This conversation was sponsored by Dash Digital Money made simple

(Juan) Hello, we're here at LABitCoin 2015 In Mexico City And I'm joined by Evan Duffield, the lead developer of Dash Which is the Number 5 Cryptocurrency As far as Market Cap goes How's your day going? (Evan) Well, the day's going fantastic It's been a really exciting conference so far (Juan) Exellent

Alright, so there's a lot happening this, this conference are you going to be it's going to be a big announcement from Dash, but before we get into that which is Dash Evolution, I wanted to ask you about one of the last update that you did to Dash which is the Governance Model And maybe, could you explain about how it works and then tell us how the voting process has gone how the incentives are working out? (Evan) Yah, absolutely So essentially the governance model is built on top of the second tier and and maybe we should back up a little bit to talk about the layering of the infrastructure and how it works So, we have collateralize full nodes on the network And, these are simply full nodes that have 1000 dash input that's attached to them And that's essentially their identity on the network

And then based off of this, we can do neat things Since we know who these people are according to their blockchain identity they can do secure communication, for example So we can do secure voting on the network You pool them together as a giant group of thousands of nodes and you can then ask them questions quarry them about, you know, should we do this or should we do that and that's generally what the governance model is (Juan) And a key aspect of that is that it protects against Sybil attacks

So if you actually want to try to subvert the network in some way you have to pay 1000 dash to be able to have a vote, which is a considerable amount of money So, how has the – well the governance model, I think I can explain – I think – and you correct me if I'm wrong, but – basically the inflationary – the predictable inflation of Dash – a portion of that has been assigned to projects that are voted on by the community And if the right amounts of votes happen, if people approve it, then that money goes towards, whatever, marketing, legal fees, particular sections of development, which allows the development of the technology and the network to be decentralized and internal to the network rather than be funded by MIT who's got connections to the White House or a bunch of other big companies, right? It's pretty critical advancement So how is the voting process work so far? (Evan) So essentially what we're going for is something I refer to as Decentralized Sovereignty We want to stay decentralized as we grow and as a crypto-currency, we want to maintain our sovereignty

We don't want to be controlled by any of the existing systems Because, this thing has to survive for a very, very long time without being lead astray by the powers that be, you know? And so we've built these systems very carefully to, to be adaptive to the current state and the current powers that be The governance system is not inflationary and the budget system particularly, because we allocate a piece of the reward to the system and they actually can't go over that piece (allocated budget) and that's 10% of the monthly the block reward that they're allowed to spend If they don't spend all of it, it's actually burned And so it never gets created

And so it's actually a deflationary aspect of the currency then (Juan) Does it require a limited amount of votes to be able to allocate the reward? Like 20% of the network have to vote, or something like that, and if they don't the money does not get created? (Evan) So essentially what happens is we have many proposals on the network and lets say we have 10 proposals And then we rank them by the amount of support that they have And so the first one lets say we have 80% of the network that voted positively on this, that one definitely gets paid And the next one is 70%, and the next one is 65% and these are added to the total budget until we reach the point where all of the budget money is taken at which point we stop paying out the budgets, so that's generally how it works

(Juan) Right, right, so it's predictable sort of inflation and it might not inflate if it doesn't fit the right rules So lets talk about some of the ideas you're going to be talking about here in the conference and this won't go public until later, so So one of them is the decentralized API (DAPI) And I'm not sure I understand what it is I believe it's a way that clients can connect to the network and utilize technology maybe you can tell us a little more about what it is? (Evan) Sure, so the idea behind the second tier network is that you have this collateralize second tier which in our network is about 40% of the total coins, so it's Sybil proof

And, based off of that you do the voting, you do the funding, you do the governance And then all of these new ideas showed up, which we've been using, and we can do so many things that we had never thought of And so, one of these is this decentralized API (DAPI) and in simple terms, what we want to do is create a mobile interface where you can talk to the network through, that acts as a centralized API except it's not And we do actions on the network that are group actions And so what happens is, when you do a decentralized API request, it gets executed on 7 servers at the same time

