0:00 Welcome back to the Mining Pod. On today's show, we're joined by Paul Sztorc and James 0:03 McAvity of LayerTwo Labs and Cormint, respectively. In this show, we talk about Bitcoin mining fees, 0:08 design space for L2s, and why Bitcoin miners are not very involved in today's Bitcoin governance 0:13 conversations. As an editorial note, LayerTwo Labs is currently a sponsor of the show. 0:18 Did you know that you can make more money by merge mining other networks? Check out 0:21 makemoremoneymining.com for information on BIP300/301, a proposal to bring more revenue 0:27 to Bitcoin miners through sidechains and merge mining, called Drivechains. Increase your mining 0:31 revenues and learn more about participating in Bitcoin governance by visiting makemoremoneymining.com. 0:37 Are you a miner who wants to activate Bitcoin improvements? Check out activation.watch. See 0:42 what Bitcoin improvements the Bitcoin community, developers, and miners are considering, 0:46 and show support by signaling for one of many BIPs up for consideration. Activation.watch. 0:52 Is your mining operation happening ready? Take control of your own future with the 0:56 right energy strategy. LinkCoin Energy Training Platform is a tool used by miners to design, 1:00 monitor, and seamlessly orchestrate sophisticated energy strategies within electricity markets, 1:06 such as ERCOT, New York, and PJM. Avoid penalties, participate in demand response programs, 1:11 and capture hundreds of thousands of dollars per megawatt per year by deploying the right block 1:15 and index strategy. Secure your competitive edge at LinkCoin.com. 1:20 Hey, MiningPod. I'm Lee Bratcher, President of the Texas Blockchain Council. The Texas Blockchain 1:24 Summit is now the North American Blockchain Summit, the same emphasis on policy, energy, 1:29 and Bitcoin mining, but now expanded by working with our partners across the country. We've got 1:34 great sponsors lined up like Riot Marathon, GDA, CleanSpark, Bitdeer, Lancium, Cormint, Compass, 1:40 HTS, Crypto Power, Priority Power, Sonota, and many more. Solidify your next deal or JV, 1:47 or just come for the networking on November 15th through 17th in Fort Worth, Texas, 1:51 for the third annual North American Blockchain Summit. We'll see you there. 1:56 Are you a retail or institutional investor interested in Bitcoin mining companies? The 2:00 MinerMag brings you free data and analysis from all major NASDAQ-listed Bitcoin mining operations 2:04 to know who stands out. Check out visualized metrics and data-dependent stories at theminermag.com. 2:10 Welcome back to the MiningPod, joined today by James and Paul, 2:13 welcome both to the show. We've been looking forward to this conversation for quite a bit, 2:18 talking about Bitcoin mining, BIP300, 301, aka Drivechains, and really what's going to happen 2:24 with all these Bitcoin fees in an emergent L2 world on top of Bitcoin. But again, welcome to 2:28 the show. Hey, thanks for having me. Thanks. Okay, we'll start off talking about fees, 2:33 because I think that's really just the key part here is like, do we want fees on top of Bitcoin? 2:40 And if so, where do we want those fees to go? And I think that really is like the nexus, 2:44 if you will, of like BIP300, 301, and all these other protocols we're seeing pop up, 2:49 whether it be ARK, or BTM, or Lightning, things like that. Paul, I want to throw it over to you 2:54 first, just to sort of lay out the groundwork for that argument, and including some like 2:58 information about sort of like the TAM for this market. Yeah, well, we currently, the Bitcoin 3:06 network collects around 500,000 a day, US, in fee revenue. And yeah, so look at that. Okay, 3:14 I'm glad that you put that up. And I just, that was a shot in the dark on my part, but it starts 3:18 with a five, so I'm happy about that. And then yeah, Ethereum sometimes can do 10 times as much 3:24 or even more. Today, they're doing not quite 10 times as much, but they're doing much more. And 3:32 then you have to, you know, you factor in just basically all the other transaction fees that 3:36 are out there, everything, all of Visa's fees, everything for like registering a domain name, 3:42 all kinds of other things that we could have fees do. This is a huge amount. It could be 100x, 3:48 1,000x, or even 10,000. 10,000x is certainly possible, because Visa alone is like collecting 3:54 something like 100, not sure exactly, but it's like 120 million or something like that. 4:00 Not sure exactly, but it's like 120 million per day. So that's a lot of money. And we have, 4:07 you know, you imagine a big pie chart where we have crypto is only a tiny slice, and we have 4:13 fiat, and we have what you might be end up being something like a CBDC fee, like a WeChat pay where 4:20 it's subsidized by the government. They've got their thumb on the scale, trying to get everyone 4:25 to use WeChat pay because of, you know, surveillance reasons or just political reasons. 4:30 So we have this huge slice of money, and all of that could be Bitcoin transactions that Bitcoin 4:40 miners collect. But it seems as though that that is now very uncertain. So I guess that's the 4:50 thought. It's definitely uncertain. I think the question comes down to like, do you want Bitcoin 4:55 to be a multi-asset protocol of sorts with sidechains where you're able to issue other 5:01 tokens or other like assets on top of it? And where do you want those fees to settle? So there's 5:06 lots of different emergent ideas around this. We mentioned ARK already. There's this idea with 5:11 Covenant and CTV that could play into it somewhat. And then there's more emergent things like BitVM. 5:17 James, I want to throw this one over to you. I think like the interesting thing that we're 5:20 kind of leaning into here is like, why shouldn't miners get these fees? And 5:25 like, yeah, again, just why shouldn't miners get these fees? 5:28 No, I think it's a great question. And I think there's probably a couple of different reasons 5:37 why people think that miners not getting those fees or not prioritizing miners getting those fees 5:43 is okay. The first one is some people contend that the security budget is a myth and that 5:49 having a strong mining incentive to ensure fast confirmation times is not an important feature 5:55 of Bitcoin. I violently disagree with that. And I think it's a really kind of a preposterous 6:01 statement to make because we have no way of knowing what Bitcoin's value will be in that 6:06 environment. Bitcoin is valuable right now with a healthy $5 billion a year mining incentive, 6:13 mining revenue is about $5 billion a year, and the protocol market cap is $500 billion. So, 6:19 you know, it's about 1%, 1.5%, I believe is the exact number heading into the 6:26 halving. Obviously, that'll drop. And, you know, that school of thought, I think it assumes a 6:33 future state. The kind of second school of thought would be that users shouldn't have to pay high 6:41 fees. And so scaling solutions like Lightning that allow smaller transactions to avoid high fees 6:46 are obviously good for users. I think that's a healthy debate where you kind of move along the 6:52 lines of healthy push and pull between miners and users where users don't want to pay high 6:57 transaction fees. And miners need to somehow have sufficient revenue to incentivize them to, 7:04 you know, mine blocks with valid transactions, valid blocks with valid transactions quickly. 7:09 And so that third parties who look at that, whether it's, you know, Lightning channels or 7:15 exchanges or merchants who are doing transactions that are settling on Bitcoin, they feel that 7:19 there's a strong assurance there. But generally speaking, I think that this issue has been 7:26 de-emphasized. And there's a lot of dismissing it and saying, you know, this is FUD, miners are 7:32 greedy, you're all terrible people, all you care about are profits. And that comes from certain 7:40 very loud users who will only say positive things about Bitcoin, they will never talk about a 7:46 potential flaw or vulnerability, you know, security issue, fragility in Bitcoin in the future. And so 7:54 I'm glad to see that there's some momentum pushing against that attitude. And yeah, I think 8:02 miners are not bad people. Talking about increasing mining revenue is an important 8:08 part of keeping Bitcoin the same. You know, the metric that I like to look at is what is mining 8:13 revenue versus the total market cap of Bitcoin. And right now it's around one, one and a half 8:19 percent. You want it to stay in a healthy range there. If that drops down to say 20 basis points, 8:25 10 basis points, maybe even lower, or if there's tremendous volatility in how miners are in 8:30 revenue when fees spike, potentially for some periods of the day, but then the rest of the day, 8:37 they're relatively low. It's just a different system. It's a different protocol. And so 8:41 we got to keep Bitcoin the same by ensuring that fees are consistent, and there's a healthy mining 8:48 incentive. I want to go over and talk about the idea of like a novel build on top of Bitcoin or 8:57 soft fork, just racing towards a world where there's more than just lightning. And if there 9:02 is just lightning, what are the catastrophic scenarios with that? What are the scenarios 9:06 where we just like don't have the ability to scale with it? Paul, we were talking a little 9:10 bit earlier about this. And in a world where there is L2s, there's multiple L2s, that's a world where 9:16 a lot of these Bitcoin miners are just going to be outcompeted by an L2. And then in a lightning 9:22 based world, it doesn't seem like miners can compete either. They're sort of like in this 9:26 worst case scenario on either pathway at this point, where they're not going to get the 9:30 fees if we're doing like an arc build setup or an L1 setup, and we can't get enough momentum to 9:36 diverge from a pathway where miners can get fees. What are your thoughts on how we're going to move 9:41 forward with an L2 setup? Well, I think an interesting thing is that I see it in kind of 9:49 an, the miners can always, what they can always do is actually just attack the L2s. But that's 9:55 sort of a mean thing to say out loud. I mean, I don't want to give anyone any ideas. But like, 10:01 you know, the L2s, they all rely on something happening on L1 periodically in order for the 10:07 coins to even enter the L2. So there's no way you can have an L2 that someone can use. For example, 10:12 with the lightning network, you must do the funding transaction. That has to happen on L1. 