sergey Nazarov (2:38:11.560)

a better world as you create,

Lex Fridman (2:38:14.080)

because then you can actually create it.

Sergey Nazarov (2:38:16.080)

Yeah, I'm one of the people that thinks

Lex Fridman (2:38:19.920)

that having an optimistic view of the world

Sergey Nazarov (2:38:24.800)

is better for design and creativity

Lex Fridman (2:38:26.840)

than having a pessimistic one.

Sergey Nazarov (2:38:28.840)

It's hard to design when you're in fear.

Lex Fridman (2:38:33.360)

Do you have advice for young people,

Sergey Nazarov (2:38:37.040)

speaking of being excited about

Lex Fridman (2:38:38.960)

and hopeful about the future world,

Lex Fridman (2:38:40.880)

do you have advice for young people today

Lex Fridman (2:38:43.880)

in computer science world,

Sergey Nazarov (2:38:46.760)

in software engineering world, in crypto world,

Lex Fridman (2:38:48.920)

but maybe in any world whatsoever for life,

Lex Fridman (2:38:53.680)

how to pick a career or how to live life in general?

Lex Fridman (2:38:58.080)

I think the thing that young people should do

Sergey Nazarov (2:39:02.280)

is not any one specific thing

Lex Fridman (2:39:04.160)

for any one specific young person.

Sergey Nazarov (2:39:07.440)

I think what they should do is what they won't be able to do

Lex Fridman (2:39:11.920)

in the later stages of their life.

Lex Fridman (2:39:14.520)

And the way, in my opinion,

Lex Fridman (2:39:16.160)

from a framework point of view to think about that

Sergey Nazarov (2:39:19.520)

is that the amount of obligations

Lex Fridman (2:39:23.320)

and the amount of time that a person has

Lex Fridman (2:39:27.680)

seems to just diminish over time, right?

Lex Fridman (2:39:30.520)

So the amount of free time they have, right?

Lex Fridman (2:39:32.480)

So you start your job,

Lex Fridman (2:39:33.600)

you get a bunch of responsibilities,

Sergey Nazarov (2:39:35.600)

something with your partner or spouse,

Lex Fridman (2:39:37.240)

more responsibilities,

Sergey Nazarov (2:39:38.560)

kids, probably even more responsibilities,

Lex Fridman (2:39:40.720)

and soon enough, the time that you have to educate yourself,

Sergey Nazarov (2:39:45.640)

to travel, to experience the world however,

Lex Fridman (2:39:50.080)

create whatever creative endeavor you're interested in,

Sergey Nazarov (2:39:53.320)

slowly but surely disappears.

Lex Fridman (2:39:55.800)

I think this is something

Sergey Nazarov (2:39:57.840)

that young people don't fully realize.

Lex Fridman (2:40:01.280)

They assume that the world as it is now

Lex Fridman (2:40:04.240)

and the amount of free time that they have to travel,

Lex Fridman (2:40:08.520)

to educate themselves, to make new friends,

Sergey Nazarov (2:40:11.320)

to do all these things,

Lex Fridman (2:40:12.600)

will somehow maybe diminish by 10%.

Sergey Nazarov (2:40:16.720)

It won't diminish by 10%, it will diminish by 90%.

Lex Fridman (2:40:20.760)

And the 10% that you have,

Sergey Nazarov (2:40:22.480)

you'll be resting to get back to work and get things done.

Lex Fridman (2:40:27.040)

So what I think young people should do,

Lex Fridman (2:40:30.160)

and this is why it's very different for each of them, right?

Lex Fridman (2:40:32.600)

I can't tell young people,

Sergey Nazarov (2:40:33.720)

hey, you should study philosophy, travel,

Lex Fridman (2:40:36.440)

and start your own enterprise to achieve something

Lex Fridman (2:40:38.800)

worthwhile in the world, right?

Lex Fridman (2:40:39.760)

That might be something that's good for me

Sergey Nazarov (2:40:41.640)

with my values and my kind of worldview,

Lex Fridman (2:40:45.440)

but for other people might be something else.

Sergey Nazarov (2:40:47.840)

I think the way that they should conceptualize it

Lex Fridman (2:40:51.160)

is imagine if over the next 10, 12 years,

Sergey Nazarov (2:40:58.120)

the amount of choice that you had about what you could do

Lex Fridman (2:41:02.200)

was cut down by 90%.

Lex Fridman (2:41:05.320)

What would you, and this is copying from this kind of

Lex Fridman (2:41:07.920)

Jeff Bezos regret minimization framework.

Sergey Nazarov (2:41:11.560)

In that framework, it's like,

Lex Fridman (2:41:12.720)

what would I regret not doing at 80?

Lex Fridman (2:41:16.040)

And that's kind of meant to create this longterm view

Lex Fridman (2:41:19.400)

and make these decisions now that'll get you

Sergey Nazarov (2:41:22.040)

to a longterm future that you can look back on

Lex Fridman (2:41:24.840)

and be proud of your life, right?

Lex Fridman (2:41:26.960)

What I think young people should do

Lex Fridman (2:41:28.840)

is they should say to themselves,

Sergey Nazarov (2:41:30.600)

look, if I never get the chance to travel

Lex Fridman (2:41:33.960)

for as long as I live,

Sergey Nazarov (2:41:36.000)

assuming that after 25, after 27, after 29,

Lex Fridman (2:41:40.440)

that's the case, how will I feel about that?

Sergey Nazarov (2:41:43.400)

If I never get to start a company after 25,

Lex Fridman (2:41:46.920)

after I get married, after I have kids,

Lex Fridman (2:41:49.080)

how will I feel about that?

Lex Fridman (2:41:50.960)

And whatever they feel the worst about

Sergey Nazarov (2:41:53.280)

is what they should do.

Lex Fridman (2:41:54.880)

Whatever they feel like when they say to themselves,

Sergey Nazarov (2:41:57.120)

you know, if I don't travel now, I will never travel.

Lex Fridman (2:42:01.360)

And they feel horrible about that.

Sergey Nazarov (2:42:02.880)

They just have an overwhelming fear

Lex Fridman (2:42:05.960)

and disgust at themselves in that type of state

Sergey Nazarov (2:42:10.760)

at 25, 27, 29, that's what they should do.

Lex Fridman (2:42:14.600)

And they shouldn't listen to anybody else.

Sergey Nazarov (2:42:19.080)

Let me put it to you this way.

Lex Fridman (2:42:20.920)

If you're really smart, you're gonna make it anyway.

Sergey Nazarov (2:42:24.560)

There's a lot of people putting a lot of pressure on you

Lex Fridman (2:42:26.360)

because they're afraid whether you're gonna make it.

Sergey Nazarov (2:42:28.560)

If you're really smart, you're gonna make it anyway.

Lex Fridman (2:42:31.280)

If you're not really smart, you're screwed anyway.

Lex Fridman (2:42:33.600)

So at the end of the day.

Lex Fridman (2:42:36.120)

Either way, just relax with it and use your time well

Sergey Nazarov (2:42:39.000)

to do the things you would most regret not doing.

Lex Fridman (2:42:43.080)

That's really fascinating.

Sergey Nazarov (2:42:44.720)

I wouldn't say relax.

Lex Fridman (2:42:46.120)

I would say very much cherish the free time,

Sergey Nazarov (2:42:50.360)

the discretionary time that you have

Lex Fridman (2:42:52.640)

from the age of 18 to maybe 25.

Sergey Nazarov (2:42:56.360)

Because at 25, everyone's gonna start looking at each other

Lex Fridman (2:42:59.760)

and asking, what have I achieved?

Sergey Nazarov (2:43:02.040)

Like my friends have achieved, I haven't achieved.

Lex Fridman (2:43:04.520)

And then by the time you get to 30,

Sergey Nazarov (2:43:06.200)

you're gonna look at each other again and go,

Lex Fridman (2:43:07.960)

well, my friends have a family or a company

Lex Fridman (2:43:11.360)

or a PhD or a whatever, what do I have?

Lex Fridman (2:43:14.480)

And the pressure will just increase.

Lex Fridman (2:43:16.040)

And it'll increase so much that even if you want to go

Lex Fridman (2:43:20.040)

and do the fun thing, it will not be fun.

Sergey Nazarov (2:43:22.760)

Because the pressure of comparing yourself

Lex Fridman (2:43:26.080)

to your friends at 25 or your peers at 30

Sergey Nazarov (2:43:29.240)

will be so great that it will no longer be normal

Lex Fridman (2:43:33.560)

for you to be in a hostel at 30,

Sergey Nazarov (2:43:36.440)

kind of like living it up.

Lex Fridman (2:43:40.480)

And this is why I also can't tell you

Sergey Nazarov (2:43:42.400)

specifically what it is.

Lex Fridman (2:43:43.360)

For me, it was getting an education in philosophy

Sergey Nazarov (2:43:46.000)

that was rigorous and in depth.

Lex Fridman (2:43:47.760)

It was traveling and it was starting an enterprise

Sergey Nazarov (2:43:50.280)

that I thought that was worthwhile, that I directed,

Lex Fridman (2:43:52.640)

that I could make into something great.

Sergey Nazarov (2:43:54.320)

That's what it was for me.

Lex Fridman (2:43:55.600)

For other people, it might be something with a band,

Sergey Nazarov (2:43:58.040)

it might be something with painting,

Lex Fridman (2:43:59.880)

it might be an education.

Sergey Nazarov (2:44:02.280)

You, by the way, also should not assume

Lex Fridman (2:44:04.760)

that your ability to get an education will improve.

Sergey Nazarov (2:44:09.840)

All of those responsibilities will take away

Lex Fridman (2:44:13.200)

your ability to get an education.

Lex Fridman (2:44:15.480)

So if you value having an education,

Lex Fridman (2:44:17.480)

if you value being a deeply educated, well rounded person

Sergey Nazarov (2:44:22.000)

with a wide array of knowledge on a wide array of topics,

Lex Fridman (2:44:25.320)

capitalism will force you to specialize.

Sergey Nazarov (2:44:27.920)

That's what it's good at, it's gonna take you,

Lex Fridman (2:44:29.720)

it's gonna fashion you into a very specific tool

Sergey Nazarov (2:44:32.920)

for a very, most people, into a very specific set of tasks.

Lex Fridman (2:44:36.880)

If you want to have an education in something, get it now.

