GRTiQ Podcast: 41 Hiroki Kotabe

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Hiroki Kotabe (00:21):

I, right now, feel pretty confident that it’s going to be a multichain future. And in a multichain, multiprotocol future, it’s going to be really important to build a web on top of all these different protocols. And, essentially, The Graph is doing that. So yeah, that enticed me and made me think it has a lot of promise.

Nick (01:09):

Welcome to the GRTiQ Podcast. Today I’m speaking with Hiroki Kotabe, research analyst at The Block. I first became aware of Hiro when several of his research articles on web3, some of which highlighted The Graph, began circulating online and on social media. Hiro is a brilliant researcher and thinker with an incredible professional pedigree that includes two doctorates, one in behavioral science and another in cognitive science, along with a master’s in psychology. Before his work at The Block, Hiro authored over 20 scientific publications, taught at university, and even started his own business, Katobe Labs. During our conversation, Hiro shares his journey from academia to the Crypto space and joining The Block, his research interests and insights and his ideas on web3 and The Graph. As always, I started our discussion by asking Hiro about his background.

Hiroki Kotabe (02:12):

So my background’s pretty varied and, I think, on the surface it can seem like I’ve kind of been all over the place. I think there’s probably a lot of connections that could be made, in terms of my interest within each of the areas I’ve studied. So, basically, I started my undergraduate studies in media studies, and that was also partly because it wasn’t really a hard major and I was really interested in music at that time. I was mostly writing and making and producing music on the side, but at the same time studying media and media theory and so forth. I think that’s, probably, my first taste of more sociology, psychology of mass media and its influence, interactions with society and stuff like that. So yeah, it’s a pretty interesting topic that led me into working, for over a year, including an internship, in a big advertising company in New York City.

(03:10):

So this is the start and then it goes in a lot of different directions from there. So, basically, that wasn’t as intellectually stimulating as I was going for, not at the role that I was in. I was working in search engine marketing, and I think I realized that in marketing as, a whole, the most interesting part of it, to me, was about consumer behavior society, essentially psychology and social psychology. So then I went back to school at Columbia University and studied social psychology for a couple of years, and I kind of found my niche there in a area that bridges social and cognitive psychology, as well as business and economics. It was a very generalist, multidisciplinary field called judgment and decision making. Now it’s become pretty well known, this concept of behavioral economics. People like Daniel Kahneman who got the Nobel Prize. He wrote Thinking Fast and Slow.

(04:08):

So I was kind of part of that crowd for quite a while because after Columbia, I got accepted for a dual PhD in behavioral science and cognitive science at the University of Chicago. So behavioral science was at the Chicago Booth Business School side and cognitive science in the psychology department. And there I studied a lot of topics, but my main interests were still in judgment and decision making. And another area that I would relate, sort of emerging area called environmental neuroscience. And I was really interested in these two fields and trying to find bridges across these areas. Partly because the methodology is so different. In judgment decision making research, a lot of the research is more on small scale experimentation within the lab and testing. It takes a bit more of a top down approach. Taking theories from decision making from behavioral economics and testing them in lab settings. And environmental neuroscience…

(05:14):

I was sort of exposed to a lot more quantitative methodology. So we use brain scanning and the data sets are really complex. We also use some other methods like eye tracking and more field research or looking at secondary large data sets. I was exposed to more multivariate statistics and those methods that I saw less in decision making. So I was trying to learn as much as I can in the time that I could, while being financially supported, essentially, paid doing my PhD, which is a pretty great opportunity. So that combination of experiences led me to stay in academia and after doing my postdoc, I, one, wanted to move to Asia, but I also wanted a secure tenure track job. And I eventually got accepted to be a tenure track professor of marketing. And just by the title, it’s marketing, but really, my focus was in consumer behavior with a lot of freedom to bring in the past experiences I had from my experiences at UChicago.

Nick (06:27):

Given everything that you’ve been working on, I got to imagine this was an incredible opportunity and experience for you.

Hiroki Kotabe (06:33):

That was a really good experience, starting to manage my lab and direct research. I think the context at the place that I worked was probably quite traditional. So the school was in Korea and it was an international school, but Korea is still a bit more traditional when it comes to how the business schools are managed and organized and so forth. And I guess I felt like I wanted some more freedom, as well as maybe a bit of impatience in terms of how long it can take to publish scientific research and so forth. There is pros and cons to that. I really appreciate the rigor that’s involved, but at the same time, I think that there are ways that I could be streamlined or that I could be working on something with maybe more practical significance. So I set off and started a freelance business as an independent researcher/consultant.

