Jag Sidhu discusses DAOs and decentralized governance on Syscoin

0:01i'm ashton addison from block west capital for investment pitch media and today on the Crypto Coin Show once again jag sidhu the lead developer of ciscoin president of the cisco foundation and cto of blockchain foundry jag welcome back to the show once again and thank you so much for taking the time it's not excited to be back likewise there's so much to dive into

0:23in part two of our interview you know we talked about the inner workings of cisco how to make the best of what's the best on bitcoin and what's the best on ethereum and tie it all together for the people who want to know about that check out part one of the interview it will also be in the description box below yeah there's still so much to talk about

0:44and with ciscoin and just with the industry overall because we really haven't spoken in a while so i would love to kick off our conversation by talking about you know the move of internet organizations into dows and we're seeing a lot of protocols and dows popping up and i feel like we're really early stage in you know the maturation of what dows will become and

1:10you know how the biggest companies in the world will hopefully eventually be more transparent democratized and be doused and i know cisco is also working on like a dao sis and i would love to get your thoughts on you know the industry of taos and where they're at right now and what dao sis is working on yeah i mean this the concept of the dao

1:33Started to exist right around when ethereum came out and yeah they started to be touring complete stuff so people like wow if you could do touring complete finance this means that you can have autonomous companies you don't need companies anymore just put them on there but obviously that's going a little bit too far and we've been working on

1:56those concepts since and you know what we're working on is what the iteration of dows now are they've modeled it after companies with shareholder voting and this sort of thing we've taken from a clean slate with like forget all of that because as soon as you have voting because it's completely unregulated and it's anonymous you don't know how many shares one

2:23person owns to be able to vote on that and it's it's completely trustless unless that black box is completely compliant in a compliant layer where every user counts as one vote and you can check them there is no sense of doing mimicking companies in that way what we've come up with is a self-sovereign system that tries to with no crazy speculative pokemon

2:52either like home or anything like that we create a self-sovereign treasury management system and build a dow off of that like like how knows this is to multisig the management system on the treasury will be to the defy space for treasure managing the treasury so every every defect project has some sort of treasury or some sort of financial

3:16management system this self-sovereign thing is going to be kind of the lego blocks for all of that and you know this goes back all the way down to economic philosophy and you know are you keens are you marx are you what type of austrian what type of economic philosophy do you prescribe to and how would you run the world if you had the choice and the

3:42governments are just enforcing those specific fault philosophies because the corporate environments that are set up with that philosophy like in the western world it's kind of a mix lasse fair austrian kinesians basically a mix of both and you know in dubai and uae and some of these other china and singapore a little bit of the other style where the government

4:07controls and dictates and does it pretty good right neither are that bad they've both shown crazy amount of growth i would say right now the controlled economies are actually growing much faster but the desire to live in a country where you think you have complete freedom whether it's real freedom or not seem to be the

4:35kind of the theme of the last 50 or 60 years where people wanted to live there and therefore those economies ended up growing a lot more even with much more wealth but now it's seeing some of these others catching up these are all economic philosophies but this self-sovereign financial system that we're creating does is it kind of removes a lot of it or all of it or

5:03removes the debate because there is no government dictating how things will work in that environment it's your own money at work and so if you want to maximize the your capital or grow your capital or you're part of the ecosystem and you're looking for a job and you want to provide value back to the ecosystem or provide knowledge back to the ecosystem

5:29you can come in and ask or start doing work for others the people will put up funding and their own funding because there's a loan involved they're borrowing funds to get stuff done the loans are being covered by themselves it's self-sovereign and the interest is self-repaying because of the defund markets behind it technically how it works is you know

5:54when you're using uniswap you create a lp token right the lp token is an interest bearing position now if you take that interest rate position and you store it into the dow the dow is going to give you a receipt saying great that's what we want we love interest bearing positions because now we can you take your position you can create a debt on it one-to-one debt you know it's

6:15there's no counterparty risk or anything there's no risk of that system breaking down it's dead against your own it's rebasing and you are being paid out based on the defined interest on your position and now multiply that by all of the positions in that treasury and it's all being used to help you pay off your loan so now really the opportunity risk is

