0:00 Hello and welcome back to On The Brink, I'm Nick Carter. 0:03 This episode is brought to you by Fireblocks, more about them later in the episode. 0:07 Today I'm sitting down with Paul Sztorc, one of the most anticipated episodes we've ever 0:12 done on this show. 0:13 I've received countless requests for it, here it is, and it doesn't disappoint. 0:17 So for those of you who don't know, Paul Sztorc is one of the most prolific and long-running 0:24 thinkers in the Bitcoin space. 0:26 I think I became aware of his work in 2014, and some of his old posts have held up really 0:32 really well, we actually discussed that in the episode. 0:34 Paul is quietly very influential in the Bitcoin space, certainly to me specifically, I've 0:39 learned a lot from him. 0:41 He's also something of a critic of sort of Bitcoin development culture and prevailing 0:45 ideas among Bitcoiners. 0:47 He's certainly not afraid to tread a different path, and that's what I really like about 0:51 him. 0:52 In this episode specifically, we talk about his Drivechain project, which has code that's 0:58 deployed, and his BIP300/301. 1:02 The idea of Drivechains is to facilitate blind merged mining so that Bitcoin block space 1:07 can become more useful and abundant while providing more fees to the miners. 1:12 Paul has a very definite point of view on this, and certainly expresses concern over 1:17 Bitcoin's security budget and the trajectory of that. 1:21 This is, of course, one of the most pitched debates in the Bitcoin community, although 1:25 I think people are oftentimes afraid to make their feelings known on this. 1:30 Paul certainly isn't, and has a very clear perspective on the matter. 1:35 This is a highly informative episode, if you're not familiar with Paul's work, please read 1:39 it. 1:40 It's incredibly good, and even his posts from 2014-15 are very prescient, hold up very very 1:46 well. 1:47 I'm including them in the show notes. 1:48 Listen to the episode, give his work a read. 1:50 Let's dive into it. 2:20 So I'm here with Paul Sztorc, just learned the correct pronunciation, I got that wrong, 2:30 I had that wrong for seven years. 2:32 Well, you know, that's a common thing to get, I get all kinds of things, I remember in high 2:40 school I would get everything, and then my friends would know how to pronounce it so 2:44 the teachers would say some random thing, and then we would all just go along with it. 2:50 So Paul, welcome to the studio, aka my apartment, this is actually the first podcast I've recorded 2:55 here. 2:56 Oh, it's a cool apartment, I'll tell you that. 2:58 Thank you, I'm gonna keep that in the show so everybody knows. 3:03 So you used to live in Miami, because I remember I saw you three times, and now you are no 3:09 longer in Miami. 3:10 Yeah, I'll be back, I mean I planned on doing like a 51% of the time a year type of a thing. 3:17 I just haven't gotten around to kind of coming back, but I think it's great here, and I think 3:21 that if you're considering moving somewhere, this is a pretty good choice, just easier 3:30 to live here, great weather, great taxes, rent is affordable, places are nice, people 3:39 are having fun. 3:40 I do like it, I mean you're going the opposite direction, everybody's coming and you've left, 3:45 but we can forgive you for that. 3:47 Alright, so you're actually the most requested guest for this podcast, do you know that? 3:51 No. 3:52 Yeah, so because I've read your work many times and obviously cited it, and I often 3:59 refer to you as the Steely Dan of Bitcoin, does this make sense to you? 4:06 I mean I know who Steely Dan is, but I'm waiting for it to click into place as to what you 4:10 mean by that. 4:11 Actually I think it was Tor Demeester that first described you, and so I stole that from 4:15 Tor. 4:16 So basically, not to be too much of a sycophant here, but so Steely Dan is beloved by musicians, 4:26 so like by other musicians. 4:28 That's the angle. 4:29 So I'm like the expert's expert or something. 4:31 Exactly. 4:32 Oh, that's so nice of you to say. 4:33 Yeah, I try to only write about things that I think, see what bothers me is I don't want 4:39 to write something that's just like something that everyone else will say. 4:43 I think that's horrible, but that's like what gets a lot of attention. 4:47 If you just reiterate what, tell the audience what they want to hear, you just go up there 4:52 and you say, taxation is theft or whatever, or like lightning network is DeFi on Bitcoin, 4:57 or you say some funny little phrase like that. 4:58 Yeah, just play the hits. 4:59 Play the hits, yeah. 5:00 Play the hits, right, exactly. 5:01 Just go up there and play Don't Stop Believing, and the audience will love it, you know? 5:05 There's something to be said for that. 5:06 If they don't hear Don't Stop Believing at your concert, where are they going to hear 5:10 it? 5:11 So you take a different tack. 5:13 I mean, just thinking back, you measuring decentralization post was very influential 5:18 to me. 5:19 I still talk about it. 5:20 Proof-of-work versus proof-of-stake, where you describe proof-of-stake as a veiled proof-of-work. 5:24 I don't know if that was the exact expression you used, but it was compelling to me. 5:28 I think it was right. 5:30 So actually, that's where we're going to start. 5:31 Yeah, those have held up really well, I think. 5:32 So that was going to be my question. 5:34 Okay, what's the question? 5:36 Are you satisfied with how your work has aged from 2014? 5:40 Yeah, great question. 5:41 Seven years now. 5:42 Yeah, it's a long time. 5:44 I think measuring decentralization is one where I sort of... 5:48 Part of that was about the... 5:51 There was obviously the scaling debate, and then I kind of wanted to make it possible 5:56 for both of the two different sides to make some kind of progress in the conversation. 6:01 And what was really weird about that is both sides sort of endorsed it, but they also sort 6:06 of ignored it, or something, I want to say, because that was supposed to be kind of like 6:10 maybe a gift to the small blocker side, and say, you have now this measurable thing that 6:16 you can say that increasing the block size will make it just harder to run a full node. 6:21 And that's what the whole frame should be. 6:22 It should just be, makes it harder to run a full node, what are you going to do? 6:27 And so that was supposed... 6:31 But they were just kind of like, it was already so dogmatic at that point, that they were 6:36 just like, those people are evil, and it kind of didn't really succeed in helping either 6:44 of the two kind of combatants. 6:47 But it was weird, because the audience liked it, and I think that one held up super, super 6:51 well. 6:52 I think that is the right thing to do, is if you can't measure something, it doesn't 6:57 exist, I think. 6:59 So if people were talking about all this stuff, and they were saying, oh, if we increase the 7:03 block size, it will harm the decentralization a bit. 7:05 But it was just this abstract concept, and it made it impossible to have a conversation, 7:11 or even really to think about what was happening. 7:13 And I thought that was so annoying, because it was like, these people were just talking, 7:17 it's like people talk about justice, or something, and it's just like, so annoying. 7:22 And it's like, if you had something, it literally comes down to a number. 7:28 So I thought that one was really, really great. 7:30 I think the sort of, nothing is cheaper than proof of work, about proof of stake just being 7:35 proof of work, I think that also held up really, really, really well. 7:42 In particular, I, at the time, convinced most people, I remember convincing Jake Kwan and 7:50 Vlad Zamfir in the comments section, that I brought them around to that point of view. 7:54 But then they kind of kept on, they kept on working on proof of stake, right? 7:59 Well, you didn't cure them. 8:00 I know, I went to Consensus in New York City, and I saw Vlad Zamfir, and I came up to him, 8:06 and I was like, don't you, people were talking to him, I was talking to him. 8:10 And I was like, yeah, but didn't you agree with me in my article? 8:13 And he said, yes. 8:14 And I was like, so why are you still working on, why are you still working on proof of 8:18 stake at all? 8:21 And he kind of had no answer to that. 8:23 It's very kind of silly. 8:24 Why does the alchemist stop trying to make gold? 8:27 Right, exactly. 8:29 In particular, that essay was really about like, even if you could get proof of stake 8:33 to work, which itself is, it was always going to be this huge challenge, and as you can 8:38 see, they constantly push it back, the Marty Banta thread or whatever, they constantly 8:43 fail to get it to work. 8:44 But the point of that article was like, even if you got it to work, it would be, it would 8:49 be useless. 8:50 It wouldn't like, it wouldn't like achieve a good, a positive outcome in terms of this 8:55 whole waste thing. 8:57 So yeah, so I have a lot of thoughts about that still to this day. 9:03 But yeah, I don't know. 9:04 I think those two are pretty good. 9:07 So I feel like we could do an episode on, frankly, either one of those. 9:11 Maybe we're going to do a series or something. 9:13 You told me that you like to do four hour episodes. 9:15 Yeah, I know. 9:16 It ends up happening a lot. 9:18 So okay, measuring the centralization. 9:20 Do you remember Balaji Srinivasan's blog post on that? 9:22 Yeah, it was horrible, wasn't it? 9:24 No offense to him, but it was like, that was the one where he, I want to make sure I'm 9:26 remembering it right. 9:27 Yeah. 9:28 He had like, where he had like six metrics. 9:30 Yeah. 9:31 And then he sort of like took some, some bizarre like aggregation of them or something. 9:36 What was it like? 9:37 What did he even do? 9:38 He called it the Nakamoto coefficient. 9:39 It was something like, he took the Gini of a bunch of different metrics. 9:45 I didn't like it either. 9:46 I like Balaji actually a lot. 9:48 He's been on the show, but I thought that was a mess. 9:51 Yeah, exactly. 9:52 Yes. 9:53 Because they were all very arbitrary. 9:54 I think he's, I think he's like, I kind of have like sort of a love-hate relationship. 9:59 I think he gets a lot of really important things right, and then sometimes I just have 10:03 no idea what he's talking about, you know. 10:04 But that's an example because why, you know, that's an example of exactly the kind of writing 10:10 that I don't like or the type of analysis that I don't like where he like seemed to 10:16 draw on, first of all, he made the mistake, common mistake about when you have the data, 10:22 you just use the data. 10:23 So like he had data on those things and he was like, I can, and that's similar with the 10:27 Gini coefficient. 10:28 He was like, this thing exists in the world and we can take out a calculator and use it. 10:35 So all the best statistics, and I used to be a statistician professionally, and all 10:42 the best statistics are ones that actually you just invent for the purpose of solving 10:48 your problem. 10:49 So you never want to roll your own crypto, but I think that all the great statistics 10:53 are because you need to have like an idea of what you're doing first, right? 10:56 And then people say, oh, we're going to use like linear regression or whatever, we're 10:59 going to use correlation or something. 11:02 They just got, they saw someone else do that and they are just, this is the Steely Dan 11:06 thing that's coming back. 11:08 But it's like, I think that was an example of just chaos because he picked those things. 11:15 Many of them had no real relation to anything and there was no thought behind it, right? 11:22 And I critique that specifically in my post about the number of nodes. 11:27 One guy who could be, you know, JP Morgan or whatever, one person could just spin up 11:32 like 10 million nodes on Monday, and then on Tuesday they could shut half of them off. 11:38 And then your metric is going to be like whipsawing, but nothing actually happened. 11:43 So it's like, isn't that an enormous disqualifier for that? 11:47 So I kind of hated that. 11:48 I thought it was, but luckily for me, a lot of other people also hated it, so it wasn't 11:53 influential. 11:54 Yeah, I call it the pie chart theory of decentralization. 12:00 Because they always put up that exact thing. 12:01 They get the pie chart. 12:02 That's good. 12:03 I think BitShares really pioneered that. 12:06 He was, Dan Larimer was into that. 12:08 He loved the pie charts. 