And these are deterministically ‎picked by the proof of work, so you can't fake that portion, and they all do the same thing, they get the same result and they sign it with their private keys They return to you the result and the 7 signatures Therefore you know if anything was tampered with Based on this, we can implement really neat features So since we have the second tier, what if you put storage, so if you require storage on each individual node on the second tier

Now, suddenly we have about 40 terabytes of storage on the network – sharded And so, we can store things like friends lists, and your transaction history and things like that that are encrypted, so when you log in, you log in with a user name, you log in with your password, you request the information from the network itself, like "Hey, who are my friends" you know, try to get my private data, you decrypt it and suddenly you're up to date with everything And now you can send money to friends by name Because, if you and me were friends on the network, we would negotiate keys between us so I would know your next 5 keys, you would know my next 5 keys, and I could pay you by name I would burn one of the keys, you would send me another one and then rinse and repeat

And so this is how our next network will function (Juan) Personally, I think that's a huge ease of use feature I've worked with – I've been getting paid in Bitcoin for two years and you constantly have to go and update your private key – or the public key or else everybody is going to know what your public key is and you know if you want to keep your privacy – you want to keep refreshing, but there's no automated way to share public key lists, so that's fantastic and the identity stuff, great You're talking about "Friends Lists" and it seems that there's a trend that Dash is moving to, and there's a lot of companies that are kind of looking at – a little bit – at social markets which are sort of social networks enabled with financial technology, which is just basically made for Bitcoin and blockchain technology, or Dash And so want to tell us about what your vision is there? (Evan) Yes, so once you have the friends list implemented in – you have these very normal features like you would have with Paypal

Like, you have contacts, or you can send to email, things like that with Paypal So you could do a similar thing with this network after this is implemented And by that, lets say I get on, I invite my – you know, closest 10 friends, and then they get on and then they invite their closest 10 friends and then it becomes a social network of money And everyone is just connected to their friends and I imagine that the first use case will be just for you know, paying people back, or selling somebody a couch or things like that Which should be really easy to do with a system like this

(Juan) This is sort of like social network Are you looking at integrating this technology with a current social network, or maybe starting your own social network? How do you see the actual path to that stage? (Evan) We have no plans on integrating it with like a service, like what change tip does or something like that where you can tip people on the internet They would pretty much have to have an identity on the network for you to send money to them And it's its own social network But the idea is that by allowing this ease of use function where you can search for your friends by their user name or email, if they want to, if they don't want to be publicly searchable, then they won't be as well

So there is still some privacy as well But then there is ease of use in that you don't have to remember all these keys, and I think that it'll make it so easy to use that we'll actually get some, you know, normal people using it that don't have any experience with crypto, and I think that's really the point (Juan) Yah, I think that moving to an identity system is a huge ease of use step Identities are kind of an interesting problem though It's sort of like domain names, you could think of it like domain names

But you have to get the balance right Namecoin has been having problems lately, I think there, I think there's been some bad press I haven't followed it too much, but I think one of the problems is that once you bought a Namecoin domain, it was yours forever, and so I think people were stock piling them And so how does – how are you thinking about the way the scarcity of these identities are they, if you buy Evan Duffield domain, is it gone? or can I get another one with the same (name) and stuff like that? (Evan) The plan currently was to implement something where you enter your user name and you set up an account, and then you fund it, and then after that whole process is complete then it's done and now you have the reservation And so maybe what could happen is that if you remove your money from the network and you stop using it, then it expires after a certain time Because we're just storing these identities on the sharded data system

It's not a blockchain in the classic sense where you can actually remove data from it so we can definitely invalidate these identities if no one is using them

(Juan) Excellent So we're talking about decentralized storage, and this is a huge topic got a lot of people excited about this StorageJ, Maidsafe, big names in the space Is Dash getting into decentralized storage? (Evan) I would say no

