July 3, 2021 • 23 mins
Kendrick Tan, also known as @kendrick on Slack, has worked in the blockchain space for many years, and currently works at DFX in decentralised finance, where he is the Chief Technical Officer. He’s here to give us a 20-minute rundown on blockchain, Ethereum, decentralised finance and more, as well as addressing some of the concerns regarding the past, present and future of cryptocurrency.
Kendrick graduated with a computer science degree from QUT in 2019. He also has a cat!
EY and zero knowledge proofs: https://github.com/eyblockchain/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Matt (00:00):
Hi, and welcome to the router, the official podcast of
the UQ computing society, wherewe explore the human side of
tech.
I'm your host, Matt and we areback after exams with a brand
new episode.
Today we're having a chat toKendrick Tan, also known as
@kendrick on slack.
He has worked in the blockchainspace for many years and
currently works at DFX indecentralized finance, where he
(00:22):
is the chief technical officer.
He's here to give us a 20 minuterundown on blockchain, Ethereum,
decentralized finance, and moreas well as addressing some of
the concerns regarding the pastpresent and future of
cryptocurrencies.
(00:44):
All right.
Welcome Kendrick to the show.
How are you today?
Kendrick (00:47):
I'm good.
How are you?
Matt (00:49):
Yeah.
I'm all right.
Um, before I begin, it would begood if you could introduce
yourself to anyone who doesn'tknow about you, who you are,
what's your background, whereyou work that kind of thing.
Kendrick (01:00):
Yeah, so I'm Kendrick.
So I graduated from QT and 2019with a computer science degree.
Uh, the reason I got a computerscience degree because my mom
wanted me to get a degree and Iwas like, probably quickest way
to get Out of uni.
And so I got one.
So after graduating, I've beenworking full time in the
(01:22):
cryptocurrency space.
Um, I originally wanted to getkind of FAANG job, but after
dipping my toes in thisecosystem, I decided there'll be
such a pity if I didn't kind ofg rab t he opportunity, to go in
such an emerging field.
So since 2 019 I've been workingwith, u h, various companies, u
h, one of them being, u h, theEthereum foundation.
(01:43):
So I contracted with theEthereum foundation for about
half a year.
And we did a lot of work on zero knowledge proofs, which is
like basically m oon math o fpeople l ike to call it, but I
was the one reading the papersand applying the math rather
than coming u p with the m ath.
S o that a very big difference.
U m, in that it was very fun.
(02:03):
Like I l earned a lot about theprocesses of how, like these
cryptographers came u p, came upto these conclusions and how to
actually use them and how, like,it's really interesting how y ou
can like use these propertiesin, u h, in, in, in if y ou're
specifically, anyway, I was i nl ove with a couple of t he
layer two scaling solutions a ndf iguring, w hich i s like, u h,
(02:27):
products or applications o rprotocols t hat a re dedicated
to create help make your scaleslike higher, u h, h igh T PS or
higher transactions, the second.
Uh, but eventually, um, during2020, um, I found out about DeFi
and the decentralized financeand after dipping my toes into
(02:49):
that, I decided I wanted to gofull time into that.
And so I worked for a companycalled UMA.
Unfortunately the time zonesdidn't work out.
And so I left and now I'mcurrently working at DFX, which
I'm also the CTO.
Matt (03:03):
Oh, very nice.
So, uh, you kind of startedworking, um, in Ethereum or
generally, and then moved into,uh, decentralized finance.
Kendrick (03:13):
Yeah.
Yes.
So it was mostly, I wasinterested in the cryptography
space, but then suddenly thiswave of innovation came from,
like on the finance side, Ididn't know anything about
finance back then.
I was still at like a geek, uh,like more like a technical guy,
but just the amount of likesmart people in the space kind
(03:35):
of convinced me that maybe Ishould check it out.
And the minute I did, I was likethere's no turning back.
Yeah.
Matt (03:42):
That sounds super fun.
Um, I guess to begin, um,because personally, I don't know
too much about, uh, this area ofwork.
Uh, could you begin by trying togive like a, I dunno, explain
like I'm five kind ofintroduction to what theorem is,
how it differs from, you know,Bitcoin or other
cryptocurrencies, um, and maybealso a bit of an intro into what
(04:05):
decentralized finance is.
Yeah.
Kendrick (04:08):
Yeah.
So Bitcoin at its very core isjust a ledger, which all the
participants in a network willagree upon the state of the
ledger.
Um, and in Bitcoin's case,there'll be how much Bitcoin
everyone owns.
So for example, uh, if this,like, if it is like 10
(04:28):
participants eventually, andlet's say, I'm sending you 10
Bitcoins, eventually everyone,like you will broadcast a signal
telling everyone in the networksaying, Hey, I sent you 10
Bitcoins, eventually everyone'sledger.
What kind of agreed upon that?
I've sent, you 10 Bitcoins, andso they'll deduct 10 Bitcoins
from my account and add thecoins to your account.
(04:51):
So that's like a very at itshighest level, there's like a
more there's like morecomplicated stuff, such as peer
to peer networking, routing andconsensus theory.
