Welcome to Drivechain Twitter Spaces.
This is Henry of LayerTwo Labs.
Everyone is welcome to raise your hand and come up to the stage to ask a question or share a comment.
Today is Monday, March 27th.
We've had another exciting week of Drivechain discourse on Twitter.
Great conversations in the Drivechain Telegram group.
Over 700 people are in the Drivechain Telegram group.
Many of them observe and others write and chat about Drivechain and related topics.
There's a number of different topics people talk about,
including...
Oh, welcome to the stage.
Good evening.
Good evening, yes.
Wow, we are so early in this.
So, what brings you here today?
No, nothing. I see the title and that is up my alley.
Very interested in these things.
Cool.
So, you're in a part of the world where it's evening?
Yeah.
Are you in Switzerland?
Where are you?
Southeast Asia, Bangkok, actually.
All right.
I just saw The Hangover Part 2, so I'm familiar with Bangkok.
That's great.
It looks like, just a little bit off-topic, but everyone is probably in those other countries.
It looks like, just a little bit off-topic, but everyone is probably in those other Twitter spaces where people are talking about Binance and all that bullshit.
Yeah, there's a lot of news that occurs in crypto and people are very interested in the day-to-day news.
For me personally, I used to be like that, so I understand and I sympathize.
I used to follow the day-to-day crypto news, the latest headline, but then I discovered Drivechain.
And ever since then, I've understood that this upgrade could be transformative for Bitcoin and would potentially eclipse all the news of the last few years in importance.
Because if Drivechain is adopted on the Bitcoin network, and if it is very successful, that would mean, potentially, that a large amount of technology that's so far been only available on altcoins would become available in a peer-to-peer arrangement on Bitcoin.
And that might bring a lot of the users, developers, and value from the altcoins to Bitcoin.
And there also are some technologies that have never been built because of the lack of Drivechain.
For example, HiveMind. HiveMind is the sidechain developed by Paul Sztorc, one of the co-authors of the Drivechain Bips, and he's never launched HiveMind.
Yeah, that's BIP300, right?
Yeah, BIP300 and BIP301. Those are the two. Drivechain refers to those two BIPs, and Drivechains refers to the sidechains that would be enabled through Drivechain adoption.
So, as I was saying, there's a huge amount of growth, innovation, and exciting progress that could be achieved for Bitcoin, potentially, through this upgrade. So much more important than everything else that's going on, I think, out there.
I agree. I could not agree more.
On that note, leading up to Drivechains, and something that we already have had for quite some time, the Liquid Network.
Just as an example, I could never store USDT on any other chain besides Liquid, because the rest of them are just not secure. Liquid's interesting, and I believe, and I can begin to imagine that Drivechains would be ever more interesting.
Yeah, the Liquid Network is great. It's an achievement of Blockstream and a number of other collaborators who are serving in different roles.
So, there's a bunch of members of Liquid Network, and then there is the functionaries who operate the security model of Liquid, which is a federation with 15 participants.
Liquid is not merged-mined, so in that way it's different from Drivechains, and it's different from federated, merged-mined sidechains like Rootstock.
So, I think Liquid is great for a few reasons. Well, for one, I think Adam Back does a really great job running Blockstream, and he is an advocate for Drivechain.
So, he's said a whole number of different times in the last few years that Drivechain is pretty cool, and it could have been even more useful and important than Taproot.
And because he's involved in Liquid and Drivechain in those ways I just described, through his comments and activities, I think he does a great job of bringing these projects into alignment.
So, Liquid is a sidechain. Drivechain is an upgrade which would strengthen all of the work that everyone's doing related to sidechains, because it would make sidechains more prominent and important for Bitcoin's future, which I think is essential.
So, some Drivechain supporters don't think it's essential, but I think it is essential because we want Bitcoin to become multi-chain, so multiple blockchains, and we want all of those blockchains to be designed in a way that accrues value to Bitcoin, the token, and Bitcoin's block space.
So, that's what Drivechain is all about. It's the idea that we should have a whole bunch of sidechains on Bitcoin, meaning blockchains where the native asset of the sidechain is a synthetic Bitcoin that's redeemable for Bitcoin, and that is issued only in proportion to the collection of actual Layer 1 Bitcoin in the hashrate escrow of the sidechain.
And then the transaction fees paid on the sidechain are almost entirely paid to Bitcoin Layer 1 miners. So, this boosts Bitcoin's security budget in exactly the way that Satoshi himself, for what it's worth, envisioned and supported.
He supported there being a multitude of blockchains that are merged-mined with Bitcoin. In fact, he wanted every single blockchain ever created to be a merged-mined Bitcoin blockchain, meaning a blockchain that's merged-mined, where the transaction fees are paid to Bitcoin miners.
Now, I should concede that when he was speaking about that, he thought they would be altcoins that are merged-mined. So, he was referring to BitDNS, which later became known as Namecoin. So, he had in mind a merged-mined altcoin, where the native token has a value that has a freely floating exchange rate with Bitcoin's token, BTC.
However, the Drivechain vision is an improvement upon that. So, Drivechain envisions that all of these multitudinous blockchains that are merged-mined with Bitcoin would not be altcoin blockchains with a free floating native token. Instead, they would be sidechains.
So, the main difference there is that instead of there being an altcoin that has its own value separate from BTC, instead, there's a synthetic Bitcoin on the sidechain.
This is good for everyone involved because you have no money issuance. The 21 million cap stays the same because the only way you generate tokens on the sidechain is by locking up Bitcoin on the mainchain.
Right, right. So, similar in the multi-sig peg-in, peg-out of Liquid in that sense, right?
Yes.
Alright.
Yeah.
So, this would be a BIP. Excuse my ignorance, but this would be a BIP which would have to be adopted in the source code, right? In core.
Yes.
Alright.
Yeah, there are two BIPs. BIP300 and BIP301. And what would be necessary is for the community to be so interested in Drivechain that there is apparent consensus.
For example, right now there are a number of people who support it, but there are some who are vocally opposed.
If the majority of people, or even a super majority of people in Bitcoin who are public intellectuals, were saying, we all want Drivechain, let's do it, then people would say there is consensus, let's go forward.
And then the maintainers of Bitcoin Core, who are right now five or so people, four or five, they would feel comfortable merging the code into Bitcoin Core and then everyone would upgrade their nodes on the same day.
And then there would be the adoption of a soft fork as there was with Taproot and SegWit. SegWit 2017, Taproot 2021, Drivechain 2023 or 2024.
If we had consensus right now, then it would take maybe a few months or more to get ready to go forward.
So in the best possible case, which I'm optimistic about, we could see in the next few months a substantial acknowledgement throughout the community that Drivechain is the way to go.
And then I think it would take maybe half a year to sort of plan and get ready.
And lots of people would come over the code, maybe find a few things to tweak and optimize, dot the I's, cross the T's.
And then maybe in 12 months from now we could have activation day or that sort of thing.
And there would be, you know, in the time between now and then, you know, lots of use of testnet, signet, that sort of thing to like, you know, iron everything out beforehand.
And I think that what would be necessary for us to achieve that kind of adoption and progress would be that some of the more influential Bitcoiners out there, it would be very helpful if they would come forward and express clear support for this.
So right now we have a lot of support, but I would describe it in my personal opinion as about roughly half.
So about roughly half of the very influential big names in Bitcoin are either favorable or neutral on Drivechain.
And I would say roughly half of the others are either unsure, negative or have never expressed an opinion.
So it's an idea which is on its way towards consensus.
And it's been seven years.
And in the last 12 months, there's been what some have described as a significant uptick in interest and understanding.