6:39the only thing i play here would you want to invest in joe or bob which one can get their job done faster so you pick on one then there's opportunity cost on should you got invested somewhere else but there's no counterparty risk right if that person runs off the only thing you lose is opportunity risk you still get your money back over time you can come back and pay now i would

7:01argue even the banks mainly it's all opportunity risk because the federal reserve loans them money at its lower interest the banks lend it out a higher interest now this is opportunity cost that's why they do these strict credit checks to make sure you pay off your loan if you're going to default tell me now because i could just lend it up to somebody else it won't default that's my

7:23opportunity cost i'm getting the money for free anyways i'm getting it from the central bank at a certain interest i'm giving it to you at essentia that's my profit and if you if i choose the wrong person that's opportunity same way but there is no central bank interest rate here there is no borrowing done from the bank to the central bank you take

7:44your own money as a and you become a bank yourself and you can loan it out to anybody you probably want to do your diligence checks there but you can loan it out to anybody you can loan it out to yourself you can borrow that money to build a home or just cash out or do whatever you want to do but it's completely self-sovereign and there's there's no risk other than opportunity

8:03so in that case now you can you can think about this as a new economic alignment with the broader ecosystem of the blockchain and if you if you really think where this blockchain is going to be going this blockchain stuff it's disrupting finance disrupting corporations maybe even disrupting the way governments operate because now as i was saying if the economic philosophies

8:29have thrown up the window the governments don't really have to prescribe to a specific policy all their jobs should be doing is protecting the best interests of the citizens non-financially in other ways you know maybe there's no tax at that point because there's no financials involved but they should be you know if they should be maybe even

8:50participating in the dow for example if they want to be able to set up you know there's a cost for infrastructure costs for police costs for military this kind of thing you know that's that's where you'll be using all a unified system you can't print money you've got to be able to use money somewhere so someone can fund you and it's for the good of the ecosystem

9:12there's going to be a few main blockchains out there that can actually securely and decent in a decentralized way serve these systems and these all end up kind of being like you know you have your markets today where you can go and lick fiverr.com and these sorts of where you could just go get a job and people will pay you for five bucks to build

9:38something you don't have to have a long-term job at a company to do that it's kind of like that but on steroids because now there's gonna be a market there for lending and borrowing and it's fully autonomous instead of you know you have to find somebody you have to sign up then they have to pay you with some currency of choice and then there's no one to really

10:02arbitrate and it's up to you to find like there's going to be it's it's completely self-sovereign it's governed by a smart contract system and it's on the blockchain so you get all the benefits all of that and you still get the fiverr.com use cases where people can come in and find a job it's gonna be global where anyone who needs to get a job most likely will be coming to these

10:25sorts of systems and if that's where all the jobs are that's where the economies are if that's where the economies are that's where the corporations and this sort of thing are set up so it's disrupting corporate finance it's disrupting the model to achieve interest so in the uae there's sharia compliance and they're big with that they think that's the way the world

10:46should operate and that's never really been possible because who would lend out for zero interest so they've got some other pseudo ways to collect rent off of the board money and this is probably the first example that can give back in that way without creating a surplus it's a zero-sum game you lend out your own capital and you end up the d5 market is covering you it's an

11:11opportunity risk but you choose wisely and who you want to lend to what you want to build and most likely you're going to be benefiting the ecosystem because whatever you're lending out you're going to choose maybe someone who's going to be benefiting you who's going to build on that ecosystem so you know in the impending what i call the knowledge economy

11:32which is where iot and ai and you know robotics starts to take over the manual labor in our economies really what's left is just specific domain knowledge that we have that cannot be replaced that's where the jobs will be you'll be worth your weight in gold if you have some sort of knowledge that can't be replaced so in the knowledge economy this is

11:55where people be going to get stuff done because you be paid for in a market you know there's very physical work still happening but those markets are kind of going to be migrated away because of automation right so this is the way i see in a potential future may not be happening right away may not even be in our lifetime but we see this is unfolding and we're laying out the

12:22kind of the ground rules for this building blocks to be built and then you know then we can start to go into why even public permissionless smart contract systems aren't ready for alice and jane and joe right now as well definitely yeah great insight there and very forward thinking you know beyond our lifetime even i feel like where we're at with dao was you know

