1
00:00:00,000 --> 00:00:03,320
Hello and welcome back to On The Brink, I'm Nick Carter.

2
00:00:03,320 --> 00:00:07,600
This episode is brought to you by Fireblocks, more about them later in the episode.

3
00:00:07,600 --> 00:00:12,120
Today I'm sitting down with Paul Sztorc, one of the most anticipated episodes we've
ever

4
00:00:12,120 --> 00:00:13,120
done on this show.

5
00:00:13,120 --> 00:00:17,640
I've received countless requests for it, here it is, and it doesn't disappoint.

6
00:00:17,640 --> 00:00:24,240
So for those of you who don't know, Paul Sztorc is one of the most prolific and
long-running

7
00:00:24,240 --> 00:00:26,800
thinkers in the Bitcoin space.

8
00:00:26,800 --> 00:00:32,280
I think I became aware of his work in 2014, and some of his old posts have held up
really

9
00:00:32,280 --> 00:00:34,680
really well, we actually discussed that in the episode.

10
00:00:34,680 --> 00:00:39,840
Paul is quietly very influential in the Bitcoin space, certainly to me specifically,
I've

11
00:00:39,840 --> 00:00:41,600
learned a lot from him.

12
00:00:41,600 --> 00:00:45,940
He's also something of a critic of sort of Bitcoin development culture and
prevailing

13
00:00:45,940 --> 00:00:47,960
ideas among Bitcoiners.

14
00:00:47,960 --> 00:00:51,680
He's certainly not afraid to tread a different path, and that's what I really like
about

15
00:00:51,680 --> 00:00:52,680
him.

16
00:00:52,680 --> 00:00:58,400
In this episode specifically, we talk about his Drivechain project, which has code
that's

17
00:00:58,400 --> 00:01:02,200
deployed, and his BIP300/301.

18
00:01:02,200 --> 00:01:07,720
The idea of Drivechains is to facilitate blind merged mining so that Bitcoin block
space

19
00:01:07,720 --> 00:01:12,880
can become more useful and abundant while providing more fees to the miners.

20
00:01:12,880 --> 00:01:17,920
Paul has a very definite point of view on this, and certainly expresses concern over

21
00:01:17,920 --> 00:01:21,040
Bitcoin's security budget and the trajectory of that.

22
00:01:21,040 --> 00:01:25,480
This is, of course, one of the most pitched debates in the Bitcoin community,
although

23
00:01:25,480 --> 00:01:30,840
I think people are oftentimes afraid to make their feelings known on this.

24
00:01:30,840 --> 00:01:35,120
Paul certainly isn't, and has a very clear perspective on the matter.

25
00:01:35,120 --> 00:01:39,840
This is a highly informative episode, if you're not familiar with Paul's work,
please read

26
00:01:39,840 --> 00:01:40,840
it.

27
00:01:40,840 --> 00:01:46,200
It's incredibly good, and even his posts from 2014-15 are very prescient, hold up
very very

28
00:01:46,200 --> 00:01:47,200
well.

29
00:01:47,200 --> 00:01:48,200
I'm including them in the show notes.

30
00:01:48,200 --> 00:01:50,360
Listen to the episode, give his work a read.

31
00:01:50,360 --> 00:01:51,360
Let's dive into it.

32
00:02:20,360 --> 00:02:30,480
So I'm here with Paul Sztorc, just learned the correct pronunciation, I got that
wrong,

33
00:02:30,480 --> 00:02:32,520
I had that wrong for seven years.

34
00:02:32,520 --> 00:02:40,520
Well, you know, that's a common thing to get, I get all kinds of things, I remember
in high

35
00:02:40,520 --> 00:02:44,080
school I would get everything, and then my friends would know how to pronounce it so

36
00:02:44,080 --> 00:02:49,920
the teachers would say some random thing, and then we would all just go along with
it.

37
00:02:50,480 --> 00:02:55,040
So Paul, welcome to the studio, aka my apartment, this is actually the first podcast
I've recorded

38
00:02:55,040 --> 00:02:56,040
here.

39
00:02:56,040 --> 00:02:58,480
Oh, it's a cool apartment, I'll tell you that.

40
00:02:58,480 --> 00:03:03,360
Thank you, I'm gonna keep that in the show so everybody knows.

41
00:03:03,360 --> 00:03:09,840
So you used to live in Miami, because I remember I saw you three times, and now you
are no

42
00:03:09,840 --> 00:03:10,840
longer in Miami.

43
00:03:10,840 --> 00:03:17,280
Yeah, I'll be back, I mean I planned on doing like a 51% of the time a year type of
a thing.

44
00:03:17,320 --> 00:03:21,920
I just haven't gotten around to kind of coming back, but I think it's great here,
and I think

45
00:03:21,920 --> 00:03:30,480
that if you're considering moving somewhere, this is a pretty good choice, just
easier

46
00:03:30,480 --> 00:03:39,040
to live here, great weather, great taxes, rent is affordable, places are nice,
people

47
00:03:39,040 --> 00:03:40,040
are having fun.

48
00:03:40,040 --> 00:03:45,280
I do like it, I mean you're going the opposite direction, everybody's coming and
you've left,

49
00:03:45,280 --> 00:03:47,040
but we can forgive you for that.

50
00:03:47,040 --> 00:03:51,920
Alright, so you're actually the most requested guest for this podcast, do you know
that?

51
00:03:51,920 --> 00:03:52,920
No.

52
00:03:52,920 --> 00:03:59,800
Yeah, so because I've read your work many times and obviously cited it, and I often

53
00:03:59,800 --> 00:04:06,400
refer to you as the Steely Dan of Bitcoin, does this make sense to you?

54
00:04:06,400 --> 00:04:10,520
I mean I know who Steely Dan is, but I'm waiting for it to click into place as to
what you

55
00:04:10,520 --> 00:04:11,520
mean by that.

56
00:04:11,720 --> 00:04:15,480
Actually I think it was Tor Demeester that first described you, and so I stole that
from

57
00:04:15,480 --> 00:04:16,480
Tor.

58
00:04:16,480 --> 00:04:26,920
So basically, not to be too much of a sycophant here, but so Steely Dan is beloved
by musicians,

59
00:04:26,920 --> 00:04:28,680
so like by other musicians.

60
00:04:28,680 --> 00:04:29,680
That's the angle.

61
00:04:29,680 --> 00:04:31,720
So I'm like the expert's expert or something.

62
00:04:31,720 --> 00:04:32,720
Exactly.

63
00:04:32,720 --> 00:04:33,720
Oh, that's so nice of you to say.

64
00:04:33,720 --> 00:04:39,040
Yeah, I try to only write about things that I think, see what bothers me is I don't
want

65
00:04:39,040 --> 00:04:43,840
to write something that's just like something that everyone else will say.

66
00:04:43,840 --> 00:04:47,680
I think that's horrible, but that's like what gets a lot of attention.

67
00:04:47,680 --> 00:04:52,160
If you just reiterate what, tell the audience what they want to hear, you just go up
there

68
00:04:52,160 --> 00:04:57,560
and you say, taxation is theft or whatever, or like lightning network is DeFi on
Bitcoin,

69
00:04:57,560 --> 00:04:58,560
or you say some funny little phrase like that.

70
00:04:58,560 --> 00:04:59,560
Yeah, just play the hits.

71
00:04:59,560 --> 00:05:00,560
Play the hits, yeah.

72
00:05:00,560 --> 00:05:01,560
Play the hits, right, exactly.

73
00:05:01,560 --> 00:05:05,280
Just go up there and play Don't Stop Believing, and the audience will love it, you
know?

74
00:05:05,280 --> 00:05:06,800
There's something to be said for that.

75
00:05:06,840 --> 00:05:10,640
If they don't hear Don't Stop Believing at your concert, where are they going to
hear

76
00:05:10,640 --> 00:05:11,800
it?

77
00:05:11,800 --> 00:05:13,280
So you take a different tack.

78
00:05:13,280 --> 00:05:18,920
I mean, just thinking back, you measuring decentralization post was very influential

79
00:05:18,920 --> 00:05:19,920
to me.

80
00:05:19,920 --> 00:05:20,920
I still talk about it.

81
00:05:20,920 --> 00:05:24,680
Proof-of-work versus proof-of-stake, where you describe proof-of-stake as a veiled
proof-of-work.

82
00:05:24,680 --> 00:05:28,760
I don't know if that was the exact expression you used, but it was compelling to me.

83
00:05:28,760 --> 00:05:30,200
I think it was right.

84
00:05:30,200 --> 00:05:31,200
So actually, that's where we're going to start.

85
00:05:31,200 --> 00:05:32,840
Yeah, those have held up really well, I think.

86
00:05:32,840 --> 00:05:34,480
So that was going to be my question.

87
00:05:34,480 --> 00:05:36,080
Okay, what's the question?

88
00:05:36,840 --> 00:05:40,840
Are you satisfied with how your work has aged from 2014?

89
00:05:40,840 --> 00:05:41,840
Yeah, great question.

90
00:05:41,840 --> 00:05:42,840
Seven years now.

91
00:05:42,840 --> 00:05:44,680
Yeah, it's a long time.

92
00:05:44,680 --> 00:05:48,840
I think measuring decentralization is one where I sort of...

93
00:05:48,840 --> 00:05:51,960
Part of that was about the...

94
00:05:51,960 --> 00:05:56,000
There was obviously the scaling debate, and then I kind of wanted to make it
possible

95
00:05:56,000 --> 00:06:01,320
for both of the two different sides to make some kind of progress in the
conversation.

96
00:06:01,320 --> 00:06:06,060
And what was really weird about that is both sides sort of endorsed it, but they
also sort

97
00:06:06,060 --> 00:06:10,780
of ignored it, or something, I want to say, because that was supposed to be kind of
like

98
00:06:10,780 --> 00:06:16,820
maybe a gift to the small blocker side, and say, you have now this measurable thing
that

99
00:06:16,820 --> 00:06:21,220
you can say that increasing the block size will make it just harder to run a full
node.

100
00:06:21,220 --> 00:06:22,940
And that's what the whole frame should be.

101
00:06:22,940 --> 00:06:27,420
It should just be, makes it harder to run a full node, what are you going to do?

102
00:06:27,420 --> 00:06:31,340
And so that was supposed...

103
00:06:31,660 --> 00:06:36,860
But they were just kind of like, it was already so dogmatic at that point, that they
were

104
00:06:36,860 --> 00:06:44,500
just like, those people are evil, and it kind of didn't really succeed in helping
either

105
00:06:44,500 --> 00:06:47,180
of the two kind of combatants.

106
00:06:47,180 --> 00:06:51,020
But it was weird, because the audience liked it, and I think that one held up super,
super

107
00:06:51,020 --> 00:06:52,020
well.

108
00:06:52,020 --> 00:06:57,500
I think that is the right thing to do, is if you can't measure something, it doesn't

109
00:06:57,500 --> 00:06:59,000
exist, I think.

110
00:06:59,000 --> 00:07:03,040
So if people were talking about all this stuff, and they were saying, oh, if we
increase the

111
00:07:03,040 --> 00:07:05,160
block size, it will harm the decentralization a bit.

112
00:07:05,160 --> 00:07:11,320
But it was just this abstract concept, and it made it impossible to have a
conversation,

113
00:07:11,320 --> 00:07:13,960
or even really to think about what was happening.

114
00:07:13,960 --> 00:07:17,960
And I thought that was so annoying, because it was like, these people were just
talking,

115
00:07:17,960 --> 00:07:22,240
it's like people talk about justice, or something, and it's just like, so annoying.

116
00:07:22,240 --> 00:07:28,160
And it's like, if you had something, it literally comes down to a number.

117
00:07:28,240 --> 00:07:30,560
So I thought that one was really, really great.

118
00:07:30,560 --> 00:07:35,480
I think the sort of, nothing is cheaper than proof of work, about proof of stake
just being

119
00:07:35,480 --> 00:07:42,720
proof of work, I think that also held up really, really, really well.

120
00:07:42,720 --> 00:07:50,000
In particular, I, at the time, convinced most people, I remember convincing Jake
Kwan and

121
00:07:50,000 --> 00:07:54,320
Vlad Zamfir in the comments section, that I brought them around to that point of
view.

122
00:07:54,360 --> 00:07:59,520
But then they kind of kept on, they kept on working on proof of stake, right?

123
00:07:59,520 --> 00:08:00,520
Well, you didn't cure them.

124
00:08:00,520 --> 00:08:06,800
I know, I went to Consensus in New York City, and I saw Vlad Zamfir, and I came up
to him,

125
00:08:06,800 --> 00:08:10,200
and I was like, don't you, people were talking to him, I was talking to him.

126
00:08:10,200 --> 00:08:13,000
And I was like, yeah, but didn't you agree with me in my article?

127
00:08:13,000 --> 00:08:14,000
And he said, yes.

128
00:08:14,000 --> 00:08:18,200
And I was like, so why are you still working on, why are you still working on proof
of

129
00:08:18,200 --> 00:08:21,400
stake at all?

130
00:08:21,400 --> 00:08:23,080
And he kind of had no answer to that.

131
00:08:23,120 --> 00:08:24,600
It's very kind of silly.

132
00:08:24,600 --> 00:08:27,320
Why does the alchemist stop trying to make gold?

133
00:08:27,320 --> 00:08:29,320
Right, exactly.

134
00:08:29,320 --> 00:08:33,560
In particular, that essay was really about like, even if you could get proof of
stake

135
00:08:33,560 --> 00:08:38,840
to work, which itself is, it was always going to be this huge challenge, and as you
can

136
00:08:38,840 --> 00:08:43,680
see, they constantly push it back, the Marty Banta thread or whatever, they
constantly

137
00:08:43,680 --> 00:08:44,760
fail to get it to work.

138
00:08:44,760 --> 00:08:49,600
But the point of that article was like, even if you got it to work, it would be, it
would

139
00:08:49,600 --> 00:08:50,600
be useless.

140
00:08:50,600 --> 00:08:55,600
It wouldn't like, it wouldn't like achieve a good, a positive outcome in terms of
this

141
00:08:55,600 --> 00:08:57,720
whole waste thing.

142
00:08:57,720 --> 00:09:03,840
So yeah, so I have a lot of thoughts about that still to this day.

143
00:09:03,840 --> 00:09:04,840
But yeah, I don't know.

144
00:09:04,840 --> 00:09:07,080
I think those two are pretty good.

145
00:09:07,080 --> 00:09:11,480
So I feel like we could do an episode on, frankly, either one of those.

146
00:09:11,480 --> 00:09:13,320
Maybe we're going to do a series or something.

147
00:09:13,320 --> 00:09:15,280
You told me that you like to do four hour episodes.

148
00:09:15,280 --> 00:09:16,280
Yeah, I know.

149
00:09:16,280 --> 00:09:18,120
It ends up happening a lot.

150
00:09:18,120 --> 00:09:20,080
So okay, measuring the centralization.

151
00:09:20,080 --> 00:09:22,720
Do you remember Balaji Srinivasan's blog post on that?

152
00:09:22,720 --> 00:09:24,080
Yeah, it was horrible, wasn't it?

153
00:09:24,080 --> 00:09:26,720
No offense to him, but it was like, that was the one where he, I want to make sure
I'm

154
00:09:26,720 --> 00:09:27,720
remembering it right.

155
00:09:27,720 --> 00:09:28,720
Yeah.

156
00:09:28,720 --> 00:09:30,120
He had like, where he had like six metrics.

157
00:09:30,120 --> 00:09:31,120
Yeah.

158
00:09:31,120 --> 00:09:36,040
And then he sort of like took some, some bizarre like aggregation of them or
something.

159
00:09:36,040 --> 00:09:37,040
What was it like?

160
00:09:37,040 --> 00:09:38,040
What did he even do?

161
00:09:38,040 --> 00:09:39,600
He called it the Nakamoto coefficient.

162
00:09:39,600 --> 00:09:45,000
It was something like, he took the Gini of a bunch of different metrics.

163
00:09:45,000 --> 00:09:46,400
I didn't like it either.

164
00:09:46,440 --> 00:09:48,240
I like Balaji actually a lot.

165
00:09:48,240 --> 00:09:51,640
He's been on the show, but I thought that was a mess.

166
00:09:51,640 --> 00:09:52,640
Yeah, exactly.

167
00:09:52,640 --> 00:09:53,640
Yes.

168
00:09:53,640 --> 00:09:54,640
Because they were all very arbitrary.

169
00:09:54,640 --> 00:09:59,920
I think he's, I think he's like, I kind of have like sort of a love-hate
relationship.

170
00:09:59,920 --> 00:10:03,360
I think he gets a lot of really important things right, and then sometimes I just
have

171
00:10:03,360 --> 00:10:04,800
no idea what he's talking about, you know.

172
00:10:04,800 --> 00:10:10,720
But that's an example because why, you know, that's an example of exactly the kind
of writing

173
00:10:10,720 --> 00:10:16,280
that I don't like or the type of analysis that I don't like where he like seemed to

174
00:10:16,280 --> 00:10:22,640
draw on, first of all, he made the mistake, common mistake about when you have the
data,

175
00:10:22,640 --> 00:10:23,640
you just use the data.

176
00:10:23,640 --> 00:10:27,120
So like he had data on those things and he was like, I can, and that's similar with
the

177
00:10:27,120 --> 00:10:28,120
Gini coefficient.

178
00:10:28,120 --> 00:10:35,080
He was like, this thing exists in the world and we can take out a calculator and use
it.

179
00:10:35,080 --> 00:10:42,360
So all the best statistics, and I used to be a statistician professionally, and all

180
00:10:42,360 --> 00:10:48,280
the best statistics are ones that actually you just invent for the purpose of
solving

181
00:10:48,280 --> 00:10:49,840
your problem.

182
00:10:49,840 --> 00:10:53,400
So you never want to roll your own crypto, but I think that all the great statistics

183
00:10:53,400 --> 00:10:56,760
are because you need to have like an idea of what you're doing first, right?

184
00:10:56,760 --> 00:10:59,680
And then people say, oh, we're going to use like linear regression or whatever,
we're

185
00:10:59,680 --> 00:11:01,800
going to use correlation or something.

