Hedera Hashgraph – NYC Meetup – April 12, 2018 (Q&A with Jordan Fried)

– [Man In Black] You mentioned
that it's proof of stake. Can you elaborate a little bit on how that fits in with taxonomy? I'd like to ask different stakes. – That's a great question actually. We did not touch on this,
so this is really important. In a private network, when
you deploy private networks, it's typically one computer, one vote. So when you, if you remember back to those images with the members, every member would submit a vote.

And in a private system
you can trust that, right? That's okay because you
can deploy ten nodes inside an IBM regional office and say "Oh, these ten nodes
distribute this application, "we get our DDOS resilience, right?" What you can't do is in a public network do one node, one vote, okay? If you do one node one vote, you're vulnerable to a class
of attack called Sybil attack.

A Sybil attack is when a bad actor can take 10,000 nodes, now
these are probably DPSs, or digitalocean instances where you take these 10,000 nodes, throw
them onto the network and say "I have 10,000 votes!" and you disrupt consensus, right? You'd ruin the whole network. So what you need is a
scarce economic resource. Mathematically what we do
is we do one coin one vote. What you need to do then,
is you need to protect, because the definition of asynchronous Byzantine fault tolerance is resistance to a 33% attack, where you have 33%, it would be 33% plus one, so a third plus one of all
the coins in circulation consolidated by a bad actor. That would disrupt consensus, so how do you prevent that from happening? Governance body. You have have this governance body, that are the trustees for
a multi-signature wallet, that decide with a signature on when the coin gets
released into the supply. Now there's a schedule
where at the beginning, the genesis of the network as
you call it, where those coins you cannot have a third
plus one floated on day one.

It would be fairly
trivial with a lower value for a bad actor like, let's say the evil North
Korean hermit kingdom, to consolidate all the coins and disrupt Hashgraph consensus. – [Man In Black] So the council, almost like a central
bank, releases coins? – Correct. Now, they don't own the coins. But, they act as trustees and they release it for the
public good of the network. Now, they have an economic incentive because we don't trust
the council either, right? But, the council has an economic incentive to protect the supply of the coins to ensure that the network continues. So what the council does
is they vote over time, now there is a set schedule
initially, but the idea… I'll be transparent with all of you, the first five years there
will not be anything close to a third of the coins in circulation. There's a very tiny float. The idea there is that it
becomes economically prohibitive, over time, for a bad actor to
consolidate all of the coins.

So that later, more
supply can be released. – [Man In Black] You provide the scarcity as opposed to the difficulty
of finding prime numbers. – That's exactly right,
that's exactly right. So, they are the mechanism through which scarcity is preserved in
the early days and thus, asynchronous Byzantine fault
tolerance is preserved. Where they're staking
their nodes in the network stake those transactions. Yes, please. – [Man Off Camera] Are these
39 entities anonymous or? – No, no, no, no. It's a good question. So, we wanted to announce the
names on stage in New York, we decided not to. Trying to get a bunch
of companies together to agree on a press release
and whose name goes first, is quite difficult. And they all have rather
restrictive PR departments. We'd love them to death, but then you have their publicity… Please don't hate me for saying that.

But, what we've decided to do is we are gonna make a separate
announcement this Fall. We'll announce some of it at, we haven't even talked
about this publicly, but I'm happy to share
with you that this Fall we have about 3,000 developers
joining us for DEF CON. We have not announced
where DEF CON will be. We have a big developer conference where a lot of our
ecosystem will be there. We will be announcing the location shortly and some of our governing
members will also come. Their CEOs, and CTOs, and
heads of emerging tech will be there to announce
what they've done. Many of them are actually
building private POCs where they're using the network
to build stuff internally and then they hope to release
distribute applications. Every one on the planet will know all the names when we launch. So, you know, when we're at scale all the names will be fully released. Yeah, please, behind you.

– [Man Off Camera] So, what's the governance process for those 39 members? How do they get elected,
how do they rotate, how does that work? – That's a great question. So, you have to prevent
against a bunch of things. One of them is stagnation, how you do you prevent lame duck members that aren't doing a whole bunch? So, they're actually term-limited. They're limited to two
consecutive three year terms is first and foremost. So, right after six years, you're out. If you've served those full six years, you must leave, it's a requirement. And then someone else will come and if it was decided that you were good enough to come back, the members vote on that. So, there is a membership
committee, let's start with that, it's a great starting point. Now, you have to start somewhere. So, initially the vision for this, we should probably go way back. Let's go back to 1960, okay? There was a guy named Dee Hock,
has anyone heard that name? Guy named Dee Hock started
with the same set of problems when he tried to start Visa. How do you get a bunch of
competing organizations to come together to create an output that will create this international
payments organization, which is a really remarkable organization, but what is the governance process for putting that in place? Visa has more than 20,000 members today, which is incredible.

We started with a book that he
wrote called, One From Many. I highly recommend anyone
listening to buy this. 'Cause I think these
chaordic organizations, we're only gonna see more of them as distributed networks
become more popular. Because the element of centralization is a benevolent dictator,
the element of centralization is when the code bases control
by political core developers. You need to have proper
governance in place. So, we started with Dee Hock's books so there is precedent for a
governance body like this. Then what we did is, we
created a membership committee where we had certain
criteria being best in class. There's also rules, where if a
governing member breaks a law or is held in violation of
some international treaty, there's a process for the
members to come to consensus, literally amongst
themselves come to consensus much like the nodes of the
network, about removing a member. There's also a membership
committee for new members applying and how you replace them, and
how you keep the geodiversity, and how you keep the diversity
across industry sector. All of these by-laws and all of this will be published on the website and we're going one step further, we will retroactively publish the minutes from the meetings that the members have.

So, the entire world will have insight, also stored on a ledger, of what's happening inside
these governance meetings, which I also think is really killer. That in itself is a killer app, right? So, not like anyone would watch
it would probably be, like, a really bad C-SPAN, but it
would still be in public records to be available so people
have insight into it. Did that answer your question? Okay. – Could they on their first meeting say, "Okay, we're not gonna allow the minutes "to be public anymore" or? What kind of power do they have? – Yeah, so there's mechanisms in place. Many decisions actually require a complete unanimous decision.