So it's moved from sort of the fringe to sort of the forefront.
But now it's at the beginning of its sort of wide.
Because, like, for example, one key issue is that, you know, the supporters who are vocal and public about it.
In the recent year, you know, Adam Back joined that group where, you know, every couple of months he puts out like a statement on stage at a conference saying that he supports.
He thinks Drivechain is pretty cool.
You know, and then things like that.
So there's a bunch of people who are vocal like that, who have in the last year kind of come forward.
I made a list of them.
If you go to Drivechain.info forward slash friends.
So that's Drivechain.info forward slash friends.
You can see a list I made that has his statements and the statements of others.
So we have a lot of really key supporters like Adam Back, Fiatjaf, the creator of Nostr.
He's one of the most famous people in crypto now because he created Nostr, which is so popular.
And I think he was the sole author of that project.
Although I've also heard people say that...
Yeah, and then there's others.
Yeah, if I may ask, do I remember correctly that Adam and Paul were talking about this last time at Honeybadger, right?
Yeah, that's right.
Yeah.
And then on to just something which, you know, not so much about the process of consensus, but more on what is possible on a drivechain.
Could I...
Could we have...
Okay, so we could have stable coins.
We could have asset issuance, tokenized securities, limit orders.
All of those things, right?
You can have literally anything.
Anything, okay.
Right. There's an unlimited amount of expressive, programmable extensibility that's possible for a drivechain.
I believe it's infinite.
Now, I think that there are certain sort of basic assumptions that attend the drivechain inspiration, the design.
Like, for example, if a person has swallowed the ESG narrative and thinks that proof of work is evil, then probably they're not a good candidate for drivechain, you know, support.
Because they're going to be on some altcoin that is, you know, purporting to be energy efficient and entirely software based with no mining.
So they're going to be over there doing Tezos or Ethereum or something.
But if a person wants the smart contracting of Ethereum, for example, then 100% of that Ethereum smart contracting capability.
So basically everything going on in Ethereum can be done as a drivechain.
I believe that's something that the designers and other people would say.
Same thing with Zcash, very sophisticated privacy technology.
You could have a drivechain that does that.
So the word that I've heard the designers speak of is cloning.
So we can clone the software of an altcoin into a drivechain.
And therefore what you get is the ability.
This is my personal interpretation is that the essential gain there is you develop an implementation of that software that is economically harmonious with Bitcoin.
Meaning that all demand for that sidechain flows into Bitcoin's value as well as Bitcoin's fees.
So you get, you're basically taking the altcoin community, trying to migrate them into an arrangement which is the same experience for them or better.
And it's accruing value to Bitcoin and Bitcoin's block space.
So Bitcoin goes up and Bitcoin's miners get more revenue.
And bringing the altcoiners over isn't even really the main idea.
It's more about making Bitcoiners have more options and capabilities.
So there's a lot of Bitcoiners right now who are just hodling.
But if drivechain is created, simply hodling will no longer be the main thing you do with your Bitcoin.
You can send your Bitcoin into a sidechain and do cool stuff.
So instead of Bitcoin just being digital gold, Bitcoin would have hive mind, the prediction market where people can bet on an unlimited number of interesting events in the future and then make money.
And there's a peer to peer Oracle network which overcomes the Oracle problem.
And it's unstoppable and permissionless and might even improve society by enabling markets to signal what would happen if certain politicians were elected.
What would the effect be on employment, on prosperity, on war?
So this prediction market could have benefits to society by existing.
And there's greater privacy that's possible for Bitcoiners when they are using the latest technology on Monero or Zcash.
So those altcoins could be cloned into drivechains, enabling Bitcoiners to have greater privacy, which is part of the ethos of Bitcoin.
It's the cypherpunk anonymous private benefits.
And it also benefits Bitcoin main chain because when Bitcoiners have these sidechains, it enables a live testing ground for value to be at risk in very cutting edge technology on Bitcoin.
And over time, as those drivechains grow and as Bitcoiners become more comfortable in understanding them and using them, this can accelerate and improve the process by which layer one is improved.
So once drivechain is adopted, probably never again would there be a change to layer one that isn't first tested in a drivechain.
So drivechain fundamentally enhances the process by which Bitcoin layer one is upgraded.
Public intellectuals deliberate on Twitter and Reddit about and back rooms at conferences about
which upgrade is good. Instead, each upgrade can be tested in a drivechain with billions of dollars
at risk. And if it's successful and sustainable and stable, then everyone will say, hey, look,
this drivechain is working so well. Let's bring that technology down to layer one.
So anyone who wants there to be certain changes made to layer one might advocate for drivechain
and then use the drivechain that they like. And then it would help demonstrate its operation
and viability as a layer one potential upgrade. So drivechain is an upgrade for upgrades. It
upgrades the entire process by which Bitcoin changes. Things like taproot might have come
faster to Bitcoin if drivechain had been adopted. Maybe taproot wouldn't have taken as long as it
did. And in addition, maybe the issues like ordinals and inscriptions that taproot enabled,
whether unwittingly or intentionally, those things might have been more understood in advance
before taproot activation on layer one occurred had it been first tested in a drivechain
with real money at stake. So in summary, drivechain improves the upgrade consensus problem
by enhancing the process by which changes are made to layer one. Instead of it being purely
deliberative, it would become competitive. In other words, people would look at the different
sidechains on Bitcoin, the different drivechains, and say, hey, look, this one's
10 times larger than that one. And therefore, it appears that people want this upgrade more
than that one. And then they can use that information to help them think about
which changes should be made to layer one, if any.
That makes sense. It has an added benefit. It offers a perfect testing ground
and its merged mind. And it helps with what you mentioned earlier about the security model,
which plays out far into the future. Question. So if BIP-30301 is passed through
and then drivechains are activated,
how do you see the drivechain, let's call it, yeah, so the ecosystems that get built up
on the drivechains, how do you vision it or imagine it or picture it in a couple of years,
let's say three years after BIP-30301? Would you see a couple of drivechains
with different teams building on each one, for example? Maybe different chains have got different
added functionalities in, let's call it, I mean, you said like anything is possible. So
maybe that drivechain would have much more, like they'll be focusing on inscriptions.
Another drivechain would be focusing on maybe limit orders and on-chain derivatives and
things like that. So would you see different drivechains with different people building
different things and kind of just going at it all simultaneously?
Yeah, there would be a number of very interesting developments once drivechain is adopted.
People would be very excited to see which sidechains are launched and how they do.
The process by which sidechains are launched is articulated in the BIPs and the miners are
are playing an important role in that process. So there wouldn't be a thousand new sidechains
launched the day of drivechain activation, unlike the way that things are launched in Ethereum.
In drivechain, the community and the miners have a say and the number of drivechains would be
not extremely high at first. There would probably be, in the months after drivechain activation,
a number of drivechains launched. Some of them are written at drivechain.info. If you click on
drivechain.info and then click on sidechain projects, there's a list of six or ten or more
or more drivechains that are envisioned. Some of the basic ones that will make a lot of sense to
a lot of people without much explanation are a privacy drivechain, a big block drivechain,
so that's more or less roughly described as a clone of Bitcoin but with larger blocks.
And that way there can be a ton more transactions with much lower fees,
so instead of one or two dollars per transaction it might be less than a penny.
And this enables people to opt in to scalability and lower decentralization. And on the privacy
drivechain they can opt in to higher fungibility and lower auditability. If I'm not mistaken,
I think auditability would be the thing which is on the other side of the trade-off when you get
higher privacy. It tends to lead to a lower degree of a certain dimension of stability or auditability.
