In this episode of Defi Download, Piers Ridyard speaks with Tom Trowbridge, co-founder of the Fluence Project and former president of Hedera Hashgraph about governance models in decentralised systems - particularly BTC and HBAR
In this episode of Defi Download, Piers Ridyard speaks with Tom Trowbridge, co-founder of the Fluence Project and former president of Hedera Hashgraph about governance models in decentralised systems - particularly BTC and HBAR
Piers 00:04
Hello and welcome. I am Piers Ridyard, CEO of the decentralized finance protocol Radix, a public ledger entirely focused on bringing DeFi to the mainstream. This is our podcast, the DeFi Download, a show about decentralized finance and all things crypto, where we dive into the details of the projects, assets and services that are powering the DeFi revolution. I just wanted to record a little intro at the start of this one, particularly because this was actually the first podcast we recorded. And I do apologize, the sound quality is much worse than the future ones will have. But I did enjoy the conversation with Tom Trowbridge so much that I wanted to make sure that we put it out in this episode. So without further ado, over to the podcast. Well, thank you very much for joining for the podcast. I really appreciate that. I think that it would be really good if you could, just at the top of the podcast, if you could just introduce yourself, sort of a bit about what you've done and sort of why you're on talking about governance.
Tom 01:07
Oh sure, well, Piers, thank you for having me. You know, my name is Tom Trowbridge and I was one of the founders of Hedera Hashgraph. And you know, when I joined Mance and Leemon, the company was Swirlds and they knew they wanted a governing council and that was kind of an important concept given the Proof of Stake model they had, but it hadn't been fleshed out too much beyond that. And so we really put our heads together and worked to come up with what we thought was, you know, over many months, what we thought was a very workable governance solution. And you know, I guess, why do I care? Why am I interested in governance, and I think, partly being involved in a lot of businesses before has given me some experience in terms of, you know, how people act and kind of how to game theory out different scenarios. Also, I think it probably doesn't hurt that both my parents and one of my sisters are attorneys and so their perspective is always looking at what can go wrong. And that's obviously the reverse of most entrepreneurs, who are always focused on what can go right. And, you know, I certainly have the "blue sky" side of entrepreneurialism, but I had been, you know, indoctrinated in some of the what-can-go-wrong concepts and I think with governance to go up and come up with good governance, you always have to be thinking about what could go wrong, because of things that often do.
Piers 02:32
And was that like the biggest part of forming the Hedera governing council was looking to, well, how do we mediate conflict? How do we resolve issues? Was that the sort of the main motivation for it?
Tom 02:49
Well, it was less about that and more, although that came up, it was more about who, what, how do you prevent bad actors from influencing it, how do you prevent concentration, and how do you create a governance mechanism that structurally is very difficult to compromise or take advantage of? And so if you start with how do we prevent it from being corrupted or taken advantage of, then you have to think about, okay, how do you corrupt or take advantage of systems? And you got to think about all the different ways someone could try to do that, then think, okay, who would want to take advantage of it? What would their motivations, resources be? And you go down that road, so it's really about, it was more about the protection of the purity or at least the governance model than it was a "how do we mediate between different parties?"
Piers 03:45
Okay, I mean, like a lot of the early, decentralized ledger sort of community, especially around Bitcoin and Ethereum, sort of the Code is Law, would sort of posit that you don't really need any of that beyond just an adversarial approach to how you create the code within a, you know, Byzantine fault-tolerant system, and what, why do you need anything beyond just the rules of the code? So, I suppose that is the question, like, why do you think governance beyond just what the code says you can do is so important for decentralized systems?
