 All right, this is going to be an exciting conversation, I hope, because we're going to pose you a challenge. If you are the founder of a startup, you're not just building products and services. You are building the tools of a new society, and you have an obligation, a social responsibility, to make careful choices about how you build the next society that we will all have to live in. Centralized financial systems and a centralized web are threatening privacy and democracy. But fortunately, two technologies are emerging today that are massively increasing the opportunities for decentralization. Those two technologies are cryptocurrencies for the use in financial payments on the internet, and the third wave of the web, or Web 3 as it's known, platforms based on the blockchain, to build completely decentralized applications, and Ethereum is one of those. So, today we want to talk about why choosing to build decentralized systems will not only benefit your business, but society as a whole. So, let's start with what are these things we're talking about? The third web, Yuta, do you want to lead us in the discussion? Sure. So, the third web to me is a whole new stack of technologies, as you said, that will underlie the very businesses that we built. So, why we've seen so far massive startups using this centralized architecture of client and server, like in the future there'll be all peers that interconnect with each other, and thus will lead to also very, very different sort of businesses that we see, because it won't be as easy as it is now, like to just sit on the user data, but the user will hopefully then sit at the edges with each of us instead of being centralized and stored in a data warehouse where it can be just monetized by a single entity. But most companies never really consider architecture of how they build their products and services. Perhaps as an afterthought or maybe a technical consideration. So, how can it be optimized? How can it be efficient? That seems to be a bit in conflict, because for many startups, if your plan is exit, if your plan is to make a lot of money, sell to a bigger company in exit, then private information on your customers is a very valuable asset. How do you reconcile those two positions? Pamela, you have some thoughts on that? Absolutely. So, I think that one of the joys of working in the cryptocurrency industry is that we can start to see people being able in a reasonable way to make alternative choices. So, in the past, we've had very few choices on decentralization. We can decentral tiny portions of our business, but generally the architecture, as you said, has been an afterthought at best. When I as an attorney advise my clients and my founders, I often encourage them to look for decentralized solutions, not only because I think it's much more interesting, but also because it helps to mitigate risk. So, we're starting to see more and more data breaches. We're starting to see there are a lot of costs, uncalculated costs, recognized costs in collecting and centralizing data, and it puts founders and companies at risk if you collect that data and then have no reasonable way to secure it. So, I think it's interesting to try and move towards this decentralization, not only in the basic architecture, but also adding cryptocurrencies to that mix. So, if you're Equifax and you destroy the privacy of 150 million people, you probably survive. Worst case you change your name. Or you make millions. Yes, or you make millions off the breach itself. In fact, most people don't know Equifax. It wasn't called Equifax. They changed their name after the previous scandal about 15 years ago, when they were under congressional inquiry. But if you're a startup, you can't. If you're a startup, this is a terminating event. You can burn all of your customer loyalty. You can suffer operating costs that exceed all of your runway, and you're done. And nobody's going to buy you because you're toxic at that point. So, it has an impact directly on exit. And I guess, even if you're not even thinking of the worst case, I mean, we have the new data regulation coming in next year in Europe. And I mean, this will lead to a massive cost in order to comply with that as a startup. So, I hope that these technologies will actually help to establish a more level ground for startups also then to compete in such an environment in the future, because it will just be too costly to comply with all this. I mean, the legal cost and whatnot. From a security perspective, I think what the internet has shown us over the last 25 years is that the only way to secure data is to not collect and store it in the first place. No one is able to secure large amounts of data, not the government, not the very well-funded large corporations, even those whose security is their job, not the intelligence agencies. I mean, if the NSA can't secure data, why do you think your startup will? It's impossible. So, the moment you start collecting and storing data on your customers, any data, not just personally identifiable data, but metadata, location data, simple things like photographs now, which are a risk in themselves, you are putting your customers at risk, and then you are putting your company at risk. Many, many startups assume that that's the right thing to do. How do we change that mentality? I think given what we've seen so far and the fact that more and more users become aware that they are giving away a lot when they just sign up to service, there's actually a big opportunity to sort of rethink what the actual offer is that you're making as a startup. What is it actually that users should pay for hopefully directly and not just indirectly through their data? So, thinking about ways how the data can also be used and benefited from by the users themselves and not by the startup. So, that's the sort of thought that I would look at like if I was to start a company now. Let me jump in and give kind of a real-world example because a lot of times when I talk with people about, hey, let's start decentralizing the architecture. They look at me kind of with the deer and headlights look and go, I don't know what you mean. So, let me give kind of a real-world example. So, in the cryptocurrency industry, we know that we have exchanges, and those are places where we can go and exchange our national currency for cryptocurrency. Most of the exchanges that have been built today have been built in a somewhat centralized fashion, meaning that they are complying with existing anti-money laundering, know your customer data collection, big data collection, passports, identity verification, all of these things. So, we have a situation where many startups in crypto are collecting a lot of personally identifiable information. And they do this because I think their advisors tell them, yes, okay, you want to open an exchange, these