So the key here is that you're opting in to trade-offs, so Bitcoiners would have more options,
kind of like going into a store that all of a sudden has more products to buy. You don't have
to buy any of them, but you have more options, so you're benefited that way. So Bitcoiners would
get scalability on the big blocks, they would get privacy with the Zcash technology, and there'd be
others that are really exciting like BitNames, which is a DNS-focused sidechain. In fact,
that was one of the ideas for blockchain applications other than money that Satoshi
himself thought was cool. He wrote favorably about DNS on blockchain, giving you a self-sovereign
property right over the website domain technology. So that's a cool idea that never has taken off
as big as it might if it's on Bitcoin. It might be very popular and successful that way,
altering the course of social media and website domains forever. There's also BitAssets. That's
one of the planned drivechains, which would be focused on NFTs and related things. So a lot of
this Ordinals stuff, inscriptions, NFTs, there's a lot of fees and value that go into those markets,
which ideally would be on top of Bitcoin. In fact, Bitcoin was the original place for such things.
So it would be great to develop Bitcoin's technological capabilities to include
a sidechain that is oriented towards facilitating those kinds of markets,
making sure Bitcoin gets that value instead of altcoins.
And there's more. There's, of course, the HiveMind
drivechain, which is a peer-to-peer Oracle network.
So it would be awesome to have each of these really cool cutting-edge things on a Bitcoin
sidechain. Right now, every Bitcoin sidechain is federated. So if drivechain is adopted, then
probably all of the Bitcoin sidechains, or most of them by value at least, will be peer-to-peer.
So another question. A drivechain does not need that federated model
because of it being directly merge-mined with the layer 1, right?
The merge-mining is not part of the hashrate escrow. They're separate.
So, of course, there are connections, but there are two different BIPs.
The more important one is BIP300. And for that reason, people sometimes refer to drivechain as
BIP300. But precisely, drivechain refers to BIP300 and BIP301. So BIP300 is hashrate escrows
and BIP301 is blind merged mining. And they're two separate technologies.
Now, of course, most drivechain supporters, probably 99% of them, are in favor of both.
And most people who oppose drivechain are probably against both of these BIPs. So they tend to come
as a package. But the designers separated them to enable the community to understand them distinctly
because they are separate technologies. So the hashrate escrow is a miner-controlled two-way peg
for Bitcoin to be sent to a sidechain and for the sidechain to issue a token. And then when the
user is finished, then they want to get rid of their sidechain token, go back to layer 1 Bitcoin.
That's what the hashrate escrow facilitates. So it's a two-way peg that's miner-controlled
instead of federation-controlled. So because it's miner-controlled, it's peer-to-peer
in my view. And a federation is not peer-to-peer in my view because in a federation,
there are 15 people who control the federation. So if you want to become one of those people,
they'd have to fire one and then give you the keys. So with a miner-controlled peg,
anyone without social permission from anyone else can participate because anyone can mine.
All you have to do is get some mining equipment. So it's more capitalistic. It's more dynamic.
The set of parties who are participating in Bitcoin mining changes every day.
Whereas the set of people who control the 15 sets of keys for a multi-sig, they might be
fixed in nature. And the companies involved might not be changing dynamically as a result
of market forces, the way that Bitcoin miners are highly dynamic as a set of parties. And they're
global. And there's a ton of money at stake. And there's no elections involved. It's just
the market for Bitcoin mining. So it's a superior system because it's peer-to-peer.
Because Bitcoin is peer-to-peer and therefore Bitcoin mining is peer-to-peer.
And therefore the hash rate escrow is peer-to-peer. And therefore drivechains are
peer-to-peer. And this is why Adam Back refers to drivechains as peer-to-peer sidechains
in distinction from federated sidechains. So his analysis is one I think is correct.
I think he's totally correct. Drivechains are all about peer-to-peer sidechains.
And the blind merge mining is an extra enhancement to the overall approach where BIP301 enables all
the Bitcoin miners to receive a portion of the fees from the sidechains without necessarily
running the sidechain nodes. So it makes it better for Bitcoin miners because they all get
a chance to receive fees from these sidechains even if the miner doesn't run the node of the
sidechain. Some of them might run the nodes because they choose to. Just like some Bitcoiners today
run nodes even though they don't need to. So it makes the node running optional.
And that way they don't have to necessarily run them.
One more question and then I got to bounce. Sure. Your questions have been great.
Thanks for elaborating. My question is, do you think drivechains will have any
implications for Lightning?
What I've heard from the drivechain thinkers and writers is that there could be a great
harmony between Lightning and drivechain because there could be a sidechain where Lightning is
conducted at a great scale. There could be a sidechain that is designed specifically to
facilitate Lightning transactions. So the big block scaling sidechain called Funder
is a complement to Lightning. So they're not in competition, they're complementary.
And that's how we see it. So Lightning is part of the scaling vision for Bitcoin
and big block sidechains are another way of doing that and there probably will be
some harmonies there where they can be done together and as complements.
I think drivechains will, like you mentioned earlier, be immensely positive.
It will be a great positive driving force for everything. All the different scaling solutions and
technologies they've tried right now. Liquid, Lightning, scalability and also four layer one.
It's great. Thanks a lot. Cool. That was cool. Thank you. Yeah, all right. Have a good evening.
Have a good evening. Well, everybody, welcome to Drivechain Twitter Spaces.
We chat every Monday and Thursday about drivechain here on Twitter.
We review the latest news and updates.
Everyone is welcome to come on up to the stage and share your thoughts and questions,
comments and rants.
Don't be shy. Come on up. Share your opinion.
Be heard by the world.
We have some of the usual suspects in the audience.
All are welcome to come on up and ask a question. I shared in the nest here a tweet from Troy Cross.
There has been a lot of conversation in the last couple of days about the Bitcoin security budget.
It all started when Michael Saylor tweeted that he thinks Bitcoin is secure because of higher
hash rate. And Eric Wall corrected him and explained that higher hash rate does not imply
higher security. And then, unfortunately, Michael Saylor dug in and elaborated
on his own inaccurate understanding. And since then, there's been a lot of tweets about how
Bitcoin's security model works. One of the achievements of the drivechain community
is maintaining a correct understanding of the Bitcoin security budget.
Drive chainers know that it's important that fees rise in the long term on Bitcoin layer one.
And if the fees do not rise, then Bitcoin will not be secure.
Or to state it more precisely, if fees don't rise on Bitcoin layer one as the Coinbase declines in
the years to come, then it is very possible, according to our understanding of Bitcoin's
security model, that there might be a problem. I don't want to say there will be a problem because
things could evolve. Bitcoin could be altered in some new way that's ingenious, that somehow
secures the blockchain asymmetrically, regardless of the fee revenue. But the understanding we've
always had for a long time is well expressed in certain tweets by Adam Back, as is often the case.
He has a tweet from 2019 that I recall, where he said in a conversation, in a thread with other
people that he wrote that Bitcoin has signatures, which are, you know, a lot of people don't know
which are asymmetrically secure. But transaction finality is not asymmetrically secure. Transaction
finality is a balance of the economics of mining. So by that, in that statement, which I'm not
saying I quoted it word for word, but I think that's pretty close. What he's saying there is that
when you sign a Bitcoin transaction, it's like using a password on your computer.
It's asymmetrically secure, meaning a little bit of effort on your part to create the password
results in a very large amount of protection and security, because the effort to break the
password is extraordinarily large, even though the effort to create it is low. But when it comes to
the hashing, what's called economic security, which is, you know, the difficulty that would
be involved in trying to attack Bitcoin as a hostile miner that has a majority of the hash rate,
that is the economic security or the security budget or the cost of attack. And that is not
asymmetrically secure. Rather, that security arises by nature of the cost of being a 51 percent miner,
which is not an asymmetric matter, but rather a question of majority or minority.
