The Nexus Revolution, Part 1: The Technical Foundation Of The Nexus System With Colin Cantrell And Phillip Lee
Are you sick of living in a centralized world wherein the person in power siphons all the money, and all you get is a tiny portion of what you have mined? In the mining industry, there is a way that allows us to do service where everyone can benefit equally through programming the currency to distribute profits as you will through decentralization. In this episode, we dive even deeper into decentralization with Colin Cantrell, the founder of Nexus, and his associate, Phillip Lee. Together, they discuss the Nexus revolution and the technical foundation of its system. Tune in to this conversation and hear more from our guests as they explore the social implications of a decentralized world and a decentralized economy.
Listen to the podcast here
The Nexus Revolution, Part 1: The Technical Foundation Of The Nexus System With Colin Cantrell And Phillip Lee
Welcome to a very special and different edition of the show. We’re going to skip the normal interview style that I’ve been using for the last 300 episodes and do something completely different. The reason we’re going to be doing something completely different is that we have an opportunity to speak with some interesting folks who are at the cutting-edge or the creation of an entirely new structure when it comes to financial blockchain, cryptocurrency, and more, but we’re going to go beyond all of these concepts.
Over the course of this interview, you’re going to understand, like you never have before, why crypto is important. I don’t mean necessarily from a tokenized version of something or whether or not your Bitcoin goes up in value tomorrow. Those are fine but ultimately, what are the opportunities here with a clean slate to create almost a new civilization using the structure of blockchain? More importantly, the element of blockchain that makes this possible is decentralization.
There are very few decentralized coins. There’s Bitcoin. That’s the one I know about. There’s Nexus. The reason that we’re talking about decentralization is that we’re living in a world where governments appear to be interested in controlling everything. That’s not a political statement. That’s an observation. Look at different governments around the world. I’m not here to hold a political viewpoint. I’m here to bring you information about what’s going on in this world that can affect you and your business and, more importantly, help you grow.
Let’s get into it. Let me introduce my guests. I’m going to also share with you a little bit more about their mission as they will as well. Let’s start with the basics. We’re going to be speaking to the Founder of Nexus. His name is Colin Cantrell and his associate, Phil Lee. What these two guys have done over the course of the last several years is amazing.
If you’re watching the video, you will see Colin sitting out here in the woods, Phil sitting in his bedroom, and me sitting in my studio, but these guys did not have the traditional venture capital Silicon Valley structure to do all of this. They did it by themselves. I’m not saying they didn’t have any help, but once you understand what they have created and why I felt it was so important to have them on the show, you will get a much clearer idea. Welcome, Colin and Phil, to the show.
Thanks for having us.
It’s my pleasure. We had a little bit of a pre-discussion over messaging before we had this meeting and we have met before as well. This isn’t our first conversation, but this is going to be our first deep dive into the advantages and disadvantages of decentralization. Let me set the scene. Blockchain overcomes these disadvantages of the traditional currency model and even the traditional technology model, but it is decentralization that changes the game.
Without decentralization, it’s another elite with another billion-dollar company that has their finger on the switch and based on political pressure, may control things the way they are told to. These guys are not in that place. They don’t have that power. That’s what decentralization is about. Let’s start with you, Colin. Tell us a little bit about the origins here, how you came up with this, and how it has evolved. Give us some timelines and milestones. Let’s get started.
For me, this work goes back to 2010 when I started looking at how society was moving and realized, “I don’t think this is particularly sustainable.” I started doing research with high-voltage electrolysis, where you’re creating hydrogen and oxygen from gas. In the immediate term, it was to increase the gas mileage. I drive an old ‘65 Mustang. Fifty miles per gallon of gas was expensive. I was poor.
I started building the hydrogen boosters and getting my Mustang up to about 30 to 35 miles per gallon. That started this whole process of realizing, “We have all these problems. We have these big centralized power companies.” Everybody has heard the quote, “Power corrupts and absolute power corrupts absolutely.” That’s one of the fundamental premises of decentralization.Our financial systems have caused a lot more problems than they've solved. Click To Tweet
We’re able to take that power away and remove the concentration of power. I dabbled in the hydrogen. I was focusing on developing that into a new technology that could help us with a lot of our fossil fuel dependency issues and our energy dependency issues. You can use hydrogen to control your burn temperature with water vapor to run it into your house and other things like that.
I got into cryptocurrency in about 2013. Bitcoin was worth about $70 a Bitcoin. Sometimes you know. That’s pretty much what happened when I discovered it, “This is the solution that we have.” I have always been aware of the side of the financial systems and how our financial systems have caused a lot more problems than they have solved. Money is a technology. It’s a tool that’s meant to improve our lives but I’ve seen all this economic disparity in countries in South America or Africa.