Many of them require
just a simple majority, some of them require two-thirds majority, so there's different– – [Man In Black] Sort
of like a constitution? – Yes, there is a constitution. There's a set of by-laws every member– the process, in full transparency, the process the members
we're in right now, behind the scenes is, you could say, kind of brokering term sheets. Brokering the final membership documents where they are coming
to agreements just now on how they're all gonna
collaboratively work together. That's a really hard process, we have a slew of people
working on solving that problem. That's really non-technical,
but that's really important. If you get that wrong, the public network will
have bad governance, which doesn't make it better than what else is the market place. We think we have it right
because where we started, and Visa being a great example of this, we started with a really strong position. And as it turns out, others have done this and have done it really well, so when you take that and copy that over, I also think it would work well.

Because Hedera isn't much different, and I don't wanna attract
unwanted attention by Visa MasterCard here but, Hedera isn't much different than an international payments network in the way it would function at scale. – How do you, just to follow that up like, how do you make sure that
the ethics are pro-people and not just pro-companies? 'Cause if you look at the news it's like every single day you see now where large
companies, banks, auto companies, they go ahead and do what's right for them and then they save a bit
money to settle later on. So, how do you prevent that… How do you prevent some
sort of form of tyranny from taking place where these
companies are doing things that are not in the overall
interest of humanity? – So, what we've done is
we simultaneously started a separate organization called, the Distributive Ledger Foundation. And that organization is tasked with exactly what you're talking about, which is first and foremost, helping to bridge the
gap between little coders and actual coders because
there's a massive gap today.

I actually don't think
there's any legal precedent for a smart contract to be
held up in a court of law. So, can we still call it a contract? When is that legal precedent gonna come? I can't wait to see what
a precedent that will be. And then, you know, even just running a project
like Hedera in America, requires all sorts of
stepping on egg shells. But, I would say that there's
also the social implications of that we funded a free
and fair voting initiative, so that's the first social good cause that we're happy to throw our name behind. Which will end up being
this international effort to prevent voter fraud. I spent the last seven years
over in Budapest, Hungary and they just had a
really terrible election by the far right where, I argue that wasn't a
very fair election at all. And they've really
demonized Western, you know, liberal thinking institutions like Central European University. What we need is better insight into the voting processes over there and doing it on a ledger is perfect.

If we trust the ledger, we can see the providence of every vote. Every citizen every vote, we would run real and fair elections. So, a free and fair voting
initiative, that's gonna change, that's a great starting
place to change the world. Now we are light years
away from really, you know, and by light years I mean
probably a year or two more. But, it's frustrating
working with these groups and you're gonna need international
chaordic organizations like the United Nations or, you know, other consortia to come together
and help put this in place. But, I think you're gonna
start to see this… Start to see this sooner
rather than later. Yeah, Dmitri. – Hey Jordan, I'm curious,
you've done so many events now. How many have you done? How many people do you
think you've spoken to since you guys started doing these? – Man, I mean, when we met you? Probably, like, 500 people I talked to. Now, we're probably approaching, I mean collectively across
the whole company, I'd say– – [Dmitri] No, you, you personally.

– Me personally? – I think it'd be cool to have you– I have a follow up question about this. – How many people have I talked to? – You don't have to give me an exact– – Yeah, I don't know, maybe 10,000 max. – I imagine many. I'm curious, with the
implementation on Hedera, you have to secure the network, right? So, you use delegated
proof-of-stake, I'm curious? – [Jordan] Not delegated proof-of-state– – I mean, I'm sorry. So, I'm curious if people
express confusion about… the consensus mechanism for
Hedera, given the fact that, let's say Ethereum wants
to move the proof-of-stake? Do they…

What are some interesting
questions that people ask you, where they express a level of confusion about how a consensus process works for a POS system on block chain versus one that has a consensus
protocol, which is the Hashgraph, but then which uses POS
to secure the network? – Sure, sure. Let me, I'm gonna try to
answer your question by first saying, we will
start proof-of-stake, I do not envy the position
that Vitalik is in right now and I think you can see
a lot his frustration in some of his recent comments.

He's in a really hard spot
and I feel for the guy. He needs to rally and get
the community of miners to come to consensus on
upgrading the platform and I think you have a
lot of social problems associated with doing that
'cause I don't believe the miners actually wanted to move over to that. They're making so much money just mining in a proof-of-work system, they don't really wanna upgrade to a cask or something like that. Now with Ethereum, today has
tragedy of the commons problem, but I think that's their economic model. You're asking about consensus. People do ask questions about
how proof-of-stake works because they understand it
through economy-based systems like a Casper proposal. They are confused,
namely, at how you achieve asynchronous Byzantine
fault tolerance security with proof-of-stake. And then that question
they get more clarity when they see the governance group and then the skeptics, the
anarchists that hear this, are like, "Absolutely not.

"We don't wanna submit
to a governance group "of 39 of the biggest
companies on the planet." And I respect that, I understand that. But if the space is to
mature or to go forward, I would say proof-of-stake
gives you the ABFT security but we don't trust the network
to preserve the ABFT security 'cause there's gonna be
bad actors in the network. So we need to trust someone and
we better not trust someone, we better trust the collective someone and that collective can be this council. So, I'd say that's typically
where we get friction, in full transparency. It's with the governance council 'cause it's really different and people say it's
Ripple esque, it's not. They actually have control
of the code-base here and the platform and,
truthfully, they own the company. Like, we are one 39th– – Is there a conflict of
interest that they will govern in a way that will
work for the company, not for the user or the
voter or whatever…

– So, you could argue that but, you know– – It's proven, it's been proven. – I would argue that
'cause I'd say that greedy, greed is predictable. You know when it's coming,
you know that companies are– – But is there an interest in– – But, you do know that they're gonna act in their economic interest to preserve the security of the network. – How can you make sure
the economic interest is– – Because they make
money, they make money. They get one-39th of the money. – But they can be lobbied outside the… – But they have no interest to collude, they have to keep the
security of the network. – [Dmitri] But isn't there
also a point to be made about the fact that, I
think in Bitcoin network, because proof-of-work has economy in scale that manifest in centralization.

So, what is the centralization
to the Bitcoin network? Two or three miners, right? – Well, it's all, yes. And you can call it China coin because of all the
hashing power is in China, but if we nationalize that
then China controls Bitcoin. So, you have the same problem. I mean, all the, the majority
of the hashing power's there. – Also, to be clear, the type of centralization
he's talking about is before you reach a certain scale where the market cap is large
enough to sustain, right? So, this is basically
the incubation period. – Yeah, and that's what we're in. You have to get the network alive, so you need a period of time
where the dream would be to, and we just found out
this is not even legal, if you could just drop this across, air drop it across the
entire world, right? That's the dream, every
person on the planet.

