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Hi, welcome to epicenter Bitcoin the show, which talks about the
Technologies, projects and startups, driving
decentralization, and the global cryptocurrency Revolution, my
name is Sebastian quechua, and my name is Franco and grain.
We're back again today. All guests that we've had before
attempts once and many of you will know him, he's been very
vocal in the Bitcoin Community, making people very angry on
Reddit. And then the last episode, we
call them the big coin by posture.
And he's been busy keeping that up but he's also done a lot of
really interesting work in particular.
He's written an opinion, a white paper on this whole idea of sort
of blockchains before. Bitcoin, which is very
interesting. So, thanks for coming on today,
Tim. Hey, thanks again for having me,
guys. Appreciate it.
So yeah you have a you always keep up this enormous volume of
writing which is very impressive and you have you've written some
some really important I think sort of thought pieces on the
kind of evolution of the space among other things.
You've written this white paper on consensus as a service.
Can you talk a little bit about what this sort of, you know what
the main idea of things? Sure.
So last year I was continually struck by this, this notion that
we are identifying people on both sides of transactions
through these different on ramps and off ramps, but we aren't
doing any doxing on validators and understand, you know, the
whole purpose of Bitcoin was couldn't trust.
Anyone couldn't trust the validators, so we use proof of
work, but if you're continually to doxing everybody, but the
validators. Why Why bother using, you know,
Bitcoin itself? Why not do some kind of database
and it was towards the end of the year.
The it's I began seeing a number of different startups emerge.
And then earlier this year, the it's kind of did a different
approach. They did a basically a, it's
called now permission during a gated validation within the
network and that's specific to specific use cases.
This is not to say that it's the only approach.
And even compete with Bitcoin like in my view.
Let's Bitcoin be Bitcoin and not try to turn it into a million
different things that it's not particularly suited for based on
its capital expenses that are involved with proof of work.
And so it led me to write this report I guess that two months
ago and this is main thesis is okay, guys.
Well, it's the end of the day. How are we going to do?
Validation is our is one approach.
Much better than the other or they both have different
different advantages and disadvantages and my I guess
General take over over viewer, take takeaway, is that?
There is no one-size-fits-all. They both have trade-offs and
that they'll probably both coexist so they different
customers want to use both. Yeah, absolutely.
And I guess this is the idea though, because many people seem
to think in the Bitcoin space, that the very idea of having A
blockchain or doing any of these things, sort of, but separated
from Bitcoin, that doesn't work. And that makes no sense.
Why do you think that idea is so held by so many people?
Well, number one, they own a lot of Bitcoins so that they wanted
to be that way because they'll hope that those coins.
Appreciate, that's totally fine. You know, if, if you were around
100 years ago, 115 years ago and you're like, oh I I think the
the aeronautical vehicles are, are the way forward and you
start. Testing and then make sure you
might have been writing your thesis and they became big.
But you may have just invested in companies or a company that
didn't pan out too well. So I think that there's a lot of
also ideological reasons, you know, there's a number of people
out there who think that Banks and Wall Street and all this
other you know the traditional Financial sphere just can be
destroyed. I'm not going to say that there
won't be margins will be eroded or there won't be entire
divisions removed like back officer or something that I
Speak to that. I really don't know.
But, you know, Banks each have their own, you know, in my
experience of talking with different banks.
The last three four months has, they've all had their own teams,
internal teams working sometimes, multiple different
groups of people working on how to integrate this technology.
So, just like you had pgp and SSL and Linux and open source
software in general, these ideas that were forked in merged
within Enterprises 15, 20 years ago.
I think it'll end up happening with this Tech to, I mean, You
don't, you don't necessarily need a Bitcoin like blockchain
though, to do all those things and I think that that Ruffles
some people's feathers because they bought into this, this
narrative that's prevalent on Reddit and it conferences that
the only one and the way the truth and the light, the the one
and only Savior for four or Ledger.
If you will is the Bitcoin letter, maybe, maybe that is the
case. But I have some doubts and we
could talk about some of those in this, if you like So, I mean,
it seems to me that we're talking about a very different
thing. And it's often important to sort
of like conceptualize that, right?
Because when you, when you start talking about a ledger where you
have different entities that are known and you know, we've done
some podcasts with well, hyper Ledger or areas that are both
sort of tackling that space. Then it's a really different
thing. Right, from where a network,
where it's open. In and sort of people in China,
can mine on it, on anybody can turn their machine on and
participate, right? And it's it's trying to solve a
really different problem. Yes, for sure.
The, the Bitcoin solves a problem for cypherpunks, how can
you do, how can you process transactions?
I can Section 1, how can you process transactions without a
third party? You trusted third party.
And if you already, I fear a fear of financial institution,
you your, your starting assumptions are different.
You already have identities of your customer base, your staff,
your partners, and your payment processor.
So you don't necessarily need proof of work, but you don't
need a centralized database to there's still advantages of a
distributed Ledger. Resiliency such as the ability
to conduct transactions without having to worry about
necessarily counterparty risk for a variety of reasons that
are trying to be tackled by like you said like hyper Ledger Eros
and Claire Maddox, maybe at the end of the day we end up with
the weird Fusion between distributed databases and
distribute the ledgers for some of these companies.
I don't think that the company, these large institutions are
going to going to disappear. I mean they they all have
enormous amount of capital to use to either buy any of these
companies. That have traction or to create
their own own systems that create this utility and enhance,
you know, whatever customer services reduce costs of what?
Yeah, yeah. So I think that regarding the
sort of Bitcoin Reddit narrative that are the Bitcoin maximalism
as we might call it. I think part of that is also,
you know, every all these companies that are doing these
really Innovative things with Ledger's sort of all get dropped
into like the Bitcoin space, where they I have been inspired
by a Bitcoin to do the touch things are doing now, but their
interests don't lie with you. Like you said, the cypherpunks
are not in line with the cypherpunks.
So and I mean, I think you've seen this before in other
Technologies as well. I mean, just look at Linux, you
know, it's powering all Apple and Android phones.
And, you know, Apple is very much a close technology now.
So I think that's sort of part of the problem also is that we,
there's no line between what Bitcoin is trying to achieve.
Achieve and what is perceived to be like for it says, with Hyper
Ledger is trying to do or areas or these other permission
Ledger's that we can get into that later.
Yeah, I mean, actually, one of the funny things about this is
that when you look at this coin desk state of Bitcoin report and
they said, like, if you see fundings for Bitcoin startups,
the includes like Ripple in there, and things like that.
If it's just, is quite funny, right?
I've gotta find out to be extremely misleading as it is.
Yeah, totally. People speaking of VC funding,
so yeah, as of today we've had about 800 million dollars, put
into this ecosystem. Have a post about this about a
week or so ago and if you just do the cost of customer
acquisition. So typical Bank in the u.s. it
cost about $1200 on board people.
And if you just do the division on 10 users, again, the whole,
you know, thesis with Bitcoin is you get to be your own bank and
your own bare asset. But if you look at the address,
The entities on on the Bitcoin Network itself to unchain side.