They have fertile land but yet they’re still unable to grow food because of all these economic issues and issues with Monsanto. I’ll stay out of some of the complex problems, but the fundamental is that for us to have a highly-functioning society, we need to decentralize all of these things based on certain fundamental principles. One of which is Russell’s paradox if you are familiar with set theory.
It states that you can’t fit everything inside a unified set. Otherwise, you get these mathematical anomalies. In the same sense, trying to put everybody under this blanket legal system or a large blanket economic system causes somebody to always be losing out while someone else is gaining. This started development on May 5th of, 2014, improving the Bitcoin source code.
I started with Bitcoin to learn how it worked. Originally, the project was called Coinshield in those days because we were working on trying to help improve the image of the industry. As you’ve seen, there’s a lot of centralization being claimed decentralized. There are a lot of people that are siphoning up 100% of an economy. Developers own 90% of the currency. It’s completely unstable and unpractical magical-internet-money-type mentalities.
We wanted to take that, make it something real, and fix a lot of those cultural issues. We started on that. That developed a lot of the initial technology. Since then, it has been growing in scope. All these different pieces have connected together. That’s when Nexus found its name in 2015, realizing that this hydrogen research and alternative energy research I had been doing and then communication research all interwove into the same type of thing.
The blockchain became this technology that was able to augment and solve a lot of problems that we have had before, such as scientific papers. How do you review papers? How do you make sure information is sourced from the correct place? How do you know that these tomatoes came from this farm and were organically certified? All these things started to become solved with blockchain. The technology kept growing from there. I had this fundamental drive.
We’re decentralizing everything, but the more I’ve been getting to understand the existing technological infrastructure, the more I realize how centralized it all is, including the internet. This came down to the idea, “What if we could develop new communication technology? What if we could have our physical layer?” That’s a fundamental and important quality because if we want to have freedom of speech and be sovereign, we need to be able to communicate freely. That ties back into the name of Nexus. It means a connection or a series of connections linking two or more things.
Let me ask you a question because I want to cover a few of the things you mentioned. One of the things you mentioned was that you started with the Bitcoin code. You started tinkering with the code. I don’t know if anybody realizes it. Correct me if I’m wrong. There are about 30,000 nodes all over the world that must run the same code to agree on the calculation of a blockchain. In essence, that’s what Bitcoin is. There’s no single computer that can control that network. It’s all decentralized. Why didn’t you continue with the Bitcoin code? Why did you have to create something new that wasn’t Bitcoin?
There were a lot of fundamental architectural issues around studying Bitcoin. I started with Bitcoin because that’s how I learned how to program. I started at age eleven and read other people’s code, “This is how you do this.” When I got into Bitcoin in 2013, there were no tutorials, “This is how you build a cryptocurrency.” The only tutorial I had was Bitcoin.
I started with the early code base because I wanted to live in the thought of if Satoshi finished Bitcoin, what would it look like? Satoshi left Bitcoin after about a year. A lot of development was left. We could argue whether or not the Bitcoin development has gone in the direction it was intended, but I fundamentally found that there were too many issues for it to reach that threshold or promise of pure decentralization.
Architecturally, it takes a very detailed-oriented mindset to get every little thing because when you add this decentralized network, errors multiply. You could have one little bug on one computer in a client and that’s fine, but once you make this into a network, every little inefficiency you’ve made multiplies. The slowest computer slows down everything else.
It got to the point where I realized that there were too many issues. If Bitcoins are sent to you at the wrong address, they’re gone. I uninstalled the mobile law from my phone. The Bitcoins were gone. I forget my password for my wallet.debt. The Bitcoins are gone. Somebody gets my private key. My Bitcoins are gone. There are so many ways for Bitcoins to be gone in a lot of ways more than the way for them to not be gone.
That was one of the big issues. I realized that there’s this massive gap that people are never going to be able to bridge. What’s happening is that gap has been bridged with centralized services. People, to feel safer, are keeping the coins on exchanges, or mobile wallets are using these proxies. They have supplemented all these technological deficiencies with centralized technologies.
I wanted to see Satoshi’s vision fully realized. Satoshi’s original intent with the scaling of Bitcoin was based on Moore’s Law. What that means is every number of years, the number of transistors doubles. More transistors mean you have more bytes. A doubling would be a half-terabyte to one terabyte. Your hard drives get bigger. This is exponential growth. There’s geometric growth in hardware capacity.
Satoshi believed that growth in hardware capabilities would eventually lead to the point where sending a high-definition movie over the internet wouldn’t be a problem, but there were a lot of other issues that I discovered along the way that prevented that from happening. One of which is Moore’s Law is becoming saturated already. There’s this thing called quantum tunneling.
I’ll spare you too many details, but an electron should be here. It decides to pop up over here. It tunnels through barriers when it shouldn’t. That happens when the transistors get close together. If you’ve noticed, we’re already getting the processes over the last few years. They haven’t gone over four gigahertz. They have just increased the number of quartz because you’re already getting saturation of that quartz’s crystal as well.