12:48with the dao back when ethereum was created was like the simplest errors i like smart contract error to siphon the funds but now moving beyond that you know you talked about like having the voting rights and i feel like there's a lot of issues as you mentioned that with that and what i'm seeing right now is and we saw with the rome dao or om there's

13:09almost like there's potential for collusion for people to you know talk to each other and be like hey let's team up to work our own position into the dao or the anonymity you know where we saw with sifu ended up managing all of the funds and end up you know being somebody that wasn't that trustworthy managing hundreds of millions of dollars of other people they didn't really know

13:34And you know we talked about in part one how proof of work in bitcoin and like having that system that has like a self-interest and if you try to go against the bitcoin network then like you're punished for it doesn't work i feel like that incentive mechanism working in a dow would would work really well yeah i mean right now the smart contracts are just they're so very early

14:02Some say the standards haven't even been set like it should be standard programming languages like c plus plus and some are moving away from the solidity but i feel like solidity has captured the market for general purpose smart contracts and there's courses and universities teaching this stuff now the problem is the contracts the lego

14:26blocks have been built are not adequately secured and there's all sorts of complexity and the scale as as we scale up we're getting all sorts of use cases and new new lego blocks that may not be sturdy as you get new use cases you got people like india sitting in a in their in their basements figuring out new use cases with little to no help because they're using their imagination

14:51because they're not incumbent in the scale problem anymore so you'll get 10 to 50x new use cases soon as we get these layer twos and modular designs but then you get 10 to 50x new hacks because these new use cases funnel money in people are excited about it they open up a universe of opportunity but they open up the attack fracture because there's no barrier of entry to this

15:11stuff so having the right lego blocks what does that even mean when we get there how do we proceed if we don't get the lego blocks you know as a bitcoin fundamentalist i would say that's why ethereum doesn't work because at some point there's always going to be a new use case that's going to funnel money out it's going to keep shaking the confidence keep shaking the tree to

15:35extract as much money as possible and scammers galore and that's why i need a simple system that just stores money that's it that's all you need you can't do more however i come from both sides now and i can see that yes that's true today and bitcoin people have a point but it's not going to be true in the future because this is the source of things we're working on to create those

15:58lego blocks let's just start with treasury management first nothing else that's not let's not focus on game phi or you know nft markets or anything this is focused on managing treasury because that's the core fundamental principle of all this hacks usually happen on the treasury nothing else there's usually phishing attacks nasa's and stuff but that's

16:20ux related we're talking about this right in the smart contract it's usually hacked right in the treasury so if we create the building blocks of the treasury and we say this has been audited and secured and this is you know for us that's our foundation and everything built on top of that will be built off a solid foundation that's when the fundamentalists of on the bitcoin

16:45side they really have no choice but to acknowledge that this is actual innovation and not just copy pasting a blockchain idea from bitcoin and adding in an ieo or ico and trying to make pumps and dumps and all that it's about letting those indians or africans make money to get out of the gutter so that they could raise money go ahead why not they don't need to be accredited

17:08investors or reach out to credit investors they should raise money for anybody but they know that they're on solid foundation so that their smart contract level security is there so that's you know that's one thing that we're the problem is right now is it's hard for the whole industry to kind of build on the same foundations so you know compliance is necessary i

17:33would say right now as a stepping stone to get average people in because the average people they have no awareness of the stuff they can't audit the code they have no clue if it's safe or not they need to be have assurance that they're not going to get rug pulled by accident by a hacker not by the guy who's running the project with 99 of the time

17:52that's fine it's that guy's probably doxxed or those sort of projects people are not going to invest in but it's all about an attacker that can come in and pull the liquidity and now everyone's hooked we've got to avoid those situations the only way to do that is having solid foundations so compliance is the first step in the next few years can be critical that's

18:12stuff we're working on as well and then the open permissionless stuff once we have some semblance that okay the foundation is solid and we can trust the stuff and there's been no hacks for many years on this stuff definitely i feel like there's still hacks fairly frequently and you know you talked about being a bitcoin fundamentalist there and sort of the

18:32problems with ethereum i'm curious on your take on you know how the shifting narrative of the main purpose of ethereum you know and at first it was before all of the other narratives came in it was you know just to create a world computer and smart contract platform but then it was like the main purpose was icos and creating new projects and then

