Zooko Wilcox-O’Hearn: Crypto risks mirroring the Linux movement’s decline, user experience is crucial for mass adoption, and funding has advanced zero-knowledge proofs

Key takeaways

• The future of crypto might parallel the Linux movement, benefiting large corporations more than individual users.
• Crypto has not yet succeeded in achieving its original goals, according to Zooko Wilcox-O’Hearn.
• Funding from the crypto space has significantly advanced technologies like zero-knowledge proofs.
• Recent crypto developments diverge from the cypherpunk vision but still represent progress.
• The cypherpunk movement failed to prioritize user experience, impacting its success.
• Technologies need at least 100 million users to have a meaningful societal impact.
• User experience is crucial for onboarding new users to crypto technologies.
• Large user bases can mitigate regulatory risks for crypto projects.
• Decentralization could extend beyond finance to areas like AI and storage.
• Misunderstandings about the security of platforms like Telegram are prevalent among crypto users.
• Future user experience advancements may stem from encryption technologies.
• The success of crypto could lead to traditional finance adopting its best features, potentially diluting the original movement.

Guest intro

Zooko Wilcox-O’Hearn is the head of product at Shielded Labs. He is the founder and former CEO of Zcash, the privacy-focused crypto based on his pioneering work on Zerocash and zero-knowledge proofs. With over 20 years in secure distributed systems, he coined Zooko’s Triangle and co-founded the Tahoe-LAFS decentralized file storage project.

The potential future of crypto

• “The future of crypto could mirror the decline of the Linux movement, benefiting only a few large corporations while leaving the majority of users unempowered.” – Zooko Wilcox-O’Hearn
• Crypto’s trajectory may lead to centralization similar to the Linux movement.
• The crypto movement has not succeeded in achieving its goals, according to Zooko.
• “No jeez that’s a leading question you didn’t expect any positive answer to that honestly now you say that it makes me kind of depressed and negative.” – Zooko Wilcox-O’Hearn
• Understanding the historical context of the Linux movement is crucial for predicting crypto’s future.
• “Crypto could be like that you know ten fifteen years from now it could be something that a couple of mega corporations like cost optimized by using crypto or blockchain or something and the other now 99.9% of the people are not empowered or benefited in any way by it.” – Zooko Wilcox-O’Hearn
• The potential for crypto to follow the Linux path highlights the risk of centralization.
• The decline of the Linux movement serves as a warning for the crypto industry.

Advancements in cryptography

• Crypto has significantly funded and advanced cryptographic technologies like zero-knowledge proofs.
• “What I most love about crypto so far is that it’s funded a whole bunch of really good technology like zero knowledge proofs that zcash pioneered.” – Zooko Wilcox-O’Hearn
• The advancements in cryptography over the last decade would not have occurred without the influence of crypto.
• “They wouldn’t have developed any of that in the last ten years without crypto.” – Zooko Wilcox-O’Hearn
• Crypto funding has played a crucial role in technological innovation, especially in cryptography.
• Understanding traditional funding sources for technological development highlights the unique role of crypto.
• The impact of crypto funding on cryptographic advancements is a key aspect of the industry.
• Crypto’s influence on cryptography underscores its importance in technological progress.

The cypherpunk vision and user experience

• The recent developments in crypto may not align with the original cypherpunk vision but still represent progress.
• “I think lately there have been a lot of themes around crypto or blockchain’s ability to kind of transform wall street… it is extending the adoption of some of our protocols.” – Zooko Wilcox-O’Hearn
• The current developments in crypto have not yet improved the lives of people in a meaningful way.
• “It would be good if it was actually improving the lives of people in a way that I care about which it could but it hasn’t yet.” – Zooko Wilcox-O’Hearn
• The cypherpunk dream has failed because it did not account for user experience.
• “He said the cyberpunks have totally failed… and he said the program… was like step one we’ll make tools that work well for us and then step two we’ll teach everyone else in the world to be like us and he said that’s never gonna work.” – Zooko Wilcox-O’Hearn
• To have a meaningful impact, a technology must reach at least 100 million users.
• “He said… if you have fewer than a 100,000,000 users then you’re not affecting the world it doesn’t matter what you’re doing is a waste of time.” – Zooko Wilcox-O’Hearn