12:09 And then his big thing was he was going to take like the log base two of it or something. 12:13 Like that was supposed to be a big improvement or something. 12:16 When you, the marketing for these proof-of-stake chains would be like, we have 21 validators 12:21 and Bitcoin only has like three. 12:24 Yeah, they say that's horrible. 12:27 A lot of people say that. 12:28 Yeah, I'm sorry, I don't know what to tell you in the audience if you're still saying 12:31 that today. 12:32 I mean, what can we say to cure them of that? 12:35 Like the relationship between the miner who has invested enormous, like possibly millions 12:43 of dollars, but at least they have hardware that cannot be used for anything else. 12:48 And then the pool, and they can switch pools on a dime. 12:52 And they can very easily monitor the pool for doing anything that they think they do 12:57 themselves. 12:58 They do switch pools, by the way. 12:59 We see this happening. 13:00 They are very disposed of the pools, as they should. 13:04 So the, whether, which pool they're at is completely a formality, ladies and gentlemen. 13:08 It has very little, whether they're with one pool or another pool makes no, all the pools 13:15 mostly do the exact same thing. 13:17 It's very easy to, if a pool did the wrong thing, they would be kicked out of the system. 13:25 So hopefully, if you listen to this podcast, stop saying that. 13:30 Yeah, so my view on Privostek is that basically it can be made to work. 13:36 There are Privostek blockchains in the wild that have been running, like Tezos has been 13:40 going for a couple of years. 13:42 EOS has been running. 13:44 I just think of them as standard financial institutions, which have shareholder governance, 13:50 basically. 13:51 That's how I think about them. 13:53 And so I don't think of them as particularly transformative. 13:55 I think of them as a resumption of the prior system, basically. 14:00 If A, do you agree with that, and then B, do you think the market just doesn't care 14:08 enough? 14:09 That's a very good question. 14:13 I certainly think of Proof-of-Work as more like an industrial process, and Proof-of-Stake 14:17 is more like this sort of weird legal type brand thing that relies a lot on your, which 14:24 domain names you have registered. 14:29 And I definitely am sort of surprised that the number of Proof-of-Stake coins that work 14:34 and just didn't burst completely into flames. 14:37 I was a little surprised by that, but I do think it is a byproduct of people, first of 14:41 all, the underdog has an advantage, because everyone wants to work together to take over 14:47 the top spot, and then they'll turn on each other, but not until then. 14:50 Well, actually, if you paid attention, they totally have been turning on each other this 14:54 year. 14:55 I bet. 14:56 Well, yeah. 14:57 That was like the Ethereum, like the Binance Smart Chain, Solana, Avalanche, they're all 15:02 fighting. 15:03 It's like a Russian dolls of like ... See, that's the thing, your second question is 15:07 very important, because I think the idea of Proof-of-Work is that it is a kind of this 15:12 like shield or defense system. 15:15 I think maybe even you were saying that or something. 15:18 I don't remember who was saying it, but it was like, it's like having a big wall around 15:22 your city, but then if no one tries to invade, it makes it look like the wall is pointless. 15:27 It's a waste. 15:29 So obviously, that's not the way people make decisions about whether or not they should 15:35 build walls, which is because they shouldn't, because the wall could be a deterrent. 15:40 But yeah, I do wonder, it's possible to tell a weird story where you say Bitcoin needed 15:45 to have Proof-of-Work so that it would survive, because the whole point of Bitcoin's design 15:50 is to ... It was a reaction to like Liberty Reserve and these other things, so there's 15:54 just one server, and it was not only very cheap, but it was just very straightforward 15:59 to just shut the entire thing off. 16:02 So you had like Liberty Dollar, Liberty Reserve, DigiCash, Egold, exactly. 16:09 So that was like the big reason to switch to Proof-of-Work, because Proof-of-Work says 16:14 that every node can be a server now, and no one needs to have any particular like a trump 16:22 card on what the truth is. 16:24 So that was the whole design problem of Bitcoin, and then they opened the door to like just 16:31 cryptocurrency, or just the idea of having private keys that control little UTXOs, or 16:38 little whatever you want to call it, and the other coins that don't have UTXO model. 16:43 But they kind of opened that door up, and then maybe it's like the government can't 16:51 tell the difference, or the public can't really tell the difference, and so as a result, how 16:57 can they close down only some and not others? 17:02 So then it is possible that maybe you needed to have Proof-of-Work to open the tip of the 17:05 spear, and then afterwards, Proof-of-Work is a complete waste of time. 17:09 That's a shocking thought, but I think that it is possible. 17:12 So Proof-of-Work was the dynamite that blew open the Overton window, and then Proof-of-Stake 17:16 crawled through. 17:17 Exactly, yes. 17:18 The Overton window. 17:19 That's a very good way of, yeah, that's what I was searching for. 17:20 The idea that it would just like, you know, Lyft and Uber were like technically illegal 17:25 for a long time, but it ended up being so popular that in practice, it just, yeah. 17:32 In general, I think people, whatever the sort of law is, or whatever the formal rules are, 17:39 is not as important as what is in people's brains, and like a culture of a place makes 17:45 an enormous difference, and so Proof-of-Work maybe changed the culture. 17:50 But then you wonder, like, is it a, is it just, is it not even, is it pointless? 17:55 And then you get with stuff like, you know, like buying a smart chain or whatever, you're 17:58 kind of like, people are taking that to the absolute edge where they say, but that's one 18:02 of the reasons why, among other things, I advocate that a less decentralized scalability 18:07 sidechain, because I just think you have to be able to win in either world. 18:13 In a world where it's not going to matter how decentralized the coin is, well then you 18:16 can take advantage of the sidechain, and then in a world where that, it does matter, then 18:22 all of the decentralized projects will be killed out. 18:26 So another great analogy is like a kind of bacteria or something, like you put in, if 18:31 you put in antibiotics, then it really helps to be an antibiotic-resistant bacteria. 18:37 But if you don't, then you just need to be whatever bacteria is like spreading the fastest 18:42 or whatever, so all that, whatever you, I'm not familiar with how they achieve that bacterial 18:47 resistance, but it must come with some trade-off, right, otherwise every bacteria would be. 18:52 So on the waste question, this is the, you know, Congress is going to have a hearing 18:56 on whether, this is great, I should, you know, there's a chance that I'm there and I'll just 19:01 tell them, read Paul Sztorc's essays, guys, come on, he wrote it in 2015, we've had time 19:07 to read it. 19:09 So proof of stake is if it consumes societal resources, if it consumes capital and it mobilizes 19:16 it, that means capital can't be used for other stuff, is that, and that other stuff could 19:22 be like building nuclear power plants, is that like a reasonable argument to push back 19:27 at this like, oh, pure work is wasting energy kind of thing? 19:30 Well, I think, I'm not sure how persuasive it will be, because it's sort of abstract. 19:35 Even what I was saying about the fact that you have, you've folded up capital and so 19:41 then the fewer projects to build a better future can be taken advantage of in the proof 19:48 of stake world. 19:49 Even that was like, that was me trying to go to like an absolute like limit. 19:53 I think in practice, there will be even more other forms of proof of stake, like the proof 19:59 of stake waste will take on even other forms, like just like people trying to denial of 20:03 service attack the other stakers or people go back in time and they get old keys that 20:11 people don't own now, but they did in the past and then they try to rewrite the chain 20:15 from there, which is computationally basically free. 20:19 They just have to then get whatever the strategy is for beating the, like whatever, they have 20:26 to get the exchanges like off the network. 20:28 But then you can, that's possible, you can do that with like denial of service or just 20:32 whatever it is, you can put the network in some kind of dilemma. 20:36 So I think the waste is mostly, as I try to get into the piece, like fundamentally the 20:43 driver of the waste is just the fact that the blocks have a certain amount of value 20:47 and they're just, the block is just worth $10 million. 20:50 So people are just going to be fighting over the block and they're going to fight. 20:55 You could design something that's really, really perfect. 20:59 I mean, I think you probably can't, but the point is if in proof of work, they're bidding 21:03 with energy up to the $10 million amount and with proof of stake, they'll just be bidding 21:09 with whatever else they think will increase their chances. 21:12 So it's the fact that the coin is worth so much that drives the waste, it has nothing 21:17 to do with whether or not it's proof of stake or proof of work or anything else. 21:21 But again, I don't think it'll be persuasive at all. 21:23 Those people are just want to, they've got their story that they want to sell and they're 21:29 going to go for that. 21:30 I'm not sure what to do at this point about the whole, the energy FUD type people, you know? 21:35 Well, it's all tied into this sort of Malthusian idea that just consuming energy is a sin. 21:41 Yeah, I think, yeah, that's a good point. 21:43 I think the real thing is to just try to retake the offensive. 21:46 There was a book called The Ultimate Resource that you may be familiar with. 21:50 I don't remember, I think the guy's name was, what was it, Paul Simon? 21:53 He took the other side of the Ehrlich bet. 21:55 You know, I knew or know Paul Ehrlich. 21:58 Oh, really? 21:59 He's a family friend. 22:00 Oh. 22:01 I'm sorry to hear that. 22:02 No, it's okay. 22:03 I mean, look, I disagree with the man. 22:05 So that's the point is, the guy who won the bet wrote a book, The Ultimate Resource, and 22:09 he argues that, and I think correctly, and the book is like that none of our resources 22:15 are meaningfully finite. 22:16 Yeah, because everything got more deflationary, we got better at pulling. 22:20 And constantly we get better at it, and each of the things that we do now requires fewer 22:25 resources. 22:26 There's another great book, The Beginning of Infinity by David Deutsch, who's still 22:30 alive. 22:31 Those are two books that just, they just take this view that there's no, like, the right 22:39 thing to do is to do more with less. 22:41 Yeah. 22:42 It's not, we don't have to all just like stop enjoying ourselves, stop enjoying our energy, 22:49 stop enjoying our whatever. 22:50 You know, the incredible thing is to bring up that early 1970s alarmism about resources 22:56 is absolutely correct, because what happened was, so Paul Ehrlich wrote this book, The 23:01 Population Bomb, this is for the benefit of our listeners, and basically the idea was 23:07 like the global South is going to starve because we don't have enough food, we're not good 23:11 enough at making food. 23:13 Then we like discovered high yield GMO rice strains, and like, you know, basically we 23:19 figured out how to feed like 15 billion people if we wanted. 23:24 And all of his predictions were wrong about starvation, but you know what happened in 23:30 the meantime was, like, driven by these academics, Western, like, international financial institutions 23:39 and actually the policy establishment made it a cornerstone of their foreign policy to 23:45 encourage, like, effectively eugenics in the third world. 23:49 This is the part that people don't know. 23:50 I don't know this either. 23:51 So this is a crazy story. 23:53 So the U.S. at the highest levels. 