But, um, let's just ignore thatfocus on like the, the core
idea, which is like adecentralized ledger, which will
form eventual consistency orlike a distributed database, if
(05:12):
you don't want to put it thatway.
Okay.
So that's the current state A tostate B.
I want to kind of emphasize thatstate transition because it's
very important in Bitcoin's caseit's very, uh, very application
specific.
It just tells you how manyBitcoins is in transferred from
A to B or like the, the, thedelta, or like the state of how
(05:35):
many Bitcoins you own.
Ethereum on the other hand canbe seen as like a hack of
Bitcoin.
So instead of having a veryrigid system, a very rigid state
transition system state A tostate B.
You any programmer can create anarbitrary logic to kind of
indicate how the statetransitions should be from state
(05:58):
to state.
So if I want to like say deploya new token on Ethereum, and
I'll basically create a newtoken and deploy it onto the
ledger, like there's a gooddatabase, where it stores, like
the byte code of yourapplication.
And let's say state A doesn'thave the tokens.
Once you deploy the contract,State B will state that, Hey, in
(06:18):
this, in this, uh, storage slot,I like to call it, there is now
a new token with this bytecodeand now I can execute arbitrary
code against as, or execute likesome kind of a code on Ethereum
against that deployed by thestate to change more states.
So it's more like a, ageneralized state transition
(06:39):
machine.
And also keep in mind thatEthereum, runs in virtual
machine, just like the JVM, butthey call it the EVM, it's your
emotion machine, which is alsooccurring complete.
So now you have like generalizeds, so that's like a complete
state machine.
Um, and Bitcoin's like more like, uh, application specific ones.
(07:01):
So, uh, in that sense I would,that's what I like to call it
like a hackers Bitcoin.
It's a lot more exciting, uh,because you can build any,
anything you can dream of.
Well, right now, right now it'smainly finance.
Um, because if Ethereum andBitcoin are speculative assets.
So, uh, like the mainapplications built on.
And right now I financiallyrelated, which brings us into
(07:23):
DeFi.
Um, so DeFi is this movementfrom kind of like the secret
world the wall street and likethe centrally controlled, like
Mon like sovereign money intothis, like cyber punkish, uh,
like democratized, uh, moneyplatform, if you will, which is
(07:46):
which essentially what DeFi is.
I remember three years ago whenI started out in this space,
there wasn't a stable point, um,when I started up, but now
there's like so many, so manyfinancial infrastructure, it's
impossible to keep up in thespace.
Matt (08:02):
I mean, so there's so many like different words that kind
of get thrown around when itcomes to like cryptocurrency and
this sort of thing.
So it's good to hear about, um,a few of those things.
Are there any other kind of morespecialized things that you work
in, maybe give a brief introinto, you mentioned
zero-knowledge proofs before.
What is that like?
Like what, what is it likeworking in that space?
(08:23):
Um, I it's, it's a cryptographicthing, right.
So I guess is like a lot of mathinvolved, that kind of thing.
Yeah.
Kendrick (08:29):
Oh, keep in mind.
I was the one who was readingthe papers
Matt (08:31):
Yeah.
Yeah.
That's all good.
Kendrick (08:33):
Yeah.
Yeah.
But essentially what I did mywork in the zero knowledge proof
space is, how do we, it was likea voting system.
It's like, how do I, how do Ivote for someone without
revealing my vote?
And in fact, if you'reinterested in it, I think, uh,
EY also released something to dowith like transacting on the
(08:53):
blockchain with zero knowledgeproofs.
So how do I create a receipt toaccompany that I'm dealing, uh,
that I have like some kind ofrelationship to kind of prove
that I sent payment withoutactually revealing the payment,
because keep in mind, thesepayments are publicly, uh, on a
public ledger.
And if your competitor knows,like who you're paying and how
much you're paying for whatamount of like, uh, supply and
(09:16):
it's like kind of bad news,because then they can kind of
use this information to theiradvantage.
Um, I forgot what it's called,but if you look up EY zero
knowledge proofs ethereum itshould come up.
Matt (09:25):
Yeah, yeah.
I will.
I'll link that in, in thedescription of the podcast.
Um, yeah, I'll find it.
Yeah.
Kendrick (09:32):
So essentially it's like, how do I prove I have
something without necessarilyrevealing that particular
something, um, is the whole ideaof like so much proves there's
also like other rabbit holesthat you want to dive deep into
and it's consensus theory ofwhich I'm not, I'm not I'm, I
haven't touched, touched at all,but there's also something
(09:53):
called MEV or minor extractedvalue.
Um, when I, when I mentionedlike the state transitions, the
all their state transition canbe exploited.
It's almost like an order on anexchange like high-frequency
exchange.
If you were to suddenly jump thequeue, you were like profit and
loss.
And it's the same with like mineextract value because mine is
(10:16):
kind of dictate the order oftransactions that occur.
And how do you like game thesystem?
So what order of the statetransition costs will your
maximum value is quite a, quitea new field.
It's only come around in thelast four months or five months,
but it's slowly gainingmomentum.
(10:33):
Huh.
