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Transcript below.
Erica D'Eramo 0:09
Hello, and welcome to the two peers podcast season two. I'm your host, Erica D'Eramo. And today I'm joined by a special guest, Karen Scarbrough. Karen is going to talk to us a little bit about blockchain, cryptocurrency - just give us some information about how we can get involved and develop our understanding.
Erica D'Eramo 0:37
So welcome, Karen.
Karen Scarbrough 0:39
Hi, Erica. Thanks for having me.
Erica D'Eramo 0:43
So, tell us a little bit about yourself, Karen, like your background, and maybe how you got involved or developed a curiosity around blockchain?
Karen Scarbrough 0:53
Sure. Um, so I actually graduated from university as an engineer, but I went into supply chain because I was really interested in understanding how just businesses and systems operated at a global scale. And when blockchain was first coming out, as a innovative technology, a lot of the applications first pointed towards supply chain, and I was really interested in something that could solve kind of the fires, so to speak, that I was putting out every day as a long term solution rather than than just a day to day fix. So I got interested in the tech. I learned how to program and develop applications within blockchain, specifically within Ethereum, that was the most prominent at the time. And since that the space has really evolved and what's more interesting now is what it can do on the the financial side realistically, and there's probably much more that blockchain can do in the future. That definitely what's happening from a financial perspective is really interesting to follow and pay attention to and not just the pricing, it's definitely the the way things are being built and the new designs of a financial system. To be honest, the price is probably the least interesting aspect of things right now.
Erica D'Eramo 2:27
Yeah, it's probably the piece that gets the most attention. But I feel like at least for myself, I hear a lot about blockchain. I hear a lot about cryptocurrency. But I'm not sure that I really understand it. So can you tell us a little bit about what exactly is blockchain?
Karen Scarbrough 2:45
Sure. So some of the components that make up blockchain, I think it's easiest to explain what those components are first, and then kind of add them up together. So one thing that we're used to from databases and networks is what we call different nodes in a network. So nodes would store a replication of the data set that you're looking at. So if you have a couple of different nodes, maintaining a database, each node would have a replication of the database. And what's different in blockchain is, unlike the nodes from a closed database system, any nodes can participate in this replication of data, because they've designed what they call a consensus mechanism that ensures that any party who verifies tran... what we call transactions, so updates to the data, essentially, is ensured to be to have integrity within the system. So the what these creators of blockchain essentially did was take the the benefits of decentralized systems and they came up with a really interesting what they call game theory, or game theoretic way of making the system open, but also secure. So we can get into a little bit more about what that means. But the the whole system integrity is maintained by different forms of cryptography as well. So like, for example, verifying transactions and that you as Erica signed that you want to send the, you know, X amount of money to somebody is verified through forms of cryptography. And then there's a couple of different ways that the nodes which you realistically call miners, that maintain the network and add these blocks to the blockchain, there's a couple of different ways that they compete in which to, quote unquote, win the block. So, they do that, because when they win the block and are the, basically the miner chosen to add a block onto the blockchain, they're rewarded in cryptocurrencies. So the incentivization is that these miners spend their energy, their compute power to participate in the blockchain. And therefore, they should be creating correct transactions and the reward for that is the reward in cryptocurrencies. So there's some newer forms of consensus out for certain, I think, proof of work, which is what that's called, will likely go away in the next few years. The way that mining is being redirected is that instead of compute power, proving your integrity in the network, miners instead lock collateral up in the network and say, well, I'm going to give 32 Ether to the network, and they can hold on to that, and I'll verify transactions correctly, until I want to withdraw that and not participate as a miner anymore. So again, it's iterating on itself and saying, okay, we got this open system to work, how can we make it better? So that's a really long introduction. But there's just been so much happening that I don't want to leave out what's happened first versus what's happened now.
Karen Scarbrough 6:43
So we can go further into any of those components, for sure.
Erica D'Eramo 6:48
Yeah, no, it sounds fascinating. So when you say they can provide Ether? Is that a type of cryptocurrency?
