Hey, everyone. Welcome to the show. I’m here with Jason Lowery. Jason, this is long overdue. This discussion is long overdue. I’m really excited to have this with you,
so welcome to the show. Jason Lowery (00:01:53): Thanks, Preston. I’ve been a low-key fan boy of yours for
a while. So very excited to be here. Preston Pysh (00:01:58): I’m honored. I’m honored. Hey, so I want to start off this conversation
with this idea of property rights. So Jeff Booth is really big on first principles. Let’s start with the first principles thinking
on all of this, and you had made this recommendation to me when we were talking about how to go
about the show. I think it’s a great idea about property
rights and how they first emerged, and then I guess we’ll just take it from there after
you take that away. Jason Lowery (00:02:26): Okay. Cool. Yeah. So property rights, how they first emerged,
how sapiens first started managing their internal resources, determining who has control authority
over those resources, determining how to settle disputes related to property rights, and also
achieving consensus on the legitimate state of ownership and chain of custody of property. So at some point in the time scale of human
beings, we started experimenting with different protocols for doing that, but where we came
from was effectively a proof of power protocol. Jason Lowery (00:03:05): So before sapiens and even before primates,
most animals, especially pack animals, when they just took down a kill and they have excess
meat, it is an existential imperative for those pack animals to manage those resources,
to determine who has the pecking order, essentially like, “How do you divvy those up? Whose property does this belong to?” So it’s important to realize that this is
an existentially important question. Jason Lowery (00:03:33): The way natural selection has optimized itself
is what you see in surviving animals today, which is for the overwhelming majority of
cases, when pack animals have property to distribute amongst the pack, they feed and
they breed the most powerful members of the pack. So the powerful, the power projectors, power
as in watts, as in joules per second, literally the strongest members of the pack get first
dips, and then if they have property disputes like a group of wolves, like a pack of wolves,
they settle those disputes through physical power competition. So they snarl and bite at each other, and
they’re constantly doing this. So they’re constantly snarling and biting
at each other and establishing the state of ownership and chain of custody of their property
using this proof of power protocol, you could call it. Jason Lowery (00:04:26): The reason why they appear to have done that
is because of, like I said before, natural selection. So something that a lot of people forget when
they’re evaluating or studying nature is something called survivorship bias, where
they forget that what you observe in nature is what has survived a very rigorous selection
process. So the reason why you see so many pack animals
use this proof of power protocol for establishing consensus on the legitimate state of ownership
and chain of custody property within their packs is because all the other animal packs
that used other techniques didn’t survive. Jason Lowery (00:05:06): So right away, you already see that this proof
of power protocol where people settle disputes with power competitions and achieve consensus
on the legitimate state of ownership and chain of custody of property, and determine resource
control over it using physical power, that is the protocol that has survived natural
selection. That’s why you see it in nature. So that’s just something too that’s worth
noting because humans, sapiens, for whatever reason after we transitioned from the upper
Paleolithic era into the Neolithic era, in the beginning, there wasn’t really much
of a sign. There isn’t really much of a sign in the
human fossil record throughout the Paleolithic age of any meaningful scale like killing of
humans, human on human killing. There’s not really much on in the fossil
record. Jason Lowery (00:05:54): In the Neolithic age, we adopted new types
of protocols for establishing consensus on the legitimate state of ownership and chain
of custody of our internal resources, and then after we established these new protocols,
you start to see signs of massive scale warfare. So this is really important to pull the thread
on from both an anthropology perspective, but also the core. Really, what it comes down to when we talk
about Bitcoin is really just a philosophy about how do you determine the basis for which
you establish resource control authority and deter, have consensus on those legitimate
state of ownership and chain of custody of an underlying piece of property. Jason Lowery (00:06:33): So what sapiens started doing is they started
abstracting. Sapiens have really big neocortexes. They started coming up with imaginary alternatives
to the proof of power protocol. So what they effectively started doing was
appointing people with imaginary power. We could call it rank, for example. So in the neolithic age, you started to see
signs of rank, and it was really obvious in the fossil record because of how they bury
people of high rank. They bury people of high rank with much more
literally gold-plated graves and the great pyramids and stuff. These are people with such imaginary power
that they are … People legitimately believe they’re gods. Jason Lowery (00:07:14): So early in this age, we had god kings. So the god kings got the resource control
authority. So they were the ones that determined what
the legitimate state of ownership and chain of custody and property was, and if people
had disputes on their property rights, that god kings would adjudicate those disputes,
but at the end of the day, it is all just an abstraction, right? Let’s be real. They probably weren’t actually gods and
then there’s no indication that they were. Preston Pysh (00:07:41): I think you see some of this abstraction in
just … You ever see these videos of maybe a smaller dog being the alpha dog and there’s
other larger dogs there, but the little one is dry, it’s calling the shots in the house. Is that abstract power? Would you consider that being just because
that little guy has convinced the others that it’s more powerful, even though it’s physically
not, it’s very clear that it’s physically not, in their mind, the larger dogs are looking
at and saying, “Yeah, I guess I need to listen to this little thing that’s yapping
at me,” or whatever. Jason Lowery (00:08:18): So that is actually a great example for two
reasons. So the first one is the little yapping dog
is, in my opinion, doing the physical power projection technique. So what a yapping dog is doing is saying,
“I will impose a physically prohibitive cost on you. I am defending my territory by signaling to
you my capacity to impose a severe physical prohibitive cost.” So it’s a form of deterrence. This is the same thing that we do when we
blow up, rattling. They’ll get a B-2 bomber fly low pass right
across their coast just to remind them or when you’re down range, all the shows of
force. Preston Pysh (00:08:57): Peacocking. Jason Lowery (00:08:58): Yeah. You’re just letting people know, it’s
like, “I have the capacity to impose severe physical prohibitive cost.” Now, the reason why it’s hilarious with
when the little dog does it is because when the little dog is yapping at the bigger dog,
the bigger dog has been domesticated. They’re both domesticated. So those dogs have been their wolves, extremely
aggressive wolves that over 40,000 years have had their physical aggression and their inclination
to be physically aggressive, essentially bred out of them. So domestication is the process of humans
deliberately removing a animal pack’s inclination to impose physically prohibitive costs, making
them docile. Jason Lowery (00:09:41): The reason why that’s a such great example
is because that gives us what is essentially what we need to causally infer that the relationship
between when you stop projecting power, when you forfeit your power and you stop trying
to secure yourself by imposing physically prohibitive costs on your attackers, there’s
this direct causal effect of you become less secure. Jason Lowery (00:10:04): So for example, a lot of people will say,
“Well, correlation doesn’t necessarily imply causation,” but if you have randomized
AB testing across 40 different domesticated animals and in every case when you remove
their physical aggression, when you remove their capacity and inclination to impose severe
physical prohibitive costs on their attackers, they do become demonstrably insecure. We have the data to do the causal inference
off that because we eat it for breakfast and for lunch and for dinner or we cuddle with
it like we do with our dogs. Jason Lowery (00:10:37): So domestication is proof that if you do a
different protocol than the proof of power protocol, then you risk systemic exploitation
because that is what domestication represents, fundamentally, is the systemic exploitation,
and it’s randomized. It’s like a natural experiment because we
never actually- Preston Pysh (00:10:55): Because nothing … You’d never see that
in nature. Jason Lowery (00:10:56): Right. Yeah. So I always joke because I love wiener dogs
and I love Italian greyhounds and whippets, but I always joke, “Those are abominations
of nature. We literally bred these creatures to worship
of us. They would never survive in the Siberian wilderness,”
and if that yappy little dog ever acted that way to Siberian wolves, it wouldn’t turn
out the way. So they only get away with that because they’re
all domesticated animals. It’s the same reason why. That is essentially the foundation of modern
agrarian society is our ability to make animals less physically aggressive, less inclined
to impose physical power, to impose costs on us, and then as a result of that, we can
take advantage of them. Preston Pysh (00:11:43): I’m not trying to jump ahead, but I guess
we got our example of proof of stake right there. Jason Lowery (00:11:48): Well, so what we have shown using a causally
inferable randomized dataset is that there are dramatic strategic security implications
for choosing not to project power because when we do it to animals, look what happens. We turn orcs into ox and then they become
pack animals and they become slaves and they grow our grain to feed the other slaves that
we’ve domesticated, slave being the domesticated candid animals. Jason Lowery (00:12:18): You turn boars into pigs, you turn jungle
fowl into chicken. So the difference between a boar and a pig
is the pig doesn’t put up a fight. So that gets to be a major issue when we get
to agrarian society because of abstract thinking. Abstract thinking enables theology, philosophy,
enables ideologies, and it became considered morally reprehensible to use physical power
as the basis for which you settle property disputes or determine resource control authority
or chief consensus on the legitimate state of ownership and chain of custody of property,
and it was essentially morally condemned for two reasons. Jason Lowery (00:13:02): The first one being because of the energy
that it uses. It’s very energy-intensive to establish
a pecking order using physical power. Just watch a pack of wolves. It looks exhausting. They’re constantly fighting against each
other. Then of course, obviously, if you use physical
power as the basis to do this, then you risk physical injury if you’re doing it kinetically. So if you’re imposing physically prohibitive
costs kinetically using force to displace mass, then obviously, you’re going to have
accidents. I say accidents because a lot of pack animals
have natural instincts to basically pull their punches to effectively not injure each other. Jason Lowery (00:13:43): So they have to figure out a way to use power
as the basis to achieve consensus on the legitimate state of ownership of property, but they have
natural instincts which prevent them from obviously killing each other because that’s
an obvious existential threat. If wolves fought each other to the death over
every stake, there would be no pack anymore because all the wolves would die, and humans
have the same, and most, a lot of primates have the same natural instinct. Jason Lowery (00:14:06): So lieutenant colonel, I think his name’s
Grossman, Army psychologist and a bunch of other psychologists, they’ve led multiple
studies to show and basically quantify the aversion that humans have to injuring other
humans. The famous example that I always use that
I got from Lieutenant Colonel Grossman was the example of Gettysburg, where when they
took the rifles off the soldiers that were killed in Gettysburg, and 80% of those rifles
had never been fired, and several of those rifles had been double and triple stuffed
with ball and powder. So it was implying that these soldiers that
had died were not firing their shots and were in fact faking full fire and reload sequences
during the battle. Jason Lowery (00:14:55): That’s how powerful the natural instinct
is to not impose lethal costs on or not physically or lethally injure fellow humans. Then he makes the argument that when you started
having long range weapons and then, of course, airplanes and bombs and stuff like that, you
basically stop seeing the person you’re killing, and that was part of the reason why
war fighting became so lethal during the 1900s is because you don’t have that natural instinct
prohibiting you anymore. Jason Lowery (00:15:20): So anyways, that is all to say that humans
have a very strong inclination to not use physical power as the basis for which they
settle disputes, determine who gets to control the resources and achieve consensus on the
legitimate state of ownership and chain of custody of property. So they use an abstract form of power, and
this abstract form of power is considered better because it does not use energy. Jason Lowery (00:15:47): It reminds you of proof of stake, right? Also, obviously, it doesn’t cause injury
because it’s abstract, right? You can’t cause injury because it’s not
even physical. So that was the basis of abstract power hierarchies. The reason why agrarian society adopted these
abstract power hierarchies where they had these people of different ranks, they had
the judges, they had the kings, and they had the resource control authority, and based
off of what they say, you get to do all the things that you need to do to manage resources,
but there are, of course, major systemic differences when you do that. Jason Lowery (00:16:22): So we’ve already established that when you
take the will to fight out of domesticated animals, they become systemically exploitable. That same thing repeated itself when agrarian
society first adopted these abstract power hierarchies because these god kings essentially