The idea here is more just to store user's metadata, and some of their private data that they'd want to store in an encrypted way on our network And, the idea here is that I can log in on my Android phone, and then I can go home and I can log in on a browser with the same user name and password and both of these devices will be in sync Like if I added a friend on one, it'll automatically add it on the other And so there's really no management of like trying to move a wallet here or any of that, it's just all automatic so that's the part that seems centralized but it's not (Juan) And the files are shredded encrypted and then there's redundancey and then they're stored in Masternode storage

Like Masternode computers that provide that storage extra space, right? That's basically, to my understanding, what StorageJ are trying to do, or Maidsafe are trying to do as far as decentralized storage Do you see are there any limitations that would keep that from evolving into this decentralized internet, decentralized web-hosting decentralized storage that people are so excited about? (Evan) Well, it could be used like that and I expect people to fork the project and do things like that to make a competitor to StorageJ or you know

But, I don't think that it's the right path for Dash, because we have enough on our plate to do this technology with the friends list and this API, and Dash Drive just alone And we don't, I don't think we really want to be storing random data on the network This is more data that is crucial to the people's you know, the installation on their phone, and it's crucial to their specific account

So, it's information that they're storing that they want later that's related to to the payments and their specific account, not like, a file that they want saved on the network (Juan) So, the access to these resources is the way that people can interact with this technology would be through the decentralized API Lets talk about the resource management of the API I think that you mentioned that there's ways to prevent abuse, there's um, and anybody can interact with the API without necessarily having a Masternode or full node um what are the requirements to ask the API questions or give it information? (Evan) Well, so that's a really interesting question

There's a whole model of security here And basically what it comes down to is, you have an identity on the network, it's a user name, and that goes back to a 64 bit integer, which is your real identity, and then you can use, what we call blind keys which hide your real identity but when you do things on the network you're still incurring query time cost And so since Masternodes are actually executing commands, we can take the amount of time average that was used and then charge it to the user account And so all the user accounts are actually free to use up to a certain point And so what we want to do is to get 90% of the users in this free zone, and then 10% of the users would have to pay for extra

So you could purchase extra processing time on the network if you were like a large merchant or something, and then everyone else uses it for free And the reason why this works is because our second tier network is actually incentivized So we're subsidizing the cost from the actual blockchain of the users that are utilizing it (Juan) That's very exciting, and giving free access to 90% of the users is one of those strategies that seem to work very, very well for a lot of companies WhatsApp is one of the biggest voice over ip chat messaging systems and what they did was they just opened it up to anybody and then after a year, they start charging a little bit

And it blows up, so that's great stuff Lets talk about anonymity a little bit, because Dash was sort of famous for this, and this is one of the core elements of Dash, is protecting user privacy and they want that by default How does this identity system and interaction with the identity system um, interact with the privacy concerns and the value that a lot of libertarians or users in Bitcoin have? (Evan) So, there is still privacy on the network and we highly value privacy And so the argument for privacy is more about fungibility, we don't want our users being spied on in the long term and so when designing the system, we've made a distinction

We're separating the user identities from the payments that they do on the network And so when they get put into the blockchain, there is no connection anymore And the network can't follow you Also, when you access the network, you're only hitting a few servers, you'll hit 7 to about 15 servers, and then every time you hit the network, you can hit a different quorum, and so what happens is you spread out your foot print among this entire network that's all over the earth, and no one can really tell what you're doing then And so the users get privacy, but we can still make sure they're not abusing the system because it all goes through their identity originally, which then they're incurring that query time

(Juan) And you mention the word Quorum This is to my understanding, so like a randomly selected group of servers that are the ones that will be serving the API and information Yes, so quorums If you think about the Bitcoin blockchain and the proof of work you can create a random number generator and you can actually seed it with the proof of work from a known block and what happens is, if everyone on the network does the same thing, they all get this same number out of this random number generator, because they're really not random But then that sequence of numbers is very very secure And so what you do is, you take the Masternode list and then you sort it by the proof of work hash, using this randomized method And then by taking, you know, one to ten – the first one to ten entries in the list; that's one quorum – 11 to 20 is the next quorum, etc

