Money 3.0: Ryan Taylor from Dash talks about cryptocurrency governance

In this episode of Money 3.0, Abra founder and CEO Bill Barhydt talks to Dash Core Group CEO Ryan Taylor all about Dash. Dash has some really interesting governance features in its master note system, and Dash developers are working to create a fast and low-cost currency that is useful on point of sale and instant settlement application.

Listen to the episode wherever you get your podcasts, or find a complete transcript below.

Bill Barhydt: Hey everyone, Bill Barhydt here. Welcome to another exciting episode of Abra’s Money 3.0. With me today is Ryan Taylor, CEO of the would you say Dash…

Ryan Taylor: Dash Core Group.

Bill Barhydt: Dash Core Group. And I’d love to actually dig in on that a little bit. We’ll get into that in a minute, but obviously Dash is one of the key cryptocurrencies supported in the Abra app and we’re excited that we now support the ability to both deposit and withdrawal via Dash inside the Abra app.

Do you think that when we look back on cryptocurrency blockchain, like 20 years from now, today we talk about the dot com days, right? I was at Netscape, we talked about that. When people talk about the crypto days from like 20 years from now, where do you think the whole idea of having altcoins is going to fit in that conversation? Well, do you think the conversation is going to center on Bitcoin?

Ryan Taylor: Well, I obviously am coming from a fairly biased place.

Bill Barhydt: Okay, well, that’s what we want. We want your bias.

Ryan Taylor: Yeah. My background is in payments. I spent a number of years in a consulting role working for some of the largest financial institutions and then went into the investment field and specialized within payments. And I learned a lot about what makes a great payment system, how they get adopted, what are the decision making criteria for merchants, for consumers. And so I’m taking those lenses to the cryptocurrency space. And I think that it’s pretty clear by now that different cryptocurrencies and cryptoassets can perform different tasks better or worse. And there are technical trade-offs between speed, scalability, security, and so on. And with a variety of different needs in the marketplace, it’s clear to me that years from now it will be abundantly obvious why there are multiple assets that are needed to fulfill all of these things.

Bill Barhydt: So you foresee a future where we’re talking about lots of different cryptocurrency projects and we’re looking back and saying, the VHS moment for Bitcoin may have been something like Dash where we could now facilitate real payments maybe in addition to the digital gold model and Bitcoin. Is that fair?

Ryan Taylor: Yeah. And I think that there are different types of payments. There are micropayments and a lot of payments you need the liquidity of Bitcoin as an example. I would never suggest purchasing a home with Dash because the liquidity isn’t there in the marketplace to allow that transfer to take place. And so you can already see with those examples that there might be advantages or disadvantages to different technologies based on the value transfer that you’re trying to accomplish.

Bill Barhydt: Well, given the state of Dash today, and we’ll get into the details of the differences in a minute, but let’s make this super useful right away. Given the state of Dash today, what type of payment is Dash most suited for now? And then what type of payment will you think that it would be suited for, let’s say in two to three years if it’s not the same type of payment?

Ryan Taylor: Well, the types of payments that Dash facilitates really well is point-of-sale type transactions. And there are a few reasons for that. One, it’s instant. All transactions are locked within one to two seconds and that makes it very viable at a point of sale. It’s also very inexpensive and so you get that combination of speed and low cost. It’s not so low cost that you can do internet of things, purchases of a thermostat reading on a device or something and pay a fraction of a penny for it economically. And so it doesn’t do everything well, but it really performs these point of sale transactions very well. And also any transaction that requires instant settlement. Gaming is another example where we’re seeing a lot of natural uptake within the gaming industry because you can place bets that no other payment method can facilitate. It’s a cash-like instrument, but it settles within two seconds. That allows you to place a bet right before a game starts or something without any risk to the merchant.

Bill Barhydt: Now, how is it that Dash is able to achieve instant settlement when traditional Bitcoin or other similar blockchains are using multi minutes block cycles which in English simply means the amount of time between which any transactions could be recognized by the network. But you’re saying that you can do it in two seconds.