There's only about three hundred.
Seventy thousand individuals or entities that actually control
any, you know, any number any large amount anything larger
than one Bitcoin basically you can go to the Bitcoin really say
the distribution of this 99 98.9% of all Bitcoins are held
by by these entities. So if you just do the math on
that it's about 2400 dollars per individual actually sorry about
22. Hundred dollars per person or
entity, which is about twice as much as Banks do for customer
acquisition. So, my might not be a Perfect
Analogy, but the basically, these are spending enormous
amount of money on trying to get people to do something that they
don't want to do, or individuals prefer using trusted third
parties, like coinbase and zap. Oh, and I understand, you know,
nobody wants to sit there and have to go through the hassle of
securing. Their own private keys.
But if you're using these trusted third parties, why don't
you? There's not a whole lot of
advantage of using them. Versus a large bank and this is
not to say one is better than the other, but if you just look
at the actual metrics of it, if these exact go and clean base
end up having to get licenses and do all the same rigmarole as
Banks do at the end of the day you just end up with a less less
secure bank and again maybe maybe things will change in the
future but that's kind of the way it's played at the last I
guess, six years or so. Yeah.
I mean of course you still have the option right with Bitcoin to
not do that. Like there's a lot of threads
now about coinbase wanting to, you know, prevent you from
sending certain point or coins to certain addresses, or you
received it from certain addresses, like, gambling sites.
They'll close down your account and then you're staying.
Like I was told and maybe this is completely wrong.
But, you know, there s VB, is they have basically 10
controllers, 10 people, monitoring the blockchain
active, We any time looking to see where transactions are are
going or where they've been received following basic us,
believe that they work on behalf of coinbase again.
Yeah, just what I've heard from multiple really good sources and
that makes sense. You know, hey you want to you
want to track Providence to see if it came from illicit trade
in. The reason I'm saying, it makes
sense, is they want to keep their banking license or being
chartered and so forth. So like they have it in
incentive, not to have that revoked, so they go and look at
the stuff. So I'm not The coinbase is going
to become a closed ecosystem, but yeah, for now you're right,
you can withdraw a coins and send them to different addresses
and so forth. But if you already dachshund
people on both sides, if you send wines from from coinbase to
zap, oh why do you need Bitcoin? Why can't you use one of these
other Ledger systems? There's no reason to go through
a minor in China to do that. I mean, I agree with you, right?
There, is this 10 cm and I think the bitlicense stuff is totally
in that direction. R.
I mean, I'm not exactly sure if that's still in there.
But for at least a while, it said in there, right?
That bitlicense companies, that get a bit license, will need to
do kyc on both parties or both sides of each transaction,
right? So, and actually, in the digital
gold book, it was also written a basic about you said, now that
coinbase has had for a long time.
They've had to, you know, basically try to figure out
where you send money. And make sure that it's below a
certain amount of things like that.
And and otherwise they would have to perhaps reverse your
payments and things like that. And there are sometimes reports
that happening on Reddit. Is it all the time?
I saw some of that this week actually.
Yeah. Right so and of course if you
take this further, write a mean, if there will be a point where
maybe it says, like oh you can't send from coinbase to some
unknown address and if that happens on a wide scale, then,
yes, I mean that really sort of rates Bitcoin at some point but
I personally don't think I think that will happen.
I think we're probably will happen is just a drives people
to using wall, etcetera, run locally because they're you just
can't do that. Yeah.
But those people are not who are those people, right?
Those are not the masses, those are.
Yeah, I mean, of course, it remains to be seen to what
extent this breakthrough and I mean I think that's that's one
of the one of the interesting things that one of the ways I
think about this, But it stays is really ambitious Gamblin.
Bet to have this Global decentralized, cryptocurrency,
peer-to-peer cryptocurrency, and it's a long shot.
It's a hard thing but it's a revolutionary, huge idea, right?
It's a huge idea that people keep their wealth may be in
developing world and other countries in Bitcoin and, but a
lot of startups that are sort of implicitly making that bit and
then there are others and Laughing, that's where the
permission letter idea comes in. That's a well there's something
interesting about this technology but we're not going
to make this bet that it's going to like power this new world
currency. But we'll use it for something
else. And then that's sort of obvious
in near and it's not nearly as risky because you don't you
don't make out of it. Sure, obviously I have no
crystal ball, a lot of again and this is not to be saying that
these are bad or entrepreneurs are bad in this space but almost
all I don't say almost all significant portion of the
funding has gone into it. So far is based on Forex plays
basically, you know the bitpay, one of the guys was just talking
this last week that hey we hold as many Bitcoins as we can.
We try not to sell them at least not on exchanges because we're
Thing that it will appreciate and therefore investors make
money off of the appreciation. Well, that's just an asset
manager. That's just a 4X play.
That's not, that's not that's not payments.
I mean if you go to Angel list right now there's just under his
a big pay said they are basically trying to speculate on
the Bitcoin price. Yes yes.
I mean I've heard it like 4 other five.
I've heard it since the last fall but this is the first time
anyone said it in public, you know hey we're holding on to as
many coins as we can as a result end up having you know large
amount. Out of of underwater coins on
their books. And again, maybe it turns out
well and you know, they make a lot of money because it goes at,
you know, 10,000 some like that. But that's a 4X B, that's not a
payments bet. And so as a result you end up
like Robert Sanders pointed this out last year, basically, the
whole ecosystem of the Holy Ghost, a significant portion of
the ecosystem is relying on price appreciation.
So they're holding onto these coins and having to rely on VC
funding on Fiat cash. Another National currencies
actually build the The system itself there was one criticism
of the article I wrote I guess a week or so ago about how you
know miners over the last two years have received about 1.1
billion about 1.1 billion dollars worth of rewards, you
have the wealth transfer from parties one party to another in
the form of the seniority of this block reward and you know
they didn't they're not spending that.
You don't the only company I believe that's actually spending
that is bitfury on and on other Investments improvements to the
ecosystem. Everyone else's is effectively
cashing out which is great for Them.
But the point is all these other startups are still having to
rely on VC funding to actually build it.
So Robertson's analogy was like it's like relying on People's
Bank of China to actually build your economy rather than using
your own domestic currency to actually build up.
So again, you know, people in practice versus people in
theory, people, in practice, our want to use this informational
commodity to speculate on as an asset rather than, as an actual
virtual cash or virtual currency, So Perhaps, Perhaps
them startups should rather be mining and using that mining
reward to fund their companies rather than getting VC money
because it looks like, like, like miners are making more
money than the startups are. Yeah, it's a zero.
Okay, so the question is, is it what's your thesis like is?
Are you, are you willing to bet? Like so mining is is a force
play. You are literally converting one
National unit of account for virtual unit of account with the
hope it's going long. On one currency in short on the
other. And so, you know, are you
willing to play with variance? Is that the dance you willing to
do? Or are you willing to bet on the
they'll be uptake through some other consumer-facing product.