So Michael Saylor said some things in his tweets like something about the honest miners are the ones who would have the ASICs and the dishonest miners are the ones who would just be using their computers.
So he unfortunately doesn't know at all what he's talking about, I believe. However, he's a very smart person, and I'm sure in the near future he will rephrase what he's said in a way that's more accurate.
And I look forward to that.
Because there's no real problem here. The right understanding is that Bitcoin's fees have to rise and that Bitcoin's economic security is a question of rising fees over time.
There are some people who like to talk about, well, maybe there'll be a whole lot of ideological mining. And even though there's no fees, there'll just be people out of the love of their hearts for Bitcoin mining.
Or maybe a whole country will decide they love Bitcoin so much that they'll have, you know, Jason Lowery and others set up a government taxpayer funded mining operation to defend Bitcoin at the Department of Defense.
And maybe that'll occur too. However, my view is, and I think this is kind of like the drivechain view, probably, just roughly speaking, is that what we need is rising fees over time.
And it would be great if Bitcoin's fees right now were at $25, $50, $100 per layer one transaction. And then we would see a very large amount of fees being paid to the miners every day, millions of dollars of fees.
And then there would be no cause for concern about perpetually low fees and declining security.
It's very interesting to observe the intellectual community in crypto and how some people have left Bitcoin because of the problem of low fees and the possibility of continued low fees.
For example, Vitalik and others in Ethereum have from time to time pointed out that Bitcoin's fee reliant long term security model is potentially unstable.
And there are certain Ethereum influencers on Twitter with over 100,000 followers who write almost every day to their following that Bitcoin will eventually need to adopt inflation.
And there are some within the Bitcoin community who support inflation and they're public about it. And there's others who support it who aren't public about it, but who still support it.
So these people are not confident that Bitcoin will achieve a high enough rate of fees to support the economic security model.
But of course, if drivechain is adopted and if it's very successful, then the growth of fee revenue on Bitcoin could be very significant.
And the most optimistic vision of drivechain is that once drivechain is adopted, then in the years to come, Bitcoin's dominance would climb not only in terms of market cap, but also in terms of block space.
So the block space dominance would mean that Bitcoin would have a higher share of transaction fees paid on blockchains.
Right now, about 1 15th of all fees paid on all blockchains are paid to Bitcoin.
But let's assume in the future, if drivechain is very successful, what if Bitcoin had 95% of all of the fees paid on all blockchains?
In that optimistic hypothetical future, then Bitcoin would have 15 times more fees if we may project and presume.
Of course, in reality, any transformation like that would not result in a simple 15 multiple, but instead could be very different from 15 times because of the way that things would evolve.
But roughly speaking, we could have much more, such as 10 times more or higher fees for Bitcoin if drivechain is maximally successful.
And that would be great. And then there wouldn't be these constant calls for inflation from Bitcoin's enemies, as well as those within Bitcoin who publicly support inflation like Peter Todd.
So it's interesting how there are some people who don't like drivechain, but who still understand that Bitcoin needs more revenue for miners.
And instead of embracing merged mining, they prefer to embrace inflation.
And then there are others who don't really understand the problem at all and who think that nothing will be necessary.
They think that we don't need inflation and we don't need drivechain.
They think that things are fine as they are, and that would probably include Michael Saylor.
But as we've seen in the recent tweets, that understanding is not so coherent and it's kind of uninformed about how the whole system works.
Welcome to the room, everyone who's joined. All are welcome to come on up to the stage and chat, vibe, hang out.
One of the complexities in this realm of the security budget is the view that some people have that the security budget is really all about energy.
It's not about fees. And this is a view that I heard.
I saw Shinobi write recently yesterday on Twitter. It's all about fees. I'm sorry. He wrote it's all about energy, which is incorrect.
It's ultimately about fees. So even those who think that Saylor was incorrect have their own view sometimes, which isn't quite right.
I think Eric Wall understands it completely. And I think the drive chainers and he's one.
But people who understand drivechain tend to understand well that we need more fees.
Ultimately, the energy that's purchased by the Bitcoin miners and used is not their only input.
There's also machines. There's also labor. And the most important fundamental factor for understanding the cost of an attack is going to be an economic phenomenon, which is the fees.
It's per unit of time, not energy. Welcome to the stage, Sahil. How are you?
Hey, can you hear me?
Yes, I can. What is up?
Nothing much. I'm actually pretty new to drivechains and just came here to learn a little bit.
I just heard you talking about why fees are important. Could you brief a little bit of why exactly we need high fees for Bitcoin?
I'm a little bit confused. I'm a bit noob here. If you don't mind. Thank you.
Sure. So high fees are important because the cost to be 51 percent of Bitcoin's hash rate is determined by the economic activity in the mining space.
And the economic activity in the mining space is going to decline unless fees rise because the on-chain income to miners has two components.
One is fees and the other is coinbase. The coinbase is often referred to as the subsidy or the inflation.
But I'm saying coinbase so as to be less provocative.
Some people don't like calling it subsidy, even though Satoshi himself wrote the word subsidy in the code.
But nevertheless, I say coinbase and the coinbase declines programmatically every four years.
There's a quadrennial halvening. So every time we have the halvening, we go down in the number of Bitcoin that are included in the coinbase.
So if fees don't rise, then the miner revenue will decline.
So right now, in a typical Bitcoin block, there are 6.25 coinbase Bitcoin.
And then there are fees, which might be less than a Bitcoin or more than a Bitcoin.
So right now, the total number of Bitcoin that are received every day from coinbase is 900.
Because there are 900 times divided by 6.25 Bitcoin per day in each block.
Let me rephrase that. 900 Bitcoin a day are issued in the coinbase.
So if you were to divide 900 by 6.25, you would get the number of blocks per day.
And the number of fees that are paid in all those blocks together right now is about one million dollars of fees per day, approximately.
And it's up a little bit from where it used to be.
Over the last year, the average is probably $500,000 worth of fees per day.
But with the taproot and ordinals and the bull market in Bitcoin picking up a little bit, there's been an uptick in the number of fees that are paid each day.
So it's about a million dollars per day.
And many people are curious to see if that rises or falls over the next few months.
Will we come back down to the base or will we stay elevated for a long time?
Does that answer your question?
Basically, fees have to rise because the coinbase is being cut in half every four years.
Eventually, there'll be no more coinbase in 100 years or so, 120 years.
There'll only be fees paying the miners on chain.
So, you know, if there's very little payment, then there'll be very little mining.
So the cost that a person would have to incur to be over half of all the hash rate would therefore fall over time unless the fees grow.
Thanks.
I'm still, you know, a little bit less technically sound, but I'll surely be, you know, diving deep into the technicalities of why, you know, deflation and the fees, everything matters.
But thanks.
Thanks for the answer.
Appreciate it.
Sure.
There's a great article by Lynn Alden that you might enjoy if you're interested in the topic of fees.
So you can find it if you go to Google and type in Lynn Alden Bitcoin fee modeling.
So this this article she wrote is called Bitcoin fee based security modeling written in March 2021.
I like to recommend this article to people who are interested in this.
It's a great article.
It's very detailed.
And she explains how over the long haul, it's important that the fees rise.
She's not an alarmist on this issue.
She doesn't want to get into too much detail.
She's not an alarmist on this issue.
She doesn't say that there's a problem.
