so hi everyone my name is axel Erickson
and today my co-founder is AK Lauren
tonight are gonna be talking about what
we're building over at one protocol so
who we are we were both studying at
Stanford University Computer Science and
Mathematics respectively and chose to do
a theory on protocol development full
time in the beginning of this year and
that is not a decision that I regret so
for those of you who haven't heard about
one protocol or haven't heard about the
concepts of virtual workers the short
version of this speech is essentially
that instead of signing machines up
directly as validators in Casper or as
solvers in Troubadour more generally as
workers in staking protocols we can
actually sign up smart contracts as
these workers in these staking protocols
and in doing so we can actually solve
some fundamental problems inherent in
all staking protocols and we can also
introduce some new exciting properties
so to get to that we're gonna start by
introducing a useful model that we can
use to think about protocols like
aetherium true--but and foul coin and
then we're gonna explore different ways
that we can ensure correctness in these
protocols and what we're gonna find is
that using staking in the general sense
is a very cheap way of ensuring
correctness however there is a
fundamental problem with slapping
staking onto onto a market protocol so
we're going to introduce that and then
zach is going to introduce our solution
which are of course virtual workers
we're gonna give you a sneak peek for
what virtual workers may look like on
protocols like Casper true bit and even
Radin and then we're gonna finish off by
introducing you to the idea of the one
protocol which is of course what we're
working towards so to begin we think
they had a nice and easy way to think
about protocols like like if your iam
and and true bit it's simply that they
are marketplaces for some digital
service and in marketplaces of course
you have a set of sellers and you have a
set of buyers and with the buyers do is
that they form Jah
along with payments and they send them
to the sellers and what the sellers are
expected to do is to return some service
and perhaps the protocol that fits this
model best is true--but where of course
you have a set of task givers which are
either you know it curiam accounts or
smart contracts themselves that want to
do some option computation what they do
is that they create what would what are
called tasks in in the true--but system
along with payments and they send those
two to the solvers on the other side but
of course execute the programs so we can
imagine that the service being mediated
across true--but the market protocol is
quite literally off tuning computation
like we would expect but this this model
extends to etherium itself so in
etherium we can imagine that the buyers
of the service for all the people that
hold private keys and sewing
transactions tasks that they send to the
sellers are literally the signed
aetherium transactions that they
broadcast across the network and then
the miners are of course the machines
that plug in on the selling side to
provide the service but what is the
service in in market in the market
protocol or theorem
well it's quite literally having your
transaction included in the etherium
state okay simple enough there is
however a fundamental difference between
you know these market protocols and how
we imagine a normal market to work and
this is of course that they're both open
and anonymous and what we mean by this
is that anyone should be able to plug in
as the seller in one of these protocols
and when they do we don't know who they
are simultaneously the users expect the
protocol to reliably deliver the service
and the users really don't want to have
to care about who they actually got much
get matched up with on the other side
and if we think about it this is of
course the expected behavior in
aetherium one anyone can join as a miner
and two when you as a user sign your
theorem transactions and send them away
you never actually want to have to you
never want to have to worry about which
miner actually picks it up so the
question is how can we achieve this
well in the general case the short
answer is that we use financial
incentives so we can imagine that for
any worker that plugs in as a as a
seller to provide some service there's
essentially two categories of strategies
that they can employ and the first
category is the first strategy is the
correct strategy
which is when the seller simply delivers
what the user expects them to he
performs according to the protocol this
would be analogous to running the
standard implementation of some mining
software and then the second strategy
isn't is the incorrect strategy which is
any other one so this could be either
that the the miner accidentally faults
meaning that the software breaks down
mid execution or that he deliberately
does something that he shouldn't do
think selfish mining attacks and there
of course expected returns to both these
strategies and using this notation we
can ask well what's the cost of
incorrectness to the miner that chooses
to cheat well the cost of incorrectness
is of course going to be the opportunity
cost of the of correctness which is the
payment that he doesn't get because he
doesn't perform correctly and from the
cost of incorrectness we're gonna
subtract what he actually does make when
when he chooses an incorrect strategy so
in order to ensure correctness all that
we're really trying to do is just trying
to maximize this difference so how can
we do that well there's really only two
options so we can start with trying to
maximize the opportunity cost of
correctness the problem with this is
that we're effectively saying that the
price in the correct case should be
higher right which means everybody pays