(07:30):

And that, I guess, because of my background in research, was quite strong on record. So I started getting contacted quite a lot for freelance jobs and it was just more than I could handle. So I thought, “What could I do with this?” And at that time, I’m, pretty much, a digital nomad academic. I call it DNA. And I started finding other academics who were in various positions. Some were even part-time professors working at companies, some were other freelance, like me. The thing is, there’s very few people who leave academia and become these independent freelance researchers. They usually go to companies or work, primarily, as teachers or adjunct faculty or something like that. So I started connecting with those people found, okay, I can start outsourcing a good amount of my work and build a, you could say, decentralized research organization.

(08:37):

And that’s what I call Kotabe Labs. So, on my LinkedIn you may see, I’m founder of Kotabe Labs. So for about a year, I managed this remote group of researchers and tried to give them as much freedom as possible. But I would, mostly, take the role of finding work and distributing it. But I encouraged other members to work all together to help us find high quality work that had suitable pay and so forth in the area of research that can be quite tough because there isn’t huge funding in other areas in tech or finance. So that became something that I could have done long term.

(09:19):

But then I ran into Crypto and went down the rabbit hole. And because of my work situation, the flexibility of running my own remote organization, I could, flexibly, take less and less projects or distribute them more and take less on myself, of course then reducing my own pay. But I was so interested in Crypto and blockchain and understanding the technologies. Super fascinated in both web3 and DeFi at that time. So I was essentially at a point where I wanted to stop all my Kotabe Labs work so I could fully focus on setting this thing. Because, usually, if I get really into something I, really, a hundred percent get into it.

Nick (10:05):

I get it. So this is an interesting inflection point. So what did you decide to do at that point

Hiroki Kotabe (10:11):

So at that point I thought, “Well, I really want to continue this and I do need to make money, so I should probably try to find a research job.” I applied to a few different companies and ended up having a really good conversation and interview and meeting with people at The Block. And that’s how I got to my current position as a research analyst at The Block research. So yeah, I think, to tie the connections together, from media studies to marketing advertising to behavioral science, neuroscience, so many things. I think there is probably… The guiding principle behind all of that is a super deep interest in people in society, in technology, and also about the future. And, I think, my studies, I always narrow in on certain fundamental or deeper aspects, you could say, certain micro aspects of each of these fields and connect it to the macro. So from my experiential standpoint, I don’t really feel like I’ve gone to many different places, just on the surface.

Nick (11:19):

I appreciate you explaining all of that. I’d like to go back to when you first became interested in Crypto, because, in so many ways, this is a giant jump in the disciplines and the research that you had been doing. So what was that original spark of interest in the Crypto space that drew your attention?

Hiroki Kotabe (11:35):

Yeah, I think Crypto, specifically Bitcoin, when I first heard of it back in around 2014, I think it touched on a lot of stuff that I was interested in about… Essentially, I’m quite a big picture thinker and Bitcoin had a very big level promise in terms of money without borders, money without government, encrypted and secured by mathematics and of just a very elegant system behind it, as well as big ideas. I guess that’s one thing I didn’t touch on, too, is that working in academia, I always try to seek out some sort of big idea that hasn’t been addressed enough yet. I get a lot more excitement working on that kind of thing than a super narrow… Important, all the narrow, I would say, a lot of the narrow science is quite important, but just doesn’t excite me to the level that I need to stay sufficiently stimulated.

(12:33):

But Bitcoin did and it did in 2014. It did, again, in 2018. The thing is, I guess, I’ve just been working really hard and both of those times, I think, I was too focused on other things to get deep enough into it. Back in 2014, I’m in the middle of my PhD. 2018, I’m at the start of my tenure track professorship, teaching classes and doing research, learning how to manage a lab. So it’s really just more recently, around the beginning of this year, at the turn of last year, I could just stop doing my other stuff and fully get into Crypto. And so I started reading and studying some of the basic manuals behind Bitcoin and Ethereum. And the more I learned, got more and more compelled. It’s one of those things that with more fluency, it gets more exciting, more flow into the subject.

(13:30):

And, finally, I wish it happened in 2014, looking at how well it’s done in the market structure and so forth. But, yeah, I still think that it’s still pretty early in its adoption curve. Those technologies, I think, finally, with the way that I am naturally a skeptic and careful thinker before I dive into something, change my career, which is a huge investment of energy and time, any kind of big investment like that, I’m going to need to form a thesis to myself. And that thesis wasn’t formed until around the beginning of this year.

Nick (14:12):

And so if you had to summarize what that thesis is, presently, what would you say?

