The call went out and you Steemers answered! I presented a Gig to transcribe Dan Larimer's awesome May 4th 2017 interview on Blocktalk!
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Anchor: I’m curious what you think about IBM’s Hyperledger because it sounds like it’s got a lot of the same features that Bitshares has.
Dan: Actually most of these projects don’t have anywhere near the same features as Bitshares or Steem…..On the surface they all look the same, there all promising, very high throughput but there’s features like the accounts system, account recovery process, just the way that throughput is achieved is very different in Bitshares and Steem than anything else out there! There are some things that you can’t get around, limits that are hard, like the performance of a single core CPU. You have to be very efficient in how you do your core business logic or you’re going to max out that CPU and that’s going to be your limiting factor not the size of your network but the size of a single CPU and that’s growing at a very slow rate of a couple percent per year. So the future in blockchain is all in parallel execution of blockchains.
Anchor - So how long would you say it takes for the Bitshares network to have full consensus? Does it happen all within this one block? Is there a direct link between one block and the next or is there kind of like the uncle system that we see with the Ethereum where it's like there's almost multiple streams that are linked together?
Dan - Bitshares and Steem both produce blocks exactly every three seconds with perfect timing and you either produce a block or the block skipped and you'll have a block for that time slot. And because everyone has an exact time when they are going to produce, assuming everyone is online, if they produce a block, that's going to be the block with near 99.9 percent certainty. Which means you have 99.9 percent certainty after an average of one and a half seconds and then on from there. Now you have absolutely irreversible certainty once 2/3 of the active block producers sign off - which on Steem is about 40 seconds but that's only for the extremely paranoid because if you take any block and you observe, the probability of it not being confirmed is infinitesimal.
Anchor - I guess it's the value of the transaction. Like if it's an upload on Steem and it doesn't get confirmed in the next block or the network somehow forks, it doesn't get included. That's a real low value in terms of like network transactions but if I'm able to transact to somewhere like bittrex and I can send hundred thousand dollars, sell it on the order books as soon as it shows up and then undo that transaction that’s like where the rubber meets the road, the system needs to work. It's serious money at stake man.
Dan - The only people that have the ability to do that are well-known public - the elected block producers. So if something like that happened to support defrauding an exchange and if the exchange was accepting confirmations of less than 40 seconds, then you know exactly who is responsible and who to bring a lawsuit against. But with 40 seconds for absolute irreversibility, there's no reason not to wait that long and in fact I believe that the speed at which transactions are confirmed is actually a really big problem to the overall security of the blockchain space because you don't know that you've been hacked until your key is used to steal all your money and it's gone. There's no window of time during which you can see “hey there's a transaction out there” and then you can work with your multi-sig friends and family to cancel it before you lose your money. So the reality is that blockchains as a whole need to slow down transactions kind of like the current banking system. You know we like to say “oh we can transact instantly”, which is really great for some things like trading, but when you're transferring funds from your control to someone else's control and they’re large amounts, you definitely want a time delay in there because that's the only way to secure the funds because systems and computer don’t care if you’re using hardware wallets or thousand factor authentication. You know Bitfinex has multi-sig and they were hacked because all the keys were compromised and they were used at once. So the time delay is a critical aspect of security because it allows you to heal and to recover and that's something that's missing from almost everything except Steem at this point.
Anchor - I believe Nexus has it as well. I recall them saying like they have reversible transactions so it could go into the mempool but you could cancel it after the fact within like I don't know six to ten minutes or something but yeah that's a very interesting concept.
Dan - Reversibility of five minutes is almost worthless. If you go to the bathroom your money's stolen right because you weren't awake or aware to have a time to respond. I think you definitely need hours of thoughts, a day or two of reversibility to secure your large amounts of money.
Anchor - So is that available for every transaction on Steem?
Dan - Steem’s got two things that lock you, that protects you and it actually saved the network when a lot of keys and accounts are compromised. We have Steem Power which is locked for three months and we also have a savings account which is three days.
Anchor - I guess it’s the same concept too with editing of posts because I remember I could edit a post and after a day or two it is locked in.