Sergey Nazarov (2:44:40.600)

If you wanna travel somewhere, travel there now.

Lex Fridman (2:44:43.120)

If you wanna do some kind of creative endeavor

Sergey Nazarov (2:44:45.360)

that you doubt whether you'll have time for in the future,

Lex Fridman (2:44:48.640)

do it now.

Sergey Nazarov (2:44:49.480)

You won't have time for it in the future,

Lex Fridman (2:44:51.320)

you won't have time to read philosophy books all day,

Sergey Nazarov (2:44:54.560)

unfortunately, you won't have time to fly to Italy

Lex Fridman (2:44:59.560)

and kind of hang out with people.

Sergey Nazarov (2:45:02.080)

If you're serious about your life,

Lex Fridman (2:45:04.040)

you're gonna get more responsibilities,

Sergey Nazarov (2:45:05.440)

you're gonna get more stuff to do.

Lex Fridman (2:45:07.360)

And so my advice to you is do not piss away

Sergey Nazarov (2:45:10.920)

this rare, unique, discretionary time.

Lex Fridman (2:45:14.480)

And if your friends are, get new friends.

Sergey Nazarov (2:45:18.080)

Get smarter friends, get people who are using

Lex Fridman (2:45:21.480)

the limited time they have better.

Sergey Nazarov (2:45:23.160)

That's my advice.

Lex Fridman (2:45:25.920)

So it's just a quickly comment, it's brilliant.

Sergey Nazarov (2:45:29.240)

You know, to reframe high school

Lex Fridman (2:45:31.480)

and undergraduate college education,

Sergey Nazarov (2:45:34.120)

sometimes people wanna quickly get it over with.

Lex Fridman (2:45:37.400)

But one thing I remember thinking,

Lex Fridman (2:45:42.640)

and it's very true about high school,

Lex Fridman (2:45:45.440)

is one of the only times in your life

Sergey Nazarov (2:45:48.120)

you'll get a chance to truly get a broad education.

Lex Fridman (2:45:51.280)

You don't often think of it that way,

Lex Fridman (2:45:53.840)

but it's a chance to really enjoy learning things

Lex Fridman (2:45:57.160)

that are outside of the specialty

Sergey Nazarov (2:45:58.720)

that you'll eventually end up with.

Lex Fridman (2:46:00.480)

And that's how college education is.

Lex Fridman (2:46:02.280)

And on a more fun side, I played music,

Lex Fridman (2:46:05.640)

I did martial arts, and we offline mentioned

Sergey Nazarov (2:46:09.360)

played video games.

Lex Fridman (2:46:10.720)

I find it fascinating and brilliant what you said,

Sergey Nazarov (2:46:14.120)

which is the world will not give you a chance

Lex Fridman (2:46:17.400)

to truly enjoy many of these things

Lex Fridman (2:46:19.760)

and truly get value from many of those things

Lex Fridman (2:46:23.600)

once you get older.

Sergey Nazarov (2:46:25.560)

I find it exceptionally difficult to enjoy video games now.

Lex Fridman (2:46:29.440)

There's so much stuff to do,

Sergey Nazarov (2:46:30.280)

there's so much responsibility.

Lex Fridman (2:46:32.960)

And I, at the time when I played Elder Scrolls

Lex Fridman (2:46:37.280)

and Baldur's Gate and Diablo II,

Lex Fridman (2:46:39.920)

and at the time I thought maybe that was a waste of time.

Lex Fridman (2:46:45.880)

But now looking back, I realize,

Lex Fridman (2:46:49.080)

because I always thought,

Sergey Nazarov (2:46:50.520)

let me get the career first

Lex Fridman (2:46:52.120)

and then I'll have a chance to play video games.

Sergey Nazarov (2:46:54.080)

That's the way I was thinking.

Lex Fridman (2:46:55.880)

It was a waste of time

Sergey Nazarov (2:46:57.080)

because I should really progress on the career

Lex Fridman (2:47:01.120)

and then I'll have time to play video games.

Sergey Nazarov (2:47:03.160)

No, the reality is that was really fulfilling.

Lex Fridman (2:47:06.160)

Those are some of the happiest travel experiences

Sergey Nazarov (2:47:10.560)

of my life is me traveling to those virtual worlds

Lex Fridman (2:47:14.040)

and spending time in them.

Lex Fridman (2:47:15.680)

And it was really fulfilling

Lex Fridman (2:47:16.880)

and they stayed with me for the rest of my life.

Lex Fridman (2:47:19.160)

And I get to experience echoes of that

Lex Fridman (2:47:21.880)

when I play video games these days

Sergey Nazarov (2:47:23.440)

for an hour here, an hour there,

Lex Fridman (2:47:25.280)

like one hour a month or something like that.

Lex Fridman (2:47:27.840)

But even those experiences, as silly as they are,

Lex Fridman (2:47:30.960)

they seem like a waste of time at the time,

Sergey Nazarov (2:47:33.440)

enjoying them fully, unapologetically.

Lex Fridman (2:47:37.040)

And in a framework exactly as you said,

Sergey Nazarov (2:47:41.160)

would I regret being the kind of person

Lex Fridman (2:47:43.800)

who've never played those video games?

Lex Fridman (2:47:46.560)

And I can, for myself, honestly say that yes.

Lex Fridman (2:47:50.120)

Look, when I'm on my death bed,

Sergey Nazarov (2:47:53.480)

I'm glad I built Baldur's Gate 2

Lex Fridman (2:47:57.400)

and all those arena, Daggerfall, Morrowind

Lex Fridman (2:48:00.960)

and all the Elder Scrolls games.

Lex Fridman (2:48:03.600)

And yeah, the things that don't necessarily fit

Sergey Nazarov (2:48:10.440)

into this kind of storyline

Lex Fridman (2:48:12.280)

of what a career is supposed to be,

Sergey Nazarov (2:48:14.480)

travel and all those experiences that you mentioned.

Lex Fridman (2:48:16.480)

I think I'd just like to say one final quick thing on this.

Sergey Nazarov (2:48:21.560)

I think this extends to really hard things as well.

Lex Fridman (2:48:24.000)

It extends to the things you wanna do,

Lex Fridman (2:48:25.800)

but one of the best pieces of advice

Lex Fridman (2:48:27.360)

one of my mentors gave me early on in my career

Sergey Nazarov (2:48:31.720)

around this time is that it will actually become harder

Lex Fridman (2:48:35.400)

to start a company as you get older.

Sergey Nazarov (2:48:38.760)

Once again, because you have more responsibilities,

Lex Fridman (2:48:41.360)

you're responsible to your partner for some kind of income

Sergey Nazarov (2:48:44.560)

to create a life together.

Lex Fridman (2:48:45.720)

Once you have kids, you're responsible

Sergey Nazarov (2:48:47.160)

for an even greater income to create a life for kids.

Lex Fridman (2:48:50.320)

And startups do not generate income, right?

Sergey Nazarov (2:48:53.280)

They take many, many years before anything happens.

Lex Fridman (2:48:56.040)

People are getting evicted, people are eating ramen noodles.

Sergey Nazarov (2:48:59.160)

That is a thing, that happens, that will happen.

Lex Fridman (2:49:02.160)

So I'm not saying that you should do the fun things

Sergey Nazarov (2:49:05.920)

or the enjoyable things.

Lex Fridman (2:49:07.360)

I'm saying the things that you would regret not doing,

Sergey Nazarov (2:49:12.200)

that you can uniquely do in the time span from 18 to 25.

Lex Fridman (2:49:18.080)

Which one of which is, if you plan to have a family

Lex Fridman (2:49:22.360)

and start a family when you're 25,

Lex Fridman (2:49:24.680)

you should start a company now.

Sergey Nazarov (2:49:26.840)

You should not wait until a bunch of people depend on you

Lex Fridman (2:49:29.440)

for income to eat, to start a company.

Sergey Nazarov (2:49:32.120)

The amount of pressure that will be on you at that point

Lex Fridman (2:49:34.720)

will be monumental.

Sergey Nazarov (2:49:36.480)

You should start a company when nobody depends on you

Lex Fridman (2:49:39.200)

and you can sleep on the floor eating ramen noodles

Lex Fridman (2:49:42.680)

and still have a great time and show up

Lex Fridman (2:49:45.040)

with a lot of enthusiasm and be excited.

Lex Fridman (2:49:47.720)

So I just mean whatever you want to really devote yourself

Lex Fridman (2:49:52.760)

to and really do, don't put it off.

Sergey Nazarov (2:49:56.200)

Don't go to consulting or banking or any other industry

Lex Fridman (2:49:59.080)

and say, I'm gonna do this for three years

Lex Fridman (2:50:00.600)

and I'll get experience.

Lex Fridman (2:50:02.080)

The only way you get experience is by doing something.

Sergey Nazarov (2:50:04.680)

You go, you do it, you fail, you do it again and again

Lex Fridman (2:50:07.440)

and again and again and again and then you have experience

Lex Fridman (2:50:09.680)

and then you can do it right.

Lex Fridman (2:50:10.720)

That's the only way experience happens.

Sergey Nazarov (2:50:12.360)

There is no other way short of mentorship.

Lex Fridman (2:50:14.720)

If you're lucky to get mentorship,

Sergey Nazarov (2:50:16.240)

99% of people don't get mentorship.

Lex Fridman (2:50:18.760)

And even though we're talking about young people,

Sergey Nazarov (2:50:20.640)

I feel like you're speaking to me as somebody who spent

Lex Fridman (2:50:23.720)

the last two weeks sleeping on the floor

Sergey Nazarov (2:50:25.720)

because there's no mattress and somebody who is single

Lex Fridman (2:50:28.400)

and somebody who's thinking about doing a startup,

Sergey Nazarov (2:50:30.840)

I felt like you're speaking to me as a fellow young person.

Lex Fridman (2:50:34.760)

Let me ask you about this whole life of ours

Sergey Nazarov (2:50:41.040)

to zoom out on the big philosophical question,

Lex Fridman (2:50:43.160)

the ridiculous question.

Lex Fridman (2:50:44.520)

What do you think is the meaning of it all?

Lex Fridman (2:50:47.960)

Do you think about this kind of stuff

Sergey Nazarov (2:50:49.320)

as you're creating all the technology,

Lex Fridman (2:50:51.920)

as you're thinking about this future?

Lex Fridman (2:50:54.520)

You ever zoom out and think like, why?