And again, I'm not saying one is better than the other we know
mining zero-sum. The only people who actually
really make money are those who either steal electricity or have
some subsidized electricity somewhere in China or Georgia or
something like that. So yeah, there's trade-offs and
I'm not going to say one's better than the other.
I certainly can't do that. Kind of judgment.
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Let's talk a little bit more about this permission.
Ledger's case. So, I mean, one of the arguments
is and I it It's an argument that kind of makes some sense is
that if you have a bunch of people who are known, write a
bunch of banks that operate. Is this Ledger Network?
Why do you need in the first place?
Like why is a blockchain necessary?
Then what value does it provide? If it's not that censorship
resistant think that Bitcoin does?
It's a really good question. I get this asked many times I
think Roberts has actually done the most intellectual heavy
lifting on this again. If people aren't just, did it
really recommend just looking through the report, especially
the last section, before the list of companies that I look
at, I think the ins it's between like, page, 25, and 28 or so,
and they're actually the 20s. If you will, the 20s in his
thesis. And I guess a couple other
people at this point is the hey you could use this data layer as
both. And to structure, whatever, kind
of instructions do have this Turing completeness at several,
these systems. Have not all not all the
margarine complete obviously, but Aris, clear, Mattox.
And I guess a couple other ones could modify to to use some kind
of Turing complete virtual machine.
The idea is you get to basically use The Ledger itself as the
settlement mechanism which speeds up settlement finality
between numerous Different. Well in this case Financial
image instruments like the this report again was is basically
this focused on how can financial institutions use this
for effectively settlement clearing.
And so you could reduce, you know, settlement time from from
t, plus v, 2 T to 10 minutes or 10 seconds or whatever arbitrary
amount of time you want to do and that supposedly will save
people costs whether that does it along when we'll find out.
So it's some point in the next six to 12 months, I think we'll
have more data to See if it actually, you know, is a good
idea or not. So it's he idea here that the,
because, of course, he could have some Central party, that
just does Vicki the settlement and then they could do just as
good of a job as using a blockchain - oh, is he is the
advantage here that you don't. People don't want to trust and
Central party to do the settlement and that's why using
a ledger is better for that. Well, we already have, we have,
we have Clearing Houses in cchs. Ccps were created.
You know, after 2008 to do just that, like, there was no
Clearinghouse for OTC derivatives.
And I know, at least it's clear backs.
And, by the way, disclosure, I'm an advisor to both hyper Ledger
and Claire Maddox. And just want to let people know
that the idea was. I believe that clear Maddox is
saying, hey, this network that we're creating is actually the
Clearinghouse, or sorry. It is the counterparty, the is
distributed. So you have a In counterparty
effectively and which makes being it creates a new Financial
control and I'll you have segregated, the only have
segregated facilities for you know a variety of different
exchange of broker-dealer so forth.
But now that you have this other Financial control in which
nobody can actually it becomes increasingly difficult to
reverse those transactions or manipulate this transactions
that could be actually a reduced costs and create more
transparency within an organization with Bitcoin
itself. There is no way to it from a
technical standpoint. Point to actually prevent a 51%
attack or history reversing attract.
It's an economic incentive and economic issue.
There's no, you know, I think it was it Andreas Antonopoulos.
He got, he got scolded on Reddit for saying, hey, we could
rewrite the code or we could, you know, Blacklist different
different nodes. That's if you can Blacklist,
then you that you've kind of defeated the whole purpose of
Bitcoin itself. Right.
The whole purpose was it did its Dynamic membership?
Our who are signing these coinbase transactions and if
you're black listing them, then you're just going back to this
old system. So at least for censorship with
these permission Ledger's, you know, they're assuming that, you
know, irreversibilities the priority and you can actually
contractually obligated make that happen with with, with
gated with permission. Ledger's, you sacrificed some
censorship resistance for that, but at the end of the day,
financial institutions are more interested in irreversibilities.
And censorship resistant. So why is that 51%?
Attack threat such an issue? I mean, like, let's say you want
to do security settlement on the blockchain, because I mean,
after all, so far, there hasn't been a proper 51% attack because
it's been around for a long time is just that big possibility
that it could happen such a big problem for this use case, it's
two things. Number one, ignoring 51% for a
moment, any given day, you are Have two or three pools and
simply just have no incentive to add more transactions.
So you only have the coinbase transaction one transaction in a
block. So you have, you know, thousands
of transactions, of pileup, regardless of bees that don't
get included. So you have a interesting game
theory issue going on to where if you're trying to build a
time-sensitive settlement product or something that ties
in with the Bitcoin network, has a settlement product you're
having to rely on these the suit Anonymous minor.
So, actually, we actually pretty much know.
No, it's not to include or not to include or to sensory
transaction so forth but the 51%.
Yeah, who do you call if that happens?
There's no terms of service. There's no contractual
obligation to go through with this.
So, you're SOL basically just like, in two years ago, when you
had that effective for, you know, for your 20 4 blocks that
were thrown away that added up to be tens of thousands of
dollars for something, for some customers, for some payment
processors, in March 2013. And so, it was There hasn't been
an attack because there's no release incentive attack.
But if you start beginning to put large value transactions in
bulk, you now have a new potential attack Vector.
I think that, you know, you've had guests on with Jonathan
being or maybe at least you've talked to him on the off chain,
if you will about this, you know what what are the ramifications
of putting watermarks coins are colored coins or metal coins on
to a Bitcoin like blockchain that are transferring octane
assets are to trying to To settle off, chain assets.
There's again, you know, if it's already off chain and you having
identified these different users and so forth, why would you go
through these student on this validators?
The it's there's no terms of service for its communal.
That's a communal issue, right? Like, well, who do you call?
If they reverse your transactions, what ends up
happening? Is you go on, read it and you
complain a lot. That's what happened there.
Was it? There was an instance, just last
month, a user, or two months ago, a user accidentally sent
was like, 85. For a transaction fee.
And because a bit GO error with big go.
And they sat there, there was for a whole day.
There's lots of yelling and screaming.
And finally, I was a bit main, they and they run a pool to
Chinese pool and, and pool said, I will refund your cash.
Okay. And so, like, in the future, you
know, I are you, are we gonna is NASDAQ ready to have to go on to
Reddit and sit there and complain all day to have, you
know, a hundred Bitcoin transaction or Watermark coin.
That's worth, you know, you know, I must have value, like
Apple stock, you know, put some 150 billion dollars of Apple
stock on the network and you'll have new incentives to
potentially reverse it, because miners aren't really effectively
destroying enough Capital to protect that.
There they no way for them to recognize that that colors exist
and so forth. Maybe there's some, maybe
there's some solutions, that, you know, see some proposals for
for getting mining pools, color, or Lair, or Watermark to wear,
but that y goes through this rigmarole.
Why use is proof of work network.
If you're already have the identities of all the different
parties, All right, so one of the issues would be the bullet,
a hypothetical. Somebody said we want to start
trading stocks on the Bitcoin blockchain using colored coins.