186
00:11:02,440 --> 00:11:06,960
They just got, they saw someone else do that and they are just, this is the Steely
Dan

187
00:11:06,960 --> 00:11:08,760
thing that's coming back.

188
00:11:08,760 --> 00:11:15,040
But it's like, I think that was an example of just chaos because he picked those
things.

189
00:11:15,040 --> 00:11:22,080
Many of them had no real relation to anything and there was no thought behind it,
right?

190
00:11:22,080 --> 00:11:27,080
And I critique that specifically in my post about the number of nodes.

191
00:11:27,080 --> 00:11:32,360
One guy who could be, you know, JP Morgan or whatever, one person could just spin up

192
00:11:32,360 --> 00:11:38,120
like 10 million nodes on Monday, and then on Tuesday they could shut half of them
off.

193
00:11:38,120 --> 00:11:43,280
And then your metric is going to be like whipsawing, but nothing actually happened.

194
00:11:43,280 --> 00:11:47,280
So it's like, isn't that an enormous disqualifier for that?

195
00:11:47,280 --> 00:11:48,280
So I kind of hated that.

196
00:11:48,280 --> 00:11:53,720
I thought it was, but luckily for me, a lot of other people also hated it, so it
wasn't

197
00:11:53,720 --> 00:11:54,720
influential.

198
00:11:54,880 --> 00:12:00,240
Yeah, I call it the pie chart theory of decentralization.

199
00:12:00,240 --> 00:12:01,960
Because they always put up that exact thing.

200
00:12:01,960 --> 00:12:02,960
They get the pie chart.

201
00:12:02,960 --> 00:12:03,960
That's good.

202
00:12:03,960 --> 00:12:06,320
I think BitShares really pioneered that.

203
00:12:06,320 --> 00:12:08,480
He was, Dan Larimer was into that.

204
00:12:08,480 --> 00:12:09,760
He loved the pie charts.

205
00:12:09,760 --> 00:12:13,720
And then his big thing was he was going to take like the log base two of it or
something.

206
00:12:13,720 --> 00:12:16,280
Like that was supposed to be a big improvement or something.

207
00:12:16,280 --> 00:12:21,920
When you, the marketing for these proof-of-stake chains would be like, we have 21
validators

208
00:12:21,920 --> 00:12:24,280
and Bitcoin only has like three.

209
00:12:24,840 --> 00:12:27,360
Yeah, they say that's horrible.

210
00:12:27,360 --> 00:12:28,360
A lot of people say that.

211
00:12:28,360 --> 00:12:31,880
Yeah, I'm sorry, I don't know what to tell you in the audience if you're still
saying

212
00:12:31,880 --> 00:12:32,880
that today.

213
00:12:32,880 --> 00:12:35,560
I mean, what can we say to cure them of that?

214
00:12:35,560 --> 00:12:43,400
Like the relationship between the miner who has invested enormous, like possibly
millions

215
00:12:43,400 --> 00:12:48,960
of dollars, but at least they have hardware that cannot be used for anything else.

216
00:12:48,960 --> 00:12:52,400
And then the pool, and they can switch pools on a dime.

217
00:12:52,400 --> 00:12:57,760
And they can very easily monitor the pool for doing anything that they think they do

218
00:12:57,760 --> 00:12:58,760
themselves.

219
00:12:58,760 --> 00:12:59,760
They do switch pools, by the way.

220
00:12:59,760 --> 00:13:00,760
We see this happening.

221
00:13:00,760 --> 00:13:04,160
They are very disposed of the pools, as they should.

222
00:13:04,160 --> 00:13:08,640
So the, whether, which pool they're at is completely a formality, ladies and
gentlemen.

223
00:13:08,640 --> 00:13:15,480
It has very little, whether they're with one pool or another pool makes no, all the
pools

224
00:13:15,480 --> 00:13:17,600
mostly do the exact same thing.

225
00:13:17,920 --> 00:13:25,280
It's very easy to, if a pool did the wrong thing, they would be kicked out of the
system.

226
00:13:25,280 --> 00:13:30,800
So hopefully, if you listen to this podcast, stop saying that.

227
00:13:30,800 --> 00:13:36,760
Yeah, so my view on Privostek is that basically it can be made to work.

228
00:13:36,760 --> 00:13:40,560
There are Privostek blockchains in the wild that have been running, like Tezos has
been

229
00:13:40,560 --> 00:13:42,560
going for a couple of years.

230
00:13:42,560 --> 00:13:44,800
EOS has been running.

231
00:13:44,800 --> 00:13:50,840
I just think of them as standard financial institutions, which have shareholder
governance,

232
00:13:50,840 --> 00:13:51,840
basically.

233
00:13:51,840 --> 00:13:53,600
That's how I think about them.

234
00:13:53,600 --> 00:13:55,720
And so I don't think of them as particularly transformative.

235
00:13:55,720 --> 00:14:00,920
I think of them as a resumption of the prior system, basically.

236
00:14:00,920 --> 00:14:08,720
If A, do you agree with that, and then B, do you think the market just doesn't care

237
00:14:08,720 --> 00:14:09,720
enough?

238
00:14:09,720 --> 00:14:13,360
That's a very good question.

239
00:14:13,360 --> 00:14:17,440
I certainly think of Proof-of-Work as more like an industrial process, and
Proof-of-Stake

240
00:14:17,440 --> 00:14:24,920
is more like this sort of weird legal type brand thing that relies a lot on your,
which

241
00:14:24,920 --> 00:14:29,400
domain names you have registered.

242
00:14:29,400 --> 00:14:34,780
And I definitely am sort of surprised that the number of Proof-of-Stake coins that
work

243
00:14:34,780 --> 00:14:37,120
and just didn't burst completely into flames.

244
00:14:37,120 --> 00:14:41,520
I was a little surprised by that, but I do think it is a byproduct of people, first
of

245
00:14:41,520 --> 00:14:47,360
all, the underdog has an advantage, because everyone wants to work together to take
over

246
00:14:47,360 --> 00:14:50,760
the top spot, and then they'll turn on each other, but not until then.

247
00:14:50,760 --> 00:14:54,960
Well, actually, if you paid attention, they totally have been turning on each other
this

248
00:14:54,960 --> 00:14:55,960
year.

249
00:14:55,960 --> 00:14:56,960
I bet.

250
00:14:56,960 --> 00:14:57,960
Well, yeah.

251
00:14:57,960 --> 00:15:02,960
That was like the Ethereum, like the Binance Smart Chain, Solana, Avalanche, they're
all

252
00:15:02,960 --> 00:15:03,960
fighting.

253
00:15:03,960 --> 00:15:07,960
It's like a Russian dolls of like ... See, that's the thing, your second question is

254
00:15:07,960 --> 00:15:12,680
very important, because I think the idea of Proof-of-Work is that it is a kind of
this

255
00:15:12,680 --> 00:15:15,080
like shield or defense system.

256
00:15:15,080 --> 00:15:18,240
I think maybe even you were saying that or something.

257
00:15:18,240 --> 00:15:22,760
I don't remember who was saying it, but it was like, it's like having a big wall
around

258
00:15:22,760 --> 00:15:27,640
your city, but then if no one tries to invade, it makes it look like the wall is
pointless.

259
00:15:27,640 --> 00:15:29,880
It's a waste.

260
00:15:29,880 --> 00:15:35,300
So obviously, that's not the way people make decisions about whether or not they
should

261
00:15:35,300 --> 00:15:40,780
build walls, which is because they shouldn't, because the wall could be a deterrent.

262
00:15:40,780 --> 00:15:45,500
But yeah, I do wonder, it's possible to tell a weird story where you say Bitcoin
needed

263
00:15:45,500 --> 00:15:50,600
to have Proof-of-Work so that it would survive, because the whole point of Bitcoin's
design

264
00:15:50,600 --> 00:15:54,260
is to ... It was a reaction to like Liberty Reserve and these other things, so
there's

265
00:15:54,260 --> 00:15:59,460
just one server, and it was not only very cheap, but it was just very
straightforward

266
00:15:59,460 --> 00:16:02,260
to just shut the entire thing off.

267
00:16:02,260 --> 00:16:09,300
So you had like Liberty Dollar, Liberty Reserve, DigiCash, Egold, exactly.

268
00:16:09,300 --> 00:16:14,940
So that was like the big reason to switch to Proof-of-Work, because Proof-of-Work
says

269
00:16:14,940 --> 00:16:22,420
that every node can be a server now, and no one needs to have any particular like a
trump

270
00:16:22,420 --> 00:16:24,060
card on what the truth is.

271
00:16:24,060 --> 00:16:31,380
So that was the whole design problem of Bitcoin, and then they opened the door to
like just

272
00:16:31,500 --> 00:16:38,100
cryptocurrency, or just the idea of having private keys that control little UTXOs,
or

273
00:16:38,100 --> 00:16:43,500
little whatever you want to call it, and the other coins that don't have UTXO model.

274
00:16:43,500 --> 00:16:51,300
But they kind of opened that door up, and then maybe it's like the government can't

275
00:16:51,300 --> 00:16:57,860
tell the difference, or the public can't really tell the difference, and so as a
result, how

276
00:16:57,860 --> 00:17:02,100
can they close down only some and not others?

277
00:17:02,100 --> 00:17:05,780
So then it is possible that maybe you needed to have Proof-of-Work to open the tip
of the

278
00:17:05,780 --> 00:17:09,780
spear, and then afterwards, Proof-of-Work is a complete waste of time.

279
00:17:09,780 --> 00:17:12,620
That's a shocking thought, but I think that it is possible.

280
00:17:12,620 --> 00:17:16,900
So Proof-of-Work was the dynamite that blew open the Overton window, and then
Proof-of-Stake

281
00:17:16,900 --> 00:17:17,900
crawled through.

282
00:17:17,900 --> 00:17:18,900
Exactly, yes.

283
00:17:18,900 --> 00:17:19,900
The Overton window.

284
00:17:19,900 --> 00:17:20,900
That's a very good way of, yeah, that's what I was searching for.

285
00:17:20,900 --> 00:17:25,340
The idea that it would just like, you know, Lyft and Uber were like technically
illegal

286
00:17:25,340 --> 00:17:32,660
for a long time, but it ended up being so popular that in practice, it just, yeah.

287
00:17:32,660 --> 00:17:39,100
In general, I think people, whatever the sort of law is, or whatever the formal
rules are,

288
00:17:39,100 --> 00:17:45,700
is not as important as what is in people's brains, and like a culture of a place
makes

289
00:17:45,700 --> 00:17:50,020
an enormous difference, and so Proof-of-Work maybe changed the culture.

290
00:17:50,020 --> 00:17:55,580
But then you wonder, like, is it a, is it just, is it not even, is it pointless?

291
00:17:55,580 --> 00:17:58,660
And then you get with stuff like, you know, like buying a smart chain or whatever,
you're

292
00:17:58,660 --> 00:18:02,820
kind of like, people are taking that to the absolute edge where they say, but that's
one

293
00:18:02,820 --> 00:18:07,940
of the reasons why, among other things, I advocate that a less decentralized
scalability

294
00:18:07,940 --> 00:18:13,380
sidechain, because I just think you have to be able to win in either world.

295
00:18:13,380 --> 00:18:16,700
In a world where it's not going to matter how decentralized the coin is, well then
you

296
00:18:16,740 --> 00:18:22,220
can take advantage of the sidechain, and then in a world where that, it does matter,
then

297
00:18:22,220 --> 00:18:26,180
all of the decentralized projects will be killed out.

298
00:18:26,180 --> 00:18:31,220
So another great analogy is like a kind of bacteria or something, like you put in,
if

299
00:18:31,220 --> 00:18:37,200
you put in antibiotics, then it really helps to be an antibiotic-resistant bacteria.

300
00:18:37,200 --> 00:18:42,260
But if you don't, then you just need to be whatever bacteria is like spreading the
fastest

301
00:18:42,260 --> 00:18:47,620
or whatever, so all that, whatever you, I'm not familiar with how they achieve that
bacterial

302
00:18:47,620 --> 00:18:52,100
resistance, but it must come with some trade-off, right, otherwise every bacteria
would be.

303
00:18:52,100 --> 00:18:56,420
So on the waste question, this is the, you know, Congress is going to have a hearing

304
00:18:56,420 --> 00:19:01,540
on whether, this is great, I should, you know, there's a chance that I'm there and
I'll just

305
00:19:01,540 --> 00:19:07,900
tell them, read Paul Sztorc's essays, guys, come on, he wrote it in 2015, we've had
time

306
00:19:07,900 --> 00:19:09,260
to read it.

307
00:19:09,260 --> 00:19:16,500
So proof of stake is if it consumes societal resources, if it consumes capital and
it mobilizes

308
00:19:16,500 --> 00:19:22,100
it, that means capital can't be used for other stuff, is that, and that other stuff
could

309
00:19:22,100 --> 00:19:27,780
be like building nuclear power plants, is that like a reasonable argument to push
back

310
00:19:27,780 --> 00:19:30,340
at this like, oh, pure work is wasting energy kind of thing?

311
00:19:30,340 --> 00:19:35,260
Well, I think, I'm not sure how persuasive it will be, because it's sort of
abstract.

312
00:19:35,260 --> 00:19:41,620
Even what I was saying about the fact that you have, you've folded up capital and so

313
00:19:41,620 --> 00:19:48,060
then the fewer projects to build a better future can be taken advantage of in the
proof

314
00:19:48,060 --> 00:19:49,460
of stake world.

315
00:19:49,460 --> 00:19:53,300
Even that was like, that was me trying to go to like an absolute like limit.

316
00:19:53,300 --> 00:19:59,860
I think in practice, there will be even more other forms of proof of stake, like the
proof

317
00:19:59,860 --> 00:20:03,820
of stake waste will take on even other forms, like just like people trying to denial
of

318
00:20:03,820 --> 00:20:11,020
service attack the other stakers or people go back in time and they get old keys
that

319
00:20:11,020 --> 00:20:15,860
people don't own now, but they did in the past and then they try to rewrite the
chain

320
00:20:15,860 --> 00:20:19,380
from there, which is computationally basically free.

321
00:20:19,380 --> 00:20:26,500
They just have to then get whatever the strategy is for beating the, like whatever,
they have

322
00:20:26,500 --> 00:20:28,780
to get the exchanges like off the network.

323
00:20:28,780 --> 00:20:32,220
But then you can, that's possible, you can do that with like denial of service or
just

324
00:20:32,220 --> 00:20:36,740
whatever it is, you can put the network in some kind of dilemma.

325
00:20:36,740 --> 00:20:43,500
So I think the waste is mostly, as I try to get into the piece, like fundamentally
the

326
00:20:43,500 --> 00:20:47,740
driver of the waste is just the fact that the blocks have a certain amount of value

327
00:20:47,740 --> 00:20:50,700
and they're just, the block is just worth $10 million.

328
00:20:50,700 --> 00:20:55,780
So people are just going to be fighting over the block and they're going to fight.

329
00:20:55,780 --> 00:20:59,460
You could design something that's really, really perfect.

330
00:20:59,460 --> 00:21:03,820
I mean, I think you probably can't, but the point is if in proof of work, they're
bidding

331
00:21:03,820 --> 00:21:09,620
with energy up to the $10 million amount and with proof of stake, they'll just be
bidding

332
00:21:09,620 --> 00:21:12,340
with whatever else they think will increase their chances.

333
00:21:12,340 --> 00:21:17,060
So it's the fact that the coin is worth so much that drives the waste, it has
nothing

334
00:21:17,060 --> 00:21:21,820
to do with whether or not it's proof of stake or proof of work or anything else.

335
00:21:21,820 --> 00:21:23,980
But again, I don't think it'll be persuasive at all.

336
00:21:23,980 --> 00:21:29,180
Those people are just want to, they've got their story that they want to sell and
they're

337
00:21:29,180 --> 00:21:30,540
going to go for that.

338
00:21:30,540 --> 00:21:35,740
I'm not sure what to do at this point about the whole, the energy FUD type people,
you know?

339
00:21:35,740 --> 00:21:41,420
Well, it's all tied into this sort of Malthusian idea that just consuming energy is
a sin.

340
00:21:41,420 --> 00:21:43,220
Yeah, I think, yeah, that's a good point.

341
00:21:43,220 --> 00:21:46,540
I think the real thing is to just try to retake the offensive.

342
00:21:46,540 --> 00:21:50,460
There was a book called The Ultimate Resource that you may be familiar with.

343
00:21:50,460 --> 00:21:53,420
I don't remember, I think the guy's name was, what was it, Paul Simon?

344
00:21:53,420 --> 00:21:55,820
He took the other side of the Ehrlich bet.

345
00:21:55,820 --> 00:21:58,380
You know, I knew or know Paul Ehrlich.

346
00:21:58,380 --> 00:21:59,380
Oh, really?

347
00:21:59,380 --> 00:22:00,380
He's a family friend.

348
00:22:00,380 --> 00:22:01,380
Oh.

349
00:22:01,380 --> 00:22:02,380
I'm sorry to hear that.

350
00:22:02,380 --> 00:22:03,380
No, it's okay.

351
00:22:03,380 --> 00:22:05,140
I mean, look, I disagree with the man.

352
00:22:05,140 --> 00:22:09,980
So that's the point is, the guy who won the bet wrote a book, The Ultimate Resource,
and

353
00:22:09,980 --> 00:22:15,140
he argues that, and I think correctly, and the book is like that none of our
resources

354
00:22:15,140 --> 00:22:16,860
are meaningfully finite.

355
00:22:16,860 --> 00:22:20,860
Yeah, because everything got more deflationary, we got better at pulling.

356
00:22:20,860 --> 00:22:25,100
And constantly we get better at it, and each of the things that we do now requires
fewer

357
00:22:25,100 --> 00:22:26,100
resources.

358
00:22:26,180 --> 00:22:30,180
There's another great book, The Beginning of Infinity by David Deutsch, who's still

359
00:22:30,180 --> 00:22:31,180
alive.

360
00:22:31,180 --> 00:22:39,620
Those are two books that just, they just take this view that there's no, like, the
right

361
00:22:39,620 --> 00:22:41,940
thing to do is to do more with less.

362
00:22:41,940 --> 00:22:42,940
Yeah.

363
00:22:42,940 --> 00:22:49,380
It's not, we don't have to all just like stop enjoying ourselves, stop enjoying our
energy,

364
00:22:49,380 --> 00:22:50,820
stop enjoying our whatever.