exploited their populations at egregious scales. Preston Pysh (00:16:41): You still see this today. I mean, look at North Korea. They think Kim Jong-un a god. It’s crazy. Jason Lowery (00:16:48): Yeah, yeah. It’s a trust based system. You have to trust in your god king and the
benevolence of your god king effectively because when you create an abstract form of power,
they are essentially, in many cases, unimpeachable. They have unimpeachable power now, and you
have also technically removed the constraints of their control authority. So whereas the alpha wolf can only control
what he has the physical power to control, if you change it to abstract power, there
is technically no limit to what that god king can claim power over. So you can expand their abstract power and
abstract resource control authority at zero marginal cost. He can just say, “I’m the god, so everything’s
fine,” and it’s like, “Okay. Well, I guess you’re right.” So if you look at how- Preston Pysh (00:17:41): Jason, real fast. It seems like the physical power would’ve
been bound by geographic region. You can only expand it so far, at least throughout
history, and we can get into the arguments of where we’re at now with Bitcoin, specifically,
but in the past, it seems like you were bound by a range or it was very difficult to extend
out. Jason Lowery (00:18:04): Yeah. So that’s actually a huge point because
I’ve made this point before too. Let’s fast forward to today, okay? There’s a bunch of physical resources. The main one that people seem to enjoy is
the surface area of the earth, that is a resource that sapiens seem to value. So the question is, how should sapiens manage
resource control authority over the surface area of the earth and determine what the “legitimate
state of ownership and chain of custody” of the surface area of the earth is? Jason Lowery (00:18:38): So if you take an extraterrestrial point of
view and you’re an alien and you’re visiting earth and you’re looking at the sapiens
from your extraterrestrial point of view, sapiens are just one single species. So you look at them and then you would note
to yourself, you would say, “That’s interesting. They don’t have centralized control over
the surface area of the earth. For some reason, they decentralize their control
authority over the surface area of the earth, and they do it using a massive scale, global,
physical power projection.” Jason Lowery (00:19:14): So there’s no one government that has abstract
control authority over all the resources of the earth. In fact, sapiens deliberately prohibit that. How? By imposing a physically prohibitive costs
on gaining single and centralized control authority over all of the surface area of
the earth. So effectively, that is the proof of work
protocol where we are using power, physical power, and we have a bunch of different large
scale physical power competition, and the benefit of that large scale power competition
on a global scale is decentralization of control authority over earth’s natural resources. Preston Pysh (00:19:58): Wow. Jason Lowery (00:19:59): So basically, yes, you’re exactly right. In fact, at scale, because a lot of people
will say, “Well, military centralized power,” it’s like, “No. Take a global picture of it. It is precisely the case that no country can
gain 51% control over all the natural resources because we’re constantly engaging in this
physical power competition,” and anytime Mr. Genghis Khan or Mr. Adolf Hitler or whoever
tries to achieve centralized control authority over physical resources, the reason why this
system is secure is because there’s no limit to how much power honest people can sum together
to make it too physically cost prohibited to achieve centralized control authority over
resources. Preston Pysh (00:20:45): The idea just struck a chord on a book that
I read that I’ve never even talked about before, but this was a book that in the summary
at the back of this, it gets into that exact point that you just made is the physical cost,
that great, and here’s the title of the book, The Rise and Fall of Great Powers. This is by Paul Kennedy, and that’s one
of the main things at the end. The summary is that the thing that you see
through each one of these great powers throughout time is they overextend themselves militarily. It almost always also corresponds with them
debasing currency and trying to, a lot of the stuff you’re seeing right now playing
out in the world as far as offsetting some of that and expending and having all this
gross fiscal spending and the power projection as they push out to a company that large fiscal
spending to try to offset the issues that they’re having with their currencies. That being the crux of how all these great
superpowers have failed over time. It’s a fascinating read if people want to
dig into it. What was the one that you just held up, Jason? Jason Lowery (00:21:57): This one’s called The Collapse of Complex
Societies. This was recommended to me by Natalie Smolenski
from the Texas Blockchain Council, but it’s not just that. It has multiple different explanations for
how complex societies break down, but yeah, that’s a clear trend in history. The opposite is also true. Another clear trend is when people stop keeping
a military or they deliberately impede their own capacity to project physical power, they
tend to have Hannibal at their gates really quickly. So there’s a balance there, but yeah, it’s
really interesting. Preston Pysh (00:22:42): Another point that’s very pertinent to the
world today, but anyway- Jason Lowery (00:22:50): Yeah, there’s so many good examples now. I often joke. It’s just like, “I don’t even need to
write this thesis anymore because it’s just playing out in realtime.” Preston Pysh (00:23:00): It’s crazy. Jason Lowery (00:23:01): By the time it publishes, it’ll just be
probably obvious, but I guess what we’re starting to speak about now is the systemic
benefits, the systemic trade offs of abstract power hierarchies as a basis for controlling
resources and physical power hierarchies. So the big ones that we’ve highlighted is
when you use physical power as the basis for which you manage your resources, physical
power is inclusive. Meaning, every single person can have access
to physical power. Jason Lowery (00:23:37): You all are always able to swing a fist or
swing a sword if you ever achieve a state where you’re being invaded or you’re being
exploited by your god king. So it’s a highly inclusive protocol everyone
can fight. Physical power is also unbounded. So there is no limit to the amount of … There’s
theoretically no limit to the amount of physical costs you can impose in watts, especially
after humans discovered fire because it used to be like animals can only project as much
power as they can summon endogenously off of their own calories that they ingest and
can swing through their muscles, but especially once humans found gun powder and these other
power projection technologies, what that represents is you’re tapping into an exogenous supply
of power and then using that to impose physically prohibitive costs on your attackers or your
exploiters. Again, power meaning physical watts. Jason Lowery (00:24:31): So that game, this power projection game,
has scaled to the point of nuclear weapons. That’s how when we say there’s theoretically
no limit to the amount of power that honest people can summon to defend themselves, that
has scaled to the point of we could actually destroy the planet at this point. We have that means now. That’s how high this honest people can scale
that. Jason Lowery (00:24:55): Another big one, and this is a huge one, when
we get into a future conversation about proof of work versus proof of stake is that physical
power is systemically exogenous. Meaning, it cannot be systemically exploited. Whereas rank people can change their rank
or people can change the rules so that rank has more abstract power than not, right? Rank is instantiated by the system itself
and, therefore, is systemically exploitable, but physical walks is an ontologically different
phenomenon that exists completely outside of these abstract power hierarchies that we
use to manage resources. So it doesn’t matter. Jason Lowery (00:25:35): This is why all those movie examples where
the … It’s like those David-Goliath stories, where it’s like there’s someone of high
rank, there’s some king, and they’ve got their abstract power hierarchy, and they’ve
got themselves systemically secured, and it’s just like you’re just going to get steamrolled
by these peasants with their sorts because you can’t exploit their power. It’s exogenous to the system that you’re
the king of. Then another big one, and you mentioned this
too, but it’s a huge one, is that, obviously, physical power is physically decentralized. So you can actually validate, you actually
see physical power, and you can actually validate it. Okay. Compare that to stake. Well, actually, let’s say the bad sides
again, though, physical power is energy intensive and physical power is prone to causing injury. So those are the downsides, but everything
else, if physical power was not energy intensive or if it was highly energy efficient, and
if physical power had no capacity to cause injury, say, if it was in an electric form,
then it would be a fantastic, it would be a highly systemically secure protocol, and
it would probably not be condemned as ideologically bad on any philosophical or theological reasons
because it is so good at preventing systemic exploitation or invasion. Jason Lowery (00:27:02): When you use abstract power, abstract power
is non-inclusive. So not everyone gets to have a high rank. In fact, usually, there’s one person at
the top and they’ve got most of the power, but the point is not everyone can have access
to it. So it’s non-inclusive and, therefore, not
fully representative. Jason Lowery (00:27:21): Another problem with abstract power is it’s
bounded in zero sum. So there is a hard limit. There’s a mathematical limit to how much
abstract power that honest people can use to represent their interests or do some other
things, and that becomes a very big systemic difference that is important to call out with
proof of stake, but we’ll wait until we get there. Then another problem with abstract power is,
obviously, it’s physically impossible to see it. It’s impossible to validate if it’s decentralized. Like we said before, there’s essentially
no limit to how far you can scale your abstract power. Preston Pysh (00:28:02): It only exists in the imagination of the one
to number of people that are part of said system, correct? Jason Lowery (00:28:11): Yeah. So if they’re unsympathetic to your abstract
power, then it’s completely useless or if they don’t understand your laws because
they speak completely different language or if you’ve been geographically separated. Preston Pysh (00:28:23): So for abstract power to work in the interim
because it seems like it’ll always be an interim way to project power, the trend of
participants always has to be going up instead of collapsing down. Is that fair? Jason Lowery (00:28:38): Yeah. You expand the scale of your abstract power
hierarchies by adding more participants. There are some benefits that are worth calling
out. The benefits of abstract power is it is not
energy intensive, so it’s highly efficient. It’s like if you live in a well-functioning,
trustworthy society, then it is just fantastic. You can get enormous resource abundance from
it because people are trustworthy and they’re following the rules and they’re sympathetic
to the rules and the people that you trust as intermediaries and the judges are fair. It works out really well, and it has directly
led to the enormous amounts of resource abundance and prosperity that sapiens, agrarian society
has experienced. Obviously, it is not capable of causing injury. Jason Lowery (00:29:26): The problem that you just highlighted is it
tends to break down over time. The root problem, as someone said, with all
these abstract power hierarchies is that people must be trusted not to exploit them, not to
be unsympathetic to them, not to invade them, and history is filled with examples of breaches
of that trust. Preston Pysh (00:29:46): So it requires trust. Jason Lowery (00:29:48): So it is a trust-based system, yes. You must trust the people of high rank that
are appointed over you to not abuse their rank or you must trust the neighbors that
are unsympathetic to your laws, the Hannibal’s out there, the Genghis Khans out there to
just- Jason Lowery (00:30:00): The Hannibals out there, the Genghis Khans
out there, to just not roll in and take your stuff. And so, for these reasons, it’s systemically
insecure because so long as you have and rely on abstract power, you are technically powerless
from a physical standpoint. You have no capacity to impose severe physically
prohibitive costs on people who either try to invade you or try to exploit you. Preston Pysh (00:30:27): Parasites are not allowed into an abstract
power situation, or it will eventually collapse upon itself. Jason Lowery (00:30:37): But the problem is, if you are a parasite
or a sociopath or you’re just a guy that wants a lot of control authority over resources,
abstract power hierarchies create a nice, beautiful honey pot for you. All you have to do is become a high ranking
person. Preston Pysh (00:30:55): They’re incentivized to find it. Jason Lowery (00:30:59): Yeah. It’s like moths to a flame. Preston Pysh (00:31:01): Wow. I’m sorry, but to me that’s a super powerful
statement that I have never thought about. Jason Lowery (00:31:09): And also, that’s why you see nepotism in
abstract power hierarchy over the course of a growing society. So they will come up with abstract reasons
to say why these high ranked positions should stay in the bloodline. And so I’m the king. I was appointed by [inaudible 00:31:26], there’s
some God that says I have a divine right to be this powerful, abstract powerful. And my son carries my blood and therefore
carries my abstract power. They come up with reasons. And over time that becomes very bad because
the people at the high positions of abstract power are literally deformed. They’re inbred freaks. The King Tut Exhibit is here in Boston. King Tut was not a healthy person. These God kings and the kings, there’s so
many examples. It’s not meritocratic at all because there’s
literally inbreeding just to keep their abstract power. Jason Lowery (00:32:05): Anyways, yeah. And so it’s like moths to a flame. It is actually way easier to exploit people
through positions of higher rank than it would be if they used physical power as the method
to do it. And so, this gets back into the case with
the wolves or with any form of abstract power, or sorry, physical power projectors in nature. It’s like, yeah, these wolves constantly
fight over each other, but that alpha is not exploiting their pack like humans can through