Hiroki Kotabe (14:16):

I think the more connections I saw between Crypto blockchain and web3 and the crazy amount of new projects coming out that are super innovative, super exciting, touching on so many huge aspects, from how to operate global organizations to… As I said before, as an artist, I’m a musician. To changing that entire space, possibly bringing value and respect to artists that, in my opinion, they always deserve, but now with certain web3, Crypto technologies, have more, I would say, a lot more opportunity than before. That kind of thing made me think, “Okay, this is something worth working for. This is something to really devote myself to long term.”

Nick (15:04):

So, you mentioned you’ve moved into a role at The Block. For listeners that aren’t familiar with The Block, how would you describe what The Block is?

Hiroki Kotabe (15:11):

The Block is both a news and research agency for blockchain and Crypto, covering pretty much everything and trying to be first. Their slogan is being the first and final word in this entire space. So, yeah, that’s its main task. As an organization, we’re a fully international organization with teams across Asia, Europe, the US and other countries, even in Africa, we have interned there. So it’s really a organization that, I think, takes on the ethos and philosophy behind this blockchain, Crypto space as well.

Nick (15:52):

Sure. And The Block is widely recognized, it being the forefront of publication and research in the blockchain, Crypto space. And you’re working as a research analyst. Are you focusing your research, then? Do you have a specific beat, for lack of a better word, on the things that you’re taking a look at and watching?

Hiroki Kotabe (16:10):

Yeah, when I started, not really. My first couple articles I published there, I was still getting my hands around how to bring in my previous research skills and apply them to studying Crypto and blockchain. So, first, I took on more statistical tasks, looking at numbers behind Bitcoin market structure, doing some time series analyses to see the predictions that could be made, given the sort of extreme volatility we’ve seen in Bitcoin’s price history. That was all interesting to me, but that was more, apply my previous skill sets. And I was also searching the kind of research that has been done in the Crypto space and I didn’t see too much statistical data science work, actually, despite very rich data sets being available. So I just thought, “Okay, I haven’t seen anyone do a time series and I’ll see, it seems pretty obvious we have a beautiful time series data set with Bitcoin price history, so I’ll do that.”

(17:09):

But I knew that… web3 kept being in the back of my head or being in my heart from when I got deeper into Crypto. So I knew that I wanted to shift into more web3 topics. I didn’t quite know, yet, how. And one of the first protocols that really enticed me was The Graph. And I just thought that the system they’ve created, one, is very novel and innovative in the entire Crypto space. And, two, that it was fascinating. Again, tying back to this thing I said about maybe my way of thinking about connecting, trying to find a micro level or a very basic level understanding that connects to very high level things and macro possibilities of the future. I saw The Graph as a very fundamental piece of web3, in the sense that it’s almost like a web connecting the backbone structure, which is blockchain and other digital ledger technologies, but mostly blockchain. And The Graph sitting on top of that, connecting it like a beautiful web.

(18:16):

That led me to The Graph, but I think my first piece on web3 is more general. And that may be because I was studying The Graph and that started bringing my mind to more basic principles of what is web3 and how in the world is it structured and what really makes it different from web2. I mean, you keep hearing about web3 versus web3, oftentimes in a categorical sense with people bringing up tables about web2 is this app, web3 is this app, but that doesn’t really tell me what web3 is. So my first piece was, really, about drilling into that and just finding every resource I could to come up with a comprehensive and integrative model of web3 technology. Sort of a base from which I could, probably, build out a whole many years of research.

Nick (19:07):

So Hiro, before we started recording, you mentioned that you’re joining me from Thailand. What’s taken you to Thailand?

Hiroki Kotabe (19:13):

So, after I finished my PhD, I did a backpacking trip, just to let out all that extreme dissertation stress that had built up. And Thailand was one of the places I spent most of my time. I knew that I was interested in Asia, in general, and I had a really good experience before in Vietnam. So South-East Asia was really interesting to me. I spent a lot of time in Thailand, a bit cliche story, but fell in love with it. It’s a bit too hot, but aside from that… There’s a lot of mosquitoes. But, I think, besides that, there’s just a lot of good things happening here. The culture is really inviting. A lot of the people are really friendly. I think it depends on every individual, but,, obviously a lot of foreigners like to come here. There are a lot of expats here.

(20:00):

I think there must be something attractive here, especially if you can make a decent income. So that drew me here. I also saw there’s certain cities like Bangkok and Chiang Mai that have so many options in terms of workspaces. Beautiful workspaces, surrounded by lots of restaurants and a lot of nice amenities and so forth, that I would have to pay so much for in the US or they would be far away and they’re everywhere here. So, it’s really convenient. For the first two years I just had a motorbike. I didn’t even need a car. So that drew me to Thailand.

