Layer 1 Stage | NEARly Decentralized? Principles That Cross-Chain Builders Must Remember

Captions as YouTube publishes them, usually machine-generated, so product and people names can be misheard.

1. 0:03

   boardon good afternoon um as Martin mentioned my name is John yarwood I'm with the UDC and the Executive Vice President of legal and advocacy um who is the UDC you might ask we are uh oh all right we're a group of former maker Foundation um Executives and advisers who now use the knowledge we gained and experience we gained uh bootstrap the maker di protocol and dissolving and decentralizing um the protocol after

2. 0:35

   dissolving the foundation to fund and strategically support new projects who are building things to combine Defi and traditional Finance into what we believe will usher in new Finance so before we talk about decentralization we kind of have to come to a common understanding of what that means right there are a lot of things things you can say decentralization and there's a huge umbrella that many

3. 1:04

   projects fall under that word so what we say is the system is decentralize if it is fault and attack resistant with a remote likelihood of collusion or creating a common point of control and with a sufficient number of diverse and independent contributors political actors and social influencers or community members operating the systems logic and when we analyze a project or platform or an app when we think about decentralization we tend to look at this Arc of decentralization for its development starts here with Founders or

4. 1:37

   a founding team they're in control they're maintaining that control as they build and need to bootstrap they seek funding whether that's publicly or privately and they seed a little of that control over to those funders and then as they build the projects and their communities they build in such a way where they can hand over the workforce and the control of that project to the

5. 1:59

   community itself Landing in the spot of optimal decentralization as we stand here today there's a couple questions I think I want to go through and answer with you first is near a decentralized protocol right now second how will the near ecosystem maintain a decentralized ethos as boss is increasingly used to expand the near ecosystem and then as we answer those questions we also need to think about at the same time when not if near reaches an inflection

6. 2:34

   point what may follow what exogenous pressures may come to the ecosystem as near Scales and reaches that inflection point so today we're pretty close to busting out towards that inflection point as we speak over the last few months um8 to 10 months certainly after the FTX collapse the daily daily user accounts the um excuse me one second daily active addresses new addresses and smart contracts have grown at a steady pace so has the growth in transaction volume and the number of validators have increased on

7. 3:18

   near and over the last quarter specifically these have jumped Leaps and Bounds right shout out to Kai now for helping with that but as that happens you're going to see there are increased security attacks increased pressure on the system and then also more legal and Regulatory scrutiny of the ecosystem as it grows and considering how much near social growth and widget development has

8. 3:49

   happened since boss was introduced in March that will happen soon so when we analyze something at the udh we like to think of it as the four attributes framework we look at the structure number of tokens computers addresses clients control the number of people that actually control that structure the influence the number of people whether directly or indirectly influencing that control and then the number of processes and functions the

9. 4:20

   protocol has and the overarching objective of this decentralization we believe is uner auton user autonomy or self- sovereignty so we look at the near text stack right now right let's go to the front end layer front end layer we rate the structure out of four and a four out of five there's multiple independent front ends that access the protocol I've heard thousands thrown around this week right

10. 4:45

    control access by open source and proprietary front ends influence community and user base uh influences the direction of development and accessibility and then process uh the process exposes protocol functionality with added features smart contract layer five out of five on structure great job smart contract layer is open and versatile enough to create any protocol or dap control it's an open and

11. 5:15

    upgradeable smart contracts four out of five influence smart contract layer is primarily influenced by near Foundation alongside the community it is not influenced by public policy or regulation necessarily at the moment process the smart contract layer is available for protocol and dap development to all continue the data layer structure this is where we start to run into a little less decentralization right the data layer some data is stored offchain with

12. 5:47

    compressed data secured onchain control it's a three out of five most State data is readily accessible with onchain data being immutable influence the data later design balance is security with performance at the moment and accessible it's accessible under pseudo anonymity for autonomous use and process all data layer processing on chain and secure it on chain when we get to the settlement layer you're going to see a drop off and that's understood at this point in time where the near near protocol is if you

13. 6:20

    remember that Arc of decentralization I mentioned so for structure it's significant geographical distribution and there's an implied Independence among Val validators however when you get to control right now there's a low number of validators a higher control with a single sequencer and near concentration influence node profit right now is balanced with security as the protocol is still developing an arc of decentralization it's not a completely open incentivization system yet for

14. 6:50

    nodes and validators process getting a little better better it's versatile but it's still decentralizing so not yet ready for full ecosystem now then we like to look at the softer points right and this is more human or entity control uh and um participation on the the protocol so when we're looking at user autonomy or self- sovereignty first of all we believe that a neutral infrastructure is at the heart of that we look at a political aspect is

15. 7:24

    the community has the decision-making power and influence to create policy administrative it's Community is responsible for planning financing and management and economic is a community responsible for generating revenue and controlling expenditures right now politically the decision and policym is publicly accessible you all know what's happening however it's particularly focused by the near Foundation but new governance is

16. 7:56

    coming on live like the NDC right had their first vote just this past quarter it's a milestone that can't be ignored administratively near is developing a diverse Community contributing towards establishing new operational functionality you have devhub you have the near development Suite of tools the big query public data set and you have the success of kakai now as an example