Ryan Taylor: Yeah. The average time is about 1.8 seconds. And the way that the network is able to reach that level of consensus where there’s essentially no risk for the recipient is through a second layer of our network called master nodes. Just like with Bitcoin, anyone is free to download the software and use it and run a full node and validate all of the transactions. Master nodes are special. In order to upgrade your node from a full node to a master node, you have to prove ownership over a thousand Dash. And what that does is it prevents any one individual from controlling a large number of those. There are around 5,000 master nodes, and they’re used in a way to essentially vote on these transactions. In a similar way, when a new block is published by minors that entire block of transactions is locked by an even larger number of master nodes.

Ryan Taylor: And so we can achieve a very high level of security in a very short period of time. So if I send a transaction to you, it publishes or it propagates around the network. 30 random master nodes are selected to vote on that transaction. And if a supermajority of them evaluate it and determine there’s no conflicting transaction here. Within that two seconds they vote and cast basically a special message out to the network using a special type of cryptography called BLS signatures. And upon receiving that lock, the entire network knows that no conflicting transaction can be honored at that point.

Bill Barhydt: Got you. So really what you’re saying is, is that you’re not doing a realtime settlement. You’re actually basically doing the credit card equivalent of an authorization, but in a way where the funds can’t be used in the future for anything else. [crosstalk 00:08:27]

Ryan Taylor: They’re double-spend-proofed and actually they can be reused.

Bill Barhydt: I see. [crosstalk 00:08:33] like have nested authorizations or [inaudible 00:08:35].

Ryan Taylor: Yeah, we also introduced a new technology called chain locks that prevent 51% attacks really any chain reorganization. Within about four to six seconds of a new block being published, that entire block cannot be reversed. The combination of the two allows us to do what’s called chained instant sends. If I send money to you within the 1.8 seconds, you can then send it to someone else without any risk to [crosstalk 00:09:02].

Bill Barhydt: That’s fantastic. So, okay. I love this. So let me play devil’s advocate for a second. I was listening to Nick Szabo on Peter McCormick’s podcast the other day and Nick’s been very, very consistent on his feelings around Bitcoin. Basically, for him, its most important features are security and trust minimization. In the face of that comment, why wouldn’t the core developers of Bitcoin simply agree that what you’re doing makes Bitcoin useful as a payment rail and they should simply adopt that for Bitcoin?

Ryan Taylor: Well, I think that there would be some barriers to that being accepted by the network. The primary one is economic. Right now, the Bitcoin network protocol basically allocates 100% of the block reward towards minors. So in order for a scheme like this to work, you have to have an incentive for the master node operators.

Bill Barhydt: Sure.

Ryan Taylor: And Dash splits its block reward, 45% goes towards mining, 45% goes towards master nodes that provide the infrastructure and relay the messages around and store full copies of the blockchain, all the stuff that’s necessary for the network to run, and the last 10% goes towards our proposal system. This is everything else. Anyone could put a proposal up to the network to receive funding. The master nodes themselves vote on it.

Bill Barhydt: So is the proposal system, a fancy word for governance?

Ryan Taylor: Mm-hmm (affirmative)

Bill Barhydt: I got you. Okay.

Ryan Taylor: Yeah. It is a component of our governance system. And so what would it take for this to get adopted in Bitcoin? Well, it would take the miners to agree that they would give up 55% or some percentage of their earnings. I think that paints them a bit into a corner because giving up a portion of their expected revenue would decrease the returns that they were expecting when they bought their equipment.

Bill Barhydt: Sure. Although two years ago they were willing to vote for larger blocks. Which in…

Ryan Taylor: Which would not be in their economic best interests.

Bill Barhydt: Right but if it’s in the interest of the network, in their opinion, right or wrong, they seem to be willing to at least entertain a vote that isn’t in their economic best interest. Or maybe because they’d be more longterm sighted or have more longterm vision for what is in their best interests, right?

Ryan Taylor: Yeah, and so for those reasons, it could be adopted. I don’t see a great deal of uniform agreement that that would be something that the miners or even network users would want. I think that there’s a lot of religion within this space about how things should be. And it’s a bit like trying to move an iceberg in many cases where it’s really hard.

Bill Barhydt: I get you. Why is this not as… Well, why is this as secure as Bitcoin and why is it not as untrust minimizes Bitcoin? Meaning it just distrust minimizes Bitcoin or is that the wrong way to look at it in the first place?