Sounds interesting.
Um, yeah, I'm new to all thisstuff.
Um, I guess another questionthat people ask, I think, um,
when they hear about, uh,Ethereum cryptocurrencies and
this kind of thing, um, at leastfrom what I've heard, it's, it's
kind of, some people think of itas something that you tried kind
of treat it like a stock or likea, you know, a currency you're
(10:55):
like just buying into it.
Um, and you just hope to see theprice rise when you buy, you
know, try to make some money offof it.
Um, but I guess some peoplelike, like me, I'm wondering,
like there are some of thesebenefits to, you know,
decentralization, um, and Iguess, you know, getting rid of
(11:15):
that, no mysterious wall streethole that the money seems to go
into.
Um, but like what, what other,like, does it solve any other
kind of problems?
Like what, what other things canyou apply this theory of, um,
idea to, in terms of liketechnology,
Kendrick (11:33):
That's definitely the main narrative.
So Bitcoin that's like adecentralized store value.
That's like not...
To answer your question, sorry.
That's one of the main, that'sone of the main use case just
recently, because Bitcoin hasbeen a transfer of value, like
a, like a store value that canelectronically transfer, like
(11:55):
Bitcoin is money as a datastructure, which that concept
is, in my opinion, incrediblypowerful.
I guess we don't really, wedon't really experience it here,
like in Australia because it's alot of that we have a stable
political system or currency isrelatively strong.
There isn't much need to kind ofcall, um, outside of like
(12:16):
sovereign money.
But if you live in say Zimbabweor Venezuela or Turkey, or
recently Turkey where there'slike a dictatorship happening
and, um, there's like, it'spolitical instability, that's a
real, real need to have accessthese kinds of instruments
because you want to be able toleave the country with your
(12:37):
wealth intact.
Like it will be, I mean, if youcan escape the country, but
start from zero, that wouldn'tbe ideal.
Right.
Um, yeah, but to answer yourquestion, that's like the main
use cases and I can perceivecertain other use cases such as
voting, uh, on blockchain.
But that kind of brings up a lotof, um, other, um, potential
(13:02):
issues with that.
Yeah.
Matt (13:04):
Yeah.
Like I guess, um,confidentiality and, you know,
making sure that your votes aresecret and I've heard about some
, uh, approaches to this kind of, um, you know, making elections
better, but, um, it seems likethe best way forward is to keep
developing this technology, um,seeing if we can get around
(13:25):
those issues and it's betterthan at least it sounds like
there's more potential in theseblockchain approaches than the
current system of digitalvoting, which is just some dodgy
windows XP machine in a, in abooth that you just type your
votes into and hope that it, youknow, this is correct.
And
Kendrick (13:46):
Yeah, because with voting, like how do you
guarantee that the hardwareyou're running is going to
execute what it says on thescreen?
We don't even know that, likeit's a lot, a lot of issues
about like from the hardwarelevel and and if the software is
perfect, how you, you can'tguarantee stuff in hardware that
was simply just too manypotential, uh, backdoors.
(14:09):
Mm.
Matt (14:11):
Um, I'm gonna pivot over to something a little bit
different.
Uh, so you're talking about, Iguess the use of Bitcoin and
crypto currency in general, likeit's, it's kind of going up and
I've noticed, like, there's beennews stories about how, like,
you know, in El Salvador andcountries like that with us
starting to, you know, acceptBitcoin as like legal tender.
(14:32):
Um, so Bitcoin is becoming moreand more popular and people are
more and more interested in, uh,possessing Bitcoin mining
Bitcoin, obtaining Bitcoin.
Um, and that's kind of led tothis discussion about the
environmental impacts ofcryptocurrencies, because
obviously currencies in generalhave their own environmental
(14:53):
impacts, you know, generated byall this production of, you
know, minting and things likethat.
But it's a bit unique and it's abit different because now it's
kind of intersecting with thetech world a little bit and
where, you know, there's beenthis rise of people purchasing
GPU's to mine, Bitcoin and, youknow, different methods of
(15:14):
verifying ledgers and thingslike that has led to the
increase of like computationaluse of power.
Um, so I guess there's like afew, few things been brought up
about that.
Um, I guess, could you give abit of background from your like
cryptocurrency perspective aboutwhat, what, what are the issues
(15:34):
about it?
How, what is the issues ofBitcoin or cryptocurrency and in
terms of that, how is cryptotrying to tackle these issues?
Kendrick (15:46):
Um, well, first of all, I completely agree with
your statement that it'sconsuming too much electricity.
Um, however, I do, I would liketo point out that a lot of the,
like, like the criticismssurrounding the electricity
consumption by the media, it's alittle bit misguided in some
sense, um, cause like Bitcoinand cryptocurrency mining in
(16:10):
general have this very, a uniqueproperty, like their power.
They consume power in a verygeographically independent
manner.
So we're used to consumingpower.
That's kind of close to us.
So for example, Brisbane, weused to pack consuming power.
That's kind of generated inQueensland.