We’re reaching an upper limit in computing. Even electricity itself has an upper limit of 300 gigahertz. Once you can go over 300 gigahertz, you’re an infrared light. We’re already running into a lot of these barriers. I realized that the technology of Bitcoin was deficient. A lot of the people that had been promoting their solutions did not seem ample to me.
Segregated Witness is a good intent, but it removes the counting of the signature against the block size, which is a pseudo increase in block size. The people were correct too. You can’t increase this block size because you’re not going to be able to process that block. You have one signature per input. Each one of those needs to be signed and verified.
Colin, let me interrupt again here. I want to unpack a little bit about what you said. You mentioned Moore’s Law. Moore’s Law comes from the semiconductor industry. I was in the semiconductor industry throughout the ’70s and the ’80s. What it means is that Gordon Moore, who worked at the time at Intel and was the president of Intel, said, “We could double the capacity of this integrated circus that we create every eighteen months.”If we want to have freedom of speech and be sovereign, we need to be able to communicate freely. Click To Tweet
He also said, “We don’t know how long we can do that for. Eventually, we will reach the limits of science and physics when it comes to doing that.” That’s what you explained about electron tunneling between transistors. I want to be clear that we’re not talking about that, but that is an interesting analogy to some of the things that you said. You had this realization. What you’re saying is that Bitcoin is broken because of the things you said. You could lose your coins. Someone could steal your coins.
It’s not done. It wasn’t finished. To add a little weight to that, if anybody noticed Bitcoin wallets, the version always starts with a zero. That means beta. You remove that zero when you move out of beta at least by conventional software versioning. The very first version of Bitcoin Satoshi released releases an alpha. It’s pre-beta even. Even the versioning of Bitcoin is indicating that it’s still a beta.
You come to this fork in the road. The fork in the road is, “I could fix Bitcoin. I could attempt to suggest to the community that these are changes that would benefit everybody.” I imagine that you must have at one point tried something like that until, eventually, you decided it’s not somehow feasible or worth doing. Tell us about that break from wanting to evolve Bitcoin to abandoning it and creating something new.
I wouldn’t say we have ever abandoned Bitcoin. I always say, “Respect your roots.” If it wasn’t for Bitcoin, none of us would be here. I didn’t invent blockchain. Satoshi took together cipher blockchaining, B-money, and then hashcash. He combined together these three separate protocols and architectures to create Bitcoin. Without Bitcoin, none of us would be here and now the problems.
You don’t know what you don’t know until it’s put out. Those are seeds to Nexus that I can’t ever deny. We never necessarily felt like, “I’m going to go contribute to the Bitcoin source code. I want to get the Bitcoin developers. I want to be a Bitcoin developer.” It never went down that road. One of our advisors, Jeff Garzik, was one of the original Bitcoin developers. I’ve become pretty good friends with him.
I’ve had a connection with the Bitcoin developers, but our strategy for improving Bitcoin was demonstrating new technology on a chain, Nexus, that can eventually be used for Bitcoin as well. The upgraded path and the technology we have developed from the Bitcoin source can be implemented over Bitcoin, such as the constant-time database that I built. I built a database that doesn’t slow down as you add more data to it.
Think about it as a room where you keep adding more luggage or more books in the library, but no matter how many books are in that library, you always know exactly how many steps to get to each book. You always know exactly where each one is. That database could be dropped in right over Bitcoin. Bitcoin, for instance, takes about ten minutes to boot up sometimes, depending on the chain and the speed of your disk.
Nexus boots instantly because of this database technology. It reduces your blockchain size by about 30% because you don’t need to store all these keys on the disc because you use deterministic randomness. You’re hashing all of it with a HashMap and bloom filters. Pardon the technicalities. That’s too technical. In essence, what it means is that the database doesn’t slow down as the dataset grows.
What Bitcoin uses now is called LevelDB developed by Google. It slows down logarithmically, which means you add more keys. It takes longer to sort through all the keys. We have developed technology that can be used for Bitcoin. That’s one of our hopes that Bitcoin, at some point in the future, will see the value in that and also see the proven track record.
This has been on a live network running for eight years. They know that it’s got some value to it. That gives them an option if they choose to take it. One thing that we’re going to do in the future is to release our version of Bitcoin core with our lower-level database. That will demonstrate to people, “This is how Nexus technology benefits Bitcoin specifically.”
You can download a Bitcoin node. It’s going to sink way faster. It’s not going to take as long to process your transactions. It’s going to boot up instantly. You’re going to save 30% of your data space. With Bitcoin being 300 gigabytes, that saves you 100 gigabytes of disc space. We feel like there’s a need for a virtuous cycle. There are so many crypto projects always looking to replace Bitcoin.