But, how do you get it to them? How do you get it to them? You need to have them
connected to the network first. So, the full vision is that
every person on the planet is gonna have this platform token. And you don't have to trust the members because they don't hold
the consensus votes. But, you need to get there somehow and there's not a good answer
on how to do it, right? We could try to literally air drop it, just drop phones to North Korea,
drop phones here, you know, there's actually someone's
got a really proposal on that, but practically it doesn't really work. So, this is the incubation of what becomes this global distributive network where every person on the
planet has access to this. Yes? – One thing that I found
that was concerning to me, especially during tax season, is the tax on transaction
crypto-currencies. And now what's being proposed,
or if it hasn't passed, I'm pretty sure it's been passed already, but you won't even have to convert your crypto-currency into Fiat.

It will be taxed on these particular– – [Jordan] Already passed, be careful. It's already passed, if you
just sell ETH or an OCoin, – [Man In Hat] I thought
so, it has passed. – With the new tax update,
they snuck that one in. So, I can suggest moving to Puerto Rico. It's a really beautiful place, but if you don't wanna dodge paying taxes and you wanna stay here, like I think New York's
a great place to be, yeah, it's painful. It's not conducive for day
trading crypto anymore. – So, I mean, do you have… Are you making any adjustments to that law that would help users to be
aware of their tax liability? – So, what we are doing with the Distributive Ledger Foundation, we hired this guy Don Thibeau, Don Thibeau built standards
in the identity space, he built the open idea exchange, and this guy is a Washington,
you could call him, I don't wanna scare you with the term but, he's a Washington networker,
he knows the people in power.

What we've decided to
do with our foundation is not create a tech specific foundation. We didn't wanna create
the Ethereum foundation, the IOTA foundation, or the really, like, a Hashgraph specific foundation
'cause as it turns out, you can't get a meeting with
a senate finance committee with a foundation called
Company foundation, right? You can if you call it the
Distributed Ledger Foundation and you invite Ethereum, which we've done, and invite IOTA, and invite
all the other protocols to come and collaboratively
address the problem. Which is our starting
point in what we've done. So, we have started by
capitalizing this organization. How much money did we
put in the DLF already? – [Man In Black Shirt] Million.

– More than a million
I think at this stage. But we're continuing to
put money in this group, we just opened office in DC and we are inviting other protocols to match the money we're putting in here because we all, this high tide, this open-source legal community
that we all should join, this will help IOTA, will
help Ethereum, will help NEO, will help guys like you, will help anyone that wants to be actively investing in trading the space.

And frankly, it will help
create projects here. Right now it's scary when we're
actually starting Hashgraph, I'm ashamed to even admit,
that the question is: Can we even do this in America? Do we have to go to Singapore? An entrepreneur should never be tasked with trying to answer
that question, right? We should say, "Obviously we
should do it here in America. "America's the best place in
the world to start country." But, funny, you know, we just got back from a
road show in Korea and Japan and Singapore and things are
a lot more lax over there, you know? They embrace you with open arms. Oh, you wanna start a crypto company? Great, we'll give you a government grant, we'll give you this, it's incredible. I mean, the amount of
innovation over there is great. I think we can be like that
here in the United States, we just have to get our shit together.

– And the thing that worries
me is not even just trade, if you wanna conduct commerce, like, you wanna sell a good
using crypto currency, you can't even do that here. Because of the tax law. – Yeah, if it means anything,
I feel your pain man. I really do, it's brutal. But, there's gotta be… You have to abide by the laws here. But this going forward, I
don't see it changing tomorrow, but I think that we can be
one small part of that change.

I'd love for Vitalik
and his crew to join us and I'd love the IOTA guy,
we'd love to be working with the people that the
market sees as our competitors. This is a problem for all of us. And it's not just an
America specific problem, we're doing this in
London and in Amsterdam. We're taking this to the regulators, the financial conduct authority, for a lot of the commonwealth, you know, UK, Australia, Singapore.

A lot of these countries are
based on I think it's FCA, if I know the acronym right. A lot of their guidance
so, we're working on it. Yeah? – One of the problems I've
beaten in Vitalik's head, quite a few times on there, and something you haven't
addressed yourself on there is digital identity. – Sure. – Because it seems like you are
a victim of the same problem where everybody is
collapsed digital identity to one public private key… Right? Where authorization, access
control, identity, location is in one key, I steal your
key, you lose your 401K.

I'm sorry, that's still voodoo and scifi. Have you started addressing that? Because that's not on
any one of your slides and you kind of breezed
over the entire topic. – Yeah, so we don't jump
into a ton of identity here. But, I will tell you that Patrick Harding, our new SPB product serves
as the CTO of ping identity, a big player in the single
sign on identity space for the last 10 years. So, identity's a major concern for us. We actually expect to
have product features and product lines that help organization's application
builders incorporate this. Practically, how some
of those things work… If you've been here
the whole presentation, when I talk about the revocation service, I think there's a lot of
really important things about even you being able to
revoke your own credential that may be publicly exposed or to be able to revoke
who has access to it.

So you can say that
only this set of people have access to it and not every body else. Really, that conducts the foundation of where a self sovereign
identity feature begins. We also are very close with
the Sovereign Foundation and we were just out in Denver
with the folks over there, with the Sovereign Foundation. – But still what people
are not addressing on there privacy is still a protected right. Which basically means you
cannot use one digital identity that can be traced across
all asset posses on there, use Wall street for an example on there. You should see that transaction occurred, but you shouldn't see those Goldman Sachs versus JP Morgan because that– – Oh, so you mean encrypting who the transaction's coming from? – I want to make sure it's a privacy friendly
identity system on there. So that this way, you have a new identity for
every single transaction where you can only disclose– 'cause the problem is,
is when you get into the public ledgers on there, regulatory snooping is gonna occur and you can't have congress or
whomever to come in to say…

I need to know your transaction, you should have it for
this two week time period not your entire 10 year
history that's on here. – You're exactly right. So here's what we're doing on that. I misunderstood your question. What we're doing on that is we don't take a position here or there, we don't give the
government your information and we give you the complete
right to be anonymous. – [Man In Brown Jacket] Of
course, it's just a number.