(16:31):
It'd be absurd to think that wewill consume power generate in
some way or Singapore orsomewhere in New Zealand or
somewhere in Iceland, China, butthat's exactly what a Bitcoin
story it's actually consumingelectricity in, in areas that
are kind of, uh, in areas thathave an overabundance of power.
(16:54):
So for example, like the main,uh, mining published in China
and Sichuan and Inner Mongoliafar away from the city center as
well, um, in Iceland where likethe city, like actually
cryptocurrency, mining consumesmore electricity than I think
certain parts of Iceland.
(17:15):
The point being that like theseelectricity consumption is
actually being consumed and alsokeep in mind that energy, energy
is really hard.
Like electricity in particularis very hard and very expensive
to store.
So the minute you produce it, itkind of needs to be consumed
immediately.
Otherwise it would be wasted andelectricity consumption has to
(17:36):
like kind of go with like thepeaks and troughs of our
consumption.
So for example, in the afternoonmight consume more electricity,
but like at night as Bitcoin'slike constant.
Uh, so I guess what I'm tryingto articulate is that a lot of
the times like these energyconsumption by cryptocurrency
and Bitcoin mining inparticular, Bitcoin mining
(17:57):
particular would otherwise beelectricity, that's kind of
wasted.
So you kind of monetize and, uh,and, and kind of like a resource
that would otherwise go towaste.
Um, however, I do agree thatthere's contributing to a lot of
greenhouse gases.
Um, and, uh, there are some wayskind of, there are plans in
(18:19):
Ethereum, not for the coin, thecoin kind of staying on this
whole proof of work thing whereyou use like computational
resources to kind of validatethe block state.
Whereas if you're in this kindof moving on to this, uh, this,
this system of calling it, usingthe system called proof of stake
where you capital to verify, um,the validate like the block
(18:42):
state, rather than using somesort of, uh, some are they're
using a computational power, uh,which would in theory,
significantly reduce, uh, theenergy consumption.
Matt (18:55):
So I guess there's, there's, there's more approaches
being developed now to try toget around this issue, I guess.
That's good.
Um, do, do you think that as aresult of this, um, people might
move away from Bitcoin or do youthink that Bitcoin is kind of
going to have the same value,same role that it has now,
Kendrick (19:15):
Uh, it has past the litmus test, um, too many times,
uh, it's, it's, it's going likea lot of times, like these
ledgers on like thesecryptocurrencies are kind of
like, instead of, I kind of likea social consensus amongst
people, I like to think that, um, like there's now a social
(19:39):
consensus amongst all the hedgefunds and all like the big
finance finance companies thatBitcoin is here to stay and
they're kind of looking moredeeply into it.
And so I do not think that, andBitcoin has a dominant, Bitcoin
is the dominant asset that'slooked at as a stored value kind
of hedge against the recent, uh,US supposedly US inflation.
(20:03):
So I do not think that peopleparticularly, uh, I don't really
think anyone would really moveaway actually, because of these
energy consumption issues.
Matt (20:16):
It's good to keep in mind, you know, um, the impacts of
that kind of thing, and
Kendrick (20:21):
Yeah, yeah, totally agree that it can be, can be
better, but yeah, you know, ifyou, I mean, nationally, and
also if you think that, uh,Bitcoin as a settlement layer is
worth$0 then naturally, or itreally depends on how much you
value Bitcoin as a settlementlayer, as you mentioned,
currencies creation and mintingof currency do generate kind of
(20:45):
like green and greenhouse andcontribute global warming.
So if you think that Bitcoin asthe settlement layer is$0 and
naturally all the energy, likeno matter how much, how middle
energy consumes it still
Matt (20:58):
Is waste.
Yeah.
Yeah.
All right.
Um, I didn't really have anyother questions to ask.
One thing I wanted to ask is if,if some listen up someone
listening would like to find outmore about these kinds of
technologies, uh, where do youthink they should go?
Like, do you have any kind ofresources, things to read things
(21:20):
to watch?
I don't know, um,recommendations,
Kendrick (21:23):
Uh, personally I found that creating a Twitter account
and following a key set ofthought leaders is probably the
best way to get forward becausethe information just there's
just too much information outthere.
It's too sparse.
No, one's, it's no real, uh,there's no centralized
repository where you can kind ofgo through and find out what to
(21:44):
do.
Like it's just too muchhappening every day.
Like every day, that's like anew concept, opening protocol
being released.
There's like a new paper thatyou should read.
And so I would highly recommendcreating a Twitter account and
following a few key.
He key influencers, if you will.
(22:04):
Um, that's like how I stayupdated, otherwise it's just
impossible.
Matt (22:08):
Yeah.
So it sounds a lot like ML hasbeen for the past few years
where it's just a constantstream of information and the
only way to keep up is Twitteror like arXiv and just it's
crazy.
Kendrick (22:21):
Yeah.
Yeah.
Definitely some similaritiesthen.
Yeah.
Yeah.
Matt (22:26):
All right.
Um, that's it for me?
Uh, thanks so much for joiningus on this, uh, episode.
Um, I will make sure to linkeverything that's been mentioned
in the, in the description and,uh, yeah.
Uh, thanks for coming along.