Tom 04:25
Well listen, it's a foundational question, I think something is glossed over by many people. And, you know first, there's two different types of things we're talking about here. So first, let's just make it super clear: consensus happens by code, whether that's the Bitcoin, whether it's, you know, Radix, you know, Ethereum, Hedera, whatever. So, we're talking about governance, which is how the system architecture evolves, who steers that evolution, and how does it get implemented. And so while the actual mechanisms of, you know, smart contract enforcement, whatever that is, can be done specifically Code is Law when it comes time to do a code update, who is determining that code update? How is it implemented? Who accepts it? How many have to accept it? And, you know, you think about the Laws of Power. And, you know, the first law that the sort of, the most basic piece or the sort of last bit is who votes on it. But before you get that, it's like, who decides what's on the agenda to even vote on? And so, when we are talking about governance, we're talking about who's guiding the whole protocol forward. And so Bitcoin has obviously, you know, progressed at a very, you know, measured and appropriate pace, you know, its governance consists of two different constituencies: the core developer teams that basically pull in and prioritize code updates, and then that has to be accepted by the miners. And you know, Ethereum has a somewhat similar concept, and you know, those for Bitcoin, in particular, that's worked very well. It's kept Bitcoin functioning, it's gone through some updates. Now I question, you know, whether that is appropriate for a protocol that has ambitions for thousands or millions of enterprises being on it that would seem to need to develop at a faster pace and include more enhancements in Bitcoin, whereas constituency is a very different one than Bitcoin, but I guess I would say that the Code is Law concept actually applies to almost no protocols. The only ones you could talk about that would maybe be on-chain voting protocols, where if you have a coin or token you can vote and whatever you vote wins and that's that, and that's sort of a, you know, an EOS model for one example, and that is rife with all kinds of problems, which, when you basically have economics dictate the governance going forward as you can easily, you know, understand.
Piers 07:08
I mean, that's often the incentive that is built into the systems in the first place, right, is like, this sort of founding principle of "I just want people to work in a rational, economic and selfish way for an emergent property of the system to come about." It's sort of like this idea of how Bitcoin is able to function. But I think that if you just create people working in just economically rational ways, and you have no other concept of the benefits that the system can accrue to people who may be on miners, for example, or on running the network, but are actually stakeholders in there and rely on it, you definitely start to see where that's gonna start to fall down. If you only have the people who are running the network only work in a short-sighted, sort of selfish manner, right?
Tom 08:04
Right. Well, and Piers I'll go, you know, another level on this, which is I think we also have to think forward and use our imagination as to where we think this industry is going to be, and pick your date five years, ten years. And if we achieve the scalability, obviously, that Radix clearly intends to and Hedera, you know, has implemented to some extent now and others are working hard to do. You know, we expect a great deal of commerce to be running on any of these platforms, and the more commerce you have running on them, the more incentive there is for parties to try to take advantage of it, and for parties to try to corrupt it. Or for one protocol, frankly, interest to try to nefariously hurt another protocol. And so the problem with the rational actor economic argument is that in sort of closed laboratory settings, that makes a ton of sense. But when you get to the level where you could have... You know, pick an example: Say you have a US dollar stablecoin, or you know, [unintelligible] on running on a decent-, on the ledger. I think they'll probably be kept private for this reason. But if you had a systematically important currency running on pick-your-network, now all of a sudden, you could have a state actor interested in disrupting that ledger. And so when you start to think about the powers of either very large companies that may have an interest adverse to some of these technologies succeeding or even states that are threatened by them, now you enter into areas where the economic interest is so much bigger than the current system, and then the system could be in a couple of years, you have to think larger than just everyone's going to maximize their return in that system. Because the returns of many of these parties could accrue if that system, in fact, failed, right? And so that becomes a much more complicated task to model into and to protect against.
Piers 10:12
Right. And I also think you're often dealing with, like, it's nice to believe that you can always have everyone in alignment at all times. But often, you're dealing with conflicting desires where, you know, like, the benefit to one party may actually mean the service being more expensive to another or may mean that running one thing is highly beneficial for one company, but actually makes another company's use of that service more difficult. And so you have to have this way of balancing the Digital Commons or the common good that is the platform. And I always, like, end up going between viewing this as either, like, as a Digital Commons, which has all of the problems that you often have with the tragedy of the commons and just everyone being selfish about the management of it. Look at, you know, the way that fishing stocks are managed or look at the way that grazing fields used to be managed, and often what happened is, as a result, if people were able to act purely selfish, and were not able to coordinate together to come to a better outcome. But also sometimes looking at, like, just what happens with states and state breakdown and how good governance and bad governance looks at the state level, because often when writ large, these systems do start to look more and more like digital countries.
Tom 11:32
Yeah, without a doubt, and I think that that is a real concern. And I think that the distinction between... or just to make that, to try to draw that analogy of an even larger sort of the tragedy of the commons concept is that, not only could your rational interest, you know, maybe hurt others, but you might have someone who has a field next door and they want your... the commons to be muddy, you know, [unintelligible], so their field becomes more valuable, right? So they just put all their animals on it because they want it to be muddy so they can sell theirs for more, right? Like you get, you can keep this analogy going even more in this landscape because again, it's not a closed system.