Nick (20:36):

I know you’re not from there and you’ve only been there for a little while, but I always like to ask guests of the podcast about the attitudes and opinions of the local population from where they’re joining me. So have you been able to pick up or make any observations about the people of Thailand’s opinions or attitudes towards Crypto and blockchain?

Hiroki Kotabe (20:55):

Yeah, so I have quite a few Thai friends and it’s very easy to meet Thai people. A lot of them are really friendly. And the moment that I tell them that I work in Crypto, they’re like, “You buy this.” And they very quickly go to trading a lot about different alt points and so forth. So my personal experience is that there’s, anecdotally, a ton of interest in Crypto or maybe more fundamentally, a ton of interest in possibilities to make money quickly and easily. It’s probably everywhere that you don’t hear too much about all the people who also lose money the same way, but there is that gambling interest, for sure. And I think that makes sense. Crypto is… It’s pretty easy for people of any income to come in and buy, even, let’s say, fractions of Bitcoin and Ethereum and hope to make some gains.

(21:54):

A lot of the people here are living on low incomes, so there’s a lot of hope for any opportunities to make extra money. Hopefully that interest could translate into something, probably, maybe, more sustainable. I have not looked into something like World Coin enough to talk about it, but I think they have this idea that Crypto can give back to communities, if they’re willing to give something back to the protocol and so forth. And that would be great to see more of that happening in less economically privileged places like Thailand. But also, it differs a lot too. A lot of people say Bangkok is a different country within Thailand. In Bangkok you have these… In places it’s completely first world, I would say. Infrastructure and the buildings and cafes and stuff. It’s just incredibly high quality and you have a lot of big stuff happening there.

(22:54):

BitCup is a Bitcoin exchange. It’s reached unicorn status. It recently sold for over a billion dollars to one of the government banks here. And then you have other massive protocols doing a lot of cool stuff in DeFi or like Alpha Finance and Band Protocol working on Oracles. There’s a lot of high level Crypto business happening here and there’s a lot of interest and also, I would say, a surprising amount of support. I mean, maybe the Thai government is interested in trying to find ways to bring this into their vision of Thailand 4.0 with certain things like SCB Bank, which is a government owned bank, buying BitCup. It could be a political move, as well.

Nick (24:53):

Well, you said something there, that I want to revisit here, before we move on to The Graph and web3. It’s the different ways people approach and get into Crypto. And I’m just curious, based on your background in behavioral economics and decision theory and things like this, how much of that are you using as Crypto and web3?

Hiroki Kotabe (25:20):

Yeah, I think that’s a hard question because in one sense, I would say, there’s a lot of theories of decision making that I learned during my PhD studies. And, so far, I haven’t really applied those theories in my own Crypto research writing or web3 writing. But, I would say, the two things that I have applied, one, is easier to explain. I’ve learned quite a lot of quantitative and qualitative research methods and I can see the way I approach research, it’s just naturally using that background. So that’s something that seems obvious that those research skills have translated to how I approach research at The Block. And second, I think that going through so many years, easily over 20,000 hours of study in behavioral science and cognitive science, has shaped my entire frame of thinking. Also spending quite a lot of time studying statistics.

(26:24):

I think statistics… I would suggest everyone to just push it and try to learn some basic statistics. Because, I think, it really sharpens one’s way of thinking and helps us overcome a lot of our cognitive biases in terms of looking at news stories or anecdotes and so forth. And looking, instead, at data. Really putting much more faith in what we don’t know, putting much more faith in what we can’t see and not being too confident in the things we do see, and what we do know. A lot of what the truth is about is, what we don’t know. I would say, what we don’t know and knowing that we don’t know.

Nick (27:04):

Right. Well, I love that answer and I appreciate you sharing that. Let’s turn our attention now to the research you’re doing at The Block and some of these great articles that you’ve published. So, you referenced a moment ago that one of the articles you published, and this was in October of 2021, entitled A Simple Framework for Understanding web3 versus web2. And as you said, these are often talked about at the conceptual high level, but what does it actually mean? What is web3? And I wonder if you could take a stab at helping listeners understand the difference here and what web3 truly is.

Hiroki Kotabe (27:41):

Yeah, so the deeper I dug into it, the more I realized that the biggest difference is about how data structures are stored and organized in web3 versus web2. So I think that the answer would be about… If you want to understand web3, you really have to understand the backbone data structure of web3. What’s amazing about web3, I guess, is that once you see that, really, the fundamental thing is about these data structures. Essentially about distributed servers, nodes, blockchain versus centralized servers that we have in web2, like AWS.