Karen Scarbrough 6:57
Yes, so most people are probably familiar with Bitcoin that the first public blockchain with crypto currency out there, there had been other decentralized, or I don't know if they were decentralized, but there were other forms of digital cash in the past that other creators had tried to prolifo... proliferate. But Bitcoin was the most successful, I think, in part due to just the design of open participation and its global scale. What Ethereum did differently is Bitcoin users can send Bitcoin to and from participants on the network, and Ethereum, you can add programming to that. So instead of me just sending you Ether, I could say, if seven days from now I have 100 Ethers send 10 to Erica. So that enables you to build more sophisticated applications with the logic built into the financial system. So it that's why the majority of the the coins that you see out there on the list, they actually are built on the Ethereum network, 'cause you use that kind of logic to build tokens. There's certainly a lot of other blockchains coming up, that work in the similar way that have claims of improving upon the consensus mechanism. They may be faster, say they're cheaper or whatnot. But that premise of moving from just a blockchain that sends and receives cryptocurrencies to one where you have programmable logic is the most interesting component of what you can do with blockchain right now.
Erica D'Eramo 8:54
So when we use the term cryptocurrency and we use the term blockchain, what is the relationship between those two? Is it interchangeable? Or what's the relationship?
Karen Scarbrough 9:06
It's a good question. So because blockchain has been a big topic within enterprises as well, so those blockchains that you see that companies are using that are using them to track and trace something in supply chain or do some kind of verification among a consortium, those blockchains don't have cryptocurrencies associated with them. And the reason for that is that they're private. So if a company knows that they're only going to have themselves and their suppliers and industry partners that they have agreements with participate in the network, then they don't need this incentivization for actors to behave truthfully. Where the cryptocurrency comes in is when Bitcoin or Ethereum, as an open network, wants to allow everybody to participate, but there's got to be a sort of skin in the game measure. One, for miners to put in correct blocks, and that they won't put a bad block in and say, well, you know, all of a sudden I have a million Ether and I'm just going to take that and cash that out. Other miners would see that in the network and say, no, that's not right, we're not going to add that block. And then also, there's transaction fees associated with things on the user side as well. So for example, if the network has a high amount of usage, and lots of people want to send transactions, the transaction fees will actually go up on these networks, and those transaction fees are received by the miners again, but it actually does a an OK job right now at balancing the amount of network traffic on the blockchain as well, these public blockchains because, you know, if you've read recently, the the fees are actually really high on some of these blockchains. And you've got a lot of developers and cryptographers looking at ways to design better optimization around that. So it's, it's kind of like a self propagating cycle, really, is that, as the fees go up, people look for ways to to get around that. And then, uh, you know, that makes the whole system theoretically better, and that that cycle kind of starts over again. And it's ultimately supposed to be a good way to maintain the network and incentivize participation, but also, not just, I would say, needless transactions that makes a user really think do I really want to put this on the blockchain? Or should I be doing this and another format off chain? So they work in a couple of different ways the the cryptocurrencies do to facilitate what's happening. And I should add too that, there's two different frameworks that you want to think in as well. There's protocol cryptocurrencies. So like, your bitcoins and your Ethers that are the ones that maintain the the main blockchain, and those are the ones that are paid transaction fees in. But there's also, because Ethereum has that programmable logic, you can actually use code to create a token on top of the network as well. So some of the examples of those that you might have seen in the news, there's a stable currency called USDC. So USD Coin, that's a token that's built on top of the Ethereum network. There's others like Dai, which is another stable coin: D, A, I. That's also built in that manner. And there's, there's really 1000s of them. I mean, I could go through them all, and probably mentioned another one or two here, but that that realistically gives you the whole picture of what's happening with cryptocurrencies, in terms of blockchain. So the summary is that they're needed for public blockchains because they maintain the integrity of the network and incentivize people to behave in the right way to maintain it. And then there's in blockchains, like Ethereum, where you can program on top of it, you can also program cryptocurrencies on top of it for specific applications.
Erica D'Eramo 14:04
So whenever you mention miner, I think of someone who can't buy alcohol, but actually, in this case, it's miner with an E, correct? And what what is that person?
Karen Scarbrough 14:15
Right!
Erica D'Eramo 14:16
What's like the definition of a miner?