10:18 So, you know, a super extreme, insane thing to do, but theoretically possible, 10:23 is it would be that the miners can just refuse to mine transactions that pay. 10:28 If this is somehow in their interest, they can refuse to mine anything that pays into a multi-sig 10:34 output, and they would lose the transaction fee from that. But if there's some kind of decision 10:40 calculus where that encourages them to use something else, you know, the user to use 10:44 something else the way they do get the fee. But that's a crazy idea. But I think the key is that 10:51 there's this huge pile of fees. And if the L2s get, there's L2s can get some of that, and then 10:59 the miners won't. And so the question is, will there be just one arc super node that collects 11:04 this hundred million dollars a day or a billion dollars a day of fees? And if so, see, but this 11:11 is where I flip the question back around because I say, now, isn't this a problem for the arc 11:16 super node that it relies crucially on L1? All the L2s rely on L1. So they all crucially rely on L1. 11:25 So this idea that it doesn't matter how low the miner revenues get, I don't know, like sometimes 11:31 I've asked people like, okay, is, you know, you disagree on where the line should be drawn and 11:36 they say, oh no, it never matters. And then I say, what does it, what if they get paid 10 cents a year? 11:42 You know, won't they just be, it'd be so easy to just bully around an industry that has such a tiny 11:48 amount of money coming in and a tiny amount of loyalty really to the actual end Bitcoin user. 11:56 So this amount is real. People can argue about what is the significance of the security budget, 12:00 but the security budget is normal thing to want. And it's, there is certainly some tension between, 12:09 so like if all the transaction fees are happening on an L2 that does not pay the miners anything. 12:14 So if everything happened on liquid, for example, then maybe like if it could happen in the miner 12:20 centric L2, or it could happen in liquid and they're all in liquid and it's really, it really 12:28 is $500 million a day in revenue versus on the L1, you know, nothing, $1 a day. Well, in that case, 12:36 you kind of could imagine where a miner's all getting together and saying, well, listen, 12:40 we'll just pull the plug on all multi-sync transactions in the hopes of moving. I mean, 12:46 how could you not? And so, so that's just kind of, I bring that up not to be too much of a 12:52 doom and gloomer, but just to say, actually, this is something that people have to think about 12:58 when we imagine like what kind of future is sustainable for Bitcoin. 13:03 The health of the L1 mining network is a prerequisite for anything being viable on 13:11 L2s on top of it. Yeah. That's exactly what it is. It is that you can't just disregard 13:18 the existing, the existing mining network, the existing mining participants. And I know it's, 13:25 it feels weird to say it because I'm a miner. Obviously I'm speaking to my interests, but 13:31 you know, when I feel weird saying that, I'm like, I'm supposed to say that. I should say that 13:36 because we, this whole system works based on the conditions that we understand it operating under 13:43 today. And if all of a sudden we're going to hypothesize about these future states where the 13:49 system still works, but somehow this core component of it no longer has an incentive, 13:55 you know, and nobody is investing the, the hundreds of thousands, millions, 14:00 tens of millions of dollars into building data centers, buying mining equipment, 14:04 you know, staffing their, their buildings, doing all these, these upfront heavy CapEx things for 14:10 the certainty or for the promise of future Bitcoin denominated revenues, it's just going to, 14:15 it's going to change a lot of stuff. I mean, we might as well just say, let's switch to proof 14:18 of stake then because the holders have all the power and, and they've been, you know, 14:23 they've had their foot on the head of the miners for the better part of, of a decade. And, you 14:29 know, eventually we're just going to switch to proof of stake because the holders are, are what, 14:33 what, you know, where all the power resides. Well, it happens to be the case, like exactly 14:38 the case that the amount of proof of work there is in Bitcoin equals the security budget. Like 14:43 if you measure them both in dollars, it is the same thing because the mining total amount of 14:47 money paid to miners in transaction fees, that is the total amount of revenue collected by miners. 14:52 And then because the difficulty adjustment makes it an equilibrium, the total amount of money spent 14:57 by miners on all the hashing activity has to also equal that number. So, so the, the security budget 15:04 is the proof of work. That's why if it drops to like 10% or 10 cents a year, it will, that would 15:09 be a tiny amount of money that will basically won't be proof of work. Bitcoin is a, is a $10 15:14 trillion protocol and mining revenue is $500 million a year. Show me where the incentive 15:22 is aligned there. I just don't see it. And, you know, I'm not a miner at all, but I feel 15:28 the exact same way that it's very rational to advocate for more mining revenue. The, the, 15:35 the miners are the ones who, there's actually a theorem in economics about a separation of 15:40 ownership and control about that usually being a disaster. The miners are the ones who, who put 15:46 the transactions in, they control which transactions make it into a block. And so in that sense, 15:51 they're kind of the owners of the block space. They sell the block space. So if there's a 15:56 scenario where someone else is, someone else is making money off of this and they're not cut in, 16:02 then it's just a misaligned incentive, I think. You guys pulled on a few things I want to unpack 16:07 it really quickly. First, Jamie, your notion of like governance is sort of brought up here 16:12 where like Bitcoin miners in the past have been a part of governance. And then after 2017, 16:17 four quarters, they kind of sidestepped out of it. And now Bitcoin miners need to be acknowledged 16:23 as probably the most long Bitcoin, right? Like they have these huge facilities, they're 16:27 planning years into the future. They're making easy purchases. Extremely liquid. And then the 16:32 most long Bitcoin, yet they're not allowed to have a conversation around like what Bitcoin should 16:37 look like. Where do you think that comes from? And how do you think that changes in the next 16:41 few years? Like how do miners push back on that notion? Yeah, it's a great question. I think it 16:47 comes from a clearly antagonistic actor being on the opposite side of those, those debates in 16:56 the 2017 four quarters, as you mentioned. At that time, I think Bitmain's monopoly on 17:04 ASIC supply was viewed as an existential threat to Bitcoin. They were, it was known that they did 17:10 nefarious practices, whether it was Amplead running their machines, shipping busted machines 17:16 like the S17, you know, they just, they seem to really be very self-interested and 17:24 potentially thinking about only short term incentives. And I think it was an appropriate 17:28 immune response to get all the users together and to make a demonstration of user power. 17:35 And that, it's obviously part of what has made Bitcoin great over the years, but 17:41 you know, now I think it's different. We have diversity of ASIC manufacturers, 17:46 the price that you can sell a brand new ASIC for is orders of magnitude lower than it was during 17:55 that era, which was the era of the S9. And actually, I think, you know, ASIC manufacturers 18:02 are, they're hurting right now because mining revenues are pretty low. I mean, mining break, 18:07 even on the old gen equipment is like 70 bucks a megawatt hour and the new stuff is right around 18:11 a hundred. And then, you know, during periods like that, especially with a lot of competition, 18:15 they can't make a ton of money. So I think mining is more made up of Bitcoin interested firms now 18:23 and Bitcoin oriented firms and people who are reasonable. It has a much, much larger North 18:29 American footprint. So there's no longer this state divide, you know, during the 2017 fork wars, 18:36 I think over 60% of the hash rate was in China. Now the US has a lead in hash rate. And so 18:42 the users and miners are speaking the same language. They're in Western democracies. And 18:51 I just think, you know, we could settle this up if we all got together and had dinner, 18:54 broke some bread and discussed some of these ideas and implementations where 19:00 valid security concerns were brought up and discussed openly. Obviously we can't tweet it, 19:05 you know, because then the plebs will not buy Bitcoin. But, you know, we could have 19:10 these conversations behind closed doors. Yeah, just zagging there on you for a second. I want 19:17 to move back over to the technical discussion now that we got that governance question there, 19:21 which I think is really important. And one thing you brought up really quickly is like the China 19:26 ban that brought on like a very different constituency of Bitcoin miners. And oftentimes 19:31 we see like these Bitcoin miners in the same bit devs meetups in Austin and Houston and Nashville. 