18:53it was and defy and creating the world of finance and then sort of shifted more to like nfts and helping artists bringing ownership do you see it as like all of these narratives or like do you see something wrong with the narrative continually shifting to something new as it sort of moves up and then loses hype well i mean the ethereum foundation has

19:15not taken a stance on anything like these narratives have come up on their own it's because blockchain wasn't used at scale right the seven transactions a second was never really capped until you had cryptokitties and that was like probably the ftd5 room before that you just didn't have enough people using the system so you had great i can make money by raising tokens

19:38i can i don't have to create a blockchain i could just create a token on this thing and raise money let's do it and then okay now we have smart contracts that could do all sorts of cool stuff let's start building apps and now focus on the app layer and raise money that way and make money that way so that those are just what i was saying was every time you enable that scale you

19:58get all sorts of use cases those were the main use cases that come up came out just by capping the scale of what ethereum can do today now imagine if you can do 10 or 100 x scale which is what the idea behind the foundation of moving to proof of stake was when you have sharding and proof of stake potentially we can get another 50 to 100x scale and therefore who knows what type of use

20:24cases will come out we're not going to dictate those use cases they're going to happen on their own these are people that are usually students that are learning this stuff and have really good imaginations they come up with new concepts the world is working feverishly on what they value as it's going to help them them their own situations make money and

20:48other people latch on because it's a great concept and there's a first mover advantage and therefore you get this feverish push into all the stuff what we you know when you do scale up you get much more now yeah the whole issue was with proof of stake and sharding you do start to get away from the bitcoin side of things of the secure elements of the system

21:11and ethereum people say no it's much more secure but i would argue there actually is situations where it technically cannot be as secure like if the hyperinflation kicks in or state-driven attacks if someone wants to print a bunch of money and then all of a sudden before inflation kicks in they just control a whole bunch of this stuff and now inflation's kicking in they

21:34have complete control and the cost of obviously cost of mining bitcoin doesn't it only goes up during inflation because you can't produce different ways to make energy you can't inflate energy so there's no way that the cost of bitcoin production would go down the cost of bitcoin might go down short term under the cost of production but long term it should always be around

21:58that around the cost or above the premium because people see that is hard money they'll hold into it and it probably should create a the ratio between something like ethan bitcoin bitcoin will go shooting sky high because of the premium and eth may or may not depending on how hard it's perceived in that situation it becomes easier and easier to attack those sorts of systems

22:23now is that a viable outcome i don't know i just know it's something that would happen and it's something that you cannot contain in a system perspective it's an externality that you can't contain on paper the system looks great you know data availability sampling and charting looks great it's a very low probability that you'd ever get any type of

22:45conflicts in that system but externalities is where you potentially can have those systems break and the bitcoin system has survived i would say nations have tried probably to go after it and they've found the game theory doesn't work out because if they're economically trying to attack the mining component they end up losing money and it keeps going if they try to buy

23:10bitcoin up to attack what's the game there you just try to dump it people people are smart enough to hoard around that you can try to short the market but you have to buy it up again at some point and so you know every other scenario ends up looking like we're taking a little bit of a step back from the security and decentralization and we take the fundamental stance of

23:34those ideas are great of data availability and layer two execution just don't think that you're solving all the world's problems by switching to this proof-of-stake system you didn't even have to switch to because we can scale this thing up to thousands or tens or hundreds of thousands of transactions a second as ethereum is today you can scale it up

23:57the proof of a system was a mandate set by the foundation back in 16 and now because of the world economic forum and the green initiatives and all these political pressures they have to and they're going to switch so that's for us we need to offer an alternative to the world so that they can still have that secure system but still get all the benefits of

24:20what ethereum came up with so not taking away all of the innovation of that what they've done it's great i think they're ushering in a new world but you've got to do i think you just got to stick to the fundamentals and the bitcoin community would agree with that sticking to the fundamentals make sense definitely and it's crazy to think they're going to be

24:45you know switching the consensus people made the analogy of like it's a jumbo jet flying you know halfway through a flight and you know it's full of passengers and then they're gonna try to change the engine out while it's flying you know and into a whole new mechanism and hopefully nothing goes wrong do you see what if when you know that specific

25:08event happens do you foresee potential catastrophes yeah yeah there's a lot of risk in that sort of system but they're spending a lot of time to try to make sure that won't happen but if anything could go wrong it probably will i hope not for the industry because if something does go wrong it will be bad for everybody it will shake the tree and