Ryan Taylor: Well, I think there are many ways you can look at this and I think that people assume that security and trust are linear and I think they’re far more likely moving three-dimensional objects with multiple variables all working at once to kind of provide different types of security if you will. And one view that you can take is what would it cost to attack this network? You could calculate that on the basis of how much would I have to pay to rent enough equipment to attack the network over a given period of time? Or how much equipment would I need to purchase with a capital outlay in order to attack the network? And so there’s a lot of different ways you can calculate the cost of attacking a network. But what Dash has done is at a much smaller scale, dramatically increased the cost of attacking the Dash network. Why? Because you would have to control around 60% of the master nodes to issue false locks. And there’s no real way to gain that. You would literally have to buy 3000 master nodes worth of Dash that’s 3 million Dash or about a third of the supply of the entire network.

Ryan Taylor: In the process of doing that, you would undoubtedly increase the price along the way and so you would have to have hundreds of millions of dollars in order to perform that type of attack. At what point is security good enough? That’s what I would ask. Once you’re 99.999% secure and it is incredibly tough to attack a network to the point that there’s no economic incentive left for doing so, that’s probably good enough for most users.

Bill Barhydt: Okay. So that makes perfect sense. So then, what is the path to adoption for a system that has effectively real-time authorization, is super high performance and is obviously reasonably accessible to the average at least crypto enthusiasts today? What’s it going to take?

Ryan Taylor: Well, for us, we really focus on areas that we think that cryptocurrency is particularly well-suited relative to alternatives, either where there are no alternatives in order to make a particular payment or where are the alternatives suck, right?

Bill Barhydt: Yeah. Okay.

Ryan Taylor: Bitcoin is already used a lot for remittances. This is a great use case for Bitcoin. The existing systems are inefficient, and they are really slow so that it takes days to get a payment across borders.

Bill Barhydt: Absolutely.

Ryan Taylor: And so certainly remittances is one area that we feel cryptocurrency can really make a difference, and so we’re focused there. High inflation markets. This is obvious, right? What we found is it’s not so much the inflation as it is the breakdown of all payment types when hyperinflation enters the market. We’ve learned a lot in our adoption efforts in Venezuela and at this point, Dash is the most used cryptocurrency at the point of sale in Venezuela. And another is gaming or high chargeback markets. We’re focused on sports betting, e-sports betting and fantasy sports type betting because time is very critical in those transactions.

Bill Barhydt: Right. You can’t wait 10 minutes necessarily for a bet to settle. Is that a good [crosstalk 00:16:27]

Ryan Taylor: Yeah, or trying to place a bet before a game starts. That just doesn’t… 20, 30-minute timeline just doesn’t work in those scenarios. And so we’re finding that we can address things that even other cryptocurrencies can’t address. But I think the entire space of high chargeback credit card transactions is one that digital cash can do really, really well.

Bill Barhydt: Okay. So let’s talk about that for a second. Maybe that and remittances. As somebody who’s worked in the payment space as well, I totally get why the chargeback risk of certain transaction types is an issue especially for low margin transactions, right? So always great for the merchant to eliminate chargebacks, but the consumer loves the protection they get from the credit card. So what’s the consumer’s incentive going to be to want to pay with something like a Dash that effectively looks like cash versus what they’re paying with today that obviously has all of the protections that actually created the chargeback problem in the first place?

Ryan Taylor: Well, I think there are two aspects to this that you need to focus on. One is, it isn’t the consumer that’s making those transactions in many cases. And that is why the protection becomes important. If someone sends digital currency, it’s a currency that they control. So if someone makes a purchase in my name and it wasn’t me with digital currency, great. I call up the company and say, “Hey, that wasn’t me.” “Okay, great. We don’t owe you any money back.” So it eliminates certain types of fraud to begin with because a fraudster isn’t going to spend their own money in order to impersonate you. That’s just a type of fraud that doesn’t exist. They’re trying to consume something. Let’s look at the consumers then incentive to use it. The first incentive is I can be charged less. Part of the fee that I’m paying to the merchant is to pay for those chargebacks and to pay for the processor. And so the merchant has the ability to pass along savings to customers that are willing to pay in the equivalent of cash. And so that’s one incentive.