365
00:22:50,900 --> 00:22:56,900
You know, the incredible thing is to bring up that early 1970s alarmism about
resources

366
00:22:56,900 --> 00:23:01,940
is absolutely correct, because what happened was, so Paul Ehrlich wrote this book,
The

367
00:23:01,940 --> 00:23:07,700
Population Bomb, this is for the benefit of our listeners, and basically the idea
was

368
00:23:07,700 --> 00:23:11,820
like the global South is going to starve because we don't have enough food, we're
not good

369
00:23:11,820 --> 00:23:13,260
enough at making food.

370
00:23:13,260 --> 00:23:19,860
Then we like discovered high yield GMO rice strains, and like, you know, basically
we

371
00:23:19,900 --> 00:23:24,700
figured out how to feed like 15 billion people if we wanted.

372
00:23:24,700 --> 00:23:30,060
And all of his predictions were wrong about starvation, but you know what happened
in

373
00:23:30,060 --> 00:23:39,780
the meantime was, like, driven by these academics, Western, like, international
financial institutions

374
00:23:39,780 --> 00:23:45,260
and actually the policy establishment made it a cornerstone of their foreign policy
to

375
00:23:45,260 --> 00:23:49,340
encourage, like, effectively eugenics in the third world.

376
00:23:49,340 --> 00:23:50,780
This is the part that people don't know.

377
00:23:50,780 --> 00:23:51,780
I don't know this either.

378
00:23:51,780 --> 00:23:53,380
So this is a crazy story.

379
00:23:53,380 --> 00:23:55,980
So the U.S. at the highest levels.

380
00:23:55,980 --> 00:23:57,380
The stupid population bomb.

381
00:23:57,380 --> 00:23:58,380
Made it.

382
00:23:58,380 --> 00:24:03,820
So this book infected everyone's brains, and then they were like, okay, we need to
convince

383
00:24:03,820 --> 00:24:06,620
India to stop making so many people right now.

384
00:24:06,620 --> 00:24:10,420
And so then there were these massive sterilization campaigns in India.

385
00:24:10,420 --> 00:24:16,180
Indira Gandhi actually was, she won all these prizes, and all of the sterilization
was connected

386
00:24:16,180 --> 00:24:21,140
to aid dispersed by, like, the World Bank and stuff.

387
00:24:21,140 --> 00:24:22,820
This is a giant nightmare.

388
00:24:22,820 --> 00:24:23,820
It was incredible.

389
00:24:23,820 --> 00:24:26,260
But I'm not surprised, though, because here's the thing, is when, like, when people
start

390
00:24:26,260 --> 00:24:28,860
to go wrong, like, you know what I mean, like, to get an argument right.

391
00:24:29,328 --> 00:24:36,328
Every part of it has to be correct. And if you flip one thing, it's multiplied by
negative one or whatever, and the whole argument, you just become a crazy person.
But, but yeah, that's too bad.

392
00:24:36,328 --> 00:24:41,328
And it's like something like six million people in India was sterilized due to this.

393
00:24:41,328 --> 00:24:45,328
And then who knows about, like, that makes me think about the China's one child
policy or something.

394
00:24:45,328 --> 00:24:49,328
Completely related. And that's a demographic disaster now, on the other side.

395
00:24:50,328 --> 00:24:55,328
Yes. Because this is so important, that every single person alive needs to
understand this.

396
00:24:55,328 --> 00:24:59,328
There's this naive view, and then there's the correct view.

397
00:24:59,328 --> 00:25:06,328
The naive view is that you just take all the resources that we know that we have
now, like in some Excel sheet or something,

398
00:25:06,328 --> 00:25:11,328
and then the current rate of usage, and then you just multiply, and you just say,
well, run out.

399
00:25:11,328 --> 00:25:16,328
We're going to run out in, because it sounds incredible for someone to come onto a
podcast and say, none of our resources are available.

400
00:25:16,328 --> 00:25:21,328
Because it sounds incredible for someone to come onto a podcast and say, none of our
resources are finite in any meaningful sense.

401
00:25:21,328 --> 00:25:25,328
Like, that sounds crazy, if you think about it, because that's outside of most
people's experience.

402
00:25:25,328 --> 00:25:35,328
Someone has, you know, if you have, you go to the store and you buy four bananas or
something, you know, you think, oh, it's only a matter of time before these bananas
run out.

403
00:25:35,328 --> 00:25:45,328
And then, but this is a very naive view, is to just say this, okay, this is the oil
we know about, and we use X amount, you know, per person per year, and then you just
multiply.

404
00:25:45,328 --> 00:25:50,328
That's not actually how anything works in practice.

405
00:25:50,328 --> 00:25:59,328
The real view is that what humans do every day is, many of them, you know, some just
go to work and do what they're told,

406
00:25:59,328 --> 00:26:05,328
but many of them, they look around for a problem to solve, and they look for the
most important problem.

407
00:26:05,328 --> 00:26:12,328
They don't solve the least, the tenth most important problem to them, or the, you
know, the 40 millionth most important.

408
00:26:12,328 --> 00:26:15,328
What is the most important problem today?

409
00:26:15,328 --> 00:26:19,328
They solve that problem, and that's why all the big problems get a lot of attention.

410
00:26:19,328 --> 00:26:32,328
They get solved, and so, you know, things do not, things have been getting better on
an extremely continuous way for the last, basically forever,

411
00:26:32,328 --> 00:26:36,328
but especially over the last, like, 300 years or so.

412
00:26:36,328 --> 00:26:39,328
Things have been constantly getting better, and I have one more thing that I have to
add,

413
00:26:39,328 --> 00:26:50,328
which is the reason people adopt the naive view is because the real, the correct
view, it relies on people creating knowledge.

414
00:26:50,328 --> 00:26:56,328
So it's sure we don't know today how the people in 2050 are going to get their
energy,

415
00:26:56,328 --> 00:27:04,328
and so you could say, well, maybe we'll just stop inventing, you know, new energy
technology,

416
00:27:04,328 --> 00:27:09,328
but you could also say maybe we'll invent the best energy technology ever, and
people will be laughing at this conversation.

417
00:27:09,328 --> 00:27:15,328
You know, the point is you have no idea either way, and we've been inventing things
ever since we got here on this planet,

418
00:27:15,328 --> 00:27:20,328
so there's plenty of room for more inventions, and it's this idea that you don't
have the knowledge,

419
00:27:20,328 --> 00:27:25,328
but if we don't have the knowledge of 2050, if we did, we would, you know, we would
just switch all that energy today,

420
00:27:25,328 --> 00:27:29,328
so, but yeah, I hope that, this is a sad thing.

421
00:27:29,328 --> 00:27:39,328
I think that is, you're right though, I think that that's fundamentally the proof of
work conversation is mostly actually trapped in that completely different thing.

422
00:27:39,328 --> 00:27:43,328
It's not actually a conversation between blockchain engineers about consensus.

423
00:27:43,328 --> 00:27:48,328
Of course not, and I mean, you know, you could have the same conversation about
gold.

424
00:27:48,328 --> 00:27:56,328
You know, gold extraction uses probably more energy than Bitcoin, and it can't be
cleaned up because you're using diesel trucks and stuff like that.

425
00:27:57,328 --> 00:28:01,328
It's a type of argument that no one else makes, like, how much energy does the NFL
use?

426
00:28:01,328 --> 00:28:07,328
Like, no one, we don't do this with any other thing, where we say, ah, all of the
energy they use to make Q-tips.

427
00:28:07,328 --> 00:28:10,328
Well, we're cursed, because it's easy to tally it up for Bitcoin.

428
00:28:10,328 --> 00:28:14,328
Yes, I think that's the reason. It's the same thing with the data is there, so they
just say, well.

429
00:28:14,328 --> 00:28:21,328
And Bitcoin's new, and not a lot of people use it, so they, and I was, you know, I
was on a run this morning,

430
00:28:21,328 --> 00:28:28,328
I was looking at the cruise ships out there, and I was thinking to myself, well,
what percentage of the Earth's population has been on a cruise ship?

431
00:28:28,328 --> 00:28:31,328
You know, probably not that, probably not a big percent.

432
00:28:31,328 --> 00:28:39,328
But these things are belching, like, sulfur into the oceans, like, disgusting filth,
basically killing the manatees and the dolphins.

433
00:28:39,328 --> 00:28:44,328
Yeah, and then it's the other thing, it's like, rich American, sort of like,
Americans go on a cruise ship,

434
00:28:44,328 --> 00:28:48,328
so it's like skiing versus boxing or something, there's all these, like.

435
00:28:48,328 --> 00:28:53,328
Well, yeah, I guess the thing is, like, your New Yorker columnists that are, like,
criticizing Bitcoin's energy,

436
00:28:53,328 --> 00:28:56,328
they're probably not on cruise ships either, frankly, so.

437
00:28:56,328 --> 00:29:05,328
Well, you're right, they may be trapped in the, like, self-hatred spiral or
whatever.

438
00:29:05,328 --> 00:29:09,328
But here's the thing, here's connecting the thread, and I know people get mad when I
do this,

439
00:29:09,328 --> 00:29:14,328
from this, like, eugenic campaign from the 70s, which was very much colonial,

440
00:29:14,328 --> 00:29:19,328
and it was, like, the West basically saying to the rest of the world, don't use our
resources, don't have kids.

441
00:29:19,328 --> 00:29:21,328
It's the same thing with the energy.

442
00:29:21,328 --> 00:29:26,328
If you listen to the Glasgow, what was it, the Glasgow Cop 2 or whatever, did you
pay attention to this thing?

443
00:29:26,328 --> 00:29:28,328
I actually, I didn't.

444
00:29:28,328 --> 00:29:37,328
Well, it was the most exciting development in, you know, energy, concern, trolling,
environmentalist, you know.

445
00:29:37,328 --> 00:29:39,328
I think maybe I, you know, heard some of it on Twitter.

446
00:29:40,328 --> 00:29:49,328
So basically, you know, all the delegates globally get together, and then the
wealthy nations complain that the poor nations are, like, industrializing,
basically.

447
00:29:49,328 --> 00:29:56,328
And so this one was a disaster, that was the outcome, because India, again, didn't
commit to, you know,

448
00:29:56,328 --> 00:30:00,328
some language that would have them reducing their emissions by a certain amount,

449
00:30:00,328 --> 00:30:03,328
because India, rightfully so, likes air conditioning.

450
00:30:03,328 --> 00:30:07,328
And they like toilets and things, they have a lot of things they need to build.

451
00:30:07,328 --> 00:30:13,328
And they like electricity, and they like industrialization, and sort of, like, being
able to buy things, and not dying, and things like that.

452
00:30:13,328 --> 00:30:15,328
And so they're interested in that.

453
00:30:15,328 --> 00:30:19,328
And so the Western nations were completely distraught by this.

454
00:30:19,328 --> 00:30:24,328
Because, you know, that means that India's going to, you know, consume more and more
energy.

455
00:30:24,328 --> 00:30:26,328
And that was a terrible thing.

456
00:30:26,328 --> 00:30:31,328
Yeah, I would say the title, the ultimate resource, the title is about how humans
are actually better.

457
00:30:31,328 --> 00:30:33,328
The more humans, the better.

458
00:30:33,328 --> 00:30:35,328
The more humans, the more innovation.

459
00:30:35,328 --> 00:30:38,328
Because each person can think of ideas.

460
00:30:38,328 --> 00:30:41,328
And the ideas spread very easily and freely.

461
00:30:41,328 --> 00:30:43,328
So more people is better.

462
00:30:43,328 --> 00:30:45,328
It's better for everything.

463
00:30:45,328 --> 00:30:52,328
I think the counterpoint I would have to that is that there's, like, certain
geographical, like, places in certain periods of time.

464
00:30:52,328 --> 00:30:53,328
There's a short-term thing.

465
00:30:53,328 --> 00:30:55,328
Innovation is, like, very, very concentrated.

466
00:30:55,328 --> 00:30:57,328
Oh, yeah, there's certainly golden ages.

467
00:30:57,328 --> 00:31:00,328
Well, yes, it's not only, it's necessary but not sufficient.

468
00:31:00,328 --> 00:31:02,328
You can't average innovation over time.

469
00:31:02,328 --> 00:31:04,328
Well, there was, of course, many, you know, there were more people.

470
00:31:04,328 --> 00:31:07,328
Ancient Athens, you know, had, like, a golden age.

471
00:31:07,328 --> 00:31:11,328
But there were more people living in India in 400 B.C. or whatever.

472
00:31:11,328 --> 00:31:13,328
So why didn't they have big golden ages?

473
00:31:13,328 --> 00:31:16,328
So that's the – well, both books get into that.

474
00:31:16,328 --> 00:31:18,328
It's because policy plays a big role, too.

475
00:31:18,328 --> 00:31:23,328
It's, like, does the culture just reward conformists or does it reward –

476
00:31:23,328 --> 00:31:27,328
for innovation, you just need ideas that are – excuse me –

477
00:31:27,328 --> 00:31:30,328
ideas that are in conflict with each other and ideas that compete.

478
00:31:30,328 --> 00:31:33,328
So that the best ideas rise to the top.

479
00:31:33,328 --> 00:31:36,328
That's really all it takes, just Darwinian evolution of ideas.

480
00:31:36,328 --> 00:31:42,328
And often, you know, because of government policy or because of culture,

481
00:31:42,328 --> 00:31:46,328
people decide to keep their new ideas to themselves.

482
00:31:46,328 --> 00:31:47,328
They feel embarrassed.

483
00:31:47,328 --> 00:31:49,328
They don't want to say what they really think.

484
00:31:49,328 --> 00:31:54,328
Well, that doesn't make me optimistic that America is going to be a center of
innovation right now.

485
00:31:54,328 --> 00:31:55,328
Don't you think?

486
00:31:55,328 --> 00:31:57,328
America, relative to many – well, you know, it depends.

487
00:31:58,328 --> 00:32:01,328
But we don't want – people can set a good example.

488
00:32:01,328 --> 00:32:05,328
Like when Elon Musk lands the rockets, like, right side up.

489
00:32:05,328 --> 00:32:07,328
But you can think all kinds of things about Elon Musk.

490
00:32:07,328 --> 00:32:10,328
But stuff like that is genuinely sort of inspiring to people.

491
00:32:10,328 --> 00:32:13,328
They look at that and they think, I didn't think that was even possible.

492
00:32:13,328 --> 00:32:15,328
And then they see that it actually happens.

493
00:32:15,328 --> 00:32:22,328
And then they're like, wow, you know, maybe my weird idea for a new hit comedy show
about whatever,

494
00:32:22,328 --> 00:32:26,328
silly things about my houseplants and my apartment is going to be great or
something.

495
00:32:27,328 --> 00:32:32,328
So, you know, like they kind of – it goes in big waves.

496
00:32:32,328 --> 00:32:33,328
I agree.

497
00:32:33,328 --> 00:32:36,328
There's a wave of optimism, novelty.

498
00:32:37,328 --> 00:32:39,328
So we want – you have to do your part.

499
00:32:39,328 --> 00:32:40,328
It's like a zombie thing.

500
00:32:40,328 --> 00:32:44,328
You have to do your part to stay out of the evil team and join the good team

501
00:32:44,328 --> 00:32:46,328
because you convert people back over.

502
00:32:46,328 --> 00:32:48,328
People are converting each other back and forth.

503
00:32:48,328 --> 00:32:52,328
It's way easier to be an innovator in a society of innovators.

504
00:32:52,328 --> 00:32:56,328
So, I mean, you know, leaving aside the sort of Miami boosterism,

505
00:32:56,328 --> 00:33:04,328
like what parts of the U.S. would you say have like a pocket of sort of actual
intellectual innovation right now?

506
00:33:04,328 --> 00:33:06,328
Well, that's a good question.

507
00:33:06,328 --> 00:33:07,328
I mean, I'm not sure.

508
00:33:07,328 --> 00:33:11,328
First of all, like I've only been so many places around the world, right, that I've
experienced firsthand.

509
00:33:11,328 --> 00:33:17,328
I would say maybe even give up on geography and just say like the internet is better

510
00:33:17,328 --> 00:33:19,328
because the internet, you know, connects everyone.

511
00:33:19,328 --> 00:33:25,328
And without the internet, the Bitcoin community would have had a very, very, very
hard time.

512
00:33:25,328 --> 00:33:31,328
Imagine if there was no like Bitcoin talk, if there was no Reddit, if there was no
Telegram, you know, if there was no Twitter.

513
00:33:31,328 --> 00:33:36,328
We rely – us poor Bitcoin people are addicted to Twitter.

514
00:33:36,328 --> 00:33:38,328
But it also – it helps everyone.

515
00:33:38,328 --> 00:33:40,328
You can just talk to anyone.

516
00:33:40,328 --> 00:33:45,328
But, yeah, certainly Austin and Miami are doing very well, relatively speaking.

517
00:33:45,328 --> 00:33:49,328
So actually, okay, so narrowing the question to the internet.

518
00:33:49,328 --> 00:33:53,328
So you're actually a big – you're kind of a critic of Bitcoin development culture, I
would say.

519
00:33:53,328 --> 00:33:54,328
Yes.

520
00:33:54,328 --> 00:33:56,328
You know, that was actually one of my questions.

521
00:33:56,328 --> 00:33:59,328
It's the important thing is that we should always push for better ideas.

522
00:33:59,328 --> 00:34:05,328
So – but this is what I wanted to ask because in one sense, you know, Bitcoin
Twitter is fine.

523
00:34:05,328 --> 00:34:11,328
But in other ways, Bitcoin Twitter is like a terrible place where people believe
like crazy stuff like stock to flow.

524
00:34:11,328 --> 00:34:14,328
Yes, there's many tragedies on Twitter.

525
00:34:14,328 --> 00:34:18,328
I mean there's an anti-intellectualism on there, not to claim that I'm intellectual
or anything.

526
00:34:18,328 --> 00:34:21,328
But certainly there's a strain of anti-intellectualism.

527
00:34:21,328 --> 00:34:24,328
Yes, exactly as I said, but the culture can become static.

528
00:34:24,328 --> 00:34:30,328
Whereas people can say things like Bitcoin is perfect the way it is and its success
is preordained.

