Decentralisation: has the internet locked a reach for freedom into a clinch with central power? – Joseph Kennedy

Gareth King (00:30)

Joseph, thank you very much for joining us and welcome to the show.

Joseph Kennedy (00:33)

Thank much for having me. Delighted to be here.

Gareth King (00:36)

Before we get into it today though, can you tell us a bit about what you do and the journey that's led you to this point?

Joseph Kennedy (00:41)

Sure. I started out as a content writer in the crypto space back in 2017. Before that I worked in journalism and environmental media sustainability. I just fell in love with the whole blockchain tech and so I moved over. Now I'm head of marketing at Alephium. It's a layer one proof of work blockchain from Switzerland. We are highly decentralized and that's why I'm here to talk about decentralization and why I think the internet may have ruined it.

Gareth King (01:07)

Yes. Well, I'm sure, I'm sure we're to get into it, but just for anyone that may not know, what does that layer one terminology mean?

Joseph Kennedy (01:15)

Layer one is the base layer. So it's a lot of the blockchains that you will know. Let's say Bitcoin and Ethereum, Ripple, right? These are the base layers and they allow other applications to be built on top of them in most cases. So, they do all of the processing, the distributed ledger. They are the network essentially.

Gareth King (01:38)

Great. Now we've got that out of the way. As you mentioned, we are here to talk about decentralization. From your perspective, what's been going on that's led to you feeling like the internet's ruined it? And what are some examples of what's been happening?

Joseph Kennedy (01:52)

Oh that is a good question. If you go back, right, 2008, you had this guy, Satoshi Nakamoto, not his real name, a fake name. He introduced Bitcoin with this white paper and it was revolutionary, right? But it came off the back of this like cypherpunk movement whereby people didn't trust the government. You know, this is timed around the financial crisis. So, there were just a lot of distrust going on and he presented an alternative

And it was decentralized, it was secure, it was really a solution to what was going on and people loved it. But it took time to be adopted and even to this day, many people are still Bitcoin maximalists. Bitcoin is in some people's views, still the perfect cryptocurrency. But as time went on, more and more cryptocurrencies and blockchains came along. A lot of blockchains came over the next kind of decade and then millions of cryptocurrencies.

I've read an estimate there's about a hundred million cryptocurrencies now. It's so fragmented and most of them are junk. And the other issue is that the industry grew from this cypherpunk movement, right? So, they're basically like punk cryptographers who wanted to grow this like genuine network to help move value around, right? And data and information.

And then came in the venture capitalists, the banks, you know, all of those value extractors came in and, it became a business and then in 2017, 2018, we had this like ICO crisis where people were basically doing fake fundraisers, stealing millions of dollars.

And that kind of poor ethic is still present. But the more you invite institutional capital, big tech, centralized entities, the more you invite them in or encourage them, the more value extractors appear because there's more value to be extracted. And so we have this kind of no-win situation where the original core ethos of decentralization has been so diluted that there's not much of it left and that most of the industry now is value extraction.

Gareth King (03:54)

Look, I think that's pretty good summary. Now I think there's probably everyone on earth by this point has heard about Bitcoin and as you mentioned, Bitcoin maxis, you know, I know a couple, and then at the other end of the spectrum, just these crazy cynics that can't understand obviously all the stuff put out in the white paper, et cetera, et cetera.

But while we are talking about that crypto space, as you started us off, I think one thing that a lot of people associate with it is, as you said, like junk and scams, and whether it's institutional value extraction or generally the lack of guardrails in the space, I think that that potentially leaves a bad taste in some people's mouths.

Ah what was it? There was, there was a, was it Luna or some coin like just, just went to zero in, in overnight. And correct me if that's not the one, but I remember sitting eating my lunch and I could hear a dude on the phone talking about how he'd lost everything, you know, in, this coin and like, I kind of chuckle about it now. And I was just like, oh, this poor guy, but he was like one of so many people that day.

So anyway, I guess where I'm going with this is the fact that it is like that does lead to people calling for that big tech, venture capital to come in and put some protections in there for amateur users of the thing. What are some examples, the more well-known examples of venture capital getting involved?

Joseph Kennedy (05:16)

Well, for venture capital, you know, there's a lot of hedge funds and institution managers. They come in, they pump a lot of money into projects. They take their cut and they OTC out. They take their profit and they run. They don't really care about the projects, right? They only care about one thing. And I think this is an industry that requires care. It requires Satoshi-like principles is what people say. Decentralized, secure, scalable. You need these things. And venture capital, they threaten that. They threaten decentralization by bringing in centralization. Big tech is what we're trying to move away from. Big finance, what we're trying to move away from.