And so these are secure subsets of Masternodes that no one on the network can predict and tamper with, and then those are the ones that do the work and group actions and then sign the results which then go back to the user (Juan) Lets talk a little about scalability So the Hong Kong conference is happening right now basically as we speak, talking about Bitcoin scalability and how to overcome those big challenges in blockchain technology that I think a lot of people have yet to overcome

There are some organizations that are claiming to have maybe solved it but how are you looking at this from Dash's perspective I think the incentive structure of Dash is the right one to go with for a system that scales, you know, with many, many, many users And the reason for that is because when you give a percentage of the blockchain to the infrastructure you create a market And this market has equilibrium with the second tier And so it'll figure out how many servers it can support from within that market

And what happens, as the currency grows, is that these markets get bigger More users means more money is in the ecosystem, means the markets have more money which mean the servers could be even bigger or we could have more of them and so it is a scalability solution in itself and we've proven it works I think that the Dash project should be used as an example of a two tiered strategy before fixing the Bitcoin scalability issues And I believe that if they implemented a varient of this technology that they could actually remove the block size limitation and, you know, scale the system and it would actually perform really really well

(Juan) There's three camps more or less in the blockchain size debate to my understanding, right? There's the small block people, they want to keep them small, and keep Bitcoin as a payment layer internationally There's the big block people that say no, all transactions should be there, there's a bunch of people in the middle and then there's other corner that is rarely talked about which is , I think it's pioneered by Justus Ranvier, and he's talking about completely creating a as much as a free market as you can within the blockchains, so that blocksize and bandwidth costs, and notice, it's all a free market and it's not some sort of top down regulatory style decision that decides how big the block size is, but there's a market, an order book for this

Where would you sort of place yourself in that? (Evan) I think that the bitcoin debate on the blocksize is really interesting and I would lean more toward the camp that they shouldn't increase it right now because of the full node count issue I believe now from I've studied this for a few months now and I've been studying whether the transaction volume average correlates inversely to the full node count

And from what I've found, and I've done some statistical modeling on it, is that they are indeed correlated And, when you impact one of these numbers, you do impact the other one And so if you raise the blocksize limitation, then you're causing more bandwidth on the network, and more bandwidth will then drive down the full nodes And so I think we need, we definitely need a good solution to it and I think the solution does come back to something like Dash did We need some kind of market that compensates these people in a permanent way that's scalable

(Juan) Excellent OK, we're gonna do the Facebook questions now Um, Patrick Wade asks – sidechains on the Bitcoin blockchain vs Dash How do you look at sidechains and the potential clone going on sidechains, like may happen to Etherium soon? (Evan) Well, OK, well the Sidechain issue is really interesting The Etherium clone is a really well developed idea, I think, and Rootstock is interesting because it's actually supported by one of the Bitcoin core developers, which is also an interesting point, so I'm really interested in seeing what they do with that because it actually might be kind of different from Ethereum

As for sidechains and Dash, it's hard to recreate Dash because you need an actual blockchain that's separate from Bitcoin that has it's own monetary value, because you're rewarding people for running the nodes and they need to be compensated for running them right? So how do you do that with a sidechain that is part of the Bitcoin network and carries no value other than just being another token? (Juan) Interestingly enough, I actually shared an article I wrote in Coin Telegraph about how Dash works and the governance system with (name) who is an Ethereum, you know, and apparently the Rootstock people, I think you were telling me maybe about it? That the Rootstock people are sort of starting to think about implementing something like Dash, like Dash's governance system on Rootstock How do you do you have any ideas of how that might happen or anything you want to share on that? (Evan) Um, so they have a very interesting approach and they're looking for a few different solutions and I've been talking to them over the past few days about implementing something similar to what we've done in a completely different way

And so it'll be interesting to see what they come up with (Juan) Kristov Atlas asks, I'm curious if he tracks progress of privacy improvements on Bitcoin vs Dash and what he thinks about the progress in these last couple of years (Evan) Interesting question The progress in Bitcoin is, you know, always slow And, especially for fungibility, because that's a sensitive topic in the Bitcoin community

