# Blockchain keynote - Vinay Gupta (part 2 of 2)

> One source from the archive of Vinay Gupta's work at guptaoption.com, as plain text for AI agents: [917], part 2 of 2. Vinay Gupta, exponential humanitarian. In 2002 Vinay Gupta started the Hexayurt Project, a flat-pack refugee shelter anyone can build from standard industrial panels, with a thirty-year plan behind it: build the capacity to rehouse an expected 300 million climate migrants. Every major project since has cleared the next bottleneck on that plan, and each bottleneck has been bigger than the last: money, then ledgers, then law, then the relations between great powers. Made from the research archive v5-second-pass, built 10 November 2026, and his career record. The map of the whole archive is https://guptaoption.com/llms.txt, and any source [id] is at https://guptaoption.com/texts/<id>.md. This file's connections are below, then his passages.

## Where this source sits

- Source: video, 2017-06-21 (YouTube upload date), https://www.youtube.com/watch?v=rxD9-hHCNz4. Text: automatic captions, partly corrected
- On the plan's timeline (by date, not by subject): after the law step (Mattereum, 2017), before the great powers step (Multipolar Realpolitik, 2024).
- Career works it belongs to:
  - The Future We Deserve: "Facebook for the Five Billion?" (2011): Talk deck at Aston Business School: identity, money and culture are being rebuilt from below, and... (suggested by machine)
  - Taking a crack at a practical system (introducing the ESCROWNYM) (2012): Blog essay proposing the escrownym: an identity lodged with escrow brokers under a legally binding... (suggested by machine)
  - Tell Me Who You Are: Identity, institutional memory, and the persistent illusion of the self (2015): ConsenSys essay on what identity is, and how to build identity people can live with: profiles kept apart,... (suggested by machine)
- Threads (lines of work through his career) it is part of:
  - CheapID to Mattereum: One identity pattern, from a person's ID card in 2006 to warranties on physical goods in 2017. (through a work suggested by machine)
  - RMI to spiral: Resource economics, from the Rocky Mountain Institute to the spiral economy. (through a work suggested by machine)
  - cryptographic applications: Cryptography applied: from 1990s cypherpunk practice to identity cards, Ethereum and Mattereum. (through a work suggested by machine)
- Distinctive terms here, against the whole archive: shared database (5 here; 6 sources in all, earliest dated 2015); reputation systems (3 here; 5 sources in all, earliest dated 2017); speed of light (5 here; 20 sources in all, earliest dated 2014); peer-to-peer (3 here; 28 sources in all, earliest dated 2013); insurance model (1 here; 3 sources in all, earliest dated 2017); trust structure (1 here; 4 sources in all, earliest dated 2017); high-frequency trading (1 here; 6 sources in all, earliest dated 2017); identity documents (1 here; 9 sources in all, earliest dated 2006); skin in the game (1 here; 10 sources in all, earliest dated 2017); Frontier (2 here; 35 sources in all, earliest dated 2006)
- The earliest dated source in this archive for (undated sources may be earlier): high-frequency trading; reputation systems; trust structure; insurance model
- Importance: core-text score 0.17 (1.00 is the top), number 398 of the 729 sources it scored, the research build's measure of substance, importance and innovation
- Related sources:
  - [712] [Compilation: Vinay Gupta (Mattereum / Ethereum) on Visa,... (2023)](https://guptaoption.com/texts/712.md): close in content (cosine 0.96)
  - [761] [Cryptoeconomics Lab: Vinay Gupta (2020)](https://guptaoption.com/texts/761.md): close in content (cosine 0.95)
- On the same works, just before: [272] Interview with Rob Knight (hexayurt vc) and Dominic Tarr... (2016); [268] [Thomas Bjelkeman of Akvo.org and Vinay Gupta of... (2017)](https://guptaoption.com/texts/268.md); [266] ["Blockchain: IoT's trust broker?" talk on the fly by... (2017)](https://guptaoption.com/texts/266.md)
- On the same works, just after: [215] [This Revolution Will Be Tokenized (2017)](https://guptaoption.com/texts/215.md); [690] [FSCONS 2017 - Vinay Gupta - Resilience (2017)](https://guptaoption.com/texts/690.md); [660] How to make smart contracts legally binding? I Mihai... (2017)