And I feel like we're going full circle. We're basically heading back to the situation we were trying to get away from. That's why so many people were drawn in. People like myself, maybe like yourself too, was a bit of distrust and curiosity. They wanted to support this alternative way. And now it's going back to the problems, it's hard to accept.

Gareth King (06:13)

It's very interesting that you've just said it's coming back full circle because I think as it's quite well known now, things like Bitcoin ETFs and fund managers with Bitcoin in the portfolio. But how do, whether it's VCs or big tech, throw their weight around in the space and take it over? Is it simply a case of having the money or the resources or is it something else?

Joseph Kennedy (06:37)

It's more than that. Influence is massive and cloud, I would say cloud providers have way too much power, like a real imbalance of power where your cloud goes down and like 70 % of crypto platforms or what we call dApps, they just go down because their interfaces are hosted by the cloud, by centralized cloud. So, we've got this single point of failure and it's a real issue. There's this kind of blurring of the lines between centralized and decentralized and decentralization is a spectrum. It's not a yes or no. So, I think that that's a real big issue. Yeah.

Gareth King (07:16)

Is it a case that the amount of users and I guess the size of the networks and the amount of activity, they would need infrastructure on the scale potentially of what Amazon can provide, or is there another way that would remain more decentralized?

Joseph Kennedy (07:30)

Yeah, there are decentralized cloud providers, decentralized hosting, decentralized storage, decentralized indexing. You have solutions now. There are ways to do it and decentralized compute as well. People can basically rent out the compute that they're not using to these providers and it gets redistributed.

Now, I don't know how feasible it is for every single project. I don't know how cost effective it is for every single project. Some of these services work out to be more cost effective and some less so. Some have some kind of complexity set up and some are just kind of incompatible. But it's that whole space is called D-PIN, Decentralized Physical Infrastructure Networks. And it's a really good growing space because it's solving this problem like cloud dependency, API dependency and other issues in this realm where we've got the underlying infrastructure is great. The blockchain itself is decentralized, but kind of everything on top of it that glues it together is then centralized, and that's an issue.

But what's important to know is that if you have more technical skills, if you are good with smart contracts, you can always work your smart contract with the blockchain directly if you know how to code. If you don't, you need to go through the user interfaces, the dApps, the platforms, the protocols. And if they're down, then your funds are basically trapped because you don't know how to directly involve yourself with the blockchain. So that's a real issue.

What I've seen is that people are within communities when a dApp goes down, there's always people, not always, but a lot of the time, people who are able to quickly throw up a user interface to help the community. It's not that complex to build a UI. It's just that people are perfectionists. They want incredible UI. That's the new demand of Web3.

Gareth King (09:14)

Where that leads me to was, I would say it probably happened during the years of the pandemic where cryptocurrency just kind of became a thing. And then obviously there was exchanges like crypto.com, et cetera, et cetera, that were very accessible to the average person. Now, as we mentioned a few minutes ago, the average person may be looking for that security, safety, something they can trust. They don't need to learn so much and they just want to kind of connect their bank. I don't know. Let's say invest in something and take the money out at the other end.

I guess my question with this is obviously it brings a lot of people into the space, potentially learning about what's going on, but what are the risks to decentralization of using, let's say a centralized crypto exchange to get people involved in the space?

Joseph Kennedy (10:08)

Well, decentralized crypto exchanges have less risk than centralized exchanges, because they don't have a single point of failure. So your centralized exchanges, almost all of them have been hacked at some point. They've been exploited because they're only as good as their development and their code. And it's the same with decentralized exchanges, but the top ones, they're all audited by the best security companies in the space and they're safe.

It's not the decentralized exchanges you have to worry about, but the bridges. These days most of the decentralized exploits and they come from vulnerabilities in bridge contracts. And a bridge is where you're moving your crypto from one blockchain to another and they're incompatible. So, they have to go through a bridge, and the bridge allows your coin to be or token to be wrapped up in and made usable on the other blockchain. It's kind of hard to explain, I guess, but it's a bit like they put it in escrow.

The coins come from each side, they go in escrow and there's some vulnerable moment in there that has been exploited far too many times. But decentralized exchanges are very safe. And as long as you have your Metamask or other wallet, similar wallet, and yeah, I've never encountered a problem and they're quite uncommon.

Gareth King (11:26)

Interesting. There's obviously the perception out in the world that it's a little bit sketchy. Is that just the perception of say the cryptocurrency space or what would you say the general public's perception of Web3 in general is at this point? And what do you think it should be?

