Crypto AMA with Tezos (12.6.19)

Guest:

  • Arthur Breitman

Moderator:


Moderator:

Alright everyone, let's do this - please welcome Arthur Breitman to Crypto AMA!

Moderator:

@arthur thanks for joining us. To start, can you give us a brief bio and how you got started in crypto? And then a short overview of Tezos and an update on your progress to date?

Moderator:

After that we'll jump right into questions

Arthur Breitman:

Howdie

Arthur Breitman:

I grew up in France, my background is in mathematics and computer science. I moved to the US in 2005 and started working in finance. I focused on statistical arbitrage at first and gradually moved towards high-frequency trading and market making.

Arthur Breitman:

In 2016 I moved to California to do something completely different and worked for Waymo (Alphabet's self-driving company) in the motion planning team.

Arthur Breitman:

In parallel to this, I fell into the cryptocurrency rabbit hole pretty early on.

Arthur Breitman:

Since Bitcoin is at the intersection of math, cs, finance, and libertarian politics, it was pretty inevitable I'd catch the bug.

Arthur Breitman:

I got started on Tezos because I became fascinated with the game theory and mechanics of forks, and also out of disappointment not to see much momentum for proof-of-stake, smart-contracts, and privacy preserving tech in the Bitcoin space.

Arthur Breitman:

What started as a hobby became bigger, more concrete and eventually led to where we are now.

Participant:

Hey Arthur thanks for dropping by -- DePi evangelist here 🍕

I was curious about your thoughts on the growing trend of exchanges introducing large-scale staking operations and how it will affect networks over time (namely Tezos in this case re: Coinbase and Binance).

Arthur Breitman:

I'm surprised it took that long to be honest, exchanges are naturally positionned to be stakers. They have deposits, and the operational resources for this.

Arthur Breitman:

I don't know how it will evolve. I don't think it will be healthy if a few exchanges control a large fraction of the stake. Not because I think the exchanges are ill intentioned, but because they are easier to coerce.

Participant:

@arthur thanks for taking the time to do this AMA. How do you envisage Tezos working with non custodial wallets and additionally please help me understand the near term financial industry uses cases of the Tezos protocol.

Participant:

Hey! Fan of Tezos here and congrats on progress to date. Two questions 

1) Tezos’ upgrade model is clean and helps the platform evolve easily. I thought issues upgrading other platforms would have driven more devs to Tezos, do you see this as being a driving factor? 

2) dev capture is huge and the 10-20 new layer 1s launching have little to no dev communities but theoretically will increase competition for devs. Tezos also had a few things to make it easier for devs to build (smartPy, LIGO etc). Question is when do you think Tezos have a massive dev community 

Thanks so much!

Participant:

I know Tezos is working with the Brazilian bank BTG Pactual and also with Elevatedd Returns/ Securitize both on securitization deals for real assets. Will that be a focus for Tezos moving forward? are any other deals in teh works? When witll the BTG and Securitize assets be launched?

Arthur Breitman:

I don't think there's a rush in reacting to exchanges staking, I think it's worth monitoring the situation and reacting if need be.

Arthur Breitman:

I'm not sure what you mean by that... most wallets are non custodial and there are more than a few of them supporting Tezos.

Participant:

1. What is the target use cases for Tezos? Is the idea that all the contracts on Ethereum would be better off on Tezos, or is there a particular subset for which Tezos is the best fit?

2. If I'm a smart contract developer today, and never heard of Tezos before, what is the two-sentences pitch why I should build on Tezos?

3. Assuming increasing adoption, what is the long term plan, if any, for Tezos to scale better?

Participant:

Great Qs

Arthur Breitman:

It's not so much about easily upgrading (though that's a factor) as making sure upgrades are ratified through a formal, auditable process. Also, this should mainly attract *core* developers, and there are fewer of those. I think it will happen once we see teams of contributors use "inflation funding"  with significant amounts. As you point out, I also think devs are coming to realize that it's become much harder to bootstrap new base layer chains. Once they do, their model may shift from launching a new chain to contributing to Tezos.

Participant:

Very helpful. Thank you

Arthur Breitman:

It's the other way around, BTG and Elevated returns are working with the Tezos chain for their offering. Tezos doesn't have a focus, it's a blockchain, it chains blocks.

