In this thought-provoking episode of Lightspeed, hosts Mert and Garrett are joined by Balaji Srinivasan and Akshay BD for an in-depth discussion on crypto networks, sovereignty, and the practicality of decentralization. The conversation spans a wide range of topics, from the philosophical underpinnings of cryptocurrency to the practical aspects of building effective communities in the digital age.

The Multifaceted Nature of Cryptocurrency

Balaji Srinivasan begins by emphasizing that cryptocurrency is not a singular bet, but rather a multifaceted investment in various technological and ideological concepts. He breaks down the different aspects of crypto investments:

1. Bitcoin as digital gold: A bet on the return to hard money, evidenced by central banks buying gold and increasing shakiness around the dollar.

2. Ethereum as a parallel Wall Street: Decentralized finance (DeFi) offering advantages over traditional finance, such as 24/7 uptime and international capital formation.

3. Solana as a high-throughput blockchain: Enabling massive on-chain events, like the new compressed NFTs feature allowing millions of NFTs to be created cheaply.

4. Zcash and privacy coins: A bet on the importance of privacy and the future of zero-knowledge technology.

Srinivasan draws an analogy to the internet, where different platforms serve various purposes: "Google and Facebook and so on, they're all different kinds of things. Google is your short libraries, basically. Facebook, your long online interaction. And Twitter, your short traditional news media in a sense."

The Ideological Foundations of Crypto

Akshay BD emphasizes the potential of cryptocurrency to transform labor into capital without traditional barriers: "If there is a group of people that can come together to do some work and own a piece of their fruits of their labor without having to go through some elaborate process that includes skipping through regulatory hoops and lawyers and accountants and things like this, that I think allows us to live in a world where there is much more equitable distribution of capital."

Srinivasan takes this idea further, arguing that the technology in crypto is actually downstream of its ideological foundations. He states, "I actually look at it as first and foremost, actually ideological. And the technology is actually downstream of the ideology." This perspective challenges the common notion that crypto is primarily a technological innovation, suggesting instead that it's a manifestation of specific ideological goals and values.

Blockchain Infrastructure Ideologies

When discussing different blockchain infrastructure ideologies, Srinivasan provides insights into three main approaches:

1. Monolithic (e.g., Solana): Putting everything in one place, which is conceptually easier but may have limitations.

2. Modular (e.g., Ethereum with L2s): Allowing for scaling solutions but adding complexity.

3. App Chains (e.g., Cosmos ecosystem): Providing full vertical ownership over the stack but potentially becoming isolated from the broader ecosystem.

Srinivasan argues that all these approaches have merit depending on the specific use case and context. He also introduces the concept of "sub-chains" or "API chains," exemplified by Coinbase's Base, which offer a new way of thinking about API design and data accessibility.

The Evolution of Solana and Its Ecosystem

Akshay BD shares his journey into the Solana ecosystem, highlighting the user experience as a key factor in his initial attraction: "I remember it was the Sollet wallet and I was mind blown by sort of like the user experience of the time and I was like okay this is really interesting because I remember my text to Rod which he tweeted at some point saying you know it felt like taking my first Uber ride or like using like the iPhone for the first time."

This anecdote underscores Solana's reputation for providing a seamless and intuitive user experience, which has been a significant factor in its growing adoption and ecosystem development.

The Network State Concept

A significant portion of the conversation is dedicated to discussing Balaji Srinivasan's concept of the "Network State." Srinivasan traces the origins of this idea back to 2015, with roots in his earlier writings on how software is reorganizing the world.

Srinivasan explains that the Network State concept emerged from his realization that many innovations in biomedicine were blocked not by technical or logistical problems, but by regulatory and political issues. This led him to consider the deeper questions of sovereignty and political reform.

He draws parallels between the tech industry's approach to reform and the concept of Network States: "Essentially, you can think of tech as a vehicle for reform of a particular kind, which is it's not about going and taking over an existing institution and trying to do a turnaround. What Elon is doing at Twitter is very exceptional, actually, in that respect, right?"

Instead, Srinivasan argues that the Network State approach involves starting from a clean slate, with empowered management and the potential for venture returns. This model, he suggests, could be more effective in bringing about meaningful change than attempting to reform existing institutions.

The Three Powers: God, State, and Network

Srinivasan introduces a framework for understanding different ideologies and approaches to power, based on three fundamental concepts: God, State, and Network. He traces this framework back to the 19th-century Swiss historian Jacob Burckhardt, who identified religion, state, and culture as the three primary forces shaping society.

In Srinivasan's modern interpretation:

1. God represents traditional religious or metaphysical authority.
2. State represents centralized political power.
3. Network represents decentralized, peer-to-peer interactions enabled by technology.