23:55 The stupid population bomb. 23:57 Made it. 23:58 So this book infected everyone's brains, and then they were like, okay, we need to convince 24:03 India to stop making so many people right now. 24:06 And so then there were these massive sterilization campaigns in India. 24:10 Indira Gandhi actually was, she won all these prizes, and all of the sterilization was connected 24:16 to aid dispersed by, like, the World Bank and stuff. 24:21 This is a giant nightmare. 24:22 It was incredible. 24:23 But I'm not surprised, though, because here's the thing, is when, like, when people start 24:26 to go wrong, like, you know what I mean, like, to get an argument right. 24:29 Every part of it has to be correct. And if you flip one thing, it's multiplied by negative one or whatever, and the whole argument, you just become a crazy person. But, but yeah, that's too bad. 24:36 And it's like something like six million people in India was sterilized due to this. 24:41 And then who knows about, like, that makes me think about the China's one child policy or something. 24:45 Completely related. And that's a demographic disaster now, on the other side. 24:50 Yes. Because this is so important, that every single person alive needs to understand this. 24:55 There's this naive view, and then there's the correct view. 24:59 The naive view is that you just take all the resources that we know that we have now, like in some Excel sheet or something, 25:06 and then the current rate of usage, and then you just multiply, and you just say, well, run out. 25:11 We're going to run out in, because it sounds incredible for someone to come onto a podcast and say, none of our resources are available. 25:16 Because it sounds incredible for someone to come onto a podcast and say, none of our resources are finite in any meaningful sense. 25:21 Like, that sounds crazy, if you think about it, because that's outside of most people's experience. 25:25 Someone has, you know, if you have, you go to the store and you buy four bananas or something, you know, you think, oh, it's only a matter of time before these bananas run out. 25:35 And then, but this is a very naive view, is to just say this, okay, this is the oil we know about, and we use X amount, you know, per person per year, and then you just multiply. 25:45 That's not actually how anything works in practice. 25:50 The real view is that what humans do every day is, many of them, you know, some just go to work and do what they're told, 25:59 but many of them, they look around for a problem to solve, and they look for the most important problem. 26:05 They don't solve the least, the tenth most important problem to them, or the, you know, the 40 millionth most important. 26:12 What is the most important problem today? 26:15 They solve that problem, and that's why all the big problems get a lot of attention. 26:19 They get solved, and so, you know, things do not, things have been getting better on an extremely continuous way for the last, basically forever, 26:32 but especially over the last, like, 300 years or so. 26:36 Things have been constantly getting better, and I have one more thing that I have to add, 26:39 which is the reason people adopt the naive view is because the real, the correct view, it relies on people creating knowledge. 26:50 So it's sure we don't know today how the people in 2050 are going to get their energy, 26:56 and so you could say, well, maybe we'll just stop inventing, you know, new energy technology, 27:04 but you could also say maybe we'll invent the best energy technology ever, and people will be laughing at this conversation. 27:09 You know, the point is you have no idea either way, and we've been inventing things ever since we got here on this planet, 27:15 so there's plenty of room for more inventions, and it's this idea that you don't have the knowledge, 27:20 but if we don't have the knowledge of 2050, if we did, we would, you know, we would just switch all that energy today, 27:25 so, but yeah, I hope that, this is a sad thing. 27:29 I think that is, you're right though, I think that that's fundamentally the proof of work conversation is mostly actually trapped in that completely different thing. 27:39 It's not actually a conversation between blockchain engineers about consensus. 27:43 Of course not, and I mean, you know, you could have the same conversation about gold. 27:48 You know, gold extraction uses probably more energy than Bitcoin, and it can't be cleaned up because you're using diesel trucks and stuff like that. 27:57 It's a type of argument that no one else makes, like, how much energy does the NFL use? 28:01 Like, no one, we don't do this with any other thing, where we say, ah, all of the energy they use to make Q-tips. 28:07 Well, we're cursed, because it's easy to tally it up for Bitcoin. 28:10 Yes, I think that's the reason. It's the same thing with the data is there, so they just say, well. 28:14 And Bitcoin's new, and not a lot of people use it, so they, and I was, you know, I was on a run this morning, 28:21 I was looking at the cruise ships out there, and I was thinking to myself, well, what percentage of the Earth's population has been on a cruise ship? 28:28 You know, probably not that, probably not a big percent. 28:31 But these things are belching, like, sulfur into the oceans, like, disgusting filth, basically killing the manatees and the dolphins. 28:39 Yeah, and then it's the other thing, it's like, rich American, sort of like, Americans go on a cruise ship, 28:44 so it's like skiing versus boxing or something, there's all these, like. 28:48 Well, yeah, I guess the thing is, like, your New Yorker columnists that are, like, criticizing Bitcoin's energy, 28:53 they're probably not on cruise ships either, frankly, so. 28:56 Well, you're right, they may be trapped in the, like, self-hatred spiral or whatever. 29:05 But here's the thing, here's connecting the thread, and I know people get mad when I do this, 29:09 from this, like, eugenic campaign from the 70s, which was very much colonial, 29:14 and it was, like, the West basically saying to the rest of the world, don't use our resources, don't have kids. 29:19 It's the same thing with the energy. 29:21 If you listen to the Glasgow, what was it, the Glasgow Cop 2 or whatever, did you pay attention to this thing? 29:26 I actually, I didn't. 29:28 Well, it was the most exciting development in, you know, energy, concern, trolling, environmentalist, you know. 29:37 I think maybe I, you know, heard some of it on Twitter. 29:40 So basically, you know, all the delegates globally get together, and then the wealthy nations complain that the poor nations are, like, industrializing, basically. 29:49 And so this one was a disaster, that was the outcome, because India, again, didn't commit to, you know, 29:56 some language that would have them reducing their emissions by a certain amount, 30:00 because India, rightfully so, likes air conditioning. 30:03 And they like toilets and things, they have a lot of things they need to build. 30:07 And they like electricity, and they like industrialization, and sort of, like, being able to buy things, and not dying, and things like that. 30:13 And so they're interested in that. 30:15 And so the Western nations were completely distraught by this. 30:19 Because, you know, that means that India's going to, you know, consume more and more energy. 30:24 And that was a terrible thing. 30:26 Yeah, I would say the title, the ultimate resource, the title is about how humans are actually better. 30:31 The more humans, the better. 30:33 The more humans, the more innovation. 30:35 Because each person can think of ideas. 30:38 And the ideas spread very easily and freely. 30:41 So more people is better. 30:43 It's better for everything. 30:45 I think the counterpoint I would have to that is that there's, like, certain geographical, like, places in certain periods of time. 30:52 There's a short-term thing. 30:53 Innovation is, like, very, very concentrated. 30:55 Oh, yeah, there's certainly golden ages. 30:57 Well, yes, it's not only, it's necessary but not sufficient. 31:00 You can't average innovation over time. 31:02 Well, there was, of course, many, you know, there were more people. 31:04 Ancient Athens, you know, had, like, a golden age. 31:07 But there were more people living in India in 400 B.C. or whatever. 31:11 So why didn't they have big golden ages? 31:13 So that's the – well, both books get into that. 31:16 It's because policy plays a big role, too. 31:18 It's, like, does the culture just reward conformists or does it reward – 31:23 for innovation, you just need ideas that are – excuse me – 31:27 ideas that are in conflict with each other and ideas that compete. 31:30 So that the best ideas rise to the top. 31:33 That's really all it takes, just Darwinian evolution of ideas. 31:36 And often, you know, because of government policy or because of culture, 31:42 people decide to keep their new ideas to themselves. 31:46 They feel embarrassed. 31:47 They don't want to say what they really think. 31:49 Well, that doesn't make me optimistic that America is going to be a center of innovation right now. 31:54 Don't you think? 31:55 America, relative to many – well, you know, it depends. 31:58 But we don't want – people can set a good example. 32:01 Like when Elon Musk lands the rockets, like, right side up. 32:05 But you can think all kinds of things about Elon Musk. 32:07 But stuff like that is genuinely sort of inspiring to people. 32:10 They look at that and they think, I didn't think that was even possible. 32:13 And then they see that it actually happens. 32:15 And then they're like, wow, you know, maybe my weird idea for a new hit comedy show about whatever, 32:22 silly things about my houseplants and my apartment is going to be great or something. 32:27 So, you know, like they kind of – it goes in big waves. 32:32 I agree. 32:33 There's a wave of optimism, novelty. 32:37 So we want – you have to do your part. 32:39 It's like a zombie thing. 32:40 You have to do your part to stay out of the evil team and join the good team 32:44 because you convert people back over. 32:46 People are converting each other back and forth. 32:48 It's way easier to be an innovator in a society of innovators. 32:52 So, I mean, you know, leaving aside the sort of Miami boosterism, 32:56 like what parts of the U.S. would you say have like a pocket of sort of actual intellectual innovation right now? 33:04 Well, that's a good question. 33:06 I mean, I'm not sure. 33:07 First of all, like I've only been so many places around the world, right, that I've experienced firsthand. 33:11 I would say maybe even give up on geography and just say like the internet is better 33:17 because the internet, you know, connects everyone. 33:19 And without the internet, the Bitcoin community would have had a very, very, very hard time. 33:25 Imagine if there was no like Bitcoin talk, if there was no Reddit, if there was no Telegram, you know, if there was no Twitter. 33:31 We rely – us poor Bitcoin people are addicted to Twitter. 33:36 But it also – it helps everyone. 33:38 You can just talk to anyone. 33:40 But, yeah, certainly Austin and Miami are doing very well, relatively speaking. 33:45 So actually, okay, so narrowing the question to the internet. 33:49 So you're actually a big – you're kind of a critic of Bitcoin development culture, I would say. 33:53 Yes. 33:54 You know, that was actually one of my questions. 33:56 It's the important thing is that we should always push for better ideas. 33:59 So – but this is what I wanted to ask because in one sense, you know, Bitcoin Twitter is fine. 34:05 But in other ways, Bitcoin Twitter is like a terrible place where people believe like crazy stuff like stock to flow. 34:11 Yes, there's many tragedies on Twitter. 34:14 I mean there's an anti-intellectualism on there, not to claim that I'm intellectual or anything. 34:18 But certainly there's a strain of anti-intellectualism. 34:21 Yes, exactly as I said, but the culture can become static. 34:24 Whereas people can say things like Bitcoin is perfect the way it is and its success is preordained. 34:30 All we have to do is nothing and Bitcoin will take over and everyone will be so grateful to be paying $2,000 transaction fees. 34:40 And then we'll have the Citadel and blah, blah, blah, blah. 34:42 So we don't have to do anything to achieve that. 34:44 Maybe you're like our Neo Voltaire. 34:46 You know, did you read Candide? 34:48 So like, you know, you need to write the great satire and explain how that Bitcoin Leibnizianism is like, you know, have the character of Pangloss. 