Karen Scarbrough 14:19
Good question. Though, there's somewhat, uh they, miners on the network, basically, when we say blockchain, you think of blocks and a chain, right. And that is the way the data on the network is maintained. So in Bitcoin every 10 minutes, you have a new block and Ethereum it's about every 15 seconds, you have a new block of data. And it's based on time and so it's a chunk of transactions basically, and a little bit more cryptography and things mixed in but the miners are the ones that produce these blocks. So if you want your transaction included in a blockchain, it's the miners who would verify it and add it to a block. And the the tie in there is that the miners, because it's open, and anybody could participate, like theoretically, and it's, it's happened, I mean, you can have miners that come in and say, well, I would like to create a block where I own, you know, a million Bitcoin or something like that. And they'll try to include a false block. What the network is built to do is that you should have enough miners incentivized to earn cryptocurrencies through through mining and maintaining the network that a faulty block wouldn't be included. So the miners are the maintainers of the network, and the builders of it really. And the novel part is just again, going back to you could have malicious actors come in and say, I want to include a faulty transaction, but because like, for example, I know, I believe Bitcoin and Ethereum have over 10,000 nodes throughout the world. And that's probably more than that. But if you get one out of those 10,000, trying to put up something false, the other ones are going to say, well, we have no interest in crashing this network and the price of bitcoin or Ether going down, so we're not going to include your faulty transaction, we're going to show what actually happened and maintain the network with integrity. And that's like, how it's supposed to ultimately be maintained that that game theory around if you are mining, you want more than most parties, that it's a good network that people want to use it and they trust it. So that's kind of the the reciprocity there.
Erica D'Eramo 17:07
So what are some other terms that we should maybe know or be familiar with? We've kind of covered blockchain and cryptocurrency and, and some others throughout this discussion, and now miners. Are there any others that get you know, any other terms that get thrown around that perhaps people should be aware of?
Karen Scarbrough 17:29
So I have alluded to code being built on top of Ethereum, and that would be referred to as a smart contract, that people often call that. It makes it sound like a financial agreement, but really what all a smart contract is, is code. So you can have a smart contract that has nothing to do with sending cryptocurrency back and forth, but just, you know, stores something like a "Hello World" expression. So that's one distinction to note there. And then probably another one to be familiar with is decentralized finance. That's, that's also been a popular terminology that's been coming out. So decentralized finance refers to financial applications that have been built with code smart contracts on top of these decentralized, public blockchains. And they're a bit different because it's not codifying old financial systems, like you wouldn't take what a bank does today and just put that in code and put it on a blockchain. Like, the differences lie in the fact that the smart contracts themselves can actually hold value. So that's a that's a pretty novel aspect to understand. So like if, if a company writes a smart contract, where, let's say I send 10 Ether to that smart contract, that 10 ether is debited from my account. So it's no long... it's not in my account. It's not in the developer company's account. It's in this smart contract that they've built, it's in code. They can write a smart contract like that, for example, that somebody else can take out a loan or something against my 10 Ether. And you can programmatically maintain the integrity of that loan. And there's a couple of different ways that they do that, but that's a good short example of what's happening is that the the value isn't being held in centralized systems for decentralized finance, it's been held in smart contracts. And they're programmed in such a way that they facilitate things like loans and exchanging and even insurance that we do today in our financial systems, but they're not operating at the same way when you get down to a granular level, because you've got these smart contracts, maintaining what's going on, not the centralized systems that we we had in the past.
Erica D'Eramo 20:29
So that, you know, brings me nicely to one of my next questions, which is what do you see is sort of some long term macro impacts of blockchain and cryptocurrency or maybe even just decentralization?
Karen Scarbrough 20:45
It's a good question. I think we're shaping, and the days of depending on how regulations go, and the innovations go it could shape up in lots of different ways. And what ultimately, the aim is to enable, I would say, a lot more frictionless personal banking, in a lot of ways. And that can span everything from, you know, alternative currencies and exchange rates across borders to the example I just mentioned, where you know, somebody putting up collateral for a loan, it's far easier then applications that we've had in the past and a lot more open. And I guess, I don't want to say more easily maintained, but it's something that that when I say easily maintained, what I what I more mean, is that because the whole system works together, and you could and what's happening is on the blockchain, because you can build an exchange, a loan system, an insurance platform, and all these different applications, they're not disjointed anymore, they actually talk to each other and build on top of each other because they're built on the same protocol. So like, for example, like imagine if we all use like a different internet today. And I had to connect to one internet to get Facebook and one internet to get Google like, eventually, what happened in the days of the early internet is we all agreed on one protocol that pretty much whatever website you want to access, uses the same underlying protocol. And that's what's happening realistically, with things being built in decentralized finance and public blockchain is we're agreeing, as a financial system, okay, I'm going to build this on this protocol, as an exchange, and there's going to be this company that builds a lending system, this company that builds a insurance system. And because it's all in the same protocol for a user, you can actually connect what you want to do far more easily in a lot of ways than we can today where we have to go to these different institutions to do different things.
