Quantifying and Qualifying Decentralization | The Balaji Series | Episode 7

Minimum Nakamoto Coefficient 

  • The Nakamoto Coefficient is a simple quantitative measure of a system’s decentralization. The number of entities you need to capture to compromise a system.
  • Engineers need metrics. Need a goal, an objective function to understand how decentralized systems are
  • It uses 6 Metrics – Miners, nodes, exchanges, ownership, clients, and developers
  • Public blockchains have subsystems, if one point is choke-pointed, the system is flawed. If you can capture more than 50% of any of these systems, you can take over the system.

Bitcoin and Bitcoin  2.0

  • It’s extremely difficult to replicate bitcoin. Doesn’t mean it’s completely invulnerable. Technical defense>Social Defense
  • Balaji supports multiple coins for immune diversity. He doesn’t want a single point of failure and doesn’t think we can achieve true decentralization with only one coin.
  • Client diversity level and technical hacks are the biggest potential issues for BTC.
  • The blockchain is more difficult to attack than the protocol
  • In a true emergency, Bitcoin’s transaction history could be imported into other chains.

Maximalists and Optimalists

  • Satoshi was a pragmatic engineer, not a  troll. He was interested in other coins.
  • There’s a moderating effect of having skin in the game vs. being ideological on social media. 
  • Optimalists and Maximalists may have similar trajectories to start but Maximalists may push past the optimum.
  • Ideological points on a compass are direction headings. Find a key metric and optimize for it.
  • Optimalism is basically setting an objective function, making it explicit, ascending the objective function, and setting a new one. China and successful startups are run like this
  • Maximalism is basically fundamentalism. Too much is never enough.
  • The only important metric for BTC Maxis should be how much BTC they have, not Twitter likes.

Ethics and Power

  • Humans don’t want too much power in one thing.  That’s why we have multiple countries, currencies, and companies.
  • Crypto makes progressives more libertarian and libertarians more progressive. If govt was abolished, libertarians would have to reestablish a state and trust systems.
  • Centralized states value order above all else.
  • The ethics that survive are the ethics that generate sufficient power to survive.
  • Power is the entire point of life. Systems that channel more power over time are the systems that proliferate. Ethics will piggyback on the systems best at channeling energy. 

What Drives Balaji

  • He’s interested in the infinite frontier, immutable money, and eternal life.  Space, Bitcoin, Life extension.
  • Transhumanism. Technology is what makes us human. The ultimate metric for civilization is whether we’ve advanced at math. 
  • Extropian ideology is the true underpinnings of Bitcoin as opposed to the common ultra-conservative Maximalists.
  • Lance Armstrong’s chemist should’ve won the Nobel prize. Restore sight. Cure deafness. Boost muscle mass.
  • Cryptocurrency allows us to unbundle from the state and re-bundle into new states
  • Money as a tool. What you can build is much more interesting than what you can buy.
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Notes By Paul Keating

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