The importance of user experience

• User experience (UX) is critical for onboarding new users to crypto technologies.
• “What I mainly think of it following moxie again is it’s all about ux it’s all about onboarding and cognitive load to use it.” – Zooko Wilcox-O’Hearn
• The cypherpunk vision in crypto has the potential to expand beyond just financial applications.
• “I hope it goes all the way because… there are others that still believe in this cypherpunk expansive universe of decentralized identity and compute and storage and almost a parallel internet.” – Zooko Wilcox-O’Hearn
• Having a large user base can mitigate regulatory risks for crypto projects.
• “He said have at least a 100,000,000 users that was his strategy to solve regulatory risk.” – Zooko Wilcox-O’Hearn
• User experience should be prioritized over technology in secure communication tools.
• “there’s something about the moxie marlinspike approach to really appreciate which is start from the user not from the technology.” – Zooko Wilcox-O’Hearn
• The user experience of a chat app should accurately reflect its security features.
• “the whole idea of signal is that the ux should reflect the underlying reality.” – Zooko Wilcox-O’Hearn

Decentralization beyond finance

• Decentralization can extend beyond crypto to areas like AI, storage, and social communication.
• “can we have can crypto become decentralized ai and storage and communication and news and social or maybe it won’t be even crypto…” – Zooko Wilcox-O’Hearn
• User interfaces can be designed to accurately reflect who is involved in communication, enhancing transparency.
• “an accurate ux that tells the user what’s really going on shows all these other parties listening in on your line…” – Zooko Wilcox-O’Hearn
• Crypto users often misunderstand the security implications of using platforms like Telegram and Twitter.
• “despair that all the crypto people use telegram and think it’s secure like how dumb can crypto people be because if you open telegram and you oh join a group you got your five friends and yourself and you need to see pavel durov’s face in that ux or else it’s lying to you.” – Zooko Wilcox-O’Hearn
• Future advancements in user experience may emerge from encryption technologies rather than crypto itself.
• “these things might come out of encryption rather than crypto itself.” – Zooko Wilcox-O’Hearn
• The adoption of technology by large corporations may not necessarily lead to increased freedom for end users.
• “I kind of vaguely remember discussions that remind me of what you just said… with linux it has resulted in almost no additional freedom for the end user.” – Zooko Wilcox-O’Hearn

The role of AI in technology adoption

• AI will significantly enhance the ability of non-technical users to adopt and use complex systems like Linux.
• “I think maybe in 2026 or ’27 or so they’re going to be able to say to their AI okay like install linux on this computer for me and like debug it and configure it.” – Zooko Wilcox-O’Hearn
• The crypto industry has a larger proportion of non-technical users compared to the Linux industry.
• “One difference that I see in the crypto industry versus the linux industry is that actually crypto has a pretty big proportion of nontechnical users now.” – Zooko Wilcox-O’Hearn
• The user experience for interacting with technology will evolve to be more intuitive, resembling voice commands seen in sci-fi movies.
• “the ux is no longer ascii strings or buttons or positions on a screen the ux is like in all those sci fi movies you explain what you want out loud.” – Zooko Wilcox-O’Hearn
• AI tools like ChatGPT may inadvertently censor or limit discussions around certain technologies due to perceived risks.
• “chatgpt just without being asked went ahead and removed all mention of these one time phone number services and of crypto.” – Zooko Wilcox-O’Hearn
• The web two business model, primarily driven by advertising, is a significant factor in the problems of the internet.
• “I think basically everything that is wrong… 80% of things that are wrong with the internet I think are because advertising was the only working business model starting in you know the early 2000s.” – Zooko Wilcox-O’Hearn

The impact of business models on technology

• If advertising becomes the primary business model for AI, we may face similar negative outcomes as seen with the internet.
• “If advertising is the only working business model for ai then we’ll probably have a similar bad outcome.” – Zooko Wilcox-O’Hearn
• The current AI landscape is repeating the same exploitative strategies seen in Silicon Valley.
• “I really feel like they’re doing exactly those two things running it back turbo… what’s Google’s business model? Yeah, that’s the worst in terms of how much Google relies on that kind of extractive squeezing of value out of its users.” – Zooko Wilcox-O’Hearn
• Crypto may lead to new business models that could provide sustainable feedback loops.
• “Hopefully we can get some sustainable ongoing feedback loops of the same kind of thing.” – Zooko Wilcox-O’Hearn
• The price performance of Zcash reflects a growing interest in privacy.
• “I’m very, very optimistic… with that huge price run up in zcash… it shows a bunch of people that privacy is valuable to you to people it’s valued.” – Zooko Wilcox-O’Hearn
• The lack of advertising and lock-in for Zcash has contributed to its organic growth.
• “No advertising and no lock in all organic… it’s kinda like bitcoin but kinda not.” – Zooko Wilcox-O’Hearn