So it's not too provocative, although buried in the article are some important acknowledgements.
So I think she does understand this.
And I'm personally looking forward to when she eventually writes about drivechain.
I think she's the kind of person who probably knows about it because she's very detailed and careful.
So she probably is aware of each Bitcoin improvement proposal and is under and understands the concepts of how Bitcoin can have a deficiency, which is addressed through an improvement proposal.
She probably under she probably understands how merged mining is potentially a source of more income for Bitcoin, even though I think she's never once ever written about merged mining.
So I'm looking forward to when she eventually does come out on the issue of merged mining and drivechain.
And maybe she'll come out as a supporter of drivechain.
Or maybe maybe not.
She probably wants to be considered to be a mainstream Bitcoin.
And if she were to come out in favor of drivechain, that would create a little bit of controversy.
So I'm looking forward to when she takes the plunge and announces support for drivechain if she is a supporter.
So we'll find out.
We'll find out in the coming months, maybe.
Maybe she'll announce an opinion.
Welcome to the room, everyone.
This is drivechain Twitter spaces.
Everyone's welcome to come on up, chat about anything you'd like.
Chat about anything you'd like.
Anyone have any questions or comments?
Don't be shy.
Welcome to the stage.
Welcome to the stage, Roz.
Hey, Henry.
Hey, everyone.
Thanks for bringing me up.
I was also listening in, but I just joined, so I don't want to totally pivot the flow of where you're going.
I have a couple of things to announce, but we can do it at the end of the drivechain discussion.
Sure.
Now is also fine.
It's very free form.
We don't have too many people lined up right now to speak, so all are welcome to share anything.
Cool, cool.
I was just going to mention about the Discord, of course, our second layer Discord, which is a couple weeks ago.
Sergio, author of the Rootstock paper, had a good tweet about potentially bringing a bunch of the layer to the different projects.
Assembling, trying to scale this and have a shared community where they all have kind of open space to talk about ideas,
maybe do some debate series on the VC about some of the more contentious ideas and different concepts.
We all are trying to, I think, achieve a lot of the same things, so doing that on Discord.
And at some point this week, probably Friday, it's not nailed down yet, but we'll have Paul, Sergio,
hopefully some other people from some other projects, other layer twos in there to kind of talk about a shared vision
for what a better ecosystem around Bitcoin innovation looks like and try to make it happen on that second layer Discord server.
So if you're not in there already, I encourage you to join.
It's a very small crew, but we'll be consistently using the voice channel on there to kind of do Twitter spaces type stuff,
but just more casual, you know, more of a hangout vibe on Discord.
So I encourage everybody to find second layer.
I'll tweet again the invite link.
But yeah, that was my main thing.
So thank you.
Awesome.
Thank you.
That was great.
Well, we've been going for about an hour now.
Everyone is welcome to come on up and share more thoughts and questions, comments.
I'm glad that there's been a bunch of interesting discussions in Bitcoin in recent months.
First, we had the ordinals and inscriptions debate, which highlighted to people the value of small blocks.
And once the blocks started very frequently being four megabytes, which is the maximum, some people started wondering if maybe the block
size should be reduced.
Among many drivechain thinkers, a block size reduction would be a good thing.
And there are some people who don't even support drivechain who like the idea of smaller blocks.
So I think it's great for Bitcoin's community to be discussing the possibility of a block size limit reduction.
And that's what that ordinals and inscriptions episode in Bitcoin generated was interest in discussion of that possibility, the benefits of doing that.
And then now with Michael Saylor's tweets about hash rate, there is a different kind of conversation happening, which is also good for drivechain understanding.
So just like drivechain is all about small blocks on layer one and making larger blocks optional, drivechain is also about getting higher fees for Bitcoin layer one.
And that's one of the ways a person can appreciate drivechain.
Not all drive trainers are focused on fees.
Some are focused purely on the idea of just making Bitcoin have more innovation and extensibility.
For example, when Adam Back talks about drivechain, it's usually about innovation and extensibility, bringing more privacy to Bitcoin.
So he's mentioned in recent months the privacy sidechain and the big block sidechain.
Those are the two sidechains I've heard him tweet about.
I've seen him tweet about.
So some Bitcoiners talk about innovation.
Other other Bitcoiners who are interested in drivechain don't just talk about innovation and talk about fees.
So what we're getting right now is a conversation on fees.
Because of Michael Saylor's tweets. And it's great to have people discussing this, to have people
discussing the fact that higher hash rate is not an indication of higher security. The hash rate can
rise while the security is going down. What's necessary to achieve higher security is higher
miner revenue. Higher miner revenue causes the mining industry to expand and that puts upward
pressure on hash rate. However, other things can cause hash rate to go up, such as better ASICs or
lower energy cost. Hash rate has multiple variables that constitute it, and therefore hash rate alone
is not an indication of anything that is important with respect to Bitcoin.
The hash rate in 100 years might be 1 million times higher than it is today.
Even while Bitcoin has almost no use. So if Bitcoin completely fails,
and in 100 years no one knows what Bitcoin is and only three people are using it, it still might be
the case that in 100 years computers are so much more powerful that the hash rate is a million
times what it is today. And therefore hash rate alone does not indicate or imply higher security.
Hello and welcome to the stage, memetic money. How's it going?
Please chime in with your comment.
What's up, Layer 2? I just like talking about mining.
Hello.
Thanks. Welcome. What is your question or comment?
Maybe a smaller comment. I mean, I think there is overt value in the hash rate metric of Bitcoin
in and of itself. I think merge mining, sidechains and that stuff does have promise, but
in and of itself, its purpose is to secure the Bitcoin network.
So there is value just in the metric of hash rate alone. I mean, it's serving a purpose.
That makes sense.
It doesn't, because as I explained, the hash rate can go up a lot without any increase
in security. And in fact, over any period of time, whether a day or a century,
if the hash rate has increased, that doesn't tell you necessarily that security increased.
Security could go down by 10 times while hash rate increases by 10 times over any time period.
And because that's true, the hash rate tells you nothing.
But hash rate is proportional to security. You could have a non-hash rate vector attack on
Bitcoin. Bitcoin's hash rate is the amount of power that is competing to write the next block.
So if you want to double spend a Bitcoin, you have to overpower that.
So it is a measure of Bitcoin's overt security level in and of itself.
The opposite is true for the reason I explained. So let me explain it one more time and then you
let me know if you think that what I've said either is wrong or doesn't make sense.
Okay. So here's the explanation again. And by the way, when I explain things,
people often don't agree with me. So feel free to say that you don't understand what I'm saying
or that you think it's wrong, but just try to let me know why exactly. So what I said is
that over any period of time, whether a day or a century or a decade, if the hash rate has gone up,
it is possible that security has gone down. Security defined as the cost to be a 51% miner.
So do you agree that rising hash rate does not imply rising cost of attack?
No, not at all. I think it does imply a rising cost of attack. It might not do that over short
time periods of a week, but when you take the broader increase scale on its exponential curve,
it absolutely means it's more expensive to attack Bitcoin's blockchain.
That's why difficulty is often a better measurement than hash rate.