Piers 12:18
Right? How much did you... How much were you guys concerned, when you were building the Hedera governance model, about other projects coming and being adversarial in sort of a dirty tricks kind of way?
Tom 12:33
That? We weren't concerned about it. From our standpoint, I think our model is really set up to be pretty resistant to that. I think that model, who the projects that are more vulnerable to that model are some of the on-chain voting mechanisms or the reputational mechanisms. It isn't that they're more, I think kind of traditional, I think or, nutritional's the wrong word, but more on-chain related, I think are the more vulnerable to those. We weren't as worried about that from our side, we were sort of from day one thought that our, the enterprise component would protect against that. It introduces other issues obviously, but it wasn't, it does leave it pretty resistant to other protocol, you know, kind of behaviour, I guess, in a way that it doesn't if you want to, you're a big protocol and you want to challenge, you know, a coin-weighted voting one, you know, there are ways there's, it's far easier to do that.
Piers 13:41
So let's dive into a couple of more specific examples. What projects do you think are currently getting the systems right, like, what are you seeing that's happened or is on or is happening at the moment in the industry that you're like "yes, that's a really good way of doing things, I really like that or I really like that project for these reasons?"
Tom 14:02
Um, listen, I'm obviously biased. I think Hedera said something interesting. I know that that is, it's not widely understood; I'll just mention it for a moment so people can know it and then we can go from there but, you know.
Piers 14:15
Sure.
Tom 14:15
And just so people know I wrote a piece on Medium. @Tomtrow4 Medium, if you want to see the talks about kind of governance in the whole space. But there's a concept that you've got this council of enterprises that first are not economically motivated, they don't have, they're not getting dividends. And secondly, they're term-limited only three years. And the third concept is that they then vote to find their replacements. And so that leads, we think, to diversification in geography time, and also industry, which we think helps provide a persistently decentralized, you know, community effectively of people that are actually going to be using the technology and, you know, it's too early to tell, right? The... We don't know, the console is still being built. You know, sort of the Chinese proverb when they ask, you know, how's the, what do you think of the French Revolution? How'd that work out? And they're like, "well, you know, it's too early to tell." So, you know, we needed time to see if this works. I think, you know, it's easier for me to lob criticisms around. I guess, you know, you obviously, the default in the community, I think, is the Bitcoin model. And I think that it has really proven itself to work. The challenges, how replicable is it? You need to have buy-in from core developers and you need to have, you know, miners that you can't really, they won't really settle or tour or adopt things that, developments that don't have to hurt their economics. And so while that works really well, I think for Bitcoin, you know, I think that you are seeing problems when you have something like that with regard to like an Ethereum update, where the proof of stake is going to be detrimental, potentially to the rewards of the miners, and that creates real difficulty in moving the system forward. And so, you either need to set up something where you don't have ambitions to change it. The scale is what the scale is. You expect to have relatively modest technology improvements, and that's fine. That I think is working incredibly well for Bitcoin. I think that is a, you got to be careful when implementing a system like that going forward. You know, I'll tell you that within a closed system, Polkadot has interesting concepts where voting, you know, you get more votes, the longer you lock up your dots, at least that was the last version of it that I read. And I think that is interesting. So your vote counts as sort of a multiplier of how long you want to lock it up. And I think that...
Piers 16:59
A bit like Decred. Decred has a similar idea as well.
Tom 17:06
And those rationally, like, that makes sense. It means you're going to put... you're going to have a longer... you'll be more attached to this network and so you're going to have a longer horizon. So you, your vote should count more, again that's me, I like... Does that prevent someone again from outside the system voting something in against the interest system, because their reward is far larger in another place? No, not at all. But that sets an example; something that in the closed system makes a ton of sense in a grander system, you know, I'm not sure how much it helps.