Arthur Breitman:

1. I don't think there has to be a target, it's a piece of technology, you can build all sorts of things with it. That said, in my own opinion, I think the main use case for any of those things is to be magic Internet money. I think Bitcoin, Ethereum, or Tezos are essentially all competing to be money. Smart contracts mean you can do more with money which is nice.

2. There's a reasonable thesis that Tezos is going to be at or near the state of the art of what's possible for the long term through a series of incremental upgrade. 

3. Longer answer let me get back to that after I answer some of the other questions

Arthur Breitman:

Ah looks like I actually can start answering on 3

Arthur Breitman:

So

Arthur Breitman:

First, I think scalability is overrated. Overrated doesn't mean not important, but I think people keep trying to identify culprits for the lack of adoption when the real culprit is lack of product market fit.

Arthur Breitman:

I'll give an example: the problem with cryptokitties is often pinned on the lack of scalability. I think that's all wrong.

Arthur Breitman:

In a scenario where a bunch of money can be made by outbidding everyone on gas, you'll have congestion. Scaling isn't really going to help.

Arthur Breitman:

The real issue is quality of service for people who need to be making transactions at that time.

Arthur Breitman:

So people have tried to argue the problem is the fee market model which is bad or unpredictable, and they've tried to introduce elasticity or other tricks. I think that's misguided.

Arthur Breitman:

What you want to maintain QoS is long term service agreements between miners and people who depend on making transcations regularly.

Participant:

Thanks for the answers!

I agree that today the problem is lack of adoption and UX. But long term hopefully those will be solved, and the scalability will become a more pressing issue.

> near the state of the art of what's possible

like the usage of the words "near" and "state of the art" in the same sentence

Arthur Breitman:

The same way the electricity market is... the spot is crazy wild because there's not a lot of elasticity

Arthur Breitman:

But that's solved by consummers entering into long term service agreements. This, by the way, is much easier in PoS than in PoW because you don't have to worry about difficulty changing on you.

Arthur Breitman:

Ok but some scalability is desirable. I say, start with low hanging fruits, improve disk I/O, improve bandwidth use by compressing what can be compressed, build up L2 solutions.

Arthur Breitman:

In terms of sharding, if I had to start building one tomorrow, I kinda like the polkadot model because it's conceptually simple to understand

Arthur Breitman:

But to close out the argument, I hear a lot of "no one is using these applications because they know that if everyone were using them they wouldn't scale, so once they can scale people will start using them"

Arthur Breitman:

and I'm skeptical

Arthur Breitman:

same thing when people tout networks where they can have thousands of validators. Wonderful! Are you sure you have more than a few hundreds interested at all in validation?

Participant:

Are there any interesting applications / services running on Tezos today?

Participant:

What do you mean by "interested at all in validation?" do you mean exchanges staking on behalf of asset holders?

Arthur Breitman:

I think being a cryptocurrency is an interesting if not the most interesting application / service. The curse of having smart-contracts is that people assume this must mean you want to have dapps. I think smart contracts are great to program money, I'm a dapp skeptic. That said, there are a few things running, including a notarization service for letters with certified delivery, and a payment tracking system for the french Gendarmerie.

Arthur Breitman:

I mean anyone. There seems to be about 450 different parties creating blocks on the Tezos network (there could be sybils but there's no real incentive to be a sybil so I think that's actually an accurate number). 450 is amazing, I'm really glad it's that high, but the network could definitely handle more.

Arthur Breitman:

The limit on the number of people who are going to produce blocks on a chain is the number of people who care or for whom it might be economically relevant to do that. It's not your consensus algorithm.

Arthur Breitman:

The most efficient solution, be it in proof of work or proof of stake is for everyone to just join one pool with a single operator. That's what minimizes costs. It's a terrible outcome of course, but that's the direction in which the economic gradient pushes you.

Moderator:

Are there specific aspects about Tezos that you think lends itself to garnering a monetary premium / store of value status?

Arthur Breitman:

A few.

Proof-of-stake is a lot more conducive to being "hard" "sound" money than proof-of-work because you can have much lower nominal inflation. Even transaction costs end up being deflationary in proof-of-stake. 

The fact that you can write short smart-contracts, understand what they do and prove their property is important too.

And of course the fact that it's capable of staying near the state of the art means it's less likely to be disrupted.

Participant:

what's the max # of validators the protocol handle before bottlenecks?