529
00:34:30,328 --> 00:34:40,328
All we have to do is nothing and Bitcoin will take over and everyone will be so
grateful to be paying $2,000 transaction fees.

530
00:34:40,328 --> 00:34:42,328
And then we'll have the Citadel and blah, blah, blah, blah.

531
00:34:42,328 --> 00:34:44,328
So we don't have to do anything to achieve that.

532
00:34:44,328 --> 00:34:46,328
Maybe you're like our Neo Voltaire.

533
00:34:46,328 --> 00:34:48,328
You know, did you read Candide?

534
00:34:48,328 --> 00:34:59,328
So like, you know, you need to write the great satire and explain how that Bitcoin
Leibnizianism is like, you know, have the character of Pangloss.

535
00:34:59,328 --> 00:35:00,328
Yeah, I think that's a good idea.

536
00:35:00,328 --> 00:35:02,328
I've actually thought about that idea with satire.

537
00:35:02,328 --> 00:35:07,328
I mean like John Seth wrote that allegory with Christian or whatever.

538
00:35:07,328 --> 00:35:08,328
That was great.

539
00:35:09,328 --> 00:35:10,328
Finding Bitcoin Mountain.

540
00:35:10,328 --> 00:35:12,328
Oh, it's like a very obscure, but it was like...

541
00:35:12,328 --> 00:35:15,328
Wait, you know, I think I read that a long time ago.

542
00:35:15,328 --> 00:35:16,328
Yeah, there are other great characters.

543
00:35:16,328 --> 00:35:21,328
Blythe Bruderin, inventor of the credit default swap, master of ether or whatever.

544
00:35:21,328 --> 00:35:27,328
And there's like the fork in the road and it's like the difficult path of learning.

545
00:35:27,328 --> 00:35:28,328
And it's like...

546
00:35:28,328 --> 00:35:29,328
I do.

547
00:35:29,328 --> 00:35:30,328
You know what?

548
00:35:30,328 --> 00:35:31,328
I did read that.

549
00:35:31,328 --> 00:35:34,328
I didn't know John Seth wrote it because it was just like a text.

550
00:35:34,328 --> 00:35:36,328
Yeah, it was written by blockchain Jesus.

551
00:35:36,328 --> 00:35:37,328
Okay.

552
00:35:37,328 --> 00:35:40,328
I didn't, frankly, I was too new to these ideas.

553
00:35:40,328 --> 00:35:41,328
I didn't understand what the allegory was.

554
00:35:41,328 --> 00:35:46,328
Yeah, no, if you don't understand that it's an allegory and that it's like a...

555
00:35:46,328 --> 00:35:47,328
What is it?

556
00:35:47,328 --> 00:35:49,328
Like Christian Pilgrim's Progress or whatever it is.

557
00:35:49,328 --> 00:35:51,328
If you don't understand that it's a big...

558
00:35:51,328 --> 00:35:53,328
It would just make no sense.

559
00:35:53,328 --> 00:35:54,328
It would just make no sense to you.

560
00:35:54,328 --> 00:35:56,328
Why did someone invest all this time?

561
00:35:56,328 --> 00:36:00,328
We need maybe yourself, maybe like we can convince Josh Cincinnati to do it.

562
00:36:00,328 --> 00:36:02,328
I think there should be a satire.

563
00:36:02,328 --> 00:36:04,328
Yeah, I think that actually would help a lot.

564
00:36:04,328 --> 00:36:06,328
There's a lot of material.

565
00:36:07,328 --> 00:36:15,328
When your business is scaling up and your portfolio is growing,

566
00:36:15,328 --> 00:36:20,328
you don't want to waste precious time on manual crypto treasury management or
settlement.

567
00:36:20,328 --> 00:36:25,328
Fireblocks can handle that for you with smart custody solutions for your crypto
business,

568
00:36:25,328 --> 00:36:28,328
along with industry leading security technology.

569
00:36:28,328 --> 00:36:31,328
Whether you're starting a new fund or expanding operations,

570
00:36:31,328 --> 00:36:35,328
Fireblocks offers scalable solutions for companies of any size.

571
00:36:35,328 --> 00:36:39,328
From day-to-day crypto transactions to the most advanced DeFi strategies,

572
00:36:39,328 --> 00:36:42,328
Fireblocks is here to give you a competitive edge.

573
00:36:42,328 --> 00:36:45,328
They'll take care of the back end so you can focus on the big picture.

574
00:36:45,328 --> 00:36:49,328
Visit onthebrink.link slash fireblocks to learn more.

575
00:36:49,328 --> 00:36:51,328
All right, so Stock To Flow had to talk about it.

576
00:36:51,328 --> 00:36:53,328
I know I'm going to quote you.

577
00:36:53,328 --> 00:36:55,328
You said, it's so dumb.

578
00:36:55,328 --> 00:36:58,328
It was so dumb that even critiquing it would have been too humiliating,

579
00:36:58,328 --> 00:37:01,328
like critiquing Flat Earth or something.

580
00:37:01,328 --> 00:37:02,328
Yes.

581
00:37:02,328 --> 00:37:04,328
Yeah, no, I completely believe that.

582
00:37:04,328 --> 00:37:08,328
When I first came out, I kind of thought it was just a harmless, like,

583
00:37:08,328 --> 00:37:12,328
you know, like we had the Bitcoin wizard, like r slash Bitcoin join us,

584
00:37:12,328 --> 00:37:15,328
and it was like an MS Paint, and it looked ridiculous, you know?

585
00:37:15,328 --> 00:37:16,328
I love that.

586
00:37:16,328 --> 00:37:17,328
It was like a joke.

587
00:37:17,328 --> 00:37:18,328
I love that.

588
00:37:18,328 --> 00:37:21,328
It was like we don't care, but we secretly do care, you know?

589
00:37:21,328 --> 00:37:24,328
It was just like a meme thing.

590
00:37:24,328 --> 00:37:27,328
But I thought this was just like a thing that you could just say.

591
00:37:27,328 --> 00:37:29,328
I couldn't believe that people actually thought that.

592
00:37:29,328 --> 00:37:31,328
I mean, what happened to supply and demand?

593
00:37:31,328 --> 00:37:34,328
What happened to efficient markets hypothesis?

594
00:37:34,328 --> 00:37:39,328
What happened to the fact that, like, Bitcoin cash is the same stock to flow ratio?

595
00:37:39,328 --> 00:37:47,328
Like, what if you could fork Bitcoin and trivially alter the stock part,

596
00:37:47,328 --> 00:37:50,328
but the fork would have no value because it would have no demand?

597
00:37:50,328 --> 00:37:52,328
Like every part of it made no sense at all.

598
00:37:52,328 --> 00:37:53,328
Yeah.

599
00:37:53,328 --> 00:37:56,328
I mean, but they have answers for all these points.

600
00:37:56,328 --> 00:37:58,328
Like there's a secret.

601
00:37:58,328 --> 00:38:02,328
There's something special about Bitcoin, which is why stock to flow doesn't work for
altcoins.

602
00:38:02,328 --> 00:38:03,328
That's what they would always say.

603
00:38:03,328 --> 00:38:06,328
Yeah, but then that special thing has to be in the model somewhere.

604
00:38:06,328 --> 00:38:09,328
That special thing is called demand, for those of you listening.

605
00:38:09,328 --> 00:38:11,328
That's an extra variable that's in there.

606
00:38:11,328 --> 00:38:12,328
Bitcoin.

607
00:38:12,328 --> 00:38:15,328
I mean, it's like it broke a number of statistical rules as well.

608
00:38:15,328 --> 00:38:17,328
They probably are so obscure that no one will care about,

609
00:38:17,328 --> 00:38:20,328
but you're not supposed to, like, there's this big thing,

610
00:38:20,328 --> 00:38:25,328
and it goes back to Fisher and these other things about when you fit parameters to
the data,

611
00:38:26,328 --> 00:38:30,328
you're biased towards whatever data you have, and you can't just like –

612
00:38:30,328 --> 00:38:38,328
you could easily – you could trivially, like caring about R-squared in a naive sense
of just like

613
00:38:38,328 --> 00:38:43,328
it's really accurate if the R-squared is high, but that's not true.

614
00:38:43,328 --> 00:38:48,328
The idea even that the accuracy of the model,

615
00:38:48,328 --> 00:38:55,328
even that the model's predictive power or how well the data fits,

616
00:38:55,328 --> 00:38:59,328
the idea that that is more important than the model structure being right,

617
00:38:59,328 --> 00:39:03,328
even that is false because as I point out a lot,

618
00:39:03,328 --> 00:39:10,328
Ptolemy had this astronomical model that involved all these epicircles,

619
00:39:10,328 --> 00:39:13,328
circles of circles, and it was all nonsense.

620
00:39:13,328 --> 00:39:15,328
None of it was correct, but the predictions were perfect

621
00:39:15,328 --> 00:39:18,328
because it was this overfit model that had degrees of freedom,

622
00:39:18,328 --> 00:39:24,328
and then when they proposed that planets go around the sun in a circle,

623
00:39:24,328 --> 00:39:28,328
the model was less accurate since they were like really ellipses and things,

624
00:39:28,328 --> 00:39:33,328
and there was like the gravity from Jupiter sometimes biases the –

625
00:39:33,328 --> 00:39:37,328
some of the other planets' orbits and things in these weird cycles.

626
00:39:37,328 --> 00:39:43,328
So often the model will become less accurate when it becomes –

627
00:39:43,328 --> 00:39:48,328
well, it becomes – the prediction, the numerical predictions can get worse,

628
00:39:48,328 --> 00:39:52,328
but the model itself will be more right.

629
00:39:52,328 --> 00:39:55,328
I feel like this critique is actually too sophisticated.

630
00:39:55,328 --> 00:39:57,328
Right. That's what I mean. Exactly. It's like what can you say?

631
00:39:57,328 --> 00:40:00,328
If you start to talk about autocorrelation and –

632
00:40:00,328 --> 00:40:02,328
Yeah, autocorrelation.

633
00:40:02,328 --> 00:40:06,328
It completely violates the regression assumptions of normality of residuals.

634
00:40:06,328 --> 00:40:08,328
It's like no one knows anything about it anymore.

635
00:40:08,328 --> 00:40:11,328
The real thing is that prices – we already had models of prices.

636
00:40:11,328 --> 00:40:16,328
It's supply and demand, like the idea that the efficient markets hypothesis,

637
00:40:16,328 --> 00:40:21,328
and then what happened to the Austrian view that like the Hayek –

638
00:40:21,328 --> 00:40:27,328
the Hayek-Mises view that they would represent signals of information or something

639
00:40:27,328 --> 00:40:29,328
that would be constantly changing over time.

640
00:40:29,328 --> 00:40:30,328
Yeah.

641
00:40:30,328 --> 00:40:34,328
Just torpedoed like all of these really solid things.

642
00:40:34,328 --> 00:40:36,328
So I don't know.

643
00:40:36,328 --> 00:40:39,328
But again, almost when you critique it, it almost gives it too much attention.

644
00:40:39,328 --> 00:40:40,328
It gives it more fuel.

645
00:40:40,328 --> 00:40:41,328
Yeah.

646
00:40:41,328 --> 00:40:44,328
You're almost giving it validity if you're reacting to it with these

647
00:40:44,328 --> 00:40:49,328
abstruse econometric terms, which basically nobody understands.

648
00:40:49,328 --> 00:40:55,328
And really the answer is just that this model is incredibly stupid and shouldn't
exist.

649
00:40:55,328 --> 00:40:59,328
But yeah, so that Stock-to-Flow officially debunked –

650
00:40:59,328 --> 00:41:01,328
Yeah, I give it two thumbs down.

651
00:41:01,328 --> 00:41:03,328
I just – I don't understand.

652
00:41:03,328 --> 00:41:07,328
Why don't people – there was nothing wrong with supply and demand, everyone.

653
00:41:07,328 --> 00:41:08,328
That was –

654
00:41:08,328 --> 00:41:09,328
That was good enough.

655
00:41:09,328 --> 00:41:10,328
That was a real –

656
00:41:10,328 --> 00:41:11,328
But it wasn't –

657
00:41:11,328 --> 00:41:12,328
It was a real model.

658
00:41:12,328 --> 00:41:14,328
It wasn't reducible to a single formula.

659
00:41:14,328 --> 00:41:16,328
Also, and then the wishful thinking, we're all going to get rich,

660
00:41:16,328 --> 00:41:19,328
and we just have to – again, we just have to do nothing.

661
00:41:19,328 --> 00:41:20,328
Okay.

662
00:41:20,328 --> 00:41:22,328
So we haven't even talked about the thing I wanted to talk about,

663
00:41:22,328 --> 00:41:27,328
which is basically the security budget and how it's insufficient, allegedly.

664
00:41:27,328 --> 00:41:31,328
So I'm going to give you some numbers right now.

665
00:41:31,328 --> 00:41:35,328
Right now it's about $15 billion annualized.

666
00:41:35,328 --> 00:41:36,328
Does that seem sufficient?

667
00:41:36,328 --> 00:41:37,328
Is that too much?

668
00:41:37,328 --> 00:41:38,328
Is that too little?

669
00:41:38,328 --> 00:41:40,328
How do you include the block subsidy?

670
00:41:40,328 --> 00:41:41,328
Right.

671
00:41:41,328 --> 00:41:47,328
So, I mean, the block subsidy, as we all know, is on a trajectory towards zero.

672
00:41:47,328 --> 00:41:54,328
It may take a while, but it does – when you get cut in half every four years –

673
00:41:54,328 --> 00:41:58,328
I mean being cut in half is very significant.

674
00:41:58,328 --> 00:42:02,328
So – and then the price has to be going up –

675
00:42:02,328 --> 00:42:05,328
I don't remember exactly what it is, but something like 17% annually on average or
something.

676
00:42:05,328 --> 00:42:12,328
The price has to go up by two every four years to offset that.

677
00:42:12,328 --> 00:42:15,328
And the problem with that is eventually Bitcoin will just be worth –

678
00:42:15,328 --> 00:42:18,328
well, I know that this is – obviously this is a good problem to have,

679
00:42:18,328 --> 00:42:23,328
but eventually Bitcoin will just be worth all of the money in the world,

680
00:42:23,328 --> 00:42:28,328
and then it cannot easily double in value relative to the stuff.

681
00:42:28,328 --> 00:42:32,328
It cannot easily double in value for the next four years.

682
00:42:32,328 --> 00:42:36,328
So like eight years after that, the block subsidy is going down again.

683
00:42:36,328 --> 00:42:37,328
Well, I mean –

684
00:42:37,328 --> 00:42:41,328
So the block subsidy is not a reliable – it's not like a sustainable thing to rely
on.

685
00:42:41,328 --> 00:42:43,328
We have – the fees have to go up.

686
00:42:43,328 --> 00:42:46,328
So the fees – I also pulled the numbers.

687
00:42:46,328 --> 00:42:48,328
They are very low, frankly.

688
00:42:48,328 --> 00:42:52,328
Yeah, that's the – most of the thrust of the article is about the fees do not –

689
00:42:52,328 --> 00:42:54,328
they're not on this magical upward trend.

690
00:42:54,328 --> 00:42:55,328
No, in fact –

691
00:42:55,328 --> 00:42:57,328
They're mostly zero most of the time.

692
00:42:57,328 --> 00:43:01,328
Sometimes during bubbles they rise, but then they go back down to there.

693
00:43:01,328 --> 00:43:02,328
So we're going to link your articles.

694
00:43:02,328 --> 00:43:05,328
They do a better job of summarizing this, but –

695
00:43:05,328 --> 00:43:11,328
so right now they're around $250 million annualized,

696
00:43:11,328 --> 00:43:16,328
which is sort of – seems like a lot, but then again you're trying to safeguard a
network

697
00:43:16,328 --> 00:43:18,328
which is worth almost a trillion dollars.

698
00:43:18,328 --> 00:43:22,328
Yeah, I mean if it's $250 million a year, then what is it per month?

699
00:43:22,328 --> 00:43:25,328
Like something like whatever, like $20-something million a month,

700
00:43:25,328 --> 00:43:30,328
and then like per like a week that's – we're chopping it down to like $5 million.

701
00:43:30,328 --> 00:43:35,328
So to 51% attack the network for like three days, it's going to cost you like
whatever,

702
00:43:35,328 --> 00:43:37,328
like $1-2 million.

703
00:43:37,328 --> 00:43:41,328
Yeah, well, assuming you can sort of get the ASICs and stuff.

704
00:43:41,328 --> 00:43:43,328
So on Ethereum, here's the weird thing.

705
00:43:43,328 --> 00:43:46,328
Ethereum is $16 billion a year in fees.

706
00:43:46,328 --> 00:43:52,328
The one site that I – when I presented at Bitcoin 2021,

707
00:43:52,328 --> 00:43:56,328
I pulled the numbers from whatever crypto fees that info or whatever was.

708
00:43:56,328 --> 00:43:59,328
That's a sad – for this year that's been –

709
00:43:59,328 --> 00:44:04,328
Because there's individual smart contracts on Ethereum that are higher than all the
Bitcoin fees.

710
00:44:04,328 --> 00:44:08,328
Well, it's just shocking to see – to watch the trend over this year.

711
00:44:08,328 --> 00:44:10,328
I mean, was that your graph?

712
00:44:10,328 --> 00:44:12,328
You had the greatest graph.

713
00:44:12,328 --> 00:44:16,328
I don't know if it was you, but I think it was – I think Austin gave it to me from
you or something.

714
00:44:16,328 --> 00:44:21,328
The graph of Ethereum's fees versus Bitcoin's fees on a log scale.

715
00:44:21,328 --> 00:44:23,328
Oh, yeah, that's right.

716
00:44:23,328 --> 00:44:24,328
It's shocking.

717
00:44:24,328 --> 00:44:27,328
Ethereum's a steady march upward, and now it's 80 times.

718
00:44:27,328 --> 00:44:36,328
It's a diagonal line, and most importantly, the line starts at like .001, and it
ends at like 50x or something.

719
00:44:36,328 --> 00:44:37,328
More, more.

720
00:44:37,328 --> 00:44:45,328
So it has crossed the crucial 1.0 horizontal, and not only has it crossed, but it's
just blown way past it.