Piers 17:39
Yeah, I suppose it's like this. The Hedera model is an interesting sort of approach in that it's sort of, it's very inorganic, in its growth. You have to, you sort of have to go out and find the stakeholders for whom you think this system is going to be most important for and convince them to be part of the system, and then hope that that system then builds its own momentum. Whereas something like the Ethereum model or the Bitcoin model is much more, it's much sort of more organic in its scope. It's like you don't have to be part of anything to get in here. But there is, there is going to be a little more anarchy in how things sort of like turn out. And I think there's often, yeah, if you look at the problems that happened with the Bitcoin block size, and there's the subsequent forks that occurred, there's really good arguments on both sides, one being like, well, that was governance working, because the governance should, like, should resist changes into the underlying protocol of an immutable ledger. And it should be the like, it should require a very large movement of community for you really to move anything to do with the code. And it's interesting, like, I've heard things similar from, said from government officials themselves. Like, a minister told me that one of the main functions of the mechanism of government is making it very difficult to change laws quickly. And I think that some of that sort of, like, brutal simplicity and how Bitcoin governance happens can be seen as what result is in some people at the time were like, oh, that's a failure of governance. And then you look at it over time, you're like, well, maybe it's not, maybe that's what the point of the Bitcoin code is. And then, but then you also look at things like what created Ethereum Classic, right? When the DAO hack happened. And while that may have been the right decision, you know, to reverse the hack, and make sure that people got their funds back, there wasn't a forum for doing it. There wasn't any place in which a discussion could occur. And that ended up meaning that you're, that anarchy actually created, even though that the decision was okay, there wasn't a good forum for it, you weren't really sure who was party to the decision, how this decision was made. And it was subsequently announced and pushed by the foundation. Fine. But I think that there was, it would have been much more helpful if there was like a more formal organization to be able to at least discuss and air all sides of the disagreements that might happen so that a decision could be reached in a more orderly fashion.
Tom 20:31
Well, listen, I agree. There are a lot of things to respond to in that, um... I think, on the government side of it, if you think we're obviously all prisoners of our experiences, and you know, you're [from the] UK, I'm [from the] US, and I think that the American system to your point was specifically designed to have [the] government not be very active. Like, you know, people talk about how hard [it] is that they get things done and then was, they forget, that's the point of why you have Houses that are voted by different ways with different powers Supreme Court. The whole point was to make things complicated. If our founders had wanted the government to work really quickly, there's a lot of ways to make it work a lot faster than how they designed it. And so this was specifically architected to make it really, really sort of a broad consensus necessary for any material changes to happen. And that's the whole point. So I 100% agree with you there. And then... And I think that it... that does tie nicely to the Bitcoin concept with it, with again the exception or the comment that Bitcoin is only supposed to do a certain thing. And so, that's fine. I don't know how well that mechanism works if you're trying to build something that you're still in the process of building it and you want it to be able to scale and evolve and change to meet the needs of the globe. And that's a different... I think that might require more speedy response times and speedy adjustments than is allowed for in the Bitcoin governance model. With regard to Ethereum, the thing that I don't like is if you have the Bitcoin model, great. If you have a different model fine. But the decentralized models that are actually centralized but masked as decentralized? I have a big problem with those. And so, your point on the DAO, you know, quote, put the "hack" in quotes here, is that that was really, from everything I've understood, decided by the Ethereum Foundation, very minimal input from the community, small number of votes. Very, to your point, opaquely decided. So, don't call yourself a decentralized protocol with decentralized governance when a couple of people can decide. And that, you know, there's a huge part of the community that basically views Ethereum as a centralized governance model, as a result of that. And not without, you know, good reason.
Piers 23:15
Yeah. It's, um, I think this is sort of, like, runs into my next question, which is, like, can a good governance system be retrofitted to a successful network?
Tom 23:28
I mean, listen, I think the answer is, yes. The problem is, what... What is the existing system? Because that system needs to approve the retrofitting. And so... That what... It really dramatically differs on what that system is, and how and what those interests and those people are, those actors are versus the new one. And we're seeing the problems in Ethereum with that right now. Are there other systems that have successfully undergone a change in governance? I mean, what you're effectively saying is you want to shift power from one group to another. That's not an easy thing to do.
Piers 24:12
Right? I think that’s sort of very visible with things like what's happening with EOS and EOS examples are particularly interesting one because we... EOS started with a set of rules, I'm forgetting the word... Was the American Constitution. It started with the constitution. That sort of laid out the rules and was actually, you know, very carefully put together. And then was just sort of just ripped up. And then this case of like this so much simpler meld model came about and now we have all of these issues that we're seeing were sort of the people, the largest Ethereum holders are voting entirely in their own self-interest. And it's interesting because we had a chat with Thomas Cox, who is the guy who designed the governance mechanisms for EOS that weren't rolled out. He very strongly views... believes that it's, that once the system is in flight, it's very difficult to go and change it. I am still on the fence on this. I like, do you think that Ethereum could adopt a better government system and what would you, what would be the first thing that you would do to start that process?
