 All right, so hi, I'm Charles Hoskinson. Thank you all for coming You know I was having a conversation this morning with a friend of mine And I said you know I've been up since 5 30 in the morning And I've worn the same clothes for three days because they lost my luggage and he said oh you must be an Odessa by then I was like, yeah, this is a nice place This is I think my third or fourth BIP conference and I keep coming. It's lovely. I come for the weather stay for the people anyway, I I Thought a bit about what I should talk about, you know What would be meaningful and so I've been kind of reviewing the types of questions that I've been getting over the last few Months and the most significant set of questions have to do with regulation and Ico's this is kind of the vogue topic Right people are raising hundreds of millions of dollars and what the hell does it all mean? And when are we all going to jail? usually is the set of the progression of the questions I get from journalists and And they say have we ever had anything happen like this before and I can't help But remember a quote which is history doesn't repeat itself, but it does rhyme So I look back to history and said what part of history seems the most similar And so people because they tend to recall things closer than further away. They sell the dot-com crisis Not quite. There's actually a period of history that was very similar to the one we have today And I brought a little something that's from that period So this is a pocket watch. I collect them. It's made in Canton, Ohio in 1901 it's 115 years old still runs. It's nice to watch and it was right in the middle of the knicker-bocker crisis right before of it So 1907 the whole markets collapsed. It's a horrible event America almost went bankrupt JP Morgan had to bail out the country and eventually it led to the creation of the Federal Reserve the Pujo Commission All this terrible stuff to go ahead and save America from itself in the excesses of capitalism So what was going on in 1901? Well, we had truss We had rampant insider trading. We had these beautiful board transitivity where everybody was sitting on each other's boards and You had for the first time ever people were able to invest in global investments So if you were in America, you could buy bonds issued by a Japanese company couldn't do that before at least not as an everyday person and The markets collapsed and so the regulator saved us, right? No, the 1920s happened the melanomics and then nine years after that We had the Great Depression and then after that well We created securities exchange commission in 1933 and the story goes on and on and on and on and on and every time It'll be different because things change society changes so Anyway Given that I tried to think for a bit How do we reconcile these legacy systems and legacy regulation with? Crypto systems, what's the same? What's different and where are we going from a regulatory viewpoint? How do we kind of merge these two worlds together and hopefully create a better outcome? So I thought a bit about it and I said well, what do we have in commerce in the most Abstractive ways that potentially could cause some issues for people. Well first off transactions have metadata Does anybody know what metadata is? So metadata is kind of one of those ill-defined nice topics that covers a lot of stuff and actually Bruce Schneier wrote a wonderful book Almost completely about it called data and in Goliath, but I'll give you a scenario So let's say Bob every week withdraws $400 from an ATM That's an event. So let's add some color to that event. That's the metadata So what if I was to tell you that that $400 he withdraws that ATM happens to be right next to a brothel and Bob happens to spend an hour in that location after withdrawing it would that change your opinion of Bob or what Bob's doing with the money Well, what if I give you more metadata? What if his favorite restaurant happens to be right next to that ATM? Is he sleeping with a hooker or eating lunch? It's hard to know that's metadata and that's the problem with metadata is it's never complete enough and the more of it You get the more stories you can invent and it's certainly mutable It's certainly changeable and it's certainly up to opinion and context, okay? And it turns out modern financial systems are rich in metadata every time you buy something you do something It's recorded. It's put somewhere. All right. What else do we got? Well, we got attribution. So what's attribution? So when I send something from point a to point B who owned point a and who owns point B? Alice and Bob How do we know who they are and where did Alice get her money from that's called origin of funds? And how far back can you follow that? How many hops? Where did it come from? Did it touch an embargoed country? Did it touch some money that was laundered? There's no de minimis clause on money laundering It's gets pretty complicated and what are the costs associated with following that? so that's attribution and That's a difficult topic onto itself. Are we done? No, we have intent What's intent so when Alice sent value to Bob? That's an event it happened and we can talk about it provide metadata about it We can identify the actors, but how do we know that Alice wasn't defrauded. So let's think about Ethereum So if you bought the Ethereum ICO You're pretty happy guy right now right because you made a lot of money and so you think you're a genius Of course