Kendrick (22:42):
Well, thank you.
Thanks for having me.
Thanks.
Matt (22:44):
All right.
That's all we have time fortoday.
Thanks for joining us as usual.
Our next episode will be out ina fortnight, but until then come
join us on our slack communityat slack.uqcs.org.
Hi, and welcome to the router, the official podcast of
the UQ computing society, wherewe explore the human side of
tech.
I'm your host, Matt and we areback after exams with a brand
new episode.
Today we're having a chat toKendrick Tan, also known as
@kendrick on slack.
He has worked in the blockchainspace for many years and
currently works at DFX indecentralized finance, where he
(00:22):
is the chief technical officer.
He's here to give us a 20 minuterundown on blockchain, Ethereum,
decentralized finance, and moreas well as addressing some of
the concerns regarding the pastpresent and future of
cryptocurrencies.
(00:44):
All right.
Welcome Kendrick to the show.
How are you today?
Kendrick (00:47):
I'm good.
How are you?
Matt (00:49):
Yeah.
I'm all right.
Um, before I begin, it would begood if you could introduce
yourself to anyone who doesn'tknow about you, who you are,
what's your background, whereyou work that kind of thing.
Kendrick (01:00):
Yeah, so I'm Kendrick.
So I graduated from QT and 2019with a computer science degree.
Uh, the reason I got a computerscience degree because my mom
wanted me to get a degree and Iwas like, probably quickest way
to get Out of uni.
And so I got one.
So after graduating, I've beenworking full time in the
(01:22):
cryptocurrency space.
Um, I originally wanted to getkind of FAANG job, but after
dipping my toes in thisecosystem, I decided there'll be
such a pity if I didn't kind ofg rab t he opportunity, to go in
such an emerging field.
So since 2 019 I've been workingwith, u h, various companies, u
h, one of them being, u h, theEthereum foundation.
(01:43):
So I contracted with theEthereum foundation for about
half a year.
And we did a lot of work on zero knowledge proofs, which is
like basically m oon math o fpeople l ike to call it, but I
was the one reading the papersand applying the math rather
than coming u p with the m ath.
S o that a very big difference.
U m, in that it was very fun.
(02:03):
Like I l earned a lot about theprocesses of how, like these
cryptographers came u p, came upto these conclusions and how to
actually use them and how, like,it's really interesting how y ou
can like use these propertiesin, u h, in, in, in if y ou're
specifically, anyway, I was i nl ove with a couple of t he
layer two scaling solutions a ndf iguring, w hich i s like, u h,
(02:27):
products or applications o rprotocols t hat a re dedicated
to create help make your scaleslike higher, u h, h igh T PS or
higher transactions, the second.
Uh, but eventually, um, during2020, um, I found out about DeFi
and the decentralized financeand after dipping my toes into
(02:49):
that, I decided I wanted to gofull time into that.
And so I worked for a companycalled UMA.
Unfortunately the time zonesdidn't work out.
And so I left and now I'mcurrently working at DFX, which
I'm also the CTO.
Matt (03:03):
Oh, very nice.
So, uh, you kind of startedworking, um, in Ethereum or
generally, and then moved into,uh, decentralized finance.
Kendrick (03:13):
Yeah.
Yes.
So it was mostly, I wasinterested in the cryptography
space, but then suddenly thiswave of innovation came from,
like on the finance side, Ididn't know anything about
finance back then.
I was still at like a geek, uh,like more like a technical guy,
but just the amount of likesmart people in the space kind
(03:35):
of convinced me that maybe Ishould check it out.
And the minute I did, I was likethere's no turning back.
Yeah.
Matt (03:42):
That sounds super fun.
Um, I guess to begin, um,because personally, I don't know
too much about, uh, this area ofwork.
Uh, could you begin by trying togive like a, I dunno, explain
like I'm five kind ofintroduction to what theorem is,
how it differs from, you know,Bitcoin or other
cryptocurrencies, um, and maybealso a bit of an intro into what
(04:05):
decentralized finance is.
Yeah.
Kendrick (04:08):
Yeah.
So Bitcoin at its very core isjust a ledger, which all the
participants in a network willagree upon the state of the
ledger.
Um, and in Bitcoin's case,there'll be how much Bitcoin
everyone owns.
So for example, uh, if this,like, if it is like 10
(04:28):
participants eventually, andlet's say, I'm sending you 10
Bitcoins, eventually everyone,like you will broadcast a signal
telling everyone in the networksaying, Hey, I sent you 10
Bitcoins, eventually everyone'sledger.
What kind of agreed upon that?
I've sent, you 10 Bitcoins, andso they'll deduct 10 Bitcoins
from my account and add thecoins to your account.
(04:51):
So that's like a very at itshighest level, there's like a
more there's like morecomplicated stuff, such as peer
to peer networking, routing andconsensus theory.
But, um, let's just ignore thatfocus on like the, the core
idea, which is like adecentralized ledger, which will
form eventual consistency orlike a distributed database, if
(05:12):
you don't want to put it thatway.
Okay.
So that's the current state A tostate B.