34:59 Yeah, I think that's a good idea. 35:00 I've actually thought about that idea with satire. 35:02 I mean like John Seth wrote that allegory with Christian or whatever. 35:07 That was great. 35:09 Finding Bitcoin Mountain. 35:10 Oh, it's like a very obscure, but it was like... 35:12 Wait, you know, I think I read that a long time ago. 35:15 Yeah, there are other great characters. 35:16 Blythe Bruderin, inventor of the credit default swap, master of ether or whatever. 35:21 And there's like the fork in the road and it's like the difficult path of learning. 35:27 And it's like... 35:28 I do. 35:29 You know what? 35:30 I did read that. 35:31 I didn't know John Seth wrote it because it was just like a text. 35:34 Yeah, it was written by blockchain Jesus. 35:36 Okay. 35:37 I didn't, frankly, I was too new to these ideas. 35:40 I didn't understand what the allegory was. 35:41 Yeah, no, if you don't understand that it's an allegory and that it's like a... 35:46 What is it? 35:47 Like Christian Pilgrim's Progress or whatever it is. 35:49 If you don't understand that it's a big... 35:51 It would just make no sense. 35:53 It would just make no sense to you. 35:54 Why did someone invest all this time? 35:56 We need maybe yourself, maybe like we can convince Josh Cincinnati to do it. 36:00 I think there should be a satire. 36:02 Yeah, I think that actually would help a lot. 36:04 There's a lot of material. 36:07 When your business is scaling up and your portfolio is growing, 36:15 you don't want to waste precious time on manual crypto treasury management or settlement. 36:20 Fireblocks can handle that for you with smart custody solutions for your crypto business, 36:25 along with industry leading security technology. 36:28 Whether you're starting a new fund or expanding operations, 36:31 Fireblocks offers scalable solutions for companies of any size. 36:35 From day-to-day crypto transactions to the most advanced DeFi strategies, 36:39 Fireblocks is here to give you a competitive edge. 36:42 They'll take care of the back end so you can focus on the big picture. 36:45 Visit onthebrink.link slash fireblocks to learn more. 36:49 All right, so Stock To Flow had to talk about it. 36:51 I know I'm going to quote you. 36:53 You said, it's so dumb. 36:55 It was so dumb that even critiquing it would have been too humiliating, 36:58 like critiquing Flat Earth or something. 37:01 Yes. 37:02 Yeah, no, I completely believe that. 37:04 When I first came out, I kind of thought it was just a harmless, like, 37:08 you know, like we had the Bitcoin wizard, like r slash Bitcoin join us, 37:12 and it was like an MS Paint, and it looked ridiculous, you know? 37:15 I love that. 37:16 It was like a joke. 37:17 I love that. 37:18 It was like we don't care, but we secretly do care, you know? 37:21 It was just like a meme thing. 37:24 But I thought this was just like a thing that you could just say. 37:27 I couldn't believe that people actually thought that. 37:29 I mean, what happened to supply and demand? 37:31 What happened to efficient markets hypothesis? 37:34 What happened to the fact that, like, Bitcoin cash is the same stock to flow ratio? 37:39 Like, what if you could fork Bitcoin and trivially alter the stock part, 37:47 but the fork would have no value because it would have no demand? 37:50 Like every part of it made no sense at all. 37:52 Yeah. 37:53 I mean, but they have answers for all these points. 37:56 Like there's a secret. 37:58 There's something special about Bitcoin, which is why stock to flow doesn't work for altcoins. 38:02 That's what they would always say. 38:03 Yeah, but then that special thing has to be in the model somewhere. 38:06 That special thing is called demand, for those of you listening. 38:09 That's an extra variable that's in there. 38:11 Bitcoin. 38:12 I mean, it's like it broke a number of statistical rules as well. 38:15 They probably are so obscure that no one will care about, 38:17 but you're not supposed to, like, there's this big thing, 38:20 and it goes back to Fisher and these other things about when you fit parameters to the data, 38:26 you're biased towards whatever data you have, and you can't just like – 38:30 you could easily – you could trivially, like caring about R-squared in a naive sense of just like 38:38 it's really accurate if the R-squared is high, but that's not true. 38:43 The idea even that the accuracy of the model, 38:48 even that the model's predictive power or how well the data fits, 38:55 the idea that that is more important than the model structure being right, 38:59 even that is false because as I point out a lot, 39:03 Ptolemy had this astronomical model that involved all these epicircles, 39:10 circles of circles, and it was all nonsense. 39:13 None of it was correct, but the predictions were perfect 39:15 because it was this overfit model that had degrees of freedom, 39:18 and then when they proposed that planets go around the sun in a circle, 39:24 the model was less accurate since they were like really ellipses and things, 39:28 and there was like the gravity from Jupiter sometimes biases the – 39:33 some of the other planets' orbits and things in these weird cycles. 39:37 So often the model will become less accurate when it becomes – 39:43 well, it becomes – the prediction, the numerical predictions can get worse, 39:48 but the model itself will be more right. 39:52 I feel like this critique is actually too sophisticated. 39:55 Right. That's what I mean. Exactly. It's like what can you say? 39:57 If you start to talk about autocorrelation and – 40:00 Yeah, autocorrelation. 40:02 It completely violates the regression assumptions of normality of residuals. 40:06 It's like no one knows anything about it anymore. 40:08 The real thing is that prices – we already had models of prices. 40:11 It's supply and demand, like the idea that the efficient markets hypothesis, 40:16 and then what happened to the Austrian view that like the Hayek – 40:21 the Hayek-Mises view that they would represent signals of information or something 40:27 that would be constantly changing over time. 40:29 Yeah. 40:30 Just torpedoed like all of these really solid things. 40:34 So I don't know. 40:36 But again, almost when you critique it, it almost gives it too much attention. 40:39 It gives it more fuel. 40:40 Yeah. 40:41 You're almost giving it validity if you're reacting to it with these 40:44 abstruse econometric terms, which basically nobody understands. 40:49 And really the answer is just that this model is incredibly stupid and shouldn't exist. 40:55 But yeah, so that Stock-to-Flow officially debunked – 40:59 Yeah, I give it two thumbs down. 41:01 I just – I don't understand. 41:03 Why don't people – there was nothing wrong with supply and demand, everyone. 41:07 That was – 41:08 That was good enough. 41:09 That was a real – 41:10 But it wasn't – 41:11 It was a real model. 41:12 It wasn't reducible to a single formula. 41:14 Also, and then the wishful thinking, we're all going to get rich, 41:16 and we just have to – again, we just have to do nothing. 41:19 Okay. 41:20 So we haven't even talked about the thing I wanted to talk about, 41:22 which is basically the security budget and how it's insufficient, allegedly. 41:27 So I'm going to give you some numbers right now. 41:31 Right now it's about $15 billion annualized. 41:35 Does that seem sufficient? 41:36 Is that too much? 41:37 Is that too little? 41:38 How do you include the block subsidy? 41:40 Right. 41:41 So, I mean, the block subsidy, as we all know, is on a trajectory towards zero. 41:47 It may take a while, but it does – when you get cut in half every four years – 41:54 I mean being cut in half is very significant. 41:58 So – and then the price has to be going up – 42:02 I don't remember exactly what it is, but something like 17% annually on average or something. 42:05 The price has to go up by two every four years to offset that. 42:12 And the problem with that is eventually Bitcoin will just be worth – 42:15 well, I know that this is – obviously this is a good problem to have, 42:18 but eventually Bitcoin will just be worth all of the money in the world, 42:23 and then it cannot easily double in value relative to the stuff. 42:28 It cannot easily double in value for the next four years. 42:32 So like eight years after that, the block subsidy is going down again. 42:36 Well, I mean – 42:37 So the block subsidy is not a reliable – it's not like a sustainable thing to rely on. 42:41 We have – the fees have to go up. 42:43 So the fees – I also pulled the numbers. 42:46 They are very low, frankly. 42:48 Yeah, that's the – most of the thrust of the article is about the fees do not – 42:52 they're not on this magical upward trend. 42:54 No, in fact – 42:55 They're mostly zero most of the time. 42:57 Sometimes during bubbles they rise, but then they go back down to there. 43:01 So we're going to link your articles. 43:02 They do a better job of summarizing this, but – 43:05 so right now they're around $250 million annualized, 43:11 which is sort of – seems like a lot, but then again you're trying to safeguard a network 43:16 which is worth almost a trillion dollars. 43:18 Yeah, I mean if it's $250 million a year, then what is it per month? 43:22 Like something like whatever, like $20-something million a month, 43:25 and then like per like a week that's – we're chopping it down to like $5 million. 43:30 So to 51% attack the network for like three days, it's going to cost you like whatever, 43:35 like $1-2 million. 43:37 Yeah, well, assuming you can sort of get the ASICs and stuff. 43:41 So on Ethereum, here's the weird thing. 43:43 Ethereum is $16 billion a year in fees. 43:46 The one site that I – when I presented at Bitcoin 2021, 43:52 I pulled the numbers from whatever crypto fees that info or whatever was. 43:56 That's a sad – for this year that's been – 43:59 Because there's individual smart contracts on Ethereum that are higher than all the Bitcoin fees. 44:04 Well, it's just shocking to see – to watch the trend over this year. 44:08 I mean, was that your graph? 44:10 You had the greatest graph. 44:12 I don't know if it was you, but I think it was – I think Austin gave it to me from you or something. 44:16 The graph of Ethereum's fees versus Bitcoin's fees on a log scale. 44:21 Oh, yeah, that's right. 44:23 It's shocking. 44:24 Ethereum's a steady march upward, and now it's 80 times. 44:27 It's a diagonal line, and most importantly, the line starts at like .001, and it ends at like 50x or something. 44:36 More, more. 44:37 So it has crossed the crucial 1.0 horizontal, and not only has it crossed, but it's just blown way past it. 44:45 And that's a – I think that's a sad thing because I try to focus – my background is in economics, 44:53 and Adam Smith, you know, he has this famous line about the conspiracy against the public, which is about guilds and things. 45:00 Because Adam Smith hated – he was a critic of the government and terrible mercantilist policy, 45:05 but he also knew that the merchants and producers were not to be trusted as well. 45:10 And he started sort of – I'm not sure who started it for, you know, in a historical sense, 45:16 but the idea that you have to care about the customer and the consumer. 45:20 Customer is always right. 45:22 And this idea of the fees is – you know, it shows that these have users who pay money, 45:31 and they – so obviously the customer is being made happy in some way. 45:35 That's certainly not the only criterion or whatever, but I do worry that, you know, 45:41 we want to keep the focus on what is best for the user. 45:47 You know, like what would like Stallman say or something like that? 45:51 You know, anyone – people from the open source movement or the cypherpunk movement or whatever, 45:57 it's like the software has to empower the user. 46:00 So it should give the user what they want, and there should not be – you know, the user is supposed to be sovereign. 46:10 So – all right. 46:12 So we have this fee quandary, let's call it. 46:15 They're either pretty high or effectively zero. 46:18 And they're only high when there's like these big price bubbles. 46:22 So that's what really concerns me is you have these people. 46:24 They've been like investing like a couple weekends. 46:28 They read everything by Nick Carter or whatever. 46:30 They're getting ready to like become a Bitcoiner. 46:32 So they've already invested an enormous amount of time. 46:34 So when push comes to shove and the price is going up, they say, well, I'll just pay $50 or whatever. 