Lex Fridman (2:50:57.160)

Why are you surrogate striving?

Lex Fridman (2:50:59.880)

Why are we the human species striving for the stars?

Lex Fridman (2:51:05.040)

So I think it comes down to whether people

Sergey Nazarov (2:51:08.880)

wanna live in society.

Lex Fridman (2:51:11.200)

So if people decide to be part of society,

Sergey Nazarov (2:51:14.960)

they have a certain set of conditions

Lex Fridman (2:51:20.040)

that they decide to take part in, right?

Lex Fridman (2:51:23.240)

So I think what this comes down to is a lot of

Lex Fridman (2:51:27.640)

really involved conversations.

Lex Fridman (2:51:30.280)

But if we assume people have free will and choice,

Lex Fridman (2:51:33.000)

if we just kind of make that blanket assumption,

Sergey Nazarov (2:51:36.120)

then the question starts to become,

Lex Fridman (2:51:37.600)

well, what choices do we make?

Lex Fridman (2:51:39.200)

And how do we live with those choices?

Lex Fridman (2:51:41.880)

And I think probably the most fundamental choice

Sergey Nazarov (2:51:44.640)

is whether we exist in a society

Lex Fridman (2:51:47.560)

or we choose to leave society.

Lex Fridman (2:51:49.840)

And there are people that do this.

Lex Fridman (2:51:50.880)

There are people that go live in the woods.

Sergey Nazarov (2:51:52.000)

There are people that immigrate to other societies

Lex Fridman (2:51:55.080)

and they make a choice, right?

Lex Fridman (2:51:56.880)

And as they enter those other societies

Lex Fridman (2:51:58.840)

or they choose to leave society and go live in the woods,

Lex Fridman (2:52:01.840)

they adopt a certain set of values, right?

Lex Fridman (2:52:05.960)

They adopt values that the society prescribes,

Sergey Nazarov (2:52:08.400)

they compromise their own values,

Lex Fridman (2:52:09.680)

they define their own values,

Lex Fridman (2:52:11.000)

and they create a set of values for themselves, right?

Lex Fridman (2:52:14.760)

I think at the end of the day,

Sergey Nazarov (2:52:18.080)

if you're going to choose to live in society,

Lex Fridman (2:52:22.040)

in addition to all the minimums of not throwing garbage

Sergey Nazarov (2:52:25.600)

on the floor and doing nice things for people

Lex Fridman (2:52:28.920)

that need help and doing any number of things

Sergey Nazarov (2:52:31.520)

to just be a normal human being within society,

Lex Fridman (2:52:34.640)

you have to ask yourself,

Lex Fridman (2:52:37.120)

what am I doing as part of society, right?

Lex Fridman (2:52:39.880)

You can always say, hey, I'm going to leave society.

Sergey Nazarov (2:52:42.640)

I'm going to live in the woods.

Lex Fridman (2:52:43.680)

I did that, right?

Sergey Nazarov (2:52:44.720)

I went and I lived in the woods and I gave it a shot,

Lex Fridman (2:52:46.960)

realized a ton of stuff, huge amount of clarity from that.

Lex Fridman (2:52:49.760)

But when you decide to live in society,

Lex Fridman (2:52:52.760)

you take on, first of all, certain minimal agreements.

Sergey Nazarov (2:52:57.480)

You mold your values a little bit to that society.

Lex Fridman (2:53:01.040)

That's another choice that people inherently make.

Lex Fridman (2:53:03.960)

And then there's a question of,

Lex Fridman (2:53:07.120)

well, what am I doing here, right?

Lex Fridman (2:53:08.920)

What am I doing in society, right?

Lex Fridman (2:53:11.000)

So when people say the meaning of life,

Sergey Nazarov (2:53:12.960)

I don't know what the meaning of life is.

Lex Fridman (2:53:14.440)

It's the meaning of life in society.

Sergey Nazarov (2:53:16.480)

Right, what's the meaning of life for the choice

Lex Fridman (2:53:18.400)

that you've made within society, right?

Sergey Nazarov (2:53:20.480)

Because that's maybe the first fundamental choice

Lex Fridman (2:53:22.640)

you made.

Sergey Nazarov (2:53:23.280)

You made a choice and you continue

Lex Fridman (2:53:24.560)

to make a choice to be part of society

Lex Fridman (2:53:27.280)

and a specific society, right?

Lex Fridman (2:53:30.600)

So you've made this choice.

Sergey Nazarov (2:53:32.280)

You're part of a society.

Lex Fridman (2:53:34.120)

And now you kind of have a life and you have people around you.

Lex Fridman (2:53:41.880)

And then the question is, in my opinion,

Lex Fridman (2:53:44.640)

the question is, what is the body of work

Lex Fridman (2:53:46.800)

that you want to make, right?

Lex Fridman (2:53:50.120)

I think, personally, that life is kind of so short.

Lex Fridman (2:53:55.040)

And the ability to get enough resources for yourself

Lex Fridman (2:53:57.760)

in at least the developed markets

Sergey Nazarov (2:53:59.440)

where we're lucky to be in is so relatively abundant

Lex Fridman (2:54:03.600)

that we, you and me, have the luxury,

Sergey Nazarov (2:54:08.200)

by your pursuit of a PhD, you've had this luxury,

Lex Fridman (2:54:10.960)

I've had this luxury through the work

Sergey Nazarov (2:54:13.360)

that I've been doing, to pursue something

Lex Fridman (2:54:16.760)

that makes society better.

Lex Fridman (2:54:19.800)

So this is kind of the question, I would say.

Lex Fridman (2:54:25.000)

The question is, am I going to live in society, yes or no?

Sergey Nazarov (2:54:28.280)

Yes, OK.

Lex Fridman (2:54:28.960)

Most people choose yes.

Sergey Nazarov (2:54:30.120)

I understand why, to a degree.

Lex Fridman (2:54:31.600)

I understand why some people choose no.

Lex Fridman (2:54:33.400)

And then what is the but?

Lex Fridman (2:54:35.440)

And I'm going to be in society.

Sergey Nazarov (2:54:37.040)

If you choose to be in society, you're

Lex Fridman (2:54:38.440)

just choosing to abide by the rules.

Lex Fridman (2:54:40.200)

You're choosing to just do the minimum, right?

Lex Fridman (2:54:42.600)

That's what being part of society means.

Sergey Nazarov (2:54:44.360)

People that choose to be part of society

Lex Fridman (2:54:45.840)

but don't want to do this, it's very confusing.

Sergey Nazarov (2:54:47.920)

They should just leave.

Lex Fridman (2:54:48.840)

They should just go, look, I don't like this deal.

Sergey Nazarov (2:54:51.200)

I'm going to go somewhere else.

Lex Fridman (2:54:52.600)

I'm going to live in Tibet.

Sergey Nazarov (2:54:53.640)

I'm going to live in the woods.

Lex Fridman (2:54:55.120)

I'm going to live wherever the rules are to my liking, right?

Sergey Nazarov (2:55:00.000)

You've chosen to be in society.

Lex Fridman (2:55:02.240)

Next question, kind of final question,

Lex Fridman (2:55:04.120)

is what is the body of work that I'm going to be involved in?

Lex Fridman (2:55:07.280)

Because in looking at that Jeff Bezos kind of regret

Sergey Nazarov (2:55:10.200)

minimization framework thing, I think

Lex Fridman (2:55:12.400)

that's what a lot of it really comes down to,

Sergey Nazarov (2:55:14.280)

is you kind of, the framework is at 80 years old,

Lex Fridman (2:55:16.800)

you look back over your life, what would you

Lex Fridman (2:55:18.800)

regret not doing?

Lex Fridman (2:55:19.840)

What would you regret not pursuing?

Sergey Nazarov (2:55:23.360)

I think there are a number of things on a personal level

Lex Fridman (2:55:26.000)

each person has, but I think, at least for me,

Lex Fridman (2:55:29.800)

and probably for many of the other people I know,

Lex Fridman (2:55:32.720)

there's a question of what is the body of work

Lex Fridman (2:55:35.800)

that I was involved in?

Lex Fridman (2:55:37.280)

What did I do?

Lex Fridman (2:55:38.680)

What happened, right?

Lex Fridman (2:55:40.160)

What was I involved in?

Lex Fridman (2:55:42.760)

And in my opinion, you should have a good answer to that.

Lex Fridman (2:55:47.840)

You mentioned the body of work in relation

Sergey Nazarov (2:55:50.120)

to whether it helped make a better world.

Lex Fridman (2:55:54.760)

And the fundamental question there is,

Lex Fridman (2:55:58.280)

what does better mean?

Lex Fridman (2:56:00.120)

So it's our striving to understand what is better.

Lex Fridman (2:56:03.920)

What kind of world would we love to exist after we're gone?

Lex Fridman (2:56:09.400)

And I think that's another thing,

Sergey Nazarov (2:56:12.040)

almost unanswerable question,

Lex Fridman (2:56:13.600)

but it's one we can strive towards,

Lex Fridman (2:56:16.440)

is what is a better world?

Lex Fridman (2:56:19.960)

Right, I think that's once again,

Sergey Nazarov (2:56:22.560)

that's a very personal question.

Lex Fridman (2:56:23.800)

I'm not sure if there's an objective moral truth

Sergey Nazarov (2:56:26.240)

that's gonna suddenly give us all an answer.

Lex Fridman (2:56:28.440)

I think it's actually quite fascinating to me

Sergey Nazarov (2:56:30.520)

when people feel they have this objective moral truth,

Lex Fridman (2:56:32.600)

they're so sure in their opinions,

Sergey Nazarov (2:56:34.600)

this is what we do, we should go hurt them or help them

Lex Fridman (2:56:37.800)

or kill them or rescue them or whatever, right?

Sergey Nazarov (2:56:41.080)

There's all these kind of very situational specific

Lex Fridman (2:56:44.320)

kind of like, this is the right thing to do,

Sergey Nazarov (2:56:46.560)

the objective moral truth told me that this is it.

Lex Fridman (2:56:49.960)

But maybe there's a definitive truth

Sergey Nazarov (2:56:51.960)

that we can arrive towards sort of a consensus

Lex Fridman (2:56:56.360)

of what that is within the little local pocket

Sergey Nazarov (2:56:59.640)

of society that you're in.