I want to kind of emphasize thatstate transition because it's
very important in Bitcoin's caseit's very, uh, very application
specific.
It just tells you how manyBitcoins is in transferred from
A to B or like the, the, thedelta, or like the state of how
(05:35):
many Bitcoins you own.
Ethereum on the other hand canbe seen as like a hack of
Bitcoin.
So instead of having a veryrigid system, a very rigid state
transition system state A tostate B.
You any programmer can create anarbitrary logic to kind of
indicate how the statetransitions should be from state
(05:58):
to state.
So if I want to like say deploya new token on Ethereum, and
I'll basically create a newtoken and deploy it onto the
ledger, like there's a gooddatabase, where it stores, like
the byte code of yourapplication.
And let's say state A doesn'thave the tokens.
Once you deploy the contract,State B will state that, Hey, in
(06:18):
this, in this, uh, storage slot,I like to call it, there is now
a new token with this bytecodeand now I can execute arbitrary
code against as, or execute likesome kind of a code on Ethereum
against that deployed by thestate to change more states.
So it's more like a, ageneralized state transition
(06:39):
machine.
And also keep in mind thatEthereum, runs in virtual
machine, just like the JVM, butthey call it the EVM, it's your
emotion machine, which is alsooccurring complete.
So now you have like generalizeds, so that's like a complete
state machine.
Um, and Bitcoin's like more like, uh, application specific ones.
(07:01):
So, uh, in that sense I would,that's what I like to call it
like a hackers Bitcoin.
It's a lot more exciting, uh,because you can build any,
anything you can dream of.
Well, right now, right now it'smainly finance.
Um, because if Ethereum andBitcoin are speculative assets.
So, uh, like the mainapplications built on.
And right now I financiallyrelated, which brings us into
(07:23):
DeFi.
Um, so DeFi is this movementfrom kind of like the secret
world the wall street and likethe centrally controlled, like
Mon like sovereign money intothis, like cyber punkish, uh,
like democratized, uh, moneyplatform, if you will, which is
(07:46):
which essentially what DeFi is.
I remember three years ago whenI started out in this space,
there wasn't a stable point, um,when I started up, but now
there's like so many, so manyfinancial infrastructure, it's
impossible to keep up in thespace.
Matt (08:02):
I mean, so there's so many like different words that kind
of get thrown around when itcomes to like cryptocurrency and
this sort of thing.
So it's good to hear about, um,a few of those things.
Are there any other kind of morespecialized things that you work
in, maybe give a brief introinto, you mentioned
zero-knowledge proofs before.
What is that like?
Like what, what is it likeworking in that space?
(08:23):
Um, I it's, it's a cryptographicthing, right.
So I guess is like a lot of mathinvolved, that kind of thing.
Yeah.
Kendrick (08:29):
Oh, keep in mind.
I was the one who was readingthe papers
Matt (08:31):
Yeah.
Yeah.
That's all good.
Kendrick (08:33):
Yeah.
Yeah.
But essentially what I did mywork in the zero knowledge proof
space is, how do we, it was likea voting system.
It's like, how do I, how do Ivote for someone without
revealing my vote?
And in fact, if you'reinterested in it, I think, uh,
EY also released something to dowith like transacting on the
(08:53):
blockchain with zero knowledgeproofs.
So how do I create a receipt toaccompany that I'm dealing, uh,
that I have like some kind ofrelationship to kind of prove
that I sent payment withoutactually revealing the payment,
because keep in mind, thesepayments are publicly, uh, on a
public ledger.
And if your competitor knows,like who you're paying and how
much you're paying for whatamount of like, uh, supply and
(09:16):
it's like kind of bad news,because then they can kind of
use this information to theiradvantage.
Um, I forgot what it's called,but if you look up EY zero
knowledge proofs ethereum itshould come up.
Matt (09:25):
Yeah, yeah.
I will.
I'll link that in, in thedescription of the podcast.
Um, yeah, I'll find it.
Yeah.
Kendrick (09:32):
So essentially it's like, how do I prove I have
something without necessarilyrevealing that particular
something, um, is the whole ideaof like so much proves there's
also like other rabbit holesthat you want to dive deep into
and it's consensus theory ofwhich I'm not, I'm not I'm, I
haven't touched, touched at all,but there's also something
(09:53):
called MEV or minor extractedvalue.
Um, when I, when I mentionedlike the state transitions, the
all their state transition canbe exploited.
It's almost like an order on anexchange like high-frequency
exchange.
If you were to suddenly jump thequeue, you were like profit and
loss.
And it's the same with like mineextract value because mine is
(10:16):
kind of dictate the order oftransactions that occur.
And how do you like game thesystem?
So what order of the statetransition costs will your
maximum value is quite a, quitea new field.
It's only come around in thelast four months or five months,
but it's slowly gainingmomentum.
(10:33):
Huh.
Sounds interesting.
Um, yeah, I'm new to all thisstuff.
Um, I guess another questionthat people ask, I think, um,
when they hear about, uh,Ethereum cryptocurrencies and
this kind of thing, um, at leastfrom what I've heard, it's, it's
kind of, some people think of itas something that you tried kind
of treat it like a stock or likea, you know, a currency you're
(10:55):
like just buying into it.