19:36 And yet, for some reason, they're not allowed to have like a governance conversation together. 19:40 It's just really odd to me. Going back to what Paul was talking about, the L2 and L1's relationship 19:48 in Ethereum land, which I know a lot of people don't like to talk about, but I think is pretty 19:52 instructive when it comes to designing protocols. L2's in Ethereum typically use rollups and all 19:58 these rollup designs are purpose built so to be secure from the base layer so that a user has the 20:05 ability to off port safely with their funds so that the L2 can't harm the L1 and then vice versa, 20:12 the L1 can't harm the L2. There's a lot of nuance on this whole thing. But Paul, 20:19 I want to throw it over to when you're designing BIP300 or 301 or when you're talking about the 20:24 relationship between any L2 and any L1 out there, what are some things that you're thinking about 20:29 that make it important? Well, that's a very interesting question. I mean, I designed this 20:36 BIP300 thing a long time ago in November 2015. I just want to briefly mention on the previous 20:43 topic, I don't understand, what do people have in mind? Bitcoin users and Bitcoin miners are 20:49 going to just hate each other forever and mistrust each other? That's the plan forever? 20:55 But this was before that it happened. I had this type of L2 in mind and it was very 21:03 experimental. It wasn't as popular among the technical intelligentsia and it still is not 21:08 because it is more loose. It is not as secure. And in particular, this one thing you mentioned, 21:14 the ability to always, you're on the L2 and you always be able to be given something that 21:20 you can broadcast on L1 and retreat back to L1 unilaterally. That is something that BIP300 21:28 does not have. And for a while, I thought, you know, there are pros and cons. But now, 21:33 actually, I think it was a con, but now I actually think it is a pro because 21:39 this is something the Lightning Network and ARK always has this, but it turns out that this is not 21:44 as useful as it might first appear. So, for example, we first take the case that not 8 21:50 billion people in the world, 8 billion people cannot use L1 and get like a UTXO on L1 and 21:57 broadcast into the block space of L1. There's just not enough space. Now, with that in mind, 22:05 what's the sense of having the ability to go from L2 to L1 whenever you want? Because if you have 22:10 8 billion people, for example, on one L2, this is just a hypothetical simplification to just make 22:15 this point. Well, they can't all use the escape hatch. It's the same thing as them all using L1 22:22 in the first place. So, actually, I now think that that is not even really a good thing for 22:28 the L2 because it actually sacrifices a lot to make that happen. And I think instead, 22:35 the best bet is having L2 where the coins move over there and then they can expand out to new 22:42 users and then contract to a user who moves them back down to L1. Don't always insist that 22:50 you can redeem on L1 because that's not possible anyway. And so, actually, now I think that that is 22:58 too much of a disadvantage because the upkeep required to support that type of thing is too 23:02 much. But I think we should try all the L2s. We should try L2s of every shape and size and we 23:08 should see what works. What I certainly object to is this idea that we should not have, I get this 23:14 critique of BIP300 that it affects mining incentives. What they mean by that is it 23:19 pays miners. Miners get the money instead of the ARK Supernode or whatever. I got nothing 23:23 against the ARK Supernode either. I think that the ARK Supernode is fine. I just think it's an 23:28 irrational criterion. We shouldn't be in the business of picking who gets the fee. That 23:34 should be the end user should pick whatever they like. And we certainly shouldn't be in the business 23:40 of tweaking it away from, you know, we want to avoid changing the miners incentives. But what 23:50 people mean in practice is this whole ecosystem is supposed to be growing geometrically forever, 23:56 but the miners stay exactly where they are. That doesn't really make any sense. 24:00 Yeah, I think you actually bring up an interesting point, which there could be a situation where 24:06 if some new L2 sprouts up that offers an amazing user experience and it's leaps and bounds away, 24:16 you know, the far best product in terms of offering fast settlement, quick transactions, 24:23 whatever the features, composability, for example, that users demand on L2, there could be a tragedy 24:31 of the commons situation where that product is not designed in such a way that it maintains 24:36 healthy L1 incentives and it keeps all those transactions happening in its little Supernode 24:42 bubble. You know, ultimately that would be a design flaw from the original product designer 24:49 of that L2 to not be mindful of the L1 incentive as something that would be in their long-term 24:55 best interest to retain the viability of their product. 24:59 But there could be a little tragedy of the commons scenario, which I don't think is widely acknowledged now where we are tinkering with the incentive model and the commons in this case is the proof of work that is hashing with a healthy mining incentive and nobody really owns that on the L2, although they do, just like the environment is tragedy of the commons, you know, it's earth, if earth, if it's the earth, it's the earth. 25:26 It becomes uninhabitable, we're all going to die, but, you know, it's not exactly my backyard because it's co-owned, because the hashing power is technically co-owned by all the protocol users, there's nobody really directly responsible for that, except for the miners, which is, you know, to your point, Will, why I think paying attention to the miner voices is actually some good signal to listen to. 25:48 Yeah, we, I think we have to go back to that because it's this, the SegWit2x story, I'm not sure how many people know. 25:56 I mean, I don't want to bore everyone with a really, really long historical thing, as I often do, but it's like it really affected the technical community a lot where it has permanently altered what directions of research people go into, where before, like now things that touch a soft fork are not done, even there are things such as uTreeXO, these are very helpful things. 26:25 They help increase security, they help people, they make it so you can run a full node on your cell phone. It's a certain type of full node. 26:32 But people say, oh, we want everyone should run a node, whatever. And then, you know, we pitched these normal people and then they download Bitcoin Core and it says we will need, you know, like 650 gigabytes of disk space or something. 26:43 And most people are like, wait a minute, like what, like what is this thing doing? And so the node thing is not, you know, I don't know how many people are deterred marginally by each thing, but there's this uTreeXO idea. 26:55 It's not required, it doesn't require a soft fork because they invented this hack around it, these bridge nodes. The bridge nodes are this awkward, annoying hack. 27:05 But if instead we just had, we just made it a requirement in the protocol that there be included this uTreeXO commitment, this tiny little, tiny little thing in one out of every thousand Coinbases like once a week. 27:19 So we're talking like a tiny, tiny, tiny, tiny thing for something that the software is already doing automatically. 27:27 So it just says the software is already going to compute this hash, but we're just going to put it in the same spot each time so that the small nodes always know where to find. 27:35 But this idea, this idea, people won't touch this idea because of the fear of the soft fork or even talking about it. People wouldn't touch activation of Taproot. 27:44 They would, they would work on Taproot and then it just, it was idle for months because people didn't even want to bring it up because of what had happened with SegWit. 27:51 And SegWit is weird. I'm not sure, I don't want to ramble on and on about this, but I think it's in everyone's best interest to educate themselves on just, it's just a litany of tragedies. 28:03 You know, like it was like this SegWit was, it was promised, like someone, someone made, Scaling 2 was in 2015 and someone shouted out this date of April 1st. 28:15 And then there was some people took that as a promise and then it was, wasn't shipped to the hackathon after Scaling 3 and a dissatisfied miner had left Signal with BU and this held it up. 28:26 And then this whole holdup was the SegWit drama and the UASF drama and then the SegWit2x drama and then SegWit2x ended exactly when the BCH split off occurred. 28:37 So we have had a lot of people who I really think were trying to help, but they really, they really messed everything up. 28:44 And there was, Jamie mentioned one, and there are many people who they didn't have the right idea about how to build consensus among humans. 