– Yeah, exactly, it's just a number. Literally what you're doing
is creating an account. You're right, the account has
a public private key pair, but it's your public private key pair; no one knows who you are. But, here's what we're
expecting to happen, right? I expect the market to
move to a set of policies where you have policy
makers that are gonna say, "Okay," I didn't catch your name. – [Guy In Brown Jacket] Eric Anderson. – Eric, Eric. So, I expect the network to say, let's say the DMV becomes
the certificate authority and the United States
sovereign government says, "The DMV is now the certificate authority "and we further say that Eric
Anderson can never purchase "a ticket on American Airlines,
or anybody for that matter, "can ever purchase on American Airlines, "unless they buy it from a
wallet that's undergone KYC, AML. – [Eric] Sure, that solves KYC issues, but it does not solve– – But, let me finish.

When you issue your wallet, we do not require you to undergo KYC AML. We don't need to know who you are, to the end of time no
one can know who you are. It is the case, Eric, that you may only be able
to transact peer-to-peer across the network. You may only be able to go to other peers because American Airlines
may be under regulation that requires them not to take your money because they can only take
money from KYC AML wallets. But, we don't KYC AML you. That's at the application layer, the CA, the certificate authority would probably issued you that wallet. So, we don't as a group, we want you to be as
anonymous as you wanna be. No one will ever know
your account address, they won't know whether you're
Goldman Sachs or my mom.

You're completely anonymous. So, in terms of that,
you're hidden, you're great, we give you that permission. It just so happens we also recognize that CAs are definitely
coming to the market place. I think you're gonna see this happen. There's no chance you're buying American Airlines flight with Bitcoin. That's never gonna happen, right? Unless, you KYC AML that wallet. And when people wanna
start using their money for mainstream tra– we have a guy here from
Overstock, who's from Overstock? Yeah, Overstock. Oh, you guys take Bitcoin, you guys take cryptocurrency. Today it's anonymous,
but you're not selling, correct me if I'm wrong, you're not selling stuff to make, like, nuclear arms, you're
not selling, you know, you're not selling any
controlled substances or anything of that matter, so.

– [Overstock Man] Not even cigarettes. – Not even cigarettes. (laughter) Yeah, seriously, yeah. So, you know, if you pay
Overstock in Bitcoin, you're still anonymous, right? Well, you probably typed
in some of your information in the shopping cart, but. – [Overstock Man] You've got an account and shipping address and all that. – But you could create
a new Bitcoin address and expose only that address and send money from that address. You can still stay relatively anonymous if you made the effort.

– [Overstock Man] But
I'll also tell you Jordan, I'm working mostly in
capital markets with T-0 and KYC AML is a huge deal there. – Yeah, yeah, yeah. And in regulated markets, you're gonna be forced do to KYC AML, we have the tools set to do it. Again, we don't take a position. Just 'cause we have the tool set, we still let you be completely anonymous. No one will ever know who
you are, if you want that. You just may not be able to
do a whole lot on the network in some future off-land 10 years from now, where everything will be regulated.

– [Eric] Yeah, I mean, and
you give a good use case where this comes in,
let's call it near money, so this way you're not
worried about somebody taking my piggy bank and
stealing it on there. Because the main problem
people had on the ledgers was they merged together the ledger
and the piggy bank together then you manipulate the ledger, then you're taking over
control of the piggy bank. It should be a ledger transaction on this. So, let me use the used
case of there of near money, let's call it food stamps, where you're gonna go into
Stop and Jump, whatever, you're gonna make half of a purchase on a government regulated weight
product on there for milk. But you're gonna make the
other half of the purchase on some other assets that
are not government regulated, where the government is gonna need to be able to snoop in your transaction and see what you purchased.

But then the other part
of the transaction… Not gonna need to be able to see. So, solving– – Don't they need to see
the entire transaction if it's a food stamp? – But, it's gonna be a
split transaction on there. Where part of the identity
that's gonna be public and visible to all. You should see that I
used the government money. Completely, everybody should see that.

But, you shouldn't see
that I bought Cheerios or some other brand of it
that is not government. Solving that as more of an identity level, where you're using more random identities that people can publicly use. – So, what you're talking about though, what you're talking about literally lives at the application layer. If there's an application that
sits on top of these services that is a food stamp– – [Eric] But, if you don't
build it from the ground up– – But we have been. So, we build that from the ground up. You are completely anonymous
at the account level.

In our system, you're anonymous. If Whole Foods, or let's
take the food stamp agency, I don't know the name of the WIC, if you take this group
that issues food stamps and at the application layer
they require you to submit what you bought with it,
we can't control that 'cause you opted in to
use their application. It's the same thing like Facebook
using the internet, right? Like, Facebook requires you by using their service to
giving your information. Give them fake information, but you have to give them
some set of information to use their service,
that's their business. But, you're opting into that. That's application layer.

At this core layer, your wallet, your account address,
completely anonymous. – [Eric] I get it, you're making
it somebody else's problem. – Right. Until you talk to
somebody that required you to disclose who you are. The second you do that,
you're no longer anonymous. – But, when you integrate the right thing at the plumbing level, – Yeah. – Then not make it the
applications problem to deal with 'cause that's, everybody's
doing the same thing. – Let's continue this 'cause I'll tell you the plumbing
there, in the white paper, it's completely anonymous. You're not gonna know
who anyone is over there. It's impossible to actually know unless they tell you who they are. – But once you have the
public key, it's over.

They know, from the
dawn of time going back they can see all the transactions– – Well, oh, yeah, they
would see the flow of money. But that's a cryptocurrency application. You're talking about an application– – Even in near money, even in near money. Even a game currency as
well, integrated into a MMO. You're still gonna see every
transaction a person has done. – Yes, they just won't know who you are.

I mean, the IRS– – [Woman] They can figure it out. – They can figure it out, trust me. – [Woman] It's not just the
governmental regulations, it's state auditing companies, which they're doing already on Bitcoin. – Exactly, so much so that
if you try to claim tax or try to look at a
Bitcoin wallet address, they'll tell you if it ever touched a money laundering wallet. – [Woman] No, it's not just that. A KYC governmental regulations thing. It's data mining by private
companies that are trying to figure out patterns
of your transactions. And they can figure out, based on the pattern, who you are. – So, your literal
questions is if we make, here in the plumbing, if
we make your transactions anonymous, we make you anonymous. If someone wants to come in
and download the complete, anonymous record of every
cryptocurrency exchanging hands, would you not anonymize that information.