Rising difficulty or rising hash rate, neither one indicates rising economic security because
over, let's just take a realistic example of over the next 10 years, Bitcoin's hash rate might
increase 10X because of better machines or cheaper energy. So if energy becomes more plentiful,
hash rate will tend to rise as a result. If machines such as ASICs become more efficient
and productive, hash rate will tend to rise as a result. Therefore, when we see rising hash rate,
there are multiple factors that can cause it. And not all of those factors have anything to
do with economic security because the cost of energy is the same for the attacker and the
defender. And so is the hardware. I mean, I get what you're saying. The
hash rate and difficulty will vary according to economic incentives, but that does not imply that
if hash rate goes up, it's less secure. If hash rate goes up, it's more secure. That is more
cooperative power on the Bitcoin network. Thus, by definition, you have to have more cooperative
power to overpower it. It's a direct measurement. Economic incentives, I get. It'll go up and down
depending on the incentives to make money at mining. But the profitability of mining does
not have to do with security of the Bitcoin network. They're two different things.
Do you see the tweet in the Nest?
I do, yeah.
Okay. So this is a tweet that I agree with. And what he's doing here is he's responding to,
without mentioning him, Michael Saylor's and other people's recent tweets where they express
the view consistent with yours, which is that as hash rate goes up, Bitcoin is more secure,
which is not correct because hash rate represents a multi-factor pattern of activity
and increased economic security for Bitcoin is only one of those factors.
So you shouldn't assume when hash rate goes up.
You're conflating the economic security with double spin.
Hash rate is a very predictable, repeatable SHA-256 double hash of the mempool, period.
There are long-term economic incentives like one pool gaining too much power over the network that
could lead to an attack on Bitcoin. That is a different type of attack than a double spending
attack. Hash rate is a measure of Bitcoin's firewall, for lack of a better term. It's the
amount of power it takes to write the next block in the chain. The higher that number is, the more
secure Bitcoin is. All right. Well, I tried to explain it. I feel like we're not on the same
page, but let me try a different way. If in five years from now, Bitcoin has a higher hash rate
than it does today, do you feel that that necessarily means that Bitcoin is more secure?
Or do you know, as you should, that if ASICs improve, then the amount of economic activity
in the Bitcoin mining space could decline even while hash rate goes up because although there
are fewer miners expending less economic resources, hash rate could rise simply because
a newer edition of ASICs that's more productive and efficient has been released, sending hash rate
higher even while the income to miners has fallen. Yeah, that could very happen. Satoshi described
this in his white paper, but this was his genius. If that happens, Bitcoin is more secure.
Ashes are what secure Bitcoin. You are correct that we could have less miners with a higher
hash rate. And what Satoshi said is because the hash rate is higher, Bitcoin is more secure.
He didn't ever say that. I've read every word he's ever written. He never said the words.
He didn't say that exactly, but that's the point of many of his Bitcoin talk forms. He talked about
this is how he solved the Byzantine generals problem. As long as I incentivize them to
cooperate, Bitcoin benefits. If they're an dishonest actor, but they still run the hashing
algorithm the way it should be, it still benefits Bitcoin. I'm not disagreeing with you that there
are economic hacks to Bitcoin that you could do. What I'm saying is that hash rate is the measure
of Bitcoin security protocol. The higher it is, the more secure Bitcoin is. Arguably,
it's oversecured today. We're wasting hashes. It's extremely secure.
It's a truism to say that it's potentially oversecured because if it weren't secured enough,
then it would be destroyed by a hostile miner, mining in perpetuity and censoring all transactions.
Bitcoin is a truism to say that it hasn't yet been attacked or that it's oversecured.
That's my opinion. It's oversecured. It is extremely profitable to mine right now,
especially when you have low power rates. If you look at the original white paper,
it estimates the last Bitcoin being mined in 2140. We brought that forward north of 20 years already.
We are doing 10 minute block times routinely because mining is so profitable right now.
I want to drill down to the first principles that we're trying to discuss
so we can connect on our understanding. You've said that, if I understand you correctly,
you've said that higher hash rate means Bitcoin is more secure. But I think that's exactly wrong.
Higher hash rate doesn't imply more security. You're going to see, always and forever,
because of the nature of technological progress, people don't forget how to build ASICs. There's
always going to be improvements to ASICs. There's never going to be a step backwards.
There's never going to be a new line of ASICs that are invented where they're less productive.
The same is true for all computer chips. Yes.
Let me just elaborate. It sounds like you're sort of understanding what I'm saying,
which is that better ASICs will be invented forever, sending Bitcoin's
hash rate higher and higher, even while if we assume that there's declining
miner income in the future, because let's assume hypothetically that fees don't rise
and that the Coinbase is halved, as it is programmatically every four years.
Let's just focus on one question. Do you understand that if fees don't rise,
then as a result of halvings of the Coinbase, miner income on-chain will decline?
That is completely wrong unless you factor in Bitcoin price.
If Bitcoin price goes up and transaction fees go to zero, you can still make money mining, period.
Well, in the long run, if there are no transaction fees and the Coinbase is halved to zero,
what would the profit for mining be?
We're not talking long run. We're talking exactly what you said around the bounds of that problem.
If transaction fees were zero and Bitcoin price went to 40k,
you would see everybody turn their miners on.
Because the majority of income to miners on-chain right now is from the Coinbase.
Clearly, yes. It's always been that way, but Bitcoin price has always been that way.
But Bitcoin, since it started, that is part of Satoshi's longer experiment,
is given enough time, can I bootstrap the network to where fees are self-sustaining and not
my incentive block reward? That's his whole experiment.
That's probably going to take 100 years to figure out.
I get your point about ASICs getting better. I don't think what you're seeing is that if ASICs
get better and they get stronger, and we approach 7nm chips and 6nm chips just like they do
in Intel and TSMC, the ASICs become more expensive.
You don't get the latest, greatest ASIC with the latest, greatest hashing for cheap.
That puts positive pressure on the entry price to mine in Bitcoin,
thus making the network more secure.
Ashes on the network secure Bitcoin. That's part of the design.
So, you understood that the on-chain revenue, which is the Coinbase and the fees,
are important, but you have a view that in the years to come, in the next few years,
we still have a lot of Coinbase left, where there's 6.25 and then 3.125 for the next four
years. So, you made a point that I agree with, which is that if Bitcoin's price rose tomorrow
to $40K, then a lot of Bitcoin miners would increase their operations because of that higher
revenue for the next year. However, do you agree with this statement that in the long run,
in the long term, higher fees are necessary for Bitcoin's security because
the Coinbase is halved towards zero in the long term?
I mean, in a roundabout way, I do, because you have to incentivize miners to mine.
Miners provide security. In 2140 or 2138, when the block subsidy goes to zero, of course,
there's going to have to be a subsidy to attract miners. If there's not, if there's
no profit in mining, people don't mine. When you say subsidy, do you mean the Coinbase or
do you mean the block reward? I mean the Coinbase block reward,
that is Satoshi's subsidy that halves every four years.
People refer to the Coinbase, so there's two components to the on-chain income. There's
the Coinbase and there's the fees. The word subsidy in these kinds of conversations
usually refers to the Coinbase. Of course, yes.
People don't- It is.
Okay, I was just clarifying. So you're not referring to the entire block reward-
No, I'm talking to the Coinbase refers to the Coinbase transaction, which pays the miners.
Satoshi referred to the mining block reward as a subsidy to bootstrap the network until fees
could provide the income that miners need. That Coinbase transaction is where the subsidy is
distributed to the person who solved the block reward, the block equation that found that
particular nonce and wrote the next block. Well, we've tried to-
Well, hey now. Sup, Seton.
Hi there, Seton. Hi there. Seton, what's your question?
Haha. Well, I just came in to say hi, so I don't have a question.
Give me a moment to get acclimatized and then I'll probably have a question.
All right. You don't have any question to ask? You're sure?
Well, other than, you know, is there more coffee? I need to get some coffee in my system.
All right. All right. You can come back when he has a productive question to share.