28:57 But it's the point I'm trying to make is because how does it affect us today? 29:01 It affects us today where, yeah, there is this attitude that the miners should never, ever do anything. 29:09 But since really every soft fork is activated with the participation of the miners and there's so many things that could be done, the development could have gone in a very different direction where if the miners are making money off of each transaction fee on a sidechain, for example. 29:29 Well, now the miners are cheering on this side. Everyone's on the same team again. 29:33 In the past, we had something like a tug of war. 29:36 And the better thing than making sure that you always win the tug of war is just to get everyone on the same side of the tug of war. 29:43 And then you always win and you also have teamwork. 29:46 I mean, think about the equity side of it, right? 29:48 Think about all this North American hash rate. 29:51 There's an R&D side of these companies that's building payments technology, building the actual ultra fast tech enabled payment solution of the future on top of this decentralized money platform. 30:05 They're earning those incremental fees. 30:07 They're getting an EBITDA multiple on that. 30:10 I mean, I can't think of a more powerful incentive because some of these miners traded 10, 15, 20 times EBITDA. 30:17 And so if their R&D teams are working on building really competitive layer two scaling technologies and all of those fees come back proportionally to the existing hash that's installed, that market multiple for the North American capital markets, the strongest and most robust pool of capital in the entire world and most liquid. 30:41 That could be this huge renaissance where all of a sudden there's real R&D dollars flowing in from the North American hash rate onto these layer twos because there's a direct line of sight for how those fees are going to come back to the miners and how the vision of fees being the mining incentive is really going to develop. 31:01 The problem I have with the lightning assumptions is that we're assuming that some user is going to pay a very high fee. 31:10 Each marginal user will regularly pay a very high fee at some point in the future. 31:16 I just think that that vision is tough. 31:19 I'd rather see users pay lower fees, but have lots and lots of users doing so. 31:26 Yeah, absolutely. 31:27 It's much easier to have 10 cents on many, many, many, many people paying 10 cents versus a few people paying a huge amount. 31:35 Maybe we should talk about, Paul, what do you think about the fungibility criticisms for sidechains? 31:44 Sorry to hijack the question, Will. 31:47 You may have had a good one. 31:49 Because I do think we could use some of this time to talk about some of the criticisms where lightning theoretically is the most fungible layer two version of Bitcoin because it's opening and closing directly via the channel. 32:01 Well, what do people mean? 32:03 They mean that it's very private, the lightning network? 32:06 Is that what you're saying? 32:07 No, just that because all of the transactions come up and down from L1 to L2 and there's kind of, I wouldn't say mutually assured destruction, but there's good security guarantees. 32:22 It's pretty simple calculation versus the pegging out a Bitcoin-dominated unit to a sidechain. 32:31 It becomes less fungible. 32:33 It's harder to move that back. 32:34 You can't just yank it back quickly. 32:39 I was trying to mention before that the ability to yank it back is kind of actually, for a while I agreed with those people, but now I kind of just, I've seen the light maybe. 32:50 Because remember, 8 billion people can't yank it back. 32:53 So the ability to yank it back is always kind of like some kind of conditional thing. 32:57 It's inescapable. 33:00 Meaning that in the event of a violence. 33:02 8 billion people using lightning. 33:04 No, I'm just saying if for any reason, if they're all on some like lightning, there's 8 billion people. 33:10 If there's one lightning channel is open today and then we wait 8 billion days and this, I know the scenario doesn't make any sense, but we have 8 billion days. 33:18 Now we have 8 billion channels that are open. 33:20 They can't all go back from L2 to L1 on a random Tuesday because L1 doesn't have space for 8 billion people. 33:27 So again, it's unfortunate that I think there's a lot of emotional, because this sounds a lot like I'm advocating for like naive large blockism or something, which I think is the problem. 33:41 That it sounds a lot like that, but the, I don't know. 33:46 I'm going to try to just say something and see if any of this is making any sense or answering any questions. 33:50 But the most fungible, I don't know what that means. 33:52 I'd like to talk to whoever told you that. 33:54 I'd like to figure out what they were really trying to say, because I don't understand what they. 33:58 It was Parker Lewis. 34:00 That seems like he's talking about like in a sidechain world, you're issuing a token, right? 34:06 So like Bitco issues WBTC. 34:09 The lightning software also issues the token in its own network. 34:12 It's just, they're all denominated in BTC and they both have, it's very similar. 34:19 Yeah, but I want to go back. 34:21 It is just BTC instead of this like half rate escrowed BTC. 34:27 You know, it could be. 34:29 Again, the lightning is always conditional, be able to come down because. 34:32 So let me give you two more examples. 34:35 One is what you were saying before was someone has to pay high L1 fees if there's going to be proof of work on this network that has the lightning network on top of it. 34:43 So someone's got to be paying this marginal L1 fee. 34:46 Well, actually, if the L1 fee rates rise, or even if they're just volatile, they rise temporarily and go back down. 34:52 Even if the two lightning nodes disagree on what the prevailing L1 fee rate is, or if it climbs too high, then it must uncooperative close. 35:02 So the lightning, and we saw this with Ordinals. 35:05 This is, I think, this is my guess. 35:07 I have no idea. 35:08 It's hard to say how much of this is cultural nonsense. 35:13 When the Ordinals fee spike happened, it broke lightning. 35:15 It broke lightning somewhat. 35:17 So that I think is, we'll see that also happen more. 35:20 So this, again, shows you that stuff that happens on L1 will affect whether or not L2 is viable. 35:26 And in particular, this idea of, I'm not sure, like this idea that you can always come back, you're on L2 and you can always come back to L1 is like. 35:36 Got it. 35:37 So you would say that the fungibility claims are probably overstated there. 35:41 Yeah, I think one thing that I wish, I think it would be better if, it would be better. 35:49 A lot of this stuff, I think people should use it with their own two hands. 35:52 I think back to my own experience when I first read about Bitcoin. 35:56 It took me a really long time to have some vague understanding of it. 36:01 And then I used it for the first time and I realized that about half of what I thought I understood was not correct. 36:06 In particular, I didn't realize I had the software open. 36:09 I waited for six confirmations and then I went, I was like, okay, I've collected six. 36:13 And then I went to sleep and then I woke up the next day and I was like, why do I, why am I getting more? 36:17 You know, I didn't, I really didn't understand it at all. 36:19 So I think a lot of people will, it'd be this, it's the same way where I think people have to use, the stuff should be in use somewhere, maybe before. 36:31 We have testnet software that I wish people would run. 36:35 I have to, I'm trying to speak to the fact that there's anxiety over, okay. 36:41 I want to go back to what I think is the most important thing, which is the idea of the block size war was this tug of war between two people who wanted something. 36:50 Some people wanted a large block version of Bitcoin and some people wanted a small block version. 36:55 The reason they wanted a large block was because they wanted to keep the cost of running a node. 37:01 The nuance of that debate was people wanted small blocks so that the cost of running a node would remain low. 37:06 Isn't that correct? 37:07 Yes, yes. 37:08 The cost of running the node is the cost of seeing the blockchain, checking the rules. 37:12 If the blockchain becomes dark, the more expensive it is to run a node. 37:16 What is the objection to having that happen on a layer two? 37:19 That's what I'm trying to say is the correct solution was not to, I think, you know, I mean, what can I, whether everyone believes me or not. 37:28 But there's a question of should one side win or, you know, like when two people disagree, there's always like one, they can just fight it out and one can win. 37:38 Or you could try to find some way of giving people what they want in a way that does not. 37:44 Expressivity on this L2 would be key here. 37:48 I think that's a big design function that you've come up with. 37:52 The key idea of BIP300 is about those people would get what they want, but the L1 people would also get what they want. 38:00 And that's this idea of people being on the same side. 38:03 And that's why it's dicey because you always wonder, are people going to think that this is just SegWit2x or the block size war all over again? 38:12 But it's not. 38:14 This is the key point about it's much easier to just have everyone on the same team. 38:20 And that's the tragedy is that the miners, this vision you pitched is the same one that I think would be great of miners making a ton of money, new bull market. 