Erica D'Eramo 23:20
So that sort of makes me think about regulation, then what eventually, do you see the state of regulation with regard to cryptocurrency or I guess, do you have any thoughts on the current state and maybe the future state?
Karen Scarbrough 23:36
I think the discussion between you know, what's happening with inflation and fiat versus crypto is one that, you know, it's just a that's a hard one to comment on, because it's, there's so many factors that play into that, but I think what's more important to understand is what you can do as a personal user with cryptocurrency versus cash, because the other reason why cryptocurrency is so interesting is that you can hold funds in your own personal digital wallet, that you are the only one that has the the password to it. That introduces a lot of challenges, because if you lose it, you know, obviously you don't have a backup to potentially get your cryptocurrency back. So there are tons of risks involved there. But it also is something that opens up, you know, a lot more seamless of a financial system and a lot of ways just on the digital side. So to thrash out what that means a little bit more. If I go to a central exchange, and I buy Ether with my cryptocurrency, what I can do is I can take that that cryptocurrency that I bought and say I want to send it to this address. And a cryptocurrency address is like, you might have seen them in the news, they look like 0x, seven, four, etc, you know, 64 numbers leading off of that it's just a randomized set of numbers. But when you send that from the centralized exchange to your wallet, you can you control where it goes, it can go in and out. So it's, in many ways, it's a bit the equivalent of taking out a chunk of cash from your bank. And, you know, once it's in your wallet, realistically, the bank doesn't know where it goes from there. The catch 22 of cryptocurrency, and where some of the regulation gets interesting, is that because blockchain keeps a record of all the transactions, realistically, if you take out cryptocurrency from an exchange, and then send it to somebody else, people can see that you've done that, because these systems are public right now. There are lots of different privacy solutions coming out that might change that in the future. But as far as an auditing system, it's actually a lot better than cash. There's a big misconception about a lot of criminal activity happening with cryptocurrencies. Smart criminals really aren't doing that. I mean, that it happens all they can fully see that. But if it was really this private, great system for criminals, I think we'd see a lot more activity of it. There's some reports that have said that that criminal activity has even gone down in the past couple of years, and the reason for that is the auditability of it. And the fact that you can go back and see, well, if this address, got Bitcoin from this address, and sent it here, this must have been what they did with it. So there's some regulation, proposals around exchanges being responsible for reporting above a certain threshold that if they if you withdraw this much amount, then the exchange has to report that, and then the exchange has to report where you sent it. That's actually far more invasive than what we have for cash right now. So like, for example, if I withdraw cash from a bank, like, they report that I withdrew the cash, but they don't know where I spent it, so they don't report it. So there are some lawmakers that want to put that extra reporting burden really, on some of these centralized institutions. And yeah, that's kind of up for debate, it would make it a little bit harder as to some of the innovation in some ways. But, you know, that's just being discussed at the regulator level. You know, with these systems being live for bitcoins, you know, 20, oh, gosh, almost 20 or no, not 20, 12 years now. And then, with Ethereum being live for six years, or, yeah, six years this year, I think. Anyways, like that's already that the the cat's kind of out of the box already. And that kind of transmission's happening. So it'll be interesting to see which way it goes. But users just have to be conscious that it hasn't been fully determined how these systems should operate. And I feel like we're trying to allow for innovation but also maintain the integrity of the financial system as well. So the hope is that we reach the right balance with that.
Erica D'Eramo 29:19
So what do you personally see as some of the risks involved in either partaking or investing at this point?
Karen Scarbrough 29:31
So there's lots of risks because the... so you can definitely...
Erica D'Eramo 29:38
You mentioned a couple like forgetting your password.