Lex Fridman (2:57:01.400)

Yeah, that's the point.

Sergey Nazarov (2:57:02.240)

That's what happens.

Lex Fridman (2:57:03.080)

People just then mislabel it

Lex Fridman (2:57:04.360)

and they go like objective moral truth.

Lex Fridman (2:57:06.520)

This is not our idea.

Sergey Nazarov (2:57:09.280)

This is coming up from on high here.

Lex Fridman (2:57:10.760)

This is the objective moral truth that,

Sergey Nazarov (2:57:15.240)

I think exists in some metaphysical form somewhere.

Lex Fridman (2:57:18.640)

And then you build a building with marble and it's big

Lex Fridman (2:57:21.160)

and usually what happens.

Lex Fridman (2:57:22.840)

And then you convince yourself

Sergey Nazarov (2:57:23.920)

that that building represents.

Lex Fridman (2:57:24.760)

I think those people actually,

Sergey Nazarov (2:57:26.440)

the people who build those buildings

Lex Fridman (2:57:27.920)

probably understand that there is no metaphysical objective.

Sergey Nazarov (2:57:30.280)

They're just like, we're all just coming to consensus.

Lex Fridman (2:57:32.640)

I'm gonna build the biggest building and you're like me

Lex Fridman (2:57:34.280)

and that's what we're gonna do, right?

Lex Fridman (2:57:35.800)

They just look at it that way probably.

Sergey Nazarov (2:57:37.960)

I think what ends up happening with all these values is,

Lex Fridman (2:57:43.240)

yeah, people should determine that for themselves.

Sergey Nazarov (2:57:45.000)

I agree that there's a second order question here

Lex Fridman (2:57:47.200)

of what is the best body of work to work on.

Sergey Nazarov (2:57:51.480)

Personally, I think that's probably a mix

Lex Fridman (2:57:53.480)

of what could you realistically achieve?

Sergey Nazarov (2:57:57.280)

Is that gonna have an impact on society

Lex Fridman (2:57:59.040)

that you feel good about?

Lex Fridman (2:58:00.160)

Yeah. Right?

Lex Fridman (2:58:01.480)

So these are probably the two aspects of this question

Lex Fridman (2:58:04.680)

and is this gonna have a good impact on society

Lex Fridman (2:58:07.080)

that you feel good about?

Lex Fridman (2:58:08.120)

Obviously very subjective, right?

Lex Fridman (2:58:09.760)

Some people save animals, some people save forests.

Sergey Nazarov (2:58:13.200)

We and I are creating this system of economic fairness

Lex Fridman (2:58:17.640)

and transparency.

Sergey Nazarov (2:58:19.120)

I feel that I'm in a good position to enable that.

Lex Fridman (2:58:22.920)

I feel that I have a good chance of succeeding at that.

Lex Fridman (2:58:25.680)

And I think that the impact will be quite meaningful

Lex Fridman (2:58:29.080)

for a large number of people.

Lex Fridman (2:58:30.720)

And so I'm completely happy to look back

Lex Fridman (2:58:34.120)

once I made it and see a body of work that achieved that

Lex Fridman (2:58:37.360)

and be very proud of that, right?

Lex Fridman (2:58:38.520)

Because I think that's what I'll be doing

Sergey Nazarov (2:58:40.440)

when I'm looking back.

Lex Fridman (2:58:42.120)

Well, I agree with you.

Sergey Nazarov (2:58:43.040)

The scale of impact as a hybrid smart contracts,

Lex Fridman (2:58:48.400)

this whole idea that you're working on

Sergey Nazarov (2:58:50.760)

has a potential to transform the world for the better

Lex Fridman (2:58:55.360)

at a scale that I can't even imagine.

Lex Fridman (2:59:00.800)

So speaking of which means even more

Lex Fridman (2:59:03.720)

that you would waste so many hours

Sergey Nazarov (2:59:05.880)

of that exciting life with me.

Lex Fridman (2:59:07.520)

Thank you so much for talking to me, Sergei.

Sergey Nazarov (2:59:09.160)

This is a really fascinating conversation,

Lex Fridman (2:59:11.320)

a really fascinating space, and I can't wait to learn more.

Lex Fridman (2:59:14.680)

So thank you so much for talking today.

Lex Fridman (2:59:17.040)

Thank you for having me.

Sergey Nazarov (2:59:17.880)

It's been an absolute pleasure.

Lex Fridman (2:59:19.980)

Thanks for listening to this conversation

Sergey Nazarov (2:59:21.560)

with Sergei Nazarov.

Lex Fridman (2:59:22.880)

And thank you to Wine Access, Athletic Greens, Magic Spoon,

Sergey Nazarov (2:59:27.520)

Indeed, and BetterHelp.

Lex Fridman (2:59:29.800)

Check them out in the description to support this podcast.

Lex Fridman (2:59:33.520)

And now let me leave you with some words from Copernicus.

Lex Fridman (2:59:37.080)

To know that we know what we know

Lex Fridman (2:59:39.560)

and to know that we do not know what we do not know,

Lex Fridman (2:59:43.160)

that is true knowledge.

Sergey Nazarov (2:59:45.640)

Thank you for listening and hope to see you next time.

Lex Fridman (30:00.480)

is that the definition has now come to mean on chain code.

Lex Fridman (30:05.560)

So it's come to mean the codification

Lex Fridman (30:08.440)

of contractual agreement on a blockchain, right?

Lex Fridman (30:11.680)

So there's some code somewhere on some blockchain

Lex Fridman (30:14.120)

that defines what the agreement is.

Sergey Nazarov (30:17.600)

Now that eliminates the part of the definition

Lex Fridman (30:20.840)

that's related to knowing things about the world

Lex Fridman (30:23.160)

and it partly eliminates the definition about payments

Lex Fridman (30:26.080)

and stuff like that.

Lex Fridman (30:26.920)

But basically it's on chain code, right?

Lex Fridman (30:30.560)

We in our recent work on a second white paper

Sergey Nazarov (30:34.000)

have actually put out a different definition

Lex Fridman (30:36.160)

that we call hybrid smart contracts

Sergey Nazarov (30:38.480)

that actually tries to go back to the initial definition

Lex Fridman (30:41.440)

that I started with seven or eight years ago,

Sergey Nazarov (30:43.120)

which basically says that there's some proof somewhere

Lex Fridman (30:47.160)

that's proven to the contract

Lex Fridman (30:48.440)

and the contract can know that

Lex Fridman (30:49.880)

and the contract can gain proof.

Sergey Nazarov (30:51.840)

Then it can use that proof to settle the agreement

Lex Fridman (30:55.040)

that's codified on a blockchain.

Lex Fridman (30:57.520)

So you both need a mechanism to provide proof.

Lex Fridman (31:00.440)

You need a mechanism to codify the contract

Sergey Nazarov (31:02.720)

in a tamper proof way on something like a blockchain.

Lex Fridman (31:05.480)

And then as with all contracts,

Sergey Nazarov (31:06.880)

there's a presumption that there's

Lex Fridman (31:07.800)

some kind of release of value.

Lex Fridman (31:09.480)

So I think a smart contract in our industry right now

Lex Fridman (31:13.280)

means on chain code,

Sergey Nazarov (31:15.040)

which limits it to whatever can be done on chain only.

Lex Fridman (31:19.040)

And then in our internal definition for us

Lex Fridman (31:22.240)

and for us at Chainlink and for me,

Lex Fridman (31:24.480)

it's hybrid smart contracts,

Sergey Nazarov (31:26.600)

which is actually the original definition.

Lex Fridman (31:28.480)

It's the idea that a contract can both know what happened

Lex Fridman (31:32.520)

and automatically resolve to the proper outcome

Lex Fridman (31:36.720)

based on what happened.

Lex Fridman (31:38.000)

So you're referring to the Chainlink 2.0 white paper,

Lex Fridman (31:41.080)

which is a paper that I recommend people look.

Sergey Nazarov (31:45.640)

It's a very easy read and very well structured

Lex Fridman (31:48.200)

and very thorough.

Lex Fridman (31:49.040)

So I really enjoyed it.

Lex Fridman (31:50.400)

Very recently released, I guess.

Lex Fridman (31:53.000)

Can you dig in deeper?

Lex Fridman (31:53.920)

What is a hybrid smart contract?

Sergey Nazarov (31:57.120)

You mentioned sort of this idea of data

Lex Fridman (32:00.640)

or knowing about the world and on chain and off chain.

Lex Fridman (32:05.840)

So what are the different roles in this?

Lex Fridman (32:07.680)

So hybrid, by the way, refers to the fact

Sergey Nazarov (32:10.600)

that it's on chain and off chain contracts.

Lex Fridman (32:14.800)

So maybe digging deeper of what the heck is it

Lex Fridman (32:18.560)

and what does it mean to know stuff about the world?

Lex Fridman (32:21.640)

Like how do you actually achieve that?

Sergey Nazarov (32:23.720)

Yeah, absolutely.

Lex Fridman (32:26.080)

So the on chain part is where the agreement itself is.

Sergey Nazarov (32:30.520)

That's the smart contract itself.

Lex Fridman (32:32.960)

And that's where you codify certain conditions,

Sergey Nazarov (32:35.040)

such as the conditions under which an interest payment

Lex Fridman (32:38.920)

is made or the conditions under which the contract pays out

Sergey Nazarov (32:41.760)

the full amount that it holds to someone based

Lex Fridman (32:44.480)

on a derivative outcome or something like that.

Sergey Nazarov (32:47.080)

Now, what the on chain code is very good at

Lex Fridman (32:49.120)

is creating transparency about what the core conditions

Sergey Nazarov (32:52.160)

of the contract are.

Lex Fridman (32:53.920)

It's very good at taking in money from other private keys

Sergey Nazarov (32:57.120)

that send it tokens and send it value to hold.

Lex Fridman (33:00.800)

And then it's also very good at returning money

Sergey Nazarov (33:03.680)

or returning value back to other addresses

Lex Fridman (33:06.480)

or other private keys.

Sergey Nazarov (33:08.000)

It can also be involved in governance.

Lex Fridman (33:09.560)

It can be involved in a few other private key signature

Sergey Nazarov (33:11.680)

based operations.

Lex Fridman (33:14.400)

But primarily the on chain part of a hybrid smart contract,

Sergey Nazarov (33:18.160)

from what I've seen so far, defines the agreement,

Lex Fridman (33:21.360)

takes in value and returns value based upon the conditions

Sergey Nazarov (33:24.840)

codified in the agreement on a blockchain.