38:32 And then each transaction collected is like, you know, this is a world of very aligned incentives. 38:44 And it was thrown off a little by the block size debate. 38:49 And I was a small blocker. 38:51 That debate is that large blocks are OK as long as it doesn't impact the L1 node. 38:57 Yeah. The idea is that, yeah, see, this is what a lot of people don't get. 39:03 But you get it, though, which is that there was a point. 39:06 It was they had benefits and drawbacks. 39:09 So if we all we do is we say, OK, we like the benefits. 39:13 But what was the key drawback? 39:15 It made the L1 node more expensive to run. 39:17 But with BIP300, it doesn't happen. 39:20 You have its own L2, which is its own piece of software. 39:23 And that's the thing that's difficult to run. 39:25 But that's also the thing that all these other people, Roger Ver and whatever, they said they would be happy to run all by themselves. 39:30 And they said they were happy to have SPV security anyway, so they wouldn't even care about the different tradeoffs. 39:35 So I was giving them what they wanted. 39:37 The idea that Peter Todd brings up where he says, well, that's going to make mining more expensive because then miners are going to have to add all this incremental hardware. 39:48 Peter Todd, you agree, Paul, that Peter Todd is rooted in sort of a 2012 version of mining. 39:55 I've got my laptop and I'm mining from a hut in the middle of the Sahara. 40:03 And I have a $40 computer. 40:06 These are not mining firms today. 40:08 Mining firms today, you have to have 50 megawatts in order to be operating like a good viable business at scale. 40:15 Yeah, well, the idea that he thinks that the sidechain L2 node software would affect which scales of mining are profitable or viable or like leading or something, I think that's really absurd. 40:29 And it's also it's like this pre. 40:33 I think it's simply it actually boils down to just a mistake, though, which is that we want everyone to be able to run a node. 40:38 We want the node costs to be cheap. 40:40 We want cheaper nodes is always good, but it just can't be the case that cheaper mining is always good. 40:46 That's the security budget going down. 40:48 So this is a situation where it actually has flipped around. 40:50 And so this is a misgeneralization on his part. 40:53 I've tried very hard to get him to come around on this. 40:56 I think most people have come around on it, but he's he's absolutely. 41:00 Yeah. 41:02 Who's the smartest Drivechain hater? 41:04 Who is who is the adversary? 41:07 Because, you know, you're fighting a thousand wars on Twitter and, you know, everybody's following along. 41:12 The weird thing is, I think they would follow Peter if he flipped. 41:17 But Peter has just he's just decided that he's not going to believe this. 41:20 He thinks like any amount. 41:21 He really thinks this affects like the scale economies of mining, which is very, really bizarre thing to even think out loud because the L2 software, it just cannot be significantly. 41:32 It can cost anywhere near one tenth of what a I don't know what the smallest block miner. 41:37 Maybe if you could find this to have block eruptors. 41:40 I don't know. 41:41 My mining knowledge is is very, very, very amateur about what is the cheapest miner you could buy. 41:47 But I don't know what it would be, but it has nothing to do with. 41:50 So there's and there's many other things I could get into the theory. 41:53 But like, I don't think the miners, their job is to hash. 41:58 It's each user who runs the node. 42:00 And so the miners have done and they should do. 42:03 They have many clever ways of shirking the cost of running the full node and they push it to the pool. 42:09 And they should do that because they are they should be aiming for efficiency. 42:12 So you run a node when you get paid by the pool, you should run a node and make sure they're really paying you. 42:17 But as and as an operation, the miner should only be focused on efficiency. 42:23 So there are no smart Drivechain haters. 42:28 Well, I mean, I think Peter has demonstrated many times that he refuses to really risk, even though we've literally paid him money to research the idea. 42:37 He just does not he isn't his heart is not actually into looking into the idea at all. 42:43 At Baltic County Badger this year, he said no one has written code for to do any of this, even though we had lots of had lots of code years ago. 42:51 We had the Zcash sidechain two and a half years before he said that. 42:56 So he's something about it. 42:58 He's just really not interested in it. 43:00 And maybe this conflict of interest with RGB or something. 43:02 I don't know. 43:03 But whatever it is, he he's just not he's really not into this idea. 43:07 And he had an idea that was the truth, which is that it's more expensive. 43:13 Nodes is harms decentralization, but it only harms node decentralization. 43:19 It does not harm minor decentralization or anything like that. 43:22 So we can get into this boring theory. 43:24 But I don't know who it would really be. 43:26 I think that we need to know. 43:28 He's got to know. 43:29 He has eyes. 43:30 Ironically, should know. 43:31 He has. 43:32 I think he has researched it more. 43:35 He wrote a nice, a relatively nice article that had only like one mistake a few like a year and a half ago or something. 43:43 But Shinobi is just I think with Shinobi. 43:46 And I don't know what could be done with Shinobi because I think he has been anti Drivechain for so long. 43:53 It's just become part of his personality and that there's literally nothing at all at this point. 43:57 He's just determined. 43:58 He just comes up with these strange. 44:01 He's just like really. 44:03 I mean, he is Shinobi. 44:04 I really think. 44:05 And, you know, for the audience to judge whether or not this is fair for me to say or not. 44:09 But I think he takes out a piece of paper. 44:11 And he takes out a pen at the very bottom. 44:13 He writes. 44:14 That's why Drivechains are a bad, bad, bad idea. 44:18 And then he tries to figure out like, what? 44:20 What can I find? 44:21 What does it find? 44:22 He says, oh, maybe. 44:23 Yeah. 44:24 He says these very, very obscure. 44:26 Maybe they give the answer first. 44:28 And then, yeah. 44:30 And it's like for Blind Merged Mining. 44:32 Maybe. 44:33 Maybe the. 44:35 Maybe one of the nodes will shortchange the minor. 44:38 And then the minor is tired of getting shortchanged. 44:40 And so they run their own node. 44:42 It's all like. 44:43 None of that stuff really makes any difference. 44:45 All the sidechain nodes compete. 44:47 I'm just picking out one of his recent points that Peter copied. 44:50 He just kind of copied and pasted it into his. 44:52 This thing that we paid him to write his review. 44:55 And but these are. 44:58 They're just like weird points where. 45:02 I just don't think that they don't have an actual. 45:05 Like if you sit down and talk to these people. 45:07 I don't think they have an actual empathy for the problem. 45:10 Even they don't even sit down and say, well, it would be nice if we could do. 45:13 Trustless peer to peer sidechains. 45:16 But we have the such and such problem. 45:18 You know, that's actually a good point to jump in there and talk about. 45:22 Like what happens on the other side of this world when things go bad. 45:25 So we've established that. 45:26 There's more fees coming to Bitcoin or Bitcoin is going to pass on more fees. 45:30 They're going to go to visa. 45:31 They're going to go with your worst case. 45:33 They go to Tron. 45:34 That could happen. 45:35 Yeah. 45:36 Right now. 45:37 People use Tron because it has low fees. 45:40 Yeah. 45:41 I'd love USDT. 45:42 Of course. 45:43 That's the other weird thing is we have. 45:45 And it's cheap to move it on Tron. 45:47 Are we going to continue to pretend like the end users desires don't matter. 45:53 Like do we care about the customer also or do we want. 45:56 We have many people take this attitude of just those people all come crawling 46:01 back or whatever and they'll need to buy Bitcoin to eat or something. 46:04 And it's like, well, maybe. 46:05 You know, that might be the. 46:06 That might be the last 10 percent. 46:08 The last 800 million people on the planet are that we've converted 90 percent. 46:13 But I don't think that's working great in 2023 from where I'm standing. 46:17 I just think. 46:18 Can we care a little bit about send user. 46:21 So just my question there is like, what is there to lose in this situation? 46:26 James, I know we've talked a little bit from the mining side. 46:29 There could be a lot of different attack scenarios with mining pools or miners 46:33 themselves when they're looking at a world where all these fees are going to 46:36 different chains and they're getting starved of mining fees. 46:40 Paul, we talk about that as well. 46:42 And then there's also just like the fact that Bitcoin get lapped and everyone 46:45 goes to a different chain because they know that Bitcoin only offers like one 46:49 product that isn't as sexy or useful as another product like Tron at this point. 46:55 Jamie, I'll throw it to you first. 46:56 I'm curious if you have any thoughts about like from a miners perspective, 46:59 like what is there to lose here? 47:02 Yeah, I mean, well, it's a great question. 47:04 And I mean, I think that sort of characterizes the whole debate, which is, 47:10 hey, be patient. 47:12 Chill out. 47:13 I got my mug here. 47:15 Slow yourself down. 47:16 That's the user's mantra to the miners is, hey, it's still your role, homie. 