their abstract power hierarchies. It is much more of a meritocracy than what
sapien structures look like, what their abstract power structures look like for that reason. Jason Lowery (00:32:48): And so this is why I often bring up the example
of stags or a lot of different herbivores because what’s cool about what they’ve
done is they actually evolved a way to continue the power projection game where they use physical
power as the basis through which they achieve resource control, authority and determine
legitimacy of ownership or chain of custody of property. But they have designed these weird things
that come out of their heads and they’re not horns. So they’re not pointy. They’re all tangled at the end. And so when they butt heads and they fight
each other, they actually get entangled by design to prevent themselves from injuring
each other. But those same antlers can be used to stab
enemy predators that are attacking them. Jason Lowery (00:33:36): So they’ve created a way where they can
use physical power and they can still have lethal things on their heads to help impose
physical costs if they need to defend themselves. But when they use those same devices to achieve
pecking order internally, it minimizes the capacity for injury. It doesn’t completely eliminate it. Accidents happen, and sometimes their antlers
interlock a little bit too much and they die. Preston Pysh (00:33:59): Another one that I find fascinating on the
proof of work is bees. I find how the queen bee, I guess, goes out
and then the fastest one is the one that genetic line is passed on. You might know more about it than I do, but
that is just fascinating to me. And it’s exactly what you’re getting at
as far as projecting watts or power in this physical power display. Jason Lowery (00:34:28): Honey bees are a fantastic example of strategic
security because they literally create a honey pot. Security problem, right? It’s honey, everyone wants their honey. Yeah. It’s literally a honey pot security problem. Honey bees have stingers, but those stingers
don’t protect the individual honeybee. When a honey bee stings something, they will
sink that thing so deep in their skin that, because of how it’s designed, the only way
to get that thing to detach from the person they sting is to disembowel themselves and
then they die. So a stinger on a honeybee is not designed
to protect the honeybee, it’s not designed for self-defense. The stinger of a honeybee is designed to inflict
as much pain as possible on an attacker, to impose as much physically prohibitive costs
on an attacker for the systemic defense of the hive. And they will die in the process of doing
it. Not to protect themselves, but to protect
the hive. And it’s just a great illustration of that
point. Jason Lowery (00:35:32): The really easy and simple way to think about
it is, everything has a benefit to cost ratio of attacking or being attacked. There’s some benefit of attacking someone
and there’s some cost of attacking someone. And so if you want to be systemically secure,
you need the cost of attacking you to be as high as possible, and you need to strive to
keep it high in order to keep your benefit to cost ratio as low as possible. And you can never know how much is enough
cost. You don’t know how much ability to impose
physically, severe physically prohibitive costs you need to ensure that you’re ‘secure’. So you just have to be able to ensure that
you have that ability and strive to do it as much as possible and kind of manage it. Jason Lowery (00:36:12): When you use abstract power hierarchies and
you get enormous amounts of resource abundance, but you don’t have a military to protect
it. So you have all this freshly irrigated farmland,
but you have no soldiers to protect it, your benefit to cost ratio is extremely high. The benefit of attacking you is high. The cost of attacking you is low. You’re going to get Sargon the Conqueror
or Charlemagne or Napoleon or all these other economists that have ever lived. They’re going to take advantage of your
high benefit to cost ratio. And this is how it works in nature too. So it’s not like it’s a sapien thing. Preston Pysh (00:36:45): So let’s pause there. So people are hearing about power projection,
they’re hearing about physical power projection versus abstract. I would just generically say the one is proof
of work, the other one is a proof of stake idea. And we’re going to cover those in much more
detail here. But before we do that, I want to ask you about
the basics of computer science and how computer programming emerged before we then transition
those ideas that we just talked about to proof of stake and proof of work found on protocols. Jason Lowery (00:37:17): Yeah, this is really helpful if you just have
kind of a quick crash course on computer science because it’ll make arguments about the difference
between proof of work and proof of stake a lot simpler to understand. So at the end of the day, a computer is simply
a general purpose state machine. So it’s a machine where you can change its
state. And so back in the day, 2,000 years ago, the
Greeks had astrolabes, and you could calculate where the stars are going to be in the future,
where the heavenly bodies are going to be in the future. And the state machine programmer would change
its state by pulling a lever or pushing a button or turning a dial in some cases. So you’re changing the state of this machine. Jason Lowery (00:38:01): And these state machines are named after their
function, not their form. So the main function of a state machine is
to compute something, to compute the position of the heavenly bodies in the future or to
compute whatever. And so these computers, these state machines,
have existed for 2,000 years. But only a little over 150 years ago, I guess
maybe a hundred years ago now, 200 years ago, yeah, 200 years, they have been general purpose. So for 2,000 years, state machines were special
purpose state machines. So if you wanted to compute something, you
had to build a dedicated machine to compute that. Jason Lowery (00:38:36): Babbage and his friends, in the 1830s, start
conceiving of this idea called a general purpose state machine. And the reason why that was such a big deal
is because you no longer had to build a special purpose machine to do a compute that you needed. You could just program this general purpose
machine to do it. But the act of programming was the act of
giving this thing instructions manually by pressing buttons or turning a dial or pulling
a lever. And also, the big leap there is that now the
act of programming or the act of building and designing a special purpose state machine
to do your computation became an abstract idea. So you actually didn’t need to build anything. You just needed to think of a good design,
and then figure out how to translate what was in your brain into instructions for a
machine. For example, the first computer programmer,
Ada Lovelace, her program was for a machine that didn’t even exist. Babbage’s analytical engine in the 1830s
was never built because it was too expensive to use, but she could still program it. She could still conceive of the sequence of
operations that general purpose state machine would need in order to act like a special
purpose state machine. Jason Lowery (00:39:53): So an easy way to think about what programming
represents is kind of to think about Shakespeare. Shakespeare comes up with a story, an abstract,
fictional story called, what’s the famous one? Romeo and Juliet. So Romeo and Juliet is just a fictional story,
does not physically exist. It’s a figment of his imagination. And then Shakespeare converts that from an
imaginary story that’s only in his brain, and he writes it down. So he uses a symbolic language, a syntactically
and semantically complex language to translate the fictional story in his head onto a script. And then he hands that script to an actor,
and then the actors give a performance. So in that sequence of events, Romeo and Juliet
is still just an abstract story. It still only exists in abstract reality. It doesn’t physically exist. Just because the medium through which it’s
communicated, the script, physically exists doesn’t mean Romeo and Juliet exists. And just because actors can act it out and
have an emotionally moving performance that people think is real doesn’t mean Romeo
and Juliet is anything but a fictional story. It’s still just a figment in this guy’s
imagination that he’s communicated through a physical medium. Jason Lowery (00:41:02): Computer programming is effectively the same
way. Computer programmers think of fictional designs
in their brain, fictional stories. They write those down on scripts using a newly
invented symbolic language called machine code. And then they hand those scripts to machines,
and then machines can actually read those. And then the machines act like. They basically role play. These general purpose state machines role
play according to the instructions that they’ve received. So at no point did the program actually physically
exist, just the medium through which it was transferred to the machine. So if you took my computer right here, this
general purpose state machine, it is a bunch of circuitry. It’s a bunch of floating gate transistors
with electrons on them. So that exists right now. As soon as I ‘load a program on it’, nothing’s
changed. It’s still the exact same circuitry. It’s still the exact same electrons stored
in floating gate transistors. And if I ‘remove or delete’ that program,
the circuits and the floating gate transistors with the electrons in them are still there. The only thing that has physically changed
is the state of the machine, not the state itself. Jason Lowery (00:42:16): So this usually trips people out when you
explain it, but programming or a program that you have loaded or the piece of software that
you have loaded is just the symbolic meaning that you apply to the state change of the
state machine. And that’s because a human’s effectively
figured out a way to apply symbolic meanings to circuits, and then they get those circuits
to repeat that symbolic meaning back to them. So a painter thinks of a scene, and he uses
physical paint and canvas to depict that scene. Of course, the scene isn’t real, just the
paint and the canvas is real. And so that’s what we would do with computers. So technically, Preston, you have no experiential
knowledge of me whatsoever. Everything that you are seeing is an abstraction
right now. You are not looking at me. You are looking at light emitting diodes in
an array on a plane controlled by a general purpose state machine. You just know based off of where we are with
technology that I’m probably real, I’m probably not an AI talking to you. Preston Pysh (00:43:18): I don’t know. I’m not convinced. Jason Lowery (00:43:21): But 20 years in the future, it might not be
so easy. And so everything that you see on a computer
screen is a symbolic representation of what’s in someone’s brain that a state machine
is acting out for you and making a very convincing thing. And then you false equivalate or you think
that it’s real because the physical medium through which it’s communicated to you is
real. So you’re making a false correlation between
your abstract ideas and this symbolic meaning and the thing that you see in front of you. But they’re actually two completely separate
things. A program is just an idea floating in abstract
reality, virtual reality. That’s why it’s called virtual reality. And a machine, a general purpose state machine,
is what physically exists in shared objective reality. Jason Lowery (00:44:11): So why do we say that? Because that is an extremely trippy way. That’s an extremely hard thing to wrap your
head around, that we have invented essentially a symbolic language to speak to machines who
then speak back to us. And that what we’re effectively doing is
showing each other what’s only in our imaginations through the machines that we program, through
this virtual reality. That’s really hard to understand. So what people do to make it simpler to understand
is they do something called hypostatization where they treat these abstract things as
if they were concretely real just for simplicity. So we just talk like a program is a physically
real thing that is ‘loaded’ onto a machine, just like people talk about the fictional
story of Romeo and Juliet is loaded into the pages of the script. We just say that it’s- Preston Pysh (00:44:58): It’s a file, it’s a folder, it’s a trash
can here on my desktop. But it’s none of those things. Jason Lowery (00:45:05): Those are abstractions. They don’t physically exist. They’re just figs of our imagination. And it makes it way easier to handle what
is an extreme leap in abstract thinking that humans only recently discovered 80 years ago
through stored programs, general purpose computers with von Neumann and his studies. That is so complex. Machine code is so complex- Preston Pysh (00:45:26): It is binary. I mean, mind blowing. Jason Lowery (00:45:31): Yeah, they invented a new logic through Boolean
Logic. So they’re implying symbolic meaning to
binary states that are then physically input into a computer. And it’s mind blowing. It’s way more complex than any human could
really understand like maybe von Neumann could. Preston Pysh (00:45:50): I want to pause here because where we’re
going with this, and I think this is important for people just to kind of, like why are they
talking about this stuff? We’re talking about this because we’re
about to talk about how Bitcoin, and I’m not trying to steal the punchline here, but
I think it’s important for people to correlate why what you just explain is so important. We’re going to talk about the physical reality
of energy expenditure, which is real in tangible form, versus virtual reality, ones and zeros
and how one can be exploited and the other one can’t, and how there’s a tie to physical
reality in one and there’s no tie to physical reality in the other. And that’s a foot stomp moment. And I’m sorry if I stole. Jason Lowery (00:46:37): No, not yet. No, I still got the punchline. Preston Pysh (00:46:41): So that’s important. That is something to kind of pause, think
about, don’t forget it because where we’re going next ties a lot of what he was just
talking about to this much more deep dive in proof of work for Bitcoin, proof of stake
for, call it Ethereum or any other proof of stake token that’s out there, which is pretty
much everything other than Bitcoin. So are you ready to go there or did you have
other things that you wanted to talk about with respect to the computer science stuff? Jason Lowery (00:47:15): With computer science, the last thing I’ll
leave is, it’s so complex that we just pile on different abstract ideas to make it simpler
for us to comprehend what is way more complex than we comprehend. So over the four decades following the development