46:40 And then when they sober up weeks later or whatever, they kind of have more strategies about maybe they're not going to use on-chain as much. 46:48 They keep the money on the exchange or they switch from Bitcoin to, you know, cheaper block space on other altcoins or something. 46:57 So this really concerns me, the fact that what tricks people into thinking that the fees are going up is just these unrepresentative bubble periods. 47:10 So, all right, so here's something. 47:12 So I want to talk about this wait for more confirmations fallacy. 47:16 I don't know if you call it a fallacy, but we can call it that. 47:18 But firstly, I think that this year liquidity has been very portable across blockchains thanks to certain things like, you know, people primarily actually use stable coins to transact these days as opposed to like your native crypto assets. 47:34 And your stable coins are very busy straddling like dozens of different blockchains. 47:38 And so it's relatively easy to go across chains now. 47:43 So if you look at Tether, like it started on Omni and then it went to Ethereum and then it went to Tron. 47:49 And now you can use Tether on other blockchains too. 47:54 If you look at USDC, I think it's on a half a dozen blockchains. 47:58 The liquidity is straddling blockchains. 48:01 Does that accelerate the death of this idea that liquidity is sticky on a blockchain? 48:10 Is that evidence of users having absolutely no allegiance to a specific blockchain? 48:17 Well, one thing I try to make really clear in that piece to the extent that I think I have like a few graphics about it or whatever is that there's two different economic goods. 48:29 Like the coin is very different from the Bitcoin layer 1 transactions. 48:35 And they have a different price. 48:38 There's only 21 million coins, but every 10 minutes there's a new – on average, there's a new block space that can accommodate layer 1 transactions. 48:47 The Bitcoin layer 1 transactions are not like lightning network transactions or something. 48:51 So that's yet a third category of thing. 48:54 So people often try to make the argument about like, oh, Bitcoin is really special. 48:58 People will pay. 49:00 Well, a lot of that's true. 49:02 They'll pay for the coin, but they won't necessarily pay for space in Bitcoin's blockchain. 49:08 In fact, even when I was researching the article, I found that Satoshi said almost word for word that exact sentence or something. 49:14 He said people may not want to shell out for the expensive space in Bitcoin's chain. 49:20 And in the thread where he invents merge mining, he casually adopts this view that there will be many different blockchains with different fee rates. 49:29 And that the fee rates would drive people. 49:32 And that the fee rates would drive people away from the more expensive, small block, decentralized chain. 49:37 And so I was shocked. 49:39 Kind of we have to dig that up. 49:41 That's some prime Satoshi exegesis. 49:44 And he just kind of just he's very, very nonchalant about that. 49:49 He just sort of assumes like he takes it for granted. 49:51 But today that would be a heretical view that blocks based on anything other than the one. 49:58 Well, heretical among like a small crowd of Bitcoiners, but they're the minority. 50:02 Yeah, we do have a problem where I think there is a loud minority on Twitter that that unfortunately has a large influence on the culture. 50:10 But what can you do? 50:12 But anyway, this was your actual question. 50:14 Oh, yeah, of course. 50:14 Like do users have allegiance to a blockchain? 50:17 I think that, you know, if they did, we would not be seeing we would see more differences of fees on everything. 50:24 But what we see really is that when the fees go up, new entrepreneurs just create more blockchains. 50:30 Yeah. So they they it's a very much the same marginal cost equals marginal revenue argument from the proof of work article where they just the marginal cost of making new block space that is apparently a good enough substitute is like basically zero because they can always make some new chain with its own blocks. 50:49 And so. It's hard for the equilibrium price, you know, not to be zero because the supply curve is just right because you can create a block space and even worse, if you throw all your your your decentralization requirements out the window, you can create a ton of block space and the people who are trading or transacting are not, you know, holding or huddling. 51:14 So so they may not be you know, they may want to make some transaction through some some kind of crypto system and they they may want to end up with Bitcoin or they want to end up with, you know, US dollars in a bank account. 51:28 And so since their final destination is not the coin, all the dark net people, the dark net markets have, you know, they have switched to Monero a lot. 51:37 Many of them, except I see like the Pirate Bay, except Bitcoin Cash or whatever, they had like Bitcoin Cash, LOL or whatever. 51:44 But then they had it. So and if people have Litecoin, if you if you don't want to hold the coin and you only want to do the transacting part. 51:51 And this is where I worry that people ignore what I said before about the coin and the Bitcoin layer one transaction are very different things. 51:58 So the coin is insulated from competition because it has unique network effects. 52:05 You people want to coordinate on one money. 52:09 They do not want there to be all these different monies around that's Metcalfe's law, blah, blah, blah. 52:14 All that applies to the coin, but it does not necessarily apply to the the Bitcoin layer one transactions, which are a completely different thing. 52:21 And I think that if if people really cared about one versus the other, you would see that the prices be very, very different. 52:30 But just how can it be the case now that I question to people who believe that is how can it be the case now that Bitcoin fees are like zero? 52:39 Like Litecoin fees are also zero, whatever it is, you know, everything has this kind of natural zero resting place that everything returns to. 52:51 So it does. 52:52 So and even with the theorem, fees are very material, but people are upset about the fees, you know, like it actually comes up in Congress. 52:58 And when they do, they what happens? 53:00 Someone makes a new. Yeah, they move to other blockchains, smart chain, Solana, whatever. 53:05 They make the new whatever it is, Polkadot or something that inspires people to take advantage of that situation. 53:13 So does that kind of suggest that actually fees are, especially as we have these like mono nodal blockchains that like create tons of block space, fees are just destined to be zero across the board? 53:27 That's that's kind of what I think may be the case, because one thing that is that think about this is, you know, maybe you like Bitcoin core and you like decentralization. 53:38 Someone can just copy and paste Bitcoin core and make, you know, Bitcoin core two or whatever, beta, Charlie Echo or whatever. 53:46 They can just keep making these. 53:48 And then that's even more decentralized because it has a smaller, it has no historical blockchain, could even have a smaller block size as far as anyone cares, because you just keep copying and pasting them. 53:59 So what features? 54:04 You know, the only feature that the Bitcoin core original would have is that it's the only thing that can move BTC, which, of course, that is significant. 54:16 But again, it's not significant for anyone using it to transact. 54:19 Anyone using it to transact, they won't be holding BTC at the end of the day to hold whatever else it is they wanted. 54:27 And so that, I think, poses a challenge. 54:31 The other thing is to say, like, everyone prefers one money, therefore, BTC has an advantage. 54:36 That's what they call circular reasoning, because BTC is on top right now. 54:41 It has the network effect right now. 54:42 But that's one of those things that's only true until it's not right. 54:45 And as soon as something else is the biggest, then all of that advantage that you you banked for your argument. 54:53 Now, all of that multiplied by negative one becomes a disadvantage. 54:56 And your argument is now completely toast, because it was 100 percent reliant on something that switched from being true to being false. 55:03 So I think this problem is worth thinking about a little more. 55:06 I think a lot of people just don't think about this problem for some reason. 55:09 Well, I think crypto people had this view that people would willingly use native crypto assets, like volatile native crypto assets. 55:19 And I sound like an economist at the Cato Institute or something saying this, but like they, you know, crypto people thought that people would do payments or like use crypto assets as a medium of exchange. 55:30 And like, basically, that didn't materialize, in my opinion, like it sort of did. 55:35 You have like a niche little economies. 55:37 But like, really, if you want to use a blockchain based asset for a, you know, contract with a non zero duration or you want to do your remittances or your round trip, you basically probably want to use a stable coin, frankly. 55:52 And if you just look empirically, like there's 150 billion dollars of stable coins and their, you know, whatever velocity is very high. 56:01 So that is appears to be like the preferred transactional medium on blockchains. 56:09 And so it already seems like this network effect thing is like, well, yeah, it's the dollar. 56:13 The dollar is the thing that people want to use on blockchains. 56:17 If you're a network effect maximalist, then you're really screwed because the U.S. dollar, obviously, you know, it's hard for Bitcoin to replace the U.S. dollar in that, you know, because the network effect is enormous. 56:27 I think it's also it's a conceit, like it's very easy for someone to just have their own little pet theory and they think, well, the world's going to work out like this and I'm going to get super rich along the way. 56:40 And it's like, you know, OK, but does it bother you at all that, you know, anyone can do that, right? 56:47 You know, we have this this graph of the fees, you know, is I think this is presents it calls out for explanation, you know, that you think, like, why are they why are they why are the Bitcoin fee rates like so low today? 57:03 This should be according to the people who say this is a steady upward trend. 57:07 This should be the highest ever every single day. 57:10 It shocked me, honestly, I'll admit that. 57:12 So. All right. So before we get to the solution, this wait for more confirmations ideas, a lot of people say, well, doesn't matter, you know, the security budget is too low. 57:22 We can just wait for more confirmations. 57:24 Why is that false? 57:26 Yeah, I was surprised Nick Sabo said this in particular, and I was surprised to hear that because, yeah, I don't agree with that. 57:35 To me, the the security budget is that's equal to how much money we pay the miners. 57:41 So that's all the money we pay to the miners. 57:44 And so therefore, if you're a miner, if you're 100 percent of the miners, all the miners as a group, that's all of your revenue. 57:50 That's all of your income. 57:52 So that's all the money because the way the difficulty adjustment works. 57:57 But that's going to be like all of your costs. 58:00 But your costs can't possibly be more than that. 58:02 So that's the best case scenario. 58:04 That's all the best case scenario is the entire security budget is translated to like hashrate security or something. 58:11 That's a best case scenario because you can't if you're paying your gardener, you know, a hundred dollars to, you know, do landscaping on your house. 58:20 He can't it can't cost him one hundred and five dollars, you know. 58:23 So that's all that we need. 58:25 So that number is how much the miners spend and how if the miners spend the proof of work, you know, it is a totally there's no identity. 58:35 It's a it's a dispassionate metric. 58:40 It's this industrial number. 58:42 So it's just like, you know, measuring voltage or something. 58:45 So anything that anything that the miners do to defend the network, someone else could do to attack the network. 58:54 And so to me, this security budget is just the cost of, you know, attacking the network. 58:58 Now, why isn't it, you know, just would more confirmations help? 59:03 Well, the I use security budget is like this dollars per month thing. 