47:20 It's going to be OK. 47:21 We're going to make it. 47:22 A hybrid Bitcoinization is coming. 47:24 Increasing monetary utility is the roadmap. 47:26 That's all there is. 47:29 I think, you know, if you were an average person who's in the Bitcoin 47:35 conservatism camp, we'll call them and you listen to the intro segment to this 47:42 question where we talked about USDT on Tron, you know, that's like a shit 47:48 coin scammers, all you can eat buffet there. 47:51 And they'll say, you know, USDT is this potentially loosely backed euro dollar 47:57 thing. And Tron is, you know, God knows what Tron is and what's even going on 48:03 on the inside there. 48:04 And so I do think there is a question of how much we pay attention to the 48:09 market and how much we should look at use cases that are exploding in growth 48:15 in the market and really attribute those as a valid signal for us to go after. 48:23 But, you know, let's set that issue aside and say there is clearly some demand 48:31 to settle different types of cryptocurrencies against stable assets. 48:36 And there always will be. 48:38 People will always want to on ramp a some kind of stable coin or stable fiat, 48:43 whatever, into a crypto asset and trade those kind of things. 48:47 And stable coins are dominating Bitcoin in terms of being used as a means of 48:53 settlement and the networks that are making it easy and cheap for stable coins 48:58 to settle are attracting users because of that. 49:02 So I do think at some point we'll need to think about composability and the 49:09 ability for Bitcoin or somewhat native Bitcoin to interact with these other 49:15 types of digital assets in a way that benefits Bitcoin. 49:20 That certainly makes sense. 49:23 You can see the way that Ethereum has designed itself is kind of interesting 49:27 because it's a lot of shit coin trading happening on Ethereum. 49:30 And when people trade lots of shit coins on Ethereum, 49:34 Ethereum stakers earn the most revenue. 49:38 And previously, you know, that was Ethereum miners. 49:41 During the DeFi summer of 2020, 49:44 Ethereum miners had an absolute field day and had just absolutely tremendous 49:48 revenues because fees were through the roof because everybody was yield 49:52 farming some XYZ scam food coin. 49:55 And I do think there is an elegance to that, which is that. 50:00 Humans are going to be degenerate gamblers, they're going to do silly things with their money, they're going to chase scams, they're going to participate in scams, they're going to, you know, invest in dubious things and at its heart, like that's just core human behavior and everything that was once a successful investment was probably at some point, a dubious thing, a dubious prospect. 50:22 So creating a mechanism by which people are free to speculate on those things and capital formation can occur on Bitcoin, or people can at least trade Bitcoin natively with other types of stable coins or whatever it might be, as long as that is done in a way where it strengthens mining incentives and strengthens the security guarantees of Bitcoin, I'm not really morally opposed to it. 50:50 I don't think that morality should come into where Bitcoin finds its product market fit. 50:56 You shouldn't be telling people, don't do that, that's not safe. 51:00 You should allow people to do what they want with their money. 51:03 And certainly people told me, many people have told me and early Bitcoiners, you know, that like about Bitcoin itself, they said, you can't possibly be serious about, you haven't put money into that, have you? 51:16 So if we respect consumer, the investor's sovereignty, then yeah, I mean, it's not really about like, I think it's so unfortunate that this point is misunderstood when I make it a lot. 51:30 I think you made it very well there, but it's like I said, we don't want people to do like certain things. 51:34 It's not about wanting people to do certain things or not do certain things. 51:39 It's just someone out there like Tron, like what is going on with Tron? 51:42 What is going on with Tron? 51:44 No one really knows for sure, but it's like someone is willing to make that software. 51:48 Someone is willing to run the software. 51:50 Someone is willing to transact and pay the fee and someone is willing to collect the fee. 51:55 So that thing exists now. 51:58 It has some market niche. 52:01 There's literally no reason at all why that can't be a merge mine sidechain of BTC and have all the revenue go to the Bitcoin miners and have all of the transactions be transactions that pay BTC in fee, just thus making it more desirable to own Bitcoin for everyone involved. 52:18 I really hope the people you mentioned, the people you mentioned earlier about like, oh, we don't need to do anything. 52:23 Bitcoin is already going to succeed. 52:26 Again, it's not that I disagree with those people. 52:28 I mean, I kind of I sort of do a little bit, but that's not the point where it's like, I mean, I hope that those people are right. 52:35 That would be great if it's really the case that we just need to do absolutely nothing whatsoever. 52:40 And we just need to literally do nothing. 52:43 And it will Bitcoin will go, you know, whatever to the moon and it will become five hundred million dollars a coin and everyone will willingly pay. 52:51 It will live in a world where it costs a chicken sandwich, costs fifteen dollars or whatever the equivalent percentage of that of BTC. 52:59 And yet people are willing to pay a transaction fee that is five hundred dollars or whatever the equivalent is in that future world. 53:06 You know, you know, for two thousand for every L1 transaction, two thousand five hundred maybe per every ten minutes, twenty four, seven, three sixty five. 53:17 Like even at 2 a.m. on the East Coast, we're going to be people are going to be filling up the blocks with five hundred dollar transaction fees or a thousand dollar transaction fees because this is the best way to whatever you're going to do when your child turns 16. 53:32 You give them their you spend a thousand dollars and you give them your you buy them a car and you buy you open their one lightning channel that they'll need for the rest of their lives. 53:41 I mean, OK, whatever. Like, you know, I that if this is all really figured out, everything's one hundred percent figured out. 53:48 Then I think that would just be great. 53:51 But unfortunately, I you know, I work in this industry and I go to all the conferences and I talk to all these people. 53:56 And it doesn't you know, like you can search on you could just go into YouTube and find a search for the phrase lightning limitations. 54:04 It's now a very popular panel. 54:07 We had one at Bitcoin Amsterdam. 54:09 There's very popular. 54:11 So just don't take it from me. 54:13 Take it from them. That's where I got it. 54:15 I got it from them. And they have they say, you know, privacy is five years away on lightning. 54:20 They say certain things are no it'll never be possible for everyone to open a channel. 54:27 That's that's part of how ARC was invented. 54:29 So so it's kind of like, you know, I that would just be great if everything is a million percent fine and we don't need to talk about any bitcoins problems because it doesn't have any at all. 54:40 Then I think that would be great. 54:41 But I just think on the off chance there are some maybe we can just could just shed a tiny bit of light on those. 54:50 That would be you know, they said what was that? 54:52 They had that bumper sticker or whatever, like I don't remember exactly what it was, but it was like dissent is patriotism or something like that. 54:58 In America, dissent is patriotism or something. 55:01 So I think the similar thing for Bitcoin. 55:03 I hope so, man. 55:04 I mean, it does feel I talked about this a little bit of pub key a couple weeks ago where I said, you know, it does feel weird. 55:13 There is a natural aversion to openly talking about Bitcoin's flaws because it doesn't represent it's not consistent with my investment views, not consistent with my portfolio. 55:24 Like I'm all in to Bitcoin in so many ways, vocationally, investment, you know, ideologically, my credibility amongst my entire network of friends and investors, my professional reputation. 55:39 You know, I'm all in in so many ways, but I just know I've been a part of startups my entire life and every startup on the outside, it feels great. 55:47 And everybody's like, wow, this thing is so, so amazing. 55:51 And your customers are excited if it's going well and you're doing a good job, you know, it's going great. 55:56 And on the inside, it feels like the fucking world is ending. 55:59 You know, it's like, oh, man, this thing's broken and we got to worry about this. 56:02 And that dichotomy always exists. 56:04 And I just want if there's some secret meeting or some like secret crew where people get around and they are obsessively paranoid about the future of Bitcoin and its roadmap and how to make it absolutely bulletproof. 56:18 And, you know, I can get invited to that meeting. 56:22 I want to go. I want to be a part of that group where we think about every possible issue that could arise and try and make Bitcoin as bulletproof as possible. 56:32 Not because we don't think that it's great right now, but because we want to keep it great in the future. 56:38 Yeah, it's really strange. 56:40 The soft fork thing, I think, is something that every miner must – someone has to do something about this. 56:48 Because we had many – because first of all, people don't understand a soft fork is an opt in change. 