Lex Fridman (33:27.480)

The second and equally important off chain part

Sergey Nazarov (33:30.400)

is where the term oracle and an oracle comes in

Lex Fridman (33:33.400)

or an oracle mechanism or a decentralized oracle network

Sergey Nazarov (33:36.640)

as we describe it in the paper.

Lex Fridman (33:38.440)

And this is another decentralized computational system

Lex Fridman (33:43.760)

that has a different goal, right?

Lex Fridman (33:45.280)

So blockchains have the goal of packaging transactions

Sergey Nazarov (33:48.840)

into blocks and connecting them

Lex Fridman (33:50.800)

in a cryptographically unique way to create security

Lex Fridman (33:54.480)

and assurance about that chain of transactions.

Lex Fridman (33:57.960)

Oracles and decentralized oracle networks

Sergey Nazarov (34:01.680)

achieve consensus and they achieve decentralization

Lex Fridman (34:06.320)

about the topic of what happened, right?

Lex Fridman (34:09.000)

So blockchains structure transactions.

Lex Fridman (34:11.520)

Some of those transactions might be the state changes

Sergey Nazarov (34:14.280)

in different pieces of on chain code.

Lex Fridman (34:16.960)

And then those on chain pieces of code require input.

Sergey Nazarov (34:23.320)

I think the thing that people get kind of a little bit

Lex Fridman (34:25.800)

thrown by is despite being called smart contracts,

Sergey Nazarov (34:29.840)

the on chain code on a blockchain

Lex Fridman (34:32.160)

cannot actually speak to any other system.

Lex Fridman (34:35.560)

So blockchains are valuable and useful

Lex Fridman (34:38.400)

as far as they're tamper proof and secure.

Lex Fridman (34:40.720)

And to be tamper proof and secure,

Lex Fridman (34:42.200)

they're made this kind of walled garden

Sergey Nazarov (34:44.160)

that is able to know and interact

Lex Fridman (34:46.920)

only with the highly reliable information

Sergey Nazarov (34:49.600)

that's within that system,

Lex Fridman (34:51.800)

which is basically tokens and private key signatures.

Sergey Nazarov (34:56.240)

All the other world's information is not available

Lex Fridman (34:59.320)

in a blockchain inherently.

Lex Fridman (35:01.280)

And a smart contract or a piece of on chain code

Lex Fridman (35:04.000)

can't just say, hey, I'm gonna go get some data

Sergey Nazarov (35:06.520)

from over here because the API they would get it from

Lex Fridman (35:09.800)

creates a whole bunch of security concerns

Sergey Nazarov (35:11.840)

for the blockchain itself

Lex Fridman (35:13.440)

and a whole bunch of consensus issues

Sergey Nazarov (35:14.960)

about how to agree on what that API said

Lex Fridman (35:17.720)

or what the truth of the world is, right?

Sergey Nazarov (35:19.320)

Because it's not even agreeing on what one API said,

Lex Fridman (35:22.400)

it's more so creating a reliable

Sergey Nazarov (35:25.360)

form of decentralized computation

Lex Fridman (35:27.440)

that can give you a definitive proof of what happened

Lex Fridman (35:30.040)

and not just what one API said.

Lex Fridman (35:31.840)

So for example, some of our most widely used networks

Sergey Nazarov (35:34.520)

have well over 30 nodes and well over 10 data sources

Lex Fridman (35:37.480)

that are all providing information

Sergey Nazarov (35:38.960)

about the same type of data.

Lex Fridman (35:40.640)

And then there's consensus on that one piece of data,

Sergey Nazarov (35:43.960)

which is then written in and essentially given back

Lex Fridman (35:46.400)

into the on chain code to tell it what happened

Sergey Nazarov (35:49.880)

because you can't really make an agreement

Lex Fridman (35:52.240)

unless you know what happened, right?

Sergey Nazarov (35:54.320)

If you and me were to make an agreement

Lex Fridman (35:55.680)

and set some contractual conditions,

Lex Fridman (35:57.400)

but our agreement could never know what happened,

Lex Fridman (35:59.920)

it would be completely useless.

Sergey Nazarov (36:02.640)

However, if you and me made an agreement

Lex Fridman (36:04.400)

and there was another system called an Oracle mechanism

Sergey Nazarov (36:06.600)

or decentralized Oracle network

Lex Fridman (36:08.000)

that proved what happened definitively

Lex Fridman (36:10.600)

and you and me pre agreed

Lex Fridman (36:12.000)

that whatever this mechanism says is what happened,

Sergey Nazarov (36:15.120)

then we can achieve an entirely new level of automation.

Lex Fridman (36:18.800)

We can suddenly say, there's this piece of on chain code

Sergey Nazarov (36:22.200)

that's highly reliable.

Lex Fridman (36:23.520)

We can give it millions, billions,

Sergey Nazarov (36:25.600)

eventually trillions of dollars in value.

Lex Fridman (36:27.880)

And it is controlled by this other system over here

Sergey Nazarov (36:30.840)

that's also highly reliable

Lex Fridman (36:32.600)

under this configurable set of definitive truth

Lex Fridman (36:35.040)

and decentralization conditions,

Lex Fridman (36:36.520)

which we all agree are sufficiently stringent

Sergey Nazarov (36:39.480)

to control that much value.

Lex Fridman (36:41.360)

And therefore the combination

Sergey Nazarov (36:42.880)

of this tamper proof on chain representation of a contract

Lex Fridman (36:46.240)

and this mutually agreed upon definition

Sergey Nazarov (36:50.200)

of a trigger or a proof system combined

Lex Fridman (36:54.640)

is a hybrid smart contract,

Sergey Nazarov (36:56.760)

which as you can see probably already

Lex Fridman (36:59.320)

does a lot more than just a contract on chain, right?

Lex Fridman (37:03.880)

Can you talk about this consensus mechanism,

Lex Fridman (37:05.640)

which by the way is just fascinating.

Lex Fridman (37:07.560)

So there's the on chain consensus mechanism

Lex Fridman (37:11.480)

of proof of work and proof of stake.

Lex Fridman (37:14.600)

And then there is this Oracle network consensus mechanism

Lex Fridman (37:20.680)

of what is true.

Lex Fridman (37:23.960)

So how do you, can you compare the two?

Lex Fridman (37:26.960)

Like how do you achieve that kind of consensus?

Lex Fridman (37:28.840)

How do you achieve security

Lex Fridman (37:30.880)

in integrating data about the world

Sergey Nazarov (37:35.520)

in a way that's definitively true

Lex Fridman (37:39.240)

in a way that is usefully true,

Sergey Nazarov (37:41.200)

such that we can rely on it in making major agreements

Lex Fridman (37:44.480)

that as you said, involve billions of trillions of dollars.

Sergey Nazarov (37:49.160)

Right, so this is the challenging,

Lex Fridman (37:50.440)

this is the challenging question, right?

Sergey Nazarov (37:51.880)

This is the challenging problem that Oracle networks,

Lex Fridman (37:56.520)

Oracles, we at Chainlink that we work on

Sergey Nazarov (37:59.640)

in order to create this definitive truth

Lex Fridman (38:01.800)

to trigger and create hyper automation

Sergey Nazarov (38:04.360)

in this more advanced form,

Lex Fridman (38:06.640)

more advanced form of hybrid smart contracts.

Sergey Nazarov (38:09.240)

The reality I think of this problem

Lex Fridman (38:12.400)

is that it is very specific to each use case.

Lex Fridman (38:16.520)

And it, and this is actually how we've architected our system

Lex Fridman (38:20.760)

is in a very flexible way.

Lex Fridman (38:22.760)

So for example, you need an ability for an Oracle network

Lex Fridman (38:27.240)

to grow in the amount of nodes that it has

Lex Fridman (38:30.320)

relative to the value it secures, right?

Lex Fridman (38:33.200)

So if you have an Oracle network

Sergey Nazarov (38:34.960)

that secures a hundred thousand dollars

Lex Fridman (38:37.240)

in like a beta of a financial product,

Sergey Nazarov (38:40.080)

maybe it can be fine with only seven nodes

Lex Fridman (38:42.640)

and only two or three data sources, right?

Sergey Nazarov (38:44.440)

Because the risk to that Oracle network

Lex Fridman (38:47.120)

is relatively low based on the value it secures.

Lex Fridman (38:50.960)

So the first question is actually

Lex Fridman (38:53.160)

how do you scale security relative to value

Lex Fridman (38:57.960)

secured by that Oracle network?

Lex Fridman (38:59.480)

Because it wouldn't be very efficient

Sergey Nazarov (39:00.800)

to have a thousand nodes securing $100,000 worth of value.

Lex Fridman (39:05.800)

So one of the first questions is how do we properly scale

Lex Fridman (39:08.720)

and how do we compose ensembles of nodes

Lex Fridman (39:12.040)

in a decentralized way where we can know that,

Sergey Nazarov (39:14.840)

okay, we're going from seven nodes in a network

Lex Fridman (39:17.320)

to 15, to 31, to 57, to 105, to a thousand, right?

Lex Fridman (39:23.520)

So that's one dimension of the problem.

Lex Fridman (39:25.800)

So you have to be scaling the number of nodes

Sergey Nazarov (39:27.440)

relative to the value that's derived

Lex Fridman (39:31.120)

from the truth integrated into those nodes.

Lex Fridman (39:34.280)

Well, that's not the only problem, right?

Lex Fridman (39:36.240)

The other side of this is that you're trying to create

Sergey Nazarov (39:38.760)

a deterministic result, a deterministic output

Lex Fridman (39:42.040)

from a set of non deterministic disparate systems,

Sergey Nazarov (39:44.400)

data sources, or places that prove things.

Lex Fridman (39:47.040)

Can you also, just as an aside, what is an Oracle node?

Lex Fridman (39:51.080)

What is the role of an Oracle node?

Lex Fridman (39:53.480)

Sure, so an Oracle node essentially exists in both places,

Sergey Nazarov (39:58.200)

it exists in both worlds.

Lex Fridman (40:00.120)

It exists as an on chain contract

Sergey Nazarov (40:02.760)

that represents either an Oracle network or an Oracle node.