(28:22):

Just by changing the way that data is stored, secured, and so forth, as well as giving these data structures state… In other words, retaining a sort of history of the entire ledger and so forth and controlling state history transitions and so forth. These things give rise to a lot of the high level topics that people are talking about. It’s just those connections, I think, haven’t been made that clearly. So people talk about decentralization, they talk about ownership or things like verifiability when it comes to web3 and all of these come from the basic data structures that web3 is built on. And so that became really fascinating. And I’m on a journey, now, in the process of publishing articles and doing more and more research to, basically, keep seeing how this backend to front end link works.

(29:15):

And when I say backend, I mean, let’s say, for example, blockchain all the way up to front end applications like Wallets and Gateways, but how those experiences or video games, applications, NFT’s in there, how that’s going to give rise to social level changes in terms of user experience with decentralized organizations, ownership of parts of the web, public and community ownership, verifiability of the sort of public data that has reached consensus in a fault-tolerant way. And execution, which is about how smart contracts work, which is that they execute exactly as they’re written. And so if you pick up on the keywords that I use, they are D-O-V-E. So this is my fun acronym, which, I think, is a nice symbol for web3, which is DOVE. The symbol of liberty and freedom and hope.

Nick (30:12):

So web3, ultimately, is a story about a change in data structures?

Hiroki Kotabe (30:18):

Yeah, of web architecture. And, I think, it’s about how those basic data structure changes have so many ramifications, all the way up to, I would, argue the entire world. As much as we are integrated with the metaverse or with the digital virtual reality, it’s going to change all those things. Because once you change the data, it’s going to have ramifications all the way to the highest level.

Nick (30:45):

Well, I’m very interested in some of these ideas because I’ve interviewed a lot of different people and asked them the question of what is web3? And I’m always curious about the impact on the world of web3. So for the average person that isn’t doing the research that you’re doing and maybe doesn’t understand some of the architecture that’s beneath web3, how does it impact regular everyday people’s lives? Do you have any thoughts on that?

Hiroki Kotabe (31:10):

Yeah, so I think that one of the more easy things to understand, if people are in the Crypto space and they’ve been joining some Discord communities or keeping track of, let’s say, some recent viral things that have happened like ConstitutionDAO, these web3 movements. I think what we’re seeing is this combination of more ownership over parts of certain protocols, you could say, of parts of web3, combined with a lot of capital inflow into this space, have set the seeds for a really powerful platform where people can have more, I would say, generally, more openness and inclusivity in terms of running this platform, participating in it, not being users as we are in web2, but being participants, really, in an open web. Where people can have more means, more possibilities than ever before to start movements that they care about. And to play the role of, let’s say, product manager or management in these different projects.

(32:21):

That’s a huge change in terms of everyday experience of web users. You just have to go on some of these Discord communities and see the amount of volunteer interest, is just amazing. There’s people, voluntarily, helping the community so much, a lot of participatory cooperative people involved. And that’s happening at the level of helping bring in adoption. It’s also happening at the level of protocol development with open source code, as we see with Ethereum and so forth. So yeah, I think we see that much more than ever before with a typical web2 structure, where a lot of our interest or our ownership and our vestedness, it’s much less when you have companies like Facebook, Google and Amazon that are really controlling the resources and we’re just users of their platforms.

Nick (33:15):

So if web3 is, primarily, a story about data and you’ve so well articulated that it is, I’m also curious how we would quantify this revolutionary social perspective, where so many people across the world are getting involved in what, I think, they perceive as a revolution against legacy systems and centralization. How have you tried to contextualize that element of web3?

Hiroki Kotabe (33:43):

Yeah. Basically, in my research I have touched on those topics in terms of how they are byproducts or ramifications of the way that data is stored. And I think that if you draw the links from the data to those high level movements, the whole cultural movement of web3, it does make sense. I would also hedge that a lot of these hopes are based on a lot of speculation. A lot of web3 hasn’t been built yet, but it definitely does, I would say, have the potential based on those data structures. But I would say there’s nothing disagreeable about hope and speculation. I mean, arguably, a lot of what we build, a lot of the great things that we do like, eventually, eradicating malaria, it’s based on hope, not on essentially what’s possible right now.

(34:35):

And I think that, similar, with web3, a lot of things that we’re hoping for, as we’ve seen this sort of sentiment growing for many, many years now with tech giants just growing in insanely fast and out of control with their power, what they can do with our user data, with business models that, essentially, focus on collecting as much user data as possible from you and selling that at huge profits. I think that has become a bit more distasteful. You can see that all the way from the Grassroots to tech critics to antitrust watchdog and so forth, it’s all over the news. So the sentiment has been growing and it coincides with the developments of web3, which promise a really different kind of web. You could think of it almost like… I sometimes say, “web3 is an attempt by a lot of the smartest people in the world and developers and so forth to redo web2 without making the missteps that they did.”