721
00:44:45,328 --> 00:44:53,328
And that's a – I think that's a sad thing because I try to focus – my background is
in economics,

722
00:44:53,328 --> 00:45:00,328
and Adam Smith, you know, he has this famous line about the conspiracy against the
public, which is about guilds and things.

723
00:45:00,328 --> 00:45:05,328
Because Adam Smith hated – he was a critic of the government and terrible
mercantilist policy,

724
00:45:05,328 --> 00:45:10,328
but he also knew that the merchants and producers were not to be trusted as well.

725
00:45:10,328 --> 00:45:16,328
And he started sort of – I'm not sure who started it for, you know, in a historical
sense,

726
00:45:16,328 --> 00:45:20,328
but the idea that you have to care about the customer and the consumer.

727
00:45:20,328 --> 00:45:22,328
Customer is always right.

728
00:45:22,328 --> 00:45:31,328
And this idea of the fees is – you know, it shows that these have users who pay
money,

729
00:45:31,328 --> 00:45:35,328
and they – so obviously the customer is being made happy in some way.

730
00:45:35,328 --> 00:45:41,328
That's certainly not the only criterion or whatever, but I do worry that, you know,

731
00:45:41,328 --> 00:45:47,328
we want to keep the focus on what is best for the user.

732
00:45:47,328 --> 00:45:51,328
You know, like what would like Stallman say or something like that?

733
00:45:51,328 --> 00:45:57,328
You know, anyone – people from the open source movement or the cypherpunk movement
or whatever,

734
00:45:57,328 --> 00:46:00,328
it's like the software has to empower the user.

735
00:46:00,328 --> 00:46:10,328
So it should give the user what they want, and there should not be – you know, the
user is supposed to be sovereign.

736
00:46:10,328 --> 00:46:12,328
So – all right.

737
00:46:12,328 --> 00:46:14,328
So we have this fee quandary, let's call it.

738
00:46:15,328 --> 00:46:18,328
They're either pretty high or effectively zero.

739
00:46:18,328 --> 00:46:22,328
And they're only high when there's like these big price bubbles.

740
00:46:22,328 --> 00:46:24,328
So that's what really concerns me is you have these people.

741
00:46:24,328 --> 00:46:28,328
They've been like investing like a couple weekends.

742
00:46:28,328 --> 00:46:30,328
They read everything by Nick Carter or whatever.

743
00:46:30,328 --> 00:46:32,328
They're getting ready to like become a Bitcoiner.

744
00:46:32,328 --> 00:46:34,328
So they've already invested an enormous amount of time.

745
00:46:34,328 --> 00:46:40,328
So when push comes to shove and the price is going up, they say, well, I'll just pay
$50 or whatever.

746
00:46:40,328 --> 00:46:48,328
And then when they sober up weeks later or whatever, they kind of have more
strategies about maybe they're not going to use on-chain as much.

747
00:46:48,328 --> 00:46:57,328
They keep the money on the exchange or they switch from Bitcoin to, you know,
cheaper block space on other altcoins or something.

748
00:46:57,328 --> 00:47:09,328
So this really concerns me, the fact that what tricks people into thinking that the
fees are going up is just these unrepresentative bubble periods.

749
00:47:10,328 --> 00:47:12,328
So, all right, so here's something.

750
00:47:12,328 --> 00:47:16,328
So I want to talk about this wait for more confirmations fallacy.

751
00:47:16,328 --> 00:47:18,328
I don't know if you call it a fallacy, but we can call it that.

752
00:47:18,328 --> 00:47:34,328
But firstly, I think that this year liquidity has been very portable across
blockchains thanks to certain things like, you know, people primarily actually use
stable coins to transact these days as opposed to like your native crypto assets.

753
00:47:34,328 --> 00:47:38,328
And your stable coins are very busy straddling like dozens of different blockchains.

754
00:47:38,328 --> 00:47:43,328
And so it's relatively easy to go across chains now.

755
00:47:43,328 --> 00:47:49,328
So if you look at Tether, like it started on Omni and then it went to Ethereum and
then it went to Tron.

756
00:47:49,328 --> 00:47:54,328
And now you can use Tether on other blockchains too.

757
00:47:54,328 --> 00:47:57,328
If you look at USDC, I think it's on a half a dozen blockchains.

758
00:47:58,328 --> 00:48:01,328
The liquidity is straddling blockchains.

759
00:48:01,328 --> 00:48:10,328
Does that accelerate the death of this idea that liquidity is sticky on a
blockchain?

760
00:48:10,328 --> 00:48:17,328
Is that evidence of users having absolutely no allegiance to a specific blockchain?

761
00:48:17,328 --> 00:48:29,328
Well, one thing I try to make really clear in that piece to the extent that I think
I have like a few graphics about it or whatever is that there's two different
economic goods.

762
00:48:29,328 --> 00:48:34,328
Like the coin is very different from the Bitcoin layer 1 transactions.

763
00:48:35,328 --> 00:48:38,328
And they have a different price.

764
00:48:38,328 --> 00:48:47,328
There's only 21 million coins, but every 10 minutes there's a new – on average,
there's a new block space that can accommodate layer 1 transactions.

765
00:48:47,328 --> 00:48:51,328
The Bitcoin layer 1 transactions are not like lightning network transactions or
something.

766
00:48:51,328 --> 00:48:54,328
So that's yet a third category of thing.

767
00:48:54,328 --> 00:48:58,328
So people often try to make the argument about like, oh, Bitcoin is really special.

768
00:48:58,328 --> 00:49:00,328
People will pay.

769
00:49:00,328 --> 00:49:02,328
Well, a lot of that's true.

770
00:49:02,328 --> 00:49:08,328
They'll pay for the coin, but they won't necessarily pay for space in Bitcoin's
blockchain.

771
00:49:08,328 --> 00:49:14,328
In fact, even when I was researching the article, I found that Satoshi said almost
word for word that exact sentence or something.

772
00:49:14,328 --> 00:49:20,328
He said people may not want to shell out for the expensive space in Bitcoin's chain.

773
00:49:20,328 --> 00:49:29,328
And in the thread where he invents merge mining, he casually adopts this view that
there will be many different blockchains with different fee rates.

774
00:49:29,328 --> 00:49:32,328
And that the fee rates would drive people.

775
00:49:32,472 --> 00:49:37,632
And that the fee rates would drive people away from the more expensive, small block,
decentralized chain.

776
00:49:37,872 --> 00:49:39,072
And so I was shocked.

777
00:49:39,752 --> 00:49:41,312
Kind of we have to dig that up.

778
00:49:41,352 --> 00:49:44,232
That's some prime Satoshi exegesis.

779
00:49:44,272 --> 00:49:49,032
And he just kind of just he's very, very nonchalant about that.

780
00:49:49,072 --> 00:49:51,432
He just sort of assumes like he takes it for granted.

781
00:49:51,472 --> 00:49:57,192
But today that would be a heretical view that blocks based on anything other than
the one.

782
00:49:58,192 --> 00:50:02,632
Well, heretical among like a small crowd of Bitcoiners, but they're the minority.

783
00:50:02,752 --> 00:50:09,752
Yeah, we do have a problem where I think there is a loud minority on Twitter that
that unfortunately has a large influence on the culture.

784
00:50:10,232 --> 00:50:11,792
But what can you do?

785
00:50:12,672 --> 00:50:14,032
But anyway, this was your actual question.

786
00:50:14,072 --> 00:50:14,952
Oh, yeah, of course.

787
00:50:14,952 --> 00:50:17,352
Like do users have allegiance to a blockchain?

788
00:50:17,352 --> 00:50:24,552
I think that, you know, if they did, we would not be seeing we would see more
differences of fees on everything.

789
00:50:24,552 --> 00:50:30,912
But what we see really is that when the fees go up, new entrepreneurs just create
more blockchains.

790
00:50:30,992 --> 00:50:49,272
Yeah. So they they it's a very much the same marginal cost equals marginal revenue
argument from the proof of work article where they just the marginal cost of making
new block space that is apparently a good enough substitute is like basically zero
because they can always make some new chain with its own blocks.

791
00:50:49,872 --> 00:51:14,232
And so. It's hard for the equilibrium price, you know, not to be zero because the
supply curve is just right because you can create a block space and even worse, if
you throw all your your your decentralization requirements out the window, you can
create a ton of block space and the people who are trading or transacting are not,
you know, holding or huddling.

792
00:51:14,232 --> 00:51:28,192
So so they may not be you know, they may want to make some transaction through some
some kind of crypto system and they they may want to end up with Bitcoin or they
want to end up with, you know, US dollars in a bank account.

793
00:51:28,792 --> 00:51:37,072
And so since their final destination is not the coin, all the dark net people, the
dark net markets have, you know, they have switched to Monero a lot.

794
00:51:37,072 --> 00:51:44,232
Many of them, except I see like the Pirate Bay, except Bitcoin Cash or whatever,
they had like Bitcoin Cash, LOL or whatever.

795
00:51:44,232 --> 00:51:51,792
But then they had it. So and if people have Litecoin, if you if you don't want to
hold the coin and you only want to do the transacting part.

796
00:51:51,792 --> 00:51:57,752
And this is where I worry that people ignore what I said before about the coin and
the Bitcoin layer one transaction are very different things.

797
00:51:58,312 --> 00:52:05,072
So the coin is insulated from competition because it has unique network effects.

798
00:52:05,792 --> 00:52:09,072
You people want to coordinate on one money.

799
00:52:09,072 --> 00:52:13,792
They do not want there to be all these different monies around that's Metcalfe's
law, blah, blah, blah.

800
00:52:14,272 --> 00:52:21,152
All that applies to the coin, but it does not necessarily apply to the the Bitcoin
layer one transactions, which are a completely different thing.

801
00:52:21,152 --> 00:52:30,112
And I think that if if people really cared about one versus the other, you would see
that the prices be very, very different.

802
00:52:30,112 --> 00:52:38,592
But just how can it be the case now that I question to people who believe that is
how can it be the case now that Bitcoin fees are like zero?

803
00:52:39,592 --> 00:52:51,112
Like Litecoin fees are also zero, whatever it is, you know, everything has this kind
of natural zero resting place that everything returns to.

804
00:52:51,312 --> 00:52:52,632
So it does.

805
00:52:52,632 --> 00:52:58,992
So and even with the theorem, fees are very material, but people are upset about the
fees, you know, like it actually comes up in Congress.

806
00:52:58,992 --> 00:53:00,912
And when they do, they what happens?

807
00:53:00,912 --> 00:53:05,392
Someone makes a new. Yeah, they move to other blockchains, smart chain, Solana,
whatever.

808
00:53:05,752 --> 00:53:13,752
They make the new whatever it is, Polkadot or something that inspires people to take
advantage of that situation.

809
00:53:13,752 --> 00:53:26,952
So does that kind of suggest that actually fees are, especially as we have these
like mono nodal blockchains that like create tons of block space, fees are just
destined to be zero across the board?

810
00:53:27,032 --> 00:53:37,592
That's that's kind of what I think may be the case, because one thing that is that
think about this is, you know, maybe you like Bitcoin core and you like
decentralization.

811
00:53:38,312 --> 00:53:46,032
Someone can just copy and paste Bitcoin core and make, you know, Bitcoin core two or
whatever, beta, Charlie Echo or whatever.

812
00:53:46,032 --> 00:53:47,352
They can just keep making these.

813
00:53:48,272 --> 00:53:59,152
And then that's even more decentralized because it has a smaller, it has no
historical blockchain, could even have a smaller block size as far as anyone cares,
because you just keep copying and pasting them.

814
00:53:59,832 --> 00:54:02,592
So what features?

815
00:54:04,072 --> 00:54:15,912
You know, the only feature that the Bitcoin core original would have is that it's
the only thing that can move BTC, which, of course, that is significant.

816
00:54:16,352 --> 00:54:19,072
But again, it's not significant for anyone using it to transact.

817
00:54:19,072 --> 00:54:26,072
Anyone using it to transact, they won't be holding BTC at the end of the day to hold
whatever else it is they wanted.

818
00:54:27,072 --> 00:54:31,512
And so that, I think, poses a challenge.

819
00:54:31,512 --> 00:54:36,632
The other thing is to say, like, everyone prefers one money, therefore, BTC has an
advantage.

820
00:54:36,792 --> 00:54:41,072
That's what they call circular reasoning, because BTC is on top right now.

821
00:54:41,072 --> 00:54:42,472
It has the network effect right now.

822
00:54:42,912 --> 00:54:45,592
But that's one of those things that's only true until it's not right.

823
00:54:45,592 --> 00:54:52,552
And as soon as something else is the biggest, then all of that advantage that you
you banked for your argument.

824
00:54:53,072 --> 00:54:56,512
Now, all of that multiplied by negative one becomes a disadvantage.

825
00:54:56,512 --> 00:55:02,792
And your argument is now completely toast, because it was 100 percent reliant on
something that switched from being true to being false.

826
00:55:03,312 --> 00:55:06,832
So I think this problem is worth thinking about a little more.

827
00:55:06,832 --> 00:55:09,672
I think a lot of people just don't think about this problem for some reason.

828
00:55:09,912 --> 00:55:18,912
Well, I think crypto people had this view that people would willingly use native
crypto assets, like volatile native crypto assets.

829
00:55:19,392 --> 00:55:29,472
And I sound like an economist at the Cato Institute or something saying this, but
like they, you know, crypto people thought that people would do payments or like use
crypto assets as a medium of exchange.

830
00:55:30,232 --> 00:55:35,112
And like, basically, that didn't materialize, in my opinion, like it sort of did.

831
00:55:35,112 --> 00:55:36,752
You have like a niche little economies.

832
00:55:37,032 --> 00:55:51,552
But like, really, if you want to use a blockchain based asset for a, you know,
contract with a non zero duration or you want to do your remittances or your round
trip, you basically probably want to use a stable coin, frankly.

833
00:55:52,352 --> 00:56:01,352
And if you just look empirically, like there's 150 billion dollars of stable coins
and their, you know, whatever velocity is very high.

834
00:56:01,832 --> 00:56:07,272
So that is appears to be like the preferred transactional medium on blockchains.

835
00:56:09,032 --> 00:56:13,752
And so it already seems like this network effect thing is like, well, yeah, it's the
dollar.

836
00:56:13,952 --> 00:56:16,832
The dollar is the thing that people want to use on blockchains.

837
00:56:17,272 --> 00:56:26,992
If you're a network effect maximalist, then you're really screwed because the U.S.
dollar, obviously, you know, it's hard for Bitcoin to replace the U.S. dollar in
that, you know, because the network effect is enormous.

838
00:56:27,872 --> 00:56:39,192
I think it's also it's a conceit, like it's very easy for someone to just have their
own little pet theory and they think, well, the world's going to work out like this
and I'm going to get super rich along the way.

839
00:56:40,472 --> 00:56:47,792
And it's like, you know, OK, but does it bother you at all that, you know, anyone
can do that, right?

840
00:56:47,792 --> 00:57:03,032
You know, we have this this graph of the fees, you know, is I think this is presents
it calls out for explanation, you know, that you think, like, why are they why are
they why are the Bitcoin fee rates like so low today?

841
00:57:03,392 --> 00:57:07,032
This should be according to the people who say this is a steady upward trend.

842
00:57:07,072 --> 00:57:09,032
This should be the highest ever every single day.

843
00:57:10,032 --> 00:57:12,032
It shocked me, honestly, I'll admit that.

844
00:57:12,072 --> 00:57:22,272
So. All right. So before we get to the solution, this wait for more confirmations
ideas, a lot of people say, well, doesn't matter, you know, the security budget is
too low.

845
00:57:22,752 --> 00:57:24,512
We can just wait for more confirmations.

846
00:57:24,552 --> 00:57:26,072
Why is that false?

847
00:57:26,112 --> 00:57:34,112
Yeah, I was surprised Nick Sabo said this in particular, and I was surprised to hear
that because, yeah, I don't agree with that.

848
00:57:35,312 --> 00:57:41,392
To me, the the security budget is that's equal to how much money we pay the miners.

849
00:57:41,512 --> 00:57:44,112
So that's all the money we pay to the miners.

850
00:57:44,472 --> 00:57:50,712
And so therefore, if you're a miner, if you're 100 percent of the miners, all the
miners as a group, that's all of your revenue.

851
00:57:50,792 --> 00:57:51,832
That's all of your income.

852
00:57:52,872 --> 00:57:57,072
So that's all the money because the way the difficulty adjustment works.

853
00:57:57,072 --> 00:58:00,352
But that's going to be like all of your costs.

854
00:58:00,792 --> 00:58:02,632
But your costs can't possibly be more than that.

855
00:58:02,632 --> 00:58:04,192
So that's the best case scenario.

856
00:58:04,232 --> 00:58:11,232
That's all the best case scenario is the entire security budget is translated to
like hashrate security or something.

857
00:58:11,272 --> 00:58:20,432
That's a best case scenario because you can't if you're paying your gardener, you
know, a hundred dollars to, you know, do landscaping on your house.

858
00:58:20,432 --> 00:58:22,992
He can't it can't cost him one hundred and five dollars, you know.

859
00:58:23,512 --> 00:58:25,952
So that's all that we need.

860
00:58:25,992 --> 00:58:35,472
So that number is how much the miners spend and how if the miners spend the proof of
work, you know, it is a totally there's no identity.

861
00:58:35,512 --> 00:58:39,632
It's a it's a dispassionate metric.

862
00:58:40,032 --> 00:58:41,752
It's this industrial number.

863
00:58:42,912 --> 00:58:45,472
So it's just like, you know, measuring voltage or something.

864
00:58:45,912 --> 00:58:52,672
So anything that anything that the miners do to defend the network, someone else
could do to attack the network.

865
00:58:54,192 --> 00:58:58,512
And so to me, this security budget is just the cost of, you know, attacking the
network.

866
00:58:58,832 --> 00:59:02,952
Now, why isn't it, you know, just would more confirmations help?

867
00:59:03,272 --> 00:59:07,192
Well, the I use security budget is like this dollars per month thing.

868
00:59:07,232 --> 00:59:08,072
So it's like a rate.

869
00:59:08,472 --> 00:59:14,072
To me, it has to be a rate because that's just how that's just how it is in the real
world.