of stored program computers where you can apply symbolic meanings to the states of state
machines and all this trippy stuff, that’s when we get assembly language and then eventually
higher order languages like we use today like C or, in Bitcoin’s case, C++ or Python and
all these other things. These are just languages that make it easier
to communicate to these machines and, specifically, to communicate our abstract ideas that we
design in our brains and then we get our computers to role play back to us. Jason Lowery (00:48:05): Cyberspace, this idea of cyberspace, is virtual. Obviously it’s a virtual reality. And so everything in cyberspace does not physically
exist. The only thing that really physically exists
is all the machines and all the computer screens that we use to basically role play. And it’s like the famous line from the Matrix,
when Neo’s visiting the oracle and he sees that little boy monk and he is like, “Instead
of trying to bend the spoon, only try to realize the truth. There is no spoon.” That’s actually a legitimate computer science
principle. There is no spoon. We use things like object oriented design
as a technique to manage the complexity of programming. And so we arbitrarily choose to describe the
complex emergent behavior of the machines that we program as if it were an object or
an orientation of objects simply to make it easier- Preston Pysh (00:49:06): Because it’s too hard to wrap your head
around it otherwise, right? Jason Lowery (00:49:08): Yeah. It’s too hard to program computers. But more importantly, it’s too hard to explain
your design to other people unless you explain it in terms that they understand. And since all humans live in a three dimensional
reality where objects are oriented around themselves, we arbitrarily choose to describe
the complex emergent behavior of these machines as objects. But the objects are not real. The spoon is not there. There is no spoon. Preston Pysh (00:49:35): It’s just a charge or no charge. Jason Lowery (00:49:39): And the story of Neo is, once you realize
that software is just an abstraction, then you can figure out how to exploit it. And then that’s how Neo gets his powers
just because by just simply realizing that nothing in the matrix is real, therefore there’s
technically no restrictions, no physical restrictions, limits to his power. And so software- Preston Pysh (00:50:00): Reminds you of a clip I might play here at
the end of the show. Jason Lowery (00:50:04): Yeah, I know. And so that’s really important when it comes
to the field of software system security because it’s important to recognize that software
doesn’t break, it can’t break. Software just does exactly as it’s told. So it does exactly as it’s designed. So if there’s ever a hack or if there’s
ever something bad that happens, nothing was broken, people are just taking advantage of
the rules of the system. Jason Lowery (00:50:35): And so how do people make software more secure,
especially if it’s in charge of sensitive information or it has sensitive commands? Sometimes software runs major weapons systems. The way that most software security is done
is by creating an abstract power hierarchy where you assign rank to certain positions. So like admin privileges or admin rights,
these people higher up in the ranks have more control authority, they can access more information
or they can do more dangerous commands. And the way you keep your software secure,
at least in the old way, is by these abstract power hierarchies. Of course, since everything in software is
abstract, then the basis through which you choose to determine resource control authority
within your software instantiated system or the basis through which you choose to achieve
consensus on whatever the legitimate state of ownership and chain of custody of whether
the abstraction you’ve created in software, you have to use an abstract power hierarchy
to do it because there is no alternative, not until we get to hashing. Jason Lowery (00:51:40): But that’s why it’s just important. There is no spoon. We arbitrarily choose to describe software
as objects to make it easier to understand their complex emergent behavior. And for the purposes of system security, technically
all software is an abstract power hierarchy where usually the developer is the one who
effectively functions as the God king who gives themselves the most abstract power,
therefore the most control authority over whatever resources that software manages. So like Mark Zuckerberg and all these big
time, they’re God kings. They wield these enormous amount of abstract
power. They have control over billions of people’s
computers and the information on those computers. And they have control authority over resources
for no other reason than they’re the highest ranking person on Facebook. Preston Pysh (00:52:29): Wow. That is so profound. Jason Lowery (00:52:33): Yeah. And in cyberspace you’ve got all these God
kings emerging. And so you kind of see them doofing it out. And so it’s in this migration of human society. Now we’re, once again, using abstract power
hierarchies to manage our resources, but now we’re doing it in cyberspace, managing things
like information. But if you have abstract power over machines,
and people become increasingly more dependent on those machines, then that translates to
power over the people too. So for example, weaponized misinformation. If people get all their information from social
media and then you’re in charge of social media, if you’re the head honcho at Facebook
or whatever, you get to control the information that people see that affects their behavior. So it is enormous. People today in cyberspace have levels of
abstract power that would make the pharaohs blush. Preston Pysh (00:53:25): Don’t you think that they also have a bit
of physical power too? Because when you describe physical power as
watts, just look at these server farms. Take Zuckerberg for example, all of this data
and all this information that he is storing on behalf of these billions of people require
watts in order to run these on the hardware. So would you argue that there’s a mix between
physical power and abstract power that a guy like that wields? Jason Lowery (00:53:54): Yeah, I guess you could say it’s a mix. There’s two different realities to keep
track. And this will be helpful when we talk about
proof of work. There’s abstract reality. All that data on a server, again, it is symbolic
meaning that we assign to electrons in a floating gate transistor. It’s not actual data, there’s not actual
ones and zeros. We choose to say this switch and this position
is a one and this one is a zero. And through extraordinarily complex semantic
and syntactic language which we get Romeo and Juliet or information out of it. So there’s shared abstract reality. And then in shared objective reality, there’s
the actual physical hardware of the systems. Jason Lowery (00:54:34): And yeah, I guess you could say they have
physical control over that physical hardware, but that is defended the good old fashioned
way. That’s on a plot of land, and it’s probably
got a big old fence with a bunch of barbed wire around it. It’s being physically defended. So they have control authority over that. And I guess the physical power of their fence. And they probably have armed guards. So in fact, I know they do have armed guards. That is a form of physical power. But that pales in comparison to the amount
of abstract power and resource control authority they have from and through cyberspace. Jason Lowery (00:55:12): Now let’s fast forward. So for 60 years, we once again have another
honey pot problem where you have these massive data repositories. You have this capacity to control a bunch
of people’s computers all across the world, but you have no capacity to impose physically
prohibitive costs on the abuse of that information, that data or the abuse of that abstract power. And you have all these people that are designing
systemically exploitative abstract power hierarchies through their software. It’s very obvious. And then you also have all the just massive
levels of hacks and everything. A hack is just people taking advantage of
the rules of the system. Nothing breaks in a hack, it’s just systemic
exploitation. So this big problem with hacking is just essentially
a big problem of people systemically exploiting abstract power hierarchies. And a main challenge of all this is just the
fact that you cannot impose physically prohibitive costs on people in, and from, and through
cyberspace, at least not until Adam Back. Jason Lowery (00:56:11): So that’s why when you think of the hash
cost function, that’s why it’s such a big deal is because what he did was he created
a program whose sole purpose is to impose a real world physically prohibitive cost on
people and programs on other computers. So to solve a hash function, you have to use
brute force, physical power. You have to use just electricity and just
guess a bunch. So the only point of solving a hash function
is to impose an electricity casa, physical costs and watts and non-kinetic, so a non
lethal physical cost, but still a severe physically prohibitive cost on solving the hash function. Jason Lowery (00:56:51): And then in return for solving the hash function,
in case of Adam Back’s invention with Hashcash, you get a receipt. You say, “Okay, I have proven that I have
done this work.” Or in other words, I have proven real world
power, I have proven that I have been imposed by real world physical costs. And so there’s a very subtle but important
implication of that from the perspective of cyber security. Because in the case of Adam Back, the reason
why he created this was to defend against systemic abuse. It’s literally called a denial surface counter
measure. So what an easy way to systemically abuse
people is to spam them through email, right? Because there’s no marginal cost. Preston Pysh (00:57:30): I think that’s when Adam came up with this. Jason Lowery (00:57:33): And so Adam, the point of hashing is to impose
a real world, physically prohibitive cost on people who are spamming or otherwise systemically
exploiting the abstract power hierarchies instantiated by your software. And that’s a big deal. That’s a big piece because, once again,
7,000 years ago, you’ve got God kings exploiting people through their abstract power. Eventually the slaves figure out, we can impose
a physically prohibitive cost on our God kings and they’ll stop exploiting us. Fast forward to 1997, you’ve got people
abusing their abstract power hierarchies and Adam Back comes up with a mechanism through
which you can impose physically prohibit of costs on people exploiting you, and it issues
a receipt and it’s a proof of work receipt. But it doesn’t really matter what it’s
called because it’s all abstract anyways. The point is, you’re imposing physically
prohibitive costs on people, not in abstract reality, but through shared objective reality. That’s a big deal. Jason Lowery (00:58:26): And from a computer science perspective, it’s
also a big deal because it’s kind of creating this gateway between worlds where you have
real world electricity passing into the hash function. And then coming out of the hash function is
a receipt that you can then abstract as an object and then pass around or, in his case,
it wasn’t transferable. But the point is, instead of most things in
computer science where you hypostatize an abstract thing as a concretely real thing. Proof of work does the exact opposite. It’s reverse hypostatization, where you
take a real world thing, electricity, watts, and then you treat it as an abstract receipt. And so that’s huge because now, in cyberspace
or on your computer, if you see that proof of work receipt, you see proof of real, you
see proof of something that physically exists. That’s not true for anything else that you
see on a computer screen. Preston Pysh (00:59:17): For people that are hearing all this terminology
and they’re saying, I hear what you’re saying, but I just can’t really understand,
what’s happening in the math? How is the code actually able to imply or
apply that physical work in physical reality to the person who’s the attacker? And so if I was going to just very simply
try to demonstrate to people in real time what’s happening there, this is a way that
I’m going to put some proof of work on Jason right now. Jason, I’m thinking of a number between
1 and 10. And go, I want you to start guessing what
it is. Jason Lowery (00:59:59): Three. Preston Pysh (00:59:59): No. Jason Lowery (01:00:00): Five. Preston Pysh (01:00:01): No. Jason Lowery (01:00:01): Eight. Preston Pysh (01:00:02): No. Jason Lowery (01:00:03): Nine. Preston Pysh (01:00:00): No. Jason Lowery (01:00:00): Five. Preston Pysh (01:00:01): No. Jason Lowery (01:00:01): Eight. Preston Pysh (01:00:02): No. Jason Lowery (01:00:03): Nine. Preston Pysh (01:00:04): No. The number was seven. So he would keep going through this, right? Until he gets it right. But he’s expending watts, he’s expending
energy trying to figure out what the number is, and so through the mathematics, he would
then be able to… When he does find the answer and he does see
that it’s seven, he can mathematically, through encryption, prove that that was the
only answer to the question that I asked, which would’ve had… The way I asked it was it’s between 1 and
10 and to go, right? There’s a way to verifiably prove that that
was the only right answer to the question that I asked through mathematics. And this is what’s happening, where… And we’re doing this digitally over the
internet, right? This is what’s happening in a proof of work
system that these miners are solving for, and it’s verifiable through mathematics. Jason Lowery (01:00:57): And there’s a lot of different ways that
you could design a physical cost function. Adam Back just seems to just nailed it. There are several other people trying to solve
this problem, but the beauty of Adam Back is that it appears to be perfectly fair, like
there’s no advantage gained by anyone. You just have to brute force it, you just
have to randomly guess, and then you’re just randomly lucky. Preston Pysh (01:01:22): Yeah. Jason Lowery (01:01:22): And so it imposes physically-prohibitive costs
evenly to anyone who tries to solve it there. It has no favorites, essentially. But it’s important to emphasize that a proof
of work cash cost function is a physical cost function. Its sole purpose is to impose a real-world
physically-prohibitive cost on the people who try to solve it, and that’s huge because
if you demand that someone essentially collateralize or present proof of work in order to send
you an email, in the case of that, and that’s Hashcash, or to do anything to execute any
action or to send any bit of information, then what you have technically done in the
non-abstract reality of shared objective reality is impose a physically-prohibitive cost on