Joseph Kennedy (11:42)

Well, it's led by the media, right? If the media only highlights the bad stuff that happens, know, hacks and scams and exploits, and they don't report on all of the good stuff, the innovations, the progress, the utility, then there's a kind of warped perception. And now I think it's totally fair to highlight all the bad stuff and the risks because people have been very skeptical about crypto for a long time. But I do feel like that is changing. It is more accessible now.

I think the public should try for themselves, but only get involved if you're willing to do your research. This is what I say to anybody. If somebody comes to me and they haven't never invested or bought a crypto and they asked me for advice, I say, well, I'm not your starting point. Your starting point is to go watch YouTube videos and read some blogs. Would you invest in something that you don't know anything about if it wasn't crypto? You're only here because you heard that you can make 20X on your investment overnight. That's the only reason you've come to me. And in that point, I don't really want to help them because they're just here to value extract.

If people say, oh I'm a developer, I want to contribute. I really align with the values of the movement. I want to be part of a community. I want to find projects that solve problems for me. Then I can guide them in the right direction. I think that's much more important. I want people who are going to come and promote and contribute. I don't want people who are just general consumers.

That's their goal is to come in, make a bit of money and go. And that's absolutely fine. But that doesn't really touch decentralization, right? Their fiat money is centralized. Their Binance.com is completely centralized. All of their experience is centralized. The decentralization stuff happens elsewhere. And it's fun. There's cool stuff out there. There's gaming and casinos and different ways to store your funds and trade and provide liquidity. And you learn a lot in the process.

Gareth King (13:35)

I think that's a really good point that you've raised there as well around people are just looking at it to extract value just as, as consumers. Let's move into now what the real good stuff happening somewhere else is.

You said there's casinos and games and things that are kind of in the real decentralized space. Before we get into what those are and what's happening, how much kind of eyeballs from say governments and regulators does that attract? Is the entire space being affected by such powerful entities as that at the moment, or is it kind of doing its own thing?

Joseph Kennedy (14:10)

It's really on a case-by-case basis. A lot of it depends what the SEC decides. The US kind of leads enforcement and a lot of countries follow behind, right? Now, the good thing is that Trump promised to fire Gary Gensler if he became president. Now, Gary Gensler was the chairman of the SEC and he resigned before Trump had the chance. Gary Gensler was so against crypto that he did everything he could to stifle it, to just completely squash it.

He sent out indictments and Wells notices and subpoenas and all these legal mechanisms to stop it. Since Trump, that's not been happening, right? Trump has changed the position of the U.S. on the crypto world, centralized and decentralized, and it's allowed it to start growing again. And while the prices might not reflect that, the industry is growing again. People are innovating again.

And for one example would be prediction markets. These were born in decentralized spaces, where you vote on an outcome, right? These became incredibly popular. Kalshi, which is the second biggest one, created, I think, the first self-made female billionaire in the US for some years. Polymarket is massive. It's centralized. These are both centralized. They are in the pockets of Wall Street. They're owned by big tech. So, all that did was inspire decentralized alternatives, and now you see them popping up.

So influence can work both ways. The decentralized space is not completely separate from the centralized space. It's finding a way to do what traditional finance does, but in a decentralized way. And sometimes it's the other way around. Traditional finance sees something good from decentralized world and tries to recreate it in a centralized way. But yeah, I think I've gone off track there with the question.

Gareth King (15:56)

No, no, I think, I think that's, that's led us onto something else there. You've mentioned outside entities with money, influence, resources, power, whatever it is, and either trying to get involved or make their own. And one I'd love to talk to you about was majors like Meta, trying to create something that they're presenting as this Web3 space or service. What's your take on these companies getting involved like that? Why do you think they're doing it and is it acceptable?

Joseph Kennedy (16:28)

Maximum shareholder value. You know, Meta, Microsoft, whatever. Like these guys, they want to be close to what's ever happening in big tech, right? They're somewhat involved in AI, in quantum, in Web3, metaverse, wearables, whatever. Apple's the same. I think Meta tried to be the centre of it, right? They wanted to create the metaverse, the social network. They wanted the wearable goggles. Whereas I think Microsoft was smarter. They provided more of an infrastructure layer, right? With the cloud, the chips, the tech, this kind of stuff.

I don't have a huge issue with them being part of it. It's just how they do it, right? Like Meta just completely failed. Libra blockchain was a fail. Their metaverse was a fail. I think they did it to push like stock prices. It's smoke and mirrors. It's classic like vapourware to try and get more funding. I think Microsoft has better intentions.