59:07 So it's like a rate. 59:08 To me, it has to be a rate because that's just how that's just how it is in the real world. 59:14 It's not like a certain amount of money we pay it and then the miners hash and then the miners never hash again or something like that's just not what it is. 59:21 So it's this ongoing rate. 59:24 And yeah, whoever pays the rate has the longest chain. 59:28 You know, they have the most proof of work and that's what the software will use. 59:32 And if you want the software to do something else, you have you open up your, you know, you open up your flank to like a million other arguments about how do you know that that will work? 59:40 Why didn't you know, you know, it won't be worse and blah, blah, blah. 59:45 So just ignoring that for the moment, whoever pays the security budget, that is what it costs to. 59:54 Basically, have the most proof of work and basically 51 percent Bitcoin permanently for as long as you're going to pay the rate. 1:00:01 So you can just if you're willing to pay whatever it is, like a million dollars per day or whatever, which is like what it is now, then for as long as you are paying that you're in control. 1:00:14 And so what difference does it make how many kind of you they're not going to get any the people on the real chain will never get any confirmations on the longest chain, so it won't make any difference. 1:00:26 And then the other problem is if the number is really low, then forget just having one person, 51 percent attack the network like once or something like if this number is really low. 1:00:38 Like, imagine if it costs 10 cents, like the people who say this, like the people who aren't worried about the security budget, of which there are some, some people just reject this idea. 1:00:46 But my question to them is, would it bother you if it would cost like 10 cents to rewrite the blockchain for like all of last year or something like that? 1:00:53 Really, you would really just be completely Zen about that. 1:00:57 You wouldn't be worried about that at all. 1:00:58 The number is too low. 1:01:00 People can easily attack the network like seven or eight times at once, like 100 times over or something. 1:01:06 And then the whole proof of work part that is the core element of the design, the proof of work part just sort of stops doing anything. 1:01:17 It has no effect. 1:01:17 So that's just over. 1:01:18 It's just the end of proof of work, which if you've got some other great idea, then maybe you wouldn't be worried about that. 1:01:24 But I think that's like, that's the idea. 1:01:26 That's the, if you have a Bitcoin investment thesis or whatever, this is like a core part of what you're buying. 1:01:34 So I find that kind of surprising. 1:01:37 I wonder what those people would really say to that 10 cents to rewrite the blockchain for last year, if that would really not bother them at all. 1:01:43 So your point about this, you can't wait for more confirmations, is because like you're, if someone is presumed to have an advantage and is an attacker, their advantage isn't necessarily decaying, right? 1:01:56 Yeah, they have an advantage. 1:01:57 They'll beat every block. 1:01:58 They will find the block before you. 1:02:00 So, and then people try to say, well, we'll notice that it's an attack. 1:02:05 And then we will, with our magic, magic coordination powers, we will flag that one as the bad one. 1:02:11 And then we have the magic bit, you know, zero or one. 1:02:14 We have the magic oracle bit. 1:02:16 And we'll know that this one is bad. 1:02:19 You know, even if you could do that, first of all, it doesn't make any difference because they just restart the attack at the tip of whatever it is that you blessed with your magic powers. 1:02:30 They can just keep attacking over and over again forever. 1:02:32 So you have to keep using this magical power over and over again. 1:02:36 And that's really the whole point with the problem with the argument is it just passes the buck to how are you doing this magic thing that is not the most proof-of-work rule. 1:02:45 Yeah, so you've introduced a new rule, and it's, so you now have a parallel rule. 1:02:48 That thing is the new consensus. 1:02:50 Yeah. 1:02:51 So then it's like— 1:02:52 So if you have that, then great. 1:02:53 Then we look, everyone in the world, including me, looks forward to hearing more about how that works. 1:02:58 Well, then we didn't need proof-of-work. 1:02:59 In the first place. 1:03:00 At all. 1:03:01 Yeah. 1:03:01 So the proof-of-stake people have the same thing. 1:03:03 They're like, well, you know, actually what we're going to do is identify the bad people. 1:03:06 And actually, we're going to slash them. 1:03:08 And we're going to take away their money. 1:03:09 That doesn't work. 1:03:09 I have to say, a lot of that's commonly believed. 1:03:11 But I think that's dead. 1:03:13 There's no, that's completely wrong. 1:03:14 I mean— 1:03:14 That's ludicrous. 1:03:15 The attacker will go back. 1:03:18 They will have, they'll go back to a time in history in the proof-of-stake chain where they control all the keys. 1:03:24 They can easily do this in many ways by maybe buying the coin and then selling it. 1:03:28 Or going to people who used to own the coin and getting their keys that they no longer use. 1:03:32 And which have no value to the present-day owners. 1:03:37 And when they rewrite the chain, they will control everything that's in it, 1:03:40 including any evidence of any slashing or— 1:03:43 And when they're in control of the chain, they can censor anything from it they like. 1:03:47 So you won't be able to just broadcast your little thing that says that you're going to slash. 1:03:51 They will be controlling whether or not that thing makes it into the blockchain. 1:03:55 So that's, I think that idea is, that idea is substantially easier said than done. 1:04:01 I think they won't be able to do that, in fact. 1:04:03 Yeah, I mean— 1:04:04 They might come up with some kind of crazy, convoluted way to maybe do it sometimes or something. 1:04:08 But it's just also, it's, I think it's just naive to build into your consensus mechanism 1:04:14 a notion that there is some way to determine intent in a blockchain context and morality 1:04:21 and things like that. 1:04:22 Like, this person is malicious and this person is good. 1:04:26 What if a large exchange or custodian gets slashed? 1:04:30 Then they'll just lobby the developers to be like, don't slash me. 1:04:33 Refuse to list the other blockchain history, you know? 1:04:37 So the thing is very, it's very— 1:04:41 And I think, you know, I mean, we've all got our views. 1:04:44 But of course, the proof of work, what makes it so great is it's a simple rule that everyone 1:04:48 can calculate. 1:04:49 And it does not involve these ideas of morality that require enormous amounts of context and 1:04:56 things. 1:04:56 Basically, people need to read their Zabo. 1:04:58 Unless he is talking about this— 1:05:01 Yeah, I don't know why he jumped on that quickly. 1:05:03 But that was, like, very quickly before he got, like, banned from Twitter or whatever, 1:05:07 or whatever happened. 1:05:07 Was he banned? 1:05:08 I think he, like, quit or something. 1:05:09 I think what's possible is he made a couple, you know, made a couple tweets on some sensitive 1:05:15 topics, let's just say, I think. 1:05:16 And then what they sometimes do is they say, if you don't delete this tweet, you won't. 1:05:21 I think it's become a little stubborn in those particular political views. 1:05:26 So he's probably, he's a little curmudgeonly. 1:05:29 They want you to do your struggle session. 1:05:32 They want you to put on, like, the dunce cap. 1:05:35 That's my guess. 1:05:36 I don't know. 1:05:36 They want you to basically be, like, the Chinese peasant or whatever, and wear your placard 1:05:41 saying, like, I've sinned, you know, I repent, like, I'm sorry. 1:05:45 But yeah, it does not—the number of confirmations does not matter. 1:05:47 If they're paying more than you per month, no amount of confirmations, you will never 1:05:54 have any in the longest chain of any—you have zero. 1:05:57 And then the worst thing is, of course, if the attack is overwhelming in its success, 1:06:02 that's a big if, but if the attacker really can pay the security and is willing and able 1:06:07 to pay, then all the honest miners will be earning nothing. 1:06:10 So they will eventually, you know, become discouraged, and then that will be a disaster, 1:06:15 because the security budget will then plummet, and it will be very easy to keep the attack 1:06:20 going, although they'll always need to be willing and able to pay the larger number 1:06:25 to be a deterrent, but they won't actually have to pay it. 1:06:28 They'll just need to be willing and able to pay it. 1:06:30 They'll just need to be willing and able to pay it, and that will be horrible. 1:06:33 So we haven't really actually talked about BIP300, and while I feel like BIP300 is 1:06:39 too narrow, because you have like a sort of a cluster of ideas, and you were telling me 1:06:45 you first presented this in 2015. 1:06:47 Is that right? 1:06:47 I had this idea at Drivechain, which was just an idea in 2015, November. 1:06:54 And then over time, it has actually become, to make it into just easier to understand, 1:07:00 and for code reasons, I split it into two BIPs, BIP300/301, but BIP300 is 1:07:08 basically this sidechain's idea that hashrate S grows, this SPV-proof code idea, and the 1:07:17 301 is Blind Merged Mining, so I thought it would be easier for people to read. 1:07:21 It makes the BIPs a lot shorter, so you can read, if you're into reading about BIPs, 1:07:27 like the actual BIPs are, of course, in the Luke Dashjr. controlled BIP repository in 1:07:35 the little table, so you can read those, and each is only half as long, because I split 1:07:40 them into two. 1:07:42 And what's your sort of current attitude in terms of the process of including these? 1:07:47 Well, yeah, this is a thing where they're determined to... 1:07:53 You just look at the frequency has been decreasing of soft fork upgrades, but just also of any 1:07:59 kind of major release of any kind has become very rare. 1:08:04 It's become literally like four or five years in between soft forks, whereas in the past, 1:08:09 there were very many. 1:08:11 In 2015, there were like three the same month of scaling two or something, like they had 1:08:20 been done before, and there were like five that year or something like that. 1:08:27 There used to be many more. 1:08:29 There used to be more upgrades. 1:08:31 But now, which is partially a good thing, the protocol has ossified to some extent, 1:08:36 but also there's this kind of very bureaucratic, slow consensus building process. 1:08:44 And if you can't, it's a good thing, you want to be able to demonstrate that nothing that 1:08:51 you add to Bitcoin in terms of code or whatever, that should never affect any of the people 1:08:57 who aren't using it, which is great. 1:09:00 Although that rule was broken for SegWit since it was a mandatory block size increase. 1:09:04 But the point is that that is the criterion, but not only do you have to meet the criterion, 1:09:09 which is great, but you have to have some kind of overwhelming ability to persuade everyone 1:09:14 that you really have met the criterion. 1:09:17 And plenty of people are just like, you know, they're really busy with what they're doing, 1:09:21 and they'll just not look into whatever argument you make that this will not affect people 1:09:29 who aren't using the software. 1:09:31 You've even said things like you can have a different version of Bitcoin Core that doesn't 1:09:36 have any BIP300 code in it at all. 1:09:40 And, you know, that version will work just the same as the, you know, you won't be able 1:09:46 to use sidechains on that version, but it will work just the same. 1:09:49 But people are kind of like, you know, it takes effort for everyone to understand every 1:09:52 argument. 1:09:52 So you look at Jeremy Rubin is suffering through this right now. 1:09:56 His thing is a very simple repurposing of one of the opcodes, which has been done many 1:10:03 times before. 1:10:05 If you don't, if your transaction doesn't use this opcode, it will never trigger any 1:10:09 of his code or whatever. 1:10:11 But still, this has led to this long, long, long conversation about, you know, who affects 1:10:18 what and then who thinks what and why. 1:10:22 Anyone can just comment. 