Lex Fridman (40:07.440)

So there's an on chain interface in the form of a contract

Sergey Nazarov (40:10.400)

that says, I exist to give you this list of inputs.

Lex Fridman (40:15.080)

You can request weather data from me,

Sergey Nazarov (40:16.920)

you can request price data from me,

Lex Fridman (40:18.960)

you can ask me to send a payment somewhere.

Lex Fridman (40:20.520)

So it's like an API, so it's a pointer to a API

Lex Fridman (40:24.480)

that provides truth about this world.

Sergey Nazarov (40:28.880)

It's an interface, so just like an API

Lex Fridman (40:31.320)

is an interface for Web 2.0 engineers,

Sergey Nazarov (40:35.480)

Oracle networks and the contracts that represent them

Lex Fridman (40:39.480)

or individual nodes are the interface

Sergey Nazarov (40:42.480)

of Web 3.0's use of services.

Lex Fridman (40:45.560)

And services includes all services,

Sergey Nazarov (40:48.600)

data, payment systems, messaging systems,

Lex Fridman (40:52.560)

whatever Web 2.0 or any kind of computing service

Sergey Nazarov (40:56.200)

that you can conceptualize,

Lex Fridman (40:58.240)

needs an interface on chain in the form of a contract

Sergey Nazarov (41:01.680)

that says, here are the services I can provide for you,

Lex Fridman (41:04.800)

here are the transactions you need to send me

Sergey Nazarov (41:07.280)

to get back this data or that computation or this result.

Lex Fridman (41:11.240)

And then what you actually see

Sergey Nazarov (41:12.360)

is that decentralized Oracle networks,

Lex Fridman (41:14.000)

because they're uniquely capable of generating

Sergey Nazarov (41:16.960)

their own computations in a decentralized way

Lex Fridman (41:19.760)

around the data that they have access to,

Sergey Nazarov (41:22.400)

you actually see decentralized Oracle networks

Lex Fridman (41:24.760)

generating a lot of these services.

Lex Fridman (41:26.360)

So for example, we have a randomness service,

Lex Fridman (41:29.440)

a verifiable randomness function service

Sergey Nazarov (41:32.080)

that basically provides randomness on chain

Lex Fridman (41:35.880)

and that randomness is then used in lotteries

Lex Fridman (41:38.160)

and various other contracts that need randomness.

Lex Fridman (41:40.240)

But that randomness, it's not a piece of data

Sergey Nazarov (41:42.400)

that comes from somewhere else.

Lex Fridman (41:43.680)

We don't go to another data source and get it.

Sergey Nazarov (41:46.560)

We generate it within an Oracle node

Lex Fridman (41:49.000)

that then provides it over into Oracle node

Sergey Nazarov (41:52.120)

or Oracle nodes that provide it

Lex Fridman (41:53.280)

into the contracts themselves.

Lex Fridman (41:55.160)

So why do you say Oracle nodes are non deterministic?

Lex Fridman (41:58.760)

Well, they are as far as they come to consensus,

Lex Fridman (42:01.080)

but there's this kind of different problem here, right?

Lex Fridman (42:05.720)

The blockchains are very focused

Sergey Nazarov (42:08.160)

on generating blocks of transactions

Lex Fridman (42:10.720)

within a smaller universe of transaction types,

Sergey Nazarov (42:13.600)

a certain block size and a certain set of conditions.

Lex Fridman (42:16.880)

And then they have a economic system that says,

Sergey Nazarov (42:20.640)

I will perpetually generate blocks of this size

Lex Fridman (42:23.280)

with these transaction types in this kind of limited set

Sergey Nazarov (42:26.120)

of transaction types, whether those are UTXO transactions

Lex Fridman (42:29.240)

or scripted solidity or whatever it is.

Sergey Nazarov (42:32.920)

Oracles and Oracle networks,

Lex Fridman (42:35.360)

we don't have a blockchain, for example.

Sergey Nazarov (42:36.840)

There is no chain link blockchain.

Lex Fridman (42:38.680)

Our goal is not to generate a certain set

Sergey Nazarov (42:41.920)

of very clearly predetermined transaction types

Lex Fridman (42:45.240)

into a set of transactions that are put into blocks

Lex Fridman (42:48.120)

and it will infinitely be done that way.

Lex Fridman (42:50.720)

Our goal is actually to create what we call a Meta layer,

Sergey Nazarov (42:54.840)

a decentralized Meta layer between the non deterministic,

Lex Fridman (42:58.840)

highly unreliable world

Lex Fridman (43:01.720)

and the highly hyper reliable world of blockchains

Lex Fridman (43:05.760)

so that the unreliable world can be passed

Sergey Nazarov (43:08.480)

through this decentralized Meta layer.

Lex Fridman (43:10.120)

And it can coexist with a reliable on chain world.

Sergey Nazarov (43:13.920)

Exactly, it can coexist and in some cases,

Lex Fridman (43:15.960)

the Meta layer might generate it.

Lex Fridman (43:17.800)

So the problem in giving you this straight answer

Lex Fridman (43:20.240)

is that there's just such a wide array of services.

Sergey Nazarov (43:24.160)

If you were to say,

Lex Fridman (43:25.000)

well, Sergey, how do we generate randomness

Lex Fridman (43:27.840)

from a data source?

Lex Fridman (43:28.840)

Well, we don't use a data source to generate the randomness.

Sergey Nazarov (43:31.280)

That's the type of service that can be generated

Lex Fridman (43:33.160)

in an Oracle network itself.

Lex Fridman (43:35.200)

And so there'll be certain computations

Lex Fridman (43:37.120)

that Oracle networks themselves generate themselves

Sergey Nazarov (43:40.240)

to augment and improve blockchains.

Lex Fridman (43:43.000)

And it is actually the goal of Oracles

Sergey Nazarov (43:44.600)

to consistently do that.

Lex Fridman (43:45.720)

So if you were to think about the stack

Sergey Nazarov (43:48.280)

in a very generic high level,

Lex Fridman (43:50.200)

you would see blockchains or databases.

Sergey Nazarov (43:52.400)

They're basically the data structures

Lex Fridman (43:53.720)

that retain a lot of information

Sergey Nazarov (43:55.800)

in this transparent, highly reliable form.

Lex Fridman (43:58.400)

Smart contract code is the application logic.

Sergey Nazarov (44:01.880)

It is the logic under which all of this

Lex Fridman (44:04.240)

kind of activity occurs,

Sergey Nazarov (44:06.320)

storing data in the data structure in the blockchain

Lex Fridman (44:09.480)

as a database in a certain conceptualization of it.

Lex Fridman (44:13.720)

And then Oracles and Oracle networks

Lex Fridman (44:15.760)

are all the services that are used by the application code.

Sergey Nazarov (44:20.840)

So, you know, by analogy, let's take Uber.

Lex Fridman (44:23.360)

Uber initially, some core code goes and gets the GPS API

Sergey Nazarov (44:27.800)

from Google Maps about the user's location,

Lex Fridman (44:30.000)

sends a message to the user through Twilio,

Sergey Nazarov (44:32.280)

pays the driver through Stripe.

Lex Fridman (44:34.720)

If those services weren't available

Sergey Nazarov (44:36.760)

to the people who made Uber,

Lex Fridman (44:38.280)

they wouldn't have made Uber, right?

Sergey Nazarov (44:39.680)

Because they would have written their core code

Lex Fridman (44:41.120)

on some database,

Lex Fridman (44:42.280)

and then they would have had to make a geolocation company,

Lex Fridman (44:44.720)

a telecom messaging company,

Lex Fridman (44:46.680)

and the global payments company.

Lex Fridman (44:48.320)

And they wouldn't have done that because it's too hard.

Lex Fridman (44:50.600)

And that's the weird scenario

Lex Fridman (44:52.360)

that a lot of people in our industry are in.

Lex Fridman (44:54.400)

And that's the problem that Oracles and Oracle networks fix

Lex Fridman (44:57.920)

is they provide these decentralized services

Sergey Nazarov (45:00.920)

to take this developer ecosystem,

Lex Fridman (45:03.840)

the blockchain and smart contract developer ecosystem

Sergey Nazarov (45:06.800)

from, hey, I can have a database

Lex Fridman (45:09.480)

and write some application logic

Sergey Nazarov (45:11.040)

about tokenization and voting and private key signing,

Lex Fridman (45:14.160)

all of which is super useful and is a critical foundation.

Lex Fridman (45:17.400)

But now, if you just layer on all the world's services,

Lex Fridman (45:20.880)

whether that's market data, weather data, randomness,

Sergey Nazarov (45:23.680)

suddenly people can build DeFi, fraud proof gaming,

Lex Fridman (45:26.880)

fraud proof global trade, fraud proof ad networks.

Lex Fridman (45:30.320)

And that's why this world of decentralized services

Lex Fridman (45:33.760)

and decentralized Oracle networks

Sergey Nazarov (45:35.440)

is particularly, in my opinion, important to our industry.

Lex Fridman (45:38.880)

Yeah, it's funny.

Lex Fridman (45:39.720)

And you talk about the currents of a decentralized world,

Lex Fridman (45:42.840)

decentralized world, DeFi,

Lex Fridman (45:44.200)

but decentralized services world is primarily just tokens.

Lex Fridman (45:48.160)

And it's basically just financial transactions.

Lex Fridman (45:51.880)

And the kind of thing, the reason why it's super exciting,

Lex Fridman (45:55.480)

the kind of thing you do with Chainlink and Oracle networks

Sergey Nazarov (45:58.160)

is that you can basically open up

Lex Fridman (46:00.120)

the whole world of services

Sergey Nazarov (46:02.920)

to this kind of decentralized smart contract world.

Lex Fridman (46:07.920)

I mean, you're talking about just orders of magnitude

Sergey Nazarov (46:14.360)

greater impact financially

Lex Fridman (46:16.080)

and just socially and philosophically.

Sergey Nazarov (46:21.600)

Are there interesting near term

Lex Fridman (46:23.360)

and long term applications that excite you?

Sergey Nazarov (46:26.000)

Yeah, there's a lot that excites me.

Lex Fridman (46:27.720)

And that is how I think about it,

Sergey Nazarov (46:28.920)

that it's not just about

Lex Fridman (46:29.880)

we made a decentralized Oracle network.

Sergey Nazarov (46:31.880)

It's about we made a decentralized service

Lex Fridman (46:34.120)

or collection of services

Sergey Nazarov (46:35.400)

that's going from hundreds to thousands.