That is on the network, you would be able to see that
information, that's there. – [Woman] If you have an
immutable public blockchain, or Hashgraph, or whatever
you wanna call it. – Now what you can do, is
you can download add the SDK and you can be a Swirlds customer and you can build that
into your application and a private permission
network where you know the nodes and can help people to opt into that. We do have companies that are
very concerned about anonymity or possessing HIPPA compliant
data or things like that. If you wanted to do that,
we also have that service. On our public network,
this is the feature set and the plumbing is what it is today. I mean, it will change variably over time.

– [Woman] Right. But when you are claiming that
you are completely anonymous, that's not true. That's just not true. – So, we are– – [Woman] Well, even if
it's true at this moment, it may not be true in the future because you're talking about an immutable public record ledger… – Correct. We, admittedly, we did
not build the protocol with you to be anonymous in mind. That was not the main intention. Bitcoin was built for you to
be completely anonymous, right? – There's been some
BIPs that have come out that are gonna say, let's say… Back in the original public private key, we're not gonna get away from
the next 50 years, right? – Yeah. – But, when you use the
elliptic curve multiplications, you can keep the multiplier round, you have a brand new key
for every single transaction that could be proved back
to the original source.

– Of course, yeah. – When you put something
that, at the plumbing level, is still provable back, if it would have been
integrated at that level, I'd be very happy. – Oh, okay, gotcha. – Do you understand? – I understand your point,
I understand your point. – If you do that at the plumbing, it's not only the app's problem
to deal with the problem. – Then, I don't mean to mislead
by saying it's anonymous. We do not do that, we're not giving you a changing public key that
you're exposing over time, no. – [Eric] These are common problems that we've been working
on across the industry. I just never seen anybody do it. Your business model is
exactly the same as everybody. "Oh, I have no cryptocurrency
on there, here's how "I incentivize you for
being a market participant." But it if had integrated
that at the root level, solves a lot of the problems and you can't leak your identity across.

You can see that Eric Anderson, you can't see that I went
in the adult book store and bought something, right? You can't see that that one
key is disclosed everywhere. That is the root problem that most people are still not addressing. If it was put in that
plumbing level, oh my God– – [Woman] They're not
incentivized to do that though. – [Eric] Of course they're not. – Yes, Billy. – [Billy] Hey, so Jordan,
speaking about the Hashgraph SDK. So, I know now what's out
there is the Swirlds SDK that's publicly available,
but can you speak to me and maybe some of the time
lines as far as, like, when the Hedera Hashgraph's
SDK being released and the public can get their hands on it? – Yeah, so the SDK that
we have on our website now the consensus algorithm is currently for the permission network and the SDK. If you'd like to learn more
about the Hedera network, we're in a private test that
now we are letting companies in in a queue order as they came to us. There's been a huge overwhelming interest from solidity developers to use
the solidity script machine, which is gonna be great,
but we have to control that.

We will end up releasing, fully, the fully documented version
of the entire code base in the Spring. We're fast approaching that. What we wanted to do was
release it simultaneously, we're still doing it this way, where we have a full curriculum
course that you go through where you get educated on
how to use these services and how you can build your first app. Actually, I think we have a demo app that you actually build
as you walk through. And then there'll eventually
be an account creation process. But, the idea is this Spring and it'll be pretty developer friendly. – [Billy] So, I know you
might've mentioned something about the end of April being, like, a release like API like developers? – So, the APIs will be complete from what we are iterating
on now by the end of April, we will be releasing publicly after that.

Our team is in the process
of documenting them now and writing curriculum for it now. We actually have a really
cool curriculum platform broken down into modules
that you would take this and you'd go through the course. And then at the end, you get a certificate that says you're certified. Which is kinda cool. Yes? – [Man In Red Jacket] So,
in terms of open source… the incentive of forking the
main chain as the time goes by would become less and less for all those open
source projects, I guess. But the incentive of 39 companies, without even them colluding, is actually to not accepting innovation after they get to a stable point and I guess we have seen these
on every major initiative.

So how do you put
innovation that can compete with open source project in this? – Yeah, so I would say, this is actually one of my complaints with the big credit card companies, is how slow that they move
and adopt new standards and do things. We prevent stagnation
by kicking members out after a forced number of
years, so they must go and the membership
committee must replace them. That's not us, that's in the by-laws, in the constitution of
how the council runs.

So, that company will be replaced
and they will continue to, ideally, put new fresh blood on there that will then get the
opportunity to earn money by issuing the governance of the council. So, that's one of the things
as the network gets more usage, the members make more money, obviously. So, the networks, the business
is to sell the services. As the services are paid for, the members earn revenue on that and the incentive is you want more high throughput transactions, you want more business coming to it. So I'd argue that they have the incentive to continue to innovate and
draw that to the Hedera network. – [Man in Red Jacket] If
they all start the same time, they'll be kicked out at the same time. – No, it's actually staggered. That's a good question. So, they're staggered. There's, it's actually
written in the constitution, but it's practically the
founding members are kicked out then there's a slower wave
of how they're kicked out. – I was gonna say, I'm sorry… You know if we're talking
about tax liability, we're talking about
identification, you know.

We've forgotten how this
whole technology came about. It's against tyranny and, you know, what this country started
as and what it is now is two different things. – [Jordan] I would
agree with that, Walter. – That's where the problem lies. – We completely recognize
that this whole space came from a economic disaster
where trust was abused. I also think it continues
to be abused today where you have very little
insight, us as American citizens, have very little insight in how much money our government continues to print.

– [Walter] But it's not our government, it's the bank and we're
slaves, we're employees, to the government, which is turn an employee of the bank. – [Jordan] Yeah, well it's– – And this is supposed
to bring down the bank. – [Jordan] Well, the central– – Whoa. – The central bankers of the world that continue to bring money, I'd say that if we had more insight into, not just how that money was
printed or when it was printed, but how it was used, you'd have better insight
on how governments operate. And I'm not saying that that
will ever happen on Hedera, but I'm saying that that
will happen on technology that's capable of powering
an entire sovereign economy.