Zcash’s development and governance

• The Zcash dev fund receives a significant portion of newly created coins, which increases in value as the price of Zcash rises.
• “In zcash 80% of the newly created coins go to the miner who might not block and 20% of them go to this dev fund thing… if the price has gone up like 7x… that’s going to be about $200,000,000 is going to be issued through this dev fund thing.” – Zooko Wilcox-O’Hearn
• The rising price of Zcash creates a positive feedback loop that empowers the recipients of the dev fund.
• “That’s a lot of money… it proves that people value this and it means all those recipients of the dev fund are going to be more numerous and more high powered more empowered more well fueled for years positive feedback loop.” – Zooko Wilcox-O’Hearn
• Zcash’s development fund is a strategic advantage that is baked into its social contract.
• “Zcash has fully supported this type of idea from the earlier like a much earlier set point and just kind of baked it in and so now it’s part of the social contract.” – Zooko Wilcox-O’Hearn
• The Ethereum community has struggled with the idea of a protocol-based development fund due to concerns about governance and potential corruption.
• “The reason always given in the ethereum world is like well who decides where the funds go to is this not a vector for corruption or something what do we turn this into a token vote and like well we don’t like token votes for plutocratic reasons and it could be a vector for control.” – Zooko Wilcox-O’Hearn

Governance challenges in Zcash

• The development funds for Zcash have been crucial in preventing a death spiral during price declines.
• “the deaf funds sustained zcash all along until now and… when the price token price is going down that means development and maintenance and everything is getting worse and that makes the token price go down more.” – Zooko Wilcox-O’Hearn
• The Zcash community has come to view the development fund as a social contract.
• “the zcash community has gotten used to it and treats it as a social contract people who buy zcash are expecting but that’s part of what they’re getting into.” – Zooko Wilcox-O’Hearn
• The initial funding model for Zcash included a sunset clause that led to a constitutional crisis.
• “we baked a sunset clause into the initial rules and that forced exactly as we had sort of intended that forced a constitutional crisis when a bunch of zcashers said okay well the social contract was we would endure this thing for four years.” – Zooko Wilcox-O’Hearn
• The funding structure for Zcash has evolved to include a dev fund that adjusts every four years based on community agreements.
• “the social contract is that miners can get 80% for the next four years and 20% will go to this new dev fund thing… the new one that’s now in effect there’s no organizations that receive any direct funding… it’s now controlled by two different things one’s a committee of five humans… and then the other one is on chain token holder voting.” – Zooko Wilcox-O’Hearn

The evolution of Zcash governance

• The concerns raised by Vitalik Buterin regarding Zcash’s funding and governance are valid and worth considering.
• “I think they were valid and you mentioned either vitalik or other people also had these other concerns and objections.” – Zooko Wilcox-O’Hearn
• The governance structure of Zcash has evolved through different phases to improve funding and decision-making.
• “we’re trying a committee and a token holder vote that are independent separate like houses or whatever for the coming four years.” – Zooko Wilcox-O’Hearn
• Zcash’s funding model has been critical for its development.
• “I feel like it’s worked pretty well for zcash so far and in fact you’ve got the trump card to say like zcash probably wouldn’t be here in its current form unless we had that.” – Zooko Wilcox-O’Hearn
• The governance disputes in Zcash are tied to the increased importance of block rewards and development funds due to significant price action.
• “the fact that it’s both came downstream of the very incredible price action of zcash which increased the importance of governance over the block rewards and the lockbox.” – Zooko Wilcox-O’Hearn
• The developers of Zashi want to transition it from a nonprofit to a for-profit company to pursue capitalistic opportunities.
• “the developers of zashi wants to get it out of the foundation…turn it into a company because they want capitalistic startups.” – Zooko Wilcox-O’Hearn