#CryptoExplained: Sreeram Kannan And Soubhik Deb Believe the Outsourcing Of Trust Can Fundamentally Transform Society, Culture, And India!

Sreeram Kannan and Soubhik Deb are leading Eigenlayer’s innovative restaking protocol. Restaking is a new concept developed by Sreeram Kannan, and is currently spurring a new era of innovation on Ethereum infrastructure. Egenlayer raised a $50 million series A in February 2023. Sreeram also leads the Blockchain Lab at the University of Washington.

Ethereum is the second largest cryptocurrency by market cap, and possibly the largest ecosystem by total value locked. On September 15th, 2022 Ethereum transitioned to a Proof of Work consensus system, which many analogize as swapping a combustion engine with an electric engine while driving. With Restaking, Sreeram and his team will allow other services to effectively borrow trust from Ethereum’s proof of stake system to secure themselves.

The following is an edited version of our conversation. 

What got you excited about crypto?

Sreeram: In 2017-2018, I became interested in cryptocurrency due to my background in peer-to-peer systems. Initially, I was skeptical about the potential of Bitcoin and thought it might be just another speculative trend. However, after studying the concept for a few months, I realized that cryptocurrency offered a revolutionary way for large numbers of people to cooperate and coordinate without relying on trust. Trust is essential for cooperation, but if we can separate trust from the equation through cryptographic mechanisms, the possibilities for coordination expand immensely. This permissionless innovation and open collaboration enabled by blockchain technology allows for specialization, similar to how venture capital separates innovation and capital. By rethinking and rebuilding systems of trust intermediation, such as Wall Street, social media, and even companies themselves, we can create better solutions and transform various aspects of society.

The fundamental idea behind my interest in crypto is the ability for large-scale cooperation without relying on trust. Cryptocurrency allows us to abstract trust from the equation and create systems for coordination. This separation of trust and innovation is a significant shift, as it enables permissionless innovation and specialization. By leveraging blockchain technology, we can reimagine and rebuild various trust intermediaries, including financial institutions, social media platforms, and even traditional companies. This broader thesis suggests that by developing better tools for coordination, we have the potential to transform and improve many aspects of our society.

Soubhik: While working in the 5G telecommunications industry, I faced the challenges of dealing with bureaucratic processes and the need for permission from established companies to make any progress or propose new developments. This, coupled with the capital-intensive nature of deploying new technologies, led me to explore alternative avenues that offered easier and more accessible solutions. It was during this exploration that I discovered blockchain technology. Initially, I didn’t have a term for it, but I was drawn to the concept of permissionless innovation, which eliminates the need for incumbency and allows for the deployment of new technologies without unnecessary barriers. This aspect of blockchain fascinated me, as it provided the freedom to be anywhere in the world and deploy systems and contracts. Additionally, the realization that trusted intermediaries could be removed for digital goods, unlike physical goods, opened up a new realm of possibilities in the digital economy, where monitoring, allocation, and governance could be streamlined and enforced more efficiently. This realization further deepened my fascination and love for cryptocurrencies and blockchain technology.

How do you think crypto will evolve in India?

Sreeram: Permissionless innovation has transformed the concept of global creators by providing a trust framework through blockchain technology. This eliminates the need for a centralized trust authority and allows anyone with an Ethereum wallet to contribute and innovate on a global scale. The pseudonymous economy, enabled by blockchains, offers a liberating environment where discrimination becomes nearly impossible, as one’s identity is concealed, focusing solely on the value of their contributions. This has significant implications for India, as it unlocks opportunities for Indians to participate equally in the global economy without the need to leave their home country. With the increasing digitalization and access to cheap internet, talented individuals in India can leverage their software engineering skills and creativity to build new products and contribute from their local communities. India’s diverse culture and value systems can be effectively coordinated in this pseudonymous economic model, making it a natural fit for the country’s decentralized economy and fostering a thriving ecosystem of decentralized innovation.

Soubhik: With the availability of cheap internet, even in rural areas and smaller cities, individuals in India can now leverage their software engineering and crypto-related talents to build innovative products without the need to relocate. This eliminates the previous necessity of moving across the world to contribute significantly. The emergence of good internet services and the digital nature of products make it possible for Indians to make significant contributions from their own localities. India’s diverse culture and decentralized nature are well-suited for coordination in the pseudonymous economy, where technological anonymity facilitates collaboration and eliminates discrimination based on individual identities. This presents a promising opportunity for India to become a thriving decentralized economy, fostering innovation and equal participation on a global scale.

How do you think the ability for Indians to contribute globally without having to move away will affect India’s cultural unity, which was previously seen as essential for competing in the global economy?

Sreeram:The pseudonymous economy presents a particularly intriguing opportunity for India, given its diverse cultural fabric. In the past, India had to navigate the challenge of stitching together its cultural identity to compete in the global economy. However, with the advent of decentralized innovation and the ability to contribute from one’s own locality, Indians can now participate globally without needing to compromise their cultural values and practices. This shift eliminates the pressure to conform to a standardized culture or relocate to specific global hubs. Instead, it allows for a celebration of India’s rich cultural heritage and the preservation of its unique traditions. The pseudonymous economy empowers Indians to contribute on their own terms, fostering a more inclusive and diverse global ecosystem that appreciates and embraces India’s distinct cultural identities.

What are your thoughts on India’s tax and regulatory treatment of crypto?