Bill Barhydt: Have you seen any examples? I would have thought that areas like cross-border commerce, which I know is a big deal in Latin America for example, where people might buy goods from the US and have them shipped to Brazil or even vice versa for credit card fees are very high that the ability to pass on that savings in real-time to the consumer via something like Dash would be very compelling. Have you seen real-world examples of that yet where you see websites charging a discount if I use crypto versus a credit card?

Ryan Taylor: I haven’t seen widespread examples of this yet. I have seen some examples. We have some on our own website. We have a gift card buying portion of our website. It’s giftcards.dash.org and you can get discounts on many national brands.

Bill Barhydt: That’s cool.

Ryan Taylor: Basically we’re passing along the savings to the users. There are some other examples and some that we’re in discussions with now with some merchants. I think that at the current stage, the reason merchants are accepting digital currencies is primarily to access new customers. It’s not so much that this is driving huge cost savings for them. There is a cost to implementing a new payment type and so they have that fixed cost that they have to pay for. So I don’t think they’re quite at the stage where they’re willing to pass along the card processing savings to the customer. But I think it happens eventually. And so I think their motivations just aren’t quite there yet. But there are certain high chargeback categories where I think you’ll see it happen first, and I think gaming is likely to be one of them. We’re in discussions with some firms that are considering doing just that to encourage people to stop using credit cards.

Ryan Taylor: Essentially they’re already charging them a 3% premium to use the credit card, but making that explicit and making it a separate line item, that might cause a change in behavior. The second reason though why they might want to accept it is higher limits. Gaming is a perfect example where sure a hundred dollar transactions are very feasible, but allowing someone to do a $20,000 transaction, which can happen with sports bets that have been placed in Vegas back when the odds were 2000 to one and low and behold, they’re in the Superbowl now. Selling that asset is not something that can be done with a credit card. And so there are use cases for high chargeback categories that allow them to serve an entirely different market that they aren’t able to do today.

Bill Barhydt: Yeah, I think gambling is a really interesting use case because people who are gambling online are usually highly motivated, right? So they’re willing to learn what Dash even means. They might go through the hoops of actually acquiring Dash, especially if it’s cheaper than just paying with a credit card or… because, especially if they can just set it up once and wire money or their exchange or whatever but-

Ryan Taylor: There’s another aspect to it too, which is those are people that don’t mind the volatility. I mean, they’re already…. they’re paying to get volatility.

Bill Barhydt: …sure and you’re dealing with an intangible, right? In terms of digital goods, gambling. But So the counter to that is the remittance space where volatility is a big deal, right? And the idea that a consumer, especially in immigrants or their family in a remote country would actually learn what a new currency is in many ways untenable. Right? And so yet the space focuses very heavily on cross border transactions because of the friction of the banking system as being a great use case, but yet that hasn’t really taken hold and mass across any crypto ecosystem. Yes, Bitcoin definitely gets anecdotal evidence that people do use it for cross border transactions. I certainly have, but not where it’s a mass-market phenomenon in any way, shape or form.

Ryan Taylor: It’s very self-service today and the volatility issue is real. It’s even more real for a smaller cryptocurrency like Dash which has about 25% higher volatility than Bitcoin does.

Bill Barhydt: Sure.

Ryan Taylor: One of the advantages that Dash has is its speed, however, because volatility over time can be reduced if the time itself is compressed. And so when we have exchanges that honor instant send transactions or honor one confirmation, it can allow them to only take cryptocurrency fluctuation risk for a period of a couple of minutes. Over the course of an hour, the price of Bitcoin or any of these assets can change dramatically. Over the course of two minutes, not so much. And so one of the answers that we have to the volatility issue is if you’re really just getting in and getting back out Dash’s speed offers advantages. Now that’s dependent on the exchanges themselves supporting these features, they don’t all support it.

Ryan Taylor: Some of them are still in the mentality of you need six confirmations regardless of your security model. And so we have to go out and educate the exchanges, answer questions about different scenarios, What happens if I don’t see a chain lock? What happens if I don’t see the instance unlock? How do I manage risk and in certain edge cases? And so we have to go out and educate them on how to accept these, how to recognize the instance unlocks and so on and recognize the benefits to them. The exchanges that honor instant send, it’s probably obvious, but they see higher volumes. They see higher trading volumes.