them. Preston Pysh (01:02:09): Yeah. Jason Lowery (01:02:10): So we’re talking, this is like the real
world, like now you figured out a way to essentially countervail the abstract power of software,
of the people who code software, because it’s like your software is not allowed to execute
a control action or send any information unless you present proof of real to me, and by demanding
that receipt, you’ve technically imposed a real-world physically-prohibitive cost on
them. And so Finney took that and he was like, “Okay,
that’s pretty sweet. Let’s make that a transferable or a reusable
proof of work.” So Adam Back is kind of a stamp, like you
just stamp an email, “Okay, this has imposed physically-prohibitive costs on someone.” But with reusable proofs of work, then now
you have enabled this system where you can impose physically-prohibitive costs on people
for anything that you want because these proofs of work can be applied to emails, they could
be applied to like anything. Jason Lowery (01:03:02): And so that was the original important thing
about hash cost function and proof of work. Now, it had nothing to do… I mean, you could choose to call it a way
to systemically secure money, but it’s that’s not really what it is. It’s a whole new transformational way of
cybersecurity and people are just happen to be using it for a piece of software that would
instantiate something that we could call money and monetize. But on its own, by itself, proof of work is
a major leap in cybersecurity and computer science, even if it has nothing to do with
money whatsoever. Jason Lowery (01:03:37): But the big question hanging over that was,
“Okay. Wow, this is pretty insane. We’ve created a way to impose physically-prohibitive
costs on people using this tokenized form of cyber power, this reverse hypothesized
thing where we’ve taken a physically real thing but then transferred it into cyberspace
as an abstract thing but it can still impose real-world physical costs.” The million dollar question was, who gets
to control that? Because whoever can control that is now, once
again, another god king, right? And so that’s where Satoshi comes in because
he figured out a way to make it so that the protocol which controls this reusable proof
of work token itself is secured by its own hash cost function. So it’s like a self-enforcing, self-securing,
reusable proof of work token protocol. Jason Lowery (01:04:27): So the easy way to think of it is, really,
what you want to do is, if you’re going to demand this cyber power token as collateral
to execute a sensitive command action or send information, then you have to have some way
to track its position in cyberspace, essentially, and so you need a ledger of some kind, you
need someone to record where it is and have verifiable ownership of it at all times, which
means you have to have someone to write that ledger, okay? But if you have someone that has the authority,
the abstract control authority to write the ledger, they have enormous abstract power
because they can control which transactions get added and they can also withhold transactions. So whoever’s in charge, whatever entity
is allowed to add or withhold transactions of the cyber power token has enormous abstract
power. Jason Lowery (01:05:16): And so Satoshi, the beauty of Bitcoin is like,
“Okay, well how do you decentralize that control authority over that ledger?” Well, how do you do it? You make the people who solve the hash cost
function the people who get to write the ledger. So by doing that, you impose a real-world
physically-prohibitive cost on people who attempt to control the ledger, and then boom,
right there, now you have a proof of power system, just like natural selection is vetted,
right? You have people who have the means, who have
physical powers, fully inclusive, everyone has access to watts. Physical power is physically decentralized. There’s watts all over the world. You can pull watts out of the air, the wind,
out of the water, out of natural gas, out of solar. So this power’s available everywhere exogenously,
systemically exogenously, so there’s no way that you can code a systemically exploitable
piece of software that prevents people from using their real-world watts. It’s fully inclusive, so everyone can have
access to these watts. Jason Lowery (01:06:16): But the big one is it’s unbounded. So let’s say if someone starts gaining a
lot of control authority over this ledger, well, because you’re using watts power as
the basis through which you achieve control authority over the ledger, that means there
is no, theoretically, just like there was no theoretical limit to the amount of kinetic
power that people can use to defend their access to their property in the real world,
there is no physical limit, there is no theoretical limit to how many watts honest people can
summon to impose severe physically-prohibitive costs on anyone who tries to gain and exploit
centralized control authority over the ledger. Jason Lowery (01:07:01): And so that’s the primary basis through
which this system is secured, is there’s no limit to how many watts that people can
summon to defend it. And it’s clear that Satoshi was concerned
about this, because in eight pages, he mentions the word attack 25 times. He talks about people attacking with the same
protocol more than any other word. And this whole thing is like, “Okay, listen,
if you use physical power, if you make it so that you can achieve control of authority
over the ledger, unless you solve the hash function, that gives honest people the ability,
the unbounded ability to impose physically-prohibitive costs. So their benefit-to-cost ratio now can plummet
because there’s no limit to how much they can cost, they can impose on anyone trying
to gain 51% of the control. And that’s where decentralization really
comes from. There’s obviously decentralization and the
nodes and everything, but really, it’s the decentralization of the control authority
over the ledger achieved through using the physical power as the basis through which
you can have control authority over the ledger, and there’s no substitute for physical power
for doing that. Preston Pysh (01:08:04): Let’s go to proof of stake. Jason Lowery (01:08:06): Okay. So just like in the birth of agrarian society,
where people start condemning the use of physical power as the basis through which they settle
disputes over property, determine control authority over property, or achieve consensus
on the legitimate state of ownership and chain of custody of property, people started to
condemn the use of physical power for theological reasons, because it’s energy-intensive or
prone to cause injury. In the case of proof of work, obviously, doesn’t
cause injury because it’s electric, it’s non-kinetic. But it is energy intensive, okay? So once again, you have these abstract power
hierarchies emerging, where people are making the claim that it is, on some ideological
basis, not on any meaningful systemic basis, especially meaningful from the point of view
of systemic security, they’re claiming that it is “ideologically bad” to use proof
of work because of the energy that it expends. Jason Lowery (01:09:06): This happened with agrarian society, and this
is how most kings rise to power, right? They say, “Okay, the use of physical power
to establish control authority over resources is morally bad. We should use rank to do it.” Proof of stake is effectively proof of rank. It’s people saying, “Okay, we should forfeit
our capacity to project physical power to defend ourselves and go back to, go rewind
ourselves 25 years back in the history and progression of computer science and go back
to abstract power hierarchies.” It’s important to note the primary design
concept of proof of stake existed before proof of work came out. People were already using and designing abstract
power hierarchies to manage control over a randomly thing, like coins that they extracted. That was already being done. Proof of stake goes back to that. Jason Lowery (01:09:54): And so the easy way to simply compare, like
when you start to look at the difference between proof of work and proof of stake, and if you’re
new to this and you’re trying to really genuinely understand the main systemic differences,
it really just comes down to two different theories on how to secure your access to your
property. The proof of work theory is, you secure your
access to your property by preserving your ability to impose severe physically-prohibitive
costs on anyone that would try to take it from you, deny your access to it, or exploit
your rules. Proof of stake says we can create some abstract
form of power and then use that as the basis through which we defend ourselves. Jason Lowery (01:10:33): And so those are the two fundamentally different,
like that’s the main difference, is can I design, can I use a general purpose state
machine to design a program to create abstract power that does the same job as physical power? That’s what stake ostensibly does. And if I do that, can a thing which does not
physically exist… Remember, there is no spoon, so state is not
real, state does not physically exist. Can a thing that does not physically exist
achieve the same complex emergent behavior as a thing that does physically exist? So can a system that is defended through physical
power have the same complex emergent properties as something that is defended through abstract
power? And I don’t, well… Preston Pysh (01:11:15): Talk to us about validators, specifically
on Ethereum, how they work, and then talk to us about slashing, because in their abstract
power, as you would describe it, this is how they claim that they will defend the integrity
of the ledger. Jason Lowery (01:11:33): Yeah, so the idea behind slashing is we can
impose cost by allowing honest people to “slash” the stake of validators that might be abusing
their control authority over the ledger. Preston Pysh (01:11:47): So if I’m a validator, I have whatever amount
of ETH to set up my validation node, and I’m looking at transactions and I’m saying,
“Yep, these ones are good. Include these ones in the next block. These ones are good,” and you think that
I’m a dishonest broker and enough people like you agree with you that I’m a dishonest
broker, you can slash me out of the validation mechanism. Is that correct? Jason Lowery (01:12:12): Yeah. What we’re going after here, the main thing
that’s making this secure and insecure is control authority over the ledger. So validators have control authority over
the ledger. They’re essentially the gatekeepers. They get to choose which transactions get
added to the ledger or which ones don’t, but that is a double-edged sword because that
also means they get to withhold transactions from the ledger, which technically means they’re
performing a denial-of-service attack. So you have to protect yourself against that. Now, the way Bitcoin does that is, the people
who are validating or the people who are adding transactions to the ledger, if they start
to be abusive, you can basically just hash them out of the hash amount of their control
authority. But with validators, you can’t because stake
itself is zero-sum, okay? For example, let’s just say there’s a
situation where some single entity controls 60% of all stake. If some single person controls 60% of all
stake, they can split that stake across millions of validators and it would still be the same
single entity and then they could use those validators to start tactfully withholding
specific transactions from the blockchain. Preston Pysh (01:13:26): And so when you say they have 60% of the stake,
you’re saying they have 60% of the validators, because if they had 60% of the coins that
are outstanding on that protocol, they could have way more than 60% of the validators,
correct? Jason Lowery (01:13:39): Yeah. So there is a difference between the number
of coins on the protocol and the number of coins that are parked in validators, but the
worst case scenario is, 60% of the stake is controlled by a single entity and they put
all of that in validators. That would be the worst case scenario. Or actually, that could be the best case scenario
because you have to look specifically at the stake, and if someone controls 60% of all
coins, they can have far more than 60% of the stake that’s being used in validators. Preston Pysh (01:14:15): Yes. Jason Lowery (01:14:15): So just to give them the benefit of the doubt,
let’s just assume that everyone who owns coins is using it in a validator, like all
the honest people are putting up their biggest fight possible to try to resist, so you’ve
got like 40% of all the coins being staked by honest people and then 60% of the coins
being staked by dishonest people. The whole point of bringing this up is, in
that situation, because stake is bounded and zero-sum, the honest people can’t get more
stake. They can’t simply regain control authority
over the ledger by adding more stake because it’s a zero-sum and out. This isn’t a problem in proof of work. If you only have 40% of the hash, if honest
people only have 40% of the hash, there’s no limit to how much hash they can add back
into the system, there’s no limit to how much computing resources they can get and
electricity they can get. But in stake, you’re stuck. Preston Pysh (01:15:08): And let’s frame this real fast. In a world where you have runaway fiat printing
that has no production cost whatsoever and nation states that could print by coins off
the protocol and then start staking them, there’s arguably an incentive to act this
way, to control which transactions are being included, not included, stuck in the mempool. I mean, at that point, you can do whatever
you want. Jason Lowery (01:15:40): Yeah, there’s nothing physically preventing
you from just printing all the money to buy all the stake to gain the control authority
over the ledger. That’s one of the dangers of coupling control
authority over the ledger to something that doesn’t physically exist. Preston Pysh (01:15:54): That has no tie to physical reality. Jason Lowery (01:15:57): That has no tie to physical reality that you
can’t see. So the easy way to think of it is, remember,
all objects in software, there is no spoon. So stake does not physically exist. That means it’s not verifiably physically
decentralized. It’s like physically impossible for it to
be verifiably decentralized because it’s not a real thing. So no one can prove that stake isn’t already
centralized. Preston Pysh (01:16:18): Right now. Jason Lowery (01:16:19): You just have to trust that it isn’t. And then if it is and then people start to
abuse the control authority that they have by virtue of having majority stake, then that’s
where slashing will supposedly help the honest people because, okay, the honest people can
slash the stake of the people that are using it to attack the network, censor transactions,