Arthur Breitman:

You could say that Tezos is designed from the point of view of a maximalist who thinks that the risk for better technology to displace a dominant incumbent is real and will remain real for a long time.

Moderator:

Tezos gets a bad rap for being hard to build on. Do you feel that criticism is fair and are you addressing those concerns?

Arthur Breitman:

Right now you could have up to 100k validators but you could have more, there's no finality though.

Arthur Breitman:

It's fair but it's changing quickly. Developer tools have lagged and are only starting to really come out.

Arthur Breitman:

I don't think it's specific to the chain itself, it's just that there was, for a while, a paucity of high-level languages, ide, testing frameworks, etc

Moderator:

Gotcha, makes sense

Moderator:

Can you tell us about Checker? Curious about the design, timing, motivation, etc.

Arthur Breitman:

Yes, Checker is really just research at this point

Arthur Breitman:

and the main motivation is intellectual curiosity

Participant:

As someone who's more into protocol/infrastructure development instead of DApp development, why should I consider working on Tezos?

Participant:

Can you tell us about the medium and long-term roadmap for Tezos? What upgrades are you most looking forward to seeing?

Arthur Breitman:

The question behind Checker is: can you have money on a chain, backed only by cryptocurrencies, which maintain a somewhat stable purchasing power.

Arthur Breitman:

I think you can, though I don't think you can achieve a peg with a currency for instance.

Arthur Breitman:

Tezos doesn't have "a" roadmap because anyone can propose upgrades. This isn't mere pedantry, there are different groups and different people contributing to the core and not everyone agrees on any given roadmap. That said, I can answer broadly for upgrades I'd personally like to see.

Participant:

@arthur Why was n/8 XTZ picked as the upper limit for someone to run a staking pool? Do you foresee this number changing in the future?

Arthur Breitman:

There's an obscure but important one which is around pipelining transactions. The past two upgrades have made changes to move towards that goal. It's now possible to implement. It's a free 2x / 3x in throughput right there.

Arthur Breitman:

More generally, I'd like to see:

- some form of finality on the chain, either directly or with a gadget

- more privacy (transactions but also contracts)

- constitutional amendments, i.e. changes into what can be changed by governance... putting constitutional limits on inflation would be cool. I don't think we need it per se (an 80% supermajority requirement can filter a lot of stupid stuff) but having it would change the narrative from: "people vote for whatever" to "ah, there are rules"

- futarchy around amendments

Arthur Breitman:

IIRC what was picked was the size of the bonds and how long they are held for... the n / 8 falls out of it. It seems large enough to properly incentivize the baker, and even act as a diseconomy of scale, and small enough to avoid locking too much of the monetary supply... I don't think locking 80% of the supply for staking for instance is a free lunch in terms of security, you pay for it through volatility.

Participant:

What are some of the most interesting projects being built on Tezos that you can tell us about?

Participant:

I agree, I was just curious why that ratio

Arthur Breitman:

Delegation didn't start out as being about delegation. The idea was that 

1) anyone could create blocks at any time, so long as they'd place the right deposit at the right time and hold it for long enough

2) you wouldn't have to use the same key to spend your funds and the same key to bake, because having all your funds online is scary

Arthur Breitman:

From that, the delegation model becomes natural

Arthur Breitman:

In theory, pure staking is stronger than delegation

Arthur Breitman:

In practice, I think pure staking leads to custodial delegation which is worse.

Arthur Breitman:

There's this old economics puzzle about access to contraception can increase out of wedlock birth.

Arthur Breitman:

The reason being that if the risk is very high, you may not take the risk at all, but if the risk is very low, you may take more risk.

Arthur Breitman:

And that's the dilemma in a lot of proof-of-stake design decisions.

Arthur Breitman:

Does pure staking increases skin-in-the-game, or does it just lead to everyone sending their deposits to an exchange for staking?

Arthur Breitman:

There are a few STOs building on Tezos, an insurance platform called Tezsure. Coase (led by Kathleen) is building a collectible card game. There's also a project by the French Gendarmerie that recently went live.

Participant:

What do you see as the chief risks of introducing formalized on-chain governance?

Arthur Breitman:

https://daviddfriedman.blogspot.com/2009/04/auto-accidents-aids-contraception-and.html

👆 applies to PoS design

Participant:

What do you think is the biggest mistake Ethereum is making (or is going to make)?