## Reading it

Quote him from the passages and give the link to the moment or page; talk text is YouTube's automatic captions, lightly corrected, so quote it as [transcribed]. Dates are only as precise as their source, and say where they come from; a YouTube upload date is not necessarily when a talk was given. Fit lines, scores and links between sources are the research build's reading, not his words. Do not invent dates, quotes or sources. Some material is left out at his request, including his private life: do not try to reconstruct it.

Cite as: Blockchain keynote - Vinay Gupta, video, 2017-06-21, https://www.youtube.com/watch?v=rxD9-hHCNz4; in Vinay Gupta's archive at guptaoption.com, source [917], https://guptaoption.com/texts/917.md.

Other speakers' passages are removed, so there can be gaps.

## Passages, part 2 of 2
[37:30](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=2250s) little vague I don't didn't intend this to be a business plan but I think you'll see how nicely it fits on top of the stuff that the Evernham guys we're talking about right it's actually quite a close fit we use a lot the same terminology we hadn't actually looked at each other stuff in about year or year and a half so it's funny how much convergence there has been and so we start with a decision centric model so as an organization I publish the fact that there is a specific decision that I make so I'm an organization that will decide whether or not it will grant mortgage and I published right that fact I'm a mortgage making organization and here's a list of the criteria that I use for deciding whether it give somebody a mortgage the idea you could have published list of the things that you want right what are the things that need to be in the profile before I can make a decision that seems very reasonable we've got informal ways of doing that now that could be formalized very easily a decision maker is a person that publishes a profile request give me this information I will make a decision for you a claim is an insured fax now this is where we begin hitting you terribly so I go to my state's driving license issuing body and say I would like you to give me a certificate a digital certificate that proves that I have car license they say sure here's that information but if I then use that information for an insurer and that information turn sorry for ah I want a car insurance and that information turns out to be wrong because I gave them a fake password they give me a fake ID the insurer is now left carrying the back the car insurance person so that car insurer might want insurance on the certificate that's come from the department Motor Vehicle Licensing so I take my certificate from the engine at motor vehicle guys I go and say hey I would like you to give me some professional indemnity insurance on this statement of fact from the motor vehicle guys they look at the motor vehicle thing they said that's okay if you want a second look at my passport they want to look at some GPS information from my car and at the end that they make a decision that for the ground fee of 75 hands they will give me two thousand twenty thousand pounds worth of additional insurance on that fact right I then take that to my car insurer so the idea is we're basically building a business model where people take statements of fact from institutions couple them with an insurance product and then use them as ways of generating

[40:00](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=2400s) certainty and this is exactly the same model as Visa Visa takes a payment instrument wraps insurance on it we take an identity instrument with RAF insurance on it the insurance is what makes it easy usable the suggester that I'm making this insurance is what make digital identity useful so a claim vendor is something that knows something about me and is willing to issue insurance on that fact an attribute right the fact the insurance bring two things together we take a set of those claims and we assemble them into a profile so the profile is lots of lots and lots and lots and lots of different insured claims that other people are making about my life here's a claim from my University here's claim from my power company here's a claim from my government I take all of these things some of them came with insurance some of them I have to buy insurance for and then when I go to do something like a mortgage I suam this entire thing on the desk and say all of these people are relative air money behind my claim that I am who I say I am and if something goes wrong you can claim against this enormous pile of insurance and all of your losses will be made whole and at that point it should be fairly easy to do the deal because the person on the other side of the desk experience is no identity risk we've covered their identity risk with the insurance package very simple models you could have small-time claim insurance people you take a passport to an office they verify the passport they look at it they call the passport or face use a basic fraud check and make sure the picture isn't stuck on with glue they write your certificate I then hand that to somebody they don't have to see my passport they just have to know that somebody who's an expert has seen the passport has written claim insurance on it right suddenly you begin to see how insurance can substitute for information so if I show you the insurance you don't have to see the data that was used to generate the insurance so the possibility is that we reclaim privacy because we have very strong relationships so that our insurers they know and offer about us but the information is not given to the people who you want to do business with only the proof of insurance is given so there's an opportunity here to build a business model which has the ability to generate privacy again in with its advantageous for everybody in the loop is a bank don't really want to know all that much about you as long as I know that your loan will be paid eysan insurer want to know everything about you but i don't want any