Karen Scarbrough 29:42
Absolutely. So the market in general is unlike anything that can be mirrored in traditional markets. People don't know how to value these cryptocurrencies yet and that's why you see, in part these wide swings of prices. And you do have instances as well, where a small amount of users can possess a large amount of tokens depending on which one you're trading. So that is also something to be aware of is that we talked about these systems being decentralized. But if you have a core group of users kind of having the majority of the tokens, that's also not a great thing for market control and fluctuations, in many ways, so it's the volatility that that's out there and the fact that people don't know how to value these things, that gives it such a wild, swinging price differentiator. And then when you get, especially for decentralized finance, these systems are all are all new. So in many ways, they're like, you can see that they're, you know, quote, unquote, working because they have users, things have worked thus far. That doesn't mean down the line, that it's not going to have issues. So there have been hacks, and even not like code hacks in the smart contracts, but like, for example, there was one platform that pegged their price oracle, so where they were getting their price, from a certain website. And that particular website had a big price swing that day. So the other websites moder... monitoring cryptocurrency prices didn't see this. So what happened on that platform is that because of these wild price swings, the loans were called in, and many people were liquidated because of it. So it's, it's not something that like, they hacked the, you know, loan or borrowing platform code. It worked as it should. But, you know, these price oracles were erroneous that they were looking at. So there's things like that, that that can happen. There's all sorts of components in these systems now where people just have to take into consideration that if one of these goes wrong, that's when issues come up. And then there's also a catch 22 in that, unlike traditional financial systems, a lot of these don't have emergency brakes. So, you know, like, with what happened with Robinhood and GameStop, and how they stopped trading, you know, whether you think that's a good thing or a bad thing, that's another discussion. But you know, there were sort of emergency brakes built into the system, so to speak.
Erica D'Eramo 32:58
I won't comment. It's a different podcast episode.
Karen Scarbrough 33:04
But in crypto currencies, you don't have those emergency breaks. So, you know, that is something to consider as well is that you just have to be really responsible and aware of what you're getting into and be prepared with what you're putting up for risk to be there. So, yeah.
Erica D'Eramo 33:28
Kind of buyer beware.
Karen Scarbrough 33:30
Yeah, exactly. I mean, I, it's I think these systems have a tremendous opportunity and innovation to make things better than existing systems, but, you know, at the same time, it requires people to be aware of because, yeah, there's still just so much in flux. So I think the better you can promote what's actually going on, as opposed to buy this token then, you know, retire next week, is all the better because it's, it's amazing what's being built but the buyers need to be just as informed in this as they would in a lot of other undertakings and financial systems.
Erica D'Eramo 34:20
So when you talk about cryptocurrency, and we talk about different coins, what, what are some of the different types of cryptocurrency out there right now? And how would one decide? I mean, are they all the same? Or is there some differentiator? Is it just like gambling or how would you make a decision about where to focus?
Karen Scarbrough 34:45
Yeah, there's so there's a couple of different categories there. We already mentioned the the protocol tokens, so the ones that are rewarded to the miners that people pay transaction fees in, like Bitcoin and Ethereum. And then more than that, there's the tokens that can be built in the smart contracts and the toe... in the code. So I mentioned earlier there's cryptocurrencies now that are pegged to fiat and one of those is USDC, and that institution basically keeps US dollars in a bank on a one to one basis of the the tokens that they issue. The other stable token that's interesting is called Dai. And it's D, A, I. It's made by a company that called MakerDAO. And I hesitate to say that because it's actually a decentralized system where, you know, if MakerDAO actually went down tomorrow, you'd still have Dai. So and how that works is you lock collateral in a smart contract that based on the ratios that are decided by that team, you basically received Dai, which is pegged one to one with the US dollar. So there's, gosh, there's over $2 billion tokenized in Dai now that are pegged to the US dollar, and they're collateralized with things like Ether and a couple of other cryptocurrencies on the Ethereum blockchain. And a good kind of lead in is, I mentioned the company, MakerDAO that's maintaining this. So there's also a maker token, which functions as what they call a governance token. So those tokens allow you to vote in protocol changes. So like, for example, if you wanted to decrease the collateralization rate, you could buy some MKR token and participate in that voting structure. And, yeah, there's also, I guess, a broader category of that is like utility tokens, that power basically like a specific network. There's a company called Brave, which has made a browser that has built-in ad blockers. And essentially, if you are shown ads like you can be re... you can receive micro micro payments in their token. So people have made specific tokens for their application, they've made these governance tokens, there's stable tokens, and then you might have also heard of these other tokens called non fungible tokens. And basically, the interesting point about those is instead of like, a token being a part of a group, so like, for example, if I trade you one Dai, my one Dai is equal to your one Dai. Whereas if we have a non fungible token, what they call NFTs, those tokens can represent specific things. So like people are making them represent things like a song or a piece of artwork. And it's basically like a digital certificate of ownership of a specific asset. So...