are the rules, these are the things that we should do, this is how we're going to scale. There's one interesting organization, and there are quite a few that are trying to do this, but there's one that's called BISC, and they are trying to build a decentralized exchange. So, instead of collecting customer data, what they're actually doing is creating software that allows users to connect with one another and then bypass and go outside the system to transfer fiat. This organization, to my knowledge, and I'm not affiliated with them in any way, but to my knowledge, they're not collecting any PII because they're not operating as a bank. So, they're still providing the same functionality, but they don't have the same risks. They don't have a huge legal compliance budget because they're not collecting data. They don't have to worry about their privacy collection and retention policies because they're not collecting data. And I think that to have a real-world example and an illustration is really important because then other startups can look at that and say, hey, how can we do something similar? They have no idea who their customers are. Correct. And I think to many startups that seems both bizarre and potentially a bit frightening. They also have no control over the application once it's running. They can release new software, but their customers may choose not to upgrade. And one of the interesting things about that is that if someone comes to them and says, here's the subpoena for information, the answer is we don't have any. And if they say, you must stop this now, the answer is we can't. And that's a completely different model for looking at how you build applications on the internet. Yeah. And that's why I think these technologies will also in the end change like the way how society operates as a whole in the long run because, I mean, we think through all the internet has done so far as digitized and made real world processes just more efficient. But what we've so far done is just taken the institutions that we've had previously and as I said, just made them a bit more efficient through digitizing, but they haven't really questions like the fundamental way how we've organized, the way how we work together in the first place, like this very fact that we used to have this institution and I'm not just thinking about governments but like banks and whatnot that work as intermediaries in order to facilitate and be the grease of our economies. So that's going to be really interesting to see how this alters and it makes like new forms of collaboration, like also cross-border possible if you think of supply chains, like fundamentally, I mean, who should be the entity that sort of should own data that is supposed to flow between the US, China, Russia, like all the different countries that don't trust each other and where it would be really, really useful to have information being accessible by the right people. The internet has been a massive force for disintermediation in traditional industries at least, but it also has many centralized components. And one thing to notice is that the centralized components mostly centralized around applications of trust, verification of identity, reputation, and of course payment systems. And this is really the fundamental innovation of blockchain technology, cryptocurrencies like Bitcoin for use in payments and blockchain platforms like Ethereum is that they allow you to take the same disintermediation and now apply it to applications of trust, which was impossible before. And that means payments that are completely global, uncensurable, that can reach every part of the world without asking for permission. Of course, this terrifies some institutions and in many cases it requires you to take a novel approach to regulations. So here's another interesting thing we see, which is companies themselves are centralized entities. The idea of grouping together with other people, having control over all of the decisions, and having a known well-defined entity of directors and shareholders, Ethereum is now changing that too. Yeah, so their project is trying to experiment with the opportunities that Ethereum offers so in order to come up with more participatory models that are like hard-coded into the DNA of the company through these technologies basically. So you end up with a voting system, a governance system that literally can't be just changed by the owners or shareholders of the company, not only by a single person, but only if everybody does it according to the rules that were agreed to in the first place. And that's really exciting. And also I think allows for much broader collaboration than we've seen so far. Open-source software development was the first example of how beneficial working together really large groups can be to society. And these technologies will allow further and wider ways of collaboration than we've seen so far by having sort of this organizational tool out of the box. I think, again, this may seem alien to a lot of startups. One of the expressions that's used in cryptocurrency such as Bitcoin is the idea of having rules without rulers and having systems that deliver predictable outcomes without anyone being in control. So I think of it more fluid and more flexible and much more cheap tools for establishing collaboration between people. So far, different countries have come up with different organizational structures, different forms of companies or incorporated organizations that we can use in order to do so. And like cryptocurrencies and blockchain allows just much more flexible and trans-border ways of doing that. It also allows us to, on the flip side, it's very flexible. But I notice when I talk to founders and when I help people start companies, many of them don't actually read the operating agreement. None of you out there are these people, right? You've all read your operating agreements. So when we move to software-based governance, that means, A, you really do have to know how this thing works. And I think that it's great to start that conversation before you actually start to work together. I think it can lead to better collaboration and in the long run, more satisfaction. And it would also allow us to use these tools that software developers have come up with over the past 20, 30 years. All the testing tools. Think of how today legal agreements are drafted. It's really hard, as you say, to get through them and understand what happens in certain edge cases. But software development has come up with tools. We have testing frameworks. And this is all what we could apply if we hard-code our operating systems in that way, our social operating systems. Yeah, and I also like the idea that when you move it to software, you're not relying on people to do what they say they're going to do. But rather, you're relying on the software