They do invest in some really cool Web3 startups. I know there are investors out there who look at what Microsoft is doing and invest in the same projects because they do have really good due diligence when it comes to Web3 projects and seeing which ones are actual valuable long-term tech. So yeah, I don't have a problem with Microsoft. I think Meta goes about it the wrong way. Apple's not too involved in Web3.

One of the best examples is Nike. Nike, not really seen by many as a tech company, but it really is a tech company. They bought a company called Artifact and it's seen as like one of the best case studies of NFTs and Nike use their power and influence in a really cool way for that. I think some brands can come in and do cool stuff. Some tech companies can come in and do it right, but it all depends on their intentions. And it's the same for the users. We're back to square one, right? Are you a value extractor or a contributor?

Gareth King (18:18)

No, of course. And you just mentioned there the Nike and was it Artifact? What, what were they doing? Cause I think a lot of people hear NFTs and they think about Bored Ape. You know, they say the monkey JPEG. Like that basic stuff, I think is a lot of people's impression of what NFTs are. What are they actually? What, what's some great use cases going on in that space?

Joseph Kennedy (18:40)

This is not my area. I'm not a huge fan of NFTs and I'm still really waiting for utility. I still think NFTs are in this really long novelty stage while they figure out their utility. I think there are good use cases. I would say the royalty design is something that I'm really impressed by.

Right now in the real world, if you're an artist, you create a piece of art, say a beautiful painting, you sell it in a gallery for, you know, 5,000 bucks, you're done. The chain's over, it's onto someone else, you never see another penny.

But with NFTs, if you create an NFT, you can code royalties into the artwork so that every time it's sold, you get a commission. Every time it changes hands, you get a commission. I think that's a wonderful thing. I think that's much fairer. So that if over time, the value of that artwork really increases, the artist should still benefit from that, right? The original creator.

Gareth King (19:33)

It's an interesting point there, you know, the piece of art that can be fragmented, pay commissions, royalties, whatever, as long as it keeps changing down the line. Is it simply a case of, a lot of people not interested in kind of the digital asset space. They may not see any inherent value in something just while we're talking about value. And I think that that's fine.

You know, other people may not see any inherent value in some paint on a canvas, but just to address the cynics of the digital asset space, is it just simply a case of value is simply what someone assigns to something and that value is a lot more transportable and flexible and fragmentable within the digital space.

Joseph Kennedy (20:20)

Yeah, it's the same as the real world. Something's only worth what somebody's willing to pay for it. It's just that in the real world, you value something psychologically based on your local currency, the currency that you use daily. So, I'll look at an iPhone, I see it's for sale. Okay. It's a thousand dollars. Right. I say, well, I don't think it's worth a thousand dollars. I'd rather buy an older model second-hand for three or 400, right. That's, and I'm creating that connection with a real world currency.

Now, when you're in the digital asset space, people's funds have all come from different sources. Somebody may have bought a token for a dollar, it's gone up to a hundred dollars and then they go and buy that NFT for a hundred dollars, but it's only cost them really one dollar, right? There's the values people assigned to it. It's a market like a free market in the real world. It's just that there is more volatility. There's less buyers, perhaps there's more chaos and a lot of it's driven by trends and bandwagons and hype, and people get sucked into things.

For NFTs, you've got this Beeple. You may have heard of Beeple. He's got like the world record for the most expensive NFT ever. I think it was like 60 something million USD, right? Now I looked further into it because I agreed and I said, there's no way somebody would spend $60 million on this. This huge JPEG is, it's like 5,000 or 500 pieces of art woven together. I said nobody would really pay for that.

Now I dug into it, I found the guy that bought it. I found an interview with him where he said, well, he actually paid for it in Ethereum and he bought that Ethereum for 5,000 USD. So that 60 million, cost him years before just 5,000 USD. And he felt like he was the real winner, whereas everyone else is laughing at him. So, there's this disconnect between like in the real world, we have one or two fiat currencies that we associate price with. Whereas in the digital asset world, there's thousands and people's wealth can grow and drop so drastically in a short amount of time that your relativity between cryptocurrencies and assets is completely disrupted. It's distorted.

Gareth King (22:26)

That's a great point there around two things that you've brought up there. One kind of chasing those narratives and hype, but then also the growing of the wealth in such a short space of time. And it's obvious why both of those things would attract the attention of the more centralized larger organizations to get involved.

But what I wanted to ask you on that point is if these more centralized companies, entities are barging their way into the decentralized space. Do the only people that see that's a problem are those that really believe in the decentralized space as it is, or is it a much larger problem that people just aren't aware of the potential ramifications?