Um, and you just hope to see theprice rise when you buy, you
know, try to make some money offof it.
Um, but I guess some peoplelike, like me, I'm wondering,
like there are some of thesebenefits to, you know,
decentralization, um, and Iguess, you know, getting rid of
(11:15):
that, no mysterious wall streethole that the money seems to go
into.
Um, but like what, what other,like, does it solve any other
kind of problems?
Like what, what other things canyou apply this theory of, um,
idea to, in terms of liketechnology,
Kendrick (11:33):
That's definitely the main narrative.
So Bitcoin that's like adecentralized store value.
That's like not...
To answer your question, sorry.
That's one of the main, that'sone of the main use case just
recently, because Bitcoin hasbeen a transfer of value, like
a, like a store value that canelectronically transfer, like
(11:55):
Bitcoin is money as a datastructure, which that concept
is, in my opinion, incrediblypowerful.
I guess we don't really, wedon't really experience it here,
like in Australia because it's alot of that we have a stable
political system or currency isrelatively strong.
There isn't much need to kind ofcall, um, outside of like
(12:16):
sovereign money.
But if you live in say Zimbabweor Venezuela or Turkey, or
recently Turkey where there'slike a dictatorship happening
and, um, there's like, it'spolitical instability, that's a
real, real need to have accessthese kinds of instruments
because you want to be able toleave the country with your
(12:37):
wealth intact.
Like it will be, I mean, if youcan escape the country, but
start from zero, that wouldn'tbe ideal.
Right.
Um, yeah, but to answer yourquestion, that's like the main
use cases and I can perceivecertain other use cases such as
voting, uh, on blockchain.
But that kind of brings up a lotof, um, other, um, potential
(13:02):
issues with that.
Yeah.
Matt (13:04):
Yeah.
Like I guess, um,confidentiality and, you know,
making sure that your votes aresecret and I've heard about some
, uh, approaches to this kind of, um, you know, making elections
better, but, um, it seems likethe best way forward is to keep
developing this technology, um,seeing if we can get around
(13:25):
those issues and it's betterthan at least it sounds like
there's more potential in theseblockchain approaches than the
current system of digitalvoting, which is just some dodgy
windows XP machine in a, in abooth that you just type your
votes into and hope that it, youknow, this is correct.
And
Kendrick (13:46):
Yeah, because with voting, like how do you
guarantee that the hardwareyou're running is going to
execute what it says on thescreen?
We don't even know that, likeit's a lot, a lot of issues
about like from the hardwarelevel and and if the software is
perfect, how you, you can'tguarantee stuff in hardware that
was simply just too manypotential, uh, backdoors.
(14:09):
Mm.
Matt (14:11):
Um, I'm gonna pivot over to something a little bit
different.
Uh, so you're talking about, Iguess the use of Bitcoin and
crypto currency in general, likeit's, it's kind of going up and
I've noticed, like, there's beennews stories about how, like,
you know, in El Salvador andcountries like that with us
starting to, you know, acceptBitcoin as like legal tender.
(14:32):
Um, so Bitcoin is becoming moreand more popular and people are
more and more interested in, uh,possessing Bitcoin mining
Bitcoin, obtaining Bitcoin.
Um, and that's kind of led tothis discussion about the
environmental impacts ofcryptocurrencies, because
obviously currencies in generalhave their own environmental
(14:53):
impacts, you know, generated byall this production of, you
know, minting and things likethat.
But it's a bit unique and it's abit different because now it's
kind of intersecting with thetech world a little bit and
where, you know, there's beenthis rise of people purchasing
GPU's to mine, Bitcoin and, youknow, different methods of
(15:14):
verifying ledgers and thingslike that has led to the
increase of like computationaluse of power.
Um, so I guess there's like afew, few things been brought up
about that.
Um, I guess, could you give abit of background from your like
cryptocurrency perspective aboutwhat, what, what are the issues
(15:34):
about it?
How, what is the issues ofBitcoin or cryptocurrency and in
terms of that, how is cryptotrying to tackle these issues?
Kendrick (15:46):
Um, well, first of all, I completely agree with
your statement that it'sconsuming too much electricity.
Um, however, I do, I would liketo point out that a lot of the,
like, like the criticismssurrounding the electricity
consumption by the media, it's alittle bit misguided in some
sense, um, cause like Bitcoinand cryptocurrency mining in
(16:10):
general have this very, a uniqueproperty, like their power.
They consume power in a verygeographically independent
manner.
So we're used to consumingpower.
That's kind of close to us.
So for example, Brisbane, weused to pack consuming power.
That's kind of generated inQueensland.
(16:31):
It'd be absurd to think that wewill consume power generate in
some way or Singapore orsomewhere in New Zealand or
somewhere in Iceland, China, butthat's exactly what a Bitcoin
story it's actually consumingelectricity in, in areas that
are kind of, uh, in areas thathave an overabundance of power.