this is analogous to block rewards and
consensus protocols and it might seem
fine because it achieves what we're
trying to do but in a system like
aetherium for example these costs can go
crazy after after a while so with three
new ethers being issued in every new
block and one new block every 13 seconds
all that during users are actually
cumulatively planned paying about 5.5
million dollars today to increase the
opportunity cost of correctness on a
theorem so a fun calculation to do is to
simply take the number of ether that you
have and divide it by 18 and then you'll
find out how much you're paying every
day to increase this opportunity cost in
dollars but there is of course a second
thing that we can do and we can try to
minimize the payout of being incorrect
and if we're able to implement this
correctly what we achieve is that we
increase costs only for the actors that
choose that strategy and this is of
course what's taking tries to achieve we
make it a part of the requirement to be
a selling machine to put up
massive security deposit when you join
that you'll always lose loose if you
cheat according to the rules of the
protocol so when implemented correctly
we can actually make this expected
return something correctness negative
which of course is going to maximize the
cost of an correctness and the idea
there is that for any incorrect strategy
that a malicious miner can confined
either accidentally or deliberately he's
always going to lose money if he chooses
that path so so what we found
essentially is that staking in the
general sense is a very cheap way of of
ensuring correctness and this is of
course why so many protocols have have
you stake in different ways to ensure
correctness and we have you know often
computation protocols decentralized file
storage marketplaces consensus protocols
etc there is however a fundamental
problem that's not talked about that
much that is inherent to all staking
protocols and if you think about it what
we've done is that we've essentially
taken a worker and we've changed what it
needs to do so instead of just
performing a task and delivering some
some useful service we've also said that
this worker needs to put up a massive or
a stake so what we've effectively done
is that we've limited the supply of
viable workers which in the short term
means higher prices for the same
security or lower security for the same
price and this in the long term creates
a big big macro inefficiency in any
protocol that chooses the strategy and I
think this is all very you know up there
and theoretical but I think the
pragmatic way to think about it is
simply that which of the people that we
would ideally want to run Kaspar
validators also have $100,000,000 in
ether to stick and the answer is not
that many so this is the problem and to
present the solution is Zach
thank you so the solution is actually to
divide the labor using smart contracts
so more specifically you can imagine
using smart contracts which we term
virtual workers to allow two parties one
a capitalist who's providing some tokens
another party the operator who's
providing the computational resources to
work collaboratively for these different
staking protocols that axel was talking
about and then use the virtual worker
contract to share in the returns so
let's take a quick look at the actual
logic that we imagine to be contained in
these smart contracts so the first role
of the smart contract would be in
restricting how this operator can use
the borrowed capital so you can imagine
in a virtual worker for Casper the logic
would ensure that the operator can only
use the capital to sign up as a
validator in Casper and validate blocks
now second also important point in logic
is to ensure that the operator doesn't
destroy any of the capital that is
actually borrowing so you can imagine in
the case of Casper you wouldn't want no
the operator to destroy the capital and
that to protect against that you would
use a virtual worker logic to
incentivize machines to be moderating
this upper operator and reporting before
he destroys any of the capital and then
finally you would just use the virtual
worker to handle division of the rewards
so you can imagine the virtual worker
would allow the operator in capitals to
negotiate some sort of rate which they
would use to split the rewards so now
we'd like to present a few of the
virtual workers that we've been
designing I have one protocol so
starting with Casper so as most of you
probably already know aetherium is
planning transition from its current
proof of work base consensus mechanism
to a proof of stake basic consensus
mechanism and one of the upcoming hard
forks and essentially all that means is
that miners are going to have to supply
a stake in order to perform work for the
consensus in other words its theorem is
becoming a stake in protocol
so we have two ideas for how to create a
virtual worker for Casper in the first
one operator produces blocks and also
supplies a small stake which is lost if
he loses any of the capitalists money
and then you have the capitalist as
before just supplies tokens in this case
ether so the other model we have which
actually applies to many different
staking protocols not only Casper is the
producer signer model so in this case we
actually further divide the role of
operator into producer which produces
the blocks and proposes blocks to be
signed and signer which actually decides
which of these proposed blocks to sign
and then broadcast to the network so
this makes a lot of sense in protocols
where the the computation being
performed is very expensive and it would
make sense in Casper if the cost of
running a full miner becomes
prohibitively expensive so a lot of
players can't participate so the the
second virtual worker we wanted to