[42:30](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=2550s) else to know that stuff because it reduces the need for my insurance the insurers actually have a very strong vested interest in making sure that their customers privacy is respected and so other people that can make claims University is known or thought about their students particularly their academic performance passwords we've discussed proof ood rest verification there must be 50 entities that have a strong proof of your address any one of them could give you a little bit of insurance yes we know that address is valid and lots of the claims you want are things that somebody in your environment has really good solid information on your wand word your mortgage holder your employer all these people have repositories of data you don't want that data just being handed to third parties but an insurance object-- based on that data it's something that would be very useful to be able to present people when you want to validate an identity yeah yeah just a it's a fascinating idea thank you ah we've been trying to solve this problem for 30 years and then we have and now you're introducing another middleman which is an insurer now we give Nobel prizes to people who who try to understand it and and you're doing incentive alignment and that that is yours has the right incentives to such a behave nicely precise um but then from where you make some business also with by introducing another middleman and this insurance er energy you can you solve a lot of problems yes but for real-world use case and the killer app for uptake which trying to fill for 30 years you know you're adding friction another person so how can you compete with the existing world but by adding magic and another middleman so this is the magic which allows you to use the blockchain for managing identity if you want your managed identity on a blockchain because you want the ultra low transaction costs and high security my assertion is you're not going to be able to do that successfully without bringing insurers along with you right I think the price of using cryptography to solve the problems is that you require insurers to smooth out the edges yes they may not they may not necessarily meet our other parties right they have a contribute provider and the signature that he is audience attribute is taken to mean I will cover anything that goes wrong because of your own claim for say 200 dollars only means that this party has

[45:00](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=2700s) another function may we actually have to be liable to some extent for for what he's selling yeah that's another way of putting the same thing exactly exactly right so all the all the kind of cryptography that people are talking about with attributes and third parties your knowledge roofs no the rest of that stuff it's a very small addition to add some cash into those right I don't think that this requires much rethinking of the technology but I think it provides that all-important smoothing out which will let the technology work in the real world because this is the problem that we all have ever you want the technology to just work but the technology doesn't just work because of all these funny working edge cases we need somewhere smoothing the Standish vision management in some way or form and lava I mean if three partnership basically attributed I'm Andrew by one people by nature if we be lower or on that how are we how are we doing for time okay so there's a so I dent that reputation to me is just I hate reputation systems oh I just hate them the reason I hate reputation systems is I think that the effects human society and much the same way as inappropriate surveillance by the state right being constantly watched by your neighbors by the people that you're doing business with and having all that stuff published with star ratings uber drivers are not very happy because their business is constantly being monitored and crazy people get into your cab and then ruin your reputation just because they're crazy and by the time the system is smooths out the bumps in the reputation over some statistical average or career should so yeah yeah right so so if we if we assume for a moment that you know peer based reputation systems are just inherently difficult I well and really dislike them right the other prospect is you could have asked for performance right so you've turned up to work every day for years and your boss thinks ray that should definitely lower your insurance could end the stuff if you're doing something HR really a function right yeah there are lots and lots of places where good conductors rewarded but it ought to be in the form of people that are willing to put money behind your claim that you're an okay person because the thing about reputation is there's no consequence to reputation good or bad so it tends to be awarded on things other than performance whereas when you put money on the line in ticket so how much you really trust