And they would need to be
able to track the currency. I'm gonna make a bold claim, and yes, we've had preliminary
conversations with central bankers. Just where they've brought
us in to educate them on the space and brought Dr. Baird in and some of our developers,
but we are, I think, we're five years away from
having a central bank, a sovereign nation, actually issue cryptocurrency
as a sovereign currency. – [Walter] And it's all over. – Well, I think what you're gonna see is insight into exactly
how much money is created, exactly what the money
supplies of these are. And I'll tell you, I think they're probably gonna
be in the more agile nations where population size is
closer to five million or less. And you can figure out where
those are in the world. But, there's a lot of
POCs in the market place from these countries where
they're working on this. And they're doing it collaboratively. So, it's gonna be interesting. Yeah. – [Man In Black] Have
you released the names of any of the participants…? – I think one of them leaked
out, but I'm not at liberty, I'm legally not allowed to
mention any of their names and I'd get in a lot of trouble.

– [Man In Black] Then
there's NDAs with these? – We, no, we just… The state of where we're at right now, we've agreed that when
we make announcements we do it collectively and
that we do it with them. They're aware of when
we're gonna use their name. So, they will, obviously, have
the name used at full launch, they've all opted into that. So when the network is out, their names, their appointees, you can
think them like a board, the board members will be,
from each organization, will be public on the website and the logos of the companies
will be there as well. – [Man In Black] Are they only
companies, any universities? – So we have another class of membership, where we have many universities involved.

We call them our advisory members. So, our advisory members, we have some really cool universities– – (mumbles) – Did we announce any
university partnerships? – I don't know why. Somewhere I thought I
found one of the videos. – You can kind of figure
it out, because it's the ones that keep inviting
us to come do things. So there's some really
cool academics that have invited us to participate,
and then we've invited them to use nodes to have
transparency into the network.

And then we have associate
members, which are, they didn't quite meet
the tier of best in their industry, but they were
really fast in terms of what they're building, and what they're doing with the technology, that
we let them get early access to the test net, we're letting
them put nodes on the network and some of them, you
probably saw our launch, and that we had machines in there.

They had one of their
machines that was building Satori, their pub-sub
platform, on top of there. Which is really, really freaking cool. Yes, please. – You mentioned that Hedera is for profit. – Yes.
– Can you talk a little bit about how they're funded, and how do they profit? – Yes, so how it's funded,
it's a non-equity fundraise. The 39 on the organization,
one 39 equally across the organization, was a non-equity
fundraise through a SAFT where there was a crypto financing event, where there was (mumbles)
presold to the marketplace to get the initial capital. That money was used to
hire teams, developers, and teams of marketers, and
pay us to keep the lights on, keep the organization running. That money is kept in trust,
there's a certain amount that's kept in trust, so the
business continues to operate.

The business is to sell these public APIs. Every time that someone
makes an API call, there's a small markup on the
API call, so when you want to send money across
the network, you pay a transaction fee. The fact majority, 90%
of that transaction, gets distributed to the person who executed the transaction. The single mom in Australia,
or Kyle, or you, or me, right? The person who is contributing
the bandwidth CPU cycles and storage on the network. Now if you're storing the
file, and someone's paying you per byte per second, you're
storing that file on their behalf and you're getting paid to do that.

You're getting paid per byte per second. So there's this economic
incentive, much like miners are coming on to the Ethereum network to give transaction confirmations. There's this incentive to
provide these services. Everybody including the
members provides these services by putting their
computers on the networks. The members have a 10%, I have to confirm the actual numbers, but
there's a very tiny markup on top of that that gets
distributed to the members, and gets paid out to them. So that is what they have
as a benefit of the members. Again, that position gets
rotated, and they are selling, they're in the business of selling APIs, much like Twilio sells an API
call, or any sort of business that sell access to an API,
the members are in the business of selling APIs.

In the future, they may
add additional services that also enhance and
do other further things and adjust the plumbing to
provide further enhanced anonymity, but that's
the economic model thing. – [Woman] But Hedera
itself is a private company and the salaries of the
people who are either equity holders or employees of Hedera, it's not public, right? – [Blond Man] One 39th, he says. – So all of the equity,
the (mumbles) is completely transparent, it's one 39th.

The members get one 39th,
Swirlds is one 39th. Swirlds is a private
company, so the relationship between the two, Hedera
is a completely separate chaordic member funded organization. Swirlds is a private business, right? – [Woman] So Swirlds owns the patent? – Swirlds owns the patent, correct. And Swirlds gives exclusive
right to the patent to Hedera. There will never be another– – [Woman] The one 39
companies are the only ones who profit? – The 39 Swirlds also profits,
being one of the 39 as well. And I would say, they're
not (mumbles) the majority of the profit, 90% of
the profit is distributed to the average person
lending the computing power to the network, so the transaction fee, the line share, the
majority gets distributed to everybody's computers on the network. The members get a small markup on it. So the economic model is
that all of us in the future, will at home… I'm just going to give you my opinion on where I think the world
has gone and came from.

We went from data centers,
where you have to invest in this infrastructure,
stand up this data center, which is quite burdensome. We've moved to public
private cloud, where you have this public cloud where
people store information. We're still in that
transition, by the way. AWS's massive market share, we believe as a company philosophy that
we're moving to this world where this new internet
will be peer-to-peer, instead of… Yeah, like a mesh. Instead of you calling some
AWS server and trusting AWS or Facebook with
all of your information, you're storing it in this
distributed, encrypted way where you can encrypt that
file, store it on some random stranger's computer,
and then call that file back up at your leisure, at
the application level. So we believe in this
peer-to-peer internet where everybody in the world is connected. When we're playing games,
we're playing peer-to-peer, and not how it is today where
I ping central gaming server, ping Kyle, and so I'm
pinging directly to Kyle.

So he can be in China,
I can be in New York, and we're playing complete
fairness, Kyle knows he shot me before I shot
Kyle, he wins said round. So that's the vision,
to do that we need every computer in the world
to come on to a network. You need a Raspberry Pi, you
need all of this cool stuff.

Once that comes onto a
network, you're gonna get that cool functionality. Yes. – So how would the
compensation structure work for the average person in terms of, is it dependent on the bandwidth,
the amount of resources that you're reading, so let's say you– – Time online, right? So you have to be online so
you can get paid for a day? You get paid like you get
paid to work for a day. So if you're online for 90% of the day, you get paid, you get paid for that day. But you get paid more for
the bandwidth that you contribute to the network,
so if you're mining on let's say, it's not possible
today, but in the future it very well may be, where
you're mining on your cell phone and you're on the LTE network,
probably not gonna get as much as if you had a
gigabit plug in, right? So, bandwidth, CPU cycles, and storage.