Tom 25:44
Is it... I have... With Ethereum I have no, I don't know where to start, I guess. You have to figure out what you were trying to achieve. And, you know, the issue is that Vitalik is by far the most powerful advocate for that network. And for, you know, obviously for the protocol. And he obviously exercises a, you know, material influence in the direction of the project. And so if you were to change governance such that the Ethereum Foundation and he was less involved a) that had to be a formal process, cause, you know, informally, of course, he's going to exercise control. And then the second question, do you want to? You know. Because I, you know, the thing, and there was this I wrote about, you argue that, what does he want? He wants it to be adopted and be successful. And you could argue the same thing about, you know, a variety of other kinds of benevolent dictators that, I would argue he's probably not corruptible. He probably has the best interest in network at heart. It's his legacy. So, I think that having someone like that involved, I don't think is bad. The question is what happens next and what happens you know, after Vitalik and who does it transition to? Who takes that power? Does the Foundation take that power? Does it get dissipated? People in the community step up? Maybe that could happen. We just don't know; how you take it away from the miners is the real problem. And you know, one of the things that I like on Hedera's side, and this is sort of, I think, lacking in others, is that Hedera wants corporate government and corporations really to be using it, we think there's, Hedera thinks that there's a real use, users in high volume of this, and then their government. And so that, to me, is very linked up. And so, if you're building a protocol, pick your EOS, for example, you know, right now, who are your block producers, you know, they're not, by and large, they're miners, right, and there are exchanges or their exchanges vote for them, etc. Economically motivated, great, but that's still a little bit different than having the actual users of the network being the ones that have a say in the governance of it. And I think if you really want to be widely adopted, to your point, thinking about all the different trade-offs you have to make and, you know, don't you want users involved in those discussions and decisions?
Piers 28:11
Do you see, like, do you see that eventually extending all the way down to the individual? Or do you think that will always stop at the companies and the developers and the entrepreneurs who decide to use x y z platform over another platform?
Tom 28:31
It could, it could! I bet you could see multiple successful outcomes. You could see governance that was heavily driven by the community. That to me is certainly an interesting way, the way that works now is really developers that do that. And I think, you know, there's some projects I'm familiar with, where it's basically a protocol for developers. And so developers are the ones that are going to be, sort of unique in that regard and developers are the real ones using it. And so they're going to be the ones heavily involved in governance. And so I think that ties in well. If you're talking about, you know, every holder of Bitcoin having a say in how Bitcoin develops and management goes forward, that to me is a bit cumbersome. I'm not sure that the easy way to do that and, you know, what kind of turnout you get for that so, that, you know, that strikes me is maybe a bridge too far. But I bet you there's some other sort of, you know, interim possibilities.
Piers 29:34
Yeah, it's sort of really interesting like, when I first got into Ethereum, the concept of like, liquid democracy and sort of direct participation and all that kind of stuff was very much the main talk. Like, governance seems to almost have been forgotten in that it is such an important aspect but like it feels like, as soon as things start to be successful and move, and people, it's less of a talking shop about what the future might look like, and actually just sort of going ahead and building stuff that sometimes you're like, well, actually, these governance systems if we don't think about them now, and there is a problem later on down the line, it becomes very difficult to actually give people a way of, yeah, like working out. Now, obviously, one of the ways of working out with these decentralized systems, apart from in the case of Hedera, which is why I wanted to sort of talk about forking specifically is, you know, this ability to fork, this ability of a community to say: "hey, I disagree with where this is going". And because this is open-source, and because we can, we can choose to split. We can say we're going to create our own new digital state over here, and you guys can carry on in this state over here, but we're going to leave. So, like, could you talk a little bit about how you think governance and forkings of, like, overlap and some of the sort of, like, difficult decisions you have to make on both sides of the fence?
