LETS TALK BITCOIN

Episode 117 The Truth Matrix

Participants:

Adam B. Levine (AL) Host
Paul Sztorc (PS) Founder of Truthcoin project Decentralized Prediction Marketplace
Lamar Wilson (WS) Founder of Pheeva wallet & Cycle of Goodness cooperative
Lafe Taylor (LT) - Founder of Pheeva wallet & Cycle of Goodness cooperative


Today is June 10
th
2014 and this is Episode 117.

This program is intended for informational and educational purposes only.
Cryptocurrency is a new field of study. Consult your local futurist, lawyer and investment
advisor before making any decisions whatsoever for yourself.


AL: Welcome to Lets Talk Bitcoin, a twice weekly show about the ideas, people and
projects building the digital economy and the future of money. My name is Adam B. Levine
and today, were going to talk about predicting the future.

Paul Sztorc isnt the first to theorize on prediction markets but his approach is
definitely novel. We talk privileged knowledge, bad actors and how to fund a
lighthouse by betting against its creation
Then, Lamar and Lafe from Pheeva wallet check in about their projects progress,
team management and Pheeva Plus

I wanted to mention that, as many of you have noticed, Lets Talk Bitcoin is spending much
of its time talking about projects outside of Bitcoin. As todays Truthcoin interview nicely
demonstrates, this is because after a year of talking about Bitcoin, the most interesting
initiatives are being tested as alts or user-created assets now because Bitcoins getting big.
We do have upcoming episodes on items like ColoredCoins and, of course, merchant
interviews but as Bitcoin becomes more mainstream, the interviews become less interesting
to me personally and so I tend to follow the innovation as best I can see it. Im not always
right and I hope you dont think I claim to be the authority; Im just a schlub with a
microphone who decided this was the best way to spend his time and then turn it into a
platform for others to use. Lets Talk Bitcoin is my exploration into the cryptocurrency
world, specifically the parts that I find most interesting, as we say, the ideas, the people and
the projects. As always, feedbacks, suggestions and comments are welcome at
adam@letstalkbitcoin.com and if youre interested in starting or participating in a new
show, the LTB network would love to help you get started. Thats enough out of me. Enjoy
the show! [1:59]
Adam B. Levine interview with Paul Sztorc


AL: Today on Lets Talk Bitcoin, were joined by Paul Sztorc. Paul thanks for joining us.
[2:06]

PS: Thanks for having me. [2:07]

AL: You and I have been having an off and on conversation about something called
prediction markets and this is a follow-up on a project that youve been putting together. I
dont even know what stage youre at with it right now, called Truthcoin. Can you give us a
really brief, 90-second overview of what the Truthcoin project is? [2:26]

PS: Truthcoin is a trustless and decentralized prediction marketplace. Its supposed to be
very similar to Bitcoin in its overall philosophy of not trusting anyone, which unfortunately is
required in the sort of distributed asset ledger environment where you need the ledger to
show who owns what. With prediction markets, you have to store up some money and
then release it, depending on what happens, so its an opportunity to follow the Bitcoin
model. Where we are right now is that Id like to see a lot of attention from people who can
code. I wrote a White paper which is pretty detailed and Im in the process of working with
a few developers to really flesh out, in great detail, exactly what the transactions are so that
someone can make this. I dont think that it would be difficult to make but it doesnt exist in
a usable form yet and theres a GitHub but I only coded proof-of-concept version of what
the newest parts are. I didnt do any of the blockchain parts. Im absolutely certain that
someone else is going to be much better at that. Thats the state of the project. *3:32+

AL: It sounds like youve written this White paper and youve been talking to people and
youve done some proof-of-concept implementations of some specific parts of it. Of all the
different types of technologies that are out there, that someone whos intelligent and
looking to develop in this type of space can do, why are prediction markets one of the areas,
or the area, that youve picked as the greatest opportunity for your work personally? *3:54]

PS: OK, well its true that I believe that this project is the single, most valuable use of my
time and I think a lot of other peoples time. I should say first, is that I wrote a whole
document about this that I put on our forum website which is forum.truthcoin.info and you
can find it its in the general section under Why do this? I wrote a big manifesto about
why its important and there are a lot of reasons for this. There are a lot of applications but
just to put it in a really general picture is that information really has the ability to help
people improve their lives a lot and its a great thing when people know things and they
have reliable information that they can trust. There is really nothing better than that. In
our modern world of the internet, it connects a lot of people to each other and you can hear
a lot of different points of view but its very difficult to aggregate all those points of view
into one usable idea that you know is reliable. It doesnt help if there are a lot of people
saying this and a lot of people saying that and you dont know which people are more
trustworthy without doing a lot of effort, on your own part. These markets have much
more potential than what you may have seen on Intrade or what you may be seeing on
prediction market websites today. They can do much more than just say Will a certain
candidate be elected? Will a team win a sports match? They can say which CEO would raise
the stock price the most. They could say which political candidate would keep us out of war,
or put us in war, or increase GDP. Which Fed policy would create the appropriate amount
of inflation, whatever you think that is, unemployment or something? They have a lot of
potential to really make it accessible to just a lay person. You just look up on the internet
and see the prices and then you know what the state of reliable information is. The
information age - I think, this is going to be a big thing, maybe THE big thing, I dont know.
Its hard to say but I think this is a really important institution. [5:57]

AL: Lets talk about some of those examples and Im aware those might be a little bit more
complex but I, actually, do want to try to understand how something like this works because
the way that it would work in my head, based on what youre telling me, is something along
the lines of youre basically incentivizing anybody who has real information to act in their
own financial best interest and make a bet, based on private information that they know.
Then, because theyve made that bet, thats a public bet that then other people can see.
They cant see who made the bet but they can see that there is a lot of value that believes
this certain way. Therefore, the market should, over time, align itself better... like people
who have inside information should be more inclined to bet, therefore, the odds should go
in favor of the outcome thats most informed, which informs the rest of the market? Is that
the basic logic? [6:48]