Dan - I think they just changed it so you can edit it anytime because we have account recovery where if your keys are stolen and your owner key is updated, you can use any previous owner key along with your recovery partner to change it back. There’s only two people that can have your key, you and the hacker. And if they have to go and reveal themselves to your recovery partner, which is Steemit, and who have your phone and email to verify you by, they’ve verified who the hacker is. And since the hacker is not going to do this, you get your account back.
The account recovery is a critical combination with the time delay. So in fact you have three things; the checking account which is all the money you can spend in Steemit but it can be stolen instantly without anything like the cash in your wallet, the savings account which you can spend within three days and if it’s stolen, you’ve got three days to recover, and then you’ve got the long term commitment which is SP. You’ve got months to recover that if it is compromised.
Time is a critical element of security that is overlooked, as well as the ability to have people recover your account using past keys and past authorities on the account in combination with multi-sig versus just using the instantaneous owner of the account.
Forgetting your password is a different thing from having someone stealing your password. If you forget your password on Steem, even Steemit can’t help you because having one of the old passwords is proof that you were a previous owner and that’s how the blockchain prevents anyone other than the owner or the hacker from getting control of the account.
Anchor - Yeah I really like that approach. That's good. So when you were talking in there I heard you mistakenly say “we” and then say “they” for Steemit and it's fairly well known that you're no longer working directly with the project. So do you think you can give us what your take of what exactly what went down there? When I interviewed Ned last time he said you were on Steem full time and I was almost kind of surprised to hear that. What really went down and what’s your status on you working with and without Steem?
Dan - So yeah I started Steem with Ned and created Steemit Inc so that Steemit Inc.could go on. I knew early on that I wanted to do a smart contract platform and Steem was a stepping stone towards a longer vision. So I helped Ned bootstrap it and when the time was right, I left Steem and now Steem is in good hands. They’ll be able to continue and now I’m working to build the next smart contract platform which was recently announced called EOS. There’s going to be a major announcement on that coming up on Consensus this May.
Anchor - So where are you putting the announcement?
Dan - I announced on Steemit.com. I didn’t accept any payment for Steem.
Anchor: I do believe you do a lot of good work for the space. Steemit is an amazing platform and I was thoroughly impressed with it. Regardless of my opinions on the economics of it the actual technical chops were there. I sent a bit to Bitrex and before I was logged in it was there! It was amazing! Bravo! Bravo!
Dan: Steem is the first blockchain that has equal mix of men and women on there and it’s the first one that people use without even knowing they’re using a blockchain. It’s really an achievement. It’s the first one with an account recovery when you get hacked. So there’s a lot of firsts in Steem and it really brought home the point that every website can be powered by a blockchain. Every business should be powered by a blockchain and there’s no reason why User Experience needs to suffer because you’re on a blockchain or why users have to see things like hashes and addresses.
Anchor – I got people that have no knowledge of crypto to use it and they made a couple of dollars. They said what can I do with it now and I said you can get Bitcoin with it and it brought a lot of people into the space. Theres’ a very balance demographic too! I think we have to admit that Steem was a net benefit for the crypto space and it still is.
Dan - Well, it was a huge experiment in decentralized government and budgeting and in terms of allocation, what Steem does is that it allocates the money Bitcoin allocates to mining, to all the users via democratic voting, social media style allocation process and that is just a legitimate way of allocating a currency. In fact it might be more legit because more people can participate in the process than just those who are technically skilled enough to run mining hardware and so it builds this community, it builds content that has lasting value to the network in terms of long term search engine optimization and in traffic and all those things are adding long-term value versus the transient value of mining.
Anchor - I'm just curious like where do you think that the value is going to come into the system to pay for Heidi travels (@heiditravels) to go to all these different places in the world because if she is going to be this you know professional blogger that travels the world like that value has to come from somewhere.