Bill Barhydt: It seems to me that the chicken and egg problem you’re referring to would be easily addressed if consumer demand was already there. I definitely foresee a day when there is consumer demand. My question is what is the path between today and that future day? How do we get over the hump of initial consumer demand so that an awesome technology like Dash is being used for remittances and that dream is fulfilled, right? What is the path of least resistance to the average consumer who doesn’t know what a private key is? Using a cryptocurrency model like Dash to actually send money to Mexico for example?

Ryan Taylor: Well, we’re trying a few different things and I think it’s yet to be determined what will be successful, but we’re trying to take lessons from the payments space when new payment methods are introduced, how have they been successful? And I think for me, there are two main answers to this. One is you have to have a concentration of use somewhere. This can’t be something that you use once a year or the consumer forgets that they even have a wallet. What that means for us in places like Venezuela is we’re penetrating an entire mall and getting Dash integrated into everything in the mall so that a consumer can go there and they don’t even have to think twice.

Bill Barhydt: Mm-hmm (affirmative) interesting.

Ryan Taylor: And so we are able to get these ecosystems going where we can build off of them and they tend to be concentrated in very centralized little niches within a city. And that seems to be working very well.

Ryan Taylor: I think the second… and by the way, this doesn’t need to be in the physical realm. It could be penetration in the gambling space where you know that every gaming platform accepts Dash and I can cash out from one and send it to another one. And so it doesn’t have to be physical, but Dash is pretty uniquely positioned there so that’s one of the reasons we go for that. I think the second attribute is we need to partner with companies that are enabling the cash in and cash out and building solutions that are easy for people to use. An example of this is we worked with Bitnovo in Spain and they’re now in many countries in Europe where users can go in at a convenience store or a grocery store, they can actually buy a card, a Dash card with Dash on it. And then we integrated a service called Dash Text that allows them to actually go to the Bitnovo website and actually text the balance to someone. And that is the type of user experience that average people can use.

Bill Barhydt: Yup. Fantastic.

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Bill Barhydt: So I look at technologies for the all coin space constantly, right? I think the single best way to move the crypto ball forward is to have competing technologies, and if you want to improve technologies like Bitcoin the best way to do that is just basically have more and more of these competing technologies. So if you look at other technologies in the space, right? Do you have an opinion on things that you think you would want to bring into Dash right now that you’re particularly excited about?

Ryan Taylor: I think that there are some really interesting things that continue to happen with privacy that are increasingly scalable and don’t impact the user experience quite as much as some of the early technologies did. And so I think that’s an area where we’re to be exploring it quite a bit. The second area is honesty block propagation technologies. We want to be able to scale massively and there are some real innovations that are happening around block propagation that if you speed up block propagation the economics for the minor changes, absolutely. They can include more transactions with lower fees and still be assured that their block will be accepted by the network. And so we’ve done quite a bit of research in that area ourselves and we’ve also looked at what’s being done with Bitcoin cash and some of the other chains that are looking more towards scaling.

Ryan Taylor: And so I think there are some innovative things there that we could incorporate, and I’d say the last is really around identity. We’re rolling out the Dash platform later this year onto our Testnet and it incorporates a lot of different things to be able to allow users to create a username and be able to create friends lists where if I send you a friend request and you accept it, now we’re connected. I don’t have to send you an address outside of the network through an insecure email channel that’s subject to man in the middle of tax and then make a phone call to you to verify it. We can just transact with each other. So it’s more secure, it’s more user-friendly because it’s similar to the services we’re used to like Venmo and I think there’s been some work done around identity and sharing that type of information through the network.

Bill Barhydt: For sure.

Ryan Taylor: And we’re very far along with our implementation of that. So that’s the next big release that we have coming.

Bill Barhydt: Tell me about the development within the Dash community, right? You talked about identity, we’ve talked about also the ways which the zero confirmation or realtime authorization works, how many developers are working on all of this? Where are they based and how are they paid?