(35:36):

The web was supposed to be open and inclusive from the beginning, as Tim Berners-Lee and the web3 Foundation dreamt of, and it turned into something really different because open source was really hard to monetize in the past, in the nineties. And so, naturally, as people started to see that the web could be utilized as a place that could be commercialized a lot and quite a lot of money can be made, again, this concept of value transitioning more and more into virtual worlds, you just, naturally, start getting a lot more closed source protocols, a lot more centralization and so forth. But, I think, it was Tim Berners-Lee has stayed himself. It’s really not the direction that he dreamt of and I don’t think it’s the direction that anyone, except the people on top of those massive centralized entities, dream of. So web3 is an opportunity to take on new technologies, enabled all the way at the basic level of data, to have more public ownership. Again, more openness, more inclusivity, more participation. “A web for everyone”, in Tim Berners-Lee’s words.

Nick (36:45):

Do you feel like web3 is an experiment we’re hoping or watching unfold? Or do you think it’s an inevitability, it’s a next stage in the tech?

Hiroki Kotabe (36:56):

Yeah, I see tech as… Even the web, you can trace back to [inaudible 00:37:03] before the web, before Arbinet and so forth. Tech technology accretes, it layers and layers. And so, I think that the way that I’ve understood web3 as an expansion or additional layer next to web2. I see as a horizontal expansion, in the sense that it still works as client survey relationships. But the big difference is that the way servers work is really different. And that has resulted in new kinds of front end differences on the client side, but it is still this client survey relationship running through the internet protocol stack, but it’s done in a very different way. So this idea of technology evolving, I really see technology as a living organism and because of the way that technologies are built and because of their intrinsic accretion, I do think that web3 is an inevitability.

(37:59):

And I think that the evolution from web2 to web3 is just starting to happen. I think we’ll see a lot of really exciting changes in the next 10 to 20 years. I think we’re at the beginning of an inflection point in the web’s evolution. But I think that this evolution is inevitable, like an organism’s evolution is inevitable. The web is going to evolve to integrate with this technological changes that are happening. So technological developments give more capacities to the web and it’s also going to evolve based on what is valued, what is demanded by the society that uses it. And I think the products of web3 are going to represent those two things together.

Nick (38:38):

Before we turn our attention to The Graph, when you first became aware of it and how it fits into the research you’ve done, and you’ve published some articles that have talked about The Graph, I’d like to know if you’ve contemplated any of the challenges that Face Web three? And if you’d be willing to share what you think some of those might be?

Hiroki Kotabe (38:56):

Sure, So far, I think, right now, in terms of the more immediate challenge, there are a lot of limitations or challenges in terms of the pace at which web3 DApps can be developed and deployed. How they can be managed, for example, by decentralized autonomous organizations, DAOs. So in terms of the way that decentralization works, it does create a lot more security. It reduces single points of failure and so forth, but it also makes for platforms that, right now, are still just being figured out how to deploy and develop these platforms at the pace that massive, extremely resourced companies, like Amazon, can do. So in terms of, if you think of web2 and web3 DApps at competition, one of the biggest challenges, I would say, is how to develop and deploy at the pace that web2 companies are doing. How to provide the same level of user experience, and so forth.

(39:59):

One of the biggest things that I’ve been contemplating about is that, yes, web3 offers a lot of beneficial changes to the user experience, but, I think, for the average user, a lot of people won’t necessarily be thinking too much about Facebook’s taking my data and I don’t like it. And I would rather use a less user-friendly, much more user experienced version of a Facebook that’s decentralized. A lot of the benefits require a certain level of education and understanding of what’s going on. But I think, also, part of the big challenges will be about that education campaign. We’re seeing how much people care about the benefits that web3 provides.

Nick (40:45):

So Hiro, you and I first met because you recently published an article for The Block called Streamlining blockchain Data Access, and part of that article’s focus was The Graph and you did a nice job highlighting the value The Graph creates in a web3 environment. I’d like to ask you when you first became aware of The Graph and what that original impression was, regarding what The Graph is doing?

Hiroki Kotabe (41:08):

I first became aware of The Graph around the beginning of this year, basically, when I took my deep dive into Crypto. I just went through the top 50 or so protocols on CoinMarketCap and studied all of them. Of course just at a cursory level, but enough to see what interested me more than others. And The Graph did stand out. One, because it just seems so unique, but also the way that it’s marketed as Google for blockchains was immediately intriguing and it raised a lot of questions, too. Do we need a Google for blockchains? Do we need to index blockchain data and so forth? And that drove me to a lot more questions, which eventually got me to the point thinking, “Yeah, we do need to index blockchain data.”