PS: Thats the basic logic. Maybe I can give another example. If there is a prediction
market saying Barack Obama will be elected in 2012 or 2008, or whatever you want, theres
a market for that that says theres a 99% chance that hell be elected and then theres
another market that says, Barack Obama will be elected and the detention facility at
Guantanamo Bay will be closed. That market is at 5% or 3% or something like that. You
know that Barack Obama is being elected, maybe it already happened, but you know that
Guantanamo Bay probably wont be closed. If someone did know that, the question is why
arent you betting and taking advantage of this free money? The real benefit is that you can
start these markets long before Barack Obama starts campaigning or as soon as he starts
campaigning, so youd know immediately the joint probability is the probability of two
things happening at once and then youd know whats the probability of Barack Obama
being elected maybe its 60% or 80% but if hes elected, whats the probability of
Guantanamo Bay being closed it could be very low. When Barack Obama says Im going
to close the detention facility at Guantanamo Bay, you would know that he is lying. [8:01]

AL: Really it sounds like you need to have a lot of options here for this to really... its only as
good as the amount of bets you have, not the actual value of bets you have... [8:12]

PS: Thats true. *8:12+

AL: ...but the amount of options of bets you have so people can pick the best option, based
on their inside knowledge. [8:16]

PS: Thats correct and there are some techniques for making it... you can modularize the
bet so you dont need someone to take... if you want to make a really complicated bet that,
for example some ex-candidate will win and the Dow Jones industrial average would be
above Y and the weather or a certain day will be cloudy. If you want to do all these things,
you dont need to find one person. Thanks to something called market scoring rules, which I
implemented in the design of this project, you dont need to find someone thats going to
take the exact opposite position from you on that. It can be modularized and broken up and
so it has huge benefits. Market scoring technology was invented a long time ago and it was
not used. Its never been used by anyone, Intrade or any of these websites and its a real
shame because this is the true value. There is a blogpost by Hal Finney at Overcoming Bias.
He has an example where there is a politician being elected. I think the example is if the
Democrats take the Senate, where will national debt be and when will war end and our
defence spending. There is all this potential thats being totally overlooked. Its more than
just gambling on politicians and stuff. This is a really, really big deal and theres a lot of
potential here. [9:38]

AL: Where does ideology come into play on something like this though because I mean, Ive
seen centralized prediction markets before, like Intrade you mentioned. Intrade didnt do
that great a job of tracking what actually happened in reality. This is because it was a
relatively small market and so, in order to get the types of benefits youre talking about, this
really has to be something that people within the eco-system know about pervasively and
know that its in their best interest to participate when they have this information. Is there
a chicken/egg here where these arent as useful until they get really big and they cant get
really big until theyre useful? *10:11+

PS: Youre absolutely right. Its very difficult to build a ramp but I have kind of a plan for
that and that is that first of all, there are some people who really love the political markets
and maybe the sports markets so you can kind of get some of those people in to get it
started a little bit. What you can also do is you can also have a market that involves
arbitrage so you can say What will the Dow Jones industrial average be on a certain date?
Then, if the markets not really tracking the days price, its sort of like youre leaving money
on the table. You can get some people in to take this free money as the actual market price
changes from the prediction market price. Youre right. This is a challenge that its a
chicken and egg problem, as you say, where until theyre big they dont have a lot of the
attention and a lot of the financial influence that they might otherwise have. One thing the
market scoring rules do is that they make it so that someone can always make a trade. The
market cant stall out from a lack of volume. You can always trade... even if youre the only
one in the market, theres a tiny little bit of money there and theres this cool math trick
that lets you trade against that and against yourself, if you change your mind. The liquidity
can never fall to zero in the markets that Ive designed, even if theres no one on the other
side of your trade, theres still a little tiny pot of money that youre fighting over. I think this
is going to help... I also think that Intrade had a lot of problems. It was very unclear whether
or not you could get your money out of Intrade. Intrade did, eventually, close and have
customers funds locked up for a really long time and some people didnt get their money
back at all. Intrade did not allow you, for example, bet on a very long term contract, so they
had contracts that were like Will extraterrestrial life be found in 2020 or something and
you couldnt bet on this in a way that would match the return of the stock market? You see,
you have to be compensated for losing access to your cash for like ten years. [12:09]

AL: Right. [12:10]

PS: One of the things they didnt do, they didnt do the multi-dimensional markets I was
talking about. If Hilary Clinton is elected, will we be at war with France, or whatever?
[12:20]

AL: They also were a real company too. It seemed like that was this thing that eventually
caught up with them. [12:25]

PS: Right. Of course, they were closed down so that was a very sad day. Even though they
werent very good, they were the best. It was sad to see them go. That was, actually,
really... that was not great, even though it was foreseeable because similar things that
happened in the past to the policy analysis market, where people just didnt like it. Its very
taboo. Youve got money and gambling and politics so theyd run foul of the Commodity
Futures Trading Commission. [12:55]

AL: We cant play politics with money, right? *12:57]

PS: Right. One taboo too many and its too useful... *13:02+

AL: Yeah. (Laughter) [13:02]

PS: ...because people were saying that Barack Obama was in the lead. I think he was never
below 60%. I think he was never below 64% for being elected in 2012. Some people
thought that it influenced voter turnout and that it wasnt in the public interest and all this
other stuff which is debateable certainly. [13:23]

AL: One question I do have about it is that I can understand this tool makes a ton of sense
to me in a Bitcoin paradigm world. In a cryptocurrency paradigm world where everything is
flat, basically, but we have a lot of legal structures on a variety of books that this kind of
sounds like insider trading or some type of... again, its sort of illegal to trade on knowledge
that you have. Is the argument here that its totally pseudonymous so its impossible to tell
who is doing this, therefore you cant stop people from acting in their best interests? Or are
you thinking again, this is more like a Bitcoin type future where these structures maybe
arent so much there? *14:01+

PS: Im hoping that... whats legal isnt always the right thing to do. Slavery was once legal
and there were a lot of bad laws and there was a lot of misunderstanding. Even the stock
market and life insurance those were illegal. People thought it was betting on peoples
death and they were horrified by it. Eventually, there were these exceptions made. I think
its just about raising consciousness. You mention insider trading. I dont think its possible
to prevent insider trading, no matter what, even if you wanted to. Even if you could, I dont
even think that you would want to. Its just my opinion that markets aggregate information
and you want them to do that because you dont want... what if someone knew, like a
factory burns down and someone knows that the stock price of a company is going down
and they are the only one who knows so its insider information as they were the only one
at the factory, in Idaho or somewhere where theres no one else. Meanwhile, someone
with a pension fund, or something, is buying the stock the next day, theyre going to get
ripped off theyre going to get a higher price than they would have got if this guy hadnt
contributed his information as soon as possible. Its a big debate and I think its just about
raising consciousness and raising awareness of the benefits of these markets which are very
high because they enable people to understand the world that they live in and you dont
have to trust someone when they say Im going to close Guantanamo Bay. You can see
whether or not they will and thats worth a lot to me. *15:27+

AL: Lets talk about the blockchain type of construct that youve hypothesized here because
this is a project that would be built on its own blockchain and it would, I assume, this would
be a mined blockchain? Can you tell me a little bit about the technical backend you envision
for this and why it was something that you didnt feel like would be a good fit on Bitcoin
itself or just using Bitcoin? [15:49]

PS: Its funny you mention that. I wanted it to be on Bitcoin but some people advised me
that it would actually be too difficult. I kind of designed it, even before the term sidechain
was invented, I kind of designed it as a sidechain where I just said OK, Im going to specify
all the rules for moving the Bitcoin around and then, Ill let someone else figure out how Id
actually get to move it around according to these rules. In that way, its kind of tailored-
made almost for Ethereum or something where I just kind of wrote down the rules in a very
black and white, just follow this recipe way. I did design it for Bitcoin first and I still think
that would be great if someone could invent sidechains really soon, that would be ideal but I
dont think thats going to happen for a while. Someone advised me to just make it on its
own chain and we can test it out and see what happens. Maybe we can take it from there
where you just keep it on the chain, or move it back, or just do a third thing, or move it to
Ethereum, or do whatever just kind of get it started though. I thought that was a great
suggestion. To explain the blockchain since now its going to be on its own blockchain,
there are now two layers so theres like a currency coin and then there is what Im calling
now VoteCoins. There are these coins that represent a proportional ownership of the voting
mechanism. Im going to explain this is three phases how this works because the trick is to
get, only assuming that people are selfish, the trick is to figure out whether or not Hilary
Clinton was elected in 2016, despite the fact that many people are going to have a strong
incentive to lie about that if theyre holding losing shares or if they just hate everything.
Thats a big challenge and I dont agree with some of the methods that have been proposed
for this, I dont think theyll work at all. I did something that was a little bit more involved so
Im going to have to explain it in three parts. Luckily one in three are very simple so one in
three I just break up responsibility proportionally to this coin. If you own 40% of the
VoteCoins, you own 40% of the income the transaction fees and you have a 40% influence
in the vote. The goal is to split this up so that its very, very, very low trust with no single
person... but it doesnt necessarily fail if one person has a very large percentage. [18:10]

AL: What does that percentage allow you to do? Is this the ability that you have to
influence the outcome? The other thing that we havent talked about is data feeds. *18:17+

PS: Thats where this is going. *18:18+

AL: OK, great. [18:18]

PS: These people are going to provide the data. Unfortunately, its become clear to me and
other people, for something like the prediction market, you cant say query Google or
something. It really has to come from a human labor; it has to read whats going on in
supply. Thats really unfortunate but if we just deal with it, we can do the best that we can
with it and design constraint. What Im doing with the VoteCoins is breaking up
responsibility among multiple people who are going to all cross-validate each other, at some
point, but again, in three phases. Phase one is people own small percentages of this
fictitious company or corporation and theyre going to vote on all the events, not just one,
but all the events taking place on a certain time period. If Hillary Clinton is being elected in
November 2016, theyre going to vote on that in December but theyre also going to vote on
how many Senate seats were won by American Democrats and whether or not the Dow
Jones industrial average is above this, or what value it was, or whether or not something
happened in November. All the November stuff is going to be voted on in December just to
take an example of one month, which I think is probably whats going to happen. Youve got
these months and youre going to vote on all the things that happened in the month and
thats going to be what I call ballot of votes. Youve got to get them all together and thats
simple thats Part one which I dont think is controversial. Then theres Part 3 Im going
to skip Part 2. Part 3 is simple you aggregate the votes in some way. For a number like
What was the Dow Jones industrial average? I take the weighted median. There are a lot of
technical details that maybe Ill just blur over but, mostly, its a weighted median or theres
a weighted average for TRUE/FALSE. You just say, 111000 and you weight and average
them and you see where are you? Are you closer to 1 or 0 or are you somewhere in
between? Again, I hope Part 3 thats pretty simple and you can just take an average or you
can take a median. [20:23]

This Part 2 is the complicated part. Its a matrix factorization because I have a matrix here
where everyones votes are the rows and all the things they voted on are the columns. I
have a matrix of their responses and I do something called singular value decomposition on
this matrix and its a little complicated. The point of this is that it gives you a continuous
measure of conformity because what it does is theres a column of one of the outputs of
this process that shows you to what extent each voter, each person voting on the outcomes
varied all of their votes across the whole ballot. To what extent they varied their votes with
a voter who was maximally representative of the entire matrix. You get a measure of
conformity and its continuous. Even if this was all TRUE/FALSE, TRUE/FALSE, TRUE/FALSE,
you would know one guy, because he voted FALSE on the one that everyone voted TRUE on
or because he voted FALSE on the one that people were split on a 60/40 split on and they
were confused about. I dont expect any of this to happen; I dont expect anyone to be
confused. My expectation is that everyone will actually vote the exact same way but the
game theory requires us to consider all the off paths and things that might happen. What
this does is it lets you consider every way someone could submit a different ballot and you
want to know who is the weirdest guy and then who is the second weirdest guy and then
who are the most conformist people? Im going to use that measure in the second part.
Part 2 only has two parts because I realize I already made it three parts but Part 2 itself has
two parts. This is the last part so hopefully its not getting too complicated. The last part is
that now that youve got a measure of conformity, Im going to punish people. You have
something called a coordination game where any ballot would win the game, as long as
everyone else was playing it because you can see, you dont want to be the guy whos away
from the herd, you want to be very close to what other people have done. Youve got to
pick one that its going to be the same as everyone elses and not just the same as everyone
elses most of the time, youve got to really, very carefully consider what other people are
going to do so that you can vote that way and since I encrypt the ballots to just gloss over
another details about how theyre encrypted and contain a new public key. Again, there are
a lot of details that Ill just have to blur over just to get through the explanation. You want
to coordinate with everyone else and the ballots are very big. If there are 100 TRUE/FALSE
possibilities, thats 2:100 and you really need to get the same one as everyone else. When
you consider the fact that you want to get the same as everyone else, and you consider the
fact that these VoteCoins will be worth the most when the network performs optimally,
then you have... because these VoteCoins collect fees, they collect a little bit of fees, thats a
standard costing that everyone is doing, which is good. What you have is a situation where
everyone wants to vote the way that actually happened because you need a way to
coordinate and you dont want the network to fail completely. As soon as you get just a few
people on some easy ones with Hilary Clinton winning and then it sort of becomes unclear
where exactly did the hard ones begin... although I hope that it will be easy. You have this
big system where everyone wants to vote the way other people voted and no one wants to
crash the network and.... [23:48]

AL: Its sort of like a 51% attack because to vote against the network or to vote against what
actually happened before everyone else on the network also is voting against what actually
happened. Its an economically bad decision, basically, compared to just voting what
actually happened, which pretty much everybody else will be too, since thats what actually
happened. [24:07]

PS: Right. Its very similar to a 51%, its very similar to a 51% in spirit but actually, its the
case that if people are voting completely at random, even if 95 (this is the function of a
couple of different things) but even if a huge percentage of people vote away from the truth
but they do so in a way thats very random, as long as theres a coordinated group of 5%
that are voting exactly the same, those people are going to win through singular value
decomposition and everyone else will be punished to the extent that they... if you really
think that theres going to be a good block of coordinated people, you have to join that
group. I put a lot of thought into it and I think this is a pretty clever way of having the
distributed thing figure out what actually happened so you know whose shares are worth
money and whose shares are not because thats a requirement for a prediction market.
[25:00]


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________________________________________________


PS: Theres a way of funding public goods in a trustless way without taxes. Its very cool.
Satoshi built into Bitcoin, support for something called an insurance contract which is a very
cool economic invention, which is sort of like Kickstarter where people pledge money. If
someone says I want to build a lighthouse a lighthouse is a public good because once
youve built it, you cant stop people from using it, you cant only show the light to a few
people, to a few ships, thats impossible. *27:01+

AL: With a lighthouse, theres a free-rider problem. [27:05]

PS: Exactly. Theres a free-rider problem and so historically, theyve taxed the surrounding
city for the funds to build the lighthouse, with the logic being that the city would enjoy the
benefits when the ships could safely dock there and trade and do these sort of things.
Thats great but can we do even better and the answer is yes. With the insurance contract,
you say Oh, I need a $1m to build my lighthouse. People pledge... and if they dont pledge
and the whole $1m isnt pledged, then it goes back to the people. You dont have to spend
money, you just have to tie it up. People will say Id like a lighthouse, thats great. Satoshi
built this into Bitcoin with the anyone can pay... I think, Im not entirely sure but I think its
anyone can pay feature or something. The problem with the insurance contract though is
that your money is tied up and some people will go and theyll say Why should I bother
because they wont raise the $1m, they think? Its a doubt problem, like a cascading doubt
issue. Another thing is that the person building the lighthouse can ask to wear two hats at
once, they have to be great at building lighthouses and they also have to do the market
research required to see if these people are going to raise the money. There is dominance
assurance contract which is another cool piece of technology which I think Mike Hearn, or
someone on the Bitcoin Wikipedia wrote a way of doing this where theres an
entrepreneur who does market research on the viability of the lighthouse. He says I think
a lighthouse would be great here and I think people would pay $1m for it. He puts up some
of his own money he puts up, maybe I dont know, $20,000 or something. He goes out to
everyone and says We need $1.1m because hes giving himself a little bit of money. We
need $1.1m to build this lighthouse and you should pledge it and if we dont raise $1m, not
only do you get your money back, but youll get some of my money some of this $20,000
or $30,000 that he put aside. People now have an incentive, if they really want the
lighthouse to have an incentive to pledge because theyve got something in it for them. The
moneys not tied up for no reason. You could potentially get some more money back or you
get the lighthouse. Youre kind of happy either way. Its sort of just modularizes this more...
its like a new entrepreneur whos kind of greasing the wheels and making this happen.
Thats very cool but the problem with that is that in Bitcoin world, theres no way of proving
that anyone will do this or will do that with their money. What you do is instead, you
make a prediction market that has, instead of yes/no, it has three states. State one is that
nothing will happen and state two is that a lighthouse will be built thats 100ft tall and
conforms to coastguard standards for lighthouses etc and is this close to a certain city, or
something. Then you say thats state two and state three is the exact same thing a
lighthouse is going to be built and the only difference between states two and three is that
youre going to paint a letter on the lighthouse. If its state two its going to be the letter A
and if its state three its going to be the letter B. Its very, very, very simple and the
lighthouse builder can sort of change his mind last minute, so only he kind of knows. Thats
where this is going. Only he kind of knows whether or not it will be state two or state three
if its built but if its state one it wont be built. The analogue is that you build a prediction
market where you cant sell and it only collects money and then you can only redeem if you
win the prediction market or not. [30:46]

AL: I have a question about malicious actors here because, again, it seems like youre
setting up an incentive structure where thats the case but if theyre on one side of the bet,
then whats to stop somebody from taking that other side of the bet and then acting in real
life just as that guys acting in real live to evangelize the cause, whats to stop someone who
bets against you from evangelizing in the opposite direction and trying to stop it from being
built? [31:08]

PS: They can and thats obviously not desirable but its the case that you would actually be
betting on state one that it wouldnt be built because youre tying your money up on
purpose. Its exactly the same as the dominant assurance contract where, if the lighthouse
doesnt get built, then you end up being right and then you end up getting more money
back and so, because youve bought this state, these three states, youve bought one and
the price, of course, of these three states must add up to one. Youre buying a state one for
less than one but when you redeem it at the end, itll be worth one. Youre actually getting
this return. All the people who want the lighthouse would be betting that it wouldnt be
built. Youre right, there may be some people who just genuinely believe that theres not a
chance of this lighthouse being built and then they might be surprised that its suddenly
being built and then they might decide to go to the town hall, or something and try and
protest. Thats kind of true of everything, dont you think? *32:04+

AL: Sure. [32:04]

PS: I mean, its true of everything. Some people have a problem with this or a problem with
that. [32:09]

AL: Let me give you another example. [32:10]

PS: Sure. [32:12]

AL: In these anonymous markets, like you talked about assurance contracts, which are like
crowd-funding or KickStarter sorts of things, whats to stop somebody from starting a
campaign and then betting against themselves so that when they fail, they get money?
(Laughter) I know the answer. The answer is theres nothing to stop them so I guess a
better question is, is that important? Does that matter? Is the benefit that were getting
from this such that it makes it so thats ok? *32:38+

PS: Its important because I dont think Im explaining it well enough for you to get. You
want to bet against it if you want to donate to this cause and make it more likely to happen,
youre actually going to bet against this, so the money is tied up in this market. Someone
could also make a bet against it... [32:55]

AL: Youre making this bet with the intention of losing? *32:56+

PS: Right, exactly. [32:57]

AL: OK, because when we lose... ahhh... interesting. [33:00]

PS: Yeah, thats right, exactly. *33:02]

AL: Theres nothing stopping anybody from hedging the other way too. Thats just betting
against themself succeeding. [33:05]

PS: Thats exactly what the entrepreneurs going to do. The entrepreneur who, remember
hes going to put up $20-$30,000 and say Hey, if you pledge and you dont get any money
back, Im going to give you some of my money because I believe in this cause so much and I
want to make it worth your while to tie up this money. [33:22]

AL: That person whos put up that $20,000 thats not the only money that theyve put into
this project, in theory. The other money would be money that theyve put into actually
getting it built, or whatever because they want to see it built. This is just like the incentive
that gets it so that other people care a lot. [33:38]

PS: Right. They may, particularly at the end... like I was saying you need $1.1m now... they
might decide, if it gets like $1.09m or something, they might decide Oh, I really dont want
to lose that $30-$20,000 that I put up. Im just going to finish the market myself, or get a
loan or something. They could certainly wear different hats. The entrepreneurs going to
buy both states two and three, which again, is going to be less than one and as long as
theyre right, as long as someone builds the lighthouse, even if its not them, it puts an A or
a B in it. As long as someone does that, theyre going to get one back from one of those
states. As long as they can buy equally, they can equally have states two and three.
Whatever that is, the total of that is not going to cost more than one but theyll get one
back because one of those shares will be worth money if the lighthouse is built. Its very
ideal, the perfect fit, the only last piece is the lighthouse builder has to look at this market
and the simple math formula that Im probably going to automate so that other people
dont have to do it. They can look at it and say how much money is here and how much
money could I make if I built the lighthouse and then only I know whether its going to
contain an A or B and then you make a huge trade at the end you bet it all on B, or
something and as long as that trade goes through no problem, you just pay to B on, right at
the last minute. Then, you hold a press conference and you talk about how great this
lighthouse is and how its 100ft tall and how it has the letter B. Then the market is over.
Yeah, youre making bets, planning to lose as a donation but its a really clever donation
which is conditional on the lighthouse being built, so thats kind of neat. Thats a kind of
cool idea. [35:22]

AL: In order to validate predictions, youre basically asking people who will hold the coin to
make a judgment, right? [35:30]

PS: Correct. [35:32]

AL: If youre successful with this, arent you going to have just a ridiculous flow through rate
of these predictions that need to be validated? Is this something where every user is going
to be expected to validate everything, or you anticipating only low participation, or is it
incentivized in some way? [35:48]

PS: It would not scale, I agree. Remember though, it has two layers so one layer is
currency only and the other layer is the ownership of this sort of corporation thats going to
do the judgment. The vision is actually the key splitting that, something I call branching
where its like a fork but youre only forking the... it was originally planned as a fork because
it would have made more sense as a sidechain. Maybe I need a different word for it now
but basically, Im thinking youd create a new... the VoteCoins on the altcoin design would
be like ColoredCoins. Youd make a new set of ColoredCoins and youd give them to the
same people as before so youd have the same accumulated reputation but instead of just
being general, one would maybe specialize in sports so then all the people who owned a
general would now own two and so, instead of doing 100 per month, theyd be doing... if it
maybe went up to 200 a month theyd split and then thered be 100 on each. If youre OK
with doing 200 a month and this is going to be like your full time job or something, then you
can just keep both but otherwise youd sell, or buy, or do whatever you want to these
ScarceCoins these VoteCoins for sports only. Eventually, too many sports contracts and
youd split it into sports/baseball and then sports/not baseball. Youd split not baseball,
youd split that one into basketball and... *37:22+

AL: Theres a cascading value it seems like where a platform reaches a certain size and then
it gets big enough that you can use the token of that platform for fundraising and the next
generation of tokens. It seems like, over time as these networks get bigger, that is what
might happen is that it might just continue to kind of split like that where its not really
different, its just more specific because that means you have a more niche performance?
[37:45]

PS: Thats exactly what Im envisioning. Thats another desirable feature of that is that,
eventually, although currently the scope is only for things that you would very easily verify...
because if youre going to play coordination game, its doesnt help if you ask whats the
worlds favorite color or something stupid like that where no one can coordinate on
anything. I have a plan for that... I go off several times with a lot of details so, if youre still
sceptical of this, I encourage you to read the White paper on all this stuff. There are a lot of
details that Im more clear about but theres not enough time to get to them all. One thing
is that if you keep branching like this, eventually, you can get a really, really specific group of
people who know everything about and very comfortable with putting in the M/ph of every
pitch thrown at a certain game, or a certain college softball game, or something really
specific like that, youd eventually make it down there and youd be able to do this; very
specific politics, very specific finance, very specific everything. Thats a cool thing.
Unfortunately, a lot of details I had to kind of blur over and it just gets a little complicated.
[39:00]

AL: Yeah Paul, Id definitely be ready to have you back on to continue this conversation.
[39:04]

PS: Id be happy to be back on. [39:06]

AL: It sounded like youre in the fairly early stages of this. Youve got a couple of papers
written about this and youve got some proof-of-concept implementations. What type of
help are you looking for at this point? Where can somebody get in touch with you? [39:17]

PS: OK, we have a forum now at Forum.TruthCoin.info and if you can show up on the
forum, thats great. A lot of people are currently waging a little debate on both via email
and on the forum on exactly how to implement this its on chain, or in BitShares toolkit, or
as an Ethereum contract. There are a lot of different people. My preference would be to
have it on everything at once and just kind of see. I just care about the idea more than
anything else. The help thats really required is someone who knows a lot about the Bitcoin
blockchain, someone who is comfortable writing code that... or copying the code from
Bitcoin or from another blockchain technology. Thats really whats required. Im just an
economist really and I just designed this this incentive scheme. I knew enough about
cryptography to get by but I did have to even make some last minute changes after Id
published the first version. I was talking to G Maxwell and other people. Even that, a
security audit by someone whos really good at cryptography. That would be really good
but that should probably wait until the code is at a more... bigger... just more lines of code
need to be there...[40:43]

AL: Right, until theres code there to audit. *40:44+

PS: ...because I just have proof-of-concept of the new parts. If youre really comfortable
adding the old parts, thats great the Bitcoin parts or things about new transaction types.
[40:56]

AL: Within the Bitcoin eco-system, when youre launching one of these new projects,
crowd-sales have become pretty popular. Do you guys have any fundraising plans at this
point? Are you still just focused on getting the product before you worry about fundraising
for it? Or do you have any thoughts about that yet? [41:11]

PS: Yeah, I have a lot of thoughts about that. Its something Ive avoided thinking about for
a really long time. I really dont... there are a lot of parts to it, right? One thing is that I just
like a big hassle legally and you can get into a lot of trouble as Eric Voorhees found out. You
can get into a lot of trouble and its a big headache because I live in the United States, I live
in Connecticut. Its like a big deal if you want to get involved with this kind of stuff at all. I
kind of prefer to avoid it completely. The other thing is that Im not entirely sure how much
money is actually required because a lot of people have already come in and they said Id
be happy to help work on this. Im hoping that by coming on this show, even more people
will also come and also help. I think its actually... the thing is its so similar to Bitcoin with
just a couple of other transaction types and its weird incentive thing that Ive built but its
really simple. I think its much simpler than... I mean, when I designed it, I thought this was
really complicated but when I started reading about what other people are doing with
Ethereum and BitShares and Counterparty and all these other things, then I just thought this
is much... very tame. I think it might not require a huge amount of money. I would like to
have money to subsidize the first couple of prediction markets that come out that people
have a lot to kind of trade against and trade with so its a very, very liquid and very nice
experience for the first users. Other than that, I mean, I dont know how comfortable I am
at all with raising money and holding onto the money and what I would do with it. Ideally,
one really rich person would just kind of hire me into something and theyd take care of all
this stuff and theyd hire... theyd let me hire developers and then they would just go from
there. The crowd-funding thing is really intimidating to me personally. For me, its difficult.
[43:07]

AL: OK. Whats the next thing on your plate for this project? Whats the thing thats
occupying your attention for the rest of the day? [43:14]

PS: I wrote all this in R which is this weird... its a very statistical academic language so I was
rewriting it in Python to get it out before I released the first version of the software and I
never really finished doing that, so I was going to do more of this work in Python, sort of a
more general language that more people like but, more than that, I was going to try and
really just describe in documentation exactly what all the functions are supposed to do so
that someone whos much better at coding can just read that and then just do it the right
way. Just write down all the rules, not in a White paper format but just in a literal this
function, this function, this function kind of thing. Thats sort of what Im working on
because I just want to get other people involved who are much better at this than I am
because Im really not qualified to finish the project by myself at all. *44:05]

AL: Paul Sztorc, thank you very much for telling us about TruthCoin today and thanks for
your time. [44:08]

PS: Thanks for having me. [44:10]


__________________________________________


ADVERT:

Hey there LTB listeners, in the last six months, weve morphed from the Lets Talk Bitcoin
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rate, review and share. Thanks for listening. Back to the show. [45:03]


_____________________________________________


Adam B. Levine interview with Lamar Wilson & Lafe Taylor


AL: Today on Lets Talk Bitcoin, were joined by Lamar Wilson and Lafe Taylor of the
Cooperative of Good Collective and creators of Pheeva wallet. Guys, how are you doing?
[45:12]

LW: Doing well. [45:13]

LT: Doing well, Adam. [45:15]

AL: Well, thanks for rejoining us today on Lets Talk Bitcoin. Its been a couple of months
since we talked. You guys had kind of an innovative product and an interesting way of
getting it into the Apple App Store. Can you kind of just recap for listeners, who didnt hear
the earlier thing, what your project is? [45:29]

LW: What we have is a cooperative called the COG Coop which allows us to distribute our
wallet, the Pheeva wallet, to its members. Like we always say, its not getting around the
App Store, its actually fitting within the Apple rules and we can distribute whatever
applications we need to the members of the cooperative. Its going really well and were
getting some really good reviews. People are liking the wallet a lot. Of course, there are
some bugs in the software but we are working with every single person that emails us to try
to make sure we get those bugs locked out. Were just having a really good time doing it.
[46:05]

AL: The reason to use COG as a vehicle here is because you cant sell your app in the App
Store because its a wallet and theyre not letting wallets be sold or distributed through the
App Store? [46:16]

LW: Yeah, that is correct. We actually had the idea for the cooperative before the Apple
ban and it just so happened that the Apple ban kind of allowed us to be the only ones that
could distribute a fully functional wallet right now. [46:30]

AL: Do you see this as an advantage or a disadvantage because it kind of seems like the
amount of people who would find you through the App Store looking for a wallet, compared
to the amount of people who are going to find you on internet looking for a wallet, it would
be a real advantage to be in the App Store, right? [46:43]

LT: Yeah, it would be an advantage definitely to be in App Store but we dont necessarily
see it as a disadvantage going back to the premise of why we started the cooperative in the
first place. Actually, its just a better way to funnel people directly through the cooperative
for us. [46:58]

LW: We would love to be in the App Store. I mean, its a lot easier distribution, people
understand it a lot better but we never let obstacles kind of stop us. We try to figure out
OK, how can we overcome the obstacle and be able to provide the best product or service
to the people who need to get it. So Apple lifts its ban, then well do it this way. If Apple
lifts its ban, I think we still have a wallet that is very competitive and can stand up with the
best of them. We tend to try to do things to make it a lot easier for users to adopt Bitcoin
anyway. Hopefully, we would win in that situation as well. [47:32]

AL: How has that been? You released a couple of months ago now. How long ago was it -
three or four months ago? [47:37]

LW: It was actually at the Texas Bitcoin conference so it was March 6
th
, I believe. Yeah, a
couple of months ago. Yeah, its been really well. Like I said, weve actually launched the
Android wallet so we have an iOS wallet, a Chrome extension and the Android wallet. All of
them, of course, theyre out there in the world. People have been giving us great reviews.
Of course, like I said, there are some bugs in certain situations and we cant handle every
use-case but we are constantly working on fixing those bugs and also adding new features.
[48:07]

AL: The wallet space has been one of... you know, there hasnt been a lot of innovation and
it kind of seems like you guys are trying to do some new things. What are the use-cases that
you think Pheeva shines in and what are the ones where its just like Well, just dont
bother with us, there are better options out there? [48:22]

LW: The Pheeva wallet shines in quick transactions. Pheeva is the transaction wallet. It
should be a hot wallet, not one that you store a lot of Bitcoin in. Weve noticed that some
people are storing a lot of their Bitcoin in there but thats all of your purpose. We say that it
should be a transactional wallet the one that you are spending Bitcoin with, sharing
Bitcoin with other users and thats why we have things like the Coin ID to make it really easy
to share with the people around you so that you dont have to have that huge Bitcoin
address. Also, were trying to make it to where you can buy goods a lot easier. We have
this philosophy of Pheeva Plus where we want to bring in other brands that help the
adoption. Our first brand that weve brought in was Gyft which is a global distributor of
giftcards, a digital distributor of giftcards, excuse me. What we thought about when we
thought about doing the Gyft partnership was we wanted to make sure that people could
use their Bitcoin in as many retail locations as possible, even if those retail locations had not
adopted Bitcoin just yet. [49:22]

AL: What does the Gyft integration actually look like? Is this part of the Pheeva app on your
phone? How does someone interact with Gyft through that? [49:30]

LW: Theres a Plus section in the application. We just added it. Gyft is just the first of many
apps that are coming but theres a Plus section. All you do is hit the Plus button, it takes you
to Gyft and if you have a Gyft account and you sync that, if you dont have a Gyft account,
you can create one directly within the application. From there, its really easy then, you
just go through and browse all the different stores. There are about 200 different retailers.
Were going to be adding some more soon. Once you go through those stores, you find one
you want, like Wholefoods... I think Wholefoods has been a big one because people want to
buy groceries. You click on Wholefoods and you go directly to how much you want to pay
for it. If you want to get $25 or $100 worth, then you hit Buy now and because youre in
the wallet, it handles the transaction immediately for you and then, if you go back to your
Gyft application, theres the giftcard. Its a lot faster way to use Bitcoin directly in
Wholefoods. Youre in Wholefoods and you want to buy some groceries, of course, they
dont take Bitcoin but you can quickly exchange your Bitcoin for a giftcard, cash out and
walk out the door. [50:34]

AL: Sounds very cool. Basically, the partnerships that youre having are going to be for
spending things, right? Places that people would want to spend Bitcoin, youre essentially
doing kind of a deeper integration so that you dont have to deal with addresses? *50:44+

LW: No, not necessarily. When we first thought about the Pheeva hot wallet, the whole
idea was to become the hot wallet for many of the large brands. Coinbase, even Circle...
exchanges like BitStamp because if you think about E-Trade E-Trade has a Visa card that
you can take some money out of your account and be able to use it quickly through a debit
card situation or... lets see... there are many different ones in the world that have Visa
cards that are attached to larger accounts to allow (?? mini transacting them) The way
were thinking about it is OK, well allow you to connect your Coinbase account, well allow
you to connect your Circle account and easily put some money over to your (??) online or in
person, like as we did when we went to taste the tyre in Lexington, we used our Pheeva
wallet there. Like Ive said, its more of your checking/debit account, the Pheeva wallet
should be and so well probably try to pull in some other Coinbase, or Circle if they have an
API, to bring into the wallet to make it a lot easier to even bring money from your huge cold
storage or long storage account into a transactional wallet. [51:54]

AL: It seems like were moving towards debit cards that link into Bitcoin into kind of a more
direct fashion. Those dont have the disadvantage of having to have confirmations... I mean,
they can be reversible but that can be a good or a bad thing in a hot wallet, depending on
your perspective. Do you think that this type of hot wallet solution is superior to cards or
are you saying its just another option? *52:17+

LW: Right now, its another option. Yes, we would love to go to the card situation but thats
what were noticing because we take every email that people give us. Lafe and I answer
every single email so if people... once again people might email us... publically Im
Lamar@Pheeva.com and Lafe is Lafe@Pheeva.com or you can reach us both at
Hello@Pheeva.com. Because it is a cooperative and we made a wallet for the cooperative,
we take as many suggestions as we possibly can get and a lot of people would love to be
able to easily transfer some of their money from their Coinbase account into Pheeva to use
because the Coinbase wallet, of course on iOS has been banned by Apple, but with us, they
can at least take some money out of Coinbase and use it in their everyday wallet and not
have to worry about... especially for new Coinbase users... and not have to worry about
dealing with the whole Apple ban and everything. [53:11]

AL: Sounds very cool. Whats next for you guys after this? New features coming to Pheeva
Plus or a different program rolling out? I know youve had kind of a variety of initiatives on
the burners. [53:22]

LW: Pheeva Plus is something were working on heavily. Its amazing the amount of
suggestions we get. I mean, the amount of different implementations that people would
love to see. Even from the ATM standpoint, I think youll see a lot in the Pheeva Plus coming
forward. Weve been approached by some very large brands to do some things that I think
are very creative. Thats really what we want to keep bringing to the table is, we want to
keep pushing the edge a little bit further to make adoption really, really, really simple and to
get people to understand that just because you have Bitcoin, doesnt mean you cant live,
that you cant live day to day. We want to show people that you can use Bitcoin in your
everyday life and yes, we would love those retailers to adopt Bitcoin directly but if we can
still spend Bitcoin at some of the largest brands, I think that still serves a good purpose for
us. Yeah, youll see some things in the Pheeva Plus category and then were also working
right now on our ads. I know we talked about ads at the very beginning. The Gyft
partnership came a lot faster than what we thought, so we kind of put the ads on the
background but we will be building an ad network for our wallet so that other companies
can advertise directly within the wallet themselves to our cooperative. Like we were saying
before (?? direct) we split between the company and also back to the cooperative. Anyone
whos in the cooperative, they would get whats called a patronage refund for their
patronage points. Thats another way for us to allow people to get Bitcoin quickly and
easily. [54:55]

AL: Interesting. This is a wallet where users control their own keys or have the capability to
control their keys. Its not something where you guys are on boarding that risk, right?
[55:02]

LW: The keys are created on their client and we were going to provide an exodus address,
possibly or some other way for them to get their keys. Right now, we dont know what the
keys are and we have no idea. They encrypt them on their device. Its almost like the old
Blockchain.info wallet or the current Blockchain.info wallet where you encrypt the keys on
your device and we just store the encrypted version on the server but we want to, and we
are building ways for (??) those keys. Its just a security risk at times with the double-spend
and we dont really have a huge problem with that but because were such a fast
transactional wallet, we wanted to kind of gauge that risk as well to make sure that people
get the keys because not everybody in the cooperative is a good user. Wed love to think
that but not everybodys not like that so we dont want a bunch of trouble out there about
people having their wallet and using ours quickly, in certain several places. Were trying to
gauge that a little bit. At the end of the day, if you want your keys, well definitely get you
the keys, no problem. [56:04]

AL: This is basically why you emphasize that its a hot wallet then is... *56:08]

JW: Exactly. [56:08]

AL: ...because this is basically the primary attack vector that could be brought against it and
really, the defence is just not having anything more than youre planning on spending on
there. [56:14]

LW: Right, exactly. [56:16]

AL: OK. [56:16]

LW: Well give anybody an exodus address right now. Were just not opening it up because
number one the people who are getting our wallet, that are hoping are getting our wallet
up, are those new people who dont even understand it to the point to where they
understand what a private and public key is. We want to aspect that away and make it
really easy for them to have a wallet without thinking about how can I take the key here and
move it there and all that kind of stuff. If they want to get out, like I said if anybody wants
to get out, all you have to do is email me, Ill send you an address, you can go in and get
your keys and what well probably do is just, at that moment, well delete the account.
Once you get access to your keys, well probably delete the account just to make sure that
there arent any situations going on, as far as people trying to do some fraudulent things
with it. [57:00]

AL: Lamar and Lafe, thank you very much for your time today. If people want to get in
touch with you or if people are interested in learning more about the project, what are the
addresses and domains? [57:09]

LT: www.Pheeva.com and you can reach Lamar at Pheeva.com and you can reach Lafe at
Pheeva.com or you can reach the both of us at Hello@Pheeva.com. We answer every email
thats been sent. *57:24+

LW: You can also go to www.COGcoop.com as well and sign up for the cooperative there.
[57:31]

AL: Guys, thank you very much for your time. We look forward to your continued progress.
[57:36]


____________________________________________


CREDITS:


Thanks for listening to Episode 117 of Lets Talk Bitcoin.

Content for this episode was provided by Paul Sztorc, Lamar Wilson, Lafe Taylor and
Adam B. Levine
This episode was edited by Adam Levine and Denise Levine
Music for this episode was provided by Jared Rubens, General Fuzz and Gurty Beats

Any questions or comments? Email Adam@letstalkbitcoin.com

Have a good one! [58:00]