So, memetic money. Let's try to drill down to this topic we're discussing. I think that right
now in a lot of spaces and in a lot of conversations at local Bitcoin meetups and on forums, people are
getting interested in this topic. I think that it's a great topic to get into. And I think the
conversation we're having right now is one that's been had thousands of times all over the world as
people grapple with how Bitcoin works and what it means for the fees to go up or the hash rate to go
up. So I think the questions you've asked and statements you've made are ones which a lot of
people have heard or said. So I just want to make that clear. I do think that we have.
I love money.
Yeah, that's cool. And I think a lot of Bitcoin miners, some of them understand things the way
I'm sharing and some of them probably understand things the way you're sharing. I feel confident
that certain statements you've made are not correct in my view, which is that you seem to say
that the essence of Bitcoin's security in terms of its defense from attacks in mining is determined
by the height of the hash rate. And if the hash rate increases, Bitcoin is more secure.
Just to clarify, I'm saying that is true for a double spend attack. Bitcoin hash rate does not
prevent miner centralization. There are other hacks. You could talk about the user assisted
soft fork that we did back in 2018 in the big block wars. That could be considered a Bitcoin
hack when you change the source code. Those are all hacks. What I'm saying is that hash rate
specifically prevents a double spend of Bitcoin. This was the solution to the Byzantine General's
problem.
Yeah, what I'm saying is, though, that if you look at hash rate going up, I'm making a precise
claim that higher hash rate over any period of time. So if hash rate doubles, for example, over a
day or over a month or a year or a decade or a century, the fact that hash rate has gone up in
absolute terms in terms of numbers of hash per second, the fact that hash rate has increased
over any period of time tells you nothing about whether Bitcoin is becoming more secure or
not.
Generally, what I'm saying is it does mean against a double spend attack. If hash rate
doubles, you are twice as secure against a double spend. You might not be twice as secure against
an economic hack, but it is unquestionable fact in the code you are twice as protected
against a double spend.
Okay, so here's my question to you then. Suppose over the next three years, the hash rate goes up
five times because over the next three years, the.
Cost of energy around the world falls because people adopt more nuclear power stations, that there's some kind of invention, people discover fracking and stuff like that.
So imagine over the next three years, energy costs go down and imagine hypothetically that the whole world starts using a different blockchain because they decide they don't like Bitcoin.
So Bitcoin's price goes down a lot.
And however, the energy costs have gone down.
And imagine the ASIC manufacturers come out with a much more powerful ASIC that produces 100 times more hash rate per second with the same amount of electricity.
So imagine in my hypothetical, imagine that hash rate has gone up even while all of the economic activity associated with Bitcoin has gone down.
So the number of people use…
That hypothetical doesn't make any sense.
If energy was super cheap and you didn't make any money mining at Bitcoin, then hash rate would not go up.
The miners wouldn't go there. Miners only mine when it's profitable.
Bitcoin's security is proof of work.
It doesn't matter how you get that work.
If ASICs come out and ASICs are 20 times as efficient, they're gonna cost more.
You still have to compete on the open market to obtain that.
If power drops five times and it's super cheap, you still have to compete with people that have the good tech.
Miners won't mine unless it's profitable.
Well, what I'm trying to say is…
You're not gonna see hash rate explode when there's no profits in Bitcoin.
That will never happen.
The whole point of my hypothetical is not that it's likely.
The whole point of my hypothetical is to illustrate to you the logical possibility of hash rate rising during a period of time when the cost to attack Bitcoin as a majority miner declined.
You see, you're looking at hash rate as an indication of the cost of…
If the hash rate goes up, it's by definition more expensive.
You cannot have hash rate go up and have it be less expensive.
That doesn't make any sense.
If power gets cheaper, more people mine.
I think what you're saying is exactly wrong, but I'm trying to explain it with hypotheticals so you can grok where I'm coming from, which is that the cost to be 51% of Bitcoin's hash rate can go down while the hash rate is increasing.
How?
Because the improvements in ASICs…
Why don't we use the example you gave where power is cheaper?
If we just stick with that, say ASIC technology stays the same and power gets much cheaper.
More people are gonna mine then.
When more people mine and you wanna hack, then you have to overpower even more people.
So the notion that energy going down is gonna make it easier to hack is poppycock.
That doesn't make any sense, bro.
More people mine.
That means you need more power to overpower them.
The same thing holds true for ASICs.
If ASICs go up in tech, people are gonna buy that and mine with it.
And if you wanna attack them, you have to buy the ASICs over them.
Okay, let's look at a hypothetical where the only thing that changes in the world is the cost of energy.
So let's look at two points in time.
One point in time is today, right now.
And then the next point in time is a year from now.
So let's imagine, hypothetically, the only thing that changes between now and a year from now is that energy prices go down.
So Bitcoin adoption doesn't change.
Got it. So Bitcoin energy goes down, that means more people will mine.
You agree?
It's easier to turn a profit, so if more people mine, it's harder to attack.
You just proved my point.
Well, because of the difficulty adjustment, I don't think the profitability of Bitcoin mining increases when energy costs go down.
It does. What are you talking about?
If it costs you less to produce the hash, you make more money.
A decrease in energy prices means an increase in the profitability of Bitcoin.
Of Bitcoin mining or Bitcoin?
Of Bitcoin mining. If you pay less for your utility, you will have more profit.
The problem you're talking about is when power gets cheaper, more people mine.
That makes Bitcoin more secure, and that means you need more power to overpower those new miners if you want a 51% attack.
The only way Bitcoin becomes less secure is if less people mine.
I know, but because we assumed that the cost of energy goes down, that's the one thing we're assuming, therefore the cost to get that additional power is…
Do you follow what I'm saying?
I don't, you're wrong. If power is cheaper, more people mine.
That means the network's stronger.
Yeah, but the amount of energy that it takes to be a majority of the hash rate is lower, but it's lower proportionally to the reduction in the cost of energy.
So actually the economic cost of being 51% of the miners hasn't changed when the cost of electricity falls.
Yes, it has. You're assuming that difficulty doesn't change when energy drops.
If energy drops, more people mine, which is why difficulty goes up.
That is the algorithm adjusting to be self-secure.
Every time I say that hash rate is going up, I'm assuming difficulty is rising too, so I'm not assuming what you said.
Right, so difficulty goes up. It's called difficulty because it's more difficult to mine.
Energy price goes down, difficulty goes up, network more secure.
I get that when it's cheaper power, you can buy more power.
The point is you have to buy even more power than the more power because everybody else is mining.
That's why it's a cooperative network.
If we assume in our hypothetical the only thing that's changing is that energy prices fall, then we can conclude from that fall in energy prices that hash rate will go up.
Yep.
However, the cost to be a 51% miner will not have changed because although more energy would be required to be a 51% miner, that more energy is cheaper per unit of energy because of the fall in energy prices, which we initially assumed.
Completely true, but difficulty is not. Difficulty in that scenario is higher. It's self-adjust.
I know. I told you that every time I assume a higher hash rate, I'm assuming a higher difficulty because they're causally linked.
How can you say the network's less secure? They have to purchase more hash rate if it's a higher difficulty to 51% attack.
Here's why. They have to purchase more hash rate, but the hash rate is cheaper because, as I told you, energy prices have fallen.
I know, but if energy prices fall and they have to buy more, this is not going to lead to a decrease in security.
You're making up a hypothetical that doesn't even work as a hypothetical.
Why would it not work to assume that energy prices go down? That's the only thing I'm assuming.
You just said that energy prices are going down, and I assume difficulty is going to go up because more people will hack.
Yes.