(16:54):
So for example, like the main,uh, mining published in China
and Sichuan and Inner Mongoliafar away from the city center as
well, um, in Iceland where likethe city, like actually
cryptocurrency, mining consumesmore electricity than I think
certain parts of Iceland.
(17:15):
The point being that like theseelectricity consumption is
actually being consumed and alsokeep in mind that energy, energy
is really hard.
Like electricity in particularis very hard and very expensive
to store.
So the minute you produce it, itkind of needs to be consumed
immediately.
Otherwise it would be wasted andelectricity consumption has to
(17:36):
like kind of go with like thepeaks and troughs of our
consumption.
So for example, in the afternoonmight consume more electricity,
but like at night as Bitcoin'slike constant.
Uh, so I guess what I'm tryingto articulate is that a lot of
the times like these energyconsumption by cryptocurrency
and Bitcoin mining inparticular, Bitcoin mining
(17:57):
particular would otherwise beelectricity, that's kind of
wasted.
So you kind of monetize and, uh,and, and kind of like a resource
that would otherwise go towaste.
Um, however, I do agree thatthere's contributing to a lot of
greenhouse gases.
Um, and, uh, there are some wayskind of, there are plans in
(18:19):
Ethereum, not for the coin, thecoin kind of staying on this
whole proof of work thing whereyou use like computational
resources to kind of validatethe block state.
Whereas if you're in this kindof moving on to this, uh, this,
this system of calling it, usingthe system called proof of stake
where you capital to verify, um,the validate like the block
(18:42):
state, rather than using somesort of, uh, some are they're
using a computational power, uh,which would in theory,
significantly reduce, uh, theenergy consumption.
Matt (18:55):
So I guess there's, there's, there's more approaches
being developed now to try toget around this issue, I guess.
That's good.
Um, do, do you think that as aresult of this, um, people might
move away from Bitcoin or do youthink that Bitcoin is kind of
going to have the same value,same role that it has now,
Kendrick (19:15):
Uh, it has past the litmus test, um, too many times,
uh, it's, it's, it's going likea lot of times, like these
ledgers on like thesecryptocurrencies are kind of
like, instead of, I kind of likea social consensus amongst
people, I like to think that, um, like there's now a social
(19:39):
consensus amongst all the hedgefunds and all like the big
finance finance companies thatBitcoin is here to stay and
they're kind of looking moredeeply into it.
And so I do not think that, andBitcoin has a dominant, Bitcoin
is the dominant asset that'slooked at as a stored value kind
of hedge against the recent, uh,US supposedly US inflation.
(20:03):
So I do not think that peopleparticularly, uh, I don't really
think anyone would really moveaway actually, because of these
energy consumption issues.
Matt (20:16):
It's good to keep in mind, you know, um, the impacts of
that kind of thing, and
Kendrick (20:21):
Yeah, yeah, totally agree that it can be, can be
better, but yeah, you know, ifyou, I mean, nationally, and
also if you think that, uh,Bitcoin as a settlement layer is
worth$0 then naturally, or itreally depends on how much you
value Bitcoin as a settlementlayer, as you mentioned,
currencies creation and mintingof currency do generate kind of
(20:45):
like green and greenhouse andcontribute global warming.
So if you think that Bitcoin asthe settlement layer is$0 and
naturally all the energy, likeno matter how much, how middle
energy consumes it still
Matt (20:58):
Is waste.
Yeah.
Yeah.
All right.
Um, I didn't really have anyother questions to ask.
One thing I wanted to ask is if,if some listen up someone
listening would like to find outmore about these kinds of
technologies, uh, where do youthink they should go?
Like, do you have any kind ofresources, things to read things
(21:20):
to watch?
I don't know, um,recommendations,
Kendrick (21:23):
Uh, personally I found that creating a Twitter account
and following a key set ofthought leaders is probably the
best way to get forward becausethe information just there's
just too much information outthere.
It's too sparse.
No, one's, it's no real, uh,there's no centralized
repository where you can kind ofgo through and find out what to
(21:44):
do.
Like it's just too muchhappening every day.
Like every day, that's like anew concept, opening protocol
being released.
There's like a new paper thatyou should read.
And so I would highly recommendcreating a Twitter account and
following a few key.
He key influencers, if you will.
(22:04):
Um, that's like how I stayupdated, otherwise it's just
impossible.
Matt (22:08):
Yeah.
So it sounds a lot like ML hasbeen for the past few years
where it's just a constantstream of information and the
only way to keep up is Twitteror like arXiv and just it's
crazy.
Kendrick (22:21):
Yeah.
Yeah.
Definitely some similaritiesthen.
Yeah.
Yeah.
Matt (22:26):
All right.
Um, that's it for me?
Uh, thanks so much for joiningus on this, uh, episode.
Um, I will make sure to linkeverything that's been mentioned
in the, in the description and,uh, yeah.
Uh, thanks for coming along.
Kendrick (22:42):
Well, thank you.
Thanks for having me.
Thanks.
Matt (22:44):
All right.
That's all we have time fortoday.
Thanks for joining us as usual.
Our next episode will be out ina fortnight, but until then come
join us on our slack communityat slack.uqcs.org.
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