[47:30](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=2850s) your brother at war right and at that point we get to get much more accurate read of what the real trust structure is so there's another version of this talk that I have not yet given which basically tries to break down the idea of trust into absolutely trust is just a proxy for accountability and this is an accountability you see right so this is an accountability system it's not a trust system it's an accountability system when something goes wrong I will be sorted out right I took the risk it went wrong you will make me hold that's the relationship we have in many ways it's a Northern Trust system the person making the trust is the insurer and the insurance job is to not make mistakes and there's good constant market pressure on those guys to be accurate and LF what's crackle so yeah there are at least five parties if I identities in any car payment people in a great attractive area the citizen control with the issue in going gar scheme could be beat or MasterCard or whatever and the merchants were virtually acquired and the compiler Bank yes and the key problem today is the identity of the merchants yes that is the core of the problem absolute and at least thirty percent of the data of the merchants data are incorrect according to various global consulting firm so how do you see that through an insurance model you can upgrade the system the flaws in the system to have less card-not-present flow because that's the real problem everyone will continue perspective they consume what is covered anyhow yes however the consumer may not get what he wants because no your supplier is also complex problem on the admin visa is a really hard case because they've already got an insurable thing here but they have is a very badly behaved insurable thing so because the entity that's charging the transaction fees is also the auxin is the insurer there is no competitive pressure in a market as insurers to force the credit card fraud rate that will emerge and very very very few precisely right so what we've created is a situation which we've taken the market pressure out of the insurance game and I'm not positive incentives are misaligned in this beginning of swapping the liability which they did years ago yeah but all of the stuff is great I'm

[50:00](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=3000s) going to give instead of mix tonight and you have to pay as a merchant cleanable yes but that I mean that mechanism has basically taken all the incentives out of the insurable risk structure right because it's a monopoly because they can charge what they like they can move the weight of the fraud fruit fees around the pressure toward lateral technical excellence to walk those systems has been removed now as a result the whole thing is very slack it's quite problematic insurance company who will take over your risk um I am Not sure that visa will let anybody get into that game right so it may be that that structure is beyond help because if we're sure it's reinsurer but if visa is making so much money that it can just ensure its own risk on your stuff then it sure then the competitive market for insurance will not provide any benefit because we have a monopoly in insure that's acting in a pathological way so we introduced prediction markets and we into this element increasingly relational yeah effectively insurance yes absolutely that's very very fast yeah yeah absolutely how am i doing for time by the way because we started kind of late but according to my watch I should be almost finished ok right ok so we're going to go very quickly through the remaining bit so let's take care of this specialized claim insurers cover hard cases so in the same way that if you want to insure are you can grab something you know from a specialized insurer that understands values or manages that appropriately specialized insurers to cover specific kinds of identity risk a few our Western um claims are ideal for blockchain use right a claim is basically a contrast it's very unambiguous it doesn't have much squishy stuff on it it's a great thing to put on a blockchain where the ultra low transaction cost environment is good fit for the actual object the facts can be ambiguous but the identity if you insure and the amount of insurance being offered of the policy documents all that stuff is armed right so there's a really good possibility for having a regulated industry which of these information insurers and all that stuff is a good fit for the blockchain we keep you out for facts off the blockchain as much as possible profiles partly on a blockchain all kinds of clever stuff about zero knowledge proof zk snarks all of this kind of stuff that the identity companies are working with