And then now there is a 51% attack something like that and
the ownership is changed, right? Like let's say I managed to
steal some Apple stock this way. Then what happens, right?
Does that mean like for example, am I going to be able to use the
owner? Ship of this cryptographic token
to now, receive the Apple dividends and stuff.
Or does that mean? Because actually, I stole it and
somebody can prove. I stole it that even though in
our own this cryptographic token, I don't actually own the
underlying asset, right? So that seems to be a big issue.
Sure. Yeah.
So I really couple articles last year with the help of some
people like like Jonathan Roberts Sam's.
The idea is this is if you in the instance it's somebody ends
up. With a good or in this case a
dividend, it's not there's the companies left with two choices
right there left was either paying that dividend which then
makes them liable to basically being sued by either knowingly
paying a criminal or somebody that doesn't want to wear number
two, if they don't pay and they, you know, reverse that
transmitter trying to reverse it or they just cut off that that
coin or whatever it might be, then it defeats the purpose of
using a decentralized network, right?
So, I think the See the funny quote, I've heard most recently,
he's with IBM in Samsung doing that partnership with with the
washing machine Richard Brown. It was an on-call Richard Brown.
If you guys aren't familiar, is got a great blog.
He works over at and UK at IBM and this is his own personal
view. I believe was, what happens what
happens if we put these digital these virtual Wallets on on
these different machines, these different appliances and they
end up in. We have these Bearer instruments
flying around in one day you wake up in your washing machine
somehow. Ended up with property titles in
Deeds to, you know, homes and hospitals and stuff like that.
Like, why what do you do in this instance?
So it raises up a bunch of, not a bunch of really good
questions. But then a day, if you have real
world, identity attached to any of these things, you don't
necessarily need to use a proof-of-work blockchain for
this. So, if you have to turn to
reverse those transactions or go to court and say, hey Court, you
know, my property Deeds sitting on a washing machine, a thousand
miles away, you know, what do I do?
Or you know what my heart my house.
But the the fire in my washing machine is bald my house.
Like I get it back. Yeah.
Or you know you see this already happened with big we've had
between 2009 and 2014 and had about a million Bitcoins that
were lost stolen, see is distributed.
We ended up with was out there. The rightful owner, legitimate
owner, however, you want to Define it.
And so, this devolves into questions of bona, fide
ownership and Nema dot. Like, it was a really good law
article written earlier this year.
Talking about encumbered Lines or coins that lack good title.
And since we've had, you know, like I said, a million coins and
been lost on Steve's and Andre lost or Source re-released on
and so forth and they're mixed and pooled.
It creates a problem for for those who have clear tie, like
who knows if this ever gets big enough to actually sue people
for, but there could be a chance a case made the it's even coins
that you guys might have were proceeds of an illicit
transaction. There's no way to effectively
cleanse these tokens from encumbrance from previous
illicit, or accidental trades and so forth.
So we end up having is you have an economy that grants to a
standstill because none of its Exempted from Nemo dot.
Even got Switz are our currencies in the world are is
once they go through a custodian, they're magically
cleanse, we don't have that yet. In the Bitcoin World, maybe
there will be one at some point. But this this this Bearer
instrument is just dual sided, right?
You have the ability to be your own paying, but at the same
time, You lose that somehow. If you lose a credential that
practically you lose access to not just the coins as a Arts
early, the assets as they are today, but in the future, maybe
homes, the cars boats and so forth, but I mean, how is that?
If cash, I mean, if I get a receipt you know I pay
something. Someone gives me a ten dollar or
ten years or whatever that at one point were stolen and maybe
that number is recorded somewhere, still?
That's that's now my money, right?
Nobody's going to come and Take it away.
Sure sure. So this is not going to similar
way. No.
Also. Right now there's a principle
called me MoDOT. It's actually longer it's a
Latin phrase and I've written about it three or four times.
I'm not the lawyer. I talked to the lawyers.
Have been looking into this including Ryan Strauss and
there's a guy Perkins Foy Perkins boy named.
I think his George Fogg who wrote an article that was quoted
in the financial times. A few months ago, the general
idea is, hey, legal tender laws. Apply to what we have these
National currencies and I'm not defending legal.
Laws per say I'm saying, but the way it works is Cash is
specifically Exempted from having to deal with this
Providence issue. Because just as you said, if it
if your cash was at any time, proceeds or took part in illicit
trade, the economy would grind to a standstill because you just
wouldn't know what to use this cash for.
Oh, I just, let's go to leave it there, right?
But Bitcoins are virtual currencies at this point, still
haven't gone through that kind of vetting process.
There's no such thing as a custodian that cleanse Azure
provides exemption to is encumbered coins, if you will,
or encumbered virtual assets. Maybe there will be at some
point but they're not. So yeah, I think that's
something that's the legal Community within the legal
profession. Within the Bitcoin Community is
debating. You see it on Twitter
occasionally I'm sometimes interjected because I think it's
I think it's a very interested in Bitcoins recreated all that
all the problems we've had the last 400 years but with the
intermediaries as custodians with currency.
So and we get to see it, you know, in a very compact 67-year
form. So it's a very it's a very
interesting way of looking at history and seeing why
intermediaries were created in the first place and why, you
know, what's the purpose of disintermediating, if we keep on
creating the same, intermediaries today's magic
word is hype hyp e head over to. Let's talk Bitcoin.com to sign
in enter the magic word and claim your part of the listener
reward. So what were the interesting
parts of your white paper? Or the thought part that I
really liked is the way that you sort of.
Look at the entire spectrum of Ledger Technologies from the
fully decentralized to the fully centralized.
And on one end we have like Bitcoin type technology on the
other end. We have the existing banking
system and Of the things that you do in the white paper.
And you quote mayor Roy, who's got this really nice chart of
sort of the the different levels of tokenization.
I would say that we have sort of in this Bitcoin ecosystem but
it's a broader sense like the financial technology in
ecosystem, can you talk about some of the different levels and
the use cases that we would have in each level are going from
like for instance like the hyper Ledger type of Technology.
E all the way down to Bitcoin work.
We see this going in, like maybe some lunch shots like ten years.
Wow, long shot, ten years so that's really good questions.
Yeah, so for the, for the listeners mayor Roy, he
published this really interesting two different
charts. If you look on the paper, it's
on page 13 and 14. Basically, he takes, you know,
different assumptions. What are you what are your your
investment thesis? What is your invention thesis if
you will from token gnosticism, which would be I guess heiress
and Hyperlite Your ticket the currency maximalism some kind of
cryptocurrency work run wins out for everything the Bitcoin
maximalism hyper Bitcoin has Asian hyper Bitcoin is a shinza
theory. The Bitcoin takes over
everything and anything and everything.
You know the the financial industry is completely in
upheaval and destroyed so forth. So, you know, the the there's
different levels of this and the VC thesis so far at least the
public stuff has been towards, you know, big Coin maximalism at
least cryptocurrency maximalism and even to some extent, hyper
Bitcoin ization. So there hasn't been a whole lot
of funding really in token agnosticism and I think that's
not because these are bad or stupid or anything.