Dan - Where is the value that comes in to pay for all the electricity? Billions of dollars that are being spent mining stuff right? The money comes in. You don't necessarily need money to come in as long as the people value it. And there's lots of things that can come in. Attention is coming in, influence is something that people desire so people bring money in for the influence they get within the social standing of the ecosystem. So there's lots of reasons why there's value there and why people perceive value. Where there's value money will come. It's no different than having three bloggers get together and say let's start a business, we’ll all allocate ourselves one third of the shares and we'll just start writing. Steem just opens it up and scales it up so you can have tens of thousands of bloggers all participating in the business and all allocating equity in the business according to an algorithm that they all agree to. And in that process you've got this massive production of content out of nowhere, a website that moves to the top nine thousand sites in the United States in less than a year. I think top nine thousand in the whole world in less than a year. All crowd-sourced content and that's the power of aligning incentives to a token and the people that are part of the community value it because it's like the points, it's the credit you get for having contributed something. It shows that you did something for other people and that's what money is.
Anchor: Money or value is a lot of things….It can be Bitcoin …It can be time…it can be reputation….
Dan - Yes it's really amazing what Steem has accomplished just based on technology alone and the community, it's all been grassroots. There's been no really big backers, no big money that's been behind Steem. It's an entirely grassroots project and it's done incredibly well in a very short period of time. And to really talk about the technology that's behind both Steem and Bitshares, Steem was conceived January of 2016 and it was implemented and launched within three months with a website and showing user interface in five months. So yeah this is a very capable blockchain conceived and launched doing stuff that other people haven't been able to do with smart contracts and years and lots of money. All of Steem was built with a seed round of $225,000.
Anchor - Not too bad. Now was that to contract your services or were you in it for just starting a new company? I'm curious how was your involvement really like measured in Steem? Were you part of the team and contributing time and reputation towards it or were you actually, was money involved?
Dan - Money came in from a third party to fund the company and it paid for the developers and I was a co-founder in the project.
Anchor - So does Ned still talk to you and ask for some advice from time to time? I mean it's your technology that you've created and obviously it's nice to be able to ask the creator like hey what do you think the best way of going about adding this new feature is, like is this possible, who should we get to do it, are you able to do it? Is that still kind of the relationship you guys have?
Dan – Not necessarily but he's got a great team there who's been working with me for years on Bitshares and Steem and that team's capable of doing everything they need to do. I've trained them well.
Anchor: I get the feeling that it’s a very cohesive group. You’ve got Bitshares and Steemit and what about Peerplay?
Dan - I'm not involved in any way with peer plays but yes it is based off the same technology as Bitshares and then EOS is using the design philosophy of… its using chain base in that base and and other things but it's taking things to a whole new level
yeah like yeah it sounds like I can run any contract I want on it because like with Steemit Steem dollars is baked into the underlying protocol it's not like something that someone is running it's an actual like feature that can't be removed
Dan - EOS is a smart contract platform designed for parallel execution of smart contracts and I can't really say too much about it at this time but that's the idea, to give the performance of Steem and Bitshares for single-threaded applications but then scale it up to horizontal scaling for as many cores and/or computers as you can throw at it.
Anchor - so a lot of different like quotes Steems or Peerplays and then they're all interoperable?
Dan - Yes the idea was that when we were building Steem there was no other smart contract platform there's actually capable of deploying the application on. You couldn't deploy Steem or Bitshares on something like Ethereum. The block times are too long, there's reordering, the gas costs are too high, there's just a lot of real practical technical limitations that prevent applications that are trying to give the User Experience. Bitshares replicates that centralized exchange performance and reaction time pretty closely compared to any other blockchain on the market and -- Steem gives you an experience like Reddit or Medium very fast thing. So if you want to replicate those experiences you need a very high throughput, low latency blockchain processing tens or hundreds of thousands of transactions per second. Facebook's like fifty two thousand likes per second so if you want to do Facebook on a blockchain you need to have some serious horsepower and the underlying technology.
Anchor: that's the people I use with a lot of people trying to explain like a you know transaction like a like on Facebook with like a transaction the difference is who is saying that it happened and telling every other user um if it's yeah this core entity or if it's a…. the user experience is actually the same I that's why I think Steem was so successful it's like nobody really knew what was going on in the background in this like oh yeah that's blockchain and they’re like whoa whoa whoa what okay cool whatever I don't care. I'm over it
Dan - But uh yeah I think if you wanted to put Bittrex on a blockchain they do two to ten thousand transactions per second on a slow day so yeah that's the type of throughput that you need for real-world businesses and Bittrex is a smaller exchange compared to some of the bigger ones which I'm sure probably do ten times that. So it's really a requirement for businesses that want to operate on a blockchain and blockchains provide a ton of value but you need hundreds of thousands of transactions per second, you need horizontal scalability, you need an easy programming environment for developers who want to build these applications and maintain consensus without having to worry about all the details about running your own network and ideally you'd have interoperability where many different people can run and communicate with the rest of the environment. So if you wanted to run something like an exchange and Steem on one blockchain, well neither one of those applications could run alone on something like Ethereum. If you want to build a general purpose platform where lots of businesses come, each of which need thousands of transactions per second you need a horizontally scalable system.