Erica D'Eramo 38:29
That's fascinating. I knew nothing about that, actually.
Karen Scarbrough 38:33
Yeah, they're gaining in popularity. I feel like they're the beanie babies of the next generation in some ways.
Erica D'Eramo 38:43
So I'm curious about another element that I, you know, you hear a lot in the news, and that is the environmental impact of some of the mining and just kind of the power requirements and energy usage. So in this world where there's so much discussion about net zero and emissions and in power consumption, what, what is the implication for blockchain or cryptocurrency?
Karen Scarbrough 39:16
That's a good question. So I'll try to keep it short and we can dive into more things that we'd be more interested in. So to dive in a bit more about how mining works, this proof of work mining where you have to extend computational power. Basically how that works is you make random guesses on a computer over and over again. They use a algorithm called hashing, which is basically something that takes in an input and gives you a randomized output. And it's an output that can't be like backwards computed. So, anyways, this hashing algorithm, every time a Bitcoin block, or a Bitcoin transaction, excuse me, happens on average it takes 8.7 quintillion hashes to produce that transaction. So that is a ton of hashing algorithms. I mean, imagine if you like ran 8.7 quintillion addition, you know, sequences on your own computer. Like, it would take a lot of power. And then when you add something...
Erica D'Eramo 40:35
I don't even know how many zeros are in that number.
Karen Scarbrough 40:39
Yeah, it's a lot. But anyways, that goes back to like the computing power to that's required for it. And what's fascinating is, it's not that the production of the block requires these hashes, those hashes are there so that a miner can't just come and randomly produce a block, like, basically, it happens that as network usage goes up, like the mining will go up or down. So if you have more miners, the mining will get harder. If you have less miners, then the the mining will get easier. And it's kind of maintained that way. But that just gives you a frame of reference for like, right now, I think that calculation was done at the end of last year. It's 8.7 quintillion hashes per transaction on average. But that's a lot. And so there's wild estimates out there because you can't necessarily calculate the power consumption in detail. Because if I'm a miner, and I use some equipment to make my hashes, I may have completely different hashes, hashing equipment than what you have. And maybe I'm using renewable energy for my hashing, and you're using, you know, coal, or whatever's cheapest in your area. So you see, like wildly different estimates on, oh, Bitcoin takes as much energy as the country of Ireland, and then it's like, oh, no, they take so much more energy than that, it's more like, you know, 1/4 of Germany or something, all these different estimates that kind of swing wildly. But it goes back to we don't know all the mining equipment, we don't know what power is being used. But we know it's taking a lot of hashes to make these things happen. But that is where the move to what I alluded to earlier, proof of stake gets interesting because proof of stake takes out that need to do all those hashes, because instead of that power consumption from miners proving integrity, instead, they have their Ether or whatever cryptocurrency depending on the network locked in a smart contract, saying, I'll make a block for you. Here's a bunch of money that says I'm probably not going to, you know, produce a bad block. So, you know, let me participate as a miner basically. And instead of mi... at those proof of stake miners participating as a competition, what effectively happens is they're randomly selected to produce a block. So you basically lock your collateral in a smart contract, you may have done that with millions of other people. I don't know if it's a million yet. But it's it's good that the numbers are getting up there. But anyway, it's like you're randomly selected and if you win the block what you have to produce is a block. Because you don't have to do all that hashing, it's really simple. It's like less than 1% of the energy consumption that's involved in proof of work with all the hashing that has to take place. So I think in the long run, that proof of work will go away. And I don't know, like one challenge with the Bitcoin network is, you know, and I am no expert, but I haven't seen as much of a path to get there as some of the other networks that are out there. Like there's some networks that have already have started day one with proof of work or proof of stake. There's networks like Ethereum that have said we're going to transition and they've already started it. But the environmental concern comes from that proof of work, but again, it's a, it was a trade off in the beginning in that they had to have a way for miners to have that skin in the game, so that they participated with integrity. But obviously, you know, the world doesn't want us to waste that much energy on, you know, random guessing. And computers. That's, I mean, it's not ideal. So that's where the biggest concern comes from.