or do whatever bad things they can do with the control authority that they have. Preston Pysh (01:16:42): And then you get into the whole argument discussion
of what’s considered honest and who are we talking about, how they view what is honest,
right? Jason Lowery (01:16:51): Exactly. Preston Pysh (01:16:52): Look at the world today, it’s a perfect
example of that exact point, is, are you in this camp or that camp, or who’s right and
who’s wrong, while the people in your family, you could probably split them right down the
middle of what they believe in and both of them think that they’re right. Jason Lowery (01:17:10): Yeah. There’s three main critical problems with
the idea of slashing that I see just as a military adversarial thinker. The first one is, first of all, how would
you even attribute an attack? So if someone has 51% control of 50% of all
Ethereum and they’re staking all of it, right? And so the majority of staked Ethereum is
controlled by one person. Because it’s not a physically real thing,
they can trivially divide that stake across millions of validators and then they could
pick which validators they want to use to start tactfully withholding transactions from
specific targets. So they call this censoring, but it’s just
withholding valid transaction requests from the blockchain, and you could do that and
you could do that across validators, okay? So how do honest people identify that the
attack is even occurring if it’s happening across millions of different validators controlled
by a single entity? That’s really difficult to do. Preston Pysh (01:18:09): Impossible to do? Jason Lowery (01:18:11): Yeah, I don’t know, but- Preston Pysh (01:18:15): But maybe. Jason Lowery (01:18:17): What I do know is that it is physically impossible
to verify that stake isn’t centralized. Preston Pysh (01:18:22): Yes. Jason Lowery (01:18:23): So it’s going to be really hard to make
the claim that there is a 51% attack occurring if it’s already physically impossible to
verify that it’s not or is centralized in the first place. Okay, so that’s assumption number one, that
you can even have attributability, and I don’t know how that could happen, like I can’t
reasonably figure out how people are going to come to consensus about that. Because if you look at how Vitalik describes
it is, if beyond a reasonable doubt that we have identified that an attack is occurring,
then we could slash. It’s like, “Okay, well, how are you going
to achieve beyond a reasonable doubt?” Because I don’t know how you would do that. Any self-respecting attacker isn’t going
to put all their sake in one validator. I don’t even think they can because I think
it’s limited. Jason Lowery (01:19:04): Okay, so that’s problem number one. Problem number two, this gets to your point,
which is, you’re assuming that people will think that the synth strain is bad. That almost never happens in actual sanctions
on financial systems, Canada being a great example. When they started sanctioning or denial-of-service
attacking Canadian truckers, a lot of people didn’t think that was a bad thing, okay? So how are you going to achieve consensus
from the majority of the people that they should even slash someone if there is some
theological, philosophical, or ideological reason why they are abusing their validators. Preston Pysh (01:19:42): Because at the end of the day, everybody on
the planet has to agree with the idea that if you and I want to transact, if I want to
transmit some type of value to you, I should have the right to be able to do that. Jason Lowery (01:19:55): Right. Preston Pysh (01:19:56): Regardless of what anybody else in the world
thinks, right? Jason Lowery (01:20:00): Yeah. And what are the chances that everyone’s
going to believe that, especially when only select few people who might be easy to perceive
as bad are the ones being denial-of-service attacked? Preston Pysh (01:20:10): Yeah. Jason Lowery (01:20:10): You see all of it with Canada and then, obviously,
you see it with the sanctions against Russia. Most people, like a lot of people think that
it’s good that we are denial-of-service attacking or 51% attacking Russia and censoring
their transactions off Swift for ideological reasons, okay? Preston Pysh (01:20:28): And people will always think that until it
happens to them and they’re on the wrong side of the equation. Jason Lowery (01:20:33): Right. Yeah. But in reality, what you would expect is if
someone has that much control authority of the ledger, they would only be using it to
denial-of-service attack certain people, not everyone. Preston Pysh (01:20:43): Yeah. Jason Lowery (01:20:44): And so what are the chances you’re going
to get everyone else who isn’t being attacked to come to unanimous conclusion or how ever
much conclusion you need to prove without a reasonable doubt that the censoring is occurring
and that it’s a bad thing when in most cases of sanctions, people think it’s justified
and they aren’t mad about it? Jason Lowery (01:21:02): So that’s problem number two. And then the third and glaring one is slashing
works both ways. Preston Pysh (01:21:09): Yeah. Jason Lowery (01:21:09): Okay? So the honest members can always slash the
majority stakers that are abusing their control authority over the ledger, but the people
with the majority control authority over the ledger because of their majority stake can
slash the honest people back to maintain their majority stake, and so you get basically into
slash wars instead of hash wars. Preston Pysh (01:21:28): It goes back to what we were talking about
early on where the apex predator of an abstract power hierarchy, they would do anything and
everything to ensure that they can continue to control this system, this protocol. But for the people that are at the bottom
of this protocol or this social order, if you will, they don’t have the incentive
for it to be kept in place because they’re the victim of this environment that they have
to operate within. Jason Lowery (01:21:59): And it’s worth just repeating like we’ve
created over the last 5,000 years, we have used symbolic language to formally codify
abstract power hierarchies where rank is ostensibly decentralized across senates or voting systems,
where we hire something like 500 representatives of rank, we use voting systems, and we trust
in them to represent us. But over the course of those 5,000 years,
time and time and time again, they get exploited. People find a way to systemically exploit
the rule set to take advantage of the abstract power. There is an enormous incentive to do that
because it’s a giant honey problem. And so when you go to a proof of stake system,
what you have, once again, done is created an abstract power hierarchy and a voting system
and you’re just making this claim that this like thing won’t be systemically exploited,
that people aren’t going to figure out how to abuse the rules. Jason Lowery (01:23:03): And it’s silly to me because people can’t
even verify that it’s not already centralized. People don’t know. You have no idea who is behind the stake. So at least in governments, oppressive governments
or regulatory captured governments, you at least can see your oppressors. In stake, they’re anonymous and you have
no idea what’s behind these people. So it seems to be extremely systemically insecure,
but even if you don’t believe that, it is 100% irrational to make the argument that
a system based on something abstract which doesn’t physically exist can have the same
complex emergent behavior of system security as a system that uses something that is physically
real, like power. Like you can’t reasonably make the argument
that they will have the same emergent properties because they are very physically and systemically
completely different systems. Preston Pysh (01:23:59): I want to play a clip as we’re talking about
how the apex predators have an incentive to keep these systems in place. This is a clip. I’m going to play it, I’m not going to
tell you what it is, and then I want to capture your thoughts after we’re done playing it. And this is an apex predator of the existing
proof of stake system. Here it comes. Speaker 1 (01:24:23): Mr. Dimon, if I can ask you one other question,
I’d like to ask of another topic that I’ve been very focused on, which is the rapid development
of digital assets and related financial technology. I believe the United States should lead the
development of emerging technologies like distributed ledgers and blockchain, and the
federal government should provide the certainty needed for the country to serve as a hub for
financial innovation. And I’ve developed legislation to help define
qualified stablecoins, which I know the chairwoman and the ranking member are also working on,
and to select the appropriate regulator. I’ve read that you’re a little skeptical
of some of these new technologies, but what are the biggest things keeping you from being
more active in the space? And do you worry that we would miss the vote
and give other nations like China an opportunity to advance their digital currency and other
payment systems that could undermine the US dollar? And I’d love to get some of your thoughts
on that. Jamie Dimon (01:25:05): So you have to separate blockchain, which
is real, DeFi, which is real, ledgers, tokens that do something and deliver information,
money, ideas, simplify smart contracts. That’s one thing. I’m not a skeptic. Okay, I’m a major skeptic on crypto tokens,
which you call currency like Bitcoin. They are decentralized Ponzi schemes, and
the notion that’s good for anybody is unbelievable. So we sit here in this room and talk about
a lot of things, but $2 billion has been lost every year, $30 billion of ransomware, AML,
sex trafficking, stealing. It’s dangerous. There’d be nothing wrong with the stablecoin,
just like a money market fund, properly regulated. Preston Pysh (01:25:51): All right, Jason, your thoughts? Jason Lowery (01:25:55): Again, all software is abstract, and because
software is abstract, there’s a lot of semantic ambiguity about what kind of matters and what
doesn’t. And so… Preston Pysh (01:26:08): And real fast, that was Jamie Dimon from JPMorgan
Chase, if people didn’t hear the names or aren’t familiar with the clip. I’m sorry. Keep going. Jason Lowery (01:26:17): Yeah. No, this is great because let’s use adversarial
thinking here. From Jamie Dimon’s point of view, to your
point, he’s the top dog, he’s the apex predator in his abstract power hierarchy,
right? He’s the god king. He needs to do whatever he can to maintain
his abstract power. He’s talking about because software is so
semantically ambiguous and because it’s all abstract, a common tactic, and you see
this with like the crypto world, is you pick something random and you say that’s the
innovation. Preston Pysh (01:26:48): Yeah. Jason Lowery (01:26:48): So you say, “Oh, it’s blockchain. That’s the innovation,” “Oh, it’s
smart contracts that are the innovation,” or, “Oh, it’s this,” or it’s, “Oh,
it’s that,” and it’s like- Preston Pysh (01:26:56): Everything but Bitcoin. Jason Lowery (01:26:57): Yeah, it’s like wave here and then don’t
pay attention to the thing that actually matters, which is Bitcoin, which is- Preston Pysh (01:27:07): Work. Jason Lowery (01:27:07): … physical cost functions and physical decentralization
of control authority over resources. And so that’s exactly what Jamie Dimon is
doing, and you’ll see this with everyone. You’ll see this with the CBDCs, you’ll
see this with like Ethereum, for example, is they say that something else is the innovation
to try to get you into their abstract- Preston Pysh (01:27:28): They won’t even talk about it. Like Andreessen Horowitz, right? They had some big giant recap, crypto recap
paper, I think it was Pierre Rochard that was talking about. Bitcoin wasn’t even mentioned- Jason Lowery (01:27:43): Wow. Yeah. Preston Pysh (01:27:43): … in the entire report, but yet it has the
largest market cap of any type of “crypto asset,” using air quotes there for people. Jason Lowery (01:27:54): And if you study computer science, if you
study software reuse, the most common form of software reuse is design reuse, so people
take a design of an existing piece of software and then tweak it a little bit. Preston Pysh (01:28:07): Yeah. Jason Lowery (01:28:08): Majority of cryptocurrencies out there is
reused Bitcoin, right? But they tweak it- Preston Pysh (01:28:13): Minus the proof of work. Jason Lowery (01:28:14): Minus the proof of work. So they copy the design of Bitcoin, then they
remove the proof of work, and they create an abstract power hierarchy where they have
the control authority over the ledger in some backdoor way or some trap door way through
the systemic exploitation of the rules. Preston Pysh (01:28:30): They get VC money, they then pump the marketing
to get a bunch of people to buy it, then they get their bags pumped, then they offload it,
and then they probably go and buy Bitcoin with the proceeds. Jason Lowery (01:28:41): Yeah, I mean, if they were smart. I would do that if I were kind of evil that
way. Preston Pysh (01:28:46): No, you wouldn’t. You’re not evil like that. Jason Lowery (01:28:49): But the point is, whatever you do, don’t
let people realize the value of physically defending their access to their property or
physically defending their policy against systemic exploitation using real-world physical
power. Condemn it as much as possible. Get people to forfeit their physical aggression,
domesticate them, and then once they stop using physical power, they adopt abstract
power hierarchies and then they become the domesticated animal that you can exploit. And so you’ll see this with everything now,
is they’re going to come up with every possible different way to get you to not appreciate
proof of work or the use of real power to secure your access to the things that you
freely choose to value, and you should just be very, very- Preston Pysh (01:29:33): Skeptical? Jason Lowery (01:29:34): Yeah, that should raise red flags. Anyone tries to raise the argument that the
use of physical power to physically defend yourself by imposing severe physical costs
on attackers is somehow bad because of the- Preston Pysh (01:29:45): Red flag. Jason Lowery (01:29:45): … energy it uses, that’s a red flag. That’s a god king trying to build an abstract
power hierarchy, trying to trap you, and that’s exactly what Jamie Dimon here is doing. He’s saying, “Okay, well, this blockchain
isn’t bad and smart contracts aren’t bad, but that thing called Bitcoin, that’s bad,
and look at all these bad people.” So he’s the… Jason Lowery (01:30:00): Called Bitcoin that’s bad. And look at all these bad people. So he’s the shark trying to get you to think
that your swimming pool isn’t safe. And he is trying to say what is safe is this
open water where I swim, you just have to be careful. Preston Pysh (01:30:15): All right, here’s the next clip I’m going