present is our virtual worker for
true--but so for those that don't know
true--but is a protocol on aetherium
which allows users to hire a solver to
solve a computational task notably these
solvers have to supply a security
deposit which is slashed if the task is
performed incorrectly and also these
solvers are chosen to put salt tasks
based on the size of their security
deposits so in the case of our virtual
worker again the operator supplies a
small stake which is slash if he
performs incorrectly and then this
operator leverages the tokens it borrows
from the token holder in order to
increase his chances of being selected
for tasks and also to be able to take on
many different jobs and now in this
virtual worker there's also logic which
incentivizes different workers to
monitor the operator and replace him if
he fails to perform a task correctly so
the final virtual worker we want to
presented was one for Raiden so for
those who don't know Raiden is a
implementation of
eight channels on top of etherium
essentially if Alice wants to send
capital to Bob or ether to Bob they can
create a payment channel and send an
unlimited number of transactions amongst
each other off chain and then close this
channel only actually needing to
interact with the etherion blockchain to
open and close the channel for many use
cases that's good but for some it's not
it's actually too much to have to
communicate with aetherium twice so you
can imagine if axel is communicating
with BBC and BBC's charging axel for
every webpage he visits you know Axel's
not gonna want to have to wait several
blocks to begin visiting websites and
BBC it's not going to want to have to
wait several blocks in order to receive
confirmation of the payment so so Raiden
does have a solution to this it's in the
form of mediated transfers so you can
imagine if acts already has a payment
channel open with a mediator who's also
connected to BBC then Axl can pay the
mediator to forward a payment to BBC for
Axl the caveat here is that the mediator
has to have enough tokens already in the
channel with BBC in order to handle the
requests from Axl so you can imagine
some ideal mediator could be connected
to all the major recipients like live
Pier BBC New York Times etc and then
users Axl Bob and Zack etc wouldn't even
need to ever connect to these vendors
directly instead they would connect to
the mediator and send all of their
payments directly through the mediator
now the caveat with this is the mediator
is gonna have to have a lot of tokens to
be able to Hannah that you can imagine
potentially millions of dollars worth of
tokens flowing through this mediator
means it has to have millions of dollars
of tokens and all of these channels so
we think that's a perfect opportunity
for a virtual worker and so as before we
use the operator token holder model or
token holders put tokens into this
virtual work contract and the operator
handles the job of being this ideal
mediator and they split the rewards yeah
so this is just a preview of a couple of
the protocols we're building virtual
workers for and we're playing designed
virtual workers for for many
more upcoming staking protocols but the
ultimate aim of what we're doing is is
actually to create marketplace for
capitalists and operators to match up be
placed into virtual workers and then
start working for arbitrary staking
protocols so we want to create this
shared platform for a couple of reasons
the first one being that there's a huge
benefit for virtual workers to be all in
the same platform in that many of these
virtual workers rely on a deep you know
liquid pool of workers which can come in
and replace their operator if he acts
maliciously and also some of these
virtual workers rely on operators which
are monitoring their operators ensuring
that they don't lose any of the capital
and then additionally we just want to
make it as seamless as possible for any
capitalists or operator to find a
protocol which can give them the highest
returns and as soon as it stops giving
the highest returns switch to some new
protocol so at this point in the
explanation people usually start asking
me ok so how you know how higher my
returns gonna be on tokens if I put them
into the system and then my response to
that is that you know potential returns
are always a function of risk and you
know there's risk associated right now
with owning crypto tokens it's also risk
associated with interacting with one of
these virtual workers and so the returns
are gonna be positively correlated with
that and so it's hard to say exactly so
you know moving forward you can imagine
rather than having you know individual
users plugging in as capitalists or an
operator instead having smart contracts
plugging in you know in the case of
multiple capitalists plugging in via
smart contract we term that a fun pool
and you could further imagine these fun
pools tokenizing participation in other
words issuing shares which then the
participants can go to exchanges on
making it even easier for people to
start interacting with the system and
finally with what we're building with
the one protocol we see that right now
there's a lot of idle capital out there
tons of people have you know millions if
not billions of dollars in cold storage
and ether and whether or not it's you
know your ether and coal storage or your
old
smartphone in the drawer that you
haven't seen in years we think that if
there's an easy seamless way for people
to start getting returns on that capital
by plugging into the digital ecosystem
that could make the whole digital
economy a lot faster so thank you guys
so much for your attention so we're
currently hiring so feel free to reach
out and if you guys have any questions
you know feel free to reach out to us
via our website thank you
[Applause]
[Music]