Let’s be fair here. They’re not looking to replace Bitcoin. My understanding is that you’re looking to supplement Bitcoin with lightning networks and ways. It takes ten minutes to create a block. Those ten minutes won’t necessarily speed up because there are more transactions even though computers are getting faster, but then the code gets heavier at the same time. The databases get larger as you said before but let’s move a little bit above the surface of this. Is Nexus a Bitcoin project? Is Nexus a unique and individual decentralized cryptocurrency?
It’s a unique and individual decentralized cryptocurrency. It was launched. The very first block was produced on September 23rd, 2014. We’re not only an independent blockchain, but we’re an independent blockchain that has survived for eight years, which is saying a lot being proof-of-work and proof-of-stake. One of the unique challenges of being an altcoin is the mining industry developed around Bitcoin. At first, there were only CPU miners.
People like Laszlo, the 10,000 Bitcoin pizza guy, developed GPU miners. That’s 10,000 Bitcoins. As that evolved, more people were able to start GPU mining. That grew. They started building up their mining farms and so on, but when Bitcoin launched, there wasn’t any infrastructure for the money. When you came in 2014, five years after Bitcoin launched, there were people that have been mining Bitcoin for five years. They have big GPU farms. They have all this technology and infrastructure that wasn’t there before. It became a lot easier for them to try to attack the network.
We had to think very sophisticatedly about how we developed our checkpointing system and multiple consensus channels to protect ourselves from this, prime number-searching algorithms, and other things. It adds a lot of weight and merit to our chain. We’re battle-proven. We have been around for eight years. We have been running our chain. We have been developing new technology on the net in the wild. It’s easy to conceptualize something in your mind and develop it. It worked in the lab.
You run into so many things you didn’t anticipate when you put it out into the wild. That’s why I feel like it’s very important to incrementally release those things. That’s our strategy and what we have been doing for Nexus for about eight years. There are incremental improvements bit by bit in the security. It’s our independent blockchain with our technology that also can be used to help Bitcoin and others.
That makes a lot of sense. You said it’s decentralized. How is it controlled? Where are the nodes that resolve Nexus blockchain? When Nexus coin is somehow embedded in a transaction or traded as a cryptocurrency, where does it get resolved? How many nodes are there for Nexus?
I get about 1 to 2 connections per second. That means 1 to 2 nodes are generally coming on and offline per second on my logs. The last assessment I did is the nodes that have been running for about a year. I have about 40,000 addresses I’ve seen, but that’s a rough number because you don’t know if those are VPNs or proxies. If I run my node for a day and wipe my address database, it cedes addresses when a new node comes online. I see at least a few thousand active new nodes in a day. I estimate anywhere from 5,000 to 10,000 active nodes that come on and offline.
There are about 500 to 1,000 that are probably online all the time. I’m not sure of the number of miners. The mining difficulty is fairly high. There are too many channels and one proof-of-stake channel. They all check and balance each other. It’s like checking and balancing power. If one channel tries to monopolize the block production, it can easily get shut down by any of the other two channels. It checks and balances the consensus. Our hash channel is using 1024-bit. That’s mainly FPGAs now. It’s probably going to go to 86. That’s intended to be the ASIC FPGA channel.
Field Programmable Gate Arrays are not important to my readers because they’re not going to be doing this themselves. They want to understand the value here. Here’s what we’re going to do. There are 6,000-plus altcoins or cryptocurrencies available. I’m going to ask Phil. Why would someone choose Nexus over any one of the other 6,000 cryptocurrencies?The real problem is centralization. Click To Tweet
A simple answer would be is, as far as I can tell, it’s the most decentralized. I’ve been listening to Colin do interviews for years. It has become very apparent to me that he’s unwilling to compromise when it comes to decentralization. Pretty much all of these other projects to become more scalable become more centralized. A lot of people blame the problems of society on economic and political structures like capitalism, communism, and socialism, but the real problem is centralization.
I’m focused on two ways to decentralize society. We live in a physical world and a digital world. To decentralize a physical world, we have to start switching over to small communities. If you have a network of small communities that are all governed independently, that’s decentralized government. If they all grow their food, that’s decentralized agriculture. If we cover the whole planet in millions of small communities, we pretty much make those global corporations collectively known as Big Food and Big Agriculture.
They will pretty much become obsolete. If everyone eats locally-grown organic foods, they will become healthy and less reliant on pharmaceuticals. Big Pharma will become Little Pharma. That’s how to decentralize the physical world. We have the digital world. Blockchain is how you decentralize the digital world. Nexus is the most decentralized of all the blockchains.
How does Nexus solve the problems Colin mentioned earlier about losing your tokens, having them stolen, or having them held in a centralized wallet that can be seized or controlled? How does Nexus fix that?
It’s the Signature Chains. I still don’t understand why it hasn’t caught on in terms of popularity. The Signature Chains are an amazing technology. You no longer need hardware wallets. You just need to memorize your login passcode. That’s it. Your private keys are in your brain. Why would you want to carry around a physical hard drive to store your digital coins? It makes no sense. The Signature Chain will be used for so much more than to hold your coins. It will be your way of accessing a decentralized internet in the future. Colin, talk more about what the Signature Chain is.