That's has more new like the narrative has been.
You know, since 2009 they take one Ledger is going to rule them
all and is going to absorb all the purchasing power of all
these different Fiat currencies and and so on and so forth,
maybe that happens. But there's also a If a good
chance that, that doesn't happen if it doesn't happen, then what,
what, what can you invest in and what kind of start ups are out
there to do that? So yeah, the report primarily
looked at levels 2 & 3, Tok, agnosticism and cryptocurrency
maximalism. At least companies that would
fall underneath that. I don't think that the people
within those companies. I don't want to put words in her
mouth, but I don't think that they are necessarily maximalist
towards a particular token or currency.
I think that they're more looking for this this you these
Has requirements that these different companies have and
maybe again I think the tokens themselves are just a red
herring. Like maybe there is a use for
maybe there, isn't it? Disciplines on the business
requirements. So what for whatever reason,
though, if when you go to these meetups really, really smart
people, all of them were much more brilliant than me, higher
IQs and so forth, really good software designers, but on the
finance and econ side, you know, I think that they could learn a
bit from financing econ, gurus and in the actual sexual like
Financial world. But tend not to in fact, not to
pick on point as but they had an article like villains Bitcoin
last year and you know, the some of the villains I have there
were these econ gurus who tried to, you know, give free advice
to the the Bitcoin Community saying, hey, you guys might be
interested in knowing what's happened before in history but
you know, if I'll give you one small like that, I was in
Singapore in November and I was a couple different events out
there for a week and One and one closed-door session.
That was a VC, a lady who is, who's out in California, who
works for VC firm. And she's like, oh, the hashcash
reinvented rules of Economics, laws of Economics.
We don't need to listen to these other guys and I was like, oh
wait. So you're saying that the whole
the whole world of economics has been overturned because a big
fine. She said, yes, and stuff like
that. So I'm not saying all these are
just like her but I think that there is a bit of Wishful
Thinking then kind of Pervades this community, maybe that will
change and maybe my sample size is way too small.
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Now if we look sort of the startup space, are you seeing or
should we expect as so? For instance, if Bitcoin doesn't
work out or if we see the price stagnating over the next 70
year, for instance, can we expect to see more startup movie
into the sort of level 2 territory into the token
agnostics type startups where Bitcoin is not at the like sort
of the center of attention. I think you'll have an easier
way. I again once you start talking
to financial institutions that have been destroyed like that's
a prediction. I got a 2014 is the year, the
banks are district 2015 of years since banks have been destroyed.
Well you ask why? And then you start talking to
Banks signing out. Hey what do you actual business
needs? What and what are the what are
the reasons you haven't been killed by and we were killed by
Bit Coin yet and you start seeing, you know, hey, maybe
there's some solutions. I can provide some problems but
maybe not, maybe none of this technology is actually
applicable to them. We certainly haven't seen any
large production scale, companies have done that even
though you know obviously I'm hoping you're betting on.
If you will with my advising time, some of these companies do
pan out but it didn't today. You know, there's specific
business needs that. These companies have
organizations have that need to be fulfilled.
Are you able to build an actual product for that?
And it, you know, sometimes there's a token that might be
you sometimes it won't be. Sometimes it may be big.
My I have doubts about necessarily just be big point.
It's a whole nother conversation though.
It's so as far as startups moving into space since I wrote
that report looked at eight different companies, I've
probably come across another eight nine, maybe ten startups
and of receive some seed funding at some level have at least some
relatively competent developers and then come on my radar that
are trying to build products. So that's I suspected that will
continue going on for as long as there's both capital.
And there's actual like meetings with financial institutions,
whether the willing to have that Dialogue.
So what's interesting there is the you know these companies
have these business needs, okay? Once a criticism of I said the
best coin space in general is that it's trying to find a
problem to solve that isn't necessarily there.
Well I one area that I think really needs to be solved is the
micro payments area? Like I really think that they're
there can be a needs to be some really serious Innovation there
and it can benefit a whole lot of interest Industries like
whether it be paying payments For content, for instance, or
you know, like paying for Wi-Fi, little things like that.
What are your opinions? Like the biggest areas in which
there can be Innovation using these types of Technologies.
Okay. So I can't speak for all of them
because I feared a million different use cases the last
year. I'm sure I'm sure everyone's at
this point heard and scattershot of all these different use cases
that are potentially use cases the Civil, we were the the
group's I'm talking to primarily looking Back Office Solutions
like they have enormous costs. Deutsche Bank did a study and
found the as a sector the banking sphere in the financial
industry spends about twice as much of it was like seven point
three percent on I.T costs. Relative 7.3 percent relative to
their overall costs compared to other sectors to do like three
point seven or something to that effect.
So they're spending enormous on I.T costs.
Why? Well number one you have to do a
lot of reporting now and since 2008 to being compliant.
You need to be very transparent. So is there a way to reduce
these costs centers? There are several banks that
spend well, over 45 billion dollars a year on operating
expenses and much as that's it related.
So you have all these Acquisitions took place in the
last seven years. The, it's the systems that don't
interoperate is there a way that you can reduce those costs with
these different Ledger's, that provide, not only settlement
finality, but transparency, provide the report reporting
requirement. Fulfill the reporting
requirements and so on, you know what I mean?
I mean, maybe I should rephrase my question.
What I meant to say is, is so consumer-facing.
We're so like, for instance, micropayments can be used by
consumers and, you know, there could be some great benefits.
There were some of the areas of innovation because I think
that's where a lot of the Bitcoin startups are trying to
focus on trying to find like these consumer-facing
innovations that can benefit people but the nurse not finding
them. Where do you think those those?
Yeah. It becomes a but with Bitcoins
thing like there's a website called but with Bitcoins.com
it's great like basically that's what's happened with these
consumer facing products. I wish them luck.
Good luck. But Micro payments isn't a new
thing like that was trikes, 15. 16 years ago.
In the.com bubble, there was many different company or not
many, there was at least a good handful flus and beans were two
of the ones that off the top of my head to try to do that.
So you if the end of the day it comes back to you know, what are
the frictions involved with that?
Well, number one, obviously of interchange fees.
But it's not do that for. Look at that for just a moment.
But instead, look at the frictions for the mental issues,
of people wanting to go in and out having to calculate this,
Nick Szabo wrote a paper on. This clay shirky wrote a paper.
This is 15 years ago. They wrote different articles
saying, what is the mental cost of calculation, or the mental
calculation cost of going through a nickel and diming
yourself, effectively on these different costs.
So I'm not saying that, there isn't a case, the I see people
talking about preventing spam but for most people spams on a
big issue for Most people not wanting to buy an ad is an issue
that modeling by content. We already have
microtransactions in the form of ads, like, Google is basically a
micro transaction engine, credit cards are micro loans.
If you will, although you have those interchange fees and that
I know people like, oh, that's 35 percent.