You have a ton of stuff
stored, and a ton of people on network are storing on
your local copy the database, you're going to get paid a lot, right? You're gonna get paid per
byte per second for that. So you get paid to work
on that, and archive, it's just that we've
connected you to this massive global network, much like a VISA. – [Blond Man] (mumbles)
said you could (mumbles) that phone, and you could pay for– – Well, yes, so we do
all of our testing today on Raspberry Pis, which are very low– Yes, we are moving to
more powerful machines to create a much faster
starting point for network. The vision long term is that
anyone with a mobile device can be gossiping about gossip, or virtual boarding on
network and making money.

Now that may be only
a few dollars per day, it may be more, but that's
gonna change a lot of people's lives where that's the standard
of living in some places in the world. – [Man In Black Suit] Do you
see the value of the currency as being very stable relative
in respects to say the dollar? – So I would say that I'm
not an economist, and I do not pretend to be, so that
would be a tough question for me to answer. I would anticipate there
to be a lot less volatility with our platform because
of the governments and the controls. I would say the way we're
running it is like running a publicly traded business
where we do things a different way, and we move slower,
but it's more thought out, more methodical.

I can't answer the
volatility question, really. We're not in the marketplace today. We've not distributed the token. We will, but until that happens– – [Man In Black Suit] It seems
to have held up the usage of Bitcoin in commerce
because your cup of coffee could end up being worth
a thousand dollars– – Well you'd be waiting four
hours to buy that cup of coffee so I'd argue that that's
the main problem with this. Dmitri. – I was gonna say, to
answer the gentleman's question, perhaps also there
is something to be said about the…

The hoarding impulse
that's driven up the price of Bitcoin, let's you guys
have a, your market capture just blows up, that would
change your release schedule as well, right, for tokens,
and how you would manage all of that, and would you be able to scale the network faster. I was kinda riffing off what
you were saying, but I'm not sure if I was… – Yeah, the members would have the ability to increase the supply. In terms of hording, because
I think what you bring up is a really important point,
you need to keep the coin on the network participating consensus. So this is not delegated proof-of-stake. That's the wrong term for it.

There's a lot of problems
with the (mumbles). So what we do, is we do a
proxy state, where you can stake your coins… Let's say that Dmitri has got
a really big super powerful computer at home, but all
you have is your cell phone. And you want to give Dmitri
the proxy rights to your coins for the day. "Hey Dmitri, hold onto my coins," and be gossiping about gossip and be participating in that
where Dmitri's gonna earn some money, and he's going to
know exactly how much of that was attributed to how much
you proxy stake with him, and he controls the votes
associated with those coins.

You don't even have to trust
Dmitri with those coins. So that's the default
setting to keep the coins gossiping about gossip,
keeping them on the network. But it's also going to
disrupt the banking model very much, because effectively
what Dmitri just became is a bank, is a safe
place for you to deposit and make money, because he's
got high computing power. Now, long term, we're lowering,
lowering the computing power required. We're doing testing
privately now on 1080 Tis, which are the same 600 dollar
chips, or graphics cards that the Ethereum network is
using, so as it gets lower, you get really fast speeds when you do… By the way, the only thing
we're using a GPU for is digital signature
verification, that's it. We're just signing digital
signatures on the GPU. So when we do that fast,
we're doing the validation– So on AWS, we're using the
B100, which is admittedly a very expensive card, very prohibitive.

I think that's about 8,000 dollars. – I was talking about the function. – Oh the function of the GPU? I can't speak to the– – The function you created to
create the digital signatures. – Oh, good question,
we're open sourcing that. So we will share that with
the world, what we're using. As it turns out, there's
no library for it, so we wrote it and we'll
share that with you. And we actually wrote it with
a very large manufacturer of GPUs, whose name I can't say. – [Man With Glasses] I have
one last question regarding. The gossip about gossip seems
to be a very interesting concept, I haven't seen
it working anywhere else. Maybe the most (mumbles)
thing is sending massive updates to many nodes at the same time, or trying to get an
update one to the other, but– – What would you call that, batching? – People call it different
names, like you guys call things some different names. I get it, but have you
seen gossip on gossip work anywhere else before? – Oh, so no, that's what the patent is on.

Leemon was the first to
invent gossip about gossip, and we learned that when
he filed the patent. We've not seen anyone in
the market deploy it before. We assume that's why we
got the rights to it. The breakthrough is
literally the two hashes. So if we were to look at
an event, in hashgraph, a block is an event, right? If we were to look at an event,
it would be a bit circle, we'd divide the circle,
you have a timestamp, so with this timestamp,
you'd have an arbitrary transaction payload right
under where you would have, it's arbitrary to the
business application. Cryptocurrency applications
are like 100 bucks. Under that you have two hashes,
two bytes of information, one is the digital
signature of the last person on the network who sent you
a digital signed transaction. So the last transaction from them. The other's the last
transaction your local copy of the database. With those two bytes of
information, what we're building is a data structure where
you have four nodes, and time starts here
and goes up over time, and what we're building is a graph, where, I don't know if you've seen
the image of the hashgraph, but you have this graph
where the lines connect.

Yeah, so the lines represent,
the lines go down too. That may not be very, I
always comment that we have to make those bolder. The lines reference the last
transaction you as a node, the last transaction you
had, and then the last one you received from someone else. With these two bytes of
information, we know everyone that's talked to everyone
across time, and then we know, if you have Alice, Bob,
Carol, and David, we know Alice knows what Bob, Carol,
and David know, because she can just see their
local copy of the hashgraph.

So we know when Bob rejoins
the network, Alice and Bob do a quick sync event, and
we know that Alice only has ten digital signatures, or
Bob only has ten digital signatures, Alice has
eighteen, and there needs to be a sync to update that. And there's an incentive,
by the way, to do that, where Alice gets paid to
pass that information off. – [Man Off Camera] One thing I've missed in your presentation is, it seems like you're mixing
together proof-of-stake with proof of resources, meaning
I have this much bandwidth, I have this much file storage. How are you aware that I have
five of the 8,000 dollar GPUs and I'm being incentive
for that participation? – Yeah, I don't have the
technical answer for that. I think there's a way to test
what card you're actually contributing to the network
though, and when you sign into the network– Yeah, I believe it can
be measured, I believe the mechanism for that's in place.