17. 8:21

    of this administrative decentralization right economic the community has some influence or say over revenue or expens we now have the marketing Dow the development Hub we just heard from and creatives DOW who all have budgets and a grant system to help decentralize economically the protocol but then lastly the UDC likes to look at the tokenomics of a protocol if there are any at the moment with near there was an initial sale sold through

18. 8:55

    an Ico in April of 2018 which helped fund the foundation and the protocol itself but that's pretty centralized right use cases however the token itself is a utility token that's used for staking gas and governance so we're seeing some utility in the token it's not purely speculative and then there are no rights and values it doesn't act like a stock certificate right you don't have rights to any Revenue you don't have any attributable value coming forth from the operation of the protocol to token holders so maybe

19. 9:28

    it's a little bit more decentralized than that Ico comment would necessarily indicate and so near Arc of decentralization started off blank there was pretty much tight control within the near Foundation as it um built the protocol and then into its Ico it had the funding you see that that point there is close to funding still close to control not anywhere near community and decentralization and as we see now at current point it's moving towards that community and that op optimal

20. 9:59

    decentralization sphere so we can probably say that the near blockchain is arguably a public good or rather infrastructure if you prefer that term however despite the Leaps and Bounds and development over the last eight months there's some areas for growth and progress and that's going to become very important as the regul regulatory Spotlight begins shining on the near ecosystem so the regulatory touch points

21. 10:39

    that most people focus on and we agree with as well are front ends on and off ramps centralized and quasi centralized Financial applications and DOW rappers you know if you create an entity to encircle a dow to give it legal personhood or even voters if any of you follow us uh litigation in Uka the cftc went directly after the voters themselves but that was a particularized case with some Nuance

22. 11:09

    but again back to this inflection point questions will begin to be asked of the corporate structure development implementation and funding like we've just covered but we'll also be asked about regulatory interoperability which we'll cover in just a few minutes so now that we've talked about near decentralization let's talk about moving into the future with boss as you all know boss was launched in March with six pillars fast author authorization

23. 11:40

    development enablement Universal search gateways content moderation and near tasks with boss comes three wonderful attributes that I think are being pushed heavily this week rightly so interoperability democ democratize development and Open Access and control for interoperability we have to worry about a few things though first of all as you work across the you know digitalized

24. 12:15

    Ledger environment and you become interoperable and cross chain you tend to inherit the traits of the many change you're working on as you build an app or project because of that we have to consider when building in Boss are we going to establish a minimum set of standards that will require when you build and when you move across chains or will we have you know um fall to the lowest common

25. 12:45

    denominator if we want to in EN enforce those minimum standards will we do that through boss can we build it into the modules themselves can we do it through the community how will we do that then we also not only do we inherit traits we increase the amount of vulnerabilities that the ecosystem may be subject to so if you have a vulnerability on another chain or an L2 what does that mean for what's being built here on near and will that vulnerability bleed over and if it does that means any exploitation of that

26. 13:20

    vulnerability will Ripper Ripple through the ecosystem and if it does how will we know so maybe governance the near governance Community needs to set up a monitoring tool or an information repository where people can understand what these vulnerabilities are and how to build around them then lastly as I said we we get to regulatory interoperability jurisdictionally it's a global blockchain right so you're going to have to work across the world with different

27. 13:50

    regulators and have to consider all of the regulations that you're subject to then regulatory regimes defi blockchain crypto we like to remove intermediaries right and we work without silos well the traditional Finance World works with intermediaries and silos which means Securities and um Commodities don't mix together right they're kept separate lending and payments are kept separate that's not the same here so what are you subject to if you build something that

28. 14:21

    combines those functions right does that mean you have to answer the SEC and the cftc in the US does that mean you have to answer to the fs say in the UK and also the EU or the French authorities or the Portuguese authorities and how do you build for that then I'm going to move through these very quickly democratized development it's a great attribute can we encode decentralization into democratized development with boss

29. 14:46

    similar to building um standards into modules can we make sure open source is enshrined in in the boss ecosystem and how do we do that it's admittedly difficult if it's a truly open development environment people can build with open source code but they can close some of it off too because it's open and then variable control and user autonomy is built into democratized development however the nature of boss means that it is that it is built in a decentralized manner and very with variable control

30. 15:20

    but it also means that developers can build centralized apps and platforms can the community influence this socially or economically through near task or other elements lastly access and control current access points the near Foundation primarily control is fast off at the moment but others are building and hopefully we'll open up those access points the boss system and near governance how can that interact together how can these four new Dows come together and affect the boss ecosystem and then lastly will boss and

31. 15:53

    will near tolerate centralized development through boss and if not how will the community come together to enforce that principle it's a little bit um philosophical but it's something the community needs to to Grapple with soon anyway thank you I know it was quick if you want to analyze your own project or your own build we have is it decentralized doapp which is a series of questions that leads you through this analysis and we'll give you a number

32. 16:23

    score at the end of it uh and you can use as you build so then lastly I just want to say you know while the blockchain seems to be nearly decentralized please keep all the foregoing in mind as the near Community leads the world into the open web like a boss thank you