(41:55):

I think all the used cases for that are still coming out, but I do see that, right now, feel pretty confident that it’s going to be a multichained future. And in a multichain, multiprotocol future, it’s going to be really important to build a web on top of all these different protocols. And, essentially, The Graph is doing that. So yeah, that enticed me and made me think it has a lot of promise. And then I got into some of the actors in The Graph, like Delegators and Indexers, Curators, and this sounded interesting, almost like living in a different reality with these actors at play. It also seemed fun and seeing the economic games that are being played out between these actors to ensure high quality indexing data.

Nick (42:39):

So based on your research, then, of web3 and of blockchain, is it your current position that a solution where you can query and index blockchain data is a necessary component for web3 to fully realize its potential in the world?

Hiroki Kotabe (42:55):

I think that it makes a lot of sense that a protocol like The Graph will likely be a big part of web3. And that’s because, so far, it does seem that we’re going to have a multichain future, multiprotocol future. And right now, there aren’t very good decentralized infrastructures. If we were to, really, build a decentralized web3, there aren’t that many infrastructures to address a lot of core challenges in terms of streamlining access to blockchain data. And so that could be like how do we efficiently bring data from blockchains to apps? Another aspect, how do we easily get data from all these different blockchains that aren’t talking to each other and how do we do that in a decentralized way? And I think The Graph is addressing all three of those challenges. So The Graph or platforms like that that are addressing these challenges, I would say, are probably going to be important in a future where we’re building a really interconnected web3, in terms of the different servers and so forth.

(43:57):

It’s hard to imagine a web3 where the protocols really stay siloed because that’s almost like a huge contrast to what we’re aiming for. In web2 you can have siloed database and so forth. But in web3 we’re approaching a much more singular idea that we can build a web that’s almost one application in it itself. A very modular web where data can be accessed across different protocols and there’s a lot more cooperation between, not even companies, you could say, protocols and different Crypto platforms. And then the basic metaphor of The Graph is a web sitting atop and making these interconnections between a multichain, web3 seems like something almost inevitable.

Nick (44:38):

Hiro, precarious in your research of web3 and this question about accessing blockchain data, if you were able to formulate how The Graph is different from other protocols trying to provide a similar solution in this space, are you able to articulate how The Graph is different from others?

Hiroki Kotabe (44:58):

Yeah, So far, there’s so many protocols, so I can’t say that I’ve covered every single one. But from the many hours of research I’ve done in this space about different infrastructure providers, I would say, The Graph does differ in a specific way, which is that they’re trying to fully decentralize indexed information held across nodes. So there are quite a few other protocols focusing on some of the other challenges I said. Like how to access blockchain information, how to streamline that access, but they don’t have this bigger vision, I would say, as The Graph. They are very practical in the sense that, let’s say, a protocol like Pocket Network has shown its usefulness in terms of being a relay node provider. So instead of working through, let’s say, more centralized infrastructures like Infera or Alchemy’s Ethereum nodes, you can now connect to your meta mass to Ethereum through Pocket network.

(45:58):

And it works, it seems to work really well and handle a lot of traffic. But The Graph is doing a lot more than solving this relay node incentivization problem, which is about, okay, there just aren’t enough full nodes run by individuals and companies because there aren’t enough incentives built in the system. The Graph is addressing that issue, as well. So in the sense you could see it’s a compliment or competitor with certain protocols like that. But it also has this broader focus of, as they frame themselves as being a Google for blockchains, which includes a strong emphasis on indexing data, storing index data and organizing it in a way that’s universally useful and an accessible, kind of like Google. So that’s something really special in The Graph that I haven’t seen in other protocols, yet. And what I mean by I haven’t seen it, yet, is I haven’t seen any protocol doing it at the level of success and operation that I’ve seen with The Graph. There may be some more startup protocols that are trying to attempt to address this issue, as well.

Nick (47:01):

Hiro, thank you for taking the time to explain your research on web3 and sharing some of your thoughts about The Graph. I’d like to ask you a follow-up question, more general, about what you think the next big thing is in the Crypto blockchain or web3 space? What do you think the next big thing might be?