Ryan Taylor: Right. Dash’s treasury funds a lot of different teams. Many of them are working on the ground type of adoption efforts. Most of the developers that work for Dash work for Dash Core Group, and that’s the entity that I lead. We have around 30 developers in total, and we also have a community of volunteers similar to Bitcoin and other cryptocurrencies will submit pull requests and things of that nature. Outside the core development, there are other wallet projects. There are developers that are building point of sale software that allows for integration into point of sale systems or is the standalone basic point of sale systems for accepting Dash. And so I don’t know how many developers are working on those types of projects because they’re independently funded.

Bill Barhydt: Yup.

Ryan Taylor: But we’ve got an Electrum Wallet team that is developing and continuing to advance the Dash version of the Electrum Wallet. We’ve got a number of teams that are developing merchant tools. So I’d say, it’s probably somewhere between 50 and a hundred total that do work on the protocol. I met with some developers today at a conference here in San Francisco and I had never met them or interacted with them before and they had three different projects that they were working on. So who knows how many are out there that are building things?

Bill Barhydt: Yeah. You talked about… Well, we briefly touched on this idea of governance when we talked about the financial incentives earlier. I think you said something like 10% of the fees generated by the network. I don’t know if I’m saying that correctly, are basically allocated for governance-related issues. Is that accurate?

Ryan Taylor: Well, I’d say that the governance oversees the distribution of those funds, but yes, 10% of the new coins that are created as part of the block reward are set aside for our proposal system.

Bill Barhydt: How does that work? Give me an example, like a real potential use case for how that would work from end to end.

Ryan Taylor: Sure. Our proposal system is basically a monthly budget. The 10% is not paid out in every single block, but it’s held back for a period of roughly 30 days. And once per month, there’s what’s called a superblock. During the month, anyone is free to put proposals up to the network. There’s a small fee for putting a proposal up to avoid spam, but anyone is free to do this. And basically the proposal owner says what they’re going to deliver, what they’re asking for in terms of fees and for how many months, and then the network votes on that, specifically the master nodes. And so they cast votes and the highest-ranking proposals payout first until that budget is gone. There is a threshold required. You need at least 10% net votes. That means yes votes minus no votes, and so currently there are approximately 5,000 master nodes. So you need at least 500 more yes votes and no votes.

Bill Barhydt: So it sounds like really it’s an idea generation tool or it’s an ideation tool more so than a governance tool, right? Because there’s no… it doesn’t sound like there’s any external feed saying when something has been implemented. It’s simply a question of what was most interesting to the master nodes in terms of maybe the roadmap or any other ideas that I wanted to put in the system. Is that correct?

Ryan Taylor: I mean, every network has governance, whether it says that it does or not. There’s a form of governance inherent in every network. And that can range from complete anarchy through to complete decision making authority on the part of the users. Dash is somewhere in the middle. What the master nodes have the authority to do is to dictate how that money is allocated. But it doesn’t have the right to say exactly who Dash Core Group hires with its allocation, what specifically we’re supposed to be working on, how a particular technology is implemented, and so it’s really a governance over the distribution of resources that are available to the network. And if you do a poor job, you’re not going to get funded any.

Bill Barhydt: That was making my next comment. The incentive alignment comes from the fact that if you don’t do what you said you were going to do, visa vie the voting system, you’re probably not going to get the votes the next time around. So it might be a fool me once shame on you. Fool me twice shame on me kind of scenario, right?

Ryan Taylor: Right. And we see scenarios where people come to the network and no one’s ever heard of them before. There’s obviously a low level of trust there and it’s very hard to get a proposal like that over the line. So the way it usually works is people come and contribute for a period of time and build up a reputation and build up credibility.

Bill Barhydt: Do you’ve coalition building like in the sense of a government where coalitions will form to get credibility to get more votes.

Ryan Taylor: Not really. I haven’t seen any evidence of something like that. I suppose it’s feasible.

Bill Barhydt: Right. How much of the votes or the reward goes back to your organization as the people with the most resources or the group with the most resources working on the projects to begin with?

Ryan Taylor: It’s ranged quite a bit. During the peak of the bubble, we weren’t asking for anything because we were already well funded.

Bill Barhydt: I see.

Ryan Taylor: Recently we’ve been requesting and getting about 60% of the available budget and the other 40% is going towards about a dozen other projects or so. So when the price is high it tends to fund a lot more teams and when the price is low and obviously funds fewer.