Well, it's in the day you probably have to spend at least
35 cents for a Bitcoin transaction.
Once once you have different things, play out such as the
block toward having and and so forth.
So I don't think Bitcoin on chain microtransactions are a
Golden silver bullet, you know, consumer facing solution, maybe
it is. But I haven't seen any good math
on it that this is sustainable. And there's already plenty of
Angel list listed companies. Like, if listeners are
interested as a website called Angel list you go there and you
put your start up there and, you know, payment startups is over
1600 and mobile payments is like, just around 1000.
So, even Norma's amount of competition that's coming in.
That has nothing at all to do with a blockchain, maybe block
change the solution, maybe it's not.
But It did in the day, you could be a, you know, it'll be an
execution race, it'll be a customer acquisition race,
there's a number of different variables.
And in one thing that's not being recognized is, is groups
like Facebook and even Ali Baba. They're getting money,
transmitter licenses to be able to provide, you know, basically
person-to-person peer-to-peer transactions for almost, no
cost. Obviously onboarding requires a
bank account so that doesn't help people that are unbanked
and underbanked but I don't think Bitcoin does either
because you know people Well, that are unbanked and unbanked
or underbanked they don't have access to cheap energy.
So they're not competitive mining so they can't claims that
way. And number two, you know, many
of these VC funded exchanges globally, different Emerging
Markets. You need to have some kind of
vetting process that they require vetting process through
kyc a melt all C's. So in that process, you end up
having to need a bank account in those countries, but those
people don't have Banks and bank accounts to begin with, to get
on top of these platforms. So I don't think that Bitcoin is
a solution for micropayments and maybe, not even for some of this
in Final payments up, but obviously, I could be wrong.
I know a line, Commerce did X and coins at pH.
They've all claim to have a bit of traction.
Even online Commerce. I was talking with one of the
team members and based on the numbers actually sounded like
they were doing more volume than Ali pay.
Sorry, bitpay, although bit pays been stagnant for over a year
now I think it's like 12 15, hundred big ones so maybe maybe
some of you heard of it beat Bigfoot bitpay right now.
But still I think that until more people publish numbers in
the actual math and Like the round trips and stuff like that.
I think that we should be skeptical of gigantic claims,
without any evidence. Yeah, I mean, I think, obviously
with Bitcoin, but there has been this big bad that so far, hasn't
panned out in May in different areas and I guess it's hard to
predict one of the things that sort of strike me about what
you're talking about. Now, I was recently at an event
and something similar came up and the guy was they make me
point. It was like, but If Bitcoin
doesn't, you know, if because doesn't work out, if that's not
the focus on, I mean, there are all these other people doing
this new things, but then it's like selling it2 selling
software to the, IT staff of a bank.
But it's not doesn't have to same revolutionary excitement
with it. But what do you think, what you
think of the scope of this? Do you think these permission
Ledger's stuff in a sort of an optimal case would like Lee
fundamentally change things or is this just like I've heard
sometimes the comparison like better database technology
which, you know, maybe it maybe one could build some significant
businesses but it's not exactly you know, doesn't exactly get
people excited or make documentaries about it or God
knows what? Yeah, sure.
So Michael Casey Wall Street Journal and a call with him a
couple months ago and he's like, oh it's not utopian though like
where's the utopianism too? And so, yeah, it did.
The day, you know, everyone has their reasons for why they were
in this space and it seems to be a at least we.
This is there's no argument that a lot of it originally was
politically motivated. So if you're politically
motivated, and you're certainly not like the JAMA tonus is of
the world of the Roger of Errors of the world.
They want to you know not have to deal with these kind of
trusted third parties that did exist today.
But the question is is is that actually going to play out like
our laws going to Appear are human institutions going to
disappear because of a Bitcoin like blockchain or Bitcoin
itself and I'm skeptical that just because it does not help
people, people aren't cypherpunks like in general like
we could do lots of surveys to figure out what is it?
The normal populist like that. You're actually trying to sell
this Tech to and they don't want to have to go through 47
different ways here, the private wallets, they don't want have to
their keys, they don't have the epoxy, their laptops, or spend,
you know, 37 hours looking at YouTube videos on how to, you
know, do the Different steps to to get away.
Or they said it towards like that.
It's a lot of friction, JP Connick.
He just wrote an article. If you guys aren't familiar,
he's the one who first wrote, the FED coin article many months
ago, and he just wrote an article a couple days ago on,
like, why has, why has the consumer adoption of for retail
payments? Just not taken off and he
actually cited some of the stuff I did on bitpay.
Some of the numbers there, but the general idea is you have
these frictions, which one's work requires, which one
requires more hoops, Go through using a simple credit or debit
card in a developed country or going through all the Hoops, to
get a Bitcoin and spend it and based on, you know, his thought
process and his experiment or thought.
Experiment is look, you just have to its mental gymnastics.
I have to go through all these different, all these different
Hoops to get to bitcoin to sell it for another National growth.
Effectively, sell it for another National currency.
Why don't you just keep your dollars and spend those dollars
through these micro loans, through credit cards and so
forth. This is not to defend the
incumbents or the status quo and you And the greatest, it's there
was no margin to reduce cost of reduced and consumers.
It's an additional benefits. But if you're not providing
those benefits, upfront and visibly to Consumers.
Why are they going to adopt it and so far that value
proposition from payment processors hasn't hasn't Arisen
so maybe that'll change but let's look at the facts just
over a year ago about 18 months ago there was you know just just
under around 20,000 Merchants it accepted Bitcoin today there's
over 100,000 and during that time so you had a queen tickling
Of actual users or Merchants accepting it, but you haven't
had a Content bullying of users actually going through and
spending submitting these points.
And it goes multiple reasons. Number one, the frictions and
the hoops and summer to the the fact is that most of these
people who own Bitcoin own it for an investment for
speculative purposes, that's perfectly fine.
But their time Horizons are different to the fact that they
think the future utilities greater than the current utility
and that's totally irrational understandable.
But as a result, all these companies that are betting on
you know, transactional Just these payment processor.
It's they're going to be left on left high and dry as I say.
So yeah I think that wanting to disintermediate intermediaries
at find. I have your own philosophy in
the day. What's actually going to
actually happen? Not just what you want to
happen. Yeah, I mean, that's true, I
threw this. What I said, I feel that once
you sort of take out the ideological, okay, libertarian
ideas, which are Not everybody's political leanings.
Especially I mean, specifically not mine, then you're left with.
Okay? Then what's the point?
Yeah, but I mean, I'm gonna have to disagree here and I think
there is something to be said here.
Well, that there's just one case that I think only Bitcoin can do
and that is potentially massive and that's simply the idea.
Having like a Global Currency that you can sort of hold
anywhere in the world. You know, you can travel pay
with that, you, it's an alternate it's a better gold,
right? It says a store of value that,
you know, you can rely on and that's like finite and, you
know, you can send anywhere you can transport across borders
without being confiscated. And, you know, you can transmit
it to the globally and that's I think, is a huge potential use
case and I I think that's it's really compelling.