The address of your Bitcoin is a hash of a public key. That means you have to have that private key. That’s what your wallet.data is when you’re storing that. You have your seed phrase. If you have a Bitcoin wallet, that generates your keys. What this does is it has redundancy. It decouples your key from your actual account identity and changes your key every transaction. For one, that protects against quantum computers. Anytime you reuse a key, depending on how well it’s designed, you can leak key information. You weaken your key over time.
Another one is that there’s a conditional contract built into the protocol. When you send your coins, you can set an expiration on that to say, “If this isn’t claimed within one week of me sending it, then I can reverse that transaction back to me.” The coins come back to you if they never reach the recipient. That’s a big design issue that we added to it. Another one is no storage on the local device. You can log into your Sigchain at any place and on any computer.
That decouples this hardware. The idea of my computer is my physical device. It makes your computer more of this mathematical hyperspace. That sets the stage for the operating system we’re developing and adding identification onto the internet. That also is what we use for a proof-of-stake system to build trust. Trust is a way that you mathematically verify how trustworthy someone is to the network. That’s part of what gives them voting weight in it.
The Signature Chains themselves make it familiar, too, because a lot of people are used to going to their online bank account. They type in their user name and their password. That’s something familiar to people. This technology can be familiar if we designed it to be so. That’s why we have developed this authentication system in that way. It also functions to provide authentication for all web applications. You can have this remote login system and a login with Nexus button that will allow you to use your Sigchain to authenticate it using public key cryptography under the hood.
It’s way more secure than your conventional authentication systems. You don’t have a database exposed with password hashes. Nobody types their credentials into any remote site other than their mobile wallet, so you can’t get fished. Fishing is where somebody makes a fake login page, you type in your password on it, and then they get your password. That’s the number one way that people get hacked. These Signature Chains augment that and provide this utility that is familiar to people.
It feels like you’re logging into your online bank, but it provides all these other functions. One other thing that we did in 2021 is we compiled our Nexus node to run on your mobile phone. As far as we’re aware, that’s the first that we have seen that happen. Most mobile wallets talk to a proxy that talks to the blockchain. Your node is running a blockchain on it, but it only takes 200 megabytes of disc space rather than 200 gigabytes like you see with other blockchains.
Let me ask you a question here. The way it works now is that if anyone reading has cryptocurrency, you can go to your login, such as Coinbase, for example, and type in your username and password. There on your screen, you hold up your phone. You can see your coins or whatever value those coins are worth at that moment. Theoretically, Coinbase is a centralized organization.
That means they have a building, a CEO, and the IRS that controls them more or less, but in your world with Nexus and even with Bitcoin, there is no centralization, so there is no way to know who owns what unless you are aware of their wallet address. That is how the FBI and the CIA hunt down pirates by mapping their wallet addresses to IP addresses and then zeroing in on physical locations. How is Nexus better than that? Ultimately, your information must be stored on a server somewhere. If it’s not Coinbase, what is it? Is it not the Nexus Corporation’s server? I assume it’s a decentralized node on a decentralized network.
The way it works is you generate your keys with your username, password, and pin. That gives you access to your Sigchain. Your Sigchain exists on all of the people running a node with a copy of the blockchain. As long as somebody is running one node with the Nexus blockchain on it, the blockchain is there. We calculated it. There are about 1,000 daily active nodes and probably 5,000 or 10,000 weekly active nodes. That’s a lot of redundancy.
You would have to shut down and turn off all of those computers to make it go away. It was interesting writing this decentralized authentication system, too, because what happens if you’re trying to hack into someone’s account? On a centralized system, you do the password wrong three times. They said, “You’re locked out of your account.” You could do that in a centralized way very easily because you’re accessing the server, but we had to do it with cryptography.
We use this memory password-hashing algorithm called Argon2. That takes about one second to generate a key. It requires a lot of memory rather than a processor. All those fancy Bitcoin miner computers, GPS, or anything have no benefit over a CPU. You have this type of brute force protection mathematically and cryptographically. Think of it as you own the space in math. Your keys or your username, password, and pin are the key to unlocking your space. Within your space, you will have your assets, tokens, and coins.
When we get to the operating system, which we will probably talk about on another part, that will be your computer as well so that you will no longer have this binding, “I have to back up my computer to iCloud. I have to do this.” Your computer will exist in this network of all these other people. You will be able to form your networks with your friends if you want or anything like that. The idea is to decouple the hardware from the software so that the software can exist independently of the hardware.
Colin, if someone steals my phone on the subway and they have figured out my password and get into my phone, can they steal my crypto if it’s Nexus?