Erica D'Eramo 45:23
Interesting. And are you seeing any sort of regulation or lobbying for this or activism around pushing cryptocurrency and blockchain to a more environmentally friendly model?
Karen Scarbrough 45:41
I think you do see a lot from people who are critics of public networks in general. And the, there's also been studies that have said 34% of mining and public networks that use proof of work actually already use renewable energy sources as well. So I mean, probably the biggest concern is just what Bitcoin is going to do, because I, there realistically are no more networks that are coming to light that are using proof of work, because it's not the best design anymore. And then...
Erica D'Eramo 46:29
Interesting.
Karen Scarbrough 46:29
...Ethereum has its transition plans. So the probably the biggest question from a future standpoint is just what's going to happen with Bitcoin and proof of work?
Erica D'Eramo 46:41
What is the market share that Bitcoin has, if they're one of the key players?
Karen Scarbrough 46:47
Well, I mean, as a value proposition, they, you know, obviously have the largest market cap, but from a transaction activity perspective, gosh, there's there's like 10x or more happening on other blockchains. So I think, you know, Bitcoin people are interested in for the price, for this opportunity to be a world reserve currency, if it ends up in that way. But realistically, the actual activity and and people actually, moving cryptocurrencies from here to there, building in logic, actually using it on a day to day basis, is happening on other networks. So, where that leaves proof of work, we still don't know, because the the Bitcoin network was, I mean, all these networks are designed in slightly different ways than another like, you know, you don't realistically have smart contracts on Bitcoin. I think there's some people in Bitcoin who would challenge that and say, you can do a smart contract on Bitcoin if you really want to, but it's, it's not the same as other networks. So, yeah, it just leaves a big question of a network that big, with that much value, you know, what's the the transition plan? And, yeah, well, we'll see where it ends up in the long run, in many ways. So another thing to consider, and it gets really interesting, is that as Bitcoin mining and this, like hashing function got such a rise in popularity, the hardware has gotten better. So there's whole hardware industries that have made specific hardware for Bitcoin mining, and it's also gotten more efficient in a lot of ways in what it's doing. So I think, overall, the kind of exciting thing to think about with a lot of these systems is that because they're open, as long as people find value there, innovators will innovate. And, you know, theoretically make it better. So I don't think there's any malicious parties out there that want to maintain proof of work, because it's a better system, and, you know, we got to have that. I think, maybe that's a little bit optimistic to me, but I think that the free market is intelligent enough to, or, you know, not that they're unintelligent, but you know, that there's that genuine drive to like, make it better. It's just figuring out the solution, I guess you can say. And that looks different for different networks.
Erica D'Eramo 49:38
And steering the ship probably looks different for, you know, for something like Bitcoin that, like you said, has attracted a lot of attention and very high amounts of, of just monetary investment. Might be a bit harder to steer the ship and make changes, but...
Karen Scarbrough 49:59
Yeah.
Erica D'Eramo 50:00
So. I, one of the primary reasons that I really wanted to invite you on to the podcast to talk about this is because I feel like there's a perception that cryptocurrency and Bitcoin and blockchain are all sort of the domain of the tech bros and you sort of envision like a white dude in Silicon Valley, talking about, you know, mining for coins, I guess. And I feel like it can maybe be intimidating for people who don't envision themselves that way, or don't feel that this is a space that they would be welcome in. So tell me a little bit about your thoughts on that.
Karen Scarbrough 50:50
There's so many components to this industry now that I think on the spectrum of, you know, whether your strength is in creativity and design, or communication, or organization and project management, or as a programmer, or a developer, like that's a place for excelling in all those areas. So it's definitely, from what I've seen, you know, it's not just the technologists' domain anymore. And it's really exciting because it's more than just a technology, it's a financial system, it's a new design. It's about user experience, as well, which, as designers will tell you, that's just a whole domain in and of itself. So there's just so many components that you can participate in, that I think people that are interested, you know, spending a little time in the ecosystem, just maybe listening to some different podcasts or reading some articles. There's lots of companies hiring and it's using the skills that you have to make the industry as it is better. Because it definitely needs more strength in it to refine what's happening. So yeah, there's a lot of different ways to do that now, I'd say.
Erica D'Eramo 52:28
And probably wou... that the industry, I guess, I guess we could call it an industry, would benefit from the diversity of thought of having people from a variety of backgrounds across the gender spectrum involved in, in sort of this development and the future.