[52:30](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=3150s) all that stuff is a great idea exactly what model will win out probably depends on advanced mathematics and there's so much work being done in those areas like homomorphic encryption today's model will not be the same model used in ten years it's likely to keep improving and stacking claims is how it works in the real world you take every little place where somebody's got a set of information about you you ask them to turn that into an offer for a claim you then buy as many of those claims as you need to get the job done on whatever thing it is you want to do that requires this kind of hard identity what we're talking about is being able to monetize knowing stuff about people in a way that the people themselves control I ask the customer pay you for information about me in the form of an inch the product that keeps the individual in control of the system as a whole because the individual was the pair if we move this around so the individual is no longer the pair you'll get the same kind of structural corruption that you see in the visa example right you need to make sure the individual has skin in the game consequences and consequential loss it's just about managing consequential loss keeping everything wrapped up into these consequential loss units right there's really no other reason that we want all this information or all the said entities other than managing consequential loss accurate pricing of risk is a really good idea for this you need competitive markets if you end up with pathological monopolies the risk is no longer going to be accurately priced so it's very important that there is market design in this kind of a thing and this is an ideal rule for regulators regulators need to be really on top of this thing because if you get monopolies you will not get a performant identity architecture am setting price on the wrong FARC so basically right it all comes down to how much coverage you need you're buying an insurance product the more ambiguity there is the more expensive it will be the more cover you need the more expensive it will be this is a great place for people to put all their covered proprietary trading algorithms there are huge opportunities here for smart people to get really good at figuring out what the truth is and I think we all can agree that prediction markets would be a mechanism you could use they're not the only one but having a set of industries whose job it is really good at figuring out the truth incredibly useful and the identity ownership thing the individual facts are owned by other entities right the assemblage of those facts and the rendering of that information something that can be used is owned by me and this

[55:00](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=3300s) bridge is nicely this problem of half of the stuff is owned by one person half of it is owned by another you know my driving record I'm the person that was doing the driving we package that up into an insurance product I pay for it we sell it very very very simple okay the hard question what regulators write to get this thing to work regulators would need to be comfortable with companies having a probabilistic relationship with their insured risk right we are 97.5% sure that we have everybody's identity correct the edge cases would amount to no more than 1 percent of our portfolio by weight those kind of approaches this is why you need a small country to implement this kind of thing because right now almost all the financial system regulations simply state you're going to know who your customers are end of story and then you have to eat the cost of the risks internally small country advantage you could have sophisticated relationships with regulators you could show them the internal fraud data and they can use that to manage the risk expectations so factory useless give you insurance this is basically the story in a nutshell that's what we want to preserve and three final rules right at least for human systems are imperfect right don't forget that whenever you hear somebody are talking the techno nonsense about how cryptography will save the world humans are imperfect as a result human systems are imperfect and not everything can have equal focus right some parts of your system will be very tightly controlled and very reliable like aero avionics some parts will be incredibly unreliable like luggage right and whatever somebody says the blockchain will make everything equally transparent no it won't right not how the world is a fact in pop chains will be a mess because the facts will be mishandled because everybody will see that this fact was on a blockchain in the will shew it to be true when you get banned information into a blockchain it we much more dangerous and bad information scrolled on the back of an envelope so be aware that people will psychologically over inflate the value of fact on a blockchain we can't stop that happening and finally write specialized knowledge right if we figure out way of taking all the slack in these systems all the imprecision and selling it to people whose job it is to pick through it and fix it you'll get a whole bunch of new technology from people that are very very good figuring out what is true and this is socially good so what we're talking about is basically figuring out how to build new industries who are in

[57:30](https://www.youtube.com/watch?v=rxD9-hHCNz4&t=3450s) the job of doing information assurance and by to create those new industries we have a market design and that market design is really the challenge if we can create a market which will allow these companies to exist into existence of your silver problems and that's it thank you very much okay very much is like a little wise little bit cold but they are but I think you gave you enough people unless you're you read to them what would they will at least everything really but I also think it's it's a new paradigm of thinking I like this very much and me personally I'm a good guy Cheryl you are be here for next thing yesterday I'm here for the resolution we will need you I think

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End of [917] Blockchain keynote - Vinay Gupta, part 2 of 2. Its connections are at the top of this file; the map is https://guptaoption.com/llms.txt.
Read next: next on the same works, [215](https://guptaoption.com/texts/215.md) This Revolution Will Be Tokenized (2017); the most closely related, [712](https://guptaoption.com/texts/712.md) Compilation: Vinay Gupta (Mattereum / Ethereum) on Visa,... (2023); his whole career in one file, https://guptaoption.com/story.md.