870
00:59:14,072 --> 00:59:21,192
It's not like a certain amount of money we pay it and then the miners hash and then
the miners never hash again or something like that's just not what it is.

871
00:59:21,712 --> 00:59:24,352
So it's this ongoing rate.

872
00:59:24,992 --> 00:59:28,792
And yeah, whoever pays the rate has the longest chain.

873
00:59:28,792 --> 00:59:31,712
You know, they have the most proof of work and that's what the software will use.

874
00:59:32,432 --> 00:59:40,832
And if you want the software to do something else, you have you open up your, you
know, you open up your flank to like a million other arguments about how do you know
that that will work?

875
00:59:40,832 --> 00:59:44,832
Why didn't you know, you know, it won't be worse and blah, blah, blah.

876
00:59:45,072 --> 00:59:53,072
So just ignoring that for the moment, whoever pays the security budget, that is what
it costs to.

877
00:59:54,232 --> 01:00:00,112
Basically, have the most proof of work and basically 51 percent Bitcoin permanently
for as long as you're going to pay the rate.

878
01:00:01,072 --> 01:00:13,872
So you can just if you're willing to pay whatever it is, like a million dollars per
day or whatever, which is like what it is now, then for as long as you are paying
that you're in control.

879
01:00:14,672 --> 01:00:26,192
And so what difference does it make how many kind of you they're not going to get
any the people on the real chain will never get any confirmations on the longest
chain, so it won't make any difference.

880
01:00:26,912 --> 01:00:37,152
And then the other problem is if the number is really low, then forget just having
one person, 51 percent attack the network like once or something like if this number
is really low.

881
01:00:38,192 --> 01:00:46,192
Like, imagine if it costs 10 cents, like the people who say this, like the people
who aren't worried about the security budget, of which there are some, some people
just reject this idea.

882
01:00:46,832 --> 01:00:53,952
But my question to them is, would it bother you if it would cost like 10 cents to
rewrite the blockchain for like all of last year or something like that?

883
01:00:53,952 --> 01:00:57,472
Really, you would really just be completely Zen about that.

884
01:00:57,472 --> 01:00:58,592
You wouldn't be worried about that at all.

885
01:00:58,752 --> 01:00:59,872
The number is too low.

886
01:01:00,512 --> 01:01:06,512
People can easily attack the network like seven or eight times at once, like 100
times over or something.

887
01:01:06,512 --> 01:01:17,072
And then the whole proof of work part that is the core element of the design, the
proof of work part just sort of stops doing anything.

888
01:01:17,072 --> 01:01:17,792
It has no effect.

889
01:01:17,792 --> 01:01:18,752
So that's just over.

890
01:01:18,752 --> 01:01:24,512
It's just the end of proof of work, which if you've got some other great idea, then
maybe you wouldn't be worried about that.

891
01:01:24,512 --> 01:01:26,992
But I think that's like, that's the idea.

892
01:01:26,992 --> 01:01:33,472
That's the, if you have a Bitcoin investment thesis or whatever, this is like a core
part of what you're buying.

893
01:01:34,432 --> 01:01:37,952
So I find that kind of surprising.

894
01:01:37,952 --> 01:01:43,712
I wonder what those people would really say to that 10 cents to rewrite the
blockchain for last year, if that would really not bother them at all.

895
01:01:43,712 --> 01:01:56,192
So your point about this, you can't wait for more confirmations, is because like
you're, if someone is presumed to have an advantage and is an attacker, their
advantage isn't necessarily decaying, right?

896
01:01:56,192 --> 01:01:57,072
Yeah, they have an advantage.

897
01:01:57,072 --> 01:01:58,032
They'll beat every block.

898
01:01:58,032 --> 01:01:59,712
They will find the block before you.

899
01:02:00,272 --> 01:02:05,232
So, and then people try to say, well, we'll notice that it's an attack.

900
01:02:05,232 --> 01:02:11,552
And then we will, with our magic, magic coordination powers, we will flag that one
as the bad one.

901
01:02:11,552 --> 01:02:14,912
And then we have the magic bit, you know, zero or one.

902
01:02:14,912 --> 01:02:16,272
We have the magic oracle bit.

903
01:02:16,272 --> 01:02:18,272
And we'll know that this one is bad.

904
01:02:19,552 --> 01:02:29,632
You know, even if you could do that, first of all, it doesn't make any difference
because they just restart the attack at the tip of whatever it is that you blessed
with your magic powers.

905
01:02:30,512 --> 01:02:32,672
They can just keep attacking over and over again forever.

906
01:02:32,672 --> 01:02:36,352
So you have to keep using this magical power over and over again.

907
01:02:36,352 --> 01:02:45,792
And that's really the whole point with the problem with the argument is it just
passes the buck to how are you doing this magic thing that is not the most
proof-of-work rule.

908
01:02:45,792 --> 01:02:48,992
Yeah, so you've introduced a new rule, and it's, so you now have a parallel rule.

909
01:02:48,992 --> 01:02:50,832
That thing is the new consensus.

910
01:02:50,832 --> 01:02:51,392
Yeah.

911
01:02:51,392 --> 01:02:52,432
So then it's like—

912
01:02:52,432 --> 01:02:53,552
So if you have that, then great.

913
01:02:53,552 --> 01:02:58,432
Then we look, everyone in the world, including me, looks forward to hearing more
about how that works.

914
01:02:58,432 --> 01:02:59,952
Well, then we didn't need proof-of-work.

915
01:02:59,952 --> 01:03:00,592
In the first place.

916
01:03:00,592 --> 01:03:01,152
At all.

917
01:03:01,152 --> 01:03:01,792
Yeah.

918
01:03:01,792 --> 01:03:03,392
So the proof-of-stake people have the same thing.

919
01:03:03,392 --> 01:03:06,512
They're like, well, you know, actually what we're going to do is identify the bad
people.

920
01:03:06,512 --> 01:03:08,032
And actually, we're going to slash them.

921
01:03:08,032 --> 01:03:09,152
And we're going to take away their money.

922
01:03:09,152 --> 01:03:09,632
That doesn't work.

923
01:03:09,632 --> 01:03:11,472
I have to say, a lot of that's commonly believed.

924
01:03:11,472 --> 01:03:13,072
But I think that's dead.

925
01:03:13,072 --> 01:03:14,592
There's no, that's completely wrong.

926
01:03:14,592 --> 01:03:14,752
I mean—

927
01:03:14,752 --> 01:03:15,792
That's ludicrous.

928
01:03:15,792 --> 01:03:18,192
The attacker will go back.

929
01:03:18,992 --> 01:03:24,352
They will have, they'll go back to a time in history in the proof-of-stake chain
where they control all the keys.

930
01:03:24,352 --> 01:03:28,752
They can easily do this in many ways by maybe buying the coin and then selling it.

931
01:03:28,752 --> 01:03:32,112
Or going to people who used to own the coin and getting their keys that they no
longer use.

932
01:03:32,912 --> 01:03:37,392
And which have no value to the present-day owners.

933
01:03:37,392 --> 01:03:40,352
And when they rewrite the chain, they will control everything that's in it,

934
01:03:40,352 --> 01:03:42,832
including any evidence of any slashing or—

935
01:03:43,552 --> 01:03:47,232
And when they're in control of the chain, they can censor anything from it they
like.

936
01:03:47,232 --> 01:03:51,712
So you won't be able to just broadcast your little thing that says that you're going
to slash.

937
01:03:51,712 --> 01:03:55,072
They will be controlling whether or not that thing makes it into the blockchain.

938
01:03:55,072 --> 01:04:01,392
So that's, I think that idea is, that idea is substantially easier said than done.

939
01:04:01,392 --> 01:04:03,792
I think they won't be able to do that, in fact.

940
01:04:03,792 --> 01:04:04,352
Yeah, I mean—

941
01:04:04,352 --> 01:04:08,352
They might come up with some kind of crazy, convoluted way to maybe do it sometimes
or something.

942
01:04:08,352 --> 01:04:14,512
But it's just also, it's, I think it's just naive to build into your consensus
mechanism

943
01:04:14,512 --> 01:04:21,872
a notion that there is some way to determine intent in a blockchain context and
morality

944
01:04:21,872 --> 01:04:22,832
and things like that.

945
01:04:22,832 --> 01:04:25,632
Like, this person is malicious and this person is good.

946
01:04:26,592 --> 01:04:30,112
What if a large exchange or custodian gets slashed?

947
01:04:30,112 --> 01:04:33,712
Then they'll just lobby the developers to be like, don't slash me.

948
01:04:33,712 --> 01:04:36,672
Refuse to list the other blockchain history, you know?

949
01:04:37,392 --> 01:04:40,592
So the thing is very, it's very—

950
01:04:41,152 --> 01:04:44,672
And I think, you know, I mean, we've all got our views.

951
01:04:44,672 --> 01:04:48,992
But of course, the proof of work, what makes it so great is it's a simple rule that
everyone

952
01:04:48,992 --> 01:04:49,712
can calculate.

953
01:04:49,712 --> 01:04:56,112
And it does not involve these ideas of morality that require enormous amounts of
context and

954
01:04:56,112 --> 01:04:56,592
things.

955
01:04:56,592 --> 01:04:58,672
Basically, people need to read their Zabo.

956
01:04:58,672 --> 01:05:00,752
Unless he is talking about this—

957
01:05:01,632 --> 01:05:03,952
Yeah, I don't know why he jumped on that quickly.

958
01:05:03,952 --> 01:05:07,232
But that was, like, very quickly before he got, like, banned from Twitter or
whatever,

959
01:05:07,232 --> 01:05:07,632
or whatever happened.

960
01:05:07,632 --> 01:05:08,432
Was he banned?

961
01:05:08,432 --> 01:05:09,952
I think he, like, quit or something.

962
01:05:09,952 --> 01:05:15,152
I think what's possible is he made a couple, you know, made a couple tweets on some
sensitive

963
01:05:15,152 --> 01:05:16,752
topics, let's just say, I think.

964
01:05:16,752 --> 01:05:21,552
And then what they sometimes do is they say, if you don't delete this tweet, you
won't.

965
01:05:21,552 --> 01:05:26,992
I think it's become a little stubborn in those particular political views.

966
01:05:26,992 --> 01:05:29,792
So he's probably, he's a little curmudgeonly.

967
01:05:29,792 --> 01:05:32,672
They want you to do your struggle session.

968
01:05:32,672 --> 01:05:35,552
They want you to put on, like, the dunce cap.

969
01:05:35,552 --> 01:05:36,192
That's my guess.

970
01:05:36,192 --> 01:05:36,672
I don't know.

971
01:05:36,672 --> 01:05:41,072
They want you to basically be, like, the Chinese peasant or whatever, and wear your
placard

972
01:05:41,072 --> 01:05:44,512
saying, like, I've sinned, you know, I repent, like, I'm sorry.

973
01:05:45,152 --> 01:05:47,872
But yeah, it does not—the number of confirmations does not matter.

974
01:05:47,872 --> 01:05:54,672
If they're paying more than you per month, no amount of confirmations, you will
never

975
01:05:54,672 --> 01:05:57,312
have any in the longest chain of any—you have zero.

976
01:05:57,312 --> 01:06:01,152
And then the worst thing is, of course, if the attack is overwhelming in its
success,

977
01:06:02,112 --> 01:06:07,712
that's a big if, but if the attacker really can pay the security and is willing and
able

978
01:06:07,712 --> 01:06:10,912
to pay, then all the honest miners will be earning nothing.

979
01:06:10,912 --> 01:06:15,712
So they will eventually, you know, become discouraged, and then that will be a
disaster,

980
01:06:15,712 --> 01:06:20,832
because the security budget will then plummet, and it will be very easy to keep the
attack

981
01:06:20,832 --> 01:06:25,312
going, although they'll always need to be willing and able to pay the larger number

982
01:06:25,312 --> 01:06:28,112
to be a deterrent, but they won't actually have to pay it.

983
01:06:28,112 --> 01:06:30,112
They'll just need to be willing and able to pay it.

984
01:06:30,192 --> 01:06:33,712
They'll just need to be willing and able to pay it, and that will be horrible.

985
01:06:33,712 --> 01:06:39,392
So we haven't really actually talked about BIP300, and while I feel like BIP300 is

986
01:06:39,392 --> 01:06:45,472
too narrow, because you have like a sort of a cluster of ideas, and you were telling
me

987
01:06:45,472 --> 01:06:47,232
you first presented this in 2015.

988
01:06:47,232 --> 01:06:47,872
Is that right?

989
01:06:47,872 --> 01:06:53,072
I had this idea at Drivechain, which was just an idea in 2015, November.

990
01:06:54,032 --> 01:07:00,432
And then over time, it has actually become, to make it into just easier to
understand,

991
01:07:00,432 --> 01:07:08,432
and for code reasons, I split it into two BIPs, BIP300/301, but BIP300 is

992
01:07:08,432 --> 01:07:17,072
basically this sidechain's idea that hashrate S grows, this SPV-proof code idea, and
the

993
01:07:17,072 --> 01:07:21,472
301 is Blind Merged Mining, so I thought it would be easier for people to read.

994
01:07:21,632 --> 01:07:27,152
It makes the BIPs a lot shorter, so you can read, if you're into reading about BIPs,

995
01:07:27,152 --> 01:07:35,552
like the actual BIPs are, of course, in the Luke Dashjr. controlled BIP repository
in

996
01:07:35,552 --> 01:07:40,832
the little table, so you can read those, and each is only half as long, because I
split

997
01:07:40,832 --> 01:07:41,392
them into two.

998
01:07:42,032 --> 01:07:47,872
And what's your sort of current attitude in terms of the process of including these?

999
01:07:47,872 --> 01:07:50,752
Well, yeah, this is a thing where they're determined to...

1000
01:07:53,152 --> 01:07:59,152
You just look at the frequency has been decreasing of soft fork upgrades, but just
also of any

1001
01:07:59,152 --> 01:08:04,592
kind of major release of any kind has become very rare.

1002
01:08:04,592 --> 01:08:09,792
It's become literally like four or five years in between soft forks, whereas in the
past,

1003
01:08:09,792 --> 01:08:10,592
there were very many.

1004
01:08:11,312 --> 01:08:20,592
In 2015, there were like three the same month of scaling two or something, like they
had

1005
01:08:20,592 --> 01:08:24,992
been done before, and there were like five that year or something like that.

1006
01:08:27,792 --> 01:08:28,832
There used to be many more.

1007
01:08:29,872 --> 01:08:31,792
There used to be more upgrades.

1008
01:08:31,792 --> 01:08:36,912
But now, which is partially a good thing, the protocol has ossified to some extent,

1009
01:08:36,912 --> 01:08:43,152
but also there's this kind of very bureaucratic, slow consensus building process.

1010
01:08:44,912 --> 01:08:51,632
And if you can't, it's a good thing, you want to be able to demonstrate that nothing
that

1011
01:08:51,632 --> 01:08:57,632
you add to Bitcoin in terms of code or whatever, that should never affect any of the
people

1012
01:08:57,632 --> 01:09:00,752
who aren't using it, which is great.

1013
01:09:00,752 --> 01:09:04,032
Although that rule was broken for SegWit since it was a mandatory block size
increase.

1014
01:09:04,032 --> 01:09:09,072
But the point is that that is the criterion, but not only do you have to meet the
criterion,

1015
01:09:09,072 --> 01:09:14,832
which is great, but you have to have some kind of overwhelming ability to persuade
everyone

1016
01:09:14,832 --> 01:09:16,512
that you really have met the criterion.

1017
01:09:17,152 --> 01:09:21,072
And plenty of people are just like, you know, they're really busy with what they're
doing,

1018
01:09:21,072 --> 01:09:29,792
and they'll just not look into whatever argument you make that this will not affect
people

1019
01:09:29,792 --> 01:09:31,872
who aren't using the software.

1020
01:09:31,872 --> 01:09:36,832
You've even said things like you can have a different version of Bitcoin Core that
doesn't

1021
01:09:36,832 --> 01:09:39,392
have any BIP300 code in it at all.

1022
01:09:40,912 --> 01:09:46,432
And, you know, that version will work just the same as the, you know, you won't be
able

1023
01:09:46,432 --> 01:09:49,232
to use sidechains on that version, but it will work just the same.

1024
01:09:49,232 --> 01:09:52,432
But people are kind of like, you know, it takes effort for everyone to understand
every

1025
01:09:52,432 --> 01:09:52,752
argument.

1026
01:09:52,752 --> 01:09:56,192
So you look at Jeremy Rubin is suffering through this right now.

1027
01:09:56,912 --> 01:10:03,472
His thing is a very simple repurposing of one of the opcodes, which has been done
many

1028
01:10:03,472 --> 01:10:04,192
times before.

1029
01:10:05,952 --> 01:10:09,872
If you don't, if your transaction doesn't use this opcode, it will never trigger any

1030
01:10:09,872 --> 01:10:11,552
of his code or whatever.

1031
01:10:11,552 --> 01:10:18,992
But still, this has led to this long, long, long conversation about, you know, who
affects

1032
01:10:18,992 --> 01:10:22,032
what and then who thinks what and why.

1033
01:10:22,672 --> 01:10:24,272
Anyone can just comment.

1034
01:10:24,272 --> 01:10:26,832
And so the process has become very, very, very slow.

1035
01:10:27,632 --> 01:10:35,232
I'm not sure I actually know how to, you know, what the strategy is for actually
succeeding

1036
01:10:35,872 --> 01:10:36,432
anymore.

1037
01:10:37,552 --> 01:10:41,712
It may even be the case that it may just not even be possible.

1038
01:10:41,712 --> 01:10:46,592
A lot of people, for Taproot, they were like, I'll code Taproot.

1039
01:10:47,792 --> 01:10:50,592
But they were like, but I don't want to have anything to do with the activation.

1040
01:10:50,592 --> 01:10:55,232
They just intentionally fell on the sword or whatever with that.

1041
01:10:55,232 --> 01:10:56,992
And they were just like, this is like...

1042
01:10:58,032 --> 01:11:03,312
Because it was so traumatic, this scaling war in SegWit and all that other stuff.

1043
01:11:03,312 --> 01:11:04,352
It's been so long.