You are by definition saying that it is harder to hack the Bitcoin network when energy prices go down.
No, that's what you're saying.
That's what the math is saying. It's been an awesome debate. I've got to jump for a two o'clock. I'll try to hop back into space.
It's good debates like this. I think they help educate people about Bitcoin.
It was a pleasure.
It was a pleasure.
It's a good one.
Yes.
Partly, too. And we've got topside chains, too, and dropchains.
That'd be great. Come on back any time.
All right, brother. Peace.
Peace.
Well, in that conversation, I think that he got a little bit into an erroneous view, in my opinion, where he thought that it's harder to be a 51 percent miner because difficulty rises.
I think he's focused there on the word difficulty, which has a special meaning within Bitcoin.
When difficulty is increasing, it's not the difficulty to be an attacker or it's not economic difficulty.
So I think that was the core of his misunderstanding is he thinks that it's harder to be a miner when difficulty rises.
And he thinks it's harder economically. In other words, higher cost.
But it's certainly not the case.
It is certainly not the case that rising hash rate or rising difficulty on Bitcoin's blockchain means that the economic cost in terms of purchasing power or value is higher to be a majority of the hash rate.
So that was an interesting example.
That conversation sort of illustrated what Michael Saylor would have said or others would have said, who have this view that Bitcoin's hash rate going up means Bitcoin is more secure and they celebrate higher hash rate.
It's an illusory and incorrect view.
I think it's like saying that when GDP hits all time highs, America is richer when, of course, the government is inflating the money.
So there's multiple variables here.
People shouldn't look at one variable and assume that it means something different than it means.
Just like the price of Bitcoin in dollars, it can rise for multiple reasons.
If the price is at all time high, it could be because Bitcoin is demanded more or it could be because the U.S. government has printed more money.
If the U.S. government tomorrow issues $100 trillion and airdrops it to everyone who has a bank account in America, I guarantee you the price of Bitcoin will be much higher.
But will it have risen because of Bitcoin demand going up or will it have risen simply because of money printing?
So when we're looking at a variable, we have to understand all the factors that go into it.
So that prior speaker, I think he would have a different view on what hash rate means if he were to read a whole bunch of articles on it.
So there are some great articles.
I'll just mention once again, the best one in my view as an introduction to the topic is by Lynn Alden called Bitcoin Fee Modeling, written in March 2021.
And if a person's interested in a more comprehensive kind of Ph.D. level discussion, then a good place to go is Truthcoin.info, where Drivechain co-author Paul Sztorc has written two articles on that topic.
One is called Bitcoin Security Budget in the Long Run, is the first one.
Welcome back, Roz.
What's up?
Hey, thanks. I think that was a really enjoyable back and forth with MMT.
Respectful debate is always nice.
And I am looking forward to listening in on the resolution for some of the other topics.
I think, yeah, keeping the space going twice a week, right?
That door stays open for the dissenting opinions and trying to find the concepts where our consensus is missing.
So that's a beautiful thing.
I'm just smashing the thumbs up on keeping it rolling.
But jump back to you.
So I just wanted to bring some more than just the thumb emoji, I guess.
Cool.
Yeah, I mean, I appreciated his efforts and he is a Bitcoin miner, so he has knowledge and passion.
I think he's definitely wrong.
And I'm sure of it.
And almost all of the intellectuals in Bitcoin would agree.
However, it's fine that he thinks what he thinks.
And, you know, it's not harmful.
And I'm confident that in more conversations, he would understand what I think.
And then he would simply update his mental model and his vocabulary on the subject.
The truth is that everyone in Bitcoin is going to learn one way or another in the long run.
That what matters for Bitcoin's economic security model is rising fees, not rising hash rate.
Understanding that is complicated and not everyone understands it.
Not even Michael Saylor, a great person.
And, you know, he has a PhD in engineering, but he thinks that higher hash rate makes Bitcoin more secure.
He even wrote publicly on Twitter yesterday that the honest miners are the ones with the ASICs and the dishonest miners don't have the ASICs, which is, of course, wrong.
And the reason why people are talking about this is that in the last couple of days, there have been a number of Bitcoiners who have written on Twitter that the hash rate is high.
And it looks like it's so high that maybe the explanation is something surprising.
And I guess we'll find out in the future what's going on.
For example, I'm looking at it right now.
The hash rate is hitting an all time high as of this week.
On March 22nd, it hit the all time high.
So people are wondering, why is this?
Why is hash rate so high?
And Shinobi tweeted that he's, you know, maybe people should be suspicious.
He used that word suspicion.
And then today I saw Hodlenot, another notable Bitcoiner, write something similar.
So some Bitcoiners are even wondering if in the worst case scenario, they're not putting it explicitly, but in the worst case scenario is something going on that's not good.
Like, could this be an attack on Bitcoin where someone is preparing a massive reorg that would then hit the blockchain?
So my understanding of the crypto economics of this is that hypothetically, suppose the U.S. government were trying to destroy Bitcoin right now by mining in secret a chain which double spends like all of the transactions on chain.
And they do this.
If they were to do that for half a year as a majority of the hash rate, then they would be able to in that time probably collect all of the circulating Bitcoin, like all the Bitcoin that moves.
They could double spend because they're the majority.
And then do a massive reorg where all of that Bitcoin is moved to their ownership.
So they would have stolen all the Bitcoin from everyone who had moved Bitcoin over the course of half a year.
Because I think that the rate at which Bitcoin circulates is high enough that if you were to double spend for a half year in secret on the longest chain, then you could announce it and release that long chain.
Then all the nodes would think that that's the right, the heaviest chain.
So there'd be a huge reorg of over 10,000 blocks.
It would be the most unprecedented and surprising thing in the history of Bitcoin probably.
And of course, this is a theoretical hypothetical thought experiment and not realistic.
Although if it were going on, I think that the way we would perceive it is that we would see hash rate very high without explanation for a while.
And then the reorg would be revealed to the world after it had been going on for a while.
So I think that's what Shinobi, Hadalnaut and others are wondering.
Is something going on of that nature?
So they're attuned to the importance of these things.
I can't hear you. I think you're in the meeting.
My initial reaction, despite the whole debate earlier, was, oh, Bitcoin is more secure.
It's in the sake of hash rate. So it was a positive, less suspicious.
Yeah, people think hash rate going higher is better and they celebrate milestones in the hash rate.
But the truth is that actually higher hash rate doesn't tell us anything.
And what we want to see is higher fees because eventually there'll be no more Coinbase and we'll need high fees.
Otherwise, Bitcoin will have to resort to inflation or accept low security.
And low security would reverse the value accrual to Bitcoin's native token.
Because if transactions have low finality assurances, then people wouldn't want to store their money in Bitcoin's blockchain.
It's all pretty complicated. I had to read a whole bunch of articles to understand it.
You should tweet those articles. Do you have those? How many articles does it fit in a tweet?
I guess tweets can be really long now, actually.
My favorite one is Lyn Alden's Bitcoin Fee Modeling.
I can try to find a tweet of it.
But if you just Google Bitcoin Fee Modeling Lyn Alden, you'll find it immediately.
Well, it's 11 o'clock now. I think we should adjourn until Thursday.
Thanks, everyone, for being here. I'll see you all on Thursday.
Bring your friends and family so we can talk more about Drivechain, get more questions and comments.
Hopefully we'll have more debate. And this is the way things will grow over time.
So I'm excited that you're all here.
And sometimes these spaces get really big. Sometimes they're kind of small.
So that gives everyone an opportunity to experience both.
All right. Thank you, Raz and our other speakers.
Thanks, Henry.