Lex Fridman (46:37.600)

And then people are able to build

Sergey Nazarov (46:39.000)

the hybrid smart contracts,

Lex Fridman (46:40.440)

which I think will redefine what our industry is about.

Sergey Nazarov (46:43.200)

Because for example, for the people

Lex Fridman (46:44.480)

that only learned about blockchains

Sergey Nazarov (46:45.960)

through the lens of NFTs,

Lex Fridman (46:48.080)

they understand blockchains through NFTs,

Lex Fridman (46:50.360)

not through speculative tokens or Bitcoins, right?

Lex Fridman (46:53.120)

And I think that will continue.

Sergey Nazarov (46:55.800)

I think the use cases that excite me,

Lex Fridman (46:58.280)

they vary between the developed market,

Sergey Nazarov (47:01.000)

the developed world's economies and emerging markets.

Lex Fridman (47:04.440)

I think in the developed world,

Lex Fridman (47:06.200)

what you will see is that transparency,

Lex Fridman (47:09.160)

creating a new level of information

Sergey Nazarov (47:12.840)

for how markets work and the risk that is in markets

Lex Fridman (47:16.480)

and kind of the dynamics that put

Sergey Nazarov (47:19.640)

the global financial system

Lex Fridman (47:20.960)

at systemic financial risk like 2008.

Lex Fridman (47:23.600)

And my hope is that all of this infrastructure

Lex Fridman (47:25.880)

will soften the boom and bust cycles

Sergey Nazarov (47:29.960)

by making information immediately available

Lex Fridman (47:32.280)

to all market participants,

Sergey Nazarov (47:34.000)

which is by the way, what all market participants want,

Lex Fridman (47:36.680)

except for the very, very, very small minority

Sergey Nazarov (47:39.280)

that are able to game the system and their benefit

Lex Fridman (47:41.760)

and benefit from booms but avoid busts

Sergey Nazarov (47:43.640)

because of their asymmetric access to information,

Lex Fridman (47:46.160)

which really everybody should have

Lex Fridman (47:47.680)

and which this technically solves.

Lex Fridman (47:49.800)

I think in the process of doing that

Lex Fridman (47:51.720)

and which is happening, I think right about now,

Lex Fridman (47:54.320)

you see a polishing of the technology

Sergey Nazarov (47:56.640)

such that it can be made available to emerging markets.

Lex Fridman (47:59.680)

And on a personal level,

Sergey Nazarov (48:00.960)

I feel that the emerging markets will benefit much more

Lex Fridman (48:04.800)

from this technology,

Sergey Nazarov (48:06.120)

just like the emerging markets benefit much more

Lex Fridman (48:08.360)

from the internet or from those $50 Android phones

Sergey Nazarov (48:12.440)

that people can have,

Lex Fridman (48:13.760)

because it's such a massive shift

Lex Fridman (48:15.960)

in how people's lives work, right?

Lex Fridman (48:17.920)

I have always had access to books and a library,

Sergey Nazarov (48:20.320)

which has been fantastic and very important.

Lex Fridman (48:23.200)

But there are places in the world

Sergey Nazarov (48:24.520)

where people don't have libraries,

Lex Fridman (48:26.480)

but now they have the internet and a $50 Android phone

Lex Fridman (48:29.920)

and they can watch the same Stanford lecture that I watch.

Lex Fridman (48:32.960)

I mean, that's kind of mind blowing realistically, right?

Sergey Nazarov (48:35.760)

They just went from zero to one in a very,

Lex Fridman (48:38.560)

very dramatic way.

Sergey Nazarov (48:40.280)

I think all of these smart contracts,

Lex Fridman (48:43.400)

and in my case, I think the one

Sergey Nazarov (48:45.040)

that I seem to keep coming back to is crop insurance,

Lex Fridman (48:48.360)

where partly because it doesn't have

Sergey Nazarov (48:49.840)

a tokenization component,

Lex Fridman (48:50.960)

partly because it's actually much more important

Sergey Nazarov (48:52.520)

than it might seem.

Lex Fridman (48:55.920)

What is crop insurance?

Sergey Nazarov (48:57.760)

Right, so this is the nature of why it's sometimes hard

Lex Fridman (49:03.320)

to see the full value of what our industry does,

Sergey Nazarov (49:05.200)

because it solves all these kinds of backend problems

Lex Fridman (49:07.360)

that we don't have, right?

Lex Fridman (49:08.400)

So crop insurance is if I own a farm and it doesn't rain,

Lex Fridman (49:12.520)

I get an insurance payout,

Lex Fridman (49:14.160)

so I don't need to close down my farm,

Lex Fridman (49:16.280)

because if it didn't rain, I don't have crops, right?

Lex Fridman (49:19.560)

So people in the developed world can get crop insurance

Lex Fridman (49:23.680)

and there's all kinds of systems

Sergey Nazarov (49:25.520)

that basically pay them out,

Lex Fridman (49:26.680)

and then they can argue with the insurance company

Sergey Nazarov (49:29.440)

if they don't get paid out properly and whatever.

Lex Fridman (49:31.840)

And this allows people to smooth out risk.

Sergey Nazarov (49:35.960)

In fact, a lot of the global options markets

Lex Fridman (49:39.040)

were about this, right?

Sergey Nazarov (49:40.200)

They were initially about people selling their produce

Lex Fridman (49:43.360)

or their crops ahead of time,

Lex Fridman (49:45.200)

so that if there was a risk of drought,

Lex Fridman (49:47.280)

they weren't impacted by it, right?

Lex Fridman (49:49.640)

And that's where a lot of options trading

Lex Fridman (49:51.360)

and all this kind of stuff came from,

Sergey Nazarov (49:53.680)

even though it's now turned into this kind of global casino.

Lex Fridman (49:57.040)

But in the emerging market,

Sergey Nazarov (49:58.960)

there are literally people that,

Lex Fridman (50:01.280)

if they don't have rain for two seasons,

Sergey Nazarov (50:03.520)

they need to close down their farm

Lex Fridman (50:04.880)

and become a migrant worker of some kind.

Lex Fridman (50:07.240)

And now they have a $50 Android phone

Lex Fridman (50:10.160)

where they can read Wikipedia,

Lex Fridman (50:12.120)

but they're still decades away from an insurance company

Lex Fridman (50:15.400)

coming to their geography and offering them insurance

Sergey Nazarov (50:18.280)

because their local legal system simply doesn't allow

Lex Fridman (50:20.560)

that type of thing to exist.

Sergey Nazarov (50:22.040)

No insurance company is gonna go and create insurance entity

Lex Fridman (50:25.040)

and offer them insurance because the levels of fraud

Lex Fridman (50:27.680)

and the ability to resolve that fraud through courts

Lex Fridman (50:29.640)

would just not exist.

Lex Fridman (50:31.280)

So now these people have to wait for decades

Lex Fridman (50:34.160)

to have this very basic form of financial protection

Sergey Nazarov (50:37.160)

or something like a bank account even.

Lex Fridman (50:39.520)

And with this technology, they don't, right?

Lex Fridman (50:42.000)

So with this technology, if I have a $50 Android phone

Lex Fridman (50:45.560)

and the smart contract has data from satellites

Sergey Nazarov (50:48.840)

or weather stations about the weather conditions

Lex Fridman (50:51.200)

in the geography that my farm is in,

Sergey Nazarov (50:53.480)

I can put value into the smart contract

Lex Fridman (50:57.320)

and the smart contract will automatically pay me out back,

Sergey Nazarov (51:00.720)

pay me back out at my Android phone.

Lex Fridman (51:02.720)

And guess what?

Sergey Nazarov (51:04.120)

I just leapfrogged past my corrupt government

Lex Fridman (51:07.680)

not being able to provide a legal infrastructure

Sergey Nazarov (51:10.800)

to create insurance.

Lex Fridman (51:12.320)

I just leapfrogged past dealing with insurance companies

Sergey Nazarov (51:15.080)

that'll probably price gouge me and often not pay out.

Lex Fridman (51:19.520)

And I leapfrogged into the world of hyper reliable

Sergey Nazarov (51:24.640)

kind of guaranteed smart contract outcomes

Lex Fridman (51:27.560)

that are as good or in many cases better

Sergey Nazarov (51:29.480)

than what farmers in all parts of other parts

Lex Fridman (51:31.440)

of the world have.

Lex Fridman (51:32.720)

And this type of dynamic for the emerging markets

Lex Fridman (51:35.160)

of creating a way for people to control and manage risk

Sergey Nazarov (51:37.960)

in their economic life, I think extends way past insurance.

Lex Fridman (51:41.200)

It extends to them having bank accounts

Sergey Nazarov (51:42.800)

to combat local inflation.

Lex Fridman (51:44.360)

It extends to them being able to sell their goods

Sergey Nazarov (51:46.680)

on the free market of global trade without middlemen.

Lex Fridman (51:50.200)

It extends to all these things

Lex Fridman (51:51.320)

that we don't really care about, right?

Lex Fridman (51:53.120)

Because we're not farmers,

Lex Fridman (51:54.840)

but are unbelievably impactful for people

Lex Fridman (51:57.920)

that don't have a bank account

Lex Fridman (51:59.480)

and their inflation rate in their country is double digits

Lex Fridman (52:03.320)

or their farm completely depends on rain

Sergey Nazarov (52:06.040)

or their livelihood completely depends

Lex Fridman (52:07.800)

on their ability to sell goods.

Lex Fridman (52:10.120)

And they can't sell those goods because there's a middleman

Lex Fridman (52:12.720)

who essentially controls all the trust relationships.

Lex Fridman (52:16.160)

But now we have the internet and smart contracts

Lex Fridman (52:18.640)

and that might not have to be the case

Sergey Nazarov (52:20.800)

in the next five or 10 years.

Lex Fridman (52:22.480)

Yeah, so that definitely has a quality of life impact

Sergey Nazarov (52:25.560)

on the particular farmer's life,

Lex Fridman (52:27.040)

but I suspect it has a huge like down the line ripple effect

Sergey Nazarov (52:32.600)

on the whole supply chain.