56:53 So it's not a change like in the traditional sense. 56:56 You can keep running the old version of the software where literally everything is the same. 57:01 And so it's not quite a change. 57:03 It's this new magical thing. 57:05 The fact that it's even possible is kind of amazing, honestly. 57:08 But there used to be many of these. 57:10 Sixteen in the first seven years, there were 16. 57:13 And then that was it because then we had SegWit and then Taproot. 57:19 And SegWit took 20 months from when it was coded and when it finally activated. 57:24 And there was an adversarial activation of many months. 57:27 But then Taproot took 46 months, much longer. 57:31 And it was self-inflicted that time, the anxiety over activating it. 57:37 And in fact, we had something weird happen where a lot of people cheered it on and activated it without really even knowing. 57:43 They didn't really know anything about it. 57:45 The pendulum swung the other way. 57:47 But what I'm trying to say is I think the key about the inability to discuss the flaws is a very, very bad sign, actually. 57:55 It's the worst flaw of them all. 57:57 A lot of people will say stuff like this. 57:59 The worst problem in any organization is the one that people are unwilling to talk about. 58:05 And what I think has happened to some people is they got involved with Bitcoin. 58:10 They were sold on the big, big, big idea of this hyper-Bitcoinization. 58:15 This will take over the world. 58:17 And then they encounter a couple of the flaws. 58:19 And then I actually think some people have experienced this. 58:23 Because similarly, I'm kind of all in on Bitcoin. 58:27 I don't want to know how super clear. 58:31 It's not a great OPSEC to be super clear about that. 58:34 But I think what some people, the newer people, they get involved. 58:39 They're sold this big vision. 58:41 They realize it's flawed. 58:43 And now they think, OK, I need to just meme the big vision a lot and maybe meme the vision and then sell or something. 58:51 They're not actually real Bitcoiners. 58:53 And they're not as voices, too. 58:55 Those are the people who have the largest online followings. 58:59 And nobody wants to listen to someone who's going to say, like, well, we got to think about all of these problems. 59:05 I think it's because it's hard enough as it is, right? 59:08 Like holding Bitcoin through all the tremendous market volatility. 59:11 You know, it's an over 100 implied volatility asset historically for some periods of time. 59:16 It's not right now, but it has been. 59:17 And it's just it's hard. 59:19 And you need like cheerleading and psychological reinforcement in these online communities. 59:26 And so the group, I think miners are just such a good group to actually provide that because we're fucked. 59:35 I mean, and when I say fucked, I mean, if something were if a vulnerability were to be disclosed today in Bitcoin, we would have the least liquidity. 59:45 Everyone else X, Y, Z, HODL 69 to the moon infinity. 59:50 You can dump and be like, well, that was an interesting part of my, you know, my 20s. 59:55 And I'm out of that thing now. I'm going to go work at Microsoft. 59:58 But like we've got, you know, tens of millions of dollars in the ground out there in the middle of the West Texas desert. 1:00:04 And it's like we cannot get liquidity on that. 1:00:07 No one's going to pay me for my S-19s or my M-30s. 1:00:11 What is this? Cool. 1:00:13 This is a doorstop. 1:00:15 When you are a miner, the illiquidity of your position puts you in that camp where it's like you are stuck in this and you're always going to be three years away, two, three years away. 1:00:28 Your revenue stream is always going to be in the future. 1:00:30 I mean, you can hedge it, I guess, by being short all your future production. 1:00:35 But mechanically, like it's just financially difficult to even do that. 1:00:37 So it's there's something about the nature of that relationship, you know, the illiquidity of it that I think predisposes miners to being good long term thinkers about Bitcoin. 1:00:48 Yeah, we need that to happen. 1:00:52 Unfortunately, what is happening now is I think unintentionally there in the technical community, there is a fear of involving miners too much. 1:01:00 And I think among the miners, there is a fear of doing something the technical community might not like. 1:01:06 And among the grassroots Bitcoiners, there is a fear of doing anything that either group doesn't like. 1:01:15 So we have three groups that are each afraid. 1:01:20 They don't know what to do next. 1:01:22 There is definitely a status quo bias. 1:01:24 And I think the status quo is, again, I hope the people who say status quo is going to be great. 1:01:30 I hope they're right. I think that they are not right. 1:01:33 I think that how did we get to $20,000 a coin in 2017? 1:01:39 It definitely was not by not changing Bitcoin. 1:01:41 There was all the cool stuff that was being invented that time. 1:01:44 You know, multisig, BIP39 seed phrases, the fact that we have HD wallets at all that can be linked to one seed phrase. 1:01:51 Like that's relatively new from my point of view. 1:01:55 Like imagine how much everything would suck if we didn't have all that. 1:01:59 So I think though, related to your point about the miners are the least liquid, why do people doubt the miners? 1:02:08 I think there's something else going on where a lot of it was just accidental cultural mistakes and bad luck. 1:02:16 But I do think a lot of people have an interest in amplifying certain narratives. 1:02:22 Something is going on. 1:02:25 I'm not going to say like the sabotage, but there's something weird is going on. 1:02:28 And I think that there's a lot of... 1:02:30 I don't think it's deliberate. 1:02:32 I don't think it's deliberate at all. 1:02:34 I think it's just an accident. 1:02:36 Well, I think a lot of it's that HODL69 character that we love to talk about on Bitcoin Twitter. 1:02:41 They come in, they learn about Bitcoin's history from their favorite podcast or whoever. 1:02:47 They have bits and pieces. 1:02:49 And the thing they pick up on is that miners are always against the network and you need to vote against them. 1:02:53 When in reality, most Bitcoin miners are actually like your neighbors now. 1:02:57 Like they go to BitDevs, they live in Austin. 1:02:59 And that's a sizable percentage of the community now. 1:03:01 And they're also Bitcoin participants. 1:03:03 Paul, I want to throw it over to you and talk about like what miners can do in terms of activating SoftWorks. 1:03:08 What does that look like? 1:03:09 Because I think a lot of Bitcoin miners don't even know. 1:03:12 Every SoftWork has been activated by the miners. 1:03:15 And this is, I don't know, maybe we should... 1:03:17 I don't know how much time if people have time for Paul's blah, blah, blah theory or historical situation or something. 1:03:24 But it's like the... 1:03:28 The SoftWork is this idea that you can have a new set of rules that's compatible with the old set. 1:03:35 And if 51% of the hash rate are using that version of the software, then the old people who don't upgrade will also be dragged onto the same network. 1:03:46 Because they'll be finding rule blocks that are valid on both. 1:03:49 But every block will be following the new rules. 1:03:53 So the whole reason this was invented was because it's much too difficult to get everyone to upgrade their software. 1:03:58 And also that leads to a horrible incentive of whoever's releasing the software can be like, you know, you can hold a gun to that person's head. 1:04:06 And have them release a version of the software that's very, very, very different, very incompatible. 1:04:10 Like, you know, this has 22 million coins or something. 1:04:13 So the SoftWork thing is great. 1:04:15 Every SoftWork has been activated by miners. 1:04:18 It's true that SegWit, it was... 1:04:21 There was the UASF kind of holding a gun to the miners' heads. 1:04:24 But that one also activated before the UASF would have kicked in. 1:04:29 The miner kind of folded in that. 1:04:31 This whole thing about miners versus other Bitcoiners, this is all related to SegWit activation. 1:04:38 This one fluke case. 1:04:40 And the case was mostly just miners thought... 1:04:45 This is my guess. I don't really... 1:04:47 No one knows for sure what happened. 1:04:49 But, you know, some people at Bitmain and others. 1:04:53 They thought that if they could persuade... 1:04:57 It was the Mexican standoff with the two guns pointed at each other. 1:05:00 And they thought, OK, we'll give them SegWit. 1:05:05 And in return, we want this 2x block size increase. 1:05:09 It's a very, very long story that everyone should impact. 1:05:14 What happens is miners activate a SoftWork if 51% of the hash rate run the new version of the software. 1:05:23 So this is why I find it very disturbing that SoftWorks have become such a big political deal. 1:05:32 Because the actual ask is very, very small. 1:05:36 It's really not that big. It's really nothing. 1:05:39 And it's something we used to do all the time. 1:05:41 And we have enormous potential. 1:05:43 Even for those of you who don't want to do any SoftWorks, I have many messages for you. 1:05:49 One of them is, you know, with BIP300, we just don't... 1:05:54 With BIP300, we wouldn't need any more soft or hard forks, potentially. 1:06:01 So that's a SoftWork to end all SoftWorks. 1:06:03 The idea... 1:06:06 Like, the idea that the upgrade might be bad. 1:06:11 I don't know what planet these people are living on. 1:06:14 Because we released new versions... 1:06:16 Bitcoin Core releases new versions of the software often. 