If they have your password, they won’t have your pin. Based on that, they would have to have your pin number to gain access to it. If you lost your phone, what you would most likely do when you got home is you would go and enter your recovery phrase on your desktop wallet and change your password. Even if your account was compromised, you can do that immediately.
If you’re staking your coins, let’s say the majority of your coins are in stake, which means they’re locked up. You can’t spend them. That’s how you build trust. You earn a return or a reward based on how much trust you have. You start with 0.5% and get up to 3% after one year. That creates an incentive for people to build up trust. That gives you voting weight. That locks your coins in there. If someone hacked into your account and your coins were locked in stake, they wouldn’t be able to unstake the Sigchain.No one in power will ever promote decentralization because that would mean they would lose their power. Click To Tweet
To boil this down a little bit, staking is like if you went up to your buddy who’s a good poker player and said, “I’m going to give you $10,000. I want you to play poker with $10,000. If you win, we will split the winnings.” I’ve staked this guy. In the crypto world, staking means, “I’m going to give you my cryptocurrency and you’re going to go and use it to do whatever you’re going to do, but I’m going to share the profits of the transaction that you are sticking with my cryptocurrency.” Is that an accurate description?
No. That’s how it works in the legacy financial systems. You take your money and put it in the bank. You’re loaning the bank your money, and they pay you interest. That’s why I said reward and not interest because it’s not debt-based. It’s equity-based. You’re locking your coins up in a register no one else can access. No one can spend it. No one can do anything. As soon as you pull your coins out of it, you wipe out your trust. Think of it as proof that you have a certain amount of Nexus at stake.
You’re using that to verify transactions for other people. You get paid by the network, not by any one individual. You get paid by the network to produce those blocks. That also checks and balances the miners. As we know with Bitcoin, if a mining pool gets over 51% of the hash power, the network can be compromised. With Nexus, you have to have 51% of two of the mining channels and 51% of the trust of the stake channel to try to monopolize block production.
Readers, if you’re following this, you’re doing better than me, but I’m getting the gist of it here. I’ve had conversations with brilliant people before. When they get into their world, they speak their language and their speed. That’s part of what’s going on. I’m doing my best to act as an interpreter best as I can. I hope that you’re getting value from so far what we’re talking about. We’ve got a lot more to go.
What we have done so far, and correct me if I’m wrong, is we have laid a technical foundation for the Nexus coin or the Nexus system, why it’s different from Bitcoin, and why it’s different from other cryptos out there. The primary difference is that it’s an evolution of Bitcoin’s idea, but at the same time, it’s a decentralized coin. The decentralization is even more powerful. When I asked Phil to describe it, he started talking about something that I’ve never heard anybody else in the crypto world talk about. That is the language of decentralizing society.
This is part of why I became interested in this, not because I’m interested in withdrawing from society. It’s quite the opposite. I’m interested in finding a way to return freedom to people to do what they want the way they want without harming others. That’s what attracted me to this Nexus project. I believe that Nexus has this potential. Phil, if you wouldn’t mind, I would like you to elaborate and get more granular about how Nexus plays into this bigger picture. Instead of going right into decentralized farming, Big Pharma, and all this other stuff, take me down the pathway.
Most people are intimidated by blockchain. They think it’s only for coders. Personally, I don’t know. I’m not a coder. I trust Colin with the technical details. I know that he wouldn’t compromise when it comes to decentralization. I try to simplify things as much as I can. When I explain to people how they can use Nexus or blockchain in general, I would ask them, “How would you use the internet?” For instance, what do we do on the internet? We do a lot of shopping. Most people use Amazon.
If we had a decentralized version of Amazon, it could be distributed to the sellers instead of all that money flowing to Jeff Bezos. If we had a decentralized version of Uber, all that money that goes to the CEO of Uber would go to the drivers. If you had a decentralized version of Facebook, all that money going to Mark Zuckerberg would go to the users, or in a decentralized version of Google, instead of all our data being tracked, we would be able to maintain privacy.
What you’re saying is that with a Nexus-type currency, we can program the currency to distribute profits the way we say. If I’m running a business and I charge a Nexus coin for my services, 20% of that coin could go into a pool for my retirement funds, 20% could go into paying my team, and 20% could go back to my existing customers who may have referred other customers to me. Are we getting to that level of granularity with programming now?
It could be programmed however people want it to be programmed. The great thing about decentralization is people will migrate to do the service that’s the most beneficial to everyone. It will create a more equitable system. We can spread the wealth and move towards a world of abundance because we can’t have abundance if all our money is being siphoned towards the top 0.01% of the world.
Those people are not necessarily that interested in changing the way things work. Let’s call that an uphill battle, but this is not a battle that will be fought by the oligarchs or by the billionaires. This is for the people. This, again, is what caught my attention here. Where you’re saying is that if we were to choose to create a Nexus-based economy, then we could bypass the US dollar and the current American or any country’s system of exchange. The only problem I see with that is that we might have some guys in black suits and sunglasses knocking on our door pretty quickly. How do we get around that?