Lex Fridman (52:33.920)

So if you think about farmers,

Lex Fridman (52:36.160)

but any other people that produce things

Lex Fridman (52:41.160)

that are part of a large like logistics network,

Sergey Nazarov (52:46.800)

like supply chain network,

Lex Fridman (52:48.920)

that means when you increase reliability,

Sergey Nazarov (52:52.520)

you sort of increase transparency and control,

Lex Fridman (52:57.520)

but like where any one node in that supply chain network

Sergey Nazarov (53:01.880)

can formalize the way it operates

Lex Fridman (53:06.280)

in its agreements with others,

Sergey Nazarov (53:08.640)

then you could just have a very like at scale

Lex Fridman (53:13.840)

transformative effect on how people that down the line

Sergey Nazarov (53:18.960)

use the services that you provide,

Lex Fridman (53:20.880)

the products that you create operate.

Lex Fridman (53:23.240)

So like, it's almost hard to imagine

Lex Fridman (53:27.680)

the possible ways it might transform the world.

Sergey Nazarov (53:30.520)

I wonder how much friction there is in the system,

Lex Fridman (53:33.160)

I guess, currently that smart contracts might remove.

Sergey Nazarov (53:37.520)

That's almost unknown.

Lex Fridman (53:40.680)

You can sort of hypothesize and stuff, but I wonder.

Sergey Nazarov (53:44.440)

I've seen enough bureaucracy in my life

Lex Fridman (53:47.840)

to know that smart contracts in many cases

Sergey Nazarov (53:50.400)

would remove bureaucracy.

Lex Fridman (53:52.560)

And I wonder how the world will be

Sergey Nazarov (53:55.600)

once you remove much of the bureaucracy.

Lex Fridman (53:58.320)

Coming from the Soviet Union,

Sergey Nazarov (54:00.120)

where I just have seen the life sucked out

Lex Fridman (54:05.120)

of the innovative spirit of human nature by bureaucracy.

Sergey Nazarov (54:11.280)

I wonder, the kind of amazing world that could be created

Lex Fridman (54:14.880)

once bureaucracy is removed.

Sergey Nazarov (54:17.920)

Yeah, I think it's fascinating how the world can evolve.

Lex Fridman (54:22.280)

I think this extends a lot further than people think

Sergey Nazarov (54:25.280)

into many, many different parts of the global economy.

Lex Fridman (54:28.040)

It might start with NFTs for art,

Lex Fridman (54:30.880)

or it might start with DeFi, right?

Lex Fridman (54:33.280)

Or it might start with fraud proof ad networks next.

Sergey Nazarov (54:36.600)

We don't know what it's gonna go to next,

Lex Fridman (54:39.320)

but I think the implication of people being

Sergey Nazarov (54:42.440)

in a system of contracts that holds them accountable

Lex Fridman (54:46.360)

and guarantees contractual outcomes,

Sergey Nazarov (54:48.960)

regardless of a local legal system,

Lex Fridman (54:51.240)

is something that I think extends to the supply chain.

Sergey Nazarov (54:53.960)

You can prove that goods were sourced in an ethical way,

Lex Fridman (54:57.720)

and you can prove that in a way that can't be gamed.

Sergey Nazarov (55:00.200)

That'll change buying power and supplier power

Lex Fridman (55:03.480)

and how people produce goods that we all consume.

Lex Fridman (55:06.760)

And then on the political level,

Lex Fridman (55:08.840)

I personally think that in a number of decades,

Sergey Nazarov (55:11.760)

we could literally be in a place

Lex Fridman (55:13.560)

where politicians can commit

Sergey Nazarov (55:16.000)

to a certain set of smart contract kind of budget,

Lex Fridman (55:20.360)

definitional kind of results.

Sergey Nazarov (55:22.280)

For example, we discovered oil.

Lex Fridman (55:24.560)

I promise as a politician, I'm gonna take the oil

Lex Fridman (55:26.840)

and I'm gonna redistribute it to all of you.

Lex Fridman (55:29.200)

Well, that's wonderful.

Sergey Nazarov (55:30.440)

That's a great idea.

Lex Fridman (55:31.640)

Sounds very nice when you're running for office.

Lex Fridman (55:34.240)

Why don't we codify that in a smart contract?

Lex Fridman (55:36.760)

And why don't we put those conditions

Lex Fridman (55:38.760)

very solidly on a blockchain?

Lex Fridman (55:40.680)

And then once you've been elected,

Sergey Nazarov (55:44.040)

we'll just turn that one on

Lex Fridman (55:45.760)

and it'll distribute the money just like you said,

Lex Fridman (55:48.880)

and everything will be fine.

Lex Fridman (55:50.520)

I personally think that this new level of systems

Sergey Nazarov (55:53.880)

that allows trustworthy collaboration between everybody,

Lex Fridman (55:57.160)

between supply chain partners, ad network users,

Sergey Nazarov (55:59.680)

the financial system, insurance companies, and farmers,

Lex Fridman (56:04.080)

all of these are just interactions

Sergey Nazarov (56:06.480)

that require a trusted entity,

Lex Fridman (56:09.520)

or in this case, a trusted piece of code

Sergey Nazarov (56:12.200)

to orchestrate the interaction

Lex Fridman (56:14.440)

in the way that everyone agrees.

Sergey Nazarov (56:17.440)

Yeah, one of the things that makes the United States

Lex Fridman (56:20.200)

fascinating is the founding documents.

Lex Fridman (56:23.080)

And it's fascinating to think of us moving into the new

Lex Fridman (56:26.000)

in the 21st century to a digital version of that.

Lex Fridman (56:30.240)

So the constitution, a smart constitution,

Lex Fridman (56:33.280)

no offense to the paper constitution,

Lex Fridman (56:37.080)

and that would have transformative effects

Lex Fridman (56:39.800)

on politicians and governments,

Sergey Nazarov (56:43.200)

holding people accountable.

Lex Fridman (56:45.640)

Oh man, that's so exciting to think that

Sergey Nazarov (56:50.560)

we might enforce accountability

Lex Fridman (56:58.200)

through the smart contract process.

Lex Fridman (57:00.920)

Exactly, why can't that happen?

Lex Fridman (57:02.640)

Anything that we could codify into a smart contract,

Lex Fridman (57:05.680)

and anything that we all agree

Lex Fridman (57:07.160)

is the way the world should work.

Lex Fridman (57:09.120)

And then anything that we can get proof about, right?

Lex Fridman (57:12.280)

Anything that a system somewhere could tell us happened,

Lex Fridman (57:15.800)

those are the pieces of the puzzle, right?

Lex Fridman (57:19.040)

We need a trusted piece of code,

Sergey Nazarov (57:21.120)

we need to have agreement

Lex Fridman (57:23.040)

that that's how the world should work,

Lex Fridman (57:24.560)

and we need a system that'll tell that trusted piece

Lex Fridman (57:26.760)

of code what happened.

Sergey Nazarov (57:28.480)

As long as we have those three things,

Lex Fridman (57:30.760)

we can theoretically codify any set of agreements

Sergey Nazarov (57:34.040)

about anything where those three properties take hold.

Lex Fridman (57:39.800)

I wonder if you could apply that

Sergey Nazarov (57:40.920)

to like military conflict and so on.

Lex Fridman (57:43.760)

Recently, Biden announced that we're going to pull off

Sergey Nazarov (57:48.080)

from Afghanistan after 20 years in the war.

Lex Fridman (57:52.480)

I wonder, there's a lot of debacles around war in Afghanistan

Lex Fridman (57:58.600)

and invasion of Iraq, all those kinds of things.

Lex Fridman (58:00.960)

I wonder if that was instead formulated as a smart contract.

Sergey Nazarov (58:06.280)

Like that might have actually huge impact

Lex Fridman (58:11.000)

on the way we do conflict.

Lex Fridman (58:12.640)

So you think of the smart contract

Lex Fridman (58:15.360)

as a kind of win win situation where you're doing

Sergey Nazarov (58:18.720)

like financial transactions or something like that.

Lex Fridman (58:21.520)

But you could see that also about military conflict

Sergey Nazarov (58:25.320)

or like whenever two nations are at tension with each other,

Lex Fridman (58:30.040)

different scales of conflict,

Sergey Nazarov (58:32.000)

that you can have conflict codified.

Lex Fridman (58:36.800)

And that would potentially resolve conflict much faster

Sergey Nazarov (58:40.920)

because there's honesty, transparency and control

Lex Fridman (58:43.360)

within that conflict, because there's conflict in this world.

Lex Fridman (58:46.160)

And I, again, very, very inspiring to think

Lex Fridman (58:49.800)

about the kind of effects it might have

Sergey Nazarov (58:52.880)

on the negative kinds of contracts,

Lex Fridman (58:56.360)

on the tense, painful kinds of contracts.

Sergey Nazarov (58:59.560)

I haven't thought about that as much.

Lex Fridman (59:01.240)

It's actually kind of scary,

Sergey Nazarov (59:02.200)

the stuff you're thinking through now

Lex Fridman (59:04.000)

with like the war contracts or something.

Sergey Nazarov (59:06.240)

That's not in the white paper.

Lex Fridman (59:07.360)

We don't have anything about war contracts or anything.

Sergey Nazarov (59:09.560)

Again, this is the Russian, we're both Russian,

Lex Fridman (59:12.520)

but I'm a little more Russian in the suffering side.

Sergey Nazarov (59:15.280)

Maybe I read way too much Dostoevsky

Lex Fridman (59:17.200)

and military kind of ideas.

Lex Fridman (59:19.400)

But anyway, holding politicians accountable in all forms,

Lex Fridman (59:24.960)

I think is really powerful.

Sergey Nazarov (59:26.160)

Is there something you could say as a small aside

Lex Fridman (59:29.200)

on how smart contracts actually work if we look at the code?

Sergey Nazarov (59:33.520)

Is there some nice way to say technically

Lex Fridman (59:37.160)

what is a smart contract?

Lex Fridman (59:39.000)

What does it mean to codify these agreements,

Lex Fridman (59:41.640)

the actual process for people

Lex Fridman (59:42.920)

who might not at all be familiar?

Lex Fridman (59:46.480)

I think you just write it into code

Sergey Nazarov (59:48.640)

that operates in this kind of decentralized infrastructure.

Lex Fridman (59:52.560)

You usually write code

Sergey Nazarov (59:54.160)

that runs in a central server somewhere.

Lex Fridman (59:56.160)

Now you write code that runs across a lot

Sergey Nazarov (59:58.800)

of different machines in this decentralized way.