In fact, I know that, yeah,
in fact you would need that to be measured, because you
would be able to measure to even opt into the file
store, and be able to make money doing that, you would have
to disclose how many files you can receive. And I believe the requirement,
we also have starting in (mumbles), and it even
includes a terabyte drive that you start it with. So you'll be starting with that. And also, I'll bring this
up, Leemon, one of the ways we said we could do sharding
is, we can have a really fast shard, and a really slow
shard, and then you can have a really big storage shard,
a really small storage shard. And you could shard that with it. We talked earlier, it's a
really bad idea to shard a New York shard, or a Virginia shard.

You don't want to shard that
way, because there's lots of ways to corrupt that or take that down. And by the way, every shard is ABFT. When you start sharding,
the entire network preserves ABFT, it's at random
that a node in one shard would ping a node at another shard. Now I'm not expert on
our intershard protocol, and how we scale, but Leemon's
presentation in New York gave some insight into that,
and I'd be happy to share.

There's also more information
in our white paper on how that grows over time. But it preserves ABFT. – Yeah, I'd like to see
his presentation on it. – Yeah, if you go to
hashgraph.com, there's a link to the replay of that entire presentation. Other questions? This was a tough, this
is a good crowd tonight. Yeah? – So is there a way that, I'm
just thinking, just the way that it's organized, is
there a way that a virus, for example, could propagate
throughout the network? – [Jordan] What propagates, one more time? – A virus.

– Oh, a virus would
copy across the network? Well, I'm telling you right
now, we will have a scenario where people store nefarious
information in the file store. That every file store
that has ever existed has that problem. Leaseweb has that problem. I'll admit, we ran our
(mumbles) service through data centers. We had their stuff. We probably got more
DMCA take down requests than anybody, and we complied
with every single one of them. You have to, right? It's the law, so if there's
a take down request, there's a mechanism in the
file store called revocation, where you can do a transaction,
it actually costs money to do this transaction,
but it costs money, you have to pay the node that's storing it to also delete it.

So if you create a file,
you can also remove it, if there's some DMCA abuse
file, someone's storing the whole fifth season of the Sopranos, you're probably gonna
wanna take that down. And there's legal mechanisms
that we're going to have to comply with as a company. We are already anticipating
that, and it's much like a web posting company. So there is precedent for that problem. – [Blond Man] That's gonna
get a lot of people angry that across the world
stream a lot of video. – Well, it also depends on what
jurisdiction the node's in. If the node's in the Rock of
Gibraltar, what jurisdiction do you comply with, what can you do? You have to ask these questions.

There's no legal
precedent for any of this. And that's the biggest shock
for me is, you would have thought that the lawmakers
would have had this figured out. They're still figuring it
out, I think like most of us. – [Blond Man] What did they
just pass with the budget about accessing information? I thought they could do that now? – [Man With Glasses] It's
the case with Microsoft, giving access to American
data centers, but not access to foreign data centers, because– – [Blond Man] But (mumbles)
a mechanism to do that, go to Ireland and– – [Man With Glasses] No,
well we have to comply with the laws of the– – No but those sovereign
states do comply with some of the PRISM standards,
where they will opt in to mobile surveillance,
so you have those problems with those companies.

I don't have another comment for that. I'm surprised Zuckerberg
wasn't asked more about PRISM, or what he? I didn't see any of that. – [Man With Glasses] Because
it's a (mumble) thing, the wrong people who (mumbles)– – Oh right, the senators keep
it running, keep it funded, so they're not gonna ask (mumbles). I like how we're talking
about the PRISM leaks here. Yes, please. – Governments and code reviews
and these review processes slow down innovation if
you have tens of thousands, or millions of people building
on top of your effort. – Yeah, see I don't
think so, and here's why. The idea is to deliver a
platform, a set of tools. I see us as in the business
of making these tools, where the entire world
can leverage and build really cool stuff, like
whatever you want, whatever you can think up, this is the
platform where you're going to go and you're going to host it.

You might store some of the
assets to your app here, you might be using aspects
of the micropayments here, and then you're going
to use solidity scripts, in the future, we're
going to do these in java, which I think is really
cool, and then you can execute these in a
bunch of different ways, so I don't think that hinders innovation. I think what it encourages
is, well first, let's start with another point. Is someone gonna build
a DAP from a platform that's going to fork tomorrow? That's going to really
screw up your data, right? If the platform forks, what
happens to the cost of the gas price, or the transaction fee? I think what the space
needs is something stable with proper governance, and I
think this is the way forward.

I think that this is controversial,
and I get ripped apart for saying this, and please
feel free to do that same because I can take it, but
anarchy, being anarchists, they're a great catalyst for change. They created this incredible
new space, and I wouldn't even be working in it if they didn't do it in the first place, and I'm the first– – [Man With Beard] It's not
a comparison to the other platforms, it's more specified to– – So right, what we
recognize as a platform, as a company, is that there
are problems in this space that can be attributed
to a lack of governance, and there are platforms in
this space that are preventing mission critical organizations,
like many of the companies we're working with, from
deploying applications. I do not think you are ever
going to see a Red Cross application on Ethereum. I don't think that's ever going to happen. Please call me if it does.

I just can't see it happening. Too much of what they
do is mission critical. They need uptime, they need it
to run, so how do you create a globally peer-to-peer
distributed main network without proper governance? I think what we're doing is
encouraging more innovation that is skeptical to
jump into the space now, and to deploy applications
that are gonna change a lot of people's lives. And the governance may not
be the most popular way to do it, but at the end of
the day, the end consumer gets a better quality
life because they're using a better application that
actually has the ability to bank the unbanked, to not just say it. Because what have we
really done in 10 years? We haven't done a whole lot, right? This may actually give
us a shot to get there. That's all I'm saying. Not saying it's the answer,
right, but I'm saying it's going to get us there. – [Blond Man] It's called CLOUD Act. It just passed with the
budget, and it has yet to spells an acronym with (mumbles). – That's the one they
snuck into the end of it? – [Blond Man] They snuck it in.

That's what I'm talking about. – Politicians. I'm ending on that note. But I'll be around to
just hang out if you guys have one-on-one questions. Thank you so much..

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