Anchor 2 - I'm just curious, how is your time split currently between current projects, upcoming projects? What does your average day look like?
Dan - My average day is 100%, 110% devoted to EOS.
Anchor – It’s really interesting but one of the big problems if I want to try to explain how Steemit works is the Steem, Steem Power and Steem Dollars and trying to explain that to people. Can you in layman's terms explain what these three things are?
Dan - Yeah the easiest analogy is a company. You've got the company shares and then you've got debt of the company right? The company owes you money and if the company defaults on the debt then now your debt gets converted to equity. So the idea is, as long as you believe the equity of the company is worth more than the debt of the company then the debt’s good. So it's uh it's a very… it's using economics as this as “hey here I owe you $1 worth of shares” and a dollars’ worth of shares is defined by a price feed coming from 20 independent sources each of which are monitoring markets and trying to make sure that's right and so you have this sort of guarantee of a conversion there. And the amount of outstanding Steem Dollars is like a couple percent of the entire market cap of Steem. Which means that Steem would have to fall to one twentieth of its current value which would be like from like sixty million to less than three million and you'd still have $1 worth of Steem. So because the market knows that, the market tends to trade it around a dollar and now it's been recently that it's actually been trading for more than a dollar and that's because there's a limited rate at which it’s created as people are posting content and the demand for people looking for something that's a hedge against downward trading crypto currencies is very high. So not particularly in light of Bitfinex’s trouble with the banks right? It’s Mt. Gox 2013 all over again. The banks are preventing the funds from transferring and whatever is going on there.
Anchor: Steem is very transparent….. and if you do enough research with Steem Dollars it actually does work.
Dan - The volume on Steem dollars is about a third of the entire supply of Steem dollars or more sometimes. Some days it's multiples of the entire supply that's trading. Steem dollars are very liquid for an asset with only about a million in circulation right now but I think it's a huge success. There's some opportunities I think to improve and to keep the price down but I view Steem dollars as insurance against falling below a dollar rather than a guarantee of a perfect peg. And depending on the perspective you take, it's an interesting crypto instrument.
So Steem power is nothing more than Steem that has been put into a staking contract and is earning interest and in order to remove from the staking contract it takes time. So Steem power is just Steem in a staking contract that's earning interest and while it's in the staking contract you get voting rights too.
Anchor - But is it actually providing any metric of security beyond just like the subjective voting on the future of the network?
Dan - The security provides you two fold, like I pointed out earlier. When you’re hacked, the hacker can't take all your money immediately so that's good that's a provide security there also provides security in the sense that the voters can't vote in a way that will harm the network and then exit immediately. You know they're stuck in the network for at least three months which is enough time to suffer any price damage that were caused by their voting. And if they're a big player it keeps the big players on it's because they've got a lot of money to lose by voting poorly.
Anchor - so if I have a lot of Steem Power is that actually a metric of control of something like a hard fork?
Dan - you indirectly control the hardfork through the producers - the block producers. You elect the producers and the producers decide on the hardfork.
Anchor 2 – One of the big problems I saw on Steem was the rise of the whales and then suddenly there was lots of people that had a lot of power and lots of people that had next to nothing and now you had these dolphins like in the middle…
Dan - There's an economic principle I think it's a creative principle that's is the 80/20 rule and it exists in all financial markets and even if you gave everyone the same starting wealth and you allowed free trade to occur in a very short period of time you get this 80/20 principle you know 80% of 20% of people have 80% of the wealth and it's a recursive within the 20%, 80/20 applies again. You see that in Bitcoin, you see that in hash power distribution, you see that everywhere in nature. It’s just a fact. So we have a voting system that’s stake weighted. It was causing some issues because you had thousands of people but most of the influence was in the hands of a few people and they just couldn't process it. Even though they had the best intentions as I believe most of them did, they might have different opinions about which way to go so they weren't necessarily all pooling in the same direction and they couldn't review all the content but with recent changes to Steem including the ability to delegate your Steem power to other people and the agreement or a truce among the whales to not vote with their full weight but to vote as peers with everyone else it's really increased the democratic nature of Steem.
Dan - I believe, I'm not sure because since I left Steemit, but we had talked about delegating a fixed amount of Steem power to all accounts that are “behaving” so we can always retract the delegation of our Steem power from an account that started misbehaving and in that sense we empower all the little guys to be like dolphins. I don't know if that's going on but I suspect that it is or it could be going on and the truce of the whales where they just don't vote with all their weight is really levelling the playing field.
Anchor: I do go and check Steem it’s definately more than just crypto, it’s a good resource!
Anchor - would it be correct at all to say that when you post something, you're able to post it into I believe it's Steem dollars or Steem or can you kind of divide it?
Dan - yes when you post something you can either get paid all in Steem power or combination of half Steem Power, half Steem dollars or you can decline payout altogether like I do.
Dan - Steem power is just locked up. It’s just Steem. Steem Power also does level the playing field a little bit. There's a misconception that the insiders were able to dump when Steem spiked to 400 million but the reality is no one was able to dump, at least not everything because everyone, 99 percent of the network was locked in, at the time, a two-year power down period which meant that they could tap it most one percent per week. So at those high prices everyone was getting out a teeny tiny little bit and then by the time it fell you know it really evened things out that it prevented a situation where the first person out the door won and so I think that there's a lot of other benefits in terms of stabilizing the emotional response to the market for a lot of people who would otherwise probably end up selling low and buying high
Anchor - well I do a lot of community management and really careful in terms of like doing bounties and stuff because truly easy to get people that are just there for a quick buck and like that's what may be my main criticism of Steemit is like you know it's really easy for people to get value. They create a new post and like they get 10 bucks. Like that's a decent amount of money if you're in you know a third world country but yeah long-term you want people who are very committed and believe in the value of the project because that’s where the value of the project comes from. It is the people that hold the token so yeah it's good to have these ebbs and flows right?
Dan - well I think that there's just all this euphoria right when it so came out and since then it's been it did attract a lot of people are just trying to get money out of it and there was a bit of a culture shock. Some people were there for the money other people there for the community the long slow price decline over from September to March was… it really filtered out a lot of those people. The people that remain are very passionate about the project, they care about what's going on and it's a GREAT community and since then it's been growing steadily right? It’s gone up significantly since I left and I don't know if I should be offended or not!
Anchor 2 : And there have been a lot of meetups….
Dan – Hey, all problems of Steem are mostly just social problems any group of people has particularly when you start throwing money in the mix. So they were really battling human nature and there's only so much technology can do. People do tend to be less “trollish”, more polite than you would find on other forums and that's because their reputation impacts their future earning power. And getting people to follow you and large stakeholders to follow you, avoiding flags even though sometimes flagging have been used but good behavior is the best way to avoid flags and to have sympathy when you are flagged. So those things add up to create what's hopefully an incentive structure that promotes growth and cooperation and good behavior rather than trolling.
Anchor – I’m fairly impressed with Reddit. Steemit is, I’m not really sure how much ahead but you guys have really good product…. Reddit should operate like Steemit….. Any social media platform has a lot more flaws than what Steemtit has. It’s definitely an improvement.
Anchor 2: One quick last one okay so it is Steem hosted on a central server? Is it really peer-to-peer?
Dan - it's a peer-to-peer network for all the blockchain aspects of it, all the transactions to post, the comments the voting is peer-to-peer with probably 50 plus nodes around the globe at least maybe hundreds of nodes around the globe then the steemit.com itself is centralized but there's also busy org and a half-dozen other websites that are all hosting the same content from the blockchain so as many interfaces - Steem it's just one of many so it's decentralized in almost every respect
I hope that you enjoyed the transcript and that it will help many! Steem on!
Until next time,
@kus-knee (The Old Dog)
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