Tom 31:14
Yeah, listen, forking... You know, there's no investor, in particular, who likes open-source projects always present as a... what he feels is an optimal decision-making process, because should whoever is making decisions do something drastically wrong, the community always has the option to fork it. And so he thinks that is a good sort of, I wouldn't quite say gun to the head, but a credible threat to enforce appropriate decision making. And I think that there's a real point to that. The problem is, we've seen many cases with the DAO one just being one where forks happen and you, but you can't argue is that, you know, I'm sorry, I'm a fan of double negative, is that they aren't destructive. And so, forks clearly do not help either the industry or certainly that company or protocol, and does not inspire more people to use it. You know, I think that the ideal is you avoid forks; the more complex the protocols get, the more companies and applications depend on the state, and the more ramifications there will be for a fork and for, you know, competing states to exist. And so, I do think you want that obviously always exist for open-source, and I think that is certainly appropriate, you know, alternative and does provide some good incentives. But is it sufficient? You know, I don't think so. And there's nothing to say that when the fork happens, what then are the governance mechanisms of that fork? Was that a new governance model or not? How's that set up? And you end up with the same problem all over again. Not sure.
Piers 33:10
Yeah, it's a really interesting one because, like, again, my mind has shifted on this over the course of the years, like, early days, I used to think, oh, you know, like forking Bitcoin, that just detracts from the value of Bitcoin. And I remember when Ethereum Classic happened and like, the way that that split the community and how upsetting that was. So, because I mean, I invested in the DAO and, like, I was part and parcel in, like, sort of being very loud, I was very excited about what Ethereum was capable of, with all of these things, governance and investment. And that was very early in that genesis of what became the Ethereum community, and it really did wrench the community apart, but I actually think that it was incredibly important because what it allowed is it wouldn't just allow dissatisfaction. It didn't allow people to just sit there and stare and go: "well, if we'd been allowed to go this direction, then everything would be better". Because you're allowed to have that scenario play out and it gives you multiple ways in which it could so, like, I can see how not, like, preventing forking, can feel like a good way of keeping something monolithic, but I don't think these things are all monolithic. I think they are community-led, I think they are down entirely to what the community wants to. Sometimes communities do split and that is your hard power, this ability to fork, but I think that because Ethereum Classic happened and then because nothing really happened with Ethereum... Okay, I'm gonna get a lot of Ethereum Classic fanboys coming after me for this, but, like, because nothing really happened with Ethereum Classic it was a way of showing that Ethereum was stronger and was a better way, but it didn't, it meant that any of the unhappy community members were, weren't just sitting around going: "well, you know, the DAO hack happened, and you gave the money back, and you've broken the promise of Ethereum, therefore you've destroyed the value of Ethereum". If you believed that you could go for it, but you had the alternative, you had that exit point. And I think with Bitcoin, like, in the short term, we maybe thought: "oh yeah, all of this forking of Bitcoin is going to make Bitcoin confusing" and you got Bitcoin Satoshi vision, you got Bitcoin Cash, you got Bitcoin Gold, you got Bitcoin Diamond. Like, isn't this dilutative to the value of Bitcoin? I love this phrase someone said to me recently, which is: "The universe is infinite and zero-sum thinking is finite". And, like, the fact that the Bitcoin and Bitcoin Cash exist, doesn't necessarily mean that it's zero-sum like Bitcoin Cash wins, Bitcoin loses, like, there is this organic nature of communities trying things out, trying things out of value, that then either succeed or fail as successes. And like if Ethereum Classic has succeeded over Ethereum, then we've been building on Ethereum Classic, but was, like, what was more important? The idea and the code that supported the community or keeping a community monolithic in the first place?