This framework allows for a nuanced understanding of different ideological positions, including those within the crypto space. For example, Srinivasan categorizes the American establishment as typically "atheist, monostatist, a-coiner" (not believing in God, believing in one state, and against cryptocurrencies), while Bitcoin maximalists might be "atheist or monotheist, a-statist, and insistent monocoiners."

Building Effective Communities

Akshay BD shares insights on building effective communities, drawing from his experience with Super Team in the Solana ecosystem. He outlines three key properties of a successful community:

1. Ideological alignment
2. Financial incentives
3. Operational capability

BD emphasizes the importance of managing these aspects while maintaining decision-making efficiency: "Make the decision with the least number of people required to make the decision in the room and then communicate it effectively outwards."

He proposes a model where larger communities spawn smaller, more focused groups (likened to "rollups" in blockchain terminology) to tackle specific objectives. This approach allows for both broad alignment and efficient execution.

The Challenge of Scaling Communities

The discussion touches on the concept of Dunbar's number - the cognitive limit to the number of stable social relationships an individual can maintain. BD reveals that Super Team caps membership at 150 to maintain effective relationships and communication within the community.

Srinivasan expands on this, discussing three primary ways of aligning people in larger groups:

1. Inheritance (genetics)
2. Incentives (economics)
3. Ideology (politics)

He argues that while tech often focuses primarily on economic alignment, effective large-scale coordination often requires a combination of all three factors.

Combating Tribalism in Crypto

The hosts raise the issue of tribalism within the crypto space, asking how it can be addressed. Srinivasan provides a nuanced perspective, arguing that what appears as simple tribalism often has deeper ideological roots.

He introduces the concept of "comparative religion" for understanding crypto tribalism, suggesting that different blockchain ecosystems can be viewed as distinct belief systems with their own values and assumptions. This framework helps explain why conflicts arise and persist between different crypto communities.

Srinivasan states, "Once you kind of see that, that combination of clean slate, empowered management, venture returns, that is where our sweet spot is. And then the meta game is how do you create those clean slates?"

The Future of Open Source and Centralized Companies

The conversation turns to the potential impact of crypto on traditional centralized companies. Srinivasan suggests that we may see a diverse range of approaches, similar to how companies have strategically used open-source software in the past.

He provides examples such as Facebook's potential integration with decentralized protocols like Mastodon, and Coinbase's Base project, which he describes as an "API chain" rather than an app chain. These developments suggest that even large, centralized companies are exploring ways to incorporate decentralized technologies and principles into their operations.

Advice for Aspiring Founders

Both guests offer advice for aspiring founders in the crypto and network state space. Srinivasan recommends reading "The Network State" and developing skills in AI content creation, coding and math, or operational execution.

Akshay BD emphasizes the opportunity for "community founders" who can build valuable communities that may evolve into network cities or states. He argues that there is venture-scale opportunity in this space, particularly for those with strong right-brain skills who can effectively build and manage communities.

The Role of Solana in the Evolving Crypto Landscape

While the conversation covers a broad range of topics, it's worth noting the positive sentiment expressed towards Solana. Akshay BD's personal experience with Solana's user-friendly wallet and overall ecosystem played a significant role in his deeper involvement in the crypto space.

The discussion of Solana's approach to blockchain infrastructure - described as monolithic and focused on high throughput - highlights its unique position in the crypto ecosystem. Srinivasan's comment about Solana being "another gear on the bicycle" that allows for blasting lots of events on-chain efficiently underscores its potential for enabling new types of applications and use cases.

Furthermore, the success of initiatives like Super Team within the Solana ecosystem demonstrates the platform's ability to foster vibrant and effective communities. This aligns well with the broader themes of community building and decentralized coordination discussed throughout the podcast.

Conclusion

This wide-ranging conversation between Balaji Srinivasan, Akshay BD, and the Lightspeed hosts offers a deep dive into the philosophical, technological, and practical aspects of cryptocurrency and decentralized systems. From the ideological foundations of different blockchain approaches to the challenges of building effective communities and combating tribalism, the discussion provides valuable insights for anyone interested in the future of technology, governance, and social organization.

The ideas presented, particularly around the concept of Network States and the framework for understanding different power structures, offer a novel perspective on the potential long-term impacts of cryptocurrency and blockchain technology. As the crypto space continues to evolve, the insights shared in this podcast may prove invaluable for founders, developers, and community leaders working to shape the future of decentralized systems.