Hiroki Kotabe (47:20):

I think there’s a lot of stuff happening with NFTs. There’s been a lot of buzz about music and how that can interact with music industry, with NFTs, but, actually, one of the recent news that caught my interest was this thing called ConstitutionDAO, which, essentially, a group of people, a community, got together and created a decentralized protocol to try to buy a copy of the Constitution from Sotheby’s. And in less than a week they raised over 40 million dollars, which just blew my mind. And that got me thinking, “Okay, we really don’t see too much of this stuff happening in web2, not at this scale.” Of course we have fundraisers and causes and platforms for that, lots of different platforms for that, but I think web3, partly because it has such a strong sense of community, more sense of participation and ownership, these things I talked about before, I think, that you’re getting…

(48:18):

As well as capital inflow, I said this combination of community plus capital is really a powerful thing. Because, I think, we might start seeing a bit more of things like that, like viral fundraising campaigns for certain causes which are supported by DAOs. And DAOs are a really exciting thing to watch evolve, as well. I think that a lot of people may be underestimating how important of a role they’re going to play in the future of web3 of governance of even outside of the web of how they’re going to interact with the world outside. It gave me hope, too, more for grassroots movements that have justifiable or great causes behind them. If we have this combination of community and capital and DAOs a very open, inclusive, transparent DAOs like ConstitutionDAO was through the process of this, then we might see a lot more empowerment to the people, to actually realize causes that are worth fighting for. So just being hidden behind these fundraising platforms that can raise a few hundred thousand dollars, I mean 40 million’s no joke, they almost won.

Nick (49:29):

Well, you bring up the ConstitutionDAO, and I know The Graph had a little bit of involvement in that and it certainly was a headline. As we’ve seen the backend of that, headline news and different talking heads have been a little bit critical of that experiment. What are your thoughts on, I guess, not only what you shared but maybe the back end of that experiment?

Hiroki Kotabe (49:49):

Yeah, so, I think, this is one of the first experiments in this space of how DAOs can empower grassroots movements to an extent that we’ve never seen before. And, I think, the issues, the fallout of this situation of not winning the auction, people want to get refunded and then people are encountering these issues about gas fees and the hundreds of dollars and so forth. And those are some of the growing pains of a web3 that hasn’t figured out very effective scaling solutions, yet. And I think that’s just one case study that can start to piece together when scaling solutions build and the importance of them when they can build out and start running, being integrated across wallets and being used every day as an everyday thing. That’s when web3 will probably hit another inflection point in terms of adoption and usership. Right now, there’s a bottleneck and that’s largely because scaling solutions are still not quite at maturation.

Nick (50:53):

As you look to the future of your own pursuits in terms of the research you’re doing at The Block, and again, I want to encourage listeners to visit The Block and look up your research. Some really great articles, some of which highlight the work at The Graph. What other topics or things are you interested in exploring?

Hiroki Kotabe (51:11):

One of my next big interests, that I’ve been spending some time studying, is about scaling solutions for Ethereum or even scaling solutions in general. Because blockchains, they provide a lot of security and so forth, but the decentralized network of nodes does invoke a extreme form of data replication and processing, which quickly becomes computationally too intensive. And you can see that in the fees, Ethereum gas fees and so forth. So I think that scaling solutions are super important. First, so far, from what I understand, I don’t think that the future web3 is going to be solely based on Layer 1s operating alone. I think that Layer 2 and even layer three and so forth are going to also naturally evolve to the speed-up processing. Similar to how we’ve seen how money operates, we don’t use cash anymore much at all.

(52:09):

I mean, we use credit cards, which are layer three solutions. We use exchanges, Layer 2 solutions. DeFacto, Layer 2 solutions and so forth. So I think that, similarly, there’s going to be ways that we can extract the security from Layer 1, the benefits from Layer 1, and retain them to a reasonable degree while trying to maximize or improve certain other aspects like speed, efficiency, lower fees and so forth, that make it a lot more accessible for the masses. People without millions of dollars to spend on transacting with huge gas fees. So yeah, I’m really excited to dig into that more and also look into how possible interactions between platforms like The Graph and Layer 2, side chains, scaling solutions, how all of those things are, possibly, going to interact in the future. That’s a really speculative new area, I would say, in terms of web3 technology, but I think that anywhere that valuable technological developments will happen, they are going to happen because a lot of talented developers are going to see, “Oh, we can make this benefit by connecting these protocols or these technologies on the backend.”

Nick (53:23):

Well, Hiro, I want to thank you for being so gracious with your time and taking the opportunity to speak with me. I’m really interested in your research and so much of what you’re doing is valuable, not only to members of The Graph community and those interested in the web3 space, but Crypto and blockchain in general. So, if listeners want to stay in touch with you or follow your work, what’s the best way to do it?

Hiroki Kotabe (53:47):

So I can be contacted a lot of ways. You can find me on LinkedIn at linkedin.com/hirokikotabe. You can also email me, if it’s more like a formal note. If you just want to, informally, reach out to me, I’ve been using Twitter a lot, @BlockHiro. And all of those things will be in the show notes below.