Thinking about decentralization, no one in power is ever going to promote decentralization because that would mean they would lose their power. It has to come from the people like you or me. That’s why I volunteered as an ambassador for Nexus. I’m here to teach people about its potential. Anyone is welcome to join the Nexus DAO that I’m part of. They can become an ambassador as well. People have to take an active role. They can’t sit back and wait for someone else to save them. Nexus is about empowering people to take action and be more responsible for the future.
Once again, there has got to be a portal to the real world or fiat. If I have a business and I’m using Nexus as my currency and I have the Nexus system set up so that I’m bypassing fiat, I still can’t go into the grocery store and buy a cantaloupe with the Nexus. I need at some point to build a pathway from my crypto exchange or my cryptocurrency wallet to a fiat wallet. How does that work? Is that part of what you’ve already designed?
For now, we still have to go through exchanges for the most part. There are some services that allow you to buy directly with a credit card, like Routelay. There are swaps that don’t require any KYC. If you have other cryptos, you can, for instance, swap your Bitcoins for Nexus and back. That’s a problem switching from fiat to crypto. We have to come up with more creative ways of overcoming this problem. Ideally, if we can also have more people accept Nexus, then we don’t need to.
You’re talking about the old way and the new way but there has to be a bridge between them. We haven’t even discussed the value of the coin at all yet. Maybe we will save that for the next episode. What I’m trying to understand here is that if this is truly to be a viable currency and a viable trust-based system of operating a society, then it needs to be legal. Otherwise, you can’t fight people with guns all the time and expect it and expect to win. You can’t expect your ambassadors or your customers to either. How does that work?
As far as legality, are you speaking in reference to securities laws and things such as that?
If I buy a Nexus token for $1 and I sell it for $2, I owe Capital Gains Tax on the gain from the difference between what I bought it for and what I sold it for.
That’s something that’s going to be a part of the way we have to operate. It was in 2013 that the IRS released tax guidance. I came in before there was any legal standing on what blockchain represented. They tax it as property, but they regulate it as a currency. A lot of the centralized projects that you mentioned are securities because you have the Howey Test.
Nexus is sufficiently decentralized that we’re not as a security. We have plenty of legal to present and show that because we don’t have any control of the issuance. It was mined into existence like Bitcoin. The SEC made a ruling that even Ethereum that did do an initial coin offering is not a security because they’re sufficiently decentralized. Decentralization is immunity in the legal system.
The legal system conventionally is built off of authority and accountability. Who has authority is accountable for that? It makes sense, but ultimately, the CEO is always liable for what the people do in his company. He has to exercise some level of control to make sure that everything is done correctly.Nexus is about empowering people to take action and be more responsible for the future. Click To Tweet
With Nexus, it’s less focused on one organization producing it. It’s a decentralized bottom-up structure where everybody contributes and gets involved. The currency isn’t emitted by any central authority. I don’t have control over that. I founded Nexus. Everybody voted on the name of the fundamental unit. Phil is like, “We voted against your will.” I was like, “It’s good. This is what we want,” which is good. That’s what it’s meant to be.
It censors no “Authority.” There’s no accountable party. I’m a software developer. I develop software that people utilize and install. That’s the virtuous cycle that’s created. People go and start promoting it. As far as creating that bridge, he brought up an important point. This is something that a lot of projects miss. How do you connect this with the real world?
You have this mutable system that tracks information and keeps time, but that’s immutable. Look at Ethereum. You have the DAO. $100 million immutably has gone. You have immutable bugs and all these issues with connecting it to the world. How is this practically going to affect me? One way that’s done is by getting people to accept Nexus.
We were at a festival doing a booth there. People were buying and selling barbecues with Nexus. There’s the person that works on my car. I pay him in Nexus. I have other people that I can pay in Nexus. You build these little micro-economies. We have other methods that we’re working on as far as geospatial contracts. You could create an affiliate program where somebody, let’s say, in Venezuela.
A thousand Nexus goes into Venezuela. For every ten wallet installs in a mobile wallet, you earn one Nexus with your affiliate link. These people start doing that. If you get a restaurant to accept Nexus, then it’s 100 Nexus. You go through the whole process. I earned 50 Nexus, I get a restaurant, and then I earn another 100 Nexus. What am I going to do with that Nexus? I’m going to go spend that at the restaurant. The restaurant is going to start earning money that they didn’t have before.
You’re able to inject this value into economically deprived areas while you’re building adoption of the technology. Fiat on and off ramps are important, but I see fiat as an unsustainable currency system. Conventionally, fiat currencies only last about 27 years. That’s on average. When you print money, supply and demand, this is going to erode the value of the currency.
If you keep printing, you get into a hyperinflation cycle. We’re focused primarily on the real world. One of the most important things we can do is agriculture. This is something Phil and I have been working on a lot. It’s building these tokenization economies and decentralized exchange mechanisms. I could have a farm or a little garden at my house. I grow too many tomatoes this year but I need some eggs.