1:06:17 Can we talk about this a little bit, Will? 1:06:20 You know, can you... 1:06:22 Paul, can you talk us through this? 1:06:24 Because when I first looked at this, this was very confusing for me as well. 1:06:27 The... 1:06:29 When Will was just showing that activation.watch graphic. 1:06:33 Who is signaling there? 1:06:35 What do those numbers mean? 1:06:37 Just talk us through what that all means. 1:06:39 Well, activation.watch is a site. 1:06:41 It's similar to taproot.watch where there are bits. 1:06:43 There's version bits. 1:06:45 Each block is a version number. 1:06:47 So people set those bits to a certain thing. 1:06:51 And this is something that really... 1:06:53 It doesn't affect the block. 1:06:55 It's like a cosmetic writing on the block. 1:06:57 So who is this 190? 1:06:59 89 of 190. 1:07:01 190 what? 1:07:03 What is that? 1:07:05 Well, the 190 is counting up from the amount of block, 1:07:10 like the 2016 block window. 1:07:13 And then it counts over again. 1:07:15 Got it. 1:07:17 These, I think, are all just bits that are randomly flipping. 1:07:20 So I don't think anyone is actually signaling using this yet 1:07:25 because the version bits are unclaimed. 1:07:28 They are... 1:07:30 So they're used for randomness. 1:07:32 But when soft forks are ready to be activated, 1:07:35 they... 1:07:37 Someone claims a bit. 1:07:39 And they say, we will always set this bit to one. 1:07:42 And so every time we find a block, this bit is found. 1:07:45 And so... 1:07:47 So what is this bit 118, 89 out of 190? 1:07:51 I think it means mostly nothing now 1:07:54 because I think it's about half. 1:07:56 And so I'm not sure if I'm explaining this very well, 1:08:00 but the miners have the total ability to set these bits. 1:08:04 And this is a cool way of getting messages from miners, 1:08:07 even in a way that maybe is like a secret ballot, 1:08:10 like it protects your anonymity. 1:08:12 Maybe you don't want to... 1:08:13 And is this a pool or is this an individual miner or... 1:08:17 This... 1:08:19 No, it shouldn't matter, 1:08:21 but the pool is probably the one who would construct the block, 1:08:24 I would imagine. 1:08:26 The pool would probably be the one to do this. 1:08:29 They would set the bits, 1:08:32 which you could either set them directly or you can... 1:08:36 I'm not exactly... 1:08:38 There's several different ways to set these bits. 1:08:40 But this is what used to be done routinely 1:08:44 in BIP-9 soft fork activation. 1:08:46 So could this... 1:08:48 What could be interesting here is that 1:08:50 you have an issue where I think Marathon was 1:08:56 historically a group who attempted... 1:08:59 I don't know the exact story. 1:09:01 They tried to do some changes or signals for some changes 1:09:04 and there was a strong market reaction against them. 1:09:08 And because they put their name on it, 1:09:11 obviously the boardroom of Marathon there probably said, 1:09:15 hey, let's not do that again. 1:09:17 We got a nice business here. 1:09:19 We want to be a good actor on the network. 1:09:21 So we're not going to go out and be publicly 1:09:23 proclaiming to try or to lead changes for Bitcoin, 1:09:27 but it might be controversial, yada, yada, yada. 1:09:29 This is anonymous, right? 1:09:32 This could be... 1:09:34 So the CEO of the mining company says, 1:09:36 look, we've discussed this strategically 1:09:40 and says to the lead developer, 1:09:42 I want to be signaling this. 1:09:44 Or says even to the pool, 1:09:46 hey pool, I want you to signal this for me. 1:09:48 And there's no... 1:09:50 It doesn't get connected back to that firm in any way. 1:09:52 Is that correct? 1:09:54 I think it would inevitably be connected to the pool. 1:09:56 But of course the pool can always say, 1:09:58 we let our... 1:10:00 We let our members decide. 1:10:02 And then the members... 1:10:04 So you would have two layers of obfuscation there theoretically. 1:10:06 The miner communicating to the pool 1:10:09 and then the pool signaling to the broader mining, 1:10:12 I guess Bitcoin ecosystem in its entirety. 1:10:15 We support these changes. 1:10:17 I mean, I think everyone... 1:10:19 If anyone... 1:10:21 If there are miners out there who believe my story 1:10:23 about there's this one fluke event 1:10:25 and it created this rift in the community 1:10:27 and that this tug of war became 1:10:29 something worse almost than the block size debate 1:10:33 because it's now become something where 1:10:34 miners not only... 1:10:37 Miners are seen as the enemy, 1:10:40 but also we're denied the world you described before 1:10:42 where the incentives are aligned 1:10:44 and the miners are collecting more money 1:10:47 as the network gets used 1:10:49 and they have an incentive to show adoption 1:10:51 and says every transaction fee that's collected anywhere 1:10:54 is going to them 1:10:56 and they would... 1:10:58 And they could then pass it on 1:11:00 and they could exercise their own judgment 1:11:01 rationally in saying, 1:11:03 what do we actually need to build? 1:11:05 Do we need yet another address format? 1:11:07 What do we need? 1:11:09 Or do we need something else? 1:11:11 Or should we do a Canadian truckers war games 1:11:13 which I thought we really dropped the ball on. 1:11:15 It was really bizarre that we screwed that up. 1:11:17 So if you believe my story, 1:11:19 I think miners should signal 1:11:22 on all five of those bits 1:11:24 on activation.watch 1:11:26 because the language leaves... 1:11:28 It says if there's no objections 1:11:29 because it's just signaling... 1:11:31 It's trying to bring this back of saying 1:11:34 the idea that this soft fork 1:11:36 is an insurmountable ask 1:11:39 that no one could ever possibly achieve. 1:11:44 If we just bring that to an end, 1:11:46 it's so easy to actually achieve 1:11:48 and yet it's created this tension 1:11:51 and it's not good 1:11:53 and we could have everyone on the same team. 1:11:55 I think that is what everyone should do 1:11:57 is try to signal for all five of them 1:11:59 on all five of those. 1:12:01 Even stuff like BIF 345 1:12:03 is not totally finished per se. 1:12:06 But it just says 1:12:08 the mining community is interested 1:12:10 in going back to what it did before 1:12:13 in basically the whole era 1:12:16 of the enormous bull market 1:12:19 which was the 2009 to 2017 era. 1:12:23 And what has followed instead 1:12:25 is an era of mistrust and suspicion 1:12:27 and just kind of like hand-wringing 1:12:29 over whether or not Bitcoin... 1:12:31 We even want people to use Bitcoin 1:12:33 and weird stuff like that. 1:12:35 So I think you can draw... 1:12:37 I think it's all connected. 1:12:39 It's not a coincidence in the slightest. 1:12:41 This is all the... 1:12:43 We want to get back to a world 1:12:45 where there's more collaboration 1:12:47 and I think that is the thing to do 1:12:50 is just signal interest 1:12:52 and just signal that it's like... 1:12:54 Let's talk really quickly 1:12:55 just about what you guys think 1:12:57 is going to happen next year. 1:12:59 So I do think there's a lot of interest 1:13:01 right now in Bitcoin Season 2 1:13:03 or Bitcoin Renaissance, if you will. 1:13:05 And there's BitDM, 1:13:07 there's Taproot Wizards, 1:13:09 there's Drivechains. 1:13:11 There's a lot of people competing 1:13:13 for mine space right now 1:13:15 or mine share in this topic. 1:13:17 What are you guys excited about? 1:13:19 What's getting you up in the morning 1:13:21 to think about this stuff 1:13:23 and where do you think it goes 1:13:25 in the future? 1:13:27 I mentioned this earlier, 1:13:29 but I think that a lot of the hash rate 1:13:31 being in North America now 1:13:33 and the user base of Bitcoin 1:13:36 being Western democracies as well, 1:13:38 I think that that's now hopefully... 1:13:41 I don't want to say healing, 1:13:43 but maybe that's the right way to say it. 1:13:45 I'd like to see more collaboration 1:13:47 between miners and users, 1:13:50 less division amongst Bitcoin. 1:13:53 That's what I hope to see. 1:13:55 I think that after the halving next year, 1:13:59 if there is a Bitcoin ETF 1:14:02 and the halving occurs in April, 1:14:05 I think that Bitcoin could really 1:14:07 explode in value next year. 1:14:09 Historically, it typically does that. 1:14:12 And I know the number one reason 1:14:14 why people use Bitcoin 1:14:16 is for speculation and investment purposes. 1:14:18 And so I'm going to give the people 1:14:20 what they want to hear. 1:14:22 I think 2024 is going to be 1:14:23 the moon, bull market. 1:14:25 Everyone's got our halving party, right? 1:14:27 That's what we have. 1:14:29 Blah, blah, blah about Tron transaction fees, 1:14:33 but then we got our halving party. 1:14:36 Love it. 1:14:38 Where can we follow you guys on Twitter? 1:14:40 And let's close out from there. 1:14:42 I'm Truthcoin on Twitter. 1:14:45 T-R-U-T-H-C-O-I-N. 1:14:47 Yep. And I'm at James McAvity. 1:14:50 It's spelled M, cavity like the tooth. 1:14:51 And my company is at Cormant Inc. 1:14:54 Awesome. 1:14:56 And we've definitely had Cormant on the show before. 1:14:58 So go check out that episode. 1:15:00 Have you guys on twice. 1:15:02 Paul, James, thank you so much for joining today. 1:15:04 You guys coming to Texas Blockchain? 1:15:06 Yes, sir. Dallas. 1:15:08 Paul? 1:15:10 I don't know. 1:15:12 I have to look at when it is. 1:15:14 I didn't know. 1:15:16 We'll have to do a BIP300 301. 1:15:18 November 15th through 17th. 1:15:19 And maybe we could record something in person. 1:15:22 That's a good idea. Let's do it. 1:15:24 Let me close out here. 1:15:26 Thanks, guys. 1:15:28 Thanks, James. Thanks, Paul. Talk soon.