to operate as it's intended to do. And people can always jump in later. But what you've agreed to is what will happen unless you jump in. And that's not the case with traditional legal agreements. Well, another big challenge is the idea that a lot of these applications and companies that people are building these tools operate on a truly global, transnational basis that has no relationship to any specific legal jurisdiction. This is causing a lot of friction in the centralized web because what are the laws that apply to Facebook? Do US laws apply? The US certainly seems to think that applies everywhere. Other countries may have minor disagreements with that. And they have to deal with this patchwork of regulations and laws. And so when you're talking about corporations that don't have legal or physical presence in any country, but simply have a software operating agreement, applications that don't exist anywhere other than on the internet, is this legal? And if so, how? And where do we go from here? I mean, I will not speak for every jurisdiction and this is the issue. You know, currently our laws are jurisdiction-based. And the cruel, honest answer is, states have jurisdiction over people, not over software. And so if you are located in a jurisdiction where they will pull you out of your home and put you in jail, maybe you need to take a second look. But if you truly are operating in a decentralized way, and maybe this is the litmus test, if you really don't have control, then it's unlikely that in any civilized government they would pull you in and arrest you if you actually couldn't exert control. Well, this opens some interesting opportunities because a lot of innovation, if you look historically, disruptive technologies, almost always either break laws in small ways or at least they violate existing regulations. And the reason for that is that both the laws and the regulations were written by the traditional and incumbent industries. So Skype was illegal pretty much everywhere. And yet they just did it and figured it out later. Airbnb, Uber, just recent examples, but if you go back, many technologies have had that impact on the world. And now we're seeing that expand to corporations and money. But what happens when there isn't an Airbnb or there isn't an Uber to go after, right? So right now I think Uber is banned here, but they're allowing it to come back in June, is that right? And so this is interesting because it's a perfect illustration of how decentralization could change this. Right now there is an Uber to go after, but what if it really was peer-to-peer? What if there was no Uber in the middle where we could actually use a software application to hail a ride from someone and there wasn't a centralized third party to go after? How do you actually stop that? And do we want to? So I think so far we've made some arguments as to why this might be beneficial to companies, why it also might be a bit scary. But what about social responsibility? You know, the bigger issue here is if we do not change how we build products, if we do not change how we build companies, where is the web going with these trends of centralization? I mean, yeah, I think it's exactly that what you're saying, like becoming more and more centralized, more of the Facebooks and Googles that just sit on the data and basically become effective governmental institutions, if you think about it clearly, which they are not supposed to be. We've seen this especially in the case of money. Money is being used as a law enforcement tool throughout the world, but increasingly we're going to see that expand to other areas that are related to personal data. Reputation and identifiers, identity, is increasingly being used to select who is included and who is excluded. One of the scariest things I've read about recently is the idea of Sesame, which is a reputation scoring system being used in China that is like a credit score, but it scores you on your political loyalty. And everybody has a score and based on whether they post things online of certain content, they get scored up or scored down as to their loyalty. These are direct results of the way we build applications on the internet. So for all of the startup founders out there, if you stop for a moment and you think, the thing I'm building now is the basis for the society my children will live in. What kind of society do we want that to be? And we have an opportunity to create incredibly good, open, free structures for the world, or we can create incredibly centralized structures that will end up being used for purposes we didn't want. Do we leave everybody on a positive note there? I hope so. The fact is we've seen already incredible amounts of people experimenting with these new systems and coming up with new ideas how to re-architect the web. It's going to be interesting to see how the governments react and I hope that regulation won't come in too quickly before these technologies can actually develop. And I think it's also important to recognize the purpose of regulation when it's not written by the incumbents and the purpose of regulation is to create a society that we all want to live in. And I think that we're trying to do that with decentralized technologies and decentralized autonomous organizations and cryptocurrencies and this frees us from the traditional constraints in a way that we haven't been freed before and that's why I work in this industry. That said, I mean in the end it's just a technology and like with every technology it also will show its downsides that we probably even aren't aware of today. I mean like when people, like when this web how we know it became or started to grow like people were excited about like the decentralized web but in the end it turned out to be something different and I think it's important to watch out for like signs where we then start to understand where the technology is being misused or used in bad ways. I think that's why we're here today talking to founders and trying to get them to better decentralized architecture. So if you are building a startup right now I would like to leave you with a thought experiment. This weekend your database was compromised. All of the data has been released on a public web server by anonymous or a government agency or a group of hackers. All of the information you have collected all of the metadata you have collected is now available. What damage does that do to your customers? What if your family were customers? What damage does that do to your business? What damage does that do to society? Run that experiment because one day it will happen and there is nothing you can do to stop it. You can choose to build socially responsible businesses because it's good for you and if you don't choose that you will have to face the consequences. So let's do the right thing. Thank you very much.