Bill Barhydt: And how does the protocol work in terms of consensus for changes to the protocol, right? I mean, I understand the reward system for deciding what people or what master nodes say they want, but now I’ve done… I’ve implemented X, right? Some cool new mining feature or whatever. How do I get the network in the case of Dash to accept that feature now?

Ryan Taylor: It’s a very similar process for deploying a new version of Bitcoin or new features in Bitcoin.

Bill Barhydt: I see. Yeah.

Ryan Taylor: So the software is obviously published and it requires a certain threshold of miners and master nodes both adopting the latest version. And usually we’ve got… if it’s a hard fork of some type we’ve got some threshold that the network measures and once it passes it, say 80% are on the latest version, then it would in the next cycle of blocks implement those features.

Bill Barhydt: Does Dash continue to adopt Bitcoin core upgrades like SegWit or other Taproot and other things going to come into Dash eventually as well or.

Ryan Taylor: Yeah, so we do maintain… we’re based on Bitcoin’s codebase and we do maintain backporting of the features that are rolled out to Bitcoin. We don’t deploy everything. There are some obvious ones that we wouldn’t want to do like RBF which is “replace by fee.

Bill Barhydt: Shouldn’t be necessary in theory given what you’ve already said, right?

Ryan Taylor: Exactly. In fact, it would be detrimental. Replaced by fee basically allows a stuck transaction to get unstuck by sending a second transaction with the same inputs to another address. But that could also be used to attack a merchant, say who accepted a zero-confirmation transaction. I run out to my car and get on my laptop real quick and send an RBF and back to myself. And so that’s obviously something we don’t want to incorporate. Solves a problem for Bitcoin, doesn’t and actually would not be advantageous for us. Segwit is not one that we’ve deployed. We do have other plans to address some of those things that SegWit addressed.

Bill Barhydt: But all of the multi-sig capabilities of Bitcoin, all of the opcodes are all there. If I wanted to run a lightening like system on Dash, I could, you just probably don’t really see the need given your current capabilities. Is that a fair [crosstalk 00:41:37]?

Ryan Taylor: Yeah, because we have these incentivized nodes and because we have these mechanisms to lock transactions and make them double-spend proof-

Bill Barhydt: Right, there’s no need I guess.

Ryan Taylor: … yeah. We’re really focused on maxing out on-chain scalability before we start looking at any other type of options. And from the research that we’ve done with Arizona state, they tested up to 10-megabyte blocks. And mind you, they come every two and a half minutes and they never found a limit for our network because of the speed of the servers that are running it. And because of the speed of block propagation and a number of other things. That alone would get us near to PayPal level transaction volumes. And so we just don’t see a need to pursue anything else right now. We can achieve the scalability we need on-chain. And if we’re doing that many transactions, the price of Dash isn’t where it is today and we got lots of money available for research grants and things of that nature to scale further so that’s not an area we focus on.

Bill Barhydt: Have you thought about smart contract extensions to Dash beyond just the multi-sig meaning true kind of Turing complete but something that enables true smart contracts?

Ryan Taylor: We’re not pursuing true smart contracts. They have pretty limited use cases. When you consider the fact that they’re essentially unstoppable code. What that means is A, the compute is taking place within the network in most of these networks. That makes them very expensive to execute programs. The second issue is they’re unstoppable code. And we’ve seen the consequences of unstoppable code which hacks of some of these smart contracts.

Bill Barhydt: [inaudible 00:43:36], yeah.

Ryan Taylor: Yeah. And so we think a more practical approach for most use cases is something that we’re deploying with Dash platform. And that is what we call data contracts. It allows you to define your own data hierarchies, data schemers within the network store, your application data within the network. But the compute itself takes place on your local device and you access that information through a decentralized API. And what that allows you to do is to run applications even on multiple devices and they’ll all stay synced up with each other and show you the same information. If I update it on one device, it’ll on my tablet or whatever. And it also allows the data to be immutable and stored within the network. But without all that cost overhead and over-engineering that’s needed to have an unstoppable piece of code.

Bill Barhydt: When you say stored in the network, where is the information actually being stored physically? Is it inside a block or?

