So what were some of the uh opportunities that you saw or some of the things that you felt needed to be extended beyond ethereum? So the problem with ethereum is that it is really truly a proof of concept and the first person to agree about that is vitalik, because he's.
Building ethereum too you don't. You don't, go build a sequel if the original is okay uh and they're, really three classes of problems, and i turned this to third generation problems, and this is where we're currently at as an industry.
Many people are chasing them in their own ways, first, their scale and that's. A super easy one to understand. So, in a distributed system, you'd, like a situation that, as you add people, the quality of experience and the availability of resources and operating costs, stays the same or gets better.
You don't want a situation where there's, a scarcity phenomena that, as you add people you get less and less for everyone. The easiest way of understanding that is kind of thinking. Like imagine a dinner where you know you add people around a table, but you have the same amount of food.
Everybody gets less on their plate. You ideally like a potluck where people come and as they show up, they bring food with them. So there's enough food to feed everybody, regardless of the size of the party, and we have protocols like this, for example, bittorrent is, is one of the greatest examples where the more people downloading a movie on bittorrent, the faster you get it as Opposed to the slower and that's opposite of most web systems, where the more people using something if you're at a surge hour, the website gets slower and hard harder to access, so that's.
The first property is that we don't have that in the cryptocurrency space. This is why ethereum fees are so expensive and why bitcoin gets clogged and why you can ' T really do things when you start talking about millions to billions of users, whether you have a billion users or a million users.
The amount of total available resources is the same. So you need to go and change that paradigm and become scalable. So we're, all kind of looking for that in our own way, and it's, a very difficult problem.
Second, there's over 8 000 cryptocurrencies, now holy hell and there's. Tons of legacy financial systems floating around and so how the heck do all these things talk to each other. Imagine wi-fi where your wi-fi only works with the manufacturer of your phone, so your apple phone can only talk to an apple router.
Your samsung phone can only talk to a samsung right. It'd, be a mess, but we don't have that we have perhaps the first truly interoperable protocol in all of humanity. You could be in north korea, south korea, iran, israel, russia, china, america in germany and, despite the fact, these countries collectively will never agree on anything common.
Your phone probably can connect to the hotel, wi-fi network and all of them that's. A pretty amazing thing, if you think about it, so that tells you it's, a truly interoperable protocol, that is device and country and geopolitically agnostic.
So what is the wi-fi moment for our industry? How do you move assets? How do you move identity? People value information between systems, and so there's, a huge demand for interoperability. If these things are truly to be useful or else what will happen, is you'll have 800 fragmented standards and the world won't consolidate and then finally, you have this meta problem of governance, and i call this the who pays And who decides or the sustainability problem so bitcoin the reason why it's, not competitive is because it can't evolve.
You know, bitcoin is aware the developers are incredibly smart. They're, some of the brightest people in our industry. They're aware of ethereum. They're aware of cardona. They're, aware of the other eight thousand cryptocurrencies, but even if they want to add smart contract support or side chains or more scalable protocols, it's.
Just it's, chaos, it's, damn near impossible to upgrade that protocol and because there's, no governance layer. How do you govern a system without rulers? Normally, we think there's. A ceo there's, a company there's; microsoft, to windows.
There's apple to the iphone there's, google to android. Even if these are federated projects like linux, there's. Still some ruling class of you know powerful companies or powerful individuals that stand behind the project they kind of act as beneficial dictators or the the prophets who shall say what the future needs to be and kind of push people in that direction.
With cryptocurrencies we're, saying no one's in charge. There's, no leader there's. No ceo! There's. No president, there's, no powerful company that gets to decide. So the problem is, in the absence of that you have two models: either you can somehow self-assemble a completely decentralized government and figure out a way to converge to controversial decisions, or you have anarchy and chaos and things slow down.
As you add people, so just like scalability, as you add people to the system, the system slows down under the current designs. As you add people to the system, their innovation rate slows down. It becomes more and more difficult for us to actually see things come better.
The internet is a great example of that. Look. How long it's taken to get ipv6 compliance. Look how long it's taken us for the good things that everybody agrees is a universally good idea. Yet it takes 20 30 years for the internet to upgrade because it doesn't have the right type of governance layer, so everything grinds to a halt and it's very difficult to do.
System scale upgrades well, these are financial protocols, not just communication protocols, they have identity, they have value, they have all these things and if you're really going to be competitive with the legacy financial system, you need the ability to upgrade with some predictability And even if it takes years it's, a process that we know will eventually converge and get done without creating a bitcoin cash or a bitcoin sv or an ethereum classic, or you know any of these governance failures that we see inside the system.
So that's. The third problem is the sustainability problem, and a corollary to that problem is the problem of who pays a lot of this innovation is horrendously expensive. We as a company pay tens of millions of dollars in engineering and science fees every year, just to maintain our people, but then collectively there are probably 100 200 million dollars of money that our industry is spending on engineering and r d budgets just right and come Up with new protocols and as our industry grows in size and scale that's going to become billions of dollars.
So how does a cryptocurrency pay for its own growth? You need some form of a treasury system. For this, you need some sort of financing model that allows it to pay not just today's bills, but bills 20 years from now bill's 30 years from now, or else you'll have the golden rule.
He, who has the gold, makes the rules. So if you add these three things together: sustainability, scalability and interoperability, i view that as kind of the third generation problem of cryptocurrencies, you keep all the old stuff.
You keep the programmability. You keep the instantaneously being able to teleport value. You keep the decentralization you have to do all of that, but now you have to do it at a scale of billions of people.
Now you have to do it where it can talk to everything else. Now you have to do it where it has the ability to govern itself and pay for its own bills and the first person to solve that is probably going to realize the the vision that satoshi started with and then the cypherpunks were started with the 1980s, which Is a truly a global scale, financial operating system? So it's a really exciting time, because the the rate of innovation is increasing, the rate of investment's increasing and the competition is very different.
When i started it was just a bunch of guys we were having fun, but we weren't, particularly special people. Now my competitors are people like sylvia mccauley who's. You know one of the world's top professors.
He's, got the nobel prize at computer science, the touring prize winner at mit, and that's, just one of dozens who are at that equivalent level and that's just eight years. It's. Incredible to see that we've been able to attract that kind of brilliance and talent into the space, and because of that, i think it's going to get done and the third generation will be realized.