Joseph Kennedy (23:07)

Yeah, I do have a good story for this. There's this guy called Justin Sun. He's quite famous. He's the founder of Tron, which is one of the biggest blockchain networks. Now, back in 2020, there was this blockchain called Steemit, and it was a really noble project. Like they wanted to be decentralized. They wanted to reward contributors. And so, the whole blockchain was based around that, was about rewarding contributors. And they had this awesome long-term vision.

Now, unfortunately, at some point, the founding team decided to sell their stake in the company over to Justin Sun. He identified it as an investment. Now, what they didn't account for was that Justin Sun's intentions were not what they appeared to be. There was this huge ecosystem fund. Now, whenever a blockchain forms, they allocate parts of the coin to different things like for salaries to the team, the business entity, for exchanges and also for ecosystem development, like to give grants to projects that want to build or migrate over to your blockchain.

Now they had this huge fund. It was worth a lot of money. And basically, they didn't account for the fact that Justin Sun was going to come in and try and take that pot of money for himself. But as soon as he'd bought the company side, he saw that as his personal property, as kind of he was right to do. He'd bought the business, he'd bought the assets that came with it.

Now the community were furious. They didn't feel that they were consulted in this and the community in this blockchain called Steemit are called witnesses. They can stake their Steem coins to become part of the government, right, which helps to govern the protocol. So, the community came together, they staked, they got enough power to basically vote on freezing the fund, that big pot of money that they thought that Justin Sun was coming for. And they did, they succeeded and they did what we call a soft fork where they were able to change some of the code to basically block that fund and any addresses associated with it from moving the money around.

Now, Sun was furious. In return, he was absolutely livid. He basically showed his true colours and why he had actually come. It was for that big pot of money. So, he has influence, right? Because he is a bit more on the centralized side. He has such great connections with Binance and Huobi, two of the biggest exchanges. So, he basically went to them and said, look, you guys actually have more of this Steem coin than the community because it's sitting there on your exchanges for people to trade. You have huge liquidity.

He goes what I want you to do is stake all of that Steem into the government and we're going to basically take over. We're going to have a bigger pot. We're going to take more control and we're going to vote to reverse the block. And then we're going to vote to take the money.

And he did it. Some blockchains call it a 51 % attack. I think some call it like a velvet glove takeover, but it's basically a hostile takeover. It worked. Sadly, he took full control. He replaced all of the witnesses on the decentralized governments. He reversed the soft fork. He took the big pot of ecosystem money for himself. And then using that big pot of money that he'd taken, he restaked that and took full control and enacted martial law over the whole blockchain. And he even called it martial law.

And the community were like, this is what we told you would happen. And so that community who were outraged and quite upset, they created a hard fork. A hard fork is where you basically create a copy of the blockchain at certain point and you just split off. You take the same code and you create a new blockchain.

And they created a new one called Hive and it's run entirely by the DAO, this decentralized governance. There's no actual employees or owners. It's just owned by the people who own the coin. Its whole purpose is to reward contributors. And it is such a good thing. It's so wonderfully decentralized. It worked. It outperformed Steemit. Steemit did terrible. Justin Sun maybe didn't benefit as much as he thought he would. And he really damaged his reputation in that.

The surviving community of Steemit moved over to Hive. And the original team that built Steemit are basically seen as as traitors. And after they sold and realized what Sun was doing, they actually took Justin Sun's side, which is why they're seen as traitors. They said to the community, if you're voting to try and block him from taking the funds, you're acting like a centralized entity. And they said, no, like we're decentralized. We're trying to protect this project. It's a bit messy, but it is a really good story. I can give you the link if you want to read it in more detail, but it's, it's, it's mad. Yeah.

I think there are a lot of purists and builders, people in this space who are here because they do care, that are concerned. I went to Malaysia recently to talk about this issue in a conference and around the same time, I saw a few articles kind of along the same narrative that there's too much centralization and there's too much corporate influence right now and it's worrying. It's a real threat. Long-term it's a threat. It's inviting more censorship. It's inviting more single points of failure, inequity, systemic risk, lack of accountability, surveillance, invasions of privacy, exclusion, and this word that I absolutely love is plutocracies.

So, I use this a lot. A plutocracy is a government of the wealthy. It's where the rich control a country, but in this sense, it's where the rich control blockchains or platforms just because they're rich. That's what happens when too much institutional capital comes in. You get these plutocracies. And I think people don't realize the danger until it's too late, and that's kind of this ethical tragedy for me.