Tom 36:27
You know, relevant question, I mean, last time I looked at Bitcoin, it's something you know, 44-47 forks, something along those lines, there's Bitcoin Pizza. So, you know, I think that the, and by the way, there could be another hundred I don't, to your point that's not going to impact Bitcoin's adoption or price or anything going forward. So I completely agree with you there. But I do think Bitcoin's a bit of a special animal. What I'm, what I was thinking about more was, and again, I'm a bit trapped in this mentality, but a bit more about the... what I was more referring to was sort of enterprise usage. And just the concern of: "gee, we just spent two months working with this company and now all of a sudden there's two different groups, each claiming to be that company, each claiming to be that protocol. Ah! And what do we do?" And so, again, when this happened to Ethereum was, today, we're not even talking institutions of that time, right? So, it wasn't an issue. I also think it would have been more interesting if a bigger chunk of the core team had gone to Classic and really created a competing, you know, weight, I guess I would say. But, you know, to your point, there is room for all of this without a doubt. And I don't dispute that. And I, you know, I know, I mean I certainly mentioned this yesterday, you know, Hedera has, you know, it's committed to releasing its code, you know, in December said earlier this year, I hope it does soon. The more I think about it, the more I think they benefit from code release. And the more to your point, I don't think someone forking Hedera and trying to create an open-source version of it, I think that solves for a different sort of use and governance model and everything that Hedera is doing, and so I don't think it would actually negatively impact Hedera if that were to happen. And so my thinking kind of has evolved from "protect against forks at all cost" being like, you know, in many cases, they're probably okay. That's different, though, from an existing state being forked off and two different groups kind of competing for the same, the same mantle, I guess.
Piers 38:52
Yeah, I again, like, I think there's certainly, there's sort of really good arguments on all sides, like the starting point is everyone argues about everything, right, and you're always going to have splits like your... If Hedera keeps going down the route is going with regards to building the council there is going to come a point where they're going to come across companies, which will go we're not going to cut join because those guys are in that, are in there. And so, we don't want to, we don't want to be part of it. Because, you know, like, the best example would be Ant Financial and Tencent, right, like, Ant will not be in anything that Tencent is and Tencent will not be in anything that's Ant, and they are such sworn rivals that, like, they are, like, stealing deals from each other. And, like, properly getting involved with industrial espionage and all this kind of stuff. And so, that kind of rivalry always is going to create scenarios where there does have to be competing systems and I think that there will be competing systems for a long time. Like, I think you know, Radix and Hedera and [unintelligible] and Ethereum and EOS, and all of these systems, like, are unlike companies in many ways, because they are perpetual. Once the system's running, everyone can run them in it and it doesn't really matter what happened to the company. So it's going to be really interesting to see what happens to change over the long run versus, you know, what generally happens to companies that well, they die when they run out of money. And that's just not going to happen with Chains that have reached a certain degree of adoption. But I think that this, that this sort of like creative destruction and trying different paths is absolutely critical to actually coming to any kind of system that we will eventually all use like it's a cliche example but, like, the internet is another example of that. The internet started off as being closed competing gardens. You had, like, AOL online, you had the French internet, which was run by the French government. You had competing protocols, right? TCP/IP wasn't the only protocol that people were looking at using, and there was all of these experimentations that happened and then eventually we got to the point where we were like: "okay, well, this is the standard". But it was only really by it being a fully open, free-to-use standard that ended up being the standard because there wasn't any form of permission for people going: "I'm gonna run an experiment on this". So, yeah. My conclusion on this is basically, I think that in the short run, what looks like chaos, actually, in the long run, turns out to be the ground on which the sort of the largest trees that we will rely on in the future is fertilized in.
Tom 41:42
I certainly hope so. You know, I'll just make another interesting comment. So for anyone interested in, you know, Weaving the Web is a book by Tim Berners-Lee about how he created it, which is a fascinating read. It sounds like I'm sure you, sounds like you've read it as well. I think people forget also that he created a consortium of companies to not govern but to basically help come to a consensus about standards going forward.
Piers 42:11
Right.
Tom 42:11
And so, you know, he basically got the companies who would profit, who had the most invested, they were hardware manufacturers primarily, together, and they paid to come together and continually adapt and evolve standards. And I think that was a good thing to do. But it worked out also because these were the companies that were going to benefit most from the Web's growth. So sort of a narrower band that I think we're talking about here with distributed ledgers. But that's just a note that I don't think is as kind of appreciated, given our views of the decentralization and democratization and those are certainly Tim's ideals, but he also recognized the relevance of pulling in stakeholders and getting them to agree on at least standards, even if they weren't enforceable, but suggestions going forward. And I think that is a, a terrific principle that is not widely kind of discussed.
Piers 43:10
That's pretty interesting. Like, and in some ways, you can think of, like, what is happening with smart contracts. I know indeed what, you know, the [unintelligible] Radix is doing with the Radix Engine, like, a lot of these are just about standardization of function, right? Like, if you standardize the way you issue tokens, aka ERC-20, then all of the infrastructure works with it. And I think that that, like, need for standards and that need for paying attention more to what everyone needs to work with, not just like a niche part of the industry is going to be, like, critical for the success of whatever protocol is the ultimate winner at the end of this. And, like, yeah, I think that's a really important part. It's one of the more boring parts of it, right, like [unintelligible] set a standard for how we're going to do securities but yeah, like really important.