Ryan Taylor: It’s actually on basically a side chain that only runs on the master nodes themselves. So the master nodes are the only ones that are going to have to keep copies of this data. And so that means that I can run a regular full node without the overhead of storing everybody’s data.

Bill Barhydt: So little like liquid from, from blockstream I guess maybe in some ways.

Ryan Taylor: Yeah. And so all of that data is hashed back to the main chain to prove that it’s not been tampered with in any way, shape or form. And so what this allows is for much cheaper data storage and access and compute on your local device. Enterprises will love it because there’ll be able to access through an API with their existing legacy architecture and without the overhead of a new programming language, without having to rewrite anything and accessing the network using standard protocols like HTTPS. And so we’re trying to make it much more usable yet providing a lot of the functionality that smart contracts provide.

Bill Barhydt: Yep. Are there any live applications running on these smart contracts or side chains yet?

Ryan Taylor: Well, we are in Devnets right now and so we do have a couple of reference applications that we’re developing. One is the Dash pay app. The Dash pay app is one that will allow us to create usernames and transact with each other. I can send a note along with it, basic information. We’re also developing as a reference app, a Twitter-like application that stores all of the tweets within the network itself with a tipping functionality attached to it. And so we’re doing that as a demonstration of what the network can do. And so it’s still a decentralized app.

Bill Barhydt: So long the number of master nodes remains sufficiently decentralized, whatever that means in quantitative versus qualitative terms.

Ryan Taylor: Decentralized is one of the poorest defined terms in cryptocurrency.

Bill Barhydt: Right. I think that’s why I think Nick’s phrase “trust minimization” while it’s not as elegant, it’s probably more accurate, right?

Ryan Taylor: Yeah, exactly.

Bill Barhydt: And so it sounds like maybe even, just as the last point, I mean I’m fascinated by this whole stable coin discussion happening in the market from many different perspectives, but it sounds like you could even develop something like a Dai using this side chain model that could potentially use Dash as the collateral for a stable coin similar to the Dai model. Is that…?

Ryan Taylor: Yeah. I mean, people have already developed different models for how to create stable coins. You can certainly issue tokens within this type of platform. You can issue [crosstalk 00:47:58].

Bill Barhydt: But the tokens would be worthless. The question is what gives the tokens their value-

Ryan Taylor: Yeah, exactly.

Bill Barhydt: … if they were collateralized in Dash for example. That could be interesting, right?

Ryan Taylor: Yeah. It’ll be interesting to see… The idea behind the platform is let’s put it out there and let’s see what creative things people come up with and develop for it. I think that if you are able to do asset issuance on something as basic as Bitcoin cash with SLP this is like that on steroids, right? You really have infinite flexibility about how you define your data, how the data relates to each other, what are the dependencies between data, what’s the structure of the data has to follow. And so you can really build out something very sophisticated, store all of that data and be able to verify it independently.

Bill Barhydt: Got you. Last question. Five years out. Who has more users? Dasher or Libra?

Ryan Taylor: I’m going to say Dash. I have been skeptical of Libra since day one. I think the day it came out I put out a tweetstorm about it and said that it won’t be long before people start withdrawing, particularly the payments-related companies, which start withdrawing from their consortium. And I think that they’re going to launch something. It will be in certain jurisdictions not any of the ones they would like to be in. And it’s unclear to me how long they’ll pursue it, but I could be wrong on that, but I’ve been one of the biggest skeptics since the day it came out. So I know I’m not the norm within the crypto space, but I really think that they’re going to have a very hard time.

Bill Barhydt: Got you. Well, Ryan Taylor, CEO of the Dash Core Group, thank you so much for joining us. I’m going to stop there and say that was a fantastic overview of Dash and everything that’s happening there. If you’re using Abra, please go check out Dash in the Abra app and support the community like we do here in Abra. And thanks for joining us for another episode of Abra Money 3.0. Thank you, Ryan, for being here.

Ryan Taylor: Thank you very much for having me on.

Bill Barhydt: My pleasure. I look forward to having you back again soon. All right, take care everyone. We’ll see you again soon.

Speaker 1: Thanks again for listening to the Abra Money 3.0 show. We hope you liked this episode as much as we did. If so, please subscribe to the show wherever you get your podcasts and download the Abra app wherever you get your apps. Thanks again.

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