to play for you. You ready? Jason Lowery (01:30:18): Yeah. Preston Pysh (01:30:18): Here it comes. Vitalik (01:30:20): So I did look to summarize that one of the
ways that I think about this in a more philosophical way is, Proof of Work is based on the laws
of physics and so you have to work with the world as it is. You have to work with electricity as it is,
hardware as it is, what computers are as it is. Whereas because Proof of Stake is virtualized
in this way, it’s basically letting us create a simulated universe that has its own laws
of physics. And that just gives us as protocol developers
a lot more freedom to optimize the system around actually having all of the different
security properties that we want and- Jason Lowery (01:30:58): That we want. Vitalik (01:30:59): … if we want the system to have a particular
security guarantee. And then often there is a way to modify the
upper stake mechanism to also achieve it. So it’s just much more flexible and it shows
through in the efficiency and the security of the network. Preston Pysh (01:31:16): Way more flexible, Jason, to give us the security
that we desire. Jason Lowery (01:31:23): Yeah. I study system security of software intensive
systems at MIT, for whatever reason I find that interesting. And so I took as many graduate classes as
I can on that. And it’s actually extremely common. So what’s happening here is Vitalik is making
the claim that if you remove the physical constraints, it will somehow make it safer
or make it more secure. But he doesn’t realize is the thing that’s
achieving the security is the physical constraints. Preston Pysh (01:31:50): Yeah. I mean you’re not going to… Fort Knox, right? It’d be like saying, “Oh yeah, we’re
going to take the walls down, we’re going to remove the fence, we’re going to remove
the security guards, we’re going to move the brick walls, we’re going to remove the
metal casing around the vault, to make it more secure Jason.” Jason Lowery (01:32:10): Yeah. But this isn’t just true for this scenario. We’ve studied, at least in my graduate classes,
so many different fields make the same mistake. Aviation has made this mistake multiple times. Preston Pysh (01:32:20): In what way? What do you mean? Jason Lowery (01:32:21): Well, you replace a physical interlock or
a physical impediment with something digital or with a piece of software. And then you end up inadvertently removing
the physical constraint that was actually keeping that thing safe. And then the rocket blows up or the airplane
blows up, or the Boeing 737 dive bombs. Jason Lowery (01:32:46): And so this is a common problem. It is just something that software developers
do for some reason, is they think that, for whatever… they don’t realize that system security
is a complex emergent behavior, and often the result of physical constraints that cannot
be replicated in a virtual environment where nothing physically exists. And it was so refreshing to hear him make
this assertion because I had already started down this path of making the distinction between
Proof of Work and Proof of Stake, and saying the reason why Proof of Stake isn’t going
to work is because stake doesn’t physically exist. And what they’re essentially doing is trying
to make the claim that they can virtualize Physical Power and still achieve the same
levels of systemic security. I had already made that argument. I had already written 50 pages on that for
my thesis that I’m having to write. Preston Pysh (01:33:35): I’m sure you did. I’m sure you did. Jason Lowery (01:33:37): And then he said it, he said it on the night
of Proof of Stake. And I saw it in the morning and I was like,
“Oh my God, this is it.” Preston Pysh (01:33:44): Oh, the Holy Grail. Jason Lowery (01:33:45): Yeah. Preston Pysh (01:33:46): The Holy Grail. Jason Lowery (01:33:47): I had already been arguing with people on
Twitter about it and they weren’t buying it. And so I was starting to feel insecure. I was like, “I don’t know if this is the
right angle to take.” And then Vitalik just flat out says it. Preston Pysh (01:33:55): He knew. Jason Lowery (01:33:55): He flat out makes the assertion that you can
remove the physical constraints, replace it in a virtualized environment, and he’s claiming
that it will be more secure. Preston Pysh (01:34:04): Yeah. Classic. Jason Lowery (01:34:04): And that is just god king, Abstract Power
building 101 right there, is convinced people that to forfeit their Physical Power and the
physical constraints protecting them. Preston Pysh (01:34:17): So I’ve often wondered, as you’ve been
very public in your research, your just interactions on Twitter. And for people who are not familiar with you,
let me just describe my point of view of how Jason Lowrey came on the scene. Jason Lowery (01:34:36): Oh boy. Preston Pysh (01:34:36): So here we are on Twitter and we’re just
intellectually battling with each other, joking around, whatever, on a constant daily basis,
just having fun really. And somebody posted this screenshot of this
guy on LinkedIn going to battle; basically doing what we do on Twitter every day, but
doing it on LinkedIn, which was just hilarious. You have no idea how hard I laughed the first
time I saw one of these JPEGs of you just beating up some total suit on LinkedIn. And so evidently somebody reached out to you
and said, “Hey, the real conversation’s happening here on Twitter.” And- Jason Lowery (01:35:16): It was Greg Foss. Preston Pysh (01:35:17): Was it Greg Foss? Jason Lowery (01:35:18): Yes. Preston Pysh (01:35:18): Okay, I didn’t know that. Yes. So Greg Foss reaches out to you, you then
go on Twitter and you immediately captured a really large following. A lot of people, myself included, battling
with you over some of the choice of words that you used. But you know what, when I look at how much
your thesis has evolved through the time that you’ve been at MIT writing this, I can see,
Jason, that you took a lot of the things that people were saying to heart and really wanted
to understand other people’s vantage point. You weren’t battling with them via ego,
you were battling with them intellectually to try to understand their point of view. And all of that has come out. And I think people that are listening to this
conversation can see that evolution in your writing and your thesis that you’ve developed. Preston Pysh (01:36:04): But here’s my question. Sorry to keep going on. My question is this. How has MIT and the professors there received
this? Because I would think that it hasn’t been
received well, because it seems like so much of the Proof of Stake, saves the energy usage
stuff, is so indoctrinated at the academic level that I would think that you’re literally
banging your head against the wall. Jason Lowery (01:36:32): Yeah. So I got invited here… I forgot that’s how I got famous is through
the bashing of suits on LinkedIn. I forgot about that. Greg Foss, yeah he was like, “Dude, you
got to come to Twitter. Your people are here. You don’t really get it.” Preston Pysh (01:36:47): We were watching… People were posting these things on Twitter,
these screen grabs, and I’m telling you we were laughing so hard. Jason Lowery (01:36:56): I was so afraid to come to Twitter. And I was like, “I’m going to say something
that gets me in trouble.” And sure enough, day one I say something about
the grounded theory methodology… So I’m using a grounded theory methodology,
which is essentially you try to just talk to people as much as you can. Preston Pysh (01:37:15): Interviews. Yeah. Jason Lowery (01:37:16): Preferably talking to people who are knowledgeable
in your subject matter area. Well, there ain’t no such thing as an expert
in cryptocurrency, as much as people on LinkedIn likes to put it on their profiles. No one actually- Preston Pysh (01:37:27): Web3, they’re putting Web3 Jason. Jason Lowery (01:37:29): Yeah. There’s no such thing as an expert in this
field yet. It’s too new. And so if you want to find the most knowledgeable
people, they’re going to be on LinkedIn. Or they’re… No sorry, not LinkedIn. God no, not on LinkedIn. On Twitter. Preston Pysh (01:37:40): Twitter. Jason Lowery (01:37:41): They’re going to be on Twitter. Preston Pysh (01:37:42): And their name’s probably going to be douchebag5
or something like that. Jason Lowery (01:37:45): Yeah, right. No, and it’s true. And then they’re going to have a cartoon
as their profile picture with laser eyes, but those people have enormous technical knowledge. Way more so than you could get from any professors
here. Not all of them, but most people in any institution
just because this field is so new. And so my approach to this thesis was a grounded
theory methodology where I engage in unstructured interviews with the public, or with anyone
I could find, and then just have intellectual debates on them. And then I use their feedback to… and that’s
just the grounded theory methodology is you just use their core concepts and you improve,
improve, improve, improve, and try to get to what’s called saturation. And so yeah, no, I owe all my ideas to the
something like 70,000 comments that I’ve replied to in the last year. Jason Lowery (01:38:31): Okay, sorry. I just wanted to address that because I do
really appreciate all the help and all the people like you that I get to meet, that can
help shape this. It’s really important to me to do this publicly
because of my job and the reason why I’m at MIT. I am a US National Defense fellow. I am an active duty officer. I am researching the national strategic implications
of Bitcoin and I am going to send this straight to the Joint Chiefs once we finish it. And I am going to be advising senior policy
makers and I already do. And so I don’t want that to be secret. I want that to be an open conversation and
I want to be as fully transparent as possible. Jason Lowery (01:39:05): Now in terms of how people at MIT react to
it, I have seen the same thing you’ve seen, which is this obsession with Proof of Stake. There’s that MIT article that talked about,
it’s such a big deal and I get in lots of fights with those people. But luckily the way MIT’s structured is
there’s different schools and no one really has any claim over any particular subject. So there’s not one department that gets
to claim all Bitcoin research or all cryptocurrency research. There’s people in the business school, there’s
people in engineering school, there’s people in the computer science school and you pretty
much have freedom of action. Jason Lowery (01:39:44): And so what I did was I deliberately steered
away from the professors. I do clash with most of the line of thinking
with the business school people here, they’re just so into Web3 and crypto right now. It’s just kind of hopeless, I don’t even
try to talk to them now. I found the expert in software security and
software system security. I found the expert with 40 years of knowledge
and literally wrote the book on system security that the whole world uses. And I found her and she was also skeptical. She’s like, “I think it’s all scam.” But I was like, “Okay, then you should be
my advisor and let me prove to you using your own area of expertise why Bitcoin is the exception. If I can convince you using your own area
expertise of why Bitcoin actually is a major new change in cybersecurity, then wouldn’t
that be a good thesis?” And she was like, “Okay, cool.” So I found her as my advisor. Preston Pysh (01:40:42): And? Jason Lowery (01:40:42): So far it’s going well. I won’t know if it’s successful until
I publish next year, but man, she’s just awesome. She’s actually… like I said, she’s one of the world leading
experts in system security. And Ethereum developers have been starting
to go to her conferences and I’m just [inaudible 01:41:03]. Yeah, so it’s just kind of funny. It’s like anytime an Ethereum developer
signs up or whatever, she’s like, “Hey, check this out.” Preston Pysh (01:41:08): So this is something I want to just say. So if somebody from your school, or one of
your advisors, are listening to this, the thing that you get in this space, and I was
talking to you a little bit about this before we started recording, is you get people that
come to Bitcoin from so many different expertise. Some people come from the software side, some
people come from the game theory side, some people come from the finance side. I’m coming from the financial lens and that’s
how I found Bitcoin in 2015. How I found it is I had the opinion that the
credit markets were going to implode and that there was no way out for central banks to
contain how broke credit markets had become, because I was looking at this long term credit
cycle that was made famous by Ray Dalio. And I was just looking at it as just like,
what can possibly catch all of this buying power when this neutron star of credit explodes? That’s how I personally found Bitcoin. So I came with that bias. I came with that lens. Preston Pysh (01:42:09): And so, one of the things that sold me on
Bitcoin versus everything else that was happening, was if you’re going to catch something with
call it 300 trillion dollars worth of buying power and it’s going to implode like a neutron
star, security is the primary thing that people are going to want to nest that buying power
into, to ensure that it can’t be taken. There has to be some type of enormous amount
of security and Physical Power behind the security of that in order for it to ultimately
win. Because when you look at how bond investors
look at their invest… they’re obviously not concerned about the
yield because you just started getting… And I wouldn’t even call these good yields,
especially when inflation’s at 8% and they’re offering 4% on the 10 Year Treasury, you’re
guaranteed to lose 4%. They’re not there for the yield, they’re
there for the preservation of buying power, and it’s to the tune of hundreds of trillions
of dollars that they just want to preserve the buying power. So if this thesis of the credit markets exploding
is valid and true, which I’m saying as an if, because I’m trying to look at it as
objectively as possible, how can anybody think that that’s going to manifest itself anywhere
other than the most secure protocol or money on the other side of such an event? Preston Pysh (01:43:32): And so I guess that’s me venting a little
bit. And I’m sorry to go off on a tangent because
this show’s not about me, it’s about you and your thesis here. But I find it frustrating that people are
not seeing that. Instead they’re caught up in these tokens
or these get rich quick ideas that, “Oh, it’s an innovative blockchain, smart contract,
Jamie Dimon BS.” And they’re missing the elephant that is
so big in the room that it’s suffocating the person. They can’t see it, it’s literally suffocating
them because it’s so big. Jason Lowery (01:44:15): Can I vent on this real fast. Preston Pysh (01:44:16): Yes, please. Jason Lowery (01:44:16): So you came in from the financial perspective. My first job in the military was as a blast