1044
01:11:04,352 --> 01:11:08,992
You'd think that sort of our PTSD would be, you know, we'd like go to therapy and
sort

1045
01:11:08,992 --> 01:11:10,752
of like fix that.

1046
01:11:11,312 --> 01:11:15,232
You would think that, or that we would, you know, this is a crazy idea.

1047
01:11:15,232 --> 01:11:22,752
You'd think that maybe you would think that we would like come up with a solution to
make

1048
01:11:22,752 --> 01:11:28,512
it easier to like have the process more formal or have something about procedure,
you know,

1049
01:11:28,512 --> 01:11:30,272
like figure that out with the law.

1050
01:11:30,272 --> 01:11:35,792
Like that's why the law has all these silly things, arraignment, trial, jury
selection.

1051
01:11:35,792 --> 01:11:39,792
We figured out that it's a big mess if you don't have like a plan.

1052
01:11:40,752 --> 01:11:46,352
That was sort of, there was so much bellyaching over taproot, but we eventually did
settle on

1053
01:11:46,352 --> 01:11:48,432
a method of sorts.

1054
01:11:49,312 --> 01:11:51,872
I think it was the first time we did it in this sort of specific way.

1055
01:11:52,992 --> 01:11:54,752
Some people have a problem with the way.

1056
01:11:54,752 --> 01:11:57,232
I mean, you know, I didn't.

1057
01:11:57,232 --> 01:12:04,192
But, you know, like Luke Dashjr. had a problem with how it was done or whatever.

1058
01:12:04,192 --> 01:12:05,552
I mean, so it's tough.

1059
01:12:05,552 --> 01:12:06,192
It's difficult.

1060
01:12:06,992 --> 01:12:08,832
I think it is hard to get things.

1061
01:12:10,512 --> 01:12:13,952
It's a very, it's very bureaucratic.

1062
01:12:13,952 --> 01:12:19,712
And I do, the whole point of sidechains is that you could let the, one of the points
is that you

1063
01:12:19,712 --> 01:12:25,232
could let layer one ossify safely and still take advantage of everyone's creative
screwball ideas.

1064
01:12:25,872 --> 01:12:30,512
So if the protocol is going to ossify, it would have been really, really nice to
ossify with

1065
01:12:31,472 --> 01:12:34,592
BIP300 in it or something that does what BIP300 does.

1066
01:12:35,552 --> 01:12:42,672
That would be great because then the ossification is no longer a liability because
the idea of

1067
01:12:42,672 --> 01:12:49,792
becoming obsolete is, that is, you know, that would be horrible for the network if
there

1068
01:12:49,792 --> 01:12:54,432
was something that, again, the users, you have to focus on the users and the
customers.

1069
01:12:54,432 --> 01:13:00,992
It's a very common thing to have contempt for the user and to insist that, you know,

1070
01:13:01,392 --> 01:13:05,712
maybe the developers are, the technical people are the philosopher kings and they

1071
01:13:05,712 --> 01:13:06,992
should rule over everyone.

1072
01:13:06,992 --> 01:13:08,752
But I do not accept that view.

1073
01:13:09,872 --> 01:13:12,512
I think the user is ultimately going to get what they want.

1074
01:13:12,512 --> 01:13:17,072
If you don't give the user what they want, then you're going to become a problem for
the user.

1075
01:13:17,632 --> 01:13:18,912
And people are just very smart.

1076
01:13:18,912 --> 01:13:20,832
They're very good at solving their problems eventually.

1077
01:13:20,832 --> 01:13:26,832
You know, maybe not the next day, but they will eventually get what they want.

1078
01:13:26,832 --> 01:13:30,832
And if they want stupid, you know, like we had like all kinds of, whenever we had
counterparty,

1079
01:13:30,832 --> 01:13:36,352
we had colored coins, we had Omni, we had all this like NFT style stuff.

1080
01:13:36,352 --> 01:13:36,592
Yeah.

1081
01:13:37,392 --> 01:13:42,192
And, you know, if the people just want crypto kitties or whatever, and they are
willing

1082
01:13:42,192 --> 01:13:48,992
to pay and they're willing to invest their time and energy in that and, you know,
and

1083
01:13:48,992 --> 01:13:54,352
it doesn't bring any harm to the people around them, then that's the direction
society is

1084
01:13:54,352 --> 01:13:55,072
going to go.

1085
01:13:55,072 --> 01:13:58,032
And same for anything they want, like more privacy.

1086
01:13:58,992 --> 01:14:02,352
You know, like Monero, there's a darknet market that went Monero only.

1087
01:14:02,352 --> 01:14:06,672
And then they made so much money that they closed down, I think, without exit
scamming.

1088
01:14:06,672 --> 01:14:06,832
Yeah.

1089
01:14:06,832 --> 01:14:07,872
I think I saw that.

1090
01:14:07,872 --> 01:14:10,352
That was like a first almost.

1091
01:14:10,352 --> 01:14:12,112
It's like they just peacefully exited.

1092
01:14:12,112 --> 01:14:14,672
They're like, you know, we're actually not going to exit scam.

1093
01:14:14,672 --> 01:14:16,352
I was like, wow, this is so awesome.

1094
01:14:16,352 --> 01:14:17,392
Very, very rare.

1095
01:14:17,392 --> 01:14:18,672
It's like they sort of like did it.

1096
01:14:18,672 --> 01:14:19,872
They met their goal and they're done.

1097
01:14:19,872 --> 01:14:21,952
But this kind of really makes it look like...

1098
01:14:21,952 --> 01:14:22,672
Exactly right.

1099
01:14:22,672 --> 01:14:27,072
Like then they did that and by being Monero only.

1100
01:14:27,072 --> 01:14:28,512
They have a plan and they plan.

1101
01:14:28,512 --> 01:14:30,672
They wanted the privacy feature.

1102
01:14:30,897 --> 01:14:36,297
And they they succeeded and they met their goal, like they retired or whatever.

1103
01:14:36,297 --> 01:14:39,497
And we live in Miami now, probably saw them on my run this morning.

1104
01:14:39,497 --> 01:14:42,097
So, yeah, that'd be great.

1105
01:14:42,097 --> 01:14:43,817
Yeah, as like as not.

1106
01:14:43,817 --> 01:14:49,857
So OK, but so Blind Merged Mining, is there an instance of it in Bitcoin today or
something

1107
01:14:49,857 --> 01:14:50,857
similar?

1108
01:14:50,857 --> 01:14:57,137
It you could easily do it with the what BIP301 does is it makes a blind merge
mining

1109
01:14:57,137 --> 01:15:03,937
not require any trust between someone running the sidechain full node and the layer
one

1110
01:15:03,937 --> 01:15:08,017
SHA-256 hashers that we think of as miners today.

1111
01:15:08,017 --> 01:15:16,017
So the idea of Blind Merged Mining, you could do it without BIP301 today very
easily, in

1112
01:15:16,017 --> 01:15:20,537
fact, because people have could have a relationship with a pool or something.

1113
01:15:20,537 --> 01:15:22,417
They could just have like a pay as you go.

1114
01:15:22,417 --> 01:15:28,217
Like if you had to leave someone a bushel of oranges at a certain pier and then you

1115
01:15:28,217 --> 01:15:31,737
come back and they pay you and they just do this every day, you wouldn't.

1116
01:15:31,737 --> 01:15:36,617
But BIP301 makes it atomic.

1117
01:15:36,617 --> 01:15:41,697
You get the cash at the exact same moment you leave the oranges or whatever.

1118
01:15:41,697 --> 01:15:44,217
So there is no example.

1119
01:15:44,217 --> 01:15:47,937
I mean, people, anyone could be doing it is my point without BIP301.

1120
01:15:48,337 --> 01:15:52,537
BIP301, we have testnet software that uses it.

1121
01:15:52,537 --> 01:15:54,697
So the software exists.

1122
01:15:54,697 --> 01:15:56,857
The software works.

1123
01:15:56,857 --> 01:15:59,777
You can check it out at drivechain.info if you want.

1124
01:15:59,777 --> 01:16:04,617
But I don't think anyone has deployed it except for me.

1125
01:16:04,617 --> 01:16:05,617
I don't know.

1126
01:16:05,617 --> 01:16:06,617
I don't know that.

1127
01:16:06,617 --> 01:16:09,297
If you have, let me know because I don't know anything about that.

1128
01:16:09,297 --> 01:16:16,537
But there has been a lot of regular merge mining in Bitcoin since I think 2010,
2011.

1129
01:16:16,537 --> 01:16:17,537
Right.

1130
01:16:18,137 --> 01:16:19,137
That was also a Satoshian idea.

1131
01:16:19,137 --> 01:16:22,657
Yeah, he invented that idea to help out Namecoin.

1132
01:16:22,657 --> 01:16:26,257
This is another thing that is very different.

1133
01:16:26,257 --> 01:16:29,057
Satoshi is like the co-inventor of the first altcoin or whatever.

1134
01:16:29,057 --> 01:16:31,377
So this is very bizarre.

1135
01:16:31,377 --> 01:16:34,697
We've come a very long way.

1136
01:16:34,697 --> 01:16:43,017
I think even Satoshi would not be allowed to appear at a Bitcoin conference if you
only

1137
01:16:43,017 --> 01:16:49,457
saw his resume because his resume would include like inventing like a shift coin.

1138
01:16:49,457 --> 01:16:54,657
So he would be like barred because people in force, like I don't want to
particularly

1139
01:16:54,657 --> 01:16:57,257
name – I mean you probably know the conferences I'm thinking of.

1140
01:16:57,257 --> 01:17:00,057
But the conferences, they have a policy.

1141
01:17:00,057 --> 01:17:05,337
Sometimes a formal policy where the organizers of the conference have said on
recorded YouTube

1142
01:17:05,337 --> 01:17:11,777
videos or whatever, they say if anyone has anything to do with any altcoins,
especially

1143
01:17:11,977 --> 01:17:16,897
God forbid they created it, helped create an altcoin, they would not be allowed to.

1144
01:17:16,897 --> 01:17:24,617
But then that would – by that criterion narrowly applied, they would have to prevent

1145
01:17:24,617 --> 01:17:29,777
him from speaking at the conference.

1146
01:17:29,777 --> 01:17:31,457
So that's like – I don't know what to make of that.

1147
01:17:31,457 --> 01:17:38,537
I mean that's just a thing that people don't realize that the plan is – the problem
of

1148
01:17:38,537 --> 01:17:45,017
altcoins is you don't want anyone – it dilutes the message.

1149
01:17:45,017 --> 01:17:51,217
In the past, we had this message like Bitcoin versus the banks and altcoins wreck
the message

1150
01:17:51,217 --> 01:17:55,817
and they make it like confusing and every altcoin is kind of like as Gavin
Andreessen

1151
01:17:55,817 --> 01:18:01,777
said long ago, kind of a sneaky way of getting around the 21 million coin limit.

1152
01:18:01,777 --> 01:18:08,377
But the problem of – to solve the problem of altcoins is not to just go around and
try

1153
01:18:08,377 --> 01:18:15,377
to suppress people's creativity and people's interests and desires and things.

1154
01:18:15,377 --> 01:18:19,457
The problem – the solution which is like part of what Satoshi was doing when he
invented

1155
01:18:19,457 --> 01:18:21,657
merge mining in 2010.

1156
01:18:21,657 --> 01:18:26,817
The solution is to try and come up with something that – where you get all the
benefits of

1157
01:18:26,817 --> 01:18:32,057
having the altcoin but you don't have this dilution of – you don't have this
inflation

1158
01:18:32,057 --> 01:18:35,977
tax and you don't have this dilution of the message like to the point where people

1159
01:18:35,977 --> 01:18:38,417
today – they've heard of Bitcoin.

1160
01:18:38,417 --> 01:18:42,137
They heard of Bitcoin last week and they heard of Solana last week and they're
completely

1161
01:18:42,137 --> 01:18:46,577
different between the two and they have no idea what the differences are.

1162
01:18:46,577 --> 01:18:53,577
You want to have just – and the genesis of all that thought was in 2013, the two-way

1163
01:18:53,577 --> 01:19:00,497
peg or in 2014 became the sidechain and that was supposed to be just this big
solution

1164
01:19:00,497 --> 01:19:05,337
and that's what I and many other people thought would be the solution to the problem
of altcoins

1165
01:19:05,337 --> 01:19:12,497
is that you just take all of the – if you have Zcash or Monero or Namecoin or
whatever

1166
01:19:12,497 --> 01:19:23,057
it is, whatever it is that people are interested in, NFTs, Turing Complete, smart
contracts,

1167
01:19:23,057 --> 01:19:25,537
you would just like – I remember Rootstock, that was super old.

1168
01:19:25,537 --> 01:19:28,617
That was like 2015 that they were announced or something and they were like, we're
just

1169
01:19:28,617 --> 01:19:30,617
going to copy Ethereum and put it on Bitcoin.

1170
01:19:30,617 --> 01:19:33,537
Well, it's operational now, Rootstock, right?

1171
01:19:33,537 --> 01:19:38,697
Yeah, but they haven't quite succeeded in their mission to like – you know what I

1172
01:19:38,697 --> 01:19:39,697
mean?

1173
01:19:39,697 --> 01:19:43,177
Like how much activity is there on Ethereum versus Rootstock?

1174
01:19:43,177 --> 01:19:47,817
Well that's because I think people – like if you just like look out there in the
world,

1175
01:19:47,817 --> 01:19:51,937
like all the potential users of a blockchain, it's just a lot of people don't care
about

1176
01:19:51,977 --> 01:19:53,697
using Ethereum on Bitcoin.

1177
01:19:53,697 --> 01:19:54,697
They're just fine using Ethereum.

1178
01:19:54,697 --> 01:19:55,697
Yeah.

1179
01:19:55,697 --> 01:19:57,897
They don't have any ideological hang up.

1180
01:19:57,897 --> 01:20:01,137
But that would never have happened like before 2016.

1181
01:20:01,137 --> 01:20:08,057
Remember before 2016, Ethereum was like whatever, like 4% of Bitcoin or something.

1182
01:20:08,057 --> 01:20:13,617
It was like this very, very small thing and then – so this was – when the genesis

1183
01:20:13,617 --> 01:20:19,057
of the sidechain idea happened, Ethereum was like this tiny, tiny, tiny little thing
and

1184
01:20:19,057 --> 01:20:26,657
it wasn't until 2016 when Ethereum kind of like 100x in value or something and like

1185
01:20:26,657 --> 01:20:30,537
became like worth like a third of what Bitcoin was worth or something.

1186
01:20:30,537 --> 01:20:35,617
And it was like all this drama in Bitcoin about the scaling world, the block size
war,

1187
01:20:35,617 --> 01:20:42,297
knowing people like the future was uncertain, it was like stress, it was like
miserable.

1188
01:20:42,297 --> 01:20:44,257
Yeah, it was tough.

1189
01:20:44,257 --> 01:20:52,217
So okay, so does BIP300 slash 301 solve this problem of our weak security budget?

1190
01:20:52,217 --> 01:20:54,297
Well, I think it would.

1191
01:20:54,297 --> 01:21:00,937
I mean, I don't know what else would because the issue is merge mining for the
purposes

1192
01:21:00,937 --> 01:21:05,537
of the security budget is like unlimited block size increase.

1193
01:21:05,537 --> 01:21:11,977
It lets you collect all the fees from other blockchains, all of them without limit,
without

1194
01:21:11,977 --> 01:21:13,937
any inconvenience really to you.

1195
01:21:14,617 --> 01:21:17,617
That's regular merge mining, does that.

1196
01:21:17,617 --> 01:21:22,577
So just regular merge mining I think would – could solve this security but even
without

1197
01:21:22,577 --> 01:21:23,577
301.

1198
01:21:23,577 --> 01:21:31,217
301 just makes it very, very easy because 301 lets regular miners merge mine
everything

1199
01:21:31,217 --> 01:21:37,577
that's 301 like compliant or whatever without even doing anything, like without
running

1200
01:21:37,577 --> 01:21:41,817
any full nodes of sidechain or altcoin.

1201
01:21:42,697 --> 01:21:50,977
So you have a 301 merge mine, a blind merge mine altcoin and it could have all these
fees.

1202
01:21:50,977 --> 01:21:54,897
What happens is the fees are paid to someone over there, some user over there who
happens

1203
01:21:54,897 --> 01:21:58,657
to also have Bitcoin and they make a transaction on Bitcoin to the miners.

1204
01:21:58,657 --> 01:22:02,137
They like that kind of just a sacrificial transaction.

1205
01:22:02,137 --> 01:22:09,057
They pay like whatever it is like the – let's say the sidechain has like $700 worth
of transaction

1206
01:22:09,057 --> 01:22:14,897
fees and they would pay on layer one, they pay with BTC 699 to the miners and then
exchange

1207
01:22:14,897 --> 01:22:19,017
the miners like include some little code that mines the block.

1208
01:22:19,017 --> 01:22:26,097
So they get $700 in the world of the other chain and the miners just – they just see

1209
01:22:26,097 --> 01:22:32,297
that they just got $699 in exchange for including a transaction basically for
including data

1210
01:22:32,297 --> 01:22:34,257
in the blockchain.

1211
01:22:34,377 --> 01:22:39,777
So as far as they're concerned, this is just a weird transaction that pays them
$700.

1212
01:22:39,777 --> 01:22:44,017
This one transaction that pays them all the sum, the amount that is the sum of all
the

1213
01:22:44,017 --> 01:22:46,657
fees of the other block.

1214
01:22:46,657 --> 01:22:49,577
So that's just – they're not doing anything they don't already normally do which is
just

1215
01:22:49,577 --> 01:22:53,177
include all the transactions in the block that pay them the most money.

1216
01:22:53,177 --> 01:22:58,697
So 301 just makes it so they don't have to think about anything at all or do
anything

1217
01:22:58,697 --> 01:23:02,097
and they just get paid in layer one.

1218
01:23:02,097 --> 01:23:05,817
So 301 I think is – it makes life a lot easier.

1219
01:23:05,817 --> 01:23:12,337
Whereas with regular merge mining, they have to actually run the software of the
weirder

1220
01:23:12,337 --> 01:23:17,577
altcoin like or layer two or whatever you want to call it.