25:33bitcoin is not going to be excluded from that event i don't know for how long it would affect something like bitcoin but it will affect bitcoin so i hope that i hope i hope it goes seamless long term i just yeah it's one of those things that great if it works awesome let's let's you know we're there as an alternative but we're still pushing and rooting for ethereum because

25:54they've brought these innovations without them that those innovations would not have happened but someone would have probably someone would have still come up with touring complete smart contracts it would have taken off the way it's taken off you know i'd say the evm is well designed it's done its job it's gotten traction and we figured out how to scale it what

26:15else could you ask for like it's given the world something that's so critical so i definitely hope that we can you know usher in this new merge and it actually works and people get really excited about it industry does a 10x because of it you see all sorts of new use cases the academics become excited and jump in we see a whole new bunch of research

26:43happening to scale up and do more things and digital identities and all sorts of things start coming to life we'll just be there right we're gonna be in the guts working on this in the trenches offering our solution and it is it's like an alternative that's like bitcoin and eve put together but eth by itself you know it's going to have its run it's going to be

27:06interesting people are going to be excited assuming that it just all works and hopefully i can't say if it will or won't no they got some smart people over there so hopefully it'll go pretty smooth definitely yeah i know and as you mentioned it's like there's cascading if it doesn't work then there's potential negative implications for all of cryptocurrency

27:29and it hurts everybody and you know we're all trying to grow together so you know good insight there on thank you for bringing all that information on the dao dao sis and like the future of dao's and like the problems that we're sort of facing right now for people that want to learn more about you know your insights on that and sort of follow along with dowsies what

27:50is the best way for them to learn more oh yeah that's there's a live paper out on dialysis.com and it's probably like a work in progress we're just going to be updating or making an official white paper kind of thing with some modeling that we're doing on the science side so yeah look forward to that you guys can go to dallas.com and check it out

28:12and there's the papers on there just like just general how-to of what it is i guess things like it maybe altimex b2 is kind of very similar but we are the difference between alchemix v2 and what dialysis is dowsis is a unified treasury management system not a specific treasury amount system is unified across all debt in the system compared to specific tokens and alcohol there's debt

28:41markets and each are isolated in our case we're we're indexing the entire system and the entire debt system and other systems can plug in to ours like we can we can actually help alchemix we can help ava you can help balance our curve and they can use our code and then we build it down on top of that and other dials the other innovations we're doing are kind of like

29:06The ability to upgrade smart contracts in a way where you don't actually have control of the smart contract like right now a lot of the upgradeability happens because you actually own a proxy where you own like you actually have authority to change the contract which means you have complete custody over everything that happens in that contract what we're

29:27thinking we're doing is having once you have the lego blocks built up they're built off what are called factories and you can actually ping other contracts and say are you part of our factory did you get built in our factory if you did get built in our factory we can trust your tragedy magic side of things and therefore you can work with us we will we'll push value to

29:49you and we'll become friends in a smart contract sense and other gals and other projects that come from the same factory systems can just plug in this way and there's a semblance of contract to contract trust not people it's more like the smart car i can trust you therefore it opens up a little connection like a little bridge where you can actually use those systems

30:15internally so that's the way we think about it and the way an upgrade would work is we essentially are just and copying that contract with new feature and it's from the same factory so users of one can have the option to just move over to the other one it's a copy with a new feature you don't actually change the first contract you would say no we're giving a

30:37new contract but we've registered it and so you can use this contract to just click and say oh i'd like to leverage this new feature or i just want to stick to this one i could keep using this one where i could use that new feature over here and here's the new feature so let me just move my value there now i'm on the new one completely safe because it's part of the same

30:58factory system it's checked in the contract and i now have access to this new feature so these are the sorts of things we're thinking about before we even get to the dow we think about upgradability the lego blocks the treasury management and then the dial concepts after that incredible thank you so much for taking the time jag i will leave the dow sis

31:20link as well in the description box for the viewers for easy access all the best with everything on the dow and everything on cisco and blockchain foundry as well and let's follow up in the near future yeah thanks man thanks for having me i'm glad to maybe once once it actually comes up glad to jump on again and maybe demo it definitely would love to have you back

31:50you