yay Vitalik yay Ethereum. It's a wonderful thing But what if a theorem was play a mind experiment collapsed and they lost everything and they never shipped a protocol How many people would have wanted their money back would have sued would have said they were defrauded same transaction Alice to Bob, but the difference was outcome So it seems that you know in this intent type of a deal outcomes really important But wait a minute isn't that kind of predatory to the seller because if the buyer gets a good outcome He's happy if the bar gets a bad outcome. He's not happy So you have to think about that So these are all human things and they live in the legacy financial system And if you were living with Sargon 3,000 years ago 4,000 years ago There would be some legal system some methodology for addressing these things and providing a framework for these things to work Now let's look to crypto currencies history rhymes. It doesn't repeat We have a new tool now something that's changed the paradigm that allows us to do all these crazy things and Cryptocurrencies are actually unique because they're not people They're like mirrors that show us who we really are not who we want to be but who we are shows us all of our Sins and our hypocrisies and our flaws and our failings and that's something we've never really had before in a commercial Context but we live with it every day if you're a mover you can't be holding this heavy box and say, you know Gravity, can you just get a little lighter for me today? I just want to or if you're on a mountain You can't say you know air. Can you get a little thicker? I'm getting a bit hypoxic You're not allowed to change the laws of physics and for a long time humanity didn't like to accept that and when we did We invented this thing called the scientific method and it's given us modern society We didn't want reality as it ought to be but reality as it is We accepted it and we lived with it. We built it and it helped us improve and it augmented us Commerce doesn't behave this way. It's right now in the legacy world in a completely human sense. It's very subjective It's very outcome oriented There's many interpretations for the same set of facts and events and then suddenly what we have managed to do is invent a natural law for commerce Protocols where they are who they are they don't change and whether you agree with them you like them you accept the outcome or not They're there And I think that's something that's very special The problem is that we don't understand it. We don't have models for it We can't really understand what's rational and what's not rational when you're talking about non-humans and Interactions with non things and you can certainly try to apply old methods like the scientific method Roman does it I do it. I which Kate does it a lot. We think about provable security. We think about adversaries We think about models, but at the end of the day There's only so far that we can take these things because Vlad is actually very correct There's something missing in that puzzle of how do you link the legacy with this new system? So let's wrap it up back to the beginning, which is regulation How do you regulate these kinds of things? How do you change heart and minds? How do you create proper outcomes? And what is this all going to mean? Well first We're in a bubble in my view. So it's gonna collapse The price will go down and a lot of these businesses will wash away because they don't have good foundations That's nothing new. We've been through bubbles before we've been through collapses before and the strong will survive There's a nice Darwinian view of these things, but moving beyond that we have kind of two options We can either repeat history and create another Federal Reserve and another securities exchange commission and pray that this time We've gotten smart enough to change things or we can start asking what parts of regulation Can we now actually encapsulate in code and encapsulate in protocols as opposed to people? What about metadata can be made deterministic and objective? What about attribution ought to be declared and we just have to accept That's the way it is and live with it just like we live with gravity That is I think the ultimate challenge that we face as a space and if we're actually able to solve this Then not only have we created something that is much more efficient and much more transparent much better But we've created something that actually will be global in nature It becomes like a fundamental law of physics and that means you don't need a regulator You don't need a government to endorse it. You don't even need people to endorse it like gravity We just live with it and that's actually my hope for what cryptocurrencies can bring to the conversation. It's a new idea It's a new methodology. It's a kind of an artificial encapsulation of a physical law in a certain sense And if we can get there you'll notice some things scams will start disappearing Commercial transactions will become far more fluid. We'll start standardizing things and things will become uniform You'll just have an expectation that things ought to work the way they ought to as opposed to how they work today So those are my thoughts on all of it I wanted to leave it a little bit philosophical and existential at a certain set and I love Q&A So I'd love to get some questions. Thank you so much. Charles. Let's give a big round of applause I'm coming to lots anticipating some questions