Karen Scarbrough 52:46
Yeah, I'd say so. And I think programming, developers, technology in general, you know, the, the repres... representation of women is, you know, unbalanced and for for different reasons, but what's absolutely fantastic about this industry is that, you know, most of it is open source, if not all of it. And that really breaks down kind of the barriers to entry of who wants to get involved. So like, in comparison, you know, an industry like we've worked in like oil and gas, if you want to learn how a piece of equipment works, like you got to go talk to all these different people, it may or may not be written down. What's wonderful about public blockchains, in general, is that code's open for anybody to go and read and spend some time on to understand. So I think that can open up a lot of doors that haven't been as easy in other industries.
Erica D'Eramo 53:50
Yeah, you don't need a helicopter to go check it out.
Karen Scarbrough 53:55
Yeah, exactly.
Erica D'Eramo 53:56
Yeah. So if somebody wanted to learn more, you mentioned podcasts. What you know, where would you point someone to if they wanted to do some more research and maybe dip their toe?
Karen Scarbrough 54:10
Yeah. So the podcasts out there that are great. There's one called Bankless that that does some great overviews. There's another called Zero Knowledge that gets into a lot of the cryptography side. It's it's fantastic if you want to learn the cryptography but if you're just starting out in blockchain there's also ones like Epicenter. Another podcast is called Unchained. And all of them to some degree use a little bit of their own lingo for blockchain, but there's been a lot of people posting articles on Medium. There's a, there's a great newsletter called Week in Ethereum, that gives an overview from a developer perspective and then, you know, also what's happening in the industry. And yeah, I mean, it's sometimes it's hard to differentiate what's happening from a, an article point of view versus under the hood, with developers and technologies, but I would say the best source of information is trying to get it directly from people building things, rather than, like third party sources that are that are writing on them because there's so much blogs and articles from people who are building applications or protocols. Like that's really the the best place to start. And this industry in general does do a pretty decent job at, you know, what people are working on they'll write about or put go on podcasts about, so, you know, like...
Erica D'Eramo 56:01
Like we're doing today.
Karen Scarbrough 56:03
Yeah, exactly. But I would say definitely, it's kind of hard to decipher what's going on, if you go to a mainstream media outlet. I think there's a lot of confusion at that level. But if you go to the source, there's a lot more clarity.
Erica D'Eramo 56:19
And how about organizations? Are there any sort of organizations that are focused on this that people could find some community in?
Karen Scarbrough 56:28
Yeah, I know almost in every major city there's either some kind of Bitcoin meetup or Ethereum meetup that different people host. And then there's a lot of projects, too, that just have an open chat forum and applications like Telegram or Discord, to ask questions as well. And yeah, I mean, because this is a online first kind of community, I think there's a lot of opportunity that if you don't feel like you're in the right city, you can actually connect with people a lot more easily than you probably think, just by the nature of what it is.
Erica D'Eramo 57:15
Yeah, that's, that's really interesting. So I think we've exhausted sort of all the areas that I wanted to explore but I'm interested if there were any parting thoughts that you wanted to leave us with on, you know, blockchain, cryptocurrency and, and the future?
Karen Scarbrough 57:37
Um, I guess I would say, like I got involved in 2017 was when I first started working in the industry. And I have just continuously been amazed at how many problems they've that that different developers and researchers have solved and made better and not that everything's perfect yet. But I think there's just such an amazing room to grow. And you've got lots of brilliant minds working on this stuff. So if anything, I hope the discussion kind of led people away from price tickers, and more interested in actually what's going on. Because it's worth it to just spend some time and understand because it's definitely has huge opportunities for the future.
Erica D'Eramo 58:26
Yeah, absolutely. This has been fascinating for me, and really, really insightful. So I appreciate you dispelling quite a few myths and giving us a bit more vocabulary and understanding to to help maybe introduce us and do a bit more research after this. Actually, I'm probably going to start digging into some of those other areas to learn more. So thank you, Karen. We appreciate it.
Karen Scarbrough 58:53
Awesome. Thanks for having me.
Erica D'Eramo 58:55
Thanks. And for our listeners, you can find more information about Two Piers on our website at twopiersconsulting.com. And you can follow us on all of our social media channels. So Facebook, Twitter, Instagram and LinkedIn and we look forward to seeing you at the next podcast.