You've got so much speed and convenience and these tools that look incredible, but all they're doing is giving more power to different gatekeepers. And it was the gatekeepers we were trying to get away from, right? VC firms, institutions, big tech giants. We tried to replace them. And like I said, we've come full circle and we're back to having gatekeepers again. They just may be not the same gatekeepers, right? It's the consequence of not doing things the right way.

Gareth King (29:09)

Yeah, look, that makes total sense. And you said a couple of things there that sound like a risk that anybody could understand as a risk. And one was censorship and one was surveillance. I guess what I'm trying to understand is the risk of surveillance and censorship in a decentralized space. If it's a bad risk there, how much worse is it than people in the centralized space imagine, in the centralized space, would you say?

Joseph Kennedy (29:35)

I think in the centralized space, people just accept it as the norm, right? The decentralized space was born by people trying to create an alternative. So naturally they'll have more friction when they feel centralization kind of creeping in. I think they'll feel it as kind of controls.

Decentralization, you should be free to do whatever you want to do, to build where you want to build and access all these different decentralized applications and explore as you wish. Once you start seeing walls and controls and limits or surveillance, then you're going to really be upset and you're going to look for new alternatives.

Gareth King (30:13)

You said something there too, around the decentralized space, looking to kind of build what you want, create what you want in the space. You know, there's always going to be bad actors doing some sketchy stuff. How does the space self-regulate?

Joseph Kennedy (30:29)

That is a good question. How does it self-regulate? Scammers these days, people will do kind of whatever analysis they can to identify them and make sure they get punished by the real world. Crypto is regulated enough that if you are a scammer and you steal from people, you are committing a real-world crime. It's not just because it's in the decentralized world that it's no longer a crime.

I was writing an article about this recently. There's a shift that's going on right now. So, some of the big crypto banks, the centralized ones, they're basically forming unions, kind of unions or frameworks, or collaborating to identify and prevent threats. Now what happened in the past was, let's say an exchange got exploited or a protocol got hacked. They just went, oh no, really sorry that happened to you. Good luck next time. Right. And they were not accountable. It was a big issue for people with trust and risk.

And now what's happening is there's these groups of projects really working together to build safety frameworks and improve security at the start. And they're really good. They can identify a lot of data points that flag a potential threat really early on and stifle them. So, what we've seen last year is that the volume of hacks went up, but the frequency went down. And this is a trend. There's less hacks, but they're able to get more money. It's this cat and mouse game. Self-regulation is like every time you improve the system, the hackers are forced to improve too.

And unfortunately they're just as talented. And I hate to say that. I hate to give them any praise because they're so damaging, but you know you've got like the Lazarus group from North Korea, the most famous hacking group in crypto. They're phenomenal at what they do. They really are. They've stolen billions and they're really good at it. And so it's really hard for every platform and project to build enough defence mechanisms to stop them.

By this point, pretty much every project knows that once you get hacked, your reputation will never be stronger than that moment, right? You're only going down. So, the self-regulation is more of like a preservation principle, you know, it's survival of the fittest. So, you need to be the fittest.

Gareth King (32:46)

I'd imagine that over time, as there's more people getting into the space, that knowledge and skill and talent of everybody is rising as it always would. Now that said, with all this talent and intellect creating, not so much unregulated, but you know, kind of self-regulated stuff out in the decentralized space, say if a government of the world decided, okay, we don't like this, we're going to come in and shut it down. Can they do that? How would they do that? Is there ways that it can be escaped if they tried to do that?

Joseph Kennedy (33:18)

They can. Some people disagree. Some people will say, no, if you're decentralized, the government can't do anything. It's not necessarily true. I would kind of go through like a hypothetical process with you, right? Centralization is about control. Decentralization is about freedom, if we put it that simple. So how can you put control measures on top of a decentralized platform or cryptocurrency or whatever?

So it starts with governments. The first part would be to pressure the exchanges that list that coin. So let's go with a decentralized crypto blockchain that has its own cryptocurrency. The government's going to go to all the exchanges and say, you have to delist this coin or we're going to subpoena you. We're going to punish you. You're going to get big fines, we want to shut this one down.

So, the government's going to try and stifle it. Then they're going to go to the gatekeepers or what I call the choke points, right? That's your centralized cloud provider, your API providers. You're going to start by putting pressure on them to stop access, right? To try and shut down the front end if there's some kind of app to just to make things difficult.

Then you're going to go to the stable coin issuers, USDC, USDT. These are the two main ones and these are moving trillions of dollars a month now. They are fully centralized. Let's say the US government, they want to shut down a coin. They go to Tether or USD or Circle, whatever. And they say to them, now, if somebody trades this coin, you're going to freeze the USDC or USDT so that they cannot financially profit from selling a coin that we've forbidden. So as soon as they sell it, their proceeds are frozen and their wallet is flagged. Basically their wallet becomes blacklisted.