1:10:24 And so the process has become very, very, very slow. 1:10:27 I'm not sure I actually know how to, you know, what the strategy is for actually succeeding 1:10:35 anymore. 1:10:37 It may even be the case that it may just not even be possible. 1:10:41 A lot of people, for Taproot, they were like, I'll code Taproot. 1:10:47 But they were like, but I don't want to have anything to do with the activation. 1:10:50 They just intentionally fell on the sword or whatever with that. 1:10:55 And they were just like, this is like... 1:10:58 Because it was so traumatic, this scaling war in SegWit and all that other stuff. 1:11:03 It's been so long. 1:11:04 You'd think that sort of our PTSD would be, you know, we'd like go to therapy and sort 1:11:08 of like fix that. 1:11:11 You would think that, or that we would, you know, this is a crazy idea. 1:11:15 You'd think that maybe you would think that we would like come up with a solution to make 1:11:22 it easier to like have the process more formal or have something about procedure, you know, 1:11:28 like figure that out with the law. 1:11:30 Like that's why the law has all these silly things, arraignment, trial, jury selection. 1:11:35 We figured out that it's a big mess if you don't have like a plan. 1:11:40 That was sort of, there was so much bellyaching over taproot, but we eventually did settle on 1:11:46 a method of sorts. 1:11:49 I think it was the first time we did it in this sort of specific way. 1:11:52 Some people have a problem with the way. 1:11:54 I mean, you know, I didn't. 1:11:57 But, you know, like Luke Dashjr. had a problem with how it was done or whatever. 1:12:04 I mean, so it's tough. 1:12:05 It's difficult. 1:12:06 I think it is hard to get things. 1:12:10 It's a very, it's very bureaucratic. 1:12:13 And I do, the whole point of sidechains is that you could let the, one of the points is that you 1:12:19 could let layer one ossify safely and still take advantage of everyone's creative screwball ideas. 1:12:25 So if the protocol is going to ossify, it would have been really, really nice to ossify with 1:12:31 BIP300 in it or something that does what BIP300 does. 1:12:35 That would be great because then the ossification is no longer a liability because the idea of 1:12:42 becoming obsolete is, that is, you know, that would be horrible for the network if there 1:12:49 was something that, again, the users, you have to focus on the users and the customers. 1:12:54 It's a very common thing to have contempt for the user and to insist that, you know, 1:13:01 maybe the developers are, the technical people are the philosopher kings and they 1:13:05 should rule over everyone. 1:13:06 But I do not accept that view. 1:13:09 I think the user is ultimately going to get what they want. 1:13:12 If you don't give the user what they want, then you're going to become a problem for the user. 1:13:17 And people are just very smart. 1:13:18 They're very good at solving their problems eventually. 1:13:20 You know, maybe not the next day, but they will eventually get what they want. 1:13:26 And if they want stupid, you know, like we had like all kinds of, whenever we had counterparty, 1:13:30 we had colored coins, we had Omni, we had all this like NFT style stuff. 1:13:36 Yeah. 1:13:37 And, you know, if the people just want crypto kitties or whatever, and they are willing 1:13:42 to pay and they're willing to invest their time and energy in that and, you know, and 1:13:48 it doesn't bring any harm to the people around them, then that's the direction society is 1:13:54 going to go. 1:13:55 And same for anything they want, like more privacy. 1:13:58 You know, like Monero, there's a darknet market that went Monero only. 1:14:02 And then they made so much money that they closed down, I think, without exit scamming. 1:14:06 Yeah. 1:14:06 I think I saw that. 1:14:07 That was like a first almost. 1:14:10 It's like they just peacefully exited. 1:14:12 They're like, you know, we're actually not going to exit scam. 1:14:14 I was like, wow, this is so awesome. 1:14:16 Very, very rare. 1:14:17 It's like they sort of like did it. 1:14:18 They met their goal and they're done. 1:14:19 But this kind of really makes it look like... 1:14:21 Exactly right. 1:14:22 Like then they did that and by being Monero only. 1:14:27 They have a plan and they plan. 1:14:28 They wanted the privacy feature. 1:14:30 And they they succeeded and they met their goal, like they retired or whatever. 1:14:36 And we live in Miami now, probably saw them on my run this morning. 1:14:39 So, yeah, that'd be great. 1:14:42 Yeah, as like as not. 1:14:43 So OK, but so Blind Merged Mining, is there an instance of it in Bitcoin today or something 1:14:49 similar? 1:14:50 It you could easily do it with the what BIP301 does is it makes a Blind Merged Mining 1:14:57 not require any trust between someone running the sidechain full node and the layer one 1:15:03 SHA-256 hashers that we think of as miners today. 1:15:08 So the idea of Blind Merged Mining, you could do it without BIP301 today very easily, in 1:15:16 fact, because people have could have a relationship with a pool or something. 1:15:20 They could just have like a pay as you go. 1:15:22 Like if you had to leave someone a bushel of oranges at a certain pier and then you 1:15:28 come back and they pay you and they just do this every day, you wouldn't. 1:15:31 But BIP301 makes it atomic. 1:15:36 You get the cash at the exact same moment you leave the oranges or whatever. 1:15:41 So there is no example. 1:15:44 I mean, people, anyone could be doing it is my point without BIP301. 1:15:48 BIP301, we have testnet software that uses it. 1:15:52 So the software exists. 1:15:54 The software works. 1:15:56 You can check it out at drivechain.info if you want. 1:15:59 But I don't think anyone has deployed it except for me. 1:16:04 I don't know. 1:16:05 I don't know that. 1:16:06 If you have, let me know because I don't know anything about that. 1:16:09 But there has been a lot of regular merge mining in Bitcoin since I think 2010, 2011. 1:16:16 Right. 1:16:18 That was also a Satoshian idea. 1:16:19 Yeah, he invented that idea to help out Namecoin. 1:16:22 This is another thing that is very different. 1:16:26 Satoshi is like the co-inventor of the first altcoin or whatever. 1:16:29 So this is very bizarre. 1:16:31 We've come a very long way. 1:16:34 I think even Satoshi would not be allowed to appear at a Bitcoin conference if you only 1:16:43 saw his resume because his resume would include like inventing like a shift coin. 1:16:49 So he would be like barred because people in force, like I don't want to particularly 1:16:54 name – I mean you probably know the conferences I'm thinking of. 1:16:57 But the conferences, they have a policy. 1:17:00 Sometimes a formal policy where the organizers of the conference have said on recorded YouTube 1:17:05 videos or whatever, they say if anyone has anything to do with any altcoins, especially 1:17:11 God forbid they created it, helped create an altcoin, they would not be allowed to. 1:17:16 But then that would – by that criterion narrowly applied, they would have to prevent 1:17:24 him from speaking at the conference. 1:17:29 So that's like – I don't know what to make of that. 1:17:31 I mean that's just a thing that people don't realize that the plan is – the problem of 1:17:38 altcoins is you don't want anyone – it dilutes the message. 1:17:45 In the past, we had this message like Bitcoin versus the banks and altcoins wreck the message 1:17:51 and they make it like confusing and every altcoin is kind of like as Gavin Andreessen 1:17:55 said long ago, kind of a sneaky way of getting around the 21 million coin limit. 1:18:01 But the problem of – to solve the problem of altcoins is not to just go around and try 1:18:08 to suppress people's creativity and people's interests and desires and things. 1:18:15 The problem – the solution which is like part of what Satoshi was doing when he invented 1:18:19 merge mining in 2010. 1:18:21 The solution is to try and come up with something that – where you get all the benefits of 1:18:26 having the altcoin but you don't have this dilution of – you don't have this inflation 1:18:32 tax and you don't have this dilution of the message like to the point where people 1:18:35 today – they've heard of Bitcoin. 1:18:38 They heard of Bitcoin last week and they heard of Solana last week and they're completely 1:18:42 different between the two and they have no idea what the differences are. 1:18:46 You want to have just – and the genesis of all that thought was in 2013, the two-way 1:18:53 peg or in 2014 became the sidechain and that was supposed to be just this big solution 1:19:00 and that's what I and many other people thought would be the solution to the problem of altcoins 1:19:05 is that you just take all of the – if you have Zcash or Monero or Namecoin or whatever 1:19:12 it is, whatever it is that people are interested in, NFTs, Turing Complete, smart contracts, 1:19:23 you would just like – I remember Rootstock, that was super old. 1:19:25 That was like 2015 that they were announced or something and they were like, we're just 1:19:28 going to copy Ethereum and put it on Bitcoin. 1:19:30 Well, it's operational now, Rootstock, right? 1:19:33 Yeah, but they haven't quite succeeded in their mission to like – you know what I 1:19:38 mean? 1:19:39 Like how much activity is there on Ethereum versus Rootstock? 1:19:43 Well that's because I think people – like if you just like look out there in the world, 1:19:47 like all the potential users of a blockchain, it's just a lot of people don't care about 1:19:51 using Ethereum on Bitcoin. 1:19:53 They're just fine using Ethereum. 1:19:54 Yeah. 1:19:55 They don't have any ideological hang up. 1:19:57 But that would never have happened like before 2016. 1:20:01 Remember before 2016, Ethereum was like whatever, like 4% of Bitcoin or something. 1:20:08 It was like this very, very small thing and then – so this was – when the genesis 1:20:13 of the sidechain idea happened, Ethereum was like this tiny, tiny, tiny little thing and 1:20:19 it wasn't until 2016 when Ethereum kind of like 100x in value or something and like 1:20:26 became like worth like a third of what Bitcoin was worth or something. 1:20:30 And it was like all this drama in Bitcoin about the scaling world, the block size war, 1:20:35 knowing people like the future was uncertain, it was like stress, it was like miserable. 1:20:42 Yeah, it was tough. 1:20:44 So okay, so does BIP300 slash 301 solve this problem of our weak security budget? 1:20:52 Well, I think it would. 1:20:54 I mean, I don't know what else would because the issue is merge mining for the purposes 1:21:00 of the security budget is like unlimited block size increase. 1:21:05 It lets you collect all the fees from other blockchains, all of them without limit, without 1:21:11 any inconvenience really to you. 1:21:14 That's regular merge mining, does that. 1:21:17 So just regular merge mining I think would – could solve this security but even without 1:21:22 301. 1:21:23 301 just makes it very, very easy because 301 lets regular miners merge mine everything 1:21:31 that's 301 like compliant or whatever without even doing anything, like without running 1:21:37 any full nodes of sidechain or altcoin. 1:21:42 So you have a 301 merge mine, a blind merge mine altcoin and it could have all these fees. 1:21:50 What happens is the fees are paid to someone over there, some user over there who happens 1:21:54 to also have Bitcoin and they make a transaction on Bitcoin to the miners. 1:21:58 They like that kind of just a sacrificial transaction. 1:22:02 They pay like whatever it is like the – let's say the sidechain has like $700 worth of transaction 1:22:09 fees and they would pay on layer one, they pay with BTC 699 to the miners and then exchange 1:22:14 the miners like include some little code that mines the block. 1:22:19 So they get $700 in the world of the other chain and the miners just – they just see 1:22:26 that they just got $699 in exchange for including a transaction basically for including data 1:22:32 in the blockchain. 1:22:34 So as far as they're concerned, this is just a weird transaction that pays them $700. 1:22:39 This one transaction that pays them all the sum, the amount that is the sum of all the 1:22:44 fees of the other block. 