But I think that we really need to focus on scalability now that is the primary problem in Bitcoin at this point because we've reached the limitation, or we're almost at full block pretty much all the time now So that is much more pressing Fungibility will become an issue after we resolve that again It's still an issue that hasn't been resolved though (Juan) To follow up on that question, there's a few companies out there that are doing blockchain analytics on Bitcoin

Do you know anything about the kind of techniques that they have and do you have any concerns as far as them focusing on Dash at some point? (Evan) Well, I'm more concerned about them focusing on the Bitcoin ecosystem because it's ledgers are a lot less private than ours In ours, coins are randomly anonymized and you can't cross that boundary And so you can't follow back history very far So if you identify somebody, you can identify a little bit of their history but not that much Where as on the Bitcoin network, if you identify, a few key places, you can figure out what somebody has done for you know, months even

And that can be an issue Some of these companies are using statistical methods of figuring it out and some really advanced algorithms that do work and I believe that they will have a pretty good database of trying to figure out the identities of these people, and then begin selling it which we really want to protect our users from I don't think that type of data should be able to be sold to companies and what not (Juan) I have to say I agree with that But um

I'm the journalist, I shouldn't have opinions, (laughs) Ok, Ruben asks, what are your favorite 3 crypto-currencies and a short explanation maybe (Evan) Alright, so I would say, um, Primecoin, Quark and Litecoin And so there's a really interesting reason for this

Primecoin is where I got the difficulty algorithm idea from And mine doesn't work as well as theirs did Theirs was a little bit better But that's where I got the idea from none the less And then Quark, because of the chaining algorithm for hashing, that's where I got that idea from

And then litecoin because it's the fork that first started Dash And so these are the three that really got me going into the Dash project (Juan) Excellent, and is there any TA for the Dash Evolution release, or where are you guys in the development? (Evan) So we're going to try a brand new approach to development this time around that I don't think (has) ever been tried before We don't have a clear path We have a very structured idea of how these things should work, and now we want to team up with the community, open source all the documents and actually figure it out as a community what we really want

It's essentially going to be a giant conversation with thousands of people to try to figure out the path, the best path that most people want Because we don't want to create something that people don't want to use, right? so if we make all of our users happy, that's the primary goal And as for an ETA, we're looking for a prototype within about 2 months and then after that, we should have something more concrete in maybe a year, a year and a half It's definitely going to take some time, it's a very, very large project (Juan) How does it feel to be in the center, or very close to the center of what I argue is a kind of cyber organism? I think, unlike any other project where you have external funding and it's much more maybe centralized

Right now, I think that Dash is the best example I can think of a Decentralized Autonomous Organization and it's funding mechanism is internal and based on the value of it's coin How does it feel to be in so a decentralized community and such a fast developing space? (Evan) It's quite interesting, it never is boring And, I mean, the things we are doing are really exciting, so just implementing the decentralized voting and funding and governance and just watching it being used by the community is just phenomenal And then the community at large is just full of other interesting ideas as well I think the entire thing could be considered a giant organism

But I definitely agree that we're probably the first Decentralized Autonomous Organization because, I mean, it's completely self funded Dash is completely self funded which means that it can survive on it's own after all of us leave It defeats the first adopter problem which I think is critical You get first adopters which get coins cheap, they do work because they're incentivized but the second adopters, third adopters, forth adopters aren't So who is going to take over the really really laborious terrible task of managing Bitcoin Core, later

And you basically hand them this thing and say, you know if you screw up, you screw up billions of dollars of infrastructure You know, have fun And then who pays them? It's a hard problem to solve and I think we have a good solution So I'm really excited for that, and I'm really excited to see where it goes (Juan) Is there anything else you would like to add, any (thing else) you'd like to share? (Evan) Ah, yes, so, we're open sourcing the Dash Evolution and it's going to be open for conversation about where we go and the direction of it, so I'd like everyone to get involved in telling us what they think of it and coming up with improvements so that we can build the best thing possible

And so I encourage you to come over to dashevolutioncom and check out the documents and see what we're working on and collaborate; help us out (Juan) Excellent, Thank you very much