Machine learning models trained on data from blockchain-based marketplaces have the potential to create the world’s most powerful artificial intelligences. They combine two potent primitives: private machine learning, which allows for training to be done on sensitive private data without revealing it, and blockchain-based incentives, which allow these systems to attract the best data and models to make them smarter. The result is open marketplaces where anyone can sell their data and keep their data private, while developers can use incentives to attract the best data for their algorithms to them.

Constructing these systems is challenging and the requisite building blocks are still being created, but simple initial versions look like they are starting to become possible. I believe these marketplaces will transition us out of the current era of Web 2.0 data monopolies into a Web 3.0 era of open competition for data and algorithms, where both are directly monetized. …

This post describes why blockchain governance design is one of the most important problems out there, its critical components, current approaches, potential future approaches, and concludes with suggestions for the community.

As with organisms, the most successful blockchains will be those that can best adapt to their environments. Assuming these systems need to evolve to survive, initial design is important, but over a long enough timeline, the mechanisms for change are most important.

As a result, I believe governance is the most vital problem in the space. Other fundamental problems like scalability are arguably best approached by using governance to set the right incentives for people to solve them.

Decentralized exchange is early today but feels like it will be essential in a few years.

First, the difference between a decentralized exchange and a decentralized exchange protocol:

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EtherDelta, an early decentralized exchange

A decentralized exchange has some combination of decentralized properties. At the moment this most likely means some mix of 1) on-blockchain trade clearing, 2) ability for users to retain control of their funds, and 3) hosting an orderbook in some decentralized manner (this is currently inefficient with current levels of blockchain scaling). They are mostly frontend apps for now. They may run on a decentralized exchange protocol (see below). In the future they may not be a frontend, but rather nodes in a p2p network which relay orders to others, and have only programmatic interfaces. Early examples of decentralized exchanges with frontends include EtherDelta and OasisDEX. Neither currently use an underlying decentralized exchange protocol. …

In a prior post I proposed funding protocol development through inflation as a powerful tool to evolve blockchains.

Forking is a second critical evolutionary mechanism for blockchains. Just like mutations to DNA in biological organisms allow for evolution through natural selection, forking lets us run multiple experiments in parallel where the strongest versions survive. Unlike Web 2.0 companies, forking a blockchain is possible because the current code and state of a blockchain can be freely copied. It is the equivalent of any developer being able to make a copy of Facebook’s code and spin up a competing version at any time — something a Web 2.0 …

Blockchains are digital organisms. As organisms evolve through changes in their DNA, blockchain protocols evolve through changes in their code. And like biological organisms, the most adaptive blockchains will be the ones that survive and thrive.

So what makes for a strong evolutionary process in a blockchain? Forking is an important mechanism that is becoming more common. Forks can speed evolution by allowing many different approaches to be tried in parallel. However, I feel there is another which is barely talked about: the economic incentives to contribute to a blockchain’s core protocols. …

Tokens are selling at valuations which imply they’ll have millions of users. But can the blockchain support it? If not, how far away are we?

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There are two requirements to building scaled dApps:

  1. Having all of the necessary parts of the dApp developer stack. I’d say we are 70% to a shaky first version of each.
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2. Scalability of these components. I think this will be the main limiting factor and what will be discussed in this post.

Let’s do the math on running something like Facebook. Facebook handles about 175k requests per second (900k users on the site in any given minute, assume an action is taken every 5 seconds). …

I currently look at the development of the blockchain ecosystem through the lens of creating a new decentralized application development stack. A good barometer is asking the question: “do we have all the parts of the stack we need to create a fully decentralized app”? When the answer to that question is “yes!”, the ecosystem can rapidly create decentralized applications and experience explosive mainstream growth.

I came to this view after a painful period in 2014 at Coinbase. We had been sitting around thinking there would be tons of apps, yet we were seeing almost none. …

Sam Altman recently wrote that we are entering an era of hyperscale technology companies. These companies own massive troves of data with strong network effects around them and they are only getting stronger. Google and Facebook now own almost 70% of internet ad revenue and rising, growing a combined 103% in 2016 while the sum of everyone else shrank.

This has important implications for the development of AI. AIs are only as good as the data they are trained on. …

I spent a weekend with 10 execs of some of the largest companies working on VR to talk about how to responsibly create the “Metaverse” — the name for an immersive virtual reality world taken from Neil Stevenson’s 1992 VR novel Snow Crash. The idea is pretty simple: if people start living in VR, its rules and systems will be just as important as the “real” world’s.

To illustrate why, imagine if everyone lived in World of Warcraft or the virtual world that Facebook is building. People’s social lives, assets, and jobs will be tied up in this world. …

I’ll be stepping back from my day to day responsibilities at Coinbase at the end of January. I’ll continue to be involved with the company as a board member. I plan to take my first real time off in 7 years and then start tinkering again.

This experience has been incredible. When I first met Brian, we had a dream that we could bring digital currency to millions of people. What seemed crazy is becoming reality. Coinbase is the best known name in the space and is flourishing. …


Fred Ehrsam

@Paradigm. Previously co-founder @Coinbase, trader @GoldmanSachs, computer science @DukeU.

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