Facts + Figures

• Cryptocurrency is not a single bet, but a multifaceted investment in various technological and ideological concepts.
• Bitcoin is seen as a bet on the return to hard money, evidenced by central banks buying gold.
• Ethereum is described as a parallel Wall Street, offering 24/7 uptime compared to traditional finance's 40 hours per week.
• Solana is highlighted for its ability to handle massive on-chain events, such as creating millions of compressed NFTs cheaply.
• The number of countries in the UN has increased from about 45-50 in 1950 to almost 200 today.
• Super Team, a community in the Solana ecosystem, caps membership at 150 to maintain effective relationships.
• Balaji Srinivasan's concept of the Network State dates back to a talk in Estonia in 2015.
• The framework of God, State, and Network is traced back to 19th-century Swiss historian Jacob Burckhardt's identification of religion, state, and culture as primary societal forces.
• Facebook's longest-serving employee was Naomi Gleit, while Andrew McCollum designed the Facebook logo.
• Zuckerberg's Meta recently open-sourced Llama 2, a significant move in the AI space.
• The podcast mentions that there are trillions of dollars in unrealized losses in the US financial system, according to Stanford reports.
• Balaji Srinivasan co-authored a paper on the "Nakamoto coefficient" for quantifying decentralization.
• The concept of "market depth" is compared to the "Overton window" in politics to explain how ideas and prices can shift.
• The number of blockchain transactions required to back up an Ethereum contract to Bitcoin every 10 minutes is estimated at 144 per day, or about 52,560 per year.

Questions Answered

What is the Network State concept?

The Network State is an idea developed by Balaji Srinivasan that envisions new forms of governance and community organization enabled by technology. It emerged from his realization that many innovations, particularly in biomedicine, were blocked not by technical issues but by regulatory and political problems. The Network State concept proposes starting new political entities from a clean slate, with empowered management and the potential for venture returns, as an alternative to reforming existing institutions.

How does Balaji Srinivasan categorize different approaches to blockchain infrastructure?

Srinivasan outlines three main approaches to blockchain infrastructure: monolithic (like Solana), modular (like Ethereum with L2s), and app chains (like the Cosmos ecosystem). He explains that monolithic approaches put everything in one place, which is conceptually easier but may have limitations. Modular approaches allow for scaling solutions but add complexity. App chains provide full vertical ownership over the stack but may become isolated from the broader ecosystem. Srinivasan argues that each approach has merit depending on the specific use case and context.

What are the three primary ways of aligning people in large groups according to Srinivasan?

Srinivasan identifies three primary ways of aligning people in large groups: inheritance (genetics), incentives (economics), and ideology (politics). He argues that while the tech industry often focuses primarily on economic alignment, effective large-scale coordination often requires a combination of all three factors. This framework helps explain why some communities are more cohesive and effective than others, and why purely economic incentives may not be sufficient for building strong, lasting communities.

How does Akshay BD propose to build effective communities in the crypto space?

Akshay BD outlines three key properties of a successful community: ideological alignment, financial incentives, and operational capability. He proposes a model where larger communities spawn smaller, more focused groups (likened to "rollups" in blockchain terminology) to tackle specific objectives. This approach allows for both broad alignment and efficient execution. BD also emphasizes the importance of limiting community size, citing the example of Super Team which caps membership at 150 to maintain effective relationships and communication.

What is the "God, State, Network" framework and how does it relate to crypto ideologies?

The "God, State, Network" framework is Srinivasan's modern interpretation of historian Jacob Burckhardt's identification of religion, state, and culture as primary societal forces. In this framework, God represents traditional religious or metaphysical authority, State represents centralized political power, and Network represents decentralized, peer-to-peer interactions enabled by technology. Srinivasan uses this framework to categorize different ideological positions within the crypto space, helping to explain the underlying reasons for conflicts and disagreements between different crypto communities.

How does Srinivasan suggest combating tribalism in the crypto space?

Srinivasan provides a nuanced perspective on crypto tribalism, arguing that what appears as simple tribalism often has deeper ideological roots. He introduces the concept of "comparative religion" for understanding crypto tribalism, suggesting that different blockchain ecosystems can be viewed as distinct belief systems with their own values and assumptions. This framework helps explain why conflicts arise and persist between different crypto communities. By understanding these underlying ideological differences, Srinivasan suggests we can better navigate and potentially reconcile conflicting viewpoints in the crypto space.

What advice does Balaji Srinivasan offer for aspiring founders in the crypto and network state space?

Srinivasan recommends reading "The Network State" to understand the concept in depth. He also advises developing skills in AI content creation, coding and math, or operational execution. Srinivasan emphasizes the importance of staying on top of multiple tech trends simultaneously, suggesting that while it's a full-time job to stay current with crypto, having peripheral vision on other emerging technologies like AI, transhumanism, and drones can be valuable. He encourages aspiring founders to pick one area to focus on while maintaining awareness of related fields.

How does Akshay BD view the opportunity for "community founders" in the crypto space?

Akshay BD sees significant opportunity for "community founders" who can build valuable communities that may evolve into network cities or states. He argues that there is venture-scale opportunity in this space, particularly for those with strong right-brain skills who can effectively build and manage communities. BD draws a parallel to how social media influencers emerged as key players in the previous tech wave, suggesting that community founders could play a similar role in the next phase of crypto and web3 development. He encourages those with community management skills to think bigger and consider the potential for their communities to grow into significant entities.