And I think also the thing is here, Bitcoin may all have all
these flaws, but for this use case, the key thing is trust,
right? The key thing is, you need to
believe that it will actually still be around.
In 10 years. It will be secure.
It will have its value. And so if Bitcoin Fails Like, if
some other guy comes with a better cryptocurrency like
ether, maybe maybe with proof of stake, will be perfectly secure
and scalable and cheap. Tetra.
But it will be I think almost impossible to take that place of
Bitcoin applicant has today because people will be like I'll
but the first thing failed. Why would I believe in the
second thing? That's not to say that big could
will succeed. It may not write.
So I mean we've often talked about some of the security
issues with Bitcoin but it at least has that shot.
That something really big and I don't think that's necessarily
so political it's partially political but I think There's a
real real strong utility there. I think that if in my personal
opinion, if if I have the choice between Bitcoin and its current
condition and something more similar to a Fed coin, and I
mean, that's a terrible name. I like it would never use
anything called fed going, but the what's common between the
two and what I think is really valuable.
It's just the ease of use and like that's that's four.
See what I find is most valuable with Bitcoin is being able to
use across borders, like, pay people like that.
That's like, that just blows me away and blows people away when
when you first show them. So, I think that if I had a
choice between 22 and made some mental gymnastics to say, okay,
well, I'm going to like trust this government currency which I
do. I mean, we all use government
currencies every day. I'm probably would pick the
government currency. Yeah, but I think What's is also
blow stomping that sort of blows me away to is the idea of a
global decentralized, you know, peer-to-peer store of value and
medium of exchange. That's just I think that's a
mind-blowing thing. But nobody uses a museum
exchange. Like we I think the between us
three, we probably know everyone who actually spends Bitcoins
like Theory like what's the transaction of volume on a given
day of gold, like who are the wealthiest gold owners?
Well, like these are these are questions like the end of the
day, you know, if it's supposed to be virtual cash, like that's
what that's what the abstract and section. 1 are talking
about, like, let's create, you know, an actual e-cash, digital
cash. Some kind of some kind of method
for actual payments. Payments is actually, I forgot
how many times was used, it was used multiple times throughout
the paper was like 11 times a week, so like that whoever
created bitcoin, had this view, that it could do, all these
different things. But in practice, it's not being
used for those things because people have different time
Horizons. Dances and so forth.
So maybe you're right. Maybe it could be used for this
all in one Global Currency, but there's no reason why it has to
be Bitcoin itself. I mean, maybe it is, I mean, I
agree with you actually add for as for payments are huge issues
with it, right. The volatility is a huge issue
for payment and then just that it's another currency it's a
huge victory for payments, right?
Like if you don't you don't want as a company to have like more
currencies on your accounts and you need it.
But that's something different from I mean even one of the use
cases that thing is you just like tax evasion for example in
the future and things like that, you know, and and evading
Capital controls like these are both huge use cases and I think
they're very compelling now whether one likes him or not
whether it's where people are attracted to that or not.
But I think it's those are just obvious and big use cases.
Right there, they already use cases.
But the question is, how many people actually want to do that
and how many people are going to find you?
I'm sure groups. You know, a lot of slack and
comment saying oh Tim you're defending the state's, like look
at, this is. Look at it from a pack.
I think we're gonna get a lot of slack and comments for this
whole. So like so coinbase.
They might as well go ahead there, their pitch deck leak
their September. Pick stick week to the Press
Free. Beacon did a couple articles on
it, basically, like on slide two and they posted this slide.
It said you can use Bitcoins. You big capital.
Rolls on sanctions on Russia. And then like a page later they
had different and emblems of the different, like New York
Department, Department of Financial Services us since in
all these different organizations, they say that
they're in compliant talks with so, but they got slapped
claimed, he's got slapped because it's saying, hey, you
know what you're talking about. Being a legitimate regulated
entity yet. Here you are saying, you're one
of the features is it could get around sanctions.
We know this. We know that it can be used for
money laundering, like, I got cheated by an attorney this last
week. Because I was quoted in article
very early this week. Mark, karpeles, wrote this
article saying no talking about exchanges.
And mention how, you know, all points to be used for money.
Laundering. And somebody asked for those,
this reporter asked me for comment.
And I said, yes, you can use all coins for money laundering like
coins. Probably, the biggest use case
for Litecoin right now is probably for money laundering.
And the lawyer got upset because I mentioned that without saying
any statistics like look I used to do some stuff with an
exchange, you know melodic and you start talking to other
exchanges and you find out, you know, what are the different
altcoins being used for? Or and yeah, they're being used
basically ends up happening, is people take their Bitcoin, they
convert it to Litecoin, like on btc-e.
They send it to like, shape shift or cripsy or something
like that. They re convert it to bitcoin
the cash out somehow, or they convert it to another coin.
So it's, you need to use. If you're doing this, you have
to use something that's highly liquid.
And it's, there's enough volume in any given day, especially on
chain that yours just shows up as noise.
It can't be detected again. I'm not encouraging that.
In fact, I think that by you promoting that is a use case,
you Create a bigger Target and you can pickling the community.
So small, they expect accepting thinking that they could absorb.
The gigantic finds that HSBC or Barclays or any of these other
guys is that they all pay, like billion dollar fines for this
kind of stuff, and sometimes even some people sort of kind of
sentences. It's like this so encouraging
that I think is I understand it is a use case and people do use
it for that. I'm not sure.
That's something you should go out and sell.
So, like normal people because maybe one more people just know,
but I didn't know that. That was specifically
identifiable. Use case of like Point.
Yeah. That's I mean, I always felt
like when I dabbed that no use cases but I guess that's right.
Maybe one. So let's talk a little bit about
NASDAQ because recently there is a new story and it got a lot of
attention that NASDAQ is planning to have some sort of
stock trading on the Bitcoin blockchain specifically using
open assets. To call which is colored coins.
Basically we've had flown via of coin prism on the show, who is
the guy who created the open assets protocol that seems to?
That seems to go against your argument.
That it makes no sense use the Bitcoin protocol for things like
that. What's your point of view here?
Sure sure. That's a really good point real
quick question to so it last month was that are interested
in. NASDAQ announced that they're
going to be throwing some of their private.
They have a several different markets and could put some of
their private Market guess cap tables on on the Bitcoin
blockchain using it looks like coin prism or at least open
assets. I'm not sure if they're actually
going to talk with the company but yeah so there's two things
here. Number one it's unclear what
that actually means are they actually going to do?
It's a hash of all the transactions and put it on the
Bitcoin blockchain every day, every hour, every minute, you
know, what are they trying to actually?
Accomplish with it. That's not fully clear yet.
The second thing is, if they actually try to put all the
transactions that take place to treating transactions, obviously
this from a logistics standpoint that does this won't happen
because we know from block sizes, that as of today, you
know, just the blocks are just not big enough to handle that
kind of volume, maybe, at some point, they'll be solutions for
that. Obviously, you know, Gavin, and
we can talk about that at the end, but Gavin's proposal and
some counter proposals and stuff like that if you'd like.