and ballistics research engineer where I literally measured the watts of bombs that go off and
bullets that go off. So I’m literally measuring our ability to
impose physically prohibitive costs on people in watts. Jason Lowery (01:44:37): My second job in the military was as a subject
matter expert in electronic warfare, specifically directed energy weapons. So once again, using watts as a measure to
impose severe physical prohibitive costs for the sake of securing something. Okay? Jason Lowery (01:44:51): Then I transitioned into the world of space,
I became an astronomical engineer, learned how to use and design spacecraft. And then I was part of the founding team of
officers that stood-up US Space Command and also US Space Force, which was essentially
a question of, well how do we impose physically prohibitive costs in a completely new domain. Jason Lowery (01:45:14): So what I’m saying is I know a lot about
the use of watts, the importance of watts for achieving security, and the question of
how do you start using watts in a new domain to secure the stuff that you care about. So what attracted me to Bitcoin was just this
idea that of course, it’s going to be the case that we are going to figure out a way
to use watts to impose physically prohibitive costs on people in and from through cyberspace
to defend ourselves in and from through cyberspace, especially our cyber-property, and especially
our policies are our rule sets and the software that we use. So the missing ingredient of cyberspace is
the ability to impose physically prohibitive costs in and from through cyberspace using
watts, obviously we’re going to that future. It doesn’t make any sense, I don’t understand
how anyone can think that we wouldn’t go to that future if we’ve already done it
in land. We’ve already done it in sea, we’ve already
done it in space, of course we’re going to do it in and air. Of course we’re going to do it in cyberspace. Jason Lowery (01:46:18): And so you have to just be looking out what’s
it going to be a protocol that people use to impose physically prohibited costs on people
in and from through cyberspace. And that’s clearly Bitcoin. And that was clearly the original intent of
Bitcoin. And it’s supposed to be a denial service
or denial of service counter measure or a counter measure against systemic exploitation
of software. That’s how it started. That’s how they talked about it. Yes, Satoshi took it and framed it as a cash,
but like we said before, that just happens to be a great use case. One of many use cases that this type of technology
could be used to secure, but it isn’t limited to just cash. And so I’m in the same boat. It’s so frustrating for people to just… Especially at big institutions like at MIT
for people just to ignore the major- Preston Pysh (01:47:05): Yes. But think about it makes sense, Jason. It goes back to what you’re talking about,
Abstract Power, right? There’s no more Abstract Power going on
than in an academic institution of who’s who and who’s tenured and whose class is
most noteworthy. Jason Lowery (01:47:28): I guess my point is you could have called
Bitcoin anything, it could have been called Bitunicorn or just anything. It doesn’t matter what it’s called, whatever
it was called. It would’ve still been a major leap in the
field of computer science and cyber security. It’s just such a dramatically different
way of doing things that is so completely unique and different, that no matter what
you call it. And it’s just that we happen to call it
money and we happen to use the first use case for which we started to secure this was as
a peer-to-peer cash system. People just get obsessed with this idea as
Bitcoin only being a monetary system. But it’s like no, what we have done is we’ve
created a giant global scale physical defense infrastructure that people are using to physically
defend what they value, not just the money but [inaudible 01:48:20] Preston Pysh (01:48:19): There’s the time and energy. Jason Lowery (01:48:22): You could use it to defend you against emails. And it’s only a matter of time, so people
are going to start using the lightning protocol and they’re going to start using Bitcoin
as basically a cyber dome to protect people using this Physical Power infrastructure. They’re going to figure it out. And it’s only a matter of time and I wouldn’t
be surprised that it emerges in the next couple years. And it’s like that is such, in my opinion,
a bigger deal and more importantly, a more inevitable deal. Of course that’s going to be something that
happens. Of course, we’re going to start figuring
out how to use protocols to physically defend ourselves through cyberspace. And for whatever reason, that’s just missing. People just aren’t thinking about that. Maybe that’s because people don’t think
about it often. And maybe because I’m the guy that measures
watts because I’m the military guy, I’m just more inclined to see that sooner, than
the- Preston Pysh (01:49:11): Yeah. I think that’s what it is. I think that when you pull back the thread
on how many complex academic and real world things are colliding here to understand the
magnitude of all of it coming together, you just have to have some expertise in a whole
lot of different domains to get it. Jason Lowery (01:49:36): Yeah. It’s a very tough systemic problem that
is multidisciplinary. It combines computer science, it combines
anthropology, it combines political history, it combines military strategy and it combines
money. And then you have to be able to just zoom
out and see what the big picture is, like what is the ‘so what’. And I think what the ‘so what’ is, for
the first time occurring society, we figured out how to use a power based control structure
to manage resources and to achieve consensus on the legitimate state of chain custody of
property and to physically defend ourselves in and from through cyberspace, and we’ve
done all these things at the same time and we’ve done it non lethally. And that’s huge. Preston Pysh (01:50:18): It’s unreal. Jason Lowery (01:50:18): This is going to be so much bigger than money
if people start using this thing beyond just money. And I think it’s going to start happening. And so that’s the message I’m trying to
get out. Preston Pysh (01:50:30): So Jason, let’s say that you had policy,
anybody in government or policy listening to the discussion, which I’m sure we might
have. What would be, if you had to frame up guidance
to them, what would be the one thing or two things that you would say to a person who’s
looking to implement policy on some of this stuff? Jason Lowery (01:50:52): Couple of things. So this is an example I like to use; when
gun powder was first invented, when black powder was first invented for more than 200
years, it was considered to be medicine and it was monetized and traded as medicine. So they invented this new power projection
technology and they called it medicine for essentially no other reason than the fact
that the doctor who invented it was intended to build medicine and named it medicine. And so for that reason they just called it
medicine and traded it as medicine. Called it fire medicine. And then they noticed that it was quick to
hold a flame. They weren’t quite sure what medicinal purposes
that could be used for, but whatever. The point is, it was a power projection technology. And you could have gone to doctors and you
could have asked doctors for their professional opinion on how good this black powder stuff
is as medicine. Jason Lowery (01:51:46): But whatever they would have to recommend
wouldn’t have been useful for the real purpose of this black powder stuff. And I say that because we keep on saying software
is an abstraction. What Proof of Work really represents is a
cybersecurity system as specifically a system where people are learning how to defend themselves,
learning how to defend the access that to their property that they freely value or to
defend their policy against systemic exploitation and abuse or just to figure out how to use
this thing for all sorts of new cybersecurity reasons. And it was called a coin and people act like
it’s a coin, but that’s just one of many use cases of this thing. Jason Lowery (01:52:26): And so Adam Back, I talked to him about when
he first invented the hash function. And he first called the receipt for solving
the hash function a stamp. And so imagine how ridiculous it would be
to go to the United States Postal Office and ask for their technical inputs about the technical
merits of Bitstamp, just because it was arbitrarily called stamp. Or imagine how ridiculous it would be to ask
a meteorologist about the technical merit of that stuff that stores your emails just
because it’s called a cloud. So just because we happen to call this power
projection system, this massive scale physical defense system that people are using to secure
their property, a coin, doesn’t automatically make it the case that the United States Treasury
Department or the United States Federal Reserve is qualified to be talking about the technical
merits of this technology. Preston Pysh (01:53:23): Wow. Jason Lowery (01:53:23): Least of all is the freaking bankers because
of the- [inaudible 01:53:27] Preston Pysh (01:53:26): Perverse incentives. Jason Lowery (01:53:28): Yes. Because of the very obvious incentives we
heard Dimon talk about. So the last people qualified to be talking
about the national strategic security implications of this power projection technology is the
United States Treasury Department, is any bank. And so who’s running the conversation about
the national strategic security impacts of Bitcoin right now and why? And what qualifications do they have? Because from my perspective, from a guy who
actually spends all his time studying power projection technology, I do not think they’re
qualified to be talking about the technical merits with this technology. At least not about Bitcoin specifically or
anything that uses the Proof of Work protocol. And so my recommendation to any policy maker
that might be listening to this is, the last people you should be listening to are bankers
and financiers about power projection technology. That’s silly. It’s like listening to doctors about the
technical merits of- Preston Pysh (01:54:26): Gun powder. Jason Lowery (01:54:26): Black powder, just because they called it
medicine. [inaudible 01:54:31] Preston Pysh (01:54:30): That is not the response I was ever expecting
to hear from you. That’s fascinating that you frame it that
way because as a person that comes with a financial lens, a very financial lens to this,
I just would not have ever viewed it from that optic. I view it as very financial. Jason Lowery (01:54:49): And it definitely is because to your point
earlier, if you’ve created the most secure system ever, it’s going to double as a great
thing to monetize, to secure your money. Preston Pysh (01:55:01): Yeah. Jason Lowery (01:55:03): But people also monetize black powder. That doesn’t mean that… So you just have to be careful here because
of the second point, which is anytime any new power projection technology has emerged
throughout history to include black powder, to include torpedoes, to include aircraft,
to include nuclear weapons or whatever, anytime a new power projection technology emerges,
it becomes a strategic selling point. And there’s many examples in history where
bad things happen because countries don’t appreciate its strategic importance soon enough. Preston Pysh (01:55:41): Wow. Jason Lowery (01:55:42): China just made this mistake, in my opinion,
at an epic scale by seeking- Preston Pysh (01:55:46): Epic scale. Totally agree with you. Jason Lowery (01:55:48): But the problem is China’s very authoritarian. And so once they figured out that they messed
up, they can pivot quickly too. They can pivot quickly back into Bitcoin. And so I guess my advice to people is, if
this is a power projection technology, if this is a wholly new way for people to defend
themselves or particularly their property, then- Preston Pysh (01:56:11): Better take it serious. Jason Lowery (01:56:12): You should take it extremely seriously from
a national strategic standpoint. And the last thing you should do is be too
quick to kick it out of your country or disenfranchise it or condemn it because you could be handing
the keys to the kingdom over the next 500 years to someone you don’t want to hand
it to. And so this is a very serious matter if you
consider it from the perspective of national strategic defense, not as a monetary system,
but of a global physical defense system. Preston Pysh (01:56:42): That’s pretty profound. Jason, give people a handoff if they want
to follow you where they can do that. Also, can we have links in our show notes
to your drafts and the papers and everything that you have academically written to date? Can we do that? Jason Lowery (01:57:01): Yeah. I don’t know how much I’ve published. I started a website, so I’ll send that link. Preston Pysh (01:57:05): Perfect. That’s perfect. Jason Lowery (01:57:07): Yeah, so the first question is where can you
find me? Is that it? Preston Pysh (01:57:10): Yeah. Jason Lowery (01:57:10): Yeah. Just on Twitter. I mean I just use Twitter to… Jasonplowery, L-O-W-E-R-Y. I just use that as my interface to engage
with what I believe are the subject matter experts in here, which is just Bitcoin Twitter. It’s such a bowl of knowledge that you can
drink up everyday. Preston Pysh (01:57:26): And if you’re feeling like you want to use
some Physical Power, he’s on LinkedIn. Jason Lowery (01:57:31): I’m on LinkedIn too, but I have to be. I’ve got to be more professional on LinkedIn. Preston Pysh (01:57:39): I think you’re plenty professional, sir. I think you [inaudible 01:57:42] Jason Lowery (01:57:42): I get a lot more freedom on Twitter. Preston Pysh (01:57:45): Oh lordy. We’ll have links to LinkedIn, to Twitter
and your website there where you’re posting interviews, you’re posting some of the things
that you’re writing. What a pleasure. Thank you so much for making time to have
this conversation. I thoroughly enjoyed this. I learned a ton and wow, what exciting work
that you’re doing there at MIT and it’s been fun for me to see the progression. It really has. And I’m sure there’s a lot of other people
that share that sentiment that have engaged with you on Twitter. Because I know you’re very active with a
lot of the people that are providing counter responses and different opinions. Jason Lowery (01:58:27): And I appreciate all of the honest feedback. It’s extremely helpful and I hope you can
see that I have been incorporating that. Preston Pysh (01:58:34): Bravo. Jason Lowery (01:58:34): Thank you. Thanks for talking to me so long. And sorry I took so long but this has just
been great. Preston Pysh (01:58:38): No. No. God. This was a blast. So thanks Jason. Really enjoyed it.