I can put my tomatoes for sale. Somebody can buy those tomatoes and pick them up. I could go look for eggs in this market. You create this order matching system where you can identify where certain produce is in a decentralized fashion, but then you get this byproduct where these tokens show where the food was grown and the supply chains came from. You get the supply chain tracking on top of that.
That’s where we’re focusing primarily as far as making that connection. It’s through food because we’re seeing increasing food shortages, manufacturing capacity reduced, transportation capacity reduced, and farms. From what I understand, 30% of all the tractors are unusable in the States because of diesel costs and parts. People can’t get parts for the tractor. They’re having to pull parts off of old trackers and stuff.
This will create a self-sustaining economy as more localized. It’s 100 or 200 people to be fully self-sustaining. You get 100 people together in close proximity. Usually, with about 100 to 200 people, you have enough production of different things to have a pretty well-functioning society. The other side of it, too, is a little non-sequitur, but it’s relevant to everything. You have a jar of jelly beans.
Mitch, guess how many jelly beans are in this jar? You put your number in. Phil, guess how many? We pass this jar around. When you get to about 100 people, if you average everyone’s guess, it becomes within 1% accurate. What that means is that all of us together have different sides of these perspectives. I can go look at a tree and see one side of it, but I have to move to the other side of the tree to see the other perspectives.
These decentralized systems also help us focus our energies together. That’s what creates a truly decentralized system and a network effect. It’s called Metcalfe’s Law, which says that the value of a telecommunication system is proportional to the square of the participants, which means decentralized systems and network effects multiply value exponentially.
What are the biggest companies in the world? They’re mostly telecommunication companies or they’re associated through telecommunication. Carlos Slim was the richest man in the world for a period because he gained control over the telecommunication system in Mexico. Telecommunication systems exponentially multiply value. You can see this very simply with social media.
Let’s say we have a social media network with two people on it. You can only have so many conversations. We add Phil in there. Phil and I can talk or you and Phil can talk. We have that many more connections. You add more people. There are so many more possible connections that can be had. That’s how this value could be derived.
We produce this technology that helps incentivize people. It also comes through new social architectures because down the line of all this blockchain cut back to the original, “How did you start with the timeline?” It came to a point where I realized we’re running outdated social architectures. We have CEOs and C-Suites. They’re all spiders. You have democracies that are still pseudo-decentralized but you’re still electing a king. That was a big thing.
When Phil talked about the Nexus DAO, that’s what it is. It’s a new social architecture where it doesn’t require a central leader. It’s designed after a starfish. There’s a book called The Starfish and the Spider. If you’re interested in reading it, I would highly recommend it. Conventional corporate structures are spiders. They have a head, which is the CEO and the board. They have the legs that are the departments.
If you chop off a leg, the spider can’t walk. If you chop off the head, it’s dead. On the other hand, if you chop the starfish in half, you end up with two starfishes. If you chop an arm off the starfish, it walks off and forms a new starfish. They realized this when there was a spiky starfish invasion. It was in Australia. They went and chopped all the starfishes in half with batons. The starfish population doubled. Our social architecture is designed on that. That comes back to answer your question too.
How do you protect against those who will not leave us alone that are against this step of technology proliferating? You make it purely decentralized and create these social organizations that are like starfishes. Chop the starfish in half. You’ve got two starfishes. It’s making these strong and resilient social systems that also focus everybody’s energy together according to Metcalfe’s Law so that we can demonstrate an exponential proliferation of value rather than a linear proliferation of value.
We’re at a point now where we’re going to be ending this episode. This has been part one, readers. I hope you’ve enjoyed this. In part two, we’re going to explore the social implications of a decentralized world and a decentralized economy and maybe even the blueprint on how to do it. If you enjoyed this episode, tune in. The next one should be even better.
Thank you so much for your time. I look forward to part two of this, where we will dive deep. Believe me, we’re going down the rabbit hole here. We’re talking about the future, but more importantly, there are smart people out there. Two of them are on this episode. You can learn how the future will be created by the people who are creating it. Thank you for reading. We will chat again soon.
About Phillip Lee
Phillip Lee, registered nurse, attorney and founder of Project Phoenix, seeks to add the human component to Nexus blockchain technology. Volunteers as a Nexus Ambassador, constantly searching for ways to incorporate Nexus into everyday life in a way that helps the community, in order to gain trust that will lead to worldwide adoption. He believes that a system which incentivizes cooperation over competition is the way of the new world.
About Colin Cantrell
Colin Cantrell is a software architect, engineer, musician and father, who started programming at the age of 11. He has experience in network development, social systems, security, decentralized networks, cryptography, quantum computing, and is a contributor to the IETF.
Love the show? Subscribe, rate, review, and share!
Join Your First Thousand Clients Community today: