Silvio Micali: Cryptocurrency, Blockchain, Algorand, Bitcoin & Ethereum | Lex Fridman Podcast #168

1. 0:00 – 1:59

   Introduction

   1. LFLex Fridman0:00

      The following is a conversation with Silvio Micali, a computer scientist at MIT, winner of the Turing Award, and one of the leading minds in the fields of cryptography, information security, game theory, and most recently, cryptocurrency and the theoretical foundations of a fully decentralized secure and scalable blockchain at Algorand, a company of cryptographers, engineers, and mathematicians that he founded in 2017. Quick mention of our sponsors, Athletic Greens nutrition drink, The Information in-depth tech journalism website, Four Sigmatic Mushroom Coffee, and BetterHelp online therapy. Click the sponsor links to get a discount and to support this podcast. As a side note, let me say that I will be having many conversations this year on the topic of cryptocurrency. I'm reading and thinking a lot on this topic. I just recently finished reading the Bitcoin Standard, a book I highly recommend. As always, with this podcast, I'm approaching it with an open mind, with compassion, with as little ego as possible, and yes, with love. I hope you go along with me on this journey and don't judge me too harshly on any likely missteps. As usual, I will play devil's advocate. I will, on purpose, sometimes ask simple, even dumb questions, all to try and explore the space of ideas here with as much grace as I can muster. I have no financial interests here, I only have a simple curiosity and a love for knowledge, especially about a set of technologies that may very well transform the fabric of human civilization. If you enjoy this thing, subscribe on YouTube, review it on Apple Podcasts, follow on Spotify, support it on Patreon, or connect with me on Twitter @lexfriedman. And now, here's my conversation with Silvio Micali.

2. 1:59 – 4:56

   Blockchain

   1. LFLex Fridman1:59

      Let's start with the big and the basic question. What is a blockchain and why is it interesting, why is it fascinating, why is it powerful?

   2. SMSilvio Micali2:08

      All right. So a blockchain, think of it, is a- is really a common database, distributed. Think about it as a ledger in which everybody can write an entry in a page. You can write, I can write, and everybody can read, and you have a guarantee that everybody has the same copy of the ledger that is in front of you. So if- whatever you see on page seven, anyone else sees on page seven. So what is, uh, extraordinary about this is this common knowledge thing that I think is a really- a first for humanity. I mean, if you look at communication, like right now you can communicate very quickly images or pho- photos, but do you ever the certainty that whatever you have received has been received by everybody else? Not really. And so this commonality of knowledge and the certainty that everybody can write, nobody has- has been prevented from writing whatever they want. Nobody can erase, nobody can tear a page of a ledger, nobody can swap page, nobody can change anything, and, uh, that is immutable common record is, uh, extremely powerful.

   3. LFLex Fridman3:23

      And there's something fundamental that is decentralized about it, so at least in spirit, uh, some degree against maybe a resistance to centralization.

   4. SMSilvio Micali3:34

      Absolutely. If it is not decentralized, how can it be common knowledge? If only one person or a few people have a ledger, the only w- you don't have a ledger, you have to ask, you know, what is on page seven and how do you know that whatever they tell you is on page seven, they tell the same thing to everybody else. And so that is, this commonality is extremely, um, powerful just to, uh, um, just to give you an example, assume that, uh, you do an auction, okay? You have, uh, worked very hard, you build a building and now you want to auction off. Makes sense because, uh, you want to auction worldwide, better yet, you want to tokenize the building and sell it in, um, in parcels. Now, everybody sees the bids and you know that everybody sees the bids. You and I see the same bid and so does everybody else, so you know that a fair price is reached and you know who owns what and who has paid how much. And if you do it inst- instead of otherwise in a centralized system, I put a bid, say, "Oh, congratulations, Alexei, you won and your price is $12,570." How do you know? (laughs) So if instead there is a common knowledge is a very powerful, um, uh, tool for humanity.

3. 4:56 – 7:45

   Cryptocurrency

   1. SMSilvio Micali4:56

   2. LFLex Fridman4:56

      So we returned to it from a bunch of different perspectives, including like a technical perspective, but you often talk about blockchain and some of these concepts of decentralization, scalability, security, all those kinds of things, but one of the most maybe impactful, exciting things that leverage the blockchain, this kind of ledger idea of common knowledge, is cryptocurrency. So the fi- in the financial space.

   3. SMSilvio Micali5:27

      Yes.

   4. LFLex Fridman5:28

      So is there... Can you say in the same kind of basic way what is cryptocurrency in the context of this common knowledge and in the context of the blockchain?

   5. SMSilvio Micali5:37

      Great. Cryptocurrency, right, is a- is a currency that is on such a ledger. So imagine that on the ledger, right, initially, you know that somehow, say, you and I are the only owner, each one, let's give it a- our- e- eh- ourselves a billion, uh, each or whatever this unit. Then I start, uh, uh, writing on the ledger, I give a hundred of these units to my sister...... you give, I give this much to my aunt. And then, and then now because it's written on the ledger and everybody can see, my sister can give 57 of these units that she received from me to somebody else. And so, and, and, and, and that is money, and that is money because you can see that somebody who tenders you a payment has really the money there, right? You don't have any more of a doubt when you want to sell an item. "If I write you a check, is the check covered?" If I, uh, w- right, or do I have the money at the moment of a transaction? You really see because the ledger is always updated. What you see is what I see, what the merchant sees. You know that I have the money, so is, uh, is the most, um, powerful, uh, um, um, money system there is because it is totally transparent. And so you know that you have been paid, and, uh, and you know that the money is there. You have not to second-guess anything else.

   6. LFLex Fridman6:58

      So the, the common knowledge applied there is you're basically mimicking the same kind of thing you would get in physical space, which is, uh, if you give 100 bucks or 100 of that thing, whatever, of that cryptocurrency to your sister, the actual transfer is as real as you giving, like, a, a, a, a basket of apples to your sister. Because the, uh ... So in the case, in the physical space, the, the common knowledge is in the physics-

   7. SMSilvio Micali7:31

      Right.

   8. LFLex Fridman7:31

      ... of the atoms.

   9. SMSilvio Micali7:32

      Yes.

   10. LFLex Fridman7:32

       And in its digital space, the common knowledge is in this ledger. And so that transfer holds, um, the same kind of power, but now it's operating in that digital space.

4. 7:45 – 11:59

   Money

   1. LFLex Fridman7:45

   2. SMSilvio Micali7:45

      Correct.

   3. LFLex Fridman7:47

      Again, I apologize for a set of ridiculous questions, but, uh, you mentioned cryptocurrency as money. What, what is money? Uh.

   4. SMSilvio Micali7:57

      (laughs)

   5. LFLex Fridman7:58

      Why do we have money? Do you think about this kind of from this high philosophical level at times of this, uh, tool, this idea that we humans have all kind of came up with and seem to be using effectively to do stuff?

   6. SMSilvio Micali8:14

      (laughs) Um, uh, money is a social construct, okay? In, in, in my opinion. And this has been, um, somehow people always felt that somehow money is a way to allow us to transact even though we want different things.

   7. LFLex Fridman8:30

      Yeah.

   8. SMSilvio Micali8:30

      So I have, uh, two sheep, and then, uh, you have one cow. And I want the cow, but you are looking for blankets instead, you know? So to have money is really simplifies this. But at the end of ... And that's why, uh, Bitcoin was invented. And you start with gold, you start then with coinage, and then you start with check. But at the end of the day, money is essentially a social construct because you know that what you receive, you can actually spend with somebody else. And so there is a kind of a social pact and social belief that, that, that you have. Uh, at the end of the day, even barter is a, requires, um, th- these beliefs, that other people are going to accept the "currency" you offer them. Because if I'm a mason, and you ask me to build a wall, uh, in your, um, field, and I did, and you, uh, in exchange, you give me 1,000 sheep, what am I going to do? Eat them all? No, I have to feed them. (laughs) And if I don't feed them, they die, and I, my value is zero. So in receiving these livestock, I must believe that somebody else will accept them in return for something else.

   9. LFLex Fridman9:48

      Yeah, that's fascinating.

   10. SMSilvio Micali9:48

       So money is this social belief, social shared belief system that makes people transact.

   11. LFLex Fridman9:56

       That's fascinating. I didn't even, I didn't even think about that. That you, you're actually, uh, you, you have a deep, like, network of beliefs about how society operates. So the value is assigned even to sheep based on that everyone will continue operating how they were previously operating.

   12. SMSilvio Micali10:14

       Yeah.

   13. LFLex Fridman10:14

       Somebody will feed the sheep. Some ... (laughs)

   14. SMSilvio Micali10:16

       (laughs)

   15. LFLex Fridman10:17

       I didn't even, I didn't even think about that. That's, that's fascinating. So that directly transfers to, uh, to the space of money and then to the space of digital money and cryptocurrency, okay. Uh, does it bother you sort of intellectually when this money that is a social construct is not directly tied to physical goods like, uh, gold, for example?

   16. SMSilvio Micali10:41

       Not at all, because after all, gold has some industrial value. Nobody denies it. It's a, it's a metal, it doesn't oxidate, it has some good things about it. But (laughs) does this industrial value really represent the value at which it now is traded? No. So gold is another way to express our belief. I give you an ounce of gold, you treat it like, "Oh, somebody else will want this for doing, uh, um, something else." So it is really this notion of this ... Money is a, a mental construct. It's really ... A- and it's shared. It's a, it's a social construct, I really, uh, believe. And so some people feel that it's physical, so therefore gold exists. Uh, but then, as you know now, we, um, countries, most sophisticated, uh, country right now, uh, they print their own money, and you believe that they are not going to exaggerate it with inflation. Not everybody believes that, but I'm saying there is at least a ... Not, they're not going to exaggerate it blatantly. And, uh, and therefore you receive it because you know that, um, somebody else will accept it, will have faith in the currency and so on and so forth. But whether it's gold, whether it's livestock, whether whatever it is, money is really a shared belief.

5. 11:59 – 13:41

   Scarcity

   1. SMSilvio Micali11:59

   2. LFLex Fridman11:59

      So there, there is something, you know ... And I've been reading more and more about different cryptocurrencies.There is a kind of a belief that the scarcity of a particular resource, like Bitcoin has a limited amount, uh, and it's tied to physical, you know, uh, to, to, to proof of work. So it's tied to physical reality in terms of how much you can mine effectively and so on. That that's an important feature of money. Do you think that's an important feature to be, uh, part of whatever the money is?

   3. SMSilvio Micali12:35

      That is certainly a very useful part. So, um, at some point in time, you know, assume that, um, money is something that all of a sudden we say, "Daisies are money. I have a currency."

   4. LFLex Fridman12:46

      (laughs)

   5. SMSilvio Micali12:47

      Then, uh, you know, I offer you 10 daisies in payment of whatever goods and services you want to provide. But, but at, at the end of the day, if you know that, uh-

   6. LFLex Fridman12:56

      Mm-hmm.

   7. SMSilvio Micali12:56

      ... you can cultivate it and generate them, um, at will, then, uh, perhaps, you know, you should not accept, uh, my payment in, uh, "Here is a, a, um, um, bouquet of daisies." Uh, uh... So you need some kind of a scarcity, the inability to create it, uh, suddenly out of nothing is, uh, is, uh, is an important. And, um, and, uh, it's not that, uh, intrinsic necessity, but it's much easier to accept once you know that there is a fixed number of units or whatever currency there is, and therefore you can mentally understand, "I'm getting, you know, this much or this piece of, of the pie, and therefore I consider myself paid, I understand what I'm receiving."

6. 13:41 – 17:06

   Scalability, Security, and Decentralization

   1. SMSilvio Micali13:41

   2. LFLex Fridman13:41

      You described the goals of a blockchain, you have a nice presentation on this, uh, as scalability, security, and, uh, decentralization. And you challenge the blockchain trilemma that claims you can only have two of the three. So let's talk about each.

   3. SMSilvio Micali13:58

      (laughs)

   4. LFLex Fridman13:58

      What is scalability? In, in the context of blockchain and cryptocurrency, what does scalability mean?

   5. SMSilvio Micali14:03

      So, huh, remember, if we said that the blockchain is a ledger and each page receives a... gets some transaction and everybody can write in this, uh, in these, uh, pages of a ledger, nobody can be stopped for writing and everybody can read them. Okay. Scalability means how fast can you write? Just imagine that you can write an entry in this, uh, special shared ledger once every hour. Well, you know, what are you going to do if you have an, uh, one transaction per hour? Uh, the world doesn't go around. So you need, um, uh, to have scalability means here that you can somehow write a lot of transaction and then, uh, you, you can read them and everybody can validate them, and that is the speed and, and, and this, um, and the number of transactions, um, per second, and the fact that they are shared, so you want to have this, uh, th- this, uh, the speed not only in writing, but in, in sharing and, uh, and, uh, and inspection for validity. This is scalability. The world is big, the world wants to interact with... people want to interact with each other, and, uh, you better be prepared to have a ledger in which you can write lots and lots and lots of transactions in this special way very, very, very quickly.

   6. LFLex Fridman15:19

      So maybe from a more mathematical perspective or can we say something about how much scalability is needed for a world that is big?

   7. SMSilvio Micali15:28

      (laughs) Well, it really depends how many transactions, um, uh, you want. But remember that, um, I, I, I think and, um, um, uh, right now yet to go into at least 1,000 sub-transactions, uh, um, uh, per second. Even if you look at and, um, uh, um, credit cards, right? And, um, we are going to go from, uh, an average of 1,600 to peaks of, uh, uh, 20,000, of, of, uh, 40,000. Uh, something like this. But, uh, but remember, it's not only a question of a, of a transaction per se, but the value is that the transaction is actually being shared and visible to everybody. And the certainty that that is the case. I can, uh, print on, on my own printer, uh, way more transactions that nobody has ev- the time to see or to inspect, that doesn't count, right? So you want scalability at this common knowledge level, and that is the challenge.

   8. LFLex Fridman16:24

      I also meant from a perspective of like, uh, like a complexity analysis. So does it... You know, when you get more and more people involved, doesn't it just scale in some kind of way that, uh... Like do you, do you like to see certain kind of properties in order to say something is scalable?

   9. SMSilvio Micali16:42

      Oh, absolutely. I took a little bit implicitly that the people transacting are, uh, actually very different.

   10. LFLex Fridman16:49

       Mm-hmm.

   11. SMSilvio Micali16:49

       So if there is two people who can do, uh, uh, 5,000 transaction per second with each other, this is not so interesting. What we really need is to say there are billions of people at any point in time, you know, thousands and thousands of them want to transact with, with each other, and you want to support that.

7. 17:06 – 33:40

   Algorand

   1. LFLex Fridman17:06

      So Algorand, uh, it solves... So that's the, the, the company, the team, the cryptographers and mathematicians, engineers, so on that challenge the blockchain trilemma. So let's break it down. In terms of achieving scalability, how do we achieve scalability in, in the space of blockchain, in the space of cryptocurrency?

   2. SMSilvio Micali17:28

      Okay, so, uh, scalability, security, uh, remember, and decentralization, right?

   3. LFLex Fridman17:34

      Yes, yeah.

   4. SMSilvio Micali17:34

      So that, that's what, what they want -

   5. LFLex Fridman17:35

      What's the best way to approach? Can we break it down? Let's start with scalability and think about how do we achieve it?

   6. SMSilvio Micali17:41

      Well, to achieve it, uh, one at a time is, uh, um, uh, perhaps a little easy. Even security, if nobody transacts, nobody loses money. So that is secure, but it's not (laughs) scalable. So-

   7. LFLex Fridman17:53

      Good point.

   8. SMSilvio Micali17:54

      ... let me tell you, I'm a cryptographer so, so I try to, um, fight the bad guys and, uh, what they... what you want is that this ledger that we discussed before, uh, cannot be tampered with. So you must think of it that, uh, is a special ink that nobody can erase.

   9. LFLex Fridman18:11

      Okay.

   10. SMSilvio Micali18:11

       Then it has to be...... eh, everybody should be able, uh, to read and not to alter the, the pages or the content of the pages. That's okay. But you know what? Uh, that is actually easy cryptographically. Easy cryptographically means you can use tools invented 50 years ago, which in cryptographic time is prehistory. Okay? We are (laughs) cavemen working around-

   11. LFLex Fridman18:37

       Yes.

   12. SMSilvio Micali18:38

       ... and solve their problem in cryptography land. But, you know, but there is really a fundamental problem which is really almost a social, it seems a political problem, is to say, who the hell chooses or publishes the next page of a ledger? I mean, that is really the challenge. This ledger, you can always add a page because more and more transaction are to be written on there, and somebody has to assemble this, this transaction, putting them on a page, and add the next page. Who is this somebody who chooses the page and adds it on?

   13. LFLex Fridman19:13

       Who can be trusted to do it?

   14. SMSilvio Micali19:14

       Exactly. Assume it is me for the time being, right, not that I want volunteer for the job, but then I would have more power than any absolute monarch in history because I would have the tremendous power to say, "These are the transactions that the entire world should see. And whatever I don't write, this transaction will never see the light of day." I mean, no one had any such power in history. So it's very important to, uh, to do that. And that is the quintessential problem in a blockchain. And, uh, people have thought about it to say, "It's not me, it's not you," but for instance, in, uh, proof of work, what people say is they'll say, "Okay, it's not me, it's not you." You know what it is? We make a very difficult... We invent an, a cryptographic puzzle, very hard to solve. The first one who solves it has the right to add one page to the ledger on behalf of everybody else. And that's now is, seems okay because, you know, sometimes I solve the puzzle before you do, sometimes you solve it before I do or before, uh, somebody else, somebody else solves it, it's okay.

   15. LFLex Fridman20:22

       And presumably, the effort you put in is somehow correlated with how much trust, uh, you should be given to add to the ledger.

   16. SMSilvio Micali20:33

       Yeah, so somehow you want to make sure that, you know, you need to w- work because you want to prevent... You want to make sure that, you know, you get one solution every 10 minutes, say, like in, in part- in particular example of Bitcoin. So that is very rare that two pages are added at the same time.

   17. LFLex Fridman20:51

       Mm-hmm.

   18. SMSilvio Micali20:51

       Because if I solve the pu- puzzle at the same time you do, it could happen that, uh... If it happens once or twice, we can survive this. But if it happens, you know, every other page, you know, is a double page, then, uh, which, uh, of the two is the real page? It becomes a problem. So that's why in Bitcoin it is important that, to have a substantial amount of work so that no many how many people try on Earth to solve a puzzle, you have one solution out of how many people are trying every 10 minutes. So that you have, you distanciate these pages and you have the time to propagate through the network the solution and the page attached to it, and therefore there is one page at a time that is added.

   19. LFLex Fridman21:35

       Mm-hmm.

   20. SMSilvio Micali21:36

       And they say, "Well, why don't we do it? We have a solution." Well, first of all, a page every 10 minutes is not fast enough, so it's a question of scalability. And second of all, to ensure that no matter how many people try, you get, uh, one page every 10 minutes, one solution to the riddle every 10 minutes. This means that, uh, the riddle becomes very, very hard. And, uh, to s- to have a chance to solve it in, within 10 minutes you must have such an expensive apparatus in terms of specialized computers. Not one, not two, but thousand and thousand of them. And they produce tons of heat, okay? This, they dissipate heat like maniac. And then you need to refrigerate them too. And so then now you have air conditioning, uh, galore to add it to the thing. It becomes so expensive that fewer and fewer and, and fewer people can actually compete in order to add to the page. And, uh, and, and the problem becomes so, so, uh, so, um, crucial that, you know, uh, in a, in, uh, in Bitcoin, um, depending on which day of the week you look at it, you are going to have two or three mining pools are really the ones, uh, capable of controlling the chain. And-

   21. LFLex Fridman22:56

       So you're saying that's, uh, that's almost like, uh, leads to centralization.

   22. SMSilvio Micali23:02

       Right. It started being decentralized, and... But the expenses become higher and higher and higher. When the cost becomes higher and higher, fewer and fewer people can afford them, and then, you know, it becomes, you know, de facto centralized, right?

   23. LFLex Fridman23:17

       Yeah.

   24. SMSilvio Micali23:18

       And, uh, and a different type of approach, uh, is instead, for instance, a delegated proof of stake, which is also very easy to explain, uh, essentially boils down to, to say, well, uh, look at these, uh, 21 people, say, okay? Uh, don't they look honest? Yes, they do. In fact, I believe that they're going to remain honest for the foreseeable future, so why don't we do ourselves a favor? Let's entrust them to add the page on behalf of all of us to the ledger. Okay? Okay. But now we are going to say, is this centralized or decentralized? Well, 21 is better than one (laughs) , what can I say? It's very little. So if you look at, uh, when people rebelled to centralize power, I don't know, the French Revolutions, okay?

   25. LFLex Fridman24:07

       Mm-hmm.

   26. SMSilvio Micali24:07

       There was a monarch and the nobles.

   27. LFLex Fridman24:09

       Yes.

   28. SMSilvio Micali24:09

       Uh, were there 21 nobles? No, there were thousands of them. But there were millions and millions of, uh, disempowered, uh, citizens. So-... one is centralized, 21 is also centralized. Right?

   29. LFLex Fridman24:22

       So that's delegated proof of stake.

   30. SMSilvio Micali24:24

       Delegated proof of stake.
8. 33:40 – 36:43

   Bitcoin

   1. SMSilvio Micali33:40

   2. LFLex Fridman33:40

      So everything you just described is kind of, it's fascinating, uh, set of ideas, and I, you know, online I've been reading quite a bit, and people are really excited about those set of ideas. Nevertheless, it is not the dominating technology today. So Bitcoin, in terms of cryptocurrency, is the most popular, uh, cryptocurrency, and then Ethereum and so on. So it's useful to kind of comment, we already talked about proof of work a little bit, but what, in your sense, does Bitcoin get right, and where is it lacking?

   3. SMSilvio Micali34:16

      Okay. So the first thing that Bitcoin got right is to understand that there was the need of a cryptocurrency. And that, in my opinion, Trumps (laughs) . They deserve all the success because they said the time is ripe for this idea.

   4. LFLex Fridman34:31

      Yes.

   5. SMSilvio Micali34:31

      Because very often, it's not enough to be right, you have to be right at the right time-

   6. LFLex Fridman34:35

      Yes.

   7. SMSilvio Micali34:36

      ... and, uh, somebody got it right there. So hat off to Bitcoin for that. And, um, and so what they got right is they make, that is make, that is hard to subvert and change the ledger, to, to cancel a, um, transaction. It's not impossible, but it is very h- hard. What they did not get right is somehow better, is a great store of value currency-wise, but, uh, money is not only a question that you store it and you put under the mattress. Money wants to be transacted. And the transaction in Bitcoins are very little. So if you want to store value, everybody needs to store value, might as well use Bitcoin. I mean, it's the plan, but, uh, uh, if you are o- um, uh, don't look at it for a moment, at least there's a great store of value, and everybody needs a store of value. But most of the time, we want to transact, we want to interact, we don't put the money under the mattress, right? So we want to transact. And that, they didn't get it right. That is too slow to transact. Too, too few transactions.

   8. LFLex Fridman35:43

      Just the scalability.

   9. SMSilvio Micali35:44

      The scalability issue.

   10. LFLex Fridman35:45

       Is it possible to build stuff on top of Bitcoin that's, uh, sort of, uh, fixes the scalability? I mean, this is the thing, you look at, there's a bunch of technologies that kind of, uh, hit the right need at the right time, and they have flaws, but we kind of build infrastructures on top of them over time to fix it. Uh, as opposed to getting it right from the beginning. Or, or is, is it difficult to do?

   11. SMSilvio Micali36:15

       Well, that is difficult to do. So you are talking to somebody that when I decided to throw my hat in the arena-And I decided, first of all, I, as I said before, I much admire my predecessors. I mean, they got it right on lot of things, and I- and I- I really am a- admire for that. But, you know, I had, uh, a choice to make. Either I patch something that has holes all over the place-

   12. LFLex Fridman36:39

       Yes.

   13. SMSilvio Micali36:39

       ... or I start from scratch.

   14. LFLex Fridman36:40

       Yeah.

   15. SMSilvio Micali36:40

       I decided to start from scratch because sometimes-

   16. LFLex Fridman36:42

       Yeah.

   17. SMSilvio Micali36:42

       ... it's a

9. 36:43 – 38:14

   Ethereum

   1. SMSilvio Micali36:43

      better way.

   2. LFLex Fridman36:43

      So what about, uh, Ethereum? Which looks like proof of stake and a lot of difference innovative ideas are kind of, uh, improve or seek to improve on some of the flaws of Bitcoin.

   3. SMSilvio Micali36:55

      Ethereum had another great idea. So they figured out that was- that money and payments are important as they are. They're only the first level, the fi- first stepping stone. The next level are, uh, smart contracts, and they were at the vision to says, "The people will need smart contract which allow me and you to, somehow, to- to transact securely without being shopped around by a trusted third party, by a mediator." By the way, because mediators are hard to find, and in fact, maybe even impossible to find. If you live in Thailand and I live in, um, in- in New Zealand, maybe we don't have a- a common person that we know and trust. And even if we find them, guess what? They want to be paid. So much so, right, that, uh, 6% of the- of the world, uh, GDP is, um, goes into financial friction, which is essentially third party. So, they had it right, the world needed that, but again, the scalability is not there, and the system is, of smart contracts in Ethereum, is so slow and expensive. And, um, and I- I believe is not enough to satisfy the- the appetite and the need we have for smart contracts.

10. 38:14 – 41:38

    NFTs

    1. SMSilvio Micali38:14

    2. LFLex Fridman38:14

       Well, what do you make of, just as a small sort of aside in human history, perhaps it's a big one, is the NFT, the non-fungible tokens. Do you find those interesting technically or is it more interesting on the social side of things?

    3. SMSilvio Micali38:28

       Well, um, um, both. I think, you know, I think it's, um, NFTs are actually great, right? So you have this, um, you are an artist who create, um, a song, or it could be, um, a- um, um, a piece of art. Um, he has many unique representation, right, of a- of- of unique, um, uh, piece, whether is an artifact or of a- a something dreamed up, uh, by you. And, uh, and as unique representation that now you can trade. And allow... And the important fact is that now you have this, uh, not only the NFTs themselves, but the ability to trade them quickly, fast, securely, knowing that who- who owns which rights. And, uh, that gives a totally new opportunity for content creators to be remunerated for what they do.

    4. LFLex Fridman39:20

       So, but ultimately, you still have to have the scalability, security, uh, and decentralization to- to make this-

    5. SMSilvio Micali39:29

       Yes.

    6. LFLex Fridman39:29

       ... you know, to- to make it work-

    7. SMSilvio Micali39:31

       Absolutely.

    8. LFLex Fridman39:32

       ... for bigger and bigger applications.

    9. SMSilvio Micali39:33

       Correct, yeah.

    10. LFLex Fridman39:35

        Yeah. I- I still wonder what kind of applications are yet to be, like, enabled by it because so much... The interesting thing about NFTs, you know, if you look outside of art, is, uh, just like money, you can start playing with different social constructs, is you can start playing with the ideas, you can starting playing with, um, with, uh, even, like, investing. Somebody was talking about almost creating an economy out of, uh, like, uh, creative people or influencers. Like, if you start a YouTube channel or something like that, you can invest in that person, and you can start trading their creations, and then almost like create a market out of people's ideas, out of people's creations, out of the people themselves, uh, that generate those creations. And there's a lot of interesting possibilities of what you can do with that. I mean, it seems ridiculous but, uh, you're basically creating a hierarchy of value, maybe artificial, in the digital world and, uh, trading that.

    11. SMSilvio Micali40:46

        Yeah.

    12. LFLex Fridman40:46

        But in so doing, are inspiring people to create. (laughs) So maybe, uh, as a sort of our economy gets better and better and better where actual work in the physical space, uh, becomes less and less in terms of its importance, maybe we'll completely be operating in a digital space where, uh, where these kinds of economies have more and more power, and then you have to have this kind of blockchains to, uh, the scalability, security and decentralization. And then decentralization is, of course, the tricky one because, uh, people in power start to get nervous.

    13. SMSilvio Micali41:25

        Absolutely. (laughs) Once in power, you're always nervous that you'll be supplanted by somebody else. But this is your job.

    14. LFLex Fridman41:33

        So you- you-

    15. SMSilvio Micali41:33

        Congratulations, you got the job, the top job, and now everybody wants it. (laughs)

    16. LFLex Fridman41:37

        Well,

11. 41:38 – 45:46

    Decentralization of power

    1. LFLex Fridman41:38

       what is your sense about our- our time and the future hope about the decentralization of power? Do you think that's something that we can actually achieve, uh, given that power corrupts, and absolute power corrupts absolutely, and it's so wonderful to be absolutely powerful?

    2. SMSilvio Micali42:00

       Well, good question. So there are... So first of all, I believe that, by the way, there is, um, um... It's a complex questions, uh, Lex, um, um, uh, like all the rest of your questions. (laughs)

    3. LFLex Fridman42:13

       (laughs) I- I'm so very sorry.

    4. SMSilvio Micali42:16

       Uh, it's okay. I- I am enjoying it. So, but, um, so there are two things. First of all, power has been, um, centralized for a variety of reasons. When you want to get it, it's easier for somebody, uh, even a single, uh, person to grab power. But there is also some kind of a technology-... lack thereof that, uh, justified having power. Because in a way, i- in a society in which even communication, nevermind blockchain, which is common knowledge, but even simple unilateral communication is hard, it is much easier to say, "You do as I say," because, uh, the alternatives. But as... So there is a little bit of a technology barrier, but I think that... And, and now to get to this common knowledge that is a totally different story, now we have finally the technology for doing this. So that is one part. But I really believe that, you know, not... By having a distributed system, not only you don't have a way... Um, um, you have actually much more stable and doable system, because not only for corruption, but even for things that go astray. And you give it a long enough time by strange, uh, version of Murphy's Law, whatever goes wrong, goes wrong. (laughs)

    5. LFLex Fridman43:32

       Yeah.

    6. SMSilvio Micali43:32

       And so... And if y- the power is diffused, you actually are much more stable. If you look at a, any, any living, uh, complex living being is distributed. I mean, um, uh, I don't have somebody say, "Okay, tell Silvio now it's time to eat." Uh, so-

    7. LFLex Fridman43:50

       You have millions of cells in your body, you have billions of bacteria.

    8. SMSilvio Micali43:54

       Exactly. Help me, in the guts of the thing, you know, we are in a soup that somehow (laughs) keeps us alive.

    9. LFLex Fridman44:00

       It's just pure mess.

    10. SMSilvio Micali44:00

        It is, uh, is... And, and so strange enough, however, when we design systems, we design them centralized. We ourselves are distributed beings, and when we plan to say, "Okay, I want to (laughs) create an architecture, how about I make a pyramid?" (laughs) "I put this on the top and the, and the power flows down." And, um, and so again, it's a part... A little bit perhaps of a technology problem, but now the technology is there, so that is a big challenge to rethink how we want to organize the power, um, in very large system. And, um, and, and distributed system, in my opinion, are much more resilient. Let's put it this way. There was a mine of mine, uh, Italian compatriots, right? You know, Machiavelli, who, who looked at the time there was a big... There was a bunch of small state democratic republic of Florence, of Venice, and then the other thing. And there was the Ottoman Empire, that at the time was an empire and the Sultan was very centralized. And he made a political observation that goes roughly to say, whenever you have such a centralizing, it's very hard to overtake that form of government is centralized, but if you get it, it's so easy to keep the population. When instead with other, uh, with other things are much more, um, uh, um, resilient. Um, um, when the power is distributed is, is much more... Is going to be lasting for a much longer time.

    11. LFLex Fridman45:30

        And ultimately, maybe the human spirit wants that kind of resilience, wants that kind of distribu-

    12. SMSilvio Micali45:36

        Absolutely.

    13. LFLex Fridman45:36

        It's just that we didn't have technology throughout history. Machiavelli didn't have the computer, the internet, and, uh (laughs) -

    14. SMSilvio Micali45:43

        That is certainly part of the reason, yes.

12. 45:46 – 48:28

    Intelligent adaptation

    1. SMSilvio Micali45:46

    2. LFLex Fridman45:46

       You've, uh, written an interesting blog post if we take a step out of the realm of bits and into this, the realm of governance. You wrote a blog post about making Algorand governance decentralized. Uh, can you explain what that means, the philosophy behind that? You know, how, how do you decentralize basically all aspects of this kind of system?

    3. SMSilvio Micali46:10

       Well, the philosophy and how. Let's start with the philosophy. So I really believe that, uh, nothing fixed lasts very long. And, uh, and so I really believe that life is about intelligent adaptation. Things change, and we have to be nimble and adjust to change. And, uh, and a l- when I, when I see a lot of, uh, of a, um, um, crypto project, actually very proud to say it's fixed in stone, um, uh, writing or code is law, law is code, therefore the code will never change, and you go, "Wow." When I'm saying this is a recipe to me of, of disaster, not immediately-

    4. LFLex Fridman46:55

       Yeah.

    5. SMSilvio Micali46:55

       ... but soon. Just imagine you take an ocean liner and you want to go, I don't know, from, um, uh, Lisbon to New York, and you set a course, iceberg, no iceberg, uh, tempest or no tempest and all, it doesn't matter. (laughs) You keep on going. That is not the way. You need ʻatil, you need to correct, you need to adjust. And, um, and so, um, by the way, we design Algorand with the idea that, uh, the code was evolving-

    6. LFLex Fridman47:27

       Mm-hmm.

    7. SMSilvio Micali47:27

       ... as the needs. And of course, whenever there is a system in which every time there is an adjustment, you must have essentially a vote that, uh, right now is, uh, or- orchestrated with 90% of the stake. They say, "Okay, we are ready. We agree on the next version, and we pick up this version." So we are able to evolve without losing too many components left and right. But I think without evolving, any system essentially become asphytic, and that is going to shrivel and die sooner or later.

    8. LFLex Fridman47:56

       Yeah.

    9. SMSilvio Micali47:57

       And, uh, and so that is, um, is needed. And what you want to do on the blockchain, you have a perfect platform in which you can log your wishes, your votes, your things, so that you have a guarantee that whatever vote you express is actually seen by everybody else. So everybody sees really the outcome, call it a referendum of a change, and that is, uh, in my opinion now, a system that wants to live long as to adapt.

13. 48:28 – 51:35

    Leaders

    1. SMSilvio Micali48:28

    2. LFLex Fridman48:28

       There's an interesting question about leaders. Uh, I've talked to Vitalik Buterin, and I'll probably talk to him again soon. He's, uh...... one of the leaders, maybe one of the faces of the Ethereum project. And it's interesting, you have, uh, uh, Satoshi Nakamoto, who's the face of Bitcoin, I guess, but he's faceless. He, she, they.

    3. SMSilvio Micali48:50

       (laughs)

    4. LFLex Fridman48:51

       (laughs) It does seem like in our, whatever it is, maybe it's 20th century, maybe it's Vec- Machiavellian thinking, but we seek leaders. Leaders have value. Linus Torvalds, the leader of, uh, of Linux, um, uh, open source development a lot. I mean, there's no, it's not, it's not that the leadership is so dogmatic, but it's inspiring, and it's also powerful in that through leaders, we propagate the vision, like the, the vision of the project is more stable. Maybe not the details, but the vision. And so do you think there's value to... 'C- 'cause w- we're, there's a tension between decentralization and leadership, like envision air.

    5. SMSilvio Micali49:39

       Yes.

    6. LFLex Fridman49:40

       W- what do you make of that tension?

    7. SMSilvio Micali49:42

       Okay. So I really believe that-

    8. LFLex Fridman49:44

       (laughs)

    9. SMSilvio Micali49:44

       ... that's another good question. I think that, um, uh, I really believe in the power of emotions. I think the, the-

    10. LFLex Fridman49:50

        (laughs)

    11. SMSilvio Micali49:50

        ... emotion are the creative impulse of everybody else.

    12. LFLex Fridman49:53

        Yeah.

    13. SMSilvio Micali49:54

        And verif- therefore, it's very easy for a leader to be a, uh, a physical person, a real being and, uh, that, uh, interprets our emotions. By the way, this emotion has to resonate, and what is good is that the, the, the, the, the more intimate our emotions are, the more universal they are, paradoxically.

    14. LFLex Fridman50:14

        Mm-hmm.

    15. SMSilvio Micali50:14

        The more personal, the more everybody else-

    16. LFLex Fridman50:17

        Yes.

    17. SMSilvio Micali50:17

        ... somehow magically agrees and feels a bit of a same. And so, and is very important to have a leader in, in the initial phase that generates out of nothing something. That is important leadership. But then the true test of leadership is to disappear after you lead the community. So in my opinion, the quintessential leader, in my, uh, uh, according to my vision, is George Washington. He served for one term, he served for another term, and then all of a sudden, he retired and became a private citizen. And 200 and change years later, we still are, with some defects, but we have done a lot of things right, and we have been able to vote. That to me is success in leadership. When instead, you contrast our experiment with a lot of experiment. I've done so much, so well, that I want another 40 years. And why shouldn't it be only four and I have another eight?

    18. LFLex Fridman51:16

        Yeah.

    19. SMSilvio Micali51:16

        Why should there be another eight? Give me 16, I will fix all your problem. And now, then is the type, in my opinion, of failed leadership. Leadership ought to be really lead, ignite, and disappear. And if you don't disappear, the system is going to die with you and it's not a good idea for everybody else.

14. 51:35 – 54:34

    Freedom

    1. SMSilvio Micali51:35

    2. LFLex Fridman51:35

       Is there... So we've been talking a little bit about cryptocurrency, but is there spaces where this kind of blockchain ideas that you're describing, which I find fascinating, uh, do you think they can revolutionize some other aspects of our world that's not just money?

    3. SMSilvio Micali51:53

       A lot of things are going to be revolutionized, is, uh, is, uh, independent of finance. By the way, I really believe that, uh, um, uh, finance is, uh, an incredible form of freedom. I mean, if I'm free-

    4. LFLex Fridman52:08

       Right.

    5. SMSilvio Micali52:08

       ... to do everything I want, but I don't have any means to anything, that's a bad idea. So, I firmly believe in financial freedom. It's, uh, very, very important. But, you know, but ju- just I can say that, you know, against, you know, censorship, you write something on the chain, and now nobody can take it out- can take it out. That is a very important way to express, you know, um, um, um, um, um, our view. And, um, and then the transparency that, uh, that, that, that you give because, uh, everybody can see what's happening on the blockchain. So, transparency is not money, but I believe that transparency actually is a very important ingredient also of finance. Let- let's put this away. As much as I'm enthusiastic about blockchain and, uh, uh, decentralized finance, uh, um, and that we have actually, our expression of a trend, we're creating this future five. Because as much as we want to do, we must agree that the first guarantee of financial growth and prosperity are really the legal system, the courts.

    6. LFLex Fridman53:14

       Mm-hmm. Mm-hmm.

    7. SMSilvio Micali53:14

       Because we may not think about them and say, "Oh, the courts are kind of b- bunch of boring lawyers," but without them, I'm saying there is no certainty, there is no, uh, notion of, of equality. If there is no notion that you can resolve your disputes, think, that's what drives commerce and things. And so what I really believe that the blockchain actually makes a lot of this trust essentially automatic, but make it impossible to cheat in every way.

    8. LFLex Fridman53:41

       Mm-hmm.

    9. SMSilvio Micali53:41

       You don't even need to go to court if nobody can change the ledger.

    10. LFLex Fridman53:46

        Mm-hmm.

    11. SMSilvio Micali53:46

        Right? So, essentially, it's a way of, uh, you cannot solve a legal system and reduce it to a blockchain, but what I'm saying, a big chunk of it can actually be guaranteed and there is no reason why technology should be antagonistic, uh, um, to legal scholarship. It could, it could be actually coexisting, and one should start to doing the interest things that the technology alone cannot do, and then you go from there. Um, but, but I think that is, uh, essentially is, uh, it co- blockchain can affect all kinds of our, uh, of our behavior.

    12. LFLex Fridman54:24

        Yes. In some sense, the transparency, the, uh, required transparency ensures honesty, prevents corruption. So there's a lot of systems that could use that, and the legal system

15. 54:34 – 57:18

    Privacy

    1. LFLex Fridman54:34

       is one of them. There's a little bit of a tension that I wonder if you can speak to where this kind of transparency, there's a tension with privacy.Is it possible to achieve privacy, if wanted, on, uh, on a blockchain? Do you have, do you have ideas about different technologies that can do that? People have been playing with different ideas.

    2. SMSilvio Micali54:58

       So, absolutely. The answer is, uh, yes and, um, by-by-by-by-by way, I'm a cryptographer.

    3. LFLex Fridman55:05

       Right.

    4. SMSilvio Micali55:05

       Uh, okay. So I really believe in privacy and I believe in, uh ... And, and I've devoted it all my, my, my ... A big chunk of my life to guarantee privacy even when it seems almost impossible to have it. And, um, and it is possible to have it in also in the blockchain too. And however, I believe in timing as well, and I believe that the people have the right to understand their system they live in. And, uh, right now, um, uh, people can understand the blockchain to be, uh, something that is not con- uh, uh, cannot be altered, and is, uh, transparent, and that is good enough. And right now, any way to adopt ... And there is a pseudo-privacy for the fact that who knows if these keys belong, public key belongs to me or to you, right, and I can ... When I want to change my money from one public key, I split it through other public keys, going to figure out which one is Silvio, are all of them are Silvio, or only one of Silvio. Who knows? So you get some vanilla privacy, not, uh, you know, not the one I can talk. And I think it's good enough because then it's important for now that we absorb this stage, because the next stage we must understand the privacy tool rather than taking on faith. When the public start say, "I believe in the scientist and whatever they say, I swear by them, and therefore they tell me it's private, it's private," and nobody understands it very well, we need a much more educated about the tools we are using. And so I look forward to deploying more and more privacy on the blockchain, but, uh, we are not... I, I, I will not rush to it until the people understand and are behind whatever we have right now.

    5. LFLex Fridman56:57

       So you build privacy on top of the power of the blockchain, you have to first understand the power of the blockchain?

    6. SMSilvio Micali57:02

       Yes.

    7. LFLex Fridman57:02

       Yes. So, Algorand is, like, one of the most exciting, technically at least, f- from my perspective, technologies, ideas, in this whole space. What's the future of Algorand look like? Uh, is it possible for it to dominate the world?

    8. SMSilvio Micali57:17

       Let's

16. 57:18 – 1:01:04

    Bitcoin maximalism

    1. SMSilvio Micali57:18

       put it this way. I certainly working very hard with a great team to give the best blockchain that, uh, one, uh, can demand and enjoy. And th- that said, I really believe that, uh, there is going to be ... It's not a winner takes them all, so it's going to be a few blockchains, and each one is going to have its own, uh, brand and, uh, it's going to be great at something. And sometimes it's the scalability, sometimes it's, uh, ease of use, sometimes it's, uh, thing. And, and it's important to have a dialogue between these things. And I'm sure, and I'm working very hard to make sure Algorand is one of them. But I don't believe that it's, you know, it's even, um, desirable to have, you know, um, a winner takes all, because, uh, um, we need to express different things. But the important thing is going to have enough interoperability of our systems so that you can transfer your assets where you have the best tool to service them, whatever your needs are at the time.

    2. LFLex Fridman58:25

       So there's a idea, I don't know, they call themselves Bitcoin maximalists, which is essentially the bet that, uh, the philosophy that Bitcoin will eat the world. So you're, you're talking about it's good to have variety. Their claim is it's good to have the best technology dominate the, the medium of exchange, the, the medium of store value, the money, the dig- you know, the, the digital currency space. What's your sense of the positives and the negatives of that?

    3. SMSilvio Micali59:03

       So I feel people are smart and it's going to be very hard for anybody and-

    4. LFLex Fridman59:09

       To win.

    5. SMSilvio Micali59:09

       ... Bitcoin, um, uh, to win. And because people want more and more things-

    6. LFLex Fridman59:15

       Yeah.

    7. SMSilvio Micali59:15

       Uh, um, there is an Italian saying that goes as, uh, translates well, I think. Uh, it goes, "The appetite grows while eating." Okay?

    8. LFLex Fridman59:24

       (laughs)

    9. SMSilvio Micali59:24

       I think you understand what it, what it means.

    10. LFLex Fridman59:26

        Yes.

    11. SMSilvio Micali59:26

        So I say, "I'm not hungry." Oh, oh, okay, food. Oh, let me try this and ... So we want more and more and more. And when you find something like Bitcoin, which already had, uh, very good things to say, but it does something very well, but it's a static.

    12. LFLex Fridman59:41

        Mm-hmm.

    13. SMSilvio Micali59:41

        I mean, store of value. Yes, I think it's a great like... For the rest, you know, it, it would be a sad world if the world in which we are so hunkered down, so on the defensive, that we want to store value and hide it under the mattress. Uh, I long for a world in which it is open, people want to transact, interact with which way. And therefore, when you want to store value, one, perhaps a one chain. When you want to, uh, transact maybe is, is another. I'm not saying that, you know, uh, one chain cannot be store of value or other thing, but I really believe, uh, uh ... I believe in the ingenuity of people and in the innovation that is intrinsic to human nature. We want always different things. So how can it be something invented, whatever it is, decades ago is going to fulfill the needs of our future generations? Um, I'm not going to, uh, fulfill my needs, let alone my kids' (laughs) or their kids'. I mean, it's ... We're going to have a different world and, uh-... uh, things will evolve.

    14. LFLex Fridman1:00:47

        So you believe, yeah, so you believe that life, intelligent life is ultimately about ad- adaptability-

    15. SMSilvio Micali1:00:53

        Yes.

    16. LFLex Fridman1:00:53

        ... and evolving. So static is, um, static loses in the end.

    17. SMSilvio Micali1:00:59

        Yes.

    18. LFLex Fridman1:00:59

        (laughs) Uh, let me ask the, well, first, the ridiculous

17. 1:01:04 – 1:05:42

    Satoshi Nakamoto

    1. LFLex Fridman1:01:04

       question. Do you have any clue who S- who Satoshi Nakamoto is? Is that even a y- interesting question?

    2. SMSilvio Micali1:01:12

       Well-

    3. LFLex Fridman1:01:13

       Is it you?

    4. SMSilvio Micali1:01:13

       ... like, your questions-

    5. LFLex Fridman1:01:14

       By the way. (laughs)

    6. SMSilvio Micali1:01:15

       ... are very interesting. So the, and I think that I ... So I would say, first of all, it's not me.

    7. LFLex Fridman1:01:20

       Okay.

    8. SMSilvio Micali1:01:21

       And I can prove it because, you know, (laughs) if I were Satoshi Nakamoto, I would have not found out Algorand (laughs) because-

    9. LFLex Fridman1:01:27

       Yeah.

    10. SMSilvio Micali1:01:27

        ... takes totally different principle to, to approach to, to assist them. But the other thing, who is Satoshi Nakamoto? You know what the right answer is? It's not him or she, her, or them. Satoshi Nakamoto is Bitcoin, because to me, it's such a coherent proof of work that at the end, the creator and the creation identify themselves. So it's a, okay, understand Michelangelo, okay, he did the Sistine Chapel, fine, he did the, eh, Saint Peter's Dome, fine, he did, uh, uh, the, the Moses of the Pieta statue, fine. But besides this, who was Michelangelo on this?

    11. LFLex Fridman1:02:06

        Yeah.

    12. SMSilvio Micali1:02:06

        That's their own question. It's his own work. That is Michelangelo.

    13. LFLex Fridman1:02:10

        Yeah.

    14. SMSilvio Micali1:02:10

        So I think that when you look at the Bitcoin is a piece of work that has its defects, yes, like anything human, but it was captivated the imaginations of millions of people as subverted the status quo. And I'm saying, you know, whoever (laughs) this person or people are, he's living in this piece of work.

    15. LFLex Fridman1:02:35

        That-

    16. SMSilvio Micali1:02:35

        To me, it is Bitcoin. That's what I ... That's my answer.

    17. LFLex Fridman1:02:38

        The idea the work is-

    18. SMSilvio Micali1:02:40

        Yes.

    19. LFLex Fridman1:02:41

        ... is, is bigger. We forget that sometimes. It, it's something about our biology wants, likes to see a face and attach a face to an idea, when really the idea is the thing we love, the idea is the thing that impact, the idea is the thing that ultimately we ... You know, Steve Jobs or somebody like that, we associate with the Mac or the iPhone, with j- just everything he did at Apple. Apple, actually, the company, is Steve Jobs. Steve Jobs the man is, uh, is, uh, is, uh, pales in comparison to the creations of the man.

    20. SMSilvio Micali1:03:11

        Correct. And the sense of aesthetics that has brought-

    21. LFLex Fridman1:03:14

        Yes.

    22. SMSilvio Micali1:03:14

        ... to the daily lives. And very often, uh, uh, aesthetic wins in the long, in the long, in the long game. And these are very elegant designed product. And when you say, "Oh, elegance, a very few people care about it," apparently millions and millions and millions and millions of people do because we are attracted by beauty. And these are beautifully designed products. And, uh, and, uh, and, you know, and they've, uh, in addition to ever the technological aspect, the other thing, and I think, yes, that is, uh ...

    23. LFLex Fridman1:03:48

        Yeah, as Dostoevsky said, "Beauty will save the world." So I'm, I'm with you on that one.

    24. SMSilvio Micali1:03:52

        Great.

    25. LFLex Fridman1:03:53

        (laughs)

    26. SMSilvio Micali1:03:53

        (laughs)

    27. LFLex Fridman1:03:55

        It, uh, currently seems like cryptocurrency, all these different technologies are, um, uh, gathering a lot of excitement, not just in our discourse, but in their, like, scale financial impact. Uh, a lot of companies are starting to invest in Bitcoin. Do you think that, uh, the main method of store value and exchange of value basically money will soon, or at some point in a century, will become cryptocurrency?

    28. SMSilvio Micali1:04:30

        Yes. So mind you as I said that the notion of cryptocurrency, like any other fundamental human notion, has to evolve, but yes. So I think that, uh, it has, uh, a lot of momentum behind it. Um, it's not only static as this, uh, programmable money, as, uh, uh, I think-

    29. LFLex Fridman1:04:51

        Smart contracts all that kind of stuff.

    30. SMSilvio Micali1:04:53

        Smart contracts, is, uh, it allows a peer-to-peer interaction or among people who don't even know each other, right? Uh, and they don't even therefore cannot even trust each other just because of they, they never, uh, saw each other. So I think it's so powerful that, uh, um, uh, is going to do. That said, again, a particular cryptocurrency should develop and cryptocurrency, they will all develop, but the answer is yes, we are going, uh, towards a much more, uh ... Unless we have a society, a sudden crisis (laughs) for different reasons which-
18. 1:05:42 – 1:09:55

    One-way function

    1. LFLex Fridman1:05:42

       It, it's funny you mentioned that, um, Michelangelo and Steve Jobs, you know, set of ideas represents the person's work. So we talked about Al- Algorand, which is this super interesting set of technologies, but, you know, he did also win the Turing (laughs) Turing Award.

    2. SMSilvio Micali1:06:00

       (laughs)

    3. LFLex Fridman1:06:01

       (laughs) You have a bunch of, you have a bunch of ideas that are, you know, seminal ideas. So can we talk about cryptography for a little bit? What is the most beautiful idea in cryptography or computer science or mathematics in general? Asking somebody who has explored the depths of all.

    4. SMSilvio Micali1:06:24

       (laughs) Well, there are a few contenders. (laughs)

    5. LFLex Fridman1:06:29

       (laughs)

    6. SMSilvio Micali1:06:30

       And, uh, um-

    7. LFLex Fridman1:06:31

       Either your work or, or, or, or other work.

    8. SMSilvio Micali1:06:34

       Well, um, uh, let's leave my work aside.

    9. LFLex Fridman1:06:37

       Yes.

    10. SMSilvio Micali1:06:37

        And, uh, and, uh, so but one powerful idea and is, uh, both an old idea in some sense and a very, very modern one, and, uh, it might have been on this very idea of a one-way function.So a function that easy to evaluate, so given X you can compute F of X easily. But given F of X, it's very hard to go back to X. Okay? Think like... breaking a glass, easy. Reconstruct the ha- the glass, harder. Frying an egg, easy. (laughs) From the fried egg to go back to the original egg, harder. If you want to be extreme, killings a living being, unfortunately easy, the other way around, very hard. And so the fact that the notion of, of a function which you have a, a recipe that is in front of your eyes to transform an X into F of X, and then from F of X, even though you see the recipe to transform it, you cannot go back to X. That, in my opinion, is one of the most elegant and momentous notions that there are. And is a, a computational notion because of the difficulties in a computational sense, it is a mathematical notion because we are talking about function, and, uh, is so fruitful because that is actually the foundation of all cryptography. And, uh, let me tell you, it's an old notion because very often in any mythology that we think of, the most powerful gods or goddesses are the ones of X and the opposite of X.

    11. LFLex Fridman1:08:22

        Mm-hmm.

    12. SMSilvio Micali1:08:23

        The gods of love and death. And when you take opposites, they don't just, you know, erase one another, you create something way more powerful. And they, this one-way function is extremely powerful because essentially becomes something that is easy for the good guys and bad for the... bu- hard for the bad guys. So for instance, in pseudo-random number generation, the easy part of the function corresponds you want to generate beats very quickly, and hard is predicting what the next beat is. It says, "Jail, it doesn't look the same." One is X, F of X, going from F of X to X are what does do predicting beats. By a magic of reductions and mathematical, um, um, um, apparatus, this simple function morphs itself into sort of random generation. This simple function morphs itself in digital signature scheme, in which digitally signing should be easy and forging should be hard. Again, a digital signature is not going from X to F of X, but the magic and the richness of this notion is met, that it is so powerful that it morphs in all kinds of incredible constructs, and, uh, in both these two opposites co-exist, the easy and the hard, and in my opinion is, um, very, very elegant notion, so.

    13. LFLex Fridman1:09:49

        That simple notion ties together cryptography, like you said, pseudo-random number

19. 1:09:55 – 1:14:38

    Pseudorandomness

    1. LFLex Fridman1:09:55

       generation. You have work on pseudo-random functions. What are those?

    2. SMSilvio Micali1:10:02

       (laughs)

    3. LFLex Fridman1:10:02

       What, uh, what's the difference between those and the generators, p- pseudorando- random number generators?

    4. SMSilvio Micali1:10:09

       Okay. Let's stop-

    5. LFLex Fridman1:10:10

       How do they work?

    6. SMSilvio Micali1:10:10

       ... let's, uh, let's, uh, go back to pseudo-random number generation.

    7. LFLex Fridman1:10:14

       Yes.

    8. SMSilvio Micali1:10:15

       First of all, people think of the pseudo-random number generation generates random number. Not true, because I don't believe that, uh, from nothing you can get, you can, (laughs) you can get, uh, something. So n- nothing from nothing.

    9. LFLex Fridman1:10:29

       (laughs)

    10. SMSilvio Micali1:10:29

        But, uh, randomness, you cannot create out of nothing, but what you could do is that you could, it can be expanded. So in other words, if you give me somehow 300 random beats, truly random beats, then I can give you 300 thousand, 300 million, 300 trillions, 300 quadrillions, as many as you want random beats, so that even though I tell you the recipe by which I produce these beats-

    11. LFLex Fridman1:10:56

        Mm-hmm.

    12. SMSilvio Micali1:10:56

        ... but I don't tell you the initial 300 random numbers, I keep them secret, and you see all the beats I produced so far, if I, if you were to bet, given all the beats produced so far, what is the next beat in my sequence? Better than 50/50. Of course, 50/50 anybody can guess, right?

    13. LFLex Fridman1:11:15

        Mm-hmm.

    14. SMSilvio Micali1:11:15

        But to be inferring something, you have to be a bit better. Then the effort to, to do this extra beat is so enormous, that is de facto random. So that is a, pseudo-random generator are these expanders of secret randomness, which goes extremely fast. Okay, this said, what is-

    15. LFLex Fridman1:11:37

        Expanders of secret randomness. Beautifully put. Okay.

    16. SMSilvio Micali1:11:40

        Yes.

    17. LFLex Fridman1:11:40

        So every time, every time somebody who, if you're a programmer is using a function that's not called pseudo-random, it's called random usually, you know, these programming languages and it's generating different, uh-

    18. SMSilvio Micali1:11:53

        (laughs) .

    19. LFLex Fridman1:11:53

        Uh, that's essentially expanding the secret randomness.

    20. SMSilvio Micali1:11:57

        Well, they should. Um, in the past actually, most library, they used, uh, something pre-cry- modern cryptography, unfortunately. We'll be better served (laughs) to take, uh, 300, uh, uh, real seed, random number, and, uh, and then expand them properly as we know now.

    21. LFLex Fridman1:12:17

        Yeah.

    22. SMSilvio Micali1:12:18

        Uh, but that has been a, a very, um, uh, old, uh, idea. In fact, one of the, um, best philosophers have debated, uh, the, uh, whether the world was deterministic or probabilistic.

    23. LFLex Fridman1:12:30

        Yes.

    24. SMSilvio Micali1:12:30

        Very big questions, right?

    25. LFLex Fridman1:12:32

        Does God play dice?

    26. SMSilvio Micali1:12:33

        Exactly. Einstein says it does, it doesn't.

    27. LFLex Fridman1:12:37

        Okay.

    28. SMSilvio Micali1:12:37

        But in fact, now we have a language that even, uh, at the Albert, uh, time was not around, but it was this complexity theory, modern complexity-based cryptography, and now we know that if the universe has 300 random beats, whether, whether it's random or probabilistic or, uh, deterministic, it doesn't matter because you can expand this initial seed of randomness...... forever, in which all the experiments you could do, all the inferences you could do, all the things you could do, they are -- you are not be able to distinguish them from truly random. So if you are not able to distinguish truly random from this super-duper pseudo-randomness... Are they really different things? That's what I want to say. So then it become really philosophical.

    29. LFLex Fridman1:13:24

        Yeah.

    30. SMSilvio Micali1:13:25

        So for things to be different, but I don't have in my lifetime, in the lifetime of the universe any method to set them aside, well, I should be intellectually honest and say, "Well, pseudo-random, in this special function, is as good as random."
20. 1:14:38 – 1:16:43

    Free will

    1. SMSilvio Micali1:14:38

    2. LFLex Fridman1:14:38

       Did you ever -- again, just to stay on philosophical for a bit, for a brief moment -- do you ever think about free will and, uh, whether that exists? Because ultimately, free will sort of is this experience that we have like we're making choices, even though i- it appears that, you know, the world is deterministic at the q-- I mean, that's against the debate, but if it is in fact deterministic at the lowest possible level, uh, at the p- at, at the physics level, uh, how do you make -- if, if it is deterministic, how do you make, uh, what -- how do you make sense of the difference between the experience of us feeling like we're making a choice and the whole thing being deterministic?

    3. SMSilvio Micali1:15:25

       So first of all, let me give you a gut reaction-

    4. LFLex Fridman1:15:27

       Yeah.

    5. SMSilvio Micali1:15:27

       ... to the question. And, um, the gut reaction is that it is important that we believe that there exists free will. And second of all, almost, uh, by weird logic, if we believe it exists, then it does exist, okay? (laughs)

    6. LFLex Fridman1:15:46

       Yeah.

    7. SMSilvio Micali1:15:47

       So it's very important for our social con- apparatus, for our sense of ourselves that it exists. And the mo- the moment in which, you know, we, we so want to, we almost -- we conjure it up in existence. But again, I really feel that if you look at some point, um, the space of free will seems to shrink. We realize how -- more and more how much of our, say, genetic apparatus dictates who we are, why we prefer certain, uh, things than others, right, and, uh, why we react to noises of music, uh, we per- prefer poetry over everything else. We may explain even all this, but, uh, but at, at the end of the day, whether it ex- exists in a philosophical sense or not is like randomness. If you can -- if pseudo-random is as good as random vis-a-vis lifetime of the universe, our experience, when does it really matter?

    8. LFLex Fridman1:16:42

       Yeah.

21. 1:16:43 – 1:21:48

    Will quantum computers break cryptography?

    1. LFLex Fridman1:16:43

       So, you know, we're, we're talking about randomness, and I wonder if I can weave in, uh, quantum mechanics for a brief moment. There's, uh, you know, a lot of advancements on the quantum computing side, so leveraging quantum mechanics to perform a new kind of computation, and there's concern of that being a threat to a lot of the basic assumptions that underlie cryptography. What do you think? Do you think quantum computing will challenge a lot of cryptography? Will cryptography be able to defend? All those kinds of things.

    2. SMSilvio Micali1:17:22

       Okay, great. So first of all, uh, for the record, because I think, uh, it matters, but it's important to set the record, there are people who con- continue to contend that quantum mechanics exists, (laughs) but has nothing to do with computing, is not going to accelerate it, um, at least in all, um, v- very basic and all, um, uh, the computation. That is a belief that you cannot, uh, uh, take it out. My own -- I'm a little bit, uh, more agnostic about it, but I really believe, going back to whatever I said about the, the one-way function.

    3. LFLex Fridman1:17:56

       Mm-hmm.

    4. SMSilvio Micali1:17:57

       So one-way function, what is it? That is a cryptography. So does quantum computing challenge-

    5. LFLex Fridman1:18:03

       The one-way function.

    6. SMSilvio Micali1:18:04

       Essentially. You can boil it down to, does quantum computing find a one-way function? What is one-way function? Easy in one direction, hard in the other. Okay, but if quantum computing exists, when you define what it is easy, it's not by a -- easy by a classical computer and hard by a classical computer, but easy for a, uh, for a quantum computer. That's a bad idea. But once easy means it should be easy for a quantum and hard for also quantum.

    7. LFLex Fridman1:18:33

       Mm-hmm.

    8. SMSilvio Micali1:18:33

       Then you can see that you are -- yes, it's a challenge, but you have hope because you can absorb, if quantum computing really realizes and, and becomes available, um, um, uh, according to the promises, then you can use them also for the easy part.

    9. LFLex Fridman1:18:48

       Mm-hmm.

    10. SMSilvio Micali1:18:49

        And once you use it for the easy part, the choices that you have a one-way function, they multiply. So, okay, so the particular candidates of one-way function may not be one way anymore.... but quantum one-way function may continue to exist. And so I really believe that on a, uh, um, for, uh, life to be meaningful with one-way function had to exist. Because just imagine that anything that is-

    11. LFLex Fridman1:19:24

        (laughs)

    12. SMSilvio Micali1:19:24

        ... easy- becomes easy to, to do. I mean, what kind of life is it? I mean, so you need that, uh, th- and if something is hard, but it's so hard to generate, you'll never find something which is hard for you. You won't but there is abundance, there is easy to produce hard problem. That's my opinion is why life is interesting, (laughs) because hard problem pop up on a really relative speed. So in some sense, I almost think that I do hope they exist. If they don't exist, uh, somehow life is way less interesting than, uh, it actually is.

    13. LFLex Fridman1:19:59

        Yeah, it does... that's funny. It does seem like the one-way function is fundamental to all of life, which is, uh, the, the emergence of the complexity that we see around us seem to require the one-way function. I don't know if you, uh, play with cellular automata, that's just another formulation of-

    14. SMSilvio Micali1:20:19

        I know, but it's, it's-

    15. LFLex Fridman1:20:20

        ... very simple. It's, it's almost a very simple illustration of starting out with simple rules, and one way being able to generate incredible amounts of complexity, but then you ask the question, can I reverse that? And it's just, it's just, uh, surprising how difficult it is to reverse that.

    16. SMSilvio Micali1:20:42

        (laughs) .

    17. LFLex Fridman1:20:43

        It's surprising even in constrained situations, it's very difficult to prove anything. Uh, that... uh, it almost, uh, I mean, the sad thing about it, um, I don't know if it's sad, but it seems like we don't even have the mathematical tools to reverse engineer stuff. Uh, I don't, I don't know if they exist or not, but in the space of cellular automata, when you start with something simple and you create something incredibly complex, can you take something, a small picture of that complex and reverse engineer? That's kind of what we're doing as scientists, you're, you're seeing the result of the complexity, and you're trying to come up with some universal law that generated all of this. What is the, you know, the theory of everything? What are the basic physics laws that generated this whole thing? And there's a hope that you should be able to do that, but it gets... it's difficult.

    18. SMSilvio Micali1:21:35

        Yeah, but there is also some portrait of the fact that it's difficult-

    19. LFLex Fridman1:21:38

        Right.

    20. SMSilvio Micali1:21:39

        ... because, uh, it gives us a mystery (laughs) to life, which, without which-

    21. LFLex Fridman1:21:44

        Yeah, that's true. Mystery is fun.

    22. SMSilvio Micali1:21:44

        ... I mean, uh, it's not so fun, uh, right? Life would be

22. 1:21:48 – 1:28:41

    Interactive proofs

    1. SMSilvio Micali1:21:48

       less fun.

    2. LFLex Fridman1:21:48

       Can we, uh, talk about interactive proofs a little bit and zero-knowledge proofs? What are those?

    3. SMSilvio Micali1:21:54

       Okay.

    4. LFLex Fridman1:21:54

       How do they work?

    5. SMSilvio Micali1:21:55

       So interactive proof, uh, actually is, um, uh, is, um, is a modern realization and conceptualization of something that we knew was true. That, you know, that is easy to go to lecture, in fact, that's my motivation. We invented schools to go to lecture.

    6. LFLex Fridman1:22:14

       Yes.

    7. SMSilvio Micali1:22:15

       We don't say, "Oh, I'm the Minister of Education, I publish this book, you read it."

    8. LFLex Fridman1:22:18

       Yeah.

    9. SMSilvio Micali1:22:19

       And this is book for this year, this book for this year. We spend a lot of our treasury in educating our kids. And in person, educating, go to class, interact with teacher, on the blackboard, and chalk on my time. Now we can have, you know, whiteboard and presumably going to have actually this, uh, magic pens and display instead.

    10. LFLex Fridman1:22:42

        Yes.

    11. SMSilvio Micali1:22:42

        But the, the, the idea is that interactively, you can convey truth much more efficiently. And we knew this psychologically. It's better to hear an explanation than just to belabor some paper, right? Same thing. So interactive proofs is a way to, to do the following. Rather than doing in some complicated very long papers and possibly infinitely long proofs, exponentially long proofs, you say the following: If this theorem is true, there is a game that is associated to the theorem. And if a theorem is true, this game, I have a winning strategy that I can win half of the, of, of the time.

    12. LFLex Fridman1:23:24

        Mm-hmm.

    13. SMSilvio Micali1:23:24

        No matter what you do. Okay, so then you say, "Well, is the theorem true? You believe me." "Why should I believe you?" You say, "Okay, let's play." So, and if I prove that I have a strategy that... and I win the first time, and I win the second time, then I lose a third time, but I win ev- say, um, more than half of the time, or I win, say, all the time if the theorem is true, and at least at most half of the time if the theorem is false, you statistically get convinced you can verify this quickly.

    14. LFLex Fridman1:23:54

        Mm-hmm.

    15. SMSilvio Micali1:23:55

        And, and therefore is a much... when the game... and the game typically is extremely fast, so you generate a miniature game in which if the theorem is true, I win all the time. If the theorem is false, I can win at most half of the time. And if I win, win, win, win, win, win, win, you can deduce either the theorem is true, which most probably is the case (laughs) so to speak, or I've been very, very unlucky. Because it's like if I had 100 coin tosses and I got 100 heads, very improbable, right? So that is a way in. So this transformation from the state, formal statement of a proof into a game that can be quickly played, and you can draw statistics how many times you win, and you... is, uh, is one of a big conquest of modern complexity theory, and in fact, actually as highlighted, the, the notion of, uh, of a proof has really give us a new insight to what to be true means, and what, what truth is, and what proofs are.

    16. LFLex Fridman1:25:01

        So these are legitimately proofs. So-

    17. SMSilvio Micali1:25:03

        Yes.

    18. LFLex Fridman1:25:05

        ... what kind of mysteries can it allow us to unlock and, and prove? You said truth. Uh, so, uh, w- what does it allow us, what kind of truth does it allow us to arrive at?

    19. SMSilvio Micali1:25:20

        So it enlarges the realm of what is provable because in s- in some sense, the classical way of proving things was extremely inefficient from the verifier point of view.

    20. LFLex Fridman1:25:34

        Yes.

    21. SMSilvio Micali1:25:34

        Right.

    22. LFLex Fridman1:25:35

        (laughs)

    23. SMSilvio Micali1:25:36

        So, and, and so therefore, there is so much proof that you can take, um, but in this way, you can actually very quickly, minutes, uh, verify something that, uh, is, uh, the correctness of an assertion that otherwise would have taken, you know, a lifetime to belabor and check all the, the, the, the passages of a very, very, very long proof. And you better check all of them, because if you don't check one line, the... an error can be in that line. And so you have to go linearly through all the stuff rather than bypass this. So you enlarge tremendous amount what the proof is. And in addition, um, y- once you have a... the idea that essentially a proof system is something that allows me to convince you of a true statement, but does not allow me to convince you of a false statement, and that at the answer is evidence of proof. Proof can be beautiful, should be, should be elegant, but at the end it's, is true or false that you want (laughs) to be able to differentiate. It is possible to prove the truth, and it should be impossible or statistically extremely hard to prove something false. And if you do this, you can prove way, way more once you understand this. And on top of it, we got some insight, like in these zero-knowledge proofs, that is in... something which you took for granted were the same, knowledge and verification are actually separate concepts.

    24. LFLex Fridman1:27:08

        Mm-hmm.

    25. SMSilvio Micali1:27:08

        So you can verify that an assertion is correct without having any idea why this is so. And so people failed to say, "Well, if you want to verify something, you have to, to have a proof. Once you have a proof, you know why it's true, you have the proof itself." So somehow you can totally differentiate knowledge and, and, uh, and verification, validity. So totally, you can decide if something is true and still have no idea why.

    26. LFLex Fridman1:27:38

        Is there a good example in your mind?

    27. SMSilvio Micali1:27:40

        Oh, actually, you know, at the very beginning, we l- labored to find the first knowledge, zero-knowledge proof. Then we found a second, then we found a third. And then a few years later, actually we proved a theorem which essentially says every theorem, no matter what about, can be explained in a zero-knowledge way. Okay?

    28. LFLex Fridman1:28:04

        Wow.

    29. SMSilvio Micali1:28:04

        So it's not a class of theorem, but all theorems, and is a very powerful thing. So, eh, we were really, for thousands of years, bought this identity between knowledge and verification had to be hand-in-hand together, and, uh, for no reason at all. I mean, we had to develop a way with technology. As you know, I'm very big (laughs) on technology, because, uh, it makes us more human and, uh, and make us understand more things than before. And, uh, and I think that is, uh, that is, uh, um, uh, th- th- that's a good thing.

    30. LFLex Fridman1:28:38

        So this, uh, interactive proof process, um,

23. 1:28:41 – 1:36:08

    Mechanism design

    1. LFLex Fridman1:28:41

       there's power in games.

    2. SMSilvio Micali1:28:43

       Yes.

    3. LFLex Fridman1:28:43

       And you've recently, you've gotten into, uh, recently, I'm not sure, you can correct me, uh, mechanism design.

    4. SMSilvio Micali1:28:50

       Yeah.

    5. LFLex Fridman1:28:50

       Uh, so it's... I mean, first of all, maybe you can explain what mechanism design is, and, um, the, the fascinating space of playing with games and designing games.

    6. SMSilvio Micali1:29:03

       Mechanism design is where you want to... you want a certain behavior to arise, right? If you want to organize, you know, a societal structure or something, you want to have some orderly, uh, behavior to arise, right? Because, uh, eh, it is important for your goals. But, but you know that people, they don't care what my goals are. (laughs) They cares about, uh, maximizing their utility. So putting crassly, making money. The more money, the, the better, so to speak, right? I'm exaggerating, but-

    7. LFLex Fridman1:29:36

       Self-interest in whatever-

    8. SMSilvio Micali1:29:37

       Self-interest.

    9. LFLex Fridman1:29:38

       ... in whatever way them-

    10. SMSilvio Micali1:29:39

        So what you want to do is, um, ag- um, uh, ideally, what you want to do is to design a game so that while people played so to maximize their self-interest, they achieve the social goal and behavior that I want. That is really the best (laughs) type of thing. And it is a very hard science and art to design these games. And it challenges us to actually come up with solution concept for way to analyzing the games that need to be broader. And I think of a nom- game theory as developing, uh, a bunch of very compelling way to analyze the game, that if the game has a vast property, only you can have a pretty good guarantee that it's going to be played in a given way.

    11. LFLex Fridman1:30:39

        Mm-hmm.

    12. SMSilvio Micali1:30:40

        But as it turns out, and not surprisingly, these tools have a range of action like anything else. All these, uh, so-called technically solution concept, the way to analyze the game, like dominant strategy equilibrium is something that comes to mind to be very meaningful, uh, but has a limited power. In some sense-

    13. LFLex Fridman1:31:01

        Okay.

    14. SMSilvio Micali1:31:01

        ... the games that they can be a- admit such a way to be analyzed is very special.

    15. LFLex Fridman1:31:05

        There's a very specific kind of games, and the r- the rules are set, the constraints are set, the utilities are all set.

    16. SMSilvio Micali1:31:12

        Yes. Yes.

    17. LFLex Fridman1:31:12

        You can say something strong about it.

    18. SMSilvio Micali1:31:13

        So if you want to reason, if... there is a way, say, uh, that you can analyze c-... a restricted class of games this way, but most games, you know, don't fall into this restricted class. Then what do I do? Then w- you need to enlarge a way what a rational player can do. So for instance, uh, in my opinion, at least in some of my... I played with this for a few years, and I, I was doing some exoteric things, I'm sure, in, uh, in the, in the space that were, were not exactly mainstream, and then I changed my interest, and now I'm doing (laughs) blockchain. But, (laughs) but when I'm thinking, for a while I was doing th- so for instance, to me, is a way in which, uh, I design the game, and you don't have the best move for you.

    19. LFLex Fridman1:32:02

        Mm-hmm.

Episode duration: 1:53:41