Sreeram: From an external perspective, it appears that there is a lack of understanding regarding the true power and potential of permissionless systems with credible neutrality, particularly in the context of blockchain technology. Governments, including India, often focus on narrow aspects like cryptocurrency and fail to grasp the broader framework and platform that can enhance various forms of coordination. This issue is not exclusive to India, as even in places like Washington, DC, similar misconceptions prevail. It is crucial for leaders to gain a more comprehensive understanding of crypto beyond its association with non-state currencies like Bitcoin. Efforts to enlighten and educate policymakers about the broader possibilities and benefits of blockchain technology are essential for informed decision-making and effective governance.

Soubhik: It appears that there is a need for increased engagement between the crypto community and the Indian government. While initiatives to engage with lawmakers and provide feedback on policy frameworks exist in places like Washington, DC, a similar visible engagement with the Indian government seems to be lacking or not widely known. Establishing a more transparent and structured roadmap for such engagements would be highly beneficial, as it would facilitate greater understanding and exchange of information between the crypto community and the Indian government.

How can Indian innovators use Eigenlayer to their advantage?

Sreeram: There are two distinct layers where Indian innovators can make significant contributions in the crypto space. The first layer is the infrastructure layer, which can be likened to the early days of the internet in 1995. Just as building a product back then required creating a service stack, identity stack, payment stack, and more, the infrastructure layer in crypto offers opportunities to build specialized solutions that rely on Ethereum as a common trust source. This allows innovators to create new SaaS (Software-as-a-Service) solutions such as article builders, data storage solutions, comment review systems, secure multi-party setups, and authentication networks, among others. The potential for building in this layer is vast and opens up possibilities for Indian innovators to contribute significantly.

The second layer involves solving real customer problems, not only for customers in India but also for customers worldwide. With crypto adoption still in its early stages, there is ample room for innovation and product-market fit. These innovations do not need to emerge solely from Silicon Valley; they can originate from places like Chennai or Bengaluru. Indian innovators have already demonstrated their capabilities in both the infrastructure and application layers, with examples like Freshworks in the SaaS domain and various consumer applications across India. Overall, the current climate presents a favorable environment for Indian innovators to make their mark in the crypto market by contributing to infrastructure development and creating valuable applications that address emerging market needs.

Soubhik: Before the advent of the Eigen layer, developers could only build smart contracts on existing blockchains. However, if they wanted to create a protocol or system that couldn’t be implemented as a smart contract, they had to launch their own trust network. This process was challenging and required engaging with venture capitalists, tokenization, and significant effort. But with the Eigen layer, developers can access trust networks directly from Ethereum. They can simply purchase the necessary trust from the Ethereum market and deploy their new distributed systems from anywhere, including smaller cities in India. This unleashes a whole new realm of possibilities and opens up a Pandora’s box of innovative systems.

Sreeram: In the creator economy, one of the key challenges is intermediation, where creators often face limitations and revenue cuts from intermediaries. However, the Eigenlayer can enable the development of permissionless systems to address these issues. For instance, in the context of streaming platforms, a decentralized approach can be adopted, where anyone can serve as a streaming service but must stake or restate on a trusted layer. If they misbehave, they face penalties. This opens up opportunities to build the necessary infrastructure, such as atomic data exchange systems and decentralized marketplaces for selling creative data. NFTs can also play a role by representing streaming rights and ensuring proper payment and distribution. Building social networks and facilitating permissionless derivative creations are additional areas of interest, although the mechanics of determining relative value between original creations and derivatives remain an ongoing challenge.

The long-term goal is to create a media environment where people can freely generate derivatives and the value generated is distributed between the original creator and subsequent contributors. However, finding a robust solution for determining the relative value between the original and derivative works is still a work in progress. Nonetheless, this remains a significant focus for future development.

How can crypto and Eigenlayer help the creator economy?

Soubhik: One of the key features of being a creator, whether an artist or a technologist, is having control over the systems they develop and the revenue streams associated with them. In traditional platforms like YouTube, creators often don’t receive a fair share of the value generated by their content, as intermediaries take a significant proportion. However, in the world of crypto, creators have the opportunity to capture the value they create and use it to fuel further innovation. This sense of sovereignty, or control, over value capture is a powerful aspect of crypto. With the Eigen layer, this concept expands even further, providing creators with more avenues to exercise their sovereignty and fully benefit from their creations.

How do you see the crypto ecosystem evolving globally in the next 5 years? How can India take advantage of this?

Soubhik: Back in 2016, India had missed the 4G bus, we cannot afford to miss the opportunity to take lead in development of crypto technology.. Every technology has its potential for both good and bad outcomes, and India can demonstrate how crypto can be used for the proper allocation of digital goods and benefit society. To achieve this, India needs to invest more in startups and education, ensuring that learning is aligned with the digital economy and its convergence with AI. By integrating crypto-related concepts into college curricula and promoting a startup mindset, India can not only adopt new technologies but also become a leader in developing them. Investing in this digital future will be crucial for India to play a major role in shaping the 21st century as an Indian century.

Sreeram: In the next five years, the crypto ecosystem is expected to evolve significantly, with the possibility of witnessing the first product to achieve mass adoption. India has a unique opportunity to lead this adoption by directly leaping into the neutral platform of crypto, bypassing intermediated platforms. Entrepreneurs who carefully consider this opportunity can find areas where crypto solutions can have a transformative impact. For example, projects focused on getting rural Indian women involved in crypto, such as microcredit initiatives, can bring new forms of coordination and credit to underserved communities. The goal is to create a future where crypto adoption reaches unprecedented levels, with diverse participation and innovative use cases.

Overall, the potential for crypto in India is exciting, and there is a shared enthusiasm among the participants for the possibilities and impact it can bring to various sectors.