1:22:46 So that's just – they're not doing anything they don't already normally do which is just 1:22:49 include all the transactions in the block that pay them the most money. 1:22:53 So 301 just makes it so they don't have to think about anything at all or do anything 1:22:58 and they just get paid in layer one. 1:23:02 So 301 I think is – it makes life a lot easier. 1:23:05 Whereas with regular merge mining, they have to actually run the software of the weirder 1:23:12 altcoin like or layer two or whatever you want to call it. 1:23:17 They have to run Namecoin and then like Namecoin will like make a Namecoin block that also 1:23:21 is a Bitcoin block that when you hash the Bitcoin part is a really low hash or something 1:23:28 like that. 1:23:29 So you're beholden to like this weird – the weird new experimental software. 1:23:35 And as a miner – 1:23:36 It's kind of annoying. 1:23:37 Like miners we know are like pretty lazy and don't update their software a lot. 1:23:41 You know, you said who wants to – I mean who even wants to upgrade their normal computer? 1:23:45 Like the thing pops up and they're like, oh, a bunch of people did work for you. 1:23:48 But you're like, I never – whoever wants to update their computer at all, who wants 1:23:52 to update their phone? 1:23:53 Who wants to update anything? 1:23:54 So the miners especially like they're making an enormous amount of money like per second. 1:23:59 They have it all charted out. 1:24:00 They can't. 1:24:01 But what's funny is that the Namecoin software, merge mining they would get like $5 like per 1:24:07 block and then the Bitcoin block was like $5,000 and they would still like half the 1:24:11 network – 1:24:12 They would do it, yeah. 1:24:13 And sometimes the Namecoin software would crash and like they would like, you know, 1:24:18 the whole farm, mining farm would like go down as like their software reset or whatever 1:24:23 and yeah. 1:24:25 I think even once or twice there's just so much voltage that if it doesn't go into 1:24:29 the ASICs, like it literally like transformers like it burst into flames and explode or something. 1:24:33 Like I'm not 100% sure that that ever – that really happened and it's not just a story 1:24:38 that someone told me. 1:24:39 It might be a story, yeah. 1:24:41 All right, so one thing I forgot to ask you before about security budget. 1:24:45 Okay, so I think we probably differ on this. 1:24:49 Why can't you just contract the block size and target a certain amount of revenue by 1:24:54 doing the OPEC thing and cardinalizing? 1:24:56 Yeah, I do because the problem with that is – so this is like, you know, just like the 1:25:01 fee rate is like the price and then the fee is the thing that I'm focused on is like 1:25:05 the revenue. 1:25:06 The aggregate, yeah. 1:25:07 So it's price times quantity. 1:25:08 So it's this area of this square or this rectangle in economics of the price times 1:25:13 quantity and yes, if you reduce the quantity, let's say you cut the quantity, you know, 1:25:19 to a tenth. 1:25:20 You cut it by an order of magnitude and instead of being – right now it's four megabytes. 1:25:25 You cut it to 400 kilobytes. 1:25:31 You would then – immediately your problem becomes ten times harder. 1:25:35 So if the price doesn't change, which of course you and I agree that it would, but 1:25:41 just – I'm just saying step by step. 1:25:43 The first thing that you did is you just made the entire problem ten times worse. 1:25:47 So you have to hope that the fees go from whatever they were to something that's ten 1:25:51 times higher just to get back to where you started. 1:25:53 Well, you need convexity, right? 1:25:55 Like – 1:25:56 Yes. 1:25:57 Or I don't know if that's the right shape of the curve. 1:25:58 I always get them confused, you know. 1:26:00 Actually, it's funny. 1:26:01 I think you do. 1:26:02 I think convexity is right. 1:26:03 You need the price to go up by more than you reduce the quantity of block space, right? 1:26:08 Right. 1:26:09 So you need the price to go – the delta on the price, the whatever, the multiplier 1:26:12 of the price to go up by a factor of more than ten. 1:26:16 More than ten, yeah. 1:26:17 In that example. 1:26:18 So you just don't believe that would happen. 1:26:21 You know, first of all, now – yeah, the problem is the logic I outline in the piece 1:26:29 is that when the price is really, really high, the idea of focusing on the high P, that creates 1:26:40 – you know, that means that each transaction is expensive, you know, just straightforward. 1:26:46 But that means that whenever anything is expensive – we just talked about the whole Simon Ehrlich 1:26:53 thing too. 1:26:54 Whenever something is expensive, it's a problem for the user. 1:26:57 So the tune of however expensive it is. 1:27:00 And you know, most things have just – you know, as we were talking about before, they 1:27:03 just get cheaper over time and a lot of things today on the internet are just free. 1:27:08 And so I would imagine like it would be tough to hit these levels you would need to hit. 1:27:13 I mean, think about what you would need to hit to replace. 1:27:16 If you wanted fees to replace the block subsidy today, the math on what is required to hit 1:27:22 that is like – we're talking like $200 per transaction. 1:27:28 We're talking like – you know, and if you're cutting it, it depends on what you 1:27:31 cut it by. 1:27:32 You know, we're talking like numbers that people would find genuinely inconvenient. 1:27:36 You know, if you're going to cut it by ten, you have to go ten times higher than that 1:27:39 just to get back to where you started, let alone to make it increase. 1:27:44 So I'm not sure that – I think there is really kind of like a limit like that. 1:27:48 I think that maybe there's a – because again, we're talking long run, 24-7, 365 fees. 1:27:55 So right now, it's like 2,000 transactions per block. 1:27:59 And we're talking like what's the average price going to be in the long run future, 1:28:05 you know, that – are people really going to pay $50 every time, $2,000 a – you know, 1:28:12 2,000 times every ten minutes at 3 a.m., you know, at like whatever. 1:28:17 Like is this – this is the future like forever? 1:28:20 And then the other problem is our adversaries, JP Morgan, whatever, whoever you want to 1:28:25 name the crazy people in the Russian government or the Chinese government or the U.S. government 1:28:32 or whatever you want to – whoever in the name is the – people who may not have their 1:28:37 interests completely aligned with Bitcoin, whoever they are. 1:28:41 Their profitability is going to be growing at a geometric rate. 1:28:46 You know, I calculated most of the – I calculated a lot of figures in the article. 1:28:51 Most of them like, you know, the – I had like the U.S. military budget, like visas, 1:28:56 operating profits. 1:28:57 I had all those things. 1:28:58 Most of those things just happen to be growing by like around 6% per year, just kind of – just 1:29:02 like a back of the envelope calculation, like for all of the historical data that was like 1:29:07 available. 1:29:08 So they're just going to be growing all the time. 1:29:10 So now, $50 fees, you know, are people going to pay that in 2075 or something? 1:29:17 And then it needs to get – it needs to be going up and up and up and up over time. 1:29:21 And in the real world, you know, you have things like – what about – there was a 1:29:25 time before Venmo, right? 1:29:27 There was a time before Litecoin, there was a time before Bitcoin Cash, you know, there 1:29:32 was a time before Solana competing and keeping the fees down. 1:29:38 So I think it's tough. 1:29:39 I think it's tough to rely on the high P. I think that's – the high price. 1:29:44 I think that is – I think you're really putting yourself at a big risk if you do that. 1:29:53 And so I think it's better to just say that the prices will probably always be low and 1:29:56 you have to make it up on volume, as they say. 1:29:58 What people don't understand is that they – because it's a violation of the block 1:30:03 size limit as far as mining revenues are concerned. 1:30:06 But it is not at all – I can say this as the author of the measuring decentralization 1:30:11 post or whatever. 1:30:12 It has nothing to do with how expensive it is for you to run your full node and fully 1:30:16 validate the blockchain. 1:30:17 It has nothing to do with that at all. 1:30:19 And that is the missing piece that people get. 1:30:22 They think that merge mining makes it more expensive for them to run a node or something. 1:30:26 It does not. 1:30:27 The Blind Merged Mining definitely does not because even the miners don't need to run 1:30:33 It's possible for the whole system to be running without people knowing what altcoin 1:30:39 or sidechain nodes are even being used to create these fees in the first place. 1:30:45 It's always possible that your blockchain will reorg or that miners will decide to do 1:30:50 something crazy. 1:30:52 But that has nothing to do with the presence or absence of merge mining. 1:30:56 And in fact, if there is no merge mining, I really worry that the security budget will 1:31:00 be very low. 1:31:01 That problem is a hundred, a thousand times more important than the fact that you may 1:31:08 not like the fact that some miners have a side hustle where they earn money or something. 1:31:13 The fact that some miners would have the side hustle and some won't and then some miners 1:31:17 will go out of business and so we should shed a tear over the fact that those miners can't 1:31:22 buy as many Christmas presents for their kids. 1:31:25 Mining is an evolutionary process and we want it to be very simple. 1:31:35 Whoever does the most hashing is the winner. 1:31:40 They provide the most security per Bitcoin layer one block or whatever and that's what 1:31:45 we want. 1:31:46 Okay, I think we have to leave it there. 1:31:47 We basically covered everything I wanted to talk about. 1:31:51 What would you instruct our dear listeners in order to, you know, subsequent instructions? 1:31:57 Where would you send them? 1:31:59 I think the security budget is a really good window into my brain and how I do things. 1:32:04 And again, it's just a giant list of things where I disagree with what most Bitcoiners 1:32:10 believe. 1:32:14 And I try to say why that is. 1:32:17 And I think that one is a big tour of all of my, like, heretical thoughts. 1:32:23 So I think if you go into that, you'll find there's just so much in there, especially 1:32:27 when you make it down to the bottom, all the stuff about the history of Blind Merged Mining 1:32:32 and like people's attitudes to it and things. 1:32:34 I have lots of links and stuff in there. 1:32:37 So I think, you know, if you liked any of that, you might like the article. 1:32:42 I did put a lot of effort into writing it. 1:32:45 And I think that's a good idea of like what kind of stuff that I'm up to. 1:32:49 And then you can look, you can just go, that's like on my blog, and you can just click the 1:32:54 latest post of the archive button and then you can see other other stuff there that you 1:32:57 might want to read. 1:32:59 If you're interested in the BIP300 or 301, you would go to drivechain.info and hopefully, 1:33:08 the best thing is to download the software because don't listen to, you know, you can 1:33:14 make up your own mind. 1:33:16 Download the software and use it and then you'll know more about BIP300 than anyone 1:33:21 who hasn't. 1:33:22 You have to trust yourself, your own experiences. 1:33:28 You're a smart person. 1:33:29 You'll figure it out. 1:33:30 I believe in you. 1:33:31 So if you have real software that you can download and I would do that. 1:33:35 That's the only best way to understand. 1:33:37 So I will link to all these things. 1:33:39 I'd certainly recommend that, well, you have two security budget posts, I think. 1:33:45 Right. 1:33:46 Yeah. 1:33:47 I wrote the first one. 1:33:48 I thought it was quite good. 1:33:49 And then there was a lot of like pushback from it. 1:33:51 So I was like, oh, I don't have to write the second one. 1:33:54 Yes. 1:33:55 Read the whole corpus of the Truthcoin.info. 1:33:58 Read the archives. 1:33:59 It's probably the number one thing I recommend to people if they can handle the iconoclasm 1:34:05 therein. 1:34:06 But yes, I'm going to put it all together. 1:34:09 Paul, thank you for coming on the show. 1:34:11 It's been three years almost, maybe two years of doing this show. 1:34:15 Never had you on, so thanks. 1:34:16 No, hey, thanks for having me.