I actually found that USDT, as of July, they've frozen nearly $3 billion worth of assets through this blacklisting method. That's like 5,000 wallets. Now these are like identified criminals and sanctioned people and stuff. So, it's control, it's influence. So, it does hurt you, right? If you own that coin, you can't sell it because your thing's going to get frozen. You're then going to have to try and find an alternative, like moving into a privacy coin, right? Where you can move it around.

But the governments have already squashed the privacy coin, like Monero, Monero, the biggest one. They already put in mechanisms to control it because it was uncontrollable. So they've managed to find centralized measures. And in the case of Monero, they actually said, the devil you know. Instead of pushing it further underground, they kind of let it be, but with a closer watch on it.

Gareth King (35:56)

That's, that's interesting to hear, and I just wanted to ask you from there, rather than just picking out specific users to sanction or blacklist, like what would make an entire coin or creation be sanctioned as a whole? Like what happens there? What catches the eye of the people wanting to shut it down?

Joseph Kennedy (36:15)

Yeah, the big one over the last few years, probably the best example is Tornado Cash. So it's a mixing service. what it does is like, let's say I want to send some crypto to you, but I don't want anyone to know about it. I want it to be totally secret. I would send it through a mixing service. And what they do is they take that coin, they send it to all sorts of places and it bounces around and it creates this really messy web and it kind of chops it up and then it sends it to you. And it's made such a mess in the middle that they can't see that it came from me in the first place, right. And it's basically a money laundering tool.

And, and so obviously the governments are like, nah, we can't have that. So, you know, they, the government tried to attack it through technical means, but in the end they realized their best way to stop it was to go and arrest all the people involved. So they did whatever they needed to do to identify those people and they arrested them all. I believe it might be live again now. I'm not sure because I've never used it, but that's how they got shut down. The government just said, nah.

Gareth King (37:22)

Yeah, like it's interesting, it has come back to what you said, centralized real world crimes being committed in the decentralized space. That said, let's look to the future for a minute. What would you say at this point is holding true decentralization back from that mass adoption that we spoke about earlier? Is it simply a lack of technical skills and tech savviness amongst average users? Is it the fact that it is somewhat more sophisticated than just logging into a browser, for good reasons, or is it something else? What would you say is the biggest hurdle right now for decentralization?

Joseph Kennedy (38:02)

This is hard. There's a few. I just think it's All the capital that's come in. It's changed people's principles. The industry was formed on a certain set of principles, decentralization, scalability, security, and peer-to-peer Electronic cash right? That blockchain idea that still works right? That that is still there. That's still good, it still works.

Now over time people came in and they built more, and they're more centralization, but they built some good ideas, some really great protocols, more money came in and it grew and grew and grew. But there's still hurdles is that you can try and build something decentralized, but then somebody else might build the same thing that's less decentralized. And by being less decentralized, they're able to do it faster and cheaper. And it's a shame, but that's the reality.

We all know if blockchains want to compete with as like a payment platforms like to compete with Visa or MasterCard, they have to give up their decentralization, right? To be faster, to process more, and they can't do all of the same security checks. So, it's an issue there.

I think there's this catch 22, let's say that if a project's building decentralized, but it wants to have more impact, do more and get faster and stronger and stuff like that, they basically have to give up parts of their decentralization. And that's really frustrating.

Will decentralization eventually win? Probably not, right? That's why I'm here on your podcast, because I think the internet has ruined decentralization. Decentralization is a wonderful thing. It's why I'm here in this industry. Is it beyond saving? Absolutely not, right? There's still scenarios where decentralization wins, and it may be where a lot of the value extractors just go away and move on to the next thing like AI.

Gareth King (39:52)

I was going to say that earlier, is it, is it a case that now everything is just being pumped into AI that it's given a little bit of breathing room back to the decentralized space? And if that's the case, what projects are out there fighting against centralization that you'd be happy to explain a little bit about here today?

Joseph Kennedy (40:12)

Well, I'd say the proof of work blockchains, they're still fighting that good fight. Now, if I kind of hypothetically look at it, what's going to happen? It has become a business ecosystem as well. I ghost wrote an article for a client maybe six months ago talking about this. What happens? What's the end game?