1221
01:23:17,577 --> 01:23:21,737
They have to run Namecoin and then like Namecoin will like make a Namecoin block
that also

1222
01:23:21,737 --> 01:23:28,217
is a Bitcoin block that when you hash the Bitcoin part is a really low hash or
something

1223
01:23:28,217 --> 01:23:29,217
like that.

1224
01:23:29,857 --> 01:23:35,657
So you're beholden to like this weird – the weird new experimental software.

1225
01:23:35,657 --> 01:23:36,657
And as a miner –

1226
01:23:36,657 --> 01:23:37,657
It's kind of annoying.

1227
01:23:37,657 --> 01:23:41,577
Like miners we know are like pretty lazy and don't update their software a lot.

1228
01:23:41,577 --> 01:23:45,297
You know, you said who wants to – I mean who even wants to upgrade their normal
computer?

1229
01:23:45,297 --> 01:23:48,217
Like the thing pops up and they're like, oh, a bunch of people did work for you.

1230
01:23:48,217 --> 01:23:52,137
But you're like, I never – whoever wants to update their computer at all, who wants

1231
01:23:52,137 --> 01:23:53,137
to update their phone?

1232
01:23:53,137 --> 01:23:54,737
Who wants to update anything?

1233
01:23:54,737 --> 01:23:58,977
So the miners especially like they're making an enormous amount of money like per
second.

1234
01:23:59,737 --> 01:24:00,737
They have it all charted out.

1235
01:24:00,737 --> 01:24:01,737
They can't.

1236
01:24:01,737 --> 01:24:07,457
But what's funny is that the Namecoin software, merge mining they would get like $5
like per

1237
01:24:07,457 --> 01:24:11,817
block and then the Bitcoin block was like $5,000 and they would still like half the

1238
01:24:11,817 --> 01:24:12,817
network –

1239
01:24:12,817 --> 01:24:13,817
They would do it, yeah.

1240
01:24:13,817 --> 01:24:18,977
And sometimes the Namecoin software would crash and like they would like, you know,

1241
01:24:18,977 --> 01:24:23,577
the whole farm, mining farm would like go down as like their software reset or
whatever

1242
01:24:23,577 --> 01:24:25,057
and yeah.

1243
01:24:25,057 --> 01:24:28,737
I think even once or twice there's just so much voltage that if it doesn't go into

1244
01:24:29,497 --> 01:24:33,497
the ASICs, like it literally like transformers like it burst into flames and explode
or something.

1245
01:24:33,497 --> 01:24:38,537
Like I'm not 100% sure that that ever – that really happened and it's not just a
story

1246
01:24:38,537 --> 01:24:39,537
that someone told me.

1247
01:24:39,537 --> 01:24:41,297
It might be a story, yeah.

1248
01:24:41,297 --> 01:24:45,377
All right, so one thing I forgot to ask you before about security budget.

1249
01:24:45,377 --> 01:24:49,657
Okay, so I think we probably differ on this.

1250
01:24:49,657 --> 01:24:54,137
Why can't you just contract the block size and target a certain amount of revenue by

1251
01:24:54,137 --> 01:24:56,137
doing the OPEC thing and cardinalizing?

1252
01:24:56,297 --> 01:25:01,497
Yeah, I do because the problem with that is – so this is like, you know, just like
the

1253
01:25:01,497 --> 01:25:05,177
fee rate is like the price and then the fee is the thing that I'm focused on is like

1254
01:25:05,177 --> 01:25:06,177
the revenue.

1255
01:25:06,177 --> 01:25:07,177
The aggregate, yeah.

1256
01:25:07,177 --> 01:25:08,177
So it's price times quantity.

1257
01:25:08,177 --> 01:25:13,297
So it's this area of this square or this rectangle in economics of the price times

1258
01:25:13,297 --> 01:25:19,737
quantity and yes, if you reduce the quantity, let's say you cut the quantity, you
know,

1259
01:25:19,737 --> 01:25:20,737
to a tenth.

1260
01:25:20,737 --> 01:25:25,617
You cut it by an order of magnitude and instead of being – right now it's four
megabytes.

1261
01:25:25,617 --> 01:25:31,217
You cut it to 400 kilobytes.

1262
01:25:31,217 --> 01:25:35,497
You would then – immediately your problem becomes ten times harder.

1263
01:25:35,497 --> 01:25:41,417
So if the price doesn't change, which of course you and I agree that it would, but

1264
01:25:41,417 --> 01:25:43,417
just – I'm just saying step by step.

1265
01:25:43,417 --> 01:25:47,057
The first thing that you did is you just made the entire problem ten times worse.

1266
01:25:47,057 --> 01:25:51,097
So you have to hope that the fees go from whatever they were to something that's ten

1267
01:25:51,097 --> 01:25:53,577
times higher just to get back to where you started.

1268
01:25:53,577 --> 01:25:55,617
Well, you need convexity, right?

1269
01:25:55,617 --> 01:25:56,617
Like –

1270
01:25:56,617 --> 01:25:57,617
Yes.

1271
01:25:57,617 --> 01:25:58,937
Or I don't know if that's the right shape of the curve.

1272
01:25:58,937 --> 01:26:00,617
I always get them confused, you know.

1273
01:26:00,617 --> 01:26:01,617
Actually, it's funny.

1274
01:26:01,617 --> 01:26:02,617
I think you do.

1275
01:26:02,617 --> 01:26:03,617
I think convexity is right.

1276
01:26:03,617 --> 01:26:08,337
You need the price to go up by more than you reduce the quantity of block space,
right?

1277
01:26:08,337 --> 01:26:09,337
Right.

1278
01:26:09,337 --> 01:26:12,897
So you need the price to go – the delta on the price, the whatever, the multiplier

1279
01:26:12,897 --> 01:26:16,257
of the price to go up by a factor of more than ten.

1280
01:26:16,257 --> 01:26:17,257
More than ten, yeah.

1281
01:26:17,257 --> 01:26:18,257
In that example.

1282
01:26:18,257 --> 01:26:21,257
So you just don't believe that would happen.

1283
01:26:21,257 --> 01:26:29,177
You know, first of all, now – yeah, the problem is the logic I outline in the piece

1284
01:26:29,177 --> 01:26:40,617
is that when the price is really, really high, the idea of focusing on the high P,
that creates

1285
01:26:40,617 --> 01:26:46,697
– you know, that means that each transaction is expensive, you know, just
straightforward.

1286
01:26:46,817 --> 01:26:53,617
But that means that whenever anything is expensive – we just talked about the whole
Simon Ehrlich

1287
01:26:53,617 --> 01:26:54,617
thing too.

1288
01:26:54,617 --> 01:26:57,537
Whenever something is expensive, it's a problem for the user.

1289
01:26:57,537 --> 01:27:00,137
So the tune of however expensive it is.

1290
01:27:00,137 --> 01:27:03,377
And you know, most things have just – you know, as we were talking about before,
they

1291
01:27:03,377 --> 01:27:08,897
just get cheaper over time and a lot of things today on the internet are just free.

1292
01:27:08,897 --> 01:27:13,577
And so I would imagine like it would be tough to hit these levels you would need to
hit.

1293
01:27:13,577 --> 01:27:16,317
I mean, think about what you would need to hit to replace.

1294
01:27:16,317 --> 01:27:22,317
If you wanted fees to replace the block subsidy today, the math on what is required
to hit

1295
01:27:22,317 --> 01:27:28,037
that is like – we're talking like $200 per transaction.

1296
01:27:28,037 --> 01:27:31,517
We're talking like – you know, and if you're cutting it, it depends on what you

1297
01:27:31,517 --> 01:27:32,517
cut it by.

1298
01:27:32,517 --> 01:27:36,797
You know, we're talking like numbers that people would find genuinely inconvenient.

1299
01:27:36,797 --> 01:27:39,797
You know, if you're going to cut it by ten, you have to go ten times higher than
that

1300
01:27:39,797 --> 01:27:44,077
just to get back to where you started, let alone to make it increase.

1301
01:27:44,077 --> 01:27:48,077
So I'm not sure that – I think there is really kind of like a limit like that.

1302
01:27:48,077 --> 01:27:55,397
I think that maybe there's a – because again, we're talking long run, 24-7, 365
fees.

1303
01:27:55,397 --> 01:27:59,637
So right now, it's like 2,000 transactions per block.

1304
01:27:59,637 --> 01:28:05,957
And we're talking like what's the average price going to be in the long run future,

1305
01:28:05,957 --> 01:28:12,677
you know, that – are people really going to pay $50 every time, $2,000 a – you know,

1306
01:28:12,677 --> 01:28:17,797
2,000 times every ten minutes at 3 a.m., you know, at like whatever.

1307
01:28:17,797 --> 01:28:20,437
Like is this – this is the future like forever?

1308
01:28:20,437 --> 01:28:25,557
And then the other problem is our adversaries, JP Morgan, whatever, whoever you want
to

1309
01:28:25,557 --> 01:28:32,277
name the crazy people in the Russian government or the Chinese government or the
U.S. government

1310
01:28:32,277 --> 01:28:37,717
or whatever you want to – whoever in the name is the – people who may not have their

1311
01:28:37,717 --> 01:28:41,757
interests completely aligned with Bitcoin, whoever they are.

1312
01:28:41,757 --> 01:28:46,397
Their profitability is going to be growing at a geometric rate.

1313
01:28:46,397 --> 01:28:51,197
You know, I calculated most of the – I calculated a lot of figures in the article.

1314
01:28:51,197 --> 01:28:56,477
Most of them like, you know, the – I had like the U.S. military budget, like visas,

1315
01:28:56,477 --> 01:28:57,477
operating profits.

1316
01:28:57,477 --> 01:28:58,477
I had all those things.

1317
01:28:58,477 --> 01:29:02,117
Most of those things just happen to be growing by like around 6% per year, just kind
of – just

1318
01:29:02,117 --> 01:29:07,237
like a back of the envelope calculation, like for all of the historical data that
was like

1319
01:29:07,237 --> 01:29:08,917
available.

1320
01:29:08,917 --> 01:29:10,597
So they're just going to be growing all the time.

1321
01:29:10,597 --> 01:29:17,597
So now, $50 fees, you know, are people going to pay that in 2075 or something?

1322
01:29:17,597 --> 01:29:21,957
And then it needs to get – it needs to be going up and up and up and up over time.

1323
01:29:21,957 --> 01:29:25,437
And in the real world, you know, you have things like – what about – there was a

1324
01:29:25,437 --> 01:29:27,517
time before Venmo, right?

1325
01:29:27,517 --> 01:29:32,557
There was a time before Litecoin, there was a time before Bitcoin Cash, you know,
there

1326
01:29:32,557 --> 01:29:38,597
was a time before Solana competing and keeping the fees down.

1327
01:29:38,597 --> 01:29:39,957
So I think it's tough.

1328
01:29:39,997 --> 01:29:44,677
I think it's tough to rely on the high P. I think that's – the high price.

1329
01:29:44,677 --> 01:29:53,077
I think that is – I think you're really putting yourself at a big risk if you do
that.

1330
01:29:53,077 --> 01:29:56,357
And so I think it's better to just say that the prices will probably always be low
and

1331
01:29:56,357 --> 01:29:58,757
you have to make it up on volume, as they say.

1332
01:29:58,757 --> 01:30:03,037
What people don't understand is that they – because it's a violation of the block

1333
01:30:03,037 --> 01:30:06,997
size limit as far as mining revenues are concerned.

1334
01:30:06,997 --> 01:30:11,837
But it is not at all – I can say this as the author of the measuring
decentralization

1335
01:30:11,837 --> 01:30:12,837
post or whatever.

1336
01:30:12,837 --> 01:30:16,237
It has nothing to do with how expensive it is for you to run your full node and
fully

1337
01:30:16,237 --> 01:30:17,237
validate the blockchain.

1338
01:30:17,237 --> 01:30:19,437
It has nothing to do with that at all.

1339
01:30:19,437 --> 01:30:22,077
And that is the missing piece that people get.

1340
01:30:22,077 --> 01:30:26,757
They think that merge mining makes it more expensive for them to run a node or
something.

1341
01:30:26,757 --> 01:30:27,757
It does not.

1342
01:30:27,757 --> 01:30:32,837
The Blind Merged Mining definitely does not because even the miners don't need to run

1343
01:30:33,837 --> 01:30:39,117
It's possible for the whole system to be running without people knowing what altcoin

1344
01:30:39,117 --> 01:30:45,677
or sidechain nodes are even being used to create these fees in the first place.

1345
01:30:45,677 --> 01:30:50,797
It's always possible that your blockchain will reorg or that miners will decide to
do

1346
01:30:50,797 --> 01:30:52,357
something crazy.

1347
01:30:52,357 --> 01:30:56,037
But that has nothing to do with the presence or absence of merge mining.

1348
01:30:56,037 --> 01:31:00,877
And in fact, if there is no merge mining, I really worry that the security budget
will

1349
01:31:00,877 --> 01:31:01,877
be very low.

1350
01:31:01,917 --> 01:31:08,557
That problem is a hundred, a thousand times more important than the fact that you
may

1351
01:31:08,557 --> 01:31:13,317
not like the fact that some miners have a side hustle where they earn money or
something.

1352
01:31:13,317 --> 01:31:17,157
The fact that some miners would have the side hustle and some won't and then some
miners

1353
01:31:17,157 --> 01:31:22,277
will go out of business and so we should shed a tear over the fact that those miners
can't

1354
01:31:22,277 --> 01:31:25,917
buy as many Christmas presents for their kids.

1355
01:31:25,917 --> 01:31:35,557
Mining is an evolutionary process and we want it to be very simple.

1356
01:31:35,557 --> 01:31:40,677
Whoever does the most hashing is the winner.

1357
01:31:40,677 --> 01:31:45,077
They provide the most security per Bitcoin layer one block or whatever and that's
what

1358
01:31:45,077 --> 01:31:46,077
we want.

1359
01:31:46,077 --> 01:31:47,957
Okay, I think we have to leave it there.

1360
01:31:47,957 --> 01:31:51,517
We basically covered everything I wanted to talk about.

1361
01:31:51,517 --> 01:31:57,797
What would you instruct our dear listeners in order to, you know, subsequent
instructions?

1362
01:31:57,797 --> 01:31:59,477
Where would you send them?

1363
01:31:59,477 --> 01:32:04,337
I think the security budget is a really good window into my brain and how I do
things.

1364
01:32:04,337 --> 01:32:10,237
And again, it's just a giant list of things where I disagree with what most
Bitcoiners

1365
01:32:10,237 --> 01:32:14,557
believe.

1366
01:32:14,557 --> 01:32:17,157
And I try to say why that is.

1367
01:32:17,157 --> 01:32:23,477
And I think that one is a big tour of all of my, like, heretical thoughts.

1368
01:32:23,477 --> 01:32:27,237
So I think if you go into that, you'll find there's just so much in there,
especially

1369
01:32:27,237 --> 01:32:32,237
when you make it down to the bottom, all the stuff about the history of blind merge
mining

1370
01:32:32,237 --> 01:32:34,677
and like people's attitudes to it and things.

1371
01:32:34,677 --> 01:32:37,317
I have lots of links and stuff in there.

1372
01:32:37,317 --> 01:32:42,797
So I think, you know, if you liked any of that, you might like the article.

1373
01:32:42,797 --> 01:32:45,577
I did put a lot of effort into writing it.

1374
01:32:45,577 --> 01:32:49,617
And I think that's a good idea of like what kind of stuff that I'm up to.

1375
01:32:49,617 --> 01:32:54,097
And then you can look, you can just go, that's like on my blog, and you can just
click the

1376
01:32:54,097 --> 01:32:57,977
latest post of the archive button and then you can see other other stuff there that
you

1377
01:32:57,977 --> 01:32:59,737
might want to read.

1378
01:32:59,737 --> 01:33:08,617
If you're interested in the BIP300 or 301, you would go to drivechain.info and
hopefully,

1379
01:33:08,617 --> 01:33:14,297
the best thing is to download the software because don't listen to, you know, you
can

1380
01:33:14,297 --> 01:33:15,297
make up your own mind.

1381
01:33:16,017 --> 01:33:21,937
Download the software and use it and then you'll know more about BIP300 than anyone

1382
01:33:21,937 --> 01:33:22,937
who hasn't.

1383
01:33:22,937 --> 01:33:28,417
You have to trust yourself, your own experiences.

1384
01:33:28,417 --> 01:33:29,417
You're a smart person.

1385
01:33:29,417 --> 01:33:30,417
You'll figure it out.

1386
01:33:30,417 --> 01:33:31,417
I believe in you.

1387
01:33:31,417 --> 01:33:35,297
So if you have real software that you can download and I would do that.

1388
01:33:35,297 --> 01:33:37,337
That's the only best way to understand.

1389
01:33:37,337 --> 01:33:39,817
So I will link to all these things.

1390
01:33:39,817 --> 01:33:45,337
I'd certainly recommend that, well, you have two security budget posts, I think.

1391
01:33:45,337 --> 01:33:46,337
Right.

1392
01:33:46,337 --> 01:33:47,337
Yeah.

1393
01:33:47,337 --> 01:33:48,337
I wrote the first one.

1394
01:33:48,337 --> 01:33:49,337
I thought it was quite good.

1395
01:33:49,337 --> 01:33:51,057
And then there was a lot of like pushback from it.

1396
01:33:51,057 --> 01:33:54,577
So I was like, oh, I don't have to write the second one.

1397
01:33:54,577 --> 01:33:55,577
Yes.

1398
01:33:55,577 --> 01:33:58,497
Read the whole corpus of the Truthcoin.info.

1399
01:33:58,497 --> 01:33:59,497
Read the archives.

1400
01:33:59,497 --> 01:34:05,137
It's probably the number one thing I recommend to people if they can handle the
iconoclasm

1401
01:34:05,137 --> 01:34:06,137
therein.

1402
01:34:06,857 --> 01:34:09,617
But yes, I'm going to put it all together.

1403
01:34:09,617 --> 01:34:11,617
Paul, thank you for coming on the show.

1404
01:34:11,617 --> 01:34:15,337
It's been three years almost, maybe two years of doing this show.

1405
01:34:15,337 --> 01:34:16,337
Never had you on, so thanks.

1406
01:34:16,337 --> 01:34:17,337
No, hey, thanks for having me.