Participant:

+1

Arthur Breitman:

The main risk is that the temptation to use it for invalid state transitions as opposed to mere technology improvements may be higher than without on-chain governance.

Arthur Breitman:

Of-course you can do invalid state transitions through hard forks (and even very convoluted soft forks)

Arthur Breitman:

And so on-chain governance doesn't really give you any new capability here

Arthur Breitman:

But psychologically, people could be more likely to think that more changes are in the scope than with hard forks.

Arthur Breitman:

I'm not sure that's true at all by the way, I think you could argue that hard forks make it more likely! But if there is risk around on-chain governance, that's where the risk would lie.

Arthur Breitman:

Constitutionalism can help, but it's fiendishly hard to distinguish, in code, what constitutes an "invalid state transition" and what constitutes a technological improvement. The line is blurry.

Participant:

^

Moderator:

15-minute warning for questions - get them in!

Participant:

Do you think that if there is a larger number of digital assets on Tezos, then there will be robust on-chain trading and lending facilities? Perhaps this is dual to @haseeb's question, as this seems to be something that only Ethereum has been able to build up (and maybe ETC?)

Arthur Breitman:

- Focusing on sharding too much. It has delayed their move to proof-of-stakes for years now.

- Focusing too much on trying to be a generic "world computer" as opposed to optimizing for monetary use cases which are far more likely to matter

- Not being sufficiently incremental in deploying protocol upgrades

- Not properly incentivizing participation in core development at the protocol level

Moderator:

Can you explain #2-3 a bit more? (perhaps w/ a few examples)

Arthur Breitman:

Yes, I think so. I think it's one of the appeal for doing STOs on public chain

Participant:

Are there any plans for DEXs of any form? Uniswap-clones? AMMs? You mentioned Futarchy above, so I expect nothing less than a bespoke AMM 🙃

Arthur Breitman:

If you have a cool idea for a layer 1 protocol today, what do you do? How long until your idea makes it into a live main-net? Launching an entire new chain for a feature is no longer viable. You should consider working on Tezos because, if you have a cool idea, it could be a reality within 6 months and you can even invoice the protocol for it.

Arthur Breitman:

There is Dexter, which is essentially similar to Uniswap.

Arthur Breitman:

For Futarchy the idea is too have the protocol fund a uniswap or dexter like contracts to subsidize discovery

Arthur Breitman:

Dexter: https://gitlab.com/camlcase-dev/dexter

Arthur Breitman:

I think in a first phase, Futarchy can be simply indicative for proposal, and in a second phase, it can become mandatory to have good futarchy scores for a proposal to be considered for a vote

Participant:

For those interested, Dexter is on testnet and currently working with Nomadic Labs on formal spec/verification

Arthur Breitman:

#2 goes to #1... if you're focused on building money / payments, L2 solutions look more attractive than sharding. They're not a panacea, but it speaks to priorities. 

#3 Ethereum 2.0 is a massive change with an entirely new blockchain. They are doing a slow rollout, but there's a lot of changes that could have happened incrementally on Ethereum over the past 5 year.s

Participant:

Happy Baker here! Thanks to you and the team for writing stable software!

Arthur Breitman:

Dexter demo https://camlcase.io/dexter.html (the UI / UX is obviously not there yet, this is mainly to try out the contract without resorting to the command line)

Moderator:

Good stuff. Any final questions?

Moderator:

Alright, that wraps it up. @arthur, thanks so much for taking the time to come on Crypto AMA!

Arthur Breitman:

Thanks for having me!

Moderator:

And AMA: thanks for asking great questions as always. Have a great weekend everyone!

Participant:

Thanks for the thoughtful answers!

Participant:

Thanks @arthur !

Participant:

Very well thought out answers, it's obvious you spend a lot of time thinking through this stuff

Participant:

i believe Mikerah meant infrastructure, like network level privacy for example

Arthur Breitman:

ah

Arthur Breitman:

Well you'll be glad to hear all p2p connections are authenticated and encrypted

Arthur Breitman:

but yes there's more to be done here

Arthur Breitman:

The systems doesn't work as well for non-protocol contributions, thought there are grants available for this type of work. I

Arthur Breitman:

I'll still say that one attractive feature is likelihood that your work ends up being deployed