But, yeah, I think that fundamentally anytime That
Watermark coin on a public Ledger using a private chain or
quasi private chain. I think it's a different thing.
But anyways I'll me and I public Ledger like Bitcoin.
It creates this top-heavy protocol, basically you're
cheating your your free writing off of everybody else.
Paying some kind of fee for what is nominally is you're creating
extra value on the edges that's being protected by not enough
value being destroyed. So, miners in the long run, as
we've talked about destroy the Capital up to the point where,
you know, a Bitcoin equals at creating a Bitcoin equals of a
coin in the long run. Obviously there's margins and
there's fluctuations so forth. But in theory, that's what kind
of actually practice it actually kind of is what kind of happens
when you get price run up. So it goes up and when prices go
down, people go bankrupt and so forth.
But it with color coins in these metal coins, is they create this
top-heavy non-proportional disproportional reward
mechanisms where pools or minors at these Farms are not
destroying enough Capital to Act, you know, whatever,
billions of dollars of assets that the actual assets represent
from NASDAQ again. I don't know the specifics.
I think it's a little too sweet to be a little to speculate at
this point, but I think that if they do, you know more power to
them, they'll do trial by fire and maybe just like Patrick
Byrne, who announces that? You do?
Like a 25 million-dollar bond in the coming weeks and maybe even
tomorrow or that they'll find out.
Maybe even the hard way that the transactions don't go through,
is they thought because there's no, there's no priority system.
Because there's no terms of service built into the network.
Maybe you could have, you know, one-on-one relationships with
the pools. But if you're using the pools to
do that, why don't you just create one of these permission
Ledger's systems? Why use proof of work at all?
So, you know, I wish them all good luck and maybe they will
completely disprove everything I've ever said that's a total
possibility. I think that Robert Sam's is
probably correct. Like why?
Why bother validating, you know, on either side of the
transactions and not the validators who cannot protect
It's you against irreversibility if there's incentive to do so.
So let's before we wrap up here, I know this is come up again and
again, and again in the show and people are probably getting
tired of hear about it. But what's your opinion on the
Block size? Increase the bait.
Sure. So I have no horses in the race
again. Just full disclosure, I don't
own any questions at this at this time.
And that's not because I hate them or anything.
I just, I just don't. Um, so I don't think I like to
think that I'm fairly objective when it comes to that,
obviously, people disagree. And think I'm very unobjective
for not owning lots of Bitcoins or something.
But I think this is the both sides have had some pretty good
points, obviously gathered and Mike who you guys have spoken
to, they seem to really want to make Bitcoin become a large like
they want it to be more successful with payments.
They want the ability for it to compete.
Did some scale relative to I guess?
PayPal or even Visa even though those aren't necessarily the
best direct comparisons. But there's a trade-off.
There's a cost to making bigger blocks and I was just talking to
Brian before the show about this is, if you 20 make block and you
fill it up and you need to do that your own node at home.
You end up with like a terabyte of data throughout the year and
if you do that, you know, if you need to connect with 8 10, 12,
whatever the amount of nodes, your peers are that you're
trying to send us this adds up, you just multiply it, right?
So you know, there is a possibility that from a hardware
and even networks standpoint that there could be a lot of
notes. But in practice what ends up
happening is what we've seen, you know, from March 2014 to
today, March, B14, that was about thirteen thousand nodes.
Today, there's this under 6,000 and that's not even, you know,
full one block notes. So somewhat one big block node
so maybe maybe that Trend continues, maybe changes but
it's into the day. I think the other the other side
of the argument there's to right or from races and privacy.
If blocks be get bigger fewer, there could be fewer nodes
because there's no incentive necessarily run it it's out of
your own pocket. If that's the case then it
becomes much easier to identify transactions especially if
you're trying to do my laundry. I like it.
End of the day, you know, these various companies that are doing
Contracting Services for governments for money laundry.
They could end up representing, you know, five ten, fifteen
percent of the network and makes it much more identify easily
identifiable. So if you're concerned about
privacy, then maybe that's something to take into
consideration that bigger blocks, make it difficult to run
nodes, therefore, reducing them notes, making it much more easy
to identify transaction. Potentially the other side also,
says, is what the, a lot of the Chinese exchanges in miners.
Have been talking about the last L, so is saying, hey guys, we
understand, you want bigger blocks, but we just don't have
the network to do that. Now, there's, there's two sides
to that you have F to pool. One of the administrators from
active pool proton. The devil is saying, hey guys,
we, you know, we'd like to have a bigger block but not, you
know, 20, Mega or something like that because we just don't have
the network capacity to propagate it because it will
leads orphan races. I know if you maybe get on the
show, if you will, you can find Avalon, says it ships.
I just talked to him last Week, two about Network, networking
issues. He just a lot of network
analysis, now, especially for Chinese companies.
And he was talking about, you know, if these you have these
net splits in China, because the, the peering agreements
between China and the rest of the world, kind of kind of Muddy
right now because of how the great firewall of China is.
And so what you could end up having is you for what you do
have is you have a Reliance on just a couple different nose in
a couple different cities which could go out.
So you end up with, you know, half of the network ashrae
coming out of just a few nodes and that's kind of dangerous.
Even today. So I'm expecting them to
propagate, really big blocks is another issue.
He's actually trying to solve so maybe if you're looking for
somebody who really understands the the Chinese side understands
network analysis and and Mining, and so forth, he threw could
probably be a good balanced approach to some answers there.
I think that there will be some kind of consensus if you will
but it could lead to a split. Maybe you have as I say gal
blocks and maybe you have different other different chain,
a Chinese chain. And I certainly cannot predict
that. But yeah, it'll be interesting
in 6-12 months. Coming back in and revisiting
that question. Yeah, absolutely.
That's it interesting. Actually, we, I mean, we were
aware to some extent, I mean nothing.
Mike also mentioned that that especially, yeah, especially if
you have a really bad, really bad band.
If it can be an issue for minor 7 larger blocks but it was in
the way of some of the Solis especially that there's only.
So few notes in China that plays such a central role there.
Yeah, well, thanks so much for coming on.
Dimmers are at the end of our show, we're going to have links
to your papers and your prolific blog posts in the show.
Notes of people who, you know, who want to learn more about
that can check it out. And I think I, the paper does a
really good job at sort of giving an overview.
That's really accessible about the sort of different ways.
That block change, can be used and some of the use cases that
people often talk about but that may actually not make So much
sense for Bitcoin. So yeah, thanks for that.
And thanks for coming on today. Hey my pleasure Hayden.
Well, we'll see if if I've been able to kill Bitcoin as people
in mediclaim so I don't think I don't think I have the power to
do that so I don't I hope it continues to go on so we can
learn a lot. So you certainly keep trying.
There's a node running somewhere must be taken down.
So thanks a lot guys. Have a great week, cheers.
Yeah, and thanks for listeners for listening.
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