Tom 44:05
Yeah, definitely. Right. Yeah. The one other thing I just want to mention, just quickly, also, when we talked about participation in governance is that I think a lot of us are so close to this industry. And everyone's so passionate about it, they can't help but think everyone is going to be as passionate, care as much as they do. And there's a very obvious experiment, has been going on for a very long time, is in public companies and in general elections. And so you get public company boards. They have to be elected every year. Participation there is not high. And this is very easily done. It doesn't require any computer knowledge whatsoever, right? And participation rate is incredibly low for public company governance and ends up being dominated by the shareholder services. So I think it's also a little bit, this is sort of diverging from our topic or conversation flow a little bit. But to think that, in this world, everyone is going to be voting on-chain for all the different protocols that they hold or care about, to me, it sort of flies in the face of the obvious examples all around us that have been happening for a century.
Piers 45:22
I mean, that actually leads me on to my sort of, one of my closing questions, is it, like, future, future-gazing: What crisis of governance do you think is waiting to happen or a prediction of the future around?
Tom 45:38
Mmm, hmm. Yeah, I don't... I guess I'd say that I don't know if we'll find... The crisis will come as we as an industry become more successful and more widely adopted. And so I think that even if there were to be a crisis now, it would, it couldn't be that big of a crisis given where we are. But what's going to sneak up on us? And the way you know, for example, the way it's, the Ethereum gas price spike completely snuck up on the Maker DeFi ecosystem. And the fact that Ethereum could spike 7,000%. And that led to $4 million being lost in collateral, no one was going to predict that could happen, you know, there have been 100 bucks on a system you don't even know about it. If there had been 100 million, there'd be, you know, riots. So, you know, I think that the success of all of us is what is going to test these systems. And we have a little ways to go before that happens. So I don't think they're... I think we've got a year, a couple of years before there is a real crisis. I can't imagine what it is, but I expect it'll happen and I think frankly, someone important, will probably, unfortunately, pass away at some point and that's going to lead to some turmoil. But that could be in a, hopefully, very long ways away.
Piers 47:08
And so, you obviously... you stepped down as the president of Hedera. So what have you been doing during quarantine and what are you doing next?
Tom 47:20
Well, I'm doing a couple things. So I've been advising a project quietly since October, that we hope to be able to announce within the coming weeks, that's, I think, very exciting. And it's basically a, I'll just call it an open software-as-a-service model that combines a hardware and services layer that I think is potentially, you know, really interesting, and I'm super excited about it and about the team. So, that is something that I've been spending a lot of time on. And I've also, you know, I also learned a tremendous amount at Hedera and I've put together a couple of pieces that I've posted on Medium; they go into everything from governance, which we've talked about now, to the regulatory side and, you know, Central Bank digital currencies etc. So, anyone that cares there's some pieces out there that I sort of want to, at least, share that information while it was in my head, and there have been some other projects but those are the ones that have been kind of most exciting.
Piers 48:25
Awesome! So, if people want to...
Tom 48:27
That, and growing my beard!
Piers 48:29
That and growing your beard! Which is, it's looking fantastic! When are you going to cut it?
Tom 48:35
You know I, I've told my wife that I have to, you know, have to leave the country to cut the beard, so that sets incentives for both of us to break quarantine. I'm not sure when that's going to happen. But, you know, every week, it seems a week further away, so we'll see.
Piers 48:53
Oh dear me! I mean, it's gonna be fabulous. It's already, it's already looking marvellously bushy. So, I wish you and your wife the best of luck with that. Lastly, if people want to sort of follow you and see your thoughts and just read what you're thinking they can find you on Medium, right? How would they find you on Medium?
Tom 49:15
Yes! Well, Medium and Twitter I'm just @Tomtrow4, the number four, so Tomtrow4. And as you can also find me on LinkedIn but those are where probably most of my stuff is. I'm not a frequent poster on Twitter, but you know, I do put on there from time to time.
Piers 49:38
Awesome, Tom, it's been an absolute pleasure. Thank you so much for coming on and giving us your time.