And we kind of discussed this great divide, this huge split that's coming, right? Yeah, you've got a load of people going off to AI. That's absolutely fine. But you've got too much fragmentation here in the crypto space. It's got all of these different issues going on and what's going to happen, it's going to tear into two parts of the crypto world. Eventually there will just be two sides. There will be the purists. There will be the people who love chaos and volatility with the crypto casino, the wild west of blockchain, all of this stuff. People love crazy trading and NFTs and meme coins and all this stuff. That will be on one side. And it will be decentralized and it will be messy and it will have exploits and hacks and it will have, you know, a load of mess. But people want that. People still love that chaos.

And then on the other side, you'll have this gentle, boring, safe side, the institutional side where you've got centralized exchanges, centralized funds, centralized VC, centralized everything, centralized, you know, crypto bank cards, centralized prediction markets. It's all going to be on that side. And I see that divide happening already.

But what's happening now is they're still mingling with one another, but eventually they're going to be separate. They're going to look at each other with disgust, and the decentralized side is going to say, you're banksters, you're suits, you only care about one thing. We're here to have fun, have a good time and enjoy the chaos.

And the centralized capital side, they're going to look at the decentralized and go, you're a bunch of crazy degens doing ridiculous stuff. We don't want you as part of our system either. We’re doing it by the books, you guys are chaotic. I think that's kind of happening already and it's like ideology, right? It's a trade off.

Gareth King (42:15)

Yeah, look on that note then, where would you on a personal level like to see things end up? Create your ideal version of decentralization. What's going on?

Joseph Kennedy (42:26)

I want to see Alephium win. Right. Of course. I think Alephium is doing it right. It's why I joined this project. It is a proof of work blockchain. It's highly decentralized, secure, it's scalable. It's kind of addressed this trilemma problem. It's a good place to build. We just need more activity, more volume and stuff. And I think that will come with time. More interest will come in. It's this kind of project where I think, yeah, this is right because it's built on these Satoshi principles.

My kind of end goal is to see people get fed up with the market cycles, with all the hype and the bandwagons and the short-term trends, and all the nonsense and distractions and new shiny tools, and all this absolute nonsense. It's just going to fade out. And what will still be left standing is the robust, good tech that is decentralized and offers people permissionless, composable environments to build on. And that goes back. We basically then go full circle back to where things should have been several years ago.

You know you mentioned that during the pandemic, things became much hotter for crypto and that was because people were getting stimulation checks in the US. People were getting CJRS in the UK. I'm sure in Australia you were getting some kind of free money from the government, or some people were, you know, we were getting all this money was being pumped into crypto and so it exploded and that money is kind of gone now, right? It's been extracted.

Gareth King (43:52)

It was a crazy, crazy time. And I think that if everyone could look up what the crypto token or currency space, like the values and things, we'd all be looking at it now, maybe apart from like Bitcoin and just be like what is going on?

You know, I think everything that you've just said there, it sounds like you're still optimistic and much aligned with that original intention. But that said, what is on the horizon for you, Joseph? And where can people follow what you're up to?

Joseph Kennedy (44:20)

Well, Alephium.org is where I work. I run the content side as well. So, if you look at Alephium.org slash news, or you go to us on X or Twitter, Alephium, A-L-E-P-H-I-U-M. I'm showing up on a lot of X Spaces, podcasts, and trying to be everywhere across all different time zones.

I am a real promoter of the decentralized movement. I haven't wavered. I got into this industry as a sideways move from sustainable technologies, which I thought were going to change the world for the better. And I moved into blockchain because I thought this technology would change the world for the better. I still believe that. I still believe it can. I just think it's all about how you use it.

And everyone I know in crypto uses it completely differently. And I have one of the healthiest, most loving relationships with crypto because of how I use it, right? Because I still do peer to peer. I still have friends we send each other money. I still know people in real life who broker transactions, who do things peer to peer, who are OGs, who are maxis. They're totally different kind of people. We are totally different kind of people to the new generation of airdrop farmers and wealth extractors and, and crazy risk takers.

We, we do it old school. Our mission was always, I don't trust the banks. I don't trust the governments. I need a safe alternative. I want to look after my own money. Like I don't have any centralized exchange. I got kicked off of crypto.com, kicked off of Binance, kicked off of Coinbase. They didn't like where I was traveling, so they kicked me off. Right? That's unacceptable. So, I self custody and I feel safer doing that than any bank account or any centralized exchange. That's me.

Gareth King (45:58)

Well, look, Joseph, you've definitely given us a lot to think about when it comes to decentralization today. Thank you once again for your time.

Joseph Kennedy (46:07)

Thank you for having me. I know there's some technical jargon in there, it's a fun space. I invite anyone to do further reading.